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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC 20549

FORM 20-F

o

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934ORý

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2009ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
from                             toORo

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


Date of event requiring this shell company report

Commission file number 001-33060

DANAOS CORPORATION(Exact name of Registrant as specified in its charter)Not Applicable(Translation of Registrant's name into English)Republic of The Marshall Islands(Jurisdiction of incorporation or organization)c/o Danaos Shipping Co. Ltd
14 Akti Kondyli
185 45 Piraeus
Greece(Address of principal executive offices)Dimitri J. Andritsoyiannis
c/o Danaos Shipping Co. Ltd
14 Akti Kondyli
185 45 Piraeus
Greece
Telephone: +30 210 419 6480
Facsimile: +30 210 419 6489(Name, Address, Telephone Number and Facsimile Number of Company Contact Person)


Securities
registered or to be registered pursuant to Section 12(b) of the Act:

Title of each class

Name of each exchange on which registeredCommon stock, $0.01 par value per share

New York Stock ExchangePreferred stock purchase rights

New York Stock Exchange


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Securities registered or to be registered pursuant to Section 12(g) of the Act:

None.

Securities
for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None.

As
of December 31, 2009, there were 54,550,858 shares of the registrant's common stock outstanding.

Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes
o    No ý

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.

Yes
o    No ý

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days.

Yes
ý    No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files).

Yes
o    No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer
and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one):

o Large accelerated filer

o Accelerated filer

ý Non-accelerated filer


Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

ý U.S. GAAP

o International Financial Reporting Standards

o Other


If "Other" has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

o
Item 17    o Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes
o    No ý

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Table of Contents



TABLE OF CONTENTS



PageFORWARD-LOOKING INFORMATION

iPART I

1Item 1.

Identity of Directors, Senior Management and Advisers

1Item 2.

Offer Statistics and Expected Timetable

1Item 3.

Key Information

1Item 4.

Information on the Company

34Item 4A.

Unresolved Staff Comments

53Item 5.

Operating and Financial Review and Prospects

53Item 6.

Directors, Senior Management and Employees

87Item 7.

Major Shareholders and Related Party Transactions

95Item 8.

Financial Information

101Item 9.

The Offer and Listing

103Item 10.

Additional Information

103Item 11.

Quantitative and Qualitative Disclosures About Market Risk

126Item 12.

Description of Securities Other than Equity Securities

129PART II

129Item 13.

Defaults, Dividend Arrearages and Delinquencies

129Item 14.

Material Modifications to the Rights of Security Holders and Use of Proceeds

129Item 15.

Controls and Procedures

130Item 16A.

Audit Committee Financial Expert

131Item 16B.

Code of Ethics

131Item 16C.

Principal Accountant Fees and Services

131Item 16D.

Exemptions from the Listing Standards for Audit Committees

132Item 16E.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

132Item 16F

Change in Registrant's Certifying Accountant

132Item 16G.

Corporate Governance

133PART III

134Item 17.

Financial Statements

134Item 18.

Financial Statements

134Item 19.

Exhibits

134INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

F-1


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FORWARD-LOOKING INFORMATION

This annual report contains forward-looking statements based on beliefs of our management. Any statements contained in this annual
report that are not historical facts are forward-looking statements as defined in Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S. Securities
Exchange Act of 1934, as amended. We have based these forward-looking statements on our current expectations and projections about future events, including:



The
words "anticipate," "believe," "estimate," "expect," "forecast," "intend," "potential," "may," "plan," "project," "predict," and "should" and similar expressions as they relate to us
are intended to identify such forward-looking statements, but are not the exclusive means of identifying such statements. We may also from time to time make forward-looking statements in our periodic
reports that we file with the U.S. Securities and Exchange Commission ("SEC") other information sent to our security holders, and other written materials. Such statements reflect our current views and
assumptions and all forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. The factors that could affect our
future financial results are discussed more fully in "Item 3. Key InformationRisk Factors" and in our other filings with the SEC. We caution readers of this annual report not to
place undue reliance on these forward-looking statements, which speak only as of their dates. We undertake no obligation to publicly update or revise any forward-looking statements.

i

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PART I

Danaos Corporation is a corporation domesticated in the Republic of The Marshall Islands that is referred to in this Annual Report on
Form 20-F, together with its subsidiaries, as "Danaos Corporation," "the Company," "we," "us," or "our." This report should be read in conjunction with our consolidated financial
statements and the accompanying notes thereto, which are included in Item 18 to this annual report.

As
described in "Item 5. Operating and Financial Review and Prospects," we have reached an agreement in principle with our existing lenders to restructure our existing
indebtedness, other than under our KEXIM and KEXIM-Fortis credit facilities, and agreements in principle for new financing arrangements. These agreements remain subject to the approval of the credit
committees of the respective lenders, negotiation and execution of definitive documentation and other conditions, including our receipt of requisite proceeds from equity issuances.

We
use the term "Panamax" to refer to vessels capable of transiting the Panama Canal and "Post-Panamax" to refer to vessels with a beam of more than 32.31 meters that cannot
transit the Panama Canal. We use the term "twenty foot equivalent unit," or "TEU," the international
standard measure of containers, in describing the capacity of our containerships. Unless otherwise indicated, all references to currency amounts in this annual report are in U.S. dollars.

Item 1.    Identity of Directors, Senior Management and Advisers

Not Applicable.

Item 2.    Offer Statistics and Expected Timetable

Not Applicable.

Item 3.    Key Information

Selected Financial Data

The following table presents selected consolidated financial and other data of Danaos Corporation and its consolidated subsidiaries for
each of the five years in the five year period ended December 31, 2009, reflecting the discontinued operations of the drybulk carriers owned by subsidiaries of Danaos Corporation between 2005
and 2007 as discontinued operations. The table should be read together with "Item 5. Operating and Financial Review and Prospects." The selected consolidated financial data of Danaos
Corporation is derived from our consolidated financial statements and notes thereto, which have been prepared in accordance with U.S. generally accepted accounting principles, or "U.S. GAAP",
and have been audited for the years ended December 31, 2009, 2008, 2007, 2006 and 2005 by PricewaterhouseCoopers S.A., an independent registered public accounting firm.

Our
audited consolidated statements of income, stockholders' equity and cash flows for the years ended December 31, 2009, 2008 and 2007, and the consolidated balance sheets at
December 31, 2009 and 2008, together with the notes thereto, are included in "Item 18. Financial Statements" and should be read in their entirety.

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Year Ended December 31,2009

2008

2007

2006

2005In thousands, except per share amountsSTATEMENT OF INCOMEOperating revenues

$
319,511

$
298,905

$
258,845

$
205,177

$
175,886Voyage expenses


(7,346
)

(7,476
)

(7,498
)

(5,423
)

(3,883
)Vessel operating expenses


(92,327
)

(89,246
)

(65,676
)

(52,991
)

(45,741
)Depreciation


(60,906
)

(51,025
)

(40,622
)

(27,304
)

(22,940
)Amortization of deferred drydocking and special survey costs


(8,295
)

(7,301
)

(6,113
)

(4,127
)

(2,638
)Bad debt expense





(181
)

(1
)

(145
)

(36
)General and administrative expenses


(14,541
)

(11,617
)

(9,955
)

(6,413
)

(3,914
)Gain/(loss) on sale of vessels





16,901


(286
)




Income from operations


136,096


148,960


128,694


108,774


96,734Interest income


2,428


6,544


4,861


3,605


6,345Interest expense


(36,208
)

(34,740
)

(22,421
)

(23,905
)

(19,190
)Other finance (expenses)/income, net


(2,290
)

(2,047
)

(2,779
)

2,049


(6,961
)Other (expenses)/income, net


(336
)

(1,060
)

14,560


(18,476
)

(270
)(Loss)/gain on fair value of derivatives


(63,601
)

(597
)

183


(6,628
)

2,831Total other expenses, net


(100,007
)

(31,900
)

(5,596
)

(43,355
)

(17,245
)Net income from continuing operations

$
36,089

$
117,060

$
123,098

$
65,419

$
79,489Net (loss)/income from discontinued operations

$


$
(1,822
)
$
92,166

$
35,663

$
43,361Net income

$
36,089

$
115,238

$
215,264

$
101,082

$
122,850PER SHARE DATA(i)(ii)(iii)Basic and diluted net income per share of common stock from continuing operations

$
0.66

$
2.15

$
2.26

$
1.40

$
1.79Basic and diluted net (loss)/income per share of common stock from discontinued operations

$


$
(0.04
)
$
1.69

$
0.76

$
0.98Basic and diluted net income per share of common stock

$
0.66

$
2.11

$
3.95

$
2.16

$
2.77Basic and diluted weighted average number of shares


54,550


54,557


54,558


46,751


44,308CASH FLOW DATANet cash provided by operating activities

$
93,166

$
135,489

$
158,270

$
151,578

$
162,235Net cash used in investing activities


(372,909
)

(511,986
)

(687,592
)

(330,099
)

(40,538
)Net cash provided by/(used in) financing activities


281,073


433,722


549,742


183,596


(180,705
)Net increase/(decrease) in cash and cash equivalents


1,330


57,225


20,420


5,075


(59,008
)BALANCE SHEET DATA (at period end)Total current assets

$
300,504

$
250,194

$
92,038

$
59,700

$
64,012Total assets


3,142,711


2,828,464


2,071,791


1,297,190


945,758Total current liabilities, including current portion of long term debt


2,518,007


122,215


51,113


45,714


70,484Current portion of long-term debt


2,331,678


42,219


25,619


22,760


57,521Long-term debt, net of current portion





2,054,635


1,330,927


639,556


609,217Total stockholders' equity


405,591


219,034


624,904


565,852


262,725Common stock(i)(ii)(iii)


54,551


54,543


54,558


54,558


44,308Share capital(i)


546


546


546


546


443


(i)As
adjusted for 88,615-for-1 stock split effected on September 18, 2006.(ii)As
adjusted for 15,000 shares repurchased in the open market during December 2008, held by the Company and reported as Treasury Stock as of
December 31, 2008.(iii)As
adjusted for 6,642 shares held by the Company and reported as Treasury Stock as of December 31, 2009.


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As a privately held company, we paid aggregate dividends of $244.6 million in 2005. We paid no dividends in 2006. We paid our first quarterly dividend
since becoming a public company in October 2006, of $0.44 per share, on February 14, 2007, and subsequent dividends of $0.44 per share, $0.44 per share, $0.465 per share and $0.465 per share on
May 18, 2007, August 17, 2007, November 16, 2007 and February 14, 2008. In addition, we paid a dividend of $0.465 per share on May 14, 2008, August 20, 2008
and November 19, 2008, respectively. In the first quarter of 2009, our board of directors decided to suspend the payment of further cash dividends as a result of market conditions in the
international shipping industry. Our payment of dividends is subject to the discretion of our Board of Directors. Our loan agreements and the provisions of Marshall Islands law also contain
restrictions that affect our ability to pay dividends and we generally will not be permitted to pay cash dividends under the terms of the bank agreement and new financing agreements for which we have
reached agreements in principle. See "Item 3. Key InformationRisk FactorsRisks Inherent in Our BusinessWe are not permitted to pay dividends under the
waiver agreements and amendments to our existing credit facilities, and under the agreements in respect of the restructuring of these facilities and the new financing arrangements for which we have
reached agreements in principle, we generally will not be permitted to pay cash dividends." see "Item 8. Financial InformationDividend Policy."

Capitalization and Indebtedness

Not Applicable.

Reasons for the Offer and Use of Proceeds

Not Applicable.

Risk Factors

Risks Inherent in Our Business

Our inability to comply with certain financial and other covenants under our loan agreements raises substantial doubt about our ability to continue as a going concern.

As a result of the decline in the containership charter market and related decline in vessel values in the containership sector we are
in breach of certain financial covenants under two of our credit facilities (our $60.0 million credit facility with HSH Nordbank and our $180.0 million credit facility with Deutsche
Bank), under which an aggregate of $217.0 million was outstanding as of December 31, 2009, for which we have not obtained waivers. In addition, although we were in compliance with the
covenants in our credit facility with the Export-Import Bank of Korea ("KEXIM")) under which $70.4 million was outstanding as of December 31, 2009, and have obtained waivers expiring on
October 1, 2010 of covenant breaches under our other credit facilities, under the cross default provisions of the respective credit facilities our lenders could require immediate repayment of
the outstanding debt under the respective credit facilities (see Note 13 to our consolidated financial statements included elsewhere in this annual report). In addition, were we to default on
installment payments for our newbuilding containerships, for a number of which we have reached agreements in principle to finance with new credit facilities, but do not yet have definitive agreements
in place, such default would also constitute an event of default under certain of our loan agreements. A total of $2.3 billion of our indebtedness as of December 31, 2009 has been
reclassified as current liabilities as a result of our non-compliance with financial covenants contained in our loan agreements. As a result of this reclassification we had a working
capital deficit of $2.2 billion as of December 31, 2009. Our independent registered public accounting firm included an explanatory paragraph in its opinion on our most recently audited
financial statements for the year ended December 31, 2009 that expressed substantial doubt about our ability to continue as a going concern. Our financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and classification of

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assets
or the amounts and classification of liabilities that may result from the outcome of our inability to continue as a going concern. However, there is a material uncertainty related to events or
conditions which raises substantial doubt on our ability to continue as a going concern and, therefore, we may be unable to realize our assets and discharge our liabilities in the normal course of
business.

We
have reached an agreement in principle with the lenders under all of our existing credit facilities, other than the lenders under our credit facilities with KEXIM and KEXIM-Fortis,
for an agreement that, among other things, would provide for the waiver of any covenant breaches or defaults under our existing credit facilities with such lenders and the amendment of covenants. If,
however, we are unable to enter into a definitive documentation for such agreement and otherwise satisfy the conditions thereto, including raising the requisite proceeds from equity issuances, or if
the credit committees of the respective lenders do not approve the agreements, and we are unable to enter into agreements under our KEXIM and KEXIM-Fortis credit facilities, our lenders could
accelerate our indebtedness under credit facilities in respect of which we do not have waivers, as well as our other credit facilities which contain cross-default provisions, or upon expiration of our
existing waivers, if we are not then in compliance and are not able to obtain extensions, and foreclose upon the vessels in our fleet which could prevent us from continuing to conduct our business.

We are not and have not been in compliance with financial covenants contained in certain of our credit facilities and the current low containership charter rates and
containership vessel values and any future declines in these rates and values will affect our ability to comply with various covenants in our credit facilities.

Our credit facilities, which are secured by mortgages on our vessels, require us to maintain specified collateral coverage ratios and
satisfy financial covenants, including requirements based on the market value of our containerships and our net worth. The market value of containerships is sensitive to, among other things, changes
in the charter markets with vessel values deteriorating in times when charter rates are falling and improving when charter rates are anticipated to rise. The depressed state of the containership
charter market coupled with the prevailing difficulty in obtaining financing for vessel purchases has adversely affected containership values since the middle of 2008. These conditions have led to a
significant decline in the fair market values of our vessels and the extremely low prevailing interest rates have led to significant declines in the fair value of our interest rate swap agreements. As
a result, we were in breach of covenants contained in two of our loan agreements as of December 31, 2009 for which we have not obtained waivers. We also had to obtain waivers of breaches of
covenants in certain of our loan agreements as of December 31, 2008 and June 30, 2009 (see Note 13 to our consolidated financial statements included elsewhere in this annual
report). In addition, although we were in compliance with the covenants in our credit facility with KEXIM, under the cross default provisions of this credit facility, and the cross default provisions
of our credit facilities for which waivers were obtained during 2009, the lenders could require immediate repayment of the related outstanding debt.

If
we fail to enter into a definitive bank agreement, under which the lenders participating thereunder would waive any existing covenant breaches or defaults under our existing credit
facilities (other than our KEXIM and KEXIM-Fortis credit facilities which will not be covered thereby), as well as agree to amend the covenants under our existing credit facilities, and fail to reach
separate agreements in respect of our KEXIM and KEXIM-Fortis credit facilities, and we are not otherwise able to obtain waivers of our existing covenant breaches or extensions of our current waivers
under our other credit facilities, our lenders could accelerate our indebtedness and foreclose on the vessels in our fleet, which would impair our ability to continue to conduct our business. Any such
acceleration, because of the cross-default provisions in our loan agreements, could in turn lead to additional defaults under our other loan agreements and the consequent acceleration of the
indebtedness thereunder and the commencement of similar foreclosure proceedings by our other lenders. If our indebtedness were

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accelerated
in full or in part, it would be very difficult in the current financing environment for us to refinance our debt or obtain additional financing and we could lose our vessels if our lenders
foreclose upon their liens, which would adversely affect our ability to continue our business.

Our business, and an investment in our securities, involves a high degree of risk, including risks relating to the downturn in the container shipping market, which continues
to adversely affect the major liner companies which charter our vessels and has had and may continue to have an adverse effect on our earnings, affect our compliance with our loan covenants and could
result in us having to restructure our obligations.

The abrupt and dramatic downturn in the containership market, from which we derive all of our revenues, has severely affected the
container shipping industry, particularly the large liner companies to which we charter our vessels, and has adversely affected our business. The average daily charter rate of a 4,400 TEU
containership, which represents the approximate average TEU capacity of our vessels, decreased from $36,000 in May 2008 to $20,000 in April 2010, after reaching a low of $6,400 in December 2009. The
decline in charter rates is due to various factors, including the reduced availability of trade financing for purchases of containerized cargo carried by sea, which has resulted in a significant
decline in the volume of cargo shipments, and the level of global trade, including exports from China to Europe and the United States. The decline in the containership market has affected the major
liner companies which charter our vessels, some of which have announced efforts to obtain third party aid and restructure their obligations. It also affects the value of our vessels, which follow the
trends of freight rates and containership charter rates, and the earnings on our charters, and similarly, affects our cash flows and liquidity, as well as adversely affecting our ability to obtain the
significant amount of additional financing needed to fund the remaining installments on our contracted newbuilding containerships. We have had to obtain waivers (or extensions of waivers) from the
lenders under all but one of our credit facilities (our credit facility with KEXIM) because we have not been in compliance with the covenants contained in our loan agreements. In addition, we have not
obtained waivers for new breaches as of December 31, 2009 under two of our credit facilities (our $60.0 million credit facility with HSH Nordbank and our $180.0 million credit
facility with Deutsche Bank). The decline in the containership charter market has had and may continue to have additional adverse consequences for our industry including an absence of financing for
vessel acquisitions and newbuildings, the absence of an active secondhand market for the sale of vessels, charterers not performing under, or requesting modifications of, existing time charters and
widespread loan covenant defaults in the container shipping industry. As a result of this dramatic downturn in the container shipping industry, including any of these factors, it is possible that we
could become unable to service our debt and other obligations, particularly if we are not able to enter into definitive documentation for the bank agreement in respect of restructuring our existing
credit facilities and new financing arrangements for which we have reached agreements in principle, and could have to restructure our obligations, either as part of a court supervised process or
otherwise.

Obtaining financing for 11 of our newbuildings is dependent upon our ability to enter into definitive agreements with existing lenders to restructure our existing
indebtedness and provide additional financing.

Our existing lenders with whom we have reached an agreement in principle for the restructuring of our existing indebtedness, have
agreed, as part of the restructuring, to provide us with up to $426.4 million of new credit facilities for the $1.1 billion in funds we need to finance installment payments for 11 of our
newbuildings. We have also reached agreements in principle for up to $393.4 million to finance additional installment payments for these newbuildings, which are scheduled to be delivered in
2011 and 2012. These agreements are not, however, binding contracts, and remain subject to approval by the credit committees of the respective lenders and certain conditions, including negotiation and
execution of definitive documentation for each such agreement, our receipt of net proceeds of $200 million from equity issuances, including an investment by our Chief Executive Officer, and, in
the case of the new credit facilities for which we have reached agreements in principle, our

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reaching
separate agreements for amendments to our KEXIM and KEXIM-Fortis credit facilities. See "Item 5. Operating and Financial Review and ProspectsBank Agreement,"
"New Credit Facilities," "Citi-CEXIM Credit Facility" and "Hyundai Samho Vendor Financing." If we are unable to enter into definitive agreements with
our lenders implementing our debt restructuring and the new credit facilities and other financing agreements, or to satisfy the conditions of these agreements, we will not be able to make the required
installment payments on these newbuildings. If this were to occur, we could lose our advances for vessels under construction, which amounted to $1.0 billion as of May 31, 2010, excluding
the $64.35 million in cash deposits that we agreed to forfeit in connection with the cancellation of three newbuildings in the first half of 2010 (together with $7.16 million of other
capitalized expenses), and incur additional liability to charterers and shipyards, which may pursue claims against us under our newbuilding construction contracts and retain and sell to third parties
such newbuildings to the extent completed, and incur other costs. If we are unable to negotiate and enter into definitive documentation, and satisfy the other conditions to the new financing
arrangements for which we have reached agreements in principle and we cannot arrange financing when these installment payments come due, we could exhaust our existing cash resources and available
financing.

We are dependent on the ability and willingness of our charterers to honor their commitments to us for all of our revenues and the failure of our counterparties to meet
their obligations under our time charter agreements, or under our shipbuilding contracts, could cause us to suffer losses or otherwise adversely affect our business.

We derive all of our revenues from the payment of charter hire by our charterers. Our 45 containerships are currently employed under
time charters with eleven liner companies, with 94% of our revenues in 2009 generated from six such companies. We have also arranged long-term time charters for each of our 20 contracted
newbuilding
containerships. We could lose a charterer or the benefits of a time charter if:



A
number of major liner companies, including some of our charterers, have announced efforts to obtain third party aid and restructure their obligations and request charter modifications,
as well as an intention to reduce the number of vessels they charter-in, which circumstances may increase the likelihood of losing a charterer or the benefits of a time charter.

If
we lose a time charter, we may be unable to re-deploy the related vessel on terms as favorable to us or at all. We would not receive any revenues from such a vessel while
it remained unchartered, but we may be required to pay expenses necessary to maintain the vessel in proper operating condition, insure it and service any indebtedness secured by such vessel.

The
time charters on which we deploy our containerships generally provide for charter rates that are significantly above current market rates. The ability and willingness of each of our
counterparties to perform its obligations under their time charters with us will depend on a number of factors that are beyond our control and may include, among other things, general economic
conditions, the condition of the container shipping industry, which has experienced severe declines since the second half of 2008, and the overall financial condition of the counterparty. Furthermore,
the combination of a reduction in cash flow resulting from declines in world trade, a reduction in borrowing bases under credit facilities

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and
the reduced availability of debt and equity financing may result in a significant reduction in the ability of our charterers to make charter payments to us, with a number of large liner companies
announcing efforts to obtain third party aid and restructure their obligations. For example, Senator Lines, the charterer of one of our vessels defaulted on its charter due to its insolvency in the
first quarter of 2009 and the replacement charter we were able to arrange was at a reduced rate. The likelihood of a charterer seeking to renegotiate or defaulting on its charter with us may be
heightened to the extent such customers are not able to utilize the vessels under charter from us, and instead leave such chartered vessels idle, as was recently the case with certain of our vessels.
Should a counterparty fail to honor its obligations under agreements with us, it may be difficult to secure substitute employment for such vessel, and any new charter arrangements we secure may be at
lower rates given currently depressed situation in the charter market. If our charterers fail to meet their obligations to us or attempt to renegotiate our charter agreements, we could sustain
significant losses which would have a material adverse effect on our business, financial condition, results of operations and cash flows, as well as our ability to pay dividends, if any, in the
future, and comply with the covenants in our credit facilities. If charterers of our vessels were to fail to meet their obligations under the charters for our vessels or seek to reduce their charter
rates thereunder, as part of a court-led restructuring or otherwise, we could be unable to service our debt and other obligations and could ourselves have to restructure our obligations,
either as part of a court-supervised process or otherwise.

We depend upon a limited number of customers, some of which have acknowledged financial difficulties and announced efforts to restructure their obligations, for a large part
of our revenues. The loss of these customers could adversely affect us.

Our customers in the containership sector consist of a limited number of liner operators. The percentage of our revenues derived from
these customers has varied in past years. In the past several years, Hanjin Shipping, CMA CGM, HMM Korea and Yang Ming have represented substantial amounts of our revenue. In 2009, approximately 94%
of our revenues from continuing operations were generated by six customers, China Shipping, CMA CGM, HMM Korea, Maersk, Yang Ming and ZIM, and in 2008 these six customers generated approximately 93%
of our revenues from continuing operations. As of the date of this filing, we have charters for 4 of our existing vessels and none of our newbuildings with China Shipping, for 8 of our existing
vessels and 7 of our newbuildings with CMA CGM, for 11 of our existing vessels and 5 of our newbuildings with HMM Korea, for 7 of our existing vessels and two of our newbuildings with Yang Ming and
six of our existing vessels with ZIM. We expect that a limited number of liner companies may continue to generate a substantial portion of our revenues, some of which liner companies including CMA CGM
and Zim have publicly acknowledged the financial difficulties facing them, reported substantial losses in 2009 and announced efforts to obtain third party aid and restructure their obligations,
including under charter contracts. Further, CMA CGM announced in September 2009 that CMA CGM and its lenders are exploring a potential financial restructuring to address its short and medium term
financing requirements and that CMA CGM is seeking to reduce and in some cases cancel certain vessel deliveries. It is impossible to predict the outcome of these discussions. If any of these liner
operators cease doing business or do not fulfill their obligations under their charters for our vessels, due to the increasing financial pressure on these liner companies from the significant
decreases in demand for the seaborne transport of containerized cargo or otherwise, our results of operations and cash flows could be adversely affected. Further, if we encounter any difficulties in
our relationships with these charterers, our results of operations, cash flows and financial condition could be adversely affected.

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Although we have arranged charters for each of our 20 contracted newbuilding vessels, we are dependent on the ability and willingness of the charterers to honor their
commitments under such charters as it would be difficult to redeploy such vessels at equivalent rates, or at all, if charter markets continue to experience weakness.

We are dependent on the ability and willingness of the charterers to honor their commitments under the multi-year time
charters we have arranged for each of our 20 contracted newbuilding vessels. The combination of a reduction of cash flow resulting from declines in world trade, a reduction in borrowing bases under
credit facilities and the lack of availability of debt or equity financing may result in a significant reduction in the ability of our charterers to make charter payments to us. Furthermore, the
surplus of containerships available at lower charter rates and lack of demand for our customers' liner services could negatively affect our charterers' willingness to perform their obligations under
the time charters for our newbuildings, which provide for charter rates
significantly above current market rates. The decline in the containership market has affected the major liner companies which charter our vessels, some of which have announced efforts to obtain third
party aid and restructure their obligations. In addition, if we fail to enter into definitive documentation for our new financing arrangements or otherwise fail to obtain financing for any of our
newbuilding containerships, or otherwise fail to timely deliver such containerships to their respective charterers, such charterers may cancel their charter contracts with, and, possibly assert claims
against, us. The combination of the current surplus of containership capacity, and the expected significant increase in the size of the world containership fleet over the next few years, as the high
volume of containerships currently being constructed are delivered, would make it difficult to secure substitute employment for any of our newbuilding vessels if our counterparties failed to perform
their obligations under the currently arranged time charters, and any new charter arrangements we were able to secure would be at lower rates given currently depressed charter rates. As a result of
the foregoing, we could sustain significant losses which would have a material adverse effect on our business, financial condition, results of operations and cash flows, as well as our ability to
comply with the covenants in our credit facilities. If the charterers do not honor their commitments under these charters, we may have rights for certain claims, subject to the terms and conditions of
each charter. However, pursuing these claims may be time consuming, uncertain and ultimately insufficient to compensate us for any failure of the charterers to honor their commitments.

Our profitability and growth depend on the demand for containerships and the recent changes in general economic conditions, and the impact on consumer confidence and
consumer spending, has resulted and may continue to result in a decrease in containerized shipping volume, driving charter rates to significantly lower levels than the historic highs of the past few
years. Charter hire rates for containerships may continue to experience volatility or settle at depressed levels, which would, in turn, adversely affect our profitability.

Demand for our vessels depends on demand for the shipment of cargoes in containers and, in turn, containerships. The ocean-going
container shipping industry is both cyclical and volatile in terms of charter hire rates and profitability. Since the second half of 2008, the ocean-going container shipping industry has experienced
severe declines, with charter rates at significantly lower levels than the historic highs of the past few years. Variations in containership charter rates result from changes in the supply and demand
for ship capacity and changes in the supply and demand for the major products transported by containerships. The factors affecting the supply and demand for containerships and supply and demand for
products shipped in containers are outside of our control, and the nature, timing and degree of changes in industry conditions are unpredictable. The recent global economic slowdown and disruptions in
the credit markets have significantly reduced demand for products shipped in containers and, in turn, containership capacity.

Factors
that influence demand for containership capacity include:



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Factors
that influence the supply of containership capacity include:



Consumer
confidence and consumer spending have deteriorated significantly over the past year, and could remain depressed for an extended period. Consumer purchases of discretionary
items, many of which are transported by sea in containers, generally decline during periods where disposable income is adversely affected or there is economic uncertainty and, as a result, liner
company customers may ship fewer containers or may ship containers only at reduced rates. This decrease in shipping volume could adversely impact our liner company customers and, in turn, demand for
containerships. As a result, charter rates and vessel values in the containership sector have decreased significantly and the counterparty risk associated with the charters for our vessels has
increased.

Our
ability to recharter our containerships upon the expiration or termination of their current charters and the charter rates payable under any renewal or replacement charters will
depend upon, among other things, the prevailing state of the charter market for containerships. The charters for four of our existing vessels expire between July and November 2010. If the charter
market is depressed, as it has been since the second half of 2008, when our vessels' charters expire, we may be forced to recharter the containerships, if we are able to recharter such vessels at all,
at sharply reduced rates and possibly at a rate whereby we incur a loss. If we are unable to recharter our vessels on favorable terms, we may potentially scrap certain of such vessels, which may
reduce our earnings or make our earnings volatile. Moreover, a number of major liner companies, including some of our customers, have announced an intention to reduce the number of vessels they
charter-in as part of an effort to reduce the size of their fleets to better align fleet capacity with the reduced demand for the marine transportation of containerized cargo, which may
increase the difficulty of rechartering our vessels. The same issues will exist if we acquire additional containerships, if we are able to recharter such vessels at all, and attempt to obtain
multi-year charter arrangements as part of an acquisition and financing plan.

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Disruptions in world financial markets and the resulting governmental action in the United States and in other parts of the world could have a further material adverse
impact on our results of operations, financial condition and cash flows, and could cause the market price of our common stock to decline further.

Although showing signs of recovery, the United States and other parts of the world have exhibited weak economic trends and have been in
a recession. For example, the credit markets in the United States have experienced significant contraction, de-leveraging and reduced liquidity, and the United States federal government
and state governments have implemented and are considering a broad variety of governmental action and/or new regulation of the financial markets. Securities and futures markets and the credit markets
are subject to comprehensive statutes, regulations and other requirements. The U.S. Securities and Exchange Commission, or the SEC, other regulators, self-regulatory organizations and
securities exchanges are authorized to take extraordinary actions in the event of market emergencies, and may effect changes in law or interpretations of existing laws.

Global
financial markets and economic conditions have been, and continue to be, severely disrupted and volatile. Credit markets and the debt and equity capital markets have been
exceedingly distressed. These issues, along with the re-pricing of credit risk and the difficulties being experienced by financial institutions have made, and will likely continue to make,
it difficult to obtain financing. As a result of the disruptions in the credit markets, the cost of obtaining bank financing has
increased as many lenders have increased interest rates, enacted tighter lending standards, required more restrictive terms, including higher collateral ratios for advances, shorter maturities and
smaller loan amounts, refused to refinance existing debt at maturity at all or on terms similar to our current debt. Furthermore, certain banks that have historically been significant lenders to the
shipping industry have announced an intention to reduce or cease lending activities in the shipping industry. Although we have not experienced any difficulties drawing on committed facilities to date,
we may be unable to fully draw on the available capacity under our existing credit facilities in the future if our lenders are unwilling or unable to meet their funding obligations. We cannot be
certain that financing will be available on acceptable terms or at all. If financing is not available when needed, or is available only on unfavorable terms, we may be unable to meet our obligations,
including under our newbuilding contracts, as they come due. Our failure to obtain the funds for these capital expenditures would have a material adverse effect on our business, results of operations
and financial condition. In the absence of available financing, we also may be unable to take advantage of business opportunities or respond to competitive pressures, any of which could have a
material adverse effect on our revenues and results of operations.

We
face risks attendant to changes in economic environments, changes in interest rates, and instability in the banking and securities markets around the world, among other factors. Major
market disruptions and the current adverse changes in market conditions and the regulatory climate in the United States and worldwide may adversely affect our business or impair our ability to borrow
amounts under our credit facilities or any future financial arrangements. We cannot predict how long the current market conditions will last. However, these recent and developing economic and
governmental factors, together with the concurrent decline in charter rates and vessel values, may have a material adverse effect on our results of operations, financial condition or cash flows, have
caused the price of our common stock to decline and could cause the price of our common stock to decline further.

Weak economic conditions throughout the world, particularly in the Asia Pacific region, and including due to the recent European Union sovereign debt default fears, could
have a material adverse effect on our business, financial condition and results of operations.

Negative trends in the global economy that emerged in 2008 have continued through the first half of 2010. In particular, recent
concerns regarding the possibility of sovereign debt defaults by European Union member countries, including Greece, have resulted in significant devaluation of the Euro, disruptions of financial
markets throughout the world and have led to concerns regarding consumer demand both in Europe and other parts of the world, including the United States. The deterioration in

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the
global economy has caused, and may continue to cause, a decrease in worldwide demand for certain goods and, thus, container shipping. Continuing economic instability could have a material adverse
effect on our financial condition and results of operations. In particular, we anticipate a significant number of the port calls made by our vessels will continue to involve the loading or unloading
of containers in ports in the Asia Pacific region. As a result, negative changes in economic conditions in any Asia Pacific country, and particularly in China, may exacerbate the effect of the
significant downturns in the economies of the United States and the European Union and may have a material adverse effect on our business, financial position and results of operations, as well as our
future prospects. In recent years, China has been one of the world's fastest growing economies in terms of gross domestic product, which has had a significant impact on shipping demand. China and
other countries in the Asia Pacific region may, however, experience slowed or even negative economic growth in the future. Moreover, the current slowdown in the economies of the United States, the
European Union and other Asian countries may further adversely affect economic growth in China and elsewhere. In particular, the possibility of sovereign debt defaults by European Union member
countries, including Greece, and the resulting weakness of the Euro, including against the Chinese renminbi, could adversely affect European consumer demand, particularly for goods imported, many of
which are shipped in containerized form, from China and elsewhere in Asia, and reduce the availability of trade financing which is vital to the conduct of international shipping. Our business,
financial condition, results of operations, ability to pay dividends, if any, as well as our future prospects, will likely be materially and adversely affected by a further economic downturn in any of
these countries.

Demand for the seaborne transport of products in containers has decreased dramatically since the second half of 2008, placing significant financial pressure on liner
companies and, in turn, decreasing demand for containerships and increasing our charter counterparty risk.

The sharp decline in global economic activity since the second half of 2008 has resulted in a substantial decline in the demand for the
seaborne transportation of products in containers, reaching the lowest levels in decades. Consequently, the cargo volumes and freight rates achieved by liner companies, with which all of the existing
and contracted newbuilding vessels in our fleet are chartered, have declined sharply, reducing liner company profitability and, at times, failing to cover the costs of liner companies operating
vessels on their shipping lines. In response to such reduced cargo volume and freight rates, the number of vessels being actively deployed by liner companies has decreased, with almost 12% of the
world containership fleet estimated to be out of service at its high point as of December 2009, although the idle capacity of the global containership fleet had decreased to 6.8% of total fleet
capacity as of the end of April 2010. Moreover, newbuilding containerships with an aggregate capacity of 4.4 million TEUs, representing approximately 33% of the world's fleet capacity as of
April 2010, were under construction, which may exacerbate the surplus of containership capacity further reducing charterhire rates or increasing the number of unemployed vessels. In 2009, a number of
major liner companies, including some of our customers, announced plans to reduce the number of vessels they charter-in as part of efforts to reduce the size of their fleets to better
align fleet capacity with the reduced demand for marine transportation of containerized cargo. In some instances, these liner companies have announced efforts to obtain third party aid and restructure
their obligations, including obligations under charter contracts.

The
reduced demand and resulting financial challenges faced by our liner company customers has significantly reduced demand for containerships and may increase the likelihood of one or
more of our customers being unable or unwilling to pay us the contracted charterhire rates, which are generally significantly above prevailing charter rates, under the charters for our vessels. We
generate all of our revenues from these charters and if our charterers fail to meet their obligations to us, we would sustain significant losses which could materially adversely affect our business
and results of operations, as well as our ability to comply with covenants in our credit facilities.

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An over-supply of containership capacity may prolong or further depress the current low charter rates and adversely affect our ability to recharter our
containerships at profitable rates or at all and, in turn, reduce our profitability.

While the size of the containership order book has declined from historic highs since mid-2008, at the end of April 2010
newbuilding containerships with an aggregate capacity of 4.4 million TEUs, were under construction representing approximately 33% of existing global fleet capacity. The size of the orderbook is
large relative to historic levels and, although some orders will likely be cancelled or delayed, will likely result in a significant increase in the size of the world containership fleet over the next
few years. An over-supply of containership capacity, particularly in conjunction with the currently low level of demand for the seaborne transport of containers, could exacerbate the
recent decrease in charter rates or prolong the period during which low charter rates prevail. In 2009, a number of major liner companies, including some of our customers, announced plans to reduce
the number of vessels they charter-in as part of their efforts to reduce the size of their fleets to better align fleet capacity with the reduced demand for the marine transport of
containerized cargo. We do not hedge against our exposure to changes in charter rates, due to increased supply of containerships or otherwise. As such, if the current low charter rate environment
persists, or a further reduction occurs, during a period when the current charters for our containerships expire or are terminated, we may only be able to recharter those containerships at reduced or
unprofitable rates or we may not be able to charter those vessels at all. The charters for four of our exisiting vessels expire between July 2010 and November 2010.

We may be unable to draw down the full amount of our credit facilities, pursuant to the terms of the bank agreement with respect to restructuring our existing credit
facilities and the new financing arrangements for which we have reached agreements in principle, and we may have difficulty obtaining other financing, particularly if the market values of our vessels
further decline.

There are restrictions on the amount of cash that can be advanced to us under our existing credit facilities and new credit facilities
for which we have reached agreements in principle based on the market value of the vessel or vessels in respect of which the advance is being made, and other customary conditions to such advances. If
the market value of our fleet, which has
experienced substantial recent declines, declines further, we may not be able to draw down the full amount of certain of our credit facilities, pursuant to the terms of the bank agreement with respect
to restructuring our existing credit facilities and the new financing arrangements for which we have reached agreements in principle, obtain other financing or incur debt on terms that are acceptable
to us, or at all. We may also not be able to refinance our debt or obtain additional financing, particularly for our newbuilding vessels which have remaining installment payments well in excess of
their current charter-free market value, to the extent we seek bank financing in addition to that contemplated by the bank agreement with respect to restructuring our existing credit
facilities and the new financing arrangements for which we have reached agreements in principle. Any inability for us to draw down the full amount of our credit facilities due to the market value of
our vessels or otherwise would have a material adverse effect on our liquidity and financial condition.

The bank agreement covering the restructuring of certain of our existing credit facilities and new financing arrangements, for which we have reached agreements in principle,
will impose more stringent operating and financial restrictions on us which may, among other things, limit our ability to grow our business.

Our existing credit facilities, under the terms of the agreement for which we have reached an agreement in principle, and our new
credit facilities and financing arrangements for which we have reached agreements in principle, will impose more stringent operating and financial restrictions on us

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than
those currently contained in our existing credit facilities. These restrictions, as described in "Item 5. Operating and Financial Review and Prospects," would generally preclude us
from:



As
a result we will have reduced discretion in operating our business and may have difficulty growing our business beyond our currently contracted newbuilding vessels. In addition, our
respective lenders under these financing arrangements would, at their option, be able to require us to repay in full amounts outstanding under such respective credit facilities, upon a "Change of
Control" of our company, which for these purposes and as further described in "Item 5. Operating and Financial Review and ProspectsBank Agreement", includes Dr. Coustas
ceasing to be our Chief Executive Officer, Dr. Coustas and members of his family ceasing to collectively own over one-third of the voting interest in our outstanding capital stock
or any other person or group controlling more than 20% of the voting power of our outstanding capital stock.

Certain
of our existing credit facilities require us to maintain specified financial ratios and satisfy financial covenants, including requirements to maintain minimum levels of market
value adjusted net
worth and stockholders' equity; minimum ratios of the market value of our fleet to net consolidated debt; minimum ratios of the aggregate market value of the vessels in our fleet securing a loan to
the amount of debt outstanding under such loan; minimum ratios of market value adjusted stockholders' equity to total market value adjusted assets; maximum ratios of total liabilities to total market
value adjusted assets; minimum cash and cash equivalents and minimum ratios of EBITDA to interest expense. These financial ratio and covenant requirements will be reset pursuant to the terms of the
bank agreement for which we have reached an agreement in principle, and the new financing arrangements for which we have reached agreements in principle will contain financial covenants, such that we
will be required to:



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If
we fail to meet our payment or covenant compliance obligations under the terms of the bank agreement covering the restructuring of our existing credit facilities (other than our KEXIM
and KEXIM-Fortis credit facilities) for which we have reached an agreement in principle or our other new financing arrangements for which we have reached agreements in principle, our lenders could
then accelerate our indebtedness and foreclose on the vessels in our fleet securing those credit facilities, which could result in cross-defaults under our other credit facilities, and the consequent
acceleration of the indebtedness thereunder and the commencement of similar foreclosure proceedings by other lenders. In addition, if we fail to enter into definitive documentation for the bank
agreement and satisfy the conditions thereto, which contemplates waivers of any existing breaches under certain of our existing credit facilities, for some of which we do not have waivers, as well as
covenant amendments, through December 31, 2018 and reach separate waiver or amendment agreements in respect of our KEXIM and KEXIM-Fortis credit facilities, we could face the same consequences
as described in the preceding sentence, including due to cross default provisions in those credit agreements for which other covenant breaches have been waived. The loss of these vessels would have a
material adverse effect on our operating results and financial condition.

Our profitability and growth depends on our ability to expand relationships with existing charterers and to obtain new time charters, for which we will face substantial
competition from established companies with significant resources as well as new entrants.

One of our objectives over the mid- to long-term is, when market conditions warrant, to acquire additional
containerships in conjunction with entering into additional multi-year, fixed-rate time charters for these vessels. We employ our vessels in highly competitive markets that are
capital intensive and highly fragmented, with a highly competitive process for obtaining new multi-year time charters that generally involves an intensive screening process and competitive
bids, and often extends for several months. Generally, we compete for charters based on price, customer relationship, operating

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expertise,
professional reputation and the size, age and condition of our vessels. In recent months, in light of the dramatic downturn in the containership charter market, other containership owners,
including many of the KG-model shipping entities, have chartered their vessels to liner companies at extremely low rates, including at unprofitable levels, increasing the price pressure
when competing to secure employment for our containerships. Container shipping charters are awarded based upon a variety of factors relating to the vessel operator,
including:



We
face substantial competition from a number of experienced companies, including state-sponsored entities and major shipping companies. Some of these competitors have significantly
greater financial resources than we do, and can therefore operate larger fleets and may be able to offer better charter rates. We anticipate that other marine transportation companies may also enter
the containership sector, including many with strong reputations and extensive resources and experience. This increased competition may cause greater price competition for time charters and, in
stronger market conditions, for secondhand vessels and newbuildings.

In
addition, a number of our competitors in the containership sector, including several that are among the largest charter owners of containerships in the world, have been established in
the form of a German KG (Kommanditgesellschaft), which provides tax benefits to private investors. Although the German tax law was amended to significantly restrict the tax benefits to taxpayers who
invest after November 10, 2005, the tax benefits afforded to all investors in the KG-model shipping entities continue to be significant, and such entities will continue to be
attractive investments. Their focus on these tax benefits allows the KG-model shipping entities more flexibility in offering lower charter rates to liner companies. Further, since the
charter rate is generally considered to be one of the principal factors in a charterer's decision to charter a vessel, the rates offered by these sizeable competitors can have a depressing effect
throughout the charter market.

As
a result of these factors, we may be unable to compete successfully with established companies with greater resources or new entrants for charters at a profitable level, or at all,
which would have a material adverse effect on our business, results of operations and financial condition.

We may have more difficulty entering into multi-year, fixed-rate time charters if a more active short-term or spot container shipping
market develops.

One of our principal strategies is to enter into multi-year, fixed-rate containership time charters
particularly in strong charter rate environments, although in weaker charter rate environments, such as the one that currently exists, we would generally expect to target somewhat shorter charter
terms of three to six years or even shorter periods. As more vessels become available for the spot or short-term market, we may have difficulty entering into additional
multi-year, fixed-rate time charters for our containerships due to the increased supply of containerships and the possibility of lower rates in the

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spot
market and, as a result, our cash flows may be subject to instability in the long-term. A more active short-term or spot market may require us to enter into charters based
on changing market rates, as opposed to contracts based on a fixed rate, which could result in a decrease in our cash flows and net income in periods when the market for container shipping is
depressed, as it is currently, or insufficient funds are available to cover our financing costs for related containerships.

Delays in deliveries of our additional 20 contracted newbuilding vessels could harm our business.

The 20 contracted newbuilding vessels in our contracted fleet are expected to be delivered to us at various times between June 2010 and
June 2012. Delays in the delivery of these vessels, or any other newbuilding containerships we may order or any secondhand vessels we may agree to acquire, would delay our receipt of revenues under
the arranged time charters and could result in the cancellation of those time charters or other liabilities under such charters, and therefore adversely affect our anticipated results of operations.
In 2009, we reached agreements to delay the delivery of most of our containership newbuildings for periods of up to one year and in the first half of 2010 agreed to cancel three newbuildings and their
related charter arrangements. As of May 31, 2010, after giving effect to the cancellation of the three newbuilding vessels in 2010, we expect to take delivery of seven newbuilding vessels in
the remainder of 2010, eight in 2011 and five in 2012. The remaining capital expenditure installments for these vessels was approximately $480.6 million for the remainder of 2010,
$540.7 million for 2011 and $448.6 million for 2012. Although the delivery delays arranged in 2009 will delay our funding requirements for the installment payments to purchase these
vessels, it will also delay our receipt of contracted revenues under the charters for such vessels.

The
delivery of the newbuilding containerships could also be delayed because of, among other things:



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The
shipbuilders with which we have contracted for our 20 newbuildings may be affected by the ongoing instability of the financial markets and other market conditions, including with
respect to the fluctuating price of commodities and currency exchange rates. In addition, the refund guarantors under our newbuilding contracts, which are banks, financial institutions and other
credit agencies, may also be affected by financial market conditions in the same manner as our lenders and, as a result, may be unable or unwilling to meet their obligations under their refund
guarantees. If our shipbuilders or refund guarantors are unable or unwilling to meet their obligations to us, this will impact our acquisition of vessels and may materially and adversely affect our
operations and our obligations under our credit facilities.

The
delivery of any secondhand containership we may agree to acquire could be delayed because of, among other things, hostilities or political disturbances, non-performance
of the purchase agreement with respect to the vessels by the seller, our inability to obtain requisite permits, approvals or financing or damage to or destruction of the vessels while being operated
by the seller prior to the delivery date.

Certain of the containerships in our contracted fleet are subject to purchase options held by the charterers of the respective vessels, which, if exercised, could reduce the
size of our containership fleet and reduce our future revenues.

The chartering arrangements with respect to theCMA-CGM Moliere, the CMA-CGM Musset, theCMA-CGM Nerval, theHN
S4004and theHN S4005include options for the charterer, CMA-CGM, to purchase the vessels eight years after the
commencement of their respective charters, which, based on the respective expected delivery dates for these vessels, is expected to fall in September 2017, March 2018, May 2018, June 2018 and July
2018, respectively, each for $78.0 million. The option exercise prices with respect to these vessels reflect an estimate of market prices, which are in excess of the vessels' book values net of
depreciation, at the time the options become exercisable. If CMA-CGM were to exercise these options with respect to any or all of these vessels, the expected size of our combined
containership fleet would be reduced and, if there were a scarcity of secondhand containerships available for acquisition at such time and because of the delay in delivery associated with
commissioning newbuilding containerships, we could be unable to replace these vessels with other comparable vessels, or any other vessels, quickly or, if containership values were higher than
currently anticipated at the time we were required to sell these vessels, at a cost equal to the purchase price paid by CMA-CGM. Consequently, if these purchase options were to be
exercised, the expected size of our combined containership fleet would be reduced, and as a result our anticipated level of revenues would be reduced.

Containership values have recently decreased significantly, and may remain at these depressed levels, or decrease further, and over time may fluctuate substantially. If
these values are low at a time when we are attempting to dispose of a vessel, we could incur a loss.

Due to the sharp decline in world trade and containership charter rates, the market values of the containerships in our fleet are
currently significantly lower than prior to the downturn in the second half of 2008. Containership values may remain at current low, or lower, levels for a prolonged period of time and can fluctuate
substantially over time due to a number of different factors, including:



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In
the future, if the market values of our vessels experience further deterioration or we lose the benefits of the existing charter arrangements for any of our vessels and can not
replace such arrangements with charters at comparable rates, we may be required to record an impairment charge in our financial statements, which could adversely affect our results of operations. If a
charter expires or is terminated, we may be unable to re-charter the vessel at an acceptable rate and, rather than continue to incur costs to maintain and finance the vessel, may seek to
dispose of it. Our inability to dispose of the containership at a reasonable price could result in a loss on its sale and adversely affect our results of operations and financial condition.

We are not permitted to pay dividends under the waiver agreements and amendments to our existing credit facilities, and under the agreement in respect of restructuring such
facilities and the new financing arrangements for which we have reached agreements in principle, we generally will not be permitted to pay cash dividends.

Prior to 2009, we paid regular cash dividends on a quarterly basis. In the first quarter of 2009, our board of directors suspended the
payment of cash dividends as a result of market conditions in the international shipping industry and in particular the sharp decline in charter rates and vessel values in the containership sector.
Until such market conditions significantly improve, it is unlikely that we will reinstate the payment of dividends and if reinstated, it is likely that any dividend payments would be at reduced
levels. Under the waivers and amendments to our credit facilities agreed to in 2009, we will need to obtain the consent of certain of our lenders to make future dividend payments, if any, during the
period covered by such waivers. In addition, the bank agreement in respect of restructuring our existing credit facilities and our new financing arrangements for which we have reached agreements in
principle would not permit us to pay cash dividends or repurchase shares of our common stock until the termination of such agreements in 2018, absent a significant decrease in our leverage.

We are a holding company and we depend on the ability of our subsidiaries to distribute funds to us in order to satisfy our financial obligations.

We are a holding company and our subsidiaries conduct all of our operations and own all of our operating assets. We have no significant
assets other than the equity interests in our subsidiaries. As a result, our ability to pay our contractual obligations and, if permitted by our lenders and reinstated, to make any dividend payments
in the future depends on our subsidiaries and their ability to distribute funds to us. The ability of a subsidiary to make these distributions could be affected by a claim or other action by a third
party, including a creditor, or by the law of their respective jurisdictions of incorporation which regulates the payment of dividends by companies. If we are unable to obtain funds from our
subsidiaries, even if our lenders agreed to allow dividend payments, our board of directors may exercise its discretion not to declare or pay dividends. If we reinstate dividend payments in the
future, we do not intend to seek to obtain funds from other sources to make such dividend payments, if any.

If we are unable to fund our capital expenditures, we may not be able to continue to operate some of our vessels or grow our fleet, which would have a material adverse
effect on our business.

We must make substantial capital expenditures to maintain the operating capacity of our fleet and to grow our fleet. Maintenance
capital expenditures include capital expenditures associated with drydocking a vessel, modifying an existing vessel or acquiring a new vessel to the extent these expenditures are incurred to maintain
the operating capacity of our fleet. These expenditures could increase as a result of changes in the cost of labor and materials; customer requirements; increases in

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our
fleet size or the cost of replacement vessels; governmental regulations and maritime self-regulatory organization standards relating to safety, security or the environment; and
competitive standards.

In
order to fund our capital expenditures, other than installment payments for our currently contracted newbuilding vessels which we expect to fund with borrowings under the new
financing arrangements for which we have reached agreements in principle, we generally plan to use equity financing given the restrictions that will be contained in our restructured credit facilities
and new financing arrangements on the use of cash from our operations, debt financings and asset sales for purposes other than debt repayment. Our ability to access the capital markets through future
offerings may be limited by our financial condition at the time of any such offering as well as by adverse market conditions resulting from, among other things, general economic conditions and
contingencies and uncertainties that are beyond our control. Moreover, only a portion of the proceeds from any equity financings that we are able to complete will be permitted to be used for purposes
other than debt repayment under our restructured and new financing arrangements. Our failure to obtain the funds for necessary future capital expenditures could limit our ability to continue to
operate some of our vessels or grow our fleet or impair the values of our vessels and could have a material adverse effect on our business, results of operations, financial condition and cash flows.

Substantial debt levels could limit our flexibility to obtain additional financing and pursue other business opportunities.

As of May 31, 2010, we had outstanding indebtedness of $2.3 billion and we expect to incur substantial additional
indebtedness, including under the existing and the new credit facilities and other financing arrangements for which we have reached agreements in principle in aggregate principal amounts of
$1.2 billion, as we finance the $1.5 billion aggregate remaining purchase price for our 20 newbuilding containerships (following cancellation of three newbuildings in the first half of
2010) and, as market conditions warrant over the medium to long-term, further grow our fleet. Although we will not be required to make repayments of principal until December 31,
2012 under our existing credit facilities, other than our KEXIM and KEXIM-Fortis credit facilities, pursuant to the terms of the bank agreement in respect of restructuring such agreements for which we
have reached an agreement in principle or under our new credit facilities for which we have reached agreements in principle, this level of debt could have important consequences to us, including the
following:



Our
ability to service our debt will depend upon, among other things, our future financial and operating performance, which will be affected by prevailing economic conditions and
financial, business, regulatory and other factors, some of which are beyond our control. Due to the restrictions on the use of cash from operations and other sources for purposes other than the
repayment of indebtedness, even if we otherwise generate sufficient cash flow to service our debt, we may still be forced to take actions

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such
as reducing or delaying our business activities, acquisitions, investments or capital expenditures, selling assets, restructuring or refinancing our debt or seeking additional equity capital. We
may not be able to effect any of these remedies on satisfactory terms, or at all. In addition, restrictions in the bank agreement in respect of restructuring existing credit facilities and new credit
facilities for which we have
reached agreements in principle and a lack of liquidity in the debt and equity markets could hinder our ability to refinance our debt or obtain additional financing on favorable terms in the future.

The derivative contracts we have entered into to hedge our exposure to fluctuations in interest rates could result in higher than market interest rates and reductions in our
stockholders' equity, as well as charges against our income.

We have entered into interest rate swaps, in an aggregate notional amount of $4.1 billion as of December 31, 2009 (of
which $1.55 billion related to forward starting arrangements), generally for purposes of managing our exposure to fluctuations in interest rates applicable to indebtedness under our credit
facilities which were advanced at floating rates based on LIBOR, as well as two interest rate swap agreements, in an aggregate notional amount of $122.9 million as of December 31, 2009,
converting fixed interest rate exposure under our credit facilities advanced at a fixed rate of interest to floating rates based on LIBOR. Our hedging strategies, however, may not be effective and we
may incur substantial losses if interest rates move materially differently from our expectations.

To
the extent our existing interest rate swaps do not, and future derivative contracts may not, qualify for treatment as hedges for accounting purposes we would recognize fluctuations in
the fair value of such contracts in our consolidated statements of income. If our estimates of the forecasted incurrence of debt change, as they did as of December 31, 2009 due to the deferred
delivery dates arranged for certain of our newbuildings and as we expect will occur as a result of the modified amortization of our existing credit facilities under the terms of the restructuring
agreement for which we have reached in agreement in principle, our interest rate swap arrangements may cease to be effective as hedges and, therefore, cease to qualify for treatment as hedges for
accounting purposes. In addition, changes in the fair value of our derivative contracts, even those that qualify for treatment as hedges for accounting and financial reporting purposes, are recognized
in "Accumulated Other Comprehensive Loss" on our consolidated balance sheet in relation to the effective portion of our cash flow hedges and in our consolidated income statement in relation to the
ineffective portion, and can affect compliance with the net worth covenant requirements in our credit facilities.

Our
financial condition could also be materially adversely affected to the extent we do not hedge our exposure to interest rate fluctuations under our financing arrangements under which
loans have been advanced at a floating rate based on LIBOR. Any hedging activities we engage in may not effectively manage our interest rate exposure or have the desired impact on our financial
conditions or results of operations.

Because we generate all of our revenues in United States dollars but incur a significant portion of our expenses in other currencies, exchange rate fluctuations could hurt
our results of operations.

We generate all of our revenues in United States dollars and for the year ended December 31, 2009, we incurred approximately 60%
of our vessels' expenses in currencies other than United States dollars. This difference could lead to fluctuations in net income due to changes in the value of the United States dollar relative to
the other currencies, in particular the Euro. Expenses incurred in foreign currencies against which the United States dollar falls in value could increase, thereby decreasing our net income. We have
not hedged our currency exposure and, as a result, our U.S. dollar-denominated results of operations and financial condition could suffer.

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Due to our lack of diversification following the sale of our drybulk carriers, adverse developments in the containership transportation business could reduce our ability to
meet our payment obligations and our profitability.

In August 2006, we agreed to sell the six drybulk carriers in our fleet, with an aggregate capacity of 342,158 deadweight tons, or dwt,
for an aggregate of $143.5 million. In the first quarter of 2007, we delivered five of these vessels to the purchaser, which is not affiliated with us, for an aggregate of $118.0 million
and the remaining vessel to the purchaser for $25.5 million when its charter expired in the second quarter of 2007. Subject to market conditions, including the availability of suitably
configured vessels, we may reinvest in the drybulk sector of the shipping industry. Unless we acquire replacement drybulk carriers, we will rely exclusively on the cash flows generated from charters
for our vessels that operate in the containership sector of the shipping industry. Due to our lack of diversification, adverse developments in the container shipping industry have a significantly
greater impact on our financial condition and results of operations than if we maintained more diverse assets or lines of business.

We may have difficulty properly managing our growth through acquisitions of additional vessels and we may not realize the expected benefits from these acquisitions, which
may have an adverse effect on our financial condition and performance.

To the extent market conditions warrant and we are able to obtain sufficient financing for such purposes in compliance with the
restrictions in our financing arrangements for which we have reached agreements in principle, we intend to grow our business over the medium to
long-term by ordering newbuilding containerships and through selective acquisitions of additional vessels. Future growth will primarily depend on:



Although
charter rates and vessel values have recently declined significantly, along with the availability of debt to finance vessel acquisitions, during periods in which charter rates
are high, vessel values generally are high as well, and it may be difficult to acquire vessels at favorable prices. Moreover, our financing arrangements for which we have reached agreements in
principle will impose significant restrictions in our ability to use debt financing, or cash from operations, asset sales or equity financing, for purposes, such as vessel acquisitions, other than
debt repayment without the consent of our lenders. In addition, growing any business by acquisition presents numerous risks, such as managing relationships with customers and integrating newly
acquired assets into existing infrastructure. We cannot give any assurance that we will be successful in executing our growth plans or that we will not incur significant expenses and losses in
connection with our future growth efforts.

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Under the terms of a plea agreement, our manager pled to one count of negligent discharge of oil from the Henry (ex CMA CGM Passiflore) and one count of obstruction of
justice, based on a charge of attempted concealment of the source of the discharge. Any violation of the terms of the plea agreement, or any penalties or heightened environmental compliance plan
requirements imposed as a result of any alleged discharge from any other vessel in our fleet calling at U.S. ports could negatively affect our operations and business.

In the summer of 2001, one of our vessels, theHenry(exCMA
CGM Passiflore), experienced engine damage at sea that resulted in an accumulation of oil and oily water in the vessel's engine room. The U.S. Coast Guard found oil in the
overboard discharge pipe from the vessel's oily water separator. Subsequently, on July 2, 2001, when the vessel was at anchor in Long Beach, California, representatives of our manager notified
authorities of the presence of oil on the water on the starboard side of the vessel. On July 3, 2001, oil was found in an opening through which seawater is taken in to cool the vessel's
engines. In connection with these events, our manager entered into a plea agreement with the U.S. Attorney, on behalf of the government, which was filed with the U.S. District Court on June 20,
2006, pursuant to which our manager agreed to plead guilty to one count of negligent discharge of oil and one count of obstruction of justice, based on a charge of attempted concealment of the source
of the discharge. Our manager also agreed to a probation period of three years and to pay an aggregate of $500,000 in penalties in connection with the charges of negligent discharge and obstruction of
justice, with half of the penalties to be applied to community service projects that would benefit, restore or preserve the environment and ecosystems in the central California area. Consistent with
the government's practice in similar cases, our manager agreed to develop and implement an approved third-party consultant monitored environmental compliance plan, designate an internal corporate
compliance manager, and arrange for, fund and complete a series of audits of its fleet management offices and of waste streams of the vessels it manages, including all of the vessels in our fleet that
call at U.S. ports, as well as an independent, third-party focused environmental compliance plan audit. On August 14, 2006, the court accepted our manager's guilty plea to the two counts and,
on December 4, 2006, sentenced our manager in accordance with the terms of the plea agreement. Our manager has developed and is implementing the environmental compliance plan. Any violation of
this environmental compliance plan or of the terms of our manager's probation or any penalties, restitution or heightened environmental compliance plan requirements that are
imposed relating to alleged discharges in any other action involving our fleet or our manager could negatively affect our operations and business.

We are subject to regulation and liability under environmental laws that could require significant expenditures and affect our cash flows and net income.

Our business and the operation of our vessels are materially affected by environmental regulation in the form of international,
national, state and local laws, regulations, conventions and standards in force in international waters and the jurisdictions in which our vessels operate, as well as in the country or countries of
their registration, including those governing the management and disposal of hazardous substances and wastes, the cleanup of oil spills and other contamination, air emissions, wastewater discharges
and ballast water management. Because such conventions, laws, and regulations are often revised, we cannot predict the ultimate cost of complying with such requirements or their impact on the resale
price or useful life of our vessels. Additional conventions, laws and regulations may be adopted that could limit our ability to do business or increase the cost of doing business and which may
materially and adversely affect our operations. We are required by various governmental and quasi-governmental agencies to obtain certain permits, licenses, certificates and financial assurances with
respect to our operations. Many environmental requirements are designed to reduce the risk of pollution, such as oil spills, and our compliance with these requirements can be costly.

Environmental
requirements can also affect the resale value or useful lives of our vessels, could require a reduction in cargo capacity, ship modifications or operational changes or
restrictions, could lead to decreased availability of insurance coverage for environmental matters or could result in the

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denial
of access to certain jurisdictional waters or ports or detention in certain ports. Under local, national and foreign laws, as well as international treaties and conventions, we could incur
material liabilities, including cleanup obligations and natural resource damages liability, in the event that there is a release of petroleum or other hazardous material from our vessels or otherwise
in connection with our operations. We could also become subject to personal injury or property damage claims relating to the release of hazardous substances associated with our existing or historic
operations. Violations of, or liabilities under, environmental requirements can result in substantial penalties, fines and other sanctions, including, in certain instances, seizure or detention of our
vessels.

The
operation of our vessels is also affected by the requirements set forth in the International Maritime Organization's, or IMO's, International Management Code for the Safe Operation
of Ships and Pollution Prevention, or the ISM Code. The ISM Code requires shipowners and bareboat charterers to develop and maintain an extensive "Safety Management System" that includes the adoption
of a safety and environmental protection policy setting forth instructions and procedures for safe operation and describing procedures for dealing with emergencies. Failure to comply with the ISM
Code may subject us to increased liability, may decrease available insurance coverage for the affected ships, and may result in denial of access to, or detention in, certain ports.

Increased inspection procedures, tighter import and export controls and new security regulations could cause disruption of our containership business.

International container shipping is subject to security and customs inspection and related procedures in countries of origin,
destination, and certain trans-shipment points. These inspection procedures can result in cargo seizure, delays in the loading, offloading, trans-shipment, or delivery of containers, and the levying
of customs duties, fines or other penalties against exporters or importers and, in some cases, charterers and charter owners.

Since
the events of September 11, 2001, U.S. authorities have more than doubled container inspection rates to over 5% of all imported containers. Government investment in
non-intrusive container scanning technology has grown and there is interest in electronic monitoring technology, including so-called "e-seals" and "smart"
containers, that would enable remote, centralized monitoring of containers during shipment to identify tampering with or opening of the containers, along with potentially measuring other
characteristics such as temperature, air pressure, motion, chemicals, biological agents and radiation. Also, as a response to the events of September 11, 2001, additional vessel security
requirements have been imposed including the installation of security alert and automatic information systems on board vessels.

It
is further unclear what changes, if any, to the existing inspection and security procedures will ultimately be proposed or implemented, or how any such changes will affect the
industry. It is possible that such changes could impose additional financial and legal obligations, including additional responsibility for inspecting and recording the contents of containers and
complying with additional security procedures on board vessels, such as those imposed under the ISPS Code. Changes to the inspection and security procedures and container security could result in
additional costs and obligations on carriers and may, in certain cases, render the shipment of certain types of goods by container uneconomical or impractical. Additional costs that may arise from
current inspection or security procedures or future proposals that may not be fully recoverable from customers through higher rates or security surcharges.

Governments could requisition our vessels during a period of war or emergency, resulting in loss of earnings.

A government of a ship's registry could requisition for title or seize our vessels. Requisition for title occurs when a government
takes control of a ship and becomes the owner. Also, a government could requisition our containerships for hire. Requisition for hire occurs when a government takes

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control
of a ship and effectively becomes the charterer at dictated charter rates. Generally, requisitions occur during a period of war or emergency. Government requisition of one or more of our
vessels may negatively impact our revenues and results of operations.

Terrorist attacks and international hostilities could affect our results of operations and financial condition.

Terrorist attacks such as the attacks on the United States on September 11, 2001 and more recent attacks in other parts of the
world, and the continuing response of the United States and other countries to these attacks, as well as the threat of future terrorist attacks, continue to cause uncertainty in the world financial
markets and may affect our business, results of operations and financial condition. The conflicts in Iraq and Afghanistan may lead to additional acts of terrorism, regional conflict and other armed
conflicts around the world, which may contribute to further economic instability in the global financial markets. These uncertainties could also adversely affect our ability to obtain additional
financing on terms acceptable to us, or at all.

Terrorist
attacks targeted at sea vessels, such as the October 2002 attack in Yemen on the VLCC Limburg, a ship not related to us, may in the future also negatively affect our operations
and financial condition and directly impact our containerships or our customers. Future terrorist attacks could result in increased volatility of the financial markets in the United States and
globally and could result in an economic recession affecting the United States or the entire world. Any of these occurrences could have a material adverse impact on our operating results, revenue and
costs.

Changing
economic, political and governmental conditions in the countries where we are engaged in business or where our vessels are registered could affect us. In addition, future
hostilities or other political instability in regions where our vessels trade could also affect our trade patterns and adversely affect our operations and performance.

Acts of piracy on ocean-going vessels have recently increased in frequency, which could adversely affect our business.

Acts of piracy have historically affected ocean-going vessels trading in regions of the world such as the South China Sea and in the
Gulf of Aden off the coast of Somalia. Since 2008, the frequency of piracy incidents has increased significantly, particularly in the Gulf of Aden off the coast of Somalia. For example, in January
2010, the Maran Centaurus, a tanker vessel not affiliated with us, was captured by pirates in the Indian Ocean while carrying crude oil estimated to be worth $20 million, and was released in
January 2010 upon a ransom payment of over $5 million. In addition, crew costs, including costs due to employing onboard security guards, could increase in such circumstances. We may not be
adequately insured to cover losses from these incidents, which could have a material adverse effect on us. In addition, any detention or hijacking as a result of an act of piracy against our vessels,
or an increase in cost, or unavailability, of insurance for our vessels, could have a material adverse impact on our business, financial condition, results of operations and ability to pay dividends.

Risks inherent in the operation of ocean-going vessels could affect our business and reputation, which could adversely affect our expenses, net income and stock price.

The operation of ocean-going vessels carries inherent risks. These risks include the possibility of:



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Such
occurrences could result in death or injury to persons, loss of property or environmental damage, delays in the delivery of cargo, loss of revenues from or termination of charter
contracts, governmental fines, penalties or restrictions on conducting business, higher insurance rates, and damage to our reputation and customer relationships generally. Any of these circumstances
or events could increase our costs or lower our revenues, which could result in reduction in the market price of our shares of common stock. The involvement of our vessels in an environmental disaster
may harm our reputation as a safe and reliable vessel owner and operator.

Our insurance may be insufficient to cover losses that may occur to our property or result from our operations due to the inherent operational risks of the shipping
industry.

The operation of any vessel includes risks such as mechanical failure, collision, fire, contact with floating objects, property loss,
cargo loss or damage and business interruption due to political circumstances in foreign countries, hostilities and labor strikes. In addition, there is always an inherent possibility of a marine
disaster, including oil spills and other environmental mishaps. There are also liabilities arising from owning and operating vessels in international trade. We procure insurance for our fleet against
risks commonly insured against by vessel owners and operators. Our current insurance includes (i) hull and machinery insurance covering damage to our vessels' hull and machinery from, among
other things, contact with free and floating objects, (ii) war risks insurance covering losses associated with the outbreak or escalation of hostilities and (iii) protection and
indemnity insurance (which includes environmental damage and pollution insurance) covering third-party and crew liabilities such as expenses resulting from the injury or death of crew members,
passengers and other third parties, the loss or damage to cargo, third-party claims arising from collisions with other vessels, damage to other third-party property, pollution arising from oil or
other substances and salvage, towing and other related costs and loss of hire insurance for theCSCL Europe, theCSCL
America(exMSC Baltic), theCSCL Pusan(exHN
1559) and theCSCL Le Havre(exHN 1561).

We
can give no assurance that we are adequately insured against all risks or that our insurers will pay a particular claim. Even if our insurance coverage is adequate to cover our
losses, we may not be able to obtain a timely replacement vessel in the event of a loss. Under the terms of our credit facilities, we will be subject to restrictions on the use of any proceeds we may
receive from claims under our insurance policies. Furthermore, in the future, we may not be able to obtain adequate insurance coverage at reasonable rates for our fleet. We may also be subject to
calls, or premiums, in amounts based not only on our own claim records but also the claim records of all other members of the protection and indemnity associations through which we receive indemnity
insurance coverage for tort liability. Our insurance policies also contain deductibles, limitations and exclusions which, although we believe are standard in the shipping industry, may nevertheless
increase our costs.

In
addition, we do not carry loss of hire insurance (other than for theCSCL Europe, theCSCL
America(exMSC Baltic), theCSCL Pusan(exHN
1559) and theCSCL Le Havre(exHN 1561) to satisfy our loan agreement
requirements). Loss of hire insurance covers the loss of revenue during extended vessel off-hire periods, such as those that occur during an unscheduled drydocking due to damage to the
vessel from accidents. Accordingly, any loss of a vessel or any extended period of vessel off-hire, due to an accident or otherwise, could have a material adverse effect on our business,
results of operations and financial condition and our ability to pay dividends to our stockholders.

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Maritime claimants could arrest our vessels, which could interrupt our cash flows.

Crew members, suppliers of goods and services to a vessel, shippers of cargo and other parties may be entitled to a maritime lien
against that vessel for unsatisfied debts, claims or damages. In many jurisdictions, a maritime lien holder may enforce its lien by arresting a vessel through foreclosure proceedings. The arrest or
attachment of one or more of our vessels could interrupt our cash flows and require us to pay large sums of money to have the arrest lifted.

In
addition, in some jurisdictions, such as South Africa, under the "sister ship" theory of liability, a claimant may arrest both the vessel that is subject to the claimant's maritime
lien and any "associated" vessel, which is any vessel owned or controlled by the same owner. Claimants could try to assert "sister ship" liability against one vessel in our fleet for claims relating
to another of our ships.

The aging of our fleet may result in increased operating costs in the future, which could adversely affect our earnings.

In general, the cost of maintaining a vessel in good operating condition increases with the age of the vessel. As our fleet ages, we
may incur increased costs. Older vessels are typically less fuel efficient and more costly to maintain than more recently constructed vessels due to improvements in engine technology. Cargo insurance
rates also increase with the age of a vessel, making older vessels less desirable to charterers. Governmental regulations and safety or other equipment standards related to the age of a vessel may
also require expenditures for alterations or the addition of new equipment to our vessels, and may restrict the type of activities in which our vessels may engage. Although our current fleet of 45
containerships had an average age (weighted by TEU capacity) of approximately 9.0 years as of May 31, 2010, we cannot assure you that, as our vessels age, market conditions will justify
such expenditures or will enable us to profitably operate our vessels during the remainder of their expected useful lives.

Compliance with safety and other requirements imposed by classification societies may be very costly and may adversely affect our business.

The hull and machinery of every commercial vessel must be classed by a classification society authorized by its country of registry.
The classification society certifies that a vessel is safe and seaworthy in accordance with the applicable rules and regulations of the country of registry of the vessel and the Safety of Life at Sea
Convention, and all vessels must be awarded ISM certification.

A
vessel must undergo annual surveys, intermediate surveys and special surveys. In lieu of a special survey, a vessel's machinery may be on a continuous survey cycle, under which the
machinery would be surveyed periodically over a five-year period. Each of the vessels in our fleet is on a special survey cycle for hull inspection and a continuous survey cycle for
machinery inspection.

If
any vessel does not maintain its class or fails any annual, intermediate or special survey, and/or loses its certification, the vessel will be unable to trade between ports and will
be unemployable, and we could be in violation of certain covenants in our loan agreements. This would negatively impact our operating results and financial condition.

Our business depends upon certain employees who may not necessarily continue to work for us.

Our future success depends to a significant extent upon our chief executive officer, Dr. John Coustas, and certain members of
our senior management and that of our manager. Dr. Coustas has substantial experience in the container shipping industry and has worked with us and our manager for many years. He and others
employed by us and our manager are crucial to the execution of our business strategies and to the growth and development of our business. In addition, under the terms of the bank agreement in respect
of restructuring our existing credit facilities and the new financing

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arrangements
for which we have reached agreements in principle, Dr. Coustas ceasing to serve as our Chief Executive Officer, absent a successor acceptable to our lenders, would constitute an
event of default under these agreements. If these certain individuals were no longer to be affiliated with us or our manager, or if we were to otherwise cease to receive advisory services from them,
we may be unable to recruit other employees with equivalent talent and experience, and our business and financial condition may suffer as a result.

The provisions in our employment arrangements with our chief executive officer restricting his ability to compete with us, like restrictive covenants generally, may not be
enforceable.

In connection with his employment agreement with us, Dr. Coustas, our chief executive officer, has entered into a restrictive
covenant agreement with us under which he is precluded during the term of his employment and for one year thereafter from owning and operating drybulk ships or containerships larger than 2,500 TEUs
and from acquiring or investing in a business that owns or operates such vessels. Courts generally do not favor the enforcement of such restrictions, particularly when they involve individuals and
could be construed as infringing on their ability to be employed or to earn a livelihood. Our ability to enforce these restrictions, should it ever become necessary, will depend upon the circumstances
that exist at the time enforcement is sought. We cannot be assured that a court would enforce the restrictions as written by way of an injunction or that we could necessarily establish a case for
damages as a result of a violation of the restrictive covenants.

We depend on our manager to operate our business.

Pursuant to the management agreement and the individual ship management agreements, our manager and its affiliates may provide us with
certain of our officers and will provide us with technical, administrative and certain commercial services (including vessel
maintenance, crewing, purchasing, shipyard supervision, insurance, assistance with regulatory compliance and financial services). Our operational success will depend significantly upon our manager's
satisfactory performance of these services. Our business would be harmed if our manager failed to perform these services satisfactorily. In addition, if the management agreement were to be terminated
or if its terms were to be altered, our business could be adversely affected, as we may not be able to immediately replace such services, and even if replacement services were immediately available,
the terms offered could be less favorable than the ones currently offered by our manager. Our management agreement with any new manager may not be as favorable.

Our
ability to compete for and enter into new time charters and to expand our relationships with our existing charterers depends largely on our relationship with our manager and its
reputation and relationships in the shipping industry. If our manager suffers material damage to its reputation or relationships, it may harm our ability to:



If
our ability to do any of the things described above is impaired, it could have a material adverse effect on our business and affect our profitability.

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Our manager is a privately held company and there is little or no publicly available information about it.

The ability of our manager to continue providing services for our benefit will depend in part on its own financial strength.
Circumstances beyond our control could impair our manager's financial strength, and because it is a privately held company, information about its financial strength is not available. As a result, our
stockholders might have little advance warning of problems affecting our manager, even though these problems could have a material adverse effect on us. As part of our reporting obligations as a
public company, we will disclose information regarding our manager that has a material impact on us to the extent that we become aware of such information.

We are a Marshall Islands corporation, and the Marshall Islands does not have a well developed body of corporate law.

Our corporate affairs are governed by our articles of incorporation and bylaws and by the Marshall Islands Business Corporations Act,
or BCA. The provisions of the BCA are similar to provisions of the corporation laws of a number of states in the United States. However, there have been few judicial cases in the Republic of The
Marshall Islands interpreting the BCA. The rights and fiduciary responsibilities of directors under the law of the Republic of The Marshall Islands are not as clearly established as the rights and
fiduciary responsibilities of directors under statutes or judicial precedent in existence in certain U.S. jurisdictions. Stockholder rights may differ as well. While the BCA does specifically
incorporate the non-statutory law, or judicial case law, of the State of Delaware and other states with substantially similar legislative provisions, our public stockholders may have more
difficulty in protecting their interests in the face of actions by the management, directors or controlling stockholders than would stockholders of a corporation incorporated in a U.S. jurisdiction.

It may be difficult to enforce service of process and enforcement of judgments against us and our officers and directors.

We are a Marshall Islands corporation, and our registered office is located outside of the United States in the Marshall Islands. A
majority of our directors and officers reside outside of the United States, and a substantial portion of our assets and the assets of our officers and directors are located outside of the United
States. As a result, you may have difficulty serving legal process within the United States upon us or any of these persons. You may also have difficulty enforcing, both in and outside of the United
States, judgments you may obtain in the U.S. courts against us or these persons in any action, including actions based upon the civil liability provisions of U.S. federal or state securities laws.

There
is also substantial doubt that the courts of the Marshall Islands would enter judgments in original actions brought in those courts predicated on U.S. federal or state securities
laws. Even if you were successful in bringing an action of this kind, the laws of the Marshall Islands may prevent or restrict you from enforcing a judgment against our assets or our directors and
officers.

We maintain cash with a limited number of financial institutions including financial institutions that may be located in Greece, which will subject us to credit risk.

We maintain all of our cash with a limited number of financial institutions, including institutions that are located in Greece. These
financial institutions located in Greece may be subsidiaries of international banks or Greek financial institutions. Economic conditions in Greece have been, and continue to be, severely disrupted and
volatile, and as a result of sovereign weakness, Moody's Investor Services Inc. has recently downgraded the bank financial strength ratings, as well as the deposit and debt ratings, of several
Greek banks to reflect their weakening stand-alone financial strength and the anticipated additional pressures stemming from the country's challenged economic prospects.

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We
do not expect that any of our balances held with Greek financial institutions will be covered by insurance in the event of default by these financial institutions. The occurrence of
such a default could therefore have a material adverse effect on our business, financial condition, results of operations and cash flows. If we are unable to fund our capital expenditures, we may not
be able to continue to operate some of our vessels, which would have a material adverse effect on our business and could diminish our ability to pay dividends.

Risks Relating to Our Common Stock

The market price of our common stock has fluctuated widely and the market price of our common stock may fluctuate in the future.

The market price of our common stock has fluctuated widely since our initial public offering in October 2006, reaching a high of $40.26
per share in 2007 and a low of $2.72 per share in the third quarter of 2009, and may continue to do so as a result of many factors, including our actual results of operations and perceived prospects,
the prospects of our competition and of the shipping industry in general and in particular the containership sector, differences between our actual financial and operating results and those expected
by investors and analysts, changes in analysts' recommendations or projections, changes in general valuations for companies in the shipping industry, particularly the containership sector, changes in
general economic or market conditions and broad market fluctuations.

If
the market price of our common stock remains below $5.00 per share, under stock exchange rules, our stockholders will not be able to use such shares as collateral for borrowing in
margin accounts. This inability to use shares of our common stock as collateral may depress demand as certain institutional investors are restricted from investing in shares priced below $5.00 and
lead to sales of such shares creating downward pressure on and increased volatility in the market price of our common stock.

In
addition, under the rules of The New York Stock Exchange, listed companies are required to maintain a share price of at least $1.00 per share and if the share price declines below
$1.00 for a period of 30 consecutive business days, then the listed company would have a cure period of 180 days to regain compliance with the $1.00 per share minimum. In the event that our
share price declines below $1.00, we may be required to take action, such as a reverse stock split, in order to comply with the New York Stock Exchange rules that may be in effect at the time in order
to avoid delisting of our common stock and the associated decrease in liquidity in the market for our common stock.

We cannot be assured that we will be able to raise sufficient equity proceeds to satisfy the condition to our new credit facilities and a bank agreement covering the
restructuring of our existing credit facilities that we raise net proceeds from equity issuances of $200 million or that we would be able to raise alternative debt financing sufficient to meet
our future capital and operating needs. This or other future issuances of equity or equity-linked securities, or future sales of our common stock by existing stockholders, may result in significant
dilution and adversely affect the market price of our common stock.

A principal condition to the agreements in principle we have reached for new credit facilities and restructuring our existing credit
facilities is that we raise net proceeds from equity issuances of $200 million, including an investment by our chief executive officer. In order to raise sufficient proceeds to satisfy this
condition we will have to issue a substantial number of shares of our common stock, and there can be no assurance that we will be able to raise sufficient proceeds from, or even complete, such an
equity offering, which will be subject to market conditions. Sales of a substantial number of shares of our common stock in such an equity offering or other sales in the public market, or the
perception that these sales could occur, may depress the market price for our common stock. Such sales could also impair our ability to raise additional capital through the sale of our equity
securities in the future. In addition, we have agreed to grant warrants to our existing lenders

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participating
under the new credit facilities for which we have reached agreements in principle, upon entry into definitive documentation for such arrangements, for no additional consideration,
entitling such lenders acquire up to an aggregate of 15 million additional shares of our common stock, which is equal to approximately 27.5% of our currently outstanding shares of common stock,
at exercise price of $7. 0 per share.

We
may have to attempt to sell additional shares in the future to satisfy our capital and operating needs. In addition, lenders may be unwilling to provide future financing or may
provide future financing only on unfavorable terms. In light of the restrictions on our use of cash from operations, debt financings and asset sales that we expect to be contained in our bank
agreement for the structuring of our existing credit facilities and new credit facilities for which we have reached agreements in principle, to finance further growth beyond our contracted
newbuildings we would likely have to issue additional shares of common stock or other equity securities. If we sell shares in the future, the prices at which we sell these future shares will vary, and
these variations may be significant. If made at currently prevailing prices, these sales would be significantly dilutive of existing stockholders.

Subsequent
resales of substantial numbers of such shares in the public market, moreover, could adversely affect the market price of our shares. We filed with the SEC a shelf registration
statement on Form F-3 registering under the Securities Act 44,318,500 shares of our common stock for resale on behalf of selling stockholders, including our executive officers, in
addition to securities issuable by us. In the aggregate these 44,318,500 shares represent approximately 81% of our outstanding common stock as of May 31, 2010. These shares may be sold in
registered transactions and may also be resold subject to the holding period, volume, manner of sale and notice requirements of Rule 144 under the Securities Act. Sales or the possibility of
sales of substantial amounts of our
common stock by these shareholders in the public markets could adversely affect the market price of our common stock.

We
cannot predict the effect that future sales of our common stock or other equity related securities would have on the market price of our common stock.

The Coustas Family Trust, our principal existing stockholder, controls the outcome of matters on which our stockholders are entitled to vote and its interests may be
different from yours.

The Coustas Family Trust, under which our chief executive officer is both a beneficiary, together with other members of the Coustas
Family, and the protector (which is analogous to a trustee), through Danaos Investments Limited, a corporation wholly-owned by Dr. Coustas, owned, directly or indirectly, approximately 80% of
our outstanding common stock as of May 31, 2010. This stockholder is able to control the outcome of matters on which our stockholders are entitled to vote, including the election of our entire
board of directors and other significant corporate actions. The interests of this stockholder may be different from yours. Under the terms of the bank agreement for restructuring our existing credit
facilities and new financing arrangements for which we have reached agreements in principle, Dr. Coustas, together with the Coustas Family Trust and his family, ceasing to own over
one-third of our outstanding common stock will constitute an event of default in certain circumstances.

We are a "controlled company" under the New York Stock Exchange rules, and as such we are entitled to exemptions from certain New York Stock Exchange corporate governance
standards, and you may not have the same protections afforded to stockholders of companies that are subject to all of the New York Stock Exchange corporate governance requirements.

We are a "controlled company" within the meaning of the New York Stock Exchange corporate governance standards. Under the New York
Stock Exchange rules, a company of which more than 50% of the voting power is held by another company or group is a "controlled company" and may elect not to comply with certain New York Stock
Exchange corporate governance requirements, including (1) the requirement that a majority of the board of directors consist of independent directors, (2) the

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requirement
that the nominating committee be composed entirely of independent directors and have a written charter addressing the committee's purpose and responsibilities, (3) the requirement
that the compensation committee be composed entirely of independent directors and have a written charter addressing the committee's purpose and responsibilities and (4) the requirement of an
annual
performance evaluation of the nominating and corporate governance and compensation committees. We may utilize these exemptions, and currently a non-independent director serves on our
compensation committee and on our nominating and corporate governance committees. As a result, non-independent directors, including members of our management who also serve on our board of
directors, may serve on the compensation or the nominating and corporate governance committees of our board of directors which, among other things, fix the compensation of our management, make stock
and option awards and resolve governance issues regarding us. Accordingly, you may not have the same protections afforded to stockholders of companies that are subject to all of the New York Stock
Exchange corporate governance requirements.

The requirements of being a public company may strain our resources and distract management.

As a public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, and the
Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act. These requirements may place a burden on our systems and resources. The Securities Exchange Act of 1934, as amended, requires that we file annual
and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act, among other things, requires that we maintain effective disclosure controls and procedures and
internal controls for financial reporting. In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, significant
resources and management oversight are required. This may divert management's attention from other business concerns, which could have a material adverse effect on our business, financial condition,
results of operations and cash flows.

In
addition, if we fail to maintain effective controls and procedures, we may be unable to provide the financial information that publicly traded companies are required to provide in a
timely and reliable fashion. Any such delays or deficiencies could limit our ability to obtain financing, either in the public capital markets or from private sources, and could thereby impede our
ability to implement our strategies. In addition, any such delays or deficiencies could result in failure to meet the requirements for continued listing of our common stock on the New York Stock
Exchange, which would adversely affect the liquidity of our common stock.

Anti-takeover provisions in our organizational documents could make it difficult for our stockholders to replace or remove our current board of directors or
could have the effect of discouraging, delaying or preventing a merger or acquisition, which could adversely affect the market price of the shares of our common stock.

Several provisions of our articles of incorporation and bylaws could make it difficult for our stockholders to change the composition
of our board of directors in any one year, preventing them from changing the composition of our management. In addition, the same provisions may discourage, delay or prevent a merger or acquisition
that stockholders may consider favorable.

These
provisions:



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We
have adopted a stockholder rights plan pursuant to which our board of directors may cause the substantial dilution of the holdings of any person that attempts to acquire us without
the approval of our board of directors. In addition, our respective lenders under our existing credit facilities covered by the bank agreement for the restructuring thereof and the new credit
facilities for which we have reached agreements in principle will be entitled to require us to repay in full amounts outstanding under such credit facilities, if Dr. Coustas ceases to be our
Chief Executive Officer or, together with members of his family and trusts for the benefit thereof, ceases to collectively own over one-third of the voting interest in our outstanding
capital stock or any other person or group controls more than 20.0% of the voting power of our outstanding capital stock.

These
anti-takeover provisions, including the provisions of our stockholder rights plan, could substantially impede the ability of public stockholders to benefit from a
change in control and, as a result, may adversely affect the market price of our common stock and your ability to realize any potential change of control premium.

Tax Risks

We may have to pay tax on U.S.-source income, which would reduce our earnings.

Under the United States Internal Revenue Code of 1986, as amended, or the Code, 50% of the gross shipping income of a ship owning or
chartering corporation, such as ourselves, that is attributable to transportation that begins or ends, but that does not both begin and end, in the United States is characterized as U.S.-source
shipping income and as such is subject to a 4% U.S. federal income tax without allowance for deduction, unless that corporation qualifies for exemption from tax under Section 883 of the Code
and the Treasury Regulations promulgated thereunder.

Other
than with respect to four of our vessel-owning subsidiaries, as to which we are uncertain whether they qualify for this statutory tax exemption, we believe that we and our
subsidiaries currently qualify for this statutory tax exemption and we currently intend to take that position for U.S. federal income tax reporting purposes. However, there are factual circumstances
beyond our control that could cause us or our subsidiaries to fail to qualify for the benefit of this tax exemption and thus to be subject to U.S. federal income tax on U.S.-source shipping income.
There can be no assurance that we or any of our subsidiaries will qualify for this tax exemption for any year. For example, even assuming, as we expect will be the case, that our shares are regularly
and primarily traded on an established securities market in the United States, if shareholders each of whom owns, actually or under applicable attribution rules, 5% or more of our shares own, in the
aggregate, 50% or more of our shares, then we and our subsidiaries will generally not be eligible for the Section 883 exemption unless we can establish, in accordance with specified ownership
certification procedures, either (i) that a sufficient number of the shares in the closely-held block are owned, directly or under the applicable attribution rules, by "qualified
shareholders" (generally, individuals resident in certain non-U.S. jurisdictions) so that the shares in the closely-held block that are not so owned could not constitute 50% or
more of our shares for more than half of the days in the relevant tax year or (ii) that qualified shareholders owned more than 50% of our shares for at least half of the days in the relevant
taxable year. There can be no assurance that we will be able to establish such ownership by qualified shareholders for any tax year. In

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connection
with the four vessel-owning subsidiaries referred to above, we note that qualification under Section 883 will depend in part upon the ownership, directly or under the applicable
attribution rules, of preferred shares issued by such subsidiaries as to which we are not the direct or indirect owner of record.

If
we or our subsidiaries are not entitled to the exemption under Section 883 for any taxable year, we or our subsidiaries would be subject for those years to a 4% U.S. federal
income tax on our gross U.S. source shipping income. The imposition of this taxation could have a negative effect on our business and would result in decreased earnings available for distribution to
our stockholders. A number of our charters contain provisions that obligate the charterers to reimburse us for the 4% gross basis tax on our U.S. source shipping income.

If we were treated as a "passive foreign investment company," certain adverse U.S. federal income tax consequences could result to U.S. stockholders.

A foreign corporation will be treated as a "passive foreign investment company," or PFIC, for U.S. federal income tax purposes if at
least 75% of its gross income for any taxable year consists of certain types of "passive income," or at least 50% of the average value of the corporation's assets produce or are held for the
production of those types of "passive income." For purposes of these tests, "passive income" includes dividends, interest, and gains from the sale or exchange of investment property and rents and
royalties other than rents and royalties that are received from unrelated parties in connection with the active conduct of a trade or business. For purposes of these tests, income derived from the
performance of services does not constitute "passive income." In
general, U.S. stockholders of a PFIC are subject to a disadvantageous U.S. federal income tax regime with respect to the distributions they receive from the PFIC, and the gain, if any, they derive
from the sale or other disposition of their shares in the PFIC. If we are treated as a PFIC for any taxable year, we will provide information to U.S. stockholders to enable them to make certain
elections to alleviate certain of the adverse U.S. federal income tax consequences that would arise as a result of holding an interest in a PFIC.

While
there are legal uncertainties involved in this determination, including as a result of a recent decision of the United States Court of Appeals for the Fifth Circuit in Tidewater Inc. and Subsidiaries v. United
States, 565 F.3d 299 (5th Cir. 2009) which held that income derived from certain time
chartering activities should be treated as rental income rather than services income for purposes of the foreign sales corporation rules under the U.S. Internal Revenue Code, we believe we should not
be treated as a PFIC for the taxable year ended December 31, 2009. However, if the principles of the Tidewater decision were applicable to our time charters, we would likely be treated as a
PFIC. Moreover, there is no assurance that the nature of our assets, income and operations will not change or that we can avoid being treated as a PFIC for subsequent years.

The enactment of proposed legislation could affect whether dividends paid by us constitute qualified dividend income eligible for the preferential rate.

Legislation has been introduced that would deny the preferential rate of federal income tax currently imposed on qualified dividend
income with respect to dividends received from a non-U.S. corporation, unless the non-U.S. corporation either is eligible for benefits of a comprehensive income tax treaty with
the United States or is created or organized under the laws of a foreign country which has a comprehensive income tax system. Because the Marshall Islands has not entered into a comprehensive income
tax treaty with the United States and imposes only limited taxes on corporations organized under its laws, it is unlikely that we could satisfy either of these requirements. It is not possible at this
time to predict with certainty whether or in what form the proposed legislation will be enacted.

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If the regulations regarding the exemption from Liberian taxation for non-resident corporations issued by the Liberian Ministry of Finance were found to be
invalid, the net income and cash flows of our Liberian subsidiaries and therefore our net income and cash flows, would be materially reduced.

A number of our subsidiaries are incorporated under the laws of the Republic of Liberia. The Republic of Liberia enacted a new income
tax act effective as of January 1,
2001 (the "New Act") which does not distinguish between the taxation of "non-resident" Liberian corporations, such as our Liberian subsidiaries, which conduct no business in Liberia and
were wholly exempt from taxation under the income tax law previously in effect since 1977, and "resident" Liberian corporations which conduct business in Liberia and are, and were under the prior law,
subject to taxation.

In
2004, the Liberian Ministry of Finance issued regulations exempting non-resident corporations engaged in international shipping, such as our Liberian subsidiaries, from
Liberian taxation under the New Act retroactive to January 1, 2001. It is unclear whether these regulations, which ostensibly conflict with the express terms of the New Act adopted by the
Liberian legislature, are valid. However, the Liberian Ministry of Justice issued an opinion that the new regulations are a valid exercise of the regulatory authority of the Ministry of Finance. The
Liberian Ministry of Finance has not at any time since January 1, 2001 sought to collect taxes from any of our Liberian subsidiaries.

If
our Liberian subsidiaries were subject to Liberian income tax under the New Act, they would be subject to tax at a rate of 35% on their worldwide income. As a result, their, and
subsequently our, net income and cash flows would be materially reduced. In addition, as the ultimate stockholder of the Liberian subsidiaries, we would be subject to Liberian withholding tax on
dividends paid by our Liberian subsidiaries at rates ranging from 15% to 20%, which would limit our access to funds generated by the operations of our subsidiaries and further reduce our income and
cash flows.

Item 4.    Information on the Company

History and Development of the Company

Danaos Corporation is an international owner of containerships, chartering its vessels to many of the world's largest liner companies.
We are a corporation domesticated in the Republic of The Marshall Islands on October 7, 2005, under the Marshall Islands Business Corporations Act, after having been incorporated as a Liberian
company in 1998 in connection with the consolidation of our assets under Danaos Holdings Limited. In connection with our domestication in the Marshall Islands we changed our name from Danaos Holdings
Limited to Danaos Corporation. Our manager, Danaos Shipping Company Limited, or Danaos Shipping, was founded by Dimitris Coustas in 1972 and since that time it has continuously provided seaborne
transportation services under the management of the Coustas family. Dr. John Coustas, our chief executive officer, assumed responsibility for our management in 1987. Dr. Coustas has
focused our business on chartering
containerships to liner companies and has overseen the expansion of our fleet from three multi-purpose vessels in 1987 to the 45 containerships comprising our containership fleet as of May 31,
2010. In October 2006, we completed an initial public offering of our common stock in the United States and our common stock began trading on the New York Stock Exchange. Our principal executive
offices are c/o Danaos Shipping Co. Ltd., 14 Akti Kondyli, 185 45 Piraeus, Greece. Our telephone number at that address is +30 210 419 6480.

Our
company operates through a number of subsidiaries incorporated in Liberia and Cyprus, all of which are wholly-owned by us and either directly or indirectly own the vessels in our
fleet. A list of our active subsidiaries as of May 31, 2010, and their jurisdictions of incorporation, is set forth in Exhibit 8 to this annual report on Form 20-F.

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Business Overview

We are an international owner of containerships, chartering our vessels to many of the world's largest liner companies. As of
May 31, 2010, we had a fleet of 45 containerships aggregating 193,629 TEUs, making us among the largest containership charter owners in the world, based on total TEU capacity. Our strategy is
to charter our containerships under multi-year, fixed-rate period charters to a diverse group of liner companies, including many of the largest such companies globally, as
measured by TEU capacity. As of May 31, 2010, these customers included China Shipping, CMA-CGM, Hanjin, Hyundai, Maersk, MISC, United Arab Shipping Company ("UASC"), Wan Hai, The
Containership Company ("TCC"), Yang Ming and ZIM Israel Integrated Shipping Services. We believe our containerships provide us with contracted stable cash flows as they are deployed under
multi-year, fixed-rate charters that range from less than one to 18 years for vessels in our current fleet and our contracted newbuilding vessels.

Our Fleet



We deploy our containership fleet principally under multi-year charters with major liner companies that operate regularly
scheduled routes between large commercial ports. As of May 31, 2010, our containership fleet was comprised of 45 containerships deployed on time charters. The average age (weighted by TEU) of
the 45 vessels in our containership fleet was approximately 9.0 years as of May 31, 2010 and, upon delivery of all of our contracted vessels as of the end of the second quarter of 2012,
the average age (weighted by TEU) of the 65 vessels in our containership fleet (assuming no other acquisitions or dispositions) will be approximately 6.0 years. As of May 31, 2010, the
average remaining duration of the charters for our containership fleet, including our 20 contracted newbuilding vessels for each of which we have arranged charters, was 11.2 years (weighted by
aggregate contracted charter hire).



The table below provides additional information about our fleet of 45 cellular containerships as of May 31, 2010.

Vessel Name

Year
Built

Vessel
Size
(TEU)

Time
Charter
Term(1)

Expiration
of Charter(1)

ChartererPost-PanamaxCSCL Le Havre

2006


9,580

12 years

September 2018


China ShippingCSCL Pusan

2006


9,580

12 years

July 2018


China ShippingCSCL America (exMSC Baltic)(2)

2004


8,468

12 years

September 2016


China ShippingCSCL Europe

2004


8,468

12 years

June 2016


China ShippingCMA CGM Moliere(3)

2009


6,500

12 years

August 2021


CMA-CGMCMA CGM Musset(3)

2010


6,500

12 years

February 2022


CMA-CGMCMA CGM Nerval(3)

2010


6,500

12 years

April 2022


CMA-CGMHyundai Commodore (ex MOL Affinity)(4)

1992


4,651

8 years

March 2011


HyundaiHyundai Duke

1992


4,651

8 years

February 2011


HyundaiHyundai Federal (exAPL Confidence)(5)

1994


4,651

6.5 years

September 2012


HyundaiPanamaxMarathonas (exMSC Marathon)(6)

1991


4,814

5 years

September 2011


MaerskMaersk Messologi

1991


4,814

5 years

September 2011


MaerskMaersk Mytilini

1991


4,814

5 years

September 2011


MaerskYM Colombo (exNorasia Integra)(7)

2004


4,300

12 years

March 2019


Yang Ming


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Vessel Name

Year
Built

Vessel
Size
(TEU)

Time
Charter
Term(1)

Expiration
of Charter(1)

ChartererYM Singapore (exNorasia Atria)(8)

2004


4,300

12 years

October 2019


Yang MingYM Seattle

2007


4,253

12 years

July 2019


Yang MingYM Vancouver

2007


4,253

12 years

September 2019


Yang MingZIM Rio Grande

2008


4,253

12 years

May 2020


ZIMZIM Sao Paolo

2008


4,253

12 years

August 2020


ZIMZIM Kingston

2008


4,253

12 years

September 2020


ZIMZIM Monaco

2009


4,253

12 years

November 2020


ZIMZIM Dalian

2009


4,253

12 years

February 2021


ZIMZIM Luanda

2009


4,253

12 years

May 2021


ZIMBunga Raya Tiga (exMaersk Derby)(9)

2004


4,253

1 year

March 2011


MISCBunga Raya Tujuh (exMaersk Deva)(10)

2004


4,253

7 years

February 2011


MaerskAl Rayyan (exNorasia Hamburg)(11)

1989


3,908

3 years

January 2011


United Arab Shipping Co.YM Yantian

1989


3,908

5 years

July 2011


Yang MingHanjin Buenos Aires

2010


3,400

10 years

March 2020


n/a
(16)YM Milano

1988


3,129

7.5 years

May 2011


Yang MingCMA CGM Lotus (exVictory I)(12)

1988


3,098

3 years

July 2010


CMA-CGMCMA CGM Vanille (exIndependence)(13)

1986


3,045

3 years

July 2010


CMA-CGMHenry (exCMA CGM Passiflore)(14)

1986


3,039

0.5 years

October 2010


Wan-HaiCMA CGM Elbe

1991


2,917

1 year

June 2011


TCCCMA CGM Kalamata

1991


2,917

1 year

June 2011


TCCCMA CGM Komodo

1991


2,917

1 year

June 2011


TCCHyundai Advance

1997


2,200

10 years

June 2017


HyundaiHyundai Future

1997


2,200

10 years

August 2017


HyundaiHyundai Sprinter

1997


2,200

10 years

August 2017


HyundaiHyundai Stride

1997


2,200

10 years

July 2017


HyundaiHyundai Progress

1998


2,200

10 years

December 2017


HyundaiHyundai Bridge

1998


2,200

10 years

January 2018


HyundaiHyundai Highway

1998


2,200

10 years

January 2018


HyundaiHyundai Vladivostok

1997


2,200

10 years

May 2017


HyundaiHanjin Montreal (exMontreal Senator)(15)

1984


2,130

2.5 years

November 2010


HanjinBareboat
Charter
Term(1)YM Mandate

2010


6,500

18 years

January 2028


n/a
(16)


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Our
contracted vessels are being built based upon designs from Hyundai Samho Heavy Industries Co. Limited ("Hyundai Samho"), Hanjin Heavy Industries &
Construction Co., Ltd. ("Hanjin"), Shanghai Jiangnan Changxing Heavy Industry Company Limited ("Shanghai Jiangnan") and Sungdong Shipbuilding & Marine
Engineering Co., Ltd. ("Sungdong"). In some cases designs are enhanced by us and our manager, Danaos Shipping, in consultation with the charterers of the vessels and two classification
societies, Det Norske Veritas and the Lloyds Register of Shipping. These designs, which include certain technological advances and customized modifications, make the containerships efficient with
respect to both voyage speed and loading capability when compared to many vessels operating in the containership sector.

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The
specifications of our 20 contracted vessels under construction as of May 31, 2010 are as follows:

Name

Year
Built

Vessel
Size
(TEU)

Shipyard

Expected
Delivery Period

Time
Charter
Term(1)

ChartererHN S4004(2)


2010


6,500

Sungdong

2nd Quarter 2010

12 years


CMA-CGMHN N-220


2010


3,400

Hanjin

3rd Quarter 2010

10 years


n/a
(3)HN S4005(2)


2010


6,500

Sungdong

3rd Quarter 2010

12 years


CMA-CGMHN N-221


2010


3,400

Hanjin

3rd Quarter 2010

10 years


n/a
(3)HN N-222


2010


3,400

Hanjin

4th Quarter 2010

10 years


n/a
(3)HN N-223


2010


3,400

Hanjin

4th Quarter 2010

10 years


n/a
(3)Hull No. S-461


2011


10,100

Hyundai Samho

1st Quarter 2011

12 years


n/a
(3)Hull No. S-462


2011


10,100

Hyundai Samho

1st Quarter 2011

12 years


n/a
(3)HN Z00001


2011


8,530

Shanghai Jiangnan

1st Quarter 2011

12 years


n/a
(3)Hull No. S-463


2011


10,100

Hyundai Samho

2nd Quarter 2011

12 years


n/a
(3)HN Z00002


2011


8,530

Shanghai Jiangnan

2nd Quarter 2011

12 years


n/a
(3)HN Z00003


2011


8,530

Shanghai Jiangnan

2nd Quarter 2011

12 years


n/a
(3)HN Z00004


2011


8,530

Shanghai Jiangnan

2nd Quarter 2011

12 years


n/a
(3)HULL 1022A


2011


8,530

Shanghai Jiangnan

3rd Quarter 2011

12 years


n/a
(3)Hull No. S-456


2012


12,600

Hyundai Samho

1st Quarter 2012

12 years


n/a
(3)Hull No. S-457


2012


12,600

Hyundai Samho

1st Quarter 2012

12 years


n/a
(3)Hull No. S-458


2012


12,600

Hyundai Samho

2nd Quarter 2012

12 years


n/a
(3)Hull No. S-459


2012


12,600

Hyundai Samho

2nd Quarter 2012

12 years


n/a
(3)Hull No. S-460


2012


12,600

Hyundai Samho

2nd Quarter 2012

12 years


n/a
(3)Bareboat
Charter
Term(1)HN N-215


2010


6,500

Hanjin

3rd Quarter 2010

18 years


n/a
(3)


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As the container shipping industry has grown, the major liner companies have increasingly contracted for containership capacity. As of
May 31, 2010, our diverse group of customers in the containership sector included China Shipping, CMA-CGM, Hanjin, HMM, Maersk, MISC, TCC, Yang Ming, UASC, Wan Hai and ZIM
Integrated Shipping Services. In addition, we have arranged time charters ranging from 10 to 12 years with CMA-CGM, Yang Ming and two other accredited charterers for 19 of our
contracted vessels and an 18-year bareboat charter with an accredited charterer for our other contracted vessel.

The
containerships in our combined containership fleet are or, upon their delivery to us, will be deployed under multi-year, fixed-rate time charters having
initial terms that range from less than one to 18 years. These charters expire at staggered dates ranging from the third quarter of 2010 to the first quarter of 2028, with no more than 15
scheduled to expire in any 12-month period. The staggered expiration of the multi-year, fixed-rate charters for our vessels is both a strategy pursued by our
management and a result of the growth in our fleet over the past several years. Under our time

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charters,
the charterer pays voyage expenses such as port, canal and fuel costs, other than brokerage and address commissions paid by us, and we pay for vessel operating expenses, which include crew
costs, provisions, deck and engine stores, lubricating oil, insurance, maintenance and repairs. We are also responsible for each vessel's intermediate and special survey costs.

Under
the time charters, when a vessel is "off-hire" or not available for service, the charterer is generally not required to pay the hire rate, and we are responsible for
all costs. A vessel generally will be deemed to be off-hire if there is an occurrence preventing the full working of the vessel due to, among other things, operational deficiencies,
drydockings for repairs, maintenance or inspection, equipment breakdown, delays due to accidents, crewing strikes, labor boycotts, noncompliance with government water pollution regulations or alleged
oil spills, arrests or seizures by creditors or our failure to maintain the vessel in compliance with required specifications and standards. In addition, under our time charters, if any vessel is
off-hire for more than a certain amount of time (generally between 10-20 days), the charterer has a right to terminate the charter agreement for that vessel. Charterers
also have the right to terminate the time charters in various other circumstances, including but not limited to, outbreaks of war or a change in ownership of the vessel's owner or manager without the
charterer's approval.



On March 7, 2008, we exercised our right to have our wholly-owned subsidiaries replace a subsidiary of Lloyds Bank as direct
owners of theCSCL Europe, theCSCL America(exMSC
Baltic), theBunga Raya Tiga(exMaersk Derby), the Bunga Raya Tujuh(exMaersk Deva), theCSCL Pusan(ex HN 1559) and theCSCL Le Havre(exHN 1561) pursuant to
the terms of the leasing arrangements, as restructured on October 5, 2007, we had in place with such subsidiaries of Lloyds Bank, Allco Finance Limited, a U.K.-based financing company, and
Allco Finance UK Limited, a U.K.-based financing company. We had during the course of these leasing arrangements and continue to have full operational control over these vessels and we consider each
of these vessels to be an asset for our financial reporting purposes and each vessel is reflected as such in our consolidated financial statements included elsewhere herein.

On
July 19, 2006, legislation was enacted in the United Kingdom that would have resulted in a claw-back or recapture of certain of the benefits that were expected to
be available to the counterparties to the original leasing transactions at their inception. Accordingly, the put option price that was part of the original leasing arrangements would have been
increased to compensate the counterparties for the loss of these benefits. In 2006 we recognized an expense of $12.8 million, which is the amount by which we expected the increase in the put
price to exceed the cash benefits we had expected to receive, and had expected to retain, from these transactions. The October 5, 2007 restructuring of these leasing arrangements eliminated
this put option and the $12.8 million expense recorded in 2006, was reversed and recognized in earnings in the fourth quarter of 2007.



The charters with respect to theCMA CGM Moliere, theCMA CGM
Musset, theCMA CGM Nerval, theHN S4004and theHN
S4005include an option for the charterer, CMA-CGM, to purchase the vessels eight years after the commencement of the respective charters, which, based on the
respective expected delivery dates for these vessels, are expected to fall in September 2017, March 2018, May 2018, June 2018 and July 2018, respectively, each for $78.0 million. In each case,
the option to purchase the vessel must be exercised 15 months prior to the acquisition dates described in the preceding sentence. The $78.0 million option prices reflect an estimate of
the fair market value of the vessels at the time we would be required to sell the vessels upon exercise of the options. If CMA-CGM

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were
to exercise these options with respect to any or all of these vessels, the expected size of our combined containership fleet would be reduced, and as a result our anticipated level of revenues
after such sale would be reduced.

Pursuant
to the exercises of similar options, contained in the respective charters, to purchase theAPL England,the APL Scotland, theAPL
Hollandand theAPL Belgium,we
delivered such vessels to their charterer, APL-NOL, on March 7, 2007, June 22, 2007, August 3, 2007 and January 15, 2008, respectively, each for
$44.5 million.



In August 2006, we agreed to sell the six drybulk carriers in our fleet, with an aggregate capacity of 342,158 dwt, for an aggregate of
$143.5 million. In the first quarter of 2007, we delivered five of these vessels to the purchaser, which is not affiliated with us, for an aggregate of $118.0 million and the remaining
vessel to the purchaser for $25.5 million when its charter expired in the second quarter of 2007.

Management of Our Fleet

Our chief executive officer, chief operating officer and chief financial officer provide strategic management for our company while
these officers also supervise, in conjunction with our board of directors, the management of these operations by Danaos Shipping, our manager. We have a management agreement pursuant to which our
manager and its affiliates provide us and our subsidiaries with technical, administrative and certain commercial services for an initial term that expired on December 31, 2008, with automatic
one year renewals for an additional 12 years at our option. On February 12, 2009, we signed an addendum to the management contract changing the management fees we pay, effective
January 1, 2009 and, on February 8, 2010, we signed an addendum to the management contract adjusting the management fees, effective January 1, 2010. Our manager reports to us and
our board of directors through our chief executive officer, chief operating officer and chief financial officer.

Our
manager is regarded as an innovator in operational and technological aspects in the international shipping community. Danaos Shipping's strong technological capabilities derive from
employing highly educated professionals, its participation and assumption of a leading role in European Community research projects related to shipping, and its close affiliation to Danaos Management
Consultants, a leading ship-management software and services company. Danaos Management Consultants provides software services to two of our charterers, CMA-CGM and Maersk.

Danaos
Shipping achieved early ISM certification of its container fleet in 1995, well ahead of the deadline, and was the first Greek company to receive such certification from Det Norske
Veritas, a leading classification society. In 2004, Danaos Shipping received the Lloyd's List Technical Innovation Award for advances in internet-based telecommunication methods for vessels. Danaos
Shipping maintains the quality of its service by controlling directly the selection and employment of seafarers through its crewing offices in Piraeus, Greece as well as in Odessa and Mariupol in the
Ukraine. Investments in new facilities in Greece by Danaos Shipping enable enhanced training of seafarers and highly reliable infrastructure and services to the vessels.

Historically,
Danaos Shipping only infrequently managed vessels other than those in our fleet and currently it does not actively manage any other company's vessels other than providing
certain management services to Castella Shipping Inc., in which our chief executive officer has an investment. Danaos Shipping also does not arrange the employment of other vessels and has
agreed that, during the term of our management agreement, it will not provide any management services to any other entity without our prior written approval, other than with respect to Castella
Shipping Inc. and other entities controlled by Dr. Coustas, our chief executive officer, which do not operate within the

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containership
(larger than 2,500 TEUs) or drybulk sectors of the shipping industry or in the circumstances described below. Other than Castella Shipping Inc., Dr. Coustas does not
currently control any such vessel-owning entity. We believe we will derive significant benefits from our exclusive relationship with Danaos Shipping.

Dr. Coustas
has also personally agreed to the same restrictions on the provision, directly or indirectly, of management services during the term of our management agreement. In
addition, our chief executive officer (other than in his capacities with us) and our manager have separately agreed not, during the term of our management agreement and for one year thereafter, to
engage, directly or indirectly, in (i) the ownership or operation of containerships of larger than 2,500 TEUs or (ii) the ownership or operation of any drybulk carriers or
(iii) the acquisition of or investment in any business involved in the ownership or operation of containerships of larger than 2,500 TEUs or any drybulk carriers. Notwithstanding these
restrictions, if our independent directors decline the opportunity to acquire any such containerships or to acquire or invest in any such business, our chief executive officer will have the right to
make, directly or indirectly, any such acquisition or investment during the four-month period following such decision by our independent directors, so long as such acquisition or
investment is made on terms no more favorable than those offered to us. In this case, our chief executive officer and our manager will be permitted to provide management services to such vessels.

Danaos
Shipping manages our fleet under a management agreement whose initial term expired at the end of 2008. The management agreement automatically renews for a one-year
periods if we do not provide 12 months' notice of termination. During the initial term of the management agreement, for providing its commercial, chartering and administrative services our
manager received a fee of $500 per day and for its technical management of our ships, our manager received a management fee of $250 per vessel per day for vessels on bareboat charter and $500 per
vessel per day for the remaining vessels in our fleet, each pro rated for the number of calendar days we own each vessel. These fees are now adjusted annually by agreement between us and our manager.
For its chartering services rendered to us by its Hamburg-based office, our manager also receives a commission of 0.75% on all freight, charter hire, ballast bonus and demurrage for each vessel.
Further, our manager receives a commission of 0.5% based on the contract price of any vessel bought or sold by it on our behalf, excluding newbuilding contracts. We also paid our manager a flat fee of
$400,000 per newbuilding vessel, which we capitalized, for the on premises supervision of our newbuilding contracts by selected engineers and others of its staff.

On
February 12, 2009, we signed an addendum to the management contract adjusting the management fees, effective January 1, 2009, to a fee of $575 per day for commercial,
chartering and administrative services, a fee of $290 per vessel per day for vessels on bareboat charter and $575 per vessel per day for vessels on time charter and a flat fee of $725,000 per
newbuilding vessel for the supervision of newbuilding contracts. All commissions to the manager remained unchanged.

On
February 8, 2010, we signed an addendum to the management contract adjusting the management fees, effective January 1, 2010, to a fee of $675 per day for commercial,
chartering and administrative services, a fee of $340 per vessel per day for vessels on bareboat charter and $675 per vessel per day for vessels on time charter. All commissions to the manager
remained unchanged. The incremental amount of the management fees above the levels agreed for 2009 are payable by us, as accrued until the date of payment, at any time before the end of 2010.

Competition

We operate in markets that are highly competitive and based primarily on supply and demand. Generally, we compete for charters based
upon price, customer relationships, operating expertise, professional reputation and size, age and condition of the vessel. Competition for providing containership services comes from a number of
experienced shipping companies. In the containership

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sector,
these companies include Zodiac Maritime, Seaspan Corporation and Costamare. A number of our competitors in the containership sector have been financed by the German KG (Kommanditgesellschaft)
system, which was based on tax benefits provided to private investors. While the German tax law has been amended to significantly restrict the tax benefits available to taxpayers who invest after
November 10, 2005, the tax benefits afforded to all investors in the KG-financed entities will continue to be significant and such entities will continue to be attractive
investments. These tax benefits allow these KG-financed entities to be more flexible in offering lower charter rates to liner companies.

The
containership sector of the international shipping industry is characterized by the significant time necessary to develop the operating expertise and professional reputation
necessary to obtain and retain customers and, in the past a relative scarcity of secondhand containerships, which necessitated reliance on newbuildings which can take a number of years to complete. We
focus on larger TEU capacity containerships, which we believe have fared better than smaller vessels during global downturns in the containership sector. We believe larger containerships, even older
containerships if well maintained, provide us with increased flexibility and more stable cash flows than smaller TEU capacity containerships.

Crewing and Employees

We have four shore-based employees, our chief executive officer, our chief financial officer, our chief operating officer and our
deputy chief financial officer. As of December 31, 2009, 822 people served on board the vessels in our fleet and Danaos Shipping, our manager, employed approximately 121 people, all of whom
were shore-based. In addition, our manager is responsible for recruiting, either directly or through a crewing agent, the senior officers and all other crew members for our vessels and is reimbursed
by us for all crew wages and other crew relating expenses We believe the streamlining of crewing arrangements through our manager ensures that all of our vessels will be crewed with experienced crews
that have the qualifications and licenses required by international regulations and shipping conventions.

Permits and Authorizations

We are required by various governmental and other agencies to obtain certain permits, licenses and certificates with respect to our
vessels. The kinds of permits, licenses and certificates required by governmental and other agencies depend upon several factors, including the commodity being transported, the waters in which the
vessel operates, the nationality of the vessel's crew and the age of a vessel. All permits, licenses and certificates currently required to permit our vessels to operate have been obtained. Additional
laws and regulations, environmental or otherwise, may be adopted which could limit our ability to do business or increase the cost of doing business.

Inspection by Classification Societies

Every seagoing vessel must be "classed" by a classification society. The classification society certifies that the vessel is "in
class," signifying that the vessel has been built and maintained in accordance with the rules of the classification society and complies with applicable rules and regulations of the vessel's country
of registry and the international conventions of which that country is a member. In addition, where surveys are required by international conventions and corresponding laws and ordinances of a flag
state, the classification society will undertake them on application or by official order, acting on behalf of the authorities concerned.

The
classification society also undertakes on request other surveys and checks that are required by regulations and requirements of the flag state. These surveys are subject to
agreements made in each individual case and /or to the regulations of the country concerned.

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For maintenance of the class, regular and extraordinary surveys of hull and machinery, including the electrical plant, and any special equipment classed are
required to be performed as follows:

Annual Surveys.For seagoing ships, annual surveys are conducted for the hull and the machinery, including the electrical plant, and
where
applicable, on special equipment classed at intervals of 12 months from the date of commencement of the class period indicated in the certificate.

Intermediate Surveys.Extended annual surveys are referred to as intermediate surveys and typically are conducted two and one-half years
after commissioning and each class renewal. Intermediate surveys may be carried out on the occasion of the second or third annual survey.

Class Renewal Surveys.Class renewal surveys, also known as special surveys, are carried out on the ship's hull and machinery,
including the
electrical plant, and on any special equipment classed at the intervals indicated by the character of classification for the hull. During the special survey, the vessel is
thoroughly examined, including audio-gauging to determine the thickness of the steel structures. Should the thickness be found to be less than class requirements, the classification society would
prescribe steel renewals. The classification society may grant a one-year grace period for completion of the special survey. Substantial amounts of funds may have to be spent for steel
renewals to pass a special survey if the vessel experiences excessive wear and tear. In lieu of the special survey every four or five years, depending on whether a grace period is granted, a shipowner
has the option of arranging with the classification society for the vessel's hull or machinery to be on a continuous survey cycle, in which every part of the vessel would be surveyed within a
five-year cycle. At an owner's application, the surveys required for class renewal may be split according to an agreed schedule to extend over the entire period of class. This process is
referred to as continuous class renewal.

The
following table lists the next drydockings and special surveys scheduled for the vessels in our current containership fleet:

Vessel Name

Next Survey

Next DrydockingMaersk Mytilini

March 2011

January 2011CMA CGM Lotus

January 2011

January 2011Maersk Messologi

March 2011

March 2011CMA CGM Kalamata

March 2010

March 2011CMA CGM Vanille

March 2011

March 2011Marathonas

June 2010

April 2011Hanjin Montreal

September 2010

May 2011Al Rayyan

November 2012

June 2011Hyundai Commodore

September 2010

July 2011CMA CGM Elbe

August 2011

August 2011CMA CGM Komodo

August 2011

August 2011CSCL Pusan

November 2011

September 2011Henry

October 2011

October 2011CSCL Le Havre

November 2011

November 2011Hyundai Vladivostok

October 2010

July 2012Hyundai Federal

October 2010

July 2012Hyundai Advance

January 2011

July 2012Hyundai Stride

December 2010

September 2012YM Seattle

December 2010

September 2012Hyundai Future

December 2010

September 2012YM Vancouver

February 2011

November 2012Hyundai Sprinter

March 2011

December 2012Hyundai Progress

May 2011

March 2013


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Vessel Name

Next Survey

Next DrydockingHyundai Highway

June 2011

March 2013Hyundai Bridge

June 2011

March 2013YM Milano

November 2011

June 2013Zim Rio Grande

October 2011

July 2013Zim Sao Paolo

December 2011

September 2013Hyundai Duke

January 2011

October 2013Zim Kingston

February 2012

November 2013Zim Monaco

April 2012

January 2014YM Yantian

October 2012

February 2014CSCL Europe

August 2011

February 2014Bunga Raya Tujuh

June 2012

February 2014Zim Dalian

June 2012

March 2014YM Colombo

March 2012

March 2014Bunga Raya Tiga

July 2012

April 2014Zim Luanda

September 2012

June 2014CSCL America

November 2011

August 2014YM Singapore

September 2012

September 2014CMA CGM Moliere

March 2012

September 2014CMA CGM Musset

September 2012

March 2015CMA CGM Nerval

November 2012

May 2015Hanjin Buenos Aires

November 2012

May 2015


All
areas subject to surveys as defined by the classification society are required to be surveyed at least once per class period, unless shorter intervals between surveys are otherwise
prescribed. The period between two subsequent surveys of each area must not exceed five years. Vessels under bareboat charter, such as theYM Mandate,
are drydocked by their charterers.

Most
vessels are also drydocked every 30 to 36 months for inspection of their underwater parts and for repairs related to such inspections. If any defects are found, the
classification surveyor will issue a "recommendation" which must be rectified by the ship-owner within prescribed time limits.

Most
insurance underwriters make it a condition for insurance coverage that a vessel be certified as "in class" by a classification society which is a member of the International
Association of Classification Societies. All of our vessels are certified as being "in class" by Lloyds Register of Shipping, Bureau Veritas, NKK, Det Norske Veritas, the American Bureau of Shipping
or RINA SpA.

Risk of Loss and Liability Insurance



The operation of any vessel includes risks such as mechanical failure, collision, property loss, cargo loss or damage and business
interruption due to political circumstances in foreign countries, hostilities and labor strikes. In addition, there is always an inherent possibility of marine disaster, including oil spills and other
environmental mishaps, and the liabilities arising from owning and operating vessels in international trade. The U.S. Oil Pollution Act of 1990, or OPA, which imposes virtually unlimited liability
upon owners, operators and demise charterers of vessels trading in the United States exclusive economic zone for certain oil pollution accidents in the United States, has made liability insurance more
expensive for shipowners and operators trading in the United States market.

While
we maintain hull and machinery insurance, war risks insurance, protection and indemnity coverage for our containership fleet in amounts that we believe to be prudent to cover
normal risks in our operations, we may not be able to maintain this level of coverage throughout a vessel's useful life. Furthermore, while we believe that our insurance coverage will be adequate, not
all risks can be

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insured,
and there can be no guarantee that any specific claim will be paid, or that we will always be able to obtain adequate insurance coverage at reasonable rates.

Dr. John
Coustas, our chief executive officer, is a member of the Board of Directors of The Swedish Club, our primary provider of insurance, including a substantial portion of our
hull & machinery, war risk and protection and indemnity insurance.



We maintain marine hull and machinery and war risks insurance, which covers the risk of particular average, general average, 4/4ths
collision liability, contact with fixed and floating objects (FFO) and actual or constructive total loss in accordance with Swedish conditions for all of our vessels. Our vessels will each be covered
up to at least their fair market value after meeting certain deductibles per incident per vessel.

We
carry a minimum loss of hire coverage only with respect to theCSCL America(exMSC
Baltic), theCSCL Europe, theCSCL Pusan(exHN
1559) and theCSCL Le Havre(exHN 1561) to cover standard requirements of
KEXIM, the bank providing financing for our acquisition of these vessels. We do not and will not obtain loss of hire insurance covering the loss of revenue during extended off-hire periods
for the other vessels in our fleet because we believe that this type of coverage is not economical and is of limited value to us, in part because historically our fleet has had a very limited number
of off-hire days.



Protection and indemnity ("P&I") insurance covers our third-party and crew liabilities in connection with our shipping activities. This
includes third-party liability, crew liability
and other related expenses resulting from the injury or death of crew, passengers and other third parties, the loss or damage to cargo, third-party claims arising from collisions with other vessels,
damage to other third-party property, pollution arising from oil or other substances and salvage, towing and other related costs, including wreck removal. Our protection and indemnity insurance, other
than our 4/4ths collision and FFO insurance (which is covered under our hull insurance policy), is provided by mutual protection and indemnity associations, or P&I associations. Insurance provided by
P&I associations is a form of mutual indemnity insurance. Unless otherwise provided by the international conventions that limit the liability of shipowners and subject to the "capping" discussed
below, our coverage under insurance provided by the P&I associations, except for pollution, will be unlimited.

Our
protection and indemnity insurance coverage in accordance with the International Group of P&I Club Agreement for pollution will be $1.0 billion per vessel per incident. Our
P&I war risk coverage is $500.0 million per vessel per incident, while for passenger and seaman risks the limit is $3.0 billion, with a sub-limit of $2.0 billion for
passenger claims only. The fourteen P&I associations that comprise the International Group insure approximately 90% of the world's commercial blue-water tonnage and have entered into a
pooling agreement to reinsure each association's liabilities. As a member of a P&I association that is a member of the International Group, we will be subject to calls payable to the associations
based on the International Group's claim records as well as the claim records of all other members of the individual associations.

Environmental and Other Regulations

Government regulation significantly affects the ownership and operation of our vessels. They are subject to international conventions,
national, state and local laws, regulations and standards in force in international waters and the countries in which our vessels may operate or are registered, including those governing the
management and disposal of hazardous substances and wastes, the cleanup of oil spills and other contamination, air emissions, wastewater discharges and ballast water management.

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These
laws and regulations include the U.S. Oil Pollution Act of 1990 (OPA), the U.S. Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), the U.S. Clean Water Act, the
International Convention for Prevention of Pollution from Ships, regulations adopted by the IMO and the European Union, various volatile organic compound air emission requirements and various Safety
of Life at Sea (SOLAS) amendments, as well as other regulations described below. Compliance with these laws, regulations and other requirements entails significant expense, including vessel
modifications and implementation of certain operating procedures.

A
variety of governmental and private entities subject our vessels to both scheduled and unscheduled inspections. These entities include the local port authorities (U.S. Coast Guard,
harbor master or equivalent), classification societies, flag state administration (country of registry), charterers and,
particularly, terminal operators. Certain of these entities require us to obtain permits, licenses, certificates and financial assurances for the operation of our vessels. Failure to maintain
necessary permits or approvals could require us to incur substantial costs or result in the temporary suspension of operation of one or more of our vessels.

We
believe that the heightened level of environmental and quality concerns among insurance underwriters, regulators and charterers is leading to greater inspection and safety
requirements on all vessels and may accelerate the scrapping of older vessels throughout the industry. Increasing environmental concerns have created a demand for vessels that conform to the stricter
environmental standards. We are required to maintain operating standards for all of our vessels that will emphasize operational safety, quality maintenance, continuous training of our officers and
crews and compliance with U.S. and international regulations. We believe that the operation of our vessels is in substantial compliance with applicable environmental laws and regulations. However,
because such laws and regulations are frequently changed and may impose increasingly stricter requirements, such future requirements may limit our ability to do business, increase our operating costs,
force the early retirement of our vessels, and/or affect their resale value, all of which could have a material adverse effect on our financial condition and results of operations.



Our vessels are subject to standards imposed by the IMO (the United Nations agency for maritime safety and the prevention of pollution
by ships). The IMO has adopted regulations that are designed to reduce pollution in international waters, both from accidents and from routine operations. These regulations address oil discharges,
ballasting and unloading operations, sewage, garbage, and air emissions. For example, Annex III of the International Convention for the Prevention of Pollution from Ships, or MARPOL, regulates
the transportation of marine pollutants, and imposes standards on packing, marking, labeling, documentation, stowage, quantity limitations and pollution prevention. These requirements have been
expanded by the International Maritime Dangerous Goods Code, which imposes additional standards for all aspects of the transportation of dangerous goods and marine pollutants by sea.

In
September 1997, the IMO adopted Annex VI to the International Convention for the Prevention of Pollution from Ships to address air pollution from vessels. Annex VI,
which came into effect on May 19, 2005, sets limits on sulfur oxide and nitrogen oxide emissions from vessel exhausts and prohibits deliberate emissions of ozone depleting substances, such as
chlorofluorocarbons. Annex VI also includes a global cap on the sulfur content of fuel oil and allows for special areas to be established with more stringent controls on sulfur emissions.
Annex VI has been ratified by some, but not all IMO member states, including the Marshall Islands. Pursuant to a Marine Notice issued by the Marshall Islands Maritime Administrator as revised
in March 2005, vessels flagged by the Marshall Islands that are subject to Annex VI must, if built before the effective date, obtain an International Air Pollution Prevention Certificate
evidencing compliance with Annex VI by the first dry docking after May 19, 2005, but no later than May 19, 2008. All vessels subject to Annex VI and built after
May 19,

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2005
must also have this Certificate. We have obtained International Air Pollution Prevention certificates for all of our vessels. In October 2008, the Marine Environment Protection Committee, or
MEPC, of the IMO adopted amendments to Annex VI regarding particulate matter, nitrogen oxides and sulfur oxide emission standards that will enter into force in July 2010. The United States
ratified the amendments in October 2008, and all vessels subject to Annex VI must comply with the amended requirements when entering U.S. ports or operating in U.S. waters. The new standards
seek to reduce air pollution from vessels by establishing a series of progressive standards to further limit the sulfur content of fuel oil, which would be phased in through 2020, and by establishing
new tiers of nitrogen oxide emission standards for new marine diesel engines, depending on their date of installation. Additionally, more stringent emission standards could apply in coastal areas
designated as Emission Control Areas, such as the United States and Canadian coastal areas recently designated by IMO's Marine Environment Protection Committee (MEPC). We may incur costs to install
control equipment on our engines in order to comply with the new requirements. Additional or new conventions, laws and regulations may be adopted that could adversely affect our ability to manage our
vessels.

The
operation of our vessels is also affected by the requirements set forth in the IMO's International Management Code for the Safe Operation of Ships and Pollution Prevention, or the
ISM Code, which was adopted in July 1998. The ISM Code requires shipowners and bareboat charterers to develop and maintain an extensive "Safety Management System" that includes the adoption of a
safety and environmental protection policy setting forth instructions and procedures for safe operation and describing procedures for dealing with emergencies. The ISM Code requires that vessel
operators obtain a Safety Management Certificate for each vessel they operate. This certificate evidences compliance by a vessel's management with code requirements for a Safety Management System. No
vessel can obtain a certificate unless its operator has been awarded a document of compliance, issued by each flag state, under the ISM Code. The failure of a shipowner or bareboat charterer to comply
with the ISM Code may subject such party to increased liability, decrease available insurance coverage for the affected vessels and result in a denial of access to, or detention in, certain ports.
Currently, each of the vessels in our fleet is ISM code-certified. However, there can be no assurance that such certifications will be maintained indefinitely.

In
2001, the IMO adopted the International Convention on Civil Liability for Bunker Oil Pollution Damage, or the Bunker Convention, which imposes strict liability on ship owners for
pollution damage in jurisdictional waters of ratifying states caused by discharges of bunker oil. The Bunker Convention also requires registered owners of ships over a certain size to maintain
insurance for pollution damage
in an amount equal to the limits of liability under the applicable national or international limitation regime (but not exceeding the amount calculated in accordance with the Convention on Limitation
of Liability for Maritime Claims of 1976, as amended). The Bunker Convention entered into force on November 21, 2008. Our entire fleet has been issued a certificate attesting that insurance is
in force in accordance with the insurance provisions of the Convention.



OPA established an extensive regulatory and liability regime for the protection and cleanup of the environment from oil spills. It
applies to discharges of any oil from a vessel, including discharges of fuel oil and lubricants. OPA affects all owners and operators whose vessels trade in the United States, its territories and
possessions or whose vessels operate in U.S. waters, which include the United States' territorial sea and its two hundred nautical mile exclusive economic zone. While we do not carry oil as cargo, we
do carry fuel oil (or bunkers) in our vessels, making our vessels subject to the OPA requirements.

Under
OPA, vessel owners, operators and bareboat charterers are "responsible parties" and are jointly, severally and strictly liable (unless the discharge of pollutants results solely
from the act or omission of a third party, an act of God or an act of war) for all containment and clean-up costs and

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other
damages arising from discharges or threatened discharges of pollutants from their vessels. OPA defines these other damages broadly to include:



OPA
preserves the right to recover damages under existing law, including maritime tort law.

Effective
July 31, 2009, the U.S. Coast Guard increased the limits of OPA liability to the greater of $1000 per ton or $854,400 for non-tank vessels and established a
procedure for adjusting the limits for inflation every three years. These limits of liability do not apply if an incident was directly caused by violation of applicable U.S. federal safety,
construction or operating regulations or by a responsible party's gross negligence or willful misconduct, or if the responsible party fails or refuses to report the incident or to cooperate and assist
in connection with oil removal activities.

OPA
requires owners and operators of vessels to establish and maintain with the United States Coast Guard evidence of financial responsibility sufficient to meet their potential
liabilities under the OPA. Under the regulations, vessel owners and operators may evidence their financial responsibility by showing proof of insurance, surety bond, self-insurance, or
guaranty, and an owner or operator of a fleet of vessels is required only to demonstrate evidence of financial responsibility in an amount sufficient to cover the vessels in the fleet having the
greatest maximum liability under OPA.

The
U.S. Coast Guard's regulations concerning certificates of financial responsibility provide, in accordance with OPA, that claimants may bring suit directly against an insurer or
guarantor that furnishes certificates of financial responsibility. In the event that such insurer or guarantor is sued directly, it is prohibited from asserting any contractual defense that it may
have had against the responsible party and is limited to asserting those defenses available to the responsible party and the defense that the incident was caused by the willful misconduct of the
responsible party. Certain organizations, which had typically provided certificates of financial responsibility under pre-OPA 90 laws, including the major protection and indemnity
organizations have declined to furnish evidence of insurance for vessel owners and operators if they are subject to direct actions or required to waive insurance policy defenses. This requirement may
have the effect of limiting the availability of the type of coverage required by the Coast Guard and could increase the costs of obtaining this insurance for us and our competitors.

The
U.S. Coast Guard's financial responsibility regulations may also be satisfied by evidence of surety bond, guaranty or by self-insurance. Under the
self-insurance provisions,
the shipowner or operator must have a net worth and working capital, measured in assets located in the United States against liabilities located anywhere in the world, that exceeds the applicable
amount of financial responsibility. We have complied with the U.S. Coast Guard regulations by providing a financial guaranty evidencing sufficient self-insurance.

OPA
specifically permits individual states to impose their own liability regimes with regard to oil pollution incidents occurring within their boundaries, and some states have enacted
legislation providing for unlimited liability for oil spills. In some cases, states, which have enacted such legislation, have not yet issued implementing regulations defining vessels owners'
responsibilities under these laws. We intend to comply with all applicable state regulations in the ports where our vessels call.

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We
currently maintain, for each of our vessels, oil pollution liability coverage insurance in the amount of $1 billion per incident. In addition, we carry hull and machinery and
protection and indemnity insurance to cover the risks of fire and explosion. Given the relatively small amount of bunkers our vessels carry, we believe that a spill of oil from the vessels would not
be catastrophic. However, under certain circumstances, fire and explosion could result in a catastrophic loss. While we believe that our present insurance coverage is adequate, not all risks can be
insured, and there can be no guarantee that any specific claim will be paid, or that we will always be able to obtain adequate insurance coverage at reasonable rates. If the damages from a
catastrophic spill exceeded our insurance coverage, it would have a severe effect on us and could possibly result in our insolvency.

Title
VII of the Coast Guard and Maritime Transportation Act of 2004, or the CGMTA, amended OPA to require the owner or operator of any non-tank vessel of 400 gross tons or
more, that carries oil of any kind as a fuel for main propulsion, including bunkers, to prepare and submit a response plan for each vessel on or before August 8, 2005. Previous law was limited
to vessels that carry oil in bulk as cargo. The vessel response plans include detailed information on actions to be taken by vessel personnel to prevent or mitigate any discharge or substantial threat
of such a discharge of oil from the vessel due to operational activities or casualties. We have approved response plans for each of our vessels.



CERCLA governs spills or releases of hazardous substances other than petroleum or petroleum products. The owner or operator of a ship,
vehicle or facility from which there has been a release is liable without regard to fault for the release, and along with other specified
parties may be jointly and severally liable for remedial costs. Costs recoverable under CERCLA include cleanup and removal costs, natural resource damages and governmental oversight costs. Liability
under CERCLA is generally limited to the greater of $300 per gross ton or $0.5 million per vessel carrying non-hazardous substances ($5.0 million for vessels carrying
hazardous substances), unless the incident is caused by gross negligence, willful misconduct or a violation of certain regulations, in which case liability is unlimited. The U.S. Coast Guard's
financial responsibility regulations under OPA also require vessels to provide evidence of financial responsibility for CERCLA liability in the amount of $300 per gross ton.



The U.S. Clean Water Act, or CWA, prohibits the discharge of oil or hazardous substances in navigable waters and imposes strict
liability in the form of penalties for any unauthorized discharges. The CWA also imposes substantial liability for the costs of removal, remediation and damages and complements the remedies available
under the more recent OPA and CERCLA, discussed above. Under U.S. Environmental Protection Agency, or EPA, regulations that took effect on February 6, 2009, we are required to obtain a CWA
permit regulating and authorizing any discharges of ballast water or other wastewaters incidental to our normal vessel operations if we operate within the three-mile territorial waters or
inland waters of the United States. The permit, which EPA has designated as the Vessel General Permit for Discharges Incidental to the Normal Operation of Vessels, or VGP, incorporates the current
U.S. Coast Guard requirements for ballast water management, as well as supplemental ballast water requirements and limits for 26 other specific discharges. Regulated vessels cannot operate in U.S.
waters after September 19, 2009 unless they are covered by the VGP. To do so, vessel owners must submit a Notice of Intent, or NOI, at least 30 days before the vessel operates in U.S.
waters. To comply with the VGP vessel owners and operators may have to install equipment on their vessels to treat ballast water before it is discharged or implement port facility disposal
arrangements or procedures at potentially substantial cost. The VGP also requires states to certify the permit, and certain states have imposed more stringent discharge standards as a condition of
their

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certification.
Many of the VGP requirements have already been addressed in our vessels' current ISM Code SMS Plan. We have submitted NOIs for all of our vessels that operate in U.S. waters.



The Federal Clean Air Act (CAA) requires the EPA to promulgate standards applicable to emissions of volatile organic compounds and
other air contaminants. Our vessels are subject to CAA vapor control and recovery standards for cleaning fuel tanks and conducting
other operations in regulated port areas and emissions standards for so-called "Category 3 "marine diesel engines operating in U.S. waters. The marine diesel engine emission
standards are currently limited to new engines beginning with the 2004 model year. However, on April 30, 2010, EPA adopted more stringent standards for emissions of particulate matter, sulfur
oxides, and nitrogen oxides and other related provisions for new Category 3 marine diesel engines installed on vessels registered or flagged in the U.S. We may incur costs to install control
equipment on our vessels to comply with the new standards. Several states regulate emissions from vessel vapor control and recovery operations under federally-approved State Implementation Plans.
California has adopted limits on particulate matter, sulfur oxides, and nitrogen oxides emissions from the auxiliary diesel engines of ocean-going vessels in waters within approximately 24 miles of
the California coast. Compliance is to be achieved through the use of marine diesel oil with a sulfur content not exceeding .1% by weight, or marine gas oil, or through alternative means of emission
control, such as the use of shore-side electrical power or exhaust emission controls. These rules were struck down by the Ninth Circuit Court of Appeals in February 2008 on the grounds
that they were preempted by the CAA, and in May 2008 California was permanently enjoined from enforcing the rules. However, the state has requested EPA to grant it a waiver under the CAA to enforce
its invalidated vessel emission standards, and the Center for Biological Diversity has petitioned EPA to regulate black carbon emissions from vessels and other sources. The California Air Resources
Board also adopted fuel content regulations effective July 1, 2009 that apply to all vessels sailing within 24 miles of the California coast and whose itineraries call for them to enter
California ports, terminal facilities or estuarine waters. If new or more stringent requirements relating to emissions from marine diesel engines or port operations by vessels are adopted by EPA or
the states, compliance with these regulations could entail significant capital expenditures or otherwise increase the costs of our operations.



The EU has also adopted legislation that: (1) requires member states to refuse access to their ports to certain
sub-standard vessels, according to vessel type, flag and number of previous detentions; (2) creates an obligation on member states to inspect at least 25% of vessels using their
ports annually and provides for increased surveillance of vessels posing a high risk to maritime safety or the marine environment; (3) provides the EU with greater authority and control over
classification societies, including the ability to seek to suspend or revoke the authority of negligent societies, and (4) requires member states to impose criminal sanctions for certain
pollution events, such as the unauthorized discharge of tank washings. The European Parliament recently endorsed a European Commission proposal to criminalize certain pollution discharges from ships.
If it becomes formal EU law, it will affect the operation of vessels and the liability of owners for oil and other pollutional discharges. It is difficult to predict what legislation, if any, may be
promulgated by the European Union or any other country or authority.

The
U.S. National Invasive Species Act, or NISA, was enacted in 1996 in response to growing reports of harmful organisms being released into U.S. ports through ballast water taken on by
ships in foreign ports. Under NISA, the U.S. Coast Guard adopted regulations in July 2004 imposing mandatory ballast water management practices for all vessels equipped with ballast water tanks
entering U.S. waters. These requirements can be met by performing mid-ocean ballast exchange, by retaining

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ballast
water on board the ship, or by using environmentally sound alternative ballast water management methods approved by the U.S. Coast Guard. (However, mid-ocean ballast exchange is
mandatory for ships heading to the Great Lakes or Hudson Bay, or vessels engaged in the foreign export of Alaskan North Slope crude oil.) Mid-ocean ballast exchange is the primary method
for compliance with the Coast Guard regulations, since holding ballast water can prevent ships from performing cargo operations upon arrival in the United States, and alternative methods are still
under development. Vessels that are unable to conduct mid-ocean ballast exchange due to voyage or safety concerns may discharge minimum amounts of ballast water (in areas other than the
Great Lakes and the Hudson River), provided that they comply with record keeping requirements and document the reasons they could not follow the required ballast water management requirements. In
August 2009 the Coast Guard published proposed amendments to its ballast water management regulations that could ultimately set maximum acceptable discharge limits for various invasive species and/or
lead to requirements for active treatment of ballast water.

A
number of bills relating to ballast water management have been introduced in the U.S. Congress, but we cannot predict which bill, if any, will be enacted into law. In the absence of
federal standards, states have enacted legislation or regulations to address invasive species through ballast water and hull cleaning management and permitting requirements. Michigan's ballast water
management legislation was upheld by the Sixth Circuit Court of Appeals and California has recently enacted legislation extending its ballast water management program to regulate the management of
"hull fouling" organisms attached to vessels and adopted regulations limiting the number of organisms in ballast water discharges. Other states may proceed with the enactment of similar requirements
that could increase the costs of operating in state waters.

At
the international level, the IMO adopted an International Convention for the Control and Management of Ships' Ballast Water and Sediments, or the BWM Convention, in February 2004. The
Convention's implementing regulations call for a phased introduction of mandatory ballast water exchange requirements (beginning in 2009), to be replaced in time with mandatory concentration limits.
The BWM Convention will not enter into force until 12 months after it has been adopted by 30 states, the combined merchant fleets of which represent not less than 35% of the gross tonnage of
the world's merchant shipping. As of April 30, 2010, the BWM Convention has been ratified by 24 states, representing 23.29% of world tonnage.

If
the mid-ocean ballast exchange is made mandatory throughout the United States or at the international level, or if water treatment requirements or options are instituted,
the cost of compliance could increase for ocean carriers. Although we do not believe that the costs of compliance
with a mandatory mid-ocean ballast exchange would be material, it is difficult to predict the overall impact of such a requirement on the business.

Although
the Kyoto Protocol to the United Nations Framework Convention on Climate Change requires adopting countries to implement national programs to reduce emissions of greenhouse
gases, emissions from international shipping are not subject to the Kyoto Protocol. Although there was some expectation that a new climate change treaty would be adopted at the December 2009 United
Nations Copenhagen climate change conference, it did not result in any binding commitments. Instead, the participating countries developed an accord regarding a framework for negotiations in 2010 that
includes emission reduction targets for developed countries and goals for limiting increases in atmospheric temperature. The implementation of the Copenhagen accord could lead to restrictions on the
emissions of greenhouse gases from shipping. International or multi-national bodies or individual countries may adopt their own climate change regulatory initiatives. The EU intends to expand its
emissions trading scheme to vessels, and the IMO's MEPC is developing technical and operational measures to limit emissions of greenhouse gases from international shipping for consideration by IMO
this fall. The U.S. EPA Administrator issued a finding that greenhouse gases threaten the public health and safety and that emissions from new motor vehicles and motor vehicle engines contribute to

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concentrations
of greenhouse gases in the atmosphere. In connection with these findings, EPA has adopted regulations relating to the control of greenhouse gas emissions from certain mobile and
stationary sources. Although the EPA findings and regulations do not extend to vessels and vessel engines, the EPA is separately considering a petition from the California Attorney General and
environmental groups to regulate greenhouse gas emissions from ocean-going vessels under the CAA. The U.S. Congress is also considering climate change initiatives. Any passage of climate control
legislation or other regulatory initiatives by the IMO, the EU or individual countries in which we operate could require us to make significant financial expenditures or otherwise limit our operations
that we cannot predict with certainty at this time.



Since the terrorist attacks of September 11, 2001, there have been a variety of initiatives intended to enhance vessel security.
On November 25, 2002, the U.S. Maritime Transportation Security Act of 2002 (MTSA) came into effect. To implement certain portions of the MTSA, in July 2003, the U.S. Coast Guard issued
regulations requiring the implementation of certain security requirements aboard vessels operating in waters subject to the jurisdiction of the United States. Similarly, in December 2002, amendments
to SOLAS created a new chapter of the convention dealing specifically with maritime security. The new chapter went into effect in July 2004, and imposes various detailed security obligations on
vessels and port authorities, most of which are contained in the newly created International Ship and Port Facilities Security (ISPS) Code.

The
ISPS Code is designed to protect ports and international shipping against terrorism. To trade internationally a vessel must obtain an International Ship Security Certificate, or
ISSC, from a recognized security organization approved by the vessel's flag state. To obtain an ISSC a vessel must meet certain requirements, including:



In
addition, as of January 1, 2009, every company and/or registered owner is required to have an identification number which conforms to the IMO Unique Company and Registered Owner
Identification Number Scheme. Our Manager has also complied with this amendment to SOLAS XI-1/3-1.

The
U.S. Coast Guard regulations are intended to align with international maritime security standards and exempt non-U.S. vessels that have a valid ISSC attesting to the
vessel's compliance with SOLAS security requirements and the ISPS Code from the requirement to have a U.S. Coast Guard approved vessel security plan. We have implemented the various security measures
addressed by the MTSA, SOLAS and the ISPS Code and have ensured that our vessels are compliant with all applicable security requirements. Our fleet, as part of our continuous improvement cycle, is
reviewing vessels SSPs and is maintaining best Management practices during passage through security risk areas.

Seasonality

Our containerships operate under multi-year charters and therefore are not subject to the effect of seasonal variations in
demand.

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Properties

We have no freehold or leasehold interest in any real property. We occupy office space at 14 Akti Kondyli,
185 45 Piraeus, Greece that is owned by our manager, Danaos Shipping, and which is provided to us as part of the services we receive under our management agreement.

Item 4A.    Unresolved Staff Comments

Not applicable.

Item 5.    Operating and Financial Review and Prospects

The following discussion of our financial condition and results of operations should be read in conjunction
with the financial statements and the notes to those statements included elsewhere in this annual report. This discussion includes forward-looking statements that involve risks and uncertainties. As a
result of many factors, such as those set forth under "Item 3. Key InformationRisk Factors" and elsewhere in this annual report, our actual results may differ materially from those
anticipated in these forward-looking statements.

Overview

Our business is to provide international seaborne transportation services by operating vessels in the containership sector of the
shipping industry. Our fleet as of May 31, 2010 consisted of 45 containerships and, as described below, as of that date we had newbuilding contracts for an additional 20 containerships, which
we currently expect will be delivered to us by the end of June 2012.

We
deploy our containerships on multi-year, fixed-rate charters to take advantage of the stable cash flows and high utilization rates typically associated with
multi-year charters. As of May 31, 2010, 44 containerships in our fleet were employed on time charters and one vessel was employed on a bareboat charter. Our containerships are
generally deployed on multi-year charters to large liner companies that charter-in vessels on a multi-year basis as part of their business strategies.

The
average number of containerships in our fleet for the years ended December 31, 2009, 2008 and 2007 was 40.5, 37.7 and 32.3, respectively.

As
of May 31, 2010, we had newbuilding contracts with Hyundai Samho, Hanjin, Shanghai Jiangnan and Sungdong for an additional 20 containerships with an aggregate capacity of
169,050 TEUs, with scheduled deliveries to us from June 2010 through June 2012.

After
delivery of these 20 containerships, our containership fleet of 65 vessels will have a total capacity of 362,679 TEUs, assuming we do not acquire any additional vessels or dispose
of any of our vessels.

As
of May 31, 2010, our diverse group of customers in the containership sector included China Shipping, CMA-CGM, Hanjin, HMM, Maersk, MISC, TCC, Yang Ming, UASC, Wan
Hai and Zim Integrated Shipping Services. In addition, we have arranged time charters ranging from 10 to 12 years with CMA-CGM, Yang Ming and two other accredited charterers for 19
of our contracted vessels and an 18-year bareboat charter with an accredited charterer for our other contracted vessel.

As
described below, we have reached an agreement in principle with our existing lenders to restructure our existing indebtedness, other than under our KEXIM and KEXIM-Fortis credit
facilities, and agreements in principle for new financing arrangements. These agreements are non-binding and remain subject to the approval of the credit committees of the respective
lenders, negotiation and execution of definitive documentation and other conditions, including our receipt of requisite proceeds from equity issuances.

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Purchase Options

We sold theAPL England,theAPL
Scotland, theAPL Hollandand theAPL Belgiumfor $44.5 million each to
their charterer, APL-NOL, upon its exercise of the purchase options in the charters. We delivered these vessels to APL-NOL on March 7, 2007, on June 22, 2007, on
August 3, 2007 and on January 15, 2008, respectively. The option exercise prices were below the fair market value of each of these vessels at the time the options were exercised.

The
charters with respect to theCMA CGM Moliere, theCMA CGM Musset, the CMA CGM Nerval, theHN S4004and theHN S4005include an
option for the charterer, CMA-CGM, to purchase the vessels eight years after the commencement of the respective charters, which, based on the respective expected delivery dates for these
vessels, are expected to fall in September 2017, March 2018, May 2018, June 2018 and July 2018, respectively, each for $78.0 million. In each case, the option
to purchase the vessel must be exercised 15 months prior to the acquisition dates described in the preceding sentence. The $78.0 million option prices reflect an estimate of the fair
market value of the vessels at the time we would be required to sell the vessels upon exercise of the options. If CMA-CGM were to exercise these options with respect to any or all of these
vessels, the expected size of our combined containership fleet would be reduced, and as a result our anticipated level of revenues would be reduced.

Our Manager

Our operations are managed by Danaos Shipping, our manager, under the supervision of our officers and our board of directors. We
believe our manager has built a strong reputation in the shipping community by providing customized, high-quality operational services in an efficient manner for both new and older
vessels. We have a management agreement pursuant to which our manager and its affiliates provide us and our subsidiaries with technical, administrative and certain commercial services. The initial
term of this agreement expired on December 31, 2008, and the agreement now renews each year for a one-year term for the next 12 years unless we give a one-year
notice of non-renewal (subject to certain termination rights described in "Item 7. Major Shareholders and Related Party Transactions"). Our manager is ultimately owned by Danaos
Investments Limited as Trustee of the 883 Trust, which we refer to as the Coustas Family Trust. Danaos Investments Limited, a corporation wholly-owned by our chief executive officer, is the protector
(which is analogous to a trustee) of the Coustas Family Trust, of which Dr. Coustas and other members of the Coustas family are beneficiaries. The Coustas Family Trust is also our largest
stockholder.

Factors Affecting Our Results of Operations

Our financial results are largely driven by the following factors:



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Our operating revenues are driven primarily by the number of vessels in our fleet, the number of operating days during which our
vessels generate revenues and the amount of daily charter hire that our vessels earn under time charters which, in turn, are affected by a number of factors, including our decisions relating to vessel
acquisitions and dispositions, the amount of time that we spend positioning our vessels, the amount of time that our vessels spend in drydock undergoing repairs, maintenance and upgrade work, the age,
condition and specifications of our vessels and the levels of supply and demand in the containership charter market. Vessels operating in the spot market generate revenues that are less predictable
but can allow increased profit margins to be captured during periods of improving charter rates.

Revenues
from multi-year period charters comprised substantially all of our revenues from continuing operations for the years ended December 31, 2009, 2008 and 2007.
The revenues relating to our multi-year charters will be affected by the delivery dates of our contracted containerships and any additional vessels subject to multi-year
charters we may acquire in the future, as well as by the disposition of any such vessel in our fleet. Our revenues will also be affected if any of our charterers cancel a multi-year
charter. Each of our current vessel construction agreements has a contracted

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delivery
date. A change in the date of delivery of a vessel will impact our revenues and results of operations. In 2009, we arranged, in cooperation with our charterers, delays in the delivery of most
of our contracted vessels for periods ranging between two months and one year and, in the first half of 2010, agreed to cancel three of our newbuilding vessels, which delays and cancellations are
factored into the below table. See "Item 3. Key InformationRisk FactorsDelays in deliveries of our additional 20 newbuilding containerships could harm our operating
results". Our multi-year charter agreements have been contracted in varying rate environments and expire at different times. Generally, we do not employ our vessels under voyage charters
under which a shipowner, in return for a fixed sum, agrees to transport cargo from one or more loading ports to one or more destinations and assumes all vessel operating costs and voyage expenses.

Our
expected revenues as of December 31, 2009, based on contracted charter rates, from our charter arrangements for our containerships having initial terms of more than
12 months and giving effect to the cancellation of three newbuildings and their associated charters in the first half of 2010, is shown in the table below. Although these expected revenues are
based on contracted charter rates, any contract is subject to performance by the counterparties. If the charterers are unable or unwilling to make charter payments to us, our results of operations and
financial condition will be materially adversely affected. See "Item 3. Key InformationRisk FactorsWe are dependent on the ability and willingness of our charterers to
honor their commitments to us for all of our revenues and the failure of our counterparties to meet their obligations under our time charter agreements, or under our shipbuilding contracts, could
cause us to suffer losses or otherwise adversely affect our business." In addition, our ability to obtain financing for 11 of our newbuildings is dependent upon our ability to enter into definitive
agreements with existing lenders to restructure our existing indebtedness and provide additional financing for such newbuildings and other financing agreements for which we have reached agreements in
principle.

Contracted Revenue from Multi-Year Charters as of December 31, 2009(1)
(amounts in millions of U.S. dollars)

Number of Vessels(2)

2010

2011 - 2012

2013 - 2014

2015 - 2019

2020 - 2028

Total66.0(3)(4)

$
352.5

$
951.5

$
1,102.2

$
2,497.2
(5)
$
1,246.4
(5)
$
6,149.8


(1)Annual
revenue calculations are based on an assumed 364 revenue days per annum representing contracted fees, based on contracted charter rates from our
current charter agreements. Although these fees are based on contractual charter rates, any contract is subject to performance by the counter parties and us. Additionally, the fees above reflect an
estimate of off-hire days to perform periodic maintenance. If actual off-hire days are greater than estimated, these would decrease the level of revenues above.(2)Includes
four containerships we have taken delivery of in 2010, theCMA CGM Musset,the CMA CGM Nerval,theYM Mandateand theHanjin Buenos
Aires,and 20 newbuilding containerships, theHN S4004,the HN S4005,theHN N-215, the HN N-220, theHN N-221, the HN N-222,
theHN N-223, theHN Z00001, theHN Z00002, the HN Z00003, theHN Z00004, theHull 1022A,
theHull No. S-456, theHull No. S-457, the Hull No. S-458, theHull
No. S-459,the Hull No. S-460,theHull No. S-461, the Hull No. S-462and theHull No. S-463,expected to be delivered to
us in 2010, 2011 and 2012. The contracted revenue shown in the above table from these newbuildings for the specified periods is as follows: $59.2 million in 2010, $526.1 million in
2011-2012, $719.6 million in 2013-2014, $1,767.4 million in 2015-2019, $1,183.5 million in 2020-2028. The table also includes one
over 30-year old containership, theMSC Eagle, and revenue from its charter prior to its sale, which was sold by us on January 22,
2010. The table excludes three 6,500 TEU newbuilding vessels, theHN N-216, the HN N-217and theHN N-218,we agreed to cancel in the first half
of 2010. See "Item 3. Key InformationRisk FactorsAlthough we have arranged charters for each of our 20


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newbuilding
containerships, we are dependent on the ability and willingness of the charterers to honor their commitments under such charters as it would be difficult to redeploy such vessels at
equivalent rates, or at all, if charter markets continue to experience weakness" and "Item 3. Key InformationRisk FactorsObtaining financing for 11 of our newbuildings
is dependent upon our ability to enter into definitive agreements with existing lenders to restructure our existing indebtedness and provide additional financing." (3)Includes
theCMA CGM Molieredelivered to us in 2009, theCMA CGM
Mussetand theCMA CGM Nervaldelivered to us during the first half of 2010, as well as two more vessels under construction, the HN S4004and theHN S4005, which are each subject to options for the charterer to purchase
the vessels eight years after the commencement of the respective charters, which, based on the respective expected delivery dates for these vessels, are expected to fall in September 2017,
March 2018, May 2018, June 2018 and July 2018, respectively, each for $78.0 million. The $78.0 million option prices reflect an estimate of the fair market
value of the vessels at the time we would be required to sell the vessels upon exercise of the options.(4)As
of May 31, 2010, we have agreed to cancel three 6,500 TEU newbuilding vessels and their associated charters and accordingly the table above
excludes revenues of $553.1 million under such chartering arrangements.(5)An
aggregate of $242.5 million ($48.5 million with respect to each newbuilding vessel) of revenue with respect to the CMA CGM Moliere,theCMA CGM Musset, theCMA CGM Nerval,
theHN S4004and theHN S4005, following September 2017, March 2018,
May 2018, June 2018 and July 2018, respectively, is included in the table because we cannot predict the likelihood of these options being exercised.


We
generally do not charter our containerships in the spot market. Vessels operating in the spot market generate revenues that are less predictable than vessels on period charters,
although this chartering strategy can enable vessel-owners to capture increased profit margins during periods of improvements in charter rates. Deployment of vessels in the spot market creates
exposure, however, to the risk of declining charter rates, as spot rates may be higher or lower than those rates at which a vessel could have been time chartered for a longer period.



Voyage expenses include port and canal charges, bunker (fuel) expenses, address commissions and brokerage commissions. Under
multi-year time charters and bareboat charters, such as those on which we charter our containerships and under short-term time charters, the charterers bear the voyage expenses
other than brokerage and address commissions. As such, voyage expenses represent a relatively small portion of our vessels' overall expenses.

From
time to time, in accordance with industry practice and in respect of the charters for our containerships we pay brokerage commissions of approximately 0.5% to 2.5% of the total
daily charter hire rate under the charters to unaffiliated ship brokers associated with the charterers, depending on
the number of brokers involved with arranging the charter. We also pay address commissions of up to 2.5% to some of our charterers. Our manager will also receive a commission of 0.5% based on the
contract price of any vessel bought or sold by it on our behalf, excluding newbuilding contracts. Since July 1, 2005, we have paid and will pay commissions to our manager of 0.75% on all
freight, charter hire, ballast bonus and demurrage for each vessel.



Vessel operating expenses include crew wages and related costs, the cost of insurance, expenses for repairs and maintenance, the cost
of spares and consumable stores, tonnage taxes and other

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miscellaneous
expenses. Aggregate expenses increase as the size of our fleet increases. Factors beyond our control, some of which may affect the shipping industry in general, including, for instance,
developments relating to market premiums for insurance, may also cause these expenses to increase. In addition, a substantial portion of our vessel operating expenses, primarily crew wages, are in
currencies other than the U.S. dollar and any gain or loss we incur as a result of the U.S. dollar fluctuating in value against these currencies is included in vessel operating expenses. We fund our
manager monthly in advance with amounts it will need to pay our fleet's vessel operating expenses.

Under
multi-year time charters, such as those on which we charter the 45 containerships in our current fleet, and under short-term time charters, we pay for
vessel operating expenses. Under bareboat charters, such as the one on which we chartered one of our containerships in our fleet that was sold in the second quarter of 2008, our charterers bear most
vessel operating expenses, including the costs of crewing, insurance, surveys, drydockings, maintenance and repairs.



We follow the deferral method of accounting for special survey and drydocking costs, whereby actual costs incurred are deferred and are
amortized on a straight-line basis over the period until the next scheduled survey, which is two and a half years. If special survey or drydocking is performed prior to the scheduled date,
the remaining unamortized balances are immediately written off. We capitalize the total costs associated with drydockings, special surveys and intermediate surveys and amortize these costs on a
straight-line basis over 30 months.

Major
overhaul performed during drydocking is differentiated from normal operating repairs and maintenance. The related costs for inspections that are required for the vessel's
certification under the requirement of the classification society are categorized as drydock costs. A vessel at drydock performs certain assessments, inspections, refurbishments, replacements and
alterations within a safe non-operational environment that allows for complete shutdown of certain machinery and equipment, navigational, ballast (keep the vessel upright) and safety
systems, access to major underwater components of vessel (rudder, propeller, thrusters and anti-corrosion systems), which are not accessible during vessel operations, as well as hull
treatment and paints. In addition, specialized equipment is required to access and manoeuvre vessel components, which are not available at regular ports.

Repairs
and maintenance normally performed during operation either at port or at sea have the purpose of minimizing wear and tear to the vessel caused by a particular incident or normal
wear and tear. Repair and maintenance costs are expensed as incurred.



We depreciate our containerships on a straight-line basis over their estimated remaining useful economic lives. As of
January 1, 2005, we determined the estimated useful lives of our containerships to be 30 years. Depreciation is based on cost, less the estimated scrap value of $300 per ton for all
vessels.



From July 1, 2005 to December 31, 2008, we paid our manager a fee of $500 per day for providing commercial, chartering
and administrative services, a management fee of $250 per vessel per day for its technical management of vessels on bareboat charter and $500 per vessel per day for the remaining vessels in our fleet,
pro rated for the calendar days we own each vessel. We also paid our manager a flat fee of $400,000 per newbuilding vessel for the on-premises supervision of our newbuilding contracts by
selected engineers and others of its staff.

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On
February 12, 2009, we signed an addendum to the management contract adjusting the management fees, effective January 1, 2009, to a fee of $575 per day for providing
commercial, chartering and administrative services, a fee of $290 per vessel per day for vessels on bareboat charter and $575 per vessel per day for the remaining vessels in the fleet and a flat fee
of $725,000 per newbuilding vessel for the supervision of newbuilding contracts. All commissions to the manager remained unchanged.

On
February 8, 2010, we signed an addendum to the management contract adjusting the management fees, effective January 1, 2010, to a fee of $675 per day for commercial,
chartering and administrative services, a fee of $340 per vessel per day for vessels on bareboat charter and $675 per vessel per day for vessels on time charter. All commissions to the manager
remained unchanged. The incremental amount of the management fees shall be paid, as accrued until the date of payment, at any time before the end of 2010.

Furthermore,
general and administrative expenses include audit fees, legal fees, board remuneration, executive officers compensation, directors & officers insurance, stock
exchange fees and other general and administrative expenses.



We incur interest expense on outstanding indebtedness under our credit facilities which we include in interest expenses. We also
incurred financing costs in connection with establishing those facilities, which is included in our finance costs. Further, we earn interest on cash deposits in interest bearing accounts and on
interest bearing securities, which we include in interest income. We will incur additional interest expense in the future on our outstanding borrowings and under future borrowings.



The interest rate swap arrangements we enter into are generally based on the forecasted delivery of vessels we contract for and our
debt financing needs associated therewith. A portion of these interest rate swap agreements were effective as hedges as of December 31, 2009 under the applicable accounting guidance, while a
portion were not. If our estimates of the forecasted timing of the incurrence of such debt change, as they did as of December 31, 2009, due to the deferred delivery dates for certain of our
newbuildings which we agreed in 2009 and as we expect will occur as a result of the modified variable amortization of our existing credit facilities under the terms of the bank agreement restructuring
such facilities for which we reached an agreement in principle, as well as the cancellation of three newbuildings in 2010 resulting in reduced forecasted debt needs, our interest rate
swap arrangements may cease to be effective as hedges. Any such resulting hedge ineffectiveness of our swap arrangements is recognized in our consolidated statement of income and may result in the
reclassification of unrealized losses or gains from "Accumulated other comprehensive (gain) loss" in our consolidated balance sheet to our consolidated statement of income. As of December 31,
2009, the total notional amount of our interest rate swap arrangements was $4.1 billion.



While our focus is on the containership sector, in 2002 we made an investment in the drybulk sector, and from 2002 to 2007, we owned a
number of drybulk carriers, chartering them to our customers (the "Drybulk Business") in the spot market, including through pooling arrangements. In the first quarter of 2007, we sold five of the six
drybulk vessels in our fleet to an unaffiliated purchaser, for an aggregate of $118.0 million and sold the last drybulk carrier, theMV
Achilleas, in our fleet to the same purchaser for $25.5 million, when its charter subsequently expired in 2007. As detailed in Note 25, Discontinued Operations,
in the notes to our consolidated financial statements included elsewhere herein, we have determined that our Drybulk Business should be reflected as discontinued

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operations.
We have included the financial results of the Drybulk Business in discontinued operations for all periods presented and discussed under "Results of Operations." In the future,
we may reinvest in the drybulk sector with the acquisition of more recently built drybulk carriers with configurations better suited to employment in the current drybulk charter market, subject to
market conditions, including the availability of suitable vessels to purchase.

Results of Operations

The following discussion solely reflects results from continuing operations (containerships), unless otherwise noted. As described in
Note 25, Discontinued Operations, in the Notes to our Consolidated Financial Statements certain reclassifications have been made to reflect the discontinued operations treatment of our Drybulk
Business.



During the year ended December 31, 2009, we had an average of 40.5 containerships as compared to 37.7 containerships for 2008.
During 2009, we took delivery of four vessels, theZim Monacoon January 2, 2009, theZim Dalianon March 31, 2009, theZim Luandaon June 26, 2009 and theCMA CGM Moliereon
September 28, 2009.



Operating revenue increased 6.9%, or $20.6 million, to $319.5 million in the year ended December 31, 2009, from
$298.9 million in the year ended December 31, 2008. The increase was primarily attributed to the addition to our fleet of four vessels, which collectively contributed revenues of
$22.0 million during the year ended December 31, 2009.

In
addition, three 2,200 TEU containerships, theHyundai Progress, theHyundai Highwayand
theHyundai Bridge, as well as, three 4,253 TEU containerships, theZim Rio Grande, the Zim Sao Paoloand
theZIM Kingston, which were added to our fleet on February 11, 2008,
March 18, 2008 and March 20, 2008, July 4, 2008, September 22, 2008 and November 3, 2008, contributed incremental revenues of $20.4 million during the year
ended December 31, 2009 compared to 2008. These additional contributions to revenue were offset in part by our sale of five vessels in 2008, which vessels, as a result, contributed
$12.4 million during the year ended December 31, 2008 compared to no revenues in the year ended December 31, 2009. The balance of $9.4 million is mainly attributable to
revenue lost due to off-hire days, as well as re-chartering of two of our vessels at reduced charter rates.



Voyage expenses decreased 2.7%, or $0.2 million, to $7.3 million in the year ended December 31, 2009, from
$7.5 million for the year ended December 31, 2008. Voyage expenses mainly relate to address and brokerage commissions, as well as commissions on gross revenue paid to our manager.



Vessel operating expenses increased 3.5%, or $3.1 million, to $92.3 million in the year ended December 31, 2009,
from $89.2 million in the year ended December 31, 2008. The increase was due to the increase in the average number of our vessels in our fleet during the year ended December 31,
2009 compared to the year ended December 31, 2008.

This
overall increase was offset in part by the lower average daily operating cost per vessel of $6,241 for the year ended December 31, 2009 compared to $6,574 for the year ended
December 31, 2008.

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Amortization of deferred dry-docking and special survey costs increased 13.7%, or $1.0 million, to
$8.3 million in the year ended December 31, 2009, from $7.3 million in the year ended December 31, 2008. The increase reflects higher drydocking costs incurred, which were
subject to amortization during the year ended December 31, 2009 compared to 2008.



Depreciation expense increased 19.4%, or $9.9 million, to $60.9 million in the year ended December 31, 2009, from
$51.0 million in the year ended December 31, 2008. The increase in depreciation expense was due to the increased average number of vessels in our fleet during the year ended
December 31, 2009, compared to 2008.



General and administrative expenses increased 25.0%, or $2.9 million, to $14.5 million in the year ended
December 31, 2009, from $11.6 million in the year ended December 31, 2008. The increase was mainly a result of increased fees of $1.7 million paid to our Manager in the
year ended December 31, 2009 compared to the year ended December 31, 2008 due to the increase in the average number of our vessels in our fleet and an increase of the fees paid to our
manager since January 1, 2009. Furthermore, various other general and administrative expenses related to legal and other advisory fees increased by $1.2 million in the year ended
December 31, 2009 compared to 2008.



For the year ended December 31, 2009, we did not sell any vessels. For the year ended December 31, 2008, the gain on sale
of vessels reflects the sale of theAPL Belgium, theWinterberg, theMaersk
Constantia, theAsia Expressand theSederbergfor $44.5 million,
$11.2 million, $15.8 million, $10.2 million and $4.9 million, respectively, resulting in an aggregate net gain of $16.9 million during the year ended
December 31, 2008.



Interest expense increased 4.3%, or $1.5 million, to $36.2 million in the year ended December 31, 2009, from
$34.7 million in the year ended December 31, 2008. The change in interest expense was due to the increase in our average debt by $511.2 million to $2,226.6 million in the
year ended December 31, 2009 from $1,715.4 million in the year ended December 31, 2008, as well as, the increased margins over LIBOR on which our indebtedness is subject to,
following our agreements with our lenders to waive certain covenant breaches as of December 31, 2008 and June 30, 2009, partially offset by decrease of LIBOR payable under our credit
facilities in the year ended December 31, 2009 compared to the year ended December 31, 2008. The financing of our extensive newbuilding program resulted in interest capitalization,
rather than such interest being recognized as an expense, of $33.1 million for the year ended December 31, 2009 compared to $36.9 million of capitalized interest for the year
ended December 31, 2008.

Interest
income decreased by $4.1 million, to $2.4 million in the year ended December 31, 2009, from $6.5 million in the year ended December 31, 2008.
The decrease in interest income is mainly attributed to lower interest rates on which our cash balances were subject to, partially offset by higher average
bank deposits during the year ended December 31, 2009 compared to the year ended December 31, 2008.

Other
finance cost, net, increased by $0.3 million, to $2.3 million in the year ended December 31, 2009, from $2.0 million in the year ended
December 31, 2008.

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Other income/(expenses), net, decreased by $0.8 million, to an expense of $0.3 million in the year ended
December 31, 2009, from an expense of $1.1 million in the year ended December 31, 2008. The decrease in other income/(expenses) is mainly attributed to a non-recurring
expense of $1.6 million recorded in the year ended December 31, 2008 in relation to insurance for the years of 2006 and 2007, reflecting the contribution of our insurer to the exposure
of the International Group of Protection & Indemnity Clubs.



Loss on fair value of derivatives, increased by $63.0 million, to a loss of $63.6 million in the year ended
December 31, 2009, from a loss of $0.6 million in the year ended December 31, 2008. The increase is attributable to non-cash losses due to changes in the fair value of
interest rate swaps of $29.5 million recorded in our consolidated statement of income in 2009, due to hedge accounting ineffectiveness, compared to $2.4 million gain in 2008, as well as
realized
losses on interest rate swap hedges of $34.1 million recorded in our consolidated statement of income during the year ended December 31, 2009, mainly attributed to reduced LIBOR payable
on our credit facilities against LIBOR fixed through our interest rate swaps, compared to a $3.0 million loss in the year ended December 31, 2008. In addition, realized losses on cash
flow hedges of $36.3 million and $11.6 million in the years ended December 31, 2009 and 2008, respectively, were deferred and recorded in "Accumulated Other Comprehensive Loss",
rather than such realized losses being recognized as an expense, and will be reclassified into earnings over the depreciable life of these vessels under construction, which are financed by loans for
which their interest rate has been hedged by our interest rate swap contracts.

During
2009, we entered into agreements with the shipyards to defer the delivery of certain newbuildings, resulting in a reassessment of the forecasted debt required to build these
vessels in relation to the timing of forecasted debt draw downs expected during the construction period of such vessels. The interest rate swaps entered by us in the past, which are accounted for as
cash flow hedges, were based on the originally forecasted delivery of vessels and the respective debt needs. As of December 31, 2009, we revised our estimates of the forecasted debt timing,
which resulted in hedge ineffectiveness of $(21.4) million recorded in the consolidated statement of income, reclassification of $(18.1) million of unrealized losses from "Accumulated other
comprehensive loss" in our consolidated balance sheet to the consolidated statement of income and unrealized gains of $8.2 in relation to fair value changes of interest rate swaps for the fourth
quarter of 2009, which were recorded in the consolidated statement of income due to the retrospective effectiveness testing failure of certain swaps. The total fair value change of the interest rate
swaps for the period January 1, 2009 to December 31, 2009, amounted to $155.3 million.



We had no net income/(loss) from discontinued operations in 2009 compared to a loss of $(1.8) million in the year ended
December 31, 2008, primarily reflecting an expense of $(1.5) million recorded during 2008 following an unfavorable outcome of a lawsuit regarding the operation of one of the dry bulk
vessels (sold in May 2007). As discussed in Note 25 to our Consolidated Financial Statements included elsewhere in this annual report, we have determined that our drybulk business should
be reflected as discontinued operations.



During the year ended December 31, 2008, we had an average of 37.7 containerships in our fleet. During the year ended
December 31, 2007, we had an average of 32.3 containerships in our fleet. We

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took
delivery of three 2,200 TEU containerships, on February 11, 2008, March 18, 2008 and March 20, 2008, and three 4,253 TEU containerships, on July 4, 2008,
September 22, 2008 and November 3, 2008. We also sold one 5,506 TEU containership on January 15, 2008 and four 3,101 TEU containerships, on January 25, 2008, May 20,
3008, October 26, 2008 and December 10, 2008, respectively.



Operating revenue increased 15.5%, or $40.1 million, to $298.9 million in the year ended December 31, 2008, from
$258.8 million in the year ended December 31, 2007. The increase was partly attributable to the addition to our fleet of six vessels, which collectively contributed revenues of
$22.0 million in 2008. In addition, two 4,300 TEU containerships, theYM Colomboand theYM
Singapore, which were added to our fleet on March 12, 2007 and October 9, 2007, five 2,200 TEU containerships, theHyundai
Vladivostok, theHyundai Advance, theHyundai Stride, the Hyundai Futureand theHyundai Sprinter, which were added to our fleet on July 23, 2007, on
August 20, 2007, on September 5, 2007, on October 2, 2007 and on October 15, 2007, respectively, and two 4,253 TEU containerships, theYM
Seattleand theYM Vancouver, which were added to our fleet on September 10, 2007 and November 27, 2007
respectively, contributed incremental revenues of $44.5 million in the year ended December 31, 2008 compared to the year ended December 31, 2007. These additional contributions to
revenue were offset in part by our sale of eight vessels in 2008 and 2007, which vessels, as a result, contributed $23.6 million less revenue in the year ended December 31, 2008 than in
the year ended December 31, 2007. We also had a further decrease in revenues of $2.8 million attributed to more off-hire days and re-chartering of certain vessels
at lower charter rates during the year ended December 31, 2008 compared to the year ended December 31, 2007.



Voyage expenses remained stable at $7.5 million in the year ended December 31, 2008 and December 31, 2007. Voyage
expenses mainly relate to commissions paid to our
manager on vessels acquired and sold in accordance with our management agreement and commissions on gross revenue, address and brokerage commissions.



Vessel operating expenses increased 35.8%, or $23.5 million, to $89.2 million in the year ended December 31, 2008,
from $65.7 million in the year ended December 31, 2007. The increase was mainly due to the increase in the average number of our vessels in our fleet under time charter during the year
ended December 31, 2008 compared to the year ended December 31, 2007.

Our
daily operating expenses per vessel increased by 4.0% in the year ended December 31, 2008 compared to the year ended December 31, 2007. The increase was mainly due to
higher crew wages and total repair and maintenance costs.



Amortization of deferred drydocking and special survey costs expense increased 19.7%, or $1.2 million, to $7.3 million in
the year ended December 31, 2008, from $6.1 million in the year ended December 31, 2007. The increase reflects higher dry-docking costs incurred, which were subject to
amortization during the year ended December 31, 2008 as compared to the same period of 2007.



Depreciation expense increased 25.6%, or $10.4 million, to $51.0 million in the year ended December 31, 2008, from
$40.6 million in the year ended December 31, 2007. The increase in

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depreciation
expense was due to the increased average number of vessels in our fleet during the year ended December 31, 2008 compared to the same period of 2007.



General and administrative expenses increased 16.0%, or $1.6 million, to $11.6 million in the year ended
December 31, 2008, from $10.0 million in the same period of 2007. The increase was principally a result of increased fees of $1.3 million paid to our Manager in the year ended
December 31, 2008 compared to the same period of 2007, attributed to the increase in the average number of our vessels in our fleet. Moreover, other administrative expenses were higher by
$0.3 million in the year ended December 31, 2008 compared with the year ended December 31, 2007.



Interest expense increased 54.9%, or $12.3 million, to $34.7 million in the year ended December 31, 2008, from
$22.4 million in the year ended December 31, 2007. The change in interest expense was due to the increase in our average debt by $882.8 million to $1,715.4 million in the
year ended December 31, 2008 from $832.6 million in the year ended December 31, 2007. Our extensive newbuilding program resulted in interest capitalization, rather than such
interest being recognized as an expense, of $36.9 million for the year ended December 31, 2008 as opposed to $22.9 million of capitalized interest for the year ended
December 31, 2007.

Interest
income increased 32.7%, or $1.6 million, to $6.5 million in the year ended December 31, 2008, from $4.9 million in the year ended December 31,
2007. The increase in interest income is mainly
attributed to higher average cash deposits, partially offset by lower interest rates, during the year ended December 31, 2008, as opposed to the year ended December 31, 2007.

Restricted
cash increased by $205.3 million, to $251.5 million as of December 31, 2008, from $46.2 million as of December 31, 2007. The restricted cash
is mainly attributed to cash borrowed under our revolving credit facilities designated to finance certain of our new buildings and is gradually utilized to fund progress payments of these new
buildings up to their deliveries through the third quarter of 2011.

Other
finance income (expenses), net, decreased by $0.8 million, to an expense of $2.0 million in the year ended December 31, 2008, from an expense of
$2.8 million in the year ended December 31, 2007. The change in other finance income (expenses), net, was mainly due to the first drawdown facility fees of $1.0 million expensed
in 2007 in relation to the agreements with HSH Nordbank and The Royal Bank of Scotland, our revolving credit facilities of up to $700 million each.



The gain on sale of vessels for the year ended December 31, 2008, reflects the sale of theAPL
Belgium, theWinterberg, theMaersk Constantia, theAsia
Expressand theSederbergfor $44.5 million, $11.2 million, $15.8 million, $10.2 million and
$4.9 million, respectively, resulting in an aggregate net gain of $16.9 million during the year ended December 31, 2008. The loss on sale of vessels for the year ended
December 31, 2007, reflects the sale of theAPL England,APL Scotlandand APL Hollandto APL, following
the exercise of the purchase options APL had for these vessels, for $44.5 million each, resulting in an aggregate
net loss of $(0.3) million during the year ended December 31, 2007.



Other income/(expenses), net, decreased by $15.7 million, to an expense of $(1.1) million for the year ended
December 31, 2008, from an income of $14.6 million in the year ended December 31, 2007. The decrease in other income/(expenses) is mainly attributed to a non-recurring
net gain of

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$15.9 million
related to restructuring of our leasing arrangements for theCSCL Europe, theMSC
Baltic, theBunga Raya Tiga(exMaersk Derby), theBunga
Raya Tujuh(exMaersk Deva), theCSCL Pusanand
theCSCL Le Havreand their subsequent restructuring entered into in 2007, as detailed in Note 12(a) in the notes to the consolidated financial
statements included in this annual report. In addition, during the fourth quarter of 2008, we recorded a non-recurring expense of $1.6 million in relation to insurance for the years
of 2006 and 2007, reflecting the contribution of our insurer to the exposure of the International Group of Protection & Indemnity Clubs.



(Loss)/gain on derivatives decreased by $0.8 million, to a $(0.6) million loss in the year ended December 31,
2008, from a $0.2 million gain in the year ended December 31, 2007. The decrease is attributable to unrealized gains on derivatives of $2.4 million recorded in our consolidated
statement of income in 2008 compared to $(0.2) million loss in 2007. Furthermore, we realized losses on derivatives of $3.0 million recorded in our consolidated statement of income
during the year ended December 31, 2008 compared to $0.4 million gain in 2007.



Net income from discontinued operations decreased by $94.0 million, to a loss of $(1.8) million in the year ended
December 31, 2008 from a gain of $92.2 million in the year ended December 31, 2007, primarily reflecting an expense of $(1.5) million recorded during 2008 following an
unfavorable outcome of a lawsuit regarding the operation of one of the dry bulk vessels (sold in May 2007) compared to a gain of $88.6 million on the sale of six dry bulk carriers during
2007. As discussed in Note 25 to our Consolidated Financial Statements included elsewhere in this annual report, we have determined that our Drybulk Business should be reflected as discontinued
operations.

Liquidity and Capital Resources

Historically, our principal source of funds has been equity provided by our stockholders, operating cash flows, including from vessel
sales, and long-term bank borrowings, as well as proceeds from our initial public offering in October 2006. Our principal uses of funds have been capital expenditures to establish,
grow and maintain our fleet, comply with international shipping standards, environmental laws and regulations and to fund working capital requirements.

Our
primary short-term liquidity needs are to fund our vessel operating expenses, loan amortization and interest payments. Our medium-term liquidity needs
primarily relate to the purchase of the 20 additional containerships as of May 31, 2010, for which we have contracted and for which we had scheduled future payments through the scheduled
delivery of the final contracted vessel during 2012 aggregating $1.5 billion as of May 31, 2010. Our long-term liquidity needs primarily relate to debt repayment. We
anticipate that our primary sources of funds will be cash from our existing credit facilities and additional credit facilities and financing arrangements for which we have reached agreements in
principle as described below, cash from operations and equity and equity-linked financings. Specifically, we have reached agreements in principle for an agreement (the "Bank Agreement") in respect of
our existing financing arrangements, other than our KEXIM and KEXIM-Fortis credit facilities, and for new credit facilities from certain of our current lenders aggregating approximately
$426.4 million. In addition, we have reached an agreement in principle with Citibank and the Export-Import Bank of China for a new $203.4 million credit facility (the
"Citi-CEXIM Credit Facility"), in respect of which the China Export & Credit Insurance Corporation (or Sinosure) would cover certain risks, as well as guarantee our obligations in
certain circumstances, and an agreement in principle with Hyundai Samho Shipyard (the "Hyundai Samho Vendor Financing") to finance 15%, or $190.0 million, of the aggregate purchase price of
eight of our newbuilding containerships. Our receipt of net proceeds from equity issuances of $200 million, including an investment by our Chief Executive

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Officer,
will be among the conditions to the Bank Agreement and new credit facilities. Any such equity offering is subject to, among other things, market conditions and there is no assurance that such
an offering will be completed. We believe that, so long as we are able to enter into and comply with the terms of the definitive agreements for these arrangements, including raising the requisite net
proceeds from equity issuances and the satisfaction of the other conditions thereto, we will be able to fund the remaining installment payments under our newbuilding contracts and satisfy our other
liquidity needs.

In
the first half of 2010, we agreed to cancel newbuilding contracts for three 6,500 TEU containerships which were scheduled to be delivered to us in 2012, in return for the shipyard
retaining $64.35 million in previously paid deposits for such vessels and to write-off other capitalized expenses of $7.16 million, and we entered into agreements to cancel
the charters for such vessels. As of May 31, 2010, after giving effect to these cancellations, the remaining capital expenditure installments for our 20 newbuilding vessels were approximately
$480.6 million for the remainder of 2010, $540.7 million for 2011 and $448.6 million for 2012. As of May 31, 2010, we expect to fund the remaining installment payments of
approximately $1.5 billion with undrawn borrowing capacity under our existing credit facilities of $334.9 million and with borrrowings under the new credit facilities with certain of our
existing lenders, under the Citi-CEXIM Credit Facility, under the Hyundai Samho Vendor Financing for which we have reached agreements in principle, as well as up to $200 million of
net proceeds from equity issuances and cash generated from our operations.

Under
our existing multi-year charters as of December 31, 2009, giving effect to the cancellation of the charters for the three newbuildings we agreed to cancel in the
first half of 2010, we had contracted revenues of $352.5 million for 2010, $427.2 million for 2011 and, thereafter, approximately $5.4 billion, of which amounts
$59.2 million, $198.8 million and $4.0 billion, respectively, are associated with charters from our contracted newbuildings, some of which do not yet have committed financing
arrangements in place. However, as described above, we have reached agreements in principle
to partially finance such newbuildings, along with amounts we expect to fund with up to $200 million of net proceeds from equity issuances and with cash generated from our operations. Although
these expected revenues are based on contracted charter rates, we are dependent on our charterers' ability and willingness to meet their obligations under these charters. See "Risk Factors."

On
April 14, 2010, we entered into a supplemental agreement with the Royal Bank of Scotland for the release of the balance of our restricted cash with the bank of
$169.9 million and the immediate application of such amount as a prepayment of our $700.0 million senior revolving credit facility. The amount prepaid pursuant to this agreement is
available for re-drawing as progress payments to shipyards for specific newbuildings. As of May 31, 2010, we had approximately $334.9 million undrawn under our credit
facilities, $21.2 million of restricted deposits designated for newbuilding progress payments, and cash and cash equivalents of $120.3 million. Our board of directors has determined to
suspend the payment of further cash dividends as a result of market conditions in the international shipping industry and in particular the sharp decline in charter rates and vessel values in the
containership sector. In addition, during the period covered by the waiver agreements entered with our lenders in relation to certain covenant breaches, we are not permitted to make dividend payments
without the consent of our lenders and under the terms of our Bank Agreement will generally not be permitted to pay dividends.

As
of December 31, 2009, we were newly in breach of the corporate leverage ratio in our $60 million credit facility with HSH Nordbank and the market value adjusted net
worth covenant under our Deutsche Bank credit facility, for which, in each case for which we have not obtained waivers and in the view of one of our lenders we have not been in compliance with the
conditions to the effectiveness of their waiver agreement. In addition, although we were in compliance with the covenants in our credit facility with the KEXIM, and have obtained waivers of
non-compliance under our other credit facilities as described below, under the cross default provisions of our credit facilities the lenders could require immediate repayment of the
related outstanding debt. Our lenders have

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agreed
to waive and not to exercise their right to demand repayment of any amounts due under the respective loan agreements resulting from the December 31, 2008 and June 30, 2009
covenant breaches under certain of our loan agreements, and any future breaches of such covenants, through October 1, 2010. Under the terms of the Bank Agreement for which we have reached an
agreement in principle, the lenders under our existing credit facilities, other than under our KEXIM and our KEXIM-Fortis credit facilities, would waive any existing covenant breaches or defaults
under our existing credit facilities, and agree to amend the covenants under the existing credit facilities in accordance with the terms of the Bank Agreement. For additional information regarding our
existing credit facilities, including the financial covenants contained therein and the waivers and amendments we have obtained in respect of our non-compliance therewith, see
Note 13 to our consolidated financial statements included elsewhere in this annual report.

If
we are not able to obtain waivers to these existing breaches, which due to the cross default provisions in our loan agreements result in breaches under our other credit facilities, by
entering into definitive documentation for the Bank Agreement or otherwise and to reach separate agreements in respect of our KEXIM and KEXIM-Fortis credit facilities, our lenders could accelerate our
outstanding
indebtedness and foreclose upon the vessels in our fleet, adversely affecting our ability to conduct our business. In addition, if the current low charter rates in the containership market and low
vessel values continue or decrease further, or our charterers were to fail to meet their payment obligations, our ability to comply with the covenants in our loan agreements, including the modified
covenants that would be applicable to our existing credit facilities under the terms of the Bank Agreement and the covenants in the other new financing arrangements for which we have reached
agreements in principle, may be adversely affected and we may not be able to draw down the full amount of certain of our credit facilities, which contain restrictions on the amount of cash that can be
advanced to us under our credit facilities based on the market value of the vessel or vessels in respect of which the advance is being made.

Due
to the uncertainties relating to our ability to comply with the financial covenants in our existing credit facilities and procure additional bank, equity or other financing to repay
outstanding indebtedness under such credit facilities should our lenders accelerate such indebtedness due to such covenant non-compliance, our independent registered public accounting firm
has issued its audit opinion with an explanatory paragraph in connection with our financial statements included elsewhere in this annual report that expresses substantial doubt about our ability to
continue as a going concern. Our financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and
classification of liabilities that may result from the outcome of our inability to continue as a going concern. There is, however, a material uncertainty related to events or conditions which raise
substantial doubt on our ability to continue as a going concern and, therefore, we may be unable to realize our assets and discharge our liabilities in the normal course of business. Our management
has taken a number of steps to mitigate these concerns by seeking to conserve cash resources, reduce capital expenditure obligations and procure additional financing. Our management believes that such
steps, which include seeking to restructure our existing debt, obtain additional bank financing, obtain vendor financing from shipyards, reduce our newbuilding capital expenditure obligations and
raise equity capital as described above, will be sufficient to provide us with the ability to continue our operations, however, there can be no assurance that we will be able to negotiate and enter
into definitive documentation for these arrangements for which we have reached agreements in principle or be able to satisfy the conditions thereto, including raising the requisite net proceeds from
equity issuances.

We
sold theMSC Eagle, on January 22, 2010, a 1,704 TEU containership, for net proceeds of $4.1 million. We sold the APL Belgium, a 5,506 TEU
containership, to APL-NOL for $44.3 million net proceeds pursuant to the terms of purchase option contained in the
charter of the vessel on January 15, 2008. In addition, we sold theWinterberg, on January 25, 2008, theMaersk
Constantia, on May 20, 2008,

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theAsia Express,on October 26, 2008, and theSederberg, on December 10, 2008, for net
proceeds of $10.2 million, $14.6 million, $9.4 million and $4.5 million, respectively.

Cash Flows

The discussion of our cash flows below includes cash flows attributable to both our containership fleet and the discontinued operations
of the drybulk carriers for all periods discussed, which is consistent with the presentation of our consolidated statement of cash flows included elsewhere in this annual report.

Working
capital is equal to current assets minus current liabilities, including all of our outstanding debt which has been classified as current as of December 31, 2009. Our
working capital deficit was $2.2 billion as of December 31, 2009 compared to working capital surplus of $128.0 million as of December 31, 2008. The deficit in 2009 is due
to the reclassification of long-term debt to current liabilities.

We
have reached agreements in principle for a Bank Agreement restructuring our existing financing arrangements, other than our KEXIM and KEXIM-Fortis credit facilities, and for new
credit facilities and other financing arrangements. In addition, our receipt of net proceeds from equity issuances of $200 million, including an investment by our Chief Executive Officer, will
be a condition to the Bank Agreement. Any such equity offering is subject to, among other things, prevailing market conditions and there is no assurance that such an offering will be completed. We
believe that, so long as we are able to enter into and comply with the terms of the definitive agreements for these arrangements, including raising the requisite net proceeds from equity issuances, we
will be able to fund the remaining installment payments under our newbuilding contracts and satisfy our other liquidity needs.



Net cash flows provided by operating activities decreased 31.2%, or $42.3 million, to $93.2 million in the year ended
December 31, 2009 compared to $135.5 million in the year ended December 31, 2008. The decrease was primarily the result of increased interest cost of $57.2 million
(including realized losses on our interest rate swaps), which was partially offset by a favorable change in the working capital position and increased cash from operations of $11.5 million, as
well as reduced payments for drydocking of $3.4 million in the years ended December 31, 2009 compared to the years ended December 31, 2008.

Net
cash flows provided by operating activities decreased 14.4%, or $22.8 million, to $135.5 million in the year ended December 31, 2008 compared to
$158.3 million in the year ended December 31, 2007. The decrease was primarily the result of a one-time cash benefit of $15.4 million relating to lease arrangements
that was recognized in 2007, as described in Note 12, Lease Arrangements, in the notes to our consolidated financial statements included elsewhere herein and the increase in the
payments for drydockings in 2008 as opposed to 2007, partially offset by increased cash received from operations in 2008 compared to 2007 due to the increase in the average number of vessels in our
fleet.



Net cash flows used in investing activities decreased 27.2%, or $139.1 million, to $372.9 million in the year ended
December 31, 2009 compared to $512.0 million in the year ended December 31, 2008. The difference between the years ended December 31, 2009 and 2008 primarily reflects the
funds used to acquire secondhand vessels of $93.4 million in 2008 as opposed to nil in 2009, cash received of $16.9 million on March 7, 2008 in respect of certain lease
arrangements as further described in Note 12, Lease Arrangements, in the notes to our consolidated financial statements included elsewhere herein that partially offset the cash used to acquire
vessels, installment payments for newbuildings, as

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well
as interest capitalized and other related capital expenditures of $374.9 million in 2009 as opposed to $518.5 million during the year ended December 31, 2008 and proceeds
from sale of vessels of $83.0 million in 2008 as opposed to $2.3 million of advances received in 2009 in relation to the sale ofMSC Eaglein January 2010.

Net
cash flows used in investing activities decreased 25.5%, or $175.6 million, to $512.0 million in the year ended December 31, 2008 compared to
$687.6 million in the year ended December 31, 2007. The difference between the years ended December 31, 2008 and 2007 primarily reflects the funds used to acquire secondhand
vessels of $93.4 million in 2008 as opposed to $266.6 million in 2007, cash received of $16.9 million on March 7, 2008 in respect of certain lease arrangements (refer to
Note 12, Lease Arrangements, in the notes to our consolidated financial statements included elsewhere herein) that partially offset the cash used to acquire vessels, installment payments for
newbuildings of $518.5 million in 2008 as opposed to $696.8 million during the year ended December 31, 2007 and proceeds from sale of vessels of $83.0 million in 2008 as
opposed to $275.8 million in 2007.



Net cash flows provided by financing activities decreased 35.2%, or $152.6 million, to $281.1 million in the year ended
December 31, 2009 compared to $433.7 million in the year ended December 31, 2008. The decrease in 2009 is primarily due to the net proceeds from long-term debt of
$234.8 million during the year ended December 31, 2009 as opposed to $745.1 million in the year ended December 31, 2008, and dividend payments of $101.5 million
during the
year ended December 31, 2008 as opposed to nil dividends during the year ended December 31, 2009 and $53.1 million decrease of restricted cash in 2009 as opposed to
$205.4 million increase in 2008.

Net
cash flows provided by financing activities decreased 21.1%, or $116.0 million, to $433.7 million in the year ended December 31, 2008 compared to
$549.7 million in the year ended December 31, 2007. The decrease in 2008 is primarily due to the net proceeds from long-term debt of $745.1 million during the year
ended December 31, 2008 as opposed to $691.7 million in the year ended December 31, 2007, dividend payments of $101.5 million during the year ended December 31, 2008
as opposed to $97.4 million during the year ended December 31, 2007 and $205.4 million of restricted cash in 2008 as opposed to $43.7 million in 2007.

Bank Agreement

We have reached an agreement in principle, subject to approval of the credit committees of the respective lenders, for an agreement,
which we refer to as the Bank Agreement, that would supersede, amend and supplement the terms of each of our existing credit facilities (other than our credit facilities with KEXIM and KEXIM-Fortis
which would not be covered thereby), and provide for, among other things, revised amortization schedules, interest rates, financial covenants, events of defaults, guarantee and security packages.
Subject to the terms of the Bank Agreement and the intercreditor agreement (the "Intercreditor Agreement"), which we would enter into with each of the lenders participating under the Bank Agreement to
govern the relationships between the lenders thereunder, under the New Credit Facilities (as described and defined below) and under the Hyundai Samho Vendor Financing described below, the lenders
participating thereunder would continue to provide our existing credit facilities (which are described below under "Credit Facilities") and would waive any existing covenant breaches or
defaults under our existing credit facilities and agree to amend the covenants under the existing credit facilities in accordance with the terms of the Bank Agreement. The Bank Agreement will be
conditioned upon our entry into definitive documentation for such agreement and for the New Credit Facilities, the Intercreditor Agreement, the Hyundai Samho Vendor Financing and documentation
evidencing our cancellation of three newbuilding agreements in 2010, as well as a commitment letter for the Citi-CEXIM Credit Facility and our receipt of $200 million in net
proceeds from equity issuances, including an investment by our Chief Executive Officer. This agreement in

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principle
also remains subject to approval by the credit committees of the respective lenders. Accordingly, the terms described are not final and remain subject to change.

We
will also agree to use all reasonable efforts to ensure that as soon as reasonably practicable the principal terms, including the financial covenants, of the KEXIM and KEXIM-Fortis
credit facilities are amended to be consistent with the terms of the Bank Agreement such that defaults would not generally
be triggered under the KEXIM and KEXIM-Fortis credit facilities in circumstances that would not constitute a default under the Bank Agreement.



Under the terms of the Bank Agreement, borrowings under each of our existing credit facilities, other than the KEXIM and KEXIM-Fortis
credit facilities which are not covered by the Bank Agreement, would bear interest at an annual interest rate of LIBOR plus a margin of 1.85%. We would also be required to make a margin adjustment and
waiver adjustment payment such that each existing lender would receive interest payments at an average margin for the period from July 1, 2009 to the date of the Bank Agreement of 1.85% and
cumulative waiver fees during the period preceding such date of 0.2% of its existing financing commitments. To the extent an existing lender has received interest and fees below such levels, we will
make payments equal to such shortfall upon entering into the Bank Agreement. We would also be required to pay an amendment fee equal to 0.50% of the outstanding commitments under each existing
financing arrangement, with 60% of such amount due upon entry into the Bank Agreement and the balance due on December 31, 2014. All reasonable expenses of the lenders, including the fees and
expenses of their financial and legal advisors, will be payable by us.



Under the terms of the Bank Agreement, we would not be required to repay any outstanding principal amounts under our existing credit
facilities, other than the KEXIM and KEXIM-Fortis credit facilities which are not covered by the Bank Agreement, until December 31, 2012; thereafter until the earlier of (x) the date on
which our consolidated net leverage is below 6:1 and (y) December 31, 2014 we would be required to make quarterly principal payments equal to (i) 75% of the forecasted Free Cash Flow for
such quarter and (ii) 70% of the remaining Free Cash Flow over such amount (17.5% of the forecasted Free Cash Flow); and thereafter through maturity, which would be December 31, 2018 for
each covered credit facility, we would be required to make quarterly principal payments equal to (i) 75% of the forecasted Free Cash Flow for such quarter and (ii) 58% of the remaining
Free Cash Flow over such amount (14.5% of the forecasted Free Cash Flow). In addition, any additional amounts of cash and cash equivalents in excess of the greater of (1) $50 million of
accumulated unrestricted cash and cash equivalents and (2) 2% of our consolidated debt would be applied first to the prepayment of the new credit facilities for which we have reached agreements
in principle and after the new credit facilities are repaid, to the existing credit facilities. Under the Bank Agreement, "Free Cash Flow" with respect to each credit facility covered thereby would be
equal to revenue from the vessels collateralizing such facility, less the sum of (a) interest expense under such credit facility, (b) pro-rata portion of payments under our
interest rate swap arrangements, (c) interest expense and scheduled amortization under the Hyundai Samho Vendor Financing and (d) per vessel operating expenses and pro rata per vessel
allocation of general and administrative expenses (which are not permitted to exceed the relevant budget by more than 20%), plus (e) the pro-rata share of operating cash flow of any
Applicable Second Lien Vessel
(which will mean, with respect to an existing facility, a vessel with respect to which the participating lenders under such facility have a second lien security interest and the first lien credit
facility has been repaid in full).

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Under
the terms of the Bank Agreement, we would continue to be required to make any mandatory prepayments provided for under our existing credit facilities and would be required to make
additional prepayments as follows:



which
amounts would first be applied to repayment of amounts outstanding under the new credit facilities and then to the existing credit facilities. Any equity proceeds retained by us and not used
within 12 months for certain specified purposes would be applied for prepayment of the new credit facilities and then to the existing credit facilities. We would also be required to prepay the
portion of a credit facility attributable to a particular vessel upon the sale or total loss of such vessel; the termination or loss of an existing charter for a vessel, unless replaced within a
specified period by a similar charter acceptable to the lenders; or the termination of a newbuilding contract. Our respective lenders under our existing credit facilities covered by the Bank Agreement
and the New Credit Facilities may, at their option, require us to repay in full amounts outstanding under such respective credit facilities, upon a "Change of Control" of our company, which for these
purposes is defined as (i) Dr. Coustas ceasing to be our Chief Executive Officer, (ii) our common stock ceasing to be listed on the NYSE (or Nasdaq or other recognized stock
exchange), (iii) a change in the ultimate beneficial ownership of the capital stock of any of our subsidiaries or ultimate control of the voting rights of those shares,
(iv) Dr. Coustas and members of his family ceasing to collectively own over one-third of the voting interest in our outstanding capital stock or (v) any other person
or group controlling more than 20% of the voting power of our outstanding capital stock.



Under the Bank Agreement, the financial covenants under each of our existing credit facilities, other than the KEXIM and KEXIM-Fortis
credit facilities which are not covered thereby, would reset to require us to:



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For
the purpose of these covenants, the market value of our vessels would be calculated, except as otherwise indicated above, on a charter-inclusive basis (using the present value of the
"bareboat-equivalent" time charter income from such charter) so long as a vessel's charter has a remaining duration at the time of valuation of more than 12 months plus the present value of the
residual value of the relevant vessel (generally equivalent to the charter free value of such a vessel at the age such vessel would be at the expiration of the existing time charter). The market value
for newbuilding vessels, all of which currently have multi-year charters, would equal the lesser of such amount and the newbuilding vessel's book value.

Under
the terms of the Bank Agreement, the existing credit facilities would also contain customary events of default, including those relating to cross-defaults to other indebtedness,
defaults under our swap agreements, non-compliance with security documents, material adverse changes to our business, a Change of Control as described above, a change in our Chief
Executive Officer, our common stock ceasing to be listed on the NYSE (or Nasdaq or another recognized stock exchange), a change in, or breach of the management agreement by, the manager for the
vessels securing the respective credit facilities and cancellation or amendment of the time charters (unless replaced with a similar time charter with a charterer acceptable to the lenders) for the
vessels securing the respective credit facilities.

Under
the terms of the Bank Agreement, we generally would not be permitted to incur any further financial indebtedness or provide any new liens or security interests, unless such
security is provided for the equal and ratable benefit of each of the lenders party to the Intercreditor Agreement, other than security arising by operation of law or in connection with the
refinancing of outstanding indebtedness, with the consent, not to be unreasonably withheld, of all lenders with a lien on the security pledged against such outstanding indebtedness. In addition, we
would not be permitted to pay cash dividends or repurchase shares of our capital stock unless (i) our consolidated net leverage is below 6:1 for two consecutive quarters and (ii) the
ratio of the aggregate market value of our vessels to our outstanding indebtedness exceeds 125% for four consecutive quarters and provided that an event of default has not
occurred and we are not, and after giving effect to the payment of the dividend, in breach of any covenant.



Each of our existing credit facilities and swap arrangements, to the extent applicable, would continue to be secured by their existing
collateral on the same basis, and receive, to the extent not previously provided, pledges of the shares of our subsidiaries owning the vessels collateralizing the applicable facilities,
cross-guarantees from each of each subsidiary owning the vessels collateralizing

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such
facilities, assignment of the refund guarantees in relation to any newbuildings funded by such facilities and other customary shipping industry collateral.

New Credit Facilities (HSH Nordbank, RBS, Fortis Club facility, Club Facility and Citi-Eurobank)

We have also reached agreements in principle, subject to approval of the credit committees of the respective lenders, for the following
new credit facilities: (i) a $125.0 million Tranche B credit facility provided by HSH, which would be secured by Hull No. S459, Hull No. S462 and Hull
No. S4004 and customary shipping industry collateral related thereto (the $125.0 million amount includes remaining available principal commitment of $25.0 million under the Aegean
Baltic BankHSH NordbankPiraeus Bank credit facility as of December 31, 2009, which will be transferred to the new facility upon finalization of the agreement);
(ii) a $100.0 million Tranche B credit facility provided by RBS, which would be secured by Hull No. S458 and Hull No. S461 and customary shipping industry collateral
related thereto; (iii) a $37.5 million credit facility with Fortis and lenders participating under the Bank Agreement which would be secured by Hull No. S463 and customary
shipping industry collateral related thereto; (iv) a $83.9 million new club credit facility to be provided, on a pro rata basis, by the other existing lenders participating under the
Bank Agreement, which would be secured by Hull No. S456 and Hull No. S457 and customary shipping industry collateral related thereto; and (v) a $80 million credit facility
with Citibank and Eurobank, which would be secured by Hull No. S460 and customary shipping industry collateral related thereto ((i)-(v), collectively, the "New Credit Facilities").
The New Credit Facilities will be conditioned upon us entering into definitive documentation therefore and for the Bank Agreement, the Intercreditor Agreement, the Hyundai Samho Vendor Financing
Agreement, the newbuilding cancellation agreement with Hanjin, the Citi-CEXIM Credit Facility (and the satisfaction of all conditions thereto) and our receipt of $200 million in net
proceeds from equity issuances, including an investment by our Chief Executive Officer. An additional condition to each of the New
Credit Facilities is our entry into amendments, or long-term waivers satisfactory to the lenders, in respect of the KEXIM and KEXIM-Fortis credit facilities such that defaults would not
generally be triggered under the KEXIM and KEXIM-Fortis credit facilities in circumstances that would not constitute a default under the New Credit Facilities or the Bank Agreement. These agreements
in principle also remain subject to approval by the credit committees of the respective lenders. Accordingly, the terms described are not final and remain subject to change.



Borrowings under each of the New Credit Facilities, which would be available for drawdown until the later of September 30, 2012
and delivery of our last contracted newbuilding vessel collateralizing such facility (so long as such delivery is no more than 240 days after the currently scheduled delivery date), would bear
interest at an annual interest rate of LIBOR plus a margin of 1.85%, subject, on and after January 1, 2013, to increases in the applicable margin to: (i) 2.50% if the outstanding
indebtedness thereunder exceeds $276 million, (ii) 3.00% if the outstanding indebtedness thereunder exceeds $326 million and (iii) 3.50% if the outstanding indebtedness
thereunder exceeds $376 million. Upon entering into each of these credit facilities, we would be committed to pay an arrangement fee of 2.00% of the respective loan amount and a commitment fee
of 0.75% per annum payable quarterly in arrears on the committed but undrawn portion of the respective loan. In addition we would be required to pay an aggregate exit fee of $15.0 million
payable on the common maturity date of the New Credit Facilities of December 31, 2018 or such earlier date when all of the New Credit Facilities are repaid in full. We would be required to pay
an additional $10.0 million if we do not repay at least $100.0 million in the aggregate under the New Credit Facilities by December 31, 2014. All reasonable expenses of the
lenders, including the fees and expenses of their financial and legal advisors, would be payable by us.

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We would not be required to repay any outstanding principal amounts under the New Credit Facilities until December 31, 2012;
thereafter until the earlier of (x) the date on which our consolidated net leverage is below 6:1 and (y) December 31, 2014 we would be required to make quarterly principal payments equal
to (i) 75% of the forecasted Free Cash Flow for such quarter and (ii) 70% of the remaining Free Cash Flow over such amount (17.5% of the forecasted Free Cash Flow); and thereafter
through maturity, which would be December 31, 2018 for each New Credit Facility, we would be required to make quarterly principal payments equal to (i) 75% of the forecasted
Free Cash Flow for such quarter and (ii) 58% of the remaining Free Cash Flow over such amount (14.5% of the forecasted Free Cash Flow). Free Cash Flow would, for these purposes, generally be
defined as described above under "Bank AgreementPrincipal Payments." The New Credit Facilities would contain substantially the same mandatory prepayment provisions as
applicable to our existing credit facilities under the Bank Agreement described above.



The New Credit Facilities would contain substantially the same financial and operating covenants, events of default, dividend
restrictions and other terms and conditions as applicable to our existing credit facilities as revised under the Bank Agreement described above.



The collateral described above relating to the newbuildings being financed by the respective credit facilities, will be (other than in
respect of Hull No. S4004 which will at all times be first priority) third priority until repayment of the related Hyundai Samho Vendor financing (described below) for such vessels, at which
time the collateral will become second priority. In addition lenders who participate in the new $83.9 million club credit facility described above would receive a second lien on Hull No. S456andHull No. S457as additional security in respect of the existing credit
facilities we have with such lenders. The lenders under the other new credit facilities would also receive a second lien on the respective vessels securing such new credit facilities as additional
collateral in respect of our existing credit facilities and interest rate swap arrangements with such lenders and Citibank and Eurobank would also receive a second lien onHull
No. S460as collateral in respect of our currently unsecured interest rate arrangements with them.

In
addition, HSH Nordbank would also receive a second lien on theBunya Raya Tujuh, theCSCL
Europeand theCSCL Pusanas collateral in respect of all borrowings from HSH Nordbank, and RBS would also receive a second lien
on theBunya Raya Tiga, theMSC Balticand theCSCL Le
Havreas collateral in respect of all borrrowings from RBS.

Our
obligations under the New Credit Facilities would be guaranteed by our subsidiaries owning the vessels collateralizing the respective credit facilities. Our Manager would also
provide an undertaking to continue to provide us with management services and to subordinate its rights to the rights of our lenders, the security trustee and applicable hedge counterparties.



We have agreed to issue to the lenders under our New Credit Facilities warrants to purchase an aggregate of 15 million shares of
our common stock for an exercise price of $7.00 per share. The warrants would expire on December 31, 2018.

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New Citi-CEXIM Credit Facility

We have reached an agreement in principle with Citibank, N.A. and the Export-Import Bank of China ("CEXIM") for a senior secured credit
facility (the "Citi-CEXIM Credit Facility") of up to $203.4 million, in three tranches each in an amount equal to the lesser of $67.8 million and 60.0% of the contract price
for the newbuilding vessels,Hull No. Z00002,Hull No. Z00003and Hull No. Z00004, securing
such tranche. We expect that an aggregate of $101.7 million, or $33.9 million per tranche, would be
available for pre-delivery financing and the remaining $101.7 million, or $33.9 million per tranche, would be available for post-delivery financing of these
vessels. CEXIM is expected to provide the majority of the loan amount and a syndicate of lenders for which Citibank would act as agent is expected to provide the remainder of the loan. The China
Export & Credit Insurance Corporation, or Sinosure, is expected to cover most political and commercial risks associated with each tranche of the credit facility. This credit facility will be
conditioned upon, among other things, negotiation and execution of definitive documentation and remains subject to formal approval. Accordingly, the terms described are not final and remain subject to
change.

Borrowings
under the Citi-CEXIM Credit Facility are expected to bear interest at an annual interest rate of LIBOR plus a margin payable semi-annually in arrears.
Upon entering into the credit facility, we expect to be committed to pay an arrangement fee and a
commitment fee, as well as a flat fee to Sinosure for its participation. We expect to be required to repay principal amounts drawn under each tranche of the Citi-CEXIM Credit Facility in
consecutive semi-annual installments over a ten-year period commencing after the delivery of the respective newbuilding being financed by such amount through the final maturity
date of the respective tranches and repay the respective tranche in full upon the loss of the respective newbuilding. We expect the Citi-CEXIM Credit Facility to require us to comply with
certain financial and operating covenants and contain customary events of default. The Citi-CEXIM Credit Facility would be secured by customary pre-delivery and
post-delivery shipping industry collateral.

Hyundai Samho Vendor Financing

We have reached an agreement in principle with Hyundai Samho Heavy Industries ("Hyundai Samho") for a financing facility of
$190.0 million in respect of eight of our newbuilding containerships being built by Hyundai Samho, Hull Nos.S456, S457, S458, S459, S460, S461,
S462andS463, in the form of delayed payment of a portion of the final installment for each such newbuilding. This facility
will be conditioned upon, among other things, negotiation and execution of definitive documentation, the time charters for such newbuildings remaining in place and the absence of defaults under our
credit facilities secured by such newbuildings. Accordingly, the terms described are not final and remain subject to change.

Borrowings
under this facility are expected to bear interest at a fixed interest rate. We expect to be required to repay principal amounts under this financing facility in seven
consecutive semi-annual installments commencing one and a half years, in the case of three of the newbuilding vessels being financed, and one year, in the case of the other five
newbuilding vessels, after the delivery of the respective newbuilding being financed. We expect this financing facility will require us to comply with certain covenants and contain customary events of
default, including those relating to cross-defaults. This financing facility is expected to be secured by second priority collateral related to the newbuilding vessels being financed.

Credit Facilities

We, as guarantor, and certain of our subsidiaries, as borrowers, have entered into a number of credit facilities in connection with
financing the acquisition of certain vessels in our fleet, which are described in Note 13 to our consolidated financial statements included in this annual report. We also

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have
entered into guarantee facility agreements, with HSH Nordbank and the Royal Bank of Scotland, which are described in Note 19 to our consolidated financial statements included in this
annual report. As described above in "Bank Agreement," under the Bank Agreement for which we have reached an agreement in principle, these existing credit facilities would continue to be
made available by the respective lenders but (other than with respect to our KEXIM and KEXIM-Fortis credit facilities which are not covered by the Bank Agreement) with revised amortization schedules,
interest rates, financial covenants, events of default and other terms. In addition, while the vessels currently securing these credit facilities would continue to collateralize such facilities, we
would provide additional collateral under certain of these credit facilities and provide first priority liens over certain currently unencumbered newbuildings and second or third priority liens over
certain vessels currently securing existing facilities as collateral for our new credit facilities. The following summarizes certain terms of our existing credit facilities, as well as the new credit
facilities for which we have reached agreements in principle:

Lender

Remaining
Available
Principal
Amount
(in millions)(1)

Outstanding
Principal
Amount
(in millions)(1)

Collateral Vessels(5)Existing Credit FacilitiesThe Royal Bank of Scotland(3)(*)

$
37.5

$
652.6

Mortgages for existing vessels and refund guarantees for newbuildings relating to theHyundai Progress,theHyundai Highway,theHyundai Bridge, theHyundai Federal(exAPL Confidence),theZim Monaco,theHanjin Buenos Aires,theHN N-221,theHN N-222,theHN S-4005theHN H1022A, theHN N-218(cancelled as of May 31, 2010), theHN S-458, theHN S-459, theHN S-460and theHN S-461Aegean Baltic BankHSH NordbankPiraeus Bank(4)(2)(*)

$
25.0

$
675.0

CMA CGM Elbe, theCMA CGM Kalamata, theCMA CGM Komodo, theCMA CGM Passiflore, theMOL Affinity(exHyundai Commodore), theHyundai Duke, theCMA CGM Vanille,theMarathonas(exMaersk
Marathon), theMaersk Messologi, theMaersk Mytilini, theYM Yantian, theAl Rayyan(exNorasia Hamburg), theYM Milano, theCMA CGM Lotus, theHyundai Vladivostok, theHyundai Advance, theHyundai Stride,theHyundai
Future,theHyundai Sprinter, Hanjin Montreal and MSC Eagleand assigned refund guarantees related to pre-delivery installments for theHN Z00001, theHN Z00002, theHN Z00003and theHN Z00004Emporiki Bank of Greece S.A.

$
31.1

$
125.7

CMA CGM MoliereandCMA CGM MussetDeutsche Bank

$


$
180.0

Zim Rio Grande,theZim Sao PaoloandZim KingstonCredit Suisse

$
100.0

$
121.1

Zim Luanda,CMA CGM NervalandYM Mandate


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Lender

Remaining
Available
Principal
Amount
(in millions)(1)

Outstanding
Principal
Amount
(in millions)(1)

Collateral Vessels(5)Existing Credit FacilitiesFortis BankLloyds TSBNational Bank of Greece

$


$
253.2

YM Colombo,YM Seattle,YM
VancouverandYM SingaporeDeutsche SchiffsbankCredit SuisseEmporiki Bank

$
194.9

$
103.6

ZIM Dalianand assignment of refund guarantees and newbuilding contracts relating to theHN N-220,theHN N-223,theHN N-215and theHN Z0001HSH Nordbank

$


$
37.0

Bunga Raya Tujuh(exMaersk Deva)and theBunga Raya Tiga(exMaersk Derby)KEXIM

$


$
70.4

CSCL Europeand theCSCL America(exMSC Baltic)KEXIM-Fortis

$


$
113.1

CSCL Pusanand theCSCL Le HavreNew Credit Facilities For Which We Have Reached Agreements In Principle**HSH Nordbank(***)

$
125.0

$


HN S459, HN S462andHN S4004RBS

$
100.0

$


HN S458andHN S461Fortis Club Facility

$
37.5

$


HN S463Club Facility

$
83.9

$


HNS456andHN S457Citi-Eurobank

$
80.0

$


HN S460Citi-CEXIM

$
203.4

$


Hull No. Z00002, Hull No. Z00003andHull
No. Z00004Hyundai Samho Vendor

$
190.0

$


Second priority liens onHulls No. S456, S457, S458, S459, S460, S461, S462andS463.


*Revolving
credit facility.**As
of June 18, 2010, we have not yet obtained formal approvals from the respective credit committees of the banks.***Includes
remaining available principal commitment of $25.0 million under the Aegean Baltic BankHSH NordbankPiraeus Bank
credit facility as of December 31, 2009, which will be transferred to the new facility upon finalization of the agreement.(1)As
of December 31, 2009.(2)As
of July 10, 2009, we agreed to amend the facility by adding additional collateral as follows: (a) newbuilding vessel HN S-4004to be provided as first priority security under the facility,
 (b) second priority mortgages on the Bunga Raya Tujuh(exMaersk Deva) and theBunga Raya Tiga(ex Maersk Derby) financed by HSH Nordbank AG and Dresdner Bank and (c) second priority mortgages on theCSCL
Europeand theCSCL America(exMSC Baltic) financed by KEXIM credit facility and the CSCL
Pusan(exHN 1559) and theCSCL Le Havre(ex HN 1561) financed by our
KEXIM-Fortis credit facility.(3)Pursuant
to the Bank Agreement for which we have reached an agreement in principle, this credit facility would also be secured by a second priority lien on
theBunga Raya Tiga, theMSC Baltic and the CSCL Le Havre.


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(4)Pursuant
to the Bank Agreement for which we have reached an agreement in principle, this credit facility would also be secured by a second priority lien on
theBunga Raya Tujuh, theCSCL Europe and the CSCL Pusan.(5)Pursuant
to the Bank Agreement for which we have reached an agreement in principle, our existing credit facilities with banks participating as lenders under
the new credit facilities for which we have reached agreements in principle would also be collateralized by second or third priority liens on the vessels that would be subject to first priority liens
under the new credit facilities with such lenders.


Outstanding indebtedness under our each of our existing credit facilities, other than our KEXIM and KEXIM-Fortis credit facilities, bears interest
at a rate of LIBOR plus an applicable margin. The weighted average interest rate margin over LIBOR in respect of our existing credit facilities was 2.17% and 0.67% for the year ended
December 31, 2009 and 2008, respectively. As described above, the interest rate, amortization profile and certain other terms of each of our existing credit facilities would be adjusted to
provide for consistent terms under each facility pursuant to the terms of the Bank Agreement, other than with respect to our KEXIM and KEXIM-Fortis credit facilities which will not
be covered by the Bank Agreement. Our KEXIM credit facility, under which outstanding indebtedness bears interest at a fixed rate of 5.0125%, and our KEXIM-Fortis credit facility, under which
$98.5 million of the outstanding indebtedness, as of May 31, 2010, bears interest at a fixed rate of 5.02% and $9.0 million of the outstanding indebtedness, as of May 31,
2010, bears interest at a rate of LIBOR plus a margin, have maturity dates of November 2016 and October 2018 (in respect of the fixed rate tranche) and January 2019 (in respect of
the floating rate tranche), respectively.

As
of December 31, 2009, we were in breach of the corporate leverage ratio in our $60 million credit facility with HSH Nordbank and the market value adjusted net worth
covenant under our $180 million Deutsche Bank credit facility, in each case for which we have not obtained waivers. In addition, although we were in compliance with the covenants in our credit
facility with KEXIM, and have obtained waivers expiring on October 1, 2010 of covenant breaches under our other credit facilities, under the cross default provisions of these respective credit
facilities the lenders could require immediate repayment of the outstanding indebtedness thereunder. As described above, we have reached an agreement in principle for a Bank Agreement with the lenders
under each of our existing credit facilities (other than our KEXIM and KEXIM-Fortis credit facilities), which contemplates that the lenders participating thereunder would continue to provide our
existing credit facilities and would waive any existing covenant breaches or defaults under our existing credit facilities and agree to amend the covenants under our existing credit facilities in
accordance with the terms of the Bank Agreement. Our existing credit facilities also contain other restrictions and customary events of default with respect to us and our applicable subsidiaries, such
as a cross-default with respect to financial indebtedness or any adverse change in the financial position or prospects of the vessel-owning subsidiaries or the Company that creates a material risk to
our ability to repay such indebtedness and, in some cases, certain changes in the charters for vessels mortgaged under the applicable credit facility.

For
additional details regarding our existing credit facilities, including the covenants and repayment terms contained therein, and the waiver agreements and amendments which we entered
into in 2009 in connection with our non-compliance with certain of these covenants, please see Note 13 to our consolidated financial statements included elsewhere in this annual
report.

Interest Rate Swaps

We have entered into interest rate swap agreements converting floating interest rate exposure into fixed interest rates in order to
hedge our exposure to fluctuations in prevailing market interest rates, as well as interest rate swap agreements converting the fixed rate we pay in connection with certain of our credit facilities
into floating interest rates in order to economically hedge the fair value of the fixed rate credit facilities against fluctuations in prevailing market interest rates. See "Item 11.
Quantitative and Qualitative Disclosures About Market Risk." As described above under "Factors Affecting our

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Results
of OperationsLoss/(gain) on fair value of derivatives," due to the contemplated changes to the amortization profiles and interest rates under our existing credit facilities
pursuant to the terms of the Bank Agreement our interest rate swap agreements are expected to have a greater degree of ineffectiveness as hedging instruments with the result that changes in the fair
value of such ineffective portion of such swap arrangements would be recognized in our statement of income.

Leasing Arrangements

On March 7, 2008, we exercised our right to have our wholly-owned subsidiaries replace a subsidiary of Lloyds Bank as direct
owners of theCSCL Europe, theCSCL America(exMSC
Baltic), theBunga Raya Tiga(exMaersk Derby), the Bunga Raya Tujuh(exMaersk Deva), theCSCL Pusan(exHN 1559)and theCSCL Le Havre(ex HN 1561) pursuant to the terms of the leasing arrangements, as
restructured on October 5, 2007, we had in place with such subsidiaries of
Lloyds Bank, Allco Finance Limited, a U.K.-based financing company, and Allco Finance UK Limited, a U.K.-based financing company. We had during the course of these leasing arrangements and continue to
have full operational control over these vessels and we consider each of these vessels to be an asset for our financial reporting purposes and each vessel is reflected as such in our consolidated
financial statements included elsewhere herein.

On
July 19, 2006, legislation was enacted in the United Kingdom that was expected to result in a claw-back or recapture of certain of the benefits that were expected
to be available to the counterparties to the original leasing transactions at their inception. Accordingly, the put option price that was part of the original leasing arrangements was expected to be
increased to compensate the counterparties for the loss of these benefits. In 2006 we recognized an expense of $12.8 million, which is the amount by which we expected the increase in the put
price to exceed the cash benefits we had expected to receive, and had expected to retain, from these transactions. The October 5, 2007 restructuring of these leasing arrangements eliminated
this put option and the $12.8 million expense recorded in 2006, was reversed and recognized in earnings in the fourth quarter of 2007.

Contractual Obligations

Our contractual obligations as of December 31, 2009 were:

Payments Due by PeriodTotal

Less than
1 year
(2010)

1 - 3 years
(2011 - 2012)

3 - 5 years
(2013 - 2014)

More than
5 years (After
January 1, 2015)in thousands of DollarsLong-term debt obligations(1)

$
2,331,678

$
79,021

$
287,756

$
525,617

$
1,439,284Interest on long-term debt obligations(1)


759,301


65,796


179,710


198,927


314,868Payments to our manager(2)


21,862


21,862








Newbuilding contracts(3)


1,908,802


701,700


1,207,102





Total

$
5,021,643

$
868,379

$
1,674,568

$
724,544

$
1,754,152


(1)We
expected to be obligated to make the principal and interest payments set forth in the above table with respect to our debt obligations existing as of
December 31, 2009. However, as described above under "Bank Agreement," "New Credit Facilities," "Citi-CEXIM Credit Facility" and
"Hyundai Samho Vendor Financing," we have reached agreements in principle to restructure our existing credit facilities (other than our KEXIM and KEXIM-Forts credit facilities), including
significant modifications to the scheduled principal payments and applicable interest rates thereunder, and for additional credit facilities and other financing arrangements. The interest


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payments
in this table give effect to the credit facility waivers and amendments entered into in 2009, as described in Note 13 to our consolidated financial statements included elsewhere in
this annual report, and are based on an assumed LIBOR rate of 0.53% in 2010, 1.75% in 2011 and up to a maximum of 5.5% thereafter, but, as noted above, do not give effect to the agreements in
principle to restructure our existing debt obligations and new financing agreements we have reached in 2010. In addition, as described in Note 1 to our consolidated financial statements, we
have classified all of our indebtedness as current as of December 31, 2009. (2)Under
our management agreement with Danaos Shipping, effective January 1, 2010, the management fees were adjusted to a fee of $675 per day for
commercial, chartering and administrative services, a fee of $340 per vessel per day for vessels on bareboat charter and $675 per vessel per day for vessels on time charter. As of December 31,
2009, we had a fleet of 42 containerships, all of which were on time charters. One vessel was sold in January 2010, decreasing the size of our fleet, and as of May 31, 2010, four
containerships have been delivered to us in 2010 (three of which have time charter arrangements and one of which has a bareboat charter arrangement) increasing the size of our fleet. In 2010, 2011 and
2012, our fleet is expected to increase by another seven containerships (six have time charter arrangements and one has a bareboat charter arrangement), eight containerships (all of which have time
charter arrangements) and five containerships (all of which have time charter arrangements), respectively. These management fees will be adjusted annually by agreement between us and our manager. In
addition, we also will pay our manager a commission of 0.75% of the gross freight, demurrage and charter hire collected from the employment of our ships, 0.5% of the contract price of any vessels
bought or sold on our behalf and, effective January 1, 2009, $725,000 per newbuilding vessel for the supervision of newbuilding contracts. We expect to be obligated to make the payments set
forth in the above table under our management agreement in the year ending December 31, 2010, based on our currently contracted revenue, as reflected above under "Factors Affecting
Our Results of OperationsOperating Revenues," and our currently anticipated vessel acquisitions and dispositions and chartering arrangements described in this annual report. No interest
is payable with respect to these obligations if paid on a timely basis, therefore no interest payments are included in these amounts.(3)Of
the $1.9 billion set forth in the above table, $36.6 million, $27.5 million, $59.4 million and $27.9 million represent
the balance of the purchase price for theCMA CGM Musset,theCMA CGM Nerval,the YM MandateandHanjin Buenos Aires, respectively, which remained unpaid as of December 31, 2009.
As of May 31, 2010, each of these vessels had been delivered to us, upon the delivery of which we paid the respective remaining aggregate purchase price. As described above under
"Liquidity and Capital Resources," in 2010 we have entered into an agreement to cancel the construction contracts for three newbuilding vessels under which aggregate remaining installment
payments of $232.7 million, as of December 31, 2009, are included in the above table ($14.9 million in 2010, $49.5 million in 2011 and $168.3 million in 2012).


Research and Development, Patents and Licenses

We incur from time to time expenditures relating to inspections for acquiring new vessels that meet our standards. Such expenditures
are insignificant and they are expensed as they are incurred.

Trend Information

Our results of operations depend primarily on the charter hire rates that we are able to realize. Charter hire rates paid for
containerships are primarily a function of the underlying balance between vessel supply and demand and respective charter-party details. The demand for containerships is determined by the underlying
demand for goods which are transported in containerships.

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During
the second half of 2008, containership freight rates dropped even more steeply than demand, and the result was a prolonged cash crunch across all liner companies throughout 2009,
which in certain cases raised solvency concerns. The year of 2009 was one of the most difficult in the history of container shipping and the liner business. Both demand and supply were severely
imbalanced. Consumer demand fell sharply immediately after the third quarter of 2008 and continued to retreat for most of 2009, and, at the same time, the supply of shipping tonnage kept increasing
with deliveries of vessels ordered in previous years. Importantly though, no containerships were added to the newbuilding order-book in 2009, which should help the balance of supply and
demand on a going forward basis. In 2009, a number of impacted liner companies successfully restructured their balance sheets. Consequently, charter owners like us which had long term fixed time
charters were able to avoid revenue volatility insofar they had little re-chartering exposure.

The
gradual stabilization of the world economy has resolved a large portion of the uncertainty, and while so far there has been limited job growth, cargo volumes across the globe have
started to show strong recovery trends also on the back of re-stocking. Approximately 10% of the world containership fleet was idle in 2009. However, through the first five months of 2010,
there has been an increasing demand for larger versus smaller vessels, which indicates that the major east-west routes are picking up and that the underlying demand is further
strengthening. Accordingly, the recent rise in container volumes has renewed demand for containership capacity and
the idle capacity of the worldwide fleet had decreased to 0.9 million TEU, or 6.8% of total fleet capacity, as of the end of April 2010. Liner companies have been able to significantly
increase box rates from their lows reached in 2009. The average daily charter rate of a 4,400 TEU containership, which represents the approximate average TEU capacity of our vessels, decreased from
$36,000 in May 2008 to $20,000 in April 2010, after reaching a low of $6,400 in December 2009.

As
of June 15, 2010, we did not have any containerships without charter arrangements and four containerships with charter arrangements expiring within the remainder 2010.

Off-Balance Sheet Arrangements

We do not have any other transactions, obligations or relationships that could be considered material off-balance sheet
arrangements.

Critical Accounting Policies

We prepare our consolidated financial statements in accordance with U.S. GAAP, which requires us to make estimates in the
application of our accounting policies based on our best assumptions, judgments and opinions. We base these estimates on the information currently available to us and on various other assumptions we
believe are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. Following is a discussion of the accounting policies that
involve a high degree of judgment and the methods of their application. For a further description of our material accounting policies, please refer to Note 2, Significant Accounting Policies,
to our consolidated financial statements included elsewhere in this annual report.



Vessels are stated at cost, which consists of the contract purchase price and any material expenses incurred upon acquisition
(improvements and delivery expenses), less accumulated depreciation. Subsequent expenditures for conversions and major improvements are also capitalized when they appreciably extend the life, increase
the earning capacity or improve the efficiency or safety of the vessels. Otherwise we charge these expenditures to expenses as incurred. Our financing costs incurred during the construction period of
the vessels are included in vessels' cost.

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The
vessels that we acquire in the secondhand market are treated as a business combination to the extent that such acquisitions include continuing operations and business
characteristics, such as management agreements, employees and customer base, otherwise we treat an acquisition of a secondhand vessel as a purchase of assets. Where we identify any intangible assets
or liabilities associated with the acquisition of a vessel purchased on the secondhand market, we record all identified tangible and intangible assets or liabilities at fair value. Fair value is
determined by reference to market data and the discounted amount of expected future cash flows. We have in the past acquired certain vessels in the secondhand market. These acquisitions were
considered to be acquisitions of assets. Certain vessels in our fleet that were purchased in the secondhand market were acquired with existing charters. We determined that the existing charter
contracts for these vessels, other than the charter for theMOL Confidence, did not have a material separate fair value and, therefore, we recorded such
vessels at their fair value, which equaled the consideration paid. In respect of the existing time charter for theMOL Confidence, we identified a
liability of $14.4 million upon its delivery to us in March 2006, which we recorded as unearned revenue in "Current LiabilitiesUnearned Revenue" and "Long-Term
LiabilitiesUnearned Revenue, net of current portion" on our consolidated balance sheet for the existing charter, which will be amortized over the remaining period of the time charter.

The
determination of the fair value of acquired assets and assumed liabilities requires us to make significant assumptions and estimates of many variables, including market charter
rates, expected future charter rates, future vessel operating expenses, the level of utilization of our vessels and our weighted average cost of capital. The use of different assumptions could result
in a material change in the fair value of these items, which could have a material impact on our financial position and results of operations.



We considered six of the containerships in our current fleet, which until March 7, 2008 were subject to leasing arrangements, to
be owned by us for financial reporting purposes since the vessels were under our operational control and we retained risks associated with ownership. After March 7, 2008, each of these vessels
has been directly owned by wholly-owned subsidiaries. Prior to March 7, 2008, we also reflected the indebtedness under which the vessels were mortgaged as a liability on our consolidated
balance sheet.



Our revenues and expenses are recognized on the accrual basis. Revenues are generated from bareboat hire and time charters. Bareboat
hire revenues are recorded over the term of the hire on a straight-line basis. Time charter revenues are recorded over the term of the charter as service is provided. Unearned revenue
includes revenue received in advance, and the amount recorded for an existing time charter acquired in conjunction with the purchase of theMOL
Confidence, as discussed under the heading "Purchase of Vessels" above.

We
have been a member of a pool arrangement with respect to two drybulk carriers, theAlexandra Iand the MV Achilleas, which we have sold and are
reflected as discontinued operations. The resulting net revenues of the pool are distributed as time charter
hire to each participant in accordance with the pool earning points of the individual vessels in the pool adjusted for any off-hire amount. Distributions of time charter hire to us were
made every two weeks according to the pooling arrangement. An amount not exceeding four weeks' time charter hire for each of our vessels in the pool was permitted to be withheld from us as working
capital for the pool. For the periods prior to the sale of these vessels, revenue related to the pooling arrangements was recognized only when all contingencies under the agreements are resolved.

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We follow the deferral method of accounting for special survey and drydocking costs. Actual costs incurred are deferred and are
amortized on a straight-line basis over the period until the next scheduled survey, which is two and a half years. If special survey or drydocking is performed prior to the scheduled date,
the remaining unamortized balances are immediately written-off.

Major
overhauls performed during drydocking is differentiated from normal operating repairs and maintenance. The related costs for inspections that are required for the vessel's
certification under the requirement of the classification society are categorized as drydock costs. A vessel at drydock performs certain assessments, inspections, refurbishments, replacements and
alterations within a safe non-operational environment that allows for complete shutdown of certain machinery and equipment, navigational, ballast (keep the vessel upright) and safety
systems, access to major underwater components of vessel (rudder, propeller, thrusters anti-corrosion systems), which are not accessible during vessel operations, as well as hull treatment
and paints. In addition, specialized equipment is required to access and manoeuvre vessel components, which are not available at regular ports.



Our vessels represent our most significant assets and we state them at our historical cost, which includes capitalized interest during
construction and other construction, design, supervision and predelivery costs, less accumulated depreciation. We depreciate our containerships, and for the periods prior to their sale, our drybulk
carriers, on a straight-line basis over their estimated remaining useful economic lives. Historically, we estimated this to be 25 years. As of January 1, 2005, we determined
that the estimated useful lives of our containerships are 30 years in line with the industry practice, whereas for drybulk carriers we continued to estimate their useful lives to be
25 years. Depreciation is based on cost less the estimated scrap value of the vessels. Should certain factors or circumstances cause us to revise our estimate of vessel service lives in the
future or of estimated scrap values, depreciation expense could be materially lower or higher. Such factors include, but are not limited to, the extent of cash flows generated from future charter
arrangements, changes in international shipping requirements, and other factors many of which are outside of our control.

We
have calculated the residual value of the vessels taking into consideration the 10 year average and the five year average of the scrap. We have applied uniformly the scrap
value of $300 per ton for all vessels. We believe that $300 per ton is a reasonable estimate of future scrap prices, taking into consideration the cyclicality of the nature of future demand for scrap
steel. Although we believes that the assumptions used to determine the scrap rate are reasonable and appropriate, such assumptions are highly subjective, in part, because of the cyclical nature of
future demand for scrap steel.



We evaluate the net carrying value of our vessels for possible impairment when events or conditions exist that cause us to question
whether the carrying value of the vessels will be recovered from future undiscounted net cash flows. An impairment charge would be recognized in a period if the fair value of the vessels was less than
their carrying value and the carrying value was not recoverable from future undiscounted cash flows. Considerations in making such an impairment evaluation would include comparison of current carrying
value to anticipated future operating cash flows, expectations with respect to future operations, and other relevant factors.

As
of December 31, 2009, we concluded that events occurred and circumstances had changed, which may trigger the existence of potential impairment of our long-lived
assets. These indicators included a significant decline in our stock price, deterioration in the spot market and the potential impact the current marketplace may have on our future operations. As a
result, we performed an impairment assessment of our long-lived assets by comparing the undiscounted projected net operating

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cash
flows for each vessel to their carrying value. Our strategy is to charter any vessels under multi-year, fixed rate period charters that range from one to 18 years for our
current and contracted vessels, providing us with contracted stable cash flows. The significant factors and assumptions we used in our undiscounted projected net operating cash flow analysis included
operating revenues, off-hire revenues, dry docking costs, operating expenses and management fees estimates. Revenue assumptions were based on contracted time charter rates up to the end of
life of the current contract of each vessel as well as the historical average time charter rates for the remaining life of the vessel after the completion of the current contract. In addition, we used
annual operating expenses escalation factor and estimations of scheduled and unscheduled off-hire revenues based on historical experience. All estimates used and assumptions made were in
accordance with our internal budgets and historical experience of the shipping industry.

Our
assessment concluded that step two of the impairment analysis was not required and no impairment of vessels existed as of December 31, 2009, as the undiscounted projected net
operating cash flows per vessel exceeded the carrying value of each vessel.

On
March 31, 2010, we expected to enter into an agreement with Hanjin Heavy Industries & Construction Co. Ltd. to cancel three 6,500 TEU newbuilding
containerships, theHN N-216, theHN N-217and the HN N-218, initially expected to be delivered in the
first half of 2012, and, accordingly, recorded impairment losses of $71.5 million
in the first quarter of 2010. On May 25, 2010, we entered into the cancellation agreement.

Recent Accounting Pronouncements

Fair Value

In September 2006, the FASB issued guidance which defines fair value, establishes a framework for measuring fair value and expands
disclosures about fair value measurements. In February 2008, the FASB deferred the effective date to January 1, 2009 for all nonfinancial assets and liabilities, except for those that are
recognized or disclosed at fair value on a recurring basis (that is, at least annually). The guidance was effective for us for the fiscal year beginning January 1, 2009 and did not have a
material effect on our consolidated financial statements.

In
April 2009, the FASB issued additional guidance for estimating fair value. The additional guidance addresses determining fair value when the volume and level of activity for an asset
or liability have significantly decreased and identifying transactions that are not orderly. This additional guidance is effective for us and did not have an impact on our consolidated financial
statements. Refer to Note 16, Financial Instruments, for the methods and significant assumptions used to estimate the fair value of financial instruments in our consolidated financial
statements.

In
January 2010, the FASB issued amended standards requiring additional fair value disclosures. The amended standards require disclosures of transfers in and out of Levels 1 and 2
of the fair value hierarchy, as well as requiring gross basis disclosures for purchases, sales, issuances and settlements within the Level 3 reconciliation. Additionally, the update clarifies
the requirement to determine the level of disaggregation for fair value measurement disclosures and to disclose valuation techniques and inputs used for both recurring and nonrecurring fair value
measurements in either Level 2 or Level 3. The new guidance became effective in the first quarter of 2010, except for the disclosures related to purchases, sales, issuance and
settlements, which will be effective for us beginning in the first quarter of 2012. The adoption of the new standards is not expected to have a significant impact on our consolidated financial
statements.

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Accounting for Business Combinations

We adopted new U.S. GAAP guidance related to business combinations beginning in the first quarter of 2009. Earlier adoption was
prohibited. The adoption of the new guidance did not have an immediate impact on our consolidated financial statements; however, it will impact the accounting for future business combinations. Under
the new guidance, an entity is required
to recognize the assets acquired, liabilities assumed, contractual contingencies and contingent consideration at their fair value on the acquisition date. It further requires that acquisition-related
costs be recognized separately from the acquisition and expensed as incurred; that restructuring costs generally be expensed in periods subsequent to the acquisition date; and that changes in
accounting for deferred tax asset valuation allowances and acquired income tax uncertainties after the measurement period be recognized as a component of provision for income taxes. In addition,
acquired-in process research and development is capitalized as an intangible asset and amortized over its estimated useful life.

Noncontrolling Interests in Consolidated Financial Statements

We adopted new U.S. GAAP guidance related to noncontrolling interests in consolidated financial statements beginning in our
first quarter of fiscal 2009. Earlier adoption was prohibited. The adoption of this guidance did not have an impact on our consolidated financial statements. The guidance revises new accounting and
reporting standards for the noncontrolling interest in a subsidiary and the accounting for the deconsolidation of a subsidiary. It also clarifies that changes in a parent's ownership interest in a
subsidiary that do not result in deconsolidation are equity transactions if the parent retains its controlling financial interest and requires that a parent recognize a gain or loss in net income when
a subsidiary is deconsolidated. The gain or loss is measured using the fair value of the noncontrolling equity investment on the deconsolidation date. The guidance also requires expanded disclosures
regarding the interest of the parent of the noncontrolling interest.

Determining the Primary Beneficiary of a Variable Interest Entity

In June 2009, the FASB issued new guidance concerning the determination of the primary beneficiary of a variable interest entity
("VIE"). This new guidance amends current U.S. GAAP by: requiring ongoing reassessments of whether an enterprise is the primary beneficiary of a VIE; amending the quantitative approach
previously required for determining the primary beneficiary of the VIE; modifying the guidance used to determine whether an equity is a VIE; adding an additional reconsideration event
(e.g. troubled debt restructurings) for determining whether an entity is a VIE; and requiring enhanced disclosures regarding an entity's involvement with a VIE.

This
new guidance is effective for us beginning in the first quarter of 2010, with earlier adoption prohibited. We are in the process of assessing the impact of this new guidance on its
consolidated financial statements.

FASB Accounting Standards Codification

In June 2009, the FASB issued new guidance concerning the organization of authoritative guidance under U.S. GAAP. This new
guidance created the FASB Accounting Standards Codification ("Codification"). The Codification has become the source of authoritative U.S. GAAP recognized by the FASB to be applied by
nongovernmental entities. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. The Codification
became effective for us in the third quarter of 2009. As the Codification is not intended to change or alter existing U.S. GAAP, it did not have any impact on our consolidated financial
statements. On its effective date, the Codification superseded all then-existing non-SEC accounting and reporting standards. All other nongrandfathered non-SEC
accounting literature not included in the Codification will become nonauthoritative.

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Transfers of Financial Assets

In June 2009, the FASB issued new guidance concerning the transfer of financial assets. This guidance amends the criteria for a
transfer of a financial asset to be accounted for as a sale, creates more stringent conditions for reporting a transfer of a portion of a financial asset as a sale, changes the initial measurement of
a transferor's interest in transferred financial assets, eliminates the qualifying special-purpose entity concept and provides for new disclosures. This new guidance became effective for us for
transfers of financial assets beginning in the first quarter of 2010, with earlier adoption prohibited. We do not expect the impact of this guidance to be material to its consolidated financial
statements.

Measuring Liabilities at Fair Value

In August 2009, the FASB released new guidance concerning measuring liabilities at fair value. The new guidance provides clarification
that in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using certain valuation techniques.
Additionally, it clarifies that a reporting entity is
not required to adjust the fair value of a liability for the existence of a restriction that prevents the transfer of the liability. This new guidance is effective for the first reporting period after
its issuance, however earlier application is permitted. The application of this new guidance is not expected to have a significant impact on the Company's consolidated financial statements.

Subsequent Events

In May 2009, the FASB released new guidance establishing general standards of accounting for and disclosure of events that occur after
the balance sheet date but before financial statements are issued or are available to be issued. The new guidance requires the disclosure of the date through which an entity has evaluated subsequent
events and the basis for that datethat is, whether that date represents the date the financial statements were issued or were available to be issued. This disclosure should alert all
users of financial statements that an entity has not evaluated subsequent events after that date in the set of financial statements being presented. This new guidance is effective for interim and
annual periods ending after June 15, 2009. The application of this new guidance did not have an effect on our consolidated financial statements.

In
February 2010, the FASB issued amended guidance on subsequent events. SEC filers are no longer required to disclose the date through which subsequent events have been evaluated in
originally issued and revised financial statements. This guidance will be effective immediately and the Company will adopt the new requirements in the first quarter of 2010. The application of this
new guidance is not expected to have an effect on our consolidated financial statements.

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Item 6.    Directors, Senior Management and Employees

The following table sets forth, as of May 31, 2010, information for each of our directors and executive officers.

Name

Age

PositionDr. John Coustas


54

President and CEO and Class I DirectorIraklis Prokopakis


59

Senior Vice President, Chief Operating Officer and Treasurer and Class II DirectorDimitri J. Andritsoyiannis


45

Vice President and Chief Financial Officer and Class III DirectorEvangelos Chatzis


37

Deputy Chief Financial Officer and SecretaryAndrew B. Fogarty


65

Class II DirectorMiklós Konkoly-Thege


67

Class III DirectorMyles R. Itkin


62

Class I DirectorRobert A. Mundell


78

Class I Director


The
term of our Class I directors expires in 2012, the term of our Class II directors expires in 2011 and the term of our Class III directors expires in 2010.
Certain biographical information about each of these individuals is set forth below.

Dr. John Coustasis our President, Chief Executive Officer and a member of our board of directors. Dr. Coustas has over
27 years of experience in the shipping industry. Dr. Coustas assumed management of our company in 1987 from his father, Dimitris Coustas, who founded Danaos Shipping in 1972, and has
been responsible for our corporate strategy and the management of our affairs since that time. Dr. Coustas is also a member of the board of directors of Danaos Management Consultants, The
Swedish Club, the Union of Greek Shipowners and the Cyprus Union of Shipowners. Dr. Coustas holds a degree in Marine Engineering from National Technical University of Athens as well as a
Master's degree in Computer Science and a Ph.D in Computer Controls from Imperial College, London.

Iraklis Prokopakisis our Senior Vice President, Treasurer, Chief Operating Officer and a member of our board of directors.
Mr. Prokopakis joined us in 1998 and has over 32 years of experience in the shipping industry. Prior to entering the shipping industry, Mr. Prokopakis was a captain in the
Hellenic Navy. He holds a Bachelor of Science in Mechanical Engineering from Portsmouth University in the United Kingdom, a Master's degree in Naval Architecture and a Ship Risk Management Diploma
from the Massachusetts Institute of Technology in the United States and a post-graduate diploma in business studies from the London School of Economics. Mr. Prokopakis also has a
Certificate in Operational Audit of Banks from the Management Center Europe in Brussels and a Safety Risk Management Certificate from Det Norske Veritas.

Dimitri J. Andritsoyiannisis our Vice President, Chief Financial Officer and a member of our board of directors.
Mr. Andritsoyiannis joined us in September 2005 and has over 15 years of experience in finance and banking. Prior to joining us, Mr. Andritsoyiannis served as director of
investment banking and as a member of the board of Alpha Finance, the investment banking arm of Greece's Alpha Bank. During his years with Alpha Finance from the early 1990s until joining us,
Mr. Andritsoyiannis led a variety of financings, mergers and acquisitions, restructurings, privatizations and public offerings both in Greece and abroad. Mr. Andritsoyiannis holds a
degree in Economics and Political Science from the Economic University of Athens, an MBA in finance from Columbia University as well as a post-graduate diploma in Ship Risk Management from
the Massachusetts Institute of Technology.

Evangelos Chatzisis our Deputy Chief Financial Officer and Secretary. Mr. Chatzis joined us in 2005 and has over 15 years
of experience in corporate finance and the shipping industry. Prior to joining us, Mr. Chatzis was Chief Financial Officer of Globe Group of Companies, a public company in Greece engaged in a
diverse scope of activities including dry bulk shipping, the textile industry, food

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production &
distribution and real estate. Throughout his career he has developed considerable experience in operations, finance, treasury management, risk management and international business
structuring. Mr. Chatzis holds a Bachelor of Science degree in Economics from the London School of Economics, a Master's of Science degree in Shipping Trade & Finance from City
University Cass Business School, as well as a post-graduate diploma in Shipping Risk Management from IMD Business School.

Andrew B. Fogartyhas been a member of our board of directors since October 2006. Mr. Fogarty has over 25 years of
experience in the transportation industry. After a career in government, including as Secretary of Transportation for the Commonwealth of Virginia, from 1989 Mr. Fogarty held various executive
positions with CSX Corporation or its predecessors, including as Senior Vice PresidentCorporate Services of CSX Corporation from 2001 to 2005, and as Special Assistant to the Chairman of
CSX from 2006 to 2009. Previously, Mr. Fogarty also held the positions of President and CEO of CSX World Terminals, and Senior Vice President and Chief Financial Officer of Sea-Land
Service, Inc. CSX is one of the world's leading transportation companies providing rail, intermodal and rail-to-truck transload services. Mr. Fogarty is the
former chairman and current member of the board of directors of the National Defense Transportation Association and a fellow of the National Academy of Public Administration. He holds a Bachelor of
Arts from Hofstra University, a Master's of Public Administration from the Nelson A. Rockefeller College of Public Affairs & Policy at the State University of New York, and a Ph.D. from Florida
State University.

Myles R. Itkinhas been a member of our board of directors since October 2006. Mr. Itkin is the Executive Vice President, Chief
Financial Officer and Treasurer of Overseas Shipholding Group, Inc. ("OSG"), in which capacities he has served, with the exception of a promotion from Senior Vice President to Executive Vice
President in 2006, since 1995. Prior to joining OSG in June 1995, Mr. Itkin was employed by Alliance Capital Management L.P. as Senior Vice President of Finance. Prior to that, he was
Vice President of Finance at Northwest Airlines, Inc. Mr. Itkin joined the board of directors of the U.K. P&I Club in 2006. Mr. Itkin holds a Bachelor's degree from Cornell
University and an MBA from New York University.

Miklós Konkoly-Thegehas been a member of our board of directors since October 2006. Mr. Konkoly-Thege began at Det
Norske Veritas ("DNV"), a ship classification society, in 1984. From 1984 through 2002, Mr. Konkoly-Thege served in various capacities with DNV including Chief Operating Officer, Chief
Financial Officer and Corporate Controller, Head of Corporate Management Staff and Head of Business Areas. Mr. Konkoly-Thege became President and Chairman of the Executive Board of DNV in 2002
and served in that capacity until his retirement in May 2006. Mr. Konkoly-Thege is a member of the board of directors of Wilhelmsen Maritime Services Holding AS. Mr. Konkoly-Thege holds
a Master of Science degree in civil engineering from Technische Universität Hannover, Germany and an MBA from the University of Minnesota.

Dr. Robert A. Mundellhas been a member of our board of directors since October 2006. Dr. Mundell is the University
Professor of Economics at Columbia University. Dr. Mundell's principal occupation since 1967 has been as a member of the faculty of Columbia University. Dr. Mundell has served as a
member of the board of directors of Olympus Corporation since 2005. Since 2003, Dr. Mundell has also served as Chairman of the Word Executive Institute in Beijing, China. He has been an adviser
to a number of international agencies and organizations including the United Nations, the IMF, the World Bank, the Government of Canada, several governments in Latin America and Europe, the Federal
Reserve Board
and the U.S. Treasury. In 1999 Dr. Mundell received the Nobel Prize in Economics. Dr. Mundell holds a Bachelor's degree from the University of British Columbia, a Master's degree from
the University of Washington and a Ph.D. from the Massachusetts Institute of Technology.

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Compensation of Directors and Senior Management

Beginning in the fiscal year ending December 31, 2006, non-executive directors received annual fees in the amount of
$50,000, plus reimbursement for their out-of-pocket expenses. For the fiscal year ending December 31, 2006, these fees were paid pro rata for the period after our
non-executive directors were first elected, which coincided with our becoming a public company in October 2006. As of January 1, 2008, the non-executive directors'
annual fee was increased to $62,500, plus reimbursement for their out-of-pocket expenses, which amounts are payable at the election of each non-executive director
in cash or stock as described below under "Equity Compensation Plan". We do not have service contracts with any of our directors, other than the employment agreements with our three
directors who are also executive officers of our company, as described below under "Employment Agreements."

During
the year ended December 31, 2007, we paid our Chief Executive Officer, Chief Operating Office and Chief Financial Officer an aggregate amount of $1.3 million and
during the year ended December 31, 2008, we paid these executive officers an aggregate amount of $1.6 million. During the year ended December 31, 2009, we paid these executive
officers, as well as our deputy chief financial officer, who as of January 1, 2009 has been directly employed and compensated by us, an aggregate amount of $2.2 million. Pursuant to the
employment agreements we have entered into with these officers as described below, from time to time we may pay any bonus component of their compensation in the form of restricted stock, stock options
or other awards under our equity compensation plan, which is described below under "Equity Compensation Plan." No equity awards had been granted to these officers as of May 31,
2010.

Employees

We have four salaried employees. Approximately 822 officers and crew members served on board the vessels we own as of
December 31, 2009, but are employed by our manager. Crew wages and other related expenses are paid by our manager and our manager is reimbursed by us.

Share Ownership

The common stock beneficially owned by our directors and executive officers and/or companies affiliated with these individuals is
disclosed in "Item 7. Major Shareholders and Related Party Transactions" below.

Board of Directors

At December 31, 2009 and May 31, 2010, we had seven members on our board of directors. The board of directors may change
the number of directors to not less than two, nor more than 15, by a vote of a majority of the entire board. Each director shall be elected to serve until the third succeeding annual meeting of
stockholders and until his or her successor shall have been duly elected and qualified, except in the event of death, resignation or removal. A vacancy on the board created by death, resignation,
removal (which may only be for cause), or failure of the stockholders to elect the entire class of directors to be elected at any election of directors or for any other reason, may be filled only by
an affirmative vote of a majority of the remaining directors then in office, even if less than a quorum, at any special meeting called for that purpose or at any regular meeting of the board of
directors.

During
the year ended December 31, 2009, the board of directors held six meetings. Each director attended all of the meetings of the board of directors and of the committees of
which the director was a member. Our board of directors has determined that each of Messrs. Fogarty, Konkoly-Thege and Itkin and Dr. Mundell are independent (within the requirements of
the NYSE and SEC).

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To
promote open discussion among the independent directors, those directors met twice in 2009 in regularly scheduled executive sessions without participation of our company's management
and will continue to do so in 2010. Mr. Andrew B. Fogarty has served as the presiding director for purposes of these meetings. Stockholders who wish to send communications on any topic to the
board of directors or to the independent directors as a group, or to the presiding director, Mr. Andrew B. Fogarty, may do so by writing to our Secretary, Mr. Evangelos Chatzis, Danaos
Corporation, c/o Danaos Shipping Co. Ltd., 14 Akti Kondyli, 185 45 Piraeus, Greece.

Corporate Governance

The board of directors and our company's management have engaged in an ongoing review of our corporate governance practices in order to
oversee our compliance with the applicable corporate governance rules of the New York Stock Exchange and the SEC.

We
have adopted a number of key documents that are the foundation of its corporate governance, including:



These
documents and other important information on our governance, including the board of director's Corporate Governance Guidelines, are posted on the Danaos Corporation website, and
may be viewed athttp://www.danaos.com. We will also provide a paper copy of any of these documents upon the written request of a stockholder.
Stockholders may direct their requests to the attention of our Secretary, Mr. Evangelos Chatzis, Danaos Corporation, c/o Danaos Shipping Co. Ltd., 14 Akti Kondyli, 185 45 Piraeus,
Greece.

Committees of the Board of Directors

We are a "controlled company" within the meaning of the New York Stock Exchange corporate governance standards. Pursuant to certain
exceptions for foreign private issuers and controlled companies, we are not required to comply with certain of the corporate governance practices followed by U.S. and non-controlled
companies under the New York Stock Exchange listing standards. We comply fully with the New York Stock Exchange corporate governance rules applicable to both U.S. and foreign private issuers that are
"controlled companies," however, as permitted for controlled companies, one member of each of the compensation committee and nominating and corporate governance committee of our board of directors is
a non-independent director.



Our audit committee consists of Myles R. Itkin (chairman), Andrew B. Fogarty and Miklós Konkoly-Thege. Our board of
directors has determined that Mr. Itkin qualifies as an audit committee "financial expert," as such term is defined in Regulation S-K. The audit committee is responsible for
(1) the hiring, termination and compensation of the independent auditors and approving any non-audit work performed by such auditor, (2) approving the overall scope of the
audit, (3) assisting the board in monitoring the integrity of our financial statements, the independent accountant's qualifications and independence, the performance of the independent
accountants and our internal audit function and our

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compliance
with legal and regulatory requirements, (4) annually reviewing an independent auditors' report describing the auditing firms' internal quality-control procedures, any material issues
raised by the most recent internal quality-control review, or peer review, of the auditing firm, (5) discussing the annual audited financial and quarterly statements with management and the
independent auditor, (6) discussing earnings press releases, as well as financial information and earning guidance, (7) discussing policies with respect to risk assessment and risk
management, (8) meeting separately, periodically, with management, internal auditors and the independent auditor, (9) reviewing with the independent auditor any audit problems or
difficulties and management's response, (10) setting clear hiring policies for employees or former employees of the independent auditors, (11) annually reviewing the adequacy of the
audit committee's written charter, (12) handling such other matters that are specifically delegated to the audit committee by the board of directors from time to time, (13) reporting
regularly to the full board of directors and (14) evaluating the board of directors' performance. During 2009, there were four meetings of the audit committee.



Our compensation committee consists of Andrew B. Fogarty (chairman), Miklós Konkoly-Thege and Iraklis Prokopakis. The
compensation committee is responsible for (1) reviewing key employee compensation policies, plans and programs, (2) reviewing and approving the compensation of our chief executive
officer and other executive officers, (3) developing and recommending to the board of directors compensation for board members, (4) reviewing and approving employment contracts and other
similar arrangements between us and our executive officers, (5) reviewing and consulting with the chief executive officer on the selection of officers and evaluation of executive performance
and other related matters, (6) administration of stock plans and other incentive compensation plans, (7) overseeing compliance with any applicable compensation reporting requirements of
the SEC, (8) retaining consultants to advise the committee on executive compensation practices and policies and (9) handling such other matters that are specifically delegated to the
compensation committee by the board of directors from time to time. During 2009, there was one meeting of the compensation committee.



Our nominating and corporate governance committee consists of Dimitri J. Andritsoyiannis, Myles R. Itkin and Robert A. Mundell
(chairman). The nominating and corporate governance committee is responsible for (1) developing and recommending criteria for selecting new directors, (2) screening and recommending to
the board of directors individuals qualified to become executive officers, (3) overseeing evaluations of the board of directors, its members and committees of the board of directors and
(4) handling such other matters that are specifically delegated to the nominating and corporate governance committee by the board of directors from time to time. During 2009, there was one
meeting of the nominating and corporate governance committee.

Employment Agreements



Our president and chief executive officer, Dr. John Coustas, has entered into an employment agreement with us. The employment
agreement provides that Dr. Coustas receives an annual base salary subject to increases at the discretion of the compensation committee of our board of directors. Dr. Coustas is also
eligible for annual bonuses as determined by the compensation committee, and the employment agreement provides that any bonus may be paid in whole or in part with awards under our equity compensation
plan. Pursuant to the employment agreement, Dr. Coustas is required to devote such time and attention to our business and affairs as is reasonably necessary to the duties of his position, and
otherwise may devote a portion of his time and attention to our affiliates and to other ventures he controls or in which he invests in accordance with the terms of the non-competition

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agreement
he has entered into with us as described below. The initial term of the agreement will expire on December 31, 2012, however, unless written notice is provided 120 days prior to
a termination date, the agreement will automatically extend for additional successive one-year terms.

The
terms of the employment agreement also provide for the payment of severance of two times his annual salary plus bonus (based on an average of the prior three years), as well as
continued benefits, if any, for 24 months if we terminate Dr. Coustas without "cause," as defined in the agreement, or he terminates his employment with 30 days' notice for "good
reason," as defined in the agreement. In addition, Dr. Coustas will receive a pro rata bonus for the year in which the termination occurs. If such termination without cause or resignation for
good reason occurs within two years of a "change of control," as defined in the agreement, Dr. Coustas would be entitled to the greater of (a) $800,000 or (b)(i)(A) the total amount of
his salary and bonus (based on an average of the prior three years), plus (B) the value on the date of grant of any equity grants made under our equity compensation plan during that
three-year period (which, for stock options, will be the Black-Scholes value), (ii) multiplied by three, as well as continued benefits, if any, for 36 months.

Dr. Coustas
has also entered into a non-competition agreement with us that prohibits his direct or indirect ownership or operation of containerships of larger than
2,500 TEUs or drybulk carriers, and the provision, directly or indirectly, of commercial or technical management services to vessels in these sectors of the shipping industry or to entities owning
such vessels, other than in limited circumstances. The terms of the employment agreement also prohibit Dr. Coustas from soliciting or attempting to solicit our employees or customers during the
two-year period following termination of his employment.



Our senior vice president, treasurer and chief operating officer, Iraklis Prokopakis, has entered into an employment agreement with us.
The employment agreement provides that Mr. Prokopakis receives an annual base salary subject to increases at the discretion of the compensation committee of our board of directors.
Mr. Prokopakis is also eligible for annual bonuses as determined by the compensation committee, and the employment agreement provides that any bonus may be paid in whole or in part with awards
under our equity compensation plan. Pursuant to the employment agreement, Mr. Prokopakis is required to devote his full business time and attention to our business and affairs, although he may,
as directed by our chief executive officer or board of directors, devote a portion of his time and attention to our affiliates. The initial term of the agreement will expire on December 31,
2012, however, unless written notice is provided 120 days prior to a termination date, the agreement will automatically extend for additional successive one-year terms.

The
terms of the employment agreement also provide for the payment of severance of two times his annual salary plus bonus (based on an average of the prior three years), as well as
continued benefits, if any, for 24 months if we terminate Mr. Prokopakis without "cause," as defined in the agreement, or he terminates his employment with 30 days' notice for
"good reason," as defined in the agreement. In addition, Mr. Prokopakis will receive a pro rata bonus for the year in which the termination occurs. If such termination without cause or
resignation for good reason occurs within two years of a "change of control," as defined in the agreement, Mr. Prokopakis would be entitled to the greater of (a) $800,000 or (b)(i)(A)
the total amount of his salary and bonus (based on an average of the prior three years), plus (B) the value on the date of grant of any equity grants made under our equity compensation plan
during that three-year period (which, for stock options, will be the Black-Scholes value), (ii) multiplied by three, as well as continued benefits, if any, for 36 months.

The
terms of the employment agreement also prohibit Mr. Prokopakis from soliciting or attempting to solicit our employees or customers during the two-year period
following termination of his employment, and from being substantially involved in the management or operation of containerships of larger than 2,500 TEUs or drybulk carriers, if such business is one
of our competitors, during the term of the agreement.

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Our vice president and chief financial officer, Dimitri J. Andritsoyiannis, has entered into an employment agreement with us. The
employment agreement provides that Mr. Andritsoyiannis receives an annual base salary subject to increases at the discretion of the compensation committee of our board of directors.
Mr. Andritsoyiannis is also eligible for annual bonuses as determined by the compensation committee, and the employment agreement provides that any bonus may be paid in whole or in part with
awards under our equity compensation plan. Pursuant to the employment agreement, Mr. Andritsoyiannis is required to devote his full business time and attention to our business and affairs,
although he may, as directed by our chief executive officer or board of directors, devote a portion of his time and attention to our affiliates. The initial term of the agreement will expire on
December 31, 2012, however, unless written notice is provided 120 days prior to a termination date, the agreement will automatically extend for additional successive one-year
terms.

The
terms of the employment agreement also provide for the payment of severance of two times his annual salary plus bonus (based on an average of the prior three years), as well as
continued benefits, if any, for 24 months if we terminate Mr. Andritsoyiannis without "cause," as defined in the agreement, or he terminates his employment with 30 days' notice
for "good reason," as defined in the agreement. In addition, Mr. Andritsoyiannis will receive a pro rata bonus for the year in which the termination
occurs. If such termination without cause or resignation for good reason occurs within two years of a "change of control," as defined in the agreement, Mr. Andritsoyiannis would be entitled to
the greater of (a) $800,000 or (b)(i)(A) the total amount of his salary and bonus (based on an average of the prior three years), plus (B) the value on the date of grant of any equity
grants made under our equity compensation plan during that three-year period (which, for stock options, will be the Black-Scholes value), (ii) multiplied by three, as well as
continued benefits, if any, for 36 months.

The
terms of the employment agreement also prohibit Mr. Andritsoyiannis from soliciting or attempting to solicit our employees or customers during the two-year period
following termination of his employment, and from being substantially involved in the management or operation of containerships of larger than 2,500 TEUs or drybulk carriers, if such business is one
of our competitors, during the term of the agreement.



Our deputy chief financial officer and secretary, Evangelos Chatzis, has entered into an employment agreement with us. The employment
agreement provides that Mr. Chatzis receives an annual base salary subject to increases at the discretion of the compensation committee of our board of directors. Mr. Chatzis is also
eligible for annual bonuses as determined by the compensation committee, and the employment agreement provides that any bonus may be paid in whole or in part with awards under our equity compensation
plan. Pursuant to the employment agreement, Mr. Chatzis is required to devote his full business time and attention to our business and affairs, although he may, as directed by our chief
executive officer or board of directors, devote a portion of his time and attention to our affiliates. The initial term of the agreement will expire on December 31, 2014, however, unless
written notice is provided 120 days prior to a termination date, the agreement will automatically extend for additional successive one-year terms.

The
terms of the employment agreement also provide for the payment of severance of two times his annual salary plus bonus (based on an average of the prior three years), as well as
continued benefits, if any, for 24 months if we terminate Mr. Chatzis without "cause," as defined in the agreement, or he terminates his employment with 30 days' notice for "good
reason," as defined in the agreement. In addition, Mr. Chatzis will receive a pro rata bonus for the year in which the termination occurs. If such termination without cause or resignation for
good reason occurs within two years of a "change of control," as defined in the agreement, Mr. Chatzis would be entitled to the greater of (a) €600,000 or (b)(i)(A) the
total amount of his salary and bonus (based on an average of the prior

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three
years), plus (B) the value on the date of grant of any equity grants made under our equity compensation plan during that three-year period (which, for stock options, will be
the Black-Scholes value), (ii) multiplied by three, as well as continued benefits, if any, for 36 months.

The
terms of the employment agreement also prohibit Mr. Chatzis from soliciting or attempting to solicit our employees or customers during the two-year period
following termination of his employment, and from being substantially involved in the management or operation of containerships of larger than 2,500 TEUs or drybulk carriers, if such business is one
of our competitors, during the term of the agreement.

Equity Compensation Plan

We have adopted an equity compensation plan, which we refer to as the Plan. The Plan is generally administered by the compensation
committee of our board of directors, except that the full board may act at any time to administer the Plan, and authority to administer any aspect of the Plan may be delegated by our board of
directors or by the compensation committee to an executive officer or to any other person. The Plan allows the plan administrator to grant awards of shares of our common stock or the right to receive
or purchase shares of our common stock (including options to purchase common stock, restricted stock and stock units, bonus stock, performance stock, and stock appreciation rights) to our employees,
directors or other persons or entities providing significant services to us or our subsidiaries, including employees of our manager, and also provides the plan administrator with the authority to
reprice outstanding stock options or other awards. The actual terms of an award, including the number of shares of common stock relating to the award, any exercise or purchase price, any vesting,
forfeiture or transfer restrictions, the time or times of exercisability for, or delivery of, shares of common stock, will be determined by the plan administrator and set forth in a written award
agreement with the participant. Any options granted under the Plan will be accounted for in accordance with accounting guidance for share-based compensation.

The
aggregate number of shares of our common stock for which awards may be granted under the Plan cannot exceed 6% of the number of shares of our common stock issued and outstanding at
the time any award is granted. Awards made under the Plan that have been forfeited (including our repurchase of shares of common stock subject to an award for the price, if any, paid to us for such
shares of common stock, or for their par value) or cancelled or have expired, will not be treated as having been granted for purposes of the preceding sentence.

The
Plan requires that the plan administrator make an equitable adjustment to the number, kind and exercise price per share of awards in the event of our recapitalization,
reorganization, merger, spin-off, share exchange, dividend of common stock, liquidation, dissolution or other similar transaction or event. In addition, the plan administrator will be
permitted to make adjustments to the terms and conditions of any awards in recognition of any unusual or nonrecurring events. Unless otherwise set forth in an award agreement, any awards outstanding
under the Plan will vest upon a "change of control," as defined in the Plan. Our board of directors may, at any time, alter, amend, suspend, discontinue or terminate the Plan, except that any
amendment will be subject to the approval of our stockholders if required by applicable law, regulation or stock exchange rule and that, without the consent of the affected participant under the Plan,
no action may materially impair the rights of
such participant under any awards outstanding under the Plan. The Plan will automatically terminate ten years after it has been most recently approved by our stockholders.

As
of April 18, 2008, we established the Directors Share Payment Plan, which we refer to as the Directors Plan, under the Plan. The purpose of the Directors Plan is to provide a
means of payment, under the Plan, of all or a portion of compensation payable to directors of the company in the form of our common stock. Each member of our Board of Directors may participate in the
Directors Plan. Pursuant to the terms of the Directors Plan, Directors may elect to receive all or a portion of their compensation in common stock, which is credited to their respective share payment
account on the last

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business
day of each quarter. Following December 31st of each year, we will deliver to each director the number of shares represented by the rights credited to their Share Payment
Account during the preceding calendar year. The Directors Plan is administered and otherwise subject to the terms and conditions, including limitations on the number of shares issued, under the Plan.
Non-executive directors electing to receive common stock in lieu of cash compensation resulted in the right to receive 6,112 shares of common stock during 2008 and 13,110 shares of common
stock during 2009, which shares of common stock granted in 2008 and 2009 were distributed to non-executive directors in the first half of 2009 and 2010, respectively, from shares held as
treasury stock. Refer to Note 21, Stock Based Compensation, in the notes to our consolidated financial statements included elsewhere herein.

Item 7.    Major Shareholders and Related Party Transactions.

Related Party Transactions



Danaos Shipping Co. Ltd., which we refer to as our Manager, is ultimately owned by Danaos Investments Limited as Trustee
of the 883 Trust, which we refer to as the Coustas Family Trust. Danaos Investments Limited is the protector (which is analogous to a trustee) of the Coustas Family Trust, of which Dr. Coustas
and other members of the Coustas family are beneficiaries. Dr. Coustas has certain powers to remove and replace Danaos Investments Limited as Trustee of the 883 Trust. The Coustas Family Trust
is also our largest stockholder, owning approximately 80.1% of our outstanding common stock as of May 31, 2010. Our Manager has provided services to our vessels since 1972 and continues to
provide technical, administrative and certain commercial services which support our business, as well as comprehensive ship management services such as technical supervision and commercial management,
including chartering our vessels pursuant to a management agreement which was amended and restated as of September 18, 2006 and amended on February 12, 2009 and February 8, 2010.

Management
fees in respect of continuing operations under our management agreement amounted to approximately $8.7 million in 2009, $7.0 million in 2008 and
$5.7 million in 2007. The related expenses are shown under "General and administrative expenses" on the statement of income. We pay monthly advances in regard to these management fees. These
prepaid management fees are presented in our consolidated balance sheet under "Due from related parties" and totaled $8.6 million and $7.1 million as of December 31, 2009 and
2008, respectively.



Under our management agreement, our Manager is responsible for providing us with technical, administrative and certain commercial
services, which include the following:



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Our Manager reports to us and our Board of Directors through our Chief Executive Officer, Chief Operating Officer and Chief Financial
Officer. Under our management agreement, our Chief Executive Officer, Chief Operating Officer and Chief Financial Officer may direct the Manager to remove and replace any officer or any person who
serves as the head of a business unit of our Manager. Furthermore, our Manager will not remove any person serving as an officer or senior manager without the prior written consent of our Chief
Executive Officer, Chief Operating Officer and Chief Financial Officer.



During the initial term of the management agreement, for providing its commercial, chartering and administrative services our manager
received a fee of $500 per day and for its technical management of our ships, our manager received a management fee of $250 per vessel per day for vessels on bareboat charter and $500 per vessel per
day for the remaining vessels in our fleet, each pro rated for the number of calendar days we own each vessel. These fees are now adjusted annually by agreement between us and our manager. Should we
be unable to agree with our Manager as to the new fees, the rate for the next year will be set at an amount that will maintain our Manager's average profit margin for the immediately preceding three
years. For its chartering services rendered to us by its Hamburg- based office, our manager also receives a commission of 0.75% on all freight, charter hire, ballast bonus and demurrage for each
vessel. Further, our manager receives a commission of 0.5% based on the contract price of any vessel bought or sold by it on our behalf, excluding newbuilding contracts. We also paid our manager a
flat fee of $400,000 per newbuilding vessel, which we capitalized, for the on premises supervision of our newbuilding contracts by selected engineers and others of its staff.

On
February 12, 2009, we signed an addendum to the management contract adjusting the management fees, effective January 1, 2009, to a fee of $575 per day for commercial,
chartering and administrative services, a fee of $290 per vessel per day for vessels on bareboat charter and $575 per vessel per day for vessels on time charter and a flat fee of $725,000 per
newbuilding vessel for the

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supervision
of newbuilding contracts. All commissions to the manager remained unchanged. On February 8, 2010, we signed an addendum to the management contract adjusting the management fees,
effective January 1, 2010, to a fee of $675 per day for commercial, chartering and administrative services, a fee of $340 per vessel per day for vessels on bareboat charter and $675 per vessel
per day for vessels on time charter. All commissions to the manager remained unchanged. The incremental amount of the management fees shall be paid, as accrued until the date of payment, at any time
before the end of 2010. We believe these fees and commissions are no more than the rates we would need to pay an unaffiliated third party to provide us with these management services.

We
also advance, on a monthly basis, all technical vessel operating expenses with respect to each vessel in our fleet to enable our Manager to arrange for the payment of such expenses on
our behalf. To the extent the amounts advanced are greater or less than the actual vessel operating expenses of our fleet for a quarter, our Manager or us, as the case may be, will pay the other the
difference at the end of such quarter, although our Manager may instead choose to credit such amount against future vessel operating expenses to be advanced for future quarters.



The initial term of the management agreement expired on December 31, 2008. The management agreement now automatically renews for
one-year periods and will be extended, unless we give 12-months' written notice of non-renewal and subject to the termination rights described below, in additional
one-year increments until December 31, 2020, at which point the agreement will expire.

Our Manager's Termination Rights.Our Manager may terminate the management agreement prior to the end of its term in the two following
circumstances:



Our Termination Rights.We may terminate the management agreement prior to the end of its term in the two following circumstances upon
providing the
respective notice:



We
also may terminate the management agreement immediately under any of the following circumstances:



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In
addition, we may terminate any applicable ship management agreement in any of the following circumstances:





Our Manager has agreed that, during the term of the management agreement, it will not provide any management services to any other
entity without our prior written approval, other than with respect to entities controlled by Dr. Coustas, our Chief Executive Officer, which do not operate within the containership (larger than
2,500 twenty foot equivalent units, or TEUs) or drybulk sectors of the shipping industry or in the circumstances described below. Dr. Coustas does not currently control any such vessel-owning
entity or have an equity interest in any such entity, other than Castella Shipping Inc., owner of one 1,700 TEU vessel. Dr. Coustas has also personally agreed to the same restrictions on
the provision, directly or indirectly, of management services during this period. In addition, our Chief Executive Officer (other than in his capacities with us) and our Manager have separately agreed
not, during the term of our management agreement and for one year thereafter, to engage, directly or indirectly, in (i) the ownership or operation of containerships of larger than 2,500 TEUs or
(ii) the ownership or operation of any drybulk carriers or (iii) the acquisition of or investment in any business involved in the ownership or operation of containerships larger than
2,500 TEUs or drybulk carriers. Notwithstanding these restrictions, if our independent directors decline the opportunity to acquire any such containerships or drybulk carriers or to acquire or invest
in any such business, our Chief Executive Officer will have the right to make, directly or indirectly, any such acquisition or investment during the four-month period following such
decision by our independent directors, so long as such acquisition or investment is made on terms no more favorable than those offered to us. In this

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case,
our Chief Executive Officer and our Manager will be permitted to provide management services to such vessels.



Our Manager has agreed that it will not transfer, assign, sell or dispose of all or a significant portion of its business that is
necessary for the services our Manager performs for us without the prior written consent of our Board of Directors. Furthermore, in the event of any proposed sale of our Manager, we have a right of
first refusal to purchase our Manager. This prohibition and right of first refusal is in effect throughout the term of the management agreement and for a period of one year following the expiry or
termination of the management agreement. Our Chief Executive Officer, Dr. John Coustas, or any trust established for the Coustas family (under which Dr. Coustas and/or a member of his
family is a beneficiary), is required, unless we expressly permit otherwise, to own 80% of our Manager's outstanding capital stock during the term of the management agreement and 80% of the voting
power of our Manager's outstanding capital stock. In the event of any breach of these requirements, we would be entitled to purchase the capital stock of our Manager owned by Dr. Coustas or any
trust established for the Coustas family (under which Dr. Coustas and/or a member
of his family is a beneficiary). Under the terms of certain of our financing agreements, including the Bank Agreement restructuring our existing credit facilities for which we have reached an
agreement in principle, the failure of our Manager to continue managing our vessels securing such agreements would constitute an event of default thereunder.



Dr. John Coustas, our Chief Executive Officer, is a member of the Board of Directors of The Swedish Club, our primary provider
of insurance, including a substantial portion of our hull & machinery, war risk and protection and indemnity insurance. During the years ended December 31, 2009, 2008 and 2007, we paid
premiums of $7.4 million, $4.1 million and $2.8 million, respectively, to The Swedish Club under these insurance policies.



Our Chief Executive Officer, Dr. John Coustas, co-founded and has a 50.0% ownership interest in Danaos Management
Consultants, which provides the ship management software deployed on the vessels in our fleet to our Manager on a complementary basis. Dr. Coustas does not participate in the
day-to-day management of Danaos Management Consultants.



We occupy office space that is owned by our Manager and which is provided to us as part of the services we receive under our management
agreement.

Major Stockholders

The following table sets forth certain information regarding the beneficial ownership of our outstanding common stock as of
May 31, 2010 held by:



Beneficial
ownership is determined in accordance with the rules of the SEC. In general, a person who has voting power or investment power with respect to securities is treated as a
beneficial owner of those securities.

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Beneficial ownership does not necessarily imply that the named person has the economic or other benefits of ownership. For purposes of this table, shares subject
to options, warrants or rights or shares exercisable within 60 days of May 31, 2010 are considered as beneficially owned by the person holding those options, warrants or rights. Each
stockholder is entitled to one vote for each share held. The applicable percentage of ownership of each stockholder is based on 54,556,215 shares of common stock outstanding as of May 31, 2010.
Information for certain holders is based on their latest filings with the SEC or information delivered to us. Except as noted below, the address of all stockholders, officers and directors identified
in the table and accompanying footnotes below is in care our principal executive offices.

Identity of Person or Group

Number of Shares
of Common Stock
Owned

Percentage of
Common
StockOfficers and Directors:John Coustas(1)


43,687,195


80.1
%Iraklis Prokopakis


355,075


*Dimitri J. Andritsoyiannis





Evangelos Chatzis





Andrew B. Fogarty


90,265


*Myles R. Itkin





Miklós Konkoly-Thege


12,957


*Robert A. Mundell





5% Beneficial Owners:Danaos Investments Limited as Trustee of the 883 Trust(2)


43,687,195


80.1
%All executive officers and directors as a group (8 persons)


44,145,492


80.9
%


*Less
than 1%.(1)By
virtue of shares owned indirectly through Danaos Investments Limited as Trustee of the 883 Trust, which is our principal stockholder. The beneficiaries
of the trust are Dr. Coustas, his wife and his descendants. Dr. Coustas has certain powers to remove and replace Danaos Investments Limited as Trustee of the 883 Trust and, accordingly,
he may be deemed to beneficially own the shares of common stock owned by Danaos Investments Limited as Trustee of the 883 Trust.(2)According
to a Schedule 13G jointly filed with the SEC on February 9, 2007 by Danaos Investments Limited as Trustee of the 883 Trust and John
Coustas, Danaos Investments Limited as Trustee of the 883 Trust owns 43,687,195 shares of common stock and has sole voting power and sole dispositive power with respect to all such shares. The
beneficiaries of the trust are Dr. Coustas, his wife and his descendants. Dr. Coustas has certain powers to remove and replace Danaos Investments Limited as Trustee of the 883 Trust and,
accordingly, he may be deemed to beneficially own these shares of common stock.


In
October 2006, we completed a registered public offering of our shares of common stock and our common stock began trading on the New York Stock Exchange. Accordingly, certain of our
principal stockholders acquired their shares of common stock either at or subsequent to this time. Our major stockholders have the same voting rights as our other stockholders. As of May 31,
2010, we had approximately seven stockholders of record, each of which were located in the United States and held an aggregate of 54,556,215 shares of common stock representing all of our outstanding
shares of common stock. However, one of the United States stockholders of record is CEDEFAST, a nominee of The Depository Trust Company, which held 54,548,165 shares of our common stock. Accordingly,
we believe that the shares held by CEDEFAST include shares of common stock beneficially owned by both holders in the United States and non-United States beneficial owners, including
44,055,227 shares beneficially owned by our officers and directors resident outside the United States and 90,265 shares

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beneficially
owned by directors resident in the United States as reflected in the above table. We are not aware of any arrangements the operation of which may at a subsequent date result in our change
of control.

The
Coustas Family Trust, under which our chief executive officer is both a beneficiary, together with other members of the Coustas Family, and the protector (which is analogous to a
trustee), through Danaos Investments Limited, a corporation wholly-owned by Dr. Coustas, owns, directly or indirectly, approximately 80.1% of our outstanding common stock. This stockholder is
able to control the outcome of matters on which our stockholders are entitled to vote, including the election of our entire board of directors and other significant corporate actions. Our respective
lenders under our existing credit facilities covered by the Bank Agreement and the New Credit Facilities will be entitled to require us to repay in full amounts outstanding under such respective
credit facilities, if, among other circumstances, Dr. Coustas ceases to be our Chief Executive Officer or, together with members of his family and trusts for the benefit thereof, ceases to
collectively own over one-third of the voting interest in our outstanding capital stock or any other person or group controls more than 20.0% of the voting power of our outstanding capital
stock.

Item 8.    Financial Information

See "Item 18. Financial Statements" below.

Significant Changes.We have reached an agreement in principle with the lenders under all of our existing credit facilities, other than
the lenders
under our credit facilities with KEXIM and KEXIM-Fortis, for a Bank Agreement that, among other things, would provide for the waiver of
existing covenant breaches or defaults under our existing credit facilities with such lenders and the amendment of the covenants under our existing credit facilities. No other significant change has
occurred since the date of the annual financial statements included in this annual report on Form 20-F.

Legal Proceedings.In the summer of 2001, one of our vessels, theHenry (ex
CMA CGM Passiflore), experienced engine damage at sea that resulted in an accumulation of oil and oily water in the vessel's engine room. The Coast
Guard found oil in the overboard discharge pipe from the vessel's oily water separator. On July 2, 2001, when the vessel was at anchor in Long Beach, California, representatives of our manager
notified authorities of the presence of oil on the water on the starboard side of the vessel and, on July 3, 2001, divers retained by our manager found oil in the vessel's starboard sea chest
(an opening through which sea water is taken in to cool the engines).

In
connection with these events, our manager entered into a plea agreement with the U.S. Attorney, on behalf of the government, which was filed with the U.S. District Court on
June 20, 2006, pursuant to which our manager agreed to plead guilty to one count of negligent discharge of oil and one count of obstruction of justice, based on a charge of attempted
concealment of the source of the discharge. Consistent with the government's practice in similar cases, our manager agreed to develop and implement a third-party consultant monitored environmental
compliance plan and to designate an internal corporate compliance manager. This compliance plan would require our manager to prepare an environmental compliance plan manual for approval by such
third-party environmental consultant and the U.S. government. The program would also require our manager to arrange for, fund and complete a series of audits of its fleet management offices and of
waste streams of the vessels it manages, including all of the vessels in our fleet that call at U.S. ports, as well as an independent, third-party focused environmental compliance plan audit. Our
manager also agreed to a probation period of three years under the plea agreement. Our manager further agreed to pay an aggregate of $500,000 in penalties in connection with the charges of negligent
discharge and obstruction of justice under the plea agreement, with half of the penalties to be applied to community service projects that will benefit, restore or preserve the environment and
ecosystems in the central California area. On

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August 14,
2006, the court accepted our manager's guilty plea to the two counts and, on December 4, 2006, sentenced our manager in accordance with the terms of the plea agreement.

In
the more than eight years since the detention of theHenry (exCMA CGM Passiflore), our
vessels have not been subject to any other detentions or enforcement proceedings involving alleged releases of oil. Our manager began preparation of a proactive management program designed to prevent
future non-compliance.

We
have not been involved in any legal proceedings that we believe would have a significant effect on our business, financial position, results of operations or liquidity, and we are not
aware of any
proceedings that are pending or threatened that may have a material effect on our business, financial position, results of operations or liquidity. From time to time, we may be subject to legal
proceedings and claims in the ordinary course of business, principally personal injury and property casualty claims. We expect that these claims would be covered by insurance, subject to customary
deductibles. However, those claims, even if lacking merit, could result in the expenditure of significant financial and managerial resources.

Dividend Policy.Our board of directors has determined to suspend the payment of cash dividends as a result of market conditions in the
international
shipping industry. Declaration and payment of any future dividend is subject to the discretion of our board of directors. In addition, under the waiver agreements we entered into with certain of our
lenders in 2009, our payment of any dividend is subject to the approval of certain our lenders during periods covered by the waivers and is subject to caps on the dividends that we may pay pursuant to
terms of waivers from other lenders. Moreover, under the Bank Agreement in respect of our existing credit facilities and various new financing arrangements for which we have reached agreements in
principle, we generally will not be permitted to pay cash dividends or repurchase shares of our capital stock through December 31, 2018, absent a substantial reduction in our leverage. We are a
holding company, and we depend on the ability of our subsidiaries to distribute funds to us in order to satisfy our financial obligations and to make dividend payments. See "Item 3. Key
InformationRisk FactorsRisks Inherent in Our Business" for a discussion of the risks related to dividend payments, if any.

After
our initial public offering, we paid regular quarterly dividends from February 2007 to November 19, 2008. We paid no dividends in 2006 and, prior to our initial public
offering, in 2005 we paid dividends of $244.6 million to our stockholders from our retained earnings.

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Item 9.    The Offer and Listing

Our common stock is listed on the New York Stock Exchange under the symbol "DAC."

Trading on the New York Stock Exchange

Since our initial public offering in the United States in October 2006, our common stock has been listed on the New York Stock Exchange
under the symbol "DAC." The following table shows the high and low sales prices for our common stock during the indicated periods.

High

Low2006

(Annual)(1)

$
24.10

$
19.612007

(Annual)

$
40.26

$
21.55First Quarter


26.95


21.55Second Quarter


33.55


26.11Third Quarter


40.26


29.02Fourth Quarter


37.50


26.352008

(Annual)

$
29.96

$
3.18First Quarter


29.96


23.23Second Quarter


27.18


21.98Third Quarter


24.94


14.84Fourth Quarter


14.05


3.182009

(Annual)

$
10.50

$
2.72First Quarter


10.50


3.00Second Quarter


5.34


2.91Third Quarter


6.99


2.72Fourth Quarter


5.25


3.82October 2009


5.25


3.96November 2009


4.70


3.82December 2009


5.03


4.222010

First Quarter

$
5.00

$
3.82January 2010


5.00


4.46February 2010


4.75


3.82March 2010


4.90


4.03Second Quarter (through June 15, 2010)


5.25


3.60April 2010


5.25


4.20May 2010


5.09


3.63June 2010 through June 15, 2010


4.20


3.60


(1)For
the period from October 6, 2006, the date on which our common stock began trading on the NYSE, until the end of the period.


Item 10.    Additional Information

Share Capital

Under our articles of incorporation, our authorized capital stock consists of 750,000,000 shares of common stock, $0.01 par value per
share, of which, as of December 31, 2009 and May 31, 2010, 54,550,858 shares and 54,556,215, respectively, were issued and outstanding and fully paid, and 100,000,000 shares of blank
check preferred stock, $0.01 par value per share, of which, as of December 31, 2009 and May 31, 2010, no shares were issued and outstanding and fully paid. One million shares of the
blank check preferred stock have been designated Series A Participating Preferred

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Stock
in connection with our adoption of a stockholder rights plan as described below under "Stockholder Rights Plan." All of our shares of stock are in registered form.



We have agreed to issue to the lenders under our New Credit Facilities warrants to purchase an aggregate of 15 million shares of
our common stock for an exercise price of $7.00 per share. The warrants would expire on December 31, 2018.



Each outstanding share of common stock entitles the holder to one vote on all matters submitted to a vote of stockholders. Subject to
preferences that may be applicable to any outstanding shares of preferred stock, holders of shares of common stock are entitled to receive ratably all dividends, if any, declared by our board of
directors out of funds legally available for dividends. Holders of common stock do not have conversion, redemption or preemptive rights to subscribe to any of our securities. All outstanding shares of
common stock are fully paid and nonassessable. The rights, preferences and privileges of holders of shares of common stock are subject to the rights of the holders of any shares of preferred stock
which we may issue in the future.

There
were 500 shares of common stock outstanding on October 7, 2005, the date our company was domesticated in the Republic of The Marshall Islands. On September 18, 2006
we effected an 88,615-for-1 stock split. On October 6, 2006, we completed our initial
public offering and listing of the common stock on the New York Stock Exchange. In this respect 10,250,000 shares of common stock, with par value of $0.01 per share, were issued.



Under the terms of our articles of incorporation, our board of directors has authority, without any further vote or action by our
stockholders, to issue up to 100,000,000 shares of blank check preferred stock, of which 1,000,000 shares have been designated Series A Participating Preferred Stock in connection with our
adoption of a stockholder rights plan as described below under "Stockholder Rights Plan." Our board of directors may issue shares of preferred stock on terms calculated to discourage,
delay or prevent a change of control of our company or the removal of our management.



Each share of our common stock includes a right that entitles the holder to purchase from us a unit consisting of
one-thousandth of a share of our Series A participating preferred stock at a purchase price of $25.00 per unit, subject to specified adjustments. The rights are issued pursuant to a
rights agreement between us and American Stock Transfer & Trust Company, as rights agent. Until a right is exercised, the holder of a right will have no rights to vote or receive dividends or
any other stockholder rights.

The
rights may have anti-takeover effects. The rights will cause substantial dilution to any person or group that attempts to acquire us without the approval of our board of
directors. As a result, the overall effect of the rights may be to render more difficult or discourage any attempt to acquire us. Because our board of directors can approve a redemption of the rights
or a permitted offer, the rights should not interfere with a merger or other business combination approved by our board of directors. The adoption of the rights agreement was approved by our
stockholders prior to our initial public offering.

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We
have summarized the material terms and conditions of the rights agreement and the rights below. For a complete description of the rights, we encourage you to read the rights
agreement, which is an exhibit to this annual report.



The rights are attached to all shares of our outstanding common stock and will attach to all common stock that we issue prior to the
rights distribution date that we describe below. The rights are not exercisable until after the rights distribution date and will expire at the close of business on the tenth anniversary date of the
adoption of the rights plan, unless we redeem or exchange them earlier as described below. The rights will separate from the common stock and a rights distribution date will occur, subject to
specified exceptions, on the earlier of the following two dates:



Existing
stockholders and their affiliates are excluded from the definition of "acquiring person" for purposes of the rights, and therefore their ownership or future share acquisitions
cannot trigger the rights. Specified "inadvertent" owners that would otherwise become an acquiring person, including those who would have this designation as a result of repurchases of common stock by
us, will not become acquiring persons as a result of those transactions.

Our
board of directors may defer the rights distribution date in some circumstances, and some inadvertent acquisitions will not result in a person becoming an acquiring person if the
person promptly divests itself of a sufficient number of shares of common stock.

Until
the rights distribution date:



As
soon as practicable after the rights distribution date, the rights agent will mail certificates representing the rights to holders of record of common stock at the close of business
on that date. After the rights distribution date, only separate rights certificates will represent the rights.

We
will not issue rights with any shares of common stock we issue after the rights distribution date, except as our board of directors may otherwise determine.



A "flip-in event" will occur under the rights agreement when a person becomes an acquiring person. If a flip-in
event occurs and we do not redeem the rights as described under the heading "Redemption of Rights" below, each right, other than any right that has become void, as described below, will
become exercisable at the time it is no longer redeemable for the number of shares of common stock, or, in some cases, cash, property or other of our securities, having a current market price equal to
two times the exercise price of such right.

If
a flip-in event occurs, all rights that then are, or in some circumstances that were, beneficially owned by or transferred to an acquiring person or specified related
parties will become void in the circumstances the rights agreement specifies.

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A "flip-over event" will occur under the rights agreement when, at any time after a person has become an acquiring
person:



If
a flip-over event occurs, each holder of a right, other than any right that has become void as we describe under the heading "Flip-In Event"
above, will have the right to receive the number of shares of common stock of the acquiring company having a current market price equal to two times the exercise price of such right.



The number of outstanding rights associated with our common stock is subject to adjustment for any stock split, stock dividend or
subdivision, combination or reclassification of our common stock occurring prior to the rights distribution date. With some exceptions, the rights agreement does not require us to adjust the exercise
price of the rights until cumulative adjustments amount to at least 1% of the exercise price. It also does not require us to issue fractional shares of our preferred stock that are not integral
multiples of one one-hundredth of a share, and, instead we may make a cash adjustment based on the market price of the common stock on the last trading date prior to the date of exercise.
The rights agreement reserves us the right to require, prior to the occurrence of any flip-in event or flip-over event that, on any
exercise of rights, that a number of rights must be exercised so that we will issue only whole shares of stock.



At any time until 10 days after the date on which the occurrence of a flip-in event is first publicly announced, we
may redeem the rights in whole, but not in part, at a redemption price of $0.01 per right. The redemption price is subject to adjustment for any stock split, stock dividend or similar transaction
occurring before the date of redemption. At our option, we may pay that redemption price in cash, shares of common stock or any other consideration our board of directors may select. The rights are
not exercisable after a flip-in event until they are no longer redeemable. If our board of directors timely orders the redemption of the rights, the rights will terminate on the
effectiveness of that action.



We may, at our option, exchange the rights (other than rights owned by an acquiring person or an affiliate or an associate of an
acquiring person, which have become void), in whole or in part. The exchange must be at an exchange ratio of one share of common stock per right, subject to specified adjustments at any time after the
occurrence of a flip-in event and prior to:



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While the rights are outstanding, we may amend the provisions of the rights agreement only as follows:



At
any time when no rights are outstanding, we may amend any of the provisions of the rights agreement, other than decreasing the redemption price.

Memorandum and Articles of Association

Our purpose is to engage in any lawful act or activity relating to the business of chartering, rechartering or operating
containerships, drybulk carriers or other vessels or any other lawful act or activity customarily conducted in conjunction with shipping, and any other lawful act or activity approved by the board of
directors. Our articles of incorporation and bylaws do not impose any limitations on the ownership rights of our stockholders.

Under
our bylaws, annual stockholder meetings will be held at a time and place selected by our board of directors. The meetings may be held in or outside of the Marshall Islands. Special
meetings may be
called by the board of directors or, at the request of the holders of a majority of our issued and outstanding stock entitled to vote on the matters proposed to be considered at such meeting, or by
our secretary. Our board of directors may set a record date between 15 and 60 days before the date of any meeting to determine the stockholders that will be eligible to receive notice and vote
at the meeting.



Our directors are elected by a plurality of the votes cast at each annual meeting of the stockholders by the holders of shares entitled
to vote in the election. There is no provision for cumulative voting.

The
board of directors may change the number of directors to not less than two, nor more than 15, by a vote of a majority of the entire board. Each director shall be elected to serve
until the third succeeding annual meeting of stockholders and until his or her successor shall have been duly elected and qualified, except in the event of death, resignation or removal. A vacancy on
the board created by death, resignation, removal (which may only be for cause), or failure of the stockholders to elect the entire class of directors to be elected at any election of directors or for
any other reason, may be filled only by an affirmative vote of a majority of the remaining directors then in office, even if less than a quorum, at any special meeting called for that purpose or at
any regular meeting of the board of directors. The board of directors has the authority to fix the amounts which shall be payable to the members of our board of directors for attendance at any meeting
or for services rendered to us.



Under the Marshall Islands Business Corporations Act, or the BCA, our stockholders have the right to dissent from various corporate
actions, including any merger or sale of all or substantially all of our assets not made in the usual course of our business, and to receive payment of the fair value of their shares. In the event of
any further amendment of our articles of incorporation, a stockholder also

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has
the right to dissent and receive payment for his or her shares if the amendment alters certain rights in respect of those shares. The dissenting stockholder must follow the procedures set forth in
the BCA to receive payment. In the event that we and any dissenting stockholder fail to agree on a price for the shares, the BCA procedures involve, among other things, the institution of proceedings
in the high court of the Republic of The Marshall Islands in which our Marshall Islands office is situated or in any appropriate jurisdiction outside the Marshall Islands in which our shares are
primarily traded on a local
or national securities exchange. The value of the shares of the dissenting stockholder is fixed by the court after reference, if the court so elects, to the recommendations of a court-appointed
appraiser.



Under the BCA, any of our stockholders may bring an action in our name to procure a judgment in our favor, also known as a derivative
action, provided that the stockholder bringing the action is a holder of common stock both at the time the derivative action is commenced and at the time of the transaction to which the action
relates.



Several provisions of our articles of incorporation and bylaws may have anti-takeover effects. These provisions are
intended to avoid costly takeover battles, lessen our vulnerability to a hostile change of control and enhance the ability of our board of directors to maximize stockholder value in connection with
any unsolicited offer to acquire us. However, these anti-takeover provisions, which are summarized below, could also discourage, delay or prevent (1) the merger or acquisition of
our company by means of a tender offer, a proxy contest or otherwise, that a stockholder may consider in its best interest and (2) the removal of incumbent officers and directors.



Under the terms of our articles of incorporation, our board of directors has authority, without any further vote or action by our
stockholders, to issue up to 5,000,000 shares of blank check preferred stock, of which 1,000,000 shares have been designated Series A Participating Preferred Stock in connection with our
adoption of a stockholder rights plan as described above under "Stockholder Rights Plan." Our board of directors may issue shares of preferred stock on terms calculated to discourage,
delay or prevent a change of control of our company or the removal of our management.



Our articles of incorporation provide for a board of directors serving staggered, three-year terms. Approximately
one-third of our board of directors will be elected each year. This classified board provision could discourage a third party from making a tender offer for our shares or attempting to
obtain control of our company. It could also delay stockholders who do not agree with the policies of the board of directors from removing a majority of the board of directors for two years.



Our articles of incorporation and bylaws prohibit cumulative voting in the election of directors. Our bylaws require parties other than
the board of directors to give advance written notice of nominations for the election of directors. Our bylaws also provide that our directors may be removed only for cause and only upon the
affirmative vote of the holders of at least 662/3% of the outstanding shares of our capital stock entitled to vote for those directors. These provisions may discourage, delay or prevent
the removal of incumbent officers and directors.

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Our bylaws provide that special meetings of our stockholders may be called by our board of directors or, at the request of holders of a
majority of the common stock entitled to vote at such meeting, by our secretary.



Our bylaws provide that stockholders seeking to nominate candidates for election as directors or to bring business before an annual
meeting of stockholders must provide timely notice of their proposal in writing to the corporate secretary.

Generally,
to be timely, a stockholder's notice must be received at our principal executive offices not less than 90 days nor more than 120 days prior to the first
anniversary date of the previous year's annual meeting. Our bylaws also specify requirements as to the form and content of a stockholder's notice. These provisions may impede stockholders' ability to
bring matters before an annual meeting of stockholders or to make nominations for directors at an annual meeting of stockholders.



Although the BCA does not contain specific provisions regarding "business combinations" between companies organized under the laws of
the Marshall Islands and "interested stockholders," we have included these provisions in our articles of incorporation. Specifically, our articles of incorporation prohibit us from engaging in a
"business combination" with certain persons for three years following the date the person becomes an interested stockholder. Interested stockholders generally include:



Subject
to certain exceptions, a business combination includes, among other things:



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These provisions of our articles of incorporation do not apply to a business combination if:



Material Contracts

The following is a summary of each material contract that we have entered into outside the ordinary course of business during the two
year period immediately preceding the date of this Annual

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Report
on Form 20-F. Such summaries are not intended to be complete and reference is made to the contracts themselves, which are exhibits to this Annual Report on
Form 20-F.



On May 13, 2003, we, as guarantor, and certain of our vessel-owning subsidiaries, as borrowers, entered into a
$124.4 million credit facility with the Export-Import Bank of Korea, which we refer to as our KEXIM credit facility, for a term of 12 years to finance a portion of the purchase price of
theCSCL Europeand theCSCL America(exMSC Baltic).As
of May 31, 2010, $67.8 million was outstanding under this credit facility and there were no undrawn funds available.

Interest
on borrowings under the KEXIM credit facility accrues at a fixed rate. Beginning on December 15, 2004, we began repaying the principal amount of this loan in 48
consecutive quarterly installments of $2.6 million (except for the first installment of $1.5 million) plus installments of $1.3 million, $1.0 million and
$0.69 million payable in August 2016, September 2016 and November 2016, respectively.

In
connection with our KEXIM facility, on November 15, 2004, we entered into an interest rate hedging transaction with RBS. The transaction is an amortizing interest rate swap,
with the end result being the conversion of the fixed rate payable on the loan to a floating rate (U.S. dollar LIBOR). The notional amortizing schedule of the swap exactly mirrors the amortization
schedule of the above loan.



On January 29, 2004, we, as guarantor, and certain of our vessel-owning subsidiaries, as borrowers, entered into a
$144.0 million credit facility with the Export-Import Bank of Korea and Fortis Capital, which we refer to as the KEXIM-Fortis credit facility, repayable over 12 years commencing with the
delivery of theCSCL Pusan(exHN 1559)and theCSCL
Le Havre(exHN 1561). As of May 31, 2010, $107.5 million was outstanding under this credit facility and
there were no undrawn funds available.

The
KEXIM-Fortis credit facility is organized in two tranches, Tranche A and Tranche B. Each of Tranche A and Tranche B is comprised of two parts. One part of
Tranche A, consisting of $67.5 million, and Tranche B, consisting of $4.5 million, is attributable to theCSCL Pusan. The
second part of Tranche A, consisting of $67.5 million, and Tranche B, consisting of $4.5 million, is attributable to theCSCL
Le Havre(exHN 1561). The portion of Tranche A attributable to theCSCL
Pusan

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(exHN 1559) is repayable in 24 semi-annual installments of $2.8 million each, commencing on March 15, 2007. The
portion of Tranche B attributable to theCSCL Pusanconsists of a balloon payment of $4.5 million payable with the final installment of
Tranche A on September 8, 2018. The portion of Tranche A attributable to theCSCL Le Havreis repayable in 24
semi-annual installments of $2.8 million each, commencing on March 15, 2007. The portion of Tranche B attributable to theCSCL
Le Havreconsists of a balloon payment of $4.5 million payable with the final installment of Tranche A on March 15, 2019.

Interest
on borrowings under Tranche A of the KEXIM-Fortis credit facility accrues at a fixed interest rate. Interest on borrowings under Tranche B of the KEXIM-Fortis
credit facility accrues at LIBOR plus margin.



On November 14, 2006, we, as borrower, and certain of our vessel-owning subsidiaries, as guarantors, entered into a
$700.0 million revolving and term loan credit facility with Aegean Baltic Bank S.A., HSH Nordbank AG and Piraeus Bank, which we refer to as the Aegean BalticHSH
NordbankPiraeus credit facility. The credit facility is for a committed amount of $700.0 million and is collateralized by mortgages and other security relating to the CMA CGM Elbe, theCMA CGM Kalamata, theCMA CGM Komodo,
theHenry(exCMA CGM Passiflore), theHyundai
Commodore(exMOL Affinity), theHyundai Duke, the CMA CGM Vanille,theMarathonas, theMaersk
Messologi, theMaersk Mytilini, theYM Yantian, theAl
Rayyan(exNorasia Hamburg), theYM Milano, the CMA CGM Lotus, theHyundai Vladivostok, theHyundai
Advance, theHyundai Stride,theHyundai Future,the Hyundai Sprinter,theHanjin Montrealand theMSC Eagle.The loan is repayable in up to 20 consecutive quarterly installments beginning in 2012 and a balloon payment, if applicable, together with the last payment due in November 2016. Specifically, the
repayment schedule as well as the balloon will be determined based upon the weighted average age of the vessels that will comprise the securities portfolio for this loan at the end of the fifth year
(i.e., November 14, 2011).

As
of July 21, 2009, we agreed to amend the facility as follows:



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In
January 2010, we repaid a principal amount of $10.7 million with the Aegean Baltic BankHSH NordbankPiraeus Bank revolving credit facility.

As
of May 31, 2010, $664.3 million was outstanding under the Aegean BalticHSH NordbankPiraeus Bank credit facility.



On February 20, 2007, we, as borrower, and certain of our vessel-owning subsidiaries, as guarantors, entered into a
$700.0 million senior revolving credit facility with The Royal Bank of Scotland, which we refer to as the RBS credit facility. On April 14, 2010, we signed a supplemental agreement with
the Royal Bank of Scotland to release the balance of our restricted cash with the bank of $169.9 million and the immediate application of such amount as prepayment of the $700.0 million
senior revolving credit facility. The amount prepaid pursuant to this agreement will be available for re-drawing as progress payments to shipyards for specific newbuildings. As of
May 31, 2010, the utilized portion of this facility was $522.1 million, with a remaining $164.7 million committed and available for future drawings.

The
$522.1 million outstanding loan balance consists of the following:



On December 17, 2002, we, as guarantor, and certain of our vessel owning subsidiaries, as borrowers, entered into a
$60.0 million credit facility with HSH Nordbank AG, Dresdner Bank and Aegean Baltic Bank acting as agent, which we refer to as the HSH Nordbank credit facility, with a term of 10 years
to finance a portion of the purchase price of theBunga Raya Tujuh(exMaersk Deva) and the Bunga Raya Tiga(exMaersk Derby). As of May 31, 2010, $36.0 million was outstanding under
this credit facility and there were no undrawn funds available.



On February 15, 2008, we, as borrower, and certain of our vessel-owning subsidiaries, as guarantors, entered into a credit
facility for up to $156.8 million to finance part of the purchase price

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of
theCMA CGM MoliereandCMA CGM Musset. As of May 31, 2010, $156.8 million was
outstanding under this credit facility and there were no undrawn funds available.



On
July 29, 2008, we entered into a new credit facility of $253.2 million with Fortis Bank (acting as agent), Lloyds TSB and National Bank of
Greece in relation to the financing of vesselsYM Colombo, YM Seattle, YM Vancouver and YM Singapore. The structure of this credit facility is such that
the group of banks loaned funds of $253.2 million to the Company, which we then re-loaned to a newly created entity of the group of banks ("Investor Bank"). With the proceeds,
Investor Bank then subscribed for preference shares in Auckland Marine Inc., Seacarriers Services Inc., Seacarriers Lines Inc., and Wellington Marine Inc. (subsidiaries of
Danaos Corporation). In addition, four of our subsidiaries issued a put option in respect of the preference shares. The effect of these transactions is that our subsidiaries are required to pay out
fixed preference dividends to the Investor Bank, the Investor Bank is required to pay fixed interest due on the loan from us to Investor
Bank and finally the Investor Bank is required to pay put option premium on the put options issued in respect of the preference shares. As of May 31, 2010, $253.2 million was outstanding
under this credit facility and there were no undrawn funds available.



On May 9, 2008, we entered into a credit facility with Credit Suisse for an amount equal to $221.1 million to finance new
vessels, a 4,250 TEU containership, theZim Luanda, a 6,500 TEU containership, theCMA CGM Nerval, and a
6,500 TEU containership, theYM Mandate. As of May 31, 2010, $221.1 million was outstanding under this credit facility and there were no
undrawn funds available.



On May 30, 2008, we entered into a credit facility with Deutsche Bank for up to $180.0 million in relation to the
acquisition of three 4,253 TEU containerships, theZim Rio Grande, theZim Sao Paoloand the Zim Kingston.
As of May 31, 2010, $180.0 million was outstanding under this credit facility and there were no undrawn funds available.



On February 2, 2009, the Company, as borrower, and certain of its vessel-owning subsidiaries, as guarantors, entered into a
credit facility with Deutsche Schiffsbank, Credit Suisse and Emporiki Bank of $298.5 million in relation to pre and post-delivery financing for five new-building
vessels, theZIM Dalian(a 4,253 TEU vessel), theHN N-220and the HN N-223(two 3,400 TEU vessels), theHN N-215(a 6,500 TEU vessel) and the HN Z0001(a 8,530 TEU vessel), which are currently under construction and will be gradually delivered to us from the
third quarter of 2010 until the end
of the first quarter of 2011, with theZim Dalianhaving been delivered to us on March 31, 2009. As of May 31, 2010, $128.3 million
was outstanding under this credit facility and $170.2 million of undrawn availability remained available to us for future borrowings.

As
described in "Item 5. Operating and Financial Review and ProspectsBank Agreement," we have reached an agreement in principle to restructure our obligations under
each of the credit facilities described above, other than the KEXIM and KEXIM-Fortis credit facilities. We have also reached agreements in principle with those lenders for five new credit facilities,
and have reached agreements in principle for another new credit facility and a vendor financing arrangement, all as described in "Item 5. Operating and Financial Review and Prospects." For
additional information regarding our existing credit facilities, including the financial covenants contained therein and the waivers and

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amendments
we have obtained in respect of our non-compliance therewith, see Note 13 to our consolidated financial statements included elsewhere in this annual report.

Exchange Controls and Other Limitations Affecting Stockholders

Under Marshall Islands and Greek law, there are currently no restrictions on the export or import of capital, including foreign
exchange controls or restrictions that affect the remittance of dividends, interest or other payments to non-resident holders of our common stock.

We
are not aware of any limitations on the rights to own our common stock, including rights of non-resident or foreign stockholders to hold or exercise voting rights on our
common stock, imposed by foreign law or by our articles of incorporation or bylaws.

Tax Considerations



We are a Marshall Islands corporation. Because we do not, and we do not expect that we will, conduct business or operations in the
Marshall Islands, under current Marshall
Islands law we are not subject to tax on income or capital gains and our stockholders will not be subject to Marshall Islands taxation or withholding on dividends and other distributions, including
upon a return of capital, we make to our stockholders. In addition, our stockholders, who do not reside in, maintain offices in or engage in business in the Marshall Islands, will not be subject to
Marshall Islands stamp, capital gains or other taxes on the purchase, ownership or disposition of common stock, and such stockholders will not be required by the Republic of The Marshall Islands to
file a tax return relating to the common stock.

Each
stockholder is urged to consult their tax counsel or other advisor with regard to the legal and tax consequences, under the laws of pertinent jurisdictions, including the Marshall
Islands, of their investment in us. Further, it is the responsibility of each stockholder to file all state, local and non-U.S., as well as U.S. federal tax returns that may be required of
them.



The Republic of Liberia enacted a new income tax act effective as of January 1, 2001 (the "New Act"). In contrast to the income
tax law previously in effect since 1977, the New Act does not distinguish between the taxation of "non-resident" Liberian corporations, such as our Liberian subsidiaries, which conduct no
business in Liberia and were wholly exempt from taxation under the prior law, and "resident" Liberian corporations which conduct business in Liberia and are (and were under the prior law) subject to
taxation.

In
2004, the Liberian Ministry of Finance issued regulations exempting non-resident corporations engaged in international shipping, such as our Liberian subsidiaries, from
Liberian taxation under the New Act retroactive to January 1, 2001. It is unclear whether these regulations, which ostensibly conflict with the provisions of the New Act, are a valid exercise
of the regulatory authority of the Liberian Ministry of Finance such that the regulations can be considered unquestionably enforceable. However, an opinion dated December 23, 2004 addressed by
the Minister of Justice and Attorney General of the Republic of Liberia to The LISCR Trust Company stated that the regulations are a valid exercise of the regulatory authority of the Ministry of
Finance. The Liberian Ministry of Finance has not at any time since January 1, 2001 sought to collect taxes from any of our Liberian subsidiaries.

If,
however, our Liberian subsidiaries were subject to Liberian income tax under the New Act, they would be subject to tax at a rate of 35% on their worldwide income. As a result, their,
and subsequently our, net income and cash flow would be materially reduced. In addition, as the ultimate

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shareholder
of the Liberian subsidiaries we would be subject to Liberian withholding tax on dividends paid by our Liberian subsidiaries at rates ranging from 15% to 20%.



The following discussion of United States federal income tax matters is based on the Internal Revenue Code of 1986, or the Code,
judicial decisions, administrative pronouncements, and existing and proposed regulations issued by the United States Department of the Treasury, all of which are in effect and available and subject to
change, possibly with retroactive effect. Except as otherwise noted, this discussion is based on the assumption that we will not maintain an office or other fixed place of business within the United
States. We have no current intention of maintaining such an office. References in this discussion to "we" and "us" are to Danaos Corporation and its subsidiaries on a consolidated basis, unless the
context otherwise requires.



Unless exempt from United States federal income taxation under the rules discussed below, a foreign corporation is subject to United
States federal income taxation in respect of any income that is derived from the use of vessels, from the hiring or leasing of vessels for use on a time, operating or bareboat charter basis, from the
participation in a pool, partnership, strategic alliance, joint operating agreement or other joint venture it directly or indirectly owns or participates in that generates such income, or from the
performance of services directly related to those uses, which we refer to as "shipping income," to the extent that the shipping income is derived from sources within the United States. For these
purposes, 50% of shipping income that is attributable to
transportation that begins or ends, but that does not both begin and end, in the United States constitutes income from sources within the United States, which we refer to as "United States-source
shipping income."

Shipping
income attributable to transportation that both begins and ends in the United States is generally considered to be 100% from sources within the United States. We do not expect
to engage in transportation that produces income which is considered to be 100% from sources within the United States.

Shipping
income attributable to transportation exclusively between non-United States ports is generally considered to be 100% derived from sources outside the United States.
Shipping income derived from sources outside the United States will not be subject to any United States federal income tax.

In
the absence of exemption from tax under Section 883 of the Code, our gross United States-source shipping income and that of our vessel-owning or vessel-operating subsidiaries,
unless determined to be effectively connected with the conduct of a United States trade or business, as described below, would be subject to a 4% tax imposed without allowance for deductions as
described below.



Other than with respect to four of our vessel-owning subsidiaries which are discussed in greater detail below, under Section 883
of the Code, we and our vessel-owning or vessel-operating subsidiaries will be exempt from United States federal income taxation on United States-source shipping income if:

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We
believe, based on Revenue Ruling 2008-17, 2008-12 IRB 626, and, in the case of the Marshall Islands, an exchange of notes between the United States and
the Marshall Islands, 1990-2 C.B. 321, in the case of Liberia, an exchange of notes between the United States and Liberia, 1988-1 C.B. 463, in the
case of Cyprus, an exchange of notes between the United States and Cyprus, 1989-2 C.B. 332 and, in the case of Singapore, an exchange of notes between the United States and
Singapore, 1990-2 C.B. 323, (each an "Exchange of Notes") that the Marshall Islands, Liberia, Cyprus and Singapore, the jurisdictions in which we and our vessel-owning and
vessel-operating subsidiaries are incorporated, grant an "equivalent exemption" to United States corporations. Therefore, we believe that we and our vessel-owning and vessel-operating subsidiaries
other than four vessel-owning subsidiaries discussed below will be exempt from United States federal income taxation with respect to United States-source shipping income if either the 50% Ownership
Test or the Publicly-Traded Test is met. While we believe that we currently satisfy the 50% Ownership Test, we expect that, if the 883 Trust were to come to own 50% or less of our shares, it may be
difficult for us to satisfy the 50% Ownership Test due to the public trading of our stock. Our ability to satisfy the Publicly-Traded Test is discussed below.

The
Section 883 regulations provide, in pertinent part, that stock of a foreign corporation will be considered to be "primarily traded" on an established securities market in a
particular country if the number of shares of each class of stock that are traded during any taxable year on all established securities markets in that country exceeds the number of shares in each
such class that are traded during that year on established securities markets in any other single country. For 2009, our common stock, which is the sole class of our issued and outstanding stock, was
"primarily traded" on the New York Stock Exchange and we anticipate that that will also be the case for subsequent taxable years.

Under
the regulations, our common stock will be considered to be "regularly traded" on an established securities market if one or more classes of our stock representing more than 50% of
our outstanding shares, by total combined voting power of all classes of stock entitled to vote and total value, is listed on the market. We refer to this as the "listing threshold". Since our common
stock is our sole class of
stock we satisfied the listing threshold for 2009 and expect to continue to do so for subsequent taxable years.

It
is further required that with respect to each class of stock relied upon to meet the listing threshold (i) such class of the stock is traded on the market, other than in
minimal quantities, on at least 60 days during the taxable year or 1/6 of the days in a short taxable year; and (ii) the aggregate number of shares of such class of stock
traded on such market is at least 10% of the average number of shares of such class of stock outstanding during such year or as appropriately adjusted in the case of a short taxable year. We believe
that we satisfied the trading frequency and trading volume tests years for 2009 and we expect to continue to satisfy these requirements for subsequent taxable years. Even if this were not the case,
the regulations provide that the trading frequency and trading volume tests will be deemed satisfied if, as was the case for 2009 and we expect to be the case with our common stock for subsequent
taxable years, such class of stock is traded on an established market in the United States and such stock is regularly quoted by dealers making a market in such stock.

Notwithstanding
the foregoing, the regulations provide, in pertinent part, that a class of our stock will not be considered to be "regularly traded" on an established securities market
for any taxable year

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in
which 50% or more of such class of our outstanding shares of the stock is owned, actually or constructively under specified stock attribution rules, on more than half the days during the taxable
year by persons who each own 5% or more of the value of such class of our outstanding stock, which we refer to as the "5 Percent Override Rule."

For
purposes of being able to determine the persons who own 5% or more of our stock, or "5% Stockholders," the regulations permit us to rely on those persons that are identified on
Schedule 13G and Schedule 13D filings with the United States Securities and Exchange Commission, or the "SEC," as having a 5% or more beneficial interest in our common stock. The
regulations further provide that an investment company which is registered under the Investment Company Act of 1940, as amended, will not be treated as a 5% Stockholder for such purposes.

More
than 50% of our shares of common stock are currently owned by 5% stockholders. Thus, we will be subject to the 5% Override Rule unless we can establish that among the shares
included in the closely-held block of our shares of common stock there are a sufficient number of shares of common stock that are owned or treated as owned by "qualified stockholders" such
that the shares of common stock included in such block that are not so treated could not constitute 50% or more of the shares of our common stock for more than half the number of days during the
taxable year. In order to establish this, such qualified stockholders would have to comply with certain documentation and certification requirements designed to substantiate their identity as
qualified stockholders. For these purposes, a "qualified stockholder" includes (i) an individual that owns or is treated as owning shares of our common stock and is a resident of a jurisdiction
that provides an exemption that is equivalent to that provided by Section 883 of the Code and (ii) certain other persons.
There can be no assurance that we will not be subject to the 5 Percent Override Rule with respect to any taxable year.

Approximately
80.1% of our shares will be treated, under applicable attribution rules, as owned by the 883 Trust whose ownership of our shares will be attributed, during his lifetime, to
John Coustas, our chief executive officer, for purposes of Section 883. Dr. Coustas has entered into an agreement with us regarding his compliance, and the compliance of certain entities
that he controls and through which he owns our shares, with the certification requirements designed to substantiate status as qualified stockholders. In certain circumstances, including circumstances
where Dr. Coustas ceases to be a "qualified stockholder" or where the 883 Trust transfers some or all of our shares that it holds, Dr Coustas' compliance, and the compliance of certain
entities that he controls or through which he owns our shares, with the terms of the agreement with us will not enable us to satisfy the requirements for the benefits of Section 883. Following
Dr. Coustas' death, there can be no assurance that our shares that are treated, under applicable attribution rules, as owned by the 883 Trust will be treated as owned by a "qualified
stockholder" or that any "qualified stockholder" to whom ownership of all or a portion of such ownership is attributed will comply with the ownership certification requirements under
Section 883. As to the four vessel-owning subsidiaries referred to above, we believe that their qualification for the benefits of Section 883 for any taxable year will depend upon
whether preferred shares issued by such subsidiaries, as to which we are not the direct or indirect shareholder of record, are owned, directly or under applicable ownership attribution rules, by
"qualified shareholders" who comply with specified ownership certification procedures. There can be no assurance that such preferred shares will be treated as so owned with respect to any taxable
year.

Accordingly,
there can be no assurance that we or any of our vessel-owning or vessel-operating subsidiaries will qualify for the benefits of Section 883 for any taxable year.

To
the extent the benefits of Section 883 are unavailable, our U.S.-source shipping income, to the extent not considered to be "effectively connected" with the conduct of a United
States trade or business, as described below, would be subject to a 4% tax imposed by Section 887 of the Code on a gross basis, without the benefit of deductions. Since, under the sourcing
rules described above, we expect that no more than 50% of our shipping income would be treated as being derived from United States sources, we expect that the maximum effective rate of United States
federal income tax on our

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gross
shipping income would never exceed 2% under the 4% gross basis tax regime. Many of our charters contain provisions obligating the charter to reimburse us for amounts paid in respect of the 4%
tax with respect to the activities of the vessel subject to the charter.

To
the extent the benefits of the Section 883 exemption are unavailable and our United States-source shipping income is considered to be "effectively connected" with the conduct
of a United States trade or business, as described below, any such "effectively connected" U.S.-source shipping income, net of applicable deductions, would be subject to the United States federal
corporate income tax currently imposed at rates of up to 35%. In addition, we may be subject to the 30% "branch profits" taxes on
earnings effectively connected with the conduct of such trade or business, as determined after allowance for certain adjustments, and on certain interest paid or deemed paid attributable to the
conduct of our United States trade or business.

Our
U.S.-source shipping income, other than leasing income, will be considered "effectively connected" with the conduct of a United States trade or business only
if:



Our
U.S.-source shipping income from leasing will be considered "effectively connected" with the conduct of a U.S. trade or business only if:



For
these purposes, leasing income is treated as attributable to a fixed place of business where such place of business is a material factor in the realization of such income and such
income is realized in the ordinary course of business carried on through such fixed place of business. Based on the foregoing and on the expected mode of our shipping operations and other activities,
we believe that none of our U.S.-source shipping income will be "effectively connected" with the conduct of a U.S. trade or business.



Regardless of whether we qualify for exemption under Section 883, we will not be subject to United States federal income
taxation with respect to gain realized on a sale of a vessel, provided the sale is considered to occur outside of the United States under United States federal income tax principles. In general, a
sale of a vessel will be considered to occur outside of the United States for this purpose if title to the vessel, and risk of loss with respect to the vessel, pass to the buyer outside of the United
States. It is expected that any sale of a vessel will be so structured that it will be considered to occur outside of the United States unless any gain from such sale is expected to qualify for
exemption under Section 883.

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As used herein, the term "United States Holder" means a beneficial owner of common stock that is a United States citizen or resident,
United States corporation or other United States entity taxable as a corporation, an estate the income of which is subject to United States federal income taxation regardless of its source, or a trust
if a court within the United States is able to exercise primary jurisdiction over the administration of the trust and one or more United States persons have the authority to control all substantial
decisions of the trust.

If
a partnership holds our common stock, the tax treatment of a partner will generally depend upon the status of the partner and upon the activities of the partnership. Partners in a
partnership holding our common stock are encouraged to consult their tax advisor.



Subject to the discussion of passive foreign investment companies, or PFICs, below, any distributions made by us with respect to our
common stock to a United States Holder will generally constitute dividends, which may be taxable as ordinary income or "qualified dividend income" as described in more detail below, to the extent of
our current or accumulated earnings and profits, as determined under United States federal income tax principles. Distributions in excess of our earnings and profits will be treated first as a
nontaxable return of capital to the extent of the United States Holder's tax basis in his common stock on a dollar for dollar basis and thereafter as capital gain. Because we are not a United States
corporation, United States Holders that are corporations will not be entitled to claim a dividends received deduction with respect to any distributions they receive from us. Dividends paid with
respect to our common stock will generally be treated as passive category income or, in the case of certain types of United States Holders, general category income for purposes of computing allowable
foreign tax credits for United States foreign tax credit purposes.

Dividends
paid on our common stock to a United States Holder who is an individual, trust or estate (a "United States Individual Holder") should be treated as "qualified dividend income"
that is taxable to such United States Individual Holders at preferential tax rates (through 2010) provided that (1) the common stock is readily tradable on an established securities market in
the United States (such as the New York Stock Exchange); (2) we are not a PFIC for the taxable year during which the dividend is paid or the immediately preceding taxable year (see the
discussion below under "PFIC Status and Material U.S. Federal Tax Consequences"); and (3) the United States Individual Holder owns the common stock for more than 60 days in
the 121-day period beginning 60 days before the date on which the common stock becomes ex-dividend. Special rules may apply to any "extraordinary dividend". Generally,
an extraordinary dividend is a dividend in an amount which is equal to or in excess of ten percent of a stockholder's adjusted basis (or fair market value in certain circumstances) in a share of
common stock paid by us. If we pay an "extraordinary dividend" on our common stock that is treated as "qualified dividend income," then any loss derived by a United States Individual Holder from the
sale or exchange of such common stock will be treated as long-term capital loss to the extent of such dividend.

There
is no assurance that any dividends paid on our common stock will be eligible for these preferential rates in the hands of a United States Individual Holder. Moreover, it is unclear
whether these preferential tax rates on dividends will be extended on or before December 31, 2010 or, in the alternative, whether they will expire on such date. Any dividends paid by us which
are not eligible for these preferential rates will be taxed to a United States Individual Holder at the standard ordinary income rates.

Legislation
has been introduced that would deny the preferential rate of federal income tax currently imposed on qualified dividend income with respect to dividends received from a
non-U.S. corporation, unless the non-U.S. corporation either is eligible for the benefits of a comprehensive

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income
tax treaty with the United States or is created or organized under the laws of a foreign country which has a comprehensive income tax system. Because the Marshall Islands has not entered into a
comprehensive income tax treaty with the United States and imposes only limited taxes on corporations organized under its laws, it is unlikely that we could satisfy either of these requirements.
Consequently, if this legislation were enacted in its current form the preferential rate of federal income tax described above may no longer be applicable to dividends received from us. As of the date
hereof, it is not possible to predict with certainty whether or in what form the proposed legislation will be enacted.



Assuming we do not constitute a PFIC for any taxable year, a United States Holder generally will recognize taxable gain or loss upon a
sale, exchange or other disposition of our common stock in an amount equal to the difference between the amount realized by the United States Holder from such sale, exchange or other disposition and
the United States Holder's tax basis in such stock. Such gain or loss will be treated as long-term capital gain or loss if the United States Holder's holding period is greater than one
year at the time of the sale, exchange or other disposition. Such capital gain or loss will generally be treated as United States-source income or loss, as applicable, for United States foreign tax
credit purposes. A United States Holder's ability to deduct capital losses is subject to certain limitations.



Special United States federal income tax rules apply to a United States Holder that holds stock in a foreign corporation classified as
a passive foreign investment company, or PFIC, for United States federal income tax purposes. In general, we will be treated as a PFIC in any taxable year in which, after applying certain
look-through rules, either:



For
purposes of determining whether we are a PFIC, we will be treated as earning and owning our proportionate share of the income and assets, respectively, of any of our subsidiary
corporations in which we own at least 25% of the value of the subsidiary's stock. Income earned, or deemed earned, by us in connection with the performance of services will not constitute passive
income. By contrast, rental income will generally constitute "passive income" unless we are treated under specific rules as deriving our rental income in the active conduct of a trade or business.

We
may hold, directly or indirectly, interests in other entities that are PFICs ("Subsidiary PFICs"). If we are a PFIC, each United States Holder will be treated as owning its pro rata
share by value of the stock of any such Subsidiary PFICs.

While
there are legal uncertainties involved in this determination, we believe that we should not be treated as a PFIC for the taxable year ended December 31, 2009. We believe
that, although there is no legal authority directly on point, the gross income that we derive from time chartering activities of our subsidiaries should constitute services income rather than rental
income. Consequently, such income should not constitute passive income and the vessels that we or our subsidiaries operate in connection with the production of such income should not constitute
passive assets for purposes of determining whether we are a PFIC. The characterization of income from time charters, however, is uncertain. Although there is older legal authority supporting this
position consisting of case law and Internal Revenue Service, or IRS, pronouncements concerning the characterization of income derived from time

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charters
as services income for other tax purposes, the United States Court of Appeals for the Fifth Circuit recently held inTidewater Inc. and Subsidiaries v. United
States, 565 F.3d 299; (5th Cir. 2009), that income derived from certain time chartering activities should be treated as rental income rather than services income
for purposes of the "foreign sales corporation" rules under the Code. The IRS has stated that it disagrees with and will not acquiesce to theTidewaterdecision, and in its discussion stated that the time charters at issue inTidewaterwould be treated as producing services income for PFIC purposes.
However, the IRS's statement with respect to theTidewaterdecision was an administrative action that cannot be relied upon or otherwise cited as
precedent by taxpayers. Consequently, in the absence of any binding legal authority specifically relating to the statutory provisions governing PFICs, there can be no assurance that the IRS or a court
would agree with theTidewaterdecision. However, if the principles of theTidewaterdecision were
applicable to our time charters, we would likely be treated
as a PFIC. Moreover, although we intend to conduct our affairs in a manner to avoid being classified as a PFIC, we cannot assure you that the nature of our assets, income and operations will not
change, or that we can avoid being treated as a PFIC for any taxable year.

Under
recently enacted legislation, if we were to be treated as a PFIC for any taxable year after 2010, a United States Holder would be required to file an annual report with the IRS for
that year with respect to such holder's common stock. In addition, as discussed more fully below, if we were to be treated as a PFIC for any taxable year, a United States Holder would be subject to
different taxation rules depending on whether the United States Holder makes an election to treat us as a "Qualified Electing Fund," which election we refer to as a "QEF election." As an alternative
to making a QEF election, a United States Holder should be able to make a "mark-to-market" election with respect to our common stock, as discussed below.



If a United States Holder makes a timely QEF election, which United States Holder we refer to as an "Electing Holder," for United
States federal income tax purposes each year the Electing Holder must report his, her or its pro-rata share of our ordinary earnings and our net capital gain, if any, for our taxable year
that ends with or within the taxable year of the Electing Holder, regardless of whether or not distributions were received from us by the Electing Holder. Generally, a QEF election should be made on
or before the due date for filing the electing United States Holder's U.S. federal income tax return for the first taxable year in which our common stock is held by such United States Holder and we
are classified as a PFIC. The Electing Holder's adjusted tax basis in the common stock would be increased to reflect taxed but undistributed earnings and profits. Distributions of earnings and profits
that had been previously taxed would result in a corresponding reduction in the adjusted tax basis in the common stock and would not be taxed again once distributed. An Electing Holder would generally
recognize capital gain or loss on the sale, exchange or other disposition of our common stock. A United States Holder would make a QEF election with respect to any year that our company and any
Subsidiary PFIC are treated as PFICs by filing one copy of IRS Form 8621 with his, her or its United States federal income tax return and a second copy in accordance with the instructions to
such form. If we were to become aware that we were to be treated as a PFIC for any taxable year, we would notify all United States Holders of such treatment and would provide all necessary information
to any United States Holder who requests such information in order to make the QEF election described above with respect to our common stock and the stock of any Subsidiary PFIC.



Alternatively, if we were to be treated as a PFIC for any taxable year and, as we anticipate, our common stock is treated as
"marketable stock," a United States Holder would be allowed to make a "mark-to-market" election with respect to our common stock, provided the United States Holder

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completes
and files IRS Form 8621 in accordance with the relevant instructions and related Treasury Regulations. If that election is made, the United States Holder generally would include as
ordinary income in each taxable year the excess, if any, of the fair market value of the common stock at the end of the taxable year over such holder's adjusted tax basis in the common stock. The
United States Holder also would be permitted an ordinary loss in respect of the excess, if any, of the United States Holder's adjusted tax basis in the common stock over its fair market value at the
end of the taxable year, but only to the extent of the net amount previously included in income as a result of the mark-to-market election. A United States Holder's tax basis
in his, her or its common stock would be adjusted to reflect any such income or loss amount. Gain realized on the sale, exchange or other disposition of our common stock would be treated as ordinary
income, and any loss realized on the sale, exchange or other disposition of the common stock would be treated as ordinary loss to the extent that such loss does not exceed the net
mark-to-market gains previously included by the United States Holder. A mark-to-market election under the PFIC rules with respect to our common stock
would not apply to a Subsidiary PFIC, and a United States Holder would not be able to make such a mark-to-market election in respect of its indirect ownership interest in that
Subsidiary PFIC. Consequently, United States Holders of our common stock could be subject to the PFIC rules with respect to income of the Subsidiary PFIC, the value of which already had been taken
into account indirectly via mark-to-market adjustments.



Finally, if we were treated as a PFIC for any taxable year, a United States Holder who does not make either a QEF election or a
"mark-to-market" election for that year, whom we refer to as a "Non-Electing Holder," would be subject to special rules with respect to (1) any excess
distribution (i.e., the portion of any distributions received by the Non-Electing Holder on our common stock in a taxable year in excess of 125% of the average annual distributions
received by the Non-Electing Holder in the three preceding taxable years, or, if shorter, the Non-Electing Holder's holding period for the
common stock) and (2) any gain realized on the sale, exchange or other disposition of our common stock. Under these special rules:



If
a United States Holder held our common stock during a period when we were treated as a PFIC but the United States Holder did not have a QEF election in effect with respect to us, then
in the event that we failed to qualify as a PFIC for a subsequent taxable year, the United States Holder could elect to cease to be subject to the rules described above with respect to those shares by
making a "deemed sale" or, in certain circumstances, a "deemed dividend" election with respect to our common stock. If the United States Holder makes a deemed sale election, the United States Holder
will be treated, for purposes of applying the rules described in the preceding paragraph, as having disposed of our common stock for their fair market value on the last day of the last taxable year
for which we qualified as a PFIC (the "termination date"). The United States Holder would increase his, her or its basis in such common stock by the amount of the gain on the deemed sale described in
the preceding sentence. Following a deemed sale election, the United States Holder would not be treated, for

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purposes
of the PFIC rules, as having owned the common stock during a period prior to the termination date when we qualified as a PFIC.

If
we were treated as a "controlled foreign corporation" for United States tax purposes for the taxable year that included the termination date, then a United States Holder could make a
deemed dividend election with respect to our common stock. If a deemed dividend election is made, the United States Holder is required to include in income as a dividend his, her or its pro rata share
(based on all of our stock held by the United States Holder, directly or under applicable attribution rules, on the
termination date) of our post-1986 earnings and profits as of the close of the taxable year that includes the termination date (taking only earnings and profits accumulated in taxable
years in which we were a PFIC into account). The deemed dividend described in the preceding sentence is treated as an excess distribution for purposes of the rules described in the second preceding
paragraph. The United States Holder would increase his, her or its basis in our common stock by the amount of the deemed dividend. Following a deemed dividend election, the United States Holder would
not be treated, for purposes of the PFIC rules, as having owned the common stock during a period prior to the termination date when we qualified as a PFIC. For purposes of determining whether the
deemed dividend election is available, we will generally be treated as a controlled foreign corporation for a taxable year when, at any time during that year, United States persons, each of whom owns,
directly or under applicable attribution rules, common stock having 10% or more of the total voting power of our common stock, in the aggregate own, directly or under applicable attribution rules,
shares representing more than 50% of the voting power or value of our common stock.

A
deemed sale or deemed dividend election must be made on the United States Holder's original or amended return for the shareholder's taxable year that includes the termination date and,
if made on an amended return, such amended return must be filed not later than the date that is three years after the due date of the original return for such taxable year. Special rules apply where a
person is treated, for purposes of the PFIC rules, as indirectly owning our common stock.



A beneficial owner of common stock that is not a United States Holder and is not treated as a partnership for United States federal
income tax purposes is referred to herein as a "Non-United States Holder."



Non-United States Holders generally will not be subject to United States federal income tax or withholding tax on dividends
received from us with respect to our common stock, unless that income is effectively connected with the Non-United States Holder's conduct of a trade or business in the United States. If
the Non-United States Holder is entitled to the benefits of a United States income tax treaty with respect to those dividends, that income generally is taxable only if it is attributable
to a permanent establishment maintained by the Non-United States Holder in the United States.



Non-United States Holders generally will not be subject to United States federal income tax or withholding tax on any gain
realized upon the sale, exchange or other disposition of our common stock, unless:



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If
the Non-United States Holder is engaged in a United States trade or business for United States federal income tax purposes, the income from the common stock, including
dividends and the gain from the sale, exchange or other disposition of the stock that is effectively connected with the conduct of that trade or business will generally be subject to regular United
States federal income tax in the same manner as discussed in the previous section relating to the taxation of United States Holders. In addition, in the case of a corporate Non-United
States Holder, such holder's earnings and profits that are attributable to the effectively connected income, which are subject to certain adjustments, may be subject to an additional branch profits
tax at a rate of 30%, or at a lower rate as may be specified by an applicable income tax treaty.



In general, dividend payments, or other taxable distributions, made within the United States to a noncorporate United States holder
will be subject to information reporting requirements and backup withholding tax if such holder:



Non-United
States Holders may be required to establish their exemption from information reporting and backup withholding by certifying their status on IRS
Form W-8BEN, W-8ECI or W-8IMY, as applicable.

If
a holder sells our common stock to or through a United States office or broker, the payment of the proceeds is subject to both United States backup withholding and information
reporting unless the holder certifies that it is a non-United States person, under penalties of perjury, or the holder otherwise establishes an exemption. If a holder sells our common
stock through a non-United States office of a non-United States broker and the sales proceeds are paid outside the United States, information reporting and backup withholding
generally will not apply to that payment. However, United States information reporting requirements, but not backup withholding, will apply to a payment of sales proceeds, even if that payment is made
outside the United States, if a holder sells our common stock through a non-United States office of a broker that is a United States person or has some other contacts with the United
States.

Backup
withholding tax is not an additional tax. Rather, a holder generally may obtain a refund of any amounts withheld under backup withholding rules that exceed such stockholder's
income tax liability by filing a refund claim with the IRS.

Dividends and Paying Agents

Not applicable.

Statement by Experts

Not applicable.

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Documents on Display

We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended. In accordance with these
requirements, we file reports and other information as a foreign private issuer with the SEC. You may inspect and copy our public filings without charge at the public reference facilities maintained
by the SEC at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information about the public reference room. You
may obtain copies of all or any part of such materials from the SEC upon payment of prescribed fees. You may also inspect reports and other information regarding registrants, such as us, that file
electronically with the SEC without charge at a web site maintained by the SEC athttp://www.sec.gov.

Item 11.    Quantitative and Qualitative Disclosures About Market Risk



In connection with certain of our credit facilities under which we pay a floating rate of interest, we entered into interest rate swap
agreements designed to decrease our financing cash outflows by taking advantage of the relatively lower interest rate environment in recent years. We have recognized these derivative instruments on
the consolidated balance sheet at their fair value. Pursuant to the adoption of our Risk Management Accounting Policy, and after putting in place the formal documentation required by the accounting
guidance for derivatives and hedging in order to designate these swaps as hedging instruments, as of June 15, 2006, these interest rate swaps qualified for hedge accounting, and, accordingly,
since that time, only hedge ineffectiveness amounts arising from the differences in the change in fair value of the hedging instrument and the hedged item are recognized in our earnings. Assessment
and measurement of prospective and retrospective effectiveness for these interest rate swaps are performed on a quarterly basis, on the financial statement and earnings reporting dates. Prior to
June 15, 2006, we recognized changes in the fair value of the interest rate swaps in current period earnings as these interest rate swap agreements did not qualify as hedging instruments under
the requirements in the accounting literature described below because we had not adopted a hedging policy. These changes would occur due to changes in market interest rates for debt with substantially
similar credit risk, payment profile and terms. We have not held or issued derivative financial instruments for trading or other speculative purposes.

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Set
forth below is a table of our interest rate swap arrangements converting floating interest rate exposure into fixed as of December 31, 2009 and 2008 (in thousands).

Counter-party

Contract
Trade Date

Effective
Date

Termination
Date

Notional
Amount on
Effective
Date

Fixed Rate
(Danaos pays)

Floating Rate
(Danaos receives)

Fair Value December 31, 2009

Fair Value December 31, 2008RBS


03/09/2007


3/15/2010


3/15/2015

$
200,000


5.07% p.a.

USD LIBOR 3M BBA

$
(19,100
)
$
(25,181
)RBS


03/16/2007


3/20/2009


3/20/2014

$
200,000


4.922% p.a.

USD LIBOR 3M BBA

$
(19,264
)
$
(27,438
)RBS


11/28/2006


11/28/2008


11/28/2013

$
100,000


4.855% p.a.

USD LIBOR 3M BBA

$
(9,234
)
$
(13,451
)RBS


11/28/2006


11/28/2008


11/28/2013

$
100,000


4.875% p.a.

USD LIBOR 3M BBA

$
(9,310
)
$
(13,546
)RBS


12/01/2006


11/28/2008


11/28/2013

$
100,000


4.78% p.a.

USD LIBOR 3M BBA

$
(8,947
)
$
(13,093
)HSH Nordbank


12/06/2006


12/8/2006


12/8/2009

$
200,000


4.739% p.a.

USD LIBOR 3M BBA

$


$
(6,474
)HSH Nordbank


12/06/2006


12/8/2009


12/8/2014

$
400,000


4.855% p.a.

USD LIBOR 3M BBA

$
(37,850
)
$
(48,115
)CITI


04/17/2007


4/17/2008


4/17/2015

$
200,000


5.124% p.a.

USD LIBOR 3M BBA

$
(21,650
)
$
(35,220
)CITI


04/20/2007


4/20/2010


4/20/2015

$
200,000


5.1775% p.a.

USD LIBOR 3M BBA

$
(19,210
)
$
(25,853
)RBS


09/13/2007


10/31/2007


10/31/2012

$
500,000


4.745% p.a.

USD LIBOR 3M BBA

$
(40,333
)
$
(54,131
)RBS


09/13/2007


9/15/2009


9/15/2014

$
200,000


4.9775% p.a.

USD LIBOR 3M BBA

$
(20,011
)
$
(26,067
)RBS


11/16/2007


11/22/2010


11/22/2015

$
100,000


5.07% p.a.

USD LIBOR 3M BBA

$
(6,561
)
$
(11,564
)RBS


11/15/2007


11/19/2010


11/19/2015

$
100,000


5.12% p.a.

USD LIBOR 3M BBA

$
(6,828
)
$
(11,801
)Eurobank


12/06/2007


12/10/2010


12/10/2015

$
200,000


4.8125% p.a.

USD LIBOR 3M BBA

$
(10,348
)
$
(20,611
)Eurobank


12/06/2007


12/10/2007


12/10/2010

$
200,000


3.8925% p.a.

USD LIBOR 3M BBA

$
(6,306
)
$
(9,565
)CITI


10/23/2007


10/25/2009


10/27/2014

$
250,000


4.9975% p.a.

USD LIBOR 3M BBA

$
(25,290
)
$
(32,319
)CITI


11/02/2007


11/6/2010


11/6/2015

$
250,000


5.1% p.a.

USD LIBOR 3M BBA

$
(17,128
)
$
(29,338
)CITI


11/26/2007


11/29/2010


11/30/2015

$
100,000


4.98% p.a.

USD LIBOR 3M BBA

$
(6,070
)
$
(11,123
)CITI


01/8/2008


1/10/2008


1/10/2011

$
300,000


3.57% p.a.

USD LIBOR 3M BBA

$
(9,090
)
$
(12,985
)CITI


02/07/2008


2/11/2011


2/11/2016

$
200,000


4.695% p.a.

USD LIBOR 3M BBA

$
(8,035
)
$
(19,168
)Eurobank


02/11/2008


5/31/2011


5/31/2015

$
200,000


4.755% p.a.

USD LIBOR 3M BBA

$
(6,993
)
$
(15,842
)Total fair value

$
(307,558
)
$
(462,885
)


Accounting guidance for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities
requires that an entity recognize all derivatives as either assets or liabilities in the consolidated balance sheet and measures those instruments at fair value. If certain conditions are met, a
derivative may be specifically designated as a hedge, the objective of which is to match the timing of gain or loss recognition on the hedging derivative with the recognition of (i) the changes
in the fair value of the hedged asset or liability that are attributable to the hedged risk or (ii) the earnings effect of the hedged forecasted transaction. For a derivative not designated as
a hedging instrument, the gain or loss is recognized in income in the period of change.



These interest rate swaps are designed to economically hedge the fair value of the fixed rate loan facilities against fluctuations in
the market interest rates by converting its fixed rate loan facilities to floating rate debt. Pursuant to the adoption of our Risk Management Accounting Policy, and after putting in place the formal
documentation required by accounting guidance for derivatives and hedging in order to designate these swaps as hedging instruments, as of June 15, 2006, these interest rate swaps qualified for
hedge accounting, and, accordingly, since that time, hedge ineffectiveness amounts arising from the differences in the change in fair value of the hedging instrument and the hedged item are recognized
in our earnings. We consider our strategic use of interest rate swaps to be a prudent method of managing interest rate sensitivity, as it prevents earnings from being exposed to undue risk posed by
changes in interest rates. Assessment and measurement of prospective and retrospective effectiveness for these interest rate swaps are performed on a quarterly basis, on the financial statement and
earnings reporting dates.

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The
interest rate swap agreements converting fixed interest rate exposure into floating, as of December 31, 2009 and 2008 were as follows (in thousands):

Counter party

Contract
trade Date

Effective
Date

Termination
Date

Notional
Amount on
Effective Date

Fixed Rate
(Danaos receives)

Floating Rate
(Danaos pays)

Fair Value
December 31,
2009

Fair Value
December 31,
2008RBS


11/15/2004


12/15/2004


8/27/2016

$
60,528

5.0125% p.a.

USD LIBOR 3M BBA + 0.835% p.a.

$
1,865

$
3,289RBS


11/15/2004


11/17/2004


11/2/2016

$
62,342

5.0125% p.a.

USD LIBOR 3M BBA + 0.855% p.a.

$
1,897

$
3,402Total fair value

$
3,762

$
6,691


The total fair value change of the interest rate swaps for the period from January 1, 2009 until December 31, 2009, amounted to
$(2.9) million, and is included in the Statement of Income in "Gain/(loss) on fair value of derivatives". The related asset of $3.8 million is shown under "Other non-current assets"
in the consolidated balance sheet. The total fair value change of the underlying hedged debt for the period from January 1, 2009 until December 31, 2009, amounted to $4.8 million
and is included in the Statement of Income in "Gain/(loss) on fair value of derivatives". The net ineffectiveness for December 31, 2009, amounted to $1.9 million and is shown in the
Statement of Income in Gain/(loss) on fair value of derivatives".



We, according to our long-term strategic plan to maintain relative stability in our interest rate exposure, have decided to
swap part of our interest expenses from floating to fixed. To this effect, we have entered into 21 interest rate swap transactions with varying start and maturity dates, in order to
pro-actively and efficiently manage its floating rate exposure.

These
interest rate swaps are designed to economically hedge the variability of interest cash flows arising from floating rate debt, attributable to movements in three-month U.S. Dollar
LIBOR. According to our Risk Management Accounting Policy, and after putting in place the formal documentation required by the accounting guidance for derivatives and hedging in order to designate
these swaps as hedging instruments, as from their inception, these interest rate swaps qualified for hedge accounting, and, accordingly, since that time, only hedge ineffectiveness amounts arising
from the differences in the change in fair value of the hedging instrument and the hedged item are recognized in our earnings. Assessment and measurement of prospective and retrospective effectiveness
for these interest rate swaps are performed on a quarterly basis. For qualifying cash flow hedges, the fair value gain or loss associated with the effective portion of the cash flow hedge is
recognized initially in shareholders' equity, and recycled to the Statement of Income in the periods when the hedged item will affect profit or loss. Any ineffective portion of the gain or loss on the
hedging instrument is recognized in the Statement of Income immediately.

During
2009, we entered into agreements with the shipyards to defer the delivery of certain newbuildings, resulting in a reassessment of the forecasted debt required to build these
vessels in relation to the timing of forecasted debt drawdowns expected during the construction period of such vessels. The interest rate swaps entered into by us in the past were based on the
originally forecasted delivery of vessels and the respective debt needs. As of December 31, 2009, we revised our estimates of the forecasted debt timing, which resulted in hedge ineffectiveness
of $(21.4) million recorded in the consolidated statement of income, reclassification of $(18.1) million of unrealized losses from "Accumulated other comprehensive loss" in our consolidated balance
sheet to the consolidated statement of income and unrealized gains of $8.2 million in relation to fair value changes of interest rate swaps for the fourth quarter of 2009, which were recorded
in the consolidated statement of income

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due
to the retrospective effectiveness testing failure of certain swaps. The total fair value change of the interest rate swaps for the period January 1, 2009 to December 31, 2009,
amounted to $155.3 million.

Assuming
no changes to our borrowings or hedging instruments after December 31, 2009, a 0.1% increase in interest rates on floating rate debt outstanding at December 31,
2009 would result in a decrease of approximately $0.6 million in earnings in 2010. These amounts are determined by calculating the effect of a hypothetical interest rate change on our floating
rate debt, after giving consideration to our interest rate swaps. These amounts do not include the effects of certain potential results of changing interest rates, such as a different level of overall
economic activity, or other actions management may take to mitigate this risk. Furthermore, this sensitivity analysis does not assume alterations in our gross debt or other changes in our financial
position.



We generate all of our revenues in U.S. dollars, but for the year ended December 31, 2009 we incurred approximately 60% of our
expenses in currencies other than U.S. dollars. As of December 31, 2009, approximately 7.2% of our outstanding accounts payable were denominated in currencies other than the U.S. dollar (mainly
in Euro). We have not entered into derivative instruments to hedge the foreign currency translation of assets or liabilities or foreign currency transactions other than as described below with respect
to expected inflows in connection with the leasing transactions with respect to vessels in our fleet and we do not use financial instruments for trading or other speculative purposes.

We
have recognized these financial instruments on our consolidated balance sheet at their fair value. These foreign currency forward contracts did not qualify as hedging instruments
until June 30, 2006 and after the restructuring of the leasing arrangements for six vessels in our fleet on October 5, 2007 ceased to qualify as hedging instruments as these leasing
arrangements were no longer expected to result in cash inflows, and thus, other than for the period from June 30, 2006 until October 5, 2007, we
recognized changes in their fair value in our current period earnings. As of July 1, 2006 these foreign currency forward contracts qualified for hedge accounting and, accordingly, from that
time until October 5, 2007, changes in the fair value of these instruments were not recognized in current period earnings.

Forward
contracts with fair value of $(1.3) million expired and cash settled in April 2008. All of the remaining forwards with fair value of $0.5 million early terminated and cash
settled in September 2008. These are included in the Statement of Income in "Other Income (Expenses) net". As of December 31, 2008 and 2009 and the date of this annual report, we had no
outstanding foreign currency contracts.

Item 12.    Description of Securities Other than Equity Securities

Not Applicable.

PART II

Item 13.    Defaults, Dividend Arrearages and Delinquencies

Not Applicable.

Item 14.    Material Modifications to the Rights of Security Holders and Use of Proceeds

Not Applicable.

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Item 15.    Controls and Procedures



Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of
the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as of
December 31, 2009. Disclosure controls and procedures are defined under SEC rules as controls and other procedures that are designed to ensure that information required to be disclosed by a
company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within required time periods. Disclosure controls and
procedures include controls and
procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated
to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required
disclosure. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the
controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.

Based
on our evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of December 31,
2009.



Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in
Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, and for the assessment of the effectiveness of internal control over financial reporting. Our
internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles in the United States ("GAAP").

A
company's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit the preparation of
financial statements in accordance with GAAP, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and
(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the
financial statements.

Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In
making its assessment of our internal control over financial reporting as of December 31, 2009, management, including the Chief Executive Officer and Chief Financial Officer,
used the criteria set forth in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO").

Management
concluded that, as of December 31, 2009, our internal control over financial reporting was effective.

130

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Table of Contents



PricewaterhouseCoopers S.A, which has audited the consolidated financial statements of the Company for the year ended
December 31, 2009, has also audited the effectiveness of the Company's internal control over financial reporting as stated in their audit report which is incorporated into Item 18 of
this Form 20-F from page F-2 hereof.



During the period covered by this Annual Report on Form 20-F, we have made no changes to our internal control over
financial reporting that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

Item 16A.    Audit Committee Financial Expert

Our Audit Committee consists of three independent directors, Andrew B. Fogarty, Miklos Konkoly Thege, and Myles R. Itkin, who is the
chairman of the committee. Our board of directors has determined that Myles R. Itkin, whose biographical details are included in "Item 6. Directors, Senior Management and Employees," qualifies
as an audit committee financial expert as defined under current SEC regulations. Mr. Itkin is a United States Certified Public Accountant and independent in accordance with the listing
standards of the New York Stock Exchange.

Item 16B.    Code of Ethics

We have adopted a Code of Business Conduct and Ethics for all officers and employees of our company, a Code of Conduct for the chief
executive officer and senior financial officers of our company and a Code of Ethics for directors of our company, copies of which are posted on our website, and may be viewed at http://www.danaos.com.
We will also provide a paper copy of these documents free of charge upon written request by our stockholders. Stockholders may
direct their requests to the attention of Mr. Evangelos Chatzis, Danaos Corporation, c/o Danaos Shipping Co. Ltd., 14 Akti Kondyli, 185 45 Piraeus, Greece. No waivers of the Code
of Business Conduct and Ethics, the Code of Conduct or the Code of Ethics have been granted to any person during the year ended December 31, 2009.

Item 16C.    Principal Accountant Fees and Services

PricewaterhouseCoopers S.A., an independent registered public accounting firm, has audited our annual financial statements
acting as our independent auditor for the fiscal years ended December 31, 2009, 2008 and 2007.

The
chart below sets forth the total amount billed and accrued for the PricewaterhouseCoopers S.A. services performed in 2009 and 2008 and breaks down these amounts by the
category of service.

2009

2008(in thousands of dollars)Audit fees

$
756.4

$
793.1Audit-related fees


124.0


Total fees

$
880.4

$
793.1


131

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Table of Contents

Audit Fees

Audit fees paid were compensation for professional services rendered for the audits of our consolidated financial statements.

Audit-related Fees

Audit-related fees for 2009 include audit-related fees in connection with the Registration Statement on Form F-1
(Reg. No. 333-161133), which we
filed with the SEC in the third quarter of 2009. PricewaterhouseCoopers S.A. did not provide any services that would be classified in this category in 2008.

Other Fees

PricewaterhouseCoopers S.A. did not provide any other services that would be classified in this category in 2009 or 2008.

Pre-approval Policies and Procedures

The audit committee charter sets forth our policy regarding retention of the independent auditors, requiring the audit committee to
review and approve in advance the retention of the independent auditors for the performance of all audit and lawfully permitted non-audit services and the fees related thereto. The
chairman of the audit committee or in the absence of the chairman, any member of the audit committee designated by the chairman, has authority to approve in advance any lawfully permitted
non-audit services and fees. The audit committee is authorized to establish other policies and procedures for the pre-approval of such services and fees. Where
non-audit services and fees are approved under delegated authority, the action must be reported to the full audit committee at its next regularly scheduled meeting.

Item 16D.    Exemptions from the Listing Standards for Audit Committees

Not Applicable.

Item 16E.    Purchases of Equity Securities by the Issuer and Affiliated Purchasers

On November 25, 2008, we publicly announced that our Board of Directors had approved a share repurchase program and authorized
the officers of the company to repurchase, from time to time, up to 1,000,000 shares of our common stock.

Period

Total
Number of
Shares
Purchased
(a)

Average
Price
Paid Per
Share
(b)

Total Number
of Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs
(c)

Maximum
Number of Shares
that May Yet Be
Purchased Under
the Plans or
Programs
(d)December 2 to December 19, 2008


15,000

$
5.90


15,000


985,000March 4, 2010


12,000

$
4.14


27,000


973,000


We
did not repurchase any shares of our common stock in 2009.

Item 16F.    Change in Registrant's Certifying Accountant

Not Applicable.

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Table of Contents

Item 16G.    Corporate Governance

Statement of Significant Differences Between our Corporate Governance Practices and the New York Stock Exchange Corporate Governance Standards for U.S.
Non-Controlled Issuers

Pursuant to certain exceptions for foreign private issuers and controlled companies, we are not required to comply with certain of the
corporate governance practices followed by U.S. and non-controlled companies under the New York Stock Exchange listing standards. However, pursuant to Section 303.A.11 of the New
York Stock Exchange Listed Company Manual and the requirements of Form 20-F, we are required to state any significant differences between our corporate governance practices and the
practices required by the New York Stock Exchange. We believe that our established practices in the area of corporate governance are in line with the spirit of the New York Stock Exchange standards
and provide adequate protection to our stockholders. The significant differences between our corporate governance practices and the New York Stock Exchange standards applicable to listed U.S.
companies are set forth below.

The
New York Stock Exchange requires that a listed U.S. company have a nominating/corporate governance committee and a compensation committee, each composed of independent directors. As
permitted under Marshall Islands law and our bylaws, non-independent directors, which are members of our management who also serve on our board of directors, serve on the compensation and
the nominating and corporate governance committees of our board of directors.

133

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Table of Contents

PART III

Item 17.    Financial Statements

Not Applicable.

Item 18.    Financial Statements

Reference is made to pages F-1 through F-49 included herein by reference.

Item 19.    Exhibits

Number

Description1.1

Amended and Restated Articles of Incorporation*****1.2

Amended and Restated Bylaws*****4.1

Amended and Restated Management Agreement between Danaos Shipping Company Limited and Danaos Corporation*4.1.1

Addendum No. 1 to Amended and Restated Management Agreement, dated February 12, 2009 between Danaos Shipping Company Limited and Danaos Corporation****4.1.2

Addendum No. 2 to Amended and Restated Management Agreement, dated February 8, 2010 between Danaos Shipping Company Limited and Danaos Corporation4.2

Form of Management Agreement between Danaos Shipping Company Limited and our vessel-owning subsidiaries (See Appendix I to Exhibit 4.1)*4.3

Form of Restrictive Covenant Agreement between Danaos Corporation and Dr. John Coustas*4.4

Stockholder Rights Agreement*4.5

2006 Equity Compensation Plan*4.5.1

Directors' Share Payment Plan****4.6

Loan Agreement and Supplemental Agreement, dated December 17, 2002 and April 21, 2005 respectively, with Aegean Baltic Bank S.A. and HSH Nordbank AG*4.7

Loan Agreement, dated May 13, 2003, with the Export-Import Bank of Korea*4.8

Loan Agreement, dated January 29, 2004, with the Export-Import Bank of Korea and Fortis Capital Corp.*4.9

Loan Agreement, dated August 14, 2006, with Seasonal Maritime Corporation*4.10

Loan Agreement, dated September 25, 2006, with Seasonal Maritime Corporation*4.11

Loan Agreement, dated November 14, 2006, with Aegean Baltic Bank S.A. and HSH Nordbank AG**4.12

Loan Agreement, dated February 20, 2007, with The Royal Bank of Scotland**4.13

Loan Agreement, dated February 15, 2008, with Emporiki Bank of Greece S.A.***4.14

Loan Agreement, dated May 9, 2008, with Credit Suisse****4.15

Loan Agreement, dated May 30, 2008, with Deutsche Bank****


134

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Table of Contents

Number

Description4.16

Loan Agreement, dated July 29, 2008, with Fortis Bank (acting as agent), Lloyds TSB and National Bank of Greece****4.17

Supplemental Agreement, dated August 13, 2009, with Fortis Bank, Lloyds TSB and National Bank of Greece, in respect of Loan Agreement, dated July 29, 2008****4.18

Loan Agreement, dated February 2, 2009, with Deutsche Schiffsbank, Credit Suisse and Emporiki Bank****4.19

Supplemental Letters, dated August 6, 2009 and December 15, 2009, with Deutsche Bank AG Filiale Deutschlandgeschaft, as agent, in respect of Loan Agreement, dated May 30, 20084.20

Supplemental Agreement, dated August 13, 2009, with Fortis Bank, Lloyds TSB and National Bank of Greece, in respect of Loan Agreement, dated July 29, 20084.21

Supplemental Letter Agreement, dated April 14, 2010, with Royal Bank of Scotland in respect of Loan Agreement dated February 20, 20078

Subsidiaries11.1

Code of Business Conduct and Ethics**11.2

Code of Conduct**11.3

Code of Ethics**12.1

Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended12.2

Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended13.1

Certification of Chief Executive Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350 as added by Section 906 of the Sarbanes-Oxley Act of
200213.2

Certification of Chief Financial Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350 as added by Section 906 of the Sarbanes-Oxley Act of
200215

Consent of Independent Registered Public Accounting Firm


---

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Table of Contents

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly
caused and authorized the undersigned to sign this annual report on its behalf.

DANAOS CORPORATION/s/ DIMITRI J. ANDRITSOYIANNIS Name:  Dimitri J. Andritsoyiannis
Title:Vice President and Chief Financial Officer


Date:
June 18, 2010

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Table of Contents

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



Report of Independent Registered Public Accounting Firm

F-2Consolidated Balance Sheets as of December 31, 2009 and 2008

F-4Consolidated Statements of Income for the Years Ended December 31, 2009, 2008 and
2007

F-5Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 2009, 2008 and
2007

F-6Consolidated Statements of Cash Flows for the Years Ended December 31, 2009, 2008 and
2007

F-7Notes to the Consolidated Financial Statements

F-8


F-1

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Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To
the Shareholders and the Board of Directors

In
our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, statement of equity and cash flows present fairly, in all material
respects, the financial position of Danaos Corporation and its subsidiaries (the "Company") at December 31, 2009 and December 31, 2008, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 2009 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the
Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on criteria established in Internal
ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for these financial statements,
for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in "Management's Report on Internal Control over Financial Reporting", appearing in Item 15(b) of the
Company's 2009 Annual Report on Form 20-F. Our responsibility is to express opinions on these financial statements and on the Company's internal control over financial reporting
based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was
maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness
of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a
reasonable basis for our opinions.

The
accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated
financial statements, the Company's inability to comply with financial covenants under its current debt agreements as of December 31, 2009, its negative working capital deficit and other
matters discussed in Note 1 raise substantial doubt about its ability to continue as a going concern. Management's plans concerning this matter are also described in Note 1. The
consolidated financial statements do not include any adjustments to reflect the possible future effects that may result from the outcome of this uncertainty.

A
company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures
that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

F-2

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Table of Contents

Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/
PricewaterhouseCoopers S.A.

Athens
June 18, 2010

F-3

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Table of Contents



DANAOS CORPORATION        CONSOLIDATED BALANCE SHEETS        (Expressed in thousands of United States dollars, except share amounts)

As of December 31,Notes

2009

2008ASSETSCURRENT ASSETSCash and cash equivalents



$
122,050

$
120,720Restricted cash, current portion

3


154,078


104,401Accounts receivable, net




3,732


1,119Inventories




7,653


8,070Prepaid expenses




1,056


999Due from related parties

14


8,647


7,118Other current assets

7


3,288


7,767Total current assets




300,504


250,194Fixed assets, net

4


1,573,759


1,339,645Advances for vessels under construction

5


1,194,088


1,067,825Restricted cash, net of current portion

3


44,393


147,141Deferred charges, net

6


20,583


16,098Other non-current assets

16b,8


9,384


7,561Total non-current assets




2,842,207


2,578,270Total assets



$
3,142,711

$
2,828,464LIABILITIES AND STOCKHOLDERS' EQUITYCURRENT LIABILITIESAccounts payable

9

$
49,542

$
13,902Accrued liabilities

10


31,096


11,429Current portion of long-term debt

13


2,331,678


42,219Unearned revenue




5,626


6,448Other current liabilities

11,16a


100,065


48,217Total current liabilities




2,518,007


122,215LONG-TERM LIABILITIESLong-term debt, net of current portion

13





2,054,635Unearned revenue, net of current portion




3,914


6,112Other long-term liabilities

11,16a


215,199


426,468Total long-term liabilities




219,113


2,487,215Total liabilities




2,737,120


2,609,430Commitments and Contingencies

19





STOCKHOLDERS' EQUITYPreferred stock (par value $.01, 100,000,000 and 5,000,000 preferred shares authorized and not issued as of December 31, 2009 and 2008)

22





Common stock (par value $0.01, 750,000,000 and 200,000,000 common shares authorized as of December 31, 2009 and 2008. 54,557,500 issued as of
December 31, 2009 and 2008. 54,550,858 and 54,542,500 shares outstanding as of December 31, 2009 and 2008)

22


546


546Additional paid-in capital




288,613


288,615Treasury stock

22


(39
)

(88
)Accumulated other comprehensive loss

16a


(324,093
)

(474,514
)Retained earnings




440,564


404,475Total stockholders' equity




405,591


219,034Total liabilities and stockholders' equity



$
3,142,711

$
2,828,464


The accompanying notes are an integral part of these consolidated financial statements

F-4

---





Table of Contents



DANAOS CORPORATION        CONSOLIDATED STATEMENTS OF INCOME        (Expressed in thousands of United States dollars, except share and per share amounts)

Year ended December 31,Notes

2009

2008

2007OPERATING REVENUES


18

$
319,511

$
298,905

$
258,845OPERATING EXPENSES:Voyage expenses





(7,346
)

(7,476
)

(7,498
)Vessel operating expenses





(92,327
)

(89,246
)

(65,676
)Depreciation


4


(60,906
)

(51,025
)

(40,622
)Amortization of deferred drydocking and special survey costs


6


(8,295
)

(7,301
)

(6,113
)Bad debt expense








(181
)

(1
)General and administrative expenses





(14,541
)

(11,617
)

(9,955
)Gain/(loss) on sale of vessels


20





16,901


(286
)Income from operations





136,096


148,960


128,694OTHER INCOME (EXPENSES):Interest income





2,428


6,544


4,861Interest expense





(36,208
)

(34,740
)

(22,421
)Other finance (expenses)/income, net





(2,290
)

(2,047
)

(2,779
)Other (expenses)/income, net


24


(336
)

(1,060
)

14,560(Loss)/gain on fair value of derivatives





(63,601
)

(597
)

183Total Other Expenses, net





(100,007
)

(31,900
)

(5,596
)Net income from continuing operations




$
36,089

$
117,060

$
123,098Net (loss)/income from discontinued operations


25

$


$
(1,822
)
$
92,166Net Income




$
36,089

$
115,238

$
215,264EARNINGS PER SHAREBasic and diluted net income per share (from continuing operations)




$
0.66

$
2.15

$
2.26Basic and diluted net (loss)/income per share (from discontinued operations)




$


$
(0.04
)
$
1.69Basic and diluted net income per share (from total operations)




$
0.66

$
2.11

$
3.95Basic and diluted weighted average number of shares





54,549,794


54,557,134


54,557,500


The
accompanying notes are an integral part of these consolidated financial statements

F-5

---





Table of Contents



DANAOS CORPORATION        CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY        (Expressed in thousands of United States dollars, except number of shares)

Common Stock

Treasury StockAccumulated
other
comprehensive
income/(loss)Comprehensive
Income/(loss)

Number
of
shares

Par
value

Number
of
shares

Amount

Additional
paid-in
capital

Retained
earnings

TotalAs of January 1, 2007

$
105,023


54,558

$
546







$
288,530

$
3,941

$
272,835

$
565,852Comprehensive income:Net income


215,264




















215,264


215,264Change in fair value of financial instruments


(58,827
)
















(58,827
)




(58,827
)Dividends ($1.78 per share)























(97,385
)

(97,385
)As of December 31, 2007

$
156,437


54,558

$
546







$
288,530

$
(54,886
)
$
390,714

$
624,904Comprehensive income/(loss):Net income


115,238




















115,238


115,238Change in fair value of financial instruments


(407,999
)
















(407,999
)




(407,999
)Realized losses on cash flow hedges amortized over the life of the newbuildings, net of amortization


(11,629
)
















(11,629
)




(11,629
)Stock compensation

















85








85Treasury stock purchased





(15
)




15


(88
)










(88
)Dividends ($1.86 per share)























(101,477
)

(101,477
)As of December 31, 2008

$
(304,390
)

54,543

$
546


15

$
(88
)
$
288,615

$
(474,514
)
$
404,475

$
219,034Comprehensive income/(loss):Net income


36,089




















36,089


36,089Change in fair value of financial instruments


155,327

















155,327





155,327Realized losses on cash flow hedges amortized over the life of the newbuildings, net of amortization


(36,232
)
















(36,232
)




(36,232
)Reclassification of unrealized losses to earnings


31,326

















31,326





31,326Stock compensation

















47








47Treasury stock distributed





8





(8
)

49


(49
)







As of December 31, 2009

$
186,510


54,551

$
546


7

$
(39
)
$
288,613

$
(324,093
)
$
440,564

$
405,591


The accompanying notes are an integral part of these consolidated financial statements

F-6

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Table of Contents



DANAOS CORPORATION        CONSOLIDATED STATEMENTS OF CASH FLOWS        (Expressed in thousands of United States dollars)

Year ended December 31,2009

2008

2007Cash Flows from operating activities:Net income

$
36,089

$
115,238

$
215,264Adjustments to reconcile net income to net cash provided by operating activitiesDepreciation


60,906


51,025


41,093Amortization of deferred drydocking and special survey costs


8,295


7,301


6,216Written off amount of drydocking and special survey costs





181


337Written off amount of finance and other costs


412


128


284Amortization of finance costs


889


220


164Payments for drydocking and special survey costs


(7,259
)

(10,625
)

(7,592
)Gain on sale of vessels





(16,901
)

(88,349
)Stock based compensation


47


85


Change in fair value of derivative instruments


(6,801
)

(15,332
)

193(Increase)/decrease in:Accounts receivable


(2,613
)

3,202


(2,151
)Inventories


417


(2,309
)

(1,989
)Prepaid expenses


(57
)

(113
)

452Due from related parties


(1,529
)

(2,523
)

(1,732
)Other assets, current and non-current


(273
)

(553
)

(3,810
)Increase/(decrease) in:Accounts payable


(4,059
)

2,331


1,919Accrued liabilities


10,992


5,613


723Unearned revenue, current and long term


(3,020
)

(2,455
)

(2,242
)Other liabilities, current and long-term


730


976


(510
)Net cash provided by operating activities


93,166


135,489


158,270Cash flows from investing activities:Vessel acquisitions and additions including advances for vessel acquisitions


(299
)

(76,506
)

(266,608
)Vessels under construction


(374,921
)

(518,512
)

(696,752
)Proceeds from sale of vessels and deposits received from vessel sale


2,311


83,032


275,768Net cash used in investing activities


(372,909
)

(511,986
)

(687,592
)Cash flows from financing activities:Proceeds from long-term debt


267,043


805,010


1,014,177Payments on long-term debt


(32,219
)

(59,919
)

(322,437
)Treasury stock purchased





(88
)

Dividends paid





(101,477
)

(97,385
)Deferred finance costs


(6,438
)

(4,328
)

(500
)Deferred public offering costs


(384
)

(113
)

(427
)Decrease/(increase) in restricted cash


53,071


(205,363
)

(43,686
)Net cash provided by financing activities


281,073


433,722


549,742Net increase in cash and cash equivalents


1,330


57,225


20,420Cash and cash equivalents, beginning of year


120,720


63,495


43,075Cash and cash equivalents, end of year

$
122,050

$
120,720

$
63,495Supplementary Cash Flow informationCash paid for interest, net of capitalized interest

$
36,502

$
34,917

$
22,726Non-cash capitalized interest on vessels under construction

$
8,675

$


$
Decrease in vessels' values in respect of lease arrangements

$


$
(16,944
)
$
(29,269
)Progress payments of vessels under construction accrued

$
37,388

$


$



The
accompanying notes are an integral part of these consolidated financial statements

F-7

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Table of Contents



DANAOS CORPORATION        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1 Basis of Presentation and General Information

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP"). The reporting
and functional currency of the Company is the United States Dollar.

Danaos
Corporation ("Danaos"), formerly Danaos Holdings Limited, was formed on December 7, 1998 under the laws of Liberia and is presently the sole owner of all outstanding shares
of the companies listed below. Danaos Holdings Limited was redomiciled in the Marshall Islands on October 7, 2005. In connection with the redomiciliation, the Company changed its name to Danaos
Corporation. On October 14, 2005, the Company filed and the Marshall Islands accepted Amended and Restated Articles of Incorporation. Under the Amended and Restated Articles of Incorporation,
the authorized capital stock of Danaos Corporation increased to 100,000 shares of common stock with a par value of $0.01 and 1,000 shares of preferred stock with a par value of $0.01. On
September 18, 2006, the Company filed and Marshall Islands accepted Amended and Restated Articles of Incorporation. Under the Amended and Restated Articles of Incorporation, the authorized
capital stock of Danaos Corporation increased to 200,000,000 shares of common stock with a par value of $0.01 and 5,000,000 shares of preferred stock with a par value of $0.01. On September 18,
2009, the Company filed and Marshall Islands accepted Articles of Amendment. Under the Articles of Amendment, the authorized capital stock of Danaos Corporation increased to 750,000,000 shares of
common stock with a par value of $0.01 and 100,000,000 shares of preferred stock with a par value of $0.01. Refer to Note 22, Stockholders' Equity for additional information.

The
Company's vessels operate worldwide, carrying containers for many established charterers.

The
Company's principal business is the acquisition and operation of vessels. Danaos conducts its operations through the vessel owning companies whose principal activity is the ownership
and operation of containerships (refer to Note 2, Significant Accounting Policies) that are under the exclusive management of a related party of the Company (refer to Note 14, Related
Party Transactions).

The
consolidated financial statements have been prepared to reflect the consolidation of the companies listed below. The historical balance sheets and results of operations of the
companies listed below have been reflected in the consolidated balance sheets and consolidated statements of income, cash flows and stockholders' equity at and for each period since their respective
incorporation dates.

The
consolidated companies are referred to as "Danaos," or "the Company."

As
of December 31, 2009, the Company was newly in breach of the corporate leverage ratio in its $60 million credit facility with HSH Nordbank and the market value adjusted
net worth covenant under its $180 million credit facility with Deutsche Bank, in each case for which the Company has not obtained a waiver. In addition, although the Company was in compliance
with the covenants in its credit facility with the Export-Import Bank of Korea under the cross default provisions of this credit facility, and the cross default provisions of the Company's other
credit facilities for which waivers have been obtained during 2009, the respective lenders could require immediate repayment of the debt outstanding thereunder. Even though none of the lenders
declared an event of default under the loan agreements, these breaches constituted defaults and potential events of default and, together with the cross default provisions in the various loan
agreements, could result in the lenders requiring immediate repayment of all of the loans. The Company's lenders agreed to waive, and not to exercise their right to demand repayment of any amounts due
under certain loan agreements as a result of, the December 31, 2008 and June 30, 2009 covenant breaches under certain of its loan agreements, and any

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Table of Contents

DANAOS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1 Basis of Presentation and General Information (Continued)

future
breaches of such covenants, through October 1, 2010. Accordingly, no new breaches of these clauses existed as of December 31, 2009, other than those described above. The current
waiver agreements expire as of October 1, 2010, when the original covenants come back in force. The Company has deemed it is probable that it may not be able to comply with the original
covenants at measurement dates that are within the next twelve months. In addition, the cross default provisions in the Company's loan agreements, actual breaches existing under its credit facilities
as of December 31, 2009, as well as potential defaults and events of default under loan agreements with waivers expiring on October 1, 2010, could result in events of default under all
of the Company's affected debt and the acceleration of such debt by its lenders. In this respect, the Company classified its long-term debt of $2.3 billion as of December 31,
2009 as current debt (for further details, refer to Note 13, Long-Term Debt). The Company continues to pay loan instalments and accumulated or accrued interest as they fall due
under the existing credit facilities.

While
these consolidated financial statements have been prepared using generally accepted accounting principles applicable to a going concern, which contemplate the realization of assets
and liquidation of liabilities during the normal course of operations, the conditions and events described above raise substantial doubt about the Company's ability to continue as a going concern. The
financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may
result from the outcome of the Company's inability to continue as a going concern other than the reclassification of $2.3 billion of its long-term debt as current.

The
Company has reached an agreement in principle, but it has not obtained yet formal approvals from the credit committees of the respective banks, for an agreement (the "Bank
Agreement") that will supersede, amend and supplement the terms of each of its existing credit facilities (other than its credit facilities with KEXIM and KEXIM-Fortis) and provide for, among other
things, revised amortization schedules, interest rates, financial covenants, events of defaults, guarantee and security packages, as well as New Credit Facilities available for certain of its
currently non-financed newbuildings. Subject to the terms of the Bank Agreement and under the New Credit Facilities of $426.4 million, the lenders will continue to provide the
Company's existing credit facilities, will waive covenant breaches or defaults under its existing credit facilities, as well as amend covenants under such existing credit facilities in accordance with
the Bank Agreement. The Bank Agreement will be conditioned upon the Company's entry into the Intercreditor Agreement, the Hyundai Samho Vendor Financing of $190.0 million and the newbuilding
cancellation agreement in relation to three 6,500 TEU vessels, theHN N-216, theHN
N-217and theHN N-218(refer to Note 26, Subsequent Events), as well as a commitment letter for
the new Citi-CEXIM Credit Facility of $203.4 million and the receipt of $200 million in net proceeds from equity issuances, including an investment by the Company's Chief
Executive Officer. In addition, as of May 31, 2010, the Company had approximately $334.9 million undrawn funds under its credit facilities, $21.2 million of restricted deposits
designated for newbuilding progress payments, and cash and cash equivalents of $120.3 million.

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Table of Contents

DANAOS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1 Basis of Presentation and General Information (Continued)

As of December 31, 2009, Danaos consolidated the vessel owning (including vessels under contract and/or construction) companies (the "Danaos Subsidiaries") listed below, which all
own container vessels:

Company

Date of Incorporation

Vessel Name

Year
Built

TEUDeleas Shipping Ltd.


July 29, 1987

Hanjin Montreal


1984


2,130Seasenator Shipping Ltd.


June 11, 1996

AL Rayyan


1989


3,908Seacaravel Shipping Ltd.


June 11, 1996

YM Yantian


1989


3,908Peninsula Maritime Inc.


June 10, 1997

MSC Eagle


1978


1,704Appleton Navigation S.A.


May 12, 1998

CMA CGM Komodo


1991


2,917Geoffrey Shipholding Ltd.


September 22, 1997

CMA CGM Kalamata


1991


2,917Lacey Navigation Inc.


March 5, 1998

CMA CGM Elbe


1991


2,917Saratoga Trading S.A.


May 8, 1998

YM Milano


1988


3,129Tyron Enterprises S.A.


January 26, 1999

CMA CGM Passiflore


1986


3,039Independence Navigation Inc.


October 9, 2002

CMA CGM Vanille


1986


3,045Victory Shipholding Inc.


October 9, 2002

CMA CGM Lotus


1988


3,098Duke Marine Inc.


April 14, 2003

Hyundai Duke


1992


4,651Commodore Marine Inc.


April 14, 2003

Hyunday Commodore


1992


4,651Containers Services Inc.


May 30, 2002

Bunga Raya Tujuh


2004


4,253Containers Lines Inc.


May 30, 2002

Bunga Raya Tiga


2004


4,253Oceanew Shipping Ltd.


January 14, 2002

CSCL Europe


2004


8,468Oceanprize Navigation Ltd.


January 21, 2003

CSCL America


2004


8,468Federal Marine Inc.


February 14, 2006

Hyunday Federal


1994


4,651Karlita Shipping Co. Ltd.


February 27, 2003

CSCL Pusan


2006


9,580Ramona Marine Co. Ltd.


February 27, 2003

CSCL Le Havre


2006


9,580Boxcarrier (No. 6) Corp.


June 27, 2006

MSC Marathon


1991


4,814Boxcarrier (No. 7) Corp.


June 27, 2006

Maersk Messologi


1991


4,814Boxcarrier (No. 8) Corp.


November 16, 2006

Maersk Mytilini


1991


4,814Auckland Marine Inc.


January 27, 2005

YM Colombo


2004


4,300Seacarriers Services Inc.


June 28, 2005

YM Seattle


2007


4,253Speedcarrier (No. 1) Corp.


June 28, 2007

Hyundai Vladivostok


1997


2,200Speedcarrier (No. 2) Corp.


June 28, 2007

Hyundai Advance


1997


2,200Speedcarrier (No. 3) Corp.


June 28, 2007

Hyundai Stride


1997


2,200Speedcarrier (No. 5) Corp.


June 28, 2007

Hyundai Future


1997


2,200Speedcarrier (No. 4) Corp.


June 28, 2007

Hyundai Sprinter


1997


2,200Wellington Marine Inc.


January 27, 2005

YM Singapore


2004


4,300Seacarriers Lines Inc.


June 28, 2005

YM Vancouver


2007


4,253Speedcarrier (No. 7) Corp.


December 6, 2007

Hyundai Highway


1998


2,200Speedcarrier (No. 6) Corp.


December 6, 2007

Hyundai Progress


1998


2,200Speedcarrier (No. 8) Corp.


December 6, 2007

Hyundai Bridge


1998


2,200Bayview Shipping Inc.


March 22, 2006

Zim Rio Grande


2008


4,253Channelview Marine Inc.


March 22, 2006

Zim Sao Paolo


2008


4,253Balticsea Marine Inc.


March 22, 2006

Zim Kingston


2008


4,253Continent Marine Inc.


March 22, 2006

Zim Monaco


2009


4,253Medsea Marine Inc.


May 8, 2006

Zim Dalian


2009


4,253Blacksea Marine Inc.


May 8, 2006

Zim Luanda


2009


4,253Boxcarrier (No. 1) Corp.


June 27, 2006

CMA CGM Moliere(1)


2009


6,500


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Table of Contents

DANAOS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1 Basis of Presentation and General Information (Continued)

Company

Date of Incorporation

Vessel Name

Year
Built(2)

TEUVessels under constructionBoxcarrier (No. 2) Corp.


June 27, 2006

CMA CGM Musset(1)(3)


2010


6,500Boxcarrier (No. 3) Corp.


June 27, 2006

CMA CGM Nerval(1)(3)


2010


6,500Expresscarrier (No. 1) Corp.


March 5, 2007

YM Mandate(3)


2010


6,500Boxcarrier (No. 4) Corp.


June 27, 2006

Hull No. S4004(1)


2010


6,500Boxcarrier (No. 5) Corp.


June 27, 2006

Hull No. S4005(1)


2010


6,500Expresscarrier (No. 2) Corp.


March 5, 2007

Hull No. N-215


2010


6,500CellContainer (No. 1) Corp.


March 23, 2007

Hanjin Buenos Aires(3)


2010


3,400CellContainer (No. 2) Corp.


March 23, 2007

Hull No. N-220


2010


3,400CellContainer (No. 3) Corp.


March 23, 2007

Hull No. N-221


2010


3,400CellContainer (No. 4) Corp.


March 23, 2007

Hull No. N-222


2010


3,400CellContainer (No. 5) Corp.


March 23, 2007

Hull No. N-223


2010


3,400Teucarrier (No. 1) Corp.


January 31, 2007

Hull No. Z00001


2011


8,530Teucarrier (No. 2) Corp.


January 31, 2007

Hull No. Z00002


2011


8,530Teucarrier (No. 3) Corp.


January 31, 2007

Hull No. Z00003


2011


8,530Teucarrier (No. 4) Corp.


January 31, 2007

Hull No. Z00004


2011


8,530Teucarrier (No. 5) Corp.


September 17, 2007

Hull No. H1022A


2011


8,530Cellcontainer (No. 6) Corp.


October 31, 2007

Hull No. S-461


2011


10,100Cellcontainer (No. 7) Corp.


October 31, 2007

Hull No. S-462


2011


10,100Cellcontainer (No.8) Corp.


October 31, 2007

Hull No. S-463


2011


10,100Expresscarrier (No. 3) Corp.


March 5, 2007

Hull No. N-216(4)


2012


6,500Expresscarrier (No. 4) Corp.


March 5, 2007

Hull No. N-217(4)


2012


6,500Expresscarrier (No. 5) Corp.


March 5, 2007

Hull No. N-218(4)


2012


6,500Megacarrier (No. 1) Corp.


September 10, 2007

Hull No. S-456


2012


12,600Megacarrier (No. 2) Corp.


September 10, 2007

Hull No. S-457


2012


12,600Megacarrier (No. 3) Corp.


September 10, 2007

Hull No. S-458


2012


12,600Megacarrier (No. 4) Corp.


September 10, 2007

Hull No. S-459


2012


12,600Megacarrier (No. 5) Corp.


September 10, 2007

Hull No. S-460


2012


12,600


(1)Vessel
subject to charterer's option to purchase vessel after first eight years of time charter term for $78.0 million(2)Estimated
completion year.(3)During
the first months of 2010, the Company took delivery of the vessels.(4)In
2010, the Company entered into an agreement with Hanjin Heavy Industries & Construction Co. Ltd. to cancel three 6,500
TEU newbuilding containerships, theHN N-216, theHN N-217and theHN N-218, initially expected to be delivered in 2012.


2 Significant Accounting Policies

Principles of Consolidation:The accompanying consolidated financial statements represent the consolidation of the accounts of
the Company and its
wholly-owned subsidiaries. The subsidiaries are fully consolidated from the date on which control is transferred to the Company.

The
Company also consolidates entities that are determined to be variable interest entities as defined in the accounting guidance, if it determines that it is the primary beneficiary. A
variable

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DANAOS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2 Significant Accounting Policies (Continued)

interest
entity is defined as a legal entity where either (a) equity interest holders as a group lack the characteristics of a controlling financial interest, including decision making ability
and an interest in the entity's residual risks and rewards, or (b) the equity holders have not provided sufficient equity investment to permit the entity to finance its activities without
additional subordinated financial support, or (c) the voting rights of some investors are not proportional to their obligations to absorb the expected losses of the entity, their rights to
receive the expected residual returns of the entity, or both and substantially all of the entity's activities either involve or are conducted on behalf of an investor that has disproportionately few
voting rights. Refer to Note 13, Long-Term Debt, which describes the arrangement under the credit facility with Fortis Bank, Lloyds TSB and National Bank of Greece.

Inter-company
transaction balances and unrealized gains/(losses) on transactions between the companies are eliminated.

Where
necessary, comparative figures have been reclassified to conform with changes in presentation in the current year. For the year ended December 31, 2008 and 2007, the Company
reclassified an amount of $(2,994) thousand and $492 thousand, respectively, of its realized (losses)/gains on interest rate swaps from the "Interest expense" to "(Loss)/gain on fair value of
derivatives". In addition, as of December 31, 2008, the Company reclassified an amount of $10,824 thousand of its fair value hedged debt from the "Long-term debt, net of
current portion" to "Other long-term liabilities"

Use of Estimates:The preparation of consolidated financial statements in conformity with the U.S. GAAP requires management
to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the dates of the financial statements and the reported amounts of
revenues and expenses during the reporting periods. On an on-going basis, management evaluates the estimates and judgments, including those related to future drydock dates, the selection
of useful lives for tangible assets, expected future cash flows from long-lived assets to support impairment tests, provisions necessary for accounts receivables, provisions for legal
disputes, and contingencies. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results
of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates
under different assumptions and/or conditions.

Other Comprehensive Income (Loss):The Company follows the provisions of the accounting guidance for comprehensive income, which
requires separate
presentation of certain transactions, which are recorded directly as components of stockholders' equity.

Foreign Currency Translation:The functional currency of the Company is the U.S. dollar. The Company engages in worldwide
commerce with a variety of
entities. Although, its operations may expose it to certain levels of foreign currency risk, its transactions are predominantly U.S. dollar denominated. Additionally, the Company's wholly-owned vessel
subsidiaries transacted a nominal amount of their operations in Euros; however, all of the subsidiaries' primary cash flows are U.S. dollar denominated. Transactions in currencies other than the
functional currency are translated at the exchange rate in effect at the date of each transaction. Differences in exchange rates during the period between the date a transaction denominated in a
foreign currency is consummated and the date on which it is either settled or translated, are recognized in the statement of operations. The foreign

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Table of Contents

DANAOS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2 Significant Accounting Policies (Continued)

currency
exchange gains/(losses) recognized in the accompanying consolidated statement of income for each of the years ended December 31, 2009, 2008 and 2007 were $(1.6) million,
$(0.2) million and $0.1 million, respectively.

Cash and Cash Equivalents:Cash and cash equivalents consist of call and time deposits with original maturities of three months
or less which are not
restricted for use or withdrawal. Cash and cash equivalents of $122.1 million as of December 31, 2009 (December 31, 2008: $120.7 million) comprise cash balances and short
term deposits, of which short term time deposits were $82.6 million as of December 31, 2009 and $93.4 million as of December 31, 2008.

Restricted Cash:Cash restricted accounts include retention and restricted deposit accounts. Certain of the Company's loan
agreements require the
Company to deposit one-third of quarterly and one-sixth of the semi-annual principal installments and interest installments, respectively, due on the outstanding
loan balance monthly in a retention account. On the rollover settlement date, both principal and interest are paid from the retention account.

Accounts Receivable, Net:The amount shown as Accounts Receivable, net, at each balance sheet date includes estimated recoveries
from charterers for
hire and demurrage billings, net of a provision for doubtful accounts. At each balance sheet date, all potentially uncollectible accounts are assessed individually for purposes of determining the
appropriate provision for doubtful accounts based on the
Company's history of write-offs, level of past due accounts based on the contractual term of the receivables and its relationships with and economic status of its customers. Bad debts are
written off in the period in which they are identified.

Insurance Claims:Insurance claims represent the claimable expenses, net of deductibles, which are expected to be recovered from
insurance companies.
Any costs to complete the claims are included in accrued liabilities. The Company accounts for the cost of possible additional call amounts under its insurance arrangements in accordance with the
accounting guidance for contingencies based on the Company's historical experience and the shipping industry practices. These claims are included in the consolidated balance sheet line item "Other
current assets".

Prepaid Expenses and Inventories:Prepaid expenses consist mainly of insurance expenses, and inventories consist of bunkers,
lubricants and
provisions remaining on board the vessels at each period end, which are valued at the lower of cost or market value as determined using the weighted average method. Costs of spare parts are expensed
as incurred.

Financing Costs:Fees incurred for obtaining new loans are deferred and amortized over the loans' respective repayment periods
using the effective
interest rate method. These charges are included in the consolidated balance sheet line item "Deferred Charges".

Fixed Assets:Fixed assets consist of vessels. Vessels are stated at cost, less accumulated depreciation. The cost of vessels
consists of the
contract purchase price and any material expenses incurred upon acquisition (improvements and delivery expenses). Subsequent expenditures for conversions and major improvements are also capitalized
when they appreciably extend the life, increase the earning capacity or improve the efficiency or safety of the vessels. Otherwise, these expenditures are charged to expense as incurred. Financing
costs incurred during the construction period of the vessels are included in vessels' cost.

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DANAOS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2 Significant Accounting Policies (Continued)

Vessels
acquired in the secondhand market are treated as a business combination to the extent that such acquisitions include continuing operations and business characteristics such as
management agreements, employees and customer base. Otherwise, these are treated as purchase of assets. Where the Company identifies any intangible assets or liabilities associated with the
acquisition of a vessel purchased in the secondhand market, the Company records all identified tangible and intangible assets or liabilities at fair value. Fair value is determined by reference to
market data and the discounted amount of expected future cash flows. The Company has acquired certain vessels in the secondhand market, all of which were considered to be acquisitions of assets.

Depreciation:The cost of the Company's vessels is depreciated on a straight-line basis over the vessels' remaining economic
useful lives
after considering the estimated residual value. Management has estimated the useful life of the Company's vessels to be 30 years from the year built.

Accounting for Special Survey and Drydocking Costs:The Company follows the accounting guidance for planned major maintenance
activities. Drydocking
and special survey costs include planned major maintenance and overhaul activities for ongoing certification including the inspection, refurbishment and replacement of steel, engine components,
electrical, pipes and valves, and other parts of the vessel. The Company follows the deferral method of accounting for special survey and drydocking costs, whereby actual costs incurred are deferred
and amortized on a straight-line basis over the period until the next scheduled survey, which is two and a half years. If special survey or drydocking is performed prior to the scheduled
date, the remaining unamortized balances are immediately written off.

The
amortization periods reflect the estimated useful economic life of the deferred charge, which is the period between each special survey and drydocking.

Costs
incurred during the drydocking period relating to routine repairs and maintenance are expensed. The unamortized portion of special survey and drydocking costs for vessels sold is
included as part of the carrying amount of the vessel in determining the gain/(loss) on sale of the vessel.

Impairment of Long-lived Assets:The accounting guidance for impairment addresses financial accounting and reporting for the
impairment
or disposal of long-lived assets. The standard requires that long-lived assets and certain identifiable intangibles held and used or disposed of by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. If the future net cash flows are less than the carrying value of the
asset, an impairment loss is recorded equal to the difference between the asset's carrying value and fair value.

As
of December 31, 2009, the Company concluded that events occurred and circumstances had changed, which triggered the existence of potential impairment of its
long-lived assets. These indicators included a significant decline in the Company's stock price, deterioration in the spot market, vessels' market values and the potential impact the
current marketplace may have on its future operations. As a result, the Company performed an impairment assessment of the Company's long-lived assets by comparing the undiscounted
projected net operating cash flows for each vessel to their carrying value. The Company's strategy is to charter its vessels under multi-year, fixed rate period charter that range from one
to 18 years for vessels in its current fleet and its contracted vessels, providing the Company with contracted stable cash flows. The significant factors and assumptions the Company used in its
undiscounted projected net operating cash flow analysis included, among others, operating revenues, off-hire revenues, drydocking costs, operating expenses and management fees estimates.
Revenue

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Table of Contents

DANAOS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2 Significant Accounting Policies (Continued)

assumptions
were based on contracted time charter rates up to the end of life of the current contract of each vessel, as well as, historical average time charter rates for the remaining life of the
vessel after the completion of the current contract. In addition, the Company used annual operating expenses escalation factor and estimations of scheduled and unscheduled off-hire
revenues based on historical experience. All estimates used and assumptions made were in accordance with the Company's internal budgets and historical experience of the shipping industry.

The
Company's assessment concluded that step two of the impairment analysis was not required and no impairment of vessels existed as of December 31, 2009, as the undiscounted
projected net operating cash flows per vessel exceeded the carrying value of each vessel.

Pension and Retirement Benefit Obligations-Crew:The crew on board the companies' vessels serve in such capacity under
short-term contracts (usually up to seven months) and accordingly, the vessel-owning companies are not liable for any pension or post retirement benefits.

Accounting for Revenue and Expenses:Revenues from time chartering of vessels are accounted for as operating leases and are thus
recognized on a
straight line basis as the average revenue over the rental periods of such charter agreements, as service is performed. The Company earns revenue from bareboat and time charters. Bareboat and time
charters involve placing a vessel at the charterers' disposal for a period of time during which the charterer uses the vessel in return for the payment of a specified daily hire rate. Under a time
charter, the daily hire rate includes the crew, lubricants, insurance, spares and stores. Under a bareboat charter, the charterer is provided only with the vessel.

General and administrative expenses:General and administrative expenses include management fees paid to the vessels' manager
(refer to
Note 14, Related Party Transactions), audit fees, legal fees, board remuneration, executive officers compensation, directors & officers insurance and stock exchange fees.

Repairs and Maintenance:All repair and maintenance expenses are charged against income when incurred and are included in vessel
operating expenses
in the accompanying consolidated statements of income.

Dividends:Dividends are recorded in the Company's financial statements in the period in which they are declared by the
Company's board of directors.

Segment Reporting:The Company reports financial information and evaluates its operations by total charter revenues. Although
revenue can be
identified for different types of charters, management does not identify expenses, profitability or other financial information for different charters. As a result, management, including the chief
operating decision maker, reviews operating results solely by revenue per day and operating results of the fleet, and thus the Company has determined that it has only one operating and reportable
segment.

Derivative Instruments:The Company enters into interest rate swap contracts and forward exchange rate contracts to create
economic hedges for its
interest rate risks and its exposure to currency exchange risk on certain foreign currency receivables. When such derivatives do not qualify for hedge accounting, the Company presents these financial
instruments at their fair value, and recognizes the fair value changes thereto in the Statement of Income. When the derivatives do qualify for hedge accounting, depending upon the nature of the hedge,
changes in the fair value of derivatives are either

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Table of Contents

DANAOS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2 Significant Accounting Policies (Continued)

offset
against the fair value of assets, liabilities or firm commitments through income, or recognized in other comprehensive income/(loss) (effective portion) and are reclassified to earnings when
the hedged transaction is reflected in earnings. If the probability that the forecasted transaction will not occur, the ineffective portion of a derivative's change in fair value is immediately
recognized in income.

At
the inception of the transaction, the Company documents the relationship between hedging instruments and hedged items, as well as its risk management objective and the strategy for
undertaking various hedging transactions. The Company also documents its assessment, both at the hedge inception and on an ongoing basis, of whether the derivative financial instruments that are used
in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.

The
Company shall discontinue hedge accounting prospectively for an existing hedge if the derivative expires or is sold, terminated or exercised, or the Company removes the designation
of the hedge. The Company may elect to designate prospectively a new hedging relationship with a different hedging instrument or de-designate the derivative and re-designate it
as a hedge of another exposure or designate an existing exposure not previously designated as a hedge. In the case of a cash flow hedge, the net gain or loss through the effective date of the actions
above will remain in Other Comprehensive Income until the hedged item will impact earnings.

The
Company's forward exchange contracts expired or were early terminated and cash settled within 2008.

The
Company does not use financial instruments for trading or other speculative purposes.

Earnings Per Share:The Company has presented net income/(loss) per share for all periods presented based on the weighted
average number of
outstanding shares of common stock of Danaos Corporation at the reported periods. There are no dilutive or potentially dilutive securities, accordingly there is no difference between basic and diluted
net income per share.

Equity Compensation Plan:The Company has adopted an equity compensation plan (the "Plan"), which is generally administered by
the compensation
committee of the Board of Directors. The Plan allows the plan administrator to grant awards of shares of common stock or the right to receive or purchase shares of common stock to employees, directors
or other persons or entities providing significant services to the Company or its subsidiaries. The actual terms of an award will be determined by the plan administrator and set forth in written award
agreement with the participant. Any options granted under the Plan will be accounted for in accordance with the accounting guidance in share-based compensation.

The
aggregate number of shares of common stock for which awards may be granted under the Plan cannot exceed 6% of the number of shares of common stock issued and outstanding at the time
any award is granted. Awards made under the Plan that have been forfeited, cancelled or have expired, will not be treated as having been granted for purposes of the preceding sentence. Unless
otherwise set
forth in an award agreement, any awards outstanding under the Plan will vest immediately upon a "change of control", as defined in the Plan. The Plan will automatically terminate ten years after it
has been most recently approved by the Company's stockholders. To date, no stock options have been issued under this plan.

F-16

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Table of Contents

DANAOS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2 Significant Accounting Policies (Continued)

As
of April 18, 2008, the Company established the Directors Share Payment Plan ("Directors Plan"). The purpose of the Directors Plan is to provide a means of payment of all or a
portion of compensation payable to directors of the Company in the form of Company's Common Stock. Each member of the Board of Directors of the Company may participate in the Directors Plan. Pursuant
to the terms of the Directors Plan, Directors may elect to receive in Common Stock all or a portion of their compensation. On the last business day of each quarter, the rights of common stock are
credited to each Director's Share Payment Account. Following December 31st of each year, the Company will deliver to each Director the number of shares represented by the rights credited
to their Share Payment Account during the preceding calendar year. Refer to Note 21, Stock Based Compensation.

As
of April 18, 2008, the Board of Directors and the Compensation Committee approved the Company's ability to provide, from time to time, incentive compensation to the employees
of Danaos Shipping Company Limited (the "Manager"), in form of free shares of the Company's common stock. Prior approval is required by the Compensation Committee and the Board of Directors. The plan
was effective since December 31, 2008. Pursuant to the terms of the plan, employees of the Manager may receive (from time to time) shares of Company's common stock as additional compensation
for their services offered during the preceding period. The stock will have no vesting period and the employee will own the stock immediately after grant. The total amount of stock to be granted to
employees of the Manager will be at the Company's Board of Directors' discretion only and there will be no contractual obligation for any stock to be granted as part of the employees' compensation
package in future periods. Refer to Note 21, Stock Based Compensation.

Recent Accounting Pronouncements:

Fair Value

In September 2006, the FASB issued guidance which defines fair value, establishes a framework for measuring fair value and expands
disclosures about fair value measurements. In February 2008, the FASB deferred the effective date to January 1, 2009 for all nonfinancial assets and liabilities, except for those that are
recognized or disclosed at fair value on a recurring basis (that is, at least annually). The guidance was effective for the Company for the fiscal year beginning January 1, 2009 and did not
have a material effect on its consolidated financial statements.

In
April 2009, the FASB issued additional guidance for estimating fair value. The additional guidance addresses determining fair value when the volume and level of activity for an asset
or liability have significantly decreased and identifying transactions that are not orderly. This additional guidance is effective for the Company and did not have an impact on the consolidated
financial statements of the Company. Refer to Note 16, Financial Instruments, for the methods and significant assumptions used to estimate the fair value of financial instruments in the
Company's consolidated financial statements.

In
January 2010, the FASB issued amended standards requiring additional fair value disclosures. The amended standards require disclosures of transfers in and out of Levels 1 and 2
of the fair value hierarchy, as well as requiring gross basis disclosures for purchases, sales, issuances and settlements within the Level 3 reconciliation. Additionally, the update clarifies
the requirement to determine the level of disaggregation for fair value measurement disclosures and to disclose valuation techniques and inputs used for both recurring and nonrecurring fair value
measurements in either Level 2 or Level 3. The new guidance will be effective in the first quarter of 2010, except for the disclosures related to

F-17

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Table of Contents

DANAOS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2 Significant Accounting Policies (Continued)

purchases,
sales, issuance and settlements, which will be effective for the Company beginning in the first quarter of 2012. The adoption of the new standards is not expected to have a significant
impact on the Company's consolidated financial statements.

Accounting for Business Combinations

The Company adopted new U.S. GAAP guidance related to business combinations beginning in its first quarter of fiscal 2009.
Earlier adoption was prohibited. The adoption of the new guidance did not have an immediate impact on its consolidated financial statements; however, it will impact the accounting for future business
combinations. Under the new guidance, an entity is required to recognize the assets acquired, liabilities assumed, contractual contingencies and
contingent consideration at their fair value on the acquisition date. It further requires that acquisition-related costs be recognized separately from the acquisition and expensed as incurred; that
restructuring costs generally be expensed in periods subsequent to the acquisition date; and that changes in accounting for deferred tax asset valuation allowances and acquired income tax
uncertainties after the measurement period be recognized as a component of provision for income taxes. In addition, acquired-in process research and development is capitalized as an
intangible asset and amortized over its estimated useful life.

Noncontrolling Interests in Consolidated Financial Statements

The Company adopted new U.S. GAAP guidance related to noncontrolling interests in consolidated financial statements beginning in
its first quarter of fiscal 2009. Earlier adoption was prohibited. The adoption of this guidance did not have an impact on the Company's consolidated financial statements. The guidance revises new
accounting and reporting standards for the noncontrolling interest in a subsidiary and the accounting for the deconsolidation of a subsidiary. It also clarifies that changes in a parent's ownership
interest in a subsidiary that do not result in deconsolidation are equity transactions if the parent retains its controlling financial interest and requires that a parent recognize a gain or loss in
net income when a subsidiary is deconsolidated. The gain or loss is measured using the fair value of the noncontrolling equity investment on the deconsolidation date. The guidance also requires
expanded disclosures regarding the interest of the parent of the noncontrolling interest.

Determining the Primary Beneficiary of a Variable Interest Entity

In June 2009, the FASB issued new guidance concerning the determination of the primary beneficiary of a variable interest entity
("VIE"). This new guidance amends current U.S. GAAP by: requiring ongoing reassessments of whether an enterprise is the primary beneficiary of a VIE; amending the quantitative approach
previously required for determining the primary beneficiary of the VIE; modifying the guidance used to determine whether an equity is a VIE; adding an additional reconsideration event
(e.g. troubled debt restructurings) for determining whether an entity is a VIE; and requiring enhanced disclosures regarding an entity's involvement with a VIE.

This
new guidance will be effective for the Company beginning in its first quarter of fiscal 2010, with earlier adoption prohibited. The Company is in the process of assessing the impact
of this new guidance on its consolidated financial statements.

F-18

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Table of Contents

DANAOS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2 Significant Accounting Policies (Continued)

FASB Accounting Standards Codification

In June 2009, the FASB issued new guidance concerning the organization of authoritative guidance under U.S.GAAP. This new guidance
created the FASB Accounting Standards Codification ("Codification"). The Codification has become the source of authoritative U.S.GAAP recognized by the FASB to be applied by nongovernmental entities.
Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. The Codification became effective for the
Company in its third quarter of fiscal 2009. As the Codification is not intended to change or alter existing U.S. GAAP, it did not have any impact on the Company's consolidated financial
statements. On its effective date, the Codification superseded all then-existing non-SEC accounting and reporting standards. All other nongrandfathered non-SEC
accounting literature not included in the Codification will become nonauthoritative.

Transfers of Financial Assets

In June 2009, the FASB issued new guidance concerning the transfer of financial assets. This guidance amends the criteria for a
transfer of a financial asset to be accounted for as a sale, creates more stringent conditions for reporting a transfer of a portion of a financial asset as a sale, changes the initial measurement of
a transferor's interest in transferred financial assets, eliminates the qualifying special-purpose entity concept and provides for new disclosures. This new guidance will be effective for the Company
for transfers of financial assets beginning in its first quarter of fiscal 2010, with earlier adoption prohibited. The Company does not expect the impact of this guidance to be material to its
consolidated financial statements.

Measuring Liabilities at Fair Value

In August 2009, the FASB released new guidance concerning measuring liabilities at fair value. The new guidance provides clarification
that in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to
measure fair value using certain valuation techniques. Additionally, it clarifies that a reporting entity is not required to adjust the fair value of a liability for the existence of a restriction
that prevents the transfer of the liability. This new guidance is effective for the first reporting period after its issuance, however earlier application is permitted. The application of this new
guidance is not expected to have a significant impact on the Company's consolidated financial statements.

Subsequent Events

In May 2009, the FASB released new guidance establishing general standards of accounting for and disclosure of events that occur after
the balance sheet date but before financial statements are issued or are available to be issued. The new guidance requires the disclosure of the date through which an entity has evaluated subsequent
events and the basis for that datethat is, whether that date represents the date the financial statements were issued or were available to be issued. This disclosure should alert all
users of financial statements that an entity has not evaluated subsequent events after that date in the set of financial statements being presented. This new guidance is effective for interim and
annual periods ending after June 15, 2009. The application of this new guidance did not have an effect on the Company's consolidated financial statements.

F-19

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Table of Contents

DANAOS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2 Significant Accounting Policies (Continued)

In February 2010, the FASB issued amended guidance on subsequent events. SEC filers are no longer required to disclose the date through which subsequent events have been evaluated in
originally issued and revised financial statements. This guidance will be effective immediately and the Company will adopt the new requirements in the first quarter of 2010. The application of this
new guidance is not expected to have an effect on the Company's consolidated financial statements.

3 Restricted Cash

Restricted cash comprised the following at December 31 (in thousands):

2009

2008Retention

$
2,905

$
4,445Restricted deposits


195,566


247,097Total

$
198,471

$
251,542


Restricted
deposits as of December 31, 2009, are analyzed as follows:



As
of December 31, 2009, the Company recorded an amount of $154,078 thousand (2008: $104,401 thousand) and $44,393 thousand (2008: $147,141 thousand)
as current and non-current restricted cash, respectively.

F-20

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Table of Contents

DANAOS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4 Fixed Assets, Net

Vessels' cost, accumulated depreciation and changes thereto were as follows (in thousands):

Vessel
Cost

Accumulated
Depreciation

Net Book
ValueAs of January 1, 2008

$
1,369,739

$
(187,234
)
$
1,182,505Additions


289,671


(51,025
)

238,646Disposals


(75,468
)

10,906


(64,562
)Decrease in vessels' values in respect of lease arrangements(a)


(16,944
)




(16,944
)As of December 31, 2008

$
1,566,998

$
(227,353
)
$
1,339,645Additions


295,020


(60,906
)

234,114As of December 31, 2009

$
1,862,018

$
(288,259
)
$
1,573,759


(a)Vessels
with a cost of $373.4 million and net book value of $342.7 million as of March 7, 2008, which were subject to certain leasing
arrangements, are explained in Note 12(a), Other Lease Arrangements.
i.On
January 2, 2009, the Company took delivery of a new-building 4,253 TEU vessel, theZim
Monaco, for $63.8 million. The vessel is time chartered out for 12 years to one of the world's major liner companies.ii.On
March 31, 2009, the Company took delivery of a new-building 4,253 TEU vessel, theZim
Dalian, for $63.8 million. The vessel is time chartered out for 12 years to one of the world's major liner companies.iii.On
June 26, 2009, the Company took delivery of a new-building 4,253 TEU vessel, theZim
Luanda, for $63.8 million. The vessel is time chartered out for 12 years to one of the world's major liner companies.iv.On
September 28, 2009, the Company took delivery of a new-building 6,500 TEU vessel, theCMA CGM
Moliere, for $91.5 million. The vessel is time chartered out for 12 years to one of the world's major liner companiesv.The
residual value (estimated scrap value at the end of the vessels' useful lives) of the fleet was estimated at $222.3 million as of
December 31, 2009 and $195.8 million as of December 31, 2008. The Company has calculated the residual value of the vessels taking into consideration the 10 year average and
the five year average of the scrap. The Company has applied uniformly the scrap value of $300 per ton for all vessels. The Company believes that $300 per ton is a reasonable estimate of future scrap
prices, taking into consideration the cyclicality of the nature of future demand for scrap steel. Although the Company believes that the assumptions used to determine the scrap rate are reasonable and
appropriate, such assumptions are highly subjective, in part, because of the cyclical nature of future demand for scrap steel.


The
cost of vessel acquired is the contracted price of vessel excluding any items capitalized during the construction period, such as interest expense.

As
of December 15, 2009, the Company signed an agreement to sell theMSC Eagleto an unrelated third party upon the termination of
its time charter in January 2010 for $4.6 million. As

F-21

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Table of Contents

DANAOS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4 Fixed Assets, Net (Continued)

security
for the execution of the agreement, the Company received an advance payment of 50% of the sale consideration.

5 Advances for Vessels under Construction

a)    Advances
for vessels under construction were as follows at December 31 (in thousands):

2009

2008Advance payments for vessels

$
501,544

$
533,298Progress payments for vessels


612,645


479,071Capitalized interest


79,899


55,456Total

$
1,194,088

$
1,067,825


The
Company entered into four newbuilding contracts on March 2, 2007, with China Shipbuilding Trading Company, Limited for four 6,800 TEU containerships (the HN Z00001, theHN
Z00002,theHN Z00003and the HN Z00004). The contract price of each vessel is $92.5 million. The Company paid an advance of
$141.3 million as of December 31,
2009, in relation to these contracts. On July 12, 2007, the Company agreed with China Shipbuilding Trading Company Limited for the upgrading of its earlier order for four 6,800 TEU
containerships to four 8,530 TEU vessels. The contract price of each vessel is $113.0 million. These vessels will be built by the Shanghai Jiangnan Changxing Heavy Industry Company Limited and
are expected to be delivered to the Company during the first and second quarter of 2011. The Company has arranged to charter these containerships under 12-year charters with a major liner
company upon delivery of each vessel.

The
Company entered into five newbuilding contracts on March 16, 2007, with Hanjin Heavy Industries & Construction Co, Ltd for five 6,500 TEU containerships (the HN N-214, theHN N-215,the HN N-216,theHN N-217and theHN N-218). The contract price of each vessel is $99.0 million. The Company paid an advance of $133.7 million as of
December 31, 2009 in relation to these contracts. The vessels are
expected to be delivered to the Company during the second quarter of 2010 and the first half of 2012. The Company arranged for 15 year charters for three of these vessels with a major liner
company upon delivery of vessels. On May 24, 2007, the Company announced that it had secured 18 year bareboat charters for each of the remaining two 6,500 TEU containerships upon
delivery of the vessels. On May 25, 2010, the Company came to an agreement with Hanjin Heavy Industries & Construction Co. Ltd. to cancel three 6,500 TEU newbuilding
containerships, theHN N-216, theHN N-217and the HN N-218. The Company has agreed to
forfeit cash advances of $64.35 million paid to the shipyard, as well as
$7.16 million of interest capitalized and other predelivery capital expenditures in relation to the construction of the respective newbuildings. Refer to Note 26, Subsequent Events.

The
Company entered into newbuilding contracts on April 5, 2007, with Hanjin Heavy Industries & Construction Co, Ltd for five 3,400 TEU containerships (the HN N-219, theHN N-220,the HN N-221,theHN N-222and theHN N-223). The contract price of each vessel is $55.9 million. The Company paid an advance of $111.8 million as of
December 31, 2009, in relation to these contracts. The vessels are expected to be delivered to the Company throughout 2010. On April 11, 2007, the Company arranged for 10 year
charters for all of these vessels with a major line company upon delivery of each vessel.

F-22

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Table of Contents

DANAOS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5 Advances for Vessels under Construction (Continued)

On
September 19, 2007, the Company extended its shipbuilding contracts with China Shipbuilding Trading Company Limited to include one more 8,530 TEU vessel, bringing the total
number to five vessels. The Company paid an advance of $47.0 million as of December 31, 2009, in relation to this contract. All five Post Panamax containerships will be built by the
Shanghai Jiangnan Changxing Heavy Industry Company Limited and are expected to be delivered throughout 2011. The Company has also arranged with a major liner company to charter all these vessels for
12 years each upon delivery of the vessels.

The
Company entered into newbuilding contracts on September 28, 2007, with Hyundai Samho Heavy Industries Co. Limited for five 12,600 TEU containerships (the HN S-456, theHN S-457,the HN S-458,theHN S-459and the HN S-460). The contract price of each vessel is $166.2 million. The Company paid an advance of $249.2 million as of
December 31, 2009, in relation to these contracts. The vessels are expected to be delivered to the Company throughout the first half of 2012. The Company has arranged to charter each of these
containerships under 12-year charters with a major liner company upon delivery of each vessel.

The
Company entered into newbuilding contracts on November 9, 2007, with Hyundai Samho Heavy Industries Co. Limited for three 10,100 TEU containerships (the HN S-461, theHN S-462and the HN S-463). The contract price of each vessel is
$145.2 million. The Company paid an advance of $174.3 million as of December 31, 2009, in relation to these contracts. The vessels are expected to be delivered to the Company
during the first half of 2011. The Company has arranged to charter each of these containerships under 12-year charters with a major liner company upon delivery of each vessels.

The
Company entered into newbuilding contracts on July 26, 2006, with Sungdong Shipbuilding & Marine Engineering Co. Ltd. for four containerships (the HN S4002, theHN S4003,the HN S4004and theHN S4005) of 6,500 TEU each. The contract price of each vessel is
$91.5 million. The Company paid an advance of $210.5 million as of December 31, 2009, in relation to these contracts. The vessels are expected to be delivered to the Company
throughout up to the third quarter of 2010. The Company has arranged to charter each of these containerships under 12-year charters with a major liner company upon delivery of each vessel.

b)    Advances
for vessels under construction and transfers to vessels' cost as of December 31, 2009 and 2008 were as follows (in thousands):

As of January 1, 2008

$
745,534Additions


518,512Transfer to vessels' cost


(196,221
)As of December 31, 2008


1,067,825Additions


420,984Transfer to vessels' cost


(294,721
)As of December 31, 2009

$
1,194,088


F-23

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Table of Contents

DANAOS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6 Deferred Charges, Net

Deferred charges consisted of the following (in thousands):

Drydocking and
Special Survey
Costs

Finance
and Other
Costs

Total
Deferred
ChargesAs of January 1, 2008

$
8,868

$
1,563

$
10,431Additions


10,625


4,441


15,066Written off amounts


(181
)

(128
)

(309
)Amortization


(7,301
)

(220
)

(7,521
)Written off due to sale of vessels


(1,569
)




(1,569
)As of December 31, 2008

$
10,442

$
5,656

$
16,098Additions


7,259


6,822


14,081Written off amounts





(412
)

(412
)Amortization


(8,295
)

(889
)

(9,184
)As of December 31, 2009

$
9,406

$
11,177

$
20,583


The
Company follows the deferral method of accounting for drydocking and special survey costs in accordance with accounting guidance for planned major maintenance activities.
Furthermore, when a vessel is drydocked for more than one reporting period, the respective costs are identified and recorded in the period in which they were incurred and not at the conclusion of the
drydocking.

7 Other Current Assets

Other current assets consisted of the following at December 31 (in thousands):

2009

2008Insurance claims

$
1,013

$
4,279Advances to suppliers and other assets


2,275


3,488Total

$
3,288

$
7,767


Insurance
claims, net of applicable deductibles arising from hull and machinery damage or other insured risks, are expected to be fully collected.

8 Other Non-current Assets

Other non-current assets consisted of the following at December 31 (in thousands):

2009

2008Fair value of swaps

$
3,762

$
6,691Other assets


5,622


870Total

$
9,384

$
7,561


In
October 30, 2009, the Company agreed with one of its charterers, Zim Integrated Shipping Services Ltd., revisions to charterparties for six of its vessels in operation,
which keep the original charter terms in place with deferred, interest bearing payment terms. In this respect, the Company

F-24

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Table of Contents

DANAOS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8 Other Non-current Assets (Continued)

recorded
a receivable in "Other non-current assets" of $4.5 million from ZIM, which will be cash settled in accordance with the agreement.

In
respect to the fair value of swaps, refer to Note 16b, Financial InstrumentsFair Value Interest Rate Swap Hedges.

9 Accounts Payable

Accounts payable consisted of the following at December 31 (in thousands):

2009

2008Suppliers, repairers

$
47,612

$
10,481Insurers, agents, brokers


693


2,216Other creditors


1,237


1,205Total

$
49,542

$
13,902


As
of December 31, 2009, the Company recognized a liability of $20.4 million in relation to three of its newbuilding vessels being built by Hanjin Heavy Industries &
Construction Co. Ltd., theHN N-216, theHN N-217and theHN N-220, based on the construction stage (steel cutting, steel cutting and keel laying, respectively) as described in the
agreement with the shipyard (recorded as suppliers in the above table). An amount of $5.6 million was cash settled in January 19, 2010 (in relation to the HN N-220). On May 25, 2010,
the Company came to an agreement with Hanjin Heavy Industries &
Construction Co. Ltd. to cancel three 6,500 TEU newbuilding containerships, theHN N-216, the HN N-217and theHN N-218and the outstanding amounts due as of
December 31, 2009, will be forfeited. Refer to Note 26, Subsequent Events. In addition, the Company recognized a liability of $17.0 million in relation to one of its newbuilding
vessels being built by Shanghai Jiangnan Changxing Heavy Industry Company Ltd., theHN Z0003, based on the construction stage (steel
cutting) as described in the agreement with the shipyard, which will be cash settled within the 2010.

10 Accrued Liabilities

Accrued liabilities consisted of the following at December 31 (in thousands):

2009

2008Accrued payroll

$
912

$
1,025Accrued interest


11,348


3,600Accrued expenses


18,836


6,804Total

$
31,096

$
11,429


As
of December 31, 2009, the Company has recorded accrued interest of $10.3 million in relation to the margin increase of its $700.0 million senior credit facility
with Aegean Baltic Bank S.A., HSH Nordbank AG and Piraeus Bank in agreement with the terms and conditions of a commitment letter the Company has entered into (refer to Note 13,
Long-Term Debt), which will be cash settled within 2010.

Accrued
expenses mainly consisted of accrued realized losses of cash flow interest rate swaps of $13.6 million and $2.0 million as of December 31, 2009 and 2008,
respectively.

F-25

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Table of Contents

DANAOS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

11 Other Current and Long-term Liabilities

Other current liabilities consisted of the following at December 31 (in thousands):

2009

2008Fair value of swaps


100,065


48,217


Other
long-term liabilities consisted of the following at December 31 (in thousands):

2009

2008Fair value hedged debt

$
6,000

$
10,824Fair value of swaps


207,493


414,668Other long-term liabilities


1,706


976Total

$
215,199

$
426,468


In
respect to the fair value of swaps, refer to Note 16a, Financial InstrumentsCash Flow Interest Rate Swap Hedges.

12 Lease Arrangements

a)    Other
lease arrangements

During
2004, the Company entered into a structured transaction with third parties affecting four vessels in its current fleet and two vessels under construction whereby such vessels were
acquired by counterparties to the transaction which then time chartered the vessels to the Company for a period of 61/2 years. The Company did not account for the transactions as sale
and lease-backs because the consideration for the vessels was not under the Company's control. Accordingly, the vessels continued to be recognized in the Company's books along with the external bank
debt used to finance the initial acquisition. The Company reduced the cost basis of the vessels and hulls at inception with the present value of the future cash inflows amounting to
$59.6 million, $32.3 million and $27.3 million for the vessels and for the hulls, respectively, and recognized this amount as a receivable in respect of the lease arrangements.
The receivable balance was being reduced by the actual cash inflows over the 61/2 year term. The discount rates used in the present value calculation ranged from 4.2% to 4.9%,
reflecting the GBP applicable interest rate at the time of the inception of the transactions. As a result of a change in U.K. law enacted in 2006, the Company estimated that the cash benefits
initially expected to be derived from this structure would eventually be paid back and, accordingly, reinstated the original book basis of the acquired vessels, recognized a liability for the net
proceeds received by the Company reflecting periodic cash benefits received and recognized an incremental liability of $12.8 million, which was recorded as an expense. As a result of a
restructuring in October 2007, the Company no longer expected to have to pay back any amounts previously evaluated due to the 2006 change in U.K. law. As a result, the Company expected to retain the
cash benefits of $29.3 million received. Accordingly, the liability for cumulative net periodic distributions received in the form of cash benefits was reversed and recorded as a reduction of
the book basis of the vessels. In addition, the incremental liability of $12.8 million, which was recorded as expense in 2006, was reversed and recognized in earnings in 2007. On
March 7, 2008, the Company exercised its right to arrange the sale of the vessels subject to the respective leasing arrangements, resulting in the cessation of the above structure, to 100%
owned subsidiaries of the Company and realized an additional cash benefit of $16.9 million which was recorded as a further reduction of the book basis of the vessels.

F-26

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Table of Contents

DANAOS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

12 Lease Arrangements (Continued)

b)    Charters-out:

The
future minimum revenue, expected to be earned on non-cancelable time charters with initial terms of one year or more consisted of the following at December 31,
2009 (in thousands):

2010

$
352,4942011


427,1812012


551,7952013


590,0852014


587,9372015 and thereafter


4,193,407Total future revenue

$
6,702,899


Revenues
from time charters are not generally received when a vessel is off-hire, including time required for normal periodic maintenance of the vessel. In arriving at the
minimum future charter revenues, an estimated time off-hire to perform periodic maintenance on each vessel has been deducted, although there is no assurance that such estimate will be
reflective of the actual off-hire in the future. The off-hire assumptions used relate mainly to drydocking and special survey maintenance carried out approximately every
2.5 years per vessel and which may last approximately 10 to15 days.

In
2010, the Company has entered into an agreement to cancel the construction contracts for three newbuilding vessels under which contracted revenues of $27.5 million in 2012,
$37.9 million in 2013, $37.9 million in 2014 and $449.8 million in 2015 and thereafter, are included in the above table. Refer to Note 26, Subsequent Events.

13 Long-Term Debt

Long-term debt as of December 31, 2009 and 2008 consisted of the following (in thousands):

Lender

As of
December 31,
2009

Current
portion

Long-term
portion

As of
December 31,
2008

Current
portion

Long-term
portionThe Royal Bank of Scotland

$
652,649

$
652,649

$


$
640,449

$
6,600

$
633,849HSH Nordbank


37,000


37,000





41,000


4,000


37,000The Export-Import Bank of Korea ("KEXIM")


70,417


70,417





80,786


10,369


70,417The Export-Import Bank of Korea & Fortis Bank


113,109


113,109





124,359


11,250


113,109Deutsche Bank


180,000


180,000





180,000





180,000Emporiki Bank of Greece


125,700


125,700





71,000





71,000HSH Nordbank AG-Aegean Baltic Bank-Piraeus Bank


675,000


675,000





675,000


10,000


665,000Credit Suisse


121,050


121,050





31,060





31,060Fortis Bank-Lloyds TSB-National Bank of Greece


253,200


253,200





253,200





253,200Deutsche Schiffsbank-Credit Suisse-Emporiki Bank of Greece


103,553


103,553











Total

$
2,331,678

$
2,331,678

$


$
2,096,854

$
42,219

$
2,054,635


F-27

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Table of Contents

DANAOS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

13 Long-Term Debt (Continued)

All loans discussed above are collateralized by first and second preferred mortgages over the vessels financed, general assignment of all hire
freights, income and earnings, the assignment of their insurance policies, as well as any proceeds from the sale of mortgaged vessels and the corporate guarantee of Danaos Corporation.

As
of December 31, 2009, the Company was newly in breach of the corporate leverage ratio in its $60 million credit facility with HSH Nordbank and the market value adjusted
net worth covenant under its Deutsche Bank credit facility, in each case for which the Company has not obtained waivers. In addition, although the Company was in compliance with the covenants
contained in the Company's $124.4 million credit facility with the Export-Import Bank of Korea, or KEXIM, the cross default provisions of the respective credit facility resulted in an event of
default. As a result, the lenders currently have the ability to call the related debt due immediately. Furthermore, the Company's lenders agreed to waive, and not to exercise their right to demand
repayment of any amounts due under the respective loan agreements as a result of, the December 31, 2008 and June 30, 2009 covenant breaches under certain of its loan agreements, and any
future breaches of such covenants, through October 1, 2010. The Company has not obtained extension of such waivers to cover a twelve month period from the balance sheet date.

In
this respect, the Company classified its long-term debt of $2.3 billion as of December 31, 2009 as current debt. The Company continues to pay loan
instalments and accumulated or accrued interest as they fall due under its credit facilities.

The
repayment terms of the loans outstanding as of December 31, 2009, as described in the loan agreements, are as follows:

Lender

Outstanding
Principal
Amount in
millions

Interest Rate

Maturity

DetailsThe Royal Bank of Scotland

$
652.6

LIBOR + margin

Due
September 2021

Revolving credit facility of up to $700.0 million for the purpose of financing existing vessels or part of the newbuilding
program.HSH Nordbank

$
37.0

LIBOR + margin

Due
March 2014

17 quarterly installments of $1.0 million; balloon payment of $20.0 million.KEXIM

$
70.4

Fixed

Due
November 2016

26 quarterly installments of $2.6 million; plus installments of $1.0 million, $1.3 million and $0.69 million
payable in August 2016, September 2016 and November 2016, respectively.


F-28

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Table of Contents

DANAOS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

13 Long-Term Debt (Continued)

Lender

Outstanding
Principal
Amount in
millions

Interest Rate

Maturity

DetailsKEXIM-Fortis

$
113.1

$104.1 million Fixed; and $9.0 million: LIBOR
+ margin

Due
October 2018 and
January 2019

18 semi-annual installments of $5.625 million; plus installments of $2.14 million and $0.7 million; plus balloon payments of
$9.0 million payable in October 2018 and January 2019.Aegean Baltic Bank-HSH Nordbank-Piraeus Bank

$
675.0

LIBOR + margin

Due
November 2016

Revolving credit facility of up to $700.0 million in order to partially finance existing vessels and the construction of
new vessels. Repayment schedule, as amended in July 2009 will be based on quarterly installments, as well as, a balloon payment at the end.Emporiki Bank of Greece S.A.

$
125.7

LIBOR + margin

Due
June 2021

Loan facility of up to $156.8 million advanced to the vessel owning subsidiaries in order to partially finance the
construction of new vessels. The credit facility will be repaid over a 12 year period, with two years' grace period, in 20 equal consecutive semi-annual installments of $4.25 million and a balloon payment of $71.8 million along with
the final installment.Deutsche Bank

$
180.0

LIBOR + margin

Due
October 2018

32 consecutive quarterly installments each in the amount of $2.5 million and a final balloon payment of $100.0 million
payable together with the last such installment. The first installment is due on December 31, 2010.


F-29

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Table of Contents

DANAOS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

13 Long-Term Debt (Continued)

Lender

Outstanding
Principal
Amount in
millions

Interest Rate

Maturity

DetailsCredit Suisse

$
121.1

LIBOR + margin

Due
December 2019

28 consecutive quarterly installments amounting to $3.99 million each, with the first installment due March 31, 2013 and a final
balloon installment of $109.35 million which is due together with the final installment.Fortis BankLloyds TSBNational Bank of Greece

$
253.2

LIBOR + margin

Due
July 2018

16 equal semi-annual installments of $8.6 million, with the first installment due on July 29, 2010; and a final
balloon payment of $115.2 million on July 29, 2018.Deutsche Schiffsbank-Credit Suisse-Emporiki Bank of Greece

$
103.6

LIBOR + margin

Due
June 2021

20 consecutive semi-annual installments of $8.8 million, with the first installment due on December 30, 2011; and a
final balloon payment of $122.8 million on June 30, 2021.


On February 2, 2009, the Company, as borrower, and certain of its vessel-owning subsidiaries, as guarantors, entered into a credit facility
with Deutsche Schiffsbank, Credit Suisse and Emporiki Bank of up to $298.5 million in relation to pre and post-delivery financing for five new-building vessels, the ZIM
Dalian (a 4,253 TEU vessel), the HN N-220 and the HN N-223 (two 3,400 TEU vessels), the HN N-215 (a 6,500 TEU vessel) and the HN Z0001 (a 8,530 TEU vessel), which
are currently under construction and will be gradually delivered to us from the first quarter of 2009 until the end of the first quarter of 2011, with the Zim Dalian having been delivered to us on
March 31, 2009. The interest rate on the credit facility is LIBOR plus margin.

On
July 29, 2008, the Company entered into a credit facility of $253.2 million with Fortis Bank (acting as agent), Lloyds TSB and National Bank of Greece in relation to the
financing of vessels YM Colombo, YM Seattle, YM Vancouver and YM Singapore. The structure of this credit facility is such that the group of banks loaned funds of $253.2 million to the Company,
which the Company then re-loaned to a newly created entity of the group of banks ("Investor Bank"). With the proceeds, Investor Bank then subscribed for preference shares in Auckland
Marine Inc., Seacarriers Services Inc., Seacarriers Lines Inc. and Wellington Marine Inc. (subsidiaries of Danaos Corporation). In addition, four of the Companies'
subsidiaries issued a put option in respect of the preference shares. The effect of these transactions is that the Company's subsidiaries are required to pay out fixed preference

F-30

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Table of Contents

DANAOS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

13 Long-Term Debt (Continued)

dividends
to the Investor Bank, the Investor Bank is required to pay fixed interest due on the loan from the Company to Investor Bank and finally the Investor Bank is required to pay put option
premium on the put options issued in respect of the preference shares.

The
interest payments to the Company by Investor Bank are contingent upon receipt of these preference dividends. In the event these dividends are not paid, the preference dividends will
accumulate until such time as there are sufficient cash proceeds to settle all outstanding arrearages. Applying variable interest accounting to this arrangement, the Company has concluded that the
Company is the primary beneficiary of Investor Bank and accordingly has consolidated it into the Company's group. Accordingly, as at December 31, 2009, the Consolidated Balance Sheet and
Consolidated Statement of Operations includes Investor Bank's net assets of $nil and net income of $nil, respectively, due to elimination on consolidation, of accounts and transactions arising between
the Company and the Investor Bank.

In
December 2007, the Company filed a registration statement with the SEC for a shelf registration. The amount registered was US$1.0 billion. As of the date of filing of this
report, no securities had been issued under the shelf.

The
Company must maintain the following financial covenants:



Set
forth below are details of the respective waivers agreed in 2009 with the Company's lenders in respect of breaches of the loan covenants contained in certain of its credit facilities
and its guarantee facility with HSH Nordbank.

F-31

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Table of Contents

DANAOS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

13 Long-Term Debt (Continued)

The Royal Bank of Scotland Credit Facility.As of December 31, 2008, the Company was in breach of the collateral coverage ratio
and corporate
leverage ratio covenants contained in the Company's $700.0 million senior revolving credit facility with The Royal Bank of Scotland. The Company entered into an agreement waiving the breach of
the corporate leverage ratio covenant for the year ended December 31, 2008, as well as any subsequent breach of such covenant, up to January 31, 2010 and
reducing the collateral coverage ratio to 100% from 125% (at which revised collateral coverage ratio the Company would have been in compliance as of December 31, 2008 and June 30, 2009)
in respect of the year ended December 31, 2008 and up until January 31, 2010, with an increase in the interest rate margin by 1.5 percentage points per annum for the remaining
period of the loan and a one-time fee of $100,000. In addition, during the period covered by the waiver the Company is not permitted to make dividend payments without the consent of its
lender under this credit facility. On July 17, 2009, the Company entered into an agreement with the lender under this credit facility to extend the waiver period through October 1, 2010.

HSH Nordbank Credit Facility (with Aegean Baltic Bank acting as agent).As of December 31, 2008, the Company was in breach of the
net worth
covenant contained in the Company's $60.0 million credit facility with HSH Nordbank, Dresdner Bank and Aegean Baltic Bank acting as agent. The Company entered into an agreement waiving the
breach of such covenant for the year ended December 31, 2008, as well as any subsequent breach of such covenant, up to January 31, 2010. Such waiver has been provided by its lenders
under this credit facility pursuant to the terms and conditions of a commitment letter the Company has entered into with such lenders pursuant to which the Company has agreed to amend the credit
facility to increase the interest rate margin over LIBOR by 1.725 percentage points per annum (or, if lower, an increase in the interest rate margin of 1.225 percentage points and the
replacement of LIBOR by the bank's cost of funding) for the waiver period and increase the interest rate margin by 0.975 percentage points per annum for the remaining period of the loan as well
as pay a one-time fee of 0.30 percentage points on the facility amount outstanding. On July 21, 2009, the Company entered into an agreement with the lenders under this credit
facility to extend the waiver period through October 1, 2010, with the above interest rate margin increases being applied to the revised waiver period.

As
of December 31, 2009, the Company was in breach of the corporate leverage ratio covenant under this credit facility, which was not covered by the existing waivers and has not
obtained waiver. As a result of this non-compliance, the lenders currently have the ability to call the related debt due immediately.

Aegean Baltic BankHSH NordbankPiraeus Bank Credit Facility.As of December 31, 2008, the Company was in breach of
the collateral coverage ratio, corporate leverage ratio and net worth covenants contained in the Company's $700.0 million senior credit facility with Aegean Baltic Bank S.A., HSH
Nordbank AG and Piraeus Bank. The Company entered into an agreement waiving breaches of such covenants for the year ended December 31, 2008, as well as any subsequent breach of such covenants,
up to January 31, 2010. Such waiver has been provided by its lenders under this credit facility pursuant to the terms and conditions of a commitment letter the Company has entered into with
such lenders pursuant to which the Company has agreed to amend the credit facility, including to add additional collateral and increase the interest rate margin by 1.8 percentage points per
annum for the waiver period and increase the interest rate margin by 1.05 percentage points per annum for the remaining period of the loan, as well as pay a one-time fee of
$2.1 million and make $5.0 million

F-32

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Table of Contents

DANAOS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

13 Long-Term Debt (Continued)

payments
on July 31, 2009, October 31, 2009 and January 31, 2010, plus payment of any additional amounts from funds in the pledged account from income from the mortgaged vessels
under this credit facility on January 31, 2010. The Company has also agreed to use its best efforts to raise additional equity capital, with the participation of its largest stockholder in any
such transaction. In addition, during the period covered by the waiver the Company is not permitted to make dividend payments without the consent of its lenders under this credit facility. On
July 21, 2009, the Company entered into an agreement with the lenders under this credit facility to extend the waiver period through October 1, 2010, with the above interest rate margin
increases being applied to the revised waiver period, as well as to make additional $5.0 million payments on April 30, 2010 and July 31, 2010, plus payment of any additional
amounts from funds in the pledged account from income from the mortgaged vessels under this credit facility on April 30, 2010, July 31, 2010 and September 30, 2010 as the lender
under this credit agreement may determine.

The Export-Import Bank of Korea.As of December 31, 2008, the Company was in compliance with the covenants in its credit facility
with the
Export-Import Bank of Korea. As of December 31, 2009, although the Company was in compliance with the covenants in its credit facility, under the cross default provisions of the respective
credit facility the lenders could require immediate repayment of the related debt due.

KEXIMFortis Credit Facility.As of December 31, 2008, the Company was in breach of the corporate leverage ratio and net worth
covenants contained in the Company's $144.0 million credit facility with the Export-Import Bank of Korea and Fortis Bank. The Company entered into an agreement waiving compliance with such
covenants for the year ended December 31, 2008 and providing that compliance with such covenants in respect of the year ended December 31, 2009 will be tested within 180 days
following that date. In return, the Company paid its lenders under this credit facility a one-time fee of $360,000 and the interest rate margin was increased by 0.5 percentage
points for the waiver period. As of June 30, 2009, the Company was in breach of an additional
corporate leverage ratio contained in this credit facility and on September 22, 2009, the Company has entered into an agreement with the lenders under this credit facility to extend the waiver
of the breach of the corporate leverage ratio and net worth covenants obtained for the year ended December 31, 2008, as well as any subsequent breaches of such covenant, through
October 1, 2010 and waiving the breach of the additional corporate leverage ratio covenant identified as of June 30, 2009, and any subsequent breaches of such covenant, through
October 1, 2010, with an increase in the interest rate margin by 1.0 percentage points per annum for the waiver period from June 30, 2009 to December 31, 2009 and
0.5 percentage points per annum for the waiver period from January 1, 2010 to October 1, 2010, as well as a one-time fee of $360,000. The Company also agreed to use
its best efforts to raise additional equity capital, and to use the net proceeds of any such equity capital issuance, as well as any debt raised, to fund a portion of the Company's newbuilding
program. Under the terms of the waiver, during the waiver period the Company is not permitted to pay dividends.

Emporiki Bank Credit Facility.As of December 31, 2008, the Company was in breach of the corporate leverage ratio and minimum net
worth
covenants contained in the Company's $156.8 million credit facility with Emporiki Bank. The Company entered into an agreement waiving breaches of such covenants for the year ended
December 31, 2008, as well as any subsequent breach of such covenants, up to January 31, 2010, with an increase in the interest rate margin by 1.65 percentage points per annum for
the waiver period and 0.65 percentage points per annum for the period thereafter. On

F-33

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Table of Contents

DANAOS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

13 Long-Term Debt (Continued)

August 12,
2009, the Company entered into an agreement with the lender under this credit facility to extend the waiver period through October 1, 2010 (except for the minimum book net
worth covenant, which was not breached as of June 30, 2009), with a one-time amendment fee of $0.2 million and the above interest rate margin increases being applied to the
revised waiver period.

Deutsche Bank Credit Facility.As of December 31, 2008, the Company was in breach of the corporate leverage ratio covenant
contained in the
Company's $180.0 million credit facility with Deutsche Bank. The Company entered into an agreement waiving the breach of such covenant for the year ended December 31, 2008, as well as
any subsequent breach of such covenant, up to January 31, 2010. In return, the Company paid to the bank a one-time fee of 0.3% of the loan amount. As of June 30, 2009, the
Company was in breach of the collateral coverage ratio covenant contained in its credit facility with Deutsche Bank, which was not covered by the waiver obtained in relation to the December 31,
2008 breach. On August 6, 2009, the Company entered into an agreement with Deutsche Bank to extend the waiver of the breach of the corporate leverage ratio covenant obtained for the year ended
December 31, 2008, as well as any subsequent breaches of such covenant, through October 1, 2010 and waiving the breach of the collateral coverage ratio covenant identified as of
June 30, 2009, and any subsequent breaches, through October 1, 2010, with an increase in the interest rate margin by 1.315 percentage points per annum for the waiver period and
0.815 percentage points per annum thereafter, as well as a one-time fee of $0.4 million. The Company also agreed to use its best efforts to raise additional equity capital.
Under the terms of the waiver, during the waiver period the Company is not permitted to pay dividends without the consent of its lenders under this credit facility. On December 15, 2009, the
Company agreed to modify its agreement with Deutsche Bank to
reduce the collateral coverage ratio covenant requirement to 85% during the waiver period, while cancelling the waiver. As of December 31, 2009, the Company was in breach of the market value
adjusted net worth covenant under its credit facility and has not obtained waiver. As a result of this non-compliance, the lender currently has the ability to call the related debt due
immediately.

Credit Suisse Credit Facility.As of December 31, 2008, the Company was in breach of the corporate leverage ratio and net worth
covenants
contained in its credit facility with Credit Suisse. The Company entered into an agreement waiving breaches of such covenants for the year ended December 31, 2008, as well as any subsequent
breach of such covenants, up to January 31, 2010. As of June 30, 2009, the Company was in breach of the collateral coverage ratio covenant, which was not covered by the waiver obtained
in relation to the December 31, 2008 breaches, contained in the Company's $221.1 million credit facility with Credit Suisse. On July 29, 2009, the Company entered into an
agreement with Credit Suisse to extend the waiver of the breaches of the corporate leverage ratio and net worth covenants obtained for the year ended December 31, 2008 (except for the minimum
book net worth covenant, which was not breached as of June 30, 2009), as well as any subsequent breach of such covenants, through October 1, 2010 and reducing the collateral coverage
ratio to 100% from 125% (at which revised collateral coverage ratio the Company would have been in compliance as of June 30, 2009) in respect of the period ended June 30, 2009 and
through October 1, 2010, with an increase in the interest rate margin by 1.225 percentage points per annum for the waiver period and a one-time fee of $50,000. Under the
terms of the waiver, during the waiver period the Company is not permitted to pay dividends without the consent of its lenders under this credit facility.

Fortis BankLloyds TSBNational Bank of Greece Credit Facility.As of December 31, 2008, the Company was in compliance
with all covenants contained in its $253.2 million credit facility with Fortis

F-34

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Table of Contents

DANAOS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

13 Long-Term Debt (Continued)

BankLloyds
TSBNational Bank of Greece. As of June 30, 2009, the Company was in breach of the corporate leverage ratio and collateral coverage ratio covenants contained
in this credit facility. On August 13, 2009, the Company entered into an agreement with the lenders under its Fortis BankLloyds TSBNational Bank of Greece waiving the
breach of the corporate leverage ratio and collateral coverage ratio covenant identified as of June 30, 2009, and any subsequent breaches, through October 1, 2010, with an increase in
the interest rate margin by 1.25 percentage points per annum for the remaining period of the loan, as well as a one-time fee of $1.0 million. The Company also agreed to use
its best efforts to raise additional equity capital, and to use the net proceeds of any such equity capital issuance to fund a portion of the Company's newbuilding program. Under the terms of the
waiver, during the waiver period the Company is not permitted to pay dividends.

Deutsche SchiffsbankCredit SuisseEmporiki Bank Credit Facility.During the first quarter of 2009, the Company was in breach
of the corporate leverage ratio and net worth covenants contained in its $298.5 million credit facility. On March 19, 2009, the Company entered into an agreement waiving breaches of such
covenants, as well as any subsequent breach of such covenants, up to January 31, 2010. During the waiver period the Company is not permitted to pay dividends without the consent of its lenders
under this credit facility. On August 17, 2009, the Company entered into an agreement with the lenders to extend the waiver period through October 1, 2010 (except for the minimum book
net worth covenant, which was not breached as of June 30, 2009), with an increase in the interest rate margin by 0.8 percentage points per annum for the waiver period and a
one-time waiver fee of 0.2 percentage points on the outstanding loan amount.

HSH Nordbank Guarantee Facility (with Aegean Baltic Bank acting as agent).As of December 31, 2008, the Company was in breach of
the corporate
leverage ratio and net worth covenants contained in the Company's $148.0 million guarantee facility with HSH Nordbank, with Aegean Baltic Bank acting as agent. The Company entered into an
agreement, pursuant to the terms and conditions of a commitment letter, regarding the guarantee facility waiving breaches of such covenants for the year ended December 31, 2008, as well as any
subsequent breach of such covenants, up to October 1, 2010. In addition, during the period covered by the waiver the Company is not permitted to make dividend payments without the consent of
its lenders under this facility.

The
weighted average interest rate on long-term borrowings for the years ended December 31, 2009, 2008 and 2007 was 3.1%, 4.1% and 5.6%, respectively.

Total
interest paid during the years ended December 31, 2009, 2008 and 2007 was $62.4 million, $71.4 million and $46.4 million, respectively.

The
total amount of interest cost incurred in 2009 was $69.3 million (2008: $71.6 million, 2007: $45.3 million). The amount of interest expensed in 2009 was
$36.2 million (2008: $34.7 million, 2007: $22.4 million) and the amount of interest capitalized in 2009 was $33.1 million (2008: $36.9 million, 2007:
$22.9 million).

14 Related Party Transactions

Management Services:Pursuant to a ship management agreement between each of the vessel owning companies and Danaos Shipping
Company Limited (the
"Manager"), the Manager acts as the fleet's technical manager responsible for (i) recruiting qualified officers and crews, (ii) managing day to day vessel operations and relationships
with charterers, (iii) purchasing of stores, supplies and new

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Table of Contents

DANAOS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

14 Related Party Transactions (Continued)

equipment
for the vessels, (iv) performing general vessel maintenance, reconditioning and repair, including commissioning and supervision of shipyards and subcontractors of drydock facilities
required for such work, (v) ensuring regulatory and classification society compliance, (vi) performing operational budgeting and evaluation, (vii) arranging financing for vessels,
(viii) providing accounting, treasury and finance services and (ix) providing information technology software and hardware in the support of the Company's processes. The Manager is a
common controlled entity.

On
February 12, 2009, the Company signed an addendum to the management contract adjusting the management fees, effective January 1, 2009, to a fee of $575 per day for
commercial, chartering and administrative services, a fee of $290 per vessel per day for vessels on bareboat charter and $575 per vessel per day for vessels on time charter and a flat fee of $725,000
per newbuilding vessel for the supervision of newbuilding contracts. In 2008 and 2007, the management contract provided for a fee of $500 per day for commercial, chartering and administrative
services, $250 per vessel per day for vessels on bareboat charter and $500 per vessel per day for vessels on time charter, pro rated for the calendar days each vessel was owned. In addition, the
Manager received a flat fee of $400,000 per newbuilding vessel for the supervision of newbuilding contracts. On February 8, 2010, the Company signed an addendum to the management contract
adjusting the management fees, effective January 1, 2010, to a fee of $675 per day for commercial, chartering and administrative services, a fee of $340 per vessel per day for vessels on
bareboat charter and $675 per vessel per day for vessels on time charter. The incremental amount of the management fees above the previous fee level are payable by the Company, as accrued until the
date of payment, at any time before the end of 2010.

The
Manager also receives a commission of 0.75% on gross freight, charter hire, ballast bonus and demurrage with respect to each vessel in the fleet and a commission of 0.5% based on the
contract price of any vessel bought or sold by the manager on its behalf (excluding newbuildings).

Management
fees in 2009 amounted to approximately $8.7 million from continuing operations (2008: $7.0 million, 2007: $5.7 million). The related expenses are shown
under "General and administrative expenses" on the Statement of Income.

The
Company pays monthly advances on account of the above management services. These prepaid amounts are presented in the consolidated balance sheet under "Due from related parties"
totaling $8.6 million and $7.1 million as of December 31, 2009 and 2008, respectively.

In
2008, the Company reimbursed the Manager for an amount of $2.0 million related to newbuildings site offices set up costs, which was in addition to the flat fee of $400,000 per
newbuilding discussed above. The $2.0 million fee is not considered an additional fee but, rather, representing costs directly borne by the Company and paid through Danaos
Shipping Co. Ltd. in connection with start-up cost and other related costs necessary to initiate specific locally based offices related to the newbuilding program of the
Company. The Company considers necessary and has instructed the Manager to build up such offices in the respective shipyards in order to better and more efficiently progress the shipbuilding
supervision of its vessels.

Dr. John
Coustas, the Chief Executive Officer of the Company, is a member of the Board of Directors of The Swedish Club, the primary provider of insurance for the Company,
including a substantial portion of its hull & machinery, war risk and protection and indemnity insurance. During the years ended December 31, 2009 and 2008, the Company paid premiums to
The Swedish Club of

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Table of Contents

DANAOS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

14 Related Party Transactions (Continued)

$7.4 million
and $4.1 million, respectively. As of December 31, 2009 and 2008, the Company owed to The Swedish Club an amount of $0.3 million and $1.5 million,
respectively.

15 Taxes

Under the laws of the countries of the Company's ship owning subsidiaries' incorporation and/or vessels' registration, the Company's ship operating subsidiaries are not subject to tax on
international shipping income, however, they are subject to registration and tonnage taxes, which have been included in Vessel Operating Expenses in the accompanying consolidated Statements of Income.

Pursuant
to the U.S. Internal Revenue Code (the "Code"), U.S.-source income from the international operation of ships is generally exempt from U.S. tax if the company operating the ships
meets certain requirements. Among other things, in order to qualify for this exemption, the company operating the ships must be incorporated in a country which grants an equivalent exemption from
income taxes to U.S. corporations.

All
of the Company's ship-operating subsidiaries satisfy these initial criteria. In addition, these companies must be more than 50% owned by individuals who are residents, as
defined, in the countries of incorporation or another foreign country that grants an equivalent exemption to U.S. corporations. These companies also currently satisfy the more than 50% beneficial
ownership requirement. In addition, should the beneficial ownership requirement not be met, the management of the Company believes that by virtue of a special rule applicable to situations where the
ship operating companies are beneficially owned by a publicly traded company like the Company, the more than 50% beneficial ownership requirement can also be satisfied based on the trading volume and
the anticipated widely-held ownership of the Company's shares, but no assurance can be given that this will remain so in the future, since continued compliance with this rule is subject to
factors outside of the Company's control.

16 Financial Instruments

The principal financial assets of the Company consist of cash and cash equivalents, trade receivables and other assets. The principal financial liabilities of the Company consist of
long-term bank loans, accounts payable and derivatives.

Derivative Financial Instruments:The Company only uses derivatives for economic hedging purposes. The following is a summary of
the Company's risk
management strategies and the effect of these strategies on the Company's consolidated financial statements.

Interest Rate Risk:Interest rate risk arises on bank borrowings. The Company monitors the interest rate on borrowings closely to
ensure that the
borrowings are maintained at favorable rates. The interest rates relating to the long-term loans are disclosed in Note 13, Long-term Debt.

Concentration of Credit Risk:Financial instruments that potentially subject the Company to significant concentrations of credit
risk consist
principally of cash, trade accounts receivable and derivatives. The Company places its temporary cash investments, consisting mostly of deposits, with high credit qualified financial institutions. The
Company performs periodic evaluations of the relative credit standing of those financial institutions that are considered in the Company's investment strategy. The Company is exposed to credit risk in
the event of non-performance by counterparties to derivative

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Table of Contents

DANAOS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

16 Financial Instruments (Continued)

instruments,
however, the Company limits this exposure by diversifying among counterparties with high credit ratings. The Company depends upon a limited number of customers for a large part of its
revenues. Credit risk with respect to trade accounts receivable is generally managed by the selection of customers among the major liner companies in the world and their dispersion across many
geographic areas. The Company's maximum exposure to credit risk is mainly limited to the carrying value of its derivative instruments. The Company is not a party to master netting arrangements.

Fair Value:The carrying amounts reflected in the accompanying consolidated balance sheets of financial assets and liabilities
excluding
long-term bank loans approximate their respective fair values due to the short maturity of these instruments. The fair values of long-term floating rate bank loans approximate
the recorded values, generally due to their variable interest rates. The fair value of the swap agreements equals the amount that would be paid by the Company to cancel the swaps.

Interest Rate Swaps:The off-balance sheet risk in outstanding swap agreements involves both the risk of a counter-party not
performing
under the terms of the contract and the risk associated with changes in market value. The Company monitors its positions, the credit ratings of counterparties and the level of contracts it enters into
with any one party. The counterparties to these contracts are major financial institutions. The Company has a policy of entering into contracts with parties that meet stringent qualifications and,
given the high level of credit quality of its derivative counter-parties, the Company does not believe it is necessary to obtain collateral arrangements.



The Company, according to its long-term strategic plan to maintain relative stability in its interest rate exposure, has
decided to swap part of its interest expenses from floating to fixed. To this effect, the Company has entered into interest rate swap transactions with
varying start and maturity dates, in order to pro-actively and efficiently manage its floating rate exposure.

These
interest rate swaps are designed to economically hedge the variability of interest cash flows arising from floating rate debt, attributable to movements in three-month USD$ LIBOR.
According to the Company's Risk Management Accounting Policy, and after putting in place the formal documentation required by hedge accounting in order to designate these swaps as hedging instruments,
as from their inception, these interest rate swaps qualified for hedge accounting, and, accordingly, since that time, only hedge ineffectiveness amounts arising from the differences in the change in
fair value of the hedging instrument and the hedged item are recognized in the Company's earnings. Assessment and measurement of prospective and retrospective effectiveness for these interest rate
swaps are performed on a quarterly basis. For qualifying cash flow hedges, the fair value gain or loss associated with the effective portion of the cash flow hedge is recognized initially in
stockholders' equity, and recognized to the Statement of Income in the periods when the hedged item affects profit or loss. If the forecasted transaction does not occur, the ineffective portion of the
gain or loss on the hedging instrument is recognized in the Statement of Income immediately.

F-38

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Table of Contents

DANAOS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

16 Financial Instruments (Continued)

The
interest rate swap agreements converting floating interest rate exposure into fixed, as of December 31, 2009 were as follows (in thousands):

Counter-party

Contract
Trade
Date

Effective
Date

Termination
Date

Notional
Amount on
Effective
Date

Fixed Rate
(Danaos
pays)

Floating Rate
(Danaos receives)

Fair Value
December 31,
2009

Fair Value
December 31,
2008RBS


03/09/2007


3/15/2010


3/15/2015

$
200,000


5.07% p.a.

USD LIBOR 3M BBA

$
(19,100
)
$
(25,181
)RBS


03/16/2007


3/20/2009


3/20/2014

$
200,000


4.922% p.a.

USD LIBOR 3M BBA

$
(19,264
)
$
(27,438
)RBS


11/28/2006


11/28/2008


11/28/2013

$
100,000


4.855% p.a.

USD LIBOR 3M BBA

$
(9,234
)
$
(13,451
)RBS


11/28/2006


11/28/2008


11/28/2013

$
100,000


4.875% p.a.

USD LIBOR 3M BBA

$
(9,310
)
$
(13,546
)RBS


12/01/2006


11/28/2008


11/28/2013

$
100,000


4.78% p.a.

USD LIBOR 3M BBA

$
(8,947
)
$
(13,093
)HSH Nordbank


12/06/2006


12/8/2006


12/8/2009

$
200,000


4.739% p.a.

USD LIBOR 3M BBA

$


$
(6,474
)HSH Nordbank


12/06/2006


12/8/2009


12/8/2014

$
400,000


4.855% p.a.

USD LIBOR 3M BBA

$
(37,850
)
$
(48,115
)CITI


04/17/2007


4/17/2008


4/17/2015

$
200,000


5.124% p.a.

USD LIBOR 3M BBA

$
(21,650
)
$
(35,220
)CITI


04/20/2007


4/20/2010


4/20/2015

$
200,000


5.1775% p.a.

USD LIBOR 3M BBA

$
(19,210
)
$
(25,853
)RBS


09/13/2007


10/31/2007


10/31/2012

$
500,000


4.745% p.a.

USD LIBOR 3M BBA

$
(40,333
)
$
(54,131
)RBS


09/13/2007


9/15/2009


9/15/2014

$
200,000


4.9775% p.a.

USD LIBOR 3M BBA

$
(20,011
)
$
(26,067
)RBS


11/16/2007


11/22/2010


11/22/2015

$
100,000


5.07% p.a.

USD LIBOR 3M BBA

$
(6,561
)
$
(11,564
)RBS


11/15/2007


11/19/2010


11/19/2015

$
100,000


5.12% p.a.

USD LIBOR 3M BBA

$
(6,828
)
$
(11,801
)Eurobank


12/06/2007


12/10/2010


12/10/2015

$
200,000


4.8125% p.a.

USD LIBOR 3M BBA

$
(10,348
)
$
(20,611
)Eurobank


12/06/2007


12/10/2007


12/10/2010

$
200,000


3.8925% p.a.

USD LIBOR 3M BBA

$
(6,306
)
$
(9,565
)CITI


10/23/2007


10/25/2009


10/27/2014

$
250,000


4.9975% p.a.

USD LIBOR 3M BBA

$
(25,290
)
$
(32,319
)CITI


11/02/2007


11/6/2010


11/6/2015

$
250,000


5.1% p.a.

USD LIBOR 3M BBA

$
(17,128
)
$
(29,338
)CITI


11/26/2007


11/29/2010


11/30/2015

$
100,000


4.98% p.a.

USD LIBOR 3M BBA

$
(6,070
)
$
(11,123
)CITI


01/8/2008


1/10/2008


1/10/2011

$
300,000


3.57% p.a.

USD LIBOR 3M BBA

$
(9,090
)
$
(12,985
)CITI


02/07/2008


2/11/2011


2/11/2016

$
200,000


4.695% p.a.

USD LIBOR 3M BBA

$
(8,035
)
$
(19,168
)Eurobank


02/11/2008


5/31/2011


5/31/2015

$
200,000


4.755% p.a.

USD LIBOR 3M BBA

$
(6,993
)
$
(15,842
)Total fair value


















$
(307,558
)
$
(462,885
)


During 2009, the Company entered into agreements with the shipyards to defer the delivery of certain newbuildings, resulting in a reassessment of
the forecasted debt required to build these vessels, in relation to the timing of forecasted debt drawdowns expected during the construction period of such vessels. The interest rate swaps entered by
the Company in the past were based on the originally forecasted delivery of vessels and the respective debt drawdowns. As of December 31, 2009, the Company revised its estimates of the
forecasted debt timing, which resulted in hedge ineffectiveness of $(21.4) million recorded in the consolidated statement of income, reclassification of $(18.1) million of unrealized losses from
"Accumulated other comprehensive loss" in the consolidated balance sheet to consolidated statement of income and unrealized gains of $8.2 in relation to fair value changes of interest rate swaps for
the fourth quarter of 2009, which were recorded in the consolidated statement of income due to the retrospective effectiveness testing failure of certain swaps. The total fair value change of the
interest rate swaps for the period January 1, 2009 to December 31, 2009, amounted to $155.3 million.

The
variable-rate interest on specific borrowings is associated with vessels under construction and is capitalized as a cost of the specific vessels. In accordance with the
accounting guidance on derivatives and hedging, the amounts in accumulated comprehensive income/(loss) related to realized gain or losses on cash flow hedges that have been entered into, in order to
hedge the variability of that interest, are classified under other comprehensive income/(loss) and are reclassified into earnings over the depreciable life of the constructed asset, since that
depreciable life coincides with the amortization period for the capitalized interest cost on the debt. Realized losses on cash flow hedges of

F-39

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Table of Contents

DANAOS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

16 Financial Instruments (Continued)

$36,298 thousand
and $11,635 thousand were deferred in other comprehensive loss as of December 31, 2009 and 2008, respectively, and an amount of $66 thousand and
$6 thousand was reclassified into earnings as of December 31, 2009 and 2008, respectively, representing its amortization over the depreciable life of the vessels.



These interest rate swaps are designed to economically hedge the fair value of the fixed rate loan facilities against fluctuations in
the market interest rates by converting the Company's fixed rate loan facilities to floating rate debt. Pursuant to the adoption of the Company's Risk Management Accounting Policy, and after putting
in place the formal documentation required by hedge accounting in order to designate these swaps as hedging instruments, as of June 15, 2006, these interest rate swaps qualified for hedge
accounting, and, accordingly, since that time, hedge ineffectiveness amounts arising from the differences in the change in fair value of the hedging instrument and the hedged item are recognized in
the Company's earnings. The Company considers its strategic use of interest rate swaps to be a prudent method of managing interest rate sensitivity, as it prevents earnings from being exposed to undue
risk posed by changes in interest rates. Assessment and measurement of prospective and retrospective effectiveness for these interest rate swaps are performed on a quarterly basis, on the financial
statement and earnings reporting dates.

The
interest rate swap agreements converting fixed interest rate exposure into floating, as of December 31, 2009 and 2008, were as follows (in thousands):

Counter party

Contract
trade Date

Effective
Date

Termination
Date

Notional
Amount on
Effective
Date

Fixed Rate
(Danaos
receives)

Floating Rate
(Danaos pays)

Fair Value
December 31,
2009

Fair Value
December 31,
2008RBS


11/15/2004


12/15/2004


8/27/2016

$
60,528


5.0125% p.a.

USD LIBOR 3M BBA + 0.835% p.a.

$
1,865

$
3,289RBS


11/15/2004


11/17/2004


11/2/2016

$
62,342


5.0125% p.a.

USD LIBOR 3M BBA + 0.855% p.a.

$
1,897

$
3,402Total fair value


















$
3,762

$
6,691


The total fair value change of the interest rate swaps for the period from January 1, 2009 until December 31, 2009, amounted to
$(2.9) million, and is included in the Statement of Income in "Gain/(loss) on fair value of derivatives". The related asset of $3.8 million is shown under "Other non-current assets"
in the consolidated balance sheet. The total fair value change of the underlying hedged debt for the period from January 1, 2009 until December 31, 2009, amounted to $4.8 million
and is included in the Statement of Income in "Gain/(loss) on fair value of derivatives". The net ineffectiveness for December 31, 2009, amounted to $1.9 million and is shown in the
Statement of Income in Gain/(loss) on fair value of derivatives".



The Company entered into foreign currency forward contracts in 2004 to economically hedge its exposure to fluctuations of its
anticipated cash inflows in U.K. pounds relating to certain lease arrangements as explained in Note 12(a), Lease Arrangements. Pursuant to the adoption of the Company's risk management
accounting policy, and after putting in place the formal documentation

F-40

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Table of Contents

DANAOS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

16 Financial Instruments (Continued)

required
by hedge accounting in order to designate these forwards as hedging instruments, as of June 30, 2006, these foreign exchange forwards qualified for hedge accounting, and, accordingly,
since that time, only hedge ineffectiveness amounts arising from the differences in the change in fair value of the hedging instrument and the hedged item were recognized in the Company's earnings.

The
Company's forward contracts ceased to qualify as hedging instruments under hedge accounting in October 2007 as a result of amendments to the leasing arrangements described in
Note 12(a), Lease Arrangements. Forward contracts with fair value of $(1.3) million expired and cash settled in April 2008. All of the remaining forwards with fair value of $0.5 million
early terminated and cash settled in September 2008. These are included in the Statement of Income in "Other Income (Expenses) net".

Fair Value of Financial Instruments

Effective January 1, 2008, the Company adopted requirements of the accounting guidance for the fair value measurement and
disclosure. The guidance clarifies the definition of fair value, prescribes methods for measuring fair value, establishes a fair value hierarchy based on the inputs used to measure fair value and
expands disclosures about the use of fair value measurements.

The
following tables present the Company's assets and liabilities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy. The fair value
hierarchy has three levels based on the reliability of the inputs used to determine fair value.

Fair Value Measurements as of December 31, 2009Assets

Total

Quoted Prices in
Active Markets for
Identical Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)(in thousands of $)Interest rate swap contracts

$
3,762

$


$
3,762

$
LiabilitiesInterest rate swap contracts

$
307,558

$


$
307,558

$



Interest
rate swap contracts are measured at fair value on a recurring basis. Fair value is determined based on inputs that are readily available in public markets or can be derived from
information available in publicly quoted markets. Such instruments are typically classified within Level 2 of the fair value hierarchy. The fair values of the interest rate swap contracts have
been calculated by discounting the projected future cash flows of both the fixed rate and variable rate interest payments. Projected interest payments are calculated using the appropriate prevailing
market forward rates and are
discounted using the zero-coupon curve derived from the swap yield curve. Refer to Note 16(a)-(b) above for further information on the Company's interest rate swap contracts.

The
Company is exposed to credit-related losses in the event of nonperformance of its counterparties in relation to these financial instruments. As of December 31, 2009, these
financial instruments are in the counterparties' favor. The Company has considered the risk of non-performance by its and its counterparties in accordance with fair value accounting. The
Company performs evaluations of its counterparties for credit risk through ongoing monitoring of their financial health and risk profiles to identify risk or changes in their credit ratings.

F-41

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Table of Contents

DANAOS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

17 Operating Revenue

Operating revenue from significant customers (constituting more than 10% of total revenue) at December 31, were as follows:

Charterer

2009

2008

2007HMM Korea


22
%

22
%

13
%CSCL


14
%

16
%

18
%CMA CGM


15
%

17
%

13
%YML


18
%

19
%

11
%Maersk


11
%

16
%

21
%ZIM


14
%

Under 10
%




18 Operating Revenue by Geographic Location

Operating revenue by geographic location at December 31, was as follows (in thousands):

Continent

2009

2008

2007AustraliaAsia

$
231,290

$
193,845

$
154,467America








1,494Europe


88,221


105,060


102,884Total Revenue

$
319,511

$
298,905

$
258,845


F-42

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Table of Contents

DANAOS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

19 Commitments and Contingencies

Commitments

The Company, as of December 31, 2009 and December 31, 2008, had outstanding commitments of $1,908.8 million and
$2,250.4 million, respectively, for the construction of container vessels as follows (in thousands):

Vessel

TEU

Contract Price

As of
December 31,
2009

As of
December 31,
2008Zim Dalian











38,280Zim Luanda











38,280CMA CGM Moliere











45,750Hull S4002


6,500


91,500


36,600


54,900Hull S4003


6,500


91,500


27,450


54,900Hull S4004


6,500


91,500


45,750


54,900Hull S4005


6,500


91,500


45,750


73,200Hull N-214


6,500


99,000


59,400


79,200Hull N-215


6,500


99,000


69,300


79,200Hull N-216*


6,500


99,000


74,250


79,200Hull N-217*


6,500


99,000


79,200


79,200Hull N-218*


6,500


99,000


79,200


79,200Hull N-219


3,400


55,880


27,940


39,116Hull N-220


3,400


55,880


33,528


39,116Hull N-221


3,400


55,880


33,528


39,116Hull N-222


3,400


55,880


33,528


39,116Hull N-223


3,400


55,880


39,116


39,116Hull Z00001


8,530


113,000


56,500


90,400Hull Z00002


8,530


113,000


73,450


90,400Hull Z00003


8,530


113,000


90,400


90,400Hull Z00004


8,530


113,000


90,400


90,400HN H 1022A


8,530


117,500


70,500


94,000Hull S-456


12,600


166,166


116,316


116,316Hull S-457


12,600


166,166


116,316


116,316Hull S-458


12,600


166,166


116,316


116,316Hull S-461


10,100


145,240


87,144


87,144Hull S-462


10,100


145,240


87,144


87,144Hull S-463


10,100


145,240


87,144


87,144Hull S-459


12,600


166,166


116,316


116,316Hull S-460


12,600


166,166


116,316


116,316211,450

$
2,976,450

$
1,908,802

$
2,250,402


---

F-43

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Table of Contents

DANAOS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

19 Commitments and Contingencies (Continued)

Contingencies

The Company entered into a guarantee facility agreement with HSH Nordbank on April 20, 2007, by which the Bank issued a
performance guarantee for $148.0 million, guaranteeing certain future payments to Shanghai Jiangnan Changxing Heavy Industry Company Ltd shipyard, regarding relevant shipbuilding
contracts between the Company and the shipyard for the
construction of four vessels. The guarantee amount will be decreasing as installments are being paid by the Company and is scheduled to reduce to zero during the third quarter of 2010, when all of the
installments that have been guaranteed are scheduled to have been remitted. For the issuance of the guarantee, the Company contributed 25% of the guaranteed amount ($37.0 million) as cash
collateral at inception. As the installments are paid, this cash collateral amount will be reduced accordingly so as to always represent 25% of the outstanding guaranteed amount. The restricted cash
balance from the guarantee facility agreement with HSH Nordbank is $21.19 million at December 31, 2009. In addition, the Company was in breach of certain covenants under this guarantee
facility as of December 31, 2008, which have been waived by the bank, as discussed in Note 13, Long-term Debt.

The
Company entered into a guarantee facility agreement with the Royal Bank of Scotland on October 3, 2007, by which the Bank issued a performance guarantee for
$35.3 million, guaranteeing certain future payments to Shanghai Jiangnan Changxing Heavy Industry Company Ltd shipyard, regarding relevant shipbuilding contracts between the Company and
the shipyard for the construction of one vessel. The guarantee amount will be decreasing as installments are being paid by the Company and is scheduled to reduce to zero during the third quarter of
2010, when all of the installments that have been guaranteed are scheduled to have been remitted. For the issuance of the guarantee, the Company contributed 20% of the guaranteed amount
($7.05 million) as cash collateral at inception. Going forward, as the installments are paid, this cash collateral amount will be reduced accordingly so as to always represent 20% of the
outstanding guaranteed amount. The restricted cash balance from the guarantee facility agreement with the Royal Bank of Scotland was $2.35 million at December 31, 2009.

There
are no material legal proceedings to which the Company is a party or to which any of its properties are the subject, or other contingencies that the Company is aware of, other than
routine litigation incidental to the Company's business. In the opinion of management, the disposition of the aforementioned lawsuits should not have a significant effect on the Company's results of
operations, financial position and cash flows.

20 Sale of Vessels

No vessels were sold by the Company in 2009.

The
"Gain on sale of vessels" of $16.9 million for the period ended December 31, 2008, reflects the sale ofAPL Belgium, Winterberg,Maersk Constantia,Asia ExpressandSederbergas described below.

On
January 15, 2008, the Company sold and delivered theAPL Belgiumto APL following the exercise of the purchase option APL had
for this vessel. The sale consideration was $44.5 million. The Company realized a gain on this sale of $0.8 million.

On
January 25, 2008, the Company sold and delivered the vesselWinterberg. The sale consideration was $11.2 million. The
Company realized a gain on this sale of $4.8 million.

F-44

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Table of Contents

DANAOS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

20 Sale of Vessels (Continued)

On
May 20, 2008, the Company sold and delivered the vesselMaersk Constantia. The sale consideration was $15.8 million. The
Company realized a gain on this sale of $9.3 million.

On
October 26, 2008, the Company sold and delivered the vesselAsia Express. The sale consideration was $10.2 million. The
Company realized a gain on this sale of $3.5 million.

On
December 10, 2008, the Company sold and delivered the vesselSederberg. The sale consideration was $4.9 million. The
Company realized a loss on this sale of $1.5 million.

The
"Loss on sale of vessels" of $0.3 million for the period ended December 31, 2007, reflects the sale ofAPL England, APL ScotlandandAPL Hollandto APL.

On
March 7, 2007, the Company sold and delivered theAPL Englandto APL following the exercise of the purchase option APL had for
this vessel. The sale consideration was $44.5 million. The Company incurred a loss on this sale of $0.2 million.

On
June 22, 2007, the Company sold and delivered theAPL Scotlandto APL following the exercise of the purchase option APL had for
this vessel. The sale consideration was $44.5 million. The Company incurred a loss on this sale of $0.03 million.

On
August 3, 2007, the Company sold and delivered theAPL Hollandto APL following the exercise of the purchase option APL had for
this vessel. The sale consideration was $44.5 million. The Company incurred a loss on this sale of $0.05 million.

21 Stock Based Compensation

As of April 18, 2008, the Board of Directors and the Compensation Committee approved incentive compensation of Manager's employees with its shares from time to time, after
specific for each such time, decision by the compensation committee and the Board of Directors in order to provide a means of compensation in the form of free shares to certain employees of the
Manager of the Company's common stock. The Plan was effective as of December 31, 2008. Pursuant to the terms of the Plan, employees of the Manager may receive (from time to time) shares of the
Company's common stock as additional compensation for their services offered during the preceding period. The stock will have no vesting period and the employee will own the stock immediately after
grant. The total amount of stock to be granted to employees of the Manager will be at the Company's Board of Directors' discretion only and there will be no contractual obligation for any stock to be
granted as part of the employees' compensation package in future periods. As of December 31, 2008, the Company granted 2,246 shares to certain employees of the Manager and recorded an expense
of $15,183 in "General and Administrative Expenses" representing the fair value of the stock granted as at December 31, 2008. The Company distributed shares of its treasury stock to the
qualifying employees of the Manager during the first semester of 2009 in settlement of the 2,246 shares granted. As of December 31, 2009, no further shares were granted.

The
Company has also established the Directors Share Payment Plan under its 2006 equity compensation plan. The purpose of the Plan is to provide a means of payment of all or a portion of
compensation payable to directors of the Company in the form of Company's Common Stock. The Plan was effective as of April 18, 2008. Each member of the Board of Directors of the Company may
participate in the Plan. Pursuant to the terms of the Plan, Directors may elect to receive in Common Stock all or a portion of their compensation. During the first six months of 2009, two directors
elected

F-45

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Table of Contents

DANAOS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

21 Stock Based Compensation (Continued)

to
receive in Company shares 50% of their compensation and one director elected to receive in Company shares 50% of his compensation in the third and fourth quarter of 2009. On the last business day
of each quarter of 2009, rights to receive 13,110 shares in aggregate for the year ended December 31, 2009, were credited to the Director's Share Payment Account. As of December 31,
2009, $47 thousand were reported in "Additional Paid-in Capital" in respect of these rights. Following December 31 of each year, the Company will deliver to each Director the
number of shares represented by the rights credited to their Share Payment Account during the preceding calendar year. During 2009, the Company distributed 6,112 shares to Directors of the Company
from its treasury stock in settlement of shares granted as of December 31, 2008. As of April 1, 2010, the Company distributed 13,110 shares to Directors of the Company from its treasury
stock in settlement of shares granted as of December 31, 2009.

22 Stockholders' Equity

On October 14, 2005 and September 18, 2006, the Company's Articles of Incorporation were amended. Under the amended articles of incorporation the Company's authorized
capital stock consists of 200,000,000 shares of common stock with a par value of $0.01 and 5,000,000 shares of preferred stock with a par value of $0.01. On September 18, 2009, the Company's
Articles of Incorporation were amended. Under the Articles Amendment, the Company's authorized capital stock consists of 750,000,000 shares of common stock with a par value of $0.01 and 100,000,000
shares of preferred stock with a par value of $0.01.

Additionally,
on September 18, 2006, the Company effected an 88,615-for-1 split of its outstanding common stock. All common stock amounts (and per share
amounts) in the accompanying financial statements have been adjusted to reflect the 88,615-for-1 stock split. In the accompanying consolidated balance sheets, the Company has
adjusted its stockholders' equity accounts as of December 31, 2006, by increasing the stated capital and decreasing the additional paid-in capital by $443,070 to reflect the
increase in outstanding shares from 500 shares par value $.01 to 44,307,500 shares par value $.01. In the accompanying consolidated statements of income, basic and diluted net income per share and
weighted average number of shares have been adjusted for all periods presented.

On
October 6, 2006, the Company completed its initial public offering and the Company's common stock was listed on the New York Stock Exchange. In this respect 10,250,000 shares
of common stock at par value of $0.01 were issued for $21 per share. The net proceeds to the Company totaled $201.3 million.

On
October 24, 2008, the Company's Board of Directors approved a share repurchase program for the repurchase, from time to time, of up to 1,000,000 shares of the Company's common
stock (par value $0.01). As at December 31, 2008, the Company had re-acquired 15,000 shares for an aggregate purchase price of $88,156, which has been reported as Treasury stock in
the consolidated Balance Sheet.

On
January 18, 2007, the Company declared dividends amounting to $0.44 per common share for the fourth quarter of 2006, which resulted in an aggregate dividend of
$24.0 million paid on February 14, 2007, to all shareholders of record as of January 29, 2007. On April 24, 2007, the Board of Directors declared a dividend of $ 0.44 per
common share for the first quarter of 2007, which resulted in an aggregate dividend of $24.0 million paid on May 18, 2007, to all shareholders of record as of May 4, 2007. On
July 23, 2007, the Board of Directors declared a dividend of $ 0.44 per common

F-46

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Table of Contents

DANAOS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

22 Stockholders' Equity (Continued)

share
for the second quarter of 2007, which resulted in an aggregate dividend of $24.0 million paid on August 17, 2007, to all shareholders of record as of August 3, 2007. On
October 22, 2007, the Board of Directors declared a dividend of $ 0.465 per common share for the third quarter of 2007, which resulted in an aggregate dividend of $25.4 million, paid on
November 16, 2007 to all shareholders of record as of November 2, 2007.

On
January 23, 2008, the Company declared dividends amounting to $0.465 per common share for the fourth quarter of 2007, which resulted in an aggregate dividend of
$25.4 million paid on February 14, 2008, to all shareholders of record as of January 30, 2008. On April 18, 2008, the Company declared a dividend amounting to $0.465 per
common share for the first quarter of 2008, which resulted in an aggregate dividend of $25.4 million paid on May 14, 2008, to all shareholders of record as of April 30, 2008. On
July 18, 2008, the Company declared a dividend amounting to $0.465 per common share for the second quarter of 2008, which resulted in an aggregate dividend of $25.4 million paid on
August 20, 2008 to all shareholders of record as of August 6, 2008. On October 24, 2008, the Board of Directors
declared a dividend of $0.465 per common share for the third quarter of 2008, which resulted in an aggregate dividend of $25.4 million, paid on November 19, 2008 to all shareholders of
record as of November 5, 2008.

During
2009, the Company did not declare any dividends. The Company is not permitted to pay dividends under its existing waiver agreements (Refer to Note 13, Long-term
Debt).

23 Earnings per Share

The following table sets forth the computation of basic and diluted earnings per share for the years ending December 31 (in thousands):

2009

2008

2007Numerator:Net income

$
36,089

$
117,060

$
123,098Denominator(number of shares):Basic and diluted weighted average ordinary shares outstanding


54,549.8


54,557.1


54,557.5


24 Other income/(expenses), net

Other income/(expenses), net, of $(336) thousand in 2009 mainly consists of foreign currency revaluation losses of $(1.4) million, which partially offset by other income of
$1.1 million.

Other
income/(expenses), net, of $(1,060) thousand in 2008 mainly consists of a non-recurring expense of $1,636 thousand in relation to insurance expenses for the
years
of 2006 and 2007, which have been recorded in 2008 reflecting the contribution of the Company's insurer to the exposure of the International Group of P&I Clubs. In addition, the Company early
terminated and cash settled forwards with positive fair value of $471 thousand in September 2008 (refer to Note 16c, Financial Instruments).

Other
income/(expenses), net, of $14,560 thousand in 2007 mainly consists of a non-recurring gain of $15,905 thousand related to the leasing arrangements of the CSCL Europe, theCSCL America, theBunga Raya Tiga, the Bunga Raya Tujuh,theCSCL Pusanand theCSCL Le Havreand their

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Table of Contents

DANAOS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

24 Other income/(expenses), net (Continued)

subsequent
restructuring entered into in 2007 (refer to Note 12, Lease Arrangements). In addition, the Company recorded legal expenses in relation to this leasing arrangement of
$205 thousand.

25 Discontinued Operations

From 2002 to 2007, the Company owned a number of drybulk carriers, chartering them to its customers (the "Drybulk Business"). In 2006, the Company sold one drybulk vessel to an
unaffiliated purchaser for $27.5 million and in 2007, the Company sold all six (6) remaining drybulk vessels in its fleet to an unaffiliated purchaser, for aggregate consideration of
$143.5 million. The Company determined that the Drybulk Business met the requirements of accounting guidance for the impairment or disposal of long-lived assets, and, accordingly,
the Drybulk Business is reflected as discontinued operations in the Company's consolidated statements of income for the years presented. The Company allocated to discontinued operations nil interest
expense for the years ended December 31, 2009, 2008 and $0.4 million for the year ended December 31, 2007, based on actual interest incurred by each of the subsidiaries that owned
the vessels that were disposed of. The Company allocated to discontinued operations an expense of $1.5 million following an unfavorable outcome of a lawsuit regarding the operation of one of
the dry bulk vessels (sold in May 2007) for the year ended December 31, 2008. The Company allocated to discontinued operations gain on sale of vessels of $88.6 million for the year ended
December 31, 2007.

The
following table represents the revenues and net income from discontinued operations for the years ended December 31 (in thousands):

2009

2008

2007Operating Revenues

$


$


$
6,515Net (loss)/income

$


$
(1,822
)
$
92,166


The
reclassification to discontinued operations had no effect on the Company's previously reported consolidated net income.

26 Subsequent Events

On January 22, 2010, the Company sold and delivered theMSC Eagle. The sale consideration was $4.6 million. The Company
realized a net gain on this sale of $1.9 million. TheMSC Eaglewas over 30-years old and was generating revenue under its time
charter, which expired in early January 2010.

On
February 5, 2010, the Company granted 4,641 shares to certain employees of the Manager.

On
February 8, 2010, the Company signed an addendum to the management contract adjusting the management fees, effective January 1, 2010, to a fee of $675 per day for
commercial, chartering and administrative services, a fee of $340 per vessel per day for vessels on bareboat charter and $675 per vessel per day for vessels on time charter. The incremental amount of
the management fees shall be paid, as accrued until the date of payment, at any time before the end of 2010.

On
March 4, 2010, the Company repurchased 12,000 shares for an aggregate purchase price of $49,882, under its share purchase plan.

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Table of Contents

DANAOS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

26 Subsequent Events (Continued)

On
March 12, 2010, the Company took delivery of the newbuilding 6,500 TEU vessel, theCMA CGM Musset. The vessel has been deployed
on a 12-year time charter with one of the world's major liner companies.

On
March 31, 2010, the Company expected to enter into an agreement with Hanjin Heavy Industries & Construction Co. Ltd. to cancel three 6,500 TEU newbuilding
containerships, theHN N-216, theHN N-217and the HN N-218, initially expected to be
delivered in the first half of 2012, and recorded impairment losses of $71.5 million in the
first quarter of 2010. On May 25, 2010, the Company signed the cancellation agreement.

On
April 14, 2010, the Company signed a supplemental agreement with the Royal Bank of Scotland to release the balance of its restricted cash with the bank of $169.9 million
and the immediate application of such amount as prepayment of the $700.0 million senior revolving credit facility. The amount prepaid pursuant to this agreement will be available for
re-drawing as progress payments to shipyards for specific newbuildings.

On
May 17, 2010, the Company took delivery of the newbuilding 6,500 TEU vessel, theCMA CGM Nerval. The vessel has been deployed on
a 12-year time charter with one of the world's major liner companies.

On
May 19, 2010, the Company took delivery of the newbuilding 6,500 TEU vessel, theYM Mandate. The vessel has been deployed
on a 18-year bareboat charter with one of the world's major liner companies.

On
May 27, 2010, the Company took delivery of the newbuilding 6,500 TEU vessel, theHanjin Buenos Aires. The vessel has been
deployed on a 10-year time charter with one of the world's major liner companies.

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