Basic Agreement

Agreement

1. Owner agrees to let and Lessee agrees to hire, on a bareboat basis, the vessel name in field 1.a, Official Number in field 1.b, hereafter referred to as Vessel, on the terms and under the conditions set forth below.

TERM

2. This charter shall be for a period agreed in field 2.b with the charter deemed to commence as of the date of delivery of the Vessel by Owner to Lessee. The charter shall terminate upon the date set forth above or upon redelivery of the Vessel to Owner, whichever shall later occur.

CHARTER HIRE

3. Charter is to pay hire to Owner as follows:

A monthly hire as agreed in field 3 per month, with the one-month hire payable in advance upon execution of this Agreement and all further hire payable in advance in monthly increments on or before the 25^th day of each month.

Hire for the entire charter period shall be deemed irrevocably earned as of the date of delivery of the Vessel to Lessee. Hire payments due earned as of the date of delivery of the Vessel to Lessee. Hire payments due but unpaid shall bear interest at the rate of 12% per annum until full paid.

In the event of a total loss or constructive total loss of the Vessel, and upon receipt by Owner of the full hull insurance proceeds, Lessees obligation for hire shall cease.

OPERATION AND USE

4. Charter shall, at it sole expense, man, fuel, victual, navigate, operation, maintain and supply the Vessel, and shall pay all charges and expenses of every kind and nature whatsoever relating to the use and operation of the Vessel during the charter. It is expressly understood that this is intended as a demise of the Vessel by Owner to Lessee for the term of this agreement, and that Lessee shall have full, complete and exclusive possession, command and control of the Vessel and of its navigation and operation.

REPRESENTATION

5. The Vessel is chartered to Lessee on an “as-is” basis, with no warranty or representation of any nature by Owner. Lessee shall have full opportunity to inspect the Vessel prior to delivery to determine its condition and suitability for service, and may additional arrange for the inspection of the Vessel by a surveyor or similar technical representative of its choice.

It is specifically agreed that Owner makes no warranty, express or implied, regarding condition of the Vessel or its suitability for any purpose, and Owner shall not be held to any warranty of seaworthiness, fitness for a particular purpose or workmanlike service.

DELIVERY

6. The Vessel shall be delivered to Lessee as agreed in field 4. Owner shall not be obligated to Lessee under this agreement if causes beyond its control prevent delivery.

Acceptance of the Vessel by Lessee shall constitute the admission by Lessee of Owner’s full performance of its obligations under this agreement, and Lessee shall not thereafter be entitled to claim against Owner on any basis, including (without limitation) seaworthiness of the Vessel, negligence of Owner, latent defect or condition, any condition or fitness, or any representation or warranty, express or implied, with respect to the vessel, her furnishings and equipment.

ON-HIRE SURVEY

7. On or before the date specified above for delivery of the Vessel to Lessee, the Vessel shall be surveyed by a mutually acceptable surveyor to determine its condition. The surveyor shall include interior and underwater portions of the Vessel, as well as those parts more readily accessible. The surveyor shall prepare a written report, copies of which shall be given to each party.

The costs of the surveyor and related costs incurred necessary to complete the survey (such as hauling the Vessel, hiring a diver to complete an underwater inspection, photographs, tests, etc.) shall be for the Lessees account.

The on-hire survey shall be conclusive evidence of the condition of the Vessel as of the date of delivery. Every effort shall be made to have the same person conduction the on-hire survey do the off-hire survey. A copy of the on-hire survey is to be given to Owner prior to the Vessel departing for charter. A copy of the off-hire survey is to be given to Owner promptly upon the return of the vessel. If Lessee waives the right to survey the vessel prior to delivery of the vessel to Lessee, Lessee shall accept the condition of the vessel as represented by Owner and shall have no recourse to dispute damage finding when the vessel is surveyed for off-hire evaluation.

Lessee has had the opportunity to completely inspect the vessel and has relied solely upon its own inspection and judgment in determining if the vessel is fit for any specific purpose and expressly agrees there is no express or implied warranty of seaworthiness or fitness for any specific purpose.

INVENTORIES

8. Prior to delivery of the Vessel, Owner and Lessee shall each appoint an individual to prepare a joint written inventory of equipment and consumables on board the Vessel? The inventory shall specifically identify the items, and the quantity and condition.

At or prior to redelivery, the same individuals shall inventory the Vessel to determine the equipment and consumables as when received. Any deficiencies in equipment or consumables at redelivery shall be made up by Lessee or Lessee shall pay to Owner the sums actually necessary to replenish the equipment and consumables with items of like kind and quality, at Owner’s option.

The joint written inventory shall be conclusive between the parties with respect to equipment and consumables.

MAINTENANCE

9. Lessee shall, at its own expenses, maintain the Vessel in the same good condition, repaid and working order as when received. Lessees responsibility for maintenance shall include all costs and expenses relating to Coast Guard, American Bureau of Shipping and similar inspections arising during the term of the charter, including the cost and expenses of compliance with the requirements of such entities.

10. Lessee may not modify the Vessel, install any equipment or make alterations or additions without written consent of Owner.

Any alterations, additions or modifications allowed by Owner shall be removed by Lessee prior to redelivery and the Vessel shall be returned to the same condition as upon delivery (less ordinary wear and tear set forth in paragraph 11, below).

OFF-HIRE SURVEY

11. At the conclusion of the charter term (or sooner, at Owner’s option in the vent of default by Lessee), an off-hire survey of the Vessel shall be made by the same surveyor conducting the on-hire survey. This survey shall also include the interior and underwater portions of the Vessel, as well as those areas more readily accessible.

The surveyor shall prepare a written report of his results which shall note specifically any changes in the condition or repair of the Vessel from the on-hire survey. This survey shall be conclusive between the parties with respect to Lessees obligation to redeliver the Vessel to Owner in the same good working order, repair and condition as when received, less ordinary wear and tear. The term “ordinary wear and tear” shall not include such wear and tear as would have been corrected with routine maintenance.

The costs of the off-hire survey, including related costs necessary to complete it, shall be for Lessees account and paid directly by Lessee.

REDELIVERY

12. Lessee shall be obligated to redeliver the vessel to Owner at the place of delivery at the conclusive of the charter term or earlier (at Owner’s election in event of default) in the same good condition, repair and working order as when received, less ordinary wear and tear, as identified in paragraph 10 above. Redelivery shall not be deemed to have occurred until the Vessel is restored to the same repair and condition, less ordinary wear and tear, as upon initial delivery.

Charter hire shall continue at the rate as agreed in field 5.a per day, plus a penalty surcharge as agreed in field 5.b per day for everyday after date specified at the conclusion of the charter term, until redelivery ahs occurred, i.e. the Vessel has been restored to the required good order and condition.

Should Lessee fail to make required repairs, Owner shall have the following options:

1. Arrange for the necessary repairs itself, with Lessee to reimburse Owner fully and Character to pay a 20% penalty surcharge for Owner’s administrative expenses, and 12% interest charge per annum on the cost of repairs and surcharge until both shall have been fully paid. Lessee shall remain liable for the hire (and penalty surcharge) during the period of repairs.

2. Value the repairs and submit to Lessee an invoice for the cost of repairs

plus the hire (and penalty surcharge) for the time which would be required to

complete repairs. This invoice shall bear interest at the rate of 12% per annum

until fully paid.

At the time of redelivery, the Vessel shall be free to any claims, liabilities, liens or encumbrances created or arising during the term of this charter (except such claims, liabilities, liens or encumbrances which have been created solely by Owner). Should any such claims, liabilities, liens or encumbrances exist at redelivery and Owner shall resolve or settle them, then Lessee shall pay Owner:

1. The full sums expanded by Owner;

2. Owner’s administrative charge of 20% of those sums;

3. Owner’s legal fees and costs, including such fees or costs necessary to establish its right to collect such sums from Lessee as well as fees and costs necessary to resolve or settle such claims liabilities, liens or encumbrances;

4. Interest at 12% per annum and all of the sums above until they shall have been fully paid.

INSURANCE

13. Lessee shall, at its sole expense, procure and maintain the following insurances during the full term of this charter including any extension thereof:

a. Hull and Machinery Insurance, including collision and tower’s liability coverage, pursuant to Pacific Coast Tug/Barge Form (1979), with an insured amount as agreed in field 6.a. The Hull and Machinery Insurance shall be extended to include risk and S.R. and C.C. coverage, on forms approved by Owner.

b. Protection and Indemnity Insurance, including pollution liability coverage,

with limits of $10,000,000.00 per occurrence.

c. Workers’ Compensation (including Longshoremen’s and Harbor Workers’

Compensation Act Coverage) and Employer’s Liability Insurance for all

employees of Lessee, all Lessees contractors and subcontractors and all

employees of such contractors and subcontractors. Such insurances shall

be statutory limits for compensation coverage, and with minimum limits of

$1,000,000.00 per accident in all other instances.

d. Pollution liability Insurance in the amount of $5,000,000.00

The following additional conditions shall apply to each of the insurances identified above:

a. The policies shall have the following trading limits as agreed in field 6.b.

b. Lessee shall be responsible for all deductibles of all policies.

c. Each insurance to be provide (except for Workers’ compensation and Employer’s Liability Insurance) shall name the Owner as an additional insured with waiver of subrogation. Owner shall be designated as loss payee on the Hull Insurance as shall be none, as mortgagee.

d. Each policy shall be specifically endorsed to require that notice of cancellation must be sent in writing to each insured at least thirty (30) days in advance of such cancellation. (10 days for non-payment).

e. Lessee shall provide Owner with certificates of insurance with policy endorsements attached, or if requested with actual policies.

f. Lessee agrees to indemnify and hold harmless (including necessary legal fees and costs) Owner of and from any loss, damage and/or claim resulting from its failure to procure the specified insurances, or the failure of a specified insurance, including exposure to any loss, damage, claim, suit or liability which would have been covered had the insurances been provided.

LIABILITY, LIENS, AND INDEMNITY

14. Lessee assumes all risk of liability for and to the Vessel and for the use and operations thereof, and for injuries to or deaths of persons and/or loss of or damage to property arising from or incident to such use or operation, whether such injuries or death involve Lessees employees or others and whether such loss or damage involves property of Lessee or of others. Lessee will indemnify and hold harmless Owner and the Vessel against and from all loss, damage, liability and expense, including attorneys’ fees and legal costs, arising from or in connection with such injury, death, loss or damage, howsoever caused and whether resulting in whole or in part from the negligence or other fault of either party or the Vessel.

15. Neither Lessee, Master, nor any other person shall have any right, power or authority to create, incur or permit to be imposed upon the Vessel any liens whatsoever. Lessee agrees to carry a properly certified copy of this charter with the Vessel’s papers, and to exhibit the same to any person having business with the Vessel which might give rise to any lien thereon. Lessee agrees to notify any persons furnishing repairs, supplies, towage or other necessities to the Vessel, that neither Lessee nor the Master has any right to incur, create or permit to be imposed upon the Vessel any liens whatsoever. Such notice, as far as may be practicable, shall be in writing.

Lessee shall place and keep permanently in a conspicuous place on the Vessel, including in the wheelhouse or pilothouse, during the term of this charter, a notice in the following form:

THIS VESSEL IS OWNED BY GREGER PACIFIC MARINE INC. AND IS UNDER CHARTER TO AS AGREED IN FIELD 2a. UNDER THE TERMS AND SAID CHARTER, NEITHER THE CHARTERER, OR ITS OFFICERS, EMPLOYEES OR AGENTS, THE MASTER OR ANY OTHER OFFICER OR MEMBER OF THE CREW OF THIS VESSEL, ONRANY OTHER PERSON SHALL HAVE ANY RIGHT, POWER OR AUTHORITY TO CREATE, INCUR OR PERMIT TO BE IMPOSED UPON THIS VESSEL ANY LIENS WHATSOEVER, EXCEPT FOR SALVAGE.

If any libel should be filed against the Vessel, or if the Vessel be otherwise levied against, arrested or take into custody by virtue of any legal proceedings in any court because of any lien or claim arising out of or during the possession, use or operation of said Vessel by Lessee, Lessee shall promptly, and in any event within ten (10) days thereof, cause the Vessel to be released and the lien to be discharged, provided, however, that this provision shall not in any way affect or impair any other obligation or responsibility set forth in this agreement. If the Vessel shall be levied against as set forth above due to any lien or claim arising out of any act omission by Owner, Owner shall promptly, and in any event within ten (10) days thereof’ cause the Vessel to be released.

Lessee shall indemnify and hold Owner harmless from, and at its own cost defend Owner against, any liens of whatsoever nature upon said Vessel and any claims of whatsoever nature against Owner arising out of or in any way related to any act or neglect of Lessee in relation to said Vessel or arising out or during or related to, the possession, use or operation for the Vessel by Lessee.

DEFAULT

16. The following shall, without limitations, constitute events of default under this charter:

a. Failure of the Lessee to pay charter hire when and as due;

b. Failure of the Lessee to operate said Vessel pursuant to the terms

hereof or the failure to fully perform each and every covenant

contained herein to be done and performed by it;

c. The occurrence of any event causing the Lessee to be prohibited

by governmental or other action from chartering and/or operating

the Vessel;

d. The filing of a petition in bankruptcy by or against the Lessee; the

e. entry of any order adjudicating the Lessee a bankrupt; the making by Lessee or a general assignment from for the benefit or creditors; the appointment of a receiver of any kind, whether in admiralty, bankruptcy, common law or equity proceedings; the filing by Lessee of a petition for reorganization under the bankruptcy Act, and/or failure of the Lessee to comply with any relevant provisions of state, federal, and/or territorial laws.

In the event of default, Owner may:

1. Personally or by agents or attorneys enter and retake the Vessel without legal process wherever the same may be, and Lessee forthwith upon demand of Owner shall surrender to the Owner possession of the Vessel.

2. In the event that the Vessel shall be arrested or detained while in possession of Lessee by any judicial or other officer of any country or nation and shall not be released from detention within ten (10) days from the date of arrest or detention, Lessee does hereby empower and authorize Owner, in the name of Lessee, to apply for and receive possession thereof, or to take possession thereof, and this power of attorney shall be irrevocable and may be exercised not only by Owner but also by any appointee or appointees of the above-named attorneys by express designation.

3. In its discretion do all acts and make all reasonable expenditures necessary to retake or regain possession of the Vessel, including without limitation, incur travel, towing and other expenses in retaking and regaining, or attempting to retake and regain, possession of the Vessel. Lessee covenants and agrees to promptly reimburse Owner, with interest at the rate of 12% per annum and an additional 20% administrative surcharge, for any and all expenditures so made or incurred, and until Lessee has to reimbursed Owner for such expenditures the amount thereof, together with such interest, shall be an additional indebtedness due from Lessee to Owner.

4. If any charter hire due under this charter from Lessee to Owner, or any part therefore, shall be and remain unpaid when the Vessel shall have been retaken and/or repossessed, the notwithstanding such retaking and/or repossession by the Owner, the liability of the Lessee for the charter hire for balance of the term of the charter, as provided for herein, shall not be extinguished, and Lessee covenants and agrees to make good to the Owner and deficiency with may arise from retaking and/or repossession of the Vessel and/or the negotiation of a new charter with any other party or parties at a lesser amount of charter hire that that herein agreed to, or from its inability to secure any satisfactory party or parties with whom to execute such reasonable charter agreements. Charter specifically covenants and agrees to pay such deficiency each month as the amount thereof is ascertained by Owner.

INSPECTION

17. The owner shall have the right to board and examine the Vessel and its logs at any reasonable time. Lessee shall be given reasonable notice of Owner’s intent to inspect said Vessel, and shall cooperate in providing access.

CASUALTIES

18. Immediately after any casualty, accident, or damage to the Vessel, Lessee shall furnish Owner full particulars thereof, including copies of any survey reports available to Lessee. Also, Lessee shall notify Owner as soon as practicable of any claim which may be asserted in writing by any third party against the Vessel and shall send Owner a copy of such writing.

ASSIGNMENT

19. Neither the Owner nor the Lessee shall have any right to assign this agreement without the prior written consent of the other. The Lessee shall not have the right to sub-charter this Vessel without prior written consent of Owner.

LIMITATION OF LIABILITY

20. Nothing contained in this charter shall be deemed to prohibit or deny to Owner the benefit of all limitations of, and exemptions from, liability accorded to owners of vessels by any statute or rule of law for the time being in force. This agreement shall not be deemed to be personal contract such as to deprive Owner of the rights and benefits of any law limiting the liability of vessel owners.

PERMITS AND LICENSES

21. Lessee shall be required to obtain and maintain at its sole cost, all permits, licenses and authorities required for its use or operation of the Vessel by applicable national, state, local or foreign laws or regulations.

22. Lessee shall be responsible for any transportation, use, sales, property and all other taxes levied or assessed by any taxing entity in connection with this charter, or with the vessel or its operation during the term of this charter or arising thereafter as a result of the use or operation of the vessel during this charter.

LEGAL

23. Place of Suit: Any suit between the parties shall, to the extent there is subject matter jurisdiction in the U.S. District Court, be filed in the U.S. District Court for the Northern District of California in San Francisco. Such action shall be before a District Judge, not a Magistrate Judge. If no Federal subject matter jurisdiction, then suit may be filed in the California Superior Court for the City and County of San Francisco, or Contra Costa County or Marin County, depending on which is the proper venue for the case. The parties agree to accept service of process by certified U.S. mail, return receipt requested. Addresses for mailing shall be as set forth in this Agreement and if not, then the mailing shall be directed to the attorney for that party or to the business address of the party. Failing a business address, then the mailing shall be to the party's residence. The parties do not agree to arbitration.

24. Attorney Fees: Lessee agrees to pay Owners reasonable attorneys’ fees and collection costs incurred to collect sums due or to enforce any right possessed by Owner under this Agreement, even though no suit or action is filed hereon; however, if suit, action the amount of such reasonable attorneys’ fees at trial, or appeal, shall be fixed by the court. Such award may include attorneys’ fees as may be incurred in collection of any judgment rendered, as well as deposition costs and fees of expert witnesses engaged in any such action.

25. Complete Integration: This Agreement represents the final and complete agreement of the parties for the lease undertaken, and all prior written and oral statements, representations or agreements with respect to the towage service are superseded by and full integrated into this Agreement.

26. Modification: This contract cannot be modified except in writing signed by all parties hereto.

ADDITIONAL PROVISIONS

23. a. Only fresh water shall be used as ballast.

b. All obligations of Lessee to insure, reimburse, indemnify, defend, hold harmless or pay Owner under this agreement shall survive termination, cancellation or expiration of this agreement.

c. Lessee specifically warrants it is a citizen of the United States as defined in Section 2 of the Shipping Act, 1916, as amended, or alternatively, that this charter has been approved by the Maritime Administration.

d. The headings utilized in this agreement and for reference only; they are not substantive and may not be used to construe this agreement.

e. Salvage: All derelicts and salvage shall be for the equal benefit of Owner and Lessee, after deducting Lessees actual expenses.