Dated 12 December 2008 FOURTHONE CORP. as Borrower - and - DEUTSCHE SCHIFFSBANK AKTIENGESELLSCHAFT as Lender LOAN AGREEMENT relating to a term loan facility of up to $41,600,000 to part-finance the acquisition cost of Hull no. H-I 021 (tbn “NAVIG8...

Exhibit 10.7

Dated 12 December 2008

FOURTHONE CORP.
as Borrower

- and -

DEUTSCHE SCHIFFSBANK AKTIENGESELLSCHAFT
as Lender

LOAN AGREEMENT

relating to a term loan facility of up to $41,600,000
to part-finance the acquisition
cost of Hull no. H-I 021 (tbn “NAVIG8 MALOU”)
under construction at SPP Shipyard, Korea

XXXXXX, XXXXXX & XXXXXXXX
Piraeus

INDEX

Clause		Page
1	INTERPRETATION	1
2	FACILITY	12
3	DRAWDOWN	12
4	INTEREST	13
5	INTEREST PERIODS	14
6	DEFAULT INTEREST	14
7	REPAYMENT AND PREPAYMENT	15
8	CONDITIONS PRECEDENT	17
9	REPRESENTATIONS AND WARRANTIES	18
10	GENERAL UNDERTAKINGS	20
11	CORPORATE UNDERTAKINGS	22
12	INSURANCE	23
13	SHIP COVENANTS	27
14	SECURITY COVER	30
15	PAYMENTS AND CALCULATIONS	31
16	APPLICATION OF RECEIPTS	32
17	EVENTS OF DEFAULT	33
18	FEES AND EXPENSES	36
19	INDEMNITIES	37
20	NO SET-OFF OR TAX DEDUCTION	39
21	ILLEGALITY, ETC	39
22	INCREASED COSTS	40
23	SET-OFF	41
24	TRANSFERS AND CHANGES IN LENDING OFFICES	41
25	VARIATIONS AND WAIVERS	42
26	NOTICES	43

27	SUPPLEMENTAL	44
28	LAW AND JURISDICTION	44

EXECUTION PAGE	46
SCHEDULE I DRAWDOWN NOTICE	47
SCHEDULE 2 CONDITION PRECEDENT DOCUMENTS PART A	48

THIS AGREEMENT is made on 12 December 2008

BETWEEN:

(1) FOURTHONE CORP., a corporation incorporated in the Republic of the Xxxxxxxx Islands whose registered office is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Xxxxxxxx Islands (the “Borrower”); and

(2) DEUTSCHE SCHIFFSBANK AKTIENGESELLSCHAFT, Bremen and Hamburg, acting through its office at Xxxxxxx 00, X-00000 Xxxxxx, Xxxxxxx Xxxxxxxx of Germany (the “Lender”)

BACKGROUND

The Lender has agreed to make available to the Borrower a term loan facility of up to $41,600,000 in a single advance for the purpose of part-financing the acquisition cost of the Ship, known as Hull No. H-1021 (to be named “NAVIG8 MALOU”) which is to be constructed by SPP Shipbuilding Co., Ltd. and sold by the Seller to the Borrower pursuant to the MOA (as defined below).

IT IS AGREED as follows:

1 INTERPRETATION

1.1 Definitions. Subject to Clause 1.5 in this Agreement:

“Approved Flag” means such flag as the Lender may approve as the flag on which the Ship shall be registered;

“Approved Flag State” means any country in which the Lender may approve that the Ship be registered;

“Approved Manager” means, together, Pyxis Maritime as commercial manager (the “Commercial Manager”) and International Tanker Management Ltd. (ITM), a company organised and existing under the laws of Bermuda whose principal place of business is at Xxxxxxxx Xxxx, 00 Xxxx Xxxxxx, Xxxxxxxx XX 00, Bermuda as technical manager (the “Technical Maganager”) or any other company which the Lender may, in its sole and absolute discretion, approve from time to time as the commercial and/or technical manager of the Ship, and, in the singular, means any of them;

“Availability Period” means the period commencing on the date of this Agreement and ending on:

(a) 30 June 2009 (or such later date as the Lender may agree with the Borrower); or

(b) if earlier, the date on which the Lender’s obligation to make the Loan is cancelled or terminated;

“Borrower” means Fourthone Corp. a corporation incorporated in the Republic of the Xxxxxxxx Islands and having its registered office at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Xxxxxxxx Xxxxxxx XX00000;

“Builder” means SPP Shipbuilding Co., Ltd., a corporation organised and existing under the laws of South Korea, having its principal office at 0000-0, Xxxxx-Xx, Xxxxxxx- Myun, Xxxx Xxxxx City, Xxxxxx Xxxx Nam-Do, Korea;

“Business Day” means a day on which banks are open in London, Athens, Hamburg and Korea and, in respect of a day on which a payment is required to be made under a Finance Document, also in New York City;

“Charter” means a charterparty agreement in respect of the Ship dated 10 July 2008 made between the Borrower as owner and the Charterer, providing for the chartering of the Ship for a 5-year period (commencing on the date of delivery of the Ship by the Borrower to the Charterer under the terms of the Charter) at a daily charter hire rate of $21,500 per day;

“Charterer” means Navig8 Pte Ltd, a company incorporated in Singapore and having its registered address at 00-00 Xxxxxxxxxx Xxxxx, 0 Xxxxxxx Xxxxxx, Xxxxxxxxx 039 190;

“Charter Assignment” means a specific assignment of the rights under the Charter and the Charter Guarantee to be executed by the Borrower in favour of the Lender in such form as the Lender may approve or require;

“Charter Guarantee” means a guarantee dated 20 August 2008 provided to the Borrower by the Charter Guarantor in respect of the Charterer’s obligations under the Charter;

“Charter Guarantor” means Navig8 Limited, a company organised and existing under the laws of Jersey and having its registered office at First Island House, Xxxxx Xxxxxx, Xx. Xxxxxx, Xxxxxx, Xxxxxxx Xxxxxxx, XX00XX;

“Charter Period” means the period during which the Ship is operating under the Charter;

“Contractual Currency” has the meaning given in Clause 19.4;

“Delivery Date” means the date on which the Ship is delivered by the Seller to the Borrower in accordance with the MOA;

“Dollars” and “$” means the lawful currency for the time being of the United States of America;

“Drawdown Date” means the date requested by the Borrower for the Loan to be advanced, or (as the context requires) the date on which the Loan is actually advanced;

“Drawdown Notice” means a notice in the form set out in Schedule I (or in any other form which the Lender approves or requires);

“Earnings” means all moneys whatsoever which are now, or later become, payable (actually or contingently) to the Borrower and which arise out of the use or operation of the Ship, including (but not limited to):

(a) all freight, hire and passage moneys, compensation payable to the Borrower who owns the Ship in the event of requisition of the Ship for hire, remuneration for salvage and towage services, demurrage and detention moneys and damages for breach (or payments for variation or termination) of any charterparty or other contract for the employment of the Ship;

(b) all moneys which are at any time payable under Insurances in respect of loss of earnings; and

(c) if and whenever the Ship is employed on terms whereby any moneys falling within paragraphs (a) or (b) are pooled or shared with any other person (which may only be effected with the prior consent of the Lender in accordance with Clause 13.14), that proportion of the net receipts of the relevant pooling or sharing arrangement which is attributable to the Ship;

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“Environmental Claim” means:

(a) any claim by any governmental, judicial or regulatory authority which arises out of an Environmental Incident or an alleged Environmental Incident or which relates to any Environmental Law; or

(b) any claim by any other person which relates to an Environmental Incident or to an alleged Environmental Incident,

and “claim” means a claim for damages, compensation, fines, penalties or any other payment of any kind, whether or not similar to the foregoing; an order or direction to take, or not to take, certain action or to desist from or suspend certain action; and any form of enforcement or regulatory action, including the arrest or attachment of any asset;

“Environmental Incident” means:

(a) any release of Environmentally Sensitive Material from the Ship; or

(b) any incident in which Environmentally Sensitive Material is released from a vessel other than the Ship and which involves a collision between the Ship and such other vessel or some other incident of navigation or operation, in either case, in connection with which the Ship is actually or potentially liable to be arrested, attached, detained or injuncted and/or the Ship and/or the Borrower who owns the Ship and/or any operator or manager of the Ship is at fault or allegedly at fault or otherwise liable to any legal or administrative action; or

(c) any other incident in which Environmentally Sensitive Material is released otherwise than from a Ship and in connection with which that Ship is actually or potentially liable to be arrested and/or where the Borrower who owns such Ship and/or any operator or manager of the Ship is at fault or allegedly at fault or otherwise liable to any legal or administrative action;

“Environmental Law” means any law relating to pollution or protection of the environment, to the carriage of Environmentally Sensitive Material or to actual or threatened releases of Environmentally Sensitive Material;

“Environmentally Sensitive Material” means oil, oil products and any other substance (including any chemical, gas or other hazardous or noxious substance) which is (or is capable of being or becoming) polluting, toxic or hazardous;

“Event of Default” means any of the events or circumstances described in Clause 17,1;

“Finance Documents” means:

(a) this Agreement;

(b) the Master Agreement;

(c) the Master Agreement Assignment;

(d) the Charter Assignment;

(e) the Mortgage;

(f) the General Assignment; and

(g) any other document (whether creating a Security Interest or not) which is executed at any time by the Borrower or any other person as security for, or to establish any form of subordination or priorities arrangement in relation to, any amount payable to the Lender under this Agreement or any of the other documents referred to in this definition;

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“Financial Indebtedness” means, in relation to a person (the “debtor”), a liability of the debtor:

(a) for principal, interest or any other sum payable in respect of any moneys borrowed or raised by the debtor;

(b) under any loan stock, bond, note or other security issued by the debtor;

(c) under any acceptance credit, guarantee or letter of credit facility made available to the debtor;

(d) under a financial lease, a deferred purchase consideration arrangement or any other agreement having the commercial effect of a borrowing or raising of money by the debtor;

(e) under any foreign exchange transaction, any interest or currency swap or any other kind of derivative transaction entered into by the debtor or, if the agreement under which any such transaction is entered into requires netting of mutual liabilities, the liability of the debtor for the net amount; or

(f) under a guarantee, indemnity or similar obligation entered into by the debtor in respect of a liability of another person which would fall within (a) to (e) if the references to the debtor referred to the other person;

“General Assignment” means a general assignment of the Earnings, the Insurances and any Requisition Compensation of the Ship in such form as the Lender may approve or require and, in the plural means all of them;

“Group” means the Borrower, Pyxis Maritime and Xxxxxx Shipping and includes all of their respective subsidiaries or companies associated with, or in the same or substantially the same beneficial ownership as, the Borrower, the Pyxis Maritime and Xxxxxx Shipping, or owning ships managed by Pyxis Maritime and/or Xxxxxx Shipping;

“Insurances” means:

(a) all policies and contracts of insurance, including entries of the Ship in any protection and indemnity or war risks association, which are effected in respect of the Ship, her Earnings or otherwise in relation to her; and

(b) all rights and other assets relating to, or derived from, any of the foregoing, (b) including any rights to a return of a premium;

“Interest Period” means a period determined in accordance with Clause 5;

“ISM Code” means:

(a) ‘The International Management Code for the Safe Operation of Ship and for Pollution Prevention’, currently known or referred to as the ‘ISM Code’, adopted by the Assembly of the International Maritime Organisation by Resolution A.741(18) on 4 November 1993 and incorporated on 19 May 1994 into chapter IX of the International Convention for the Safety of Life at Sea 1974 (SOLAS 1974); and

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(b) all further resolutions, circulars, codes, guidelines, regulations and recommendations which are now or in the future issued by or on behalf of the International Maritime Organisation or any other entity with responsibility for implementing the ISM Code, including without limitation, the ‘Guidelines on implementation or administering of the International Safety Management (ISM) Code by Administrations’ produced by the International Maritime Organisations pursuant to Resolution A.788(19) adopted on 25 November 1995,

as the same may be amended, supplemented or replaced from time to time;

“ISM Code Documentation” means:

(a) the document of compliance (DOC) and safety management certificate (SMC) issued pursuant to the ISM Code in relation to the Ship within the periods specified by the ISM Code; and

(b) all other documents and data which are relevant to the ISM SMS and its implementation and verification which the Lender may require; and

(c) any other documents which are prepared or which are otherwise relevant to establish and maintain the Ship’s compliance or the compliance of the relevant Borrower, with the ISM Code which the Lender may require;

“ISM Code” means the International Safety Management Code (including the guidelines on its implementation), adopted by the International Maritime Organisation Assembly as Resolutions A.741 (18) and A.788 (19), as the same may be amended or supplemented from time to time (and the terms “Safety Management System”, “Safety Management Certificate” and “Document of Compliance” have the same meanings as are given to them in the ISM Code);

“ISM SMS” means the safety management system for the Ship which is required to be developed, implemented and maintained under the ISM Code;

“ISPS Code” means the “International Code for the Security of Ships and of Port Facilities” as adopted on 12 December 2002 by resolution 2 of the Conference of Contracting Governments to the International Convention for the Safety of Life at Sea, 1974;

“Xxxxxx Shipping” means Xxxxxx Shipping Agencies S.A., a corporation having established a Greek office at 000-000 Xxxxxxxxx Xxxxxx, Xxxxxxxx, Xxxxxx, Xxxxxx and whose registered address is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Xxxxxxxx Xxxxxxx, XX00000;

“Lender” means Deutsche Schiffsbank Aktiengesellschaft Bremen and Hamburg, acting through its office at Xxxxxxx 00, X-00000 Xxxxxx, Xxxxxxx Xxxxxxxx of Germany;

“LIBOR” means, in relation to an Interest Period, the rate per annum equal to the offered quotation for deposits in Dollars for a period equal to, or as near as possible equal to, the relevant Interest Period which appears on Reuters BBA Page LIBOR 01 at or about 11.00 a.m. (London time) on the second Business Day prior to the commencement of that Interest Period (and, for the purposes of this Agreement, “Reuters BBA Page LIBOR 01” means the display designated as “Reuters BBA Page LIBOR 01” on the Reuters Money News Service or such other page as may replace BBA Page LIBOR 01 on that service for the purpose of displaying rates comparable to that rate or on such other service as may be nominated by the British Bankers’ Association as the information vendor for the purpose of displaying British Bankers’ Association Interest Settlement Rates for Dollars);

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“Loan” means the principal amount for the time being outstanding under this Agreement;

“Major Casualty” means any casualty to the Ship in respect of which the claim or the aggregate of the claims against all insurers, before adjustment for any relevant franchise or deductible, exceeds $1,000,000 or the equivalent in any other currency;

“Management Agreement” means an agreement in respect of the technical and commercial management of the Ship made between each Approved Manager and the Borrower as owner of the Ship, and, in the plural, means all of them;

“Manager’s Undertaking” means a letter of undertaking executed or to be executed by the Approved Manager in favour of the Lender in the terms required by the Lender agreeing certain matters in relation to the Approved Manager serving as the manager of the Ship and subordinating the rights of the Approved Manager against the Ship and the Borrower to the rights of the Lender under the Finance Documents in such form as the Lender may approve or require;

“Master Agreement” means any Master Agreement for Financial Derivatives Transactions (“Rahmenvertrag fiir Finanztermingeschafte”) in such form as the Lender may approve (the “Deutscher Rahmenvertrag”) to be entered into with the Borrower pursuant to Clause 4.12;

“Master Agreement Assignment” means an assignment of the Borrower’s rights under the Master Agreement and each Transaction executed or to be executed by the Borrower in favour of the Lender in such form as the Lender may approve or require;

“Master Agreement Liabilities” means, at any relevant time, all liabilities actual or contingent, present or future of the Borrower to the Lender under the Master Agreement;

“Margin” means:

(a) when the Ship is registered under a European Union flag (or any other flag, as determined by the Lender in its sole discretion to be equivalent), 1.20 per cent. per annum; or

(b) otherwise, 1.30 per cent. per annum;

“MOA” means the memorandum of agreement dated 31 May 2007 (as supplemented by Addendum No. 1 dated 6 June 2007) in relation to the Ship made between the Seller and the Borrower as buyer as the same may be further amended and supplemented from time to time;

“Mortgage” means the first preferred or, as the case may be, priority ship mortgage on the Ship and, if required pursuant to the laws of the applicable Approved Flag State, a deed of covenant collateral thereto in such form as the Lender may approve or require;

“Negotiation Period” has the meaning given in Clause 4.6;

“Payment Currency” has the meaning given in Clause 19.4;

“Permitted Security Interests” means:

(a) Security Interests created by the Finance Documents;

(b) liens for unpaid master’s and crew’s wages in accordance with usual maritime practice;

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(c) liens for salvage;

(d) liens arising by operation of law for not more than 2 months’ prepaid hire under any charter in relation to the Ship not prohibited by this Agreement;

(e) liens for master’s disbursements incurred in the ordinary course of trading and any other lien arising by operation of law or otherwise in the ordinary course of the operation, repair or maintenance of the Ship, provided such liens do not secure amounts more than 30 days overdue (unless the overdue amount is being contested by the relevant Borrower in good faith by appropriate steps) and subject, in the case of liens for repair or maintenance, to Clause 13.12(g));

(f) any Security Interest created in favour of a plaintiff or defendant in any proceedings or arbitration as security for costs and expenses where a Borrower is actively prosecuting or defending such proceedings or arbitration in good faith; and

(g) Security Interests arising by operation of law in respect of taxes which are not overdue for payment or in respect of taxes being contested in good faith by appropriate steps and in respect of which appropriate reserves have been made;

“Pertinent Document” means:

(a) any Finance Document;

(b) any policy or contract of insurance contemplated by or referred to in Clause 12 or any other provision of this Agreement or another Finance Document;

(c) any other document contemplated by or referred to in any Finance Document; and

(d) any document which has been or is at any time sent by or to the Lender in contemplation of or in connection with any Finance Document or any policy, contract or document falling within paragraphs (b) or (c);

“Pertinent Jurisdiction”, in relation to a company, means;

(a) England and Wales;

(b) the country under the laws of which the company is incorporated or formed;

(c) a country in which the company’s central management and control is or has recently been exercised;

(d) a country in which the overall net income of the company is subject to corporation tax, income tax or any similar tax;

(e) a country in which assets of the company (other than securities issued by, or loans to, related companies) having a substantial value are situated, in which the company maintains a permanent place of business, or in which a Security Interest created by the company must or should be registered in order to ensure its validity or priority; and

(f) a country the courts of which have jurisdiction to make a winding up, administration or similar order in relation to the company or which would have such jurisdiction if their assistance were requested by the courts of a country referred to in paragraphs (b) or (c) above;

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“Pertinent Matter” means:

(a) any transaction or matter contemplated by, arising out of, or connection with a Pertinent Document; or

(b) any statement relating to a Pertinent Document or to a transaction or matter falling within paragraph (a);

and covers any such transaction, matter or statement, whether entered into, arising or made at any time before the signing of this Agreement or on or at any time after that signing;

“Potential Event of Default” means an event or circumstance which, with the giving of any notice, the lapse of time, a determination of the Lender and/or the satisfaction of any other condition, would constitute an Event of Default;

“Purchase Price” means the amount payable or actually paid by the Borrower to the Seller in relation to the purchase of the Ship pursuant to the MOA;

“Pyxis Maritime” means Pyxis Maritime Corp., a corporation having established a Greek office at 000-000 Xxxxxxxxx Xxxxxx, Xxxxxxxx, Xxxxxx, Xxxxxx and whose registered address is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Xxxxxxxx Xxxxxxx, XX00000;

“Quotation Date” means, in relation to any Interest Period (or any other period for which an interest rate is to be determined under any provision of a Finance Document), the day on which quotations would ordinarily be given by leading banks in the London Interbank Market for deposits in the currency in relation to which such rate is to be determined for delivery on the first day of that Interest Period or other period;

“Relevant Person” has the meaning given in Clause 17.7;

“Repayment Date” means a date on which a repayment is required to be made under Clause 7;

“Requisition Compensation” includes all compensation or other moneys payable by reason of any act or event such as is referred to in paragraph (b) of the definition of “Total Loss”;

“Secured Liabilities” means all liabilities which the Borrower, the Security Parties or any of them have, at the date of this Agreement or at any later time or times, under or in connection with any Finance Document or any judgment relating to any Finance Document; and for this purpose, there shall be disregarded any total or partial discharge of these liabilities, or variation of their terms, which is effected by, or in connection with, any bankruptcy, liquidation, arrangement or other procedure under the insolvency laws of any country;

“Security Interest” means:

(a) a mortgage, charge (whether fixed or floating) or pledge, any maritime or other lien or any other security interest of any kind;

(b) the security rights of a plaintiff under an action in rem; and

(c) any arrangement entered into by a person (A) the effect of which is to place another person (B) in a position which is similar, in economic terms, to the position in which B would have been had he held a security interest over an asset of A; but this paragraph (c) does not apply to a right of set off or combination of accounts conferred by the standard terms of business of a bank or financial institution;

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“Security Party” means any person who, as a surety or mortgagor, as a party to any subordination or priorities arrangement, or in any similar capacity, executes a document falling within the last paragraph of the definition of “Finance Documents”;

“Security Period” means the period commencing on the date of this Agreement and ending on the date on which the Lender notifies the Borrower and the Security Parties that:

(a) all amounts which have become due for payment by the Borrower or any Security Party under the Finance Documents have been paid;

(b) no amount is owing or has accrued (without yet having become due for payment) under any Finance Document;

(c) neither the Borrower nor any Security Party has any future or contingent liability under Clause 19, 20, or 21 or any other provision of this Agreement or another Finance Document; and

(d) the Lender does not consider that there is a significant risk that any payment or transaction under a Finance Document would be set aside, or would have to be reversed or adjusted, in any present or possible future bankruptcy of the Borrower or a Security Party or in any present or possible future proceeding relating to a Finance Document or any asset covered (or previously covered) by a Security Interest created by a Finance Document;

“Seller” means Atlantic Palace Marine Limited a company organised and existing under the laws of Cyprus and having its registered office at 00 Xxxxxxxx Xxxxxx, Xxxxxxxx, Xxxxxx;

“Ship” means the product tanker of approximately 50,000 metric tons deadweight currently being constructed by the Builder (having Hull No. H-1021) which is to be purchased by the Borrower pursuant to the terms of the MOA and registered in its ownership under an Approved Flag with the name “NAVIG8 MALOU”;

“Total Loss” means:

(a) actual, constructive, compromised, agreed or arranged total loss of the Ship;

(b) any expropriation, confiscation, requisition or acquisition of the Ship, whether for full consideration, a consideration less than its proper value, a nominal consideration or without any consideration, which is effected by any government or official authority or by any person or persons claiming to be or to represent a government or official authority (excluding a requisition for hire for a fixed period not exceeding 1 year without any right to an extension) unless it is within 1 month redelivered to the Borrower’s full control;

(c) any arrest, capture, seizure or detention of the Ship (including any hijacking or theft) unless it is within 1 month redelivered to the Borrower’s full control;

“Total Loss Date” means:

(a) in the case of an actual loss of the Ship, the date on which it occurred or, if that is unknown, the date when the Ship was last heard of;

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(b) in the case of a constructive, compromised, agreed or arranged total loss of the Ship, the earliest of:

(i) the date on which a notice of abandonment is given to the insurers; and

(ii) the date of any compromise, arrangement or agreement made by or on behalf of the Borrower with the Ship’s insurers in which the insurers agree to treat the Ship as a total loss; and

(c) in the case of any other type of total loss, on the date (or the most likely date) on which it appears to the Lender that the event constituting the total loss occurred; and

“Transaction” has the meaning given to such term in the Master Agreement.

1.2 Construction of certain terms. In this Agreement:

“approved” means, for the purposes of Clause 12, approved in writing by the Lender;

“asset” includes every kind of property, asset, interest or right, including any present, future or contingent right to any revenues or other payment;

“company” includes any partnership, joint venture and unincorporated association;

“consent” includes an authorisation, consent, approval, resolution, licence, exemption, filing, registration, notarisation and legalisation;

“contingent liability” means a liability which is not certain to arise and/or the amount of which remains unascertained;

“document” includes a deed; also a letter or fax;

“excess risks” means the proportion of claims for general average, salvage and salvage charges not recoverable under the hull and machinery policies in respect of the Ship in consequence of its insured value being less than the value at which the Ship is assessed for the purpose of such claims;

“expense” means any kind of cost, charge or expense (including all legal costs, charges and expenses) and any applicable value added or other tax;

“law” includes any order or decree, any form of delegated legislation, any treaty or international convention and any regulation or resolution of the Council of the European Union, the European Commission, the United Nations or its security council;

“legal or administrative action” means any legal proceeding or arbitration and any administrative or regulatory action or investigation;

“liability” includes every kind of debt or liability (present or future, certain or contingent), whether incurred as principal or surety or otherwise;

“months” shall be construed in accordance with Clause 1.3;

“obligatory insurances” means all insurances effected, or which the relevant Borrower is obliged to effect, under Clause 12 or any other provision of this Agreement or another Finance Document;

“person” includes any company; any state, political sub-division of a state and local or municipal authority; and any international organisation;

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“policy”, in relation to any insurance, includes a slip, cover note, certificate of entry or other document evidencing the contract of insurance or its terms;

“protection and indemnity risks” means the usual risks covered by a protection and indemnity association managed in London, including pollution risks and the proportion (if any) of any sums payable to any other person or persons in case of collision which are not recoverable under the hull and machinery policies by reason of the incorporation in them of clause 1 of the Institute Time Clauses (Hulls)(1/10/83) or (with respect to Insurances commencing on or after 1/11/1995) clause 8 of the Institute Time Clauses (Hulls) (1/11/1995) or the Institute Amended Running Down Clause (1/10/71) or any equivalent provision;

“regulation” includes any regulation, rule, official directive, request or guideline whether or not having the force of law of any governmental, intergovernmental or supranational body, agency, department or regulatory, self-regulatory or other authority or organisation;

“successor” includes any person who is entitled (by assignment, novation, merger or otherwise) to any other person’s rights under this Agreement or any other Finance Document (or any interest in those rights) or who, as administrator, liquidator or otherwise, in entitled to exercise those rights; and in particular references to a successor include a person to whom those rights (or any interest in those rights) are transferred or pass as a result of a merger, division, reconstruction or other reorganisation of it or any other person;

“tax” includes any present or future tax, duty, impost, levy or charge of any kind which is imposed by any state, any political sub-division of a state or any local or municipal authority (including any such imposed in connection with exchange controls), and any connected penalty, interest or fine; and

“war risks” includes the risk of mines and all risks excluded by clause 23 of the Institute Time Clauses (Hulls)(1/10/83) or (with respect to Insurances commencing on or after 1/11/1995) clause 24 of the Institute Time Clauses (Hulls) (1/11/1995).

1.3 Meaning of “month”. A period of one or more “months” ends on the day in the relevant calendar month numerically corresponding to the day of the calendar month on which the period started (“the numerically corresponding day”), but:

(a) on the Business Day following the numerically corresponding day if the numerically corresponding day is not a Business Day or, if there is no later Business Day in the same calendar month, on the Business Day preceding the numerically corresponding day; or

(b) on the last Business Day in the relevant calendar month, if the period started on the last Business Day in a calendar month or if the last calendar month of the period has no numerically corresponding day;

and “month” and “monthly” shall be construed accordingly.

1.4 General Interpretation. In this Agreement:

(a) references in Clause 1.1 to a Finance Document or any other document being in the form of a particular appendix include references to that form with any modifications to that form which the Lender approves or reasonably requires;

(b) references to, or to a provision of, a Finance Document or any other document are references to it as amended or supplemented, whether before the date of this Agreement or otherwise;

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(c) references to, or to a provision of, any law include any amendment, extension, re-enactment or replacement, whether made before the date of this Agreement or otherwise;

(d) words denoting the singular number shall include the plural and vice versa; and

(e) Clauses 1.1 to 1.5 apply unless the contrary intention appears.

1.5 Headings. In interpreting a Finance Document or any provision of a Finance Document, all clause, sub-clause and other headings in that and any other Finance Document shall be entirely disregarded,

2 FACILITY

2.1 Amount of facility. Subject to the terms of this Agreement, and reliance (inter alia) on the representations and warranties of the Borrower set out in Clause 9 and the representations and warranties of the Borrower and the other parties to the Finance Documents as set out in the Finance Documents, the Lender agrees to make available to the Borrower, in one advance, a loan facility of either:

(a) in circumstances where the Ship is not subject to the Charter, up to the lesser of (i) $36,400,000 and (ii) 70 per cent, of the Purchase Price (the “Minimum Facility”); or

(b) in circumstances where the Lender is satisfied that the Ship is subject to the Charter, up to the lesser of (i) $41,600,000 and (ii) 80 per cent. of the Purchase Price (the “Maximum Facility”).

2.2 Purpose of Loan. The Borrower undertakes with the Lender to use the Loan only for the purpose stated in Clause 2,1 above.

3 DRAWDOWN

3.1 Request for Advance. Subject to the following conditions, the Borrower may request the Loan to be advanced by ensuring that the Lender receives a completed Drawdown Notice not later than 11.00 a.m. (Hamburg time) 2 Business Days prior to the intended Drawdown Date.

3.2 Availability. The conditions referred to in Clause 3.1 are that:

(a) the Drawdown Date has to be a Business Day during the Availability Period;

(b) if the Loan (or any part thereof) has not been advanced prior to the end of the Availability Period the Lender shall be under no further obligation to advance the Loan (or any part thereof) under this Agreement; and

(c) the amount of the Loan shall not exceed the amount of the facility as outlined in Clause 2.1.

3.3 Drawdown Notice irrevocable. The Drawdown Notice must be signed by a director or other authorised person of the Borrower; and once served, the Drawdown Notice cannot be revoked without the prior consent of the Lender.

3.4 Disbursement of Loan. Subject to the terms of this Agreement, the Lender shall on the Drawdown Date advance the Loan to the Borrower by paying the proceeds thereof to an account to be nominated by the Borrower and specified in the Drawdown Notice for payment to the Seller and the Borrower hereby unconditionally and irrevocably authorises the Lender to make such payment on its behalf.

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3.5 Disbursement of Advance to third party. The payment by the Lender under Clause 3.4 to the Seller shall constitute the making of the Loan and the Borrower shall at that time become indebted, as principal and direct obligor, to the Lender in an amount equal to the Loan.

4 INTEREST

4.1 Payment of normal interest. Subject to the provisions of this Agreement, interest on the Loan (or any part thereof) in respect of each Interest Period shall be paid by the Borrower on the last day of that Interest Period.

4.2 Normal rate of interest. Subject to the provisions of this Agreement, the rate of interest on the Loan (or any part thereof) in respect of an Interest Period shall be:

(i) in the case of any Interest Period for which LIBOR is applicable, the applicable Margin plus LIBOR; or

(ii) in the case of any Interest Period for which LIBOR is not applicable, such interest rate as shall be mutually agreed between the Lender and the Borrower.

4.3 Payment of accrued interest. In the case of an Interest Period longer than 6 months, accrued interest shall be paid every 6 months during that Interest Period and on the last day of that Interest Period,

4.4 Notification of market disruption. The Lender shall promptly notify the Borrower if no rate is quoted on Reuters BBA Page LIBOR01, if the rate quoted on Reuters BBA Page LIBOR 01 does not represent the cost of funding of the Lender for the applicable Interest Period or if for any reason the Lender is unable to obtain Dollars in the London Interbank Market in order to fund the Loan (or any part of it) during any Interest Period, stating the circumstances which have caused such notice to be given.

4.5 Suspension of drawdown. If the Lender’s notice under Clause 4.4 is served before the Loan (or any part thereof) is advanced, the Lender’s obligation to advance the Loan (or any part thereof) shall be suspended while the circumstances referred to in the Lender’s notice continue.

4.6 Negotiation of alternative rate of interest. If the Lender’s notice under Clause 4.4 is served after the Loan (or any part thereof) is advanced, the Borrower and the Lender shall use reasonable endeavours to agree, within the 30 days after the date on which the Lender serves its notice under Clause 4.4 (the “Negotiation Period”), an alternative interest rate or (as the case may be) an alternative basis for the Lender to fund .or continue to fund the Loan during the Interest Period concerned.

4.7 Application of agreed alternative rate of interest. Any alternative interest rate or an alternative basis which is agreed during the Negotiation Period shall take effect in accordance with the terms agreed.

4.8 Alternative rate of interest in absence of agreement. If an alternative interest rate or alternative basis is not agreed within the Negotiation Period, and the relevant circumstances are continuing at the end of the Negotiation Period, then the Lender shall set an interest period and interest rate representing the cost of funding of the Lender in Dollars or in any available currency of the Loan plus the applicable Margin; and the procedure provided for by this Clause 4.8 shall be repeated if the relevant circumstances are continuing at the end of the interest period so set by the Lender.

4.9 Notice of prepayment. If the Borrower does not agree with an interest rate set by the Lender under Clause 4.8, the Borrower may give the Lender not less than 15 Business Days’ notice of its intention to prepay at the end of the interest period set by the Lender.

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4.10 Prepayment. A notice under Clause 4.9 shall be irrevocable; and on the last Business Day of the interest period set by the Lender, the Borrower shall prepay (without premium or penalty) the Loan, together with accrued interest thereon at the applicable rate plus the applicable Margin.

4.11 Application of prepayment. The provisions of Clause 7 shall apply in relation to the prepayment.

4.12 Interest hedging. Subject to the consent of the Lender (such consent to be given in the Lender’s absolute discretion), the Borrower may, for the purpose of managing its exposure to interest rate fluctuations, request the Lender to enter into a Master Agreement pursuant to which the Borrower may enter into Transactions with the Lender.

5 INTEREST PERIODS

5.1 Commencement of Interest Periods. The first Interest Period applicable to the Loan shall commence on the Drawdown Date and each subsequent Interest Period shall commence on the expiry of the preceding Interest Period.

5.2 Duration of normal Interest Periods. Subject to Clauses 5.3 and 5.4, each Interest Period shall be:

(a) 3, 6, 9 or 12 months as notified by the Borrower to the Lender not later than 11.00 a.m. (Hamburg time) 2 Business Days before the commencement of the Interest Period; or

(b) 3 months, if the Borrower fails to notify the Lender by the time specified in paragraph (a); or

(c) such other period as the Lender may agree with the Borrower.

5.3 Duration of Interest Periods for repayment instalments. In respect of an amount due to be repaid under Clause 7 on a particular Repayment Date, an Interest Period shall end on that Repayment Date.

5.4 Non-availability of matching deposits for Interest Period selected. If, after the Borrower has selected and the Lender has agreed an Interest Period longer than 6 months, the Lender notifies the Borrower by 11.00 a.m. (Hamburg time) on the third Business Day before the commencement of the Interest Period that it is not satisfied that deposits in Dollars for a period equal to the Interest Period will be available to it in the London Interbank Market when the Interest Period commences, the Interest Period shall be of 6 months duration.

6 DEFAULT INTEREST

6.1 Payment of default interest on overdue amounts. The Borrower shall pay interest in accordance with the following provisions of this Clause 6 on any amount payable by the Borrower under any Finance Document which the Lender, or other designated payee does not receive on or before the relevant date, that is:

(a) the date on which the Finance Documents provide that such amount is due for payment; or

(b) if a Finance Document provides that such amount is payable on demand, the date on which the demand is served; or

(c) if such amount has become immediately due and payable under Clause 17.4, the date on which it became immediately due and payable.

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6.2 Default rate of interest. Interest shall accrue on an overdue amount from (and including) the relevant date until the date of actual payment (as well after as before judgment) at the rate per annum determined by the Lender to be 2 per cent. above:

(a) in the case of an overdue amount of principal, the higher of the rates set out at paragraphs (a) and (b) of Clause 6.3; or

(b) in the case of any other overdue amount, the rate set out at paragraph (b) of Clause 6.3.

6.3 Calculation of default rate of interest. The rates referred to in Clause 6.2 are:

(a) the rate applicable to the overdue principal amount immediately prior to the relevant date (but only for any unexpired part of any then current Interest Period);

(b) the applicable Margin plus, in respect of successive periods of any duration (including at call) up to 3 months which the Lender may select from time to time:

(i) LIBOR; or

(ii) if the Lender determines that Dollars deposits for any such period are not being made available to any Lender by leading banks in the London Interbank Market in the ordinary course of business or LIBOR does not represent the cost of funding of the Lender at the relevant time, a rate from time to time determined by the Lender by reference to the cost of funds to the Lender from such other sources as the Lender may from time to time determine or as the case may be, the Lender’s cost of funding.

6.4 Notification of interest periods and default rates. The Lender shall promptly notify the Borrower of each interest rate determined by the Lender under Clause 6.3 and of each period selected by the Lender for the purposes of paragraph (b) of that Clause; but this shall not be taken to imply that the Borrower is liable to pay such interest only with effect from the date of the Lender’s notification.

6.5 Payment of accrued default interest. Subject to the other provisions of this Agreement, any interest due under this Clause shall be paid on the last day of the period by reference to which it was determined; and the payment shall be made to the Lender for the account if the Lender to which the overdue amount is due.

6.6 Compounding of default interest. Any such interest which is not paid at the end of the period by reference to which it was determined shall thereupon be compounded.

7 REPAYMENT AND PREPAYMENT

7.1 Amount of repayment instalments. Subject to the proviso to Clause 7.2, the Borrower shall repay the Loan by 34 consecutive semi-annual instalments by:

(a) if the Minimum Facility has been drawn by:

(i) in the case of the first to the thirty-third such instalments (inclusive), in the amount of $1,070,000 each; and

(ii) in the case of the thirty-fourth such instalment, in the amount of $1,090,000;

(b) if the Maximum Facility has been drawn by:

(i) in the case of the first to the tenth such instalments (inclusive), in the amount of $1,590,000 each;

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(ii) in the case of the eleventh to the thirty-third such instalments (inclusive), in the amount of $1,070,000 each; and

(iii) in the case of the thirty-fourth such instalment, in the amount of $1,090,000,

Provided that if, in either the case of (a) or (b) above, less than the maximum amount of the relevant facility has been drawn down hereunder, each repayment instalment applicable to that facility shall be reduced pro rata by an amount in aggregate equal to the undrawn amount of that facility.

7.2 Repayment Dates. The first repayment instalment shall be repaid on the date falling 6 months after the Drawdown Date and each subsequent repayment instalment shall be repaid at semi-annual intervals thereafter and the last repayment instalment, shall be repaid on the date falling on the seventeenth anniversary of the Drawdown Date Provided that the Lender shall have the right, at its discretion, to cancel the Loan on the twelfth anniversary of the Drawdown Date and to demand that, on such date, all amounts due to the Lender under this Agreement and the other Finance Documents be immediately paid by the Borrower.

7.3 Final Repayment Date. On the final Repayment Date, the Borrower shall additionally pay to the Lender all other sums then accrued or owing under any Finance Document.

7.4 Voluntary prepayment. Subject to the following conditions, the Borrower may prepay the whole or any part of the Loan on the last day of an Interest Period.

7.5 Conditions for voluntary prepayment. The conditions referred to in Clause 7.4 are that:

(a) a partial prepayment shall be equal to a repayment instalment as outlined in Clause 7.1 or a multiple thereof;

(b) the Lender has received from the Borrower at least 30 days’ prior written notice specifying the amount to be prepaid and the date on which the prepayment is to be made;

(c) the Borrower has provided evidence satisfactory to the Lender that any consent required by the Borrower or any Security Party in connection with the prepayment has been obtained and remains in force, and that any regulation relevant to this Agreement which affects the Borrower or any Security Party has been complied with.

7.6 Effect of notice of prepayment. A prepayment notice may not be withdrawn or amended without the consent of the Lender and the amount specified in the prepayment notice shall become due and payable by the Borrower on the date for prepayment specified in the prepayment notice.

7.7 Mandatory prepayment. The Borrower shall be obliged to prepay the Loan:

(a) if the Ship is sold, on or before the date on which the sale is completed by delivery of the Ship to the buyer; or

(b) if the Ship becomes a Total Loss, on the earlier of the date falling 150 days after the Total Loss Date and the date of receipt by the Lender of the proceeds of insurance relating to such Total Loss,

7.8 Mandatory prepayment on termination of the Charter, The Borrower shall be obliged to prepay the Relevant Amount of the Loan upon demand by the Lender if the Charter is terminated, cancelled or expires for any reason prior to the stated expiry date and the Borrower has not within 14 days provided a substitute charterparty agreement in respect of the Ship with a charterer and upon terms which are acceptable to the Lender in all respects acting in its absolute discretion.

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In this Clause 7.8, “Relevant Amount” means such amount as shall be determined by the Lender to be the difference between (i) the amount actually advanced to the Borrower pursuant to Clause 2.1(b), and (ii) the Minimum Facility which would have been advanced to the Borrower pursuant to Clause 2.1(a) had the Ship not been subject to the Charter.

7.9 Amounts payable on prepayment. A prepayment shall be made together with accrued interest (and any other amount payable under Clause 18 or otherwise) in respect of the amount prepaid and, if the prepayment is not made on the last day of an Interest Period together with any sums payable under Clause 18.1(b).

7.10 Application of partial prepayment. Each partial prepayment shall be applied against the then outstanding repayment instalments referred to in Clause 7.1 in inverse order of maturity.

7.11 No reborrowing. No amount prepaid may be reborrowed.

8 CONDITIONS PRECEDENT

8.1 Documents, fees and no default. The Lender’s obligation to advance the Loan is subject to the following conditions precedent:

(a) that, on or before service of the Drawdown Notice, the Lender has received the documents described in Part A of Schedule 2 in a form and substance satisfactory to it and its lawyers;

(b) that, on or before the Drawdown Date, the Lender receives the documents described in Part B of Schedule 2 in a form and substance satisfactory to it and its lawyers;

(c) that, on or before service of the Drawdown Notice the Lender has received all accrued commitment commission due and payable pursuant to Clause 18.1;

(d) that, on or before service of the Drawdown Notice, the Lender has received the arrangement fee referred to in Clause 18.1;

(e) that both at the date of the Drawdown Notice and at the Drawdown Date:

(i) no Event of Default or Potential Event of Default has occurred or would result from the borrowing of the Loan;

(ii) the representations and warranties in Clause 9.1 and those of the Borrower or any Security Party which are set out in the other Finance Documents would be true and not misleading if repeated on each of those dates with reference to the circumstances then existing;

(iii) none of the circumstances contemplated by Clause 4,4 has occurred; and

(iv) there has been no material adverse change in the financial condition, state of affairs or prospects of the Borrower or any Security Party applying at the date of this Agreement;

(f) that, if the ratio set out in Clause 14.1 were applied immediately following the advance of the Loan, the Borrower would not be obliged to provide additional security or prepay part of the Loan under that Clause; and

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(g) that the Lender has received, and found to be acceptable to it, any further opinions, consents, agreements and documents in connection with the Finance Documents which the Lender may request by notice to the Borrower prior to the Drawdown Date.

8.2 Waivers of conditions precedent. If the Lender, at its discretion, permits the Loan to be borrowed before certain of the conditions referred to in Clause 8.1 are satisfied, the Borrower shall ensure that those conditions are satisfied within 5 Business Days after the Drawdown Date (or such longer period as the Lender may specify).

9 REPRESENTATIONS AND WARRANTIES

9.1 General. The Borrower represents and warrants to the Lender as follows.

9.2 Status. The Borrower is duly incorporated and validly existing and in good standing under the laws of the Xxxxxxxx Islands.

9.3 Share capital and ownership. The Borrower has an authorised share capital of 500 shares of no par value, all of which shares have been issued to bearer.

9.4 Corporate power. The Borrower has the corporate capacity, and has taken all corporate action and obtained all consents necessary for it:

(a) to purchase and pay for the Ship and register its Ship in its name under an Approved Flag;

(b) to execute the Finance Documents to which it is a party; and

(c) to borrow under this Agreement and to make all the payments contemplated by, and to comply with, those Finance Documents to which it is a party.

9.5 Consents in force. All the consents referred to in Clause 9.4 remain in force and nothing has occurred which makes any of them liable to revocation.

9.6 Legal validity; effective Security Interests. The Finance Documents to which the Borrower is a party, do now or, as the case may be, will, upon execution and delivery (and, where applicable, registration as provided for in the Finance Documents):

(a) constitute the Borrower’s legal, valid and binding obligations enforceable against it in accordance with their respective terms; and

(b) create legal, valid and binding Security Interests enforceable in accordance with their respective terms over all the assets to which they, by their terms, relate,

subject to any relevant insolvency laws affecting creditors’ rights generally.

9.7 No third party Security Interests. Without limiting the generality of Clause 9,6, at the time of the execution and delivery of each Finance Document:

(a) the Borrower will have the right to create all the Security Interests which that Finance Document purports to create; and

(b) no third party will have any Security Interest (except for Permitted Security Interests) or any other interest, right or claim over, in or in relation to any asset to which any such Security Interest, by its terms, relates.

9.8 No conflicts. The execution by the Borrower of each Finance Document and the borrowing by it of the Loan, and the Borrower’s compliance with each Finance Document will not involve or lead to a contravention of:

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(a) any law or regulation; or

(b) the constitutional documents of the Borrower; or

(c) any contractual or other obligation or restriction which is binding on the Borrower or any of its assets.

9.9 No withholding taxes. All payments which the Borrower is liable to make under the Finance Documents may be made without deduction or withholding for or on account of any tax payable under any law of any Pertinent Jurisdiction.

9.10 No default. No Event of Default or Potential Event of Default has occurred.

9.11 Information. All information which has been provided in writing by or on behalf of the Borrower or any Security Party to the Lender in connection with any Finance Document satisfied the requirements of Clause 9.5; all accounts which have been so provided satisfied the requirements of Clause 9.7; and there has been no material adverse change in the financial position or state of affairs of the Borrower from that disclosed in the latest of those accounts, or in the financial position or state of any Security Party from that disclosed to the Lender at the date of execution of the Lender’s commitment letter.

9.12 No litigation. No legal or administrative action involving the Borrower (including action relating to the alleged or actual breach of the ISM Code and the ISPS Code) has been commenced or taken or, to its knowledge, is likely to be commenced or taken which, in either case, would be likely to have a material adverse effect on its financial position or profitability.

9.13 Validity and completeness of MOA. The MOA constitutes valid, binding and enforceable obligations of the Seller and the Borrower respectively in accordance with its terms; and:

(a) the copy of the MOA delivered to the Lender before the date of this Agreement is a true and complete copy; and

(b) no amendments or additions to the MOA have been agreed nor has the Borrower waived any of its rights under the MOA.

9.14 No rebates etc. There is no agreement or understanding to allow or pay the rebate, premium, commission, discount or other benefit or payment (howsoever described) to the Borrower, the Seller or a third party in connection with the purchase by the Borrower of the Ship, other than as disclosed to the Lender in writing on or prior to the date of this Agreement.

9.15 Compliance with certain undertakings. At the date of this Agreement, the Borrower is in compliance with Clauses 10.2, 10.4, 10.9 and 10.13.

9.16 Taxes paid. The Borrower has paid all taxes applicable to, or imposed on or in relation to it, its business or the Ship.

9.17 No money laundering. Without prejudice to the generality of Clause 2.2, in relation to the borrowing by the Borrower of the Loan, the performance and discharge of the Borrower’s obligations and liabilities under the Finance Documents to which it is a party, and the transaction and other arrangements affected or contemplated by the Finance Documents to which the Borrower is a party, the Borrower confirms (i) that it is acting for its own account; (ii) that it will use the proceeds of the Loan for its own benefit, under its full responsibility and exclusively for the purposes specified in this Agreement; and (iii) that the foregoing will not involve or lead to a contravention of any law, official requirement or other regulatory measure or procedure implemented to combat “money laundering” (as defined in Article 1 of Directive (91/308) EEC) of the Council of the European Communities.

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10 GENERAL UNDERTAKINGS

10.1 General. The Borrower undertakes with the Lender to comply with the following provisions of this Clause 10 at all times during the Security Period, except as the Lender may otherwise permit.

10.2 Title; negative pledge. The Borrower will:

(a) hold the legal title to, and own the entire beneficial interest in its Ship, the Insurances and Earnings, free from all Security Interests and other interests and rights of every kind, except for those created by the Finance Documents and the effect of assignments contained in the Finance Document and except for Permitted Security Interests;

(b) not create or permit to arise any Security Interest (except for Permitted Security Interests) over any other asset, present or future; and

(c) procure that its liabilities under the Finance Documents to which it is party do and will rank at least pari passu with all other present and future insecured liabilities, except for Liabilities which are mandatorily preferred by law.

10.3 No disposal of assets. The Borrower will not transfer, lease or otherwise dispose of

(a) all or a substantial part of its assets, whether by one transaction or a number of transactions, whether related or not; or

(b) any debt payable to it or any other right (present, future or contingent right) to receive a payment, including any right to damages or compensation.

10.4 No other liabilities or obligations to be incurred. The Borrower will not incur any liability or obligation except liabilities and obligations under the MOA and the Finance Documents to which it is a party and liabilities or obligations reasonably incurred in the ordinary course of operating and chartering the Ship.

10.5 Information provided to be accurate. All financial and other information which is provided in writing by or on behalf of the Borrower under or in connection with any Finance Document will be true and not misleading and will not omit any material fact or consideration.

10.6 Provision of financial statements. The Borrower will send to the Lender:

(a) as soon as possible, but in no event later than 180 days after the end of each financial year (commencing with the financial statements relating to the financial year of the Borrower ending 31 December 2009), its audited financial statements and the combined audited financial statements of the Group;

(b) as soon as possible, upon receipt of the Lender’s request, information with respect to the financial standing, commitments, operations and performance of the Borrower, the Ship, the Commercial Manager and any other company in the Group.

10.7 Form of financial statements. All accounts delivered under Clause 10.6 will:

(a) be prepared in accordance with all applicable laws and generally accepted accounting principles consistently applied;

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(b) give a true and fair view of the state of affairs of the Borrower or, as the case may be, the Commercial Manager and the ship-owning companies which are ultimately owned or controlled by the Commercial Manager at the date of those financial statements and of its or their profit for the period to which those accounts relate; and

(c) fully disclose or provide for all significant liabilities of the Borrower or, as the case may be, the Commercial Manager and the ship-owning companies which are ultimately owned or controlled by the Commercial Manager.

10.8 Shareholder and creditor notices. The Borrower will send the Lender, at the same time as they are despatched, copies of all communications which are despatched to its shareholders or creditors or any class of them.

10.9 Consents. The Borrower will maintain in force and promptly obtain or renew, and will promptly send certified copies to the Lender of, all consents required:

(a) for the Borrower to perform its obligations under any Finance Document to which it is a party;

(b) for the validity or enforceability of any Finance Document to which it is a party;

(c) for the Borrower to continue to own and operate the Ship,

and the Borrower will comply with the terms of all such consents.

10.10 Maintenance of Security Interests. The Borrower will:

(a) at its own cost, do all that it reasonably can to ensure that any Finance Document validly creates the obligations and the Security Interests which it purports to create; and

(b) without limiting the generality of paragraph (a), at its own cost, promptly register, file, record or enrol any Finance Document with any court or authority in all Pertinent Jurisdictions, pay any stamp, registration or similar tax in all Pertinent Jurisdictions in respect of any Finance Document, give any notice or take any other step which may be or become necessary or desirable for any Finance Document to be valid, enforceable or admissible in evidence or to ensure or protect the priority of any Security Interest which it creates.

10.11 Notification of litigation. The Borrower will provide the Lender with details of any legal or administrative action involving it, any Security Party, or the Ship, the Earnings or the Insurances as soon as such action is instituted or it becomes apparent to the Borrower that it is likely to be instituted, unless it is clear that the legal or administrative action cannot be considered material in the context of any Finance Document.

10.12 No amendment to MOA. The Borrower will not agree to any amendment or supplement to, or waive or fail to enforce the MOA or any of its provisions.

10.13 Principal place of business. The Borrower will maintain its place of business, and keep its corporate documents and records, at the address stated at Clause 27.2(a); and the Borrower will not establish, or do anything as a result of which it would be deemed to have a place of business in any country other than the Xxxxxxxx Islands.

10.14 Confirmation of no default. The Borrower will, within 2 Business Days after service by the Lender of a written request, serve on the Lender a notice which is signed by 2 of its directors or officers and which:

(a) states that no Event of Default or Potential Event of Default has occurred; or

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(b) states that no Event of Default or Potential Event of Default has occurred, except for a specified event or matter, of which all material details are given.

10.15 Notification of default. The Borrower will notify the Lender as soon as it becomes aware of:

(a) the occurrence of an Event of Default or a Potential Event of Default; or

(b) any matter which indicates that an Event of Default or a Potential Event of Default may have occurred;

and will keep the Lender fully up-to-date with all developments.

10.16 Provision of further information. The Borrower will (and shall procure that the Commercial Manager will), as soon as practicable after receiving the request, provide the Lender with any additional financial or other information relating to:

(a) it, the Ship, the MOA, the Earnings or the Insurances relative to the Ship and, if applicable, the Charter; or

(b) any other matter relevant to, or to any provision of, a Finance Document which may be requested by the Lender at any time.

11 CORPORATE UNDERTAKINGS

11.1 General. The Borrower also undertakes with the Lender to comply with the following provisions of this Clause 11 at all times during the Security Period except as the Lender may otherwise permit.

11.2 Maintenance of status. The Borrower will maintain its separate corporate existence and remain in good standing under the laws of the Xxxxxxxx Islands.

11.3 Negative undertakings. The Borrower will not:

(a) carry on any business other than the ownership, chartering and operation of the Ship; or

(b) pay any dividend or make any other form of distribution or effect any form of redemption, purchase or return of share capital; or

(c) repay any shareholders’ loans or any other loans advanced to it by any person or pay interest thereon (other than principal and interest under the Loan) nor make any loans or advances to any person Provided that if the Lender gives its consent to the making of any loan, the Borrower agrees to fully subordinate, or procure the full subordination of any such loan, to the rights of the Lender under this Agreement and the Finance Documents and execute, and procure the execution of, such documents as may be required by the Lender to give effect to such subordination; or

(d) provide any form of credit or financial assistance to:

(i) a person who is directly or indirectly interested in the Borrower’s share or loan capital; or

(ii) any company in or with which such a person is directly or indirectly interested or connected;

(iii) or enter into any transaction with or involving such a person or company on terms which are, in any respect, less favourable to it than those which it could obtain in a bargain made at arms’ length;

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(e) issue, allot or grant any person a right to any shares in its capital or repurchase or reduce its issued share capital;

(f) acquire any shares or other securities other than US or UK Treasury bills and certificates of deposit issued by major North American or European banks, or enter into any transaction in a derivative;

(g) enter into any form of amalgamation, merger or de-merger or any form of reconstruction or reorganisation; or

(h) acquire any vessel other than the Ship.

12 INSURANCE

12.1 General. The Borrower undertakes to comply with the following provisions of this Clause 12 at all times during the Security Period (after the Ship has been delivered to it under the MOA) except as the Lender may otherwise permit.

12.2 Maintenance of obligatory insurances. The Borrower shall keep the Ship insured at its expense against:

(a) fire and usual marine risks (including hull and machinery and excess risks);

(b) war risks;

(c) protection and indemnity risks;

(d) any other risks against which the Lender considers, having regard to practices and other circumstances prevailing at the relevant time, it would in the opinion of the Lender be reasonable for the Borrower to insure and which are specified by the Lender by notice to the Borrower.

12.3 Terms of obligatory insurances. The Borrower shall effect such insurances:

(a) in Dollars;

(b) in the case of fire and usual marine risks and war risks, in an amount on an agreed value basis at least the greater of (i) the market value of the Ship (determined in accordance with Clause 14.5) and (ii) 120 per cent. of the Loan;

(c) in the case of oil pollution liability risks, for an aggregate amount equal to the highest level of cover from time to time available under basic protection and indemnity club entry and in the international marine insurance market (currently $1,000,000,000);

(d) in relation to protection and indemnity risks in respect of the full tonnage of the Ship owned by it;

(e) on approved terms; and

(f) through approved brokers and with approved insurance companies and/or underwriters or, in the case of war risks and protection and indemnity risks, in approved war risks and protection and indemnity risks associations.

12.4 Further protections for the Lender. In addition to the terms set out in Clause 12.3, the Borrower shall procure the obligatory insurances shall:

(a) whenever the Lender requires name (or be amended to name) the Lender as additional named assured for its rights and interests, warranted no operational interest and with full waiver of rights of subrogation against the Lender, but without the Lender thereby being liable to pay (but having the right to pay) premiums, calls or other assessments in respect of such insurance;

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(b) name the Lender as loss payee with such directions for payment as the Lender may specify;

(c) provide that all payments by or on behalf of the insurers under the obligatory insurances to the Lender shall be made without set-off, counterclaim or deductions or condition whatsoever;

(d) provide that such obligatory insurances shall be primary without right of contribution from other insurances which may be carried by the Lender; and

(e) provide that the Lender may make proof of loss if the Borrower fails to do so.

12.5 Renewal of obligatory insurances. The Borrower shall:

(a) at least 21 days before the expiry of any obligatory insurance effected by it:

(i) notify the Lender of the brokers (or other insurers) and any protection and indemnity or war risks association through or with whom the Borrower proposes to renew that obligatory insurance and of the proposed terms of renewal; and

(ii) obtain the Lender’s approval to the matters referred to in paragraph (i);

(b) at least 14 days before the expiry of any obligatory insurance, renew that obligatory insurance in accordance with the Lender’s approval pursuant to paragraph (a); and

(c) procure that the approved brokers and/or the war risks and protection and indemnity associations with which such a renewal is effected shall promptly after the renewal notify the Lender in writing of the terms and conditions of the renewal.

12.6 Copies of policies; letters of undertaking. The Borrower shall ensure that all approved brokers provide the Lender with pro forma copies of all policies relating to the obligatory insurances which they are to effect or renew and of a letter or letters or undertaking in a form required by the Lender and including undertakings by the approved brokers that:

(a) they will have endorsed on each policy, immediately upon issue, a loss payable clause and a notice of assignment complying with the provisions of Clause 12.4;

(b) they will hold such policies, and the benefit of such insurances, to the order of the Lender in accordance with the said loss payable clause;

(c) they will advise the Lender immediately of any material change to the terms of the obligatory insurances;

(d) they will notify the Lender in writing, not less than 14 days before the expiry of the obligatory insurances, in the event of their not having received notice of renewal instructions from the Borrower or its agents and, in the event of their receiving instructions to renew, they will promptly notify the Lender of the terms of the instructions; and

(e) they will not set off against any sum recoverable in respect of a claim relating to the Ship under such obligatory insurances any premiums or other amounts due to them or any other person whether in respect of the Ship or otherwise, they waive any lien on the policies, or any sums received under them, which they might have in respect of such premiums or other amounts, and they will not cancel such obligatory insurances by reason of non-payment of such premiums or other amounts, and will arrange for a separate policy to be issued in respect of the Ship forthwith upon being so requested by the Lender.

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12.7 Copies of certificates of entry. The Borrower shall ensure that any protection and indemnity and/or war risks associations in which the Ship is entered provides the Lender with:

(a) a certified copy of the certificate of entry for the Ship;

(b) a letter or letters of undertaking in such form as may be required by the Lender;

(c) where required to be issued under the terms of insurance/indemnity provided by the Borrower’s protection and indemnity association, a certified copy of each United States of America voyage quarterly declaration (or other similar document or documents) made by the Borrower in relation to the Ship in accordance with the requirements of such protection and indemnity association; and

(d) a certified copy of each certificate of financial responsibility for pollution by oil or other Environmentally Sensitive Material issued by the relevant certifying authority in relation to the Ship.

12.8 Deposit of original policies. The Borrower shall ensure all policies relating to obligatory insurances are deposited with the approved brokers through which the insurances are effected or renewed.

12.9 Payment of premiums. The Borrower shall punctually pay all premiums or other sums payable in respect of the obligatory insurances and produce all relevant receipts when so required by the Lender.

12.10 Guarantees. The Borrower shall ensure that any guarantees required by a protection and indemnity or war risks association are promptly issued and remain in full force and effect.

12.11 Restrictions on employment. The Borrower shall not employ the Ship, nor permit her to be employed, outside the cover provided by any obligatory insurances.

12.12 Compliance with terms of insurances. The Borrower shall not do or omit to do (or permit to be done or not to be done) any act or thing which would or might render any obligatory insurance invalid, void, voidable or unenforceable or render any sum payable under an obligatory insurance repayable in whole or in part; and, in particular:

(a) the Borrower shall not take all necessary action and comply with all requirements which may from time to time be applicable to the obligatory insurances, and (without limiting the obligation contained in Clause 12.7 (c)) ensure that the obligatory insurances are not made subject to any exclusions or qualifications to which the Lender has not given its prior approval;

(b) the Borrower shall not make any changes relating to the classification or classification society or manager or operator of its Ship approved by the underwriters of the obligatory insurances;

(c) the Borrower shall make (and promptly supply copies to the Lender of) all quarterly or other voyage declarations which may be required by the protection and indemnity risks association in which the Ship is entered to maintain cover for trading to the United States of America and Exclusive Economic Zone (as defined in the United States Oil Pollution Act 1990 or any other applicable legislation); and

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(d) the Borrower shall not employ the Ship, nor allow it to be employed, otherwise than in conformity with the terms and conditions of the obligatory insurances, without first obtaining the consent of the insurers and complying with any requirements (as to extra premium or otherwise) which the insurers specify.

12.13 Alteration to terms of insurances. The Borrower shall not either make or agree to any alteration to the terms of any obligatory insurance nor waive any right relating to any obligatory insurance.

12.14 Settlement of claims. The Borrower shall not settle, compromise or abandon any claim under any obligatory insurance for Total Loss or for a Major Casualty, and the Borrower shall do all things necessary and provide all documents, evidence and information to enable the Lender to collect or recover any moneys which at any time become payable in respect of the obligatory insurances.

12.15 Provision of copies of communications. The Borrower shall provide the Lender, at the time of each such communication, copies of all written communications between it and:

(a) the approved brokers; and

(b) the approved protection and indemnity and/or war risks associations; and

(c) the approved insurance companies and/or underwriters, which relate directly or indirectly to.

(i) the Borrower’s obligations relating to the obligatory insurances including, without limitation, all requisite declarations and payments of additional premiums or calls; and

(ii) any credit arrangements made between the Borrower and any of the persons referred to in paragraphs (a) or (b) relating wholly or partly to the effecting or maintenance of the obligatory insurances.

12.16 Provision of information. In addition, the Borrower shall promptly provide the Lender (or any persons which it may designate) with any information which the Lender (or any such designated person) requests for the purpose of:

(a) obtaining or preparing any report from an independent marine insurance broker as to the adequacy of the obligatory insurances effected or proposed to be effected; and/or

(b) effecting, maintaining or renewing any such insurances as are referred to in Clause 12.17 below or dealing with or considering any matters relating to any such insurances;

and the Borrower shall, forthwith upon demand, indemnify the Lender in respect of all fees and other expenses incurred by the Lender in connection with any such report as is referred to in paragraph (a).

12.17 Mortgagee’s interest and additional peril insurances, The Lender shall be entitled from time to time to effect, maintain and renew a mortgagee’s interest marine insurance policy in an amount equal to 110 per cent. of the Loan and a mortgagee’s interest additional perils insurance policy on such terms, through such insurers and generally in such manner as the Lender may form time to time consider appropriate, including, without limitation, cover for the Ship if it is at any time trading in a jurisdiction or waters where the US Oil Pollution Act 1990 or similar applies, and the Borrower shall upon demand fully indemnify the Lender in respect of all premiums and other expenses which are incurred in connection with or with a view to effecting, maintaining or renewing any such insurance or dealing with, or considering, any matter arising out of any such insurance.

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12.18 Review of insurance requirements. The Lender shall be entitled to review the requirements of this Clause 12 from time to time in order to take account of any changes in circumstances after the date of this Agreement which are, in the opinion of the Lender, significant and capable of affecting the Borrower or the Ship and its insurance (including, without limitation, changes in the availability or the cost of insurance coverage or the risks to which the Borrower may be subject), and may appoint insurance consultants in relation to this review at the cost of the Borrower.

12.19 Modification of insurance requirements. The Lender shall notify the Borrower of any proposed modification under Clause 12.18 to the requirements of this Clause 12 which the Lender consider appropriate in the circumstances, and such modification shall take effect on and from the date it is notified in writing to the Borrower as an amendment to this Clause 12 and shall bind the Borrower accordingly.

12.20 Compliance with mortgagee’s instructions. The Lender shall be entitled (without prejudice to or limitation of any other rights which it may have or acquire under any Finance Document) to require the Ship to remain at any safe port or to proceed to and remain at any safe port designated by the Lender until the Borrower implements any amendments to the terms of the obligatory insurances and any operational changes required as a result of a notice served under Clause 12.19.

13 SHIP COVENANTS

13.1 General. The Borrower also undertakes with the Lender to comply with the following provisions of this Clause 13 at all times during the Security Period (after the Ship has been delivered to it under the MOA) except as the Lender may otherwise permit in writing.

13.2 Ship’s name and registration. The Borrower shall keep the Ship registered in its name under the Approved Flag; shall not do or allow to be done anything as a result of which such registration might be cancelled or imperilled; and shall not change the name or port of registry of the Ship, in each case without the prior written consent of the Lender.

13.3 Repair and classification. The Borrower shall keep the Ship in a good and safe condition and state of repair:

(a) consistent with first-class ship ownership and management practice;

(b) so as to maintain the Ship with the highest class available for vessels of the same type, age and specification as the Ship with Lloyd’s Register of Shipping free of outstanding recommendations and conditions of such classification society affecting the Ship’s class; and

(c) so as to comply with all laws and regulations applicable to vessels registered at ports in the Approved Flag State or to vessels trading to any jurisdiction to which the Ship may trade from time to time including but not limited to the ISM Code, the ISPS Code and the ISM Code Documentation.

13.4 Modification. The Borrower shall not make any modification or repairs to, or replacement of, the Ship or equipment installed on the Ship which would or might materially alter the structure, type or performance characteristics of the Ship or materially reduce the value.

13.5 Removal of parts. The Borrower shall not remove any material part of the Ship, or any item of equipment installed on the Ship, unless the part or item so removed is forthwith replaced by a suitable part or item which is in the same condition as or better condition than the part or item removed, is free from any Security Interest or any right in favour of any person other than the Lender and becomes on installation on the Ship the property of the Borrower and subject to the security constituted by the Mortgage Provided that the Borrower may install equipment owned by a third party if the equipment can be removed without any risk of damage to the Ship.

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13.6 Surveys. The Borrower shall submit the Ship regularly to all periodical or other surveys which may be required for classification purposes and, if so required by the Lender, provide the Lender with copies of all survey reports.

13.7 Inspection. The Borrower shall permit the Lender (by surveyors or other persons appointed by it for that purpose) to board the Ship at all reasonable times (during the pre-delivery and post-delivery period) to inspect its condition or to satisfy themselves about proposed or executed repairs and shall afford all proper facilities for such inspections, and all costs and expenses in relation thereto shall be for the account of the Borrower.

13.8 Prevention of and release from arrest. The Borrower shall promptly discharge:

(a) all liabilities which give or may give rise to maritime or possessory liens on or claims enforceable against the Ship, the Earnings or the Insurances;

(b) all taxes, dues and other amounts charged in respect of the Ship, the Earnings or the Insurances; and

(c) all other outgoings whatsoever in respect of the Ship, the Earnings or the Insurances,

and, forthwith upon receiving notice of the arrest of the Ship, or of its detention in exercise or purported exercise of any lien or claim, the Borrower shall procure its release by providing bail or otherwise as the circumstances may require.

13.9 Compliance with laws etc. The Borrower shall:

(a) comply, or procure compliance with the ISM Code, the ISPS Code, all Environmental Laws and all other laws or regulations relating to the Ship, its ownership, operation and management or to the business of the Borrower and the Commercial Manager;

(b) not employ the Ship nor allow its employment in any manner contrary to any law or regulation in any relevant jurisdiction including but not limited to the ISM Code and the ISPS Code; and

(c) in the event of hostilities in any part of the world (whether war is declared or not), not cause or permit it to enter or trade to any zone which is declared a war zone by any government or by the Ship’s war risks insurers unless the prior written consent of the Lender has been given and the Borrower has (at its expense) effected any special, additional or modified insurance cover which the Lender may require.

13.10 Provision of information. The Borrower shall promptly provide the Lender with any information which it requests regarding:

(a) the Ship, its employment, position and engagements;

(b) the Earnings and payments and amounts due to the Ship’s master and crew;

(e) any expenses incurred, or likely to be incurred, in connection with the operation, maintenance or repair of the Ship and any payments made in respect of the Ship;

(d) any towages and salvages;

(e) the Borrower’s, the Approved Managers’ or the Ship’s compliance with the ISM Code and the ISPS Code; and, upon the Lender’s request, provide copies of any current charter relating to the Ship, of any current charter guarantee and of the Document of Compliance, Safety Management Certificate and International Ship Security Certificate of the Ship.

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13.11 Notification of certain events. The Borrower shall immediately notify the Lender by fax, confirmed forthwith by letter, of:

(a) any casualty which is or is likely to be or to become a Major Casualty;

(b) any occurrence as a result of which the Ship has become or is, by the passing of time or otherwise, likely to become a Total Loss;

(c) any requirement or recommendation made by any insurer or classification society or by any competent authority which is not immediately complied with;

(d) any arrest or detention of the Ship, any exercise or purported exercise of any lien on the Ship or its Earnings or any requisition of the Ship for hire;

(e) any intended dry docking of the Ship;

(f) any Environmental Claim made against the Borrower or in connection with the Ship, or any Environmental Incident;

(g) any claim for breach of the ISM Code or the ISPS Code being made against the Borrower, any Approved Manager or otherwise in connection with the Ship;

(h) any other matter, event or incident, actual or threatened, the effect of which will or could lead to the ISM Code or the ISPS Code not being complied with;

and the Borrower shall keep the Lender advised in writing on a regular basis and in such detail as the Lender shall require of the Borrower’s, the relevant Approved Manager’s or any other person’s response to any of those events or matters.

13.12 Restrictions on chartering, appointment of managers etc. The Borrower shall not:

(a) let the Ship on demise charter for any period;

(b) enter into any time or consecutive voyage charter in respect of the Ship for a term which exceeds, or which by virtue of any optional extensions may exceed, 13 months;

(c) enter into any charter in relation to the Ship under which more than 2 months’ hire (or the equivalent) is payable in advance;

(d) charter the Ship otherwise than on bona fide arm’s length terms at the time when the Ship is fixed;

(e) appoint a manager of the Ship other than an Approved Manager or agree to any alteration to the terms of an Approved Manager’s appointment;

(f) de-activate or lay up the Ship; or

(g) put the Ship into the possession of any person for the purpose of work being done upon her in an amount exceeding or likely to exceed $250,000 (or the equivalent in any other currency) unless that person has first given to the Lender and in terms satisfactory to it a written undertaking not to exercise any lien on the Ship or the Earnings for the cost of such work or for any other reason.

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13.13 Notice of Mortgage. The Borrower shall keep the Mortgage registered against the Ship as a valid first priority or preferred (as the case may be) mortgage, carry on board its Ship a certified copy of the Mortgage and place and maintain in a conspicuous place in the navigation room and the Master’s cabin of the Ship a framed printed notice stating that the Ship is mortgaged by the Borrower to the Lender.

13.14 Sharing of Earnings. The Borrower shall not:

(a) enter into any agreement or arrangement for the sharing of any Earnings;

(b) enter into any agreement or arrangement for the postponement of any date on which any Earnings are due; the reduction of the amount of any Earnings or otherwise for the release or adverse alteration of any right of the Borrower to any Earnings; or

(c) enter into any agreement or arrangement for the release of, or adverse alteration to, any guarantee or Security Interest relating to any Earnings.

14 SECURITY COVER

14.1 Minimum required security cover. Clause 14.2 applies if the Lender notifies the Borrower that:

(a) the market value (determined as provided in Clause 14.5) of the Ship; plus

(b) the net realisable value of any additionally security previously provided under this Clause 14

is below 125 per cent. of the aggregate of the Loan and the Master Agreement Liabilities.

14.2 Provision of additional security cover; prepayment. If the Lender serves a notice on the Borrower under Clause 14,1, the Borrower shall, within 1 month after the date on which the Lender’s notice is served, either:

(a) provide, or ensure that a third party provides, additional security which, in the opinion of the Lender, has a net realisable value at least equal to the shortfall and is documented in such terms as the Lender may approve or require; or

(b) prepay in accordance with Clause 7 such part (at least) of the Loan as will eliminate the shortfall.

14.3 Meaning of additional security. In Clause 14.1 “security” means a Security Interest over an asset or assets (whether securing the Borrower’s liabilities under the Finance Documents or a guarantee in respect of those liabilities), or a guarantee, letter of credit or other security in respect of the Borrower’s liabilities under the Finance Documents.

14.4 Requirement for additional documents. The Borrower shall not be deemed to have complied with Clause 14.1 (1) above until the Lender has received in connection with the additional security certified copies of documents of the kinds referred to in paragraphs 3, 4 and 5 of Schedule 2, Part A below and such legal opinions in terms acceptable to the Lender from such lawyers as they may select.

14.5 Valuation of Ship. The market value of the Ship at any date is that shown by a valuation prepared:

(a) as at a date not more than 14 days previously;

(b) by an independent sale and purchase shipbroker which the Lender has approved or appointed for the purpose;

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(c) with or without physical inspection of the Ship (as the Lender may require);

(d) on the basis of a sale for prompt delivery for cash on normal arm’s length commercial terms as between a willing seller and a willing buyer;

(e) with or without charter of other contract of employment at the option of the Lender;

(f) after deducting the estimated amount of the usual and reasonable expenses which would be incurred in connection with the sale.

In case such valuation is not accepted by the Borrower, then the Borrower shall have the right to appoint another shipbroker to value the Ship on the same basis. In case of a difference in value of greater than 10 per cent. in the amount of each valuation, the Lender and the Borrower agree to accept the valuation of a third shipbroker nominated by each party (such valuation to be formally requested by and addressed to the Lender), otherwise the valuation by the shipbroker appointed by the Lender shall prevail. Each Borrower agrees to supply to the Lender and to any such shipbroker such information concerning its Ship and its condition as such shipbroker may require for the purpose of making such valuation.

14.6 Value of additional security. The net realisable value of any additional security which is provided under Clause 14.1 and which consists of a Security Interest over a vessel shall be that shown by a valuation complying with the requirements of Clause 14.4.

14.7 Valuations binding. Any valuation under Clause 14.2, 14.3 or 14.4 shall be binding and conclusive as regards the Borrower, as shall be any valuation which the Lender makes of a security which does not consist of or include a Security Interest.

14.8 Provision of information. The Borrower shall promptly provide the Lender and any broker or expert acting under Clause 14.4 or 14.5 with any information which the Lender or the broker or expert may request for the purposes of the valuation; and, if the Borrower fails to provide the information by the date specified in the request, the valuation may be made on any basis and assumptions which the broker or the Lender (or the expert appointed by them) consider prudent.

14.9 Payment of valuation expenses. Without prejudice to the generality of the Borrower’s obligations under Clauses 18.2, 18.3 and 19.3, the Borrower shall, on demand, pay the Lender the amount of the fees and expenses of any broker or expert instructed by the Lender under this Clause and all legal and other expenses incurred by the Lender in connection with any matter arising out of this Clause.

14.10 Application of prepayment. Clause 7 shall apply in relation to any prepayment pursuant to Clause 14.2(b).

15 PAYMENTS AND CALCULATIONS

15.1 Currency and method of payments. All payments to be made by the Borrower to the Lender under a Finance Document shall be made to the Lender:

(a) by not later than 11.00 a.m. (New York City time) on the due date;

(b) in same day Dollars funds settled through the New York Clearing House Interbank Payment System (or in such other Dollar funds and/or settled in such other manner as the Lender shall specify as being customary at the time for the settlement of international transactions of the type contemplated by this Agreement); and

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(c) to the account of the Lender at Citibank N.A., III Wall Street, New York, New York U.S.A. (Account No. 00000000), or to such other account with such other bank as the Lender may from time to time notify to the Borrower.

15,2 Payment on non-Business Day. If any payment by the Borrower under a Finance Document would otherwise fall due on a day which is not a Business Day:

(a) the due date shall be extended to the next succeeding Business Day; or

(b) if the next succeeding Business Day falls in the next calendar month, the due date shall be brought forward to the immediately preceding Business Day;

and interest shall be payable during any extension under paragraph (a) at the rate payable on the original due date.

15.3 Basis for calculation of periodic payments. All interest and commitment fee and any other payments under any Finance Document which are of an annual or periodic nature shall accrue from day to day and shall be calculated on the basis of the actual number of days elapsed and a 360 day year.

15.4 Lender accounts. The Lender shall maintain an account showing the amounts advanced by the Lender and all other sums owing to the Lender from the Borrower and each Security Party under the Finance Documents and all payments in respect of those amounts made by the Borrower and any Security Party.

15.5 Accounts prima facie evidence. If the account maintained under Clauses 15.4 shows an amount to be owing by the Borrower or a Security Party to the Lender, that account shall be prima facie evidence that that amount is owing to the Lender.

16 APPLICATION OF RECEIPTS

16.1 Normal order of application. Except as any Finance Document may otherwise provide, any sums which are received or recovered by the Lender under or by virtue of any Finance Document shall be applied:

(a) FIRST: in or towards satisfaction of any amounts then due and payable under the Finance Documents (or any of them) in such order of application and/or such proportions as the Lender may specify by notice to the Borrower and the Security Parties;

(b) SECONDLY: in retention of an amount equal to any amount not then due and payable under any Finance Document but which the Lender, by notice to the Borrower and the Security Parties, states in its opinion will or may become due and payable in the future and, upon those amounts becoming due and payable, in or towards satisfaction of them in accordance with the provisions of this Clause; and

(c) THIRDLY: any surplus shall be paid to the Borrower or to any other person appearing to be entitled to it.

16.2 Variation of order of application. The Lender may, by notice to the Borrower and the Security Parties, provide for a different manner of application from that set out in Clause 16.1 either as regards a specified sum or sums or as regards sums in a specified category or categories.

16.3 Notice of variation of order of application. The Lender may give notices under Clause 16.2 from time to time; and such a notice may be stated to apply not only to sums which may be received or recovered in the future, but also to any sum which has been received or recovered on or after the third Business Day before the date on which the notice is served.

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16.4 Appropriation rights overridden. This Clause 16 and any notice which the Lender gives under Clause 16.2 shall override any right of appropriation possessed, and any appropriation made, by the Borrower or any Security Party.

17 EVENTS OF DEFAULT

17.1 Events of Default. An Event of Default occurs if:

(a) the Borrower or any Security Party fails to pay when due or (if so payable) on demand any sum payable under a Finance Document or under any document relating to a Finance Document; or

(b) any breach occurs of Clause 8.2, 10,2, 10.3, 11.2, 11.3, or 14.2; or

(c) any breach by the Borrower or any Security Party occurs of any provision of a Finance Document (other than a breach covered by paragraphs (a) or (b) above) if, in the opinion of the Lender, such default is capable of remedy, and such default continues unremedied 10 days after written notice from the Lender requesting action to remedy the same; or

(d) (subject to any applicable grace period specified in the Finance Document) any breach by the Borrower or any Security Party occurs of any provision of a Finance Document (other than a breach covered by paragraphs (a), (b) or (c) above); or

(e) any representation, warranty or statement made by, or by an officer of, the Borrower or a Security Party in a Finance Document or in the Drawdown Notice or any other notice or document relating to a Finance Document is untrue or misleading when it is made; or

(f) any of the following occurs in relation to any Financial Indebtedness of a Relevant Person:

(i) any Financial Indebtedness of a Relevant Person is not paid when due or, if so payable, on demand; or

(ii) any Financial Indebtedness of a Relevant Person becomes due and payable or capable of being declared due and payable prior to its stated maturity date as a consequence of any event of default; or

(iii) a lease, hire purchase agreement or charter creating any Financial Indebtedness of a Relevant Person is terminated by the lessor or owner or becomes capable of being terminated as a consequence of any termination event; or

(iv) any overdraft, loan, note issuance, acceptance credit, letter of credit, guarantee, foreign exchange or other facility, or any swap or other derivative contract or transaction, relating to any Financial Indebtedness of a Relevant Person ceases to be available or becomes capable of being terminated as a result of any event of default, or cash cover is required, or becomes capable of being required, in respect of such a facility as a result of any event of default; or

(v) any Security Interest securing any Financial Indebtedness of a Relevant Person becomes enforceable; or

(g) any of the following occurs in relation to a Relevant Person:

(i) a Relevant Person becomes, in the opinion of the Lender, unable to pay its debts as they fall due; or

(ii) any assets of a Relevant Person are subject to any form of execution, attachment, arrest, sequestration or distress in respect of a sum of, or sums aggregating, $100,000 or more or the equivalent in another currency unless such execution, attachment, arrest, sequestration or distress is dismissed or withdrawn within 15 days; or

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(iii) any administrative or other receiver is appointed over any asset of a Relevant Person; or

(iv) a Relevant Person makes any formal declaration of bankruptcy or any formal statement to the effect that it is insolvent or likely to become insolvent, or a winding up or administration order is made in relation to a Relevant Person, or the members or directors of a Relevant Person pass a resolution to the effect that it should be wound up, placed in administration or cease to carry on business, save that this paragraph does not apply to a fully solvent winding up of a Relevant Person other than the Borrower which is, or is to be, effected for the purposes of an amalgamation or reconstruction previously approved by the Lender and effected not later than 3 months after the commencement of the winding up; or

(v) a petition is presented in any Pertinent Jurisdiction for the winding up or administration, or the appointment of a provisional liquidator, of a Relevant Person unless the petition is being contested in good faith and on substantial grounds and is dismissed or withdrawn within 30 days of the presentation of the petition; or

(vi) a Relevant Person petitions a court, or presents any proposal for, any form of judicial or non-judicial suspension or deferral of payments, reorganisation of its debt (or certain of its debt) or arrangement with all or a substantial proportion (by number or value) of its creditors or of any class of them or any such suspension or deferral of payments, reorganisation or arrangement is effected by court order, contract or otherwise; or

(vii) any meeting of the members or directors of a Relevant Person is summoned for the purpose of considering a resolution or proposal to authorise or take any action of a type described in paragraphs (iii), (iv), (v) or (vi) above; or

(viii) in a Pertinent Jurisdiction other than England, any event occurs or any procedure is commenced which, in the opinion of the Lender, is similar to any of the foregoing; or

(h) the Borrower ceases or suspends carrying on its business or a part of its business which, in the opinion of the Lender, is material in the context of this Agreement; or

(i) it becomes unlawful in any Pertinent Jurisdiction or impossible:

(i) for the Borrower or any Security Party to discharge any liability under a Finance Document or to comply with any other obligation which the Lender considers material under a Finance Document; or

(ii) for the Lender to exercise or enforce any right under, or to enforce any Security Interest created by, a Finance Document; or

(j) any official consent necessary to enable the Borrower to own, operate or charter the Ship or to enable the Borrower or any Security Party or the Charterer to comply with any provision which the Lender considers material of a Finance Document or the Charter is not granted, expires without being renewed, is revoked or becomes liable to revocation or any condition of such a consent is not fulfilled; or

(k) it appears to the Lender that, without its prior consent, a change has occurred or probably has occurred after the date of this Agreement in the ultimate beneficial ownership of any of the shares in the Borrower or any Security Party or in the ultimate control of the voting rights attaching to any of those shares; or

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(l) any provision which the Lender considers material of a Finance Document proves to have been or becomes invalid or unenforceable, or a Security Interest created by a Finance Document proves to have been or becomes invalid or unenforceable or such a Security Interest proves to have ranked after, or loses its priority to, another Security Interest or any other third party claim or interest; or

(m) the security constituted by a Finance Document is in any way imperilled or in jeopardy; or

(n) the MOA is amended or varied without the prior written consent of the Lender except for any such amendment or variation as is permitted by this Agreement or any relevant finance Document; or

(o) the Ship ceases to be managed by the Approved Managers on the terms of the Management Agreements, unless prior to such cessation the Borrower has appointed a substitute manager acceptable to the Lender, on terms approved by the Lender in all respects and subject to receipt by the Lender of a Manager’s Undertaking from any new manager;

(p) the Charter is amended, varied, terminated, cancelled or expires for any reason prior to the stated expiry date without the prior written consent of the Lender (except for any such amendment or variation as is permitted by this Agreement or any relevant Finance Document) and, in the case of termination, cancellation or early expiry, within 14 days the Borrower has neither (i) provided a substitute charterparty agreement in respect of the Ship with a charterer and upon terms which are acceptable to the Lender in all respects acting in its absolute discretion, or (ii) made a prepayment pursuant to Clause 7.8; or

(q) any other event occurs or any other circumstances arise or develop including, without limitation:

(i) a change in the financial position, state of affairs or prospects of the Borrower, or any Approved Manager; or

(ii) any accident or other event involving the Ship or another vessel owned, chartered or operated by a Relevant Person;

in the light of which the Lender considers that there is a significant risk that the Borrower or any Security Party is, or will later become, unable to discharge its liabilities under the Finance Documents as they fall due.

17.2 Actions following an Event of Default. On, or at any time after, the occurrence of an Event of Default the Lender may:

(a) serve on the Borrower a notice stating that the obligations of the Lender to the Borrower under this Agreement are terminated; and/or

(b) serve on the Borrower a notice stating that the Loan, all accrued interest and all other amounts accrued or owing under this Agreement are immediately due and payable or are due and payable on demand; and/or

(c) take any other action which, as a result of the Event of Default or any notice served under paragraph (a) or (b) above, the Lender is entitled to take under any Finance Document or any applicable law.

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17.3 Termination of obligations. On the service of a notice under Clause 17.2(a), all the obligations of the Lender to the Borrower under this Agreement shall terminate.

17.4 Acceleration of Loan. On the service of a notice under Clause 17.2(b), the Loan, all accrued interest and all other amounts accrued or owing from the Borrower or any Security Party under this Agreement and every other Finance Document shall become immediately due and payable or, as the case may be, payable on demand.

17.5 Multiple notices; action without notice. The Lender may serve notices under Clause 17.2 (a) and (b) simultaneously or on different dates and it may take any action referred to in Clause 17.2 if no such notice is served or simultaneously with or at any time after the service of both or either of such notices.

17.6 Exclusion of Lender liability. Neither the Lender nor any receiver or manager appointed by the Lender, shall have any liability to the Borrower or a Security Party:

(a) for any loss caused by an exercise of rights under, or enforcement of a Security Interest created by, a Finance Document or by any failure or delay to exercise such a right or to enforce such a Security Interest; or

(b) as mortgagee in possession or otherwise, for any income or principal amount which might have been produced by or realised from any asset comprised in such a Security Interest or for any reduction (however caused) in the value of such an asset;

except that this does not exempt the Lender or a receiver or manager from liability for losses shown to have been caused directly and mainly by the dishonesty or the wilful misconduct of the Lender’s own officers and employees or (as the case may be) such receiver’s or manager’s own partners or employees.

17.7 Relevant Persons. In this Clause 17 a “Relevant Person” means the Borrower and a Security Party and any company which is a subsidiary of the Borrower or a Security Party or of which the Borrower or a Security Party is a subsidiary but excluding any company which is dormant and the value of whose gross assets is $50,000 or less.

17.8 Interpretation. In Clause 17.1(f) references to an event of default or a termination event include any event, howsoever described, which is similar to an event of default in a facility agreement or a termination event in a finance lease; and in Clause 17.1(g) “petition” includes an application.

18 FEES AND EXPENSES

18.1 Arrangement and commitment fees. The Borrower shall pay to the Lender:

(a) available a non-refundable arrangement fee equal to 0.40 per cent. of the maximum available amount of the Loan (being $166,400) payable on the date of this Agreement;

(b) quarterly in arrears during the period from (and including) the date of execution of the Lender’s commitment letter to the Drawdown Date (and on the last day of such period), a commitment fee equal to 0.15 per cent. per annum on the undrawn amount of the Loan; and

(c) if the Loan is repaid by using funds borrowed from a bank or a financial institution other than the Lender within four years from the Drawdown Date, the Borrower shall pay to the Lender on the date on which the Loan is prepaid a prepayment fee equal to 0.375 per cent. of the amount being prepaid.

18.2 Costs of negotiation, preparation etc. The Borrower shall pay to the Lender on its demand the amount of all expenses incurred by the Lender in connection with the negotiation, preparation, execution or registration of any Finance Document or any related document or with any transaction contemplated by a Finance Document or a related document.

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18.3 Costs of variation, amendments, enforcement etc. The Borrower shall pay to the Lender, on the Lender’s demand, the amount of all expenses incurred by the Lender or the Lender in connection with:

(a) any amendment or supplement to a Finance Document, or any proposal for such an amendment to be made;

(b) any consent or waiver by the Lender under or in connection with a Finance Document, or any request for such a consent or waiver;

(c) the valuation of any security provided or offered under Clause 14 or any other matter relating to such security;

(d) the opinions of the independent insurance consultant referred to in paragraph 6, Part B of Schedule 2; or

(e) any step taken by the Lender with a view to the protection, exercise or enforcement of any right or Security Interest created by a Finance Document or for any similar purpose.

There shall be recoverable under paragraph (e) the full amount of all legal expenses, whether or not such as would be allowed under rules of court or any taxation or other procedure carried out under such rules.

18.4 Documentary taxes. The Borrower shall promptly pay any tax payable on or by reference to any Finance Document, and shall, on the Lender’s demand, fully indemnify the Lender against any claims, expenses, liabilities and losses resulting from any failure or delay by the Borrower to pay such a tax.

18.5 Certification of amounts. A notice which is signed by an authorised officer of the Lender, which states that a specified amount, or aggregate amount, is due to that Lender under this Clause 18 and which indicates (without necessarily specifying a detailed breakdown) the matters in respect of which the amount, or aggregate amount, is due shall be prima facie evidence that the amount, or aggregate amount, is due.

19 INDEMNITIES

19.1 Indemnities regarding borrowing and repayment of Loan. The Borrower shall fully indemnify the Lender on its demand in respect of all claims, expenses, liabilities and losses which are made or brought against or incurred by the Lender, or which the Lender reasonably and with due diligence estimates that it will incur, as a result of or in connection with:

(a) the Loan not being borrowed on the date specified in the Drawdown Notice for any reason other than a default by the Lender;

(b) the receipt or recovery of all or any part of the Loan or an overdue sum otherwise than on the last day of an Interest Period or other relevant period;

(c) any failure (for whatever reason) by the Borrower to make payment of any amount due under a Finance Document on the due date or, if so payable, on demand (after giving credit for any default interest paid by the Borrower on the amount concerned under Clause 6;

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(d) the occurrence and/or continuance of an Event of Default or a Potential Event of Default and/or the acceleration of repayment of the Loan under Clause 17;

and in respect of any tax (other than tax on its overall net income) for which the Lender is liable in connection with any amount paid or payable to the Lender (whether for its own account or otherwise) under any Finance Document.

19.2 Breakage costs. Without limiting its generality, Clause 19.1 covers any claim, expense, liability or loss, including a loss of a prospective profit, incurred by the Lender:

(a) in liquidating or employing deposits from third parties acquired or arranged to fund or maintain all or any part of the Loan and/or any overdue amount (or an aggregate amount which includes the Loan or any overdue amount); and

(b) in terminating, or otherwise in connection with, any interest and/or currency swap or any other transaction entered into (whether with another legal entity or with another office or department of the Lender) to hedge any exposure arising under this Agreement or a number of transactions of which this Agreement is one.

19.3 Miscellaneous indemnities. The Borrower shall fully indemnify the Lender on its respective demands in respect of all claims, demands, proceedings, liabilities, taxes, losses and expenses of every kind (“liability items”) which may be made or brought against, or incurred by, the Lender in any country, in relation to:

(a) any action taken, or omitted or neglected to be taken, under or in connection with any Finance Document by the Lender or by any receiver appointed under a Finance Document;

(b) any other event, matter or question which occurs or arises at any time during the Security Period and which has any connection with, or any bearing on, any Finance Document, any payment or other transaction relating to a Finance Document or any asset covered (or previously covered) by a Security Interest created (or intended to be created) by a Finance Document;

other than liability items which are shown to have been caused by the gross negligence or the wilful misconduct of the Lender’s or (as the case may be) the Lender’s own officers or employees.

19.4 Currency indemnity. If any sum due from the Borrower or any Security Party to the Lender under a Finance Document or under any order or judgment relating to a Finance Document has to be converted from the currency in which the Finance Document provided for the sum to be paid (the “Contractual Currency”) into another currency (the “Payment Currency”) for the purpose of:

(a) making or lodging any claim or proof against the Borrower or any Security Party, whether in its liquidation, any arrangement involving it or otherwise; or

(b) obtaining an order or judgment from any court or other tribunal; or

(c) enforcing any such order or judgment,

the Borrower shall indemnify the Lender against the loss arising when the amount of the payment actually received by the Lender is converted at the available rate of exchange into the Contractual Currency.

In this Clause 19.4, the “available rate of exchange” means the rate at which the Lender is able at the opening of business (London time) on the Business Day after it receives the sum concerned to purchase the Contractual Currency with the Payment Currency.

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This Clause 19.4 creates a separate liability of the Borrower which is distinct from its other liabilities under the Finance Documents and which shall not be merged in any judgment or order relating to those other liabilities.

19.5 Certification of amounts. A notice which is signed by an authorised officer of the Lender, which states that a specified amount, or aggregate amount, is due to the Lender under this Clause 19 and which indicates (without necessarily specifying a detailed breakdown) the matters in respect of which the amount, or aggregate amount, is due shall be prima facie evidence that the amount, or aggregate amount, is due.

20 NO SET-OFF OR TAX DEDUCTION

20.1 No deductions. All amounts due from the Borrower under a Finance Document shall be paid:

(a) without any form of set-off, cross-claim or condition; and

(b) free and clear of any tax deduction except a tax deduction which the Borrower is required by law to make.

20.2 Grossing-up for taxes. If the Borrower is required by law to make a tax deduction from any payment:

(a) the Borrower shall notify the Lender as soon as it becomes aware of the requirement;

(b) the Borrower shall pay the tax deducted to the appropriate taxation authority promptly, and in any event before any fine or penalty arises;

(c) the amount due in respect of the payment shall be increased by the amount necessary to ensure that the Lender receives and retains (free from any liability relating to the tax deduction) a net amount which, after the tax deduction, is equal to the full amount which it would otherwise have received.

20.3 Evidence of payment of taxes. Within one month after making any tax deduction, the Borrower shall deliver to the Lender documentary evidence satisfactory to the Lender that the tax had been paid to the appropriate taxation authority.

20.4 Exclusion of tax on overall net income. In this Clause 20 “tax deduction” means any deduction or withholding for or on account of any present or future tax except tax on the Lender’s overall net income.

21 ILLEGALITY, ETC

21.1 Illegality. This Clause 21 applies if the Lender notifies the Borrower that it has become, or will with effect from a specified date, become:

(a) unlawful or prohibited as a result of the introduction of a new law, an amendment to an existing law or a change in the manner in which an existing law is or will be interpreted or applied; or

(b) contrary to, or inconsistent with, any regulation,

for the Lender to maintain or give effect to any of its obligations under this Agreement in the manner contemplated by this Agreement.

21.2 Notification and effect of illegality. On the Lender notifying the Borrower under Clause 21.1, the Lender’s obligation to advance the Loan shall terminate; and thereupon or, if later, on the date specified in the Lender’s notice under Clause 21.1 as the date on which the notified event would become effective the Borrower shall prepay the Loan in full in accordance with Clause 7.

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21.3 Mitigation. If circumstances arise which would result in a notification under Clause 21.1 then, without in any way limiting the rights of the Lender under Clause 21.2, the Lender shall use reasonable endeavours to transfer its obligations, liabilities and rights under this Agreement and the Finance Documents to another office or financial institution not affected by the circumstances but the Lender shall not be under any obligation to take any such action if, in its opinion, to do would or might:

(a) have an adverse effect on its business, operations or financial condition; or

(b) involve it in any activity which is unlawful or prohibited or any activity that is contrary to, or inconsistent with, any regulation; or

(c) involve it in any expense (unless indemnified to its satisfaction) or tax disadvantage.

22 INCREASED COSTS

22.1 Increased costs. This Clause 22 applies if the Lender notifies the Borrower that it considers that as a result of:

(a) the introduction or alteration after the date of this Agreement of a law or an alteration after the date of this Agreement in the manner in which a law is interpreted or applied (disregarding any effect which relates to the application to payments under this Agreement of a tax on the Lender’s overall net income); or

(b) the effect of complying with any regulation (including any which relates to capital adequacy or liquidity controls or which affects the manner in which the Lender allocates capital resources to its obligations under this Agreement) which is introduced, or altered, or the interpretation or application of which is altered, after the date of this Agreement,

is that the Lender (or a parent company of it) has incurred or will incur an “increased cost”, that is to say,:

(i) an additional or increased cost incurred as a result of, or in connection with, the Lender having entered into, or being a party to, this Agreement of funding or maintaining the Loan or performing its obligations under this Agreement, or of having outstanding all or any part of the Loan or other unpaid sums; or

(ii) a reduction in the amount of any payment to the Lender under this Agreement or in the effective return which such a payment represents to the Lender or on its capital;

(iii) an additional or increased cost of funding all or maintaining all or any of the advances comprised in a class of advances formed by or including the Loan or (as the case may require) the proportion of that cost attributable to the Loan; or

(iv) a liability to make a payment, or a return foregone, which is calculated by reference to any amounts received or receivable by the Lender under this Agreement;

but not an item attributable to a change in the rate of tax on the overall net income of the Lender (or a parent company of it) or an item covered by the indemnity for tax in Clause 20.1 or by Clause 21.

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For the purposes of this Clause 22.1 the Lender may in good faith allocate or spread costs and/or losses among its assets and liabilities (or any class thereof) on such basis as it considers appropriate.

22.2 Payment of increased costs. The Borrower shall pay to the Lender, on the Lender’s demand, the amounts which the Lender from time to time notifies the Borrower that it has specified to be necessary to compensate the Lender for the increased cost.

22.3 Notice of prepayment. If the Borrower is not willing to continue to compensate the Lender for the increased cost under Clause 22.2, it may give the Lender not less than 20 Business Days notice of its intention to prepay the Loan. If the prepayment is made on a date other than at the end of an Interest Period, the Borrower shall indemnify the Lender in respect of any amount that arises pursuant to Clause 19.

22.4 Prepayment. A notice under Clause 22.3 shall be irrevocable and on the date specified in its notice of intended prepayment, the Borrower shall prepay (without premium or penalty) the Loan, together with accrued interest thereon at the applicable rate plus the applicable Margin.

22.5 Application of prepayment. Clause 7 shall apply in relation to the prepayment.

23 SET-OFF

23.1 Application of credit balances. The Lender may without prior notice:

(a) apply any balance (whether or not then due), which at any time stands to the credit of any account in the name of the Borrower at any office in any country of the Lender in or towards satisfaction of any sum then due from the Borrower to the Lender under any of the Finance Documents; and

(b) for that purpose:

(i) break, or alter the maturity of, all or any part of a deposit of the Borrower;

(ii) convert or translate all or any part of a deposit or other credit balance into Dollars;

(iii) enter into any other transaction or make any entry with regard to the credit balance which the Lender considers appropriate.

23.2 Existing rights unaffected. The Lender shall not be obliged to exercise any of its rights under Clause 23.1; and those rights shall be without prejudice and in addition to any right of set-off, combination of accounts, charge, lien or other right or remedy to which the Lender is entitled (whether under the general law or any document).

23.3 No Security Interest. This Clause 23 gives the Lender a contractual right of set-off only, and does not create any equitable charge or other Security Interest over any credit balance of any Borrower.

24 TRANSFERS AND CHANGES IN LENDING OFFICES

24.1 Transfer by Borrower. The Borrower may not, without the consent of the Lender transfer any of its rights, liabilities or obligations under any Finance Document.

24.2 Assignment by Lender. The Lender may assign all or any of the rights and interests which it has under or by virtue of the Finance Documents without the consent of the Borrower.

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24.3 Rights of assignee. In respect of any breach of a warranty, undertaking, condition or other provision of a Finance Document, or any misrepresentation made in or in connection with a Finance Document, a direct or indirect assignee of any of the Lender’s rights or interests under or by virtue of the Finance Documents shall be entitled to recover damages by reference to the loss incurred by that assignee as a result of the breach or misrepresentation irrespective of whether the Lender would have incurred a loss of that kind or amount.

24.4 Sub-participation; subrogation assignment. The Lender may sub-participate all or any part of its rights and/or obligations under or in connection with the Finance Documents without the consent of, or any notice to, the Borrower; and the Lender may assign, in any manner and terms agreed by it, all or any part of those rights to an insurer or surety who has become subrogated to them.

24.5 Disclosure of information. The Lender may disclose to a potential assignee or sub-participant any information which the Lender has received in relation to the Borrower, any Security Party or their affairs under or in connection with any Finance Document, unless the information is clearly of a confidential nature.

24.6 Change of lending office. The Lender may change its lending office by giving notice to the Borrower and the change shall become effective on the later of:

(a) the date on which the Borrower receives the notice; and

(b) the date, if any, specified in the notice as the date on which the change will come into effect.

25 VARIATIONS AND WAIVERS

25.1 Variations, waivers etc. by Lender. A document shall be effective to vary, waive, suspend or limit any provision of a Finance Document, or the Lender’s rights or remedies under such a provision or the general law, only if the document is signed, or specifically agreed to by fax, by the Borrower and the Lender and, if the document relates to a Finance Document to which a Security Party is party, by that Security Party.

25.2 Exclusion of other or implied variations. Except for a document which satisfies the requirements of Clause 25.1, no document, and no act, course of conduct, failure or neglect to act, delay or acquiescence on the part of the Lender (or any person acting on its behalf) shall result in the Lender (or any person acting on its behalf) being taken to have varied, waived, suspended or limited, or being precluded (permanently or temporarily) from enforcing, relying on or exercising:

(a) a provision of this Agreement or another Finance Document; or

(b) an Event of Default; or

(c) a breach by the Borrower or a Security Party of an obligation under a Finance Document or the general law; or

(d) any right or remedy conferred by any Finance Document or by the general law;

and there shall not be implied into any Finance Document any term or condition requiring any such provision to be enforced, or such right or remedy to be exercised, within a certain or reasonable time

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26 NOTICES

26.1 General. Unless otherwise specifically provided, any notice under or in connection with any Finance Document shall be given by letter or fax and references in the Finance Documents to written notices, notices in writing and notices signed by particular persons shall be construed accordingly.

26.2 Addresses for communications. A notice shall be sent:

(a)	to the Borrower:	x/x Xxxxxxxxxx Xxxxxxx
		000-000 Xxxxxxxxx Xxxxxx
		Xxxxxxxx, Xxxxxx
		Xxxxxx
		Fax No: x00 000 0000000
(b)	to the Lender:	Deutsche Schiffsbank XX
		Xxxxxxx 00
		X-00000 Xxxxxx
		Xxxxxxx
		Fax No: x00 000 000 0000

or to such other address as the relevant party may notify the Lender or, if the relevant party is the Lender, the Borrower, the Lender and the Security Parties.

26.3 Effective date of notices. Subject to Clauses 26.4 and 26.5:

(a) a notice which is delivered personally or posted shall be deemed to be served, and shall take effect, at the time when it is delivered;

(b) a notice which is sent by telex or fax shall be deemed to be served, and shall take effect, 2 hours after its transmission is completed.

26.4 Service outside business hours. However, if under Clause 26,3 a notice would be deemed to be served:

(a) on a day which is not a business day in the place of receipt; or

(b) on such a business day, but after 5 p.m. local time;

the notice shall (subject to Clause 26.5) be deemed to be served, and shall take effect, at 9 a.m. on the next day which is such a business day.

26.5 Illegible notices. Clauses 26.3 and 26.4 do not apply if the recipient of a notice notifies the sender within 1 hour after the time at which the notice would otherwise be deemed to be served that the notice has been received in a form which is illegible in a material respect.

26.6 Valid notices. A notice under or in connection with a Finance Document shall not be invalid by reason that its contents or the manner of serving it do not comply with the requirements of this Agreement or, where appropriate, any other Finance Document under which it is served if:

(a) the failure to serve it in accordance with the requirements of this Agreement or other Finance Document, as the case may be, has not caused any party to suffer any significant loss or prejudice; or

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(b) in the case of incorrect and/or incomplete contents, it should have been reasonably clear to the party on which the notice was served what the correct or missing particulars should have been.

26.7 English language. Any notice under or in connection with a Finance Document shall be in English.

26.8 Meaning of “notice”. In this Clause 26 “notice” includes any demand, consent, authorisation, approval, instruction, waiver or other communication.

27 SUPPLEMENTAL

27.1 Rights cumulative, non-exclusive. The rights and remedies which the Finance Documents give to the Lender are:

(a) cumulative;

(b) may be exercised as often as appears expedient; and

(c) shall not, unless a Finance Document explicitly and specifically states so, be taken to exclude or limit any right or remedy conferred by any law.

27.2 Severability of provisions. If any provision of a Finance Document is or subsequently becomes void, unenforceable or illegal, that shall not affect the validity, enforceability or legality of the other provisions of that Finance Document or of the provisions of any other Finance Document.

27.3 Counterparts. A Finance Document may be executed in any number of counterparts.

27.4 Third party rights. A person who is not a party to this Agreement has no right under the Contracts (Rights of Third Parties) Xxx 0000 to enforce or to enjoy the benefit of any term of this Agreement.

28 LAW AND JURISDICTION

28.1 English law. This Agreement shall be governed by, and construed in accordance with, English law.

28.2 Exclusive English jurisdiction. Subject to Clause 28.3, the courts of England shall have exclusive jurisdiction to settle any disputes which may arise out of or in connection with this Agreement.

28.3 Choice of forum for the exclusive benefit of the Lender. Clause 28.2 is for the exclusive benefit of the Lender, each of which reserves the right:

(a) to commence proceedings in relation to any matter which arises out of or in connection with this Agreement in the courts of any country other than England and which have or claim jurisdiction to that matter; and

(b) to commence such proceedings in the courts of any such country or countries concurrently with or in addition to proceedings in England or without commencing proceedings in England.

The Borrower shall not commence any proceedings in any country other than England in relation to a matter which arises out of or in connection with this Agreement.

28.4 Process Agent. The Borrower irrevocably appoints WFW Legal Services Limited at its registered office for the time being, presently at 00 Xxxxxx Xxxxxx, Xxxxxx XX0X 0XX, Xxxxxxx to act as its agent to receive and accept on its behalf any process or other document relating to any proceedings in the English courts which are connected with this Agreement.

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28.5 Lender’s rights unaffected. Nothing in this Clause 28 shall exclude or limit any right which the Lender may have (whether under the law of any country, an international convention or otherwise) with regard to the bringing of proceedings, the service of process, the recognition or enforcement of a judgment or any similar or related matter in any jurisdiction.

28.6 Meaning of “proceedings”. In this Clause 28, “proceedings” means proceedings of any kind, including an application for a provisional or protective measure.

THIS AGREEMENT has been entered into on the date stated at the beginning of this Agreement.

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EXECUTION PAGE

BORROWER
SIGNED by IOANNIS MYRIUOS	)	/s/ IOANNIS MYRIUOS
for and on behalf of	)
FOURTHONE CORP,	)
in the presence of:	)
XXXXXXXXX XXXXXXXXXXXXX
SOLICITOR
XXXXXX, XXXXXX & XXXXXXXX
2, DEFTERAS MERARCHIAS
XXXXXXX 000 00 - XXXXXX
LENDER
SIGNED by XXXXXX PALGOKRASSAS	)	/s/ XXXXXX PALGOKRASSAS
for and on behalf of	)
DEUTSCHE SCHIFFSBANK	)
AKTIENGESELLSHAFT	)
in the presence of:	)
XXXXXXXXX XXXXXXXXXXXXX
SOLICITOR
XXXXXX, XXXXXX & XXXXXXXX
2, DEFTERAS XXXXXXXXXX
XXXXXXX 000 00 - XXXXXX

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SCHEDULE 1

DRAWDOWN NOTICE

To: Deutsche Schiffsbank AG
Domshof 17
D-28195 Bremen
Germany

Attention: Shipping Department

[·]

DRAWDOWN NOTICE

1 We refer to the loan agreement (the “Loan Agreement”) dated [·] 2008 and made between ourselves as Borrower and yourselves as Lender in connection with a loan facility of up to $41,600,000. Terms defined in the Loan Agreement have their defined meanings when used in this Drawdown Notice.

2 We request to borrow the Loan as follows:

(a) Amount of Loan: $[·].

(b) Drawdown Date: [                  ].

(c) Duration of the first Interest Period shall be [·] months;

(d) Payment instructions : account of [·] and numbered [·] with [·] of [·].

3 We represent and warrant that:

(a) the representations and warranties in Clause 9 of the Loan Agreement would remain true and not misleading if repeated on the date of this notice with reference to the circumstances now existing;

(b) no Event of Default or Potential Event of Default has occurred or will result from the borrowing of the Loan.

4 This notice cannot be revoked without the prior consent of the Lender.

5 We authorise you to deduct from the amount of the Loan all accrued but unpaid fees payable pursuant to Clause 18.1.

For and on behalf of

FOURTHONE CORP.

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SCHEDULE 2

CONDITION PRECEDENT DOCUMENTS

PART A

The following are the documents referred to in Clause 8.1(a),

1 A duly executed original of this Agreement, the Master Agreement and the Master Agreement Assignment.

2 Copies of the certificate of incorporation and constitutional documents of the Borrower.

3 Copies of resolutions of the shareholders and directors of the Borrower authorising the execution of the Finance Documents to which the Borrower is a party and authorising named officers to give the Drawdown Notice and other notices under this Agreement and ratifying the execution of the MOA.

4 The original of any power of attorney under which any Finance Document is executed on behalf of the Borrower.

5 Copies of all consents which the Borrower or any Security Party requires to enter into, or make any payment under, any Finance Document or the MOA.

6 A copy of the MOA and of all documents signed or issued by the Borrower or the Seller (or either of them) under or in connection with the MOA in a form acceptable to the Lender.

7 In circumstances where the Borrower is drawing the Maximum Facility, a certified true copy of the Charter duly signed by the Charterer and the Borrower and a certified true copy of the Charter Guarantee, each to be on terms xxx.xx form acceptable to the Lender (in its discretion).

8 Documentary evidence that the Lender for service of process named in Clause 28 has accepted its appointment.

9 Favourable legal opinions from lawyers appointed by the Lender on such matters concerning the laws of the Xxxxxxxx Islands and such other relevant jurisdictions as the Lender may require.

10 If the Lender so requires, in respect of any of the documents referred to above, a certified English translation prepared by a translator approved by the Lender.

PART B

The following are the documents referred to in Clause 8.1(b).

1 A duly executed original of the Mortgage, the General Assignment, and, if the Borrower is drawing the Maximum Facility, the Charter Assignment (and of each document to be delivered pursuant to each of them including, without limitation, an acknowledgement from the Charterer in relation to the Charter Assignment).

2 Documentary evidence that:

(a) the Ship has been unconditionally delivered by the Seller to, and accepted by the Borrower under the MOA, and the full purchase price payable under the MOA (in addition to the part to be financed by the Loan) has been duly paid, together with a copy of each of the documents deliverable by the Seller to the Borrower under the MOA (including but not limited to, the Builder’s certificate, the xxxx of sale, the commercial invoice and the protocol of delivery and acceptance);

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(b) in circumstances where the Borrower is drawing the Maximum Facility, evidence that the Ship has been unconditionally delivered by the Borrower to, and accepted by, the Charterer pursuant to the Charter for operation thereunder together with a waiver from the Charterer in respect of any claim against the Borrower or the Ship for any latent or hidden defects;

(c) the Ship is definitively registered in the name of the Borrower under an Approved Flag;

(d) the Ship is in the absolute and unencumbered ownership of the Borrower save as contemplated by the Finance Documents;

(e) the Ship maintains the classification specified in Clause 13.3(b) with Lloyd’s Register of Shipping free of all recommendations and conditions of such classification society;

(f) the Mortgage has been duly registered against the Ship as a valid first preferred or priority ship mortgage in accordance with the laws of the applicable Approved Flag State; and

(g) the Ship is insured in accordance with the provisions of this Agreement and all requirements therein in respect of insurances have been complied with.

3 A duly issued invoice from the Seller showing all sums due and payable to the Seller pursuant to the MOA upon delivery of the Ship.

4 Documents establishing that the Ship will, as from the Delivery Date, be managed by the Approved Managers on terms acceptable to the Lender, together with:

(a) copies of the Management Agreements and the Approved Managers’ Undertakings in relation to the Ship duly signed by each Approved Manager;

(b) copies of the document of compliance (DOC) and safety management certificate (SMC) in respect of the Ship referred to in paragraph (a) of the definition of the ISM Code Documentation certified as true and in effect by the Borrower and the relevant Approved Manager; and

(c) a copy of the International Ship Security Certificate in respect of the Ship certified as true and in effect by the Borrower and the relevant Approved Manager.

5 If required by the Lender, a valuation of the Ship (at the expense of the Borrower) by an independent sale and purchase broker appointed by the Lender, prepared in accordance with Clause 14 which shows a value of the Ship in an amount acceptable to the Lender.

6 A favourable opinion from an independent insurance consultant acceptable to the Lender on such matters relating to the insurances for the Ship as the Lender may require.

7 Favourable legal opinions from lawyers appointed by the Lender on such matters concerning the laws of the applicable Approved Flag State and such other relevant jurisdictions as the Lender may require.

Every copy document delivered under this Schedule shall be certified as a true and up to date copy by a director, the secretary (or equivalent officer) or an authorised attorney of the Borrower.

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