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2.NOTICE OF DELAY

Within seven (7)days from the date of commencement of any delay on account of which the SELLER claims that it is entitled under this Contract to an extension of the time for delivery of the VESSEL, the SELLER shall advise the BUYER by telex confirmed in writing, of the date such delay commenced, and the reasons therefore.

Likewise within seven(7)days after such delay ends, the SELLER shall advise the BUYER in writing or by telex confirmed in writing of the date such delay ended, and also shall specify the maximum period of the time by which the date for delivery of the VESSEL is extended by reason of such delay. Failure of the BUYER to acknowledge of SELLER,s notification of any claim for extension of the Delivery Date within thirty (30)days  after receipt by the BUYER of such notification, shall be deemed to be a waiver by the BUYER of its right to object to such extension,.

3.RIGHT TO CANCEL FOR EXCESSIVE DELAY

If the total accumulated time of all permissible delays and non-permissible delays aggregate to_____ days or more, excluding delays due to arbitration as provided for in Article XVI here of due to default in performance by the BUYER, of due to delays in delivery of the BUYER,s supplied items, and excluding delays due to cause which, under Article V, VI, XI, and XII hereof, permit extension or postponement of the time for delivery of the VESSEL, then in such event, the BUYER may in accordance with the provisions set out herein cancel this Contract by serving upon the SELLER telexed notice of cancellation which shall be confirmed in writing and the provisions of Article X of this Contract shall apply. The SELLER may, at any time, after the accumulated time of the aforementioned delays justifying cancellation by the BUYER as above provided for, demand in writing that the BUYER shall make an election, in which case the BUY-ER shall, within thirty(30)days after such demand is received by the BUYER either notify the SELLER of its. Intention to cancel, or consent to an extension of the time of delivery to an agreed future date, it being understood and agreed by the parties hereto that if any further delay occurs on account of causes justifying cancellation as specified in this Contract, the BUYER shall have the same right of cancellation upon the same terms as hereinabove provided.

4.DEFINITON OF PERMISSIBLE DELAY

Delays on account of such causes as provided for in Paragraph 1 of this Article, but excluding any other extensions of a nature which under the terms of this Contract permit postponement of the Delivery Date, shall be understood to be (and are herein referred to as)permissible delays, and are to be distinguished from non-permissible delays on account of which the Contract Price of the VESSEL is subject to adjustment provided for in Article Ⅲ hereof.

ARTICLE  XVI  TITLE AND RISK

Title to and risk of the VESSEL shall rest with the BUILDER before delivery and pass to the BUYER immediately upon delivery and acceptance thereof.

At the time of delivery, the VESSEL shall be free of all liens, mortgages, claims, charges, and other encumbrances.

ARTICLE  XVII  POSSESSION AND REMOVAL OF VESSEL

1. THE POSSESSION OF THE VESSEL

The BUYER shall take physical possession of the VESSEL immediately upon delivery and acceptance thereof.

2. THE REMOVAL OF THE VESSEL

The BUYER shall remove the VESSEL from the port of the BUILDER or delivery place within five (5) calendar days after delivery and acceptance as above. If the BUYER does not remove the VESSEL within the aforesaid five (5) calendar days, in such event, the BUYER shall pay to the BUILDER the reasonable mooring charge of the VESSEL and the BUILDER is entitled to remove the VESSEL at any time thereafter from the delivery place to another safe premise with prior notice to the BUYER.

ARTICLE  XVIII  VESSEL REGISTRATION

The BUYER shall register the VESSEL at its own cost and expense in accordance with (here to fill in the name of the country where the VESSEL is to be registered) law after delivery and acceptance.

ARTICLE  XIX  BUILDER’S GURANTEE OF QUALITY

1. GURANTEE OF MATERIAL AND WORKMANSHIP

Within a period of twelve (12) months following the Vessel delivery to the BUYER, the BUILDER shall guarantee the Vessel, her hull and machinery and all parts and equipments thereof that are manufactured or furnished or supplied by the BUILDER and/or its sub-contractors under the Contract including material, equipment (however excluding any parts for the Vessel which have been supplied by or on behalf of the BUYER) against all defects which are due to defective materials, and/or poor workmanship.

2. NOTICE OF DEFECTS

The BUYER shall give the notice to the BUILDER in writing as promptly as possible, after the discovery of any defect or deviation for which a claim may be made under this guarantee. The BUYER’s written notice shall describe the nature of the defect and the extent of the damage caused thereby. The BUILDER shall have no obligation under this guarantee for any defects discovered prior to the expiry date of the guarantee period, unless such notice is received by the BUILDER not later than thirty (30) days after the expiry date. The written notice of defects received within thirty (30) days after the expiry date of guarantee period shall explain the nature of such defect and extent of damage, so that the forthcoming claim will be sufficient compliance with the requirements as to time.

3. REMEDY OF DEFECTS

The BUILDER shall remedy any defects against which the Vessel or any parts of the equipment thereof is guaranteed under this Article by making all necessary repairs and/replacement. Such repairs and/or replacement shall be made at the BUILDER’s cost and expense.

However, if it is impractical to make the repair by the BUILDER, as if the BUILDER’s supply of replacement parts, and materials can not be accomplished without impairing or delaying the operation or working of the Vessel, then in such event that the BUYER makes the necessary repairs or replacements elsewhere at the discretion of the BUYER, the BUYER shall first and in all events, will, as soon as possible, give the BUILDER the notice in writing or orally of the time and place such repairs will be made. Without impairing or delaying the operation or working of the Vessel, the BUILDER shall have the right to inspect through its own representative or that of Classification Society the nature and extent of the Guarantee Defects to be replaced or repaired claimed by the BUYER. The BUILDER shall, in such case, promptly advise the BUYER in writing, after such examination has been completed, of its acceptance or rejection of such Guarantee Defects as ones that covered by the guarantee. In most cases, the Guarantee Engineer, as hereinafter provided for the Vessel, will act for and on behalf of the BUILDER.

In any circumstances as set out below, the BUILDER shall immediately pay to the BUYER in the currency of United States Dollars by telegraphic transfer the actual costs for such repairs or replacements including transportation costs, or at the average lever for making similar repairs or replacements including transportation costs as quoted by the leading shipyards, whichever is lower:

(1) Upon the BUILDER’s acceptance of the defects as justifying remedy under this Article, or

(2) If the BUILDER neither accepts nor rejects the notice of defects as above provided, nor refer to the arbitration within thirty (30) days after the receipt of the BUYER’s notice of defects.

Any dispute shall be referred to arbitration in accordance with the provisions of Article XXVI hereof.

4. EXTENT OF THE BUILDER’S LIABILITY

The BUILDER shall have no obligation and/or liabilities with respect to any defects discovered after the expiration of the Guarantee Period specified as above.

The BUILDER shall be liable to the BUYER for defects and damages caused by any of the defects specified in Paragraph 1 of this Article provided that such liability of the BUILDER shall be limited to the defects discovered within the Guarantee Period specified in Paragraph 1. The BUILDER shall not be obligated to repair, or be liable for, damages to the Vessel, or to any part of the equipment thereof, due to ordinary wear and tear or caused by the defects other than those specified in Paragraph 1 as above, nor shall there be any BUILDER’s liability hereunder for defects in the Vessel, or any part of the equipment thereof, caused by fire or accidents at sea or elsewhere, or management mistake, accidents, negligence, or willful neglect, on the part of the BUYER, its employees or agents including the Vessel’s officers, crew and passengers, or any persons on or doing work on the Vessel other than the BUILDER, its employees, agents or sub-contractors. Likewise, the BUILDER shall not be liable for defects in the Vessel, or the equipment or any part thereof, due to repairs or replacement which made by those than the BUILDER and/or their sub-contractors.

Upon the delivery of the Vessel to the BUYER, in accordance with the terms of the Contract, the BUILDER shall thereby and thereupon be released of all responsibility and liability whatsoever and howsoever arising under or by virtue of the Contract (save in respect of those obligations to the BUYER expressly provided for in this Article IX), including but not limit to any responsibility or liability for defective workmanship, materials, or equipment, design or in respect of any other defects whatsoever and any loss or damage resulting from any act, omission or default of the BUILDER. The BUILDER shall, in any circumstances, be liable for any consequential loss or special loss, or expense arising from any cause whatsoever including not limit to, loss of time, profit or earning or demurrage directly from any commitments of the BUYER in connection with the Vessel.

The Guarantee provided in this Article and the obligations and the liabilities of the BUILDER hereunder are exclusive and in lieu of and the BUYER hereby waives all other remedies, warranties, guarantees or liabilities, express or implied, arising by Law or otherwise (including but not limit to any obligations of the BUILDER with respect to fitness, merchantability and consequential damage) or whether or not occasioned by the BUILDER’s negligence, The Guarantee shall not be extended, altered or varied except by a written instrument signed by the duly authorized representatives of the BUILDER, and the BUYER.

ARTICLE  XX  GUARANTEE PERIOD AND GUARANTEE ENGINEER

1. GUARANTEE PERIOD

The SELLER shall guarantee the VESSEL for a period of twelve (12) months from the month of delivery to the last day of the twelfth month.

2. GUARANTEE ENGINEER

The BUILDER shall appoint one or two Guarantee Engineer (s) to serve the VESSEL as the BUILDER’s representative (s) for a period of three (3) months from the delivery of the VESSEL. The BUYER, and his employees, shall give such Guarantee Engineer (s) full co-operation in carrying out his/their duties as the representative (s) of the SELLER on board the VESSEL. The BUYER shall accord the Guarantee Engineer (s) the treatment comparable to the VESSEL’s Chief Engineer, and shall provide him with accommodation and subsistence at no cost to the SELLER and/or the Guarantee Engineer (s).

The BUYER shall pay to the Guarantee Engineer (s) the sum of United States Dollarsper month per person to cover his/their miscellaneous expenses including wages and also the BUYER shall pay the expense of repatriation to the location of the BUILDER by air upon termination of his/their service, the expense of his/their communications with the BUILDER when made in performance of his/their duties as the Guarantee Engineer (s) and the expenses. if any, of his/their medical and hospital care. The BUYER, its successor (s) and/or assign (s), shall be liable to and indemnify the SELLER and/or the Guarantee Engineer (s) and /or the SELLER for personal injuries, including death and damages to, or loss or destruction of property of the Guarantee Engineer (s), if such death, injuries, damages, loss and/or destruction were caused by gross negligence or willful misconduct of the BUYER and/or, its successor (s) and/or assign (s) or its employees and/or agents.

Pertaining to the detailed particulars of this Paragraph, a written agreement shall be made according to this effect between the parties hereto upon delivery of the VESSEL…

SECTION  5  LEGAL

ARTICL  XXI  LAW APPLICABLE

The parties hereto agree that the Contract should be governed by and interpreted in accordance with the Laws of People’s Republic of China or the laws of other state agreed by the two parties.

ARTICLE  XXII  BUYER’S DEFAULT

1. DEFINITION OF DEFAULT

The BUYER shall be deemed in default of its obligation under the Contract if any of the following events occurs:

(1) The BUYER fails to pay the Second or Third or Fourth installment to the BUILDER when any such installment becomes due and payable under the provisions of Article V hereof and provided the BUYER shall have received the BUILDER’s demand for payment in accordance with Article IV hereof, or

(2) The BUYER fails to pay the fifth installment to the BUILDER in accordance with Paragraph 3 (5) and 4 (5) of Article XIII hereof provided the BUYER shall have received the BUILDER’s demand for payment in accordance with Article IV hereof; or

(3) The BUYER fails to take delivery of the Vessel, when the Vessel is duly tended for delivery by the BUILDER under the provisions of Article XIII hereof.

2. NOTICE OF DEFAULT

If the BUYER is in default of payment or in performance of its obligations as provided hereinabove, the BUILDER shall notify the BUYER in writing on the date of occurrence of the default as per Paragraph 1 of this Article and the BUYER shall forthwith acknowledge in writing to the BUILDER that such notification has been received. In case the BUYER does not give the aforesaid acknowledgement in writing to the BUILDER within three (3) calendar days it shall be deemed that such notification has been duly received by the BUYER.

3. INTEREST AND CHARGE

(1) If the BUYER is in default of payment as to any installment as provided in Paragraph 1 (1) and/or 1 (1) of this Article, the BUYER shall pay interest on such installment at the rate of    

percent ( %) per annum for a period of 15 days from the due date thereof and thereafter at the rate of percent (%) per annum until the date of the payment of the full amount, including all aforesaid interest.

In case the BUYER shall fail to take delivery of the Vessel as provided in Paragraph 1 (3) of this Article, the BUYER shall be deemed in default of payment of the fifth installment and shall pay interest thereon at the same rate as aforesaid form (and including) the day on which the Vessel is tendered for delivery, as provided in Article XIII Paragraph 6 hereof.

(2) In any event of default by the BUYER under 1 (1) or 1 (2) or 1 (3) above, the BUYER shall not costs, charges and expenses incurred by the BUILDER in consequence of such default unless provided by relevant.

4. DEFAULT BEFORE DELIVERY OF THE VESSEL

(1) If any default by the BUYER occurs as defined in Paragraph 1 (1) or 1 (2) or 1 (3) of this Article, the Delivery Date shall at the BUILDER’s option, be postponed for a period of continuance of such default by the BUYER.

(2) If any such default as defined in Paragraph 1 (1) or 1 (2) or 1 (3) of this Article committed by the BUYER continues for a period of fifteen (15) days, then, the BUILDER shall have all following rights and remedies:

(i) The BUILDER may, at its option, cancel or rescind the Contract, provided the BUILDER has notified the BUYER of such default pursuant to Paragraph 2 of this Article, by giving notice of such effect to the BUYER by telex confirmed in writing. Upon receipt by the BUYER of such telex notice of cancellation or rescission, all of the BUYER’s Supplies shall forthwith become the sole property of the BUILDER, and the Vessel and all its equipment and machinery shall be at the sole disposal of the BUILDER for sale or otherwise; and

(ii) (Applicable to any BUYER’s default defined in 1 (1) of this Article) The BUILDER shall, without prejudice to the BUILDER’s right to recover from the BUYER the 5th installment, interest, costs and/or expenses by applying the proceeds to be obtained by sale of the Vessel in accordance with the provisions set out in the Contract, have the right to declare all unpaid 2nd, 3rd and 4th installments to be forthwith due and payable, and upon such declaration, the BUILDER shall have the right to immediately demand the payment of the aggregate amount of all unpaid 2nd, 3rd and 4th installments from the Guarantor in accordance with the terms and conditions of the guarantee issued by the guarantor.

5. SALE OF THE VESSEL

(1) In the event of cancellation or rescission of the Contract as above provided, the BUILDER shall have full right and power either to complete or not to complete the Vessel at it deems fit, and to sell the VESSEL at a public or private sale on such terms and conditions as the BUILDER thinks fit without being answerable for any loss or damage occasioned to the BUYER thereby. 

In the case of sale VESSEL, the BUILDER shall give telex or written notice to the BUYER.

(2) In the event of the sale of the VESSEL in its completed state, the proceeds of sale received by the BUYER shall be applied firstly to payment of all expenses attending such sale and otherwise incurred by the BUILDER as a result of the BUYER’s default, and then to payment of all unpaid installments and/or unpaid balance of the Contract Price and interest on such installment at the interest rate as specified if the relevant provisions set out above from the respective due dates thereof to the date of application.

(3) In the event of the sale of the VESSEL in its incomplete state, the proceeds of sale received by the BUILDER shall be applied firstly to all expenses attending such sale and otherwise incurred by the BUILDER as a result of the BUYER’s default, and then to payment of all costs of construction of the VESSEL (such costs of construction, as herein mentioned, shall include but are not limited to all costs of labor and/or the costs paid by the BUILDER for the equipment and/or materials to be installed on the VESSEL) and/or any fees, charges, expenses and/or royalties incurred and/or to be incurred for the VESSEL less the installments so retained by the BUILDER, and compensation to the BUILDER for a reasonable sum of loss of profit due to the cancellation or rescission of the Contract.

(4) In either of the above events of sale, if the proceed of sale exceeds the total of the amounts to which such proceeds are to be applied as aforesaid, the BUILDER shall promptly pay the excesses to the BUYER without interest, provided, however that the amount of each payment to the BUYER shall in no event exceed the total amount of installments already paid by the BUYER and the cost of the BUYER’s supplies, if any.

(5) If the proceed of sale are insufficient to pay such total amounts payable as aforesaid, the BUYER shall promptly pay the deficiency to the BUILDER upon request.

ARTICLE  XXIII  BUILDER’S DEFAULT

Failure to accomplish the following obligations by the BUILDER shall constitute events of default:

1. The failure of the BUILDER to prosecute the Contract work with such diligence and in such manner as will disable it to complete the VESSEL construction by the Delivery Date stipulated in the Contract, except and to the extent that such failure is due to the causes stated in Article XI of the Contract for which the BUILDER would be entitled to an extension of the Delivery Date, such as the delay of the VESSEL delivery caused by force majeure; provided that the BUYER shall have given the BUILDER notice of such failure and that the BUILDER shall not, within fifteen (15) days of the date of receipt of such notice, have shown to the satisfaction of the BUYER that it has taken steps sufficient to remedy the failure in a manner satisfactory to the BUYER.

2. The failure of the BUILDER in any other respect to use due diligence in the performance of the Contract work or its failure to perform any of the covenants, agreements or undertakings on its part to be performed under the Contract, including but not limited to, the BUILDER’s agreement to make prompt payment for all labor, material, services and other charges which are to be paid by the BUILDER; provided that the BUYER shall give notice to the BUILDER as to such failure, and the BUILDER shall not, within fifteen (15) days after being so notified, correct any failure to use due diligence or undertake the performance of said covenants, undertakings or agreements required to cure such failure, and thereafter prosecute in good faith to completion all such work or performance required to cure such failure.

3. The BUILDER being dissolved or adjudicated a bankrupt or making a general assignment for the benefit of its creditors, or the appointment of a receiver or receivers of any kind whatsoever, whether or not appointed in bankruptcy, common law or equity proceedings, whether temporary or permanent for the property of the BUILDER, or the filing by the BUILDER of a petition for reorganization or other proceedings under any of the provisions of the Bankruptcy Code, or the filing of such petition by creditors, stakeholders or any other person whatsoever and approval thereof by the Court.

4. Where there is a cause of delay in the Contract beyond prior expectation (except such causes stated in Article XI of the Contract for which the BUILDER would be entitled to extent the completion), and such delay would disable the BUILDER to accomplish the obligations under the Contract as determine by the BUYER.

ARTICLE  XXIV  ASSIGNMENT OF THE CONTRACT

1. ASSIGNMENT OF THE BUILDER

To prevent the committed financing from suffering any loss, the BUILDER shall have the right to assign the benefit arising under or by virtue of the Contract to the financing party.

2. ASSIGNMENT OF THE BUYER

(1) To prevent the committed financing from suffering any loss, the BUYER shall have the right to assign the benefit arising under or by virtue of the Contract to the financing party.

(2) After obtaining consent from the BUILDER (such consent not to be unreasonably withheld), the BUYER shall assign or transfer the right and obligation under the Contract or assign the Contract to the third party.

(3) Assigner and assignee shall jointly undertake and responsible for the execution of the provisions set forth under the Contract between the assignee and the BUILDER.

ARTICLE  XXV  LIEN AND MORTGAGE OF THE VESSEL

1. LIEN OF THE VESSEL

If the BUILDER is under no default, the BUILDER shall have the right to lien the possessing constructing VESSEL to insure the repayment of the construction cost when the contractual payment obligation has not been performed by the BUYER.

2. MORTGAGE OF THE VESSEL

The VESSEL which is under construction shall be eligible for shipping mortgage. The BUILDER shall have the right to be the Pledger by pledging the VESSEL for the shipping mortgage and should sign a contract with the Pledgee in writing.

The mortgage registration shall be done jointly by the Pledger and the Pledgee in the VESSEL Registry for the shipping mortgage; the third party shall not be confronted for those without registration.

Registration of the shipping mortgage shall include the following main items:

(1) The name, title and address of the Pledgee and Pledger

(2) The name, nationality, the VESSEL ownership certificate issuing authority and the certificate number of the VESSEL to be mortgaged

(3) The loan amount, interest rate and the tenor to be guaranteed

The Pledger shall procure insurance for the mortgaged VESSEL unless the Contract agreed otherwise. The Pledgee shall have the right to procure insurance for the mortgaged VESSEL should it not be insured and the premium shall be borne by the Pledger.

ARTICLE  XXVI  DISPUTE RESOLUTION AND ARBITRAITON

1. CLASSIFICATION SOCIETY OR OTHER REGULATORY AUTHORITY

Disputes about whether or not the VESSEL is in accordance with the rules, regulations, and requirements of the Classification Society or other Regulatory Authority may submit to the Classification Commission of the Classification Society, or other Regulatory Authority. The determination of the authority is final and binding upon both parties. Any other disputes under the contract should be submitted to conciliation or arbitration for resolution, which is stipulated in below paragraph 2, and 3.

2. CONCILIATION

Before the dispute be submitted to arbitration, both parties agree to submit any of their disputes arising form the Contract or relating to the Contract to Shanghai Maritime Conciliation Center of CMAC for conciliation, which apply to the Center’s Conciliation Rules and Panel of conciliators. Both parties agree to submit their settlement agreement by conciliation to Shanghai Sub-Commission of CMAC and jointly appoint or entrust the chairman of CMAC shall appoint one sole arbitrator to render an arbitration award according to the law and the content of conciliation settlement between the parties. The arbitration procedure and time limit shall not be confined by the Arbitration Rules of CMAC. Unless either party opposes, the conciliator appointed in the conciliation procedure may continue to act as the sole arbitrator to render an arbitration award, if the conciliator is also listed among the Panel of Arbitrators of CMAC.

If both parties don’t agree to conciliate according to above regulations,  Conciliation Rules should be adopted by the parties. 

3. ARBITRATION

Any dispute under or in connect with the Contract shall be submit to Shanghai Sub-Commission of CMAC for arbitration which shall be conducted in accordance with the Arbitration Rules of CMAC in effect at the time of applying for arbitration. The arbitration award is final and binding upon both parties.

If both parties don’t agree to submit the dispute to the above-mentioned arbitration institute, the both parties agree to submit to ___(location or institute) and apply to ___Arbitration Rules.

ARTICLE  XXVII  SUSPENSING AND TERMINATION

1. BUYER’S TERMINATION

During the period of performing the contract, the BUYER shall have the right to terminate the Contract upon giving notice in the event that:

(1) The Guarantor providing the refund guarantee on behalf of the BUILDER is deemed insolvent, unless the BUILDER provides a replacement and acceptable refund guarantee to the BUYER within 30 days of the BUYER’s notice requiring a replacement refund guarantee to be provided, or

(2) Excluding permissible delays, the BUILDER fails to perform any work relating to the shipbuilding for a running period of at least    days, provided that thereafter the BUYER gives the BUILDER at least    days’ notice in writing of his intention to terminate the Contract under this clause and within that period the BUILDER fails to remedy its breach, or.

(3) In the event that:

(a) The delivery date is delayed by more than 180 days by fore majeure events,

(b) The delivery of the VESSEL is delayed by more than 180 days, excluding permissible delays,

(c) The aggregate of delays in the delivery of the VESSEL in (a) and (b) above is more than 270 days.

The BUILDER may at any time after the BUYER is entitled to terminates the Contract give notice to the BUYER requesting that the BUYER either agrees to a new delivery date or terminate the Contract. Such new delivery date shall be a reasonable estimated date by the BUILDER, when the VESSEL will be ready for delivery. Within 15 days of the request by the BUILDER, the BUYER shall notify the BUILDER of his determination. If the BUYER doesn’t terminate the Contract, then the new delivery date shall be deemed to be the delivery date provided it doesn’t occur later than 30 days prior to the expiry of the refund guarantee. If the VESSEL is not delivered by that date, the BUYER shall have the right to terminate this Contract.

(4) The reduction in speed, deadweight, hold capacity and the excessive fuel consumption of the main engine entitles the BUYER to reduce the Contract Price, terminate or cancel the Contract as per clause 1, 2, 3 and 4 in Article VI greater than the reduction amount stated in contract;

(5) There are deficiencies of the VESSEL as stated in the Contract to entitle the BUYER to suspend the performance of the Contract;

(6) The BUILDER’s guarantee is in breach of relevant regulations of this Contract.

2. BUILDER’S TERMINATION

During the period of performing the contract, the BUILDER shall have the right to terminate the Contract upon giving notice to the BUYER in the event that:

(1) The Guarantor providing the installment or performance guarantee on behalf of the BUYER is deemed insolvent, unless the BUYER provides a replacement and acceptable refund guarantee to the BUILDER within 30 days; or

(2) The BUYER fails to pay any sums due under the contract for a period of 21 banking days, provided that the BUILDER thereafter gave the BUYER at least 5 banking days notice of his intention to terminate the Contract under this Article and within that period the BUYER failed to remedy the breach;

(3) The BUYER fails to take delivery of the VESSEL tendered in accordance with the Contract;

(4) The BUYER fails to provide installment or performance guarantee according to this Contract.

3. Suspension of BUILDER’S Construction Work

Without prejudice to BUILDER’s right of termination, the BUILDER has the right to suspend the construction work if the BUYER fails to pay any installment due according to the contract for 15 banking days until payment of such outstanding sums.

4. DEEMED INSOLVENCY

A party or the Guarantor providing the refund guarantee shall be deemed insolvent if the proceedings are commenced against the insolvent party or the Guarantor for winding up, dissolution or reorganization (otherwise than for the purpose of amalgamation or reconstruction), liquidation, the appointment of a receiver, trustee or similar officer, bankruptcy, suspension of payments or similar events. A party shall have the right to terminate the Contract forthwith upon giving notice if the other party or Guarantor is deemed insolvent.

5. EFFECTIVENESS of BUYER’S TERMINATION

If the Contract is terminated by the BUYER, the BUILDER shall refund all sums paid by the BUYER to the BUILDER according to the contract here of plus interest thereon at the rate stated in contract per annum from the date of payment to the date of refund. The BUILDER shall also return the BUYER’s SUPPLIERS, or if they cannot be returned, the BUILDER shall pay to the BUYER an amount equal to the BUYER’s cost for such BUYER’s SUPPLIERS.

6. EFFECTIVENESS OF THE BUILDER’S TERMINATION

If this Contract is terminated by the BUILDER, the BUILDER shall have the right to retain the BUYER’s SUPPLIERS together with any installments paid by the BUYER and shall have the right and power either to complete or not to complete the shipbuilding, but in any event shall sell the VESSEL (either in its complete or incomplete form), including those BUYER’s supplies which are installed or have been utilized on board the VESSEL, at the best price reasonably obtainable at a public or private sale on reasonable terms and conditions.

(1) In the event of the sales of the VESSEL in its complete form, the proceeds of the sale received by the BUILDER shall be applied in the following order:

(a) to pay all expenses incurred by the BUILDER in respect of the sale and otherwise incurred by the BUILDER as a result of the BUYER’s breach of the contract;

(b) to pay unpaid installments of the contract price including any which would have been payable after the date of termination and interest on such installments at the rate of interest stated in contract from the respective due dates thereof to the date of application.

(2) In the event of the sale of the VESSEL in its incomplete form the proceeds of sale received by BUILDER shall be applied in the following order:

(a) To pay all expenses incurred by the BUILDER in respect of the sale and otherwise incurred by the BUILDER as a result of the BUYER’s default;

(b) To pay all unpaid installments of the Contract Price to the extent due but not yet paid at the date of termination and interest on such installments at the rate of interest stated in the Contract from the respective due date thereof to the date of application;

(c) To pay all costs of part shipbuilding less any paid installments and less any sums credited in paragraph (b) as above;

(d) To compensate the loss of the BUILDER’s reasonable net profits caused by the BUYER’s breach of the Contract.

(3) In any of the above events, if the proceeds of sale exceed the sums to which such proceeds are to be applied as aforesaid, the BUILDER shall promptly pay any such excess to the BUYER without interest thereon, provided that the amount of such payment to the BUYER shall in no event exceed the total amount of installments paid by the BUYER. The BUILDER shall at the same time either permit the BUYER to remove the BUYER’s supplies which are not installed or utilized onboard the VESSEL (if any) from the shipyard for the cost and expense of the BUYER, or give credit to the BUYER for the value thereof.

(4) If the proceeds of sale are insufficient to pay the BUILDER the total amounts due from the BUYER as aforesaid, the BUILDER may sell the BUYER’s SUPPLIES which are not installed or utilized onboard the VESSEL (if any) at the best price reasonable obtainable at a public auction or private sale on reasonable terms and conditions, applying the proceeds of such sale toward the unsatisfied amounts due from the BUYER, and giving credit to the BUYER for any excess.

(5) If the proceeds of sale are still insufficient to pay the BUILDER the total amounts due from the BUYER as aforesaid, the BUYER shall pay the BUILDER the amount of such deficiency, plus interest at the rate stated in the Contract calculated from the date when the payments become due.