Exhibit 10.1


 


Date
18 December 2006


 


PARAGON SHIPPING INC.

as
Borrower


 


- and -


 


THE BANKS AND FINANCIAL INSTITUTIONS

listed in Schedule 1

as Lenders


 


- and -


 


HSH NORDBANK AG

as Agent and as Security Trustee


 


- and -


 


HSH NORDBANK AG

as Swap Bank


 


- and -


 


HSH NORDBANK AG

as Lead Arranger, Bookrunner and Underwriter


 










 


LOAN AGREEMENT


 










 


relating to a loan facility of up to US$95,322,060 

to finance part of the purchase price of up to five vessels


 


 


WATSON FARLEY & WILLIAMS

Piraeus


 





















 


INDEX


 


	
  Clause

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1

  	
   

  	
  INTERPRETATION

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2

  	
   

  	
  FACILITY

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3

  	
   

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

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4

  	
   

  	
  DRAWDOWN

  	
   

  	
  18

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5

  	
   

  	
  INTEREST

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6

  	
   

  	
  INTEREST PERIODS

  	
   

  	
  21

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7

  	
   

  	
  DEFAULT INTEREST

  	
   

  	
  22

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8

  	
   

  	
  REPAYMENT AND PREPAYMENT

  	
   

  	
  23

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9

  	
   

  	
  CONDITIONS PRECEDENT

  	
   

  	
  25

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10

  	
   

  	
  REPRESENTATIONS AND WARRANTIES

  	
   

  	
  26

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11

  	
   

  	
  GENERAL UNDERTAKINGS

  	
   

  	
  27

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  12

  	
   

  	
  CORPORATE UNDERTAKINGS

  	
   

  	
  31

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  13

  	
   

  	
  INSURANCE

  	
   

  	
  33

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  14

  	
   

  	
  SHIP COVENANTS

  	
   

  	
  39

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  15

  	
   

  	
  SECURITY COVER

  	
   

  	
  43

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  16

  	
   

  	
  PAYMENTS AND CALCULATIONS

  	
   

  	
  44

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  17

  	
   

  	
  APPLICATION OF RECEIPTS

  	
   

  	
  46

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  18

  	
   

  	
  APPLICATION OF EARNINGS

  	
   

  	
  47

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  19

  	
   

  	
  EVENTS OF DEFAULT

  	
   

  	
  48

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  20

  	
   

  	
  FEES AND EXPENSES

  	
   

  	
  52

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  21

  	
   

  	
  INDEMNITIES

  	
   

  	
  53

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  22

  	
   

  	
  NO SET-OFF OR TAX DEDUCTION

  	
   

  	
  55

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  23

  	
   

  	
  ILLEGALITY, ETC

  	
   

  	
  56

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  24

  	
   

  	
  INCREASED COSTS

  	
   

  	
  57

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  25

  	
   

  	
  SET-OFF

  	
   

  	
  58

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  26

  	
   

  	
  TRANSFERS AND CHANGES IN LENDING OFFICES

  	
   

  	
  59

  



 

















 


	
  27

  	
   

  	
  VARIATIONS AND WAIVERS

  	
   

  	
  61

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  28

  	
   

  	
  NOTICES

  	
   

  	
  62

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  29

  	
   

  	
  SUPPLEMENTAL

  	
   

  	
  64

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  30

  	
   

  	
  LAW AND JURISDICTION

  	
   

  	
  64

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
     SCHEDULE 1 LENDERS AND COMMITMENTS

  	
   

  	
  66

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
     SCHEDULE 2 DETAILS OF SHIPS AND
  OWNERS

  	
   

  	
  67

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
     SCHEDULE 3 DRAWDOWN NOTICE

  	
   

  	
  69

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
     SCHEDULE 4 CONDITION PRECEDENT
  DOCUMENTS

  	
   

  	
  70

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
     SCHEDULE 5 TRANSFER CERTIFICATE

  	
   

  	
  73

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
     SCHEDULE 6 DESIGNATION NOTICE

  	
   

  	
  77

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
     SCHEDULE 7 FORM OF COMPLIANCE
  CERTIFICATE

  	
   

  	
  78

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
     SCHEDULE 8 MANDATORY COST FORMULA

  	
   

  	
  79

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
     EXECUTION PAGES

  	
   

  	
  82

  



 














 


THIS
LOAN AGREEMENT is made on 18 December 2006


 


BETWEEN:


 


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


 


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


 


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


 


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


 


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


 


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


 


WHEREAS


 


(A)                 The Lenders have
agreed to make available to the Borrower term loan facility in an amount of up
to the lesser of (a) US$95,322,060 and (b) 50 per cent of the aggregate Market
Value of the Ships to finance part of the purchase price of the Ships. The
Borrower will on-lend the Loan to the Owners to assist them in financing the
acquisition of the Ships.


 


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


 


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


 


IT IS
AGREED as follows:


 


1                            INTERPRETATION


 


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


 


“Advance”
means the principal amount of each borrowing by the Borrower under this
Agreement;


 


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


 


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


 


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


 


“Applicable Accounts” means, as at the date
of calculation or, as the case may be, in respect of an accounting period, the
annual audited consolidated accounts and financial


 

















 


statements of the Group
or the quarterly unaudited accounts and financial statements of the Group, in
each case, which the Borrower is obliged to deliver to the Agent pursuant to
Clause 11.6;


 


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


 


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


 


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


 


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


 


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


 


(a)                    31 January
2007 or such later date as the Agent may, with the authorisation of all the
Lenders, agree with the Borrower; or


 


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


 


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


 


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


 


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


 


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


 


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


 


2

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


3

















 


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


 


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


 


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


 


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


 


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


 


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


 


(ii)                     Net Interest
Expenses; and


 


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


 


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


 


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


 


“Environmental
Claim” means:


 


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


 


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


 


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


 


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


 


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


 


(b)                   any incident in
which Environmentally Sensitive Material is released from a vessel other than
the Ship and which involves a collision between the Ship and such other vessel
or some other incident of navigation or operation, in either case,


 


4

















 


in connection with which
the Ship is actually or potentially liable to be arrested, attached, detained
or injuncted and/or the Ship or the Owner thereof and/or any operator or
manager is at fault or allegedly at fault or otherwise liable to any legal or
administrative action; or


 


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


 


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


 


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


 


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


 


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


 


“Final
Maturity Date” means the date following 42 months after the
first Drawdown Date;


 


“Finance
Documents” means:


 


(a)                    this
Agreement;


 


(b)                   the Master
Agreement;


 


(c)                    the Agency and
Trust Deed;


 


(d)                   the Fee Letter;


 


(e)                    the
Guarantees;


 


(f)                      the Master
Agreement Assignment;


 


(g)                   the Mortgages;


 


(h)                   the General
Assignments;


 


(i)                       the Deeds
of Covenant;


 


(j)                       the
Retention Account Pledge;


 


(k)                    the Earnings
Accounts Pledge;


 


(l)                       the Swap
Account Pledge;


 


(m)                 any Charterparty
Assignment;


 


(n)                   the Management
Agreement Assignments;


 


(o)                   the Manager’s
Undertakings; and


 


5














 


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


“Guarantee”
means, in relation to each Owner, a guarantee to be given by that Owner in
favour of the Security Trustee guaranteeing the obligations of the Borrower
under (inter


 


6

















 


alia) this Agreement, the
Master Agreement and the other Finance Documents in such form as the Lenders
shall approve or require and in the plural means all of them;


 


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


 


“IACS”
means the International Association of Classification Societies;


 


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


 


“Insurances”
means, in relation to each Ship:


 


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


 


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


 


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


 


“ISM
Code” means:


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


7

















 


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


 


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


 


“ISPS
Code Documentation” includes:


 


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


 


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


 


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


 


“Lender”
means, subject to Clause 26.6:


 


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


 


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


 


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


 


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


 


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


 


“LIBOR”
means, for an Interest Period:


 


(a)                    the rate per
annum equal to the offered quotation for deposits in Dollars for a period equal
to, or as near as possible equal to, the relevant Interest Period which appears
on REUTERS BBA Page LIBOR 01 at or about 11:00 a.m. (London time) on the second
Business Day prior to the commencement of that Interest Period (and, for the
purposes of this Agreement, “REUTERS BBA Page LIBOR 01” means the display
designated as “REUTERS BBA Page LIBOR 01” on the Reuters Money News Services or
such other page as may replace REUTERS BBA Page LIBOR 01 on that service for
the purpose of displaying rates comparable to that rate or on such other
service as may be nominated by the British Bankers’ Association for the purpose
of displaying British Bankers’ Association Interest Settlement Rates for
Dollars); or


 


(b)                   if no rate is
quoted on REUTERS BBA Page LIBOR 01, the rate per annum determined by the Agent
to be the arithmetic mean of the rates per annum notified to the Agent by each
Lender to be the rate per annum at which deposits in Dollars are offered to
that Lender by leading banks in the London Interbank Market at or


 


8

















 


about 11.00 a.m. (London
time) on the second Business Day prior to the commencement of that Interest
Period for a period equal to that Interest Period and for delivery on the first
Business Day of it;


 


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


 


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


 


(b)                   the market
value of transferable certificates of deposit in a freely convertible currency
acceptable to the Lenders (being for the purposes of this Agreement, Dollars, Japanese
Yen, Swiss Francs, Euros or Sterling) issued by a prime international bank; and


 


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


 


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


 


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


 


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


 


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


 


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


 


“Majority
Lenders” means:


 


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


 


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


 


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


 


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


 


9

















 


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


 


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


 


“Margin”
means:


 


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


 


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


 


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


 


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


 


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


 


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


 


“Master
Agreement Assignment” means the assignment of the Master
Agreement in such form as the Lenders may approve or require;


 


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


 


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


 


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


 


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


 


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


 


10














 


 


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


 


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


 


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


 


“Permitted
Security Interests” means:


 


(a)                    Security
Interests created by the Finance Documents;


 


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


 


(c)                    liens for
salvage;


 


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


 


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


 


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


 


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


 


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


 


(a)                    England and
Wales;


 


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


 


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


 


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


 


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


 


(f)                      a  country the courts of which have
jurisdiction to make a winding up, administration or similar order in relation
to the company or which would have


 


 


11

















 


such jurisdiction if
their assistance were requested by the courts of a country referred to in
paragraphs (b) or (c) above;


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


“Security
Interest” means:


 


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


 


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


 


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


 


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


 


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


 


12

















 


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


 


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


 


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


 


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


 


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


 


“Seller”
means, in relation to:


 


(a)                    “BLUE SEAS”,
Icon Shipping Limited of the Cayman Islands;


 


(b)                   “CALM SEAS”,
Vortimer Marine Inc. of the Marshall Islands;


 


(c)                    “CLEAN SEAS”,
Neda Maritime Ltd. of Malta;


 


(d)                   “DEEP SEAS”,
Elegance Shipping Limited of the Cayman Islands; and


 


(e)                    “KIND SEAS”,
Indigo Shipping Company of the Marshall Islands,


 


(f)                      and in the
plural means all of them;


 


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


 


“Sponsors”
means, together:


 


(a)                    Mr Michael
Bodouroglou; and


 


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


 


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


 


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


 


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


 


13

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


“Total
Loss Date” means:


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


14

















 


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


 


1.2                  Construction of
certain terms. In this Agreement:


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


15














 


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


 


“subsidiary”
has the meaning given in Clause 1.4;


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


1.5                  General
Interpretation.


 


(a)                     In this
Agreement:


 


16

















 


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


 


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


 


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


 


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


 


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


 


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


 


2                            FACILITY


 


2.1                  Amount and purpose of facility. Subject to the other provisions of this
Agreement, the Lenders shall make available to the Borrower a loan facility in
an amount not exceeding the lesser of:


 


(a)                     $95,322,060; and


 


(b)                    50% of the aggregate Market Value of all the
Ships in up to 5 Advances. Each Advance shall be used to assist the relevant
Owner to finance up to 50 per cent. of the Market Value of the Ship to be owned
by it.


 


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


 


2.3                  Purpose of Advances. The Borrower undertakes with each Creditor
Party to use each Advance only for the purpose stated in the preamble to this
Agreement and Clause 2.1.


 


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


 


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


 


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


 


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


 


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


 


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


 


17

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


4                            DRAWDOWN


 


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


 


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


 


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


 


18

















 


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


 


(c)                     each Advance
shall not exceed 50 per cent. of the Market Value of the Ship which is the
subject of the Advance (as determined by the valuations referred to in
paragraph 8 of Part C of Schedule 4) and shall be applied in financing part of
the purchase price of the relevant Ship; and


 


(d)                    the aggregate
of the Advances shall not exceed the Total Commitments.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


4.7                  Disbursement of
Advance to third party. The payment by the Agent under Clause 4.6 to a
third party specified in the relevant Drawdown Notice shall constitute the
making of the Advance and the Borrower shall thereupon become indebted, as
principal and direct obligor, to each Lender in an amount equal to that
Lender’s Contribution.


 


5                            INTEREST


 


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


 


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


 


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


 


19

















 


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


 


(a)                     each rate of
interest; and


 


(b)                    the duration
of each Interest Period;


 


as soon as reasonably
practicable after each is determined.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


20














 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


6                            INTEREST
PERIODS


 


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


 


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


 


21

















 


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


 


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


 


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


 


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


 


7                            DEFAULT INTEREST


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


(i)                       LIBOR; or


 


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


 


22

















 


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


 


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


 


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


 


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


 


8                            REPAYMENT AND PREPAYMENT


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


8.6                  Effect of notice of prepayment. A prepayment notice may not be withdrawn or amended
without the consent of the Agent, given with the authority of the Majority


 


23

















 


Lenders, and the amount
specified in the prepayment notice shall become due and payable by the Borrower
on the date for prepayment specified in the prepayment notice.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


8.11           Mandatory prepayment.
The Borrower shall be obliged to prepay the Relevant Amount of the Loan:


 


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


 


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


 


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


 


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


 


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


 


24

















 


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


 


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


 


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


 


9                            CONDITIONS
PRECEDENT


 


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


 


(a)                     that, on or
before the date of this Agreement, the Agent receives the documents described
in Part A of Schedule 4 in a form and substance satisfactory to the Agent and
its lawyers;


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


25














 


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


 


10                     REPRESENTATIONS
AND WARRANTIES


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


(a)                     any law or
regulation; or


 


(b)                    the
constitutional documents of the Borrower; or


 


26

















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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


10.16    ISM and ISPS Code compliance.
The Borrower will procure that the Owners and the Approved Manager obtain all
necessary ISM Code Documentation and ISPS Code Documentation in connection with
the Ships and comply with the ISM Code and the ISPS Code on or before the date
on which each Ship is delivered to its Owner pursuant to the MOA relative to
that Ship.


 


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


 


11                     GENERAL UNDERTAKINGS


 


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


 


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


 


27

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


(b)                    as soon as
possible, but in no event later than each Dividend Declaration Date (commencing
with the first Dividend Declaration Date falling within 2007), the unaudited
consolidated accounts of the Group for the most recent financial quarter which
has ended before that Dividend Declaration Date and additionally, in the case
of each of the second, third and fourth financial quarters, the unaudited
consolidated accounts of the Group for the period 1 January up to the end
of the relevant financial quarter certified in each case as to their
correctness by the chief financial officer of the Borrower;


 


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


 


28

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


11.10    Maintenance of Security
Interests. The Borrower will:


 


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


 


(b)                    without
limiting the generality of paragraph (a) above, at its own cost, promptly
register, file, record or enrol any Finance Document with any court or
authority in all Pertinent Jurisdictions, pay any stamp, registration or
similar tax in all Pertinent Jurisdictions in respect of any Finance Document,
give any notice or take any other step which, in the opinion of the Majority
Lenders, is or has become necessary or desirable for any Finance Document to be
valid, enforceable or admissible in evidence or to ensure or protect the
priority of any Security Interest which it creates.


 


11.11    Notification of litigation.
The Borrower will provide the Agent with details of any legal or administrative
action involving the Borrower, any Security Party, the Approved


 


29

















 


Manager,
any Ship or the Earnings or the Insurances of any Ship as soon as such action
is instituted or it becomes apparent to the Borrower that it is likely to be
instituted, unless it is clear that the legal or administrative action cannot
be considered material in the context of any Finance Document.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


(b)                    to any other
matter relevant to, or to any provision of, a Finance Document which may be
requested by the Agent, the Security Trustee or any Lender at any time.


 


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


 


30














 


the
Borrower will provide a certified English translation prepared by a translator
approved by the Agent.


 


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


 


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


 


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


 


12                     CORPORATE UNDERTAKINGS


 


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


 


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


 


12.3           Negative undertakings. The Borrower will
not:


 


(a)                     change the
nature of its business; or


 


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


 


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


 


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


 


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


 


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


 


or
enter into any transaction with or involving such a person or company on terms
which are, in any respect, less favourable to the Borrower than those which it
could obtain in a bargain made at arms’ length Provided that this shall not prevent or restrict the Borrower
from on-lending the Loan to the Owners or granting credit or financial
assistance to its wholly-owned direct or indirect subsidiaries;


 


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


 


31

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


32

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


13                     INSURANCE


 


13.1           General. The Borrower also undertakes
with each Creditor Party to procure that each Owner will comply with the
following provisions of this Clause 13 at all times during the Security Period
(after the Ship which is owned or to be owned by that Owner has been delivered
to it under the relevant MOA) except as the Agent may, with the authority of
the Majority Lenders, otherwise permit.


 


33

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


(a)                     in Dollars;


 


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


 


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


 


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


 


(e)                     on approved
terms; and


 


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


 


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


 


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


 


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


 


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


 


34

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


(d)                    they will
notify the Security Trustee, not less than 14 days before the expiry of the
obligatory insurances, in the event of their not having received notice of
renewal


 


35














 


instructions
from that Owner or its agents and, in the event of their receiving instructions
to renew, they will promptly notify the Security Trustee of the terms of the
instructions; and


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


13.12    Compliance with terms of insurances. The
Borrower shall procure that no Owner shall do or omit to do (or permit to be
done or not to be done) any act or thing which would or might render any
obligatory insurance invalid, void, voidable or unenforceable or render any sum
payable thereunder repayable in whole or in part; and, in particular:


 


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


 


36

















 


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


 


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


 


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


 


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


 


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


 


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


 


(a)                     the approved
brokers; and


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


37

















 


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


 


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


 


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


 


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


 


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


 


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


 


(b)                    a mortgagee’s
interest additional perils policy in an amount not less than 110 per cent. of
the Loan, providing for the indemnification of the Security Trustee against,
among other things, any possible losses or other consequences of any
Environmental Claim, including the risk of expropriation, arrest or any form of
detention of any Ship, the imposition of any Security Interest over any Ship
and/or any other matter capable of being insured against under a mortgagee’s
interest additional perils policy whether or not similar to the foregoing and
the Borrower shall upon demand fully indemnify the Security Trustee in respect
of all premiums and other expenses which are incurred in connection with or
with a view to effecting, maintaining or renewing any such insurance or dealing
with, or considering, any matter arising out of any such insurance.


 


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


 


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


 


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


 


14                     SHIP COVENANTS


 


14.1           General. The Borrower also undertakes
with each Creditor Party to procure that each Owner shall comply with the
following provisions of this Clause 14 at all times during the Security Period
(after the Ship has been delivered to it under the relevant MOA) except as the
Agent, with the authority of the Majority Lenders, may otherwise permit.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


(ii)                    becomes aware
of any facts or matters which may result in or have resulted in a change,
suspension, discontinuance, withdrawal or expiry of the Ship’s class under
the rules or terms and conditions of the Owner’s or the Ship’s membership
of the classification society;


 


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


 


39

















 


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


 


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


 


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


 


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


 


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


 


14.8           Inspection.


 


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


 


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


 


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


 


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


 


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


 


40














 


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


(d)                    any towages
and salvages;


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


41

















(e)                     any intended
dry docking of the Ship;


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


42

















 


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


 


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


 


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


 


15                     SECURITY COVER


 


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


 


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


 


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


 


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


 


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


 


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


 


15.3           Requirement for additional documents.
The Borrower shall not be deemed to have complied with Clause 15.1 (i) above
until the Agent has received in connection with the additional security
certified copies of documents of the kinds referred to in paragraphs 3, 4 and 5
of Schedule 5, Part A and such legal opinions in terms acceptable to
the Majority Lenders from such lawyers as they may select.


 


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


 


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


 


43

















 


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


 


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


 


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


 


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


 


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


 


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


 


15.6           Valuations binding. Any valuation under
Clause I5.1(i), 15.4 or 15.5 shall be binding and conclusive as regards the
Borrower, as shall be any valuation which the Majority Lenders make of a
security which does not consist of or include a Security Interest.


 


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


 


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


 


16                     PAYMENTS AND CALCULATIONS


 


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


 


(a)                     by the
Lenders to the Agent; or


 


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


 


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


 


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


 


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


 


44

















 


(iii)                 to the account of
the Agent at JPMorgan Chase Bank, New York (Account No 001-1-331808 SWIFT Code:
CHASUS 33 under reference “Paragon Shipping Inc.-US$110.32m facility”), or to
such other account with such other bank as the Agent may from time to time
notify to the Borrower and the other Creditor Parties; and


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


45






 










 


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


 


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


 


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


 


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


 


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


 


17                     APPLICATION
OF RECEIPTS


 


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


 


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


 


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


 


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


 


(iii)                 thirdly, in or
towards satisfaction pro rata of the Loan and the Swap Exposure of the Swap
Bank (in the case of the latter, calculated as at the actual Early Termination
Date applying to each particular Designated Transaction, or if no such Early
Termination Date shall have occurred, calculated as if an Early Termination
Date occurred on the date of application or distribution hereunder);


 


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


 


46

















 


payable, in or towards
satisfaction of them in accordance with the provisions of Clause 17.1(a); and


 


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


 


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


 


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


 


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


 


18                     APPLICATION
OF EARNINGS


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


18.3           Shortfall in Earnings.
If the aggregate Earnings received are insufficient in any month for the
required amount to be transferred to the Retention Account under Clause 18.2,
the Borrower shall make up the amount of the insufficiency on demand from the
Agent; but, without thereby prejudicing the Agent’s right to make such demand
at any time, the Agent


 


47

















 


may, if so authorised by
the Majority Lenders, permit the Borrower to make up all or part of the
insufficiency by increasing the amount of any transfer under Clause 18.2 from
the Earnings received in the next or subsequent months.


 


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


 


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


 


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


 


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


 


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


 


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


 


18.7           Location of accounts.
The Borrower shall promptly:


 


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


 


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


 


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


 


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


 


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


 


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


 


19                     EVENTS OF
DEFAULT


 


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


 


48

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


49

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


(j)                        any
consent necessary to enable any Owner to own, operate or charter a Ship or to
enable the Borrower or any Security Party to comply with any provision which
the Majority Lenders consider material of a Finance Document is not granted,
expires without being renewed, is revoked or becomes liable to revocation or
any condition of such a consent is not fulfilled; or


 


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


 


50














 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


(b)                    the Security
Trustee may, and if so instructed by the Agent, acting with the authorisation
of the Majority Lenders, the Security Trustee shall take any action which, as a
result of the Event of Default or any notice served under paragraph (a) (i) or
(ii) above, the Security Trustee, the Agent and/or the Lenders and/or the Swap
Bank are entitled to take under any Finance Document or any applicable law.


 


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


 


19.4           Acceleration of Loan. On
the service of a notice under paragraph (a)(ii) of Clause 19.2, the Loan, all
accrued interest and all other amounts accrued or owing from the Borrower


 


51

















or any Security Party
under this Agreement and every other Finance Document shall become immediately
due and payable or, as the case may be, payable on demand.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


20                     FEES AND
EXPENSES


 


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


 


(a)                     a commitment
fee for distribution among the Lenders pro rata to their Commitments at the
rate of 0.30 per cent. per annum on the amount of the Total Commitments less
the amount of the Loan for the period from (and including) the earlier of (i)
the date of this Agreement and (ii) 30 December 2006 up to and including the
earlier of (A) the


 


52

















 


Drawdown Date in respect
of the fifth and final Advance and (B) the last day of the Availability Period,
such fee to be paid quarterly in arrears and on the last day of such period;
and


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


21                     INDEMNITIES


 


21.1           Indemnities regarding
borrowing and repayment of Loan. The Borrower shall fully indemnify the
Agent and each Lender on the Agent’s demand and the Security Trustee on its
demand in respect of all expenses, liabilities and losses which are incurred by
that


 


53

















 


Creditor Party, or which
that Creditor Party reasonably and with due diligence estimates that it will
incur, as a result of or in connection with:


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


54

















 


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


 


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


 


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


 


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


 


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


 


(c)                     enforcing any
such order or judgment;


 


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


 


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


 


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


 


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


 


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


 


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


 


22                     NO SET-OFF OR
TAX DEDUCTION


 


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


 


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


 


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


 


55














 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


23                     ILLEGALITY,
ETC


 


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


 


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


 


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


 


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


 


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


 


23.3           Prepayment; termination
of Commitment. On the Agent notifying the Borrower under Clause 23.2, the
Notifying Lender’s Commitment shall terminate; and thereupon or, if later, on
the date specified in the Notifying Lender’s notice under Clause 23.1 as the
date on which the notified event would become effective the Borrower shall
prepay the Notifying Lender’s Contribution in accordance with Clause 8.


 


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


 


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


 


56

















 


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


 


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


 


24                     INCREASED
COSTS


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


(iv)               a liability to make
a payment, or a return foregone, which is calculated by reference to any
amounts received or receivable by the Notifying Lender under this Agreement;


 


but not an item
attributable to a change in the rate of tax on the overall net income of the
Notifying Lender (or a parent company of it) or an item covered by the
indemnity for tax in Clause 21.1 or by Clause 22.


 


For the purposes of this
Clause 24.1 the Notifying Lender may in good faith allocate or spread costs
and/or losses among its assets and liabilities (or any class thereof) on such
basis as it considers appropriate.


 


24.2           Notification to
Borrower of claim for increased costs. The Agent shall promptly notify the
Borrower and the Security Parties of the notice which the Agent received from
the Notifying Lender under Clause 24.1.


 


57

















 


24.3           Payment of increased
costs. The Borrower shall pay to the Agent, at the end of any Interest
Period during which the Agent makes demand, for the account of the Notifying
Lender, the amounts which the Agent from time to time notifies the Borrower
that the Notifying Lender has specified to be necessary to compensate the
Notifying Lender for the increased cost.


 


24.4           Notice of prepayment.
If the Borrower is not willing to continue to compensate the Notifying Lender
for the increased cost under Clause 24.3, the Borrower may give the Agent not
less than 14 days’ notice of its intention to prepay the Notifying Lender’s
Contribution at the end of an Interest Period.


 


24.5           Prepayment; termination
of Commitment. A notice under Clause 24.4 shall be irrevocable; the Agent
shall promptly notify the Notifying Lender of the Borrower’s notice of intended
prepayment; and:


 


(a)                     on the date
on which the Agent serves that notice, the Commitment of the Notifying Lender
shall be cancelled; and


 


(b)                    on the date
specified in its notice of intended prepayment, the Borrower shall prepay
(without premium or penalty) the Notifying Lender’s Contribution, together with
accrued interest thereon at the applicable rate plus the applicable Margin and
the Mandatory Cost (if any).


 


24.6           Application of
prepayment. Clause 8 shall apply in relation to the prepayment.


 


25                     SET-OFF


 


25.1           Application of credit
balances. Each Creditor Party may without prior notice:


 


(a)                     apply any
balance (whether or not then due) which at any time stands to the credit of any
account in the name of the Borrower at any office in any country of that
Creditor Party in or towards satisfaction of any sum then due from the Borrower
to that Creditor Party under any of the Finance Documents; and


 


(b)                    for that
purpose:


 


(i)                       break, or
alter the maturity of, all or any part of a deposit of the Borrower;


 


(ii)                    convert or
translate all or any part of a deposit or other credit balance into Dollars;


 


(iii)                 enter into any
other transaction or make any entry with regard to the credit balance which the
Creditor Party concerned considers appropriate.


 


25.2           Existing rights
unaffected. No Creditor Party shall be obliged to exercise any of its
rights under Clause 25.1; and those rights shall be without prejudice and in
addition to any right of set-off, combination of accounts, charge, lien or
other right or remedy to which a Creditor Party is entitled (whether under the
general law or any document).


 


25.3           Sums deemed due to a
Lender. For the purposes of this Clause 25, a sum payable by the Borrower
to the Agent or the Security Trustee for distribution to, or for the account
of, a Lender shall be treated as a sum due to that Lender; and each Lender’s
proportion of a sum so payable for distribution to, or for the account of, the
Lenders shall be treated as a sum due to such Lender.


 


58

















 


26                     TRANSFERS AND
CHANGES IN LENDING OFFICES


 


26.1           Transfer by Borrower.
The Borrower may not, without the consent of the Agent, given on the
instructions of all the Lenders:


 


(a)                     transfer any
of its rights or obligations under any Finance Document; or


 


(b)                    enter into any
merger, de-merger or other reorganisation, or carry out any other act, as a
result of which any of its rights or liabilities would vest in, or pass to,
another person.


 


26.2           Transfer by a Lender.
Subject to Clause 26.5, a Lender (the “Transferor
Lender”) may at any time (and with the consent of the Agent), cause:


 


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


 


(b)                    its
obligations in respect of all or part of its Commitment; or


 


(c)                     a combination
of (a) and (b)


 


to be (in the case of its
rights) transferred to, or (in the case of its obligations) assumed by, another
bank or financial institution which is experienced in ship financing (a “Transferee Lender”) by delivering to the
Agent a completed certificate in the form set out in Schedule 4 with any
modifications approved or required by the Agent (a “Transfer Certificate”) executed by the Transferor Lender and
the Transferee Lender.


 


However any rights and
obligations of the Transferor Lender in its capacity as Agent or Security
Trustee will have to be dealt with separately in accordance with the Agency and
Trust Deed.


 


26.3           Transfer Certificate,
delivery and notification. As soon as reasonably practicable after a
Transfer Certificate is delivered to the Agent, it shall (unless it has reason
to believe that the Transfer Certificate may be defective):


 


(a)                     sign the
Transfer Certificate on behalf of itself, the Borrower, the Security Parties,
the Security Trustee and each of the Lenders;


 


(b)                    on behalf of
the Transferee Lender, send to the Borrower and each Security Party letters or
faxes notifying them of the Transfer Certificate and attaching a copy of it;
and


 


(c)                     send to the
Transferee Lender copies of the letters or faxes sent under paragraph (b)
above.


 


26.4           Effective Date of
Transfer Certificate. A Transfer Certificate becomes effective on the date,
if any, specified in the Transfer Certificate as its effective date Provided that it is signed by the Agent
under Clause 26.3 on or before that date.


 


26.5           No transfer without
Transfer Certificate. No assignment or transfer of any right or obligation
of a Lender under any Finance Document is binding on, or effective in relation
to, the Borrower, any Security Party, the Agent or the Security Trustee unless
it is effected, evidenced or perfected by a Transfer Certificate.


 


26.6           Lender re-organisation;
waiver of Transfer Certificate. However, if a Lender enters into any
merger, de-merger or other reorganisation as a result of which all its rights
or obligations vest in another person (the “successor”),
the successor shall automatically and without any further act being necessary
become a Lender with the same Commitment and Contribution as were held by the
predecessor Lender.


 


59

















 


26.7           Effect of Transfer
Certificate. A Transfer Certificate takes effect in accordance with English
law as follows:


 


(a)                     to the extent
specified in the Transfer Certificate, all rights and interests (present,
future or contingent) which the Transferor Lender has under or by virtue of the
Finance Documents are assigned to the Transferee Lender absolutely, free of any
defects in the Transferor Lender’s title and of any rights or equities which
the Borrower or any Security Party had against the Transferor Lender;


 


(b)                    the Transferor
Lender’s Commitment is discharged to the extent specified in the Transfer
Certificate;


 


(c)                     the
Transferee Lender becomes a Lender with the Contribution previously held by the
Transferor Lender (or the part thereof specified in the Transfer Certificate)
and a Commitment of an amount specified in the Transfer Certificate;


 


(d)                    the Transferee
Lender becomes bound by all the provisions of the Finance Documents which are
applicable to the Lenders generally, including those about pro-rata sharing and
the exclusion of liability on the part of, and the indemnification of, the
Agent and the Security Trustee and, to the extent that the Transferee Lender
becomes bound by those provisions (other than those relating to exclusion of
liability), the Transferor Lender ceases to be bound by them;


 


(e)                     any part of
the Loan which the Transferee Lender advances after the Transfer Certificate’s
effective date ranks in point of priority and security in the same way as it
would have ranked had it been advanced by the transferor, assuming that any
defects in the transferor’s title and any rights or equities of the Borrower or
any Security Party against the Transferor Lender had not existed;


 


(f)                       the
Transferee Lender becomes entitled to all the rights under the Finance
Documents which are applicable to the Lenders generally, including but not
limited to those relating to the Majority Lenders and those under Clause 5.5
and Clause 20, and to the extent that the Transferee Lender becomes entitled to
such rights, the Transferor Lender ceases to be entitled to them; and


 


(g)                    in respect of
any breach of a warranty, undertaking, condition or other provision of a
Finance Document or any misrepresentation made in or in connection with a
Finance Document, the Transferee Lender shall be entitled to recover damages by
reference to the loss incurred by it as a result of the breach or
misrepresentation, irrespective of whether the original Lender would have
incurred a loss of that kind or amount.


 


The rights and equities
of the Borrower or any Security Party referred to above include, but are not
limited to, any right of set off and any other kind of cross-claim.


 


26.8           Maintenance of register
of Lenders. During the Security Period the Agent shall maintain a register
in which it shall record the name, Commitment, Contribution and administrative
details (including the lending office) from time to time of each Lender holding
a Transfer Certificate and the effective date (in accordance with Clause 26.4)
of the Transfer Certificate; and the Agent shall make the register available
for inspection by any Lender, the Security Trustee and the Borrower during
normal banking hours, subject to receiving at least 5 Business Days prior
notice.


 


26.9           Reliance on register of
Lenders. The entries on that register shall, in the absence of manifest
error, be conclusive in determining the identities of the Lenders and the
amounts of their Commitments and Contributions and the effective dates of
Transfer Certificates and may be relied upon by the Agent and the other parties
to the Finance Documents for all purposes relating to the Finance Documents.


 


60














 


26.10    Authorisation of Agent to sign
Transfer Certificates. The Borrower, the Security Trustee and each Lender
irrevocably authorise the Agent to sign Transfer Certificates on its behalf.


 


26.11    Registration fee. In
respect of any Transfer Certificate, the Agent shall be entitled to recover a
registration fee of $2,000 from the Transferor Lender or (at the Agent’s
option) the Transferee Lender.


 


26.12    Sub-participation; subrogation
assignment. A Lender may sub-participate all or any part of its rights and/or
obligations under or in connection with the Finance Documents without the
consent of, or any notice to, the Borrower, any Security Party, the Agent or
the Security Trustee; and the Lenders may assign, in any manner and terms
agreed by the Majority Lenders, the Agent and the Security Trustee, all or any
part of those rights to an insurer or surety who has become subrogated to them.


 


26.13    Disclosure of information.
A Lender may disclose to a potential Transferee Lender or sub-participant any
information which the Lender has received in relation to the Borrower, any
Security Party or their affairs under or in connection with any Finance
Document, unless the information is clearly of a confidential nature.


 


26.14    Change of lending office.
A Lender may change its lending office by giving notice to the Agent and the
change shall become effective on the later of:


 


(a)                     the date on
which the Agent receives the notice; and


 


(b)                    the date, if
any, specified in the notice as the date on which the change will come into
effect.


 


26.15    Notification. On receiving
such a notice, the Agent shall notify the Borrower and the Security Trustee;
and, until the Agent receives such a notice, it shall be entitled to assume
that a Lender is acting through the lending office of which the Agent last had
notice.


 


27                     VARIATIONS
AND WAIVERS


 


27.1           Variations, waivers
etc. by Majority Lenders. Subject to Clause 27.2, a document shall be
effective to vary, waive, suspend or limit any provision of a Finance Document,
or any Creditor Party’s rights or remedies under such a provision or the
general law, only if the document is signed, or specifically agreed to by fax,
by the Borrower, by the Agent on behalf of the Majority Lenders, by the Agent
and the Security Trustee in their own rights, and, if the document relates to a
Finance Document to which a Security Party is party, by that Security Party.


 


27.2           Variations, waivers
etc. requiring agreement of all Lenders. However, as regards the following,
Clause 27.1 applies as if the words “by the Agent on behalf of the Majority
Lenders” were replaced by the words “by or on behalf of every Lender and the
Swap Bank”:


 


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


 


(b)                    a change to
the date for, or the amount of, any payment of principal, interest, fees, or
other sum payable under this Agreement;


 


(c)                     a change to
any Lender’s Commitment;


 


(d)                    an extension
of the Availability Period;


 


(e)                     a change to
the definition of “Majority Lenders” or “Finance Documents”;


 


 


61

















 


(f)                       a change to
the preamble or to Clause 2, 3, 4, 5.1, 8.1, 8.2, 17, 18, 19 or 30;


 


(g)                    a change to
this Clause 27;


 


(h)                    any release
of, or material variation to, a Security Interest, guarantee, indemnity or
subordination arrangement set out in a Finance Document; and


 


(i)                        any other
change or matter as regards which this Agreement or another Finance Document
expressly provides that each Lender’s consent is required.


 


27.3           Exclusion of other or
implied variations. Except for a document which satisfies the requirements
of Clauses 27.1 and 27.2, no document, and no act, course of conduct, failure
or neglect to act, delay or acquiescence on the part of the Creditor Parties or
any of them (or any person acting on behalf of any of them) shall result in the
Creditor Parties or any of them (or any person acting on behalf of any of them)
being taken to have varied, waived, suspended or limited, or being precluded
(permanently or temporarily) from enforcing, relying on or exercising:


 


(a)                     a provision
of this Agreement or another Finance Document; or


 


(b)                    an Event of
Default; or


 


(c)                     a breach by
the Borrower or a Security Party of an obligation under a Finance Document or
the general law; or


 


(d)                    any right or
remedy conferred by any Finance Document or by the general law;


 


and there shall not be
implied into any Finance Document any term or condition requiring any such
provision to be enforced, or such right or remedy to be exercised, within a
certain or reasonable time.


 


28                     NOTICES


 


28.1           General. Unless
otherwise specifically provided, any notice under or in connection with any
Finance Document shall be given by registered letter or fax; and references in
the Finance Documents to written notices, notices in writing and notices signed
by particular persons shall be construed accordingly.


 


28.2           Addresses for
communications. A notice shall be sent:


 


 


	
  (a)                     to
  the Borrower:

  	
   

  	
  Paragon Shipping Inc.

  Voula Center

  Vasileos Pavlou Avenue 102-104

  166 73 Voula

  Greece

  Fax No: +(30) 210 899 5085

  Attn: the Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
  (b)                    to
  a Lender:

  	
   

  	
  At the address opposite its name in Schedule I or
  (as the

  case may require) in the relevant Transfer Certificate; and

  
	
   

  	
   

  	
   

  
	
  (c)                     to
  the Swap Bank,

  the Agent and

  the Security Trustee:

  	
   

  	
  HSH Nordbank AG

  Gerhart-Hauptmann-Platz 50

  D-20095 Hamburg

  Germany

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Fax No: +(49) 40 33 33 34 118

  Attn: Shipping, Greek clients

  



 


62

















 


or to such other address
as the relevant party may notify the Agent or, if the relevant party is the
Agent or the Security Trustee, the Borrower, the Lenders, the Swap Bank and the
Security Parties.


 


28.3           Effective date of
notices. Subject to Clauses 28.4 and 28.5:


 


(a)                     a notice
which is delivered personally shall be deemed to be served, and shall take
effect, at the time when it is delivered;


 


(b)                    a notice which
is delivered by registered letter shall be deemed to be served, and shall take
effect, 5 Business Days after being deposited in the post postage prepaid in an
envelope addressed to it at the relevant address; and


 


(c)                     a notice
which is sent by fax shall be deemed to be served, and shall take effect, 2
hours after its transmission is completed.


 


28.4           Service outside
business hours. However, if under Clause 28.3 a notice would be deemed to
be served:


 


(a)                     on a day
which is not a business day in the place of receipt; or


 


(b)                    on such a
business day, but after 5 p.m. local time;


 


the notice shall (subject
to Clause 28.5) be deemed to be served, and shall take effect, at 9 a.m. on the
next day which is such a business day.


 


28.5           Illegible notices.
Clauses 28.3 and 28.4 do not apply if the recipient of a notice notifies the
sender within one hour after the time at which the notice would otherwise be
deemed to be served that the notice has been received in a form which is
illegible in a material respect.


 


28.6           Valid notices. A
notice under or in connection with a Finance Document shall not be invalid by
reason that its contents or the manner of serving it do not comply with the
requirements of this Agreement or, where appropriate, any other Finance
Document under which it is served if;


 


(a)                     the failure
to serve it in accordance with the requirements of this Agreement or other
Finance Document, as the case may be, has not caused any party to suffer any significant
loss or prejudice; or


 


(b)                    in the case of
incorrect and/or incomplete contents, it should have been reasonably clear to
the party on which the notice was served what the correct or missing
particulars should have been.


 


28.7           English language.
Any notice under or in connection with a Finance Document shall be in English.


 


28.8           Meaning of “notice”.
In this Clause “notice” includes any demand, consent, authorisation, approval,
instruction, waiver or other communication.


 


28.9           Electronic communication


 


(a)                     Any
communication to be made between the Agent or the Security Trustee and a Lender
or the Swap Bank under or in connection with the Finance Documents may be made
by electronic mail or other electronic means, if the Agent, the Security
Trustee and the relevant Lender or, as the case may be, the Swap Bank:


 


63

















 


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


 


(ii)                    notify each
other in writing of their electronic mail address and/or any other information
required to enable the sending and receipt of information by that means; and


 


(iii)                 notify each other
of any change to their address or any other such information supplied by them,


 


(b)                    Any electronic
communication made between the Agent and a Lender or the Swap Bank or the
Security Trustee will be effective only when actually received in readable form
and in the case of any electronic communication made by a Lender or the Swap
Bank to the Agent or the Security Trustee only if it is addressed in such a
manner as the Agent or Security Trustee shall specify for this purpose.


 


29                     SUPPLEMENTAL


 


29.1           Rights cumulative,
non-exclusive. The rights and remedies which the Finance Documents give to
each Creditor Party are:


 


(a)                     cumulative;


 


(b)                    may be
exercised as often as appears expedient; and


 


(c)                     shall not,
unless a Finance Document explicitly and specifically states so, be taken to
exclude or limit any right or remedy conferred by any law.


 


29.2           Severability of
provisions. If any provision of a Finance Document is or subsequently
becomes void, unenforceable or illegal, that shall not affect the validity,
enforceability or legality of the other provisions of that Finance Document or
of the provisions of any other Finance Document.


 


29.3           Third party rights.
A person who is not a party to this Agreement has no right under the Contracts
(Rights of Third Parties) Act 1999 to enforce or to enjoy the benefit of any
term of this Agreement.


 


29.4           Counterparts. A
Finance Document may be executed in any number of counterparts.


 


30                     LAW AND
JURISDICTION


 


30.1           English law. This
Agreement shall be governed by, and construed in accordance with, English law.


 


30.2           Exclusive English
jurisdiction. Subject to Clause 30.3, the courts of England shall have
exclusive jurisdiction to settle any disputes which may arise out of or in
connection with this Agreement.


 


30.3           Choice of forum for the
exclusive benefit of the Creditor Parties. Clause 30.2 is for the exclusive
benefit of the Creditor Parties, each of which reserves the right:


 


(a)                     to commence
proceedings in relation to any matter which arises out of or in connection with
this Agreement in the courts of any country other than England and which have
or claim jurisdiction to that matter; and


 


(b)                    to commence
such proceedings in the courts of any such country or countries concurrently
with or in addition to proceedings in England or without commencing proceedings
in England.


 


64

















 


The Borrower shall not
commence any proceedings in any country other than England in relation to a
matter which arises out of or in connection with this Agreement.


 


30.4           Process agent. The
Borrower irrevocably appoints HTD Services Limited at their office for the time
being, presently at Irongate House, Duke’s Place, London EC3A 7HX, England, to
act as its agent to receive and accept on its behalf any process or other
document relating to any proceedings in the English courts which are connected
with this Agreement.


 


30.5           Creditor Party rights
unaffected. Nothing in this Clause 30 shall exclude or limit any right
which any Creditor Party may have (whether under the law of any country, an
international convention or otherwise) with regard to the bringing of proceedings,
the service of process, the recognition or enforcement of a judgment or any
similar or related matter in any jurisdiction.


 


30.6           Meaning of
“proceedings”. In this Clause 30, “proceedings”
means proceedings of any kind, including an application for a provisional or
protective measure.


 


AS
WITNESS the hands of the duly authorised officers or
attorneys of the parties the day and year first before written.


 


65














 


SCHEDULE 1


 


LENDERS AND COMMITMENTS


 


 


	
  Lender

  	
   

  	
  Lending Office

  	
   

  	
  Commitment

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  (US Dollars)

  	
   

  
	
  HSH Nordbank AG

  	
   

  	
  Gerhart-Hauptmann-Platz 50

  D-20095 Hamburg

  Germany

  	
   

  	
  95,322,060

  	
   

  



 


66

















SCHEDULE 2


 


DETAILS OF SHIPS AND OWNERS


 


	
  1

  	
  Name of Ship:

  	
  “BLUE SEAS”

  
	
   

  	
   

  	
   

  
	
   

  	
  Flag:

  	
  Cayman Islands

  
	
   

  	
   

  	
   

  
	
   

  	
  IMO Number:

  	
  9104550

  
	
   

  	
   

  	
   

  
	
   

  	
  Official Number:

  	
  739718

  
	
   

  	
   

  	
   

  
	
   

  	
  Dwt:

  	
  45,654

  
	
   

  	
   

  	
   

  
	
   

  	
  Class Society and notation:

  	
  [•]

  
	
   

  	
   

  	
   

  
	
   

  	
  Year built:

  	
  1995

  
	
   

  	
   

  	
   

  
	
   

  	
  Owner:

  	
  Camelia Navigation S.A.

  
	
   

  	
   

  	
   

  
	
  2

  	
  Name of Ship:

  	
  “CALM SEAS”

  
	
   

  	
   

  	
   

  
	
   

  	
  Flag:

  	
  Marshall Islands

  
	
   

  	
   

  	
   

  
	
   

  	
  IMO Number:

  	
  9184835

  
	
   

  	
   

  	
   

  
	
   

  	
  Official Number:

  	
  [•]

  
	
   

  	
   

  	
   

  
	
   

  	
  Dwt:

  	
  74,047

  
	
   

  	
   

  	
   

  
	
   

  	
  Class Society and notation:

  	
  [•]

  
	
   

  	
   

  	
   

  
	
   

  	
  Year built:

  	
  1999

  
	
   

  	
   

  	
   

  
	
   

  	
  Owner:

  	
  Frontline Marine Company

  
	
   

  	
   

  	
   

  
	
  3

  	
  Name of Ship:

  	
  “CLEAN SEAS”

  
	
   

  	
   

  	
   

  
	
   

  	
  Flag:

  	
  Cayman Islands

  
	
   

  	
   

  	
   

  
	
   

  	
  IMO Number:

  	
  9109366

  
	
   

  	
   

  	
   

  
	
   

  	
  Official Number:

  	
  [•]

  
	
   

  	
   

  	
   

  
	
   

  	
  Dwt:

  	
  46,640

  
	
   

  	
   

  	
   

  
	
   

  	
  Class Society and notation:

  	
  [•]

  
	
   

  	
   

  	
   

  
	
   

  	
  Year built:

  	
  1995

  
	
   

  	
   

  	
   

  
	
   

  	
  Owner:

  	
  Explorer Shipholding Limited

  
	
  4

  	
  Name of Ship:

  	
  “DEEP SEAS”

  



 


67

















 


	
   

  	
  Flag:

  	
  Cayman Islands

  
	
   

  	
   

  	
   

  
	
   

  	
  IMO
  Number:

  	
  9169380

  
	
   

  	
   

  	
   

  
	
   

  	
  Official
  Number:

  	
  [•]

  
	
   

  	
   

  	
   

  
	
   

  	
  Dwt:

  	
  72,891

  
	
   

  	
   

  	
   

  
	
   

  	
  Class
  Society and notation:

  	
  [•]

  
	
   

  	
   

  	
   

  
	
   

  	
  Year
  built:

  	
  1999

  
	
   

  	
   

  	
   

  
	
   

  	
  Owner:

  	
  Trade Force Shipping S.A.

  
	
   

  	
   

  	
   

  
	
  5

  	
  Name
  of Ship:

  	
  “KIND SEAS”

  
	
   

  	
   

  	
   

  
	
   

  	
  Flag:

  	
  Marshall Islands

  
	
   

  	
   

  	
   

  
	
   

  	
  IMO
  Number:

  	
  9205847

  
	
   

  	
   

  	
   

  
	
   

  	
  Official
  Number:

  	
  [•]

  
	
   

  	
   

  	
   

  
	
   

  	
  Dwt:
  

  	
  72,493 

  
	
   

  	
   

  	
   

  
	
   

  	
  Class
  Society and notation:

  	
  [•]

  
	
   

  	
   

  	
   

  
	
   

  	
  Year
  built:

  	
  1999

  
	
   

  	
   

  	
   

  
	
   

  	
  Owner:

  	
  Fairplay Maritime Ltd.

  



 


68

















 


SCHEDULE 3


 


DRAWDOWN NOTICE


 


To:                 HSH Nordbank AG

Gerhart-Hauptmann-Platz 50

D-20095 Hamburg

Germany


 


	
  Attention: Loans
  Administration

  	
  [                    ]
  2006

  



 


DRAWDOWN NOTICE


 


1                            We
refer to the loan agreement (the “Loan
Agreement”) dated 18 December 2006 and made between ourselves as
Borrower, the Lenders referred to therein, yourselves as Agent and as Security
Trustee, the Swap Bank referred to therein, yourselves as Lead Arranger,
Bookrunner, and Underwriter in connection with a loan facility of up to US$95,322,060.
Terms defined in the Loan Agreement have their defined meanings when used in
this Drawdown Notice.


 


2                            We
request to borrow an Advance to part-finance the vessel “[•]” as
follows:


 


(a)                     Amount of
Advance: $[         ];


 


(b)                    Drawdown Date: [         ];


 


(c)                     Duration of the first Interest Period shall
be [         ] months;


 


(d)                    Payment
instructions : account of [                                  ]
and numbered [                ]
with [         ] of [             ].


 


3                            We
represent and warrant that:


 


(a)                     the
representations and warranties in Clause 10 of the Loan Agreement would remain
true and not misleading if repeated on the date of this notice with reference
to the circumstances now existing;


 


(b)                    no Event of
Default or Potential Event of Default has occurred or will result from the
borrowing of the Loan.


 


4                            This
notice cannot be revoked without the prior consent of the Majority Lenders.


 


5                            [We
authorise you to deduct all accrued commitment fee applicable to the Advance
referred to in Clause 20.1 from the amount of the Advance].


 


 


	
  [Name of Signatory]

  
	
   

  
	
   

  	
   

  	
   

  
	
  for and on behalf of

  PARAGON SHIPPING INC.

  



 


69

















 


SCHEDULE 4


 


CONDITION PRECEDENT DOCUMENTS


 


PART A


 


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


 


1                            A duly
executed original of each of:


 


(a)                     this
Agreement;


 


(b)                    the Agency and
Trust Deed;


 


(c)                     the Fee
Letter;


 


(d)                    the Master
Agreement;


 


(e)                     the Master
Agreement Assignment;


 


(f)                       the
Guarantees;


 


(g)                    the Retention
Account Pledge;


 


(h)                    the Earnings
Account Pledge; and


 


(i)                        the Swap
Account Pledge.


 


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


 


3                            Copies
of resolutions of the shareholders and directors of the Borrower and of each
Owner authorising the execution of each of the Finance Documents to which the
Borrower or that Owner is a party and, in the case of the Borrower, authorising
named officers to give the Drawdown Notices and other notices under this
Agreement.


 


4                            The
original of any power of attorney under which any Finance Document is executed
on behalf of the Borrower or an Owner.


 


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


 


6                            A copy
of the memorandum relating to the private placement of the share capital of the
Borrower.


 


7                            If the
Agent so requires, in respect of any of the documents referred to above, a
certified English translation prepared by a translator approved by the Agent.


 


PART B


 


The following are the
documents referred to in Clause 9. l(b).


 


1                            Evidence
satisfactory to the Agent and its legal advisers that:


 


70

















 


(a)                     the Borrower
has received net cash proceeds from the Sponsors in an amount of at least
$113,120,000 from a private placement of the share capital of the Borrower; and


 


(b)                    Mr Michael
Bodouroglou has made an additional equity contribution of at least 7 per cent.
of the Borrower’s Total Equity.


 


2                            The
originals of any mandates or other documents required in connection with the
opening or operation of each Earnings Account and the Retention Account.


 


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


 


4                            All
documentation required by each Creditor Party in relation to the Borrower and
any Security Party pursuant to that Creditor Party’s “know your customer”
requirements.


 


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


 


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


 


PART C


 


The following are the
documents referred to in Clause 9.1(c). “Relevant
Ship” means, in relation to an Advance, the Ship which is to be
part-financed by that Advance.


 


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


 


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


 


3                            A duly
executed original of the Mortgage, the Deed of Covenant (if applicable), the
General Assignment, the Management Assignment and the Charterparty Assignment
(in respect of the relevant Initial Charterparty) for the Relevant Ship (and of
each document to be delivered under each of them).


 


4                            Documentary
evidence that:


 


(a)                     the Relevant
Ship has been unconditionally delivered to, and accepted by, the relevant Owner
under the relevant MOA and the full purchase price payable under that MOA
comprising the equity contribution of the Sponsors (in addition to the part
financed by the relevant Advance) has been duly paid;


 


(b)                    the Relevant
Ship has been unconditionally delivered to, and accepted by, the relevant
charterer for service under the Initial Charterparty in respect of the Relevant
Ship;


 


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


 


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


 


71














 


(e)                     the Relevant
Ship maintains the highest available class with such first-class classification
society which is a member of IACS as the Agent may approve free of all
recommendations and conditions of such classification society;


 


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


 


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


 


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


 


6                            Copies
of:


 


(a)                     the document
of compliance (DOC) and safety management certificate (SMC) referred to in
paragraph (a) of the definition of the ISM Code Documentation in respect of the
Relevant Ship and the Approved Manager certified as true and in effect by the
Owner of the Relevant Ship; and


 


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


 


7                            A
survey report of the Relevant Ship dated no later than 20 days prior to the
relevant Drawdown Date in form, scope and substance satisfactory to the Agent
and its legal and technical advisors.


 


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


 


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


 


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


 


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


 


12                     If the Agent
so requires, in respect of any of the documents referred to above, a certified
English translation prepared by a translator approved by the Agent.


 


Every other copy document
delivered under this Schedule shall be certified as a true and up to date copy
by a director or the secretary (or equivalent officer) of the Borrower or any
other person acceptable to the Agent in its sole discretion.


 


 


72

















 


SCHEDULE 5


 


TRANSFER CERTIFICATE


 


The
Transferor and the Transferee accept exclusive responsibility for ensuring that
this Certificate and the transaction to which it relates comply with all legal
and regulatory requirements applicable to them respectively.


 


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


 


[                           ]


 


1                            This
Certificate relates to a Loan Agreement (the “Loan
Agreement”) dated 18 December 2006 and made between (1) Paragon
Shipping Inc. as borrower (the “Borrower”),
(2) the banks and financial institutions named therein as Lenders, (3) HSH
Nordbank AG as Agent, (4) HSH Nordbank AG as Swap Bank, (5) HSH Nordbank AG as
Lead Arranger, Bookrunner and Underwriter and (6) HSH Nordbank AG as Security
Trustee in respect of a term loan facility of up to US$95,322,060.


 


2                            In
this Certificate:


 


“the
Relevant Parties” means the Agent, the Borrower, each Security
Party, the Security Trustee, the Swap Bank and each Lender;


 


“the
Transferor” means [full name] of [lending office];


 


“the
Transferee” means [full name] of [lending office].


 


Terms defined in the Loan
Agreement shall, unless the contrary intention appears, have the same meanings
when used in this Certificate.


 


3                            The
effective date of this Certificate is          200   Provided that this Certificate shall not
come into effect unless it is signed by the Agent on or before that date.


 


4                            The
Transferor assigns to the Transferee absolutely all rights and interests
(present, future or contingent) which the Transferor has as Lender under or by
virtue of the Loan Agreement and every other Finance Document in relation to
[        ] per cent, of the Contribution
outstanding to the Transferor (or its predecessors in title) which is set out
below:


 


73

















 


	
  Contribution

  	
   

  	
  Amount
  transferred

  



 


5                            By
virtue of this Transfer Certificate and Clause 26 of the Loan Agreement, the
Transferor is discharged [entirely from its Commitment which amounts to
$[             ]]
[from [     ] per cent, of its Commitment, which
percentage represents $[          ]]
and the Transferee acquires a Commitment of
$[        ].


 


6                            The
Transferee undertakes with the Transferor and each of the Relevant Parties that
the Transferee will observe and perform all the obligations under the Finance
Documents which Clause 26 of the Loan Agreement provides will become binding on
it upon this Certificate taking effect.


 


7                            The
Agent, at the request of the Transferee (which request is hereby made) accepts,
for the Agent itself and for and on behalf of every other Relevant Party, this
Certificate as a Transfer Certificate taking effect in accordance with Clause
26 of the Loan Agreement.


 


8                            The
Transferor:


 


(a)                     warrants to
the Transferee and each Relevant Party:


 


(i)                       that the
Transferor has full capacity to enter into this transaction and has taken all
corporate action and obtained all consents which are in connection with this
transaction; and


 


(ii)                    that this
Certificate is valid and binding as regards the Transferor;


 


(b)                   warrants to the
Transferee that the Transferor is absolutely entitled, free of encumbrances, to
all the rights and interests covered by the assignment in paragraph 4 above;


 


(c)                    undertakes
with the Transferee that the Transferor will, at its own expense, execute any
documents which the Transferee reasonably requests for perfecting in any
relevant jurisdiction the Transferee’s title under this Certificate or for a
similar purpose.


 


9                           The
Transferee:


 


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


 


(e)                    agrees that it
will have no rights of recourse on any ground against either the Transferor,
the Agent, the Security Trustee, the Swap Bank or any Lender in the event that:


 


(i)                      the Finance
Documents prove to be invalid or ineffective,


 


(ii)                   the Borrower or
any Security Party fails to observe or perform its obligations, or to discharge
its liabilities, under the Finance Documents;


 


(iii)                it proves
impossible to realise any asset covered by a Security Interest created by a
Finance Document, or the proceeds of such assets are insufficient to discharge


 


74

















 


the liabilities of the
Borrower or any Security Party under the Finance Documents;


 


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


 


(g)                    warrants to
the Transferor and each Relevant Party (i) that it has full capacity to enter
into this transaction and has taken all corporate action and obtained all
official consents which it needs to take or obtain in connection with this
transaction; and (ii) that this Certificate is valid and binding as regards the
Transferee; and


 


(h)                    confirms the
accuracy of the administrative details set out below regarding the Transferee.


 


10                     The
Transferor and the Transferee each undertake with the Agent and the Security
Trustee severally, on demand, fully to indemnify the Agent and/or the Security
Trustee in respect of any claim, proceeding, liability or expense (including
all legal expenses) which they or either of them may incur in connection with
this Certificate or any matter arising out of it, except such as are shown to
have been mainly and directly caused by the gross and culpable negligence or
dishonesty of the Agent’s or the Security Trustee’s own officers or employees.


 


13                     The Transferee
shall repay to the Transferor on demand so much of any sum paid by the
Transferor under paragraph 10 above as exceeds one-half of the amount demanded
by the Agent or the Security Trustee in respect of a claim, proceeding,
liability or expense which was not reasonably foreseeable at the date of this
Certificate; but nothing in this paragraph shall affect the liability of each
of the Transferor and the Transferee to the Agent or the Security Trustee for
the full amount demanded by it.


 


 


	
  [Name
  of Transferor]

  	
  [Name of Transferee]

  
	
   

  	
   

  
	
  By:

  	
  By:

  
	
   

  	
   

  
	
  Date:

  	
  Date:

  



 


Agent


 


Signed for itself and for
and on behalf of itself

as Agent and for every other Relevant Party


 


HSH NORDBANK AG


 


	
  By:

  
	
   

  
	
  Date:

  



 


75

















 


Administrative Details of Transferee


 


Name of Transferee:


 


Lending Office:


 


Contact Person

(Loan Administration Department):


 


Telephone:


 


Telex:


 


Fax:


 


Contact Person

(Credit Administration Department):


 


Telephone:


 


Telex:


 


Fax:


 


Account for payments:


 


Note:      This Transfer Certificate
alone may not be sufficient to transfer a proportionate share of the
Transferor’s interest in the security constituted by the Finance Documents in
the Transferor’s or Transferee’s jurisdiction. It is the responsibility of each
Lender to ascertain whether any other documents are required for this purpose.


 


76






 










 


SCHEDULE 6


 


DESIGNATION NOTICE


 


To:                 HSH Nordbank AG

Gerhart-Hauptmann-Platz 50

D-20095 Hamburg

Germany


 


[•]


 


Dear Sirs


 


Loan
Agreement dated 18 December 2006 made between (inter alia) (i) ourselves as
Borrower, (ii) the Lenders, (iii) yourselves as Agent and Security Trustee and
(iv) yourselves as swap bank (the “Loan Agreement”)


 


We refer to:


 


1                            the
Loan Agreement;


 


2                            the
Master Agreement dated [•] made between ourselves and [•]; and


 


3                            a
Confirmation delivered pursuant to the said Master Agreement dated [•]
and addressed by [•] to us.


 


In accordance with the
terms of the Loan Agreement, we hereby give you notice of the said Confirmation
and hereby confirm that the Transaction evidenced by it will be designated as a
“Designated Transaction” for the purposes of the Loan Agreement and the Finance
Documents.


 


Yours faithfully,


 


	
   

  	
   

  
	
   

  
	
  for and on behalf of

  PARAGON SHIPPING INC.

  



 


77

















SCHEDULE 7


 


FORM OF COMPLIANCE CERTIFICATE


 


To:                 HSH Nordbank AG

Gerhart-Hauptmann-Platz 50

D-20095 Hamburg

Germany


 


[•]
200[•]


 


Dear Sirs,


 


We refer to a loan
agreement dated 18 December 2006 (the “Loan
Agreement”) made between (amongst others) yourselves and ourselves
in relation to a term loan facility of up to $95,322,060.


 


Words and expressions
defined in the Loan Agreement shall have the same meaning when used in this
compliance certificate.


 


We enclose with this
certificate a copy of the [audited]/[unaudited] consolidated accounts for the
Group for the [Financial Year] [3-month period] ended [•].
The accounts (i) have been prepared in accordance with all applicable laws and
GAAP all consistently applied, (ii) give a true and fair view of the state of
affairs of the Group at the date of the accounts and of its profit for the
period to which the accounts relate and (iii) fully disclose or provide for all
significant liabilities of the Group.


 


We also enclose copies of
the valuations of all the Fleet Vessels which were used in calculating the
Market Value Adjusted Total Assets of the Group as at [•].


 


The Borrower represents
that no Event of Default or Potential Event of Default has occurred as at the
date of this certificate [except for the following matter or event [set out all material details of matter or event]]. In addition as of [•],
the Borrower confirms compliance with the financial covenants set out in Clause
12.4 of the Loan Agreement for the 3 months ending as of the date to which the
enclosed accounts are prepared.


 


We now certify that, as
at [•]:


 


(a)                     the ratio of
Total Liabilities to EBITDA is [•]:[•];


 


(b)                    the Market
Value Adjusted Net Worth of the Group is $[•];


 


(c)                     Liquid Assets
available to the Group are $[•] in aggregate of which an aggregate
amount of $[•]
is standing to the credit of the Earnings Accounts and the Swap Account;


 


(d)                    the ratio of
Total Liabilities to Market Value Adjusted Total Assets is [•]:[•];
and


 


(e)                     the Security
Cover Percentage is [•] per cent.


 


This certificate shall be
governed by, and construed in accordance with, English law.


 


 


	
   

  	
   

  
	
  [•]

  Chief Financial Officer of

  Paragon Shipping Inc.

  



 


78

















 


SCHEDULE 8


 


MANDATORY COST FORMULA


 


1                            The
Mandatory Cost is an addition to the interest rate to compensate Lenders for
the cost of compliance with (a) the requirements of the Financial Services
Authority (or any other authority which replaces all or any of its functions)
or (b) the requirements of the European Central Bank.


 


2                            On
the first day of each Interest Period (or as soon as possible thereafter) the
Agent shall calculate, as a percentage rate, a rate (the “Additional Cost Rate”) for each Lender, in
accordance with the paragraphs set out below. The Mandatory Cost will be
calculated by the Agent as a weighted average of the Lenders’ Additional Cost
Rates (weighted in proportion to the percentage participation of each Lender in
the Loan) and will be expressed as a percentage rate per annum.


 


3                            The
Additional Cost Rate for any Lender lending from a lending office in a
Participating Member State will be the percentage notified by that Lender to
the Agent. This percentage will be certified by that Lender in its notice to
the Agent to be its reasonable determination of the cost (expressed as a
percentage of that Lender’s participation in the Loan) of complying with the
minimum reserve requirements of the European Central Bank in respect of loans
made from that lending office.


 


4                            The
Additional Cost Rate for any Lender lending from a lending office in the United
Kingdom will be calculated by the Agent as follows:


 


	
   

  	
  E x 0.01

  	
   per cent. per
  annum

  
	
   

  	
  300

  



 


Where:


 


E                           is
designed to compensate Lenders for amounts payable under the Fees Rules and is
calculated by the Agent as being the average of the most recent rates of charge
supplied by the Lenders to the Agent pursuant to paragraph 6 below and
expressed in pounds per £1,000,000.


 


5                            For
the purposes of this Schedule:


 


(a)                     “Special Deposits” has the meaning given to
it from time to time under or pursuant to the Bank of England Act 1998 or (as
may be appropriate) by the Bank of England;


 


(b)                    “Fees Rules” means the rules on periodic
fees contained in the FSA Supervision Manual or such other law or regulation as
may be in force from time to time in respect of the payment of fees for the
acceptance of deposits;


 


(a)                     “Fee Tariffs” means the fee tariffs
specified in the Fees Rules under the activity group A.1 Deposit acceptors
(ignoring any minimum fee or zero rated fee required pursuant to the Fees Rules
but taking into account any applicable discount rate);


 


79

















 


(b)                    “Participating Member State” means any
member state of the European Union that adopts or has adopted the euro as its
lawful currency in accordance with legislation of the European Union relating
to European Monetary Union; and


 


(c)                     “Tariff Base” has the meaning given to it
in, and will be calculated in accordance with, the Fees Rules.


 


6                            If
requested by the Agent, each Lender lending from a lending office in the United
Kingdom shall, as soon as practicable after publication by the Financial
Services Authority, supply to the Agent, the rate of charge payable by that
Lender to the Financial Services Authority pursuant to the Fees Rules in
respect of the relevant financial year of the Financial Services Authority
(calculated for this purpose by that Lender as being the average of the Fee
Tariffs applicable to that Lender for that financial year) and expressed in
pounds per £1,000,000 of the Tariff Base of that Lender.


 


7                            Each
Lender shall supply any information required by the Agent for the purpose of
calculating its Additional Cost Rate. In particular, but without limitation,
each Lender shall supply the following information in writing on or prior to
the date on which it becomes a Lender:


 


(a)                     the
jurisdiction of its lending office; and


 


(b)                    any other
information that the Agent may reasonably require for such purpose.


 


Each Lender shall
promptly notify the Agent in writing of any change to the information provided
by it pursuant to this paragraph.


 


8                            The
rates of charge of each Lender lending from a lending office in the United
Kingdom for the purpose of calculating E shall be determined by the Agent based
upon the information supplied to it pursuant to paragraph 6 above and on the
assumption that, unless a Lender notifies the Agent to the contrary, each
Lender’s obligations in relation to cash ratio deposits and Special Deposits
are the same as those of a typical bank from its jurisdiction of incorporation
with a lending office in the same jurisdiction as its lending office.


 


9                            The
Agent shall have no liability to any person if such determination results in an
Additional Cost Rate which over or under compensates any Lender and shall be
entitled to assume that the information provided by any Lender pursuant to
paragraphs 3, 6 and 7 above is true and correct in all respects.


 


10                     The Agent
shall distribute the additional amounts received as a result of the Mandatory
Cost to the Lenders on the basis of the Additional Cost Rate for each Lender
based on the information provided by each Lender pursuant to paragraphs 3, 6
and 7 above.


 


11                     Any
determination by the Agent pursuant to this Schedule in relation to a formula,
the Mandatory Cost, an Additional Cost Rate or any amount payable to a Lender
shall, in the absence of manifest error, be conclusive and binding on all
parties.


 


The Agent may from time
to time, after consultation with the Borrower and the Lenders, determine and
notify to all parties any amendments which are required to be made to this
Schedule in order to comply with any change in law, regulation or any
requirements from time to time imposed by the Financial Services Authority or
the European Central Bank (or, in any case,


 


80

















 


any other authority which
replaces all or any of its functions) and any such determination shall, in the
absence of manifest error, be conclusive and binding on all parties


 


81














 


EXECUTION PAGES


 


	
  BORROWER

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SIGNED by CHRISTOPHER THOMAS

  	
  )

  	
  /s/ Christopher Thomas

  	
   

  
	
  for
  and on behalf of

  	
  )

  	
   

  	
   

  
	
  PARAGON SHIPPING INC.

  	
  )

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  LENDERS

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SIGNED by ERICA LACOMBE

  	
  )

  	
  /s/ Erica Lacombe

  	
   

  
	
  for
  and on behalf of

  	
  )

  	
   

  	
   

  
	
  HSH NORDBANK AG

  	
  )

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  AGENT

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SIGNED by ERICA LACOMBE

  	
  )

  	
  /s/ Erica Lacombe

  	
   

  
	
  for
  and on behalf of

  	
  )

  	
   

  	
   

  
	
  HSH NORDBANK AG

  	
  )

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SECURITY TRUSTEE

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SIGNED by ERICA LACOMBE

  	
  )

  	
  /s/ Erica Lacombe

  	
   

  
	
  for
  and on behalf of

  	
  )

  	
   

  	
   

  
	
  HSH NORDBANK AG

  	
  )

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SWAP BANK

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SIGNED by ERICA LACOMBE

  	
  )

  	
  /s/ Erica Lacombe

  	
   

  
	
  for
  and on behalf of

  	
  )

  	
   

  	
   

  
	
  HSH NORDBANK AG

  	
  )

  	
   

  	
   

  



 


82

















 


	
  LEAD ARRANGER/
  BOOKRUNNER/UNDERWRITER

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SIGNED by ERICA LACOMBE

  	
  )

  	
  /s/ Erica Lacombe

  	
   

  
	
  for
  and on behalf of

  	
  )

  	
   

  	
   

  
	
  HSH NORDBANK AG

  	
  )

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Witness
  to all the

  	
  )

  	
  /s/ Maria-Chryssoula Karpida

  	
   

  
	
  above
  signatures

  	
  )

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Address:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  MARIA-CHRYSSOULA KARPIDA

  	
   

  	
   

  	
   

  
	
  WATSON, FARLEY & WILLIAMS

  	
   

  	
   

  	
   

  
	
  2, DEFTERAS MERARCHIAS

  	
   

  	
   

  	
   

  
	
  PIRAEUS 185 36 - GREECE

  	
   

  	
   

  	
   

  



 


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