Exhibit 10.35

 

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DEMISE CHARTER

 

between

 

STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT,

NATIONAL ASSOCIATION, not in its individual capacity but solely as trustee of
the

GTC CONNECTICUT STATUTORY TRUST,

 

Shipowner,

 

and

 

GULFCOAST TRANSIT COMPANY,

 

Charterer.

 

Dated as of December 21, 2001

 

of the United States Flag

dry-bulk cargo vessels named

 

BARBARA KESSEL, Official No. 583310

GAYLE EUSTACE, Official No. 587045

PEGGY PALMER, Official No. 641530

MARY TURNER, Official No. 646730

 

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TABLE OF CONTENTS

 

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ARTICLE 1

  Definitions    2

ARTICLE 2

  Delivery and Acceptance of the Vessels    2

ARTICLE 3

  Use and Operation of the Vessels    3

ARTICLE 4

  Maintenance of Classification and Repairs    4

ARTICLE 5

  Use of Stores and Equipment    6

ARTICLE 6

  Charterer’s Changes, Installation of Equipment and Removal of Parts    6

ARTICLE 7

  Liens and Mortgages    9

ARTICLE 8

  Risk of Loss    11

ARTICLE 9

  Insurance    11

ARTICLE 10

  Term of Demise Charter and Charter Hire    15

ARTICLE 11

  Event of Loss and Right to Terminate.    19

ARTICLE 12

  Requisition of Use    20

ARTICLE 13

  Redelivery    21

ARTICLE 14

  Assignments; Subcharters    21

ARTICLE 15

  Events of Default; Remedies    22

ARTICLE 16

  Option To Purchase At Expiration of the Term    27

ARTICLE 17

  Taxes    28

ARTICLE 18

  Environmental Matters    35

ARTICLE 19

  General Indemnification and Expenses    36

ARTICLE 20

  Miscellaneous    37

ARTICLE 21

  Notices    40

SCHEDULE A

  Definitions     

SCHEDULE B

  Schedule of Stipulated Loss Values     

SCHEDULE C

  Schedule of Base Rental Factors          (Expressed as a Percentage of
Lessor’s Costs)     

 

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DEMISE CHARTER

 

DEMISE CHARTER dated as of December 21, 2001 between STATE STREET BANK AND TRUST
COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity but
solely as trustee of the GTC CONNECTICUT STATUTORY TRUST, a Connecticut
statutory trust, as Shipowner, and GULFCOAST TRANSIT COMPANY, a Florida
corporation, as Charterer.

 

W I T N E S S E T H:

 

WHEREAS, Shipowner is the documented owner of the following United States flag
dry-bulk cargo marine transportation assets:

 

(a) the BARBARA KESSEL, a 7,200 horsepower integrated blue-water tug-barge unit,
built in 1977, Official No. 583310;

 

(b) the GAYLE EUSTACE, a 36,686 short-ton cargo capacity integrated blue-water
barge, built in 1977, Official No. 587045;

 

(c) the PEGGY PALMER, a 37,700 short-ton cargo capacity blue-water barge, built
in 1981, Official No. 641530;

 

(d) the MARY TURNER, a 42,800 short-ton cargo capacity blue-water barge, built
in 1982, Official No. 646730; and

 

WHEREAS, commencing on the first day of the Term, Shipowner wishes to demise
charter the Vessels to Charterer and Charterer wishes to demise charter the
Vessels from Shipowner, in each case subject to and on the terms and conditions
hereinafter set forth.

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein
contained and for other good and valuable consideration, the receipt and
adequacy of which the parties hereto acknowledge, commencing on the first day of
the Term, Shipowner agrees to let and demise and Charterer agrees to hire and
demise charter, subject to and on the terms and conditions hereinafter set
forth, the Vessels.

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ARTICLE 1

 

Definitions

 

The capitalized terms used herein which are defined in, or by reference to,
Schedule A attached hereto and made a part hereof, shall have the meanings
specified in said Schedule A unless the context otherwise requires.

 

ARTICLE 2

 

Delivery and Acceptance of the Vessels

 

(a) Notwithstanding any other provision of this Demise Charter, concurrently
with the acquisition of the Vessels by Shipowner from Seller, subject only to
Shipowner having on such day the legal ability to deliver possession of the
Vessels free and clear of all Liens (other than Permitted Liens), Shipowner
shall be deemed to have tendered, and Charterer shall be deemed to have
accepted, at such time on such date, delivery of the Vessels under this Demise
Charter “as is, where is” in whatever condition it may be, AND IT IS AGREED THAT
SHIPOWNER MAKES NO WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, AS TO
TITLE TO, AS TO THE DESIGN, CONDITION, MERCHANTABILITY OR SEAWORTHINESS OF, AS
TO THE QUALITY OF THE MATERIAL, EQUIPMENT OR WORKMANSHIP IN, OR AS TO THE
CONSUMABLE STORES ON BOARD, THE VESSELS, OR AS TO THE FITNESS OF THE VESSELS FOR
ANY PARTICULAR PURPOSE OR ANY PARTICULAR TRADE, OR ANY OTHER WARRANTY OR
REPRESENTATION WHATSOEVER (except Shipowner represents and warrants only that at
all times during the Term it will possess title to each Vessel transferred to it
by Seller on the Closing Date free and clear of all Shipowner’s Liens other than
the Permitted Lien constituted by this Demise Charter), it being agreed that all
such risks (except for Shipowner’s Liens) arising prior to or during the Term,
as between Shipowner and Charterer, are to be borne by Charterer. Charterer’s
acceptance of the Vessels under this Demise Charter, as provided in this Article
2(a), shall confirm and be conclusive evidence, as between Shipowner and
Charterer, that the Vessels have been accepted by Charterer and are in
compliance with all requirements of this Demise Charter, and Charterer will not
assert any claim of any nature whatsoever against Shipowner or the Vessels
(except as to Shipowner’s Liens) based on any of the foregoing matters in this
Article 2(a).

 

(b) Upon delivery of the Vessels to Charterer hereunder, the Vessels shall be
documented in the name of Shipowner under the laws and flag of the United States
with coastwise endorsement.

 

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ARTICLE 3

 

Use and Operation of the Vessels

 

(a) Charterer shall have full use of the Vessels and may employ the Vessels
operating between safe ports and safe berths worldwide, in any lawful trade and
carrying such lawful dry-bulk cargoes for which the Vessels are suitable,
subject to Institute Warranties and Clauses, provided, however, that (w) no
Vessel shall carry any Excluded Cargoes, (x) no Vessel shall be operated in any
manner contrary to the applicable laws and regulations of the United States or
the jurisdiction in which it is operating (other than operation in innocent
passage) except to the extent that any non-compliance therewith is not material
and does not involve any risk of forfeiture, arrest, detention or the loss of
use of such Vessel, or in any manner which can or may injuriously affect the
documentation thereof under such laws and regulations, or in any area in which
the insurance required by the terms of Article 9 shall not be in full force and
effect, (y) no Vessel shall be operated in the territorial waters of any
jurisdiction that at the time does not recognize the rights of United States
flag vessels, and (z) no Vessel shall be operated in a manner inconsistent with,
or which jeopardizes, its privileges to engage in the United States coastwise
trade.

 

(b) So long as no Event of Default shall have occurred and be continuing,
Charterer shall be entitled to quiet use and enjoyment of the Vessels in
accordance with this Demise Charter and shall have exclusive possession and
control of the Vessels and shall man, victual, navigate and operate the Vessels
at its own expense or by its own procurement throughout the Term. As between
Shipowner and Charterer, the master, officers and crew of each of the Vessels
shall be engaged and employed by Charterer (directly or by its duly authorized
agent) and shall remain Charterer’s servants, navigating and working the Vessels
on behalf of and at the risk of Charterer. Shipowner shall not have any interest
in salvage moneys earned by the Vessels or received by Charterer during the
Term. Charterer shall pay all port charges, pilotages, and all other costs,
charges and expenses whatsoever incident to the documentation, use, operation,
maintenance and repair of the Vessels during the Charter Period and until the
Vessels have been redelivered to Shipowner at the expiration of the Charter
Period free of Liens (other than Shipowner’s Liens) and in all respects in the
condition required by the Demise Charter.

 

(c) Charterer shall without expense to Shipowner, throughout the Charter Period
maintain the documentation of the Vessels under the laws and flag of the United
States with coastwise endorsement in the name of Shipowner, and Shipowner shall
upon the request of Charterer execute such documents and furnish such
information as Charterer may reasonably require to enable Charterer to maintain
such documentation. The Vessels shall, and Charterer covenants that it shall, at
no expense to Shipowner, at all times during the Term comply with all applicable
laws, treaties and conventions in effect from time to time and rules and
regulations issued thereunder applicable to the jurisdictions in which the
Vessels are operating (other than operation in innocent passage) except to the
extent that any non-compliance therewith is not material and does not involve
any risk of forfeiture, arrest, detention or the loss of use of any Vessel,
including particularly, but without limitation by this enumeration, the
International Convention for Safety of Life at Sea, 1960, as amended, and all
applicable laws, rules and regulations administered by the Maritime
Administration, the United States Coast Guard, the

 

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Customs Service, the Treasury Department, the Federal Communications Commission,
the Public Health Service, the Environmental Protection Agency and any other
United States, state, or foreign nation agency having jurisdiction in connection
with the use, control, operation and maintenance of the Vessels, or their
respective successors, and Charterer covenants that it will have on board each
Vessel, when required thereby, valid certificates showing compliance therewith.
Charterer shall establish and maintain financial security or responsibility in
respect to oil or other pollution damage as required by any government, or any
division or authority thereof, to enable the Vessels, without delay, penalty or
charge, lawfully to enter, remain at, or leave any port or place. Charterer
covenants that it will not suffer or permit anything to be done which might
injuriously affect the documentation of any Vessel under the laws and
regulations of the United States and will not abandon any Vessel in a foreign
port (unless there shall have been an actual or constructive total loss or
agreed or compromised total loss of such Vessel), or engage in any unlawful
trade or violate any law or regulation or carry any cargo that may expose any
Vessel to penalty, forfeiture or seizure. Shipowner hereby represents that it
presently meets the requirements of law so that the Vessels are eligible for
documentation under United States flag pursuant to Title 46, United States Code
(“U.S.C.”), Section 12106(e) and the regulations related thereto. Charterer
hereby represents that it meets and covenants that it will meet, or will use its
best efforts to meet, at all times throughout the Charter Period and upon any
redelivery of the Vessels to Shipowner as required by this Demise Charter, the
requirements of law so that the Vessels are eligible for documentation and
operation under United States flag pursuant to Title 46 U.S.C. Section 12106(e)
and the regulations related thereto and Charterer further represents and
covenants that it is and, so long as the same shall be necessary to maintain the
documentation of the Vessels under the laws and flag of the United States and to
operate the Vessels in the coastwise trade of the United States, will be, or
will use its best efforts to be, a citizen of the United States within the
meaning of Section 2 of the Shipping Act.

 

ARTICLE 4

 

Maintenance of Classification and Repairs

 

(a) Charterer shall be charged with full responsibility for maintenance and
repair of the Vessels throughout the Charter Period in a manner consistent with
its current maintenance and repair program as of the date hereof, and shall at
all times during the Charter Period, without expense to Shipowner, maintain and
preserve the Vessels in good condition, working order and repair, ordinary wear
and tear only excepted, so that the Vessels shall be throughout the Charter
Period, insofar as due diligence can make them so, tight, staunch, strong and
well and sufficiently tackled, appareled, furnished, equipped and in every
respect seaworthy and in good operating condition, including without
deterioration of external coatings on the Vessels that would allow for corrosion
or deterioration of the Vessels’ steel (except for such corrosion or
deterioration as may ordinarily be present at the end of a maintenance cycle
notwithstanding the satisfactory performance of scheduled maintenance, including
with respect to exterior coatings). Charterer shall at all times during the
Charter Period maintain the Vessels so as to entitle them to the highest
classification and rating of the Classification Society for vessels of the same
age and type, submitting the Vessels to all required surveys of the
Classification Society, and annually, during each year of the Charter Period,
shall furnish to Owner Participant reproduced copies of

 

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all annual certificates with respect to each of the Vessels issued by the
Classification Society, dated within the previous thirty (30) days, and,
promptly upon receipt by Charterer, copies of all other certificates as may from
time to time be issued by the Classification Society with respect to any Vessel.
During the Charter Period all repairs or changes necessary to cause the Vessels
to comply with the requirements and recommendations of the Classification
Society, including changes or additions to such requirements, shall be for
Charterer’s account.

 

(b) During the Charter Period the Vessels shall be repaired and overhauled by
Charterer whenever reasonably necessary. During the Charter Period the Vessels
shall likewise be dry-docked, cleaned and the bottom painted by Charterer
whenever reasonably necessary and, in any event, whenever required by applicable
regulations of the United States Coast Guard or any other state or federal
agency having jurisdiction. Charterer shall give Owner Participant written
notice of each proposed dry-docking or surveying (pursuant to this Article 14 or
otherwise occurring) thirty (30) days in advance if practicable, but otherwise
so long in advance as may be practicable under the circumstances, in order that
Owner Participant may, if it so desires, have a representative present at such
dry-docking or surveying and otherwise inspect the Vessels at Owner
Participant’s expense.

 

(c) Subject to any applicable laws and regulations, Owner Participant or its
authorized representatives shall have the right at reasonable times, on
reasonable notice, to inspect or survey any Vessel, if it is then in port, in
order to ascertain its condition and to satisfy itself that such Vessel is being
properly repaired and maintained in accordance with this Article 4, but
inspection in drydock shall be made only when a Vessel shall be in drydock under
the provisions of Article 4(b). Any such inspection shall be at the expense of
Owner Participant, except to the extent such inspection is undertaken as a
result of an Event of Default and the costs and expenses thereof are payable by
Charterer pursuant to Article 15 of the Demise Charter. Any such inspection by
Owner Participant shall not delay any Vessel in the prosecution of any voyage or
interfere with the normal operation of such Vessel; provided, however, that (i)
any such visit or inspection shall be subject to applicable laws and regulations
governing the operation of the Vessels, and (ii) Charterer shall not be
responsible to Owner Participant or any of its employees, representatives or
agents, and Owner Participant shall release Charterer from any and all liability
to Owner Participant or any personal injury to its employees, representatives or
agents suffered in connection with such visit or inspection. During the Charter
Period, Charterer shall make, or cause to be made, all such repairs, without
expense to Shipowner or Owner Participant, as such inspection or survey may show
to be reasonably required in order to meet the requirements of this Article 4,
consistent with such repairs as may be required by the Classification Society,
the Vessels’ insurers, the USCG or any other governmental agency having
jurisdiction over the Vessels. Charterer shall (x) permit Owner Participant or
its authorized representatives, to inspect any Vessel’s logs and papers and make
copies thereof whenever requested, on reasonable notice and in a manner that
does not interfere with the normal operation of the Vessels, and (y) furnish
Owner Participant with full information (including, without limitation, any
survey reports) regarding any casualties or other accidents or physical damage
to the Vessels or other property, or to any person, involving an amount in
excess of $250,000.

 

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(d) Shipowner shall have no responsibility for maintenance or repair of the
Vessels during the Charter Period, except for the application, in accordance
with Articles 9 and 11, of insurance proceeds actually received by Shipowner.

 

ARTICLE 5

 

Use of Stores and Equipment

 

(a) Charterer may, without additional payment to Shipowner, use and consume such
fuel, diesel oil, fresh water, lubricating oil, greases and consumable stores
belonging to Shipowner as may be on board the Vessels on the Closing Date and,
upon Redelivery, all fuel, diesel oil, fresh water, lubricating oil, greases and
consumable stores as may be left on board at that time shall be the property of
Shipowner.

 

(b) Charterer shall have the use, without additional payment to Shipowner, of
all outfit, equipment (including cabin, crew and galley equipment), furniture,
furnishings, appliances, spare and replacement parts and non-consumable stores
belonging to Shipowner as shall have been on board the Vessels on the Closing
Date. Charterer shall from time to time during the Term replace at its sole
expense any items of equipment so damaged or worn as to be unfit for use, in
such manner as shall not diminish the value of the Vessels.

 

(c) Charterer shall provide, without expense to Shipowner, such additional
outfit, furniture, furnishings, appliances, spare and replacement parts, tools
and stores as may be required by Charterer for the operation of the Vessels.
Such additional property so provided shall not become part of the Vessels but
shall remain the property of Charterer and, unless Shipowner shall otherwise
agree, Charterer shall remove the same, without expense to Shipowner, at or
before Redelivery and each Vessel shall be restored prior to Redelivery to the
condition she would have been in if such property had not been installed.

 

ARTICLE 6

 

Charterer’s Changes, Installation of

Equipment and Removal of Parts

 

(a) Modifications.

 

(i) Structural Modifications. During the Term, Charterer will not make any
substantial structural changes or alterations in any Vessel without the prior
written consent of Shipowner, which consent shall not be unreasonably withheld
or delayed. For purposes of this Article 6(a), “substantial structural changes
or alterations” means any change or alteration which costs more than $1,000,000
and shall not include any steel renewal in respect of any Vessel.

 

(ii) Alterations and Restoration. Subject to the Redelivery and maintenance
provisions of this Demise Charter, Charterer may at any time alter or remove
items of equipment

 

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on the Vessels, or may fit additional items of equipment; provided Charterer
absorbs the cost and time of such alterations and refitting and restoring the
Vessels to original condition before re-delivery of the Vessels. Such changes
shall not be made without the appropriate approval of the Classification Society
and the USCG and any other relevant certifying authorities.

 

(iii) Replacements. Charterer shall from time to time during the Demise Charter,
at its own cost and expense, replace such items of equipment on the Vessels as
shall be so damaged or worn as to be unfit for use.

 

(iv) Required Modifications. Subject to Article 6(d) below, Charterer, at its
expense, shall make all Modifications required by any applicable law or
governmental action.

 

(b) Title to Modifications. Title to each Modification shall vest as follows:

 

(i) in the case of each Non-Severable Modification, whether or not Owner
Participant shall have provided or arranged financing (in whole or in part) of
the cost of such Modification, Shipowner shall, without further act, effective
on the date such Modification shall have been incorporated into any Vessel,
acquire title to such Modification;

 

(ii) in the case of each Severable Modification that it is not required by
applicable United States law or governmental action, Charterer shall retain
title to such Modification;

 

(iii) in the case of Severable Modifications required by applicable United
States law or governmental action, title to such Modifications shall immediately
vest in Shipowner at no cost to Shipowner and without further action by
Charterer; provided, however, that Charterer shall take such actions as may be
reasonably required by Owner Participant to evidence the transfer of title; and

 

(iv) unless Charterer has then purchased the Vessels, title to all Severable
Modifications which was vested in Charterer pursuant to clause (ii) which remain
in or on the Vessels upon Redelivery shall vest automatically in Shipowner as of
such date without the payment of any sum; provided, however, that Charterer’s
failure to remove any such Severable Modification prior to Redelivery shall not
cause or result in such reversion of title so long as (x) Charterer has given
Shipowner notice of its intent to remove such Modification, such notice
specifying the Modification or Modifications being removed, and (y) such failure
to remove prior to Redelivery is caused by Shipowner’s failure to cooperate with
Charterer’s actions to remove such items.

 

Immediately upon title to a Modification vesting in Shipowner pursuant to
subparagraphs (i) or (iii) of this Article 6(b), such Modification shall,
without further act, become subject to this Demise Charter and be deemed part of
the Vessels for all purposes hereof. Modifications title to which remains in
Charterer pursuant to subparagraph (ii) of this Article 6(b) shall not be deemed
a part of the Vessels.

 

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(c) Removal of Property.

 

(i) Subject to compliance, in all material respects, with applicable law and so
long as no Event of Default shall have occurred and be continuing, Charterer
may, prior to Redelivery, remove any Severable Modification to which Charterer
shall have title as provided in this Article 6, provided, that Charterer, at its
expense and prior to Redelivery, shall repair any damage to any Vessel (or any
part thereof) caused by such removal and shall restore any diminishment in the
value, utility or remaining useful life of any Vessel caused by such removal (as
compared to the value, utility or remaining useful life of such Vessel if such
Severable Modification had not been made).

 

(ii) If any Part is removed from any Vessel for the purpose of replacement
thereof with another Part, title to such removed Part shall remain the property
of Shipowner, no matter where such removed Part is located, until such time as
the Part constituting a replacement thereof shall have been incorporated into
such Vessel, at which time, without further act, title to such removed Part
shall vest in Charterer or such Person as shall be designated by Charterer, and
such property shall not thereafter be part of the such Vessel. Each such
replacement Part shall be free and clear of all Liens (other than Permitted
Liens), shall upon installation become a part of the Vessels (with title thereto
vesting in Shipowner), and shall be in as good operating condition as, and shall
have a value, utility and remaining useful life at least equal to, that of the
Part removed, it being assumed for purposes of this sentence that such removed
Part was in the condition and state of repair required by Article 6(e).

 

(d) Contest of Requirements of Law. If, with respect to any requirement of
applicable law or any governmental action (i) Charterer is contesting diligently
and in good faith by appropriate proceedings such requirement of applicable law
or governmental action, or (ii) compliance with such requirement or governmental
action shall have been excused or exempted by a valid nonconforming use permit,
waiver, extension or forbearance exempting Charterer from such requirement or
governmental action, or (iii) Charterer shall be making a good faith effort and
shall be diligently taking appropriate steps to comply with such requirement or
governmental action, then the failure by Charterer to comply with such
requirement or governmental action shall not constitute an Event of Default
hereunder; provided, however, that such contest or noncompliance does not
involve (A) any danger of criminal liability being imposed on any Indemnified
Party, or (B) any material risk of (1) the imminent arrest or sale of, or the
creation of any Lien (other than a Permitted Lien) on any Vessel, or (2)
material civil liability being imposed on any Indemnified Party. Charterer shall
provide Owner Participant with notice of any contest of the type described in
clause (i) above in detail sufficient to enable Owner Participant to ascertain
whether such contest may have any adverse effect of the type described in the
above proviso. If such contest shall not be resolved to the satisfaction of
Shipowner prior to the end of the Charter Period, then Charterer shall be
obligated to continue such contest until it has been so resolved or Charterer
shall have complied at its expense with the requirement so contested.

 

(e) Charterer will maintain or cause to be maintained the Vessels’ machinery and
equipment in compliance with manufacturer’s recommendations and specifications
and the requirements of the Classification Society, the USCG and any other
governmental authorities having jurisdiction over the Vessels and their
equipment.

 

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(f) In each case in compliance with applicable laws, Charterer shall have the
right to paint the Vessels in its own colors, to name and rename the Vessels
(and Shipowner will, at Charterer’s sole cost and expense, on Request execute
such documents as shall be required to effect any such change of name), to
install and display its stack insignia and to fly its house flag, all without
expense to Shipowner, and Charterer shall remove such flag and insignia, without
expense to Shipowner, prior to Redelivery.

 

(g) Charterer shall permit no Modification of any Vessel that results in a
diminishment of the value, utility or remaining useful life of such Vessel.

 

ARTICLE 7

 

Liens and Mortgages

 

(a) Charterer covenants that it will, at all times, at its own cost and expense,
warrant and defend Shipowner’s title to the Vessels and all components thereof
during the Charter Period, and all right, title and interest of Shipowner in, to
and under any charter assignment, insurances assignment or other assignment
given by Charterer to Shipowner in connection with this Demise Charter or the
Vessels, and in any way relating to any thereof, against the claims, liens and
demands of all Persons, which obligation shall survive Redelivery and
termination of this Demise Charter; provided, however, that Charterer shall not
have any responsibility in respect of Shipowner’s Liens.

 

(b) Without prejudice to the rights of Shipowner under Article 14, neither
Charterer, the master of any Vessel, nor any other Person has or shall have any
right, power or authority, without the prior written consent of Shipowner, to
create, incur or permit to be placed or imposed upon any Vessel any mortgage,
lien, charge or other encumbrance whatsoever other than Permitted Liens, nor
shall Shipowner have any right, power or authority so to do. During the Term,
Charterer agrees to carry a true copy of this Demise Charter with the ship’s
papers on board each of the Vessels and to exhibit the same on demand to any
Person having business with the Vessels which may give rise to a maritime lien
upon the Vessels, and on demand to any representative of Shipowner. Charterer
shall also place and keep prominently exhibited in the master’s cabin and the
chart room of each of the Vessels, or at another appropriate place or places on
board the Vessels, a printed notice which will be substantially in the following
form:

 

“NOTICE OF DEMISE CHARTER

 

This Vessel is owned by GTC Connecticut Statutory Trust, a Connecticut statutory
trust, acting by and through State Street Bank and Trust Company of Connecticut,
National Association, as trustee (“Shipowner”), and is under demise charter to
Gulfcoast Transit Company, a Florida corporation (“Charterer”).

 

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Under the terms of said demise charter, neither Charterer, any other charterer,
the master or agent of this Vessel nor any other person (other than Shipowner)
has any right, power or authority to create, incur or permit to be placed or
imposed upon this Vessel any lien whatsoever other than Permitted Liens as
defined in said demise charter, including liens for wages of a stevedore when
employed directly by Charterer or the operator, master or agent of this Vessel,
for wages of the crew in respect of this Vessel, or for general average, or for
salvage (including contract salvage).”

 

(c) If a libel shall be filed against any Vessel, or if any Vessel shall be
otherwise levied upon or taken into custody by virtue of proceedings in any
court or tribunal in any country or nation of the world or by any governmental
or other authority because of any liens or claims (other than Shipowner’s
Liens), Charterer shall, without expense to Shipowner, cause such Vessel to be
released within twenty (20) Business Days and any such claims or liens to be
discharged when such claims or the obligations or charges secured by such liens
are due and payable and are not being contested in good faith by appropriate
proceedings. In the event any Vessel is levied upon or taken into custody or
detained by any authority whatsoever, Charterer agrees forthwith to notify
Shipowner thereof by telefax, telegram or telex, confirmed by letter.

 

(d) Notwithstanding the provisions of this Article 7, in the event any Vessel
shall be arrested or detained by a marshal or other officer of any court of law,
equity or admiralty jurisdiction in any country or nation of the world or by any
government or other authority and shall not be released from arrest or detention
within twenty (20) Business Days from the date of arrest or detention, Shipowner
shall be at liberty to apply for and receive possession of and to take
possession in such proceeding of such Vessel (subject however to this Demise
Charter) and to protect its right, title and interest as owner in such Vessel
with all the rights and powers that Shipowner might have, possess and exercise
in any such event. If such arrest or detention is such that under this Article 7
Charterer is required to defend any Vessel there against, then all expenses
incurred by Shipowner pursuant to the foregoing sentence shall constitute a debt
due from Charterer to Shipowner, but Shipowner shall not be obligated to take
the action authorized by the foregoing sentence.

 

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ARTICLE 8

 

Risk of Loss

 

Subject to the provisions of Articles 6, 7, 11, and 12 hereof, Charterer shall
bear the entire risk of loss and damage to the Vessels or any of their component
parts during the Charter Period. Notwithstanding the foregoing sentence, in no
event shall Charterer’s obligation to Shipowner in respect of the loss of or
damage to any Vessel, or in respect of any Event of Default, be in excess of the
amount in dollars which Charterer would be obligated to pay to Shipowner
pursuant to Article 11 upon the occurrence of an Event of Loss, or Article 15
upon the occurrence of an Event of Default, as the case may be.

 

ARTICLE 9

 

Insurance

 

(a) Charterer shall, without expense to Shipowner, provide and maintain
insurance on or with respect to the Vessels and the operation thereof during the
Charter Period as follows:

 

(1) At its own expense, Charterer shall procure and maintain or cause to be
procured and maintained full marine navigating risk hull and machinery
insurance, and increased value or other forms of total loss only insurance, and
shall also procure and maintain or cause to be procured and maintained marine
war risk navigating hull and machinery insurance and increased value or other
forms of total loss only insurance. While any Vessel is laid up, in lieu of the
aforesaid coverage, port risk hull and machinery insurance may be taken out on
such Vessel by Charterer. The foregoing insurance shall be in aggregate amounts
equal to the Vessel’s Lessor’s Cost as of the date hereof and for the first year
of the Term, and thereafter at all times in an amount not less than the
Stipulated Loss Value of the Vessel at such time. The foregoing insurance may
provide for a deductible amount approved by Shipowner but no consent or approval
of Shipowner shall be required for a deductible amount of up to $1,000,000 with
respect to any one accident, occurrence or event.

 

(2) At its own expense, Charterer shall procure and maintain or cause to be
procured and maintained marine and war risk full form protection and indemnity
coverages, including coverage against liability for property damage to third
persons (including liability to any governmental authority or other person with
respect to pollution liability) and personal injury or death to any person
arising out of the maintenance, use, operation and ownership of the Vessels,
cargo damage or loss, and wreck removal in such amounts as are usually carried
by prudent shipowners for similar vessels engaged in the same or similar trades
as Charterer; provided, however, that in no event shall the per occurrence and
aggregate limit of such insurance be less than $75,000,000 (subject to a
deductible or self-insured retention not in excess of $1,000,000 unless
Shipowner shall otherwise consent in writing). Such liability insurance shall
name each of Shipowner, Charterer and Other Interested Persons as insureds, as
their respective interests may appear, but without recourse to Shipowner or
Other Interested Persons for the payment of premiums, commissions, assessments
or advances (or if such coverage be effected by entry in a Protection and
Indemnity Club, for payment of calls or assessments). Such insurance shall
include a waiver of subrogation against Charterer, Shipowner, and Other
Interested Persons.

 

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(3) Charterer shall procure and maintain or cause to be procured and maintained
Innocent Owners Protection policies or endorsements naming Shipowner as sole
loss payee in the event of loss or damage to any Vessel, subject to no defense
based on breach of warranty or failure of condition by Charterer or any other
Person, in the same amounts and subject to the same deductibles provided for in
Article 9(a)(1).

 

(b) All policies of insurance (other than those relating to protection and
indemnity and/or other third party liability risks) shall be taken out in the
names of Shipowner and Charterer, and Other Interested Persons as named insureds
or additional named insureds as their interests may appear, and the policies
shall provide that (or operate so that) there shall be no recourse against
Shipowner or Other Interested Persons for the payment of premiums, commissions,
assessments or advances and shall provide for at least thirty (30) days’ prior
written notice to be given by insurers or underwriters (or by Charterer’s marine
insurance broker on behalf of insurers or underwriters) to Charterer and
Shipowner in the event of cancellation for nonpayment of premium or other
material adverse change in the terms of coverage and, to the maximum extent that
the insurers or underwriters or other entities affording coverage thereunder
will agree so to do, of non-renewal or other cancellation of the applicable
policy.

 

(c) All policies of insurance shall provide that losses thereunder shall be
payable to the named insured or additional named insureds as their interests may
appear; provided, however, that such policies of insurance may provide that:

 

(1) any loss under any insurance on the Vessels with respect to protection and
indemnity risks or other liability insurance may be paid (x) directly to the
Person to whom any liability covered by such insurance has been incurred or (y)
to the extent Charterer has paid the loss, damage or expense covered by such
insurance to the Person referred to in clause (x), directly to Charterer to
reimburse it for such payments made by Charterer, provided, however, that the
insurers or underwriters and Shipowner (I) shall have first received evidence
that the liability insured against has been discharged or is being discharged
simultaneously with such payment and (II) shall not in the case of payments to
Charterer under clause (y) above be paid to Charterer after the insurers or
underwriters shall have received written notice from Shipowner of the occurrence
of an Event of Default or, if having received such notice, have been notified by
Shipowner in writing that such Event of Default has been cured or waived;

 

(2) in case of any loss (other than a loss covered by clause (1) above or a loss
which is an Event of Loss) under any insurance with respect to any Vessel
involving any damage to such Vessel, the insurers or underwriters may (x) pay
directly for the repair or other charges or losses involved, unless the insurers
or underwriters have received written notice from Shipowner of the occurrence of
an Event of Default (which notice has not been modified or withdrawn by
Shipowner as a result of the cure or waiver thereof) or (y) unless the insurers
or underwriters have received written notice from Shipowner of the occurrence of
an Event of Default, make payment directly to Charterer as

 

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reimbursement if Charterer shall have first repaired the damage and paid the
cost thereof and paid the costs or other charges or losses involved, and the
insurers or underwriters and Shipowner shall have received evidence of such
repair and payment or that such payment will be made simultaneously with the
payment by the insurers or underwriters;

 

(3) in the event of an Event of Loss, accident, occurrence or event resulting in
an actual or constructive total loss of any Vessel, Charterer shall have the
right to declare and claim for a constructive total loss of such Vessel and to
require that Shipowner accede to or join in such claim, and if (i) such claim is
accepted by all insurers or underwriters under all applicable policies then in
force as to the Vessel under which payment is due for such total loss, and (ii)
payment in full is made under such policies, then Charterer shall have the right
at its election, and Shipowner the obligation, to abandon such Vessel to the
insurers or underwriters under such policies, with the insurers or underwriters’
approval, free from the lien of this Demise Charter and any Shipowner’s Liens,
and upon payment to Shipowner of the amounts referred to in Article 11(a)
Charterer’s obligation to pay further Charter Hire hereunder shall terminate;
provided that, no such declaration and/or abandonment shall be effected by
Charterer without Shipowner’s consent if the proceeds payable under such
policies in respect of such Event of Loss shall aggregate less than the
Stipulated Loss Value of such Vessel applicable at the time of such loss; and

 

(4) in the event of an accident, occurrence or event of damage to any Vessel not
constituting an Event of Loss or resulting in liability to persons other than
Charterer or Other Interested Person, Charterer shall have the right, but only
with prior written consent of Shipowner, to enter into an agreement or
compromise with insurers or underwriters providing for an agreed or compromised
total loss of such Vessel.

 

(d) In the event that a claim is made against any Vessel for loss, damage or
expense which is covered by insurance, and it is necessary for Charterer to
obtain a bond or to supply other security to prevent arrest of such Vessel or to
release such Vessel from arrest on account of such claim, Shipowner agrees on
request of Charterer to assign to any Person executing a surety or guaranty bond
or other agreement to save or release such Vessel from such arrest, all right,
title and interest of Shipowner in and to such insurance or proceeds therefrom
covering such loss, damage or expense as collateral security to indemnify
against liability under such bond or other agreement.

 

(e) Charterer shall, without expense to Shipowner, have the right, duty and
responsibility to make all proofs of loss and take any and all other steps
necessary to effect collections from insurers or underwriters for any loss under
any insurance on or with respect to the Vessels or the operation thereof,
including the right to effect compromises of claims against insurers; provided,
however, that such compromises, if materially at variance from the amount of any
claim in excess of $1,000,000, shall be subject to the prior written approval of
Shipowner. Shipowner shall cooperate, at Charterer’s expense, in making all
proofs of loss and shall take all other reasonable steps necessary to effect
collection from insurers or underwriters.

 

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(f) The insurance provided and maintained on or with respect to the Vessels or
the operation thereof in accordance with this Demise Charter shall be on such
forms of policies or other evidence thereof (except in the case of protection
and indemnity coverage) published by the American Institute of Marine
Underwriters, the International Underwriting Association of London (IUA), and/or
such other forms of policies approved by Shipowner, insuring the Vessel against
the usual risks covered by such forms as is customary at the time for U.S. flag
vessels of similar size, type, age and trade. The forms of policies or entries
effecting protection and indemnity coverage shall be satisfactory to Shipowner.
Notwithstanding the foregoing, Shipowner may require changes if such changes are
necessary to comply with requirements of or to insure against liabilities
created or increased by law (including those arising by reason of a change,
modification, or amendment thereof, or any judicial or administrative decisions
relating thereto) or regulations of the United States or the government of any
state, territory, or possession thereof or of any nation or other place where
the Vessels may be operating (except in innocent passage) or the laws of which
may otherwise apply.

 

(g) Charterer will procure and maintain or cause to be procured and maintained
all insurance required under this Demise Charter with sound and reputable marine
insurance companies, underwriters’ associations or syndicates, protection and
indemnity associations that are members of the International Group of Protection
and Indemnity Clubs, or underwriting funds approved by Shipowner (which approval
shall not be unreasonably withheld). All insurance provided under this Article 9
shall be primary (with respect to co-insurance clauses or other applicable
insurance clauses, but not with respect to insurance procured and maintained by
Charterer) and shall not require contribution from Shipowner, Charterer or any
Other Interested Person.

 

(h) Charterer shall deliver to Shipowner the originals or certified copies of
the cover notes evidencing the insurance required to be provided and maintained
pursuant to this Demise Charter. Charterer shall also deliver copies of all
insurance policies (as soon as available) upon receipt of a written request by
Shipowner and, if applicable, Protection and Indemnity Club Certificates of
Entry and applicable club rules. A certificate of insurance, cover note, binder,
or confirmation of coverage and any other available evidence of insurance, shall
be provided by Charterer to Shipowner and Owner Participant not less than ten
(10) days in advance of each renewal.

 

(i) Nothing in this Article 9 shall prohibit Shipowner from placing, at
Shipowner’s expense, insurance on or with respect to the Vessels or the
operation thereof in an amount exceeding the amount required to be carried or
maintained by Charterer pursuant to Article 9(a), or against risks not required
to be covered pursuant to Article 9(a), unless such insurance would conflict
with or otherwise limit the insurance to be provided or maintained by Charterer
in accordance with Article 9(a) or carried or proposed to be carried by
Charterer in accordance with this Article 9(i). Charterer agrees, upon receipt
of a request of, and payment of the premium therefor (and other associated
costs) by, Shipowner, to apply for and carry any insurance permitted to be
carried by Shipowner pursuant to the preceding sentence, to the extent such
insurance is available, with Shipowner named as the sole loss payee. Shipowner
agrees, upon the placing of any such insurance, to furnish Charterer promptly
with copies of all Policies relating to such insurance. Nothing in this Article
9 shall prohibit Charterer from placing any

 

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additional insurance Charterer desires, at Charterer’s expense, on or with
respect to the Vessels or the operation thereof, unless such insurance would
conflict with or otherwise limit the insurance to be carried or maintained by
Charterer in accordance with Article 9(a). Charterer agrees, upon the placing of
any such insurance, to furnish Shipowner promptly with copies of all Policies
relating to such insurance. The benefit of any insurance permitted by the first
or fourth sentence of this Article 9(i) shall inure to benefit of the party at
the expense of which such insurance is procured. Any such additional insurance
procured pursuant to this Article 9(i) shall provide, or shall operate as if it
provided, for a waiver of subrogation, if procured by Shipowner, against
Charterer (and to the extent available against their respective Affiliates,
officers, directors and employees) and if procured by Charterer against
Shipowner.

 

(j) Unless an Event of Default has occurred and is continuing, Charterer shall
have the right to prosecute claims against third parties for (i) damage to any
Vessel, (ii) personal injuries, or (iii) other claims, losses or damages, for
which Charterer or Shipowner has been named as a defendant or held liable, where
necessary in the name of Shipowner.

 

(k) Charterer shall secure the agreement of its marine insurance broker to
advise Shipowner and Owner Participant promptly of nonpayment of premium,
material adverse changes in the terms of coverage, or cancellation or
non-renewal of policies providing required coverages hereunder.

 

ARTICLE 10

 

Term of Demise Charter and Charter Hire

 

(a) This Demise Charter shall remain in effect until, and shall terminate at,
the end of the Charter Period. Charterer shall, however, provided no Event of
Default shall have occurred and be continuing, have the option to terminate this
Demise Charter effective upon the Early Termination Date provided Charterer
shall have delivered written notice of its irrevocable exercise of such option
not less than one hundred eighty (180) days prior to the Early Termination Date.
If Charterer shall exercise such option, Charterer shall, in addition to any
payment of Basic Hire due through and including the Early Termination Date
(except for the payment of advance rent due on the Early Termination Date) and
any other amounts then due, pay to Shipowner in immediately available funds on
or before the Early Termination Date, as and for the purchase price of the
Vessels, a sum equal to the Early Purchase Amount (subject to the installment
payment option set forth below) and concurrently therewith Shipowner shall
execute and deliver to Charterer or Charterer’s Legally Eligible Designee a bill
of sale for each Vessel, in recordable form, AS IS, WHERE IS, in whatever
condition they may be, without recourse or warranty of any kind provided,
however, that Shipowner shall warrant that each Vessel is free and clear of any
Shipowner’s Liens. In connection with and at the time of the delivery of such
bills of sale, Shipowner shall also execute and deliver to Charterer or its
Legally Eligible Designee such appropriate instruments of assignment or
reassignment (without recourse or warranty) of Shipowner’s rights, title and
interests under the Assignments as may reasonably be requested by Charterer.
Time shall be considered of the essence in the execution of such option and the
payment of the purchase price therefor and failing timely exercise or payment

 

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such option shall irrevocably and forever lapse. The early termination option
provided for in this Article 10(a) shall be exercised by Charterer, if at all,
only with respect to all of the Vessels. Notwithstanding the foregoing, provided
all other amounts due as of the Early Termination Date have been fully paid, the
Charterer may elect to pay the Early Purchase Amount in installments (expressed
as percentages of Lessor’s Cost) as follows:

 

January 2, 2007

   62.64957480

April 15, 2007

   5.24257784

June 15, 2007

   5.24257784

September 15, 2007

   5.24257784

December 15, 2007

   5.24257784;

 

provided, that, if such installment payment option is selected, at the election
of the Charterer either (i) title to the Vessels shall pass from Shipowner to
Charterer as otherwise provided above upon payment of the first installment of
the Early Purchase Amount, but only if (A) the Guarantor at the time has a long
term debt rating that is investment grade (BBB or better), or (B) the Shipowner
is granted a security interest in the Vessels (or in substitute collateral
acceptable to Owner Participant) to secure the unpaid installments of the Early
Purchase Amount, or (ii) title to the Vessels shall pass from Shipowner to
Charterer as otherwise provided above only upon payment in full of the Early
Purchase Amount, but following the Early Termination Date Shipowner shall hold
title to Vessels solely as security for the payment of unpaid installments of
the Early Purchase Amount (and the payment and performance of any other
obligations under the Demise Charter that may be attributable to Shipowner’s
ownership of the Vessel following the Early Termination Date).

 

(b) During the Term, Charterer promises to pay to Shipowner Basic Hire for each
Vessel on each Basic Hire Payment Date. During the Charter Period, Charterer
agrees to pay to Shipowner Supplemental Hire within ten (10) Business Days after
demand therefor. Until notice is given by Owner Participant to Charterer
specifying other payment instructions, Basic Hire shall be payable directly to
Owner Participant by wire transfer in accordance with the following
instructions:

 

Fleet Bank RI, ABA #011500010

For the account of Fleet Capital Leasing

Account #015-5527767

Re: Gulfcoast Transit Company, Customer #35678

Upon receipt contact: Michelle Singh, (401) 278-7532

 

In the event that Charterer does not exercise the early termination option with
respect to the Vessels pursuant to Article 10(a), Owner Participant shall
recalculate and fix each remaining payment of Basic Hire, starting with the
payment due on January 2, 2008, to equal an amount determined by multiplying the
Remaining Rental Factor as of the relevant Basic Hire Payment Date by Lessor’s
Costs for each Vessel. No later than fifteen (15) days prior to the Early
Termination Date Owner Participant shall provide to Charterer an addendum to
Schedule C setting forth the Remaining Rental Factors and the recalculated
payments of Basic Hire, which shall be determinative absent manifest error.

 

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(c) From, but excluding, the last day of the Term until and including the date
of Redelivery (if any) of the Vessels, Charterer shall pay to Shipowner Basic
Hire at the Per Diem Rate.

 

(d) In the event any amount of Charter Hire payable pursuant to this Article 10
is not paid when due as provided in this Demise Charter, Charterer promises to
pay, in addition to such amount of Charter Hire, interest on the overdue portion
thereof for the period from the due date of such Charter Hire until the date of
payment thereof at the Default Interest Rate.

 

(e) Notwithstanding anything else in this Demise Charter contained, so long as
Charterer shall not be deprived of the quiet and uninterrupted use and
possession of the Vessels through the willful misconduct of Shipowner,
Charterer’s obligations and liabilities hereunder are absolute and unconditional
except as set forth herein and in Article 11 and no Charter Hire payment nor any
other payment to be made by Charterer hereunder during the Charter Period shall,
except in accordance with the express terms hereof, be subject to (x) any
reduction (except as otherwise expressly provided herein), limitation,
impairment or termination (except upon termination of this Demise Charter in
accordance with the terms hereof) by reason of any claim of any character
whatsoever, or otherwise, including, without limitation, claims of waiver,
release, surrender, alteration, consent, extension, indulgence or compromise, or
(y) any right of set-off, counterclaim, defense, recoupment, abatement,
suspension or deferment whether based upon this Demise Charter or any other
agreement or otherwise and howsoever arising, whether out of actions or
nonactions of any other Person, and Charterer shall have no right to terminate
this Demise Charter (except as provided in Article 10(a), 10(h) and 11) or to be
released, relieved or discharged from any obligation or liability hereunder to
make such payments for any reason whatsoever. Nothing contained in this Article
10 shall be construed to be a waiver, modification, alteration or release of any
claims which Charterer may have at any time during the Term or subsequent
thereto for damages or equitable relief for any breach by Shipowner or any other
Person of any provision of this Demise Charter or any provision of any other
agreement.

 

(f) The obligation of Charterer to pay Basic Hire with respect to a Vessel
pursuant to this Demise Charter shall cease to accrue as of the day following
the date of occurrence of an Event of Loss with respect to such Vessel, or the
termination hereof pursuant to Article 15, or upon exercise by Charterer of its
option to terminate pursuant to Article 10(a) or upon the Option Closing Date
pursuant to Article 10(h) and the timely completion and fulfillment by Charterer
of its obligations thereunder.

 

(g) In the event that (i) Shipowner shall cease to be eligible to be the owner
of a United States flag vessel with coastwise endorsement pursuant to Title 46
U.S.C. Section 12106(e)(1)(B), and (ii) the Vessels shall or would therefore
become ineligible for documentation in the name of Shipowner under United States
flag or ineligible for use by Charterer in the United States coastwise trade,
then Shipowner shall, promptly upon learning of such cessation of eligibility,
notify Charterer thereof. Shipowner and Charterer acknowledge that Owner
Participant has covenanted and agreed that if (x) it shall cease to be a
Maritime Citizen or it shall obtain knowledge of events or circumstances that
would be likely to result in a cessation of its status as a Maritime Citizen,
and (y) the Vessels shall or would therefore become

 

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ineligible for documentation in the name of Shipowner under United States flag
or ineligible for use by Charterer in the United States coastwise trade, then
Owner Participant shall, forthwith upon learning of such cessation of its status
as a Maritime Citizen, or, in the event Owner Participant shall obtain knowledge
of events or circumstances that would be likely to result in such cessation at
least forty-five (45) days before such cessation or as soon thereafter as Owner
Participant obtains knowledge of such events or circumstances if such knowledge
is obtained later than forty-five (45) days before such cessation, notify
Charterer thereof. For purposes of such covenant, “knowledge” of Owner
Participant means actual knowledge of a Responsible Officer thereof. Such
notification by Owner Participant shall be deemed to satisfy the notice
obligation of Shipowner pursuant to the first sentence of this subsection (g).

 

(h) Upon receipt of the notice of cessation of eligibility of Shipowner or of
cessation of the status of Owner Participant as a Maritime Citizen referred to
in Article 10(g) above, Charterer shall have the option (exercisable by written
notice to Shipowner and Owner Participant within sixty (60) days following
receipt of such notice of cessation) but not the obligation to purchase the
Vessels from Shipowner (the date on which Charterer, having previously exercised
such option, pays the purchase price for each Vessel hereinafter set forth being
herein called the “Option Closing Date”) for a purchase price equal to the sum
of (A) the Stipulated Loss Value of each Vessel as of the Basic Hire Payment
Date immediately preceding the Option Closing Date, and (B) all unpaid Charter
Hire, if any, due and payable hereunder through the Option Closing Date;
provided, however, that any Basic Hire paid in advance by Charterer for any
period following the Option Closing Date shall be credited, on a per diem basis,
against the amount due from Charterer under this Article 10(h). Concurrently
with the payment of such purchase price Shipowner shall transfer title to the
Vessels to Charterer or its Legally Eligible Designee, AS IS, WHERE IS, in
whatever condition they may be (free and clear, however, of any Shipowner’s
Liens). In the event of the exercise by Charterer of its option to purchase the
Vessels in accordance with this Article 10, Shipowner, concurrently with the
payment by Charterer of the purchase price, shall execute and deliver to
Charterer or Charterer’s Legally Eligible Designee a bill of sale for each
Vessel, in recordable form, in accordance with the preceding sentence, and, in
connection with and at the time of delivery of such bills of sale, Shipowner
shall also execute and deliver to Charterer or its Legally Eligible Designee
such appropriate instruments of assignment or reassignment (without recourse or
warranty) of Shipowner’s rights, title and interests under the Assignments as
may be reasonably requested by Charterer. The purchase option provided for in
this Article 10(h) shall be exercised by Charterer, if at all, only with respect
to all of the Vessels.

 

(i) Any provision of this Demise Charter to the contrary notwithstanding, upon
redelivery of the Vessels to Shipowner under Article 13 or following the
occurrence of an Event of Default, each Vessel shall be free and clear of all
Liens (other than Shipowner’s Liens, if any), including, without limitation, the
Lien of any Other Charter, free of cargo with clean swept holds and in all other
respects charter free, and in the condition in which they are required to be
maintained under this Demise Charter, ordinary wear and tear excepted.

 

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ARTICLE 11

 

Event of Loss and Right to Terminate.

 

(a) Upon the occurrence of an Event of Loss with respect to any Vessel during
the Term, the obligations under this Demise Charter with respect to such Vessel
shall terminate (but only with respect to such Vessel) upon the payment to
Shipowner of the payments referred to in the next sentence. After such
occurrence Charterer shall pay to Shipowner (i) an amount equal to all out of
pocket expenses (including reasonable legal and investigator fees) incurred by,
and not otherwise reimbursed to, Owner Participant and Shipowner in connection
with the occurrence of the Event of Loss as set forth in an Officer’s
Certificate of Shipowner received by Charterer at least five (5) Business Days
prior to the date of such payment, (ii) within 120 days following such Event of
Loss the Stipulated Loss Value of such Vessel at the date of the occurrence of
the Event of Loss, and (iii) all unpaid Charter Hire with respect to such
Vessel, if any, due and payable hereunder through the date of the occurrence of
the Event of Loss; provided, however, that (x) any Basic Hire with respect to
such Vessel paid in advance by Charterer for any period following the date of
the occurrence of the Event of Loss shall be credited, on a per diem basis,
against the amount due from Charterer under this Article 11(a), and (y) if the
Event of Loss is a result of the application of the economic obsolescence
provisions of clause (iii) of the definition of Event of Loss and the Vessel is
sold, Charterer shall pay to Shipowner, in addition to the other amounts payable
pursuant to this Article 11(a), the amount, if any, by which the net proceeds of
such sale received by Charterer or any Affiliate of Charterer exceeds the
Stipulated Loss Value of such Vessel on the date of occurrence of such Event of
Loss.

 

(b) Charterer agrees forthwith upon obtaining knowledge thereof to notify
Shipowner by telefax, telegram or telex, confirmed by letter, of the occurrence
of an Event of Loss or of an event which with the passage of time would become
an Event of Loss.

 

(c) If an Event of Loss with respect to any Vessel shall occur during the Term,
Shipowner shall be entitled to retain all amounts payable to it in respect of
such Event of Loss under the insurance provided pursuant to Article 9(a) hereof
up to the aggregate amount which Charterer shall be obligated to pay to
Shipowner pursuant to Article 11(a) above (and will credit the amount of any
such policy proceeds actually received against Charterer’s obligations to
Shipowner under this Demise Charter) and shall remit any excess (including any
excess by reason of payment by Charterer prior to the receipt by Shipowner of
insurance proceeds as the result of any Event of Loss) to Charterer; provided,
however, (i) that any excess proceeds received as the result of excess coverage
procured by a party hereto pursuant to Article 9(i) hereof shall be retained by
the party procuring the same as its own property, to which the other party
hereto shall have no claim or right, and (ii) that if Charterer has paid all
amounts which Charterer is obligated to pay Shipowner pursuant to Article 11(a)
above and all other obligations of Charterer to Shipowner hereunder are current,
Shipowner shall direct that all insurance proceeds be paid to Charterer (except
as otherwise provided in clause (i) of this proviso).

 

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ARTICLE 12

 

Requisition of Use

 

(a) In the event any Vessel is requisitioned for use by any governmental or
other competent authority during the Term, such requisition (unless it
constitutes an Event of Loss hereunder) shall not terminate or entitle Charterer
to terminate this Demise Charter or to cease or interrupt payment in full of
Charter Hire. If during the Term any Vessel is under such requisition, Charterer
shall be entitled to any amounts payable to Shipowner or to Charterer in respect
of such requisition insofar as it falls within the Term (and, upon the request
of Charterer, Shipowner shall execute and deliver to Charterer any necessary
instrument of assignment with respect to the claim of Shipowner with respect
thereto) and, provided no Event of Default (other than an Event of Default
solely attributable to the fact that required action by Charterer with respect
to such Vessel is prevented by such requisition) shall have occurred and be
continuing, Shipowner shall pay any such amounts to Charterer immediately upon
receipt thereof by Shipowner.

 

(b) Should any Vessel be under requisition for use at or beyond the end of the
Term:

 

(i) Charterer shall, if prevented by reason of the requisition from redelivering
such Vessel as provided in Article 13(a) hereof, be relieved from the obligation
to do so, but shall consult with Shipowner as to the most convenient method of
enabling Shipowner to obtain redelivery of such Vessel when she is released from
such requisition;

 

(ii) provided Charterer continues to pay Charter Hire as required hereunder,
including Basic Hire pending Redelivery as provided in Article 10(c), during
such period of requisition Charterer shall be entitled to any amounts payable to
Shipowner or to Charterer in respect of such requisition (and, upon the request
of Charterer, Shipowner shall execute and deliver to Charterer any necessary
instrument of assignment with respect to the claim of Shipowner with respect
thereto) and, provided no Event of Default (other than an Event of Default
solely attributable to the fact that required action by Charterer with respect
to such Vessel is prevented by such requisition) shall have occurred and be
continuing, Shipowner shall pay any such amounts to Charterer immediately upon
receipt thereof by Shipowner; and

 

(iii) after such release Charterer shall be given a reasonable opportunity of
complying with Charterer’s obligation under Article 6 and of removing any such
additional equipment as is referred to in Article 6(b) hereof on the terms
referred to therein.

 

(c) Charterer agrees forthwith to notify Shipowner by telefax, telegram or
telex, confirmed by letter, of any requisition of use of any Vessel by the
United States or any other government.

 

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ARTICLE 13

 

Redelivery

 

(a) Subject to the rights of Charterer under Articles 10(a), 10(h) and the
rights and obligations of Charterer under Article 16 hereof, on or before the
last day of the Charter Period (but in no event prior to the expiration of the
Term), unless an Event of Loss has occurred or this Demise Charter has been
terminated pursuant to Article 15(b) or use of any Vessel has been requisitioned
and such requisition is continuing at the end of the Charter Period, Charterer
shall effect Redelivery of the Vessels to Shipowner at safe and suitably
equipped berths at Tampa, Florida, or such other safe berths and safe port
suitable for the Vessels on the Gulf Coast of the United States designated by
Shipowner, unless otherwise agreed by Shipowner and Charterer, in class and in
the order and condition required by the terms of Article 4, except for ordinary
wear and tear not affecting class, with no required surveys or inspections which
are due or overdue and with no outstanding recommendations or requirements on
the Vessels (nor subject to any damage or other condition which, if known to the
Classification Society or USCG, would result in such a recommendation or
requirement). Charterer shall give written notice to Shipowner of the expected
time and port of Redelivery at least sixty (60) days prior to Redelivery. At the
request of Shipowner a surveyor shall be appointed for the purpose of
determining and confirming in writing the condition of the Vessels at the time
of Redelivery. Charterer shall bear all survey expenses and other costs, if any,
including the cost of docking and undocking, if required, as well as all repair
costs incurred, in connection with such Redelivery. Owner Participant may
require that Charterer lay up any Vessel at the time of Redelivery for a period
of up to two hundred seventy (270) days, the expense of such lay-up to be for
Charterer’s account for the first ninety (90) days, and thereafter for the
account of Owner Participant, at prevailing local commercial rates, provided
that such lay-up may be at a Gulf Coast port designated by Charterer, subject to
the other requirements of this Article 13(a).

 

(b) Any property of Charterer remaining aboard any Vessel upon Redelivery and
not removed by Charterer may be retained by Shipowner as its own property
without prejudice to Charterer’s obligation under Article 6 to restore such
Vessel to the condition it would have been in had it not been so installed by
Charterer.

 

ARTICLE 14

 

Assignments; Subcharters

 

(a) Trustee shall have the right to assign this Demise Charter to a successor
Trustee under the Trust Agreement or as otherwise permitted by the Agreement.

 

(b) Except as otherwise expressly required or permitted by the Agreement,
without the prior written consent of Shipowner, Charterer may not assign or
transfer this Demise Charter or create a security interest herein and any such
permitted assignment or creation of a security interest shall be absolutely
void; provided, however, that Charterer may assign this Demise Charter in its
entirety to an Affiliate of the Guarantor if (i) there is then no Event of
Default,

 

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(ii) such Affiliate is a solvent corporation organized and in good standing in a
jurisdiction in the United States and has the corporate power and authority to
enter into and carry out the transactions contemplated by the Transaction
Documents to which Charterer is a party, (iii) such Affiliate is a citizen of
the United States within the meaning of Section 2 of the Shipping Act, 1916, as
amended, 46 App. U.S.C. 802, for purposes of engaging in the coastwise trade,
(iv) such Affiliate expressly assumes and agrees to be bound by the obligations
of Charterer hereunder by agreement reasonably satisfactory to Owner
Participant, and (v) the obligations of the Guarantor under the Guaranty are not
thereby released or otherwise limited or impaired.

 

(c) Charterer shall not enter into Other Charter of any Vessel during the Term
except with the prior written consent of Shipowner; provided that Charterer may
enter into any Other Charter of a Vessel if (i) such Other Charter does not
extend beyond the Term, (ii) any rights created by such Other Charter are fully
and expressly subject and subordinate in all respects to this Demise Charter,
(iii) such Other Charter does not adversely affect the eligibility of the Vessel
for documentation and operation in the United States coastwise trade, (iv)
Charterer remains primarily liable for all its obligations under this Demise
Charter, and (v) the obligations of the Guarantor under the Guarantee are not
thereby released, limited or otherwise impaired.

 

ARTICLE 15

 

Events of Default; Remedies

 

(a) The following events shall constitute Events of Default:

 

(1) Shipowner shall not have received within five (5) days of the date when due
any amount of Charter Hire which is payable by Charterer to Shipowner under this
Demise Charter; or

 

(2) Charterer shall take any action which results in a breach of Institute
Warranties and Clauses (if such breach would result in cancellation, loss or
other material adverse change in required insurance taken as a whole) or
cancellation or revocation of the documentation of the Vessels under the laws
and regulations of the United States or Charterer shall abandon any Vessel in a
foreign port (unless there shall have been an actual or constructive total loss
or agreed or compromised total loss of such Vessel), or Charterer shall make any
assignment prohibited by Article 14(b) or any Other Charter prohibited by
Article 14(c), or Charterer shall fail to maintain insurance on the Vessels
which in all material respects complies with the requirements of Article 9
hereof; or

 

(3) any material representation or warranty made by Charterer herein or in any
other Transaction Document shall prove to be inaccurate in any material respect
on the date as of which it was made, and, if the same is susceptible to cure in
a manner that is not prejudicial to any right or interest of Shipowner, Owner
Participant or the Trust Company, Charterer fails to effect such cure within
thirty (30) days after Charterer receives written notice thereof; or

 

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(4) Charterer shall fail to perform or observe any other covenant, condition or
agreement to be performed or observed by it under this Demise Charter and such
failure shall continue unremedied for a period of thirty (30) days after receipt
by it of written notice thereof from Shipowner; or

 

(5) Charterer (i) shall fail to perform or observe any covenant, condition or
agreement to be performed or observed by it under any of the other Transaction
Documents and such failure continues for thirty (30) days after receipt by it of
written notice thereof from Shipowner or Owner Participant, or (ii) shall be in
default pursuant to the terms of any of the other Transaction Documents after
the giving of notice and the passage of any grace period, if any, provided
therein with respect to such default; or

 

(6) the occurrence of a Transaction Event of Default; or

 

(7) Charterer shall cease to be a “citizen of the United States” qualified to
engage in the United States coastwise trade within the meaning of Section 2 of
the Shipping Act; or

 

(8) the entry of a decree or order by a court having jurisdiction in the
premises adjudging Charterer as bankrupt or insolvent, or approving as properly
filed a petition seeking reorganization, arrangement, adjustment or composition
of or in respect of Charterer under the Federal Bankruptcy Code or any other
applicable Federal, State or foreign law, or appointing a receiver, liquidator,
assignee, trustee, sequestrator or other similar official of Charterer or of any
substantial part of its property, or ordering the winding-up or liquidation of
the affairs of Charterer, and the continuance of such decree or order unstayed
and in effect for a period of ninety (90) consecutive days; or an involuntary
petition shall have been filed against Charterer seeking reorganization,
arrangement, adjustment or composition of or in respect of Charterer under the
Federal Bankruptcy Code or any other applicable Federal, State or foreign law
and such petition shall not have been withdrawn, dismissed or stayed within
ninety (90) days of filing; or

 

(9) the institution by Charterer of proceedings to be adjudicated a bankrupt or
insolvent, or the consent by Charterer to the institution of bankruptcy or
insolvency proceedings against it, or the filing by Charterer of a petition or
answer or consent seeking reorganization or relief under the Federal Bankruptcy
Code or any other applicable Federal, State or foreign law, or the consent by
Charterer to the filing of any such petition or to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator or other similar official
of Charterer or of any substantial part of its property, or the making by
Charterer of an assignment for the benefit of creditors, or the admission by
Charterer in writing of an inability to pay debts generally as they become due,
or the taking of corporate action by Charterer in furtherance of any such
action; or

 

(10) Charterer or any Affiliate thereof, shall default (after the expiration of
any applicable period of grace with respect thereto) in the payment of any
Indebtedness in excess of $10,000,000.00 or in the payment of any Indebtedness
due to Owner Participant or any of its Affiliates, or, to the extent not covered
in any other clause of this

 

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Article 15(a), shall default in the performance of any other material obligation
to, or observance of any material covenant for the benefit of, Owner Participant
or any of its Affiliates which results in the acceleration of the indebtedness
due under any loan, note, indenture, security agreement, lease, guarantee, title
retention or conditional sales agreement or other instrument or agreement
evidencing such indebtedness or obligation; or

 

(11) Charterer shall terminate its existence, be a party to any merger,
consolidation or sale of substantially all of its assets except as permitted
pursuant to Section 5.1(e) of the Agreement.

 

Charterer shall promptly notify Shipowner of the occurrence of any Event of
Default or the occurrence of any events or conditions, which, upon the giving of
notice or lapse of time, or both, may become an Event of Default.

 

(b) Upon the occurrence of any Event of Default, Shipowner, so long as the same
shall be continuing, may, by written notice to Charterer, declare this Demise
Charter to be in default; provided, however, no written notice need be given or
declaration made in respect of an Event of Default pursuant to Article 15(a)(8)
or (a)(9) hereof; and at any time thereafter, so long as Charterer shall not
have remedied all continuing Events of Default, Shipowner may do, and Charterer
shall comply with, one or more of the acts specified in subparagraphs (i)
through (iv) of this Article 15(b) as Shipowner in its sole discretion shall
elect:

 

(i) (A) Upon written demand, Shipowner may cause Charterer at Charterer’s
expense to, and Charterer shall promptly, redeliver the Vessels or cause the
Vessels to be redelivered, with all reasonable dispatch to Shipowner and in the
condition required by the terms of Article 13 hereof as if the Vessels were
being redelivered at the expiration of the Charter Period, and all obligations
of Charterer under said Article 13 shall apply to such Redelivery, or (B)
Shipowner or its agent, at Shipowner’s option, without further notice, may, but
shall be under no obligation to, retake the Vessels wherever found, whether upon
the high seas or at any port, harbor or other place and irrespective of whether
Charterer, any subcharterer or any other Person may be in possession of the
Vessels, all without prior demand and without legal process, and for that
purpose Shipowner or its agent may enter upon any dock, pier or other premises
where the Vessels may be and may take possession thereof, without Shipowner or
its agent incurring any liability by reason of such retaking, whether for the
restoration of damage to property caused by such retaking or otherwise. The
exercise by Shipowner of its remedies under this subparagraph (i) shall be
without prejudice, and in addition, to any of Shipowner’s other remedies
referred to below in this Article 15(b).

 

(ii) Shipowner, by written notice to Charterer specifying a payment date not
earlier than ten (10) nor later than thirty (30) days from the date of such
notice, may require Charterer to pay to Shipowner, and Charterer hereby agrees
that it will pay to Shipowner, on the payment date specified in such notice, as
liquidated damages for loss of a bargain and not as a penalty, and in lieu of
any Basic Hire payments hereunder, all unpaid Basic Hire, if any, through the
payment date specified in such notice, plus an

 

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amount equal to the Stipulated Loss Value of each Vessel computed as of the
Basic Hire Payment Date immediately preceding the payment date specified in such
notice (or as of such payment date if such payment date is a Basic Hire Payment
Date), and Shipowner shall pay over to Charterer the net proceeds of any sale,
charter or other disposition of the Vessels actually received by Shipowner
(after deducting all costs and expenses whatsoever incurred by Shipowner in
connection therewith and all other amounts which may become payable to Shipowner
hereunder or under or pursuant to any of the other Transaction Documents) up to
the amount of such Stipulated Loss Value and interest actually paid by Charterer
to Shipowner; provided, however, that in the event that (x) Charterer pays all
such liquidated damages, interest, and any other amounts which may become
payable hereunder or under any other Transaction Document, and (y) the Vessels
are not then sold, Shipowner shall, at the request of Charterer, transfer, for
no additional consideration, the Vessels to Charterer as is, where is, without
recourse or warranty of any kind (other than a warranty against Shipowner’s
Liens).

 

(iii) Whether or not Shipowner shall have exercised, or shall thereafter at any
time exercise, any options, rights or remedies under Article 15(b)(i) or
(b)(iv), Shipowner in lieu of exercising its rights under paragraph (ii) of this
Article 15(b), may by notice to Charterer specifying a Basic Hire Payment Date
which is not earlier than ten (10) days nor more than thirty (30) days after the
date of such notice, require Charterer to pay to Shipowner, and Charterer shall
pay to Shipowner, on the payment date specified in such notice, as liquidated
damages for loss of a bargain and not as a penalty, an amount equal to the
aggregate of all unpaid Basic Hire and Supplemental Hire payable in accordance
with the terms of this Demise Charter (plus any other amounts due to Shipowner)
on or prior to such payment date plus an amount equal to the excess of:

 

(1) Stipulated Loss Value for each Vessel, computed as of the Basic Hire Payment
Date occurring on or immediately preceding the payment date specified in such
notice, over

 

(2) whichever of the following amounts Shipowner, in its sole discretion, shall
specify in such notice: (x) the Fair Market Sales Value of each Vessel as of the
Basic Hire Payment Date occurring on or next preceding the payment date
specified in such notice or (y) the Fair Market Bareboat Charter Value of each
Vessel for the period from the Basic Hire Payment Date occurring on or next
preceding the payment date specified in such notice to what would have been the
end of the Term in the absence of the termination of Charterer’s rights to such
Vessel, after discounting such Fair Market Bareboat Charter Value semi-annually
(effective on each Basic Hire Payment Date which would have occurred under this
Charter) to present worth (using a rate equal to the 1-year Treasury Constant
maturity rate as published in the Selected Interest Rates table of the Federal
Reserve statistical release H.15(519) for the week ending immediately prior to
the Closing Date).

 

The whole sum of the liquidated damages shall be remitted by Charterer to
Shipowner. For purposes of clause (2) of subparagraph (iii), above, (x) the Fair
Market Sales Value or the Fair

 

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Market Bareboat Charter Value, as the case may be, shall be zero if Shipowner is
unable to recover possession of the Vessels in accordance with the terms of this
subsection (b); (y) if Shipowner shall have sold the Vessels prior to the giving
of the notice referred to above in this subsection (a)(iii), the Fair Market
Sales Value shall be the net proceeds of such sale after deducting all
unreimbursed costs and expenses whatsoever incurred by Shipowner in connection
therewith; and (z) there shall be added to Fair Market Sales Value or to Fair
Market Bareboat Charter Value, as the case may be, the net proceeds received by
Shipowner (after deducting all unreimbursed costs and expenses whatsoever of
Shipowner with respect thereto) from any charter of the Vessels to others
pursuant to this Article 15(b) to the extent such proceeds are received by
Shipowner prior to the giving of the notice referred to above in this Article
15(b)(iii). If at any time within eighteen (18) months after the payment of the
amounts specified in this Article 15(b)(iii) under the circumstances described
in clause (x) above (in which the Fair Market Sales Value or Fair Market
Bareboat Charter Value of the Vessels was deemed to have been zero), Shipowner
shall obtain possession of the Vessels and sell or charter the Vessels, then
promptly after receipt by Shipowner thereof, Shipowner shall pay to Charterer
all net proceeds of such sale or charter up to the amount paid by Charterer
pursuant to this Article 15(b)(iii). Notwithstanding the provisions of this
Article 15(b), in the event that (x) Charterer pays all liquidated damages under
this Article 15(b)(iii) and any other amounts owed under this paragraph (iii)
within a one year period from the occurrence of the applicable Event of Default,
and (y) the Vessels are not then sold, Shipowner shall, at the request of
Charterer, transfer, for no additional consideration, the Vessels to Charterer,
AS IS, WHERE IS, without recourse or warranty of any kind (other than a warranty
against Shipowner’s Liens). Nothing contained in this Article 15(b) shall
require Shipowner to sell or charter the Vessels at any time.

 

(iv) Shipowner or its agent may sell the Vessels at public or private sale, with
or without advertisement or publication, as Shipowner may determine (but with at
least ten (10) days’ prior written notice to Charterer, which both parties
hereto agree is reasonable notice), or otherwise may dispose of, hold, use,
operate, charter (whether for a period greater or less than the balance of what
would have been the Term in the absence of the termination of Charterer’s rights
to the Vessels) to others or keep idle the Vessels, all on such terms and
conditions and at such place or places as Shipowner may determine in good faith
and all free and clear of any rights of Charterer and of any claim of Charterer
in admiralty, in equity, at law or by statute, whether for loss or damage or
otherwise, and without any duty to account to Charterer except to the extent
specifically provided in paragraph (iii) of this Article 15(b). If Shipowner
decides to sell, charter or otherwise dispose of the Vessels, it may, in its
sole discretion, determine to do so only in a single transaction with respect to
all of the Vessels.

 

(c) In addition to all amounts payable pursuant to Article 15(b) hereof,
Charterer shall be liable for any and all Supplemental Hire payable under this
Demise Charter before, during or after the exercise of any of the foregoing
remedies and for all reasonable costs including all legal fees and any other
costs and expenses whatsoever incurred by Shipowner by reason of the occurrence
of any Event of Default or by reason of the exercise by Shipowner of any remedy
hereunder, including, without limitation, all costs and expenses incurred by
Shipowner in connection with any retaking of the Vessels and, upon the
redelivery or retaking of the Vessels in accordance with this Article 15(b), the
placing of the Vessels in the condition and seaworthiness required by the terms
of Article 13 hereof and including interest on overdue

 

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Charter Hire as provided in Article 20(h) hereof. No remedy referred to in this
Article 15 is intended to be exclusive, but each shall be cumulative, is in
addition to, and may be exercised concurrently with, any other remedy which is
referred to in Article 15(b) and 15(c) or which may otherwise be available to
Shipowner at law, in equity or in admiralty, including, without limitation, the
right of Shipowner to rescind this Demise Charter, to enforce the terms hereof,
and the exercise or beginning of exercise by Shipowner of any one or more of
such remedies shall not preclude the simultaneous or later exercise by Shipowner
of any or all such other remedies; provided, however, that liquidated damages
having been agreed to by the parties hereto pursuant to Article 15(b), Shipowner
shall not be entitled to recover from Charterer as damages upon the occurrence
of one or more Events of Default an amount in excess of such liquidated damages
plus any Supplemental Hire, and all costs, interest and expenses. There shall be
deducted from the aggregate amount so recoverable by Shipowner the net balance,
if any, remaining of any monies held by Shipowner which would have been required
by the terms hereof to have been paid to Charterer but for the occurrence of an
Event of Default or an event which with the lapse of time or the giving of
notice, or both, would constitute an Event of Default.

 

(d) The rights of Shipowner and the obligations of Charterer under this Article
15 shall be effective and enforceable regardless of the pendency of any
proceeding which has or might have the effect of preventing Shipowner or
Charterer from complying with the terms of this Demise Charter. No express or
implied waiver by Shipowner of any Event of Default shall in any way be, or be
construed to be, a waiver of any further or subsequent Event of Default.
Shipowner shall in no event waive an Event of Default without there having first
been made a Request for a waiver from Charterer to Shipowner. To the extent
permitted by applicable law, Charterer hereby waives any rights now or hereafter
conferred by statute or otherwise which may require Shipowner to sell, charter
or otherwise use the Vessels in mitigation of Shipowner’s damages, except to the
extent expressly set forth in this Article 15.

 

ARTICLE 16

 

Option To Purchase At Expiration of the Term

 

Any provision of this Demise Charter to the contrary notwithstanding, provided
no Event of Default shall have occurred and then be continuing, Charterer shall
have the following options exercisable upon not less than one hundred eighty
(180) days’ written notice prior to the expiration of the Term:

 

(i) Charterer may purchase the Vessels, AS IS, WHERE IS, without recourse or
warranty of any kind (provided, however, that Shipowner shall warrant that each
Vessel is free and clear of any Shipowner’s Lien) against Shipowner effective on
the last day of the Term upon payment to Shipowner of the Sales Value of the
Vessel; or

 

(ii) Charterer may renew this Demise Charter of the Vessels for one renewal term
for a period of one (1) year or such other duration mutually acceptable to
Charterer and Owner Participant, and each semi-annual installment of Basic Hire
payable during

 

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such renewal term shall be in an amount equal to the Fair Market Bareboat
Charter Value for the Vessels. Such renewal term shall commence immediately upon
the expiration of the base Term. The Stipulated Loss Value with respect to a
Vessel payable during the renewal term with respect to an Event of Loss shall be
equal to the Fair Market Sales Value of such Vessel.

 

The exercise of either such option shall be as to all of the Vessels and shall
be irrevocable once notice thereof is given to Shipowner, except as Owner
Participant may otherwise agree. In the event of the exercise by Charterer of
its option to purchase the Vessels in accordance with this Article 16,
Shipowner, concurrently with the payment by Charterer of the purchase price,
shall execute and deliver to Charterer or Charterer’s Legally Eligible Designee
a bill of sale for each Vessel, in recordable form, in accordance with
subparagraph (i), above, and, in connection with and at the time of delivery of
such bills of sale, Shipowner shall also execute and deliver to Charterer or its
Legally Eligible Designee such appropriate instruments of assignment or
reassignment (without recourse or warranty) of Shipowner’s rights, title and
interests under the Assignments as may be reasonably requested by Charterer.

 

ARTICLE 17

 

Taxes

 

(a) General Taxes. All payments by Charterer, or by any other party on behalf of
or for the account of Charterer, under or pursuant to the Demise Charter or any
other Transaction Document (other than the Tax Indemnity Agreement), including
all amounts received by any Indemnified Party on account of Charter Hire, shall
be free of withholdings of any nature whatsoever in respect of Taxes indemnified
pursuant to this Article 17 (and at the time that Charterer is required to make
any payment upon which any such withholding is required, Charterer shall pay an
additional amount such that the net amount actually received by the Person
entitled to receive such payment will, after such withholding, equal the full
amount of the payment then due), and shall be free of expense to each
Indemnified Person for collection or other charges, and, whether or not any of
the transactions contemplated hereby are consummated, Charterer agrees to pay
and assume liability for, and does hereby agree to indemnify, protect, defend
and hold harmless each Indemnified Person from and against, all taxes,
assessments, fees and charges, together with any penalties, fines, additions to
tax or Interest thereon, howsoever imposed, whether levied or imposed upon such
Indemnified Person, Charterer, the Vessels or any part thereof by any federal,
state or local government or governmental subdivision or taxing authority in the
United States, by any foreign country or subdivision thereof, by any other
foreign or international taxing authority or by any other authority having or
asserted to have jurisdiction to tax, upon or with respect to, the Vessels or
any part thereof; the manufacture, construction, acceptance, rejection,
transfer, control, operation, condition, servicing, maintenance, repair,
abandonment, replacement, purchase, sale, ownership, delivery, non-delivery,
leasing, insuring, possession, use, improvement, transfer of title, return or
other disposition thereof; the rentals, receipts or earnings arising therefrom;
this Demise Charter and the other Transaction Documents (other than the Tax
Indemnity Agreement) or any payment made pursuant thereto; or otherwise in
connection with the transactions

 

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contemplated by the Transaction Documents (other than the Tax Indemnity
Agreement) (all such taxes, assessments, fees, charges, penalties, fines,
additions to tax and interest imposed as aforesaid, whether now existing or
hereinafter enacted or adopted, being hereinafter called “Taxes”); excluding,
however, the following:

 

(A) Taxes based on or measured by the net income, gross income (to the extent
such gross income tax replaces or is dollar for dollar in lieu of a tax on net
income) or net receipts of an Indemnified Person (including, but not limited to,
any minimum Taxes, any capital gain Taxes, or value added Taxes to the extent
such Taxes replace or are in lieu of a tax on net income) or Taxes on or
measured by items of tax preference of an Indemnified Person, other than (i)
Taxes in the nature of or in lieu of sales, use or rental taxes; and (ii) Taxes
upon or with respect to indemnification payments made pursuant to this Article
17 which are imposed on such Indemnified Persons by the United States or any
state or political subdivision thereof or by any foreign country, in which such
Indemnified Person has a place of business;

 

(B) whether or not described in clause (A) above, (i) Taxes (other than taxes in
the nature of sales, use or rental Taxes) imposed on an Indemnified Person that
are, or are in the nature of, Taxes on, based upon, measured by or imposed with
respect to gross receipts, (ii) any Taxes on or measured by capital, net worth
or excess profits, (iii) any Taxes that are or are in the nature of capital
stock taxes, franchise taxes or doing business taxes, and (iv) any additions to
tax, surcharges, interest, penalties, fines or other charges in respect of any
of the foregoing;

 

(C) Taxes included in Lessor’s Cost;

 

(D) Taxes resulting from the voluntary transfer by an Indemnified Person of any
interest arising under the Transaction Documents or with respect to the Vessels
(provided, however, that (x) except as otherwise provided in clause (y) which
follows, a transfer required by the Transaction Documents shall not be
considered a voluntary transfer, and (y) a transfer of Owner Participant’s
beneficial interest in the Trust as a result of the loss or prospective loss of
its status as a Maritime Citizen shall be considered a voluntary transfer)
unless such transfer shall occur as a result of Shipowner exercising its rights
and remedies while an Event of Default shall have occurred and be continuing;

 

(E) any Tax attributable to any Vessels that is imposed with respect to any
period after the earliest of the following events: (i) expiration of the Charter
Period with respect to the Vessels; (ii) discharge in full of Charterer’s
obligations to pay Stipulated Loss Value and any other amounts due by Charterer
with respect to such Vessel under the Demise Charter, and (iii) the return of
possession of such Vessel to Shipowner in accordance with Article 15 of the
Demise Charter; provided, however, that this exception shall not apply to Taxes
(including any interest, penalties, and additions to tax with respect thereto
whether or not such amounts relate to a period after such expiration) relating
to events occurring or matters arising prior to or simultaneously with such
event;

 

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(F) Taxes imposed on an Indemnified Person to the extent that such Taxes result
from an Indemnified Person engaging in activities or transactions unrelated to
any transaction contemplated by the Transaction Document;

 

(G) Taxes that are imposed as a result of any Indemnified Person not being a
“United States person” as defined in Section 7701(a)(30) of the Code;

 

(H) Taxes that are imposed (i) as a result of the gross negligence, willful
misconduct or bad faith of any Indemnified Person, or (ii) as a result of the
inaccuracy or breach of a representation, warranty or covenant of any
Indemnified Person in any Transaction Document;

 

(I) any Tax that is enacted or adopted as a substitute for or in lieu of any Tax
that would not have been indemnified against pursuant to this Article 17;

 

(J) Taxes that have not been paid or credited and that are being contested in
accordance with the provisions of Section 17(b) below, during the pendency of
such contest;

 

(K) Taxes imposed as a result of any Indemnified Person’s failure to fulfill its
obligations under Section 17(b) below;

 

(L) any interest, penalties, fines or additions to Tax attributable to the
failure of an Indemnified Person to file any return properly and timely pursuant
to its obligations under Section 17(d) below, except to the extent that such
failure is a result of the failure of Charterer to fulfill its obligations, if
any, under Section 17(d) below, with respect to such return or claim;

 

(M) Taxes imposed on an Indemnified Person to the extent of the excess of such
Taxes over the amount of such Taxes that would have been imposed had there not
been a transfer of a Vessel or any interest therein or in any Indemnified Person
or any interest arising under any Transaction Document by any Indemnified
Person; provided, however, that the exclusion set forth in this clause (M) shall
not apply if any such transfer shall occur in connection with any foreclosure or
pursuit of remedies (whether by Shipowner or otherwise) in connection with an
Event of Default that has occurred and is continuing;

 

(N) Taxes imposed on an Indemnified Person that result from Shipowner’s Liens;

 

(O) any Tax resulting from any amendment or modification entered into by any
Indemnified Person to any Transaction Document if Charterer is not a party to
such amendment or modification and has not given its express written consent to
such amendment or modification, unless (i) such amendment, modification,
supplement, consent or waiver arises in connection with an Event of Default that
has occurred and is continuing, or (ii) such amendment, modification,
supplement, consent or waiver is

 

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required by the Transaction Documents or applicable law or is necessary or
appropriate to, and is in conformity with, any other amendment, modification or
supplement to any Transaction Document initiated, requested by or consented to
by Charterer;

 

(P) Taxes that otherwise are the subject of an indemnity obligation of Charterer
to the extent such Taxes are actually utilized by the Indemnified Person as a
credit against Taxes otherwise payable by such Indemnified Person that are not
indemnified hereunder;

 

(Q) Taxes imposed on an Indemnified Person in the nature of an intangible, stamp
or similar Tax (other than any such tax imposed by any jurisdiction as a result
of any Vessel being used or located, or the Transaction Documents being executed
or delivered or the activities or presence of Charterer in such jurisdiction);

 

(R) Taxes which are subject to indemnification under the Tax Indemnity
Agreement;

 

(S) Taxes imposed on or in connection with any transfer by any Indemnified
Person by reason of any insolvency, bankruptcy, foreclosure or similar
proceeding in respect of the Indemnified Person, other than any such proceeding
arising as a result of an Event of Default; and

 

(T) any Tax to the extent such Tax would not have been imposed if an Indemnified
Person was not organized in the jurisdiction imposing such Tax or did not
maintain an office in that jurisdiction.

 

(b) Contests; etc. If any claim is made against any Indemnified Person or if any
proceeding is commenced against any Indemnified Person (including a written
notice of such proceeding) for any Taxes as to which Charterer has an indemnity
obligation pursuant to Article 17(a), such Indemnified Person shall promptly
notify Charterer and shall not take any action with respect to such claim
without the consent of Charterer for thirty (30) days after such notice;
provided, however, that if such Indemnified Person shall be required by law or
regulation to take action with respect to any such claim prior to the end of
such thirty (30) day period, such Indemnified Person shall, in such notice to
Charterer, so inform Charterer, and such Indemnified Person shall not take any
action with respect to such claim without the consent of Charterer before the
date on which such Indemnified Person shall be required to take action. Without
prejudice to any other rights Charterer may have in connection therewith
(including, without limitation, any claim for damages for a failure to give
notice specified in the preceding sentence), the parties agree that the failure
to provide such notice shall not affect Charterer’s obligations hereunder to any
Indemnified Person except to the extent such failure materially adversely
affects Charterer’s ability to contest such claim. If reasonably requested by
Charterer in writing and upon the reasonable determination by such Indemnified
Person that the action to be taken will not result in any substantial risk of
the imposition of a lien on or the forfeiture of any Vessel or any part thereof,
such Indemnified Person shall, upon receipt of indemnity reasonably satisfactory
to it and at the expense of Charterer (including, without limitation, all
reasonable costs, expenses, attorneys’ and accountants’ fees and disbursements,
penalties and interest), in

 

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good faith contest the validity, applicability or amount of such Taxes
(including, without limitation, by pursuit of administrative and judicial
appeals) by, in such Indemnified Person’s sole discretion, after considering in
good faith the views of Charterer and its counsel, (i) resisting payment
thereof; (ii) not paying the same except under protest, if protest is necessary
and proper; or (iii) if payment is made, using reasonable efforts to obtain a
refund thereof in appropriate administrative and judicial proceedings. Any
contest required pursuant to the immediately preceding sentence shall, at the
option of such Indemnified Person, be conducted by such Indemnified Person or
Charterer in the name of Charterer or such Indemnified Person. The Indemnified
Person shall consult in good faith with Charterer regarding the conduct of any
contest, and cooperate in good faith to permit Charterer to participate in such
contest; provided, however, that the Indemnified Person shall control the
contest. However, Charterer shall not be allowed to participate in proceedings
to the extent such proceedings relate to Taxes which are not subject to the
indemnified of Article 17(a) above. If any such contest involves payment of the
Tax in question, Charterer shall either make such payment directly to the
appropriate authority or furnish to such Indemnified Person sufficient funds to
make such payment. If any Indemnified Person obtains a refund of all or any part
of any Tax paid or reimbursed by Charterer and if no Event of Default shall have
occurred and be continuing, such Indemnified Person shall promptly pay to
Charterer the amount of such refund net of expenses not already paid or
reimbursed by Charterer; provided, however, that such amount shall in no event
be payable before such time as Charterer shall have made all payments and
indemnities then due and payable under the Charterer Documents to such
Indemnified Person; provided further, however, that the aggregate amount of all
payments with respect to any Taxes by such Indemnified Person pursuant to this
sentence shall not exceed the aggregate amount of all payments made by Charterer
pursuant to Article 17(a) with respect to such Taxes. Any such amounts not paid
to Charterer pursuant to this limitation contained in this sentence shall be
carried forward to reduce, pro tanto, any future amounts that may become payable
by Charterer to such Indemnified Person. If, in addition to such refund such
Indemnified Person shall receive an amount representing interest on the amount
of such refund, Charterer shall promptly be paid that portion of such interest
that is fairly attributable to Taxes paid or reimbursed by Charterer prior to
the receipt of such refund. Nothing contained in this Article 17 shall require
any Indemnified Person to contest or permit Charterer to contest a claim which
it would otherwise be required to contest or permit Charterer to contest
pursuant to this Article 17 if such Indemnified Person shall waive payment by
Charterer of any amount that might otherwise be payable by Charterer under this
Article 17 by way of indemnity in respect of such claim, and shall pay to
Charterer any amount previously paid or advanced by Charterer pursuant to this
Article 17 (by way of indemnification or advance for the payment of a Tax) with
respect to such claim. Notwithstanding anything contained in this Article 17(b)
to the contrary, Charterer shall at any time be entitled to contest in its own
name and at its own expense the validity, applicability and amount of any Taxes
for which it is responsible under this Demise Charter, and to withhold payments
during the pending of such contest, to the extent permitted by applicable law.
Charterer agrees to give such Indemnified Person reasonable notice of any such
contest prior to the commencement thereof.

 

(c) Payments. All Taxes shall be paid when due and payable and all amounts
payable as indemnities pursuant to this Article 17 shall be payable, to the
extent not theretofore paid, within thirty (30) days after receipt of written
demand by any Indemnified Person, but not earlier than the date payment of such
Taxes shall be due, which demand shall be accompanied by a

 

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written statement describing in reasonable detail the amount so payable. No Tax
shall be payable to the Indemnified Person before any contest to which Charterer
is entitled under Article 17(b) above is concluded, unless prepayment of such
Tax is a condition to pursuing the contest. Notwithstanding any other provision
of this Demise Charter, to the extent Charterer shall be required to make any
payment under this Article 17 (including under this Article 17(c)), Charterer’s
payment or indemnity obligation shall also include any amount necessary to hold
each Indemnified Person harmless from all Taxes required to be paid by such
Indemnified Person with respect to such payment or indemnity (taking into
account any current deduction to which the Indemnified Person may be entitled).
Whenever any payment is to be made by Charterer under this Article 17 and it
shall be necessary in calculating the amount of such payment, and any related
payment pursuant to the preceding sentence, to compute the amount of any
liability for Federal, income tax imposed on or measured by the net income of
any Indemnified Person, such computation shall be based on the assumption that
such taxes shall be payable at the highest marginal statutory rate in effect for
the relevant period that is generally applicable to corporations.

 

(d) Reports and Returns. In case any report or return shall be required to be
made with respect to any Tax that is the obligation of Charterer under this
Article 17, Charterer shall (i) to the extent required or permitted by law, and
provided that Charterer has been furnished at such Indemnified Person’s expense
with such information, not within the control of Charterer, as (x) is in such
Indemnified Person’s control, (y) is reasonably available to such Indemnified
Person, and (z) is necessary to file such report, return or statement, make and
file in its own name such return, statement or report, and (ii) in the case of
any other such return, statement or report required to be made in the name of
any Indemnified Person, advise such Indemnified Person of such fact and prepare
such return, statement or report for filing by such Indemnified Person or, where
such return, statement or report shall be required to reflect items in addition
to any obligations of Charterer under or arising out of this Article 17, provide
such Indemnified Person with information sufficient to permit such return,
statement or report to be properly made with respect to any Tax that is the
obligation of Charterer under this Article 17.

 

(e) Definition of Indemnified Person. For purposes of this Article 17, the term
Indemnified Person shall include the successors and assigns of each respective
Indemnified Person, and for purposes of federal income taxes, the affiliated
group of corporations and each member thereof (within the meaning of Section
1504 of the Code) of which such Indemnified Person is or shall become a member,
if such group shall file a consolidated United States federal income tax return,
and, for purposes of income or franchise taxes imposed by a particular state or
local taxing jurisdiction, shall include any consolidated or combined group of
which such Indemnified Person is or shall be a member that is treated as such by
such state or local taxing jurisdiction.

 

(f) Receipts. Charterer agrees to use its best efforts to obtain official
receipts indicating the payment of all foreign Taxes that are subject to
indemnification under this Article 17 and shall promptly send to the Indemnified
Person each such receipt obtained by Charterer.

 

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(g) If an Indemnified Person shall realize any Tax savings as a result of any
Taxes paid or indemnified against by Charterer under this Article 17 or as a
result of any amount for which Charterer has paid an indemnity pursuant to
Article 19, whether by way of deduction, credit, offset, allocation,
apportionment or otherwise, or would have received such a refund or credit but
for a counterclaim or other claim not indemnified by Charterer hereunder (a “Tax
Savings”), and such Tax Savings is not taken into account in computing the
amount of the indemnity required to be paid by Charterer hereunder or under
Article 19, such Indemnified Person shall pay promptly to Charterer the amount
of such Tax Savings plus any Tax Savings realized by such Indemnified Person as
a result of payment pursuant to this sentence. Each Indemnified Person shall in
good faith use reasonable efforts in filing its tax returns and in dealing with
taxing authorities to minimize the amount of Taxes for which Charterer must
indemnify hereunder, and to maximize the amount of Tax Savings payable to Demise
Charter, provided, however, that no Indemnified Person shall be required to take
any action which, in its good faith judgment, would have any material adverse
business consequences to it. If any Indemnified Person shall receive a refund of
(or receive a credit against, or any other current reduction in, any Taxes not
indemnified by Charterer pursuant to this Article 17) all or any part of the
Taxes paid, reimbursed or advanced by Charterer (or would have received such a
refund, credit or reduction but for a counterclaim or other claim not
indemnified by the Demise Charter hereunder), such Indemnified Person shall pay
promptly to Charterer any such refund (including any applicable interest
received with respect to such refund) plus any Tax Savings realized by such
Indemnified Person as a result of a payment pursuant to this sentence. An
Indemnified Person shall not be obligated pursuant to this Article 17(g) to make
a payment in excess of the amounts paid by Charterer to such Indemnified Person
pursuant to this Article 17 or Article 19, as the case may be (minus any amounts
previously paid to Charterer by such Indemnified Person pursuant to this Article
17(g)), provided that any such amounts not paid to Charterer pursuant to this
limitation contained in this sentence shall be carried forward to reduce, pro
tanto, any future amounts that may become payable by Charterer to such
Indemnified Person pursuant to this Article 17 or Article 19, and provided
further that no payment shall be made if an Event of Default has occurred and is
continuing if and to the extent that the amount payable under this Article 17(g)
is to be used to offset amounts owed by Charterer to Shipowner or Owner
Participant as a result of such Event of Default. The disallowance or reduction
of any credit, refund or other tax savings with respect to which an Indemnified
Person has made a payment to Charterer under this Article 17(g) shall be treated
as a Tax for which Charterer is obligated to indemnify such Indemnified Person
hereunder without regard to Article 17(a)(A-Q) hereof or Article 17(b).

 

(h) At Charterer’s request, the amount of any indemnity payment by Charterer
pursuant to Article 17(a) above, or any payment by an Indemnified Person to
Charterer pursuant to Article 17(g) above, shall be verified and certified by an
independent, nationally recognized, accounting firm mutually acceptable to
Charterer and the Indemnified Person. Within thirty (30) days after Charterer’s
request, such independent accounting firm either shall confirm the accuracy of
the Indemnified Person’s computation or shall notify the Indemnified Person that
such computation is inaccurate. In the latter event, the Indemnified Person
shall consult with Charterer and the independent accounting firm as to the
proper computation of the indemnity, whereupon the Indemnified Person shall
recompute the indemnity in such a manner as shall enable the independent
accounting firm to confirm its accuracy. The determination of the

 

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independent accounting firm in accordance with this Article 17(h) shall be
conclusive and binding. All expenses incurred by the Indemnified Person and
Charterer in connection with the verification procedures described in this
Article 17(h) (including the fees and expenses of the independent accounting
firm) shall be paid by Charterer unless such verification shall result in an
adjustment in Charterer’s favor of five percent (5%) or more of the indemnity
payment or payments computed by the Indemnified Person, in which case such costs
shall be borne by the Indemnified Person. Charterer and each Indemnified Person
agree that the sole responsibility of the independent accounting firm shall be
to verify the amount of a payment pursuant to this Article 17(h) and that
matters of interpretation of this Article 17 are not within the scope of the
independent accounting firm’s responsibility. Charterer shall have no right to
examine the tax returns or books and records of Shipowner or the Owner
Participation in connection with the verification procedure described in this
Article 17(h).

 

ARTICLE 18

 

Environmental Matters

 

(a) Charterer shall keep the Vessels and any other property either owned or
occupied by it free and clear of any Liens on account of any Environmental
Claims or imposed by failure to comply with any Environmental Laws, (each, an
“Environmental Lien”), and shall keep the Vessels and all such property in
compliance with all Environmental Laws, (except where such failure does not
relate to any Vessel and would not otherwise have a Material Adverse Effect with
respect to Charterer); provided, however, Charterer shall have the right at its
sole cost and expense, and acting in good faith, to contest, object or appeal by
appropriate legal proceedings the validity of any Environmental Lien. The
contest, objection or appeal with respect to the validity of an Environmental
Lien shall suspend the obligation to eliminate such Environmental Lien under
this paragraph pending a final determination by appropriate administrative or
judicial authority of the legality, enforceability or status of such
Environmental Lien, provided that the following conditions are satisfied: (i)
contemporaneously with the commencement of such proceedings, Charterer shall
give written notice thereof to Shipowner; (ii) if under applicable law any
Vessel is subject to sale or forfeiture for failure to satisfy the Environmental
Lien prior to a final determination of the legal proceedings, Charterer must
successfully move to stay (or provide adequate security that will have the same
effect as a stay) such sale, forfeiture or foreclosure pending final
determination of action; and (iii) Charterer must, if requested, furnish to
Shipowner a good and sufficient bond, surety, letter of credit or other security
satisfactory to Owner Participant equal to the amount (including any interest
and penalties) secured by any Environmental Lien affecting such Vessel.

 

(b) Charterer will defend, indemnify and hold harmless each Indemnified Person
from and against any liabilities, obligations, losses, damages, penalties,
actions, judgments, suits and claims, joint or several, and any costs,
disbursements and expenses (including reasonable attorneys’ fees and expenses
and costs of investigation) of whatsoever kind or nature, known or unknown,
contingent or otherwise, arising out of or in any way related to (i) the
presence, disposal, release, removal, discharge, storage or transportation of
any Hazardous Material upon, into, from or affecting any Vessel or caused by or
attributable to the use or operation thereof;

 

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(ii) any judicial or administrative action, suit or proceeding, actual, pending
or threatened, relating to Hazardous Material upon, in, from or affecting any
Vessel; (iii) any violation of any Environmental Law by any Charterer or any
Affiliate thereof or with respect to any Vessel or any imposition of any
Environmental Lien for the recovery of costs expended in the investigation,
study or remediation of any environmental liability of (or asserted against)
such Vessel or such Charterer or Affiliate; and (iv) any other Environmental
Claim. This subsection (c) and subsection (d) below shall survive the expiration
of the Charter Period but shall not apply to any incident or occurrence
following the redelivery or repossession of the Vessel pursuant to the Demise
Charter except to the extent any liability referred to above is attributable to
such Vessel not being in the condition required upon Redelivery thereof.

 

(c) To the extent that Owner Participant, Shipowner, Charterer, or any Affiliate
of any thereof, is strictly liable without regard to fault under any
environmental law, regulation or ordinance, Charterer’s obligations to Owner
Participant and Shipowner under any of the indemnification provisions of this
Agreement shall likewise be strict without regard to fault with respect to the
violation of any environmental law, regulation or ordinance which results in any
liability to any of the Indemnified Persons referred to in subsection (c) above.

 

ARTICLE 19

 

General Indemnification and Expenses

 

(a) Charterer does hereby assume liability for, and does hereby agree (whether
or not any of the transactions contemplated hereby shall be consummated) to
indemnify, protect, save and hold harmless and keep whole each Indemnified
Person from and against any and all liabilities (including but not limited to
liabilities arising out of the doctrine of strict liability), obligations,
losses, damages, penalties, claims, actions, suits, judgments, costs, expenses
and disbursements, whether any of the foregoing be founded or unfounded
(including reasonable legal fees and expenses and costs of investigation), of
whatsoever kind and nature (provided that this Article 19 shall not apply to
indemnification for any Tax other than any net additional income tax arising as
a result of receipt of any indemnity payment pursuant to this Article 19 or the
loss of any Tax benefit or to the costs or expenses of any Tax contest) that may
be imposed on, incurred by or asserted against any Indemnified Person, and in
any way relating to or arising out of this Demise Charter or the other
Transaction Documents (including, without limitation, the exercise of rights and
the performance of all obligations thereunder) including in connection with an
Event of Loss, any Event of Default and terminations or any assignment thereof
or subcharter thereunder, or any amendments, waivers or consents of or with
respect to any thereof required by Charterer (whether or not the same shall
become effective) or resulting from any Event of Default or an event, which with
the giving of notice and/or the passage of time, would constitute an Event of
Default, or the construction, purchase, acceptance, rejection, ownership,
delivery, non-delivery, possession, use, operation, leasing, subleasing,
condition, maintenance, repair, sale, return, redelivery or other disposition
of, or the imposition of any Lien (or incurrence of any liability to refund or
pay over any amount as a result of any Lien) on, the Vessels (including, without
limitation, any claim arising out of violations of applicable laws, latent or
other defects, whether or not discoverable by Shipowner, Charterer or any other
Person,

 

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and any claim for patent, trademark or copyright infringement), except only that
Charterer shall not be required pursuant to this Article 19 to indemnify:

 

(i) any Indemnified Person for loss or liability to the extent resulting from
such Indemnified Person’s own gross negligence or willful misconduct, from
Shipowner’s Liens, or from the inaccuracy of any representation or warranty by
such Indemnified Person or the breach by such Indemnified Person of any
agreement or covenant in any of the Transaction Documents;

 

(ii) any Indemnified Person for any liability relating to any Vessel arising out
of acts or events that occur after redelivery of such Vessel in accordance with
Article 13 of the Demise Charter (other than a redelivery pursuant to Article 15
of this Demise Charter);

 

(iii) claims or liabilities arising solely from any voluntary transfer or
disposition of Owner Participant’s interest (other than arising in connection
with an Event of Default).

 

(b) If any Indemnified Person shall have knowledge of any claim or liability
indemnified against pursuant to Article 18 or 19 hereof, it shall give prompt
written notice thereof to Charterer; provided, however, that the failure of such
Indemnified Party to give such notice shall not relieve Charterer of its
obligations hereunder except to the extent such failure materially adversely
affects Charterer’s ability to contest such claim. Charterer may, at its
expense, in good faith and by appropriate legal proceedings, contest or defend
an asserted claim or liability for which it is indemnifying under Article 18 or
19 (and has acknowledged liability in writing to the relevant Indemnified
Persons) so long as, in the reasonable opinion of the Indemnified Person, such
defense is being diligently conducted by Persons reasonably satisfactory to the
affected Indemnified Person. Settlement of any dispute or claim or action in the
name of an Indemnified Person shall not be made or otherwise finalized without
such Indemnified Person’s prior written consent, which consent shall not be
unreasonably withheld.

 

(c) All amounts payable by Charterer pursuant to Articles 17, 18 and 19 shall be
payable directly to the parties entitled to be indemnified. Except as otherwise
expressly provided herein, all the indemnities contained in Articles 17, 18 and
19 shall continue in full force and effect notwithstanding the expiration of the
Charter Period or other termination of this Demise Charter and are expressly
made for the benefit of, and shall be enforceable by, each Indemnified Person.

 

ARTICLE 20

 

Miscellaneous

 

(a) Shipowner and Charterer severally agree to perform or cause to be performed
such action, and to execute, deliver or furnish or to cause to be executed,
delivered or furnished, all such further assurances, certificates, opinions and
other documents necessary or proper to carry out this Demise Charter.

 

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(b) No change in, or modification of, this Demise Charter or any Schedule hereto
shall be effective unless agreed in writing by the parties hereto.

 

(c) The invalidity of any provision of this Demise Charter shall not affect the
remainder hereof, which shall in such event be construed as if such invalid
provision had not been inserted.

 

(d) The table of contents and headings of this Demise Charter are for purposes
of convenient reference only, and shall in no way limit or otherwise affect any
of the terms or provisions hereof.

 

(e) Subject to the provisions of Article 14, the terms of this Demise Charter
shall be binding upon, and inure to the benefit of the parties hereto and their
respective permitted successors and assigns.

 

(f) All interest payments to be computed under this Demise Charter shall be
computed on the basis of a 360-day year of twelve 30-day months.

 

(g) This Demise Charter shall be construed and enforced in accordance with and
governed by the general maritime law of the United States and, insofar as
applicable, the internal laws of the State of New York

 

(h) All amounts payable hereunder by Charterer to Shipowner shall be paid in
Dollars in immediately available funds directly to, or as otherwise requested in
writing (including to such bank account as may be specified) by, Shipowner. All
amounts payable by Charterer hereunder not paid when due shall bear interest at
the Default Interest Rate unless otherwise specified herein.

 

(i) CHARTERER AND SHIPOWNER EACH HEREBY IRREVOCABLY CONSENTS AND AGREES THAT ANY
LEGAL ACTION, SUIT, OR PROCEEDING ARISING OUT OF OR IN ANY WAY IN CONNECTION
WITH THIS DEMISE CHARTER MAY BE INSTITUTED OR BROUGHT IN THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, AND BY EXECUTION AND
DELIVERY OF THIS DEMISE CHARTER, EACH OF THE SHIPOWNER AND THE CHARTERER HEREBY
IRREVOCABLY ACCEPTS AND SUBMITS TO, FOR ITSELF AND IN RESPECT OF ITS PROPERTY,
GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF SUCH COURT, AND
TO ALL PROCEEDINGS IN SUCH COURT. EACH OF SHIPOWNER AND CHARTERER IRREVOCABLY
CONSENTS TO SERVICE OF ANY SUMMONS AND/OR LEGAL PROCESS BY REGISTERED OR
CERTIFIED UNITED STATES MAIL, POSTAGE PREPAID, TO SUCH PERSON AT THE ADDRESS SET
FORTH IN ARTICLE 21 HEREOF, SUCH METHOD OF SERVICE TO CONSTITUTE, IN EVERY
RESPECT, SUFFICIENT AND EFFECTIVE SERVICE OF PROCESS IN ANY SUCH LEGAL ACTION OR
PROCEEDING. NOTHING IN THIS DEMISE CHARTER

 

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SHALL AFFECT THE RIGHT OF SHIPOWNER OR CHARTERER TO EFFECT SERVICE OF PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW OR LIMIT THE RIGHT OF SHIPOWNER OR CHARTERER
TO BRING ACTIONS, SUITS OR PROCEEDINGS WHETHER IN REM, IN PERSONAM, IN LAW,
EQUITY, ADMIRALTY OR OTHERWISE IN THE COURTS OF ANY OTHER JURISDICTION. EACH OF
CHARTERER AND SHIPOWNER FURTHER AGREES THAT A FINAL JUDGMENT AGAINST IT IN ANY
SUCH LEGAL ACTION, SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN
ANY OTHER JURISDICTION, WITHIN OR OUTSIDE THE UNITED STATES OF AMERICA, BY SUIT
ON THE JUDGMENT, A CERTIFIED OR EXEMPLIFIED COPY OF WHICH SHALL BE CONCLUSIVE
EVIDENCE OF THE FACT AND THE AMOUNT OF THE LIABILITY.

 

(j) SHIPOWNER AND CHARTERER EACH IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY
JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY
COUNTERCLAIM THEREIN.

 

(k) This Demise Charter is not a personal contract. Shipowner and Charterer
shall have the benefit of all limitations of, and exemptions from, liability
accorded to the owner or chartered owner of vessels by any statute or rule of
law for the time being in force.

 

(l) It is the intent of the parties to this Demise Charter that it will be a
true lease and not a “conditional sale” and that Shipowner shall at all times be
considered to be the owner of the Vessels which is the subject of this Demise
Charter for the purposes of all federal, state, city and local income taxes or
for franchise taxes measured by net income, and that this Demise Charter conveys
to Charterer no right, title or interest in the Vessels except as Charterer
(provided that Charterer shall have no liability to Shipowner by virtue of this
Article 20(l)).

 

(m) It is understood and agreed that the Trust Company is entering into this
Demise Charter solely in its capacity as Trustee under the Trust Agreement and
that all of the representations, warranties, undertakings and agreements of, by
and for the purpose of binding Shipowner are not the responsibility of the Trust
Company individually but are intended solely for the purpose of binding the
Trust and that the Trust Company shall not be liable or accountable in its
individual capacity in any circumstances whatsoever except as otherwise
expressly provided in the Agreement or in the Trust Agreement. It is further
agreed that all Persons having any claims against Shipowner as a result of this
Demise Charter or transactions contemplated hereby shall look solely to the
Trust Estate for satisfaction thereof, except as provided in the first sentence
of this subparagraph. It is also understood and agreed that, absent written
instructions from Owner Participant pursuant to the Trust Agreement, Shipowner
shall not be under any obligation to exercise any of the permissive rights or
powers granted to it under this Demise Charter.

 

(n) This Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an original
for all purposes, but all such counterparts shall together constitute but one
and the same instrument.

 

- 39 -

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ARTICLE 21

 

Notices

 

All notices and other communications hereunder shall be in writing and shall,
unless otherwise provided herein, be (i) delivered or mailed postage prepaid,
(ii) personally delivered, (iii) sent by telecopy (confirmed by personal
delivery, mail or overnight courier) or (iv) sent by overnight courier, and
addressed as follows:

 

To Shipowner:

 

STATE STREET BANK AND TRUST COMPANY OF

CONNECTICUT, NATIONAL ASSOCIATION, as trustee of the

GTC Connecticut Statutory Trust

 

Goodwin Square

225 Asylum Street

Hartford, Connecticut 06103

 

Attention: Corporate Trust Department

Telecopy: 860 244-1889

 

with copies to:

 

FLEET CAPITAL CORPORATION

Fleet Capital Leasing

50 Kennedy Plaza

5th Floor

Providence, Rhode Island 02903

 

Attention: Senior Credit Officer

Telecopy: 401 278-3139

 

To Charterer:

 

GULFCOAST TRANSIT COMPANY

702 North Franklin Street

Tampa, Florida 33602

 

Attention: Secretary

Telecopy: (813) 228-1328

 

- 40 -

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with a copy to:

 

TECO ENERGY, INC.

702 North Franklin Street

Tampa, Florida 33602

 

Attention: General Counsel

Telecopy: (813) 228-4811

 

or, as to each party, at such other address as shall be designated by such party
in a written notice to the other Person named above. All notices and demands
shall be effective upon receipt.

 

[The signature page follows]

 

- 41 -

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IN WITNESS WHEREOF, the parties have caused this Demise Charter to be signed as
of the day and year first above written.

 

STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in
its individual capacity but solely as trustee of the GTC Connecticut Statutory
Trust

By:

 

 

--------------------------------------------------------------------------------

Name:

   

Title:

   

GULFCOAST TRANSIT COMPANY

By:

 

 

--------------------------------------------------------------------------------

Name:

   

Title:

   

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SCHEDULE A

 

Definitions

 

“ABS” shall mean the American Bureau of Shipping or any successor organization.

 

“Adjustment Factor” shall mean the percentage adjustment calculated, upward or
downward, by multiplying the Adjustment Factor Percentage for each one basis
point (.01%) corresponding change in the Relevant Treasury Rate from the
Reference Rate.

 

“Adjustment Factor Percentage” shall mean the number 0.003272 expressed as a
percentage.

 

“Affiliate” shall mean any Person directly or indirectly controlling, controlled
by or under direct or indirect common control with another Person. For the
purpose of this definition, “control” when used with respect to any specified
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms “controlling” and “controlled” shall have
meanings correlative to the foregoing.

 

“Agreement” shall mean that certain Agreement to Acquire and Charter dated as of
December 21, 2001 by and among Shipowner, Owner Participant, the Seller,
Charterer and the Guarantor, providing, among other things, for the agreement of
Shipowner to purchase the Vessels from the Seller and of Charterer concurrently
therewith to enter into the Demise Charter and to accept delivery of the Vessels
from Shipowner under the Demise Charter.

 

“Appraisal Procedure” means the procedure specified in the succeeding sentences
for determining an amount or value hereunder. The parties shall consult for the
purpose of determining such amount or value by mutual agreement. In the absence
of such agreement after thirty (30) days, either party may give written notice
to the other requesting determination of such amount or value by appraisal and
in such event the parties shall consult for the purpose of appointing a mutually
acceptable qualified independent appraiser (which shall include the Appraiser).
If the parties are unable to agree on an appraiser within twenty (20) days of
the giving of such notice, such amount or value shall be determined by each of
two independent appraisers, one of whom shall be selected by Charterer and the
other of whom shall be selected by Shipowner, on or before the twenty-first
(21st) day following the giving of such notice. If the determination made by the
appraiser reaching the greater value does not exceed the lower value by more
than ten percent of the lower value, the two values shall be averaged and such
determination shall constitute the determination of the appraisers. If such
excess shall be greater than ten percent of the lower value, a third appraiser
shall be selected by the two appraisers or by the Society of Maritime
Arbitrators, Inc., if the other two are unable to agree upon a third appraiser
within ten days. The third appraiser shall make his determination within fifteen
(15) days of his appointment. Of the three appraisals, the determination of the
appraiser which differs most from the other two appraisers shall be excluded,
the remaining two determinations shall be averaged and such average shall
constitute the determination of the appraisers.

--------------------------------------------------------------------------------

“Appraiser” shall mean ABS Consulting Ltd.

 

“Assignments” shall mean the Demise Charter Assignment and the Insurances
Assignment.

 

“Base Rental Factor” shall mean the percentage set forth in the column entitled
“Total Base Rental Factor” in Schedule C to the Demise Charter for the relevant
Basic Hire Payment Date.

 

“Basic Hire” with respect to any Vessel shall mean payments of charter hire
under the Demise Charter payable on each Basic Hire Payment Date, each in an
amount equal to Lessor’s Cost of such Vessel multiplied by the Base Rental
Factor applicable to such Basic Hire Payment Date; provided, however, that (i)
if Charterer does not exercise the early termination option with respect to the
Vessels pursuant to Article 10(a) of the Demise Charter, Basic Hire shall then
be reset as provided in Article 10(b) of the Demise Charter to an amount equal
to Lessor’s Cost multiplied by the Remaining Rental Factor, and (ii) if
Charterer exercises its option to renew in Article 16 of the Demise Charter,
Basic Hire for such renewal term shall be determined in accordance with Article
16.

 

“Basic Hire Payment Date” shall mean each Basic Hire Payment Date set forth in
Schedule C to the Demise Charter; provided, however, that if a Basic Hire
Payment Date is not a Business Day, the Basic Hire payable by Charterer on such
Basic Hire Payment Date shall be made at the opening of business on the next
following Business Day.

 

“Business Day” shall mean a day which is not a Saturday, Sunday, or other day on
which banking institutions doing business in Providence, Rhode Island, New York,
New York or Tampa, Florida, are authorized or obligated by law or required by
executive order to remain closed.

 

“Certificate of Delivery And Acceptance” shall mean that certain Certificate
substantially in the form of Exhibit B to the Agreement whereby (i) Charterer
accepts delivery of the Vessels from Seller on behalf of Shipowner under the
Agreement, and (ii) Charterer irrevocably and unconditionally accepts delivery
of the Vessels under the Demise Charter.

 

“Charter Hire” shall mean Basic Hire and Supplemental Hire.

 

“Charter Period” shall mean the Term plus a period of time, if any, reasonably
required to effect Redelivery (including the time necessary to remove any
Severable Modifications to which Charterer has title pursuant to Article
6(c)(i)); provided, however, that the Charter Period shall not exceed the Term
by more than fifteen (15) days, absent force majeure.

 

“Charterer” shall mean Gulfcoast Transit Company, a Florida corporation,
together with its permitted successors and assigns under the Demise Charter.

 

SA-2

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“Classification Society” shall mean the recognized classification society which
at any time is designated for purposes of surveying the Vessels and is
acceptable to Shipowner, and may include ABS and DNV, provided such
classification society is at the time a member of the International Association
of Classification Societies and approved by the USCG.

 

“Closing Date” shall mean the date and time on which concurrently (i) Seller
delivered the Vessels to Shipowner under the Agreement at the direction of
Charterer, and (ii) Shipowner shall have delivered and Charterer shall have
accepted the Vessels pursuant to Article 2 of the Demise Charter, which in no
event shall occur later than 5:00 p.m. EST on December 31, 2001.

 

“Code” shall mean the Internal Revenue Code of 1986, as amended.

 

“Consolidated or consolidated” shall mean with reference to any term defined
herein, shall mean that term as applied to the accounts of any Person and its
Subsidiaries, consolidated in accordance with GAAP.

 

“Crew’s Wages” shall mean crew’s wages, including the wages of the master, to
the extent provided by Public Law 90-293, approved April 25, 1968.

 

“Default Interest Rate” shall mean a variable interest rate equal to the Prime
Rate plus two percent (2%) per annum.

 

“Delivery” shall mean the delivery of the Vessels by Shipowner to Charterer
under the Demise Charter on the Closing Date, which shall be concurrent as to
time and place with delivery of the Vessels from Seller to Shipowner under the
Agreement.

 

“Demise Charter” shall mean the Demise Charter between Shipowner and Charterer,
providing for the demise charter by Charterer from Shipowner of the Vessels, as
originally executed or as modified, amended or supplemented in accordance with
the applicable provisions thereof.

 

“Demise Charter Assignment” means the General Assignment of Freights, Charters
and Hires from Charterer to Shipowner.

 

“Designated Taxes” shall have the meaning set forth in Article 2 of the
Guarantee.

 

“DNV” shall mean Det Norske Veritas or any successor organization.

 

“Documentation Citizen” shall mean a corporation established under the laws of
the United States or of a State thereof, whose president or other chief
executive officer, by whatever title, and chairman of its board of directors are
citizens of the United States, as well as any officers authorized to act in
their absence or disability, and no more of its directors are non-citizens than
a minority of the number necessary to constitute a quorum.

 

SA-3

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“Dollars” shall mean any coin or currency which at the time of payment is legal
tender for the payment of public and private debts in the United States, and
shall be represented by the sign “$”.

 

“Early Purchase Amount” shall mean 83.61988618% of Lessor’s Cost.

 

“Early Termination Date” means January 2, 2007.

 

“Environmental Claim” means any administrative, regulatory or judicial suit,
proceeding, action, judgment, notice of violation, claim, demand, abatement
order, direction, investigation, litigation or any other proceeding by any
governmental authority or any other Person, based on any Environmental Law or
any violation thereof, for personal injury (including sickness, disease or
death), tangible or intangible property damage, damage to environmental or
natural resources, reimbursement of environmental cleanup costs, nuisance,
pollution, contamination, fines, penalties, restrictions, attorneys’ fees,
health effects, monitoring or any other adverse effects on the environment.

 

“Environmental Law” means any applicable foreign, federal, state or local
statute, law (including common law), ordinance, rule, regulation, order (whether
voluntary or not) relating to the environment, natural resources, or human
health and safety, including the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. § 9601 et seq.), the Oil Pollution
Act of 1990 (33 U.S.C. § 2701 et seq.), the Hazardous Material Transportation
Act (49 U.S.C. § 1801 et seq.), the Resource Conservation and Recovery Act, also
known as the Solid Waste Disposal Act (42 U.S.C. § 6901 et seq.), the Federal
Water Pollution Control Act (33 U.S.C. § 1251 et seq.), the Clean Air Act
(U.S.C. § 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. § 2601 et
seq.), the Occupational Safety and Health Act (29 U.S.C. § 651 et seq.) and any
analogous state or local law, as such laws have been or will be amended or
supplemented now or in the future, and expressly including any additional law
(including common law), ordinance, rule, or regulation relating to the
environment, natural resources, or human health and safety which may be enacted,
pronounced or promulgated in the future.

 

“Environmental Lien” shall have the meaning set forth in Article 18(a) of the
Demise Charter.

 

“Event of Default” shall mean any of the Events of Defaults specified in Article
15(a) of the Demise Charter.

 

“Event of Loss” shall mean any of the following events occurring during the
Charter Period: (i) the actual or constructive total loss of any Vessel, which
shall include damages to an extent determined in good faith by Charterer, and
accepted by such Vessel’s underwriter, to make repairs uneconomical or to render
such Vessel unfit for normal use or the compromised or agreed total loss (as
determined in accordance with such Vessel’s Policies of Insurance) of such
Vessel during the Charter Period (even though Charterer shall have been deprived
of, or limited in, the use of such Vessel in any respect at the time of such
loss by reason of any act or omission of Shipowner), (ii) the requisition of the
title to or other compulsory acquisition of any of the Vessels otherwise than by
a requisition for use of the Vessels as described in Article 12 of the

 

SA-4

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Demise Charter, or the capture, seizure, arrest (other than by reason of a
claim, the failure of Charterer to discharge which, would constitute an Event of
Default under the Demise Charter), detention by the operation of political or
executive act or confiscation of any Vessel by any government or Persons acting
or purporting to act on behalf of any government unless such Vessel be released
and restored to Shipowner or Charterer, as the case may be, from such
requisition, capture, seizure, arrest, detention or confiscation within ninety
(90) days after the occurrence thereof, or (iii) the imposition, by governmental
action, change in applicable law or change in the applicable requirements of the
USCG or the Classification Society, of the obligation to make Modifications to a
Vessel that (A) cost more than $1,000,000, and (B) in the reasonable good faith
judgment of Charterer would be uneconomical solely as a consequence of the age
and type of the Vessel; provided that Charterer as a result of such
determination of economic obsolescence ceases operation of such Vessel and sells
such Vessel for scrap or otherwise (in an arm’s length transaction to a
non-Affiliate of Charterer). An Event of Loss shall be deemed to have occurred
(w) in the event of an actual total loss of any of the Vessels, on the date of
such loss; (x) in the event of a constructive total loss; (y) in the case of a
compromised or agreed total loss, on the date agreed upon by underwriter; or on
such ninetieth (90th) day in the case of such a requisition, capture, seizure,
arrest, detention or confiscation; or (z) upon the date of sale in the case of
economic obsolescence under clause (iii) above.

 

“Excluded Cargoes” with respect to any Vessel shall mean cargoes that are (i)
Hazardous Materials, and (ii) either (A) are excluded from or would invalidate
applicable insurance carried, or required by the Demise Charter to be carried,
with respect to such Vessel and its operations, (B) are not permitted by such
Vessel’s certificate of inspection, or (C) are liquid cargoes (including, but
not limited to, petroleum, petroleum products and chemicals).

 

“Fair Market Bareboat Charter Value” and “Fair Market Sales Value” shall mean,
respectively, the fair market value which would be realized by the owner of the
Vessels for a bareboat charter or upon a sale of the Vessels, determined by the
Appraisal Procedure. For purposes of this Demise Charter, fair market value
shall be determined on the basis of, and shall be equal in amount to, the value
which would be obtained in an arm’s length transaction between an informed and
willing charterer or buyer, as the case may be, of the Vessels for use as U.S.
flag vessels eligible to engage in the coastwise trade of the United States
(other than a charterer or buyer currently in possession) and an informed and
willing lessor or seller under no compulsion to charter or sell and, in such
determination, any costs of removal from the location(s) of current use shall
not be a deduction from fair market value, provided, however, that the
determinations of Fair Market Bareboat Charter Value and Fair Market Sales Value
for purposes of Articles 15 and 16 of the Charter shall be based upon the actual
condition of the Vessels at the time of such determination and shall take into
account any legal impediments to the prompt sale or chartering of such Vessels.

 

“Federal Bankruptcy Code” shall mean the United States Bankruptcy Code, Title 11
United States Code, as amended.

 

“Fees, Taxes and/or Other Charges” shall mean any and all fees (including,
without limitation, documentation, license and registration fees) and any and
all taxes (including, without limitation, income, gross receipts, franchise,
sales, use, personal property (tangible or intangible), stamp and interest
equalization taxes), levies, imposts, duties, charges or withholdings of any
nature whatsoever, together with any and all penalties, fines or interest
thereon.

 

SA-5

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“GAAP” shall mean generally accepted accounting principles as in effect in the
United States, consistently applied.

 

“Guarantee” shall mean that certain Guarantee Agreement entered into between
Guarantor and Shipowner dated the Closing Date.

 

“Guaranteed Agreement” and “Guaranteed Agreements” shall have the meanings set
forth in the second recital of the Guarantee.

 

“Guaranteed Obligation” and “Guaranteed Obligations” shall have the meanings set
forth in Section 1.1 of the Guarantee.

 

“Guaranteed Party” and “Guaranteed Parties” shall have the meaning set forth in
the third recital of the Guarantee.

 

“Guarantor” shall mean TECO Energy, Inc., a Florida corporation.

 

“Hazardous Material” shall mean any material or substance that, whether by its
nature or use, is at any time subject to regulation, or for which liability is
imposed, under any Environmental Law or other applicable legal requirements,
including without limitation crude petroleum, any petroleum products (whether or
not refined or otherwise processed), asbestos, flammables, volatile
hydrocarbons, industrial solvents, explosive or radioactive materials, hazardous
wastes, toxic substances or related materials.

 

“Indebtedness” shall mean with respect to any Person, without duplication, (a)
every obligation of such Person for money borrowed, (b) every obligation of such
Person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses, (c) every reimbursement obligation of such Person with
respect to letters of credit, bankers, acceptances or similar facilities issued
for the account of such Person, (d) every obligation of such Person issued or
assumed as the deferred purchase price of property or services (but excluding
(i) trade accounts payable or accrued liabilities arising in the ordinary course
of business which are not overdue by sixty (60) days or more or are being
contested in good faith and (ii) obligations arising under construction
contracts for the construction of qualified vessels substituted pursuant to the
terms of the Indenture), (e) interest accrued after the commencement of any
bankruptcy, insolvency, receivership or similar proceedings and other interest
that would have accrued but for the commencement of such proceedings, (f) the
maximum fixed redemption or repurchase price of preferred stock of such Person
at the time of determination, (g) every obligation of the type referred to in
clauses (a) through (h) of another Person and all dividends of another Person
the payment of which, in either case, such Person has guaranteed or is
responsible or liable, directly or indirectly, as obligor, guarantor or
otherwise. Any reference in this definition to indebtedness shall be deemed to
include any renewals, extensions, refundings, amendments and modifications to
any such indebtedness or any indebtedness issued in exchange for such
indebtedness.

 

SA-6

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“Indemnified Persons” shall mean the Trust Company, in its individual capacity
and as Trustee, the Trust, Owner Participant, and their respective Affiliates,
officers, directors, agents, servants, employees, and their successors and
assigns.

 

“Institute Warranties and Clauses” shall mean the trading warranty clauses in
general use and promulgated by the American Institute of Marine Underwriters or
the Institute of London Underwriters or other underwriters approved in
accordance with the provisions of Article 9 of the Demise Charter, whichever is
applicable with respect to the United States placed or foreign placed hull
insurance.

 

“Insurances Assignment” shall mean that certain Assignment of Insurances whereby
Charterer assigns to Shipowner all of its right, title and interest in, to, and
under, all Policies of Insurance.

 

“Legally Eligible Designee” shall mean a Person which at the time in question is
permitted by applicable United States laws and regulations to purchase and take
title to the Vessels.

 

“Lessor’s Cost” shall mean with respect to each Vessel the fair market value of
such Vessel as determined by the Appraiser, as set forth on Schedule 2 to the
Agreement.

 

“Liens” shall mean any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other security
interest or any preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement and any capitalized lease
having substantially the same economic effect as any of the foregoing), or
rights of others.

 

“Maritime Citizen” shall mean any Person who either (i) is a citizen of the
United States within the meaning of Section 2 of the Shipping Act, 1916, as
amended, 46 App. U.S.C. 802, for the purpose of engaging in coastwise trade, or
(ii) is a Documentation Citizen which is, or whose parent entity is, or whose
parent entity has a subsidiary which is, primarily engaged in leasing or
financing transactions within the meaning of 46 U.S.C. 12106(e)(1)(B).

 

“Material Adverse Effect” means any event or circumstance which (a) constitutes
or would result in an Event of Default, or (b) materially and adversely effects
(i) the assets, liabilities, financial condition or operations of an Obligor,
or, if applicable, an Obligor and its Subsidiaries taken as a whole, (ii) the
ability of an Obligor to perform its obligations under the Transaction Documents
to which it is a party, or (iii) the condition, value, utility or operation of,
or title to, any Vessel.

 

“Modification” means any improvement, modification, alteration or addition to
any Vessel.

 

SA-7

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“Non-Severable Modification” means, with respect to any Vessel, any Modification
that is not a Severable Modification.

 

“Notice” shall mean any written notice given by one Person to any other Person
or Persons in the manner set forth in one or the other of the manners set forth
in the Notice provisions of any applicable Transaction Document.

 

“Obligations” shall mean the joint and/or several obligations of the Obligors
under, pursuant or relating to, the Transaction Documents.

 

“Obligors” shall mean Charterer and the Guarantor.

 

“Officer’s Certificate” shall mean, when used with respect to any corporation, a
certificate signed by the chairman of the board, the managing director, any
director, the president, any vice president, the secretary, or the treasurer of
such corporation.

 

“Opinion of Counsel” shall mean the opinion of counsel to Charterer and the
Guarantor addressing the matters described in Exhibit A to the Agreement.

 

“Option Closing Date” shall have the meaning set forth in Article 10(h) of this
Demise Charter.

 

“Other Charter” shall mean any bareboat charter or bareboat subcharter, entered
into with respect to any Vessel, other than the Demise Charter.

 

“Other Interested Persons” shall mean, for purposes of any policies of insurance
required to be maintained on or with respect to the Vessel, (1) Owner
Participant, (2) Trust Company, and (3) any other permitted charterer
(individually, an “Other Interested Person”).

 

“Owner Participant” shall mean Fleet Capital Corporation, a Rhode Island
corporation.

 

“Parts” means appliances, parts, instruments, appurtenances, accessories and
equipment of whatever nature, whether or not constituting Modifications.

 

“Per Diem Rate” means a per diem rate calculated on the basis of the average of
Basic Hire for the last seven (7) years of the Term.

 

“Permitted Liens” shall mean (1) liens for Crew’s Wages and salvage (including
contract salvage), general average and damages arising out of maritime torts
which are either unclaimed or covered by insurance, (2) liens incident to
current operations and not more than thirty (30) days past due unless same is
being contested in good faith by Charterer and Charterer has set aside adequate
reserves in accordance with GAAP with respect to same, (3) liens for wages of
stevedores when employed directly by the Vessels, Charterer, or the master(s) of
the Vessels, (4) liens covered by insurance and any deductible applicable
thereto, (5) the Charters Assignment and the Insurances Assignment, (6) liens
for repairs or for changes made in the Vessels to comply with law, the
requirements of the Vessels’ classification society in order to

 

SA-8

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maintain their class as required by Article 4 of the Demise Charter, or in
accordance with Article 6 of the Demise Charter, provided that any liens
permitted by this clause (6) shall be discharged in the ordinary course of
business of Charterer and in any event shall secure claims not more than thirty
(30) days past due unless same is being contested in good faith by Charterer and
Charterer has set aside adequate reserves in accordance with GAAP with respect
to same, and (7) the encumbrances, if any, constituted by the Demise Charter.

 

“Person” means any individual, corporation, partnership, limited partnership,
limited liability partnership, joint venture, association, joint-stock company,
company, limited liability company, trust, unincorporated organization or
government or any agency or political subdivision thereof.

 

“Plans and Specifications” shall mean the plans and specifications for the
Vessels furnished by Seller to Owner Participant.

 

“Policies of Insurance” and “Policies” shall mean all cover notes, binders,
policies of insurance and certificates of entry in protection and indemnity
associations, clubs or syndicates with respect to the Vessels including all
endorsements and riders to any thereof.

 

“Prime Rate” shall mean the interest rate announced from time to time by Fleet
National Bank as its prime rate, notwithstanding the fact that such bank may
regularly make loans at rates of interest less than such prime rate.

 

“Redelivery” shall mean redelivery of the Vessels by Charterer to Shipowner upon
the termination of the Charter Period free and clear of all liens, encumbrances
and rights of others for which Charterer is responsible under the terms of the
Demise Charter and in all respects in the condition required by the Demise
Charter, and the term “Redelivered” shall have a meaning correlative to the
foregoing. The term “Redelivery” shall include retaking of the Vessels in
accordance with Article 15(b)(i) of the Demise Charter.

 

“Reference Rate” shall mean 3.12%.

 

“Relevant Treasury Rate” shall mean the Treasury Constant Maturity rate for a
2-year period, as published in the Selected Interest Rates table of Federal
Reserve statistical release H.15(519) (or similar successor publication) in
effect thirty (30) days prior to the Early Termination Date.

 

“Remaining Rental Factor” shall mean the Base Rental Factor, adjusted (upward or
downward) by the Adjustment Factor.

 

“Request” shall mean a written request to a Person for the action therein
specified, signed when made by any Person by the chairman of the board, the
president, any vice president, the secretary, or the treasurer of such Person.

 

“Responsible Officer” shall mean with respect to any Person the chairman of the
board, the president, any vice president, the secretary, or treasurer of such
Person, and with respect to the Trust Company or the Trustee, means any officer
in its corporate trust administration department.

 

SA-9

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“Sales Value” means with respect to any Vessel 45.34125% of Lessor’s Cost of
such Vessel.

 

“Seller” means Gulfcoast Transit Company, a Florida corporation, as owner (prior
to the Closing Date) and seller of the Vessels.

 

“Severable Modification” shall mean any Modification (i) the cost of which was
not included in Lessor’s Cost, and (ii) that can be readily removed from any of
the Vessels (or any part thereof) without causing damage to or diminishment of
the value, utility or remaining useful life of such Vessel.

 

“Shipowner” shall mean the Trust, acting by and through the Trust Company, not
in its individual capacity but solely as Trustee under the Trust Agreement,
together with its permitted successors and assigns.

 

“Shipowner’s Liens” shall mean Liens arising solely as the result of Owner
Participant’s or Shipowner’s acts or omissions (other than acts or omissions for
which Shipowner or Owner Participant is indemnified pursuant to the terms of the
Transaction Documents) or of claims or demands against Owner Participant or
Shipowner unrelated to (i) Shipowner’s ownership of the Vessels, (ii) the
administration of the Trust Estate, or (iii) the transactions contemplated by
the Transaction Documents.

 

“Shipping Act” shall mean the Shipping Act, 1916, as at any time amended, Title
46, United States Code, §801 et seq., or any successor statute thereto.

 

“Stipulated Loss Value” with respect to any Vessel shall mean at any date during
the Term, if such date is a Basic Hire Payment Date, the amount determined by
multiplying Lessor’s Cost for such Vessel times the percentage set forth
opposite such date under the heading “Stipulated Loss Value” on Schedule B and
if such date is not a Basic Hire Payment Date the percentage set forth opposite
the date next preceding such date under the heading “Stipulated Loss Value” on
Schedule B, plus interest at the Default Rate on such amount from such date to
the date of payment of Stipulated Loss Value (and each reference in the Demise
Charter to Stipulated Loss Value calculated as of a particular date shall be
deemed to include such interest factor to the date of payment).

 

“Subsidiary” shall mean any corporation, association, trust, or other business
entity of which the designated parent shall at any time own directly or
indirectly through a Subsidiary or Subsidiaries at least a majority (by number
of votes) of the outstanding voting stock or shall otherwise have a majority
interest therein.

 

“Supplemental Hire” shall mean all amounts at any time payable to Shipowner
under or pursuant to the terms of the Demise Charter other than Basic Hire,
including, without limitation, interest on late payments, payments on accounts
of indemnities, legal fees, expenses of

 

SA-10

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investigation, out-of-pocket expenses, the fees and expenses of the Trust
Company, and all other amounts of whatsoever kind and nature payable under,
pursuant to, or by reason of the Demise Charter or any provision thereof, but
excluding Basic Hire.

 

“Tangible Net Worth” for any Person, shall mean the shareholder’s equity of such
Person and its Subsidiaries determined on a consolidated basis in accordance
with GAAP.

 

“Tax Indemnity Agreement” shall mean the Tax Indemnity Agreement dated as of
December 21, 2001 between Charterer and Owner Participant.

 

“Taxes” shall have the meaning set forth in Article 17 of the Demise Charter.

 

“Term” shall mean a period commencing with the Closing Date, and ending on the
twelfth (12th) anniversary of the Closing Date, or, if Charterer has exercised
its option to renew in Article 16, on the last day of such renewal term,
provided, however, that the Term shall end prior to said day in the event of a
termination thereof in accordance with Articles 10, 11 or 15 of the Demise
Charter.

 

“Todd Shipyards Lien” shall mean a maritime lien on the MARY TURNER, Official
No. 646730, filed on October 9, 1985 in favor of Todd Shipyards Corporation in
the amount of $160,000.

 

“Transaction Costs” shall have the meaning set forth in Section 6.1 of the
Agreement.

 

“Transaction Documents” shall mean the Agreement, the Demise Charter, the
Guarantee, the Tax Indemnity Agreement, the Assignments, the Certificate of
Delivery and Acceptance, the Bills of Sale, including any and all schedules and
exhibits thereto, and all other certificates, affidavits, applications,
agreements, writings and documents in any way pertaining to any of the
transactions referred to in the foregoing enumerated documents, and “Transaction
Document” shall mean any of the foregoing.

 

“Transaction Event of Default” shall mean any of the “Transaction Events of
Default” specified in Section 5.7 of the Agreement

 

“Trust” shall mean the GTC CONNECTICUT STATUTORY TRUST, a Connecticut statutory
trust created by and existing pursuant to the Trust Agreement.

 

“Trust Agreement” shall mean the Amended and Restated Trust Agreement dated as
of December 21, 2001, between Owner Participant and the Trust Company.

 

“Trust Company” shall mean State Street Bank and Trust Company of Connecticut,
National Association, in its individual capacity.

 

“Trust Estate” shall have the meaning assigned to that term in the Trust
Agreement.

 

SA-11

--------------------------------------------------------------------------------

“Trustee” shall mean the Trust Company, not in its individual capacity but
solely as trustee of the Trust.

 

“USC” shall mean the United States Code.

 

“USCG” shall mean the United States Coast Guard, Department of Transportation,
or any successor agency thereto.

 

“Vessels” or “Vessel” shall mean the following United States flag dry-bulk cargo
marine transportation vessels:

 

  (i) the BARBARA KESSEL, a 7,200 horsepower integrated blue-water tug-barge
unit, built in 1977, Official No. 583310;

 

  (ii) the GAYLE EUSTACE, a 36,686 short-ton cargo capacity integrated
blue-water barge, built in 1977, Official No. 587045;

 

  (iii) the PEGGY PALMER, a 37,700 short-ton cargo capacity blue-water barge,
built in 1981, Official No. 641530;

 

  (iv) the MARY TURNER, a 42,800 short-ton cargo capacity blue-water barge,
built in 1982, Official No. 646730;

 

or each or any such vessel as the context may require, and in each case shall
include, subject to Sections 5(c), 6(b) and 6(c) of the Demise Charter, all of
their engines, boilers, machinery, masts, boats, anchors, cables, chains,
rigging, tackle, apparel, furniture, capstans, outfit, tools, pumps, pumping and
other equipment, gear, furnishings, appliances, fittings and spare and
replacement parts and all other appurtenances to said vessels appertaining or
belonging, whether now owned or hereafter acquired, whether on board or not on
board, and also any and all additions, improvements and replacements hereafter
made in or to said vessels or any part thereof, including all items and
appurtenances as aforesaid. If the Demise Charter terminates with respect to any
such vessel upon the occurrence of an Event of Loss and payment to Shipowner of
all amounts due with respect to such vessel as a result of such Event of Loss
pursuant to Article 11(a) of the Demise Charter, such vessel shall thereafter be
excluded from the definition of “Vessels” or “Vessel”, as the case may be.

 

SA-12

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SCHEDULE B

 

Schedule of Stipulated Loss Values

 

    

Basic Hire Payment Date

--------------------------------------------------------------------------------

  

Stipulated Loss Value

Expressed as a

Percentage of Lessor’s Cost

--------------------------------------------------------------------------------

1.

   December 21, 2001    102.00000000

2.

   March 21, 2002    103.76504347

3.

   July 2, 2002    106.12371837

4.

   January 2, 2003    101.83586979

5.

   July 2, 2003    105.11002171

6.

   January 2, 2004    98.40702270

7.

   July 2, 2004    101.40426217

8.

   January 2, 2005    94.44072383

9.

   July 2, 2005    97.18930380

10.

   January 2, 2006    89.98953523

11.

   July 2, 2006    92.51073968

12.

   January 2, 2007    85.09291646

13.

   July 2, 2007    74.79762102

14.

   January 2, 2008    76.75407531

15.

   July 2, 2008    66.12322938

16.

   January 2, 2009    67.79363741

17.

   July 2, 2009    56.87048546

18.

   January 2, 2010    58.24219074

19.

   July 2, 2010    47.01379930

20.

   January 2, 2011    48.07358532

21.

   July 2, 2011    36.53421869

22.

   January 2, 2012    37.30164056

23.

   July 2, 2012    25.80997705

24.

   January 2, 2013    26.32791374

25.

   July 2, 2013    18.93733410

26.

   December 21, 2013    17.50000000

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SCHEDULE C

 

Schedule of Base Rental Factors

(Expressed as a Percentage of Lessor’s Costs)

 

   

Basic Hire

Payment Date

--------------------------------------------------------------------------------

 

Advance

Rental Factor

--------------------------------------------------------------------------------

 

Arrears

Rental Factor

--------------------------------------------------------------------------------

 

Total Base

Rental Factor

--------------------------------------------------------------------------------

1.     December 21, 2001   0.00000000   0.00000000   0.00000000 2.     March 21,
2002   0.00000000   0.00000000   0.00000000 3.     July 2, 2002   0.00000000  
0.00000000   0.00000000 4.     January 2, 2003   0.00000000   7.82218048  
7.82218048 5.     July 2, 2003   0.00000000   0.00000000   0.00000000 6.    
January 2, 2004   0.00000000   10.01338986   10.01338986 7.     July 2, 2004  
0.00000000   0.00000000   0.00000000 8.     January 2, 2005   0.00000000  
10.01338986   10.01338986 9.     July 2, 2005   0.00000000   0.00000000  
0.00000000 10.   January 2, 2006   0.00000000   10.01338986   10.01338986 11.  
July 2, 2006   0.00000000   0.00000000   0.00000000 12.   January 2, 2007  
12.16807908   10.01338986   22.18146894 13.   July 2, 2007   0.00000000  
0.00000000   0.00000000 14.   January 2, 2008   12.22370902   0.00000000  
12.22370902 15.   July 2, 2008   0.00000000   0.00000000   0.00000000 16.  
January 2, 2009   12.22370902   0.00000000   12.22370902 17.   July 2, 2009  
0.00000000   0.00000000   0.00000000 18.   January 2, 2010   12.22370902  
0.00000000   12.22370902 19.   July 2, 2010   0.00000000   0.00000000  
0.00000000 20.   January 2, 2011   12.22370902   0.00000000   12.22370902 21.  
July 2, 2011   0.00000000   0.00000000   0.00000000 22.   January 2, 2012  
11.90937730   0.00000000   11.90937730 23.   July 2, 2012   0.00000000  
0.00000000   0.00000000 24.   January 2, 2013   5.79946240   0.00000000  
5.79946240 25.   July 2, 2013   0.00000000   2.02380989   2.02380989 26.  
December 21, 2013   0.00000000   1.90013262   1.90013262         78.77175486  
51.79968243   130.57143729        

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