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VESSEL PURCHASE AGREEMENT

Purchase and Sale Agreement

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TORCH OFFSHORE INC

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Title: VESSEL PURCHASE AGREEMENT
Governing Law: Delaware     Date: 6/20/2005
Industry: Oil Well Services and Equipment     Sector: Energy

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                            VESSEL PURCHASE AGREEMENT

 

            THIS VESSEL PURCHASE AGREEMENT (this "Agreement") is entered into as

      of May 5, 2005 (the "Effective Date"), by and between General Electric

      Capital Corporation, a corporation organized under the laws of Delaware

      (the "Buyer"), and Torch Offshore, Inc., a Delaware corporation ("Torch

      Offshore"), Torch Offshore, LLC, a Delaware limited liability company

      ("Torch, LLC" and, jointly with Torch Offshore, the "Seller"), and Torch

      Express, LLC ("Torch Express") a Louisiana limited liability company.

 

                                    RECITALS

 

            WHEREAS, Seller and Seller's affiliate, Torch Express (Torch

      Express, together with Seller, "Debtors") are indebted to Buyer in the

      amount of not less than $21,835,595.75 as of January 7, 2005 plus

      attorneys' fees and related expenses (the "Debt"), which indebtedness is

      represented by (i) that certain promissory note executed by Torch, LLC,

      dated March 21, 2003 in the principal amount of $9,250,000.00, and

      guaranteed by Torch Offshore and Torch Express, the payment of which is

      secured by, among other things, that certain first preferred ship mortgage

      in the principal amount of $9,250,000.00 executed by Torch, LLC, dated

      March 21, 2003, on the vessel M/V Midnight Eagle, recorded with the U.S.

      Coast Guard National Vessel Documentation Center ("NVDC") in Book 03-61,

      page 292, and by that certain preferred fleet mortgage dated December 17,

      2003 in the principal amount of $9,250,000.00 on the vessel M/V Midnight

      Gator recorded with the NVDC on December 18, 2003 in Batch Number 181843,

      Document ID No. 1598179, and by that certain financing statement recorded

      with the Delaware Secretary of State at file number 3075660, all as more

      fully set forth in the loan and security documentation pertaining thereto,

      and (ii) that certain promissory note executed by Seller and Torch

      Express, dated December 17, 2003 in the principal amount of $15,000,000,

      the payment of which is secured by that certain first preferred ship

      mortgage in the principal amount of $24,250,000.00 executed by Torch

      Offshore, dated December 17, 2003, on the vessel M/V Midnight Wrangler,

      recorded with the Vanuatu Maritime Authority on December 19, 2003 and

      recorded at Book PM 24, page 86, and by a first preferred fleet mortgage

      in the original principal amount of $15,000,000.00 executed by Torch, LLC,

      dated December 17, 2003, on the vessels M/V Midnight Eagle and M/V

      Midnight Gator, recorded with the NVDC on December 18, 2003 in Batch

      Number 181834, Document ID No. 1598161, and by those certain financing

      statements recorded with the Delaware Secretary of State at file numbers

      33335240 and 33335661, all as more fully set forth in the loan and

      security documentation pertaining thereto (collectively, all of the

      foregoing are the "GE Capital Security Interests";

 

            WHEREAS, certain of Buyer's collateral, the M/V Midnight Eagle and

      M/V Midnight Wrangler, has been seized in an attempt by Buyer to cause the

      satisfaction of Debtors' obligations to Buyer;

 

             WHEREAS, on January 7, 2005 (the "Petition Date"), each of the

      Debtors' petitioned for relief under chapter 11 of title 11 of the United

      States Code; and

 

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            WHEREAS, Debtors have reached an arrangement whereby Seller will

      sell to Buyer and Buyer will purchase from Seller all of Buyer's

      collateral, subject to acquisition by a higher bidder at an auction

      conducted in Debtors' bankruptcy case.

 

            NOW, THEREFORE, in consideration of the mutual covenants and

      agreements herein contained, and of other valuable consideration, the

      receipt of which is hereby acknowledged, the Parties hereby agree as

      follows:

 

                                    ARTICLE I

                                   DEFINITIONS

 

            The following terms employed in this Agreement have the meanings set

      forth as follows:

 

            "Agreement" has the meaning set forth in the Preamble.

 

            "Allowed Custodia Legis Expenses" means all allowed custodia legis

      expenses directly related to the preservation of a Vessel from and after

      the commencement of the Bankruptcy Cases, as determined by the Bankruptcy

      Court.

 

            "Allowed Secured Claims" means any Lien on a Vessel superior in rank

      to the GE Capital Security Interests, as determined by the Bankruptcy

      Court in a final non-appealable order.

 

            "Approval Order" means an order of the Bankruptcy Court, in form and

      substance reasonably acceptable to the Buyer in all material respects,

      approving the Transaction and all of the terms and conditions contemplated

      hereby, which order (i) shall be in full force and effect and (ii) shall

      not have been stayed, reversed, modified or amended in any respect and, if

      the Approval Order is the subject of a pending appeal, the consummation of

      the Transaction shall not be the subject of a presently effective stay

      pending appeal.

 

            "Auction" means the Bankruptcy Court auction for the Sale Assets to

      be held in accordance with the Bidding Procedures Order.

 

            "Bankruptcy Case" means Seller's chapter 11 cases currently pending

      before the Bankruptcy Court.

 

            "Bankruptcy Code" means title 11 of the United States Code, as

      heretofore and hereafter amended, and codified as 11 U.S.C. sections 101,

      et seq.

 

            "Bankruptcy Court" means the United States Bankruptcy Court for the

      Eastern District of Louisiana and any other court having jurisdiction over

      the Bankruptcy Case.

 

            "Bidding Procedures" means bidding procedures established by the

      Bankruptcy Court and set forth in the Bidding Procedures Order.

 

            "Bidding Procedures Hearing" means the hearing to be scheduled and

      conducted by the Bankruptcy Court to consider approval of the Bidding

      Procedures.

 

                                       2

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            "Bidding Procedures Order" means an order of the Bankruptcy Court in

      the form of Exhibit "A" annexed here to or as otherwise agreed by Buyer,

      establishing the Bidding Procedures.

 

            "Business Days" are days on which banks are open in the place of

      Closing provided in Section 2.2.

 

            "Buyer" has the meaning set forth in the Preamble.

 

            "Buyer's Authorized Representative" has the meaning set forth in

      Section 10.5.

 

            "Claimants" has the meaning set forth in Section 6.5.

 

            "Closing" has the meaning set forth in Section 2.2.

 

            "Closing Date" has the meaning set forth in Section 2.2.

 

            "Competing Bidder" has the meaning set forth in Section 3.2(a).

 

            "Debt" has the meaning set forth in the Recitals.

 

            "Debtors" has the meaning set forth in the Recitals.

 

            "Effective Date" has the meaning set forth in the Preamble.

 

            "Equipment" means with respect to any vessel (i) said Vessel's

      machinery, engines, lay installation equipment, tower, reels, cranes,

       tensioners, spares, consumables, motors, generators, riggings,

      attachments, accessories, fixtures, replacement parts and other

      appurtenances and equipment associated therewith, whether on board or

      ashore; (ii) all surveys, inspection records, safety logs and maintenance

      and navigation records relating to the Vessel; and (iii) all owner's and

      operator's manuals related to, or used or usable by the Vessel. Without

      limitation of the foregoing, the meaning of term "Equipment" shall

      include, (a) in the case of the MV Midnight Wrangler, the four (4) reels

      and the modular lay system, including all components thereof, as further

      described in Exhibit C hereto, (b) in the case of the M/V Midnight Eagle,

      the American Crane, Model 5299 and the Gallion hydraulic pedestal crane as

      further described in Exhibit C hereto to the extent deemed encumbered by

      the GE Capital Security Interests, and (c) in the case of the M/V Midnight

      Gator, the two (2) Caterpillar Model 3512-D1 (S/N 50Y00958 and S/N

      50Y00962) engines driving skid mounted jet pumps as described in Exhibit C

      hereto.

 

            "GE Capital Security Interests" shall have the meaning set forth in

      the Recitals.

 

             "Governmental Approval" means any authorization, consent, approval,

      license, franchise, ruling, permit, tariff, rate, certification,

      exemption, filing or registration by or with any Governmental Authority

      relating to the ownership of the Sale Assets or to the execution, delivery

      or performance of this Agreement.

 

                                       3

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            "Governmental Authority" means any national government, any state or

      other political subdivision thereof, and any entity exercising executive,

      legislative, judicial, regulatory or administrative functions of or

      pertaining to government and any other governmental entity with authority

      over the Buyer or Seller or the operation of the Vessels.

 

            "Law" means any statute, law, rule, regulation, ordinance, order or

      code, now or hereafter in effect, and any judicial or administrative

      interpretation thereof by a Governmental Authority or otherwise, including

      any judicial or administrative order, consent decree or judgment.

 

            "Lien" or "Liens" means any mortgage, lien (statutory or other),

      pledge, security interest, encumbrance, hypothecation, assignment for

      security, or deposit arrangement or other security agreement or adverse

      claim to ownership of the Vessels or the Equipment of any kind or nature

      whatsoever, recorded or unrecorded.

 

            "M/V Midnight Eagle" means that certain steel pipe laying/burying

      barge Midnight Eagle including all of her Equipment, a vessel registered

      and flagged under the laws of the United States of America, Official

      Number 588872, and owned by Torch, LLC, as described on Exhibit "C"

      attached hereto and made a part hereof.

 

             "M/V Midnight Gator" means that certain shallow water jet/bury barge

      Midnight Gator including all of her Equipment, a vessel registered and

      flagged under the laws of the United States of America, Official Number

      1131254, and owned by Torch, LLC, as described on Exhibit "C" attached

      hereto and made a part hereof.

 

            "M/V Midnight Wrangler" means that certain construction/pipe lay

      vessel Midnight Wrangler including all of her Equipment, a vessel

      registered and flagged under the laws of the Republic of Vanuatu, Official

      Number 1480, and owned by Torch Offshore, as described on Exhibit "C"

      attached hereto and made a part hereof

 

            "Preferred Claims" has the meaning set forth in Section 3.1(a).

 

            "Party" or "Parties" means, in the singular, Seller or Buyer as the

      context requires, and, in the plural, Seller and Buyer.

 

            "Person" means an individual, a partnership, a corporation, a joint

      venture, an unincorporated association, a joint-stock company, a trust, a

      limited liability company, or other entity or a government or any agency

      or political subdivision thereof.

 

            "Purchase Price" has the meaning set forth in Section 3.1.

 

             "Requirement of Law" means, as to any Person, the certificate of

      incorporation and by-laws or partnership agreement or other organizational

      or governing documents of such Person, and any law applicable to or

      binding upon such Person or any of its properties or to which such Person

      or any of its properties is subject.

 

                                       4

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            "Sale Assets" has the meaning set forth in Section 2.1.

 

            "Sale Hearing" means the hearing to be scheduled and conducted by

      the Bankruptcy Court to consider approval and entry of the Approval Order.

 

            "Sale Motion" means the motion or motions of Seller, in form and

      substance reasonably acceptable to Buyer, seeking approval and entry of

      the Bidding Procedures Order and the Approval Order and scheduling of the

      Bidding Procedures Hearing and the Sale Hearing.

 

            "Security Deposit" has the meaning set forth in Section 3.2(a).

 

            "Security Deposit Escrow Agent" means J.P. Morgan Trust Company,

      National Association, or such other entity agreed to by the parties.

 

            "Security Deposit Escrow Agreement" means that certain Security

      Deposit Escrow Agreement, substantially in the form attached hereto as

      Exhibit "B".

 

            "Seller" has the meaning set forth in the Preamble.

 

            "Torch Express" has the meaning given to it in the Recitals.

 

            "Transaction" means the purchase and sale of the Sale Assets, along

      with any other transactions contemplated in this Agreement or related

      thereto.

 

            "Vessels" means, collectively, the M/V MIDNIGHT WRANGLER, the M/V

      MIDNIGHT EAGLE, vessel M/V MIDNIGHT GATOR, as identified on Exhibit "C"

      attached hereto and made a part hereof, and "Vessel" means, individually,

      any one of the Vessels.

 

                                   ARTICLE II

                  PURCHASE AND SALE OF SALE ASSETS; THE CLOSING

 

            2.1 Sale and Purchase. Seller hereby agrees to sell to Buyer, and

      Buyer hereby agrees to purchase from the Seller, effective as of the

      Closing Date, the Vessels (collectively, the "Sale Assets"). Any

      equipment, machinery or other items currently leased or rented by Seller

      shall be excluded from the Sale Assets and shall not form a part of this

      Transaction.

 

            2.2 The Closing. The closing of the purchase and sale of the Sale

      Assets (the "Closing") will take place as soon as reasonably practicable

      after entry of the Approval Order, during normal business hours at the

      offices of Heller, Draper, Hayden, Patrick & Horn, L.L.C. in New Orleans,

      Louisiana or at such other venue as the Seller may select. The Parties

      shall use all reasonable efforts to cause the Closing to occur within ten

      (10) Business Days following the entry of the Approval Order (such date,

      the "Closing Date").

 

                                       5

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                                   ARTICLE III

                           PURCHASE PRICE; ADJUSTMENTS

 

      3.1    Purchase Price.

 

            (a) The aggregate amount (such amount, as adjusted pursuant to any

      other provisions of this Agreement, referred to as the "Purchase Price")

       to be paid by Buyer to Seller for the Sale Assets is U.S. $18,360,000.00,

      allocated as follows: (i) $11,520,000.00 to M/V Midnight Wrangler; (ii)

      $5,760,000.00 to M/V Midnight Eagle; and (iii) $1,080,000.00 to M/V

      Midnight Gator, or such higher amount as may be bid by Buyer or a

      competing bidder at the Auction. Seller acknowledges and agrees that (1)

      Buyer shall be entitled to bid in its Debt in lieu of cash at the Auction

      with respect to any one or more of the Vessels, (2) in the event Buyer is

      the successful bidder with respect to any Vessel, Buyer shall be obligated

      to pay the following expenses (collectively, the "Preferred Claims"): (i)

      all Allowed Custodia Legis Expenses; (ii) all Allowed Secured Claims; and

      (iii) an administrative fee to Seller of $75,000 for services rendered in

      maintaining and in marketing the sale and soliciting of bids for the

      Vessels (the "Administrative Fee"), which shall be allocated as follows:

      (i) $47,058.82 to M/V Midnight Wrangler; (ii) $23,529.41 to M/V Midnight

      Eagle; and (iii) $4,411.76 to M/V Midnight Gator. In the event Buyer is

      the successful bidder with respect to any Vessel, Debtors shall receive a

      credit against the Debt equal to Buyer's approved bid price for the Vessel

      less the amount of all Preferred Claims. Such credit shall be applied

      against the Debt in the following manner: (x) first against the

      outstanding balance of principal and interest due by Debtors to Seller as

      of the commencement of the Bankruptcy Case; (y) second, against any unpaid

      post-petition interest (including any penalties and/or default interest);

      and (z) third, against reasonable attorneys' fees and all other expenses

      incurred by Seller in connection with the collection of the Debt and

      foreclosure and sale of the Vessels, in each case, as approved by the

      Bankruptcy Court.

 

            (b) In the event a person other than Buyer is the successful bidder

      at the Auction with respect to one or more of the Vessels, the Purchase

      Price shall be paid in cash at the Closing, the cash proceeds of the

      Purchase Price shall be deposited into the registry of the Bankruptcy

      Court and the amount thereof, plus any accrued interest, shall be

      distributed first to the payment of all Preferred Claims, and second to

      the Buyer until the Debt has been fully satisfied, and the balance shall

      remain in the registry of the Bankruptcy Court to be distributed as the

      Bankruptcy Court may order.

 

            (c) Except for the Administrative Fee, in no event shall Debtors or

      any successor in interest of Debtors including, without limitation, any

      trustee in bankruptcy in the Bankruptcy Case, seek or be entitled to costs

      or expenses of administration of Debtors' Bankruptcy Case against any of

      the Vessels pursuant to Section 506 (c) of the Bankruptcy Code or

      otherwise.

 

      3.2    Security Deposit.

 

             (a) In the event that a Person other than Buyer wishes to submit a

      competing bid to purchase one or more of the Vessels for cash at the

      Auction pursuant to the

 

                                       6

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      Bidding Procedures Order, such Person (a "Competing Bidder") shall execute

      the Security Deposit Escrow Agreement with Seller and shall pay a deposit

      (the "Security Deposit") equal to 10% Purchase Price allocated to each

      Vessel bid upon by such Person by wire transfer to an escrow account in

      the U.S. to be established with the Security Deposit Escrow Agent and held

      pursuant to the Bidding Procedures Order. The Competing Bidder shall be

      responsible for all costs and fees of the Security Deposit Escrow Agent.

      Buyer shall not be required to execute a Security Deposit Escrow Agreement

      or place a Security Deposit.

 

            (b) Upon the termination of this Agreement for any reason other than

      a breach by the Competing Bidder of its obligations hereunder, the

      Competing Bidder shall be entitled to the return of the Security Deposit

      plus any interest earned thereon pursuant to the terms of the Security

      Deposit Escrow Agreement, and the Parties shall provide joint written

      instructions to the Security Deposit Escrow Agent to such effect.

 

            (c) In the event of a termination of the Agreement due to a breach

      by a Competing Bidder of said Competing Bidder's obligations under this

      Agreement, the Competing Bidder shall forfeit its Security Deposit (plus

      any interest earned thereon). The forfeited Security Deposit shall be

      considered as a portion of the sale proceeds with respect to one or more

      of the Vessels (as applicable) and shall be distributed as follows: [One

      of the following alternatives, as approved by the Court:

 

      Alternative A:

 

      to the Seller.

 

      Alternative B:

 

      to satisfy the Allowed Secured Claims, if any, and GE Capital Security

      Interests pertaining to each Vessel, with the balance, if any, distributed

      to the Seller.

 

            (d) If a Closing occurs with a Competing Bidder, then at the

      Closing, the Seller and the Competing Bidder shall provide joint written

      instructions to the Security Deposit Escrow Agent to release the Security

      Deposit and Seller shall credit the Security Deposit plus any accrued

      interest thereon against the Purchase Price paid at Closing.

 

                                   ARTICLE IV

                               CLOSING DELIVERIES

 

      4.1 Closing Deliveries of Seller. On the Closing Date, in exchange for the

Purchase Price, Seller shall deliver the following to Buyer:

 

            (a) A certificate evidencing resolutions of the Board of Directors

      of the Seller, certified by the Secretary or other appropriate officer or

      agent of the Seller, duly authorizing the execution, delivery and

      performance of this Agreement and other transaction documents;

 

                                        7

<PAGE>

 

            (b) A bill of sale for the Vessels in a form recordable in the U.S.

      Coast Guard National Vessel Documentation Center with respect to M/V

      Midnight Eagle and M/V Midnight Gator and in the Vanuatu Maritime Ship

      Registry with respect to M/V Midnight Wrangler, duly notarially attested,

      transferring the Vessels free and clear of all Liens ;

 

            (c) A current Certificate of Ownership and Encumbrances issued by

      the appropriate Governmental Authorities of the United States of America

      (with respect to M/V Midnight Eagle and M/V Midnight Gator) and the

      Republic of Vanuatu (with respect to M/V Midnight Wrangler) showing the

      current record owners of the Vessels and stating that the Vessels are free

      from all registered Liens; and

 

            (d) Any additional documents reasonably required by the appropriate

      Governmental Authorities for the purpose of re-documenting Seller's

      ownership of the Vessels with the Vanuatu Ship Registry (with respect to

      the M/V Midnight Wrangler) and with the U.S. Coast Guard National Vessel

      Documentation Center (with respect to the M/V Midnight Eagle and the M/V

      Midnight Gator) free and clear of all Liens, claims and interests,

      provided Buyer notifies the Seller of any such documents as soon as

      possible after the date of this Agreement.

 

      4.2 Closing Deliveries of Buyer. On the Closing Date, in exchange for the

Sale Assets, Buyer shall deliver the following to Seller:

 

            (a) A certificate evidencing resolutions of the Board of Directors

      of the Buyer, certified by the Secretary or other appropriate officer or

      agent of the Buyer, duly authorizing the execution, delivery and

       performance of this Agreement and other documents relating hereto.

      Notwithstanding the preceding sentence, Debtors shall waive the delivery

      requirement of this subsection (a) on the Closing Date with respect to

      General Electric Capital Corporation; and

 

            (b) The Purchase Price, which shall be paid in accordance with

      Section 3.1 hereof.

 

                                    ARTICLE V

                            REPRESENTATIONS OF BUYER

 

      5.1 Organization, Power and Status of the Buyer. Buyer is (i) an entity

duly formed, validly existing and in good sta


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