§ 310.11 Discipline and dismissal, (a) The Superintendent is authorized to place any cadet on a non-pay basis for disciplinary reasons, not to exceed a maximum of thirty days.

(b) In the event it is determined that a cadet was married at the time of admission to the academy or if he marries while in attendance at the academy he shall be dismissed.

(c) In the event a cadet is dismissed from a State Maritime Academy for disciplinary reasons, the Superintendent may deny payment to such cadet of all earnings due and unpaid such cadet at the time of dismissal.

§ 310.12 Scope and effect of §§ 310.1 to 310.12, inclusive. (a) If any provisions of §§ 310.1 to 310.12, inclusive, are in conflict with laws and regulations of the state, the appropriate state authorities shall notify the Director in writing of such conflict and pertinent circumstances.

(b) The Director may, after-consultation with the appropriate state authorities, issue instructions supplementing §§ 310.1 to 310.12, inclusive.

(c) Effective June 1, 1947, §§ 310.1 to 310.12, inclusive, supersede all previous regulations for State Maritime Academies.

62-R010-42)1: Provided, That (1) in determining the amount of working capital, unpaid tenders of "just compensation" made by the Maritime Commission (or War Shipping Administration) for title to or use (to the extent accrued) of vessels (irrespective of whether or not such tenders have been accepted by the owners) may be included, (2) an amount equivalent to the excess (if any) of 50% of the amount of unterminated Voyage Revenue over the amount of unterminated Voyage Expense reflected in the balance sheet shall be deducted from the amount of working capital determined in accordance with the preceding provisions of this paragraph, and (3) the amount of working capital thus determined shall in no event be in excess of the sum of (i) unrestricted cash and readily marketable securities included in total current working assets and (ii) admitted current receivables against the Maritime Commission and unpaid tenders of "just compensation" made by the Maritime Commission (or War Shipping Administration) for title to or use of vessels, less the amount of all current payables to the Maritime Commission.

(b) Net worth. "Net worth" shall include capital stock, capital surplus, and earned surplus adjusted to exclude capital stock subscribed but not issued, capital stock held in the treasury, appreciation, good will, and other intangibles not actually acquired for cash or for a consideration determined by the Commission

1 Copies of the "General Financial Statement" will be furnished by the Maritime Commission on request.

to be the equivalent thereof, and such other adjustments as are consistent with sound accounting principles.

(c) Preoperating and operating expenses. "Preoperating and operating expenses" shall include wages, subsistence, stores, supplies, equipment, fuel, maintenance, repairs, insurance, and other - vessel expenses as described in the instructions embodied in the "General Financial Statement" prescribed by the Commission (accounts numbered 700.01 to 700.64 inclusive, pages 8 and 9) and overhead expenses, but shall not include agency fees and commissions; wharfage, dockage, and other port expenses; stevedoring and other cargo expenses; brokerage, canal tolls, and other voyage expenses.

Such preoperating and operating expenses for a 30 day period (except prepaid insurance which is for a period of one year) shall be deemed to aggregate:

(d) Related company. The term "related company", used to indicate a relationship with the applicant, shall include any person or concern that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the applicant. The term "control" (including the terms "controlled by" and "under common control with") means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of the applicant (or related company), whether through ownership of voting securities, by contract, or otherwise.

The certification on the profit and loss statement should be to the effect that, to the best of the knowledge and belief of the person making the certification, such statement correctly states the operating results of the applicant for the period covered thereby.

§ 311.3 Commission examination of books and accounts. The Commission shall have the right to examine the books, records, and accounts of applicants if and to the extent deemed necessary to verify financial statements submitted to it.

Subpart B-Applications

§ 311.11 Application form and requirements-(a) Application form. The application to charter a vessel under this part shall be substantially in the form of the application to charter a war-built vessel under the Merchant Ship Sales Act of 1946, as prescribed by § 299.81 of this chapter: Provided, That instead of the exhibits required under item G of the form prescribed by § 299.81 of this chapter, the following exhibits shall be furnished:

Exhibit 1. A copy of the certificate of incorporation of the applicant or other organization papers, including all amendments thereto presently in effect.

Exhibit II. A copy of the by-laws or other governing instruments of the applicant, including all amendments thereto presently in effect.

Exhibit III. A copy of (1) a balance sheet as of the end of a calendar month (except in instances where the fiscal year of the applicant ends on some other day) within not more than six months and not less than one month (except in instances where the applicant was established more recently) of the date of the filing of the application (or amendment thereto changing the type or number of vessels applied for) with the Commission, (2) a brief statement of the nature of any substantial changes in the financial condition of the applicant, or the results of its operations since the date of the balance sheet required hereunder, and (3) profit and loss statements for each year (or other accounting period) beginning with the fiscal year ended in 1939 and ending with the date of the balance sheet. If during the period covered by such profit and loss statements, the applicant succeeded to the business and assets of another person, the statements furnished should reflect the operations of such predecessor or predecessors for that part of such period preceding the date of acquisition.

(b) Minimum financial requisites to charter vessels. Each application shall include sufficient information to enable the Commission to determine that it pos

sesses the following minimum financial requisites:

(1) Sufficient working capital, as defined in § 311.1 (a), to cover the sum of (i) basic charter hire for a period of thirty days, (ii) prepaid insurance for the period of the bareboat charter agreement but not in excess of one year, and (iii) preoperating and operating expenses (other than prepaid insurance), as defined in § 311.1 (c) of the vessel for a period of thirty days. In determining the amount of such working capital, the amount of any securities pledged or to be pledged with the Commission in lieu of a surety bond, as prescribed in § 311.21 (b), shall be excluded.

(2) Net worth, as defined in § 311.1 (b) at least equal to the greater of (i) the basic charter hire for the period of the bareboat charter agreement but not more than one year, payable with respect to the vessel, or (ii) an amount calculated at the rate of ten percent of the unadjusted statutory sales price or floor price (whichever is the higher) in the instance of a warbuilt vessel (as defined in the Merchant Ship Sales Act of 1946, or at the rate of ten percent of its value as determined by the Commission in the instance of any other vessel, for the period of the bareboat charter agreement but not more than one year.

Such minimum financial requirements shall be applicable with respect to each vessel applied for. In instances where the applicant is engaged in the operation of other vessels or in activities other than the operation of vessels, the amount of working capital and net worth required for such purposes will be taken into account in addition to such minimum financial requirements in determining whether the applicant possesses the required financial resources.

The Commission, in any instance where it deems it necessary or desirable to do so, may employ bases other than those expressed above in determining financial responsibility.

(c) Philippine Government approval. All such applications shall bear Philippine Government approval prior to being presented for approval by the United States Maritime Commission.

Subpart C-Charter Terms and
Conditions

§ 311.21 Mandatory provisions in charter. Every charter made by the

Commission pursuant to the provisions of the Philippine Rehabilitation Act of 1946, and pursuant to this part, shall include the following mandatory provisions:

(a) Books and accounts of charterer; Commission examination and audit. That the charterer shall keep its books and accounts relating to the vessel in such form as the Commission may prescribe, shall file such financial statements as the Commission may require, and shall permit the Commission to examine and audit its books, records, and accounts.

(b) Bond of charterer. That for each vessel chartered under the Philippine Rehabilitation Act of 1946, the charterer shall deposit with the Commission a bond, in such amount as the Commission shall require but not less than $25,000, to be approved by the Commission both as to form and sufficiency of the sureties, conditioned upon the true and faithful performance of all and singular the covenants and agreements of the charterer contained in the charter, including, but not limited to, the charterer's obligation to pay charter hire and damages, and indemnity against liens on the chartered vessel. The charterer may, in lieu of furnishing such bond, pledge United States Government securities in the face value of the required amount under an agreement satisfactory in form and substance to the Commission.

(c) Financial limitations. That the charterer agrees that (1) no capital shall be withdrawn, (2) no share capital shall be redeemed or converted into debt, (3) no dividend shall be paid, (4) no loan or advance (except advances to cover current expenses of the charterer) shall be made, either directly or indirectly, to any stockholder, director, officer, or employee of the charterer or to any related company (as defined in § 311.1 (d)), (5) no investment shall be made in the securities of any related company (as defined in § 311.1 (d)), (6) no indebtedness to any stockholder, director, officer, or employee of the charterer or to any related company (as defined in § 311.1 (d)) which was classified as long-term or noncurrent in the balance sheet submitted with the application (or amendment thereto) to charter the vessel, shall be repaid in whole or in part, and (7) no salary at a rate in excess of $12,500.00 per annum shall be paid if, after such transaction, the amount of working capital or the amount of net

worth thereby would be reduced below the minima prescribed in § 311.11.

(d) Restricted operations. That the vessel shall be operated only in the interisland commerce in the Philippines.

§ 311.22 Charter form. Unless otherwise ordered by the Commission, the charter form shall be substantially in the

form of the charter of a war-built drycargo vessel under the Merchant Ship Sales Act of 1946, as prescribed by § 299.82 of this chapter: Provided, That such charter shall be modified to give effect to the provisions of this part, and there shall be eliminated from such charter all provisions applicable only to the payment of additional charter hire.