EXHIBIT 2.35

                                 AGREEMENT FOR
                                        A
                           U.S. $44,000,000 TERM LOAN
                                    FACILITY

                             TO BE MADE AVAILABLE TO
                       BARRINGTON (AUSTRALIA) PTY LIMITED
                                (ACN 080 850 559)
                       PALMERSTON (AUSTRALIA) PTY LIMITED
                                (ACN 080 850 586)

                                       BY

                             RABO AUSTRALIA LIMITED
                                (ACN 060 452 217)



                                December 18, 1997

<PAGE>


                                      INDEX

                                                                            PAGE


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

         1.1           Defined Terms........................................   1
         1.2           Construction.........................................   5
         1.3           Accounting Terms.....................................   5

CLAUSE 2  REPRESENTATIONS AND WARRANTIES....................................   5

         2.1(a)        Due Organization and Power...........................   5
         2.1(b)        Authorization and Consents...........................   5
         2.1(c)        Binding Obligations..................................   6
         2.1(d)        No Violation.........................................   6
         2.1(e)        Litigation...........................................   6
         2.1(f)        No Default...........................................   6
         2.1(g)        Financial Statements.................................   6
         2.1(h)        Tax Returns and Payments.............................   6
         2.1(i)        Insurance............................................   7
         2.1(j)        Offices..............................................   7
         2.1(k)        Equity Ownership.....................................   7
         2.1(l)        Limited Purpose......................................   7
         2.1(m)        Confirmation.........................................   7
         2.1(n)        Survival.............................................   7

CLAUSE 3  THE LOAN     .....................................................   7

         3.1(a)        Purposes.............................................   7
         3.1(b)        Loan ................................................   7
         3.2           Drawdown Notice......................................   7
         3.3           Effect of Drawdown Notice............................   8

CLAUSE 4  CONDITIONS PRECEDENT..............................................   8

         4.1           Conditions Precedent to Drawdown of
                         Loan ..............................................   8
         4.2           Further Conditions Precedent.........................   9

CLAUSE 5  REPAYMENT AND PREPAYMENT .........................................  10

         5.1           Repayment............................................  10
         5.2           Voluntary Prepayment.................................  10
         5.3           Application of Prepayments...........................  10

CLAUSE 6  INTEREST AND RATE.................................................  11

         6.1           Interest Rate; Default Rate..........................  11
         6.2           Interest Periods.....................................  11
         6.3           Interest Payments....................................  11
         6.4           Calculation of Interest..............................  11

CLAUSE 7  PAYMENTS     .....................................................  11

         7.1           Place of Payments, No Set Off........................  11
         7.2           Tax Credits..........................................  13

CLAUSE 8 EVENTS OF DEFAULT..................................................  13

         8.1(a)        Repayment............................................  13
         8.1(b)        Other Payments.......................................  13
         8.1(c)        Representations, etc.................................  13
         8.1(d)        Impossibility, Illegality............................  13
         8.1(e)        Covenants............................................  14
         8.1(f)        Indebtedness.........................................  14
         8.1(g)        Stock Ownership......................................  14
         8.1(h)        Default under the Reimbursement
                         Agreement..........................................  14
         8.1(i)        Bankruptcy...........................................  14
         8.1(j)        Sale of Assets.......................................  15
         8.1(k)        Judgments............................................  15
         8.1(l)        Inability to Pay Debts...............................  15
         8.1(m)        Financial Position...................................  15
         8.2           Indemnification......................................  16
         8.3           Application of Moneys................................  16

CLAUSE 9 COVENANTS     .....................................................  16

         9.1           Covenants............................................  16

CLAUSE 10  ASSIGNMENT  .....................................................  18

CLAUSE 11  ILLEGALITY, INCREASED COST,
                        NON-AVAILABILITY, ETC...............................  18

         11.1          Illegality   ........................................  18
         11.2          Increased Cost.......................................  19
         11.3          Determination of Losses..............................  20
         11.4          Compensation for Losses..............................  20

CLAUSE 12  CURRENCY INDEMNITY       ........................................  20

         12.1          Currency Conversion..................................  20
         12.2          Change in Exchange Rate..............................  20
         12.3          Additional Debt Due..................................  20
         12.4          Rate of Exchange.....................................  20

CLAUSE 13  FEES AND EXPENSES        ........................................  21

         13.1          Expenses     ........................................  21

CLAUSE 14  APPLICABLE LAW, JURISDICTION AND WAIVER..........................  21

         14.1          Applicable Law.......................................  21
         14.2          Jurisdiction ........................................  21

CLAUSE 15  NOTICES AND DEMANDS      ........................................  22

         15.1          Notices      ........................................  22

CLAUSE 16  MISCELLANEOUS            ........................................  23

         16.1          Time of Essence......................................  23
         16.2          Unenforceable, etc., Provisions -
                         Effect     ........................................  23
         16.3          References   ........................................  23
         16.4          Further Assurances...................................  23
         16.5          Joint and Several Obligations........................  23
         16.6          Entire Agreement, Amendments.........................  23
         16.7          Headings     ........................................  24


EXHIBITS

    A Form of Letter of Guarantee
    B Form of Drawdown Notice

99182.020 #160632



                          TERM LOAN FACILITY AGREEMENT

                  THIS TERM LOAN  FACILITY  AGREEMENT is made as of the 17th day
of December, 1997, and is by and among:

          (1)  BARRINGTON  (AUSTRALIA)  PTY  LIMITED  (ACN  080  850  559),  and
               PALMERSTON  (AUSTRALIA)  PTY  LIMITED  (ACN  080 850  586),  both
               corporations  incorporated  and  existing  under  the laws of New
               South  Wales,  Australia  (together,  the  "Borrowers",   each  a
               "Borrower"); and

          (2)  RABO   AUSTRALIA   LIMITED  (ACN  060  452  217),  a  corporation
               incorporated  and  existing  under the laws of New  South  Wales,
               Australia (the "Lender").

                                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 in Clause 1.1 of the  Reimbursement  Agreement (as defined  below) or as
follows:

     "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;

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

     "Banks" means the "Banks" party to the Reimbursement Agreement.

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

     "Drawdown Date" means, the date, being a Banking Day falling not later than
     January 31, 1998,  upon which the Borrowers  shall have  requested that the
     Loan be made available as provided in Clause 3 hereof and;

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

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

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

     "Guarantor" Nedship Bank (America) N.V., a banking corporation incorporated
     and existing under the laws of the Netherlands Antilles;


     "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  Loan,  means  any  period  by
     reference to which an interest  rate is  determined  pursuant to Clause 6.2
     hereof;


     "Letter of Guarantee" means the letter of guarantee in respect of the joint
     and  several  obligations  of the  Borrowers  under  this  Agreement  to be
     executed by the Guarantor in favor of the Lender  pursuant to Clause 4.1(d)
     hereof substantially in the form of Exhibit B hereto;

     "LIBOR"  means,  in relation  to  Interest  Periods of three (3) or six (6)
     months,  the rate (rounded upward to the nearest 1/16th of one percent) for
     offer rates 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
     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  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
     Lender pursuant to Clause 3.1 in the maximum principal amount of Forty Four
     Million U.S.  Dollars  (US$44,000,000)  or the balance thereof from time to
     time outstanding;

     "Manager"  means  Australian  Tankships  Pty  Limited  a  New  South  Wales
     corporation and a Wholly Owned Subsidiary of Teekay;

     "Margin" is .10% per annum;


     "Maturity  Date" means the day which  falls  eight 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;

     "Reimbursement  Agreement" means the Reimbursement Agreement dated the date
     hereof entered into between the Borrowers, Palmstar Thistle, Inc., Alliance
     Chartering,  the Banks (as  defined  therein),  the Agent and the  Security
     Trustee (as defined therein);

     "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;

     "Security Document" means the Letter of Guarantee;

     "Security  Trustee"  means Nedship Bank (America)  N.V.,  appointed as such
     pursuant to Clause 13 of the Reimbursement Agreement;

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

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

     "Vessels" means the Australian registered vessels,  BARRINGTON Official No.
     853229, and PALMERSTON Official No. 853755;

1.2  Construction.  Words  importing the singular  number only shall include the
plural and vice versa. Words importing persons shall include  companies,  firms,
corporations,  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  consistently  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 Lender 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 drawdown of the Loan hereunder) that:

                  (a) Due Organization and Power.  Each of the Borrowers 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 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  to enter  into and  perform  its  obligations  under the  Transaction
Documents and 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 enforceable against each 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 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  Lender on or before  the date  hereof,  no action,  suit or  proceeding  is
pending or threatened against any of the Borrowers 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 either of the Borrowers.

                  (f) No Default.  Neither of the  Borrowers 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)  Financial  Statements.  Except as otherwise  disclosed in
writing to the Lender on or prior to the date hereof,  all information and other
data furnished by the Borrowers to the Lender are complete and correct,  and all
financial statements furnished by the Borrowers 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.

                  (h) Tax Returns and Payments.  Each of the Borrowers 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.

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

                  (j)  Offices.  Each of the chief  executive  office  and chief
place of business of each of the Borrowers and the office in which the financial
records  relating the Vessels are kept,  is, and will continue to be, located at
Ernst & Young at Ernst & Young Building,  321 Kent Street, Sydney NSW Australia;
none of the Borrowers  maintains a place ofbusiness in Canada, the United States
or the United Kingdom.

                  (k) Equity Ownership.  Each of the Borrowers is a Wholly Owned
Subsidiary of Teekay.  On the Drawdown Date,  none of the Borrowers will own any
shares of capital  stock,  partnership  interest or any other direct or indirect
equity interest in any corporation, partnership or other entity.

                  (l)  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.

                  (m)   Confirmation.   All   representations,   covenants   and
undertakings made pursuant to Clause 3 of the Reimbursement Agreement are hereby
incorporated,  repeated  and  warranted  to be true and  correct as if they were
fully set forth herein;

                  (n) Survival.  All  representations,  covenants and warranties
made herein and in any certificate or other document  delivered  pursuant hereto
or in connection herewith shall survive the making of the Loan.

3        THE LOAN

3.1 (a) Purposes.  The Lender shall make the Loan available to the Borrowers for
the purpose of financing the acquisition cost of the Vessels.

                  (b) Loan. The Lender, 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 advance the Loan to the  Borrowers.  The proceeds of the Loan
shall be utilized to partially finance the acquisition cost of the Vessels.

3.2 Drawdown Notice. The Borrowers, shall, at least five (5) Banking Days before
a Drawdown Date, serve a notice,  such notice to be substantially in the form of
Exhibit C hereto (a "Drawdown Notice"),  on the Lender which notice shall (a) be
in writing  addressed to the Lender,  (b) be effective on receipt by the Lender,
(c) specify  the amount of the Loan to be drawn,  (d) specify the Banking Day on
which the Loan is to be drawn,  (e) identify the  purpose(s) of the Loan and the
Borrower(s)  on whose  behalf the Loan is  requested,  (f)  specify  the initial
Interest Period for the Loan, (g) specify the disbursement  instructions and (h)
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 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 Lender
to make the Loan  available  to the  Borrowers  under  this  Agreement  shall be
expressly subject to the following conditions precedent:

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

          (i)  copies,  certified  as true and complete by an officer of each of
               the Borrowers, of the resolutions of each such company's board of
               directors   (and,  if  any  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  Borrowers  or  other  applicable  party,  of  all  documents
               evidencing any other necessary action (including  actions by such
               parties  thereto other than the Borrowers,  as may be required by
               the Lender), approvals or consents with respect to this Agreement
               and the transactions contemplated hereby and thereby;

          (iii)copies,  certified  as true and complete by an officer of each of
               the Borrowers 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 issued by the appropriate authorities of
               the respective jurisdiction of incorporation of such parties; and

     (b) the Lender shall have received evidence  satisfactory to the Lender and
     counsel to the Lender that all conditions  precedent  required  pursuant to
     Clause 4 of the Reimbursement Agreement have been satisfied;

     (c) each Borrower shall have duly executed and delivered this Agreement;

     (d) the  Guarantor  shall have duly  executed and  delivered  the Letter of
     Guarantee;

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

     (f) the  Borrowers  shall have  provided  such  evidence  as the Lender may
     require  documenting  the current  legal and  beneficial  ownership  of the
     shares of the Borrowers; and

     (g)  Norton  Smith & Co.,  special  counsel  to the  Lender on  matters  of
     Australian  law,  shall have  advised  the  Lender  that the  Borrower  has
     complied with, or made  satisfactory  arrangement for compliance  with, the
     requirements of clauses 4.1(a) through (f).

4.2 Further Conditions Precedent.  The obligation of the Lender to make the Loan
available to the Borrowers  shall be expressly and separately from the foregoing
conditional upon, on the relevant Drawdown Date:

     (a) the Lender having  received a Drawdown  Notice in  accordance  with the
     terms of Clause 3.2;

     (b) the  representations  stated in Clause 2 (updated  mutatis  mutandis to
     such date) being true and correct as if made on that date;

     (c) no Event of Default having  occurred and being  continuing and no event
     having occurred and being  continuing  which,  with the giving of notice or
     lapse of time, or both, would constitute an Event of Default;

     (d) the  Lender  being  satisfied  that no  Event  of  Default  will  arise
     following the drawdown of the Loan in question by reason of the drawdown of
     the Loan and that no event or state of affairs exists which constitutes, in
     the  reasonable  opinion of the  Lender,  a  material  risk that it will be
     unlawful  or  impossible  for the  Borrowers,  or any other of the  parties
     thereto to make any payment or perform any material  obligation as required
     under the terms of this Agreement and the Security  Document to which it is
     a party or any of them; and

5        REPAYMENT AND PREPAYMENT

5.1 Repayment.  The Borrowers shall repay the principal  amount of the Loan with
interest  thereon in sixteen (16)  consecutive  semiannual  installments  on the
Repayment  Dates, the first fifteen of which shall be in the principal amount of
Two Million Two Hundred Thousand Dollars ($2,200,000) and the sixteenth and last
installment  shall  be  in  the  principal  amount  of  Eleven  Million  Dollars
($11,000,000).

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) in increments of $1,000,000
or the full amount of the Loan.

5.3  Application  of  Prepayments.  Any  prepayments  of the Loan made hereunder
(including,  without  limitation,  those made  pursuant  to Clauses 5.2 and 9.1)
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 three or six
months, or such other period as selected by the Borrowers which is available to,
and accepted by the Lender 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 to  allow  the  installments  to be met on each  Repayment  Date.  The
Borrowers,  shall provide the Lender 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  fail  to give  notice  as
aforesaid, the relevant Interest Period shall be three (3) months.

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 Lender at its
office located at Level 10, Challis House, 4 Martin Place, Sydney, NSW Australia
or to such other place as the Lender may direct 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 Lender 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 Lender such documentary evidence with respect to such withholding or
deduction  as may be required  from time to time by the Lender.  Notwithstanding
the preceding  sentence,  the Borrowers  shall not be required to pay additional
amounts or otherwise indemnify the Lender for or on account of:

                  (i) Taxes  based on or  measured  by the overall net income of
the 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 the Lender that would not have been
imposed  but for the Lender  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
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 the Lender as a
result of a transfer,  sale,  assignment,  or other disposition by the Lender of
any interest in any  Transaction  Document 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 the Lender (and  including as such a transferee  the
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, the
Lender had there not been a transfer,  sale,  assignment or other disposition of
the shares of the Lender or a transfer, sale, assignment or other disposition by
the Lender of any  interest in any Vessel 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 the  Lender  that  would not have been
imposed  but for any  failure  of the Lender to comply  with any  return  filing
requirement or any certification, information, documentation, reporting or other
similar  requirement  known to the  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 the Lender for or on account of any Tax
pursuant to Clause 7.1(a),  the Borrower will promptly  notify the Lender of the
nature of such Tax,  and shall  furnish  such  information  to the  Lender  with
respect to such Tax, as the Lender may reasonably  request.  In the event of any
knowledge or opinion of a Borrower  described  in the  preceding  sentence,  the
Borrowers  and the Lender shall  consult in good faith to determine  what may be
required to fund the Loan in  Australian  Dollars  and/or to eliminate or reduce
such Tax, and shall each use  reasonable  efforts to fund the Loan in Australian
Dollars  and/or to eliminate or reduce such Tax (so long as such efforts do not,
in the  reasonable  opinion of the  relevant  Lender,  result in any cost to the
Lender or any  modification  of the terms or  repayment of the Loan or result in
the Lender being subjected to any additional risk or exposure).

7.2 Tax  Credits.  If the Lender at its  discretion  utilises  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 the Lender shall  reimburse  the Borrowers for the amount of the
credit so obtained.  The Lender shall use reasonable  efforts in filing such tax
return as are necessary to obtain any such credit. In connection therewith,  the
Lender may consult with its legal advisers, all fees and expenses of which shall
be for the  account  of the  Borrowers.  Where the Credit is not  utilized,  the
Lender shall use reasonable endeavors to pass credit on to 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 is not paid
on the due date; or

                  (b) Other Payments.  Any fees or other amount becoming payable
to the Lender  under this  Agreement 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  Borrowers  in  this  Agreement  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,  to fulfill any of the  covenants  and  obligations
contained  herein or, exercise any of the rights vested in any of them hereunder
and such  impossibility or illegality,  in the reasonable opinion of the Lender,
will have a  material  adverse  effect  on its  rights  hereunder,  or under the
Security Document or on its rights to enforce any thereof; or

                  (e)  Covenants.  Either  of  the  Borrowers  defaults  in  the
performance of any term, covenant or agreement contained in this Agreement 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  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  Lender,  could have a material  adverse  effect on their  rights
hereunder or under any of the Security Document or on their right to enforce any
thereof and continues unremedied for a period of thirty (30) days; or

                  (f)  Indebtedness.  The Borrowers 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
$500,000 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  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 Lender (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 Trustee or (iii) less than
fifty-one  percent (51%) of the issued and outstanding  shares of Teekay is held
beneficially and of record by the Cirrus Trust and the JTK Trust; or

                  (h) Default  under the  Reimbursement  Agreement.  There is an
event of default under the Reimbursement Agreement which shall have occurred and
be continuing; or

                  (i)  Bankruptcy.   Either  of  the  Borrowers   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 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 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 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  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 Security
Document or any of them; or

                  (l) Inability to Pay Debts.  Any of the Borrowers 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 Borrower  which,  in the reasonable  opinion of the Lender,  is likely to
have a material  adverse  effect on the ability of the  Borrowers to perform its
material obligations under this Agreement;

         then the Lender's  obligation to make the Loan thereof  available shall
cease  and the  Lender,  by  notice  to the  Borrowers,  may  declare  the  then
outstanding  amount of the Loan,  accrued interest and any other sums payable by
the Borrowers  hereunder,  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  shall be
immediately  due  and  payable  without  declaration  or  other  notice  to  the
Borrowers. In such event, the Lender, may (i) proceed to protect and enforce its
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 or in the Security  Document or to enforce the payment of the Security
Document or to enforce any other legal or equitable right of the Lender, or (ii)
proceed to take any action authorized or permitted under the terms of any of the
Security  Document or by applicable  laws for the collection of all sums due, or
so declared due 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  Lender  hereunder,  all moneys and other
amounts of the  Borrowers,  then or  thereafter  in  possession  of the  Lender,
inclusive  of the balance of any  deposit  account  (demand or time,  matured or
unmatured) of the Borrowers, then or thereafter with the Lender.

8.2 Indemnification.  The Borrowers agree to, and shall,  indemnify and hold the
Lender harmless against any loss or costs or expenses  (including legal fees and
expenses)  which the Lender  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  (other than costs and  expenses  caused by the
gross negligence or willful misconduct of the 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 Lender's  certification  of such costs and  expenses  shall,
absent any manifest error, be conclusive and binding on the Borrowers.

8.3  Application of Moneys.  All moneys received by the Lender under or pursuant
to this Agreement  after the happening of any Event of Default  (unless cured to
the  satisfaction of the Lender) shall be applied by the Lender in the following
manner:

               (i)  first,  in or towards  the payment or  reimbursement  of any
                    expenses or liabilities incurred by the Lender in connection
                    with the  ascertainment,  protection or  enforcement  of its
                    rights  and  remedies   hereunder  and  under  the  Security
                    Document,

               (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 Lender under this Agreement, and

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

9    COVENANTS

9.1 Each Borrower hereby covenants and undertakes with the Lender that, from the
date hereof and so long as any principal,  interest or other monies are owing in
respect of this Agreement:

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 Lender) of, the terms of this Agreement and the Reimbursement Agreement;

                  (ii)  Notice of  Default.  Promptly  inform  the Lender 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) any
litigation  or  governmental   proceeding  pending  or  threatened  against  the
Borrowers  or Teekay  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 (c) 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;

                 (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
Lender's') obligations under this Agreement;

                  (iv) Corporate Existence.  Do or cause to be done, and procure
that Teekay and  Alliance  Chartering  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;

                   (v) Taxes.  Pay and discharge,  and cause Teekay and Alliance
Chartering 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  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;

                  (vi)  Compliance  with Statutes,  etc. Do or cause to be done,
and procure  that Teekay and Alliance  Chartering  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,  Teekay  and  Alliance
Chartering and including,  without limitation, those laws, rules and regulations
relating to employee benefit plans and environmental matters;

                 (vii)  Maintenance  of  Properties.  Maintain,  or  cause to be
maintained,  and keep, or cause to be kept, and procure that Teekay and Alliance
Chartering 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;

10       ASSIGNMENT

                  This Agreement shall be binding upon, and inure to the benefit
of, the  Borrowers,  the Lender and their  respective  successors  and  assigns,
except  that the  Borrowers  may not  assign  any of its  rights or  obligations
hereunder except as specifically provided herein. The Lender 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 Lender in connection  with any
such  assignment  shall be for its own  account).  The  Borrowers  will take all
reasonable actions requested by the Lender 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 the
Lender  reasonably  concludes  that it has  become  unlawful  for the  Lender to
maintain or give effect to its  obligations as  contemplated  by this Agreement,
the Lender shall inform the Borrowers to that effect,  whereafter  the liability
of the Lender to make the Loan available shall forthwith cease and the Borrowers
shall be required to prepay the then outstanding portion of the 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 the Lender shall negotiate in good faith with
a view to agreeing on terms for making the Loan available in Australian  Dollars
or or otherwise  restructuring  the Loan on a basis which is not  unlawful  with
respect to the Lender and the  Lender  shall use  reasonable  efforts to replace
itself 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 interpretation 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 the Lender 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 the Lender effected by
          the  jurisdiction of organization or the jurisdiction of the principal
          place of business of the Lender,  the  Commonwealth of Australia,  the
          State of New  South  Wales 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 Lender, or

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

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

          (b)  the Borrowers  agree  forthwith  upon demand to pay to the Lender
               such amount as the Lender certifies to be necessary to compensate
               the Lender 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 Lender at any time before or after
               any repayment of the Loan.

11.3  Determination  of Losses.  A certificate  or  determination  notice of the
Lender,  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 Lender all accrued interest to
the date of actual  payment and all other sums  payable by the  Borrowers to the
the Lender 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 then the conversion shall be made, in the discretion of the Lender, 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 Lender 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.

12.2  Change in  Exchange  Rate.  If there is a change  in the rate of  exchange
prevailing  between the  conversion  date 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  in
Dollars;  any excess  over the amount due  received or  collected  by the Lender
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.

12.4. Rate of Exchange.  The term "rate of exchange" in this Clause 12 means the
rate at which the Lender 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 Expenses.  The Borrowers  jointly and severally  agree,  whether or not the
transactions hereby contemplated are consummated, on demand to pay, or reimburse
the Lender for its payment of, the reasonable expenses of the Lender 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 the  Lender's  rights or  remedies  with  respect  thereto or in the
preservation of the Lender's  priorities  under the  documentation  executed and
delivered in connection 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 fees and disbursements
of the Lender's counsel in connection  therewith,  including Seward & Kissel and
Norton  Smith  & Co.,  as  well  as the  reasonable  fees  and  expenses  of any
independent appraisers,  surveyors,  engineers and other consultants retained by
the  Lender  in  connection  with this  transaction,  all  reasonable  costs and
expenses,  if any, in connection  with the enforcement of this Agreement and the
Security  Document and stamp and other similar  taxes,  if any,  incident to the
execution  and delivery of the  documents  herein  contemplated  and to hold the
Lender 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 Lender, 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 the  Lender,  at its  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 South Wales.

14.2  Jurisdiction.  Each of the  Borrowers  hereby  irrevocably  submits to the
jurisdiction of the Supreme Court of New South Wales and of the Federal Court of
Australia  in any action or  proceeding  brought  against it by the Lender 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  Clayton  Utz,  Levels  27-35,  No. 1
O'Connell Street, Sydney NSW Australia. 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 the fact and of the amount of any  indebtedness  of the
Borrowers  to the Lender)  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 Lender  promptly of any
change of  address  for the  purpose  of  service  of  process.  Notwithstanding
anything  herein to the  contrary,  the  Lender  may  bring any legal  action or
proceeding in any other appropriate jurisdiction.

15                NOTICES AND DEMANDS

15.1 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
and  Lender at the  address  or  telecopy  number set out below 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
                           4th Floor
                           Euro-Canadian Centre
                           Marlborough Street and Navy Lion Road
                           P.O. Box SS 7293
                           Nassau, Bahamas
                           Telecopy No.: 242-328-7330
                           Attention: The President

                  If to the Lender:

                  Rabo Australia Limited
                  Level 10, Challis House
                  4 Martin Place
                  Sydney, NSW AUSTRALIA
                  Telecopy No.: 612-9231-0007
                  Attention: Veronica White

16                MISCELLANEOUS

16.1 Time of Essence. Time is of the essence of this Agreement but no failure or
delay on the part of the  Lender  to  exercise  any  power or right  under  this
Agreement  shall  operate as a waiver  thereof,  nor shall any single or partial
exercise  by the Lender 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.

16.2  Unenforceable,  etc.,  Provisions - Effect. In case any one or more of the
provisions  contained in this  Agreement  would,  if given  effect,  be invalid,
illegal or unenforceable in any respect under any law applicable in any relevant
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.

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

16.4 Further  Assurances.  Each of the Borrowers agree that if this Agreement in
the  reasonable  opinion of the Lender,  at any time be deemed by the Lender 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 Lender may be required
in order more effectively to accomplish the purposes of this Agreement.

16.5 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  Lender  hereunder  and  (b)  be  fully  subject  and
subordinate to the rights of the Lender hereunder.

16.6  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 Lender
(and, if the rights or duties of the Lender are affected thereby, by the Lender,
as applicable).

16.7 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.



<PAGE>



Executed as an Agreement



Signed for and on behalf of                                 )
Barrington (Australia) Pty. Limited                         )
ACN 080 850 559                                             )
in the presence of:                                         )



-------------------------



Signed for and on behalf of                                 )
Palmerston (Australia) Pty Limited                          )
ACN 080 850 586                                             )
in the presence of:                                         )



-------------------------



Signed for and on behalf of                                 )
Rabo Australia Limited                                      )
ACN 060 452 217                                             )
in the presence of :                                        )



-------------------------

99182.020 #160632



<PAGE>


December 17, 1997
To:        Rabo Australia Limited
           Level 10, Challis House
           74 Martin Place
           Sydney NSW Australia

At the request of  Barrington  (Australia)  Pty.  Limited  (ACN 080 850 559) and
Palmerston (Australia) Pty. Limited (ACN 080 850 586) (the "Borrowers"),  we the
undersigned Nedship Bank (America) N.V., hereby issue the following guarantee to
you (the "Guarantee").

We have  received  a copy of and have  duly  noted the  contents  of a term loan
facility  agreement dated on or about December 18, 1997,  between the Borrowers,
as borrowers, and you, as lender (the "Term Loan Facility Agreement"), regarding
a Loan (as  defined  in the Term  Loan  Facility  Agreement)  in the  amount  of
US$44,000,000  provided  by you in  order  to  assist  in the  financing  of the
Australian  flag  vessels  BARRINGTON  and  PALMERSTON.  Terms not  specifically
defined herein shall have the meaning ascribed to them in the Term Loan Facility
Agreement.

           1.     In  consideration  of you having  entering  into the Term Loan
                  Facility Agreement we hereby  irrevocably  guarantee to pay to
                  you as primary  obligor any and all amounts due and payable to
                  you from the Borrowers under the Term Loan Facility  Agreement
                  (the "Guaranteed Amount") as herein provided.

           2.     We shall immediately,  and no later than five (5) Banking Days
                  after receipt of your written  demand,  pay to you all amounts
                  due and which the  Borrowers  are  obliged to pay to you under
                  the Term  Loan  Facility  Agreement,  provided  only that your
                  demand  recites that there has been an Event of Default  under
                  the Term Loan Facility Agreement and that you have accelerated
                  the Loan and  specifies  the  amount  that the  Borrowers  are
                  obliged  to pay to you.  No  further  documentation  or action
                  shall be necessary in order to oblige us to make payment under
                  this Guarantee.

           Upon our  payment  of the  Guaranteed  Amount,  you  shall  execute a
           release of this  Guarantee.  Any costs  incurred by you in connection
           with such release shall be for our account.

     3.    As a separate  obligation we unconditionally and irrevocably agree to
           indemnify  you against all  liability or loss arising  from,  and any
           costs,  charges or expenses  incurred  directly or  indirectly,  as a
           result of or arising out of the Guaranteed


Amount not being or ever having been recoverable  from the Borrowers  because of
any circumstance.

     4. Our  obligations  hereunder  shall be irrevocable  and absolute  without
regard to:


           (1)    the Lender or another person granting time or other indulgence
                  (with or without the  imposition of an additional  burden) to,
                  compounding  or  compromising  with  or  wholly  or  partially
                  releasing the Borrowers, any other guarantor or another person
                  in any way;

           (2)    laches,  acquiescence,  delay, acts,  omissions or mistakes on
                  the part of the Lender or another person or any one or more of
                  them;

           (3)    any  variation or novation of a right of the Lender or another
                  person or material alteration of a document, in respect of the
                  Borrowers, the Guarantor or another person including,  without
                  limitation,  an increase in the limit of or other variation in
                  connection with advances or accommodation;

           (4)    the  transaction  of business,  expressly or impliedly,  with,
                  for, or at the request of, the Borrowers, the the Guarantor or
                  another person;

           (5)    changes  which  from  time  to  time  may  take  place  in the
                  membership, name or business of a firm, partnership, committee
                  or  association  whether by death,  retirement,  admission  or
                  otherwise whether or not the Guarantor or another person was a
                  member;

           (6)    the loss or impairment  of any security  given with respect to
                  the Term Loan Facility Agreement (a "Security Interest");

           (7) a Security Interest being void, voidable or unenforceable;

           (8)    a person  dealing  in any way with a  guarantee,  judgment  or
                  negotiable instrument (including,  without limitation, taking,
                  abandoning  or  releasing  (wholly or  partially),  realizing,
                  exchanging,  varying,  abstaining  from  perfecting  or taking
                  advantage of it);

                  (9) the  death of any  person or any  insolvency,  bankruptcy,
reorganization or other similar proceeding (an "Insolvency Event");

(10)a change in the legal capacity, rights or obligations of a person;

           (11)   the fact that a person is a  trustee,  nominee,  joint  owner,
                  joint  venturer  or  a  member  of  a  partnership,   firm  or
                  association;

           (12) a judgment against either Borrower or another person;

           (13)   the  receipt of a dividend  after an  Insolvency  Event or the
                  payment of a sum or sums into the  account of either  Borrower
                  or  another  person  at any  time  (whether  received  or paid
                  jointly, jointly and severally or otherwise);

           (14) any part of the Guaranteed Amount being irrecoverable;

           (15) an  assignment  of  rights  in  connection  with the  Guaranteed
Amount;

           (16) the acceptance of repudiation or other termination in connection
with the Guaranteed Amount;

           (17)   the  invalidity  or   unenforceability  of  an  obligation  or
                  liability of a person other than the Guarantor;

           (18)   invalidity or  irregularity in the execution of this guarantee
                  by the Guarantor or any deficiency in or  irregularity  in the
                  exercise  of the  powers  of the  Guarantor  to enter  into or
                  observe its obligations under this guarantee and indemnity;

           (19)   the  opening  of a new  account  by either  Borrower  with the
                  Lender or another person or the operation of a new account;

           (20) any obligation of either Borrower being  discharged by operation
of law;

           (21)   property  secured under a Security  Interest being  forfeited,
                  extinguished, surrendered, resumed or determined.

The liability of the Guarantor under this Guarantee is not affected;

           (a)    because any other  person who was  intended to enter into this
                  Guarantee,  or otherwise become a co-surety or  co-indemnifier
                  for payment of the  Guaranteed  Amount or other money  payable
                  under this  guarantee and indemnity has not done so or has not
                  done so effectively; or

<PAGE>
                                                         5
           (b)    because a person  who is a  co-surety  or  co-indemnifier  for
                  payment of the Guaranteed  Amount or other money payable under
                  this  Guarantee  is  discharged  under an  agreement  or under
                  statute or a principle of law or equity.

     1.           This Guarantee shall remain in full force and effect up to the
                  date which is six months after the Maturity Date.

     2.           If at any time any amount  payable by the Borrowers  under the
                  Term Loan Facility Agreement is rescinded or must be otherwise
                  restored  or  returned  upon  the  insolvency,  bankruptcy  or
                  reorganization   of  either   Borrower   or   otherwise,   our
                  obligations  hereunder  with respect to such payment  shall be
                  reinstated  at such time as though  such  payment had not been
                  made.

     3.           We waive any  right we may have of  requiring  you to  proceed
                  against or enforce your rights against the Borrowers under the
                  Term Loan Facility Agreement or any other person before making
                  a demand under the Guarantee.

           We confirm that our rights of  subrogation  and our rights to proceed
           against the  Borrowers  (including  without  limitation  the right to
           initiate  legal  proceedings  against the  Borrowers and the right to
           claim dividend from the Borrower's  estate) are  subordinated to your
           rights  against the  Borrowers.  We shall not exercise any such right
           unless  either  the  Guaranteed  Amount has been paid in full or with
           your prior written consent.

     4.    Any and all  payments  under this  Guarantee  shall be made in freely
           available  funds  without  set-off or  counterclaims  and without any
           restrictions  or  condition  and free and clear of all and any taxes,
           duties, charges or other deductions or withholdings of any nature.

     5. This  Guarantee  is  governed  by the law in force in New  South  Wales,
        Australia.

           The undersigned hereby irrevocably and unconditionally submits to the
           non-exclusive  jurisdiction  of the  courts  of New  South  Wales and
           courts of appeal from them. The  undersigned  waives any right it has
           to object to an action  being  brought  in those  courts,  including,
           without  limitation,  by claiming that the action has been brought in
           an inconvenient forum or that those courts do not have jurisdiction.
           Without  preventing  any other mode of  service,  any  document in an
           action (including,  without limitation,  any writ of summons or other
           originating process or any third or other party notice) may be served
           on the  undersigned  by being  delivered to or left for that party at
           Scharlooweg 55 Curacao, Netherlands Antilles,  Attention: Richard van
           Heel.

     6. This Guarantee becomes effective on the date hereof.



Executed as an Agreement


Signed for and on behalf of                          )
Nedship Bank (America) N.V.                          )
in the presence of:                                  )


 ............................................




99182.020 #160632



<PAGE>


                                 DRAWDOWN NOTICE


                                                               December 11, 1997





Rabo Australia Limited
Level 10, Challis House
4 Martin Place
SYDNEY 2000
NSW AUSTRALIA



Attention:  Veronica White

Dear Sirs:

                  Please be advised that,  in  accordance  with the terms of the
Term Loan  Facility  Agreement  among (i) you,  as lender (the  "Lender"),  (ii)
Barrington Pty. Ltd. and Palmerston  Pty. Ltd., as borrowers (the  "Borrowers"),
to be dated on or about  December  11,  1997 (the "Loan  Agreement"),  we hereby
irrevocably request that the loan be advanced to the Borrowers as follows:

         (1)      Amount: US$44,000,000 (the "Loan")

         (2)      Date Loan requested to be made available: December 18, 1997

         (3)      Purpose:  To assist the  financing of the  acquisition  of the
                  vessels BARRINGTON and PALMERSTON

         (2)      Initial Interest Period:

         (3)      Disbursement Instructions: Transfer for value today
                  US$                                         to your account at
                  Account No.                  for further credit to

                  In the event that the Lenders  shall not be obliged  under the
terms of the Loan Agreement or as a result of any other cause or circumstance to
make the Loan, the Borrowers  together with the undersigned  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 and the  undersigned as to the extent of
any such losses.

The  undersigned  hereby  represents and warrants that all corporate  action has
been taken to authorize,  and all necessary  consents and authorities  have been
obtained to permit,  the  undersigned to enter into and perform its  obligations
under this Drawdown Notice.

This Drawdown Notice is governed by the law of New South Wales.


                           TEEKAY SHIPPING CORPORATION
                             on behalf of itself and

                          PALMERSTON (AUSTRALIA), PTY.
LTD. (ACN 080 850 586)

                          BARRINGTON (AUSTRALIA), PTY.
LTD. (ACN 080 850 559)


                            By_______________________
                                      Name:
                                     Title:


99182.020 #160632