FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
(Mark One)
[ X ]Quarterly Report Pursuant to Section 12 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 1995
[ ]Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from _______________________
to________________________
For Quarter Ended June 30, 1995
Commission File Number 0-16572
AVONDALE INDUSTRIES, INC.
Louisiana 39-1097012
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P. O. Box 50280, New Orleans, Louisiana 70150
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 504/436-2121
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 (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to file such filing requirements
for the past 90 days. YES X NO .
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date.
Class Outstanding at June 30, 1995
Common stock, par value $1.00 per share 14,464,175 shares
<PAGE>
AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
Page No.
Part I. Financial Information
Item 1. Financial Statements
Independent Accountants' Report
Consolidated Balance Sheets -
June 30, 1995 and December 31, 1994
Consolidated Statements of Operations -
Quarters and Six Months Ended June 30, 1995 and 1994
Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1995 and 1994
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Part II.Other Information
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors and Shareholders of
Avondale Industries, Inc.
We have reviewed the condensed consolidated financial statements of
Avondale Industries, Inc. and subsidiaries, as listed in the
accompanying index, as of June 30, 1995 and for the three-month and
six-month periods ended June 30, 1995 and 1994. These financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by
the American Institute of Certified Public Accountants. A review of
interim financial information consists principally of applying
analytical procedures to financial data and of making inquiries of
persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to such condensed consolidated financial
statements for them to be in conformity with generally accepted
accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet of Avondale
Industries, Inc. and subsidiaries as of December 31, 1994, and the
related consolidated statements of operations, shareholders' equity,
and cash flows for the year then ended (not presented herein); and in
our report dated February 24, 1995, we expressed an unqualified
opinion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying consolidated balance
sheet as of December 31, 1994 is fairly stated, in all material
respects, in relation to the consolidated balance sheet from which it
has been derived.
/s/DELOITTE & TOUCHE LLP
August 4, 1995
New Orleans, Louisiana
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)
(UNAUDITED)
June 30, December 31,
1995 1994
-------- ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.... $ 34,114 $ 15,414
Restricted short-term
investments (Note 3)........ 4,615 1,811
Receivables (Note 2):
Accounts receivable........ 18,947 25,342
Contracts in progress...... 62,037 59,168
Inventories:
Goods held for sale........ 7,663 7,908
Materials and supplies..... 7,797 8,201
Prepaid expenses and other
current assets (Note 5)..... 6,247 10,092
------- -------
Total current assets....... 141,420 127,936
------- -------
Property, Plant and Equipment:
Land......................... 9,162 9,324
Construction in progress..... 18,052 5,698
Buildings and improvements... 44,398 42,281
Machinery and equipment...... 172,510 174,694
------- -------
Total........................ 244,122 231,997
Less accumulated depreciation (117,299) (112,836)
------- -------
Property, plant and equipment - net 126,823 119,161
------- -------
Goodwill - net................. 8,919 15,431
Deferred tax assets (Note 5)... 15,444 7,000
Funds held for construction (Note 3) 6,547 --
Other assets................... 3,295 3,975
------- -------
Total assets............... $ 302,448 $ 273,503
======= =======
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)
(UNAUDITED)
June 30, December 31,
1995 1994
-------- ------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 4,469 $ 5,866
Accounts payable............. 62,829 60,917
Accrued employee compensation 12,664 12,948
Other........................ 17,289 13,369
------- -------
Total current liabilities.. 97,251 93,100
Long-term debt (Note 3)........ 59,574 45,875
Other liabilities and deferred credits 11,208 11,650
------- -------
Total liabilities............ 168,033 150,625
------- -------
Commitments and contingencies (Note 4)
Shareholders' Equity:
Common stock, $1.00 par value,
authorized 30,000,000 shares;
issued - 15,927,191 shares in
1995 and 1994............... 15,927 15,927
Additional paid-in capital... 373,911 373,911
Accumulated deficit.......... (243,567) (255,104)
------- -------
Total...................... 146,271 134,734
------- -------
Treasury stock (common: 1,463,016
shares in 1995 and 1994) at
cost........................ ( 11,856) ( 11,856)
------- -------
Total shareholders' equity... 134,415 122,878
------- -------
Total........................ $ 302,448 $ 273,503
======= =======
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(UNAUDITED)
Quarters Ended June 30, Six Months Ended June 30,
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Continuing Operations:
Net sales............. $ 152,788 $ 118,437 $ 286,363 $ 219,766
Cost of sales......... 138,968 107,154 259,139 198,977
------- ------- ------- -------
Gross profit.......... 13,820 11,283 27,224 20,789
Selling, general and
administrative expenses 7,598 8,090 15,261 14,610
------- ------- ------- -------
Income from operations 6,222 3,193 11,963 6,179
Interest expense...... ( 1,278) ( 953) ( 2,557) ( 2,157)
Other - net........... 499 230 831 366
------- ------- ------- -------
Income from continuing
operations before
income taxes........ 5,443 2,470 10,237 4,388
Income tax
benefit (Note 5).... 3,050 --- 1,300 ---
------- ------- ------- -------
Income from continuing
operations.......... 8,493 2,470 11,537 4,388
Discontinued Operations:
Loss from discontinued
operations (Note 1) --- ( 396) --- ( 280)
------- ------- ------- -------
Net income............ $ 8,493 $ 2,074 $ 11,537 $ 4,108
======= ======= ======= =======
Income (loss) per share of
common stock:
Continuing operations $ 0.59 $ 0.17 $ 0.80 $ 0.30
Discontinued operations --- (0.03) --- (0.02)
------- ------- ------- -------
Net income per share of
common stock... $ 0.59 $ 0.14 $ 0.80 $ 0.28
======= ======= ======= =======
Weighted average number of
shares outstanding 14,464 14,468 14,464 14,472
======= ======= ======= =======
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994
(in thousands)
(UNAUDITED)
1995 1994
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income..................................... $ 11,537 $ 4,108
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Depreciation and amortization................. 4,873 5,800
Deferred income tax benefit................... (1,300) ---
Changes in operating assets and liabilities,
net of dispositions:
Receivables.................................. 2,495 65,581
Inventories.................................. 132 (978)
Prepaid expenses and other current assets.... 2,745 (429)
Accounts payable............................. 1,912 (5,482)
Accrued employee compensation................ (284) 2,225
Other - net.................................. 3,546 (1,312)
------- -------
Net Cash Provided by Operating Activites...... 25,656 69,513
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures......................... (12,974) (2,014)
Purchase of investments - net................ (9,351) (1,193)
Proceeds from sale of assets................. 3,067 ---
Payment to former corporate parent........... --- (5,000)
------- -------
Net Cash Used for Investing Activities........ (19,258) (8,207)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of long-term borrowings.............. (5,478) (80,840)
Proceeds from long-term borrowings (Note 3).. 17,780 36,250
Net Cash Provided by (Used For)
Financing Activities........................ 12,302 (44,590)
------- -------
Net increase in cash and cash equivalents.... 18,700 16,716
Cash and cash equivalents at beginning of period 15,414 3,195
------- -------
Cash and cash equivalents at end of period...... $ 34,114 $ 19,911
======= =======
Supplemental disclosures of cash flow information:
Cash paid during the period for interest....... $ 2,517 $ 2,461
======= =======
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements
include the accounts of Avondale Industries, Inc. and its
wholly-owned subsidiaries ("Avondale" or the "Company"). In
the opinion of the management of the Company, all adjustments
(such adjustments consisting only of a normal recurring
nature) necessary for a fair presentation of the operating
results for the interim periods presented have been included
in the interim financial statements. These interim financial
statements should be read in conjunction with the December 31,
1994 audited financial statements and related notes filed on
Form 10-K for the year ended December 31, 1994 (the "1994 Form
10-K").
As disclosed in Note 7 of the Company's Annual Report on the
1994 Form 10-K, during the third quarter of 1994 the Company
decided to discontinue its service contracting line of
business. Accordingly, its operating results for the prior-
year periods are reported as discontinued operations.
The financial statements required by Rule 10-01 of Regulation
S-X have been reviewed by independent public accountants as
stated in their report included herein.
2. RECEIVABLES
As discussed in its 1994 Annual Report on Form 10-K, the
Company has filed a Request for Equitable Adjustment
("Minehunter REA") with the U.S. Navy seeking substantial
increases in the contract prices for four MHC-51 Class
Minehunters ("MHC") currently being built by the Company. In
connection with developing the Minehunter REA, the Company
realized that it would be necessary to increase its cost to
complete estimates for the MHC vessels. The Company, in
consultation with outside counsel, reviewed the Minehunter REA
and determined a minimum estimate of its probable recoverable
amount. During the second quarter of 1995, based on an
evaluation of the underlying facts and circumstances, the cost
to complete estimates and minimum probable amount of recovery
were revised upward. Based on its review and supported by the
view of outside counsel that it had no reason to believe that
the use of $23 million in quantifying the minimum probable
amount of recovery was unreasonable, management concluded that
it was appropriate to offset the loss that it would have
otherwise had to recognize with respect to the MHC program by
such amount. In addition, the effects of the cost increase
have been partially offset also by certain contractual cost
sharing and cost escalation provisions which obligate the U.S.
Navy to bear a portion of the additional costs. To the extent
that any portion of the $23 million recognized is not
recovered, then losses in addition to those previously
recorded will have to be recognized. The Minehunter REA is
being evaluated currently by the U.S. Navy.
<PAGE>
3.FINANCING ARRANGEMENTS
In February 1995 the Company completed financing of $17.8
million of an approximately $20 million plant modernization
effort by issuing mortgage bonds utilizing a U.S. Government
guarantee under Title XI of the Merchant Marine Act, 1936, as
amended. The bonds bear interest at the rate of 8.16% and are
payable in equal semi-annual principal payments of $593,000
over a fifteen year period beginning March 30, 1996.
The terms of the Title XI guarantee provide for the proceeds
from the financing to be held in a construction escrow fund
and released to the Company as allowable project costs are
incurred by the Company and approved by the U.S. Department of
Transportation, Maritime Administration. At June 30, 1995 the
Company has determined that it is currently entitled to
approximately $4.4 million of the escrowed funds and
accordingly has classified this amount as a current asset in
Restricted Short-term Investments. The balance of the funds,
approximately $6.5 million at June 30, 1995, is recorded as
Funds Held for Construction which represents the balance of
the project costs which the Company will be entitled to
receive over the remaining construction period of the
modernization project.
In the second quarter of 1995 the Company amended its
revolving credit agreement. The amendment, among other
things, increased the amount of the credit agreement to $42.5
million and extended the term of the credit agreement from May
1996 to May 1997. Further, the amendment revised the credit
agreement to permit the issuance of the mortgage bonds
discussed above and revised the level of permitted capital
expenditures and certain coverage ratios to take into
consideration the plant modernization project. There have
been no borrowings in 1995 under the revolving credit
agreement. There were $25.5 million of letters of credit
outstanding under the facility at June 30, 1995.
4. COMMITMENTS AND CONTINGENCIES
Litigation
As discussed in further detail in Note 12 of the Company's
Annual Report on the 1994 Form 10-K, in 1986 the Company was
advised that it is a potentially responsible party ("PRP")
with respect to an oil reclamation site, operated by an
unaffiliated company, in Walker, Louisiana. To date, the
Company and certain of the other PRPs for the site have funded
the site's remediation under a preliminary cost-sharing
agreement. As of June 30, 1995, clean-up costs totalled $17
million, of which the Company has contributed $3.5 million.
Additional remedial work scheduled for the site includes the
completion of studies in 1995 and 1996, and, if required by
the results of these studies, subsequent post-closure
activities. Future aggregate expenses are expected to be
approximately $1 million, exclusive of any groundwater
monitoring and remediation, to which no estimate is currently
available. The Company believes that its proportionate share
of expenditures for any additional remedial work will not have
a material effect on the Company's financial statements. In
<PAGE>
addition, the Company believes that its proportionate
responsibility for the clean-up costs will not be materially
increased.
Since July 1986, a number of "toxic tort" lawsuits have been
filed against the Company and numerous other defendants
alleging various claims in connection with the oil reclamation
site discussed above. The plaintiffs also seek substantial
punitive damages. These cases have been consolidated and
certified as a class action.
In May of 1995 the Board of Directors of the Company approved
a settlement of the class action subject to approval by the
Federal District Court before which the action is currently
pending. On July 28, 1995 the Federal District Court for the
Middle District of Louisiana approved the settlement of the
class action litigation asserting various toxic tort claims
arising out of the Walker, La. oil reclamation site. Under
the terms of the settlement, the Company will pay $4.0 million
into a settlement fund on or before August 27, 1995.
Additionally, as part of the settlement, the Company will
issue a $2.0 million unsecured note to the plaintiff class.
The note will bear interest at 8% per annum and will be due on
January 28, 1997. Management of the Company believes that the
cash payment and issuance of the note will not have a material
effect on the Company's financial condition and results of
operations because the Company has recorded an accrual for the
$6 million settlement as of June 30, 1995 and has sufficient
cash available from operations or under its credit facility to
fund the cash payment and the note.
Avondale could also be responsible for payment to the
plaintiffs of an additional sum of up to $6 million in the
event that the plaintiffs are unsuccessful in collecting
certain amounts with respect to rights that will be assigned
to them under the settlement agreement.
With respect to the potential contingent liability of the
Company to pay additional sums under the settlement agreement,
management believes that the eventual resolution of this
matter will not have a material effect on the Company's
financial statements. The Company will continue to consult
with its counsel and establish a reserve against such exposure
in an appropriate amount if and when circumstances warrant.
In addition to the above, the Company is also named as a
defendant in numerous other lawsuits and proceedings arising
in the ordinary course of business, some of which involve
substantial damage claims made by the plaintiffs.
The Company has established accruals as appropriate for
certain of the matters discussed above. While the ultimate
outcome of lawsuits and proceedings against the Company cannot
be predicted with certainty, management believes, based on
current facts and circumstances and after review with counsel,
that the eventual resolution of these matters is not expected
to have a material adverse effect on the Company's financial
statements.
<PAGE>
Letters of Credit
In the normal course of its business activities, the Company
is required to provide letters of credit to secure the payment
of workers' compensation and insurance obligations.
Additionally, under certain contracts the Company may be
required to provide letters of credit which may be drawn down
in the event of the Company's failure to perform under the
contracts. Outstanding letters of credit relating to these
business activities amounted to approximately $25.5 million
and $23.3 million at June 30, 1995 and December 31, 1994,
respectively.
Plant Modernization Program
The Company's plant modernization and expansion project is
currently in progress. At an estimated cost of approximately
$20.0 million, the project is expected to be completed during
the third quarter of 1995.
The Company has recorded project costs through June 30, 1995
of approximately $13.7 million of which approximately $10.9
million was incurred in 1995. Outstanding purchase
commitments at June 30, 1995 were approximately $3.4 million.
Refer to Note 3 herein regarding financing for this project.
5. INCOME TAXES
During the second quarter of 1995 the deferred tax valuation
allowance decreased by $10 million based on a current
evaluation of the Company's expectations of the likelihood of
future operating income related to its existing backlog. The
first $5 million of this decrease was recorded as a reduction
in goodwill in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes"
(see Note 9 in the Company's 1994 Annual Report on Form 10-K).
The remaining $5 million was recorded as a reduction of income
tax expense. The income tax benefit of $3.1 million recorded
in the second quarter of 1995 includes this $5 million benefit
net of a tax provision of $1.9 million related to current
period operating results.
Item 2:Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following discussion should be read in conjunction with the
Company's unaudited consolidated financial statements for the
periods ended June 30, 1995 and 1994 and Management's Discussion
and Analysis of Financial Condition and Results of Operations
included under Item 7 of the Company's Annual Report on Form 10-K
for the year ended December 31, 1994 (the "1994 Form 10-K").
Overview
The Company continued the trend of improvement in its results of
operations by recording significant increases compared to the
same periods in the prior year. Net sales for the second quarter
and first six months of 1995 increased markedly over the prior
year's periods. Income from continuing operations before income
taxes for the current quarter and six month period also showed
<PAGE>
significant increases, more than doubling the level reported in
the same periods in 1994. Further, second quarter 1995 net
income surpassed net income reported in each quarter of 1994 and
represents the highest quarterly net income for the last six
years, even excluding a tax benefit recorded in the second
quarter of 1995.
The Company's backlog at June 30, 1995 was $1.35 billion
(excluding options). Included in the backlog is a $144 million
contract, awarded in February 1995, to construct vessel
forebodies for four ocean-going product carriers. Owner
financing was completed in May of 1995 and the contract is
underway with delivery of the first two vessels scheduled for
1996 and the last two in 1997. These will be the first U.S.-flag
product carriers built in the United States in eight years and
are designed to comply fully with the provisions of the Oil
Pollution Act of 1990. Also included in the backlog at June 30,
1995 is an approximately $12.9 million contract to construct a
series of river hopper barges; the contract also contains options
for another series of barges. Delivery of the barges is
scheduled to commence in September of 1995. These two contracts
are significant in that they are tangible results of the
Company's continuing efforts to secure commercial construction
contracts. Also, these two contracts will be the first to
utilize the new steel processing facilities which are part of the
Company's $20 million plant modernization project. Additionally,
the Company announced on August 8, 1995 that it signed a contract
for the construction of seven 42,000 DWT product carriers. The
value of the contract was not disclosed. The contract is subject
to the receipt of a Title XI financing guarantee from the U.S.
Maritime Administration and is subject to the satisfaction of
certain other conditions.
Thus far in 1995 the Company has delivered one T-AO Oiler ("T-
AO"), which was the first double-hulled ship built in the United
States, one Landing Ship Dock - Cargo Variant ("LSD-CV") and the
last of three paddle-wheel gaming vessels. Scheduled deliveries
for the remainder of 1995 include one T-AO Oiler and the first of
the four MHC-51 Class Coastal Minehunters ("MHC").
As discussed in the 1994 Form 10-K, the Company has filed a
Request for Equitable Adjustment ("Minehunter REA") with the U.S.
Navy seeking substantial increases in the contract prices for
four MHC-51 Class Minehunters ("MHC") currently being built by
the Company. In connection with developing the Minehunter REA,
the Company realized that it would be necessary to increase its
cost to complete estimates for the MHC vessels. The Company, in
consultation with outside counsel, reviewed the Minehunter REA
and determined a minimum estimate of its probable recoverable
amount. During the second quarter of 1995, based on an
evaluation of the underlying facts and circumstances, the cost to
complete estimates and minimum probable amount of recovery were
revised upward. Based on its review and supported by the view of
outside counsel that they had no reason to believe that the use
of $23 million in quantifying the minimum probable amount of
recovery was unreasonable, management concluded that it was
appropriate to offset the loss that it would have otherwise had
to recognize with respect to the MHC program by such amount. In
addition, the effects of the cost increase have been partially
<PAGE>
offset also by certain contractual cost sharing and cost
escalation provisions which obligate the U.S. Navy to bear a
portion of the additional costs. To the extent that any portion
of the $23 million recognized is not recovered, then losses in
addition to those previously recorded will have to be recognized.
The Minehunter REA is being evaluated currently by the U.S. Navy.
As detailed in Note 12 of the Company's Annual Report on the 1994
Form 10-K and as discussed in Note 4 of the notes to the
consolidated financial statements herein, the Company has been
informed that it is a potentially responsible party ("PRP") in
connection with an oil reclamation site operated by an
unaffiliated company. The Company, along with other PRPs, has
fully funded its share of the clean-up costs incurred to date
under a preliminary agreement to fund the site's remediation.
Additional work scheduled for the site includes completion of
studies in 1995 and 1996, and, if required by the results of
these studies, subsequent post-closure activities. Future
aggregate expenses are expected to be approximately $1 million,
exclusive of any groundwater monitoring and remediation, to which
no estimate is currently available. The Company believes that
its proportionate share of expenditures for any additional
remedial work will not have a material effect on the Company's
financial statements. In addition, the Company believes that its
proportionate responsibility for the cleanup costs will not be
materially increased.
Additionally, since July 1986 a number of "toxic tort" lawsuits
have been filed against the Company and numerous other defendants
alleging various claims in connection with the oil reclamation
site discussed above. The plaintiffs also seek substantial
punitive damages. These cases have been consolidated and
certified as a class action.
In May of 1995 the Board of Directors of the Company approved a
settlement of the class action subject to approval by the Federal
District Court before which the action is currently pending. On
July 28, 1995 the Federal District Court for the Middle District
of Louisiana approved the settlement of the class action
litigation asserting various toxic tort claims arising out of the
Walker, La. oil reclamation site. Under the terms of the
settlement, the Company will pay $4.0 million into a settlement
fund on or before August 27, 1995. Additionally, as part of the
settlement, the Company will issue a $2.0 million unsecured note
to the plaintiff class. The note will bear interest at 8% per
annum and will be due on January 28, 1997. Management of the
Company believes that the cash payment and issuance of the note
will not have a material effect on the Company's financial
condition and results of operations because the Company has
recorded an accrual for the $6 million settlement as of June 30,
1995 and has sufficient cash available from operations or under
its credit facility to fund the cash payment and the note.
Avondale could also be responsible for payment to the plaintiffs
of an additional sum of up to $6 million in the event that the
plaintiffs are unsuccessful in collecting certain amounts with
respect to rights that will be assigned to them under the
settlement agreement.
<PAGE>
With respect to the potential contingent liability of the Company
to pay additional sums under the settlement agreement, management
believes that the eventual resolution of this matter will not
have a material effect on the Company's financial statements.
The Company will continue to consult with its counsel and
establish a reserve against such exposure in an appropriate
amount if and when circumstances warrant.
As discussed in the 1994 Form 10-K, certain of the Company's
operations closed in 1994 upon the completion of their respective
contracts. Two of these facilities are currently offered for
sale while the Company continues to seek alternative uses for
these facilities. With respect to environmental matters, the
Company currently is not aware of any material liabilities to be
incurred for site restoration, post closure, monitoring
commitments, or other exit costs that may occur or result from
the sale, disposal or abandonment of any of these properties.
Results of Operations
The Company recorded net income of $8.5 million, or $0.59 per
share, for the second quarter of 1995 compared to $2.1 million,
or $0.14 per share, for the second quarter of 1994, representing
a fourfold increase in net income over the second quarter of
1994. For the first six months of 1995 the Company recorded net
income of $11.5 million, or $0.80 per share, compared to $4.1
million, or $0.28 per share, for the same period in 1994, or more
than double the level for the first six months of 1994.
Additionally, the Company recorded income from operations of $6.2
million in the current quarter and $12.0 million for the first
six months of 1995, representing an increase of 94% over the
same periods in the prior year.
The significant increases in the Company's operating results in
the current periods primarily reflect operating profits
recognized on the LSD-CV 52 and seven T-AO contracts. As
disclosed in Item 7 of the 1994 Form 10-K, the operating profit
projected to be recognized in 1995 will be related principally to
these two contracts. The Company also recorded in the second
quarter of 1995 a $2.25 million reversal of losses, recorded in
prior years on the contract to construct the three LSD-CVs,
representing improvement in the estimated costs to complete this
contract which is approximately 94% complete. Also contributing
to the 1995 income from operations were profits recognized on the
third gaming vessel (delivered in June of 1995) and by the
Company's marine repair and wholesale steel operations.
Further, the Company recorded in the second quarter of 1995 a
$3.1 million net income tax benefit (as discussed below).
In the third quarter of 1994 the Company decided to discontinue
its service contracting business. The Company has restated 1994
second quarter and six month results to reflect losses from
discontinued operations of approximately $396,000, or $0.03 per
share, and approximately $280,000, or $0.02 per share,
respectively.
Net sales for the current quarter and first six months of 1995
reflect an increase of approximately $34.4 million, or 29%, and
<PAGE>
approximately $66.6 million, or 30%, respectively, as compared to
the same periods in the prior year. The increases in net sales
are primarily due to increased net sales revenues recorded on the
contracts to construct the LSD-CV 52, the first of three
Strategic Sealift ships, the Icebreaker and the contract to
construct the forebodies for the four product carriers. These
increases were partially offset by reduced net sales revenues
recorded on the contracts to construct the three LSD-CVs and the
seven T-AOs as these contracts are in the latter stages of
completion.
Gross profit for the second quarter and first six months of 1995
increased approximately $2.5 million, or 22%, and approximately
$6.4 million, or 31%, respectively, compared to the same periods
in 1994. The increases in gross profit are primarily due to
profits recognized on contracts to construct the LSD-CV 52, the
seven T-AOs and the three LSD-CVs (as discussed above). Also
contributing to the 1995 gross profit were profits recognized on
the third gaming vessel and profits recognized by the Company's
marine repair and wholesale steel operations.
Selling, general and administrative ("SG&A") expenses for the
second quarter and first six months of 1995 were consistent with
the same periods in the prior year. The first six months of 1995
increased slightly as compared to the prior year due primarily to
an overall increase in operating activity as noted above and in
part to an increase in indirect labor and associated costs
resulting from an across-the-board rate increase effective
January 1, 1995.
Interest expense increased by approximately $325,000, or 34%, for
the second quarter of 1995 and approximately $400,000, or 19%,
for the first six months of 1995 as compared to the same periods
in the prior year. The overall increase in interest expense for
1995 compared to 1994 is due principally to interest costs
associated with the $17.8 million Title XI financing completed in
February 1995 and the note issued in 1994 to the Company's former
corporate parent (as discussed in Note 12 of the Company's 1994
Annual Report on Form 10-K).
The second quarter and first six months of 1995 included net
income tax benefits of $3.1 million, or $0.21 per share, and $1.3
million, or $0.09 per share, respectively. As further discussed
in Note 5 of the notes to the consolidated financial statements
herein, the net income tax benefit is principally the result of
recognizing during the second quarter of 1995, for financial
reporting purposes, a $5 million income tax benefit from certain
net operating loss carry forwards available to offset estimated
future taxable earnings. This $5 million tax benefit was offset
by a non-cash tax provision during the second quarter of 1995 of
$1.9 million. There was no provision for income taxes in the
same periods in 1994 as an income tax benefit related to
available net operating loss carry forwards was recognized only
to the extent of current operating results.
Liquidity and Capital Resources
During the six months ended June 30, 1995, the Company
experienced a net increase in its cash flow of approximately
<PAGE>
$18.7 million. The increase in net cash flow principally
resulted from operations, a decrease in accounts receivable, the
proceeds from the sale of assets (as discussed below) and the
issuance of mortgage bonds discussed in the next paragraph. As
further discussed below, a portion of the cash used for capital
expenditures represents interim funding of the plant
modernization project until such time as the Company is
reimbursed from proceeds of the permanent financing.
In February 1995 the Company completed financing of $17.8 million
of its approximately $20 million plant modernization effort by
issuing mortgage bonds utilizing a U.S. Government guarantee
under Title XI of the Merchant Marine Act, 1936, as amended. The
terms of the Title XI guarantee provide for the proceeds from the
financing to be held in a construction escrow fund and released
to the Company as allowable project costs are incurred by the
Company and approved by the U.S. Department of Transportation,
Maritime Administration. At June 30, 1995 the Company has
determined that it is currently entitled to approximately $4.4
million of the escrowed funds and accordingly has classified this
amount as a current asset in Restricted Short-term Investments.
The balance of the funds, approximately $6.5 million at June 30,
1995, is recorded as Funds Held for Construction which represents
the balance of the project costs which the Company will be
entitled to receive over the remaining construction period of the
modernization project. The Company has recorded project costs to
date of approximately $13.7 million of which approximately $10.9
million was incurred in 1995. Outstanding purchase commitments
at June 30, 1995 were approximately $3.4 million. The project
currently is estimated for completion during the third quarter of
1995.
Additionally, in the second quarter of 1995 the Company obtained
additional liquidity as its improved financial results enabled it
to amend its revolving credit agreement. The amendment, among
other things, increased the amount of the credit agreement to
$42.5 million and extended the term of the credit agreement from
May 1996 to May 1997. Further, the amendment revised the credit
agreement to permit the issuance of the mortgage bonds discussed
above and revised the level of permitted capital expenditures and
certain coverage ratios to take into consideration the plant
modernization project. There have been no borrowings in 1995
under the revolving credit agreement. There were $25.5 million
of letters of credit outstanding under the facility at June 30,
1995. The Company believes that its capital resources will be
sufficient to finance current and projected operations.
As previously disclosed in the Company's first quarter 1995 Form
10-Q filing, on May 12, 1995 the Company sold substantially all
of the operating assets used in its foundry operations. The sale
generated approximately $3.1 million of cash proceeds and will
not significantly affect the Company's results of operations.
<PAGE>
PART II - OTHER INFORMATION
Item 1.Legal Proceedings
In May 1995, the Board of Directors of the Company
approved a settlement of the class action discussed in
further detail in Note 4 of the notes to the financial
statements contained elsewhere in this Form 10-Q. On
July 28, 1995 the Federal District Court for the Middle
District of Louisiana approved the settlement of the class
action litigation asserting various toxic tort claims
arising out of the Walker, La. oil reclamation site.
Under the terms of the settlement, the Company will pay
$4.0 million into a settlement fund on or before August
27, 1995. Additionally, as part of the settlement, the
Company will issue a $2.0 million unsecured note to the
plaintiff class. The note will bear interest at 8% per
annum and will be due on January 28, 1997. Management of
the Company believes that the cash payment and issuance of
the note will not have a material effect on the Company's
financial condition and results of operations because the
Company has recorded an accrual for the $6 million
settlement as of June 30, 1995 and has sufficient cash
available from operations or under its credit facility to
fund the cash payment and the note.
Avondale could also be responsible for payment to the
plaintiffs of an additional sum of up to $6 million in the
event that the plaintiffs are unsuccessful in collecting
certain amounts with respect to rights that will be
assigned to them under the settlement agreement.
Item 2.Changes in Securities
Not applicable.
Item 3.Defaults Upon Senior Securities
Not applicable.
Item 4.Submission of Matters to a Vote of Security Holders
The Annual Meeting of the shareholders of Avondale
Industries, Inc. (The "Meeting") was held on April
28, 1995 and reconvened on June 12 and June 19,
1995 and 13,955,760 shares were present in person
or by proxy at the meeting. The voting tabulation
follows:
(a) The election of the following to the Board of
Directors:
Francis R. Donovan, 9,373,282 votes for, 593,248
votes withheld; William A. Harmeyer, 9,346,192 votes
for, 620,338 votes withheld; and Thomas M. Kitchen,
<PAGE>
9,352,157 votes for, 614,373 votes withheld.
The following is a list of each other director whose
term of office as a director continued after the
meeting:
Albert L. Bossier, Jr., Anthony J. Correro, III,
Kenneth B. Dupont, and Hugh A. Thompson.
(b) A proposal regarding constitution of the Board's
Compensation Committee: 8,035,494 against, 778,021
for, 135,753 abstained and zero broker nonvote.
(c) A proposal to urge the Board of Directors to redeem
the rights issued under the Shareholder Protection
Rights Plan: 7,491,206 against, 1,326,752 for,
131,310 abstained and zero broker nonvote.
(d) A proposal to urge the Board of Directors to
implement confidential voting by shareholders:
7,537,884 against, 1,288,205 for, 94,604 abstained
and zero broker nonvotes.
(e) A proposal related to declassification of the Board
of Directors: 6,794,174 against, 2,015,296 for,
139,798 abstained and zero broker nonvotes.
(f) A proposal regarding the process of bylaw adoption,
amendment or repeal: 5,248,749 against, 2,073,251
for, 121,047 abstained and zero broker nonvotes.
Item 5.Other Information
Not applicable.
Item 6.Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Articles of Incorporation of the Company(1)
3.2 Bylaws of the Company, as amended on July 17,
1995.
10.2 Other Operating Contracts
(d) Agreement dated May 12, 1995 by and between
the Company and American Heavy Lift Shipping
Company for the construction of one ocean-
going product tanker, S/S King.
(e) Agreement dated May 12, 1995 by and between
the Company and American Heavy Lift Shipping
Company for the construction of one ocean-
going product tanker, S/S Knight.
(f) Agreement dated May 12, 1995 by and between
<PAGE>
the Company and American Heavy Lift Shipping
Company for the construction of one ocean-
going product tanker, S/S Solar.
(g) Agreement dated May 12, 1995 by and between
the Company and American Heavy Lift Shipping
Company for the construction of one ocean-
going product tanker, S/S Spray.
10.3 Employee Benefit Plans
(c) The Company's Amended and Restated Employee
Stock Ownership Plan and the Related Trust
Agreement(2) , as amended and restated on
December 5, 1994(3), as further amended by
Amendment No. 1 adopted April 5, 1995(4)
and as further amended by Amendment No. 2
adopted June 16, 1995.
(d) The Company's Pension Plan as Amended and
Restated(3) as further amended by Amendment
No. 1 adopted June 16, 1995.
_______________
(1) Incorporated by reference from the Company's
Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 1993.
(2) Incorporated by reference from the Company's
Registration Statement on Form S-1 (Registration No.
33-20145) filed with the Commission on
February 16, 1988.
(3) Incorporated by reference from the Company's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1994.
(4) Incorporated by reference from the Company's
Quarterly Report on Form 10-Q for the quarter ended
March 31, 1995.
15 Letter re: unaudited interim financial
information.
27 Financial Data Schedule
(b) Reports on Form 8-K:
Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
AVONDALE INDUSTRIES, INC.
Date: August 14, 1995 By:/s/ ALBERT L. BOSSIER, JR.
--------------------------
Albert L. Bossier, Jr.
Chairman, President &
Chief Executive Officer
Date: August 14, 1995 By:/s/ THOMAS M. KITCHEN
---------------------
Thomas M. Kitchen
Vice President &
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Number Description
3.1 Articles of Incorporation of the Company(1)
3.2 Bylaws of the Company, as amended on July 17, 1995.
10.2 Other Operating Contracts
(d) Agreement dated May 12, 1995 by and between
the Company and American Heavy Lift Shipping
Company for the construction of one ocean-
going product tanker, S/S King.
(e) Agreement dated May 12, 1995 by and between
the Company and American Heavy Lift Shipping
Company for the construction of one ocean-
going product tanker, S/S Knight.
(f) Agreement dated May 12, 1995 by and between
the Company and American Heavy Lift Shipping
Company for the construction of one ocean-
going product tanker, S/S Solar.
(g) Agreement dated May 12, 1995 by and between
the Company and American Heavy Lift Shipping
Company for the construction of one ocean-
going product tanker, S/S Spray.
10.3 Employee Benefit Plans
(c) The Company's Amended and Restated Employee Stock
Ownership Plan and the Related Trust Agreement(2) , as
amended and restated on December 5, 1994(3), as
further amended by Amendment No. 1 adopted April 5,
1995(4) and as further amended by Amendment No. 2
adopted June 16, 1995.
(d) The Company's Pension Plan as Amended and Restated(3)
as further amended by Amendment No. 1 adopted June 16,
1995.
_______________
(1) Incorporated by reference from the Company's
Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 1993.
(2) Incorporated by reference from the Company's
Registration Statement on Form S-1 (Registration No.
33-20145) filed with the Commission on
February 16, 1988.
(3) Incorporated by reference from the Company's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1994.
<PAGE>
(4) Incorporated by reference from the Company's
Quarterly Report on Form 10-Q for the quarter ended
March 31, 1995.
15 Letter re: unaudited interim financial information.
27 Financial Data Schedule
<PAGE>
BY-LAWS
OF
AVONDALE INDUSTRIES, INC.
(as adopted on March 20, 1990)
(Section 3.1 of which was amended on June 13, 1994,
Section 5.2 of which was amended and Section 5.4
of which was deleted on December 5, 1994 and
Section 2.14 of which was added on July 17, 1995)
SECTION I
OFFICES
1.1 Principal Office. The principal office of the
Corporation shall be located at 5100 River Road, Avondale,
Louisiana 70094.
1.2 Additional offices. The Corporation may have such
offices at such other places as the Board of Directors may from
time to time determine or the business of the Corporation may
require.
SECTION 2
SHAREHOLDERS MEETINGS
2.1 Place of Meetings. Unless otherwise required by law or
these By-laws, all meetings of the shareholders shall be held at
the principal office of the Corporation or at such other place,
within or without the State of Louisiana, as may be designated by
the Board of Directors.
2.2 Annual Meetings; Notice Thereof. An annual meeting of
the shareholders shall be held on the fourth Monday of April in
each year, at 10:00 a.m., or at such other date or at such other
time specified as the Board of Directors shall designate, for the
purpose of electing directors and for the transaction of such
other business as may be properly brought before the meeting. If
no annual shareholders' meeting is held for a period of eighteen
months, any shareholder may call such meeting to be held at the
registered office of the Corporation as shown on the records of
the Secretary of State of Louisiana.
2.3 Special Meetings. Special meetings of the share-
holders, for any purpose or purposes, may be called by the
Chairman of the Board, Chief Executive Officer and President or
the Board of Directors. At any time, upon the written request of
any shareholder or group of shareholders holding in the aggregate
at least 80% of the Total Voting Power (such term to have the
same meaning in these By-laws as is assigned in Article III of
the Articles of Incorporation), the Secretary shall call a
special meeting of shareholders to be held at the registered
office of the Corporation at such time as the Secretary may fix,
not less than fifteen nor more than sixty days after the receipt
of said request, and if the Secretary shall neglect or refuse to
fix such time or to give notice of the meeting, the shareholder
or shareholders making the request may do so. Such request must
state the specific purpose or purposes of the proposed special
meeting and the business to be conducted thereat shall be limited
<PAGE>
to such purpose or purposes.
2.4 Notice of Meetings. Except as otherwise provided by
law, the authorized person or persons calling a shareholders'
meeting shall cause written notice of the time, place and purpose
of the meeting to be given to all shareholders entitled to vote
at such meeting, at least ten days and not more than sixty days
prior to the day fixed for the meeting. Notice of the annual
meeting need not state the purpose or purposes thereof, unless
action is to be taken at the meeting as to which notice is
required by law or the By-laws. Notice of a special meeting shall
state the purpose or purposes thereof, and the business conducted
at any special meeting shall be limited to the purpose or
purposes stated in the notice.
2.5 List of Shareholders. At every meeting of
shareholders, a list of shareholders entitled to vote, arranged
alphabetically and certified by the Secretary or by the agent of
the Corporation having charge of transfers of shares, showing the
number and class of shares held by each such shareholder on the
record date for the meeting, shall be produced on the request of
any shareholder.
2.6 Quorum. At all meetings of shareholders, the holders
of a majority of the Total Voting Power shall constitute a quorum
provided that this subsection shall not have the effect of
reducing the vote required to approve or affirm any matter that
may be established by law, the Articles of Incorporation or these
By-laws.
2.7 Voting. When a quorum is present at any meeting, the
vote of the holders of a majority of the Voting Power (as defined
in Article III of the Articles of Incorporation) present in
person or represented by proxy shall decide each question brought
before such meeting, unless the question is one upon which, by
express provision of law or the Articles of Incorporation, a
different vote is required, in which case such express provision
shall govern and control the decision of such question. Directors
shall be elected by plurality vote.
2.8 Proxies. At any meeting of the shareholders, every
shareholder having the right to vote shall be entitled to vote in
person or by proxy appointed by an instrument in writing
subscribed by such shareholder and bearing a date not more than
eleven months prior to the meeting, unless the instrument
provides for a long period, but in no case will an outstanding
proxy be valid for longer than three years from the date of its
execution, provided that in no event may a proxy be voted at a
meeting called pursuant to La. R.S. 12:138 unless it is executed
and dated by the shareholder within 30 days of the date of such
meeting. The person appointed as proxy need not be a shareholder
of the Corporation.
2.9 Adjournments. Adjournments of any annual or special
meeting of shareholders may be taken without new notice being
given unless a new record date is fixed for the adjourned
meeting, but any meeting at which directors are to be elected
shall be adjourned only from day to day until such directors
shall have been elected.
<PAGE>
2.10 Withdrawal. If a quorum is present or represented at a
duly organized meeting, such meeting may continue to do business
until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum as fixed in Section 2.6
of these By-laws, or the refusal of any shareholders present to
vote.
2.11 Lack of Quorum. If a meeting cannot be organized
because a quorum has not attended, those present may adjourn the
meeting to such time and place as they may determine, subject,
however, to the provisions of Section 2.9 hereof. In the case of
any meeting called for the election of directors, those who
attend the second of such adjourned meetings, although less than
a quorum as fixed in Section 2.6 hereof, shall nevertheless
constitute a quorum for the purpose of electing directors.
2.12 Presiding officer. The Chairman of the Board, Chief
Executive Officer and President or in his absence, a chairman
designated by the Board of Directors, shall preside at all
shareholders' meetings.
2.13 Definition of Shareholder. As used in these By-laws,
and unless the context otherwise requires, the term shareholder
shall mean a person who is (i) the record holder of shares of the
Corporation's voting stock or (ii) a registered holder of any
bonds, debentures or similar obligations granted voting rights by
the Corporation pursuant to La. R.S. 12:75A.
2.14 Shareholder Proposals. No shareholder proposal shall
be considered by the shareholders at any annual or special
meeting unless such proposal has been properly brought before
such meeting. No shareholder proposal shall be deemed to have
been properly brought before a special meeting of shareholders
unless (i) the proposal is submitted by the person or persons
calling the special meeting and (ii) the proposal is contained in
the notice of the meeting. No shareholder proposal shall be
deemed to have been properly brought before an annual meeting
unless each of the following conditions is satisfied:
(a) Sufficient notice of the proposal must be received
by the Secretary of the Corporation not less than 120 days
in advance of the date in the current year that corresponds
to the date on which proxy materials were first mailed by
the Corporation in connection with the previous year's
annual meeting. In the event of the change of the date of
the annual meeting to a date that is 30 days earlier or
later than the date in the current year that corresponds to
the date on which the annual meeting was held in the
previous year, or if no annual meeting was held in the
previous year, sufficient notice of the proposal must be
received by the Secretary of the Corporation no later than
the date set by the Corporation in a public announcement to
shareholders, which date shall be no earlier than a
reasonable time before the Corporation's proxy solicitation
is first made in connection with the meeting. Notice of the
proposal will be sufficient only if it contains (i) a
complete and accurate description of the proposal; (ii) a
statement that the shareholder intends to attend the meeting
and present the proposal and to hold of record securities of
<PAGE>
the Corporation entitled to vote at the meeting through the
meeting date; and (iii) the shareholder's name and address
and the number of shares of the Corporation's voting
securities that the shareholder holds of record or
beneficially as of the notice date. The shareholder shall
continue to hold of record securities of the Corporation
entitled to vote at the meeting through the meeting date.
(b) The Board of Directors shall have the power to
limit the shareholder proposals to be considered at a
meeting to the first ten shareholder proposals of which the
Secretary of the Corporation receives sufficient notice.
(c) If the Secretary of the Corporation has received
sufficient notice of a shareholder proposal that may
properly be brought before the meeting, a shareholder
proposal sufficient notice of which is subsequently received
by the Secretary and that is substantially duplicative of
the first proposal shall not be properly brought before the
meeting. If a shareholder proposal deals with substantially
the same subject matter as a prior proposal submitted to
shareholders at a meeting held within the preceding five
calendar years, it shall not be properly brought before any
meeting held within three calendar years after the latest
such previous submission, provided that:
(i) if the proposal was submitted at
only one meeting during such
preceding period, it received less
than 3% of the total number of
votes cast in regard thereto; or
(ii) if the proposal was submitted at
only two meetings during such
preceding period, it received at
the time of its second submission
less than 6% of the total number of
votes cast in regard thereto; or
(iii) if the proposal was submitted at
three or more meetings during such
preceding period, it received at
the time of its latest submission
less than 10% of the total number
of votes cast in regard thereto.
(d) Notwithstanding compliance with Sections 2.14(a),
(b), and (c), no shareholder proposal shall be deemed to be
properly brought before a shareholders' meeting if it is not
a proper subject for action by shareholders under Louisiana
law or the Articles of Incorporation.
(e) Any proposal failing to comply with Sections
2.14(a), (b), (c), or (d) shall not be considered at the
meeting and, if introduced at the meeting, shall be ruled
out of order. If a shareholder presents a proposal at a
meeting but does not continue to hold of record securities
of the Corporation entitled to vote at the meeting through
the meeting date, as required by Section 2.14(a), no
<PAGE>
proposal by that shareholder shall be considered at any
shareholders' meeting held in the following two calendar
years.
(f) Nothing in this Section 2.14 is intended to confer
any rights to have any proposal included in the notice of
any meeting or in proxy materials related to such meeting.
SECTION 3
DIRECTORS
3.1 Number. All of the corporate powers shall be vested
in, and the business and affairs of the Corporation shall be
managed by, a Board of Directors. Except as otherwise fixed by
or pursuant to Article III of the Articles of Incorporation (as
it may be duly amended from time to time) relating to the rights
of the holders of any class or series of stock having a
preference over the Common Stock as to dividends or upon
liquidation to elect, by class vote, additional directors under
particular circumstances, the Board of Directors shall consist of
not less than seven and not more than nine natural persons, as
established from time to time by a resolution of the Board of
Directors provided that, if after proxy materials for any meeting
of shareholders at which directors are to be elected are mailed
to shareholders any person or persons named therein to be
nominated at the direction of the Board of Directors becomes
unable or unwilling to serve, the foregoing number of authorized
directors as provided by the Board resolution then in effect
shall be automatically reduced by a number equal to the number of
such persons unless the Board of Directors, by a majority vote of
the entire Board, selects an additional nominee. The Board of
Directors may, by a two-thirds vote, amend this Section 3.1 to
increase or decrease the number of directors, provided that no
amendment to this Section to decrease the number of directors
shall shorten the term of any incumbent director. No director
need be a shareholder. The Secretary shall have the power to
certify at any time as to the number of directors authorized and
as to the class to which each director has been elected or
assigned.
3.2 Powers. The Board may exercise all such powers of the
Corporation and do all such lawful acts and things which are not
by law, the Articles of Incorporation or these By-laws directed
or required to be done by the shareholders.
3.3 Classes. The Board of Directors, other than those
directors who may be elected by the holders of any class or
series of stock having preference over the Common Stock as to
dividends or upon liquidation, shall be divided into three
classes as nearly equal in number as may be, with the initial
term of office of Class I expiring at the first annual meeting of
shareholders occurring more than nine months after the
incorporation of the Corporation, of Class II expiring at the
first succeeding annual meeting of shareholders and of Class III
expiring at the second succeeding annual meeting of shareholders.
Any increase or decrease in the number of directors shall be
apportioned by the Board of Directors so that all classes of
directors shall be as nearly equal in number as can be.
<PAGE>
3.4 General Election. At each annual meeting of share-
holders, directors shall be elected to succeed those directors
whose terms then expire. Such newly elected directors shall serve
until the third succeeding annual meeting of shareholders after
their election and until their successors are elected and
qualified. A director elected to fill a vacancy shall hold office
for a term expiring at the annual meeting at which the term of
the class to which he shall have been elected expires. No
decrease in the number of directors constituting the Board of
Directors shall shorten the term of any incumbent director.
3.5 Vacancies. Except as otherwise provided in the
Articles of Incorporation or these By-laws (a) the office of a
director shall become vacant if he dies, resigns or is removed
from office and (b) the Board of Directors may declare vacant the
office of a director if he (i) is interdicted or adjudicated an
incompetent, (ii) is adjudicated a bankrupt, (iii) in the sole
opinion of the Board of Directors becomes incapacitated by
illness or other infirmity so that he is unable to perform his
duties for a period of six months or longer, or (iv) ceases at
any time to have the qualifications required by law, the Articles
of Incorporation or these By-laws.
3.6 Filling Vacancies. In the event of a vacancy (includ-
ing any vacancy resulting from an increase in the authorized
number of directors, or from failure of the shareholders to elect
the full number of authorized directors) the remaining directors,
even though not constituting a quorum, may fill any vacancy on
the Board for the unexpired term by a vote of at least two-thirds
of the directors remaining in office at any time that there is no
Related Person (as such term is defined in Article V.A.2 of the
Articles of Incorporation) and a two-thirds vote of all
Continuing Directors who remain in office at any time there is a
Related Person, provided that the shareholders shall have the
right, at any special meeting called for the purpose prior to
such action by the Board, to fill the vacancy.
3.7 Directors Elected by Preferred Shareholders. Notwith-
standing anything in the foregoing to the contrary, whenever the
holders of any one or more series of preferred stock of the
Corporation shall have the right, voting separately as a class,
to elect one or more directors of the Corporation, the provisions
of Article III of the Articles of Incorporation (as it may be
duly amended from time to time) fixing the rights and preferences
of such preferred stock shall govern with respect to the
election, removal, vacancies or other related matters with
respect to such directors.
3.8 Notice of Shareholder Nominees. Only persons who are
nominated in accordance with the procedures set forth in this
Section 3.8 shall be eligible for election as directors. Nomina-
tions of persons for election to the Board of Directors of the
Corporation may be made at a meeting of shareholders by or at the
direction of the Board of Directors or by a shareholder of the
Corporation entitled to vote for the election of directors at the
meeting who complies with the notice procedures set forth in this
Section 3.8. Such nominations, other than those made by or at the
direction of the Board of Directors, shall be made pursuant to
timely notice in writing to the Secretary of the Corporation. To
<PAGE>
be timely, a shareholder's notice must be delivered or mailed and
received at the principal executive offices of the Corporation
not less than 45 days nor more than 90 days prior to the meeting;
provided, however, that in the event that less than 55 days
notice or prior public disclosure of the date of the meeting is
given or made to shareholders, notice by the shareholder to be
timely must be received no later than the close of business on
the 10th day following the day on which such notice of the date
of the meeting was mailed or such public disclosure was made.
Such shareholder's notice shall set forth the following:
a. as to each person whom the shareholder proposes to
nominate for election or re-election as a director (i) the
name, age, business address and residence address of such
person, (ii) the principal occupation or employment of such
person, (iii) the class and number of shares of the capital
stock of the Corporation of which such person is the
beneficial owner (determined in accordance with Article
V.A.2 of the Articles of Incorporation) and (iv) any other
information relating to such person that would be required
to be disclosed in solicitations of proxies for election of
directors, or would be otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act
of 1934, as amended (including without limitation such
person's written consent to being named in the proxy
statement as a nominee and to serving as a director if
elected); and
b. as to the shareholder giving the notice (i) the
name and address of such shareholder and (b) the class and
number of shares of the capital stock of the Corporation of
which such shareholder is the beneficial owner (determined
in accordance with Article V.A.2 of the Articles of
Incorporation) . If requested in writing by the Secretary
the Corporation at least 15 days in advance of the meeting,
such shareholder shall disclose to the Secretary, within 10
days of such request, whether such person is the sole
beneficial owner of the shares held of record by him; and,
if not, the name and address of each other person known by
the shareholder of record to claim a beneficial interest in
such shares.
At the request of the Board of Directors, any person nominated by
or at the direction of the Board of Directors for election as a
director shall furnish to the Secretary of the Corporation that
information required to be set forth in a shareholder's notice of
nomination which pertains to the nominee. If a shareholder seeks
to nominate one or more persons as directors, the Secretary shall
appoint two Inspectors, who shall not be affiliated with the
Corporation, to determine whether a shareholder has complied with
this Section 3.8. If the Inspectors shall determine that a
shareholder has not complied with this Section 3.8, the
Inspectors shall direct the Chairman of the meeting to declare to
the meeting that a nomination was not made in accordance with the
procedures prescribed by the Articles of Incorporation or these
By-laws; and the Chairman shall so declare to the meeting and the
defective nomination shall be disregarded.
The provisions of this Section 3.8 shall not apply to the
<PAGE>
election of any directors which the holders of preferred stock of
the Corporation, voting separately as a class, may be entitled to
elect.
3.9 Compensation of Directors. Directors as such, shall
receive such compensation for their services as may be fixed by
resolution of the Board of Directors and shall receive their
actual expenses of attendance, if any, for each regular or
special meeting of the Board; provided that nothing herein
contained shall be construed to preclude any director from
serving the Corporation in any other capacity and receiving
compensation therefor.
SECTION 4
MEETINGS OF THE BOARD
4.1 Place of Meetings. The meetings of the Board of
Directors may be held at such place within or without the State
of Louisiana as a majority of the directors may from time to time
appoint.
4.2 Initial Meetings. The first meeting of each newly
elected Board shall be held immediately following the share-
holders' meeting at which the Board is elected and at the same
place as such meeting, and no notice of such first meeting shall
be necessary for the newly elected directors in order legally to
constitute the meeting.
4.3 Regular Meetings; Notice. Regular meetings of the
Board may be held at such times as the Board may from time to
time determine. Notice of regular meetings of the Board of
Directors shall be required, but no special form of notice or
time of notice shall be necessary.
4.4 Special Meetings; Notice. Special meetings of the
Board may be called by the Chairman of the Board, Chief Executive
Officer and President on reasonable notice given to each
director, either personally or by telephone, mail or by telegram.
Special meetings shall be called by the Chairman of the Board,
Chief Executive Officer and President, or the Secretary in like
manner and on like notice on the written request of a majority of
the directors and if such officers fail or refuse, or are unable
within 24 hours to call a meeting when requested, then the
directors making the request may call the meeting on two days'
written notice given to each director. The notice of a special
meeting of directors need not state its purpose or purposes, but
if the notice states a purpose or purposes and does not state a
further purpose to consider such other business as may properly
come before the meeting, the business to be conducted at the
special meeting shall be limited to the purposes stated in the
notice.
4.5 Waiver of Notice. Directors present at any regular or
special meeting shall be deemed to have received due, or to have
waived, notice thereof, provided that a director who participates
in a meeting by telephone (as permitted by Section 4.9 hereof)
shall not be deemed to have received or waived due notice if, at
the beginning of the meeting, he objects to the transaction of
any business because the meeting is not lawfully called.
<PAGE>
4.6 Quorum. A majority of the Board shall be necessary to
constitute a quorum for the transaction of business, and except
as otherwise provided by law or the Articles of Incorporation or
these By-laws, the acts of a majority of the entire Board of
Directors at a meeting at which a quorum is present shall be the
acts of the Board. If a quorum is not present at any meeting of
the Board of Directors, the directors present may adjourn the
meeting from time to time without notice other than announcement
at the meeting, until a quorum is present.
4.7 Withdrawal. If a quorum is present when the meeting
convened, the directors present may continue to do business,
taking action by vote of a majority of a quorum as fixed in
Section 4.6 hereof, until adjournment, notwithstanding the
withdrawal of enough directors to leave less than a quorum as
fixed in Section 4.6 hereof or the refusal of any director
present to vote.
4.8 Action by Consent. Any action which may be taken at a
meeting of the Board or any committee thereof, may be taken by a
consent in writing signed by all of the directors or by all
members of the committee, as the case may be, and filed with the
records of proceedings of the Board or Committee.
4.9 Meetings by Telephone or Similar
Communication. Members of the Board may participate at and be
present at any meeting of the Board or any committee thereof by
means of conference telephone or similar communications equipment
if all persons participating in such meeting can hear and
communicate with each other.
SECTION 5
COMMITTEES OF THE BOARD
5.1 General. The Board may designate one or more
committees, each committee to consist of two or more of the
directors of the Corporation (and one or more directors may be
named as alternate members to replace any absent or disqualified
regular members), which, to the extent provided by resolution of
the Board or the By-laws, shall have and may exercise the powers
of the Board in the management of the business and affairs of the
Corporation, and may have power to authorize the seal of the
Corporation to be affixed to documents, but no such committee
shall have power or authority in reference to amending the
Articles of Incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease
or exchange of all or substantially all of the Corporation's
property and assets, recommending to the stockholders a
dissolution of the Corporation or a revocation of dissolution,
removing or indemnifying directors or amending the By-laws; and
unless the resolution expressly so provides, no such committee
shall have the power or authority to declare a dividend or
authorize issuance of stock. Such committee or committees shall
have such name or names as may be stated in the By-laws, or as
may be determined, from time to time, by the Board. Any vacancy
occurring in any such committee shall be filled by the Board, but
the President may designate another director to serve on the
committee pending action by the Board. Each such member of a
<PAGE>
committee shall hold office during the term of the Board
constituting it, unless otherwise ordered by the Board.
5.2 Compensation Committee. The Board shall establish a
Compensation Committee consisting of at least two directors. The
Compensation Committee shall administer the Performance Share
Plan, the Stock Appreciation Plan, any incentive compensation
plans involving securities of the Corporation adopted by the
Corporation in the future and employment contracts with any
employee. Each of the members of the Compensation Committee
shall be a "disinterested person" as defined in Rule 16b-3
promulgated under the Securities Exchange Act of 1934 and an
"outside director" as defined in the regulations promulgated
under 162(m) of the Internal Revenue Code. The Compensation
Committee shall determine the general compensation policies of
the Corporation and the compensation to be paid to executive
officers of the Corporation. If the Compensation Committee is
composed of an even number of persons, in the event of a
disagreement, which cannot in good faith be resolved, it will be
resolved by the affirmative vote of a majority of the entire
Board.
5.3 Audit Committee. The Board shall establish an Audit
Committee consisting of at least three directors who are not
officers or employees of the Corporation or any of its
affiliates. The Audit Committee shall (i) serve as a focal point
for communication between noncommittee directors, the independent
accountants, internal audit and management, as their duties
relate to financial accounting, reporting and controls, (ii)
assist the Board of Directors in fulfilling its fiduciary
responsibilities as to accounting policies and reporting
practices of the Corporation and all subsidiaries and the
sufficiency of auditing relative thereto and (iii) operate as the
Board's principal agent in ensuring the independence of the
Corporation's independent accountants, the integrity of
management and the adequacy of disclosure to shareholders.
SECTION 6
REMOVAL OF BOARD MEMBER
Any director or the entire Board of Directors may be removed
at any time, but only for cause (as such term is defined in
Article IV.C of the Articles of Incorporation), by the affirma-
tive vote of not less than 80% of the Total Voting Power,
provided that the removal may only be effected at a meeting of
shareholders duly called for that purpose. The shareholders at
such meeting may proceed to elect a successor or successors for
the unexpired term of the director or directors removed. Except
as provided in the Articles of Incorporation and in this Section
6, directors shall not be subject to removal.
SECTION 7
NOTICES
7.1 Form of Delivery. Whenever under the provisions of law
the Articles of Incorporation or these By-laws notice is required
to be given to any shareholder or director, it shall not be
<PAGE>
construed to mean personal notice unless otherwise specifically
provided in the Articles of Incorporation or these By-laws, but
said notice may be given by mail, addressed to such shareholder
or director at his address as it appears on the records of the
Corporation, with postage thereon prepaid. Such notices shall be
deemed to have been given at the time they are deposited in the
United States mail. Notice to a director pursuant to Section 4.4
hereof may also be given personally or by telephone or telegram
sent to his address as it appears on the records of the
Corporation.
7.2 Waiver. Whenever any notice is required to be given by
law, the Articles of Incorporation or these By-laws, a waiver
thereof in writing signed by the person or persons entitled to
said notice, whether before or after the time stated therein,
shall be deemed equivalent thereto. In addition, notice shall be
deemed to have been given to, or waived by, any shareholder or
director who attends a meeting of shareholders or directors in
person, or is represented at such meeting by proxy, without
protesting at the commencement of the meeting the transaction of
any business because the meeting is not lawfully called or
convened.
SECTION 8
OFFICERS
8.1 Designations. The officers of the corporation shall be
chosen by the directors and shall be the Chairman of the Board,
Chief Executive officer and President (with all such offices to
be held by one person), a Secretary and a Treasurer. The
directors may elect one or more Vice Presidents. Any two offices
may be held by one person, provided that no person holding more
than one office may sign, in more than one capacity, any
certificate or other instrument required by law to be signed by
two officers.
8.2 Additional Designations. The Board of Directors may
appoint such other officers as it shall deem necessary, who shall
hold their offices for such terms and shall exercise such powers
and perform such duties as shall be determined from time to time
by the Board.
8.3 Term of Office. The officers of the Corporation shall
hold office at the pleasure of the Board of Directors. Except as
otherwise provided in the resolution of the Board of Directors
electing any officer, each officer shall hold office until the
first meeting of the Board of Directors after the annual meeting
of shareholders next succeeding his or her election, and until
his or her successor is elected and qualified or until his or her
earlier resignation or removal. Any officer may resign at any
time upon written notice to the Board, to the Chairman, Chief
Executive Officer and President, or to the Secretary of the
Corporation. Such resignation shall take effect at the time
specified therein as acceptance of such resignation shall be
necessary to make it effective. The Board may remove any officer
with or without cause at any time, except that the removal of the
Chairman of the Board, Chief Executive Officer and President
shall require the vote of at least three-fourths of the entire
<PAGE>
Board. Any such removal shall be without prejudice to the
contractual rights of such offices, if any, with the Corporation,
but the election of an officer shall not in and of itself create
contractual rights. Any vacancy occurring in any office of the
Corporation by death, resignation, removal or otherwise may be
filled for the unexpired portion of the term by the Board at any
regular or special meeting.
8.4 The Chairman, Chief Executive Officer, and President.
The Chairman, Chief Executive Officer and President shall have
general and active responsibility for the management of the
business of the Corporation, shall be responsible for implement-
ing all orders and resolutions of the Board of Directors, shall
be the chief operating officer of the Corporation, and shall
supervise the daily operations of the business of the
Corporation. The Chairman of the Board shall preside at meetings
of the Board of Directors and of the shareholders.
8.5 The Vice Presidents. The Vice Presidents (if any) in
the order specified by the Board or, if not so specified, in the
order of their seniority shall, in the absence or disability of
the President, perform the duties and exercise the powers of the
President, and shall perform such other duties as the President
or the Board of Directors shall prescribe.
8.6 The Secretary. The Secretary shall attend all meetings
of the Board of Directors and all meetings of the shareholders
and record all votes and the minutes of all proceedings in a book
to be kept for that purpose. He shall give, or cause to be
given, notice of all meetings of the shareholders and special
meetings of the Board, and shall perform such other duties as may
be prescribed by the Board or President, under whose supervision
he shall be. He shall keep in safe custody the seal of the
Corporation, if any, and affix the same to any instrument
requiring it.
8.7 The Treasurer. The Treasurer shall have the custody of
the corporate funds and shall keep or cause to be kept full and
accurate accounts of receipts and disbursements in books
belonging to the Corporation and shall deposit all monies and
other valuable effects in the name and to the credit of the
Corporation in such depositories as may be designated by the
Board of Directors. He shall keep a proper accounting of all
receipts and disbursements and shall disburse the funds of the
Corporation only for proper corporate purposes or as may be
ordered by the Board and shall render to the President and the
Board at the regular meetings of the Board, or whenever they may
require it, an account of all his transactions as Treasurer and
of the financial condition of the Corporation.
SECTION 9
STOCK
9.1 Certificates. Every holder of stock in the Corporation
shall be entitled to have a certificate signed by the President
or a Vice President and the Secretary or an Assistant Secretary
evidencing the number and class (and series, if any) of shares
owned by him, containing such information as required by law and
<PAGE>
bearing the seal of the Corporation. If any stock certificate is
manually signed by a transfer agent or registrar other than the
Corporation itself or an employee of the Corporation, the signa-
ture of any such officer may be a facsimile. In case any officer,
transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to
be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with
the same effect as if he were such officer, transfer agent or
registrar at the date of issue.
9.2 Missing Certificates. The President or any Vice
President may direct a new certificate or certificates to be
issued in place of any certificate or certificates theretofore
issued by the Corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the
person claiming the certificate of stock to be lost, stolen or
destroyed. As a condition precedent to the issuance of a new
certificate or certificates, the officers of the Corporation
shall, unless dispensed with by the President, require the owner
of such lost, stolen or destroyed certificate or certificates, or
his legal representative, (i) to advertise or give the
Corporation a bond or (ii) enter into a written indemnity
agreement, in each case in an amount appropriate to indemnify the
Corporation against any claim that may be made against the
Corporation with respect to the certificate alleged to have been
lost, stolen or destroyed.
9.3 Transfers. Upon surrender to the Corporation or the
transfer agent of the Corporation, of a certificate for shares
duly endorsed or accompanied by proper evidence of succession,
assignment or authority to transfer, it shall be the duty of the
Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction
upon its books.
SECTION 10
DETERMINATION OF SHAREHOLDERS
10.1 Record Date. For the purpose of determining share-
holders entitled to notice of and to vote at a meeting, or to
receive a dividend, or to receive or exercise subscription or
other rights, or to participate in a reclassification of stock,
or in order to make a determination of shareholders for any other
proper purpose, the Board of Directors may fix in advance a
record date for determination of shareholders for such purpose,
such date to be not more than sixty days and, if fixed for the
purpose of determining shareholders entitled to notice of and to
vote at a meeting, not less than ten days, prior to the date on
which the action requiring the determination of shareholder is to
be taken.
10.2 Registered Shareholders. Except as otherwise provided
by law, the Corporation, and its directors, officers and agents
may recognize and treat a person registered on its records as the
owner of shares, as the owner in fact thereof for all purposes,
and as the person exclusively entitled to have and to exercise
all rights and privileges incident to the ownership of such
<PAGE>
shares, and rights under this Section shall not be affected by
any actual constructive notice which the Corporation, or any of
its directors, officers or agents, may have to the contrary.
SECTION 11
MISCELLANEOUS
11.1 Dividends. Except as otherwise provided by law or the
Articles of Incorporation, dividends upon the stock of the
Corporation may be declared by the Board of Directors at any
regular or special meeting. Dividends may be paid in cash,
property, or in shares of stock.
11.2 Checks. All checks or demands for money and notes of
the Corporation shall be signed by such officer or officers or
such other person or persons as the Board of Directors may from
time to time designate. Signatures of the authorized signatories
may be by facsimile.
11.3 Fiscal Year. The fiscal year of this Corporation will
be a calendar year.
11.4 Seal. The Board of Directors may adopt a corporate
seal, which seal shall have inscribed thereon the name of the
Corporation. Said seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
Failure to affix the seal shall not, however, affect the validity
of any instrument.
11.5 Gender. All pronouns and variations thereof used in
these By-laws shall be deemed to refer to the masculine, feminine
or neuter gender, singular or plural, as the identity of the
person, persons, entity or entities referred to require.
SECTION 12
INDEMNIFICATION
The Corporation shall indemnify to the full extent permitted
by law, which indemnification shall include, but shall not be
limited to, attorneys' fees, any person made or threatened to be
made a part to any action, suit or proceeding, whether criminal,
civil, administrative or investigative, by reason of the fact
that such person or such person's testator or intestate is or was
a director, officer or employee of the Corporation or serves or
served at the request of the Corporation any other enterprise as
a director, officer or employee. For purposes of this By-law,
the term "Corporation" shall include any predecessor of this
Corporation and any constituent corporation (including any
constituent of a constituent) absorbed by the Corporation in a
consolidation or merger; the term "other enterprises" shall
include any corporation, partnership, joint venture, trust or
employee benefit plan; service "at the request of the
Corporation" shall include service as a director, officer or
employee of the Corporation which imposes duties on, or involves
services by, such director, officer or employee with respect to
an employee benefit plan, its participants or beneficiaries; any
excise taxes assessed on a person with respect to an employee
<PAGE>
benefit plan shall be deemed to be indemnifiable expenses; and
action by a person with respect to an employee benefit plan which
such person reasonably believes to be in the interest of the
participants and beneficiaries of such plan shall be deemed to be
action not opposed to the best interests of the Corporation.
SECTION 13
AMENDMENTS
13.1 Adoption of By-laws; Amendments Thereof. By-laws of
the Corporation may be adopted only by (i) a majority of the
entire Board of Directors at any time when there is no Related
Person (as defined in Article V.A.2 of the Articles of
Incorporation) or (ii) both a majority of the entire Board of
Directors and a majority of the Continuing Directors (as defined
in Article V.A.4 of the Articles of Incorporation) at any time
when there is a Related Person Article (as defined in Article
V.A.2 of the Articles of Incorporation). By-laws may be amended
or repealed only by (i) a majority of the entire Board of
Directors at any time when there is no Related Person (except
that any amendment to or repeal of Section 6 of these By-laws
shall require an affirmative vote of at least three-quarters of
the entire Board of Directors), (ii) both a majority of the
entire Board and a majority of the Continuing Directors at any
time when there is a Related Person (as defined in Article V.A.2
of the Articles of Incorporation), or (iii) the affirmative vote
of the holders of at least 80% of the Total Voting Power at any
regular or special meeting of shareholders, the notice of which
expressly states that the proposed amendment or repeal is to be
considered at the meeting.
13.2 Re-Amendment or Re-adoption by Board of Directors. Any
provision of these By-laws amended or repealed by the
shareholders may be re-amended or re-adopted in the manner
provided in Section 13.1.
13.3 New By-laws; Amendments. Any purported amendment to
these By-laws which would add hereto a matter not covered herein
prior to such purported amendment shall be deemed to constitute
the adoption of a By-law provision and not an amendment to the
By-laws.
<PAGE>
S/S KING
PRODUCT TANKER CONTRACT
for
AMERICAN HEAVY LIFT
SHIPPING COMPANY
AVONDALE JOB NO. C5-80A
May 1995
AVONDALE INDUSTRIES, INC.
<PAGE>
Page
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ARTICLE I DEFINITIONS 2
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ARTICLE II GENERAL STATEMENT OF WORK 4
AND CONTRACT PRICE
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ARTICLE III CONTRACT GROUP 6
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ARTICLE IV ITEMS FURNISHED BY 6
PURCHASER
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ARTICLE V SPECIFICATIONS, 13
INTERPRETATION
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ARTICLE VI PAYMENT OF CONTRACT PRICE 14
- METHOD OF PAYMENT
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ARTICLE VII CHANGES 16
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ARTICLE VIII RIGHTS TO DESIGN DATA 19
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ARTICLE IX EXTENSION OF TIME FOR 20
COMPLETION OF WORK
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ARTICLE X PERFORMANCE STANDARD 24
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ARTICLE XI CONTRACT PRICE 24
ADJUSTMENTS
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ARTICLE XII SCHEDULES 27
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ARTICLE XIII INSURANCE 28
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ARTICLE XIV RISK OF LOSS - TOTAL LOSS 34
OF A VESSEL
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ARTICLE XV INJURY TO EMPLOYEES AND 36
OTHERS
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ARTICLE XVI APPOINTMENT OF 39
REPRESENTATIVES
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<PAGE>
ARTICLE XVII MATERIALS AND 40
WORKMANSHIP
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ARTICLE XVIII INSPECTION - APPROVAL OF 41
DRAWINGS
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ARTICLE XIX TRIALS 42
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ARTICLE XX ADDITIONAL TRIALS - 43
EXPENSES
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ARTICLE XXI ACCEPTANCE AND 44
DELIVERY OF THE VESSEL
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ARTICLE XXII GUARANTEE 46
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ARTICLE XXIII DEFAULT BY PURCHASER 50
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ARTICLE XXIV DEFAULT BY BUILDER 51
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ARTICLE XXV ACTION BY BUILDER UPON 53
DEFAULT BY PURCHASER
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ARTICLE XXVI ACTION BY PURCHASER UPON 56
DEFAULT BY BUILDER
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ARTICLE XXVII TITLE 58
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ARTICLE XXVIII LIENS 59
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ARTICLE XXIX TAXES 60
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ARTICLE XXX PATENT INFRINGEMENT 60
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ARTICLE XXXI ASSIGNMENT OF CONTRACT 61
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ARTICLE XXXII COMPUTATION OF TIME 61
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ARTICLE XXXIII BUILDER TO COMPLY WITH 62
LAWS AND REGULATIONS
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ARTICLE XXXIV APPLICABLE LAW 62
<PAGE>
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ARTICLE XXXV NOTICES 63
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ARTICLE XXXVI ARBITRATION 64
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ARTICLE XXXVII CONSEQUENTIAL DAMAGES 66
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MISCELLANEOUS 67
ARTICLE XXXVIII
EXHIBITS:
EXHIBIT A - SPECIFICATIONS (NOT ATTACHED)
EXHIBIT B - PROGRESS REPORT (NOT ATTACHED)
EXHIBIT C - BUILDER'S RISK POLICY FORM (NOT ATTACHED)
EXHIBIT D - CHANGE ORDER PROCEDURE (NOT ATTACHED)
EXHIBIT E - BUILDER'S CERTIFICATE OF INSURANCE (This
certificate will be furnished prior to the Effective Date of the
Agreement) (NOT ATTACHED)
EXHIBIT F -PURCHASER'S CERTIFICATE OF INSURANCE (NOT ATTACHED)
EXHIBIT G -SUBCONTRACTOR INSURANCE REQUIREMENTS (NOT ATTACHED)
EXHIBIT H-TITLE XI COMMITMENT LETTER OF 6 FEBRUARY 1995 BY MARAD
TO PURCHASER (NOT ATTACHED)
EXHIBIT I - CREDIT SUPPORT AGREEMENT (NOT ATTACHED)
EXHIBIT J - SALE AND PURCHASE AGREEMENT FOR THE STERN (NOT
ATTACHED)
<PAGE>
PRODUCT TANKER
FOR
AMERICAN HEAVY LIFT SHIPPING COMPANY
THIS CONTRACT, (the "CONTRACT") initially entered into on
the 12th day of October, 1994, which is hereby revised,
superseded and resigned after having been adjusted to conform to
the Title XI guarantee and financing requirements, is entered
into by and between American Heavy Lift Shipping Company, a
corporation organized under the laws of the State of Delaware,
having offices at 365 Canal Street, Suite 2670, New Orleans,
Louisiana 70130 (the "PURCHASER"), and Avondale Industries, Inc.,
a corporation organized under the laws of the State of Louisiana,
having a business address of 5100 River Road, Avondale, Louisiana
70094 (the "BUILDER");
W I T N E S S E T H:
WHEREAS:
1. The PURCHASER desires to purchase four (4) product
tankers to be flagged under the United States flag for use in
United States coastwise trade and that comply with the
requirements of the Oil Pollution Act of 1990 (OPA 90); and
2. The BUILDER is a shipbuilder with expertise, ability,
and desire to construct new tonnage that complies with OPA 90
consistent with the terms and conditions set forth in this
CONTRACT.
3. The PURCHASER has applied for Title XI guarantee for
financing under the Merchant Marine Act to the U.S. Department of
Transportation, Maritime Administration for the construction to
be performed pursuant to this CONTRACT. This CONTRACT will only
become effective between the Parties upon PURCHASER furnishing
BUILDER written evidence that the Title XI letter commitment to
guarantee and the financing commitment has been granted to
PURCHASER.
4. The BUILDER has developed the design for the
construction work of this CONTRACT in accordance with all
applicable Regulatory Body requirements.
NOW, THEREFORE, in consideration of the premises and of the
mutual promises hereinafter set forth, the Parties agree as
follows:
ARTICLE I - DEFINITIONS
As used in this CONTRACT, the following terms shall have the
following respective meanings:
BUILDER - As defined in the preamble.
Builder's Certificate - As defined in Subarticle VI(a).
CONTRACT - As defined in the preamble.
Confirmation Date - As defined in Subarticle IV(d).
Contract Group - The "Contract Group" shall mean the four (4)
<PAGE>
separate contracts between BUILDER and PURCHASER for similar
construction of four (4) vessels to replace PURCHASER's existing
vessels the S/S Knight, S/S Solar, S/S Spray and S/S King.
Contract Price - As defined in Subarticle II(a).
Contractor Group - As defined in Subarticle XV (d).
Data - As defined in Subarticle VIII(b).
Delivery Certificate - As defined in Subarticle II(b).
Delivery Date - As defined in Subarticle II(c).
Delivery Site - As defined in Subarticle II(b).
Delivery Window - As defined in Subarticle IV(d).
Docking Receipt - As defined in Subarticle IV(c).
Effective Date - The "Effective Date" is the date of the
resigning of this CONTRACT.
Essential changes - As defined in Subarticle VII(b).
Existing Inventory - As defined in Subarticle IV(j).
Existing Vessel - As defined in Subarticle IV(c).
Guarantee Deficiency - As defined in Subarticle XXII(a).
Guaranteed Speed - As defined in Subarticle X(b).
Invoice for Payment - As defined in Subarticle VI(c).
Non-essential changes - As defined in Subarticle VII(b).
Owner Group - As defined in Subarticle XV(a).
Parties - "Parties" shall mean both PURCHASER and BUILDER.
Performance Standard - As defined in Subarticle X(c).
Progress Payments - As defined in Subarticle VI(a).
PURCHASER - As defined in the preamble.
Regulatory Body(ies) - As defined in Subarticle XVII(a).
Revised Contract Price - As defined in Subarticle VI(g).
Schedule - As defined in ARTICLE XII.
Secretary - "Secretary" shall mean the United States Secretary
of Transportation acting by and through the Maritime
Administrator.
Shipyard - As defined in Subarticle II(b).
Specifications - The "Specifications" are that portion of the
CONTRACT consisting of the written requirements for design,
materials, equipment, construction systems, standards and
workmanship for the work, and performance of related services,
which are attached hereto as Exhibit "A".
Stern - that portion of the Existing Vessel (respective S/S
King, S/S Knight, S/S Solar, S/S Spray) purchased by BUILDER in
accordance with Exhibit "J", and as defined in that Exhibit "J",
for incorporation into the Vessel.
Turnover Date - As defined in Subarticle IV(d).
Turnover Window - As defined in Subarticle IV(d).
Working Drawings - The "Working Drawings" are the detailed
graphic and pictorial portions of the documents prepared by
BUILDER after the signing of the CONTRACT which show the design,
location and dimensions of the work, generally including the
outboard profile, structural details and arrangement plans,
elevations, sections, details, schedules and diagrams.
Vessel - As defined in Subarticle II(a).
Vessels - the four vessels to be constructed pursuant to the
Contract Group to replace the S/S King, S/S Solar, S/S Spray and
S/S Knight.
<PAGE>
ARTICLE II - GENERAL STATEMENT OF WORK
AND CONTRACT PRICE
(a) The BUILDER shall furnish all plant, facilities, labor,
materials, supplies and equipment, except as otherwise provided
in the Specifications, and shall perform all work necessary to
design, build, launch, outfit, test and deliver a vessel more
fully described in the Specifications (the "Vessel") at its own
risk and expense, and shall do everything required of the BUILDER
by this CONTRACT and the Specifications, including the
development of Working Drawings and the installation of any
outfitting and equipment, all for the total consideration of
"THIRTY FIVE MILLION NINE HUNDRED SIXTY THREE THOUSAND TWO
HUNDRED TWO DOLLARS ($35,963,202) ," (the "Contract Price")
together with such additions and deductions as provided elsewhere
in this CONTRACT. The Parties recognize and acknowledge that the
Contract Price, CONTRACT and/or the Specifications have required
some adjustment due to or arising from the requirements mandated
by the Title XI guarantee and financing approval process which
changes have been incorporated into this CONTRACT.
(b) The Vessel shall be identified as BUILDER's Hull No.
2380, and shall be constructed at the BUILDER's plant (the
"Shipyard"), located at Avondale, Louisiana on the west bank of
the Mississippi River at Mile 107 AHP. Some parts of the Vessel
may be constructed at BUILDER's facilities in Westwego,
Louisiana. When the work on the Vessel is complete in accordance
with this CONTRACT, and the Vessel has passed the tests required
by this CONTRACT, the Vessel as completed shall be delivered with
not less than five (5) days prior written notice by the BUILDER
and accepted by the PURCHASER at Avondale, Louisiana or a
mutually agreed other place (the "Delivery Site"), free and clear
of all liens, security interests, and claims of every nature,
excepting, however, those arising out of the acts or omissions of
the PURCHASER and the PURCHASER'S contractual obligations
pursuant to Article 4 of the Credit Support Agreement of attached
Exhibit "I". Upon such delivery, the PURCHASER shall give the
BUILDER a Delivery Certificate accepting the Vessel (the
"Delivery Certificate"). The PURCHASER shall within five (5) days
thereafter, remove or cause the Vessel to be removed from the
Delivery Site. Delivery and acceptance by the PURCHASER of the
Vessel shall be expressly conditioned upon (1) PURCHASER's rights
under ARTICLE XXII - GUARANTEE of this CONTRACT, (2) PURCHASER's
right to completion by BUILDER thereafter of any uncompleted
CONTRACT work and correction by BUILDER of any defective CONTRACT
work as shown in the Delivery Certificate in accordance with the
determination described in ARTICLE XXI - ACCEPTANCE AND DELIVERY
OF THE VESSEL.
(c) The work is to be performed according to first class
shipbuilding practice and shall be commenced and prosecuted in a
timely manner. BUILDER will deliver the Vessel to the PURCHASER
139 days following the Turnover Date as such date may be extended
pursuant to the terms of this CONTRACT (the "Delivery Date"),
provided that the S/S King is turned over to the BUILDER within
the agreed upon Turnover Window. If the S/S King is turned over
to the BUILDER before the Turnover Window, BUILDER will deliver
the Vessel to the PURCHASER 139 days following the first day of
the agreed upon Turnover Window.
<PAGE>
ARTICLE III - CONTRACT GROUP
The Contract Price for this CONTRACT is agreed to be the
consideration as part of the group of four product tankers for
the four substantially identical contracts signed by BUILDER and
PURCHASER this date. In any event that all four of the vessel
contracts are not completed, or are terminated for any reason,
except the default of the BUILDER, the Contract Price of each of
the unterminated contracts shall be adjusted to reflect the
higher per vessel cost for the remaining vessels as follows:
Number of Contracts Percent Contract Price
Terminated Increase of Each
Completed Contract
3 3.0
2 1.25
1 1.0
ARTICLE IV - ITEMS FURNISHED BY PURCHASER
a) The BUILDER shall, at its own expense and risk, receive,
check as to agreement with bills of lading, store, protect,
remove from the Existing Vessel pursuant to the Specifications,
insure and install aboard the Vessel all of the items required by
the Specifications to be furnished by the PURCHASER. The BUILDER
shall not be deemed to have extended any warranty as to materials
or equipment furnished by the PURCHASER other than the warranty
set forth in ARTICLE XXII - GUARANTEE of this CONTRACT. The
BUILDER shall be liable to the PURCHASER for any damage to or
loss of the items furnished by the PURCHASER occurring during the
BUILDER's custody thereof, which may arise from any event.
Except for the S/S King turnover requirements as indicated in
this ARTICLE IV, the Specifications indicate the need dates for
all items to be furnished by PURCHASER.
(b) Except for the S/S King turnover requirements as
indicated in this ARTICLE IV,
PURCHASER will, by furnishing reasonable documentation and notice
to BUILDER, be entitled to extension of the indicated need dates
stated in the Specifications for, and to the extent of, any cause
of delay beyond the reasonable control of PURCHASER which
PURCHASER could not reasonably have anticipated. BUILDER may
also use such cause of delay to claim delay of the Delivery Date
for the Vessel in accordance with ARTICLE IX, EXTENSION OF TIME
FOR COMPLETION OF WORK.
(c) The Stern section and after house portion of the Vessel
shall be the Stern section and after house portion of the
Existing Vessel, the S/S King, Official Number 275193, shall be
delivered by PURCHASER alongside a dock designated by BUILDER at
BUILDER's Avondale, Louisiana shipyard in accordance with the
Sale and Purchase Agreement attached as Exhibit "J". All
landside expenses associated with the dockside mooring of the S/S
King at the Shipyard, including but not limited to mooring lines,
wharfage, gangway, shipyard services, etc. are included in the
Contract Price. For purposes of clarity in this CONTRACT, the
<PAGE>
S/S King will be referred to and become the "Existing Vessel"
after the S/S King is docked at Avondale and its delivery
protocol documentation has been signed (the "Docking Receipt").
The signed Docking Receipt will also serve to transfer the risk
of loss from PURCHASER to BUILDER pursuant to Subarticle (g) of
this ARTICLE IV and the Sale and Purchase Agreement for the Stern
attached hereto as Exhibit "J".
(d) PURCHASER shall deliver the S/S King to BUILDER between
31 January 1996 and 30 March 1996 (the "Delivery Window").
During November 1995 the Parties will meet to narrow the Delivery
Window to a 2 week period when the S/S King will be ready for
delivery to the Shipyard and when the BUILDER has progressed
sufficiently with its work that it is ready to receive the S/S
King in the Shipyard ("Turnover Window"). The Parties shall
confirm in writing ("Confirmation Date") the Turnover Window. If
by 19 November 1995, the Parties are unable to agree to the
Turnover Window, the Turnover Window shall be 1 March 1996 to 14
March 1996 and the Confirmation Date for this CONTRACT shall be
deemed to be 19 November 1995. The Turnover Date (the "Turnover
Date") shall be the actual date that the S/S King is turned over
to the BUILDERS as evidenced by the Docking Receipt. The Parties
have confirmed the Delivery Window and the other dates set forth
in this paragraph on the Effective Date of the CONTRACT.
PURCHASER will be entitled to extension of the Turnover Window
for, and to the extent of, any cause of delay beyond the
reasonable control of PURCHASER which PURCHASER could not
reasonably have anticipated.
(e) With reasonable notice, PURCHASER may deliver the S/S
King at any time up to thirty (30) days prior to the Turnover
Window without any increase in the Contract Price. A docking fee
of $1,200.00 per day plus direct costs for extending the
insurance obligations of BUILDER under this CONTRACT will be
charged to PURCHASER for early delivery in excess of thirty (30)
days prior to the Turnover Window. The early delivery docking
fee includes monitoring of mooring lines, pressure fire system
and shore power. Other services are available at standard rates.
(f) PURCHASER will pay BUILDER TWENTY THOUSAND DOLLARS
($20,000.00) per day liquidated damages in addition to the
Contract Price for each and every day that the S/S King is
delivered to BUILDER more than (5) days after the Turnover
Window, up to an aggregate maximum of three percent (3%) of the
Contract Price decreased by FOUR MILLION NINE HUNDRED SEVENTY-
FOUR THOUSAND TWO HUNDRED TWO DOLLARS, as said Turnover Window
may be extended pursuant to this CONTRACT. The Delivery Date of
the Vessel, and all dates of the Contract Group, will be extended
day for day that the S/S King is delivered after the Turnover
Window at no additional cost beyond the liquidated damages paid
for late delivery of the S/S King to the BUILDER; provided,
however, that any liability for liquidated damages for any of the
remaining Vessels in the Contract Group shall be determined based
upon the extended dates of the Contract Group. BUILDER may elect
to terminate this CONTRACT by written notice to PURCHASER
pursuant to ARTICLE XXIII, DEFAULT BY PURCHASER, at any time that
the S/S King is not delivered to BUILDER within thirty (30) days
after the Turnover Window, except that Subarticle XXV(a) default
cure period does not apply to the delivery failure of the S/S
<PAGE>
King after expiration of the thirty (30) days after the Turnover
Window.
(g) The S/S King with everything belonging to it shall be
at PURCHASER's risk and expense until its delivery is confirmed
by execution of the Docking Receipt. Risk of loss of the
Existing Vessel with everything belonging to it shall be as
indicated in ARTICLE XIV, RISK-OF-LOSS - TOTAL LOSS OF A VESSEL.
The S/S King shall be delivered to BUILDER on the Turnover Date
in class, except as a result of the Existing Vessel's OPA '90
trading date restriction, repairs of PURCHASER in progress which
will be completed expeditiously by PURCHASER, or arrangements by
PURCHASER for towing of the Existing Vessel to BUILDER,
preferably free of outstanding items or recommendations, with all
tanks gas free (except for necessary fuel oil and lubricating oil
tanks) and with asbestos removed or encapsulated per the
Specifications. BUILDER shall take over remaining bunkers and
lubricating oils unless otherwise agreed in writing between the
Parties prior to arrival of the S/S King at Avondale. All such
remaining bunkers/oils may be sold or retained by BUILDER at its
option. All bunker/oil transfer costs and credits will be for
PURCHASER'S account. The Parties agree to negotiate the
performance of work required for PURCHASER furnished items and/or
the Stern of the Existing Vessel in accordance with the
requirements of ARTICLE VII, CHANGES, as directed by PURCHASER.
Such negotiations are intended to allow PURCHASER to timely order
Essential Changes for PURCHASER furnished items and/or the Stern
of the Existing Vessel in order to remedy class outstandings or
recommendations. Except for work in the Stern of the Existing
Vessel indicated in the Specifications to be performed by
BUILDER, it will be PURCHASER'S obligation under this CONTRACT
that all PURCHASER furnished items for the Vessel, and the Stern
of the Existing Vessel, or any of its parts, meet all the
applicable laws, classifications, rules, regulations, standards
and certification requirements notwithstanding the provisions of
attached Exhibit "J".
(h) PURCHASER warrants that the S/S King, at the time of
delivery to BUILDER, is free from all encumbrances, security
interests, maritime liens or any other debts whatsoever except
for the preferred maritime mortgage(s) granted in connection with
the financing of the construction of the vessels as contemplated
by ARTICLE XXVIII - TITLE, and also except for maritime liens
arising from trade payables incurred in the ordinary course of
business which will be discharged in the ordinary course of
business or bonded by PURCHASER within ten (10) working days of
any notice of a lien or other encumbrance against the Existing
Vessel. Should any claims for events which have been incurred
prior to the time of delivery of the S/S King to BUILDER be made
against the S/S King, the Existing Vessel, or parts thereof,
PURCHASER hereby undertakes to indemnify, hold harmless, and
defend BUILDER against all consequences of such claims. This
Subarticle shall survive the termination or expiration of this
CONTRACT.
(i) In the event of any actual or constructive total loss
of the S/S King prior to arrival at BUILDER's shipyard or in the
event that the Stern section and/or the after house shall, for
any reason, be unavailable, PURCHASER may either:
<PAGE>
(i) Furnish the S/S Knight or a mutually agreeable
substitute vessel, in which event BUILDER and PURCHASER shall
mutually agree on: (1) any Specification changes, (2) a new
Turnover Date and Delivery Date (3) a new Contract Price
resulting from such substitution; and (4) adjustment of all
dates and prices for all the follow vessels of the Contract
Group. PURCHASER presently has an option to purchase the S/S
Coastal Manatee (Official No. 287186). The substitution of the
S/S Coastal Manatee is subject to the approval of the PURCHASER
and the Secretary.
(ii) Not Used
(iii) Give written notice to BUILDER within fifteen (15)
days after the loss ordering BUILDER to terminate further
performance of work under this CONTRACT and shall upon demand pay
BUILDER its Costs, as defined below, plus a profit of ten percent
(10%) of such Costs, and following receipt by BUILDER of full
payment under this Subarticle (i) , all constructed work and all
materials acquired by BUILDER for the performance of this
CONTRACT shall become the property of PURCHASER. "Costs" are
defined for the purpose of this Subarticle (i) to include the
cost to BUILDER for all services performed, labor performed and
materials acquired or contracted to be acquired plus overhead
allocations for such services, labor and materials in accordance
with BUILDER's usual practices for such work, plus reasonable
cancellation costs actually paid to third parties for terminating
contractual commitments that BUILDER has made for performance of
the CONTRACT work, all in accordance with BUILDER'S established
cost accounting system as verified by an independent auditor
selected by PURCHASER and agreed to by the BUILDER. Under no
circumstances shall BUILDER's claim under this Subarticle
(i)(iii) include any costs allocated to any of the other
contracts of the Contract Group.
(j) Notwithstanding the Sale and Purchase Agreement of
attached Exhibit "J", this CONTRACT is based on utilizing the
aft portion of the S/S King as indicated by the Specifications,
and Subarticles (c) and (g) above, in generally its "AS IS"
condition on arrival at BUILDER's yard. Any desired or mandated
improvements, upgrades, damage repairs, maintenance, etc. of this
PURCHASER furnished equipment for the Vessel, and the Stern of
the Existing Vessel, will be performed and documented pursuant to
ARTICLE VII, CHANGES. The "AS IS" condition will be inventoried
and documented by BUILDER and countersigned by PURCHASER during
the delivery voyage and/or on its arrival at BUILDER's Shipyard
(the "Existing Inventory"). BUILDER is obligated to return the
PURCHASER furnished items, and the Stern of the Existing Vessel,
on the Delivery Date as documented in the Existing Inventory.
PURCHASER will provide suitable accommodations and board to
BUILDER's inspectors for performing this inventory at no charge
to BUILDER during the turnover voyage. The Parties will agree to
similar arrangements for design development inspections by
BUILDER'S inspectors at any time after the Effective Date of this
CONTRACT. Article XV, INJURY TO EMPLOYEES AND OTHERS, will also
be applicable during the delivery voyage for taking of the
Existing Inventory and during the performance of any design
development inspections by BUILDER's inspectors at any time after
the Effective Date of this CONTRACT.
<PAGE>
(k) PURCHASER will give immediate notice to BUILDER in the
event the S/S King is delayed, or is expected to be delayed, in
its scheduled turnover to BUILDER by any unforeseen event beyond
the control of PURCHASER which PURCHASER could not reasonably
have anticipated. PURCHASER will provide expeditiously all known
details of such unforeseen delay and furnish an estimate of the
extent of the claimed delay in the Turnover Date. By agreement
the Parties may mitigate such unforeseen cause of delay to their
respective best interests in adjusting the Turnover Date
including, but not limited to, utilizing the provisions of
Subarticle IV (i). Either of the Parties may request binding
arbitration pursuant to ARTICLE XXXVI, ARBITRATION, for
determination of the claimed delay of the Turnover Date. The
arbitration may not, however, revise the indicated adjustments to
be made to other dates as a consequence of such delays in the
Turnover Date.
(l) BUILDER will provide necessary dockside services for
and permit the crew of the S/S King to remain aboard the Existing
Vessel to perform their duties, provided such duties are at all
times subordinate to, and do not interfere with, BUILDER'S work,
for up to thirty (30) days after arrival of the Existing Vessel
and for thirty (30) days prior to the Delivery Date of the
Vessel. Likewise, the BUILDER will permit approved
subcontractors to perform work directly for PURCHASER that is not
ordinarily performed by BUILDER. R & R Marine Maintenance and G.
C. Electric will be allowed into the Shipyard aboard the Existing
Vessel as approved subcontractors to perform work directly for
PURCHASER not to exceed six (6) people at any one time.
(m) Notwithstanding anything contained in the Sale and
Purchase Agreement for the Stern attached hereto as Exhibit "J"
or anything else whatsoever, PURCHASER agrees to protect, defend,
indemnify and hold BUILDER, its agents, officers, directors,
employees and representatives harmless from and against all
costs, damages, losses, claims, penalties, debts or liabilities
BUILDER may incur from holding title to the Stern of the Existing
Vessel, or the Stern of the Vessel, in BUILDER'S name at any time
during the performance of this CONTRACT. It is further
understood and agreed that this indemnity and defense obligation
shall include the obligation to reimburse BUILDER for any
attorneys' fees, costs and expenses which may be incurred by
BUILDER in enforcing the defense and indemnity obligations set
forth in this Subarticle (m). This Subarticle (m) shall prevail
over any conflicting or inconsistent provisions set forth
elsewhere in this CONTRACT and shall survive any termination,
cancellation, expiration or completion of this CONTRACT.
ARTICLE V - SPECIFICATIONS, INTERPRETATION
(a) The Specifications for the construction of the Vessel
have been identified by the initials of the Parties signing this
CONTRACT and are made a part of this CONTRACT with the same force
and effect as though herein set out in full.
(b) If any discrepancy, difference or conflict exists
between the provisions of this CONTRACT and the Specifications,
then to the extent of such discrepancy, difference or conflict
only, the Specifications shall be ineffectual and the provisions
<PAGE>
of this CONTRACT shall prevail; but in all other respects the
Specifications shall be in full force and effect. If there is any
discrepancy, difference or conflict between the drawings and
Specifications, then to the extent of such discrepancy,
difference or conflict the Specifications shall prevail;
provided, however, any work called for by the Specifications and
not shown on the drawings and any work shown on the drawings but
not called for in the Specifications shall be performed by the
BUILDER as a part of the CONTRACT work. Any discrepancy,
difference or conflict between the Specifications and the
provisions of this CONTRACT and any discrepancy, difference or
conflict between the Specifications themselves discovered by one
party to this CONTRACT shall be brought to the attention of the
other party promptly in writing.
ARTICLE VI - PAYMENT OF CONTRACT PRICE - METHOD OF PAYMENT
a) PURCHASER shall pay the Revised Contract Price to
BUILDER in increments as the work progresses (the "Progress
Payments"). PURCHASER shall pay Progress Payments to BUILDER at
biweekly intervals upon the invoices of BUILDER, supported in
each instance by its Builder's Certificate. Progress Payment
shall be determined by the proportionate amount of the CONTRACT
work actually accomplished computed by the following method: the
CONTRACT work will be divided into separate components and each
component assigned a number of points. Such components and their
respective points will be as set forth on the form attached as
Exhibit "B". As of the invoice date, BUILDER shall certify the
percentage of completion of each component and the overall
percentage of completion ("Builder's Certificate"), which shall
be the sum of the percentages of completion of each component
multiplied by the number of points referable to that component
divided by the total number of points referable to all components
of CONTRACT work. Each Progress Payment shall be the increment
in overall percentage of completion since the date as of which
BUILDER computed the last previous Progress Payment times the
Revised Contract Price, as defined in Subarticle (g) of this
ARTICLE. Progress Payments shall be paid in full by wire
transfer free of bank charges as soon as possible but in no event
later than five (5) working days after receipt by the Secretary
of documents acceptable to the Secretary. As an exception to the
above procedure for Progress Payments, the first Progress Payment
in the amount of FOUR MILLION NINE HUNDRED SEVENTY FOUR THOUSAND
TWO HUNDRED TWO DOLLARS (4,974,202) will be paid by PURCHASER TO
BUILDER, by wire transfer, free of bank charges, in immediately
available funds to an account designated by BUILDER,
simultaneously with the execution of this amended and restated
CONTRACT to cover the Sale and Purchase Agreement of attached
Exhibit "J".
b) PURCHASER shall inspect and confirm achievement of the
progress by approving the Progress Billing Format form of
attached Exhibit "B". BUILDER shall invoice PURCHASER for the
percentage of the Revised Contract Price for the progress, which
invoice shall include documents acceptable to the SECRETARY.
PURCHASER will notify BUILDER if it determines that the progress
has not in fact been achieved along with PURCHASER's reasons for
said determination. PURCHASER's failure to notify BUILDER within
two (2) business days of receipt of an invoice for payment shall
<PAGE>
constitute PURCHASER's acceptance of the progress.
c) At no time prior to the delivery of the Vessel to
PURCHASER may the cumulative invoiced total of Progress Payments
charged to PURCHASER under the provisions of this ARTICLE VI,
exceed 100% of the Revised Contract Price, as defined in
Subarticle (g) of this ARTICLE.
d) Progress Payments may include the cost of subcontracted
machinery, materials, and equipment not yet delivered to
BUILDER'S yard to the extent that BUILDER shall have acquired
title thereto and identified the goods in question to the Vessel,
provided that the risk of loss of or damage to such goods before
delivery remains with the vendor or subcontractor.
e) The final installment of the Revised Contract Price
minus a hold-back equal to 1% of the Revised Contract Price
shall be paid to BUILDER by PURCHASER at the delivery of the
Vessel to PURCHASER.
f) PURCHASER shall pay BUILDER the 1% of the Revised
Contract Price hold-back retained under the provisions of
Subarticle (e) above after the expiration of the warranty period
as provided in ARTICLE XXII, GUARANTEE.
g) In the event that the Parties should agree upon any
change to be made in accordance with the provisions of ARTICLE
VII, CHANGES, and that agreement contains no contrary provision
for time of payment, the Contract Price (or, if there have been
previous such changes, the former Revised Contract Price) shall
be increased or decreased by the amount agreed upon by the
Parties and, as thus increased or decreased, shall be called the
"Revised Contract Price." Immediately upon agreement between the
Parties of any change and the resulting increase or decrease in
the Revised Contract Price, BUILDER shall issue its invoice or
credit memo for the amount of such increase or decrease in the
Revised Contract Price attributable to the change times the
cumulative overall percentage of completion utilized in the
computation under the provisions of this ARTICLE VI of the
Progress Payment most recently invoiced; and the balance of such
increase or decrease shall be paid or deducted by use of the new
Revised Contract Price in the computation of subsequent Progress
Payments.
ARTICLE VII - CHANGES
(a) The BUILDER shall not, except as provided in Subarticle
(b) of ARTICLE V - SPECIFICATIONS, INTERPRETATION depart from the
requirements of the Specifications or make any other changes in
the CONTRACT work required by the Specifications without all
prior authorization required by the provisions of this ARTICLE.
Anything to the contrary notwithstanding, any work that is
required to be performed under this CONTRACT to anything that was
sold/purchased pursuant to attached Exhibit "J", other than what
is required by the Specifications, will be performed only
pursuant to an agreed and documented change under this ARTICLE
VII.
(b) For purposes of this ARTICLE, changes in CONTRACT work
shall be classified as either "Essential" changes or "Non-
<PAGE>
essential" changes. Essential changes shall consist of changes in
the CONTRACT work due to an action of a Regulatory Body as set
forth in ARTICLE XVII - MATERIALS AND WORKMANSHIP, (a)(iii) of
this CONTRACT, or due to any other promulgation of a new law or
rule after 7 March 1995. All other changes shall be Non-
essential changes. BUILDER shall advise PURCHASER of any
Essential changes which any Regulatory Body may require in the
Vessel.
(c) The PURCHASER shall have the right to direct the
BUILDER to perform an Essential change, and the BUILDER upon
receipt of PURCHASER's written direction shall commence the
performance of the change at such time as the PURCHASER may
direct without regard to whether prior agreement has been reached
as to the net increase or decrease in Revised Contract Price and
delay attributable to the change. The BUILDER shall be entitled
to a fair and reasonable adjustment in the Revised Contract Price
and Delivery Date for the performance of such change and in all
other terms and conditions of this CONTRACT that reasonably
require modification as a consequence of the change, for
performance of such change. Upon receipt of the PURCHASER's
written direction of an Essential change, the BUILDER shall,
within fourteen (14) days, give written notice to the PURCHASER
and the Secretary, that the proposed change will result in a
change in the Performance Standard, Revised Contract Price and/or
Delivery Date and the projected date for the firm quotation for
such change which shall be within thirty (30) days of PURCHASER's
written request or as otherwise mutually agreed. If such notice
is not forwarded as required, BUILDER shall not have the right to
later make claim for such change. After receipt of BUILDERS
quotation, the PURCHASER shall have fourteen (14) days to respond
to the BUILDER. If no response is received within the fourteen
(14) days, the quotation shall be deemed approved. The BUILDER's
quotation shall show the following information: the effect on
weight, moments, centers; effects on the Performance Standard;
and any delay in delivery of the Vessel to result from such
change. Such estimate of price shall consist of estimates,
separately stated, for materials (by type and quantity), labor
(including overhead) based on estimated engineering manhours and
estimated production manhours, and profit. PURCHASER shall take
reasonable precautions to maintain in confidence each estimate
and not disclose the same, except to agents or contractors of
PURCHASER as necessary in the prosecution of CONTRACT work,
provided only that in making such disclosure to agents or
contractors the PURCHASER 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 PURCHASER herein. In no event shall the PURCHASER
disclose estimates to another shipyard. The PURCHASER shall not
be responsible for unauthorized actions of its employees if the
aforementioned reasonable precautions have been taken by it. Any
change work performed by the BUILDER absent written agreement
from the PURCHASER shall be at BUILDER's own risk and expense.
(d) The PURCHASER shall have the right to propose to the
BUILDER in writing a Non-essential change in the CONTRACT work.
The BUILDER shall promptly review such proposal and submit to
PURCHASER an estimate of the net increase or decrease in the
Revised Contract Price; the effect on weight, moments, and
<PAGE>
centers; effects on the Performance Standard; and any delay in
delivery of the Vessel to result from such change. If the BUILDER
and PURCHASER agree upon the net increase or decrease in Revised
Contract Price and any delay in delivery, this CONTRACT shall be
modified accordingly, and the BUILDER shall promptly proceed to
perform the change. Nothing herein shall require the BUILDER to
perform a Non-essential change proposed by the PURCHASER in the
absence of prior agreement as to the net increase or decrease in
Revised Contract Price, Performance Standard and any delay in
delivery and all other terms and conditions of this CONTRACT that
reasonably require modification as a consequence of the change.
(e) The BUILDER shall have the right to propose to the
PURCHASER in writing any change in the CONTRACT work. The BUILDER
shall transmit to the PURCHASER its proposed change accompanied
by an estimate of the net increase or decrease in the Revised
Contract Price; the effect on weight, moments, and centers;
effects on Performance Standard; and any delay in delivery of the
Vessel to result from such change. If the BUILDER and PURCHASER
agree upon the net increase or decrease in Revised Contract Price
and any delay in delivery, this CONTRACT shall be modified
accordingly, and the BUILDER shall promptly proceed to perform
the change. Nothing herein shall require the PURCHASER to accept
a change proposed by the BUILDER in the absence of prior
agreement as to the net increase or decrease in Revised Contract
Price and any delay in delivery. Any change work performed by
the BUILDER absent written agreement from the PURCHASER shall be
at BUILDER's own risk and expense.
(f) For good order the Parties may also agree to document
that repair work to PURCHASER furnished equipment for the Vessel,
and the Stern portion of the Existing Vessel as a change
notwithstanding that such documentation would not involve any
revision to the Specifications and also notwithstanding the Sale
and Purchase Agreement of attached Exhibit "J". The Parties have
agreed to utilize the attached Change Order Procedure, Exhibit
"D", for documenting and processing all changes pursuant to this
ARTICLE VII, CHANGES.
(g) Written consent of the Secretary is required to approve
any change to the CONTRACT work which exceeds $100,000 after the
aggregate sum of all changes to the CONTRACT work and the
enhancements to the Stern exceed two million dollars.
ARTICLE VIII - RIGHTS TO DESIGN DATA
(a) The BUILDER shall prepare and furnish Working Drawings
for the installation of the PURCHASER furnished equipment;
however, anything to the contrary notwithstanding, the BUILDER
shall have no obligation to furnish any other details for
operation or otherwise. PURCHASER'S review of Working Drawings
and data will not relieve BUILDER from its obligations under this
CONTRACT.
(b) All Working Drawings, and such other specified design
and engineering data required to be furnished to the PURCHASER by
the Specifications and produced by the BUILDER in the performance
of the CONTRACT (the "Data") shall be the property of the
BUILDER. The PURCHASER shall have the right to use the Data in
<PAGE>
such manner as it may deem proper, including the right to make
reproducibles and copies and the right to make alterations
therein, additions thereto, or other changes, provided that (i)
Data will not be made available to any of BUILDER's competitors
at any time by the PURCHASER, except for the sole purpose of
operating, maintaining or repairing the Vessel and (ii) BUILDER
and/or BUILDER's licensor will be entitled to a reasonable
royalty, fee, or commission in the event any Data is so made
available by the PURCHASER and is used for purposes other than
operating, maintaining or repairing the Vessel. The BUILDER also
shall have the unrestricted right to sell or transfer any Data.
(c) Each party shall take reasonable precautions to
maintain in confidence that information disclosed to it in the
performance of this CONTRACT which is specifically identified as
confidential, other than information, which at the time of
disclosure, is known or become available from sources other than
the party disclosing such information or which is or shall become
capable of being independently produced by those skilled in the
trade to which such information relates. Notwithstanding
anything to the contrary herein contained, the BUILDER shall not
be precluded from disclosing information which may be necessary
for the prosecution of the CONTRACT work, provided only that in
making such disclosure the BUILDER 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 it herein; nor shall the BUILDER be
responsible for unauthorized actions of its employees provided
that the aforementioned reasonable precautions have been taken by
it; nor shall anything contained herein restrict or limit the
BUILDER's use of any information contained in the Specifications,
whether confidential or not, for the performance of this
CONTRACT.
(d) PURCHASER shall have all rights to the Data at no cost
for completing construction of the Vessel in the event that this
CONTRACT is terminated due to default of BUILDER pursuant to
ARTICLE XXIV, DEFAULT BY BUILDER.
ARTICLE IX - EXTENSION OF TIME FOR COMPLETION OF WORK
(a) Except as provided under ARTICLE IV, ITEMS FURNISHED BY
PURCHASER, if the BUILDER shall have transmitted written notice
to the PURCHASER of a cause of delay delaying the performance of
the CONTRACT work not later than five (5) working days if due to
rain or fifteen (15) days after the date that knowledge of other
delay in the CONTRACT work has come to the BUILDER, or after the
date that it is determined the BUILDER should have known of the
delay in the CONTRACT work, if such date is an earlier date, and
the cause of delay is beyond the control of the BUILDER, as
provided in Subarticle (b) below, and which the BUILDER could
not reasonably have anticipated, the BUILDER shall be entitled to
an extension of the Delivery Date set out in this CONTRACT by the
number of days that the Delivery Date was delayed by said cause
of delay, except as otherwise provided in Subarticle (e) below.
If such notice is not given within the time allowed, such delay
may not be subsequently invoked.
(b) A cause of delay beyond the control of the BUILDER
<PAGE>
shall include, without prejudice to the generality, delay caused
by the PURCHASER or by any agency or instrumentality of the
United States, including delays in the granting of any consents
or approvals by the U.S. Maritime Administration, by Government
priorities, by civil, naval or military authorities, by acts of
God (including hurricanes) by earthquakes, lightning, floods,
union elections, strikes or other industrial disturbances; by
rain as more fully described in Subarticle (c) of this ARTICLE;
such explosions, fires, vandalism as are the result of causes
reasonably beyond the BUILDER's control; by riots, by
insurrections, by sabotage, by blockades, by embargoes, by
epidemics; by the unavailability or late delivery to the BUILDER
of CONTRACT required machinery, equipment and supplies to be
incorporated in the Vessel where it is determined that the
BUILDER's procurement or attempt to procure for such machinery,
equipment and supplies to be incorporated in the Vessel was
expeditious and prudent, that the BUILDER has exercised due
diligence in the performance of any acts required of the BUILDER
and that the BUILDER has exercised due diligence in expediting
deliveries under the BUILDER's purchase CONTRACT or in seeking
equivalent substitute performance; and by the late performance or
default of a subcontract where it is determined that the
BUILDER's choice of the subcontractor was reasonable and
responsible and the BUILDER has exerted all reasonable efforts to
expedite performance, avoid default and procure reasonable
substitute performance; and by the breach of this CONTRACT by the
PURCHASER.
(c) From the Effective Date of this CONTRACT until the
delivery of the Existing Vessel to the Shipyard, the following
provisions shall determine delay caused by rain:
(1) The rain experienced at the project site during
CONTRACT period must be found to be unusually severe. That is,
more severe than the rain anticipated for the project location
during any given month.
(2) The rain must actually cause a delay to the
completion of the project in accordance with the Schedule. The
delay must be beyond the control and without the fault or
negligence of the BUILDER.
(3) Delay in the completion of the project shall be
determined on a shift by shift basis. If the project is running
two shifts at the time it will require two shifts delay to equal
one day of delay and if the shipyard is working three shifts at
the time, it shall require three shifts delay to equal one day of
delay. A rain delay will only be considered a delay in the
completion of the project if its occurrence requires a shutdown
of a substantial portion of the outside work on the Vessel prior
to the mid-point of a shift on a regularly scheduled work day or
any day during the last thirty (30) days prior to the Delivery
Date and such delay shall only be considered a delay for that
particular shift.
The following schedule of monthly anticipated adverse
weather delays is based on National Oceanic and Atmospheric
Administration (NOAA) New Orleans (Audubon Weather Station
located near the project location) and will constitute the base
line for monthly weather time evaluations.
<PAGE>
JAN FEB MAR APR MAY JUNE JUL AUG SEP OCT NOV DEC
_________________________________________________________________
(11) (9) (5) (4) (4) (6) (9) (9) (6) (4) (5) (9)
The number of actual rain shift delays shall be
converted to full days as herein above stated. If the number of
actual rain delay days exceeds the number of days anticipated in
the table above, and if the conditions of paragraph (2) above are
met, the BUILDER shall be entitled to an extension of the
Delivery Date by the number of days that the Delivery Date was
delayed by the excess days of rain delay.
From the date the Existing Vessel is delivered to the
Shipyard until the completed Vessel is delivered to the
PURCHASER, the following provisions shall determine delays caused
by rain.
If rain occurs that requires a shutdown of a
substantial portion of outside work on the Vessel prior to twelve
noon on a regularly scheduled work day, or any day during the
last thirty days prior to the Delivery Date, BUILDER shall be
entitled to an extension of the Delivery Date for each such rain
day.
(d) Within five (5) working days of knowledge of any cause
of delay involving rain which may affect the Delivery Date, the
BUILDER shall notify PURCHASER in writing and shall furnish an
estimate, if possible, of the extent of the probable delay. Upon
receipt of any such notice, the PURCHASER shall, within five (5)
working days, acknowledge the same in writing and indicate
agreement that such development is to be treated as a cause of
delay event, or state any objections, and the reasons therefor,
to acceptance of this development as the cause
of delay event. If BUILDER fails to notify PURCHASER of a cause
of delay event involving rain within five (5) working days after
knowledge of the event, BUILDER shall be estopped from thereafter
claiming a delay event for any period of delay more than five (5)
working days prior to said notice. If PURCHASER should fail to
respond within five (5) working days, the claimed extension of
the Delivery Date shall be considered approved.
(e) For any cause of delay not involving rain which may
affect the Delivery Date, the BUILDER shall notify the PURCHASER
in writing and shall furnish an estimate, if possible, of the
extent of the probable delay. Upon receipt of any such notice,
the PURCHASER shall, indicate agreement that such development is
to be treated as a cause of delay event, or state any objections,
and the reasons therefor, to acceptance of this development as a
cause of delay event. If BUILDER fails to notify PURCHASER of a
cause of delay event within fifteen (15) days after knowledge of
the event, BUILDER shall be estopped from thereafter claiming
delay for any period of delay more than fifteen (15) working days
prior to said notice. If PURCHASER should fail to respond within
ten (10) days, the claimed extension of time shall be considered
approved.
(f) If the Parties are unable to resolve their differences,
either party may request binding arbitration pursuant to ARTICLE
<PAGE>
XXXVI - ARBITRATION, for determination of the period of delay.
The arbitration may not, however, revise the indicated
adjustments to be made to other dates as a consequence of such
delays.
ARTICLE X - PERFORMANCE STANDARD
a) The principal particulars of the design for the Vessels
are as shown in the attached Specification, Exhibit "A".
(b) Within the limits stipulated in ARTICLE XI, CONTRACT
PRICE ADJUSTMENTS, the BUILDER guarantees a trial speed of 15.5
knots at a keel draft of 36 feet in calm deep sea conditions,
with a clean bottom and windforce not exceeding Beaufort scale
No. 3, "Guaranteed Speed", provided that PURCHASER'S engine
delivers 11,000 shaft horsepower, notwithstanding any provisions
of attached Exhibit "J". The speed trials are to be carried out
as specified in the Specifications.
(c) The performance parameter in Subarticle (b) above is
hereinafter referred to as the "Performance Standard."
ARTICLE XI - CONTRACT PRICE ADJUSTMENTS
(a) In the event the BUILDER fails to deliver the Vessel on
the Delivery Date provided in this CONTRACT, as said Delivery
Date may be extended pursuant to this CONTRACT, plus ninety five
(95) calendar days the PURCHASER will suffer damages which are
difficult of ascertainment. It is agreed by the BUILDER and the
PURCHASER that the sum of TWENTY THOUSAND DOLLARS ($20,000.00)
per day represents the damages to the PURCHASER for each day of
delayed delivery, and the BUILDER shall pay to the PURCHASER in
discharge of its obligations to the PURCHASER for such failure to
deliver the Vessel, as liquidated damages and not as a penalty,
the said sum as per-day liquidated damages, for each calendar day
or part thereof elapsing after the said
allowable delivery period indicated in the previous sentence and
until delivery of the Vessel. In no event will BUILDER's
liquidated damages for late delivery of the Vessel exceed a cap
of three percent (3%) of the Revised Contract Price decreased by
FOUR MILLION NINE HUNDRED SEVENTY FOUR THOUSAND TWO HUNDRED TWO
DOLLARS.
(b) The Revised Contract Price shall not be affected or
changed by reason of the speed of the Vessel, as determined by
sea trial in accordance with the Specifications, being less than
the Guaranteed Speed, if such deficiency in the aforesaid speed
of the Vessel is less than five tenths (5/10) of one (1) knot
below the Guaranteed Speed. Adjustments in the Vessel's speed
resulting from modification and/or changes in the Specifications
or the drawings agreed hereinafter provided for in ARTICLE VII,
CHANGES, shall not be considered as such deficiency. However,
commencing with and including a deficiency of five tenths (5/10)
of one (1) knot below the Guaranteed Speed the Revised Contract
Price shall be reduced by TWO HUNDRED THIRTY THREE THOUSAND
DOLLARS ($233,000) for each additional tenth of one knot
deficiency at or below a deficiency of five tenths (5/10) of one
knot. The maximum reduction in the Revised Contract Price for
Guaranteed Speed shall, however, be in no event more than the
amount as would be the case of a deficiency of nine-tenths (9/10)
<PAGE>
of one (1) knot below the Guaranteed Speed.
(c) In no event will BUILDER's liability for Guaranteed
Speed exceed a cap of three percent (3%) of the Revised Contract
Price decreased by FOUR MILLION NINE HUNDRED SEVENTY FOUR
THOUSAND TWO HUNDRED TWO DOLLARS.
(d) The rights of PURCHASER to a reduction of the Revised
Contract Price by reason of the provisions provided in this
ARTICLE XI shall be cumulative to the maximum aggregate sum not
to exceed three percent (3%) of the Revised Contract Price
decreased by FOUR MILLION NINE HUNDRED SEVENTY FOUR THOUSAND TWO
HUNDRED TWO DOLLARS. In the event that the Vessel is delivered
with better speed than set forth in this ARTICLE XI, such better
performance does not entitle BUILDER to any premium, special
bonus, or offset against deficiencies in other categories. Any
reduction of the Revised Contract Price shall be the PURCHASER'S
sole remedy for failure to meet the speed requirement which
remedy shall not exceed three percent (3%) of the Revised
Contract Price decreased by FOUR MILLION NINE HUNDRED SEVENTY
FOUR THOUSAND TWO HUNDRED TWO DOLLARS.
(e) The PURCHASER may terminate this CONTRACT and demand
delivery of the Vessel at any time after the aggregate maximum
for liquidated damages is attained pursuant to the provisions of
this ARTICLE XI(a). Upon such termination and delivery the
PURCHASER may proceed to move the Vessel elsewhere and the
BUILDER shall be responsible for the PURCHASER's reasonable
additional cost required to complete the Vessel to the
requirements of the Specifications. Notwithstanding any other
terms and conditions of this CONTRACT, the remedies set forth in
paragraph (a) and (e) of this ARTICLE XI shall be the PURCHASER's
sole remedy for late delivery of the Vessel.
(f) In the event PURCHASER fails to timely provide the
PURCHASER furnished items for the Vessel for meeting all
applicable laws, classifications, rules, regulations, standards
and certification requirements for the Vessel, so as to become
the sole cause for having to extend the Delivery Date for the
Vessel, the BUILDER will suffer damages which are difficult of
ascertainment. It is agreed by the PURCHASER and the BUILDER
that the sum of TWENTY THOUSAND DOLLARS ($20,000.00) per day
represents the damages to the BUILDER for each day of such
delayed delivery, and the PURCHASER shall pay to the BUILDER in
discharge of its obligations to the BUILDER for such failure to
deliver the PURCHASER furnished items and/or documentation, as
liquidated damages and not as a penalty, the said sum as per-day
liquidated damages, for each calendar day or part thereof
elapsing after the fourteenth (14th) day and until delivery of
the Vessel. The payment of such liquidated damages, or agreed
increase in the Revised Contract Price, shall be BUILDER'S sole
remedy for late delivery of PURCHASER furnished items. In no
event will PURCHASER's liquidated damages pursuant to this
Subarticle (f) exceed a cap of three percent (3%) of the Revised
Contract Price decreased by FOUR MILLION NINE HUNDRED SEVENTY
FOUR THOUSAND TWO HUNDRED TWO DOLLARS.
<PAGE>
ARTICLE XII - SCHEDULES
The BUILDER shall furnish the following schedules covering
work to be performed by BUILDER hereunder as the Master Schedule
(Erection Schedule and the Structural Index Schedule). The
Master Schedule, (the "Schedule") as may be revised by BUILDER
from time to time, will show the dates for all required
activities for project completion. The level of activities
included in the Master Schedule shall be sufficient to assure
that each activity listed has been properly defined and analyzed
and that there is a direct correlation of activities in this
Master Schedule to individual supporting BUILDER and
subcontractor schedules for engineering, material procurement,
forebody construction, Existing Vessel cut/join process, testing,
etc. The Master Schedule shall be submitted to the PURCHASER
within thirty (30) days of the Effective Date of this CONTRACT.
The PURCHASER'S Representative shall meet with BUILDER'S
Representative weekly to review the Master Schedule and any
changes thereto for the purpose of determining the actual
progress of the job. This Master Schedule will also be used by
the PURCHASER in his evaluation of schedule extensions, delays,
default, schedule adjustments for changes, BUILDER performance in
support of Delivery Date and any other schedule dependent
CONTRACT or Contract Group issues. Use of this Master Schedule
does not, however, change or alter any other terms and conditions
of this CONTRACT including but not limited to ARTICLE IX, ARTICLE
XI, ARTICLE XXIV, and ARTICLE XXVI.
ARTICLE XIII - INSURANCE
(a) BUILDER, at its own expense, shall from the time the
first materials and/or
equipment destined for inclusion as part of the Vessel become the
risk of the BUILDER and until the Vessel has been delivered to
and accepted by PURCHASER, keep the Vessel and all materials,
outfit, equipment and appliances to be installed on or in the
Vessel, including the Existing Vessel, fully insured under a Full
Form (including prekeel) Marine Builder's Risk Policy. The
amount of insurance, the terms of the policy, the insurance
companies and the underwriters shall at all times be satisfactory
to PURCHASER and the Secretary. The amount of such insurance
shall be at least equal to the completed Revised Contract Price
of the Vessel plus the value of all PURCHASER furnished materials
and equipment. It is agreed that the total value of all
PURCHASER furnished materials and equipment is FOUR MILLION
DOLLARS ($4,000,000) each for the S/S King, S/S Solar and S/S
Spray and FIVE MILLION DOLLARS ($5,000,000) for the S/S Knight.
In addition, the Builder's Risk Policy will contain a provision
that from the time of removal of the forebody from the Existing
Vessel until redelivery of the forebody to PURCHASER, coverage
will continue on the forebody in the amount of ONE MILLION
DOLLARS ($1,000,000). The Builder's Risk Policy shall also
include Protection and Indemnity Insurance with the limits at
least equal to the completed Revised Contract Price of the Vessel
plus the value of all PURCHASER furnished materials and
equipment.
The Builder's Risk Policy shall be in the form as set forth
<PAGE>
in Exhibit "C" attached hereto and made a part hereof. The
Builder's Risk Policy shall have a loss payable clause that shall
provide that all losses in excess of $100,000 shall be payable to
the Secretary for distribution by him to himself, the BUILDER
and/or the PURCHASER as their interests may appear. For purposes
of this Agreement, the "other than owner limitation clause" of
the Builder's Risk Policy shall be deleted and not apply.
(b) BUILDER agrees, at its own expense, during the entire
term of BUILDER'S performance of work hereunder from the time the
first materials and/or equipment destined for inclusion as part
of the Vessel become at risk or services are performed until the
Vessel has been delivered to and accepted by PURCHASER, to carry
with an insurance company satisfactory to the PURCHASER and the
Secretary and authorized to do business in the State of Louisiana
the following insurance with limits in the amounts stated for
which a certificate of insurance is attached as Exhibit "E".
1)Worker's Compensation Insurance fully complying with the laws
of the state or states in which the work is to be done, including
the Longshoremen's and Harbor Worker's Compensation act in an
amount required by said Acts and Employer's Liability Insurance,
including Maritime Employer's Liability Insurance with provisions
for the payment of transportation, wages, maintenance and cure,
in the amount of $1,000,000.
2)Comprehensive General Liability Insurance in the amount of
$1,000,000 per occurrence, Combined Single Limit but in the
aggregate each annual period with respect to the
Products/Completed Operations Hazard and subject further to a
general aggregate of $4,000,000 for Bodily Injury to or Death of
persons and for Property Damage with the Watercraft Exclusion
deleted and including Contractual Liability Insurance to cover
Hold Harmless and Indemnity Agreement contained elsewhere in this
CONTRACT.
3)Automobile Liability and Property Damage Insurance covering
Bodily injuries or Death in the amount of $500,000 per person and
$1,000,000 per any one occurrence and Property Damage in the
amount of $500,000 per accident. This coverage applies to each
and every unit of automotive equipment operated or used by
BUILDER in the performance of their work.
4)Excess Liabilities covering the liabilities insured in the
above policies with a limit equal to the difference between the
above indicated limits and $20,000,000.00 any one occurrence.
5)All subcontractors working for BUILDER at the Shipyard will be
required to have and evidence to BUILDER the insurance coverage
indicated in Exhibit "G".
(c) The Builder's Risk policy shall include PURCHASER and
PURCHASER's agents and all its subsidiaries and affiliates and
the United States of America as assureds. Underwriters agree to
waive subrogation against PURCHASER's group and the United States
of America. The policy shall also provide no recourse against
the United States of America for payment of premium and a 10 day
prior written notice of cancellation or material change in the
policy to the Secretary c/o the Maritime Administration, Chief,
<PAGE>
Division of Marine Insurance.
For liabilities and indemnities assumed by BUILDER
under this CONTRACT all insurance policies of BUILDER (and its
subcontractors, if any) shall expressly waive subrogation as to
PURCHASER and the Secretary. It is further agreed that each such
policy, other than Worker's Compensation policies, shall name
PURCHASER as an additional assured, for liabilities and
indemnities assumed by BUILDER, it being understood that such
policies shall be endorsed to provide that BUILDER's policies are
primary to, and shall receive no contribution from, any insurance
policies maintained by PURCHASER.
(d) Should PURCHASER make any claim against the BUILDER for
any alleged post Delivery Date damage to the Stern section of the
Vessel as a result of the work performed by the BUILDER under
this CONTRACT, PURCHASER and BUILDER agree that any recovery by
the PURCHASER shall be limited to the coverage provided under the
CGL and excess liability policies to the limit of $20,000,000.
This will be PURCHASER's sole remedy for any alleged post
Delivery Date damage to the Stern section of the Vessel.
(e) All insurance policies in which both parties are named
insureds will have a "Cross Liability" Clause identical to the
Cross Liabilities clause as referenced in Exhibit "C", item F
excluding all claims arising under this CONTRACT.
(f) All insurance policies will provide for thirty (30)
days prior written notice of cancellation or material change to
PURCHASER from the underwriters.
(g) Prior to commencement of work, BUILDER shall furnish to
PURCHASER a Certificate of Insurance evidencing that coverages
outlined above are in full force and effect and the originals of
the above policies shall be available in BUILDER'S office at 5100
River Road, Avondale, Louisiana for review upon reasonable
request of PURCHASER.
(h) Any deductibles under such insurance shall be borne by
BUILDER.
(i) PURCHASER agrees, at its own expense, from the time the
first materials and/or equipment destined for inclusion as part
of the Vessel become at risk or services are performed until the
Vessel has been delivered to and accepted by PURCHASER, to carry
with an insurance company satisfactory to the BUILDER and
authorized to do business in the State of Louisiana the following
insurance with limits in the amounts stated for which a
certificate of insurance is attached as Exhibit "F":
1)Worker's Compensation Insurance fully complying with the laws
of the state or states in which the work is to be done, including
the Longshoremen's and Harbor Worker's Compensation act in an
amount required by said Acts and Employer's Liability Insurance,
including Maritime Employer's Liability Insurance with provisions
for the payment of transportation, wages, maintenance and cure,
in the amount of $1,000,000.
2)Comprehensive General Liability Insurance in the amount of
<PAGE>
$1,000,000 per occurrence, Combined Single Limit for Bodily
Injury to or Death of persons and for Property Damage with the
Watercraft Exclusion deleted and including Contractual Liability
Insurance to cover Hold Harmless and Indemnity Agreement
contained elsewhere in this CONTRACT.
3)Excess Liabilities covering the liabilities insured in the
above policies with a limit equal to the difference between the
above indicated limits and $20,000,000.00 any one occurrence.
(j) From the Effective Date of this CONTRACT until delivery
of the Existing Vessel to BUILDER'S yard, PURCHASER shall procure
and maintain Protection and Indemnity insurance in a form at
least as broad as, and with limits not less than, that provided
by the Rules of the Standard Steamship Ownership Protection and
Indemnity Association (Bermuda) Limited, and PURCHASER shall
require Club Managers to register BUILDER as a Co-Assured under
Rule 8.2 of said insurance and Club Managers have noted that
there may be a transfer of interest, either of the whole or a
part of the ship, created by the Agreement to Purchase and Sell
between the member, American Heavy Lift Shipping Company and
Avondale Industries, Inc. dated May 12, 1995 prior to the Vessel
entering the yard for refit. It is agreed that such transfer of
interest will not prejudice the member's cover.
Further, PURCHASER shall require that its brokers, B & P
International, Ltd. and Lloyd Thompson give notice to BUILDER of
any notice or information relating to the cancellation,
termination or cessation of the Vessel's Club Entry or any
material change of the Vessel's Club Entry immediately upon
receipt of such notice or information.
Further, from the Effective Date of this CONTRACT until
delivery of the Existing Vessel to BUILDER'S yard, PURCHASER
shall procure and maintain Collision Liability insurance in a
form at least as broad as that contained in the American
Institute Hull Clauses (June 2, 1977).
PURCHASER shall require Hull and War Risks insurance
Underwriters to acknowledge in writing that in the event that
BUILDER should be found liable in any manner or under any theory
of law or equity for, but not limited to, loss, damage, expense,
fines, and/or penalties arising out of the operation of the
existing Vessel and the Sale and Purchase Agreement, BUILDER
shall have the same rights and status under the above and
Collision Liability Insurance Policy as the PURCHASER.
For liabilities and indemnities assumed by PURCHASER under
this CONTRACT all insurance policies of PURCHASER (and its
subcontractors, if any) shall expressly waive subrogation as to
BUILDER. It is further agreed that each such policy, other than
Worker's Compensation policies, shall name BUILDER as an
additional assured, for liabilities and indemnities assumed by
PURCHASER, it being understood that such policies shall be
endorsed to provide that PURCHASER'S policies are primary to, and
shall receive no contribution from, any insurance policies
maintained by BUILDER.
(k) All insurance policies in which both parties are named
insureds will have a "Cross Liability" Clause identical to the
<PAGE>
Cross Liabilities clause as referenced in Exhibit "C", item F
excluding all claims arising under this CONTRACT.
(l) Except for the Protection and Indemnity and War Risks
Insurance, all insurance policies will provide for thirty (30)
days prior written notice of cancellation or material change to
BUILDER from the underwriters.
(m) Prior to commencement of work, PURCHASER shall furnish
to BUILDER a Certificate of Insurance evidencing that coverages
outlined above are in full force and effect and the originals of
the above policies shall be available in PURCHASER'S office at
365 Canal Street, Suite 2670, New Orleans, Louisiana 70130 for
review upon reasonable request of BUILDER. Any deductibles under
such insurance shall be borne by PURCHASER excluding BUILDER's
Risk.
ARTICLE XIV - RISK OF LOSS - TOTAL LOSS OF A VESSEL
(a) In the event of an actual or constructive total loss of
the Vessel (as defined in BUILDER's insurance coverage) prior to
the delivery, construction of such Vessel shall proceed unless
the PURCHASER or the BUILDER shall elect within a reasonable
period of time to cancel the construction. If an election is made
to cancel the construction, the party electing to cancel shall
give notice to that effect to the other party. If no election is
made to cancel the construction, then construction and delivery
of the Vessel shall proceed in accordance with this CONTRACT, as
it may have been amended. In any such event an extension of the
CONTRACT Delivery Date of the Vessel pursuant to the provisions
of ARTICLE IX - EXTENSION OF TIME FOR COMPLETION OF WORK of this
CONTRACT shall be agreed upon.
(b) In the event that there is an actual or constructive
total loss of the Vessel prior to delivery and such loss results
from the operation of an insurable risk covered by insurance as
required under ARTICLE XIII - INSURANCE of this CONTRACT, all the
proceeds of such insurance payable as a result of such loss shall
be paid to the SECRETARY for distribution to the SECRETARY or the
PURCHASER, as appropriate, in an amount equal to (i) the total
progress payments made for the lost Vessel and (ii) the value of
all lost materials, outfit, equipment and appliances provided by
the PURCHASER for and used or to be used in the construction of
the Vessel, with the balance paid to the BUILDER. Such
distribution shall be made without regard to whether, under
Subarticle (a) above, construction is cancelled or proceeds. It
is agreed that only in the event of an actual or constructive
total loss of the Vessel prior to arrival of the existing vessel
at the Shipyard, the total progress payments for the lost Vessel
in (i) above shall not include the first progress payment paid
for the Stern of the existing vessel. It is agreed that in the
event of an actual or constructive total loss of the Vessel after
the arrival of the Existing Vessel at the Shipyard, the
obligations to pay PURCHASER shall include the amount of the
first progress payment paid by PURCHASER to BUILDER for the Stern
of the Existing Vessel and this amount shall be utilized by
PURCHASER to exercise its option to purchase the S/S COASTAL
MANATEE, Official No. 287186 or another mutually agreeable
substitute Vessel.
<PAGE>
(c) In the event that there is an actual or constructive
total loss of the Vessel prior to delivery which is not covered
by insurance and election is made by the PURCHASER or the BUILDER
to cancel construction of the Vessel, the BUILDER shall pay to
the SECRETARY for distribution to the SECRETARY or the PURCHASER,
as appropriate, an amount equal to all payments made under this
CONTRACT up to the date of the actual or constructive total loss.
It is agreed that only in the event of an actual or constructive
total loss of the Vessel prior to arrival of the existing vessel
at the Shipyard, the obligation in the above sentence for BUILDER
to pay the SECRETARY for distribution to the SECRETARY or the
PURCHASER, as appropriate, an amount equal to all payments under
this CONTRACT shall not include the first progress payment paid
by PURCHASER to BUILDER for the Stern of the existing vessel. It
is agreed that in the event of an actual or constructive total
loss of the Vessel after the arrival of the Existing Vessel at
the Shipyard the obligations of the BUILDER to pay the SECRETARY
shall include the first progress payment paid by PURCHASER to
BUILDER for the Stern of the Existing Vessel and this amount of
the first progress payment shall be utilized by PURCHASER to
exercise its option to purchase the S/S COASTAL MANATEE, Official
No. 287186 or another mutually agreeable substitute Vessel.
(d) In the event of damage to or loss of the Vessel or any
equipment or materials to be installed therein prior to the
delivery of the Vessel to PURCHASER and such loss or damage is
not an actual or constructive total loss, such loss or damage
shall be made good at BUILDER's expense; the proceeds of
insurance for said loss or damage shall be paid to the SECRETARY
for distribution to the BUILDER; and the CONTRACT Delivery Date
shall be extended as required by such additional work.
ARTICLE XV - INJURY TO EMPLOYEES AND OTHERS
(a) BUILDER agrees to protect, defend, indemnify and hold
PURCHASER, its agents, officers, directors, employees, and
representatives (hereinafter collectively referred to as "Owner
Group") harmless from and against all claims, losses, costs,
demand, damages, suits, judgments, penalties, liabilities, debts,
expenses and causes of action of whatsoever nature or character,
whether known or unknown, and whether arising out of contract,
tort, strict liability, unseaworthiness of any vessel,
misrepresentation, violation of applicable law and/or any cause
whatsoever, including but not limited to reasonable attorney's
fees and other costs and expenses, without limit and without
regard to the cause or causes thereof, which in any way arise out
of or are related to this agreement between PURCHASER and BUILDER
(including, without limitation, the performance or subject matter
of this CONTRACT or ingress, egress or presence on any premises,
whether land, buildings, vessels, or otherwise, in conjunction
with this CONTRACT) and which are asserted by or arise in favor
of BUILDER, BUILDER's agents, representatives or employees
(and/or their spouses or relatives) or BUILDER's subcontractors,
subcontractor's agents, representatives or employees (and/or
their spouses or relatives) due to bodily injury or death,
whether or not caused by the sole, joint and/or concurrent
negligence, fault or strict liability of Owner Group, the
unseaworthiness of any vessel, or any other cause whatsoever. It
<PAGE>
is further understood and agreed that this indemnity and defense
obligation shall include the obligation to reimburse PURCHASER
for any attorneys' fees, costs and expenses which may be incurred
by PURCHASER in enforcing the defense and indemnity obligations
set forth in this Article.
(b) For liabilities and indemnities assumed by BUILDER
under this CONTRACT all insurance policies of BUILDER (and its
subcontractors, if any) shall expressly waive subrogation as to
PURCHASER. It is further agreed that each such policy, other
than Worker's Compensation policies, shall name PURCHASER as an
additional insured, for liabilities and indemnities assumed by
BUILDER, it being understood that such policies shall be endorsed
to provide that BUILDER'S policies are primary to, and shall
receive no contribution from, any insurance policies maintained
by PURCHASER.
(c) Without in any manner limiting the generality of the
foregoing Subarticle (a), BUILDER agrees to protect, defend,
indemnify and hold Owner Group harmless from and against any and
all claims, demands, suits, administrative fines and penalties,
liabilities or causes of action, civil or criminal, including
those made by or before any administrative body or commission
established by any government having jurisdiction over the
premises, relating to the generation or disposal of hazardous
wastes or to the pollution or contamination of the waters, or
air, or earth, or otherwise directly or indirectly arising out of
or connected with or related to this CONTRACT or the performance
thereof, regardless of whether based on any violation or
purported violation of a statute, ordinance or regulation of any
governmental authority, but only if caused by BUILDER's
negligence. BUILDER assumes the obligation to comply with all
such statutes, ordinances and regulations. As used in this
Subarticle, the phrase "liabilities" includes without limitation
expenditures for controlling and removing pollutants,
expenditures for cleaning up any polluted areas, sums paid on
account of injury to or death of persons, and sums paid or
assessed on account of damage to or destruction of property,
public or private, including any and all natural resources and
marine life. The obligations of this Subarticle (c) will expire
on the Delivery Date.
(d) PURCHASER agrees to protect, defend, indemnify and hold
BUILDER, its agents, officers, directors, employees, and
representatives (hereinafter referred to collectively as
"Contractor Group") harmless from and against all claims, losses,
costs, suits, judgments, demands, damages, penalties,
liabilities, debts, expenses and causes of action of whatsoever
nature or character, whether known or unknown and whether arising
out of contract, tort, strict liability, unseaworthiness of any
vessel, misrepresentation, or violation of applicable law and/or
any cause whatsoever, including but not limited to reasonable
attorney's fees and other costs and expenses, without limit and
without regard to the cause or causes thereof, which in any way
arise out of or are related to this agreement between PURCHASER
and BUILDER (including, without limitation, the performance of
subject matter of this CONTRACT or ingress, egress or presence on
any premises, whether land, buildings, vessels, or otherwise, in
<PAGE>
conjunction with this CONTRACT and which are asserted by or arise
in favor of PURCHASER, PURCHASER's agents, representatives or
employees (and/or their spouses or relatives) or PURCHASER's
subcontractors, subcontractor's agents, representatives or
employees (and/or their spouses or relatives) due to bodily
injury or death, whether or not caused by the sole, joint and/or
concurrent negligence, fault or strict liability of Contractor
Group, the unseaworthiness of any vessel, or any other cause
whatsoever. It is further understood and agreed that this
indemnity and defense obligation shall include the obligation to
reimburse BUILDER for any attorneys' fees, costs and expenses
which may be incurred by BUILDER in enforcing the defense and
indemnity obligations set forth in this Article.
(e) For liabilities and indemnities assumed by PURCHASER
under this CONTRACT all insurance policies of PURCHASER (and its
subcontractors, if any) shall expressly waive subrogation as to
BUILDER. It is further agreed that each such policy, other than
Worker's Compensation policies, shall name BUILDER as an
additional insured, for liabilities and indemnities assumed by
PURCHASER, it being understood that such policies shall be
endorsed to provide that PURCHASER'S policies are primary to, and
shall receive no contribution from, any insurance policies
maintained by BUILDER.
(f) Without in any manner limiting the generality of the
foregoing Subarticle (d), PURCHASER agrees to protect, defend,
indemnify and hold Contractor Group harmless from and against any
and all claims, demands, suits, administrative fines and
penalties, liabilities or causes of action, civil or criminal,
including those made by or before any administrative body or
commission established by any government having jurisdiction over
the premises, relating to the generation or disposal of hazardous
wastes or to the pollution or contamination of the waters, or
air, or earth, or otherwise directly or indirectly arising out of
or connected with or related to this CONTRACT or the performance
thereof, regardless of whether based on any violation or
purported violation of a statute, ordinance or regulation of any
governmental authority, but only if caused by PURCHASER's
negligence. PURCHASER assumes the obligation to comply with all
such statutes, ordinances and regulations. As used in this
Subarticle, the phrase "liabilities" includes without limitation
expenditures for controlling and removing pollutants,
expenditures for cleaning up any polluted areas, sums paid on
account of injury to or death of persons, and sums paid or
assessed on account of damage to or destruction of property,
public or private, including any and all natural resources and
marine life. The obligations of this Subarticle (f) will expire
on the Delivery Date.
ARTICLE XVI - APPOINTMENT OF REPRESENTATIVES
(a) PURCHASER designates Alan B. Nierenberg to be its
authorized representative for all matters during the performance
of this CONTRACT.
(b) BUILDER designates Mr. Bruce Wismar to be its BUILDER's
Program Manager for administering the performance of this
CONTRACT.
<PAGE>
(c) The Parties agree that its named representative will be
available for consultations during normal working hours.
With respect to the performance of this CONTRACT, the
PURCHASER shall be entitled to designate authorized
representatives who shall have authority to give directions under
this CONTRACT. Notice of all such designations (together with a
statement of the scope of authority of the designee) and notice
of the revocation of any prior designation shall be given
promptly to the BUILDER in writing. The BUILDER shall have no
obligation to follow any directions of the PURCHASER except those
which shall be issued in writing over the signature of an
authorized representative of the PURCHASER acting within the
scope of his authority.
ARTICLE XVII - MATERIALS AND WORKMANSHIP
(a) In performing the CONTRACT work, the BUILDER shall
comply with all of the requirements of the American Bureau of
Shipping, the United States Coast Guard and all other agencies
having jurisdiction over the CONTRACT work (hereinafter called
individually a "Regulatory Body" and collectively "Regulatory
Bodies") notwithstanding that there may be shown in or on any
drawing set out in the Specifications and the specific
requirements of any item of CONTRACT work, and notwithstanding
any approvals shown upon said drawing , subject, however, to the
following: (i) if the Specifications specifically require work in
excess of that required by the applicable Regulatory Body, such
specifically required work shall be performed by the BUILDER as
CONTRACT work required by this CONTRACT; (ii) if the
Specifications require work which is less than that required by
the applicable Regulatory Body, the BUILDER shall perform the
work required by the Regulatory Body as CONTRACT work required by
this CONTRACT; (iii) if the Specifications require work which is
less than that required by the applicable Regulatory Body, and
such regulatory requirement is in compliance with a rule or an
interpretation of a rule of the Regulatory Body made effective
subsequent to 7 March 1995, and said requirement effects an
increase in the cost of the CONTRACT work and/or the Delivery
Date, the Revised Contract Price and/or the Delivery Date shall
be adjusted pursuant to the provisions of ARTICLE VII - CHANGES
of this CONTRACT.
(b) Unless otherwise specifically provided in the
Specifications, all workmanship, equipment, materials, and
articles incorporated in the Vessel shall be new, of first class
marine quality and not known to be a discontinued line. The
BUILDER shall furnish to the PURCHASER the purchase
specifications and vendors' specifications for materials or
components which BUILDER contemplates incorporating in the Vessel
and all changes thereto, and names of the manufactures, vendors
and subcontractors of the principal items of machinery,
mechanical and other equipment and work which it contemplates
incorporating in or having performed on the Vessel.
<PAGE>
ARTICLE XVIII - INSPECTION - APPROVAL OF DRAWINGS
(a) All material and workmanship, unless otherwise
designated by the Specifications or by this CONTRACT, shall be
subject to inspection by representatives of the PURCHASER and
representatives of Regulatory Bodies at any and all proper times
during manufacture and/or construction at any and all places
where such manufacture and/or construction are carried on, and
BUILDER's subcontracts shall make appropriate provision therefor.
Access to the Shipyard for the performance and administration
therein of all inspections and tests that may be required by the
representatives of the PURCHASER or representatives of Regulatory
Bodies shall at all times be subject to BUILDER's security
requirements.
(b) The BUILDER shall furnish promptly at the Shipyard,
without additional charge, all reasonable facilities and
materials, including suitably furnished offices for the PURCHASER
with light, heat and air conditioning, as required by climatic
conditions, telephone, desks, drawing tables, and filing
cabinets, necessary for the convenient administration of the
inspection and tests that may be required by the representatives
of the PURCHASER and Regulatory Bodies. Long distance telephone
charges will be for the account of PURCHASER.
(c) Within thirty (30) days after the effective date of
this CONTRACT, the BUILDER shall submit for approval a Working
Drawing schedule listing all Working Drawings to be prepared and
the dates by which each Working Drawing is to be completed.
Copies of all Working Drawings will be submitted to PURCHASER for
review, and the PURCHASER shall return the Working Drawings
within fourteen (14) days after receipt thereof marking
corrections required for compliance with the Specifications.
Failure of the PURCHASER to return a Working Drawing within
fourteen (14) days shall constitute acceptance of such Working
Drawing. Approval or acceptance of such Working Drawings ,
materials and components or schedules shall not relieve the
BUILDER from the responsibilities specified in this CONTRACT.
BUILDER will keep PURCHASER advised of required reviewing
priorities. BUILDER will provide PURCHASER with copies of all
correspondence with Regulatory Bodies. BUILDER will provide
PURCHASER full access to all working documents for this CONTRACT.
(d) The PURCHASER shall promptly approve all work and
materials conforming to the requirements of this CONTRACT and
shall promptly reject all work and materials not conforming to
the requirements of this CONTRACT. Rejected workmanship shall be
satisfactorily corrected, and rejected material shall be
satisfactorily repaired or replaced with proper material without
charge therefor, unless such work or material shall have been
furnished by the PURCHASER, in which event the remedying of such
defective work, or the replacing of such defective material, if
done by the BUILDER, shall be treated as a change under this
CONTRACT. The BUILDER shall promptly segregate and remove the
rejected material. The acceptance of such workmanship and
materials shall not prejudice the rights of the PURCHASER under
this CONTRACT.
(e) All inspection, tests, and approvals shall be performed
<PAGE>
in such manner as not to unnecessarily delay the work.
(f) The provisions of this Article are subject to the
provisions of other ARTICLES of this CONTRACT and Specifications
relative to the trials, tests and acceptance of work done on the
Vessel.
(g) If requested by the Secretary upon delivery of the
Vessel, the PURCHASER will provide or cause to be provided a
complete set of drawings used for the construction of the Vessel
on microfilm or other acceptable format.
ARTICLE XIX - TRIALS
(a) The Vessel shall have the trials set forth in the
Specifications and this CONTRACT. The reasonably necessary
expenses of all trials shall be borne by the BUILDER except that
the PURCHASER will furnish the operating crew for the Vessel.
(b) When work on the Vessel is substantially complete, as
required by this CONTRACT, and when the BUILDER has made
sufficient tests at the dock to the satisfaction of the PURCHASER
to be reasonably sure of compliance with the requirements of this
CONTRACT, the Vessel shall be subject to trials at sea as
prescribed by the Specifications and this CONTRACT.
(c) If there is reasonable cause to question its
performance, new machinery or machinery repaired by BUILDER shall
be opened up for post-trial inspection and examination after
completion of such trials at sea. If any defects, deficiencies
or damage appear in the work performed by the BUILDER or in the
materials or equipment supplied by the BUILDER excluding the
Stern, the defects, deficiencies or damage shall be corrected by
and at the expense of the BUILDER, after which the machinery
shall be closed and connected, ready for service.
ARTICLE XX - ADDITIONAL TRIALS - EXPENSES
If, at and upon the trials described in ARTICLE XIX - TRIALS
hereof, there shall be any failure of the Vessel to meet the
requirements of the Specifications and this CONTRACT, the BUILDER
shall, after corrective action is taken and provided a trial is
necessary to reasonably prove the effectiveness of the corrective
action, be required to make further trials, sufficient in number
reasonably to demonstrate compliance with the Specifications and
this CONTRACT. Except for the operating crew furnished by
PURCHASER, or the Stern, the costs of all additional trials
required by this ARTICLE XX - ADDITIONAL TRIALS - EXPENSES shall
be borne by the BUILDER, except that with regard to any trials
made necessary by failure or malfunction upon prior trial of
equipment or machinery furnished by the PURCHASER, the PURCHASER
shall bear the cost of such additional trial.
ARTICLE XXI - ACCEPTANCE AND DELIVERY OF THE VESSEL
(a) On completion of the inspections by PURCHASER, as well
as all tests, and trials and rectification of any defects
discovered therein, with the exception of those defects as may be
listed in the Delivery Certificate by PURCHASER, a meeting will
<PAGE>
be held between the BUILDER and PURCHASER at which:
(i) The BUILDER will report to PURCHASER on the work
carried out in rectifying any defects or omissions found in the
Vessel during the sea trials and/or any work outstanding on
completion of the sea trials;
(ii) PURCHASER'S representatives may conduct a final
inspection of the Vessel in the presence of BUILDER'S
representatives;
(iii)The Parties will agree to the quantity and value
of fuel and lubricants remaining on board after completion of all
tests and sea trials to be charged to PURCHASER.
(iv) BUILDER will present to PURCHASER evidence that
the Vessel is certified by the U.S. Coast Guard and ABS (interim
certification), unless PURCHASER furnished equipment, or the
Stern precludes such certification.
(v) PURCHASER shall pay to BUILDER any amount then due
under the provisions of ARTICLE VI, PAYMENT OF CONTRACT PRICE -
METHOD OF PAYMENT.
(vi) Upon completion of items (i), (ii), (iii), (iv),
and (v) above and any other outstanding matters, the BUILDER will
deliver the Vessel to PURCHASER, whereupon PURCHASER will accept
the Vessel by the concurrent execution by both Parties of a
Delivery Certificate, whereupon such title to the Vessel as
remains in BUILDER will pass to PURCHASER.
(b) The interval between completion of the sea trials and
the delivery shall be sufficient to enable the inspections and
rectifications of defects to be completed, but in any event shall
not be less than four (4) business days.
(c) Within five (5) business days after delivery, PURCHASER
shall remove the Vessel from BUILDER'S yard. The Vessel shall be
deemed ready for delivery when it has received the necessary
certification by the U. S. Coast Guard without any qualification
or limitation that would significantly affect the operation or
commercial value of the Vessel in the intended service and has
been judged ready for delivery without any qualification or
limitation that would significantly affect the commercial value
or operation of the Vessel in the intended service by the
Surveyor of the American Bureau of Shipping assigned to the
Vessel. If after the necessary U.S. Coast Guard certification
and ABS approvals have been obtained and there still remains a
good faith dispute between the parties as to whether the Vessel
is ready for delivery, the PURCHASER may deposit the estimated
cost of the disputed items into an escrow account in accordance
with the provisions of Subarticle XXV(f) hereof and accept
delivery of the Vessel.
(d) If by agreement between the Parties and notwithstanding
the provisions of this ARTICLE the Vessel is accepted by
PURCHASER with any known outstanding discrepancies or defects not
corrected prior to delivery, each deficiency or deviation from
the Specifications and drawings not previously approved by
<PAGE>
BUILDER and PURCHASER shall be set out in a list and signed by
PURCHASER and BUILDER. At the option of PURCHASER, the Parties
may agree on money damages in lieu of performance by BUILDER for
each such deficiency or deviation.
(e) The Vessel shall be turned over by BUILDER to PURCHASER
in midstream of the Mississippi River at the Shipyard.
ARTICLE XXII - GUARANTEE
(a) Notwithstanding any inspection or failure to reject by
the PURCHASER or any Regulatory Body pursuant to ARTICLES XVIII
through XXI of this CONTRACT, if, at any time within twelve (12)
months after delivery of the Vessel there shall arise or be
discovered any weakness, any deficiency, any failure, any
breaking down or deterioration in the design, workmanship,
equipment, machinery, or material, furnished by the BUILDER or
its subcontractors in performing the CONTRACT work, excluding all
PURCHASER furnished items and excluding the Stern except for work
performed by the BUILDER pursuant to the Specifications, which
causes the Vessel to not function as prescribed and as intended
by the Specifications and this CONTRACT (herein called a
"Guarantee Deficiency"), such Guarantee Deficiency shall be made
good, at the BUILDER's expense, to the requirements of the
Specifications and this CONTRACT; provided, however, the BUILDER
shall not be responsible for the cost of correcting any such
Guarantee Deficiency due to ordinary wear and tear, nor to the
extent increased by the negligence or other improper act of the
PURCHASER or any operator of the Vessel or of any other person
other than the BUILDER or its subcontractors during said period.
The liability of the BUILDER to the PURCHASER under this CONTRACT
on account of any such Guarantee Deficiency shall not extend
beyond the actual corrective repair or replacement thereof at
straight time commercial shipyard or ship repair yard rates, or
overtime rates that have been approved by BUILDER in case of
emergency, including the cost of the dockage of the Vessel, if
necessary. The BUILDER shall not be liable to the PURCHASER for
any damage to such Vessel or its equipment or cargo or other
property of the PURCHASER or for consequential damages of the
PURCHASER arising out of any such Guarantee Deficiency, except
that in the event any Guarantee Deficiency in any item of
machinery or equipment furnished by the BUILDER, or in the event
that any workmanship or material furnished by the BUILDER in
performance of work upon the Vessel's machinery or equipment,
gives rise to a Guarantee Deficiency causing any damage to such
items of machinery or equipment, the BUILDER shall be liable not
only for the cost of correcting or repairing such Guarantee
Deficiency, but also shall be liable for the cost of correcting
or repairing such damage to such item of machinery or equipment
caused by such Guarantee Deficiency. Any work required to be
performed pursuant to the provisions of this ARTICLE shall be
carried out, if practicable and at the PURCHASER's option, at the
shipyard of the BUILDER. The BUILDER may, with the concurrence of
the PURCHASER, have such work performed by its subcontractor,
another shipyard or repair facility. The PURCHASER may, however,
have such work performed by a shipyard or ship repair yard at any
port satisfactory to it and in that event the BUILDER shall be
liable to the PURCHASER for the reasonable expense thereof at the
<PAGE>
straight time commercial shipyard or ship repair yard rates
prevailing in such port areas, including the cost of dockage of
the Vessel, if necessary. Should the BUILDER so desire, it may
have an engineer onboard the Vessel for the guarantee period who
shall have full opportunity to observe and inspect the working of
the Vessel in all its parts, but without any directing or
controlling authority over the Vessel. PURCHASER will provide
suitable accommodations and board to the engineer during the
guarantee period without charge.
(b) The PURCHASER promptly shall notify the BUILDER of any
Guarantee Deficiencies or damage for which the BUILDER is liable
pursuant to Subarticle (a) above that are discovered or appear
within the guarantee period, but in no event later than ten (10)
days after the end of such period. In the event the PURCHASER
proposes the repair or correction of such Guarantee Deficiency or
damage before the Vessel reaches its next continental United
States port, notice shall be given to the BUILDER not later than
five (5) days after the discovery of the Guarantee Deficiency or
damage and before repair, otherwise notice shall be given five
(5) days after the Vessel next reaches a continental United
States port and before the Guarantee Deficiency or damage is
repaired or corrected. Whenever practical (taking into
consideration the necessity of keeping the Vessel on schedule)
the BUILDER shall be given an opportunity to inspect the
Guarantee Deficiency or damage before it is remedied.
(c) A final guarantee survey of the Vessel shall be
conducted by the PURCHASER at or near the expiration of the
guarantee period. Such survey shall be based on the Guarantee
Deficiencies in the CONTRACT work appearing or discovered during
the guarantee period. In the event that the Vessel is not
available for the guarantee survey on or before the end of the
guarantee period, the PURCHASER promptly shall submit to the
BUILDER a list of all of the Guarantee Deficiencies in the
CONTRACT work appearing or discovered during the guarantee period
and all damage for which the BUILDER is liable under the
provisions of this ARTICLE. The final guarantee survey shall be
held at such port in the United States as the PURCHASER
designates and seven (7) days written notice of time and place
for such guarantee survey shall be given to the BUILDER by the
PURCHASER.
(d) For the determination of any underwater Guarantee
Deficiencies, the PURCHASER, at the PURCHASER's expense, may
retain two (2) divers, one to be chosen by BUILDER, to inspect
the bottom of the Vessel in clear water. If both divers agree in
writing to the extent of underwater Guarantee Deficiencies to the
Vessel then PURCHASER may drydock the Vessel within twenty four
(24) months after its delivery at its expense and BUILDER will
not be responsible for repairs of the Guarantee Deficiencies
except as documented by the agreement of both divers. If both
divers cannot agree to the extent of the underwater Guarantee
Deficiencies to the Vessel then PURCHASER may request that
BUILDER drydock the Vessel at its expense within fifteen months
following the Vessel delivery and BUILDER's liability for
underwater Guarantee Deficiencies will be limited to those which
arose during the twelve (12) month guarantee period. If it
becomes necessary to drydock the Vessel solely for the correction
<PAGE>
of a Guarantee Deficiency for which the BUILDER is responsible,
the cost of the entire drydocking required for the correction of
the Guarantee Deficiency, as well as the cost of remedying the
deficiency, as provided in this ARTICLE , shall be at the expense
of the BUILDER.
(e) At the end of the guarantee period herein provided, the
BUILDER agrees to transfer and assign to the PURCHASER, as to any
item of material installed in the Vessel, the guarantee rights of
the BUILDER against the vendor of such item of material which
under the terms of such vendor's guarantee the vendor's
obligations extend for a period beyond the guarantee period
herein set forth; provided that the BUILDER may exclude from such
assignment any rights against the vendor in favor of the BUILDER
for Guarantee Deficiencies and damages within the guarantee
period in ARTICLE XXII - GUARANTEE (a) hereof. BUILDER will
assign to PURCHASER any warranties in excess of the twelve (12)
months after the delivery of the Vessel that BUILDER is able to
obtain from paint vendors, if any.
(f) The liability (if any) of the BUILDER for a Guarantee
Deficiency and for any damage to the equipment or machinery of
the Vessel, resulting from any Guarantee Deficiency, as set out
in this ARTICLE, is the exclusive remedy of the PURCHASER in
warranty, contract, tort or otherwise against the BUILDER for any
Guarantee Deficiency. Except for the provisions of ARTICLE XI,
CONTRACT PRICE ADJUSTMENTS, in no event under this CONTRACT shall
BUILDER be responsible for any sum in excess of the repairs
and/or replacement as specified herein it being specifically
understood that BUILDER is not responsible for delay, demurrage,
loss of profits, loss of use or any other consequential damages.
It is specifically understood that any Guarantee Deficiency
reported after the twelve (12) month guarantee period, except for
the underwater Guarantee Deficiencies of Subarticle (d) above,
and all damages therefrom, shall be the exclusive responsibility
of PURCHASER.
(g) THE GUARANTEES SET FORTH IN THIS ARTICLE XXII,
GUARANTEE, RELATING TO ANY GUARANTEE DEFICIENCY ARE EXCLUSIVE AND
ARE IN LIEU OF ALL IMPLIED WARRANTIES (INCLUDING BUT NOT LIMITED
TO ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE AND WORKMANLIKE SERVICES).
(h) Anything to the contrary notwithstanding, the BUILDER
does not guarantee PURCHASER furnished materials or equipment,
nor the Stern, for any Guarantee Deficiency items except to meet
the requirements stipulated in ARTICLE X, PERFORMANCE STANDARD.
ARTICLE XXIII - DEFAULT BY PURCHASER
The following shall constitute events of default by
PURCHASER under this CONTRACT:
(a) Delay in Payment
Failure of PURCHASER to make payment to BUILDER as required
under the provisions of ARTICLE VI - PAYMENT OF CONTRACT PRICE -
METHOD OF PAYMENT, provided payment is not received by BUILDER
for a period of ten (10) days after written notice to PURCHASER
thereof by BUILDER.
<PAGE>
(b) Non-Compliance with other Undertakings
Default in compliance with or the due and punctual
performance of any material warranties, covenants and agreements
required to be maintained and performed by PURCHASER hereunder
other than the scheduled delivery of the S/S King, which default
continues unremedied for a period of thirty (30) days after
written notice to PURCHASER thereof by BUILDER.
(c) Receivership or Insolvency
An order of a court of competent jurisdiction, other than
upon petition by BUILDER, appointing a receiver, liquidator or
trustee of the assets of PURCHASER or any part thereof or a
decree of such court adjudicating PURCHASER as bankrupt, or
declaring PURCHASER insolvent.
(d) Acts of Bankruptcy
The filing by PURCHASER of a voluntary petition in
bankruptcy, or the making by PURCHASER of an assignment for the
benefit of its creditors, or the admission by PURCHASER in
writing of its inability to pay its debts generally as they
become due, or its consent to, acquiescence in or failure to
contest the appointment of a receiver or receivers of all or part
of its assets.
(e) Voluntary Reorganization
Any petition or any answer proposing the reorganization of
PURCHASER pursuant to the Federal Bankruptcy Act or any similar
law, federal or state, being filed against PURCHASER in any court
and not being dismissed or denied within sixty (60) days after
the date on which such petition or answer was filed, or the
approval of any such petition or answer by any court.
(f) Involuntary Reorganization
The filing of a petition by any of the creditors of
PURCHASER to reorganize PURCHASER pursuant to the Federal
Bankruptcy Act or any similar law, federal or state, and such
petition not being dismissed or denied within sixty (60) days
after the date on which such petition was filed, or the approval
of such petition by the court having jurisdiction thereof.
(g) Seizure of Assets
The assumption of custody or control of the whole or any
substantial part of the assets of PURCHASER for a period in
excess of thirty (30) days by any governmental agency or any
court of competent jurisdiction at the instance of any
governmental agency.
(h) Nondelivery of S/S King
Failure to timely deliver the S/S King as required by
ARTICLE IV, ITEMS FURNISHED BY PURCHASER.
ARTICLE XXIV - DEFAULT BY BUILDER
The following shall constitute events of default by BUILDER
under this CONTRACT:
(a) Receivership or Insolvency
An order of a court of competent jurisdiction, other than
upon petition by PURCHASER, appointing a receiver, liquidator or
trustee of the assets of BUILDER or any part thereof, or a decree
of such a court adjudicating BUILDER as bankrupt, or declaring
<PAGE>
BUILDER insolvent.
(b) Acts of Bankruptcy
The filing by BUILDER of a voluntary petition in bankruptcy,
or the making by BUILDER of an assignment for the benefit of its
creditors, or the admission of BUILDER in writing of its
inability to pay its debts generally as they become due, or its
consent to, acquiescence in or failure to contest the appointment
of a receiver or receivers of all or any part of its assets.
(c) Voluntary Reorganization
Any petition or answer proposing the reorganization of
BUILDER pursuant to the Federal Bankruptcy Act or any similar
law, federal or state, being filed against BUILDER in any court
and not being dismissed or denied within sixty (60) days after
the date on which such petition or answer was filed, or the
approval of such petition or answer by any court of competent
jurisdiction.
(d) Involuntary Reorganization
The filing of a petition to reorganize BUILDER by any of the
creditors of BUILDER pursuant to the Federal Bankruptcy Act or
any similar law, federal or state, and such petition not being
dismissed or denied within sixty (60) days after the date on
which such petition was filed, or the approval of such petition
by the court having jurisdiction thereof.
(e) Attachment of Liens or Privileges
The attachment of any lien or privilege to the Vessel not
due to the acts or omissions of PURCHASER or persons in privity
with it, whether under federal or state law or the General
Maritime Law, if such lien is not removed within sixty (60) days
after written demand by PURCHASER to BUILDER for such removal or
unless BUILDER, within such time, shall not have provided
PURCHASER with a bond by sureties acceptable to PURCHASER against
such lien in an amount equal to the face amount of such lien.
(f) Non-Compliance
Default in compliance with or the due performance of any
material warranties, covenants and agreements required to be
maintained and performed by BUILDER hereunder, which default
continues unremedied for a period of third (30) days after
written notice to BUILDER thereof.
ARTICLE XXV - ACTION BY BUILDER UPON DEFAULT BY PURCHASER
(a) Right of Termination
In the event that any one or more of the events of default
specified in ARTICLE XXIII - DEFAULT BY PURCHASER of this
CONTRACT shall have occurred and be continuing, BUILDER, if it so
elects, may terminate this CONTRACT thirty (30) days (ten (10)
days if for non-payment and as otherwise indicated in ARTICLE IV,
ITEMS FURNISHED BY PURCHASER, for PURCHASER's failure to deliver
the S/S King) after written notice has been given to the
PURCHASER.
(b) Completion and Sale of Vessel
In the event of such termination, PURCHASER agrees that
BUILDER shall be entitled to continue construction and to sell
<PAGE>
the Vessel while work is in process or after completion. Sale of
the Vessel under this ARTICLE XXV means all work-in-process,
materials, articles of machinery, outfit and equipment and
supplies to be installed in the Vessel. Pending such sale,
BUILDER shall be entitled to retain any progress payments already
paid.
(i) Any such sale may be effected by the BUILDER
either by public auction (in which case BUILDER, its agents or
affiliates may bid for and buy the Vessel) or by private contract
on such terms and conditions as BUILDER may see fit, but BUILDER
shall be bound in good faith to secure the best price obtainable,
and no such private contract shall be effective until fifteen
(15) days after BUILDER has notified PURCHASER and the Secretary
of its intention to enter such contract and the purchase price
thereunder.
(ii) In the event BUILDER elects to complete and sell
the Vessel, then BUILDER thereafter shall repay to PURCHASER (but
without interest) an amount equal to the sum of all progress
payments made by PURCHASER, less any deficiency between (a) the
Revised Contract Price as adjusted under this CONTRACT at the
time of such sale and (b) the net price realized for the Vessel
from the sale, after payment of all additional costs, charges and
expenses incurred by BUILDER resulting from such default.
(iii)In the event that BUILDER elects to complete the
Vessel, PURCHASER shall be entitled to negotiate the revival of
this CONTRACT at any time before the sale of the Vessel by
providing satisfactory evidence that the events causing the
default have been remedied.
(c) Abandonment of Construction
In the event of termination, BUILDER may at its option elect
not to complete the Vessel and to sell the Vessel in its state of
completion at the time of abandonment of construction. If BUILDER
so elects, BUILDER shall notify PURCHASER in writing of its
election and shall thereafter repay to PURCHASER (but without
interest) all progress payments already paid by PURCHASER less
the sum of: (i) One-Hundred ten percent (110%) of BUILDER's
reasonable costs incurred in the CONTRACT work to the date of the
abandonment of construction, plus (ii) such other costs, charges,
expenses and damages as BUILDER may have incurred as a result of
the default of PURCHASER, minus (iii) the proceeds of any sale of
the Vessel in its state of completion as of the time of
abandonment of construction and the reasonable value of any part
thereof that remains unsold. BUILDER shall be bound in good faith
to secure the best price obtainable therefor for purposes of the
determination of item (iii) of the foregoing sum; and if
PURCHASER shall have cause to believe that BUILDER has not
obtained the best price and terms possible, PURCHASER or the
Secretary shall have the option of purchasing the Vessel for cash
within thirty (30) days after notice thereof by BUILDER to
PURCHASER at the price and on the terms of the offer by a third
party deemed by BUILDER to be most favorable to BUILDER.
(d) Alternative Remedies
The rights conferred upon BUILDER under the terms of this
ARTICLE XXV - ACTION BY BUILDER UPON DEFAULT OF PURCHASER shall
<PAGE>
not be exclusive of any other remedies in law or equity which
might be otherwise available to BUILDER upon the happening of the
events of default specified in ARTICLE XXIII - DEFAULT BY
PURCHASER hereof. Failure of BUILDER to exercise any of the
rights conferred upon it hereunder with respect to any default of
PURCHASER shall not constitute a waiver of any rights of BUILDER
with respect to any other events of default of PURCHASER
hereunder.
(e) Contract Group Adjustments
The Revised Contract Price increase due and payable as part
of the settlement of accounts pursuant to this ARTICLE XXV,
ACTION BY BUILDER UPON DEFAULT BY PURCHASER shall include any
adjustment of the Revised Contract Price to be made pursuant to
ARTICLE III, CONTRACT GROUP.
(f) Escrow of Funds During Disputes
In the event any payment or payments otherwise due to
BUILDER under this CONTRACT are subject to a good faith dispute
between the parties arising under any of the other ARTICLES of
this CONTRACT, then, pending resolution of said dispute,
PURCHASER or the Secretary shall have the right to prevent
termination of this CONTRACT by BUILDER by depositing the dollar
amount of payments then under dispute with an escrow holder which
shall be a national banking association or trust company. Said
amount shall be held by the escrow holder in interest-bearing
accounts and any interest accruing thereon (at the rate paid by
the escrow holder and not at the rate defined elsewhere in this
CONTRACT), less lawful charges, shall be paid to the party who
prevails in any such dispute to the extent it prevails. This
Subarticle shall be subject to all other ARTICLES of this
CONTRACT and is intended to provide for the specific event of
imminent termination of this CONTRACT by BUILDER or delay in the
delivery of the Vessel.
ARTICLE XXVI - ACTION BY PURCHASER UPON DEFAULT OF BUILDER
(a) In the event that any one or more of the events of
default specified in ARTICLE XXIV - DEFAULT BY BUILDER of this
CONTRACT shall have occurred except for late delivery, the
PURCHASER may terminate this CONTRACT. The PURCHASER may then
proceed to have all or part of the work on the Vessel completed
at BUILDER's Shipyard or elsewhere and for such purpose may take
possession and use and occupy so much of the
BUILDER's shipyard, plant, equipment, tools, machinery and
appliances, as may be needed for such purposes, without the
payment of any rental or other charge therefor to the BUILDER.
BUILDER hereby agrees to assure to the PURCHASER such use and
occupancy of said facilities and said other property of the
BUILDER for such period of time as may be necessary for the
completion of the CONTRACT work.
(b) If the PURCHASER shall elect to have all or part of the
CONTRACT work completed, the BUILDER shall (i) assign such
subcontractors and orders for material, services and supplies to
be used in the performance of said CONTRACT work to the PURCHASER
as the PURCHASER may direct, and (ii) pay to the PURCHASER the
amount by which the total cost to the PURCHASER of completing
said work (including all amounts paid to the BUILDER hereunder),
<PAGE>
plus such other costs, charges, expenses (including reasonable
attorneys fees) and damages as PURCHASER may have incurred as a
result of the default of BUILDER exceeds the total Revised
Contract Price provided in this CONTRACT, as adjusted hereunder;
provided, however, that in computing the amount, if any, to be
paid by the BUILDER to the PURCHASER, appropriate adjustment
shall be made for changes in the CONTRACT work subsequent to the
termination of the CONTRACT.
(c) If the PURCHASER shall elect not to complete the
Vessel, the PURCHASER, at any time within one hundred fifty (150)
days from the date of termination hereunder, may sell the
partially completed Vessel, work-in-process, materials, articles
of machinery, outfit and equipment and supplies to be installed
in the Vessel, together with providing copies of all drawings ,
specifications, calculations and other records reasonably
required for the construction or equipment thereof, provided that
subject to PURCHASER'S right to use all documentation for
completion of the Vessel the BUILDER shall continue to be
entitled to all rights under ARTICLE VIII - RIGHTS TO DESIGN
DATA. The PURCHASER shall have access to the Shipyard in order to
conduct the sale. Any purchaser at any such sale shall be given
reasonable time, not less than sixty (60) days from the date of
sale, within which to remove from the BUILDER's plant the Vessel,
work-in-process, materials, articles of machinery, outfit,
equipment and supplies purchased. The BUILDER or PURCHASER may
become a purchaser at such sale. The proceeds of the sale shall
be applied, first, to payment of all costs and expenses,
including reasonable attorney's fees incurred by the PURCHASER or
its assigns in making such sale, secondly, to reimbursement of
the PURCHASER for payments heretofore made by the PURCHASER to
the BUILDER on account of the Vessel; and thirdly, to payment of
such other costs, charges, expenses and damages, including
reasonable attorneys fees, as PURCHASER may have incurred as a
result of the default of BUILDER. The remaining proceeds, if
any, shall be paid over to the BUILDER. In the event the proceeds
of the sale shall not be sufficient to pay the first, second and
third items, as above set forth, the difference shall be paid to
the PURCHASER by the BUILDER.
(d) The rights conferred upon the PURCHASER under the terms
of this Article shall not be exclusive of any other remedies in
law or equity which might be otherwise available to PURCHASER
upon the happening of the events of default specified in ARTICLE
XXIV - DEFAULT BY BUILDER. Failure of the PURCHASER to exercise
any of the rights conferred upon it hereunder with respect to any
event of default of BUILDER shall not constitute a waiver of the
right subsequently to terminate this CONTRACT, as herein
provided.
ARTICLE XXVII - TITLE
a) Title to the Vessel and to the work for the Vessel
shall vest in the PURCHASER as and when performed, title to the
materials to be incorporated or installed in the Vessel shall
vest in the PURCHASER as and when delivered to the shipyard or
<PAGE>
yard of the BUILDER, and title to the components to be
incorporated or installed in the Vessel shall vest in the
PURCHASER as and when fabricated. As used herein, the term
"Vessel" shall also mean a "ship" as defined in LA. R.S. 9:5522
and the terms, "work", "materials" and "components" shall have
the meanings as set forth in La. R.S. 9:5522 provided, however,
that the PURCHASER's lenders agree that BUILDER's liens on the
Vessel (at any stage of completion) and on the work, materials
and components, in each case, securing BUILDER's claims for
payments due under the CONTRACT for which BUILDER has not
previously been paid as required by the CONTRACT are superior to
the lender's lien, and also provided, however, that except as may
otherwise be provided in this CONTRACT, the risk of loss or
damage to such material and the Vessel shall remain with the
BUILDER, and the PURCHASER shall not be deemed to have waived its
rights to require the BUILDER to replace, at the BUILDER's
expense, defective, damaged or destroyed workmanship or material,
and to deliver the Vessel with the CONTRACT work completed, as
provided in this CONTRACT. BUILDER will properly identify the
ship, work, components and materials as belonging to the
PURCHASER all in accordance with La. R.S. 9:5523 and shall
certify to the PURCHASER and the Secretary, from time to time,
that these requirements have been fully complied with. Title to
all scrap and title to any material which is surplus to the
requirements of this CONTRACT (except material furnished by the
PURCHASER or which under any adjustment of Revised Contract Price
under the provisions of ARTICLE VI - PAYMENT OF CONTRACT PRICE -
METHOD OF PAYMENT of this CONTRACT remains the property of the
PURCHASER) shall vest in the BUILDER. Notwithstanding the
provisions of this ARTICLE as to title, the BUILDER shall be
subject to the risk of loss of all CONTRACT workmanship and
material and the undelivered Vessel as provided in this CONTRACT.
(b) The Existing Vessel's forebody removed from the
Existing Vessel, pursuant to the terms of this CONTRACT,
including all fittings, equipment and appurtenances thereto not
used on the Vessel or having been removed as provided in the
Specification, shall become the property of the PURCHASER at the
time of severance from the Existing Vessel "AS IS" without any
warranties. PURCHASER warrants title to and that the severed
Stern section, including all such fittings, equipment and
appurtenances thereto, will on and after the delivery date of the
Existing Vessel to the Shipyard be free and clear of all liens,
security interests, claims and encumbrances of every nature and
PURCHASER shall defend, indemnify and hold BUILDER harmless from
and against any such lien, security interest, claim or
encumbrance. The obligations of this Subarticle shall survive
the termination or completion of this CONTRACT.
(c) PURCHASER will remove, or cause the removal of, the
Existing Vessel's forebody from BUILDER's premises within forty
five (45) days of BUILDER's severance of the existing forebody
from the existing Stern and the removal of reusable equipment
from the existing forebody. While the existing forebody remains
on BUILDER's premises, BUILDER shall assume all risks and
expenses associated with the dockside mooring described in
ARTICLE IV.
<PAGE>
ARTICLE XXVIII - LIENS
(a) BUILDER agrees that no liens, security interests or
rights in rem of any kind arising out of the CONTRACT work, or on
account of any claim against the BUILDER arising from the
construction of the Vessel or against any subcontractor of the
BUILDER performing work or furnishing material under this
CONTRACT shall lie or attach against or upon the Vessel or any of
said property, material or CONTRACT work, except, however, liens,
security interests or rights in rem in favor of a claimant
arising out of acts or omissions of the PURCHASER.
(b) If any such lien, security interest or right in rem of
any kind is filed or asserted against or attached upon the Vessel
or any of said property, material or CONTRACT work, the party
having knowledge thereof shall promptly notify the other party.
If such lien, security interest or right in rem does not arise
out of acts or omissions of the PURCHASER, BUILDER shall, not
later than thirty (30) days thereafter, secure the discharge or
release of such lien, security interest or right in rem;
provided, however, the BUILDER may contest such lien, security
interest or right in rem or the claim upon which it is based and
if within the time herein provided shall not have secured the
discharge or release of such lien, security interest or right in
rem by court order, then BUILDER shall furnish to PURCHASER or
the appropriate court having jurisdiction in such matters, such
bond or security therefor as shall be acceptable to PURCHASER,
and BUILDER shall indemnify and save harmless the PURCHASER from
all costs, charges and damages by reason of such lien, security
interest, right in rem or claims in any way attributable thereto.
ARTICLE XXIX - TAXES
The BUILDER shall pay, as a cost of the BUILDER, all
federal, state, parish, city and other taxes, assessments and
duties in effect prior to the date of this CONTRACT and lawfully
assessed or levied prior to delivery and acceptance of the Vessel
by the PURCHASER, against the Vessel and material, supplies and
equipment to be used, or used in, the construction of the Vessel.
Notwithstanding the provisions of the preceding sentence, any
sales, use, excise or other taxes lawfully assessed or levied
concurrently or in connection with the delivery, transfer of
possession, or acceptance or passage of title of the Vessel to
the PURCHASER shall be paid by the PURCHASER in addition to the
Revised Contract Price.
ARTICLE XXX - PATENT INFRINGEMENT
The BUILDER shall be responsible for any and all claims
against the PURCHASER or the Vessel for infringement of patents,
patent rights, copyrights or trademarks in the construction of
the Vessel as constructed by the BUILDER (excepting claims
arising out of equipment, machinery or material supplied to the
BUILDER by the PURCHASER or the use, sale or disposition thereof)
and the BUILDER shall defend, save harmless and indemnify the
PURCHASER and the Vessel against all such claims and against all
costs, expenses, charges and damages which the PURCHASER or the
<PAGE>
Vessel may be obligated to pay by reason thereof, including
expenses of litigation, if any; provided, that the foregoing
shall not apply to inventions covered by applications for United
States Letters Patent which, during the performance of this
CONTRACT, are being maintained in secrecy, under the provisions
of 35 U.S.C., Sections 181-188, nor shall the BUILDER be
obligated to indemnify the PURCHASER or the Vessel for any
infringement of patents, patent rights, copyrights or trademarks
resulting from compliance by the BUILDER with any specific
written instructions of the PURCHASER; provided, further, that
upon any such claim being made against said Parties or any
thereof, the BUILDER shall be notified promptly of such claim and
also of any suit brought in connection therewith and shall be
given an opportunity to defend the same; and provided further
that no payment on account of any such claim shall be made by the
PURCHASER unless with the consent of the BUILDER or pursuant to
the decree of a proper court or tribunal.
ARTICLE XXXI - ASSIGNMENT OF CONTRACT
This CONTRACT may not be assigned by PURCHASER or BUILDER
without the prior written consent of the other party, which
consent shall not be unreasonably withheld, except that PURCHASER
may assign this CONTRACT to any applicable United States
government entity for the purposes of financing the Contract
Price under Title XI. Neither BUILDER nor PURCHASER will make
any assignment of this CONTRACT without the prior written
approval of the Secretary.
ARTICLE XXXII - COMPUTATION OF TIME
All periods of time shall be computed by including
Saturdays, Sundays and holidays except that if such period
terminates on a Saturday, Sunday or holiday, it shall be deemed
extended to the business day next succeeding.
ARTICLE XXXIII - BUILDER TO COMPLY WITH LAWS AND REGULATIONS
The BUILDER shall comply with all laws, rules, regulations,
and requirements of any applicable classification society and of
the departments or agencies of the United States affecting the
construction of works, plants, and vessels, in or on navigable
waters and the shores thereof, and all other waters subject to
the control of the United States, and shall procure at its own
expense such permits from the United States, state and local
authorities as may be necessary in connection with beginning or
carrying on to completion of the CONTRACT work. BUILDER shall at
all times comply with all United States, state and local laws in
any way affecting the CONTRACT work; provided, however, that the
provisions of ARTICLE VII - CHANGES and ARTICLE XXII - GUARANTEE
of this CONTRACT shall govern the BUILDER's right to recover any
increased costs due to changes in the rules or laws of any
classification society or other authority affecting the CONTRACT
work.
<PAGE>
ARTICLE XXXIV - APPLICABLE LAW
(a) This CONTRACT shall be constructed in accordance with
the laws of the State of Louisiana and the General Maritime Law
where its application is required for compliance with the Title
XI financing requirements or as otherwise applicable to in this
CONTRACT.
(b) PURCHASER and BUILDER each hereby agree that any
judicial proceeding instituted by one party against the other
party involving any controversy or claim arising out of or
relating to this CONTRACT shall be instituted only in the United
States District Court for the Eastern District of Louisiana at
New Orleans, Louisiana or, if the District Court has no
jurisdiction over the cause, in the appropriate court of the
State of Louisiana in Jefferson Parish, Louisiana. The parties
hereto agree to submit to the personal jurisdiction of the above
courts.
ARTICLE XXXV - NOTICES
Until the BUILDER shall hereafter designate otherwise in
writing to the PURCHASER, all notices hereunder directed to the
BUILDER shall be in writing and shall be mailed by certified
mail, return receipt requested, first class, postage prepaid
addressed to:
Mr. Tom Doussan
Vice President - Commercial Ship Construction
Avondale Industries, Inc.
P.O. Box 50280
New Orleans, Louisiana 70150
Until the PURCHASER shall hereafter designate otherwise in
writing to the BUILDER, all notices hereunder directed to the
PURCHASER shall be in writing and shall be mailed by certified
mail, return receipt requested, first class, postage prepaid, to
the following address:
Richard D. Horner
American Heavy Lift Shipping Company, Inc.
365 Canal Street, Suite 2670
New Orleans, Louisiana 70130
All notices given pursuant to this ARTICLE XXXV shall be
deemed to have been received if so mailed and the sender has
received the return receipt with notation thereon of delivery.
ARTICLE XXXVI - ARBITRATION
(a) In the event a dispute arises hereunder, prior to the
commencement of any formal proceedings, the Parties shall
continue performance as set forth in this CONTRACT and shall
attempt in good faith to reach a negotiated resolution by
designating an officer of appropriate authority to resolve the
dispute. If the Parties have attempted in good faith to resolve
the dispute and failed to do so, if both BUILDER and PURCHASER
<PAGE>
agree, they may elect voluntary, non-binding arbitration.
Disputes as to causes of delay are agreed to be resolved by
mandatory and binding arbitration pursuant to this ARTICLE.
(b) In the event BUILDER claims a cause of delay under
ARTICLE IX, EXTENSION OF TIME FOR COMPLETION OF WORK, and
PURCHASER does not agree, or the PURCHASER claims a cause of
delay under ARTICLE IV, ITEMS FURNISHED BY PURCHASER, and BUILDER
does not agree, either of the Parties may request the Arbitrator
to decide the issue(s) which will be binding on both Parties.
(c) BUILDER and PURCHASER intend to agree on a mutually
acceptable Arbitrator, and alternate Arbitrator in the event the
office of the Arbitrator becomes vacant or otherwise is not able
to function promptly, prior to any arbitration proceeding.
(d) The Parties agree that the powers of the Arbitrator
shall be limited as follows:
1.He shall deal only with the disputes which are
referred for him to investigate and submit his findings and
recommendations.
2.He shall have no power to decide any matter which is
not directly related to the dispute submitted to him.
3.He shall have no power to modify the Working Drawings
or any Specifications, terms or conditions related thereto.
4.He shall have no power to add to, subtract from, or
modify any of the terms of this CONTRACT.
5.His decisions shall be advisory only and shall not
bind the Parties except for determination of disputed causes of
delay under ARTICLE IX, EXTENSION OF TIME FOR COMPLETION OF WORK.
6.He shall have no power to decide or interpret any matter
arising under or which involves any of CONTRACT Exhibits C, E, F,
G, H, I, or J.
(e) The party initiating the demand for arbitration shall
notify the other party in writing, at the same time stating the
matter or matters in dispute. Within a reasonable time
thereafter, not exceeding ten (10) calendar days, the second
party shall acknowledge the notice in writing, either specifying
any additional issues or issues to be arbitrated or refusing the
demand for arbitration. Providing the arbitration has been
agreed to, the arbitration shall be conducted in New Orleans,
Louisiana under applicable Louisiana laws.
(f) Should PURCHASER and BUILDER consent, the Arbitrator
will review claims and take one or more of the following
preliminary actions within ten (10) days of receipt of claim:
(1) request additional supporting data from the claimant, (2)
submit a schedule to the parties indicating when the Arbitrator
expects to take action, (3) reject the claim in whole or in part,
stating reasons for rejection, (4) recommend approval of the
claim by the other party or (5) suggest a compromise.
(g) If a claim has not been resolved, the party making the
claim, shall, within ten (10) days after the Arbitrator's
<PAGE>
preliminary response, take one or more of the following actions:
(1) submit additional supporting data requested by the Arbitrator
(2) modify the initial claim or (3) notify the Arbitrator that
the initial claim stands.
(h) If a claim has not been resolved after consideration of
the foregoing and of further evidence presented by the Parties or
requested by the Arbitrator, the Arbitrator will notify the
Parties in writing that the Arbitrator's decision will be made
within seven (7) days. Upon expiration of such time period, the
Arbitrator will render to the Parties the Arbitrator's written
decision relative to the claim, including any change in the
Revised Contract Price or Contract Time or both. Either party
aggrieved by the conduct or decision of the Arbitrator may at any
time seek a judicial determination of the claim.
(i) The Arbitrator shall also determine which party, or the
proper proportion which each party, shall assume of the expenses
of such arbitration. The arbitration expenses so allocated shall
be paid directly by the party or parties as directed by the
Arbitrator.
(j) Except for the binding arbitration of Subarticle XXXVI
(b) above, a decision by the Arbitrator shall not be required as
a condition precedent to litigation of a dispute between BUILDER
and PURCHASER.
ARTICLE XXXVII - CONSEQUENTIAL DAMAGES
Except for the adjustment to payments specifically stated in
this CONTRACT, notwithstanding anything to the contrary, neither
of the Parties to this CONTRACT will under any circumstances be
liable to the other under any theory of recovery, whether based
in contract, in tort (including negligence and strict liability)
under warranty or otherwise, for any indirect, special,
incidental or consequential loss or damage whatsoever and
howsoever caused. Consequential damages shall include, but shall
not be limited to, loss of revenue or profit, loss or delay of
production, loss of product, downtime of facilities, equipment or
vessels, loss of capital, loss of use of, or under-utilization of
labor, equipment or facilities.
ARTICLE XXXVIII - MISCELLANEOUS
(a) This CONTRACT constitutes the full and complete
understanding between the parties hereto and supersedes all prior
arrangements, negotiations, representations, understandings and
agreements, oral or written, or any matter of this CONTRACT.
(b) No change, alteration or modification of this CONTRACT
<PAGE>
may be made except in writing signed by both Parties hereto and
the prior written consent of the Secretary. Provided, however,
that the consent of the Secretary will not be required for any
changes to the CONTRACT work pursuant to ARTICLE VII except as
provided therein.
(c) The headings in this CONTRACT are for convenience of
reference only and shall not be considered as part of this
CONTRACT or limit or otherwise affect the meaning hereof.
(d) No waiver of any provision of this CONTRACT by any
party shall (1) be effective unless executed in writing, or (2)
constitute a waiver of any other provision.
(e) In case any one or more of the provisions contained in
this CONTRACT shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions
shall not be affected or impaired.
(f) The remedies, damages and obligations specified in this
CONTRACT shall be exclusive and in lieu of any other remedies,
damages or obligations available in contract , tort or otherwise
to PURCHASER or BUILDER with respect to the CONTRACT work except
where a specific provision provides to the contrary.
(g) This CONTRACT may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original but
all of which together shall constitute one and the same
instrument.
(h) Any news releases, public announcements,
advertisements, or publicity released by either party concerning
this CONTRACT, or anything incidental to the work thereof, will
be subject to prior approval of the other party. The Parties
agree that any publicity releases made by either of them shall
recognize and indicate the participation and contributions of the
other party.
(i) PURCHASER represent and warrants that: (i) it is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware; (ii) it has all the
requisite power and authority and legal right to enter into and
carry out the transactions contemplated by this CONTRACT,
including but not limited to all the Exhibits attached hereto;
(iii) the CONTRACT and all its Exhibits do not conflict with
PURCHASER's charter, by-laws, or any other agreement to which it
or its assets are bound; (iv) and that the CONTRACT, required
Exhibits and any Amendments have each been duly executed by
PURCHASER and constitute the legal, valid and binding obligation
of PURCHASER.
(j) BUILDER represent and warrants that: (i) it is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Louisiana; (ii) it has all the
requisite power and authority and legal right to enter into and
carry out the transactions contemplated by this CONTRACT,
including but not limited to all the Exhibits attached hereto;
(iii) the CONTRACT and all its Exhibits do not conflict with
<PAGE>
BUILDER's charter, by-laws, or any other agreement to which it or
its assets are bound; (iv) and that the CONTRACT, required
Exhibits and any Amendments have each been duly executed by
BUILDER and constitute the legal, valid and binding obligation of
BUILDER.
IN WITNESS WHEREOF, the Parties have caused this CONTRACT to
be executed in four counterparts as of the day above written.
ATTEST AVONDALE INDUSTRIES, INC.
(BUILDER)
/s/ R. D. Church
----------------
R.D. Church By:/s/ Albert L. Bossier, Jr.
--------------------------
Albert L. Bossier, Jr.
Title: Chairman, President & CFO
Date: May 12, 1995
AMERICAN HEAVY LIFT SHIPPING
COMPANY
ATTEST (PURCHASER)
/s/ H.A. Downing By:/s/ Richard D. Horner
---------------- ---------------------
H.A. Downing Richard D. Horner
Title: President & CEO
Date: May 12, 1995
<PAGE>
S/S KNIGHT
PRODUCT TANKER CONTRACT
for
AMERICAN HEAVY LIFT
SHIPPING COMPANY
AVONDALE JOB NO. C5-80B
May 1995
AVONDALE INDUSTRIES, INC.
<PAGE>
Page
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ARTICLE I DEFINITIONS 2
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ARTICLE II GENERAL STATEMENT OF WORK 4
AND CONTRACT PRICE
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ARTICLE III CONTRACT GROUP 6
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ARTICLE IV ITEMS FURNISHED BY 6
PURCHASER
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ARTICLE V SPECIFICATIONS, 13
INTERPRETATION
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ARTICLE VI PAYMENT OF CONTRACT PRICE 14
- METHOD OF PAYMENT
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ARTICLE VII CHANGES 16
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ARTICLE VIII RIGHTS TO DESIGN DATA 19
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ARTICLE IX EXTENSION OF TIME FOR 20
COMPLETION OF WORK
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ARTICLE X PERFORMANCE STANDARD 24
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ARTICLE XI CONTRACT PRICE 24
ADJUSTMENTS
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ARTICLE XII SCHEDULES 27
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ARTICLE XIII INSURANCE 28
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ARTICLE XIV RISK OF LOSS - TOTAL LOSS 34
OF A VESSEL
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ARTICLE XV INJURY TO EMPLOYEES AND 36
OTHERS
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ARTICLE XVI APPOINTMENT OF 39
REPRESENTATIVES
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<PAGE>
ARTICLE XVII MATERIALS AND 39
WORKMANSHIP
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ARTICLE XVIII INSPECTION - APPROVAL OF 40
DRAWINGS
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ARTICLE XIX TRIALS 42
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ARTICLE XX ADDITIONAL TRIALS - 43
EXPENSES
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ARTICLE XXI ACCEPTANCE AND 43
DELIVERY OF THE VESSEL
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ARTICLE XXII GUARANTEE 46
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ARTICLE XXIII DEFAULT BY PURCHASER 49
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ARTICLE XXIV DEFAULT BY BUILDER 51
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ARTICLE XXV ACTION BY BUILDER UPON 53
DEFAULT BY PURCHASER
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ARTICLE XXVI ACTION BY PURCHASER UPON 56
DEFAULT BY BUILDER
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ARTICLE XXVII TITLE 58
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ARTICLE XXVIII LIENS 59
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ARTICLE XXIX TAXES 60
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ARTICLE XXX PATENT INFRINGEMENT 60
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ARTICLE XXXI ASSIGNMENT OF CONTRACT 61
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ARTICLE XXXII COMPUTATION OF TIME 61
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ARTICLE XXXIII BUILDER TO COMPLY WITH 62
LAWS AND REGULATIONS
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ARTICLE XXXIV APPLICABLE LAW 62
<PAGE>
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ARTICLE XXXV NOTICES 63
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ARTICLE XXXVI ARBITRATION 64
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ARTICLE XXXVII CONSEQUENTIAL DAMAGES 66
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MISCELLANEOUS 67
ARTICLE XXXVIII
EXHIBITS:
EXHIBIT A - SPECIFICATIONS (NOT ATTACHED)
EXHIBIT B - PROGRESS REPORT (NOT ATTACHED)
EXHIBIT C - BUILDER'S RISK POLICY FORM (NOT ATTACHED)
EXHIBIT D - CHANGE ORDER PROCEDURE (NOT ATTACHED)
EXHIBIT E -BUILDER'S CERTIFICATE OF INSURANCE (This
certificate will be furnished prior to the Effective Date of the
Agreement) (NOT ATTACHED)
EXHIBIT F -PURCHASER'S CERTIFICATE OF INSURANCE (NOT ATTACHED)
EXHIBIT G -SUBCONTRACTOR INSURANCE REQUIREMENTS (NOT ATTACHED)
EXHIBIT H-TITLE XI COMMITMENT LETTER OF 6 FEBRUARY 1995 BY MARAD
TO PURCHASER (NOT ATTACHED)
EXHIBIT I - CREDIT SUPPORT AGREEMENT (NOT ATTACHED)
EXHIBIT J - SALE AND PURCHASE AGREEMENT FOR THE STERN (NOT
ATTACHED)
<PAGE>
PRODUCT TANKER
FOR
AMERICAN HEAVY LIFT SHIPPING COMPANY
THIS CONTRACT, (the "CONTRACT") initially entered into on
the 12th day of October, 1994, which is hereby revised,
superseded and resigned after having been adjusted to conform to
the Title XI guarantee and financing requirements, is entered
into by and between American Heavy Lift Shipping Company, a
corporation organized under the laws of the State of Delaware,
having offices at 365 Canal Street, Suite 2670, New Orleans,
Louisiana 70130 (the "PURCHASER"), and Avondale Industries, Inc.,
a corporation organized under the laws of the State of Louisiana,
having a business address of 5100 River Road, Avondale, Louisiana
70094 (the "BUILDER");
W I T N E S S E T H:
WHEREAS:
1. The PURCHASER desires to purchase four (4) product
tankers to be flagged under the United States flag for use in
United States coastwise trade and that comply with the
requirements of the Oil Pollution Act of 1990 (OPA 90); and
2. The BUILDER is a shipbuilder with expertise, ability,
and desire to construct new tonnage that complies with OPA 90
consistent with the terms and conditions set forth in this
CONTRACT.
3. The PURCHASER has applied for Title XI guarantee for
financing under the Merchant Marine Act to the U.S. Department of
Transportation, Maritime Administration for the construction to
be performed pursuant to this CONTRACT. This CONTRACT will only
become effective between the Parties upon PURCHASER furnishing
BUILDER written evidence that the Title XI letter commitment to
guarantee and the financing commitment has been granted to
PURCHASER.
4. The BUILDER has developed the design for the
construction work of this CONTRACT in accordance with all
applicable Regulatory Body requirements.
NOW, THEREFORE, in consideration of the premises and of the
mutual promises hereinafter set forth, the Parties agree as
follows:
ARTICLE I - DEFINITIONS
As used in this CONTRACT, the following terms shall have the
following respective meanings:
BUILDER - As defined in the preamble.
Builder's Certificate - As defined in Subarticle VI(a).
CONTRACT - As defined in the preamble.
<PAGE>
Confirmation Date - As defined in Subarticle IV(d).
Contract Group - The "Contract Group" shall mean the four (4)
separate contracts between BUILDER and PURCHASER for similar
construction of four (4) vessels to replace PURCHASER's existing
vessels the S/S Knight, S/S Solar, S/S Spray and S/S King.
Contract Price - As defined in Subarticle II(a).
Contractor Group - As defined in Subarticle XV (d).
Data - As defined in Subarticle VIII(b).
Delivery Certificate - As defined in Subarticle II(b).
Delivery Date - As defined in Subarticle II(c).
Delivery Site - As defined in Subarticle II(b).
Delivery Window - As defined in Subarticle IV(d).
Docking Receipt - As defined in Subarticle IV(c).
Effective Date - The "Effective Date" is the date of the
resigning of this CONTRACT.
Essential changes - As defined in Subarticle VII(b).
Existing Inventory - As defined in Subarticle IV(j).
Existing Vessel - As defined in Subarticle IV(c).
Guarantee Deficiency - As defined in Subarticle XXII(a).
Guaranteed Speed - As defined in Subarticle X(b).
Invoice for Payment - As defined in Subarticle VI(c).
Non-essential changes - As defined in Subarticle VII(b).
Owner Group - As defined in Subarticle XV(a).
Parties - "Parties" shall mean both PURCHASER and BUILDER.
Performance Standard - As defined in Subarticle X(c).
Progress Payments - As defined in Subarticle VI(a).
PURCHASER - As defined in the preamble.
Regulatory Body(ies) - As defined in Subarticle XVII(a).
Revised Contract Price - As defined in Subarticle VI(g).
Schedule - As defined in ARTICLE XII.
Secretary - "Secretary" shall mean the United States Secretary
of Transportation acting by and through the Maritime
Administrator.
Shipyard - As defined in Subarticle II(b).
Specifications - The "Specifications" are that portion of the
CONTRACT consisting of the written requirements for design,
materials, equipment, construction systems, standards and
workmanship for the work, and performance of related services,
which are attached hereto as Exhibit "A".
Stern - that portion of the Existing Vessel (respective S/S
King, S/S Knight, S/S Solar, S/S Spray) purchased by BUILDER in
accordance with Exhibit "J", and as defined in that Exhibit "J",
for incorporation into the Vessel.
Turnover Date - As defined in Subarticle IV(d).
Turnover Window - As defined in Subarticle IV(d).
Working Drawings - The "Working Drawings" are the detailed
graphic and pictorial portions of the documents prepared by
BUILDER after the signing of the CONTRACT which show the design,
location and dimensions of the work, generally including the
outboard profile, structural details and arrangement plans,
elevations, sections, details, schedules and diagrams.
Vessel - As defined in Subarticle II(a).
<PAGE>
Vessels - the four vessels to be constructed pursuant to the
Contract Group to replace the S/S King, S/S Solar, S/S Spray and
S/S Knight.
ARTICLE II - GENERAL STATEMENT OF WORK
AND CONTRACT PRICE
(a) The BUILDER shall furnish all plant, facilities, labor,
materials, supplies and equipment, except as otherwise provided
in the Specifications, and shall perform all work necessary to
design, build, launch, outfit, test and deliver a vessel more
fully described in the Specifications (the "Vessel") at its own
risk and expense, and shall do everything required of the BUILDER
by this CONTRACT and the Specifications, including the
development of Working Drawings and the installation of any
outfitting and equipment, all for the total consideration of
"THIRTY FIVE MILLION NINE HUNDRED SIXTY FIVE THOUSAND TWO HUNDRED
NINETEEN DOLLARS ($35,965,219)," (the "Contract Price") together
with such additions and deductions as provided elsewhere in this
CONTRACT. The Parties recognize and acknowledge that the
Contract Price, CONTRACT and/or the Specifications have required
some adjustment due to or arising from the requirements mandated
by the Title XI guarantee and financing approval process which
changes have been incorporated into this CONTRACT.
(b) The Vessel shall be identified as BUILDER's Hull No.
2381, and shall be constructed at the BUILDER's plant (the
"Shipyard"), located at Avondale, Louisiana on the west bank of
the Mississippi River at Mile 107 AHP. Some parts of the Vessel
may be constructed at BUILDER's facilities in Westwego,
Louisiana. When the work on the Vessel is complete in accordance
with this CONTRACT, and the Vessel has passed the tests required
by this CONTRACT, the Vessel as completed shall be delivered with
not less than five (5) days prior written notice by the BUILDER
and accepted by the PURCHASER at Avondale, Louisiana or a
mutually agreed other place (the "Delivery Site"), free and clear
of all liens, security interests, and claims of every nature,
excepting, however, those arising out of the acts or omissions of
the PURCHASER and the PURCHASER'S contractual obligations
pursuant to Article 4 of the Credit Support Agreement of attached
Exhibit "I". Upon such delivery, the PURCHASER shall give the
BUILDER a Delivery Certificate accepting the Vessel (the
"Delivery Certificate"). The PURCHASER shall within five (5) days
thereafter, remove or cause the Vessel to be removed from the
Delivery Site. Delivery and acceptance by the PURCHASER of the
Vessel shall be expressly conditioned upon (1) PURCHASER's rights
under ARTICLE XXII - GUARANTEE of this CONTRACT, (2) PURCHASER's
right to completion by BUILDER thereafter of any uncompleted
CONTRACT work and correction by BUILDER of any defective CONTRACT
work as shown in the Delivery Certificate in accordance with the
determination described in ARTICLE XXI - ACCEPTANCE AND DELIVERY
OF THE VESSEL.
(c) The work is to be performed according to first class
shipbuilding practice and shall be commenced and prosecuted in a
timely manner. BUILDER will deliver the Vessel to the PURCHASER
132 days following the Turnover Date as such date may be extended
pursuant to the terms of this CONTRACT (the "Delivery Date"),
provided that the S/S Knight is turned over to the BUILDER within
<PAGE>
the agreed upon Turnover Window. If the S/S Knight is turned
over to the BUILDER before the Turnover Window, BUILDER will
deliver the Vessel to the PURCHASER 132 days following the first
day of the agreed upon Turnover Window.
ARTICLE III - CONTRACT GROUP
The Contract Price for this CONTRACT is agreed to be the
consideration as part of the group of four product tankers for
the four substantially identical contracts signed by BUILDER and
PURCHASER this date. In any event that all four of the vessel
contracts are not completed, or are terminated for any reason,
except the default of the BUILDER, the Contract Price of each of
the unterminated contracts shall be adjusted to reflect the
higher per vessel cost for the remaining vessels as follows:
Number of Contracts Percent Contract Price
Terminated Increase of Each
Completed Contract
3 3.0
2 1.25
1 1.0
ARTICLE IV - ITEMS FURNISHED BY PURCHASER
a) The BUILDER shall, at its own expense and risk, receive,
check as to agreement with bills of lading, store, protect,
remove from the Existing Vessel pursuant to the Specifications,
insure and install aboard the Vessel all of the items required by
the Specifications to be furnished by the PURCHASER. The BUILDER
shall not be deemed to have extended any warranty as to materials
or equipment furnished by the PURCHASER other than the warranty
set forth in ARTICLE XXII - GUARANTEE of this CONTRACT. The
BUILDER shall be liable to the PURCHASER for any damage to or
loss of the items furnished by the PURCHASER occurring during the
BUILDER's custody thereof, which may arise from any event.
Except for the S/S Knight turnover requirements as indicated in
this ARTICLE IV, the Specifications indicate the need dates for
all items to be furnished by PURCHASER.
(b) Except for the S/S Knight turnover requirements as
indicated in this ARTICLE IV, PURCHASER will, by furnishing
reasonable documentation and notice to BUILDER, be entitled to
extension of the indicated need dates stated in the
Specifications for, and to the extent of, any cause of delay
beyond the reasonable control of PURCHASER which PURCHASER could
not reasonably have anticipated. BUILDER may also use such cause
of delay to claim delay of the Delivery Date for the Vessel in
accordance with ARTICLE IX, EXTENSION OF TIME FOR COMPLETION OF
WORK.
(c) The Stern section and after house portion of the Vessel
shall be the Stern section and after house portion of the
Existing Vessel, the S/S Knight, Official Number 277183, shall be
delivered by PURCHASER alongside a dock designated by BUILDER at
BUILDER's Avondale, Louisiana shipyard in accordance with the
<PAGE>
Sale and Purchase Agreement attached as Exhibit "J". All
landside expenses associated with the dockside mooring of the S/S
Knight at the Shipyard, including but not limited to mooring
lines, wharfage, gangway, shipyard services, etc. are included in
the Contract Price. For purposes of clarity in this CONTRACT,
the S/S Knight will be referred to and become the "Existing
Vessel" after the S/S Knight is docked at Avondale and its
delivery protocol documentation has been signed (the "Docking
Receipt"). The signed Docking Receipt will also serve to
transfer the risk of loss from PURCHASER to BUILDER pursuant to
Subarticle (g) of this ARTICLE IV and the Sale and Purchase
Agreement for the Stern attached hereto as Exhibit "J".
(d) PURCHASER shall deliver the S/S Knight to BUILDER
between 8 May 1996 and 8 July 1996 (the "Delivery Window").
During February 1996 the Parties will meet to narrow the Delivery
Window to a 2 week period when the S/S Knight will be ready for
delivery to the Shipyard and when the BUILDER has progressed
sufficiently with its work that it is ready to receive the S/S
Knight in the Shipyard ("Turnover Window"). The Parties shall
confirm in writing ("Confirmation Date") the Turnover Window. If
by 19 February 1996, the Parties are unable to agree to the
Turnover Window, the Turnover Window shall be 7 June 1996 to 20
June 1996 and the Confirmation Date for this CONTRACT shall be
deemed to be 19 February 1996. The Turnover Date (the "Turnover
Date") shall be the actual date that the S/S Knight is turned
over to the BUILDERS as evidenced by the Docking Receipt. The
Parties have confirmed the Delivery Window and the other dates
set forth in this paragraph on the Effective Date of the
CONTRACT. PURCHASER will be entitled to extension of the
Turnover Window for, and to the extent of, any cause of delay
beyond the reasonable control of PURCHASER which PURCHASER could
not reasonably have anticipated.
(e) With reasonable notice, PURCHASER may deliver the S/S
Knight at any time up to thirty (30) days prior to the Turnover
Window without any increase in the Contract Price. A docking fee
of $1,200.00 per day plus direct costs for extending the
insurance obligations of BUILDER under this CONTRACT will be
charged to PURCHASER for early delivery in excess of thirty (30)
days prior to the Turnover Window. The early delivery docking
fee includes monitoring of mooring lines, pressure fire system
and shore power. Other services are available at standard rates.
(f) PURCHASER will pay BUILDER TWENTY THOUSAND DOLLARS
($20,000.00) per day liquidated damages in addition to the
Contract Price for each and every day that the S/S Knight is
delivered to BUILDER more than (5) days after the Turnover
Window, up to an aggregate maximum of three percent (3%) of the
Contract Price decreased by FOUR MILLION NINE HUNDRED SEVENTY-SIX
THOUSAND TWO HUNDRED NINETEEN DOLLARS, as said Turnover Window
may be extended pursuant to this CONTRACT. The Delivery Date of
the Vessel, and all dates of the Contract Group, will be extended
day for day that the S/S Knight is delivered after the Turnover
Window at no additional cost beyond the liquidated damages paid
for late delivery of the S/S Knight to the BUILDER; provided,
however, that any liability for liquidated damages for any of the
remaining Vessels in the Contract Group shall be determined based
upon the extended dates of the Contract Group. BUILDER may elect
<PAGE>
to terminate this CONTRACT by written notice to PURCHASER
pursuant to ARTICLE XXIII, DEFAULT BY PURCHASER, at any time that
the S/S Knight is not delivered to BUILDER within thirty (30)
days after the Turnover Window, except that Subarticle XXV(a)
default cure period does not apply to the delivery failure of the
S/S Knight after expiration of the thirty (30) days after the
Turnover Window.
(g) The S/S Knight with everything belonging to it shall be
at PURCHASER's risk and expense until its delivery is confirmed
by execution of the Docking Receipt. Risk of loss of the
Existing Vessel with everything belonging to it shall be as
indicated in ARTICLE XIV, RISK-OF-LOSS - TOTAL LOSS OF A VESSEL.
The S/S Knight shall be delivered to BUILDER on the Turnover Date
in class, except as a result of the Existing Vessel's OPA '90
trading date restriction, repairs of PURCHASER in progress which
will be completed expeditiously by PURCHASER, or arrangements by
PURCHASER for towing of the Existing Vessel to BUILDER,
preferably free of outstanding items or recommendations, with all
tanks gas free (except for necessary fuel oil and lubricating oil
tanks) and with asbestos removed or encapsulated per the
Specifications. BUILDER shall take over remaining bunkers and
lubricating oils unless otherwise agreed in writing between the
Parties prior to arrival of the S/S Knight at Avondale. All such
remaining bunkers/oils may be sold or retained by BUILDER at its
option. All bunker/oil transfer costs and credits will be for
PURCHASER'S account. The Parties agree to negotiate the
performance of work required for PURCHASER furnished items and/or
the Stern of the Existing Vessel in accordance with the
requirements of ARTICLE VII, CHANGES, as directed by PURCHASER.
Such negotiations are intended to allow PURCHASER to timely order
Essential Changes for PURCHASER furnished items and/or the Stern
of the Existing Vessel in order to remedy class outstandings or
recommendations. Except for work in the Stern of the Existing
Vessel indicated in the Specifications to be performed by
BUILDER, it will be PURCHASER'S obligation under this CONTRACT
that all PURCHASER furnished items for the Vessel, and the Stern
of the Existing Vessel, or any of its parts, meet all the
applicable laws, classifications, rules, regulations, standards
and certification requirements notwithstanding the provisions of
attached Exhibit "J".
(h) PURCHASER warrants that the S/S Knight, at the time of
delivery to BUILDER, is free from all encumbrances, security
interests, maritime liens or any other debts whatsoever except
for the preferred maritime mortgage(s) granted in connection with
the financing of the construction of the vessels as contemplated
by ARTICLE XXVIII - TITLE, and also except for maritime liens
arising from trade payables incurred in the ordinary course of
business which will be discharged in the ordinary course of
business or bonded by PURCHASER within ten (10) working days of
any notice of a lien or other encumbrance against the Existing
Vessel. Should any claims for events which have been incurred
prior to the time of delivery of the S/S Knight to BUILDER be
made against the S/S Knight, the Existing Vessel, or parts
thereof, PURCHASER hereby undertakes to indemnify, hold harmless,
and defend BUILDER against all consequences of such claims. This
Subarticle shall survive the termination or expiration of this
<PAGE>
CONTRACT.
(i) In the event of any actual or constructive total loss
of the S/S Knight prior to arrival at BUILDER's shipyard or in
the event that the Stern section and/or the after house shall,
for any reason, be unavailable, PURCHASER may either:
(i) Furnish the S/S Spray or a mutually agreeable
substitute vessel, in which event BUILDER and PURCHASER shall
mutually agree on: (1) any Specification changes, (2) a new
Turnover Date and Delivery Date (3) a new Contract Price
resulting from such substitution; and (4) adjustment of all
dates and prices for all the follow vessels of the Contract
Group. PURCHASER presently has an option to purchase the S/S
Coastal Manatee (Official No. 287186). The substitution of the
S/S Coastal Manatee is subject to the approval of the PURCHASER
and the Secretary.
(ii) Not Used
(iii) Give written notice to BUILDER within fifteen (15)
days after the loss ordering BUILDER to terminate further
performance of work under this CONTRACT and shall upon demand pay
BUILDER its Costs, as defined below, plus a profit of ten percent
(10%) of such Costs, and following receipt by BUILDER of full
payment under this Subarticle (i) , all constructed work and all
materials acquired by BUILDER for the performance of this
CONTRACT shall become the property of PURCHASER. "Costs" are
defined for the purpose of this Subarticle (i) to include the
cost to BUILDER for all services performed, labor performed and
materials acquired or contracted to be acquired plus overhead
allocations for such services, labor and materials in accordance
with BUILDER's usual practices for such work, plus reasonable
cancellation costs actually paid to third parties for terminating
contractual commitments that BUILDER has made for performance of
the CONTRACT work, all in accordance with BUILDER'S established
cost accounting system as verified by an independent auditor
selected by PURCHASER and agreed to by the BUILDER. Under no
circumstances shall BUILDER's claim under this Subarticle
(i)(iii) include any costs allocated to any of the other
contracts of the Contract Group.
(j) Notwithstanding the Sale and Purchase Agreement of
attached Exhibit "J", this CONTRACT is based on utilizing the
aft portion of the S/S Knight as indicated by the Specifications,
and Subarticles (c) and (g) above, in generally its "AS IS"
condition on arrival at BUILDER's yard. Any desired or mandated
improvements, upgrades, damage repairs, maintenance, etc. of this
PURCHASER furnished equipment for the Vessel, and the Stern of
the Existing Vessel, will be performed and documented pursuant to
ARTICLE VII, CHANGES. The "AS IS" condition will be inventoried
and documented by BUILDER and countersigned by PURCHASER during
the delivery voyage and/or on its arrival at BUILDER's Shipyard
(the "Existing Inventory"). BUILDER is obligated to return the
PURCHASER furnished items, and the Stern of the Existing Vessel,
on the Delivery Date as documented in the Existing Inventory.
PURCHASER will provide suitable accommodations and board to
BUILDER's inspectors for performing this inventory at no charge
to BUILDER during the turnover voyage. The Parties will agree to
similar arrangements for design development inspections by
<PAGE>
BUILDER'S inspectors at any time after the Effective Date of this
CONTRACT. Article XV, INJURY TO EMPLOYEES AND OTHERS, will also
be applicable during the delivery voyage for taking of the
Existing Inventory and during the performance of any design
development inspections by BUILDER's inspectors at any time after
the Effective Date of this CONTRACT.
(k) PURCHASER will give immediate notice to BUILDER in the
event the S/S Knight is delayed, or is expected to be delayed, in
its scheduled turnover to BUILDER by any unforeseen event beyond
the control of PURCHASER which PURCHASER could not reasonably
have anticipated. PURCHASER will provide expeditiously all known
details of such unforeseen delay and furnish an estimate of the
extent of the claimed delay in the Turnover Date. By agreement
the Parties may mitigate such unforeseen cause of delay to their
respective best interests in adjusting the Turnover Date
including, but not limited to, utilizing the provisions of
Subarticle IV (i). Either of the Parties may request binding
arbitration pursuant to ARTICLE XXXVI, ARBITRATION, for
determination of the claimed delay of the Turnover Date. The
arbitration may not, however, revise the indicated adjustments to
be made to other dates as a consequence of such delays in the
Turnover Date.
(l) BUILDER will provide necessary dockside services for
and permit the crew of the S/S Knight to remain aboard the
Existing Vessel to perform their duties, provided such duties are
at all times subordinate to, and do not interfere with, BUILDER'S
work, for up to thirty (30) days after arrival of the Existing
Vessel and for thirty (30) days prior to the Delivery Date of the
Vessel. Likewise, the BUILDER will permit approved
subcontractors to perform work directly for PURCHASER that is not
ordinarily performed by BUILDER. R & R Marine Maintenance and G.
C. Electric will be allowed into the Shipyard aboard the Existing
Vessel as approved subcontractors to perform work directly for
PURCHASER not to exceed six (6) people at any one time.
(m) Notwithstanding anything contained in the Sale and
Purchase Agreement for the Stern attached hereto as Exhibit "J"
or anything else whatsoever, PURCHASER agrees to protect, defend,
indemnify and hold BUILDER, its agents, officers, directors,
employees and representatives harmless from and against all
costs, damages, losses, claims, penalties, debts or liabilities
BUILDER may incur from holding title to the Stern of the Existing
Vessel, or the Stern of the Vessel, in BUILDER'S name at any time
during the performance of this CONTRACT. It is further
understood and agreed that this indemnity and defense obligation
shall include the obligation to reimburse BUILDER for any
attorneys' fees, costs and expenses which may be incurred by
BUILDER in enforcing the defense and indemnity obligations set
forth in this Subarticle (m). This Subarticle (m) shall prevail
over any conflicting or inconsistent provisions set forth
elsewhere in this CONTRACT and shall survive any termination,
cancellation, expiration or completion of this CONTRACT.
ARTICLE V - SPECIFICATIONS, INTERPRETATION
(a) The Specifications for the construction of the Vessel
have been identified by the initials of the Parties signing this
<PAGE>
CONTRACT and are made a part of this CONTRACT with the same force
and effect as though herein set out in full.
(b) If any discrepancy, difference or conflict exists
between the provisions of this CONTRACT and the Specifications,
then to the extent of such discrepancy, difference or conflict
only, the Specifications shall be ineffectual and the provisions
of this CONTRACT shall prevail; but in all other respects the
Specifications shall be in full force and effect. If there is any
discrepancy, difference or conflict between the drawings and
Specifications, then to the extent of such discrepancy,
difference or conflict the Specifications shall prevail;
provided, however, any work called for by the Specifications and
not shown on the drawings and any work shown on the drawings but
not called for in the Specifications shall be performed by the
BUILDER as a part of the CONTRACT work. Any discrepancy,
difference or conflict between the Specifications and the
provisions of this CONTRACT and any discrepancy, difference or
conflict between the Specifications themselves discovered by one
party to this CONTRACT shall be brought to the attention of the
other party promptly in writing.
ARTICLE VI - PAYMENT OF CONTRACT PRICE - METHOD OF PAYMENT
a) PURCHASER shall pay the Revised Contract Price to
BUILDER in increments as the work progresses (the "Progress
Payments"). PURCHASER shall pay Progress Payments to BUILDER at
biweekly intervals upon the invoices of BUILDER, supported in
each instance by its Builder's Certificate. Progress Payment
shall be determined by the proportionate amount of the CONTRACT
work actually accomplished computed by the following method: the
CONTRACT work will be divided into separate components and each
component assigned a number of points. Such components and their
respective points will be as set forth on the form attached as
Exhibit "B". As of the invoice date, BUILDER shall certify the
percentage of completion of each component and the overall
percentage of completion ("Builder's Certificate"), which shall
be the sum of the percentages of completion of each component
multiplied by the number of points referable to that component
divided by the total number of points referable to all components
of CONTRACT work. Each Progress Payment shall be the increment
in overall percentage of completion since the date as of which
BUILDER computed the last previous Progress Payment times the
Revised Contract Price, as defined in Subarticle (g) of this
ARTICLE. Progress Payments shall be paid in full by wire
transfer free of bank charges as soon as possible but in no event
later than five (5) working days after receipt by the Secretary
of documents acceptable to the Secretary. As an exception to the
above procedure for Progress Payments, the first Progress Payment
in the amount of FOUR MILLION NINE HUNDRED SEVENTY SIX THOUSAND
TWO HUNDRED NINETEEN DOLLARS ($4,976,219) will be paid by
PURCHASER TO BUILDER, by wire transfer, free of bank charges, in
immediately available funds to an account designated by BUILDER,
simultaneously with the execution of this amended and restated
CONTRACT to cover the Sale and Purchase Agreement of attached
Exhibit "J".
b) PURCHASER shall inspect and confirm achievement of the
progress by approving the Progress Billing Format form of
<PAGE>
attached Exhibit "B". BUILDER shall invoice PURCHASER for the
percentage of the Revised Contract Price for the progress, which
invoice shall include documents acceptable to the SECRETARY.
PURCHASER will notify BUILDER if it determines that the progress
has not in fact been achieved along with PURCHASER's reasons for
said determination. PURCHASER's failure to notify BUILDER within
two (2) business days of receipt of an invoice for payment
together with documents acceptable to the Secretary shall
constitute PURCHASER's acceptance of the progress.
c) At no time prior to the delivery of the Vessel to
PURCHASER may the cumulative invoiced total of Progress Payments
charged to PURCHASER under the provisions of this ARTICLE VI,
exceed 100% of the Revised Contract Price, as defined in
Subarticle (g) of this ARTICLE.
d) Progress Payments may include the cost of subcontracted
machinery, materials, and equipment not yet delivered to
BUILDER'S yard to the extent that BUILDER shall have acquired
title thereto and identified the goods in question to the Vessel,
provided that the risk of loss of or damage to such goods before
delivery remains with the vendor or subcontractor.
e) The final installment of the Revised Contract Price
minus a hold-back equal to 1% of the Revised Contract Price
shall be paid to BUILDER by PURCHASER at the delivery of the
Vessel to PURCHASER.
f) PURCHASER shall pay BUILDER the 1% of the Revised
Contract Price hold-back retained under the provisions of
Subarticle (e) above after the expiration of the warranty period
as provided in ARTICLE XXII, GUARANTEE.
g) In the event that the Parties should agree upon any
change to be made in accordance with the provisions of ARTICLE
VII, CHANGES, and that agreement contains no contrary provision
for time of payment, the Contract Price (or, if there have been
previous such changes, the former Revised Contract Price) shall
be increased or decreased by the amount agreed upon by the
Parties and, as thus increased or decreased, shall be called the
"Revised Contract Price." Immediately upon agreement between the
Parties of any change and the resulting increase or decrease in
the Revised Contract Price, BUILDER shall issue its invoice or
credit memo for the amount of such increase or decrease in the
Revised Contract Price attributable to the change times the
cumulative overall percentage of completion utilized in the
computation under the provisions of this ARTICLE VI of the
Progress Payment most recently invoiced; and the balance of such
increase or decrease shall be paid or deducted by use of the new
Revised Contract Price in the computation of subsequent Progress
Payments.
ARTICLE VII - CHANGES
(a) The BUILDER shall not, except as provided in Subarticle
(b) of ARTICLE V - SPECIFICATIONS, INTERPRETATION depart from the
requirements of the Specifications or make any other changes in
the CONTRACT work required by the Specifications without all
prior authorization required by the provisions of this ARTICLE.
<PAGE>
Anything to the contrary notwithstanding, any work that is
required to be performed under this CONTRACT to anything that was
sold/purchased pursuant to attached Exhibit "J", other than what
is required by the Specifications, will be performed only
pursuant to an agreed and documented change under this ARTICLE
VII.
(b) For purposes of this ARTICLE, changes in CONTRACT work
shall be classified as either "Essential" changes or "Non-
essential" changes. Essential changes shall consist of changes in
the CONTRACT work due to an action of a Regulatory Body as set
forth in ARTICLE XVII - MATERIALS AND WORKMANSHIP, (a)(iii) of
this CONTRACT, or due to any other promulgation of a new law or
rule after 7 March 1995. All other changes shall be Non-
essential changes. BUILDER shall advise PURCHASER of any
Essential changes which any Regulatory Body may require in the
Vessel.
(c) The PURCHASER shall have the right to direct the
BUILDER to perform an Essential change, and the BUILDER upon
receipt of PURCHASER's written direction shall commence the
performance of the change at such time as the PURCHASER may
direct without regard to whether prior agreement has been reached
as to the net increase or decrease in Revised Contract Price and
delay attributable to the change. The BUILDER shall be entitled
to a fair and reasonable adjustment in the Revised Contract Price
and Delivery Date for the performance of such change and in all
other terms and conditions of this CONTRACT that reasonably
require modification as a consequence of the change, for
performance of such change. Upon receipt of the PURCHASER's
written direction of an Essential change, the BUILDER shall,
within fourteen (14) days, give written notice to the PURCHASER
and the Secretary, that the proposed change will result in a
change in the Performance Standard, Revised Contract Price and/or
Delivery Date and the projected date for the firm quotation for
such change which shall be within thirty (30) days of PURCHASER's
written request or as otherwise mutually agreed. If such notice
is not forwarded as required, BUILDER shall not have the right to
later make claim for such change. After receipt of BUILDERS
quotation, the PURCHASER shall have fourteen (14) days to respond
to the BUILDER. If no response is received within the fourteen
(14) days, the quotation shall be deemed approved. The BUILDER's
quotation shall show the following information: the effect on
weight, moments, centers; effects on the Performance Standard;
and any delay in delivery of the Vessel to result from such
change. Such estimate of price shall consist of estimates,
separately stated, for materials (by type and quantity), labor
(including overhead) based on estimated engineering manhours and
estimated production manhours, and profit. PURCHASER shall take
reasonable precautions to maintain in confidence each estimate
and not disclose the same, except to agents or contractors of
PURCHASER as necessary in the prosecution of CONTRACT work,
provided only that in making such disclosure to agents or
contractors the PURCHASER 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 PURCHASER herein. In no event shall the PURCHASER
disclose estimates to another shipyard. The PURCHASER shall not
be responsible for unauthorized actions of its employees if the
<PAGE>
aforementioned reasonable precautions have been taken by it. Any
change work performed by the BUILDER absent written agreement
from the PURCHASER shall be at BUILDER's own risk and expense.
(d) The PURCHASER shall have the right to propose to the
BUILDER in writing a Non-essential change in the CONTRACT work.
The BUILDER shall promptly review such proposal and submit to
PURCHASER an estimate of the net increase or decrease in the
Revised Contract Price; the effect on weight, moments, and
centers; effects on the Performance Standard; and any delay in
delivery of the Vessel to result from such change. If the BUILDER
and PURCHASER agree upon the net increase or decrease in Revised
Contract Price and any delay in delivery, this CONTRACT shall be
modified accordingly, and the BUILDER shall promptly proceed to
perform the change. Nothing herein shall require the BUILDER to
perform a Non-essential change proposed by the PURCHASER in the
absence of prior agreement as to the net increase or decrease in
Revised Contract Price, Performance Standard and any delay in
delivery and all other terms and conditions of this CONTRACT that
reasonably require modification as a consequence of the change.
(e) The BUILDER shall have the right to propose to the
PURCHASER in writing any change in the CONTRACT work. The BUILDER
shall transmit to the PURCHASER its proposed change accompanied
by an estimate of the net increase or decrease in the Revised
Contract Price; the effect on weight, moments, and centers;
effects on Performance Standard; and any delay in delivery of the
Vessel to result from such change. If the BUILDER and PURCHASER
agree upon the net increase or decrease in Revised Contract Price
and any delay in delivery, this CONTRACT shall be modified
accordingly, and the BUILDER shall promptly proceed to perform
the change. Nothing herein shall require the PURCHASER to accept
a change proposed by the BUILDER in the absence of prior
agreement as to the net increase or decrease in Revised Contract
Price and any delay in delivery. Any change work performed by
the BUILDER absent written agreement from the PURCHASER shall be
at BUILDER's own risk and expense.
(f) For good order the Parties may also agree to document
that repair work to PURCHASER furnished equipment for the Vessel,
and the Stern portion of the Existing Vessel as a change
notwithstanding that such documentation would not involve any
revision to the Specifications and also notwithstanding the Sale
and Purchase Agreement of attached Exhibit "J". The Parties have
agreed to utilize the attached Change Order Procedure, Exhibit
"D", for documenting and processing all changes pursuant to this
ARTICLE VII, CHANGES.
(g) Written consent of the Secretary is required to approve
any change to the CONTRACT work which exceeds $100,000 after the
aggregate sum of all changes to the CONTRACT work and the
enhancements to the Stern exceed two million dollars.
ARTICLE VIII - RIGHTS TO DESIGN DATA
(a) The BUILDER shall prepare and furnish Working Drawings
for the installation of the PURCHASER furnished equipment;
however, anything to the contrary notwithstanding, the BUILDER
<PAGE>
shall have no obligation to furnish any other details for
operation or otherwise. PURCHASER'S review of Working Drawings
and data will not relieve BUILDER from its obligations under this
CONTRACT.
(b) All Working Drawings, and such other specified design
and engineering data required to be furnished to the PURCHASER by
the Specifications and produced by the BUILDER in the performance
of the CONTRACT (the "Data") shall be the property of the
BUILDER. The PURCHASER shall have the right to use the Data in
such manner as it may deem proper, including the right to make
reproducibles and copies and the right to make alterations
therein, additions thereto, or other changes, provided that (i)
Data will not be made available to any of BUILDER's competitors
at any time by the PURCHASER, except for the sole purpose of
operating, maintaining or repairing the Vessel and (ii) BUILDER
and/or BUILDER's licensor will be entitled to a reasonable
royalty, fee, or commission in the event any Data is so made
available by the PURCHASER and is used for purposes other than
operating, maintaining or repairing the Vessel. The BUILDER also
shall have the unrestricted right to sell or transfer any Data.
(c) Each party shall take reasonable precautions to
maintain in confidence that information disclosed to it in the
performance of this CONTRACT which is specifically identified as
confidential, other than information, which at the time of
disclosure, is known or become available from sources other than
the party disclosing such information or which is or shall become
capable of being independently produced by those skilled in the
trade to which such information relates. Notwithstanding
anything to the contrary herein contained, the BUILDER shall not
be precluded from disclosing information which may be necessary
for the prosecution of the CONTRACT work, provided only that in
making such disclosure the BUILDER 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 it herein; nor shall the BUILDER be
responsible for unauthorized actions of its employees provided
that the aforementioned reasonable precautions have been taken by
it; nor shall anything contained herein restrict or limit the
BUILDER's use of any information contained in the Specifications,
whether confidential or not, for the performance of this
CONTRACT.
(d) PURCHASER shall have all rights to the Data at no cost
for completing construction of the Vessel in the event that this
CONTRACT is terminated due to default of BUILDER pursuant to
ARTICLE XXIV, DEFAULT BY BUILDER.
ARTICLE IX - EXTENSION OF TIME FOR COMPLETION OF WORK
(a) Except as provided under ARTICLE IV, ITEMS FURNISHED BY
PURCHASER, if the BUILDER shall have transmitted written notice
to the PURCHASER of a cause of delay delaying the performance of
the CONTRACT work not later than five (5) working days if due to
rain or fifteen (15) days after the date that knowledge of other
delay in the CONTRACT work has come to the BUILDER, or after the
date that it is determined the BUILDER should have known of the
<PAGE>
delay in the CONTRACT work, if such date is an earlier date, and
the cause of delay is beyond the control of the BUILDER, as
provided in Subarticle (b) below, and which the BUILDER could
not reasonably have anticipated, the BUILDER shall be entitled to
an extension of the Delivery Date set out in this CONTRACT by the
number of days that the Delivery Date was delayed by said cause
of delay, except as otherwise provided in Subarticle (e) below.
If such notice is not given within the time allowed, such delay
may not be subsequently invoked.
(b) A cause of delay beyond the control of the BUILDER
shall include, without prejudice to the generality, delay caused
by the PURCHASER or by any agency or instrumentality of the
United States, including delays in the granting of any consents
or approvals by the U.S. Maritime Administration, by Government
priorities, by civil, naval or military authorities, by acts of
God (including hurricanes) by earthquakes, lightning, floods,
union elections, strikes or other industrial disturbances; by
rain as more fully described in Subarticle (c) of this ARTICLE;
such explosions, fires, vandalism as are the result of causes
reasonably beyond the BUILDER's control; by riots, by
insurrections, by sabotage, by blockades, by embargoes, by
epidemics; by the unavailability or late delivery to the BUILDER
of CONTRACT required machinery, equipment and supplies to be
incorporated in the Vessel where it is determined that the
BUILDER's procurement or attempt to procure for such machinery,
equipment and supplies to be incorporated in the Vessel was
expeditious and prudent, that the BUILDER has exercised due
diligence in the performance of any acts required of the BUILDER
and that the BUILDER has exercised due diligence in expediting
deliveries under the BUILDER's purchase CONTRACT or in seeking
equivalent substitute performance; and by the late performance or
default of a subcontract where it is determined that the
BUILDER's choice of the subcontractor was reasonable and
responsible and the BUILDER has exerted all reasonable efforts to
expedite performance, avoid default and procure reasonable
substitute performance; and by the breach of this CONTRACT by the
PURCHASER.
(c) From the Effective Date of this CONTRACT until the
delivery of the Existing Vessel to the Shipyard, the following
provisions shall determine delay caused by rain:
(1) The rain experienced at the project site during
CONTRACT period must be found to be unusually severe. That is,
more severe than the rain anticipated for the project location
during any given month.
(2) The rain must actually cause a delay to the
completion of the project in accordance with the Schedule. The
delay must be beyond the control and without the fault or
negligence of the BUILDER.
(3) Delay in the completion of the project shall be
determined on a shift by shift basis. If the project is running
two shifts at the time it will require two shifts delay to equal
one day of delay and if the shipyard is working three shifts at
the time, it shall require three shifts delay to equal one day of
delay. A rain delay will only be considered a delay in the
<PAGE>
completion of the project if its occurrence requires a shutdown
of a substantial portion of the outside work on the Vessel prior
to the mid-point of a shift on a regularly scheduled work day or
any day during the last thirty (30) days prior to the Delivery
Date and such delay shall only be considered a delay for that
particular shift.
The following schedule of monthly anticipated adverse
weather delays is based on National Oceanic and Atmospheric
Administration (NOAA) New Orleans (Audubon Weather Station
located near the project location) and will constitute the base
line for monthly weather time evaluations.
JAN FEB MAR APR MAY JUNE JUL AUG SEP OCT NOV DEC
__________________________________________________________________
(11) (9) (5) (4) (4) (6) (9) (9) (6) (4) (5) (9)
The number of actual rain shift delays shall be
converted to full days as herein above stated. If the number of
actual rain delay days exceeds the number of days anticipated in
the table above, and if the conditions of paragraph (2) above are
met, the BUILDER shall be entitled to an extension of the
Delivery Date by the number of days that the Delivery Date was
delayed by the excess days of rain delay.
From the date the Existing Vessel is delivered to the
Shipyard until the completed Vessel is delivered to the
PURCHASER, the following provisions shall determine delays caused
by rain.
If rain occurs that requires a shutdown of a
substantial portion of outside work on the Vessel prior to twelve
noon on a regularly scheduled work day, or any day during the
last thirty days prior to the Delivery Date, BUILDER shall be
entitled to an extension of the Delivery Date for each such rain
day.
(d) Within five (5) working days of knowledge of any cause
of delay involving rain which may affect the Delivery Date, the
BUILDER shall notify PURCHASER in writing and shall furnish an
estimate, if possible, of the extent of the probable delay. Upon
receipt of any such notice, the PURCHASER shall, within five (5)
working days, acknowledge the same in writing and indicate
agreement that such development is to be treated as a cause of
delay event, or state any objections, and the reasons therefor,
to acceptance of this development as the cause
of delay event. If BUILDER fails to notify PURCHASER of a cause
of delay event involving rain within five (5) working days after
knowledge of the event, BUILDER shall be estopped from thereafter
claiming a delay event for any period of delay more than five (5)
working days prior to said notice. If PURCHASER should fail to
respond within five (5) working days, the claimed extension of
the Delivery Date shall be considered approved.
(e) For any cause of delay not involving rain which may
affect the Delivery Date, the BUILDER shall notify the PURCHASER
in writing and shall furnish an estimate, if possible, of the
<PAGE>
extent of the probable delay. Upon receipt of any such notice,
the PURCHASER shall, indicate agreement that such development is
to be treated as a cause of delay event, or state any objections,
and the reasons therefor, to acceptance of this development as a
cause of delay event. If BUILDER fails to notify PURCHASER of a
cause of delay event within fifteen (15) days after knowledge of
the event, BUILDER shall be estopped from thereafter claiming
delay for any period of delay more than fifteen (15) working days
prior to said notice. If PURCHASER should fail to respond within
ten (10) days, the claimed extension of time shall be considered
approved.
(f) If the Parties are unable to resolve their differences,
either party may request binding arbitration pursuant to ARTICLE
XXXVI - ARBITRATION, for determination of the period of delay.
The arbitration may not, however, revise the indicated
adjustments to be made to other dates as a consequence of such
delays.
ARTICLE X - PERFORMANCE STANDARD
a) The principal particulars of the design for the Vessels
are as shown in the attached Specification, Exhibit "A".
(b) Within the limits stipulated in ARTICLE XI, CONTRACT
PRICE ADJUSTMENTS, the BUILDER guarantees a trial speed of 15.5
knots at a keel draft of 36 feet in calm deep sea conditions,
with a clean bottom and windforce not exceeding Beaufort scale
No. 3, "Guaranteed Speed", provided that PURCHASER'S engine
delivers 11,000 shaft horsepower, notwithstanding any provisions
of attached Exhibit "J". The speed trials are to be carried out
as specified in the Specifications.
(c) The performance parameter in Subarticle (b) above is
hereinafter referred to as the "Performance Standard."
ARTICLE XI - CONTRACT PRICE ADJUSTMENTS
(a) In the event the BUILDER fails to deliver the Vessel on
the Delivery Date provided in this CONTRACT, as said Delivery
Date may be extended pursuant to this CONTRACT, plus ninety five
(95) calendar days the PURCHASER will suffer damages which are
difficult of ascertainment. It is agreed by the BUILDER and the
PURCHASER that the sum of TWENTY THOUSAND DOLLARS ($20,000.00)
per day represents the damages to the PURCHASER for each day of
delayed delivery, and the BUILDER shall pay to the PURCHASER in
discharge of its obligations to the PURCHASER for such failure to
deliver the Vessel, as liquidated damages and not as a penalty,
the said sum as per-day liquidated damages, for each calendar day
or part thereof elapsing after the said
allowable delivery period indicated in the previous sentence and
until delivery of the Vessel. In no event will BUILDER's
liquidated damages for late delivery of the Vessel exceed a cap
of three percent (3%) of the Revised Contract Price decreased by
FOUR MILLION NINE HUNDRED SEVENTY SIX THOUSAND TWO HUNDRED
NINETEEN DOLLARS.
(b) The Revised Contract Price shall not be affected or
changed by reason of the speed of the Vessel, as determined by
<PAGE>
sea trial in accordance with the Specifications, being less than
the Guaranteed Speed, if such deficiency in the aforesaid speed
of the Vessel is less than five tenths (5/10) of one (1) knot
below the Guaranteed Speed. Adjustments in the Vessel's speed
resulting from modification and/or changes in the Specifications
or the drawings agreed hereinafter provided for in ARTICLE VII,
CHANGES, shall not be considered as such deficiency. However,
commencing with and including a deficiency of five tenths (5/10)
of one (1) knot below the Guaranteed Speed the Revised Contract
Price shall be reduced by TWO HUNDRED THIRTY THREE THOUSAND
DOLLARS ($233,000) for each additional tenth of one knot
deficiency at or below a deficiency of five tenths (5/10) of one
knot. The maximum reduction in the Revised Contract Price for
Guaranteed Speed shall, however, be in no event more than the
amount as would be the case of a deficiency of nine-tenths (9/10)
of one (1) knot below the Guaranteed Speed.
(c) In no event will BUILDER's liability for Guaranteed
Speed exceed a cap of three percent (3%) of the Revised Contract
Price decreased by FOUR MILLION NINE HUNDRED
SEVENTY SIX THOUSAND TWO HUNDRED NINETEEN DOLLARS.
(d) The rights of PURCHASER to a reduction of the Revised
Contract Price by reason of the provisions provided in this
ARTICLE XI shall be cumulative to the maximum aggregate sum not
to exceed three percent (3%) of the Revised Contract Price
decreased by FOUR MILLION NINE HUNDRED SEVENTY SIX THOUSAND TWO
HUNDRED NINETEEN DOLLARS. In the event that the Vessel is
delivered with better speed than set forth in this ARTICLE XI,
such better performance does not entitle BUILDER to any premium,
special bonus, or offset against deficiencies in other
categories. Any reduction of the Revised Contract Price shall be
the PURCHASER'S sole remedy for failure to meet the speed
requirement which remedy shall not exceed three percent (3%) of
the Revised Contract Price decreased by FOUR MILLION NINE HUNDRED
SEVENTY SIX THOUSAND TWO HUNDRED NINETEEN DOLLARS.
(e) The PURCHASER may terminate this CONTRACT and demand
delivery of the Vessel at any time after the aggregate maximum
for liquidated damages is attained pursuant to the provisions of
this ARTICLE XI(a). Upon such termination and delivery the
PURCHASER may proceed to move the Vessel elsewhere and the
BUILDER shall be responsible for the PURCHASER's reasonable
additional cost required to complete the Vessel to the
requirements of the Specifications. Notwithstanding any other
terms and conditions of this CONTRACT, the remedies set forth in
paragraph (a) and (e) of this ARTICLE XI shall be the PURCHASER's
sole remedy for late delivery of the Vessel.
(f) In the event PURCHASER fails to timely provide the
PURCHASER furnished items for the Vessel for meeting all
applicable laws, classifications, rules, regulations, standards
and certification requirements for the Vessel, so as to become
the sole cause for having to extend the Delivery Date for the
Vessel, the BUILDER will suffer damages which are difficult of
ascertainment. It is agreed by the PURCHASER and the BUILDER
that the sum of TWENTY THOUSAND DOLLARS ($20,000.00) per day
represents the damages to the BUILDER for each day of such
delayed delivery, and the PURCHASER shall pay to the BUILDER in
<PAGE>
discharge of its obligations to the BUILDER for such failure to
deliver the PURCHASER furnished items and/or documentation, as
liquidated damages and not as a penalty, the said sum as per-day
liquidated damages, for each calendar day or part thereof
elapsing after the fourteenth (14th) day and until delivery of
the Vessel. The payment of such liquidated damages, or agreed
increase in the Revised Contract Price, shall be BUILDER'S sole
remedy for late delivery of PURCHASER furnished items. In no
event will PURCHASER's liquidated damages pursuant to this
Subarticle (f) exceed a cap of three percent (3%) of the Revised
Contract Price decreased by FOUR MILLION NINE HUNDRED SEVENTY SIX
THOUSAND TWO HUNDRED NINETEEN DOLLARS.
ARTICLE XII - SCHEDULES
The BUILDER shall furnish the following schedules covering
work to be performed by BUILDER hereunder as the Master Schedule
(Erection Schedule and the Structural Index Schedule). The
Master Schedule, (the "Schedule") as may be revised by BUILDER
from time to time, will show the dates for all required
activities for project completion. The level of activities
included in the Master Schedule shall be sufficient to assure
that each activity listed has been properly defined and analyzed
and that there is a direct correlation of activities in this
Master Schedule to individual supporting BUILDER and
subcontractor schedules for engineering, material procurement,
forebody construction, Existing Vessel cut/join process, testing,
etc. The Master Schedule shall be submitted to the PURCHASER
within thirty (30) days of the Effective Date of this CONTRACT.
The PURCHASER'S Representative shall meet with BUILDER'S
Representative weekly to review the Master Schedule and any
changes thereto for the purpose of determining the actual
progress of the job. This Master Schedule will also be used by
the PURCHASER in his evaluation of schedule extensions, delays,
default, schedule adjustments for changes, BUILDER performance in
support of Delivery Date and any other schedule dependent
CONTRACT or Contract Group issues. Use of this Master Schedule
does not, however, change or alter any other terms and conditions
of this CONTRACT including but not limited to ARTICLE IX, ARTICLE
XI, ARTICLE XXIV, and ARTICLE XXVI.
ARTICLE XIII - INSURANCE
(a) BUILDER, at its own expense, shall from the time the
first materials and/or
equipment destined for inclusion as part of the Vessel become the
risk of the BUILDER and until the Vessel has been delivered to
and accepted by PURCHASER, keep the Vessel and all materials,
outfit, equipment and appliances to be installed on or in the
Vessel, including the Existing Vessel, fully insured under a Full
Form (including prekeel) Marine Builder's Risk Policy. The
amount of insurance, the terms of the policy, the insurance
companies and the underwriters shall at all times be satisfactory
to PURCHASER and the Secretary. The amount of such insurance
shall be at least equal to the completed Revised Contract Price
of the Vessel plus the value of all PURCHASER furnished materials
and equipment. It is agreed that the total value of all
PURCHASER furnished materials and equipment is FOUR MILLION
<PAGE>
DOLLARS ($4,000,000) each for the S/S King, S/S Solar and S/S
Spray and FIVE MILLION DOLLARS ($5,000,000) for the S/S Knight.
In addition, the Builder's Risk Policy will contain a provision
that from the time of removal of the forebody from the Existing
Vessel until redelivery of the forebody to PURCHASER, coverage
will continue on the forebody in the amount of ONE MILLION
DOLLARS ($1,000,000). The Builder's Risk Policy shall also
include Protection and Indemnity Insurance with the limits at
least equal to the completed Revised Contract Price of the Vessel
plus the value of all PURCHASER furnished materials and
equipment.
The Builder's Risk Policy shall be in the form as set forth
in Exhibit "C" attached hereto and made a part hereof. The
Builder's Risk Policy shall have a loss payable clause that shall
provide that all losses in excess of $100,000 shall be payable to
the Secretary for distribution by him to himself, the BUILDER
and/or the PURCHASER as their interests may appear. For purposes
of this Agreement, the "other than owner limitation clause" of
the Builder's Risk Policy shall be deleted and not apply.
(b) BUILDER agrees, at its own expense, during the entire
term of BUILDER'S performance of work hereunder from the time the
first materials and/or equipment destined for inclusion as part
of the Vessel become at risk or services are performed until the
Vessel has been delivered to and accepted by PURCHASER, to carry
with an insurance company satisfactory to the PURCHASER and the
Secretary and authorized to do business in the State of Louisiana
the following insurance with limits in the amounts stated for
which a certificate of insurance is attached as Exhibit "E":
1)Worker's Compensation Insurance fully complying with the laws
of the state or states in which the work is to be done, including
the Longshoremen's and Harbor Worker's Compensation act in an
amount required by said Acts and Employer's Liability Insurance,
including Maritime Employer's Liability Insurance with provisions
for the payment of transportation, wages, maintenance and cure,
in the amount of $1,000,000.
2)Comprehensive General Liability Insurance in the amount of
$1,000,000 per occurrence, Combined Single Limit but in the
aggregate each annual period with respect to the
Products/Completed Operations Hazard and subject further to a
general aggregate of $4,000,000 for Bodily Injury to or Death of
persons and for Property Damage with the Watercraft Exclusion
deleted and including Contractual Liability Insurance to cover
Hold Harmless and Indemnity Agreement contained elsewhere in this
CONTRACT.
3)Automobile Liability and Property Damage Insurance covering
Bodily injuries or Death in the amount of $500,000 per person and
$1,000,000 per any one occurrence and Property Damage in the
amount of $500,000 per accident. This coverage applies to each
and every unit of automotive equipment operated or used by
BUILDER in the performance of their work.
4)Excess Liabilities covering the liabilities insured in the
above policies with a limit equal to the difference between the
above indicated limits and $20,000,000.00 any one occurrence.
<PAGE>
5)All subcontractors working for BUILDER at the Shipyard will be
required to have and evidence to BUILDER the insurance coverage
indicated in Exhibit "G".
(c) The Builder's Risk policy shall include PURCHASER and
PURCHASER's agents and all its subsidiaries and affiliates and
the United States of America as assureds. Underwriters agree to
waive subrogation against PURCHASER's group and the United States
of America. The policy shall also provide no recourse against
the United States of America for payment of premium and a 10 day
prior written notice of cancellation or material change in the
policy to the Secretary c/o the Maritime Administration, Chief,
Division of Marine Insurance.
For liabilities and indemnities assumed by BUILDER
under this CONTRACT all insurance policies of BUILDER (and its
subcontractors, if any) shall expressly waive subrogation as to
PURCHASER and the Secretary. It is further agreed that each such
policy, other than Worker's Compensation policies, shall name
PURCHASER as an additional assured, for liabilities and
indemnities assumed by BUILDER, it being understood that such
policies shall be endorsed to provide that BUILDER's policies are
primary to, and shall receive no contribution from, any insurance
policies maintained by PURCHASER.
(d) Should PURCHASER make any claim against the BUILDER for
any alleged post Delivery Date damage to the Stern section of the
Vessel as a result of the work performed by the BUILDER under
this CONTRACT, PURCHASER and BUILDER agree that any recovery by
the PURCHASER shall be limited to the coverage provided under the
CGL and excess liability policies to the limit of $20,000,000.
This will be PURCHASER's sole remedy for any alleged post
Delivery Date damage to the Stern section of the Vessel.
(e) All insurance policies in which both parties are named
insureds will have a "Cross Liability" Clause identical to the
Cross Liabilities clause as referenced in Exhibit "C", item F
excluding all claims arising under this CONTRACT.
(f) All insurance policies will provide for thirty (30)
days prior written notice of cancellation or material change to
PURCHASER from the underwriters.
(g) Prior to commencement of work, BUILDER shall furnish to
PURCHASER a Certificate of Insurance evidencing that coverages
outlined above are in full force and effect and the originals of
the above policies shall be available in BUILDER'S office at 5100
River Road, Avondale, Louisiana for review upon reasonable
request of PURCHASER.
(h) Any deductibles under such insurance shall be borne by
BUILDER.
(i) PURCHASER agrees, at its own expense, from the time the
first materials and/or equipment destined for inclusion as part
of the Vessel become at risk or services are performed until the
Vessel has been delivered to and accepted by PURCHASER, to carry
with an insurance company satisfactory to the BUILDER and
authorized to do business in the State of Louisiana the following
<PAGE>
insurance with limits in the amounts stated for which a
certificate of insurance is attached as Exhibit "F":
1)Worker's Compensation Insurance fully complying with the laws
of the state or states in which the work is to be done, including
the Longshoremen's and Harbor Worker's Compensation act in an
amount required by said Acts and Employer's Liability Insurance,
including Maritime Employer's Liability Insurance with provisions
for the payment of transportation, wages, maintenance and cure,
in the amount of $1,000,000.
2)Comprehensive General Liability Insurance in the amount of
$1,000,000 per occurrence, Combined Single Limit for Bodily
Injury to or Death of persons and for Property Damage with the
Watercraft Exclusion deleted and including Contractual Liability
Insurance to cover Hold Harmless and Indemnity Agreement
contained elsewhere in this CONTRACT.
3)Excess Liabilities covering the liabilities insured in the
above policies with a limit equal to the difference between the
above indicated limits and $20,000,000.00 any one occurrence.
(j) From the Effective Date of this CONTRACT until delivery
of the Existing Vessel to BUILDER'S yard, PURCHASER shall procure
and maintain Protection and Indemnity insurance in a form at
least as broad as, and with limits not less than, that provided
by the Rules of the Standard Steamship Ownership Protection and
Indemnity Association (Bermuda) Limited, and PURCHASER shall
require Club Managers to register BUILDER as a Co-Assured under
Rule 8.2 of said insurance and Club Managers have noted that
there may be a transfer of interest, either of the whole or a
part of the ship, created by the Agreement to Purchase and Sell
between the member, American Heavy Lift Shipping Company and
Avondale Industries, Inc. dated May 12, 1995 prior to the Vessel
entering the yard for refit. It is agreed that such transfer of
interest will not prejudice the member's cover.
Further, PURCHASER shall require that its brokers, B & P
International, Ltd. and Lloyd Thompson give notice to BUILDER of
any notice or information relating to the cancellation,
termination or cessation of the Vessel's Club Entry or any
material change of the Vessel's Club Entry immediately upon
receipt of such notice or information.
Further, from the Effective Date of this CONTRACT until
delivery of the Existing Vessel to BUILDER'S yard, PURCHASER
shall procure and maintain Collision Liability insurance in a
form at least as broad as that contained in the American
Institute Hull Clauses (June 2, 1977).
PURCHASER shall require Hull and War Risks insurance
Underwriters to acknowledge in writing that in the event that
BUILDER should be found liable in any manner or under any theory
of law or equity for, but not limited to, loss, damage, expense,
fines, and/or penalties arising out of the operation of the
existing Vessel and the Sale and Purchase Agreement, BUILDER
shall have the same rights and status under the above and
Collision Liability Insurance Policy as the PURCHASER.
<PAGE>
For liabilities and indemnities assumed by PURCHASER under
this CONTRACT all insurance policies of PURCHASER (and its
subcontractors, if any) shall expressly waive subrogation as to
BUILDER. It is further agreed that each such policy, other than
Worker's Compensation policies, shall name BUILDER as an
additional assured, for liabilities and indemnities assumed by
PURCHASER, it being understood that such policies shall be
endorsed to provide that PURCHASER'S policies are primary to, and
shall receive no contribution from, any insurance policies
maintained by BUILDER.
(k) All insurance policies in which both parties are named
insureds will have a "Cross Liability" Clause identical to the
Cross Liabilities clause as referenced in Exhibit "C", item F
excluding all claims arising under this CONTRACT.
(l) Except for the Protection and Indemnity and War Risks
insurance, all insurance policies will provide for thirty (30)
days prior written notice of cancellation or material change to
BUILDER from the underwriters.
(m) Prior to commencement of work, PURCHASER shall furnish
to BUILDER a Certificate of Insurance evidencing that coverages
outlined above are in full force and effect and the originals of
the above policies shall be available in PURCHASER'S office at
365 Canal Street, Suite 2670, New Orleans, Louisiana 70130 for
review upon reasonable request of BUILDER. Any deductibles under
such insurance shall be borne by PURCHASER excluding BUILDER's
Risk.
ARTICLE XIV - RISK OF LOSS - TOTAL LOSS OF A VESSEL
(a) In the event of an actual or constructive total loss of
the Vessel (as defined in BUILDER's insurance coverage) prior to
the delivery, construction of such Vessel shall proceed unless
the PURCHASER or the BUILDER shall elect within a reasonable
period of time to cancel the construction. If an election is made
to cancel the construction, the party electing to cancel shall
give notice to that effect to the other party. If no election is
made to cancel the construction, then construction and delivery
of the Vessel shall proceed in accordance with this CONTRACT, as
it may have been amended. In any such event an extension of the
CONTRACT Delivery Date of the Vessel pursuant to the provisions
of ARTICLE IX - EXTENSION OF TIME FOR COMPLETION OF WORK of this
CONTRACT shall be agreed upon.
(b) In the event that there is an actual or constructive
total loss of the Vessel prior to delivery and such loss results
from the operation of an insurable risk covered by insurance as
required under ARTICLE XIII - INSURANCE of this CONTRACT, all the
proceeds of such insurance payable as a result of such loss shall
be paid to the SECRETARY for distribution to the SECRETARY or the
PURCHASER, as appropriate, in an amount equal to (i) the total
progress payments made for the lost Vessel and (ii) the value of
all lost materials, outfit, equipment and appliances provided by
the PURCHASER for and used or to be used in the construction of
the Vessel, with the balance paid to the BUILDER. Such
distribution shall be made without regard to whether, under
Subarticle (a) above, construction is cancelled or proceeds. It
<PAGE>
is agreed that only in the event of an actual or constructive
total loss of the Vessel prior to arrival of the existing vessel
at the Shipyard, the total progress payments for the lost Vessel
in (i) above shall not include the first progress payment paid
for the Stern of the existing vessel. It is agreed that in the
event of an actual or constructive total loss of the Vessel after
the arrival of the Existing Vessel at the Shipyard, the
obligations to pay PURCHASER shall include the amount of the
first progress payment paid by PURCHASER to BUILDER for the Stern
of the Existing Vessel and this amount shall be utilized by
PURCHASER to exercise its option to purchase the S/S COASTAL
MANATEE, Official No. 287186 or another mutually agreeable
substitute Vessel.
(c) In the event that there is an actual or constructive
total loss of the Vessel prior to delivery which is not covered
by insurance and election is made by the PURCHASER or the BUILDER
to cancel construction of the Vessel, the BUILDER shall pay to
the SECRETARY for distribution to the SECRETARY or the PURCHASER,
as appropriate, an amount equal to all payments made under this
CONTRACT up to the date of the actual or constructive total loss.
It is agreed that only in the event of an actual or constructive
total loss of the Vessel prior to arrival of the existing vessel
at the Shipyard, the obligation in the above sentence for BUILDER
to pay the SECRETARY for distribution to the SECRETARY or the
PURCHASER, as appropriate, an amount equal to all payments under
this CONTRACT shall not include the first progress payment paid
by PURCHASER to BUILDER for the Stern of the existing vessel. It
is agreed that in the event of an actual or constructive total
loss of the Vessel after the arrival of the Existing Vessel at
the Shipyard the obligations of the BUILDER to pay the SECRETARY
shall include the first progress payment paid by PURCHASER to
BUILDER for the Stern of the Existing Vessel and this amount of
the first progress payment shall be utilized by PURCHASER to
exercise its option to purchase the S/S COASTAL MANATEE, Official
No. 287186 or another mutually agreeable substitute Vessel.
(d) In the event of damage to or loss of the Vessel or any
equipment or materials to be installed therein prior to the
delivery of the Vessel to PURCHASER and such loss or damage is
not an actual or constructive total loss, such loss or damage
shall be made good at BUILDER's expense; the proceeds of
insurance for said loss or damage shall be paid to the SECRETARY
for distribution to the BUILDER; and the CONTRACT Delivery Date
shall be extended as required by such additional work.
ARTICLE XV - INJURY TO EMPLOYEES AND OTHERS
(a) BUILDER agrees to protect, defend, indemnify and hold
PURCHASER, its agents, officers, directors, employees, and
representatives (hereinafter collectively referred to as "Owner
Group") harmless from and against all claims, losses, costs,
demand, damages, suits, judgments, penalties, liabilities, debts,
expenses and causes of action of whatsoever nature or character,
whether known or unknown, and whether arising out of contract,
tort, strict liability, unseaworthiness of any vessel,
misrepresentation, violation of applicable law and/or any cause
whatsoever, including but not limited to reasonable attorney's
fees and other costs and expenses, without limit and without
<PAGE>
regard to the cause or causes thereof, which in any way arise out
of or are related to this agreement between PURCHASER and BUILDER
(including, without limitation, the performance or subject matter
of this CONTRACT or ingress, egress or presence on any premises,
whether land, buildings, vessels, or otherwise, in conjunction
with this CONTRACT) and which are asserted by or arise in favor
of BUILDER, BUILDER's agents, representatives or employees
(and/or their spouses or relatives) or BUILDER's subcontractors,
subcontractor's agents, representatives or employees (and/or
their spouses or relatives) due to bodily injury or death,
whether or not caused by the sole, joint and/or concurrent
negligence, fault or strict liability of Owner Group, the
unseaworthiness of any vessel, or any other cause whatsoever. It
is further understood and agreed that this indemnity and defense
obligation shall include the obligation to reimburse PURCHASER
for any attorneys' fees, costs and expenses which may be incurred
by PURCHASER in enforcing the defense and indemnity obligations
set forth in this Article.
(b) For liabilities and indemnities assumed by BUILDER
under this CONTRACT all insurance policies of BUILDER (and its
subcontractors, if any) shall expressly waive subrogation as to
PURCHASER. It is further agreed that each such policy, other
than Worker's Compensation policies, shall name PURCHASER as an
additional insured, for liabilities and indemnities assumed by
BUILDER, it being understood that such policies shall be endorsed
to provide that BUILDER'S policies are primary to, and shall
receive no contribution from, any insurance policies maintained
by PURCHASER.
(c) Without in any manner limiting the generality of the
foregoing Subarticle (a), BUILDER agrees to protect, defend,
indemnify and hold Owner Group harmless from and against any and
all claims, demands, suits, administrative fines and penalties,
liabilities or causes of action, civil or criminal, including
those made by or before any administrative body or commission
established by any government having jurisdiction over the
premises, relating to the generation or disposal of hazardous
wastes or to the pollution or contamination of the waters, or
air, or earth, or otherwise directly or indirectly arising out of
or connected with or related to this CONTRACT or the performance
thereof, regardless of whether based on any violation or
purported violation of a statute, ordinance or regulation of any
governmental authority, but only if caused by BUILDER's
negligence. BUILDER assumes the obligation to comply with all
such statutes, ordinances and regulations. As used in this
Subarticle, the phrase "liabilities" includes without limitation
expenditures for controlling and removing pollutants,
expenditures for cleaning up any polluted areas, sums paid on
account of injury to or death of persons, and sums paid or
assessed on account of damage to or destruction of property,
public or private, including any and all natural resources and
marine life. The obligations of this Subarticle (c) will expire
on the Delivery Date.
(d) PURCHASER agrees to protect, defend, indemnify and hold
BUILDER, its agents, officers, directors, employees, and
representatives (hereinafter referred to collectively as
"Contractor Group") harmless from and against all claims, losses,
<PAGE>
costs, suits, judgments, demands, damages, penalties,
liabilities, debts, expenses and causes of action of whatsoever
nature or character, whether known or unknown and whether arising
out of contract, tort, strict liability, unseaworthiness of any
vessel, misrepresentation, or violation of applicable law and/or
any cause whatsoever, including but not limited to reasonable
attorney's fees and other costs and expenses, without limit and
without regard to the cause or causes thereof, which in any way
arise out of or are related to this agreement between PURCHASER
and BUILDER (including, without limitation, the performance of
subject matter of this CONTRACT or ingress, egress or presence on
any premises, whether land, buildings, vessels, or otherwise, in
conjunction with this CONTRACT and which are asserted by or arise
in favor of PURCHASER, PURCHASER's agents, representatives or
employees (and/or their spouses or relatives) or PURCHASER's
subcontractors, subcontractor's agents, representatives or
employees (and/or their spouses or relatives) due to bodily
injury or death, whether or not caused by the sole, joint and/or
concurrent negligence, fault or strict liability of Contractor
Group, the unseaworthiness of any vessel, or any other cause
whatsoever. It is further understood and agreed that this
indemnity and defense obligation shall include the obligation to
reimburse BUILDER for any attorneys' fees, costs and expenses
which may be incurred by BUILDER in enforcing the defense and
indemnity obligations set forth in this Article.
(e) For liabilities and indemnities assumed by PURCHASER
under this CONTRACT all insurance policies of PURCHASER (and its
subcontractors, if any) shall expressly waive subrogation as to
BUILDER. It is further agreed that each such policy, other than
Worker's Compensation policies, shall name BUILDER as an
additional insured, for liabilities and indemnities assumed by
PURCHASER, it being understood that such policies shall be
endorsed to provide that PURCHASER'S policies are primary to, and
shall receive no contribution from, any insurance policies
maintained by BUILDER.
(f) Without in any manner limiting the generality of the
foregoing Subarticle (d), PURCHASER agrees to protect, defend,
indemnify and hold Contractor Group harmless from and against any
and all claims, demands, suits, administrative fines and
penalties, liabilities or causes of action, civil or criminal,
including those made by or before any administrative body or
commission established by any government having jurisdiction over
the premises, relating to the generation or disposal of hazardous
wastes or to the pollution or contamination of the waters, or
air, or earth, or otherwise directly or indirectly arising out of
or connected with or related to this CONTRACT or the performance
thereof, regardless of whether based on any violation or
purported violation of a statute, ordinance or regulation of any
governmental authority, but only if caused by PURCHASER's
negligence. PURCHASER assumes the obligation to comply with all
such statutes, ordinances and regulations. As used in this
Subarticle, the phrase "liabilities" includes without limitation
expenditures for controlling and removing pollutants,
expenditures for cleaning up any polluted areas, sums paid on
account of injury to or death of persons, and sums paid or
assessed on account of damage to or destruction of property,
public or private, including any and all natural resources and
<PAGE>
marine life. The obligations of this Subarticle (f) will expire
on the Delivery Date.
ARTICLE XVI - APPOINTMENT OF REPRESENTATIVES
(a) PURCHASER designates Alan B. Nierenberg to be its
authorized representative for all matters during the performance
of this CONTRACT.
(b) BUILDER designates Mr. Bruce Wismar to be its BUILDER's
Program Manager for administering the performance of this
CONTRACT.
(c) The Parties agree that its named representative will be
available for consultations during normal working hours.
With respect to the performance of this CONTRACT, the
PURCHASER shall be entitled to designate authorized
representatives who shall have authority to give directions under
this CONTRACT. Notice of all such designations (together with a
statement of the scope of authority of the designee) and notice
of the revocation of any prior designation shall be given
promptly to the BUILDER in writing. The BUILDER shall have no
obligation to follow any directions of the PURCHASER except those
which shall be issued in writing over the signature of an
authorized representative of the PURCHASER acting within the
scope of his authority.
ARTICLE XVII - MATERIALS AND WORKMANSHIP
(a) In performing the CONTRACT work, the BUILDER shall
comply with all of the requirements of the American Bureau of
Shipping, the United States Coast Guard and all other agencies
having jurisdiction over the CONTRACT work (hereinafter called
individually a "Regulatory Body" and collectively "Regulatory
Bodies") notwithstanding that there may be shown in or on any
drawing set out in the Specifications and the specific
requirements of any item of CONTRACT work, and notwithstanding
any approvals shown upon said drawing , subject, however, to the
following: (i) if the Specifications specifically require work in
excess of that required by the applicable Regulatory Body, such
specifically required work shall be performed by the BUILDER as
CONTRACT work required by this CONTRACT; (ii) if the
Specifications require work which is less than that required by
the applicable Regulatory Body, the BUILDER shall perform the
work required by the Regulatory Body as CONTRACT work required by
this CONTRACT; (iii) if the Specifications require work which is
less than that required by the applicable Regulatory Body, and
such regulatory requirement is in compliance with a rule or an
interpretation of a rule of the Regulatory Body made effective
subsequent to 7 March 1995, and said requirement effects an
increase in the cost of the CONTRACT work and/or the Delivery
Date, the Revised Contract Price and/or the Delivery Date shall
be adjusted pursuant to the provisions of ARTICLE VII - CHANGES
of this CONTRACT.
(b) Unless otherwise specifically provided in the
Specifications, all workmanship, equipment, materials, and
articles incorporated in the Vessel shall be new, of first class
<PAGE>
marine quality and not known to be a discontinued line. The
BUILDER shall furnish to the PURCHASER the purchase
specifications and vendors' specifications for materials or
components which BUILDER contemplates incorporating in the Vessel
and all changes thereto, and names of the manufactures, vendors
and subcontractors of the principal items of machinery,
mechanical and other equipment and work which it contemplates
incorporating in or having performed on the Vessel.
ARTICLE XVIII - INSPECTION - APPROVAL OF DRAWINGS
(a) All material and workmanship, unless otherwise
designated by the Specifications or by this CONTRACT, shall be
subject to inspection by representatives of the PURCHASER and
representatives of Regulatory Bodies at any and all proper times
during manufacture and/or construction at any and all places
where such manufacture and/or construction are carried on, and
BUILDER's subcontracts shall make appropriate provision therefor.
Access to the Shipyard for the performance and administration
therein of all inspections and tests that may be required by the
representatives of the PURCHASER or representatives of Regulatory
Bodies shall at all times be subject to BUILDER's security
requirements.
(b) The BUILDER shall furnish promptly at the Shipyard,
without additional charge, all reasonable facilities and
materials, including suitably furnished offices for the PURCHASER
with light, heat and air conditioning, as required by climatic
conditions, telephone, desks, drawing tables, and filing
cabinets, necessary for the convenient administration of the
inspection and tests that may be required by the representatives
of the PURCHASER and Regulatory Bodies. Long distance telephone
charges will be for the account of PURCHASER.
(c) Within thirty (30) days after the effective date of
this CONTRACT, the BUILDER shall submit for approval a Working
Drawing schedule listing all Working Drawings to be prepared and
the dates by which each Working Drawing is to be completed.
Copies of all Working Drawings will be submitted to PURCHASER for
review, and the PURCHASER shall return the Working Drawings
within fourteen (14) days after receipt thereof marking
corrections required for compliance with the Specifications.
Failure of the PURCHASER to return a Working Drawing within
fourteen (14) days shall constitute acceptance of such Working
Drawing. Approval or acceptance of such Working Drawings ,
materials and components or schedules shall not relieve the
BUILDER from the responsibilities specified in this CONTRACT.
BUILDER will keep PURCHASER advised of required reviewing
priorities. BUILDER will provide PURCHASER with copies of all
correspondence with Regulatory Bodies. BUILDER will provide
PURCHASER full access to all working documents for this CONTRACT.
(d) The PURCHASER shall promptly approve all work and
materials conforming to the requirements of this CONTRACT and
shall promptly reject all work and materials not conforming to
the requirements of this CONTRACT. Rejected workmanship shall be
satisfactorily corrected, and rejected material shall be
satisfactorily repaired or replaced with proper material without
charge therefor, unless such work or material shall have been
<PAGE>
furnished by the PURCHASER, in which event the remedying of such
defective work, or the replacing of such defective material, if
done by the BUILDER, shall be treated as a change under this
CONTRACT. The BUILDER shall promptly segregate and remove the
rejected material. The acceptance of such workmanship and
materials shall not prejudice the rights of the PURCHASER under
this CONTRACT.
(e) All inspection, tests, and approvals shall be performed
in such manner as not to unnecessarily delay the work.
(f) The provisions of this Article are subject to the
provisions of other ARTICLES of this CONTRACT and Specifications
relative to the trials, tests and acceptance of work done on the
Vessel.
(g) If requested by the Secretary upon delivery of the
Vessel, the PURCHASER will provide or cause to be provided a
complete set of drawings used for the construction of the Vessel
on microfilm or other acceptable format.
ARTICLE XIX - TRIALS
(a) The Vessel shall have the trials set forth in the
Specifications and this CONTRACT. The reasonably necessary
expenses of all trials shall be borne by the BUILDER except that
the PURCHASER will furnish the operating crew for the Vessel.
(b) When work on the Vessel is substantially complete, as
required by this CONTRACT, and when the BUILDER has made
sufficient tests at the dock to the satisfaction of the PURCHASER
to be reasonably sure of compliance with the requirements of this
CONTRACT, the Vessel shall be subject to trials at sea as
prescribed by the Specifications and this CONTRACT.
(c) If there is reasonable cause to question its
performance, new machinery or machinery repaired by BUILDER shall
be opened up for post-trial inspection and examination after
completion of such trials at sea. If any defects, deficiencies
or damage appear in the work performed by the BUILDER or in the
materials or equipment supplied by the BUILDER excluding the
Stern, the defects, deficiencies or damage shall be corrected by
and at the expense of the BUILDER, after which the machinery
shall be closed and connected, ready for service.
ARTICLE XX - ADDITIONAL TRIALS - EXPENSES
If, at and upon the trials described in ARTICLE XIX - TRIALS
hereof, there shall be any failure of the Vessel to meet the
requirements of the Specifications and this CONTRACT, the BUILDER
shall, after corrective action is taken and provided a trial is
necessary to reasonably prove the effectiveness of the corrective
action, be required to make further trials, sufficient in number
reasonably to demonstrate compliance with the Specifications and
this CONTRACT. Except for the operating crew furnished by
PURCHASER, or the Stern, the costs of all additional trials
required by this ARTICLE XX - ADDITIONAL TRIALS - EXPENSES shall
be borne by the BUILDER, except that with regard to any trials
<PAGE>
made necessary by failure or malfunction upon prior trial of
equipment or machinery furnished by the PURCHASER, the PURCHASER
shall bear the cost of such additional trial.
ARTICLE XXI - ACCEPTANCE AND DELIVERY OF THE VESSEL
(a) On completion of the inspections by PURCHASER, as well
as all tests, and trials and rectification of any defects
discovered therein, with the exception of those defects as may be
listed in the Delivery Certificate by PURCHASER, a meeting will
be held between the BUILDER and PURCHASER at which:
(i) The BUILDER will report to PURCHASER on the work
carried out in rectifying any defects or omissions found in the
Vessel during the sea trials and/or any work outstanding on
completion of the sea trials;
(ii) PURCHASER'S representatives may conduct a final
inspection of the Vessel in the presence of BUILDER'S
representatives;
(iii)The Parties will agree to the quantity and value
of fuel and lubricants remaining on board after completion of all
tests and sea trials to be charged to PURCHASER.
(iv) BUILDER will present to PURCHASER evidence that
the Vessel is certified by the U.S. Coast Guard and ABS (interim
certification), unless PURCHASER furnished equipment, or the
Stern precludes such certification.
(v) PURCHASER shall pay to BUILDER any amount then due
under the provisions of ARTICLE VI, PAYMENT OF CONTRACT PRICE -
METHOD OF PAYMENT.
(vi) Upon completion of items (i), (ii), (iii), (iv),
and (v) above and any other outstanding matters, the BUILDER will
deliver the Vessel to PURCHASER, whereupon PURCHASER will accept
the Vessel by the concurrent execution by both Parties of a
Delivery Certificate, whereupon such title to the Vessel as
remains in BUILDER will pass to PURCHASER.
(b) The interval between completion of the sea trials and
the delivery shall be sufficient to enable the inspections and
rectifications of defects to be completed, but in any event shall
not be less than four (4) business days.
(c) Within five (5) business days after delivery, PURCHASER
shall remove the Vessel from BUILDER'S yard. The Vessel shall be
deemed ready for delivery when it has received the necessary
certification by the U. S. Coast Guard without any qualification
or limitation that would significantly affect the operation or
commercial value of the Vessel in the intended service and has
been judged ready for delivery without any qualification or
limitation that would significantly affect the commercial value
or operation of the Vessel in the intended service by the
Surveyor of the American Bureau of Shipping assigned to the
Vessel. If after the necessary U.S. Coast Guard certification
and ABS approvals have been obtained and there still remains a
<PAGE>
good faith dispute between the parties as to whether the Vessel
is ready for delivery, the PURCHASER may deposit the estimated
cost of the disputed items into an escrow account in accordance
with the provisions of Subarticle XXV(f) hereof and accept
delivery of the Vessel.
(d) If by agreement between the Parties and notwithstanding
the provisions of this ARTICLE the Vessel is accepted by
PURCHASER with any known outstanding discrepancies or defects not
corrected prior to delivery, each deficiency or deviation from
the Specifications and drawings not previously approved by
BUILDER and PURCHASER shall be set out in a list and signed by
PURCHASER and BUILDER. At the option of PURCHASER, the Parties
may agree on money damages in lieu of performance by BUILDER for
each such deficiency or deviation.
(e) The Vessel shall be turned over by BUILDER to PURCHASER
in midstream of the Mississippi River at the Shipyard.
ARTICLE XXII - GUARANTEE
(a) Notwithstanding any inspection or failure to reject by
the PURCHASER or any Regulatory Body pursuant to ARTICLES XVIII
through XXI of this CONTRACT, if, at any time within twelve (12)
months after delivery of the Vessel there shall arise or be
discovered any weakness, any deficiency, any failure, any
breaking down or deterioration in the design, workmanship,
equipment, machinery, or material, furnished by the BUILDER or
its subcontractors in performing the CONTRACT work, excluding all
PURCHASER furnished items and excluding the Stern except for work
performed by the BUILDER pursuant to the Specifications, which
causes the Vessel to not function as prescribed and as intended
by the Specifications and this CONTRACT (herein called a
"Guarantee Deficiency"), such Guarantee Deficiency shall be made
good, at the BUILDER's expense, to the requirements of the
Specifications and this CONTRACT; provided, however, the BUILDER
shall not be responsible for the cost of correcting any such
Guarantee Deficiency due to ordinary wear and tear, nor to the
extent increased by the negligence or other improper act of the
PURCHASER or any operator of the Vessel or of any other person
other than the BUILDER or its subcontractors during said period.
The liability of the BUILDER to the PURCHASER under this CONTRACT
on account of any such Guarantee Deficiency shall not extend
beyond the actual corrective repair or replacement thereof at
straight time commercial shipyard or ship repair yard rates, or
overtime rates that have been approved by BUILDER in case of
emergency, including the cost of the dockage of the Vessel, if
necessary. The BUILDER shall not be liable to the PURCHASER for
any damage to such Vessel or its equipment or cargo or other
property of the PURCHASER or for consequential damages of the
PURCHASER arising out of any such Guarantee Deficiency, except
that in the event any Guarantee Deficiency in any item of
machinery or equipment furnished by the BUILDER, or in the event
that any workmanship or material furnished by the BUILDER in
performance of work upon the Vessel's machinery or equipment,
gives rise to a Guarantee Deficiency causing any damage to such
items of machinery or equipment, the BUILDER shall be liable not
only for the cost of correcting or repairing such Guarantee
<PAGE>
Deficiency, but also shall be liable for the cost of correcting
or repairing such damage to such item of machinery or equipment
caused by such Guarantee Deficiency. Any work required to be
performed pursuant to the provisions of this ARTICLE shall be
carried out, if practicable and at the PURCHASER's option, at the
shipyard of the BUILDER. The BUILDER may, with the concurrence of
the PURCHASER, have such work performed by its subcontractor,
another shipyard or repair facility. The PURCHASER may, however,
have such work performed by a shipyard or ship repair yard at any
port satisfactory to it and in that event the BUILDER shall be
liable to the PURCHASER for the reasonable expense thereof at the
straight time commercial shipyard or ship repair yard rates
prevailing in such port areas, including the cost of dockage of
the Vessel, if necessary. Should the BUILDER so desire, it may
have an engineer onboard the Vessel for the guarantee period who
shall have full opportunity to observe and inspect the working of
the Vessel in all its parts, but without any directing or
controlling authority over the Vessel. PURCHASER will provide
suitable accommodations and board to the engineer during the
guarantee period without charge.
(b) The PURCHASER promptly shall notify the BUILDER of any
Guarantee Deficiencies or damage for which the BUILDER is liable
pursuant to Subarticle (a) above that are discovered or appear
within the guarantee period, but in no event later than ten (10)
days after the end of such period. In the event the PURCHASER
proposes the repair or correction of such Guarantee Deficiency or
damage before the Vessel reaches its next continental United
States port, notice shall be given to the BUILDER not later than
five (5) days after the discovery of the Guarantee Deficiency or
damage and before repair, otherwise notice shall be given five
(5) days after the Vessel next reaches a continental United
States port and before the Guarantee Deficiency or damage is
repaired or corrected. Whenever practical (taking into
consideration the necessity of keeping the Vessel on schedule)
the BUILDER shall be given an opportunity to inspect the
Guarantee Deficiency or damage before it is remedied.
(c) A final guarantee survey of the Vessel shall be
conducted by the PURCHASER at or near the expiration of the
guarantee period. Such survey shall be based on the Guarantee
Deficiencies in the CONTRACT work appearing or discovered during
the guarantee period. In the event that the Vessel is not
available for the guarantee survey on or before the end of the
guarantee period, the PURCHASER promptly shall submit to the
BUILDER a list of all of the Guarantee Deficiencies in the
CONTRACT work appearing or discovered during the guarantee period
and all damage for which the BUILDER is liable under the
provisions of this ARTICLE. The final guarantee survey shall be
held at such port in the United States as the PURCHASER
designates and seven (7) days written notice of time and place
for such guarantee survey shall be given to the BUILDER by the
PURCHASER.
(d) For the determination of any underwater Guarantee
Deficiencies, the PURCHASER, at the PURCHASER's expense, may
retain two (2) divers, one to be chosen by BUILDER, to inspect
the bottom of the Vessel in clear water. If both divers agree in
writing to the extent of underwater Guarantee Deficiencies to the
<PAGE>
Vessel then PURCHASER may drydock the Vessel within twenty four
(24) months after its delivery at its expense and BUILDER will
not be responsible for repairs of the Guarantee Deficiencies
except as documented by the agreement of both divers. If both
divers cannot agree to the extent of the underwater Guarantee
Deficiencies to the Vessel then PURCHASER may request that
BUILDER drydock the Vessel at its expense within fifteen months
following the Vessel delivery and BUILDER's liability for
underwater Guarantee Deficiencies will be limited to those which
arose during the twelve (12) month guarantee period. If it
becomes necessary to drydock the Vessel solely for the correction
of a Guarantee Deficiency for which the BUILDER is responsible,
the cost of the entire drydocking required for the correction of
the Guarantee Deficiency, as well as the cost of remedying the
deficiency, as provided in this ARTICLE , shall be at the expense
of the BUILDER.
(e) At the end of the guarantee period herein provided, the
BUILDER agrees to transfer and assign to the PURCHASER, as to any
item of material installed in the Vessel, the guarantee rights of
the BUILDER against the vendor of such item of material which
under the terms of such vendor's guarantee the vendor's
obligations extend for a period beyond the guarantee period
herein set forth; provided that the BUILDER may exclude from such
assignment any rights against the vendor in favor of the BUILDER
for Guarantee Deficiencies and damages within the guarantee
period in ARTICLE XXII - GUARANTEE (a) hereof. BUILDER will
assign to PURCHASER any warranties in excess of the twelve (12)
months after the delivery of the Vessel that BUILDER is able to
obtain from paint vendors, if any.
(f) The liability (if any) of the BUILDER for a Guarantee
Deficiency and for any damage to the equipment or machinery of
the Vessel, resulting from any Guarantee Deficiency, as set out
in this ARTICLE, is the exclusive remedy of the PURCHASER in
warranty, contract, tort or otherwise against the BUILDER for any
Guarantee Deficiency. Except for the provisions of ARTICLE XI,
CONTRACT PRICE ADJUSTMENTS, in no event under this CONTRACT shall
BUILDER be responsible for any sum in excess of the repairs
and/or replacement as specified herein it being specifically
understood that BUILDER is not responsible for delay, demurrage,
loss of profits, loss of use or any other consequential damages.
It is specifically understood that any Guarantee Deficiency
reported after the twelve (12) month guarantee period, except for
the underwater Guarantee Deficiencies of Subarticle (d) above,
and all damages therefrom, shall be the exclusive responsibility
of PURCHASER.
(g) THE GUARANTEES SET FORTH IN THIS ARTICLE XXII,
GUARANTEE, RELATING TO ANY GUARANTEE DEFICIENCY ARE EXCLUSIVE AND
ARE IN LIEU OF ALL IMPLIED WARRANTIES (INCLUDING BUT NOT LIMITED
TO ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE AND WORKMANLIKE SERVICES).
(h) Anything to the contrary notwithstanding, the BUILDER
does not guarantee PURCHASER furnished materials or equipment,
nor the Stern, for any Guarantee Deficiency items except to meet
the requirements stipulated in ARTICLE X, PERFORMANCE STANDARD.
<PAGE>
ARTICLE XXIII - DEFAULT BY PURCHASER
The following shall constitute events of default by
PURCHASER under this CONTRACT:
(a) Delay in Payment
Failure of PURCHASER to make payment to BUILDER as required
under the provisions of ARTICLE VI - PAYMENT OF CONTRACT PRICE -
METHOD OF PAYMENT, provided payment is not received by BUILDER
for a period of ten (10) days after written notice to PURCHASER
thereof by BUILDER.
(b) Non-Compliance with other Undertakings
Default in compliance with or the due and punctual
performance of any material warranties, covenants and agreements
required to be maintained and performed by PURCHASER hereunder
other than the scheduled delivery of the S/S Knight, which
default continues unremedied for a period of thirty (30) days
after written notice to PURCHASER thereof by BUILDER.
(c) Receivership or Insolvency
An order of a court of competent jurisdiction, other than
upon petition by BUILDER, appointing a receiver, liquidator or
trustee of the assets of PURCHASER or any part thereof or a
decree of such court adjudicating PURCHASER as bankrupt, or
declaring PURCHASER insolvent.
(d) Acts of Bankruptcy
The filing by PURCHASER of a voluntary petition in
bankruptcy, or the making by PURCHASER of an assignment for the
benefit of its creditors, or the admission by PURCHASER in
writing of its inability to pay its debts generally as they
become due, or its consent to, acquiescence in or failure to
contest the appointment of a receiver or receivers of all or part
of its assets.
(e) Voluntary Reorganization
Any petition or any answer proposing the reorganization of
PURCHASER pursuant to the Federal Bankruptcy Act or any similar
law, federal or state, being filed against PURCHASER in any court
and not being dismissed or denied within sixty (60) days after
the date on which such petition or answer was filed, or the
approval of any such petition or answer by any court.
(f) Involuntary Reorganization
The filing of a petition by any of the creditors of
PURCHASER to reorganize PURCHASER pursuant to the Federal
Bankruptcy Act or any similar law, federal or state, and such
petition not being dismissed or denied within sixty (60) days
after the date on which such petition was filed, or the approval
of such petition by the court having jurisdiction thereof.
(g) Seizure of Assets
The assumption of custody or control of the whole or any
substantial part of the assets of PURCHASER for a period in
excess of thirty (30) days by any governmental agency or any
court of competent jurisdiction at the instance of any
governmental agency.
(h) Nondelivery of S/S Knight
<PAGE>
Failure to timely deliver the S/S Knight as required by
ARTICLE IV, ITEMS FURNISHED BY PURCHASER.
ARTICLE XXIV - DEFAULT BY BUILDER
The following shall constitute events of default by BUILDER
under this CONTRACT:
(a) Receivership or Insolvency
An order of a court of competent jurisdiction, other than
upon petition by PURCHASER, appointing a receiver, liquidator or
trustee of the assets of BUILDER or any part thereof, or a decree
of such a court adjudicating BUILDER as bankrupt, or declaring
BUILDER insolvent.
(b) Acts of Bankruptcy
The filing by BUILDER of a voluntary petition in bankruptcy,
or the making by BUILDER of an assignment for the benefit of its
creditors, or the admission of BUILDER in writing of its
inability to pay its debts generally as they become due, or its
consent to, acquiescence in or failure to contest the appointment
of a receiver or receivers of all or any part of its assets.
(c) Voluntary Reorganization
Any petition or answer proposing the reorganization of
BUILDER pursuant to the Federal Bankruptcy Act or any similar
law, federal or state, being filed against BUILDER in any court
and not being dismissed or denied within sixty (60) days after
the date on which such petition or answer was filed, or the
approval of such petition or answer by any court of competent
jurisdiction.
(d) Involuntary Reorganization
The filing of a petition to reorganize BUILDER by any of the
creditors of BUILDER pursuant to the Federal Bankruptcy Act or
any similar law, federal or state, and such petition not being
dismissed or denied within sixty (60) days after the date on
which such petition was filed, or the approval of such petition
by the court having jurisdiction thereof.
(e) Attachment of Liens or Privileges
The attachment of any lien or privilege to the Vessel not
due to the acts or omissions of PURCHASER or persons in privity
with it, whether under federal or state law or the General
Maritime Law, if such lien is not removed within sixty (60) days
after written demand by PURCHASER to BUILDER for such removal or
unless BUILDER, within such time, shall not have provided
PURCHASER with a bond by sureties acceptable to PURCHASER against
such lien in an amount equal to the face amount of such lien.
(f) Non-Compliance
Default in compliance with or the due performance of any
material warranties, covenants and agreements required to be
maintained and performed by BUILDER hereunder, which default
continues unremedied for a period of third (30) days after
written notice to BUILDER thereof.
ARTICLE XXV - ACTION BY BUILDER UPON DEFAULT BY PURCHASER
(a) Right of Termination
<PAGE>
In the event that any one or more of the events of default
specified in ARTICLE XXIII - DEFAULT BY PURCHASER of this
CONTRACT shall have occurred and be continuing, BUILDER, if it so
elects, may terminate this CONTRACT thirty (30) days (ten (10)
days if for non-payment and as otherwise indicated in ARTICLE IV,
ITEMS FURNISHED BY PURCHASER, for PURCHASER's failure to deliver
the S/S Knight) after written notice has been given to the
PURCHASER.
(b) Completion and Sale of Vessel
In the event of such termination, PURCHASER agrees that
BUILDER shall be entitled to continue construction and to sell
the Vessel while work is in process or after completion. Sale of
the Vessel under this ARTICLE XXV means all work-in-process,
materials, articles of machinery, outfit and equipment and
supplies to be installed in the Vessel. Pending such sale,
BUILDER shall be entitled to retain any progress payments already
paid.
(i) Any such sale may be effected by the BUILDER
either by public auction (in which case BUILDER, its agents or
affiliates may bid for and buy the Vessel) or by private contract
on such terms and conditions as BUILDER may see fit, but BUILDER
shall be bound in good faith to secure the best price obtainable,
and no such private contract shall be effective until fifteen
(15) days after BUILDER has notified PURCHASER and the Secretary
of its intention to enter such contract and the purchase price
thereunder.
(ii) In the event BUILDER elects to complete and sell
the Vessel, then BUILDER thereafter shall repay to PURCHASER (but
without interest) an amount equal to the sum of all progress
payments made by PURCHASER, less any deficiency between (a) the
Revised Contract Price as adjusted under this CONTRACT at the
time of such sale and (b) the net price realized for the Vessel
from the sale, after payment of all additional costs, charges and
expenses incurred by BUILDER resulting from such default.
(iii)In the event that BUILDER elects to complete the
Vessel, PURCHASER shall be entitled to negotiate the revival of
this CONTRACT at any time before the sale of the Vessel by
providing satisfactory evidence that the events causing the
default have been remedied.
(c) Abandonment of Construction
In the event of termination, BUILDER may at its option elect
not to complete the Vessel and to sell the Vessel in its state of
completion at the time of abandonment of construction. If BUILDER
so elects, BUILDER shall notify PURCHASER in writing of its
election and shall thereafter repay to PURCHASER (but without
interest) all progress payments already paid by PURCHASER less
the sum of: (i) One-Hundred ten percent (110%) of BUILDER's
reasonable costs incurred in the CONTRACT work to the date of the
abandonment of construction, plus (ii) such other costs, charges,
expenses and damages as BUILDER may have incurred as a result of
the default of PURCHASER, minus (iii) the proceeds of any sale of
the Vessel in its state of completion as of the time of
abandonment of construction and the reasonable value of any part
thereof that remains unsold. BUILDER shall be bound in good faith
to secure the best price obtainable therefor for purposes of the
<PAGE>
determination of item (iii) of the foregoing sum; and if
PURCHASER shall have cause to believe that BUILDER has not
obtained the best price and terms possible, PURCHASER or the
Secretary shall have the option of purchasing the Vessel for cash
within thirty (30) days after notice thereof by BUILDER to
PURCHASER at the price and on the terms of the offer by a third
party deemed by BUILDER to be most favorable to BUILDER.
(d) Alternative Remedies
The rights conferred upon BUILDER under the terms of this
ARTICLE XXV - ACTION BY BUILDER UPON DEFAULT OF PURCHASER shall
not be exclusive of any other remedies in law or equity which
might be otherwise available to BUILDER upon the happening of the
events of default specified in ARTICLE XXIII - DEFAULT BY
PURCHASER hereof. Failure of BUILDER to exercise any of the
rights conferred upon it hereunder with respect to any default of
PURCHASER shall not constitute a waiver of any rights of BUILDER
with respect to any other events of default of PURCHASER
hereunder.
(e) Contract Group Adjustments
The Revised Contract Price increase due and payable as part
of the settlement of accounts pursuant to this ARTICLE XXV,
ACTION BY BUILDER UPON DEFAULT BY PURCHASER shall include any
adjustment of the Revised Contract Price to be made pursuant to
ARTICLE III, CONTRACT GROUP.
(f) Escrow of Funds During Disputes
In the event any payment or payments otherwise due to
BUILDER under this CONTRACT are subject to a good faith dispute
between the parties arising under any of the other ARTICLES of
this CONTRACT, then, pending resolution of said dispute,
PURCHASER or the Secretary shall have the right to prevent
termination of this CONTRACT by BUILDER by depositing the dollar
amount of payments then under dispute with an escrow holder which
shall be a national banking association or trust company. Said
amount shall be held by the escrow holder in interest-bearing
accounts and any interest accruing thereon (at the rate paid by
the escrow holder and not at the rate defined elsewhere in this
CONTRACT), less lawful charges, shall be paid to the party who
prevails in any such dispute to the extent it prevails. This
Subarticle shall be subject to all other ARTICLES of this
CONTRACT and is intended to provide for the specific event of
imminent termination of this CONTRACT by BUILDER or delay in the
delivery of the Vessel.
ARTICLE XXVI - ACTION BY PURCHASER UPON DEFAULT OF BUILDER
(a) In the event that any one or more of the events of
default specified in ARTICLE XXIV - DEFAULT BY BUILDER of this
CONTRACT shall have occurred except for late delivery, the
PURCHASER may terminate this CONTRACT. The PURCHASER may then
proceed to have all or part of the work on the Vessel completed
at BUILDER's Shipyard or elsewhere and for such purpose may take
possession and use and occupy so much of the
BUILDER's shipyard, plant, equipment, tools, machinery and
appliances, as may be needed for such purposes, without the
<PAGE>
payment of any rental or other charge therefor to the BUILDER.
BUILDER hereby agrees to assure to the PURCHASER such use and
occupancy of said facilities and said other property of the
BUILDER for such period of time as may be necessary for the
completion of the CONTRACT work.
(b) If the PURCHASER shall elect to have all or part of the
CONTRACT work completed, the BUILDER shall (i) assign such
subcontractors and orders for material, services and supplies to
be used in the performance of said CONTRACT work to the PURCHASER
as the PURCHASER may direct, and (ii) pay to the PURCHASER the
amount by which the total cost to the PURCHASER of completing
said work (including all amounts paid to the BUILDER hereunder),
plus such other costs, charges, expenses (including reasonable
attorneys fees) and damages as PURCHASER may have incurred as a
result of the default of BUILDER exceeds the total Revised
Contract Price provided in this CONTRACT, as adjusted hereunder;
provided, however, that in computing the amount, if any, to be
paid by the BUILDER to the PURCHASER, appropriate adjustment
shall be made for changes in the CONTRACT work subsequent to the
termination of the CONTRACT.
(c) If the PURCHASER shall elect not to complete the
Vessel, the PURCHASER, at any time within one hundred fifty (150)
days from the date of termination hereunder, may sell the
partially completed Vessel, work-in-process, materials, articles
of machinery, outfit and equipment and supplies to be installed
in the Vessel, together with providing copies of all drawings ,
specifications, calculations and other records reasonably
required for the construction or equipment thereof, provided that
subject to PURCHASER'S right to use all documentation for
completion of the Vessel the BUILDER shall continue to be
entitled to all rights under ARTICLE VIII - RIGHTS TO DESIGN
DATA. The PURCHASER shall have access to the Shipyard in order to
conduct the sale. Any purchaser at any such sale shall be given
reasonable time, not less than sixty (60) days from the date of
sale, within which to remove from the BUILDER's plant the Vessel,
work-in-process, materials, articles of machinery, outfit,
equipment and supplies purchased. The BUILDER or PURCHASER may
become a purchaser at such sale. The proceeds of the sale shall
be applied, first, to payment of all costs and expenses,
including reasonable attorney's fees incurred by the PURCHASER or
its assigns in making such sale, secondly, to reimbursement of
the PURCHASER for payments heretofore made by the PURCHASER to
the BUILDER on account of the Vessel; and thirdly, to payment of
such other costs, charges, expenses and damages, including
reasonable attorneys fees, as PURCHASER may have incurred as a
result of the default of BUILDER. The remaining proceeds, if
any, shall be paid over to the BUILDER. In the event the proceeds
of the sale shall not be sufficient to pay the first, second and
third items, as above set forth, the difference shall be paid to
the PURCHASER by the BUILDER.
(d) The rights conferred upon the PURCHASER under the terms
of this Article shall not be exclusive of any other remedies in
law or equity which might be otherwise available to PURCHASER
upon the happening of the events of default specified in ARTICLE
XXIV - DEFAULT BY BUILDER. Failure of the PURCHASER to exercise
any of the rights conferred upon it hereunder with respect to any
<PAGE>
event of default of BUILDER shall not constitute a waiver of the
right subsequently to terminate this CONTRACT, as herein
provided.
ARTICLE XXVII - TITLE
a) Title to the Vessel and to the work for the Vessel
shall vest in the PURCHASER as and when performed, title to the
materials to be incorporated or installed in the Vessel shall
vest in the PURCHASER as and when delivered to the shipyard or
yard of the BUILDER, and title to the components to be
incorporated or installed in the Vessel shall vest in the
PURCHASER as and when fabricated. As used herein, the term
"Vessel" shall also mean a "ship" as defined in LA. R.S. 9:5522
and the terms, "work", "materials" and "components" shall have
the meanings as set forth in La. R.S. 9:5522 provided, however,
that the PURCHASER's lenders agree that BUILDER's liens on the
Vessel (at any stage of completion) and on the work, materials
and components, in each case, securing BUILDER's claims for
payments due under the CONTRACT for which BUILDER has not
previously been paid as required by the CONTRACT are superior to
the lender's lien, and also provided, however, that except as may
otherwise be provided in this CONTRACT, the risk of loss or
damage to such material and the Vessel shall remain with the
BUILDER, and the PURCHASER shall not be deemed to have waived its
rights to require the BUILDER to replace, at the BUILDER's
expense, defective, damaged or destroyed workmanship or material,
and to deliver the Vessel with the CONTRACT work completed, as
provided in this CONTRACT. BUILDER will properly identify the
ship, work, components and materials as belonging to the
PURCHASER all in accordance with La. R.S. 9:5523 and shall
certify to the PURCHASER and the Secretary, from time to time,
that these requirements have been fully complied with. Title to
all scrap and title to any material which is surplus to the
requirements of this CONTRACT (except material furnished by the
PURCHASER or which under any adjustment of Revised Contract Price
under the provisions of ARTICLE VI - PAYMENT OF CONTRACT PRICE -
METHOD OF PAYMENT of this CONTRACT remains the property of the
PURCHASER) shall vest in the BUILDER. Notwithstanding the
provisions of this ARTICLE as to title, the BUILDER shall be
subject to the risk of loss of all CONTRACT workmanship and
material and the undelivered Vessel as provided in this CONTRACT.
(b) The Existing Vessel's forebody removed from the
Existing Vessel, pursuant to
the terms of this CONTRACT, including all fittings, equipment and
appurtenances thereto not used on the Vessel or having been
removed as provided in the Specification, shall become the
property of the PURCHASER at the time of severance from the
Existing Vessel "AS IS" without any warranties. PURCHASER
warrants title to and that the severed Stern section, including
all such fittings, equipment and appurtenances thereto, will on
and after the delivery date of the Existing Vessel to the
Shipyard be free and clear of all liens, security interests,
claims and encumbrances of every nature and PURCHASER shall
defend, indemnify and hold BUILDER harmless from and against any
such lien, security interest, claim or encumbrance. The
obligations of this Subarticle shall survive the termination or
completion of this CONTRACT.
<PAGE>
(c) PURCHASER will remove, or cause the removal of, the
Existing Vessel's forebody from BUILDER's premises within forty
five (45) days of BUILDER's severance of the existing forebody
from the existing Stern and the removal of reusable equipment
from the existing forebody. While the existing forebody remains
on BUILDER's premises, BUILDER shall assume all risks and
expenses associated with the dockside mooring described in
ARTICLE IV.
ARTICLE XXVIII - LIENS
(a) BUILDER agrees that no liens, security interests or
rights in rem of any kind arising out of the CONTRACT work, or on
account of any claim against the BUILDER arising from the
construction of the Vessel or against any subcontractor of the
BUILDER performing work or furnishing material under this
CONTRACT shall lie or attach against or upon the Vessel or any of
said property, material or CONTRACT work, except, however, liens,
security interests or rights in rem in favor of a claimant
arising out of acts or omissions of the PURCHASER.
(b) If any such lien, security interest or right in rem of
any kind is filed or asserted against or attached upon the Vessel
or any of said property, material or CONTRACT work, the party
having knowledge thereof shall promptly notify the other party.
If such lien, security interest or right in rem does not arise
out of acts or omissions of the PURCHASER, BUILDER shall, not
later than thirty (30) days thereafter, secure the discharge or
release of such lien, security interest or right in rem;
provided, however, the BUILDER may contest such lien, security
interest or right in rem or the claim upon which it is based and
if within the time herein provided shall not have secured the
discharge or release of such lien, security interest or right in
rem by court order, then BUILDER shall furnish to PURCHASER or
the appropriate court having jurisdiction in such matters, such
bond or security therefor as shall be acceptable to PURCHASER,
and BUILDER shall indemnify and save harmless the PURCHASER from
all costs, charges and damages by reason of such lien, security
interest, right in rem or claims in any way attributable thereto.
ARTICLE XXIX - TAXES
The BUILDER shall pay, as a cost of the BUILDER, all
federal, state, parish, city and other taxes, assessments and
duties in effect prior to the date of this CONTRACT and lawfully
assessed or levied prior to delivery and acceptance of the Vessel
by the PURCHASER, against the Vessel and material, supplies and
equipment to be used, or used in, the construction of the Vessel.
Notwithstanding the provisions of the preceding sentence, any
sales, use, excise or other taxes lawfully assessed or levied
concurrently or in connection with the delivery, transfer of
possession, or acceptance or passage of title of the Vessel to
the PURCHASER shall be paid by the PURCHASER in addition to the
Revised Contract Price.
ARTICLE XXX - PATENT INFRINGEMENT
The BUILDER shall be responsible for any and all claims
against the PURCHASER or the Vessel for infringement of patents,
<PAGE>
patent rights, copyrights or trademarks in the construction of
the Vessel as constructed by the BUILDER (excepting claims
arising out of equipment, machinery or material supplied to the
BUILDER by the PURCHASER or the use, sale or disposition thereof)
and the BUILDER shall defend, save harmless and indemnify the
PURCHASER and the Vessel against all such claims and against all
costs, expenses, charges and damages which the PURCHASER or the
Vessel may be obligated to pay by reason thereof, including
expenses of litigation, if any; provided, that the foregoing
shall not apply to inventions covered by applications for United
States Letters Patent which, during the performance of this
CONTRACT, are being maintained in secrecy, under the provisions
of 35 U.S.C., Sections 181-188, nor shall the BUILDER be
obligated to indemnify the PURCHASER or the Vessel for any
infringement of patents, patent rights, copyrights or trademarks
resulting from compliance by the BUILDER with any specific
written instructions of the PURCHASER; provided, further, that
upon any such claim being made against said Parties or any
thereof, the BUILDER shall be notified promptly of such claim and
also of any suit brought in connection therewith and shall be
given an opportunity to defend the same; and provided further
that no payment on account of any such claim shall be made by the
PURCHASER unless with the consent of the BUILDER or pursuant to
the decree of a proper court or tribunal.
ARTICLE XXXI - ASSIGNMENT OF CONTRACT
This CONTRACT may not be assigned by PURCHASER or BUILDER
without the prior written consent of the other party, which
consent shall not be unreasonably withheld, except that PURCHASER
may assign this CONTRACT to any applicable United States
government entity for the purposes of financing the Contract
Price under Title XI. Neither BUILDER nor PURCHASER will make
any assignment of this CONTRACT without the prior written
approval of the Secretary.
ARTICLE XXXII - COMPUTATION OF TIME
All periods of time shall be computed by including
Saturdays, Sundays and holidays except that if such period
terminates on a Saturday, Sunday or holiday, it shall be deemed
extended to the business day next succeeding.
ARTICLE XXXIII - BUILDER TO COMPLY WITH LAWS AND REGULATIONS
The BUILDER shall comply with all laws, rules, regulations,
and requirements of any applicable classification society and of
the departments or agencies of the United States affecting the
construction of works, plants, and vessels, in or on navigable
waters and the shores thereof, and all other waters subject to
the control of the United States, and shall procure at its own
expense such permits from the United States, state and local
authorities as may be necessary in connection with beginning or
carrying on to completion of the CONTRACT work. BUILDER shall at
all times comply with all United States, state and local laws in
any way affecting the CONTRACT work; provided, however, that the
provisions of ARTICLE VII - CHANGES and ARTICLE XXII - GUARANTEE
of this CONTRACT shall govern the BUILDER's right to recover any
increased costs due to changes in the rules or laws of any
<PAGE>
classification society or other authority affecting the CONTRACT
work.
ARTICLE XXXIV - APPLICABLE LAW
(a) This CONTRACT shall be constructed in accordance with
the laws of the State of Louisiana and the General Maritime Law
where its application is required for compliance with the Title
XI financing requirements or as otherwise applicable to in this
CONTRACT.
(b) PURCHASER and BUILDER each hereby agree that any
judicial proceeding instituted by one party against the other
party involving any controversy or claim arising out of or
relating to this CONTRACT shall be instituted only in the United
States District Court for the Eastern District of Louisiana at
New Orleans, Louisiana or, if the District Court has no
jurisdiction over the cause, in the appropriate court of the
State of Louisiana in Jefferson Parish, Louisiana. The parties
hereto agree to submit to the personal jurisdiction of the above
courts.
ARTICLE XXXV - NOTICES
Until the BUILDER shall hereafter designate otherwise in
writing to the PURCHASER, all notices hereunder directed to the
BUILDER shall be in writing and shall be mailed by certified
mail, return receipt requested, first class, postage prepaid
addressed to:
Mr. Tom Doussan
Vice President - Commercial Ship Construction
Avondale Industries, Inc.
P.O. Box 50280
New Orleans, Louisiana 70150
Until the PURCHASER shall hereafter designate otherwise in
writing to the BUILDER, all notices hereunder directed to the
PURCHASER shall be in writing and shall be mailed by certified
mail, return receipt requested, first class, postage prepaid, to
the following address:
Richard D. Horner
American Heavy Lift Shipping Company, Inc.
365 Canal Street, Suite 2670
New Orleans, Louisiana 70130
All notices given pursuant to this ARTICLE XXXV shall be
deemed to have been received if so mailed and the sender has
received the return receipt with notation thereon of delivery.
ARTICLE XXXVI - ARBITRATION
(a) In the event a dispute arises hereunder, prior to the
commencement of any formal proceedings, the Parties shall
continue performance as set forth in this CONTRACT and shall
attempt in good faith to reach a negotiated resolution by
designating an officer of appropriate authority to resolve the
dispute. If the Parties have attempted in good faith to resolve
<PAGE>
the dispute and failed to do so, if both BUILDER and PURCHASER
agree, they may elect voluntary, non-binding arbitration.
Disputes as to causes of delay are agreed to be resolved by
mandatory and binding arbitration pursuant to this ARTICLE.
(b) In the event BUILDER claims a cause of delay under
ARTICLE IX, EXTENSION OF TIME FOR COMPLETION OF WORK, and
PURCHASER does not agree, or the PURCHASER claims a cause of
delay under ARTICLE IV, ITEMS FURNISHED BY PURCHASER, and BUILDER
does not agree, either of the Parties may request the Arbitrator
to decide the issue(s) which will be binding on both Parties.
(c) BUILDER and PURCHASER intend to agree on a mutually
acceptable Arbitrator, and alternate Arbitrator in the event the
office of the Arbitrator becomes vacant or otherwise is not able
to function promptly, prior to any arbitration proceeding.
(d) The Parties agree that the powers of the Arbitrator
shall be limited as follows:
1.He shall deal only with the disputes which are
referred for him to investigate and submit his findings and
recommendations.
2.He shall have no power to decide any matter which is
not directly related to the dispute submitted to him.
3.He shall have no power to modify the Working Drawings
or any Specifications, terms or conditions related thereto.
4.He shall have no power to add to, subtract from, or
modify any of the terms of this CONTRACT.
5.His decisions shall be advisory only and shall not
bind the Parties except for determination of disputed causes of
delay under ARTICLE IX, EXTENSION OF TIME FOR COMPLETION OF WORK.
6.He shall have no power to decide or interpret any matter
arising under or which involves any of CONTRACT Exhibits C, E, F,
G, H, I, or J.
(e) The party initiating the demand for arbitration shall
notify the other party in writing, at the same time stating the
matter or matters in dispute. Within a reasonable time
thereafter, not exceeding ten (10) calendar days, the second
party shall acknowledge the notice in writing, either specifying
any additional issues or issues to be arbitrated or refusing the
demand for arbitration. Providing the arbitration has been
agreed to, the arbitration shall be conducted in New Orleans,
Louisiana under applicable Louisiana laws.
(f) Should PURCHASER and BUILDER consent, the Arbitrator
will review claims and take one or more of the following
preliminary actions within ten (10) days of receipt of claim:
(1) request additional supporting data from the claimant, (2)
submit a schedule to the parties indicating when the Arbitrator
expects to take action, (3) reject the claim in whole or in part,
stating reasons for rejection, (4) recommend approval of the
claim by the other party or (5) suggest a compromise.
(g) If a claim has not been resolved, the party making the
claim, shall, within ten (10) days after the Arbitrator's
preliminary response, take one or more of the following actions:
(1) submit additional supporting data requested by the Arbitrator
(2) modify the initial claim or (3) notify the Arbitrator that
<PAGE>
the initial claim stands.
(h) If a claim has not been resolved after consideration of
the foregoing and of further evidence presented by the Parties or
requested by the Arbitrator, the Arbitrator will notify the
Parties in writing that the Arbitrator's decision will be made
within seven (7) days. Upon expiration of such time period, the
Arbitrator will render to the Parties the Arbitrator's written
decision relative to the claim, including any change in the
Revised Contract Price or Contract Time or both. Either party
aggrieved by the conduct or decision of the Arbitrator may at any
time seek a judicial determination of the claim.
(i) The Arbitrator shall also determine which party, or the
proper proportion which each party, shall assume of the expenses
of such arbitration. The arbitration expenses so allocated shall
be paid directly by the party or parties as directed by the
Arbitrator.
(j) Except for the binding arbitration of Subarticle XXXVI
(b) above, a decision by the Arbitrator shall not be required as
a condition precedent to litigation of a dispute between BUILDER
and PURCHASER.
ARTICLE XXXVII - CONSEQUENTIAL DAMAGES
Except for the adjustment to payments specifically stated in
this CONTRACT, notwithstanding anything to the contrary, neither
of the Parties to this CONTRACT will under any circumstances be
liable to the other under any theory of recovery, whether based
in contract, in tort (including negligence and strict liability)
under warranty or otherwise, for any indirect, special,
incidental or consequential loss or damage whatsoever and
howsoever caused. Consequential damages shall include, but shall
not be limited to, loss of revenue or profit, loss or delay of
production, loss of product, downtime of facilities, equipment or
vessels, loss of capital, loss of use of, or under-utilization of
labor, equipment or facilities.
ARTICLE XXXVIII - MISCELLANEOUS
(a) This CONTRACT constitutes the full and complete
understanding between the parties hereto and supersedes all prior
arrangements, negotiations, representations, understandings and
agreements, oral or written, or any matter of this CONTRACT.
(b) No change, alteration or modification of this CONTRACT
may be made except in writing signed by both Parties hereto and
the prior written consent of the Secretary. Provided, however,
that the consent of the Secretary will not be required for any
changes to the CONTRACT work pursuant to ARTICLE VII except as
provided therein.
(c) The headings in this CONTRACT are for convenience of
reference only and shall not be considered as part of this
CONTRACT or limit or otherwise affect the meaning hereof.
(d) No waiver of any provision of this CONTRACT by any
party shall (1) be effective unless executed in writing, or (2)
<PAGE>
constitute a waiver of any other provision.
(e) In case any one or more of the provisions contained in
this CONTRACT shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions
shall not be affected or impaired.
(f) The remedies, damages and obligations specified in this
CONTRACT shall be exclusive and in lieu of any other remedies,
damages or obligations available in contract , tort or otherwise
to PURCHASER or BUILDER with respect to the CONTRACT work except
where a specific provision provides to the contrary.
(g) This CONTRACT may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original but
all of which together shall constitute one and the same
instrument.
(h) Any news releases, public announcements,
advertisements, or publicity released by either party concerning
this CONTRACT, or anything incidental to the work thereof, will
be subject to prior approval of the other party. The Parties
agree that any publicity releases made by either of them shall
recognize and indicate the participation and contributions of the
other party.
(i) PURCHASER represent and warrants that: (i) it is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware; (ii) it has all the
requisite power and authority and legal right to enter into and
carry out the transactions contemplated by this CONTRACT,
including but not limited to all the Exhibits attached hereto;
(iii) the CONTRACT and all its Exhibits do not conflict with
PURCHASER's charter, by-laws, or any other agreement to which it
or its assets are bound; (iv) and that the CONTRACT, required
Exhibits and any Amendments have each been duly executed by
PURCHASER and constitute the legal, valid and binding obligation
of PURCHASER.
(j) BUILDER represent and warrants that: (i) it is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Louisiana; (ii) it has all the
requisite power and authority and legal right to enter into and
carry out the transactions contemplated by this CONTRACT,
including but not limited to all the Exhibits attached hereto;
(iii) the CONTRACT and all its Exhibits do not conflict with
BUILDER's charter, by-laws, or any other agreement to which it or
its assets are bound; (iv) and that the CONTRACT, required
Exhibits and any Amendments have each been duly executed by
BUILDER and constitute the legal, valid and binding obligation of
BUILDER.
<PAGE>
IN WITNESS WHEREOF, the Parties have caused this CONTRACT to
be executed in four counterparts as of the day above written.
ATTEST AVONDALE INDUSTRIES, INC.
(BUILDER)
/s/ R. D. Church
----------------
R.D. Church By:/s/ Albert L. Bossier, Jr.
--------------------------
Albert L. Bossier, Jr.
Title: Chairman, President & CFO
Date: May 12, 1995
AMERICAN HEAVY LIFT SHIPPING
COMPANY
ATTEST (PURCHASER)
/s/ H.A. Downing By:/s/ Richard D. Horner
---------------- ---------------------
H.A. Downing Richard D. Horner
Title: President & CEO
Date: May 12, 1995
<PAGE>
S/S SOLAR
PRODUCT TANKER CONTRACT
for
AMERICAN HEAVY LIFT
SHIPPING COMPANY
AVONDALE JOB NO. C5-80C
May 1995
AVONDALE INDUSTRIES, INC.
<PAGE>
Page
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ARTICLE I DEFINITIONS 2
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ARTICLE II GENERAL STATEMENT OF WORK 4
AND CONTRACT PRICE
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ARTICLE III CONTRACT GROUP 6
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ARTICLE IV ITEMS FURNISHED BY 6
PURCHASER
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ARTICLE V SPECIFICATIONS, 13
INTERPRETATION
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ARTICLE VI PAYMENT OF CONTRACT PRICE 14
- METHOD OF PAYMENT
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ARTICLE VII CHANGES 16
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ARTICLE VIII RIGHTS TO DESIGN DATA 19
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ARTICLE IX EXTENSION OF TIME FOR 20
COMPLETION OF WORK
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ARTICLE X PERFORMANCE STANDARD 24
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ARTICLE XI CONTRACT PRICE 24
ADJUSTMENTS
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ARTICLE XII SCHEDULES 27
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ARTICLE XIII INSURANCE 28
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ARTICLE XIV RISK OF LOSS - TOTAL LOSS 34
OF A VESSEL
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ARTICLE XV INJURY TO EMPLOYEES AND 36
OTHERS
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ARTICLE XVI APPOINTMENT OF 39
REPRESENTATIVES
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<PAGE>
ARTICLE XVII MATERIALS AND 40
WORKMANSHIP
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ARTICLE XVIII INSPECTION - APPROVAL OF 41
DRAWINGS
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ARTICLE XIX TRIALS 42
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ARTICLE XX ADDITIONAL TRIALS - 43
EXPENSES
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ARTICLE XXI ACCEPTANCE AND 44
DELIVERY OF THE VESSEL
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ARTICLE XXII GUARANTEE 46
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ARTICLE XXIII DEFAULT BY PURCHASER 50
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ARTICLE XXIV DEFAULT BY BUILDER 51
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ARTICLE XXV ACTION BY BUILDER UPON 53
DEFAULT BY PURCHASER
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ARTICLE XXVI ACTION BY PURCHASER UPON 56
DEFAULT BY BUILDER
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ARTICLE XXVII TITLE 58
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ARTICLE XXVIII LIENS 60
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ARTICLE XXIX TAXES 60
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ARTICLE XXX PATENT INFRINGEMENT 60
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ARTICLE XXXI ASSIGNMENT OF CONTRACT 61
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ARTICLE XXXII COMPUTATION OF TIME 61
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ARTICLE XXXIII BUILDER TO COMPLY WITH 62
LAWS AND REGULATIONS
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ARTICLE XXXIV APPLICABLE LAW 62
<PAGE>
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ARTICLE XXXV NOTICES 63
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ARTICLE XXXVI ARBITRATION 64
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ARTICLE XXXVII CONSEQUENTIAL DAMAGES 66
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MISCELLANEOUS 67
ARTICLE XXXVIII
EXHIBITS:
EXHIBIT A - SPECIFICATIONS (NOT ATTACHED)
EXHIBIT B - PROGRESS REPORT (NOT ATTACHED)
EXHIBIT C - BUILDER'S RISK POLICY FORM (NOT ATTACHED)
EXHIBIT D - CHANGE ORDER PROCEDURE (NOT ATTACHED)
EXHIBIT E -BUILDER'S CERTIFICATE OF INSURANCE (This
certificate will be furnished prior to the Effective Date of the
Agreement) (NOT ATTACHED)
EXHIBIT F -PURCHASER'S CERTIFICATE OF INSURANCE (NOT ATTACHED)
EXHIBIT G -SUBCONTRACTOR INSURANCE REQUIREMENTS (NOT ATTACHED)
EXHIBIT H-TITLE XI COMMITMENT LETTER OF 6 FEBRUARY 1995 BY MARAD
TO PURCHASER (NOT ATTACHED)
EXHIBIT I - CREDIT SUPPORT AGREEMENT (NOT ATTACHED)
EXHIBIT J - SALE AND PURCHASE AGREEMENT FOR THE STERN (NOT
ATTACHED)
<PAGE>
PRODUCT TANKER
FOR
AMERICAN HEAVY LIFT SHIPPING COMPANY
THIS CONTRACT, (the "CONTRACT") initially entered into on
the 12th day of October, 1994, which is hereby revised,
superseded and resigned after having been adjusted to conform to
the Title XI guarantee and financing requirements, is entered
into by and between American Heavy Lift Shipping Company, a
corporation organized under the laws of the State of Delaware,
having offices at 365 Canal Street, Suite 2670, New Orleans,
Louisiana 70130 (the "PURCHASER"), and Avondale Industries, Inc.,
a corporation organized under the laws of the State of Louisiana,
having a business address of 5100 River Road, Avondale, Louisiana
70094 (the "BUILDER");
W I T N E S S E T H:
WHEREAS:
1. The PURCHASER desires to purchase four (4) product
tankers to be flagged under the United States flag for use in
United States coastwise trade and that comply with the
requirements of the Oil Pollution Act of 1990 (OPA 90); and
2. The BUILDER is a shipbuilder with expertise, ability,
and desire to construct new tonnage that complies with OPA 90
consistent with the terms and conditions set forth in this
CONTRACT.
3. The PURCHASER has applied for Title XI guarantee for
financing under the Merchant Marine Act to the U.S. Department of
Transportation, Maritime Administration for the construction to
be performed pursuant to this CONTRACT. This CONTRACT will only
become effective between the Parties upon PURCHASER furnishing
BUILDER written evidence that the Title XI letter commitment to
guarantee and the financing commitment has been granted to
PURCHASER.
4. The BUILDER has developed the design for the
construction work of this CONTRACT in accordance with all
applicable Regulatory Body requirements.
NOW, THEREFORE, in consideration of the premises and of the
mutual promises hereinafter set forth, the Parties agree as
follows:
ARTICLE I - DEFINITIONS
As used in this CONTRACT, the following terms shall have the
following respective meanings:
BUILDER - As defined in the preamble.
Builder's Certificate - As defined in Subarticle VI(a).
CONTRACT - As defined in the preamble.
Confirmation Date - As defined in Subarticle IV(d).
<PAGE>
Contract Group - The "Contract Group" shall mean the four (4)
separate contracts between BUILDER and PURCHASER for similar
construction of four (4) vessels to replace PURCHASER's existing
vessels the S/S Knight, S/S Solar, S/S Spray and S/S King.
Contract Price - As defined in Subarticle II(a).
Contractor Group - As defined in Subarticle XV (d).
Data - As defined in Subarticle VIII(b).
Delivery Certificate - As defined in Subarticle II(b).
Delivery Date - As defined in Subarticle II(c).
Delivery Site - As defined in Subarticle II(b).
Delivery Window - As defined in Subarticle IV(d).
Docking Receipt - As defined in Subarticle IV(c).
Effective Date - The "Effective Date" is the date of the
resigning of this CONTRACT.
Essential changes - As defined in Subarticle VII(b).
Existing Inventory - As defined in Subarticle IV(j).
Existing Vessel - As defined in Subarticle IV(c).
Guarantee Deficiency - As defined in Subarticle XXII(a).
Guaranteed Speed - As defined in Subarticle X(b).
Invoice for Payment - As defined in Subarticle VI(c).
Non-essential changes - As defined in Subarticle VII(b).
Owner Group - As defined in Subarticle XV(a).
Parties - "Parties" shall mean both PURCHASER and BUILDER.
Performance Standard - As defined in Subarticle X(c).
Progress Payments - As defined in Subarticle VI(a).
PURCHASER - As defined in the preamble.
Regulatory Body(ies) - As defined in Subarticle XVII(a).
Revised Contract Price - As defined in Subarticle VI(g).
Schedule - As defined in ARTICLE XII.
Secretary - "Secretary" shall mean the United States Secretary
of Transportation acting by and through the Maritime
Administrator.
Shipyard - As defined in Subarticle II(b).
Specifications - The "Specifications" are that portion of the
CONTRACT consisting of the written requirements for design,
materials, equipment, construction systems, standards and
workmanship for the work, and performance of related services,
which are attached hereto as Exhibit "A".
Stern - that portion of the Existing Vessel (respective S/S
King, S/S Knight, S/S Solar, S/S Spray) purchased by BUILDER in
accordance with Exhibit "J", and as defined in that Exhibit "J",
for incorporation into the Vessel.
Turnover Date - As defined in Subarticle IV(d).
Turnover Window - As defined in Subarticle IV(d).
Working Drawings - The "Working Drawings" are the detailed
graphic and pictorial portions of the documents prepared by
BUILDER after the signing of the CONTRACT which show the design,
location and dimensions of the work, generally including the
outboard profile, structural details and arrangement plans,
elevations, sections, details, schedules and diagrams.
Vessel - As defined in Subarticle II(a).
Vessels - the four vessels to be constructed pursuant to the
Contract Group to replace the S/S King, S/S Solar, S/S Spray and
S/S Knight.
<PAGE>
ARTICLE II - GENERAL STATEMENT OF WORK
AND CONTRACT PRICE
(a) The BUILDER shall furnish all plant, facilities, labor,
materials, supplies and equipment, except as otherwise provided
in the Specifications, and shall perform all work necessary to
design, build, launch, outfit, test and deliver a vessel more
fully described in the Specifications (the "Vessel") at its own
risk and expense, and shall do everything required of the BUILDER
by this CONTRACT and the Specifications, including the
development of Working Drawings and the installation of any
outfitting and equipment, all for the total consideration of
"THIRTY FIVE MILLION NINE HUNDRED SIXTY NINE THOUSAND THREE
HUNDRED THIRTY FOUR DOLLARS ($35,969,334)," (the "Contract
Price") together with such additions and deductions as provided
elsewhere in this CONTRACT. The Parties recognize and
acknowledge that the Contract Price, CONTRACT and/or the
Specifications have required some adjustment due to or arising
from the requirements mandated by the Title XI guarantee and
financing approval process which changes have been incorporated
into this CONTRACT.
(b) The Vessel shall be identified as BUILDER's Hull No.
2383, and shall be constructed at the BUILDER's plant (the
"Shipyard"), located at Avondale, Louisiana on the west bank of
the Mississippi River at Mile 107 AHP. Some parts of the Vessel
may be constructed at BUILDER's facilities in Westwego,
Louisiana. When the work on the Vessel is complete in accordance
with this CONTRACT, and the Vessel has passed the tests required
by this CONTRACT, the Vessel as completed shall be delivered with
not less than five (5) days prior written notice by the BUILDER
and accepted by the PURCHASER at Avondale, Louisiana or a
mutually agreed other place (the "Delivery Site"), free and clear
of all liens, security interests, and claims of every nature,
excepting, however, those arising out of the acts or omissions of
the PURCHASER and the PURCHASER'S contractual obligations
pursuant to Article 4 of the Credit Support Agreement of attached
Exhibit "I". Upon such delivery, the PURCHASER shall give the
BUILDER a Delivery Certificate accepting the Vessel (the
"Delivery Certificate"). The PURCHASER shall within five (5) days
thereafter, remove or cause the Vessel to be removed from the
Delivery Site. Delivery and acceptance by the PURCHASER of the
Vessel shall be expressly conditioned upon (1) PURCHASER's rights
under ARTICLE XXII - GUARANTEE of this CONTRACT, (2) PURCHASER's
right to completion by BUILDER thereafter of any uncompleted
CONTRACT work and correction by BUILDER of any defective CONTRACT
work as shown in the Delivery Certificate in accordance with the
determination described in ARTICLE XXI - ACCEPTANCE AND DELIVERY
OF THE VESSEL.
(c) The work is to be performed according to first class
shipbuilding practice and shall be commenced and prosecuted in a
timely manner. BUILDER will deliver the Vessel to the PURCHASER
132 days following the Turnover Date as such date may be extended
pursuant to the terms of this CONTRACT (the "Delivery Date"),
provided that the S/S Solar is turned over to the BUILDER within
the agreed upon Turnover Window. If the S/S Solar is turned over
to the BUILDER before the Turnover Window, BUILDER will deliver
<PAGE>
the Vessel to the PURCHASER 132 days following the first day of
the agreed upon Turnover Window.
ARTICLE III - CONTRACT GROUP
The Contract Price for this CONTRACT is agreed to be the
consideration as part of the group of four product tankers for
the four substantially identical contracts signed by BUILDER and
PURCHASER this date. In any event that all four of the vessel
contracts are not completed, or are terminated for any reason,
except the default of the BUILDER, the Contract Price of each of
the unterminated contracts shall be adjusted to reflect the
higher per vessel cost for the remaining vessels as follows:
Number of Contracts Percent Contract Price
Terminated Increase of Each
Completed Contract
3 3.0
2 1.25
1 1.0
ARTICLE IV - ITEMS FURNISHED BY PURCHASER
a) The BUILDER shall, at its own expense and risk, receive,
check as to agreement with bills of lading, store, protect,
remove from the Existing Vessel pursuant to the Specifications,
insure and install aboard the Vessel all of the items required by
the Specifications to be furnished by the PURCHASER. The BUILDER
shall not be deemed to have extended any warranty as to materials
or equipment furnished by the PURCHASER other than the warranty
set forth in ARTICLE XXII - GUARANTEE of this CONTRACT. The
BUILDER shall be liable to the PURCHASER for any damage to or
loss of the items furnished by the PURCHASER occurring during the
BUILDER's custody thereof, which may arise from any event.
Except for the S/S Solar turnover requirements as indicated in
this ARTICLE IV, the Specifications indicate the need dates for
all items to be furnished by PURCHASER.
(b) Except for the S/S Solar turnover requirements as
indicated in this ARTICLE IV,
PURCHASER will, by furnishing reasonable documentation and notice
to BUILDER, be entitled to extension of the indicated need dates
stated in the Specifications for, and to the extent of, any cause
of delay beyond the reasonable control of PURCHASER which
PURCHASER could not reasonably have anticipated. BUILDER may
also use such cause of delay to claim delay of the Delivery Date
for the Vessel in accordance with ARTICLE IX, EXTENSION OF TIME
FOR COMPLETION OF WORK.
(c) The Stern section and after house portion of the Vessel
shall be the Stern section and after house portion of the
Existing Vessel, the S/S Solar, Official Number 280223, shall be
delivered by PURCHASER alongside a dock designated by BUILDER at
BUILDER's Avondale, Louisiana shipyard in accordance with the
Sale and Purchase Agreement attached as Exhibit "J". All
landside expenses associated with the dockside mooring of the S/S
<PAGE>
Solar at the Shipyard, including but not limited to mooring
lines, wharfage, gangway, shipyard services, etc. are included in
the Contract Price. For purposes of clarity in this CONTRACT,
the S/S Solar will be referred to and become the "Existing
Vessel" after the S/S Solar is docked at Avondale and its
delivery protocol documentation has been signed (the "Docking
Receipt"). The signed Docking Receipt will also serve to
transfer the risk of loss from PURCHASER to BUILDER pursuant to
Subarticle (g) of this ARTICLE IV and the Sale and Purchase
Agreement for the Stern attached hereto as Exhibit "J".
(d) PURCHASER shall deliver the S/S Solar to BUILDER between
6 November 1996 and 5 January 1997 (the "Delivery Window").
During August 1996 the Parties will meet to narrow the Delivery
Window to a 2 week period when the S/S Solar will be ready for
delivery to the Shipyard and when the BUILDER has progressed
sufficiently with its work that it is ready to receive the S/S
Solar in the Shipyard ("Turnover Window"). The Parties shall
confirm in writing ("Confirmation Date") the Turnover Window. If
by 19 August 1996, the Parties are unable to agree to the
Turnover Window, the Turnover Window shall be 6 December 1996 to
19 December 1996 and the Confirmation Date for this CONTRACT
shall be deemed to be 19 August 1996. The Turnover Date (the
"Turnover Date")shall be the actual date that the S/S Solar is
turned over to the BUILDERS as evidenced by the Docking Receipt.
The Parties have confirmed the Delivery Window and the other
dates set forth in this paragraph on the Effective Date of the
CONTRACT. PURCHASER will be entitled to extension of the
Turnover Window for, and to the extent of, any cause of delay
beyond the reasonable control of PURCHASER which PURCHASER could
not reasonably have anticipated.
(e) With reasonable notice, PURCHASER may deliver the S/S
Solar at any time up to thirty (30) days prior to the Turnover
Window without any increase in the Contract Price. A docking fee
of $1,200.00 per day plus direct costs for extending the
insurance obligations of BUILDER under this CONTRACT will be
charged to PURCHASER for early delivery in excess of thirty (30)
days prior to the Turnover Window. The early delivery docking
fee includes monitoring of mooring lines, pressure fire system
and shore power. Other services are available at standard rates.
(f) PURCHASER will pay BUILDER TWENTY THOUSAND DOLLARS
($20,000.00) per day liquidated damages in addition to the
Contract Price for each and every day that the S/S Solar is
delivered to BUILDER more than (5) days after the Turnover
Window, up to an aggregate maximum of three percent (3%) of the
Contract Price decreased by FOUR MILLION NINE HUNDRED EIGHTY
THOUSAND THREE HUNDRED THIRTY-FOUR DOLLARS, as said Turnover
Window may be extended pursuant to this CONTRACT. The Delivery
Date of the Vessel, and all dates of the Contract Group, will be
extended day for day that the S/S Solar is delivered after the
Turnover Window at no additional cost beyond the liquidated
damages paid for late delivery of the S/S Solar to the BUILDER;
provided, however, that any liability for liquidated damages for
any of the remaining Vessels in the Contract Group shall be
determined based upon the extended dates of the Contract Group.
BUILDER may elect to terminate this CONTRACT by written notice to
PURCHASER pursuant to ARTICLE XXIII, DEFAULT BY PURCHASER, at any
time that the S/S Solar is not delivered to BUILDER within thirty
<PAGE>
(30) days after the Turnover Window, except that Subarticle
XXV(a) default cure period does not apply to the delivery failure
of the S/S Solar after expiration of the thirty (30) days after
the Turnover Window.
(g) The S/S Solar with everything belonging to it shall be
at PURCHASER's risk and expense until its delivery is confirmed
by execution of the Docking Receipt. Risk of loss of the
Existing Vessel with everything belonging to it shall be as
indicated in ARTICLE XIV, RISK-OF-LOSS - TOTAL LOSS OF A VESSEL.
The S/S Solar shall be delivered to BUILDER on the Turnover Date
in class, except as a result of the Existing Vessel's OPA '90
trading date restriction, repairs of PURCHASER in progress which
will be completed expeditiously by PURCHASER, or arrangements by
PURCHASER for towing of the Existing Vessel to BUILDER,
preferably free of outstanding items or recommendations, with all
tanks gas free (except for necessary fuel oil and lubricating oil
tanks) and with asbestos removed or encapsulated per the
Specifications. BUILDER shall take over remaining bunkers and
lubricating oils unless otherwise agreed in writing between the
Parties prior to arrival of the S/S Solar at Avondale. All such
remaining bunkers/oils may be sold or retained by BUILDER at its
option. All bunker/oil transfer costs and credits will be for
PURCHASER'S account. The Parties agree to negotiate the
performance of work required for PURCHASER furnished items and/or
the Stern of the Existing Vessel in accordance with the
requirements of ARTICLE VII, CHANGES, as directed by PURCHASER.
Such negotiations are intended to allow PURCHASER to timely order
Essential Changes for PURCHASER furnished items and/or the Stern
of the Existing Vessel in order to remedy class outstandings or
recommendations. Except for work in the Stern of the Existing
Vessel indicated in the Specifications to be performed by
BUILDER, it will be PURCHASER'S obligation under this CONTRACT
that all PURCHASER furnished items for the Vessel, and the Stern
of the Existing Vessel, or any of its parts, meet all the
applicable laws, classifications, rules, regulations, standards
and certification requirements notwithstanding the provisions of
attached Exhibit "J".
(h) PURCHASER warrants that the S/S Solar, at the time of
delivery to BUILDER, is free from all encumbrances, security
interests, maritime liens or any other debts whatsoever except
for the preferred maritime mortgage(s) granted in connection with
the financing of the construction of the vessels as contemplated
by ARTICLE XXVIII - TITLE, and also except for maritime liens
arising from trade payables incurred in the ordinary course of
business which will be discharged in the ordinary course of
business or bonded by PURCHASER within ten (10) working days of
any notice of a lien or other encumbrance against the Existing
Vessel. Should any claims for events which have been incurred
prior to the time of delivery of the S/S Solar to BUILDER be made
against the S/S Solar, the Existing Vessel, or parts thereof,
PURCHASER hereby undertakes to indemnify, hold harmless, and
defend BUILDER against all consequences of such claims. This
Subarticle shall survive the termination or expiration of this
CONTRACT.
(i) In the event of any actual or constructive total loss
of the S/S Solar prior to arrival at BUILDER's shipyard or in the
<PAGE>
event that the Stern section and/or the after house shall, for
any reason, be unavailable, PURCHASER may either:
(i) Furnish the S/S Manatee or a mutually agreeable
substitute vessel, in which event BUILDER and PURCHASER shall
mutually agree on: (1) any Specification changes, (2) a new
Turnover Date and Delivery Date (3) a new Contract Price
resulting from such substitution; and (4) adjustment of all
dates and prices for all the follow vessels of the Contract
Group. PURCHASER presently has an option to purchase the S/S
Coastal Manatee (Official No. 287186). The substitution of the
S/S Coastal Manatee is subject to the approval of the PURCHASER
and the Secretary.
(ii) Not Used
(iii) Give written notice to BUILDER within fifteen (15)
days after the loss ordering BUILDER to terminate further
performance of work under this CONTRACT and shall upon demand pay
BUILDER its Costs, as defined below, plus a profit of ten percent
(10%) of such Costs, and following receipt by BUILDER of full
payment under this Subarticle (i) , all constructed work and all
materials acquired by BUILDER for the performance of this
CONTRACT shall become the property of PURCHASER. "Costs" are
defined for the purpose of this Subarticle (i) to include the
cost to BUILDER for all services performed, labor performed and
materials acquired or contracted to be acquired plus overhead
allocations for such services, labor and materials in accordance
with BUILDER's usual practices for such work, plus reasonable
cancellation costs actually paid to third parties for terminating
contractual commitments that BUILDER has made for performance of
the CONTRACT work, all in accordance with BUILDER'S established
cost accounting system as verified by an independent auditor
selected by PURCHASER and agreed to by the BUILDER. Under no
circumstances shall BUILDER's claim under this Subarticle
(i)(iii) include any costs allocated to any of the other
contracts of the Contract Group.
(j) Notwithstanding the Sale and Purchase Agreement of
attached Exhibit "J", this CONTRACT is based on utilizing the
aft portion of the S/S Solar as indicated by the Specifications,
and Subarticles (c) and (g) above, in generally its "AS IS"
condition on arrival at BUILDER's yard. Any desired or mandated
improvements, upgrades, damage repairs, maintenance, etc. of this
PURCHASER furnished equipment for the Vessel, and the Stern of
the Existing Vessel, will be performed and documented pursuant to
ARTICLE VII, CHANGES. The "AS IS" condition will be inventoried
and documented by BUILDER and countersigned by PURCHASER during
the delivery voyage and/or on its arrival at BUILDER's Shipyard
(the "Existing Inventory"). BUILDER is obligated to return the
PURCHASER furnished items, and the Stern of the Existing Vessel,
on the Delivery Date as documented in the Existing Inventory.
PURCHASER will provide suitable accommodations and board to
BUILDER's inspectors for performing this inventory at no charge
to BUILDER during the turnover voyage. The Parties will agree to
similar arrangements for design development inspections by
BUILDER'S inspectors at any time after the Effective Date of this
CONTRACT. Article XV, INJURY TO EMPLOYEES AND OTHERS, will also
be applicable during the delivery voyage for taking of the
Existing Inventory and during the performance of any design
<PAGE>
development inspections by BUILDER's inspectors at any time after
the Effective Date of this CONTRACT.
(k) PURCHASER will give immediate notice to BUILDER in the
event the S/S Solar is delayed, or is expected to be delayed, in
its scheduled turnover to BUILDER by any unforeseen event beyond
the control of PURCHASER which PURCHASER could not reasonably
have anticipated. PURCHASER will provide expeditiously all known
details of such unforeseen delay and furnish an estimate of the
extent of the claimed delay in the Turnover Date. By agreement
the Parties may mitigate such unforeseen cause of delay to their
respective best interests in adjusting the Turnover Date
including, but not limited to, utilizing the provisions of
Subarticle IV (i). Either of the Parties may request binding
arbitration pursuant to ARTICLE XXXVI, ARBITRATION, for
determination of the claimed delay of the Turnover Date. The
arbitration may not, however, revise the indicated adjustments to
be made to other dates as a consequence of such delays in the
Turnover Date.
(l) BUILDER will provide necessary dockside services for
and permit the crew of the S/S Solar to remain aboard the
Existing Vessel to perform their duties, provided such duties are
at all times subordinate to, and do not interfere with, BUILDER'S
work, for up to thirty (30) days after arrival of the Existing
Vessel and for thirty (30) days prior to the Delivery Date of the
Vessel. Likewise, the BUILDER will permit approved
subcontractors to perform work directly for PURCHASER that is not
ordinarily performed by BUILDER. R & R Marine Maintenance and G.
C. Electric will be allowed into the Shipyard aboard the Existing
Vessel as approved subcontractors to perform work directly for
PURCHASER not to exceed six (6) people at any one time.
(m) Notwithstanding anything contained in the Sale and
Purchase Agreement for the Stern attached hereto as Exhibit "J"
or anything else whatsoever, PURCHASER agrees to protect, defend,
indemnify and hold BUILDER, its agents, officers, directors,
employees and representatives harmless from and against all
costs, damages, losses, claims, penalties, debts or liabilities
BUILDER may incur from holding title to the Stern of the Existing
Vessel, or the Stern of the Vessel, in BUILDER'S name at any time
during the performance of this CONTRACT. It is further
understood and agreed that this indemnity and defense obligation
shall include the obligation to reimburse BUILDER for any
attorneys' fees, costs and expenses which may be incurred by
BUILDER in enforcing the defense and indemnity obligations set
forth in this Subarticle (m). This Subarticle (m) shall prevail
over any conflicting or inconsistent provisions set forth
elsewhere in this CONTRACT and shall survive any termination,
cancellation, expiration or completion of this CONTRACT.
ARTICLE V - SPECIFICATIONS, INTERPRETATION
(a) The Specifications for the construction of the Vessel
have been identified by the initials of the Parties signing this
CONTRACT and are made a part of this CONTRACT with the same force
and effect as though herein set out in full.
(b) If any discrepancy, difference or conflict exists
<PAGE>
between the provisions of this CONTRACT and the Specifications,
then to the extent of such discrepancy, difference or conflict
only, the Specifications shall be ineffectual and the provisions
of this CONTRACT shall prevail; but in all other respects the
Specifications shall be in full force and effect. If there is any
discrepancy, difference or conflict between the drawings and
Specifications, then to the extent of such discrepancy,
difference or conflict the Specifications shall prevail;
provided, however, any work called for by the Specifications and
not shown on the drawings and any work shown on the drawings but
not called for in the Specifications shall be performed by the
BUILDER as a part of the CONTRACT work. Any discrepancy,
difference or conflict between the Specifications and the
provisions of this CONTRACT and any discrepancy, difference or
conflict between the Specifications themselves discovered by one
party to this CONTRACT shall be brought to the attention of the
other party promptly in writing.
ARTICLE VI - PAYMENT OF CONTRACT PRICE - METHOD OF PAYMENT
a) PURCHASER shall pay the Revised Contract Price to
BUILDER in increments as the work progresses (the "Progress
Payments"). PURCHASER shall pay Progress Payments to BUILDER at
biweekly intervals upon the invoices of BUILDER, supported in
each instance by its Builder's Certificate. Progress Payment
shall be determined by the proportionate amount of the CONTRACT
work actually accomplished computed by the following method: the
CONTRACT work will be divided into separate components and each
component assigned a number of points. Such components and their
respective points will be as set forth on the form attached as
Exhibit "B". As of the invoice date, BUILDER shall certify the
percentage of completion of each component and the overall
percentage of completion ("Builder's Certificate"), which shall
be the sum of the percentages of completion of each component
multiplied by the number of points referable to that component
divided by the total number of points referable to all components
of CONTRACT work. Each Progress Payment shall be the increment
in overall percentage of completion since the date as of which
BUILDER computed the last previous Progress Payment times the
Revised Contract Price, as defined in Subarticle (g) of this
ARTICLE. Progress Payments shall be paid in full by wire
transfer free of bank charges as soon as possible but in no event
later than five (5) working days after receipt by the Secretary
of documents acceptable to the Secretary. As an exception to the
above procedure for Progress Payments, the first Progress Payment
in the amount of FOUR MILLION NINE HUNDRED EIGHTY THOUSAND THREE
HUNDRED THIRTY FOUR DOLLARS ($4,980,334) will be paid by
PURCHASER TO BUILDER, by wire transfer, free of bank charges, in
immediately available funds to an account designated by BUILDER,
simultaneously with the execution of this amended and restated
CONTRACT to cover the Sale and Purchase Agreement of attached
Exhibit "J".
b) PURCHASER shall inspect and confirm achievement of the
progress by approving the Progress Billing Format form of
attached Exhibit "B". BUILDER shall invoice PURCHASER for the
percentage of the Revised Contract Price for the progress, which
invoice shall include documents acceptable to the SECRETARY.
PURCHASER will notify BUILDER if it determines that the progress
<PAGE>
has not in fact been achieved along with PURCHASER's reasons for
said determination. PURCHASER's failure to notify BUILDER within
two (2) business days of receipt of an invoice for payment shall
constitute PURCHASER's acceptance of the progress.
c) At no time prior to the delivery of the Vessel to
PURCHASER may the cumulative invoiced total of Progress Payments
charged to PURCHASER under the provisions of this ARTICLE VI,
exceed 100% of the Revised Contract Price, as defined in
Subarticle (g) of this ARTICLE.
d) Progress Payments may include the cost of subcontracted
machinery, materials, and equipment not yet delivered to
BUILDER'S yard to the extent that BUILDER shall have acquired
title thereto and identified the goods in question to the Vessel,
provided that the risk of loss of or damage to such goods before
delivery remains with the vendor or subcontractor.
e) The final installment of the Revised Contract Price
minus a hold-back equal to 1% of the Revised Contract Price
shall be paid to BUILDER by PURCHASER at the delivery of the
Vessel to PURCHASER.
f) PURCHASER shall pay BUILDER the 1% of the Revised
Contract Price hold-back retained under the provisions of
Subarticle (e) above after the expiration of the warranty period
as provided in ARTICLE XXII, GUARANTEE.
g) In the event that the Parties should agree upon any
change to be made in accordance with the provisions of ARTICLE
VII, CHANGES, and that agreement contains no contrary provision
for time of payment, the Contract Price (or, if there have been
previous such changes, the former Revised Contract Price) shall
be increased or decreased by the amount agreed upon by the
Parties and, as thus increased or decreased, shall be called the
"Revised Contract Price." Immediately upon agreement between the
Parties of any change and the resulting increase or decrease in
the Revised Contract Price, BUILDER shall issue its invoice or
credit memo for the amount of such increase or decrease in the
Revised Contract Price attributable to the change times the
cumulative overall percentage of completion utilized in the
computation under the provisions of this ARTICLE VI of the
Progress Payment most recently invoiced; and the balance of such
increase or decrease shall be paid or deducted by use of the new
Revised Contract Price in the computation of subsequent Progress
Payments.
ARTICLE VII - CHANGES
(a) The BUILDER shall not, except as provided in Subarticle
(b) of ARTICLE V - SPECIFICATIONS, INTERPRETATION depart from the
requirements of the Specifications or make any other changes in
the CONTRACT work required by the Specifications without all
prior authorization required by the provisions of this ARTICLE.
Anything to the contrary notwithstanding, any work that is
required to be performed under this CONTRACT to anything that was
sold/purchased pursuant to attached Exhibit "J", other than what
is required by the Specifications, will be performed only
<PAGE>
pursuant to an agreed and documented change under this ARTICLE
VII.
(b) For purposes of this ARTICLE, changes in CONTRACT work
shall be classified as either "Essential" changes or "Non-
essential" changes. Essential changes shall consist of changes in
the CONTRACT work due to an action of a Regulatory Body as set
forth in ARTICLE XVII - MATERIALS AND WORKMANSHIP, (a)(iii) of
this CONTRACT, or due to any other promulgation of a new law or
rule after 7 March 1995. All other changes shall be Non-
essential changes. BUILDER shall advise PURCHASER of any
Essential changes which any Regulatory Body may require in the
Vessel.
(c) The PURCHASER shall have the right to direct the
BUILDER to perform an Essential change, and the BUILDER upon
receipt of PURCHASER's written direction shall commence the
performance of the change at such time as the PURCHASER may
direct without regard to whether prior agreement has been reached
as to the net increase or decrease in Revised Contract Price and
delay attributable to the change. The BUILDER shall be entitled
to a fair and reasonable adjustment in the Revised Contract Price
and Delivery Date for the performance of such change and in all
other terms and conditions of this CONTRACT that reasonably
require modification as a consequence of the change, for
performance of such change. Upon receipt of the PURCHASER's
written direction of an Essential change, the BUILDER shall,
within fourteen (14) days, give written notice to the PURCHASER
and the Secretary, that the proposed change will result in a
change in the Performance Standard, Revised Contract Price and/or
Delivery Date and the projected date for the firm quotation for
such change which shall be within thirty (30) days of PURCHASER's
written request or as otherwise mutually agreed. If such notice
is not forwarded as required, BUILDER shall not have the right to
later make claim for such change. After receipt of BUILDERS
quotation, the PURCHASER shall have fourteen (14) days to respond
to the BUILDER. If no response is received within the fourteen
(14) days, the quotation shall be deemed approved. The BUILDER's
quotation shall show the following information: the effect on
weight, moments, centers; effects on the Performance Standard;
and any delay in delivery of the Vessel to result from such
change. Such estimate of price shall consist of estimates,
separately stated, for materials (by type and quantity), labor
(including overhead) based on estimated engineering manhours and
estimated production manhours, and profit. PURCHASER shall take
reasonable precautions to maintain in confidence each estimate
and not disclose the same, except to agents or contractors of
PURCHASER as necessary in the prosecution of CONTRACT work,
provided only that in making such disclosure to agents or
contractors the PURCHASER 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 PURCHASER herein. In no event shall the PURCHASER
disclose estimates to another shipyard. The PURCHASER shall not
be responsible for unauthorized actions of its employees if the
aforementioned reasonable precautions have been taken by it. Any
change work performed by the BUILDER absent written agreement
from the PURCHASER shall be at BUILDER's own risk and expense.
<PAGE>
(d) The PURCHASER shall have the right to propose to the
BUILDER in writing a Non-essential change in the CONTRACT work.
The BUILDER shall promptly review such proposal and submit to
PURCHASER an estimate of the net increase or decrease in the
Revised Contract Price; the effect on weight, moments, and
centers; effects on the Performance Standard; and any delay in
delivery of the Vessel to result from such change. If the BUILDER
and PURCHASER agree upon the net increase or decrease in Revised
Contract Price and any delay in delivery, this CONTRACT shall be
modified accordingly, and the BUILDER shall promptly proceed to
perform the change. Nothing herein shall require the BUILDER to
perform a Non-essential change proposed by the PURCHASER in the
absence of prior agreement as to the net increase or decrease in
Revised Contract Price, Performance Standard and any delay in
delivery and all other terms and conditions of this CONTRACT that
reasonably require modification as a consequence of the change.
(e) The BUILDER shall have the right to propose to the
PURCHASER in writing any change in the CONTRACT work. The BUILDER
shall transmit to the PURCHASER its proposed change accompanied
by an estimate of the net increase or decrease in the Revised
Contract Price; the effect on weight, moments, and centers;
effects on Performance Standard; and any delay in delivery of the
Vessel to result from such change. If the BUILDER and PURCHASER
agree upon the net increase or decrease in Revised Contract Price
and any delay in delivery, this CONTRACT shall be modified
accordingly, and the BUILDER shall promptly proceed to perform
the change. Nothing herein shall require the PURCHASER to accept
a change proposed by the BUILDER in the absence of prior
agreement as to the net increase or decrease in Revised Contract
Price and any delay in delivery. Any change work performed by
the BUILDER absent written agreement from the PURCHASER shall be
at BUILDER's own risk and expense.
(f) For good order the Parties may also agree to document
that repair work to PURCHASER furnished equipment for the Vessel,
and the Stern portion of the Existing Vessel as a change
notwithstanding that such documentation would not involve any
revision to the Specifications and also notwithstanding the Sale
and Purchase Agreement of attached Exhibit "J". The Parties have
agreed to utilize the attached Change Order Procedure, Exhibit
"D", for documenting and processing all changes pursuant to this
ARTICLE VII, CHANGES.
(g) Written consent of the Secretary is required to approve
any change to the CONTRACT work which exceeds $100,000 after the
aggregate sum of all changes to the CONTRACT work and the
enhancements to the Stern exceed two million dollars.
ARTICLE VIII - RIGHTS TO DESIGN DATA
(a) The BUILDER shall prepare and furnish Working Drawings
for the installation of the PURCHASER furnished equipment;
however, anything to the contrary notwithstanding, the BUILDER
shall have no obligation to furnish any other details for
operation or otherwise. PURCHASER'S review of Working Drawings
and data will not relieve BUILDER from its obligations under this
<PAGE>
CONTRACT.
(b) All Working Drawings, and such other specified design
and engineering data required to be furnished to the PURCHASER by
the Specifications and produced by the BUILDER in the performance
of the CONTRACT (the "Data") shall be the property of the
BUILDER. The PURCHASER shall have the right to use the Data in
such manner as it may deem proper, including the right to make
reproducibles and copies and the right to make alterations
therein, additions thereto, or other changes, provided that (i)
Data will not be made available to any of BUILDER's competitors
at any time by the PURCHASER, except for the sole purpose of
operating, maintaining or repairing the Vessel and (ii) BUILDER
and/or BUILDER's licensor will be entitled to a reasonable
royalty, fee, or commission in the event any Data is so made
available by the PURCHASER and is used for purposes other than
operating, maintaining or repairing the Vessel. The BUILDER also
shall have the unrestricted right to sell or transfer any Data.
(c) Each party shall take reasonable precautions to
maintain in confidence that information disclosed to it in the
performance of this CONTRACT which is specifically identified as
confidential, other than information, which at the time of
disclosure, is known or become available from sources other than
the party disclosing such information or which is or shall become
capable of being independently produced by those skilled in the
trade to which such information relates. Notwithstanding
anything to the contrary herein contained, the BUILDER shall not
be precluded from disclosing information which may be necessary
for the prosecution of the CONTRACT work, provided only that in
making such disclosure the BUILDER 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 it herein; nor shall the BUILDER be
responsible for unauthorized actions of its employees provided
that the aforementioned reasonable precautions have been taken by
it; nor shall anything contained herein restrict or limit the
BUILDER's use of any information contained in the Specifications,
whether confidential or not, for the performance of this
CONTRACT.
(d) PURCHASER shall have all rights to the Data at no cost
for completing construction of the Vessel in the event that this
CONTRACT is terminated due to default of BUILDER pursuant to
ARTICLE XXIV, DEFAULT BY BUILDER.
ARTICLE IX - EXTENSION OF TIME FOR COMPLETION OF WORK
(a) Except as provided under ARTICLE IV, ITEMS FURNISHED BY
PURCHASER, if the BUILDER shall have transmitted written notice
to the PURCHASER of a cause of delay delaying the performance of
the CONTRACT work not later than five (5) working days if due to
rain or fifteen (15) days after the date that knowledge of other
delay in the CONTRACT work has come to the BUILDER, or after the
date that it is determined the BUILDER should have known of the
delay in the CONTRACT work, if such date is an earlier date, and
the cause of delay is beyond the control of the BUILDER, as
provided in Subarticle (b) below, and which the BUILDER could
<PAGE>
not reasonably have anticipated, the BUILDER shall be entitled to
an extension of the Delivery Date set out in this CONTRACT by the
number of days that the Delivery Date was delayed by said cause
of delay, except as otherwise provided in Subarticle (e) below.
If such notice is not given within the time allowed, such delay
may not be subsequently invoked.
(b) A cause of delay beyond the control of the BUILDER
shall include, without prejudice to the generality, delay caused
by the PURCHASER or by any agency or instrumentality of the
United States, including delays in the granting of any consents
or approvals by the U.S. Maritime Administration, by Government
priorities, by civil, naval or military authorities, by acts of
God (including hurricanes) by earthquakes, lightning, floods,
union elections, strikes or other industrial disturbances; by
rain as more fully described in Subarticle (c) of this ARTICLE;
such explosions, fires, vandalism as are the result of causes
reasonably beyond the BUILDER's control; by riots, by
insurrections, by sabotage, by blockades, by embargoes, by
epidemics; by the unavailability or late delivery to the BUILDER
of CONTRACT required machinery, equipment and supplies to be
incorporated in the Vessel where it is determined that the
BUILDER's procurement or attempt to procure for such machinery,
equipment and supplies to be incorporated in the Vessel was
expeditious and prudent, that the BUILDER has exercised due
diligence in the performance of any acts required of the BUILDER
and that the BUILDER has exercised due diligence in expediting
deliveries under the BUILDER's purchase CONTRACT or in seeking
equivalent substitute performance; and by the late performance or
default of a subcontract where it is determined that the
BUILDER's choice of the subcontractor was reasonable and
responsible and the BUILDER has exerted all reasonable efforts to
expedite performance, avoid default and procure reasonable
substitute performance; and by the breach of this CONTRACT by the
PURCHASER.
(c) From the Effective Date of this CONTRACT until the
delivery of the Existing Vessel to the Shipyard, the following
provisions shall determine delay caused by rain:
(1) The rain experienced at the project site during
CONTRACT period must be found to be unusually severe. That is,
more severe than the rain anticipated for the project location
during any given month.
(2) The rain must actually cause a delay to the
completion of the project in accordance with the Schedule. The
delay must be beyond the control and without the fault or
negligence of the BUILDER.
(3) Delay in the completion of the project shall be
determined on a shift by shift basis. If the project is running
two shifts at the time it will require two shifts delay to equal
one day of delay and if the shipyard is working three shifts at
the time, it shall require three shifts delay to equal one day of
delay. A rain delay will only be considered a delay in the
completion of the project if its occurrence requires a shutdown
of a substantial portion of the outside work on the Vessel prior
to the mid-point of a shift on a regularly scheduled work day or
<PAGE>
any day during the last thirty (30) days prior to the Delivery
Date and such delay shall only be considered a delay for that
particular shift.
The following schedule of monthly anticipated adverse
weather delays is based on National Oceanic and Atmospheric
Administration (NOAA) New Orleans (Audubon Weather Station
located near the project location) and will constitute the base
line for monthly weather time evaluations.
JAN FEB MAR APR MAY JUNE JUL AUG SEP OCT NOV DEC
__________________________________________________________________
(11) (9) (5) (4) (4) (6) (9) (9) (6) (4) (5) (9)
The number of actual rain shift delays shall be
converted to full days as herein above stated. If the number of
actual rain delay days exceeds the number of days anticipated in
the table above, and if the conditions of paragraph (2) above are
met, the BUILDER shall be entitled to an extension of the
Delivery Date by the number of days that the Delivery Date was
delayed by the excess days of rain delay.
From the date the Existing Vessel is delivered to the
Shipyard until the completed Vessel is delivered to the
PURCHASER, the following provisions shall determine delays caused
by rain.
If rain occurs that requires a shutdown of a
substantial portion of outside work on the Vessel prior to twelve
noon on a regularly scheduled work day, or any day during the
last thirty days prior to the Delivery Date, BUILDER shall be
entitled to an extension of the Delivery Date for each such rain
day.
(d) Within five (5) working days of knowledge of any cause
of delay involving rain which may affect the Delivery Date, the
BUILDER shall notify PURCHASER in writing and shall furnish an
estimate, if possible, of the extent of the probable delay. Upon
receipt of any such notice, the PURCHASER shall, within five (5)
working days, acknowledge the same in writing and indicate
agreement that such development is to be treated as a cause of
delay event, or state any objections, and the reasons therefor,
to acceptance of this development as the cause
of delay event. If BUILDER fails to notify PURCHASER of a cause
of delay event involving rain within five (5) working days after
knowledge of the event, BUILDER shall be estopped from thereafter
claiming a delay event for any period of delay more than five (5)
working days prior to said notice. If PURCHASER should fail to
respond within five (5) working days, the claimed extension of
the Delivery Date shall be considered approved.
(e) For any cause of delay not involving rain which may
affect the Delivery Date, the BUILDER shall notify the PURCHASER
in writing and shall furnish an estimate, if possible, of the
extent of the probable delay. Upon receipt of any such notice,
the PURCHASER shall, indicate agreement that such development is
to be treated as a cause of delay event, or state any objections,
<PAGE>
and the reasons therefor, to acceptance of this development as a
cause of delay event. If BUILDER fails to notify PURCHASER of a
cause of delay event within fifteen (15) days after knowledge of
the event, BUILDER shall be estopped from thereafter claiming
delay for any period of delay more than fifteen (15) working days
prior to said notice. If PURCHASER should fail to respond within
ten (10) days, the claimed extension of time shall be considered
approved.
(f) If the Parties are unable to resolve their differences,
either party may request binding arbitration pursuant to ARTICLE
XXXVI - ARBITRATION, for determination of the period of delay.
The arbitration may not, however, revise the indicated
adjustments to be made to other dates as a consequence of such
delays.
ARTICLE X - PERFORMANCE STANDARD
a) The principal particulars of the design for the Vessels
are as shown in the attached Specification, Exhibit "A".
(b) Within the limits stipulated in ARTICLE XI, CONTRACT
PRICE ADJUSTMENTS, the BUILDER guarantees a trial speed of 15.5
knots at a keel draft of 36 feet in calm deep sea conditions,
with a clean bottom and windforce not exceeding Beaufort scale
No. 3, "Guaranteed Speed", provided that PURCHASER'S engine
delivers 11,000 shaft horsepower, notwithstanding any provisions
of attached Exhibit "J". The speed trials are to be carried out
as specified in the Specifications.
(c) The performance parameter in Subarticle (b) above is
hereinafter referred to as the "Performance Standard."
ARTICLE XI - CONTRACT PRICE ADJUSTMENTS
(a) In the event the BUILDER fails to deliver the Vessel on
the Delivery Date provided in this CONTRACT, as said Delivery
Date may be extended pursuant to this CONTRACT, plus ninety five
(95) calendar days the PURCHASER will suffer damages which are
difficult of ascertainment. It is agreed by the BUILDER and the
PURCHASER that the sum of TWENTY THOUSAND DOLLARS ($20,000.00)
per day represents the damages to the PURCHASER for each day of
delayed delivery, and the BUILDER shall pay to the PURCHASER in
discharge of its obligations to the PURCHASER for such failure to
deliver the Vessel, as liquidated damages and not as a penalty,
the said sum as per-day liquidated damages, for each calendar day
or part thereof elapsing after the said
allowable delivery period indicated in the previous sentence and
until delivery of the Vessel. In no event will BUILDER's
liquidated damages for late delivery of the Vessel exceed a cap
of three percent (3%) of the Revised Contract Price decreased by
FOUR MILLION NINE HUNDRED EIGHTY THOUSAND THREE HUNDRED THIRTY
FOUR DOLLARS.
(b) The Revised Contract Price shall not be affected or
changed by reason of the speed of the Vessel, as determined by
sea trial in accordance with the Specifications, being less than
the Guaranteed Speed, if such deficiency in the aforesaid speed
of the Vessel is less than five tenths (5/10) of one (1) knot
<PAGE>
below the Guaranteed Speed. Adjustments in the Vessel's speed
resulting from modification and/or changes in the Specifications
or the drawings agreed hereinafter provided for in ARTICLE VII,
CHANGES, shall not be considered as such deficiency. However,
commencing with and including a deficiency of five tenths (5/10)
of one (1) knot below the Guaranteed Speed the Revised Contract
Price shall be reduced by TWO HUNDRED THIRTY THREE THOUSAND
DOLLARS ($233,000) for each additional tenth of one knot
deficiency at or below a deficiency of five tenths (5/10) of one
knot. The maximum reduction in the Revised Contract Price for
Guaranteed Speed shall, however, be in no event more than the
amount as would be the case of a deficiency of nine-tenths (9/10)
of one (1) knot below the Guaranteed Speed.
(c) In no event will BUILDER's liability for Guaranteed
Speed exceed a cap of three percent (3%) of the Revised Contract
Price decreased by FOUR MILLION NINE HUNDRED
EIGHTY THOUSAND THREE HUNDRED THIRTY FOUR DOLLARS.
(d) The rights of PURCHASER to a reduction of the Revised
Contract Price by reason of the provisions provided in this
ARTICLE XI shall be cumulative to the maximum aggregate sum not
to exceed three percent (3%) of the Revised Contract Price
decreased by FOUR MILLION NINE HUNDRED EIGHTY THOUSAND THREE
HUNDRED THIRTY FOUR DOLLARS. In the event that the Vessel is
delivered with better speed than set forth in this ARTICLE XI,
such better performance does not entitle BUILDER to any premium,
special bonus, or offset against deficiencies in other
categories. Any reduction of the Revised Contract Price shall be
the PURCHASER'S sole remedy for failure to meet the speed
requirement which remedy shall not exceed three percent (3%) of
the Revised Contract Price decreased by FOUR MILLION NINE HUNDRED
EIGHTY THOUSAND THREE HUNDRED THIRTY FOUR DOLLARS.
(e) The PURCHASER may terminate this CONTRACT and demand
delivery of the Vessel at any time after the aggregate maximum
for liquidated damages is attained pursuant to the provisions of
this ARTICLE XI(a). Upon such termination and delivery the
PURCHASER may proceed to move the Vessel elsewhere and the
BUILDER shall be responsible for the PURCHASER's reasonable
additional cost required to complete the Vessel to the
requirements of the Specifications. Notwithstanding any other
terms and conditions of this CONTRACT, the remedies set forth in
paragraph (a) and (e) of this ARTICLE XI shall be the PURCHASER's
sole remedy for late delivery of the Vessel.
(f) In the event PURCHASER fails to timely provide the
PURCHASER furnished items for the Vessel for meeting all
applicable laws, classifications, rules, regulations, standards
and certification requirements for the Vessel, so as to become
the sole cause for having to extend the Delivery Date for the
Vessel, the BUILDER will suffer damages which are difficult of
ascertainment. It is agreed by the PURCHASER and the BUILDER
that the sum of TWENTY THOUSAND DOLLARS ($20,000.00) per day
represents the damages to the BUILDER for each day of such
delayed delivery, and the PURCHASER shall pay to the BUILDER in
discharge of its obligations to the BUILDER for such failure to
deliver the PURCHASER furnished items and/or documentation, as
liquidated damages and not as a penalty, the said sum as per-day
<PAGE>
liquidated damages, for each calendar day or part thereof
elapsing after the fourteenth (14th) day and until delivery of
the Vessel. The payment of such liquidated damages, or agreed
increase in the Revised Contract Price, shall be BUILDER'S sole
remedy for late delivery of PURCHASER furnished items. In no
event will PURCHASER's liquidated damages pursuant to this
Subarticle (f) exceed a cap of three percent (3%) of the Revised
Contract Price decreased by FOUR MILLION NINE HUNDRED EIGHTY
THOUSAND THREE HUNDRED THIRTY FOUR DOLLARS.
ARTICLE XII - SCHEDULES
The BUILDER shall furnish the following schedules covering
work to be performed by BUILDER hereunder as the Master Schedule
(Erection Schedule and the Structural Index Schedule). The
Master Schedule, (the "Schedule") as may be revised by BUILDER
from time to time, will show the dates for all required
activities for project completion. The level of activities
included in the Master Schedule shall be sufficient to assure
that each activity listed has been properly defined and analyzed
and that there is a direct correlation of activities in this
Master Schedule to individual supporting BUILDER and
subcontractor schedules for engineering, material procurement,
forebody construction, Existing Vessel cut/join process, testing,
etc. The Master Schedule shall be submitted to the PURCHASER
within thirty (30) days of the Effective Date of this CONTRACT.
The PURCHASER'S Representative shall meet with BUILDER'S
Representative weekly to review the Master Schedule and any
changes thereto for the purpose of determining the actual
progress of the job. This Master Schedule will also be used by
the PURCHASER in his evaluation of schedule extensions, delays,
default, schedule adjustments for changes, BUILDER performance in
support of Delivery Date and any other schedule dependent
CONTRACT or Contract Group issues. Use of this Master Schedule
does not, however, change or alter any other terms and conditions
of this CONTRACT including but not limited to ARTICLE IX, ARTICLE
XI, ARTICLE XXIV, and ARTICLE XXVI.
ARTICLE XIII - INSURANCE
(a) BUILDER, at its own expense, shall from the time the
first materials and/or
equipment destined for inclusion as part of the Vessel become the
risk of the BUILDER and until the Vessel has been delivered to
and accepted by PURCHASER, keep the Vessel and all materials,
outfit, equipment and appliances to be installed on or in the
Vessel, including the Existing Vessel, fully insured under a Full
Form (including prekeel) Marine Builder's Risk Policy. The
amount of insurance, the terms of the policy, the insurance
companies and the underwriters shall at all times be satisfactory
to PURCHASER and the Secretary. The amount of such insurance
shall be at least equal to the completed Revised Contract Price
of the Vessel plus the value of all PURCHASER furnished materials
and equipment. It is agreed that the total value of all
PURCHASER furnished materials and equipment is FOUR MILLION
DOLLARS ($4,000,000) each for the S/S King, S/S Solar and S/S
Spray and FIVE MILLION DOLLARS ($5,000,000) for the S/S Knight.
In addition, the Builder's Risk Policy will contain a provision
<PAGE>
that from the time of removal of the forebody from the Existing
Vessel until redelivery of the forebody to PURCHASER, coverage
will continue on the forebody in the amount of ONE MILLION
DOLLARS ($1,000,000). The Builder's Risk Policy shall also
include Protection and Indemnity Insurance with the limits at
least equal to the completed Revised Contract Price of the Vessel
plus the value of all PURCHASER furnished materials and
equipment.
The Builder's Risk Policy shall be in the form as set forth
in Exhibit "C" attached hereto and made a part hereof. The
Builder's Risk Policy shall have a loss payable clause that shall
provide that all losses in excess of $100,000 shall be payable to
the Secretary for distribution by him to himself, the BUILDER
and/or the PURCHASER as their interests may appear. For purposes
of this Agreement, the "other than owner limitation clause" of
the Builder's Risk Policy shall be deleted and not apply.
(b) BUILDER agrees, at its own expense, during the entire
term of BUILDER'S performance of work hereunder from the time the
first materials and/or equipment destined for inclusion as part
of the Vessel become at risk or services are performed until the
Vessel has been delivered to and accepted by PURCHASER, to carry
with an insurance company satisfactory to the PURCHASER and the
Secretary and authorized to do business in the State of Louisiana
the following insurance with limits in the amounts stated for
which a certificate of insurance is attached as Exhibit "E".
1)Worker's Compensation Insurance fully complying with the laws
of the state or states in which the work is to be done, including
the Longshoremen's and Harbor Worker's Compensation act in an
amount required by said Acts and Employer's Liability Insurance,
including Maritime Employer's Liability Insurance with provisions
for the payment of transportation, wages, maintenance and cure,
in the amount of $1,000,000.
2)Comprehensive General Liability Insurance in the amount of
$1,000,000 per occurrence, Combined Single Limit but in the
aggregate each annual period with respect to the
Products/Completed Operations Hazard and subject further to a
general aggregate of $4,000,000 for Bodily Injury to or Death of
persons and for Property Damage with the Watercraft Exclusion
deleted and including Contractual Liability Insurance to cover
Hold Harmless and Indemnity Agreement contained elsewhere in this
CONTRACT.
3)Automobile Liability and Property Damage Insurance covering
Bodily injuries or Death in the amount of $500,000 per person and
$1,000,000 per any one occurrence and Property Damage in the
amount of $500,000 per accident. This coverage applies to each
and every unit of automotive equipment operated or used by
BUILDER in the performance of their work.
4)Excess Liabilities covering the liabilities insured in the
above policies with a limit equal to the difference between the
above indicated limits and $20,000,000.00 any one occurrence.
5)All subcontractors working for BUILDER at the Shipyard will be
required to have and evidence to BUILDER the insurance coverage
<PAGE>
indicated in Exhibit "G".
(c) The Builder's Risk policy shall include PURCHASER and
PURCHASER's agents and all its subsidiaries and affiliates and
the United States of America as assureds. Underwriters agree to
waive subrogation against PURCHASER's group and the United States
of America. The policy shall also provide no recourse against
the United States of America for payment of premium and a 10 day
prior written notice of cancellation or material change in the
policy to the Secretary c/o the Maritime Administration, Chief,
Division of Marine Insurance.
For liabilities and indemnities assumed by BUILDER
under this CONTRACT all insurance policies of BUILDER (and its
subcontractors, if any) shall expressly waive subrogation as to
PURCHASER and the Secretary. It is further agreed that each such
policy, other than Worker's Compensation policies, shall name
PURCHASER as an additional assured, for liabilities and
indemnities assumed by BUILDER, it being understood that such
policies shall be endorsed to provide that BUILDER's policies are
primary to, and shall receive no contribution from, any insurance
policies maintained by PURCHASER.
(d) Should PURCHASER make any claim against the BUILDER for
any alleged post Delivery Date damage to the Stern section of the
Vessel as a result of the work performed by the BUILDER under
this CONTRACT, PURCHASER and BUILDER agree that any recovery by
the PURCHASER shall be limited to the coverage provided under the
CGL and excess liability policies to the limit of $20,000,000.
This will be PURCHASER's sole remedy for any alleged post
Delivery Date damage to the Stern section of the Vessel.
(e) All insurance policies in which both parties are named
insureds will have a "Cross Liability" Clause identical to the
Cross Liabilities clause as referenced in Exhibit "C", item F
excluding all claims arising under this CONTRACT.
(f) All insurance policies will provide for thirty (30)
days prior written notice of cancellation or material change to
PURCHASER from the underwriters.
(g) Prior to commencement of work, BUILDER shall furnish to
PURCHASER a Certificate of Insurance evidencing that coverages
outlined above are in full force and effect and the originals of
the above policies shall be available in BUILDER'S office at 5100
River Road, Avondale, Louisiana for review upon reasonable
request of PURCHASER.
(h) Any deductibles under such insurance shall be borne by
BUILDER.
(i) PURCHASER agrees, at its own expense, from the time the
first materials and/or equipment destined for inclusion as part
of the Vessel become at risk or services are performed until the
Vessel has been delivered to and accepted by PURCHASER, to carry
with an insurance company satisfactory to the BUILDER and
authorized to do business in the State of Louisiana the following
insurance with limits in the amounts stated for which a
<PAGE>
certificate of insurance is attached as Exhibit "F":
1)Worker's Compensation Insurance fully complying with the laws
of the state or states in which the work is to be done, including
the Longshoremen's and Harbor Worker's Compensation act in an
amount required by said Acts and Employer's Liability Insurance,
including Maritime Employer's Liability Insurance with provisions
for the payment of transportation, wages, maintenance and cure,
in the amount of $1,000,000.
2)Comprehensive General Liability Insurance in the amount of
$1,000,000 per occurrence, Combined Single Limit for Bodily
Injury to or Death of persons and for Property Damage with the
Watercraft Exclusion deleted and including Contractual Liability
Insurance to cover Hold Harmless and Indemnity Agreement
contained elsewhere in this CONTRACT.
3)Excess Liabilities covering the liabilities insured in the
above policies with a limit equal to the difference between the
above indicated limits and $20,000,000.00 any one occurrence.
(j) From the Effective Date of this CONTRACT until delivery
of the Existing Vessel to BUILDER'S yard, PURCHASER shall procure
and maintain Protection and Indemnity insurance in a form at
least as broad as, and with limits not less than, that provided
by the Rules of the Standard Steamship Ownership Protection and
Indemnity Association (Bermuda) Limited, and PURCHASER shall
require Club Managers to register BUILDER as a Co-Assured under
Rule 8.2 of said insurance and Club Managers have noted that
there may be a transfer of interest, either of the whole or a
part of the ship, created by the Agreement to Purchase and Sell
between the member, American Heavy Lift Shipping Company and
Avondale Industries, Inc. dated May 12, 1995 prior to the Vessel
entering the yard for refit. It is agreed that such transfer of
interest will not prejudice the member's cover.
Further, PURCHASER shall require that its brokers, B & P
International, Ltd. and Lloyd Thompson give notice to BUILDER of
any notice or information relating to the cancellation,
termination or cessation of the Vessel's Club Entry or any
material change of the Vessel's Club Entry immediately upon
receipt of such notice or information.
Further, from the Effective Date of this CONTRACT until
delivery of the Existing Vessel to BUILDER'S yard, PURCHASER
shall procure and maintain Collision Liability insurance in a
form at least as broad as that contained in the American
Institute Hull Clauses (June 2, 1977).
PURCHASER shall require Hull and War Risks insurance
Underwriters to acknowledge in writing that in the event that
BUILDER should be found liable in any manner or under any theory
of law or equity for, but not limited to, loss, damage, expense,
fines, and/or penalties arising out of the operation of the
existing Vessel and the Sale and Purchase Agreement, BUILDER
shall have the same rights and status under the above and
Collision Liability Insurance Policy as the PURCHASER.
For liabilities and indemnities assumed by PURCHASER under
this CONTRACT all insurance policies of PURCHASER (and its
<PAGE>
subcontractors, if any) shall expressly waive subrogation as to
BUILDER. It is further agreed that each such policy, other than
Worker's Compensation policies, shall name BUILDER as an
additional assured, for liabilities and indemnities assumed by
PURCHASER, it being understood that such policies shall be
endorsed
to provide that PURCHASER'S policies are primary to, and shall
receive no contribution from, any insurance policies maintained
by BUILDER.
(k) All insurance policies in which both parties are named
insureds will have a "Cross Liability" Clause identical to the
Cross Liabilities clause as referenced in Exhibit "C", item F
excluding all claims arising under this CONTRACT.
(l) Except for the Protection and Indemnity and War Risks
insurance, all insurance policies will provide for thirty (30)
days prior written notice of cancellation or material change to
BUILDER from the underwriters.
(m) Prior to commencement of work, PURCHASER shall furnish
to BUILDER a Certificate of Insurance evidencing that coverages
outlined above are in full force and effect and the originals of
the above policies shall be available in PURCHASER'S office at
365 Canal Street, Suite 2670, New Orleans, Louisiana 70130 for
review upon reasonable request of BUILDER. Any deductibles under
such insurance shall be borne by PURCHASER excluding BUILDER's
Risk.
ARTICLE XIV - RISK OF LOSS - TOTAL LOSS OF A VESSEL
(a) In the event of an actual or constructive total loss of
the Vessel (as defined in BUILDER's insurance coverage) prior to
the delivery, construction of such Vessel shall proceed unless
the PURCHASER or the BUILDER shall elect within a reasonable
period of time to cancel the construction. If an election is made
to cancel the construction, the party electing to cancel shall
give notice to that effect to the other party. If no election is
made to cancel the construction, then construction and delivery
of the Vessel shall proceed in accordance with this CONTRACT, as
it may have been amended. In any such event an extension of the
CONTRACT Delivery Date of the Vessel pursuant to the provisions
of ARTICLE IX - EXTENSION OF TIME FOR COMPLETION OF WORK of this
CONTRACT shall be agreed upon.
(b) In the event that there is an actual or constructive
total loss of the Vessel prior to delivery and such loss results
from the operation of an insurable risk covered by insurance as
required under ARTICLE XIII - INSURANCE of this CONTRACT, all the
proceeds of such insurance payable as a result of such loss shall
be paid to the SECRETARY for distribution to the SECRETARY or the
PURCHASER, as appropriate, in an amount equal to (i) the total
progress payments made for the lost Vessel and (ii) the value of
all lost materials, outfit, equipment and appliances provided by
the PURCHASER for and used or to be used in the construction of
the Vessel, with the balance paid to the BUILDER. Such
distribution shall be made without regard to whether, under
<PAGE>
Subarticle (a) above, construction is cancelled or proceeds. It
is agreed that only in the event of an actual or constructive
total loss of the Vessel prior to arrival of the existing vessel
at the Shipyard, the total progress payments for the lost Vessel
in (i) above shall not include the first progress payment paid
for the Stern of the existing vessel. It is agreed that in the
event of an actual or constructive total loss of the Vessel after
the arrival of the Existing Vessel at the Shipyard, the
obligations to pay PURCHASER shall include the amount of the
first progress payment paid by PURCHASER to BUILDER for the Stern
of the Existing Vessel and this amount shall be utilized by
PURCHASER to exercise its option to purchase the S/S COASTAL
MANATEE, Official No. 287186 or another mutually agreeable
substitute Vessel.
(c) In the event that there is an actual or constructive
total loss of the Vessel prior to delivery which is not covered
by insurance and election is made by the PURCHASER or the BUILDER
to cancel construction of the Vessel, the BUILDER shall pay to
the SECRETARY for distribution to the SECRETARY or the PURCHASER,
as appropriate, an amount equal to all payments made under this
CONTRACT up to the date of the actual or constructive total loss.
It is agreed that only in the event of an actual or constructive
total loss of the Vessel prior to arrival of the existing vessel
at the Shipyard, the obligation in the above sentence for BUILDER
to pay the SECRETARY for distribution to the SECRETARY or the
PURCHASER, as appropriate, an amount equal to all payments under
this CONTRACT shall not include the first progress payment paid
by PURCHASER to BUILDER for the Stern of the existing vessel. It
is agreed that in the event of an actual or constructive total
loss of the Vessel after the arrival of the Existing Vessel at
the Shipyard the obligations of the BUILDER to pay the SECRETARY
shall include the first progress payment paid by PURCHASER to
BUILDER for the Stern of the Existing Vessel and this amount of
the first progress payment shall be utilized by PURCHASER to
exercise its option to purchase the S/S COASTAL MANATEE, Official
No. 287186 or another mutually agreeable substitute Vessel.
(d) In the event of damage to or loss of the Vessel or any
equipment or materials to be installed therein prior to the
delivery of the Vessel to PURCHASER and such loss or damage is
not an actual or constructive total loss, such loss or damage
shall be made good at BUILDER's expense; the proceeds of
insurance for said loss or damage shall be paid to the SECRETARY
for distribution to the BUILDER; and the CONTRACT Delivery Date
shall be extended as required by such additional work.
ARTICLE XV - INJURY TO EMPLOYEES AND OTHERS
(a) BUILDER agrees to protect, defend, indemnify and hold
PURCHASER, its agents, officers, directors, employees, and
representatives (hereinafter collectively referred to as "Owner
Group") harmless from and against all claims, losses, costs,
demand, damages, suits, judgments, penalties, liabilities, debts,
expenses and causes of action of whatsoever nature or character,
whether known or unknown, and whether arising out of contract,
tort, strict liability, unseaworthiness of any vessel,
misrepresentation, violation of applicable law and/or any cause
<PAGE>
whatsoever, including but not limited to reasonable attorney's
fees and other costs and expenses, without limit and without
regard to the cause or causes thereof, which in any way arise out
of or are related to this agreement between PURCHASER and BUILDER
(including, without limitation, the performance or subject matter
of this CONTRACT or ingress, egress or presence on any premises,
whether land, buildings, vessels, or otherwise, in conjunction
with this CONTRACT) and which are asserted by or arise in favor
of BUILDER, BUILDER's agents, representatives or employees
(and/or their spouses or relatives) or BUILDER's subcontractors,
subcontractor's agents, representatives or employees (and/or
their spouses or relatives) due to bodily injury or death,
whether or not caused by the sole, joint and/or concurrent
negligence, fault or strict liability of Owner Group, the
unseaworthiness of any vessel, or any other cause whatsoever. It
is further understood and agreed that this indemnity and defense
obligation shall include the obligation to reimburse PURCHASER
for any attorneys' fees, costs and expenses which may be incurred
by PURCHASER in enforcing the defense and indemnity obligations
set forth in this Article.
(b) For liabilities and indemnities assumed by BUILDER
under this CONTRACT all insurance policies of BUILDER (and its
subcontractors, if any) shall expressly waive subrogation as to
PURCHASER. It is further agreed that each such policy, other
than Worker's Compensation policies, shall name PURCHASER as an
additional insured, for liabilities and indemnities assumed by
BUILDER, it being understood that such policies shall be endorsed
to provide that BUILDER'S policies are primary to, and shall
receive no contribution from, any insurance policies maintained
by PURCHASER.
(c) Without in any manner limiting the generality of the
foregoing Subarticle (a), BUILDER agrees to protect, defend,
indemnify and hold Owner Group harmless from and against any and
all claims, demands, suits, administrative fines and penalties,
liabilities or causes of action, civil or criminal, including
those made by or before any administrative body or commission
established by any government having jurisdiction over the
premises, relating to the generation or disposal of hazardous
wastes or to the pollution or contamination of the waters, or
air, or earth, or otherwise directly or indirectly arising out of
or connected with or related to this CONTRACT or the performance
thereof, regardless of whether based on any violation or
purported violation of a statute, ordinance or regulation of any
governmental authority, but only if caused by BUILDER's
negligence. BUILDER assumes the obligation to comply with all
such statutes, ordinances and regulations. As used in this
Subarticle, the phrase "liabilities" includes without limitation
expenditures for controlling and removing pollutants,
expenditures for cleaning up any polluted areas, sums paid on
account of injury to or death of persons, and sums paid or
assessed on account of damage to or destruction of property,
public or private,
including any and all natural resources and marine life. The
obligations of this Subarticle (c) will expire on the Delivery
Date.
<PAGE>
(d) PURCHASER agrees to protect, defend, indemnify and hold
BUILDER, its agents, officers, directors, employees, and
representatives (hereinafter referred to collectively as
"Contractor Group") harmless from and against all claims, losses,
costs, suits, judgments, demands, damages, penalties,
liabilities, debts, expenses and causes of action of whatsoever
nature or character, whether known or unknown and whether arising
out of contract, tort, strict liability, unseaworthiness of any
vessel, misrepresentation, or violation of applicable law and/or
any cause whatsoever, including but not limited to reasonable
attorney's fees and other costs and expenses, without limit and
without regard to the cause or causes thereof, which in any way
arise out of or are related to this agreement between PURCHASER
and BUILDER (including, without limitation, the performance of
subject matter of this CONTRACT or ingress, egress or presence on
any premises, whether land, buildings, vessels, or otherwise, in
conjunction with this CONTRACT and which are asserted by or arise
in favor of PURCHASER, PURCHASER's agents, representatives or
employees (and/or their spouses or relatives) or PURCHASER's
subcontractors, subcontractor's agents, representatives or
employees (and/or their spouses or relatives) due to bodily
injury or death, whether or not caused by the sole, joint and/or
concurrent negligence, fault or strict liability of Contractor
Group, the unseaworthiness of any vessel, or any other cause
whatsoever. It is further understood and agreed that this
indemnity and defense obligation shall include the obligation to
reimburse BUILDER for any attorneys' fees, costs and expenses
which may be incurred by BUILDER in enforcing the defense and
indemnity obligations set forth in this Article.
(e) For liabilities and indemnities assumed by PURCHASER
under this CONTRACT all insurance policies of PURCHASER (and its
subcontractors, if any) shall expressly waive subrogation as to
BUILDER. It is further agreed that each such policy, other than
Worker's Compensation policies, shall name BUILDER as an
additional insured, for liabilities and indemnities assumed by
PURCHASER, it being understood that such policies shall be
endorsed
to provide that PURCHASER'S policies are primary to, and shall
receive no contribution from, any insurance policies maintained
by BUILDER.
(f) Without in any manner limiting the generality of the
foregoing Subarticle (d), PURCHASER agrees to protect, defend,
indemnify and hold Contractor Group harmless from and against any
and all claims, demands, suits, administrative fines and
penalties, liabilities or causes of action, civil or criminal,
including those made by or before any administrative body or
commission established by any government having jurisdiction over
the premises, relating to the generation or disposal of hazardous
wastes or to the pollution or contamination of the waters, or
air, or earth, or otherwise directly or indirectly arising out of
or connected with or related to this CONTRACT or the performance
thereof, regardless of whether based on any violation or
purported violation of a statute, ordinance or regulation of any
governmental authority, but only if caused by PURCHASER's
negligence. PURCHASER assumes the obligation to comply with all
such statutes, ordinances and regulations. As used in this
<PAGE>
Subarticle, the phrase "liabilities" includes without limitation
expenditures for controlling and removing pollutants,
expenditures for cleaning up any polluted areas, sums paid on
account of injury to or death of persons, and sums paid or
assessed on account of damage to or destruction of property,
public or private, including any and all natural resources and
marine life. The obligations of this Subarticle (f) will expire
on the Delivery Date.
ARTICLE XVI - APPOINTMENT OF REPRESENTATIVES
(a) PURCHASER designates Alan B. Nierenberg to be its
authorized representative for all matters during the performance
of this CONTRACT.
(b) BUILDER designates Mr. Bruce Wismar to be its BUILDER's
Program Manager for administering the performance of this
CONTRACT.
(c) The Parties agree that its named representative will be
available for consultations during normal working hours.
With respect to the performance of this CONTRACT, the
PURCHASER shall be entitled to designate authorized
representatives who shall have authority to give directions under
this CONTRACT. Notice of all such designations (together with a
statement of the scope of authority of the designee) and notice
of the revocation of any prior designation shall be given
promptly to the BUILDER in writing. The BUILDER shall have no
obligation to follow any directions of the PURCHASER except those
which shall be issued in writing over the signature of an
authorized representative of the PURCHASER acting within the
scope of his authority.
ARTICLE XVII - MATERIALS AND WORKMANSHIP
(a) In performing the CONTRACT work, the BUILDER shall
comply with all of the requirements of the American Bureau of
Shipping, the United States Coast Guard and all other agencies
having jurisdiction over the CONTRACT work (hereinafter called
individually a "Regulatory Body" and collectively "Regulatory
Bodies") notwithstanding that there may be shown in or on any
drawing set out in the Specifications and the specific
requirements of any item of CONTRACT work, and notwithstanding
any approvals shown upon said drawing , subject, however, to the
following: (i) if the Specifications specifically require work in
excess of that required by the applicable Regulatory Body, such
specifically required work shall be performed by the BUILDER as
CONTRACT work required by this CONTRACT; (ii) if the
Specifications require work which is less than that required by
the applicable Regulatory Body, the BUILDER shall perform the
work required by the Regulatory Body as CONTRACT work required by
this CONTRACT; (iii) if the Specifications require work which is
less than that required by the applicable Regulatory Body, and
such regulatory requirement is in compliance with a rule or an
interpretation of a rule of the Regulatory Body made effective
subsequent to 7 March 1995, and said requirement effects an
<PAGE>
increase in the cost of the CONTRACT work and/or the Delivery
Date, the Revised Contract Price and/or the Delivery Date shall
be adjusted pursuant to the provisions of ARTICLE VII - CHANGES
of this CONTRACT.
(b) Unless otherwise specifically provided in the
Specifications, all workmanship, equipment, materials, and
articles incorporated in the Vessel shall be new, of first class
marine quality and not known to be a discontinued line. The
BUILDER shall furnish to the PURCHASER the purchase
specifications and vendors' specifications for materials or
components which BUILDER contemplates incorporating in the Vessel
and all changes thereto, and names of the manufactures, vendors
and subcontractors of the principal items of machinery,
mechanical and other equipment and work which it contemplates
incorporating in or having performed on the Vessel.
ARTICLE XVIII - INSPECTION - APPROVAL OF DRAWINGS
(a) All material and workmanship, unless otherwise
designated by the Specifications or by this CONTRACT, shall be
subject to inspection by representatives of the PURCHASER and
representatives of Regulatory Bodies at any and all proper times
during manufacture and/or construction at any and all places
where such manufacture and/or construction are carried on, and
BUILDER's subcontracts shall make appropriate provision therefor.
Access to the Shipyard for the performance and administration
therein of all inspections and tests that may be required by the
representatives of the PURCHASER or representatives of Regulatory
Bodies shall at all times be subject to BUILDER's security
requirements.
(b) The BUILDER shall furnish promptly at the Shipyard,
without additional charge, all reasonable facilities and
materials, including suitably furnished offices for the PURCHASER
with light, heat and air conditioning, as required by climatic
conditions, telephone, desks, drawing tables, and filing
cabinets, necessary for the convenient administration of the
inspection and tests that may be required by the representatives
of the PURCHASER and Regulatory Bodies. Long distance telephone
charges will be for the account of PURCHASER.
(c) Within thirty (30) days after the effective date of
this CONTRACT, the BUILDER shall submit for approval a Working
Drawing schedule listing all Working Drawings to be prepared and
the dates by which each Working Drawing is to be completed.
Copies of all Working Drawings will be submitted to PURCHASER for
review, and the PURCHASER shall return the Working Drawings
within fourteen (14) days after receipt thereof marking
corrections required for compliance with the Specifications.
Failure of the PURCHASER to return a Working Drawing within
fourteen (14) days shall constitute acceptance of such Working
Drawing. Approval or acceptance of such Working Drawings ,
materials and components or schedules shall not relieve the
BUILDER from the responsibilities specified in this CONTRACT.
BUILDER will keep PURCHASER advised of required reviewing
priorities. BUILDER will provide PURCHASER with copies of all
correspondence with Regulatory Bodies. BUILDER will provide
PURCHASER full access to all working documents for this CONTRACT.
<PAGE>
(d) The PURCHASER shall promptly approve all work and
materials conforming to the requirements of this CONTRACT and
shall promptly reject all work and materials not conforming to
the requirements of this CONTRACT. Rejected workmanship shall be
satisfactorily corrected, and rejected material shall be
satisfactorily repaired or replaced with proper material without
charge therefor, unless such work or material shall have been
furnished by the PURCHASER, in which event the remedying of such
defective work, or the replacing of such defective material, if
done by the BUILDER, shall be treated as a change under this
CONTRACT. The BUILDER shall promptly segregate and remove the
rejected material. The acceptance of such workmanship and
materials shall not prejudice the rights of the PURCHASER under
this CONTRACT.
(e) All inspection, tests, and approvals shall be performed
in such manner as not to unnecessarily delay the work.
(f) The provisions of this Article are subject to the
provisions of other ARTICLES of this CONTRACT and Specifications
relative to the trials, tests and acceptance of work done on the
Vessel.
(g) If requested by the Secretary upon delivery of the
Vessel, the PURCHASER will provide or cause to be provided a
complete set of drawings used for the construction of the Vessel
on microfilm or other acceptable format.
ARTICLE XIX - TRIALS
(a) The Vessel shall have the trials set forth in the
Specifications and this CONTRACT. The reasonably necessary
expenses of all trials shall be borne by the BUILDER except that
the PURCHASER will furnish the operating crew for the Vessel.
(b) When work on the Vessel is substantially complete, as
required by this CONTRACT, and when the BUILDER has made
sufficient tests at the dock to the satisfaction of the PURCHASER
to be reasonably sure of compliance with the requirements of this
CONTRACT, the Vessel shall be subject to trials at sea as
prescribed by the Specifications and this CONTRACT.
(c) If there is reasonable cause to question its
performance, new machinery or machinery repaired by BUILDER shall
be opened up for post-trial inspection and examination after
completion of such trials at sea. If any defects, deficiencies
or damage appear in the work performed by the BUILDER or in the
materials or equipment supplied by the BUILDER excluding the
Stern, the defects, deficiencies or damage shall be corrected by
and at the expense of the BUILDER, after which the machinery
shall be closed and connected, ready for service.
ARTICLE XX - ADDITIONAL TRIALS - EXPENSES
If, at and upon the trials described in ARTICLE XIX - TRIALS
hereof, there shall be any failure of the Vessel to meet the
requirements of the Specifications and this CONTRACT, the BUILDER
shall, after corrective action is taken and provided a trial is
necessary to reasonably prove the effectiveness of the corrective
<PAGE>
action, be required to make further trials, sufficient in number
reasonably to demonstrate compliance with the Specifications and
this CONTRACT. Except for the operating crew furnished by
PURCHASER, or the Stern, the costs of all additional trials
required by this ARTICLE XX - ADDITIONAL TRIALS - EXPENSES shall
be borne by the BUILDER, except that with regard to any trials
made necessary by failure or malfunction upon prior trial of
equipment or machinery furnished by the PURCHASER, the PURCHASER
shall bear the cost of such additional trial.
ARTICLE XXI - ACCEPTANCE AND DELIVERY OF THE VESSEL
(a) On completion of the inspections by PURCHASER, as well
as all tests, and trials and rectification of any defects
discovered therein, with the exception of those defects as may be
listed in the Delivery Certificate by PURCHASER, a meeting will
be held between the BUILDER and PURCHASER at which:
(i) The BUILDER will report to PURCHASER on the work
carried out in rectifying any defects or omissions found in the
Vessel during the sea trials and/or any work outstanding on
completion of the sea trials;
(ii) PURCHASER'S representatives may conduct a final
inspection of the Vessel in the presence of BUILDER'S
representatives;
(iii)The Parties will agree to the quantity and value
of fuel and lubricants remaining on board after completion of all
tests and sea trials to be charged to PURCHASER.
(iv) BUILDER will present to PURCHASER evidence that
the Vessel is certified by the U.S. Coast Guard and ABS (interim
certification), unless PURCHASER furnished equipment, or the
Stern precludes such certification.
(v) PURCHASER shall pay to BUILDER any amount then due
under the provisions of ARTICLE VI, PAYMENT OF CONTRACT PRICE -
METHOD OF PAYMENT.
(vi) Upon completion of items (i), (ii), (iii), (iv),
and (v) above and any other outstanding matters, the BUILDER will
deliver the Vessel to PURCHASER, whereupon PURCHASER will accept
the Vessel by the concurrent execution by both Parties of a
Delivery Certificate, whereupon such title to the Vessel as
remains in BUILDER will pass to PURCHASER.
(b) The interval between completion of the sea trials and
the delivery shall be sufficient to enable the inspections and
rectifications of defects to be completed, but in any event shall
not be less than four (4) business days.
(c) Within five (5) business days after delivery, PURCHASER
shall remove the Vessel from BUILDER'S yard. The Vessel shall be
deemed ready for delivery when it has received the necessary
certification by the U. S. Coast Guard without any qualification
or limitation that would significantly affect the operation or
<PAGE>
commercial value of the Vessel in the intended service and has
been judged ready for delivery without any qualification or
limitation that would significantly affect the commercial value
or operation of the Vessel in the intended service by the
Surveyor of the American Bureau of Shipping assigned to the
Vessel. If after the necessary U.S. Coast Guard certification
and ABS approvals have been obtained and there still remains a
good faith dispute between the parties as to whether the Vessel
is ready for delivery, the PURCHASER may deposit the estimated
cost of the disputed items into an escrow account in accordance
with the provisions of Subarticle XXV(f) hereof and accept
delivery of the Vessel.
(d) If by agreement between the Parties and notwithstanding
the provisions of this ARTICLE the Vessel is accepted by
PURCHASER with any known outstanding discrepancies or defects not
corrected prior to delivery, each deficiency or deviation from
the Specifications and drawings not previously approved by
BUILDER and PURCHASER shall be set out in a list and signed by
PURCHASER and BUILDER. At the option of PURCHASER, the Parties
may agree on money damages in lieu of performance by BUILDER for
each such deficiency or deviation.
(e) The Vessel shall be turned over by BUILDER to PURCHASER
in midstream of the Mississippi River at the Shipyard.
ARTICLE XXII - GUARANTEE
(a) Notwithstanding any inspection or failure to reject by
the PURCHASER or any Regulatory Body pursuant to ARTICLES XVIII
through XXI of this CONTRACT, if, at any time within twelve (12)
months after delivery of the Vessel there shall arise or be
discovered any weakness, any deficiency, any failure, any
breaking down or deterioration in the design, workmanship,
equipment, machinery, or material, furnished by the BUILDER or
its subcontractors in performing the CONTRACT work, excluding all
PURCHASER furnished items and excluding the Stern except for work
performed by the BUILDER pursuant to the Specifications, which
causes the Vessel to not function as prescribed and as intended
by the Specifications and this CONTRACT (herein called a
"Guarantee Deficiency"), such Guarantee Deficiency shall be made
good, at the BUILDER's expense, to the requirements of the
Specifications and this CONTRACT; provided, however, the BUILDER
shall not be responsible for the cost of correcting any such
Guarantee Deficiency due to ordinary wear and tear, nor to the
extent increased by the negligence or other improper act of the
PURCHASER or any operator of the Vessel or of any other person
other than the BUILDER or its subcontractors during said period.
The liability of the BUILDER to the PURCHASER under this CONTRACT
on account of any such Guarantee Deficiency shall not extend
beyond the actual corrective repair or replacement thereof at
straight time commercial shipyard or ship repair yard rates, or
overtime rates that have been approved by BUILDER in case of
emergency, including the cost of the dockage of the Vessel, if
necessary. The BUILDER shall not be liable to the PURCHASER for
any damage to such Vessel or its equipment or cargo or other
property of the PURCHASER or for consequential damages of the
PURCHASER arising out of any such Guarantee Deficiency, except
that in the event any Guarantee Deficiency in any item of
<PAGE>
machinery or equipment furnished by the BUILDER, or in the event
that any workmanship or material furnished by the BUILDER in
performance of work upon the Vessel's machinery or equipment,
gives rise to a Guarantee Deficiency causing any damage to such
items of machinery or equipment, the BUILDER shall be liable not
only for the cost of correcting or repairing such Guarantee
Deficiency, but also shall be liable for the cost of correcting
or repairing such damage to such item of machinery or equipment
caused by such Guarantee Deficiency. Any work required to be
performed pursuant to the provisions of this ARTICLE shall be
carried out, if practicable and at the PURCHASER's option, at the
shipyard of the BUILDER. The BUILDER may, with the concurrence of
the PURCHASER, have such work performed by its subcontractor,
another shipyard or repair facility. The PURCHASER may, however,
have such work performed by a shipyard or ship repair yard at any
port satisfactory to it and in that event the BUILDER shall be
liable to the PURCHASER for the reasonable expense thereof at the
straight time commercial shipyard or ship repair yard rates
prevailing in such port areas, including the cost of dockage of
the Vessel, if necessary. Should the BUILDER so desire, it may
have an engineer onboard the Vessel for the guarantee period who
shall have full opportunity to observe and inspect the working of
the Vessel in all its parts, but without any directing or
controlling authority over the Vessel. PURCHASER will provide
suitable accommodations and board to the engineer during the
guarantee period without charge.
(b) The PURCHASER promptly shall notify the BUILDER of any
Guarantee Deficiencies or damage for which the BUILDER is liable
pursuant to Subarticle (a) above that are discovered or appear
within the guarantee period, but in no event later than ten (10)
days after the end of such period. In the event the PURCHASER
proposes the repair or correction of such Guarantee Deficiency or
damage before the Vessel reaches its next continental United
States port, notice shall be given to the BUILDER not later than
five (5) days after the discovery of the Guarantee Deficiency or
damage and before repair, otherwise notice shall be given five
(5) days after the Vessel next reaches a continental United
States port and before the Guarantee Deficiency or damage is
repaired or corrected. Whenever practical (taking into
consideration the
necessity of keeping the Vessel on schedule) the BUILDER shall be
given an opportunity to inspect the Guarantee Deficiency or
damage before it is remedied.
(c) A final guarantee survey of the Vessel shall be
conducted by the PURCHASER at or near the expiration of the
guarantee period. Such survey shall be based on the Guarantee
Deficiencies in the CONTRACT work appearing or discovered during
the guarantee period. In the event that the Vessel is not
available for the guarantee survey on or before the end of the
guarantee period, the PURCHASER promptly shall submit to the
BUILDER a list of all of the Guarantee Deficiencies in the
CONTRACT work appearing or discovered during the guarantee period
and all damage for which the BUILDER is liable under the
provisions of this ARTICLE. The final guarantee survey shall be
held at such port in the United States as the PURCHASER
designates and seven (7) days written notice of time and place
<PAGE>
for such guarantee survey shall be given to the BUILDER by the
PURCHASER.
(d) For the determination of any underwater Guarantee
Deficiencies, the PURCHASER, at the PURCHASER's expense, may
retain two (2) divers, one to be chosen by BUILDER, to inspect
the bottom of the Vessel in clear water. If both divers agree in
writing to the extent of underwater Guarantee Deficiencies to the
Vessel then PURCHASER may drydock the Vessel within twenty four
(24) months after its delivery at its expense and BUILDER will
not be responsible for repairs of the Guarantee Deficiencies
except as documented by the agreement of both divers. If both
divers cannot agree to the extent of the underwater Guarantee
Deficiencies to the Vessel then PURCHASER may request that
BUILDER drydock the Vessel at its expense within fifteen months
following the Vessel delivery and BUILDER's liability for
underwater Guarantee Deficiencies will be limited to those which
arose during the twelve (12) month guarantee period. If it
becomes necessary to drydock the Vessel solely for the correction
of a Guarantee Deficiency for which the BUILDER is responsible,
the cost of the entire drydocking required for the correction of
the Guarantee Deficiency, as well as the cost of remedying the
deficiency, as provided in this ARTICLE , shall be at the expense
of the BUILDER.
(e) At the end of the guarantee period herein provided, the
BUILDER agrees to transfer and assign to the PURCHASER, as to any
item of material installed in the Vessel, the guarantee rights of
the BUILDER against the vendor of such item of material which
under the terms of such vendor's guarantee the vendor's
obligations extend for a period beyond the guarantee period
herein set forth; provided that the BUILDER may exclude from such
assignment any rights against the vendor in favor of the BUILDER
for Guarantee Deficiencies and damages within the guarantee
period in ARTICLE XXII - GUARANTEE (a) hereof. BUILDER will
assign to PURCHASER any warranties in excess of the twelve (12)
months after the delivery of the Vessel that BUILDER is able to
obtain from paint vendors, if any.
(f) The liability (if any) of the BUILDER for a Guarantee
Deficiency and for any damage to the equipment or machinery of
the Vessel, resulting from any Guarantee Deficiency, as set out
in this ARTICLE, is the exclusive remedy of the PURCHASER in
warranty, contract, tort or otherwise against the BUILDER for any
Guarantee Deficiency. Except for the provisions of ARTICLE XI,
CONTRACT PRICE ADJUSTMENTS, in no event under this CONTRACT shall
BUILDER be responsible for any sum in excess of the repairs
and/or replacement as specified herein it being specifically
understood that BUILDER is not responsible for delay, demurrage,
loss of profits, loss of use or any other consequential damages.
It is specifically understood that any Guarantee Deficiency
reported after the twelve (12) month guarantee period, except for
the underwater Guarantee Deficiencies of Subarticle (d) above,
and all damages therefrom, shall be the exclusive responsibility
of PURCHASER.
(g) THE GUARANTEES SET FORTH IN THIS ARTICLE XXII,
GUARANTEE, RELATING TO ANY GUARANTEE DEFICIENCY ARE EXCLUSIVE AND
ARE IN LIEU OF ALL IMPLIED WARRANTIES (INCLUDING BUT NOT LIMITED
<PAGE>
TO ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE AND WORKMANLIKE SERVICES).
(h) Anything to the contrary notwithstanding, the BUILDER
does not guarantee PURCHASER furnished materials or equipment,
nor the Stern, for any Guarantee Deficiency items except to meet
the requirements stipulated in ARTICLE X, PERFORMANCE STANDARD.
ARTICLE XXIII - DEFAULT BY PURCHASER
The following shall constitute events of default by
PURCHASER under this CONTRACT:
(a) Delay in Payment
Failure of PURCHASER to make payment to BUILDER as required
under the provisions of ARTICLE VI - PAYMENT OF CONTRACT PRICE -
METHOD OF PAYMENT, provided payment is not received by BUILDER
for a period of ten (10) days after written notice to PURCHASER
thereof by BUILDER.
(b) Non-Compliance with other Undertakings
Default in compliance with or the due and punctual
performance of any material warranties, covenants and agreements
required to be maintained and performed by PURCHASER hereunder
other than the scheduled delivery of the S/S Solar, which default
continues unremedied for a period of thirty (30) days after
written notice to PURCHASER thereof by BUILDER.
(c) Receivership or Insolvency
An order of a court of competent jurisdiction, other than
upon petition by BUILDER, appointing a receiver, liquidator or
trustee of the assets of PURCHASER or any part thereof or a
decree of such court adjudicating PURCHASER as bankrupt, or
declaring PURCHASER insolvent.
(d) Acts of Bankruptcy
The filing by PURCHASER of a voluntary petition in
bankruptcy, or the making by PURCHASER of an assignment for the
benefit of its creditors, or the admission by PURCHASER in
writing of its inability to pay its debts generally as they
become due, or its consent to, acquiescence in or failure to
contest the appointment of a receiver or receivers of all or part
of its assets.
(e) Voluntary Reorganization
Any petition or any answer proposing the reorganization of
PURCHASER pursuant to the Federal Bankruptcy Act or any similar
law, federal or state, being filed against PURCHASER in any court
and not being dismissed or denied within sixty (60) days after
the date on which such petition or answer was filed, or the
approval of any such petition or answer by any court.
(f) Involuntary Reorganization
The filing of a petition by any of the creditors of
PURCHASER to reorganize PURCHASER pursuant to the Federal
Bankruptcy Act or any similar law, federal or state, and such
petition not being dismissed or denied within sixty (60) days
after the date on which such petition was filed, or the approval
of such petition by the court having jurisdiction thereof.
<PAGE>
(g) Seizure of Assets
The assumption of custody or control of the whole or any
substantial part of the assets of PURCHASER for a period in
excess of thirty (30) days by any governmental agency or any
court of competent jurisdiction at the instance of any
governmental agency.
(h) Nondelivery of S/S Solar
Failure to timely deliver the S/S Solar as required by
ARTICLE IV, ITEMS FURNISHED BY PURCHASER.
ARTICLE XXIV - DEFAULT BY BUILDER
The following shall constitute events of default by BUILDER
under this CONTRACT:
(a) Receivership or Insolvency
An order of a court of competent jurisdiction, other than
upon petition by PURCHASER, appointing a receiver, liquidator or
trustee of the assets of BUILDER or any part thereof, or a decree
of such a court adjudicating BUILDER as bankrupt, or declaring
BUILDER insolvent.
(b) Acts of Bankruptcy
The filing by BUILDER of a voluntary petition in bankruptcy,
or the making by BUILDER of an assignment for the benefit of its
creditors, or the admission of BUILDER in writing of its
inability to pay its debts generally as they become due, or its
consent to, acquiescence in or failure to contest the appointment
of a receiver or receivers of all or any part of its assets.
(c) Voluntary Reorganization
Any petition or answer proposing the reorganization of
BUILDER pursuant to the Federal Bankruptcy Act or any similar
law, federal or state, being filed against BUILDER in any court
and not being dismissed or denied within sixty (60) days after
the date on which such petition or answer was filed, or the
approval of such petition or answer by any court of competent
jurisdiction.
(d) Involuntary Reorganization
The filing of a petition to reorganize BUILDER by any of the
creditors of BUILDER pursuant to the Federal Bankruptcy Act or
any similar law, federal or state, and such petition not being
dismissed or denied within sixty (60) days after the date on
which such petition was filed, or the approval of such petition
by the court having jurisdiction thereof.
(e) Attachment of Liens or Privileges
The attachment of any lien or privilege to the Vessel not
due to the acts or omissions of PURCHASER or persons in privity
with it, whether under federal or state law or the General
Maritime Law, if such lien is not removed within sixty (60) days
after written demand by PURCHASER to BUILDER for such removal or
unless BUILDER, within such time, shall not have provided
PURCHASER with a bond by sureties acceptable to PURCHASER against
<PAGE>
such lien in an amount equal to the face amount of such lien.
(f) Non-Compliance
Default in compliance with or the due performance of any
material warranties, covenants and agreements required to be
maintained and performed by BUILDER hereunder, which default
continues unremedied for a period of third (30) days after
written notice to BUILDER thereof.
ARTICLE XXV - ACTION BY BUILDER UPON DEFAULT BY PURCHASER
(a) Right of Termination
In the event that any one or more of the events of default
specified in ARTICLE XXIII - DEFAULT BY PURCHASER of this
CONTRACT shall have occurred and be continuing, BUILDER, if it so
elects, may terminate this CONTRACT thirty (30) days (ten (10)
days if for non-payment and as otherwise indicated in ARTICLE IV,
ITEMS FURNISHED BY PURCHASER, for PURCHASER's failure to deliver
the S/S King) after written notice has been given to the
PURCHASER.
(b) Completion and Sale of Vessel
In the event of such termination, PURCHASER agrees that
BUILDER shall be entitled to continue construction and to sell
the Vessel while work is in process or after completion. Sale of
the Vessel under this ARTICLE XXV means all work-in-process,
materials, articles of machinery, outfit and equipment and
supplies to be installed in the Vessel. Pending such sale,
BUILDER shall be entitled to retain any progress payments already
paid.
(i) Any such sale may be effected by the BUILDER
either by public auction (in which case BUILDER, its agents or
affiliates may bid for and buy the Vessel) or by private contract
on such terms and conditions as BUILDER may see fit, but BUILDER
shall be bound in good faith to secure the best price obtainable,
and no such private contract shall be effective until fifteen
(15) days after BUILDER has notified PURCHASER and the Secretary
of its intention to enter such contract and the purchase price
thereunder.
(ii) In the event BUILDER elects to complete and sell
the Vessel, then BUILDER thereafter shall repay to PURCHASER (but
without interest) an amount equal to the sum of all progress
payments made by PURCHASER, less any deficiency between (a) the
Revised Contract Price as adjusted under this CONTRACT at the
time of such sale and (b) the net price realized for the Vessel
from the sale, after payment of all additional costs, charges and
expenses incurred by BUILDER resulting from such default.
(iii)In the event that BUILDER elects to complete the
Vessel, PURCHASER shall be entitled to negotiate the revival of
this CONTRACT at any time before the sale of the Vessel by
providing satisfactory evidence that the events causing the
default have been remedied.
(c) Abandonment of Construction
In the event of termination, BUILDER may at its option elect
not to complete the Vessel and to sell the Vessel in its state of
<PAGE>
completion at the time of abandonment of construction. If BUILDER
so elects, BUILDER shall notify PURCHASER in writing of its
election and shall thereafter repay to PURCHASER (but without
interest) all progress payments already paid by PURCHASER less
the sum of: (i) One-Hundred ten percent (110%) of BUILDER's
reasonable costs incurred in the CONTRACT work to the date of the
abandonment of construction, plus (ii) such other costs, charges,
expenses and damages as BUILDER may have incurred as a result of
the default of PURCHASER, minus (iii) the proceeds of any sale of
the Vessel in its state of completion as of the time of
abandonment of construction and the reasonable value of any part
thereof that remains unsold. BUILDER shall be bound in good faith
to secure the best price obtainable therefor for purposes of the
determination of item (iii) of the foregoing sum; and if
PURCHASER shall have cause to believe that BUILDER has not
obtained the best price and terms possible, PURCHASER or the
Secretary shall have the option of purchasing the Vessel for cash
within thirty (30) days after notice thereof by BUILDER to
PURCHASER at the price and on the terms of the offer by a third
party deemed by BUILDER to be most favorable to BUILDER.
(d) Alternative Remedies
The rights conferred upon BUILDER under the terms of this
ARTICLE XXV - ACTION BY BUILDER UPON DEFAULT OF PURCHASER shall
not be exclusive of any other remedies in law or equity which
might be otherwise available to BUILDER upon the happening of the
events of default specified in ARTICLE XXIII - DEFAULT BY
PURCHASER hereof. Failure of BUILDER to exercise any of the
rights conferred upon it hereunder with respect to any default of
PURCHASER shall not constitute a waiver of any rights of BUILDER
with respect to any other events of default of PURCHASER
hereunder.
(e) Contract Group Adjustments
The Revised Contract Price increase due and payable as part
of the settlement of accounts pursuant to this ARTICLE XXV,
ACTION BY BUILDER UPON DEFAULT BY PURCHASER shall include any
adjustment of the Revised Contract Price to be made pursuant to
ARTICLE III, CONTRACT GROUP.
(f) Escrow of Funds During Disputes
In the event any payment or payments otherwise due to
BUILDER under this CONTRACT are subject to a good faith dispute
between the parties arising under any of the other ARTICLES of
this CONTRACT, then, pending resolution of said dispute,
PURCHASER or the Secretary shall have the right to prevent
termination of this CONTRACT by BUILDER by depositing the dollar
amount of payments then under dispute with an escrow holder which
shall be a national banking association or trust company. Said
amount shall be held by the escrow holder in interest-bearing
accounts and any interest accruing thereon (at the rate paid by
the escrow holder and not at the rate defined elsewhere in this
CONTRACT), less lawful charges, shall be paid to the party who
prevails in any such dispute to the extent it prevails. This
Subarticle shall be subject to all other ARTICLES of this
CONTRACT and is intended to provide for the specific event of
imminent termination of this CONTRACT by BUILDER or delay in the
delivery of the Vessel.
<PAGE>
ARTICLE XXVI - ACTION BY PURCHASER UPON DEFAULT OF BUILDER
(a) In the event that any one or more of the events of
default specified in ARTICLE XXIV - DEFAULT BY BUILDER of this
CONTRACT shall have occurred except for late delivery, the
PURCHASER may terminate this CONTRACT. The PURCHASER may then
proceed to have all or part of the work on the Vessel completed
at BUILDER's Shipyard or elsewhere and for such purpose may take
possession and use and occupy so much of the
BUILDER's shipyard, plant, equipment, tools, machinery and
appliances, as may be needed for such purposes, without the
payment of any rental or other charge therefor to the BUILDER.
BUILDER hereby agrees to assure to the PURCHASER such use and
occupancy of said facilities and said other property of the
BUILDER for such period of time as may be necessary for the
completion of the CONTRACT work.
(b) If the PURCHASER shall elect to have all or part of the
CONTRACT work completed, the BUILDER shall (i) assign such
subcontractors and orders for material, services and supplies to
be used in the performance of said CONTRACT work to the PURCHASER
as the PURCHASER may direct, and (ii) pay to the PURCHASER the
amount by which the total cost to the PURCHASER of completing
said work (including all amounts paid to the BUILDER hereunder),
plus such other costs, charges, expenses (including reasonable
attorneys fees) and damages as PURCHASER may have incurred as a
result of the default of BUILDER exceeds the total Revised
Contract Price provided in this CONTRACT, as adjusted hereunder;
provided, however, that in computing the amount, if any, to be
paid by the BUILDER to the PURCHASER, appropriate adjustment
shall be made for changes in the CONTRACT work subsequent to the
termination of the CONTRACT.
(c) If the PURCHASER shall elect not to complete the
Vessel, the PURCHASER, at any time within one hundred fifty (150)
days from the date of termination hereunder, may sell the
partially completed Vessel, work-in-process, materials, articles
of machinery, outfit and equipment and supplies to be installed
in the Vessel, together with providing copies of all drawings ,
specifications, calculations and other records reasonably
required for the construction or equipment thereof, provided that
subject to PURCHASER'S right to use all documentation for
completion of the Vessel the BUILDER shall continue to be
entitled to all rights under ARTICLE VIII - RIGHTS TO DESIGN
DATA. The PURCHASER shall have access to the Shipyard in order to
conduct the sale. Any purchaser at any such sale shall be given
reasonable time, not less than sixty (60) days from the date of
sale, within which to remove from the BUILDER's plant the Vessel,
work-in-process, materials, articles of machinery, outfit,
equipment and supplies purchased. The BUILDER or PURCHASER may
become a purchaser at such sale. The proceeds of the sale shall
be applied, first, to payment of all costs and expenses,
including reasonable attorney's fees incurred by the PURCHASER or
its assigns in making such sale, secondly, to reimbursement of
the PURCHASER for payments heretofore made by the PURCHASER to
the BUILDER on account of the Vessel; and thirdly, to payment of
such other costs, charges, expenses and damages, including
reasonable attorneys fees, as PURCHASER may have incurred as a
result of the default of BUILDER. The remaining proceeds, if
<PAGE>
any, shall be paid over to the BUILDER. In the event the proceeds
of the sale shall not be sufficient to pay the first, second and
third items, as above set forth, the difference shall be paid to
the PURCHASER by the BUILDER.
(d) The rights conferred upon the PURCHASER under the terms
of this Article shall not be exclusive of any other remedies in
law or equity which might be otherwise available to PURCHASER
upon the happening of the events of default specified in ARTICLE
XXIV - DEFAULT BY BUILDER. Failure of the PURCHASER to exercise
any of the rights conferred upon it hereunder with respect to any
event of default of BUILDER shall not constitute a waiver of the
right subsequently to terminate this CONTRACT, as herein
provided.
ARTICLE XXVII - TITLE
a) Title to the Vessel and to the work for the Vessel
shall vest in the PURCHASER as and when performed, title to the
materials to be incorporated or installed in the Vessel shall
vest in the PURCHASER as and when delivered to the shipyard or
yard of the BUILDER, and title to the components to be
incorporated or installed in the Vessel shall vest in the
PURCHASER as and when fabricated. As used herein, the term
"Vessel" shall also mean a "ship" as defined in LA. R.S. 9:5522
and the terms, "work", "materials" and "components" shall have
the meanings as set forth in La. R.S. 9:5522 provided, however,
that the PURCHASER's lenders agree that BUILDER's liens on the
Vessel (at any stage of completion) and on the work, materials
and components, in each case, securing BUILDER's claims for
payments due under the CONTRACT for which BUILDER has not
previously been paid as required by the CONTRACT are superior to
the lender's lien, and also provided, however, that except as may
otherwise be provided in this CONTRACT, the risk of loss or
damage to such material and the Vessel shall remain with the
BUILDER, and the PURCHASER shall not be deemed to have waived its
rights to require the BUILDER to replace, at the BUILDER's
expense, defective, damaged or destroyed workmanship or material,
and to deliver the Vessel with the CONTRACT work completed, as
provided in this CONTRACT. BUILDER will properly identify the
ship, work, components and materials as belonging to the
PURCHASER all in accordance with La. R.S. 9:5523 and shall
certify to the PURCHASER and the Secretary, from time to time,
that these requirements have been fully complied with. Title to
all scrap and title to any material which is surplus to the
requirements of this CONTRACT (except material furnished by the
PURCHASER or which under any adjustment of Revised Contract Price
under the provisions of ARTICLE VI - PAYMENT OF CONTRACT PRICE -
METHOD OF PAYMENT of this CONTRACT remains the property of the
PURCHASER) shall vest in the BUILDER. Notwithstanding the
provisions of this ARTICLE as to title, the BUILDER shall be
subject to the risk of loss of all CONTRACT workmanship and
material and the undelivered Vessel as provided in this CONTRACT.
(b) The Existing Vessel's forebody removed from the
Existing Vessel, pursuant to the terms of this CONTRACT,
<PAGE>
including all fittings, equipment and appurtenances thereto not
used on the Vessel or having been removed as provided in the
Specification, shall become the property of the PURCHASER at the
time of severance from the Existing Vessel "AS IS" without any
warranties. PURCHASER warrants title to and that the severed
Stern section, including all such fittings, equipment and
appurtenances thereto, will on and after the delivery date of the
Existing Vessel to the Shipyard be free and clear of all liens,
security interests, claims and encumbrances of every nature and
PURCHASER shall defend, indemnify and hold BUILDER harmless from
and against any such lien, security interest, claim or
encumbrance. The obligations of this Subarticle shall survive
the termination or completion of this CONTRACT.
(c) PURCHASER will remove, or cause the removal of, the
Existing Vessel's forebody from BUILDER's premises within forty
five (45) days of BUILDER's severance of the existing forebody
from the existing Stern and the removal of reusable equipment
from the existing forebody. While the existing forebody remains
on BUILDER's premises, BUILDER shall assume all risks and
expenses associated with the dockside mooring described in
ARTICLE IV.
ARTICLE XXVIII - LIENS
(a) BUILDER agrees that no liens, security interests or
rights in rem of any kind arising out of the CONTRACT work, or on
account of any claim against the BUILDER arising from the
construction of the Vessel or against any subcontractor of the
BUILDER performing work or furnishing material under this
CONTRACT shall lie or attach against or upon the Vessel or any of
said property, material or CONTRACT work, except, however, liens,
security interests or rights in rem in favor of a claimant
arising out of acts or omissions of the PURCHASER.
(b) If any such lien, security interest or right in rem of
any kind is filed or asserted against or attached upon the Vessel
or any of said property, material or CONTRACT work, the party
having knowledge thereof shall promptly notify the other party.
If such lien, security interest or right in rem does not arise
out of acts or omissions of the PURCHASER, BUILDER shall, not
later than thirty (30) days thereafter, secure the discharge or
release of such lien, security interest or right in rem;
provided, however, the BUILDER may contest such lien, security
interest or right in rem or the claim upon which it is based and
if within the time herein provided shall not have secured the
discharge or release of such lien, security interest or right in
rem by court order, then BUILDER shall furnish to PURCHASER or
the appropriate court having jurisdiction in such matters, such
bond or security therefor as shall be acceptable to PURCHASER,
and BUILDER shall indemnify and save harmless the PURCHASER from
all costs, charges and damages by reason of such lien, security
interest, right in rem or claims in any way attributable thereto.
ARTICLE XXIX - TAXES
The BUILDER shall pay, as a cost of the BUILDER, all
federal, state, parish, city and other taxes, assessments and
duties in effect prior to the date of this CONTRACT and lawfully
<PAGE>
assessed or levied prior to delivery and acceptance of the Vessel
by the PURCHASER, against the Vessel and material, supplies and
equipment to be used, or used in, the construction of the Vessel.
Notwithstanding the provisions of the preceding sentence, any
sales, use, excise or other taxes lawfully assessed or levied
concurrently or in connection with the delivery, transfer of
possession, or acceptance or passage of title of the Vessel to
the PURCHASER shall be paid by the PURCHASER in addition to the
Revised Contract Price.
ARTICLE XXX - PATENT INFRINGEMENT
The BUILDER shall be responsible for any and all claims
against the PURCHASER or the Vessel for infringement of patents,
patent rights, copyrights or trademarks in the construction of
the Vessel as constructed by the BUILDER (excepting claims
arising out of equipment, machinery or material supplied to the
BUILDER by the PURCHASER or the use, sale or disposition thereof)
and the BUILDER shall defend, save harmless and indemnify the
PURCHASER and the Vessel against all such claims and against all
costs, expenses, charges and damages which the PURCHASER or the
Vessel may be obligated to pay by reason thereof, including
expenses of litigation, if any; provided, that the foregoing
shall not apply to inventions covered by applications for United
States Letters Patent which, during the performance of this
CONTRACT, are being maintained in secrecy, under the provisions
of 35 U.S.C., Sections 181-188, nor shall the BUILDER be
obligated to indemnify the PURCHASER or the Vessel for any
infringement of patents, patent rights, copyrights or trademarks
resulting from compliance by the BUILDER with any specific
written instructions of the PURCHASER; provided, further, that
upon any such claim being made against said Parties or any
thereof, the BUILDER shall be notified promptly of such claim and
also of any suit brought in connection therewith and shall be
given an opportunity to defend the same; and provided further
that no payment on account of any such claim shall be made by the
PURCHASER unless with the consent of the BUILDER or pursuant to
the decree of a proper court or tribunal.
ARTICLE XXXI - ASSIGNMENT OF CONTRACT
This CONTRACT may not be assigned by PURCHASER or BUILDER
without the prior written consent of the other party, which
consent shall not be unreasonably withheld, except that PURCHASER
may assign this CONTRACT to any applicable United States
government entity for the purposes of financing the Contract
Price under Title XI. Neither BUILDER nor PURCHASER will make
any assignment of this CONTRACT without the prior written
approval of the Secretary.
ARTICLE XXXII - COMPUTATION OF TIME
All periods of time shall be computed by including
Saturdays, Sundays and holidays except that if such period
terminates on a Saturday, Sunday or holiday, it shall be deemed
extended to the business day next succeeding.
<PAGE>
ARTICLE XXXIII - BUILDER TO COMPLY WITH LAWS AND REGULATIONS
The BUILDER shall comply with all laws, rules, regulations,
and requirements of any applicable classification society and of
the departments or agencies of the United States affecting the
construction of works, plants, and vessels, in or on navigable
waters and the shores thereof, and all other waters subject to
the control of the United States, and shall procure at its own
expense such permits from the United States, state and local
authorities as may be necessary in connection with beginning or
carrying on to completion of the CONTRACT work. BUILDER shall at
all times comply with all United States, state and local laws in
any way affecting the CONTRACT work; provided, however, that the
provisions of ARTICLE VII - CHANGES and ARTICLE XXII - GUARANTEE
of this CONTRACT shall govern the BUILDER's right to recover any
increased costs due to changes in the rules or laws of any
classification society or other authority affecting the CONTRACT
work.
ARTICLE XXXIV - APPLICABLE LAW
(a) This CONTRACT shall be constructed in accordance with
the laws of the State of Louisiana and the General Maritime Law
where its application is required for compliance with the Title
XI financing requirements or as otherwise applicable to in this
CONTRACT.
(b) PURCHASER and BUILDER each hereby agree that any
judicial proceeding instituted by one party against the other
party involving any controversy or claim arising out of or
relating to this CONTRACT shall be instituted only in the United
States District Court for the Eastern District of Louisiana at
New Orleans, Louisiana or, if the District Court has no
jurisdiction over the cause, in the appropriate court of the
State of Louisiana in Jefferson Parish, Louisiana. The parties
hereto agree to submit to the personal jurisdiction of the above
courts.
ARTICLE XXXV - NOTICES
Until the BUILDER shall hereafter designate otherwise in
writing to the PURCHASER, all notices hereunder directed to the
BUILDER shall be in writing and shall be mailed by certified
mail, return receipt requested, first class, postage prepaid
addressed to:
Mr. Tom Doussan
Vice President - Commercial Ship Construction
Avondale Industries, Inc.
P.O. Box 50280
New Orleans, Louisiana 70150
Until the PURCHASER shall hereafter designate otherwise in
writing to the BUILDER, all notices hereunder directed to the
PURCHASER shall be in writing and shall be mailed by certified
mail, return receipt requested, first class, postage prepaid, to
<PAGE>
the following address:
Richard D. Horner
American Heavy Lift Shipping Company, Inc.
365 Canal Street, Suite 2670
New Orleans, Louisiana 70130
All notices given pursuant to this ARTICLE XXXV shall be
deemed to have been received if so mailed and the sender has
received the return receipt with notation thereon of delivery.
ARTICLE XXXVI - ARBITRATION
(a) In the event a dispute arises hereunder, prior to the
commencement of any formal proceedings, the Parties shall
continue performance as set forth in this CONTRACT and shall
attempt in good faith to reach a negotiated resolution by
designating an officer of appropriate authority to resolve the
dispute. If the Parties have attempted in good faith to resolve
the dispute and failed to do so, if both BUILDER and PURCHASER
agree, they may elect voluntary, non-binding arbitration.
Disputes as to causes of delay are agreed to be resolved by
mandatory and binding arbitration pursuant to this ARTICLE.
(b) In the event BUILDER claims a cause of delay under
ARTICLE IX, EXTENSION OF TIME FOR COMPLETION OF WORK, and
PURCHASER does not agree, or the PURCHASER claims a cause of
delay under ARTICLE IV, ITEMS FURNISHED BY PURCHASER, and BUILDER
does not agree, either of the Parties may request the Arbitrator
to decide the issue(s) which will be binding on both Parties.
(c) BUILDER and PURCHASER intend to agree on a mutually
acceptable Arbitrator, and alternate Arbitrator in the event the
office of the Arbitrator becomes vacant or otherwise is not able
to function promptly, prior to any arbitration proceeding.
(d) The Parties agree that the powers of the Arbitrator
shall be limited as follows:
1.He shall deal only with the disputes which are
referred for him to investigate and submit his findings and
recommendations.
2.He shall have no power to decide any matter which is
not directly related to the dispute submitted to him.
3.He shall have no power to modify the Working Drawings
or any Specifications, terms or conditions related thereto.
4.He shall have no power to add to, subtract from, or
modify any of the terms of this CONTRACT.
5.His decisions shall be advisory only and shall not
bind the Parties except for determination of disputed causes of
delay under ARTICLE IX, EXTENSION OF TIME FOR COMPLETION OF WORK.
6.He shall have no power to decide or interpret any matter
arising under or which involves any of CONTRACT Exhibits C, E, F,
G, H, I, or J.
(e) The party initiating the demand for arbitration shall
notify the other party in writing, at the same time stating the
matter or matters in dispute. Within a reasonable time
thereafter, not exceeding ten (10) calendar days, the second
<PAGE>
party shall acknowledge the notice in writing, either specifying
any additional issues or issues to be arbitrated or refusing the
demand for arbitration. Providing the arbitration has been
agreed to, the arbitration shall be conducted in New Orleans,
Louisiana under applicable Louisiana laws.
(f) Should PURCHASER and BUILDER consent, the Arbitrator
will review claims and take one or more of the following
preliminary actions within ten (10) days of receipt of claim:
(1) request additional supporting data from the claimant, (2)
submit a schedule to the parties indicating when the Arbitrator
expects to take action, (3) reject the claim in whole or in part,
stating reasons for rejection, (4) recommend approval of the
claim by the other party or (5) suggest a compromise.
(g) If a claim has not been resolved, the party making the
claim, shall, within ten (10) days after the Arbitrator's
preliminary response, take one or more of the following actions:
(1) submit additional supporting data requested by the Arbitrator
(2) modify the initial claim or (3) notify the Arbitrator that
the initial claim stands.
(h) If a claim has not been resolved after consideration of
the foregoing and of further evidence presented by the Parties or
requested by the Arbitrator, the Arbitrator will notify the
Parties in writing that the Arbitrator's decision will be made
within seven (7) days. Upon expiration of such time period, the
Arbitrator will render to the Parties the Arbitrator's written
decision relative to the claim, including any change in the
Revised Contract Price or Contract Time or both. Either party
aggrieved by the conduct or decision of the Arbitrator may at any
time seek a judicial determination of the claim.
(i) The Arbitrator shall also determine which party, or the
proper proportion which each party, shall assume of the expenses
of such arbitration. The arbitration expenses so allocated shall
be paid directly by the party or parties as directed by the
Arbitrator.
(j) Except for the binding arbitration of Subarticle XXXVI
(b) above, a decision by the Arbitrator shall not be required as
a condition precedent to litigation of a dispute between BUILDER
and PURCHASER.
ARTICLE XXXVII - CONSEQUENTIAL DAMAGES
Except for the adjustment to payments specifically stated in
this CONTRACT, notwithstanding anything to the contrary, neither
of the Parties to this CONTRACT will under any circumstances be
liable to the other under any theory of recovery, whether based
in contract, in tort (including negligence and strict liability)
under warranty or otherwise, for any indirect, special,
incidental or consequential loss or damage whatsoever and
howsoever caused. Consequential damages shall include, but shall
not be limited to, loss of revenue or profit, loss or delay of
production, loss of product, downtime of facilities, equipment or
vessels, loss of capital, loss of use of, or under-utilization of
labor, equipment or facilities.
<PAGE>
ARTICLE XXXVIII - MISCELLANEOUS
(a) This CONTRACT constitutes the full and complete
understanding between the parties hereto and supersedes all prior
arrangements, negotiations, representations, understandings and
agreements, oral or written, or any matter of this CONTRACT.
(b) No change, alteration or modification of this CONTRACT
may be made except in writing signed by both Parties hereto and
the prior written consent of the Secretary. Provided, however,
that the consent of the Secretary will not be required for any
changes to the CONTRACT work pursuant to ARTICLE VII except as
provided therein.
(c) The headings in this CONTRACT are for convenience of
reference only and shall not be considered as part of this
CONTRACT or limit or otherwise affect the meaning hereof.
(d) No waiver of any provision of this CONTRACT by any
party shall (1) be effective unless executed in writing, or (2)
constitute a waiver of any other provision.
(e) In case any one or more of the provisions contained in
this CONTRACT shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions
shall not be affected or impaired.
(f) The remedies, damages and obligations specified in this
CONTRACT shall be exclusive and in lieu of any other remedies,
damages or obligations available in contract , tort or otherwise
to PURCHASER or BUILDER with respect to the CONTRACT work except
where a specific provision provides to the contrary.
(g) This CONTRACT may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original but
all of which together shall constitute one and the same
instrument.
(h) Any news releases, public announcements,
advertisements, or publicity released by either party concerning
this CONTRACT, or anything incidental to the work thereof, will
be subject to prior approval of the other party. The Parties
agree that any publicity releases made by either of them shall
recognize and indicate the participation and contributions of the
other party.
(i) PURCHASER represent and warrants that: (i) it is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware; (ii) it has all the
requisite power and authority and legal right to enter into and
carry out the transactions contemplated by this CONTRACT,
including but not limited to all the Exhibits attached hereto;
(iii) the CONTRACT and all its Exhibits do not conflict with
PURCHASER's charter, by-laws, or any other agreement to which it
or its assets are bound; (iv) and that the CONTRACT, required
Exhibits and any Amendments have each been duly executed by
PURCHASER and constitute the legal, valid and binding obligation
of PURCHASER.
(j) BUILDER represent and warrants that: (i) it is a
<PAGE>
corporation duly organized, validly existing and in good standing
under the laws of the State of Louisiana; (ii) it has all the
requisite power and authority and legal right to enter into and
carry out the transactions contemplated by this CONTRACT,
including but not limited to all the Exhibits attached hereto;
(iii) the CONTRACT and all its Exhibits do not conflict with
BUILDER's charter, by-laws, or any other agreement to which it or
its assets are bound; (iv) and that the CONTRACT, required
Exhibits and any Amendments have each been duly executed by
BUILDER and constitute the legal, valid and binding obligation of
BUILDER.
IN WITNESS WHEREOF, the Parties have caused this CONTRACT to
be executed in four counterparts as of the day above written.
ATTEST AVONDALE INDUSTRIES, INC.
(BUILDER)
/s/ R. D. Church
----------------
R.D. Church By:/s/ Albert L. Bossier, Jr.
--------------------------
Albert L. Bossier, Jr.
Title: Chairman, President & CFO
Date: May 12, 1995
AMERICAN HEAVY LIFT SHIPPING
COMPANY
ATTEST (PURCHASER)
/s/ H.A. Downing By:/s/ Richard D. Horner
---------------- ---------------------
H.A. Downing Richard D. Horner
Title: President & CEO
Date: May 12, 1995
<PAGE>
S/S SPRAY
PRODUCT TANKER CONTRACT
for
AMERICAN HEAVY LIFT
SHIPPING COMPANY
AVONDALE JOB NO. C5-80D
May 1995
AVONDALE INDUSTRIES, INC.
<PAGE>
Page
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ARTICLE I DEFINITIONS 2
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ARTICLE II GENERAL STATEMENT OF WORK 4
AND CONTRACT PRICE
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ARTICLE III CONTRACT GROUP 6
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ARTICLE IV ITEMS FURNISHED BY 6
PURCHASER
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ARTICLE V SPECIFICATIONS, 13
INTERPRETATION
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ARTICLE VI PAYMENT OF CONTRACT PRICE 13
- METHOD OF PAYMENT
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ARTICLE VII CHANGES 16
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ARTICLE VIII RIGHTS TO DESIGN DATA 19
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ARTICLE IX EXTENSION OF TIME FOR 20
COMPLETION OF WORK
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ARTICLE X PERFORMANCE STANDARD 24
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ARTICLE XI CONTRACT PRICE 24
ADJUSTMENTS
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ARTICLE XII SCHEDULES 27
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ARTICLE XIII INSURANCE 28
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ARTICLE XIV RISK OF LOSS - TOTAL LOSS 34
OF A VESSEL
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ARTICLE XV INJURY TO EMPLOYEES AND 36
OTHERS
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ARTICLE XVI APPOINTMENT OF 39
REPRESENTATIVES
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<PAGE>
MATERIALS AND 40
ARTICLE XVII WORKMANSHIP
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ARTICLE XVIII INSPECTION - APPROVAL OF 41
DRAWINGS
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ARTICLE XIX TRIALS 42
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ARTICLE XX ADDITIONAL TRIALS - 43
EXPENSES
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ARTICLE XXI ACCEPTANCE AND 44
DELIVERY OF THE VESSEL
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ARTICLE XXII GUARANTEE 46
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ARTICLE XXIII DEFAULT BY PURCHASER 50
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ARTICLE XXIV DEFAULT BY BUILDER 51
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ARTICLE XXV ACTION BY BUILDER UPON 53
DEFAULT BY PURCHASER
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ARTICLE XXVI ACTION BY PURCHASER UPON 56
DEFAULT BY BUILDER
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ARTICLE XXVII TITLE 58
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ARTICLE XXVIII LIENS 59
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ARTICLE XXIX TAXES 60
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ARTICLE XXX PATENT INFRINGEMENT 60
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ARTICLE XXXI ASSIGNMENT OF CONTRACT 61
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ARTICLE XXXII COMPUTATION OF TIME 61
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ARTICLE XXXIII BUILDER TO COMPLY WITH 62
LAWS AND REGULATIONS
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ARTICLE XXXIV APPLICABLE LAW 62
<PAGE>
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ARTICLE XXXV NOTICES 63
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ARTICLE XXXVI ARBITRATION 64
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ARTICLE XXXVII CONSEQUENTIAL DAMAGES 66
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MISCELLANEOUS 67
ARTICLE XXXVIII
EXHIBITS:
EXHIBIT A - SPECIFICATIONS (NOT ATTACHED)
EXHIBIT B - PROGRESS REPORT (NOT ATTACHED)
EXHIBIT C - BUILDER'S RISK POLICY FORM (NOT ATTACHED)
EXHIBIT D - CHANGE ORDER PROCEDURE (NOT ATTACHED)
EXHIBIT E -BUILDER'S CERTIFICATE OF INSURANCE (This
certificate will be furnished prior to the Effective Date of the
Agreement) (NOT ATTACHED)
EXHIBIT F -PURCHASER'S CERTIFICATE OF INSURANCE (NOT ATTACHED)
EXHIBIT G -SUBCONTRACTOR INSURANCE REQUIREMENTS (NOT ATTACHED)
EXHIBIT H-TITLE XI COMMITMENT LETTER OF 6 FEBRUARY 1995 BY MARAD
TO PURCHASER (NOT ATTACHED)
EXHIBIT I - CREDIT SUPPORT AGREEMENT (NOT ATTACHED)
EXHIBIT J - SALE AND PURCHASE AGREEMENT FOR THE STERN (NOT
ATTACHED)
<PAGE>
PRODUCT TANKER
FOR
AMERICAN HEAVY LIFT SHIPPING COMPANY
THIS CONTRACT, (the "CONTRACT") initially entered into on
the 12th day of October, 1994, which is hereby revised,
superseded and resigned after having been adjusted to conform to
the Title XI guarantee and financing requirements, is entered
into by and between American Heavy Lift Shipping Company, a
corporation organized under the laws of the State of Delaware,
having offices at 365 Canal Street, Suite 2670, New Orleans,
Louisiana 70130 (the "PURCHASER"), and Avondale Industries, Inc.,
a corporation organized under the laws of the State of Louisiana,
having a business address of 5100 River Road, Avondale, Louisiana
70094 (the "BUILDER");
W I T N E S S E T H:
WHEREAS:
1. The PURCHASER desires to purchase four (4) product
tankers to be flagged under the United States flag for use in
United States coastwise trade and that comply with the
requirements of the Oil Pollution Act of 1990 (OPA 90); and
2. The BUILDER is a shipbuilder with expertise, ability,
and desire to construct new tonnage that complies with OPA 90
consistent with the terms and conditions set forth in this
CONTRACT.
3. The PURCHASER has applied for Title XI guarantee for
financing under the Merchant Marine Act to the U.S. Department of
Transportation, Maritime Administration for the construction to
be performed pursuant to this CONTRACT. This CONTRACT will only
become effective between the Parties upon PURCHASER furnishing
BUILDER written evidence that the Title XI letter commitment to
guarantee and the financing commitment has been granted to
PURCHASER.
4. The BUILDER has developed the design for the
construction work of this CONTRACT in accordance with all
applicable Regulatory Body requirements.
NOW, THEREFORE, in consideration of the premises and of the
mutual promises hereinafter set forth, the Parties agree as
follows:
ARTICLE I - DEFINITIONS
As used in this CONTRACT, the following terms shall have the
following respective meanings:
BUILDER - As defined in the preamble.
Builder's Certificate - As defined in Subarticle VI(a).
CONTRACT - As defined in the preamble.
Confirmation Date - As defined in Subarticle IV(d).
Contract Group - The "Contract Group" shall mean the four (4)
separate contracts between BUILDER and PURCHASER for similar
construction of four (4) vessels to replace PURCHASER's existing
<PAGE>
vessels the S/S Knight, S/S Solar, S/S Spray and S/S King.
Contract Price - As defined in Subarticle II(a).
Contractor Group - As defined in Subarticle XV (d).
Data - As defined in Subarticle VIII(b).
Delivery Certificate - As defined in Subarticle II(b).
Delivery Date - As defined in Subarticle II(c).
Delivery Site - As defined in Subarticle II(b).
Delivery Window - As defined in Subarticle IV(d).
Docking Receipt - As defined in Subarticle IV(c).
Effective Date - The "Effective Date" is the date of the
resigning of this CONTRACT.
Essential changes - As defined in Subarticle VII(b).
Existing Inventory - As defined in Subarticle IV(j).
Existing Vessel - As defined in Subarticle IV(c).
Guarantee Deficiency - As defined in Subarticle XXII(a).
Guaranteed Speed - As defined in Subarticle X(b).
Invoice for Payment - As defined in Subarticle VI(c).
Non-essential changes - As defined in Subarticle VII(b).
Owner Group - As defined in Subarticle XV(a).
Parties - "Parties" shall mean both PURCHASER and BUILDER.
Performance Standard - As defined in Subarticle X(c).
Progress Payments - As defined in Subarticle VI(a).
PURCHASER - As defined in the preamble.
Regulatory Body(ies) - As defined in Subarticle XVII(a).
Revised Contract Price - As defined in Subarticle VI(g).
Schedule - As defined in ARTICLE XII.
Secretary - "Secretary" shall mean the United States Secretary
of Transportation acting by and through the Maritime
Administrator.
Shipyard - As defined in Subarticle II(b).
Specifications - The "Specifications" are that portion of the
CONTRACT consisting of the written requirements for design,
materials, equipment, construction systems, standards and
workmanship for the work, and performance of related services,
which are attached hereto as Exhibit "A".
Stern - that portion of the Existing Vessel (respective S/S
King, S/S Knight, S/S Solar, S/S Spray) purchased by BUILDER in
accordance with Exhibit "J", and as defined in that Exhibit "J",
for incorporation into the Vessel.
Turnover Date - As defined in Subarticle IV(d).
Turnover Window - As defined in Subarticle IV(d).
Working Drawings - The "Working Drawings" are the detailed
graphic and pictorial portions of the documents prepared by
BUILDER after the signing of the CONTRACT which show the design,
location and dimensions of the work, generally including the
outboard profile, structural details and arrangement plans,
elevations, sections, details, schedules and diagrams.
Vessel - As defined in Subarticle II(a).
Vessels - the four vessels to be constructed pursuant to the
Contract Group to replace the S/S King, S/S Solar, S/S Spray and
S/S Knight.
ARTICLE II - GENERAL STATEMENT OF WORK
AND CONTRACT PRICE
(a) The BUILDER shall furnish all plant, facilities, labor,
materials, supplies and equipment, except as otherwise provided
in the Specifications, and shall perform all work necessary to
<PAGE>
design, build, launch, outfit, test and deliver a vessel more
fully described in the Specifications (the "Vessel") at its own
risk and expense, and shall do everything required of the BUILDER
by this CONTRACT and the Specifications, including the
development of Working Drawings and the installation of any
outfitting and equipment, all for the total consideration of
"THIRTY FIVE MILLION NINE HUNDRED SIXTY SEVEN THOUSAND FOUR
HUNDRED FIFTY SIX DOLLARS ($35,967,456)," (the "Contract Price")
together with such additions and deductions as provided elsewhere
in this CONTRACT. The Parties recognize and acknowledge that the
Contract Price, CONTRACT and/or the Specifications have required
some adjustment due to or arising from the requirements mandated
by the Title XI guarantee and financing approval process which
changes have been incorporated into this CONTRACT.
(b) The Vessel shall be identified as BUILDER's Hull No.
2382, and shall be constructed at the BUILDER's plant (the
"Shipyard"), located at Avondale, Louisiana on the west bank of
the Mississippi River at Mile 107 AHP. Some parts of the Vessel
may be constructed at BUILDER's facilities in Westwego,
Louisiana. When the work on the Vessel is complete in accordance
with this CONTRACT, and the Vessel has passed the tests required
by this CONTRACT, the Vessel as completed shall be delivered with
not less than five (5) days prior written notice by the BUILDER
and accepted by the PURCHASER at Avondale, Louisiana or a
mutually agreed other place (the "Delivery Site"), free and clear
of all liens, security interests, and claims of every nature,
excepting, however, those arising out of the acts or omissions of
the PURCHASER and the PURCHASER'S contractual obligations
pursuant to Article 4 of the Credit Support Agreement of attached
Exhibit "I". Upon such delivery, the PURCHASER shall give the
BUILDER a Delivery Certificate accepting the Vessel (the
"Delivery Certificate"). The PURCHASER shall within five (5) days
thereafter, remove or cause the Vessel to be removed from the
Delivery Site. Delivery and acceptance by the PURCHASER of the
Vessel shall be expressly conditioned upon (1) PURCHASER's rights
under ARTICLE XXII - GUARANTEE of this CONTRACT, (2) PURCHASER's
right to completion by BUILDER thereafter of any uncompleted
CONTRACT work and correction by BUILDER of any defective CONTRACT
work as shown in the Delivery Certificate in accordance with the
determination described in ARTICLE XXI - ACCEPTANCE AND DELIVERY
OF THE VESSEL.
(c) The work is to be performed according to first class
shipbuilding practice and shall be commenced and prosecuted in a
timely manner. BUILDER will deliver the Vessel to the PURCHASER
132 days following the Turnover Date as such date may be extended
pursuant to the terms of this CONTRACT (the "Delivery Date"),
provided that the S/S Spray is turned over to the BUILDER within
the agreed upon Turnover Window. If the S/S Spray is turned over
to the BUILDER before the Turnover Window, BUILDER will deliver
the Vessel to the PURCHASER 132 days following the first day of
the agreed upon Turnover Window.
ARTICLE III - CONTRACT GROUP
The Contract Price for this CONTRACT is agreed to be the
consideration as part of the group of four product tankers for
the four substantially identical contracts signed by BUILDER and
<PAGE>
PURCHASER this date. In any event that all four of the vessel
contracts are not completed, or are terminated for any reason,
except the default of the BUILDER, the Contract Price of each of
the unterminated contracts shall be adjusted to reflect the
higher per vessel cost for the remaining vessels as follows:
Number of Contracts Percent Contract Price
Terminated Increase of Each
Completed Contract
3 3.0
2 1.25
1 1.0
ARTICLE IV - ITEMS FURNISHED BY PURCHASER
a) The BUILDER shall, at its own expense and risk, receive,
check as to agreement with bills of lading, store, protect,
remove from the Existing Vessel pursuant to the Specifications,
insure and install aboard the Vessel all of the items required by
the Specifications to be furnished by the PURCHASER. The BUILDER
shall not be deemed to have extended any warranty as to materials
or equipment furnished by the PURCHASER other than the warranty
set forth in ARTICLE XXII - GUARANTEE of this CONTRACT. The
BUILDER shall be liable to the PURCHASER for any damage to or
loss of the items furnished by the PURCHASER occurring during the
BUILDER's custody thereof, which may arise from any event.
Except for the S/S Spray turnover requirements as indicated in
this ARTICLE IV, the Specifications indicate the need dates for
all items to be furnished by PURCHASER.
(b) Except for the S/S Spray turnover requirements as
indicated in this ARTICLE IV,
PURCHASER will, by furnishing reasonable documentation and notice
to BUILDER, be entitled to extension of the indicated need dates
stated in the Specifications for, and to the extent of, any cause
of delay beyond the reasonable control of PURCHASER which
PURCHASER could not reasonably have anticipated. BUILDER may
also use such cause of delay to claim delay of the Delivery Date
for the Vessel in accordance with ARTICLE IX, EXTENSION OF TIME
FOR COMPLETION OF WORK.
(c) The Stern section and after house portion of the Vessel
shall be the Stern section and after house portion of the
Existing Vessel, the S/S Spray, Official Number 282849, shall be
delivered by PURCHASER alongside a dock designated by BUILDER at
BUILDER's Avondale, Louisiana shipyard in accordance with the
Sale and Purchase Agreement attached as Exhibit "J". All
landside expenses associated with the dockside mooring of the S/S
Spray at the Shipyard, including but not limited to mooring
lines, wharfage, gangway, shipyard services, etc. are included in
the Contract Price. For purposes of clarity in this CONTRACT,
the S/S Spray will be referred to and become the "Existing
Vessel" after the S/S Spray is docked at Avondale and its
delivery protocol documentation has been signed (the "Docking
<PAGE>
Receipt"). The signed Docking Receipt will also serve to
transfer the risk of loss from PURCHASER to BUILDER pursuant to
Subarticle (g) of this ARTICLE IV and the Sale and Purchase
Agreement for the Stern attached hereto as Exhibit "J".
(d) PURCHASER shall deliver the S/S Spray to BUILDER
between 7 August 1996 and 6 October 1996 (the "Delivery Window").
During May 1996 the Parties will meet to narrow the Delivery
Window to a 2 week period when the S/S Spray will be ready for
delivery to the Shipyard and when the BUILDER has progressed
sufficiently with its work that it is ready to receive the S/S
Spray in the Shipyard ("Turnover Window"). The Parties shall
confirm in writing ("Confirmation Date") the Turnover Window. If
by 19 May 1996, the Parties are unable to agree to the Turnover
Window, the Turnover Window shall be 6 September 1996 to 19
September 1996 and the Confirmation Date for this CONTRACT shall
be deemed to be 19 May 1996. The Turnover Date (the "Turnover
Date") shall be the actual date that the S/S Spray is turned over
to the BUILDERS as evidenced by the Docking Receipt. The Parties
have confirmed the Delivery Window and the other dates set forth
in this paragraph on the Effective Date of the CONTRACT.
PURCHASER will be entitled to extension of the Turnover Window
for, and to the extent of, any cause of delay beyond the
reasonable control of PURCHASER which PURCHASER could not
reasonably have anticipated.
(e) With reasonable notice, PURCHASER may deliver the S/S
Spray at any time up to thirty (30) days prior to the Turnover
Window without any increase in the Contract Price. A docking fee
of $1,200.00 per day plus direct costs for extending the
insurance obligations of BUILDER under this CONTRACT will be
charged to PURCHASER for early delivery in excess of thirty (30)
days prior to the Turnover Window. The early delivery docking
fee includes monitoring of mooring lines, pressure fire system
and shore power. Other services are available at standard rates.
(f) PURCHASER will pay BUILDER TWENTY THOUSAND DOLLARS
($20,000.00) per day liquidated damages in addition to the
Contract Price for each and every day that the S/S Spray is
delivered to BUILDER more than (5) days after the Turnover
Window, up to an aggregate maximum of three percent (3%) of the
Contract Price decreased by FOUR MILLION NINE HUNDRED SEVENTY-
EIGHT THOUSAND FOUR HUNDRED FIFTY-SIX DOLLARS, as said Turnover
Window may be extended pursuant to this CONTRACT. The Delivery
Date of the Vessel, and all dates of the Contract Group, will be
extended day for day that the S/S Spray is delivered after the
Turnover Window at no additional cost beyond the liquidated
damages paid for late delivery of the S/S Spray to the BUILDER;
provided, however, that any liability for liquidated damages for
any of the remaining Vessels in the Contract Group shall be
determined based upon the extended dates of the Contract Group.
BUILDER may elect to terminate this CONTRACT by written notice to
PURCHASER pursuant to ARTICLE XXIII, DEFAULT BY PURCHASER, at any
time that the S/S Spray is not delivered to BUILDER within thirty
(30) days after the Turnover Window, except that Subarticle
XXV(a) default cure period does not apply to the delivery failure
of the S/S Spray after expiration of the thirty (30) days after
the Turnover Window.
<PAGE>
(g) The S/S Spray with everything belonging to it shall be
at PURCHASER's risk and expense until its delivery is confirmed
by execution of the Docking Receipt. Risk of loss of the
Existing Vessel with everything belonging to it shall be as
indicated in ARTICLE XIV, RISK-OF-LOSS - TOTAL LOSS OF A VESSEL.
The S/S Spray shall be delivered to BUILDER on the Turnover Date
in class, except as a result of the Existing Vessel's OPA '90
trading date restriction, repairs of PURCHASER in progress which
will be completed expeditiously by PURCHASER, or arrangements by
PURCHASER for towing of the Existing Vessel to BUILDER,
preferably free of outstanding items or recommendations, with all
tanks gas free (except for necessary fuel oil and lubricating oil
tanks) and with asbestos removed or encapsulated per the
Specifications. BUILDER shall take over remaining bunkers and
lubricating oils unless otherwise agreed in writing between the
Parties prior to arrival of the S/S Spray at Avondale. All such
remaining bunkers/oils may be sold or retained by BUILDER at its
option. All bunker/oil transfer costs and credits will be for
PURCHASER'S account. The Parties agree to negotiate the
performance of work required for PURCHASER furnished items and/or
the Stern of the Existing Vessel in accordance with the
requirements of ARTICLE VII, CHANGES, as directed by PURCHASER.
Such negotiations are intended to allow PURCHASER to timely order
Essential Changes for PURCHASER furnished items and/or the Stern
of the Existing Vessel in order to remedy class outstandings or
recommendations. Except for work in the Stern of the Existing
Vessel indicated in the Specifications to be performed by
BUILDER, it will be PURCHASER'S obligation under this CONTRACT
that all PURCHASER furnished items for the Vessel, and the Stern
of the Existing Vessel, or any of its parts, meet all the
applicable laws, classifications, rules, regulations, standards
and certification requirements notwithstanding the provisions of
attached Exhibit "J".
(h) PURCHASER warrants that the S/S Spray, at the time of
delivery to BUILDER, is free from all encumbrances, security
interests, maritime liens or any other debts whatsoever except
for the preferred maritime mortgage(s) granted in connection with
the financing of the construction of the vessels as contemplated
by ARTICLE XXVIII - TITLE, and also except for maritime liens
arising from trade payables incurred in the ordinary course of
business which will be discharged in the ordinary course of
business or bonded by PURCHASER within ten (10) working days of
any notice of a lien or other encumbrance against the Existing
Vessel. Should any claims for events which have been incurred
prior to the time of delivery of the S/S Spray to BUILDER be made
against the S/S Spray, the Existing Vessel, or parts thereof,
PURCHASER hereby undertakes to indemnify, hold harmless, and
defend BUILDER against all consequences of such claims. This
Subarticle shall survive the termination or expiration of this
CONTRACT.
(i) In the event of any actual or constructive total loss
of the S/S Spray prior to arrival at BUILDER's shipyard or in the
event that the Stern section and/or the after house shall, for
any reason, be unavailable, PURCHASER may either:
(i) Furnish the S/S Solar or a mutually agreeable
substitute vessel, in which event BUILDER and PURCHASER shall
<PAGE>
mutually agree on: (1) any Specification changes, (2) a new
Turnover Date and Delivery Date (3) a new Contract Price
resulting from such substitution; and (4) adjustment of all
dates and prices for all the follow vessels of the Contract
Group. PURCHASER presently has an option to purchase the S/S
Coastal Manatee (Official No. 287186). The substitution of the
S/S Coastal Manatee is subject to the approval of the PURCHASER
and the Secretary.
(ii) Not Used
(iii) Give written notice to BUILDER within fifteen (15)
days after the loss ordering BUILDER to terminate further
performance of work under this CONTRACT and shall upon demand pay
BUILDER its Costs, as defined below, plus a profit of ten percent
(10%) of such Costs, and following receipt by BUILDER of full
payment under this Subarticle (i) , all constructed work and all
materials acquired by BUILDER for the performance of this
CONTRACT shall become the property of PURCHASER. "Costs" are
defined for the purpose of this Subarticle (i) to include the
cost to BUILDER for all services performed, labor performed and
materials acquired or contracted to be acquired plus overhead
allocations for such services, labor and materials in accordance
with BUILDER's usual practices for such work, plus reasonable
cancellation costs actually paid to third parties for terminating
contractual commitments that BUILDER has made for performance of
the CONTRACT work, all in accordance with BUILDER'S established
cost accounting system as verified by an independent auditor
selected by PURCHASER and agreed to by the BUILDER. Under no
circumstances shall BUILDER's claim under this Subarticle
(i)(iii) include any costs allocated to any of the other
contracts of the Contract Group.
(j) Notwithstanding the Sale and Purchase Agreement of
attached Exhibit "J", this CONTRACT is based on utilizing the
aft portion of the S/S Spray as indicated by the Specifications,
and Subarticles (c) and (g) above, in generally its "AS IS"
condition on arrival at BUILDER's yard. Any desired or mandated
improvements, upgrades, damage repairs, maintenance, etc. of this
PURCHASER furnished equipment for the Vessel, and the Stern of
the Existing Vessel, will be performed and documented pursuant to
ARTICLE VII, CHANGES. The "AS IS" condition will be inventoried
and documented by BUILDER and countersigned by PURCHASER during
the delivery voyage and/or on its arrival at BUILDER's Shipyard
(the "Existing Inventory"). BUILDER is obligated to return the
PURCHASER furnished items, and the Stern of the Existing Vessel,
on the Delivery Date as documented in the Existing Inventory.
PURCHASER will provide suitable accommodations and board to
BUILDER's inspectors for performing this inventory at no charge
to BUILDER during the turnover voyage. The Parties will agree to
similar arrangements for design development inspections by
BUILDER'S inspectors at any time after the Effective Date of this
CONTRACT. Article XV, INJURY TO EMPLOYEES AND OTHERS, will also
be applicable during the delivery voyage for taking of the
Existing Inventory and during the performance of any design
development inspections by BUILDER's inspectors at any time after
the Effective Date of this CONTRACT.
(k) PURCHASER will give immediate notice to BUILDER in the
event the S/S Spray is delayed, or is expected to be delayed, in
<PAGE>
its scheduled turnover to BUILDER by any unforeseen event beyond
the control of PURCHASER which PURCHASER could not reasonably
have anticipated. PURCHASER will provide expeditiously all known
details of such unforeseen delay and furnish an estimate of the
extent of the claimed delay in the Turnover Date. By agreement
the Parties may mitigate such unforeseen cause of delay to their
respective best interests in adjusting the Turnover Date
including, but not limited to, utilizing the provisions of
Subarticle IV (i). Either of the Parties may request binding
arbitration pursuant to ARTICLE XXXVI, ARBITRATION, for
determination of the claimed delay of the Turnover Date. The
arbitration may not, however, revise the indicated adjustments to
be made to other dates as a consequence of such delays in the
Turnover Date.
(l) BUILDER will provide necessary dockside services for
and permit the crew of the S/S Spray to remain aboard the
Existing Vessel to perform their duties, provided such duties are
at all times subordinate to, and do not interfere with, BUILDER'S
work, for up to thirty (30) days after arrival of the Existing
Vessel and for thirty (30) days prior to the Delivery Date of the
Vessel. Likewise, the BUILDER will permit approved
subcontractors to perform work directly for PURCHASER that is not
ordinarily performed by BUILDER. R & R Marine Maintenance and G.
C. Electric will be allowed into the Shipyard aboard the Existing
Vessel as approved subcontractors to perform work directly for
PURCHASER not to exceed six (6) people at any one time.
(m) Notwithstanding anything contained in the Sale and
Purchase Agreement for the Stern attached hereto as Exhibit "J"
or anything else whatsoever, PURCHASER agrees to protect, defend,
indemnify and hold BUILDER, its agents, officers, directors,
employees and representatives harmless from and against all
costs, damages, losses, claims, penalties, debts or liabilities
BUILDER may incur from holding title to the Stern of the Existing
Vessel, or the Stern of the Vessel, in BUILDER'S name at any time
during the performance of this CONTRACT. It is further
understood and agreed that this indemnity and defense obligation
shall include the obligation to reimburse BUILDER for any
attorneys' fees, costs and expenses which may be incurred by
BUILDER in enforcing the defense and indemnity obligations set
forth in this Subarticle (m). This Subarticle (m) shall prevail
over any conflicting or inconsistent provisions set forth
elsewhere in this CONTRACT and shall survive any termination,
cancellation, expiration or completion of this CONTRACT.
ARTICLE V - SPECIFICATIONS, INTERPRETATION
(a) The Specifications for the construction of the Vessel
have been identified by the initials of the Parties signing this
CONTRACT and are made a part of this CONTRACT with the same force
and effect as though herein set out in full.
(b) If any discrepancy, difference or conflict exists
between the provisions of this CONTRACT and the Specifications,
then to the extent of such discrepancy, difference or conflict
only, the Specifications shall be ineffectual and the provisions
of this CONTRACT shall prevail; but in all other respects the
Specifications shall be in full force and effect. If there is any
<PAGE>
discrepancy, difference or conflict between the drawings and
Specifications, then to the extent of such discrepancy,
difference or conflict the Specifications shall prevail;
provided, however, any work called for by the Specifications and
not shown on the drawings and any work shown on the drawings but
not called for in the Specifications shall be performed by the
BUILDER as a part of the CONTRACT work. Any discrepancy,
difference or conflict between the Specifications and the
provisions of this CONTRACT and any discrepancy, difference or
conflict between the Specifications themselves discovered by one
party to this CONTRACT shall be brought to the attention of the
other party promptly in writing.
ARTICLE VI - PAYMENT OF CONTRACT PRICE - METHOD OF PAYMENT
a) PURCHASER shall pay the Revised Contract Price to
BUILDER in increments as the work progresses (the "Progress
Payments"). PURCHASER shall pay Progress Payments to BUILDER at
biweekly intervals upon the invoices of BUILDER, supported in
each instance by its Builder's Certificate. Progress Payment
shall be determined by the proportionate amount of the CONTRACT
work actually accomplished computed by the following method: the
CONTRACT work will be divided into separate components and each
component assigned a number of points. Such components and their
respective points will be as set forth on the form attached as
Exhibit "B". As of the invoice date, BUILDER shall certify the
percentage of completion of each component and the overall
percentage of completion ("Builder's Certificate"), which shall
be the sum of the percentages of completion of each component
multiplied by the number of points referable to that component
divided by the total number of points referable to all components
of CONTRACT work. Each Progress Payment shall be the increment
in overall percentage of completion since the date as of which
BUILDER computed the last previous Progress Payment times the
Revised Contract Price, as defined in Subarticle (g) of this
ARTICLE. Progress Payments shall be paid in full by wire
transfer free of bank charges as soon as possible but in no event
later than five (5) working days after receipt by the Secretary
of documents acceptable to the Secretary. As an exception to the
above procedure for Progress Payments, the first Progress Payment
in the amount of FOUR MILLION NINE HUNDRED SEVENTY EIGHT THOUSAND
FOUR HUNDRED FIFTY SIX DOLLARS ($4,978,456) will be paid by
PURCHASER TO BUILDER, by wire transfer, free of bank charges, in
immediately available funds to an account designated by BUILDER,
simultaneously with the execution of this amended and restated
CONTRACT to cover the Sale and Purchase Agreement of attached
Exhibit "J".
b) PURCHASER shall inspect and confirm achievement of the
progress by approving the Progress Billing Format form of
attached Exhibit "B". BUILDER shall invoice PURCHASER for the
percentage of the Revised Contract Price for the progress, which
invoice shall include documents acceptable to the Secretary.
PURCHASER will notify BUILDER if it determines that the progress
has not in fact been achieved along with PURCHASER's reasons for
said determination. PURCHASER's failure to notify BUILDER within
two (2) business days of receipt of an invoice for payment shall
constitute PURCHASER's acceptance of the progress.
<PAGE>
c) At no time prior to the delivery of the Vessel to
PURCHASER may the cumulative invoiced total of Progress Payments
charged to PURCHASER under the provisions of this ARTICLE VI,
exceed 100% of the Revised Contract Price, as defined in
Subarticle (g) of this ARTICLE.
d) Progress Payments may include the cost of subcontracted
machinery, materials, and equipment not yet delivered to
BUILDER'S yard to the extent that BUILDER shall have acquired
title thereto and identified the goods in question to the Vessel,
provided that the risk of loss of or damage to such goods before
delivery remains with the vendor or subcontractor.
e) The final installment of the Revised Contract Price
minus a hold-back equal to 1% of the Revised Contract Price
shall be paid to BUILDER by PURCHASER at the delivery of the
Vessel to PURCHASER.
f) PURCHASER shall pay BUILDER the 1% of the Revised
Contract Price hold-back retained under the provisions of
Subarticle (e) above after the expiration of the warranty period
as provided in ARTICLE XXII, GUARANTEE.
g) In the event that the Parties should agree upon any
change to be made in accordance with the provisions of ARTICLE
VII, CHANGES, and that agreement contains no contrary provision
for time of payment, the Contract Price (or, if there have been
previous such changes, the former Revised Contract Price) shall
be increased or decreased by the amount agreed upon by the
Parties and, as thus increased or decreased, shall be called the
"Revised Contract Price." Immediately upon agreement between the
Parties of any change and the resulting increase or decrease in
the Revised Contract Price, BUILDER shall issue its invoice or
credit memo for the amount of such increase or decrease in the
Revised Contract Price attributable to the change times the
cumulative overall percentage of completion utilized in the
computation under the provisions of this ARTICLE VI of the
Progress Payment most recently invoiced; and the balance of such
increase or decrease shall be paid or deducted by use of the new
Revised Contract Price in the computation of subsequent Progress
Payments.
ARTICLE VII - CHANGES
(a) The BUILDER shall not, except as provided in Subarticle
(b) of ARTICLE V - SPECIFICATIONS, INTERPRETATION depart from the
requirements of the Specifications or make any other changes in
the CONTRACT work required by the Specifications without all
prior authorization required by the provisions of this ARTICLE.
Anything to the contrary notwithstanding, any work that is
required to be performed under this CONTRACT to anything that was
sold/purchased pursuant to attached Exhibit "J", other than what
is required by the Specifications, will be performed only
pursuant to an agreed and documented change under this ARTICLE
VII.
(b) For purposes of this ARTICLE, changes in CONTRACT work
shall be classified as either "Essential" changes or "Non-
essential" changes. Essential changes shall consist of changes in
<PAGE>
the CONTRACT work due to an action of a Regulatory Body as set
forth in ARTICLE XVII - MATERIALS AND WORKMANSHIP, (a)(iii) of
this CONTRACT, or due to any other promulgation of a new law or
rule after 7 March 1995. All other changes shall be Non-
essential changes. BUILDER shall advise PURCHASER of any
Essential changes which any Regulatory Body may require in the
Vessel.
(c) The PURCHASER shall have the right to direct the
BUILDER to perform an Essential change, and the BUILDER upon
receipt of PURCHASER's written direction shall commence the
performance of the change at such time as the PURCHASER may
direct without regard to whether prior agreement has been reached
as to the net increase or decrease in Revised Contract Price and
delay attributable to the change. The BUILDER shall be entitled
to a fair and reasonable adjustment in the Revised Contract Price
and Delivery Date for the performance of such change and in all
other terms and conditions of this CONTRACT that reasonably
require modification as a consequence of the change, for
performance of such change. Upon receipt of the PURCHASER's
written direction of an Essential change, the BUILDER shall,
within fourteen (14) days, give written notice to the PURCHASER
and the Secretary, that the proposed change will result in a
change in the Performance Standard, Revised Contract Price and/or
Delivery Date and the projected date for the firm quotation for
such change which shall be within thirty (30) days of PURCHASER's
written request or as otherwise mutually agreed. If such notice
is not forwarded as required, BUILDER shall not have the right to
later make claim for such change. After receipt of BUILDERS
quotation, the PURCHASER shall have fourteen (14) days to respond
to the BUILDER. If no response is received within the fourteen
(14) days, the quotation shall be deemed approved. The BUILDER's
quotation shall show the following information: the effect on
weight, moments, centers; effects on the Performance Standard;
and any delay in delivery of the Vessel to result from such
change. Such estimate of price shall consist of estimates,
separately stated, for materials (by type and quantity), labor
(including overhead) based on estimated engineering manhours and
estimated production manhours, and profit. PURCHASER shall take
reasonable precautions to maintain in confidence each estimate
and not disclose the same, except to agents or contractors of
PURCHASER as necessary in the prosecution of CONTRACT work,
provided only that in making such disclosure to agents or
contractors the PURCHASER 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 PURCHASER herein. In no event shall the PURCHASER
disclose estimates to another shipyard. The PURCHASER shall not
be responsible for unauthorized actions of its employees if the
aforementioned reasonable precautions have been taken by it. Any
change work performed by the BUILDER absent written agreement
from the PURCHASER shall be at BUILDER's own risk and expense.
(d) The PURCHASER shall have the right to propose to the
BUILDER in writing a Non-essential change in the CONTRACT work.
The BUILDER shall promptly review such proposal and submit to
PURCHASER an estimate of the net increase or decrease in the
Revised Contract Price; the effect on weight, moments, and
centers; effects on the Performance Standard; and any delay in
<PAGE>
delivery of the Vessel to result from such change. If the BUILDER
and PURCHASER agree upon the net increase or decrease in Revised
Contract Price and any delay in delivery, this CONTRACT shall be
modified accordingly, and the BUILDER shall promptly proceed to
perform the change. Nothing herein shall require the BUILDER to
perform a Non-essential change proposed by the PURCHASER in the
absence of prior agreement as to the net increase or decrease in
Revised Contract Price, Performance Standard and any delay in
delivery and all other terms and conditions of this CONTRACT that
reasonably require modification as a consequence of the change.
(e) The BUILDER shall have the right to propose to the
PURCHASER in writing any change in the CONTRACT work. The BUILDER
shall transmit to the PURCHASER its proposed change accompanied
by an estimate of the net increase or decrease in the Revised
Contract Price; the effect on weight, moments, and centers;
effects on Performance Standard; and any delay in delivery of the
Vessel to result from such change. If the BUILDER and PURCHASER
agree upon the net increase or decrease in Revised Contract Price
and any delay in delivery, this CONTRACT shall be modified
accordingly, and the BUILDER shall promptly proceed to perform
the change. Nothing herein shall require the PURCHASER to accept
a change proposed by the BUILDER in the absence of prior
agreement as to the net increase or decrease in Revised Contract
Price and any delay in delivery. Any change work performed by
the BUILDER absent written agreement from the PURCHASER shall be
at BUILDER's own risk and expense.
(f) For good order the Parties may also agree to document
that repair work to PURCHASER furnished equipment for the Vessel,
and the Stern portion of the Existing Vessel as a change
notwithstanding that such documentation would not involve any
revision to the Specifications and also notwithstanding the Sale
and Purchase Agreement of attached Exhibit "J". The Parties have
agreed to utilize the attached Change Order Procedure, Exhibit
"D", for documenting and processing all changes pursuant to this
ARTICLE VII, CHANGES.
(g) Written consent of the Secretary is required to approve
any change to the CONTRACT work which exceeds $100,000 after the
aggregate sum of all changes to the CONTRACT work and the
enhancements to the Stern exceed two million dollars.
ARTICLE VIII - RIGHTS TO DESIGN DATA
(a) The BUILDER shall prepare and furnish Working Drawings
for the installation of the PURCHASER furnished equipment;
however, anything to the contrary notwithstanding, the BUILDER
shall have no obligation to furnish any other details for
operation or otherwise. PURCHASER'S review of Working Drawings
and data will not relieve BUILDER from its obligations under this
CONTRACT.
(b) All Working Drawings, and such other specified design
and engineering data required to be furnished to the PURCHASER by
the Specifications and produced by the BUILDER in the performance
of the CONTRACT (the "Data") shall be the property of the
BUILDER. The PURCHASER shall have the right to use the Data in
such manner as it may deem proper, including the right to make
<PAGE>
reproducibles and copies and the right to make alterations
therein, additions thereto, or other changes, provided that (i)
Data will not be made available to any of BUILDER's competitors
at any time by the PURCHASER, except for the sole purpose of
operating, maintaining or repairing the Vessel and (ii) BUILDER
and/or BUILDER's licensor will be entitled to a reasonable
royalty, fee, or commission in the event any Data is so made
available by the PURCHASER and is used for purposes other than
operating, maintaining or repairing the Vessel. The BUILDER also
shall have the unrestricted right to sell or transfer any Data.
(c) Each party shall take reasonable precautions to
maintain in confidence that information disclosed to it in the
performance of this CONTRACT which is specifically identified as
confidential, other than information, which at the time of
disclosure, is known or become available from sources other than
the party disclosing such information or which is or shall become
capable of being independently produced by those skilled in the
trade to which such information relates. Notwithstanding
anything to the contrary herein contained, the BUILDER shall not
be precluded from disclosing information which may be necessary
for the prosecution of the CONTRACT work, provided only that in
making such disclosure the BUILDER 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 it herein; nor shall the BUILDER be
responsible for unauthorized actions of its employees provided
that the aforementioned reasonable precautions have been taken by
it; nor shall anything contained herein restrict or limit the
BUILDER's use of any information contained in the Specifications,
whether confidential or not, for the performance of this
CONTRACT.
(d) PURCHASER shall have all rights to the Data at no cost
for completing construction of the Vessel in the event that this
CONTRACT is terminated due to default of BUILDER pursuant to
ARTICLE XXIV, DEFAULT BY BUILDER.
ARTICLE IX - EXTENSION OF TIME FOR COMPLETION OF WORK
(a) Except as provided under ARTICLE IV, ITEMS FURNISHED BY
PURCHASER, if the BUILDER shall have transmitted written notice
to the PURCHASER of a cause of delay delaying the performance of
the CONTRACT work not later than five (5) working days if due to
rain or fifteen (15) days after the date that knowledge of other
delay in the CONTRACT work has come to the BUILDER, or after the
date that it is determined the BUILDER should have known of the
delay in the CONTRACT work, if such date is an earlier date, and
the cause of delay is beyond the control of the BUILDER, as
provided in Subarticle (b) below, and which the BUILDER could
not reasonably have anticipated, the BUILDER shall be entitled to
an extension of the Delivery Date set out in this CONTRACT by the
number of days that the Delivery Date was delayed by said cause
of delay, except as otherwise provided in Subarticle (e) below.
If such notice is not given within the time allowed, such delay
may not be subsequently invoked.
(b) A cause of delay beyond the control of the BUILDER
shall include, without prejudice to the generality, delay caused
<PAGE>
by the PURCHASER or by any agency or instrumentality of the
United States, including delays in the granting of any consents
or approvals by the U.S. Maritime Administration, by Government
priorities, by civil, naval or military authorities, by acts of
God (including hurricanes) by earthquakes, lightning, floods,
union elections, strikes or other industrial disturbances; by
rain as more fully described in Subarticle (c) of this ARTICLE;
such explosions, fires, vandalism as are the result of causes
reasonably beyond the BUILDER's control; by riots, by
insurrections, by sabotage, by blockades, by embargoes, by
epidemics; by the unavailability or late delivery to the BUILDER
of CONTRACT required machinery, equipment and supplies to be
incorporated in the Vessel where it is determined that the
BUILDER's procurement or attempt to procure for such machinery,
equipment and supplies to be incorporated in the Vessel was
expeditious and prudent, that the BUILDER has exercised due
diligence in the performance of any acts required of the BUILDER
and that the BUILDER has exercised due diligence in expediting
deliveries under the BUILDER's purchase CONTRACT or in seeking
equivalent substitute performance; and by the late performance or
default of a subcontract where it is determined that the
BUILDER's choice of the subcontractor was reasonable and
responsible and the BUILDER has exerted all reasonable efforts to
expedite performance, avoid default and procure reasonable
substitute performance; and by the breach of this CONTRACT by the
PURCHASER.
(c) From the Effective Date of this CONTRACT until the
delivery of the Existing Vessel to the Shipyard, the following
provisions shall determine delay caused by rain:
(1) The rain experienced at the project site during
CONTRACT period must be found to be unusually severe. That is,
more severe than the rain anticipated for the project location
during any given month.
(2) The rain must actually cause a delay to the
completion of the project in accordance with the Schedule. The
delay must be beyond the control and without the fault or
negligence of the BUILDER.
(3) Delay in the completion of the project shall be
determined on a shift by shift basis. If the project is running
two shifts at the time it will require two shifts delay to equal
one day of delay and if the shipyard is working three shifts at
the time, it shall require three shifts delay to equal one day of
delay. A rain delay will only be considered a delay in the
completion of the project if its occurrence requires a shutdown
of a substantial portion of the outside work on the Vessel prior
to the mid-point of a shift on a regularly scheduled work day or
any day during the last thirty (30) days prior to the Delivery
Date and such delay shall only be considered a delay for that
particular shift.
The following schedule of monthly anticipated adverse
weather delays is based on National Oceanic and Atmospheric
Administration (NOAA) New Orleans (Audubon Weather Station
located near the project location) and will constitute the base
line for monthly weather time evaluations.
<PAGE>
JAN FEB MAR APR MAY JUNE JUL AUG SEP OCT NOV DEC
__________________________________________________________________
(11) (9) (5) (4) (4) (6) (9) (9) (6) (4) (5) (9)
The number of actual rain shift delays shall be
converted to full days as herein above stated. If the number of
actual rain delay days exceeds the number of days anticipated in
the table above, and if the conditions of paragraph (2) above are
met, the BUILDER shall be entitled to an extension of the
Delivery Date by the number of days that the Delivery Date was
delayed by the excess days of rain delay.
From the date the Existing Vessel is delivered to the
Shipyard until the completed Vessel is delivered to the
PURCHASER, the following provisions shall determine delays caused
by rain.
If rain occurs that requires a shutdown of a
substantial portion of outside work on the Vessel prior to twelve
noon on a regularly scheduled work day, or any day during the
last thirty days prior to the Delivery Date, BUILDER shall be
entitled to an extension of the Delivery Date for each such rain
day.
(d) Within five (5) working days of knowledge of any cause
of delay involving rain which may affect the Delivery Date, the
BUILDER shall notify PURCHASER in writing and shall furnish an
estimate, if possible, of the extent of the probable delay. Upon
receipt of any such notice, the PURCHASER shall, within five (5)
working days, acknowledge the same in writing and indicate
agreement that such development is to be treated as a cause of
delay event, or state any objections, and the reasons therefor,
to acceptance of this development as the cause
of delay event. If BUILDER fails to notify PURCHASER of a cause
of delay event involving rain within five (5) working days after
knowledge of the event, BUILDER shall be estopped from thereafter
claiming a delay event for any period of delay more than five (5)
working days prior to said notice. If PURCHASER should fail to
respond within five (5) working days, the claimed extension of
the Delivery Date shall be considered approved.
(e) For any cause of delay not involving rain which may
affect the Delivery Date, the BUILDER shall notify the PURCHASER
in writing and shall furnish an estimate, if possible, of the
extent of the probable delay. Upon receipt of any such notice,
the PURCHASER shall, indicate agreement that such development is
to be treated as a cause of delay event, or state any objections,
and the reasons therefor, to acceptance of this development as a
cause of delay event. If BUILDER fails to notify PURCHASER of a
cause of delay event within fifteen (15) days after knowledge of
the event, BUILDER shall be estopped from thereafter claiming
delay for any period of delay more than fifteen (15) working days
prior to said notice. If PURCHASER should fail to respond within
ten (10) days, the claimed extension of time shall be considered
approved.
(f) If the Parties are unable to resolve their differences,
<PAGE>
either party may request binding arbitration pursuant to ARTICLE
XXXVI - ARBITRATION, for determination of the period of delay.
The arbitration may not, however, revise the indicated
adjustments to be made to other dates as a consequence of such
delays.
ARTICLE X - PERFORMANCE STANDARD
a) The principal particulars of the design for the Vessels
are as shown in the attached Specification, Exhibit "A".
(b) Within the limits stipulated in ARTICLE XI, CONTRACT
PRICE ADJUSTMENTS, the BUILDER guarantees a trial speed of 15.5
knots at a keel draft of 36 feet in calm deep sea conditions,
with a clean bottom and windforce not exceeding Beaufort scale
No. 3, "Guaranteed Speed", provided that PURCHASER'S engine
delivers 11,000 shaft horsepower, notwithstanding any provisions
of attached Exhibit "J". The speed trials are to be carried out
as specified in the Specifications.
(c) The performance parameter in Subarticle (b) above is
hereinafter referred to as the "Performance Standard."
ARTICLE XI - CONTRACT PRICE ADJUSTMENTS
(a) In the event the BUILDER fails to deliver the Vessel on
the Delivery Date provided in this CONTRACT, as said Delivery
Date may be extended pursuant to this CONTRACT, plus ninety five
(95) calendar days the PURCHASER will suffer damages which are
difficult of ascertainment. It is agreed by the BUILDER and the
PURCHASER that the sum of TWENTY THOUSAND DOLLARS ($20,000.00)
per day represents the damages to the PURCHASER for each day of
delayed delivery, and the BUILDER shall pay to the PURCHASER in
discharge of its obligations to the PURCHASER for such failure to
deliver the Vessel, as liquidated damages and not as a penalty,
the said sum as per-day liquidated damages, for each calendar day
or part thereof elapsing after the said allowable delivery period
indicated in the previous sentence and until delivery of the
Vessel. In no event will BUILDER's liquidated damages for late
delivery of the Vessel exceed a cap of three percent (3%) of the
Revised Contract Price decreased by FOUR MILLION NINE HUNDRED
SEVENTY EIGHT THOUSAND FOUR HUNDRED FIFTY SIX DOLLARS.
(b) The Revised Contract Price shall not be affected or
changed by reason of the speed of the Vessel, as determined by
sea trial in accordance with the Specifications, being less than
the Guaranteed Speed, if such deficiency in the aforesaid speed
of the Vessel is less than five tenths (5/10) of one (1) knot
below the Guaranteed Speed. Adjustments in the Vessel's speed
resulting from modification and/or changes in the Specifications
or the drawings agreed hereinafter provided for in ARTICLE VII,
CHANGES, shall not be considered as such deficiency. However,
commencing with and including a deficiency of five tenths (5/10)
of one (1) knot below the Guaranteed Speed the Revised Contract
Price shall be reduced by TWO HUNDRED THIRTY THREE THOUSAND
DOLLARS ($233,000) for each additional tenth of one knot
deficiency at or below a deficiency of five tenths (5/10) of one
<PAGE>
knot. The maximum reduction in the Revised Contract Price for
Guaranteed Speed shall, however, be in no event more than the
amount as would be the case of a deficiency of nine-tenths (9/10)
of one (1) knot below the Guaranteed Speed.
(c) In no event will BUILDER's liability for Guaranteed
Speed exceed a cap of three percent (3%) of the Revised Contract
Price decreased by FOUR MILLION NINE HUNDRED SEVENTY EIGHT
THOUSAND FOUR HUNDRED FIFTY SIX DOLLARS.
(d) The rights of PURCHASER to a reduction of the Revised
Contract Price by reason of the provisions provided in this
ARTICLE XI shall be cumulative to the maximum aggregate sum not
to exceed three percent (3%) of the Revised Contract Price
decreased by FOUR MILLION NINE HUNDRED SEVENTY EIGHT THOUSAND
FOUR HUNDRED FIFTY SIX DOLLARS. In the event that the Vessel is
delivered with better speed than set forth in this ARTICLE XI,
such better performance does not entitle BUILDER to any premium,
special bonus, or offset against deficiencies in other
categories. Any reduction of the Revised Contract Price shall be
the PURCHASER'S sole remedy for failure to meet the speed
requirement which remedy shall not exceed three percent (3%) of
the Revised Contract Price decreased by FOUR MILLION NINE HUNDRED
SEVENTY EIGHT THOUSAND FOUR HUNDRED FIFTY SIX DOLLARS.
(e) The PURCHASER may terminate this CONTRACT and demand
delivery of the Vessel at any time after the aggregate maximum
for liquidated damages is attained pursuant to the provisions of
this ARTICLE XI(a). Upon such termination and delivery the
PURCHASER may proceed to move the Vessel elsewhere and the
BUILDER shall be responsible for the PURCHASER's reasonable
additional cost required to complete the Vessel to the
requirements of the Specifications. Notwithstanding any other
terms and conditions of this CONTRACT, the remedies set forth in
paragraph (a) and (e) of this ARTICLE XI shall be the PURCHASER's
sole remedy for late delivery of the Vessel.
(f) In the event PURCHASER fails to timely provide the
PURCHASER furnished items for the Vessel for meeting all
applicable laws, classifications, rules, regulations, standards
and certification requirements for the Vessel, so as to become
the sole cause for having to extend the Delivery Date for the
Vessel, the BUILDER will suffer damages which are difficult of
ascertainment. It is agreed by the PURCHASER and the BUILDER
that the sum of TWENTY THOUSAND DOLLARS ($20,000.00) per day
represents the damages to the BUILDER for each day of such
delayed delivery, and the PURCHASER shall pay to the BUILDER in
discharge of its obligations to the BUILDER for such failure to
deliver the PURCHASER furnished items and/or documentation, as
liquidated damages and not as a penalty, the said sum as per-day
liquidated damages, for each calendar day or part thereof
elapsing after the fourteenth (14th) day and until delivery of
the Vessel. The payment of such liquidated damages, or agreed
increase in the Revised Contract Price, shall be BUILDER'S sole
remedy for late delivery of PURCHASER furnished items. In no
event will PURCHASER's liquidated damages pursuant to this
Subarticle (f) exceed a cap of three percent (3%) of the Revised
Contract Price decreased by FOUR MILLION NINE HUNDRED SEVENTY
EIGHT THOUSAND FOUR HUNDRED FIFTY SIX DOLLARS.
<PAGE>
ARTICLE XII - SCHEDULES
The BUILDER shall furnish the following schedules covering
work to be performed by BUILDER hereunder as the Master Schedule
(Erection Schedule and the Structural Index Schedule). The
Master Schedule, (the "Schedule") as may be revised by BUILDER
from time to time, will show the dates for all required
activities for project completion. The level of activities
included in the Master Schedule shall be sufficient to assure
that each activity listed has been properly defined and analyzed
and that there is a direct correlation of activities in this
Master Schedule to individual supporting BUILDER and
subcontractor schedules for engineering, material procurement,
forebody construction, Existing Vessel cut/join process, testing,
etc. The Master Schedule shall be submitted to the PURCHASER
within thirty (30) days of the Effective Date of this CONTRACT.
The PURCHASER'S Representative shall meet with BUILDER'S
Representative weekly to review the Master Schedule and any
changes thereto for the purpose of determining the actual
progress of the job. This Master Schedule will also be used by
the PURCHASER in his evaluation of schedule extensions, delays,
default, schedule adjustments for changes, BUILDER performance in
support of Delivery Date and any other schedule dependent
CONTRACT or Contract Group issues. Use of this Master Schedule
does not, however, change or alter any other terms and conditions
of this CONTRACT including but not limited to ARTICLE IX, ARTICLE
XI, ARTICLE XXIV, and ARTICLE XXVI.
ARTICLE XIII - INSURANCE
(a) BUILDER, at its own expense, shall from the time the
first materials and/or
equipment destined for inclusion as part of the Vessel become the
risk of the BUILDER and until the Vessel has been delivered to
and accepted by PURCHASER, keep the Vessel and all materials,
outfit, equipment and appliances to be installed on or in the
Vessel, including the Existing Vessel, fully insured under a Full
Form (including prekeel) Marine Builder's Risk Policy. The
amount of insurance, the terms of the policy, the insurance
companies and the underwriters shall at all times be satisfactory
to PURCHASER and the Secretary. The amount of such insurance
shall be at least equal to the completed Revised Contract Price
of the Vessel plus the value of all PURCHASER furnished materials
and equipment. It is agreed that the total value of all
PURCHASER furnished materials and equipment is FOUR MILLION
DOLLARS ($4,000,000) each for the S/S King, S/S Solar and S/S
Spray and FIVE MILLION DOLLARS ($5,000,000) for the S/S Knight.
In addition, the Builder's Risk Policy will contain a provision
that from the time of removal of the forebody from the Existing
Vessel until redelivery of the forebody to PURCHASER, coverage
will continue on the forebody in the amount of ONE MILLION
DOLLARS ($1,000,000). The Builder's Risk Policy shall also
include Protection and Indemnity Insurance with the limits at
least equal to the completed Revised Contract Price of the Vessel
plus the value of all PURCHASER furnished materials and
equipment.
The Builder's Risk Policy shall be in the form as set forth
<PAGE>
in Exhibit "C" attached hereto and made a part hereof. The
Builder's Risk Policy shall have a loss payable clause that shall
provide that all losses in excess of $100,000 shall be payable to
the Secretary for distribution by him to himself, the BUILDER
and/or the PURCHASER as their interests may appear. For purposes
of this Agreement, the "other than owner limitation clause" of
the Builder's Risk Policy shall be deleted and not apply.
(b) BUILDER agrees, at its own expense, during the entire
term of BUILDER'S performance of work hereunder from the time the
first materials and/or equipment destined for inclusion as part
of the Vessel become at risk or services are performed until the
Vessel has been delivered to and accepted by PURCHASER, to carry
with an insurance company satisfactory to the PURCHASER and the
Secretary and authorized to do business in the State of Louisiana
the following insurance with limits in the amounts stated for
which a certificate of insurance is attached as Exhibit "E".
1)Worker's Compensation Insurance fully complying with the laws
of the state or states in which the work is to be done, including
the Longshoremen's and Harbor Worker's Compensation act in an
amount required by said Acts and Employer's Liability Insurance,
including Maritime Employer's Liability Insurance with provisions
for the payment of transportation, wages, maintenance and cure,
in the amount of $1,000,000.
2)Comprehensive General Liability Insurance in the amount of
$1,000,000 per occurrence, Combined Single Limit but in the
aggregate each annual period with respect to the
Products/Completed Operations Hazard and subject further to a
general aggregate of $4,000,000 for Bodily Injury to or Death of
persons and for Property Damage with the Watercraft Exclusion
deleted and including Contractual Liability Insurance to cover
Hold Harmless and Indemnity Agreement contained elsewhere in this
CONTRACT.
3)Automobile Liability and Property Damage Insurance covering
Bodily injuries or Death in the amount of $500,000 per person and
$1,000,000 per any one occurrence and Property Damage in the
amount of $500,000 per accident. This coverage applies to each
and every unit of automotive equipment operated or used by
BUILDER in the performance of their work.
4)Excess Liabilities covering the liabilities insured in the
above policies with a limit equal to the difference between the
above indicated limits and $20,000,000.00 any one occurrence.
5)All subcontractors working for BUILDER at the Shipyard will be
required to have and evidence to BUILDER the insurance coverage
indicated in Exhibit "G".
(c) The Builder's Risk policy shall include PURCHASER and
PURCHASER's agents and all its subsidiaries and affiliates and
the United States of America as assureds. Underwriters agree to
waive subrogation against PURCHASER's group and the United States
of America. The policy shall also provide no recourse against
the United States of America for payment of premium and a 10 day
prior written notice of cancellation or material change in the
<PAGE>
policy to the Secretary c/o the Maritime Administration, Chief,
Division of Marine Insurance.
For liabilities and indemnities assumed by BUILDER
under this CONTRACT all insurance policies of BUILDER (and its
subcontractors, if any) shall expressly waive subrogation as to
PURCHASER and the Secretary. It is further agreed that each such
policy, other than Worker's Compensation policies, shall name
PURCHASER as an additional assured, for liabilities and
indemnities assumed by BUILDER, it being understood that such
policies shall be endorsed to provide that BUILDER's policies are
primary to, and shall receive no contribution from, any insurance
policies maintained by PURCHASER.
(d) Should PURCHASER make any claim against the BUILDER for
any alleged post Delivery Date damage to the Stern section of the
Vessel as a result of the work performed by the BUILDER under
this CONTRACT, PURCHASER and BUILDER agree that any recovery by
the PURCHASER shall be limited to the coverage provided under the
CGL and excess liability policies to the limit of $20,000,000.
This will be PURCHASER's sole remedy for any alleged post
Delivery Date damage to the Stern section of the Vessel.
(e) All insurance policies in which both parties are named
insureds will have a "Cross Liability" Clause identical to the
Cross Liabilities clause as referenced in Exhibit "C", item F
excluding all claims arising under this CONTRACT.
(f) All insurance policies will provide for thirty (30)
days prior written notice of cancellation or material change to
PURCHASER from the underwriters.
(g) Prior to commencement of work, BUILDER shall furnish to
PURCHASER a Certificate of Insurance evidencing that coverages
outlined above are in full force and effect and the originals of
the above policies shall be available in BUILDER'S office at 5100
River Road, Avondale, Louisiana for review upon reasonable
request of PURCHASER.
(h) Any deductibles under such insurance shall be borne by
BUILDER.
(i) PURCHASER agrees, at its own expense, from the time the
first materials and/or equipment destined for inclusion as part
of the Vessel become at risk or services are performed until the
Vessel has been delivered to and accepted by PURCHASER, to carry
with an insurance company satisfactory to the BUILDER and
authorized to do business in the State of Louisiana the following
insurance with limits in the amounts stated for which a
certificate of insurance is attached as Exhibit "F":
1)Worker's Compensation Insurance fully complying with the laws
of the state or states in which the work is to be done, including
the Longshoremen's and Harbor Worker's Compensation act in an
amount required by said Acts and Employer's Liability Insurance,
including Maritime Employer's Liability Insurance with provisions
for the payment of transportation, wages, maintenance and cure,
in the amount of $1,000,000.
<PAGE>
2)Comprehensive General Liability Insurance in the amount of
$1,000,000 per occurrence, Combined Single Limit for Bodily
Injury to or Death of persons and for Property Damage with the
Watercraft Exclusion deleted and including Contractual Liability
Insurance to cover Hold Harmless and Indemnity Agreement
contained elsewhere in this CONTRACT.
3)Excess Liabilities covering the liabilities insured in the
above policies with a limit equal to the difference between the
above indicated limits and $20,000,000.00 any one occurrence.
(j) From the Effective Date of this CONTRACT until delivery
of the Existing Vessel to BUILDER'S yard, PURCHASER shall procure
and maintain Protection and Indemnity insurance in a form at
least as broad as, and with limits not less than, that provided
by the Rules of the Standard Steamship Ownership Protection and
Indemnity Association (Bermuda) Limited, and PURCHASER shall
require Club Managers to register BUILDER as a Co-Assured under
Rule 8.2 of said insurance and Club Managers have noted that
there may be a transfer of interest, either of the whole or a
part of the ship, created by the Agreement to Purchase and Sell
between the member, American Heavy Lift Shipping Company and
Avondale Industries, Inc. dated May 12, 1995 prior to the Vessel
entering the yard for refit. It is agreed that such transfer of
interest will not prejudice the member's cover.
Further, PURCHASER shall require that its brokers, B & P
International, Ltd. and Lloyd Thompson give notice to BUILDER of
any notice or information relating to the cancellation,
termination or cessation of the Vessel's Club Entry or any
material change of the Vessel's Club Entry immediately upon
receipt of such notice or information.
Further, from the Effective Date of this CONTRACT until
delivery of the Existing Vessel to BUILDER'S yard, PURCHASER
shall procure and maintain Collision Liability insurance in a
form at least as broad as that contained in the American
Institute Hull Clauses (June 2, 1977).
PURCHASER shall require Hull and War Risks insurance
Underwriters to acknowledge in writing that in the event that
BUILDER should be found liable in any manner or under any theory
of law or equity for, but not limited to, loss, damage, expense,
fines, and/or penalties arising out of the operation of the
existing Vessel and the Sale and Purchase Agreement, BUILDER
shall have the same rights and status under the above and
Collision Liability Insurance Policy as the PURCHASER.
For liabilities and indemnities assumed by PURCHASER under
this CONTRACT all insurance policies of PURCHASER (and its
subcontractors, if any) shall expressly waive subrogation as to
BUILDER. It is further agreed that each such policy, other than
Worker's Compensation policies, shall name BUILDER as an
additional assured, for liabilities and indemnities assumed by
PURCHASER, it being understood that such policies shall be
endorsed to provide that PURCHASER'S policies are primary to, and
shall receive no contribution from, any insurance policies
<PAGE>
maintained by BUILDER.
(k) All insurance policies in which both parties are named
insureds will have a "Cross Liability" Clause identical to the
Cross Liabilities clause as referenced in Exhibit "C", item F
excluding all claims arising under this CONTRACT.
(l) Except for the Protection and Indemnity and War Risks
insurance, all insurance policies will provide for thirty (30)
days prior written notice of cancellation or material change to
BUILDER from the underwriters.
(m) Prior to commencement of work, PURCHASER shall furnish
to BUILDER a Certificate of Insurance evidencing that coverages
outlined above are in full force and effect and the originals of
the above policies shall be available in PURCHASER'S office at
365 Canal Street, Suite 2670, New Orleans, Louisiana 70130 for
review upon reasonable request of BUILDER. Any deductibles under
such insurance shall be borne by PURCHASER excluding BUILDER's
Risk.
ARTICLE XIV - RISK OF LOSS - TOTAL LOSS OF A VESSEL
(a) In the event of an actual or constructive total loss of
the Vessel (as defined in BUILDER's insurance coverage) prior to
the delivery, construction of such Vessel shall proceed unless
the PURCHASER or the BUILDER shall elect within a reasonable
period of time to cancel the construction. If an election is made
to cancel the construction, the party electing to cancel shall
give notice to that effect to the other party. If no election is
made to cancel the construction, then construction and delivery
of the Vessel shall proceed in accordance with this CONTRACT, as
it may have been amended. In any such event an extension of the
CONTRACT Delivery Date of the Vessel pursuant to the provisions
of ARTICLE IX - EXTENSION OF TIME FOR COMPLETION OF WORK of this
CONTRACT shall be agreed upon.
(b) In the event that there is an actual or constructive
total loss of the Vessel prior to delivery and such loss results
from the operation of an insurable risk covered by insurance as
required under ARTICLE XIII - INSURANCE of this CONTRACT, all the
proceeds of such insurance payable as a result of such loss shall
be paid to the SECRETARY for distribution to the SECRETARY or the
PURCHASER, as appropriate, in an amount equal to (i) the total
progress payments made for the lost Vessel and (ii) the value of
all lost materials, outfit, equipment and appliances provided by
the PURCHASER for and used or to be used in the construction of
the Vessel, with the balance paid to the BUILDER. Such
distribution shall be made without regard to whether, under
Subarticle (a) above, construction is cancelled or proceeds. It
is agreed that only in the event of an actual or constructive
total loss of the Vessel prior to arrival of the existing vessel
at the Shipyard, the total progress payments for the lost Vessel
in (i) above shall not include the first progress payment paid
for the Stern of the existing vessel. It is agreed that in the
event of an actual or constructive total loss of the Vessel after
the arrival of the Existing Vessel at the Shipyard, the
obligations to pay PURCHASER shall include the amount of the
first progress payment paid by PURCHASER to BUILDER for the Stern
<PAGE>
of the Existing Vessel and this amount shall be utilized by
PURCHASER to exercise its option to purchase the S/S COASTAL
MANATEE, Official No. 287186 or another mutually agreeable
substitute Vessel.
(c) In the event that there is an actual or constructive
total loss of the Vessel prior to delivery which is not covered
by insurance and election is made by the PURCHASER or the BUILDER
to cancel construction of the Vessel, the BUILDER shall pay to
the SECRETARY for distribution to the SECRETARY or the PURCHASER,
as appropriate, an amount equal to all payments made under this
CONTRACT up to the date of the actual or constructive total loss.
It is agreed that only in the event of an actual or constructive
total loss of the Vessel prior to arrival of the existing vessel
at the Shipyard, the obligation in the above sentence for BUILDER
to pay the SECRETARY for distribution to the SECRETARY or the
PURCHASER, as appropriate, an amount equal to all payments under
this CONTRACT shall not include the first progress payment paid
by PURCHASER to BUILDER for the Stern of the existing vessel. It
is agreed that in the event of an actual or constructive total
loss of the Vessel after the arrival of the Existing Vessel at
the Shipyard the obligations of the BUILDER to pay the SECRETARY
shall include the first progress payment paid by PURCHASER to
BUILDER for the Stern of the Existing Vessel and this amount of
the first progress payment shall be utilized by PURCHASER to
exercise its option to purchase the S/S COASTAL MANATEE, Official
No. 287186 or another mutually agreeable substitute Vessel.
(d) In the event of damage to or loss of the Vessel or any
equipment or materials to be installed therein prior to the
delivery of the Vessel to PURCHASER and such loss or damage is
not an actual or constructive total loss, such loss or damage
shall be made good at BUILDER's expense; the proceeds of
insurance for said loss or damage shall be paid to the SECRETARY
for distribution to the BUILDER; and the CONTRACT Delivery Date
shall be extended as required by such additional work.
ARTICLE XV - INJURY TO EMPLOYEES AND OTHERS
(a) BUILDER agrees to protect, defend, indemnify and hold
PURCHASER, its agents, officers, directors, employees, and
representatives (hereinafter collectively referred to as "Owner
Group") harmless from and against all claims, losses, costs,
demand, damages, suits, judgments, penalties, liabilities, debts,
expenses and causes of action of whatsoever nature or character,
whether known or unknown, and whether arising out of contract,
tort, strict liability, unseaworthiness of any vessel,
misrepresentation, violation of applicable law and/or any cause
whatsoever, including but not limited to reasonable attorney's
fees and other costs and expenses, without limit and without
regard to the cause or causes thereof, which in any way arise out
of or are related to this agreement between PURCHASER and BUILDER
(including, without limitation, the performance or subject matter
of this CONTRACT or ingress, egress or presence on any premises,
whether land, buildings, vessels, or otherwise, in conjunction
with this CONTRACT) and which are asserted by or arise in favor
of BUILDER, BUILDER's agents, representatives or employees
(and/or their spouses or relatives) or BUILDER's subcontractors,
subcontractor's agents, representatives or employees (and/or
<PAGE>
their spouses or relatives) due to bodily injury or death,
whether or not caused by the sole, joint and/or concurrent
negligence, fault or strict liability of Owner Group, the
unseaworthiness of any vessel, or any other cause whatsoever. It
is further understood and agreed that this indemnity and defense
obligation shall include the obligation to reimburse PURCHASER
for any attorneys' fees, costs and expenses which may be incurred
by PURCHASER in enforcing the defense and indemnity obligations
set forth in this Article.
(b) For liabilities and indemnities assumed by BUILDER
under this CONTRACT all insurance policies of BUILDER (and its
subcontractors, if any) shall expressly waive subrogation as to
PURCHASER. It is further agreed that each such policy, other
than Worker's Compensation policies, shall name PURCHASER as an
additional insured, for liabilities and indemnities assumed by
BUILDER, it being understood that such policies shall be endorsed
to provide that BUILDER'S policies are primary to, and shall
receive no contribution from, any insurance policies maintained
by PURCHASER.
(c) Without in any manner limiting the generality of the
foregoing Subarticle (a), BUILDER agrees to protect, defend,
indemnify and hold Owner Group harmless from and against any and
all claims, demands, suits, administrative fines and penalties,
liabilities or causes of action, civil or criminal, including
those made by or before any administrative body or commission
established by any government having jurisdiction over the
premises, relating to the generation or disposal of hazardous
wastes or to the pollution or contamination of the waters, or
air, or earth, or otherwise directly or indirectly arising out of
or connected with or related to this CONTRACT or the performance
thereof, regardless of whether based on any violation or
purported violation of a statute, ordinance or regulation of any
governmental authority, but only if caused by BUILDER's
negligence. BUILDER assumes the obligation to comply with all
such statutes, ordinances and regulations. As used in this
Subarticle, the phrase "liabilities" includes without limitation
expenditures for controlling and removing pollutants,
expenditures for cleaning up any polluted areas, sums paid on
account of injury to or death of persons, and sums paid or
assessed on account of damage to or destruction of property,
public or private, including any and all natural resources and
marine life. The obligations of this Subarticle (c) will expire
on the Delivery Date.
(d) PURCHASER agrees to protect, defend, indemnify and hold
BUILDER, its agents, officers, directors, employees, and
representatives (hereinafter referred to collectively as
"Contractor Group") harmless from and against all claims, losses,
costs, suits, judgments, demands, damages, penalties,
liabilities, debts, expenses and causes of action of whatsoever
nature or character, whether known or unknown and whether arising
out of contract, tort, strict liability, unseaworthiness of any
vessel, misrepresentation, or violation of applicable law and/or
any cause whatsoever, including but not limited to reasonable
attorney's fees and other costs and expenses, without limit and
without regard to the cause or causes thereof, which in any way
arise out of or are related to this agreement between PURCHASER
and BUILDER (including, without limitation, the performance of
<PAGE>
subject matter of this CONTRACT or ingress, egress or presence on
any premises, whether land, buildings, vessels, or otherwise, in
conjunction with this CONTRACT and which are asserted by or arise
in favor of PURCHASER, PURCHASER's agents, representatives or
employees (and/or their spouses or relatives) or PURCHASER's
subcontractors, subcontractor's agents, representatives or
employees (and/or their spouses or relatives) due to bodily
injury or death, whether or not caused by the sole, joint and/or
concurrent negligence, fault or strict liability of Contractor
Group, the unseaworthiness of any vessel, or any other cause
whatsoever. It is further understood and agreed that this
indemnity and defense obligation shall include the obligation to
reimburse BUILDER for any attorneys' fees, costs and expenses
which may be incurred by BUILDER in enforcing the defense and
indemnity obligations set forth in this Article.
(e) For liabilities and indemnities assumed by PURCHASER
under this CONTRACT all insurance policies of PURCHASER (and its
subcontractors, if any) shall expressly waive subrogation as to
BUILDER. It is further agreed that each such policy, other than
Worker's Compensation policies, shall name BUILDER as an
additional insured, for liabilities and indemnities assumed by
PURCHASER, it being understood that such policies shall be
endorsed to provide that PURCHASER'S policies are primary to, and
shall receive no contribution from, any insurance policies
maintained by BUILDER.
(f) Without in any manner limiting the generality of the
foregoing Subarticle (d), PURCHASER agrees to protect, defend,
indemnify and hold Contractor Group harmless from and against any
and all claims, demands, suits, administrative fines and
penalties, liabilities or causes of action, civil or criminal,
including those made by or before any administrative body or
commission established by any government having jurisdiction over
the premises, relating to the generation or disposal of hazardous
wastes or to the pollution or contamination of the waters, or
air, or earth, or otherwise directly or indirectly arising out of
or connected with or related to this CONTRACT or the performance
thereof, regardless of whether based on any violation or
purported violation of a statute, ordinance or regulation of any
governmental authority, but only if caused by PURCHASER's
negligence. PURCHASER assumes the obligation to comply with all
such statutes, ordinances and regulations. As used in this
Subarticle, the phrase "liabilities" includes without limitation
expenditures for controlling and removing pollutants,
expenditures for cleaning up any polluted areas, sums paid on
account of injury to or death of persons, and sums paid or
assessed on account of damage to or destruction of property,
public or private, including any and all natural resources and
marine life. The obligations of this Subarticle (f) will expire
on the Delivery Date.
ARTICLE XVI - APPOINTMENT OF REPRESENTATIVES
(a) PURCHASER designates Alan B. Nierenberg to be its
authorized representative for all matters during the performance
of this CONTRACT.
<PAGE>
(b) BUILDER designates Mr. Bruce Wismar to be its BUILDER's
Program Manager for administering the performance of this
CONTRACT.
(c) The Parties agree that its named representative will be
available for consultations during normal working hours.
With respect to the performance of this CONTRACT, the
PURCHASER shall be entitled to designate authorized
representatives who shall have authority to give directions under
this CONTRACT. Notice of all such designations (together with a
statement of the scope of authority of the designee) and notice
of the revocation of any prior designation shall be given
promptly to the BUILDER in writing. The BUILDER shall have no
obligation to follow any directions of the PURCHASER except those
which shall be issued in writing over the signature of an
authorized representative of the PURCHASER acting within the
scope of his authority.
ARTICLE XVII - MATERIALS AND WORKMANSHIP
(a) In performing the CONTRACT work, the BUILDER shall
comply with all of the requirements of the American Bureau of
Shipping, the United States Coast Guard and all other agencies
having jurisdiction over the CONTRACT work (hereinafter called
individually a "Regulatory Body" and collectively "Regulatory
Bodies") notwithstanding that there may be shown in or on any
drawing set out in the Specifications and the specific
requirements of any item of CONTRACT work, and notwithstanding
any approvals shown upon said drawing , subject, however, to the
following: (i) if the Specifications specifically require work in
excess of that required by the applicable Regulatory Body, such
specifically required work shall be performed by the BUILDER as
CONTRACT work required by this CONTRACT; (ii) if the
Specifications require work which is less than that required by
the applicable Regulatory Body, the BUILDER shall perform the
work required by the Regulatory Body as CONTRACT work required by
this CONTRACT; (iii) if the Specifications require work which is
less than that required by the applicable Regulatory Body, and
such regulatory requirement is in compliance with a rule or an
interpretation of a rule of the Regulatory Body made effective
subsequent to 7 March 1995, and said requirement effects an
increase in the cost of the CONTRACT work and/or the Delivery
Date, the Revised Contract Price and/or the Delivery Date shall
be adjusted pursuant to the provisions of ARTICLE VII - CHANGES
of this CONTRACT.
(b) Unless otherwise specifically provided in the
Specifications, all workmanship, equipment, materials, and
articles incorporated in the Vessel shall be new, of first class
marine quality and not known to be a discontinued line. The
BUILDER shall furnish to the PURCHASER the purchase
specifications and vendors' specifications for materials or
components which BUILDER contemplates incorporating in the Vessel
and all changes thereto, and names of the manufactures, vendors
and subcontractors of the principal items of machinery,
mechanical and other equipment and work which it contemplates
incorporating in or having performed on the Vessel.
<PAGE>
ARTICLE XVIII - INSPECTION - APPROVAL OF DRAWINGS
(a) All material and workmanship, unless otherwise
designated by the Specifications or by this CONTRACT, shall be
subject to inspection by representatives of the PURCHASER and
representatives of Regulatory Bodies at any and all proper times
during manufacture and/or construction at any and all places
where such manufacture and/or construction are carried on, and
BUILDER's subcontracts shall make appropriate provision therefor.
Access to the Shipyard for the performance and administration
therein of all inspections and tests that may be required by the
representatives of the PURCHASER or representatives of Regulatory
Bodies shall at all times be subject to BUILDER's security
requirements.
(b) The BUILDER shall furnish promptly at the Shipyard,
without additional charge, all reasonable facilities and
materials, including suitably furnished offices for the PURCHASER
with light, heat and air conditioning, as required by climatic
conditions, telephone, desks, drawing tables, and filing
cabinets, necessary for the convenient administration of the
inspection and tests that may be required by the representatives
of the PURCHASER and Regulatory Bodies. Long distance telephone
charges will be for the account of PURCHASER.
(c) Within thirty (30) days after the effective date of
this CONTRACT, the BUILDER shall submit for approval a Working
Drawing schedule listing all Working Drawings to be prepared and
the dates by which each Working Drawing is to be completed.
Copies of all Working Drawings will be submitted to PURCHASER for
review, and the PURCHASER shall return the Working Drawings
within fourteen (14) days after receipt thereof marking
corrections required for compliance with the Specifications.
Failure of the PURCHASER to return a Working Drawing within
fourteen (14) days shall constitute acceptance of such Working
Drawing. Approval or acceptance of such Working Drawings ,
materials and components or schedules shall not relieve the
BUILDER from the responsibilities specified in this CONTRACT.
BUILDER will keep PURCHASER advised of required reviewing
priorities. BUILDER will provide PURCHASER with copies of all
correspondence with Regulatory Bodies. BUILDER will provide
PURCHASER full access to all working documents for this CONTRACT.
(d) The PURCHASER shall promptly approve all work and
materials conforming to the requirements of this CONTRACT and
shall promptly reject all work and materials not conforming to
the requirements of this CONTRACT. Rejected workmanship shall be
satisfactorily corrected, and rejected material shall be
satisfactorily repaired or replaced with proper material without
charge therefor, unless such work or material shall have been
furnished by the PURCHASER, in which event the remedying of such
defective work, or the replacing of such defective material, if
done by the BUILDER, shall be treated as a change under this
CONTRACT. The BUILDER shall promptly segregate and remove the
rejected material. The acceptance of such workmanship and
materials shall not prejudice the rights of the PURCHASER under
this CONTRACT.
<PAGE>
(e) All inspection, tests, and approvals shall be performed
in such manner as not to unnecessarily delay the work.
(f) The provisions of this Article are subject to the
provisions of other ARTICLES of this CONTRACT and Specifications
relative to the trials, tests and acceptance of work done on the
Vessel.
(g) If requested by the Secretary upon delivery of the
Vessel, the PURCHASER will provide or cause to be provided a
complete set of drawings used for the construction of the Vessel
on microfilm or other acceptable format.
ARTICLE XIX - TRIALS
(a) The Vessel shall have the trials set forth in the
Specifications and this CONTRACT. The reasonably necessary
expenses of all trials shall be borne by the BUILDER except that
the PURCHASER will furnish the operating crew for the Vessel.
(b) When work on the Vessel is substantially complete, as
required by this CONTRACT, and when the BUILDER has made
sufficient tests at the dock to the satisfaction of the PURCHASER
to be reasonably sure of compliance with the requirements of this
CONTRACT, the Vessel shall be subject to trials at sea as
prescribed by the Specifications and this CONTRACT.
(c) If there is reasonable cause to question its
performance, new machinery or machinery repaired by BUILDER shall
be opened up for post-trial inspection and examination after
completion of such trials at sea. If any defects, deficiencies
or damage appear in the work performed by the BUILDER or in the
materials or equipment supplied by the BUILDER excluding the
Stern, the defects, deficiencies or damage shall be corrected by
and at the expense of the BUILDER, after which the machinery
shall be closed and connected, ready for service.
ARTICLE XX - ADDITIONAL TRIALS - EXPENSES
If, at and upon the trials described in ARTICLE XIX - TRIALS
hereof, there shall be any failure of the Vessel to meet the
requirements of the Specifications and this CONTRACT, the BUILDER
shall, after corrective action is taken and provided a trial is
necessary to reasonably prove the effectiveness of the corrective
action, be required to make further trials, sufficient in number
reasonably to demonstrate compliance with the Specifications and
this CONTRACT. Except for the operating crew furnished by
PURCHASER, or the Stern, the costs of all additional trials
required by this ARTICLE XX - ADDITIONAL TRIALS - EXPENSES shall
be borne by the BUILDER, except that with regard to any trials
made necessary by failure or malfunction upon prior trial of
equipment or machinery furnished by the PURCHASER, the PURCHASER
shall bear the cost of such additional trial.
ARTICLE XXI - ACCEPTANCE AND DELIVERY OF THE VESSEL
(a) On completion of the inspections by PURCHASER, as well
as all tests, and trials and rectification of any defects
<PAGE>
discovered therein, with the exception of those defects as may be
listed in the Delivery Certificate by PURCHASER, a meeting will
be held between the BUILDER and PURCHASER at which:
(i) The BUILDER will report to PURCHASER on the work
carried out in rectifying any defects or omissions found in the
Vessel during the sea trials and/or any work outstanding on
completion of the sea trials;
(ii) PURCHASER'S representatives may conduct a final
inspection of the Vessel in the presence of BUILDER'S
representatives;
(iii)The Parties will agree to the quantity and value
of fuel and lubricants remaining on board after completion of all
tests and sea trials to be charged to PURCHASER.
(iv) BUILDER will present to PURCHASER evidence that
the Vessel is certified by the U.S. Coast Guard and ABS (interim
certification), unless PURCHASER furnished equipment, or the
Stern precludes such certification.
(v) PURCHASER shall pay to BUILDER any amount then due
under the provisions of ARTICLE VI, PAYMENT OF CONTRACT PRICE -
METHOD OF PAYMENT.
(vi) Upon completion of items (i), (ii), (iii), (iv),
and (v) above and any other outstanding matters, the BUILDER will
deliver the Vessel to PURCHASER, whereupon PURCHASER will accept
the Vessel by the concurrent execution by both Parties of a
Delivery Certificate, whereupon such title to the Vessel as
remains in BUILDER will pass to PURCHASER.
(b) The interval between completion of the sea trials and
the delivery shall be sufficient to enable the inspections and
rectifications of defects to be completed, but in any event shall
not be less than four (4) business days.
(c) Within five (5) business days after delivery, PURCHASER
shall remove the Vessel from BUILDER'S yard. The Vessel shall be
deemed ready for delivery when it has received the necessary
certification by the U. S. Coast Guard without any qualification
or limitation that would significantly affect the operation or
commercial value of the Vessel in the intended service and has
been judged ready for delivery without any qualification or
limitation that would significantly affect the commercial value
or operation of the Vessel in the intended service by the
Surveyor of the American Bureau of Shipping assigned to the
Vessel. If after the necessary U.S. Coast Guard certification
and ABS approvals have been obtained and there still remains a
good faith dispute between the parties as to whether the Vessel
is ready for delivery, the PURCHASER may deposit the estimated
cost of the disputed items into an escrow account in accordance
with the provisions of Subarticle XXV(f) hereof and accept
delivery of the Vessel.
(d) If by agreement between the Parties and notwithstanding
the provisions of this ARTICLE the Vessel is accepted by
PURCHASER with any known outstanding discrepancies or defects not
<PAGE>
corrected prior to delivery, each deficiency or deviation from
the Specifications and drawings not previously approved by
BUILDER and PURCHASER shall be set out in a list and signed by
PURCHASER and BUILDER. At the option of PURCHASER, the Parties
may agree on money damages in lieu of performance by BUILDER for
each such deficiency or deviation.
(e) The Vessel shall be turned over by BUILDER to PURCHASER
in midstream of the Mississippi River at the Shipyard.
ARTICLE XXII - GUARANTEE
(a) Notwithstanding any inspection or failure to reject by
the PURCHASER or any Regulatory Body pursuant to ARTICLES XVIII
through XXI of this CONTRACT, if, at any time within twelve (12)
months after delivery of the Vessel there shall arise or be
discovered any weakness, any deficiency, any failure, any
breaking down or deterioration in the design, workmanship,
equipment, machinery, or material, furnished by the BUILDER or
its subcontractors in performing the CONTRACT work, excluding all
PURCHASER furnished items and excluding the Stern except for work
performed by the BUILDER pursuant to the Specifications, which
causes the Vessel to not function as prescribed and as intended
by the Specifications and this CONTRACT (herein called a
"Guarantee Deficiency"), such Guarantee Deficiency shall be made
good, at the BUILDER's expense, to the requirements of the
Specifications and this CONTRACT; provided, however, the BUILDER
shall not be responsible for the cost of correcting any such
Guarantee Deficiency due to ordinary wear and tear, nor to the
extent increased by the negligence or other improper act of the
PURCHASER or any operator of the Vessel or of any other person
other than the BUILDER or its subcontractors during said period.
The liability of the BUILDER to the PURCHASER under this CONTRACT
on account of any such Guarantee Deficiency shall not extend
beyond the actual corrective repair or replacement thereof at
straight time commercial shipyard or ship repair yard rates, or
overtime rates that have been approved by BUILDER in case of
emergency, including the cost of the dockage of the Vessel, if
necessary. The BUILDER shall not be liable to the PURCHASER for
any damage to such Vessel or its equipment or cargo or other
property of the PURCHASER or for consequential damages of the
PURCHASER arising out of any such Guarantee Deficiency, except
that in the event any Guarantee Deficiency in any item of
machinery or equipment furnished by the BUILDER, or in the event
that any workmanship or material furnished by the BUILDER in
performance of work upon the Vessel's machinery or equipment,
gives rise to a Guarantee Deficiency causing any damage to such
items of machinery or equipment, the BUILDER shall be liable not
only for the cost of correcting or repairing such Guarantee
Deficiency, but also shall be liable for the cost of correcting
or repairing such damage to such item of machinery or equipment
caused by such Guarantee Deficiency. Any work required to be
performed pursuant to the provisions of this ARTICLE shall be
carried out, if practicable and at the PURCHASER's option, at the
shipyard of the BUILDER. The BUILDER may, with the concurrence of
the PURCHASER, have such work performed by its subcontractor,
another shipyard or repair facility. The PURCHASER may, however,
have such work performed by a shipyard or ship repair yard at any
port satisfactory to it and in that event the BUILDER shall be
<PAGE>
liable to the PURCHASER for the reasonable expense thereof at the
straight time commercial shipyard or ship repair yard rates
prevailing in such port areas, including the cost of dockage of
the Vessel, if necessary. Should the BUILDER so desire, it may
have an engineer onboard the Vessel for the guarantee period who
shall have full opportunity to observe and inspect the working of
the Vessel in all its parts, but without any directing or
controlling authority over the Vessel. PURCHASER will provide
suitable accommodations and board to the engineer during the
guarantee period without charge.
(b) The PURCHASER promptly shall notify the BUILDER of any
Guarantee Deficiencies or damage for which the BUILDER is liable
pursuant to Subarticle (a) above that are discovered or appear
within the guarantee period, but in no event later than ten (10)
days after the end of such period. In the event the PURCHASER
proposes the repair or correction of such Guarantee Deficiency or
damage before the Vessel reaches its next continental United
States port, notice shall be given to the BUILDER not later than
five (5) days after the discovery of the Guarantee Deficiency or
damage and before repair, otherwise notice shall be given five
(5) days after the Vessel next reaches a continental United
States port and before the Guarantee Deficiency or damage is
repaired or corrected. Whenever practical (taking into
consideration the necessity of keeping the Vessel on schedule)
the BUILDER shall be given an opportunity to inspect the
Guarantee Deficiency or damage before it is remedied.
(c) A final guarantee survey of the Vessel shall be
conducted by the PURCHASER at or near the expiration of the
guarantee period. Such survey shall be based on the Guarantee
Deficiencies in the CONTRACT work appearing or discovered during
the guarantee period. In the event that the Vessel is not
available for the guarantee survey on or before the end of the
guarantee period, the PURCHASER promptly shall submit to the
BUILDER a list of all of the Guarantee Deficiencies in the
CONTRACT work appearing or discovered during the guarantee period
and all damage for which the BUILDER is liable under the
provisions of this ARTICLE. The final guarantee survey shall be
held at such port in the United States as the PURCHASER
designates and seven (7) days written notice of time and place
for such guarantee survey shall be given to the BUILDER by the
PURCHASER.
(d) For the determination of any underwater Guarantee
Deficiencies, the PURCHASER, at the PURCHASER's expense, may
retain two (2) divers, one to be chosen by BUILDER, to inspect
the bottom of the Vessel in clear water. If both divers agree in
writing to the extent of underwater Guarantee Deficiencies to the
Vessel then PURCHASER may drydock the Vessel within twenty four
(24) months after its delivery at its expense and BUILDER will
not be responsible for repairs of the Guarantee Deficiencies
except as documented by the agreement of both divers. If both
divers cannot agree to the extent of the underwater Guarantee
Deficiencies to the Vessel then PURCHASER may request that
BUILDER drydock the Vessel at its expense within fifteen months
following the Vessel delivery and BUILDER's liability for
underwater Guarantee Deficiencies will be limited to those which
arose during the twelve (12) month guarantee period. If it
<PAGE>
becomes necessary to drydock the Vessel solely for the correction
of a Guarantee Deficiency for which the BUILDER is responsible,
the cost of the entire drydocking required for the correction of
the Guarantee Deficiency, as well as the cost of remedying the
deficiency, as provided in this ARTICLE , shall be at the expense
of the BUILDER.
(e) At the end of the guarantee period herein provided, the
BUILDER agrees to transfer and assign to the PURCHASER, as to any
item of material installed in the Vessel, the guarantee rights of
the BUILDER against the vendor of such item of material which
under the terms of such vendor's guarantee the vendor's
obligations extend for a period beyond the guarantee period
herein set forth; provided that the BUILDER may exclude from such
assignment any rights against the vendor in favor of the BUILDER
for Guarantee Deficiencies and damages within the guarantee
period in ARTICLE XXII - GUARANTEE (a) hereof. BUILDER will
assign to PURCHASER any warranties in excess of the twelve (12)
months after the delivery of the Vessel that BUILDER is able to
obtain from paint vendors, if any.
(f) The liability (if any) of the BUILDER for a Guarantee
Deficiency and for any damage to the equipment or machinery of
the Vessel, resulting from any Guarantee Deficiency, as set out
in this ARTICLE, is the exclusive remedy of the PURCHASER in
warranty, contract, tort or otherwise against the BUILDER for any
Guarantee Deficiency. Except for the provisions of ARTICLE XI,
CONTRACT PRICE ADJUSTMENTS, in no event under this CONTRACT shall
BUILDER be responsible for any sum in excess of the repairs
and/or replacement as specified herein it being specifically
understood that BUILDER is not responsible for delay, demurrage,
loss of profits, loss of use or any other consequential damages.
It is specifically understood that any Guarantee Deficiency
reported after the twelve (12) month guarantee period, except for
the underwater Guarantee Deficiencies of Subarticle (d) above,
and all damages therefrom, shall be the exclusive responsibility
of PURCHASER.
(g) THE GUARANTEES SET FORTH IN THIS ARTICLE XXII,
GUARANTEE, RELATING TO ANY GUARANTEE DEFICIENCY ARE EXCLUSIVE AND
ARE IN LIEU OF ALL IMPLIED WARRANTIES (INCLUDING BUT NOT LIMITED
TO ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE AND WORKMANLIKE SERVICES).
(h) Anything to the contrary notwithstanding, the BUILDER
does not guarantee PURCHASER furnished materials or equipment,
nor the Stern, for any Guarantee Deficiency items except to meet
the requirements stipulated in ARTICLE X, PERFORMANCE STANDARD.
ARTICLE XXIII - DEFAULT BY PURCHASER
The following shall constitute events of default by
PURCHASER under this CONTRACT:
(a) Delay in Payment
Failure of PURCHASER to make payment to BUILDER as required
under the provisions of ARTICLE VI - PAYMENT OF CONTRACT PRICE -
METHOD OF PAYMENT, provided payment is not received by BUILDER
for a period of ten (10) days after written notice to PURCHASER
<PAGE>
thereof by BUILDER.
(b) Non-Compliance with other Undertakings
Default in compliance with or the due and punctual
performance of any material warranties, covenants and agreements
required to be maintained and performed by PURCHASER hereunder
other than the scheduled delivery of the S/S Spray, which default
continues unremedied for a period of thirty (30) days after
written notice to PURCHASER thereof by BUILDER.
(c) Receivership or Insolvency
An order of a court of competent jurisdiction, other than
upon petition by BUILDER, appointing a receiver, liquidator or
trustee of the assets of PURCHASER or any part thereof or a
decree of such court adjudicating PURCHASER as bankrupt, or
declaring PURCHASER insolvent.
(d) Acts of Bankruptcy
The filing by PURCHASER of a voluntary petition in
bankruptcy, or the making by PURCHASER of an assignment for the
benefit of its creditors, or the admission by PURCHASER in
writing of its inability to pay its debts generally as they
become due, or its consent to, acquiescence in or failure to
contest the appointment of a receiver or receivers of all or part
of its assets.
(e) Voluntary Reorganization
Any petition or any answer proposing the reorganization of
PURCHASER pursuant to the Federal Bankruptcy Act or any similar
law, federal or state, being filed against PURCHASER in any court
and not being dismissed or denied within sixty (60) days after
the date on which such petition or answer was filed, or the
approval of any such petition or answer by any court.
(f) Involuntary Reorganization
The filing of a petition by any of the creditors of
PURCHASER to reorganize PURCHASER pursuant to the Federal
Bankruptcy Act or any similar law, federal or state, and such
petition not being dismissed or denied within sixty (60) days
after the date on which such petition was filed, or the approval
of such petition by the court having jurisdiction thereof.
(g) Seizure of Assets
The assumption of custody or control of the whole or any
substantial part of the assets of PURCHASER for a period in
excess of thirty (30) days by any governmental agency or any
court of competent jurisdiction at the instance of any
governmental agency.
(h) Nondelivery of S/S Spray
Failure to timely deliver the S/S Spray as required by
ARTICLE IV, ITEMS FURNISHED BY PURCHASER.
ARTICLE XXIV - DEFAULT BY BUILDER
The following shall constitute events of default by BUILDER
under this CONTRACT:
<PAGE>
(a) Receivership or Insolvency
An order of a court of competent jurisdiction, other than
upon petition by PURCHASER, appointing a receiver, liquidator or
trustee of the assets of BUILDER or any part thereof, or a decree
of such a court adjudicating BUILDER as bankrupt, or declaring
BUILDER insolvent.
(b) Acts of Bankruptcy
The filing by BUILDER of a voluntary petition in bankruptcy,
or the making by BUILDER of an assignment for the benefit of its
creditors, or the admission of BUILDER in writing of its
inability to pay its debts generally as they become due, or its
consent to, acquiescence in or failure to contest the appointment
of a receiver or receivers of all or any part of its assets.
(c) Voluntary Reorganization
Any petition or answer proposing the reorganization of
BUILDER pursuant to the Federal Bankruptcy Act or any similar
law, federal or state, being filed against BUILDER in any court
and not being dismissed or denied within sixty (60) days after
the date on which such petition or answer was filed, or the
approval of such petition or answer by any court of competent
jurisdiction.
(d) Involuntary Reorganization
The filing of a petition to reorganize BUILDER by any of the
creditors of BUILDER pursuant to the Federal Bankruptcy Act or
any similar law, federal or state, and such petition not being
dismissed or denied within sixty (60) days after the date on
which such petition was filed, or the approval of such petition
by the court having jurisdiction thereof.
(e) Attachment of Liens or Privileges
The attachment of any lien or privilege to the Vessel not
due to the acts or omissions of PURCHASER or persons in privity
with it, whether under federal or state law or the General
Maritime Law, if such lien is not removed within sixty (60) days
after written demand by PURCHASER to BUILDER for such removal or
unless BUILDER, within such time, shall not have provided
PURCHASER with a bond by sureties acceptable to PURCHASER against
such lien in an amount equal to the face amount of such lien.
(f) Non-Compliance
Default in compliance with or the due performance of any
material warranties, covenants and agreements required to be
maintained and performed by BUILDER hereunder, which default
continues unremedied for a period of third (30) days after
written notice to BUILDER thereof.
ARTICLE XXV - ACTION BY BUILDER UPON DEFAULT BY PURCHASER
(a) Right of Termination
In the event that any one or more of the events of default
specified in ARTICLE XXIII - DEFAULT BY PURCHASER of this
CONTRACT shall have occurred and be continuing, BUILDER, if it so
elects, may terminate this CONTRACT thirty (30) days (ten (10)
days if for non-payment and as otherwise indicated in ARTICLE IV,
<PAGE>
ITEMS FURNISHED BY PURCHASER, for PURCHASER's failure to deliver
the S/S King) after written notice has been given to the
PURCHASER.
(b) Completion and Sale of Vessel
In the event of such termination, PURCHASER agrees that
BUILDER shall be entitled to continue construction and to sell
the Vessel while work is in process or after completion. Sale of
the Vessel under this ARTICLE XXV means all work-in-process,
materials, articles of machinery, outfit and equipment and
supplies to be installed in the Vessel. Pending such sale,
BUILDER shall be entitled to retain any progress payments already
paid.
(i) Any such sale may be effected by the BUILDER
either by public auction (in which case BUILDER, its agents or
affiliates may bid for and buy the Vessel) or by private contract
on such terms and conditions as BUILDER may see fit, but BUILDER
shall be bound in good faith to secure the best price obtainable,
and no such private contract shall be effective until fifteen
(15) days after BUILDER has notified PURCHASER and the Secretary
of its intention to enter such contract and the purchase price
thereunder.
(ii) In the event BUILDER elects to complete and sell
the Vessel, then BUILDER thereafter shall repay to PURCHASER (but
without interest) an amount equal to the sum of all progress
payments made by PURCHASER, less any deficiency between (a) the
Revised Contract Price as adjusted under this CONTRACT at the
time of such sale and (b) the net price realized for the Vessel
from the sale, after payment of all additional costs, charges and
expenses incurred by BUILDER resulting from such default.
(iii)In the event that BUILDER elects to complete the
Vessel, PURCHASER shall be entitled to negotiate the revival of
this CONTRACT at any time before the sale of the Vessel by
providing satisfactory evidence that the events causing the
default have been remedied.
(c) Abandonment of Construction
In the event of termination, BUILDER may at its option elect
not to complete the Vessel and to sell the Vessel in its state of
completion at the time of abandonment of construction. If BUILDER
so elects, BUILDER shall notify PURCHASER in writing of its
election and shall thereafter repay to PURCHASER (but without
interest) all progress payments already paid by PURCHASER less
the sum of: (i) One-Hundred ten percent (110%) of BUILDER's
reasonable costs incurred in the CONTRACT work to the date of the
abandonment of construction, plus (ii) such other costs, charges,
expenses and damages as BUILDER may have incurred as a result of
the default of PURCHASER, minus (iii) the proceeds of any sale of
the Vessel in its state of completion as of the time of
abandonment of construction and the reasonable value of any part
thereof that remains unsold. BUILDER shall be bound in good faith
to secure the best price obtainable therefor for purposes of the
determination of item (iii) of the foregoing sum; and if
PURCHASER shall have cause to believe that BUILDER has not
obtained the best price and terms possible, PURCHASER or the
Secretary shall have the option of purchasing the Vessel for cash
<PAGE>
within thirty (30) days after notice thereof by BUILDER to
PURCHASER at the price and on the terms of the offer by a third
party deemed by BUILDER to be most favorable to BUILDER.
(d) Alternative Remedies
The rights conferred upon BUILDER under the terms of this
ARTICLE XXV - ACTION BY BUILDER UPON DEFAULT OF PURCHASER shall
not be exclusive of any other remedies in law or equity which
might be otherwise available to BUILDER upon the happening of the
events of default specified in ARTICLE XXIII - DEFAULT BY
PURCHASER hereof. Failure of BUILDER to exercise any of the
rights conferred upon it hereunder with respect to any default of
PURCHASER shall not constitute a waiver of any rights of BUILDER
with respect to any other events of default of PURCHASER
hereunder.
(e) Contract Group Adjustments
The Revised Contract Price increase due and payable as part
of the settlement of accounts pursuant to this ARTICLE XXV,
ACTION BY BUILDER UPON DEFAULT BY PURCHASER shall include any
adjustment of the Revised Contract Price to be made pursuant to
ARTICLE III, CONTRACT GROUP.
(f) Escrow of Funds During Disputes
In the event any payment or payments otherwise due to
BUILDER under this CONTRACT are subject to a good faith dispute
between the parties arising under any of the other ARTICLES of
this CONTRACT, then, pending resolution of said dispute,
PURCHASER or the Secretary shall have the right to prevent
termination of this CONTRACT by BUILDER by depositing the dollar
amount of payments then under dispute with an escrow holder which
shall be a national banking association or trust company. Said
amount shall be held by the escrow holder in interest-bearing
accounts and any interest accruing thereon (at the rate paid by
the escrow holder and not at the rate defined elsewhere in this
CONTRACT), less lawful charges, shall be paid to the party who
prevails in any such dispute to the extent it prevails. This
Subarticle shall be subject to all other ARTICLES of this
CONTRACT and is intended to provide for the specific event of
imminent termination of this CONTRACT by BUILDER or delay in the
delivery of the Vessel.
ARTICLE XXVI - ACTION BY PURCHASER UPON DEFAULT OF BUILDER
(a) In the event that any one or more of the events of
default specified in ARTICLE XXIV - DEFAULT BY BUILDER of this
CONTRACT shall have occurred except for late delivery, the
PURCHASER may terminate this CONTRACT. The PURCHASER may then
proceed to have all or part of the work on the Vessel completed
at BUILDER's Shipyard or elsewhere and for such purpose may take
possession and use and occupy so much of the
BUILDER's shipyard, plant, equipment, tools, machinery and
appliances, as may be needed for such purposes, without the
payment of any rental or other charge therefor to the BUILDER.
BUILDER hereby agrees to assure to the PURCHASER such use and
occupancy of said facilities and said other property of the
BUILDER for such period of time as may be necessary for the
completion of the CONTRACT work.
<PAGE>
(b) If the PURCHASER shall elect to have all or part of the
CONTRACT work completed, the BUILDER shall (i) assign such
subcontractors and orders for material, services and supplies to
be used in the performance of said CONTRACT work to the PURCHASER
as the PURCHASER may direct, and (ii) pay to the PURCHASER the
amount by which the total cost to the PURCHASER of completing
said work (including all amounts paid to the BUILDER hereunder),
plus such other costs, charges, expenses (including reasonable
attorneys fees) and damages as PURCHASER may have incurred as a
result of the default of BUILDER exceeds the total Revised
Contract Price provided in this CONTRACT, as adjusted hereunder;
provided, however, that in computing the amount, if any, to be
paid by the BUILDER to the PURCHASER, appropriate adjustment
shall be made for changes in the CONTRACT work subsequent to the
termination of the CONTRACT.
(c) If the PURCHASER shall elect not to complete the
Vessel, the PURCHASER, at any time within one hundred fifty (150)
days from the date of termination hereunder, may sell the
partially completed Vessel, work-in-process, materials, articles
of machinery, outfit and equipment and supplies to be installed
in the Vessel, together with providing copies of all drawings ,
specifications, calculations and other records reasonably
required for the construction or equipment thereof, provided that
subject to PURCHASER'S right to use all documentation for
completion of the Vessel the BUILDER shall continue to be
entitled to all rights under ARTICLE VIII - RIGHTS TO DESIGN
DATA. The PURCHASER shall have access to the Shipyard in order to
conduct the sale. Any purchaser at any such sale shall be given
reasonable time, not less than sixty (60) days from the date of
sale, within which to remove from the BUILDER's plant the Vessel,
work-in-process, materials, articles of machinery, outfit,
equipment and supplies purchased. The BUILDER or PURCHASER may
become a purchaser at such sale. The proceeds of the sale shall
be applied, first, to payment of all costs and expenses,
including reasonable attorney's fees incurred by the PURCHASER or
its assigns in making such sale, secondly, to reimbursement of
the PURCHASER for payments heretofore made by the PURCHASER to
the BUILDER on account of the Vessel; and thirdly, to payment of
such other costs, charges, expenses and damages, including
reasonable attorneys fees, as PURCHASER may have incurred as a
result of the default of BUILDER. The remaining proceeds, if
any, shall be paid over to the BUILDER. In the event the proceeds
of the sale shall not be sufficient to pay the first, second and
third items, as above set forth, the difference shall be paid to
the PURCHASER by the BUILDER.
(d) The rights conferred upon the PURCHASER under the terms
of this Article shall not be exclusive of any other remedies in
law or equity which might be otherwise available to PURCHASER
upon the happening of the events of default specified in ARTICLE
XXIV - DEFAULT BY BUILDER. Failure of the PURCHASER to exercise
any of the rights conferred upon it hereunder with respect to any
event of default of BUILDER shall not constitute a waiver of the
right subsequently to terminate this CONTRACT, as herein
provided.
<PAGE>
ARTICLE XXVII - TITLE
a) Title to the Vessel and to the work for the Vessel
shall vest in the PURCHASER as and when performed, title to the
materials to be incorporated or installed in the Vessel shall
vest in the PURCHASER as and when delivered to the shipyard or
yard of the BUILDER, and title to the components to be
incorporated or installed in the Vessel shall vest in the
PURCHASER as and when fabricated. As used herein, the term
"Vessel" shall also mean a "ship" as defined in LA. R.S. 9:5522
and the terms, "work", "materials" and "components" shall have
the meanings as set forth in La. R.S. 9:5522 provided, however,
that the PURCHASER's lenders agree that BUILDER's liens on the
Vessel (at any stage of completion) and on the work, materials
and components, in each case, securing BUILDER's claims for
payments due under the CONTRACT for which BUILDER has not
previously been paid as required by the CONTRACT are superior to
the lender's lien, and also provided, however, that except as may
otherwise be provided in this CONTRACT, the risk of loss or
damage to such material and the Vessel shall remain with the
BUILDER, and the PURCHASER shall not be deemed to have waived its
rights to require the BUILDER to replace, at the BUILDER's
expense, defective, damaged or destroyed workmanship or material,
and to deliver the Vessel with the CONTRACT work completed, as
provided in this CONTRACT. BUILDER will properly identify the
ship, work, components and materials as belonging to the
PURCHASER all in accordance with La. R.S. 9:5523 and shall
certify to the PURCHASER and the Secretary, from time to time,
that these requirements have been fully complied with. Title to
all scrap and title to any material which is surplus to the
requirements of this CONTRACT (except material furnished by the
PURCHASER or which under any adjustment of Revised Contract Price
under the provisions of ARTICLE VI - PAYMENT OF CONTRACT PRICE -
METHOD OF PAYMENT of this CONTRACT remains the property of the
PURCHASER) shall vest in the BUILDER. Notwithstanding the
provisions of this ARTICLE as to title, the BUILDER shall be
subject to the risk of loss of all CONTRACT workmanship and
material and the undelivered Vessel as provided in this CONTRACT.
(b) The Existing Vessel's forebody removed from the
Existing Vessel, pursuant to the terms of this CONTRACT,
including all fittings, equipment and appurtenances thereto not
used on the Vessel or having been removed as provided in the
Specification, shall become the property of the PURCHASER at the
time of severance from the Existing Vessel "AS IS" without any
warranties. PURCHASER warrants title to and that the severed
Stern section, including all such fittings, equipment and
appurtenances thereto, will on and after the delivery date of the
Existing Vessel to the Shipyard be free and clear of all liens,
security interests, claims and encumbrances of every nature and
PURCHASER shall defend, indemnify and hold BUILDER harmless from
and against any such lien, security interest, claim or
encumbrance. The obligations of this Subarticle shall survive
the termination or completion of this CONTRACT.
(c) PURCHASER will remove, or cause the removal of, the
Existing Vessel's forebody from BUILDER's premises within forty
five (45) days of BUILDER's severance of the existing forebody
<PAGE>
from the existing Stern and the removal of reusable equipment
from the existing forebody. While the existing forebody remains
on BUILDER's premises, BUILDER shall assume all risks and
expenses associated with the dockside mooring described in
ARTICLE IV.
ARTICLE XXVIII - LIENS
(a) BUILDER agrees that no liens, security interests or
rights in rem of any kind arising out of the CONTRACT work, or on
account of any claim against the BUILDER arising from the
construction of the Vessel or against any subcontractor of the
BUILDER performing work or furnishing material under this
CONTRACT shall lie or attach against or upon the Vessel or any of
said property, material or CONTRACT work, except, however, liens,
security interests or rights in rem in favor of a claimant
arising out of acts or omissions of the PURCHASER.
(b) If any such lien, security interest or right in rem of
any kind is filed or asserted against or attached upon the Vessel
or any of said property, material or CONTRACT work, the party
having knowledge thereof shall promptly notify the other party.
If such lien, security interest or right in rem does not arise
out of acts or omissions of the PURCHASER, BUILDER shall, not
later than thirty (30) days thereafter, secure the discharge or
release of such lien, security interest or right in rem;
provided, however, the BUILDER may contest such lien, security
interest or right in rem or the claim upon which it is based and
if within the time herein provided shall not have secured the
discharge or release of such lien, security interest or right in
rem by court order, then BUILDER shall furnish to PURCHASER or
the appropriate court having jurisdiction in such matters, such
bond or security therefor as shall be acceptable to PURCHASER,
and BUILDER shall indemnify and save harmless the PURCHASER from
all costs, charges and damages by reason of such lien, security
interest, right in rem or claims in any way attributable thereto.
ARTICLE XXIX - TAXES
The BUILDER shall pay, as a cost of the BUILDER, all
federal, state, parish, city and other taxes, assessments and
duties in effect prior to the date of this CONTRACT and lawfully
assessed or levied prior to delivery and acceptance of the Vessel
by the PURCHASER, against the Vessel and material, supplies and
equipment to be used, or used in, the construction of the Vessel.
Notwithstanding the provisions of the preceding sentence, any
sales, use, excise or other taxes lawfully assessed or levied
concurrently or in connection with the delivery, transfer of
possession, or acceptance or passage of title of the Vessel to
the PURCHASER shall be paid by the PURCHASER in addition to the
Revised Contract Price.
ARTICLE XXX - PATENT INFRINGEMENT
The BUILDER shall be responsible for any and all claims
against the PURCHASER or the Vessel for infringement of patents,
patent rights, copyrights or trademarks in the construction of
the Vessel as constructed by the BUILDER (excepting claims
arising out of equipment, machinery or material supplied to the
<PAGE>
BUILDER by the PURCHASER or the use, sale or disposition thereof)
and the BUILDER shall defend, save harmless and indemnify the
PURCHASER and the Vessel against all such claims and against all
costs, expenses, charges and damages which the PURCHASER or the
Vessel may be obligated to pay by reason thereof, including
expenses of litigation, if any; provided, that the foregoing
shall not apply to inventions covered by applications for United
States Letters Patent which, during the performance of this
CONTRACT, are being maintained in secrecy, under the provisions
of 35 U.S.C., Sections 181-188, nor shall the BUILDER be
obligated to indemnify the PURCHASER or the Vessel for any
infringement of patents, patent rights, copyrights or trademarks
resulting from compliance by the BUILDER with any specific
written instructions of the PURCHASER; provided, further, that
upon any such claim being made against said Parties or any
thereof, the BUILDER shall be notified promptly of such claim and
also of any suit brought in connection therewith and shall be
given an opportunity to defend the same; and provided further
that no payment on account of any such claim shall be made by the
PURCHASER unless with the consent of the BUILDER or pursuant to
the decree of a proper court or tribunal.
ARTICLE XXXI - ASSIGNMENT OF CONTRACT
This CONTRACT may not be assigned by PURCHASER or BUILDER
without the prior written consent of the other party, which
consent shall not be unreasonably withheld, except that PURCHASER
may assign this CONTRACT to any applicable United States
government entity for the purposes of financing the Contract
Price under Title XI. Neither BUILDER nor PURCHASER will make
any assignment of this CONTRACT without the prior written
approval of the Secretary.
ARTICLE XXXII - COMPUTATION OF TIME
All periods of time shall be computed by including
Saturdays, Sundays and holidays except that if such period
terminates on a Saturday, Sunday or holiday, it shall be deemed
extended to the business day next succeeding.
ARTICLE XXXIII - BUILDER TO COMPLY WITH LAWS AND REGULATIONS
The BUILDER shall comply with all laws, rules, regulations,
and requirements of any applicable classification society and of
the departments or agencies of the United States affecting the
construction of works, plants, and vessels, in or on navigable
waters and the shores thereof, and all other waters subject to
the control of the United States, and shall procure at its own
expense such permits from the United States, state and local
authorities as may be necessary in connection with beginning or
carrying on to completion of the CONTRACT work. BUILDER shall at
all times comply with all United States, state and local laws in
any way affecting the CONTRACT work; provided, however, that the
provisions of ARTICLE VII - CHANGES and ARTICLE XXII - GUARANTEE
of this CONTRACT shall govern the BUILDER's right to recover any
increased costs due to changes in the rules or laws of any
classification society or other authority affecting the CONTRACT
<PAGE>
work.
ARTICLE XXXIV - APPLICABLE LAW
(a) This CONTRACT shall be constructed in accordance with
the laws of the State of Louisiana and the General Maritime Law
where its application is required for compliance with the Title
XI financing requirements or as otherwise applicable to in this
CONTRACT.
(b) PURCHASER and BUILDER each hereby agree that any
judicial proceeding instituted by one party against the other
party involving any controversy or claim arising out of or
relating to this CONTRACT shall be instituted only in the United
States District Court for the Eastern District of Louisiana at
New Orleans, Louisiana or, if the District Court has no
jurisdiction over the cause, in the appropriate court of the
State of Louisiana in Jefferson Parish, Louisiana. The parties
hereto agree to submit to the personal jurisdiction of the above
courts.
ARTICLE XXXV - NOTICES
Until the BUILDER shall hereafter designate otherwise in
writing to the PURCHASER, all notices hereunder directed to the
BUILDER shall be in writing and shall be mailed by certified
mail, return receipt requested, first class, postage prepaid
addressed to:
Mr. Tom Doussan
Vice President - Commercial Ship Construction
Avondale Industries, Inc.
P.O. Box 50280
New Orleans, Louisiana 70150
Until the PURCHASER shall hereafter designate otherwise in
writing to the BUILDER, all notices hereunder directed to the
PURCHASER shall be in writing and shall be mailed by certified
mail, return receipt requested, first class, postage prepaid, to
the following address:
Richard D. Horner
American Heavy Lift Shipping Company, Inc.
365 Canal Street, Suite 2670
New Orleans, Louisiana 70130
All notices given pursuant to this ARTICLE XXXV shall be
deemed to have been received if so mailed and the sender has
received the return receipt with notation thereon of delivery.
ARTICLE XXXVI - ARBITRATION
(a) In the event a dispute arises hereunder, prior to the
commencement of any formal proceedings, the Parties shall
<PAGE>
continue performance as set forth in this CONTRACT and shall
attempt in good faith to reach a negotiated resolution by
designating an officer of appropriate authority to resolve the
dispute. If the Parties have attempted in good faith to resolve
the dispute and failed to do so, if both BUILDER and PURCHASER
agree, they may elect voluntary, non-binding arbitration.
Disputes as to causes of delay are agreed to be resolved by
mandatory and binding arbitration pursuant to this ARTICLE.
(b) In the event BUILDER claims a cause of delay under
ARTICLE IX, EXTENSION OF TIME FOR COMPLETION OF WORK, and
PURCHASER does not agree, or the PURCHASER claims a cause of
delay under ARTICLE IV, ITEMS FURNISHED BY PURCHASER, and BUILDER
does not agree, either of the Parties may request the Arbitrator
to decide the issue(s) which will be binding on both Parties.
(c) BUILDER and PURCHASER intend to agree on a mutually
acceptable Arbitrator, and alternate Arbitrator in the event the
office of the Arbitrator becomes vacant or otherwise is not able
to function promptly, prior to any arbitration proceeding.
(d) The Parties agree that the powers of the Arbitrator
shall be limited as follows:
1.He shall deal only with the disputes which are
referred for him to investigate and submit his findings and
recommendations.
2.He shall have no power to decide any matter which is
not directly related to the dispute submitted to him.
3.He shall have no power to modify the Working Drawings
or any Specifications, terms or conditions related thereto.
4.He shall have no power to add to, subtract from, or
modify any of the terms of this CONTRACT.
5.His decisions shall be advisory only and shall not
bind the Parties except for determination of disputed causes of
delay under ARTICLE IX, EXTENSION OF TIME FOR COMPLETION OF WORK.
6.He shall have no power to decide or interpret any matter
arising under or which involves any of CONTRACT Exhibits C, E, F,
G, H, I, or J.
(e) The party initiating the demand for arbitration shall
notify the other party in writing, at the same time stating the
matter or matters in dispute. Within a reasonable time
thereafter, not exceeding ten (10) calendar days, the second
party shall acknowledge the notice in writing, either specifying
any additional issues or issues to be arbitrated or refusing the
demand for arbitration. Providing the arbitration has been
agreed to, the arbitration shall be conducted in New Orleans,
Louisiana under applicable Louisiana laws.
(f) Should PURCHASER and BUILDER consent, the Arbitrator
will review claims and take one or more of the following
preliminary actions within ten (10) days of receipt of claim:
(1) request additional supporting data from the claimant, (2)
submit a schedule to the parties indicating when the Arbitrator
expects to take action, (3) reject the claim in whole or in part,
stating reasons for rejection, (4) recommend approval of the
claim by the other party or (5) suggest a compromise.
(g) If a claim has not been resolved, the party making the
<PAGE>
claim, shall, within ten (10) days after the Arbitrator's
preliminary response, take one or more of the following actions:
(1) submit additional supporting data requested by the Arbitrator
(2) modify the initial claim or (3) notify the Arbitrator that
the initial claim stands.
(h) If a claim has not been resolved after consideration of
the foregoing and of further evidence presented by the Parties or
requested by the Arbitrator, the Arbitrator will notify the
Parties in writing that the Arbitrator's decision will be made
within seven (7) days. Upon expiration of such time period, the
Arbitrator will render to the Parties the Arbitrator's written
decision relative to the claim, including any change in the
Revised Contract Price or Contract Time or both. Either party
aggrieved by the conduct or decision of the Arbitrator may at any
time seek a judicial determination of the claim.
(i) The Arbitrator shall also determine which party, or the
proper proportion which each party, shall assume of the expenses
of such arbitration. The arbitration expenses so allocated shall
be paid directly by the party or parties as directed by the
Arbitrator.
(j) Except for the binding arbitration of Subarticle XXXVI
(b) above, a decision by the Arbitrator shall not be required as
a condition precedent to litigation of a dispute between BUILDER
and PURCHASER.
ARTICLE XXXVII - CONSEQUENTIAL DAMAGES
Except for the adjustment to payments specifically stated in
this CONTRACT, notwithstanding anything to the contrary, neither
of the Parties to this CONTRACT will under any circumstances be
liable to the other under any theory of recovery, whether based
in contract, in tort (including negligence and strict liability)
under warranty or otherwise, for any indirect, special,
incidental or consequential loss or damage whatsoever and
howsoever caused. Consequential damages shall include, but shall
not be limited to, loss of revenue or profit, loss or delay of
production, loss of product, downtime of facilities, equipment or
vessels, loss of capital, loss of use of, or under-utilization of
labor, equipment or facilities.
ARTICLE XXXVIII - MISCELLANEOUS
(a) This CONTRACT constitutes the full and complete
understanding between the parties hereto and supersedes all prior
arrangements, negotiations, representations, understandings and
agreements, oral or written, or any matter of this CONTRACT.
(b) No change, alteration or modification of this CONTRACT
may be made except in writing signed by both Parties hereto and
the prior written consent of the Secretary. Provided, however,
that the consent of the Secretary will not be required for any
changes to the CONTRACT work pursuant to ARTICLE VII except as
provided therein.
(c) The headings in this CONTRACT are for convenience of
<PAGE>
reference only and shall not be considered as part of this
CONTRACT or limit or otherwise affect the meaning hereof.
(d) No waiver of any provision of this CONTRACT by any
party shall (1) be effective unless executed in writing, or (2)
constitute a waiver of any other provision.
(e) In case any one or more of the provisions contained in
this CONTRACT shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions
shall not be affected or impaired.
(f) The remedies, damages and obligations specified in this
CONTRACT shall be exclusive and in lieu of any other remedies,
damages or obligations available in contract , tort or otherwise
to PURCHASER or BUILDER with respect to the CONTRACT work except
where a specific provision provides to the contrary.
(g) This CONTRACT may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original but
all of which together shall constitute one and the same
instrument.
(h) Any news releases, public announcements,
advertisements, or publicity released by either party concerning
this CONTRACT, or anything incidental to the work thereof, will
be subject to prior approval of the other party. The Parties
agree that any publicity releases made by either of them shall
recognize and indicate the participation and contributions of the
other party.
(i) PURCHASER represent and warrants that: (i) it is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware; (ii) it has all the
requisite power and authority and legal right to enter into and
carry out the transactions contemplated by this CONTRACT,
including but not limited to all the Exhibits attached hereto;
(iii) the CONTRACT and all its Exhibits do not conflict with
PURCHASER's charter, by-laws, or any other agreement to which it
or its assets are bound; (iv) and that the CONTRACT, required
Exhibits and any Amendments have each been duly executed by
PURCHASER and constitute the legal, valid and binding obligation
of PURCHASER.
(j) BUILDER represent and warrants that: (i) it is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Louisiana; (ii) it has all the
requisite power and authority and legal right to enter into and
carry out the transactions contemplated by this CONTRACT,
including but not limited to all the Exhibits attached hereto;
(iii) the CONTRACT and all its Exhibits do not conflict with
BUILDER's charter, by-laws, or any other agreement to which it or
its assets are bound; (iv) and that the CONTRACT, required
Exhibits and any Amendments have each been duly executed by
BUILDER and constitute the legal, valid and binding obligation of
BUILDER.
<PAGE>
IN WITNESS WHEREOF, the Parties have caused this CONTRACT to
be executed in four counterparts as of the day above written.
ATTEST AVONDALE INDUSTRIES, INC.
(BUILDER)
/s/ R. D. Church
----------------
R.D. Church By:/s/ Albert L. Bossier, Jr.
--------------------------
Albert L. Bossier, Jr.
Title: Chairman, President & CFO
Date: May 12, 1995
AMERICAN HEAVY LIFT SHIPPING
COMPANY
ATTEST (PURCHASER)
/s/ H.A. Downing By:/s/ Richard D. Horner
---------------- ---------------------
H.A. Downing Richard D. Horner
Title: President & CEO
Date: May 12, 1995
<PAGE>
AMENDMENT NUMBER TWO
TO
AVONDALE INDUSTRIES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
WHEREAS, Avondale Industries, Inc., a corporation organized
and existing under the laws of the State of Louisiana, adopted
the Avondale Industries, Inc. Employee Stock Ownership Plan (the
"Plan") effective September 1, 1985; said Plan has been amended
from time to time; said Plan was amended and restated effective
January 1, 1989 and executed December 28, 1994;
WHEREAS, Avondale Industries, Inc. reserved the right to
amend the Plan by resolution of the Board of Directors;
WHEREAS, it is desirable to amend the Plan to bring the Plan
current with the law pursuant to a request for a favorable
determination letter;
NOW, THEREFORE, as authorized by Section 11.1, the Plan is
hereby amended, effective November 1, 1989, unless stated
otherwise as follows:
I.
Article VII is amended to add a sentence at the end of
Section 7.3(a) to read as follows:
The payments under a "50% Joint and Survivor
Annuity" will commence effective immediately
upon election by the Participant.
II.
The first sentence of Article VII, Section 7.3(b), is
amended and restated to read as follows:
If a Participant is not married on the date
his distribution of benefits commences, or
the Participant has not been legally married
throughout the one-year period ending on the
earlier of (i) the date as of which
distribution of his Vested Interest commences
or (ii) the date of the Participant's death,
the normal form of payment shall be a
Straight Life Annuity.
III.
Article VII, Section 7.3(c), is amended to add the following
sentence at the end of the paragraph:
Notwithstanding the above, the actuarial
equivalent value of the Preretirement
Survivor Annuity benefit to a Participant's
surviving spouse will not be less than 50% of
the Participant's Vested Interest as of the
date of the Participant's death.
<PAGE>
IV.
Article XII is amended to add a new Section 12.5 to read as
follows:
12.5 Merger or Consolidation. In the
case of a merger or consolidation with, or
transfer of assets and liabilities to, any
other plan, each Participant in the Plan on
the date such merger, consolidation or
transfer would (if the Plan then terminated)
receive a benefit immediately after the
merger, consolidation or transfer which is
equal to or greater than the benefit he or
she would have been entitled to receive
immediately prior to the merger,
consolidation, or transfer (if the Plan had
then terminated).
EXECUTED in multiple originals in Avondale, Louisiana, this
16th day of June, 1995.
AVONDALE INDUSTRIES, INC
BY: \s\ Thomas M. Kitchen
Thomas M. Kitchen,
Secretary
ATTEST
\s\ Jackie H. Walker
(Corporate Seal)
<PAGE>
ACKNOWLEDGMENT
STATE OF LOUISIANA
PARISH OF JEFFERSON
BEFORE ME, the undersigned Notary Public, personally came
and appeared Thomas M. Kitchen, who being by me sworn did depose
and state that he signed the foregoing Amendment Number Two to
the Avondale Industries, Inc. Employee Stock Ownership Plan as a
free act and deed on behalf of Avondale Industries, Inc. for the
purposes therein set forth.
\s\ Thomas M. Kitchen
Thomas M. Kitchen
SWORN TO AND SUBSCRIBED
BEFORE ME THIS 16 DAY
OF June, 1995.
\s\ A. Blomkalns
NOTARY PUBLIC
<PAGE>
AMENDMENT NUMBER ONE
TO
AVONDALE INDUSTRIES, INC.
PENSION PLAN
WHEREAS, Avondale Industries, Inc., a corporation organized
and existing under the laws of the State of Louisiana, adopted
the Avondale Industries, Inc. Pension Plan (the "Plan") effective
September 1, 1985; said Plan has been amended from time to time;
said Plan was amended and restated effective January 1, 1989 and
executed December 28, 1994;
WHEREAS, Avondale Industries, Inc. reserved the right to
amend the Plan by resolution of the Board of Directors;
WHEREAS, it is desirable to amend the Plan to bring the Plan
current with the law pursuant to a request for a favorable
determination letter;
NOW, THEREFORE, as authorized by Section 11.1, the Plan is
hereby amended, effective January 1, 1989, unless stated
otherwise, as follows:
I.
The third paragraph of Article I, Section 1.10 Compensation,
is amended and restated to read as follows:
For years beginning prior to December 31,
1993, a Participant's annual Compensation
taken into account under the Plan for any
Plan Year shall not exceed $200,000, as
adjusted from time to time in accordance with
Section 401(a)(17) of the Code. For years
beginning on or after January 1, 1994, a
Participant's annual Compensation taken into
account under the Plan for any Plan Year
shall not exceed $150,000, as adjusted from
time to time in accordance with Section
401(a)(17) of the Code. Except for the
purpose of determining compensation below the
Plan's integration level of $6,600, if
applicable, the annual Compensation limit
will be allocated among the members of a
family unit. For this purpose, a family unit
is a Participant who is a member of the
family of a 5% owner or a Highly Compensated
Employee (as defined in Section 414(q) of the
Code) in the group consisting of the 10
Highly Compensated Employees paid the
greatest compensation during the year, such
Participant's spouse and any lineal
descendants of such Participant who have not
attained age 19 before the close of the year.
If as a result of the application of these
rules the adjusted $150,000 (prior to
<PAGE>
December 31, 1993, $200,000) limit is
exceeded then the limit will be prorated
among the affected individuals determined
under this section before this limit is
applied.
II.
Article IV, Section 4.6(a)(iii), is amended and restated to
read as follows:
(iii)In the case where a benefit commences
prior to the Participant's Social Security
Retirement Age and on or after age 62, the
limitation under (ii) shall be reduced by
5/9ths of one percent for each of the first
thirty-six (36) months and 5/12ths of one
percent for each of the additional months (up
to 24 months) by which the benefit commences
before the month of the Participant's Social
Security Retirement Age. If the benefit
commences before the Participant's 62nd
birthday, the limitation described in (ii)
shall be the Actuarial Equivalent of the
limitation for benefits commencing at age 62.
III.
Article IV is amended to add a new subparagraph 4.6(a)(vii)
to read as follows:
(vii)Notwithstanding the foregoing, the
benefit payable to a Participant shall not be
considered to exceed the limitation under
(ii) if the Participant's Accrued Benefit as
of December 31, 1986, exceeds that dollar
limitation, but was not in violation of the
requirements of Code Section 415 for 1986 and
prior years.
IV.
The last sentence of Article V, Section 5.1, is amended to
read as follows:
Notwithstanding the foregoing, no benefit
shall be payable under this Section 5.1 if
the Participant is not married on the date
his distribution of benefits commences, or
the Participant has not been legally married
throughout the one-year period ending on the
earlier or (i) the date as of which
distribution of his benefit commences or
(ii) the date of the Participant's death.
V.
Article VI, Section 6.1.a. is amended by deleting the phrase
"a 50% Joint and Survivor Spouse Annuity" and adding in lieu
<PAGE>
thereof the following:
"an immediate 50% Joint and Survivor Spouse
annuity"
VI.
Article VI, Section 6.5.b. is amended to add the following
sentence at the end of the first paragraph:
The payments under a 50% Joint and Survivor
Spouse Annuity, will commence effective
immediately upon election by the Participant.
EXECUTED in multiple originals in Avondale, Louisiana, this
16th day of June, 1995.
AVONDALE INDUSTRIES, INC
BY: \s\ Thomas M. Kitchen
Thomas M. Kitchen,
Secretary
\s\ Jackie H. Walker
ATTEST
(Corporate Seal)
<PAGE>
ACKNOWLEDGMENT
STATE OF LOUISIANA
PARISH OF JEFFERSON
BEFORE ME, the undersigned Notary Public, personally came
and appeared Thomas M. Kitchen, who being by me sworn did depose
and state that he signed the foregoing Amendment Number One to
the Avondale Industries, Inc. Pension Plan as a free act and deed
on behalf of Avondale Industries, Inc. for the purposes therein
set forth.
\s\ Thomas M. Kitchen
Thomas M. Kitchen
SWORN TO AND SUBSCRIBED
BEFORE ME THIS 16 DAY
OF June, 1995.
\s\ A. Blomkalns
NOTARY PUBLIC
<PAGE>
August 11, 1995
Avondale Industries, Inc.
Post Office Box 50280
New Orleans, Louisiana 70150
We have made a review, in accordance with standards established
by the American Institute of Certified Public Accountants, of the
unaudited interim financial information of Avondale Industries,
Inc. and subsidiaries for the periods ended June 30, 1995 and
1994, as indicated in our report dated August 4, 1995; because we
did not perform an audit, we expressed no opinion on that
information.
We are aware that our report referred to above, which is included
in your Quarterly Report on Form 10-Q for the quarter ended June
30, 1995, is incorporated by reference in Registration Statement
No. 33-31984 on Forms S-8 and S-3.
We also are aware that the aforementioned report, pursuant to
Rule 436(c) under the Securities Act of 1933, is not considered a
part of the Registration Statement prepared or certified by an
accountant or a report prepared or certified by an accountant
within the meaning of Sections 7 and 11 of that Act.
\s\ DELOITTE & TOUCHE LLP
New Orleans, Louisiana
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AVONDALE
INDUSTRIES, INC.'S QUARTERLY REPORT FILED ON FORM 10-Q FOR THE QUARTER ENDED
JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 34,114
<SECURITIES> 0
<RECEIVABLES> 80,984
<ALLOWANCES> 0
<INVENTORY> 15,460
<CURRENT-ASSETS> 141,420
<PP&E> 244,122
<DEPRECIATION> (117,299)
<TOTAL-ASSETS> 302,448
<CURRENT-LIABILITIES> 97,251
<BONDS> 59,574
<COMMON> 15,927
0
0
<OTHER-SE> 118,488
<TOTAL-LIABILITY-AND-EQUITY> 302,448
<SALES> 286,363
<TOTAL-REVENUES> 286,363
<CGS> 259,139
<TOTAL-COSTS> 259,139
<OTHER-EXPENSES> 15,261
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,557
<INCOME-PRETAX> 10,237
<INCOME-TAX> (1,300)
<INCOME-CONTINUING> 11,537
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,537
<EPS-PRIMARY> .80
<EPS-DILUTED> .80
</TABLE>
