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DEMISE CHARTER

Transportation Services Agreement

DEMISE CHARTER | Document Parties: TAMPA ELECTRIC CO | STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT,NATIONAL ASSOCIATION,  | TECO OCEAN SHIPPING, INC., | TTC TRUST, LTD., You are currently viewing:
This Transportation Services Agreement involves

TAMPA ELECTRIC CO | STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT,NATIONAL ASSOCIATION, | TECO OCEAN SHIPPING, INC., | TTC TRUST, LTD.,

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Title: DEMISE CHARTER
Governing Law: New York     Date: 3/17/2004

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Exhibit 10.40

 


 

DEMISE CHARTER

 

between

 

STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT,

NATIONAL ASSOCIATION, not in its individual capacity but solely as trustee of

TTC TRUST, LTD., a Connecticut statutory trust,

 

Shipowner,

 

and

 

TECO OCEAN SHIPPING, INC.,

 

Charterer.

 

Dated as of December 30, 2002

 

of the United States Flag Vessels

on Schedule I Hereto

 



TABLE OF CONTENTS

 

 

 

 

 

 

 

 

 

  

Page


 

 

 

 

ARTICLE 1

 

Definitions

  

1

 

 

 

ARTICLE 2

 

Delivery and Acceptance of the Vessels

  

1

 

 

 

ARTICLE 3

 

Use and Operation of the Vessels

  

2

 

 

 

ARTICLE 4

 

Maintenance of Vessels and Repairs

  

4

 

 

 

ARTICLE 5

 

Use of Stores and Equipment

  

5

 

 

 

ARTICLE 6

 

Charterer's Changes, Installation of Equipment and Removal of Parts

  

6

 

 

 

ARTICLE 7

 

Liens and Mortgages

  

9

 

 

 

ARTICLE 8

 

Risk of Loss

  

10

 

 

 

ARTICLE 9

 

Insurance

  

11

 

 

 

ARTICLE 10

 

Term of Demise Charter and Charter Hire

  

15

 

 

 

ARTICLE 11

 

Event of Loss and Right to Terminate.

  

18

 

 

 

ARTICLE 12

 

Requisition of Use

  

19

 

 

 

ARTICLE 13

 

Redelivery

  

20

 

 

 

ARTICLE 14

 

Assignments; Subcharters

  

21

 

 

 

ARTICLE 15

 

Events of Default; Remedies

  

22

 

 

 

ARTICLE 16

 

Option To Purchase At Expiration of the Term

  

27

 

 

 

ARTICLE 17

 

Taxes

  

28

 

 

 

ARTICLE 18

 

Environmental Matters

  

35

 

 

 

ARTICLE 19

 

General Indemnification and Expenses

  

36

 

 

 

ARTICLE 20

 

Miscellaneous

  

38

 

 

 

ARTICLE 21

 

Notices

  

40

 

 

 

SCHEDULE A

 

Definitions

  

 

 

 

 

SCHEDULE B-1

 

Schedule of Stipulated Loss Values PAT CANTRELL

  

 

 

 

 

SCHEDULE B-2

 

Schedule of Stipulated Loss Values BEVERLY ANDERSON

  

 

 

 

 

SCHEDULE C

 

Schedule of Base Rental Factors, EBO% and Adjustment Factors

  

 


DEMISE CHARTER

 

DEMISE CHARTER dated as of December 30, 2002 (this “ Demise Charter ” or the “ TOS Charter ”) between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, not in its individual capacity but solely as trustee of TTC TRUST, LTD., a Connecticut statutory trust, as Shipowner, and TECO OCEAN SHIPPING, INC., a Florida corporation, as Charterer.

 

W I T N E S S E T H :

 

WHEREAS, Shipowner is the documented owner of the United States flag ocean-going vessels identified on Schedule I hereto.

 

WHEREAS, commencing on the first day of the Term, Shipowner wishes to demise charter the Vessels to Charterer and Charterer wishes to demise charter the Vessels from Shipowner, in each case subject to and on the terms and conditions hereinafter set forth.

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained and for other good and valuable consideration, the receipt and adequacy of which the parties hereto acknowledge, commencing on the first day of the Term, Shipowner agrees to let and demise charter and Charterer agrees to hire and demise charter, subject to and on the terms and conditions hereinafter set forth, the Vessels.

 

ARTICLE 1

 

Definitions

 

The capitalized terms used herein which are defined in, or by reference to, Schedule A attached hereto and made a part hereof, shall have the meanings specified in said Schedule A unless the context otherwise requires.

 

ARTICLE 2

 

Delivery and Acceptance of the Vessels

 

(a) The Shipowner and the Charterer acknowledge that this Demise Charter is part of a sale/leaseback transaction and the Vessels will be in the Charterer’s possession on the Closing Date. Notwithstanding any other provision of this Demise Charter, concurrently with the acquisition of the Vessels by Owner Participant from Seller and by Shipowner from Owner Participant, subject only to Shipowner having on such day the legal ability to deliver possession of the Vessels free and clear of all Shipowner Liens, Shipowner shall be deemed to have


tendered, and Charterer shall be deemed to have accepted, at such time on such date, delivery of the Vessels under this Demise Charter “AS IS, WHERE IS” in whatever condition it may be, AND IT IS AGREED THAT SHIPOWNER MAKES NO WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, AS TO TITLE TO, AS TO THE DESIGN, CONDITION, MERCHANTABILITY OR SEAWORTHINESS OF, AS TO THE QUALITY OF THE MATERIAL, EQUIPMENT OR WORKMANSHIP IN, OR AS TO THE CONSUMABLE STORES ON BOARD, THE VESSELS, OR AS TO THE FITNESS OF THE VESSELS FOR ANY PARTICULAR PURPOSE OR ANY PARTICULAR TRADE, OR ANY OTHER WARRANTY OR REPRESENTATION WHATSOEVER (except Shipowner represents and warrants only that at all times during the Term it will possess title to each Vessel transferred to it by Seller on the Closing Date free and clear of all Shipowner’s Liens), it being agreed that all such risks (except for Shipowner’s Liens) arising prior to or during the Term, as between Shipowner and Charterer, are to be borne by Charterer. Charterer’s acceptance of the Vessels under this Demise Charter, as provided in this Article 2(a), shall confirm and be conclusive evidence, as between Shipowner and Charterer, that the Vessels have been accepted by Charterer and are in compliance with all requirements of this Demise Charter, and Charterer will not assert any claim of any nature whatsoever against Shipowner or the Vessels (except as to Shipowner’s Liens) based on any of the foregoing matters in this Article 2(a).

 

(b) Upon delivery of the Vessels to Charterer hereunder, the Vessels shall be documented in the name of Shipowner under the laws and flag of the United States with coastwise and registry endorsements.

 

ARTICLE 3

 

Use and Operation of the Vessels

 

(a) Charterer shall have full use of the Vessels and may employ the Vessels operating between safe ports and safe berths worldwide, in any lawful trade and carrying such lawful dry-bulk cargoes for which the Vessels are suitable, subject to Institute Warranties and Clauses, provided, however , that (w) no Vessel shall carry any Excluded Cargoes, (x) no Vessel shall be operated in any manner contrary to the applicable laws and regulations of the United States or the jurisdiction in which it is operating (other than operation in innocent passage) except to the extent that any non-compliance therewith is not material and does not involve any risk of forfeiture, arrest, detention or the loss of use of such Vessel, or in any manner which can or may injuriously affect the documentation thereof under such laws and regulations, or in any area in which the insurance required by the terms of Article 9 shall not be in full force and effect, (y) no Vessel shall be operated in the territorial waters of any jurisdiction that at the time does not recognize the rights of United States flag vessels, and (z) no Vessel shall be operated in a manner inconsistent with, or which jeopardizes, its privileges to engage in the United States coastwise trade.

 

(b) So long as no Event of Default shall have occurred and be continuing, Charterer shall be entitled to the quiet use and enjoyment of the Vessels in accordance with this Demise Charter and shall have exclusive possession and control of the Vessels and shall man, victual,

 

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navigate and operate the Vessels at its own expense or by its own procurement throughout the Charter Period. As between Shipowner and Charterer, the master, officers and crew of each of the Vessels shall be engaged and employed by Charterer (directly or by its duly authorized agent) and shall remain Charterer’s servants, navigating and working the Vessels on behalf of and at the risk of Charterer. Shipowner shall not have any interest in salvage moneys earned by the Vessels or received by Charterer during the Term. Charterer shall pay all port charges, pilotages, and all other costs, charges and expenses whatsoever incident to the documentation, use, operation, maintenance and repair of the Vessels during the Charter Period and until the Vessels have been redelivered to Shipowner at the expiration of the Charter Period free of Liens (other than Shipowner’s Liens) and in all respects in the condition required by the Demise Charter.

 

(c) Charterer shall without expense to Shipowner, throughout the Charter Period, maintain the documentation of the Vessels under the laws and flag of the United States with coastwise and registry endorsements in the name of Shipowner, and Shipowner shall upon the request of Charterer execute such documents and furnish such information as Charterer may reasonably require to enable Charterer to maintain such documentation. The Vessels shall, and Charterer covenants that it shall, at no expense to Shipowner, at all times during the Charter Period comply with all applicable laws, treaties and conventions in effect from time to time and rules and regulations issued thereunder applicable to the jurisdictions in which the Vessels are operating (other than operation in innocent passage) except to the extent that any non-compliance therewith is not material and does not involve any risk of forfeiture, arrest, detention or the loss of use of any Vessel, including particularly, but without limitation by this enumeration, the International Convention for Safety of Life at Sea, 1960, as amended, and all applicable laws, rules and regulations administered by the Maritime Administration, the United States Coast Guard, the Customs Service, the Treasury Department, the Federal Communications Commission, the Public Health Service, the Environmental Protection Agency, the Office of Homeland Security and any other United States, state, or foreign nation agency having jurisdiction in connection with the use, control, operation and maintenance of the Vessels, or their respective successors, and Charterer covenants that it will have on board each Vessel, when required thereby, valid certificates showing compliance therewith. Charterer shall establish and maintain financial security or responsibility in respect to oil or other pollution damage as required by any government, or any division or authority thereof, to enable the Vessels, without delay, penalty or charge, lawfully to enter, remain at, or leave any port or place. Charterer covenants that it will not suffer or permit anything to be done which might injuriously affect the documentation of any Vessel under the laws and regulations of the United States and will not abandon any Vessel in a foreign port (unless there shall have been an actual or constructive total loss or agreed or compromised total loss of such Vessel), or engage in any unlawful trade or violate any law or regulation or carry any cargo that may expose any Vessel to penalty, forfeiture or seizure. Shipowner hereby represents that it presently meets the requirements of law so that the Vessels are eligible for documentation under United States flag pursuant to Title 46, United States Code (“ U.S.C. ”), Section 12106(e) and the regulations related thereto. Charterer hereby represents that it meets and covenants that it will meet, or will use its best efforts to meet, at all times throughout the Charter Period and upon any redelivery of the Vessels to Shipowner as required by this Demise Charter, the requirements of law so that the Vessels are eligible for documentation and operation under United States flag pursuant to Title 46 U.S.C.

 

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Section 12106(e) and the regulations related thereto and Charterer further represents and covenants that it is and, so long as the same shall be necessary to maintain the documentation of the Vessels under the laws and flag of the United States and to operate the Vessels in the coastwise trade of the United States, will be, or will use its best efforts to be, a “citizen of the United States” within the meaning of Section 2 of the Shipping Act.

 

ARTICLE 4

 

Maintenance of Vessels and Repairs

 

(a) Charterer shall be charged with full responsibility for maintenance and repair of the Vessels throughout the Charter Period in a manner consistent with its current maintenance and repair program as of the date hereof, and shall at all times during the Charter Period, without expense to Shipowner, maintain and preserve the Vessels in good condition, working order and repair, ordinary wear and tear only excepted, so that the Vessels shall be throughout the Charter Period, insofar as due diligence can make them so, tight, staunch, strong and well and sufficiently tackled, appareled, furnished, equipped and in every respect seaworthy and in good operating condition, including without deterioration of external coatings on the Vessels that would allow for corrosion or deterioration of the Vessels’ steel (except for such corrosion or deterioration as may ordinarily be present at the end of a maintenance cycle notwithstanding the satisfactory performance of scheduled maintenance, including with respect to exterior coatings). Charterer shall at all times during the Charter Period maintain the Vessels so as to entitle them to the highest classification and rating of the Classification Society for vessels of the same age and type, submitting the Vessels to all required surveys (including special surveys) of the Classification Society, and annually, during each year of the Charter Period, shall furnish to Initial Owner Participant annually reproduced copies of all certificates and survey reports with respect to each of the Vessels issued by the Classification Society, dated within the previous thirty (30) days, and, promptly upon receipt by Charterer, copies of all other certificates and reports as may from time to time be issued by the Classification Society with respect to any Vessel or any loss thereof or damage thereto. During the Charter Period, all repairs or changes necessary to cause the Vessels to comply with the requirements and recommendations of the Classification Society, including changes or additions to such requirements, shall be for Charterer’s account and at Charterer’s sole cost and expense.

 

(b) During the Charter Period the Vessels shall be repaired and overhauled by Charterer whenever reasonably necessary. During the Charter Period the Vessels shall likewise be dry-docked, cleaned and the bottom painted by Charterer whenever reasonably necessary and, in any event, whenever required by applicable regulations of the USCG or any other state or federal agency having jurisdiction or as may be required by the Classification Society in order to maintain such Vessel in class. Charterer shall give Initial Owner Participant written notice of each proposed dry-docking or surveying (pursuant to this Article 4 or otherwise occurring) thirty (30) days in advance if practicable, but otherwise so long in advance as may be practicable under the circumstances and without causing delay or any additional expense to the Charterer, in order that Initial Owner Participant may, if it so desires, have a representative present at such dry-docking or surveying and otherwise inspect the Vessels at Owner Participant’s expense.

 

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(c) Subject to any applicable laws and regulations, Initial Owner Participant or its authorized representatives shall have the right at reasonable times, on reasonable notice, to inspect or survey any Vessel, if it is then in port, in order to ascertain its condition and to satisfy itself that such Vessel is being properly repaired and maintained in accordance with this Article 4, but inspection in drydock shall be made only when a Vessel shall be in drydock under the provisions of Article 4(b). Any such inspection shall be at the expense of Owner Participant, except to the extent such inspection is undertaken as a result of an Event of Default or as a result of any damage to a Vessel in excess of the Value Threshold for such Vessel in which case the costs and expenses thereof shall be payable by Charterer pursuant to Article 15 of the Demise Charter. Any such inspection by Initial Owner Participant shall not delay any Vessel in the prosecution of any voyage or interfere with the normal operation of such Vessel; provided, however , that (i) any such visit or inspection shall be subject to applicable laws and regulations governing the operation of the Vessels, and (ii) Charterer shall not be responsible to Initial Owner Participant or any of its employees, representatives or agents, and Initial Owner Participant shall release Charterer from any and all liability to Initial Owner Participant or any personal injury to its employees, representatives or agents suffered in connection with such visit or inspection. During the Charter Period, Charterer shall make, or cause to be made, all such repairs, without expense to Shipowner or Owner Participant, as such inspection or survey may show to be reasonably required in order to meet the requirements of this Article 4, consistent with such repairs as may be required by the Classification Society, the Vessels’ insurers, the USCG or any other governmental agency having jurisdiction over the Vessels. Charterer shall (x) permit Initial Owner Participant or its authorized representatives, to inspect any Vessel’s logs and papers and make copies thereof whenever requested, on reasonable notice and in a manner that does not interfere with the normal operation of the Vessels, and (y) furnish Initial Owner Participant with full information (including, without limitation, any survey reports) regarding any casualties or other accidents or physical damage to the Vessels or other property, or to any person, involving an amount in excess of the Value Threshold for such Vessel.

 

(d) Shipowner shall have no responsibility for maintenance or repair of the Vessels during the Charter Period, except for the application, in accordance with Articles 9 and 11, of insurance proceeds actually received by Shipowner.

 

ARTICLE 5

 

Use of Stores and Equipment

 

(a) Charterer may, without additional payment to Shipowner, use and consume such fuel, diesel oil, fresh water, lubricating oil, greases and consumable stores belonging to Shipowner as may be on board the Vessels on the Closing Date and, upon Redelivery, all fuel, diesel oil, fresh water, lubricating oil, greases and consumable stores as may be left on board at that time shall be the property of Shipowner.

 

(b) Charterer shall have the use, without additional payment to Shipowner, of all outfit, equipment (including cabin, crew and galley equipment), furniture, furnishings,

 

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appliances, spare and replacement parts and non-consumable stores belonging to Shipowner as shall have been on board the Vessels on the Closing Date. Charterer shall from time to time during the Charter Period replace at its sole expense any items of equipment so damaged or worn as to be unfit for use, in such manner as shall not diminish the value of the Vessels.

 

(c) Charterer shall provide, without expense to Shipowner, such additional outfit, furniture, furnishings, appliances, spare and replacement parts, tools and stores as may be required by Charterer for the operation of the Vessels. Except as otherwise provided in Article 6, such additional property so provided shall not become part of the Vessels but shall remain the property of Charterer, and, unless Shipowner shall otherwise agree, Charterer shall remove the same, without expense to Shipowner, at or before Redelivery and each Vessel shall be restored prior to Redelivery to the condition she would have been in if such property had not been installed.

 

ARTICLE 6

 

Charterer’s Changes, Installation of

Equipment and Removal of Parts

 

(a) Modifications.

 

(i) Structural Modifications . During the Charter Period, Charterer shall not make any substantial structural changes or alterations in any Vessel without the prior written consent of Shipowner, which consent shall not be unreasonably withheld or delayed. For purposes of this Article 6(a), “substantial structural changes or alterations” means any change or alteration which costs more than the Value Threshold for such Vessel and shall not include any steel renewal in respect of any Vessel.

 

(ii) Alterations and Restoration . Subject to the Redelivery and maintenance provisions of this Demise Charter, Charterer may at any time alter or remove items of equipment on the Vessels, or may fit additional items of equipment; provided Charterer absorbs the cost and time of such alterations and refitting and restoring the Vessels to original condition before re-delivery of the Vessels. Such changes shall not be made without the appropriate approval of the Classification Society and the USCG and any other relevant certifying authorities.

 

(iii) Replacements . Charterer shall from time to time during the Demise Charter, at its own cost and expense, replace such items of equipment on the Vessels as shall be so damaged or worn as to be unfit for use, which upon affixation shall become the property of the Shipowner at no cost to the Shipowner and without further action by Charterer; provided , however , that Charterer shall take such actions as may be reasonably required by Shipowner to evidence the transfer of title.

 

(iv) Required Modifications . Subject to Article 6(d) below, Charterer, at its sole cost and expense, shall make all Modifications required by any applicable law or governmental action.

 

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(b) Title to Modifications. Title to each Modification shall vest as follows:

 

(i) in the case of each Non-Severable Modification, whether or not an Owner Participant shall have provided or arranged financing (in whole or in part) of the cost of such Modification, Shipowner shall, without further act, effective on the date such Modification shall have been incorporated into any Vessel, acquire title to such Modification;

 

(ii) in the case of each Severable Modification that it is not required by applicable United States law, governmental action or by the applicable Classification Society to maintain the Vessel in class, Charterer shall retain title to such Modification;

 

(iii) in the case of Severable Modifications required by applicable United States law, governmental action or by the applicable Classification Society to maintain the Vessel in class, title to such Modifications shall immediately vest in Shipowner at no cost to Shipowner and without further action by Charterer; provided, however , that Charterer shall take such actions as may be reasonably required by Shipowner to evidence the transfer of title; and

 

(iv) unless Charterer has then purchased the Vessels, title to all Severable Modifications which was vested in Charterer pursuant to clause (ii) which remain in or on the Vessels upon Redelivery shall vest automatically in Shipowner as of such date without the payment of any sum; provided, however , that Charterer’s failure to remove any such Severable Modification prior to Redelivery shall not cause or result in such reversion of title so long as (x) Charterer has given Shipowner notice of its intent to remove such Modification, such notice specifying the Modification or Modifications being removed, and (y) such failure to remove prior to Redelivery is caused by Shipowner’s failure to cooperate with Charterer’s actions to remove such items.

 

Immediately upon title to a Modification vesting in Shipowner pursuant to subparagraphs (i) or (iii) of this Article 6(b), such Modification shall, without further act, become subject to this Demise Charter and be deemed part of the Vessels for all purposes hereof. Modifications for which title remains in Charterer pursuant to subparagraph (ii) of this Article 6(b) shall not be deemed a part of the Vessels.

 

(c) Removal of Property.

 

(i) Subject to compliance, in all material respects, with applicable law and so long as no Event of Default shall have occurred and be continuing, Charterer may, prior to Redelivery, remove any Severable Modification to which Charterer shall have title as provided in this Article 6, provided , that Charterer, at its expense and prior to Redelivery, shall repair any damage to any Vessel (or any part thereof) caused by such removal and shall restore any diminishment in the value, utility or remaining useful life of any Vessel caused by such removal (as compared to the value, utility or remaining useful life of such Vessel if such Severable Modification had not been made).

 

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(ii) If any Part is removed from any Vessel for the purpose of replacement thereof with another Part, title to such removed Part shall remain the property of Shipowner, no matter where such removed Part is located, until such time as the Part constituting a replacement thereof shall have been incorporated into such Vessel, at which time, without further act, title to such removed Part shall vest in Charterer or such Person as shall be designated by Charterer, and such property shall not thereafter be part of such Vessel. Each such replacement Part shall be free and clear of all Liens (other than Permitted Liens), shall upon installation become a part of the Vessels (with title thereto vesting in Shipowner), and shall be in as good operating condition as, and shall have a value, utility and remaining useful life at least equal to, that of the Part removed, it being assumed for purposes of this sentence that such removed Part was in the condition and state of repair required by Article 6(e).

 

(d) Contest of Requirements of Law. If, with respect to any requirement of applicable law or any governmental action (i) Charterer is contesting diligently and in good faith by appropriate proceedings being diligently pursued such requirement of applicable law or governmental action, or (ii) compliance with such requirement or governmental action shall have been excused or exempted by a valid nonconforming use permit, waiver, extension or forbearance exempting Charterer from such requirement or governmental action, or (iii) Charterer shall be making a good faith effort and shall be diligently taking appropriate steps to comply with such requirement or governmental action, then the failure by Charterer to comply with such requirement or governmental action shall not constitute an Event of Default hereunder; provided, however , that such contest or noncompliance does not involve (A) any danger of criminal liability being imposed on any Indemnified Party, or (B) any material risk of (1) the imminent arrest, forfeiture or sale of, or the creation of any Lien (other than a Permitted Lien) on, any Vessel, or (2) material civil liability being imposed on any Indemnified Party. Charterer shall provide Owner Participant with notice of any contest of the type described in clause (i) above in detail sufficient to enable Owner Participant to ascertain whether such contest may have any adverse effect of the type described in the above proviso . If such contest shall not be resolved to the satisfaction of Shipowner prior to the end of the Charter Period, then Charterer shall be obligated to continue such contest until it has been so resolved or Charterer shall have complied at its expense with the requirement so contested.

 

(e) Charterer will maintain or cause to be maintained the Vessels’ machinery and equipment in compliance with manufacturer’s recommendations and specifications and the requirements of the Classification Society, the USCG and any other governmental authorities having jurisdiction over the Vessels and their equipment.

 

(f) In each case in compliance with applicable laws, Charterer shall have the right to paint the Vessels in its own colors, to name and rename the Vessels (and Shipowner will, at Charterer’s sole cost and expense, on Request execute such documents as shall be required to effect any such change of name), to install and display its stack insignia and to fly its house flag, all without expense to Shipowner, and Charterer shall remove such flag and insignia, without expense to Shipowner, prior to Redelivery.

 

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(g) Charterer shall permit no Modification of any Vessel that results in a diminishment of the value, utility or remaining useful life of such Vessel.

 

ARTICLE 7

 

Liens and Mortgages

 

(a) Charterer covenants that it will, at all times, at its own cost and expense, warrant and defend Shipowner’s title to the Vessels and all components thereof during the Charter Period, and all right, title and interest of Shipowner in, to and under any charter assignment, insurances assignment or other assignment given by Charterer to Shipowner in connection with this Demise Charter or the Vessels, and in any way relating to any thereof, against the claims, liens and demands of all Persons, which obligation shall survive Redelivery and termination of this Demise Charter; provided, however , that Charterer shall not have any responsibility in respect of Shipowner’s Liens.

 

(b) Without prejudice to the rights of Shipowner under Article 14, neither Charterer, the master of any Vessel, nor any other Person has or shall have any right, power or authority, without the prior written consent of Shipowner, to create, incur or permit to be placed or imposed upon any Vessel any mortgage, lien, charge or other encumbrance whatsoever other than Permitted Liens, nor shall Shipowner have any right, power or authority so to do. During the Charter Period, Charterer agrees to carry a true copy of this Demise Charter with the ship’s papers on board each of the Vessels and to exhibit the same on demand to any Person having business with the Vessels which may give rise to a maritime lien upon the Vessels, and on demand to any representative of Shipowner. Charterer shall also place and keep prominently exhibited in the master’s cabin and the chart room of each of the Vessels, or at another appropriate place or places on board the Vessels, a printed notice which will be substantially in the following form:

 

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“NOTICE OF DEMISE CHARTER

 

This Vessel is owned by TTC Trust, Ltd., a Connecticut statutory trust, acting by and through State Street Bank and Trust Company of Connecticut, National Association, as trustee (“ Shipowner ”), and is under demise charter to TECO Ocean Shipping, Inc., a Florida corporation (“ Charterer ”). Under the terms of said demise charter, neither Charterer, any other charterer, the master or agent of this Vessel nor any other person (other than Shipowner) has any right, power or authority to create, incur or permit to be placed or imposed upon this Vessel any lien whatsoever other than Permitted Liens as defined in said demise charter, including liens for wages of a stevedore when employed directly by Charterer or the operator, master or agent of this Vessel, for wages of the crew in respect of this Vessel, or for general average, or for salvage (including contract salvage).”

 

(c) If a libel shall be filed against any Vessel, or if any Vessel shall be otherwise levied upon or taken into custody by virtue of proceedings in any court or tribunal in any country or nation of the world or by any governmental or other authority because of any liens or claims (other than Shipowner’s Liens), Charterer shall, without expense to Shipowner, cause such Vessel to be released within twenty (20) Business Days and any such claims or liens to be discharged when such claims or the obligations or charges secured by such liens are due and payable and are not being contested in good faith by appropriate proceedings. In the event any Vessel is levied upon or taken into custody or detained by any authority whatsoever, Charterer agrees forthwith to notify Shipowner thereof by telefax, telegram or telex, confirmed by letter.

 

(d) Notwithstanding the provisions of this Article 7, in the event any Vessel shall be arrested or detained by a marshal or other officer of any court of law, equity or admiralty jurisdiction in any country or nation of the world or by any government or other authority and shall not be released from arrest or detention within twenty (20) Business Days from the date of arrest or detention, Shipowner shall be at liberty to apply for and receive possession of and to take possession in such proceeding of such Vessel (subject however to this Demise Charter) and to protect its right, title and interest as owner in such Vessel with all the rights and powers that Shipowner might have, possess and exercise in any such event. If such arrest or detention is such that under this Article 7 Charterer is required to defend any Vessel against such arrest or detention, then all expenses incurred by Shipowner pursuant to the foregoing sentence shall constitute a debt due from Charterer to Shipowner, but Shipowner shall not be obligated to take the action authorized by the foregoing sentence.

 

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ARTICLE 8

 

Risk of Loss

 

Subject to the provisions of Articles 6, 7, 11, and 12 hereof, Charterer shall bear the entire risk of loss and damage to the Vessels or any of their component parts during the Charter Period. Notwithstanding the foregoing sentence, in no event shall Charterer’s obligation to Shipowner in respect of the loss of or damage to any Vessel, or in respect of any Event of Default, be in excess of the amount in dollars which Charterer would be obligated to pay to Shipowner pursuant to Article 11 upon the occurrence of an Event of Loss, or Article 15 upon the occurrence of an Event of Default, as the case may be.

 

ARTICLE 9

 

Insurance

 

(a) Charterer shall, without expense to Shipowner, provide and maintain insurance on or with respect to the Vessels and the operation thereof during the Charter Period as follows:

 

(1) At its own expense, Charterer shall procure and maintain or cause to be procured and maintained full marine navigating risk hull and machinery insurance, and increased value, and shall also procure and maintain or cause to be procured and maintained marine war risk navigating hull and machinery insurance and increased value or other forms of total loss only insurance. While any Vessel is laid up, in lieu of the aforesaid coverage, port risk hull and machinery insurance may be taken out on such Vessel by Charterer. The foregoing insurance shall be in aggregate amounts at all times at least equal to the Vessel’s Stipulated Loss Value at such time. The foregoing insurance may provide for a deductible amount approved by Shipowner but no consent or approval of Shipowner shall be required for a deductible amount of up to $1,000,000 with respect to any one accident, occurrence or event.

 

(2) At its own expense, Charterer shall procure and maintain or cause to be procured and maintained marine and war risk full form protection and indemnity coverages, including coverage against liability for property damage to third persons (including liability to any governmental authority or other person with respect to pollution liability) and personal injury or death to any person arising out of the maintenance, use, operation and ownership of the Vessels, cargo damage or loss, and wreck removal in such amounts as are usually carried by prudent shipowners for similar vessels engaged in the same or similar trades as Charterer; provided, however , that in no event shall the per occurrence and aggregate limit of such insurance be less than $200,000,000 (subject to a deductible or self-insured retention not in excess of $1,000,000 unless Shipowner shall otherwise consent in writing). Such liability insurance shall name each of Shipowner, Charterer and Other Interested Persons as insureds, as their respective interests may appear, but without recourse to Shipowner or Other Interested Persons for the payment of premiums, commissions, assessments or advances (or if such coverage be effected by entry in a Protection and Indemnity Club, for payment of calls or assessments). Such insurance shall include a waiver of subrogation against Charterer, Shipowner, and Other Interested Persons.

 

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(3) Charterer shall procure and maintain or cause to be procured and maintained Innocent Owners Protection policies or endorsements naming Shipowner as sole loss payee in the event of loss or damage to any Vessel, subject to no defense based on breach of warranty or failure of condition by Charterer or any other Person, in the same amounts and subject to the same deductibles provided for in Article 9(a)(1).

 

(b) All Policies of Insurance (other than those relating to protection and indemnity and/or other third party liability risks) shall be taken out in the names of Shipowner and Charterer, and Other Interested Persons as named insureds or additional named insureds as their interests may appear, and the policies shall provide that (or operate so that) there shall be no recourse against Shipowner or Other Interested Persons for the payment of premiums, commissions, assessments or advances and shall provide for at least thirty (30) days’ prior written notice to be given by insurers or underwriters (or by Charterer’s marine insurance broker on behalf of insurers or underwriters) to Charterer and Shipowner in the event of cancellation for nonpayment of premium or other material adverse change in the terms of coverage and, to the maximum extent that the insurers or underwriters or other entities affording coverage thereunder will agree so to do, of non-renewal or other cancellation of the applicable policy.

 

(c) All Policies of Insurance shall provide that losses thereunder shall be payable to the named insured or additional named insureds as their interests may appear; provided, however , that such Policies of Insurance may provide that:

 

(1) any loss under any insurance on the Vessels with respect to protection and indemnity risks or other liability insurance may be paid (x) directly to the Person to whom any liability covered by such insurance has been incurred or (y) to the extent Charterer has paid the loss, damage or expense covered by such insurance to the Person referred to in clause (x), directly to Charterer to reimburse it for such payments made by Charterer, provided, however , that such payments may not be made (I) unless the insurers or underwriters and Shipowner shall have first received evidence that the liability insured against has been discharged or is being discharged simultaneously with such payment and (II) in the case of payments to Charterer under clause (y) above, if the insurers or underwriters shall have received written notice from Shipowner of the occurrence of an Event of Default, unless the insurers or underwriters have been notified by Shipowner in writing that such Event of Default has been cured or waived;

 

(2) in case of any loss (other than a loss covered by clause (1) above or a loss which is an Event of Loss) under any insurance with respect to any Vessel involving any damage to such Vessel, the insurers or underwriters may (x) pay directly for the repair or other charges or losses involved, unless the insurers or underwriters have received written notice from Shipowner of the occurrence of an Event of Default (which notice has not been modified or withdrawn by Shipowner as a result of the cure or waiver thereof) or (y) unless the insurers or underwriters have received written notice from Shipowner of the occurrence of an Event of Default, make payment directly to Charterer as reimbursement if Charterer shall have first repaired the damage and paid the cost thereof and paid the costs or other charges or losses involved, and the insurers or underwriters and Shipowner shall have received evidence of such repair and payment or that such payment will be made simultaneously with the payment by the insurers or underwriters;

 

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(3) in the event of an Event of Loss, accident, occurrence or event resulting in an actual or constructive total loss of any Vessel and provided no Event of Default has occurred and is continuing, Charterer shall have the right to declare and claim for a constructive total loss of such Vessel and to require that Shipowner accede to or join in such claim, and if (i) such claim is accepted by all insurers or underwriters under all applicable policies then in force as to the Vessel under which payment is due for such total loss, and (ii) payment in full is made under such policies, then Charterer shall have the right at its election, and Shipowner the obligation, to abandon such Vessel to the insurers or underwriters under such policies, with the insurers or underwriters’ approval, free from the lien of this Demise Charter and any Shipowner’s Liens, and upon payment to Shipowner of the amounts referred to in Article 11(a), Charterer’s obligation to pay further Basic Hire hereunder shall terminate; provided that , no such declaration and/or abandonment shall be effected by Charterer without Shipowner’s consent if the proceeds payable under such policies in respect of such Event of Loss shall aggregate less than the Stipulated Loss Value of such Vessel applicable at the time of such loss; and

 

(4) in the event of an accident, occurrence or event of damage to any Vessel not constituting an Event of Loss or resulting in liability to persons other than Charterer or any Other Interested Person, and provided no Event of Default has occurred and is continuing, Charterer shall have the right, but only with the prior written consent of Shipowner, to enter into an agreement or compromise with insurers or underwriters providing for an agreed or compromised total loss of such Vessel.

 

(d) In the event that a claim is made against any Vessel for loss, damage or expense which is covered by insurance, and it is necessary for Charterer to obtain a bond or to supply other security to prevent arrest of such Vessel or to release such Vessel from arrest on account of such claim, Shipowner agrees on request of Charterer to assign to any Person executing a surety or guaranty bond or other agreement to save or release such Vessel from such arrest, all right, title and interest of Shipowner in and to such insurance or proceeds therefrom (up to the amount claimed) covering such loss, damage or expense as collateral security to indemnify against liability under such bond or other agreement.

 

(e) Charterer shall, without expense to Shipowner, have the right, duty and responsibility to make all proofs of loss and take any and all other steps necessary to effect collections from insurers or underwriters for any loss under any insurance on or with respect to the Vessels or the operation thereof, including the right to effect compromises of claims against insurers; provided, however , that such compromises, if materially at variance from the amount of any claim in excess of the Value Threshold for such Vessel, shall be subject to the prior written approval of Shipowner. Shipowner shall cooperate, at Charterer’s expense, in making all proofs of loss and shall take all other reasonable steps necessary to effect collection from insurers or underwriters.

 

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(f) The insurance provided and maintained on or with respect to the Vessels or the operation thereof in accordance with this Demise Charter shall be on such forms of policies or other evidence thereof (except in the case of protection and indemnity coverage) published by the American Institute of Marine Underwriters, the International Underwriting Association of London (IUA), and/or such other forms of policies approved by Shipowner, insuring the Vessel against the usual risks covered by such forms as is customary at the time for U.S. flag vessels of similar size, type, age and trade. The forms of policies or entries effecting protection and indemnity coverage shall be satisfactory to Shipowner. Notwithstanding the foregoing, Shipowner may require changes if such changes are necessary to comply with requirements of or to insure against liabilities created or increased by law (including those arising by reason of a change, modification, or amendment thereof, or any judicial or administrative decisions relating thereto) or regulations of the United States or the government of any state, territory, or possession thereof or of any nation or other place where the Vessels may be operating (except in innocent passage) or the laws of which may otherwise apply.

 

(g) Charterer will procure and maintain or cause to be procured and maintained all insurance required under this Demise Charter with sound and reputable marine insurance companies, underwriters’ associations or syndicates, protection and indemnity associations that are members of the International Group of Protection and Indemnity Clubs, or underwriting funds approved by Shipowner (which approval shall not be unreasonably withheld). All insurance provided under this Article 9 shall be primary (with respect to co-insurance clauses or other applicable insurance clauses, but not with respect to insurance procured and maintained by Charterer) and shall not require contribution from Shipowner, Charterer or any Other Interested Person.

 

(h) Charterer shall deliver to Shipowner the originals or certified copies of the cover notes evidencing the insurance required to be provided and maintained pursuant to this Demise Charter. Charterer shall also deliver copies of all insurance policies (as soon as available) upon receipt of a written request by Shipowner and, if applicable, Protection and Indemnity Club Certificates of Entry and applicable club rules. A certificate of insurance, cover note, binder, or confirmation of coverage and any other available evidence of insurance, shall be provided by Charterer to Shipowner and Owner Participant not less than ten (10) days in advance of each renewal.

 

(i) Nothing in this Article 9 shall prohibit Shipowner from placing, at Shipowner’s expense, insurance on or with respect to the Vessels or the operation thereof in an amount exceeding the amount required to be carried or maintained by Charterer pursuant to Article 9(a), or against risks not required to be covered pursuant to Article 9(a), unless such insurance would conflict with or otherwise limit the insurance to be provided or maintained by Charterer in accordance with Article 9(a) or carried or proposed to be carried by Charterer in accordance with this Article 9(i). Charterer agrees, upon receipt of a request of, and payment of the premium therefor (and other associated costs) by, Shipowner, to apply for and carry any insurance permitted to be carried by Shipowner pursuant to the preceding sentence, to the extent such insurance is available, with Shipowner named as the sole loss payee. Shipowner agrees, upon the placing of any such insurance, to furnish Charterer promptly with copies of all Policies relating to such insurance. Nothing in this Article 9 shall prohibit Charterer from placing any

 

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additional insurance Charterer desires, at Charterer’s expense, on or with respect to the Vessels or the operation thereof, unless such insurance would conflict with or otherwise limit the insurance to be carried or maintained by Charterer in accordance with Article 9(a). Charterer agrees, upon the placing of any such insurance, to furnish Shipowner promptly with copies of all Policies relating to such insurance. The benefit of any insurance permitted by the first or fourth sentence of this Article 9(i) shall inure to the benefit of the party at the expense of which such insurance is procured. Any such additional insurance procured pursuant to this Article 9(i) shall provide, or shall operate as if it provided, for a waiver of subrogation, if procured by Shipowner, against Charterer (and to the extent available against their respective Affiliates, officers, directors and employees) and if procured by Charterer against Shipowner.

 

(j) Unless an Event of Default has occurred and is continuing, Charterer shall have the right to prosecute claims against third parties for (i) damage to any Vessel, (ii) personal injuries, or (iii) other claims, losses or damages, for which Charterer or Shipowner has been named as a defendant or held liable, where necessary in the name of Shipowner.

 

(k) Charterer shall secure the agreement of its marine insurance broker to advise Shipowner and Owner Participant promptly of nonpayment of premium, material adverse changes in the terms of coverage, or cancellation or non-renewal of policies providing required coverages hereunder.

 

ARTICLE 10

 

Term of Demise Charter and Charter Hire

 

(a) This Demise Charter shall remain in effect until, and shall terminate at, the end of the Charter Period. Charterer shall, however, provided no Event of Default shall have occurred and be continuing, have the option to terminate this Demise Charter effective upon the Early Termination Date provided Charterer shall have delivered written notice of its irrevocable exercise of such option not less than one hundred eighty (180) days prior to the Early Termination Date. If Charterer shall exercise such option, Charterer shall, in addition to any payment of Basic Hire due through and including the Early Termination Date (except for the payment of advance rent due on the Early Termination Date) and any other amounts then due, pay to Shipowner in immediately available funds on or before the Early Termination Date, as and for the purchase price of the Vessels, a sum equal to the Early Purchase Amount (subject to the installment payment option set forth below) and concurrently therewith Shipowner shall execute and deliver to Charterer or Charterer’s Legally Eligible Designee a bill of sale for each Vessel, in recordable form, AS IS, WHERE IS, in whatever condition they may be, without recourse or warranty of any kind provided, however , that Shipowner shall warrant that each Vessel is free and clear of any Shipowner’s Liens. In connection with and at the time of the delivery of such bills of sale, Shipowner shall also execute and deliver to Charterer or its Legally Eligible Designee such appropriate instruments of assignment or reassignment (without recourse or warranty) of Shipowner’s rights, title and interests under the Assignments as may reasonably be requested by Charterer. Time shall be considered of the essence in the exercise of such option and the payment of the purchase price therefor and failing timely exercise or payment, such

 

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option shall irrevocably and forever lapse. The early termination option provided for in this Article 10(a) shall be exercised by Charterer, if at all, only with respect to all of the Vessels subject to this Demise Charter and only in connection with the simultaneous exercise by TECO Barge Line of the early termination option under Article 10(a) of the TBL Charter (and the exercise of such early termination option under the TBL Charter shall be deemed to be the exercise by Charterer of the early termination option under this Article 10(a)).

 

(b) During the Term, Charterer promises to pay to Shipowner Basic Hire for each Vessel on each Basic Hire Payment Date. During the Charter Period, Charterer agrees to pay to Shipowner Supplemental Hire within ten (10) Business Days after demand therefor. Until notice is given by Owner Participant to Charterer specifying other payment instructions, Basic Hire shall be payable directly to Owner Participant by wire transfer in accordance with the following instructions:

 

Bankers Trust

One Bankers Trust Plaza

New York, NY 10006

ABA# 021-001-033

For the account of General Electric Capital Funding, Inc.

Account #50-270-797

Re: TECO Transport

 

In the event that Charterer does not exercise the early termination option with respect to the Vessels pursuant to Article 10(a), Initial Owner Participant shall recalculate and fix each remaining payment of Basic Hire (i) as of the Early Termination Date, to an amount determined by multiplying the Remaining Rental Factor (as calculated as of the Early Termination Date) for each remaining Basic Hire Payment Date by Lessor’s Cost for each Vessel, starting with the payment due on March 30, 2008 (September 30, 2008 in the case of the PAT CANTRELL), and (ii) as of the Second Reset Date, to an amount determined by multiplying the Remaining Rental Factor (as calculated as of the Second Reset Date) for each remaining Basic Hire Payment Date by Lessor’s Cost for each Vessel, starting with the payment due on March 30, 2013 (September 30, 2013 in the case of the PAT CANTRELL). No later than fifteen (15) days prior to the Early Termination Date and the Second Reset Date, respectively, Initial Owner Participant shall provide to Charterer an addendum to Schedule C setting forth the applicable Remaining Rental Factors and the recalculated payments of Basic Hire, which shall be determinative absent manifest error.

 

(c) From, but excluding, the last day of the Term until and including the date of Redelivery (if any) of the Vessels, Charterer shall pay to Shipowner Basic Hire at the Per Diem Rate.

 

(d) In the event any amount of Charter Hire payable pursuant to this Article 10 is not paid when due as provided in this Demise Charter, Charterer promises to pay, in addition to such amount of Charter Hire, interest on the overdue portion thereof for the period from the due date of such Charter Hire until the date of payment thereof at the Default Interest Rate.

 

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(e) Notwithstanding anything else in this Demise Charter contained, Charterer’s obligations and liabilities hereunder are absolute and unconditional and no Charter Hire payment nor any other payment to be made by Charterer hereunder during the Charter Period shall, except in accordance with the express terms hereof, be subject to (x) any reduction (except as otherwise expressly provided herein), limitation, impairment or termination (except upon termination of this Demise Charter in accordance with the terms hereof) by reason of any claim of any character whatsoever, or otherwise, including, without limitation, claims of waiver, release, surrender, alteration, consent, extension, indulgence or compromise, or (y) any right of set-off, counterclaim, defense, recoupment, abatement, suspension or deferment whether based upon this Demise Charter or any other agreement or otherwise and howsoever arising, whether out of actions or nonactions of any other Person, and Charterer shall have no right to terminate this Demise Charter (except as provided in Article 10(a), 10(h) and 11) or to be released, relieved or discharged from any obligation or liability hereunder to make such payments for any reason whatsoever. Nothing contained in this Article 10 shall be construed to be a waiver, modification, alteration or release of any claims which Charterer may have at any time during the Term or subsequent thereto for damages or equitable relief for any breach by Shipowner or any other Person of any provision of this Demise Charter or any provision of any other agreement.

 

(f) The obligation of Charterer to pay Basic Hire with respect to a Vessel pursuant to this Demise Charter shall cease to accrue as of the day following the date of occurrence of an Event of Loss with respect to such Vessel, or the termination hereof pursuant to Article 15, or upon exercise by Charterer of its option to terminate pursuant to Article 10(a) or upon the Option Closing Date pursuant to Article 10(h) and the timely completion and fulfillment by Charterer of its obligations thereunder.

 

(g) In the event that (i) Shipowner shall cease to be eligible to be the owner of a United States flag vessel with coastwise endorsement pursuant to Title 46 U.S.C. Section 12106(e)(1), and (ii) the Vessels shall or would therefore become ineligible for documentation in the name of Shipowner under United States flag or ineligible for use by Charterer in the United States coastwise trade, then Shipowner shall, promptly upon learning of such cessation of eligibility, notify Charterer thereof (with a copy to each Owner Participant). Shipowner and Charterer acknowledge that Initial Owner Participant has covenanted and agreed that, and that each transferee of the Initial Owner Participant will be required to covenant and agree, if (x) it shall cease to be a Maritime Citizen or it shall obtain knowledge of events or circumstances that would be likely to result in a cessation of its status as a Maritime Citizen, and (y) the Vessels shall or would therefore become ineligible for documentation in the name of Shipowner under United States flag or ineligible for use by Charterer in the United States coastwise trade, then such Owner Participant shall, forthwith upon learning of such cessation of its status as a Maritime Citizen, or, in the event such Owner Participant shall obtain knowledge of events or circumstances that would be likely to result in such cessation at least forty-five (45) days before such cessation or as soon thereafter as such Owner Participant obtains knowledge of such events or circumstances if such knowledge is obtained later than forty-five (45) days before such cessation, notify Charterer thereof (with a copy to each other Owner Participant). For purposes of such covenant, “knowledge” of such Owner Participant means actual knowledge of a Responsible Officer thereof. Such notification by such Owner Participant shall be deemed to satisfy the notice obligation of Shipowner pursuant to the first sentence of this subsection (g).

 

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(h) Upon receipt of the notice of cessation of eligibility of Shipowner or of cessation of the status of an Owner Participant as a Maritime Citizen referred to in Article 10(g) above, Charterer shall have the option (exercisable by written notice to Shipowner and Initial Owner Participant within sixty (60) days following receipt of such notice of cessation) but not the obligation to purchase the Vessels from Shipowner (the date on which Charterer, having previously exercised such option, pays the purchase price for each Vessel hereinafter set forth being herein called the “ Option Closing Date ”) for a purchase price equal to the sum of (A) the Stipulated Loss Value of each Vessel as of the Basic Hire Payment Date immediately preceding the Option Closing Date, and (B) all unpaid Charter Hire, if any, due and payable hereunder through the Option Closing Date; provided, however , that any Basic Hire paid in advance by Charterer for any period following the Option Closing Date shall be credited, on a per diem basis, against the amount due from Charterer under this Article 10(h). Concurrently with the payment of such purchase price Shipowner shall transfer title to the Vessels to Charterer or its Legally Eligible Designee, AS IS, WHERE IS, in whatever condition they may be (free and clear, however, of any Shipowner’s Liens). In the event of the exercise by Charterer of its option to purchase the Vessels in accordance with this Article 10, Shipowner, concurrently with the payment by Charterer of the purchase price, shall execute and deliver to Charterer or Charterer’s Legally Eligible Designee a bill of sale for each Vessel, in recordable form, in accordance with the preceding sentence, and, in connection with and at the time of delivery of such bills of sale, Shipowner shall also execute and deliver to Charterer or its Legally Eligible Designee such appropriate instruments of assignment or reassignment (without recourse or warranty) of Shipowner’s rights, title and interests under the Assignments as may be reasonably requested by Charterer. The purchase option provided for in this Article 10(h) shall be exercised by Charterer, if at all, only with respect to all of the Vessels subject to this Demise Charter and only in connection with the simultaneous exercise by TECO Barge Line of the purchase option under Article 10(h) of the TBL Charter (and the exercise of such purchase option under the TBL Charter shall be deemed to be the exercise by Charterer of the purchase option under this Article 10(h)).

 

(i) Any provision of this Demise Charter to the contrary notwithstanding, upon redelivery of the Vessels to Shipowner under Article 13 or following the occurrence of an Event of Default, each Vessel shall be free and clear of all Liens (other than Shipowner’s Liens, if any), including, without limitation, the Lien of any Other Charter, free of cargo with clean swept holds and in all other respects charter free, and in the condition in which they are required to be maintained under this Demise Charter, ordinary wear and tear excepted.

 

ARTICLE 11

 

Event of Loss and Right to Terminate.

 

(a) Upon the occurrence of an Event of Loss with respect to any Vessel during the Charter Period, the obligations under this Demise Charter with respect to such Vessel shall terminate (but only with respect to such Vessel) upon the payment to Shipowner of the payments referred to in the next sentence. After such occurrence Charterer shall pay to Shipowner (i) an

 

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amount equal to all out of pocket expenses (including reasonable legal and investigator fees) incurred by, and not otherwise reimbursed to, any Owner Participant and Shipowner in connection with the occurrence of the Event of Loss as set forth in an Officer’s Certificate of Shipowner received by Charterer at least five (5) Business Days prior to the date of such payment, (ii) within 120 days following such Event of Loss, the Stipulated Loss Value of such Vessel at the date of the occurrence of the Event of Loss, and (iii) all unpaid Charter Hire with respect to such Vessel, if any, due and payable hereunder through the date of the occurrence of the Event of Loss; provided, however , that (x) any Basic Hire with respect to such Vessel paid in advance by Charterer for any period following the date of the occurrence of the Event of Loss shall be credited, on a per diem basis, against the amount due from Charterer under this Article 11(a), and (y) if the Event of Loss is a result of the application of the economic obsolescence provisions of clause (iii) of the definition of Event of Loss and the Vessel is sold, Charterer shall pay to Shipowner, in addition to the other amounts payable pursuant to this Article 11(a), the amount, if any, by which the net proceeds of such sale received by Charterer or any Affiliate of Charterer exceeds the Stipulated Loss Value of such Vessel on the date of occurrence of such Event of Loss.

 

(b) Charterer agrees forthwith upon obtaining knowledge thereof to notify Shipowner by telefax, telegram or telex, confirmed by letter, of the occurrence of an Event of Loss or of an event which with the passage of time would become an Event of Loss.

 

(c) If an Event of Loss with respect to any Vessel shall occur during the Charter Period, Shipowner shall be entitled to retain all amounts payable to it in respect of such Event of Loss under the insurance provided pursuant to Article 9(a) hereof up to the aggregate amount which Charterer shall be obligated to pay to Shipowner pursuant to Article 11(a) above (and will credit the amount of any such policy proceeds actually received against Charterer’s obligations to Shipowner under this Demise Charter) and shall remit any excess (including any excess by reason of payment by Charterer prior to the receipt by Shipowner of insurance proceeds as the result of any Event of Loss) to Charterer; provided, however , (i) that any excess proceeds received as the result of excess coverage procured by a party hereto pursuant to Article 9(i) hereof shall be retained by the party procuring the same as its own property, to which the other party hereto shall have no claim or right, and (ii) that if Charterer has paid all amounts which Charterer is obligated to pay Shipowner pursuant to Article 11(a) above and all other obligations of Charterer to Shipowner hereunder are current, Shipowner shall direct that all insurance proceeds be paid to Charterer (except as otherwise provided in clause (i) of this proviso ).

 

ARTICLE 12

 

Requisition of Use

 

(a) In the event any Vessel is requisitioned for use by any governmental or other competent authority during the Charter Period, such requisition (unless it constitutes an Event of Loss hereunder) shall not terminate or entitle Charterer to terminate this Demise Charter or to cease or interrupt payment in full of Charter Hire. If during the Charter Period any Vessel is under such requisition, Charterer shall be entitled to any amounts payable to Shipowner or to

 

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Charterer in respect of such requisition insofar as it falls within the Term (and, upon the request of Charterer, Shipowner shall execute and deliver to Charterer any necessary instrument of assignment with respect to the claim of Shipowner with respect thereto) and, provided no Event of Default (other than an Event of Default solely attributable to the fact that required action by Charterer with respect to such Vessel is prevented by such requisition) shall have occurred and be continuing, Shipowner shall pay any such amounts to Charterer immediately upon receipt thereof by Shipowner.

 

(b) Should any Vessel be under requisition for use at or beyond the end of the Term:

 

(i) Charterer shall, if prevented by reason of the requisition from redelivering such Vessel as provided in Article 13(a) hereof, be relieved from the obligation to do so, but shall consult with Shipowner as to the most convenient method of enabling Shipowner to obtain redelivery of such Vessel when she is released from such requisition;

 

(ii) provided Charterer continues to pay Charter Hire as required hereunder, including Basic Hire pending Redelivery as provided in Article 10(c), during such period of requisition Charterer shall be entitled to any amounts payable to Shipowner or to Charterer in respect of such requisition (and, upon the request of Charterer, Shipowner shall execute and deliver to Charterer any necessary instrument of assignment with respect to the claim of Shipowner with respect thereto) and, provided no Event of Default (other than an Event of Default solely attributable to the fact that required action by Charterer with respect to such Vessel is prevented by such requisition) shall have occurred and be continuing, Shipowner shall pay any such amounts to Charterer immediately upon receipt thereof by Shipowner; and

 

(iii) after such release Charterer shall be given a reasonable opportunity of complying with Charterer’s obligation under Article 6 and of removing any such additional equipment as is referred to in Article 6(b) hereof on the terms referred to therein.

 

(c) Charterer agrees forthwith to notify Shipowner by telefax, telegram or telex, confirmed by letter, of any requisition of use of any Vessel by the United States or any other government.

 

ARTICLE 13

 

Redelivery

 

(a) Subject to the rights of Charterer under Articles 10(a), 10(h) and the rights and obligations of Charterer under Article 16 hereof, on or before the last day of the Charter Period (but in no event prior to the expiration of the Term), unless an Event of Loss has occurred or this Demise Charter has been terminated pursuant to Article 15(b) or the use of any Vessel has been requisitioned and such requisition is continuing at the end of the Charter Period, Charterer shall

 

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effect Redelivery of the Vessels to Shipowner at safe and suitably equipped berths at Tampa, Florida, or such other safe berths and safe port suitable for the Vessels on the Gulf Coast of the United States designated by Shipowner, unless otherwise agreed by Shipowner and Charterer, in class and in the order and condition required by the terms of Article 4, except for ordinary wear and tear not affecting class, with no required surveys or inspections which are due or overdue and with no outstanding recommendations or requirements on the Vessels (nor subject to any damage or other condition which, if known to the Classification Society or USCG, would result in such a recommendation or requirement) and with all required certificates in effect. Charterer shall give written notice to Shipowner of the expected time and port of Redelivery at least sixty (60) days prior to Redelivery. At the request of Shipowner a mutually agreed upon surveyor shall be appointed for the purpose of determining and confirming in writing the condition of the Vessels at the time of Redelivery. In the event that the Charterer and the Shipowner are unable to agree on a surveyor, the Charterer shall recommend a list of three (3) internationally recognized surveyors and the Shipowner shall choose one (1) surveyor from such list, who shall then act as the surveyor in connection with Redelivery. Charterer shall bear all survey expenses and other costs, if any, including the cost of docking and undocking, if required, as well as all repair costs incurred, in connection with such Redelivery. Shipowner may require that Charterer lay up any Vessel at the time of Redelivery for a period of up to two hundred seventy (270) days, the expense of such lay-up to be for Charterer’s account for the first ninety (90) days, and thereafter for the account of Owner Participant, at prevailing local commercial rates, provided that such lay-up may be at a Gulf Coast port designated by Charterer, subject to the other requirements of this Article 13(a).

 

(b) Any property of Charterer remaining aboard any Vessel upon Redelivery and not removed by Charterer may be retained by Shipowner as its own property without prejudice to Charterer’s obligation under Article 6 to restore such Vessel to the condition it would have been in had it not been so installed by Charterer.

 

ARTICLE 14

 

Assignments; Subcharters

 

(a) Trustee shall have the right to assign this Demise Charter to a successor Trustee under the Trust Agreement or to the Initial Owner Participant or as otherwise permitted by the Agreement.

 

(b) Except as otherwise expressly required or permitted by the Agreement, without the prior written consent of Shipowner, Charterer may not assign or transfer this Demise Charter or create a security interest herein and any such permitted assignment or creation of a security interest shall be absolutely void; provided, however , that Charterer may assign this Demise Charter in its entirety to an Affiliate of the Guarantor if (i) there is then no Event of Default, (ii) such Affiliate is a solvent corporation organized and in good standing in a jurisdiction in the United States and has the corporate power and authority to enter into and carry out the transactions contemplated by the Transaction Documents to which Charterer is a party, (iii) such Affiliate is a citizen of the United States within the meaning of Section 2 of the Shipping Act,

 

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1916, as amended, 46 App. U.S.C. 802, for purposes of engaging in the coastwise trade, (iv) such Affiliate expressly assumes and agrees to be bound by the obligations of Charterer hereunder by agreement reasonably satisfactory to Shipowner, and (v) the obligations of the Guarantor under the Guaranty are not thereby released or otherwise limited or impaired.

 

(c) Charterer shall not enter into any Other Charter of any Vessel during the Term unless (i) such Other Charter does not extend beyond the Term, (ii) any rights created by such Other Charter are fully and expressly subject and subordinate in all respects to this Demise Charter, (iii) such Other Charter does not adversely affect the eligibility of the Vessel for documentation and operation in the United States coastwise trade, (iv) Charterer remains primarily liable for all its obligations under this Demise Charter, and (v) the obligations of the Guarantor under the Guarantee are not thereby released, limited or otherwise impaired. In the event that any Other Charter is a bareboat charter or bareboat subcharter, Charterer shall not enter into any such Other Charter during the Term without the prior written consent of Shipowner.

 

ARTICLE 15

 

Events of Default; Remedies

 

(a) The following events shall constitute Events of Default:

 

(1) Shipowner or Owner Participant shall not have received within five (5) days of the date when due any amount of Charter Hire which is payable by Charterer to Shipowner under this Demise Charter; or

 

(2) Charterer shall take any action which results in a breach of Institute Warranties and Clauses (if such breach would result in cancellation, loss or other material adverse change in required insurance taken as a whole) or cancellation or revocation of the documentation of the Vessels under the laws and regulations of the United States or Charterer shall abandon any Vessel in a foreign port (unless there shall have been an actual or constructive total loss or agreed or compromised total loss of such Vessel), or Charterer shall make any assignment prohibited by Article 14(b) or any Other Charter prohibited by Article 14(c), or Charterer shall fail to maintain insurance on the Vessels which in all material respects complies with the requirements of Article 9 hereof; or

 

(3) any material representation or warranty made by Charterer herein or in any other Transaction Document shall prove to be inaccurate in any material respect on the date as of which it was made, and, if the same is susceptible to cure in a manner that is not prejudicial to any right or interest of Shipowner, any Owner Participant or the Trust Company, Charterer fails to effect such cure within thirty (30) days after Charterer receives written notice thereof; or

 

(4) Charterer shall fail to perform or observe any other covenant, condition or agreement to be performed or observed by it under this Demise Charter and such failure shall continue unremedied for a period of thirty (30) days after receipt by it of written notice thereof from Shipowner; or

 

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(5) the occurrence of an “ Event


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