PART II-GENERAL PROVISIONS

A. Charter hire and bond

CLAUSE 1. Basic charter hire. The Charterer shall pay to the Owner the basic charter hire at the monthly rate provided for in Part I hereof from the day and hour of delivery of the Vessel until and including the day and hour of redelivery to the Owner pursuant to the terms of this Agreement; or if any Vessel shall be lost, hire shall continue until the time of such loss, if known, or if the time of loss be uncertain, then up to and including the time last heard from. Payment of such basic charter hire shall be made to the Owner at Washington, D. C., on delivery of each Vessel for the remainder of the calendar month in which delivery is made, and thereafter monthly in advance of the first day of each month.

CLAUSE 2. Additional charter hire. (a) If, at the end of the calendar year in which this agreement becomes effective, or any subsequent calendar year or at the termination of this Agreement, the cumulative net voyage profit (after the payment of the basic charter hire hereinabove specified and payment of the Charterer's fair and reasonable overhead expenses applicable to operation of the Vessel(s)) shall exceed 10 per centum per annum on the Charterer's capital necessarily employed in the business of the Vessel(s) (all as hereinafter defined), the Charterer shall pay over to the Owner at Washington, D. C., within thirty (30) days after the end of such year or other period, as additional charter hire for such year or other period, an amount equal to one-half of such cumulative net voyage profit in excess of 10 per centum per annum on the Charterer's capital necessarily employed in the business of the Vessel(s). Such cumulative net profit so accounted for shall not be included in any calculation of cumulative net profit in any subsequent year or period.

For purposes of calculating "cumulative net voyage profit" it is agreed by the parties that at the end of each accounting period any net voyage losses and/or any unearned portion of the aforesaid allowable return of 10% per annum on capital necessarily employed, may be carried forward into the next accounting period, but that in no event shall profits in excess of 10% per annum on

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capital employed, at the end of any accounting period, be carried forward into the next accounting period; such profits being subject to distribution at the end of each accounting period as herein provided.

(b) The Charterer agrees to make preliminary payments to the Owner on account of such additional charter hire at such time and in such manner and amounts as may be required by the Owner; provided, however, that such payment of additional charter hire shall be deemed to be preliminary and subject to adjustment either at the time of the rendition of preliminary statements or upon the completion of each final audit by the Owner, at which times such payments will be made to the Owner as such preliminary statements or final audit may show to be due, or such overpayments refunded to the Charterer as may be required.

CLAUSE 3. Bond. The Charterer, at or before delivery of each Vessel under this Agreement, shall furnish the Owner with a bond with sufficient surety, in the amount specifiled in Part I hereof, such bond to be approved by the Owner, both as to form and sufficiency of the sureties, and to be conditioned upon the true and faithful performance of all and singular the covenants and agreements of the Charterer contained in this Agreement, including, but not limited to, the Charterer's obligation to pay charter hire and damages and to indemnify against llens. The Charterer may, in lieu of furnishing such bond, pledge United States Government securities in the par value of the required amount under an agreement satisfactory in form and substance to the Owner. B. Condition of Vessel (s) Equipment and Stores

CLAUSE 4. Condition of vessel(s) on delivery. Each Vessel on delivery shall be in Class A-1 American Bureau of Shipping or equivalent, with all required certificates, including but not limited to marine inspection certificates of the Coast Guard, Treasury Department, and so far as due diligence can make her so, tight, staunch, strong and well and sufficiently tackled, appareled, furnished and equipped, and in every respect seaworthy and in good running condition and repair, with clean swept holds and in all respects fit for service.

CLAUSE 5. Surveys. (a) Each Vessel shall be jointly surveyed before delivery and before redelivery under this Agreement to determine and state the condition of the Vessel. Such surveys shall include drydocking to determine and state the condition of the underwater parts, unless, at Owner's option, the drydocking in connection with delivery is postponed, in which event the cost and time (including Vessel expenses) of any damage to underwater parts found either upon delivery or during the period of the

Vessel's use under this Agreement shall be for Owner's account unless such damage is established, from the basis of all evidence, to have occurred during the period of the Vessel's use under this Agreement. The cost and time of such delivery survey shall be for account of the Owner, and similarly the cost and time of such redelivery survey shall be for the account of the Charterer. Each party shall bear the cost of surveyors appointed by it in connection with both delivery and redelivery surveys.

(b) Except as to items sighted prior to delivery and noted on the delivery survey report as defective, which shall be for the Owner's account, including cost and time (inclusive of Vessel expenses) the delivery of each Vessel by the Owner and the acceptance thereof by the Charterer shall constitute full performance by the Owner of all the Owner's obligations under this Clause with respect to such Vessel, and thereafter the Charterer shall not be entitled to make or assert any claim against the Owner on account of any agreements, representations or warranties, expressed or implied with respect to the condition of such Vessel; provided, however, that the Owner shall nevertheless be responsible for the cost and time (exclusive of Vessel expenses) of repairs or renewals occasioned by latent defects in such Vessel, her machinery or appurtenances or defects due to locked-in stresses in such Vessel existing at the time of delivery, not recoverable under the terms and conditions of the American Hull form of policy (American Institute Time (Hulls) December, 1955) containing no deductible average clause.

CLAUSE 6. Determination of class. For the purpose of this Agreement a Vessel chartered hereunder shall be deemed to be in class, whether or not any requirements or recommendations of the Classification Society are outstanding at the time of delivery or redelivery, as the case may be, unless the time limit for the accomplishment of any such requirements or recommendations, including any extension or period of grace allowed, shall have expired.

CLAUSE 7. Inventory. A complete inventory of each Vessel's entire outfit, equipment, furniture, furnishings, appliances, spare and replacement parts and of all unbroached consumable stores, subsistence stores, slop chest, containers, and bunker fuel shall be jointly taken and mutualy agreed upon as to items and quantities, at the time of delivery, by representatives of the Charterer and the Owner. The parties may agree, however, to accept any suitable prior inventory which may have been taken before the delivery of the Vessel under this Agreement. Such delivery inventory of consumable and subsistence stores, slop chest, containers, and bunker fuel shall be priced by the Charterer at the current market price prevailing at the port and time of delivery. At redelivery a complete inventory of each Vessel's entire outfit, equipment, furniture, furnishings, appliances and spare and replacement parts

shall, also, be jointly taken and mutually agreed upon as to items and quantities by representatives of the Charterer and the Owner. In addition, a complete inventory of all broached and unbroached consumable stores, subsistence stores, slop chest, containers, and bunker fuel shall be taken by the Charterer immediately prior to redelivery. Such inventory shall be priced by the Charterer at the current market price prevailing at the port and time of performance of Charterer's redelivery obligations, and the Owner shall be furnished with three certified copies of such inventory, together with an affidavit certifying as to its correctness.

CLAUSE 8. Consumable stores and fuel. The Charterer shall accept and pay for any unbroached consumable stores, subsistence stores, slop chest, returnable containers, and bunker fuel furnished by the Owner or on board at the time of delivery at the market prices current at the time and place of repairs and outfitting. The Owner shall have no obligation upon redelivery to accept or pay for consumable stores (either broached or unbroached), subsistence stores, slop chest, or returnable containers, and shall accept and pay for bunker fuel only in such minimum amounts as the Owner may determine. (Bunkers accepted by the Owner shall be paid for at the current market price prevailing at the port and time of redelivery, or, in event of redelivery at a Reserve Fleet site, at the current market price at the port and time of redelivery repairs.) Prior to redelivery, such items shall be removed from the Vessels by the Charterer in accordance with the provisions of NBA Order No. 64, as revised from time to time, and the fair and reasonable cost of such removal shall be charged in the Vessel's voyage accounts for the last voyage prior to redelivery. With respect to the aforesaid items, there shall be taken into account in the determination of additional charter hire, in accordance with Clause 2, Part II, of this Agreement, (a) the current market value thereof at the port and time of redelivery, in the event redelivery is effected at a redelivery port, or, in the event redelivery is effected at a Reserve Fleet site, the current market value at the port and time of redelivery repairs, or (b) the net proceeds from the disposition thereof, in the event the Charterer elects to dispose of the removed goods and notifies the Owner of such intention prior to redelivery. The manner of, time of and determination of net proceeds from such disposition of the items shall be subject to approval of the Owner.

CLAUSE 9. Use of equipment. The Charterer shall have the use of all outfit, equipment, furniture, furnishings, appliances, spare and replacement parts on board the Vessel at the time of delivery under this Agreement without extra cost and the same shall be returned to the Owner upon redelivery in good order and condition. Any such items damaged or so worn in service as to be unfit for use or lost or destroyed shall be replaced or made good by the Charterer

in kind at or before redelivery, or at Owner's option, the Charterer shall pay for said items at the current market prices at the port and time of performance of Charterer's redelivery obligations, based upon the condition of the items at the time of delivery. The Owner

shall have a right, but not an obligation, to accept any overages on the Vessel at redelivery. Any overages accepted by the Owner shall be paid for at the current market prices at the port and time of performance of Charterer's redelivery obligations, based upon the condition of the items at the time of redelivery. Overage and shortage statements shall be prepared and priced by the Charterer, subject to review and adjustment by the Owner.

CLAUSE 10. Maintenance. The Charterer, except as otherwise provided in Clause 4, shall, at its own expense, maintain each Vessel, her machinery, boilers, appurtenances, and spare parts during the period of the Vessel's use under this Agreement in good state of repair and in efficient operating condition and in accordance with good commercial maintenance practices and shall keep each Vessel in such condition as will entitle the Owner at all times to all required Certificates, including, without limitation, the highest classification and rating for vessels of the same age and type in the American Bureau of Shipping and with unexpired marine inspection certificates of the Coast Guard. Treasury Department.

CLAUSE 11. Structural changes. The Charterer shall make no structural changes in the Vessel(s) and shall make no changes in the machinery, boilers, appurtenances or spare parts thereof, without in each instance first securing the written approval of the Owner.

CLAUSE 12. Drydocking. The Charterer shall drydock each Vessel and clean and paint the underwater parts, when necessary, but not less than once in about every nine (9) months from date of delivery. The Charterer shall give the Owner reasonable notice of the time and place of drydocking and if practicable fifteen (15) days in advance thereof and afford the Owner an opportunity to inspect the Vessel(s) while drydocked. The Charterer shall also promptly notify the Owner sufficiently in advance to enable its representative to be present at repairs or surveys of the Vessel(s), and shall furnish the Owner with copies of reports made pursuant to such surveys.

CLAUSE 13. Inspections. The Owner shall have the right at any time, without notice, to inspect or survey the Vessels at its own expense, to ascertain their condition and to satisfy itself that the Vessels are being properly repaired and maintained in accordance with good commercial maintenance practices, but such inspections shall be held at such time and in such manner as to not interfere with Vessels' schedule. The Charterer shall make all such repairs, at its own expense, as such inspection or survey may

show to be required in compliance with the Charterer's obligations under this Agreement. The Charterer shall also permit the Owner to inspect the Vessels' logs whenever requested, and shall furnish the Owner upon request with full information regarding any casualties or other accidents or damage to the Vessels.

CLAUSE 14. Redelivery of vessel(s)—(a) Port or place of redelivery. The port of redelivery shall be the port of delivery or such other port as may be mutually agreed, Provided, that the Owner shall have the option of requiring the Charterer to place the Vessel(s) in layup at a Reserve Fleet site designated by the Owner, on the same coast as the port of redelivery, in the manner and on the basis provided for in subparagraph (d) of this Clause. In the event the Owner exercises this option, the Owner shall have the right to designate the port at which Charterer's redelivery obligations under this Clause will be performed.

(b) Redelivery conditions. Each Vessel, unless lost, shall be redelivered to the Owner, pursuant to the terms of this Agreement, in the same good order and condition as that in which she was delivered, unless the lack of good order and condition is due solely to ordinary wear and tear, and with valid classifcation and Coast Guard certificates, whether or not classification or Coast Guard repairs are due wholly or in part to ordinary wear and tear. At the redelivery survey provided for in Clause 6, surveyors appointed by the Charterer and surveyors appointed by the Owner, shall be present, who shall determine and state the repairs or work necessary to place each Vessel on the date of redelivery in the condition and class required under this Clause, which findings shall include all repairs and work required to be performed at the time of redelivery by the Classification Society and all other regulatory bodies, and all repairs and work which are necessary to place each Vessel on the date of redelivery in the good order and condition required by this Clause. The Charterer, before redelivery, shall make all such repairs and do all such work so found to be necessary at its expense and time, or at Owner's option, the Charterer shall, on Owner's request, discharge such obligation by payment to the Owner of an amount sufficient to place each Vessel in such class, order and condition and to provide for the foregoing work and repairs at the prices current at the time of redelivery, which amount shall also include compensation at the rate of basic hire payable under this Agreement for the time reasonably required under then existing conditions to complete such work or repairs and compensation for all other expenses, (including insurance) reasonably required incident to such work or repairs. In the event the Owner exercises this option, the Charterer's redelivery repair obligations shall be limited to the amount of Marine Hull and Machinery insurance required by the provisions of Part I hereof. The Charterer shall not be required to make

any repairs which were for Owner's account under Clause 4 of this Agreement, but if such repairs were made after delivery under this Agreement and paid for by the Owner, they shall be considered as having been made at the time of delivery for the purpose of determining the Charterer's obligations under this Clause 14.

(c) Disputes. Should any dispute arise between the Owner and the Charterer with respect to responsibility for repairs, renewals, replacements, or condition of the Vessel(s), at the time of redelivery, the Charterer shall, without prejudice to its contentions, make and pay for such disputed repairs, renewals, or replacements, or any part thereof, before redelivery, and may recover the cost from the Owner, together with Vessel expenses and charter hire during the period required for the performance of such work over and above the time required to perform the Charterer's redelivery repairs, in event Owner's liability therefor is established.

(d) Vessel layup. In the event that the Owner exercises its option under subparagraph (a) of this Clause to require the Charterer to place the Vessel(s) in layup following completion of Charterer's normal redelivery obligations, the Charterer shall perform and pay for all work required in connection with the preparation for layup and movement of the Vessel(s) to the Reserve Fleet site designated by the Owner, as prescribed in NSA Order No. 64, as revised from time to time. In such event, (1) basic charter hire shall cease as of completion of Charterer's normal redelivery obligations, and (11) all reasonable costs incurred by the Charterer during the period of the stripping and layup of the Vessel(s) as aforesaid, including but without limitation, cost of insurance, shall, to the extent authorized and approved by the Owner, be taken into account as voyage expense in the determination of additional charter hire under Clause 2.

O. Operation of the Vessel(s) CLAUSE 15. Charterer to man, etc. During the period of this Agreement, the Charterer shall, at its own expense, and by its own procurement, man, victual, navigate, operate, supply, fuel and, except as otherwise expressly provided in Clause 4 of this Agreement, repair each Vessel and pay all charges and expenses of every kind and nature whatsoever incident to the use and operation of the Vessel(s) under this Agreement. The Owner reserves the right to require the removal of the Master(s) or the Chief Engineer(s) if it shall have reason to be dissatisfied with their conduct or if it considers their employment to be prejudicial to the interests of the United States. Except as otherwise expressly provided in this Clause and Clause 40 of this Agreement, the Charterer and not the Owner shall have

exclusive possession, control and command of the Vessel(s) during the entire period of use under this Agreement.

CLAUSE 16. Owner's representatives. The Charterer agrees that, at its expense, it will furnish transportation on each Vessel, during the period of this Agreement, for not more than five officers and/or employees of the Federal Maritime Board-Maritime Administration, travelling on official business, who shall be given full, free and complete access at all reasonable times to all parts of such Vessel, and shall have full opportunity to observe and inspect the working of such vessel in all of its parts, but without any directing or controlling power over such Vessel's operations. The Charterer also agrees to cooperate with such representatives in the making of any inspection or investigation which the Owner may deem desirable, and to prepare and furnish full and complete reports, records or other data pertaining to such Vessel's operation, as requested by the Owner. It is mutually understood and agreed that the transportation of such Owner's representatives, shall be on the basis of not more than one round-trip per calendar year per Vessel, upon the written request of the Maritime Administrator.

CLAUSE 17. Employment of affiliates, etc.; rental of office space. (a) Unless granted an exemption upon such terms and conditions and for such specific period of time as the Owner shall determine pursuant to Section 803 of the Act, the Charterer shall not employ any person or concern performing or supplying stevedoring, ship-repair, shipchandler, towboat, or kindred services to supply such services to the chartered Vessel(s) if the Charterer or any subsidiary company, holding company, affiliate company, or associate company of the Charterer, or any officer, director, or employee of the Charterer, such subsidiary company, holding company, affiliate company, associate company of the Charterer, or any member of the immediate family of the Charterer, or of such officer, director, or employee of the Charterer, or any member of the immediate family of any officer, director, or employee of such subsidiary company, holding company, affiliate company, or associate company of the Charterer owns any pecuniary interest, directly or indirectly, in the person or concern supplying such services to the chartered Vessel, or receives any payment or other things of value, directly or indirectly, as a result of such employment of services.

or

(b) Without prior approval of the Owner granted upon such terms and conditions as the Owner may prescribe, the Charterer shall not rent office space owned by the Charterer or by any subsidiary, holding company, affiliate or associate company of the Charterer, or by any officer, director, or employee of the Charterer, or any member of the immediate family of the Charterer, or of such officer, director, or employee of the Charterer, or any member of the immediate family of any off

cer, director, or employee of such subsidiary, holding company, affiliate, or associate company of the Charterer.

CLAUSE 18. Efficient operation. The Charterer agrees to conduct its business and its operations with respect to each Vessel in an economical and efficient manner.

CLAUSE 19. Use of United States goods. Whenever practicable, the Charterer shall use only articles, materials, and supplies of the growth, production, and manufacture of the United States, as defined in Section 505 (a) of the Act, except when it is necessary to purchase supplies and equipment outside the United States to enable a Vessel to continue and complete a voyage, and the Charterer shall perform repairs to the Vessel(s) within the continental limits of the United States, except in an emergency.

CLAUSE 20. Development of American-flag merchant marine. The Charterer shall cooperate with the Owner and with other American-flag companies in the development of the American-flag merchant marine as a whole, and, whenever practicable, the Charterer shall favor American-flag companies in transshipping of cargo, in selecting foreign domestic agents or other representatives, and in the rental of terminal and other facilities and in related matters.

CLAUSE 21. Services rendered vessel(s). The Charterer, if and when requested by the Owner, shall file with the Owner rates and schedules covering any servcies rendered the Vessel(s) under this Agreement by any individual, firm or corporation.

CLAUSE 22. No transfer or assignment. The Charterer shall not, without the Owner's written or telegraphic consent, sell, transfer, or assign this Agreement or any interest therein, or time charter or subcharter the Vessel(s), or make any arrangement whereby the maintenance, management, or operation of the Vessel(s) is to be performed by any other person.

CLAUSE 23. Preference and conference agreements. (a) The Charterer shall not unjustly discriminate in any manner so as to give preference, directly or indirectly, in respect to cargo in which the Charterer has a direct or indirect ownership or purchase or vending interest. If the Charterer carries any cargo on its own behalf or for its own account or on behalf or for the account of any associate, affiliate, susidiary, parent or holding company, the Charterer shall not discriminate in its own favor, or in favor of any such associate, affiliate, subsidiary, holding or parent -company, in regard to rates charged or service rendered. The Charterer shall also hold confidential and shall not reveal to any such associate, affiliate, subsidiary, holding or parent company any information whatsoever, except such information as is generally made available to the public in the regular course of the steamship business in regard to cargo of similar kind or nature which the Charterer may at any time carry for any other interests or otherwise.

(b) The Charterer agrees not to continue as a party to or to conform to any agreement

with another carrier or carriers by water, or to engage in any practice in concert with another carrier or carriers by water, which is unjustly discriminatory or unfair to any other citizen of the United States who operates a common carrier by water exclusively employing vessels registered under the laws of the United States on any established trade route from and to a United States port or ports.

CLAUSE 24. Libels, Neither the Charterer nor the Master of the Vessel(s) nor any other person shall have the right, power, or authority to create, incur, or permit to be placed upon the Vessel(s) any liens whatsoever other than for crew's wages or salvage. The Charterer agrees to carry a properly certified copy of this Agreement with the ship's papers on board each Vessel and agrees to exhibit the same to any person having business with such Vessel and agrees also to exhibit the same to any representative of the Owner on demand.

The Charterer agrees to notify any person furnishing repairs, supplies, towage, or other necessaries to the Vessel(s) that neither the Charterer nor the Master has any right to create, incur, or permit to be imposed upon the Vessel(s) any liens whatsoever, except for crew's wages and salvage. Such notice as far as may be practicable shall be in writing. The Charterer further agrees to fasten in each Vessel in a conspicuous place, and to maintain during the charter period, a notice reading as follows:

This Vessel is the property of the United States of America. It is under charter to

and by the terms of the charter neither the Charterer nor the Master has any right, power, or authority to create, incur, or permit to be imposed upon the Vessel any lien whatsoever, except for crew's wages and salvage.

The Owner shall indemnify and hold harmless and defend the Charterer against any liens, claims or liabilities of whatsoever nature upon the Vessel(s) at the time of delivery under this Agreement. The Charterer shall indemnify and hold harmless and defend the Owner against any liens of whatsoever nature upon the Vessel(s) and against any claims against the Owner arising out of the operation of the Vessel (s) by the Charterer, or out of any act or neglect of the Charterer, in relation to the Vessel(s) or the operation thereof, except insofar as such liens or claims arise out of any matter covered by the insurance procured and in force, as provided herein. If a libel should be filled against the Vessel(s) or if the Vessel(s) is/are otherwise levied against or taken in custody by virtue of legal proceedings in any court because of any liens or claims arising out of the operation of the Vessel (s) by the Charterer, the Charterer shall at its own expense within fifteen (15) days thereof cause the Vessel(s) to be released and the lien to be discharged.