Exhibit 10.1
SHIPBUILDING CONTRACT
Between
MARITRANS OPERATING COMPANY, L.P.
and
BENDER SHIPBUILDING & REPAIR CO., INC.
[****] Confidential Treatment

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

 

TABLE OF CONTENTS

         
ARTICLE I — DESCRIPTION AND CLASS
    6  
 
       
A. Description:
    6  
B. Dimensions and Characteristics:
    6  
C. Classification, Rules and Regulations:
    7  
D. Subcontracting:
    7  
E. Maker’s List:
    7  
 
       
ARTICLE II — CONTRACT PRICE AND TERMS OF PAYMENT
    8  
 
       
A. Contract Price:
    8  
B. Terms of Payment:
    8  
 
       
ARTICLE III — ADJUSTMENT OF CONTRACT PRICE
    9  
 
       
A. Delivery:
    9  
B. Fuel Consumption:
    10  
C. Noise and Vibration:
    11  
 
       
ARTICLE IV — APPROVAL OF PLANS AND DRAWINGS AND INSPECTION DURING CONSTRUCTION
    14  
 
       
A. Approval of Plans and Drawings:
    14  
B. Appointment of Buyer’s Representative:
    15  
C. Inspection by Buyer’s Representative:
    15  
D. Facilities:
    16  
E. Responsibility of Buyer:
    16  
 
       
ARTICLE V — MODIFICATIONS
    17  
 
       
A. Modifications of Specifications:
    17  
B. Change in Class:
    19  
C. Substitution of Materials:
    19  
 
       
ARTICLE VI — TRIALS
    20  
 
       
A. Notice:
    20  
B. Weather Conditions:
    20  
C. How Conducted:
    20  
D. Method of Acceptance or Rejection:
    21  
E. Effect of Acceptance:
    21  
F. Disposition of Surplus Consumable Stores:
    22  
 
       
ARTICLE VII — PRODUCTION SCHEDULES AND PROGRESS MEETINGS
    22  

[****] Confidential Treatment

2

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

 

         
ARTICLE VIII — DELIVERY
    22  
 
       
A. Time and Place:
    22  
B. When and How Effected:
    23  
C. Documents to be Delivered to Buyer:
    23  
D. Tender of Tugs:
    24  
E. Title and Risk:
    24  
F. Removal of Tugs:
    24  
 
       
ARTICLE IX — DELAYS AND EXTENSION OF TIME FOR DELIVERY
    24  
 
       
A. Causes of Delay:
    24  
B. Notice of Delay:
    25  
C. Definition of Permissible Delay:
    26  
 
       
ARTICLE X — WARRANTY
    26  
 
       
A. Warranty:
    26  
B. Notice of Defects:
    27  
C. Remedy of Defects:
    27  
D. Extent of Builder’s Responsibility:
    28  
 
       
ARTICLE XI — BUILDER’S DEFAULT
    28  
 
       
A. Default by Builder:
    28  
B. Remedies for Builder’s Default:
    29  
 
       
ARTICLE XII — BUYER’S DEFAULT
    30  
 
       
A. Default by Buyer:
    30  
B. Remedies for Buyer’s Default:
    30  
 
       
ARTICLE XIII — INSURANCE
    31  
 
       
A. Builder’s Insurance:
    31  
B. Buyer’s Insurance:
    32  
 
       
ARTICLE XIV — DISPUTE RESOLUTION
    33  
 
       
ARTICLE XV — RIGHT OF ASSIGNMENT
    34  
 
       
ARTICLE XVI — TAXES
    34  

[****] Confidential Treatment

3

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

 

         
ARTICLE XVII — PATENTS, TRADEMARKS, COPYRIGHTS, ETC.
    34  
 
       
A. Patents, Trademarks and Copyrights:
    35  
B. Specifications and Drawings:
    35  
 
       
ARTICLE XVIII — BUYER FURNISHED EQUIPMENT
    35  
 
       
A. Responsibility of Buyer:
    35  
B. Responsibility of Builder:
    36  
 
       
ARTICLE XIX — NOTICES
    36  
 
       
A. Address:
    36  
B. Language:
    37  
 
       
ARTICLE XX — TITLE
    37  
 
       
ARTICLE XXI — INTERPRETATION
    38  
 
       
A. Laws Applicable:
    38  
B. Discrepancies:
    38  
C. Entire Agreement:
    38  
 
       
ARTICLE XXII — LIMITATION OF LIABILITY AND NO BROKERAGE
    39  
 
       
A. Limitation of Liability:
    39  
B. Brokerage:
    39  
 
       
ARTICLE XXIII — INDEMNITIES
    39  
 
       
A. Builder Indemnity:
    39  
B. Buyer Indemnity:
    41  
 
       
ARTICLE XXIV — CONTRACT PERFORMANCE SECURITY
    42  
 
       
ARTICLE XXV — MISCELLANEOUS
    43  
 
       
A. Confidentiality:
    43  
B. Buyer’s Business Standards:
    44  
 
       
ARTICLE XXVI — EFFECTIVE DATE OF CONTRACT
    44  

[****] Confidential Treatment

4

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

 

             
EXHIBIT A
  THE SPECIFICATIONS     46  
 
           
EXHIBIT B
  THE DRAWINGS     46  
 
           
EXHIBIT C
  MILESTONE PAYMENTS     46  
 
           
EXHIBIT D
  PROTOCOL OF DELIVERY AND ACCEPTANCE     46  

[****] Confidential Treatment

5

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

 

SHIPBUILDING CONTRACT
THIS CONTRACT, dated as of this 25th day of May, 2006, by and between Bender
Shipbuilding & Repair Co., Inc., a corporation organized and existing under the
laws of Alabama (“Builder”), having its principal office at 265 South Water
Street, Mobile, AL 36603 (“the Shipyard”), and Maritrans Operating Company,
L.P., a limited partnership organized and existing under the laws of Delaware
(“Buyer”), having its principal office at Two Harbor Place, 302 Knights Run
Ave., Tampa, FL 33602.
WITNESSETH:
In consideration of the mutual covenants herein contained, Builder agrees to
design, build, launch, equip and complete at the Shipyard and sell and deliver
to Buyer two (2) 8,000 HP Tugs (“the Tugs”), as more fully described in
Article I hereof. Buyer agrees to purchase and take delivery of the Tugs from
Builder at the Shipyard and to pay for the same, all upon the terms and
conditions hereinafter set forth.
ARTICLE I — DESCRIPTION AND CLASS

A.   Description:       The Tugs shall have Builder’s Hull Nos.:

     
Tug 1
  Hull No. 8015
Tug 2
  Hull No. 8016

The Tugs shall be designed, constructed, equipped and completed in accordance
with the provisions of this Contract, and the Specifications (“the
Specifications”) and Drawings (“Drawings”) signed by each of the parties hereto
for identification and attached hereto as Exhibits A and B and made an integral
part hereof.
B. Dimensions and Characteristics:

     
Length overall:
  [****]
Beam molded
  [****]
Depth, molded (baseline @ midship)
  [****]

    The details of the above dimensions, as well as definitions and methods of
measurements and calculations are more fully described in the Specifications.

[****] Confidential Treatment

6

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

 

C.   Classification, Rules and Regulations:

  1.   The Tugs, including their machinery, equipment and outfitting shall be
constructed in accordance with the rules (as published and interpreted as of the
date of this Contract, and the edition and amendments thereto being in force as
of the date of this Contract) of and under special survey of the American Bureau
of Shipping (herein called the “Classification Society”), with the notation set
out in the Specifications (herein referred to as the “Class”).     2.  
Decisions of the Classification Society as to compliance or non-compliance with
the rules thereof shall be final and binding upon both parties hereto.     3.  
The Tugs shall also comply with the rules, regulations and requirements of other
regulatory bodies as described in the Specifications, as the same have been
publicly interpreted and were in effect as of the date of this Contract.     4.
  All fees and charges incidental to the classification and with respect to
compliance with the above referred rules, regulations and requirements shall be
for account of Builder.

D.   Subcontracting:       Builder may, at its sole discretion and
responsibility, subcontract any portion of the construction work of the Tugs,
provided however, that no such subcontract in excess of Two Hundred Thousand
Dollars ($200,000) will be executed without Buyer’s prior written consent as to
amount, work, and the subcontractor, which consent shall not be unreasonably
withheld. Subject to the provisions of Article X, Builder will remain
responsible to Buyer for the performance of any and all subcontractors and for
any and all work by subcontractors.   E.   Maker’s List:       Buyer has
reviewed and approved the list of suppliers nominated by Builder for delivery of
certain therein defined equipment, machinery and services (herein referred to as
the “Maker’s List”) signed by each of the parties hereto for identification and
incorporated within the Specifications. Builder shall endeavor to select
suppliers for the therein-defined equipment, machinery and services from the
Maker’s List, and may, without the interference of Buyer, in its sole
discretion, select between the different suppliers nominated therein. However,
if Buyer requests Builder to order any equipment, machinery or services from a
particular supplier listed on the Maker’s List, Builder will take all reasonable
steps to

[****] Confidential Treatment

7

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

 

    comply with such request, provided that Buyer shall reimburse Builder any
reasonable extra costs associated with such request.

ARTICLE II — CONTRACT PRICE AND TERMS OF PAYMENT

A.   Contract Price:

  1.   The purchase price of Tug 1 is US$[****] and the purchase price of Tug 2
is $[****], the total of which is $31,400,000 (the “Contract Price”).     2.  
The Contract Price is exclusive of Buyer Furnished Equipment as provided in
Article XVII hereof and shall be subject to upward or downward adjustment, if
any, as hereinafter set forth in this Contract.     3.   All applicable taxes,
duties and tariffs imposed by federal, state or local laws as well as
assessments of charges for social security, retirement and unemployment
benefits, are the responsibility of the Builder and are included in the Contract
Price.

B.   Terms of Payment:

  1.   The Contract Price shall be paid by Buyer to Builder in accordance with
the milestone payment schedule which is attached hereto as Exhibit C.

  a.   Although the progress payments are linked to Contractor’s completion of
certain milestones, Contractor acknowledges that scheduling of all work is
exclusively and solely the responsibility of Contractor, and that Contractor
will not artificially manipulate the schedule of construction of the Vessel
merely to achieve earlier milestone payments.     b.   Any milestone payment
shall be due upon the completion of the milestone and no earlier than 15 days
prior to the milestone date contained in Exhibit C. As Builder is not
responsible for the modification of the barges to which the Tugs will be
connected, the final milestone payment shall be due on the date set forth in
Exhibit C, whether or not the “Intercon with barge trials” are conducted by such
date.

  2.   The milestone payment schedule amounts are based upon the average price
of each Tug rather than the actual price set forth in Paragraph A above.

[****] Confidential Treatment

8

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

 

  3.   Buyer will pay Builder upon presentation of an invoice:

  a.   The initial invoice will be paid within five (5) business days of
receipt.     b.   All other invoices will be paid within ten business (10) days
of receipt.

  4.   Upon request of the Buyer, Builder shall demonstrate to the reasonable
satisfaction of the Buyer that provision has been made for payment (unless such
payment is disputed by Builder) to all contractors, subcontractors, or others
for services performed on the Tugs, prior to payment by the Buyer for work
performed by the Builder. Builder hereby agrees to provide Buyer with a full
accounting on a monthly basis of expenditures made on the project, if requested.
    5.   If Owner can demonstrate a reasonable basis for a belief that the
Builder may be financially unable to complete the Work required by this Contract
or has breached Maritrans’ Vendor Code of Conduct, Buyer [****] all of Builder’s
books, records, and correspondence pertaining to the Contract, from the time of
initial payment until 18 months after completion of the second Tug.

ARTICLE III — ADJUSTMENT OF CONTRACT PRICE
The Contract Price shall be subject to adjustment, as hereinafter set forth, in
the event of the following contingencies (it being understood by both parties
that any reduction of the Contract Price is by way of liquidated damages and not
by way of penalty):
A. Delivery:

  1.   For each Tug, if the Tug is not delivered on its respective Delivery
Date, for every day after the Delivery Date the Contract Price for such Tug
shall be reduced by deducting therefrom liquidated damages calculated as
follows:

     
1st through 30th day
  $[****] per calendar day
31st through 90th day
  $[****] per calendar day
91st through 210th day
  $[****] per calendar day

    Provided, that prior to exercising such right to deduct any such liquidated
damages, Buyer shall set forth in writing to Builder the amount (and related
supporting calculations) of the liquidated damages claimed by Buyer. If Builder
disputes any such claimed liquidated damages, then Buyer shall if requested
provide a bank guaranty or other security reasonably satisfactory

[****] Confidential Treatment

9

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

 

    to the Builder in the amount of the disputed liquidated damages until such
time as the dispute with respect to the underlying claim is resolved between the
parties by mutual agreement or pursuant to Article XIV below.

  2.   If Buyer requests in writing that the delivery of either Tug be made
earlier than the Delivery Date, and if the delivery of the Tug is made, in
response to such request of Buyer, then, in such event, beginning with the first
(1st) day prior to the Delivery Date, the Contract Price of the Tugs shall be
increased by adding thereto US$[****] for each full day (it being understood
that Builder’s acceptance of such request by Buyer for early delivery shall in
no way be construed as a change or alteration of the Delivery Date under this
Contract).

B.   Fuel Consumption:

  1.   Fuel oil consumption at 2984 kW load (100 % of MCR) for the selected main
engine and at a speed of 900 rpm (or according to propeller law) will not exceed
[****] g/kW-hr with a tolerance of five percent (5%) (hereinafter referred to as
“Guaranteed Fuel Oil Consumption”) during test running at the engine
manufacturer’s factory prior to the delivery. Guaranteed Fuel Oil Consumption
shall be valid at reference conditions ISO 3046/I and a fuel net lower calorific
heat value of 42.700 kJ/kg (10.198 kcal/kg) when running on available fuel
without engine driven pumps. The leakage fuel in each engine will not be
calculated into the consumption.     2.   However, commencing with and including
an excess of five percent (5%) in the actual fuel consumption, corrected to ISO
reference condition above, over the Guaranteed Fuel Oil Consumption, the
Contract Price shall be reduced by the sum of $[****] per engine for each full
[****] percent ([****]%) increase in Fuel Oil Consumption above said [five]
percent ([****]%) (fractions of [one] percent ([****]%) to be prorated) to a
maximum of [****]%.     3.   Should the engine manufacturer, in order to meet
the Fuel Oil Consumption guarantee, be required to make adjustments or
modifications to any or all engines and any such adjustments or modifications
result in a delay of delivery of any engine to the Builder from the mutually
agreed scheduled delivery date, Builder will be entitled to up to [****] days of
force majeure on a day for day basis for such late delivery.     4.   Builder
and Buyer agree that the fuel consumption figures and liquidated damages
provided for in Subparagraphs 1 and 2 above are based on a specific engine
manufacturer. Should another engine manufacturer be selected after execution of
this Contract, the fuel consumption and liquidated damages provided by that
manufacturer will apply without any additional cost or burden to Builder. A
change to Subparagraphs 1 and 2

[****] Confidential Treatment

10

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

 

      above will be issued as a modification to this Contract within forty eight
(48) hours of final selection of an engine manufacturer if different from the
manufacturer selected above.     5.   The foregoing fuel consumption provisions
of this Paragraph (Subparagraphs 1 through 4 above) are based upon the
installation of [****] engines. Buyer may direct Builder to install [****]
engines, provided such direction shall be received in writing by Builder not
later than COB, CDT, 5 June 2006. If Buyer so directs Builder to use [****]
engines and [****] engines are available, the parties shall renegotiate the
standards contained in those Subparagraphs based upon [****] engine
specifications and the Contract Price shall be adjusted by the difference
between the [****] and [****] engines.

C.   Noise and Vibration:

  1.   Noise

  a.   The Tug will achieve noise requirements established by IMO Resolution
A.468, Code for Noise Levels On Board Ship (“IMO A.468”) for all accommodation
spaces, navigation spaces and service spaces, including the barge office, in
accordance with Sub-subparagraph c below. Measures to be undertaken are
discussed comprehensively in the Specifications.     b.   To achieve the noise
levels defined in Sub-subparagraph c below, Builder will install noise control
hardware and materials as required by the Specifications, and other measures as
stated in the Specifications. Those other measures may also include the
strategic positioning of tanks located directly above the propellers so as to
attenuate propeller induced noise, where possible. Builder will also retain the
services of a qualified HVAC system subcontractor. HVAC systems will be analyzed
for noise in accordance with procedures defined in, ASHRAE 1999, Chapter 46,
“Sound and Vibration Control”. HVAC systems will be designed with a goal that
HVAC system noise contributions are at least approximately [****] dB below the
limits stated in IMO A.468 such that when machinery noise contributions are
present, the total noise level in a ship compartment does not exceed the levels.
    c.   Builder will achieve compliance with IMO A.468 standards for the
navigation [****]-dBA) and for all offices (65-dBA) at 01 deck and above and for
all accommodation space cabins (60-dBA) at 01 deck and above. For all other
accommodation space cabins, mess room, and other spaces located on main deck or
those accommodation space cabins or other spaces which, by

[****] Confidential Treatment

11

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

 

      arrangement, are located adjacent to any machinery spaces,
connection/coupler systems or in close proximity to propellers, Builder will
achieve a noise level between [****]-dBA. The galley, pantry, mess, laundry,
public toilets and state rooms at main deck level will be at a maximum of
[****]-dBA, as required by IMO A.468, as interpreted by USCG under NVIC 12-82.  
  d.   Any noise level that exceeds the requirements stated above will be
investigated by Builder’s selected noise analyst. The cost of such noise analyst
will be to the account of Builder. This noise analyst will develop a
comprehensive list of recommended corrective actions and specific elements of
this list will be acted upon by Builder as discussed below, to the reasonable
satisfaction of the noise analyst and Buyer. Builder may, at its discretion,
elect to implement those measures which it considers to be most cost effective
in reducing the noise levels to those spaces mentioned above and Builder will
expend up to $[****] per Tug on corrective actions which are considered by the
Builder and the Builder’s assigned noise analyst to be the most cost effective
measures to achieve the required noise levels. This $[****], or any portion
thereof, will be the cost for changes to the first Tug only. These same changes
will be applied to all subsequent Tugs. However, upon expenditure of this
$[****], Builder may, at its discretion, elect to pay liquidated damages
specified herein in lieu of taking such corrective action should the cost of any
or all corrective action exceed the value of the liquidated damages to be paid
under this section. Further:

  (1)   Should, upon completion of corrective actions taken by the Builder, the
noise level problem persist or is mitigated only to a level which is still above
the required levels stated above, Builder shall pay liquidated damages of
$[****] per decibel per space above the required levels to a maximum level of
[****] decibels above the required noise level. The liquidated damages under
this section will be limited to a total of $[****].     (2)   Should the noise
levels in any accommodation or control space, after corrective action has been
taken by the Builder, exceed the levels stated above by greater than [****]
decibels, Builder will pay liquidated damages in the amount of $[****] per
decibel per space in excess of 5 decibels above the required noise level. The
liquidated damage to be paid for cases where noise levels exceed by greater than
[****] decibels above the required noise levels will be limited to a total of
$[****].

[****] Confidential Treatment

12

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

 

  (3)   Buyer may elect to refuse to accept the Tug for any noise level in any
accommodation or control space at 01 level or above which exceeds the guaranteed
levels of Paragraph D.1.(c). above by greater than [****] decibels or any other
space identified in Paragraph D.1.(c) which is equal to or greater than [****]
decibels.

  2.   Vibration

  a.   The Tugs will meet the Specification requirements regarding vibration
limits as set out in ISO 6954, “Mechanical Vibration and Shock - Guidelines for
the Overall Evaluation of Vibration in Merchant Ships” for peak acceleration
less than or equal to 285mm/s2 for the frequency range of [****] Hz to [****] Hz
and for peak velocity less than or equal to 9 mm/s for the frequency range
[****] Hz to [****] Hz.     b.   During the engineering design phase Builder
will retain the services of the propulsion engine manufacturer selected by Buyer
to perform a propulsion system torsional analysis. Builder will also retain the
services of a qualified noise and vibration analysis firm such as BBN
Technologies to perform a comprehensive whole ship (hull and superstructure)
finite element vibration analysis using methods defined in the Specifications.  
  c.   Predicted vibration levels during the design phase will be compared
against the specified vibration limits to verify vibration compliance. If
excessive vibration is predicted, Builder will undertake reasonable corrective
measures such as selection of a specific alternate propeller, local stiffening
of structure, or inclusion of additional vibration dampening material into the
ship design.     d.   Any vibration level that exceeds the requirements stated
above will be investigated by Builder’s selected vibration analyst. The cost of
such vibration analyst will be to the account of Builder. This vibration analyst
will develop a comprehensive list of recommended corrective actions and each
element of this list will be acted upon by Builder to the reasonable
satisfaction of the vibration analyst and Buyer. If, upon completion of all
directed corrective actions, the vibration level exceeds the standard required
in Article III.D.2.(a), Buyer may elect to refuse to accept the Tug.

[****] Confidential Treatment

13

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

 

ARTICLE IV — APPROVAL OF PLANS AND DRAWINGS AND
INSPECTION DURING CONSTRUCTION
A. Approval of Plans and Drawings:

  1.   Builder shall submit to Buyer four (4) hard copies and one (1) electronic
copy via e-mail or on CD-ROM of the plans, drawings, and calculations required
to be submitted thereto for its review. Buyer or Buyer’s designated Engineering
representative shall, within twenty one (21) calendar days after earliest
receipt thereof, respond to Builder, either through hard copy or electronically
via e mail, with Buyer’s comments, if any, either written on the plans thereon
or in a comment letter referencing the plan, drawing or calculation. All hard
copy drawing, plan and calculation submissions between Buyer and Builder will be
by overnight delivery through a well established courier service, the cost of
such courier service being borne by the sender. Buyer will, in response to any
drawing, plan or calculation submission from Builder, designate each drawing
formally as either “Approved without comment”, “Approved with Comments” or “Not
Approved”. Builder and Buyer will coordinate their efforts to ensure that the
twenty one (21) calendar day review time is reduced to the minimum interval
consistent with effective review through mutually agreed drawing development and
submission schedules and timely assignment of adequate personnel to the tasks of
review. Builder may formally request expedited review for plans, drawings and
calculations. Buyer agrees to consider each such request on a case by case basis
and advise Builder of ability to meet the requested date and any delays to other
review tasks but is in under no obligation to accept expedited review. Builder
shall submit to the Regulatory Agencies, the plans, drawings and calculations
that require their approval. Copies of all correspondence between the Builder
and the Regulatory Agencies as well as all hard copies of plans, drawings and
calculations returned stamped by the Regulatory Agencies shall be submitted
immediately to the Buyer in hard copy or in electronic files shared through
Builder’s electronic file system.     2.   When and if Buyer’s Representative
shall have been sent by Buyer to Builder in accordance with Paragraph B of this
Article, Builder shall provide the Buyer’s Representative at any and all Builder
sites where a Buyer’s Representative is assigned one (1) hard copy of the latest
revisions of all previously approved drawings. This Buyer’s Representative,
regardless of where located, will be provided one information hard copy of all
drawing, plan and calculation submissions to Buyer addressed in Subparagraph 1
above.     3.   Plans, drawings and calculations must be submitted for review
and approval by the Owner and Regulatory Agencies prior to their use for the

[****] Confidential Treatment

14

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

 

      construction of the vessel. Plans, drawings and calculations must be
reviewed and returned by the Owner within twenty one (21) calendar days of
receipt by the Owner. If the plans, drawings or calculations are not returned by
the Owner within twenty one (21) working days, they shall be deemed to be
approved. Should the Builder begin work covered by a plan, drawing, calculation,
etc. being reviewed by the Owner prior to the Owner’s return of the drawing by
the time specified herein, the Builder shall be responsible for all remediation
and additional work to complete the work to satisfy the Owner’s comments within
the scope of these Specifications with no additional cost to the Owner. The
Builder is required to submit a plan, drawing or calculation for comment and
approval by the Owner even if it is identical in every way to the original
Contract Drawing.     4.   Approval of these drawings by the Buyer or the
Regulatory Agencies shall not relieve the Builder of its responsibility to
deliver a complete and operable Tug in accordance with the requirements of the
Specifications. Construction errors and omissions must be corrected by the
Builder in accordance with Article X prior to delivery, even if the item at hand
was constructed as depicted on the plans, drawings or calculations approved by
the Buyer or the Regulatory Agencies. In no case shall the approval of the
drawings be interpreted as approval of errors or omissions.     5.   Errors or
inconsistencies in Buyer comments to drawings, plans and calculations submitted
under Paragraph 3 above with regard to the specifications, contract drawings or
any requirements of class or regulatory authority will be brought to the
immediate attention of the Buyer by the Builder with full delineation of the
nature and scope of the error or inconsistency. Buyer direction to incorporate
such errors or inconsistencies will be formally documented by Buyer to Builder
with full acknowledgement of Builder’s notification. Buyer directed
incorporation of such errors or inconsistencies may be the subject of an
adjustment to contract price, if rejected by class or regulatory authority.

B.   Appointment of Buyer’s Representative:       Buyer may send to and maintain
at the Shipyard, at Buyer’s own cost and expense, one representative who shall
be duly authorized in writing by Buyer (herein called “ Buyer’s Representative”)
to act on behalf of Buyer in connection with modifications of the
Specifications, adjustments of the Contract Price, approval of the plans and
drawings, attendance to the tests and inspections relating to the Tugs, its
machinery, equipment and outfitting, and any other matters for which he is
specifically authorized by Buyer   C.   Inspection by Buyer’s Representative:

[****] Confidential Treatment

15

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

 

  1.   The necessary inspections of the Tugs, its machinery, equipment and
outfitting shall be carried out by the Classification Society, other regulatory
bodies and/or an inspection team of Builder throughout the entire period of
construction, in order to ensure that the construction of the Tugs is duly
performed in accordance with this Contract and the Specifications. Buyer’s
Representative shall have, during construction of the Tugs, the right to attend
all tests, trials and inspections of the Tugs, their machinery, equipment and
outfitting. Builder shall give a notice to Buyer’s Representative reasonably in
advance of the date and place of such tests and inspections to be attended by
him for his convenience. Failure of Buyer’s Representative to be present at such
tests and inspections after due notice to him as above provided shall be deemed
to be a waiver of his right to be present.     2.   In the event that Buyer’s
Representative discovers any construction or material or workmanship which is
not deemed to conform to the requirements of this Contract and/or the
Specifications, Buyer’s Representative shall promptly give Builder a notice in
writing as to such non-conformity. Upon receipt of such notice from Buyer’s
Representative, Builder shall correct such non-conformity, if Builder agrees to
his view. In all working hours during the construction of the Tugs until
delivery thereof, Buyer’s Representative shall be given free and ready access to
the Tugs, their engines and accessories, and to any other place where work is
being done, or materials are being processed or stored, in connection with the
construction of the Tugs, including the yards, workshops, stores and offices of
Builder. Builder shall seek to arrange with Builder’s subcontractors that
Buyer’s Representative has a similar right of inspection and supervision in
respect of the work performed by the subcontractors.     3.   The fact that the
work and materials have been inspected from time to time and that payments on
account have been made shall not relieve the Builder from the responsibility to
remedy any defective work or materials. The right of inspection reserved by the
Buyer is solely for the benefit of the Buyer, and does not relieve the Builder
of any responsibilities under this Agreement.

D.   Facilities:       Builder shall furnish Buyer’s Representative and up to
three (3) assistant(s) with adequate office space, and such other reasonable
facilities according to the Builder’s practice at or in the immediate vicinity
of the Shipyard as may be necessary to enable them to effectively carry out
their duties.   E.   Responsibility of Buyer:

  1.   Buyer shall undertake and assure that Buyer’s Representative shall carry
out his duties hereunder in accordance with the normal shipbuilding

[****] Confidential Treatment

16

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

 

      practice of Builder and in such a way as to avoid any unnecessary increase
in building cost, delay in or interference with the construction of the Tugs,
and/or any disturbance in the construction schedule of Builder.     2.   Builder
has the right to request Buyer to replace Buyer’s Representative who Builder
deems unsuitable and unsatisfactory for the proper progress of the Tugs’
construction. Buyer shall investigate the situation by sending a senior
executive to the Shipyard if necessary, and if Buyer considers that such
Builder’s request is justified, Buyer shall effect such replacement as soon as
practicable.

ARTICLE V — MODIFICATIONS

A.   Modifications of Specifications:

  1.   The Buyer may, from time to time, by a written Change Order Form (or such
other Form upon which the Parties mutually agree) issued to the Builder, make
changes in Specifications or drawings, issue additional instructions, require
additional work or direct the omission of work previously ordered. The
provisions of this Agreement shall apply to all such changes, modifications and
additions with the same force and effect as if they were embodied in the
original Specifications and drawings.     2.   Except as provided for in
subparagraph 3 below, changes to the Specifications proposed by the Builder
shall be detailed on a Change Order Form by the Builder’s authorized
representative for Buyer approval. The provisions of this Agreement shall apply
to all such changes, modifications and additions with the same force and effect
as if they were embodied in the original Specifications and drawings.     3.  
The Builder shall make no changes or variations from the Drawings or
Specifications except on written order of the Buyer’s Representative through the
vehicle of a Change Order Form or through a design change reflected in a
Buyer-approved plan or drawing, it being understood that the Specifications and
Drawings are for guidance in developing the final design and production drawings
by Builder. Buyer and Builder agree that, as the detailed design progresses,
some changes from the Specifications and the Drawings may be required to meet
performance requirements or may be useful to the Builder to improve cost
effectiveness of the project without any reductions in or to fundamental
performance criteria, serviceability, operability or maintenance costs to the
Buyer. Such changes, made in the development of the final design or production
drawings, will only be subject to approval by the Buyer and will not be subject
to Change Order which requires any adjustment to Contract Price.

[****] Confidential Treatment

17

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

 

  4.   Changes or variations to existing work, as well as new items, are to be
fully described and priced on the Change Order Form. Each Change Order will be
priced by the Builder and signed by the Buyer’s Representative prior to the
start of any “change” work. No claims for an addition to the contract amount
shall be valid unless this procedure is done.     5.   For any Change Order,
including Change Orders requesting changes to the delivery date based upon late
delivery of the Vessel or Owner furnished equipment, delays in Owner-furnished
work, or Force Majeure, the Builder must note on the Change Order Form and
demonstrate:

  a.   what effect, if any, the changes, additions, or delays will have on the
total number of days originally quoted; and     b.   by specific reference to
the work schedule and Critical Path Analysis why, and the extent to which, the
Change Order will physically interfere with timely completion of the work, or
why reasonable adjustments cannot be made to keep the work on schedule.

  6.   If the parties acting in good faith cannot agree on a price or time
relating to a Change Order, the Builder shall nevertheless perform the work if
so instructed by the Buyer’s representative. In such event, the Builder’s
entitlement to a cost adjustment or modification of the Redelivery Date shall be
resolved pursuant to XIII of this Agreement. In no event shall the value of any
single Buyer-directed change order exceed a value of $[****] per Change Order
and the value of Buyer directed Change Orders in the aggregate shall not exceed
$[****] per Tug.     7.   Where appropriate, the value of Change Orders is to be
paid on a progress payment schedule commensurate with the related work and its
schedule for accomplishment. In these cases, these progress payments will be
based on the Buyer’s assigned valuation for the Buyer Change Order.     8.   In
any case, the Builder bears the burden of establishing the reasonable cost of
the change order and/or the need for any modification to the Redelivery Date.  
  9.   The Builder shall promptly respond to Buyer’s proposals for changes and
shall return all Change Order Forms to the Buyer, in conformity with this
Paragraph, within 48 hours of submission by the Buyer. Extensions of time to
return the Change Order Form may be granted if the Builder establishes that the
nature of the proposed change requires additional time, and informs the Buyer of
the need and basis for additional time within the 48-hour period following
submission by the Buyer. No extension of the Redelivery Date shall be granted
for delays caused by the Builder’s failure to provide a timely return of the
Change Order Form.

[****] Confidential Treatment

18

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

 

  10.   The Buyer’s Representative shall retain the original copies of all
Change Orders.

B.   Change in Class:       In the event that, after the date of this Contract,
any requirements as to class, or as to rules and regulations (or the
interpretation thereof) to which the construction of the Tugs are required to
conform, are altered or changed by the Classification Society, the US Coast
Guard or any other regulatory bodies authorized to make such alterations or
changes, the following provisions shall apply:

  1.   If such alterations or changes are compulsory for the Tugs, either of the
parties hereto, upon receipt of such information from the Classification
Society, the US Coast Guard or such other regulatory bodies, shall promptly
transmit the same to the other in writing, and Builder shall thereupon
incorporate such alterations or changes to the construction of the Tugs,
provided that Buyer shall first agree to adjustments required by Builder in the
Contract Price, the Delivery Date and other terms and conditions of this
Contract and the Specifications occasioned by or resulting from such alterations
or changes.     2.   If such alterations or changes are not compulsory for the
Tugs, but Buyer desires to incorporate such alterations or changes into the
construction of the Tugs, then, Buyer shall notify Builder of such intention.
Builder may accept such alterations or changes, provided that such alterations
or changes will not, in the judgment of Builder, adversely affect Builder’s
planning or program in relation to Builder’s other commitments, and provided,
further, that Buyer shall first agree to adjustments required by Builder in the
Contract Price, the Delivery Date and other terms and conditions of this
Contract and the Specifications occasioned by or resulting from such alterations
or changes.

    Agreements as to such alterations or changes under this Paragraph shall be
made in the same manner as provided in Paragraph A of this Article for
modifications or changes to the Specifications.

C.   Substitution of Materials:       In the event that any of the materials
required by the Specifications or otherwise under this Contract for the
construction of the Tugs cannot be procured in time or are in short supply to
maintain the Delivery Date of any of the Tugs, Builder may, provided that Buyer
shall so agree in writing, which agreement shall not be unreasonably withheld,
supply other materials capable of meeting the

[****] Confidential Treatment

19

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

 

    requirements of the Classification Society, or of the US Coast Guard and of
the rules, regulations and requirements with which the construction of the Tugs
must comply. Any agreement as to such substitution of materials shall be
effected in the manner provided in Paragraph A of this Article, and shall,
likewise, include alterations in the Contract Price and other terms and
conditions of this Contract occasioned by or resulting from such substitution.

ARTICLE VI — TRIALS

A.   Notice:

    Buyer shall receive from Builder at least three (3) days prior notice in
writing of the time and place of the trial run of each of the Tugs, and Buyer
shall promptly acknowledge receipt of such notice. Buyer shall have Buyer’s
Representative on board the Tug to witness such trial run. Should Buyer’s
Representative fail to attend the trial run of any of the Tugs for any reason
whatsoever after due notice to Buyer as above provided shall be deemed to be a
waiver by Buyer of its right to have Buyer’s Representative on board the Tug at
the trial run, and Builder may conduct the trial run without Buyer’s
Representative being present, and in such case Buyer shall be obligated to
accept the Tugs on the basis of a certificate of Builder that the Tugs, upon
trial run, is found to conform to this Contract and the Specifications.   B.  
Weather Conditions:       The trial run shall be carried out under weather
conditions deemed favorable enough in the judgment of Builder. In the event of
unfavorable weather on the date specified for the trial run, the same shall take
place on the first available day thereafter that weather condition permits. If
during the trial run of the Tugs, the weather should suddenly become so
unfavorable that orderly conduct of the trial run can no longer be continued,
the trial run shall be discontinued and postponed until the first favorable day
next following, unless Buyer shall assent in writing to acceptance of the Tug on
the basis of the trial run already made before such discontinuance has occurred.
      Any delay of any trial run caused by such unfavorable weather condition
shall operate to postpone the Delivery Date by the period of delay involved and
such delay shall be deemed as a permissible delay in the delivery of the Tug.  
C.   How Conducted:

  1.   All expenses in connection with the trial run are to be for the account
of Builder and Builder shall provide at its own expense the necessary crew to
comply with conditions of safe navigation. The trial run shall be conducted in
the manner prescribed in the Specifications, and shall prove fulfillment

[****] Confidential Treatment

20

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

 

      of the performance requirements for the trial run as set forth in the
Specifications. The Parties shall mutually agree on the course of the trial run.
    2.   Notwithstanding the foregoing, fuel oil, lubricating oil and greases
necessary for the trial run of the Tugs shall be supplied by Builder at the
Shipyard prior to the time of the trial run, and Buyer shall pay Builder upon
delivery of the Tugs the cost of the quantities of fuel oil, lubricating oil and
greases not consumed during the trial run at their original purchase price.

D.   Method of Acceptance or Rejection:

  1.   Upon successful completion of the trial run, Builder shall give Buyer
written notice of such completion of the trial run, and that Builder considers
that the results of the trial run indicate conformity of the Tug to this
Contract and the Specifications. Buyer shall, within three (3) days after
receipt of such notice from Builder, provide Builder written notice of its
acceptance or rejection of the Tug.     2.   Should the results of the trial run
indicate that the Tug, or any part or equipment thereof, do not conform to the
requirements of this Contract and/or the Specifications, or if Builder is in
agreement with the non-conformity specified in Buyer’s notice of rejection,
Builder shall take necessary steps to correct such non-conformity. Upon
completion of correction of such non-conformity, Builder shall give Buyer
written notice thereof, and, if necessary, conduct another trial run. Buyer
shall, within two (2) days after receipt of such notice from Builder, notify
Builder of its acceptance or rejection of the Tug.     3.   In any event that
Buyer rejects the Tug, Buyer shall indicate in its notice of rejection in what
respect the Tug, or any part or equipment thereof, do not conform to this
Contract and/or the Specifications.     4.   In event that Buyer fails to
provide Builder written notice of the acceptance of or the rejection together
with the reason therefor of the Tug within the period as provided in the above
Subparagraph 1 or 2, Buyer shall be deemed to have accepted the Tugs.     5.  
Builder may dispute the rejection of the Tug by Buyer under this Paragraph, in
which case the matter shall be submitted for final decision in accordance with
Article XIV hereof.

E.   Effect of Acceptance:

  1.   Acceptance of the Tugs as above provided shall be final and binding so
far as conformity of the Tugs to this Contract and the Specifications is

[****] Confidential Treatment

21

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

 

      concerned and shall preclude Buyer from refusing formal delivery of each
of the Tugs as hereinafter provided, if Builder complies with all other
procedural requirements for delivery as provided in Article VIII hereof.     2.
  If any work or items on the Tugs are incomplete or missing when the Tugs
otherwise are ready for delivery and such work or items do not materially affect
the operation of the Tugs nor are likely to cause damage or deterioration to the
Tugs, Buyer shall not withhold its acceptance of the Tugs subject to the right
of Buyer to have such items completed in a reasonable manner and period of time.

F.   Disposition of Surplus Consumable Stores:       Should any fresh water or
other consumable stores furnished by Builder for the trial run remain on board
the Tugs at the time of acceptance thereof by Buyer, Buyer agrees to buy the
same from Builder at the original purchase price thereof, and payment by Buyer
shall be effected upon delivery of the Tugs.

ARTICLE VII — PRODUCTION SCHEDULES AND PROGRESS MEETINGS

A.   Builder will produce, maintain, and share with the Buyer’s Representative a
Detailed Work Schedule that adheres to the total calendar days quoted to the
Owner in the bid. The schedule shall be submitted to the Owner as soon as
practicable.

B.   The schedule shall demonstrate the true timeline, including, but not
limited to: all work items, predicted start date and estimated calendar days to
complete each item, distinct milestones, sequential and parallel tasks,
subcontractor tasks and timing and installation of Owner Furnished Equipment.

C.   Upon commencement of construction, weekly progress meetings between the
Builder’s Program Manager and Buyer’s Representative will be held. The work
schedule shall be updated weekly, and any change to the work schedule will be
noted.   D.   If the Builder’s actual progress does not meet the planned
milestone or production schedule, the Builder shall provide to Owner a plan to
make up lost time, and shall timely execute such plan at no cost to the Owner.

ARTICLE VIII — DELIVERY

A.   Time and Place:

  1.   The Tugs shall be delivered by Builder to Buyer at the Shipyard on or
before the following dates:

[****] Confidential Treatment

22

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

 

     
Tug 1
  October 7, 2008
Tug 2
  March 31, 2009

      except that, in the event of delays in the construction of the Tugs or any
performance required under this Contract due to causes which under the terms of
this Contract permit postponement of the date for delivery, the aforementioned
date for delivery of the Tugs shall be postponed accordingly. The aforementioned
date, or such later date to which the requirement of delivery is postponed
pursuant to such terms, is herein called the “Delivery Date.”     2.   If the
Tugs are ready for delivery before the Delivery Date, Buyer shall be obliged to
accept such earlier delivery, provided Builder has otherwise complied with all
other procedural requirements for delivery as provided for herein.

B.   When and How Effected:

  1.   Provided that Buyer shall have fulfilled all of its obligations
stipulated under this Contract, delivery of each of the Tugs shall be effected
forthwith by the execution by both parties of a Protocol of Delivery and
Acceptance substantially in the form of Exhibit D hereto. The parties may agree
to treat any unfinished work as “punch list work” and execute the Protocol of
Delivery and Acceptance subject to the completion thereof on a schedule mutually
agreed to by the parties.     2.   In the event of any dispute concerning the
payment due upon delivery of any of the Tugs, including the question of Buyer’s
right to offset any claim it may have, Buyer is entitled to take delivery of the
Tug against payment of the undisputed amount and provide a bank guarantee or
other security satisfactory to Builder for the disputed part of the claim.
Security that has been issued by a party pursuant to this Subparagraph
terminates automatically unless the other party has invoked the dispute
resolution provisions of Article XIV below within three months from date of
issue of the security.

C.   Documents to be Delivered to Buyer:       Upon delivery and acceptance of
each of the Tugs, Builder shall deliver to Buyer the following documents, which
shall be attached to the Protocol of Delivery and Acceptance:

  1.   List of consumable stores, referred to under Paragraph C.2 of Article VI
hereof, including the original purchase price thereof.

[****] Confidential Treatment

23

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

 

  2.   All certificates, including Builder’s certificate, required to be
furnished upon delivery of the Tug pursuant to this Contract and the
Specifications. If, through no fault on the part of Builder, the classification
and/or other certificates are not available at the time of delivery of the Tug,
provisional certificates shall be accepted by Buyer, provided that Builder shall
furnish Buyer with the formal certificates as promptly as possible after such
formal certificates have been issued.     3.   Builder’s Bill of Sale certifying
that the Tug is delivered to Buyer free and clear of any liens, charges, claims,
mortgages, or other encumbrances upon Buyer’s title thereto for which Builder is
responsible under this Contract.     4.   Drawings pertaining to the Tugs as
stipulated in the Specifications.     5.   Commercial Invoice.

D.   Tender of Tugs:       If Buyer fails to take delivery of any of the Tugs
after completion thereof according to this Contract and the Specifications
without any justifiable reason, Builder shall have the right to tender delivery
of the Tug after compliance with all procedural requirements as above provided.
  E.   Title and Risk:       Title to and risk of loss of the Tugs shall pass to
Buyer only upon delivery and acceptance thereof having been completed as stated
above; it being expressly understood that, until such delivery is effected,
title to and risk of loss of the Tugs and her equipment shall be in Builder.  
F.   Removal of Tugs:       Buyer shall take possession of each of the Tugs
immediately upon delivery and acceptance thereof and shall remove the Tug from
the Shipyard within three (3) days after delivery and acceptance thereof is
effected. If Buyer shall not remove each of the Tugs from the Shipyard within
the aforesaid three (3) days, then, in such event Buyer shall pay to Builder
mooring charges in accordance with Builder’s published rates in effect at the
time.

ARTICLE IX — DELAYS AND EXTENSION OF TIME FOR DELIVERY
(FORCE MAJEURE)

A.   Causes of Delay:

[****] Confidential Treatment

24

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

 

  1.   Any delays in or failure of performance by either Buyer or Builder shall
not constitute a default under this Agreement or give rise to any claim for
damages if, and to the extent that, any such delay or failure of performance is
caused by the occurrence of “Force Majeure”.         The term “Force Majeure”
shall mean any cause whatsoever beyond the reasonable control of the party
claiming the delay, to the extent that such party shall not have been able to
avoid or overcome such delay by exercise of reasonable care. Subject to the
foregoing, “Force Majeure” shall include, but not be limited to, Acts of God;
vandalism; riots; insurrections; general or local strikes, lockouts or other
labor disturbances; labor shortages caused by a force majeure event or by a
change in the immigration law or its application; flood, typhoons, hurricanes,
earthquakes; tidal waves; landslides; fires; explosions; shortage or
non-operation of any materials, machinery or equipment; import restrictions;
inability to obtain delivery or delays in delivery of materials, machinery or
equipment; failure, shortage or restriction of electric current, oil or gas;
defects in materials, machinery or equipment supplied by third parties; casting
or forging rejects of the like supplied by third parties; acts or omissions of
the Classification Society, the U.S. Coast Guard or any other bodies whose
documents or actions are required; destruction of or damage to the Shipyard or
works of Builder, its subcontractors or suppliers, or to the Tugs or any part
thereof; delay caused by any agency or instrumentality of the United States or
by government requirements or priorities; terrorism; war; preparation for war;
acts of civil, naval or military authorities; sabotage; blockades; embargoes;
epidemics; delays of carriers by land, sea or air.     2.   Delays in
performance by the Party caused by a Party’s contractors or sub-contractors
shall be considered a Force Majeure event if and to the extent such delays are
attributable to Force Majeure as defined herein. In such case, the Party must
demonstrate that a Force Majeure event caused the subcontractor or vendors delay
in performance, and that such delay could not have been avoided by the Party
through the exercise of reasonable care.     3.   [****], delays in delivery by
the engine manufacturer or Intercon shall be considered [****] event to the
extent any impact upon the delivery schedule can not be avoided because of such
delays.

B.   Notice of Delay:       Within five (5) days from the date when either Party
knows or reasonably should have known of a Force Majeure event for which that
Party will claim relief under Article IX.A, that Party shall advise the other in
writing of the date and period of such incident, the period of time the Delivery
Date would be changed (if any) by

[****] Confidential Treatment

25

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

 

    reason of such delay, and the basis for such claim, on a Change Order Form.
Failure of a Party to so notify the other of any Force Majeure claim within five
(5) days of the date the Party knew or reasonably should have known of the Force
Majeure claim shall be deemed to be a waiver by Builder of its right to raise
such delay. Failure of the Party receiving a Force Majeure claim to object to
such claim or postponement within five (5) days after acknowledged receipt of
such notification shall be deemed to be a waiver by receiving Party of its right
to object to such claim or postponement.   C.   Definition of Permissible Delay:
      Delays on account of such causes as specified in Paragraph A of this
Article and any other delays of a nature which under the terms of this Contract
permits postponement of the Delivery Date shall be understood to be permissible
delays and are to be distinguished from unauthorized delays on account of which
the Contract Price is subject to adjustment as provided for in Article III
hereof.

ARTICLE X — WARRANTY

A.   Warranty:

  1.   Subject to the provisions hereinafter set forth, Builder warrants for a
period of [****] months after delivery and acceptance of each of the Tugs (“the
Warranty Period”) that all parts of the Tug fabricated by Builder shall be free
from defect in material and workmanship, whether latent or patent, that the work
shall be done in a good, substantial and workmanlike manner and in accordance
with the Specifications and Drawings, and that, unless otherwise specified, all
materials and equipment incorporated in the work will be new.     2.   The
Builder shall replace or repair (a) all parts and equipment of the Tug that are
directly manufactured or fabricated by the the Builder or its subcontractors
under this Agreement; and (b) all damage to the Tug, its appurtenances or
equipment caused by the defects in work performed by, or equipment directly
manufactured or fabricated by, the Builder or its subcontractors under this
Agreement; and (c) all work performed by the Builder or subcontractors of the
Builder in constructing the Tug and installing its parts, equipment and material
against, and to the extent of, all defects in material and workmanship by the
Builder or any subcontractor of the Builder and which are not due to the
negligence or other acts or omissions of the Buyer. The Builder’s obligation
includes the costs of any necessary dismantling and reassembling.     3.  
Notwithstanding anything contained in Article X.A.2, Builder shall assign to
Buyer all warranties it receives from manufacturers of machinery and

          [****] Confidential Treatment        

26

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

 

      equipment installed by Builder or its subcontractors in the Tugs. Builder
shall insure, however, the applicable manufacturer’s warranty runs from the date
of delivery of the Tug. In the event Buyer alleges a defect in such machinery or
equipment (not resulting from Builder’s installation or work), Buyer shall
pursue its remedies against the manufacturer thereof. Should such manufacturer
refuse to perform warranty repairs, Builder shall exert its best efforts to
cause it to do so.     4.   Standards and warranties pertaining to the coating
system will be the same as agreed to with respect to the 12k hp tugs

B.   Notice of Defects:       Buyer shall notify Builder in writing of any
defects for which claim is made under this warranty as promptly as feasible
after discovery thereof. If the defect was discovered during drydocking of
either Tug, Buyer must, if practicable, notify Builder in time for Builder to
inspect the defect before the Tug leaves the dry dock. Buyer’s written notice
shall describe the nature and extent of the defects. Builder shall have no
obligation for any defects discovered after the expiration of the Warranty
Period.   C.   Remedy of Defects:

  1.   Builder shall remedy, at its expense, any defects, against which each Tug
is warranted under this Article, by making all necessary repairs or replacements
at the Shipyard within [****] days of receipt of notice in accordance with
Paragraph B above, if practicable.     2.   However, if it is impractical to
bring the Tug to the Shipyard, Buyer may cause the necessary repairs or
replacements to be made in a facility elsewhere which is deemed suitable for the
purpose, provided that, in such event, Builder may forward or supply replacement
parts or materials to the Tugs, unless forwarding or supplying thereof to the
Tug would impair or delay the operation or working schedule of the Tug. In the
event that Buyer proposes to cause the necessary repairs or replacements to be
made to the Tugs at any other shipyard or works than the Shipyard, Buyer shall
first, but in all events as soon as possible, give Builder notice in writing of
the time and place such repairs will be made, and if the Tug is not thereby
delayed, or her operation or working schedule is not thereby impaired, Builder
shall have the right to verify by its own representative(s) the nature and
extents of the defects complained of. Builder shall, in such case, promptly
advise Buyer by email, after such examination has been completed, of its
acceptance or rejection of the defects as ones that are covered by the warranty
herein provided. Upon Builder’s acceptance of the defects as justifying remedy
under this Article, or upon such final decision by a competent court or
tribunal, Builder shall immediately pay to

          [****] Confidential Treatment        

27

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

 

      Buyer for such repairs or replacements a sum equal to the reasonable cost
of making the same repairs or replacements. Buyer acknowledges that, in
performing repairs, it has a duty to perform the repairs so as to mitigate
damages.     3.   In any case, the Tug shall be taken at Buyer’s cost, risk and
responsibility to the place elected, ready in all respects for such repairs or
replacements.     4.   Any dispute under this Article shall be referred to
dispute resolution in accordance with the provisions of Article XIV hereof.

D.   Extent of Builder’s Responsibility:

  1.   Builder shall have no responsibility or liability for any other defects
whatsoever in the Tugs other than the defects specified in Paragraph A of this
Article. Nor shall Builder in any circumstances be responsible or liable for
[****].     2.   Builder shall not be responsible for any defects in any part of
the Tugs which were, subsequent to delivery of the Tugs replaced or in any way
repaired by any other contractor, or for any defects which have been caused or
aggravated by omission or improper use and maintenance of the Tugs on the part
of Buyer, its servants or agents or by ordinary wear and tear, the negligence or
abuse of Buyer or the Tug’s crew or by any other circumstances whatsoever beyond
the control of Builder.     3.   The warranty contained in this Article replaces
and excludes any other liability, guarantee, warranty and/or condition imposed
or implied by the law, statutory or otherwise, by reason of the construction and
sale of the Tugs for and to Buyer. BUILDER MAKES NO FURTHER WARRANTIES, EXPRESS
OR IMPLIED, INCLUDING ANY WARRANTY OF MERCHANTABILITY OR FITNESS OF THE TUGS,
THEIR MACHINERY OR EQUIPMENT FOR A PARTICULAR PURPOSE, AND ALL SUCH FURTHER
WARRANTIES ARE EXPRESSLY EXCLUDED. FURTHERMORE, BUILDER SHALL HAVE NO LIABILITY
UNDER ANY CIRCUMSTANCES FOR MANUFACTURER’S STRICT LIABILITY IN CONNECTION WITH
THE DESIGN, MANUFACTURE OR SALE OF THE TUGS.

ARTICLE XI — BUILDER’S DEFAULT

A.   Default by Builder:       Builder shall be in default hereunder if:

          [****] Confidential Treatment        

28

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

 

  1.   the Builder fails to perform any material duty imposed upon it by this
Contract, which default Builder does not cure within ten (10) business days’
written notice thereof from Buyer.     2.   the Builder makes a general
assignment for the benefit of its creditors, files a petition in voluntary
bankruptcy or a petition for reorganization or for other relief under any
bankruptcy or insolvency law, files a petition at common law or in equity for
the appointment of a receiver in any court, or one or more of its creditors
files a petition against Builder seeking the appointment of a receiver of
Builder’s assets, whether temporary or permanent, or seeks relief under any
bankruptcy or insolvency law, which petition shall not have been dissolved
within a period of ten (10) days from the date of the filing of the petition in
that court.     3.   the Tug has not been tendered for delivery in accordance
with the requirements set forth in this Agreement within 180 calendar days
following the Scheduled Delivery Date, as the same may have been modified.

B.   Remedies for Builder’s Default:

  1.   In the event that any one or more of the events of default specified
herein shall have occurred, the Buyer, if it so elects, may terminate Builder’s
performance hereunder, provided Buyer shall have given Builder a reasonable
opportunity to cure such default. The Buyer may, subject to Subparagraph 2
below.

  a.   proceed to have the Tug completed, and for such purposes may take
possession of the Tug and remove it from the Shipyard, and in so doing invoke
the security devices set out in Article XXIV. If Buyer exercises this option,
Builder shall be liable for any costs based on market prices required for the
completion of the Tug less any costs saved by its completion in a yard other
than Builder’s or     b.   if Builder is in default because a Tug fails to meet
the performance criteria contained in this Contract, demand that the Tug be
sold, in which case the Builder shall tender the proceeds of sale, and shall pay
the difference between the proceeds of the sale and the cost of constructing a
replacement Tug, up to the liability cap set forth in this Contract.

  2.   If Buyer terminates this Contract because of Builder’s default, Builder
shall stop work, and may not recover any further payments until the work has
been completed by Buyer and only if the unpaid portion of the Contract Price
exceeds all of the reasonable costs (including litigation costs, reasonable
attorney fees and liquidated damages) incurred by Buyer in

          [****] Confidential Treatment        

29

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

 

      enforcing this Contract and completing the work (“Buyer’s Expense”). If
the unpaid portion of the Contract Price exceeds Buyer’s Expense, Buyer will pay
the excess amount to Builder. If Buyer’s Expense exceeds the unpaid balance of
the Contract Price, Builder shall pay the difference to Buyer, subject to the
limitations contained in Subparagraph 4.     3.   In the event that Builder
files for protection under the bankruptcy laws of the United States while
performing work on a Maritrans vessel, it specifically agrees to either accept
or reject this contract within the later of seven (7) working days of the
bankruptcy filing, or the minimum period permitted under the bankruptcy laws. In
the event Builder rejects the contract entered into herein, it agrees to
immediately return all property owned by Maritrans in its possession. Said
property includes, but is not limited to, the Vessel, as well as all
complements, accoutrements, appurtenances, equipment, and material prepared for
use in said Vessel.     4.   The total amount for which Builder may be liable as
a remedy for default and for liquidated damages may not exceed [**]% of the
Contract Price. In determining the applicable Contract Price under this Article,
the prices set forth in Article II.A shall be used.

ARTICLE XII — BUYER’S DEFAULT

A.   Default by Buyer:       Buyer shall be in default if Buyer:

  1.   fails to make any payment required hereunder when due or fails to perform
any other material duty imposed upon it by this Contract, which default Buyer
does not cure within ten (10) business days’ written notice thereof from
Builder.     2.   makes a general assignment for the benefit of its creditors,
files a petition in voluntary bankruptcy or a petition for reorganization or for
other relief under any bankruptcy or insolvency law, files a petition at common
law or in equity for the appointment of a receiver in any court, or one or more
of its creditors files a petition against Buyer seeking the appointment of a
receiver of Buyer’s assets, whether temporary or permanent, or seeks relief
under any bankruptcy or insolvency law, which petition shall not have been
dissolved within a period of ten (10) days from the date of the filing of the
petition in that court.

B.   Remedies for Buyer’s Default:

          [****] Confidential Treatment        

30

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

 

    In the event of Buyer’s default, Builder shall retain the hull(s) of the
Tug(s) and all payments as liquidated damages, which shall, however, not limit
Builder’s recovery against Buyer for any damages Builder has suffered by reason
of such default in excess of the value of such payments, provided, however, that
Builder shall have a duty to mitigate its damages and shall reimburse Buyer for
such payments received from Buyer to the extent it recoups such payments from
the sale of the Tug(s) to a third party, less reasonable costs (including
litigation costs and attorney fees) incurred by Builder to make the sale.

ARTICLE XIII — INSURANCE

A.   Builder’s Insurance:       During the performance of work under this
Contract, Builder shall at its sole cost and expense carry and maintain at all
times:

  1.   Comprehensive and Marine General Liability Insurance insuring and
covering the contractual and indemnity obligations and liabilities of Builder
hereunder. Such insurance shall have minimum combined single limits not less
than Ten Million ($10,000,000) for any one occurrence.     2.   Worker’s
Compensation/Employer’s Liability Insurance with scope and limits sufficient to
satisfy the legal requirements of the State of Alabama with minimum limits of
One Million ($1,000,000) as regards bodily injury or death to Builder’s
employees. Coverage shall be endorsed to provide that a claim “in rem” shall be
considered as a claim against the employer, and shall contain an “Alternate
Employer Endorsement” in favor of Buyer     3.   Longshoremen’s and Harbor
Worker’s Compensation Act coverage in an amount sufficient to cover Builder’s
liability under this Contract.     4.   Excess coverage bringing the aforesaid
liability coverages to not less than Twenty-Five Million ($25,000,000) per
occurrence, which coverage shall apply to each of the above items individually
and in the aggregate. Buyer shall be named as additional assured only to the
extent of the indemnity agreement contained herein.     5.   From the time the
first material destined for inclusion as a part of the Tugs becomes at risk at
the Shipyard and until the same is completed, delivered to and accepted by
Buyer, Builder shall, at its own cost and expense, keep the Tugs and all
machinery, materials, equipment, appurtenances and outfit delivered to the
Shipyard for the Tugs or built into, or installed in or upon the Tugs, including
Buyer Furnished Equipment, fully insured with reputable insurance companies with
coverage corresponding to the American Institute Builder’s Risk Clauses (dated
February 8, 1979). The

          [****] Confidential Treatment        

31

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

 

      amount of such insurance coverage shall, up to the date of delivery of the
Tugs, be in an amount at least equal to, but not limited to, the aggregate of
the payment made by Buyer to Builder including the value of Buyer Furnished
Equipment. The policy referred to hereinabove shall be taken out in the name of
Builder and all losses under such policy shall be payable to Builder. If Buyer
so requests, Builder shall at Buyer’s cost procure insurance on the Tugs and all
parts, materials, machinery and equipment intended therefor against risks of
earthquake, strikes, war peril or other risks not heretofore provided and shall
make all arrangements to that end. The cost of such insurance shall be
reimbursed to Builder by Buyer upon delivery of the Tugs.

    All such policies shall be endorsed to waive subrogation against all members
of the Buyer Group, as defined in Article XXII below, the Vessel and any Owner
or Charterer of the Vessel and, with the exception of Worker’s Compensation,
shall name the Buyer, the Vessel, and any Charterer of the Vessel as an
Additional Assured to the extent of risks expressly assumed by Builder under
this Contract. Deductible amounts under such insurance policies shall be for the
account of Builder. Certificates evidencing the above insurance policy shall be
furnished to Buyer prior to commencement of work hereunder. The above required
insurance represents minimum acceptable insurance coverage and such shall not,
unless otherwise specified in this Contract, limit nor amend the contractual
indemnity obligations hereunder. Such policies shall not be canceled, materially
altered or amended without thirty (30) days prior written notice having been
furnished to Buyer.       All policies of insurance (except Worker’s
Compensation and Employer’s Liability) shall be endorsed to provide that all
such insurances are primary and non-contributing with any other insurance
maintained by any member of Buyer Group to the extent of the risks expressly
assumed by Builder under this Contract.   B.   Buyer’s Insurance:       During
the performance of work under this Contract, Buyer shall at its sole cost and
expense carry and maintain at all times:

  1.   Comprehensive General Liability Insurance, including contractual
liability coverage, against bodily injury, death and property damage, with
liability limits of not less than One Million Dollars ($1,000,000) combined
single limit. Said coverage shall be written on an occurrence based insurance
form.     2.   Workmen’s Compensation Coverage, including employer’s liability
coverage for bodily injury or death, for the maximum recovery allowed by the
laws of the state in which the work is performed.

          [****] Confidential Treatment        

32

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

 

  3.   Longshoremen’s and Harbor Worker’s Compensation Act coverage in an amount
sufficient to cover Buyer’s liability under this Contract.     4.   Excess
coverage bringing the aforesaid liability coverages to not less than Twenty-Five
Million ($25,000,000) per occurrence, which coverage shall apply to each of the
above items individually and in the aggregate. Builder shall to be named as
additional assured only to the extent of the indemnity agreement contained
herein.

    With the exception of Worker’s Compensation and Longshore coverage, all such
policies shall be endorsed to waive subrogation against Builder Group, as
defined in Article XXII below, and shall name Builder as an additional insured
to the extent of risks expressly assumed by Buyer under this Contract.
Deductible amounts under such insurance policies shall be for the account of
Buyer. Certificates evidencing the above insurance policy shall be furnished to
Builder prior to commencement of work hereunder. The above required insurance
represents minimum acceptable insurance coverage and such shall not limit nor
amend the contractual indemnity obligations hereunder. Such policies shall not
be canceled, materially altered or amended without thirty (30) days prior
written notice having been furnished to Builder.       All policies of insurance
(except Worker’s Compensation and Employer’s Liability) shall be endorsed to
provide that all such insurances are primary and non-contributing with any other
insurance maintained by any member of Builder Group to the extent of the risks
expressly assumed by Buyer under this Contract.

ARTICLE XIV — DISPUTE RESOLUTION

A.   Any and all contract differences or disputes not resolved by the Owner and
the Builder shall be put to arbitration in the City of Mobile, AL, pursuant to
the rules (but not the administration) of the American Arbitration Association.
Notwithstanding the foregoing, either party may opt out of the arbitration
provision and have the matter resolved in Federal District Court for the
Southern District of Alabama in Mobile, or, if jurisdiction is lacking in such
Court, the Courts of the State of Alabama. If the initiating party decides to
opt out, that party shall give the other party 10 days notice before filing
suit. If the non-initiating party opts out, that party shall notify the
initiating party within 10 working days of receipt of notification by the other
party of intent to arbitrate. Absent opt out notice as provided herein, disputes
shall be resolved by arbitration as set forth below.   B.   The arbitration
panel shall consist of three (3) persons — one arbitrator appointed by the
Owner, one appointed by the Builder, and one appointed by the two so chosen. The
decision of any two of the three arbitrators on any point shall be final.

          [****] Confidential Treatment        

33

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

 

C.   Until such time as the arbitrators close the hearings, either party shall
have the right to specify further disputes or differences under this Agreement
for hearing and determination. These disputes are to be submitted in writing to
the arbitrators and to an officer of the other party.   D.   The arbitrators may
grant any relief which they, or a majority of them, deem just and equitable and
is within the scope of these terms and conditions. Awards pursuant to this
clause may include costs, including a reasonable allowance for attorney’s fees,
and a judgment may be entered upon any award made hereunder in any court having
jurisdiction in the premises.   E.   THE PARTIES HEREBY EXPRESSLY WAIVE THE
RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BROUGHT BY OR AGAINST
EITHER OF THEM RELATING TO THIS CONTRACT.

ARTICLE XV — RIGHT OF ASSIGNMENT
Neither of the parties hereto shall assign this Contract to a third party unless
prior consent of the other party is given in writing, except that Buyer may
assign this Contract to an affiliate so long as Buyer remains liable for all of
the Buyer’s obligations under this Contract. This Contract shall inure to the
benefit of and shall be binding upon the lawful successors or the legitimate
assigns of either of the parties hereto.
ARTICLE XVI — TAXES
Builder shall pay, as a cost of Builder, all United States, State, County, City
and other taxes, assessments and duties lawfully assessed or levied prior to
delivery and acceptance of the Tugs by Buyer against the Tugs and material,
supplies and equipment to be used or used in the performance of this Contract
(excepting, however, material, supplies and equipment furnished to Builder by
Buyer) and any sales, use or excise taxes with respect thereto lawfully assessed
or levied prior to or concurrently with delivery and acceptance of the Tugs. Any
other taxes, assessments and/or duties shall be paid by Buyer.
ARTICLE XVII — PATENTS, TRADEMARKS, COPYRIGHTS, ETC.

A.   Patents, Trademarks and Copyrights:       Machinery and equipment of the
Tugs may bear the patent number, trademarks or trade names of the manufacturers.
Nothing contained herein shall be construed as transferring any patent or
trademark rights or copyrights in

          [****] Confidential Treatment        

34

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

 

    equipment covered by this Contract, and all such rights are hereby expressly
reserved to the true and lawful owners thereof.   B.   Specifications and
Drawings:       Builder retains all rights with respect to the Specifications,
the Drawings and plans and working drawings, technical descriptions,
calculations, test results and other data, information and documents concerning
the design and construction of the Tugs and Buyer shall not disclose the same or
divulge any information contained therein to any third parties, without the
prior written consent of Builder, except where it is necessary for usual
operation, repair and maintenance of the Tugs.

ARTICLE XVIII — BUYER FURNISHED EQUIPMENT

A.   Responsibility of Buyer:

  1.   Buyer shall, at its own risk, cost and expense, supply and deliver to
Builder all of the items to be furnished by Buyer as specified in the
Specifications (herein called the “Buyer Furnished Equipment”) at a warehouse or
other storage facility of the Shipyard in the proper condition ready for
installation in or on the Tugs, in accordance with the time schedule designated
by Builder.     2.   In order to facilitate installation by Builder of Buyer
Furnished Equipment in or on the Tugs, Buyer shall furnish Builder with
necessary specifications, plans, drawings, instruction books, manuals, test
reports and certificates required for their installation. Buyer, if required by
the specifications, shall, without any charge to Builder, cause the
representatives of the manufacturers of Buyer Furnished Equipment to assist
Builder in the installation thereof in or on the Tugs and/or to carry out
installation thereof by themselves or to make necessary adjustments thereof at
the Shipyard.     3.   Any and all of Buyer Furnished Equipment shall be subject
to Builder’s reasonable right of rejection, as and if they are found to be
unsuitable or in improper condition for installation. However, if so requested
by Buyer, Builder may repair or adjust Buyer Furnished Equipment without
prejudice to Builder’s other rights hereunder and without being responsible for
any consequences therefrom. Any costs or delays caused by the foregoing shall be
subject to a Change Order pursuant to Article V.     4.   Should Buyer fail to
deliver any of Buyer Furnished Equipment within the time designated, costs or
delays caused by the foregoing shall be subject to a Change Order pursuant to
Article V.

          [****] Confidential Treatment        

35

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

 

B.   Responsibility of Builder:       Builder shall be responsible for storing
and handling with reasonable care Buyer Furnished Equipment after delivery
thereof at the Shipyard, and shall, at its own cost and expense, install them in
or on the Tugs, unless otherwise provided herein or agreed by the parties
hereto, provided, always, that Builder shall not be responsible for quality,
efficiency and/or performance of any of Buyer Furnished Equipment.

ARTICLE XIX — NOTICES

A.   Address:       Any and all notices and communications in connection with
this Contract shall be addressed as follows:

                  To Buyer:   Maritrans Operating Company L.P.         Two
Harbour Place         302 Knights Run Avenue         Tampa, FL 33602
 
      Attn: Christopher Flanagan
 
                Vice President, Engineering and Maintenance         Email:
cflanagan@maritrans.com
 
      Tel: 813-209-0600
 
      Fax: 813-221-2648
 
                To Builder:   Bender Shipbuilding & Repair Co., Inc.        
P.O. Box 42         265 S. Water Street         Mobile, AL 36601         Attn:
Thomas B. Bender, Jr.         Email: bent@bendership.com
 
      Tel: 251-431-8000
 
      Fax: 251-432-2260

    with copies to the Owner’s Representative and Builder’s authorized
representative.       Any notice, including any written notice, required
hereunder, shall be effected and deemed received only as follows:

  1.   In the case of an email, at the time of transmission recorded on the
message if such time is within normal business hours on a working day at

          [****] Confidential Treatment        

36

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

 

      the place of receipt, otherwise at the commencement of normal business
hours on the next such working day.     2.   In the case of a letter, whether
sent by registered mail or delivered by hand or by courier, at the date and time
of its actual delivery if delivered within normal business hours on a working
day at the place of receipt, otherwise at the commencement of normal business on
the next such working day.     3.   In the case of a telecopy/photographic
facsimile transmission, at the time recorded together with the telephone dialing
code of the receiving machine on the message if such time is within normal
business hours on a working day at the place of receipt, otherwise at the
commencement of normal business hours on the next such working day, but only if
the time of receipt and the said code appear on the received facsimile copy,
always provided, however, that such notice shall be sent by registered mail or
dispatched for delivery by hand or by courier not later than on the day of such
transmission.

B.   Language:       Any and all notices and communications in connection with
this Contract shall be written in the English language.

ARTICLE XX — TITLE
Title to and risk of loss of the Tugs shall pass to Buyer upon the delivery to
and acceptance by Buyer of the Tugs in accordance with the terms of this
Contract; provided, however, that Builder hereby grants to Buyer a first
priority security interest in each Tug to the extent of progress payments made
by Buyer pursuant to Article II hereof. Until such time as the Tugs are
delivered to and accepted by Buyer, title to and risk of loss of the Tugs shall
remain with Builder; provided however, that upon passing of title to Buyer,
Builder shall retain a first priority security interest in each Tug to the
extent it has not been paid under this Contract for work and materials
pertaining to the particular Tug. Title to all scrap and title to any material
that is surplus to the requirements of this Contract shall vest in Builder,
except for title to all of Buyer’s Supplies shall at all times remain with
Buyer.
Builder agrees to execute and deliver to Buyer such further agreements and
assignments or other instruments, and to do all such other things as Buyer may
reasonably deem necessary or appropriate to assure to Buyer the perfection and
priority of its security interests under this Agreement. BUILDER HEREBY
AUTHORIZES BUYER TO AUTHENTICATE AND FILE UCC FINANCING STATEMENTS AND
AMENDMENTS DESCRIBING THE COLLATERAL. BUILDER FURTHER APPOINTS BUYER OR ITS
ASSIGNEE AS ITS TRUE AND LAWFUL ATTORNEY IN FACT, IRREVOCABLY AND COUPLED WITH
AN INTEREST, TO EXECUTE AND FILE ON

          [****] Confidential Treatment        

37

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

 

BEHALF OF BUYER ALL UCC FINANCING STATEMENTS WHICH IN BUYER’S SOLE BUT
REASONABLE DISCRETION ARE NECESSARY OR PROPER TO SECURE BUYER’S INTEREST IN THE
TUGS IN ALL APPLICABLE JURISDICTIONS. BUYER SHALL PERMIT BUILDER A REASONABLE
TIME TO REVIEW AND COMMENT ON UCC FILINGS PRIOR TO FILING.
Builder is responsible for payment of all contractors hired by Builder for
completion of the Tugs. Builder shall indemnify and hold Buyer harmless from
claims by Builder’s contractors made directly against the Tugs or Buyer. Prior
to Delivery, Builder shall obtain and provide to Buyer Waivers of Lien
substantially in the form contained in Exhibit E to this Agreement from each of
Builder’s subcontractors and vendors which perform work or provide material the
aggregate value of which exceeds $ 200,000 per Tug.
ARTICLE XXI — INTERPRETATION

A.   Laws Applicable:       This Contract shall be governed by and construed in
accordance with the laws of the United States of America and the State of
Alabama except in regards to the provisions governing choice of laws.   B.  
Discrepancies:       If any discrepancy, difference or conflict exists between
the provisions of this Contract and the Specifications, then to the extent of
such discrepancy, difference or conflict only, the Specifications shall be
ineffectual and the provisions of this Contract shall prevail; but in all other
respects the Specifications and the Drawings shall be in full force and effect.
If there is any discrepancy, difference or conflict between the Specifications
and the Drawings, then to the extent of such discrepancy, difference or conflict
the Specifications shall prevail; provided, however, any work called for by the
Specifications and not shown on the Drawings and any work shown on the Drawings
but not called for in the Specifications shall be performed by Builder as a part
of the contract work. Any discrepancy, difference or conflict between the
Specifications and the Drawings and the provisions of this Contract and any
discrepancy, difference or conflict between the Specifications and the Drawings
themselves discovered by one party to this Contract shall be brought to the
attention of the other party promptly in writing.   C.   Entire Agreement:      
This Contract contains the entire agreement and understanding between the
parties hereto and supersedes all prior negotiations, representations,
undertakings and agreements on any subject matter of this Contract.

          [****] Confidential Treatment        

38

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

 

ARTICLE XXII — LIMITATION OF LIABILITY AND NO BROKERAGE

A.   Limitation of Liability:

  1.   The parties confirm that the express remedies and measures of damages
provided in this Contract satisfy the essential purposes hereof. For breach of
any provision for which an express remedy or measure of damages is provided,
such express remedy or measure of damages shall be the sole and exclusive remedy
therefor.     2.   The parties confirm and agree that under this Contract, no
party shall be required to pay or be liable for, economic losses, punitive or
exemplary damages, lost profit or business interruption damages, by statute, in
tort, contract or otherwise.     3.   To the extent any damages required to be
paid hereunder are liquidated damages, the parties acknowledge that the damages
are difficult or impossible to determine, otherwise obtaining an adequate remedy
is inconvenient and the liquidated damages constitute a reasonable approximation
of the harm and loss.     4.   In no event shall the liability of Builder to the
Owner, whether by statute, in contract, or in tort, or for any other reason,
exceed $[****]. Except for warranty repairs under Article X, the Builder shall
have no liability except to the extent covered by Builder’s insurance as
required by Article X.     5.   In no event will Builder’s aggregate liability
for default or for liquidated damages exceed a combined total of [****]% of the
contract price.

B.   Brokerage:       No third party shall be entitled to receive any brokerage
commissions, finder’s fees, fees for financial advisory services or similar
compensation in connection with the transaction contemplated by this Contract
based on any arrangement or agreement made by or on behalf of neither Buyer nor
Builder.

ARTICLE XXIII — INDEMNITIES

A.   Builder Indemnity:

  1.   Third Parties. Builder shall release, defend, indemnify, and hold the
Buyer Group harmless from and against all liability, claims, losses, damages,
punitive damages, costs, expenses, attorneys’ fees, demands, suits and causes of
action of every kind and character, arising in favor of any Third

          [****] Confidential Treatment        

39

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

 

      Party on account of personal injury or death and/or damages to Third Party
property in any way incident to, or in connection with, or arising out of or
under this Contract resulting from the joint or concurrent negligence,
negligence per se, gross negligence, statutory fault, or strict liability of any
member of the Builder Group or the unseaworthiness of any vessel owned, operated
or chartered by any member of the Builder Group, to the extent such claims were
caused by the negligence or other legal liability of any member of the Builder
Group. As used herein, a “Third Party” is any person or entity not included in
either the Buyer Group or the Builder Group.     2.   Pollution. Notwithstanding
anything to the contrary herein, Builder shall release, defend, indemnify, and
hold the Buyer Group harmless from and against all claims, demands, suits,
causes of action, damages, natural resource damage assessments, response,
cleanup, containment or disposal expenses and other liabilities, including, but
not limited to, attorneys’ fees and the costs of litigation or administrative
proceedings, arising from any spill, discharge, escape, release of or exposure
to any waste, rubbish, petroleum, chemical or hazardous substances whether
solid, liquid or gas, originating from any equipment, facility or property of
the Builder Group, or from the handling, removal, transportation or disposal
thereof, except to the extent such claims may have resulted from the conduct of
any member of the Buyer Group.     3.   Property Damage to Buyer Property. With
respect to damage to, or loss of, Buyer’s property, including without
limitation, the Vessel, (“Buyer Property”), the parties agree that Builder Group
shall not be liable to Buyer Group or its lenders or insurers for any damage to,
or loss of, Buyer Property except such damage or loss as is caused by Builder
Group’s negligence or breach of warranty, and then only to the extent of Builder
Group’s negligence or breach of warranty and in no event shall the aggregate
liabilities to all parties in interest for damage sustained by them as a result
of such damage or loss exceed the insurance coverages and limits set out in
Article XIII. Builder shall release, indemnify, defend and hold Buyer Group
harmless from and against all claims, costs, losses or liabilities (including
attorney’s fees and court costs) arising from, or relating to, destruction of or
damage to Buyer Property, but only where such damage or loss is caused by
Builder Group’s negligence or breach of warranty. This indemnity shall apply
irrespective of the joint or concurrent negligence, negligence per se, gross
negligence, statutory fault or strict liability of any member of Buyer Group or
any pre-existing condition or the unseaworthiness of any vessel. In the event
any member of Buyer Group or its lenders or any insurer of the Buyer Property
makes any claim against Builder Group for any damage to or loss of Buyer
Property, Buyer shall release, indemnify and hold Builder Group harmless from
any such claim to the extent it exposes Builder Group to any liability in excess
of the

          [****] Confidential Treatment        

40

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

 

      Contract Price. This indemnity of Builder Group by Buyer Group in excess
of the Contract Price shall apply irrespective of the sole joint or concurrent
negligence, negligence per se, gross negligence, statutory fault or strict
liability of any member of the Builder Group, or any pre-existing condition or
the unseaworthiness of any vessel.

B.   Buyer Indemnity:

  1.   Third Parties. Buyer shall release, defend, indemnify, and hold the
Builder Group harmless from and against all liability, claims, losses, damages,
punitive damages, costs, expenses, attorneys’ fees, demands, suits and causes of
action of every kind and character, arising in favor of any Third Party on
account of personal injury or death and/or damages to Third Party property in
any way incident to, or in connection with, or arising out of or under this
Contract resulting from the joint or concurrent negligence, negligence per se,
gross negligence, statutory fault, or strict liability of any member of the
Buyer Group or the unseaworthiness of the Tug or any vessel owned, operated or
chartered by any member of the Buyer Group, to the extent such claims were
caused by the negligence or other legal liability of any member of the Buyer
Group. As used herein, a Third Party is any person or entity not included in
either the Buyer Group or the Builder Group.     2.   Pollution. Notwithstanding
anything to the contrary herein, Buyer shall release, defend, indemnify, and
hold the Builder Group harmless from and against all claims, demands, suits,
causes of action, damages, natural resource damage assessments, response, clean
up, containment or disposal expenses and other liabilities, including, but not
limited to, attorneys’ fees and the costs of litigation or administrative
proceedings, arising from any spill, discharge, escape, release of or exposure
to any waste, rubbish, petroleum, chemical or hazardous substance, whether
solid, liquid or gas, originating from any equipment, facility or property of
the Buyer Group, including the Vessel, or from the handling, removal,
transportation or disposal thereof, to the extent such claims may have resulted
from the conduct of a member of the Buyer Group.     3.   Property Damage to
Builder Property. With respect to damage to, or loss of, Builder’s property,
including without limitation, its bulkheads and piers, (“Builder Property”), the
parties agree that Buyer Group shall not be liable to Builder Group or its
lenders or insurers for any damage to, or loss of, Builder Property except such
damage or loss as is caused by Buyer Group’s negligence, and then only to the
extent of Buyer Group’s negligence, and in no event shall the aggregate
liabilities to all parties in interest for damage sustained by them as a result
of such damage or loss exceed the insurance coverages and limits set out in
Article XIII. Buyer

          [****] Confidential Treatment        

41

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

 

      shall release, indemnify, defend and hold Builder Group harmless from and
against all claims, costs, losses or liabilities (including attorney’s fees and
court costs ) arising from, or relating to, destruction of or damage to Builder
Property, but only where such damage or loss is caused by Buyer Group’s
negligence. This indemnity shall apply irrespective of the joint or concurrent
negligence, negligence per se, gross negligence, statutory fault or strict
liability of any member of Builder Group or any pre-existing condition or the
unseaworthiness of any vessel. In the event any member of Builder Group or its
lenders or any insurer of the Builder Property makes any claim against Buyer
Group for any damage to or loss of Builder Property, Builder shall release,
indemnify and hold Buyer Group harmless from any such claim to the extent it
exposes Buyer Group to any liability in excess of the Contract Price. This
indemnity of Buyer Group by Builder Group in excess of the Contract Price shall
apply irrespective of the sole joint or concurrent negligence, negligence per
se, gross negligence, statutory fault or strict liability of any member of the
Buyer Group, or any pre-existing condition or the unseaworthiness of any vessel.
    In no event shall the Buyer Group, the Builder Group, or the Vessel, be
liable under this Article, whether in contract, warranty or tort (including
negligence or strict liability) for economic losses, loss of charter hire or
anticipated profits or revenues, delays or increased cost of operation, cost of
substitute vessels or by reason of shutdown. The Buyer Group and the Builder
Group hereby mutually release each other from all such loss or damage.
Similarly, in no event shall the aggregate liability under the Buyer Indemnity
or the Builder Indemnity exceed the insurance coverages and limits set out in
Article XIII.

ARTICLE XXIV — CONTRACT PERFORMANCE SECURITY

A.   Builder shall provide the following as security for Builder’s performance
under this Contract, which Buyer may draw upon for an undisputed or adjudged
event of default relating solely to performance of the portion of the Contract
providing for construction and delivery of the Tugs:

  1.   The existing Irrevocable Standby Letter of Credit in the amount of
$[****] for the benefit of Buyer (“the Letter of Credit”) as security for
Builder’s performance under the contract dated as of September 2, 2005 for the
construction of three (3) 342,000 BBL double-hull ATB Tank Barges (“the ATB
Contract”). The Letter of Credit shall be amended so that it contains in
substance the terms and conditions set forth in Exhibit F hereto (“the Amended
Letter of Credit”),     2.   An escrow agreement entered into by Builder, Buyer
and a financial institution reasonably satisfactory to Buyer and substantially
in the form of Exhibit G hereto (“the Escrow Agreement”).

          [****] Confidential Treatment        

42

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

 

  3.   A corporate guaranty issued by Builder substantially in the form of
Exhibit H hereto (“the Builder Guaranty”).     4.   [****]

B.   Prior to the date the initial payment from Buyer to Builder is due in
accordance with Article II.B.3.a above, the Amended Letter of Credit shall have
been delivered to Buyer, the Escrow Agreement shall have been entered into by
the parties thereto and the Builder Guaranty and the [****] shall have been
delivered to Buyer.   C.   Notwithstanding any other provision in this Contract,
in the event of default by Builder hereunder, Buyer shall exhaust its remedies
in the order set out in Paragraph A above. By way of example, prior to enforcing
its rights under the Escrow Agreement, Buyer shall have first exhausted its
rights under the Amended Letter of Credit.   D.   As regards the Escrow
Agreement, the Parties agree that:

  1.   Deposits made from progress payments in accordance with Article II.B
shall equal [****] percent ([****]%) of each progress payment, subject to an
aggregate limit of $[****] ,for each Tug. In no event shall the total Deposits
made by Buyer for all Tugs exceed $[****].     2.   Buyer will execute and
deliver the “proper written request to disburse” required under the Escrow
Agreement to disburse the portion of the Deposits applicable to a Tug upon
Builder’s delivery of the Tug for which such Deposits are made to Buyer.     3.
  In the event of a Builder default and failure to cure, or any other dispute
with Builder, the Buyer will execute and deliver the “proper written request to
disburse” required under the Escrow Agreement to disburse all of the Deposits
except for such amount as equals the monetary value of Buyer’s claims under this
Contract arising from such default or dispute.     4.   Any dispute pertaining
to the Deposits, disbursement thereof and/or the Escrow Agreement shall be
subject to final resolution pursuant to the arbitration procedures set out in
Article XIV only and shall not be subject to the “opt out” option thereof to
withdraw from arbitration.

ARTICLE XXV — MISCELLANEOUS

A.   Confidentiality:

          [****] Confidential Treatment        

43

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

 

    Builder shall not release or disclose the Specifications, the Drawings, or
other information about the design of the Tugs to any other party without the
consent of Buyer. Builder shall provide Buyer a copy of Builder’s procedure to
maintain confidentiality of the Specifications and the Drawings and other
aspects of the work, for the Owner’s approval (which shall not be unreasonably
withheld). Builder shall not be liable for a release or disclosure of such
information if Builder has exercised due diligence to prevent such disclosure in
accordance with its procedure. Builder shall not issue any publicity, press
releases, or press statements concerning the Tugs without the consent of Buyer.
      In the event of a conflict between the terms and conditions of this
Paragraph and those contained in the Confidentiality Agreement between the
parties dated 12 November 2004 the terms and conditions of the Confidentiality
Agreement shall prevail.

B.   Buyer’s Business Standards:

  1.   Buyer is firmly committed to ethical business practices, and expects its
vendors to share that commitment. Builder shall sign and comply with Buyer’s
Vendor Code of Conduct, a copy of which is attached as Exhibit J hereto, and
shall insure that all of its employees conducting business with Buyer are aware
of, and comply with, the Code of Conduct.     2.   Suspected violations of
Buyer’s Vendor Code of Conduct or improper practices by Buyer’s employees in
conducting business with Builder shall be reported to Buyer’s Ethics Compliance
Officer as set forth in Buyer’s Vendor Code of Conduct.

ARTICLE XXVI — EFFECTIVE DATE OF CONTRACT
This Contract shall become effective as of the date hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Contract to be duly
executed as of the day and year first above written.

              BENDER SHIPBUILDING & REPAIR CO., INC.
 
       
 
  By:    
 
       
 
      Name:
 
      Title:

          [****] Confidential Treatment        

44

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

 

         
Attest:
       
 
                 
Name:
       
Title:
       

              MARITRANS OPERATING COMPANY L.P.
 
       
 
  By:    
 
       
 
      Name:
 
      Title:

         
Attest:
       
 
                 
Name:
       
Title:
       

          [****] Confidential Treatment        

45

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

 

EXHIBIT A
THE SPECIFICATIONS
EXHIBIT B
THE DRAWINGS
EXHIBIT C
MILESTONE PAYMENTS
EXHIBIT D
PROTOCOL OF DELIVERY AND ACCEPTANCE

          [****] Confidential Treatment        

46