Exhibit 10.8


 


Date 25
July 2007


 


PARAGON SHIPPING INC.

as
Borrower


 


- and -


 


THE BANKS AND FINANCIAL INSTITUTIONS

listed in Schedule 1

as
Lenders


 


- and -


 


COMMERZBANK AG


as Agent, Arranger
and as Security Trustee


 






 


LOAN AGREEMENT


 






 


relating
to a loan facility of up to US$300,000,000

to be secured on up to nine vessels


 


WATSON FARLEY & WILLIAMS


Piraeus


 

















 


INDEX


 


	
  Clause

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1

  	
   

  	
  INTERPRETATION

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2

  	
   

  	
  FACILITY

  	
   

  	
  16

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3

  	
   

  	
  POSITION
  OF THE LENDERS AND THE MAJORITY LENDERS

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4

  	
   

  	
  DRAWDOWN

  	
   

  	
  18

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5

  	
   

  	
  INTEREST

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6

  	
   

  	
  INTEREST
  PERIODS

  	
   

  	
  21

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7

  	
   

  	
  DEFAULT
  INTEREST

  	
   

  	
  21

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8

  	
   

  	
  REPAYMENT
  AND PREPAYMENT

  	
   

  	
  22

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9

  	
   

  	
  CONDITIONS
  PRECEDENT

  	
   

  	
  24

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10

  	
   

  	
  REPRESENTATIONS
  AND WARRANTIES

  	
   

  	
  25

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11

  	
   

  	
  GENERAL
  UNDERTAKINGS

  	
   

  	
  26

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  12

  	
   

  	
  CORPORATE
  UNDERTAKINGS

  	
   

  	
  29

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  13

  	
   

  	
  INSURANCE

  	
   

  	
  32

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  14

  	
   

  	
  SHIP
  COVENANTS

  	
   

  	
  37

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  15

  	
   

  	
  SECURITY
  COVER

  	
   

  	
  40

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  16

  	
   

  	
  PAYMENTS
  AND CALCULATIONS

  	
   

  	
  42

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  17

  	
   

  	
  APPLICATION
  OF RECEIPTS

  	
   

  	
  44

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  18

  	
   

  	
  APPLICATION
  OF EARNINGS

  	
   

  	
  44

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  19

  	
   

  	
  EVENTS
  OF DEFAULT

  	
   

  	
  46

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  20

  	
   

  	
  FEES
  AND EXPENSES

  	
   

  	
  49

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  21

  	
   

  	
  INDEMNITIES

  	
   

  	
  50

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  22

  	
   

  	
  NO
  SET-OFF OR TAX DEDUCTION

  	
   

  	
  52

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  23

  	
   

  	
  ILLEGALITY,
  ETC

  	
   

  	
  53

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  24

  	
   

  	
  INCREASED
  COSTS

  	
   

  	
  53

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  25

  	
   

  	
  SET-OFF

  	
   

  	
  55

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  26

  	
   

  	
  TRANSFERS
  AND CHANGES IN LENDING OFFICES

  	
   

  	
  55

  



 

















 


 


	
  27

  	
   

  	
  VARIATIONS AND WAIVERS

  	
   

  	
  58

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  28

  	
   

  	
  NOTICES

  	
   

  	
  59

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  29

  	
   

  	
  SUPPLEMENTAL

  	
   

  	
  61

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  30

  	
   

  	
  LAW AND JURISDICTION

  	
   

  	
  61

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SCHEDULE 1 LENDERS AND COMMITMENTS

  	
   

  	
  63

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 2 DETAILS OF SHIPS AND OWNERS

  	
   

  	
  64

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 3 DRAWDOWN NOTICE

  	
   

  	
  67

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 4 CONDITION PRECEDENT DOCUMENTS

  	
   

  	
  68

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 5 TRANSFER CERTIFICATE

  	
   

  	
  72

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 6 FORM OF COMPLIANCE CERTIFICATE

  	
   

  	
  76

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 7 MANDATORY COST FORMULA

  	
   

  	
  77

  
	
   

  	
   

  	
   

  
	
  EXECUTION PAGES

  	
   

  	
  79

  



 

















 


THIS
LOAN AGREEMENT is made on 25 July 2007


 


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)                     COMMERZBANK AG acting through its office at Ness 7-9,
D-20457, Hamburg, Germany, as Agent;


 


(4)                     COMMERZBANK AG acting through its office at Ness 7-9,
D-20457, Hamburg, Germany, as Arranger; and


 


(5)                     COMMERZBANK AG acting through its office at Ness 7-9,
D-20457, Hamburg, Germany, as Security
Trustee.


 


WHEREAS


 


The Lenders have agreed
to make available to the Borrower a term loan facility in an amount of up to
the lesser of (a) US$300,000,000 and (b) 65 per cent. of the aggregate Market
Value of the Ships to (i) refinance the existing indebtedness secured on the
Existing Ships and (ii) to finance the purchase price of the Target Ships
and/or the Replacement Ship. The Borrower will on-lend the Loan to the Owners
to assist them in refinancing the Existing Ships and in financing the
acquisition of the Target Ships and/or the Replacement Ship.


 


IT IS AGREED as follows:


 


1                            INTERPRETATION


 


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


 


“Acquisition
Delivery Advance” means any Advance to be made available to
the Borrower in accordance with the terms of this Agreement which is to be used
in financing the balance of the acquisition cost payable pursuant to the MOA
applicable to a Target Ship or a Replacement Ship on delivery of that Ship to
its Owner and in the plural means all of them;


 


“Acquisition
Deposit Advance” means any Advance to be made available to
the Borrower in accordance with the terms of this Agreement which is to be used
in financing the deposit payable pursuant to the MOA applicable to a Target
Ship or a Replacement Ship and in the plural means all of them;


 


“Advances”
means the Existing Ships Advance, each Acquisition Delivery
Advance and each Acquisition Deposit Advance and in the singular means any of
them;


 


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


 


“Agency
and Trust Deed” means the agency and trust deed executed or
to be executed between the Borrower, the Lenders, the Agent and the Security
Trustee in such form as the Lenders may approve or require;


 


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


 

















 


“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, Arrow Sale & Purchase (UK) Ltd. of
London, England, Simpson Spence & Young of London, England, Fearnley AS of
Oslo, Norway and Galbraith’s Limited of London, England;


 


“Approved
Flag” means the Marshall Islands flag, the Liberian flag, the
Cayman Islands flag or such other flag as the Agent may, in its sole and
absolute discretion, approve as the flag on which a Ship shall be registered;


 


“Approved
Flag State” means the Marshall Islands, Liberia, the Cayman
Islands or any other country in which the Agent, may in its sole and absolute
discretion, approve that a Ship be registered;


 


“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;


 


“Arranger”
means Commerzbank AG acting through its office at Ness 7-9,
D-20457, Hamburg, Germany,


 


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


 


(a)                    30 September
2007 or such later date as the Agent may, with the authorisation of all the
Lenders, agree with the Borrower; or


 


(b)                   if earlier, the
date on which the Total Commitments are fully borrowed, 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 charterparty or other contract
of employment referred to in Clause 14.16 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;


 


“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


 


2

















 


this Agreement (and “Total Commitments” means the aggregate of
the Commitments of all the Lenders);


 


“Compliance
Certificate” means a certificate in the form set out in
Schedule 6 (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 12.9;


 


“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 Arranger, the Security Trustee 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;


 


“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);


 


“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
Accounts” means, together, the Existing Ships Earnings
Accounts and the New Ships Earnings Accounts and, in the singular, means any of
them;


 


“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:


 


3

















 


(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 governtmental, judicial or
regulatory authority which arises out of an Environmental Incident or an
alleged Environmental Incident or which relates to any Environmental Law; or


 


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


 


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


 


“Environmental
Incident” means, 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;


 


4

















 


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


 


“Existing
Indebtedness” means, at any relevant time, the aggregate
Financial Indebtedness of the Borrower under the Existing Loan Agreement;


 


“Existing
Loan Agreement” means the loan agreement dated 18 December
2006 (as the same has been supplemented and amended) made between (i) the
Borrower (ii) the banks and financial institutions referred to therein as
lenders and (iii) HSH Nordbank AG as (inter alia) agent, security trustee and
swap bank in respect of a loan facility of (originally) $109,538,620 (of which
an amount of $108,250,000 is outstanding by way of principal on the date of
this Agreement);


 


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


 


“Existing
Ships Advance” means the Advance to be made available to the
Borrower in accordance with the terms of this Agreement which shall be applied
in full repayment of the Existing Indebtedness;


 


“Existing
Ship Earnings Account” means, in relation to each Existing
Ship, an account in the name of the Owner of that Ship with HSH Nordbank AG
designated “[name of Ship] - Earnings Account”, or any other account (with that
or another office of HSH Nordbank AG or with the Agent (following the Agent’s
request to the Borrower pursuant to Clause 12.10)) which is designated by the
Agent as the Earnings Account for that Existing Ship for the purposes of this
Agreement and in the plural means all of them;


 


“Existing
Ship Earnings Account Pledge” means, in relation to each
Existing Ship Earnings Account, an agreement creating security in favour of the
Security Trustee over that account in such form as the Lenders may approve or
require;


 


“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 the 31 December 2007;


 


“Finance
Documents” means:


 


(a)                    this
Agreement;


 


(b)                   the Agency and
Trust Deed;


 


(c)                    the Fee
Letter;


 


(d)                   the Guarantees;


 


(e)                    the Mortgages;


 


(f)                      the General
Assignments;


 


(g)                   the Deeds of
Covenant;


 


(h)                   the Existing
Ship Earnings Accounts Pledges;


 


(i)                       the New
Ship Earnings Accounts Pledges;


 


(j)                       the Reserve
Account Pledge;


 


(k)                    any Charterparty
Assignment;


 


5

















 


(l)                       the Manager’s
Undertakings; and


 


(m)                 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 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;


 


(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;


 


“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 to be given by
that Owner in favour of the Security Trustee guaranteeing the obligations of
the Borrower under (inter alia) this Agreement and the other Finance Documents
in such form as the Lenders shall approve or require and in the plural means
all of them;


 


“HSH
Finance Documents” means all the documents defined as “Finance
Documents” in the Existing Facility Agreement;


 


“IACS” means
the International Association of Classification Societies;


 


6

















 


“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;


 


“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;


 


“ISPS
Code Documentation” includes:


 


7

















 


(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;


 


“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 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, 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


 


8

















 


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 or, 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;


 


“Mandatory
Cost” means the percentage rate per annum calculated by the
Agent in accordance with Schedule 7;


 


“Margin”
means 1 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;


 


“MOA”
means, in relation to a Target Ship, a memorandum of agreement made or to be
made between the Seller of that Ship and the Owner which is the buyer of that
Ship on terms and conditions acceptable to the Agent and, in the plural, means
all of them;


 


9

















 


“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 Approved
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;


 


“New
Ship Earnings Account” means, in relation to each Target Ship
and each Replacement 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;


 


“New
Ship Earnings Accounts Pledge” means, in relation to each New
Ship Earnings Account, a pledge agreement creating security in favour of the
Security Trustee over that account in such form as the Lenders may approve or
require and in the plural means all of them;


 


“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, in the case of all such corporations other than
Protea International Inc. and Reading Navigation Co., 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 and in the case of Protea International Inc. and
Reading Navigation Co., a corporation incorporated in the Republic of Liberia
having its registered office at 80 Broad Street, Monrovia, Republic of Liberia,
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;


 


(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


 


10

















 


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;


 


“Replacement
Ship” means a ship which satisfies the following criteria:


 


(a)                    it is
comparable in size, purchase price, quality and type to the Target Ship which
it is replacing;


 


(b)                   it is a
handysize, handymax, panamax or capesize bulk carrier or any other type of
vessel as may be approved by the Lenders (in their sole and absolute discretion);


 


(c)       on the date of delivery of such Ship to
its Owner, it is no more than 10 years old;


 


(d)                   it is purchased
on normal arm’s length commercial terms;


 


(e)                    it maintains
the highest classification with a first-class classification society which is a
member of the IACS as the Agent may approve free of any overdue recommendations
and conditions;


 


11

















 


(f)                      it is to be
registered on an Approved Flag;


 


“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”;


 


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


 


“Reserve
Account Pledge” means a pledge agreement creating security in
favour of the Security Trustee in respect of the Reserve Account in such form
as the Lenders may approve or require;


 


“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 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


 


12

















 


(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 Commerzbank AG and any of its successors
including, without limitation, any successor appointed under clause 5 of the
Agency and Trust Deed;


 


“Seller”
means, in relation to:


 


(a)                    “CAP BONA”,
Siba Ships Asia Pte Ltd. of 390 Havelock Road, #04-02 King’s Centre, Singapore
69662;


 


(b)                   “FILIA GEM”,
Filia Gem Shipping Company Limited of Cyprus;


 


(c)                    “SUNDANCE”,
Sundance Maritime Enterprises S.A. of Trust Company Complex, Ajeltake Road,
Ajeltake Island, Majuro, Marshall Islands MH 96960,


 


and in the plural means
all of them;


 


“Ships” means,
together, the Existing Ships, the Target Ships and the Replacement Ship which
may be subject to a Mortgage at any time and, in the singular, means any of
them;


 


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


 


“Total
Assets” means, as at the relevant date, the aggregate value
of all current assets, fixed assets, and other assets and restricted cash of
the Group (valued 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;


 


13

















 


“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;


 


“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;


 


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


 


14

















 


“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;


 


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


 


15

















 


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 loan facility in an amount not
exceeding the lesser of:


 


(a)                     $300,000,000;
and


 


(b)                    65 per cent. of the aggregate Market Value of
all the Ships in up to 7 Advances. The Existing Ships Advance shall be applied
in full of repayment of the Existing Indebtedness, each Acquisition Deposit
Advance shall be used to assist the relevant Owner in financing the whole of
the deposit of the Ship to be owned by it payable pursuant to the MOA relative
to that Ship and each Acquisition Delivery Advance shall be used to assist the
relevant Owner in financing the whole of the balance of the purchase price of
the Ship to be owned by it payable pursuant to the MOA relative to that Ship
upon delivery of the same to the Owner.


 


16

















 


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 and Clause 2.1.


 


3                            POSITION
OF THE LENDERS AND THE MAJORITY LENDERS


 


3.1                  Interests of
Lenders several. The rights of the Lenders under this Agreement are
several; accordingly each Lender shall be entitled to sue for any amount which
has become due and payable by the Borrower to it under this Agreement without
joining the Agent, the Security Trustee or any other Lender as additional
parties in the proceedings.


 


3.2                  Proceedings by individual
Lender. However, without the
prior consent of the Majority Lenders, no Lender 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


 


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


 


3.3                  Obligations several. The obligations of the Lenders under this
Agreement are several; and a failure of a Lender to perform its obligations
under this 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 have any responsibility for a failure of another Lender to
perform its obligations under this Agreement.


 


3.4                  Parties bound by certain
actions of Majority Lenders. Every
Lender, 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


 


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


 


17

















 


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)                    each Advance shall be made available in a
single amount and any amount undrawn in respect of an Advance shall be
cancelled and may not be borrowed by the Borrower at a later date;


 


(c)                     the Existing Ships Advance shall be in an
amount equal to the Existing Indebtedness;


 


(d)                    each Acquisition Deposit Advance shall be in
an amount equal to the deposit payable pursuant to the MOA for the Target Ship
(or, as the case may be, the Replacement Ship) to be financed by that Advance;


 


(e)                     each Acquisition Delivery Advance shall be in
an amount equal to the balance of the purchase price payable pursuant to the
MOA for the Target Ship (or as the case may be, the Replacement Ship) to be
financed by that Advance upon delivery of that Ship to its Owner;


 


(f)                       no Acquisition Advance may be made available
to the Borrower prior to the Drawdown Date of the Existing Ships Advance; and


 


(g)                    the aggregate of the Advances 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 written 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:


 


18

















 


(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 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 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.


 


19

















 


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;


 


(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 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 Margin and the Mandatory Cost (if any).


 


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


 


20

















 


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. Each Interest Period in respect of each Advance
shall be:


 


(a)                     1 or 3 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:


 


(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 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:


 


21

















 


(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.


 


8                            REPAYMENT
AND PREPAYMENT


 


8.1                  Amount of repayment
instalments. If, on a
Dividend Declaration Date, the Security Cover Percentage is less than 130 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 Reserve
Account no later than 3 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 Reserve 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:


 


(a)                     any partial prepayment to be applied against
the Loan shall be $10,000,000 or a higher multiple thereof;


 


(b)                    the Agent has received from the Borrower at
least 15 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.


 


22

















 


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 $10,000,000 or a
higher integral multiple thereof;


 


(b)                    the Agent has received from the Borrower at
least 5 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:


 


(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) the Security Cover
Percentage required to be maintained at that time pursuant to Clause 15.1.


 


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


 


23

















 


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. No amount prepaid in respect of the Loan may
be reborrowed.


 


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 date of this Agreement,
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 service of the first
Drawdown Notice, the Agent receives the documents described in Part B of
Schedule 4 in a form and substance satisfactory to the Agent and its lawyers


 


(c)                     that, on or before the Drawdown Date in
respect of each Acquisition Deposit Advance, the Agent receives the documents
described in Part C of Schedule 4 in form and substance satisfactory to the
Agent and its lawyers;


 


(d)                    that, on or before the Drawdown Date in
respect of each Acquisition Delivery Advance, the Agent receives the documents
described in Part D of Schedule 4 in form and substance satisfactory to the
Agent and its lawyers;


 


(e)                     that, on or before each Drawdown Date, the
Agent receives all facility fees referred to in Clause 20.1 which are payable
at that time (including, without limitation, any accrued commitment fee) and
has received payment of the expenses referred to in Clause 20.2;


 


(f)                       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


 


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


 


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


 


(h)                    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).


 


24

















 


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 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


 


(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.


 


25

















 


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 Target
Ship or, as the case may be, the Replacement 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 on or before:


 


(a)                     the date of this Agreement, in the case of
each Existing Ship; and


 


(b)                    the date on which each Ship is delivered to
its Owner pursuant to the MOA relative to that Ship, in the case of each other
Ship.


 


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).


 


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;


 


26

















 


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


 


(c)                     procure that its liabilities under the Finance
Documents to which it is 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 MOAs, the Finance Documents to which
each is a party, the Existing Loan Agreement and the HSH Finance Documents to
which each is a party; and


 


(b)                    (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 120 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 after the date of this Agreement), 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 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)                     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 financial covenants referred to
in Clause 12.4, the ability of the Borrower to declare a dividend in accordance
with Clause 12.8 and whether a repayment of the Loan needs to be made in
accordance with Clause 8.1; and


 


(d)                    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.


 


27














 


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 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       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.


 


11.13       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:


 


28

















 


(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 11.13 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 11.13 does not affect the Borrower’s obligations
under Clause 11.14.


 


11.14       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.


 


11.15       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


 


(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.


 


11.16       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.


 


11.17       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 (b) there shall be no change in the legal and beneficial
ownership of the shares in each Owner.


 


11.18       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.


 


29

















 


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 12.8:


 


(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 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)                     open or maintain any account with any bank or
financial institution except accounts with the Agent or HSH Nordbank AG for the
purpose of the Finance Documents and the HSH Finance Documents;


 


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


 


(g)                    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;


 


(h)                    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 Reserve Account which has been transferred thereto in accordance with
Clause 8.1 or any other restricted account) in Liquid Assets of which, all
amounts in respect of the Ships, shall be held in the Reserve Account; and


 


(d)                    the Leverage Ratio 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


 


30

















 


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.


 


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


 


12.9           Conditions for dividend
payment. The conditions referred to in Clause 12.8 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 latest 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 130 per cent.;
and


 


31

















 


(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.


 


12.10    Earnings Accounts. The
Borrower shall, promptly following the Agent’s request, procure that the Owners
of the Existing Ships shall close the Existing Ships Earnings Accounts held at
HSH Nordbank AG in Hamburg and transfer all balances on those accounts to new
earnings accounts with the Agent in Hamburg and thereafter ensure the Owners
execute all documents referred to in Clause 18.7(b) as may be required by the Agent.


 


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 (other than in the case of each Target Ship or Replacement
Ship, in which case the provisions of this Clause 13 shall apply to that Ship
as from the date on which the Target Ship or Replacement Ship which is owned or
to be owned by that Owner is delivered to it under the relevant MOA) 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


 


32

















 


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


 


(b)                    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;


 


(c)                     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;


 


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


 


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


 


(f)                       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


 


33

















 


letters of undertaking
(in the event of fleet cover, together with waivers for liens for unpaid
premiums of other vessels not mortgaged to the Security Trustee) in a form
required by the Security Trustee 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;


 


(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.


 


If any of the obligatory
insurances referred to in Clause 13.6 form part of a fleet cover, the Borrower
will procure that any letter of undertaking referred to in this Clause is
amended to provide that the relevant brokers shall undertake to the Security
Trustee that they shall neither set-off against any claims in respect of a Ship
any premiums due in respect of other vessels under such fleet cover of any
premiums due for other insurances, nor cancel the insurance for reason of
non-payment of premiums for other vessels under such fleet cover or of premiums
for such other insurances.


 


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 Security Trustee; 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.


 


34

















 


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 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


 


35

















 


(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:


 


(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 Security Trustee may
from time to time consider appropriate:


 


(a)                       a mortgagee’s interest insurance in an amount
equal to 110 per cent. of the Loan.


 


(b)                      a mortgagee’s interest additional perils
(pollution) insurance in an amount equal to 110 per cent. of the Loan.


 


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.


 


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


 


36

















 


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 (after the Ship has been delivered to it under the
relevant MOA) 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 an Approved Flag; shall not
do or allow to be done anything as a result of which such registration might be
cancelled or imperilled; and shall not change the name or port of registry of
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 at ports
in the relevant Approved Flag State or to vessels trading to any jurisdiction
to which the Ship may trade from time to time, including but not limited to the
ISM Code, the ISPS Code, 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 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


 


37

















 


(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. 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:


 


(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;


 


38

















 


(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;


 


(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


 


39

















 


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


 


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


 


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


 


(d)                      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;


 


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


 


(f)                         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:


 


(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      Charterparty Assignment.
If any Owner enters into any bareboat charter or any time charterparty or other
contract of employment for a term which exceeds or is capable of exceeding 12
months 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 charter or
other contract of employment, 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:


 


40

















 


(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 the Relevant
Percentage. 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.


 


In this Clause 15.1, “Relevant Percentage” means (i) on any
Dividend Declaration Date, 130 per cent. and (ii) at any other time, 125 per
cent.


 


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, 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.


 


41

















 


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:


 


(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 Commerzbank AG, New York Branch (Account No. 938026262 SWIFT Code:
COBADEFF208 under reference “Paragon Shipping Inc. - US$300 million 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


 


42

















 


(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 or the Security
Trustee shall be made available by the Agent to that Lender or, as the case may
be, the Security Trustee by payment, with funds having the same value as the
funds received, to such account as the Lender 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 generally shall be distributed
by the Agent to each Lender 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, deduct and withhold from that
amount any sum which is then due and payable to the Agent from that Lender
under any Finance Document or any sum which the Agent is then entitled under
any Finance Document to require that Lender 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 any sum
which the Agent is expecting to receive for remittance or distribution to the
Borrower or that Lender until the Agent has satisfied itself that it has
received that sum.


 


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,
without first having received that sum, the Borrower or (as the case may be)
the Lender 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


 


43

















 


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;


 


(b)                    SECONDLY: in retention of an amount equal to
any amount not then due and payable under any Finance Document 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 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 (subject only to provisions of
the relevant General Assignment), all the Earnings of each Ship are paid to the
Earnings Account for that Ship.


 


18.2           Transfers to Reserve Account.
The Borrower undertakes with
each Creditor Party to ensure that:


 


(a)                     no later than 3 days after a Relevant Dividend
Declaration Date, there shall be transferred to the Reserve 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 Reserve Account
out of the aggregate Earnings received in the Earnings


 


44

















 


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
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
Reserve 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 Reserve
Account. Any credit balance
on the Reserve 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 Reserve 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 Reserve 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 comply,
with any requirement of the Agent as to the location or re-location of any
Earnings Account or the Reserve Account;


 


(b)                    execute, and ensure that the Owners 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) and the Reserve 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.


 


45

















 


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


 


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


 


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, 11.7, 12.2, 12.3, 12.4, 12.5,
12.8, 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:


 


46

















 


(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 or the Lenders 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 Lenders consider material of a Finance Document is not granted,
expires without being


 


47

















 


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 in the ultimate control of the voting rights attaching to any of those
shares; or


 


(l)                        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


 


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


 


(n)                    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 Security Trustee, the Agent and/or the Lenders 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.


 


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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    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.


 


20                     FEES AND EXPENSES


 


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


 


(a)                     a commitment
fee for distribution among the Lenders pro rata to their Commitments at the
rate of 0.25 per cent. per annum on the amount of the Total Commitments less
the amount of the Loan for the period from (and including) 20 July 2007 up to
and including the earlier of (i) the Drawdown Date in respect of the seventh
and final Advance and (ii) the last day of the Availability Period, such fee to
be paid quarterly in arrears and on the last day of such period; and


 


49

















 


(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 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 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.


 


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:


 


50

















 


(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;


 


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


 


51

















 


(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           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.


 


21.7           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.


 


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;


 


52














 


(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.


 


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 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


 


53

















 


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;


 


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.


 


54

















 


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 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 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 prior
written 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,
cause:


 


(a)                     its rights in respect of all or part of its
Contribution; or


 


55

















 


(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.


 


A transfer pursuant to
this Clause 26.2 shall:


 


(i)                       require the prior written consent of the
Agent;


 


(ii)                    be effected without the consent of, but with
notice to, the Borrower and without any cost to the Borrower:


 


(A)                 following the occurrence of an Event of
Default;


 


(B)                   if such transfer is to a subsidiary or any
other company or financial institution which is in the same ownership or
control as the Transferor Lender; and


 


(iii)                 require the consent of the Borrower (such
consent not to be unreasonably withheld or delayed) in all circumstances (other
than those referred to in sub-paragraph (ii) above).


 


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 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.


 


56

















 


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 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.


 


57

















 


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”:


 


(a)                        a change
in the Margin or in the definition of LIBOR;


 


(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;


 


58

















 


(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 case may require) in the relevant Transfer Certificate; and

  
	
   

  	
   

  	
   

  
	
  (c)

  	
  the Agent and

  	
  Commerzbank AG

  
	
   

  	
  the Security Trustee:

  	
  Global Shipping

  
	
   

  	
   

  	
  Ness 7-9

  
	
   

  	
   

  	
  D-20457 Hamburg

  
	
   

  	
   

  	
  Germany

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Fax No: +(49) 40 36 83 4068

  
	
   

  	
   

  	
  Attn: Julia Schormann/Claas Ringleben

  



 


 


59

















 


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 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.


 


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 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:


 


(i)                       agree that, unless and until notified to the
contrary, this is to be an accepted form of communication;


 


60

















 


(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 Security Trustee will
be effective only when actually received in readable form and in the case of
any electronic communication made by a Lender 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.


 


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.


 


61

















 


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.


 


62

















 


SCHEDULE 1


 


LENDERS AND COMMITMENTS


 


	
  Lender

  	
   

  	
  Lending Office

  	
   

  	
  Commitment 

  (US Dollars)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Commerzbank AG

  	
   

  	
  Ness 7-9 

  D-20457 Hamburg 

  Germany

  	
   

  	
  300,000,000

  	
   

  



 


63

















 


SCHEDULE 2


 


DETAILS OF SHIPS AND OWNERS


 


PART A


 


DETAILS OF EXISTING 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:

  	
  Nippon Kaiji Kyokai NS*(BC)(ESP)/MNS*

  



 


64

















 


	
   

  	
   

  	
  Year built:

  	
  1995

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Owner:

  	
  Explorer Shipholding Limited

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  4

  	
   

  	
  Name of Ship:

  	
  “CRYSTAL SEAS”

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Flag:

  	
  Liberia

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  IMO Number:

  	
  9114153

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Official Number:

  	
  13198

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Dwt:

  	
  43,222

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Class Society and notation:

  	
  Det Norske Veritas *1A1 Bulk Carrier ESP HC-E E0
  DK(+) HOLDS (2,4) MAY BE EMPTY BIS

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Year built:

  	
  1995

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Owner:

  	
  Opera Navigation Co.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  5

  	
   

  	
  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.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  6

  	
   

  	
  Name of Ship:

  	
  “KIND SEAS”

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Flag:

  	
  Marshall Islands

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  IMO Number:

  	
  9205847

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Official Number:

  	
  2172

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Dwt:

  	
  72,493

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Class Society and notation:

  	
  Nippon Kaiji Kyokai NS*(BC, SHC 2,4,6 E)(ESP)/MNS*

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Year built:

  	
  1999

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Owner:

  	
  Fairplay Maritime Ltd.

  



 


65

















 


PART B


 


DETAILS OF TARGET SHIPS AND OWNERS


 


 


	
  1

  	
   

  	
  Name of Ship:

  	
  “CAP BONA” to be renamed “PEARL SEAS”

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Flag:

  	
  Marshall Islands

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  IMO Number:

  	
  393260

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Official Number:

  	
  [•]

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Dwt:

  	
  74,473

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Class Society and notation:

  	
  RINA (C; Bulk Carrier ESP; AUT-UMS)

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Year built:

  	
  2006

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Owner:

  	
  Donna Marine Co.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  2

  	
   

  	
  Name of Ship:

  	
  “FILIA GEM” to be renamed “SAPPHIRE SEAS”

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Flag:

  	
  Liberia

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  IMO Number:

  	
  9301146

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Official Number:

  	
  13497

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Dwt:

  	
  53,702

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Class Society and notation:

  	
  Germanischer Lloyd Hull 100 A5 ESP IW C1D11 Bulk
  Carrier, Machinery MC AUT

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Year built:

  	
  2005

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Owner:

  	
  Protea International Inc.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  3

  	
   

  	
  Name of Ship:

  	
  “SUNDANCE” to be renamed “DIAMOND SEAS”

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Flag:

  	
  Liberia

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  IMO Number:

  	
  9244219

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Official Number:

  	
  13494

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Dwt:

  	
  74,274

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Class Society and notation:

  	
  Lloyd’s Register 100A1 bulk carrier, strengthened
  for heavy cargoes, holds 2,4,6 may be empty, ESN ESP, LI LMC UMS

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Year built:

  	
  2001

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Owner:

  	
  Reading Navigation Co.

  



 


66

















 


SCHEDULE
3


 


DRAWDOWN
NOTICE


 


To:                 Commerzbank AG

Ness 7-9

D-20457 Hamburg 

Germany


 


 


	
  Attention:
  Loans Administration

  	
  [         ]
  2007

  



 


DRAWDOWN NOTICE


 


1                            We
refer to the loan agreement (the “Loan
Agreement”) dated [•] July 2007 and made between
ourselves as Borrower, the Lenders referred to therein yourselves as Agent,
Arranger and as Security Trustee in connection with a loan facility of up to
US$300,000,000. Terms defined in the Loan Agreement have their defined meanings
when used in this Drawdown Notice.


 


2                            We
request to borrow [the Existing Ships Advance] [an Acquisition [•] Advance in
relation to [•]] 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 and all other facility fees
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.


 


67

















 


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
Guarantees;


 


(e)                     the Existing
Ship Earnings Accounts Pledges; and


 


(f)                       the Reserve
Account Pledge.


 


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


 


3                            Copies
of resolutions of the shareholders and directors of the Borrower and of each
Owner authorising the execution of each of the Finance Documents to which the
Borrower or that Owner 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.


 


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


 


6                            The
originals of any mandates or other documents required in connection with the
opening or operation of each New Ship Earnings Account and the Reserve Account.


 


7                            Evidence
satisfactory to the Agent that each Owner is a direct or indirect wholly-owned
subsidiary of the Borrower.


 


8                            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.


 


9                            Documentary
evidence that the agent for service of process named in Clause 30 has accepted
its appointment.


 


10                     Favourable
legal opinions from lawyers appointed by the Agent on such matters concerning
the laws of the Marshall Islands, Liberia and Cayman Islands, and such other
relevant jurisdictions as the Agent may require.


 


68

















 


11                     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                            Evidence
that an amount of not less than $3,000,000 is standing to the credit of the
Reserve Account.


 


2                            Documentary
evidence that:


 


(a)                     each Existing
Ship is definitively and permanently registered in the name of its Owner under
the applicable Approved Flag;


 


(b)                    each Existing
Ship is in the absolute and unencumbered ownership of its Owner save as
contemplated by the Finance Documents to which that Owner is a party;


 


(c)                     each Existing
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 overdue
recommendations and conditions of such classification society;


 


(d)                    each Mortgage
relative to an Existing Ship has been duly registered against that Existing
Ship as a valid first preferred or, as the case may be, priority statutory
mortgage in accordance with the laws of applicable Approved Flag State; and


 


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


 


3                            A
copy of the Management Agreement and a duly executed original of the Manager’s
Undertaking in relation to each Existing Ship.


 


4                            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 Existing Ship and the applicable Approved Manager certified as true and in
effect by the Owner of such Existing Ship; and


 


(b)                    the ISPS Code
Documentation in respect of each Existing Ship and the Owner thereof certified
as true and in effect by that Owner.


 


5                            Two
valuations (at the cost of the Borrower) of each Existing Ship addressed to the
Agent, stated to be for the purpose of this Agreement and dated not earlier
than 15 days before the Drawdown Date for the Existing Ships Advance, each from
an Approved Broker.


 


6                            A
compliance certificate (in the form set out in Schedule 6) demonstrating the
compliance by the Borrower (or not, as the case may be) with the provisions of
Clause 12.4 (such compliance to be determined by reference to the audited
annual consolidated accounts of the Group for the Financial Year ended 31
December 2006) signed by the chief financial officer of the Borrower.


 


69

















 


7                            Favourable
legal opinions from lawyers appointed by the Agent on such matters concerning
the laws of the Marshall Islands, Liberia, the Cayman Islands and such other
relevant jurisdictions as the Agent may require.


 


8                            A
favourable opinion from an independent insurance consultant acceptable to the
Agent on such matters relating to the insurances of the Existing Ships as the
Agent may require.


 


9                            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 C


 


The following are the
documents referred to in Clause 9.1(c).


 


“Relevant
Ship” means in relation to an Acquisition Deposit Advance,
the Ship which is to be part-financed by that Advance.


 


1                            A
copy of MOA for the Relevant Ship and of all documents signed or issued by the
parties thereto under or in connection with.


 


2                            Such
documentary evidence as the Lender and its legal advisers may require in
relation to the due authorisation and execution of the MOA for the Relevant
Ship and of all documents to be executed by the parties thereto under that MOA.


 


PART D


 


The following are the
documents referred to in Clause 9.1(d).


 


“Relevant
Ship” means, in relation to an Acquisition Delivery Advance,
the Ship which is to be part-financed by that Advance.


 


1                            A
duly executed original of the Mortgage, the Deed of Covenant (if applicable),
the General Assignment, the New Ship Earnings Account Pledge and (if
applicable) the Charterparty Assignment for the Relevant Ship (and of each
document to be delivered under each of them).


 


2                            Documentary
evidence that:


 


(a)                     the Relevant
Ship has been unconditionally delivered to, and accepted by, the relevant Owner
under the relevant MOA and the full purchase price payable under that MOA has
been duly paid;


 


(b)                    the Relevant
Ship is definitively and permanently registered in the name of the relevant
Owner under an Approved Flag;


 


(c)                     the Relevant
Ship is in the absolute and unencumbered ownership of the relevant Owner save
as contemplated by the Finance Documents;


 


(d)                    the Relevant
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;


 


(e)                     the Mortgage
relative to the Relevant Ship has been duly registered or recorded (as the case
may be) against the Relevant Ship as a valid first priority or preferred ship
mortgage in accordance with the laws of the relevant Approved Flag State; and


 


70

















 


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


 


3                            A
copy of the Management Agreement and a duly executed original of the Manager’s
Undertaking in relation to the Relevant Ship.


 


4                            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 the
Relevant Ship and the Approved Manager certified as true and in effect by the
Owner of the Relevant Ship; and


 


(b)                    the ISPS Code
Documentation in respect of the Relevant Ship and the Owner thereof certified
as true and in effect by the relevant Owner.


 


5                            A
survey report of the Relevant Ship dated no earlier than 30 days prior to the
relevant Drawdown Date in form, scope and substance satisfactory to the Agent
and its legal and technical advisers.


 


6                            Two
valuations of the Relevant Ship, addressed to the Agent, stated to be for the
purpose of this Agreement and dated not earlier than 30 days before the
relevant Drawdown Date, each prepared (at the expense of the Borrower) by an
Approved Broker in accordance with Clause 15.4 which shows the value of the
Relevant Ship in an amount acceptable to the Agent.


 


7                            Evidence
satisfactory to the Agent that the Owner of the Relevant Ship remains a direct
or indirect wholly-owned subsidiary of the Borrower.


 


8                            Documentary
evidence that there is standing in the credit of the Reserve Account an amount
not less than (a) $500,000 multiplied by (b) the number of Ships subject to a
Mortgage at that time (including, without limitation, the Relevant Ship).


 


9                            A
favourable legal opinion from lawyers appointed by the Agent on such matters
concerning the laws of the Approved Flag State where the Relevant Ship is
registered and such other relevant jurisdictions as the Agent may require.


 


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


 


11                     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.


 


71

















 


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:                 Commerzbank AG
for itself and for and on behalf of the Borrower, each Security Party, the Security
Trustee and each Lender, as defined in the Loan Agreement referred to below.


 


[
                           
]


 


1                            This
Certificate relates to a Loan Agreement (the “Loan
Agreement”) dated [•] July 2007 and made between (1)
Paragon Shipping Inc. as borrower (the “Borrower”), (2) the banks and financial
institutions named therein as Lenders, (3) Commerzbank AG as Agent, (4)
Commerzbank AG as Arranger and (5) Commerzbank AG as Security Trustee in
respect of a term loan facility of up to US$300,000,000.


 


2                            In
this Certificate:


 


“the
Relevant Parties” means the Agent, the Borrower, each
Security Party, the Security Trustee 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:


 


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
$[     ].


 


72

















 


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:


 


(a)       confirms
that it has received a copy of the Loan Agreement and each other Finance
Document;


 


(b)                    agrees that it
will have no rights of recourse on any ground against either the Transferor,
the Agent, the Security Trustee 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
the liabilities of the Borrower or any Security Party under the Finance
Documents;


 


(c)                     agrees that
it will have no rights of recourse on any ground against the Agent, the
Security Trustee or any Lender in the event that this Certificate proves to be
invalid or ineffective;


 


(d)                    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


 


73

















 


(e)                     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.


 


12                     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


 


	
  COMMERZBANK
  AG

  
	
   

  
	
  By:

  
	
   

  
	
  Date:

  



 


74

















 


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.


 


75

















 


SCHEDULE 6


 


FORM OF COMPLIANCE CERTIFICATE


 


	
  To:

  	
  Commerzbank
  AG

  
	
   

  	
  Ness
  7-9

  
	
   

  	
  D-20457
  Hamburg

  
	
   

  	
  Germany

  



[•] 200[•]


 


Dear Sirs,


 


We refer to a loan
agreement dated [•] July 2007 (the “Loan Agreement”)  made between (amongst others) yourselves and ourselves in
relation to a term loan facility of up to $300,000,000.


 


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 Reserve Account;


 


(d)                    the Leverage
Ratio 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.


 


76

















 


SCHEDULE 7


 


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.I Deposit acceptors (ignoring any minimum fee
or zero rated fee required pursuant to the Fees Rules but taking into account
any applicable discount rate);


 


(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


 


77

















 


(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, 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


 


78

















 


EXECUTION PAGES


 


	
  BORROWER

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SIGNED by Maria Stefanou

  	
  )

  	
   

  
	
  for
  and on behalf of

  	
  ) 

  	
  /s/ Maria Stefanou

  	
   

  
	
  PARAGON SHIPPING INC.  at 17.00 pm 25/5/2007

  	
  )

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  LENDERS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SIGNED by Alexia Hatzimichalis

  	
  )

  	
   

  
	
  for
  and on behalf of

  	
  ) 

  	
  /s/ Alexia Hatzimichalis

  	
   

  
	
  COMMERZBANK AG

  	
  )

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  AGENT

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SIGNED by Alexia Hatzimichalis

  	
  )

  	
   

  
	
  for
  and on behalf of

  	
  ) 

  	
  /s/ Alexia Hatzimichalis

  	
   

  
	
  COMMERZBANK AG

  	
  )

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SECURITY TRUSTEE

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SIGNED by Alexia Hatzimichalis

  	
  )

  	
   

  
	
  for
  and on behalf of

  	
  ) 

  	
  /s/ Alexia Hatzimichalis

  	
   

  
	
  COMMERZBANK AG

  	
  )

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ARRANGER

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SIGNED by Alexia Hatzimichalis

  	
  )

  	
   

  
	
  for
  and on behalf of

  	
  ) 

  	
  /s/ Alexia Hatzimichalis

  	
   

  
	
  COMMERZBANK 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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