NOT TO SELL ANY VESSELS TO BUYER UNDER THE
VESSEL PURCHASE AGREEMENT, THEN THE 1031 VALUE SHALL EQUAL ZERO. EACH PARTY
AGREES NOT TO ASSERT IN CONNECTION WITH ANY TAX RETURN, TAX AUDIT OR SIMILAR
PROCEEDING, ANY POSITION INCONSISTENT WITH THIS SECTION 5.10(A)(I).
(II)
BECAUSE THE SEPARATE EXISTENCE OF SEA
COAST AND SEA COAST LLC APART FROM SALTCHUK AND SELLER AND THE SEPARATE
EXISTENCE OF BUYER APART FROM THE PARTNERSHIP ARE DISREGARDED FOR FEDERAL TAX
PURPOSES, THE TRANSACTIONS PURSUANT TO THIS AGREEMENT SHALL BE REPORTED AS A
TRANSFER OF THE ASSETS OF SEA COAST LLC DIRECTLY FROM SALTCHUK TO THE
PARTNERSHIP FOR FEDERAL INCOME TAX PURPOSES (A) IN A TAXABLE SALE OR EXCHANGE,
TO THE EXTENT ATTRIBUTABLE TO THE CASH PORTION OF THE PURCHASE PRICE AND ANY
ALLOCABLE LIABILITIES AND ADJUSTMENTS (THE "TAXABLE SALE") AND (B) IN A
CONTRIBUTION TO A PARTNERSHIP GOVERNED BY SECTION 721 OF THE CODE TO THE EXTENT
ATTRIBUTABLE TO THE PORTION OF THE PURCHASE PRICE PAID IN COMMON UNITS AND ANY
ALLOCABLE ADJUSTMENTS (THE "CONTRIBUTION").
SCHEDULE 5.10(A) SETS FORTH HOW THE
PARTIES SHALL REPORT (A) WHICH PORTION OF SEA COAST LLC'S ASSETS IS ALLOCABLE TO
THE TAXABLE SALE AND WHICH IS ALLOCABLE TO THE CONTRIBUTION, (B) WHICH
LIABILITIES AND ADJUSTMENTS ARE ALLOCABLE TO THE TAXABLE SALE, (C) THE
ALLOCATION OF THE CASH, LIABILITIES AND ADJUSTMENTS ALLOCABLE TO THE TAXABLE
SALE AMONG SEA COAST LLC'S ASSETS AND THE COVENANT NOT TO COMPETE CONTAINED IN
SECTION 5.5 AND (D) THE TAX CONSEQUENCES OF THE LIABILITIES THAT ARE NOT
ALLOCABLE TO THE TAXABLE SALE. EACH PARTY AGREES NOT TO ASSERT, IN CONNECTION
WITH ANY TAX RETURN, TAX AUDIT OR SIMILAR PROCEEDING, ANY POSITION INCONSISTENT
WITH THE ALLOCATIONS AND DETERMINATIONS DESCRIBED IN SCHEDULE 5.10(A).
(III)
AS SOON AS PRACTICABLE AFTER THE CLOSING
DATE, SELLER AND BUYER SHALL JOINTLY PREPARE IRS FORM 8594 TO REPORT THE
ALLOCATION OF THE PURCHASE PRICE AND LIABILITIES ATTRIBUTABLE TO THE TAXABLE
SALE. FOR THIS PURPOSE, THE FAIR MARKET VALUE OF THE ASSETS HELD BY SEA COAST
LLC AND ANY VESSELS TRANSFERRED PURSUANT TO THE VESSEL PURCHASE AGREEMENT SHALL
BE DETERMINED IN ACCORDANCE WITH THE VALUATION METHOD DESCRIBED IN
SCHEDULE 5.10(A).
(IV)
DIFFERENCES BETWEEN THE FAIR MARKET VALUE AND
THE BASIS OF SEA COAST LLC'S ASSETS ALLOCABLE TO THE CONTRIBUTION SHALL BE TAKEN
INTO ACCOUNT IN THE
29
MANNER REQUIRED BY SECTION 704(C) OF THE CODE.
THE PARTNERSHIP WILL ELECT THE
REMEDIAL METHOD OF TREAS. REG. §1.704-3(D) AS TO ALL SUCH ASSETS.
ALL OTHER
DETERMINATIONS REGARDING THE APPLICATION OF SECTION 704(C), THE DETERMINATION
AND MAINTENANCE OF CAPITAL ACCOUNTS AND OTHER TAX MATTERS RELATING TO THE
CONTRIBUTION AND THE ASSETS ALLOCABLE THERETO SHALL BE MADE IN THE DISCRETION OF
THE PARTNERSHIP IN A MANNER CONSISTENT WITH THE PARTNERSHIP AGREEMENT.
(B)
SELLER WILL INDEMNIFY AND HOLD SEA COAST, SEA COAST LLC, BUYER
AND THE PARTNERSHIP HARMLESS FROM (I) ANY LIABILITY FOR TAXES WITH RESPECT TO
SEA COAST ITEMS (AND ANY OTHER LIABILITY OF SEA COAST OR SEA COAST LLC FOR
TAXES) FOR EVENTS, AND FOR TAX