CLAUSE 25. Insurance. (a) The Charterer shall, at all times during the period of the Vessels' use under this Agreement, carry on each Vessel policies of insurance covering all marine and war risk hull and marine and war risk protection and indemnity risks, and all other hazards and liabilities in the amounts set out in Part I hereof, in such form and with such insurance companies, underwriters or funds as the Owner shall require and approve. All insurance required under the terms of this Agreement to be carried by the Charterer shall include the United States of America as an assured, without recourse against the United States for payment of premiums, or for assessments under any mutual form of policy. The underwriters shall have full rights of subrogation against the United States of America to the extent of any loss paid for which any assured other than the United States of America could bring suit against the United States of America, under the Suits in Admiralty, Public Vessels or Tucker Acts to recover for such loss, and, notwithstanding the fact that the United States of America may be named as an assured and as payee in the policy, such loss shall be considered to have been paid to and sustained by any assured other than the United States of America, in the first instance.

(b) All losses under the policies of insurance carried on the Vessels, except those payable under crew insurance policies, shall be made payable to the Owner for distribution by it to itself and the Charterer as their interests may appear, provided, however, that in the absence of specific instructions to the contrary, P & I insurance claims in amounts not exceeding $10,000 may be payable directly to the Charterer. Charterer shall at Charterer's expense keep the Vessels entered in the Marine Index Bureau, Inc. The originals of all cover notes or binders and policies, except those for crew insurance, shall be delivered promptly to the Owner for its custody and approval.

(c) In the event that any of the insurance hereinbefore provided for shall not, by reason of any act, omission, or negligence of the Charterer, be kept in full force and effect, or for any reason, including but without limitation the existence of any deductible average, franchise provisions, or other exclusion contained therein, but excluding insolvency of the underwriters, does not cover in full all losses, damages, claims or demands, the Charterer shall indemnify and hold harmless and defend the Owner against all such losses, claims and demands.

(d) No tender of abandonment as a constructive total loss shall be made without the prior approval of the Owner, provided, however that in the event the Owner refuses to approve such tender or falls to act thereon with twenty (20) days after receipt of Charterer's request, then charter hire shall cease as of the date of such refusal or at the expiration of such twenty (20) day period, as the case may be, and provided further that

charter hire shall cease only in the event that, but for the refusal of the Owner to agree to tender of abandonment, the amount which would have been recoverable from the hull insurance underwriters would have squalled or exceeded the amount set forth in Part I hereof.

CLAUSE 26. Bills of lading or voyage charters. All bills of lading or voyage charters issued under this Agreement shall contain directly or by reference substantially the following clauses:

(1) Clause paramount. This bill of lading shall have effect subject to the provisions of the Carriage of Goods by Sea Act of United States, approved April 16, 1936, which shall nothing herein contained shall be deemed a surrender by the Carrier of any of its rights or immunities or an increase of any of its responsibilities or liabilities under said Act. If any term of this bill of lading be repugnant to said Act to any extent, such term shall be void to that extent but no further.

(11) General average clause. General average shall be adjusted, stated, and settled, according to York-Antwerp Rules, 1950, exclusive of Rule 22, at such port or place in the United States as may be selected by the Carrier, and as to matters not provided for by these Rules, according to the laws and usages at the port of New York. In such adjustment, disbursements in foreign currencies shall be exchanged into United States money at the rate prevailing on the dates made and allowances for damage to cargo claimed in foreign currency shall be converted at the rate prevailing on the last day of discharge at the port or place of final discharge of such damaged cargo from the ship. Average agreement or bond and such additional security, as may be required by the carrier, must be furnished before delivery of the goods. Such cash deposit as the carrier or his agents may deem sufficient as additional security for the contribution of the goods and for any salvage and special charges thereon, shall, if required, be made by the goods, shippers, consignees, or owners of the goods to the carrier before delivery. Such deposit shall, at the option of the carrier, be payable in United States money, and be remitted to the adjuster. When so remitted the deposit shall be held in a special account at the place of adjustment in the name of the adjuster pending settlement of the general average and refunds or credit balances, if any, shall be paid in United States money.

(111) Amended "Jason" clause. In the event of accident, danger, damage, or disaster before or after commencement of the voyage resulting from any cause whatsoever, whether due to negligence or act, for which or for the consequence of which the carrier is not responsible by statute, contract, or otherwise, the goods, shippers, consignees, or owners of the goods shall contribute with the carrier in general average to the payment of any sacrifices, losses or expenses of a general average nature that may be made

or incurred, and shall pay salvage and special charges incurred in respect of the goods. I a salving ship is owned or operated by the carrier, salvage shall be paid for as fully as if the salving ship or ships belong to strangers.

(iv) Liberties clauses. In any situation whatsoever and wheresoever occurring and whether existing or anticipated before commencement of or during the voyage, which in the judgment of the carrier or master is likely to give rise to risk of capture, seizure. detention, damages, delay or disadvantage to or loss of the ship or any part of her cargo, or to make it unsafe, imprudent, or unlawful for any reason to commence or proceed on or continue the voyage or to enter or discharge the goods at the port of discharge, or to give rise to delay or difficulty in arriving, discharging at or leaving the port of discharge or the usual place of discharge in such port, the carrier may before loading or before the commencement of the voyage, require the shipper or other person entitled thereto to take delivery of the goods at port of shipment and upon their failure to do so, may warehouse the goods at the risk and expense of the goods; or the carrier or master, whether or not proceeding toward or entering or attempting to enter the port of discharge or reaching or attempting to reach the usual place of discharge therein or attempting to discharge the goods there, may discharge the goods into depot, lazaretto, craft or other place; or the ship may proceed or return, directly or indirectly to or stop at any such port or place whatsoever as the master or the carrier may consider safe or advisable under the circumstances, and discharge the goods, or any part thereof, at any such port or place; or the carrier or the master may retain the cargo on board until the return trip or until such time as the carrier or the master thinks advisable and discharge the goods at any place whatsoever as herein provided; or the carrier or the master may discharge and forward the goods by any means at the risk and expense of the goods. The carrier or the master is not required to give notice of discharge of the goods or the forwarding thereof as herein provided. When the goods are discharged from the ship, as herein provided, they shall be at their own risk and expense; such discharge shall constitute complete delivery and performance under this contract and the carrier shall be freed from any further responsibility. For any service rendered to the goods as herein provided the carrier shall be entitled to a reasonable extra compensation.

The carrier, master, and ship shall have liberty to comply with any orders or directions as to loading, departure, arrival, routes, ports of call, stoppages, discharge, destination, delivery or otherwise howsoever given by the Government of any nation or department thereof or any person acting or purporting to act with the authority of such government or of any department thereof, or

by any committee or person having, under the terms of the war risk insurance on the ship, the right to give such orders or directions. Delivery or other disposition of the goods in accordance with such orders or directions shall be a fulfillment of the contract voyage. The ship may carry contraband, explosives, munitions, warlike stores, hazardous cargo, and may sail armed or unarmed and with or without convoy.

In addition to all other liberties herein the carrier shall have the right to withhold delivery of, reship to, deposit or discharge the goods at any place whatsoever, surrender or dispose of the goods in accordance with any direction, condition or agreement imposed upon or exacted from the carrier by any government or department thereof or any person purporting to act with the authority of either of them. In any of the above circumstances the goods shall be solely at their risk and expense and all expenses and charges so incurred shall be payable by the owner or consignee thereof and shall be a lien on the goods.

CLAUSE 27. General and particular average. Average adjusters shall be appointed by the Charterer from a list of adjusters satisfactory to the Owner, who shall attend to the settlement and collection of both general and particular average losses subject to customary charges. The Charterer agrees to assist the adjuster in preparing the average statement and to take all other possible measures to protect the interests of each Vessel and the Owner.

CLAUSE 28. Salvage. Earned salvage shall be prorated 25% to the Owner and 75% to the Charterer, after deducting Owner's and Charterer's expenses, Master's and Crew's shares, and legal and other expenses incident to the salvage, provided, however, that hire of the Vessel(s) shall not be considered an item of the Charterer's expense hereunder. Salvage earned by the Charterer shall be considered gross income as defined in Clause 38 (a). Settlement of such claims for earned salvage shall be subject to the approval of both Owner and Charterer, Provided, that the amount of awards for the salving of vessels of which the United States, or any department or agency thereof, is the Owner or Owner pro hac vice, or for the cargoes and freights on such vessels, shall be approved by the Owner.

D. Management-Other Activities of

Charterer

CLAUSE 29. Mergers, business not related to shipping. The Charterer agrees that during the charter period it will not, without the prior written approval of the Owner, (1) effect any merger, consolidation or substantial acquisition or disposition of assets not in the ordinary course of business, or (2) directly or indirectly embark upon any new enterprise or business activity not directly connected with the business of shipping.

CLAUSE 30. Coastwise or intercoastal service. Neither the Charterer nor any holding company, subsidiary, affiliate, or associate of the Charterer nor any officer, director, agent, or executive thereof shall, without the permission of the Owner granted pursuant to Section 805 (a) of the Act, directly or indirectly, own, operate, or charter any vessel or vessels engaged in the domestic intercoastal or coastwise service, or own any pecuniary interest, directly or indirectly, in any person or concern that owns, charters or operates any vessel or vessels in the domestic intercoastal or coastwise service; Provided that, if such permission is or has been granted, none of the persons mentioned in this Clause shall divert, directly or indirectly, any moneys, property, or other thing of value, used in foreign trade operation, for which a subsidy is paid by the United States, into any such coastwise or intercoastal operations; Provided further, that where such permission is or has been granted pursuant to the Proviso clause of the first paragraph of Section 805 (a) of the Act, in the event of substantial change in the character or extent of such operations over those conducted during 1935, the foregoing permission to continue such operations may be limited or terminated by the Owner, after notice to the Charterer and opportunity for hearing, with respect to any or all of the operations thus permitted.

CLAUSE 31. Supervision of employment. Whenever the Charterer receives an operating-differential subsidy and is in default with respect to any mortgage, note, purchase contract or other obligation to the Owner, or has not maintained, in a manner satisfactory to the Owner, all of the reserves provided for in the Act, the Owner shall have the right to supervise the number and compensation of all officers and employees of the Charterer, and the Charterer shall then comply with all instructions of the Owner with respect thereto.

CLAUSE 32. Salaries and fees. No salary for personal services in excess of $25,000 per annum paid to a director, officer, or employee by the Charterer, its affiliates, subsidiary, or associates, directly or indirectly, shall be taken into account under this Agreement. The terms "director," "officer," or "employee" shall be construed in the broadest sense to include, but not to be limited to, managing trustee or other administrative agent. The term "salary" shall include wages and allowances or compensation in any form for personal services which will result in a director, officer, or employee receiving total compensation for his personal services from such sources exceeding in amount or value $25,000 per annum.

CLAUSE 33. Employment of managing agent. The Charterer shall not without the prior consent of the Owner employ any other person or concern as the managing or operating agent of the Charterer.

CLAUSE 34. Members or Delegates of Congress. The Charterer shall not employ any

Member of Congress, either with or without compensation, as an attorney, agent, officer, or director. Except to the extent permitted by law, no Member of or Delegate to Congress or any Resident Commissioner is or shall be admitted to any share or interest in this Agreement, or any benefit that may arise therefrom.

CLAUSE 35. Rescission provision. Upon determination by the Owner that any wilful violation of any provision of Clauses, 30, 31, 32, 33 or 34 has occurred, the Owner shall have the right to rescind the Agreement, and upon such rescission, the Owner shall be relieved of all further liability under this Agreement.

CLAUSE 36. Foreign-flag vessels. Neither the Charterer, nor any holding company, subsidiary, affiliate, or associate of the Charterer, nor any officer, director, agent, or executive thereof shall, directly or indirectly, own, charter, act as agent or broker for, or operate any foreign-flag vessel which competes with any American-flag vessel service which may be determined by the Owner to be essential pursuant to Section 211 of the Act, except as the Owner in its discretion and for a specific period of time may otherwise permit in accordance with the provisions of the Act.

E. Accounting-Definitions

CLAUSE 37. Accounting, report and supervision. (a) The Charterer and, to the extent required by the Owner, every affiliate, domestic agent, subsidiary, or holding company connected with, or directly or indirectly controlling or controlled by, the Charterer:

(1) shall keep its books, records and accounts relating to the management, operation, conduct of the business of and maintenance of the Vessel(s) covered by this Agreement in accordance with the "Uniform System of Accounts for Maritime Carriers" prescribed by the Maritime Administration, U. S. Department of Commerce, in General Order 22, Revised, (Issue of 1950) effective January 1, 1951, and under such regulations as may be prescribed by the Owner; Provided, That notwithstanding the provisions of said General Order 22, Revised, such reserves as may be specifically authorized by the Owner shall be taken into account in the determination of "Net Voyage Profit” hereunder or the expenses to provide for which such reserves are so authorized shall be distributed over the period of use hereunder of the Vessel involved in such manner as will accomplish the same result as though such reserves were established, all pursuant to regulations prescribed by the Owner; and Provided further, That if the Charterer is subject to the jurisdiction of the Interstate Commerce Commission, the Owner shall not require the duplication of books, records, and accounts required to be kept in some other form by that Commission; and

(2) shall file, upon notice from the Owner, balance sheets, profit and loss statements, and such other statements of financial operations, special reports, memoranda of any

facts and transactions, which in the opinion of the Owner affect the financial results in, the performance of, or transactions or operations under, this Agreement. The Owner reserves the right to require that all or any of such statements, reports and memoranda shall be certified by independent certified public accountants acceptable to the Owner. Specific reporting requirements subsequently prescribed will be subject to the approval of the Bureau of the Budget pursuant to the Federal Reports Act of 1942.

(b) The Owner is hereby authorized to examine and audit the books, records and accounts of all persons referred to above in this Clause whenever it may deem it necessary or desirable, including an analysis of the surplus and all supporting accounts. The Charterer agrees to allow any and all auditors, inspectors, attorneys, and other employees, designated by the Owner, full, free and complete access at all reasonable times, to the Vessel when in port or undergoing repairs, and to all books, records, papers, memoranda or other documents of the Charterer wherever located or of any holding company, subsidiary company or affiliated company of the Charterer pertaining to any activities relating in any way to the Vessel(s), and further agrees to permit the making of photostatic or other copies of any such books, records, papers, memoranda or other documents and to furnish without charge adequate office space and other facilities reasonably required by such auditors, attorneys, or inspectors in the performance of their duties. The Charterer further agrees to establish and maintain from time to time such checks upon or systems of control of expenditures or revenues in connection with the operation of the Vessel(s) as the Owner may request.

(c) Upon the wilful failure or wilful refusal of any person described in this Clause to comply with the above provisions of this Clause, the Owner shall have the right to rescind this Agreement, and upon such rescission, the Owner shall be relieved of all further liability under this Agreement.

CLAUSE 38. Definitions. The terms "net voyage profit," "fair and reasonable overhead expenses." and "capital necessarily employed" as used herein with respect to the operations of the Vessel(s) and services incident thereto are hereby defined for the purpose of this Agreement only, as follows:

(a) "Net voyage profit" shall be determined by deducting from gross income, as hereinafter defined, such direct vessel operating expenses, terminal and other auxiliary operating expenses, overhead expenses, interest expense, amortization of deferred charges, depreciation on property utilized in the operation of the Vessel(s), and all other charges which are customarily made in accordance with sound accounting practice in determining net profits before provision for federal income taxes, all as the Owner may deem fair and reasonable, provided, that in instances where the Charterer engages in

other activities in addition to the operation of the Vessel(s) covered by this Agreement, such charges, other than those directly and exclusively allocable to the operation of the Vessel(s) shall be prorated between these activities on such basis as the Owner may determine to be fair and reasonable.

"Gross income" shall include such items as revenue earned from the carriage of cargo, passengers, and mail, terminal and other auxiliary operations and miscellaneous profits and losses, such as those arising from pooling agreements, advance and prepaid beyond items, bar and slop chest, and such other transactions as the Owner may determine are properly included. "Gross income" shall include also interest earned, dividends received, and other non-operating income, as well as all accruals, if any, to the Charterer as an operating-differential subsidy. If the Charterer engages in any other activities in addition to the operation of the Vessel(s), the revenues and miscellaneous income, other than those exclusively applicable to the operation of the Vessel(s), shall be prorated between these activities on such basis as the Owner may determine to be fair and reasonable.

Income consisting of capital gains and expenses consisting of capital losses shall in no event be included in the computation of "Net Voyage Profit," as above defined.

Income from and expenses attributable to assets, other than the Vessel(s), excluded In the computation of "Capital Necessarily Employed," as hereinafter defined, shall not be included in the computation of "Net Voyage Profit," as above defined.

In determining "Net Voyage Profit," as above defined, all profits of persons performing services or supplying facilities to the Charterer which are required to be included in the earnings of the Charterer under Section 803 of the Act shall be taken into account.

(b) "Fair and reasonable overhead expenses" shall include those expenses actually and necessarily incurred in the conduct of the business of operating the Vessel(s), such as salaries of officers; wages of employees; legal and accounting fees and expenses; rent, heat, light, and power; communication expenses; office supplies, stationery, and printing; membership dues and subscriptions; entertaining and solicitation; traveling expenses; insurance and bond premiums; postage; maintenance of office equipment; and miscellaneous administrative and general expenses, all as the Owner may determine to be fair and reasonable and properly included, provided, that there shall be deducted from the total of such expenses, agency fees, commissions, brokerage, and such other miscellaneous earnings as the Owner may determine to be properly deductible.

"Fair and reasonable overhead expenses" shall include also freight, passenger, and other expenses incident to advertising the Vessel(s) and the route served; taxes, other than Federal income taxes; and management

and operating commissions, but only if and in the cases where the express written consent of the Owner has been given the Charterer to employ any other person or concern as the managing or operating agent of the Charterer; all as the Owner may determine to be fair and reasonable and properly included.

If the Charterer engages in other activities in addition to the operation of the Vessel(s), the "Fair and Reasonable Overhead Expenses" other than those directly and exclusively allocable to the Operation of the Vessel(s) shall be prorated between such activities on such basis as the Owner may determine to be fair and reasonable.

(c) Except in instances where the Charterer is granted an operating-differential subsidy (which is covered by the last paragraph of this subsection (c)), "Capital necessarily employed" shall be determined upon the basis of the net worth reported by the Charterer in its balance sheet as of the close of the month preceding the date of delivery of the first vessel under this Agreement (or in the last previous balance sheet deemed by the Owner to fairly present the financial position of the Charterer, but adjusted to take into account subsequent changes in net worth and such other changes as the Owner may deem essential to a proper determination of "Capital Employed" as at the end of such month), and as at each succeeding December 31st during the effective period of the Agreement, adjusted as hereinafter provided. For the purpose of this determination, net worth, as stated in the balance sheet of the Charterer, shall be deemed to include capital stock, surplus and such subdivisions thereof as capital surplus, earned surplus, and accounts of like nature. Net worth, as thus stated, shall be adjusted in such manner as the Owner may determine to be fair and reasonable, including the elimination of appreciation, adequate statement of the liabilities, and such other adjustments as are consistent with sound accounting principles. In the computation of "Capital Necessarily Employed," good will, intangibles not actually purchased and paid for, and stock held in treasury shall be excluded.

Property and other assets utilized in the operation of the Vessel(s) shall be valued at cost, including betterments and reconditioning costs, to the present owner or to any former owner at any time affiliated or assoclated directly or indirectly with the present owner, whichever is the lower, less depreciation; provided, that the cost of acquisition of assets acquired in exchange for capital share or other securities of the Charterer from other than holding, subsidiary, affiliated, or associated companies, shall not be in excess of the fair value of such property at the date of acquisition.

Additional capital, in the form of cash or tangible property paid in during the charter period, shall be included in the computation of "Capital Necessarily Employed" from the date paid in. Conversely, any withdrawals of capital shall be deducted from the date

withdrawn; provided, however, that no capital shall be withdrawn and no share capital shall be converted into debt without the prior written approval of the Owner. Earnings and capital gains (or losses) for any accounting period subsequent to the last day of the month preceding the month during which delivery of the first Vessel is made hereunder to the Charterer by the Owner shall not be included in the computation of the "Capital Necessarily Employed" for the year or other accounting period in which realized (or sustained). Dividends paid out of earnings that have not been included in "Capital Employed" shall not be deducted from "Capital Employed."

If the Charterer engages in other activities in addition to the operation of the Vessel(s), the Owner shall determine the proper allocation of capital as between such activities. The amount so allocated to the operation of the Vessel(s) shall be deemed to be the "Capital Necessarily Employed."

In the event the Charterer is granted an operating-differential subsidy, "Capital Necessarily Employed" in the business of the Vessel(s) chartered hereunder shall be determined upon the bases provided by the United States Maritime Commission with respect to subsidized vessels in its General Order No. 71 as adopted by its successors, the Federal Maritime Board and Maritime Administration, and amended from time to time, excepting inapplicable provisions of that Order (such as those relating to (1) ship equities, (2) deposits in the Special Reserve Fund, (3) deposits in the Capital Reserve Fund, and (4) progress payments on vessels under construction) as determined by the Owner.

F. Termination-Miscellaneous. CLAUSE 39. Events of default. The following shall constitute events of default under this Agreement:

(a) The failure of the Charterer to pay the charter hire on each Vessel as and when the same shall be due under the terms of this Agreement.

(b) The failure of the Charterer to operate each Vessel as required by Clause E, Part I, or the operation of the Vessel(s) on some other route without the prior written approval of the Owner.

(c) Any material misrepresentation by the Charterer in connection with this Agreement whether before or after execution hereof and whether made in an application, report or otherwise, or any wilful failure by the Charterer to disclose information necessary to cause any material representation by it not to be misleading.

(d) The occurrence of any event causing the Charterer to be ineligible for charter of the Owner's vessels.

(e) A voluntary sale by the Charterer of this Agreement or any interest therein, or any assignment, transfer, agreement or any other arrangement whereby the maintenance, management or operation of the above