EXHIBIT 10.166
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CONTRACT
FOR
CONSTRUCTION AND SALE
OF
A 103,000 METRIC TONS DISPLACEMENT
DRILLSHIP
(HULL NO. 1255)
BETWEEN
READING & XXXXX DRILLING CO.
AND
SAMSUNG HEAVY INDUSTRIES CO., LTD.
AND
SAMSUNG CORPORATION
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INDEX
PREAMBLE
ARTICLE I - DESCRIPTION AND CLASS
1. Description .......................................
2. Dimensions and Characteristics ....................
3. Classification, Rules and Regulations .............
4. Registration ......................................
5. Specifications of Drillship .......................
ARTICLE II - CONTRACT PRICE AND TERMS OF PAYMENT
1. Contract Price ....................................
2. Adjustment of Contract Price ......................
3. Currency ..........................................
4. Terms of Payment ..................................
5. Method of Payment .................................
6. Notice of Payment before Delivery .................
7. Expenses ..........................................
8. Prepayment ........................................
ARTICLE III - ADJUSTMENT OF CONTRACT PRICE
1. Delivery ..........................................
2. Speed .............................................
3. Fuel Consumption for the Diesel
Generator Prime Drivers ...........................
4. Capacity of Extended Well Test Tanks ..............
5. Displacement ......................................
6. Effect of Rescission ..............................
ARTICLE IV - APPROVAL OF PLANS AND DRAWINGS AND INSPECTION
DURING CONSTRUCTION
1. Approval of Plans and Drawings ....................
2. Appointment of BUYER's Supervisor .................
3. Inspection by the Supervisor ......................
4. Facilities ........................................
5. Liability of BUILDER ..............................
6. Responsibility of BUYER ...........................
7. Delivery and Construction Schedule.................
8. Responsibility of BUILDER .........................
ARTICLE V - MODIFICATIONS, CHANGES AND EXTRAS
1. How Effected ......................................
2. Change in Rules of Classification Society,
Regulations, etc. .................................
3. Substitution of Materials .........................
ARTICLE VI - TRIALS AND ACCEPTANCE
1. Notice ............................................
2. Weather Condition .................................
3. How Conducted .....................................
4. Method of Acceptance or Rejection .................
5. Effect of Acceptance ..............................
6. Disposition of Surplus Consumable Stores ..........
ARTICLE VII - DELIVERY
1. Time and Place ....................................
2. When and How Effected .............................
3. Documents to be Delivered to BUYER ................
4. Tender of DRILLSHIP ...............................
5. Title and Risk ....................................
6. Removal of DRILLSHIP ..............................
ARTICLE VIII - DELAYS AND EXTENSION OF TIME FOR DELIVERY
(FORCE MAJEURE)
1. Causes of Delay (Force Majeure) ...................
2. Notice of Delay ...................................
3. Definition of Permissible Delay ...................
4. Right to Rescind for Excessive Delay ..............
ARTICLE IX - WARRANTY OF QUALITY
1. Guarantee .........................................
2. Notice of Defects .................................
3. Remedy of Defects .................................
4. Extent of BUILDER's Responsibility ................
5. Guarantee Engineer ................................
ARTICLE X - RESCISSION BY BUYER
1. Notice ............................................
2. Refundment by BUILDER .............................
3. Discharge of Obligations ..........................
ARTICLE XI - BUYER'S DEFAULT
1. Definition of Default .............................
2. Effect of Default on or before Delivery of
DRILLSHIP .......................................
3. Disposal of DRILLSHIP .............................
4. Dispute............................................
ARTICLE XII - ARBITRATION
1. Decision by Classification Society ................
2. Proceedings of Arbitration ........................
3. Notice of Award ...................................
4. Expenses ..........................................
5. Entry in Court ....................................
6. Alteration of Delivery Date .......................
ARTICLE XIII - SUCCESSOR AND ASSIGNS ....................
ARTICLE XIV - TAXES AND DUTIES
1. Taxes and Duties Incurred in Korea ................
2. Taxes and Duties Incurred Outside Korea ...........
ARTICLE XV - PATENTS, TRADEMARKS, COPYRIGHTS, ETC.
1. Patents ...........................................
2. General Plans, Specifications and Working
Drawings ..........................................
3. Exceptions ........................................
ARTICLE XVI - BUYER'S SUPPLIES
1. Responsibility of BUYER ...........................
2. Responsibility of BUILDER .........................
3. Title..............................................
4. BUYER's Supplies Refundment .......................
ARTICLE XVII - INSURANCE
1. Extent of Insurance Coverage ......................
2. Application of the Recovered Amounts ..............
3. Termination of BUILDER's Obligation to Insure .....
ARTICLE XVIII - NOTICE
1. Address ...........................................
2. Language ..........................................
3. Effective Date of Notice ..........................
ARTICLE XIX - EFFECTIVE DATE OF CONTRACT ...............
ARTICLE XX - INTERPRETATION
1. Laws Applicable ...................................
2. Discrepancies .....................................
3. Entire Agreement ..................................
4. Amendments and Supplements ........................
ARTICLE XXI - CONFIDENTIALITY ..........................
END OF CONTRACT ........................................
EXHIBIT "A" LETTER OF REFUNDMENT GUARANTEE .............
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THIS CONTRACT, made and entered into on this 5th day of September,
1997 by and between READING & XXXXX DRILLING CO., a corporation existing
under the laws of Oklahoma, and having an office at 901 Threadneedle,
Houston, Texas 77079-2902(hereinafter called the "BUYER"), on the one part
and SAMSUNG CORPORATION, a corporation incorporated and existing under the
laws of the Republic of Korea, having its registered office at 000, 0-xx,
Xxxxxxxx-xx, Xxxxx-xx, Xxxxx, Xxxxx, and SAMSUNG HEAVY INDUSTRIES CO.,
LTD., a corporation incorporated and existing under the laws of the
Republic of Korea of having its registered office at 000-00 Xxxxxx-Xxxx,
Xxxxxxx-Xx, Xxxxx, Korea(hereinafter collectively called the "BUILDER"), on
the other part.
W I T N E S S E T H:
In consideration of the mutual covenants herein contained, the BUILDER
agrees to build One (1) Drillship composed of hull part as described in the
specification attached hereto as Exhibit 1 of this Contract (hereinafter
referred to as the "VESSEL") and topside part as described in the
specification attached hereto as Exhibit 2 of this Contract (hereinafter
referred to as "TOPSIDE") (the VESSEL and TOPSIDE being hereinafter
collectively referred to as the "DRILLSHIP") and in accordance with (i) the
BUILDER's Approved Vendor List attached hereto as Exhibit 3, and (ii) the
Delivery and Construction Schedule attached hereto as Exhibit 4 (said
Exhibits 1 through 4 being hereinafter collectively called the
"Specifications") which Specifications have been initialed by
representatives of the parties hereto for identification and which
Specifications hereby are each incorporated herein by reference hereto and
made an integral part of this Contract, at the BUILDER's shipyard located
in Koje Island, Korea (hereinafter referred to as the "Shipyard") and to
deliver and sell the same to the BUYER, and the BUYER hereby agrees to
purchase and accept delivery of the DRILLSHIP from the BUILDER, upon the
terms and conditions hereinafter set forth.
ARTICLE I - DESCRIPTION AND CLASS
1. Description:
The DRILLSHIP, having the BUILDER's Hull No. 1255, shall be
constructed, equipped and completed in accordance with the provisions
of this Contract, and the Specifications (as heretofore defined),
which Specifications are an integral part of this Contract as
heretofore provided.
2. Dimensions and Characteristics:
Length, overall Max. 221.5 meters
Length, between perpendiculars abt. 213.0 meters
Breadth, moulded abt. 42.0 meters
Depth, moulded abt. 20.0 meters
Xxxxxxxxx draft, moulded abt. 13.0 meters
The Generator Prime Driver will be manufactured by Wartsila at their
facility in Finland.
Thruster Motor: 4 MW with 77 tons thrust
and 3.8 meter diameter
Displacement, guaranteed: 103,000 metric tons at the
xxxxxxxxx
draft, moulded, of 13.0 meters.
Speed, guaranteed: The trial speed shall not be less than 12.0 knots
on the transit draught of 8.5 meters and at propulsion shaft power of
20,870 KW
Fuel Consumption, guaranteed, Diesel Generator Prime Drivers:
183.8g/k Wh with engine driven pumps at manufacturer's shop
trial, with burning of the marine diesel having the lower
calorific value of 42,700kJ/Kg, at 85% MCR of engine under the
environment condition of ISO 3046/1-1986 specified in the
Specifications.
Cargo tank capacity, guaranteed:
The total capacity of the Extended Well Test ("EWT") tanks
including slop tanks will not be less than 15,500 cubic meters at
the full levels (100% volume) of EWT tanks.
The details of the aforementioned particulars, as well as the
definitions and the methods of measurements and calculations
shall be as indicated in the Specifications.
3. The Classification, Rules and Regulations:
The DRILLSHIP, including its machinery, equipment and outfittings
shall be constructed and classified in accordance with the rules and
regulations (the editions and amendments thereto being in force as of
the signing date of this Contract) of and under special survey of the
American Bureau of Shipping (hereinafter called the "Classification
Society"), and shall be distinguished in the register by the symbol of
+A1 E, "Ship Type Drilling Unit", FSO where applicable, xXXX, xXXXX,
xXXX-0, XXX.
Decisions of the Classification Society as to compliance or non-
compliance with the classification rules and regulations shall be
final and binding upon both parties hereto. Details of Class notation
shall be in accordance with the Specifications.
The DRILLSHIP shall also comply with the rules, regulations and
requirements of the regulatory bodies as described and listed in the
Specifications.
The DRILLSHIP will be built and delivered (i) in accordance with the
terms of this Contract and the Specifications, (ii) in full compliance
and certification to and with the IMO MODU code with amendments, (iii)
in full compliance with the regulations, provisions, and requirements
included in the Specifications, (iv) in full compliance with the
requirements of the classification Society so as to be classed with
the Classification Society as a MODU/FSO, and (v) so that the
DRILLSHIP will be approved to operate in the United States Gulf of
Mexico/the Outer Continental Shelf of the United States. BUILDER will
take all action necessary, and remedy at its cost and expense, any
deficiency which constitutes a failure to comply with the above
requirements.
All the fees and charges incidental to the Classification Society
and in respect to compliance with the above referred rules,
regulations and requirements, as well as all DRILLSHIP design fees
and/or royalties (except any royalties for the BUYER's Supplies),
shall be for account of the BUILDER.
BUILDER shall be responsible for obtaining the Classification
Society's approval of all required plans and drawings of the
DRILLSHIP.
4. Registration:
The DRILLSHIP, at the time of its delivery and acceptance, shall
be registered at the port of registry by the BUYER under the
Panamanian flag at the BUYER's expense.
5. Specifications of Drillship:
The Contract Price set out in Article II, Paragraph 1, is based on the
Specifications of the DRILLSHIP being the same as the "Specifications"
identified in the shipbuilding contract for Hull No. 1220 as in effect
on October 31, 1996 (the "Hull 1220 Specifications") with such
changes as may be appropriate to reflect different delivery schedules
for BUYER's Supplies, vendor data, and the Delivery and Construction
Schedule of the Drillship. Any extras or change orders made to the
specifications of the BUILDER's hull no.1220 after the date of October
31, 1996, shall not be included in the specifications for the
DRILLSHIP but the BUYER shall be entitled to request the same pursuant
to the shipbuilding contract for the drillships of BUILDER's hull no.s
1220 and/or 1231. In such case, Article V hereof shall be applied.
Any adjustments to the Contract Price based on any changes to the
Specifications as agreed by BUYER shall be handled as changes under
this Contract and any adjustments to the Contract Price will be made
at the time of the payment of the Sixth Installment.
(End of Article)
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ARTICLE II - CONTRACT PRICE AND TERMS OF PAYMENT
1. Contract Price:
The purchase price of the DRILLSHIP, net receivable by the
BUILDER and exclusive of the BUYER's Supplies (as defined in Paragraph
1 of Article XVI hereof) is One Hundred Forty-Eight Million Seven
Hundred Eighty Five Thousand Eight Hundred United States Dollars
(US$148,785,800) (hereinafter referred to as the "Contract Price").
The Contract Price shall be subject to upward or downward adjustment,
if any, as hereinafter set forth in this Contract.
Pricing for all change orders for the DRILLSHIP identical to
change orders submitted by the buyers of the BUILDER's hull no.s 1220
and/or 1231 for the construction of the drillships, shall not include
a provision for the payment of design and engineering services
previously performed by the BUILDER and the buyer's behalf of the
BUILDER's hull no.s 1220 and/or 1231 contract(s).
2. Adjustment of Contract Price:
Increase or decrease of the Contract Price, if any, due to
adjustments thereof made in accordance with the provisions of this
Contract shall be adjusted by way of addition to or subtraction from
the Contract Price upon delivery of the DRILLSHIP in the manner as
hereinafter provided.
3. Currency:
Any and all payments by the BUYER to the BUILDER, or vice versa
if any which are due under this Contract shall be made in United
States Dollars.
4. Terms of Payment:
The Contract Price shall be due and payable by the BUYER to the
BUILDER in the installments as follows:
(a) First Installment:
The First Installment amounting to Thirty-Seven Million One
Hundred Ninety Six Thousand Four Hundred Fifty United States
Dollars (25%, US$37,196,450) shall be due and payable within
three (3) banking days after execution of this Contract,
provided that the Letter of Refundment Guarantee required under
Article X has been received by the BUYER or its designee of the
refund guarantee to be issued by a Korean bank.
(b) Second Installment:
The Second Installment amounting to Thirty-Seven Million One
Hundred Ninety Six Thousand Four Hundred Fifty United States
Dollars (25%, US$37,196,450) shall be due and payable upon March
4, 1998.
(c) Third Installment:
The Third Installment amounting to Fourteen Million Eight Hundred
Seventy Eight Thousand Five Hundred and Eighty United States
Dollars (10%, US$14,878,580) shall be due and payable upon
November 12, 1998.
(d) Fourth Installment:
The Fourth Installment amounting to Fourteen Million Eight
Hundred Seventy Eight Thousand Five Hundred and Eighty United
States Dollars (10%, US$14,878,580) shall be due and payable upon
January 24, 1999.
(e) Fifth Installment:
The Fifth Installment amounting to Fourteen Million Eight Hundred
Seventy Eight Thousand Five Hundred and Eighty United States
Dollars (10%, US$14,878,580) shall be due and payable upon June
6, 1999.
(f) Sixth Installment:
The Sixth Installment amounting to Twenty Nine Million Seven
Hundred Fifty Seven Thousand One Hundred and Sixty United States
Dollars (20%,US$29,757,160) plus any increase or minus any
decrease due to adjustment of the Contract Price under and
pursuant to the provisions of this Contract, shall be due and
payable upon delivery of the DRILLSHIP or upon tender for
delivery of the DRILLSHIP referred to in Paragraph 4 of Article
VII of this Contract.
5. Method of Payment:
(a) First Installment:
Within three (3) banking days after the date of execution of this
Contract, the BUYER shall remit by telegraphic transfer the first
first installment to the account of The Export/Import Bank of
Korea, Head Office, Seoul, Korea (Account No. 00-000-000,Head
Office with Bankers Trust Company, New York) or to the banks
which the BUILDER may designate (hereinafter referred to as the
"BUILDER's BANK") in favour of Samsung Heavy Industries Co., Ltd.
(b) Second, Third, Fourth and Fifth Installments:
Upon the due date of the second, third and fourth installments,
in accordance with Article II, 4 (b), (c), (d) and (e) as
appropriate, the BUYER shall remit by telegraphic transfer each
of the respective installments to the account at the BUILDER's
BANK in favor of Samsung Heavy Industries Co., Ltd.
(c) Sixth Installment:
At the time of delivery of the Vessel to the Buyer pursuant to
Section 2 of Article VII of this Contract, the BUYER shall remit
by telegraphic transfer the fifth installment to the account at
the BUILDER's BANK in favour of Samsung Heavy Industries Co.,
Ltd. with an irrevocable instruction that the amount so remitted
shall be payable to the BUILDER against presentation by the
BUILDER to the BUILDER's BANK of a copy of PROTOCOL OF DELIVERY
and ACCEPTANCE OF THE DRILLSHIP executed by the BUYER and the
BUILDER.
No payment due under this Contract shall be delayed, suspended or
withheld by the BUYER on account of any dispute or disagreement
between the parties hereto. Any claim which the BUYER may have
against the BUILDER hereunder shall be settled and liquidated
separately from any payment by the BUYER to the BUILDER
hereunder.
6. Notice of Payment before Delivery:
With the exception of the first installment, the BUILDER shall give
the BUYER Ten (10) banking days prior notice in writing or telex
confirmed in writing by registered mail of the anticipated due date
and amount of each installment payable before delivery of the
DRILLSHIP.
7. Expenses:
Expenses and bank charges for remitting payments and any taxes (other
than taxes on income imposed on the BUILDER), duties, expenses and
fees applicable to remitting such payment shall be for account of the
BUYER.
8. Prepayment:
The BUYER may prepay any or all of the installments of the Contract
Price, provided that the BUYER declares the BUYER's intention to do so
in writing or by telex confirmed in writing stating in advance the
intended date of such prepayment, subject to the BUILDER's acceptance,
which shall not be unreasonably withheld.
(End of Article)
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ARTICLE III - ADJUSTMENT OF CONTRACT PRICE
The Contract Price shall be subject to adjustment, as hereinafter set
forth, in the event of the following contingencies (it being understood by
both parties that any reduction of the Contract Price is by way of
liquidated damages and not by way of penalty):
1. Delivery:
(a) No adjustment shall be made and the Contract Price shall
remain unchanged for the first Thirty (30) days of delay in
delivery of the DRILLSHIP beyond the Delivery Date as defined in
Article VII hereof (ending as of twelve o'clock midnight of the
Thirtieth (30th) day of delay).
(b) If the delivery of the DRILLSHIP is delayed more than Thirty
(30) days after the Delivery Date, then, in such event, beginning
at twelve o'clock midnight of the Thirtieth (30th) day after the
Delivery Date, the Contract Price shall be reduced by the sum of
Ten Thousand United Dollars (US$10,000) for each full day for
which thereafter delivery is delayed.
However, the total reduction in the Contract Price pursuant to
this Paragraph (b) shall not be more than as would be the case
for a delay of One Hundred Fifty (150) days counting from mid-
night of the Thirtieth (30th) day after the delivery date at the
above specified rate of reduction.
(c) However, if the delay in delivery of the DRILLSHIP should
continue for a period of One Hundred Eighty (180) days from the
Delivery Date in Paragraph 1 of Article VII, then in such event,
and after such period has expired, the BUYER may, at its option,
rescind this Contract in accordance with the provisions of
Article X hereof.
The BUILDER may, at any time after the expiration of the
aforementioned One Hundred Eighty (180) days of delay in
delivery, if the BUYER has not served notice of rescission as
provided in Article X hereof, demand in writing that the BUYER
shall make an election, in which case the BUYER shall, within
Twenty (20) days after such demand is received by the BUYER,
notify the BUILDER of its intention either to rescind this
Contract or to consent to the acceptance of the DRILLSHIP at a
specified future date which date BUILDER represents to BUYER is
the earliest date BUILDER can deliver the DRILLSHIP to BUYER
under this Contract, based on the circumstances then known. If
the BUYER shall not make an election within Twenty (20) days as
provided hereinabove, the BUYER shall be deemed to have accepted
such extension of the delivery date to the future delivery date
indicated by the BUILDER and it being understood by the parties
hereto that if the DRILLSHIP is not delivered by such specified
date, the BUYER shall have the same right of rescission upon the
same terms and conditions as hereinabove provided.
(d) If the delivery of the DRILLSHIP is made more than thirty
(30) days earlier than the Delivery Date, then, in such event,
beginning with the thirty-first (31) day prior to the Delivery
Date, the Contract Price of the DRILLSHIP shall be increased by
adding thereto Ten Thousand United States Dollars US$10,000) for
each full day. However, the total increase in the Contract Price
pursuant to this Paragraph (d) shall not be more than as would be
the case for an early delivery of Sixty (60) days counting from
the Thirty-first (31) day prior to the Delivery Date at the above
specified rate of increase.
(e) For the purpose of this Article, the delivery of the
DRILLSHIP shall be deemed to be delayed when and if the
DRILLSHIP, after taking into account all postponements of the
Delivery Date by reason of permissible delay as defined in
Article VIII and/or any other reason under this Contract, is not
delivered by the date upon which delivery is required under the
terms of this Contract.
2. Speed:
(a) The Contract Price shall not be affected or changed by
reason of the trial speed (as determined according to the
Specifications) being more or less than the guaranteed speed, if
such variation is not more than two (2) knots.
(b) If the deficiency in the speed upon final sea trial is more
than Two (2) knots below the guaranteed speed of the DRILLSHIP,
then the BUYER may, at its option, reject the DRILLSHIP and
rescind this Contract in accordance with the provisions of
Article X hereof, or may accept the DRILLSHIP at a reduction
in the Contract Price to be agreed, provided that the price
reduction shall not be less than Two Hundred Thousand United
States Dollars.(US$200,000)
3. Fuel Consumption for the Diesel Generator Prime Drivers:
(a) The Contract Price shall not be affected or changed in case
the actual fuel consumption, as determined by the shop trial as
specified in the Specifications, is not more than Three percent
(3%) in excess of the guaranteed fuel consumption specified in
Paragraph 2 of Article I.
(b) However, in the event that the actual fuel consumption at
the shop trial is in excess of Three (3%) of the guaranteed fuel
consumption, the Contract Price shall be reduced by the sum of
Ten Thousand United States Dollars (US$10,000) for each full
gramme per metric bhp per hour in excess of the Three percent(3%)
(but disregarding fractions of One (1) gramme) of the guaranteed
fuel consumption.
(c) BUYER has an option to reject the DRILLSHIP and rescind the
Contract in accordance with the provisions of Article X hereof in
the event the actual fuel consumption is more than Ten percent
(10%) in excess of the guaranteed fuel consumption.
4. Capacity of Extended Well Test Tanks
(a) In the event the capacity of the Extended Well Test tanks,
including slop tanks, ("EWT tanks") as determined in accordance
with the Specifications is 14,310 cubic meters or less, then the
BUYER may, at its option, (i) reject the DRILLSHIP and rescind
this Contract in accordance with the provisions of Article X
hereof, or (ii) accept the DRILLSHIP with such deficiency.
(b) There will be no increase or decrease of the Contract Price
in the event the capacity of the EWT tanks is more than or less
than the guaranteed capacity of the EWT tanks as specified in
Paragraph 2 of Article I, but BUYER shall have the option of
rescission as provided for in Subparagraph (a) of this paragraph
4 of Article III.
5. Displacement:
(a) The guaranteed displacement of the DRILLSHIP is 103,000
metric tons at 13.0 meters.
(b) In the event of a discrepancy (whether higher or lower) in
the actual displacement of the DRILLSHIP being three thousand
five hundred (3,500) metric tons or more, then, the BUYER may, at
its option, reject the DRILLSHIP and rescind this Contract in
accordance with the provisions of Article X hereof or accept the
DRILLSHIP at a reduction in the Contract Price of Six Hundred
thousand United States Dollars (US$600,000).
6. Effect of Rescission:
It is expressly understood and agreed by the parties that in any case,
if the BUYER rescinds this Contract under this Article, the BUYER
shall not be entitled to any liquidated damages, or any other recourse
unless by means of the provisions of Article X hereof.
(End of Article)
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ARTICLE IV - APPROVAL OF PLANS AND
DRAWINGS AND INSPECTION DURING CONSTRUCTION
1. Approval of Plans and Drawings:
It is agreed by the parties that the BUILDER shall apply and use as
its basis for construction of the DRILLSHIP's drawings for the
BUILDER's hull no. 1220 and/or 1231 previously approved by the buyers
of the BUILDER's hull no. 1220 and/or 1231 which shall be deemed to
have been approved by the BUYER for the DRILLSHIP except for those
drawings which may require alteration for new approvals by the
Classification Society and/or the statutory bodies in connection with
change of the rules and regulations and/or the DRILLSHIP's
registration by the BUYER. Such drawings required for new approvals
shall be submitted by the BUILDER to the BUYER for the BUYER's
reference upon obtaining the approvals. Notwithstanding the above
BUILDER will supply to the BUYER a complete set of as built
drawings/documents with Hull No. 1255 so indicated thereon.
2. Appointment of BUYER's Supervisor:
The BUYER may send to and maintain at the Shipyard, at the BUYER's own
cost and expense, one supervisor (herein called the "Supervisor") who
shall be duly authorized in writing by the BUYER, which authorization
shall be described in a separate letter to be sent to the BUILDER
prior to the Supervisor's arrival, to act on behalf of the BUYER in
connection with the modifications of the Specifications, adjustments
of the Contract Price and Delivery Date in writing, approval of the
plans and drawings, attendance to the tests and inspections relating
to the DRILLSHIP, its machinery, equipment and outfittings, and any
other matters for which he is specifically authorized by the BUYER.
The Supervisor may appoint assistant(s) to attend at the Shipyard for
the purposes as aforesaid.
3. Inspection by the Supervisor:
The necessary inspections of the DRILLSHIP, its machinery, equipment
and outfittings shall be carried out by the Classification Society,
other regulatory bodies and/or the Supervisor throughout the entire
period of construction in order to ensure that the construction of the
DRILLSHIP is duly performed in accordance with the Specifications.
The Supervisor shall have, during construction of the DRILLSHIP, the
right to attend such tests and inspections of the DRILLSHIP, its
machinery and equipment within the premises of either the BUILDER or
its subcontractors. Detailed procedures of the inspection and the
tests thereof shall be in accordance with Specifications.
The Supervisor shall, within the limits of the authority conferred
upon him by the BUYER, make decisions or give advice to the BUILDER on
behalf of the BUYER promptly on all problems arising out of, or in
connection with, the construction of the DRILLSHIP and generally act
in a reasonable manner with a view to cooperating to the utmost with
the BUILDER in the construction process of the DRILLSHIP.
The decision, approval or advice of the Supervisor within the limits
of authority conferred on the Supervisor by the BUYER shall be deemed
to have been given by the BUYER. The BUYER's Supervisor shall notify
the BUILDER promptly in writing of his discovery of any construction
or materials, which he believes do not or will not conform to the
requirements of the Contract or the Specifications and likewise
advise and consult with the BUILDER on all matters pertaining to the
construction of the DRILLSHIP, as may be required by the BUILDER, or
as he may deem necessary.
However, if the Supervisor fails to submit to the BUILDER promptly any
such demand concerning alterations or changes with respect to the
construction, arrangement or outfit of the DRILLSHIP which the
Supervisor has examined, inspected or attended at the test thereof
under this Contract or the Specifications, the Supervisor shall be
deemed to have approved the same and shall be precluded from making
any demand for alterations, changes, or complaints with respect
thereto at a later date.
The BUILDER shall comply with any such demand which is not
contradictory to this Contract or the Specifications, provided that
any and all such demands by the Supervisor with regard to
construction, arrangement and outfit of the DRILLSHIP shall be
submitted in writing to the authorized representative of the
BUILDER. The BUILDER shall notify the Supervisor of the names of the
persons who are from time to time authorized by the BUILDER for this
purpose.
It is agreed upon between the BUYER and the BUILDER that the
modifications, alterations or changes and other measures necessary to
comply with such demand may be effected at a convenient time and place
at the BUILDER's reasonable discretion in view of the construction
schedule of the vessel.
In the event that the Supervisor shall advise the BUILDER that he has
discovered and believes the construction or materials do not or will
not conform to the requirements of this Contract or the
Specifications, and the BUILDER shall not agree with the views of the
Supervisor in such respect, either the BUYER or the BUILDER may either
seek an opinion of the Classification Society or request an
arbitration in accordance with the provisions of Article XII hereof.
The Classification Society or the Arbitration Board shall determine
whether or not a nonconformity with the provisions of this Contract
and the Specifications exist. If the Classification Society or the
Arbitration Board enters a determination in favour of the BUYER, then
in such case the BUILDER shall make the necessary alterations or
changes, or if such alterations or changes cannot be made in time to
meet the construction schedule for the DRILLSHIP the BUILDER shall
make fair and reasonable adjustment of the Contract Price in lieu of
such alterations and changes. If the Classification Society or the
Arbitration Board enters a determination in favour of the BUILDER,
then the time for delivery of the DRILLSHIP shall be extended for a
period of delay in construction, if any, occasioned by such
proceedings, and the BUYER shall compensate the BUILDER for the proven
loss and damages (always excluding consequential damages) incurred to
the BUILDER as a result of the dispute herein referred to.
BUYER's Supervisor, at his discretion, may refuse to inspect or attend
tests where adequate safety measures have not been implemented and in
such event such tests/inspections shall not be deemed complete.
4. Facilities:
(a) The BUILDER shall furnish the Supervisor and his
assistant(s) with adequate office space and such other
reasonable facilities according to the BUILDER's practice at or
in the immediate vicinity of the Shipyard as may be necessary to
enable them to effectively carry out their duties. The BUYER
shall pay for all such facilities other than office space at the
BUILDER's normal rate of charge. BUILDER shall advise BUYER in
advance of BUILDER's normal rate of charge for any facilities for
which BUYER will be required to pay.
(b) The BUILDER shall make available for BUYER's personnel at
the BUYER's request, during the DRILLSHIP's construction, a
minimum of 8 two or three bedroom apartments furnished with the
BUILDER's standard furniture, electrical facilities and
utilities. If BUYER requests BUILDER to provide the BUYER with
special furniture and facilities beyond the BUILDER's standard,
any additional costs which may result therefrom, if any, will be
borne by BUYER. Costs for such housing, on a monthly rental
basis, will be presented to BUYER prior to occupation and shall
be reimbursed by BUYER, along with metered utility and telephone
charges. The BUILDER will use best efforts to furnish additional
apartments requested by the BUYER.
5. Liability of BUILDER:
The BUILDER agrees to fully protect, defend, indemnify and hold
BUYER harmless from and against all liabilities, obligations,
claims or actions for personal injury or death arising out of
performance by BUILDER or BUYER of their obligations hereunder
prior to the acceptance by BUYER of the DRILLSHIP, and asserted by
or on behalf of,
(i) any employee, agent, contractor, or
subcontractor of BUILDER, or
(ii) any employee of any agent, contractor, or subcontractor of
BUILDER,
regardless of the basis of such claims and even if such claims
should arise out of the sole or concurrent fault or negligence of
BUYER, or any employee, agent, contractor or subcontractor of
BUYER.
Similarly, the BUYER agrees to fully protect, defend, indemnify
and hold BUILDER harmless from and against all liabilities,
obligations, claims or actions for personal injury or death arising
out of performance by BUILDER or BUYER of their obligations
hereunder prior to the acceptance by BUYER of the DRILLSHIP, and
asserted by or on behalf of,
(i) any employee, agent, contractor, or subcontractor of BUYER,
or
(ii) any employee of any agent, contractor, or subcontractor of
BUYER,
regardless of the basis of such claims and even if such claims should
arise out of the sole or concurrent fault or negligence of BUILDER, or
any employee, agent or subcontractor of BUILDER.
6. Responsibility of BUYER:
The BUYER shall undertake and assure that the Supervisor shall
carry out his duties hereunder in accordance with the normal
shipbuilding practice of the BUILDER, which BUILDER represents and
confirms is in all material respects in accordance with good
international shipbuilding practice and in such a way so as to avoid
any unnecessary increase in building cost, delay in the construction
of the DRILLSHIP, and/or any disturbance in the construction schedule
of the BUILDER. The BUILDER has the right to request the BUYER to
replace the Supervisor who is deemed unsuitable and unsatisfactory for
the proper progress of the DRILLSHIP's construction.
The BUYER shall investigate the situation by sending its
representative(s) to the Shipyard if necessary, and if the BUYER
considers that such BUILDER's request is justified, the BUYER shall
effect such replacement as soon as conveniently arrangeable.
7. Delivery and Construction Schedule:
Attached hereto as Exhibit 4 is a tentative Delivery and
Construction Schedule, and within Sixty (60) days after the date of
this Contract, BUILDER shall deliver or cause to be delivered to BUYER
a final Delivery and Construction Schedule (herein, as from time to
time amended with the knowledge of BUYER, referred to as the
"Schedule"), prepared in reasonable detail and setting forth the
estimated time table for the construction of the DRILLSHIP, it being
understood that the Schedule may be used by BUYER for purposes of
verifying and measuring the progress being made under the terms of
this Contract.
8. Responsibility of BUILDER:
(a) BUILDER personnel and subcontractors which, in the sole
opinion of BUYER, are found to be in violation of the safety
policies established by BUILDER or those specially in place
during the construction of the DRILLSHIP, may be requested to be
removed from the project by the BUYER's Supervisor. BUILDER
will immediately take such actions as necessary to comply with
BUYER's request.
(b) The BUILDER is to assign a dedicated safety supervisor and a
sufficient number of safety inspectors to remain in effect
throughout the Contract to monitor employee and subcontractor
safety, scaffolding and safety netting, tank entry, work
permitting procedures, electrical safety, etc. Upon request by
the BUYER, the safety supervisor shall participate in BUYER's
daily safety and quality meetings.
(c) The BUILDER shall provide a 24 hour fire-watch at the
DRILLSHIP construction site. In addition, at various locations
around the site, fire alarm stations will be situated whereby a
manual alarm may be sounded and a local emergency response team
is notified and activated.
(d) BUILDER shall immediately report to BUYER all incidents
and/or accidents involving injury, no matter the level of
severity, including first aid, loss of property, no matter the
value, as well as any identified hazards and/or near misses
occurring.
Any and all reports of hazards, accidents, incidents, or
near misses will result in the immediate and full ceasing of
construction activities in the affected area until such time as
adequate precautions have been implemented.
(e) BUILDER hereby agrees that the cranes and other related
lifting gear of the DRILLSHIP will not be used by BUILDER during
construction, without the prior written approval of BUYER.
BUIlDER and BUYER recognize that the lifting gear of the
DRILLSHIP will be used to install the BOP stack. Should such
approval be given, BUILDER shall make such cranes to normal in
functional respect of operation, including, but not limited to
the changing of all wires.
(f) It is agreed by BUILDER and BUYER that no more than twenty
percent (20%), by number, of all blocks fabricated for
construction of the VESSEL will be built outside of BUILDER's own
yard. In case more than twenty percent (20%) of all blocks for
the VESSEL is required by the BUILDER to be fabricated outside
of BUILDER's own yard, then the BUILDER shall obtain the BUYER's
prior written consent. Pursuant to the above, the only
facilities to be used other than BUILDER's are the Hanae and
Sungnae fabrication yards, provided however, funnel and/or casing
may be fabricated at Oriental Fitting Co.
It is agreed that all TOPSIDE fabrication will be done at
BUILDER's facility.
(g) All initial spare parts for BUILDER Furnished Equipment,
including those necessary for shipyard start-up testing and for
the commissioning of equipment, shall be provided by BUILDER at
BUILDER's cost. Further, BUILDER shall provide to BUYER a
listing of all critical spare parts (any long lead item and those
spares causing equipment to be out of service for extended
periods of time) and two years operating spare parts. In
addition, BUILDER agrees to specifically identify on the listing
any and all ABS required spare parts. BUILDER will provide such
spare parts listing to BUYER as soon as an order for equipment is
placed, but in no case later than 90 days prior to DRILLSHIP
delivery. The BUYER is responsible for supplying all the
equipment and material in accordance with the BUYER's Supplies
list attached hereto including the spare/service parts and
specialized tools and initial consumables for the BUYER's
Supplies.
(h) Attached hereto as Exhibit 3 is BUILDER's approved vendor
list. BUILDER agrees that any material and/or supplies not
fabricated by the BUILDER will originate from a vendor so
specified in Exhibit 3. The manufactures and specifications of
machinery and equipment for the DRILLSHIP shall be the same as
the BUILDER's hull no.1231, subject to a change(s) if agreed by
the BUILDER and the BUYER. In the event procurement of material
and/or supplies from the approved vendors are not available
due to shortage or delay in delivery thereof to meet the
BUILDER's overall construction schedule of the DRILLSHIP, the
BUILDER may mobilize and originate from other equivalent with the
BUYER's consent, which shall not be unreasonably withheld.
(i) The BUILDER shall, on a monthly basis, provide BUYER with a
written progress report regarding the construction of the VESSEL
based on the BUILDER's standards in accordance with their ISO9001
procedure. Such report is to include a summary of the progress
to date as well as the progress since the previous report. In a
form and frequency to be agreed, the BUILDER will furnish the
BUYER a simple written report updating the progress on major
milestones in the production schedule. Informal oral reports
shall be furnished to the BUYER by the BUILDER upon request.
In addition, BUILDER shall include a limited number of color
photographs relevant to the fabrication process for the construction period
of the DRILLSHIP in the progress report. Photographs are to be 5 x 7
inches, bound in books with dates and descriptive captions. As soon as
each volume is available, BUILDER shall furnish three (3) sets of books of
photographs and one (1) set of negatives to the BUYER.
(End of Article)
---------------------------------------
ARTICLE V - MODIFICATIONS, CHANGES AND EXTRAS
1. How Effected:
The Specifications may be modified and/or changed by written
request of the BUYER subject to BUILDER's approval (which approval
shall not be unreasonably withheld) and provided that any
modifications and/or changes requested by the BUYER or an accumulation
of such modifications and/or changes will not adversely affect the
BUILDER's other commitments and the BUYER shall first agree in
writing, before such modifications and/or changes are carried out, to
any adjustment in the Contract Price, time for delivery of the
DRILLSHIP or other terms and conditions of this Contract or the
Specifications occasioned by or resulting from such modifications
and/or changes. The BUILDER hereby agrees to exert its best efforts
to accommodate such reasonable request by the BUYER so that the said
changes and/or modifications may be made at a reasonable cost and
within the shortest period of time which is reasonably possible. Any
such agreement for modifications and/or changes shall include an
agreement as to the increase or decrease, if any, in the Contract
Price of the DRILLSHIP together with an agreement as to any extension
or reduction in the time of delivery, or any other alterations in this
Contract or the Specifications occasioned by such modifications and/or
changes. The aforementioned agreement to modify and/or change the
Specifications may be effected by an exchange of letters signed by the
authorized representatives of the parties hereto, or telex confirmed
in writing, manifesting such agreement. Such letters and confirmed
telex exchanged by the parties hereto pursuant to the foregoing shall
constitute an amendment of the Specifications, and such letters and
telex shall be incorporated into this Contract and made a part hereof.
The BUILDER may make minor changes to the Specifications, if found
necessary for introduction of improved production methods or
otherwise, provided that the BUILDER shall first obtain the BUYER's
written approval which shall not be unreasonably withheld.
2. Changes in Rules of Classification Society, Regulations, etc.:
If, after the date of signing this Contract, any requirements as
to Classification Society, or as to the rules and regulations to which
the construction of the DRILLSHIP is required to conform, are altered
or changed by the Classification Society or regulatory bodies
authorized to make such alterations or changes, either of the parties
hereto, upon receipt of information thereof, shall transmit such
information in full to the other party in writing, thereupon within
Twenty-One (21) days after receipt of the said notice from the other
party, the BUYER shall instruct the BUILDER in writing if such
alterations or changes shall be made in the DRILLSHIP or not, in the
BUYER's sole discretion.
The BUILDER shall promptly comply with such alterations or
changes, if any, in the construction of the DRILLSHIP, provided that
the BUYER shall first agree:
(a) To any increase or decrease in the Contract Price of the
DRILLSHIP that is reasonably occasioned by the cost of such
compliance;
(b) To any reasonable extension in the time of delivery of the
DRILLSHIP that is necessary due to such compliance;
(c) To any reasonable deviation in the contractual displacement
of the DRILLSHIP, if compliance results in an altered
displacement, or any other reasonable alterations in the terms of
this Contract or of the Specifications or both, if compliance
makes such alterations of terms necessary.
Such agreement of the BUYER shall be effected in the same manner
as provided in Paragraph 1 of this Article for modifications and/
or changes of the Specifications.
3. Substitution of Materials:
In the event that any of the materials required by the
Specifications or otherwise under this Contract for the construction
of the DRILLSHIP can not be procured in time to effect delivery of the
DRILLSHIP, or are in short supply, the BUILDER may, provided the BUYER
so agrees in writing, supply other materials and equipment of the best
available and like quality, capable of meeting the requirements of the
Classification Society and of the rules, regulations, requirements and
recommendations with which the construction of the DRILLSHIP must
comply. Any agreement as to such substitution of materials shall be
effected in the manner as provided in Paragraph 1 of this Article, and
shall, likewise, include decrease or increase in the Contract Price
and other terms and conditions of this Contract affected by such
substitution.
(End of Article)
------------------------------------------
ARTICLE VI - TRIALS AND ACCEPTANCE
1. Notice:
The sea trial shall start when the DRILLSHIP is reasonably
completed in all material respects according to the Specifications.
The BUILDER shall give the BUYER at least Twenty(20) days
estimated prior notice and Seven(7) days confirming prior notice in
writing or by telex confirmed in writing of the time and place of
the trial run of the DRILLSHIP, and the BUYER shall promptly
acknowledge receipt of such notice. The BUYER shall have its
representative and his assistant(s) on board the DRILLSHIP to
witness such trial run.
Failure in attendance of the BUYER's representative at the trial
run of the DRILLSHIP for any reason whatsoever after due notice to
the BUYER as above provided shall be deemed to be a waiver by the
BUYER of its right to have its representative on board the
DRILLSHIP at the trial run, and the BUILDER may conduct the trial
run without attendance of the BUYER's representative, and in such
case the BUYER shall be obligated to accept the DRILLSHIP on the
basis of certificates of the Classification Society and a
certificate of the BUILDER stating that the DRILLSHIP, upon trial
run, is found to conform to this Contract and the Specifications.
2. Weather Condition:
The trial run shall be carried out under the weather condition
which is deemed favorable enough by the judgement of both the BUYER
and the BUILDER. In the event of unfavorable weather on the date
specified for the trial run, the same shall take place on the first
available day thereafter that the weather condition permits. It is
agreed that, if during the trial run of the DRILLSHIP, the weather
should suddenly become so unfavorable that orderly conduct of the
trial run can no longer be continued, the trial run shall be
discontinued and postponed until the first favorable day next
following, unless the BUYER shall assent in writing to acceptance
of the DRILLSHIP on the basis of the trial run already made before
such discontinuance has occurred.
Any delay of trial run caused by such unfavorable weather
condition shall operate to postpone the Delivery Date by the period
of the delay involved and such delay shall be deemed as permissible
delay in the delivery of the DRILLSHIP.
3. How Conducted:
(a) The DRILLSHIP shall run the official trial run in the manner
as specified in the Specifications.
(b) All expenses in connection with the trial run are to be for
account of the BUILDER and the BUILDER shall provide, at its own
expense, the necessary crew to comply with conditions of safe
navigation.
(c) BUYER shall furnish complete procedures and supervision for
the installation, testing and precommissioning for the BOP stack.
4. Method of Acceptance or Rejection.
(a) Upon completion of the trial run, the BUILDER shall give the
BUYER a notice by telex confirmed in writing of completion of the
trial run, as and if the BUILDER considers that the results of
trial run indicate conformity of the DRILLSHIP to this Contract
and the Specifications. The BUYER shall, within Five (5) days
after receipt of such notice from the BUILDER, notify the BUILDER
by telex or telefax confirmed in writing of its acceptance or
rejection of the trial results.
(b) However, if the result of the trial run is unacceptable, or
if the DRILLSHIP, or any part or equipment thereof, (except a
defect in the BUYER's Supplies not the responsibility of the
BUILDER) does not conform to the requirements of this Contract
and/or the Specifications, or if the BUILDER is in agreement to
non- conformity as specified in the BUYER's notice of rejection,
then, the BUILDER shall take necessary steps to correct such non-
conformity.
The DRILLSHIP may be redocked in the event of unsatisfactory
sea-trial results for the dynamic positioning and thruster
systems, or other major system malfunction which cannot be
repaired afloat.
Upon completion of correction of such non-conformity, and re-
test or trial if necessary, the BUILDER shall give the BUYER
notice thereof by telex or telefax confirmed in writing.
The BUYER shall, within Five (5) days after receipt of such
notice from the BUILDER, notify the BUILDER of its acceptance or
rejection of the DRILLSHIP's conformity by telex or telefax
confirmed in writing.
(c) If any event that the BUYER rejects the DRILLSHIP, the BUYER
shall indicate in detail in its notice of rejection in what
respect the DRILLSHIP, or any part or equipment thereof (except a
defect in the BUYER's Supplies not the responsibility of the
BUILDER) does not conform to this Contract and/or the
Specifications.
(d) In the event that the BUYER fails to notify the BUILDER by
telex or telefax confirmed in writing of the acceptance of or the
rejection together with the reason therefor of the DRILLSHIP
within the period as provided in the above Sub-paragraph (a) or
(b), the BUYER shall be deemed to have accepted the trial results
and/or the DRILLSHIP, as appropriate.
(e) Any dispute between the BUILDER and the BUYER as to the
conformity or non-conformity of the DRILLSHIP to the requirements
of this Contract and/or the Specifications shall be submitted for
final decision in accordance with Article XII hereof.
5. Effect of Acceptance:
Acceptance of the DRILLSHIP as above provided in Paragraphs 4(a)
or 4(b) of this Article VI shall be final and binding so far as
conformity of the DRILLSHIP to this Contract and the
Specifications is concerned and shall preclude the BUYER from
refusing formal delivery of the DRILLSHIP as hereinafter
provided, if the BUILDER complies with all other procedural
requirements for delivery as provided in Article VII hereof.
However, the BUYER's acceptance of the DRILLSHIP shall not affect
the BUYER's rights under Article IX hereof.
6. Disposition of Surplus Consumable Stores:
Any fuel oil furnished and paid for by the BUILDER for trial runs
remaining on board the DRILLSHIP, at the time of acceptance of
the DRILLSHIP by the BUYER, shall be bought by the BUYER from the
BUILDER at the BUILDER's purchase price for such supply in Korea
and payment by the BUYER thereof shall be made at the time of
delivery of the DRILLSHIP. The BUILDER shall pay the BUYER at the
time of delivery of the DRILLSHIP an amount for the consumed
quantity of any lubricating oil and greases which were furnished
and paid for by the BUYER at the BUYER's purchase price thereof.
(End of Article)
------------------------------------------
ARTICLE VII - DELIVERY
1. Time and Place:
The DRILLSHIP shall be delivered by the BUILDER to the BUYER at
the Shipyard on August 31, 1999(unless delays occur in the
construction of the DRILLSHIP or in any performance required under
this Contract due to causes which under the terms of this Contract
permit postponement of the date of delivery, in which event, the
aforementioned date for delivery of the DRILLSHIP shall be changed
accordingly) or, such earlier date after completion of the
DRILLSHIP according to this Contract and the Specifications.
The aforementioned date, or such earlier or later date to which
the requirement of delivery is advanced or postponed pursuant to
this Contract, is herein called the "Delivery Date".
2. When and How Effected:
Provided that the BUILDER and the BUYER shall have fulfilled all
of their obligations stipulated under this Contract, the delivery
of the DRILLSHIP shall be effected forthwith by the concurrent
remittance of the fifth installment in accordance with Article II,
Section 5(c) and delivery by each of the parties hereto to the
other of the PROTOCOL OF DELIVERY AND ACCEPTANCE, acknowledging
delivery of the DRILLSHIP by the BUILDER and acceptance thereof by
the BUYER.
3. Documents to be delivered to BUYER:
Upon delivery and acceptance of the DRILLSHIP, the BUILDER shall
deliver to the BUYER the following documents, which shall accompany
the PROTOCOL OF DELIVERY AND ACCEPTANCE.
(a) PROTOCOL OF TRIALS of the DRILLSHIP made pursuant to the
Specifications.
(b) PROTOCOL OF INVENTORY of the equipment of the DRILLSHIP,
including spare parts and the like, as specified in the
Specifications.
(c) PROTOCOL OF STORES OF CONSUMABLE NATURE referred to under
paragraph 6 of Article VI hereof.
(d) ALL CERTIFICATES, including the BUILDER's CERTIFICATE
required to be furnished upon delivery of the DRILLSHIP pursuant
to this Contract and the Specifications.
It is agreed that if, through no fault on the part of the
BUILDER, the Classification certificates and/or other
certificates are not available at the time of delivery of the
DRILLSHIP, provisional certificates shall be accepted by the
BUYER, provided that the BUILDER shall furnish the BUYER with
the formal certificates as promptly as possible after such
certificates have been issued.
Application and certificate for statutory inspections by
Panamanian Government shall be arranged by the BUYER at its
expense.
(e) DECLARATION OF WARRANTY of the BUILDER that the DRILLSHIP is
delivered to the BUYER free and clear of any liens, charges,
claims, mortgages, or other encumbrances upon the BUYER's title
thereto, and in particular that the DRILLSHIP is absolutely free
of all burdens in the nature of imposts, taxes or charges imposed
by Korean Governmental Authorities, as well as all liabilities
of the BUILDER to its subcontractors, employees and crew, and of
the liabilities arising from the operation of the DRILLSHIP in
trial runs, or otherwise, prior to delivery.
(f) DRAWINGS AND PLANS pertaining to the DRILLSHIP as stipulated
in the Specifications.
(g) COMMERCIAL INVOICE.
(h) Necessary export licenses, permits, and clearances by Korean
Government to enable the DRILLSHIP to sail from Korea following
delivery.
(i) DRAWINGS/OPERATING MANUALS. All documentation, including,
but not limited to complete, as-built drawings, operations
manuals, commissioning reports, inclining reports, major/minor
equipment certifications, sea trial reports, spare parts list and
BUILDER's vendor's documentation will be furnished by BUILDER to
BUYER on or before the delivery of the DRILLSHIP.
4. Tender of DRILLSHIP:
If the BUYER fails to take delivery of the DRILLSHIP after
completion thereof according to this Contract and the
Specifications without any justifiable reason, the BUILDER shall
have the right to tender delivery of the DRILLSHIP after
accomplishment of all BUILDER's obligations as provided herein.
5. Title and Risk:
Title to and risk of loss of the DRILLSHIP shall pass to the
BUYER only upon the delivery and acceptance thereof having been
completed as stated above; it being expressly understood that,
until such delivery is effected, title to and risk of damage to or
loss of the DRILLSHIP and her equipment shall be in the BUILDER.
6. Removal of DRILLSHIP:
The BUYER shall take possession of the DRILLSHIP immediately upon
delivery and acceptance thereof and shall remove the DRILLSHIP from
the premises of the Shipyard within Seven (7) days after delivery
and acceptance thereof is effected.
If the BUYER shall not remove the DRILLSHIP from the premises of
the Shipyard within the aforesaid Seven (7) days, in such event,
the BUYER shall pay to the BUILDER the reasonable mooring charges
of the DRILLSHIP.
(End of Article)
------------------------------------------
ARTICLE VIII - DELAYS AND EXTENSION OF TIME FOR
DELIVERY (FORCE MAJEURE)
1. Causes of Delay (Force Majeure):
If, at any time either the construction or delivery of the
DRILLSHIP or any performance required hereunder as a prerequisite
to the delivery thereof is delayed by any of the following events;
namely war, acts of state or government, blockade, revolution,
insurrections, mobilization, civil commotion, riots, strikes,
sabotage, lockouts, Acts of God or the public enemy, plague or
other epidemics, quarantines, prolonged failure of electric
current, freight embargoes, or defects in major forgings or
castings, if any, or shortage of materials, machinery or equipment
in inability to obtain delivery or delays in delivery of materials,
machinery or equipment, provided that at the time of ordering the
same could reasonably be expected by the BUILDER to be delivered in
time, or defects in materials, machinery or equipment which could
not have been detected by the BUILDER using reasonable care, or
earthquakes, tidal waves, typhoons, hurricanes, prolonged or
unusually severe weather conditions or delay in the construction of
the BUILDER's other newbuilding projects in the same drydock due to
any such causes as described in this Article which in turn delay
the keel laying and eventual delivery of the DRILLSHIP in view of
the Shipyard's overall building programme or the BUILDER's
performance under this Contract, or by destruction of the premises
or works of the BUILDER or its sub-contractors, or of the
DRILLSHIP, or any part thereof, by fire, landslides, flood,
lightning, explosion, or other causes beyond the control of the
BUILDER, or its sub-contractors, as the case may be, or for any
other causes which, under terms of this Contract, authorize and
permit extension of the time for delivery of the DRILLSHIP, then,
in the event of delays due to the happening of any of the
aforementioned contingencies, the Delivery Date of the DRILLSHIP
under this Contract shall be extended for a period of time which
shall not exceed the total accumulated time of all such delays.
2. Notice of Delay:
Within Fourteen (14) days after the date of occurrence of any
cause of delay, on account of which the BUILDER claims that it is
entitled under this Contract to a postponement of the Delivery
Date, the BUILDER shall notify the BUYER in writing or by telex or
telefax confirmed in writing of the date when such cause of delay
occurred. Likewise, within Fourteen (14) days after the date of
ending of such cause of delay, the BUILDER shall notify the BUYER
in writing or by telex confirmed in writing of the date when such
cause of delay ended. The BUILDER shall also notify promptly the
BUYER of the period, by which the Delivery Date is postponed by
reason of such cause of delay. If the BUILDER does not give the
timely advice as above, the BUILDER shall lose the right to claim
such delays as permissible delay.
Failure of the BUYER to acknowledge to the BUILDER's claim for
postponement of the Delivery Date within Fourteen (14) days after
receipt by the BUYER of such notice of claim shall be deemed to be
a waiver by the BUYER of its right to object to such postponement
of the Delivery Date.
3. Definition of Permissible Delay:
Delays on account of such causes as specified in Paragraph 1 of
this Article and any other delay of a nature which under the terms
of this Contract permits postponement of the Delivery Date shall be
understood to be permissible delays and are to be distinguished
from unauthorized delays on account of which the Contract Price is
subject to adjustment as provided for in Article III hereof.
4. Right to Rescind for Excessive Delay:
(a) If the total accumulated time of all delays claimed by the
BUILDER on account of the causes specified in Paragraph 1 of this
Article, excluding other delays of the nature which under the
terms of this Contract permit postponement of the Delivery Date,
amounts to One Hundred Eighty (180) days or more, then, in such
event, the BUYER may rescind this Contract in accordance with the
provisions of Article X hereof.
The BUILDER may, at any time after the accumulated time of the
aforementioned delays justifying rescission by the BUYER, demand
in writing that the BUYER shall make an election, in which case
the BUYER shall, within Fourteen (14) BUILDER's working days
after such demand is received by the BUYER either notify the
BUILDER of its intention to rescind this Contract, or consent to
a postponement of the Delivery Date to a specified future date,
which date BUILDER represents to BUYER is the earliest date
BUILDER can deliver the DRILLSHIP to BUYER, based on the
circumstances then known, it being understood by the parties
hereto that if the DRILLSHIP is not delivered by such future
date, the BUYER shall have the same right of rescission upon the
same terms and conditions as hereinabove provided.
(b) If at any time during the term of this Contract, BUILDER
falls more than 270 days behind in the construction of the
DRILLSHIP according to the Delivery and Construction Schedule,
for any reason whatsoever, and whether as a result of permissible
delay or otherwise, BUYER shall be entitled to give written
notice to BUILDER that BUYER considers BUILDER in material
default of its obligations under this Contract, and if BUILDER
has not cured such default within Thirty (30) days after receipt
of such notice, BUYER shall have the right to rescind this
Contract in accordance with the provisions of Article X hereof.
(End of Article)
------------------------------------------
ARTICLE IX - WARRANTY OF QUALITY
1. Guarantee:
The BUILDER, for the period of Twelve (12) months after delivery
of the DRILLSHIP (hereinafter called "Guarantee Period"),
guarantees the DRILLSHIP and her engines, including all parts and
equipment manufactured, furnished or installed by the BUILDER or
its subcontractors under this Contract, and including the
machinery, equipment and appurtenances thereof (including the
installation work performed or required to be performed by BUILDER
under this Contract for the BUYER supplied or furnished
equipment), under the Contract but excluding any item which is
supplied or designated by the BUYER or by any other bodies on
behalf of the BUYER, against all defects and all damages to the
DRILLSHIP resulting therefrom occurring within the Guarantee Period
which are due to defective material, design and/or poor workmanship
or negligent or other improper acts or commissions on the part of
the BUILDER or its subcontractors (hereinafter called the "Defect"
or "Defects") and are not a result of accident, ordinary wear and
tear, misuse, mismanagement, negligent or other improper acts or
omissions or neglect on the part of the BUYER, its employee or
agents.
The BUILDER shall arrange for the BUYER to obtain three (3) years
guarantee after delivery of the DRILLSHIP for the paint materials
in the ballast tank coatings through the paint manufacturer
selected by the BUILDER. But, the BUILDER's guarantee for the
ballast tank coating shall be in no event longer than one (1) year
after delivery of the DRILLSHIP unless major repairs as defined in
Clause 3 of this Article have arisen. Such additional extended
guarantee shall proceed between the BUYER and the selected
manufacturer arranged by the BUILDER. Final selection of the
ballast tank coatings manufacturer is subject to the approval of
the BUYER, not to be unreasonably withheld.
2. Notice of Defects:
The BUYER shall notify the BUILDER in writing, or by telex
confirmed in writing, of any Defect for which claim is made under
this guarantee, as promptly as possible after discovery thereof.
The BUYER's written notice shall describe in detail the nature,
cause and extent of the Defects.
The BUILDER shall have no obligation for any Defect discovered
prior to the expiry date of the Guarantee Period, unless notice of
such Defect or any damage resulting therefrom is received by the
BUILDER not later than Ten (10) BUILDER's working days after the
expiry date of the Guarantee Period.
3. Remedy of Defects:
(a) The BUILDER shall remedy, at its expense, any Defect against
which the DRILLSHIP is guaranteed under this Article, by making
all necessary repairs or replacements at the Shipyard.
(b) However, if it is impracticable to bring the DRILLSHIP to
the Shipyard, the BUYER may cause the necessary repairs or
replacements to be made elsewhere which is deemed suitable for
the purpose, provided that, in such event, the BUILDER may
forward or supply replacement parts or materials to the
DRILLSHIP, unless forwarding or supplying thereof to the
DRILLSHIP would impair or delay the operation or working schedule
of the DRILLSHIP. In the event that the BUYER proposes to cause
the necessary repairs or replacements for the DRILLSHIP to be
made at any other shipyard or works than the Shipyard, the BUYER
shall first, but in all events as soon as possible, give the
BUILDER notice in writing or by telex confirmed in writing of the
time and place when and where such repairs will be made, and if
the DRILLSHIP is not thereby delayed, or her operation or working
schedule is not thereby impaired, the BUILDER shall have the
right to verify by its own representative(s) the nature, cause
and extent of the Defects complained of. The BUILDER shall, in
such case, promptly advise the BUYER by telex, after such
examination has been completed, of its acceptance or rejection of
the Defects as ones that are covered by the guarantee herein
provided. Upon the BUILDER's acceptance of the Defects as
justifying remedy under this Article, or upon award of the
arbitration so determining, the BUILDER shall pay to the BUYER
for such repairs or replacements a sum equal to the reasonable
cost of making the same repairs or replacements in a first class
Korean shipyard, at the prices prevailing at the time of such
repairs or replacements are made. The guarantee works shall be
settled regularly during the Guarantee Period. The actual
reimbursement for the guarantee shall be made in a lump sum at
the expiry of the Guarantee Period.
(c) In any case, the DRILLSHIP shall be taken, at the BUYER's
cost and responsibility, to the place elected, ready in all
respects for such repairs or replacement.
(d) Any dispute under this Article shall be referred to
arbitration in accordance with the provisions of Article XII
hereof.
(e) Repairs under this Article are guaranteed for the balance of
the period set out in paragraph 1 of this Article but for major
repairs are guaranteed for the longer of the balance of the
period set out in paragraph 1 of this Article or 6 months from
the date of completion of major repairs, but in no event longer
than 18 months after the Delivery Date. For purposes hereof,
"major repairs" shall be defined as a repair costing more than
Xxx Xxxxxxx Xxxxx Xxxxxxxx Xxxxxx Xxxxxx Dollars (US$150,000).
4. Extent of BUILDER's Responsibility:
(a) The BUILDER shall have no responsibility or liability for
any other defect whatsoever in the DRILLSHIP other than the
Defects specified in Paragraph 1 of this Article, other than to
repair all damages to the DRILLSHIP discovered within the
Guarantee Period and resulting from or caused by the Defects
which are not attributable to the BUYER's (i) improper acts or
omissions, (ii) negligence, or (iii) misuse.
Nor shall the BUILDER in any circumstances be responsible or
liable for any consequential or special loss, damage or expense,
including, but not limited to, loss of time, loss of profit of
earnings or demurrage directly or indirectly occasioned to the
BUYER by reason of the Defects specified in Paragraph 1 of this
Article or due to repairs or other works done to the DRILLSHIP to
remedy such Defects.
(b) The BUILDER shall not be responsible for any defect in any
part of the DRILLSHIP which may, subsequently to delivery of the
DRILLSHIP, have been replaced or repaired in any way by any other
contractor, unless done pursuant to Paragraph 3 (b) of this
Article, or for any defect which have been caused or aggravated
by omission or improper use and maintenance of the DRILLSHIP on
the part of the BUYER, its servants or agents or by ordinary wear
and tear or by any other cause beyond control of the BUILDER
(other than aggravation of defect or results of defect resulting
from the use or operation of the DRILLSHIP after knowledge of
same by BUYER, where such continued use or operation was
unavoidable to preserve or protect the safety of the DRILLSHIP or
her crew).
(c) The guarantee contained as hereinabove in this Article
replaces and excludes any other liability, guarantee, warranty
and/ or condition imposed or implied by the law, customary,
statutory orotherwise, by reason of the construction and sale of
the DRILLSHIP by the BUILDER for and to the BUYER.
5. Guarantee Engineer:
The BUILDER shall, at the request of the BUYER, appoint a maximum
of two (2) Guarantee Engineers to serve on the DRILLSHIP as its
representative for a period of up to Three (3) months from the date
the DRILLSHIP is delivered. However, if the BUYER shall deem it
necessary to keep the Guarantee Engineers on the DRILLSHIP for a
longer period, then he shall remain on board the DRILLSHIP after
the said up to Three (3) months, up to but not longer than Six (6)
months from the delivery of the DRILLSHIP.
The BUYER, and its employees, shall give such Guarantee Engineers
full cooperation in carrying out his duties as the representative
of the BUILDER on board the DRILLSHIP.
The BUYER shall accord the Guarantee Engineers treatment
comparable to the DRILLSHIP's Chief Engineer, and shall provide
board and lodging at no cost to the BUILDER or the Guarantee
Engineers. The BUILDER and the BUYER shall, prior to delivery of
the DRILLSHIP, execute a separate agreement regarding the Guarantee
Engineers.
While the Guarantee Engineers are on board the DRILLSHIP, the
BUYER shall pay to the Guarantee Engineers the sum of US$5,000 per
month, the expenses of his repatriation to Seoul, Korea by air upon
termination of his service, the expenses of his communication with
the BUILDER incurred in performing his duties and expenses, if any,
of his medical and hospital care in the DRILLSHIP's hospital.
BUILDER will have the option, at BUILDER's sole risk and expense,
to place a maximum of two (2) Guarantee Engineers on board the
DRILLSHIP for a period of up to six (6) months. The BUYER will
provide board, lodging, communications and general working support
services at no cost to the BUILDER or the Guarantee Engineers but
all other expenses shall be for the sole account of BUILDER.
(End of Article)
------------------------------------------
ARTICLE X - RESCISSION BY BUYER
1. Notice:
The payments made by the BUYER prior to delivery of the DRILLSHIP
shall be in the nature of advances to the BUILDER, and in the event
that the DRILLSHIP after sea trial is rejected by the BUYER or the
Contract is rescinded by the BUYER in accordance with the terms of
this Contract under and pursuant to any of the provisions of this
Contract specifically permitting the BUYER to do so, then the BUYER
shall notify the BUILDER in writing or by telex confirmed in
writing, and such rescission shall be effective as of the date when
notice thereof is received by the BUILDER.
2. Refundment by BUILDER:
In case the BUILDER receives the notice stipulated in Paragraph 1
of this Article, the BUILDER shall promptly refund to the BUYER the
full amount of all sums paid by the BUYER to the BUILDER on account
of the DRILLSHIP, together with the interest thereon, unless the
BUILDER proceeds to the arbitration under the provisions of Article
XII hereof.
In the event of such rescission by the BUYER, the BUILDER shall
pay the BUYER interest at the rate of Eight percent (8%) per annum
on the amount required herein to be refunded to the BUYER, computed
from the date following the respective date on which such sums were
paid by the BUYER to the BUILDER to the date of remittance by
transfer of such refund to the BUYER by the BUILDER, provided,
however, that if the said rescission by the BUYER is made under the
provisions of Paragraph 4 of Article VIII hereof, then in such
event the BUILDER shall pay the BUYER interest at the rate of Four
percent (4%) per annum on the sums refundable.
As security for refund of installments prior to delivery of the
DRILLSHIP, the BUILDER shall furnish to BUYER, prior to the due
date of the first installment, with a letter of guarantee covering
the amount of such pre-delivery installments and issued by the
BUILDER's BANK in favour of the BUYER. Such letter of guarantee
shall have substantially the same form and substance as Exhibit "A"
annexed hereto.
The BUILDER represents and warrants that Korean law no longer
requires issuance of an Export License on the Option Vessel in
connection with issuance of, or payment under, the Refund
Guarantee, and shall remain responsible to provide to the BUYER any
such Export License as and to the extent required by Korean law,
whether now or in the future.
3. Discharge of Obligations:
Upon such refund by the BUILDER to the BUYER, all obligations,
duties and liabilities of each of the parties hereto to the other
under this Contract shall be forthwith completely discharged,
without prejudice, however, to any claims either party may have
resulting from the other party's breach of any of its obligations
under this Contract.
(End of Article)
------------------------------------------
ARTICLE XI - BUYER'S DEFAULT
1. Definition of Default:
The BUYER shall be deemed to be in default of its performance of
obligations under this Contract in the following cases:
(a) If the first, second, third, fourth or fifth installment is
not paid by the BUYER to the BUILDER within Three(3) banking days
in New York after such installment becomes due and payable as
provided in Article II hereof; or
(b) If the sixth installment is not paid by the BUYER to the
BUILDER in New York at the time such installment becomes due and
payable upon delivery of the Vessel as provided in Article II
hereof; or
(c) If the increased amount in the Contract Price as adjusted
due and payable upon delivery of the DRILLSHIP is not paid by the
BUYER concurrently with delivery of the DRILLSHIP as provided in
Article II hereof; or
(d) If the BUYER, when the DRILLSHIP is duly tendered for
delivery by the BUILDER in accordance with the provisions of this
Contract, fails to accept the DRILLSHIP within Five (5) days from
the tendered date without any specific and valid ground thereof
under this Contract.
2. Effect of Default on or before Delivery of DRILLSHIP:
(a) Should the BUYER make default in payment of any installment
of the Contract Price on or before delivery of the DRILLSHIP, the
BUYER shall pay the installment(s) in default plus accrued
interest thereon at the rate of eight percent (8%) per annum
computed from the due date of such installment to the date when
the BUILDER receives the payment, and, for the purpose of
Paragraph 1 of Article VII hereof, the Delivery Date of the
DRILLSHIP shall be automatically extended by a period of
continuance of such default by the BUYER.
In any event of default by the BUYER, the BUYER shall also
pay all charges and expenses incurred to the BUILDER in direct
consequence of such default.
(b) If any default by the BUYER continues for a period of Ten
(10) days, the BUILDER may, at its option, rescind this Contract
by giving notice of such effect to the BUYER by telex confirmed
in writing.
Upon dispatch by the BUILDER of such notice of rescission, this
Contract shall be forthwith rescinded and terminated. In the event
of such rescission of this Contract, the BUILDER shall be entitled
to retain any installment or installments already paid by the BUYER
to the BUILDER on account of this Contract and the BUYER's
Supplies, if any.
3. Disposal of DRILLSHIP:
(a) In the event that this Contract is rescinded by the BUILDER
under the provisions of Paragraph 2(b) of this Article, the
BUILDER may, at its sole discretion, either complete the
DRILLSHIP and sell the same, or sell the DRILLSHIP in its
incomplete state, free of any right or claim of the BUYER. Such
sale of the DRILLSHIP by the BUILDER shall be either by public
auction or private contract at the BUILDER's sole discretion and
on such terms and conditions as the BUILDER shall deem fit.
(b) In the event of such sale of the DRILLSHIP, the amount of
the sale received by the BUILDER shall be applied firstly to all
expenses attending such sale or otherwise incurred to the BUILDER
as a result of the BUYER's default, secondly to the payment of
all costs and expenses of construction of the DRILLSHIP incurred
to the BUILDER less BUYER's Supplies and the installments already
paid by the BUYER, and then to the compensation to the BUILDER
for a reasonable loss of profit due to rescission of this
Contract, and finally to the repayment to the BUYER if any
balance is obtained.
(c) If the proceeds of sale are insufficient to pay such total
costs and loss of profit as aforesaid, the BUYER shall promptly
pay the deficiency to the BUILDER upon request.
4. Dispute:
Any dispute under this Article shall be referred to arbitration
in accordance with the provisions of Article XII hereof.
(End of Article)
------------------------------------------
ARTICLE XII - ARBITRATION
1. Decision by the Classification Society:
If any dispute arises between the parties hereto in regard to the
design and/or construction of the DRILLSHIP, its machinery and
equipment, and/or in respect of the materials and/or workmanship
thereof and/or thereon, and/or in respect of interpretations of
this Contract or the Specifications, the parties may by mutual
agreement refer the dispute to the Classification Society or to
such other expert as may be mutually agreed between the parties
hereto, and whose decision shall be final, conclusive and binding
upon the parties hereto.
2. Proceedings of Arbitration:
In the event that the parties hereto do not agree to settle a
dispute according to Paragraph 1 of this Article and/or in the
event of any other dispute of any kind whatsoever between the
parties and relating to this Contract or its rescission or any
stipulation herein, such dispute shall be submitted to arbitration
in London. Each party shall appoint an arbitrator and in the event
that they cannot agree, the two arbitrators so appointed shall
appoint an Umpire. If the two arbitrators are unable to agree upon
an Umpire within Twenty (20) days after appointment of the second
arbitrator, either of the said two arbitrators may apply to the
President for the time being of the London Maritime Arbitrators
Association to appoint the Umpire, and the two arbitrators and the
Umpire shall constitute the Board of Arbitration. Such arbitration
shall be in accordance with and subject to the provisions of the
British Arbitration Xxx 0000, or any statutory modification or re-
enactment thereof for the time being in force.
Either party may demand arbitration of any such dispute by giving
notice to the other party. Any demand for arbitration by either of
the parties hereto shall state the name of the arbitrator appointed
by such party and shall also state specifically the question or
questions as to which such party is demanding arbitration. Within
Fourteen (14) days after receipt of notice of such demand for
arbitration, the other party shall in turn appoint a second
arbitrator and give notice in writing of such appointment to the
party demanding arbitration. If a party fails to appoint an
arbitrator as aforementioned within Fourteen (14) days following
receipt of notice of demand for arbitration by the other party, the
party failing to appoint an arbitrator shall be deemed to have
accepted and appointed, as its own arbitrator, the arbitrator
appointed by the party demanding arbitration and the arbitration
shall proceed before this sole arbitrator who alone in such event
shall constitute the Arbitration Board.
The award of the arbitrators and/or Umpire shall be final and
binding on both parties.
3. Notice of Award:
The award decision shall immediately be communicated to the BUYER
and the BUILDER by facsimile and confirmed in writing.
4. Expenses:
The Arbitration Board shall determine which party shall bear the
expenses of the arbitration or the portion of such expenses which each
party shall bear.
5. Entry in Court:
In case of failure by either party to respect the award of the
arbitration, the judgement may be entered in any proper court having
jurisdiction thereof.
6. Alteration of Delivery Date:
In the event of reference to arbitration of any dispute arising
out of matters occurring prior to delivery of the DRILLSHIP, the award
may include any adjustment of the Delivery Date which the Arbitration
Board may deem appropriate.
(End of Article)
------------------------------------------
ARTICLE XIII - SUCCESSOR AND ASSIGNS
Neither of the parties hereto shall assign this Contract to any other
individual or company unless prior consent of the other party is given in
writing, such consent not to be unreasonably withheld, provided however,
that subsequent to the payment of the first installment of the Contract
Price, BUYER, upon giving notice in writing to the BUILDER, shall be freely
entitled to assign, in whole or in part, its rights and obligations under
this Contract to any person, company or entity whatsoever. The notice
given by BUYER of such assignment shall include a reasonable explanation of
the purpose of the assignment and shall provide sufficient information so
as to allow the BUILDER to advise the BUILDER's Bank regarding any
amendment of the name of the beneficiary of the Refund Guarantee provided
for in Article X hereof. Upon such assignment, the BUYER shall provide to
BUILDER a copy of any assignment made pursuant hereto.
In the event of any assignment pursuant to the terms of this Contract,
the assignee shall succeed to all of the assigned rights and obligations of
the assignor under this Contract and, to the extent assigned, the assignor
shall have no further right or obligation hereunder. Should BUYER assign
this Contract, any assignee or subsequent assignee of this Contract shall
succeed to the rights of the BUYER to further assign this Contract under
this Article XIII.
(End of Article)
------------------------------------------
ARTICLE XIV - TAXES AND DUTIES
1. Taxes and Duties Incurred in Korea:
The BUILDER shall bear and pay all taxes, duties, stamps and fees
incurred in Korea in connection with execution and/or performance
of this Contract as the BUILDER, and any taxes and duties imposed
in Korea upon the BUYER's Supplies resulting from the failure
attributable to the BUILDER in taking all appropriate action to
have such BUYER's Supplies imported into Korea under bond for
ultimate export with the DRILLSHIP following delivery.
2. Taxes and Duties Incurred Outside Korea:
The BUYER shall bear and pay all taxes (other than taxes on
income imposed on BUILDER), duties, stamps and fees incurred
outside Korea in connection with execution and/or performance of
this Contract as the BUYER, except for taxes and duties imposed
upon those items (other than BUYER's Supplies) to be procured by or
for the BUILDER for construction of the DRILLSHIP which shall be
the responsibility of the BUILDER.
(End of Article)
------------------------------------------
ARTICLE XV - PATENTS, TRADEMARKS, COPYRIGHTS, ETC.
1. Patents:
Except as to BUYER's Supplies, BUILDER agrees to defend,
indemnify and hold BUYER harmless from any liability or claims of
patent infringement of any nature or kind (including legal fees and
expenses) relating to the infringement or claimed infringement of
patent rights of any third party with respect to any material,
service, process, or apparatus covered by this Contract, or their
use for their intended purpose.
With regards to the performance of the current Contract, BUYER
shall defend, indemnify and hold BUILDER harmless from all claims
of infringement of patent rights of any third party related to (i)
processes supplied by BUYER or (ii) BUYER's Supplies.
Except as otherwise provided for in this Agreement, nothing
contained herein shall be construed as transferring any rights in
any patents, trademarks or copyrights utilized in the performance
of this Contract.
2. General Plans, Specifications and Working Drawings:
The BUILDER retains all rights with respect to the
Specifications, and plans and working drawings, technical
descriptions, calculations, test results and other data,
information and documents concerning the design and construction of
the DRILLSHIP except for such technical documents which have been
provided solely by the BUYER or its agents or servants to the
BUILDER in connection with design and construction of the
DRILLSHIP, and the BUYER undertakes therefore not to disclose the
same or divulge any information contained therein to any third
parties, without the prior written consent of the BUILDER (such
consent not to be unreasonably withheld) except where such
disclosure is necessary for usual operation, repair and maintenance
of the DRILLSHIP.
3. Exceptions:
(a) Notwithstanding anything else contained in this Article XV,
the BUILDER agrees that it will not, without the prior written
consent of the BUYER, no to be unreasonably withheld, disclose
any information or data or material of any nature and in whatever
form concerning or regarding the following:
Topside Specification (Exhibit 2)
This provision XV.3.(a) shall be in effect for 12 months
from Contract signing.
(b) Notwithstanding anything else contained in this Article XV,
the BUILDER agrees that the BUYER may use any information, data,
or material of any nature and in whatever form concerning or
regarding the power distribution design and management of the
DRILLSHIP and the topside Specifications for its own benefit.
(End of Article)
--------------------------------------------------
ARTICLE XVI - BUYER'S SUPPLIES
1. Responsibility of BUYER:
(a) The BUYER shall, at its own risk, cost and expense, supply
and deliver to the BUILDER all of the items to be furnished by
the BUYER as specified in the Specifications(herein called the
BUYER's Supplies) to a first point of arrival (mainly the port of
Pusan, Korea or other places as may be agreed between the
parties) in Korea in good condition. Once delivered to the
first point of arrival in Korea, the BUYER's Supplies will be at
the BUILDER's risk. Prior to the transportation of the BUYER's
Supplies within Korea, the BUILDER shall make a visual inspection
of BUYER's Supplies and report to BUYER any apparent damage to
the BUYER's Supplies. BUYER and BUILDER shall inspect the BUYER's
Supplies upon arrival thereof at the Shipyard to determine
whether the BUYER's Supplies comply with the contractual
specifications or have been damaged during the transportation.
If as the result of such inspections, (i) any defect to the
BUYER's Supplies is found, or (ii) any damage to the BUYER's
Supplies occurring prior to arrival at the first point in Korea
is found, then all the remedies and replacements thereof are
the responsibility of the BUYER. Any delay or direct expenses
regarding the construction of the DRILLSHIP resulting solely
from BUYER's failure to have the BUYER's Supplies delivered in
Korea as agreed herein shall be the BUYER's responsibility.
Risk of transportation within Korea to the Shipyard and risk of
offloading, uncrating and storage of the BUYER's Supplies upon
their arrival at the Shipyard will be with BUILDER. However, the
cost for inland transportation, customs clearance, insurance for
inland transportation and other costs, if any, for the BUYER's
Supplies shall be one point eight percent (1.8%) of the BUYER's
Supplies amount on the C.I.F. value basis, which shall be paid by
the BUYER to the BUILDER together with the payment of the 5th
installment pursuant to Article II hereof. In case such BUYER's
Supplies are delivered directly to the Koje Shipyard by the
BUYER, the applicable cost (rate) shall be reduced to zero point
zero percent (0.0%) of the BUYER's Supplies amount on the basis
of C.I.F. value, except BUYER will pay for customs clearance or
any third party costs. BUYER's Supplies sent to ports nearby
Koje Shipyard (like Changsengpo and Okpo) will be assessed
charges for transportation, customs clearance fee, harbor union
fee, pilotage and other costs that are incurred by the BUILDER to
facilitate delivery of the BUYER's Supplies to Koje Shipyard.
These fees will be charged at actual direct cost. Any loss of or
damage to the BUYER's Supplies after they are in the custody of
the BUILDER will be for the account of the BUILDER and BUILDER
will replace or repair any BUYER's Supplies that may be lost or
damaged, and a subsequent delay due to the foregoing and
resulting cost impact will be the BUILDER's responsibility.
BUILDER agrees and acknowledges that any or all of the BUYER's
Supplies may arrive at the Shipyard in individual parts or as
component parts to be placed in or made a part of a larger system
or module. The BOP is to arrive in not more than four (4) main
components.
(b) In order to facilitate installation by the BUILDER of the
BUYER's Supplies in or on the DRILLSHIP, the BUYER shall furnish
the BUILDER with necessary specifications, plans, drawings,
instruction books, manuals, test reports and certificates
required by the rules and regulations of the Specifications. If
so requested by the BUILDER, the BUYER, without any charge to the
BUILDER, shall cause the representatives of the manufacturers of
the BUYER's Supplies to advise the BUILDER in installation
thereof in or on the DRILLSHIP.
(c) Any and all of the BUYER's Supplies shall be subject to the
BUILDER's reasonable right of rejection, as and if they are found
to be unsuitable or in improper condition for installation.
(d) A preliminary Delivery Schedule of the BUYER's Supplies and
vendor data specific to the DRILLSHIP (Hull No. 1255) showing the
BUILDER's requested delivery dates is attached to the
Specifications. The Delivery Schedule of the BUYER's Supplies
and vendor data shall be mutually agreed, finalized and settled
within Sixty (60) calendar days from the date of contract
signing. The delivery dates agreed to on the Delivery Schedule
will be the dates BUYER's Supplies are required at first point in
Korea. Should the BUYER fail to deliver any of the BUYER's
Supplies within Ten (10) days of the time designated by the
Delivery Schedule, the Delivery Date shall be automatically
extended for a period not to exceed the actual delay, beyond
ten(10) days, incurred by the BUILDER. If no delay in the
delivery of the DRILLSHIP is incurred by the BUILDER, the
Delivery Date shall not change.
(e) If delay in delivery of any of the BUYER's Supplies exceeds
thirty (30) days, then, the BUILDER shall be entitled to proceed
with construction of the DRILLSHIP without installation thereof
in or on the DRILLSHIP as hereinabove provided, and the BUYER
shall accept and take delivery of the DRILLSHIP so constructed,
unless such delay is caused by Force Majeure in which case the
provision Paragraph 1(d) of this Article shall apply.
(f) The insurance for the BUYER's Supplies during storage,
construction and installation at the Shipyard is covered and
handled by the BUILDER at its cost and responsibility.
2. Responsibility of BUILDER:
The BUILDER shall be responsible for storing and handling with
reasonable care of the BUYER's Supplies after delivery thereof at
the Shipyard, and shall, at its own cost and expense, install them
in or on the DRILLSHIP, unless otherwise provided herein or agreed
by the parties hereto, provided, always, that the BUILDER shall not
be responsible for quality, efficiency and/or performance of any of
the BUYER's Supplies (other than to install same in accordance with
the manufacturer's specifications and requirements, copies of which
have been provided to BUILDER by BUYER).
It will be the BUILDER's responsibility at no cost to BUYER to:
(i) assemble the BUYER's Supplies, bulk material and provide
modularization and integration engineering, except procurement
engineering related to the BUYER's Supplies, at the Shipyard; (ii)
test the BUYER's Supplies as necessary or appropriate; (iii)
construct modules from the BUYER's Supplies as appropriate; (iv)
test and pre-commission the modules containing the BUYER's Supplies
and to generally test all of the BUYER's Supplies; (v) install the
BUYER's Supplies on the DRILLSHIP, in modules, as required, or
otherwise as required, and to integrate the BUYER's Supplies into
the overall designed system of the DRILLSHIP; (vi) test and pre-
commission the integrated modules and systems; and (vii) complete
and test the entire drilling system where practicable (i.e.,
equipment functional test only, not full operational load test) to
insure that it works harmoniously as a part of the drilling process
and the DRILLSHIP so as to be able to accomplish its intended
purpose. In no event will BUILDER charge any additional cost for
any of the above. Pre-commission or pre-commissioning as used in
this Contract or the Specifications means the putting into service
or the commissioning to be done at the Shipyard prior to delivery
and acceptance. Pre-commission or pre-commissioning does not mean
commissioning that occurs elsewhere.
3. Title:
Title to BUYER's Supplies shall at all times remain with BUYER
during the Contract; however, BUILDER shall have the risk of loss
of or damage to such BUYER's Supplies from the time set out in
subparagraph 1(a) of this Article until delivery of the DRILLSHIP.
4. BUYER's Suppplies Refundment:
Notwithstanding anything else contained in this Contract, BUILDER
agrees that if for any reason whatsoever the DRILLSHIP is not
delivered to BUYER, other than as a result of BUYER's default
under Article XI of this Contract, then BUILDER shall remit to
BUYER the full value of all BUYER's Supplies which have been
delivered to the Shipyard or which BUILDER has taken custody of
under this Article XVI. BUILDER shall remit all amounts due under
this paragraph 4 upon written demand by BUYER and upon BUILDER's
request, BUYER will furnish BUILDER with reasonable documentation
showing BUYER's cost of BUYER's Supplies. BUILDER shall remit all
amounts due within thirty (30) days of demand.
(End of Article)
--------------------------------------------------
ARTICLE XVII - INSURANCE
1. Extent of Insurance Coverage:
From the time of the launching until delivery of the DRILLSHIP,
the BUILDER shall, at its own cost and expense, keep the DRILLSHIP
and all machinery, materials and equipment delivered to the
Shipyard for the DRILLSHIP or built into or installed in or upon
the DRILLSHIP (except the BUYER's Supplies) fully insured with
first class insurance companies or underwriters in Korea with
coverage corresponding to the Institute of London Underwriter's
Clauses for Builder's Risks. From the time of the first arrival of
the BUYER's Supplies in Korea until delivery of the DRILLSHIP, the
BUILDER shall keep the BUYER's Supplies fully insured with the
aforementioned insurance companies or underwriters to cover
Builder's Risk.
The amount of such insurance coverage shall, up to the date of
delivery of the DRILLSHIP, be an amount at least equal to, but not
limited to, the aggregate of the payments made by the BUYER to the
BUILDER plus Fifty Million United States Dollars (US$50,000,000) to
cover BUYER's Supplies in the custody of the Shipyard.
The policy referred to in this paragraph for the BUYER's Supplies
shall be taken out in the name of the BUILDER and BUYER, as their
interests may appear, and all losses under such policy shall be
payable to the BUILDER and BUYER, as their interests may appear.
2. Application of the Recovered Amounts:
In the event that the DRILLSHIP shall be damaged from any insured
cause at any time before delivery of the DRILLSHIP, and in the
further event that such damage shall not constitute an actual or
constructive total loss of the DRILLSHIP, the amount received in
respect of the insurance shall be applied by the BUILDER in repair
of such damage, satisfactory to the Classification requirements,
and the BUYER shall accept the DRILLSHIP under this Contract if
completed in accordance with this Contract and the Specifications,
however, subject to the extension of delivery time under Article
VIII hereof (except in case of negligence of the BUILDER).
Should the DRILLSHIP from any cause become an actual or
constructive total loss, the BUILDER shall either:
(a) Proceed in accordance with the terms of this Contract, in
which case the amount received in respect of the insurance shall
be applied to the construction and repair of damage of the
DRILLSHIP, provided the parties hereto shall have first agreed
thereto in writing and to such reasonable extension of delivery
time as may be necessary for the completion of such
reconstruction and repair; or
(b) Refund promptly to the BUYER the full amount of all sums
paid by the BUYER to the BUILDER as installments in advance of
delivery of the DRILLSHIP, and deliver to the BUYER all BUYER's
Supplies (or the insurance proceeds paid with respect thereto),
in which case this Contract shall be deemed to be automatically
terminated and shall be deemed rescinded for purposes of Article
X hereof and all rights, duties, liabilities and obligations of
each of the parties to the other shall forthwith cease and
terminate.
3. Termination of BUILDER's Obligation to Insure:
The BUILDER shall be under no obligation to insure the DRILLSHIP
hereunder after delivery of the DRILLSHIP.
(End of Article)
--------------------------------------------------
ARTICLE XVIII - NOTICE
1. Address:
Any and all notices and communications in connection with this
Contract shall be addressed as follows:
To the BUYER:
Reading & Xxxxx Drilling Co.
000 Xxxxxxxxxxxx
Xxxxxxx, Xxxxx 00000-0000
Facsimile No.:(000)000-0000
To the BUILDER:
Samsung Heavy Industries Co., Ltd.
Xxxxxxx Xxxxx Xxxxxxxx
000-00, Xxxxxx-xxxx, Xxxxxxx-xx,
Xxxxx, Xxxxx
Facsimile No.: (000) 0000 0000
(000) 0000 0000
or preferably to its Koje Yard:
Samsung Heavy Industries Co., Ltd.
X.X. Xxx Xxxxxx 0
000, Xxxxxxxxx-xx, Xxxxxxx-xx,
Xxxx-xxx, Xxxxxxxx, Xxxxx
Telex No.: K52213
Facsimile No.: (82558) 32 2160 (Design Department)
(00000) 000 0000 (Customer Coordination Team)
2. Language:
Any and all notices and communications in connection with this
Contract shall be written in the English language.
3. Effective Date of Notice:
The notice in connection with this Contract shall become
effective from the date when such notice is received by the BUYER
or by the BUILDER except otherwise described in the Contract. In
case any notice is made by facsimile confirmed in writing, the date
when the facsimile is received shall govern.
(End of Article)
------------------------------------------
ARTICLE XIX - EFFECTIVE DATE OF CONTRACT
This Contract shall become effective upon signing by the parties
hereto.
In the event the refund guarantee has not been issued by
September 15, 1997 and the BUYER provided same, the BUYER shall
have the right to terminate the Shipbuilding Contract by written
notice to BUILDER within five business days thereafter. If the
BUYER exercises such option, neither party shall have any liability
or obligation to the other under this Contract.
(End of Article)
--------------------------------------------------
ARTICLE XX - INTERPRETATION
1. Laws Applicable:
The parties hereto agree that the validity and the interpretation
of this Contract and of each Article and part thereof shall be
governed by the laws of England.
2. Discrepancies:
All general language or requirements embodied in the
Specifications are intended to amplify, explain and implement the
requirements of this Contract. However, in the event that any
language or requirements so embodied permit an interpretation
inconsistent with any provision of this Contract, then, in each and
every such event, the applicable provisions of this Contract shall
prevail and govern. In the event of conflict between the
Specifications and Plans, the Specifications shall prevail and
govern.
3. Entire Agreement:
This Contract contains the entire agreement and understanding
between the parties hereto and supersedes all prior negotiations,
representations, undertakings and agreements on any subject matter
of this Contract.
4. Amendments and Supplements:
Any supplement, memorandum of understanding or amendment,
whatsoever form it may be relating to this Contract, to be made and
signed among parties hereof after signing this Contract, shall be
the integral part of this Contract and shall be predominant over
the respective corresponding Article and/or Paragraph of this
Contract.
(End of Article)
--------------------------------------------------
ARTICLE XXI - CONFIDENTIALITY
BUILDER and BUYER agree that the terms and conditions of this Contract
shall remain confidential and neither party shall disclose any such terms
and conditions of this Contract to any third party without first obtaining
the prior written consent of the other, provided however, that either party
shall be entitled to disclose any or all of the terms and conditions of the
Contract to the extent it is necessary to do so to implement, effectuate
and comply with the terms of the Contract or to otherwise exercise any
right or discharge any obligation that party may have pursuant to this
Contract.
BUILDER shall require the engine maker/manufacturer (Wartsila) and the
maker/manufacturer of the positioning system to sign confidentiality
agreements agreeing to keep strictly confidential all information furnished
to such party or developed in connection with the performance of this
Contract.
(End of Article)
--------------------------------------------------
IN WITNESS WHEREOF, the parties hereto have caused this Contract to be
duly executed on the day and year first above written.
BUYER: BUILDER:
READING & XXXXX DRILLING CO. SAMSUNG HEAVY INDUSTRIES CO.,
LTD.
By: By:
Title: Title:
SAMSUNG CORPORATION
By:
Title:
--------------------------------------------------
EXHIBIT "A"
LETTER OF REFUNDMENT GUARANTEE NO.
Gentlemen:
We hereby open our irrevocable letter of guarantee No. in favour of
___________________________ (hereinafter called the "BUYER") for account of
Samsung Corporation, Seoul, Korea as follows in consideration of the
shipbuilding contract dated __________________, 1997 (hereinafter called
the "Contract") made by and among the BUYER and Samsung Corporation as the
contractor and Samsung Heavy Industries Co., Ltd. as its subcontractor
(hereinafter collectively called the "BUILDER") for the construction of one
(1) drillship composed of hull part and topside part, having BUILDER's
Hull No. ___________ (hereinafter called the "DRILLSHIP").
If in connection with the terms of the Contract the BUYER shall become
entitled to a refund of the advance payment(s) made to the BUILDER prior to
the delivery of the DRILLSHIP, we hereby irrevocably guarantee the
repayment of the same to the BUYER immediately on demand
_________________________ (Say _______________________ only) together with
interest thereon at the rate of _________ per cent per annum from the date
following the date of receipt by the BUILDER to the date of remittance by
telegraphic transfer of such refund.
The amount of this guarantee will be automatically increased, not more
than ______ ( ) times, upon BUILDER's receipt of the respective
installment: each time by the amount of installment of USD
________________, USD ___________________, USD _____________________, USD
_______________________ and USD ___________________ respectively, plus
interest thereon as provided in the Contract, but in any eventuality the
amount of this guarantee shall not exceed the total sum of
____________________ (Say _________________ only) plus interest thereon at
the rate of eight per cent (8%) per annum from the date following the date
of BUILDER's receipt of each installment to the date of remittance by
telegraphic transfer of the refund.
In case any refund is made to you by the BUILDER or by us under this
guarantee, our liability hereunder shall be automatically reduced by the
amount of such refund.
In the event of rescission of the Contract being based on delays due
to force majeure or other causes beyond the control of the BUILDER, as
required by Article X of the Contract, interest shall be paid at the rate
of four percent (4%) per annum from the date following the date of
Builder's receipt of each installment to the date of remittance by
telegraphic transfer of the refund.
This letter of guarantee is available against BUYER's simple receipt
and signed statement certifying that BUYER's demand for refund has been
made in conformity with Article X of the Contract and the BUILDER has
failed to make the refund within Thirty (30) days after your demand to the
BUILDER. Refund shall be made to you by telegraphic transfer in
__________________.
This letter of guarantee shall expire and become null and void upon
receipt by the BUYER of the sum guaranteed hereby or upon acceptance by the
BUYER of delivery of the DRILLSHIP in accordance with the terms of the
Contract and, in either case, this letter of guarantee shall be returned to
us. This guarantee is valid from the date of this letter of guarantee
until delivery or in the event of delayed delivery until such time as the
DRILLSHIP is delivered by the BUILDER to the BUYER in accordance with the
terms of the Contract.
Notwithstanding the provisions hereinabove, in case we receive
notification from you or the BUILDER confirmed by the Arbitration Board
stating that your claim to rescind the Contract or your claim for
refundment thereunder has been disputed and referred to Arbitration in
accordance with the provisions of the Contract, the period of validity of
this guarantee shall be extended until Thirty (30) days after the final
award shall be rendered in the Arbitration and a copy thereof acknowledged
by the Arbitration Board. In such case, this guarantee shall not be
available unless and until such acknowledged copy of the final award in the
Arbitration justifying your claim is presented to us.
This guarantee shall not be affected by any extension of time or
concession granted by the BUYER to the BUILDER or any delay or failure of
the BUYER in enforcing its rights under the Contract.
The BUYER shall have the right to assign this guarantee and all of its
benefits to any assignee to whom the Contract is assigned.
This guarantee shall be governed by the laws of England.
Very truly yours,
_____________________________________
