<PAGE>

                                                                   EXHIBIT 10.12

THE BALTIC AND INTERNATIONAL MARITIME COUNCIL (BIMCO)                     [LOGO]
STANDARD SHIP MANAGEMENT AGREEMENT                                        PART 1
CODE NAME: "SHIPMAN 98"

1.    Date of Agreement JULY 1, 2004

2.    Owners (name, place of registered office and law of registry) (Cl.1)
      ADVENTURE THREE S.A.

      Name
      TRUST COMPANY COMPLEX, AJELTAKE RD

      Place of registered office
      AJELTAKE ISLAND, MAJURO

      Law of registry
      MARSHALL ISLANDS

3.    Managers (name, place of registered office and law of registry) (Cl. 1)
      FREE BULKERS S.A.

      Name
      TRUST COMPANY COMPLEX, AJELTAKE RD

      Place of registered office
      AJELTAKE ISLAND, MAJURO, MARSHALL ISLANDS

      Law of registry WITH OFFICES AT AKTI MIAOULI
      PIRAEUS - GR 18538 - GREECE

4.    Day and year of commencement of Agreement (Cl. 2)
      UPON SIGNATURE OF THIS AGREEMENT

5.    Crew Management (state "yes" or "no" as agreed) (Cl.3.1)
      YES

6.    Technical Management (state "yes" or "no" as agreed) (Cl. 3.2)
      YES

7.    Commercial Management (state "yes" or "no" as agreed) (Cl. 3.3)
      YES

8.    Insurance Arrangements (state "yes" or "no" as agreed) (Cl. 3.4)
      YES

9.    Accounting Services (state "yes" or "no" as agreed) (Cl. 3.5)
      YES

10.   Sale or purchase of the Vessel (state "yes" or "no" as agreed) (Cl. 3.6)
      YES

11.   Provisions (state "yes" or "no" as agreed) (Cl. 3.7)
      YES

12.   Bunkering (state "yes" or "no" as agreed) (Cl. 3.8)
      YES

13.   Chartering Services Period (only to be filled in if "yes" stated in Box 7)
      (Cl 3.3(i))
      YES

14.   Owners' Insurance (state alternative (i), (ii) or (iii) of Cl. 6.3)
      YES

15.   Annual Management Fee (state annual amount) (Cl. 8.1)
      USD 15,000 Per month or prorata

16.   Severance Costs (state maximum amount) (Cl.8.4(ii))

17.   Day and year of termination of Agreement (Cl. 17)
      AS PER CC. 17

18.   Law and Arbitration (state alternative 19.1, 19.2 or 19.3; if 19.3 place
      of arbitration must be stated) (Cl. 19)
      ENGLISH LAW, LONDON ARBITRATION

19.   Notices (state postal and cable address, telex and telefax number for
      serving notice and communication to the Owners) (Cl. 20)
      c/o FREE BULKERS S.A.
      unless otherwise notified in writing

20.   Notices (state postal and cable address, telex and telefax number for
      serving notice and communication to the Managers) (Cl. 20)
      93, AKTI MIAOULI
      PIRAEUS GR 18538, GREECE
      TEL: +30-210-4528770
      FAX: +30-210-4291010

It is mutually agreed between the party stated in Box 2 and the party stated in
Box 3 that this Agreement consisting of PART I and PART II as well as Annexes
"A" (Details or Vessel), "B" (Details of Crew), "C" (Budget) and "D" (Associated
vessels) attached hereto, shall be performed subject to the conditions contained
herein. In the event of a conflict of conditions, the provisions of PART I and
Annexes "A", "B", "C" and "D" shall prevail over those of PART II to the extent
of such conflict but no further.

Signature(s)(Owners)                               Signature(s)(Managers)
/s/ George D. Gourdomichalis                       /s/ Ion Varouxakis

Printed and sold by Fr. G. Knudtzons Bogtrykkeri A/S,Vallensbaekvej 61, DK-2625
Vallensbaek.Fax: + 4543660708

The Baltic and International Maritime Council (BIMCO), Copenhagen
ISSUED: August 1998

<PAGE>


                                     PART II
                "SHIPMAN 98" STANDARD SHIP MANAGEMENT AGREEMENT

1.    DEFINITIONS

      In this Agreement save where the context otherwise requires, the following
      words and expressions shall have the meanings hereby assigned to them.

      "Owners" means the party identified in Box 2.

      "Managers" means the party identified in Box 3.

      "Vessel" means the vessel or vessels details of which are set out in
      Annex "A" attached hereto.

      "Crew" means the Master, officers and ratings of the numbers, rank and
      nationality specified in Annex "B" attached hereto.

      "Crew Support Costs" means all expenses of a general nature which are not
      particularly referable to any individual vessel for the time being managed
      by the Managers and which are incurred by the Managers for the purpose of
      providing an efficient and economic management service and, without
      prejudice to the generality of the foregoing, shall include the cost of
      crew standby' pay, training schemes for officers and ratings, cadet
      training schemes, sick pay, study pay, recruitment and interviews.

      "Severance Costs" means the costs which the employers are legally obliged
      to pay to or in respect of the Crew as a result of the early termination
      of any employment contract for service on the Vessel.

      "Crew Insurances" means insurances against crew risks which shall include
      but not be limited to death, sickness, repatriation, injury, shipwreck
      unemployment indemnity and loss of personal effects.

      "Management Services" means the services specified in sub-clauses 3.1 to
      3.8 as indicated affirmatively in Boxes 5 to 12.

      "ISM Code" means the International Management Code for the Safe Operation
      of Ships and for Pollution Prevention as adopted by the International
      Maritime Organization (IMO) by resolution A.741 (18) or any subsequent
      amendment thereto.

      "STCW 95" means the International Convention on Standards of Training,
      Certification and Watchkeeping for Seafarers, 1978, as amended in 1995 or
      any subsequent amendment thereto.

2.    APPOINTMENT OF MANAGERS

      With effect from the day and year stated in Box 4 and continuing unless
      and until terminated as provided herein, the Owners hereby appoint the
      Managers and the Managers hereby agree to act as the Managers of the
      Vessel.

3.    BASIS OF AGREEMENT

      Subject to the terms and conditions herein provided, during the period of
      this Agreement, the Managers shall carry out Management Services in
      respect of the Vessel as agents for and on behalf of the Owners. The
      Managers shall have authority to take such actions as they may from time
      to time in their absolute discretion consider to be necessary to enable
      them to perform this Agreement in accordance with sound ship management
      practice.

      3.1 Crew Management

      (only applicable if agreed according to Box 5)

      The Managers shall provide suitably qualified Crew for the Vessel as
      required by the Owners in accordance with the STCW 95 requirements,
      provision of which includes but is not limited to the following functions:

      (i)    selecting and engaging the Vessel's Crew, including payroll
             arrangements, pension administration, and insurances for the Crew
             other than those mentioned in Clause 6;

      (ii)   ensuring that the applicable requirements of the law of the flag of
             the Vessel are satisfied in respect of manning levels, rank,
             qualification and certification of the Crew and employment
             regulations including Crew's tax, social insurance, discipline and
             other requirements;

      (iii)  ensuring that all members of the Crew have passed a medical
             examination with a qualified doctor certifying that they are fit
             for the duties for which they are engaged and are in possession of
             valid medical certificates issued in accordance with appropriate
             flag State requirements. In the absence of applicable flag State
             requirements the medical certificate shall be dated not more than
             three months prior to the respective Crew members leaving their
             country of domicile and maintained for the duration of their
             service on board the Vessel;

      (iv)   ensuring that the Crew shall have a command of the English language
             of a sufficient standard to enable them to perform their duties
             safely;

      (v)    arranging transportation of the Crew, including repatriation;

      (vi)   training of the Crew and supervising their efficiency;

      (vii)  conducting union negotiations;

      (viii) operating the Managers' drug and alcohol policy unless otherwise
             agreed.

      3.2 TECHNICAL MANAGEMENT

      (only applicable if agreed according to Box 6)

      The Managers shall provide technical management which includes, but is not
      limited to, the following functions:

      (i)    provision of competent personnel to supervise the maintenance and
             general efficiency of the Vessel;

      (ii)   arrangement and supervision of dry dockings, repairs, alterations
             and the upkeep of the Vessel to the standards required by the
             Owners provided that the Managers shall be entitled to incur the
             necessary expenditure to ensure that the Vessel will comply with
             the law of the flag of the Vessel and of the places where she
             trades, and all requirements and recommendations of the
             classification society;

      (iii)  arrangement of the supply of necessary stores, spares and
             lubricating oil;

      (iv)   appointment of surveyors and technical consultants as the Managers
             may consider from time to time to be necessary;

      (v)    development, implementation and maintenance of a Safety Management
             System (SMS) in accordance with the ISM Code (see sub-clauses 4.2
             and 5.3).

      3.3 COMMERCIAL MANAGEMENT

      (only applicable if agreed according to Box 7)

      The Managers shall provide the commercial operation of the Vessel, as
      required by the Owners, which includes, but is not limited to, the
      following functions:

      (i)    providing chartering services in accordance with the Owners'
             instructions which include, but are not limited to, seeking and
             negotiating employment for the Vessel and the conclusion
             (including the execution thereof) of charter parties or other
             contracts relating to the employment of the Vessel. If such a
             contract exceeds the period stated in Box 13, consent thereto in
             writing shall first be obtained from the Owners.

      (ii)   arranging of the proper payment to Owners or their nominees of all
             hire and/or freight revenues or other moneys of whatsoever nature
             to which Owners may be entitled arising out of the employment of or
             otherwise in connection with the Vessel.

      (iii)  providing voyage estimates and accounts and calculating of hire,
             freights, demurrage and/or despatch moneys due from or due to the
             charterers of the Vessel;

      (iv)   issuing of voyage instructions;

      (v)    appointing agents;

      (vi)   appointing stevedores;

      (vii)  arranging surveys associated with the commercial operation of the
             Vessel.

      3.4 INSURANCE ARRANGEMENTS

       (only applicable if agreed according to Box 8)

      The Managers shall arrange insurances in accordance with Clause 6, on such
      terms and conditions as the Owners shall have instructed or agreed, in
      particular regarding conditions, insured values, deductibles and
      franchises.

      3.5 ACCOUNTING SERVICES

      (only applicable if agreed according to Box 9)

      The Managers shall:

      (i)    establish an accounting system which meets the requirements of the
             Owners and provide regular accounting services, supply regular
             reports and records,

      (ii)   maintain the records of all costs and expenditure incurred as well
             as data necessary or proper for the settlement of accounts between
             the parties.

      3.6 SALE OR PURCHASE OF THE VESSEL

      (only applicable if agreed according to Box 10)

      The Managers shall, in accordance with the Owners' instructions, supervise
      the sale or purchase of the Vessel, including the

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                                     PART II
                "SHIPMAN 98" STANDARD SHIP MANAGEMENT AGREEMENT

      performance of any sale or purchase agreement, but not negotiation of the
      same.

      3.7 PROVISIONS (only applicable it agreed according to Box 11) The
      Managers shall arrange for the supply of provisions.

      3.8 BUNKERING (only applicable if agreed according to Box 12) The Managers
      shall arrange for the provision of bunker fuel of the quality specified by
      the Owners as required for the Vessel's trade.

4.    MANAGERS' OBLIGATIONS

      4.1 The Managers undertake to use their best endeavours to provide the
      agreed Management Services as agents for and on behalf of the Owners in
      accordance with sound ship management practice and to protect and promote
      the interests of the Owners in all matters relating to the provision of
      services hereunder. Provided, however, that the Managers in the
      performance of their management responsibilities under this Agreement
      shall be entitled to have regard to their overall responsibility in
      relation to all vessels as may from time to time be entrusted to their
      management and in particular, but without prejudice to the generality of
      the foregoing, the Managers shall be entitled to allocate available
      supplies, manpower and services in such manner as in the prevailing
      circumstances the Managers in their absolute discretion consider to be
      fair and reasonable.

      4.2 Where the Managers are providing Technical Management in accordance
      with sub-clause 3.2, they shall procure that the requirements of the law
      of the flag of the Vessel are satisfied and they shall in particular be
      deemed to be the "Company" as defined by the ISM Code, assuming the
      responsibility for the operation of the Vessel and taking over the duties
      and responsibilities imposed by the ISM Code when applicable.

5.    OWNERS' OBLIGATIONS

      5.1 The Owners shall pay all sums due to the Managers punctually in
      accordance with the terms of this Agreement.

      5.2 Where the Managers are providing Technical Management in accordance
      with sub-clause 3.2, the Owners shall:

      (i)   procure that all officers and ratings supplied by them or on their
            behalf comply with the requirements of STCW 95;

      (ii)  instruct such officers and ratings to obey all reasonable orders of
            the Managers in connection with the operation of the Managers'
            safety management system.

      5.3 Where the Managers are not providing Technical Management in
      accordance with sub-clause 3.2, the Owners shall procure that the
      requirements of the law of the flag of the Vessel are satisfied and that
      they, or such other entity as may be appointed by them and identified to
      the Managers, shall be deemed to be the "Company" as defined by the ISM
      Code assuming the responsibility for the operation of the Vessel and
      taking over the duties and responsibilities imposed by the ISM Code when
      applicable.

6.    INSURANCE POLICIES

      The Owners shall procure, whether by instructing the Managers under
      sub-clause 3.4 or otherwise, that throughout the period of this Agreement:

      6.1 at the Owners' expense, the Vessel is insured for not less than her
      sound market value or entered for her full gross tonnage, as the case may
      be for:

      (i)   usual hull and machinery marine risks (including crew negligence)
            and excess liabilities;

      (ii)  protection and indemnity risks (including pollution risks and Crew
            Insurances); and

      (iii) war risks (including protection and indemnity and crew risks) in
            accordance with-the best practice of prudent owners of vessels of a
            similar type to the Vessel, with first class insurance companies,
            underwriters or associations ("the Owners' Insurances");

      6.2 all premiums and calls on the Owners' Insurances are paid promptly by
      their due date,

      6.3 the Owners' Insurances name the Managers and, subject to underwriters'
      agreement, any third party designated by the Managers as a joint assured,
      with full cover, with the Owners obtaining cover in respect of each of the
      insurances specified in sub-clause 6.1:

      (i)   if reasonably obtainable, on terms such that neither the Managers
            nor any such third party shall be under any liability in respect of
            premiums or calls arising in connection with the Owners' Insurances;
            or

            Indicate alternative (i), (ii) or (iii) in Box 14. If Box 14 is left
            blank then (i) applies.

      6.4 written evidence is provided, to the reasonable satisfaction of the
      Managers, of their compliance with their obligations under Clause 6 within
      a reasonable time of the commencement of the Agreement, and of each
      renewal date and, if specifically requested, of each payment date of the
      Owners' Insurances.

7.    INCOME COLLECTED AND EXPENSES PAID ON BEHALF OF OWNERS

      7.1 All moneys collected by the Managers under the terms of this Agreement
      (other than moneys payable by the Owners to the Managers) and any interest
      thereon shall be held to the credit of the Owners in a separate bank
      account.

      7.2 All expenses incurred by the Managers under the terms of this
      Agreement on behalf of the Owners (including expenses as provided in
      Clause 8) may be debited against the Owners in the account referred to
      under sub-clause 7.1 but shall in any event remain payable by the Owners
      to the Managers on demand.

8.    MANAGEMENT FEE

      8.1 The Owners shall pay to the Managers for their services as Managers
      under this Agreement an annual management fee as stated in Box 15 which
      shall be payable by equal monthly instalments in advance, the first
      instalment being payable on the commencement of this Agreement (see Clause
      2 and Box 4) and subsequent instalments being payable every month.

      8.2 The management fee shall be subject to review upon mutual agreement.

      8.3 The Managers shall, at no extra cost to the Owners, provide their own
      office accommodation, office staff, facilities and stationery. Without
      limiting the generality of Clause 7 the Owners shall reimburse the
      Managers for postage and communication expenses, travelling expenses, and
      other out of pocket expenses property incurred by the Managers in
      pursuance of the Management Services.

      8.4 In the event of the appointment of the Managers being terminated by
      the Owners or the Managers In accordance with the provisions of Clauses 17
      and 18 other than by reason of default by the Managers, or if the Vessel
      is lost, sold or otherwise disposed of, the "management fee" payable to
      the Managers according to the provisions of sub-clause 8.1, shall continue
      to be payable for a further period of three calendar months as from the
      termination date. In addition, provided that the Managers provide Crew for
      the Vessel in accordance with sub-clause 3.1:

      (i)   the Owners shall continue to pay Crew Support Costs during the said
            further period of three calendar months and

      (ii)  the Owners shall pay an equitable proportion of any Severance Costs
            which may materialize, not exceeding the amount stated in Box 16.

      8.5 If the Owners decide to lay-up the Vessel whilst this Agreement
      remains in force and such lay-up lasts for more than three months, an
      appropriate reduction of the management fee for the period exceeding three
      months until one month before the Vessel is again put into service shall
      be mutually agreed between the parties.

      8.6 Unless otherwise agreed in writing all discounts and commissions
      obtained by the Managers in the course of the management of the Vessel
      shall be credited to the Owners.

9.    BUDGETS AND MANAGEMENT OF FUNDS

      9.1 The Managers shall present to the Owners annually a budget for the
      following twelve months in such form as the Owners require. The budget for
      the first year hereof is set out in Annex "C" hereto. Subsequent annual
      budgets shall be prepared by the Managers and submitted to the Owners not
      less than three months before the anniversary date of the

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                                     PART II
                 "SHIPMAN 98" STANDARD SHIP MANAGEMENT AGREEMENT

      commencement of this Agreement (see Clause 2 and Box 4).

      9.2 The Owners shall indicate to the Managers their acceptance and
      approval of the annual budget within one month of presentation and in the
      absence of any such indication the Managers shall be entitled to assume
      that the Owners have accepted the proposed budget.

      9.3 Following the agreement of the budget, the Managers shall prepare and
      present to the Owners their estimate of the working capital requirement of
      the Vessel and the Managers shall each month up-date this estimate. Based
      thereon, the Managers shall each month request the Owners in writing for
      the funds required to run the Vessel for the ensuing month, including the
      payment of any occasional or extraordinary item of expenditure, such as
      emergency repair costs, additional insurance premiums, bunkers or
      provisions. Such funds shall be received by the Managers within ten
      running days after the receipt by the Owners of the Managers' written
      request and shall be held to the credit of the Owners in a separate bank
      account.

      9.4 The Managers shall produce a comparison between budgeted and actual
      income and expenditure of the Vessel in such form as required by the
      Owners monthly or at such other intervals as mutually agreed.

      9.5 Notwithstanding anything contained herein to the contrary, the
      Managers shall in no circumstances be required to use or commit their own
      funds to finance the provision of the Management Services.

      9.6 Notwithstanding the above, the owners retain their right to directly
      pay any expenses related to the vessel from their account.

10.   MANAGERS' RIGHT TO SUB-CONTRACT

      The Managers shall not have the right to sub-contract any of their
      obligations hereunder, including those mentioned in sub-clause 3.1,
      without the prior written consent of the Owners which shall not be
      unreasonably withheld. In the event of such a sub-contract the Managers
      shall remain fully liable for the due performance of their obligations
      under this Agreement.

11.   RESPONSIBILITIES

      11.1 FORCE MAJEURE - Neither the Owners nor the Managers shall be under
      any liability for any failure to perform any of their obligations
      hereunder by reason of any cause whatsoever of any nature or kind beyond
      their reasonable control.

      11.2 LIABILITY TO OWNERS - (i) Without prejudice to sub-clause 11.1, the
      Managers shall be under no liability whatsoever to the Owners for any
      loss, damage, delay or expense of whatsoever nature, whether direct or
      indirect, (including but not limited to loss of profit arising out of or
      in connection with detention of or delay to the Vessel) and howsoever
      arising in the course of performance of the Management Services UNLESS
      same is proved to have resulted solely from the negligence, gross
      negligence or wilful default of the Managers or their employees, or agents
      or sub-contractors employed by them in connection with the Vessel, in
      which case (save where loss, damage, delay or expense has resulted from
      the Managers' personal act or omission committed with the intent to
      cause same or recklessly and with knowledge that such loss, damage,
      delay or expense would probably result) the Managers' liability for each
      incident or series of incidents giving rise to a claim or claims shall
      never exceed a total of ten times the annual management fee payable
      hereunder.

      (ii) Notwithstanding anything that may appear to the contrary in this
      Agreement, the Managers shall not be liable for any of the actions of the
      Crew, even if such actions are negligent, grossly negligent or wilful,
      except only to the extent that they are shown to have resulted from a
      failure by the Managers to discharge their obligations under sub-clause
      3.1, in which case their liability shall be limited in accordance with the
      terms of this Clause 11.

      11.3 INDEMNITY - Except to the extent and solely for the amount therein
      set out that the Managers would be liable under sub-clause 11.2, the
      Owners hereby undertake to keep the Managers and their employees, agents
      and sub-contractors indemnified and to hold them harmless against all
      actions, proceedings, claims, demands or liabilities whatsoever or
      howsoever arising which may be brought against them or incurred or
      suffered by them arising out of or in connection with the performance of
      the Agreement, and against and in respect of all costs, losses, damages
      and expenses (including legal costs and expenses on a full indemnity
      basis) which the Managers may suffer or incur (either directly or
      indirectly) in the course of the performance of this Agreement.

      11.4 "HIMALAYA" - It is hereby expressly agreed that no employee or agent
      of the Managers (including every sub-contractor from time to time employed
      by the Managers) shall in any circumstances whatsoever be under any
      liability whatsoever to the Owners for any loss, damage or delay of
      whatsoever kind arising of resulting directly or indirectly from any act,
      neglect or default on his part while acting in the course of or in
      connection with his employment and, without prejudice to the generality of
      the foregoing provisions in this Clause 11, every exemption, limitation
      condition and liberty herein contained and every right, exemption from
      liability, defence and immunity of whatsoever nature applicable to the
      Managers or to which the Managers are entitled hereunder shall also be
      available and shall extend to protect every such employee or agent of
      the Managers acting as aforesaid and for the purpose of all the foregoing
      provisions of this Clause 11 the Managers are or shall be deemed to be
      acting as agent or trustee on behalf of and for the benefit of all
      persons who are or might be their servants or agents from time to time
      (including sub-contractors as aforesaid) and all such persons shall to
      this extent be or be deemed to be parties to this Agreement.

12.   DOCUMENTATION

      Where the Managers are providing Technical Management in accordance with
      sub-clause 3.2 and/or Crew Management in accordance with sub-clause 3.1,
      they shall make available, upon Owners' request, all documentation and
      records related to the Safety Management System (SMS) and/or the Crew
      which the Owners need in order to demonstrate compliance with the ISM Code
      and STCW 95 or to defend a claim against a third party.

13.   GENERAL ADMINISTRATION

      13.1 The Managers shall handle and settle all claims arising out of the
      Management Services hereunder and keep the Owners informed regarding any
      incident of which the Managers become aware which gives or may give rise
      to claims or disputes involving third parties.

      13.2 The Managers shall, as instructed by the Owners, bring or
      defend actions, suits or proceedings in connection with matters entrusted
      to the Managers according to this Agreement.

      13.3 The Managers shall also have power to obtain legal or technical or
      other outside expert advice in relation to the handling and settlement of
      claims and disputes or all other matters affecting the interests of the
      Owners in respect of the Vessel.

      13.4 The Owners shall arrange for the provision of any necessary guarantee
      bond or other security.

      13.5 Any costs reasonably incurred by the Managers in carrying out their
      obligations according to Clause 13 shall be reimbursed by the Owners.

14.   AUDITING

      The Managers shall at all times maintain and keep true and correct
      accounts and shall make the same available for inspector and auditing by
      the Owners at such times as may be mutually agreed. On the termination,
      for whatever reasons, of this Agreement, the Managers shall release to the
      Owners, if so requested, the originals where possible, or otherwise
      certified copies,of all such accounts and all documents specifically
      relating to the Vessel and her operation.

15.   INSPECTION OF VESSEL

      The Owners shall have the right at any time after giving reasonable notice
      to the Managers to inspect the Vessel for any reason they consider
      necessary.

16.   COMPLIANCE WITH LAWS AND REGULATIONS

      The Managers will not do or permit to be done anything which might cause
      any breach or infringement of the laws and regulations of the Vessel's
      flag, or of the places where she trades.

17.   DURATION OF THE AGREEMENT

      This Agreement shall come into effect on the day and year stated in Box 4
      and shall continue until the date stated in Box 17. Thereafter it shall
      continue until terminated by either party giving to the other-notice in
      writing, in which event the Agreement shall

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                                     PART II
                "SHIPMAN 98" STANDARD SHIP MANAGEMENT AGREEMENT

      terminate upon the expiration of a period of two months from the date upon
      which such notice was given.

18.   TERMINATION

      18.1 OWNERS' DEFAULT

      (i)   The Managers shall be entitled to terminate the Agreement with
            immediate effect by notice in writing if any moneys payable by the
            Owners under this Agreement and/or the owners of any associated
            vessel, details of which are listed in Annex "D", shall not have
            been received in the Managers' nominated account within ten running
            days of receipt by the Owners of the Managers written request or if
            the Vessel is repossessed by the Mortgagees.

      (ii)  If the Owners:

            (a)   fail to meet their obligations under sub-clauses 5.2 and 5.3
                  of this Agreement for any reason within their control, or

            (b)   proceed with the employment of or continue to employ the
                  Vessel in the carriage of contraband, blockade running, or in
                  an unlawful trade, or on a voyage which in the reasonable
                  opinion of the Managers is unduly hazardous or improper,

            the Managers may give notice of the default to the Owners, requiring
            them to remedy it as soon as practically possible. In the event that
            the Owners fail to remedy it within a reasonable time to the
            satisfaction of the Managers, the Managers shall be entitled to
            terminate the Agreement with immediate effect by notice in writing.

      18.2 MANAGERS' DEFAULT

      If the Managers fail to meet their obligations under Clauses 3 and 4 of
      this Agreement for any reason within the control of the Managers, the
      Owners may give notice to the Managers of the default, requiring them to
      remedy it as soon as practically possible. In the event that the Managers
      fail to remedy it within a reasonable time to the satisfaction of the
      Owners, the Owners shall be entitled to terminate the Agreement with
      immediate effect by notice in writing.

      18.3 EXTRAORDINARY TERMINATION

      This Agreement shall be deemed to be terminated in the case of the sale of
      the Vessel or if the Vessel becomes a total loss or is declared as a
      constructive or compromised or arranged total loss or is requisitioned.

      18.4 For the purpose of sub-clause 18.3 hereof

      (i)   the date upon which the Vessel is to be treated as having been sold
            or otherwise disposed of shall be the date on which the Owners cease
            to be registered as Owners of the Vessel;

      (ii)  the Vessel shall not be deemed to be lost unless either she has
            become an actual total loss of agreement has been reached with her
            underwriters in respect of her constructive, compromised or arranged
            total loss or if such agreement with her underwriters is not reached
            it is adjudged by a competent tribunal that a constructive loss of
            the Vessel has occurred.

      18.5 This Agreement shall terminate forthwith in the event of an order
      being made or resolution passed for the winding up, dissolution,
      liquidation or bankruptcy of either party (otherwise than for the purpose
      of reconstruction or amalgamation) or if a receiver is appointed, or if it
      suspends payment, ceases to carry on business or makes any special
      arrangement or composition with its creditors.

      18.6 The termination of this Agreement shall be without prejudice to all
      rights accrued due between the parties prior to the date of termination.

19.   LAW AND ARBITRATION

      19.1 This Agreement shall be governed by and construed in accordance with
      English law and any dispute arising out of or in connection with this
      Agreement shall be referred to arbitration in London in accordance with
      the Arbitration Act 1996 or any statutory modification or re-enactment
      thereof save to the extent necessary to give effect to the provisions of
      this Clause.

      The arbitration shall be conducted in accordance with the London Maritime
      Arbitrators Association (LMAA) Terms current at the time when the
      arbitration proceedings are commenced.

      The reference shall be to three arbitrators. A party wishing to refer a
      dispute to arbitration shall appoint its arbitrator and send notice of
      such appointment in writing to the other party requiring the other party
      to appoint its own arbitrator within 14 calendar days of that notice and
      stating that it will appoint its arbitrator as sole arbitrator unless the
      other party appoints its own arbitrator and gives notice that it has done
      so within the 14 days specified. If the other party does not appoint its
      own arbitrator and give notice that it has done so within the 14 days
      specified, the party referring a dispute to arbitration may, without the
      requirement of any further prior notice to the other party, appoint its
      arbitrator as sole arbitrator and shall advise the other party
      accordingly. The award of a sole arbitrator shall be binding on both
      parties as if he had been appointed by agreement.

      Nothing herein shall prevent the parties agreeing in writing to vary these
      provisions to provide for the appointment of a sole arbitrator.

      In cases where neither the claim nor any counterclaim exceeds the sum of
      USD50,000 (or such other sum as the parties may agree) the arbitration
      shall be conducted in accordance with the LMAA Small Claims Procedure
      current at the time when the arbitration proceedings are commenced.

      19.2 This Agreement shall be governed by and construed in accordance with
      Title 9 of the United States Code and the Maritime Law of the United
      States and any dispute arising out of or in connection with this Agreement
      shall be referred to three persons at New York, one to be appointed by
      each of the parties hereto, and the third by the two so chosen; their
      decision or that of any two of them shall be final, and for the purposes
      of enforcing any award, judgement may be entered on an award by any court
      of competent jurisdiction. The proceedings shall be conducted in
      accordance with the rules of the Society of Maritime Arbitrators, Inc.

      In cases where neither the claim nor any counterclaim exceeds the sum of
      USD50,000 (or such other sum as the parties may agree) the arbitration
      shall be conducted in accordance with the Shortened Arbitration Procedure
      of the Society of Maritime Arbitrators, Inc. current at the time when the
      arbitration proceedings are commenced.

      19.3 This Agreement shall be governed by and construed in accordance with
      the laws of the place mutually agreed by the parties and any dispute
      arising out of or in connection with this Agreement shall be referred to
      arbitration at a mutually agreed place, subject to the procedures
      applicable there.

      19.4 If Box 18 in Part I is not appropriately filled in, sub-clause 19.1
      of this Clause shall apply.

      Note: 19.1, 19.2 and 19.3 are alternatives; indicate alternative agreed in
      Box 18.

20.   NOTICES

      20.1 Any notice to be given by either party to the other party shall be in
      writing and may be sent by fax, telex, registered or recorded mail or by
      personal service.

      20.2 The address of the Parties for service of such communication shall be
      as stated in Boxes 19 and 20, respectively.

<PAGE>

ANNEX "A" (DETAILS OF VESSEL OR VESSELS) TO
THE BALTIC AND INTERNATIONAL MARITIME COUNCIL (BIMCO)
STANDARD SHIP MANAGEMENT AGREEMENT - CODE NAME: "SHIPMAN 98"

Date of Agreement: JULY 1, 2004

Name of Vessel(s): M/V "FREE ENVOY"

Particulars of Vessel(s): BUILT 1984

                          IMO # 8317150

                          FLAG MARSHALL ISLANDS

                          CLASS KRS

                          CRT 15715/NRT 9106
<PAGE>

ANNEX "B" (DETAILS OF CREW) TO
THE BALTIC AND INTERNATIONAL MARITIME COUNCIL (BIMCO)
STANDARD SHIP MANAGEMENT AGREEMENT - CODE NAME: "SHIPMAN 98"

Date of Agreement: JULY 1, 2004

Details of Crew: AT MANAGER'S DISCRETION/AUTHORITY

Numbers                    Rank                          Nationality

<PAGE>

ANNEX "C" (BUDGET) TO
THE BALTIC AND INTERNATIONAL MARITIME COUNCIL (BIMCO)
STANDARD SHIP MANAGEMENT AGREEMENT - CODE NAME: "SHIPMAN 98"

Date of Agreement: 1 JULY 2004

Managers' Budget for the first year with effect from the Commencement Date of
this Agreement:

                       AT MANAGER'S DISCRETION/AUTHORITY

<PAGE>

ANNEX "D" (ASSOCIATED VESSELS) TO
THE BALTIC AND INTERNATIONAL MARITIME COUNCIL (BIMCO)
STANDARD SHIP MANAGEMENT AGREEMENT - CODE NAME: "SHIPMAN 98"

NOTE: PARTIES SHOULD BE AWARE THAT BY COMPLETING THIS ANNEX "D" THEY WILL BE
SUBJECT TO THE PROVISIONS OF SUB-CLAUSE 18.1(i) OF THIS AGREEMENT.

Date of Agreement: 1 JULY 2004

Details of Associated Vessels: M/V FREE DESTINY
                               M/V FREE ENVOY