<PAGE> 1


                       AGREEMENT FOR
                             A
                U.S. $90,000,000 TERM LOAN
                         FACILITY

                  TO BE MADE AVAILABLE TO
                  CERTAIN SUBSIDIARIES OF
                TEEKAY SHIPPING CORPORATION

                            BY

             CHRISTIANIA BANK OG KREDITKASSE,
                     New York Branch,
                THE BANK OF NOVA SCOTIA and
                      BANQUE INDOSUEZ





                      October 3, 1996




















<PAGE> 2


                           INDEX
                           -----

                                                       PAGE


CLAUSE 1  DEFINITIONS................................    1

    1.1     Defined Terms............................    1
    1.2     Construction.............................   14
    1.3     Accounting Terms.........................   15

CLAUSE 2  REPRESENTATIONS AND WARRANTIES.............   15

    2.1(a)  Due Organization and Power...............   15
    2.1(b)  Authorization and Consents...............   16
    2.1(c)  Binding Obligations......................   16
    2.1(d)  No Violation.............................   16
    2.1(e)  Litigation...............................   16
    2.1(f)  No Default...............................   17
    2.1(g)  Charters.................................   17
    2.1(h)  Vessel Ownership, Classification,
              Seaworthiness and Insurance............   17
    2.1(i)  Financial Statements.....................   18
    2.1(j)  Tax Returns and Payments.................   18
    2.1(k)  Insurance................................   18
    2.1(l)  Offices..................................   19
    2.1(m)  Not an Investment Company................   19
    2.1(n)  Equity Ownership.........................   19
    2.1(o)  Environmental Matters....................   19
    2.1(p)  Pending or Threatened Environmental
               Claims................................   20
    2.1(q)  Limited Purpose..........................   20
    2.1(r)  Permitted Indebtedness...................   20
    2.1(s)  Survival.................................   20

CLAUSE 3  LOAN FACILITY..............................   21

    3.1(a)  Purposes.................................   21
    3.1(b)  Making of the Loan.......................   21
    3.2     Drawdown Notice..........................   21
    3.3     Effect of Drawdown Notice................   21

CLAUSE 4  CONDITIONS PRECEDENT.......................   21

    4.1     Conditions Precedent to Drawdown of the
              Loan...................................   21
    4.2     Break Funding Costs......................   24





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<PAGE> 3




CLAUSE 5  REPAYMENT, REDUCTION AND PREPAYMENT .......   25

    5.1     Repayment................................   25
    5.2     Voluntary Prepayment.....................   25
    5.3     Mandatory Prepayment.....................   25
    5.4     Application of Prepayment................   26

CLAUSE 6  INTEREST AND RATE..........................   26

    6.1     Interest Rate; Default Rate..............   26
    6.2     Interest Periods.........................   26
    6.3     Interest Payments........................   27
    6.4     Calculation of Interest..................   27

CLAUSE 7  PAYMENTS...................................   27

    7.1     Place of Payments, No Set Off............   27
    7.2     Tax Credits..............................   29

CLAUSE 8 EVENTS OF DEFAULT...........................   29

    8.1(a)  Repayment................................   29
    8.1(b)  Other Payments...........................   29
    8.1(c)  Representations, etc.....................   29
    8.1(d)  Impossibility, Illegality................   29
    8.1(e)  Covenants................................   30
    8.1(f)  Indebtedness.............................   30
    8.1(g)  Stock Ownership..........................   30
    8.1(h)  Default under the Security Documents.....   31
    8.1(i)  Bankruptcy...............................   31
    8.1(j)  Sale of Assets...........................   31
    8.1(k)  Judgments................................   31
    8.1(l)  Inability to Pay Debts...................   31
    8.1(m)  Financial Position.......................   31
    8.1(n)  Termination, Amendment or Assignment
              of Charters............................   32
    8.2     Indemnification..........................   33
    8.3     Application of Moneys....................   33

CLAUSE 9 COVENANTS...................................   34

    9.1     Covenants................................   34
    9.1(A)(i)      Performance of Agreements.........   34
    9.1(A)(ii)     Notice of Default; Change in
                     Classification of Vessel........   34


                            ii

<PAGE> 4




    9.1(A)(iii)    Obtain Consents...................   34
    9.1(A)(iv)     Financial Statements..............   35
    9.1(A)(v)      Corporate Existence...............   36
    9.1(A)(vi)     Books, Records, etc...............   36
    9.1(A)(vii)    Inspection........................   36
    9.1(A)(viii)   Taxes.............................   36
    9.1(A)(ix)     Compliance with Statutes, etc.....   37
    9.1(A)(x)      Environmental Matters.............   37
    9.1(A)(xi)     Accountants.......................   38
    9.1(A)(xii)    Continue Charters.................   38
    9.1(A)(xiii)   Class Certificate.................   38
    9.1(A)(xiv)    Maintenance of Properties.........   39
    9.1(A)(xv)     Vessel Management.................   39
    9.1(A)(xvi)    Limitation on Restricted
                      Payments.......................   39
    9.1(B)(i)      Liens.............................   41
    9.1(B)(ii)     Loans and Advances................   42
    9.1(B)(iii)    Limitation on Indebtedness........   42
    9.1(B)(iv)     Guarantees, etc...................   45
    9.1(B)(v)      Changes in Business...............   45
    9.1(B)(vi)     Use of Corporate Funds............   45
    9.1(B)(vii)    Issuance of Shares................   45
    9.1(B)(viii)   Consolidation, Merger.............   45
    9.1(B)(ix)     Changes in Offices or Names.......   45
    9.1(B)(x)      Limitation on Transactions with
                     Shareholders and Affiliates.....   45
    9.1(B)(xi)     Change of Flag....................   46
    9.1(B)(xii)    Sale of Vessel....................   46
    9.1(b)(iii)    Modification of Agreements........   46
    9.2     Valuation of the Vessels.................   47
    9.3     Collateral Maintenance...................   47
    9.4     Release of Vessels.......................   47
    9.5     Substitution of Vessels..................   48
    9.6     Inspection and Survey Reports............   49

CLAUSE 10  ASSIGNMENT................................   49

CLAUSE 11  ILLEGALITY, INCREASED COST,
             NON-AVAILABILITY, ETC...................   49

    11.1    Illegality...............................   49
    11.2    Increased Cost...........................   50
    11.3    Determination of Losses..................   51
    11.4    Compensation for Losses..................   51

                            iii
<PAGE> 5





CLAUSE 12  CURRENCY INDEMNITY........................   51

    12.1    Currency Conversion......................   51
    12.2    Change in Exchange Rate..................   51
    12.3    Additional Debt Due......................   52
    12.4    Rate of Exchange.........................   52

CLAUSE 13  FEES AND EXPENSES.........................   52

    13.1    Agency Fee...............................   52
    13.2    Arrangement Fee..........................   52
    13.3    Expenses.................................   52

CLAUSE 14  APPLICABLE LAW, JURISDICTION AND WAIVER...   53

    14.1    Applicable Law...........................   53
    14.2    Jurisdiction.............................   53
    14.3    WAIVER OF JURY TRIAL.....................   54

CLAUSE 15  THE AGENT.................................   54

    15.1    Appointment of Agent.....................   54
    15.2    Distribution of Payments.................   54
    15.3    Holder of Interest in Note...............   55
    15.4    No Duty to Examine, Etc..................   55
    15.5    Agent as Lender..........................   55
    15.6(a) Obligations of Agent.....................   55
    15.6(b) No Duty to Investigate...................   55
    15.7(a) Discretion of Agent......................   55
    15.7(b) Instructions of Majority Lenders.........   56
    15.8    Assumption re Event of Default...........   56
    15.9    No Liability of Agent or Lenders.........   56
    15.10   Indemnification of Agent.................   57
    15.11   Consultation with Counsel................
    15.12   Resignation..............................   57
    15.13   Representations of Lenders...............   58
    15.14   Notification of Event of Default.........   58

CLAUSE 16  APPOINTMENT OF SECURITY TRUSTEE...........   58

CLAUSE 17  NOTICES AND DEMANDS.......................   59

    17.1    Notices..................................   59



                            iv

<PAGE> 6




CLAUSE 18  MISCELLANEOUS.............................   59

    18.1    Time of Essence..........................   59
    18.2    Unenforceable, etc., Provisions -
              Effect.................................   59
    18.3    References...............................   60
    18.4    Further Assurances.......................   60
    18.5    Prior Agreements, Merger.................   60
    18.5    Joint and Several Obligations............   60
    18.7    Limitation of Liability..................   61
    18.8    Entire Agreement, Amendments.............   62
    18.9    Headings.................................   63


                             v

<PAGE> 7
<PAGE> 1





               TERM LOAN FACILITY AGREEMENT
               ----------------------------

         THIS TERM LOAN FACILITY AGREEMENT is made as of the
3rd day of October, 1996, and is by and among:

    (1)  VSSI TOKYO INC., VSSI SUN INC., DORIO SHIPPING
         LTD., VSSI MARINE INC. and VSSI CARRIERS INC., each
         a corporation organized and existing under the laws
         of the Republic of Liberia, as joint and several
         borrowers together with any borrower(s) made a
         party hereto pursuant to an Accession Agreement (as
         hereinafter defined) in accordance with the terms
         hereof (together, the "Borrowers", each a
         "Borrower");

    (2)  CHRISTIANIA BANK OG KREDITKASSE, New York Branch,
         THE BANK OF NOVA SCOTIA and BANQUE INDOSUEZ, as
         lenders (together, the "Lenders", each a "Lender");
         and

    (3)  CHRISTIANIA BANK OG KREDITKASSE, New York Branch,
         as agent (in such capacity and any successor
         thereto appointed pursuant to Section 15.12 the
         "Agent") and security trustee (in such capacity and
         any successor thereto, the "Security Trustee") for
         the Lenders.

                     WITNESSETH THAT:

1.  DEFINITIONS

1.1      DEFINED TERMS.  In this Agreement the words and
expressions specified below shall, except where the context
otherwise requires, have the meanings attributed to them
below:

"Acceptable Accounting Firm" means Ernst & Young, or such other
                             recognized international accounting firm
                             as shall be approved by the Majority
                             Lenders, such approval not to be
                             unreasonably withheld;

"Accession Agreement"        means an agreement substantially in the
                             form of Exhibit J hereto pursuant to
                             which a Wholly Owned Subsidiary of the
                             Guarantor is made a Borrower in
                             accordance with the terms hereof;

"Adjusted Consolidated Net
Income"                      means the aggregate net income (or loss)
                             of the Guarantor and its consolidated
                             Subsidiaries determined in accordance
                             with GAAP; provided that the following
                             items shall be excluded in computing
                             Adjusted Consolidated Net Income (without
                             duplication):  (i) the effects of foreign
                             currency exchange adjustments under GAAP,
                             (ii) any gains or losses (on an after-tax
                             basis) attributable to vessel sales or to
                             prepayment of Indebtedness and (iii) any
                             extraordinary gains (or losses).

<PAGE> 2

"Affiliate"                  means with respect to any Person, any
                             other Person directly or indirectly
                             controlled by or under common control
                             with such Person.  For the purposes of
                             this definition, "control" (including,
                             with correlative meanings, the terms
                             "controlled by" and "under common control
                             with") as applied to any Person means the
                             possession directly or indirectly of the
                             power to direct or cause the direction of
                             the management and policies of that
                             Person whether through ownership of
                             voting securities or by contract or
                             otherwise;

"Agreement"                  means this Agreement as the same shall be
                             amended, modified or supplemented from
                             time to time;

"Applicable Rate"            means any rate of interest on the Loan
                             from time to time applicable pursuant to
                             Clause 6.1 hereof;

"Appraised Value"            means the value assigned to each of the
                             Vessels as set forth on Schedule 1;

"Assignment and Assumption   means the Assignment and Assumption
Agreement(s)"                Agreement(s) executed pursuant to
                             Clause 10 hereof substantially in the
                             form of Exhibit G hereto;

"Assignment Notices"         means: a) the notices with respect to the
                                       Earnings Assignments
                                       substantially in the form set
                                       out in Exhibit 1 thereto or in




                             2

<PAGE> 3




                                       such other form as the Lenders
                                       may agree; and

                                    b) the notices with respect to the
                                       Insurances Assignments
                                       substantially in the form set
                                       out in Exhibit 3 thereto or in
                                       such other form as the Lenders
                                       may agree;

"Assignments"                means the Insurances Assignments and the
                             Earnings Assignments;

"Banking Day(s)"             means day(s) on which banks are open for
                             the transaction of business of the nature
                             required by this Agreement in Vancouver,
                             Canada, London, England and New York, New
                             York;

"Bond Offering"              means that certain issue by the Guarantor
                             of $225,000,000 of 8.32% First Preferred
                             Mortgage Notes due February 1, 2008 made
                             pursuant to the Prospectus dated
                             January 19, 1996;

"Charter(s)"                 means the charterparty agreements entered
                             into by each of the Borrowers with Palm
                             Shipping relating to such Borrower's
                             Vessel, the date of each of which is set
                             out in Schedule 2 hereto, or any
                             substitute charter acceptable to the
                             Majority Lenders in their sole
                             discretion;

"Code"                       means the Internal Revenue Code of 1986,
                             as amended, and any successor statute and
                             regulations promulgated thereunder;

"Commitments"                in relation to a Lender, means the
                             portion of the Loan set out opposite its
                             name on the signature pages hereto or, as
                             the case may be, in any relevant
                             Assignment and Assumption Agreement;

"Compliance Certificate"     has the meaning ascribed thereto in
                             Clause 9.1(A)(iv)(a) hereof;

"Consents"                   means the Consent and Agreement to each
                             of the Earnings Assignments executed by



                             3

<PAGE> 4




                             Palm Shipping, substantially in the form
                             set out in Exhibit F hereto;

"Consolidated EBITDA"        means, with respect to any Person for any
                             period, the sum of (i) Income from Vessel
                             Operations, (ii) depreciation expense and
                             (iii) amortization expense, as presented
                             in the financial statements of such
                             Person;

"Consolidated Interest
   Expense"                  is defined to mean, with respect to any
                             Person for any period, the aggregate
                             amount of (i) interest expense and
                             (ii) losses on marketable securities less
                             (iii) interest income and (iv) gains on
                             marketable securities as disclosed on the
                             financial statements of such Person;

"Currency Agreement"         means any foreign exchange contract,
                             currency swap agreement or other similar
                             agreement or arrangement designed to
                             protect the Guarantor or any of its
                             Subsidiaries against fluctuations in
                             currency values to or under which the
                             Guarantor or any of its Subsidiaries is a
                             party or a beneficiary on the date of
                             this Agreement or becomes a party or a
                             beneficiary thereafter;

"Default Rate"               means the rate per annum equal to the sum
                             of the Applicable Rate and three percent
                             (3%);

"Dollars" and the sign "$"   means the legal currency, at any relevant
                             time hereunder, of the United States of
                             America and, in relation to all payments
                             hereunder, in same day funds settled
                             through the New York Clearing House
                             Interbank Payments System (or such other
                             Dollar funds as may be determined by the
                             Lenders to be customary for the
                             settlement in New York City of banking
                             transactions of the type herein
                             involved);

"Drawdown Date"              means the date, being a Banking Day
                             falling not later than October 31, 1996,
                             upon which the Borrowers have requested



                             4

<PAGE> 5




                             that the Loan be made available as
                             provided by Clause 3 hereof;

"Drawdown Notice"            shall have the meaning ascribed thereto
                             in Clause 3.2 hereof;

"Earnings Assignments"       means the assignments in respect of the
                             earnings of each Vessel from any and all
                             sources, including, but not limited to,
                             the respective Charter relating to such
                             Vessel, to be executed by the relevant
                             Borrower in favor of the Security Trustee
                             pursuant to Clause 4.1(c)(iv) hereof,
                             substantially in the form of Exhibit D
                             hereto;

"Environmental Approvals"    shall have the meaning ascribed thereto
                             in Clause 2.1(o) hereof;

"Environmental Claim"        shall have the meaning ascribed thereto
                             in Clause 2.1(o) hereof;

"Environmental Laws"         shall have the meaning ascribed thereto
                             in Clause 2.1(o) hereof;

"Equity"                     means for any Person, such Person's
                             shareholders' equity (inclusive of
                             retained earnings) as reflected on such
                             Person's most recent quarterly unaudited
                             or annual audited financial statements,
                             as the case may be, as prepared in
                             accordance with GAAP;

"Event(s) of Default"        means any of the events set out in
                             Clause 8 hereof;

"Facility Period"            means the period from the Drawdown Date
                             of the Loan to the date upon which all
                             amounts owing under the Loan and all
                             other amounts due to the Agent, Security
                             Trustee and the Lenders pursuant to this
                             Agreement, the Note and the Security
                             Documents become repayable and are repaid
                             in full or are prepaid in full;

"FMV"                        means with respect to a Vessel, its Fair
                             Market Value as determined in accordance
                             with Clause 9.2 hereof;




                             5

<PAGE> 6




"GAAP"                       shall have the meaning ascribed thereto
                             in Clause 1.3 hereof;

"Guarantor"                  means Teekay Shipping Corporation, a
                             corporation organized and existing under
                             the laws of the Republic of Liberia;

"Guaranty"                   means the guaranty in respect of the
                             joint and several obligations of the
                             Borrowers under this Agreement to be
                             executed by the Guarantor in favor of the
                             Security Trustee pursuant to
                             Clause 4.1(d) hereof substantially in the
                             form of Exhibit B hereto;

"Indebtedness"               means, with respect to any Person at any
                             date of determination (without
                             duplication), (i) all indebtedness of
                             such Person for borrowed money, (ii) all
                             obligations of such Person evidenced by
                             bonds, debentures, notes or other similar
                             instruments, (iii) all obligations of
                             such Person in respect of letters of
                             credit or other similar instruments
                             (including reimbursement obligations with
                             respect thereto), (iv) all obligations of
                             such Person to pay the deferred and
                             unpaid purchase price of property or
                             services, which purchase price is due
                             more than six months after the date of
                             placing such property in service or
                             taking delivery thereof or the completion
                             of such services, except trade payables,
                             (v) all obligations on account of
                             principal of such Person as lessee under
                             capitalized leases, (vi) all indebtedness
                             of other Persons secured by a lien on any
                             asset of such Person, whether or not such
                             indebtedness is assumed by such Person;
                             PROVIDED that the amount of such
                             indebtedness shall be the lesser of
                             (a) the fair market value of such asset
                             at such date of determination and (b) the
                             amount of such indebtedness, (vii) all
                             indebtedness of other Persons guaranteed
                             by such Person to the extent such
                             indebtedness is guaranteed by such
                             Person, and (viii) to the extent not
                             otherwise included in this definition,



                             6


<PAGE> 7



                             the net obligations under Currency
                             Agreements and Interest Rate Agreements.
                             The amount of Indebtedness of any Person
                             at any date shall be the outstanding
                             balance at such date of all unconditional
                             obligations as described above and, with
                             respect to contingent obligations, the
                             maximum liability upon the occurrence of
                             the contingency giving rise to the
                             obligation, PROVIDED that the amount
                             outstanding at any time of any
                             indebtedness issued with original issue
                             discount is the face amount of such
                             indebtedness less the remaining
                             unamortized portion of  the original
                             issue discount of such indebtedness at
                             such time as determined in conformity
                             with GAAP; and PROVIDED FURTHER that
                             Indebtedness shall not include any
                             liability for federal, state, local or
                             other taxes;

"Indenture"                  means that certain Indenture dated as of
                             January 29, 1996 by and among, INTER
                             ALIA, the Guarantor and the United States
                             Trust Company of New York executed
                             pursuant to the Bond Offering;

"Insurances Assignments"     means the assignments in respect of the
                             insurances of each Vessel, to be executed
                             by the relevant Borrower in favor of the
                             Security Trustee  pursuant to
                             Clause 4.1(c)(iii) hereof, substantially
                             in the form of Exhibit E hereto;

"Interest Coverage Ratio"    means, with respect to any Person on any
                             date, the ratio of (i)  the aggregate
                             amount of Consolidated EBITDA of such
                             Person for the four fiscal quarters for
                             which financial information in respect
                             thereof is available immediately prior to
                             such date to (ii) the aggregate
                             Consolidated Interest Expense of such
                             Person during such four fiscal quarters.
                             In making the foregoing calculation,
                             (A) PRO FORMA effect shall be given to
                             (1) any Indebtedness incurred subsequent
                             to the end of the four-fiscal-quarter
                             period referred to in clause (i) and



                             7
<PAGE> 8





                             prior to such date (other than
                             Indebtedness incurred under a revolving
                             credit or similar arrangement to the
                             extent of the commitment thereunder (or
                             under any predecessor revolving credit or
                             similar arrangement) in effect on the
                             last day of such period), (2) any
                             Indebtedness incurred during such period
                             to the extent such Indebtedness is
                             outstanding at such date and (3) any
                             Indebtedness to be incurred on  such
                             date, in each case as if such
                             Indebtedness had been Incurred on the
                             first day of such four-fiscal-quarter
                             period and after giving PRO FORMA effect
                             to the application of the proceeds
                             thereof as if such application had
                             occurred on such first day;
                             (B) Consolidated Interest Expense
                             attributable to interest on any
                             Indebtedness (whether existing or being
                             incurred) computed on a PRO FORMA basis
                             and bearing a floating interest rate
                             shall be computed as if the rate in
                             effect on such date (taking into account
                             any Interest Rate Agreement applicable to
                             such Indebtedness if such Interest Rate
                             Agreement has a remaining term in excess
                             of 12 months) had been the applicable
                             rate of the entire period; (C) there
                             shall be excluded from Consolidated
                             Interest Expense any Consolidated
                             Interest Expense related to any amount of
                             Indebtedness that was outstanding during
                             such four-fiscal-quarter period or
                             thereafter but that is not outstanding or
                             is to be repaid on the date, except for
                             Consolidated Interest Expense accrued (as
                             adjusted pursuant to clause (B)) during
                             such four-fiscal-quarter period under a
                             revolving credit or similar arrangement
                             to the extent of the commitment
                             thereunder (or under any successor
                             revolving credit or similar arrangement)
                             in effect on such date; and (D) PRO FORMA
                             effect shall be given to asset
                             dispositions and asset acquisitions
                             (including giving PRO FORMA effect to the
                             application of proceeds of any asset



                             8
<PAGE> 9





                             disposition) that occur during such four-
                             fiscal-quarter period or thereafter and
                             prior to such date as if they had
                             occurred and such proceeds had been
                             applied on the first day of such four-
                             fiscal-quarter period; PROVIDED that to
                             the extent that clause (D) of this
                             sentence requires that PRO FORMA effect
                             be given to an asset acquisition or asset
                             disposition, such PRO FORMA calculation
                             shall be based upon the four full fiscal
                             quarters immediately preceding such date
                             of the Person, or division or line of
                             business of the Person, that is acquired
                             or disposed for which financial
                             information is available; and PROVIDED
                             FURTHER that for purposes of determining
                             the Interest Coverage Ratio with respect
                             to the acquisition of a Vessel or the
                             financing thereof, the Guarantor may
                             apply Consolidated EBITDA for such Vessel
                             based upon historical earnings of such
                             Vessel or, if none, of its most
                             comparable Vessel during the applicable
                             four-fiscal-quarter period, or if, in the
                             good faith determination of the board of
                             directors of the Guarantor, the Guarantor
                             does not have a comparable Vessel, based
                             upon industry average earnings for
                             comparable vessels;

"Interest Payment Date"      means the last day of each Interest
                             Period and, for Interest Periods longer
                             than three months that day falling every
                             three months after the commencement
                             thereof until the end of such Interest
                             Periods; should any such day not be a
                             Banking Day the relevant Interest Payment
                             Date shall be the next following Banking
                             Day, unless such next following Banking
                             Day falls in the following calendar
                             month, in which case the relevant
                             Interest Payment Date shall be the
                             immediately preceding Banking Day;

"Interest Period(s)"         with respect to the Facility, means any
                             period by reference to which an interest
                             rate is determined pursuant to Clause 6.2
                             hereof;



                             9
<PAGE> 10






"Interest Rate Agreements"   means any interest rate protection
                             agreement, interest rate future
                             agreement, interest rate option
                             agreement, interest rate swap agreement,
                             interest rate cap agreement, interest
                             rate collar agreement, interest rate
                             hedge agreement or other similar
                             agreement or arrangement designed to
                             protect the Guarantor or any of its
                             Subsidiaries against fluctuations in
                             interest rates to or under which the
                             Guarantor or any of its Subsidiaries is a
                             party or a beneficiary on the date of
                             this Agreement or becomes a party or a
                             beneficiary hereafter;

"LIBOR"                      means, in relation to Interest Periods of
                             one (1), three (3) or six (6) months, the
                             rate (rounded upward to the nearest
                             1/16th of one percent) for deposits of
                             Dollars for a period equivalent to such
                             period at or about 11:00 a.m. (London
                             time) on the second London Banking Day
                             before the first day of such period as
                             displayed on Telerate page 3750 (British
                             Bankers' Association Interest Settlement
                             Rates) (or such other page as may replace
                             such page 3750 on such system or on any
                             other system of the information vendor
                             for the time being designated by the
                             British Bankers' Association to calculate
                             the BBA Interest Settlement Rate (as
                             defined in the British Bankers'
                             Association's Recommended Terms and
                             Conditions ("BBAIRS" terms) dated August
                             1985)), provided that if on such date no
                             such rate is so displayed or if the
                             Interest Period is other than one (1),
                             three (3) or six (6) months, LIBOR for
                             such period shall be the arithmetic mean
                             (rounded upward if necessary to four
                             decimal places) of the rates respectively
                             quoted to the Agent by each of the
                             Reference Banks at the request of the
                             Agent as the offered rate for deposits of
                             Dollars in an amount approximately equal
                             to the amount in relation to which LIBOR
                             is to be determined for a period



                            10

<PAGE> 11




                             equivalent to such period to prime banks
                             in the London Interbank Market at or
                             about 11:00 a.m. (London time) on the
                             second Banking Day before the first day
                             of such period;

"Loan"                       means the term loan to be made available
                             to the Borrowers by the Lenders pursuant
                             to Clause 3.1 in the principal amount of
                             Ninety Million Dollars ($90,000,000) or
                             the balance thereof from time to time
                             outstanding;

"Majority Lenders"           Lenders whose Commitments exceed fifty
                             percent (50%) of total Commitments;

"Management Agreement(s)"    means the agreement(s) entered into
                             between the Manager and each Borrower in
                             respect of the commercial and technical
                             management of the Borrowers' Vessels;

"Manager"                    means Teekay Shipping Limited, a Bahamian
                             company and a Wholly Owned Subsidiary of
                             the Guarantor;

"Margin"                     (a) if the Net Debt to Equity Ratio is
                             greater than 1.5:1, the Margin shall be
                             .85% per annum; (b) if the Net Debt to
                             Equity Ratio is equal to or less than
                             1.5:1 but greater than 1:1, the Margin
                             shall be .65% per annum; and (c) if the
                             Net Debt to Equity Ratio is equal to or
                             less than 1:1, the Margin shall be .55%
                             per annum; the Margin to be determined as
                             of the date hereof, and to be adjusted,
                             if necessary, as of the first Banking Day
                             following receipt by the Agent of the
                             most recent quarterly unaudited or annual
                             audited financial statements, as the case
                             may be, of the Guarantor together with
                             the Compliance Certificate of the
                             Guarantor (setting forth the Guarantor's
                             calculation of the Net Debt to Equity
                             Ratio);

"Materials of Environmental
Concern"                     shall have the meaning ascribed in Clause
                             2.1(o) hereof;




                            11
<PAGE> 12





"Maturity Date"              means the day which falls seven years
                             from the Drawdown Date; if such day is
                             not a Banking Day, the next following
                             Banking Day, unless such next following
                             Banking Day falls in the following
                             calendar month, in which case the
                             Maturity Date shall be the immediately
                             preceding Banking Day;

"Mortgages"                  means the first preferred Liberian ship
                             mortgages on each Vessel, in each case,
                             to be recorded on each Vessel and
                             executed by the relevant Borrower in
                             favor of the Security Trustee, pursuant
                             to Clause 4.1(c)(ii) hereof, and to be
                             substantially in the form of Exhibit C
                             hereto;

"Net Debt"                   means (x) the sum of long term debt and
                             capital leases (including the current
                             portions) less (y) to the extent
                             positive, the sum of cash (including cash
                             held in retention accounts for the
                             payment of debt and cash pledged as
                             collateral against balance sheet
                             obligations) and marketable securities
                             less the sum of the current portion of
                             long term debt and capital leases
                             (excluding the current portion of
                             advances outstanding under the Revolver);

"Net Debt to Equity Ratio"   means, the ratio of the Guarantor's
                             consolidated Net Debt to its consolidated
                             Equity as reflected on the most recent
                             quarterly unaudited or annual audited
                             financial statements, as the case may be,
                             as calculated by the Guarantor, which
                             calculation shall be set forth in the
                             Compliance Certificate accompanying such
                             financial statements, and agreed by the
                             Agent;

"Note"                       means the promissory note, to be executed
                             by the Borrowers to the order of the
                             Security Trustee, pursuant to
                             Clause 4.1(c)(i) hereof, to evidence the
                             Loan substantially in the form of Exhibit
                             A hereto;




                            12
<PAGE> 13





"Palm Shipping"              means Palm Shipping Inc., a corporation
                             organized and existing under the laws of
                             the Republic of Liberia and an affiliate
                             of the Borrowers and a Wholly Owned
                             Subsidiary of the Guarantor;

"Person"                     means any individual, sole
                             proprietorship, corporation, partnership
                             (general or limited), business trust,
                             bank, trust company, joint venture,
                             association, joint stock company, trust
                             or other unincorporated organization,
                             whether or not a legal entity, or any
                             government or agency or political
                             subdivision thereof;

"Reference Banks"            means Christiania Bank og Kreditkasse,
                             The Bank of Nova Scotia and Banque
                             Indosuez;

"Repayment Date"             means each of the dates falling at
                             intervals of six months after the
                             Drawdown Date; if such day is not a
                             Banking Day, the next following Banking
                             Day, unless such next following Banking
                             Day falls in the following calendar
                             month, in which case the relevant
                             Repayment Date shall be the immediately
                             preceding Banking Day;

"Revolver"                   means that certain Reducing Revolving
                             Credit Facility Agreement dated June 6,
                             1995 between certain subsidiaries of the
                             Guarantor, Den norske Bank ASA as agent,
                             Den norske Bank ASA, Christiania Bank og
                             Kreditkasse and Nederlandse
                             Scheepshypotheekbank N.V. as arrangers,
                             and certain lenders providing for a
                             reducing revolving credit facility in the
                             original maximum available amount of
                             $243,000,000;


"Security Documents"         means the Guaranty, the Mortgages, the
                             Earnings Assignments, the Insurances
                             Assignments, the Assignment Notices, the
                             Consents, and any other documents that
                             may be executed as security for the




                            13

<PAGE> 14




                             Borrowers' obligations hereunder and
                             under the Note;

"Subsidiary"                 is defined to mean, with respect to any
                             Person, any business entity of which more
                             than 50% of the outstanding Voting Stock
                             is owned directly or indirectly by such
                             Person and one or more other Subsidiaries
                             of such Person;

"Taxes"                      means any present or future income or
                             other taxes, levies, duties, charges,
                             fees, deductions or withholdings of any
                             nature now or hereafter imposed, levied,
                             collected, withheld or assessed by any
                             taxing authority whatsoever;

"Total Loss"                 means:

                             (a)    the actual, constructive,
                                    arranged, agreed, or compromised
                                    total loss of the Vessel;

                             (b)    the requisition for title or other
                                    compulsory acquisition or
                                    forfeiture of the Vessel otherwise
                                    than by requisition for hire;

                             (c)    the capture, seizure, arrest,
                                    detention or confiscation of the
                                    Vessel by any government or by
                                    persons acting or purporting to
                                    act on behalf of any government
                                    unless the Vessel be released from
                                    such capture, seizure, arrest or
                                    detention within two hundred ten
                                    (210) days after the occurrence
                                    thereof;

"Transaction Documents"      means this Agreement, the Note and the
                             Security Documents and any Assignment and
                             Assumption Agreement;

"Vessels"                    means each of the Vessels listed in
                             Schedule 1 hereto, registered in the name
                             of the relevant Borrower as set forth in
                             such schedule;





                            14

<PAGE> 15




"Wholly Owned"               means, with respect to any Subsidiary of
                             any Person, such Subsidiary of such
                             Person if all of the outstanding common
                             stock or other similar equity ownership
                             interests (but not including preferred
                             stock) in such Subsidiary (other than any
                             director's qualifying share or
                             investments by foreign nationals mandated
                             by applicable law) is owned directly or
                             indirectly by such Person.

1.2      CONSTRUCTION.  Words importing the singular number
only shall include the plural and VICE VERSA.  Words
importing persons shall include companies, firms, corpora-
tions, partnerships, unincorporated associations and their
respective successors and assigns.

1.3      ACCOUNTING TERMS.  All accounting terms not
specifically defined herein shall be construed in accordance
with generally accepted accounting principles as in effect
from time to time in the United States of America consis-
tently applied ("GAAP") and all financial statements
submitted pursuant to this Agreement shall be prepared in
accordance with, and all financial data submitted pursuant
hereto shall be derived from financial statements prepared
in accordance with, GAAP.

2        REPRESENTATIONS AND WARRANTIES

2.1      In order to induce the Lenders, the Agent and the
Security Trustee to enter into this Agreement and to make
the Loan available, each of the Borrowers hereby represents
and warrants (which representations and warranties shall
survive the execution and delivery of this Agreement and the
Note and the drawdown of the Loan hereunder) that:

         (a)  DUE ORGANIZATION AND POWER.  Each of the
Borrowers, the Guarantor and Palm Shipping is duly formed
and validly existing in good standing under the laws of its
respective jurisdiction of incorporation, has duly qualified
and, insofar as the Borrowers are aware, is authorized to do
business as a foreign corporation in each jurisdiction
wherein the nature of the business transacted thereby makes
such qualification necessary, has full power to carry on its
business as now being conducted and to enter into and
perform its respective obligations under the Transaction
Documents to which it is or is to be a party, and has
complied with all statutory, regulatory and other
requirements relative to such business and such agreements



                            15
<PAGE> 16





the noncompliance with which could reasonably be expected to
have a material adverse effect on its business, assets or
operations, financial or otherwise.

         (b)  AUTHORIZATION AND CONSENTS.  All necessary
corporate action has been taken to authorize, and all
necessary consents and authorities have been obtained and
remain in full force and effect to permit, each of the
Borrowers, the Guarantor and Palm Shipping to enter into and
perform its obligations under the Transaction Documents to
which it is a party and, in the case of the Borrowers, to
borrow, service and repay the Loan and, as of the date of
this Agreement, no further consents or authorities are
necessary for the service and repayment of the Loan or any
part of any thereof.

         (c)  BINDING OBLIGATIONS.  The Transaction
Documents constitute or, when executed and delivered, will
constitute, legal, valid and binding obligations of each of
the Borrowers, the Guarantor and Palm Shipping as is a party
thereto enforceable against each thereof as is a party
thereto in accordance with their terms, except to the extent
that such enforcement may be limited by equitable
principles, principles of public policy or applicable
bankruptcy, insolvency, reorganization, moratorium or other
laws affecting generally the enforcement of creditors'
rights.

         (d)  NO VIOLATION.  The execution and delivery of,
and the performance of the provisions of, the Transaction
Documents by each of the Borrowers, the Guarantor and Palm
Shipping as is a party thereto, do not, and will not during
the term of this Agreement, contravene any applicable law or
regulation existing at the date hereof or any contractual
restriction binding on any thereof or the articles of
incorporation or by-laws (or equivalent documents) of any
thereof.

         (e)  LITIGATION.  Except as otherwise disclosed in
writing to the Lenders on or before the date hereof, no
action, suit or proceeding is pending or threatened against
any of the Borrowers, the Guarantor and Palm Shipping before
or by any court, board of arbitration or administrative
agency which has a reasonable likelihood of resulting in any
material adverse change in the business or condition
(financial or otherwise) of any of the Borrowers, the
Guarantor and Palm Shipping.





                            16
<PAGE> 17





         (f)  NO DEFAULT.  None of the Borrowers nor the
Guarantor nor Palm Shipping is in default under any
agreement by which it is bound, nor is any thereof in
default in respect of any financial commitment or
obligation.

         (g)  CHARTERS.  Each Vessel is subject to a
Charter.  The certified copies of the Charters delivered to
the Agent on or prior to the date of this Agreement are true
and complete copies thereof and constitute legal, valid and
binding obligations of the parties thereto enforceable
against such parties in accordance with their respective
terms, except to the extent that such enforcement may be
limited by equitable principles, principles of public policy
or applicable bankruptcy, insolvency, reorganization,
moratorium or other laws affecting generally the enforcement
of creditors' rights, and no amendments thereof or
variations thereto have been proposed or agreed prior to the
date hereof other than immaterial changes, details of which
shall have been forwarded to the Agent.  The right of each
Borrower to all moneys payable under its respective Charter
is not subject to any right of set-off or counterclaim or
any lien, charge, security interest, assignment or other
encumbrance except in favor of the Agent, the Security
Trustee or the Lenders.  There are no material defaults on
the part of any party to the Charters and there is no
accrued right of any Borrower to terminate its respective
Charter with Palm Shipping or of Palm Shipping to terminate
any Charter with any Borrower.

         (h)  VESSEL OWNERSHIP, CLASSIFICATION, SEAWORTHINESS
AND INSURANCE.  On the Drawdown Date:

              (i)  each Vessel will be in the sole and
         absolute ownership of the respective Borrower,
         unencumbered, save and except for, the Mortgage
         thereon, and duly registered in the name of the
         respective Borrower under the laws and flag of the
         Republic of Liberia as set forth in Schedule 1
         hereto;

             (ii)  each Vessel will be classed in the
         highest classification and rating for vessels of
         the same age and type with the classification
         society set next to its name in Schedule 1 hereto
         or such other classification society acceptable to
         the Lenders without any outstanding recommendations
         deemed material by the Lenders except in the case
         of any Vessel which has been damaged, of which



                            17
<PAGE> 18





         damage the Borrower owning such Vessel is
         diligently effecting repair, the nature, extent and
         estimated cost of which damage have been disclosed
         to the Lenders and found by the Lenders unlikely to
         have a material adverse impact on such Borrower's
         ability to perform its obligations hereunder;

            (iii)  each Vessel will be operationally
         seaworthy and in every way fit for service; and

             (iv)  each Vessel will be insured in accordance
         with the provisions of the Mortgage thereon and the
         requirements thereof in respect of such insurances
         will have been complied with.

         (i)  FINANCIAL STATEMENTS.  Except as otherwise
disclosed in writing to the Lenders on or prior to the date
hereof, all  information and other data furnished by the
Borrowers and the Guarantor to the Lenders are complete and
correct, and  all financial statements furnished by the
Borrowers and the Guarantor have been prepared in accordance
with GAAP and accurately and fairly present the financial
condition of the parties covered thereby as of the
respective dates thereof and the results of the operations
thereof for the period or respective periods covered by such
financial statements.  Since such date or dates there has
been no material adverse change in the financial condition
or results of the operations of any of such parties and none
thereof has any contingent obligations, liabilities for
taxes or other outstanding financial obligations which are
material in the aggregate except as disclosed in such
statements, information and data.

         (j)  TAX RETURNS AND PAYMENTS.  Each of the
Borrowers and the Guarantor has filed all tax returns
required to be filed thereby and has paid all taxes payable
thereby which have become due, other than those not yet
delinquent or the nonpayment of which would not have a
material adverse effect on any such party, as the case may
be, and except for those taxes being contested in good faith
and by appropriate proceedings or other acts and for which
adequate reserves have been set aside on its books.

         (k)  INSURANCE.  Each of the Borrowers and the
Guarantor has insured its properties and assets against such
risks and in such amounts as are customary for companies
engaged in similar businesses.





                            18
<PAGE> 19





         (l)  OFFICES.  Each of the chief executive office
and chief place of business of each of the Borrowers, the
Guarantors and Palm Shipping and the office in which the
financial records relating to the Vessels are kept, is, and
will continue to be, located at Tradewinds Building, Bay
Street, Nassau, the Bahamas; none of the Borrowers maintains
a place of business in Canada, the United States or the
United Kingdom.

         (m)  NOT AN INVESTMENT COMPANY.  Neither the
Guarantor, Palm Shipping nor any of the Borrowers is an
"investment company" within the meaning of the Investment
Company Act of 1940, as amended.

         (n)  EQUITY OWNERSHIP.  Each of the Borrowers and
Palm Shipping is a Wholly Owned Subsidiary of the Guarantor.
On the Drawdown Date, none of the Borrowers nor Palm
Shipping will own any shares of capital stock, partnership
interest or any other direct or indirect equity interest in
any corporation, partnership or other entity.

         (o)  ENVIRONMENTAL MATTERS.  Except as heretofore
disclosed in writing to the Lenders (i) each of the
Borrowers will, when required, be in compliance with all
applicable United States federal and state, local, foreign
and international laws, regulations, conventions and
agreements relating to pollution prevention or protection of
human health or the environment (including, without
limitation, ambient air, surface water, ground water,
navigable waters, waters of  the contiguous zone, ocean
waters and international  waters), including, without
limitation, laws, regulations, conventions and agreements
relating to (1) emissions, discharges, releases or
threatened releases of chemicals, pollutants, contaminants,
wastes, toxic substances, hazardous materials, oil,
hazardous substances, petroleum and petroleum products and
by-products ("Materials of Environmental Concern"), or
(2) the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of
Materials of Environmental Concern ("Environmental Laws");
(ii) each of the Borrowers will, when required, have all
permits, licenses, approvals, rulings, variances,
exemptions, clearances, consents or other authorizations
required under applicable Environmental Laws ("Environmental
Approvals") and will, when required, be in full compliance
with all Environmental Approvals required to operate their
business as then being conducted; (iii) none of the
Borrowers has received any notice of any claim, action,
cause of action, investigation or demand by any person,



                            19
<PAGE> 20





entity, enterprise or government, or any political
subdivision, intergovernmental body or agency, department or
instrumentality thereof, alleging potential liability for,
or a requirement to incur, investigatory costs, cleanup
costs, response and/or remedial costs (whether incurred by a
governmental entity or otherwise), natural resources
damages, property damages, personal injuries, attorneys'
fees and expenses, or fines or penalties, in each case
arising out of, based on or resulting from (1) the presence,
or release or threat of release into the environment, of any
Materials of Environmental Concern at any location, whether
or not owned by such person, or (2) circumstances forming
the basis of any violation, or alleged violation, of any
Environmental Law or Environmental Approval ("Environmental
Claim") (other than Environmental Claims that have been
fully and finally adjudicated or otherwise determined and
all fines, penalties and other costs, if any, payable by the
Borrowers in respect thereof have been paid in full or which
are fully covered by insurance (including permitted
deductibles)); and (iv) there are no circumstances that may
prevent or interfere with such full compliance in the
future.

         (p)  PENDING OR THREATENED ENVIRONMENTAL CLAIMS.
Except as heretofore disclosed in writing to the Lenders
there is no Environmental Claim pending or threatened
against any Borrower or past or present actions, activities,
circumstances, conditions, events or incidents, including,
without limitation, the release, emission, discharge or
disposal of any Materials of Environmental Concern, that
could form the basis of any Environmental Claim against any
Borrower.

         (q)  LIMITED PURPOSE.  Each Borrower is a special
purpose company whose sole capital asset is its Vessel; no
Borrower engages in any business other than the owning of
its Vessel.

         (r)  PERMITTED INDEBTEDNESS.  The Loan and the
Guaranty thereof are Indebtedness of the Borrowers and the
Guarantor, respectively, the incurrence of which is
permitted by Section 4.03 of the Indenture because the
Interest Coverage Ratio (as such term is defined in the
Indenture) shall be greater than 2:1 after consummation of
the transactions contemplated herein.

         (s)  SURVIVAL.  All representations, covenants and
warranties made herein and in any certificate or other
document delivered pursuant hereto or in connection herewith



                            20
<PAGE> 21





shall survive the making of the Loan and the issuance of the
Note to be issued by the Borrowers hereunder.

3   THE LOAN

3.1      (a)  PURPOSES.  The Lenders shall make the Loan
available to the Borrowers for the purpose of (i) financing
the acquisition costs of the Liberian flag vessel SEMAKAU
SPIRIT and (ii) refinancing existing Indebtedness with
respect to the Vessels other than the SEMAKAU SPIRIT.

         (b)  MAKING OF THE LOAN.  Each of the Lenders,
relying upon each of the representations and warranties set
out in Clause 2, hereby severally and not jointly agrees
with the Borrowers that, subject to and upon the terms of
this Agreement, it will on the Drawdown Date make its
Commitment available through the Agent to the Borrowers.

3.2      DRAWDOWN NOTICE.  The Guarantor, on behalf of the
Borrowers, shall, at least three (3) Banking Days before the
Drawdown Date, serve a notice, such notice to be
substantially in the form of Exhibit H hereto, (a "Drawdown
Notice") on the Agent which notice shall (a) be in writing
addressed to the Agent, (b) be effective on receipt by the
Agent, (c) specify the Banking Day on which the Loan is to
be made, (d) specify the initial Interest Period, (e)
specify the disbursement instructions and (f) be
irrevocable.

3.3      EFFECT OF DRAWDOWN NOTICE.  The Drawdown Notice
shall be deemed to constitute a warranty by the Borrowers
(a) that the representations and warranties stated in
Clause 2 (updated MUTATIS MUTANDIS) are true and correct on
the date of such Drawdown Notice and will be true and
correct on the relevant Drawdown Date as if made on such
date, and (b) that no Event of Default nor any event which
with the giving of notice or lapse of time or both would
constitute an Event of Default has occurred and is
continuing.

4   CONDITIONS PRECEDENT

4.1      CONDITIONS PRECEDENT TO DRAWDOWN OF THE LOAN.  The
obligation of the Lenders to make the Loan available to the
Borrowers under this Agreement shall be expressly subject to
the following conditions precedent:






                            21
<PAGE> 22





         (a)  the Agent shall have received the following
documents in form and substance satisfactory to the Agent
and counsel to the Lenders:

         (i)  copies, certified as true and complete by an
              officer of each of the Borrowers, the
              Guarantor and Palm Shipping of the resolutions
              of each such company's board of directors
              (and, if necessary under appropriate law,
              shareholders) evidencing approval of the
              Transaction Documents to which such company is
              to be a party and authorizing an appropriate
              officer or officers or attorney-in-fact or
              attorneys-in-fact to execute the same on its
              behalf;

        (ii)  copies, certified as true and complete by an
              officer of each of the Borrower, the Guarantor
              and Palm Shipping or other applicable party,
              of all documents evidencing any other
              necessary action (including actions by such
              parties thereto other than the Borrowers, the
              Guarantor and Palm Shipping as may be required
              by the Lenders), approvals or consents with
              respect to this Agreement, the Note, the
              Security Documents and the transactions
              contemplated hereby and thereby;

       (iii)  copies, certified as true and complete by an
              officer of each of the Borrowers, the
              Guarantor and Palm Shipping, of the articles
              or certificate of incorporation and by-laws
              (or the equivalent thereof) of each thereof;

        (iv)  good standing certificates or the equivalent
              thereof with respect to each of the Borrowers,
              the Guarantor and Palm Shipping issued by the
              appropriate authorities of the respective
              jurisdiction of incorporation of such parties;
              and

         (v)  copies, certified as true and complete by an
              officer of the relevant Borrower, of the
              Charter and Management Agreement relating to
              its Vessel.

         (b)  the Agent shall have received evidence
satisfactory to the Agent and counsel to the Lenders that:




                            22
<PAGE> 23





         (i)  each of the Vessels is registered in the name
              of such Borrower listed opposite its name in
              Schedule 1 under Liberian flag and that each
              such Vessel is free and clear of all liens and
              encumbrances of record except for the Mortgage
              thereon in favor of the Security Trustee;

        (ii)  each Vessel is classed in the highest
              classification and rating for vessels of the
              same age and type with the classification
              society listed next to the Vessel in
              Schedule 1 or such other classification
              society acceptable to the Lenders without any
              material outstanding recommendations;

       (iii)  each Vessel is operationally seaworthy and in
              every way fit for service; and

        (iv)  each Vessel is insured in accordance with the
              provisions of its respective Mortgage
              (evidence of which shall include, without
              limitation, cover notes, Certificates of Entry
              and brokers' letters of undertaking and an
              opinion of an independent insurance consultant
              retained by the Lenders or such other evidence
              as shall be reasonably satisfactory to the
              Lenders) and all requirements thereof in
              respect of such insurances have been
              fulfilled;

         (c)  each Borrower shall have duly executed and
delivered:

         (i)  the Note,
        (ii)  the Mortgage relating to its Vessel,
       (iii)  the Insurances Assignment relating to its
              Vessel,
        (iv)  the Earnings Assignment relating to its
              Vessel, and
         (v)  the applicable Assignment Notices;

         (d)  the Guarantor shall have duly executed and
delivered the Guaranty;

         (e)  Palm Shipping shall have duly executed and
delivered the Consents;

         (f)  each of the Charters shall be in form and
substance satisfactory to the Lenders;



                            23
<PAGE> 24






         (g)  the Agent and the Lenders shall have received
payment in full of all fees and expenses due to the Agent
and the Lenders on the date thereof including, without
limitation, all fees and expenses due under Clause 13
hereof;

         (h)  the Lenders shall have received evidence
satisfactory to it and its legal advisers that, save for the
liens created by the respective Mortgage, Earnings
Assignment and Insurances Assignment, there are no liens,
charges or encumbrances of any kind whatsoever on any Vessel
or its earnings or insurances except as permitted hereby or
by any of the Security Documents;

         (i)  the Lenders shall be satisfied that none of
the Borrowers or, the Guarantor, or Palm Shipping is subject
to any Environmental Claim which could have a material
adverse effect on the business, assets or results of
operations of any thereof;

         (j)  the Lenders shall have received a complete
copy of (i) the consolidated audited financial report of the
Guarantor for the year ending March 31, 1996, and (ii) the
consolidated unaudited financial report of the Guarantor for
the fiscal quarter ending June 30, 1996, each of which shall
include at least the balance sheet of such corporation as of
the end of such year and the related statements of income,
cash flow and retained earnings for such year all in
reasonable detail, and which, in the case of the annual
report of the Guarantor, shall be certified by an Acceptable
Accounting Firm, together with their opinion (containing no
qualifications which the Lenders deem material);

         (k)  the Lenders shall have received opinions from
(i) Watson, Farley & Williams, counsel to the Borrowers and
the Guarantor on matters of New York law, the Federal law of
the United States and Liberian law, (ii) Seward & Kissel,
special counsel to the Lenders, in each case in such form as
the Lenders may require, as well as such other legal
opinions as the Lenders shall require as to all or any
matters under the laws of the United States of America, the
State of New York, the Republic of Liberia and other
applicable jurisdictions covering the representations and
conditions which are the subjects of Clauses 2 and 4.

4.2      BREAK FUNDING COSTS.  In the event that, on any
date specified for the making of the Loan in the Drawdown
Notice, the Lenders shall not be obliged under this



                            24
<PAGE> 25





Agreement to make the Loan available under this Agreement,
the Borrowers shall indemnify and hold the Lenders, or any
of them, fully harmless against any losses which the
Lenders, or any of them, may sustain as a result of
borrowing or agreeing to borrow funds to meet the drawdown
requirement in respect thereof and the certificate of such
Lender or Lenders shall, absent manifest error, be
conclusive and binding on the Borrowers as to the extent of
any such losses.

5   REPAYMENT AND PREPAYMENT

5.1      REPAYMENT.  The Borrowers shall repay the principal
amount of the Loan with interest thereon in fourteen (14)
consecutive semiannual installments on the Repayment Dates,
the first thirteen of which shall be in the principal amount
of Five Million Dollars ($5,000,000) and the fourteenth and
last installment shall be in the principal amount of Twenty-
Five Million Dollars ($25,000,000).

5.2      VOLUNTARY PREPAYMENT.  The Borrowers may prepay,
upon five (5) Banking Days written notice (which notice
shall be irrevocable), on the last day of any Interest
Period applicable to the Loan or the portion thereof to be
prepaid, the Loan or any portion thereof, without penalty.
Each prepayment shall be in a minimum amount of Five Million
Dollars ($5,000,000) plus any One Million Dollar
($1,000,000) multiples thereof or the full amount of the
Loan.

5.3      MANDATORY PREPAYMENTS.  Upon the sale, Total Loss
or other disposition of any Vessel, or in connection with
the release of a Borrower from its obligations hereunder
pursuant to Clause 9.4 hereof the Borrowers shall, upon
payment to or on behalf of a Borrower or any Affiliate
thereof of the proceeds of such sale, Total Loss or other
disposition or, in the case of a release as aforesaid, on
the last day of the Interest Period following a Borrower's
request for such release, prepay the Loan, in part and
without penalty, in an amount equal to the then outstanding
balance of the Loan multiplied by a fraction, the numerator
of which is the Appraised Value of the Vessel or Vessels
subject to any such sale, Total Loss, other disposition or
release and the denominator of which is the aggregate of the
Appraised Values of all the Vessels (other than any Vessel
previously sold, disposed of or the subject of a Total Loss
or released for which a prepayment under this Clause has
heretofore been made).




                            25
<PAGE> 26





5.4      APPLICATION OF PREPAYMENTS.  Any prepayments of the
Loan made hereunder (including, without limitation, those
made pursuant to Sections 5.2, 5.3 and 9.3) shall be subject
to the condition that:

         (a)  any partial prepayment made shall be applied
PRO RATA in or towards satisfaction of the remaining
installments of the Loan;

         (b)  any amounts prepaid shall not be available for
re-borrowing; and

         (c)  on the date of any prepayment all accrued
interest to the date of such prepayment shall be paid in
full with respect to the portion of the principal being
prepaid, together with any and all actual costs or expenses
incurred by any Lender in connection with any breaking of
funding (as certified by such Lender, which certification
shall, absent any manifest error, be conclusive and binding
on the Borrower).

6   INTEREST AND RATE

6.1      INTEREST RATE; DEFAULT RATE.  The Loan shall bear
interest at the Applicable Rate, which shall be the rate per
annum equal to the aggregate of (a) LIBOR for the applicable
Interest Period and (b) the Margin.  Any amounts due under
this Agreement, not paid when due, whether on a Repayment
Date, by acceleration or otherwise, shall bear interest
thereafter at the Default Rate.

6.2      INTEREST PERIODS.  The Borrowers may select
Interest Periods of one, three or six months, or such other
period as selected by the Guarantor on behalf of the
Borrowers which is available to, and accepted by, the
Lenders for purposes of funding the Loan, PROVIDED, HOWEVER,
that at all times the Borrower must select an Interest
Period for a portion of the Loan so that sufficient deposits
shall mature on each Repayment Date to cover the principal
installments due on such dates.  The Guarantor, on behalf of
the Borrowers, shall provide the Agent with written notice
specifying the Interest Period selected by the Borrowers at
least three (3) Banking Days prior to the Drawdown Date and
the end of any then existing Interest Period.  If at the end
of any then existing Interest Period the Borrowers, or the
Guarantor on their behalf, fail to give notice as aforesaid,
the relevant Interest Period shall be three (3) months.





                            26
<PAGE> 27





6.3      INTEREST PAYMENTS.  The Borrowers agree to pay
interest accrued on the Loan, in arrears, on the Interest
Payment Dates.

6.4      CALCULATION OF INTEREST.  All interest shall accrue
from day to day and be calculated on the actual number of
days elapsed over a three hundred sixty (360) day year.

7   PAYMENTS

7.1      PLACE OF PAYMENTS, NO SET OFF.  (a) All payments to
be made hereunder by the Borrowers shall be made on the due
dates of such payments to the Agent at its office located at
11 West 42nd Street, New York, New York  10036 or to such
other place as the Agent may direct, for the account of the
Lenders, without set-off or counterclaim and free from,
clear of and without deduction for, any Taxes, provided,
however, that if the Borrowers shall at any time be
compelled by law to withhold or deduct any Taxes from any
amounts payable to the Lenders hereunder, then, subject to
Clause 7.2, the Borrowers shall pay such additional amounts
in Dollars as may be necessary in order that the net amounts
received after withholding or deduction shall equal the
amounts which would have been received if such withholding
or deduction were not required and, in the event any
withholding or deduction is made, whether for Taxes or
otherwise, the Borrowers shall promptly send to the Lenders
such documentary evidence with respect to such withholding
or deduction as may be required from time to time by the
Lenders.  Notwithstanding the preceding sentence, the
Borrowers shall not be required to pay additional amounts or
otherwise indemnify the Lenders for or on account of:

         (i)    Taxes based on or measured by the overall
net income of any Lender or Taxes in the nature of franchise
taxes or taxes for the privilege of doing business imposed
by any jurisdiction or any political subdivision or taxing
authority therein unless such are imposed as a result of the
activities of the Borrowers within the relevant taxing
jurisdiction;

         (ii)   Taxes imposed by any jurisdiction or any
political subdivision or taxing authority therein on any
Lender that would not have been imposed but for such
Lender's being organized in or conducting business in or
maintaining a place of business in the relevant taxing
jurisdiction, or engaging in activities or transactions in
the relevant taxing jurisdiction that are unrelated to the
transactions contemplated by the Transaction Documents, but



                            27
<PAGE> 28





only to the extent such Taxes are not imposed as a result of
the activities of any of the Borrowers within the relevant
taxing jurisdiction or the jurisdiction of any of the
Borrowers under the laws of the taxing jurisdiction;

         (iii)  Taxes imposed on or with respect to a Lender
as a result of a transfer, sale, assignment, or other
disposition by such Lender of any interest in any
Transaction Document, any Note or any Vessel (other than a
transfer pursuant to an exercise of remedies upon an Event
of Default);

         (iv)   Taxes imposed on, or with respect to, a
transferee (or a subsequent transferee) of an original
Lender (and including as such a transferee a Lender whose
shares of stock have been transferred or the purchaser of a
participation in the Loan) to the extent of the excess of
such Tax over the amount of such Tax that would have been
imposed on, or with respect to, such original Lender had
there not been a transfer, sale, assignment or other
disposition of the shares of such Lender or a transfer,
sale, assignment or other disposition by such original
Lender of any interest in any Vessel, any Note or any
Transaction Document (in each case, other than any transfer
pursuant to the exercise of remedies as a result of an Event
of Default that shall have occurred and be continuing); or

         (v)    Taxes imposed on any Lender that would not
have been imposed but for any failure of such Lender to
comply with any return filing requirement or any
certification, information, documentation, reporting or
other similar requirement known to such Lender, if such
compliance is required to obtain or establish relief or
exemption from or reduction in such Taxes.

         (b)  In the event that any Borrower has actual
knowledge that the Borrowers are required to, or there
arises in any Borrower's reasonable opinion a substantial
likelihood that the Borrowers will be required to, pay an
additional amount or otherwise indemnify any Lender for or
on account of any Tax pursuant to Clause 7.1(a), the
Borrower will promptly notify the Agent and each relevant
Lender of the nature of such Tax, and shall furnish such
information to the Agent and such Lender with respect to
such Tax, as the Agent or such Lender may reasonably
request.  In the event of any knowledge or opinion of a
Borrower described in the preceding sentence, the Borrowers,
the Agent and each relevant Lender shall consult in good
faith to determine what may be required to avoid or reduce



                            28
<PAGE> 29





such Tax, and shall each use reasonable efforts to avoid or
reduce such Tax (so long as such efforts do not, in the
reasonable opinion of the relevant Lender, result in any
cost to such Lender or any modification of the terms or
repayment of the Loan).

7.2      TAX CREDITS.  If any Lender obtains the benefit of
a credit against its liability for Taxes imposed by any
taxing authority for all or part of the Taxes as to which
the Borrowers have paid additional amounts as aforesaid then
such Lender shall reimburse the Borrowers for the amount of
the credit so obtained.  Each Lender shall use reasonable
efforts in filing such tax return as are necessary to obtain
any such credit.  In connection therewith, the Lenders may
consult with their legal advisers, all fees and expenses of
which shall be for the account of the Borrowers.

8   EVENTS OF DEFAULT

8.1      In the event that any of the following events shall
occur and be continuing:

         (a)  REPAYMENTS.  Any principal or interest payment
due hereunder, under the Note or under any of the Security
Documents is not paid on the due date; or

         (b)  OTHER PAYMENTS.  Any fees or other amount
becoming payable to the Agent, the Security Trustee or the
Lenders under this Agreement, under the Note, or under any
of the Security Documents or under any of them is not paid
on the due date or within three (3) Banking Days after the
date of demand (as the case may be); or

         (c)  REPRESENTATIONS, ETC.  Any representation,
warranty or other statement made by the Borrower, the
Guarantor or Palm Shipping in this Agreement or in any of
the Security Documents to which it is a party or in any
other instrument, document or other agreement delivered in
connection herewith or therewith proves to have been untrue
or misleading in any material respect as at the date as of
which made; or

         (d)  IMPOSSIBILITY, ILLEGALITY.  It becomes
impossible or unlawful for the Borrowers, the Guarantor,
Palm Shipping or any of them to fulfill any of the covenants
and obligations contained herein, in the Note or in any of
the Security Documents to which it is a party or for the
Agent, the Security Trustee or the Lenders to exercise any
of the rights vested in any of them hereunder, under the



                            29
<PAGE> 30





Note or under any of the Security Documents and such
impossibility or illegality, in the reasonable opinion of
the Agent, the Security Trustee or the Majority Lenders,
will have a material adverse effect on their rights
hereunder, under the Note or under any of the Security
Documents or on their right to enforce any thereof; or

         (e)  COVENANTS.  The Borrowers, the Guarantor or
Palm Shipping or any of them defaults in the performance of
any term, covenant or agreement contained in this Agreement,
in the Note or in any of the Security Documents to which
they are a party or in any of them, or in any other
instrument, document or other agreement delivered in
connection herewith or therewith, or there occurs any other
event which constitutes a default under this Agreement, the
Note or any of the Security Documents, in each case other
than an Event of Default referred to elsewhere in this
Clause 8.1, and such default, in the reasonable opinion of
the Majority Lenders, could have a material adverse effect
on their rights hereunder, under the Note or under any of
the Security Documents or on their right to enforce any
thereof and continues unremedied for a period of thirty (30)
days; or

         (f)  INDEBTEDNESS.  The Borrowers, the Guarantor,
Palm Shipping or any Wholly Owned Subsidiary of the
Guarantor shall default in the payment when due (subject to
any applicable grace period), whether by acceleration or
otherwise, of any Indebtedness having an outstanding
principal amount of $5,000,000 or more or any party becomes
entitled to enforce the security for any such Indebtedness
and such party shall take steps to enforce the same, unless
such default or enforcement is being contested in good faith
and by appropriate proceedings or other acts and the
relevant Borrowers, the Guarantor, Palm Shipping or such
Wholly Owned Subsidiary of the Guarantor as the case may be,
shall set aside on its books adequate reserves with respect
thereto, and so long as such default or enforcement shall
not subject any Vessel to material risk of forfeiture or
loss; or

         (g)  STOCK OWNERSHIP.  There is, without the prior
written consent of the Majority Lenders (i) any change in
the legal or beneficial stock ownership or the voting
control of the Borrowers or (ii) any pledge of the shares of
the Borrowers in favor of a party other than the Security
Agent or (iii) less than fifty-one percent (51%) of the
issued and outstanding shares of the Guarantor is held




                            30
<PAGE> 31





beneficially and of record by the Cirrus Trust and the JTK
Trust; or

         (h)  DEFAULT UNDER THE SECURITY DOCUMENTS.  There
is an event of default under any of the Security Documents
which shall have occurred and be continuing; or

         (i)  BANKRUPTCY.  The Borrowers, the Guarantor or
Palm Shipping commences any proceeding relating to any
substantial portion of its property under any
reorganization, arrangement or readjustment of debt,
dissolution, winding up, adjustment, composition, bankruptcy
or liquidation law or statute of any jurisdiction, whether
now or hereafter in effect ("Proceeding"), or there is
commenced against the Borrowers, the Guarantor or Palm
Shipping any Proceeding and such Proceeding remains
undismissed or unstayed for a period of thirty (30) days; or
any receiver, trustee, liquidator or sequestrator of, or
for, the Borrowers, the Guarantor or Palm Shipping or any
substantial portion of the property of any thereof is
appointed and is not discharged within a period of thirty
(30) days; or the Borrowers, the Guarantor or Palm Shipping
by any act indicates consent to or approval of or
acquiescence in any Proceeding or to the appointment of any
receiver, trustee, liquidator or sequestrator of, or for,
itself or any substantial portion of its property; or

         (j)  SALE OF ASSETS.  The Borrowers, the Guarantor
or Palm Shipping ceases, or threatens to cease, its
operations or sells or otherwise disposes of, or threatens
to sell or otherwise dispose of, all or substantially all of
its assets or all or substantially all of its assets are
seized or otherwise appropriated; or

         (k)  JUDGMENTS.  Any judgment or order is made the
effect whereof would be to render ineffective or invalid
this Agreement, the Note, the Security Documents or any of
them; or

         (l)  INABILITY TO PAY DEBTS.  Any of the Borrowers,
the Guarantor or Palm Shipping is unable to pay or admits
its inability to pay its debts as they fall due or if a
moratorium shall be declared in respect of any Indebtedness
thereof; or

         (m)  FINANCIAL POSITION.  Any change in the
financial position of the Guarantor which, in the reasonable
opinion of the Majority Lenders, is reasonably likely to
have a material adverse effect on the ability of the



                            31
<PAGE> 32





Borrowers, the Guarantor or Palm Shipping to perform its
material obligations under this Agreement, the Note, the
Security Documents or the Charters; or

         (n)  TERMINATION, AMENDMENT OR ASSIGNMENT OF
CHARTERS.  Any of the Charters is terminated, materially
amended or modified or assigned without the prior written
consent of the Majority Lenders, or any party to any thereof
defaults or ceases to perform thereunder for any reason
whatsoever,

then the Lenders' obligation to make the Loan available
shall cease and the Agent shall, upon instructions of the
Majority Lenders, by notice to the Borrowers, declare the
then outstanding amount of the Loan, accrued interest and
any other sums payable by the Borrowers hereunder, under the
Note and under the Security Documents to be immediately due
and payable whereupon the same shall forthwith be due and
payable without presentment, demand, protest or notice of
any kind, all of which are hereby expressly waived; PROVIDED
that upon the happening of an event specified in
subclauses (i) or (l) of this Clause 8.1, the Loan, accrued
interest and any other sums payable hereunder and under the
Note shall be immediately due and payable without
declaration or other notice to the Borrowers.  In such
event, the Lenders, the Agent and/or Security Trustee may
(i) proceed to protect and enforce their rights by action at
law, suit in equity or in admiralty or other appropriate
proceeding, whether for specific performance of any covenant
contained in this Agreement, in the Note or in any of the
Security Documents, or to enforce the payment of the Note or
to enforce any other legal or equitable right of the
Lenders, the Agent and/or Security Trustee, or (ii) proceed
to take any action authorized or permitted under the terms
of any of the Security Documents or by applicable laws for
the collection of all sums due, or so declared due, on the
Note, including, without limitation, the right to
appropriate and hold or apply (directly, by way of set-off
or otherwise) to the payment of the obligations of the
Borrowers to the Lenders, the Agent and/or Security Trustee
hereunder, under the Note and/or under any of the Security
Documents (whether or not then due) all moneys and other
amounts of the Borrowers, then or thereafter in possession
of the Lenders, the Agent and/or Security Trustee, inclusive
of the balance of any deposit account (demand or time,
matured or unmatured) of the Borrowers, then or thereafter
with the Lenders, the Agent and/or Security Trustee.





                            32
<PAGE> 33





8.2      INDEMNIFICATION.  The Borrowers agree to, and
shall, indemnify and hold the Agent, the Security Trustee
and the Lenders harmless against any loss or costs or
expenses (including legal fees and expenses) which the
Agent, the Security Trustee and the Lenders sustain or incur
as a consequence of any default in repayment of the
principal amount of the Loan or interest accrued thereon or
any other amount payable hereunder, under the Note or under
the Security Documents (other than costs and expenses caused
by the gross negligence or willful misconduct of the Agent,
the Security Trustee or any Lender) including, but not
limited to, all actual losses incurred in liquidating or
re-employing fixed deposits made by third parties or funds
acquired to effect or maintain the Loan or any part thereof.
The Agent's, Security Trustee's or Lenders' certification of
such costs and expenses shall, absent any manifest error, be
conclusive and binding on the Borrowers.

8.3      APPLICATION OF MONEYS.  Except as otherwise
provided in any Security Document, all moneys received by
the Agent, Security Trustee or Lenders under or pursuant to
this Agreement, the Note or any of the Security Documents
after the happening of any Event of Default (unless cured to
the satisfaction of the Lenders) shall be applied by the
Agent in the following manner:

         (i)  first, in or towards the payment or reimburse-
              ment of any expenses or liabilities incurred
              by the Agent, the Security Trustee or the
              Lenders in connection with the ascertainment,
              protection or enforcement of its rights and
              remedies hereunder, under the Note and under
              any of the Security Documents,

        (ii)  secondly, in or towards payment of any
              interest owing in respect of the Loan,

       (iii)  thirdly, in or towards repayment of principal
              owing in respect of the Loan,

        (iv)  fourthly, in or towards payment of all other
              sums which may be owing to the Agent, the
              Security Trustee or the Lenders under this
              Agreement, under the Note or under any of the
              Security Documents, and

         (v)  fifthly, the surplus (if any) shall be paid to
              the Borrowers or to whomsoever else may be
              entitled thereto.



                            33
<PAGE> 34






9        COVENANTS

9.1      Each Borrower hereby covenants and undertakes with
the Lenders, the Agent and Security Trustee that, from the
date hereof and so long as any principal, interest or other
monies are owing in respect of this Agreement, the Note, the
Security Documents or any of them:

         A.   The Borrowers will each:

         (i)  PERFORMANCE OF AGREEMENTS.  Duly perform and
              observe, and procure the observance and
              performance by all other parties thereto
              (other than the Agent, the Security Trustee
              and the Lenders) of, the terms of this
              Agreement, the Note and the Security
              Documents;

        (ii)  NOTICE OF DEFAULT; CHANGE IN CLASSIFICATION OF
              VESSEL.  Promptly inform the Agent of the
              occurrence of (a) any Event of Default or of
              any event which with the giving of notice or
              lapse of time, or both, would constitute an
              Event of Default, (b) the withdrawal of any
              Vessel's rating by its classification society
              or the issuance by the classification society
              of any recommendation or notation affecting
              class, (c) any litigation or governmental
              proceeding pending or threatened against the
              Borrowers, the Guarantor or Palm Shipping
              which could reasonably be expected to have a
              material adverse effect on the business,
              assets, operations, property or financial
              condition of any such party and (d) any other
              event or condition of which it becomes aware
              which is reasonably likely to have a material
              adverse effect on its ability, or the ability
              of any other party thereto, to perform its
              obligations under this Agreement, the Note and
              the Security Documents or any of them;

       (iii)  OBTAIN CONSENTS.  Obtain every consent and do
              all other acts and things which may from time
              to time be necessary or advisable for the
              continued due performance of all its and any
              other party's (other than the Agent's, the
              Security Trustee's or the Lenders') respective




                            34
<PAGE> 35





              obligations under this Agreement, the Note and
              the Security Documents;

        (iv)  FINANCIAL STATEMENTS.  Deliver or cause to be
              delivered to each of the Lenders:

                   (a)  as soon as available but not later
              than ninety (90) days after the end of each
              fiscal year of the Guarantor complete copies
              of the financial reports of the Guarantor
              (together with a Compliance Certificate
              substantially in the form of Exhibit I hereto,
              signed by the Chief Financial Officer of the
              Guarantor), on a consolidated basis, which
              shall include at least the consolidated
              balance sheet of the Guarantor as of the end
              of such year and the related consolidated
              statements of income, cash flow and retained
              earnings for such year, all in reasonable
              detail, certified by an Acceptable Accounting
              Firm, together with their opinion (without
              material qualifications) thereon;

                   (b)  as soon as available but not later
              than forty-five (45) days after the end of
              each of the first three quarters of each
              fiscal year of the Guarantor, balance sheets
              of the Guarantor, on a consolidated basis, as
              at the end of such quarter and the related
              consolidated statements of income, cash flow
              and retained earnings for such quarter, all in
              reasonable detail, unaudited, but certified by
              the chief financial officer of the Guarantor,
              together, in each instance, with a Compliance
              Certificate, signed by such chief financial
              officer of the Guarantor;

                   (c)  as soon as available, copies of all
              reports, statements or other instruments filed
              with the United States Securities and Exchange
              Commission;

                   (d)  such other statement or statements,
              lists of property and accounts, budgets,
              forecasts, reports and financial information
              with respect to the operation and management
              of the Vessels and any other vessels owned or
              operated directly or indirectly by or the




                            35
<PAGE> 36





              Guarantor, as the Agent may from time to time
              reasonably request;

         (v)  CORPORATE EXISTENCE.  Do or cause to be done,
              and procure that the Guarantor and Palm
              Shipping shall do or cause to be done, all
              things necessary to preserve and keep in full
              force and effect their respective corporate
              existence, and all licenses, franchises,
              permits and assets necessary to the conduct of
              the business of each such corporation;

        (vi)  BOOKS, RECORDS, ETC.  Keep, and procure that
              the Guarantor and Palm Shipping shall keep,
              proper books of record and account into which
              full and correct entries shall be made, in
              accordance with GAAP throughout the Facility
              Period;

       (vii)  INSPECTION.  Allow, and procure that the
              Guarantor and Palm Shipping shall allow, any
              representative or representatives designated
              by the Agent or the Lenders, subject to
              applicable laws and regulations, to visit and
              inspect any of the properties of any such
              party, and, on request, to examine the books
              of account, records, reports and other papers
              (and to make copies thereof and to take
              extracts therefrom) of each such corporation
              and to discuss the affairs, finances and
              accounts of each such corporation, with the
              officers and executive employees of each such
              corporation all at such reasonable times and
              as often as the Agent or such Lender
              reasonably requests;

      (viii)  TAXES.  Pay and discharge, and cause the
              Guarantor and Palm Shipping to pay and
              discharge, all taxes, assessments and
              governmental charges or levies imposed upon
              each such corporation or upon such
              corporation's income or property prior to the
              date upon which penalties attach thereto;
              provided, however, that such corporations
              shall not be required to pay and discharge, or
              cause to be paid and discharged, any such tax,
              assessment, charge or levy so long as the
              legality or amount thereof shall be contested
              in good faith and by appropriate proceedings



                            36
<PAGE> 37





              or other acts and it shall set aside on its
              books adequate reserves with respect thereto,
              and so long as such deferment in payment shall
              not subject any Vessel to material risk of
              forfeiture or loss;

        (ix)  COMPLIANCE WITH STATUTES, ETC.  Do or cause to
              be done, and procure that the Guarantor and
              Palm Shipping shall do or cause to be done,
              all things necessary to comply with all
              material laws, and the rules and regulations
              thereunder, applicable to the Borrowers, the
              Guarantor and Palm Shipping and including,
              without limitation, those laws, rules and
              regulations relating to employee benefit plans
              and environmental matters;

         (x)  ENVIRONMENTAL MATTERS.  Promptly upon the
              occurrence of any of the following conditions,
              provide to the Agent a certificate of the
              chief executive officer thereof, specifying in
              detail the nature of such condition and the
              Borrowers', the Guarantor's or Palm Shipping's
              proposed response or the proposed response of
              any Environmental Affiliate (as such term is
              hereinafter defined) of any thereof, as the
              case may be:  (a) the Borrowers', the
              Guarantor's or Palm Shipping's receipt or the
              receipt by any Environmental Affiliate of any
              thereof of any communication whatsoever that
              alleges that such person is not in compliance
              with any applicable environmental law or
              environmental approval, if such noncompliance
              could reasonably be expected to have a
              material adverse effect on the business,
              assets, operations, property or financial
              condition of the Borrowers, the Guarantor or
              Palm Shipping, (b) knowledge by the Borrowers,
              the Guarantor or Palm Shipping or any
              Environmental Affiliate of any thereof that
              there exists any Environmental Claim pending
              or threatened against any such person which
              could reasonably be expected to have a
              material adverse effect on the business,
              assets, operations, property or financial
              condition of the Guarantor or (c) any release,
              emission, discharge or disposal of any
              material that could form the basis of any
              Environmental Claim against the Guarantor or



                            37
<PAGE> 38





              any Environmental Affiliate of any thereof if
              such Environmental Claim could reasonably be
              expected to have a material adverse effect on
              the business, assets, operations, property or
              financial condition of the Guarantor.  Upon
              the written request by the Agent, each
              Borrower will submit, and procure that the
              Guarantor and Palm Shipping shall submit, to
              the Agent at reasonable intervals, a report
              providing an update of the status of any issue
              or claim identified in any notice or
              certificate required pursuant to this
              subclause.  For the purposes of this
              subclause, "Environmental Claim" shall mean
              any claim under federal, state and local
              environmental, health and safety laws,
              statutes or regulations.  "Environmental
              Affiliate" shall mean any person or entity the
              liability of which for Environmental Claims
              the Borrowers, the Guarantor or Palm Shipping
              may have assumed by contract or operation of
              law;

        (xi)  ACCOUNTANTS.  Retain throughout the Facility
              Period an Acceptable Accounting Firm as its
              independent certified accountants;

       (xii)  CONTINUE CHARTERS.  Continue to charter the
              Vessels to Palm Shipping for the entire
              Facility Period, and ensure that the terms of
              such Charters include, INTER ALIA, that the
              payments of Palm Shipping to the Borrowers
              under the Charters will, in the aggregate, be
              sufficient to cover all payments of the
              Borrowers under this Agreement and any
              operating and other expenses of such Borrower;

      (xiii)  CLASS CERTIFICATE.  Furnish, or cause to be
              furnished, to the Agent, upon any change of a
              Vessel's classification status or the issuance
              of a recommendation affecting class by a
              Vessel's classification society or upon the
              Agent's reasonable request (to be made no more
              than once in any calendar year), a
              confirmation of class certificate covering
              each Vessel and evidencing compliance with the
              applicable provisions of the Mortgage thereon
              within thirty (30) days of such change or such
              request;



                            38
<PAGE> 39






       (xiv)  MAINTENANCE OF PROPERTIES.  Maintain, or cause
              to be maintained, and keep, or cause to be
              kept, and procure that the Guarantor and Palm
              Shipping shall maintain, or cause to be
              maintained, and keep, or cause to be kept, all
              properties used or useful in the conduct of
              its business in good condition, repair and
              working order and supplied with all necessary
              equipment and will cause to be made necessary
              repairs, renewals and replacements thereof so
              that the business carried on and in connection
              therewith and every portion thereof may be
              properly and advantageously conducted at all
              times.  In addition, each Borrower shall cause
              its Vessel to be drydocked as often as
              required by the Vessel's classification
              society and as a prudent shipowner would
              require;

        (xv)  VESSEL MANAGEMENT.  Cause its Vessel to be
              managed by the Manager or such ship manager
              selected by the Borrowers and satisfactory to
              the Majority Lenders pursuant to a written
              management agreement acceptable to the
              Majority Lenders;

       (xvi)  LIMITATION ON RESTRICTED PAYMENTS.

              Procure that the Guarantor will not directly
              or indirectly declare or pay any dividend or
              make any distribution on its capital stock
              (such payments being defined as "Restricted
              Payments") if, at the time of, and after
              giving effect to, the proposed Restricted
              Payment:  (A) a Default or Event of Default
              shall have occurred and be continuing or
              (B) the aggregate amount expended for all
              Restricted Payments (the amount so expended,
              if other than in cash, to be determined in
              good faith by the Board of Directors, whose
              determination shall be conclusive and be
              evidenced by a Board Resolution) after
              January 29, 1996 shall exceed the sum of
              (1) 50% of the aggregate amount of the
              Adjusted Consolidated Net Income (or if
              Adjusted Consolidated Net Income is a loss,
              minus one hundred percent (100%) of such
              amount) of the Guarantor accrued on a



                            39
<PAGE> 40





              cumulative basis during the period (taken as
              one accounting period) beginning February 1,
              1996 and ending on the last day of the last
              fiscal quarter preceding such date PLUS
              (2) the aggregate net proceeds (including the
              fair market value of non-cash proceeds as
              determined in good faith by the Board of
              Directors) received by the Guarantor
              (including the amount of any dividends
              reinvested in the capital stock of the
              Guarantor) from the issuance and sale
              permitted by the Indenture of capital stock of
              the Guarantor (other than redeemable stock),
              including an issuance or sale for cash or
              other property upon the conversion of any
              Indebtedness of the Guarantor subsequent to
              the date hereof, or from the issuance of any
              options, warrants or other rights to acquire
              capital stock of the Guarantor (in each case,
              exclusive of any redeemable stock or any
              options, warrants or other rights that are
              redeemable at the option of the holder, or are
              required to be redeemed, prior to the Maturity
              Date) PLUS (3) $50,000,000.

              The foregoing provision shall not take into
              account, and shall not be violated by reason
              of:

         (a)  the payment of any dividend within 60 days
              after the date of declaration thereof if, at
              said date of declaration, such payment would
              comply with the foregoing paragraph;

         (b)  the redemption, repurchase, defeasance or
              other acquisition or retirement for value of
              Indebtedness of the Guarantor that is
              subordinated in right of payment of the Loan,
              with the proceeds of, or in exchange for,
              Indebtedness incurred under
              Clause 9.1(B)(iii)(III);

         (c)  the repurchase, redemption or other
              acquisition by the Guarantor of capital stock
              of the Guarantor in exchange for, or out of
              the proceeds of a substantially concurrent
              offering of, shares of capital stock of the
              Guarantor (other than redeemable stock);




                            40
<PAGE> 41





         (d)  the acquisition by the Guarantor of its
              Indebtedness that is subordinated in right of
              payment to the Loan in exchange for or out of
              the proceeds of, a substantial concurrent
              offering of, shares of capital stock of the
              Guarantor (other than redeemable shares);

         (e)  payments or distributions pursuant to or in
              connection with a consolidation, merger or
              transfer of assets that complies with the
              applicable provisions herein; or

         (f)  certain purchases, redemptions, acquisitions,
              cancellations or other retirements for a
              nominal value per right of any rights granted
              pursuant to any shareholders' rights plan
              (i.e., a "poison pill");

              PROVIDED that in the case of the foregoing
              clauses (a) and (b), no Event of Default shall
              have occurred and be continuing or occur as a
              consequence of the actions or payments set
              forth therein.

         B.   None of the Borrowers, without the prior
written consent of the Majority Lenders, will:

         (i)  LIENS.  Create, assume or permit to exist any
              mortgage, pledge, lien, charge, encumbrance or
              any security interest whatsoever upon any of
              such party's property or other assets, real or
              personal, tangible or intangible, whether now
              owned or hereafter acquired except:

                   (a)  liens for taxes not yet payable for
              which adequate reserves have been maintained;

                   (b)  the Mortgages, the Assignments and
              other liens in favor of the Security Trustee;

                   (c)  liens, charges and encumbrances
              against their respective Vessels permitted to
              exist under the terms of the Mortgages;

                   (d)  pledges of certificates of deposit
              or other cash collateral securing the
              Borrowers' reimbursement obligations in
              connection with letters of credit now or
              hereafter issued for the account of the



                            41
<PAGE> 42





              Borrowers in connection with the establishment
              of the financial responsibility of the
              Borrowers under 33 C.F.R. Part 130 or 46
              C.F.R. Part 540, as the case may be as the
              same may be amended or replaced; and

                   (e)  other liens, charges and
              encumbrances incidental to the conduct of the
              business of each such party or the ownership
              of any such party's property and assets and
              which do not in the aggregate materially
              detract from the value of each such party's
              property or assets or materially impair the
              use thereof in the operation of its business;

        (ii)  LOANS AND ADVANCES.  Make any loans or
              advances to, or any investments in any person,
              firm, corporation, joint venture or other
              entity (including, without limitation, any
              loan or advance to any officer, director,
              stockholder, employee or customer of any
              company affiliated with the Borrowers or the
              Guarantor) except for advances and investments
              in the normal course of its business and loans
              or advances to the Guarantor;

       (iii)  LIMITATION ON INDEBTEDNESS.  (a) Incur, and
              shall procure that neither the Guarantor nor
              Palm Shipping will, incur any Indebtedness
              excluding Indebtedness hereunder to the Agent,
              the Security Trustee or the Lenders and
              Indebtedness existing (or for which a written
              commitment has been made on or before the date
              hereof) on the date hereof; PROVIDED that the
              Guarantor or any of its Subsidiaries may incur
              Indebtedness if, after giving effect to the
              incurrence of such Indebtedness and the
              receipt and application of the proceeds
              therefrom, the Interest Coverage Ratio of the
              Guarantor would be greater than 2:1.

              Notwithstanding the foregoing, the Guarantor
              may incur each and all of the following:

            (I)    Indebtedness in an aggregate principal
                   amount such that the aggregate principal
                   amount of the Indebtedness of the
                   Guarantor outstanding immediately after
                   such incurrence does not exceed the



                            42
<PAGE> 43





                   aggregate principal amount of
                   Indebtedness existing on the date hereof
                   plus $50,000,000;

           (II)    Indebtedness of the Guarantor to any
                   Wholly-Owned Subsidiary;

          (III)    Indebtedness issued in exchange for, or
                   the net proceeds of which are used to
                   refinance or refund, outstanding
                   Indebtedness of the Guarantor, other than
                   Indebtedness incurred under clauses (I)
                   or (V) of this paragraph and any
                   refinancings thereof, in an amount not to
                   exceed the principal amount so exchanged,
                   refinanced or refunded (plus premiums,
                   accrued and unpaid interest, fees and
                   expenses thereon);

           (IV)    Indebtedness (A) in respect of
                   performance, surety or appeal bonds
                   PROVIDED in the ordinary course of
                   business, (B) under Currency Agreements
                   and Interest Rate Agreements; provided
                   that, in the case of Currency Agreements
                   that relate to other Indebtedness, such
                   Currency Agreements do not increase the
                   Indebtedness of the obligor outstanding
                   at any time other than as a result of
                   fluctuations in foreign currency exchange
                   rates or by reason of fees, indemnities
                   and compensation payable thereunder, and
                   (C) arising from agreements providing for
                   indemnification, adjustment of purchase
                   price or similar obligations, or from
                   Guarantees or letters of credit, surety
                   bonds or performance bonds securing any
                   obligations of the Guarantor pursuant to
                   such agreements, in any case incurred in
                   connection with the disposition of any
                   business, assets of the Guarantor and not
                   exceeding the gross proceeds therefrom,
                   other than Guarantees of Indebtedness
                   incurred by any Person acquiring all or
                   any portion of such business or assets of
                   the Guarantor for the purpose of
                   financing such acquisition;





                            43
<PAGE> 44





            (V)    Indebtedness in connection with the
                   acquisition of any new Wholly-Owned
                   Subsidiary; PROVIDED that, with respect
                   to this clause 9.1(B)(iii)(a)(V), after
                   giving effect to the Incurrence thereof,
                   the Guarantor could incur at least $1.00
                   of Indebtedness pursuant to the first
                   paragraph of this Clause 9.1(B)(iii)(a);
                   and

           (VI)    Indebtedness of Palm Shipping incurred in
                   the ordinary course of the operation of
                   vessels or Indebtedness of Palm Shipping
                   to the Guarantor resulting from advances
                   to Palm Shipping by the Guarantor made in
                   the ordinary course of business;

                   (b)  For purposes of determining any
              particular amount of Indebtedness under this
              Clause 9.1(B)(iii), guarantees or obligations
              with respect to letters of credit supporting
              Indebtedness otherwise included in the
              determination of such particular amount shall
              not be included.  For purposes of determining
              compliance with this Clause, (i) in the event
              that an item of Indebtedness meets the
              criteria of more than one of the types of
              Indebtedness described above in this Clause,
              the Guarantor, in its sole discretion, shall
              classify such item of Indebtedness and only be
              required to include the amount and type of
              such Indebtedness in one of such clauses and
              (ii) the amount of Indebtedness issued at a
              price that is less than the principal amount
              thereof shall be equal to the amount of the
              liability in respect thereof determined in
              conformity with GAAP.  Notwithstanding any
              other provision of this Clause, the maximum
              amount of Indebtedness that the Guarantor may
              incur pursuant to this Clause shall not be
              deemed to be exceeded due solely to
              fluctuations in the exchange rates of
              currencies.

                   (c)  The Guarantor shall not incur any
              Indebtedness that is expressly subordinated to
              any other Indebtedness of the Guarantor unless
              such Indebtedness, by its terms or the terms
              of any agreement or instrument pursuant to



                            44
<PAGE> 45





              which such Indebtedness is issued or remains
              outstanding, is also expressly made
              subordinate to the Indebtedness of the
              Guarantor under the Guaranty.

        (iv)  GUARANTEES, ETC.  Assume, guarantee or (other
              than in the ordinary course of its business)
              endorse or otherwise become or remain liable,
              in connection with any obligation of any
              person, firm, company or other entity except
              for guaranties in favor of the Lenders or the
              Security Trustee on behalf of the Lenders;

         (v)  CHANGES IN BUSINESS.  Change the nature of its
              business or commence any other business;

        (vi)  USE OF CORPORATE FUNDS.  Pay out any funds to
              any company or person except (a) in the
              ordinary course of business in connection with
              the management of the business of the
              Borrowers and the Guarantor, including the
              operation and/or repair of the Vessels and
              (b) the servicing of the indebtedness to the
              Lenders;

       (vii)  ISSUANCE OF SHARES.  Issue or dispose of any
              shares of its own capital stock to any person;

      (viii)  CONSOLIDATION, MERGER.  Consolidate with, or
              merge into any corporation;

        (ix)  CHANGES IN OFFICES OR NAMES.  Change the
              location of the chief executive office of the
              Borrowers or the Guarantor, the office of the
              chief place of business any such parties, the
              office of the Borrowers in which the records
              relating to the earnings or insurances of the
              Vessels are kept unless the Lenders shall have
              received thirty (30) days prior written notice
              of such change;

         (x)  LIMITATION ON TRANSACTIONS WITH SHAREHOLDERS
              AND AFFILIATES.  None of the Borrowers will
              and will procure that neither the Guarantor
              nor Palm Shipping will, directly or indirectly
              enter into, renew or extend any transaction
              (including, without limitation, the purchase,
              sale, lease or exchange of property or assets,
              or the rendering of any service) or series of



                            45
<PAGE> 46





              related transactions with any holder (or any
              Affiliate of such holder) of 5% or more of any
              class of Capital Stock of the Guarantor or
              with any Affiliate of the Guarantor, except
              upon fair and reasonable terms no less
              favorable to the Borrowers, the Guarantor or
              Palm Shipping, than could be obtained, at the
              time of such transaction or series of related
              transactions or at the time of the execution
              of the agreement providing therefor, in a
              comparable arm's-length transaction with a
              Person that is not such a holder or Affiliate.

              The foregoing limitation does not limit, and
              shall not apply to:

         (a)  transactions or series of related transactions
              (I) approved by a majority of the
              disinterested members of the Board of
              Directors as fair to the Borrowers, the
              Guarantor or Palm Shipping, or (II) for which
              the Borrowers, the Guarantor or Palm Shipping,
              as the case may be, delivers to the Agent a
              written opinion of a nationally recognized
              investment banking firm stating that the
              transaction is fair to the Borrowers, the
              Guarantor or Palm Shipping, as the case may
              be, from a financial point of view;

         (b)  the payment of reasonable and customary
              regular fees to directors of the Borrowers,
              the Guarantor or Palm Shipping, who are not
              employees of the Borrowers, the Guarantor or
              Palm Shipping; or

         (c)  any Restricted Payments not prohibited by
              Clause 9.1(A)(xvi); or

        (xi)  CHANGE OF FLAG.  Change the flag of any Vessel
              or the management of such Vessel; or

       (xii)  SALE OF VESSEL.  Sell, transfer or otherwise
              dispose of a Vessel; or

      (xiii)  MODIFICATION OF AGREEMENTS.  Except as
              contemplated by this Agreement, amend, modify
              or otherwise change, or allow the Guarantor or
              Palm to amend, modify or change, any of the




                            46
<PAGE> 47





              Transaction Documents to which they are
              parties.

9.2      VALUATION OF THE VESSELS. The aggregate fair market
value ("FMV") of the Vessels during the Facility Period
shall be greater than or equal to: (1) for the first two
years of the Facility Period, a minimum of 120% of the Loan
during such period, (2) for the third and fourth year of the
Facility Period, a minimum of 130% of the Loan during such
period and (3) for the fifth year of the Facility Period and
up to the Maturity Date, a minimum of 140% of the Loan
during such period (the "Relevant Percentages").  The FMV of
each Vessel shall be determined at the Agent's discretion,
but no less frequently than annually, on the basis of a
valuation (the "Valuation") provided by the Agent.  In the
event one or more of the Lenders or the Borrowers disagree
with the Agent's Valuation, then the Borrowers and the Agent
shall each obtain a separate valuation (the "Additional
Valuations") from separate independent shipbrokers, and the
FMV shall be determined to be the arithmetic average of the
Additional Valuations.  The cost of all Additional
Valuations obtained hereunder shall be for the account of
the party who disagrees with the Agent's Valuation.

9.3      COLLATERAL MAINTENANCE.  If the FMV of the Vessels,
as determined pursuant to Clause 9.2 falls below the
Relevant Percentages, within a period of ten (10) Banking
Days following receipt by the Borrowers of written notice
from the Agent  notifying the Borrowers of such shortfall
and specifying the amount thereof (which amount shall, in
the absence of manifest error, be deemed to be conclusive
and binding on the Borrowers) the Borrowers shall
(a) deliver to the Agent, upon its request, additional
collateral satisfactory to the Lenders, in their sole
discretion (including the deposit of cash in a cash
collateral account maintained with the Agent), or (b) prepay
the Loan or part thereof such that (x) the sum of (i) the
value of the Vessels, as determined in accordance with the
latest valuation delivered pursuant to Clause 9.2, plus
(ii) the value of additional collateral other than cash
collateral, such value to be determined by the Lenders, when
divided by (y) the Loan (less any cash collateral held by
the Agent in a cash collateral account) shall be equal to or
greater than the Relevant Percentage of the Loan.

9.4      RELEASE OF VESSELS.  So long as no Event of Default
or event which, but for the giving of notice or passage of
time or both, would constitute an Event of Default has
occurred and is continuing, the Guarantor or the Borrowers



                            47
<PAGE> 48





may request that a Borrower be released from its obligations
hereunder and in connection herewith and that its Vessel be
released from the lien of the Mortgage thereon and the
Lenders agree to take all steps necessary to effect such
release; PROVIDED, HOWEVER, that as a condition precedent
thereto the Borrowers shall prepay prior to or simultaneous
with such release such part of the Loan as shall be
necessary to comply with Clause 5.3 hereof and PROVIDED,
FURTHER, that no such request shall be effective unless made
in writing to the Agent no fewer than fifteen (15) days
prior to the end of the then current Interest Period.

9.5      SUBSTITUTION OF VESSELS.  So long as no Event of
Default or event which, but for the giving of notice or
passage of time or both, would constitute an Event of
Default has occurred and is continuing, the Guarantor or the
Borrowers may substitute a vessel (which vessel may be owned
by a Borrower made a party hereto pursuant to an Accession
Agreement) for a Vessel provided that such substitute vessel
(and, if applicable, Borrower) is approved by the Lenders
(which approval shall not be unreasonably withheld) and such
substitute vessel meets all of the following
characteristics, and the owner of such vessel meets all of
the following conditions, as the case may be:

         (i)  an Aframax tanker between 75,000 and 115,000
              dead weight tons

        (ii)  built in or after 1987 but in no event more
              than two years older than the Vessel sold or
              released;

       (iii)  complies with requirements of Clause 4.1(b)
              hereof;

        (iv)  has, at the time of substitution, a FMV
              greater than or equal to the FMV of the Vessel
              for which it is substituted; and

         (v)  the owner of the substitute Vessel has, if
              relevant, executed an Accession Agreement and
              has executed a counterpart of the Note, a
              Mortgage, an Assignment of Earnings and an
              Assignment of Insurances and the Guarantor has
              reaffirmed the Guaranty and the owner and the
              substitute Vessel, as the case may be, has
              met the conditions, updated MUTADIS MUTANDIS,
              of Clauses 4.1(a), (b), (c), (e), (f), (g),
              (h), (i) and (k).



                            48
<PAGE> 49






9.6      INSPECTION AND SURVEY REPORTS.  If the Lenders
shall so request, the Borrowers shall provide the Lenders
with copies of all internally generated inspection or survey
reports on the Vessels.

10  ASSIGNMENT

         This Agreement shall be binding upon, and inure to
the benefit of, the Borrowers, the Agent, the Security
Trustee and the Lenders and their respective successors and
assigns, except that the Borrowers may not assign any of
their rights or obligations hereunder except as specifically
provided herein.  The Lenders may, with the prior written
consent of the Borrowers (such consent not to be
unreasonably withheld) assign a portion of their rights and
obligations under this Agreement to any one or more
commercial lenders (the expenses of the Lenders in
connection with any such assignment shall be for their own
account), PROVIDED, HOWEVER, in the event of any such
assignment, such assignment is to be made pursuant to an
Assignment and Assumption Agreement substantially in the
form of Exhibit G hereto; and PROVIDED, FURTHER, that any
assignment hereunder shall be in a minimum amount of
$7,500,000 and increments of $2,500,000 (adjusted in each
case PRO RATA in increments of $100,000 for repayments or
prepayments of the Loan made hereunder but in no event less
than $5,000,000).  The Borrowers will take all reasonable
actions requested by the Lenders to effect such assignment,
including, without limitation, the execution of a written
consent to such Assignment and Assumption Agreement.

11  ILLEGALITY, INCREASED COST, NON-AVAILABILITY, ETC.

11.1.    ILLEGALITY.  In the event that by reason of any
change in any applicable law, regulation or regulatory
requirement or in the interpretation thereof any of the
Lenders reasonably concludes that it has become unlawful for
such Lender to maintain or give effect to its obligations as
contemplated by this Agreement, such  Lender shall inform
the Agent and the Borrowers to that effect, whereafter the
liability of such Lender to make its Commitment available
shall forthwith cease and the Borrowers shall be required to
prepay the then outstanding portion of such Lender's Loan
immediately in accordance with and subject to the provisions
of Clause 11.4.  In any such event, but without prejudice to
the aforesaid obligations of the Borrowers to prepay the
Loan, the Borrowers and such Lender shall negotiate in good
faith with a view to agreeing on terms for making its



                            49
<PAGE> 50





Commitment available from another jurisdiction or otherwise
restructuring the Loan on a basis which is not unlawful with
respect to such Lender and Agent shall use reasonable
efforts to replace such Lender with a lender for which the
making and performance of the Agreement would not be
illegal.

11.2     INCREASED COST.  If any change in applicable law,
regulation or regulatory requirement or in the interpreta-
tion or application thereof by any governmental or other
authority, shall:

         (i)  change the basis of taxation (excluding any
              change in the rate of any Tax) to any of the
              Lenders of payments of principal or interest
              or any other payment due or to become due
              pursuant to this Agreement (other than a
              change in taxation of the overall net income
              of such Lender effected by the jurisdiction of
              organization or the jurisdiction of the
              principal place of business of such Lender,
              the United States of America, the State or
              City of New York or any governmental
              subdivision or other taxing authority having
              jurisdiction over the Lender (unless such
              jurisdiction is asserted solely by reason of
              the activities of any of the Borrowers) or
              such other jurisdiction where the Loan may be
              repayable), or

        (ii)  impose, modify or deem applicable any reserve
              requirements or require the making of any
              special deposits against or in respect of any
              assets or liabilities of, deposits with or for
              the account of, or loans by, the Lenders, or

       (iii)  impose on the Lenders any other condition
              affecting the Loan or any part thereof, and
              the result of the foregoing is either to
              increase the cost to the Lenders of making
              available or maintaining the Loan or any part
              thereof or to reduce the amount of any payment
              received by the Lenders, then and in any such
              case if such increase or reduction in the
              opinion of the Lenders materially affects the
              interests of the Lenders under or in
              connection with this Agreement, then:





                            50
<PAGE> 51





                   (a)  the Agent shall notify the Borrowers
              of the happening of such event,

                   (b)  the Borrowers agree forthwith upon
              demand to pay to the Agents, Security Trustee
              or the Lenders such amount as the Agent
              certifies to be necessary to compensate the
              Agent, the Security Trustee or the Lenders for
              such additional cost or such reduction, and

                   (c)  any such demand as is referred to in
              sub-clause (b) of this Clause 11.2 may be made
              by the Agent at any time before or after any
              repayment of the Loan.

11.3     DETERMINATION OF LOSSES.  A certificate or deter-
mination notice of the Agent, as to any of the matters
referred to in this Clause 11 shall, absent manifest error,
be conclusive and binding on the Borrowers.

11.4     COMPENSATION FOR LOSSES.  Where the Loan or a
portion thereof are to be prepaid by the Borrowers pursuant
to Clause 11.1 the Borrowers agree simultaneously with such
prepayment to pay to the Agent, the Security Trustee or the
Lenders all accrued interest to the date of actual payment
and all other sums payable by the Borrowers to the Agent,
the Security Trustee or the Lenders pursuant to this
Agreement without penalty or premium.

12  CURRENCY INDEMNITY

12.1     CURRENCY CONVERSION.  If for the purpose of
obtaining or enforcing a judgment in any court in any
country it becomes necessary to convert into any other
currency (the "judgment currency") an amount due in Dollars
under this Agreement, the Note or any of the Security
Documents then the conversion shall be made, in the
discretion of the Lenders, at the rate of exchange
prevailing either on the date of default or on the day
before the day on which the judgment is given or the order
for enforcement is made, as the case may be (the "conversion
date"), provided that the Lenders shall not be entitled to
recover under this clause any amount in the judgment
currency which exceeds at the conversion date the amount in
Dollars due under this Agreement, the Note and/or any of the
Security Documents.

12.2     CHANGE IN EXCHANGE RATE.  If there is a change in
the rate of exchange prevailing between the conversion date



                            51
<PAGE> 52





and the date of actual payment of the amount due, the
Borrowers shall pay such additional amounts (if any, but in
any event not a lesser amount) as may be necessary to ensure
that the amount paid in the judgment currency when converted
at the rate of exchange prevailing on the date of payment
will produce the amount then due under this Agreement, the
Note and/or any of the Security Documents in Dollars; any
excess over the amount due received or collected by the
Lenders shall be remitted to the Borrowers.

12.3     ADDITIONAL DEBT DUE.  Any amount due from the
Borrowers under Clause 12.2 shall be due as a separate debt
and shall not be affected by judgment being obtained for any
other sums due under or in respect of this Agreement, the
Note and/or any of the Security Documents.

12.4.    RATE OF EXCHANGE.  The term "rate of exchange" in
this Clause 12 means the rate at which the Lenders in
accordance with their normal practices are able on the
relevant date to purchase Dollars with the judgment currency
and includes any premium and costs of exchange payable in
connection with such purchase.

13  FEES AND EXPENSES

13.1     AGENCY FEE.  The Borrowers shall pay to the Agent
annually in advance during the Facility Period commencing on
the Drawdown Date, an agency fee of $12,000 PER ANNUM.

13.2     ARRANGEMENT FEE.  The Borrowers shall pay each
Lender on the Drawdown Date (or if the Lenders are not
obligated to make the Loan hereunder for any reason, on the
termination of the Lenders' obligations hereunder) an
arrangement fee of .30% of such Lender's respective
Commitment.

13.3     EXPENSES.  The Borrowers jointly and severally
agree, whether or not the transactions hereby contemplated
are consummated, on demand to pay, or reimburse the Agent,
the Security Trustee and the Lenders for their payment of,
the reasonable expenses of the Agent, the Security Trustee
and the Lenders incident to said transactions (and in
connection with any supplements, amendments, waivers or
consents relating thereto or incurred in connection with the
enforcement or defense of any of the Agent's, Security
Trustee's and Lenders' rights or remedies with respect
thereto or in the preservation of the Agent, the Security
Trustee's and the Lenders' priorities under the
documentation executed and delivered in connection



                            52
<PAGE> 53





therewith) including, without limitation, all reasonable
costs and expenses of preparation, negotiation, execution
and administration of this Agreement and the documents
referred to herein, the reasonable fees and disbursements of
the Lenders' counsel in connection therewith, including
Seward & Kissel, as well as the reasonable fees and expenses
of any independent appraisers, surveyors, engineers and
other consultants retained by the Agent, the Security
Trustee and the Lenders in connection with this transaction,
all reasonable costs and expenses, if any, in connection
with the enforcement of this Agreement, the Note and the
Security Documents and stamp and other similar taxes, if
any, incident to the execution and delivery of the documents
(including, without limitation, the Note) herein
contemplated and to hold the Lenders free and harmless in
connection with any liability arising from the nonpayment of
any such stamp or other similar taxes.  Such taxes and, if
any, interest and penalties related thereto as may become
payable after the date hereof shall be paid immediately by
the Borrowers to the Agent, the Security Trustee or the
Lenders, as the case may be, when liability therefor is no
longer contested by such party or parties or reimbursed
immediately by the Borrowers to such party or parties after
payment thereof (if the Agent, the Security Trustee or the
Lenders, at their sole discretion, chooses to make such
payment).

14  APPLICABLE LAW, JURISDICTION AND WAIVER

14.1     APPLICABLE LAW.  This Agreement shall be governed
by, and construed in accordance with, the laws of the State
of New York.

14.2     JURISDICTION.  Each of the Borrowers hereby
irrevocably submits to the jurisdiction of the courts of the
State of New York and of the United States District Court
for the Southern District of New York in any action or
proceeding brought against it by the Lenders under this
Agreement or under any document delivered hereunder and
hereby irrevocably agrees that service of summons or other
legal process on it may be served by registered mail
addressed thereto, c/o Watson, Farley & Williams, 380
Madison Avenue, New York, New York 10017.  The service, as
herein provided, of such summons or other legal process in
any such action or proceeding shall be deemed personal
service and accepted by the Borrowers as such, and shall be
legal and binding upon the Borrowers for all the purposes of
any such action or proceeding.  Final judgment (a certified
or exemplified copy of which shall be conclusive evidence of



                            53
<PAGE> 54





the fact and of the amount of any indebtedness of the
Borrowers to the Lenders) against the Borrowers in any such
legal action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment.
The Borrowers will advise the Lenders promptly of any change
of address for the purpose of service of process.
Notwithstanding anything herein to the contrary, the Lenders
may bring any legal action or proceeding in any other
appropriate jurisdiction.

14.3     WAIVER OF JURY TRIAL.  IT IS MUTUALLY AGREED BY AND
AMONG THE BORROWERS, THE GUARANTOR, THE AGENT, THE SECURITY
TRUSTEE AND THE LENDERS THAT EACH OF THEM HEREBY WAIVES
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
BROUGHT BY ANY PARTY HERETO AGAINST ANY OTHER PARTY HERETO
ON ANY MATTER WHATSOEVER ARISING OUT OF OR IN ANY WAY
CONNECTED WITH THIS AGREEMENT, THE NOTE OR THE SECURITY
DOCUMENTS.


15.      THE AGENT

15.1     APPOINTMENT OF AGENT.  Each of the Lenders hereby
irrevocably appoints and authorizes the Agent (which for
purposes of this Clause 15 shall be deemed to include the
Agent acting in its capacity as Security Trustee pursuant to
Clause 16 hereof) to take such action as agent on its behalf
and to exercise such powers under this Agreement, the Note,
and the Security Documents as are delegated to the Agent by
the terms hereof and thereof.  Neither the Agent nor any of
its directors, officers, employees or agents shall be liable
for any action taken or omitted to be taken by it or them
under this Agreement, the Notes, or the Security Documents
or in connection therewith, except for its or their own
gross negligence or willful misconduct.

15.2     DISTRIBUTION OF PAYMENTS.  Whenever any payment is
received by the Agent from the Borrowers for the account of
the Lenders, or any of them, whether of principal or
interest on the Notes, commissions, fees under Clauses 13.2
and 13.4, or otherwise, it will thereafter cause to be
distributed on the same day if received before 11 a.m. New
York time, or on the next day if received thereafter, like
funds relating to such payment ratably to the Lenders
according to their respective Commitments, as the case may
be, in each case to be applied according to the terms of
this Agreement.





                            54
<PAGE> 55





15.3     HOLDER OF INTEREST IN NOTE.  The Agent may treat
each Lender as the holder of all of the interest of such
Lender in the Note, as the case may be, until written notice
of transfer, in form and substance satisfactory to the
Agent, signed by such Lender shall have been filed with the
Agent.

15.4     NO DUTY TO EXAMINE, ETC.  The Agent shall not be
under a duty to examine or pass upon the validity,
effectiveness or genuineness of any of the Security
Documents or any instrument, document or communication
furnished pursuant to this Agreement or in connection
therewith or in connection with any Security Document, and
the Agent shall be entitled to assume that the same are
valid, effective and genuine, have been signed or sent by
the proper parties and are what they purport to be.

15.5     AGENT AS LENDER.  With respect to that portion of
the Facility made available by it, the Agent shall have the
same rights and powers hereunder as any other Lenders and
may exercise the same as though it were not the Agent, and
the term "Lender" or "Lenders" shall include the Agent in
its capacity as a Lender.  The Agent and its affiliates may
accept deposits from, lend money to and generally engage in
any kind of business with the Borrower and the Guarantor as
if it were not the Agent.

15.6     (a)  OBLIGATIONS OF AGENT.  The obligations of the
Agent under this Agreement, under the Notes, and under the
Security Documents are only those expressly set forth herein
and therein.

         (b)  NO DUTY TO INVESTIGATE.  The Agent shall not
at any time be under any duty to investigate whether an
Event of Default, or an event which with the giving of
notice or lapse of time, or both, would constitute an Event
of Default, has occurred or to investigate the performance
of this Agreement or any of the Security Documents by the
Borrowers or the Guarantor.

15.7     (a)  DISCRETION OF AGENT.  The Agent shall be
entitled to use its discretion with respect to exercising or
refraining from exercising any rights which may be vested in
it by, and with respect to taking or refraining from taking
any action or actions which it may be able to take under or
in respect of, this Agreement, the Note, and the Security
Documents, unless the Agent shall have been instructed by
the Majority Lenders to exercise such rights or to take or
refrain from taking such action; provided, however, that the



                            55
<PAGE> 56





Agent shall not be required to take any action which exposes
the Agent to personal liability or which is contrary to this
Agreement or applicable law.

         (b)  INSTRUCTIONS OF MAJORITY LENDERS.  The Agent
shall in all cases be fully protected in acting or
refraining from acting under this Agreement, under the Note,
under the Guaranty or under any Security Document in
accordance with the instructions of the Majority Lenders,
and any action taken or failure to act pursuant to such
instructions shall be binding on all of the Lenders.

15.8     ASSUMPTION RE EVENT OF DEFAULT.  Except as
otherwise provided in Clause 15.14 hereof, the Agent shall
be entitled to assume that no Event of Default, or event
which with the giving of notice or lapse of time, or both,
would constitute an Event of Default, has occurred and is
continuing, unless the Agent has been notified by the
Borrowers or the Guarantor of such fact, or has been
notified by a Lender that such Lender considers that an
Event of Default or such an event (specifying in detail the
nature thereof) has occurred and is continuing.  In the
event that the Agent shall have been notified by the
Borrowers or any Lender in the manner set forth in the
preceding sentence of any Event of Default or of an event
which with the giving of notice or lapse of time, or both,
would constitute an Event of Default, the Agent shall notify
the Lenders and shall take action and assert such rights
under this Agreement under the Notes and under the Security
Documents as the Majority Lenders shall request in writing.

15.9     NO LIABILITY OF AGENT OR LENDERS.  Neither the
Agent nor any of the Lenders shall be under any liability or
responsibility whatsoever:

    (A)  To the Borrowers or the Guarantor or any other
person or entity as a consequence of any failure or delay in
performance by, or any breach by, any other Lenders or any
other person of any of its or their obligations under this
Agreement or under any Security Document;

    (B)  To any Lender or Lenders, as a consequence of any
failure or delay in performance by, or any breach by, the
Borrowers or the Guarantor of any of their respective
obligations under this Agreement, under the Notes, or under
the Security Documents; or

    (C)  To any Lender or Lenders, for any statements,
representations or warranties contained in this Agreement,



                            56
<PAGE> 57





in any Security Document or any Document or instrument
delivered in connection with the transaction hereby
contemplated; or for the validity, effectiveness,
enforceability or sufficiency of this Agreement, the Note,
or any Security Document or any document or instrument
delivered in connection with the transactions hereby
contemplated.

15.10    INDEMNIFICATION OF AGENT.  The Lenders agree to
indemnify the Agent (to the extent not reimbursed by the
Borrowers or the Guarantor), pro rata according to the
respective amounts of their Commitments, from and against
any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever (including
legal fees and expenses incurred in investigating claims and
defending itself against such liabilities) which may be
imposed on, incurred by or asserted against, the Agent in
any way relating to or arising out of this Agreement, the
Note, or any Security Document, any action taken or omitted
by the Agent thereunder or the preparation, administration,
amendment or enforcement of, or waiver of any provision of,
this Agreement, the Note, or any Security Document, except
that no Lenders shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements
resulting from the Agent's gross negligence or willful
misconduct.

15.11    CONSULTATION WITH COUNSEL.  The Agent may consult
with legal counsel selected by it and shall not be liable
for any action taken, permitted or omitted by it in good
faith in accordance with the advice or opinion of such
counsel.

15.12    RESIGNATION.  The Agent may resign at any time by
giving 60 days' written notice thereof to the Lenders and
the Borrowers.  Upon any such resignation, the Lenders shall
have the right to appoint a successor Agent.  If no
successor Agent shall have been so appointed by the Lenders
and shall have accepted such appointment within 60 days
after the retiring Agent's giving notice of resignation,
then the retiring Agent may, on behalf of the Lenders,
appoint a successor Agent which shall be a bank or trust
company of recognized standing.  The appointment of any
successor Agent shall be subject to the prior written
consent of the Borrowers, such consent not to be
unreasonably withheld.  After any retiring Agent's
resignation as Agent hereunder, the provisions of this



                            57
<PAGE> 58





Clause 15 shall continue in effect for its benefit with
respect to any actions taken or omitted by it while acting
as Agent.

15.13    REPRESENTATIONS OF LENDERS.  Each Lender represents
and warrants to each other Lender and the Agent that:

    (i)  In making its decision to enter into this Agreement
and to make its portion of the Loan available hereunder, it
has independently taken whatever steps it considers
necessary to evaluate the financial condition and affairs of
the Borrowers and the Guarantor, that it has made an
independent credit judgment and that it has not relied upon
any statement, representation or warranty by any other
Lender or the Agent; and

    (ii) So long as any portion of its Commitments remain
outstanding, it will continue to make its own independent
evaluation of the financial condition and affairs of the
Borrowers and the Guarantor.

15.14    NOTIFICATION OF EVENT OF DEFAULT.  The Agent hereby
undertakes to promptly notify the Lenders, and the Lenders
hereby promptly undertake to notify the Agent and the other
Lenders, of the existence of any Event of Default which
shall have occurred and be continuing of which the Agent or
any Lender has actual knowledge.

16       APPOINTMENT OF SECURITY TRUSTEE

    Each of the Lenders irrevocably appoints the Security
Trustee as security trustee on their respective behalf with
regard to the (i) security, powers, rights, titles, benefits
and interests (both present and future) constituted by and
conferred on the Lenders or any of them or for the benefit
thereof under or pursuant to this Agreement, the Note or any
Security Documents (including, without limitation, the
benefit of all covenants, undertakings, representations,
warranties and obligations given, made or undertaken to any
Lender in the Agreement, the Note or any Security Document),
(ii) all moneys, property and other assets paid or
transferred to or vested in any Lender or any agent of any
Lender or received or recovered by any Lender or any agent
of any Lender pursuant to, or in connection with, this
Agreement, the Note or the Security Documents whether from
any Borrower or the Guarantor or any other person and (iii)
all money, investments, property and other assets at any
time representing or deriving from any of the foregoing,
including all interest, income and other sums at any time



                            58
<PAGE> 59





received or receivable by any Lender or any agent of any
Lender in respect of the same (or any part thereof).  The
Security Trustee hereby accepts such appointment.

17       NOTICES AND DEMANDS

17.1     NOTICES.  All notices, requests, demands and other
communications to any party hereunder shall be in writing
(including prepaid overnight courier, facsimile transmission
or similar writing) and shall be given to the Borrowers at
the address or telecopy number set out below and to the
Lenders, the Agent and the Security Trustee at their address
and telecopy number set out below its name on the signature
pages hereto or at such other address or telecopy number as
such party may hereafter specify for the purpose by notice
to each other party hereto.  Each such notice, request or
other communication shall be effective (i) if given by
telecopy, when such telecopy is transmitted to the telecopy
number specified in this Clause and telephonic confirmation
of receipt thereof is obtained or (ii) if given by mail,
prepaid overnight courier or any other means, when received
at the address specified in this Clause or when delivery at
such address is refused.

         If to the Borrowers:

         c/o  Teekay Shipping Limited
              6th Floor, Tradewinds Building
              Bay Street, P.O. Box SS 6293
              Nassau, Bahamas
              Fax: (809) 328-7330

18       MISCELLANEOUS

18.1     TIME OF ESSENCE.  Time is of the essence of this
Agreement but no failure or delay on the part of the Lenders
to exercise any power or right under this Agreement shall
operate as a waiver thereof, nor shall any single or partial
exercise by the Lenders of any power or right hereunder
preclude any other or further exercise thereof or the
exercise of any other power or right.  The remedies provided
herein are cumulative and are not exclusive of any remedies
provided by law.

18.2     UNENFORCEABLE, ETC., PROVISIONS - EFFECT.  In case
any one or more of the provisions contained in this Agree-
ment, in the Note or in any of the Security Documents would,
if given effect, be invalid, illegal or unenforceable in any
respect under any law applicable in any relevant



                            59
<PAGE> 60





jurisdiction, said provision shall not be enforceable
against the Borrowers, but the validity, legality and
enforceability of the remaining provisions herein or therein
contained shall not in any way be affected or impaired
thereby.

18.3     REFERENCES.  References herein to Clauses and
Schedules are to be construed as references to clauses of,
and schedules to, this Agreement.

18.4     FURTHER ASSURANCES.  Each of the Borrowers agree
that if this Agreement, the Note or any of the Security
Documents shall, in the reasonable opinion of the Lenders,
at any time be deemed by the Lenders for any reason
insufficient in whole or in part to carry out the true
intent and spirit hereof or thereof, it will execute or
cause to be executed such other and further assurances and
documents as in the opinion of the Lenders may be required
in order more effectively to accomplish the purposes of this
Agreement, the Note or any of the Security Documents.

18.5     PRIOR AGREEMENTS, MERGER.  Any and all prior
understandings and agreements heretofore entered into
between the Borrowers, the Guarantor and Palm Shipping on
the one part, and the Agent, the Security Trustee or the
Lenders, on the other part, whether written or oral, are
superseded by and merged into this Agreement and the other
agreements (the forms of which are exhibited hereto) to be
executed and delivered in connection herewith to which the
Borrowers, the Guarantor and Palm Shipping, the Security
Trustee and/or Agent and/or the Lenders are parties, which
alone fully and completely express the agreements between
the Borrowers, the Guarantor, the Security Trustee, the
Agent and the Lenders.

18.6     JOINT AND SEVERAL OBLIGATIONS.  The obligations of
the Borrowers under this Agreement and under each provision
hereof are joint and several whether or not so specified in
any provision hereof.  Each Borrower shall be entitled to
rights of contribution as against the other Borrower,
provided, however, that such rights of contribution shall
(a) not in any way condition or lessen the liability of any
Borrower as a joint and several borrower for the whole of
the obligations owed to the Lenders hereunder, under the
Note or under the Security Documents and (b) be fully
subject and subordinate to the rights of the Lenders
hereunder, under the Note and under the Security Documents.





                            60
<PAGE> 61





18.7     LIMITATION OF LIABILITY.  Notwithstanding anything
to the contrary contained in this Agreement, the Note or any
of the other Security Documents, in the event that any court
or other judicial body of competent jurisdiction determines
that legal principles of fraudulent conveyances, fraudulent
transfers or similar concepts are applicable in evaluating
the enforceability against any particular Borrower or its
assets of this Agreement, the Note or any Security Document
granted by such Borrower as security for its obligations
hereunder and that under such principles, this Agreement,
the Note or such Security Documents would not be enforceable
against such Borrower or its assets unless the following
provisions of this Clause 18.7 had effect, then, the maximum
liability of each Borrower hereunder (the "Maximum Liability
Amount") shall be limited so that in no event shall such
amount exceed the lesser of (i) the Indebtedness and (ii) an
amount equal to the aggregate, without double counting, of
(a) ninety-five percent (95%) of the such Borrower's
Adjusted Net Worth (as hereinafter defined) on the date
hereof, or on the date enforcement of this Agreement is
sought (the "Determination Date"), whichever is greater, (b)
the aggregate fair value of such Borrower's Subrogation and
Contribution Rights (as hereinafter defined) and (c) the
amount of any Valuable Transfer (as hereinafter defined) to
such Borrower, provided that such Borrower's liability under
this Agreement shall be further limited to the extent, if
any, required so that the obligations of such Borrower under
this Agreement shall not be subject to being set aside or
annulled under any applicable law relating to fraudulent
transfers or fraudulent conveyances.  In determining the
limitations, if any, on the amount of any of such Borrower's
obligations hereunder pursuant to the preceding sentence,
any rights of subrogation or contribution (collectively the
"Subrogation and Contribution Rights") which such Borrower
may have on the Determination Date with respect to any other
guarantor of the Indebtedness under applicable law shall be
taken into account.  As used in this Clause 18.7,
"Indebtedness" of the Borrower shall mean, all of the
Borrower's present or future indebtedness whether for
principal, interest, fees, expenses or otherwise, to the
Lenders under this Agreement and the Security Documents.  As
used herein "Adjusted Net Worth" of the respective Borrower
shall mean, as of any date of determination thereof, an
amount equal to the lesser of (a) an amount equal to the
excess of (i) the amount of the present fair saleable value
of the assets of such Borrower over (ii) the amount that
will be required to pay such Borrower's probable liability
on its then existing debts, including contingent
liabilities, as they become absolute and matured, and (b) an



                            61
<PAGE> 62





amount equal to (i) the excess of the sum of such Borrower's
property at a fair valuation over (ii) the amount of all
liabilities of such Borrower, contingent or otherwise, as
such terms are construed in accordance with applicable laws
governing determinations of the insolvency of debtors.  In
determining the Adjusted Net Worth of such Borrower for
purposes of calculating the Maximum Liability Amount for
such Borrower, the liabilities of such Borrower to be used
in such determination pursuant to each clause (ii) of the
preceding sentence shall in any event exclude (a) the
liability of such Borrower under this Agreement and the
Security Documents to which it is a party, (b) the
liabilities of such Borrower subordinated in right of
payment to this Agreement and (c) any liabilities of such
Borrower for Subrogation and Contribution Rights to any of
the other guarantors.  As used herein "Valuable Transfer"
shall mean, in respect of such Borrower, (a) all loans,
advances or capital contributions made to such Borrower with
proceeds of the Facility, (b) all debt securities or other
obligations of such Borrower acquired from such Borrower or
retired by such Borrower with proceeds of the Facility, (c)
the fair market value of all property acquired with proceeds
of the Facility and transferred, absolutely and not as
collateral, to such Borrower, (d) all equity securities of
such Borrower acquired from such Borrower with proceeds of
the Facility, and (e) the value of any other economic
benefits in accordance with applicable laws governing
determinations of the insolvency of debtors, in each such
case accruing to such Borrower as a result of the Facility
and this Agreement.

18.8     ENTIRE AGREEMENT; AMENDMENTS.  This Agreement
constitutes the entire agreement of the parties hereto
including all parties added hereto pursuant to an Assignment
and Assumption Agreement.  This Agreement may be executed in
any number of counterparts, each of will shall be deemed an
original, but all such counterparts together shall
constitute one and the same instrument.  Any provision of
this Agreement may be amended or waived if, but only if,
such amendment or waiver is in writing and is signed by the
Borrowers and the Majority Lenders (and, if the rights or
duties of the Agent or the Security Trustee are affected
thereby, by the Agent or the Security Trustee, as
applicable); PROVIDED that no amendment or waiver shall,
unless agreed in writing by all the Lenders, (i) increase or
decrease the Commitment of any Lender or subject any Lender
to any additional obligation, (ii) reduce the principal of
or rate of interest on the Loan or any fees hereunder, (iii)
postpone the date fixed for any payment of principal of or



                            62
<PAGE> 63





interest on the Loan or any fees hereunder or for any
termination of any Commitment, (iv) amend Section 10, (v)
waive any condition precedent to the making of the Loan,
(vi) release any collateral or (vii) amend or modify this
Section 18.8 or otherwise change the percentage of the
Commitments or of the aggregate unpaid principal amount of
the Loan, or the number or category of Lenders, which shall
be required for the Lenders or any of them to take any
action under this Clause or any other provision of this
Agreement.

18.9     HEADINGS.  In this Agreement, Clause headings are
inserted for convenience of reference only and shall not be
taken into account in the interpretation of this Agreement.

         IN WITNESS whereof the parties hereto have caused
this Agreement to be duly executed by their duly authorized
representatives as of the day and year first above written.

VSSI TOKYO INC.                             VSSI SUN INC.

By /s/ Amy J. Bokinsky                    By /s/ Amy J. Bokinsky
  --------------------                       -------------------
  Name:  Amy J. Bokinsky                    Name:  Amy J. Bokinsky
  Title: Attorney-in-Fact                   Title: Attorney-in-Fact

DORIO SHIPPING LTD.                         VSSI MARINE INC.

By /s/ Amy J. Bokinsky                    By /s/ Amy J. Bokinsky
  --------------------                       -------------------
  Name:  Amy J. Bokinsky                    Name:  Amy J. Bokinsky
  Title: Attorney-in-Fact                   Title: Attorney-in-Fact

VSSI CARRIERS INC.

By /s/ Amy J. Bokinsky
  --------------------
  Name:  Amy J. Bokinsky
  Title: Attorney-in-Fact
















                            63
<PAGE> 64





COMMITMENTS
------------

$35,000,000          CHRISTIANIA BANK OG KREDITKASSE,
                     New York Branch,
                       as Agent, Security Trustee and Lender
                     11 West 42nd Street
                     7th Floor
                     New York, NY  10036
                     Attention:  Shipping Department
                     Telephone:  (212) 827-4800
                     Telecopy:  (212) 827-4888


                     By /s/ Justin F. McCarthy, III
                        ---------------------------
                       Name: Justin F. McCarthy, III
                       Title: Vice President


                     By /s/ Hans Chr. Kjelsrud
                        ----------------------
                       Name: Hans Chr. Kjelsrud
                       Title: Vice President


$27,500,000          THE BANK OF NOVA SCOTIA,
                       as Lender
                     Scotia House
                     33 Finsbury Square
                     London, EC2A 1BB
                     England
                     Telephone:  (44-171) 826-5789
                     Telecopy:  (44-171) 454-9019
                     Attention:  Shipping Department


                     By /s/ Paul A. Schultz
                        -------------------
                       Name: Paul A. Schultz
                       Title: Vice President















                            64
<PAGE> 65







$27,500,000          BANQUE INDOSUEZ,
                       as Lender
                     47, rue de Monceau
                     75008 Paris
                     France
                     Telephone:  (331) 44-20-20-20
                     Telecopy:  (331) 44-20-29-87
                     Attention:


                     By /s/ Thibaud Escoffier
                        ---------------------
                       Name: Thibaud Escoffier
                       Title: Vice-President, Shipping





































                            65
<PAGE> 66





                   CONSENT AND AGREEMENT


         The undersigned, referred to in the foregoing Term
Loan Agreement as the "Guarantor", hereby consents and
agrees to said Agreement and to the documents contemplated
thereby and to the provisions contained therein relating to
conditions to be fulfilled and obligations to be performed
by the undersigned pursuant to or in connection with said
Agreement and agree particularly to be bound by the
representations, warranties and covenants relating to the
undersigned contained in Clauses 2 and 9 of said Agreement
to the same extent as if the undersigned were a party to
said Agreement.


                             TEEKAY SHIPPING CORPORATION



                             By /s/ John S. Osborne, Jr.
                                ------------------------
                                Name:  John S. Osborne, Jr.
                                Title: Attorney-in-Fact