Such policies may provide that (1) if the Mortgagor shall not have incurred the loss, damage, or expense in question, any loss under such insurance may be paid directly to the Person to whom any liability covered by such policies has been incurred (whether or not a Default then exists), and (2) if the Mortgagor shall have incurred the loss, damage or expense in question, any such loss shall be paid to the Mortgagor in reimbursement if there is no existing Default of which the underwriter has written notice from the Mortgagor or the Mortgagee, or, if there is such an existing Default, to the Mortgagee to be held and applied as follows: (A) applied as provided in Section 5.04 hereof in the event 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, or (B) to the extent not theretofore applied pursuant to Section 5.04 hereof, paid forthwith to the Mortgagor upon its Request in the event there is no existing Default or the Guarantee shall have terminated pursuant to Section 2.04(b) or (d) of Annex C of the Agreement at the date of delivery of such Request; provided that, irrespective of the foregoing, with the Mortgagee’s prior consent, the Mortgagor shall have the right to self-insure in an amount up to the Maximum Self-Insurance Amount hereof with respect to each accident, occurrence or event, except that, with respect to cargo or property carried, the Mortgagor, with the Mortgagee’s prior consent, shall have the right to self-insure in an amount up to the Maximum Self-Insurance Amount with respect to each cargo or property carried. (e) Insurance Underwriters. All insurance required under this Section shall be placed and kept with the Government or with United States domiciled and state-regulated or United States domiciled mutual assurance association to the maximum extent possible subject to market capacity, (and/or other foreign, if permitted by the Mortgagee in writing) insurance companies, underwriters' association or underwriting funds approved by the Mortgagee. All insurance required under this Subsection shall be arranged through United States licensed marine insurance brokers and/or underwriting agents domiciled in the United States (and/or other foreign, if permitted by the Mortgagee in writing) as chosen by the Mortgagor and approved by the Mortgagee. (f) Providing Compromised Total Loss. The Mortgagee shall not have the right to enter into an agreement or compromise providing for an agreed or compromised total loss of any Vessel without prior consent of (1) the Shipyard (prior to the Delivery Date of such Vessel) and (2) (unless there is an existing Default) the Mortgagor. If (1) the Mortgagor shall have given prior consent thereto or (2) there is an existing Default, the Mortgagee shall have the right in his discretion, and with the prior consent of the Shipyard prior to the Delivery Date of such Vessel, to enter into an agreement or compromise providing for an agreed or compromised total loss of such Vessel; provided that, if the aggregate amount payable to the Mortgagor and/or the Mortgagee under such agreement or compromise, together with funds held by the Mortgagee and available for the prepayment of the Note, is not sufficient to pay the Proportionate Part of the Outstanding Advances pursuant Section 3.03 hereof, the Mortgagee shall not enter into such agreement or compromise without the Mortgagor’s prior consent. (g) Vessel Requisition. During the continuance of (1) a taking or requisition of the use of any Vessel by any government or governmental body, or (2) a charter, with the Mortgagee’s prior consent, of the use of any Vessel by the Government, the provisions of this Section shall be deemed to have been complied with in all respects if such government or governmental body shall have agreed to reimburse, in a manner approved by the Mortgagee in writing, the Mortgagor for

First Preferred [Fleet/Ship] Mortgage, Contract No. MA-\_\_\_\_\_\_ Page 12