Exhibit 10.1


 


Date 18
December 2006


 


PARAGON SHIPPING INC.

as
Borrower


 


- and -


 


THE BANKS AND FINANCIAL INSTITUTIONS

listed in Schedule 1

as
Lenders


 


- and -


 


HSH NORDBANK AG

as
Agent and as Security Trustee


 


- and -


 


HSH NORDBANK AG

as
Swap Bank


 


- and -


 


HSH NORDBANK AG

as
Lead Arranger, Bookrunner and Underwriter


 










 


AMENDED
AND RESTATED

LOAN AGREEMENT










 


relating
to a secured revolving credit facility of

up to US$108,250,000 to be secured on

m.vs “BLUE SEAS”, “CALM SEAS”, “CLEAN SEAS”,

“CRYSTAL SEAS”, “DEEP SEAS” and “KIND SEAS”


 


WATSON FARLEY & WILLIAMS

Piraeus


 





















 


INDEX


 


	
  Clause

  	
   

  	
   

  	
   

  	
  Page

  
	
  1

  	
   

  	
  INTERPRETATION

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2

  	
   

  	
  FACILITY

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3

  	
   

  	
  POSITION OF THE LENDERS, THE SWAP BANK AND THE
  MAJORITY LENDERS

  	
   

  	
  18

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4

  	
   

  	
  DRAWDOWN

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5

  	
   

  	
  INTEREST

  	
   

  	
  20

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6

  	
   

  	
  INTEREST PERIODS

  	
   

  	
  22

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7

  	
   

  	
  DEFAULT INTEREST

  	
   

  	
  22

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8

  	
   

  	
  REPAYMENT AND PREPAYMENT

  	
   

  	
  23

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9

  	
   

  	
  CONDITIONS PRECEDENT

  	
   

  	
  25

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10

  	
   

  	
  REPRESENTATIONS AND WARRANTIES

  	
   

  	
  26

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11

  	
   

  	
  GENERAL UNDERTAKINGS

  	
   

  	
  28

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  12

  	
   

  	
  CORPORATE UNDERTAKINGS

  	
   

  	
  31

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  13

  	
   

  	
  INSURANCE

  	
   

  	
  34

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  14

  	
   

  	
  SHIP COVENANTS

  	
   

  	
  39

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  15

  	
   

  	
  SECURITY COVER

  	
   

  	
  43

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  16

  	
   

  	
  PAYMENTS AND CALCULATIONS

  	
   

  	
  44

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  17

  	
   

  	
  APPLICATION OF RECEIPTS

  	
   

  	
  46

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  18

  	
   

  	
  APPLICATION OF EARNINGS

  	
   

  	
  47

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  19

  	
   

  	
  EVENTS OF DEFAULT

  	
   

  	
  49

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  20

  	
   

  	
  FEES AND EXPENSES

  	
   

  	
  53

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  21

  	
   

  	
  INDEMNITIES

  	
   

  	
  54

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  22

  	
   

  	
  NO SET-OFF OR TAX DEDUCTION

  	
   

  	
  56

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  23

  	
   

  	
  ILLEGALITY, ETC

  	
   

  	
  56

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  24

  	
   

  	
  INCREASED COSTS

  	
   

  	
  57

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  25

  	
   

  	
  SET-OFF

  	
   

  	
  58

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  26

  	
   

  	
  TRANSFERS AND CHANGES IN LENDING OFFICES

  	
   

  	
  59

  



 

















 


	
  27

  	
   

  	
  VARIATIONS AND WAIVERS

  	
   

  	
  61

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  28

  	
   

  	
  NOTICES

  	
   

  	
  62

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  29

  	
   

  	
  SUPPLEMENTAL

  	
   

  	
  64

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  30

  	
   

  	
  LAW AND JURISDICTION

  	
   

  	
  64

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SCHEDULE 1 LENDERS AND COMMITMENTS

  	
   

  	
  66

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 2 DETAILS OF SHIPS AND OWNERS

  	
   

  	
  67

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 3 DRAWDOWN NOTICE

  	
   

  	
  69

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 4 CONDITION PRECEDENT DOCUMENTS

  	
   

  	
  70

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 5 TRANSFER CERTIFICATE

  	
   

  	
  73

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 6 DESIGNATION NOTICE

  	
   

  	
  77

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 7 FORM OF COMPLIANCE CERTIFICATE

  	
   

  	
  78

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 8 MANDATORY COST FORMULA

  	
   

  	
  79

  
	
   

  	
   

  	
   

  
	
  EXECUTION PAGE

  	
   

  	
  82

  



 

















 


THIS
LOAN AGREEMENT originally made on 18 December 2006 and as
amended and restated by an Amending and Restating Agreement (as defined below)
is made


 


BETWEEN:


 


(1)       PARAGON SHIPPING INC. a corporation incorporated in the
Marshall Islands whose registered office is at Trust Company Complex, Ajeltake
Road, Ajeltake Island, Majuro, The Marshall Islands MH 96960 as Borrower;


 


(2)       THE BANKS AND FINANCIAL
INSTITUTIONS listed in Schedule 1, as Lenders;


 


(3)       HSH NORDBANK AG acting through its office at
Gerhart-Hauptmann-Platz 50, D-20095, Hamburg, Germany, as Agent;


 


(4)       HSH NORDBANK AG acting through its office at
Gerhart-Hauptmann-Platz 50, D-20095, Hamburg, Germany, as Security Trustee;


 


(5)       HSH NORDBANK AG acting through its office
at Gerhart-Hauptmann-Platz 50, D-20095, Hamburg, Germany, as Swap Bank; and


 


(6)       HSH NORDBANK AG acting through its office
at Gerhart-Hauptmann-Platz 50, D-20095, Germany, as Lead Arranger, as Bookrunner
and as Underwriter.


 


WHEREAS


 


(A)      The Lenders have agreed to
make available to the Borrower a revolving credit facility in an amount of up
to the lesser of (a) US$108,250,000 and (b) 50 per cent. of the aggregate
Initial Market Value of the Ships to initially refinance certain existing
indebtedness secured on the Ships.


 


(B)      To the extent initially
borrowed for the purpose stated in Recital (A) and prepaid, the Borrower shall
be entitled to reborrow the prepaid amounts for general working capital
purposes.


 


(C)      The Swap Bank has agreed to
enter into interest rate swap transactions with the Borrower from time to time
to hedge the Borrower’s exposure under this Agreement to interest rate
fluctuations.


 


(D)      The Lenders and the Swap
Bank have agreed to share pari passu in the security to be granted to the
Security Trustee pursuant to this Agreement.


 


IT IS
AGREED as follows:


 


1         INTERPRETATION


 


1.1      Definitions. Subject to Clause 1.5, in this
Agreement:


 


“Advance”
means the principal amount of each borrowing by the Borrower
under this Agreement or, as the case may be, the principal amount of that
portion of each borrowing by the Borrower under this Agreement for which the
Borrower selects an Interest Period of a particular duration;


 


“Affected
Lender” has the meaning given in Clause 5.5;


 


“Agency
and Trust Deed” means the agency and trust deed dated 18
December 2006 and executed between the Borrower, the Lenders, the Swap Bank,
the Agent and the Security Trustee;


 

















 


“Agent” means
HSH Nordbank AG and any of its successors including, without limitation, any
successor appointed under clause 5 of the Agency and Trust Deed;


 


“Amending
and Restating Agreement” means the amending and restating
agreement dated      July 2007 and made between (i) the
Borrower, (ii) the Lenders, (iii) the Agent, (iv) the Security Trustee, (v) the
Swap Bank, (vi) the Lead Arranger, (vii) the Bookrunner and (viii) the
Underwriter setting out the terms and conditions upon which this Agreement has
been amended and restated;


 


“Applicable
Accounts” means, as at the date of calculation or, as the
case may be, in respect of an accounting period, the annual audited consolidated
accounts and financial statements of the Group or the quarterly unaudited
accounts and financial statements of the Group, in each case, which the
Borrower is obliged to deliver to the Agent pursuant to Clause 11.6;


 


“Approved
Broker” means each of H. Clarkson & Company Limited of
London, England, Barry Rogliano Salles S.A. of Paris, France, R.S. Platou
Shipbrokers A.S. of Oslo, Norway, P.F. Bassoe AS of Oslo, Norway, Arrow Sale
& Purchase (UK) Ltd. of London, England, Simpson Spence & Young of London,
England, Fearnley AS of Oslo, Norway, Maersk Shipbrokers of Copenhagen,
Denmark, Ingenieurburo Weselmann of Hamburg, Germany, Galbraith’s Limited of
London, England and E.A. Gibson Shipbrokers Ltd of London, England;


 


“Approved
Manager” means, in relation to each Ship, Allseas Marine S.A.
a corporation organised and existing under the laws of the Republic of Liberia,
having its registered office at 80 Broad Street, Monrovia, Liberia and
maintaining a ship management office at Voula Center, Vasileos Pavlou Avenue
102-104, 166 73 Voula, Greece or any other company which the Agent may, with
the authorisation of the Majority Lenders, approve from time to time as the
technical and/or commercial manager of a Ship;


 


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


 


(a)


 


(i)        in respect of the Initial
Advance, 30 September 2007 or such later date as the Agent may, with the
authorisation of all the Lenders, agree with the Borrower; and


 


(ii)       in respect of each subsequent
Advance, the date falling 1 month before the Final Maturity Date; or


 


(b)      if earlier, the date on
which the Total Commitments are cancelled or terminated;


 


“Borrower”
means Paragon Shipping Inc., a corporation incorporated in
the Marshall Islands and having its registered office at Trust Company Complex,
Ajeltake Road, Ajeltake Island, Majuro, The Marshall Islands MH 96960;


 


“Business
Day” means a day on which banks are open in London, Athens,
Hamburg and any other city in which a Lender is incorporated or maintains its
lending office and, in respect of a day on which a payment is required to be
made under a Finance Document, also in New York City;


 


“Charterparty
Assignment” means, in relation to each Ship, an assignment of
the rights of the Owner of that Ship under any Initial Charterparty and any
Future Charterparty executed or to be executed by the relevant Owner in favour
of the Security Trustee, in each case, in such form as the Lenders may approve
or require and, in the plural, means all of them;


 


2

















 


“Commitment”
means, in relation to a Lender, the amount set opposite its
name in the Schedule 1 or, as the case may require, the amount specified in the
relevant Transfer Certificate, as that amount may be reduced, cancelled or
terminated in accordance with this Agreement (and “Total Commitments” means the aggregate of the Commitments of
all the Lenders);


 


“Confirmation”
and “Early Termination Date”,
in relation to any continuing Designated Transaction, have the
meanings given in the Master Agreement;


 


“Compliance
Certificate” means a certificate in the form set out in
Schedule 7 (or in any other form which the Agent approves or reasonably
requires) to be provided at the times and in the manner set out in Clauses 12.5
and 12.10;


 


“Contractual
Currency” has the meaning given in Clause 21.5;


 


“Contribution”
means, in relation to a Lender, the part of the Loan which is
owing to that Lender;


 


“Creditor
Party” means the Agent, the Security Trustee, the Swap Bank or
any Lender, whether as at the date of this Agreement or at any later time;


 


“Deed of
Covenant” means, in relation to each Ship which is registered
on the Cayman Islands flag, a deed of covenant collateral to the Mortgage on
that Ship to be executed in favour of the Security Trustee by the Owner of the
relevant Ship in such form as the Lenders may approve or require and, in the
plural means all of them;


 


“Designated
Flag” means, in relation to each Ship, the flag specified
below its name in Schedule 2;


 


“Designated
Transaction” means a Transaction which fulfils the following
requirements:


 


(a)       it is entered into by the
Borrower pursuant to the Master Agreement with the Swap Bank which, at the time
the Transaction is entered into, is also a Lender;


 


(b)      its purpose is the hedging
of the Borrower’s exposure under this Agreement to fluctuations in LIBOR
arising from the funding of the Loan (or any part thereof) for a period
expiring no later than the Final Maturity Date; and


 


(c)       it is designated by the
Borrower, by delivery by the Borrower to the Agent of a notice of designation
in the form set out in Schedule 6, as a Designated Transaction for the purposes
of the Finance Documents;


 


“Dividend
Declaration Date” means, in respect of each quarterly period
during each Financial Year, a date (being a Business Day) falling no later than
60 days after the end of the relevant preceding financial quarter but in any
event not later than 10 days prior to any intended declaration by the Borrower
to its shareholders of any dividend;


 


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


 


“Drawdown
Date” means, in relation to an Advance, the date requested by
the Borrower for the Advance to be made, or (as the context requires) the date
on which the Advance is actually made;


 


“Drawdown
Notice” means a notice in the form set out in Schedule 3 (or
in any other form which the Agent approves or reasonably requires);


 


3

















 


“Earnings”
means, in relation to each Ship, all moneys whatsoever which
are now, or later become, payable (actually or contingently) to the Owner
thereof or the Security Trustee and which arise out of the use or operation of
that Ship, including (but not limited to):


 


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


 


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


 


(c)       if and whenever the Ship is
employed on terms whereby any moneys falling within paragraphs (a) or (b) above
are pooled or shared with any other person, that proportion of the net receipts
of the relevant pooling or sharing arrangement which is attributable to the
Ship;


 


“Earnings
Account” means, in relation to each Ship, an account in the
name of the Owner of that Ship, with the Agent in Hamburg designated “[name of
Ship] - Earnings Account”, or any other account (with that or another office of
the Agent) which is designated by the Agent as the Earnings Account for that
Ship for the purposes of this Agreement and, in the plural means all of them;


 


“Earnings
Account Pledge” means, in relation to the Earnings Accounts,
a pledge agreement creating security in favour of the Lenders in such form as
the Lenders may approve or require;


 


“EBITDA”
means, as at the date of calculation or, as the case may be,
for any accounting period, the consolidated net income of the Group for that
accounting period:


 


(a)       plus, to the extent
deducted in computing consolidated net income of the Group for that accounting
period, the sum, without duplication, of:


 


(i)        all federal, state, local
and foreign taxes and tax distributions;


 


(ii)       Net Interest Expenses; and


 


(iii)      depreciation, depletion,
amortisation of intangibles and other non-cash charges or non-cash losses
(including non-cash transaction expenses and the amortisation of debt
discounts) and any extraordinary losses not incurred in the ordinary course of
business;


 


(b)      minus, to the extent added
in computing consolidated net income of the Group for that accounting period,
any non-cash income or non-cash gains and any extraordinary gains not incurred
in the ordinary course of business;


 


all determined on a
consolidated basis in accordance with GAAP and as shown in the consolidated
statements of income for the Group in the Applicable Accounts;


 


“Environmental
Claim” means:


 


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


 


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


 


4

















 


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


 


“Environmental
Incident” means, in relation to each Ship:


 


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


 


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


 


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


 


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


 


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


 


“Epic” means
Epic Investments Inc., a corporation incorporated in the Marshall Islands and
having its registered office at Trust Company Complex, Ajeltake Road, Ajeltake
Island, Majuro, The Marshall Islands MH 96960;


 


“Epic
Account” means an account in the name of Epic with the Agent
in Hamburg designated “Epic Investments Inc. - Cash Management Account” or any
other account (with that or another office of the Agent) which is designated by
the Agent as the Epic Account for the purposes of the Loan Agreement;


 


“Epic
Account Pledge” means a pledge agreement dated 25 May 2007
creating security in respect of the Epic Account executed by Epic in favour of
the Lenders;


 


“Epic
Guarantee” means the guarantee dated 25 May 2007 of the
obligations of the Borrower under the Loan Agreement and the Finance Documents
executed by Epic in favour of the Security Trustee;


 


“Event
of Default” means any of the events or circumstances
described in Clause 19.1;


 


“Fee
Letter” means a letter issued or to be issued by the Borrower
to the Agent in which the Borrower agrees to pay certain fees to the Agent in
connection with this Agreement;


 


“Final
Maturity Date” means 21 June 2010;


 


5

















 


“Finance
Documents” means:


 


(a)       this Agreement;


 


(b)      the Master Agreement;


 


(c)       the Agency and Trust Deed;


 


(d)      the Fee Letter;


 


(e)       the Guarantees;


 


(f)       the Master Agreement
Assignment;


 


(g)      the Mortgages;


 


(h)      the General Assignments;


 


(i)        the Deeds of Covenant;


 


(j)        the Retention Account
Pledge;


 


(k)       the Earnings Accounts
Pledge;


 


(l)        the Swap Account Pledge;


 


(m)      any Charterparty Assignment;


 


(n)      the Management Agreement
Assignments;


 


(o)      the Manager’s Undertakings;


 


(p)      the Epic Guarantee;


 


(q)      the Epic Account Pledge; and


 


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


 


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


 


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


 


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


 


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


 


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


 


6

















 


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


 


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


 


“Financial
Year” means, in relation to the Group, each period of 1 year
commencing on 1 January in respect of which its consolidated accounts are or
ought to be prepared;


 


“Fleet
Vessels” means, together, all of the vessels (including, but
not limited to, the Ships) from time to time owned by members of the Group;


 


“Future
Charterparty” means, in relation to each Ship, any time
charterparty or contract of affreightment in respect of such Ship (other than
an Initial Charterparty) of at least 11 consecutive months in duration or under
any bareboat charter and any guarantee of such charter (if such a guarantee is
provided to the Owner owning that Ship) or other contract of employment in
respect of such Ship to be entered into by the Owner owning that Ship and a
charterer approved by the Agent in form and substance satisfactory to the
Agent;


 


“GAAP” means
generally accepted accounting principles as from time to time in effect in the
United States of America;


 


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


 


“Group” means
the Borrower and its subsidiaries (whether direct or indirect and including,
but not limited to, the Owners) from time to time during the Security Period
and “member of the Group” shall be
construed accordingly;


 


“Guarantee”
means, in relation to each Owner, a guarantee dated 18
December 2006 (and in relation to Opera Navigation Co., 9 January 2007) given
by that Owner in favour of the Security Trustee guaranteeing the obligations of
the Borrower under (inter alia) this Agreement, the Master Agreement and the
other Finance Documents and in the plural means all of them;


 


“Hedge
Strategy Letter” means a letter issued or to be issued by the
Borrower to the Agent in a form and on terms acceptable to the Agent which
letter shall be prepared in consultation with, and with the assistance of the
Agent in accordance with Clause 11.18;


 


“IACS” means
the International Association of Classification Societies;


 


“Initial
Advance” means an amount of up to the lesser of (a)
$108,250,000 and (b) 50 per cent. of the aggregate Market Value of the Ships to
be made available by the Lenders to the Borrower in accordance with, and
subject to Clauses 2.3 and 4.2(b);


 


“Initial
Charterparty” means, in relation to a Ship, a time charter of
the Ship entered or to be entered into by the Owner owning that Ship and a
charterer approved by the Agent effective on or before the first Drawdown Date
in form and substance satisfactory to the Agent and complying with the
provisions of Clause 14.16;


 


“Initial
Market Value” means, in relation to each Ship, the market
value of that Ship determined by taking the average of the two valuations of
that Ship referred to at paragraph 8 of Schedule 4, Part B;


 


7

















 


“Insurances”
means, in relation to each Ship:


 


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


 


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


 


“Interest
Period” means a period determined in accordance with Clause
6;


 


“IPO” means
a successful initial public offering of the shares of the Borrower on the New
York Stock Exchange;


 


“ISM
Code” means:


 


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


 


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


 


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


 


“ISM
Code Documentation” includes, in relation to each Ship:


 


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


 


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


 


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


 


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


 


“ISPS
Code” means the International Ship and Port Facility Security
Code constituted pursuant to resolution A.924(22) of the International Maritime
Organisation (“IMO”) now set out in Chapter XI-2 of the Safety of Life at Sea
Convention (SOLAS) 1974 (as amended) and the mandatory ISPS Code as adopted by
a Diplomatic Conference of the IMO on Maritime Security in December 2002 and
includes any amendments or extensions to it and any regulation issued pursuant
to it but shall only apply insofar as it is applicable law in the relevant Ship’s
flag state and any jurisdiction on which such Ship is operated;


 


8

















 


“ISPS
Code Documentation” includes:


 


(a)       the International Ship
Security Certificate issued pursuant to the ISPS Code in relation to each Ship
within the period specified in the ISPS Code; and


 


(b)      all other documents and data
which are relevant to the ISPS Code and its implementation and verification
which the Agent may require;


 


“Lead
Arranger” means HSH Nordbank acting through its office at
Gerhart-Hauptmann-Platz 50, D-20092, Hamburg, Germany,


 


“Lender”
means, subject to Clause 26.6:


 


(a)       a bank or financial
institution listed in Schedule 1 and acting through its branch indicated in
Schedule 1 (or through another branch notified to the Borrower under Clause
26.14) unless it has delivered a Transfer Certificate or Certificates covering
the entire amounts of its Commitment and its Contribution; and


 


(b)      the holder for the time
being of a Transfer Certificate;


 


“Leverage
Ratio” means, at any relevant time, the ratio (expressed as a
percentage) of:


 


(a)       the Total Liabilities
(including, without limitation, all amounts outstanding from time to time under
this Agreement, the Master Agreement and the other Finance Documents); and


 


(b)      the Market Value Adjusted
Total Assets (including, without limitation, the Ships);


 


“LIBOR”
means, for an Interest Period:


 


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


 


(b)      if no rate is quoted on
REUTERS BBA Page LIBOR 01, the rate per annum determined by the Agent to be the
arithmetic mean of the rates per annum notified to the Agent by each Lender to
be the rate per annum at which deposits in Dollars are offered to that Lender
by leading banks in the London Interbank Market at or about 11.00 a.m. (London
time) on the second Business Day prior to the commencement of that Interest
Period for a period equal to that Interest Period and for delivery on the first
Business Day of it;


 


“Liquid
Assets” means, at any relevant time hereunder, the aggregate
of:


 


(a)       cash in hand or held with
banks or other financial institutions of the Borrower and/or any other member
of the Group (other than restricted cash) in Dollars or another currency freely
convertible into Dollars;


 


(b)      the market value of
transferable certificates of deposit in a freely convertible currency
acceptable to the Lenders (being for the purposes of this Agreement,


 


9

















 


Dollars, Japanese Yen,
Swiss Francs, Euros or Sterling) issued by a prime international bank; and


 


(c)       the market value of equity
securities (if and to the extent that the Agent is satisfied that such equity
securities are readily saleable for cash and that there is a ready market
therefor) and investment grade debt securities which are publicly traded on a
major stock exchange or investment market (valued at market value as at any
applicable date of determination);


 


in each case owned by the
Borrower or any other member of the Group where:


 


(i)        the market value of any
asset specified in paragraph (b) and (c) shall be the bid price quoted for it
on the relevant calculation date by the Agent; and


 


(ii)       the amount or value of any
asset denominated in a currency other than Dollars shall be converted into
Dollars using the Agent’s spot rate for the purchase of Dollars with that
currency on the relevant calculation date;


 


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


 


“Major
Casualty” means, in relation to each Ship, any casualty to
that Ship in respect of which the claim or the aggregate of the claims against
all insurers, before adjustment for any relevant franchise or deductible,
exceeds $500,000 (in the case of any Ship which is a Panamax bulk carrier) or
$400,000 (in the case of any Ship which is a handymax bulk carrier) or, in
either case, the equivalent in any other currency;


 


“Majority Lenders” means:


 


(a)       before an Advance has been
made, Lenders whose Commitments total at least 66 2/3 per cent. of the Total
Commitments; and


 


(b)      after an Advance has been
made, Lenders whose Contributions total 66 2/3 per cent. of the Loan;


 


“Manager’s
Undertaking” means, in relation to each Ship, a letter of
undertaking executed or to be executed by the Approved Manager in favour of the
Security Trustee in such form as the Lenders may approve or require agreeing
certain matters in relation to the management of that Ship and subordinating
the rights of the Approved Manager against the Ship and the Owner thereof to
the rights of the Creditor Parties under the Finance Documents and, in the
plural, means all of them;


 


“Management
Agreement” means, in relation to each Ship, an agreement made
or to be made between the Owner of that Ship and the Approved Manager in
respect of the commercial and technical management of the Ship and, in the
plural, means all of them;


 


“Management
Agreement Assignment” means, in relation to each Management
Agreement, the assignment of the Owner’s rights and interests under that
Management Agreement in such form as the Lenders may approve or require and, in
the plural, means all of them;


 


“Mandatory
Cost” means the percentage rate per annum calculated by the
Agent in accordance with Schedule 8;


 


“Margin”
means:


 


(a)       at any time when the
Leverage Ratio is equal to, or less than, 55 per cent., 1 per cent. per annum;
and


 


10

















 


(b)      at all other times, 1.2 per
cent. per annum;


 


“Market
Value” means, in relation to each Ship and each Fleet Vessel,
the market value thereof calculated in accordance with Clause 15.4;


 


“Market
Value Adjusted Net Worth” means Paid-Up Capital plus General
Reserves plus Retained Earnings adjusted to reflect the difference between the
book values of the Fleet Vessels and the Market Values of all Fleet Vessels at
any relevant time;


 


“Market
Value Adjusted Total Assets” means, at any time, Total Assets
adjusted to reflect the difference between the book values of all Fleet Vessels
and the aggregate Market Value of all Fleet Vessels and lease transactions
relating to any Fleet Vessels;


 


“Master
Agreement” means the master agreement (on the 1992 ISDA
(Multicurrency - Crossborder) form) dated 18 December 2006 and made between the
Borrower and the Swap Bank and includes all Designated Transactions from time
to time entered into and Confirmations from time to time exchanged under the
master agreement;


 


“Master
Agreement Assignment” means the assignment of the Master
Agreement dated 21 December 2006;


 


“Mortgage”
means, in relation to a Ship, the first preferred or, as the
case may be, priority ship mortgage on the Ship under the relevant Designated
Flag executed by the Owner of that Ship in favour of the Security Trustee, each
in such form as the Lenders may approve or require and, in plural, means all of
them;


 


“Negotiation
Period” has the meaning given in Clause 5.8;


 


“Net
Interest Expenses” means, in respect of any relevant period,
the aggregate of all interest, commitment and other fees, commissions,
discounts and other costs, charges or expenses accruing due from all the
members the Group during that accounting period less interest income received,
determined on a consolidated basis in accordance with GAAP and as shown in the
consolidated statements of income for the Group in the Applicable Accounts;


 


“Notifying
Lender” has the meaning given in Clause 23.1 or Clause 24.1
as the context requires;


 


“Owner” means,
in relation to each Ship, the corporation which is specified in Schedule 2 as
the owner thereof, being a corporation incorporated in the Republic of the
Marshall Islands having its registered office at Trust Company Complex,
Ajeltake Road, Ajeltake Island, Majuro, The Marshall Islands MH 96960 each
being a corporation which is a direct or indirect wholly-owned subsidiary of
the Borrower and, in the plural, means all of them;


 


“Paid-Up
Capital”, “General Reserves” and “Retained Earnings” have the meanings ascribed to them in the
Applicable Accounts;


 


“Payment
Currency” has the meaning given in Clause 21.5;


 


“Permitted
Security Interests” means:


 


(a)       Security Interests created
by the Finance Documents;


 


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


 


(c)       liens for salvage;


 


11

















 


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


 


(e)       liens for master’s
disbursements incurred in the ordinary course of trading and any other lien
arising by operation of law or otherwise in the ordinary course of the
operation, repair or maintenance of a Ship, provided such liens do not secure
amounts more than 30 days overdue (unless the overdue amount is being contested
by the relevant Owner in good faith by appropriate steps) and subject, in the
case of liens for repair or maintenance, to Clause 14.13(h);


 


(f)       any Security Interest
created in favour of a plaintiff or defendant in any action of the court or
tribunal before whom such action is brought as security for costs and expenses
where the relevant Owner is prosecuting or defending such action in good faith
by appropriate steps; and


 


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


 


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


 


(a)       England and Wales;


 


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


 


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


 


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


 


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


 


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


 


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


 


“Relevant
Dividend Distribution Date” has the meaning given in Clause
8.2;


 


“Relevant
Person” has the meaning given in Clause 19.9;


 


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


 


“Retention
Account” means an account in the name of the Borrower with
the Agent in Hamburg designated “Paragon Shipping Inc. - Retention Account”, or
any other account (with that or another office of the Agent) which is
designated by the Agent as the Retention Account for the purposes of this
Agreement;


 


12

















 


“Retention
Account Pledge” means a pledge agreement dated 21 December
2006 creating security in favour of the Lenders in respect of the Retention
Account;


 


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


 


“Security
Cover Percentage” means, at any relevant time, the aggregate
of the Market Value of all the Ships subject to a Mortgage expressed as a
percentage of the Loan;


 


“Security
Interest” means:


 


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


 


(b)      the rights of the plaintiff
under an action in rem in which
the vessel concerned has been arrested or a writ has been issued or similar
step taken; and


 


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


 


“Security
Party” means each Owner, the Approved Manager, Epic and any
other person (except a Creditor Party) who, as a surety or mortgagor, as a
party to any subordination or priorities arrangement, or in any similar
capacity, executes a document falling within the final paragraph of the
definition of “Finance Documents”;


 


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


 


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


 


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


 


(c)       neither the Borrower nor
any Security Party has any future or contingent liability under Clause 20, 21
or 22 below or any other provision of this Agreement or another Finance
Document; and


 


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


 


“Security
Trustee” means HSH Nordbank AG and any of its successors
including, without limitation, any successor appointed under clause 5 of the
Agency and Trust Deed;


 


13

















 


 “Ships” means,
together, the ships referred to in Schedule 2 and, in the singular, means any
of them;


 


“Sponsors”
means, together:


 


(a)       Mr Michael Bodouroglou; and


 


(b)      such other sponsors to be
nominated and acceptable to the Lead Arranger in its sole and absolute
discretion;


 


“Swap Account”
means an account in the name of the Borrower with the Agent
in Hamburg designated “Paragon Shipping Inc. - Swap Account”, or any other
account (with that or another office of the Agent) which is designated by the
Agent as the Swap Account for the purposes of this Agreement;


 


“Swap
Account Pledge” means a pledge agreement dated 21 December
2006 creating security in favour of the Lenders in respect of the Swap Account;


 


“Swap
Bank” means HSH Nordbank AG acting through its office at
Gerhart-Hauptmann-Platz 50, D-20095, Hamburg, Germany;


 


“Swap
Exposure” means, as at any relevant date, the amount
certified by the Swap Bank to the Agent to be the aggregate net amount in
Dollars which would be payable by the Borrower to the Swap Bank under (and
calculated in accordance with) section 6(e) (Payments on Early Termination) of
the Master Agreement if an Early Termination Date had occurred on the relevant
date in relation to all continuing Designated Transactions entered into between
the Borrower and the Swap Bank;


 


“Total
Assets” means, as at the relevant date, the aggregate value
of all trade debtors and the value of all stock (valued in accordance with
GAAP) and all other investments and other tangible and intangible assets of the
Group properly included in the Applicable Accounts as “fixed assets” in
accordance with GAAP but excluding any assets held on trust;


 


“Total
Equity” means, as at the relevant date, the value of the
stockholders’ equity of the Group determined on a consolidated basis in
accordance with GAAP and as shown in the consolidated balance sheets for the
Group in the Applicable Accounts;


 


“Total
Liabilities” means, as at the date of calculation, the
aggregate Financial Indebtedness of the Group;


 


“Total
Loss” means, in relation to each Ship:


 


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


 


(b)      any expropriation,
confiscation, requisition or acquisition of the Ship, whether for full
consideration, a consideration less than her proper value, a nominal
consideration or without any consideration, which is effected by any government
or official authority or by any person or persons claiming to be or to
represent a government or official authority, excluding a requisition for hire
for a fixed period not exceeding one year without any right to an extension;


 


(c)       any condemnation of the
Ship by any tribunal or by any person or person claiming to be a tribunal;


 


(d)      any arrest, capture, seizure
or detention of the Ship (including any hijacking or theft) unless she is
within 30 days redelivered to the full control the relevant Owner;


 


14

















 


“Total
Loss Date” means:


 


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


 


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


 


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


 


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


 


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


 


“Transaction”
has the meaning given in the Master Agreement;


 


“Transfer
Certificate” has the meaning given in Clause 26.2; and


 


“Trust
Property” has the meaning given in clause 3.1 of the Agency
and Trust Deed.


 


1.2      Construction
of certain terms. In
this Agreement:


 


“approved”
means, for the purposes of Clause 13, approved in writing by
the Agent;


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


15

















 


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


 


“obligatory
insurances” means, in relation to a Ship, all insurances
effected, or which the Borrower and/or the Owner owning the Ship is obliged to
effect, under Clause 13 below or any other provision of this Agreement or
another Finance Document;


 


“parent
company” has the meaning given in Clause 1.4;


 


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


 


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


 


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


 


“regulation”
includes any regulation, rule, official directive, request or
guideline (either having the force of law or compliance with which is
reasonable in the ordinary course of business of the party concerned) of any
governmental, intergovernmental or supranational body, agency, department or
regulatory, self-regulatory or other authority or organisation;


 


“subsidiary”
has the meaning given in Clause 1.4;


 


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


 


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


 


“war
risks” means the risks according to Institute War and Strike
Clauses (Hull Time) (1/10/83) or (1/11/95), or equivalent conditions,
including, but not limited to risk of mines, blocking and trapping, missing
vessel, confiscation, vandalism, sabotage and malicious mischief and all risks
excluded from the standard form of English or other marine policy.


 


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


 


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


 


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


 


16

















 


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


 


1.4      Meaning of “subsidiary”. A
company (S) is a subsidiary of another company (P) if:


 


(a)       a majority of the issued
shares in S (or a majority of the issued shares in S which carry unlimited
rights to capital and income distributions) are directly owned by P or are
indirectly attributable to P; or


 


(b)       P has direct or indirect
control over a majority of the voting rights attached to the issued shares of
S; or


 


(c)       P has the direct or
indirect power to appoint or remove a majority of the directors of S; or


 


(d)       P otherwise has the direct
or indirect power to ensure that the affairs of S are conducted in accordance
with the wishes of P;


 


and any company of which
S is a subsidiary is a parent company of S.


 


1.5      General Interpretation.


 


(a)       In this Agreement:


 


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


 


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


 


(iii)      words denoting the singular
number shall include the plural and vice versa.


 


(b)       Clauses 1.1 to 1.4 and
paragraph (a) of this Clause 1.5 apply unless the contrary intention appears.


 


(c)       References in Clause 1.1 to
a document being in the form of a particular Appendix or Schedule include
references to that form with any modifications to that form which the Agent
(with the authorisation of the Majority Lenders in the case of substantial
modifications) approves or reasonably requires.


 


(d)       The clause headings shall
not affect the interpretation of this Agreement.


 


2         FACILITY


 


2.1      Amount and purpose of
facility. Subject to the other provisions of this Agreement, the Lenders
shall make available to the Borrower a secured revolving credit facility in a
maximum outstanding aggregate amount not exceeding the lesser of:


 


(a)       $108,250,000; and


 


(b)       50 per cent. of the Initial
Market Value of all the Ships.


 


2.2      Lenders’ participations in
Loan. Subject to the other provisions of this Agreement, each Lender shall
participate in each Advance in the proportion which, as at the relevant
Drawdown Date, its Commitment bears to the Total Commitments.


 


2.3      Purpose of Advances. The
Borrower undertakes with each Creditor Party to use each Advance only for the
purpose stated in the preamble to this Agreement.


 


17

















 


3         POSITION OF THE LENDERS,
THE SWAP BANK AND THE MAJORITY LENDERS


 


3.1      Interests of Lenders and
Swap Bank several. The rights of the Lenders and the Swap Bank under this
Agreement and the Master Agreement are several; accordingly:


 


(a)       each Lender shall be
entitled to sue for any amount which has become due and payable by the Borrower
to it under this Agreement; and


 


(b)       the Swap Bank shall be
entitled to sue for any amount which has become due and payable by the Borrower
to it under the Master Agreement.


 


without joining the
Agent, the Security Trustee, any other Lender or the Swap Bank as additional
parties in the proceedings.


 


3.2      Proceedings by individual
Lender or Swap Bank. However, without the prior consent of the Majority
Lenders, neither a Lender nor the Swap Bank may bring proceedings in respect
of:


 


(a)       any other liability or
obligation of the Borrower or a Security Party under or connected with a
Finance Document or the Master Agreement; or


 


(b)       any misrepresentation or
breach of warranty by the Borrower or a Security Party in or connected with a
Finance Document or the Master Agreement.


 


3.3      Obligations several. The
obligations of the Lenders under this Agreement and of the Swap Bank under the
Master Agreement are several; and a failure of a Lender to perform its
obligations under this Agreement or of the Swap Bank to perform its obligations
under the Master Agreement shall not result in:


 


(a)       the obligations of the
other Lenders being increased; nor


 


(b)       the Borrower, any Security
Party or any other Creditor Party being discharged (in whole or in part) from
its obligations under any Finance Document;


 


and in no circumstances
shall a Lender or the Swap Bank have any responsibility for a failure of
another Lender or the Swap Bank to perform its obligations under this Agreement
or the Master Agreement.


 


3.4      Parties bound by certain
actions of Majority Lenders. Every Lender, the Swap Bank, the Borrower and
each Security Party shall be bound by:


 


(a)       any determination made, or
action taken, by the Majority Lenders under any provision of a Finance
Document;


 


(b)       any instruction or
authorisation given by the Majority Lenders to the Agent or the Security
Trustee under or in connection with any Finance Document;


 


(c)       any action taken (or in
good faith purportedly taken) by the Agent or the Security Trustee in
accordance with such an instruction or authorisation.


 


3.5      Reliance on action of Agent.
However, the Borrower and each Security Party:


 


(a)       shall be entitled to assume
that the Majority Lenders have duly given any instruction or authorisation
which, under any provision of a Finance Document, is required in relation to
any action which the Agent has taken or is about to take; and


 


18

















 


(b)       shall not be entitled to
require any evidence that such an instruction or authorisation has been given.


 


3.6      Construction. In Clauses
3.4 and 3.5 references to action taken include (without limitation) the
granting of any waiver or consent, an approval of any document and an agreement
to any matter.


 


4         DRAWDOWN


 


4.1      Request for Advance. Subject
to the following conditions, the Borrower may request an Advance to be made by
ensuring that the Agent receives a completed Drawdown Notice not later than
11.00 a.m. (Hamburg time) 3 Business Days prior to the intended Drawdown Date.


 


4.2      Availability. The
conditions referred to in Clause 4.1 are that:


 


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


 


(b)       the Initial Advance shall
be made available in a single amount for the purpose stated in Recital (A) and
shall be in an amount of up to the lesser of (i) $108,250,000 and (ii) 50 per
cent. of the aggregate Initial Market Value of all the Ships;


 


(c)       each subsequent Advance
(which may be used for the purpose and in the circumstances stated in Recital
(B)) shall be at least [$1,000,000] (or a higher multiple thereof);


 


(d)       the aggregate outstanding
principal amount of the Advances at any time shall not exceed the Total
Commitments.


 


4.3      Notification to Lenders of
receipt of a Drawdown Notice. The Agent shall promptly notify the Lenders
that it has received a Drawdown Notice and shall inform each Lender of:


 


(a)       the amount of the Advance
and the Drawdown Date;


 


(b)       the amount of that Lender’s
participation in the Advance; and


 


(c)       the duration of the first
Interest Period applicable to that Advance.


 


4.4      Drawdown Notice irrevocable.
A Drawdown Notice must be signed by a director of the Borrower; and once
served, a Drawdown Notice cannot be revoked without the prior consent of the
Agent, acting on the authority of the Majority Lenders.


 


4.5      Lenders to make available
Contributions. Subject to the provisions of this Agreement, each Lender
shall, on and with value on each Drawdown Date, make available to the Agent for
the account of the Borrower the amount due from that Lender on that Drawdown
Date under Clause 2.2.


 


4.6      Disbursement of Advance. Subject
to the provisions of this Agreement, the Agent shall on each Drawdown Date pay
to the Borrower the amounts which the Agent receives from the Lenders under
Clause 4.5; and that payment to the Borrower shall be made:


 


(a)       to the account which the
Borrower specifies in the relevant Drawdown Notice; and


 


(b)       in the like funds as the
Agent received the payments from the Lenders.


 


4.7      Disbursement of Advance to
third party. The payment by the Agent under Clause 4.6 to a third party
specified in the relevant Drawdown Notice shall constitute the making of


 


19

















 


the Advance and the
Borrower shall thereupon become indebted, as principal and direct obligor, to
each Lender in an amount equal to that Lender’s Contribution.


 


5         INTEREST


 


5.1      Payment of normal interest. Subject
to the provisions of this Agreement, interest on each Advance and the Loan and
each part thereof in respect of each Interest Period shall be paid by the
Borrower on the last day of that Interest Period.


 


5.2      Normal rate of interest. Subject
to the provisions of this Agreement, the rate of interest on each Advance and
the Loan and each part thereof in respect of an Interest Period shall be the
aggregate of (i) the applicable Margin, (ii) the Mandatory Cost (if any) and
(iii) LIBOR.


 


5.3      Payment of accrued interest.
In the case of an Interest Period longer than 3 months, accrued interest
shall be paid every 3 months during that Interest Period and on the last day of
that Interest Period.


 


5.4      Notification of Interest
Periods and rates of normal interest. The Agent shall notify the Borrower
and each Lender of:


 


(a)       each rate of interest; and


 


(b)       the duration of each
Interest Period;


 


as soon as reasonably practicable after each is
determined.


 


5.5      Market disruption. The
following provisions of this Clause 5 apply if:


 


(a)       no rate is quoted on
Reuters BBA Page LIBOR 01 and at least half of the total number of Lenders at
any time do not, before 1.00 p.m. (Hamburg time) on the second Business Day
before the commencement of an Interest Period, provide quotations to the Agent
in order to fix LIBOR; or


 


(b)       at least one Business Day
before the start of an Interest Period, Lenders having Contributions together
amounting to more than 50 per cent. of the Loan (or, if an Advance has not been
made, Commitments amounting to more than 50 per cent. of the Total Commitments)
notify the Agent that LIBOR fixed by the Agent would not accurately reflect the
cost to those Lenders of funding their respective Contributions (or any part of
them) during the Interest Period in the London Interbank Dollar Market at or
about 11.00 a.m. (London time) on the second Business Day before the
commencement of the Interest Period; or


 


(c)       at least one Business Day
before the start of an Interest Period, the Agent is notified by a Lender (the “Affected Lender”)  that for any reason it is unable to obtain
Dollars in the London Interbank Market in order to fund its Contribution (or
any part of it) during the Interest Period.


 


5.6      Notification of market
disruption. The Agent shall promptly notify the Borrower and each of the
Lenders stating the circumstances falling within Clause 5.5 which have caused
its notice to be given.


 


5.7      Suspension of drawdown. If
the Agent’s notice under Clause 5.6 is served before an Advance is made:


 


(a)       in a case falling within
paragraphs (a) or (b) of Clause 5.5, the Lenders’ obligations to make the
Advance;


 


20

















 


(b)       in a case falling within
paragraph (c) of Clause 5.5, the Affected Lender’s obligation to participate in
the Advance;


 


shall be suspended while
the circumstances referred to in the Agent’s notice continue.


 


5.8      Negotiation of alternative
rate of interest. If  the Agent’s
notice under Clause 5.6 is served after an Advance is made, the Borrower, the
Agent and the Lenders or (as the case may be) the Affected Lender shall use
reasonable endeavours to agree, within the 30 days after the date on which the
Agent serves its notice under Clause 5.6 (the “Negotiation
Period”),  an
alternative interest rate or (as the case may be) an alternative basis for the
Lenders or (as the case may be) the Affected Lender to fund or continue to fund
their or its Contribution to the relevant Advance or Advances during the
Interest Period concerned.


 


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


 


5.10    Alternative rate of interest
in absence of agreement. If an alternative interest rate or alternative
basis is not agreed within the Negotiation Period, and the relevant
circumstances are continuing at the end of the Negotiation Period, then the
Agent shall, with the agreement of each Lender or (as the case may be) the
Affected Lender, set an interest period and interest rate representing the cost
of funding of the Lenders or (as the case may be) the Affected Lender in
Dollars or in any available currency of their or its Contribution to the
relevant Advance or Advances plus the Mandatory Cost (if any) and the
applicable Margin; and the procedure provided for by this Clause 5.10 shall be
repeated if the relevant circumstances are continuing at the end of the
interest period so set by the Agent.


 


5.11    Notice of prepayment. If
the Borrower does not agree with an interest rate set by the Agent under Clause
5.10, the Borrower may give the Agent not less than 15 Business Days’ notice of
its intention to prepay the relevant Advance or Advances at the end of the
interest period set by the Agent.


 


5.12    Prepayment; termination of
Commitments. A notice under Clause 5.11 shall be irrevocable; the Agent
shall promptly notify the Lenders or (as the case may require) the Affected
Lender of the Borrower’s notice of intended prepayment; and:


 


(a)       on the date on which the
Agent serves that notice, the Total Commitments or (as the case may require)
the Commitment of the Affected Lender shall be cancelled; and


 


(b)       on the last Business Day of
the interest period set by the Agent, the Borrower shall prepay (without
premium or penalty) the Loan or, as the case may be, the Affected Lender’s
Contribution, together with accrued interest thereon at the applicable rate
plus the applicable Margin and the Mandatory Cost (if any).


 


5.13    Application of prepayment. The
provisions of Clause 8 shall apply in relation to the prepayment.


 


5.14    Calculation of Leverage Ratio.
The Agent shall calculate the Leverage Ratio Percentage on the first
Drawdown Date and on each Dividend Declaration Date thereafter based on the
information contained in the latest Compliance Certificate (and evidenced by an
accompanying set of market valuations of all the Fleet Vessels prepared in
accordance with Clause 15.4 and the latest Applicable Accounts) for the
purposes of calculating the Margin and shall advise the Borrower and the
Lenders in writing, within 10 Business Days of each Dividend Declaration Date,
of the Margin which will apply for the next Interest Period Provided that in respect of each Dividend
Declaration Date other than the first Dividend Declaration Date, the Agent
shall only be obliged to advise


 


21

















 


the Borrowers and the
Lenders of the Margin which will apply for the next Interest Period if that
Margin will be different to the Margin which applies immediately prior to the
relevant Dividend Declaration Date.


 


For the purposes of
calculating the Leverage Ratio pursuant to this Clause 5.14, the Market Value
of the Ships shall be determined no more than 15 days prior to the relevant
Dividend Declaration Date.


 


6         INTEREST PERIODS


 


6.1      Commencement of Interest
Periods. The first Interest Period applicable to an Advance shall commence
on the Drawdown Date relative to that Advance and each subsequent Interest
Period shall commence on the expiry of the preceding Interest Period.


 


6.2      Duration of normal Interest
Periods. Subject to Clause 6.3, each Interest Period in respect of each
Advance shall be:


 


(a)       1, 3 or 6 months as
notified by the Borrower to the Agent not later than 11.00 a.m. (Hamburg time)
3 Business Days before the commencement of the Interest Period Provided that there may be no more than 2
Interest Periods having a duration of 1 month in any calendar year; or


 


(b)       in the case of the first
Interest Period applicable to the second and any subsequent Advance, a period
ending on the last day of the then current Interest Period whereupon all of the
Advances shall be consolidated and treated as a single Advance;


 


(c)       3 months, if the Borrower
fails to notify the Agent by the time specified in paragraph (a) above; or


 


(d)       such other period as the
Agent may, with the Majority Lenders’ authority, agree with the Borrower.


 


7         DEFAULT INTEREST


 


7.1      Payment of default interest
on overdue amounts. The Borrower shall pay interest in accordance with the
following provisions of this Clause 7 on any amount payable by the Borrower
under any Finance Document which the Agent, the Security Trustee or the other
designated payee does not receive on or before the relevant date, that is:


 


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


 


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


 


(c)       if such amount has become
immediately due and payable under Clause 19.4, the date on which it became
immediately due and payable.


 


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


 


(a)       in the case of an overdue
amount of principal, the higher of the rates set out at paragraphs (a) and (b)
of Clause 7.3; or


 


(b)       in the case of any other
overdue amount, the rate set out at paragraph (b) of Clause 7.3.


 


7.3          Calculation
of default rate of interest. The rates referred to in Clause 7.2
are:


 


22














 


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


 


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


 


(i)                       LIBOR; or


 


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


 


7.4                  Notification of interest periods and default rates. The
Agent shall promptly notify the Lenders and the Borrower of each interest rate
determined by the Agent under Clause 7.3 and of each period selected by the
Agent for the purposes of paragraph (b) of that Clause; but this shall not be
taken to imply that the Borrower is liable to pay such interest only with
effect from the date of the Agent’s notification.


 


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


 


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


 


7.7                  Application to Master Agreement. For the
avoidance of doubt, this Clause 7 does not apply to any amount payable under
the Master Agreement in respect of any continuing Designated Transaction as to
which section 2(e) (Default Interest; Other Amounts) of the Master Agreement
shall apply.


 


8                            REPAYMENT
AND PREPAYMENT


 


8.1                  Amount of
repayment instalments. If, on a Dividend Declaration Date, the Security
Cover Percentage is less than 140 per cent., then the Borrower shall repay the
Loan in an amount which, once repaid, shall eliminate the shortfall.


 


8.2                  Repayment dates.
If a repayment is required pursuant to Clause 8.1 on any Dividend
Declaration Date (being the “Relevant
Dividend Declaration Date”), then the Borrower shall transfer the
amount of the repayment due under Clause 8.1 into the Retention Account no
later than 3 Business Days after the Relevant Dividend Declaration Date. On the
last day of the Interest Period current as at the Relevant Dividend Declaration
Date the Agent shall apply all amounts standing to the credit of the Retention
Account in or towards repayment of the Loan and the payment of interest thereon
in accordance with Clause 18.4.


 


8.3                  Final Maturity
Date. On the Final Maturity Date, the Borrower shall additionally pay to
the Agent for the account of the Creditor Parties all principal and other sums
then accrued or owing under any Finance Document.


 


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


 


8.5                  Conditions for
voluntary prepayment. The conditions referred to in Clause 8.4 are that:


 


23

















 


(a)                     any partial
prepayment to be applied against the Loan shall be $1,000,000 or a higher
multiple thereof;


 


(b)                    the Agent has
received from the Borrower at least 5 Business Days’ prior written notice
specifying the amount to be prepaid and the date on which the prepayment is to
be made (such date shall be the last day of an Interest Period); and


 


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


 


8.6                  Effect of notice
of prepayment. A prepayment notice may not be withdrawn or amended without
the consent of the Agent, given with the authority of the Majority Lenders, and
the amount specified in the prepayment notice shall become due and payable by
the Borrower on the date for prepayment specified in the prepayment notice.


 


8.7                  Notification of
notice of prepayment. The Agent shall notify the Lenders promptly upon
receiving a prepayment notice, and shall provide any Lender which so requests
with a copy of any document delivered by the Borrower under Clause 8.5(c).


 


8.8                  Voluntary
Commitment reductions. Subject to the following conditions, the Total
Commitments may be permanently reduced, cancelled or terminated by the
Borrower.


 


8.9                  Conditions for
voluntary Commitment reduction. The conditions referred to in Clause 8.8
are that:


 


(a)                     any partial
reduction, cancellation or termination of the Total Commitments shall be for an
amount of $1,000,000 or a higher integral multiple thereof;


 


(b)                    the Agent has
received from the Borrower at least 3 Business Days prior written notice
specifying the amount of the Total Commitments to be reduced, cancelled or
terminated and the date on which such reduction, cancellation or termination is
to apply; and


 


(c)                     a notice
served under paragraph (b) may not be given after expiry of the Availability
Period and may not be withdrawn or amended without the consent of the Agent
given with the authority of the Majority Lenders.


 


8.10           Notification of notice
of Commitment reduction. The Agent shall notify the Lenders promptly upon
receiving a notice under Clause 8.9(b), and shall notify each Lender of the
amount by which its Commitment shall be reduced pursuant thereto.


 


8.11           Mandatory prepayment. The
Borrower shall be obliged to prepay the Relevant Amount of the Loan (and the
Total Commitments will, on the date on which the prepayment is made be
permanently reduced by the Relevant Amount so prepaid):


 


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


 


(b)                    if a Ship
becomes a Total Loss, on the earlier of the date falling 120 days after the
relevant Total Loss Date and the date of receipt by the Security Trustee of the
proceeds of insurance relating to such Total Loss.


 


In this Clause 8.11, “Relevant Amount” means an amount which
after giving credit for the amount of the prepayment made pursuant to this
Clause 8.11, results in the Security Cover Percentage being equal to the higher
of (i) the Security Cover Percentage maintained immediately prior to the
prepayment made pursuant to this Clause 8.11 and (ii) 140 per cent.


 


24

















 


8.12           Amounts payable on
prepayment. A prepayment shall be made together with accrued interest (and
any other amount payable under Clause 21 below or otherwise) in respect of the
amount prepaid and, if the prepayment is not made on the last day of an
Interest Period together with any sums payable under Clause 21.1 (b) but
without premium or penalty.


 


8.13           Application of partial
prepayment. Any sum received by the Agent pursuant to Clauses 8.4 and 8.11
shall be applied in prepayment of the Loan and, subject to no Event of Default
being in occurrence or continuing at the time a prepayment is made under Clause
8.11, any balance arising from the sale or Total Loss proceeds of a Ship which
is sold or becomes a Total Loss after the prepayment required by Clause 8.11
has been made shall be released to the Borrower or to such other person
(including, without limitation, the Owner of the relevant Ship) as the Borrower
may direct.


 


8.14           Reborrowing. Subject
to the other provisions of the Loan Agreement an amount repaid or prepaid may
be reborrowed.


 


8.15           Unwinding of Designated
Transactions. On or prior to any repayment or prepayment of the Loan under
this Clause 8 or any other provision of this Agreement, the Borrower shall
wholly or partially reverse, offset, unwind or otherwise terminate one or more
of the continuing Designated Transactions to the extent necessary to ensure that
the notional principal amount of the continuing Designated Transactions
thereafter remaining does not exceed the amount of the Loan following such
repayment or prepayment.


 


8.16           Prepayment of Swap
Benefit. If a Designated Transaction is terminated in circumstances where
the Swap Bank would be obliged to pay an amount to the Borrower under the
Master Agreement, the Borrower hereby agrees that such payment shall be applied
in prepayment of the Loan and authorises the Swap Bank to pay such amount to
the Agent for such purpose.


 


9                            CONDITIONS
PRECEDENT


 


9.1                  Documents, fees
and no default. Each Lender’s obligation to contribute to an Advance is
subject to the following conditions precedent:


 


(a)                     that, on or
before the service of the first Drawdown Notice, the Agent receives the
documents described in Part A of Schedule 4 in a form and substance
satisfactory to the Agent and its lawyers;


 


(b)                    that, on or
before the Drawdown Date in respect of the Initial Advance, the Agent receives
the documents described in Part B of Schedule 4 in form and substance
satisfactory to the Agent and its lawyers;


 


(c)                     that, on or
before the service of the first Drawdown Notice, the Agent receives all accrued
commitment fee and all other fees referred to in Clause 20.1 which are payable
at that time and has received payment of the expenses referred to in Clause
20.2;


 


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


 


(i)                       no Event of
Default or Potential Event of Default has occurred and is continuing or would
result from the borrowing of the relevant Advance;


 


(ii)                    the
representations and warranties in Clause 10 and those of the Borrower or any
Security Party which are set out in the other Finance Documents would be true
and not misleading if repeated on each of those dates with reference to the
circumstances then existing; and


 


25

















 


(iii)                 none of the
circumstances contemplated by Clause 5.5 has occurred and is continuing;


 


(e)                     that, if the
ratio set out in Clause 15.1 were applied immediately following the making of
the Advance, the Borrower would not be obliged to provide additional security
or prepay part of the Loan under that Clause; and


 


(f)                       that at
each Drawdown Date the Agent has received, and found to be acceptable to it,
any further opinions, consents, agreements and documents in connection with the
Finance Documents which the Agent may, with the authorisation of the Majority
Lenders, request by notice to the Borrower prior to the relevant Drawdown Date.


 


9.2                  Waiver of
conditions precedent. If the Majority Lenders, at their discretion, permit
an Advance to be borrowed before certain of the conditions referred to in
Clause 9.1 are satisfied, the Borrower shall ensure that those conditions are
satisfied within 5 Business Days after the Drawdown Date relative to that
Advance (or such longer period as the Agent may, with the authority of the
Majority Lenders, specify).


 


10                     REPRESENTATIONS
AND WARRANTIES


 


10.1           General. The
Borrower represents and warrants to each Creditor Party as follows.


 


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


 


10.3           Share capital and
ownership. The Borrower has an authorised share capital divided into 150,000,000
registered shares of $0.001 each, all of which shares have been issued each
fully paid.


 


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


 


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


 


(b)                    to borrow
under this Agreement, to enter into Designated Transactions under the Master
Agreement and to make all the payments contemplated by, and to comply with,
those Finance Documents to which the Borrower is a party.


 


10.5           Consents in force. All
the consents referred to in Clause 10.4 remain in force and nothing has
occurred which makes any of them liable to revocation.


 


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


 


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


 


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


 


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


 


10.7           No third party Security
Interests. Without limiting the generality of Clause 10.6, at the time of
the execution and delivery of each Finance Document:


 


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


 


26

















 


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


 


10.8           No conflicts. The
execution by the Borrower of each Finance Document to which it is a party, and
the borrowing by the Borrower of the Loan, and its compliance with each Finance
Document to which it is a party will not involve or lead to a contravention of:


 


(a)                     any law or
regulation; or


 


(b)                    the
constitutional documents of the Borrower; or


 


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


 


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


 


10.10    No default. No Event of
Default or Potential Event of Default has occurred and is continuing.


 


10.11    Information. All
information which has been provided in writing by or on behalf of the Borrower
or any Security Party to any Creditor Party in connection with any Finance
Document satisfied the requirements of Clause 11.5; all audited and unaudited
accounts which have been so provided satisfied the requirements of Clause 11.7;
and there has been no material adverse change in the financial position or
state of affairs of the Borrower from that disclosed in the latest of those
accounts.


 


10.12    No litigation. No legal or
administrative action involving the Borrower has been commenced or taken or, to
the Borrower’s knowledge, is likely to be commenced or taken.


 


10.13    No rebates etc. There is
no agreement or understanding to allow or pay any rebate, premium, commission,
discount or other benefit or payment (howsoever described) to a third party in
connection with the purchase by each Owner of the Ship to be owned by it, other
than as disclosed to the Lenders in writing on or prior to the date of this
Agreement.


 


10.14    Compliance with certain
undertakings. At the date of this Agreement, the Borrower is in compliance
with Clauses 11.2, 11.4, 11.9 and 11.13.


 


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


 


10.16    ISM and ISPS Code compliance. The
Borrower will procure that the Owners and the Approved Manager obtain all
necessary ISM Code Documentation and ISPS Code Documentation in connection with
the Ships and comply with the ISM Code and the ISPS Code.


 


10.17    No money laundering. Without
prejudice to the generality of Clause 2.3, in relation to the borrowing by the
Borrower of the Loan, the performance and discharge of its obligations and
liabilities under the Finance Documents, and the transactions and other
arrangements effected or contemplated by the Finance Documents to which the
Borrower is a party, the Borrower confirms that it is acting for its own
account and that the foregoing will not involve or lead to contravention of any
law, official requirement or other regulatory measure or procedure implemented
to combat “money laundering” (as defined in Article 1 of the Directive
(91/308/EEC) of the Council of the European Communities).


 


27

















 


11                     GENERAL
UNDERTAKINGS


 


11.1           General. The
Borrower undertakes with each Creditor Party to comply with the following provisions
of this Clause 11 at all times during the Security Period except as the Agent
may, with the authority of the Majority Lenders, otherwise permit.


 


11.2           Title; negative pledge
and pari passu ranking. The Borrower will:


 


(a)                     own (directly
or indirectly) the entire beneficial interest in each Owner free from all
Security Interests and other interests and rights of every kind, except for
those created by the Finance Documents;


 


(b)                    not create or
permit to arise any Security Interest (except for Permitted Security Interests)
over any other asset, present or future (including, but not limited to the
Borrower’s rights against the Swap Bank under the Master Agreement or all or
any part of the Borrower’s interest in any amount payable to the Borrower by
the Swap Bank under the Master Agreement); and


 


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


 


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


 


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


 


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


 


11.4           Restriction on other
liabilities or obligations to be incurred. The Borrower will not incur, and
will procure that none of the Owners will, incur, any liability or obligation
except liabilities and obligations:


 


(a)                     under the
Finance Documents to which each is a party;


 


(b)                    under the
Master Agreement (but in such case, only in connection with Designated
Transactions); and


 


(c)                     (in the case
of each Owner) incurred in the normal course of its business of operating its
Ship.


 


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


 


11.6           Provision of financial
statements. The Borrower will send to the Agent:


 


(a)                     as soon as
possible, but in no event later than 180 days after the end of each Financial
Year (commencing with the Financial Year ended 31 December 2006), the audited
consolidated Financial Statements of the Group for that Financial Year;


 


(b)                    as soon as
possible, but in no event later than each Dividend Declaration Date (commencing
with the first Dividend Declaration Date falling within 2007), the unaudited
consolidated accounts of the Group for the most recent financial quarter which
has ended before that Dividend Declaration Date and additionally, in the case
of each of the second, third and fourth financial quarters, the unaudited
consolidated accounts of the


 


28

















 


Group for the period 1
January up to the end of the relevant financial quarter certified in each case
as to their correctness by the chief financial officer of the Borrower;


 


(c)                     as soon as
possible, but in no event later than 45 days after the commencement of each
Financial Year (commencing with the Financial Year commencing 1 January 2007),
a cashflow projection for the Group for that Financial Year in form and
substance satisfactory to the Agent;


 


(d)                    together with
the quarterly financial statements referred to in paragraph (b) above for each
of the financial quarters in each Financial Year, at least two valuations of
each Fleet Vessel each prepared by an Approved Broker (at the cost of the
Borrower) in accordance with Clause 15.4, which valuations shall be used in
determining the Security Cover Percentage pursuant to Clause 15.1, the Margin
in accordance with Clause 5.14, the financial covenants referred to in Clause
12.4, the ability of the Borrower to declare a dividend in accordance with
Clause 12.9 and whether a repayment of the Loan needs to be made in accordance
with Clause 8.1; and


 


(e)                     promptly
after each request by the Agent, such further financial information about the
Borrower, the Group, the Ships, the other Fleet Vessels and the Owners
(including, but not limited to, charter arrangements, Financial Indebtedness and
operating expenses) as the Agent may require.


 


11.7           Form of financial
statements. All accounts (audited and unaudited) delivered under Clause
11.6 will:


 


(a)                     be prepared
in accordance with all applicable laws and GAAP consistently applied;


 


(b)                    in the case of
the annual audited financial statements of the Group, be audited by an
internationally renowned auditing firm and such financial statements shall not
include any material qualifications;


 


(c)                     give a true
and fair view of the state of affairs of the Group at the date of those
accounts and of its profit for the period to which those accounts relate; and


 


(d)                    fully disclose
or provide for all significant liabilities of the Group.


 


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


 


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


 


(a)                     for the
Borrower to perform its obligations under any Finance Document;


 


(b)                    for the
validity or enforceability of any Finance Document;


 


(c)                     for each
Owner to continue to own and operate the Ship owned by it,


 


and the Borrower will
comply (or procure compliance) with the terms of all such consents.


 


11.10    Maintenance of Security
Interests. The Borrower will:


 


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


 


(b)                    without
limiting the generality of paragraph (a) above, at its own cost, promptly
register, file, record or enrol any Finance Document with any court or
authority in all Pertinent


 


29

















 


Jurisdictions, pay any
stamp, registration or similar tax in all Pertinent Jurisdictions in respect of
any Finance Document, give any notice or take any other step which, in the
opinion of the Majority Lenders, is or has become necessary or desirable for
any Finance Document to be valid, enforceable or admissible in evidence or to
ensure or protect the priority of any Security Interest which it creates.


 


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


 


11.12    No amendment to Master
Agreement; Transactions. The Borrower will not:


 


(a)                     agree to any
amendment or supplement to, or waive or fail to enforce, the Master Agreement
or any of its provisions; or


 


(b)                    enter into any
Transaction pursuant to the Master Agreement except Designated Transactions.


 


11.13    Principal place of business. The
Borrower will maintain its place of business, and keep its corporate documents
and records, at the address stated in Clause 28.2(a); and the Borrower will not
establish, or do anything as a result of which it would be deemed to have, a
place of business in any country other than the Marshall Islands.


 


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


 


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


 


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


 


The Agent may serve
requests under this Clause 11.14 from time to time but only if asked to do so
by a Lender or Lenders having Contributions exceeding 10 per cent. of the Loan
or (if no Advance has been made) Commitments exceeding 10 per cent of the Total
Commitments; and this Clause 11.14 does not affect the Borrower’s obligations
under Clause 11.15.


 


11.15    Notification of default. The
Borrower will notify the Agent as soon as the Borrower becomes aware of:


 


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


 


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


 


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


 


11.16    Provision of further
information. The Borrower will, as soon as practicable after receiving the
request, provide the Agent with any additional financial or other information
relating:


 


(a)                     to the
Borrower, any Owner, any Ship, the Approved Manager or any other Security
Party, the Insurances or the Earnings; or


 


30

















 


(b)                    to any other
matter relevant to, or to any provision of, a Finance Document


 


which may be requested by
the Agent, the Security Trustee or any Lender at any time.


 


11.17    Provision of copies and
translation of documents. The Borrower will supply the Agent with a
sufficient number of copies of the documents referred to above to provide 1
copy for each Creditor Party; and if the Agent so requires in respect of any of
those documents, the Borrower will provide a certified English translation
prepared by a translator approved by the Agent.


 


11.18    Hedging of interest rate
risks. The Borrower shall deliver to the Agent by no later than the date of
this Agreement the duly signed Hedge Strategy Letter, and shall from time to
time, enter into such Designated Transactions with the Swap Bank in order to
implement the hedging strategy outlined in the Hedge Strategy Letter whereby
for the period on and from the date of this Agreement up to and including the
Final Maturity Date, it will hedge all or the major part of the interest risk
under this Agreement (but in any event not less than 50 per cent. of the
interest rate risk under this Agreement outstanding at any time during the
aforesaid period).


 


11.19    Ownership. The Borrower
shall ensure that (a) it shall remain the direct or indirect owner of the whole
of the issued share capital of each Owner and Epic and (b) there shall be no
change in the legal and beneficial ownership of the shares in each Owner and
Epic.


 


11.20    General and administrative
costs. The Borrow shall ensure that the payment of all the general and
administrative costs of the Borrower and the Owners in connection with the
ownership and operation of the Ships (including, without limitation, the
payment of the management fees pursuant to the Management Agreements) shall be
fully subordinated to the payment obligations of the Borrower and the Owners
under this Agreement and the other Finance Documents throughout the Security
Period.


 


12                     CORPORATE
UNDERTAKINGS


 


12.1           General. The
Borrower also undertakes with each Creditor Party to comply with the following
provisions of this Clause 12 at all times during the Security Period except as
the Agent may, with the authority of the Majority Lenders, otherwise permit.


 


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


 


12.3           Negative undertakings.
The Borrower will not:


 


(a)                     change the
nature of its business; or


 


(b)                    declare or pay any dividend or effect any
other form of distribution save as permitted pursuant to Clause 12.9:


 


(c)                     effect any form of redemption, purchase or
return of share capital; or


 


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


 


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


 


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


 


or enter into any
transaction with or involving such a person or company on terms which are, in
any respect, less favourable to the Borrower than those which it could obtain
in a


 


31

















 


bargain made at arms’
length Provided that this shall
not prevent or restrict the Borrower from on-lending the Loan to the Owners or
granting credit or financial assistance to its wholly-owned direct or indirect
subsidiaries;


 


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


 


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


 


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


 


12.4           Financial Covenants. The
Borrower shall ensure that at all times:


 


(a)                     the ratio of
Total Liabilities to EBITDA shall not exceed 5:1;


 


(b)                    the Market
Value Adjusted Net Worth of the Group shall not be less than $50,000,000;


 


(c)                     there is
available to the Borrower and all the other members of the Group an amount of
not less than $500,000 per Fleet Vessel (excluding, for the avoidance of doubt,
any amount standing to the credit of the Retention Account or any other
restricted account) in Liquid Assets of which, all amounts in respect of the
Ships, shall be held in the Earnings Accounts, the Epic Account, the Swap
Account or such other interest bearing accounts held with the Agent and pledged
in favour of the Security Trustee; and


 


(d)                    the ratio of
Total Liabilities to Market Value Adjusted Total Assets shall not exceed 0.7:1.


 


12.5           Compliance Check. Compliance
with the undertakings contained in Clause 12.4 shall be determined in each
Financial Year:


 


(a)                     at the time
the Agent receives the audited consolidated accounts of the Group and the
unaudited consolidated accounts of the Group (pursuant to Clauses 11.6(a) and
11.6(b) respectively), by reference to the unaudited consolidated accounts in
the case of the first three financial quarters in each Financial Year and for
the fourth financial quarter in each Financial Year, initially by reference to
the unaudited consolidated accounts for the relevant fourth quarter and, once
available, by reference to the audited consolidated accounts for that Financial
Year of the Group; and


 


(b)                    at any other
time as the Agent may reasonably request by reference to such evidence as the
Lenders may require to determine and calculate the financial covenants referred
to in Clause 12.4.


 


At the same time as it
delivers the consolidated accounts referred to in this Clause 12.5, the
Borrower shall deliver to the Agent a Compliance Certificate demonstrating its
compliance (or not, as the case may be) with the provisions of Clause 12.4
signed by the chief financial officer of the Borrower.


 


12.6           Change in accounting
expressions and policies. If, by reason of change in format or GAAP or
other relevant accounting policies, the expressions appearing in any accounts
and financial statements referred to in Clause 11.6 alter from those in the
accounts and financial statements for the Borrower for the year ended 31
December 2006, the relevant definitions contained in Clause 1.1 and the
provisions of Clause 12.4 shall be deemed modified in such manner as the Agent,
acting with the authorisation of the Majority Lenders, shall require to take
account of such different expressions but otherwise to maintain in all respects
the substance of those provisions.


 


32

















 


12.7           Subordination of rights
of Borrower. All rights which the Borrower at any time has (whether in
respect of the Loan or any other transaction) against any Owner or its assets
shall be fully subordinated to the rights of the Creditor Parties under the
Finance Documents; and in particular, the Borrower shall not during the
Security Period:


 


(a)                     claim, or in
a bankruptcy of any Owner or prove for any amount payable to the Borrower by an
Owner, whether in respect of the Loan or any other transaction;


 


(b)                    take or
enforce any Security Interest for any such amount; or


 


(c)                     claim to
set-off any such amount against any amount payable by the Borrower to any
Owner.


 


12.8           Free Syndication
market. The Borrower shall not, and shall ensure that no Owner, no member
of the Group and no affiliate of the Borrower or any other member Group shall,
until the Agent has declared that the primary syndication of the Loan has
closed:


 


(a)                     syndicate or
issue or attempt to syndicate or issue; or


 


(b)                    announce or
authorise the announcement of the syndication or issuance of; or


 


(c)                     engage in
discussions concerning the syndication or issuance of,


 


any Financial
Indebtedness with any banks or financial institutions in the commercial banking
market Provided that this shall
not restrict the Borrower from making any further equity offerings.


 


12.9           Dividend payment. Subject
to the following conditions, the Borrower may pay dividends in any Financial
Year.


 


12.10    Conditions for dividend
payment. The conditions referred to in Clause 12.9 are as follows:


 


(a)                     that the
Agent has received from the Borrower by no later than the relevant Dividend
Declaration Date at least 10 days’ prior written notice of its intention to
announce a dividend payment (such notice hereinafter a “Dividend Declaration”);


 


(b)                    each Dividend
Declaration is accompanied by a completed Compliance Certificate (evidencing
the Borrower is in compliance with the financial covenants referred to in
Clause 12.4) and evidence that the payment of the proposed dividend will not
result in the Borrower being in breach of any of the said financial covenants
or in the occurrence of an Event of Default or a Potential Event of Default;


 


(c)                     each
completed Compliance Certificate referred to in paragraph (b) above shall be
accompanied by the lastest Applicable Accounts evidencing, together with the
details of the aggregate Market Value of the Ships referred to in paragraph (d)
below, the compliance of the Borrower with the financial covenants referred to
in Clause 12.4;


 


(d)                    each Dividend
Declaration is accompanied by details of the Market Value of each Ship
determined in accordance with Clause 15.4 and evidence that the Security Cover Percentage
as at the Dividend Declaration Date is no less than 145 per cent.; and


 


(e)                     the Agent has
confirmed to the Borrower in writing that the Borrower is in compliance with
paragraphs (b) and (c) prior to the Borrower’s announcement of such dividend payment.


 


33

















 


13                     INSURANCE


 


13.1           General. The
Borrower also undertakes with each Creditor Party to procure that each Owner
will comply with the following provisions of this Clause 13 at all times during
the Security Period except as the Agent may, with the authority of the Majority
Lenders, otherwise permit.


 


13.2           Maintenance of
obligatory insurances. The Borrower shall procure that each Owner keep the
Ship owned by it insured at the expense of that Owner against:


 


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


 


(b)                    war risks (including protection and indemnity
war risks);


 


(c)                     in the case of protection and indemnity war
risks, in an amount equal to the amount for which the war risks under the hull
policies are effected;


 


(d)                    protection and indemnity risks in excess of
the limit of cover for oil pollution liability risks included within the
protection and indemnity risks; and


 


(e)                     any other risks against which the Majority
Lenders consider, having regard to practices and other circumstances prevailing
at the relevant time, it would in the opinion of the Majority Lenders be
reasonable for the relevant Owner to insure and which are specified by the
Security Trustee by notice to the relevant Owner.


 


13.3           Terms of obligatory
insurances. The Borrower shall procure that each Owner shall effect such
insurances:


 


(a)                     in Dollars;


 


(b)                    in the case of
fire and usual marine risks and war risks, in an amount on an agreed value
basis at least the greater of (i) an amount, which when aggregated with the
insured value of the other Ships at the relevant time subject to a Mortgage, is
equal to 120 per cent. of the Loan and (ii) the Market Value of the Ship owned
by it; and


 


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


 


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


 


(e)                     on approved
terms; and


 


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


 


13.4           Further protections for
the Creditor Parties. In addition to the terms set out in Clause 13.3, the
Borrower shall procure that the obligatory insurances shall:


 


(a)                     (except in
relation to risks referred to in Clauses 13.2(c) and (d)) name (or be amended
to name) the Security Trustee as additional named assured for its rights and
interests, warranted no operational interest and with full waiver of rights of
subrogation against the Security Trustee, but without the Security Trustee
thereby being liable to pay (but having the right to pay) premiums, calls or
other assessments in respect of such insurance;


 


34

















 


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


 


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


 


(d)                    provide that
the insurers shall waive, to the fullest extent permitted by English law, their
entitlement (if any) (whether by statute, common law, equity, or otherwise) to
be subrogated to the rights and remedies of the Security Trustee in respect of
any rights or interests (secured or not) held by or available to the Security
Trustee in respect of the Secured Liabilities, until the Secured Liabilities
shall have been fully repaid and discharged, except that the insurers shall not
be restricted by the terms of this paragraph (d) from making personal claims
against persons (other than the relevant Owner or any Creditor Party) in circumstances
where the insurers have fully discharged their liabilities and obligations
under the relevant obligatory insurances;


 


(e)                     provide that
such obligatory insurances shall be primary without right of contribution from
other insurances which may be carried by the Security Trustee;


 


(f)                       provide
that the Security Trustee may make proof of loss if the relevant Owner fails to
do so; and


 


(g)                    provide that
if any obligatory insurance is cancelled, or if any substantial change is made
in the coverage which adversely affects the interest of the Security Trustee,
or if any obligatory insurance is allowed to lapse for non-payment of premium,
such cancellation, charge or lapse shall not be effective with respect to the
Security Trustee for 30 days (or 7 days in the case of war risks) after receipt
by the Security Trustee of prior written notice from the insurers of such
cancellation, change or lapse.


 


13.5           Renewal of obligatory
insurances. The Borrower shall procure that each Owner shall:


 


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


 


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


 


(ii)                    in case of any
substantial change in insurance cover, obtain the Security Trustee’s approval
to the matters referred to in paragraph (i) above;


 


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


 


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


 


13.6           Copies of policies;
letters of undertaking. The Borrower shall procure that each Owner shall
ensure that all approved brokers provide the Security Trustee with copies of
all policies relating to the obligatory insurances which they effect or renew
and of a letter or letters of undertaking in a form required by the Majority
Lenders and including undertakings by the approved brokers that:


 


(a)                     they will
have endorsed on each policy, immediately upon issue, a loss payable clause and
a notice of assignment complying with the provisions of Clause 13.4;


 


35

















 


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


 


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


 


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


 


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


 


13.7           Copies of certificates of entry. The
Borrower shall procure that each Owner shall ensure that any protection and
indemnity and/or war risks associations in which the Ship owned by that Owner
is entered provides the Security Trustee with:


 


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


 


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


 


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


 


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


 


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


 


13.9           Payment of premiums. The
Borrower shall procure that each Owner shall punctually pay all premiums or
other sums payable in respect of the obligatory insurances and produce all
relevant receipts when so required by the Security Trustee.


 


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


 


13.11    Restrictions on employment. The
Borrower shall procure that no Owner employ the Ship owned by it, nor permit
her to be employed, outside the cover provided by any obligatory insurances.


 


13.12    Compliance with terms of insurances. The Borrower shall
procure that no Owner shall do or omit to do (or permit to be done or not to be
done) any act or thing which would or


 


36

















 


might render any
obligatory insurance invalid, void, voidable or unenforceable or render any sum
payable thereunder repayable in whole or in part; and, in particular:


 


(a)                     each Owner
shall take all necessary action and comply with all requirements which may from
time to time be applicable to the obligatory insurances, and (without limiting
the obligation contained in Clause 13.7(c) above) ensure that the obligatory
insurances are not made subject to any exclusions or qualifications to which
the Security Trustee has not given its prior approval;


 


(b)                    no Owner shall
make any changes relating to the classification or classification society or
manager or operator of the Ship owned by it unless approved by the underwriters
of the obligatory insurances;


 


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


 


(d)                    no Owner shall
employ the Ship owned by it, nor allow it to be employed, otherwise than in
conformity with the terms and conditions of the obligatory insurances, without
first obtaining the consent of the insurers and complying with any requirements
(as to extra premium or otherwise) which the insurers specify.


 


13.13    Alteration to terms of
insurances. The Borrower shall procure that no Owner shall either make or
agree to any alteration to the terms of any obligatory insurance or waive any
right relating to any obligatory insurance without the prior written consent of
the Security Trustee.


 


13.14    Settlement of claims. The
Borrower shall procure that no Owner shall settle, compromise or abandon any
claim under any obligatory insurance for Total Loss or for a Major Casualty,
and shall do all things necessary and provide all documents, evidence and
information to enable the Security Trustee to collect or recover any moneys
which at any time become payable in respect of the obligatory insurances.


 


13.15    Provision of copies of
communications. The Borrower shall procure that each Owner shall provide
the Security Trustee, at the time of each such communication, copies of all
written communications between that Owner and:


 


(a)                     the approved
brokers; and


 


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


 


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


 


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


 


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


 


13.16    Provision of information. In
addition, the Borrower shall procure that each Owner shall promptly provide the
Security Trustee (or any persons which it may designate) with any information
which the Security Trustee (or any such designated person) requests for the
purpose of:


 


37

















 


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


 


(b)                    effecting,
maintaining or renewing any such insurances as are referred to in Clause 13.17
below or dealing with or considering any matters relating to any such
insurances


 


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


 


13.17    Mortgagee’s interest and
additional peril insurances. The Security Trustee shall be entitled from
time to time to effect, maintain and renew all or any of the following
insurances in such amounts, on such terms, through such insurers and generally
in such manner as the Majority Lenders may from time to time consider
appropriate:


 


(a)                     a mortgagee’s
interest marine insurance in an amount equal to 120 per cent. of the Loan,
providing for the indemnification of the Security Trustee for any losses under
or in connection with any Finance Document which directly or indirectly result
from loss of or damage to any Ship or a liability of any Ship or of any Owner,
being a loss or damage which is prima facie covered by an obligatory insurance
but in respect of which there is a non-payment (or reduced payment) by the
underwriters by reason of, or on the basis of an allegation concerning:


 


(i)        any
act or omission on the part of any Owner, of any operator, charterer, manager
or sub-manager of any Ship or of any officer, employee or agent of any Owner or
of any such person, including any breach of warranty or condition or any
non-disclosure relating to such obligatory insurance;


 


(ii)       any
act or omission, whether deliberate, negligent or accidental, or any knowledge
or privity of any Owner, any other person referred to in paragraph (i) above,
or of any officer, employee or agent of any Owner or of such a person,
including the casting away or damaging of any Ship and/or any Ship being
unseaworthy; and/or


 


(iii)      any
other matter capable of being insured against under a mortgagee’s interest
marine insurance policy whether or not similar to the foregoing;


 


(b)                    a mortgagee’s
interest additional perils policy in an amount not less than 110 per cent. of
the Loan, providing for the indemnification of the Security Trustee against,
among other things, any possible losses or other consequences of any
Environmental Claim, including the risk of expropriation, arrest or any form of
detention of any Ship, the imposition of any Security Interest over any Ship
and/or any other matter capable of being insured against under a mortgagee’s
interest additional perils policy whether or not similar to the foregoing


 


and the Borrower shall
upon demand fully  indemnify the Security
Trustee in respect of all premiums and other expenses which are incurred in
connection with or with a view to effecting, maintaining or renewing any such
insurance or dealing with, or considering, any matter arising out of any such
insurance.


 


13.18    Review of insurance
requirements. The Majority Lenders shall be entitled to review the
requirements of this Clause 13 from time to time in order to take account of
any changes in circumstances after the date of this Agreement which are, in the
opinion of the Majority Lenders, significant and capable of affecting the
Owners or the Ships and their insurance (including, without limitation, changes
in the availability or the cost of insurance coverage or the risks to which the
Owners may be subject), and may appoint insurance consultants in relation to
this review at the cost of the Borrower.


 


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13.19    Modification of insurance
requirements. The Security Trustee shall notify the Borrower of any
proposed modification under Clause 13.18 to the requirements of this Clause 13
which the Majority Lenders consider appropriate in the circumstances, and such
modification shall take effect on and from the date it is notified in writing
to the Borrower as an amendment to this Clause 13 and shall bind the Borrower
accordingly.


 


13.20    Compliance with mortgagee’s
instructions. The Security Trustee shall be entitled (without prejudice to
or limitation of any other rights which it may have or acquire under any
Finance Document) to require any Ship to remain at any safe port or to proceed
to and remain at any safe port designated by the Security Trustee until the
Owner of that Ship implements any amendments to the terms of the obligatory
insurances and any operational changes required as a result of a notice served
under Clause 13.19.


 


14                     SHIP
COVENANTS


 


14.1           General. The
Borrower also undertakes with each Creditor Party to procure that each Owner
shall comply with the following provisions of this Clause 14 at all times
during the Security Period except as the Agent, with the authority of the
Majority Lenders, may otherwise permit.


 


14.2           Ship’s name and
registration. The Borrower shall procure that each Owner shall keep the
Ship owned by it registered in its ownership under the relevant Designated
Flag; shall not do or allow to be done anything as a result of which such
registration might be cancelled or imperilled; and shall not change the name or
port of registry of any Ship.


 


14.3           Repair and
classification. The Borrower shall procure that each Owner shall keep the
Ship owned by it in a good and safe condition and state of repair:


 


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


 


(b)                    so as to
maintain the highest class with a first-class classification society which is a
member of IACS acceptable to the Agent free of overdue recommendations and
conditions of such classification society; and


 


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


 


14.4           Classification society
undertaking. The Borrower shall procure that each Owner shall instruct the
classification society referred to in Clause 14.3 (and procure that the
classification society undertakes with the Security Trustee):


 


(a)                     to send to
the Security Trustee, following receipt of a written request from the Security
Trustee, certified true copies of all original class records and any other
related records held by the classification society in relation to the Ship
owned by that Owner;


 


(b)                    to allow the
Security Trustee (or its agents), at any time and from time to time, to inspect
the original class and related records of that Owner and its Ship at the
offices of the classification society and to take copies of them;


 


(c)                     to notify the
Security Trustee immediately in writing if the classification society:


 


(i)                       receives
notification from the Owner or any person that the Ship’s classification
society is to be changed; or


 


(ii)                    becomes aware
of any facts or matters which may result in or have resulted in a change,
suspension, discontinuance, withdrawal or expiry of the Ship’s class


 


39

















 


under the rules or terms
and conditions of the Owner’s or the Ship’s membership of the classification
society;


 


(d)                    following
receipt of a written request from the Security Trustee:


 


(i)                       to confirm
that the Owner is not in default of any of its contractual obligations or
liabilities to the classification society and, without limiting the foregoing,
that it has paid in full all fees or other charges due and payable to the classification
society; or


 


(ii)                    if the Owner
is in default of any of its contractual obligations or liabilities to the
classification society, to specify to the Security Trustee in reasonable detail
the facts and circumstances of such default, the consequences thereof, and any
remedy period agreed or allowed by the classification society.


 


14.5           Modification. The
Borrower shall procure that no Owner shall make any modification or repairs to,
or replacement of, the Ship owned by it or equipment installed on her which
would or might materially alter the structure, type or performance
characteristics of the Ship or materially reduce her value.


 


14.6           Removal of parts. The
Borrower shall procure that no Owner shall remove any material part of the Ship
owned by it, or any item of equipment installed on, the Ship unless the part or
item so removed is forthwith replaced by a suitable part or item which is in
the same condition as or better condition than the part or item removed, is
free from any Security Interest or any right in favour of any person other than
the Security Trustee and becomes on installation on the Ship the property of
the Owner and subject to the security constituted by the Mortgage and if
applicable, the Deed of Covenant, relative to the Ship Provided that the Owner may install
equipment owned by a third party if the equipment can be removed without any
risk of damage to the Ship.


 


14.7           Surveys. The
Borrower shall procure that each Owner shall submit the Ship owned by it
regularly to all periodical or other surveys which may be required for
classification purposes and, if so required by the Majority Lenders, provide
the Security Trustee (at the expense of the Borrower) with copies of all survey
reports.


 


14.8           Inspection.


 


(a)                     In the event
the survey report of a Ship obtained by the Agent pursuant to paragraph 7 of
Part C of Schedule 4 is, in the Agent’s sole and absolute discretion, not
satisfactory, the Borrower shall procure that the relevant Owner shall (at the
Borrower’s expense) permit the Agent (by surveyors or other persons appointed
by it for that purpose) to board the Ship owned by it during the first six
months after that Owner’s acquisition of such Ship at any time to inspect her
condition or to satisfy themselves about proposed or executed repairs and shall
afford all proper facilities for such inspections; and


 


(b)                    at all other
times, the Borrower shall procure that each Owner shall permit the Security
Trustee (by surveyors or other persons appointed by it for that purpose) to
board the Ship owned by it at all reasonable times to inspect her condition or
to satisfy themselves about proposed or executed repairs and shall afford all
proper facilities for such inspections Provided
that so long as no Event of Default has occurred and is continuing at
the relevant time and a Ship is found to be in a satisfactory condition (in the
opinion of the Security Trustee) the Borrower shall be obliged to pay the fees
and expenses of one inspection of that Ship in any calendar year.


 


14.9           Prevention of and release
from arrest. The Borrower shall procure that each Owner shall promptly
discharge:


 


40

















 


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


 


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


 


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


 


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


 


14.10    Compliance with laws etc. The
Borrower shall procure that each Owner and the Approved Manager shall:


 


(a)                     comply, or
procure compliance with the ISM Code, the ISPS Code, all Environmental Laws and
all other laws or regulations relating to the Ship owned by the relevant Owner,
its ownership, operation and management or to the business of that Owner;


 


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


 


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


 


14.11    Provision of information. The
Borrower shall procure that each Owner shall promptly provide the Security
Trustee with any information which the Majority Lenders request regarding:


 


(a)                     the Ship
owned by it, her employment, position and engagements;


 


(b)                    the Earnings
and payments and amounts due to the master and crew of the Ship owned by it;


 


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


 


(d)                    any towages
and salvages;


 


(e)                     its
compliance or the compliance of the Ship owned by it with the ISM Code and the
ISPS Code,


 


and, upon the Security
Trustee’s request, provide copies of any current charter relating to the Ship
and of any current charter guarantee, and copies of the ISM Code Documentation
and the ISPS Code Documentation.


 


14.12    Notification of certain
events. The Borrower shall procure that each Owner shall immediately notify
the Security Trustee by letter of:


 


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


 


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


 


41

















 


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


 


(d)                    any arrest or
detention of the Ship owned by it, any exercise or purported exercise of any
lien on that Ship or her Earnings or any requisition of that Ship for hire;


 


(e)                     any intended
dry docking of the Ship;


 


(f)                       any
Environmental Claim made against that Owner or in connection with the Ship
owned by it, or any Environmental Incident;


 


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


 


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


 


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


 


14.13    Restrictions on chartering,
appointment of managers etc. The Borrower shall procure that no Owner
shall:


 


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


 


(b)                    other than the
relevant Initial Charterparty or Future Charterparty, enter into any time or
consecutive voyage charter in respect of the Ship for a term which exceeds, or
which by virtue of any optional extensions may exceed, 11 months;


 


(c)                     change the
terms on which the Ship is employed or the identity of the person by whom the
Ship is employed;


 


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


 


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


 


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


 


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


 


(h)                    put the Ship
into the possession of any person for the purpose of work being done upon her
in an amount exceeding or likely to exceed $500,000 (or the equivalent in any
other currency) unless that person has first given to the Security Trustee and
in terms satisfactory to it a written undertaking not to exercise any lien on
the Ship or her Earnings for the cost of such work or otherwise.


 


14.14    Notice of Mortgage. The
Borrower shall procure that each Owner shall keep the Mortgage applicable to
the Ship owned by it registered against that Ship as a valid first priority or
first preferred mortgage, carry on board that Ship a certified copy of the
Mortgage and place and maintain in a conspicuous place in the navigation room
and the Master’s cabin of that Ship a framed printed notice stating that that
Ship is mortgaged by the relevant Owner to the Security Trustee.


 


14.15    Sharing of Earnings. The
Borrower shall procure that no Owner shall:


 


42

















 


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


 


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


 


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


 


14.16    Initial Charterparty. The
Borrower shall procure that on or before the first Drawdown Date, each Ship
shall be time chartered pursuant to the terms of an Initial Charterparty which
shall be for a period of not less than 12 months duration with a reputable (in
the opinion of the Agent) charterer and which shall provide for a net daily charter
hire rate sufficient (in the Agent’s sole and absolute discretion) to cover the
operational expenses of that Ship and the proportion of debt service (namely
principal and interest payments due under this Agreement) attributable by the
Agent to that Ship.


 


14.17    Charterparty Assignment. If
any Owner enters into any Future Charterparty in respect of its Ship that Owner
shall, at the request of the Agent, execute, or, as the case may be, procure
the execution in favour of the Security Trustee of a Charterparty Assignment in
respect of that Future Charterparty, and shall deliver to the Agent such other
documents equivalent to those referred to at paragraphs 3, 4 and 5 of Schedule
4, Part A as the Agent may require.


 


15                     SECURITY
COVER


 


15.1           Provision of additional
security cover; prepayment of Loan. The Borrower undertakes with each
Creditor Party that if the Agent notifies the Borrower that:


 


(a)                     the aggregate
Market Value of the Ships subject to a Mortgage; plus


 


(b)                    the net
realisable value of any additional security previously provided under this
Clause 15;


 


is below 140 per cent. of
the Loan, the Borrower will on the first Business Day after the date on which
the Agent’s notice is served prepay in accordance with Clause 8 such part (at
least) of the Loan as will eliminate the shortfall.


 


If the Borrower satisfies
the Majority Lenders that it is unable to make the prepayment of the Loan
required pursuant to this Clause 15.1, the Agent (acting upon the instructions
of the Majority Lenders) may (in its sole and absolute discretion) agree
instead to accept within 14 days after the date on which its notice is served,
additional security from the Borrower or a third party which, in the opinion of
the Majority Lenders, has a net realisable value at least equal to the
shortfall and which, if it consists of or includes a Security Interest, covers
such asset or assets and is documented in such terms as the Agent may, with
authorisation from the Majority Lenders, approve or require.


 


15.2           Meaning of additional
security. In  Clause 15.1 “security” means a Security Interest over
an asset or assets (including, without limitation a vessel (other than a Ship))
(whether securing the Borrower’s liabilities under the Finance Documents or a
guarantee in respect of those liabilities), or a guarantee, letter of credit,
cash deposit or other security acceptable to the Majority Lenders (in their
sole and absolute discretion) in respect of the Borrower’s liabilities under
the Finance Documents.


 


15.3           Requirement for
additional documents. The Borrower shall not be deemed to have complied
with Clause 15.1 (i) above until the Agent has received in connection with the
additional security certified copies of documents of the kinds referred to in
paragraphs 3,


 


43

















 


4 and 5 of Schedule 5,
Part A and such legal opinions in terms acceptable to the Majority Lenders from
such lawyers as they may select.


 


15.4           Valuation of Ship. The
market value of a Ship at any date is that shown by taking the arithmetic mean
of two valuations each prepared:


 


(a)                     as at a date
not more than 30 days previously;


 


(b)                    in the case of
the first valuation, by an Approved Broker appointed by the Borrower and, in
the case of the second valuation, by an Approved Broker appointed by the Agent;


 


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


 


(d)                    on the basis
of a sale for prompt delivery for cash on normal arm’s length commercial terms
as between a willing seller and a willing buyer, free of any existing charter
or other contract of employment; and


 


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


 


Provided
that if the two valuations provided pursuant to this Clause 15.4
differ by more than 15 per cent., a third valuation shall be obtained from a
third Approved Broker appointed by the Agent and prepared on the basis
described in paragraphs (a), (c), (d) and (e) of this Clause 15.4 and the
Market Value of the relevant Ship which is the subject of the third valuation
shall be the arithmetic mean of the three valuations obtained pursuant to this
Clause 15.4.


 


15.5           Value of additional
security. The net realisable value of any additional security which is
provided under Clause 15.1 and which consists of a Security Interest over a
vessel shall be that shown by a valuation complying with the requirements of
Clause 15.4.


 


15.6           Valuations binding. Any
valuation under Clause 15.1(i), 15.4 or 15.5 shall be binding and conclusive as
regards the Borrower, as shall be any valuation which the Majority Lenders make
of a security which does not consist of or include a Security Interest.


 


15.7           Provision of
information. The Borrower shall promptly provide the Agent and any Approved
Broker or expert acting under Clause 15.4 or 15.5 with any information which
the Agent or the Approved Broker or expert may request for the purposes of the
valuation; and, if the Borrower fails to provide the information by the date
specified in the request, the valuation may be made on any basis and
assumptions which the Approved Broker or the Majority Lenders (or the expert
appointed by them) consider prudent.


 


15.8           Payment of valuation
expenses. Without prejudice to the generality of the Borrower’s obligations
under Clauses 20.2, 20.3 and 21.3, the Borrower shall, on demand, pay the Agent
the amount of the fees and expenses of any Approved Broker instructed by the
Agent under this Clause.


 


16                     PAYMENTS AND
CALCULATIONS


 


16.1           Currency and method of
payments. All payments to be made:


 


(a)                     by the
Lenders to the Agent; or


 


(b)                    by the
Borrower to the Agent, the Security Trustee or any Lender


 


under a Finance Document
shall be made to the Agent or to the Security Trustee, in the case of an amount
payable to it:


 


44

















 


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


 


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


 


(iii)                 to the account of
the Agent at JPMorgan Chase Bank, New York (Account No 001-1-331808 SWIFT Code:
CHASUS 33 under reference “Paragon Shipping Inc. - US$108.25m facility”), or to
such other account with such other bank as the Agent may from time to time
notify to the Borrower and the other Creditor Parties; and


 


(iv)                in the case of an
amount payable to the Security Trustee, to such account as it may from time to
time notify to the Borrower and the other Creditor Parties.


 


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


 


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


 


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


 


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


 


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


 


16.4           Distribution of
payments to Creditor Parties. Subject to Clauses 16.5, 16.6 and 16.7:


 


(a)                     any amount
received by the Agent under a Finance Document for distribution or remittance
to a Lender, the Swap Bank or the Security Trustee shall be made available by
the Agent to that Lender or, as the case may be, the Swap Bank or the Security
Trustee by payment, with funds having the same value as the funds received, to
such account as the Lender, the Swap Bank or the Security Trustee may have
notified to the Agent not less than 5 Business Days previously; and


 


(b)                    amounts to be
applied in satisfying amounts of a particular category which are due to the
Lenders or the Swap Bank generally shall be distributed by the Agent to each
Lender or the Swap Bank pro rata to the amount in that category which is due to
it.


 


16.5           Permitted deductions by
Agent. Notwithstanding any other provision of this Agreement or any other
Finance Document, the Agent may, before making an amount available to a Lender
or the Swap Bank, deduct and withhold from that amount any sum which is then
due and payable to the Agent from that Lender or the Swap Bank under any
Finance Document or any sum which the Agent is then entitled under any Finance
Document to require that Lender or the Swap Bank to pay on demand.


 


16.6           Agent only obliged to
pay when monies received. Notwithstanding any other provision of this
Agreement or any other Finance Document, the Agent shall not be obliged to make
available to the Borrower or any Lender or the Swap Bank any sum which the
Agent is expecting to receive for remittance or distribution to the Borrower or
that Lender or the Swap Bank until the Agent has satisfied itself that it has
received that sum.


 


45

















 


16.7           Refund to Agent of
monies not received. If and to the extent that the Agent makes available a
sum to the Borrower or a Lender or the Swap Bank, without first having received
that sum, the Borrower or (as the case may be) the Lender or the Swap Bank
concerned shall, on demand:


 


(a)                     refund the
sum in full to the Agent; and


 


(b)                    pay to the
Agent the amount (as certified by the Agent) which will indemnify the Agent
against any funding or other loss, liability or expense incurred by the Agent
as a result of making the sum available before receiving it.


 


16.8           Agent may assume
receipt. Clause 16.7 shall not affect any claim which the Agent has under
the law of restitution, and applies irrespective of whether the Agent had any
form of notice that it had not received the sum which it made available.


 


16.9           Creditor Party
accounts. Each Creditor Party shall maintain accounts showing the amounts
owing to it by the Borrower and each Security Party under the Finance Documents
and all payments in respect of those amounts made by the Borrower and any
Security Party.


 


16.10    Agent’s memorandum account. The
Agent shall maintain a memorandum account showing the amounts advanced by the
Lenders and all other sums owing to the Agent, the Security Trustee and each
Lender from the Borrower and each Security Party under the Finance Documents
and all payments in respect of those amounts made by the Borrower and any
Security Party.


 


16.11    Accounts prima facie evidence.
If any accounts maintained under Clauses 16.9 and 16.10 show an amount to
be owing by the Borrower or a Security Party to a Creditor Party, those accounts
shall, absent manifest error, be prima facie evidence that that amount is owing
to that Creditor Party.


 


17                     APPLICATION
OF RECEIPTS


 


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


 


(a)                     FIRST: in or
towards satisfaction of any amounts then due and payable under the Finance
Documents and the Master Agreement in the following order and proportions:


 


(i)        first, in or towards
satisfaction pro rata of all amounts then due and payable to the Creditor
Parties under the Finance Documents other than those amounts referred to at
paragraphs (ii) and (iii) (including, but without limitation, all amounts
payable by the Borrower under Clauses 20, 21 and 22 of this Agreement or by the
Borrower or any Security Party under any corresponding or similar provision in
any other Finance Document or in the Master Agreement);


 


(ii)       secondly, in or towards
satisfaction pro rata of any and all amounts of interest or default interest
payable to the Creditor Parties under the Finance Documents and the Master
Agreement (and, for this purpose, the expression “interest” shall include any net amount which the Borrower
shall have become liable to pay or deliver under section 2(e) (Obligations) of
the Master Agreement but shall have failed to pay or deliver to the Swap Bank
at the time of application or distribution under this Clause 17); and


 


(iii)      thirdly, in or towards satisfaction
pro rata of the Loan and the Swap Exposure of the Swap Bank (in the case of the
latter, calculated as at the actual Early Termination Date applying to each
particular Designated Transaction, or if no


 


46

















 


such Early Termination
Date shall have occurred, calculated as if an Early Termination Date occurred
on the date of application or distribution hereunder);


 


(b)                    SECONDLY: in
retention of an amount equal to any amount not then due and payable under any
Finance Document or the Master Agreement but which the Agent, by notice to the
Borrower, the Security Parties and the other Creditor Parties, states in its
opinion will or may become due and payable in the future and, upon those
amounts becoming due and payable, in or towards satisfaction of them in
accordance with the provisions of Clause 17.1(a); and


 


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


 


17.2           Variation of order of
application. The Agent may, with the authorisation of the Majority Lenders
and the Swap Bank by notice to the Borrower, the Security Parties and the other
Creditor Parties provide for a different manner of application from that set
out in Clause 17.1 either as regards a specified sum or sums or as regards sums
in a specified category or categories.


 


17.3           Notice of variation of
order of application. The Agent may give notices under Clause 17.2 from
time to time; and such a notice may be stated to apply not only to sums which
may be received or recovered in the future, but also to any sum which has been
received or recovered on or after the third Business Day before the date on
which the notice is served.


 


17.4           Appropriation rights
overridden. This Clause 17 and any notice which the Agent gives under
Clause 17.3 shall override any right of appropriation possessed, and any
appropriation made, by the Borrower or any Security Party.


 


18                     APPLICATION
OF EARNINGS


 


18.1           Payment of Earnings. The
Borrower undertakes with each Creditor Party to ensure that throughout the
Security Period:


 


(a)                     (subject only
to provisions of the relevant General Assignment), all the Earnings of each
Ship are paid to the Earnings Account for that Ship; and


 


(b)                    all payments
by the Swap Bank to a Borrower under a Designated Transaction are paid to the
Swap Account.


 


18.2           Retentions. The
Borrower undertakes with each Creditor Party to ensure that:


 


(a)                     no later than
3 Business Days after a Relevant Dividend Declaration Date, there shall be
transferred to the Retention Account out of the aggregate Earnings received in
the Earnings Accounts, the repayment instalment falling due under Clause 8.1 at
that time; and


 


(b)                    in each
calendar month of the Security Period commencing on the date falling 1 month
after the first Drawdown Date and on the same day in each subsequent month,
there is transferred to the Retention Account out of the aggregate Earnings
received in the Earnings Accounts during the preceding calendar month the
relevant fraction of the amount of interest on the Loan which is payable on the
next due date for payment of interest for the Loan under this Agreement.


 


The “relevant fraction” in paragraph (b) above,
is a fraction of which the numerator is 1 and the denominator the number of
months comprised in the then current Interest Period applicable to the Loan
(or, if the current Interest Period ends after the next date for payment of
interest under this Agreement, the number of months from the later of the


 


47

















 


commencement of the
current Interest Period or the last due date for payment of interest to the
next date for payment of interest under this Agreement).


 


18.3           Shortfall in Earnings. If
the aggregate Earnings received are insufficient in any month for the required
amount to be transferred to the Retention Account under Clause 18.2, the
Borrower shall make up the amount of the insufficiency on demand from the
Agent; but, without thereby prejudicing the Agent’s right to make such demand
at any time, the Agent may, if so authorised by the Majority Lenders, permit
the Borrower to make up all or part of the insufficiency by increasing the
amount of any transfer under Clause 18.2 from the Earnings received in the next
or subsequent months.


 


18.4           Application of retentions.
Until an Event of Default occurs, the Agent shall on each due date for the
payment of interest under this Agreement distribute to the Lenders in
accordance with Clause 16.4 so much of the then balance on the Retention
Account as equals:


 


(a)                     any repayment
instalment due in accordance with Clause 8.1 on that interest payment date; and


 


(b)                    the amount of
interest payable on that interest payment date


 


in discharge of the
Borrower’s liability for that repayment instalment or that interest.


 


18.5           Interest accrued on
Retention Account. Any credit balance on the Retention Account shall bear
interest at the rate from time to time offered by the Agent to its customers
for Dollar deposits of similar amounts and for periods similar to those for
which such balances appear to the Agent likely to remain on the Retention
Account.


 


18.6           Release of accrued
interest. Interest accruing under Clause 18.5 shall be released to the
Borrower on each interest payment date unless an Event of Default or a
Potential Event of Default has occurred or the then credit balance on the
Retention Account is less than what would have been the balance had the full
amount required by Clause 18.2 (and Clause 18.3, if applicable) been
transferred in that and each previous month.


 


18.7           Location of accounts. The
Borrower shall promptly:


 


(a)                     comply, and
ensure that the Owners and Epic comply, with any requirement of the Agent as to
the location or re-location of any Earnings Account, the Epic Account, the Swap
Account or the Retention Account;


 


(b)                    execute, and
ensure that the Owners and Epic execute, any documents which the Agent
specifies to create or maintain in favour of the Security Trustee a Security
Interest over (and/or rights of set-off, consolidation or other rights in
relation to) the Earnings Accounts (or any of them), the Epic Account, the Swap
Account and the Retention Account.


 


18.8           Debits for expenses
etc. The Agent shall be authorised by the Borrower (but not obliged) from
time to time to debit the Earnings Account without prior notice in order to
discharge any amount due and payable under Clause 20 or 21 to a Creditor Party
or payment of which any Creditor Party has become entitled to demand under
Clause 20 or 21.


 


18.9           Borrower’ obligations
unaffected. The provisions of this Clause 18 do not affect:


 


(a)                     the
liability of the Borrower to make payments of principal and interest on the due
dates; or


 


48














 


(b)                    any other
liability or obligation of the Borrower or any Security Party under any Finance
Document.


 


18.10    Epic Account. The Owners
may from time to time transfer credit balances on the Earnings Accounts to the
Epic Account subject to the Borrower being in compliance with its obligations
under this Agreement (including, without limitation, Clause 18.2).


 


19                     EVENTS OF
DEFAULT


 


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


 


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


 


(b)                    any breach
occurs of Clause 9.2, 11.2, 11.3, 11.4, 11.6, 11.19, 11.20, 12.2, 12.3, 12.4,
12.5, 12.9, 12.10, 13.2, 15.1 or 18.1; or


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


49

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


(h)                    the Borrower
or any Security Party ceases or suspends carrying on or changes the nature of
its business or a part of its business which, in the opinion of the Majority
Lenders, is material in the context of this Agreement; or


 


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


 


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


 


(ii)                    for the Agent,
the Security Trustee, the Lenders or the Swap Bank to exercise or enforce any
right under, or to enforce any Security Interest created by, a Finance
Document; or


 


(j)                        any
consent necessary to enable any Owner to own, operate or charter a Ship or to
enable the Borrower or any Security Party to comply with any provision which
the Majority


 


50

















 


Lenders consider
material of a Finance Document is not granted, expires without being renewed,
is revoked or becomes liable to revocation or any condition of such a consent
is not fulfilled; or


 


(k)                     it appears to
the Majority Lenders that, without their prior written consent, a change has
occurred or probably has occurred after the date of this Agreement in the
ultimate beneficial ownership of any of the shares in the Borrower or any Owner
or Epic or in the ultimate control of the voting rights attaching to any of
those shares; or


 


(l)                        the
Sponsors cease to be the only shareholders of the Borrower (either directly
and/or through companies beneficially owned by the Sponsors);


 


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


 


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


 


(o)                    the Master
Agreement is terminated, cancelled, suspended, rescinded or revoked or
otherwise ceases to remain in full force and effect for any reason except with
the consent of the Agent, acting with the authorisation of the Majority
Lenders; or


 


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


 


(i)                       a change in
the financial position, state of affairs or prospects of any Security Party; or


 


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


 


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


 


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


 


(a)                     the Agent
may, and if so instructed by the Majority Lenders, the Agent shall:


 


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


 


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


 


(iii)                 take any other
action which, as a result of the Event of Default or any notice served under
paragraph (i) or (ii) above, the Agent and/or the Lenders are entitled to take
under any Finance Document or any applicable law; and/or


 


(b)                    the Security
Trustee may, and if so instructed by the Agent, acting with the authorisation
of the Majority Lenders, the Security Trustee shall take any action which, as a
result of the Event of Default or any notice served under paragraph (a) (i) or
(ii) above, the


 


51

















 


Security Trustee, the
Agent and/or the Lenders and/or the Swap Bank are entitled to take under any
Finance Document or any applicable law.


 


19.3           Termination of
Commitments. On the service of a notice under paragraph (a)(i) of Clause
19.2, the Commitments and all other obligations of each Lender to the Borrower
under this Agreement shall terminate.


 


19.4           Acceleration of Loan. On
the service of a notice under paragraph (a)(ii) of Clause 19.2, the Loan, all
accrued interest and all other amounts accrued or owing from the Borrower or
any Security Party under this Agreement and every other Finance Document shall
become immediately due and payable or, as the case may be, payable on demand.


 


19.5           Multiple notices;
action without notice. The Agent may serve notices under paragraphs (a) (i)
and (ii) of Clause 19.2 simultaneously or on different dates and it and/or the
Security Trustee may take any action referred to in that Clause if no such
notice is served or simultaneously with or at any time after the service of
both or either of such notices.


 


19.6           Notification of
Creditor Parties and Security Parties. The Agent shall send to each Lender,
the Security Trustee and each Security Party a copy of the text of any notice
which the Agent serves on the Borrower under Clause 19.2; but the notice shall
become effective when it is served on the Borrower, and no failure or delay by
the Agent to send a copy of the text of the notice to any other person shall
invalidate the notice or provide the Borrower or any Security Party with any
form of claim or defence.


 


19.7           Lender’s rights
unimpaired. Nothing in this Clause shall be taken to impair or restrict the
exercise of any right given to individual Lenders under a Finance Document or
the general law; and, in particular, this Clause is without prejudice to Clause
3.1.


 


19.8           Exclusion of Creditor
Party Liability. No Creditor Party, and no receiver or manager appointed by
the Security Trustee, shall have any liability to the Borrower or a Security
Party:


 


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


 


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


 


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


 


19.9           Relevant Persons. In
this Clause 19 “a Relevant Person” means
the Borrower, a Security Party and any other member of the Group; but excluding
any company which is dormant and the value of whose gross assets is $50,000 or
less.


 


19.10    Position of Swap Bank. Neither
the Agent nor the Security Trustee shall be obliged, in connection with any action
taken or proposed to be taken under or pursuant to the foregoing provisions of
this Clause 19, to have any regard to the requirements of the Swap Bank except
to the extent that the Swap Bank is also a Lender.


 


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


 


52

















 


20                     FEES AND
EXPENSES


 


20.1           Facility and commitment
fees. The Borrower shall pay to the Agent:


 


(a)                     commencing on
the date of the Amending and Restating Agreement a commitment fee for
distribution among the Lenders pro rata to their Commitments at the rate of
0.30 per cent. per annum on the amount of the Total Commitments less the amount
of the Loan, such fee to be paid quarterly in arrears and on termination of the
Total Commitments; and


 


(b)                    such other
facility fees as are referred to in the Fee Letter, such fees being payable at
the times and in the manner referred to in the Fee Letter.


 


20.2           Costs of negotiation,
preparation etc. The Borrower shall pay to the Agent on its demand the
amount of all expenses incurred by the Agent or the Security Trustee in
connection with the negotiation, preparation, execution or registration of any
Finance Document or any related document or with any transaction contemplated
by a Finance Document or a related document (including, without limitation, any
legal fees (which shall include, for the avoidance of doubt, the fees incurred
by the Agent with respect to the legal opinions referred to in Schedule 4) or
out of pocket expenses and printing expenses).


 


20.3           Costs of variations,
amendments, enforcement etc. The Borrower shall pay to the Agent, on the
Agent’s demand, the amount of all expenses (including, without limitation, any
legal fees or expenses) incurred by a Lender or the Swap Bank in connection
with:


 


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


 


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


 


(c)                     the valuation
of any security provided or offered under Clause 15 or any other matter
relating to such security;


 


(d)                    such
circumstances where the Agent, in its absolute opinion, considers that there
has been a material change to the insurances in respect of a Ship, the review
of the insurances of that Ship pursuant to Clause 13.18;


 


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


 


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


 


20.4           Documentary taxes. The
Borrower shall promptly pay any tax payable on or by reference to any Finance
Document, and shall, on the Agent’s demand, fully indemnify each Creditor Party
against any liabilities and expenses resulting from any failure or delay by the
Borrower to pay such a tax.


 


20.5           Certification of
amounts. A notice which is signed by two officers of a Creditor Party,
which states that a specified amount, or aggregate amount, is due to that
Creditor Party under this Clause 20 and which indicates (without necessarily
specifying a detailed breakdown) the matters in respect of which the amount, or
aggregate amount, is due shall be prima facie evidence that the amount, or
aggregate amount, is due.


 


53

















 


21                     INDEMNITIES


 


21.1           Indemnities regarding
borrowing and repayment of Loan. The Borrower shall fully indemnify the
Agent and each Lender on the Agent’s demand and the Security Trustee on its
demand in respect of all expenses, liabilities and losses which are incurred by
that Creditor Party, or which that Creditor Party reasonably and with due
diligence estimates that it will incur, as a result of or in connection with:


 


(a)                     an Advance
not being borrowed on the date specified in the Drawdown Notice for that
Advance for any reason other than a default by the Lender claiming the
indemnity;


 


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


 


(c)                     any failure
(for whatever reason) by the Borrower to make payment of any amount due under a
Finance Document on the due date or, if so payable, on demand (after giving
credit for any default interest paid by the Borrower on the amount concerned under
Clause 7);


 


(d)                    the occurrence
and/or continuance of an Event of Default or a Potential Event of Default
and/or the acceleration of repayment of the Loan under Clause 19;


 


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


 


21.2           Breakage costs. Without
limiting its generality, Clause 21.1 covers any liability, expense or loss,
including a loss of a prospective profit, incurred by a Lender:


 


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


 


(b)                    in
terminating, or otherwise in connection with, any interest and/or currency swap
or any other transaction entered into (whether with another legal entity or
with another office or department of the Lender concerned) to hedge any
exposure arising under this Agreement or that part which the Lender concerned
determines is fairly attributable to this Agreement of the amount of the
liabilities, expenses or losses (including losses of prospective profits)
incurred by it in terminating, or otherwise in connection with, a number of
transactions of which this Agreement is one.


 


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


 


(a)                     any action
taken, or omitted or neglected to be taken, under or in connection with any
Finance Document by the Agent, the Security Trustee or any other Creditor Party
or by any receiver appointed under a Finance Document;


 


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


 


54

















 


other than liability
items which are shown to have been caused by the gross negligence or the wilful
misconduct of the relevant Creditor Party’s own officers or employees.


 


21.4           Extension of
indemnities; environmental indemnity. Without prejudice to its generality,
Clause 21.3 covers:


 


(a)                     any matter
which would be covered by Clause 21.3 if any of the references in that Clause
to a Lender were a reference to the Agent or (as the case may be) to the
Security Trustee; and


 


(b)                    any liability
items which arise, or are asserted, under or in connection with any law
relating to safety at sea, pollution, the protection of the environment, the
ISM Code or the ISPS Code.


 


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


 


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


 


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


 


(c)                     enforcing any
such order or judgment;


 


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


 


In this Clause 21.5, the “available rate of exchange” means the rate
at which the Creditor Party concerned is able at the opening of business
(Hamburg time) on the Business Day after it receives the sum concerned to
purchase the Contractual Currency with the Payment Currency.


 


This Clause 21.5 creates
a separate liability of the Borrower which is distinct from its other
liabilities under the Finance Documents and which shall not be merged in any
judgment or order relating to those other liabilities.


 


21.6           Application to Master
Agreement. For the avoidance of doubt, Clause 21.5 does not apply in respect
of sums due from the Borrower to the Swap Bank under or in connection with the
Master Agreement as to which sums the provisions of section 8 (Contractual
Currency) of the Master Agreement shall apply.


 


21.7           Certification of
amounts. A notice which is signed by 2 officers of a Creditor Party, which
states that a specified amount, or aggregate amount, is due to that Creditor
Party under this Clause 21 and which indicates (without necessarily specifying
a detailed breakdown) the matters in respect of which the amount, or aggregate
amount, is due shall be prima facie evidence that the amount, or aggregate
amount, is due.


 


21.8           Sums deemed due to a
Lender. For the purposes of this Clause 21, a sum payable by the Borrower
to the Agent or the Security Trustee for distribution to a Lender shall be
treated as a sum due to that Lender.


 


55

















 


22                     NO SET-OFF OR
TAX DEDUCTION


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


22.3           Evidence of payment of
taxes. Within 1 month after making any tax deduction, the Borrower
concerned shall deliver to the Agent documentary evidence satisfactory to the
Agent that the tax had been paid to the appropriate taxation authority.


 


22.4           Exclusion of tax on
overall net income. In this Clause 22 “tax
deduction” means any deduction or withholding for or on account of
any present or future tax except tax on a Creditor Party’s overall net income.


 


22.5           Application to the
Master Agreement. For the avoidance of doubt, Clause 22 does not apply in
respect of sums due from the Borrower to the Swap Bank under or in connection
with the Master Agreement as to which sums the provisions of section 2(d)
(Deduction or Withholding for Tax) of the Master Agreement shall apply.


 


23                     ILLEGALITY,
ETC


 


23.1           Illegality. This
Clause 23 applies if a Lender (the “Notifying
Lender”) notifies the Agent that it has become, or will with effect
from a specified date, become:


 


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


 


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


 


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


 


23.2           Notification of
illegality. The Agent shall promptly notify the Borrower, the Security
Parties, the Security Trustee and the other Lenders of the notice under Clause
23.1 which the Agent receives from the Notifying Lender.


 


23.3           Prepayment; termination
of Commitment. On the Agent notifying the Borrower under Clause 23.2, the
Notifying Lender’s Commitment shall terminate; and thereupon or, if later, on
the date specified in the Notifying Lender’s notice under Clause 23.1 as the
date


 


56

















 


on which the notified
event would become effective the Borrower shall prepay the Notifying Lender’s
Contribution in accordance with Clause 8.


 


23.4           Mitigation. If
circumstances arise which would result in a notification under Clause 23.1
then, without in any way limiting the rights of the Notifying Lender under
Clause 23.3, the Notifying Lender shall use reasonable endeavours to transfer
its obligations, liabilities and rights under this Agreement and the Finance
Documents to another office or financial institution not affected by the
circumstances but the Notifying Lender shall not be under any obligation to
take any such action if, in its opinion, to do would or might:


 


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


 


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


 


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


 


24                     INCREASED
COSTS


 


24.1           Increased costs. This
Clause 24 applies if a Lender (the “Notifying
Lender”) notifies the Agent that the Notifying Lender considers that
as a result of:


 


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


 


(b)                    the effect of
complying with any law or regulation (including any which relates to capital
adequacy or liquidity controls or which affects the manner in which the
Notifying Lender allocates capital resources to its obligations under this
Agreement (including, without limitation, any laws or regulations which shall
replace, amend and/or supplement those set out in the statement of the Basle
Committee on Banking Regulations and Supervisory Practices dated July 1988 and
entitled “International Convergence of Capital Management and Capital
Structures”)) which is introduced, or altered, or the interpretation or
application of which is altered, after the date of this Agreement,


 


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


 


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


 


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


 


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


 


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


 


57

















 


but not an item
attributable to a change in the rate of tax on the overall net income of the
Notifying Lender (or a parent company of it) or an item covered by the
indemnity for tax in Clause 21.1 or by Clause 22.


 


For the purposes of this
Clause 24.1 the Notifying Lender may in good faith allocate or spread costs
and/or losses among its assets and liabilities (or any class thereof) on such
basis as it considers appropriate.


 


24.2           Notification to
Borrower of claim for increased costs. The Agent shall promptly notify the
Borrower and the Security Parties of the notice which the Agent received from
the Notifying Lender under Clause 24.1.


 


24.3           Payment of increased
costs. The Borrower shall pay to the Agent, at the end of any Interest
Period during which the Agent makes demand, for the account of the Notifying
Lender, the amounts which the Agent from time to time notifies the Borrower
that the Notifying Lender has specified to be necessary to compensate the
Notifying Lender for the increased cost.


 


24.4           Notice of prepayment. If
the Borrower is not willing to continue to compensate the Notifying Lender for
the increased cost under Clause 24.3, the Borrower may give the Agent not less
than 14 days’ notice of its intention to prepay the Notifying Lender’s
Contribution at the end of an Interest Period.


 


24.5           Prepayment; termination
of Commitment. A notice under Clause 24.4 shall be irrevocable; the Agent
shall promptly notify the Notifying Lender of the Borrower’s notice of intended
prepayment; and:


 


(a)                     on the date
on which the Agent serves that notice, the Commitment of the Notifying Lender
shall be cancelled; and


 


(b)                    on the date
specified in its notice of intended prepayment, the Borrower shall prepay
(without premium or penalty) the Notifying Lender’s Contribution, together with
accrued interest thereon at the applicable rate plus the applicable Margin and
the Mandatory Cost (if any).


 


24.6           Application of
prepayment. Clause 8 shall apply in relation to the prepayment.


 


25                     SET-OFF


 


25.1           Application of credit
balances. Each Creditor Party may without prior notice:


 


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


 


(b)                    for that
purpose:


 


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


 


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


 


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


 


25.2           Existing rights
unaffected. No Creditor Party shall be obliged to exercise any of its
rights under Clause 25.1; and those rights shall be without prejudice and in
addition to


 


58

















 


any right of set-off,
combination of accounts, charge, lien or other right or remedy to which a
Creditor Party is entitled (whether under the general law or any document).


 


25.3           Sums deemed due to a
Lender. For the purposes of this Clause 25, a sum payable by the Borrower
to the Agent or the Security Trustee for distribution to, or for the account
of, a Lender shall be treated as a sum due to that Lender; and each Lender’s
proportion of a sum so payable for distribution to, or for the account of, the
Lenders shall be treated as a sum due to such Lender.


 


26                     TRANSFERS AND
CHANGES IN LENDING OFFICES


 


26.1           Transfer by Borrower. The
Borrower may not, without the consent of the Agent, given on the instructions
of all the Lenders:


 


(a)                     transfer any
of its rights or obligations under any Finance Document; or


 


(b)                    enter into any
merger, de-merger or other reorganisation, or carry out any other act, as a
result of which any of its rights or liabilities would vest in, or pass to,
another person.


 


26.2           Transfer by a Lender. Subject
to Clause 26.5, a Lender (the “Transferor
Lender”)  may at any
time (and with the consent of the Agent), cause:


 


(a)                     its rights in
respect of all or part of its Contribution; or


 


(b)                    its
obligations in respect of all or part of its Commitment; or


 


(c)                     a combination
of (a) and (b)


 


to be (in the case of its
rights) transferred to, or (in the case of its obligations) assumed by, another
bank or financial institution which is experienced in ship financing (a “Transferee Lender”)  by delivering to the Agent a completed
certificate in the form set out in Schedule 4 with any modifications approved
or required by the Agent (a “Transfer
Certificate”)  executed
by the Transferor Lender and the Transferee Lender.


 


However any rights and
obligations of the Transferor Lender in its capacity as Agent or Security
Trustee will have to be dealt with separately in accordance with the Agency and
Trust Deed.


 


26.3           Transfer Certificate,
delivery and notification. As soon as reasonably practicable after a
Transfer Certificate is delivered to the Agent, it shall (unless it has reason
to believe that the Transfer Certificate may be defective):


 


(a)                     sign the
Transfer Certificate on behalf of itself, the Borrower, the Security Parties,
the Security Trustee and each of the Lenders;


 


(b)                    on behalf of
the Transferee Lender, send to the Borrower and each Security Party letters or
faxes notifying them of the Transfer Certificate and attaching a copy of it;
and


 


(c)                     send to the
Transferee Lender copies of the letters or faxes sent under paragraph (b)
above.


 


26.4           Effective Date of
Transfer Certificate. A Transfer Certificate becomes effective on the date,
if any, specified in the Transfer Certificate as its effective date Provided that it is signed by the Agent
under Clause 26.3 on or before that date.


 


26.5           No transfer without
Transfer Certificate. No assignment or transfer of any right or obligation
of a Lender under any Finance Document is binding on, or effective in relation


 


59

















 


to, the Borrower, any
Security Party, the Agent or the Security Trustee unless it is effected,
evidenced or perfected by a Transfer Certificate.


 


26.6           Lender re-organisation;
waiver of Transfer Certificate. However, if a Lender enters into any
merger, de-merger or other reorganisation as a result of which all its rights
or obligations vest in another person (the “successor”), the successor shall automatically and
without any further act being necessary become a Lender with the same
Commitment and Contribution as were held by the predecessor Lender.


 


26.7           Effect of Transfer
Certificate. A Transfer Certificate takes effect in accordance with English
law as follows:


 


(a)                     to the extent
specified in the Transfer Certificate, all rights and interests (present,
future or contingent) which the Transferor Lender has under or by virtue of the
Finance Documents are assigned to the Transferee Lender absolutely, free of any
defects in the Transferor Lender’s title and of any rights or equities which
the Borrower or any Security Party had against the Transferor Lender;


 


(b)                    the Transferor
Lender’s Commitment is discharged to the extent specified in the Transfer
Certificate;


 


(c)                     the
Transferee Lender becomes a Lender with the Contribution previously held by the
Transferor Lender (or the part thereof specified in the Transfer Certificate)
and a Commitment of an amount specified in the Transfer Certificate;


 


(d)                    the Transferee
Lender becomes bound by all the provisions of the Finance Documents which are
applicable to the Lenders generally, including those about pro-rata sharing and
the exclusion of liability on the part of, and the indemnification of, the
Agent and the Security Trustee and, to the extent that the Transferee Lender
becomes bound by those provisions (other than those relating to exclusion of
liability), the Transferor Lender ceases to be bound by them;


 


(e)                     any part of
the Loan which the Transferee Lender advances after the Transfer Certificate’s
effective date ranks in point of priority and security in the same way as it
would have ranked had it been advanced by the transferor, assuming that any
defects in the transferor’s title and
any rights or equities of the Borrower or any Security Party against the
Transferor Lender had not existed;


 


(f)                       the
Transferee Lender becomes entitled to all the rights under the Finance
Documents which are applicable to the Lenders generally, including but not
limited to those relating to the Majority Lenders and those under Clause 5.5
and Clause 20, and to the extent that the Transferee Lender becomes entitled to
such rights, the Transferor Lender ceases to be entitled to them; and


 


(g)                    in respect of
any breach of a warranty, undertaking, condition or other provision of a
Finance Document or any misrepresentation made in or in connection with a
Finance Document, the Transferee Lender shall be entitled to recover damages by
reference to the loss incurred by it as a result of the breach or
misrepresentation, irrespective of whether the original Lender would have
incurred a loss of that kind or amount.


 


The rights and equities
of the Borrower or any Security Party referred to above include, but are not
limited to, any right of set off and any other kind of cross-claim.


 


26.8           Maintenance of register
of Lenders. During the Security Period the Agent shall maintain a register
in which it shall record the name, Commitment, Contribution and administrative
details (including the lending office) from time to time of each Lender holding
a Transfer Certificate and the effective date (in accordance with Clause 26.4)
of the Transfer Certificate; and the Agent shall make the register available
for inspection by


 


60

















 


any Lender, the Security
Trustee and the Borrower during normal banking hours, subject to receiving at
least 5 Business Days prior notice.


 


26.9           Reliance on register of
Lenders. The entries on that
register shall, in the absence of manifest error, be conclusive in determining
the identities of the Lenders and the amounts of their Commitments and
Contributions and the effective dates of Transfer Certificates and may be
relied upon by the Agent and the other parties to the Finance Documents for all
purposes relating to the Finance Documents.


 


26.10    Authorisation of Agent to sign Transfer Certificates. The Borrower, the Security Trustee and each
Lender irrevocably authorise the Agent to sign Transfer Certificates on its
behalf.


 


26.11    Registration fee. In respect of any Transfer Certificate, the Agent shall be entitled to
recover a registration fee of $2,000 from the Transferor Lender or (at the
Agent’s option) the Transferee Lender.


 


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


 


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


 


26.14    Change of lending office. A Lender may change its lending office by
giving notice to the Agent and the change shall become effective on the later
of:


 


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


 


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


 


26.15    Notification. On receiving such a notice, the Agent shall notify the Borrower and the
Security Trustee; and, until the Agent receives such a notice, it shall be
entitled to assume that a Lender is acting through the lending office of which
the Agent last had notice.


 


27                     VARIATIONS
AND WAIVERS


 


27.1           Variations, waivers etc. by
Majority Lenders. Subject to
Clause 27.2, a document shall be effective to vary, waive, suspend or limit any
provision of a Finance Document, or any Creditor Party’s rights or remedies
under such a provision or the general law, only if the document is signed, or
specifically agreed to by fax, by the Borrower, by the Agent on behalf of the
Majority Lenders, by the Agent and the Security Trustee in their own rights,
and, if the document relates to a Finance Document to which a Security Party is
party, by that Security Party.


 


27.2           Variations, waivers etc.
requiring agreement of all Lenders. However, as regards the following, Clause 27.1 applies as if the words “by
the Agent on behalf of the Majority Lenders” were replaced by the words “by or
on behalf of every Lender and the Swap Bank”:


 


(a)                     a change in the applicable Margin or in the
definition of LIBOR;


 


61

















 


(b)                    a change to the date for, or the amount of,
any payment of principal, interest, fees, or other sum payable under this
Agreement;


 


(c)                     a change to any Lender’s Commitment;


 


(d)                    an extension of the Availability Period;


 


(e)                     a change to the definition of “Majority
Lenders” or “Finance Documents”;


 


(f)                       a change to the preamble or to Clause 2, 3, 4,
5.1, 8.1, 8.2, 17, 18, 19 or 30;


 


(g)                    a change to this Clause 27;


 


(h)                    any release of, or material variation to, a
Security Interest, guarantee, indemnity or subordination arrangement set out in
a Finance Document; and


 


(i)                        any other change or matter as regards which
this Agreement or another Finance Document expressly provides that each Lender’s
consent is required.


 


27.3           Exclusion of other or implied
variations. Except for a
document which satisfies the requirements of Clauses 27.1 and 27.2, no
document, and no act, course of conduct, failure or neglect to act, delay or
acquiescence on the part of the Creditor Parties or any of them (or any person
acting on behalf of any of them) shall result in the Creditor Parties or any of
them (or any person acting on behalf of any of them) being taken to have
varied, waived, suspended or limited, or being precluded (permanently or
temporarily) from enforcing, relying on or exercising:


 


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


 


(b)                    an Event of Default; or


 


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


 


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


 


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


 


28                     NOTICES


 


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


 


28.2           Addresses for
communications. A notice shall be sent:


 


	
  (a)

  	
  to the Borrower:

  	
   

  	
  Paragon Shipping Inc.

  
	
   

  	
   

  	
   

  	
  Voula Center

  
	
   

  	
   

  	
   

  	
  Vasileos Pavlou Avenue 102-104

  
	
   

  	
   

  	
   

  	
  166 73 Voula

  
	
   

  	
   

  	
   

  	
  Greece

  
	
   

  	
   

  	
   

  	
  Fax No: +(30) 210 899 5085

  
	
   

  	
   

  	
   

  	
  Attn: the Chief Financial Officer

  
	
   

  	
   

  	
   

  	
   

  
	
  (b)

  	
  to a Lender:

  	
   

  	
  At the address opposite its name in Schedule 1 or
  (as the

  



 


62

















 


	
   

  	
   

  	
   

  	
  case may require) in the relevant Transfer
  Certificate; and

  
	
   

  	
   

  	
   

  	
   

  
	
  (c)

  	
  to the Swap Bank,

  	
   

  	
  HSH Nordbank AG

  
	
   

  	
  the Agent and

  	
   

  	
  Gerhart-Hauptmann-Platz 50

  
	
   

  	
  the Security Trustee:

  	
   

  	
  D-20095 Hamburg

  
	
   

  	
   

  	
   

  	
  Germany

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Fax No: +(49) 40 33 33 34 118

  Attn: Shipping, Greek clients

  



 


or to such other address
as the relevant party may notify the Agent or, if the relevant party is the
Agent or the Security Trustee, the Borrower, the Lenders, the Swap Bank and the
Security Parties.


 


28.3           Effective date of notices. Subject to Clauses 28.4 and 28.5:


 


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


 


(b)                    a notice which is delivered by registered
letter shall be deemed to be served, and shall take effect, 5 Business Days
after being deposited in the post postage prepaid in an envelope addressed to
it at the relevant address; and


 


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


 


28.4           Service outside business
hours. However, if under
Clause 28.3 a notice would be deemed to be served:


 


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


 


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


 


the notice shall (subject
to Clause 28.5) be deemed to be served, and shall take effect, at 9 a.m. on the
next day which is such a business day.


 


28.5           Illegible notices. Clauses 28.3 and 28.4 do not apply if the
recipient of a notice notifies the sender within one hour after the time at
which the notice would otherwise be deemed to be served that the notice has
been received in a form which is illegible in a material respect.


 


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


 


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


 


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


 


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


 


63

















 


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


 


28.9           Electronic
communication


 


(a)                     Any communication
to be made between the Agent or the Security Trustee and a Lender or the Swap
Bank under or in connection with the Finance Documents may be made by
electronic mail or other electronic means, if the Agent, the Security Trustee
and the relevant Lender or, as the case may be, the Swap Bank:


 


(i)                       agree that,
unless and until notified to the contrary, this is to be an accepted form of
communication;


 


(ii)                    notify each
other in writing of their electronic mail address and/or any other information
required to enable the sending and receipt of information by that means; and


 


(iii)                 notify each other
of any change to their address or any other such information supplied by them.


 


(b)                    Any electronic
communication made between the Agent and a Lender or the Swap Bank or the
Security Trustee will be effective only when actually received in readable form
and in the case of any electronic communication made by a Lender or the Swap
Bank to the Agent or the Security Trustee only if it is addressed in such a
manner as the Agent or Security Trustee shall specify for this purpose.


 


29                     SUPPLEMENTAL


 


29.1           Rights cumulative,
non-exclusive. The rights and remedies which the Finance Documents give to
each Creditor Party are:


 


(a)                     cumulative;


 


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


 


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


 


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


 


29.3           Third party rights. A
person who is not a party to this Agreement has no right under the Contracts
(Rights of Third Parties) Act 1999 to enforce or to enjoy the benefit of any
term of this Agreement.


 


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


 


30                     LAW AND
JURISDICTION


 


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


 


30.2           Exclusive English
jurisdiction. Subject to Clause 30.3, the courts of England shall have
exclusive jurisdiction to settle any disputes which may arise out of or in
connection with this Agreement.


 


64

















 


30.3           Choice of forum for the
exclusive benefit of the Creditor Parties. Clause 30.2 is for the exclusive
benefit of the Creditor Parties, each of which reserves the right:


 


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


 


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


 


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


 


30.4           Process agent. The
Borrower irrevocably appoints HTD Services Limited at their office for the time
being, presently at Irongate House, Duke’s Place, London EC3A 7HX, England, to
act as its agent to receive and accept on its behalf any process or other
document relating to any proceedings in the English courts which are connected
with this Agreement.


 


30.5           Creditor Party rights
unaffected. Nothing in this Clause 30 shall exclude or limit any right
which any Creditor Party may have (whether under the law of any country, an
international convention or otherwise) with regard to the bringing of
proceedings, the service of process, the recognition or enforcement of a judgment
or any similar or related matter in any jurisdiction.


 


30.6           Meaning of “proceedings”.
In  this Clause 30, “proceedings” means proceedings of any
kind, including an application for a provisional or protective measure.


 


AS
WITNESS the hands of the duly authorised officers or
attorneys of the parties the day and year first before written.


 


65

















 


SCHEDULE 1


 


LENDERS AND COMMITMENTS


 


	
  Lender

  	
   

  	
  Lending Office

  	
   

  	
  Commitment

  (US Dollars)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  HSH Nordbank AG

  	
   

  	
  Gerhart-Hauptmann-Platz 50

  D-20095 Hamburg

  Germany

  	
   

  	
  108,250,000

  	
   

  



 


66

















 


SCHEDULE 2


 


DETAILS OF SHIPS AND OWNERS


 


	
  1

  	
   

  	
  Name of Ship:

  	
   

  	
  “BLUE SEAS”

  
	
   

  	
   

  	
  Flag:

  	
   

  	
  Cayman Islands

  
	
   

  	
   

  	
  IMO Number:

  	
   

  	
  9104550

  
	
   

  	
   

  	
  Official Number:

  	
   

  	
  739718

  
	
   

  	
   

  	
  Dwt:

  	
   

  	
  45,654

  
	
   

  	
   

  	
  Class Society and notation:

  	
   

  	
  Nippon Kaiji Kyokai NS* (Bulk Carrier) (ESP) MNS*

  
	
   

  	
   

  	
  Year built:

  	
   

  	
  1995

  
	
   

  	
   

  	
  Owner:

  	
   

  	
  Camelia Navigation S.A.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2

  	
   

  	
  Name of Ship:

  	
   

  	
  “CALM SEAS”

  
	
   

  	
   

  	
  Flag:

  	
   

  	
  Marshall Islands

  
	
   

  	
   

  	
  IMO Number:

  	
   

  	
  9184835

  
	
   

  	
   

  	
  Official Number:

  	
   

  	
  2294

  
	
   

  	
   

  	
  Dwt:

  	
   

  	
  74,047

  
	
   

  	
   

  	
  Class Society and notation:

  	
   

  	
  Nippon Kaiji Kyokai NS* (Bulk Carrier, Strengthen
  for Heavy Cargoes Nos 2, 4 & 6 Holds may be empty) (ESP) MNS*

  
	
   

  	
   

  	
  Year built:

  	
   

  	
  1999

  
	
   

  	
   

  	
  Owner:

  	
   

  	
  Frontline Marine Company

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3

  	
   

  	
  Name of Ship:

  	
   

  	
  “CLEAN SEAS”

  
	
   

  	
   

  	
  Flag:

  	
   

  	
  Cayman Islands

  
	
   

  	
   

  	
  IMO Number:

  	
   

  	
  9109366

  
	
   

  	
   

  	
  Official Number:

  	
   

  	
  739766

  
	
   

  	
   

  	
  Dwt:

  	
   

  	
  46,640

  
	
   

  	
   

  	
  Class Society and notation:

  	
   

  	
  [•]

  
	
   

  	
   

  	
  Year built:

  	
   

  	
  1995

  
	
   

  	
   

  	
  Owner:

  	
   

  	
  Explorer Shipholding Limited

  



 


67

















 


	
  4

  	
   

  	
  Name of Ship:

  	
   

  	
  “DEEP SEAS”

  
	
   

  	
   

  	
  Flag:

  	
   

  	
  Cayman Islands

  
	
   

  	
   

  	
  IMO Number:

  	
   

  	
  9169380

  
	
   

  	
   

  	
  Official Number:

  	
   

  	
  739719

  
	
   

  	
   

  	
  Dwt:

  	
   

  	
  72,891

  
	
   

  	
   

  	
  Class Society and notation:

  	
   

  	
  Nippon Kaiji Kyokai NS (Bulk Carrier, Strengthen for
  Heavy Cargoes Nos 2, 4 & 6 Holds may be empty) (ESP) MNS

  
	
   

  	
   

  	
  Year built:

  	
   

  	
  1999

  
	
   

  	
   

  	
  Owner:

  	
   

  	
  Trade Force Shipping S.A.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5

  	
   

  	
  Name of Ship:

  	
   

  	
  “KIND SEAS”

  
	
   

  	
   

  	
  Flag:

  	
   

  	
  Marshall Islands

  
	
   

  	
   

  	
  IMO Number:

  	
   

  	
  9205847

  
	
   

  	
   

  	
  Official Number:

  	
   

  	
  2172

  
	
   

  	
   

  	
  Dwt:

  	
   

  	
  72,493

  
	
   

  	
   

  	
  Class Society and notation:

  	
   

  	
  [•]

  
	
   

  	
   

  	
  Year built:

  	
   

  	
  1999

  
	
   

  	
   

  	
  Owner:

  	
   

  	
  Fairplay Maritime Ltd.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6

  	
   

  	
  Name of Ship:

  	
   

  	
  “CRYSTAL SEAS”

  
	
   

  	
   

  	
  Flag:

  	
   

  	
  Liberia

  
	
   

  	
   

  	
  IMO Number:

  	
   

  	
  9114153

  
	
   

  	
   

  	
  Official Number:

  	
   

  	
  13198

  
	
   

  	
   

  	
  Dwt:

  	
   

  	
  43,222

  
	
   

  	
   

  	
  Class Society and notation:

  	
   

  	
  DNV +1A1 BULK CARRIER ‘ESP’ HC-E E0  DK (+)HA(+)IB(+)

  
	
   

  	
   

  	
  Year built:

  	
   

  	
  1995

  
	
   

  	
   

  	
  Owner:

  	
   

  	
  Opera Navigation Co.

  



 


68





















 


SCHEDULE 3


 


DRAWDOWN NOTICE


 


To:                 HSH Nordbank AG

Gerhart-Hauptmann-Platz 50

D-20095 Hamburg

Germany


 


	
  Attention: Loans Administration

  	
   

  	
  [                ]
  2007

  



 


DRAWDOWN NOTICE


 


1                            We
refer to the loan agreement (the “Loan
Agreement”)  dated 18
December 2006 as amended and restated pursuant to an amending and restating
agreement dated [•] 2007 and made between ourselves as Borrower, the
Lenders referred to therein, yourselves as Agent and as Security Trustee, the
Swap Bank referred to therein, yourselves as Lead Arranger, Bookrunner, and
Underwriter in connection with a revolving credit facility of up to
US$108,250,000. Terms defined in the Loan Agreement have their defined meanings
when used in this Drawdown Notice.


 


2                            We
request to borrow [the Initial Advance/an Advance] as follows:


 


(a)                     Amount of
Advance: $[               ];


 


(b)                    Drawdown Date:
[          ];


 


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


 


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


 


3                            We
represent and warrant that:


 


(a)                     the
representations and warranties in Clause 10 of the Loan Agreement would remain
true and not misleading if repeated on the date of this notice with reference
to the circumstances now existing;


 


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


 


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


 


5                            [We
authorise you to deduct all accrued commitment fee applicable to the Advance
referred to in Clause 20.1 from the amount of the Advance].


 


	
  [Name of Signatory]

  
	
   

  	
   

  	
   

  
	
   

  
	
  for and on behalf of

  
	
  PARAGON
  SHIPPING INC.

  



 


69

















 


SCHEDULE 4


 


CONDITION PRECEDENT DOCUMENTS


 


PART A


 


The following are the
documents referred to in Clause 9.1(a).


 


1                            A duly
executed original of each of:


 


(a)                     this
Agreement;


 


(b)                    the Agency and
Trust Deed;


 


(c)                     the Fee
Letter;


 


(d)                    the Master
Agreement;


 


(e)                     the Master
Agreement Assignment;


 


(f)                       the
Guarantees;


 


(g)                    the Retention
Account Pledge;


 


(h)                    the Earnings
Account Pledge;


 


(i)                        the Swap
Account Pledge;


 


(j)                        the Epic
Guarantee; and


 


(k)                     the Epic
Account Pledge.


 


2                            Copies
of the certificate of incorporation and constitutional documents of the
Borrower and each Owner and Epic.


 


3                            Copies
of resolutions of the shareholders and directors of the Borrower, and of each
Owner and of Epic authorising the execution of each of the Finance Documents to
which the Borrower or that Owner or Epic is a party and, in the case of the
Borrower, authorising named officers to give the Drawdown Notices and other
notices under this Agreement.


 


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


 


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


 


6                            Documentary
evidence that the IPO has been completed.


 


7                            The
originals of any mandates or other documents required in connection with the
opening or operation of each Earnings Account, the Epic Account and the
Retention Account.


 


8                            Evidence
satisfactory to the Agent that each Owner and Epic is a direct or indirect
wholly-owned subsidiary of the Borrower.


 


70

















 


9                            Evidence
that there is standing to the credit of the Epic Account an amount of not less
than $3,000,000.


 


10                     All
documentation required by each Creditor Party in relation to the Borrower and
any Security Party pursuant to that Creditor Party’s “know your customer”
requirements.


 


11                     Documentary
evidence that the agent for service of process named in Clause 30 has accepted
its appointment.


 


12                     Favourable
legal opinions from lawyers appointed by the Agent on such matters concerning
the laws of the Marshall Islands, England, Germany and such other relevant
jurisdictions as the Agent may require.


 


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


 


PART B


 


The following are the
documents referred to in Clause 9.1(b).


 


1                            A copy
of the Initial Charterparty for each Ship and all documents signed or issued by
the parties thereto (or any of them) under or in connection with them.


 


2                            A duly
executed original of the Mortgage, the Deed of Covenant (if applicable), the
General Assignment, the Management Assignment and the Charterparty Assignment
(in respect of the relevant Initial Charterparty) for each Ship (and of each
document to be delivered under each of them).


 


3                            Documentary
evidence that:


 


(a)                     each Ship is
definitively and permanently registered in the name of the relevant Owner under
the relevant Designated Flag;


 


(b)                    each Ship is
in the absolute and unencumbered ownership of the relevant Owner save as
contemplated by the Finance Documents;


 


(c)                     each Ship
maintains the highest available class with such first-class classification
society which is a member of IACS as the Agent may approve free of all
recommendations and conditions of such classification society;


 


(d)                    each Mortgage
has been duly registered or recorded (as the case may be) against the Ship to
which it relates as a valid first priority or preferred ship mortgage in
accordance with the laws of the relevant Designated Flag; and


 


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


 


5                            A copy
of the Management Agreement and a duly executed original of the Manager’s
Undertaking in relation to each Ship.


 


6                            Copies
of:


 


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


 


71

















 


(b)                    the ISPS Code
Documentation in respect of each Ship and the Owner thereof certified as true
and in effect by the relevant Owner.


 


7                            A
survey report for each Ship dated no later than 20 days prior to the Drawdown
Date in respect of the Initial Advance in form, scope and substance
satisfactory to the Agent and its legal and technical advisers.


 


8                            Two
valuations of each Ship, addressed to the Agent, stated to be for the purpose
of this Agreement and dated not earlier than 30 days before the Drawdown Date
in respect of the Initial Advance, each prepared (at the expense of the
Borrower) by an Approved Broker in accordance with Clause 15.4 which shows the
value of each Ship in an amount acceptable to the Agent.


 


9                            Evidence
satisfactory to the Agent that each Owner and Epic remains a direct or indirect
wholly-owned subsidiary of the Borrower.


 


10                     A favourable
legal opinion from lawyers appointed by the Agent on such matters concerning
the laws of the Cayman Islands, the Marshall Islands and Liberia and such other
relevant jurisdictions as the Agent may require.


 


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


 


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


 


Every other copy document
delivered under this Schedule shall be certified as a true and up to date copy
by a director or the secretary (or equivalent officer) of the Borrower or any
other person acceptable to the Agent in its sole discretion.


 


72

















 


SCHEDULE 5


 


TRANSFER CERTIFICATE


 


The
Transferor and the Transferee accept exclusive responsibility for ensuring that
this Certificate and the transaction to which it relates comply with all legal
and regulatory requirements applicable to them respectively.


 


To:                 HSH Nordbank AG
for itself and for and on behalf of the Borrower, each Security Party, the
Security Trustee, the Swap Bank and each Lender, as defined in the Loan
Agreement referred to below.


 


[                             ]


 


1                            This
Certificate relates to a Loan Agreement (the “Loan
Agreement”) dated 18 December 2006 as amended and restated pursuant
to an amending and restating agreement dated [•] 2007 and
made between (1) Paragon Shipping Inc. as borrower (the “Borrower”),  (2) the banks and financial institutions named therein as
Lenders, (3) HSH Nordbank AG as Agent, (4) HSH Nordbank AG as Swap Bank, (5)
HSH Nordbank AG as Lead Arranger, Bookrunner and Underwriter and (6) HSH
Nordbank AG as Security Trustee in respect of a revolving credit facility of up
to US$108,250,000.


 


2                            In
this Certificate:


 


“the
Relevant Parties” means the Agent, the Borrower, each
Security Party, the Security Trustee, the Swap Bank and each Lender;


 


“the
Transferor” means [full name] of [lending office];


 


“the
Transferee” means [full name] of [lending office].


 


Terms defined in the Loan
Agreement shall, unless the contrary intention appears, have the same meanings
when used in this Certificate.


 


3                            The
effective date of this Certificate is                   
200   Provided that this
Certificate shall not come into effect unless it is signed by the Agent on or
before that date.


 


4                            The
Transferor assigns to the Transferee absolutely all rights and interests
(present, future or contingent) which the Transferor has as Lender under or by
virtue of the Loan Agreement and every other Finance Document in relation to
[     ] per cent. of the Contribution outstanding to
the Transferor (or its predecessors in title) which is set out below:


 


73

















 


Contribution             Amount
transferred


 


5                            By
virtue of this Transfer Certificate and Clause 26 of the Loan Agreement, the
Transferor is discharged [entirely from its Commitment which amounts to $[               ]]
[from [               ]
per cent. of its Commitment, which percentage represents
$[              ]]
and the Transferee acquires a Commitment of
$[              ].


 


6                            The
Transferee undertakes with the Transferor and each of the Relevant Parties that
the Transferee will observe and perform all the obligations under the Finance
Documents which Clause 26 of the Loan Agreement provides will become binding on
it upon this Certificate taking effect.


 


7                            The
Agent, at the request of the Transferee (which request is hereby made) accepts,
for the Agent itself and for and on behalf of every other Relevant Party, this
Certificate as a Transfer Certificate taking effect in accordance with Clause
26 of the Loan Agreement.


 


8                            The
Transferor:


 


(a)                     warrants to
the Transferee and each Relevant Party:


 


(i)                       that the
Transferor has full capacity to enter into this transaction and has taken all
corporate action and obtained all consents which are in connection with this
transaction; and


 


(ii)                    that this
Certificate is valid and binding as regards the Transferor;


 


(b)                    warrants to
the Transferee that the Transferor is absolutely entitled, free of
encumbrances, to all the rights and interests covered by the assignment in
paragraph 4 above;


 


(c)                     undertakes
with the Transferee that the Transferor will, at its own expense, execute any
documents which the Transferee reasonably requests for perfecting in any
relevant jurisdiction the Transferee’s title under this Certificate or for a
similar purpose.


 


9                            The
Transferee:


 


(d)                    confirms that
it has received a copy of the Loan Agreement and each other Finance Document;


 


(e)                     agrees that
it will have no rights of recourse on any ground against either the Transferor,
the Agent, the Security Trustee, the Swap Bank or any Lender in the event that:


 


(i)                       the Finance
Documents prove to be invalid or ineffective,


 


(ii)                    the Borrower
or any Security Party fails to observe or perform its obligations, or to
discharge its liabilities, under the Finance Documents;


 


(iii)                 it proves
impossible to realise any asset covered by a Security Interest created by a
Finance Document, or the proceeds of such assets are insufficient to discharge


 


74

















 


the liabilities of the
Borrower or any Security Party under the Finance Documents;


 


(f)                       agrees that
it will have no rights of recourse on any ground against the Agent, the
Security Trustee, the Swap Bank or any Lender in the event that this
Certificate proves to be invalid or ineffective;


 


(g)                    warrants to
the Transferor and each Relevant Party (i) that it has full capacity to enter
into this transaction and has taken all corporate action and obtained all
official consents which it needs to take or obtain in connection with this
transaction; and (ii) that this Certificate is valid and binding as regards the
Transferee; and


 


(h)                    confirms the
accuracy of the administrative details set out below regarding the Transferee.


 


10                     The
Transferor and the Transferee each undertake with the Agent and the Security
Trustee severally, on demand, fully to indemnify the Agent and/or the Security
Trustee in respect of any claim, proceeding, liability or expense (including
all legal expenses) which they or either of them may incur in connection with
this Certificate or any matter arising out of it, except such as are shown to
have been mainly and directly caused by the gross and culpable negligence or
dishonesty of the Agent’s or the Security Trustee’s own officers or employees.


 


13                     The
Transferee shall repay to the Transferor on demand so much of any sum paid by
the Transferor under paragraph 10 above as exceeds one-half of the amount
demanded by the Agent or the Security Trustee in respect of a claim,
proceeding, liability or expense which was not reasonably foreseeable at the
date of this Certificate; but nothing in this paragraph shall affect the
liability of each of the Transferor and the Transferee to the Agent or the
Security Trustee for the full amount demanded by it.


 


	
  [Name of Transferor]

  	
   

  	
  [Name of Transferee]

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
  By:

  
	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
  Date:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Agent

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Signed for itself and for and on behalf of itself

  as Agent and for every other Relevant Party

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  HSH NORDBANK AG

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  



 


75

















 


Administrative Details of Transferee


 


Name of Transferee:


 


Lending Office:


 


Contact Person


(Loan Administration Department):


 


Telephone:


 


Telex:


 


Fax:


 


Contact Person


(Credit Administration
Department):


 


Telephone:


 


Telex:


 


Fax:


 


Account for payments:


 


 


Note:      This Transfer Certificate
alone may not be sufficient to transfer a proportionate share of the Transferor’s
interest in the security constituted by the Finance Documents in the Transferor’s
or Transferee’s jurisdiction. It is the responsibility of each Lender to
ascertain whether any other documents are required for this purpose.


 


76

















 


SCHEDULE 6


 


DESIGNATION NOTICE


 


To:                 HSH Nordbank AG

Gerhart-Hauptmann-Platz 50

D-20095 Hamburg

Germany


 


[•]


 


Dear Sirs


 


Loan
Agreement dated 18 December 2006 as amended and restated pursuant to an
amending and restating agreement dated [•] 2007 made between (inter alia) (i) ourselves as
Borrower, (ii) the Lenders, (iii) yourselves as Agent and Security Trustee and
(iv) yourselves as swap bank (the “Loan Agreement”)


 


We refer to:


 


1                            the
Loan Agreement;


 


2                            the
Master Agreement dated [•] made between ourselves and [•]; and


 


3                            a
Confirmation delivered pursuant to the said Master Agreement dated [•]
and addressed by [•] to us.


 


In accordance with the
terms of the Loan Agreement, we hereby give you notice of the said Confirmation
and hereby confirm that the Transaction evidenced by it will be designated as a
“Designated Transaction” for the purposes of the Loan Agreement and the Finance
Documents.


 


	
  Yours faithfully,

  
	
   

  
	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  for and on behalf of

  
	
  PARAGON
  SHIPPING INC.

  



 


77

















 


SCHEDULE 7


 


FORM OF COMPLIANCE CERTIFICATE


 


To:                 HSH Nordbank AG

Gerhart-Hauptmann-Platz 50

D-20095 Hamburg

Germany


 


[•]
200[•]


 


Dear Sirs,


 


We refer to a loan
agreement dated 18 December 2006 as amended and restated pursuant to an
amending and restating agreement dated [•] 2007 (the “Loan Agreement”) made between (amongst
others) yourselves and ourselves in relation to a revolving credit facility of
up to $108,250,000.


 


Words and expressions
defined in the Loan Agreement shall have the same meaning when used in this
compliance certificate.


 


We enclose with this
certificate a copy of the [audited]/[unaudited] consolidated accounts for the
Group for the [Financial Year] [3-month period] ended [•].
The accounts (i) have been prepared in accordance with all applicable laws and
GAAP all consistently applied, (ii) give a true and fair view of the state of
affairs of the Group at the date of the accounts and of its profit for the
period to which the accounts relate and (iii) fully disclose or provide for all
significant liabilities of the Group.


 


We also enclose copies of
the valuations of all the Fleet Vessels which were used in calculating the
Market Value Adjusted Total Assets of the Group as at [•].


 


The Borrower represents
that no Event of Default or Potential Event of Default has occurred as at the
date of this certificate [except for the following matter or event [set out all material details of matter or event]]. In addition as of [•],
the Borrower confirms compliance with the financial covenants set out in Clause
12.4 of the Loan Agreement for the 3 months ending as of the date to which the
enclosed accounts are prepared.


 


We now certify that, as
at [•]:


 


(a)                     the ratio of
Total Liabilities to EBITDA is [•]:[•];


 


(b)                    the Market Value
Adjusted Net Worth of the Group is $[•];


 


(c)                     Liquid Assets
available to the Group are $[•] in aggregate of which an aggregate
amount of $[•]
is standing to the credit of the Earnings Accounts, the Epic Account and the
Swap Account;


 


(d)                    the ratio of
Total Liabilities to Market Value Adjusted Total Assets is [•]:[•];
and


 


(e)                     the Security
Cover Percentage is [•] per cent.


 


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


 


	
   

  	
   

  
	
  [•]

  Chief Financial Officer of

  Paragon Shipping Inc.

  



 


78

















 


 


SCHEDULE 8


 


MANDATORY COST FORMULA


 


1                            The
Mandatory Cost is an addition to the interest rate to compensate Lenders for
the cost of compliance with (a) the requirements of the Financial Services
Authority (or any other authority which replaces all or any of its functions)
or (b) the requirements of the European Central Bank.


 


2                            On the
first day of each Interest Period (or as soon as possible thereafter) the Agent
shall calculate, as a percentage rate, a rate (the “Additional Cost Rate”) for each Lender, in accordance with
the paragraphs set out below. The Mandatory Cost will be calculated by the
Agent as a weighted average of the Lenders’ Additional Cost Rates (weighted in
proportion to the percentage participation of each Lender in the Loan) and will
be expressed as a percentage rate per annum.


 


3                            The
Additional Cost Rate for any Lender lending from a lending office in a
Participating Member State will be the percentage notified by that Lender to
the Agent. This percentage will be certified by that Lender in its notice to
the Agent to be its reasonable determination of the cost (expressed as a
percentage of that Lender’s participation in the Loan) of complying with the
minimum reserve requirements of the European Central Bank in respect of loans
made from that lending office.


 


4                            The
Additional Cost Rate for any Lender lending from a lending office in the United
Kingdom will be calculated by the Agent as follows:


 


	
   

  	
   

  	
  E x 0.0l

  	
  per
  cent. per annum

  
	
   

  	
   

  	
  300

  



Where:


 


E                           is
designed to compensate Lenders for amounts payable under the Fees Rules and is
calculated by the Agent as being the average of the most recent rates of charge
supplied by the Lenders to the Agent pursuant to paragraph 6 below and expressed
in pounds per £1,000,000.


 


5                            For
the purposes of this Schedule:


 


(a)                     “Special Deposits” has the meaning given to
it from time to time under or pursuant to the Bank of England Act 1998 or (as
may be appropriate) by the Bank of England;


 


(b)                    “Fees Rules” means the rules on periodic
fees contained in the FSA Supervision Manual or such other law or regulation as
may be in force from time to time in respect of the payment of fees for the
acceptance of deposits;


 


(a)                     “Fee Tariffs” means the fee tariffs specified
in the Fees Rules under the activity group A.1 Deposit acceptors (ignoring any
minimum fee or zero rated fee required pursuant to the Fees Rules but taking
into account any applicable discount rate);


 


79

















 


(b)                    “Participating Member State” means any
member state of the European Union that adopts or has adopted the euro as its
lawful currency in accordance with legislation of the European Union relating
to European Monetary Union; and


 


(c)                     “Tariff Base” has the meaning given to it
in, and will be calculated in accordance with, the Fees Rules.


 


6                            If
requested by the Agent, each Lender lending from a lending office in the United
Kingdom shall, as soon as practicable after publication by the Financial
Services Authority, supply to the Agent, the rate of charge payable by that
Lender to the Financial Services Authority pursuant to the Fees Rules in
respect of the relevant financial year of the Financial Services Authority
(calculated for this purpose by that Lender as being the average of the Fee
Tariffs applicable to that Lender for that financial year) and expressed in
pounds per £1,000,000 of the Tariff Base of that Lender.


 


7                            Each
Lender shall supply any information required by the Agent for the purpose of
calculating its Additional Cost Rate. In particular, but without limitation,
each Lender shall supply the following information in writing on or prior to
the date on which it becomes a Lender:


 


(a)                     the
jurisdiction of its lending office; and


 


(b)                    any other
information that the Agent may reasonably require for such purpose.


 


Each Lender shall
promptly notify the Agent in writing of any change to the information provided
by it pursuant to this paragraph.


 


8                            The
rates of charge of each Lender lending from a lending office in the United
Kingdom for the purpose of calculating E shall be determined by the Agent based
upon the information supplied to it pursuant to paragraph 6 above and on the
assumption that, unless a Lender notifies the Agent to the contrary, each Lender’s
obligations in relation to cash ratio deposits and Special Deposits are the
same as those of a typical bank from its jurisdiction of incorporation with a
lending office in the same jurisdiction as its lending office.


 


9                            The
Agent shall have no liability to any person if such determination results in an
Additional Cost Rate which over or under compensates any Lender and shall be
entitled to assume that the information provided by any Lender pursuant to
paragraphs 3, 6 and 7 above is true and correct in all respects.


 


10                     The Agent
shall distribute the additional amounts received as a result of the Mandatory
Cost to the Lenders on the basis of the Additional Cost Rate for each Lender
based on the information provided by each Lender pursuant to paragraphs 3, 6
and 7 above.


 


11                     Any
determination by the Agent pursuant to this Schedule in relation to a formula,
the Mandatory Cost, an Additional Cost Rate or any amount payable to a Lender
shall, in the absence of manifest error, be conclusive and binding on all parties.


 


The Agent may from time
to time, after consultation with the Borrower and the Lenders, determine and
notify to all parties any amendments which are required to be made to this
Schedule in order to comply with any change in law, regulation or any requirements
from time to time imposed by the Financial Services Authority or the European
Central Bank (or, in any case,


 


80

















 


any
other authority which replaces all or any of its functions) and any such determination
shall, in the absence of manifest error, be conclusive and binding on all
parties


 


81

















 


EXECUTION PAGE


 


	
  BORROWER

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SIGNED by  Maria Stefanou

  	
  )

  	
   

  
	
  for and on behalf of

  	
  )

  	
  /s/ Maria Stefanou

  
	
  PARAGON SHIPPING INC.  at 16.30 p.m. 25/7/2007

  	
  )

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  LENDERS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SIGNED by  Alexia Hatzimichalis

  	
  )

  	
   

  
	
  for and on behalf of)

  	
  )

  	
  /s/ Alexia Hatzimichalis

  
	
  HSH
  NORDBANK AG

  	
  )

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  AGENT

  	
   

  	
   

  
	
   

  	
  )

  	
   

  
	
  SIGNED by  Alexia Hatzimichalis

  	
  )

  	
   

  
	
  for and on behalf of

  	
  )

  	
  /s/ Alexia Hatzimichalis

  
	
  HSH
  NORDBANK AG

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SECURITY TRUSTEE

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SIGNED by  Alexia Hatzimichalis

  	
  )

  	
   

  
	
  for and on behalf of

  	
  )

  	
  /s/ Alexia Hatzimichalis

  
	
  HSH
  NORDBANK AG

  	
  )

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SWAP BANK

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SIGNED by  Alexia Hatzimichalis

  	
  )

  	
   

  
	
  for and on behalf of

  	
  )

  	
  /s/ Alexia Hatzimichalis

  
	
  HSH
  NORDBANK AG

  	
  )

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  LEAD
  ARRANGER/ BOOKRUNNER/UNDERWRITER

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SIGNED by  Alexia Hatzimichalis

  	
  )

  	
   

  
	
  for and on behalf of

  	
  )

  	
  /s/ Alexia Hatzimichalis

  
	
  HSH
  NORDBANK AG

  	
  )

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Witness to all the

  	
  )

  	
  /s/ Maria-Chryssoula Karpida

  
	
  above signatures

  	
  )

  	
   

  
	
   

  	
   

  	
   

  
	
  Name :

  	
  MARIA-CHRYSSOULA KARPIDA 

  WATSON, FARLEY & WILLIAMS

  	
   

  	
   

  
	
  Address :

  	
  2, DEFTERAS MERARCHIAS
  PIRAEUS 185 36 - GREECE

  	
   

  	
   

  



 


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