Document:

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                          FIRST PREFERRED SHIP MORTGAGE

                                   GRANTED BY

                          TORCH OFFSHORE, L.L.C., OWNER

                                   IN FAVOR OF

                 GENERAL ELECTRIC CAPITAL CORPORATION, MORTGAGEE

                     ON THE UNITED STATES FLAG VESSEL NAMED

VESSEL NAME                                      VESSEL OFFICIAL NO.
-----------                                      -------------------

MIDNIGHT EAGLE                                   588872

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                              SYNOPSIS OF MORTGAGE

Name of Vessel:                     MIDNIGHT EAGLE

Official Number:                    588872

Type of Instrument:                 First Preferred Ship Mortgage

Effective Date of Instrument:       March ____, 2003

Name of Owner:                      Torch Offshore, L.L.C.

(Percentage of Vessel owned:)       (100%)

Address of Owner:                   401 Whitney Avenue
                                    Suite 400
                                    Gretna, Louisiana 70056

Name of Mortgagee:                  General Electric Capital Corporation

Address of Mortgagee:               16479 Dallas Parkway, Suite 300
                                    Addison, Texas 75001-2512

Total Principal Amount of
Mortgage (exclusive of
interest, expenses and fees):               $9,250,000.00

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                          FIRST PREFERRED SHIP MORTGAGE

         This First Preferred Ship Mortgage (the "Mortgage") is given effective
this _____ day of March, 2003 (the "Effective Date") by TORCH OFFSHORE, L.L.C. a
Delaware limited liability company, having a place of business at 401 Whitney
Avenue, Suite 400, Gretna, Louisiana 70056 (the "Mortgagor"), to GENERAL
ELECTRIC CAPITAL CORPORATION, a Delaware corporation, with a place of business
at 16479 Dallas Parkway, Suite 300, Addison, Texas 75001-2512 (the "Mortgagee").

                                    RECITALS

         WHEREAS, the Mortgagor is the sole owner of the whole of the MIDNIGHT
EAGLE, Official Number 588872 (the "Vessel"), which Vessel is duly documented in
the name of the Mortgagor under the laws and flag of the United States of
America; and

         WHEREAS, in order to secure the prompt payment of all sums due
hereunder and under that certain promissory note in the original principal
amount of $9,250,000.00, dated the date hereof, executed and delivered by
Mortgagor to Mortgagee, as the same may be amended, supplemented, extended or
otherwise modified from time to time (the "Note") (a form of which is annexed
hereto as Exhibit "A") and the Loan Agreement, dated the date hereof ("Loan
Agreement"), between Mortgagor, Mortgagee and Torch Offshore, Inc.
("Guarantor"), and the other Debt Documents (as such term is defined in the Loan
Agreement), (collectively, the "Debt Documents"), and the performance of all
covenants, terms and conditions herein and therein contained, the Mortgagor has
executed and delivered this Mortgage under and pursuant to Chapter 313 Title 46
of the United States Code. Capitalized terms used herein shall have the meanings
given them in the Master Security Agreement, unless the terms are specifically
defined herein.

         NOW, THEREFORE, This Mortgage Witnesseth:

         That in consideration of the foregoing and of the sum of Ten Dollars
($10.00) lawful money of the United States of America in hand paid, and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and in order to secure the prompt payment of the principal of,
prepayment premium, if any, and interest on, and other amounts due under the
Note as well as all other liabilities of the Mortgagor to the Mortgagee, whether
as maker, promisor, guarantor, surety, indemnitor or otherwise, and the
performance of and compliance with all of the covenants, terms, and conditions
contained in the Debt Documents, the Mortgagor by these presents does hereby
grant, bargain, sell, demise, release, convey, assign, transfer, mortgage,
deliver and pledge or cause to be granted, bargained, sold, demised, released,
conveyed, assigned, transferred, mortgaged, delivered and pledged, to the
Mortgagee, its successors and assigns, the whole of the Vessel hereto, together
with all of her engines, boilers, machinery, masts, spars, spare parts, gear,
broached and unbroached consumable stores, provisions, unused rope, furniture,
fuel, pumps, anchors, cables, chains, apparel, rigging, tackle, fittings, tools
and equipment and all other appurtenances and accessories thereunto, now, or at
any time hereafter, belonging or appertaining thereto, whether now owned or
hereafter acquired, whether on board or not, and in all additions, improvements,
substitutions and replacements hereafter made in and to the Vessel or any part
or appurtenance thereto, and all of which shall be deemed to be included in any
reference herein to the Vessel, and all books and records pertaining to the use,
operation and employment of the Vessel; it being understood, however, that
nothing contained herein shall be deemed or construed to subject to the lien of
this Mortgage any property other than a "vessel" as defined in Chapter 313,
Title 46 of the United States Code, and if any determination is made by a court
of competent jurisdiction or if the parties

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mutually agree at any time, or for any reason, that this Mortgage does include
any property other than a "vessel", then such property may be separately
discharged from the lien of this Mortgage by payment of .01% of the hereinafter
referred to total discharge amount.

         TO HAVE AND TO HOLD said Vessel and all the property and appurtenances
aforementioned unto the Mortgagee, its successors and assigns, to its and their
own use and benefit forever;

         PROVIDED, HOWEVER, and these presents are upon the condition that, if
the Mortgagor pays all sums due under and in accordance with the terms of the
Note, and all other sums that now or hereafter may be secured by the lien of
this Mortgage and performs and observes each and every term, covenant and
agreement contained in the Debt Documents, then this Mortgage shall cease,
determine and be void, but otherwise will remain in full force and effect.

         For purposes of this Mortgage, the total amount secured hereby and the
discharge amount is NINE MILLION TWO HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS
($9,250,000.00), plus interest, fees, costs and mortgage covenants. The interest
of the Mortgagor in the Vessel is 100%. The interest mortgaged with respect to
the Vessel is 100%.

         I. REPRESENTATIONS, WARRANTIES AND COVENANTS

         The Mortgagor hereby represents, warrants, covenants and agrees to and
with the Mortgagee as follows:

         1. As of the Effective Date, the Mortgagor is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of Delaware; lawfully owns and is lawfully possessed of the Vessel,
free and clear of all liens, mortgages and other encumbrances; and is duly
authorized to mortgage the Vessel as contemplated herein.

         2. As of the Effective Date, all action necessary or required by law
for the execution and delivery of this Mortgage has been duly and effectively
taken; and this Mortgage constitutes a valid and enforceable obligation of the
Mortgagor in accordance with the terms hereof.

         3. As of the Effective Date, the address stated in the preamble of this
Mortgage is the chief place of business and chief executive office of the
Mortgagor.

         4. The Mortgagor hereby warrants and shall defend the title and
possession of the Vessel and to every part thereof, including its freights, for
the benefit of the Mortgagee against the claims and demands of all persons
whomsoever.

         5. As of the Effective Date, the Mortgagor is not in default in the
performance, observance or fulfillment of the obligations, covenants or
agreements contained in any agreement or instrument to which it is a party or by
which it or any of its property is bound.

         6. The Mortgagor shall cause this Mortgage to be duly recorded in
accordance with the provisions of Chapter 313, Title 46 of the United States
Code (hereinafter as the same may be amended or supplemented from time to time,
the "Ship Mortgage Act") on the date hereof, and will otherwise comply with and
satisfy all of the provisions of the Ship Mortgage Act in order to establish and
maintain this Mortgage as a first preferred mortgage on the Vessel, on all
replacements and improvements made in or to the same, and will comply with and
satisfy all other requirements in order that the Vessel may

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remain qualified to engage in the United States coastwise trade.

         7. As of the Effective Date, the Vessel is free of all recommendations
and conditions affecting its class.

         8. The Mortgagor shall duly and punctually pay or cause to be paid to
the Mortgagee the principal of, prepayment premium, if any, and interest on, and
all other fees and charges provided for in, the Note and the other Debt
Documents in accordance with the terms thereof, and shall keep, perform and
observe all and singular the covenants, representations, warranties, terms and
agreements contained herein, in the Note and the other Debt Documents to be
kept, performed, and observed by the Mortgagor; and the terms of the Note and
the other Debt Documents are expressly incorporated herein by reference and made
a part hereof.

         9. (a) The Mortgagor shall not cause or permit the Vessel to be
operated in any manner contrary to applicable law, and the Mortgagor will not
engage in any unlawful trade or violate any law or carry any cargo that will
expose the Vessel to penalty, forfeiture or capture. The Mortgagor shall not
operate the Vessel or cause or permit the Vessel to be operated in waters
outside the United States of America not covered by its current trading
warranties.

         (b) The Mortgagor shall not do, or suffer or permit to be done,
anything which can or may injuriously affect the documentation of the Vessel
under the laws and regulations of the United States of America and shall at all
times keep the Vessel duly documented under the laws and flag of the United
States of America and, where applicable and required by law, eligible to engage
in the coastwise trade.

         10. The Mortgagor is and will at all times, so long as this Mortgage
shall remain in effect, remain a citizen of the United States within the meaning
of Section 2 of the Shipping Act of 1916, as amended, and all regulations from
time to time promulgated pursuant thereto, qualified to engage in the coastwise
trade.

         11. The Mortgagor shall from time to time pay and discharge, or cause
to be paid and discharged, as they become due and payable all taxes, assessments
and governmental charges, fines and penalties lawfully levied or assessed or
imposed upon the Vessel or any income therefrom, whether directed to the
Mortgagor, the Mortgagee or against their properties or upon any income
therefrom (excluding taxes on the overall net income of the Mortgagee or other
holder of the Note); provided, however, that the Mortgagor shall have the right
to contest, in good faith and by appropriate and diligent legal proceedings, any
such tax, assessment or governmental charge, and, pending such contest, may
defer or cause to be deferred the payment thereof, so long as such deferment of
payment shall not subject the Vessel to arrest, detention, or forfeiture of
title.

         12. Neither the Mortgagor, any charterer, the Master of the Vessel nor
any other person has or shall have any right, power or authority to create,
incur or permit to be placed or imposed upon the Vessel any mortgage, security
interest, or lien whatsoever other than the lien of this Mortgage and inchoate
materialmen's, mechanics', repairmen's and similar liens arising by operation of
law in the normal course of business for amounts which are not delinquent, liens
for crew wages, general average and salvage ("Permitted Maritime Liens").

         13. The Mortgagor shall, within five (5) days of the date hereof,
place, and thereafter at all times and places will retain, a properly certified
copy of this Mortgage on board the Vessel and will cause such certified copy and
the Vessel's marine documents to be exhibited to any and all persons

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having business therewith which might give rise to any lien thereon (other than
Permitted Maritime Liens), and to any representatives of the Mortgagee; and will
place and keep prominently displayed in the chart room and in the Master's cabin
of the Vessel a framed printed notice reading as follows:

                               NOTICE OF MORTGAGE

         This Vessel is covered by a First Preferred Ship Mortgage in favor of
         General Electric Capital Corporation, Mortgagee, under authority of
         Chapter 313, Title 46 of the United States Code. Under the terms of
         this Mortgage, neither the Owner, any charterer, the Master of this
         Vessel nor any other person has any right, power or authority to
         create, incur or permit to be placed or imposed upon this Vessel any
         lien whatsoever other than the liens of said Mortgage and liens for
         crew wages, general average and salvage.

         14. The Mortgagor shall not suffer to be continued any lien,
encumbrance or charge of the Vessel (other than Permitted Maritime Liens) or
their freights; provided, however, that without limitation of Mortgagor's
obligations under Section 15, the Mortgagor may contest (in good faith and by
appropriate and diligent legal proceedings) any lien, encumbrance or other
charge of the Vessel. The Mortgagor will pay and discharge, or cause to be paid
and discharged, or make adequate provision for the satisfaction or discharge of,
all lawful claims or demands which, if not paid or discharged, might result in
the creation of such a security interest, lien, encumbrance or charge, and will
cause the Vessel to be released or discharged from any lien, encumbrance or
charge therefor.

         15. If a libel or warrant of arrest is filed against the Vessel or the
Vessel shall be attached, levied upon or taken into custody or detained by
virtue of any legal proceeding in any court, or tribunal or by any government or
other authority, the Mortgagor will promptly notify the Mortgagee thereof by
telefax, confirmed by notice, addressed to the Mortgagee, and within fifteen
(15) days will cause the Vessel to be released and will promptly notify the
Mortgagee thereof in the manner aforesaid.

         16. The Mortgagor shall at all times and without cost or expense to the
Mortgagee maintain and preserve, or cause to be maintained and preserved, the
Vessel in good running order and repair, so that the Vessel shall be, insofar as
due diligence can make it so, tight, staunch, strong and sufficiently well
tackled, appareled, furnished, equipped and in every respect seaworthy and fit
for its intended service. The Vessel shall, and the Mortgagor covenants that it
will, at all times comply with all applicable laws, treaties and conventions of
the United States of America (including the current Certificate of Inspection
for the Vessel issued by the United States Coast Guard), and rules and
regulations issued thereunder, and shall have on board as and when required
thereby valid certificates showing compliance therewith. The Mortgagor will not
make, or permit to be made, any changes to the Vessel which would (i) detract
from its value; (ii) limit or reduce its utility; or (iii) alter its ability to
participate in the trade for which it was designed, without the Mortgagee's
prior written consent.

         17. The Mortgagee shall have the right at any time, on reasonable
notice and at the Mortgagor's expense, to inspect or survey the Vessel, to
ascertain their condition and to satisfy itself that the Vessel is being
properly maintained and, when required, repaired. The Mortgagor shall make or
cause to be made all such repairs, without expense to the Mortgagee, as such
inspection or survey may show to be required. The Mortgagor shall also permit
the Mortgagee to inspect the Vessel and its logs, whenever requested.

         18. The Mortgagor shall not transfer or change the flag or port of
documentation of the Vessel without the prior written consent of the Mortgagee,
and any such written consent to any one transfer or change of flag or port of
documentation shall not be construed to be a waiver of this provision

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with respect to any subsequent proposed transfer or change of flag or port of
documentation.

         19. The Mortgagor shall not demise charter, time charter, transfer,
mortgage, change the management of or enter into any agreement for the use of
the Vessels, without the prior written consent of the Mortgagee, except for
demise or time charters to affiliates that are majority-owned subsidiaries of
Guarantor, and time charters of six (6) months or less entered into in the
ordinary course of Mortgagor's business, provided that any such demise or time
charter shall include an acknowledgment by the Mortgagor of its obligations
under this Mortgage and by the charterer of notice of this Mortgage and the
agreement of the charterer that any claim or lien that may arise in its favor
against Mortgagor in connection with the charter, whether in contract or in
tort, shall be subordinate in all respects o the lien of this Mortgage. In any
event and notwithstanding Mortgagee's consent to the entering into of any such
agreement by Mortgagor, Mortgagor shall remain primarily bound and obligated to
fully and punctually perform all of its covenants and agreements under this
Mortgage. Any such written consent to any one demise charter, time charter,
transfer, mortgage or change of management shall not be construed to be a waiver
of this provision with respect to any subsequent proposed demise charter, time
charter, transfer mortgage or change of management. Any demise charter, time
charter, transfer, mortgage or management agreement or other similar agreement
relating to the Vessels shall be subject and subordinate to the provisions of
this Mortgage (irrespective of the basis of such claim and whether based in
contract, tort or other theory of law) and any other mortgage given by the
Mortgagor in favor of the Mortgagee on the Vessels.

         20. The Mortgagor shall reimburse the Mortgagee for all costs and
expenses which the Mortgagee may from time to time incur, lay out or expend,
together with interest at the Default Rate (as hereinafter defined) in insuring
the Vessel, discharging liens, paying taxes, dues, assessments, governmental
charges, fines and penalties that may be lawfully imposed, making repairs or in
performing any other duty which the Mortgagor is obligated to perform hereunder,
but otherwise fails to perform. The obligation to reimburse the Mortgagee for
such costs and expenses shall be an additional indebtedness due from the
Mortgagor, secured by this Mortgage, and shall be payable by the Mortgagor
within thirty (30) days of demand by Mortgagee. The Mortgagee, though privileged
so to do, shall be under no obligation to make any such expenditures, nor shall
the making thereof relieve the Mortgagor of any default in that respect.

         21. The Mortgagor hereby covenants and agrees to certify to any person
or corporation who may desire to purchase the Note and this Mortgage that the
Mortgagor has no chargeback, claim, set-off or other defense of any kind
whatsoever to the payment of any part of the obligations under the Note, either
as to principal or interest, then due and payable by the terms thereof.

         22. As of the Effective Date, the Mortgagor has filed or has caused to
have been filed all tax returns which, to the knowledge of the Mortgagor, are
required to be filed, and has paid or caused to have been paid all taxes as
shown on such returns or on any assessment received by it, to the extent that
such taxes have become due, unless and to the extent only that such taxes,
assessments and governmental charges are currently being contested in good faith
and by appropriate and diligent legal proceedings and adequate reserves therefor
have been established as required under generally accepted accounting principles
consistently applied.

         23. As of the Effective Date, the Mortgagor is not, to its knowledge,
in violation of any law, ordinance, governmental rule or regulation to which it
is subject, and the Mortgagor has obtained any and all licenses, permits,
franchises or other governmental authorizations necessary for the ownership of
its properties and the conduct of its business.

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         24. The Vessel (i) meets, and at all times shall meet (except during
any period when (1) there has been an actual or constructive total loss or an
agreed, arranged or compromised total loss of the Vessel or (2) there has been
any other loss with respect to the Vessel and the Mortgagor shall not have had a
reasonable time to repair the same) all requirements of applicable laws,
treaties and conventions and of applicable rules and regulations thereunder,
including, without limitation, the International Convention for the Safety of
Life at Sea, 1960, as amended, and all applicable laws, rules and regulations
administered by the United States Coast Guard, the Bureau of Customs, the
Treasury Department and any other United States agency having jurisdiction in
connection with the use, operation and condition of the Vessel, and (ii) has on
board all required certificates and licenses for such use and operation.

         25. No condition exists as of the Effective Date, and the Mortgagor
shall not cause or permit any condition to exist, which may result in any lien
in favor of the United States of America or any state or political subdivision
thereof against the Vessel under the provisions of the Employee Retirement
Income Security Act of 1974, as amended, or other similar Federal, state or
local legislation.

         26. The Mortgagor shall promptly inform the Mortgagee of any pending or
threatened litigation involving the Mortgagor, where the amount claimed exceeds
$50,000 and such amount is not covered by insurance, and of any other event,
condition or occurrence which the Mortgagor would likely expect to adversely
impact its ability to repay in timely fashion all amounts due under the Note or
the Debt Documents; except for those events, conditions or occurrences disclosed
in Torch Offshore Inc.'s 10Q as of September 30, 2002 and suits which may arise
as a direct result of the termination of the Midnight Hunter Charter.

         27. (a) (i) Mortgagor covenants and agrees that it will, at its
expense, maintain or cause to be maintained in effect for the Vessel, with
insurers of recognized responsibility acceptable to Mortgagee, insurance of a
kind, amount and character customarily carried by persons operating like
properties and in reasonable amounts, insurance against risk of loss and damage
in such forms and with such insurance companies, underwriters, clubs or funds as
Mortgagor may select subject to Mortgagee's right to reject such form of policy
or insurance carrier for cause.

                           (ii) Without limiting the foregoing, Mortgagor shall
procure and continuously maintain the following insurance covering the Vessel:

                                    (A) Hull and machinery insurance in an
amount equal to the fair market value of the Vessel or the aggregate principal
amount outstanding on the Debt Documents, whichever is greater, with a per
occurrence deductible not to exceed $35,000. Such insurance shall name Mortgagor
and Mortgagee as additional insureds, as their respective interest may appear,
and shall name Mortgagee as sole loss payee.

                                    (B) Protection and indemnity insurance,
including coverage for pollution liabilities and coverage for the master and
crew, in a total primary, excess and bumbershoot amount of, $10,000,000, with a
deductible not to exceed $35,000 per occurrence for bodily injury, death,
property damage, or loss. Such insurance shall name Mortgagor and Mortgagee as
additional insureds, as their respective interest may appear and co-loss payees.

                                    (C) Oil spill clean-up insurance in
sufficient amount to conform to the Federal Water Pollution Control Act, as
amended by the Clean Water Act of 1977, 33 U.S.C. Section 1251m et seq., and any
and all amendments or supplements thereto, so that, if required, Certificates of
Financial Responsibility issued by the United States Coast Guard can be
maintained on the Vessel at all times.

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                                    (D) Mortgagee's interest insurance
(including additional perils - pollution) protecting the interests of Mortgagee.

         28. The Vessel shall not carry any cargoes nor proceed into any areas
then excluded by the trading warranties under the above referenced policies
without first obtaining any necessary additional coverage, satisfactory in form
and substance, and evidence of which shall be furnished, to the Mortgagee. All
insurance shall be in form and with companies reasonably satisfactory to the
Mortgagee. All insurance for loss or damage shall provide that losses, if any,
shall be payable to the Mortgagee for distribution by it to itself and the
Mortgagor, as their respective interests may appear. Notwithstanding the
foregoing, unless otherwise required by the Mortgagee by notice to the
underwriters: (i) any loss under any insurance on the Vessel with respect to
protection and indemnity risks may be paid directly to the Mortgagor to
reimburse it for any loss, damage or expense incurred by it and covered by such
insurance or to the person to whom any liability covered by such insurance has
been incurred; and (ii) in the case of any loss (other than a "Total Loss" as
hereinafter defined) under any insurance with respect to the Vessel involving
any damage to the Vessel, the underwriters may, so long as no Event of Default,
or event which with the giving of notice or passage of time or both would
constitute an Event of Default hereunder, has occurred and be continuing and
upon receipt of evidence satisfactory to it of the completion of such repairs or
other charges, pay direct for the repair, salvage or other charges involved or,
if the Mortgagor shall have first fully repaired the damage or paid all of the
salvage or other charges, may pay the Mortgagor as reimbursement therefor;
provided, however, that if such damage involves a loss in excess of $50,000, the
underwriters shall not make such payment without first obtaining the prior
written consent thereto of the Mortgagee. Any loss covered by this paragraph
which is paid to the Mortgagee but which might have been paid, in accordance
with the provisions of this paragraph, directly to the Mortgagor or others,
shall be paid by the Mortgagee to, or as directed by, the Mortgagor and all
other payments to the Mortgagee of losses covered by this paragraph shall be
applied by the Mortgagee towards payment of any fees or other expenses then
outstanding and otherwise in accordance with the last sentence of this
paragraph. The Mortgagor shall pay the premiums and calls, if any, therefor and
deliver to the Mortgagee the policies of insurance or duplicates thereof, or
other evidence satisfactory to the Mortgagee of such insurance coverage and of
each rider and endorsement thereto or renewal thereof. In addition, the
Mortgagor shall furnish to the Mortgagee, within thirty (30) days of the
execution of this Mortgage, and annually thereafter, if requested by Mortgagee,
a detailed report signed by a firm of marine insurance brokers satisfactory to
the Mortgagee as to the insurance maintained on the Vessel, as to their opinion
as to the adequacy thereof and as to the Mortgagor's compliance with the terms
hereof. Mortgagor shall cause each insurer to agree, by endorsement upon the
policy or policies issued by it, or by independent instrument furnished to the
Mortgagee, that (1) it will give the Mortgagee thirty (30) days' prior written
notice of the effective date of any material alteration, cancellation or
non-renewal of such policy or policies and (2) insurance as to the interest of
any named loss payee other than the Mortgagor shall not be invalidated by any
actions, inactions, breach of warranty or condition or negligence of the
Mortgagor with respect to such policy or policies. In the event of: (i) an
actual or constructive total loss or an agreed, arranged or compromised total
loss of the Vessel; or (ii) any loss, theft or destruction of the Vessel or
damage thereto to such extent as shall make repair thereof uneconomical or shall
render the Vessel permanently unfit for normal use for any reason whatsoever; or
(iii) the condemnation, confiscation or requisition, forfeiture or other taking
of title to or use of the Vessel (any such occurrence being hereinafter referred
to as a "Total Loss"), the Mortgagor shall give the Mortgagee prompt written
notice thereof. Any amounts received by the Mortgagee as a result of such Total
Loss shall be applied by it to prepay the remaining principal installments due
under the Note, and any other amounts then due the Mortgagee in such order as
the Mortgagee may elect and the balance, if any, to the Mortgagor or to
whomsoever may be lawfully entitled thereto. Anything above to the contrary
notwithstanding, so long as no Event of Default, or event which with the giving
of notice or

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passage of time or both would constitute an Event of Default hereunder has
occurred and be continuing, Mortgagor shall be able to retain insurance proceeds
paid on account of a Total Loss of the Vessel on the condition that Mortgagor
has replaced the Vessel with a vessel equal to the lost Vessel's insured value
and Mortgagor grants to Mortgagee a first preferred ship mortgage in such new
vessel by supplementation of this Mortgage or through a new preferred ship
mortgage satisfactory to Mortgagee.

         29. The Mortgagor will comply with and satisfy all of the provisions of
any applicable law, regulation, proclamation or order concerning financial
responsibility for liabilities imposed on the Mortgagor or the Vessel with
respect to pollution including, without limitation, the U.S. Water Pollution
Act, as amended by the Water Pollution Control Act Amendment of 1972, and as
further amended by the Oil Pollution Act of 1990 (as the same may be further
amended from time to time), and will maintain all certificates or other evidence
of financial responsibility as may be required by any such law, regulation,
proclamation or order with respect to the trade in which the Vessel is from time
to time engaged and the cargoes carried by it.

         30. The Mortgagor irrevocably appoints the Mortgagee as the Mortgagor's
attorney-in-fact to make claim for, receive payment of, and execute and endorse
all documents, checks or drafts received in payment for loss or damage under any
of said insurance policies, but only to the extent the same relates to the
Vessel. This appointment is coupled with an interest and is irrevocable.
Mortgagee agrees that it shall not exercise the foregoing powers except upon the
occurrence and during the continuance of an Event of Default. Should the
Mortgagor fail to maintain, or cause to be maintained, insurance as herein
provided, the Mortgagee may, at its option (but shall not be obligated to),
provide such insurance, and, in such event, the Mortgagor shall, upon demand of
the Mortgagee, reimburse the Mortgagee for the cost thereof, together with
interest thereon until paid in full at the lower of eighteen percent (18%) or
the maximum rate not prohibited by applicable law (the "Default Rate").

         31. The Mortgagor shall promptly and duly execute and deliver to the
Mortgagee such further documents, instruments, and assurances and take such
further action as the Mortgagee may from time to time reasonably request in
order to carry out the intent and purpose of this Mortgage and to establish and
protect the rights and remedies created or intended to be created in favor of
the Mortgagee hereunder, including, without limitation, the execution and
delivery of other documents reasonably required, and the payment of all
necessary costs to record such documents and the payment of any documentary or
recordation taxes, to perfect and maintain perfected the liens granted under
this Mortgage and the payment of all expenses incurred by the Mortgagee in
connection with the transactions contemplated by this Mortgage, including,
without limitation, costs of printing, documentation, surveys, appraisals,
inspection reports, commitment fees, credit and lien reports, and reasonable
attorneys' (and paralegals') fees and expenses.

                                      -8-
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II.      DEFAULT AND REMEDIES

         32. The Mortgagor shall be deemed to be in default hereunder upon the
occurrence of any of the following events (each, an "Event of Default"):

                  (a) the Mortgagor fails to pay any amount when due under the
Note; or

                  (b) the Mortgagor fails to perform, observe or comply with any
agreement, covenant, term or condition contained in Article I, Sections 1
through 12 inclusive, 14, 15, 16, 18, 19, 20, 22, 23, 24, 25, 27, 28 and 29; or

                  (c) the Mortgagor fails to perform, observe or comply with any
agreement, covenant, term or condition contained in Article I, Sections 13, 17,
21, 26, 30 and 31 and such failure continues unremedied for a period of five (5)
days after written notice thereof shall have been given by the Mortgagee to the
Mortgagor; or

                  (d) the Mortgagor fails to perform, observe or comply with any
other agreement, covenant, term or condition contained herein and such default
continues unremedied for a period of thirty (30) days after written notice
thereof shall have been given by the Mortgagee to the Mortgagor; provided,
however, that if such default can be remedied but such remedy can not be
effectuated within such thirty (30) day period, no Event of Default shall be
deemed to have occurred so long as, in the Mortgagee's good faith judgment, the
Mortgagor is taking appropriate remedial action to cure such default; or

                  (e) any warranty, representation or written statement made or
furnished to the Mortgagee by or on behalf of Mortgagor proves not to have been
true in any material respect when made; or

                  (f) there occurs any unauthorized sale, transfer, charter or
other disposition of the Vessel; or

                  (g) the Mortgagor or Guarantor becomes insolvent or bankrupt
or files a voluntary petition in bankruptcy or is unable, or admits in writing
its inability to pay its debts as they mature or makes an assignment for the
benefit of its or his creditors or consents to the appointment of a trustee or
receiver, or a trustee or a receiver shall be appointed for the Mortgagor or for
a substantial part of its or his property without its or his consent and shall
not be dismissed for thirty (30) days; or

                  (h) one or more final judgment for the payment of money in
excess of $100,000 (which is not covered by insurance and for which no
reservation of rights letter has been issued by the insurer defending such
action) in the aggregate is entered by a court or courts of competent
jurisdiction against the Mortgagor and such judgment is not effectively stayed
and remains undischarged and unbonded for thirty (30) days; or

                  (i) there occurs a default or an event of default under the
Note or the other Debt Documents.

                  (j) Mortgagor or Guarantor is in default under any agreement
between by, between or among any of such parties and Mortgagee including, any
promissory note, guaranty or other instrument executed by any of such parties in
favor of Mortgagee.

         33. Upon the occurrence and during the continuance of an Event of
Default, the Mortgagee may, at any time thereafter, do any of the following:

                                      -9-
<PAGE>

                  (a) declare any and all amounts due or owing by the Mortgagor
to the Mortgagee under the Note and this Mortgage and the other Debt Documents
to be immediately due and payable, whereupon the same, together with interest
thereon to the date of declaration, shall become and be immediately due and
payable, without presentment, demand, protest or notice of any kind, all of
which are hereby waived by the Mortgagor. The Mortgagor agrees that upon such
declaration it will immediately pay all such amounts to the Mortgagee and
thereafter any such amounts not so paid (including such accrued interest and
additional amounts) and such further amounts as may be necessary to compensate
the Mortgagee for any such loss or expense incurred after the date of such
declaration or by reason of any Event of Default occurring after the date of
such declaration shall bear interest, from the date thereof until paid in full
at the Default Rate (in no event to exceed the maximum rate allowed by law);

                  (b) exercise any and all of the rights and remedies in
foreclosure and otherwise given to mortgagees by the provisions of the Ship
Mortgage Act, or of the laws of any applicable jurisdiction;

                  (c) bring suit at law, in equity or in admiralty, as it may be
advised, to recover judgment for any and all amounts due under any continuing
guaranty agreement or otherwise hereunder, and collect the same out of any and
all property of the Mortgagor whether covered by this Mortgage or otherwise;

                  (d) take possession of the Vessel, at any time, wherever the
same may be, without legal process and without being responsible for loss or
damage, and the Mortgagor or other person in possession forthwith upon demand of
the Mortgagee shall surrender to the Mortgagee possession of the Vessel, and the
Mortgagee, without being responsible for loss or damage, may hold, lay up,
lease, charter, operate or otherwise use the Vessel for such time and upon such
terms as are in accordance with applicable law and as it may deem to be for its
best advantage, and, upon taking possession thereof, may demand, collect and
retain all hire, freights, earnings, issues, revenues, income, profits, return
premiums, salvage awards or recoveries, recoveries in general average, and all
other sums due or to become due in respect of the Vessel or in respect of any
insurance thereon from any person whomsoever, accounting only for the net
profits, if any, arising from such use of the Vessel and charging upon all
receipts from the use of the Vessel or from the sale thereof by court
proceedings or as set forth below, all costs, expenses, charges, damages or
losses by reason of such use; and if at any time the Mortgagee shall avail
itself of the right herein given it to take the Vessel, the Mortgagee shall have
the right to dock the Vessel for a reasonable time at any dock, pier or other
premises of the Mortgagor without charge, or to dock the Vessel at any other
place at the cost and expense of the Mortgagor;

                  (e) take and enter into possession of the Vessel at any time,
wherever the same may be, without legal process, and if it seems desirable to
the Mortgagee and without being responsible for loss or damage (other then
caused by the Mortgagee's own gross negligence or willful misconduct), sell the
Vessel upon such terms and conditions as the Mortgagee shall deem best, free
from any claim of or by the Mortgagor, at public or private sale, by sealed bids
or otherwise, by furnishing notice of such sale, whether public or private,
addressed to the Mortgagor at its last known address, ten (10) days prior to the
date fixed for entering into the contract of sale, and, by first publishing
notice of any such public sale for ten (10) consecutive days, in some newspaper
published in the City of New Orleans, State of Louisiana. In the event that the
Vessel shall be offered for sale by private sale, no newspaper publication of
notice shall be required, nor notice of adjournment of sale; sale may be held at
such place and at such time as the Mortgagee by notice may have specified, or
may be adjourned by the Mortgagee from time to time by

                                      -10-
<PAGE>

announcement at the time and place appointed for such sale or for such adjourned
sale, and without further notice or publication the Mortgagee may make any such
sale at the time and place to which the same shall be so adjourned; and any sale
may be conducted without bringing the Vessel to the place designated for such
sale and in such manner as the Mortgagee may deem to be for its best advantage,
and the Mortgagee may become the purchaser at any sale. If the Vessel is to be
sold by private sale and the Mortgagor and Mortgagee have not reached agreement
that the price to be paid is fair and reasonable, the parties shall each appoint
a marine broker who in turn shall appoint a third marine broker. The average
value arrived at by the three marine brokers shall be deemed to be the then fair
market value of the Vessel and the Mortgagee shall be deemed to have sold the
Vessel in a commercial reasonable manner so long as the price received therefor
equals or exceeds such value.

         Any sale of the Vessel made pursuant to this Mortgage, whether under
the power of sale hereby granted or any judicial proceedings, shall operate to
divest all right, title and interest of any nature whatsoever of the Mortgagor
therein and thereto, and shall bar the Mortgagor, its successors and assigns,
and all persons claiming by, through or under them. No purchaser shall be bound
to inquire whether notice has been given, or whether any default has occurred,
or as to the propriety of the sale, or as to the application of the proceeds
thereof. In case of any such sale, any purchaser who is the holder of the Note
shall be entitled, for the purpose of making settlement or payment for the
property purchased, to use and apply all amounts due it under the Note as a
credit against the purchase price after payment of all costs and expenses of
sale; and thereupon such purchaser shall be credited, on account of such
purchase price, with the net proceeds that shall have been so credited upon the
Note. At any such sale, the holder of the Note may bid for and purchase such
property and upon compliance with the terms of sale and, to the extent permitted
by law, may hold, retain and dispose of such property without further
accountability therefor.

         34. Following the occurrence and during the continuance of an Event of
Default, the Mortgagee is hereby appointed attorney-in-fact of the Mortgagor and
may, in the name of the Mortgagor or in its own name, demand, collect, receive,
compromise and sue for, so far as may be permitted by law, all freights,
subfreights, hire, earnings, issues, revenues, income and profits of the Vessel
and all amounts due from underwriters under any insurance thereon as payment of
losses or as return premiums or otherwise, salvage awards and recoveries,
recoveries in general average or otherwise, and all other sums due or to become
due at the time of the happening of any Event of Default in respect of the
Vessel, or in respect of any insurance thereon, from any person whomever, and to
make, give and execute in the name of the Mortgagor acquittances, receipts,
releases or other discharges for the same, whether under seal or otherwise, and
to endorse and accept in the name of the Mortgagor all checks, notes, drafts,
warrants, agreements and other instruments in writing with respect to the
foregoing.

         35. Following the occurrence and during the continuance of an Event of
Default, the Mortgagee is hereby appointed attorney-in-fact of the Mortgagor and
shall be permitted to execute and deliver to any purchaser, in the name and on
behalf of the Mortgagor, a bill of sale conveying to said purchaser good and
marketable title to the Vessel. Alternatively, in the event the Vessel is sold
pursuant to any power granted herein, the Mortgagor will, if and when required
by the Mortgagee, execute such form of conveyance of the Vessel as the Mortgagee
may direct or approve.

         36. Whenever the Mortgagee becomes entitled to enter and take
possession of the Vessel, it may require the Mortgagor to deliver, and the
Mortgagor shall deliver, at its own cost and expense, the Vessel to the
Mortgagee upon demand. If any legal proceedings shall be taken to enforce any
right under this Mortgage, the Mortgagee shall be entitled as a matter of right
to the appointment of a receiver of the Vessel pursuant to 46 U.S.C. Section
31325(e) and of the freights, hire, earnings, issues, revenues, income and
profits due or to become due and arising from the operation, use, or employment
thereof.

                                      -11-
<PAGE>

         37. The Mortgagor hereby authorizes and empowers the Mortgagee or its
appointees or any of them to appear in the name of the Mortgagor, its successors
and assigns, in any court of any country or nation of the world where a suit is
pending against the Vessel because of or on account of any alleged lien against
the Vessel, and, if they so desire (but without any obligation to do so) to take
such actions as the Mortgagee or its appointees may deem proper to defend such
suit and to discharge such lien, and all expenditures made or incurred by it or
them for the purpose of such defense or discharge shall be a debt due from the
Mortgagor, its successors and assigns, to the Mortgagee, and shall bear interest
at the Default Rate, until paid in full, and shall be secured by the lien of
this Mortgage in like manner and extent as if the amount and description thereof
were written herein. Mortgagee agrees that it shall not exercise the foregoing
powers except upon the occurrence and during the continuance of an Event of
Default.

         38. Each and every power and remedy herein given to the Mortgagee shall
be cumulative and shall be in addition to every other power and remedy herein
given or now or hereafter existing in law, in equity, in admiralty or by
statute, and each and every power and remedy whether herein given or otherwise
existing may be exercised from time to time and as often and in such order as
may be deemed expedient by the Mortgagee, and the exercise or the beginning of
the exercise of any power or remedy shall not be construed to be a waiver of the
right to exercise at the same time or thereafter any other power or remedy. No
delay or omission by the Mortgagee in the exercise of any right or power or in
the pursuance of any remedy accruing upon any Event of Default shall impair any
such right, power or remedy or be construed to be a waiver of any such Event of
Default or to be an acquiescence therein; nor shall the acceptance by the
Mortgagee of any security or of any payment of or on account of the Note
maturing after any Event of Default or of any payment on account of any past
default be construed to be a waiver of any right to take advantage of any future
Event of Default or of any past Event of Default not completely cured thereby.

         39. If at any time after an Event of Default and prior to the actual
sale of the Vessel by the Mortgagee or prior to the completion of any
foreclosure proceedings the Mortgagor offers completely to cure all Events of
Default and to pay all expenses, advances and damages to the Mortgagee arising
from such Event of Default, with interest at the Default Rate, then the
Mortgagee may, if it so elects, accept such offer and payment and restore the
Mortgagor to its former position, but such action shall not affect any
subsequent Event of Default or impair any rights consequent thereon.

         40. In case the Mortgagee shall have proceeded to enforce any right,
power or remedy under this Mortgage by foreclosure, entry or otherwise, and such
proceedings shall have been discontinued or abandoned for any reason or shall
have been determined adversely to the Mortgagee, then and in every such case the
Mortgagor and the Mortgagee shall be restored to their former positions and
rights hereunder with respect to the property subject or intended to be subject
to this Mortgage, and all rights, remedies and powers of the Mortgagee shall
continue as if no such proceedings had been taken.

         41. The proceeds of any sale of the Vessel either under a power of sale
hereby granted to the Mortgagee or under a judgment or decree in any judicial
proceeding for foreclosure of this Mortgage, or proceeds arising from the
enforcement of any remedy granted to the Mortgagee hereunder or any net earnings
from any charter or other use of the Vessel by the Mortgagee or any requisition
compensation or other moneys received by the Mortgagee pursuant to or under the
terms of this Mortgage shall be applied as follows:

         FIRST: To pay or reimburse all reasonable costs and expenses (together
         with interest at the Default Rate) of the Mortgagee, including the
         compensation of its agents and attorneys, by

                                      -12-
<PAGE>

         reason of any sale, retaking, management or operation of the Vessel and
         all other sums payable to the Mortgagee hereunder by reason of any
         expenses or liabilities incurred or advances made by it for the
         protection, maintenance and enforcement of the security or of any of
         its rights hereunder or in pursuit of any remedy hereby conferred; and,
         at the option of the Mortgagee, to the payment of all taxes,
         assessments or liens claiming priority over the lien of this Mortgage;

         SECOND: To pay all amounts then due under this Mortgage, the Note, and
         other Debt Documents in the manner provided therein; and

         THIRD: The surplus, if any, to the Mortgagor or to whomsoever may be
         lawfully entitled thereto.

         42. Unless one or more Events of Default shall have occurred and be
continuing, the Mortgagor shall (a) be suffered and permitted to retain actual
possession and use of the Vessel, and (b) have the right, from time to time, in
its discretion, and without application to the Mortgagee, and without obtaining
a release thereof by the Mortgagee, to dispose of, free from the lien hereof,
any engines, boilers, machinery, bowsprits, masts, spars, rigging, boats,
anchors, cables, chains, tackle, apparel, furniture, fittings, tools, pumps or
equipment or any other appurtenances of the Vessel that are no longer useful,
necessary, profitable or advantageous in the operation of the Vessel, after
first or simultaneously replacing the same by new engines, boilers, machinery,
bowsprits, masts, soars, rigging, boats, anchors, cables, chains, tackle,
apparel, furniture, fittings, tools, pumps or equipment, or other appurtenances
of substantially equal value to the Mortgagor which shall forthwith become
subject to the lien of this Mortgage as a preferred mortgage thereon.

         III.     SUNDRY PROVISIONS

         43. Anything contained herein to the contrary notwithstanding, it is
intended that nothing herein shall waive the preferred status of this Mortgage
and that, if any provision in this Mortgage or portion thereof shall be
construed to waive the preferred status of this Mortgage, then such provision to
such extent shall be void and of no effect.

         44. This Mortgage may be executed in any number of counterparts, and
each of such counterparts shall for all purposes be deemed to be an original.

         45. The titles of the Articles herein are for convenience only and
shall not affect the construction hereof.

         46. If any part of this Mortgage shall be adjudged invalid, then such
partial invalidity shall not cause the remainder of this Mortgage to be or to
become invalid, and if a provision hereof is held invalid in one or more of its
applications, the parties hereto agree that said provision shall remain in
effect in all valid applications that are severable from the invalid application
or applications.

         47. In the event this Mortgage or any provision hereof shall be deemed
invalidated in whole or in part by any present or future law of the United
States of America or any decision of any court of competent jurisdiction, the
Mortgagor will execute such other and further instruments and do such things as
in the opinion of counsel for the Mortgagee will carry out true intent and
spirit of this Mortgage. From time to time for the reasons aforesaid, or for any
other reason deemed sufficient by the Mortgagee, the Mortgagor will execute such
assurances as in the opinion of such counsel may be required to perfect the
interest of the Mortgagee in the Vessel as security for the indebtedness secured
hereby and for the performance by the Mortgagor of all its covenants, promises
and conditions herein contained.

                                      -13-
<PAGE>

         48. All the covenants, conditions, representations, warranties,
stipulations and agreements of the Mortgagor contained in this Mortgage shall
bind the Mortgagor, its successors and assigns, and shall inure to the benefit
of the Mortgagee, its successors and assigns.

         49. All notices, requests, and demands under this Mortgage shall be
given in writing and shall be delivered, by personal delivery, overnight courier
service (e.g., Federal Express) or by certified mail, return receipt requested,
as follows:

                  To the Mortgagor:

                  Torch Offshore, L.L.C.
                  401 Whitney Avenue
                  Suite 400
                  Gretna, Louisiana  70056

                  To the Mortgagee:

                  General Electric Capital Corporation
                  16479 Dallas Parkway, Suite 300
                  Addison, Texas  75001-2512
                  Attn: Senior Risk Manager

                  with a copy to:

                  Robert J. Stefani, Jr., Esq.
                  King, LeBlanc & LeBlanc, L.L.P.
                  201 St. Charles Avenue, Suite 3800
                  New Orleans, Louisiana  70170
                  Telefax:  (504) 582-1233

or to such other address as the parties may designate from time to time and
unless otherwise specified herein, all such notices, requests and demands shall
be deemed to have been given on the date of personal delivery, one business day
after deposit with an overnight courier service, or four (4) business days after
deposit in the United States mail, postage prepaid. As used herein, the term
"business day" shall mean and include any day other than Saturdays, Sundays, or
other days on which commercial banks in New York, New York are required or
authorized to be closed.

         50. The parties agree that whenever the consent of the Mortgagee is
required for the taking of any action by the Mortgagor hereunder, such consent
shall not be unreasonably withheld.

         51. UNLESS PREEMPTED BY THE FEDERAL OR MARITIME LAW OF THE UNITED
STATES, THIS FIRST PREFERRED SHIP MORTGAGE AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAW
OF THE STATE OF NEW YORK.

         52. (a) Mortgagor hereby confesses judgment, consenting that judgment
be rendered and signed whether during term of court or in vacation, in favor of
Mortgagee for the full amount of the indebtedness secured by this Mortgage.

                                      -14-
<PAGE>

      (b) Upon the existence or occurrence of an event of default under this
Mortgage, Mortgagor declares that it shall be lawful for, and it does hereby
authorize, Mortgagee to cause all or any part of the Vessel to be seized and
sold, under executory process or under writ of fieri facias issued in execution
of an ordinary judgment obtained upon the indebtedness secured by this Mortgage,
without appraisement to the highest bidder, payable in cash; Mortgagor herein
and hereby waiving all and every appraisement thereof, and by these presents
waiving and renouncing the benefit of appraisement and of all laws relative to
the appraisement of Vessel seized and sold under executory or other legal
process. Mortgagor herein agrees to waive, and does hereby specifically waive:

         (i) The benefit of appraisement provided for in Articles 2332, 2336,
2723 and 2724, Louisiana Code of Civil Procedure, and all other laws conferring
such benefits;

         (ii) The demand and three (3) days delay accorded by Articles 2639 and
2721, Louisiana Code of Civil Procedure;

         (iii) The notice of seizure required by Articles 2293 and 2721,
Louisiana Code of Civil Procedure;

         (iv) The three days delay provided by Articles 2331 and 2722, Louisiana
Code of Civil Procedure;

         (v) The benefit of the other provisions of Articles 2331, 2772 and
2723, Louisiana Code of Civil Procedure;

         (vi) The benefit of the provisions of any other articles of the
Louisiana Code of Civil Procedure not specifically mentioned above; and

         (vii) All rights of division and discussion with respect to all
indebtedness secured by this Mortgage.

         (c) Mortgagor hereby agrees that in the event Mortgagee should, at its
option, elect to enter suit via ordinaria on Indebtedness secured by this
Mortgage, then Mortgagor does hereby, in addition to the foregoing confession of
judgment, waive citation and other legal process and legal delays, hereby
consenting that judgment for the unpaid principal due on the indebtedness
secured by this Mortgage, together with interest, attorneys' fees, costs and
other charges that may be due, be rendered and signed immediately, whether
during term of court or in vacation.

         (d) Pursuant to the authority contained in La. R.S. 9:5136 through
9:5140.1 (La. Act. No. 315 of 1976), Mortgagor does hereby expressly designate,
at this time, Mortgagee or its designee to be keeper or receiver for the benefit
of the Mortgagee or any assignee of Mortgagee, at its option, to take effect
immediately upon any seizure of the Vessel under writ of executory process or
under writ of sequestration of fieri facias as an incident to an action which
may be brought by the Mortgagee. The fees of the keeper or receiver shall be
determined by the Court before which the proceedings are pending, and the
payment of such fees shall be secured by this Mortgage.

         WITNESS THE DUE EXECUTION HEREOF by the Mortgagor this ______ day of
March, 2003.

                           TORCH OFFSHORE, L.L.C.

                           By: Torch Offshore, Inc., its sole member

                               By:
                                  --------------------------------------------
                                     Robert E. Fulton, Chief Financial Officer

                                      -15-
<PAGE>

                                 ACKNOWLEDGMENT

STATE OF LOUISIANA

PARISH OF JEFFERSON

         On this ______ day of March, 2003, before me personally came and
appeared:

                                ROBERT E. FULTON

to me known to me to be the person who signed the foregoing instrument, who
being by me duly sworn, did depose and say that

         1. He is the Chief Financial Officer of Torch Offshore, Inc., a
Delaware corporation (the "Company") and the sole member of Torch Offshore,
L.L.C., the Delaware limited liability company described in and which executed
the foregoing First Preferred Ship Mortgage;

         2. He signed his name thereto by authority of the board of directors of
the Company, and he acknowledged to me that he executed said First Preferred
Ship Mortgage as an authorized signatory of the Company; and

         3. The same is the free and voluntary act and deed of the Company,
Torch Offshore, L.L.C. and of himself as authorized signatory thereof, for the
uses and purposes therein expressed.

WITNESSES:

-----------------------------------       --------------------------------------
                                             Robert E. Fulton

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

                      ------------------------------------
                                  NOTARY PUBLIC
                       My commission expires upon my death

                                      -16-
<PAGE>

                                   EXHIBIT "A"

                             Form of Promissory Note

                                 [See attached.]

                                      -17-<PAGE>

                              TORCH OFFSHORE, INC.
                              EMPLOYMENT AGREEMENT

         THIS EMPLOYMENT AGREEMENT (this "Agreement") is effective as of July
30, 2002 (the "Effective Date"), and is entered into between Torch Offshore,
Inc., a Delaware corporation (the "Corporation"), and Robert E. Fulton, a person
of the full age of majority (the "Employee").

         1.       Employment and Duties.

         (a)      The Corporation agrees to employ the Employee as Chief
Financial Officer, or a similar capacity, as of the Effective Date for the
period set forth in paragraph 1(c) below, unless employment is terminated sooner
as provided herein.

         (b)      The Employee accepts employment and agrees to devote his full
time and attention to the performance of his duties as determined, from time to
time, by the Chief Executive Officer or the Board of Directors of the
Corporation.

         (c)      The Employee shall commence his duties as of July 30, 2002
and, except as provided herein, shall continue to serve in the employ of the
Corporation until July 30, 2004 (the "Initial Term"). This Agreement shall be
automatically renewed for successive one-year terms unless terminated at least
thirty (30) days prior to the end of the then current year term (each successive
year is the "Renewal Term").

         2.       Compensation. For all services rendered by the Employee, the
Corporation shall compensate the Employee as follows:

         (a)      Annual Salary. The Corporation shall pay to the Employee,
subject to the terms and conditions set forth in this Agreement, an annual
salary of $165,000, and such amount shall be prorated and paid in accordance
with the Corporation's customary payroll practices.

         (b)      Perquisites and Benefits. The Employee shall be eligible to
receive awards under the Corporation's 2001 Long-Term Incentive Plan and
entitled to receive in the aggregate substantially the same fringe benefits and
perquisites offered by the Corporation to any of the Corporation's similarly
situated employees, including, without limitation, participation in the various
employee benefit plans or programs provided to the employees of the Corporation
in general, subject to the regular eligibility requirements with respect to each
of such benefit plans or programs.

         (c)      Additional Benefits. The Employee shall be paid a one-time
lump sum of $10,000 with $5,000 paid with first payroll check and $5,000 paid
after six months of employment. The Employee shall be entitled to fifteen (15)
business days of paid vacation each year, to be accrued and taken in accordance
with the Corporation's standard policies and practices.

         (d)      Severance. If the Corporation terminates the employment of the
Employee for any reason other than Cause (as defined in paragraph 4(d)), then
the Corporation shall pay to the

<PAGE>

Employee severance payments of twelve (12) months of salary at his then current
rate, to be paid in accordance with the Corporation's standard payroll
practices, subject to Employee's execution of a general release as provided in
paragraph 12 of the Agreement. The Employee expressly acknowledges and agrees
that the Employee shall not be eligible to receive from the Corporation any form
of severance pay or other form of termination benefit, except as expressly
provided in this paragraph 2(d) (other than coverage under COBRA or other form
of legally mandated benefit available after the termination of employment).

                  Any amount(s) payable under this Agreement shall be subject to
the withholding of such income and employment taxes as may be required by law to
be withheld.

         3.       Payment or Reimbursement of Expenses. Subject to compliance by
the Employee with such policies regarding expenses and expense reimbursements as
may be adopted, from time to time, by the Corporation, the Employee shall be
paid or reimbursed for reasonable expenses actually incurred in connection with
the performance of his duties hereunder and in the furtherance of the business
and affairs of the Corporation. Any such reimbursement shall be made within a
reasonable period after presentation by the Employee of an itemized account of
such expenses, accompanied by appropriate receipts satisfactory to the
Corporation. In no event shall any expense be paid or reimbursed, unless
properly accounted for to the extent necessary to substantiate the Corporation's
Federal income tax deduction under the applicable provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), and the regulations promulgated
thereunder or any similar state or federal law or regulation.

In addition, the Corporation shall provide for the payment or reimbursement of
certain expenses related to the Employee's acceptance of employment and
relocation to the New Orleans, Louisiana are upon such terms and conditions as
provided in Schedule B, attached hereto and incorporated herein by reference. As
provided in Schedule B and in accordance with those terms and conditions, such
payment or reimbursement by the Corporation includes a relocation allowance, a
living allowance, and certain costs related to the purchase of a primary
residence in the New Orleans, Louisiana area, the sale of the Employee's primary
residence, and the shipment and storage of household effects.

The Employee shall receive an allowance of $450.00 per month for use of an
automobile for business purposes and shall be reimbursed for business mileage
(non-commuting) at $0.11 per mile.

         4.       Termination.

         (a)      This Agreement and the Corporation's obligations hereunder
shall terminate as of the conclusion of the Initial Term, unless terminated
earlier pursuant to this paragraph 4 or extended for successive one-year terms
as provided in paragraph 1(c) hereof.

         (b)      Either party may terminate this Agreement by providing the
other party with thirty (30) days written notice.

                                     - 2 -

<PAGE>

         (c)      If the Employee dies or becomes totally disabled (as
determined by the Board of Directors or the Chief Executive Officer of the
Corporation), this Agreement and the Employee's rights hereunder shall
automatically terminate as of the date of such death or disability.

         (d)      The Corporation may terminate this Agreement and the
Employee's rights hereunder at any time for Cause, which shall mean only (i) if
termination shall have been the result of an act or acts of dishonesty on your
part constituting a felony and resulting, or intending to result, directly or
indirectly, in gain or personal enrichment at the expense of the Corporation or
(ii) upon the willful and continued failure by you to substantially perform your
duties with the Corporation (other than any such failure resulting from your
incapacity due to mental or physical illness) after a demand in writing for
substantial performance is delivered to you by the Board of Directors of the
Corporation, which demand specifically identifies the manner in which the Board
of Directors of the Corporation believes that you have not substantially
performed your duties, and such failure to perform your duties results in
demonstrably material injury to the Corporation. Your employment shall in no
event be considered to have been terminated by the Corporation for Cause if such
termination took place as the result of (a) bad judgment or negligence on your
part, or (b) any act or omission without intent of gaining therefrom, directly
or indirectly, a profit to which you were not legally entitled, or (c) any act
or omission believed by you in good faith to have been in or not opposed to the
interest of the Corporation, or (d) any act or omission in respect of which a
determination is made that you met the applicable standard of conduct prescribed
for indemnification or reimbursement or payment of expenses under the by-laws of
the Corporation or the laws of the State of Louisiana or the directors and
officers liability insurance of the Corporation, in each case in effect at the
time of such act or omission. You shall not be deemed to have terminated for
Cause unless and until there shall have been delivered to you a copy of a
resolution duly adopted by the affirmative vote of not less than three-quarters
of the entire membership of the Board of Directors of the Corporation at a
meeting called and held for the purpose (after reasonable notice to you and an
opportunity for you, together with your counsel, to be heard before the Board of
Directors of the Corporation), finding that in the good faith opinion of the
Board of Directors of the Corporation you were guilty of conduct set forth above
in clauses (i) or (ii) of the first sentence of this definition and specifying
the particulars thereof in detail.

         5.       Covenant Not to Compete. During the term of the Employee's
employment with the Corporation or for a period of twelve (12) months following
any termination of the Employee's employment by the Corporation, the Employee
agrees that, with respect to the parishes within the State of Louisiana and the
counties within the States of Texas, Alabama, Florida, and Mississippi set forth
on Schedule A attached hereto, including the territorial waters of the United
States located offshore of such areas, each of which the Employee stipulates and
agrees that the Corporation carries on or intends to carry on a like business,
the Employee shall not, directly or indirectly, for his own benefit or to the
detriment of the Corporation or its affiliates:

         (a)      Own, manage, operate, control, or participate in the
ownership, management, operation, or control of a business (however structured)
that carries on or engages in any manner (excluding stock in a publicly held
corporation), in the Pipelay and Subsea Construction Business. For this purpose,
the term "Pipelay and Subsea Construction Business" shall refer to

                                     - 3 -

<PAGE>

the installation, laying, and/or burying of transmission lines, trunk lines, and
flowlines, laying of all rigid, flexible, reeled, or coiled tubing and
installing, laying, and/or burying of control, power umbilicals and subsea
communication or power cables, and pipeline tie-ins, pipeline burial, riser
installation and survey, inspection, maintenance, and repair services in
connection with oil and gas pipelines;

         (b)      Perform any services similar to the primary services he
performed while employed by the Corporation or any of its subsidiaries or
affiliates for any person, partnership, corporation, association, group, or
other entity engaged in the Pipelay and Subsea Construction Business (as defined
above), whether as an employee, independent contractor, or otherwise; or

         (c)      Solicit customers or employees of the Corporation or any of
its subsidiaries or affiliates for any purpose or in any manner detrimental to
the Corporation or it business or operations.

                  The parties hereto agree that each of the foregoing
prohibitions is intended to constitute a separate restriction. Accordingly,
should any such prohibition be declared invalid or unenforceable, such
prohibition shall be deemed severable from and shall not affect the remainder
thereof. The parties further agree that the foregoing restrictions are
reasonable in both time and scope.

                  Because of the difficulty of measuring economic loss to the
Corporation as a result of a breach of any of the foregoing prohibitions, and
because of the immediate and irreparable damage that could be caused to the
Corporation for which it would have no other adequate remedy, the Employee
agrees that the foregoing prohibitions may be enforced by the Corporation, in
the event of breach by him, by injunctions, restraining orders, and orders of
specific performance issued by a court of competent jurisdiction. The Employee
further agrees to waive any requirement for the Corporation's securing or
posting of any bond in connection with such remedies.

         6.       Confidential Information.

         (a)      The Employee agrees not to disclose, either while employed by
the Corporation or any of its subsidiaries or affiliates or at any time
thereafter, to any person not employed by the Corporation or not engaged by the
Corporation to render services to the Corporation, any confidential information
of the Corporation or its subsidiaries or affiliates learned by the Employee
during the course of his employment by the Corporation. This paragraph 6 shall
not preclude the Employee from the use or disclosure of information known
generally to the public or of information not considered confidential by persons
engaged in the business conducted by the Corporation or from disclosure required
by law or court order. The Employee further agrees that, upon the expiration or
termination of this Agreement for any reason, he will not take with him, without
the prior written consent of the Corporation, any document, magnetic or other
storage media, or any other books, records, files, or confidential or
proprietary information of the Corporation or any of its subsidiaries or
affiliates.

                                     - 4 -

<PAGE>

         (b)      All written materials, records, and documents made by the
Employee or in the possession of the Employee during or after the term of this
Agreement concerning the business or affairs of the Corporation or any of its
subsidiaries or affiliates, or other items or property held by or for the
Employee, but owned or used by the Corporation or its subsidiaries or
affiliates, shall be the sole property of the Corporation or such subsidiary or
affiliate, as the case may be, and, upon the expiration or termination of the
term of this Agreement or upon the request of the Corporation or such subsidiary
or affiliate, the Employee shall promptly deliver all of such materials,
records, documents, or other items or property that are then in his possession.

         7.       Notices. All notices, requests, demands, and other
communications provided for by this Agreement shall be in writing and shall be
deemed to have been duly given when delivered in person or mailed by United
States certified mail, return receipt required, postage prepaid, addressed as
follows:

                  If to the Employee:           If to the Corporation:

                  Robert E. Fulton              Torch Offshore, Inc.
                  4115 Beau Chene Drive         401 Whitney Avenue, Suite 400
                  Lake Charles, LA 70605        Gretna, Louisiana 70056
                                                Attention: Lyle Stockstill, CEO

or to such other address as any party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.

         8.       Governing Law. The provisions of this Agreement shall be
construed in accordance with the substantive local law of the State of
Louisiana, without consideration of the conflicts of law provisions thereof.

         9.       Successors. This Agreement shall be assignable by the
Corporation, with the prior written consent of the Employee. The Employee's
obligation to provide services hereunder, being personal to the Employee, may
not be assigned by the Employee.

         10.      Remedies. Each party acknowledges that the other party will
have no adequate remedy at law if the first party violates certain of the terms
of this Agreement, including but not limited to paragraphs 5 and 6, and that the
other party shall have the right, to the extent permitted by applicable law, in
addition to any other rights or remedies it may have, to obtain from any court
of competent jurisdiction, injunctive relief to restrain any breach or
threatened breach hereof or otherwise to specifically enforce the provisions
hereof.

         11.      Waiver. No waiver of any obligation, right, or remedy under
this Agreement shall be effective, unless such waiver is made in writing,
specifying the terms of this Agreement subject to waiver and executed by the
party to be charged with such waiver. A waiver by either party of any of his or
its rights or remedies hereunder on any occasion shall not be a bar to the
exercise of the same right or remedy on any subsequent occasion or of the
exercise of any other right or remedy at any time.

                                     - 5 -

<PAGE>

         12.      Release. Notwithstanding anything in this Agreement to the
contrary, the Employee shall not be entitled to receive any severance payment
pursuant to paragraph 2(c) of this Agreement unless the Employee has executed
(and not revoked) a general release of all claims the Employee may have against
the Corporation and/or its subsidiaries and affiliates with respect to
employment under this Agreement, in a form of such release reasonably acceptable
to the Corporation.

         13.      Integration and Amendments. This Agreement constitutes the
entire agreement and understanding between the parties with respect to the
subject matter hereof and supersedes any prior agreement or understanding,
whether written or oral, relating to such subject matter. No modification or
amendment to this Agreement shall be effective or binding unless in writing,
specifying such modification or amendment, executed by both of the parties
hereto.

         14.      Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect the construction or interpretation
of this Agreement.

         15.      Severability. Should any section, provision, or portion of
this Agreement be declared invalid or unenforceable in any jurisdiction, then
such section, provision, or portion shall be deemed to be (a) severable from
this Agreement as to such jurisdiction (but not elsewhere) and shall not affect
the remainder hereof and (b) amended to the extent, and only to the extent,
necessary to permit such section, provision, or portion, as the case may be, to
be valid and enforceable in such jurisdiction (but not elsewhere).

         16.      Survival of Certain Provisions. The rights and obligations of
the Employee under paragraphs 5 and 6 hereof shall survive the expiration or
termination of this Agreement.

         17.      Dispute Resolutions. Except with respect to injunctive relief
as provided in paragraphs 5, 6 and 10, neither party shall institute a
proceeding in any court or administrative agency to resolve a dispute between
the parties before that party has sought to resolve the dispute through direct
negotiation with the other party. If the dispute is not resolved within two
weeks after a demand for direct negotiation, the parties shall attempt to
resolve the dispute through mediation. If the parties do not promptly agree on a
mediator, the parties shall request the Louisiana State Bar Association to
appoint a mediator in the state of Louisiana who is qualified as a mediator
under the Louisiana Mediation Act, as amended from time to time. If the mediator
is unable to facilitate a settlement of the dispute within a reasonable period
of time, as determined by the mediator, the mediator shall issue a written
statement to the parties to that effect and any unresolved dispute or
controversy arising under or in connection with this Agreement shall be settled
exclusively by arbitration, conducted before a panel of three arbitrators in
Gretna, Louisiana in accordance with the employment dispute resolution
arbitration rules of the American Arbitration Association then in effect. The
arbitrators shall have the authority to order back-pay, severance compensation,
vesting of options (or cash compensation in lieu of vesting of options),
reimbursement of costs and expenses, including those incurred to enforce this
Agreement, including reasonable attorneys' fees, and interest thereon. A
decision by a majority of the arbitration panel shall be final and binding.
Judgment may be entered on the arbitrators' award in any court having
jurisdiction.

                                     - 6 -

<PAGE>

         THIS AGREEMENT was executed in multiple counterparts, each of which
shall be deemed an original, as of the dates set forth below, but to be
effective as of the Effective Date.

EMPLOYEE:                             TORCH OFFSHORE, INC.

____________________________          By:_______________________________________
Robert E. Fulton
                                      Title:____________________________________

Date:_______________________          Date:_____________________________________

                                     - 7 -

<PAGE>

Schedule A - Counties and Parishes in which Competition is Prohibited

<TABLE>
<S>      <C>                        <C>                        <C>
I.       TEXAS

         Jefferson                  Chambers                   Harris
         Galveston                  Brazoria
         Calhoun                    Aransas
         Nueces                     Cameron

II.      LOUISIANA

         Cameron                    Vermilion                  Lafayette
         Iberia                     St. Mary                   Orleans
         Terrebonne                 Lafourche
         Jefferson                  Plaquemines

III.     MISSISSIPPI

         Hancock                    Harrison
         Jackson

IV.      ALABAMA

         Mobile

V.       FLORIDA

         Escambia                   Santa Rosa
         Pinnellas                  Hillsborough
         Manatee                    Brevard
</TABLE>

                                     - 8 -

<PAGE>

Schedule B - Definition of Certain Payment or Reimbursement of Expenses

RELOCATION ALLOWANCE:

You will be paid a miscellaneous Relocation Allowance of one month's base pay
effective on the date your family relocates to the New Orleans area.

LIVING ALLOWANCE:

You will be eligible to receive a monthly miscellaneous Living Allowance of
$1,500 per month for six (6) months starting on your date of hire.

You will not be eligible to claim reimbursement via Expense Report for personal
expenses associated with temporary accommodations (housing/apartment/hotel),
meals, commuting mileage, a vehicle, laundry, personal long distance call, or
other such incidental expenses.

The Living Allowance may not be substituted for other benefits in-kind nor will
it be allowed to be extended beyond six (6) months. To receive payment of the
Living Allowance, the enclosed sample memorandum should be completed, signed,
approved and forwarded to the Human Resources Manager, as indicated. Requests
for payment of these amounts in advance will not be considered.

PURCHASE OF PRIMARY RESIDENCE IN THE NEW ORLEANS OR SURROUNDING AREA:

The Company will pay closing costs (see attached list) if you purchase your
primary home in the New Orleans area (does not include discount points). This
benefit will remain valid for up to one (1) year from your date of hire. The
value of this benefit may not be substituted for other benefits in-kind. For
reimbursement of realtor fees/commissions and approved closing costs, expenses
should be submitted via Expense Report (see enclosed sample). Requests for
payments of these amounts in advance will not be considered.

SALE OF PRIMARY RESIDENCE:

OPTION 1:

The Company will reimburse up to 6% of the sale price of your primary permanent
residence/home (owned solely by you; excludes vacation home) in Realtor
fees/commission plus closing costs (see attached list) associated with the sale
of this home. The benefit will remain valid for up to a maximum of one (1) year
form the date your family relocates to the New Orleans area. The value of this
benefit may not be substituted for other benefits in-kind.

OPTION II:

You will have the option to utilize the services of a professional relocation
company to assist you in the sale of your primary residence. If you choose this
option, representatives from the

                                     - 9 -

<PAGE>

relocation company will be providing you with detailed information regarding the
benefits associated with utilizing their services.

SHIPMENT OF HOUSEHOLD EFFECTS:

The Company has contracted the services of a professional moving company who
will arrange for and the Company will pay the actual costs of shipping your
personal and household belongings to the New Orleans area, and provide insurance
on same at reasonable replacement value (insurance coverage excludes heirlooms,
jewelry, plants, and those items not eligible to be transported as indicated in
the next paragraph) up to a maximum replacement value of $80,000. In the event
of an insurance claim, you will be required to substantiate the value of any
lost or damaged items.

The shipment and insurance coverage will be based on a "door-to-door" basis and
will include packing, unpacking and debris removal. It will cover normal
connecting and disconnecting of appliances at origin and destination done by the
mover. The value of shipping and insuring your belongings may not be substituted
for cash or other benefits in-kind.

The Company will not cover additional expenses for Saturday or Sunday pickup or
delivery, or be responsible for the packing or transportation of any of the
following: automobiles, boats, travel trailers, motorhomes, motorcycles,
tractors, aircraft, firearms, building materials, firewood, flammable or
explosive items (i.e. paints, gasoline, household cleaners, gas containers,
liquor, ammunition), items that are alive (i.e. tropical fish, pets or
livestock) refrigerated or frozen items, medicine, or those items having
peculiar inherent value (i.e. heirlooms, jewelry, furs, money, coin and/or stamp
collections and negotiable items of all kinds). Pickup of household goods will
be made from one (1) location only; likewise for delivery. Also, the Company
will not cover removal or installation of computers, a television antenna,
removal or installation of satellite dishes, extra labor for cleaning out a
garage or attic, tips and/or meals to the moving crew, special wiring, venting
or other unusual services in connection with the installation of appliances,
window a/c units, or dismantling of aboveground swimming pools, metal or wood
storage buildings, hot tubs, treehouses, trampolines, swing/gym sets.

HOUSEHOLD GOODS STORAGE:

The Company will pay the charges for up to thirty (30) days with prior Company
approval. Storage beyond 30 days will be at your expense. It is important to
remember that storage charges accrue daily, so please coordinate your move with
consideration of the availability of housing.

                                     - 10 -

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