SEC Filings

8-K
HORNBECK OFFSHORE SERVICES INC /LA filed this Form 8-K on 08/07/2003
Entire Document
 
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                                                                    EXHIBIT 99.1




                       ASSET PURCHASE AND OPTION AGREEMENT

                                  BY AND AMONG

                                  HOS-IV, LLC,

                      CANDY MARINE INVESTMENT CORPORATION,

                             CANDY FLEET CORPORATION

                                       AND

                                KENNETH I. NELKIN


                              DATED: JUNE 20, 2003



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                                Table of Contents

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ARTICLE 1         SALE AND PURCHASE...............................................................................2
         1.1      Sale and Purchase...............................................................................2
         1.2      Purchase Price..................................................................................3
         1.3      Closing.........................................................................................3
         1.4      Payment or Assumption of Liabilities............................................................4
         1.5      Allocation of Purchase Price....................................................................6
         1.6      Public Announcements............................................................................6
         1.7      Ad Valorem Taxes................................................................................6
         1.8      On Board Diesel Fuel............................................................................7

ARTICLE 2         REPRESENTATIONS AND WARRANTIES OF SELLER, MANAGER AND STOCKHOLDER...............................7
         2.1      Organization and Good Standing..................................................................8
         2.2      Ownership.......................................................................................8
         2.3      Authority of Seller, Manager and Stockholder....................................................8
         2.4      No Conflicts....................................................................................8
         2.5      Consents and Approvals..........................................................................9
         2.6      Title to Properties; Condition..................................................................9
         2.7      Financial Statements...........................................................................11
         2.8      Customary Business Practice....................................................................12
         2.9      Absence of Certain Changes or Events...........................................................12
         2.10     Absence of Defaults............................................................................13
         2.11     Compliance with Laws...........................................................................14
         2.12     Tax Returns and Reports........................................................................14
         2.13     Litigation.....................................................................................14
         2.14     Customers and Suppliers........................................................................15
         2.15     Inventories....................................................................................15
         2.16     ERISA and Related Matters......................................................................15
         2.17     Contracts and Commitments......................................................................20
         2.18     Patents, Trademarks and Copyrights.............................................................20
         2.19     Insurance......................................................................................21
         2.20     Employees......................................................................................21
         2.21     Labor Agreements; Disputes.....................................................................21
         2.22     Regulatory Filings.............................................................................22
         2.23     Environmental and Health and
 Safety Matters....................................................22
         2.24     Brokers/Advisors...............................................................................24
         2.25     Disclosure.....................................................................................24
         2.26     Transactions with Affiliates...................................................................25
         2.27     Consolidated Group.............................................................................25
         2.28     No MARAD Financings or Guarantees..............................................................25
         2.29     Actions by Vessel Owning Company and Optioned-Vessel Owning Companies..........................25
         2.30     Marital Property Agreement.....................................................................25
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                                  (continued)


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ARTICLE 3         REPRESENTATIONS AND WARRANTIES OF BUYER........................................................26
         3.1      Organization and Good Standing.................................................................26
         3.2      Authority of Buyer.............................................................................26
         3.3      No Conflicts...................................................................................27
         3.4      Consents and Approvals.........................................................................27
         3.5      Brokers/Advisors...............................................................................27

ARTICLE 4         ACTIONS BY SELLER, MANAGER AND STOCKHOLDER PENDING CLOSING.....................................28
         4.1      Conduct of Business............................................................................28
         4.2      Continued Administration.......................................................................28
         4.3      Records........................................................................................28
         4.4      Maintenance of Insurance.......................................................................28
         4.5      Reports........................................................................................28
         4.6      Additional Disclosure..........................................................................28
         4.7      Taxes..........................................................................................29
         4.8      Required Financial Statements..................................................................29

ARTICLE 5         COVENANTS OF SELLER, MANAGER AND STOCKHOLDER...................................................30
         5.1      Approvals......................................................................................30
         5.2      Compliance with Legal Requirements.............................................................30
         5.3      Books and Records..............................................................................30
         5.4      Investigation by Buyer.........................................................................30
         5.5      Certain Acts or Omissions......................................................................30
         5.6      Confidentiality................................................................................31
         5.7      Contracts; Liabilities.........................................................................31
         5.8      Employee Matters...............................................................................31
         5.9      Enforcement of Rights and Benefits.............................................................32
         5.10     OSV Business Inquiries.........................................................................32
         5.11     Repairs........................................................................................33
         5.12     No Purchase or Construction....................................................................33
         5.13     Vessel Options.................................................................................33
         5.14     Ownership of Vessels...........................................................................34

ARTICLE 6         COVENANTS OF BUYER.............................................................................34
         6.1      Approvals......................................................................................34
         6.2      Compliance with Legal Requirements.............................................................34
         6.3      Certain Acts or Omissions......................................................................34
         6.4      Access to Records..............................................................................35
         6.5      Vessel Markings................................................................................35

ARTICLE 7         CONDITIONS TO OBLIGATIONS OF BUYER.............................................................35
         7.1      Predicate Transaction and Purchase Agreement Transactions......................................35
         7.2      Representations and Warranties.................................................................35
</Table>




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                                Table of Contents
                                  (continued)

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         7.3      Compliance with Agreement......................................................................35
         7.4      Certificate of Seller, Manager and Stockholder.................................................36
         7.5      No Action or Proceeding........................................................................36
         7.6      Consents, Authorizations, Etc..................................................................36
         7.7      Corporate Action by Seller and Manager.........................................................36
         7.8      Corporate Action by Buyer and HOSI.............................................................36
         7.9      Completion of Due Diligence....................................................................36
         7.10     Completion of Drydock and Survey...............................................................36
         7.11     Evidence of US Flag Status and Classifications.................................................37
         7.12     Noncompetition Agreements......................................................................37
         7.13     Opinion of Counsel.............................................................................37
         7.14     Instruments of Conveyance......................................................................37
         7.15     No Material Adverse Change.....................................................................37
         7.16     Creditor Releases..............................................................................37
         7.17     Physical Possession and Control................................................................37
         7.18     Delivery of Other Documents and Instruments....................................................37
         7.19     Funding........................................................................................38
         7.20     Audit..........................................................................................38
         7.21     Termination of Management Agreement............................................................38

ARTICLE 8         CONDITIONS TO OBLIGATIONS OF SELLER, MANAGER AND STOCKHOLDER...................................39
         8.1      Representations and Warranties.................................................................39
         8.2      Compliance with Agreement......................................................................39
         8.3      Certificate of Officer.........................................................................39
         8.4      No Action or Proceeding........................................................................39
         8.5      Consents, Authorizations, Etc..................................................................39
         8.6      Corporate Action by Buyer......................................................................39
         8.7      Delivery of Purchase Price.....................................................................40
         8.8      Predicate Transaction..........................................................................40
         8.9      Opinion of Counsel.............................................................................40
         8.10     No Material Adverse Change.....................................................................40

ARTICLE 9         SURVIVAL OF REPRESENTATIONS AND WARRANTIES.....................................................40

ARTICLE 10        INDEMNIFICATION................................................................................40
         10.1     Indemnification of Purchaser Indemnitees.......................................................40
         10.2     Indemnification of Seller Indemnitees..........................................................41
         10.3     Method of Asserting Claims, Etc................................................................42
         10.4     Payment of Indemnity...........................................................................44
         10.5     Certain Limitations............................................................................44

ARTICLE 11        TERMINATION....................................................................................45
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                                  (continued)


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ARTICLE 12        NOTICES........................................................................................46

ARTICLE 13        MISCELLANEOUS..................................................................................47
         13.1     Incorporation of Schedules and Appendices; Entire Agreement....................................47
         13.2     Waiver.........................................................................................47
         13.3     Amendment......................................................................................47
         13.4     Counterparts...................................................................................48
         13.5     Headings.......................................................................................48
         13.6     Governing Law..................................................................................48
         13.7     Risk of Loss...................................................................................48
         13.8     Binding Effect.................................................................................48
         13.9     Expenses.......................................................................................48
         13.10    Further Assurances.............................................................................49
         13.11    Drafting and Negotiation of the Agreement......................................................49
         13.12    Limitation of Liability; No Consequential Damages..............................................49
         13.13    Exclusivity....................................................................................49
</Table>


         The Schedules and Appendices listed below and their related attachments
have been omitted from this filing. A copy of any such schedules and appendices
and their respective attachments shall be furnished supplementally to the
Securities and Exchange Commission upon request.


Schedules

         Schedule 1.1(a)       List of Assets (Including Vessel List)
         Schedule 1.1(b)       Excluded Assets
         Schedule 1.1(c)       Permitted Liens
         Schedule 2.6          Material Agreements
         Schedule 2.13         Litigation
         Schedule 2.14         Customers and Suppliers
         Schedule 2.16         Employee Plans
         Schedule 2.17         Contracts and Commitments
         Schedule 2.19         Insurance
         Schedule 2.20         Employees
         Schedule 2.30         Marital Property Agreement
         Schedule 5.13         Protocol for Purchase of Optioned-Vessels
         Schedule 5.14         Ownership of Vessels

Appendix

         Appendix A        Financial Statements
         Appendix B        Crew Management Agreement
         Appendix C        Noncompetition Agreement
         Appendix D        Protocol of Delivery and Acceptances
         Appendix E        Releases



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                       ASSET PURCHASE AND OPTION AGREEMENT


         THIS ASSET PURCHASE AND OPTION AGREEMENT, dated as of June 20, 2003
(together with the exhibits and schedules attached hereto, the "Agreement") is
by and among HOS-IV, LLC, a Delaware limited liability company (the "Buyer"),
Candy Marine Investment Corporation, a Louisiana corporation (the "Seller"), and
Kenneth I. Nelkin, the holder of all of the outstanding shares of capital stock
of Seller ("Stockholder"), and Candy Fleet Corporation, a Louisiana corporation
("Manager").

                                  WITNESSETH:

         WHEREAS, Hornbeck Offshore Services, LLC, a Delaware limited liability
company ("Company"), Buyer, Seller, Manager and Stockholder have executed an
Asset Purchase Agreement of even date herewith ("Purchase Agreement") to
purchase five (5) vessels and the assets and businesses ("Five Vessel
Businesses") relating to such vessels (such vessels, assets and businesses
collectively referred to as the "Five Vessel Assets and Related Businesses");

         WHEREAS, at the time of the execution of the Purchase Agreement and
this Agreement in order to accommodate Seller's timetable, the cash balances,
cash from operations, credit under existing lines of credit and immediate
sources of equity financing available to Buyer and its parent company were
sufficient to fund only the purchase of the Five Vessel Assets and Related
Businesses;

         WHEREAS, Buyer intends, subject to obtaining appropriate funding and
satisfaction of the other conditions set forth herein, to purchase a sixth
vessel from Seller and the business and assets relating to such vessel;

         WHEREAS, in connection with Buyer's desire to purchase the above
referenced sixth vessel and related assets and business and to receive options
to purchase certain vessels from Seller, Company, Seller, Manager and
Stockholder have executed and delivered a letter of intent (the "Letter") dated
April 25, 2003, pursuant to which such parties intend that Buyer purchase the
Business and certain Assets of Seller (as such terms are herein defined), as
more specifically set forth in Section 1.1 below, and Buyer receives the grant
of options to purchase the Optioned-Vessels Businesses (as herein defined), as
more specifically described below;

         WHEREAS, the Letter contemplates the negotiation and execution of a
legally binding, written "Definitive Agreement" setting forth the terms and
conditions of the sale and the grant of the vessel options described in the
Letter;

         WHEREAS, Company, Buyer, Seller, Manager and Stockholder intend that
this Agreement constitute the Definitive Agreement;

         WHEREAS, Seller and Stockholder desire that Seller sell to Buyer, and
Buyer desires to purchase from Seller, the Business and Assets of Seller for the
purchase price, upon and subject to the terms and conditions set forth herein;




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         WHEREAS, Seller and Stockholder desire that Seller grant to Buyer
options to purchase the Optioned-Vessels and the Optioned-Vessel Businesses, and
Buyer desires to receive such purchase options from Seller, upon and subject to
the terms and conditions set forth herein;

         WHEREAS, Manager manages the Vessel (as herein defined), Business, the
Optioned-Vessels and Optioned-Vessel Businesses, and thus has intimate knowledge
of the Assets, Business, Optioned-Vessels and Optioned-Vessel Businesses and the
business of its predecessors, and as an inducement for Buyer to enter into this
Agreement, Buyer has requested that Manager join as a party to this Agreement;
and

         WHEREAS, Stockholder, who directly or indirectly owns or controls
Manager and Seller, desires that Manager join as a party to this Agreement to
induce Buyer to enter into same, all for the benefit of Stockholder and his
affiliated entities, and Stockholder will cause Manager to so join as a party.

         NOW, THEREFORE, in consideration of the mutual premises, covenants and
agreements set forth herein and in reliance upon the representations and
warranties contained herein, the parties hereto covenant and agree as follows:

                                   ARTICLE 1
                                SALE AND PURCHASE

         1.1 SALE AND PURCHASE. On the terms and subject to the conditions
contained herein, Seller agrees to sell to Buyer and Buyer agrees to purchase
from Seller, free and clear of all liens, encumbrances, mortgages, pledges,
charges, options, rights, security interests, agreements, or claims of any
nature whatsoever, recorded or unrecorded (individually a "Lien" and
collectively the "Liens"), other than the Permitted Liens, all of Seller's
right, title and interest in the vessel (the "Vessel") named in Schedule 1.1(a)
attached hereto and to all of the tangible and intangible properties and assets
used primarily in or necessary to the conduct of the offshore supply vessel
business of the Vessel as conducted by the Vessel Owning Company (as herein
defined) or the Seller (the "Business"), wherever located (all such properties
and assets, together with the Vessel, collectively referred to herein as the
"Assets"), including without limitation, the non-Vessel assets set forth in
Schedule 1.1(a) and all of the following in any way pertaining to, related to,
identified primarily with or otherwise used primarily in the Business: (i) all
equipment, pumps, gears, outfit, furniture, furnishings, fittings, apparel,
appliances, appurtenances, spare and replacement parts (such as spare engines,
engine parts, shafts, rudders and wheels), fuels, oils, consumables and stores
and all other items as are on board or identified to the Vessel; (ii) such
assets as appear in the inventory and pictorial condition surveys for the Vessel
and Vessel drawings and logs; (iii) amounts prepaid on Assumed Contracts (as
herein defined) and all contract rights under Assumed Contracts (including
without limitation rights to receive payments for vessel services arising from
and after the Closing Time); and (iv) all other machinery and equipment,
computer software, contracts, licenses, permits, customer contact lists, vendor
relationships, operating rights, rights to Vessel telephone numbers, and rights
and benefits of Seller (or the right to cause Seller to enforce any such rights
or benefits) under any agreements entered into between Seller and the Vessel
Owning Company for the purchase by Seller of the Business and Assets; provided,
however, that the Assets shall not include strictly shore-based assets. The
shore-based assets and other assets of Seller that would otherwise be 



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included in the definition of "Asset" that are set forth in Schedule 1.1(b)
shall not be purchased by Buyer and are referred to herein as the "Excluded
Assets." If, upon the execution of this Agreement, the Manager is a party to any
contract constituting an Asset or Manager owns or possesses any assets or
property constituting any of the Assets, Manager shall properly assign its
rights under such contract or convey title to and deliver possession of such
assets or properties, as applicable, to Seller immediately prior to the Closing.
For purposes hereof, "Permitted Liens" shall mean the charter agreements listed
in Schedule 1.1(c), copies of which have been provided to Buyer, which list
shall be updated as of the Closing Time to account for charter agreements
entered into through the Closing Time; provided, however, that any such
additional charter agreements shall contain terms substantially similar to and
not significantly more burdensome than the terms contained in the charter
agreements listed in Schedule 1.1(c) on the execution date hereof, are
commercially reasonable and are entered into consistent with past practice,
unless otherwise approved in advance and in writing by Buyer.

         1.2 PURCHASE PRICE. In exchange for the Business and the Assets, Buyer
shall pay to Seller the aggregate purchase price (the "Purchase Price") of NINE
MILLION AND NO/100 DOLLARS ($9,000,000.00), payable as set forth in Section 1.3
below.

         1.3 CLOSING.

         (a) Subject to the terms and conditions hereof, the consummation of the
sale and purchase of the Business and the Assets provided for herein (the
"Closing") shall take place as soon as practicable after consummation of the
Predicate Transaction (as defined herein) and the transactions contemplated in
the Purchase Agreement but in any event by no later than July 31, 2003, unless
such date is extended at the sole discretion of Buyer (the date of the Closing
being referred to herein as the "Closing Date") at the business offices of Buyer
in Mandeville, Louisiana, or at such other place or on such other date upon
which Buyer and Seller may mutually agree in writing, and such Closing shall for
purposes of this Agreement be deemed effective as of 12:01 a.m. on the Closing
Date (the "Closing Time"), except that risk of loss for a Vessel shall be
determined as set forth in Section 13.7. At the option of the parties to this
Agreement, executed documents to be delivered at the Closing may be delivered to
the place of Closing by facsimile transmission on the Closing Date, with
original executed documents to be delivered to the place of Closing on the next
business day after the Closing Date. The Buyer, Seller, Manager and Stockholder
shall further deliver such other documents, certificates and opinions required
to be delivered by such party pursuant to Articles 7 and 8 hereof, and shall
provide proof or indication of the satisfaction or waiver of each of the
conditions set forth in Articles 7 and 8 hereof to the extent such party is
required to satisfy or obtain a waiver of such condition.

         (b) At the Closing, Buyer shall pay an aggregate amount equal to the
Purchase Price as follows:

                  (i) to Seller by wire transfer the amount of NINE MILLION AND
         NO/100 DOLLARS ($9,000,000.00) in immediately available federal funds
         to one or more accounts specified by Seller in a notice of wire
         instructions provided to Buyer within a reasonable time before the
         Closing Date; and



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                  (ii) The Parties hereto acknowledge and agree that although no
         amounts from the Purchase Price will be escrowed under that certain
         Escrow Agreement entered into by and among HOSI, Seller, Buyer and
         others ("Escrow Agreement") in connection with the Purchase Agreement,
         the Vessel shall be covered by the terms of such Escrow Agreement and
         the Repair Program contemplated in its exhibits to the extent that
         Buyer pursues any claims relating to the Vessel as a result of the
         drydocking scheduled to take place on or about July 10, 2003.

         1.4 PAYMENT OR ASSUMPTION OF LIABILITIES. Buyer shall assume the
contractual obligations of Seller contained in the assumed contracts assigned to
Buyer, as determined by Buyer in its sole discretion, effective at the Closing
Time (the "Assumed Contracts") and shall in its sole and absolute discretion
perform such Assumed Contracts in accordance with their terms or otherwise
arrange for their discharge, provided, however, that if any of the Assumed
Contracts are not assignable by their terms or consents to the assignment of the
Assumed Contracts cannot be obtained, then Buyer shall perform or at its
election otherwise discharge such Assumed Contracts in accordance with their
terms in the name of and on Seller's behalf, and all benefits and rights derived
thereunder shall be for the account of the Buyer. Seller shall, at the request
and expense of Buyer, enforce in a reasonable manner as directed by the Buyer,
any and all rights of the Seller under the Assumed Contracts that could not be
assigned to Buyer. Except for the Assumed Contracts, Buyer does not assume or
agree to pay, perform or discharge any debts, obligations or liabilities of the
Vessel Owning Company, Seller, Manager or Stockholder of any kind or nature,
whether or not such debts, liabilities or obligations related to or arose out of
the conduct of the Business or the operation of the Assets, whether accrued,
absolute, contingent or otherwise, or whether due or to become due, or
otherwise, whether known or unknown, which liabilities and obligations, if ever
in existence, shall continue to be liabilities and obligations of the Vessel
Owning Company, Seller, Manager and/or Stockholder, as applicable.
Notwithstanding anything to the contrary contained herein and without limiting
the generality of the foregoing, Buyer shall not, except for the Assumed
Contracts, assume or be liable for the following debts, liabilities and
obligations (together with the liabilities expressly excluded in this Section
1.4, the "Excluded Liabilities"):

         (a) VIOLATION OF REPRESENTATIONS, ETC. Debts, obligations or
liabilities which arise or exist in violation of any of the representations,
warranties, covenants or agreements of Seller, Manager or Stockholder contained
in this Agreement or in any statement or certificate delivered to Buyer by or on
behalf of Seller, Manager or Stockholder on or before the Closing pursuant to
this Agreement or in connection with the transactions contemplated hereby.

         (b) CONTINGENT LIABILITIES. Contingent liabilities of the Vessel Owning
Company, Seller, Manager or Stockholder of any kind arising or existing on or
before the Closing Time, including without limitation claims, proceedings or
causes of action which are currently or hereafter become the subject of claims,
assertions, litigation or arbitration.

         (c) TAXES DUE ON SALE. Debts, obligations or liabilities of Seller,
Manager or Stockholder for federal, state, county, parish, local, foreign or
other income, or transfer taxes or assessments (including interest and penalties
thereon, if any) of any kind whatsoever arising from, based upon or related to
the sale, transfer or delivery of the Business or the Assets pursuant to this
Agreement or otherwise.



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<PAGE>

         (d) OTHER TAXES. Debts, obligations or liabilities of the Vessel Owning
Company, Seller, Manager and/or Stockholder, whether absolute, accrued,
contingent or otherwise, for (i) federal and state income taxes; (ii) franchise
taxes, (including interest and penalties thereon, if any); and (iii) any other
taxes of such parties.

         (e) PENSION AND OTHER EMPLOYEE PLANS. Debts, obligations or liabilities
under any pension, profit sharing, savings, retirement, health, medical, life,
disability, dental, deferred compensation, stock option, bonus, incentive,
severance pay, group insurance or other similar employee plans or arrangements,
or under any policies (including vacation, holidays or sick pay), handbooks, or
custom or practice, collective bargaining agreement, or any employment
agreements, whether express or implied, applicable to the Vessel Owning
Company's, Seller's, Manager's or Stockholder's employees and arising from
events occurring at any time before the Closing Time or after the Closing Time
and during the Crew Lease Period (as herein defined) as contemplated under the
terms of the Crew Management Agreement, except for any obligations reflected in
the Financial Statements or incurred in the ordinary course of business
consistent with the past practices of the Vessel Owning Company, Seller, Manager
or Stockholder since the date of the Financial Statements and before the Closing
Date.

         (f) PERSONAL INJURY, PRODUCTS LIABILITY AND RECALL CLAIMS. Debts,
expenses, obligations or liabilities of the Vessel Owning Company, Seller,
Manager or Stockholder arising out of any claim for personal injury (including
worker's compensation or otherwise), property damage, product recall, product
liability or strict liability, arising from events (including the shipment of
goods) occurring at any time before the Closing Time or after the Closing Time
and during the Crew Lease Period as contemplated under the terms of the Crew
Management Agreement (whether or not such claim is then asserted).

         (g) INFRINGEMENTS. Any liability or obligation of the Vessel Owning
Company, Seller, Manager or Stockholder arising out of any wrongful or unlawful
violation or infringement of any intellectual property right of any person or
entity occurring at any time before the Closing Time.

         (h) INDEBTEDNESS; INTERCOMPANY OBLIGATIONS. Any indebtedness or
liability of the Vessel Owning Company, Seller, Manager, Stockholder, the spouse
of Stockholder or any affiliate of such parties.

         (i) LITIGATION. Debts, expenses, obligations or liabilities of the
Vessel Owning Company, Seller, Manager or Stockholder arising out of any claim,
action, suit, arbitration, or proceeding pending as of the Closing Time or
arising out of or relating to matters or events occurring at any time before the
Closing Time.

         (j) ENVIRONMENTAL. Debts, expenses, obligations or liabilities arising
out of any Environmental Claim (as defined in Section 2.23 below) with respect
to the conduct of the Business or the operation of the Assets at any time before
the Closing Time.

         (k) EMPLOYMENT. Debts, expenses, obligations, or liabilities of the
Vessel Owning Company, Seller, Manager or Stockholder arising out of or related
to any claim for alleged breach of any employment agreement, wrongful discharge,
collective bargaining agreement or similar claim or claims made by any current
or former employee of Seller, Manager or 



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<PAGE>

Stockholder relating to periods of employment occurring before the Closing Date
or after the Closing Date and during the Crew Lease Period as contemplated under
the terms of the Crew Management Agreement.

         (l) ASSUMED CONTRACTS. Any liabilities and/or obligations with respect
to any breach or default under the Assumed Contracts in which any material facts
and/or circumstances leading to or constituting such breach or default occurred
at any time before the Closing Time.

         (m) PRE-CLOSING LIABILITIES. Debts, expenses, obligations or
liabilities relating to the operation of the Business and/or the Assets arising
out of circumstances existing or events occurring at any time before the Closing
Time and which are not specifically assumed by Buyer, including without
limitation (i) liabilities, debts or obligations existing as of the Closing Time
and (ii) transaction expenses of Seller, Manager and Stockholder including,
without limitation, accountant's and attorneys' fees incurred in connection with
the negotiation or execution of the Letter or this Agreement or the transactions
contemplated hereby and thereby.

         (n) LIABILITIES RELATING TO EXCLUDED ASSETS. Debts, expenses or
liabilities relating to or secured by the Excluded Assets.

         1.5 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be allocated
among the Assets as the parties shall reasonably determine based on their
relative fair market values as approved by Buyer, and Buyer, Manager,
Stockholder and Seller shall utilize such values in all applicable tax reports
and filings and shall not take any action to oppose such allocations.

         1.6 PUBLIC ANNOUNCEMENTS. Before making any public announcements with
respect to this Agreement or the transactions contemplated hereby, Seller,
Stockholder, Buyer and Manager shall consult with the other parties hereto and
use good faith efforts to agree upon the text of a joint announcement to be made
by Seller, Stockholder, Buyer and Manager or use good faith efforts to obtain
such other party's approval of the text of any public announcement to be made on
behalf of any one party; provided, however, that Buyer, which is subject to
reporting obligations under federal securities laws, shall have final approval
with respect to whether any public announcements will be made by the parties and
the final text of such public announcements, if any, and if Buyer determines (in
its sole discretion) that a public announcement is warranted under the federal
securities laws, Buyer shall provide Stockholder with a copy of such
announcement prior to its public release. Subject to the preceding sentence, and
except as otherwise agreed in writing by each of Seller, Stockholder, Buyer and
Manager or as may be required by law, including any reporting obligations under
federal securities laws to which Buyer is subject, each such party shall
maintain as confidential the terms and conditions of this Agreement as required
under Section 5.6 hereof.

         1.7 AD VALOREM TAXES. The parties hereto agree that the ad valorem
taxes with respect to the Vessel and other non-Vessel Assets that are assessed
based on the presence of such property within the jurisdiction of any state,
local or municipal taxing authority on or about August 1, 2002 or January 1,
2003 or any other date prior to the Closing Date, shall be the responsibility of
Seller, regardless of which party receives a tax statement from any such taxing
authority. If the Louisiana legislature or any other taxing authority abolishes
or otherwise limits the right to claim refundable credits for ad valorem taxes
and Seller is thus unable to claim the 



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<PAGE>

benefits of any refundable credits for ad valorem taxes assessed for calendar
2003 on the Vessel or other non-Vessel Assets based on any such date prior to
the Closing Date, Buyer agrees to reimburse Seller for Buyer's pro rata share of
ad valorem taxes assessed on the Vessel or other non-Vessel Assets for such
calendar year, prorated based on the number of days before and after the Closing
Date, which reimbursement amount shall in no event exceed $33,333. Each of the
parties hereto agrees that, notwithstanding which party is the recipient of the
notice of assessment of ad valorem taxes related to the Vessel or any other
non-Vessel Assets for calendar 2003, it is the intent of the parties hereto to
cooperate with each other to give effect to the allocation of costs set forth in
the preceding portions of this paragraph, including to the extent legally
permissible, cooperating in the claiming of refundable tax credits to mitigate
the economic burden of such taxes on the parties. The parties hereto further
acknowledge that this cooperation may also require cooperation with the Vessel
Owning Companies, as possible recipients of tax statements. Any obligation of
Buyer under this paragraph shall be mitigated by and to the extent Seller is
reimbursed for or otherwise receives benefits relating to ad valorem taxes with
respect to the Vessel and non-Vessel Assets as a result of the terms and
conditions of the Predicate Transaction. Seller shall be solely responsible and
shall hold Buyer harmless from and against any ad valorem taxes assessed on the
Vessel and non-Vessel Assets with respect to periods prior to calendar 2003.

         1.8 ON BOARD DIESEL FUEL. Seller and Manager shall use, and Stockholder
shall cause Seller and Manager to use, reasonable commercial efforts to ensure
that the Vessel has a minimum of 10,000 gallons of diesel fuel on board the
Vessel at the time of Closing. The parties hereto shall verify the amount of
diesel fuel on board the Vessel by any means acceptable to the parties as soon
as practicable after the Closing. The parties acknowledge that the first 10,000
gallons of diesel fuel on board the Vessel has been paid for as part of the
Purchase Price and no additional consideration shall be paid for same. If the
aggregate amount of diesel fuel on board the Vessels exceeds 10,000 gallons,
Buyer shall pay to Seller an amount equal to the number of gallons of diesel
fuel exceeding 10,000 multiplied by $0.86 per gallon. If the aggregate amount of
diesel fuel on board the Vessel is below 10,000 gallons, Seller shall pay to
Buyer an amount equal to the number of gallons of diesel fuel below 10,000
multiplied by $0.86 per gallon. Any payment required of Seller or Buyer, as the
case may be, shall be paid within ten (10) days after such payment is requested.
A payment made by Seller pursuant hereto shall be deemed to reduce the Purchase
Price by an amount equal to the amount paid by Seller. A payment made by Buyer
pursuant hereto shall be deemed to increase the Purchase Price by an amount
equal to the amount paid by Buyer. In the event of a dispute between the parties
with respect to the amount of diesel fuel on board the Vessels or the amount
that is owed by a party with respect thereto, the parties shall engage an
independent marine surveyor acceptable to them to resolve such dispute. The
determination of such independent marine surveyor shall be binding on the
parties and the engagement fees and expenses of such accountant shall be shared
equally by Buyer and Seller.

                                   ARTICLE 2
                         REPRESENTATIONS AND WARRANTIES
                       OF SELLER, MANAGER AND STOCKHOLDER

         Seller, Stockholder and Manager hereby jointly and severally represent
and warrant to Buyer as set forth below.



                                       7

<PAGE>

         2.1 ORGANIZATION AND GOOD STANDING. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Louisiana. Seller has all requisite corporate power and authority to own, hold,
use and lease its properties and assets and to conduct its business as it is now
being conducted. Seller is duly qualified as a foreign corporation and is in
good standing in all jurisdictions in which the character of the properties and
assets now owned or leased by it or the nature of the business now conducted by
it requires it to be so qualified. Seller has delivered to Buyer true, complete
and correct copies of its articles or certificate of incorporation and bylaws,
as amended to the date of this Agreement.

         2.2 OWNERSHIP. Stockholder is the record and beneficial owner of all of
the issued and outstanding capital stock of Seller. Seller is the record and
beneficial owner of all of the issued and outstanding capital stock of Candy
Cruiser, Inc. ("Candy Cruiser"). There is no existing option, warrant, call,
commitment or other agreement with respect to the capital stock of Seller or
Candy Cruiser.

         2.3 AUTHORITY OF SELLER, MANAGER AND STOCKHOLDER. Seller and Manager
each has all requisite corporate power and authority, and Stockholder has the
full right, power, legal capacity and authority to enter into, execute and
deliver this Agreement and the documents contemplated hereby to be executed by
such parties and to perform the obligations to be performed by such parties
hereunder and thereunder, respectively. The execution, delivery and compliance
by Seller and Manager with the terms of this Agreement and the documents
contemplated hereby to be executed by Seller and Manager and the consummation by
Seller and Manager of the transactions contemplated hereby and thereby have been
duly authorized by all necessary corporate action by Seller and Manager. This
Agreement has been duly executed and delivered by Seller, Manager and
Stockholder, and this Agreement constitutes, and the documents contemplated
hereby to be executed by Seller, Manager and Stockholder, as applicable, upon
their execution and delivery as herein provided will constitute, the legal,
valid and binding obligations of Seller, Manager and Stockholder, as applicable,
enforceable against Seller, Manager and Stockholder, respectively, in accordance
with their respective terms.

         2.4 NO CONFLICTS. The execution and delivery of this Agreement and the
documents contemplated hereby to be executed by Seller, Manager and/or
Stockholder do not, and compliance by Seller, Manager and/or Stockholder with
the terms hereof and thereof and consummation by Seller, Manager and Stockholder
of the transactions contemplated hereby and thereby will not, (a) violate or
conflict with any existing term or provision of any law, statute, ordinance,
rule, regulation, order, writ, judgment, injunction or decree applicable to
Seller, Manager or Stockholder; (b) conflict with or result in a breach of or
default under any of the terms, conditions or provisions of the articles of
incorporation or bylaws of Seller or Manager or, assuming consummation of the
Predicate Transaction, any agreement or instrument to which Seller, Manager or
Stockholder is a party or otherwise subject, or by which Seller, Manager,
Stockholder, the Business or any of the Assets may be bound; (c) result in the
creation or imposition of any Lien upon the Business or any of the Assets; (d)
assuming consummation of the Predicate Transaction, give to others any right of
termination, cancellation, acceleration or modification in or with respect to
any agreement or instrument to which Seller, Manager or Stockholder is a party
or otherwise subject, or by which Seller, Manager, Stockholder, the Business or
the Assets may be bound or subject; or (e) breach any fiduciary duty owed by
Seller, Manager or Stockholder to any person or entity.



                                       8

<PAGE>

         2.5 CONSENTS AND APPROVALS. The execution and delivery by Seller,
Manager and Stockholder of this Agreement and the documents contemplated hereby
to be executed by Seller, Manager and Stockholder, compliance by Seller, Manager
and Stockholder with the terms hereof and thereof and, assuming consummation of
the Predicate Transaction, consummation by Seller, Manager and Stockholder of
the transactions contemplated hereby and thereby do not require Seller, Manager
or Stockholder to obtain any consent, approval or action of, make any filings
with or give any notice to any corporation, person, firm or other entity, or any
public, governmental or judicial authority.

         2.6 TITLE TO PROPERTIES; CONDITION.

         (a) Upon consummation of the Predicate Transaction, Seller will be
vested with good, valid and marketable title to the Assets, free and clear of
any Liens, other than the Permitted Liens, and upon the sale, assignment,
transfer and conveyance of the Assets to Buyer there will be vested in Buyer,
good, valid and marketable title to the Assets, free and clear of any Liens
other than the Permitted Liens. The Vessel is duly documented in the name of the
Vessel Owning Company with the United States Coast Guard and, at the Closing,
Seller will deliver to Buyer such documentation as may be required by the United
States Coast Guard to enable Buyer to duly document the Vessel in Buyer's name
with the United States Coast Guard and in all existing endorsements and
registries. Upon delivery of a fully executed Protocol of Delivery and
Acceptance by the Buyer and Seller, the Vessel will be afloat and seaworthy and,
except as contemplated in Section 5.11, will be in Reasonable Operating
Condition (as defined in the Escrow Agreement and its exhibits), taking into
account its age and originally intended use, and will be properly outfitted and
equipped in accordance with the requirements of any contracts with third parties
for the use of the Vessel. Each of Seller and the Vessel Owning Company has at
all times been a citizen of the United States within the meaning of Section 2 of
the Shipping Act of 1916, as amended, and the Vessel is and, upon consummation
of the Predicate Transaction, will be under United States flag and qualified to
engage in the coastwise trade. At no time during the period that the Vessel has
been owned or operated by Seller, Manager, any other affiliate of Seller or the
Vessel Owning Company has the Vessel been sold, chartered or otherwise
transferred to any person in violation of any applicable laws, rules or
regulations. The Vessel will at a minimum, at the Closing Time, have current
Certificates (as defined in the Escrow Agreement and its exhibits), free of
reported or reportable exceptions or notations for record. Schedule 2.6 includes
a list of all charters, operating agreements, maintenance agreements, management
agreements, mortgages and other documents or agreements applicable to the
Vessel, and copies of each such document has been provided to Buyer. There are
no agreements between the Vessel Owning Company and the Manager, Stockholder,
Seller or any of their affiliates with respect to the Business or Assets other
than a management agreement entered into between Manager and the Vessel Owning
Company (the "Management Agreement"), which is listed in Schedule 2.6 and will
be terminated as of the Closing Time. The other tangible non-Vessel Assets have,
as applicable, been installed, operated and maintained in accordance with
accepted industry practice, are free from known defects of workmanship or
materials, are suitable for the purposes for which they have been and are being
employed in the Business, and are in good operating condition and repair,
ordinary wear and tear excepted, taking into account their age and originally
intended use. There has been no change in the physical condition of the Assets
since December 31, 2002 that would have any effect on the value of the Assets or
the suitability of the Assets for the purposes for which they have been and are
being 



                                       9

<PAGE>

employed in the operation of the Business, ordinary wear and tear excepted, and
Seller is not aware and has not been advised by any party (including any
customers) of any performance or other defects with respect to the Assets.
Schedule 2.6 lists all material leases, operating agreements, maintenance
agreements, management agreements, mortgages and other documents or agreements
applicable to the Assets. The Vessel is not and, upon consummation of the
Predicate Transaction, the Vessel will not be under arrest and/or under
detention pursuant to the order of a competent court or authority and there are
and, upon consummation of the Predicate Transaction, there will be no actual,
pending or threatened claims against the Assets that could give rise to a Lien
(other than Liens that would be covered by valid and collectible insurance,
including applicable deductibles), or acts or incidents which could give rise to
any such claims, relating to or arising out of the Assets or the operation of
the Business. The Assets constitute all assets, properties and rights necessary,
used or useful in or to the Business as presently operated by Seller and as
previously operated by the Vessel Owning Company, and are owned of record and
beneficially by the Vessel Owning Company and, upon consummation of the
Predicate Transaction, the Assets will be owned of record and beneficially by
Seller and not by any affiliate of Seller or any other party. As to each
contract that constitutes part of the Assets, such contract is in full force and
effect, no notice of cancellation or termination or default has been received by
the Vessel Owning Company, Manager, Stockholder or Seller and no event or
condition has occurred or exists which, with notice or lapse of time or both,
would constitute a default thereunder.

         (b) Upon consummation of the Predicate Transaction, Candy Cruiser will
be vested with good, valid and marketable title to all of the Optioned-Vessel
Assets (as defined in Schedule 5.13), free and clear of any Liens, and upon the
sale, assignment, transfer and conveyance of any Optioned-Vessel Assets, at the
closing of the purchase of an Optioned-Vessel pursuant to the exercise of an
option under Section 5.13, to Buyer there will be vested in Buyer, good, valid
and marketable title to such Optioned-Vessel Assets, free and clear of any
Liens. The Optioned-Vessels are duly documented in the name of the
Optioned-Vessel Owning Companies, as the case may be, with the United States
Coast Guard and at the closing of the purchase of an Optioned-Vessel pursuant to
the exercise of an option under Section 5.13, the Candy Cruiser will deliver to
Buyer such documentation as may be required by the United States Coast Guard to
enable Buyer to duly document such Optioned-Vessel in Buyer's name with the
United States Coast Guard and in all existing endorsements and registries. Each
of the Optioned-Vessel Owning Companies has at all times been a citizen of the
United States within the meaning of Section 2 of the Shipping Act of 1916, as
amended, and each of the Optioned-Vessels is and, upon consummation of the
Predicate Transaction, will be under United States flag and qualified to engage
in the coastwise trade. At no time during the period that the Optioned-Vessels
have been owned or operated by Seller, Manager, any of the Optioned-Vessel
Owning Companies or any other affiliate of Seller or the Optioned-Vessel Owning
Companies, as the case may be, have the Optioned-Vessels been sold, chartered or
otherwise transferred to any person in violation of any applicable laws, rules
or regulations. Each Optioned-Vessel will at a minimum, at the Closing Time and
at the closing of the purchase of an Optioned-Vessel pursuant to the exercise of
an option under Section 5.13, have current Certificates (as defined in the
Escrow Agreement and its exhibits), free of reported or reportable exceptions or
notations for record. There are no agreements between the Optioned-Vessel Owning
Companies and the Manager, Stockholder, Seller or any of their affiliates with
respect to the Optioned-Vessel Businesses or any of the Optioned-Vessel Assets
other than management agreements entered into between Manager and 



                                       10

<PAGE>

the Optioned-Vessel Owning Companies (the "OV Management Agreements"), which are
listed in Schedule 2.6 and will be terminated as of the closing of the purchase
of an Optioned-Vessel pursuant to the exercise of an option under Section 5.13.
The Optioned-Vessels are not and, upon consummation of the Predicate
Transaction, the Optioned-Vessels will not be under arrest and/or under
detention pursuant to the order of a competent court or authority and there are
and, upon consummation of the Predicate Transaction, there will be no actual,
pending or threatened claims against any of the Optioned-Vessel Assets that
could give rise to a Lien (other than Liens that would be covered by valid and
collectible insurance, including applicable deductibles), or acts or incidents
which could give rise to any such claims, relating to or arising out of any of
the Optioned-Vessel Assets or the operation of the Optioned-Vessel Businesses.
The Optioned-Vessel Assets constitute all assets, properties and rights
necessary, used or useful in or to the Optioned-Vessel Businesses as presently
operated by the Optioned-Vessel Owning Companies, as the case may be, and are
owned of record and beneficially by the Optioned-Vessel Owning Companies and,
upon consummation of the Predicate Transaction, all of the Optioned-Vessel
Assets will be owned of record and beneficially by Candy Cruiser and not by any
affiliate of Seller or any other party and is operated by Candy Cruiser.

         (c) Except as expressly set forth in Section 2.6(a) and as contemplated
in the Escrow Agreement and its exhibits with respect to the Assets, Buyer
acknowledges that Seller and Manager make no other warranties of any kind
whatsoever concerning the physical condition of the Assets or any warranties
concerning the physical condition of the Optioned-Vessel Assets. Thus, in so far
as the physical condition of the Assets and any of the Optioned-Vessel Assets
are concerned, the sale of the Assets and any of the Optioned-Vessel Assets will
be made, except as expressly set forth in this Section 2.6 and except for any
provisions for repairs or replacements contemplated under this Agreement and in
the Escrow Agreement and its exhibits with respect to the Assets, "as-is, where
is," without warranties, express or implied, as to the design, condition,
merchantability or fitness for a particular purpose, including warranties
against redhibitory defects under Louisiana law. For the avoidance of all doubt,
the parties hereto acknowledge and agree that the immediately preceding sentence
shall not render any of the express representations and warranties set forth in
this Agreement void, nor shall it in any way limit the ability of the parties
hereto to adjust the Purchase Price for any reason expressly contemplated in
this Agreement, the right of the parties hereto relating to the repair or
replacement of any Assets as expressly contemplated in this Agreement and in the
Escrow Agreement and its exhibits, nor the right of any party hereto to seek and
benefit from any right of indemnification to which it may be entitled under this
Agreement.

         2.7 FINANCIAL STATEMENTS. Attached hereto as Appendix A are true and
complete copies of the (i) unaudited balance sheets of the Vessel Owning Company
as of December 31, 2001 and December 31, 2002, (ii) the unaudited statements of
income of the Vessel Owning Company for the years ended December 31, 2001 and
2002, including the notes relating thereto, (iii) copies of the unaudited
interim balance sheets of the Vessel Owning Company as of March 31, 2003 and
(iv) the unaudited interim statements of income of the Vessel Owning Company for
the period from January 1, 2003 through March 31, 2003 (collectively the
"Financial Statements"). The Financial Statements and all detailed schedules
provided with respect thereto, including without limitation schedules with
respect to accounts payable, accounts receivable, accrued liabilities,
inventory, fixed assets, prepaid expenses and other assets and liabilities, are
true and correct in all respects and, taken as a whole, fairly present, in
accordance with generally 



                                       11

<PAGE>

accepted accounting principles consistently applied, the financial position of
the Vessel Owning Company as of the dates indicated and the results of
operations of the Vessel Owning Company for the periods then ended. There are no
assets or properties of Seller, Manager and the Vessel Owning Company that
constitute any part of the Assets or Business, and there are no definite
liabilities or, to the knowledge of Stockholder, Manager or Seller, contingent
liabilities, that are not reflected in the Financial Statements and such
detailed schedules.

         2.8 CUSTOMARY BUSINESS PRACTICE. Neither Stockholder, Seller nor
Manager, or any officer, director, employee or agent of such parties acting on
behalf of any such parties has made or authorized the making of, directly or
indirectly, any offer, payment, promise to pay, or authorization of the payment
of any money, or offer, gift, promise to give, or authorization of the giving of
anything of value to:

         (a) any political party or official thereof or any candidate for
political office; or

         (b) any customer, supplier or competitor of Stockholder, Seller,
Manager or any employee, agent, officer or director thereof, as applicable;

in violation of applicable law in order to assist any of the referenced parties
in obtaining or retaining business for or with, or directing business to, any
person.

         2.9 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except for the Predicate
Transaction and the execution of agreements to effect the Predicate Transaction,
there has not been, occurred or arisen any of the following that relate to the
Business or the Assets since December 31, 2002:

         (a) any transaction by Seller except in the ordinary course of
business;

         (b) any capital expenditure by Seller;

         (c) any change in, or any event, condition or state of facts of any
character peculiar to the Assets or the operation of the Business that
individually or in the aggregate adversely affects the Business or the Assets,
or that affects the validity or enforceability of this Agreement;

         (d) any destruction, damage, or loss suffered by the Business or with
respect to any Asset (whether or not covered by insurance) in excess of
$1,000.00;

         (e) any increase in the salary or other compensation, including without
limitation all wages, salary, deferred payment arrangements, bonus payments and
accruals, profit sharing arrangements, payment in respect of stock options or
phantom stock options or similar arrangements, stock appreciation rights or
similar rights, incentive payments, pension or employment benefit contributions
or similar payments, payable or to become payable by Seller or Manager to any of
its vessel-based employees, or the declaration, payment or commitment or
obligation of any kind for the payment by Seller or Manager of a bonus or
increased or additional salary or compensation to any such person;

         (f) any sale, lease or other disposition of any Asset; except for any
charter agreements that may be entered into prior to Closing which constitute
Permitted Liens;



                                       12

<PAGE>

         (g) any mortgage, pledge, or other encumbrance of any Asset;

         (h) any amendment or termination of any Assumed Contract, except in the
ordinary course of business;

         (i) any breach of the terms of any contract or agreement that is
material to the Business;

         (j) any commencement, notice of commencement or threat of commencement
of any litigation or any governmental proceeding against or investigation of
Seller or Manager or the affairs of Seller or Manager;

         (k) any issuance or sale by Seller, other than to Stockholder, of any
of Seller's capital stock of any class, or of any other of its securities or
other ownership interest, or any commitment, obligation or agreement to do so;

         (l) any liabilities that have not been disclosed in the Financial
Statements, other than those incurred in the ordinary course of business since
December 31, 2002;

         (m) any waiver or release of any right or claim of Seller;

         (n) any amendment to any national, federal, state, municipal, local,
foreign or other tax returns or reports that have been filed in any
jurisdiction;

         (o) any transactions by Seller with an affiliate or related party;

         (p) any change by Seller in accounting methods or principles applicable
to the Business or the Assets that would be required to be disclosed under
generally accepted accounting principles;

         (q) any entry into any commitment of any kind, or the occurrence of any
event giving rise to any contingent liability not covered by the foregoing that
would have a material adverse effect on the Assets or the Business;

         (r) any change in the manner in which any of the Assets have been
historically maintained or repaired; or

         (s) any contract, commitment or agreement to do any of the foregoing.

         2.10 ABSENCE OF DEFAULTS. Neither Seller, Manager nor Stockholder is in
default, and no event has occurred which with notice or lapse of time or both
would constitute a default, in any way under any term or provision of any
agreement or instrument to which Seller, Manager or Stockholder is a party or by
which Seller, Manager or Stockholder is bound that relates to or would affect
the Business or by or to which any of the Assets is bound or subject or that
could adversely affect the ability of Seller, Manager or Stockholder to
consummate the transactions contemplated hereby.



                                       13

<PAGE>

         2.11 COMPLIANCE WITH LAWS. There has been no failure by Seller, Manager
or Stockholder to comply with any federal, state or local law, statute,
ordinance, rule or regulation in any respect that could have an adverse effect
on Buyer's ability to conduct normal operations of the Business with the Assets
after the Closing or on the ability of Seller, Manager or Stockholder to
consummate the transactions contemplated hereby.

         2.12 TAX RETURNS AND REPORTS. All federal, state, local and foreign
income, excise, property, sales, use, payroll, informational and other tax
returns and reports of the Seller (collectively, the "Tax Returns") have been
timely filed (including pursuant to extensions) with the appropriate
governmental agencies in all jurisdictions in which such returns and reports are
required to be filed, and all such returns and reports properly reflect the
taxes of Seller for the periods covered thereby. All federal income, excise and
payroll taxes, and, only insofar as the same relates to the Business and Assets,
all state, local and foreign income, excise, property, sales and use taxes,
assessments, interest, penalties, deficiencies, fees and other governmental
charges or impositions which are reflected as due by the Tax Returns, or which
are due or are claimed to be due with respect to the periods covered thereby,
from Seller (the "Taxes"), have been properly accrued or paid. Seller has not
received any notice of assessment or proposed assessment by the Internal Revenue
Service ("IRS") or any other taxing authority in connection with any Tax Returns
and there are no pending tax examinations of any Tax Returns of or tax claims in
respect of the Tax Returns asserted against Seller or the Assets. There has been
no disregard of any applicable statute, regulation, rule or revenue ruling in
the preparation of any Tax Return applicable to Seller. There are no tax liens
on any of the Assets except for Liens for current taxes not yet due and payable.
There is no basis for any additional assessment of any Taxes, penalties or
interest with respect to Seller that would affect the Assets or the Business.
Seller has not waived any law or regulation fixing, or consented to the
extension of, any period of time for assessment of any Taxes which waiver or
consent is currently in effect.

         2.13 LITIGATION. (a) Except as set forth in Schedule 2.13, there are no
actions, claims, suits, investigations, inquiries or proceedings pending against
Seller, Manager or Stockholder or in rem against any of the Assets or threatened
against Seller, Manager or Stockholder or in rem against any of the Assets, at
law or in equity, in any court, or before or by any federal, state, municipal or
other governmental department, commission, board, bureau, agency or other
instrumentality which could be expected to (i) affect the validity or
enforceability of this Agreement or the documents contemplated hereby to be
executed by Seller, Manager and/or Stockholder, (ii) restrict the continuing
transaction of business with the customers of the Business, (iii) delay
consummation of the transactions contemplated hereby or (iv) establish a Lien
against any of the Assets; and (b) neither Seller, Manager nor Stockholder is in
violation of any order, decree, judgment, award, determination, ruling or
regulation of any court, governmental department, commission, board, bureau,
agency or other instrumentality, the result of which violation individually or
violations in the aggregate has had or could be expected to have an adverse
effect on the Business or the Assets or could be expected to (i) affect the
validity or enforceability of this Agreement or the documents contemplated to be
executed by Seller, Manager and/or Stockholder, (ii) restrict the continuing
transaction of business with the customers of the Business or the documents
contemplated hereby to be executed by Seller, Manager and/or Stockholder, (iii)
delay consummation of the transactions contemplated hereby; or (iv) establish a
Lien against any of the Assets.



                                       14

<PAGE>

         2.14 CUSTOMERS AND SUPPLIERS. Schedule 2.14 lists the names and
addresses of the customers and suppliers of Seller and the Vessel Owning Company
since January 1, 2002. The relationships of Seller and the Vessel Owning Company
with the customers and suppliers listed in Schedule 2.14 are satisfactory, and
neither Seller, Manager nor Stockholder is aware of any unresolved disputes with
any of such customers or suppliers. Since January 1, 2003, no customer or
supplier has canceled, limited or notified Seller or the Vessel Owning Company
in writing of its intent to cancel, not renew or limit its relationship with
Seller or the Vessel Owning Company for any reason including without limitation
as a result of complaints concerning the Assets.

         2.15 INVENTORIES. All supply inventories are or have been carried, as
applicable, on the books of the Seller or the Vessel Owning Company at the lower
of cost or market. No items of the supply inventory of Seller constituting part
of the Assets are or will be pledged as collateral, except for pledged
inventories that will be released or discharged as of the Closing Time by
Seller's and the Vessel Owning Company's lenders, or are held by Seller or other
parties on consignment from others. Seller is not committed as of the date
hereof, and will not be committed as of the Closing Time, to purchase supply
inventories for the Business or otherwise in amounts greater than are required
in the ordinary course of business. With respect to supply inventories in the
hands of suppliers for which Seller will be committed as of the Closing Time,
such inventories will be usable in the ordinary course of business as presently
being conducted.

         2.16 ERISA AND RELATED MATTERS.

         (a) Definitions.

                  (i) Benefit Arrangement shall mean any employment, consulting,
         severance or other similar contract, arrangement or policy, any plan
         through which participants are provided with a choice between cash and
         qualified benefits under Section 125 of the Code and each plan,
         arrangement (written or oral), program, agreement or commitment
         providing for insurance coverage (including without limitation any
         self-insured arrangements), workers' compensation, disability benefits,
         supplemental unemployment benefits, vacation benefits, retirement
         benefits, life, health, disability or accident benefits (including
         without limitation any "voluntary employees' beneficiary association"
         as defined in Section 501(c)(9) of the Code providing for the same or
         other benefits) or for deferred compensation, profit-sharing bonuses,
         stock options, restricted stock, phantom stock, stock appreciation
         rights, stock purchases or other forms of incentive compensation or
         post-retirement insurance, compensation or benefits that (1) is not a
         Welfare Plan, Pension Plan or Multiemployer Plan, (2) is (or was within
         the six-year period ending on the Closing Date) entered into,
         maintained, contributed to or required to be contributed to, as the
         case may be, by Seller, Manager, Stockholder or any ERISA Affiliate,
         and (3) covers any current or former employee, leased employee (within
         the meaning of Section 414(n) of the Code), director or consultant of
         Seller, Manager, Stockholder or any ERISA Affiliate (with respect to
         their relationship with such entities).

                  (ii) COBRA shall mean Section 4980B of the Code and Sections
         601 through 608 of ERISA, as amended, and the Regulations promulgated
         thereunder.



                                       15

<PAGE>

                  (iii) Code shall mean the Internal Revenue Code of 1986, as
         amended, and the Regulations promulgated thereunder.

                  (iv) Court shall mean any court, tribunal or other judicial or
         arbitral panel of the United States, any foreign country or any
         domestic or foreign state and any political subdivision or agency
         thereof.

                  (v) Employee Plans shall mean all Benefit Arrangements,
         Multiemployer Plans, Pension Plans and Welfare Plans.

                  (vi) ERISA shall mean the Employee Retirement Income Security
         Act of 1974, as amended, and the Regulations promulgated thereunder.

                  (vii) ERISA Affiliate shall mean any entity which is (or at
         any relevant time was) a member of a "controlled group of corporations"
         with, under "common control" with, or a member of an "affiliated
         service group" with Seller, Manager or Stockholder as such terms are
         defined in Section 414(b), (c), (m) or (o) of the Code.

                  (viii) Laws shall mean all laws, statutes, ordinances, rulings
         and Regulations of the United States, any foreign country or any
         domestic or foreign state and any political subdivision or agency
         thereof, including all decisions of Courts having the effect of law in
         each such jurisdiction.

                  (ix) Multiemployer Plan shall mean any "multiemployer plan,"
         as defined in Sections 3(37) or 4001(a)(3) of ERISA, that (i) is (or
         was within the six-year period ending on the Closing Date) entered
         into, maintained, administered, contributed to or required to be
         contributed to, as the case may be, by Seller, Manager, Stockholder or
         any ERISA Affiliate and (ii) covers any employee, former employee or
         leased employee (within the meaning of Section 414(n) of the Code) of
         Seller, Manager, Stockholder or any ERISA Affiliate (with respect to
         their relationship with such entities).

                  (x) PBGC shall mean the Pension Benefit Guaranty Corporation.

                  (xi) Pension Plan shall mean any "employee pension benefit
         plan" as defined in Section 3(2) of ERISA (other than a Multiemployer
         Plan) that (1) is (or was within the six-year period ending on the
         Closing Date) entered into, maintained, administered, contributed to or
         required to be contributed to, as the case may be, by Seller, Manager,
         Stockholder or any ERISA Affiliate and (2) covers any current or former
         employee, leased employee (within the meaning of Section 414(n) of the
         Code), director or consultant of Seller, Manager, Stockholder or any
         ERISA Affiliate (with respect to their relationship with such
         entities).

                  (xii) Regulation shall mean any rule or regulation of any
         governmental authority having the effect of law.

                  (xiii) Welfare Plan shall mean any "employee welfare benefit
         plan" as defined in Section 3(1) of ERISA, that (1) is (or was within
         the six-year period ending on the Closing Date) entered into,
         maintained, administered, contributed to or required to be 



                                       16

<PAGE>

         contributed to, as the case may be, by Seller, Manager, Stockholder or
         any ERISA Affiliate and (2) covers any current or former employee,
         leased employee (within the meaning of Section 414(n) of the Code),
         director or consultant of Seller, Manager, Stockholder or any ERISA
         Affiliate (with respect to their relationship with such entities).

         (b) Seller, Manager and Stockholder jointly and severally represent and
warrant as follows:

                  (i) Pension Plans. There are no Pension Plans, and none of
         Seller, Manager, Stockholder or any ERISA Affiliate has ever
         maintained; contributed, had any obligation to contribute, or incurred
         any liability for contributions to; or participated or agreed to
         participate in any Pension Plan.

                  (ii) Multiemployer Plans. There are no Multiemployer Plans,
         and none of Seller, Manager, Stockholder or any ERISA Affiliate has
         ever maintained, contributed to, or participated or agreed to
         participate in any Multiemployer Plan. None of Manager, Stockholder,
         Seller or any ERISA Affiliate has ever withdrawn, partially or
         completely, or instituted steps to withdraw, whether partially or
         completely, from any Multiemployer Plan, nor has any event occurred
         that would enable a Multiemployer Plan to give notice of and demand
         payment of any withdrawal liability with respect to Seller, Manager,
         Stockholder or any ERISA Affiliate.

                  (iii) Welfare Plans. Each Welfare Plan is in material
         compliance with its terms and, both as to form and operation, with the
         requirements prescribed by any and all Laws that are applicable to such
         Welfare Plan, including without limitation ERISA and the Code.

                  (iv) An aggregate estimate of the liabilities of Seller,
         Manager, Stockholder and any ERISA Affiliate for providing retiree life
         and medical benefits coverage to active and retired employees of
         Seller, Manager, Stockholder and any ERISA Affiliate has been made and
         is reflected on the appropriate balance sheet and books and records
         according to Statement of Financial Accounting Standards No. 106.
         Seller, Manager, Stockholder and any ERISA Affiliate have the right to
         modify or terminate any Welfare Plans that provide coverage or benefits
         for either or both retired and active employees and/or their
         beneficiaries.

                  (v) Each Welfare Plan that is a "group health plan," as
         defined in Section 607(1) of ERISA or Section 5000(b)(1) of the Code,
         has been operated at all times in material compliance with provisions
         of Part 6 and 7 of Title I, Subtitle B of ERISA, Sections 1171 through
         1179 of the Social Security Act (relating generally to security and
         electronic transfer of health information) and Sections 4980B, 9801 and
         9833 of the Code at all times.

                  (vi) Each Welfare Plan or Benefit Arrangement that is a
         "health plan" within the meaning of 45 C.F.R. Parts 160 and 164, but
         not a "small health plan" within the meaning of 45 C.F.R. Parts 160 and
         164, satisfies the privacy requirements described in 



                                       17

<PAGE>

         the Regulations issued under sections 262 and 264 of the Health
         Insurance Portability and Accountability Act of 1996.

                  (vii) No Welfare Plans are self-insured "multiple employer
         welfare arrangements" as such term is defined in Section 3(40) of
         ERISA.

                  (viii) Benefit Arrangements. Each Benefit Arrangement is in
         material compliance with its terms and with the requirements prescribed
         by any and all Laws that are applicable to such Benefit Arrangement,
         including without limitation the Code.

                  (ix) Fiduciary Duties and Prohibited Transactions. None of
         Seller, Manager, Stockholder or any ERISA Affiliate has any liability
         with respect to any transaction that relates to any Pension Plan or any
         Welfare Plan and that is in violation of Sections 404 or 406 of ERISA
         or which constitutes a "prohibited transaction," as defined in Section
         4975(c)(1) of the Code and for which no exemption exists under Section
         408 of ERISA or Section 4975(c)(2) or (d) of the Code. None of Seller,
         Manager, Stockholder or any ERISA Affiliate has participated in a
         violation of Part 4 of Title I, Subtitle B of ERISA by any plan
         fiduciary of any Welfare Plan or Pension Plan and has no unpaid civil
         penalty under Section 502(1) of ERISA.

                  (x) Litigation. There is no action, order, writ, injunction,
         judgment or decree outstanding or claim, suit, litigation, proceeding,
         arbitral action, governmental audit or investigation (including without
         limitation any such audit or investigation by the Internal Revenue
         Service, Department of Labor or PBGC) relating to or seeking benefits
         under any Employee Plan that is pending or, to the knowledge of Seller,
         Manager or Stockholder, threatened or anticipated against Seller,
         Manager, Stockholder or any ERISA Affiliate other than routine claims
         for benefits. No Employee has any claim against Seller, Manager or
         Stockholder (whether under federal or state law, any employment
         agreement or otherwise) on account of or for (1) overtime pay, other
         than overtime pay for the current payroll period; (2) wages or salary
         for any period other than the current payroll period; (3) vacation,
         time off, sick time or pay in lieu of any of the foregoing (except as
         the same has arisen in the ordinary course of business under Seller's,
         Manager's or Stockholder's existing plans and policies); or (4) any
         violation of any statute, ordinance or regulation relating to minimum
         wages or maximum hours of work. No employee has any claim or, to the
         knowledge of Seller, Manager or Stockholder, basis for any action or
         proceeding against Seller, Manager or Stockholder, arising under any
         statute, ordinance or regulation relating to discrimination in
         employment or employment practices, occupational safety and health
         standards or workers' compensation.

                  (xi) Unpaid Contributions. None of Seller, Manager,
         Stockholder or any ERISA Affiliate has any liability for unpaid
         contributions with respect to any Employee Plan, and Seller, Manager,
         Stockholder and all ERISA Affiliates have made all required
         contributions and paid all accrued liabilities under each Employee Plan
         for all periods through and including the Closing Date. For purposes of
         the preceding sentence, accrued liability shall include a pro rata
         contribution to each Employee Plan for that portion of a plan year or
         other applicable period that precedes the Closing Date, and accrued
         liabilities for any portion of a plan year or other applicable period
         shall be determined by 



                                       18

<PAGE>

         multiplying the liability for the entire such year or period by a
         fraction, the numerator of which is the number of days preceding the
         Closing Date in such year or period, and the denominator of which is
         the number of days in such year or period, as the case may be.

                  (xii) Change of Control Payments and Compensation Reduction
         Limitations. The execution of this Agreement and the consummation of
         the transactions contemplated hereby will not result in any payment
         (whether of separation pay or otherwise) becoming due from Seller,
         Manager, Stockholder or any ERISA Affiliate to any current or former
         employee, director or consultant, or result in the vesting,
         acceleration of payment or increase in the amount of any benefit
         payable to or in respect of any such current or former employee,
         director or consultant of Seller, Manager, Stockholder or any ERISA
         Affiliate. There is no contract, agreement, plan or arrangement
         covering any current or former employee, director, or consultant of
         Seller, Manager, Stockholder or any ERISA Affiliate that, individually
         or collectively, could give rise to the payment of any amount that
         would not be deductible pursuant to the terms of Sections 162(a)(1),
         162(m), and/or 280G of the Code or would require the payment of an
         excise tax imposed by Section 4999 of the Code or of any gross up of
         any such excise tax.

                  (xiii) Copies of Documentation. Seller, Manager and
         Stockholder have delivered to Buyer pursuant to this Agreement a true
         and complete set of copies of (1) all Employee Plans and related trust
         agreements, annuity contracts or other funding instruments as in effect
         immediately before the Closing Date, together with all amendments
         thereto that shall become effective at a later date; (2) the latest
         Internal Revenue Service determination letter obtained with respect to
         any such Employee Plan qualified or exempt under Section 401 or 501 of
         the Code; (3) annual reports (Form 5500 series or the alternative
         filing, if applicable, under ERISA Regulation Section 2520.104-23) and
         certified financial statements for the most recently completed three
         fiscal years for each Employee Plan required to file such form,
         together with the most recent actuarial report, if any, prepared by the
         Employee Plan's enrolled actuary; (4) all summary plan descriptions for
         each Employee Plan required to prepare, file and distribute summary
         plan descriptions; (5) copies of all documentation relating to the
         correction of Pension Plan defects under IRS Employee Plans Compliance
         Resolution System or any predecessor or similar IRS program; (6) all
         summaries furnished or made available to employees, officers and
         directors of Seller, Manager, Stockholder or any ERISA Affiliate, as
         applicable, of all incentive compensation, other plans and fringe
         benefits for which a summary plan description is not required; (7)
         current registration statements on Form S-8 and amendments thereto with
         respect to any Employee Plan; and (8) the notifications to employees of
         their rights under COBRA and (9) copies of all employee leasing
         agreements, in any form, regarding the vessel-based employees described
         in Section 5.9 of this Agreement that are employed in the Business
         entered into by Manager, the Seller or the Vessel Owning Company. A
         list of all Employee Plans is attached as Schedule 2.16 to this
         Agreement.

                  (xiv) Sarbanes-Oxley Act Compliance. Seller, Manager,
         Stockholder and each ERISA Affiliate have complied in all material
         respects with all aspects and requirements of the Sarbanes-Oxley Act of
         2002 and the Regulations promulgated pursuant thereto 



                                       19

<PAGE>

         applicable to any Employee Plans maintained by Seller, Manager,
         Stockholder and each ERISA Affiliate.

         2.17 CONTRACTS AND COMMITMENTS. Schedule 2.17 contains a true, complete
and correct list (and Seller has previously delivered to Buyer true, complete
and correct copies) of all of the following documents or agreements, or
summaries of material oral agreements or understandings, directly relating to
the Business or primarily to the Assets to which, on the date of this Agreement,
Seller, Manager or Stockholder is a party, or which directly affect the
Business, the Assets or the transactions contemplated hereby and all documents
or agreements which may require any action or consent in connection with such
transactions, as they may have been amended to the date hereof:

         (a) any written employment or consulting agreement, contract or
commitment with any Vessel-based employee or any contract or agreement with
other consultants; 

         (b) any agreement, contract or commitment with any party containing any
covenant limiting the ability of Seller, Stockholder or any Vessel-based
employee of Seller or Manager to engage in business or to compete in any
location or with any person;

         (c) any agreement, contract or commitment relating to the future
disposition or acquisition of any investment in any party or of any interest in
any business enterprise involving the Business or the Assets;

         (d) any contract or commitment for capital expenditures or the
acquisition or construction of fixed assets;

         (e) any contract or commitment for the sale or furnishing of materials,
supplies, merchandise, equipment or services;

         (f) any written agreement, instrument or other arrangement, or any
unwritten agreement, contract, commitment or other arrangement, between or among
Seller and any of the affiliates of parties related to Seller;

         (g) any contract which grants to any person a preferential right to
purchase any of the assets or properties of Seller;

         (h) any contract, agreement or commitment with respect to the discharge
or removal of a Contaminant (as defined in Section 2.23 below) other than in the
ordinary course of business; and

         (i) any other agreement or instrument not made in the ordinary course
of business.

There is no course of dealing, waiver, side agreement, arrangement or
understanding applicable to any such contract of Seller, Manager or Stockholder.

         2.18 PATENTS, TRADEMARKS AND COPYRIGHTS. Seller neither owns nor is a
licensee or sublicensee of any patents, trademarks, copyrights or other
intellectual property rights relating to the Business or Assets except for (i)
such rights that are incorporated by the manufacturers into 



                                       20

<PAGE>

the Assets, without granting Seller any specified rights therein; and (ii)
software license agreements and related contracts relating to the Business or
the Assets, pursuant to which the payment of all costs, fees and royalties have
been duly and timely paid by Seller or its predecessors and no event of default
has occurred thereunder. There have been no claims made, and neither Seller,
Manager or Stockholder has received any notice and does not otherwise know or
have reason to believe that the operation of the Business or any of the Assets
is in conflict with the rights of others.

         2.19 INSURANCE. Schedule 2.19 sets forth a true, complete and correct
list of all insurance policies of any kind or nature covering the Business and
the Assets, including without limitation policies of life, fire, theft, employee
fidelity, worker's compensation, property and other casualty and liability
insurance, and indicates the type of coverage, name of insured, the insurer, the
premium, the expiration date of each policy and the amount of coverage for
statutory workers' compensation. Schedule 2.19 also sets forth a list of any
currently pending claims and any claims asserted under such policies or similar
policies with respect to the Business or Assets within the last three (3) years.
The premiums for the insurance policies listed in Schedule 2.19 have been fully
paid. The insurance afforded under such policies or certificates is in full
force and effect and will continue to cover the Business and the Assets through
the Closing. True, complete and correct copies of each such policy have been
made available to Buyer.

         2.20 EMPLOYEES. Schedule 2.20 lists all vessel-based employees of
Seller and Manager relating to the Business, the dates of hire and the rates of
pay for each such employee, and all commission, bonus or other compensation or
expense reimbursement or allowance arrangements between Seller, Manager and any
such employees. Schedule 2.20 lists each management or employment contract or
contract for personal services and a description of any understanding or
commitment between Seller, Manager and any vessel-based employee, independent
contractor or other person or entity. A true and complete copy of such contracts
and a description of such understandings and commitments has been delivered to
Buyer. Neither Seller nor Manager has at any time prior to the Closing Date
made, and neither will thereafter make, any statement or communication of any
kind regarding whether, or the terms and conditions upon which, any such
vessel-based employee may be employed by Buyer, unless expressly requested to do
so in writing by Buyer.

         2.21 LABOR AGREEMENTS; DISPUTES. Neither Seller nor Manager is a party
to or has any obligation under any collective bargaining agreement or other
labor union contract, white paper or side agreement with any labor union or
organization, nor any obligation to recognize or deal with any labor union or
organization. There are no pending or overtly threatened representation
campaigns, elections or proceedings or questions concerning union representation
involving any vessel-based employees of Seller or Manager engaged in the
Business. There are no overt activities or efforts of any labor union or
organization (or representatives thereof) to organize any vessel-based employees
engaged in the Business, nor of any demands for recognition or collective
bargaining, nor of any strikes, slowdowns, work stoppages or lock-outs of any
kind, or overt threats thereof, by or with respect to any of its vessel-based
employees, or any actual or claimed representatives thereof, and no such
activities, efforts, demands, strikes, slowdowns, work stoppages or lock-outs
occurred during the three-year period preceding the date hereof. There are no
charges or complaints involving any federal, state or local civil rights
enforcement agency or court; complaints or citations under the Occupational
Safety and Health Act or any 



                                       21

<PAGE>

state or local occupational safety act or regulation; unfair labor practice
charges or complaints with the National Labor Relations Board; or other claims,
charges, actions or controversies pending, or threatened or proposed, involving
Seller or Manager and any vessel-based employee, former employee or any labor
union or other organization representing or claiming to represent such
employees' interests, which could adversely affect the Business. Each of Seller
and Manager is and has heretofore been in compliance in all material respects
with all laws, rules and regulations respecting employment and employment
practices, terms and conditions of employment and wages and hours, the
sponsorship, maintenance, administration and operation of (or the participation
of its vessel-based employees in) employee benefit plans and arrangements and
occupational safety and health programs, and neither Seller nor Manager is
engaged in any violation of any law, rule or regulation related to employment,
including unfair labor practices or acts of employment discrimination, which
could adversely affect the Business.

         2.22 REGULATORY FILINGS. Seller and Manager have filed all reports,
statements, documents, registrations, filings or submissions required, in
connection with the operation of the Business or the Assets, to be filed by
Seller or Manager with any federal, state, municipal or other governmental
department, commission, board, bureau, agency or other instrumentality. All such
filings complied with applicable law when filed and no deficiencies have been
asserted by any such regulatory authority with respect to such filings or
submissions.

         2.23 ENVIRONMENTAL AND HEALTH AND SAFETY MATTERS.

         (a) As used in this Section 2.23(a) and Section 2.23(b) all terms
appearing in initial capitals shall have the meaning given them in Section
2.23(b) hereof. With respect to the Business and the Assets, (i) the operations
of Seller and Manager comply in all material respects with all applicable
environmental, health and safety statutes, treaties, conventions, rules,
ordinances, and regulations in all jurisdictions in which Seller and Manager
conducts business, including without limitation all Domestic Environmental Laws
and Foreign Environmental Laws applicable to the jurisdictions in which
operations are conducted; (ii) none of the operations of Seller or Manager are
subject to any judicial or administrative proceeding alleging the violation of
any Domestic Environmental Law or Foreign Environmental Law; (iii) none of the
operations of Seller or Manager are the subject of any federal or state
investigation evaluating whether any Remedial Action is needed to respond to a
Release of any Contaminant or other substance into the environment; (iv) neither
Seller nor Manager has any notice under any Domestic Environmental Law or
Foreign Environmental Law applicable to the jurisdiction in which operations of
Seller or Manager are conducted indicating past or present treatment, storage or
disposal of a hazardous waste or reporting a Release of a Contaminant or other
substance into the environment; (v) neither Seller nor Manager has any
contingent liability in connection with any Release of any Contaminant or other
substance into the environment, including without limitation any contingent
liability for failure to report a Release involving a Vessel; (vi) none of the
operations of Seller or Manager involve the generation, transportation,
treatment or disposal of hazardous waste, as defined under 40 C.F.R. Parts
260-270 (in effect as of the date of this Agreement) or any state equivalent
thereof, in violation of any Domestic Environmental Law or Foreign Environmental
Law applicable to the jurisdiction in which operations of Seller or Manager are
conducted, including without limitation statutes, regulations and laws
pertaining to permits and manifests; (vii) no Lien in favor of any governmental
authority for (A) any liability under Domestic Environmental Laws or Foreign
Environmental Laws applicable to the 



                                       22

<PAGE>

jurisdiction in which operations of Seller or Manager with respect to the
Business are conducted, or (B) damages arising from or costs incurred by such
governmental authority in response to a release of a Contaminant or other
substance into the environment has been filed or attached to any of the Assets;
(viii) neither Seller or Manager has Released any Contaminant from the Vessel
into waters of the United States or other navigable waters in violation of any
Domestic Environmental Law or any Foreign Environmental Law; (ix) neither Seller
or Manager have received notice of any violation of any Domestic Environmental
Law or any Foreign Environmental Law based on past Releases of any Contaminant
into waters of the United States or other navigable waters; and (x) neither
Seller or Manager know of any Environmental Claims by any person based on
alleged exposure(s) to any Contaminant resulting from the operations of the
Business or the Assets.

         (b) Environmental Definitions. Each of the following terms shall have
the meaning indicated below:

                  "Contaminant" shall mean those substances or materials that
         are defined as hazardous or toxic or that are regulated by or form the
         basis of liability under any Domestic Environmental Law or Foreign
         Environmental Law, including without limitation asbestos,
         polychlorinated biphenyls ("PCBs"), and radioactive substances, or any
         other material or substance that constitutes a health, safety or
         environmental hazard to any person or property.

                  "Domestic Environmental Laws" shall mean all federal, state or
         local laws relating to health, safety or the environment, including
         without limitation the Comprehensive Environmental Response,
         Compensation and Liability Act ("CERCLA") (42 U.S.C. Section 9601 et
         seq.), the Hazardous Material Transportation Act (49 U.S.C. Section
         1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C.
         Section 6901 et seq.), the Clean Air Act (42 U.S.C. 7401 et seq.), the
         Clean Water Act (33 U.S.C. Section 1251 et seq.), the Toxic Substances
         Control Act, as amended (15 U.S.C. Section 2601 et seq.), the National
         Environmental Policy Act (42 U.S.C. Section 4321 et seq.), the Oil
         Pollution Act (33 U.S.C. Section 2701 et seq.), the Occupational Safety
         and Health Act (29 U.S.C. Section 651 et seq.), the Marine Protection,
         Research, and Sanctuaries Act (33 U.S.C. Section 1401 et seq.), the
         Outer Continental Shelf Lands Act (43 U.S.C. Section 1331 et seq.) and
         the Act to Prevent Pollution from Ships (33 U.S.C. Sections 1901-1912,
         including without limitation Annexes I, II and V of the International
         Convention for the Prevention of Pollution from Ships, 1973, as
         modified by the Protocol of 1978 relating thereto (MARPOL 73/78) done
         at London on February 17, 1978), as these laws have been amended or
         supplemented, and any analogous state or local statutes, rules or
         ordinances and the regulations promulgated pursuant thereto.

                  "Environmental Claim" shall mean any accusation, allegation,
         notice of violation, claim, demand, abatement or other order or
         direction (conditional or otherwise) by any governmental authority or
         any person for personal injury (including sickness, disease or death),
         tangible or intangible property damage, damage to the environment,
         nuisance, pollution, contamination or other adverse effects on the
         environment, or for fines, penalties or restrictions, resulting from or
         based upon (i) the existence, or the continuation of the existence, of
         a Release (including without limitation sudden or non-



                                       23

<PAGE>

         sudden, accidental or non-accidental Releases) of or exposure to any
         Contaminant, odor or audible noise, into or onto the environment
         (including without limitation the air, ground, water or any surface)
         at, in, by, from or related to the Business or the Assets, (ii) the
         transportation, storage, treatment or disposal of materials in
         connection with the operation of the Business or Assets, (iii) the
         violation or alleged violation of any statutes, ordinances, orders,
         rules, regulations, Permits or licenses of or from any governmental
         authority, agency or court relating to environmental matters connected
         with the Business or the Assets or (iv) any other violation of any
         Domestic Environmental Laws or Foreign Environmental Laws.

                  "Foreign Environmental Laws" shall mean any applicable
         international treaties or conventions and the environmental health and
         safety statutes, rules and regulations of non-U.S. jurisdictions in
         which Seller and Manager conduct business.

                  "Permit" shall mean any permit, approval, authorization,
         license variance, or permission required from a governmental authority
         under any applicable Domestic Environmental Laws or Foreign
         Environmental Laws.

                  "Release" shall mean any release, spill, emission, leaking,
         pumping, injection, deposit, disposal, discharge, dispersal, leaching,
         or migration into the indoor or outdoor environment, or into or out of
         any property owned or leased by Seller or Manager, including the
         movement of any Contaminant through or in the air, soil, surface water,
         groundwater, or property and including without limitation the meanings
         of such words as set forth in the laws, applicable treaties, rules,
         ordinances or regulations or analogous governmental provisions referred
         to under Domestic Environmental Laws or Foreign Environmental Laws.

                  "Remedial Action" shall mean all actions required or
         voluntarily undertaken to (1) clean up, remove, treat, or in any other
         way address any Contaminant in the indoor or outdoor environment; (2)
         prevent the Release or threat of Release, or minimize the further
         Release of any Contaminant so it does not migrate or endanger or
         threaten to endanger public health or welfare of the indoor or outdoor
         environment; or (3) perform pre-remedial studies and investigations and
         post-remedial monitoring and care.

         2.24 BROKERS/ADVISORS. All negotiations with respect to this Agreement
and the transactions contemplated hereby have been carried out by Seller,
Manager and Stockholder directly with Buyer, without the intervention of any
person on behalf of Seller, Manager or Stockholder in such manner as to give
rise to any valid claim by any person against Buyer for a finder's fee,
brokerage commission or similar payment.

         2.25 DISCLOSURE. Each response by Seller, Manager and/or Stockholder by
or through its officers, employees or other representatives to inquiries in
connection with the due diligence performed by representatives of Buyer, as
revised or updated by subsequent disclosures and this Agreement, was complete
and accurate in all material respects. Copies of the most recent versions of all
documents and other written information referred to herein or in the schedules
that have been delivered or made available to Buyer are true, correct and
complete copies thereof and include all amendments, supplements or modifications
thereto or waivers thereunder. Such 



                                       24

<PAGE>

documents and other written information do not omit any material facts
necessary, in light of the circumstances under which such information was
furnished, to make the statements set forth therein not misleading. Except as
expressly set forth in this Agreement and the schedules or in the certificates
or other documents delivered pursuant hereto, there are no other facts which
will or may reasonably be expected to have any materially adverse effect on the
value of the Business or the Assets.

         2.26 TRANSACTIONS WITH AFFILIATES. There are no contracts or
arrangements (formal or informal, written or oral) related directly or
indirectly to the Business or the Assets between Seller and any other persons
controlling, under common control with or controlled by Seller, Manager or
Stockholder which will not be terminated effective at the Closing Time, provided
that the termination of any such contracts or arrangements shall not have an
adverse effect on the Business or the Assets or on the ability of Buyer to
operate the Business or Assets after the Closing.

         2.27 CONSOLIDATED GROUP. The Seller is not and has not since its
incorporation been treated as a member of a consolidated group for purposes of
the preparation of financial statements or of tax returns including the Seller.

         2.28 NO MARAD FINANCINGS OR GUARANTEES. The United States Maritime
Administration ("MARAD") has not financed or guaranteed any obligation of
Seller, Manager, Stockholder, the Vessel Owning Company or any of their
respective affiliates with respect to the Vessel.

         2.29 ACTIONS BY VESSEL OWNING COMPANY AND OPTIONED-VESSEL OWNING
COMPANIES. The representations or warranties set forth above in Sections 2.4,
2.5, 2.6, 2.7, 2.8, 2.9, 2.10, 2.11, 2.12, 2.13, 2.14, 2.15, 2.16, 2.21, 2.22,
2.23, 2.25 or 2.26, irrespective of whether same is made by Manager, Stockholder
and/or Seller, would not be in breach if such representations or warranties were
made by the Vessel Owning Company. The representations or warranties set forth
above in Sections 2.1, 2.2, 2.3, 2.4, 2.5, 2.6(b), 2.7, 2.8, 2.9, 2.10, 2.11,
2.12, 2.13, 2.14, 2.15, 2.16, 2.19, 2.20, 2.21, 2.22, 2.23 (except that no
representations and warranties with respect to asbestos shall be made), 2.24,
2.25, 2.26, 2.27, 2.28 and 2.9, irrespective of whether same is made by Manager,
Stockholder and/or Seller, would not be in breach if such representations or
warranties were made by any of the Optioned-Vessel Owning Companies; provided,
however, that all references to "Assets," "Business," "Vessel" and "Vessel
Owning Company" contained in the representations and warranties referenced
above, shall be deemed for purposes hereof to be references to "Optioned-Vessel
Assets," "Optioned-Vessel Business," "Optioned-Vessel" and "Optioned-Vessel
Owning Company," as the context requires, and, where appropriate, references to
"Seller" shall be deemed for purposes hereof to be references to the
"Optioned-Vessel Owing Companies."

         2.30 MARITAL PROPERTY AGREEMENT. The Marital Property Agreement
attached hereto as Schedule 2.30 was prepared, duly executed and recorded in the
Parish of St. Mary, State of Louisiana by Stockholder and Stockholder's spouse,
Janet Rebecca Smith, in compliance with all applicable laws in the State of
Louisiana, and was freely entered into by Stockholder and Stockholder's spouse,
and neither of such parties were under duress at the time of the execution and
recordation of said Marital Property Agreement. The Marital Property Agreement
is in legal 



                                       25

<PAGE>

form sufficient and appropriate to accomplish the intended purposes set forth
therein and is binding on and enforceable against Stockholder and Stockholder's
spouse, such that Stockholder's spouse has no claim against the assets,
properties or interests of Stockholder and thus has no claim against the Assets,
including the Vessels, the Business relating to any such Assets, the
Optioned-Vessels, including the Optioned-Vessels, or the Optioned-Vessel
Businesses relating to any such Optioned-Vessel Assets. Neither Stockholder nor
Stockholder's spouse have taken any steps to abrogate, restrict, circumvent or
void the intended purposes and effects of the Marital Property Agreement, nor
have they failed to act, in any manner which could have the effect of
rescinding, withdrawing or making null and void the Marital Property Agreement,
and have taken all steps required under applicable Louisiana law to maintain the
effectiveness of the Marital Property Agreement, and such agreement is in full
force and effect as of the date of the execution of this Agreement and will
continue in full force and effect as of the Closing Date and as of the date of
the closing of the purchase of an Optioned-Vessel pursuant to the exercising of
an option under Section 5.13. Since the execution of the Marital Property
Agreement, neither Stockholder nor Stockholder's spouse have taken any action,
including co-mingling of funds, transmuting property, etc., affecting any of the
assets, interests or properties owned by Stockholder, including, the
Stockholder's separate ownership interest in Seller, Manager, the Assets the
Business, the Optioned-Vessels, including the Optioned-Vessels, or the
Optioned-Vessel Businesses relating to any such Optioned-Vessel Assets in
anyway, that could deem them to be community property or jointly owned property
of Stockholder and Stockholder's spouse. There has been nothing in Stockholder's
spouse's conduct, statements or actions that suggests that she would or could
take a position contrary to the facts that the Marital Property Agreement is now
and as of the Closing Date and as of the date of the closing of the purchase of
an Optioned-Vessel pursuant to the exercising of an option under Section 5.13
shall be valid and enforceable and that she does not and could not assert any
claim against any of the Stockholder's assets, interests or properties, and thus
not against the Assets, including the Vessels, the Business relating to any such
Assets, the Optioned-Vessels, including the Optioned-Vessels, or the
Optioned-Vessel Businesses relating to any such Optioned-Vessel Assets.

                                    ARTICLE 3
                         REPRESENTATIONS AND WARRANTIES
                                    OF BUYER

         Buyer represents and warrants to Seller, Manager and Stockholder that:

         3.1 ORGANIZATION AND GOOD STANDING. Buyer is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of Delaware.

         3.2 AUTHORITY OF BUYER. Buyer has all requisite corporate power and
authority to enter into this Agreement and the documents contemplated hereby to
be executed by Buyer and to perform the obligations to be performed by Buyer
hereunder and thereunder. The execution, delivery and compliance by Buyer with
the terms of this Agreement and the documents contemplated hereby to be executed
by Buyer, and the consummation by Buyer of the transactions contemplated hereby
and thereby have been, or will be before the Closing, duly authorized by all
necessary corporate actions by Buyer. This Agreement has been duly executed and
delivered by Buyer. This Agreement constitutes, and the documents contemplated
hereby to be executed by Buyer upon their execution and delivery as herein
provided will constitute the 



                                       26

<PAGE>

legal, valid and binding obligations of Buyer, enforceable against Buyer in
accordance with their respective terms.

         3.3 NO CONFLICTS. The execution and delivery of this Agreement by
Buyer, and the consummation of the transactions contemplated hereby, and the
execution and delivery by Buyer of, and the consummation of the transactions
contemplated by, the documents contemplated hereby to be executed by Buyer, will
not (a) violate or conflict with any existing term or provision of any law,
statute, ordinance, rule, regulation, order, writ, judgment, injunction or
decree applicable to Buyer so as to materially and adversely affect the ability
of Buyer to consummate the transactions contemplated hereby or thereby; (b)
conflict with or result in a breach of or default under any of the terms,
conditions or provisions of the articles of association or regulations of Buyer
or any agreement or instrument to which Buyer is a party or by which Buyer or
any of the assets or properties thereof may be bound or subject, where such
breach or default may reasonably be expected to materially and adversely affect
the ability of Buyer to consummate the transactions contemplated hereby or
thereby; (c) result in the creation or imposition of any Lien upon the assets or
properties of Buyer, where such Lien may reasonably be expected to materially
and adversely affect the ability of Buyer to consummate the transactions
contemplated hereby or thereby; (d) give to others any right of termination,
cancellation, acceleration or modification in or with respect to any agreement
or instrument to which Buyer is a party, or by Buyer or any of the assets or
properties of the same may be bound or subject, where such termination,
cancellation, acceleration or modification of any such agreement or instrument
may reasonably be expected to materially and adversely affect the ability of
Buyer to consummate the transactions contemplated hereby or thereby; or (e)
breach any fiduciary duty of Buyer to any person or entity, where such breach
may reasonably be expected to materially and adversely affect the ability of
Buyer to consummate the transactions contemplated hereby or thereby.

         3.4 CONSENTS AND APPROVALS. The execution and delivery by Buyer of this
Agreement and the documents contemplated hereby to be executed by Buyer,
compliance by Buyer with the terms hereof and thereof, and the consummation by
Buyer of the transactions contemplated hereby and thereby, do not require Buyer
to obtain any consent, approval or action of, or make any filing with or give
any notice to (other than filings and press releases required under applicable
securities laws) any corporation, person or firm or other entity or any public,
governmental or judicial authority, the failure to obtain which may reasonably
be expected to materially and adversely affect the ability of Buyer to
consummate the transactions contemplated hereby or thereby.

         3.5 BROKERS/ADVISORS. All negotiations with respect to this Agreement
and the transactions contemplated hereby have been carried out by Buyer directly
with Seller, Manager and Stockholder, without the intervention of any person on
behalf of Buyer in such manner as to give rise to any valid claim by any person
against Seller, Manager or Stockholder for a finder's fee, brokerage commission
or similar payment.



                                       27

<PAGE>

                                   ARTICLE 4
           ACTIONS BY SELLER, MANAGER AND STOCKHOLDER PENDING CLOSING

         Seller, Manager and Stockholder shall (and Stockholder shall cause
Seller and Manager, as applicable, to), between the date hereof and the Closing
Date, comply with the provisions of this Article 4, except to the extent that
Buyer may otherwise consent in writing or to the extent otherwise required or
permitted by this Agreement.

         4.1 CONDUCT OF BUSINESS. Seller and Manager shall operate the Business
only in the usual, regular and ordinary manner and, to the extent consistent
with such operation, use its best efforts to maintain, preserve and protect the
Assets and the business organization of the Business, all in coordination and
cooperation with Buyer and shall keep available the services of its present
officers and employees and shall preserve the present relationships with persons
having dealings with Seller, Manager or Stockholder as the same relate to the
Business. Neither the Seller, Manager nor Stockholder shall take any of the
actions enumerated in Section 2.9 hereof or enter into any contract of the
nature enumerated in Section 2.16 hereof without the prior written approval of
Buyer.

         4.2 CONTINUED ADMINISTRATION. Seller will administer (or shall cause to
be administered) each and every employee benefit plan described in Schedule 2.16
hereto in accordance with the provisions of the Code and ERISA.

         4.3 RECORDS. Seller shall maintain (or shall cause to be maintained)
the books, accounts and records relating to the Business and Assets in the
usual, regular and ordinary manner.

         4.4 MAINTENANCE OF INSURANCE. Seller shall maintain (or shall cause to
be maintained) in full force and effect all of the presently existing insurance
coverage described in Schedule 2.19 hereto, or insurance comparable to such
existing coverage, and shall cause Buyer to receive the benefit of such coverage
from and after the Closing with respect to incidents occurring before the
Closing.

         4.5 REPORTS. Seller, Manager and Stockholder shall cause the Vessel
Owning Company to deliver to Buyer copies of all financial statements, reports
or analyses with respect to the Business which are prepared or received between
the date hereof and the Closing Date promptly after such preparation or receipt
and regardless of whether such financial statements, reports or analyses are
prepared internally or by third parties. Seller, Manager and Stockholder agree
that the nature and timing of financial statements, reports and analyses with
respect to the Vessel Owning Company which have historically been regularly
prepared will not be changed.

         4.6 ADDITIONAL DISCLOSURE. From the date of this Agreement to and
including the Closing Date, Seller, Manager or Stockholder, as applicable,
shall, promptly after the occurrence thereof is known to Seller, Manager and/or
Stockholder, as applicable, advise Buyer of each event subsequent to the date
hereof which causes any covenant of Seller, Manager or Stockholder to be
breached or causes any representation or warranty of Seller, Manager or
Stockholder contained herein to no longer be true, correct or complete.



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<PAGE>

         4.7 TAXES. From the date of this Agreement to and including the Closing
Date, Seller and Stockholder shall (and Stockholder shall cause Seller to)
continue to timely file all Tax Returns with the appropriate governmental
agencies in all jurisdictions in which such returns and reports are required to
be filed, and insure that all Taxes have been properly accrued or paid when due.

         4.8 REQUIRED FINANCIAL STATEMENTS. Immediately after the closing of the
transactions contemplated in the Purchase Agreement, Seller, Manager and
Stockholder shall cooperate with HOSI, Buyer and HOSI's independent public
accountant as and when requested by HOSI from time to time. Such cooperation
shall include, without limitation, providing comfort that the necessary
information to complete an audit will be available from Seller, Manager and All
the Vessel Owning Companies and providing appropriate responses, requested
information and representation letters to the auditors and otherwise
facilitating the ability of the auditors to issue their audit opinion without
qualification in connection with the preparation of such audited balance sheets,
income statements and statements of cash flows with respect to All the Vessel
Owning Companies, all to the extent necessary to provide the above audited
financial statements with respect to the Business and the Five Vessel
Businesses, for the years ended December 31, 2001 and 2002, and of unaudited
financial statements for any quarters and other interim periods during the
fiscal periods ending December 31 2002 and in 2003, as may be determined and
requested by HOSI, upon the advice of its counsel and the independent public
accountant, to be (a) useful in the business of HOSI or its affiliates; (b)
necessary to assist HOSI and its affiliates in complying with certain covenants
contained in HOSI's indenture agreement or (c) required by the rules and
regulations of the Securities and Exchange Commission in connection with filings
that may be made or may be required to be made by HOSI under the Securities Act,
the Securities Exchange Act of 1934, as amended, and any related rules,
regulations or state statutes, rules or regulations. As soon as reasonably
practicable after the Closing Date, Seller shall deliver to Buyer copies of (i)
the unaudited interim balance sheets of All the Vessel Owning Companies as of
the Closing Date and (ii) the unaudited interim statements of income and cash
flows of All the Vessel Owning Companies for the period from April 1, 2003
through the Closing Date, if the closing occurs during June 2003, or if
occurring after the end of such month, through June 30, 2003 and for the period
from July 1, 2003 through the Closing Date, and with respect to each of the
Optioned-Vessel Owning Companies, the financial statements referenced in (i) and
(ii) above after the Closing Date until the earlier of (a) the expiration of all
the options set forth in Section 5.13 for the purchase of the Optioned-Vessels
or (b) the exercise of all the options to purchase the Optioned-Vessels. The
statements referenced in (i) and (ii) above shall only reflect the results of
operations for the relevant time period, in accordance with generally accepted
accounting principles. Manager and Seller expressly acknowledge and agree that
if HOSI's independent public accountant requests that Manager and/or Seller
provide financial data and supporting documentation in order to successfully
perform or facilitate its audit and review procedures applicable to the Business
and the Five Vessel Businesses and the Optioned-Vessel Businesses, for the
purpose of allowing the presentation of financial information on a combined
basis with respect to All the Vessel Owning Companies, the Business, Five Vessel
Businesses and the Optioned-Vessel Businesses, Manager and Seller shall
cooperate fully with such accountant and shall provide (and Stockholder shall
cause Manager and Seller to so cooperate and provide) such financial data and
supporting documentation to such accountant.



                                       29

<PAGE>

                                   ARTICLE 5
                  COVENANTS OF SELLER, MANAGER AND STOCKHOLDER

         Seller, Manager and Stockholder covenant and agree with Buyer that:

         5.1 APPROVALS. Seller, Manager and Stockholder shall obtain, and shall
cooperate with Buyer in obtaining, as promptly as possible, all approvals,
authorizations and clearances of governmental and regulatory bodies and
officials required to consummate the transactions contemplated hereby. Seller,
Manager and Stockholder shall provide such other information and communications
to governmental and regulatory authorities, as such governmental and regulatory
authorities or Buyer may request and shall obtain the requisite consents of
third parties required to consummate the transactions contemplated hereby.
Notwithstanding any other language herein, Buyer shall not be required to make
any payment or other concession or to assume any obligation (other than with
respect to contracts expressly assumed hereunder) in connection with obtaining
such consents.

         5.2 COMPLIANCE WITH LEGAL REQUIREMENTS. Seller, Manager and Stockholder
shall comply promptly with all requirements which federal or state law may
impose on Seller, Manager, Stockholder or any of their respective affiliates
with respect to the transactions contemplated by this Agreement, and will
promptly cooperate with and furnish information to Buyer in connection with any
such requirements imposed upon it in connection therewith.

         5.3 BOOKS AND RECORDS. Seller and Manager shall make all their books
and records related to the operation of the Business or the Assets available to
Buyer during normal business hours for any reasonable business purpose or shall
deliver copies thereof to Buyer. Following the Closing Time, the Candy Cruiser,
Seller and Manager shall cause all the books and records of the Vessel Owning
Companies related to the Business or Assets and of all of the Optioned-Vessel
Assets and the Optioned-Vessel Businesses available to Buyer during normal
business hours for any reasonable business purpose or shall deliver copies
thereof to Buyer.

         5.4 INVESTIGATION BY BUYER. From and after the date hereof and until
the Closing Date, Seller, Manager and Stockholder shall each permit Buyer and
its counsel, accountants and other representatives reasonable access during
normal business hours to the properties, books, contracts, commitments and other
records directly related to the Business and Assets including without limitation
tax returns, declarations of estimated tax and tax reports, and, during such
period, Seller, Stockholder and Manager shall furnish promptly to Buyer all
other information concerning the Business, Assets and personnel as Buyer may
reasonably request; provided, however, that NO INVESTIGATION PURSUANT TO THIS
SECTION 5.4 OR OTHERWISE SHALL LIMIT THE EFFECT OF ANY REPRESENTATIONS OR
WARRANTIES CONTAINED IN THIS AGREEMENT.

         5.5 CERTAIN ACTS OR OMISSIONS. Seller, Manager and Stockholder shall
not (a) omit to take any action called for by any of their covenants contained
in this Agreement, or (b) take any action which they are required to refrain
from taking by any of such covenants. Seller, Manager and Stockholder shall,
before the Closing, cure any violation or breach of any of their
representations, warranties or covenants contained in this Agreement which
becomes known, 



                                       30

<PAGE>

occurs or arises subsequent to the date of this Agreement and shall obtain the
satisfaction of all conditions to Closing set forth in this Agreement.

         5.6 CONFIDENTIALITY. Unless compelled to disclose information by
judicial or administrative process or by other requirements of law, neither
Seller, Manager nor Stockholder shall, before the Closing Date, disclose or
allow any of their respective affiliates to disclose to third parties any
information that Seller, Manager or Stockholder has obtained from Buyer in
connection with this Agreement with respect to Buyer or any of its affiliates,
and from and after the Closing Date neither Seller, Manager nor Stockholder
shall disclose or allow any of their respective affiliates to disclose to third
parties and will not use for its or their own account or allow its or their
affiliates to use for their own accounts, any trade secrets, business secrets or
other information relating to the Business or the Assets or any information that
Seller, Manager or Stockholder has obtained from Buyer in connection with this
Agreement with respect to Buyer or any of its affiliates, provided, however,
that Manager shall have a right to use such information relating to the Business
or Assets that was in Manager's possession prior to the Closing Date, but solely
and only to the extent necessary for Manager to operate the M/V Candy Clipper,
M/V Candy Cruiser, M/V Candy Carrier and its crew boats after the Closing Date.
The parties hereto acknowledge and agree that the terms and provisions of this
Agreement are intended by the parties to supplement, but not supercede, the
terms of that certain Confidentiality Agreement dated April 24, 2003 (the
"Confidentiality Agreement") and that the confidentiality obligations set forth
herein and therein shall remain in full force and effect notwithstanding the
closing of the transactions contemplated in this Agreement or anything to the
contrary contained in this Agreement or the Confidentiality Agreement. Solely
for the purpose of preventing any of the transactions contemplated by this
Agreement from being a "reportable transaction" pursuant to Treas. Reg. Section
1.6011-4(b)(3), each Party to this Agreement (and each employee, representative
or other agent of each) may disclose to any and all persons, without limitation
of any kind, the tax treatment and tax structure of transactions contemplated in
this Agreement and all materials of any kind (including opinions or other tax
analysis) that are or have been provided to any Party relating to such tax
treatment and tax structure.

         5.7 CONTRACTS; LIABILITIES. Neither Seller, Manager nor the Stockholder
shall enter into any contracts or incur any liabilities relating to the Business
or the Assets other than in the ordinary course of business without the prior
written consent of Buyer.

         5.8 EMPLOYEE MATTERS.

         (a) Manager and Buyer shall enter into a Crew Management Agreement in
substantially the form attached hereto as Appendix B ("Crew Management
Agreement") pursuant to which Manager shall provide for the Vessel the crew
members then currently assigned to such Vessel for a period of fourteen days
after the Closing Time or such other period of time as may be specified by Buyer
(the "Crew Lease Period").

         (b) Manager acknowledges that Buyer may, in its sole discretion and
with no obligation to do so, immediately after expiration of the Crew Lease
Period for the Vessel or earlier if in accordance with this Agreement a public
announcement is made with respect to this transaction, offer employment to any
or all of the vessel-based employees employed by Manager in the Business on such
terms as Buyer may deem appropriate (any such employee who accepts 



                                       31

<PAGE>

employment with Buyer hereinafter being referred to as a "Hired Employee").
Manager shall cooperate with Buyer to facilitate any such offers if so requested
by Buyer. Manager further agrees that if necessary it will provide its
vessel-based employees with notice of the sale and termination of employment in
advance of their termination in connection with the transactions contemplated
herein, in accordance with all applicable laws including, but not limited to the
Workers Adjustment and Retraining Notification Act ("WARN") 29 U.S.C. Section
2101 et seq. Manager agrees to assume sole liability for payment of all wages
earned and accrued benefits of any Hired Employees, including vacation, through
their last day of employment with Manager (the "Termination Date") and shall pay
or make arrangement to pay the same on or before the Termination Date. Manager
agrees to assume sole responsibility and liability for any COBRA obligation
which may accrue with respect to any vessel-based employee not hired by Buyer
who does not continue employment with Manager as a result of the sale of the
Vessel. Manager agrees to maintain each of its "group health plans" as defined
in Section 2.16(b)(ix) for the benefit of its employees not hired by Buyer
pursuant to Section 5.9 after the Closing Date and until such time as
termination of such group health plans will not result in Buyer having any COBRA
obligation as a successor employer with respect to this transaction. Manager
agrees to be solely responsible for the reemployment rights of any vessel-based
employee not hired by Buyer because such vessel-based employee was on an
authorized leave of absence from Manager under the Uniformed Services Employment
and Reemployment Rights Act of 1994, the Family Medical Leave Act of 1993 or
similar laws or because the vessel-based employee was on any other form of
authorized leave of absence with reemployment rights which is sponsored by
Manager. Under no circumstance will Buyer be responsible for, and Buyer does not
assume, any obligations of Manager arising out of or related to any accrued or
unpaid vacation, sick leave or any other employee benefit due and owing to any
employee of Manager through such employee's Termination Date or any severance
benefit due any employee of Manager.

         (c) Nothing contained herein however shall be deemed to guarantee
employment for any Hired Employee for any period of time or preclude Buyer's
ability to terminate the employment of any Hired Employee for any reason
subsequent to such employee's date of hire. Buyer expressly reserves for itself
the right to evaluate the performance of all Hired Employees and the staffing
levels of the Business immediately following their respective hire dates and/or
at any point thereafter.

         5.9 ENFORCEMENT OF RIGHTS AND BENEFITS. At the request of Buyer, Seller
and Stockholder shall enforce any right, obligation or benefit to which Seller,
Stockholder or any affiliate of such parties may be entitled to under any
agreements entered into between Seller and the Vessel Owning Company for the
purchase by Seller of the Business and Assets. If permitted under such
agreements, and if so requested by Buyer, Seller shall assign any rights or
benefits under such agreements.

         5.10 OSV BUSINESS INQUIRIES. For a period of five (5) years following
the Closing Date, if Seller, Manager or Stockholder receives any inquiries from
customers or potential customers relating to offshore service vessel business
that cannot be serviced by vessels owned or operated by Seller or Manager, the
party receiving such inquiry shall refer such customer or potential customer to
Buyer (and promptly notify Buyer of such referral, together with contact
information from the inquirer) at no cost or fee to Buyer or the customer.



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<PAGE>

         5.11 REPAIRS. The Parties shall cooperate with each other in good faith
prior to the Closing Date and during the time period covered by the Escrow
Agreement to mutually agree to any repairs or equipment purchases deemed
reasonably necessary by Buyer and Seller to ensure that the Vessel is in
Reasonable Operating Condition, unless Seller makes and pays (or commits to make
and pay) for such mutually agreed repairs and equipment purchases. Seller shall
make and pay for any repairs or equipment purchases for the Vessel requested by
Buyer and agreed to by Seller within one hundred eighty days (180) days after
the Closing Date or sixty (60) days after completion of the inspection of the
Vessel by Buyer subsequent to Closing, whichever is later, which Buyer and
Seller reasonably agree are necessary to ensure that the Vessel is in Reasonable
Operating Condition, unless the repairs and equipment purchases are made and
paid for pursuant to the procedures set forth in the Escrow Agreement. In the
event of any disagreements between the Parties with respect to the amount, type
or quality of repairs and equipment purchases necessary for the Vessel that are
not resolved within ten (10) days from the day the dispute arises, the dispute
shall be referred to and resolved by the Surveyor (as defined in the Escrow
Agreement and its exhibits) in the manner contemplated in paragraphs 8, 9 and 10
of Exhibit A to the Escrow Agreement. The fees and expenses of the Surveyor
shall be shared equally by Buyer and Seller.

         5.12 NO PURCHASE OR CONSTRUCTION. As a further inducement for the Buyer
to enter into the transactions set forth herein and to pay the Purchase Price
contemplated herein to Seller, Seller, Manager and Stockholder acknowledge and
agree that for a period of five (5) years after the Closing Date, each such
party shall not directly or indirectly lease, purchase or construct any offshore
supply vessels. Crew boats, including those listed on Schedule 5.14 and
otherwise subject to regulation under 46 CFR 175 (Subchapter T), shall not be
restricted.

         5.13 VESSEL OPTIONS. As an inducement for Buyer to enter into this
transaction, effective as of the Closing Date, Seller, Candy Cruiser and
Stockholder hereby grant to Buyer and/or Buyer's designee(s) three separate
options with each such option granting Buyer the right to purchase one of the
following vessels and the business related to such vessel (each such vessel and
related business being referred to herein individually as an "Optioned-Vessel"
and the "Optioned-Vessel Business" and, collectively, as the "Optioned-Vessels"
and "Optioned-Vessel Businesses") for a purchase price of One Million Five
Hundred Thousand Dollars and No/100 ($1,500,000.00) each; the M/V CANDY CLIPPER
(O/N 965884); the M/V CANDY CRUISER (O/N 655319); and the M/V CANDY CARRIER (O/N
630379). Each such option will be exercisable independently of any other option
at any time by Buyer for a period of twelve (12) months following the Closing
Date by delivery to Seller of a written notice exercising any such option (each
an "Exercise Notice"), and the parties shall close the purchase of the
Optioned-Vessel in question within ten (10) days after such exercise, or such
later date as may be specified by Buyer in its sole discretion, in accordance
with the protocols set forth in Schedule 5.13. An option that is not exercised
in writing within the prescribed twelve month period shall terminate at the end
of such period; provided, however that nothing contained herein shall prevent an
option from being exercised during such twelve month period and consummated
after the expiration of such period. For so long as any of the options set forth
in this Section 5.13 are in effect, the Seller shall not sell, transfer,
hypothecate or convey any of its ownership interests in the Candy Cruiser to any
party, nor shall the Candy Cruiser sell, transfer, hypothecate or convey any of
the Optioned-Vessels to any party, and the Stockholder and Seller shall, as the
case may be, cause the covenants in this sentence to be complied with as
required hereunder 



                                       33

<PAGE>

provided, however, that notwithstanding the foregoing, each of the
Optioned-Vessels may be hypothecated to the extent that (i) each such
Optioned-Vessel is hypothecated for no more than $1,500,000.00 and (ii) any
documentation relating to such hypothecation expressly allows for the release of
any Liens on such Optioned-Vessel upon the payment of an amount not to exceed
$1,500,000.00.

         5.14 OWNERSHIP OF VESSELS. Seller acknowledges and agrees that at the
Closing it shall, and Stockholder shall cause Seller to, either directly hold
title to all of the vessels set forth in Schedule 5.14 or directly or indirectly
own all of the issued and outstanding ownership interests of any companies or
other entities ("Ship Holdcos") that own title to the vessels set forth in
Schedule 5.13. Seller shall deliver copies of appropriate documentation
evidencing Seller's ownership of such vessels or Ship Holdcos, as the case may
be, within thirty (30) days after the Closing. Seller shall not sell, assign,
transfer or otherwise convey title to all or substantially all of its assets
(assets for this purpose including Seller's ownership interests in the Ship
Holdcos) for a term of twenty-four (24) months following the Closing Date,
without the prior written consent of Buyer, which shall not be unreasonably
withheld or delayed. Seller, Manager and Stockholder shall act in good faith and
shall not take any action to circumvent its obligations under this Section 5.13,
including, without limitation, through a corporate restructuring, transferring
of assets, dissolving or liquidating its assets, whether voluntary, involuntary
or by operation of law.

                                   ARTICLE 6
                               COVENANTS OF BUYER

         Buyer covenants and agrees with Seller and Stockholder that:

         6.1 APPROVALS. Buyer shall take all reasonable steps, and shall use
reasonable commercial efforts to obtain, and shall cooperate with Seller and
Stockholder in obtaining, as promptly as possible, all approvals, authorizations
and clearances of governmental and regulatory bodies and officials required to
consummate the transactions contemplated hereby. Buyer shall provide such other
information and communications to governmental and regulatory authorities as
such governmental and regulatory authorities or Seller and Stockholder may
reasonably request and shall use reasonable commercial efforts to obtain any
requisite consents of third parties, to the extent required to consummate the
transactions contemplated hereby but only if no payment or other concessions are
required of Buyer to obtain such consents.

         6.2 COMPLIANCE WITH LEGAL REQUIREMENTS. Buyer shall use reasonable
commercial efforts to comply promptly with all requirements which federal or
state law may impose on it or any of its affiliates with respect to the
transactions contemplated by this Agreement and will promptly cooperate with and
furnish information to Seller and Stockholder in connection with any such
requirements imposed upon them in connection therewith.

         6.3 CERTAIN ACTS OR OMISSIONS. Buyer shall not (a) omit to take any
action called for by any of its covenants in this Agreement or (b) take any
action which it is required to refrain from taking by any of such covenants.
Buyer shall use all reasonable efforts to cure, before the Closing, any
violation or breach of any of its representations, warranties or covenants
contained 



                                       34

<PAGE>

in this Agreement which becomes known, occurs or arises subsequent to the date
of this Agreement and to obtain the satisfaction of all conditions to Closing
set forth in this Agreement.

         6.4 ACCESS TO RECORDS. Buyer hereby agrees to make any books and
records of Seller that are transferred to Buyer in consequence of the Closing
available (or to deliver copies thereof) to Seller during normal business hours
for any reasonable business purpose.

         6.5 VESSEL MARKINGS. Buyer agrees that as soon as practicable after the
Closing, Buyer shall remove the Manager's markings from the Vessel and remark
same with Buyer's markings and shall, within a period of ninety (90) days after
the Closing Time, repaint the Vessel according to Buyer's colors and
specifications.

                                   ARTICLE 7
                            CONDITIONS TO OBLIGATIONS
                                    OF BUYER

         Except as may be waived in writing by Buyer, the obligations of Buyer
to consummate this Agreement and the transactions to be consummated by Buyer
hereunder on the Closing Date shall be subject to the following conditions:

         7.1 PREDICATE TRANSACTION AND PURCHASE AGREEMENT TRANSACTIONS. Seller
shall, and Stockholder shall cause Seller to, have consummated the acquisition
(the "Predicate Transaction") of the Assets, the Business, the Five Vessel
Assets and Related Businesses, the Optioned-Vessels and the Optioned-Vessel
Businesses from Candy Cap L.P XII, XV, XVI, XVII, XVIII and XIV, Vessel One
Corporation and Candy Cruiser, Inc. (collectively, "All the Vessel Owning
Companies" and, specifically, the Vessel One Corporation and Candy Cruiser being
collectively referred to herein as the "Optioned-Vessel Owning Companies" and
Candy Cap L.P. XVII being individually referred to as the "Vessel Owning
Company"), as appropriate, and shall provide executed conveyance documents
reasonably satisfactory to Buyer evidencing the consummation by Seller of the
acquisition of such Business and Assets, including without limitation, delivery
at the Closing of original executed bills of sale in favor of the Seller
conveying title to the Vessel free and clear of all Liens to Seller in the
Predicate Transaction and copies of executed bills of sale conveying title to
the other vessels set forth in Schedule 5.14 free and clear of all Liens to
Seller, including the Optioned-Vessels. In addition, the Buyer shall have
consummated the acquisition of the Five Vessel Assets and Related Businesses
from Seller pursuant to the terms of the Purchase Agreement.

         7.2 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Seller, Manager and Stockholder contained in this Agreement or in any
certificate or document executed and delivered by Seller, Manager and/or
Stockholder to Buyer pursuant to this Agreement shall have been true and correct
on the date made and shall be true and correct on and as of the date of the
delivery and execution of all documents required to consummate the Closing as
though such representations and warranties were made at and as of such date.

         7.3 COMPLIANCE WITH AGREEMENT. On and as of the Closing Date, Seller,
Manager and Stockholder shall have performed and complied with the covenants and
agreements required 



                                       35

<PAGE>

by this Agreement to be performed and complied with by Seller, Manager and
Stockholder on or before the Closing Date.

         7.4 CERTIFICATE OF SELLER, MANAGER AND STOCKHOLDER. Stockholder shall
have delivered to Buyer a certificate and Seller, Candy Cruiser and Manager
shall have delivered to Buyer an officer's certificate (signed on behalf of such
company by its President) dated the Closing Date certifying the fulfillment of
the conditions specified in Sections 7.1, 7.2 and 7.3 hereof.

         7.5 NO ACTION OR PROCEEDING. On the Closing Date, no action or
proceeding by any public authority or any other person shall be pending before
any court or administrative body or overtly threatened to restrain, enjoin or
otherwise prevent the consummation of this Agreement or the transactions
contemplated hereby, and no action or proceeding by any public authority or
private person shall be pending before any court or administrative body or
overtly threatened to recover any damages or obtain other relief as a result of
this Agreement or the transactions contemplated herein or as a result of any
agreement entered into in connection with or as a condition precedent to the
consummation thereof, which action or proceeding could result in a decision,
ruling or finding which would adversely affect the Business or the Assets or
Buyer's ability to conduct normal operations with the Assets after the Closing.

         7.6 CONSENTS, AUTHORIZATIONS, ETC. All orders, consents, permits,
authorizations, approvals and waivers of every governmental entity or third
party required for the consummation of the transactions contemplated hereby, and
all filings, registrations and notifications to or with all governmental
entities required with respect to the consummation of such transactions, shall
have been obtained or given.

         7.7 CORPORATE ACTION BY SELLER AND MANAGER. All action necessary to
authorize the execution, delivery and performance by each of Seller and Manager
of this Agreement shall have been duly and validly taken by each of Seller and
Manager, and Seller and Manager shall have each delivered to Buyer copies,
certified as of the Closing Date by the Secretary of Seller and Manager, as
applicable, of all resolutions of the Board of Directors and stockholders of
Seller and Manager authorizing this Agreement and the transactions contemplated
by this Agreement.

         7.8 CORPORATE ACTION BY BUYER AND HOSI. All action necessary to
authorize the execution, delivery and performance by each of Buyer and HOSI of
this Agreement shall have been duly and validly taken by Buyer and HOSI.

         7.9 COMPLETION OF DUE DILIGENCE. Buyer shall have completed to its
satisfaction a due diligence review of Seller and the Assets, including, without
limitation review of the customer contracts relating to the Business and comfort
that the Assets are in good working condition, ordinary wear and tear excepted,
and are free from asbestos, the latter of which may be satisfied by a written
certification from an unaffiliated third party certifying that no asbestos
materials were used in the manufacture of the Vessel.

         7.10 COMPLETION OF DRYDOCK AND SURVEY. A drydocking of the Vessel shall
have been completed and Buyer shall have had the opportunity to inspect the
Vessel and have a representative present at such drydocking and be satisfied
after such inspection and observation 



                                       36

<PAGE>

of the drydocking, in its sole discretion, that the Vessel is in Reasonable
Operating Condition, or that repairs will be made to the Vessel under the Escrow
Agreement to ensure that the Vessel will be in Reasonable Operating Condition.

         7.11 EVIDENCE OF US FLAG STATUS AND CLASSIFICATIONS. Buyer is provided
with evidence reasonably satisfactory to such parties of the Vessel's flag
status, regulatory and hull and machinery classification society compliance
including without limitation review of current certification (supporting
material to include status reports and most recent dry-dock survey reports,
regulatory agency and internal reports, and shipyard invoices).

         7.12 NONCOMPETITION AGREEMENTS. Seller, Stockholder and Manager shall
have each delivered to Buyer an executed counterpart of the Noncompetition
Agreement in substantially the form of Appendix C attached hereto as an
inducement for Buyer to enter into this Agreement and consummate the
transactions contemplated hereby.

         7.13 OPINION OF COUNSEL. Buyer shall have received an opinion,
addressed to Buyer and dated the Closing Date, of counsel for Seller, Manager
and Stockholder, in form and substance reasonably satisfactory to Buyer and
their counsel.

         7.14 INSTRUMENTS OF CONVEYANCE. Seller shall deliver to Buyer bills of
sale, assignments and other instruments conveying title to the Business and
Assets, including the Vessels, to Buyer as set forth in Section 1.1, free and
clear of all Liens, other than Permitted Liens. All such instruments of
conveyance shall be in form and content reasonably satisfactory to Buyer and its
counsel.

         7.15 NO MATERIAL ADVERSE CHANGE. No incident or event shall have
occurred resulting in material or significant destruction, damage to, or loss of
any Asset (whether or not covered by insurance).

         7.16 CREDITOR RELEASES. Each of Seller's and All of the Vessel Owning
Companies creditors shall have released any Liens on the Assets, and Seller
shall deliver evidence of same, including without limitation, Satisfaction of
Mortgages releasing Liens against the Assets held by Key Corporate Capital Inc.
and MARCAP Corporation, and all required consents of any person or entity to the
conveyance of the Assets to Buyer shall have been obtained.

         7.17 PHYSICAL POSSESSION AND CONTROL. Effective physical possession and
control of the Vessel, including any other assets (constituting part of the
Assets), documents and certificates appurtenant to and/or required to be on
board the Vessel, shall be tendered by Seller and taken over by Buyer, with the
Vessel, safely afloat in international waters offshore Louisiana, to be
evidenced by the execution and delivery by Buyer and Seller of a Protocol of
Delivery and Acceptance in substantially the form attached hereto as Appendix D,
and the remaining Assets shall be delivered by Seller to Buyer at the offices of
Buyer or such other location(s) as may be agreed between Buyer and Seller.

         7.18 DELIVERY OF OTHER DOCUMENTS AND INSTRUMENTS. The following
additional documents shall have been executed and delivered by Seller, Manager
and Stockholder, as applicable:



                                       37

<PAGE>

         (a) Consents. Copies of all required consents and approvals;

         (b) Specific Assignments. Specific assignments of the Certificates, as
well as the contracts and leases identified in Schedule 2.6 and any significant
contracts, proprietary information and permits that Buyer may reasonably request
to assure their continuity, together with any consents to such assignments that
may be required;

         (c) Certificate of Secretary. A Certificate of the Secretary of Seller
and Manager attesting to the incumbency and the signature specimens with respect
to the officers of such entity executing the Agreement and any other document
delivered pursuant to the Agreement by or on behalf of such entity, and
attesting to such other instruments and documents as counsel for Buyer shall
reasonably request;

         (d) Releases. Releases in substantially the form attached hereto as
Appendix E of any and all claims that Seller, Manager and Stockholder may have
against the Business, the Assets, and Buyer and its affiliates, except as may
arise hereunder or under any documents executed in connection herewith; and

         (e) Other Requested Documents. Further instruments and documents, in
form and content reasonably satisfactory to counsel for Buyer, as may be
necessary or reasonably appropriate more fully to consummate the transactions
contemplated hereby.

         7.19 FUNDING. Buyer shall have secured sufficient equity and/or debt
financing and otherwise generated sufficient cash flows to fund the purchase of
the Assets, including, without limitation, the Vessel.

         7.20 AUDIT. Buyer shall be satisfied with the completion of the audit
on the balance sheets, income statements and statements of cash flows with
respect to All the Vessel Owning Companies, all to the extent necessary to
provide audited financial statements as referenced above with respect to the
Business, the Five Vessel Businesses and the Optioned-Vessel Businesses, for the
years ended December 31, 2001 and 2002, and of unaudited financial statements
for any quarters and other interim periods during the fiscal periods ending
December 31, 2002 and in 2003, and shall have received an audit opinion without
qualification from its auditor in connection with the above referenced audited
financial statements or, if the audits are completed to the satisfaction of
Buyer as referenced above with respect to the Business and the Five Vessel
Business but are not completed for the Optioned-Vessel Businesses, Buyer shall
have determined, in its sole discretion, that an audit can be successfully
completed, allowing the presentation of financial information on a combined
financial basis, with respect to the Optioned-Vessel Businesses, and that it
will be able to receive an audit opinion without qualification from its auditor
in connection with such audited financial statements.

         7.21 TERMINATION OF MANAGEMENT AGREEMENT. Seller shall deliver to Buyer
documentation evidencing termination of the Management Agreement.



                                       38

<PAGE>

                                   ARTICLE 8
                            CONDITIONS TO OBLIGATIONS
                       OF SELLER, MANAGER AND STOCKHOLDER

         Except as may be waived in writing by Seller, Manager and Stockholder,
the obligations of Seller, Manager and Stockholder to consummate this Agreement
and the transactions to be consummated by Seller, Manager and Stockholder
hereunder on the Closing Date shall be subject to the following conditions:

         8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Buyer contained in this Agreement or in any certificate or document executed
and delivered by Buyer to Seller and Stockholder pursuant to this Agreement
shall be true and correct on the date made and shall be true and correct on and
as of the date of the delivery and execution of all documents required to
consummate the Closing as though such representations and warranties were made
at and as of such date.

         8.2 COMPLIANCE WITH AGREEMENT. On and as of the Closing Date, Buyer
shall have performed and complied in all material respects with the covenants
and agreements required by this Agreement to be performed and complied with by
Buyer on or before the Closing Date.

         8.3 CERTIFICATE OF OFFICER. Buyer shall have delivered to Seller an
officer's certificate, dated the Closing Date and signed on behalf of Buyer by
the Chief Executive Officer, President or a Vice President of Buyer, certifying
the fulfillment of the conditions specified in Sections 8.1 and 8.2 hereof.

         8.4 NO ACTION OR PROCEEDING. On the Closing Date, no action or
proceeding by any public authority or any other person shall be pending before
any court or administrative body or overtly threatened to restrain, enjoin or
otherwise prevent the consummation of this Agreement or the transactions
contemplated hereby, and no action or proceeding by any public authority or
private person shall be pending before any court or administrative body or
overtly threatened to recover any damages or obtain other relief as a result of
this Agreement or the transactions contemplated herein or as a result of any
agreement entered into in connection with or as a condition precedent to the
consummation thereof, which action or proceeding could reasonably be expected to
result in a decision, ruling or finding which would have a material adverse
effect on the ability of Buyer to fulfill its obligations under this Agreement.

         8.5 CONSENTS, AUTHORIZATIONS, ETC. All orders, consents, permits,
authorizations, approvals and waivers of every governmental entity or third
party required for the consummation of the transactions contemplated hereby, and
all filings, registrations and notifications to or with all governmental
entities required with respect to the consummation of such transactions, shall
have been obtained or given; provided, however, that any third-party consent not
obtained by Seller, Manager or Stockholder, but waived by Buyer, shall not be an
unfulfilled condition hereunder.

         8.6 CORPORATE ACTION BY BUYER. All action necessary to authorize the
execution, delivery and performance by Buyer of this Agreement shall have been
duly and validly taken by Buyer and Buyer shall have delivered to Seller and
Stockholder copies, certified as at the Closing 



                                       39

<PAGE>

Date by the Secretary of Buyer, of all resolutions of the Board of Directors of
Buyer authorizing this Agreement and the transactions contemplated by this
Agreement.

         8.7 DELIVERY OF PURCHASE PRICE. The Purchase Price shall have been
delivered in the manner described in Section 1.3.

         8.8 PREDICATE TRANSACTION. Seller shall have consummated the Predicate
Transaction.

         8.9 OPINION OF COUNSEL. Seller, Stockholder and Manager shall have
received an opinion, addressed to such parties and dated the Closing Date, of
counsel for Buyer, in form and substance reasonably satisfactory to Seller,
Stockholder and Manager and their counsel.

         8.10 NO MATERIAL ADVERSE CHANGE. No incident or event shall have
occurred resulting in a material adverse change to HOSI and its subsidiaries
(including Buyer) taken as a whole; provided, however, that changes in economic
conditions or affecting the energy service sector or the offshore maritime
vessel industry, in either case as a whole, shall not constitute such a material
adverse change.

                                   ARTICLE 9
                   SURVIVAL OF REPRESENTATIONS AND WARRANTIES

         The respective representations and warranties made by the parties in
this Agreement or in any certificate or document executed and delivered by
either party to the other party pursuant to this Agreement, shall survive the
Closing Date and the consummation of the transactions contemplated hereby,
regardless of any investigation made by the parties hereto for a period of
thirty-six (36) months following the Closing Date; provided, however, that
notwithstanding the foregoing, the representations and warranties of Seller,
Manager and Stockholder under (i) Sections 2.1, 2.3, 2.4, 2.5, 2.30 and the
first sentence of Sections 2.6(a) and (b) shall survive without time limitations
after the Closing Date and the consummation of the transactions contemplated
hereby; (ii) Sections 2.16 and 2.20 shall survive for a period of six (6) years
following the Closing Date and the consummation of the transactions contemplated
hereby; and (iii) Sections 2.12, 2.22 and 2.23 shall survive the Closing Date
for the period stated in the applicable statute of limitations governing the
subject matter thereof. Notice of indemnification claims for a breach of a
representation or warranty must be made in accordance with Section 10.3 below
before expiration of the applicable survival period, if any, set forth herein.

                                   ARTICLE 10
                                 INDEMNIFICATION

         10.1 INDEMNIFICATION OF PURCHASER INDEMNITEES. Seller, Manager and
Stockholder, jointly and severally, hereby agree to indemnify and hold the
Purchaser Indemnitees (as defined below) harmless from and against:

         (a) any and all liabilities, obligations, damages, deficiencies and
expenses resulting from any misrepresentation, breach of warranty or
nonfulfillment of any covenant or agreement on the part of Seller, Manager or
Stockholder under the terms of this Agreement;



                                       40

<PAGE>

         (b) any and all liabilities, obligations, damages, deficiencies and
expenses resulting from any actions, suits, proceedings, or demands taken or
made against any Purchaser Indemnitee, the Business or the Assets (i) by any
previous or existing equity holders of Manager, Seller, the Optioned-Vessel
Owning Companies or the Vessel Owning Company, (ii) by any other third party
having a previous or existing contractual or other relationship with Seller,
Stockholder or Manager or (iii) by Stockholder's spouse, arising out of or
relating to the Letter, this Agreement or the transactions contemplated hereby
and thereby;

         (c) any and all liabilities, obligations, damages, deficiencies and
expenses resulting from any actions, suits, proceedings, or demands listed in
Schedule 2.13;

         (d) any ad valorem taxes that Seller is responsible for paying under
Section 1.7;

         (e) any and all liabilities, obligations, damages, deficiencies and
expenses resulting from any action or suit or loss suffered or incurred by any
Purchaser Indemnitee resulting or arising from (i) any Environmental Claim and
(ii) any expenses (voluntary or involuntarily incurred) relating to
investigation, removal, cleanup and/or remediation of any Contaminant present at
or arising out of the operation of the Business or the Assets at any time before
the Closing Time;

         (f) any and all liabilities, obligations or losses that may be asserted
against any Purchaser Indemnitee that are related to or arising as a result of
the ownership of the Business, the Assets and/or the use and operation of the
Business and the Assets at any time before the Closing Time;

         (g) any Excluded Liabilities; and

         (h) all actions, suits, proceedings, demands, assessments, judgments,
costs and expenses, including reasonable attorneys' fees, incident to the
foregoing.

         10.2 INDEMNIFICATION OF SELLER INDEMNITEES. Buyer agrees to indemnify
and hold Seller Indemnitees (as defined below) harmless from and against:

         (a) any and all liabilities, obligations, damages, deficiencies and
expenses resulting from any misrepresentation, breach of warranty or
nonfulfillment of any covenant or agreement on the part of Buyer under the terms
of this Agreement;

         (b) any and all liabilities, obligations or losses arising as result of
Buyer's failure to discharge and perform the Assumed Contracts;

         (c) any and all liabilities, obligations, damages, deficiencies and
expenses resulting from any action or suit or loss suffered or incurred by any
Seller Indemnitee resulting or arising from (i) any Environmental Claim and (ii)
any expenses (voluntary or involuntarily incurred) relating to investigation,
removal, cleanup and/or remediation of any Contaminant arising out of the
operation of the Business or the Assets from and after the Closing Time;

         (d) any and all liabilities, obligations or losses arising as a result
of ownership of the Assets and/or the use and operation of the Assets from and
after the Closing Time; and



                                       41

<PAGE>

         (e) all actions, suits, proceedings, demands, assessments, judgments,
costs and expenses, including reasonable attorneys' fees, incident to the
foregoing.

         10.3 METHOD OF ASSERTING CLAIMS, ETC. The items listed in Section 10.1
and Section 10.2 are, net of any proceeds of insurance actually collected or tax
benefits actually received with respect thereto by a party seeking
indemnification, sometimes collectively referred to herein as "Damages";
provided that such reference shall be understood to mean the respective damages
from and against which Buyer and its officers, directors, stockholders, agents,
attorneys, direct and indirect parents and other affiliates (the "Purchaser
Indemnitees") or Seller, Manager and Stockholder and their respective officers,
directors, agents, attorneys, direct and indirect parents and other affiliates
(the "Seller Indemnitees"), as the case may be, are indemnified as the context
requires. The person claiming indemnification hereunder, whether a Purchaser
Indemnitee or a Seller Indemnitee, is sometimes referred to as the "Indemnified
Party" and the party against whom such claims are asserted hereunder is
sometimes referred to as the "Indemnifying Party." All claims for
indemnification by an Indemnified Party under Section 10.1 or Section 10.2
hereof, as the case may be, shall be asserted and resolved as follows:

         (a) If any claim or demand for which an Indemnifying Party would be
liable for Damages to an Indemnified Party hereunder is overtly asserted against
or sought to be collected from such Indemnified Party by a third party (a "Third
Party Claim"), such Indemnified Party shall with reasonable promptness (but in
no event later than thirty (30) days after the Third Party Claim is so asserted
or sought against the Indemnified Party) notify in writing the Indemnifying
Party of such Third Party Claim enclosing a copy of all papers served, if any,
and specifying the nature of and specific basis for such Third Party Claim and
the amount or the estimated amount thereof to the extent then feasible, which
estimate shall not be conclusive of the final amount of such Third Party Claim
(the "Claim Notice"). For this purpose the commencement of any audit or other
investigation for Taxes concerning the Business or Assets shall constitute a
Third Party Claim. Notwithstanding the foregoing, failure to so provide a Claim
Notice as provided above shall not relieve the Indemnifying Party from its
obligation to indemnify the Indemnified Party with respect to any such Third
Party Claim except to the extent that a failure to so notify the Indemnifying
Party in reasonably sufficient time prejudices the Indemnifying Party's ability
to defend against the Third Party Claim. The Indemnifying Party shall have
thirty (30) days from delivery of the Claim Notice (the "Notice Period") to
notify the Indemnified Party (i) whether or not the Indemnifying Party disputes
the liability of the Indemnifying Party to the Indemnified Party hereunder with
respect to such Third Party Claim and (ii) whether or not the Indemnifying Party
desires, at the sole cost and expense of the Indemnifying Party, to defend the
Indemnified Party against such Third Party Claim.

         (b) If the Indemnifying Party notifies the Indemnified Party within the
Notice Period that the Indemnifying Party does not dispute its liability to the
Indemnified Party and that the Indemnifying Party desires to defend the
Indemnified Party with respect to the Third Party Claim pursuant to this Article
10, then the Indemnifying Party shall have the right to defend, at its sole cost
and expense, such Third Party Claim by all appropriate proceedings, which
proceedings shall be diligently prosecuted by the Indemnifying Party to a final
conclusion or settled at the discretion of the Indemnifying Party (but only if
the Indemnifying Party is liable hereunder to the Indemnified Party for the full
amount of, and all obligations under, such settlement; otherwise, no such
settlement shall be agreed to without the prior written consent of the
Indemnified Party). 



                                       42

<PAGE>

If the Indemnifying Party is liable hereunder to the Indemnified Party for the
full amount of such Third Party Claim, the Indemnifying Party shall have full
control of such defense and proceedings, including any compromise or settlement
thereof; provided, however, that the Indemnified Party is hereby authorized, at
the sole cost and expense of the Indemnifying Party (but only if the Indemnified
Party is actually entitled to indemnification hereunder or if the Indemnifying
Party assumes the defense with respect to the Third Party Claim), to file during
the Notice Period any motion, answer or other pleadings which the Indemnified
Party shall deem necessary or appropriate to protect its interests or those of
the Indemnifying Party and not prejudicial to the Indemnifying Party (it being
understood and agreed that if an Indemnified Party takes any such action which
is prejudicial and conclusively causes a final adjudication which is adverse to
the Indemnifying Party, the Indemnifying Party shall be relieved of its
obligations hereunder with respect to such Third Party Claim); and provided
further, that if requested by the Indemnifying Party, the Indemnified Party
agrees, at the sole cost and expense of the Indemnifying Party, to cooperate
with the Indemnifying Party and its counsel in contesting any Third Party Claim
which the Indemnifying Party elects to contest, or, if appropriate and related
to the Third Party Claim in question, in making any counterclaim against the
person asserting the Third Party Claim, or any cross-complaint against any
person. The Indemnified Party may participate in, but not control (except if the
Indemnifying Party is not liable hereunder to the Indemnified Party for the full
amount of such Third Party Claim, in which case whichever of the Indemnifying
Party or the Indemnified Party is liable for the largest amount of Damages with
respect to the Third Party Claim shall control), any defense or settlement of
any Third Party Claim with respect to which the Indemnifying Party is
participating pursuant to this Section 10.3(b), and except as provided in the
preceding sentence, the Indemnified Party shall bear its own costs and expenses
with respect to such participation.

         (c) If the Indemnifying Party fails to notify the Indemnified Party
within the Notice Period that the Indemnifying Party does not dispute its
liability to the Indemnified Party and that the Indemnifying Party desires to
defend the Indemnified Party pursuant to this Article 10, then the Indemnified
Party shall have the right to defend, at the sole cost and expense of the
Indemnifying Party, the Third Party Claim by all appropriate proceedings, which
proceedings shall be promptly and vigorously prosecuted by the Indemnified Party
to a final conclusion or settled. The Indemnified Party shall have full control
of such defense and proceedings, including any compromise or settlement thereof;
provided, however, that if requested by the Indemnified Party, the Indemnifying
Party agrees, at the sole cost and expense of the Indemnifying Party, to
cooperate with the Indemnified Party and its counsel in contesting any Third
Party Claim which the Indemnified Party is contesting, or, if appropriate and
related to the Third Party Claim in question, in making any counterclaim against
the person asserting the Third Party Claim, or any cross-complaint against any
person. Notwithstanding the foregoing provisions of this Section 10.3(c), if the
Indemnifying Party has timely notified the Indemnified Party that the
Indemnifying Party disputes its liability to the Indemnified Party and if such
dispute is resolved in favor of the Indemnifying Party by final, nonappealable
order of a court of competent jurisdiction, the Indemnifying Party shall not be
required to bear the costs and expenses of the Indemnified Party's defense
pursuant to this Section 10.3(c) or of the Indemnifying Party's participation
therein at the Indemnified Party's request and the Indemnified Party shall
reimburse the Indemnifying Party in full for all costs and expenses of such
litigation. The Indemnifying Party may participate in, but not control, any
defense or settlement controlled by the Indemnified Party pursuant to this
Section 10.3(c) (other than a dispute as to the Indemnifying Party's liability



                                       43

<PAGE>

to the Indemnified Party) and the Indemnifying Party shall bear its own costs
and expenses with respect to such participation.

         (d) If any Indemnified Party should have a claim against any
Indemnifying Party hereunder which does not involve a Third Party Claim, the
Indemnified Party shall notify the Indemnifying Party of such claim by the
Indemnified Party, specifying the nature of and specific basis for such claim
and the amount of the estimated amount of such claim (the "Indemnity Notice").
If the Indemnifying Party does not notify the Indemnified Party within thirty
(30) days from delivery of the Indemnity Notice that the Indemnifying Party
disputes such claim, the amount or estimated amount of such claim as specified
by the Indemnified Party shall be conclusively deemed a liability of the
Indemnifying Party. If the Indemnifying Party has timely disputed such claim, as
provided above, such dispute shall be resolved by litigation in an appropriate
court of competent jurisdiction or as the parties otherwise at such time agree.

         10.4 PAYMENT OF INDEMNITY. Any indemnity claim shall be paid in cash by
the Indemnifying Party to or on behalf of the appropriate Indemnified Party. If
the Purchaser Indemnitees assert an indemnity claim which is resolved and paid
for pursuant to the procedures set forth in the Escrow Agreement, the Purchaser
Indemnitees shall not have an additional right of indemnity pursuant to this
Article 10 for the matter that was the subject of that claim under the Escrow
Agreement, unless the escrowed funds are insufficient to fund the indemnity
obligations claimed by the Purchaser Indemnitees and then only to the extent of
the amounts not funded by the escrowed funds.

         10.5 CERTAIN LIMITATIONS. (a) Notwithstanding anything to the contrary
contained in this Agreement, Seller, Manager and Stockholder shall not be
required under this Article 10 to indemnify a Purchaser Indemnitee for Damages
that individually or in the aggregate are less than $10,000 (the "Seller
Deductible Amount"); provided, however, that (i) it is acknowledged and agreed
by the parties hereto that such Damages shall accumulate until such time or
times that such accumulated Damages exceed the Seller Deductible Amount, at
which time Seller, Manager and Stockholder shall indemnify the Purchaser
Indemnitees for the full amount of any Damages in excess of the Seller
Deductible Amount and (ii) any indemnity claims pursuant to Sections 10.1(b),
(c) and (d) shall not be subject to the Seller Deductible Amount.

         (b) The Stockholder's maximum liability for indemnification claims with
respect to the matters set forth in Sections 10.1(b), (c) and (d) shall, subject
to the terms of Section 13.12, be unlimited. If and to the extent Seller,
Manager and Stockholder comply with the terms of Section 5.14, Stockholder's
maximum liability with respect to all other matters (other than as described in
the preceding sentence) shall be limited to 25% of the Purchase Price.

         (c) Notwithstanding anything to the contrary contained in this
Agreement, Buyer shall not be required under this Article 10 to indemnify a
Seller Indemnitee for Damages that individually or in the aggregate are less
than $10,000 (the "Purchaser Deductible Amount"); provided, however, that it is
acknowledged and agreed by the parties hereto that such Damages shall accumulate
until such time or times that such accumulated Damages exceed the Purchaser
Deductible Amount, at which time Buyer shall indemnify the Seller Indemnitees
for the full amount of any Damages in excess of the Purchaser Deductible Amount.



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<PAGE>

                                   ARTICLE 11
                                   TERMINATION

         This Agreement may be terminated at any time before the Closing Date:

         (a) by mutual consent of Buyer, on the one hand, and Seller, Manager
and Stockholder, on the other hand;

         (b) by Buyer, upon notice of termination of its obligation to
consummate the transaction delivered to Seller, Manager and Stockholder, if
Buyer reasonably has determined that there has been any breach of any material
covenant of Seller, Manager and/or Stockholder or that Seller, Manager and/or
Stockholder have breached any of its or their material representations or
warranties, stating in particularity the default or defaults on which the notice
is based; provided, however, that Seller, Manager and/or Stockholder shall,
after receipt of such notice, have thirty (30) days in which to cure such breach
and, if so cured, Buyer shall, for that reason, have no right to terminate this
Agreement;

         (c) by Seller, Manager and/or Stockholder upon notice of termination of
their obligation to consummate the transaction delivered to Buyer, if Seller,
Manager and/or Stockholder have reasonably determined that there has been any
breach of any material covenant of Buyer or that Buyer has breached any of its
material representations or warranties, stating in particularity the default or
defaults on which the notice is based; provided, however, that Buyer shall,
after receipt of such notice, have thirty (30) days in which to cure such breach
and, if so cured, Seller, Manager and/or Stockholder shall, for that reason,
have no right to terminate this Agreement;

         (d) by either Buyer, on the one hand, or Seller, Manager or
Stockholder, on the other hand, if the Closing has not occurred on or before
July 31, 2003; or

         (e) by Buyer if the Agreement and the transactions contemplated
hereunder are not approved by HOSI' Board of Directors before July 31, 2003.

         If this Agreement is terminated pursuant to (a), (d), or (e) above,
such termination shall be without liability of any party, or any director,
officer, employee, agent, consultant or representative of such party, to any
other party to this Agreement by Buyer or Seller, Manager and Stockholder,
except as specifically provided in this Agreement. If this Agreement is
terminated pursuant to (b) or (c) above, the rights and remedies granted hereby
are cumulative and nonexclusive of any other right or remedy available to the
terminating party at law or in equity. The parties agree that the Business and
the Assets are unique in character and, if Seller, Manager and/or Stockholder
defaults, damages suffered by Buyer may not be readily ascertainable.
Accordingly, Seller, Manager and Stockholder agree that Buyer, at its option,
shall be entitled to the equitable remedy of specific performance, provided,
however, that specific performance shall not be available if for any reason the
Predicate Transaction is not consummated.



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<PAGE>

                                   ARTICLE 12
                                     NOTICES

         All notices, claims, certificates, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if personally delivered or if sent by nationally-recognized overnight
courier, by telecopy, or by registered or certified mail, return receipt
requested and postage prepaid, addressed as follows:

         If to Seller, to:

                  Kenneth I. Nelkin
                  1207 Front Street
                  Morgan City, Louisiana 70380
                  Attention: Kenneth I. Nelkin
                  Fax:  (985) 384-2721

         If to Stockholder or Manager, to:

                  Kenneth I. Nelkin
                  1207 Front Street
                  Morgan City, Louisiana 70380
                  Fax:  (985) 384-2721

         With a copy (which shall not constitute notice) to:

                  Edward H. Arnold, Esq.
                  Locke Liddell & Sapp LLP
                  601 Poydras Street, Suite 2400
                  New Orleans, LA 70130-6036
                  Fax:  (504) 558-5200

         And to:

                  Ricky J. Leblanc
                  Leblanc and Carpenter
                  PO Box 3479
                  Morgan City, Louisiana 70381
                  Fax: (985) 384-2635

         If to Buyer, to:

                  HOS-IV, LLC
                  c/o Hornbeck Offshore Services, Inc.
                  414 North Causeway Blvd.
                  Mandeville, Louisiana 70448
                  Attention:  Todd M. Hornbeck



                                       46

<PAGE>

                  Fax: (985) 727-2006

         With a copy (which shall not constitute notice) to:

                  R. Clyde Parker, Jr., Esq.
                  Winstead Sechrest & Minick P.C.
                  600 Town Center One
                  1450 Lake Robbins Drive
                  The Woodlands, Texas 77380
                  Fax: (281) 681-5901

or to such other address as the party to whom notice is to be given may have
furnished to the other parties in writing in accordance herewith. Any such
notice or communication shall be deemed to have been received (a) in the case of
personal delivery, on the date of such delivery if a business day or, if not a
business day, the next succeeding business day, (b) in the case of
nationally-recognized overnight courier, on the next business day after the date
when sent, (c) in the case of telecopy transmission, when received if a business
day or, if not a business day, the next succeeding business day, and (d) in the
case of mailing, on the third business day following that on which the piece of
mail containing such communication is posted.

                                   ARTICLE 13
                                  MISCELLANEOUS

         13.1 INCORPORATION OF SCHEDULES AND APPENDICES; ENTIRE AGREEMENT. The
Appendices and Schedules attached hereto are an integral part of this Agreement
and are incorporated herein by this reference and the specific references
thereto contained herein. Except for the Confidentiality Agreement, which
supplements the confidentiality terms of this Agreement, the Escrow Agreement
(and its exhibits) and any other agreements expressly contemplated herein, this
Agreement supersedes all prior discussions and agreements among the parties with
respect to the subject matter of this Agreement, and this Agreement, including
the Appendices and Schedules hereto to be delivered in connection herewith,
contains the sole and entire agreement among the parties hereto with respect to
the subject matter hereof. Notwithstanding the foregoing, the terms of this
Section 13.1 shall not supercede or include the Purchase Agreement and the
agreements contemplated therein with respect to the subject matters covered
therein.

         13.2 WAIVER. Any term or condition of this Agreement may be waived at
any time by the party which is entitled to the benefit thereof; such waiver
shall be in writing and shall be executed by the chairman, president or a vice
president of each of the parties as applicable. A waiver on one occasion shall
not be deemed to be a waiver of the same or any other matter on a future
occasion.

         13.3 AMENDMENT. This Agreement may be modified or amended only by a
writing duly executed by or on behalf of all the parties hereto.



                                       47

<PAGE>

         13.4 COUNTERPARTS. This Agreement may be executed simultaneously in any
number of counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same instrument.

         13.5 HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.

         13.6 GOVERNING LAW. Except as otherwise provided herein, this Agreement
and all rights and obligations hereunder, including matters of construction,
validity and performance shall be governed by the laws of the State of Louisiana
without giving effect to the principles of conflicts of laws thereof.

         13.7 RISK OF LOSS. The risk of any loss, damage, impairment,
confiscation or condemnation of the non-Vessel Assets or any part thereof shall
be upon Seller at all times before the Closing Time and, with respect to the
Vessel, shall be upon Seller at all times before the time and date certified in
the Protocol of Delivery and Acceptance executed by Buyer and Seller for the
Vessel. In the event of a loss, damage, impairment, confiscation or condemnation
of any Assets for which Seller is responsible, at the election of the Buyer, (a)
Seller shall repair, replace or restore any such property as soon as possible
after its loss, impairment, confiscation or condemnation, and with respect to
the Vessel, will do so to a Reasonable Operating Condition, (b) if insurance
proceeds are sufficient to repair, replace or restore the property, and with
respect to the Vessel, to a Reasonable Operating Condition, pay all such
insurance proceeds to Buyer, or (c) decrease the Purchase Price by an amount
acceptable by the Parties; provided, however, that in the event of damage to any
substantial portion of the Assets or of the Vessel, Buyer may elect to (i)
terminate this Agreement in its entirety with no penalty or liability or (ii)
terminate this Agreement, other than the options to purchase the
Optioned-Vessels and the Optioned-Vessel Businesses as set forth in Section
5.13, with no penalty or liability.

         13.8 BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of the parties and their respective successors and assigns, heirs,
legatees and legal representatives; provided, however, that this Agreement or
any right or part hereunder shall not be voluntarily assigned by either party
hereto without the prior written consent of the other party hereto, except that
Buyer may assign its rights and obligations hereunder to a wholly owned, direct
or indirect, subsidiary of Buyer.

         13.9 EXPENSES. The Stockholder shall pay his own and Seller's and
Manager's legal and other professional expenses incurred in connection with the
Letter, this Agreement and the transactions contemplated hereby, including,
without limitation, the expenses of legal counsel and accountants engaged by
them and other expenses incurred by the Stockholder, Manager and/or Seller in
connection herewith and not expressly allocated hereunder, and the drydocking
costs relating to the Vessel. Buyer shall be responsible for expenses of legal
counsel engaged by Buyer, the expenses of its due diligence review and other
expenses incurred by Buyer in connection herewith and not expressly allocated
hereunder. If the transactions contemplated hereunder are consummated, Buyer
shall reimburse Seller for any Buyer approved expenses incurred by Seller for
Vessel surveys and inspections conducted at the Buyer's written request, but not
for the drydocking costs relating to the Vessel.



                                       48

<PAGE>

         13.10 FURTHER ASSURANCES. Seller, Manager and/or Stockholder, on the
one hand, and Buyer, on the other hand, at any time after the Closing Date, will
promptly execute, acknowledge and deliver any further deeds, assignments,
conveyances and other assurances, documents and instruments of transfer,
reasonably requested by the other parties and necessary to comply with the
representations, warranties and covenants contained herein and will take any
action consistent with the terms of this Agreement that may reasonably be
requested by the other parties for the purpose of assigning, transferring,
granting, conveying, vesting and confirming ownership in or to Buyer, or
reducing to Buyer's possession, any or all of the Assets or effecting the
assumption of the Assumed Contracts.

         13.11 DRAFTING AND NEGOTIATION OF THE AGREEMENT. The parties
acknowledge and agree that the terms of this Agreement have been fully
negotiated by the parties, that the parties have equal bargaining power and that
the fact that one party may have drafted the terms of this Agreement shall not
be construed for or against the drafting party in interpreting any of the terms
of this Agreement. Furthermore, each of the parties acknowledge and agree that
they have made their own assessment, with the assistance of their legal counsel
and other advisors, of the terms of this Agreement, the transactions
contemplated herein and any actions and filings required to be taken and made by
each such party to consummate the transactions contemplated in this Agreement.

         13.12 LIMITATION OF LIABILITY; NO CONSEQUENTIAL DAMAGES. Under no
circumstance shall a Party be liable to any other Party hereto for
consequential, speculative, indirect, incidental, punitive or exemplary damages
or for loss of profits or business revenues.

         13.13 EXCLUSIVITY. If this Agreement is terminated due to Seller's,
Manager's or Stockholder's failure to satisfy any of their obligations under
Article 7 (unless otherwise waived by Buyer), including the failure to
consummate the Predicate Transaction, then, for a period of one (1) year
following the termination of this Agreement, if Seller, Manager, Stockholder or
any affiliate of such parties (the "Seller Related Parties") directly or
indirectly acquire ownership of the Vessel, Buyer shall have an exclusive right
to purchase the Vessel and related non-Vessel Assets on substantially the terms
set forth in this Agreement, at a price (including related Assets) determined
consistent with the pricing in this Agreement, provided that Buyer's acquisition
costs are reasonably consistent with the Predicate Transaction with respect to
the Vessel and the non-Vessel assets only. Within three (3) days of the direct
or indirect acquisition of the Vessel by any of the Seller Related Parties, such
party shall notify Buyer in writing of such acquisition and Buyer shall have
fifteen (15) days after its receipt of such notice to notify the Seller Related
Parties of its intent to exercise its right to purchase any the Vessel and
related Assets. The Parties shall thereafter use reasonable commercial efforts
to close the purchase of the Vessel and related Assets within forty-five (45)
days after such exercise. If, on the other hand, the Predicate Transaction does
not close and for whatever reason the Vessel Owning Companies desire to sell the
Vessel and related Assets to any other party, Stockholder and Manager
acknowledge and agree that they shall act in good-faith and use their best
efforts, in all of their various capacities with respect to the Vessel Owning
Companies, and subject to any fiduciary duties owed to the Vessel Owning
Companies to (i) cause the Vessel Owning Companies to give Buyer an exclusive
right to purchase any the Vessel and related Assets under substantially the
terms set forth in this Agreement or (ii) if such sale cannot be effected
despite their best efforts, to provide Buyer with an opportunity to match any
other offers made by any other party for the purchase of 



                                       49

<PAGE>

any Vessel and related Assets, provided that the Agreement is not terminated by
Buyer or that the failure of the Predicate Transaction to close is not due to
any default, action or inaction by Buyer.



                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]



                                       50

<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above.

                                     BUYER:

                                     HOS-IV, LLC,
                                     a Delaware limited liability company


                                     By:   /s/ Todd M. Hornbeck
                                        ----------------------------------------
                                           Todd M. Hornbeck
                                           President and Chief Executive Officer

                                     SELLER:

                                     Candy Marine Investment Corporation,
                                     a Louisiana corporation


                                     By:   /s/ Kenneth I. Nelkin
                                        ----------------------------------------
                                           Kenneth I. Nelkin
                                           President


  Shares and Percentage Ownership:   STOCKHOLDER:

            100;  100%                  /s/ Kenneth I. Nelkin
                                     -------------------------------------------
                                        Kenneth I. Nelkin

                                     MANAGER:

                                     CANDY FLEET CORPORATION,
                                     a Louisiana corporation


                                     By:   /s/ Kenneth I. Nelkin
                                        ----------------------------------------
                                           Kenneth I. Nelkin
                                           President



<PAGE>

Hornbeck Offshore Services, Inc. joins in the execution of this Agreement solely
for the purpose of agreeing to be bound by the terms of Section 1.3 with respect
to its obligations to issue the Shares at the Closing, and for the purpose of
assuring that Buyer performs on the terms of this Agreement.

Hornbeck Offshore Services, Inc.,
a Delaware corporation


By:   /s/ Todd M. Hornbeck
   ----------------------------------------
      Todd M. Hornbeck
      President and Chief Executive Officer



Candy Cruiser, Inc. joins in the execution of this Agreement solely for the
purpose of (i) granting the options to purchase the Optioned-Vessel Assets,
including the Optioned-Vessels, and Optioned-Vessel Businesses as set forth in
Section 5.13 and agreeing to be bound by the terms of Section 5.13 and Schedule
5.13 with respect thereto, (ii) making to Buyer the representations and
warranties set forth in Section 2.29 of the Agreement and (iii) agreeing to be
bound by any other covenants applicable to the Candy Cruiser, Inc. in this
Agreement.

Candy Cruiser, Inc.,
a Louisiana corporation


By:   /s/ Kenneth I. Nelkin
   ----------------------------------------
      Kenneth I. Nelkin
      President