$23,205,000
LETTER OF CREDIT
  FACILITY
AGREEMENT
 BETWEEN
  STRAITS
OFFSHORE LTD.,
  as
Account Party,
 AND
  HSH
NORDBANK AG, NEW YORK BRANCH,
  as L/C
Provider
 as of
July 31, 2008
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  INDEX
 PAGE
  1.  DEFINITIONS                                                                                                                                                                          
1
 1.1            Defined
Terms                                                                                                                                          
  1
 1.2            Computation
of Time Periods; Other Definitional
Provisions                                                              13
 1.3            Accounting
Terms                                                                                                                                     
13
 1.4            Certain
Matters Regarding
Materiality                                                                                                    13
 1.5            Forms
of
Documents                                                                                                                                 
13
 2.  LETTER OF
CREDITS                                                                                                                                                           
14
 2.1            Issuance
of the Letter of
Credit                                                                                                               14
 2.2            Payment
Obligation;
Interest                                                                                                                  
14
 2.3            Fees                                                                                                                                                            
 15
 2.4            Increased
Cost                                                                                                                                           
15
 2.5            Illegality                                                                                                                                                       16
 2.6            Substitution
of L/C
Provider                                                                                                                
   17
 2.7            General
Provisions as to
Payment                                                                                                       
   17
 2.8            Obligations
Absolute                                                                                                                             
  17
 2.9            Determination
of
Losses                                                                                                                        
  18
 2.10
Collateral
Account                                                                                                                                          
   18
 3.  REPRESENTATIONS
AND
WARRANTIES                                                                                                                      18
 3.1            Representations
and
Warranties                                                                                                              18
 4.  CONDITIONS
PRECEDENT                                                                                                                                                  
23
 4.1            Conditions
Precedent to Issuance of Letter of
Credit                                                                           23
 5.  PAYMENTS                                                                                                                                                                            
25
 5.1            Place
of Payments, No Set
Off                                                                                                                
 25
 5.2            Tax
Credits                                                                                                                                                  
26
 5.3            Right
of
Setoff                                                                                                                                            
26
 6.  EVENTS OF
DEFAULT                                                                                                                                                         
27
 6.1            In
the event that any of the following events shall occur and be
continuing:                                
27
 6.2            Indemnification                                                                                                                                          
29
 6.3            Application
of
Moneys                                                                                                                            
30
 7.  COVENANTS                                                                                                                                                                          
30
  7.1            Affirmative
Covenants                                                                                                                           
  30
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      900329 v6
  7.2            Negative
Covenants                                                                                                                        
              35
 7.3            Financial
Covenants                                                                                                                          
            36
 36
 8.  CURRENCY
INDEMNITY                                                                                                                                                 
         37
 8.1            Currency
Conversion                                                                                                                 
                    37
 8.2            Change
in Exchange
Rate                                                                                                
                             37
 8.3            Additional
Debt
Due                                                                                                                            
         37
 8.4            Rate
of
Exchange                                                                                                                               
            37
 9.  EXPENSES                                                                                                                                                                          
         37
 9.1            Expenses                                                                                                                               
                           37
 10.  INDEMNIFICATION                                                                                                                               
                                38
 10.1
Indemnification                                                                                                                                                      
 38
 11.  MISCELLANEOUS                                                                                                                                                                    38
 11.1 Time
of
Essence                                                                                                                            
                          38
 11.2
Prior Agreements,
Merger                                                                                                                                 
    39
 11.3 USA
Patriot Act Notice; OFAC and Bank Secrecy
Act                                                                                     39
 11.4
Further
Assurances                                                                                                                                                
39
 11.5
Remedies Cumulative and Not Exclusive; No
Waiver                                                                                        39
 11.6
Successors and
Assigns                                                                                                                                        
40
 11.7
Waiver;
Amendment                                                                                                                                               
40
 11.8
Invalidity                                                                                                                                                                   
40
 11.9
Notices                                                                                                                                                                       
40
 11.10
Counterparts; Electronic
Delivery                                                                                                                         41
 11.11
References                                                                                                                                                               
41
 11.12
Headings                                                                                                                                                                 
41
 12.  APPLICABLE
LAW, JURISDICTION AND
WAIVER                                                                                                         41
 12.1
Applicable
Law                                                                                                                                                       
41
 12.2
Jurisdiction                                                                                                                                                            
   41
 12.3
WAIVER OF
IMMUNITY                                                                                                                               
      42
 12.4
WAIVER OF JURY
TRIAL                                                                                                                                
     42
 
  EXHIBITS
 
  A                   Form
of Letter of Credit
 B                   Form
of Guaranty
 C                   Form
of Pledge Agreement
 D                   Form
of Assignment of MOA, Shipbuilding Contract and Refund Guarantee
 E                   Form
of Notice of Issuance
 F                   Form
of Compliance Certificate
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  LETTER
OF CREDIT
 FACILITY
AGREEMENT
  THIS
LETTER OF CREDIT FACILITY AGREEMENT dated as of July 31, 2008 (this "Agreement")
is made by and among (i) STRAITS OFFSHORE LTD., a company incorporated under the
laws of the British Virgin Islands, as account party (the "Account Party") and
(ii) HSH NORDBANK AG, NEW YORK BRANCH, as letter of credit provider (the "L/C
Provider").
 
 WHEREAS,
the Account Party, as buyer, has entered into a Memorandum of Agreement (the
"MOA"), dated July 1, 2008, with Nordic Maritime Pte Ltd. (the "Seller"), as
seller pursuant to which the Account Party has agreed to purchase a new building
accommodation barge having builder's Hull No. 1150 (the "Vessel") to be
constructed by NGV Tech SDN BHD (the "Beneficiary") at its Shipyard in
Sijangkang, Malaysia and to be delivered on September 30, 2009 or, with
extensions, no later than June 30, 2010 pursuant to a Shipbuilding Contract
dated April 11, 2008 (as same may be concurrently or hereafter assigned to the
Account Party and as otherwise amended from time to time, the "Shipbuilding
Contract") between the Seller and the Beneficiary;
 
 WHEREAS,
under the terms of the MOA, it is required that the Account Party obtain a
letter of credit issued in favor of the Beneficiary (the "Letter of Credit") in
the amount of Twenty Three Million Two Hundred Five Thousand United States
Dollars ($23,205,000) (the "L/C Amount") for the purpose of supporting the Final
Delivery Payment to the Beneficiary for the Vessel pursuant to the Shipbuilding
Contract;
 
 WHEREAS,
the Account Party has requested the L/C Provider to issue the Letter of Credit;
and
 
 WHEREAS,
the L/C Provider is willing to issue the Letter of Credit based on the terms and
conditions of this Agreement.
 
 NOW,
      THEREFORE, the parties hereto agree as follows: WITNESSETH THAT: 1.DEFINITIONS
 
 1.1            Defined Terms. In
this Agreement the words and expressions specified below shall, except where the
context otherwise requires, have the meanings attributed to them
below:
 
 "Acceptable
      Accounting Firm" means Ernst & Young, or such other recognized
      international accounting firm as shall be approved by the L/C Provider,
      such approval not to be unreasonably
withheld;
  "Account
Party" "Acquisition"
 
 has the
meaning ascribed thereto in the Preamble to this Agreement;
 
 means any
transaction or series of transactions by which the Account Party acquires,
either directly or through an
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  "Affiliate"
      "Agreement"
 "Assignment
      Notice(s)" "Banking Day(s)"
 Affiliate
or Subsidiary or otherwise, (x) any or all of the stock or other securities of
any class of any Person or (y) a substantial portion of the assets, or a
division or line of business of any Person;
 
 means,
with respect to any Person, any other Person directly or indirectly controlling,
controlled by or under common control with such Person. For the purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlled by" and "under common control with") as applied to any Person means
the possession directly or indirectly of the power to direct or cause the
direction of the management and policies of that Person whether through
ownership of voting securities or by contract or otherwise;
  means
this Agreement as such term is used in the Preamble hereto as the same shall be
amended, modified or supplemented from time to time;
  "Applicable
      Rate"
              means
      a rate equal to the LIBOR Rate for overnight deposits plus 3.65% per
      annum;
  "Assignment
of
MOA,                                                    means
the assignment of the MOA, the Shipbuilding
 Shipbuilding
Contract
and                                                    Contract
and the Refund Guarantee made by the Account
 Refund
      Guarantee"
              Party
      in favor of the L/C Provider substantially in the form of Exhibit
      D;
  means the
notices with respect to the Assignment of MOA, Shipbuilding Contract and Refund
Guarantee substantially in the form set out in Exhibits 1(A), 1(B) and 1(C)
thereto;
  means
day(s) on which banks are open for the transaction of business of the nature
required by this Agreement in New York, New York and London,
England;
  "Beneficiary"
              has
      the meaning ascribed thereto in the Preamble to this
      Agreement;
 
 "Capital
      Lease Obligations" means the obligations of any Person to pay rent or
      other amounts under any lease of (or other arrangement conveying the right
      to use) real or personal property, or a combination thereof, which
      obligations are required to be classified and accounted for as capital
      leases on a balance sheet of such Person under GAAP, and the amount of
      such obligations shall be the capitalized amount thereof determined in
      accordance with GAAP;
 
 "Cash and
Cash
Equivalents"                                                    means,
in respect of the Guarantor and its Subsidiaries, and at any
time:
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   (i)  cash in
hand or on deposit with any acceptable bank available for cash management
purposes;
  (ii)  investment
grade certificates of deposit or investment grade marketable debt securities,
maturing within one (1) year after the relevant date of calculation;
or
  (iii)  any other
instrument, security or investment approved by the L/C Provider,
  in each
case, to which each of the Guarantor and its Subsidiaries is beneficially
entitled at that time and which is capable of being applied against the Total
Debt;
  "Change
      in Control" means with respect to the Account Party, that the Guarantor,
      shall own, at any time, legally or beneficially, less than 100% of the
      ownership interest of Account Party (no matter how evidenced), as adjusted
      from time to time pursuant to any non-cash dividend or distribution or
      recapitalization or reclassification of the capital of such company; or
      (b) the shareholders of the Account Party or the Guarantor shall at any
      time approve any plan or proposal for the liquidation or dissolution of
      the Account Party or the Guarantor, as the case
  maybe;
  "Code"
      means the Internal Revenue Code of 1986, as amended, and any successor
      statute and regulations promulgated
thereunder;
  "Collateral
      Account"
              means
      the cash collateral account described in Section 2.10; or such other
      account designated by the L/C
Provider;
  "Compliance
      Certificate" means a certificate in the form set out in Exhibit F, or in
      such other form as the L/C Provider may agree, certifying the compliance
      by the Security Parties with all of the covenants contained herein and
      showing the calculations thereof, which certificate shall be executed and
      delivered by the Financial Officer of the Guarantor to the L/C Provider
      from time to time;
  "Consent
      and Agreement"
              means
      the consent and agreement relating to this Agreement to be executed by the
      Guarantor in the form attached
hereto;
  "Date of
Issuance"                                                    means
the date on which the Letter of Credit is issued pursuant to Section
2.1;
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  "Default"
      means any event or condition which constitutes an Event of Default or
      which upon notice, lapse of time or both would, unless cured or waived,
      become an Event of Default;
  "Dollars"
      and the sign "$" means the legal currency, at any relevant time hereunder,
      of the United States of America and, in relation to all payments
      hereunder, in same day funds settled through the New York Clearing House
      Interbank Payments System (or such other Dollar funds as may be determined
      by the L/C Provider to be customary for the settlement in New York City of
      banking transactions of the type herein
  involved);
  "Environmental
      Affiliate" means any person or entity, the liability of which for
      Environmental Claims the Account Party may have assumed by contract or
      operation of law;
 "Environmental
Approvals"                                                   shall
have the meaning ascribed thereto in Section 3.1(u);
 "Environmental
Claim"                                                   shall
have the meaning ascribed thereto in Section 3.1(u);
 "Environmental
Laws"                                                   shall
have the meaning ascribed thereto in Section 3.1(u);
 "Event(s)
of
Default"                                                   means
any of the events set out in Section 6;
  "Final
      Delivery Payment" means the last payment to be made by the Account Party
      or the Seller, as the case may be, to the Beneficiary pursuant to the
      Shipbuilding Contract in respect of the delivery of the
      Vessel;
  "Financial
      Officer"
              means
      the chief financial officer, principal accounting officer, treasurer or
      corporate controller of a Security
Party;
  "GAAP"
 "Governmental
Authority"
  "Guarantee
Obligation"
 
 has the
meaning ascribed thereto in Section 1.3;
  means the
government of the United States of America, any other nation or any political
subdivision thereof, whether state or local, and any agency, authority,
instrumentality, regulatory body, court, central bank or other entity exercising
executive, legislative, judicial, taxing, regulatory or administrative powers or
functions of or pertaining to government;
 
 means, as
to any Person, any obligation of such Person guaranteeing or in effect
guaranteeing any Indebtedness, lease, dividend or other obligation (the "primary
obligations") of any other Person (the "primary obligor") in any manner, whether
directly or indirectly, including, without limitation, any obligation of such
Person, whether or not contingent (a) to purchase any such primary obligation
or
  4
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  "Guaranty"
"Indebtedness"
 any
property constituting direct or indirect security therefor, (b) to advance or
supply funds (i) for the purchase or payment of any such primary obligation or
(ii) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor or to
permit the primary obligor to meet financial covenants, (c) to purchase
property, securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation or (d) otherwise to assure or hold harmless
the owner of any such primary obligation against loss in respect thereof,
including, without limitation contingent obligations with respect to performance
and other similar bonds and instruments whether secured or unsecured; provided,
however, that the term Guarantee Obligation shall not include endorsements of
instruments for deposit or collection in the ordinary course of business. The
amount of any Guarantee Obligation shall be deemed to be an amount equal to the
stated or determinable amount of the primary obligation in respect of which such
Guarantee Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof as determined by such Person
in good faith;
  "Guarantor"
              means
      B+H Ocean Carriers Ltd., a company incorporated under the laws of the
      Republic of Liberia;
  means the
guaranty by the Guarantor in favor of the L/C Provider guaranteeing the payment
of the L/C Amount substantially in the form set out in Exhibit B;
  of any
Person means, without duplication, (a) all obligations of such Person for
borrowed money or with respect to deposits or advances of any kind, (b) all
obligations of such Person evidenced by bonds, debentures, notes or similar
instruments, (c) all obligations of such Person upon which interest charges are
customarily paid, (d) all obligations of such Person under conditional sale or
other title retention agreements relating to property acquired by such Person,
(e) all obligations of such Person in respect of the deferred purchase price of
property or services (excluding current accounts payable incurred in the
ordinary course of business), (f) all Indebtedness of others secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien on property owned or acquired by such
Person, whether or not the Indebtedness secured thereby has been assumed, (g)
all
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  "L/C
Amount" "L/C Provider" "Letter of Credit"
 "LIBOR
Rate" "Lien"
 Guarantee
Obligations of such Person with respect to Indebtedness of others, (h) all
Capital Lease Obligations of such Person, (i) all obligations, contingent or
otherwise, of such Person as an account party in respect of letters of credit
and letters of guaranty and (j) all obligations, contingent or otherwise, of
such Person in respect of bankers' acceptances. The Indebtedness of any Person
shall include the Indebtedness of any other entity (including any partnership in
which such Person is a general partner) to the extent such Person is liable
therefor as a result of such Person's ownership interest in or other
relationship with such entity, except to the extent the terms of such
Indebtedness provide that such Person is not liable therefor.
  "Interest
      Rate Agreements" means any interest rate protection agreement, interest
      rate future agreement, interest rate option agreement, interest rate swap
      agreement, interest rate cap agreement, interest rate collar agreement,
      interest rate hedge agreement or other similar agreement or arrangement
      designed to protect the Account Party or any of its Subsidiaries against
      fluctuations in interest rates to or under which the Account Party or any
      of its Subsidiaries is a party or a beneficiary on the date of this
      Agreement or becomes a party or a beneficiary
  hereafter;
  has the
meaning ascribed thereto in the Preamble to this Agreement;
 
 has the
meaning ascribed thereto in the Preamble to this Agreement;
 
 means the
irrevocable letter of credit in the maximum stated amount of the L/C Amount
referred to in the Recitals of this Agreement, to be issued by the L/C Provider
to the Beneficiary pursuant to this Agreement, substantially in the form of
Exhibit A, as amended and in effect from time to time and any letter of credit
substituted therefor pursuant to Section 2.7;
 
 shall
mean the London Interbank Offered Rate ("LIBOR") as set and published by the
British Banker's Association ("BBA"), as obtained by the L/C Provider from a
wire that is sent through Bloomberg, L.P. which rate is based by BBA on an
average of the Interbank Offered Rates for Dollar deposits in the London market
based on quotes from designated banks in the London market;
 
 means,
with respect to any asset, (a) any mortgage, deed of trust, lien, pledge,
hypothecation, encumbrance, charge or security interest in, on or of such asset,
(b) the interest of a
 6
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  vendor or
a lessor under any conditional sale agreement, capital lease or title retention
agreement (or any financing lease having substantially the same economic effect
as any of the foregoing) relating to such asset and (c) in the case of
securities, any purchase option, call or similar right of a third party with
respect to such securities;
  "Material
      Adverse Effect" means a material adverse effect on (a) the business,
      assets, operations, prospects or condition, financial or otherwise, of any
      Security Party and its respective Subsidiaries taken as a whole, (b) the
      ability of any Security Party to perform any of its obligations under this
      Agreement or any of the other Transaction Documents to which it is a party
      or (c) the rights of or benefits available to the L/C Provider under this
      Agreement or any of the Transaction
Documents;
  "Materials
of
Environmental                                                    has
the meaning ascribed thereto in Section 3.1(u); Concern"
  "MOA"
              has
      the meaning ascribed thereto in the Preamble to this
      Agreement;
 "Notice
of
Issuance"                                                    shall
have the meaning set forth in Section 2.1(b);
  "Payment
      Obligations" means, as of any date, the obligations of the Account Party
      then outstanding and unpaid to pay to the L/C Provider pursuant to Section
      2.2 (including, without limitation, payment of the Pre-Delivery
      Deposit);
  "Permitted
Encumbrances"                                                    means:
 
 (a)  Liens
imposed by law for taxes that are not yet due or are being contested in
compliance with Section 7.1(g);
  (b)  carriers',
warehousemen's, mechanics', materialmen's, repairmen's and other like Liens
imposed by law, arising in the ordinary course of business and securing
obligations that are not overdue by more than 30 days or are being contested in
compliance with Section 7.1(g);
 
 (c)  pledges
and deposits made in the ordinary course of business in compliance with workers'
compensation, unemployment insurance and other social security laws or
regulations;
 
 (d)  deposits
to secure the performance of bids, trade contracts, leases, statutory
obligations, surety and appeal
 (a)
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  bonds,
performance bonds and other obligations of a like nature, in each case in the
ordinary course of business;
 
 (e)  easements,
zoning restrictions, rights-of-way and similar encumbrances on real property
imposed by law or arising in the ordinary course of business that do not secure
any monetary obligations and do not materially detract from the value of the
affected property or interfere with the ordinary conduct of business of the
Account Party, or any Subsidiary;
 (f)  Permitted
Maritime Liens; and
 (g)  Liens on
the Vessel in favor of the L/C Provider;
  provided
that the term "Permitted Encumbrances" shall not include any Lien securing
Indebtedness (other than under clause (g) above);
  "Permitted
      Maritime Liens" means any seaman's wage liens (including those of masters)
      for wages, maintenance and cure, salvage and general average liens,
      stevedore's wages, tort liens (including personal injury and death) and
      liens for necessaries, all of the foregoing liens which are either
      unclaimed or covered by insurance (other than, and after giving effect to,
      any deductibles that the Account Party may have on such insurance);
      provided, that, once any such lien is claimed, the Account Party shall be
      permitted to contest any such lien in good faith by appropriate action
      promptly initiated and diligently conducted, if (i) such reserve as shall
      be required by GAAP shall be made therefor and (ii) the Account Party
      shall have arranged for a bond or insurance (other than, and after giving
      effect to, any deductibles that the Account Party may have on such
      insurance) related to such lien in a manner that is satisfactory to L/C
      Provider in accordance with law and (iii) such lien does not involve any
      risk of seizure or sale of the
Vessel;
  "Person"
      means any individual, sole proprietorship, corporation, partnership
      (general or limited), limited liability company, business trust, bank,
      trust company, joint venture, association, joint stock company, trust or
      other unincorporated organization, whether or not a legal entity, or any
      government or agency or political subdivision
  thereof;
  "Pre-Delivery
Deposit"                                                    has
the meaning ascribed thereto in Section 2.2(a);
 
 "Pledge
      Agreement"
              means
      the pledge of common shares of the Account Party to be executed by the
      Guarantor, as pledgor, in favor of the
L/C
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  has the
meaning ascribed thereto in the Preamble to this Agreement;
 
 has the
meaning ascribed thereto in the Preamble to this Agreement;
 
 means,
with respect to any Person, any business entity of which more than 50% of the
outstanding voting stock is owned directly or indirectly by such Person and one
or more other Subsidiaries of such Person;
 "Taxes"
"Total Debt"
 Provider
pursuant to Section 4.1(c) hereof substantially in the form of Exhibit
C;
 
 "Refund
      Guarantee" means that certain guarantee issued by the Refund Guarantor in
      favor of the Seller in connection with payments made to the Beneficiary
      under the Shipbuilding Contract, as assigned to the Account Party pursuant
      to an assignment agreement dated July 29,
2008;
 
 "Refund
Guarantor"                                                    means
Malayan Banking Berhad, a company organized under the laws of
Malaysia;
  "Requirements
      of Law" means, as to any Person, the certificate of incorporation and
      by-laws or other organizational or governing documents of such Person, and
      any law, treaty, rule or regulation or determination of an arbitrator or a
      court or other Governmental Authority, in each case applicable to or
      binding upon such Person or any of its property or to which such Person or
      any of its property is subject;
  "Security
      Documents" means the Pledge Agreement, the Assignment of MOA, Shipbuilding
      Contract and Refund Guarantee (and the Assignment Notices with respect
      thereto), the Guaranty, and any other documents that may be executed as
      security for the Account Party's obligations
  hereunder;
  "Security
      Party(ies)"
              means
      each of the Account Party and the Guarantor or both of
    them;
 "Seller"
 "Shipbuilding
Contract" "Subsidiary"
   means any
present or future income or other taxes, levies, duties, charges, fees,
deductions or withholdings of any nature now or hereafter imposed, levied,
collected, withheld or assessed by any taxing authority whatsoever;
 
 means, on
a consolidated basis, the aggregate book value of all provisions, other long
term liabilities and current liabilities of the Guarantor (on a consolidated
basis);
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  (a)  Due Organization and
Power. Each Security Party is duly formed and validly existing in good
standing under the laws of its jurisdiction of incorporation, has duly qualified
and is authorized to do business as a foreign corporation in each jurisdiction
wherein the nature of the business transacted thereby makes such qualification
necessary, has full power to carry on its business as now being conducted and to
enter into and perform its obligations under the Transaction Documents to which
it is or is to be a party, and has complied with all statutory, regulatory and
other requirements relative to such business and such agreements the
noncompliance with which could reasonably be expected to have a material adverse
effect on its business, assets or operations, or condition (financial or
otherwise);
  (b)  Authorization and
Consents. All necessary corporate action has been taken to authorize, and
all necessary consents and authorizations have been obtained and remain in full
force and effect to permit each Security Party to enter into and perform its
obligations under the Transaction Documents to which it is a party and to make
all payments required under this Agreement and, as of the date of this
Agreement, no further consents or authorizations are necessary for the repayment
of the obligations under this Agreement;
  (c)  Filings, etc. Other
than the filing of UCC Financing Statements in the District of Columbia in
respect of the Assignments, and the payment and filing or recording fees
consequent thereto, it is not necessary for the legality, validity,
enforceability or admissibility into evidence of this Agreement or any of the
Transaction Documents that any of them or any document relating thereto be
registered, filed, recorded or enrolled with any court or authority in any
relevant jurisdiction or that any stamp, registration or similar Taxes be paid
on or in relation to this Agreement or any of the Transaction
Documents;
  (d)  Binding Obligations.
The Transaction Documents to which it is a party constitute or, when executed
and delivered, will constitute, legal, valid and binding obligations of each
Security Party enforceable thereagainst in accordance with their terms, except
to the extent that such enforcement may be limited by equitable principles,
principles of public policy or applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting generally the enforcement of
creditors' rights;
  (e)  No Violation. The
execution and delivery of, and the performance of the provisions of, the
Transaction Documents to which it is a party by each Security Party , do not,
and will not during the term of this Agreement, contravene (i) any applicable
law, regulation or judicial order existing at the date hereof, (ii) any material
agreement or document to which each such Security Party is a party or which is
binding upon it or any of its assets, or (iii) its articles of incorporation or
by-laws (or equivalent documents), nor will it result in the creation or
imposition of any Lien or any other security interest of any kind on the assets
of such Security Party (except for those in favor of the L/C Provider) pursuant
to the provisions of any such agreement or document;
  (f)  No Immunity. No
Security Party and no assets of any Security Party are entitled to immunity on
the grounds of sovereignty or otherwise from any legal action or proceeding
(which shall include, without limitation, suit, attachment prior to judgment,
execution or other enforcement);
  (g)  Litigation. No
action, suit or proceeding is pending or threatened against any Security Party
before or by any court, board of arbitration or administrative agency which has
a
  (a)
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  reasonable
likelihood of resulting in any material adverse change in the business or
condition (financial or otherwise) of such Security Party;
  (h)  No Default. No
Security Party is in default under any agreement by which it is bound, and no
Security Party is it default in respect of any financial commitment or
obligation;
  (i)  Financial Statements.
Except as otherwise disclosed in writing to the L/C Provider on or prior to the
date hereof, all information and other data furnished by the Security Parties to
the L/C Provider are complete and correct, and all financial statements
furnished by the Security Parties have been prepared in accordance with GAAP and
accurately and fairly present the financial condition of the parties covered
thereby as of the respective dates thereof and the results of the operations
thereof for the period or respective periods covered by such financial
statements. Since such date or dates there has been no material adverse change
in the financial condition or results of the operations of any of such parties
and none thereof has any contingent obligations, liabilities for taxes or other
outstanding financial obligations which are material in the aggregate except as
disclosed in such statements, information and data. The fiscal year of each
Security Party is the twelve months ending December 31 of each
year;
  (j)  Tax Returns and
Payments. Each Security Party has filed all tax returns required to be
filed thereby and has paid all taxes payable thereby which have become due,
other than those not yet delinquent or the nonpayment of which would not have a
material adverse effect on such Security Party, and except for those taxes being
contested in good faith and by appropriate proceedings or other acts and for
which adequate reserves have been set aside on its books;
  (k)  Insurance. Each
Security Party has insured its properties and assets against such risks and in
such amounts as are customary for companies engaged in similar
businesses;
 (1)            [Intentionally
Omitted.];
  (m)  Offices. The chief
executive office and chief place of business of each Security Party, and the
office in which the financial records relating to the Vessel are kept is, and
will continue to be, located at Palm Grove House, Road Town, Tortola, British
Virgin Islands with respect to the Account Party and at 3rdFloor
Par La Ville Place, 14 Par La Ville Road, Hamilton HM 11, Bermuda with respect
to the Guarantor;
  (n)  Foreign Trade Control
Regulations. None of the transactions contemplated herein will violate
the provisions of any statute or regulation enacted to prohibit or limit
economic transactions with foreign Persons including, without limitation, the
Foreign Assets Control Regulations of the United States of America (Title 31,
Code of Federal Regulations, Chapter V, Part 500, as amended), any of the
provisions of the Cuban Assets Control Regulations of the United States of
America (Title 31, Code of Federal Regulations, Chapter V, Part 515, as
amended), any of the provisions of the Iranian Transaction Regulations of the
United States of America (Title 31, Code of Federal Regulations, Chapter V, Part
560, as amended), any of the provisions of the Iraqi Sanctions Regulations
(Title 31, Code of Federal Regulations, Chapter V, Part 575, as amended) or any
of the provisions of the Regulations of the United States of America Governing
Transactions in Foreign Shipping of Merchandise (Title 31, Code of Federal
Regulations, Chapter V, Part 505, as amended);
  (m)
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  (o)  Liens. Other than as
disclosed herein, there are no Liens of any kind on any property owned by the
Account Party other than those Liens created pursuant to this Agreement or the
Transaction Documents or permitted thereby;
  (p)  Payment Free of
Taxes. All payments made or to be made by each Security Party under or
pursuant to this Agreement or the Transaction Documents shall be made free and
clear of, and without deduction or withholding for an account of, any
Taxes;
  (q)  No Proceedings to
Dissolve. There are no proceedings or actions pending or contemplated by
any Security Party or, to the best knowledge of each such Security Party,
contemplated by any third party, to dissolve or terminate such Security
Party;
  (r)  Solvency. On the date
of this Agreement, in the case of each Security Party (a) the sum of its assets,
at a fair valuation, does and will exceed its liabilities, including, to the
extent they are reportable as such in accordance with GAAP, contingent
liabilities, (b) the present fair market salable value of its assets is not and
shall not be less than the amount that will be required to pay its probable
liability on its then existing debts, including, to the extent they are
reportable as such in accordance with GAAP, contingent liabilities, as they
mature, (c) it does not and will not have unreasonably small working capital
with which to continue its business and (d) it has not incurred, does not intend
to incur and does not believe it will incur debts beyond its ability to pay such
debts as they mature;
  (s)  Not an Investment
Company. No Security Party is an "investment company" within the meaning
of the Investment Company Act of 1940, as amended;
  (t)  Equity Ownership. The
Guarantor owns 100% of the Account Party. On the Date of Issuance, the Account
Party will not own any shares of capital stock, partnership interest or other
direct or indirect equity interest in any corporation, partnership or other
entity;
  (u)  Environmental
Matters. Except as heretofore disclosed in writing to L/C Provider (i)
each Security Party will, when required, be in compliance with all applicable
United States federal and state, local, foreign and international laws,
regulations, conventions and agreements relating to pollution prevention or
protection of human health or the environment (including, without limitation,
ambient air, surface water, ground water, navigable waters, waters of the
contiguous zone, ocean waters and international waters), including, without
limitation, laws, regulations, conventions and agreements relating to (1)
emissions, discharges, releases or threatened releases of chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous materials, oil, hazardous
substances, petroleum and petroleum products and by-products ("Materials of
Environmental Concern"), or (2) the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Materials of
Environmental Concern ("Environmental Laws"); (ii) each Security Party will,
when required, have all permits, licenses, approvals, rulings, variances,
exemptions, clearances, consents or other authorizations required under
applicable Environmental Laws ("Environmental Approvals") and will, when
required, be in full compliance with all Environmental Approvals required to
operate their business as then being conducted; (iii) no Security Party has
received any notice of any claim, action, cause of action, investigation or
demand by any person, entity, enterprise or government, or any political
subdivision, intergovernmental body or agency, department or instrumentality
thereof, alleging potential liability for, or a requirement to incur,
investigatory costs, cleanup costs, response and/or remedial costs (whether
incurred by a
  (o)
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  governmental
entity or otherwise), natural resources damages, property damages, personal
injuries, attorneys' fees and expenses, or fines or penalties, in each case
arising out of, based on or resulting from (1) the presence, or release or
threat of release into the environment, of any Materials of Environmental
Concern at any location, whether or not owned by such person, or (2)
circumstances forming the basis of any violation, or alleged violation, of any
Environmental Law or Environmental Approval ("Environmental Claim") (other than
Environmental Claims that have been fully and finally adjudicated or otherwise
determined and all fines, penalties and other costs, if any, payable by such
Security Party in respect thereof have been paid in full or are fully covered by
insurance (including permitted deductibles)); (iv) there are no circumstances
that may prevent or interfere with such full compliance in the future; and (v)
except as heretofore disclosed in writing to the L/C Provider there is no
Environmental Claim;
  (v)  Pending or Threatened
Environmental Claims. Except as heretofore disclosed in writing to the
L/C Provider there is no Environmental Claim pending or threatened against any
Security Party or past or present actions, activities, circumstances,
conditions, events or incidents, including, without limitation, the release,
emission, discharge or disposal of any Materials of Environmental Concern, that
could form the basis of any Environmental Claim against such Security
Party;
  (w)  Permitted
Indebtedness. The Account Party has no outstanding indebtedness other
than any indebtedness evidenced by this Agreement;
  (x)  Survival. All
representations, covenants and warranties made herein and in any certificate or
other document delivered pursuant hereto or in connection herewith shall survive
the issuance of the Letter of Credit;
  (y)  No Default. No
Security Party is in default under any agreement by which it is bound, or is in
default in respect of any financial commitment or obligation, in each case,
which could or might result in any Material Adverse Effect; and
  (z)  Title. The Account
Party has and at all times will defend and continue to have good and marketable
title to all of its properties, free and clear of all Liens subject only to
Permitted Liens and the Guarantor has and at all times will defend and continue
to have good and marketable title to all shares of common stock and other equity
interests in the Account Party, free and clear of all Liens except Liens in
favor of the L/C Provider.
  4.           CONDITIONS
PRECEDENT
 
 4.1
Conditions Precedent
to Issuance of Letter of Credit. The obligation of the L/C Provider to
issue the Letter of Credit to the Beneficiary under this Agreement shall be
expressly subject to the following conditions precedent:
  (a) the
L/C Provider shall have received the following documents in form
and
  substance
satisfactory to the L/C Provider and its counsel:
 
 (i)
      copies, certified as true and complete by an officer of each Security
      Party of the resolutions of each such company's board of directors (and,
      if any necessary under appropriate law, shareholders) evidencing approval
      of the
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  Transaction
Documents to which such company is or is to be a party and authorizing an
appropriate officer or officers or attorney-in-fact or attorneys-in-fact to
execute the same on its behalf;
 
 (ii)
              copies,
      certified as true and complete by an officer of each Security Party, of
      all documents evidencing any other necessary action (including actions by
      such parties thereto other than such Security Party as may be required by
      the L/C Provider), approvals or consents with respect to this Agreement,
      the Security Documents and the transactions contemplated hereby and
      thereby;
 
 (iii)
              copies,
      certified as true and complete by an officer of each Security Party, of
      the articles or certificate of incorporation and by-laws (or the
      equivalent thereof) of each thereof.,
  (iv)
              good
      standing certificates or the equivalent thereof with respect to each
      Security Party issued by the appropriate authorities of the respective
      jurisdiction of incorporation of such parties;
  and
  (v)
              on
      the Date of Issuance, a certificate from an officer or director of each
      Security Party stating that the representations and warranties (updated
      mutatis
      mutandis
      to such date) stated Section 3 of this Agreement are true and correct as
      if made on that date;
  (b)            the
Account Party shall have duly executed and delivered the following
documents:
 (i)  this
Agreement;
  (ii)  the
Assignment of MOA, Shipbuilding Contract and Refund Guarantee; and
 (iii)  the
Assignment Notices relating to (ii) above;
 (c)            the
Guarantor shall have duly executed and delivered the following
documents:
 (i)  the
Consent and Agreement to this Agreement;
 (ii)  the
Guaranty; and
  (iii)  the
Pledge Agreement;
 
 (d) the
Account Party shall have delivered to the L/C Provider a copy of each of the
MOA, the Shipbuilding Contract and any assignment documents relating to the
Shipbuilding Contract, each in form and substance satisfactory to the L/C
Provider;
 
 (e) the
L/C Provider shall have received payment in full of all fees and expenses
(including legal fees) due to the L/C Provider on the date thereof including,
without limitation, all fees and expenses due under Section 2.3;
 
  20
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  (f)  [Intentionally
Omitted];
 
 (g)  the L/C
Provider shall be satisfied that no Security Party is subject to any
Environmental Claim which could have a material adverse effect on the business,
assets or results of operations of either thereof;
 
 (h)  the L/C
Provider shall be satisfied that no Default or Event of Default has occurred and
is continuing;
 
 (i)  the L/C
Provider shall be satisfied that no Security Party is in default under or with
respect to any of its respective obligations under any Transaction Document or
other agreement which has or is reasonably likely to have a Material Adverse
Effect;
 
 (j)  the L/C
Provider shall have received, together with a Compliance Certificate from the
Guarantor, a complete copy of the audited consolidated financial report of the
Guarantor for the year ending December 31, 2007, which shall include at least
the balance sheet of such corporation as of the end of such year and the related
statements of income, cash flow and retained earnings for such year all in
reasonable detail, certified by an Acceptable Accounting Firm, together with
their opinion (containing no qualifications which the L/C Provider deems
material);
 
 (k)  the
Account Party shall have provided such evidence as the L/C Provider may require
documenting the current legal and beneficial ownership of the shares of the
Account Party and the legal ownership of the shares of the Guarantor;
and
 
 (1) the
L/C Provider shall have received opinions from (i) Harney, Westwood &
Riegels, counsel to the Account Party on matters of British Virgin Islands and
(ii) Seward & Kissel LLP, special counsel to the L/C Provider, in each case
in such form and substance as the L/C Provider may require, as well as such
other legal opinions as the L/C Provider shall have required as to all or any
matters under the laws of the United States of America, the State of New York,
the Republic of Liberia and the British Virgin Islands covering the
representations and conditions which are the subjects of Sections 3 and 4
hereto.
  5.           PAYMENTS
 
 5.1
Place of Payments, No
Set Off. (a) All payments to be made hereunder by the Account Party shall
be made on the due dates of such payments to the L/C Provider at its office
located at 230 Park Avenue New York, NY 10169, USA or to such other place as the
L/C Provider may direct, for the account of the L/C Provider, without set-off or
counterclaim and free from, clear of and without deduction for, any Taxes,
provided, however, that if the Account Party shall at any time be compelled by
law to withhold or deduct any Taxes from any amounts payable to the L/C Provider
hereunder, then, subject to Section 5.2, the Account Party shall pay such
additional amounts in Dollars as may be necessary in order that the net amounts
received after withholding or deduction shall equal the amounts which would have
been received if such withholding or deduction were not required and, in the
event any withholding or deduction is made, whether for Taxes or otherwise, the
Account Party shall promptly send to the L/C Provider such documentary evidence
with respect to such withholding or deduction as may be required from time to
time by the L/C Provider. Notwithstanding the preceding sentence, the Account
Party
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  shall not
be required to pay additional amounts or otherwise indemnify the L/C Provider
for or on account of:
  (i)
      Taxes based on or measured by the overall net income of the L/C Provider
      or Taxes in the nature of franchise taxes or taxes for the privilege of
      doing business imposed by any jurisdiction or any political subdivision or
      taxing authority therein unless such are imposed as a result of the
      activities of the Account Party within the relevant taxing
      jurisdiction;
  (ii)
              Taxes
      imposed by any jurisdiction or any political subdivision or taxing
      authority therein on the L/C Provider that would not have been imposed but
      for the L/C Provider's being organized in or conducting business in or
      maintaining a place of business in the relevant taxing jurisdiction, or
      engaging in activities or transactions in the relevant taxing jurisdiction
      that are unrelated to the transactions contemplated by the Transaction
      Documents, but only to the extent such Taxes are not imposed as a result
      of the activities of the Account Party within the relevant taxing
      jurisdiction or the jurisdiction of the Account Party under the laws of
      the taxing jurisdiction;
  (iii)
              Taxes
      imposed on or with respect to the L/C Provider as a result of a transfer,
      sale, assignment, or other disposition by the L/C Provider of any interest
      in any Transaction Document or the Vessel (other than a transfer pursuant
      to an exercise of remedies upon an Event of
  Default);or
  (iv)
              Taxes
      imposed on the L/C Provider that would not have been imposed but for any
      failure of the L/C Provider to comply with any return filing requirement
      or any certification, information, documentation, reporting or other
      similar requirement known to the L/C Provider, if such compliance is
      required to obtain or establish relief or exemption from or reduction in
      such Taxes.
  (b) In
the event that the Account Party has actual knowledge that the Account Party is
required to, or there arises in the Account Party's reasonable opinion a
substantial likelihood that the Account Party will be required to, pay an
additional amount or otherwise indemnify the L/C Provider for or on account of
any Tax pursuant to Section 5.1(a), the Account Party will promptly notify the
L/C Provider of the nature of such Tax, and shall furnish such information to
the L/C Provider with respect to such Tax, as the L/C Provider may reasonably
request. In the event of any knowledge or opinion of the Account Party described
in the preceding sentence, the Account Party and the L/C Provider shall consult
in good faith to determine what may be required to avoid or reduce such Tax, and
each shall use reasonable efforts to avoid or reduce such Tax (so long as such
efforts do not, in the reasonable opinion of the L/C Provider, result in any
cost to the L/C Provider or any modification of the terms or payment or
repayment of the Payment Obligations).
 
 5.2 Tax Credits. If the
L/C Provider obtains the benefit of a credit against its liability for Taxes
imposed by any taxing authority for all or part of the Taxes as to which the
Account Party has paid additional amounts as aforesaid then the L/C Provider
shall reimburse the Account Party for the amount of the credit so obtained. The
L/C Provider shall use reasonable efforts to file
  SK 162790020
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  such tax
returns as are necessary to obtain any such credit. In connection therewith, the
L/C Provider may consult with their legal advisers, all fees and expenses of
which shall be for the account of the Account Party.
 
 5.3
Right of
Setoff. In addition to any rights now or hereafter granted under
applicable law or otherwise, and not by way of limitation of any such rights,
upon the occurrence and during the continuance of an Event of Default, the L/C
Provider is hereby authorized at any time or from time to time, without
presentment, demand, protest or other notice of any kind to the Account Party or
to any other Person, any such notice being hereby expressly waived, to set off
and to appropriate and apply any and all deposits (general or special) and any
other Indebtedness at any time held or owing by the L/C Provider (including,
without limitation, by branches and agencies of the L/C Provider wherever
located) to or for the credit or the account of the Account Party but in any
event excluding assets held in trust for any such Person against and on account
of the obligations and liabilities of such Account Party, as applicable, to the
L/C Provider under this Agreement or under any of the other Transaction
Documents, including, without limitation, all claims of any nature or
description arising out of or connected with this Agreement or any other
Transaction Document, irrespective of whether or not the L/C Provider shall have
made any demand hereunder and although said obligations, liabilities or claims,
or any of them, shall be contingent or unmatured.
  6.            EVENTS OF
DEFAULT
 
 6.1            In
the event that any of the following events shall occur and be
continuing:
 
 (a)  Repayments. Any
payment due under Section 2.2 is not paid on the due date; or
  (b)  Other Payments. Any
fees or other amount becoming payable to the L/C Provider under this Agreement
(other than any payment due under Section 2.2) or under any of the Transaction
Documents or under any of them is not paid on the due date or within three (3)
Banking Days after the date of demand (as the case may be); or
 
 (c)  Representations, etc.
Any representation, warranty or other statement made by any Security Party in
this Agreement or in any of the Transaction Documents to which it is a party or
in any other instrument, document or other agreement delivered in connection
herewith or therewith proves to have been untrue or misleading in any material
respect as at the date as of which it was made or delivered; or
 
 (d)  Impossibility,
Illegality. It becomes impossible or unlawful for any Security Party to
fulfill any of the covenants and obligations contained herein or in any of the
Transaction Documents to which it is a party or for the L/C Provider to exercise
any of the rights vested in any of them hereunder or under any of the
Transaction Documents and such impossibility or illegality, in the reasonable
opinion of the L/C Provider, will have a material adverse effect on their rights
hereunder or under any of the Transaction Documents or on their right to enforce
any thereof;
 
 (e)  Covenants. Any
Security Party defaults in the performance of any term, covenant or agreement
contained in this Agreement or in any other Transaction Documents to which they
are a party or in any of them, or in any other instrument, document or other
agreement delivered in connection herewith or therewith, or there occurs any
other event which
 (a)
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  constitutes
a default under this Agreement or any of other Transaction Documents, in each
case other than an Event of Default referred to elsewhere in this Section 6.1,
and such default, in the reasonable opinion of the L/C Provider, could have a
material adverse effect on their rights hereunder or under any of the other
Transaction Documents or on their right to enforce any thereof and continues
unremedied for a period of thirty (30) days; or
 
 (f)  Indebtedness. Any
Security Party or any Subsidiary or Affiliate thereof shall default in the
payment when due (subject to any applicable grace period), whether by
acceleration or otherwise, of any Indebtedness having an outstanding principal
amount of $1,000,000 or more or any party becomes entitled to enforce the
security for any such Indebtedness and such party shall take steps to enforce
the same, unless such default or enforcement is being contested in good faith
and by appropriate proceedings or other acts and such Security Party or such
Subsidiary or Affiliate thereof, as the case may be, shall set aside on its
books adequate reserves with respect thereto, and so long as such default or
enforcement shall not subject the Vessel to material risk of forfeiture or loss;
or
 (g)  Change in Control
Ownership. A Change in Control shall occur; or
  (h)  Default under the
Transaction Documents. There is an event of default under any of the
Transaction Documents which shall have occurred and be continuing;
or
  (i)  Bankruptcy. Any
Security Party commences any proceeding relating to any substantial portion of
its property under any reorganization, arrangement or readjustment of debt,
dissolution, winding up, adjustment, composition, bankruptcy or liquidation law
or statute of any jurisdiction, whether now or hereafter in effect
("Proceeding"), or there is commenced against any Security Party any Proceeding
and such Proceeding remains undismissed or unstayed for a period of thirty (30)
days; or any receiver, trustee, liquidator or sequestrator of, or for, a
Security Party or any substantial portion of the property of any thereof is
appointed and is not discharged within a period of thirty (30) days; or any
Security Party by any act indicates consent to or approval of or acquiescence in
any Proceeding or to the appointment of any receiver, trustee, liquidator or
sequestrator of, or for, itself or any substantial portion of its property;
or
 
 (j)  Sale of Assets. Any
Security Party ceases, or threatens to cease, its operations or sells or
otherwise disposes of, or threatens to sell or otherwise dispose of, all or
substantially all of its assets or all or substantially all of its assets are
seized or otherwise appropriated; or
  (k)  Judgments. One or
more judgments for the payment of money in an aggregate amount in excess of
$1,000,000 and not covered by insurance shall be rendered against any Security
Party and the same shall remain undischarged for a period of thirty (30)
consecutive days during which execution shall not be effectively stayed, or any
action shall be legally taken by a judgment creditor to attach or levy upon any
assets of a Security Party to enforce any such judgment; or
 
 (1)            [Intentionally
Omitted.]; or
 
 (m) Inability to Pay
Debts. Any Security Party is unable to pay or admits its inability to pay
its debts as they fall due or if a moratorium shall be declared in respect of
any Indebtedness thereof; or
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  (n)  Financial Position.
Any change in the financial position of any Security Party which, in the
reasonable opinion of the L/C Provider, is likely to have a material adverse
effect on the ability of such Security Party to perform its material obligations
under this Agreement or the other Transaction Documents to which it is a party;
or
 
 (o)  MOA and Shipbuilding
Contract. An event of default on the part of the Account Party has
occurred and is continuing under the MOA or event of default on the part of the
Account Party or the Seller, as the case may be, has occurred and is continuing
under the Shipbuilding Contract;
 
 then the
L/C Provider's obligation to issue the Letter of Credit shall cease and the L/C
Provider shall, by notice to the Account Party, (i) direct the Account Party to
pay to itself, and the Account Party shall immediately pay into such account as
the L/C Provider shall direct, an amount equal to all L/C Amount less the value
of any cash collateral previously provided to the L/C Provider hereunder, to be
kept as collateral for the Account Party's obligations in respect of the Letter
of Credit until the L/C Provider's obligations in respect of the Letter of
Credit are canceled and all of the Payment Obligations of the Account Party are
repaid, and declare all sums payable by the Account Party hereunder due and
payable whereupon the same shall forthwith be due and payable without
presentment, demand, protest or notice of any kind, all of which are hereby
expressly waived, and (ii) pay or prepay all other amounts owing under or in
connection with this Agreement and the Security Documents; provided that upon
the happening of an event specified in sub-section (i) or (m) of this Section
6.1, the Payment Obligations, accrued interest and any other sums payable
hereunder shall be immediately due and payable without presentment, demand,
protest, declaration or other notice to the Account Party. In any such event,
the L/C Provider may (i) proceed to protect and enforce its rights by action at
law, suit in equity or in admiralty or other appropriate proceeding, whether for
specific performance of any covenant contained in this Agreement or in any of
the Security Documents, or to enforce any other legal or equitable right, or
(ii) proceed to take any action authorized or permitted under the terms of any
of the Security Documents or by applicable laws for the collection of all sums
due, including, without limitation, the right to appropriate and hold or apply
(directly, by way of set-off or otherwise) to the payment of the obligations of
the Account Party and/or under any of the Security Documents (whether or not
then due) all moneys and other amounts of the Account Party, then or thereafter
in possession of the L/C Provider, inclusive of the balance of any deposit
account (demand or time, matured or unmatured) of the Account Party, then or
thereafter with the L/C Provider.
  6.2
Indemnification. The
Account Party agrees to, and shall, indemnify and hold harmless the L/C Provider
against any loss or costs or expenses (including legal fees and expenses) which
the L/C Provider sustains or incurs as a consequence of any default in payment
of the Payment Obligations or interest accrued thereon or any other amount
payable hereunder or under the Security Documents (other than costs and expenses
caused by the gross negligence or willful misconduct of the L/C Provider). The
L/C Provider's certification of such costs and expenses shall, absent any
manifest error, be conclusive and binding on the Account Party.
  6.3
Application of
Moneys. Except as otherwise provided in any Security Document, all moneys
received by the L/C Provider under or pursuant to this Agreement or any of the
Security Documents after the happening of any Event of Default (unless cured to
the satisfaction of the L/C Provider) shall be applied by the L/C Provider in
the following manner:
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  (i)
      first, in or towards the payment or reimbursement of any expenses or
      liabilities incurred by the L/C Provider in connection with the
      ascertainment, protection or enforcement of their rights and remedies
      hereunder and under any of the Security
  Documents;
 
 (ii)
              secondly,
      in or towards the payment of all fees payable by the Account Party under
      Section 2.3;
 
 (iii)
              thirdly,
      in or towards payment of any interest owing in respect of the Payment
      Obligations;
 
 (iv)  fourthly,
in or towards payment of any Payment Obligations;
  (v)
              fifthly,
      in or towards payment of all sums which may be owing to the L/C Provider
      or into the Collateral Account for amounts which the L/C Provider, in its
      sole discretion deems necessary to secure against future claims under the
      Letter of Credit;
 
 (vi)
              sixthly,
      in or towards payment of all other sums which may be owing to the L/C
      Provider under this Agreement or under any of the other Transaction
      Documents;
 
 (vii)
              seventhly,
      in or towards payments of any amounts then owed under any Interest Rate
      Agreement, including but not limited to, any costs associated with
      unwinding any Interest Rate Agreement, on a pari passu basis;
      and
  (viii)
              eighthly,
      the surplus (if any) shall be paid to the Account Party or to whomsoever
      else may be entitled thereto.
  7.           COVENANTS
 
 7.1
Affirmative
Covenants. The Account Party hereby covenants and undertakes with the L/C
Provider that, from the date hereof and until this Agreement and all obligations
hereunder and under any Security Document have been terminated by the parties,
that the Account Party shall, and shall cause each other Security Party
to:
  (a)             Financial Statements.
furnish to the L/C Provider:
 
 (i)
      as soon as available but not later than ninety (90) days after the end of
      each fiscal year of the Account Party, complete copies of the financial
      reports of the Account Party, all in reasonable detail, which shall
      include at least the balance sheet of the Account Party as of the end of
      such year and the related statements of income and sources and uses of
      funds for such year, all in reasonable detail, unaudited, but certified to
      be true and complete by a Financial Officer of the
    Guarantor;
 
 (ii)
      as soon as available but not less than forty-five (45) days after the end
      of each of the first three quarters of each fiscal year of the Account
      Party, a quarterly interim balance sheet of the Account Party and the
      related profit
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  and loss
statements and sources and uses of funds, all in reasonable detail, unaudited,
but certified to be true and complete by a Financial Officer of the
Guarantor;
 
 (iii)
              within
      150 days after the end of each fiscal year of the Guarantor, its audited
      consolidated balance sheet and related statements of operations,
      shareholders' equity and cash flows as of the end of and for such year,
      setting forth in each case in comparative form the figures for the
      previous fiscal year, along with a listing of all of its obligations, all
      reported on by an Acceptable Accounting Firm (without a "going concern" or
      like qualification or exception and without any qualification or exception
      as to the scope of such audit) to the effect that such consolidated
      financial statements present fairly in all material respects its financial
      condition and results of operations in accordance with GAAP consistently
      applied;
  (iv)
              within
      75 days after the end of each of the first three fiscal quarters of each
      fiscal year of the Guarantor, its consolidated balance sheet and related
      statements of operations, shareholders' equity and cash flows as of the
      end of and for such fiscal quarter and the then elapsed portion of the
      fiscal year, setting forth in each case in comparative form the figures
      for the corresponding period or periods of (or, in the case of the balance
      sheet, as of the end of) the previous fiscal year, along with a listing of
      all of its obligations, all certified by one of its Financial Officers as
      presenting fairly in all material respects its financial condition and
      results of operations of, together with its consolidated Subsidiaries, on
      a consolidated basis in accordance with GAAP consistently applied, subject
      to normal year-end audit adjustments and the absence of
      footnotes;
  (v)
              concurrently
      with any delivery of financial statements under clauses (i), (ii), (iii)
      or (iv) above, a Compliance Certificate (i) certifying that each Security
      Party during such period has observed or performed all of its covenants
      and other agreements, and satisfied every condition contained in this
      Agreement and the other Transaction Documents to be observed, performed or
      satisfied by it, that the representations and warranties in this Agreement
      are true and correct as of the date of the certificate, other than such
      representations and warranties that relate to a specific date, and that no
      Default or Event of Default has occurred and is continuing, except as
      specified in such certificate, and (ii) setting forth reasonably detailed
      calculations demonstrating compliance with Section 7.3 stating whether any
      change in GAAP or in the application thereof has occurred since the date
      of the audited financial statements dated December 31, 2007 and, if any
      such change has occurred, specifying the effect of such change on the
      financial statements accompanying such
  certificate;
 
 (vi)
              concurrently
      with any delivery of financial statements under this Section 7.1(a) above,
      a certificate of the accounting firm that reported on such financial
      statements stating whether they obtained knowledge during the course of
      their examination of such financial statements of any Default
      or
 (iii)
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  (i)
      (ii)
 Event of
Default (which certificate may be limited to the extent required by accounting
rules or guidelines); and
 
 promptly
following any request therefor, such other information regarding the operations,
business affairs and financial condition of any Security Party, or compliance
with the terms of this Agreement, as the L/C Provider may reasonably
request.
 
 (b) Performance of
Agreements. duly perform and observe, and procure the observance and
performance by all other parties thereto (other than the L/C Provider) of, the
terms of this Agreement and each of the Transaction Documents and cause the
Vessel to be constructed in accordance with the terms of the MOA and the
Shipbuilding Contract;
  (c) Obtain Consents. ,
without prejudice to Section 3.1 and this Section 7.1, obtain every consent and
do all other acts and things which may from time to time be necessary or
advisable for the continued due performance of all of such Security Party's
obligations under this Agreement and each of the Transaction Documents to which
it is a party;
  (d)Notices of Material
Events. furnish to the L/C Provider prompt written notice
  of the
following:
 
 the
occurrence of any Default or Event of Default;
  the
filing or commencement of any action, suit or proceeding by or before any
arbitrator or Governmental Authority against or affecting a Security Party or
any Affiliate thereof that, if adversely determined, could reasonably be
expected to result in a Material Adverse Effect;
  (iii)
              the
      occurrence of any event of default under the MOA or the Shipbuilding
      Contract; and
  (iv)
              any
      other development that results in, or could reasonably be expected to
      result in, a Material Adverse
Effect.
  Each
notice delivered under this Section shall be accompanied by a statement of a
Financial Officer or other executive officer of the relevant Security Party
setting forth the details of the event or development requiring such notice and
any action taken or proposed to be taken with respect thereto.
 
 (e) Existence; Conduct of
Business. (other than the Guarantor) do or cause to be done all things
necessary to preserve, renew and keep in full force and effect its legal
existence and the rights, licenses, permits, privileges and franchises material
to the conduct of its business; provided that the foregoing shall not prohibit
any merger, consolidation, liquidation or dissolution permitted under Section
7.2(c);
 
 (f) Existence of
Guarantor. the Guarantor will do or cause to be done all things necessary
to preserve, renew and keep in full force and effect its legal existence,
including its listing on the American Stock Exchange, and the rights, licenses,
permits, privileges and
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  franchises
material to the conduct of its business; provided that the foregoing shall not
prohibit any merger, consolidation, liquidation or dissolution permitted under
Section 7.2(c);
 
 (g)  Payment of
Obligations. pay its obligations, including Tax liabilities, that, if not
paid, could result in a Material Adverse Effect before the same shall become
delinquent or in default, except where (a) the validity or amount thereof is
being contested in good faith by appropriate proceedings, (b) such Account Party
has set aside on its books adequate reserves with respect thereto in accordance
with GAAP and (c) the failure to make payment pending such contest could not
reasonably be expected to result in a Material Adverse Effect;
 
 (h)  Books and Records;
Inspection Rights. keep proper books of record and account in which full,
true and correct entries are generally made of all dealings and transactions in
relation to its business and activities; permit any representatives designated
by the L/C Provider, upon reasonable prior notice, to visit and inspect its
properties, to examine and make extracts from its books and records, and to
discuss its affairs, finances and condition with its officers and independent
accountants, all at such reasonable times and as often as reasonably requested,
but not to unreasonably interfere with the conduct of the its
business;
 
 (i)  Compliance with Laws.
comply with all laws, rules, regulations and orders of any Governmental
Authority applicable to it or its property, except where the failure to do so,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect;
 
 (j)  Vessel. cause the
Vessel to be constructed in accordance with the MOA and the Shipbuilding
Contract heretofore submitted to the L/C Provider, subject to such changes and
change orders that may be agreed to between the Account Party, the Seller and
the Beneficiary;
  (k)  Maintenance of
Office. maintain its principal place of business at Palm Grove House,
Road Town, Tortola, British Virgin Islands with respect to the Account Party and
at 3'dFloor Par La Ville Place, 14 Par La Ville Road, Hamilton HM 11, Bermuda
with respect to the Guarantor or at such other place as such Security Party
shall designate upon written notice to the L/C Provider, where notices,
presentations and demands to or upon such Security Party in respect of the
Transaction Documents may be given or made;
 
 (1) Maintenance of Property;
Insurance. keep all property useful and necessary in its business in good
working order and condition; and maintain fire and other risk insurance, public
liability insurance, and such other insurance as the L/C Provider may reasonably
require with respect to such Security Party's properties and operations, in
form, amounts (including limits on the amount of any deductibles), coverages and
with insurance companies reasonably acceptable to the L/C Provider.
 
 (m) Insurance Reports.
furnish to the L/C Provider, upon request of the L/C Provider, reports on each
existing insurance policy showing such information as the L/C Provider may
reasonably request, including without limitation the following: (a) the name of
the insurer; (b) the risks insured; (c) the amount of the policy; (d) the
properties insured; (e) the then current property values on the basis of which
insurance has been obtained, and the manner of determining those values; and (f)
the expiration date of the policy; in addition, upon request of the L/C
Provider, the Account Party will have an independent appraiser satisfactory to
the L/C Provider determine, as applicable, the actual cash value or replacement
cost of the Vessel;
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  (n)  Operations.
substantially maintain its present executive and management personnel and
conduct its business affairs in a reasonable and prudent manner and in
accordance with sound business practices of similarly situated
companies;
 
 (o)  Approvals. give all
such notices to, and take all such other actions with respect to, such
Governmental Authority as may be required in order to comply with all applicable
Requirements of Law in the use and operation of the Vessel, except where the
failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect;
 
 (p)  Environmental
Matters. promptly upon the occurrence of any of the following conditions,
provide to the L/C Provider a statement of an officer thereof having actual
knowledge of any such condition, specifying in detail the nature of such
condition and its proposed response or the response of its Environmental
Affiliates: (a) the receipt by any Security Party or any Environmental
Affiliates of such Security Party of any written communication whatsoever that
alleges that such person is not in compliance with any applicable Environmental
Law or Environmental Approval, if such noncompliance could reasonably be
expected to have a Material Adverse Effect, (b) knowledge by it that there
exists any Environmental Claim pending or threatened against any Security Party
or any Environmental Affiliate thereof, which could reasonably be expected to
have a Material Adverse Effect, or (c) any release, emission, discharge or
disposal of any material that could form the basis of any Environmental Claim
against a Security Party or any Environmental Affiliate thereof, if such
Environmental Claim could reasonably be expected to have a Material Adverse
Effect; and upon the written request by the L/C Provider, it will submit to the
L/C Provider at reasonable intervals, a report providing an update of the status
of any issue or claim identified in any notice or certificate required pursuant
to this subsection;
 
 (q)  Compliance with the MOA and
the Shipbuilding Contract. comply in all material respects with the
provisions of the MOA and the Shipbuilding Contract (to the extent not
inconsistent with this Agreement or any other Transaction Document);
and
 
 (r)  Use of Letter of
Credit. use the Letter of Credit only to support the financing of the
construction of the Vessel.
 
 7.2 Negative Covenants.
The Account Party covenants and undertakes with the L/C Provider that, from the
date hereof and until this Agreement and all obligations hereunder and under any
Security Document have been terminated by the parties, that the Account Party
shall not:
 
 (a)  Indebtedness. create,
incur, assume or permit to exist any Indebtedness, except the obligations of the
Account Party under this Agreement and the Transaction Documents;
 
 (b)  Liens. create, incur,
assume or permit to exist any Lien on any collateral the subject of the Security
Documents (or as set forth in Section 7.2(h) with respect to its other assets
and properties), except Permitted Encumbrances;
 
 (c)  Fundamental Changes;
Acquisitions.
 
 (i),
      and shall procure that no other Security Party shall, unless the
      L/C
 Provider
      has consented thereto in writing, merge into or consolidate
      with
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  any other
Person, or permit any other Person to merge into or consolidate with it, or
sell, transfer, lease or otherwise dispose of (in one transaction or in a series
of transactions) any substantial part of its assets (whether now owned or
hereafter acquired), or recapitalize or liquidate or dissolve;
  (ii)
              ,
      and shall procure that no other Security Party shall, engage to any
      material extent in any business other than businesses of the type
      conducted by it on the date of execution of this Agreement and businesses
      reasonably related thereto;
 
 (iii)  make any
Acquisition;
 
 (iv)
              ,
      and shall procure that no other Security Party shall, change its principal
      place of business or its company name unless it shall have (a) given the
      L/C Provider at least thirty (30) days' advance written notice of such
      change, and (b) filed in all necessary jurisdictions such documents as may
      be necessary to continue without impairment or interruption the perfection
      and priority of the liens on the collateral in favor of the L/C Provider
      pursuant to the Security Documents;
and
  (v)
              ,
      and shall procure that no other Security Party shall, change its fiscal
      year from that set forth in Section 3.1(i) hereof.,
  (d)  [Intentionally
deleted.]
 
 (e)  Capital Expenditures.
make any investment or material capital expenditures;
  (f)  Transactions with
Affiliates. sell, lease or otherwise transfer any property or assets to,
or purchase, lease or otherwise acquire any property or assets from, or
otherwise engage in any other transactions with, any of its Affiliates, except
in the ordinary course of business at prices and on terms and conditions not
less favorable to the Account Party than could be obtained on an arm's-length
basis from unrelated third parties;
  (g)  Negative Pledge.
create, incur, assume or permit to exist any Lien on any of its assets or
properties other than those permitted in Section 7.2(b) hereof;
 
 (h)  Limitation on Sale of
Assets. other than in the ordinary course of business, without the prior
written consent of the L/C Provider, sell, lease, assign, transfer or otherwise
dispose of, or give options to purchase (a) any stock or other equity interests
in the Account Party or (b) any of its other assets (including, without
limitation, receivables and leasehold interests but excluding obsolete or worn
out property) whether now owned or hereafter acquired, and whether or not leased
back;
 
 (i)  Sale and Leaseback.
enter into any agreement, directly or indirectly, for the sale or transfer of
any of its property now owned, or hereafter acquired;
 
 7.3Financial Covenants.
The Guarantor hereby covenants and undertakes with the L/C
 Provider
that, from the date hereof and until this Agreement and all obligations
hereunder and
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  under any
Security Document have been terminated by the parties, it will, as measured at
the end of each calendar quarter,:
 
 (a)  Minimum Working
Capital. ensure that its current assets exceed its current liabilities
(excluding the portion of long term debt), all as determined in accordance with
GAAP;
 
 (b)  Minimum Value Adjusted
Equity Ratio. maintain a minimum Value Adjusted Equity Ratio of at least
thirty percent (30%);
 
 (c)  Minimum Value Adjusted
Equity. maintain a minimum Value Adjusted Equity of $50,000,000;
and
 
 (d)  Cash and Cash
Equivalents. ensure that it has Cash and Cash Equivalents equal to the
greater of (i) $15,000,000 or (ii) six percent (6%) of its long term
debt;
 
 7.4
Guarantor Dividend
Restriction. The Guarantor hereby covenants and undertakes with the L/C
Provider that, from the date hereof and until this Agreement and all obligations
hereunder and under any Security Document have been terminated by the parties,
it will not declare or make, or agree to pay or make, directly or indirectly,
any dividends or distributions totaling over US$15,000,000 per calendar year,
provided
further that the Guarantor shall not declare or make, or agree to pay or make,
directly or indirectly, any dividends or distributions unless (i) no Default or
Event of Default has occurred and is continuing and (ii) the payment of such
dividends or distributions would not result in a Default or Event of
Default.
  8.            CURRENCY
INDEMNITY
 
 8.1
Currency
Conversion. If for the purpose of obtaining or enforcing a judgment in
any court in any country it becomes necessary to convert into any other currency
(the "judgment currency") an amount due in Dollars under this Agreement or any
of the Security Documents then the conversion shall be made, in the discretion
of the L/C Provider, at the rate of exchange prevailing either on the date of
default or on the day before the day on which the judgment is given or the order
for enforcement is made, as the case may be (the "conversion date"), provided
that the L/C Provider shall not be entitled to recover under this clause any
amount in the judgment currency which exceeds at the conversion date the amount
in Dollars due under this Agreement and/or any of the Security
Documents.
 
 8.2
Change in Exchange
Rate. If there is a change in the rate of exchange prevailing between the
conversion date and the date of actual payment of the amount due, the Account
Party shall pay such additional amounts (if any, but in any event not a lesser
amount) as may be necessary to ensure that the amount paid in the judgment
currency when converted at the rate of exchange prevailing on the date of
payment will produce the amount then due under this Agreement and/or any of the
Security Documents in Dollars; any excess over the amount due received or
collected by the L/C Provider shall be remitted to the Account
Party.
 
 8.3
Additional Debt
Due. Any amount due from the Account Party under Section 8.2 shall be due
as a separate debt and shall not be affected by judgment being obtained for any
other sums due under or in respect of this Agreement and/or any other
Transaction Document.
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  8.4
Rate of
Exchange. The term "rate of exchange" in this Section 8 means the rate at
which the L/C Provider in accordance with its normal practices is able on the
relevant date to purchase Dollars with the judgment currency and includes any
premium and costs of exchange payable in connection with such
purchase.
 
 9.  EXPENSES
 
 9.1
Expenses. The
Account Party agrees, whether or not the transactions hereby contemplated are
consummated, on demand to pay, or reimburse the L/C Provider for its payment of,
the reasonable expenses of the L/C Provider incident to said transactions (and
in connection with any supplements, amendments, waivers or consents relating
thereto or incurred in connection with the enforcement or defense of the L/C
Provider's rights or remedies with respect thereto or in the preservation of the
L/C Provider's priorities under the documentation executed and delivered in
connection therewith) including, without limitation, all reasonable costs and
expenses of preparation, negotiation, execution and administration of this
Agreement and the documents referred to herein, the reasonable fees and
disbursements of the L/C Provider's counsel in connection therewith as well as
the reasonable fees and expenses of any independent appraisers, surveyors,
engineers and other consultants retained by the L/C Provider in connection with
this transaction, all costs and expenses, if any, in connection with the
enforcement of this Agreement and the Security Documents and stamp and other
similar taxes, if any, incident to the execution and delivery of the documents
herein contemplated and to hold the L/C Provider free and harmless in connection
with any liability arising from the nonpayment of any such stamp or other
similar taxes. Such taxes and, if any, interest and penalties related thereto as
may become payable after the date here of shall be paid immediately by the
Account Party to the L/C Provider, as the case may be, when liability therefor
is no longer contested by such party or parties or reimbursed immediately by the
Account Party to such party or parties after payment thereof (if the L/C
Provider, at its sole discretion, chooses to make such payment).
 10.  INDEMNIFICATION.
  10.1
Indemnification. The
Account Party and, by its execution and delivery of the Consent and Agreement
set forth below, the Guarantor jointly and severally agree to indemnify the L/C
Provider, its respective successors and assigns, and its respective officers,
directors, employees, representatives and agents (each an "Indemnitee") from,
and hold each of them harmless against, any and all losses, liabilities, claims,
damages, expenses, obligations, penalties, actions, judgments, suits, costs or
disbursements of any kind or nature whatsoever (including, without limitation,
the fees and disbursements of counsel for such Indemnitee in connection with any
investigative, administrative or judicial proceeding commenced or threatened,
whether or not such Indemnitee shall be designated a party thereto) that may at
any time (including, without limitation, at any time following the payment of
the obligations of the Account Party hereunder) be imposed on, asserted against
or incurred by, any Indemnitee as a result of, or arising out of or in any way
related to or by reason of, (a) any violation by any Security Party (or the
Seller or the Beneficiary with respect to the construction of the Vessel) of any
applicable Environmental Law, (b) any Environmental Claim arising out of the
management, use, control, ownership or operation of property or assets by any
Security Party (or, after foreclosure, by the L/C Provider or any of its
respective successors or assigns), (c) the breach of any representation,
warranty or covenant set forth in Sections 3.1(u) or 7.1(p), (d) the Letter of
Credit (including the use of the proceeds of the Letter of Credit and any claim
made for any brokerage commission, fee or
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  compensation
from any Person), of (e) the execution, delivery, performance or non-performance
of any Transaction Document, or any of the documents referred to herein or
contemplated hereby (whether or not the Indemnitee is a party thereto). If and
to the extent that the obligations of the Security Parties under this Section
are unenforceable for any reason, the Account Party and, by its execution and
delivery of the Consent and Agreement set forth below, the Guarantor jointly and
severally agree to make the maximum contribution to the payment and satisfaction
of such obligations which is permissible under applicable law. The obligations
of the Security Parties under this Section 10.1 shall survive the termination of
this Agreement and the repayment to the L/C Provider of all amounts owing
thereto under or in connection herewith.
 11. MISCELLANEOUS.
  11.1
Time of
Essence. Time is of the essence of this Agreement but no failure or delay
on the part of the L/C Provider to exercise any power or right under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise by the L/C Provider of any power or right hereunder preclude any other
or further exercise thereof or the exercise of any other power or right. The
remedies provided herein are cumulative and are not exclusive of any remedies
provided by law.
  11.2
Prior Agreements,
Merger. Any and all prior understandings and agreements heretofore
entered into between the Security Parties on the one part, and the L/C Provider,
on the other part, whether written or oral are superseded by and merged into
this Agreement and the other Transaction Documents and agreements (the forms of
which are exhibited hereto) to be executed and delivered in connection herewith
to which the Security Parties and/or the L/C Provider are parties, which alone
fully and completely express the agreements between the Security Parties and the
L/C Provider.
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  11.3
USA Patriot Act
Notice; OFAC and Bank Secrecy Act.
  (a)  The L/C
Provider hereby notifies the Security Parties that, pursuant to the requirements
of the USA Patriot Act (the "PatriotAct"), it is
required to obtain, verify and record information that identifies such party,
which information includes the name and address of such party and other
information that will allow the L/C Provider to identify such party in
accordance with the Patriot Act. Upon the L/C Provider's request, each Security
Party shall furnish such information as the L/C Provider may reasonably require
to comply with any anti-money laundering requirements of any governmental
authority applicable to the L/C Provider, including the German Act on the
Improvement of the Suppression of Money Laundering and Combating the Financing
of Terrorism of August 8, 2002 (Gesetz fiber das Aufspiiren von Gewinnen aus
schweren Straftaten (Geldwaschegesetz) (the "German Anti-Money
LaunderingAct"). Without limiting the foregoing, upon request, each
Security Party shall furnish to the L/C Provider (i) the name, date of birth,
nationality, social security number or similar number and address of each
individual who directly or indirectly holds an ownership interest of ten percent
(10%) or more in such Security Party and of each individual who acts on behalf
of such Security Party (including as an officer, director, trustee, manager,
member, agent or otherwise) with respect to this Agreement or any transaction
contemplated hereby, (ii) a copy of such individual's valid driver's license or
passport and (iii) with respect to any other person that directly or indirectly
holds ten percent (10%) or more of the ownership interests in such Security
Party, the name, address, state of formation, taxpayer/employer identification
or similar identification number and registered agent for service of process of
such person together with a copy of its certificate of organization, formation
or incorporation, as applicable.
  (b)  The
Account Party confirms that it is the beneficiary (within the meaning of Section
8 of the German Anti-Money Laundering Act) for the credit made available to it
by the L/C Provider issuing a Letter of Credit to a beneficiary. It will
promptly inform the L/C Provider (by written notice) if it is not, or ceases to
be, the beneficiary and will then set down in writing the name and the address
of the beneficiary.
  (c)  Neither
the Account Party nor, to the best of the Account Party's knowledge (after due
inquiry and investigation), any persons or entities holding any legal or
beneficial interest whatsoever in the Account Party (whether directly or
indirectly), (a) are named on any list of persons, entities, and governments
issued by the Office of Foreign Assets Control of the United States Department
of the Treasury ("OFAC") pursuant to Executive Order 13224 - Blocking Property
and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or
Support Terrorism, as in effect on the date hereof, or any similar list issued
by OFAC or any other department or agency of the United States of America
(collectively, the "OFAC Lists"); (b)
are included in, owned by, controlled by, acting for or on behalf of, providing
assistance, support, sponsorship, or services of any kind to, or otherwise
associated with any of the persons or entities referred to or described in the
OFAC Lists; or (c) have conducted business with or engaged in any transaction
with any person or entity named on any of the OFAC Lists or any person or entity
included in, owned by, controlled by, acting for or on behalf of, providing
assistance, support, sponsorship, or services of any kind to, or otherwise
associated with any of the persons or entities referred to or described in the
OFAC Lists.
  (d)  Each
Security Party hereby covenants and agrees that such Security Party, its
affiliates and subsidiaries, and any persons or entities holding any legal or
beneficial interest
  (a)
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  whatsoever
therein (whether directly or indirectly), will not knowingly conduct business
with or engage in any transaction with any person or entity named on any of the
OFAC Lists or any person or entity included in, owned by, controlled by, acting
for or on behalf of, providing assistance, support, sponsorship, or services of
any kind to, or otherwise associated with any of the persons or entities
referred to or described in the OFAC Lists.
  (e)  Each
Security Party hereby covenants and agrees that it will comply at all times with
the requirements of all Anti-Terrorism Laws. As used herein, "Anti-Terrorism Laws"
means any laws relating to terrorism or money laundering, including Executive
Order 13224; the International Emergency Economic Powers Act, 50 U.S.C. Sections
1701-06; the United and Strengthening America by Providing Appropriate Tools
Required to Intercept and Obstruct Terrorism Act of 2001, Pub. L. 107-56 (a/k/a
the USA Patriot Act); the Iraqi Sanctions Act, Pub. L. 101-513, 104 Stat.
2047-55; the United Nations Participation Act, 22 U.S.C. Section 287c; the
Antiterrorism and Effective Death Penalty Act, (enacting 8 U.S.C. Section 219,
18 U.S.C. Section 2332d, and 18 U.S.C. Section 2339b); the International
Security and Development Cooperation Act, 22 U.S.C. Section 2349 as-9; the
Terrorism Sanctions Regulations, 31 C.F.R. Part 595; the Terrorism List
Governments Sanctions Regulations, 31 C.F.R. Part 596; and the Foreign Terrorist
Organizations Sanctions Regulations, 31 C.F.R. Part 597 and any similar laws or
regulations currently in force or hereafter enacted.
  (f)  Each
Security Party hereby covenants and agrees that if such Security Party obtains
actual knowledge or receives any written notice that any Security Party, any
affiliate, subsidiary or any person or entity holding any legal or beneficial
interest whatsoever therein (whether directly or indirectly), is named on any of
the OFAC Lists (such occurrence, an "OFAC Violation"), such
Security Party will immediately (i) give written notice to the L/C Provider of
such OFAC Violation, and (ii) comply with all applicable laws with respect to
such OFAC Violation (regardless of whether the party included on any of the OFAC
Lists is located within the jurisdiction of the United States of America),
including the Anti-Terrorism Laws, and Account Party hereby authorizes and
consents to the L/C Provider's taking any and all the L/C Provider deems
necessary, in its sole discretion, to comply with all applicable laws with
respect to any such OFAC Violation, including the requirements of the
Anti-Terrorism Laws (including the "freezing" and/or "blocking" of
assets).
  (g)  Upon the
L/C Provider's request from time to time during the term of this Agreement, each
Security Party agrees to deliver a certification confirming its compliance with
the covenants set forth in this Section 11.3.
  11.4
Further
Assurances. Each Security Party agrees that if this Agreement or any
Transaction Document shall, in the reasonable opinion of the L/C Provider, at
any time be deemed by the L/C Provider for any reason insufficient in whole or
in part to carry out the true intent and spirit hereof or thereof, it shall
execute or cause to be executed such other documents or deliver or cause to be
delivered such further assurances as in the opinion of the L/C Provider may be
required in order to more effectively accomplish the purposes of this Agreement
or any other Transaction Document.
  11.5
Remedies Cumulative
and Not Exclusive; No Waiver. Each and every right, power and remedy
herein given to the L/C Provider shall be cumulative and shall be in addition to
every other right, power and remedy of the L/C Provider now or hereafter
existing at law, in equity or
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  by
statute, and each and every right, power and remedy, whether herein given or
otherwise existing, may be exercised from time to time, in whole or in part, and
as often and in such order as may be deemed expedient by the L/C Provider, and
the exercise or the beginning of the exercise of any right, power or remedy
shall not be construed to be a waiver of the right to exercise at the same time
or thereafter any other right, power or remedy. No failure, delay or omission by
the L/C Provider in the exercise of any right or power or in the pursuance of
any remedy accruing upon any breach or default by any Security Party shall
impair any such right, power or remedy or be construed to be a waiver of any
such right, power or remedy or to be an acquiescence therein; nor shall the
acceptance by the L/C Provider of any security or of any payment of or on
account of any of the amounts due from any Security Party to the L/C Provider
and maturing after any breach or default or of any payment on account of any
past breach or default be construed to be a waiver of any right with respect to
any future breach or default or of any past breach or default not completely
cured thereby. In addition to the rights and remedies granted to it in this
Agreement and in any other instrument or agreement securing, evidencing or
relating to any of the Security Parties' obligations hereunder, the L/C Provider
shall have rights and remedies of a secured party under the UCC.
  11.6
Successors and
Assigns. This Agreement and all obligations of the each Security Party
hereunder shall be binding upon the successors and assigns of each such Security
Party and shall, together with the rights and remedies of the L/C Provider
hereunder, inure to the benefit of the L/C Provider, its respective successors
and assigns.
  11.7
Waiver;
Amendment. None of the terms and conditions of this Agreement may be
changed, waived, modified or varied in any manner whatsoever unless in writing
duly signed by the Account Party and the L/C Provider.
  11.8
Invalidity. If
any provision of this Agreement shall at any time, for any reason, be declared
invalid, void or otherwise inoperative by a court of competent jurisdiction,
such declaration or decision shall not affect the validity of any other
provision or provisions of this Agreement, or the validity of this Agreement as
a whole and, to the fullest extent permitted by law, the other provisions hereof
shall remain in full force and effect in such jurisdiction and shall be
liberally construed in favor of the L/C Provider in order to carry out the
intentions of the parties hereto as nearly as may be possible. The invalidity
and unenforceability of any provision hereof in any jurisdiction shall not
affect the validity or enforceability of such provision in any other
jurisdiction.
 
 11.9
Notices. All
notices, requests, demands and other communications to any party hereunder shall
be in writing (including prepaid overnight courier, facsimile transmission,
electronic transmission or similar writing) and shall be given to the Account
Party, the Guarantor or the L/C Provider at the address, facsimile number or
email address of each set forth below or at such other address, facsimile number
or email address as such party may hereafter specify for the purpose by notice
to each other party hereto. Any notice sent by facsimile or electronic
transmission shall be confirmed by letter dispatched as soon as practicable
thereafter.
  SK 162790020
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  If to the
Account Party:
 STRAITS
OFFSHORE LTD.
 Palm
Grove House
 Road
Town
 Tortola,
British Virgin Islands
 Facsimile
No.: +1 441 295 6796 Telephone No.: +1 441 295 6875 Email:
dpaterson@consolidated.bm Attention: Mrs. Deborah L.
Paterson
 
 If to the
L/C Provider:
 HSH
NORDBANK AG, NEW YORK BRANCH 230 Park Avenue
 New York,
New York 10169
 Facsimile
No.: +1 212 407 6008
 Telephone
No.: +1 212 407-6160
 Email:
steffen.gerjets@hsh-nordbank.com Attention: Steffen Gerjets
 
 
 Every
notice or other communication shall, except so far as otherwise expressly
provided by this Agreement, be deemed to have been received (provided that it is
received prior to 2 p.m. local time; otherwise it shall be deemed to have been
received on the next following Banking Day) (i) if given by facsimile or
electronic transmission, on the date of dispatch thereof (provided further that
if the date of dispatch is not a Banking Day in the locality of the party to
whom such notice or demand is sent, it shall be deemed to have been received on
the next following Banking Day in such locality) or (ii) if given by mail,
prepaid overnight courier or any other means, when received at the address
specified in this Section or when delivery at such address is
refused.
  11.10
Counterparts;
Electronic Delivery. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all such
counterparts together shall constitute one and the same instrument. Delivery of
an executed counterpart of this Agreement by facsimile or electronic
transmission shall be deemed as effective as delivery of an originally executed
counterpart. In the event that any Security Party delivers an executed
counterpart of this Agreement by facsimile or electronic transmission, such
Security Party shall also deliver an originally executed counterpart as soon as
practicable, but the failure of such Security Party to deliver an originally
executed counterpart of this Agreement shall not affect the validity or
effectiveness of this Agreement.
 
 11.11
References.
References herein to Clauses, Sections, Exhibits and Schedules are to be
construed as references to sections of, exhibits to, and schedules to, this
Agreement, unless the context otherwise requires.
 
 11.12
Headings. In
this Agreement, Section headings are inserted for convenience of reference only
and shall not be taken into account in the interpretation of this
Agreement.
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  12. APPLICABLE LAW, JURISDICTION
AND WAIVER
 
 12.1
Applicable Law.
This Agreement shall be governed by and construed in accordance with the laws of
the State of New York without regard to principles of conflicts of laws thereof
other than Sections 5-1401 and 5-1402 of the General Obligations Law of the
State of New York.
 
 12.2
Jurisdiction.
The Account Party and, by its execution and delivery of the Consent and
Agreement set forth below, the Guarantor hereby irrevocably submits to the
jurisdiction of the courts of the State of New York and of the United States
District Court for the Southern District of New York in any action or proceeding
brought against it by the L/C Provider under this Agreement or under any
document delivered hereunder. The Account Party and, by its execution and
delivery of the Consent and Agreement set forth below, the Guarantor hereby
irrevocably appoints CT Corporation System, with a place of business at 111
Eighth Avenue, New York, NY 10011, its attorney-in-fact and agent for service of
summons or other legal process thereon, which service may be made by serving a
copy of any summons or other legal process in any such action or proceeding on
such agent and such agent is hereby authorized and directed to accept by and on
behalf of the relevant Security Party service of summons and other legal process
in any such action or proceeding against it. The service, as herein provided, of
such summons or other legal process in any such action or proceeding shall be
deemed personal service and accepted by the relevant Security Party as such, and
shall be legal and binding upon the relevant Security Party for all the purposes
of any such action or proceeding. Final judgment (a certified or exemplified
copy of which shall be conclusive evidence of the fact and of the amount of any
indebtedness of the Account Party to the L/C Provider) against any Security
Party in any such legal action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment. Each Security Party
will advise the L/C Provider promptly of any change of address for the purpose
of service of process. Notwithstanding anything herein to the contrary, the L/C
Provider may bring any legal action or proceeding in any other appropriate
jurisdiction.
  12.3
WAIVER OF
IMMUNITY. TO THE EXTENT THAT THE ACCOUNT PARTY OR THE GUARANTOR HAS OR
HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM SUIT, JURISDICTION OF ANY COURT OR ANY
LEGAL PROCESS (WHETHER THROUGH ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID
OF EXECUTION, EXECUTION OF A JUDGMENT, OR FROM ANY OTHER LEGAL PROCESS OR
REMEDY) WITH RESPECT TO ITSELF OR ITS PROPERTY, EACH OF THE ACCOUNT PARTY AND
THE GUARANTOR HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS
OBLIGATIONS UNDER THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT.
 
 12.4
WAIVER OF JURY
TRIAL. IT IS MUTUALLY AGREED BY AND AMONG THE ACCOUNT PARTY, THE
GUARANTOR AND THE L/C PROVIDER THAT EACH OF THEM HEREBY WAIVES TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY PARTY HERETO AGAINST ANY
OTHER PARTY HERETO ON ANY MATTER WHATSOEVER ARISING OUT OF OR IN ANY WAY
CONNECTED WITH THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT.
  [Signature
Page follows.]
  39
  SK 162790020
      900329 v6
  IN
WITNESS whereof the parties hereto have caused this Agreement to be duly
executed by their duly authorized representatives as of the day and year first
above written.
  STRAITS
OFFSHORE LTD., as Amt Party
   By:*                          .*.*,-`                          
Name:
 
 ast
 Title:                     Parlwa
 Aflomeym4n-Fact
  HSH
NORDBANK AG, NEW YORK BRANCH, as L/C Provider
  By:
              Name:
 Title:
  By:
              Name:
 Title:
   Agreement
  By:
                Name:
      Title:
 IN
WITNESS whereof the parties hereto have caused this Agreement to be duly
executed by their duly authorized representatives as of the day and year first
above written.
  STRAITS
OFFSHORE LTD., as Account Party
 
 
 By:             Name:
 Title:
 
 
 HSH
NORDBANK AG, NEW YORK BRANCH, as L/C Provider
  By:
  Name:                                              Cornelia
Kirstein
 Title:                                              Senior Vice
President
 HSHNordbank AG. NewYork ilranCh
 Steffen
Goleta
 Vice
President
 HSH
Nordbank AG. New York Branch
  Agreement
  
  CONSENT AND
AGREEMENT
  The
undersigned, referred to in the foregoing Letter of Credit Facility Agreement
(the "Agreement") as the "Guarantor", hereby consents and agrees to said
Agreement and to the documents contemplated thereby and to the provisions
contained therein relating to conditions to be fulfilled and obligations to be
performed by the undersigned pursuant to or in connection with said Agreement
and agrees particularly to be bound by the representations, warranties and
covenants relating to the undersigned contained in Sections 3 and 7 (including,
without limitation, Section 7.3 and Section 7.4) of said Agreement to the same
extent as if the undersigned were a party to said Agreement.
  B+H OCEAN
CARRIERS LTD.
 By
 C-D
 Name:
 Title:Parker
      S. Wise
  Attomey-in-Faci
   Agreement