Mortgagee an amount equal to (1) the verified Mandatory Loss Prepayment Amount minus (2) the amount received by the Mortgagee pursuant to Subsection (b) above. (d) After the Mortgagee has received sufficient funds to pay the Mandatory Loss Prepayment Amount pursuant to Subsections (b) and (c) above:

(1) if there is no existing Default, (A) within five (5) Business Days after receipt by the Mortgagee of the funds referred to in Subsections (b) and (c) above, the Mortgagor shall make a Mandatory Prepayment Election of the prepayment of Advances in an amount equal to the Mandatory Loss Prepayment Amount (which may not be rescinded) and shall send a Mandatory Prepayment Election Notice to the Holder with a copy to the Mortgagee, which shall specify an Intended Payment Date of not less than five (5) Business Days or more than ten (10) Business Days after the receipt of such notice by the Holder, (B) one (1) Business Day prior to the Intended Payment Date, the Mortgagor shall pay to the Mortgagee for payment to the Holder any additional amounts due to the Holder pursuant to the Note Purchase Documents as a result of such Mandatory Prepayment Election, (C) on the Intended Payment Date, the Mortgagee shall pay to the Holder the amounts held by it pursuant to Subsections (b) and (c) and clause (B) above in accordance with terms of the Mandatory Prepayment Election Notice, and (D) the balance, if any, shall be promptly paid by the Mortgagee to the Mortgagor including any interest earned on the proceeds which are in excess of the amount required to prepay such Advances; (2) if there is an existing Default and the Guarantee shall not have terminated pursuant to Section 2.04 of Annex C of the Agreement, such amounts shall be held until the same may be applied or paid under Paragraph (1) of this Subsection; provided that, in lieu of Clause (D) of Paragraph (1) of this Subsection, the balance, if any, including any interest earned on the proceeds which are in excess of the amount required to prepay the Mandatory Loss Prepayment Amount and any additional amounts due to the Holder pursuant to the Note Purchase Documents as a result of such Mandatory Prepayment Election, shall be held in the Chapter 537 Reserve Fund by the Mortgagee; (3) if the Guarantee shall have terminated pursuant to Section 2.04(c) of Annex C of the Agreement or if the Mortgagee shall have assumed the Mortgagor's rights and duties under the Note Purchase Agreement and the Note and made any payments in default under Chapter 537, such amounts shall be applied as provided in Section 5.04 hereof; or (4) if the Guarantee shall have terminated pursuant to Section 2.04(a), (b) or (d) of Annex C of the Agreement, such amounts shall be paid by the Mortgagee to the Mortgagor.

Provided that, notwithstanding the foregoing, the Mortgagor shall not be required to pay the Mortgagee any amount which the Mortgagee agrees is in excess of the amount needed for prepayment of the Proportionate Part of the Outstanding Advances affected by the Loss Event plus any additional amounts due to the Holder pursuant to the Note Purchase Documents as a result of such Mandatory Prepayment Election.

## SECTION 3.04 Vessel Covenants.

First Preferred [Fleet/Ship] Mortgage, Contract No. MA-\_\_\_\_\_\_ Page 6