Court Opinion

ID: 9733314
Source: CourtListenerOpinion
Date Created: 2023-08-26 17:02:40.468948+00
Date Added: 2024-06-11T18:26:40.420602
License: Public Domain

FROST, J.,
dissenting.
APPENDIX
The key provisions of the Participation Agreement are as follows:
Article III CONDITIONS PRECEDENT
SECTION 3.01. Conditions Precedent to Participations in Oimer’s Cost. The obligation of each Participant on the Closing Date to participate in the payment of Owner’s Cost shall be subject to the fulfillment to the satisfaction of, or waiver by, each Participant prior to or on the Closing Date, of the following conditions precedent ...:
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(j) Appraisers’ Certificates. The Owner Participant shall have received ... appraisals by Rush Johnson Associates and [Ljowell [J]ohn-ston & [Associates, [I]ne., in form and substance satisfactory to the Owner Participant ... and dated the Closing Date, stating in each case:
(i) such appraiser’s estimate of the fair market value of the Vessel on the Closing Date, which fair market value shall be equal to $66,500,000;
(ii) such appraiser’s estimate as of the Closing Date of the remaining useful life of the Vessel and the residual value thereof at the end of the Basic Term (without taking into account the effects of inflation or deflation and costs of removal to the Owner Participant or the Owner Trustee), which estimates shall be not less than 22 years and not less than 20% of Owner’s Cost for the Vessel, respectively; and
(iii)that the Vessel does not constitute “limited use property” as that term is used in Rev. Proc. 76-30.
SECTION 3.02. Conditions Precedent to Obligations of Charterer. The obligations of the Charterer to sell the Vessel to the Owner Trustee, and to charter the Vessel from the Owner Trustee on the Closing Date and to carry out its other obligations under the Operative Documents ... shall be subject to the performance by each of the other parties hereto of their respective obligations hereunder ... and the fulfillment to the satisfaction of, or waiver by, the Charterer on or prior to the Closing Date, of the following additional conditions precedent:
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(c) Other Documents. The Owner Participant shall have received the appraisals referred to in Section 3.01Q) • • •
SECTION 8.03. Representations, Warranties and, Covenants of the Charterer. The Charterer represents to, and warrants and covenants for the benefit of, the Owner Participant that:
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(b) Useful Life, etc. (i) The period consisting of the Interim Term and the Basic Term is not greater than 80% of the estimated remaining useful life of the Vessel (measured from the Closing Date), (ii) the estimated fair market value of the Vessel at the expiration of the Basic Term is equal to at least 20% of Owner’s Cost, without including in such value any increase or decrease for inflation or deflation and after subtracting from such value any estimated cost to the Owner Trustee or the Owner Participant for removal *720and delivery of possession of the Vessel to the Owner Participant at the end of such period, (iii) it is reasonable to expect that the Vessel will be useful and usable by a party other than the Charterer or any person related to the Charterer at the end of the Basic Term and any Renewal Term and capable of continued leasing or transfer to another party at that time and that it will be commercially feasible to do so such that the Vessel is not and will not be “limited use property” within the meaning of Revenue Procedure 76-30 as modified to the Closing Date, (iv) Owner’s Cost is equal to the fair market value of the Vessel on the Closing Date and (v) the estimated remaining useful life of the Vessel (measured from the Closing Date) is 22 years; provided, however, that nothing contained in this Section 8.03(b) shall constitute a guarantee of the actual useful life or residual value oftheVessel.[28]
Article IX RECOMPUTATION OF BASIC RENT, STIPULATED LOSS VALUE AND TERMINATION VALUE
SECTION 9.02. Stipulated Loss Value; Termination Value. At the time any adjustment of Basic Hire percentages shall be required under this Article IX or under Section 8.09, the Stipulated Loss Value and Termination Value percentages specified in Schedules A and B annexed to the Charter shall be adjusted by the Owner Participant, effective as of the first Hire Payment Date thereafter; provided, however, that Stipulated Loss Value and Termination Value percentages shall not be reduced below those percentages that will produce Stipulated Loss Value or Termination Value as of any Hire Payment Date until expiration of the Basic Term (taken together with any Interim Hire or Basic Hire payable on such Hire Payment Date) at least equal to the principal amount of, and interest on the Bonds outstanding on the Hire Payment Date to which such payment of Stipulated Loss Value or Termination Value, as the case may be, relates.
SECTION 9.03. Computation of Adjustments. Upon the occurrence of an event requiring an adjustment to any Basic Hire, Stipulated Loss Value or Termination Value percentages pursuant to this Article IX or under Section 8.08, [29] the Owner Participant shall make the necessary computations and, within 90 days of the Owner Participant’s knowledge of such event, furnish to the Charterer (with a copy to the Indenture Trustee) a certificate of the Owner Participant setting forth the amount of any increase or decrease in such percentages and the computation of such amounts. If the Charterer shall disagree with any *721such amounts, they shall be reviewed and determined by an independent accounting firm jointly chosen by the Owner Participant and the Charterer or, in the absence of agreement as to such firm, by a third independent accounting firm jointly chosen by two independent accounting firms, one chosen by the Owner Participant and one chosen by the Charterer. The costs of such verification shall be borne by the Charterer.
Appendix A DEFINITIONS RELATING TO THE PARTICIPATION AGREEMENT, CHARTER, INDENTURE AND TRUST AGREEMENT REFERRED TO BELOW
“Appraisal Procedure ” shall mean the procedure specified in the succeeding sentences for determining an amount, value or period. If the Owner Trustee and the Charterer shall have been unable to agree on such amount, value or period, and if either the Owner Trustee or the Charterer shall give written notice to the other requesting determination of such amount, value or period by appraisal, the Owner Trustee and the Charterer shall consult for the purpose of appointing a mutually acceptable qualified independent appraiser, who shall be a marine surveyor. If such parties shall be unable to agree on an appraiser within 20 days of the giving of such notice, such amount or value shall be determined by a panel of three independent appraisers, each of whom shall be a marine surveyor. One of such appraisers shall be selected by the Charterer and another shall be selected by the Owner Trustee; provided, however, that if either the Charterer or the Owner Trustee shall fail to select an appraiser within 30 days after the giving of such notice, such appraiser shall be selected by the other party. The two appraisers selected as aforesaid shall select the third appraiser or, if they shall be unable to agree on a third appraiser within 10 days after each of such two appraisers shall have been selected, such third appraiser shall be selected by the American Arbitration Association (or its successors). The appraiser or appraisers appointed pursuant to the foregoing procedure shall be instructed to determine such amount, value or period within 45 days after such appointment and such determination shall be final and binding upon the parties. If three appraisers shall be appointed, the determination of the appraiser that shall differ most from the second highest determination of all three appraisers shall be excluded, the remaining two determinations shall be averaged and such average shall constitute the determination of the appraisers. The fees and expenses of the appraiser appointed by the Charterer shall be paid by the Charterer, the fees and expenses of the appraiser appointed by the Owner Trustee shall be paid by the Owner Trustee and the fees and expenses of the third appraiser shall be divided equally between the Charterer and the Owner Trustee, except that all fees and expenses of all the appraisers shall be paid by the Charterer in the case of an appraisal or determination under Section 16 of the Charter.
“Event of Loss ” shall mean any of the following events:
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(d) the loss or disappearance of the Vessel, whether or not covered by insurance ....
“Fair Market Sales Value ” shall mean, as to the Vessel or any other property, the fair market sales value thereof that would be obtained in an arm’s-length transaction between an informed and willing buyer and an in*722formed and willing selter, under no compulsion, respectively, to buy or sell.
“Hire Payment Dates ” (a) for the Interim Term shall mean the first day of the Basic term, (b) for the Basic Term shall mean the six-month anniversaries of the commencement of the Basic Term occurring in March and September of each year after commencement of the Basic Term and (c) for any Renewal Term shall mean the sixth-month anniversary of the first day of such Renewal Term, each sixth-month anniversary thereafter during such Renewal Term and, if not such an anniversary, the last day of such Renewal Term.
“Interim Hire ” shall mean the charter hire payable pursuant to Section 4(b) of the Charter.
“Interim Term ” shall mean the period commencing on the Closing Date and ending on March 14, 1985, or such shorter period as may result from earlier termination of the Charter as provided herein.
“Owner Participant ” shall mean Tex-tron Financial Corporation, a Delaware corporation, and shall also include any Person to which such corporation (or any successor) shall transfer its right, title and interest in and to the Vessel and the Operative Documents in accordance with Section 11.01 of the Participation Agreement.
“Owner’s Cost ” shall mean $66,500,000.
“Renewal Term” shall mean each of the periods after the end of the Basic Term with respect to which the Charterer shall exercise its option to renew the Charter pursuant to Section 18 of the Charter, or such shorter period as may result from the termination of the Charter as provided herein.
“Stipulated Loss Value ” as of any date during the Interim Term or the Basic Term shall mean an amount equal to the product of [the] Owner’s Cost multiplied by the percentage set forth in Schedule A to the Charter opposite the applicable Hire Payment Date specified therein. “Stipulated Loss Value ” as of any date during any Renewal Term shall mean the amount determined pursuant to Section 18 of the Charter. Stipulated Loss Value shall be adjusted as required in Article IX of the Participation Agreement. Notwithstanding anything in the Charter (including Schedule A thereto) or in any other Operative Document to the contrary, Stipulated Loss Value as of any Hire Payment Date shall be, under any circumstances and in any event, in a sum at least sufficient, together with the Interim Hire or Basic Hire payable on such Hire Payment Date, to pay an amount equal to the principal of and interest on all Bonds then outstanding.
“Supplemental Hire ” shall mean any and all amounts, liabilities and obligations other than Inteiim Hire or Basic Hue that the Charterer assumes or agrees to pay under any Operative Document, including, without limitation, payments of Stipulated Loss Value, Fair Market Sales Value and Termination Value and any damages for breach of any covenants, representations, warranties or agreements therein, to any Participant, the Owner Trustee or the Indenture Trustee.
B. The Bareboat Charter
As an Owner Participant under the Participation Agreement, Textron executed a Trust Agreement with Wilmington. Rowan transferred title to the rig to Wilmington using a written bill of sale, then chartered the rig from Wilmington pursuant to a Bareboat Charter dated December 1, *7231984. The key provisions of the Bareboat Charter are as follows:
SECTION 6. Amended by Assumption & Assignment of Participation Agreement, July 14, 2000.
SECTION 7. Operations and Maintenance; Compliance with Law; Alterations, Modifications and Additions, (a) Operation and Maintenance. The Charterer shall have full responsibility for possession, use, operation, maintenance and repair of the Vessel throughout the Charter Term and until redelivery thereof. Except during such period as (y)[sie] an Event of Loss shall have occurred and be continuing, or (z) [sic] there has been any other loss or damage with respect to the Vessel and the Charterer shall not have had a reasonable time to repair the same (the Charterer hereby agreeing to diligently repair the same), the Charterer shall, at its own cost and expense (whether or not any applicable insurance proceeds are adequate for the purpose); (i) maintain and preserve the Vessel and her drilling and other equipment in good running order and repair, so that the Vessel shall be, insofar as due diligence can make her so, tight, staunch, strong and well and sufficiently tackled, separated, furnished, equipped and in every respect seaworthy and in as good operating condition as when delivered hereunder, ordinary wear and tear excepted, and in any event in the condition, running order and repair which equals or exceeds industry standards and the condition, running order and repair of other vessels and rigs and their equipment owned or leased by the Charterer of like kind and age, (ii) keep the Vessel in such condition as will entitle her to the highest classification and rating by the American Bureau of Shipping for vessels of the same age, type and use, (iii) cause the Vessel to meet all requirements of Applicable Laws ... (iv) cause the Vessel to be overhauled when necessary or appropriate and to be dry-docked, cleaned and bottom-painted when necessary ..., and (v) maintain the Vessel as required by manufacturers’ warranties and outstanding insurance policies.
SECTION 8. DELETED BY ASSUMPTION & ASSIGNMENT OF PARTICIPATION AGREEMENT, July 14, 2000
SECTION 9. Insurance, (a) Insurance Against Loss or Damage to the Vessel. The Charterer shall maintain in effect, at its own expense, “all-risk” hull insurance covering the Vessel, in an aggregate amount of not less than the greater of (i) the Stipulated Loss Value as of the last preceding Basic Hire Payment Date (or during the period from and including the Closing Date [30] to and including the first Basic Hire Date, as of the first Basic Hire Payment Date) (the “SLV Amount”) and (ii) such amount as shall be sufficient to prevent the Charterer, the Owner Trustee, the Indenture Trustee[31] any Participant or any Holder from being a coinsurer of any loss under the applicable insurance policies [ 32 ]with deductibles not in excess of
*724$500,000. Such insurance shall cover marine perils (but need not cover war risk except as set forth in Section 9(j)) on hull and machinery, and the policy or policies of insurance shall be placed through independent brokers of good standing and shall be issued by responsible underwriters reasonably acceptable to the Owner Participant, shall be maintained in the broadest forms available in either the American or British insurance markets, shall otherwise contain conditions, terms; stipulations and insurance covenants reasonably satisfactory to the Owner Participant, and shall be kept in full force and effect by the Charterer at all times during the Charter Term; provided that, so long as the Charterer’s Stockholders’ Equity is at least $400,000,000, the Charterer may self-insure up to the excess of the SLV Amount over $55,000,000; and provided further, however, that unless and until an Event of Loss shall occur with respect to the Vessel, the Charterer shall promptly and fully repair all damage to the Vessel and shall pay all salvage and other charges with respect to such damage, whether or not any insurance is maintained by the Charterer with respect to the loss resulting from such damage. The Charterer shall not put into effect or materially change any such self-insurance arrangement unless it shall have notified the Owner Trustee, the Indenture Trustee and each Participant of the details of such arrangement or change and the Charterer shall have furnished to the Owner Participant and the Indenture Trustee such evidence as shall be reasonably satisfactory to the Owner Participant and the Indenture Trustee that such arrangement or change shall not result in any coinsurance penalty.
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(k) Additional Insurance. The Owner Trustee, the Owner Participant or the Indenture Trustee may, at its expense, obtain any additional insurance covering the Vessel or covering any interests of the Owner Trustee, the Indenture Trustee or any Participant, as the case may be, with respect to the Vessel as it may in its discretion deem appropriate; provided that no such Person shall purchase any such insurance that would void, impair or reduce the coverages of the insurance required to be maintained by the Charterer pursuant to this Sec*725tion 9. Any such insurance shall not be governed by any other provision of this Charter, the Indenture or the Mortgage, including without limitation as to policy provisions and payment of proceeds.
SECTION 12. Loss, Destruction, Condemnation or Damage, (a) Payment of Stipulated Loss Value. Upon the occurrence of an Event of Loss with respect to the Vessel, the Charterer shall forthwith (and, in any event, -within five Business Days of such occurrence) give the Owner Trustee and the Indenture Trustee notice of such Event of Loss and, on the next succeeding Hire Payment Date 60 days after such occurrence (or, if earlier, the final scheduled Hire Payment Date) pay to the Indenture Trustee so long as the Indenture is in effect and thereafter to the Owner Trustee an amount equal to the sum of (i) Stipulated Loss Value calculated as of such Hire Payment Date, (ii) Interim Hire or Basic Hire due and payable on such Hire Payment Date and (iii) any other Hire then due and payable. Nothing in this Section 12 shall relieve the Charterer from its obligation to pay Interim Hire or Basic Hire on any Hire Payment Date occurring prior to or on the date on which Stipulated Loss Value shall be payable.
Upon payment in full of all amounts due pursuant to the preceding paragraph and provided no Charter Default shall have occurred and be continuing, the Owner Trustee shall transfer (without any representation, warranty or recourse whatsoever except the absence of Owner’s Liens) the Vessel to the Charterer by instruments reasonably satisfactory in form and substance to the Charterer, the obligation of the Charterer to pay Interim Hire and Basic Hire shall terminate, the Vessel shall no longer be subject to this Charter and the Charter Term shall end.
(b) Application of Payments upon an Event of Loss. Subject to the provisions of Section 12(d), any payments received at any time by the Owner Trustee or by the Charterer with respect to the Vessel (including insurance proceeds from insurance carried by the Charterer) from any governmental authority or other Person as a result of the occurrence of an Event of Loss shall be applied as follows:
(i) so much of such payments as shall not exceed all amounts required to be paid by the Charterer pursuant to Section 12(a)(i) or (ii) shall, for so long as the Indenture shall be in effect, be paid to the Indenture Trustee (or, if the Indenture shall not be in effect, to the Owner Trustee) and, to the extent so paid, shall be a credit against (or, if the Indenture shall not be in effect, be applied in reduction of) the Charterer’s obligation to pay such amounts if not already paid by the Charterer, or if already paid by the Charterer, shall be applied to reimburse the Charterer for its payment of such amounts, and
(ii) the balance, if any, of such payments remaining thereafter, shall be divided between the Owner Trustee and the Charterer as their interests may appear.
Upon payment in full of all amounts due pursuant to Section 12(a) and provided no Charter Default shall have occurred and be continuing, the Charterer shall, to the extent of its payment pursuant to Section 12(a)(i), be subrogated to any rights of the Owner Trustee arising solely out of such Event of Loss.
SECTION 15. Charter Events of Default. The following events shall constitute Charter Events of Default (whether *726any such event shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body:
(a) the Charterer shall fail to make any payment of Interim Hire, Basic Hire, Termination Value or Stipulated Loss Value within the earlier of
(i) five days after the same shall have become due or
(ii) two days after written notice by personal delivery, telex or other written communication ...; or
(b) the Charterer shall fail to make any other payment of Supplemental Hire....
(c) the Charterer shall fail to carry and maintain insurance on or with respect to the Vessel in compliance with the provisions of Section 9 hereof, or shall otherwise fail to comply with its obligations set forth in Section 9(i) hereof....
SECTION 16. Remedies. Upon the occurrence of any Event of Default and at any time thereafter so long as the same shall be continuing, the Owner Trustee may, at its option, by notice to the Charterer ..., declare this Charter to be in default, and at any time thereafter the Owner Trustee may do one or more of the following as the Owner Trustee in its sole discretion shall elect, to the extent permitted by, and subject to compliance with the mandatory requirements of, all Applicable Laws then in effect:
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(b) the Owner Trustee, by notice to the Charterer specifying a payment date not earlier than ten days nor more than 30 days from the date of such notice, may require the Charterer to pay to the Owner Trustee, and the Charterer hereby agrees that it will pay to the Owner Trustee, on the payment date specified in such notice, as liquidated damages for loss of a bargain, and not as a penalty, and in lieu of any further payments of Basic Hire hereunder, an amount (reduced by any amounts previously paid by the Charterer pursuant to Section 16(d)) equal to the sum of (i) all unpaid Basic Hire payable or that would have been payable on or before the Hire Payment Date next succeeding the date of payment specified in such notice, plus (ii) an amount equal to Stipulated Loss Value calculated as of such Hire Payment Date, unless such payment date shall occur on a Hire Payment Date, in which case Stipulated Loss Value and unpaid Basic Hire shall be computed as of such Hire Payment Date, together with interest, if any, at the Overdue Rate on the amount of such Stipulated Loss Value and Basic Hire from the Hire Payment Date as of which Stipulated Loss Value is computed until the date of actual payment; and upon such payment of liquidated damages and all other Hire then due and payable by the Charterer the Owner Trustee shall transfer (without any representation, recourse or warranty whatsoever other than the absence of Owner’s Liens) the Vessel to the Charterer and the Owner Trustee shall execute and deliver such documents evidencing such transfer and take such further action as the Charterer shall reasonably request. In addition, the Owner Trustee may, within 80 days after the Charterer shall make the full payment of Basic Hire and Stipulated Loss Value as aforesaid, give the Charterer written notice requesting that the Fair Market Sales Value of the Vessel *727as of the date as of which Stipulated Loss Value was determined pursuant to clause (ii) of this Section 16(b) be determined. If the Fair Market Sales Value of the Vessel as of such date shall be determined to exceed the Stipulated Loss Value paid pursuant to the first sentence of 16(b), the Charterer shall, within 60 days after such determination, pay the amount of such excess to the Owner Trustee.
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(d) Whether or not the Owner Trustee shall have exercised, or shall thereafter at any time exercise, any of its rights under Section 16(c) (other than a sale under Section 16(c)), the Owner Trustee may, at any time prior to the time that the Vessel shall have been transferred to the Charterer pursuant to Section 16(b) or sold by the Owner Trustee pursuant to Section 16(c), by written notice to the Charterer requesting that the Fair Market Sales Value or Fair Market Rental Value of the Vessel be determined, demand that the Charterer shall pay to the Owner Trustee, and the Charterer shall pay to the Owner Trustee on the first Hire Payment Date occurring at least ten days after the determination of such Fair Market Sales Value or Fair Market Rental Value, as the case may be, as liquidated damages for loss of a bargain and not as a penalty (in lieu of all payments of Basic Hire becoming due after the payment date), an amount equal to the sum of (i) all unpaid Basic Hire due on or before such Hire Payment Date and (ii) whichever of the following amounts the Owner Trustee, in its sole discretion, shall specify in such notice (together with interest on such amount at the Overdue Rate from the scheduled payment date to the date of actual payment): (x) [sic] an amount equal to the excess, if any, of the Stipulated Loss Value, computed as of such Hire Payment Date, over the Fair Market Rental Value of the Vessel for the remainder of the Basic Term or the then[-]current Renewal Term, as the case may be, after discounting such Fair Market Rental Value semi-annually (effective on the Hire Payment Dates) to present worth as of the scheduled payment date at the rate of interest borne by the Bonds at the time outstanding or if none shall be outstanding, the Prime Rate, or (y) [sic] an amount equal to the excess, if any, of the Stipulated Loss Value for the Vessel as of such Hire Payment Date over the Fair Market Sales Value of the Vessel.
All determinations of Fair Market Sales Value and Fair Market Rental Value pursuant to this Section 16 shall be determined in accordance with the Appraisal Procedure. No termination of this Charter, in whole or in part, or exercise of any remedy under this Section 16 shall, except as specifically provided herein, relieve the Charterer of any of its liabilities and obligations hereunder, all of which shall survive such termination, repossession or exercise or remedy. In addition, the Charterer shall be liable for any and all unpaid Supplemental Hire due hereunder (and all other amounts payable by Charterer under the Participation Agreement) before, after or during the exercise of any of the foregoing remedies, including all reasonable legal fees and other costs and expenses incurred by the Owner Trustee ... by reason of the occurrence of any Charter Event of Default or the exercise of the remedies of the Owner Trustee with respect thereto....
*728To the extent permitted by, and subject to the mandatory requirements of all Applicable Laws, each and every right, power and remedy herein specifically given to the Owner Trustee or otherwise in this Charter shall be cumulative and shall be in addition to every other right, power and remedy herein specifically given or now or hereafter existing at law, in admiralty, in equity or by statute, and each and every right, power and remedy whether specifically given herein or otherwise existing may be exercised from time to time and as often and in such order as may be deemed expedient by the Owner Trustee, 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 right, power or remedy. No delay or omission by the Owner Trustee in the exercise of any right, power or remedy or in the pursuit of any remedy shall impair any such right, power or remedy or be construed to be a waiver of any default on the part of the Charterer or to be an acquiescence therein. No express or implied waiver by the Owner Trustee of any Event of Default shall in any way be, or be construed to be, a waiver of any future or subsequent Charter Event of Default....
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SECTION 18 Renewal Options, (a) Fixed Rental Renewal Option. Unless the Charterer shall have elected to purchase the Vessel under Section 19, and unless a Charter Default shall have occurred and then be continuing, the Charterer may, by irrevocable written notice to the Owner Trustee given not less than twelve months nor more than 18 months prior to the scheduled expiration of the Basic Term, renew this Charter at the expiration of the Basic Term. Such Renewal Term shall be for a period that, when added to the Interim Term and the Basic Term, shall not exceed 80% of the total estimated remaining economic useful life of the Vessel (measured from the Closing Date) as determined by the Appraisal Procedure and in no case shall exceed 7-1/2 years; provided, however, that (A) at the end of such Renewal Term the Vessel will have an estimated residual value (in 1984 dollars without giving effect to inflation or deflation from the beginning of the Charter Term) as determined in such Appraisal Procedure of not less than 20% of the Owner’s Cost for the Vessel and (B) the use of the Vessel will, as of the beginning of such Renewal Term and as determined in such Appraisal Procedure, be reasonably expected to be commercially feasible (in a manner that would permit the Owner Trustee to realize the residual value described in the foregoing clause (A)) by some Person other than the Charterer (or any party related to the Charterer) who could charter or purchase the Vessel from the Owner Trustee at the end of such Renewal Term. In addition to the limitation set forth in the next preceding sentence, no Renewal Term pursuant to this paragraph (a) shall be entered into if it would end before one year after the commencement thereof. During such Renewal Term, all of the provisions of this Charter shall continue in full force and effect, except that (i) Basic Hire shall be payable semiannual!y in arrears in an amount equal to 50% of the weighted average amount of the semiannual installments of Basic Hire payable during the Basic Term and (ii) Stipulated Loss Value on each Hire Payment Date during such Renewal Term shall be equal to the sum of Basic Hire payable on such Date and the present value *729as of such Date of (a) Basic Hire that would have been payable over the balance of such Renewal Term and (b) the estimated residual value as of the end of such Renewal Term (present value to be determined by using a discount rate of 10% compounded semiannually) as determined by the Appraisal Procedure.
SECTION 27. Miscellaneous, (f) Governing Law. This Charter shall in all respects be governed by, and construed in accordance with, the general maritime laws of the United States of America and otherwise by the laws of the State of New York.

. In section 3.01(j) of the Participation Agreement, it is similarly stated that it is a condition precedent which must be fulfilled or waived that, as of the Closing Date, the Owner Participant shall have received appraisals by Rush Johnson Associates and Lowell Johnston & Associates, Inc., "(i) such appraiser’s estimate of the fair market value of the Vessel on the Closing Date, which ... shall be equal to $66,500,000; (ii) such appraiser’s estimate as of the Closing date of the remaining useful life of the Vessel and the residual value thereof at the end of the Basic Term ..., which estimates shall be not less than 22 years and not less than 20% of Owner’s Cost for the Vessel, respectively....”

. Section 8.08 concerns changes in tax law. Under Section 9.01, adjustments are also required if Transaction Costs are greater or less than 0.75% of Owner’s Costs or the Closing Date is other than December 28, 1984. The occurrence of a loss is not included among the events requiring such adjustment.

. The Closing Date is defined to mean December 28, 1984.

. The Participation Agreement names “The Connecticut Bank and Trust Company, National Association” as Indenture Trustee. Rowan Companies, Inc. is named as Charterer, and the remaining originally-named parties to the Participation Agreement are six Bond Purchasers.

.At the summary judgment hearing, Rowan's attorney emphasized the word, “applicable”:
Mr. Beck: It doesn't say under any insurance. It says “the applicable[.J” They knew what the applicable insurance policy was. They knew it was an agreed value policy. They knew that it was not a co-insurance situation. And over 16 years of the basic term they never com*724plained about any of this.... They didn't complain about any of that and now they’re coming in after the fact, we respectfully submit, and say, no, that's not really the procedure you should have been following.
He later explained that this shows the dealings and course of conduct of the parties. Rowan's attorney also asserted that the Owner Trastee purchased "gap insurance” for the difference between the "agreed value” coverage Rowan bought and the Owner Trustee's claimed interest. The trial court pointed out that section 9(a) requires Rowan to insure "the greater of” SLV or an amount necessary to prevent any party (the Charterer, Owner Trustee, etc.) from being a coinsurer. In response, Rowan's attorney insisted that "you cannot ignore the language under the applicable insurance policies.” The trial court also pointed out that the charter does not say that Rowan has an obligation to maintain agreed value insurance, and Rowan’s counsel answered, "No, but it’s in the certificate that tells them the type of all risk hull insurance that we bought. And it tells them specifically what the amount is. Our position was consistently throughout the 16-year term of the charter that that was the amount of the policy 9(a) required us to get. And nobody ever complained about that.” But Textron says that Jane M. Lavoie's letter of August 15, 2005 to Rowan's treasurer and vice-president of finance is evidence that they did question the adequacy of the insurance.