VESSEL PURCHASE AND SALE AGREEMENT

Transcription

1 VESSEL PURCHASE AND SALE AGREEMENT BETWEEN THE ISRAEL ELECTRIC CORPORATION LIMITED PURCHASER AND SELLER AUGUST

2 VESSEL PURCHASE AND SALE AGREEMENT TABLE OF CONTENTS ARTICLE I - PREAMBLE...5 ARTICLE II - SALE OF VESSEL AND DELIVERY DATE.5 ARTICLE III- VESSEL DESCRIPTION ARTICLE IV - PURCHASE PRICE AND PAYMENT...10 ARTICLE V - SUPERVISION, INSPECTION AND APPROVAL OF PLANS.15 ARTICLE VI - CHANGES AND SPARES...17 ARTICLE VII - PERFORMANCE GUARANTEES AND TERMINATION FOR NON-PERFORMANCE...20 ARTICLE VIII - TRIALS...23 ARTICLE IX DELIVERY...22 ARTICLE X - WARRANTY PERIOD LIABILITY FOR DEFECTIVE WORK OR MATERIAL...27 ARTICLE XI - DEFAULT OF PURCHASER...32 ARTICLE XII - DEFAULT OF THE SELLER; ACTION BY THE PURCHASER UPON DEFAULT...34 ARTICLE XIII - CANCELLATION BY THE PURCHASER...37 ARTICLE XIV INSURANCE ON THE VESSEL AND MATERIALS...40 ARTICLE XV - DAMAGE TO OR LOSS OF A VESSEL...42 ARTICLE XVI - SELLER TO RECEIVE AND CARE FOR ITEMS FURNISHED BY PURCHASER...45 ARTICLE XVII - RIGHTS OF PURCHASER WITH RESPECT TO ENGINEERING AND DESIGN DATA...46 ARTICLE XVIII - INJURY TO EMPLOYEES AND OTHERS; PROPERTY DAMAGE OR LOSS; INDEMNITY REGARDING RELATED AGREEMENTS...46 ARTICLE XX - MISCELLANEOUS

3 ATTACHMENTS ATTACHMENT A - PURCHASER'S TENDER NUMBER DATED [ ]; ATTACHMENT B- ATTACHMENT C- OIL POLLUTION TREATMENT & WORK, STEEL HULL WORKING BARGE BARGE DESIGN DRAWINGS ATTACHMENT D PRICE TABLE TENDER NO ATTACHMENT E - ATTACHMENT F - ATTACHMENT G- ATTACHMENT H- ATTACHMENT I - ATTACHMENT J - ATTACHMENT K - ATTACHMENT L - ATTACHMENT M- ATTACHMENT N- SELLER'S PROPOSAL NUMBER [ ] DATED [ ] TIME SCHEDULE; SELLER'S QUALITY ASSURANCE PROGRAM CERTIFICATE OF DELIVERY AND ACCEPTANCE CERTIFICATE OF NO LIENS FORM OF CHANGE ORDER AGREEMENT INSURANCE CERTIFICATES ADVANCE PAYMENT GUARANTEE PROGRESS PAYMENT GUARANTEE PERFORMANCE GUARANTEE 3

4 VESSEL PURCHASE AND SALE AGREEMENT THIS VESSEL PURCHASE AND SALE AGREEMENT (hereinafter "Agreement"), is entered into this th day of, 2013, by and between: THE ISRAEL ELECTRIC CORPORATION LIMITED, a government company organized under the laws of the State of Israel and having its registered offices situated at 1 Netiv HaOr Str, South Haifa, 31000, Israel, its successors and permitted assigns (hereinafter the "Purchaser"), and [ ], a company organized under the laws of _[ ], and having its registered offices situated at _[ ], its successors and permitted assigns (hereinafter the "Seller") both together hereinafter referred to as the "Parties" PREAMBLE A. WHEREAS: The Purchaser has issued a request for proposals in a public Tender attached hereto as Attachment A for the turnkey purchase of an Oil Pollution Treatment & Work, Steel Hull working barge (hereinafter the "Vessel"); and B. WHEREAS: The Seller participated in the Tender and the Purchaser has agreed to accept its proposal to supply the Vessel, to be constructed at the Seller's shipyard facility located at _[ ]_(the Shipyard ) and delivered to the port of Ashdod, Israel all as specified in Technical Specification - BARGE attached as Attachment B; and B. WHEREAS: The Seller desires to sell to Purchaser, and Purchaser desires to purchase the Vessel from the Seller all in accordance with the provisions stated herein below; NOW THEREFORE: In consideration of the premises and the covenants herein contained, and other good and valuable consideration, the adequacy and receipt of which is hereby acknowledged, the parties hereto agree as follows: 4

5 ARTICLE 1 - PREAMBLE AND DOCUMENTS 1.1 The Preamble to this Agreement and the attachments hereto shall constitute an integral part of this Agreement. 1.2 This Agreement and the Attachments hereto shall collectively be referred to as the "Contract" and in the event of any conflict between the provisions of any Attachment and this Agreement, the provisions of this Agreement shall prevail. 1.3 Seller's Proposal, attached hereto as Attachment E is made part of the Contract only insofar as it is consistent with the other Contract documents. In the event of any conflict between the Seller's Proposal and this Agreement or any other Attachments hereto, the latter shall prevail. ARTICLE 2 - SALE OF VESSEL AND DELIVERY DATE 2.1 Sale and Purchase. The Seller hereby agrees to build, sell, deliver and transfer to Purchaser on a turnkey basis, and Purchaser hereby agrees to purchase the Vessel from Seller, after it has been duly completed, delivered to the Purchaser and tested in accordance with the terms and conditions set forth in this Agreement. 2.2 Delivery Date Delivery of the Vessel shall be made to Purchaser on or before [ ] (such date, as may be modified pursuant to this Agreement, hereinafter called the "Delivery Date") The Seller shall promptly notify Purchaser in writing if, at any time during the performance of the contract work, the Seller estimates that the actual delivery date of the Vessel will differ from the Delivery Date by more than five (5) days and the parties shall agree upon a new, mutually acceptable delivery date (the Amended Delivery Date ). In such event, the Seller shall notify Purchaser in writing not less than thirty (30) days and ten (10) days prior to the estimated Amended Delivery Date. Seller shall further notify Purchaser three (3) days prior to the definite Amended Delivery Date. 5

6 2.2.3 The Seller may, upon written notice to the Purchaser, propose to accelerate the Delivery Date by providing written notice to Purchaser. If Purchaser consents to such acceleration of the Delivery Date, such new date shall become the Delivery Date for the purposes of determining liquidated damages pursuant to Article 7 and Purchaser's right to cancel this Agreement pursuant to Article 13. To remove any doubt, the Seller shall not be entitled to any additional payments for acceleration of the Delivery Date To the extent that any of Purchaser's obligations under this Agreement are based on the Delivery Date, Purchaser's fulfillment of such obligations will be extended as reasonably required by Purchaser with reference to the original Delivery Date At the Sea Trials and fourteen (14) days prior to the Delivery Date, employees of Purchaser and Purchaser's contractors or agents shall be entitled to access to the Vessel to engage in such activities and perform such work as Purchaser may specify and to familiarize the crew with the Vessel, provided that Purchaser's activities shall not interfere with any work being performed by the Seller. ARTICLE 3 - VESSEL DESCRIPTION 3.1 Designs, Drawings and Specifications The Vessel shall in all respects meet the requirements of the technical specifications set forth in Attachment B, as may be modified pursuant to this Agreement (the Specifications ). In addition to the other terms and conditions of this Agreement describing the Vessel and its performance, Seller agrees to make such changes to the Vessel, including the installation of Purchaser's Supplies and the delivery of Spare Parts The Seller shall provide the Purchaser with all required designs, drawings and specifications related to the Vessel including without limitation the designs and drawings identified in Attachment C (the Design Drawings ) and the Specifications (hereinafter jointly, the "Technical Documentation"). The Technical Documentation shall be submitted, to the largest extent possible, using computerized media and in all cases shall be clear, legible and of quality consistent with good engineering practice. 6

7 3.1.3 Where not specified in this Agreement, further details and procedures for handling of Technical Documentation shall be agreed upon by the Parties during the performance of the Contract The Seller shall be responsible for any discrepancies, errors, or omissions in the Technical Documentation supplied by it, whether they have been approved by the Purchaser or not provided that such discrepancies, errors, or omissions are not due to discrepancies, errors or omissions contained in drawings or information furnished to the Seller by the Purchaser The Seller shall at its own expense carry out any alterations or re-performance necessitated by reason of such discrepancies, errors, or omissions and shall modify the Technical Documentation accordingly The Purchaser shall be responsible for modifications, discrepancies, errors, and omissions in drawings and information supplied by the Purchaser (including the Specifications included in Attachment B) The Purchaser undertakes to submit its approval or comments to Seller s Technical Documentation within twenty (20) working days from the receipt thereof. For the removal of doubt, submission of Technical Documentation for Purchaser s approval/comments shall not derogate from Seller s right to proceed, at its responsibility and risk, with any part of the scope of supply and approval by the Purchaser shall only mean that upon Purchaser s review of the Technical Documentation, faults were not detected. The Seller remains responsible for the correctness and accuracy of the Technical Documentation even if such faults are detected after submission of Purchaser s approval For delays attributable to the Seller in submitting the Technical Documentation specified in Appendix "A" to Attachment B (Paras. 9 and 10) (hereinafter "Critical Documents"), the Seller shall be liable to pay the Purchaser liquidated damages at the rate of US$ 1,000 per Critical Document per day up to a maximum amount of US$ 20,000. The Seller shall not be liable to pay liquidated damages for delays in submitting non-critical documents. 7

8 3.1.9 The last submission date of all Critical Documents shall be the date of delivery of the Vessel and the Purchaser undertakes to confirm the receipt of the Critical Documents and the date of receipt within seven (7) working days by fax or to the Seller Scope of Work The Seller shall furnish all facilities, labor, materials, supplies and equipment, and shall perform all work necessary to design, construct, launch, outfit, test and deliver the Vessel at Seller's risk and expense, in strict accordance with the Technical Documentation referred to in Article 3.1 above, and shall do everything required by this Agreement and in the Design Drawings and the Specifications, including the spare parts specifically identified in the Specifications (the Spare Parts ) Compliance with Regulatory Bodies The Vessel shall be eligible for certification and classification as a commercial barge by the relevant authorities, including the Classification Society, as well as the authorities of Israel, together with other departments or agencies (both domestic and international) having jurisdiction over the contract work, the Shipyard, the Vessel or whose certificates are required for operation of the Vessel in the international and domestic trades with and any other authorities set out in the Specifications (the Regulatory Bodies ) In performing the Contract, Seller shall comply with all of the requirements of the Regulatory Bodies subject, however, to the following: (i) (ii) if the Technical Documentation specifically requires work in excess of that required by the applicable Regulatory Bodies, such specifically required work shall be performed by Seller as contract work required by this Agreement; if the Technical Documentation requires work which is less than that required by the applicable Regulatory Bodies, Seller shall perform the work required by the applicable Regulatory Bodies as contract work required by this Agreement; provided that if such regulatory requirement is in compliance with a rule of the Regulatory Bodies made effective following the execution of this Agreement, and said requirement effects an increase in the cost of the Contract work, the 8

9 Purchase Price shall be adjusted pursuant to the provisions of Article 6 of this Agreement. The Seller shall cause all necessary approvals of the Technical Documentation to be obtained from the Classification Society and from all Regulatory Bodies. 3.3 Workmanship and Materials Unless otherwise specifically provided in the Technical Documentation, all workmanship, equipment, materials, and articles incorporated in the Vessel shall be new and of good marine quality and in conformance with good commercial shipbuilding standards as well as the standards of Regulatory Bodies When required by the Technical Documentation, Seller shall furnish to Purchaser for its approval, which shall not be unreasonably withheld, the names of the manufacturers, vendors and subcontractors of the principal items of machinery, mechanical and other equipment and work which it contemplates incorporating in or having performed on the Vessel. When required by the Technical Documentation or when requested by Purchaser, Seller shall furnish Purchaser with full information concerning its Quality Assurance Program, Quality control compliance and details of the materials or articles that it contemplates incorporating in the Vessel. 3.4 Classification The Seller shall arrange with Lloyds or such other equivalent body as shall be approved by Purchaser (the Classification Society ) for the assignment by the Classification Society of a representative or representatives to the Vessel during construction of the Vessel at the Shipyard All fees and charges incidental to classification and compliance with the Classification Society s requirements pursuant to this Agreement, including all fees and charges unless otherwise specified shall be for the account of the Seller Prior to the construction of the respective parts of the Vessel, Seller shall submit to the Classification Society, for its approval, the Technical Documentation related to the construction of the Vessel Seller shall furnish to Purchaser copies of all correspondence with the Classification Society. 9

10 3.4.5 Decisions of the Classification Society as to the compliance or non-compliance of the Vessel with the Classification Society requirements shall be final and binding upon the Parties hereto. 3.5 Approvals by Regulatory Bodies Seller shall arrange with the relevant Regulatory Bodies for all necessary plan approvals and for the inspection of the Vessel by their representatives during construction of the Vessel at the Shipyard It is recognized and understood that Regulatory Bodies may appoint the Classification Society as their representative for some of their functions. The Seller shall be responsible for payment of all costs and expenses associated with such inspections and surveys performed by such Regulatory Bodies Seller shall be responsible for formal communications with any Regulatory Body and its representatives concerning construction of the Vessel. The above does not preclude Purchaser or any Regulatory Body from communicating directly on routine matters concerning the construction of the Vessel. ARTICLE 4 - PURCHASE PRICE AND PAYMENT 4.1 Purchase Price. The Purchase Price for the Vessel shall be (hereinafter the Purchase Price ). The Purchase Price shall include painting of the Vessel in the name specified by Purchaser and initial registration of the Vessel. 4.2 Invoices In the case that Seller is non-israeli, three (3) original copies of certified invoices shall be submitted for payment and shall contain a signed and witnessed statement as follows: We hereby certify that this invoice is correct and true in all respects and contains a true and full statement of the cost of the shipment/services and all charges thereon. We further certify that, to the best of our knowledge, payment in respect of this invoice has not previously been made. Declarant Title or Qualification Witness Title or Qualification 11

11 4.2.2 In the case that Seller is Israeli, three (3) original copies of VAT invoices shall be submitted to Purchaser for payment for shipments, such invoices to include the language quoted in Article above Each invoice shall contain: a detailed itemized description of the shipment/services for which payment is to be made. including the Purchaser s purchase order number and the item and catalogue numbers specified therein as well as the quantity, weight and dimensions of each item in the metric system of weights and measures; The amount of the payment reflecting a breakdown of price for each item shipped; The invoice number; The relevant payment milestone (where applicable); The date upon which payment is due; The relevant Change Order or Amendment number, if applicable; 4.3 Payment Conditions Precedent for Payment Any payment under this Contract and/or the establishment of the letters of credit as set forth below shall be subject to the following conditions: the Purchaser has received a fully executed copy of this Contract; the Purchaser has received the Advance Payment Guarantee, Progress Payment Guarantee and Performance Guarantee which the Seller is required to provide in accordance with Article 7. Such guarantees shall be issued by a foreign bank and confirmed by one of the four largest Israeli banks; 11

12 the Purchaser has received copies of the insurance policies or certificates which the Seller is required to provide in accordance with Attachment K; Method of Payment Payment to Israeli Sellers (if applicable) All payments (including payment for VAT) shall be made in the currency of Seller's proposal and effected by direct bank transfer to the Seller s designated bank account Payment to Non-Israeli Sellers (if applicable) All payments shall be made in the currency of Seller's proposal. Payment of the Advance on the Purchase Price of the Vessel shall be effected by cheque or direct bank transfer to the Seller s designated bank account All subsequent payments related to the Purchase Price shall be effected through a documentary, irrevocable letter of credit (hereinafter the LC ). The LC shall be established by the Purchaser at a first class Israeli bank not later than ninety (90) days after the Signature of the Contract. The LC shall be advised through a bank acceptable to the Seller in the Seller s country. The LC shall be established in an aggregate amount equal to eighty percent (80 %) of the Purchase Price and shall be valid until full payment of the last scheduled payment. The LC shall be non-confirmed; however, if the Seller requires the LC to be confirmed, confirmation costs shall be borne by the Seller. 12

13 Payment of Additional Sums Terms of Payment. Payment of additional sums not constituting part of the Purchase Price of the Vessel (eg. additional services, training, or equipment, as well as spare parts purchased by the Purchaser which are not included in Attachment B and which were purchased pursuant to Changes or additions/supplements to the Purchase Price or by options exercised, including fuel, lubrication oils and hydraulic oils on board the Vessel at the time of delivery) shall be effected by cheque or direct bank transfer to the Seller s designated bank account Twenty percent (20% ) of the Purchase Price shall be paid as an advance payment within sixty (60) days of signature of the Contract by both Parties (the Advance Payment ). Payment of the Advance Payment shall be made against receipt of the Seller's commercial or VAT invoice (as applicable) and receipt by the Purchaser of the Advance Payment Guarantee in the form specified in Attachment L in the amount of the Advance Payment and the Performance Guarantee, in an amount equal to ten percent (10%) of the Purchase Price. The Advance Payment Guarantee shall remain valid until the Delivery Date and the Performance Guarantee shall remain valid until the end of the Warranty Period, unless extended as per the provisions of Article Forty percent (40%) of the Purchase Price shall be paid within sixty (60) days after launching of the Vessel, as proven by written confirmation of the Classification Society (the Second Installment ). Payment of the Second Installment shall be made against receipt of the Seller's commercial or VAT invoice (as applicable) and receipt by the Purchaser of a Progress Payment Guarantee in the form specified in Attachment M in the amount of the Second Installment, to remain valid until the Delivery Date. 13

14 Thirty percent (30%) of the Purchase Price shall be paid sixty (60) days after delivery of the Vessel to the port of Ashdod, Israel and after Purchaser has confirmed in writing that the Vessel complies with the Technical Documentation and the requirements of all Regulatory Bodies and the Purchaser has been provided with all the certificates of approval and licenses required under the Contract and by law (the Third Installment ). The Third Installment shall also include payment for all supplies on board the Vessel (including without limitation lubricating oil, diesel oil and fuel oil for the auxiliary equipment and fresh water) requested by Purchaser from the suppliers designated by Purchaser, at Seller s invoiced cost, as well as payment of outstanding sums in respect of Changes Ten percent (10%) shall be paid as a Final Installment to be paid sixty (60) days after the end of the original Warranty Period against receipt of the Seller's commercial or VAT invoice (as applicable), provided that if the Performance Guarantee is, at the date of delivery, in full force and effect for ten percent (10%) of the Purchase Price, the Final Installment shall be paid sixty (60) days after delivery Interest for Late Payment Where Purchaser s approval is required for issuance of invoices or documents required for invoicing, Purchaser shall provide its approval or comments within 14 (fourteen) calendar days from receipt thereof If Purchaser delays any undisputed payment or approval or certification required for payment for reasons for which the Purchaser is responsible, the Seller shall be entitled to receive interest on the amount not paid during the period of delay converted into US$ in accordance with the Representative Rate published by the bank of Israel one (1) day prior to the date of payment at the six month U.S. Dollar LIBOR + 2%and then reconverted to the currency of Contractor's proposal as above for purposes of payment. Interest on any such delayed payment shall be due and payable as of the date of Seller s written notice to Purchaser regarding the delay in question. 14

15 In the event of delays in payment of any payment for reasons not attributable to the Seller, and/or in the event of delays in Purchaser s establishing an agreed L/C, the Seller shall have the right to an extension of the originally scheduled performance dates set forth in the Contract for periods equal to the period of the delay, on a day by day basis. ARTICLE 5 - SUPERVISION, INSPECTION AND APPROVAL OF PLANS 5.1 Purchaser s Representative. Purchaser shall appoint one or more representatives by notice in writing to the Seller for the purposes of the Contract (the Purchaser s Representative ). The Purchaser may, from time to time, change any Purchaser s Representative. 5.2 Facilities for Representative. The Seller shall furnish promptly, without additional charge, all reasonable facilities and materials, including suitably furnished offices (to be at least equivalent to the offices of the Seller's employees of comparable responsibility) with light, heat and air conditioning, as required by climatic conditions, telephone, desks, drawing tables, and filing cabinets, necessary for the safe and convenient administration of the inspection and tests that may be reasonably required by the representatives of the Regulatory Bodies and as specified in the Specifications and for the representatives of Purchaser. 5.3 Inspections. The Seller shall ensure that the Vessel and the Shipyard shall at all times during working hours be subject to inspections by Purchaser. All material and workmanship of the Vessel, unless otherwise designated by the Technical Documentation or by this Agreement, shall be subject to inspection by Purchaser and/or representatives of the Regulatory Bodies at any and all proper times during manufacture and/or construction at any and all places where such manufacture and/or construction are carried on; provided, however, Seller shall exercise reasonable efforts to schedule tests and inspections between the hours of 7am and 6pm on workdays. 5.4 Master Production Schedule. On or before the execution of this Agreement, Seller shall provide Purchaser with a copy of its master production schedule in accordance with Attachment F hereto. The Seller shall submit to Purchaser any other schedules reasonably required by Purchaser to keep Purchaser 15

16 informed as to the construction of the Vessel and the progress of construction. The Seller shall update such schedules monthly, if possible, but in no event less than bi-monthly. 5.5 Approval and Rejection of Work and Materials. The Purchaser shall promptly approve all work and materials conforming to the requirements of this Agreement and shall promptly reject all work and material not conforming to the requirements of this Agreement. Rejected workmanship shall be satisfactorily corrected, and rejected material shall be satisfactorily replaced with proper material without charge therefor, unless such work or material shall have been furnished by Purchaser, in which event the remedying of such defective work, or the replacing of such defective material, if caused to be done by Seller, shall be treated as a Change under this Agreement. The Seller shall promptly segregate and remove the rejected material. The acceptance of such workmanship and materials shall not prejudice the rights of Purchaser under this Agreement. Defects appearing in any stage of the work shall be cause for rejection even though the item in question may have previously been passed as satisfactory. 5.6 Quality Control. All inspections, tests, and approvals shall be performed in such a manner as not to delay the work unnecessarily and Purchaser shall not conduct unreasonable repeat inspections. Inspections performed by Purchaser shall not be a substitute for in-process control of quality by the Seller. Attachment G attached hereto describes the Builder's Quality Assurance Program. The Seller shall maintain its said Quality Assurance Program throughout the duration of this Agreement. 6.1 Generally. ARTICLE 6 - CHANGES AND SPARE PARTS The Seller shall perform all changes to the Vessel required by this Article 6 ( Changes ). The Seller shall not, except as provided in Article 3, depart from the requirements of the Technical Documentation or make any other changes in the contract work required by the Technical Documentation without all prior authorization required by the provisions of this Article 6. Payments for agreed Changes shall be divided such that one-half (50%) of the payment is made at the time of approval by Purchaser of the Change and the remaining one-half (50%) made at the time of payment of the Final Installment. 16

17 6.2 Classification of Changes. For purposes of this Article 6, changes in contract work shall be classified as either "essential" changes or "non-essential" changes. "Essential Changes" shall consist of changes in the contract work due to an action or recommendation of any of the Regulatory Bodies as set forth in Article or due to any other promulgation of a new law or rule that renders it illegal to own or operate the unchanged Vessel. All other changes shall be "Non-essential Changes." 6.3 Change Order Procedure The Seller shall be entitled to a fair and reasonable adjustment in the Purchase Price and Delivery Dates relating to any Essential Change or Non-essential Change performed hereunder. Upon receipt of Purchaser's written direction for a change, Seller shall submit within fifteen (15) days to Purchaser the detailed estimate for such change, which estimate shall include the following: the net increase or decrease in the Purchase Price, including a materials cost estimate complete with copies of material quotations valued at over $5,000 per item and with an eight percent (10%) mark-up for materials handling and administration, as well as cost of the labour required for execution of the Change; the estimate of the impact on the Delivery Date for the Vessel and the master production schedule, both in calendar days and to the Contract; = the effect of such change on the other terms and conditions of this Agreement; and a list of the plans and drawings affected by the proposed change. The foregoing hereinafter collectively referred to as the "Essential Terms." The Purchaser shall accept or reject the detailed estimate within fifteen (15) days after receipt of such estimate. If the estimate is accepted, Seller shall prepare, and Purchaser and Seller shall execute, an amendment to this Agreement, in the form of Attachment J attached hereto (the "Change"), to amend the terms and conditions of this Agreement with respect to such Essential Change or Non-essential Change. 17

18 6.4 Essential Changes. The Purchaser shall have the right to direct Seller to perform an Essential Change, and Seller upon receipt of Purchaser's written direction shall commence the performance of the Essential Change at such time as Purchaser may direct without regard to whether prior agreement has been reached as to the effect of the Essential Change on the Essential Terms. 6.5 Non-essential Changes. The Purchaser shall have the right to propose to Seller in writing a Non-essential Change in the contract work, and Seller shall promptly review such proposal and provide Purchaser with estimates relating to such change in accordance with the procedures described above. The Seller's obligation to perform such Non-essential Change shall be as follows: The Seller shall perform such Non-essential Change, provided: such change or an accumulation of such Nonessential Changes will not, in the Seller's reasonable judgment, adversely affect the Seller's planning or program in relation to the Seller's other commitments; the parties agree on the effect of the Non-essential Change on the Essential Terms and execute a Change with respect thereto In the event that the parties are unable to agree as to the effect of the Non-essential Change on the Essential Terms pursuant to Article above, Purchaser may direct Seller to perform a Non-essential Change without the prior agreement of the parties as to the effect of the Non-essential Change on the Essential Terms if such change will not, in the Seller's reasonable estimate, cause a delay of more than thirty (30) days, or in the aggregate for all Non-essential Changes for which no agreement has been reached, of more than ninety (90) days, or that such Non-essential Change, in the aggregate with all other Non-essential Changes for which no agreement has been reached, will not cost, in Seller's reasonable estimate, more than One Hundred Thousand Dollars $100,000). 18

19 6.6 Change Proposals by Seller. The Seller shall have the right to propose to Purchaser in writing any Change in the contract work. The Seller shall transmit to Purchaser its proposed change accompanied by a detailed estimate containing the information provided in and in accordance with the procedures of Article 6.3, provided that nothing herein shall require Purchaser to accept a Change proposed by Seller. 6.7 Disputed Changes. In the event that Purchaser has directed Seller to make an Essential Change pursuant to Article 6.4 or a Non-essential Change pursuant to Article 6.5 and the parties are unable to agree on the price and other Essential Terms of such change within thirty (30) days, the matter shall be settled in accordance with Article 20.8 of this Agreement and the work on such Non-essential Change shall proceed during the pendency of the proceedings pursuant to Article 20.8, except as otherwise provided herein. 6.8 Spare Parts The Purchaser will provide Seller with a list of spare parts in excess of those set forth in Exhibit B. At Purchaser's option, Seller shall purchase such spare parts on behalf of Purchaser at the prices available to Seller which shall be treated as a Non-essential Change For spare parts that are purchased by Seller prior to the expiration or waiver of Purchaser's right to cancel this Agreement pursuant to Article 13, Seller shall include a cancellation provision in the purchase orders for such spare parts. In the event that Purchaser cancels this Agreement pursuant to Article 13, Purchaser shall reimburse Seller for any cancellation fees assessed by the vendors or for any deposits or payments that Seller is unable to have refunded as a result of such cancellation. 19

20 ARTICLE 7 - PERFORMANCE GUARANTEES AND TERMINATION FOR NON-PERFORMANCE 7.1 Performance Guarantees. The Purchase Price shall be subject to adjustment, as hereinafter set forth, in the event of the following contingencies (it being understood by the parties that any reduction of the Purchase Price is by way of liquidated damages and not by way of penalty): Delivery No adjustment shall be made and the Purchase Price shall remain unchanged for the first ten (10) days of delay in delivery of the Vessel beyond the Delivery Date or the Amended Delivery Date, as applicable (ending as of twelve o'clock midnight of the tenth (10th) day of delay) If the delivery of the Vessel is delayed more than ten (10) days after the Delivery Date or the Amended Delivery Date as aforesaid, then, in such event, beginning at twelve o'clock midnight of the tenth day after the Delivery Date, the Purchase Price shall be reduced by deducting therefrom $7,000 per day If the delay in delivery of the Vessel should continue for a period of ninety (90) days from the Delivery Date, then in such event, and after such period has expired, Purchaser may at its option terminate this Agreement in accordance with the provisions of Article 13 hereof. The Seller may, at any time after the expiration of the aforementioned ninety (90) days of delay in delivery, if Purchaser has not served notice of termination as provided in Article 13 hereof, demand in writing that Purchaser shall make an election, in which case Purchaser shall, within fifteen (15) days after such demand is received by Purchaser, notify Seller of its intention either to terminate this Agreement or to consent to the acceptance of the Vessel at an agreed future date and with the reduction in the Purchase Price determined in accordance with this Article; it being understood by the parties hereto that, if the Vessel is not delivered by such future date, Purchaser shall have the same right of termination upon the same terms and conditions as hereinabove provided. 21

21 If Purchaser requests in writing that the delivery of the Vessel be made earlier than the Delivery Date, and if the delivery of the Vessel is made in response to such request of Purchaser, then, in such event, beginning with the first (1st) day prior to the Delivery Date, Seller shall promptly furnish Purchaser with an estimate of increased costs and other changes attributable to any such request in accordance with the procedures set forth in Article 6 hereof and action shall be taken as provided therein. In the event that an Amended Delivery Date is established both payments and liquidated damages will be related to the Amended Delivery Date. 7.2 Effect of Termination and Offset. Notwithstanding any other provision of this Article 7, it is expressly understood and agreed by the parties hereto that in any case any amounts of liquidated damages payable under this Article 7 may be offset from payments due from the Purchaser, including payments on account of the Purchase Price or additional sums under Article Procedure for Termination by Purchaser In the event that Purchaser shall exercise its right to terminate this Agreement under this 7, then Purchaser shall notify Seller pursuant to Article 20.9 hereof, and such termination shall be effective as of the date notice thereof is received or deemed to be received by Seller Thereupon Seller shall promptly refund to Purchaser the full amount of all sums paid by Purchaser to Seller on account of the Vessel and interest thereon from the date of payment to the date of refund at the rate of 6% per annum/pro rata on the due amount, shall pay the Purchaser liquidated damages as per Article and shall return to the Purchaser all Purchaser Supplies Upon such refund, payment of damages, and return of Purchaser Supplies by Seller to Purchaser, all obligations, duties and liabilities of each of the parties hereto to the other under this Agreement shall be forthwith completely discharged. ARTICLE 8 - TRIALS 8.1 Trials. 21

22 8.1.1 The Vessel shall have the dock trials and other trials and tests as set forth in the Specifications and in this Agreement. The expenses of such trials and tests shall be borne by Seller When the work on the Vessel is substantially complete, as required by this Agreement, and when Seller shall have made sufficient trials at the dock to be reasonably sure of satisfactory performance under the requirements of this Agreement, the Vessel shall be subject to trials at sea, in the presence of representatives of the Classification Society, as specified in Attachment B, at a place to be agreed between Seller and Purchaser (the Sea Trials ) the Sea Trials as prescribed by the and Specifications and this Agreement Arrangements will be made so as to obtain specific data during the Sea Trials that are required to determine compliance with this Agreement and the Technical Documentation. At a reasonable time, but no less than sixty (60) days before the Vessel is ready for trial, Seller shall submit a schedule and description of the Sea Trials to Purchaser for approval by Purchaser The Purchaser shall have the right to have the Purchaser s Representative(s), other authorized representatives, employees, representatives of Regulatory Bodies, inspectors and any other person reasonably designated by Purchaser present at all Sea Trials. 8.2 Additional Trials-Expenses. If at and upon Sea Trials required by the Technical Documentation and by this Agreement there shall be any failure of the Vessel to meet the requirements of this Agreement, Seller shall, after corrective action is taken, make further trials sufficient in number reasonably to demonstrate compliance with the Technical Documentation and this Agreement. The costs of all additional trials required by this Article 8.2 shall be borne by Seller. 22

23 8.3. Acceptance and Damages. If any defects, deficiencies or non-conformance with the Design Drawings and/or Specifications or damage due to such defects or deficiencies or non-conformance with the Design Drawings and/or Specifications appear in the work performed by Seller, or in the materials and equipment supplied by Seller, Seller shall correct the defects, deficiencies, non-conformance with the Design Drawings and/or Specifications or damage at the expense of Seller, after which the machinery shall be closed and connected, ready for service; provided, however, that if the requirements, conditions and guarantees of this Agreement shall not be met, the parties may stipulate money damages in lieu of performance by Seller, or Purchaser may accept delivery subject to completion or correction of all incomplete or defective contract work listed by Purchaser in the Delivery Certificate with an appropriate holdback from the Final Installment to cover the work, provided that any amount held back by Purchaser that is disputed by Seller shall be deposited in an escrow account as agreed by the Parties. Prior to delivery all oily water wastes, pumpable sludge and any sludge beyond the amount reasonably expected to be present under the circumstances shall be removed from the Vessel by the Seller Supplies used During Trials and on Board at Delivery. Seller shall use during Sea Trials and shall have on board at the time of delivery of the Vessel, the supplies (including without limitation lubricating oil, diesel oil, fuel oil and fresh water) requested by Purchaser from the suppliers designated by Purchaser, and Purchaser shall pay for the supplies left on board at delivery at Seller's invoiced cost, provided that Seller will use its best efforts to obtain competitive prices for such supplies. 23

24 ARTICLE 9- DELIVERY 9.1. General When the work on the Vessel is complete or substantially complete in accordance with this Agreement and the Vessel has passed the tests required by this Agreement, the Vessel as completed or substantially completed shall be delivered by Seller and accepted by Purchaser at the port of Ashdod, Israel free and clear of all liens, security interests, and claims of every nature, excepting, however, those in favor of a claimant, other than Seller, arising out of the acts or omissions of Purchaser, with not less than ten (10) days prior written notice to Purchaser of such delivery As used in this Agreement, the term "substantially complete" shall mean complete except for minor items not affecting the commercial utility and safe operation of the Vessel and not violating any requirement of a Regulatory Body. Unless waived by Purchaser, in Purchaser's sole discretion, the Vessel shall not be deemed to be "substantially complete" if a delivery deficiency will require the Vessel to be taken out of service prior to the Vessel's regular maintenance schedule or if the aggregate value of such delivery deficiencies is in excess of One Hundred Thousand Dollars ($100,000) Delivery and Acceptance by Purchaser of the Vessel shall be expressly conditioned upon Purchaser's right to completion by Seller thereafter of any uncompleted contract work and correction by Seller of any defective contract work. 9.2 Documents to be Furnished to Purchaser upon Delivery Upon delivery, Seller shall furnish to Purchaser the following documents: A copy of the builder's certification issued to Seller in respect of the Vessel; A Certificate of Freedom from Liens in the form specified in Attachment J; Original Bill of Sale in duplicate (2) in 10a form (or such other form as may be reasonably required by Purchaser for registration under the Israeli flag) warranting that the Vessel is free from all encumbrances, mortgages and maritime liens or any other debts or claims whatsoever, duly signed notarially attested and apostilled or as may be provided for by the country of Seller; 24

25 9.2.4 Transcript of Registry or Certificate of non encumbrances, in English, issued by the competent authority of the flag state of the Vessel showing that the Vessel is free from any registered encumbrances such as mortgages, liens, precautionary judgments, claims dated latest two days prior to the Delivery; Request for Transfer of Ownership form, in the form required by the competent authority of the flag state of the Vessel, duly signed; Certified by competent consul or notarially attested copy (1) of Resolution of the Board of Directors of the Seller authorizing the sale of the Vessel to the Purchaser on terms set forth in the Agreement and the appointment of the Seller s attorneys-in-fact as well as Articles of Association of the Seller together with major amendments thereto; Notarized or legalized by competent Consul Power of Attorney authorizing the officers and attorney(s)-in-fact of the Seller to execute and deliver all documents relevant to sale and delivery of the Vessel, including the Bill of Sale, and to physically deliver the Vessel; Original Certificate of Good standing issued at most fifteen days prior to the Delivery by the competent public authority or Consul of the nationality of the Seller; Commercial invoice in triplicate (3) including the main particulars for the Vessel. Upon payment of the invoice amount, the commercial invoice should be marked as "PAID"; Commercial invoice in triplicate (3) for bunkers/lubricating oils/greases and any other on board supplies as agreed between the Parties; Original Certificate of Delivery and Acceptance in triplicate (3), in the form specified in Attachment H, to be signed and delivered upon delivery Original of all full term Class Certificates for hull, machinery, and for other items as required by Class, clean and unextended. Interim Statutory Certificates of the Vessel will be valid for a minimum of 5 months Copies certified by a lawyer of all Trading Certificates of the flag state of the Vessel such as Safe Manning Certificate, International Tonnage Certificate, Radio License. 25

26 Technical documentation required, including any warranty certificates and manuals, as specified in the Specifications Certificate of Registration of the Vessel in the name of the Purchaser (in the original flag state of the Vessel) Any such additional documents as may be reasonably required by Regulatory Bodies for the purpose of registering the Vessel under the Israeli flag, provided that Purchaser notifies the Seller at least ten banking days before the Delivery Date and that the required documents are possible to be issued by the Vessel's flag. Any documents not in the English language shall have a certified true translation in English attached. 9.3 Documents to be Furnished to the Seller upon Delivery 9.4. Liens. Upon delivery, the Purchaser shall provide the Seller with the following documents: A Power of Attorney of the Purchaser in the English language authorizing a person or persons to sign, execute and deliver the Bill of Sale, the Certificate of Delivery and Acceptance, to pay the Purchase Price and any other monies provided in the Agreement as payable to the Seller by the Purchaser, to taking delivery of the Vessel to the Purchaser, and to sign any document relevant thereto or provided in the Purchase contract, duly notarized and legalized by Apostille Documentary evidence of the payment of the Third Installment to the Seller. At the time of delivery of the Vessel, Seller shall deliver to Purchaser a Certificate of No Liens, in the form of Attachment J attached hereto ("Lien Certificate"), certifying the absence of any liens, security interests or rights in rem of any kind on said Vessel, other than a lien, security interest or rights in rem arising out of the actions of Purchaser. Seller hereby undertakes to indemnify the Purchaser against all consequences of claims made against the Vessel which have been incurred prior to the time of delivery and transfer of ownership. 26

27 9.5. Title. Title and risk of loss of the Vessel shall pass to Purchaser only upon the completion of the delivery to and acceptance by Purchaser of the Vessel in accordance with the terms of this Agreement. Until such time, title to and risk of loss of the Vessel shall remain with Seller. Title to all scrap and title to any material that is surplus to the requirements of this Agreement (except Purchaser's Supplies or which under any adjustment of the Purchase Price under the provisions of Article 6 of this Agreement remains the property of the Purchaser) shall vest in Seller. Title to all Purchaser's Supplies shall at all times remain in Purchaser. ARTICLE 10 - WARRANTY PERIOD LIABILITY FOR DEFECTIVE WORK OR MATERIAL Assignment of Warranties. The Seller shall assign or cause to be assigned to Purchaser all guarantees and/or warranties received from the Seller s suppliers and subcontractors for any workmanship or component of the Vessel. Such warranties shall be presented to Purchaser at the time of delivery Warranty Period. Notwithstanding any inspection or failure to reject by Purchaser or any of the applicable Regulatory Bodies pursuant to this Agreement, if at any time within twenty-four (24) months after delivery of the Vessel (the "Warranty Period") there shall appear or be discovered, any weakness, any defect, any deficiency, any failure, any breaking down or deterioration in design, workmanship or material furnished by Seller in performing the contract work, or any failure of any equipment, machinery or material, so furnished by Seller or its subcontractors, to function as prescribed and as intended by the Technical Documentation and this Agreement ( a "Deficiency"), such Deficiency shall be made good, at Seller's cost, to the requirements of the Technical Documentation and this Agreement. Notwithstanding the above, Seller shall not be responsible for the cost of correcting any such Deficiency to the extent that such Deficiency resulted from Purchaser's specific written direction (including Design Drawings and/or Specifications furnished by Purchaser) later found to result in a Deficiency (but only if Seller gave Purchaser written notice that such specific direction was technically improper) nor to the extent that it is due to ordinary wear and tear, nor to the extent increased by the negligence or other improper act of Purchaser or any operator of the Vessel or of any other person other than Seller or its subcontractors during said period. 27

28 In the event that the Vessel is prevented from entering into service or is taken out of service as a result of a Deficiency, then the Warranty Period shall be extended by the period of time that the Vessel is out of service for such reason. In the event that repairs or correction of a Deficiency are completed within ninety (90) days of the expiration of the Warranty Period, the Warranty Period shall be extended with respect to such item for a period of ninety (90) days from the date of completion of repairs or corrections of the Deficiency Limitation of Warranty Liability. The liability of Seller to Purchaser under this Agreement on account of any Deficiency shall not extend beyond the actual repair or replacement thereof at straight time commercial shipyard or ship repair yard rates including the cost of the drydocking and dockage of the Vessel, if necessary, and any tariffs, imposts or levies incurred in connection therewith, plus the actual cost of any investigation by Purchaser or any subcontractor required to determine the cause of a Deficiency including, without limitation, the cost of repair parts, material, testing, and any charges or expenses reasonably incurred by Purchaser in connection therewith. The Seller shall not be liable to Purchaser for any damage to the Vessel or its equipment or cargo or other property of Purchaser or for consequential damages of Purchaser arising out of any such Deficiency, except that in the event any Deficiency in any item of machinery or equipment furnished by Seller or its subcontractors or in the event that any workmanship or material furnished by Seller in performance of work upon any of the Vessel's machinery or equipment, gives rise to a Deficiency causing any damage to such items of machinery or equipment, Seller shall be liable not only for the cost of correcting or repairing such Deficiency, but also shall be liable for the cost of correcting or repairing such damage to such item of machinery or equipment caused by such Deficiency. Any work required to be performed pursuant to the provisions of this Article 10 shall be carried out, if practicable and at Purchaser's option, at the Shipyard. The Seller may, with the consent of Purchaser, have such work performed by its subcontractor, another shipyard or repair facility. The Purchaser may, however, have such work performed by the vessel crew, or by a shipyard or ship repair yard at any port satisfactory to it and in that event Seller shall be liable to Purchaser for the expense thereof at the straight time commercial shipyard or ship repair yard rates prevailing in such port areas, including the cost of dockage of the Vessel, if necessary. In all events, Purchaser shall bring the Vessel to the site where repairs are to be effected at its own cost. In the case of repairs made by the crew, Purchaser shall make a reasonable effort to consult with Seller prior to making such repairs, and shall provide such documentation as reasonably requested by Seller to establish the nature of the Deficiency. 28