AGREEMENT TO ACQUIRE AND CHARTER

(a)  

Certificates of Authority and Incumbency.  Purchaser and Participants have received Certificates of Authority and Incumbency with respect to Waterman, Guarantor and Gulf South, each respectively executed by the secretary, assistant secretary, director or another authorized officer of such Person, and each certifying the names of the officers or directors of such Person who have been authorized to sign this Agreement, the Bareboat Charter, the Affiliate Mortgages and/or each of the other Charter Documents to which such Person is or is to be a party together with specimen signatures of such officers, which such Certificates shall have appended thereto copies of the resolutions of the board of directors of such Person, duly adopted and in force, authorizing the execution and delivery of the Charter Documents, as well as the performance of the obligations stated therein, as applicable;

(b)  

Governmental Certificates.  Purchaser and Participants have received certificates of the appropriate government officials of the state or country of incorporation or organization of Waterman, Guarantor and Gulf South as to the corporate existence and good standing of such Persons, dated within sixty (60) days prior to the Closing Date;

(c)  

Satisfactory Lien Searches.  Purchaser and Participants have received search results of abstracts of title, UCC filings, judgment liens, tax liens and pending litigation with respect to the Vessel, the Affiliate Vessels, Waterman and Gulf South, in form and substance satisfactory to Purchaser and Participants, which show that Purchaser will acquire on the Closing Date, in its capacity as the Trustee of the Trust, (i) good and merchantable title to the Vessel free and clear of all Liens (other than Permitted Maritime Liens), and (ii) a first statutory mortgage lien and security interest in the Affiliate Vessels;

(d)  

Surveys and Appraisals.  Purchaser and Participants have received (i) condition and valuation surveys of the Vessel and the Affiliate Vessels acceptable to Participants conducted by an independent marine surveyor and appraiser selected by Participants and reasonably acceptable to Waterman and Guarantor which shall respectively attest to the satisfactory condition of the Vessel and the Affiliate Vessels, state the fair market value, orderly liquidation value and the economic useful life of the Vessel and of the Affiliate Vessels as of the Closing Date, and establish a fair market value of the Vessel of not less than the Capitalized Owner’s Cost of the Vessel to be stated in the Bareboat Charter, and (ii) an on-charter survey of the Vessel conducted in accordance with the terms of the Bareboat Charter; provided, however, that if the Vessel is at sea and not available for an on-charter survey, the Participants may elect to defer the on-charter survey until the date, time and place of the special classification survey of the Vessel in 2012 (and Waterman agrees to provide notice to and to cooperate with Participants in the scheduling of such survey);

Material Adverse Change.  As determined by Participants, there shall have been no material adverse change in the business, condition (financial or otherwise), operations or properties of Waterman, Guarantor or Gulf South from the date of the most recent financial statements submitted by such Person to Purchaser and Participants prior to credit approval;

(f)  

Warranty Bill of Sale.  Purchaser has received a valid, complete and fully executed Warranty Bill of Sale, executed by Waterman in form and substance satisfactory to Purchaser and the Participants, which instrument shall convey to Purchaser, in its capacity as Trustee of the Trust, good, merchantable title to the Vessel and the Ancillary Vessel Rights (if any such rights exist), free and clear of any Liens and with the benefit of all warranties provided herein;

(g)  

Coast Guard Bill of Sale.  Purchaser has received a valid, complete and fully executed CG-1340, Bill of Sale, executed by Waterman and presented in original and recordable form, and in a form satisfactory to Purchaser and Participants, together with such additional documents as may be necessary to provide Purchaser, in its capacity as Trustee of the Trust with good, merchantable title to the Vessel, free and clear of any Liens;

(h)  

Certification of Citizenship, etc. by Waterman.  Purchaser has received a Certification executed by an authorized officer of Waterman containing a certification of Waterman’s status as a citizen of the United States within the meaning of Section 2 of the Shipping Act of 1916 (46 U.S. Code §50501), a certification concerning the existence of the Charter and such additional certifications as may be required from Waterman to document the vessel in the name of Purchaser under U.S.-flag with a registry endorsement pursuant to Chapters 121 and 531, of Title 46, U.S. Code, all in a form acceptable to Purchaser and United States Coast Guard, National Vessel Documentation Center (“NVDC”);

(i)  

Operational Certificates.  Purchaser and Participants have received true and correct copies of each of the following certificates (collectively, “Operational Certificates”): (i) a copy of the current Certificate of Documentation for the Vessel, issued by the NVDC, in the name of Waterman and endorsed for registry; (b) the Tonnage Certificate issued by the American Bureau of Shipping or other authorized classification society with respect to the Vessel; (iii) a Confirmation of Class Certificate issued by the American Bureau of Shipping or other applicable classification society showing the Vessel as in class with respect to all applicable classes, without exception, together with copies of the current classification certificates issued with respect to the Vessel; (iv) if the Vessel is an inspected vessel, or subject to load line regulations on the Closing Date, a copy of the current Certificate of Inspection and/or Load Line Certificate, and such certificates shall be in full force and effect, without exception; (v) the Certificate of Financial Responsibility with respect to the Vessel; and (vi) the Safety Management Certificate with respect to Waterman and/or the Vessel issued pursuant to the International Safety Management Code and the International Ship Security Certificate with respect to the Vessel issued pursuant to International Ship and Port Facility Security Code, as such codes have been adopted by the International Maritime Organization;

(j)  

Bareboat Charter.  Purchaser has received the Bareboat Charter duly executed by Waterman in substantially the form of Exhibit A;

(k)  

Charter Assignment and Security Agreement; Notice.  Purchaser has received (i) the Charter Assignment and Security Agreement, duly executed by Waterman in form and substance satisfactory to Purchaser and Participants, pursuant to which Waterman will collaterally assign to Purchaser, in its capacity as Trustee of the Trust, and grant a security interest in favor of Purchaser in, all of its right, title and interest in and to the Approved Time Charter of the Vessel, together with the other Assigned Property to be described therein, and (ii) the Notice and Acknowledgement of Collateral Assignment to be issued pursuant thereto duly executed by Waterman and ******, the time charterer under the Approved Time Charter, pursuant to which, among other acknowledgments and undertakings, ****** will subordinate all of its right, title and interest in and to the Vessel under the Time Charter to the interests of the Purchaser under the Bareboat Charter;

(l)  

Delivery and Acceptance Certificate.  Purchaser has received a Delivery and Acceptance Certificate, in form and substance satisfactory to Purchaser and the Participants, duly executed by Waterman, which such certificate unconditionally accepts the Vessel under the Charter and irrevocably authorizes the Purchaser to disburse the Purchase Price as provided in the first recital on page one of this Agreement and to fund the Security Deposit required under the Charter;

(m)  

Guaranty.  Purchaser has received the Guaranty duly executed by Guarantor in substantially the form of Exhibit B;

(n)  

Affiliate Mortgages.  Purchaser has received the Affiliate Mortgages duly executed by Gulf South, in form and substance satisfactory to Purchaser and the Participants, and sufficient for registration as statutory mortgages with the Singapore Registry of Ships;

(o)  

Insurance.  Purchaser has received (i) the initial report of Marsh Ltd., the insurance broker of Waterman and Gulf South, evidencing the placement of all insurance coverage on the Vessel required under Section 14 of the Bareboat Charter, and on the Affiliate Vessels required under Clause 7.22 of Affiliate Mortgages, and meeting the other requirements of those provisions, and (ii) the letter of undertaking of Marsh Ltd. required under Section 14 of the Bareboat Charter and Clause 7.22 of the Affiliate Mortgages, each in form and substance satisfactory to Purchaser and Participants;

(p)  

Assignments of Insurances.  Purchaser has received Assignments of Insurances, duly executed by Waterman and Gulf South, and Notices of Assignment, duly executed by Marsh, Ltd., all in form and substance satisfactory to Purchaser and Participants, pursuant to which Waterman and Gulf South will collaterally assign to Purchaser and grant a security interest in favor of Purchaser in, in its capacity as Trustee of the Trust, all of their respective right, title and interest in and to all policies and contracts of insurance, including, without limitation, all entries in any protection and indemnity or war risks association or club, which are from time to time taken out in respect of the Vessel and the Affiliate Vessels, their hull, machinery, freight, disbursements, profits or otherwise, and all the benefits thereof, including, without limitation, all claims of whatsoever nature arising under such policies, as well as all amounts due from underwriters under any such insurance whether as payment of losses, or as return premiums, or otherwise, and all proceeds of any of the foregoing;

(q)  

Subordination of Interests in Affiliate Vessels.  Purchaser has received a Subordination Agreement, duly executed by CG Railway, Inc., an Affiliate of Waterman and the direct subsidiary of Guarantor, in form and substance satisfactory to Purchaser and Participants, pursuant to which CG Railway, as the charterer of the Affiliate Vessels, will subordinate all of its right, title and interest in and to the Affiliate Vessels arising under or in connection with the charter of those vessels, including lien rights, to the lien and security interest of Purchaser arising under the Affiliate Mortgages;

(r)  

MARAD Approval.  Purchaser has received written approval of the United States Maritime Administration (“MARAD”) to the sale of the Vessel by Waterman to Purchaser, and to the charter or lease-back of the Vessel to Waterman, under the terms of this Agreement and the Charter;

(s)  

Continuing Defaults.  No event shall have occurred and be continuing that would constitute a “Default” or an “Event of Default” by Waterman, Guarantor or Gulf South under the terms of this Agreement or any other Charter Document, or under any other agreement between any such Person and any Participant or its Affiliates;

(t)  

Representations and Warranties.  The representations and warranties of Waterman, Guarantor and Gulf South set forth in Sections 4 and 9 of this Agreement are true and correct in all material respects on the Closing Date;

(u)  

Commitment to Purchase of Participation.  REFL has advised Purchaser that RBS Asset Finance, Inc. has issued to REFL an irrevocable and unconditional commitment to purchase a 49% participation in the beneficial interest of REFL in the Trust and the Trust Estate, and has furnished to REFL and Purchaser such documents, if any, that may be necessary to obtain the approval referenced in subsection (r) of this Section, or to document the Vessel in the name of the Trustee with the NVDC; and

(v)  

Additional Documents.  Waterman, Guarantor and/or Gulf South shall have executed and delivered to Purchaser such additional documents as may be deemed necessary by Purchaser to protect its interests, each such document to be, if required under applicable law, in recordable form.

(a)  

Corporate or Juridical Existence.  Each of Waterman, Guarantor and Gulf South (a) is a corporation duly organized, validly existing, and in good standing under the laws of its respective jurisdiction of incorporation, organization or formation; (b) has all requisite power and authority to own its assets and carry on its business as now being or as proposed to be conducted; and (c) is qualified to do business in all jurisdictions in which the nature of its business makes such qualification necessary and where failure to so qualify would have a material adverse effect on its business, condition (financial or otherwise), operations, prospects, or properties.  The names of Waterman and Gulf South stated in the preamble of this Agreement are the correct legal names of such Person, and neither Waterman nor Gulf South has operated under any other legal name within the last five (5) years.

(b)  

Due Authorization; Power.  The execution, delivery, and performance of this Agreement and the other Charter Documents to which Waterman, Guarantor or Gulf South is or may become a party has been duly authorized by all requisite action on the part of such Person, and its directors and, if required under the organizational or corporate governance documents of such Person, its shareholders.  Each of Waterman, Guarantor and Gulf South has the corporate power and authority to execute, deliver, and perform its obligations under this Agreement and the other Charter Documents to which it is or may become a party.

(c)  

No Conflicts.  The execution, delivery, and performance of this Agreement and the other Charter Documents to which Waterman, Guarantor or Gulf South is or may become a party does not and will not violate or conflict with the articles or certificate of incorporation, or the by-laws or other organizational or corporate governance documents of any such Person, or any law, rule, or regulation, or any order, writ, injunction, or decree of any court, governmental authority, or arbitrator, and does not and will not conflict with, result in a breach of, or constitute a default under, or result in the creation or imposition of any Lien upon any of the revenues or assets of any such Person pursuant to the provisions of any indenture, mortgage, deed of trust, security agreement, franchise, permit, license, or other instrument or agreement by which any such Person, or any of its properties, is bound, including, without limitation, that certain Maritime Security Program Operating Agreement, Agreement No. MA/MSP-104, dated February 1, 2005, between Waterman and the United States of America, represented by the Secretary of Transportation acting through the Maritime Administrator, as amended (the “MSP Contract”).

(d)  

Citizenship.  Each of Waterman and Guarantor is a citizen of the United States within the meaning of Section 2 of the Shipping Act of 1916 (46 U.S. Code §50501). Gulf South is a person qualified to own a Singapore ship within the meaning of the Merchant Shipping Act of the Republic of Singapore and by virtue of that status is eligible to own and register vessels, including the Affiliate Vessels, under the flag of Singapore.

(e)  

Financial Statements.  All financial statements that have been delivered by Waterman, Guarantor and Gulf South to Participants are true and correct, have been prepared in accordance with GAAP, and fairly and accurately present the financial condition of such Persons as of the respective dates, and the results of operations for the respective periods, indicated therein.  Neither Waterman, nor Guarantor nor Gulf South have any material contingent liabilities, liabilities for taxes, material forward or long-term commitments, or unrealized or anticipated losses from any unfavorable commitments not reflected in such financial statements.  There has been no material adverse change in the business, condition (financial or otherwise), operations or properties of Waterman, Guarantor or Gulf South since the effective date of such financial statements.

(f)  

Litigation and Judgments.  There is no action, suit, investigation, or proceeding before or by any court, governmental authority or arbitrator pending, or to the knowledge of Waterman, Guarantor or Gulf South, threatened against or affecting any such Person, that would, if adversely determined, cause the transactions contemplated under this Agreement and the Charter Documents to be set aside or enjoined, or which would otherwise prevent the completion and consummation of any such transactions, or the ability of any such Person to perform its obligations under the Charter Documents.

(g)  

Enforceability.  This Agreement constitutes, and the Bareboat Charter and other Charter Documents to which Waterman, Guarantor or Gulf South is a party, when delivered, shall constitute legal, valid, and binding obligations of such Person, enforceable against such Person in accordance with their respective terms, except as limited by bankruptcy, insolvency, or other laws of general application relating to the enforcement of creditor’s rights.

(h)  

Approvals.  No authorization, approval, or consent of, and no filing or registration with, any court, governmental authority, or third party is or will be necessary for the execution, delivery, or performance by Waterman, Guarantor or Gulf South of this Agreement and the other Charter Documents to which any such Person is or may become a party or the validity or enforceability thereof (other than the filing of the CG-1340, Bill of Sale, of the Vessel with the NVDC and the registration of the Affiliate Mortgages with the Singapore Ship Registry).  Without limiting the foregoing, other that the approval of the sale/leaseback transaction by MARAD, Waterman, Guarantor and Gulf South jointly and severally represent and warrant that no prior authorization, approval, or consent of, and no filing or registration with the Department of Transportation, the Department of Defense, or any other agency of the United States government is required under the terms of the MSP Contract or under applicable law for the consummation of the sale/leaseback transaction contemplated under this Agreement and the other Charter Documents on account of the enrollment of the Vessel in the Maritime Security Fleet established under Chapter 531 of Title 46, United States Code.

(i)  

Disclosure.  No statement, information, report, representation, or warranty made by Waterman, Guarantor or Gulf South in this Agreement or in any Charter Document or furnished to Purchaser in connection with this Agreement or any of the transactions contemplated hereby contains any untrue statement of a material fact or omits to state any material fact necessary to make the statements herein or therein not misleading.  There is no matter known to either Waterman, Guarantor or Gulf South which has a material adverse effect, or which might in the future have a material adverse effect, on the business, condition (financial or otherwise), operations or properties of any such Person that has not been disclosed in writing to Participants.

(j)  

Agreements.  Neither Waterman, nor Guarantor, nor Gulf South is a party to any indenture, loan, or credit agreement, or to any lease or other agreement or instrument, or subject to any charter or other organizational restriction which could have a material adverse effect on the business, condition (financial or otherwise), operations or properties of any such Person, or the ability of any such Person to pay and perform its obligations under the Charter Documents.  Neither Waterman, nor Guarantor, nor Gulf South is in default in any respect in the performance, observance, or fulfillment of any of the obligations, covenants, or conditions contained in any agreement or instrument material to its business, including without limitation, the MSP Contract.

(k)  

Compliance with Laws.  Neither Waterman, nor Guarantor, nor Gulf South is in violation in any material respect of any law, rule, regulation, order, or decree of any court, governmental authority, or arbitrator.  Without limiting the foregoing, Gulf South and the Affiliate Vessels are in compliance, in all material respects, with all laws, rules, regulations, orders, or decrees of all governmental authorities of the Republic of Singapore applicable to Gulf South, as a corporation organized under the laws of Singapore, or to the Affiliate Vessels, including with respect to the Affiliate Vessels, all applicable load line regulations, inspection or financial responsibility regulations, and the ISM and ISPS Codes.

(l)  

MSP Contract.  The MSP Contract is in full force and effect, and no event has occurred that with the passage of time and the failure of Waterman to cure would become an event of default under that agreement.  Following the consummation of the sale/leaseback of the Vessel, the MSP Contract will continue in force and the Vessel shall remain eligible for enrollment in such program, subject to the compliance of the Trust with the requirements of 46 U.S.C. §53102(c).

(m)  

Title to Vessel, Condition, etc.  Waterman has good and merchantable title to the Vessel, and the Vessel and whatever Ancillary Vessel Rights may exist (if and to the extent that Waterman holds any Ancillary Vessel Rights) are being be conveyed by Waterman to Purchaser, in its capacity as Trustee of the Trust, free and clear of all mortgages, liens, security interests, attachments, purchase options and other adverse claims or encumbrances whatsoever other than Permitted Maritime Liens and Liens which will be satisfied with the proceeds of the sale/leaseback transaction contemplated herein.  The Vessel is currently in class for each of the A-1 Vehicle Carrier, AMS and ACCU classifications issued by the American Bureau of Shipping with no outstanding requirements, recommendations or citations, and the Vessel and her appurtenances are in good condition, running order and repair, and in every respect seaworthy.  The Vessel is in compliance with all United States laws, treaties, conventions, rules, and regulations to which the Vessel is currently subject in all material respects. Gulf South has good and merchantable title to the Affiliate Vessels, free and clear of all mortgages, liens, security interests, attachments, purchase options and other adverse claims or encumbrances whatsoever other than the existing statutory mortgages in favor of Regions Bank which will be satisfied with the proceeds of the sale/leaseback transaction contemplated herein.

(n)  

Use of Proceeds.  The proceeds of the sale/leaseback of the Vessel will be applied exclusively as provided in the first recital on page one of this Agreement.

 

(a)

All of the written information that Waterman, Guarantor and Gulf South have provided to Purchaser and Participants with respect to themselves and their respective Affiliates or otherwise in connection with the transaction contemplated by this Agreement was true, correct and complete at the time it was given.

 

(b)

Waterman, Guarantor and Gulf South shall from time to time furnish any information deemed necessary by the anti-money laundering officers of Purchaser and Participants in their sole discretion (other than information that (i) Waterman, Guarantor or Gulf South do not possess, (ii) is confidential, or (iii) Waterman, Guarantor and Gulf South are under an obligation not to disclose) to comply with the USA PATRIOT Act, Federal law requirements that all financial institutions obtain, verify and record information regarding customers pursuant to 31 CFR Part 103.121, the anti-money laundering programs of Purchaser and Participants and similar or related responsibilities.  All of such information shall be true, correct and complete at the time provided.

 

(c)

Each of Waterman, Guarantor and Gulf South are entering into this Agreement, the Charter Documents, and the sale/leaseback transaction contemplated hereby and by the other Charter Documents solely for its own account, risk and beneficial interest, and not for the account or beneficial interest of any other Person.

 

(d)

To the knowledge of Waterman, Guarantor and Gulf South, without investigation, neither Waterman, nor Guarantor, nor Gulf South, nor any Affiliate of any such Person, (i) is a Person identified on any Office of Foreign Assets Control (“OFAC”) “watch list”, including, without limitation, the list of Specially Designated Nationals and Blocked Persons issued by OFAC; (ii) is a Person identified on any Federal Bureau of Investigation “watch list” or Bureau of Industry and Security list of unverified Persons or denied Persons (or are affiliated in any way with any such Persons); (iii) is a shell bank or an offshore bank; or (iv) is a Persons resident in, or whose funds are transferred from or through, or who have operations in, any jurisdiction identified as non-cooperative by the Financial Action Task Force (the “FATF”) or sanctioned by the OFAC.