Exhibit 10.5










 

Date:
January 4, 2005




 




MC
SHIPPING INC. 



 

- and
-

 

MUNIA
MOBILIENGESELLSCHAFT MBH & CO. KG

 

 




	 	 	 
	 	
       

      AGREEMENT

       
	 



 

 

 





















 

THIS AGREEMENT is made
as of 4th January
2005

 

BETWEEN





	
      (1)
	
      MC
      SHIPPING INC, a
      company incorporated in Liberia whose registered office is at 80 Broad
      Street, Monrovia, Liberia (“MC”); and








	
      (2)
	
      MUNIA
      MOBILIENGESELLSCHAFT MBH & CO. KG, whose
      registered office is at Tolzer Str.15 82031 Grunwald (the
      “Owner”).






 

BACKGROUND





	
      (A)
	
      WHEREAS
      MC
      will procure the sale of the Vessels by the Sellers (being MC’s four
      wholly owned subsidiaries) to the Owner on the terms set out in the
      Memoranda of Agreement dated 29th
      December 2004 with the Owner. Copies of the Memoranda of Agreement are
      annexed hereto at Schedule 1.








	
      (B)
	
      WHEREAS by
      a loan agreement dated January 4th,
      2005 and made between (i) the Owner as borrower and (ii) Danmarks
      Skibskreditfond as lender (the“ Lender”) it was agreed that the Lender
      would make available to the Owner a facility of up to US
      $18,000,000.








	
      (C)
	
      WHEREAS
      the execution and delivery to the Owner of this Agreement is one of the
      conditions precedent to the availability of the facility under the Loan
      Agreement.








	
      (D)
	
      WHEREAS MC
      has agreed to provide the Guarantees in the terms set out
      herein.








	
      (E)
	
      WHEREAS
      MC
      and the Owner have agreed to provide the undertakings in the terms set out
      herein.








	
      (F)
	
      WHEREAS as
      more particularly provided for in the entry agreement between MC and other
      shareholders of the Owner (the “Entry Agreement”), MC will participate in
      the equity of the Owner as to a total of USD 4 million (the “MC
      Equity”).








	
      (G)
	
      WHEREAS
      the
      partnership Agreement between MC and other shareholders of Owner (the
      “Partnership Agreement”) sets out the Parties’ agreement with regard inter
      alia to the MC Equity.








	
      (H)
	
      WHEREAS
      the Vessels were due to be delivered to the Owner on 3rd January 2005 (the
      “Delivery Date”) and the Charterer will effect payment of hire due for
      January 2005 under the Current Charters to the Sellers on or about
      10th
      January 2005 (the “ Hire”).







WHEREAS in
consideration of the foregoing the Parties have agreed as follows;




IT
IS AGREED as
follows:





	
      1.
	
      INTERPRETATION








	
      1.1
	
      Construction
      of certain terms





























In this
Agreement:




“Annual
Opex Assessment” means the annual assessment to be made by the Owner and MC in
conjunction with the Managers as to any Opex Shortfall, Opex Additional
Shortfall, Opex Surplus or Opex Additional Surplus in the respective calendar
year and for the Vessels taken together. For the avoidance of doubt, if the
Expiry Date of a Vessel falls within a calendar year, the respective Vessel
shall be considered in the assessment merely for the time period until its
Expiry Date.




“Charterer”
mean A.P Moeller Maersk A/S chartering the Vessels from the Owners pursuant to
the Charters as more particularly described in Schedule 2.




“Charter
Periods” mean the time periods from the actual delivery date of each Vessel
pursuant to the Memoranda of Agreement until: 15th
May 2009
(“Maersk Barcelona”); 1st February
2009 (“Ankara”); 1st
September 2008 (“Maersk Brisbane”) and 1st February
2008 (“Maersk Belawan”) less the number of days (up to 110 days), the Charterer
elects to redeliver the respective Vessel prior to such dates.




“Charters”
mean the charterparties of the Vessels as novated between the Owner and the
Charterer as more particularly described in Schedule 2.




“Current
Charters” means the charters currently in force between the Sellers and the
Charterer.




“Charter
Hire” means the net charter hire under the Charters in the amount of USD
8.531,25 per Vessel per day.




“Delivery
Date” is as defined in Recital H above




“Expiry
Date” is the date on which the Guarantees for any of the Vessels cease according
to paragraph 12.




“Final
Opex Assessment” means the final assessment to be made by the Owner and MC in
conjunction with the Managers within one month after the last Expiry Date of the
Vessels, as to any Opex Shortfall, Opex Additional Shortfall, Opex Surplus or
Opex Additional Surplus in the period between actual delivery of the Vessels
pursuant to the MOAS and the Expiry Dates of the respective Vessels and for the
Vessels taken together.




“Fixed
Guarantee Fee“ means the fixed guarantee fee per Vessel per day as set out in
column (c) of Schedule 3 to be paid by Owner on a monthly basis to MC until the
Expiry Date of the respective Vessel.




“Guarantees”
means the guarantees of MC to the Owner as set out in paragraph 2 and 3
below.




“Charter
Guarantee” means the guarantee of MC to the Owner as set out in paragraph 3
below.










2















“Guarantee
Payments” means the sum of all payments made by MC to Owner under the Charter
Guarantee.




“Hire” is
as defined in Recital H above.




“Loan
Agreement” is defined in Recital B above.




“Managers”
mean V. Ships (Germany) GmbH & Co. KG.




“MOAS”
mean the contracts for the sale of the Vessels by the Sellers to the Owner as
attached at Schedule 1




“Monthly
Assessment” means the monthly assessment of the surplus, if any, (the “Monthly
Surplus”) calculated on the basis of the difference between the Estimated Opex
and the Budgeted Opex in the current month, such assessment to be made by the
Owner and MC in conjunction with the Managers within 3 working days upon receipt
by the Owner of the hire under the Charters for the current month. For the
avoidance of doubt, if the Expiry Date of a Vessel falls within the respective
month, the respective Vessel will be considered in the assessment merely for the
time period until its Expiry Date.




“Actual
Opex” mean the actual operating costs for the Vessels including, but not limited
to any expenses arising out of or in connection with the operation of the
Vessel, drydocking expenses, repair expenses, third party liability expenses and
management fees, but excluding any operating costs covered and paid by insurers
or third parties.




“Budgeted
Opex” mean the budgeted operating costs for each Vessel including, but not
limited to any expenses arising out of or in connection with the operation of
the Vessel, drydocking expenses, repair expenses, third party liability expenses
and management fees, but excluding any operating costs covered and paid by
insurers or third parties as agreed from time to time between the Owners and the
Managers and as discussed with MC. The Budgeted Opex for the year 2005 is set
out in column (a) of Schedule 3.




“Estimated
Opex” mean the estimated operating costs for each Vessel including, but not
limited to any expenses arising out of or in connection with the operation of
the Vessel, drydocking expenses, repair expenses, third party liability expenses
and management fees, but excluding any operating costs covered and paid by
insurers or third parties as set out in column (b) of Schedule 3.




“Off-Hire”
means any time period under the Charters, for which the Charterer does not pay
charter hire.




“Opex
Shortfall” means the sums if any up to a maximum amount of USD 500 per Vessel
per day by which the Actual Opex exceed the Estimated Opex.

 


“Opex
Additional Shortfall” means the sums if any in excess of USD 500 per Vessel per
day by which the Actual Opex exceed the Estimated Opex.

 








3












 

“Opex
Surplus” means the sums if any up to a maximum amount of USD 100 per Vessel per
day by which the Actual Opex fall below the Estimated Opex.




“Opex
Additional Surplus” means the sums if any in excess of USD 100 per Vessel per
day by which the Actual Opex fall below the Estimated Opex.




“Parties”
mean the Owner and MC.




“Party”
means either of the Parties.




“Right of
First Refusal” means the irrevocable right of MC to be granted first right of
refusal to purchase the Vessels or any of them from the Owner should the Owner
decide to sell the Vessels or any of them at any time during the Charter
Periods, at a price offered by third party buyers. Further, in the event that
the Owner does not wish to continue to own and operate the Vessels or any of
them beyond the respective Vessel’s special survey date MC shall have the right
to buy the respective Vessels at a price offered by third party buyers
including, but not limited to scrap yards, and thereafter MC shall be at liberty
to continue with the operation of the Vessels or to seek third party buyers at
its own discretion.




“Right to
Monitor” means the right of MC to monitor the Vessels’ operations and in
particular the level of operating expenses.




“Sellers”
mean the MC subsidiaries which are selling the Vessels to the Owner pursuant to
the MOAS.




“Vessels”
mean the vessels, details of which are set out in the Definition of Charter
Period above.




“Vessel”
means any of the Vessels as the context admits.






	
      2.
	
      OPEX
      GUARANTEE




 


	2.1	
      MC
      unconditionally and irrevocably warrants, guarantees and undertakes to the
      Owner








	 	
      (a)
	
      to
      pay to the Owner the Opex Shortfall if any upon first written request,
      and





	 	
      (b)
	
      to
      pay to the Owner the Opex Additional Shortfall if
any.




 



	
      2.2
	
      The
      Owner undertakes to pay to MC following the Final Opex Assessment 25 % of
      the Opex Additional Shortfall if any.




 


	
      3.
	
      CHARTER
      GUARANTEE







 



	
      3.1
	
      MC
      unconditionally and irrevocably warrants, guarantees and undertakes to
      Owner to pay to the Owner the Charter Hire for any period, (i) in which
      any of the Vessels is Off-Hire for whatever reason (including but not
      limited to drydocking periods) and (ii) following an extraordinary
      termination of a Charter, always excluding in both (i) and (ii) any such
      event arising as a consequence of the Charterer’s insolvency,
      administration, receivership or equivalent or if the Charterer is unable
      to pay its debts as they fall due.




 







4













 


	
      4.
	
      
      MC LIABILITY
      AS PRINCIPAL AND INDEPENDENT
  DEBTOR





 



	
      4.1
	
      
      Principal
      and independent
debtor





 


	 	
      MC
      shall be liable under the Guarantees as a principal and independent debtor
      and accordingly it shall not have, as regards the Guarantees any of the
      rights or defences of a surety.




 


	
      4.2
	
      No
      limit on number of demands. 




 


	 	The Owner may serve more than one demand under the
      Guarantees such demand or demands to be made by written notice to
      MC. 



  


	
      5.
	
      EXPENSES








	
      5.1
	
      Costs
      of preservation of rights, enforcement etc. 




 


	 	MC shall pay to the Owner on its demand the amount of all
      expenses incurred by the Owner in connection with any matter arising out
      of the Guarantees. 



  



	
      6.
	
      GUARANTEE
      FEE/PAYMENTS








	
      6.1
	
      As
      remuneration for the granting of the Guarantees, the Owner shall pay to MC
      the following amounts:









	 	
      6.1.1
	
      within
      3 working days upon receipt by the Owner of the hire under the Charters
      for the current month




 



	 	
      (a)
	
      the
      Fixed Guarantee Fee








	 	
      6.1.2
	
      following
      a Monthly Assessment








	 	
      (a)
	
      the
      Monthly Surplus, if any, 








	 	
      6.1.3
	
      following
      an Annual Opex Assessment:








	 	
      (a)
	
      the
      Opex Surplus, if any; and








	 	
      (b)
	
      the
      Opex Additional Surplus, if any 








	 	
      6.1.4
	
      following
      the Final Opex Assessment:








	 	
      (a)
	
      the
      Opex Surplus, if any, and








	 	
      (b)
	
      75%
      of the Opex Additional Surplus if any and













5
















	 	
      (c)
	
      the
      Guarantee Payments, if any, up to a maximum amount of 25 % of the Opex
      Additional Surplus.








	 	
      6.1.5
	
      MC
      shall give the Owner credit for the receipt of any Monthly Surplus in the
      Annual Opex Assessment and Final Opex Assessment, and for the receipt of
      any funds pursuant to the Annual Opex Assessments in the Final Opex
      Assessment, and if applicable shall effect repayments if balances are due
      and owing to the Owner.








	
      7.
	
      MUTUAL
      UNDERTAKING




 


	 	MC
      and the Owner mutually undertake to each other to ensure that each of the
      Monthly Assessment, Annual Opex Assessment and Final Opex Assessment is
      concluded in a timely fashion and with full mutual
    cooperation. 



 


	
      8.
	
      ADDITIONAL
      OWNERS UNDERTAKING








	
      8.1
	
      MC
      shall be granted the right to discuss together with the Managers and the
      Owner the Budgeted Opex.








	
      8.2
	
      MC
      shall be granted the Right to Monitor.








	
      8.3
	
      MC
      shall be granted the Right of First
Refusal.





 


	
      9.
	
      ADDITIONAL
      MC UNDERTAKING








	
      9.1
	
      MC irrevocably
      warrants and undertakes to the Owner as
follows:








	 	
      9.1.1
	
      To
      procure the remittance to the Owner of a sum equivalent to the Hire upon
      receipt of the Hire by the Sellers from the Charterer under the Current
      Charters such Hire to be suitably apportioned to take account of the
      actual date of delivery of the Vessels to the Owner pursuant to the MOA,
      and








	 	
      9.1.2
	
      To
      pay to the Owner a sum equivalent to USD 2335 per day per Vessel in the
      event that the Vessels are not delivered by the Sellers to the Owner on
      the Delivery Date such payment to be effected within 5 banking days of the
      actual delivery of the Vessels.










	
      10.
	
      PAYMENTS






 


	
      10.1
	
      Method
      of payments




 


		
      Unless
      stated otherwise, any amount due under this Agreement (including but not
      limited to the Guarantees) shall be paid:




 




	 	
      (a)
	
      in
      immediately available funds;













6
















	 	
      (b)
	
      to
      such account as the receiving Party may from time to time notify to the
      other Party;








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








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









	
      10.2
	
      Grossing-up
      for taxes




 


	 	If a Party (the “Paying Party”) making any payment to the
      other Party (the “Receiving Party”) hereunder is required by law to make a
      tax deduction, the amount due shall be increased by the amount necessary
      to ensure that the Receiving Party receives and retains a net amount
      which, after the tax deduction, is equal to the full amount that it would
      otherwise have received. The Parties will make all reasonable efforts to
      avoid or reduce any tax deductions and to allot any benefits derived from
      such tax deduction to the Party bearing the increased
    amount.  



 


	11. 	INTEREST 



 



	
      11.1
	
      Accrual
      of interest




 


	 	Any amount due under this Agreement (including but not
      limited to the Guarantees) shall carry interest at a commercial rate after
      the second Business Day following the date on which the relevant Party
      demands payment of it until it is actually paid. 







	
      12.
	
      TERMINATION
      OF THE GUARANTEES






 


	
      12.1
	
      The
      liability of MC in respect of the Guarantees shall cease forthwith in the
      event (the “Loss Cessation”) that any Vessel becomes an actual total
      and/or constructive loss and/or a compromised and/or commercial loss (the
      “Lost Vessel”) and recovery in respect of the Lost Vessel is made by or on
      behalf of the Owner from the relevant underwriter or insurers save that
      such Loss Cessation shall only be in respect of the Lost Vessel. The
      effective date for the Loss Cessation shall be the date of the actual
      total and/or constructive loss and/or a compromised and/or commercial loss
      of the Lost Vessel.








	
      12.2
	
      The
      liability of MC in respect of the Guarantees shall cease at the end of a
      Charter Period for the respective Vessel and at the date of the sale of
      the respective Vessel (delivery of the Bill of Sale). The Guarantees shall
      only cease with respect to the respective
Vessel.








	
      13.
	
      REPRESENTATIONS
      AND WARRANTIES







	
      13.1
	
      General




 


	 	The Parties mutually represent and warrant to each other
      as follows. 






	 	
      13.2
	
      Status
















7















 


	 	The Parties are duly incorporated and validly existing
      under (in the case of MC) the laws of Liberia and (in the case of the
      Owner) Germany. 



 


	
      13.3
	
      Corporate
      power




 


	 	Each Party has the corporate capacity, and has taken all
      corporate action and obtained all consents necessary for
    it: 







	 	
      (a)
	
      to
      execute this Agreement; and








	 	
      (b)
	
      to
      make all the payments contemplated by
      this Agreement.






 


	
      13.4.
	
      No
      conflicts




 


	 	The execution by this Agreement will not involve or lead
      either Party to a contravention of: 





 


	 	
      (a)
	
      any
      law or regulation; or








	 	
      (b)
	
      the
      constitutional documents of either Party;
or








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






 


	
      13.5
	
      No
      litigation




 


	 	No legal or administrative action involving either Party
      has been commenced or taken or, to each Party’s knowledge, is likely to be
      commenced or taken which, in either case, would be likely to have a
      material adverse effect on that Party’s financial position or
      profitability. 





 


	
      14.
	
      NOTICES






 



	
      14.1
	
      Notices
      to the Parties





	 	Any notice or demand to the Parties under or in
      connection with this Agreement shall be given by letter, fax or telex
      at: 




 




	 	
      (1)
	
      MC
      




 


	 	 	MC Shipping Inc. 




	 	 	L’Aigue Marine 




	 	 	24 Ave de Fontvieille 




	 	 	P O Box 628 




	 	 	MC 98013 Monaco Cedex 




	 	 	Fax No: 00
      377 92 059416 





	 	 	 




	 	 	or to such other address which MC may notify to the
      Owner. 




 


	 	
      (2)
	
      Owner













8













 



	 	
       
	
      MUNIA
      Mobiliengesellschaft mbH & Co. KG





	 	 	Tölzer Str. 15 




	 	 	82031 Grünwald 




	 	 	Fax No: 0049 89 641 43 220 




	 	 	 




	 	 	or to such other address which the Owner may notify to
      MC. 









	
      15.
	
      ASSIGNMENT




 


	 	MC hereby acknowledges and agrees that the Owner may
      assign any of its rights under this Agreement, including but not limited
      to the Guarantees, to the Lender. 



 


	
      16.
	
      GOVERNING
      LAW AND JURISDICTION






 


	
      16.1
	
      English
      law




 


	 	This Guarantee shall be governed by, and construed in
      accordance with, English law and the High Court in London shall have
      exclusive jurisdiction over all and any disputes arising under this
      Agreement. 



 


	16.2	Process
      agent.







	 	
      (a)
	
      MC
      Shipping irrevocably appoints Marine Legal Services Limited at its
      registered office for the time being, currently at Gate House, 1
      Farringdon Street, London EC4M 7NS, to act as its agent to receive and
      accept on its behalf any process or other document relating to any
      proceedings in the English courts which are connected with this
      Agreement.








	 	
      (b)
	
      The
      Owner irrevocably appoints Michael Lloyd and Co currently at 5-7 St.
      Helen's Place London EC3A 6AU to act as its agent to receive and accept on
      its behalf any process or other document relating to any proceedings in
      the English courts which are connected with this
  Agreement




 



THIS
AGREEMENT has been
entered into with effect from the date stated at the beginning of this
Agreement.

 












9














 

EXECUTION
PAGE

 










	
      SIGNED
      by
	
      )

	
      for
      and on behalf of
	
      )

	
      MC
      SHIPPING INC.
	
      )

	
      in
      the presence of:
	
      )

	 	 
	 	 
	 	 
	 	 
	 	 
	 	 
	
      SIGNED
      by
	
      )

	
      for
      and on behalf of MUNIA
	
      )

	
      MOBILIENGESELLSCHAFT
	
      )

	
      MBH
      & CO. KG
	
      )

	
      in
      the presence of:
	
      )

	 	 



 







10















SCHEDULE
2








	
      1)
	
      Charter
      Party dated 25th
      August 1998 for m.v. “Maersk BARCELONA” between Urbana Shipping Ltd.
      Bahamas and Aktieselskabet Dampskibsselskabet Sevendborg and
      Dampskipsselskabet af 1912, Aktieselskab (today: A.P. Moeller - Maersk
      A/S)





	
      
	
      as
      amended by addenda 1 - 10.








	
      2)
	
      Charter
      Party dated 25th
      August 1998 for m.v “Maersk BAHRAIN” (today: “ANKARA”) between Gulfport
      Shipping Ltd. Bahamas and Aktieselskabet Dampskibsselskabet Sevendborg and
      Dampskipsselskabet af 1912, Aktieselskab (today: A.P. Moeller - Maersk
      A/S)





	
      
	
      as
      amended by addenda 1 - 10.




 


	
      3)
	
      Charter
      Party dated 25th
      August 1998 for m.v. “Maersk BRISBANE” between Kaplan Shipping Co. Ltd.
      Bahamas and Aktieselskabet Dampskibsselskabet Sevendborg and
      Dampskipsselskabet af 1912, Aktieselskab (today: A.P. Moeller - Maersk
      A/S)





	
      
	
      as
      amended by addenda 1 - 10.




 


	
      4)
	
      Charter
      Party dated 25th
      August 1998 for m.v. “Maersk BELAWAN” between Kokomo Shipping Co. Ltd.
      Bahamas and Aktieselskabet Dampskibsselskabet Sevendborg and
      Dampskipsselskabet af 1912, Aktieselskab (today: A.P. Moeller - Maersk
      A/S)





	
      
	
      as
      amended by addenda 1 - 10.




 







11












 


	
      SCHEDULE
      3
	 
	 	
      a
	
      b
	
      c

	 	 	 	 
	
      Year
	
      Budgeted
      OPEX
	
      Estimated
      OPEX
	
      Fee
      MC Shipping

	 	 	 	 
	 	
      p.d.
	
      p.d.
	 
	
      M/V
      "Maersk Belawan"

	
      2005
	
      4,639.00
	
      4,639.00
	
      137.00

	
      2006
	 	
      4,494.00
	
      211.00

	
      2007
	 	
      4,584.00
	
      241.00

	
      2008
	 	
      4,676.00
	
      259.00

	 	 	 	 
	
      M/V
      "ANKARA"
	 
	
      2005
	
      4,406.00
	
      4,406.00
	
      137.00

	
      2006
	 	
      4,494.00
	
      211.00

	
      2007
	 	
      4,584.00
	
      241.00

	
      2008
	 	
      4,676.00
	
      259.00

	
      2009
	 	
      4,770.00
	
      171.00

	 	 	 	 
	
      M/V
      "Maersk Brisbane"

	
      2005
	
      4,406.00
	
      4,406.00
	
      137.00

	
      2006
	 	
      4,494.00
	
      211.00

	
      2007
	 	
      4,584.00
	
      241.00

	
      2008
	 	
      4,676.00
	
      259.00

	 	 	 	 
	
      M/V
      "Maersk Barcelona"

	
      2005
	
      4,406.00
	
      4,406.00
	
      137.00

	
      2006
	 	
      4,494.00
	
      211.00

	
      2007
	 	
      4,584.00
	
      241.00

	
      2008
	 	
      4,676.00
	
      259.00

	
      2009
	 	
      4,770.00
	
      171.00

	 	 	 	 
	
      Definitions
	 



 

 

 

Budgeted
OPEX are OPEX as per agreed 2005 budget 

 

Estimated
OPEX are the OPEX guaranteed by MC Shipping

 

12