Document:

d1176153_ex4-34.htm

Exhibit 4.34

DATED                                                            2010

ERIS SHIPPING S.A.

(as Borrower)

- and -

HSBC BANK plc

(as Lender)

 

US$22,000,000 SECURED

LOAN AGREEMENT

m.v. "DREAM SEAS"

STEPHENSON HARWOOD

Piraeus Office

Ariston Building

2 Filellinon Street and Akti Miaouli

Piraeus 185 36

Greece

Tel: +30 210 4295 160

Fax: +30 210 4295 166

Ref: F23.082

 

  

  

  

CONTENTS

 

 

	  	  	
Page

	  	  	  
	
1

	
Definitions and Interpretation

	
2

	
2

	
The Loan and its Purpose

	
12

	
3

	
Conditions of Utilisation

	
12

	
4

	
Advance

	
13

	
5

	
Repayment

	
14

	
6

	
Prepayment

	
14

	
7

	
Interest

	
15

	
8

	
Indemnities

	
19

	
9

	
Fees

	
23

	
10

	
Security and Application of Moneys

	
23

	
11

	
Representations

	
27

	
12

	
Undertakings and Covenants

	
30

	
13

	
Events of Default

	
41

	
14

	
Assignment and Sub-Participation

	
45

	
15

	
Set-Off

	
46

	
16

	
Payments

	
47

	
17

	
Notices

	
48

	
18

	
Partial Invalidity

	
50

	
19

	
Remedies and Waivers

	
50

	
20

	
Miscellaneous

	
50

	
21

	
Law and Jurisdiction

	
51

 

 

 

  

  

  

 

	
SCHEDULE 1: Conditions Precedent and Subsequent

	
53

	  	
Part I: Conditions precedent

	
53

	  	
Part II: Conditions subsequent

	
58

	
SCHEDULE 2: Calculation of Mandatory Cost

	
59

	
SCHEDULE 3: Form of Drawdown Notice

	
61

	
SCHEDULE 4: Form of Compliance Certificate

	
62

  

  

  

 

LOAN AGREEMENT

 

	
Dated:

	
2010

 

BETWEEN:

 

	
(1)

	
ERIS SHIPPING S.A., a company incorporated under the laws of the Republic of Liberia whose registered address is at 80 Broad Street, Monrovia, Republic of Liberia (the "Borrower"); and

 

	
(2)

	
HSBC BANK plc having its registered office at 8 Canada Square, London, E14 5HQ, England and acting through its office at 93 Akti Miaouli, GR-185 38 Piraeus, Greece (the "Lender").

 

	
  

	
WHEREAS:

 

	
(A)

	
The Borrower has agreed to purchase the Vessel from the Seller on the terms of the MOA and intends to register the Vessel under the flag of the Republic of Liberia.

 

	
(B)

	
The Lender has agreed to advance to the Borrower up to the lesser of (i) twenty two million Dollars ($22,000,000) and (ii) sixty per cent (60%) of the Market Value on the Delivery Date in order to assist the Borrower to finance or refinance part of the Purchase Price of the Vessel.

 

IT IS AGREED  as follows:

 

	
1  

	
Definitions and Interpretation

 

1.1           In this Agreement:

 

	
  

	
"Administration" has the meaning given to it in paragraph 1.1.3 of the ISM Code.

 

	
  

	
"Annex VI" means Annex VI (Regulations for the Prevention of Air Pollution from Ships) to the International Convention for the Prevention of Pollution from Ships 1973 (as modified in 1978 and 1997).

 

"Assignment" means the deed or deeds of assignment from the Borrower referred to in Clause 11.1.2 (Security Documents).

 

"Availability Termination Date" means 31 July 2010 or such later date as the Lender may in its discretion agree.

 

  

2

  

"Beneficial Owner" means the person named in the Identity Letter specified in Part I of Schedule 1 (Conditions Precedent).

 

"Break Costs" means all sums payable by the Borrower from time to time under Clause 9.3 (Break Costs).

 

"Business Day" means a day (other than a Saturday or Sunday) on which banks are open for general business in New York, United States of America; London, England and Piraeus, Greece.

 

"Charter" means the Initial Charter or any other charterparty or contract of employment between a Charterer and the Borrower of not less than eleven (11) months duration and otherwise in form and substance acceptable to the Lender in its discretion.

 

"Charterer" means Intermare or any other charterer who may enter into a Charter with the Borrower.

 

"Charter Rights" means all rights and benefits accruing to the Borrower under or arising out of any Charter and not forming part of the Earnings.

 

"Compliance Certificate" means a certificate substantially in the form set out in Schedule 4 (Form of Compliance Certificate).

 

"Confirmation" means a Confirmation exchanged, or deemed exchanged, between the Lender and the Borrower as contemplated by the Master Agreement.

 

"Credit Support Document" means any document described as such in the Master Agreement and, where the context permits, any other document referred to in any Credit Support Document which has the effect of creating an Encumbrance in favour of the Lender.

 

"Credit Support Provider" means any person (other than the Borrower) described as such in the Master Agreement.

 

"Currency of Account" means, in relation to any payment to be made to the Lender under a Finance Document, the currency in which that payment is required to be made by the terms of that Finance Document.

 

  

3

  

"Default" means an Event of Default or any event or circumstance specified in Clause 14.1 (Events of Default) which would (with the expiry of a grace period, the giving of notice, the making of any determination under the Finance Documents or any combination of any of the foregoing) be an Event of Default.

 

"Delivery Date" means the date on which the Vessel is delivered by the Seller to the Borrower pursuant to and in accordance with the MOA.

 

"DOC" means, in relation to the ISM Company, a valid Document of Compliance issued for the ISM Company by the Administration under paragraph 13.2 of the ISM Code.

 

"Dollars" and "$" each means available and freely transferable and convertible funds in lawful currency of the United States of America.

 

"Drawdown Date" means the date on which the Loan is advanced under Clause 4 (Advance).

 

"Drawdown Notice" means a notice substantially in the form set out in Schedule 3 (Form of Drawdown Notice).

 

"Earnings" means all hires, freights, pool income and other sums payable to or for the account of the Borrower in respect of the Vessel including (without limitation) all remuneration for salvage and towage services, demurrage and detention moneys, contributions in general average, compensation in respect of any requisition for hire, and damages and other payments (whether awarded by any court or arbitral tribunal or by agreement or otherwise) for breach, termination or variation of any contract for the operation, employment or use of the Vessel.

 

"Earnings Account" means a bank account to be opened in the name of the Borrower with the Lender and designated "Eris Shipping SA - Earnings Account".

 

"Encumbrance" means a mortgage, charge, assignment, pledge, lien, or other security interest securing any obligation of any person or any other agreement or arrangement having a similar effect.

 

	
  

	
"Event of Default" means any of the events or circumstances set out in Clause 14.1 (Events of Default).

 

  

4

  

	
  

	
"Facility Maturity Date" means the tenth (10th) anniversary of the Drawdown Date.

 

"Facility Period" means the period beginning on the date of this Agreement and ending on the date when the whole of the Indebtedness has been paid in full and the Security Parties have ceased to be under any further actual or contingent liability to the Lender under or in connection with the Finance Documents.

 

"Finance Documents" means this Agreement, the Master Agreement, the Security Documents and any other document designated as such by the Lender and the Borrower and "Finance Document" means any one of them.

 

"Financial Indebtedness" means any obligation for the payment or repayment of money, whether present or future, actual or contingent, in respect of:

 

(a)           moneys borrowed;

 

(b)           any acceptance credit;

 

(c)           any bond, note, debenture, loan stock or similar instrument;

 

(d)           any finance or capital lease;

 

(e)           receivables sold or discounted (other than on a non-recourse basis);

 

(f)           deferred payments for assets or services;

 

	
  

	
(g)

	
any derivative transaction protecting against or benefiting from fluctuations in any rate or price (and, when calculating the value of any derivative transaction, only the marked to market value shall be taken into account);

 

	
  

	
(h)

	
any amount raised under any other transaction (including any forward sale or purchase agreement) having the commercial effect of a borrowing;

 

	
  

	
(i)

	
any counter-indemnity obligation in respect of a guarantee, indemnity, bond, standby or documentary letter of credit or any other instrument issued by a bank or financial institution; and

 

	
  

	
(j)

	
the amount of any liability in respect of any guarantee or indemnity for any of the items referred to in paragraphs (a) to (i) above.

 

  

5

  

"Fleet Vessel" means any vessel (including, but not limited to, the Vessel) from time to time owned by any member of the Group.

 

"GAAP" means generally accepted accounting principles in the United States of America.

 

"Group" means the Guarantor and its Subsidiaries.

 

"Guarantee" means the guarantee and indemnity referred to in Clause 11.1.3 (Security Documents).

 

"Guarantor" means Paragon Shipping Inc. of the Republic of the Marshall Islands and/or (where the context permits) any other person who shall at any time during the Facility Period give to the Lender a guarantee and/or indemnity for the repayment of all or part of the Indebtedness.

 

"Hedging Transaction" means a Transaction entered into between the Lender and the Borrower pursuant to the Master Agreement for the express purpose of hedging all or part of the Borrower's interest rate risk under this Agreement.

 

"IAPPC" means a valid international air pollution prevention certificate for the Vessel issued under Annex VI.

 

"Indebtedness" means the aggregate from time to time of: the amount of the Loan outstanding; all accrued and unpaid interest on the Loan; and all other sums of any nature (together with all accrued and unpaid interest on any of those sums) payable to the Lender under all or any of the Finance Documents.

 

"Initial Charter" means the time charter dated on or around the date of this Agreement on the terms and subject to the conditions of which the Borrower has agreed to charter the Vessel to Intermare.

 

"Insurances" means all policies and contracts of insurance (including all entries in protection and indemnity or war risks associations) which are from time to time taken out or entered into in respect of or in connection with the Vessel or her increased value or the Earnings and (where the context permits) all benefits under such contracts and policies, including all claims of any nature and returns of premium.

 

  

6

  

"Interest Payment Date" means each date for the payment of interest in accordance with Clause 7.7 (Accrual and payment of interest).

 

"Interest Period" means each period for the determination and payment of interest selected by the Borrower or agreed or selected by the Lender pursuant to Clause 7 (Interest).

 

"Intermare" means Intermare Transport GmbH, a company incorporated under the laws of                        with its registered office at                                                      .

 

"ISM Code" means the International Management Code for the Safe Operation of Ships and for Pollution Prevention.

 

"ISM Company" means, at any given time, the company responsible for the Vessel's compliance with the ISM Code under paragraph 1.1.2 of the ISM Code.

 

"ISPS Code" means the International Ship and Port Facility Security Code.

 

"ISPS Company" means, at any given time, the company responsible for the Vessel's compliance with the ISPS Code.

 

"ISSC" means a valid international ship security certificate for the Vessel issued under the ISPS Code.

 

"LIBOR" means:

 

(a)           the applicable Screen Rate; or

 

	
  

	
(b)

	
(if no Screen Rate is available for any Interest Period) the arithmetic mean of the rates (rounded upwards to four decimal places) quoted to the Lender in the London interbank market,

 

at 11.00 a.m. two (2) Business Days before the first day of the relevant Interest Period for the offering of deposits in Dollars in an amount comparable to the Loan (or any relevant part of the Loan) and for a period comparable to the relevant Interest Period.

 

"Loan" means the aggregate amount advanced or to be advanced by the Lender to the Borrower under Clause 4 (Advance) or, where the context permits, the amount advanced and for the time being outstanding.

 

  

7

  

"Management Agreement" means the agreement(s) for the commercial and/or technical management of the Vessel dated on or around the date of this Agreement between the Borrower and the Managers.

 

"Managers" means Allseas Marine S.A of the Republic of Liberia, or such other commercial and/or technical managers of the Vessel nominated by the Borrower as the Lender may approve.

 

"Mandatory Cost" means the percentage rate per annum calculated by the Lender in accordance with Schedule 2 (Calculation of Mandatory Cost).

 

"Margin" means two point six per cent (2.6 %) per annum.

 

	
  

	
"Market Value" means the market value of the Vessel as determined in accordance with Clause 11.14 (Determination of Market Value).

 

"Master Agreement" means any ISDA Master Agreement (or any other form of master agreement relating to interest or currency exchange transactions) entered or to be entered into between the Lender and the Borrower during the Facility Period subject to the Lender's prior written consent, including each Schedule to any Master Agreement and each Confirmation exchanged pursuant to any Master Agreement for a period of up to ten (10) years for the purpose of hedging financial expenses of the Loan

 

"Master Agreement Benefits" means all benefits whatsoever of the Borrower under or in connection with the Master Agreement including, without limitation, all moneys payable to the Borrower under the Master Agreement and all claims for damages in respect of any breach by the Lender of the Master Agreement.

 

"Master Agreement Charge" means the deed of charge referred to in Clause 11.1.4 (Security Documents).

 

"Master Agreement Liabilities" means, at any relevant time, all liabilities of the Borrower to the Lender under or pursuant to the Master Agreement, whether actual or contingent, present or future.

 

"Maximum Loan Amount" means the lesser of (a) twenty two million Dollars ($22,000,000) and (b) sixty per cent (60%) of the Market Value of the Vessel on the

 

  

8

  

Delivery Date as evidenced by the valuation received by the Lender under Clause 3.1 (Conditions precedent).

 

"MOA" means the memorandum of agreement dated 31 March 2010 made between the Seller, as seller and the Managers, as original buyers, as amended and supplemented by an addendum no. 1 dated 8 April 2010 made between (i) the Seller, (ii) the Managers and (iii) the Borrower, as nominee buyer, as further amended and/or supplemented from time to time, on the terms and subject to the conditions of which the Seller will sell the Vessel to the Borrower for the Purchase Price.

 

"Mortgage" means the preferred mortgage referred to in Clause 11.1.1 (Security Documents).

 

"Notional Amount", in respect of any Hedging Transaction, means the Notional Amount as defined in the Confirmation relating to that Hedging Transaction.

 

"Original Financial Statements" means the Guarantor's audited and consolidated financial statements for the financial year ended 31 December 2009.

 

"Purchase Price" means the amount of forty one million Dollars ($41,000,000) as the same is evidenced in the MOA.

 

"Relevant Documents" means the Finance Documents, the MOA, a Charter, the Management Agreement and the Managers' confirmation specified in Part I of Schedule 1 (Conditions Precedent).

 

"Repayment Date" means the date for payment of any Repayment Instalment in accordance with Clause 5.1 (Repayment of Loan).

 

"Repayment Instalment" means any instalment of the Loan to be repaid by the Borrower under Clause 5.1 (Repayment of Loan).

 

"Requisition Compensation" means all compensation or other money which may from time to time be payable to the Borrower as a result of the Vessel being requisitioned for title or in any other way compulsorily acquired (other than by way of requisition for hire).

 

"Screen Rate" means in relation to LIBOR, the British Bankers' Association Interest Settlement Rate for the relevant currency and period displayed on the appropriate

 

  

9

  

page of the Reuters screen.  If the agreed page is replaced or the service ceases to be available, the Lender may specify another page or service displaying the appropriate rate after consultation with the Borrower.

 

"Security Documents" means the Mortgage, the Assignment, the Guarantee, the Master Agreement Charge and any other Credit Support Documents or (where the context permits) any one or more of them and any other agreement or document which may at any time be executed by any person as security for the payment of all or any part of the Indebtedness and "Security Document" means any one of them.

 

"Security Parties" means the Borrower, the Guarantor, any other Credit Support Provider and any other person who may at any time during the Facility Period be liable for, or provide security for, all or any part of the Indebtedness, and "Security Party" means any one of them.

 

"Seller" means Katerina Maritime S.A. of the Republic of Panama.

 

"SMC" means a valid safety management certificate issued for the Vessel by or on behalf of the Administration under paragraph 13.7 of the ISM Code.

 

"SMS" means a safety management system for the Vessel developed and implemented in accordance with the ISM Code.

 

"Subsidiary" has the meaning ascribed to it by section 1159 of the Companies Act 2006 (as the same may be supplemented and/or amended from time to time), and "Subsidiaries" shall be interpreted accordingly.

 

"Tax" means any tax, levy, impost, duty or other charge or withholding of a similar nature (including any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same).

 

"Total Loss" means:

 

	
  

	
(a)

	
an actual, constructive, arranged, agreed or compromised total loss of the Vessel; or

 

	
  

	
(b)

	
the requisition for title or compulsory acquisition of the Vessel by any government or other competent authority (other than by way of requisition for hire); or

 

  

10

  

	
  

	
(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 is released and returned to the possession of the Borrower within one month after the capture, seizure, arrest, detention or confiscation in question.

 

"Transaction" means a transaction entered into between the Lender and the Borrower governed by the Master Agreement.

 

"Treasury Products" means all cross-currency swaps and risk management products entered into, or to be entered into between the Borrower and the Lender pursuant to the Master Agreement subject to the Lender's prior written consent and "Treasury Product" means any one of them.

 

"Vessel" means the approximately 75,151 dwt bulk carrier "IORANA" (Official no. 14710) built in 2009 at Hudong Zhongua Shipyard and currently registered under the flag of the Hellenic Republic in the ownership of the Seller and intended to be sold by the Seller to the Borrower on the terms of the MOA and to be named "DREAM SEAS" and upon acquisition by the Borrower to be registered under the flag of the Republic of Liberia, and everything now or in the future belonging to her on board and ashore.

 

1.2           In this Agreement:

 

	
  

	
1.2.1

	
words denoting the plural number include the singular and vice versa;

 

	
  

	
1.2.2

	
words denoting persons include corporations, partnerships, associations of persons (whether incorporated or not) or governmental or quasi-governmental bodies or authorities and vice versa;

 

	
  

	
1.2.3

	
references to Recitals, Clauses and Schedules are references to recitals, clauses and schedules to or of this Agreement;

 

	
  

	
1.2.4

	
references to this Agreement include the Recitals and the Schedules;

 

	
  

	
1.2.5

	
the headings and contents page(s) are for the purpose of reference only, have no legal or other significance, and shall be ignored in the interpretation of this Agreement;

 

  

11

  

	
  

	
1.2.6

	
references to any document (including, without limitation, to all or any of the Relevant Documents) are, unless the context otherwise requires, references to that document as amended, supplemented, novated or replaced from time to time;

 

	
  

	
1.2.7

	
references to statutes or provisions of statutes are references to those statutes, or those provisions, as from time to time amended, replaced or re-enacted;

 

	
  

	
1.2.8

	
references to the Lender include its successors, transferees and assignees;

 

	
  

	
1.2.9

	
a time of day (unless otherwise specified) is a reference to London time; and

 

	
  

	
1.2.10

	
words and expressions defined in the Master Agreement, unless the context otherwise requires, have the same meaning.

 

1.3           Offer letter

 

This Agreement supersedes the terms and conditions contained in any correspondence relating to the subject matter of this Agreement exchanged between the Lender and the Borrower or their representatives prior to the date of this Agreement.

 

	
2  

	
The Loan and its Purpose

 

	
  

	
2.1

	
Amount   Subject to the terms of this Agreement, the Lender agrees to make available to the Borrower a term loan in an aggregate amount not exceeding the Maximum Loan Amount.

 

	
  

	
2.2

	
Purpose   The Borrower shall apply the Loan for the purposes referred to in Recital (B).

 

	
  

	
2.3

	
Monitoring   The Lender shall not be bound to monitor or verify the application of any amount borrowed under this Agreement.

 

	
3  

	
Conditions of Utilisation

 

	
  

	
3.1

	
Conditions precedent   The Borrower is not entitled to have the Loan advanced unless the Lender has received all of the documents and other evidence listed in Part I of Schedule 1 (Conditions precedent).

 

  

12

  

	
  

	
3.2

	
Further conditions precedent   The Lender will only be obliged to advance the Loan if on the date of the Drawdown Notice and on the proposed Drawdown Date:

 

	
  

	
3.2.1

	
no Default is continuing or would result from the advance of the Loan; and

 

	
  

	
3.2.2

	
the representations made by the Borrower under Clause 12 (Representations) are true in all material respects.

 

	
  

	
3.3

	
Conditions subsequent   The Borrower undertakes to deliver or to cause to be delivered to the Lender on, or as soon as practicable after, the Drawdown Date the additional documents and other evidence listed in Part II of Schedule 1 (Conditions subsequent).

 

	
  

	
3.4

	
No waiver   If the Lender in its sole discretion agrees to advance all or any part of the Loan to the Borrower before all of the documents and evidence required by Clause 3.1 (Conditions precedent) have been delivered to or to the order of the Lender, the Borrower undertakes to deliver all outstanding documents and evidence to or to the order of the Lender no later than thirty (30) days after the Drawdown Date or such other date specified by the Lender.

 

The advance of all or any part of the Loan under this Clause 3.4 shall not be taken as a waiver of the Lender's right to require production of all the documents and evidence required by Clause 3.1 (Conditions precedent).

 

	
  

	
3.5

	
Form and content   All documents and evidence delivered to the Lender under this Clause 3 shall:

 

3.5.1           be in form and substance acceptable to the Lender; and

 

	
  

	
3.5.2

	
if required by the Lender, be certified, notarised, legalised or attested in a manner acceptable to the Lender.

 

	
4  

	
Advance

 

	
  

	
The Borrower may request the Loan to be advanced in one amount on any Business Day prior to the Availability Termination Date by delivering to the Lender a duly completed Drawdown Notice not more than ten (10) and not fewer than three (3) Business Days before the proposed Drawdown Date.

 

  

13

  

	
5 

	
Repayment

 

	
  

	
5.1

	
Repayment of Loan   The Borrower agrees to repay the Loan to the Lender by forty (40) consecutive quarterly instalments, the first thirty-nine (1st – 39th) such instalments each in the amount of four hundred thousand Dollars ($400,000) and the fortieth (40th) and last instalment in the sum of six million four hundred thousand Dollars ($6,400,000) (comprising an instalment of four hundred thousand Dollars ($400,000) and a balloon repayment of six million Dollars ($6,000,000)), the first instalment falling due on the date which is three (3) calendar months after the Drawdown Date and subsequent instalments falling due at consecutive intervals of three (3) calendar months thereafter with the last instalment falling due not later than the Facility Maturity Date.

 

	
  

	
5.2

	
Reduction of Repayment Instalments   If the aggregate amount advanced to the Borrower is less than the Maximum Loan Amount, the amount of each Repayment Instalment shall be reduced pro rata to the amount actually advanced.

 

	
  

	
5.3

	
Reborrowing   The Borrower may not reborrow any part of the Loan which is repaid or prepaid.

 

	
6  

	
Prepayment

 

	
  

	
6.1

	
Illegality   If it becomes unlawful in any jurisdiction for the Lender to perform any of its obligations as contemplated by this Agreement or to fund or maintain the Loan:

 

	
  

	
6.1.1

	
the Lender shall promptly notify the Borrower of that event; and

 

	
  

	
6.1.2

	
the Borrower shall repay the Loan (to the extent already advanced) on the last day of the current Interest Period or, if earlier, the date specified by the Lender in the notice delivered to the Borrower (being no earlier than the last day of any applicable grace period permitted by law).

 

	
  

	
6.2

	
Voluntary prepayment of Loan   The Borrower may prepay the whole or any part of the Loan (but, if in part, being an amount that reduces the Loan by a minimum amount of one million Dollars ($1,000,000) or integral multiples thereof) subject as follows:

 

  

14

  

	
  

	
6.2.1

	
it gives the Lender not less than ten (10) Business Days' (or such shorter period as the Lender may agree) prior notice;

 

	
  

	
6.2.2

	
no prepayment may be made until after the Availability Termination Date; and

 

	
  

	
6.2.3

	
any prepayment under this Clause 6.2 shall satisfy the obligations under Clause 5.1 (Repayment of Loan) pro rata.

 

	
  

	
6.3

	
Mandatory prepayment on sale or Total Loss If the Vessel is sold by the Borrower or becomes a Total Loss, the Borrower shall, simultaneously with any such sale or within one hundred and twenty (120) days after any such Total Loss, prepay the whole of the Loan.

 

	
  

	
6.4

	
Restrictions   Any notice of prepayment given under this Clause 6 shall be irrevocable and, unless a contrary indication appears in this Agreement, shall specify the date or dates upon which the relevant prepayment is to be made and the amount of that prepayment.

 

Any prepayment under this Agreement shall be made together with accrued interest on the amount prepaid and, subject to any Break Costs and subject to Clause 6.2 (Voluntary prepayment of Loan) and Clause 6.3 (Mandatory prepayment on sale or Total Loss), without premium or penalty.

 

	
7  

	
Interest

 

	
  

	
7.1

	
Interest Periods   The period during which the Loan shall be outstanding under this Agreement shall be divided into consecutive Interest Periods of three (3), six (6), nine (9) or twelve (12) months' duration, as selected by the Borrower by written notice to the Lender not later than 11.00 a.m. on the third Business Day before the beginning of the Interest Period in question, or such longer duration (exceeding twelve (12) months subject to the terms of the Master Agreement), or such other duration, as may be agreed by the Lender in its discretion.

 

	
  

	
7.2

	
Beginning and end of Interest Periods   Each Interest Period shall start on the Drawdown Date or (if the Loan is already made) on the last day of the preceding Interest Period and end on the date which numerically corresponds to the Drawdown Date or the last day of the preceding Interest Period in the relevant calendar month

 

  

15

  

	
  

	
except that, if there is no numerically corresponding date in that calendar month, the Interest Period shall end on the last Business Day in that month.

 

	
  

	
7.3

	
Interest Periods to meet Repayment Dates   If an Interest Period will expire after the next Repayment Date, there shall be a separate Interest Period for a part of the Loan equal to the Repayment Instalment due on that next Repayment Date and that separate Interest Period shall expire on that next Repayment Date.

 

	
  

	
7.4

	
Non-Business Days   If an Interest Period would otherwise end on a day which is not a Business Day, that Interest Period will instead end on the next Business Day in that calendar month (if there is one) or the preceding Business Day (if there is not).

 

	
  

	
7.5

	
Interest rate   During each Interest Period interest shall accrue on the Loan at the rate determined by the Lender to be the aggregate of (a) the Margin, (b) LIBOR and (c) the Mandatory Cost, if any.

 

	
  

	
7.6

	
Failure to select Interest Period   If the Borrower at any time fails to select or agree an Interest Period in accordance with Clause 7.1 (Interest Periods), the interest rate applicable shall be the rate determined by the Lender in accordance with Clause 7.5 (Interest rate) for an Interest Period of such duration (not exceeding six months) as the Lender may select.

 

	
  

	
7.7

	
Accrual and payment of interest   Interest shall accrue from day to day, shall be calculated on the basis of a 360 day year and the actual number of days elapsed (or, in any circumstance where market practice differs, in accordance with the prevailing market practice) and shall be paid by the Borrower to the Lender on the last day of each Interest Period and, if the Interest Period is longer than three (3) months, on the dates falling at three (3) monthly intervals after the first day of that Interest Period.

 

	
  

	
7.8

	
Default interest   If the Borrower fails to pay any amount payable by it under a Finance Document on its due date, interest shall accrue on the overdue amount from the due date up to the date of actual payment (both before and after judgment) at a rate which is two per cent (2%) higher than the rate which would have been payable if the overdue amount had, during the period of non-payment, constituted the Loan in the currency of the overdue amount for successive Interest Periods, each selected by the Lender (acting reasonably).  Any interest accruing under this Clause 7.8 shall be immediately payable by the Borrower on demand by the Lender. If unpaid, any

 

  

16

  

	
  

	
such interest will be compounded with the overdue amount at the end of each Interest Period applicable to that overdue amount but will remain immediately due and payable.

 

	
  

	
7.9

	
Alternative interest rate   If either (a) the applicable Screen Rate is not available for any Interest Period and no rates are quoted to the Lender to determine LIBOR for that Interest Period or (b) the Lender determines that the cost to it of obtaining matching deposits for any Interest Period would be in excess of LIBOR and that determination is made no later than close of business in London on the day LIBOR is determined for that Interest Period:

 

	
  

	
7.9.1

	
the Lender shall give notice to the Borrower of the occurrence of such event; and

 

	
  

	
7.9.2

	
the rate of interest on the Loan for that Interest Period shall be the rate per annum which is the sum of:

 

	
  

	
(a)

	
the Margin; and

 

	
  

	
(b)

	
the rate which expresses as a percentage rate per annum the cost to the Lender of funding the Loan from whatever source it may reasonably select; and

 

	
  

	
(c)

	
the Mandatory Cost, if any,

 

PROVIDED THAT if the resulting rate of interest is not acceptable to the Borrower:

 

	
  

	
7.9.3

	
the Lender will negotiate with the Borrower in good faith with a view to modifying this Agreement to provide a substitute basis for determining the rate of interest;

 

	
  

	
7.9.4

	
any substitute basis agreed pursuant to Clause 7.9.3 shall be binding on the parties to this Agreement; and

 

	
  

	
7.9.5

	
if, within thirty (30) days of the giving of the notice referred to in Clause 7.9.1, the Borrower and the Lender fail to agree in writing on a substitute basis for determining the rate of interest, the Borrower will immediately prepay the Loan, together with any Break Costs.

 

  

17

  

	
  

	
7.10

	
Determinations conclusive   The Lender shall promptly notify the Borrower of the determination of a rate of interest under this Clause 7 and each such determination shall (save in the case of manifest error) be final and conclusive.

 

	
8  

	
The Master Agreement

 

	
  

	
8.1

	
Applicability   The Borrower may enter into a Master Agreement with the prior written consent of the Lender and following provisions of this Clause 8 will apply if the Lender and the Borrower have entered, or enter during the Facility Period, into one or more Transactions.

 

	
  

	
8.2

	
Additional Termination Event   If the Loan is for any reason not advanced to the Borrower on or before the Availability Termination Date, and the Lender and the Borrower have entered into any Transactions on or before the Availability Termination Date, an Additional Termination Event (with the Lender as the Affected Party) shall be deemed to have occurred under the Master Agreement on the Availability Termination Date.

 

	
  

	
8.3

	
Adjustment of Notional Amounts   If:

 

	
  

	
8.3.1

	
the amount of the Loan actually advanced by the Lender to the Borrower is less than the Notional Amount (or the aggregate Notional Amounts) of the Hedging Transactions entered into on or before the Drawdown Date; or

 

	
  

	
8.3.2

	
the Borrower prepays part of the Loan under any provision of this Agreement, and the amount of the Loan remaining outstanding after that prepayment is less than the Notional Amount (or the aggregate Notional Amounts) of the Hedging Transactions then in effect,

 

the Borrower's obligations under those Hedging Transactions shall (unless otherwise agreed by the Lender) be calculated (so far as the Lender considers it practicable to do so) by reference to a Notional Amount (or aggregate Notional Amounts) as reduced on each Repayment Date by the amount of the Repayment Instalment then due, and adjusted if necessary in accordance with Clause 8.2.

 

	
  

	
8.4

	
Authority   In order to give effect to Clause 8.3, or in the event of voluntary or mandatory prepayment by the Borrower of the whole of the Loan, the Borrower

 

  

18

  

	
  

	
irrevocably authorises the Lender to amend, restructure, unwind, cancel, net out, terminate, liquidate, transfer or assign any of the rights or obligations under any Hedging Transaction, and/or to enter into any other interest rate exchange and/or hedging transaction or commitment with any other counterparty.

 

	
  

	
8.5

	
Termination of Transactions   If the exercise of the Lender's rights under Clause 8.4 results in the termination of any Transaction, that Transaction shall, for the purposes of the Master Agreement (including, without limitation, section 6(e)(i) of the Master Agreement) be treated as a Terminated Transaction resulting from an Event of Default by the Borrower.

 

	
  

	
8.6

	
Indemnity The Borrower will indemnify the Lender from time to time on demand in respect of all liabilities, losses, costs or expenses suffered, incurred or sustained by the Lender arising in any way in relation to the exercise by the Lender of its rights under this Clause 8, or arising in any way from any other termination, cancellation, unwinding or restructuring of any Transaction.

 

	
  

	
8.7

	
Treasury Products The Borrower may enter into one or more Treasury Products subject to the Lender's prior written consent.

 

	
9  

	
Indemnities

 

	
  

	
9.1

	
Transaction expenses   The Borrower will, within fourteen (14) days of the Lender's written demand, pay the Lender the amount of all costs and expenses (including legal fees and Value Added Tax or any similar or replacement tax if applicable) incurred by the Lender in connection with:

 

	
  

	
9.1.1

	
the negotiation, preparation, printing, execution and registration of the Finance Documents (whether or not any Finance Document is actually executed or registered and whether or not all or any part of the Loan is advanced);

 

	
  

	
9.1.2

	
any amendment, addendum or supplement to any Finance Document (whether or not completed); and

 

	
  

	
9.1.3

	
any other document which may at any time be required by the Lender to give effect to any Finance Document or which the Lender is entitled to call for or

 

  

19

  

	
  

	
obtain under any Finance Document (including, without limitation, any valuation of the Vessel).

 

 

	
  

	
9.2

	

Funding costs   The Borrower shall indemnify the Lender on the Lender's written demand against all losses and costs incurred or sustained by the Lender if, for any reason, the Loan is not advanced to the Borrower after the relevant Drawdown Notice has been given to the Lender, or is advanced on a date other than that requested in the Drawdown Notice (unless, in either case, as a result of any default by the Lender).

 

	
  

	
9.3

	
Break Costs   The Borrower shall indemnify the Lender on the Lender's written demand against all costs, losses, premiums or penalties incurred by the Lender as a result of its receiving any prepayment of all or any part of the Loan (whether pursuant to Clause 6 (Prepayment) or otherwise) on a day other than the last day of an Interest Period for the Loan or relevant part of the Loan, or any other payment under or in relation to the Finance Documents on a day other than the due date for payment of the sum in question, including (without limitation) any losses or costs incurred in liquidating or re-employing deposits from third parties acquired to effect or maintain all or any part of the Loan, and any liabilities, expenses or losses incurred by the Lender in terminating or reversing, or otherwise in connection with, any Transaction or any other interest rate and/or currency swap, transaction or arrangement entered into by the Lender to hedge any exposure arising under this Agreement, or in terminating or reversing, or otherwise in connection with, any open position arising under this Agreement or the Master Agreement.

 

	
  

	
9.4

	
Currency indemnity   In the event of the Lender receiving or recovering any amount payable under a Finance Document in a currency other than the Currency of Account, and if the amount received or recovered is insufficient when converted into the Currency of Account at the date of receipt to satisfy in full the amount due, the Borrower shall, on the Lender's written demand, pay to the Lender such further amount in the Currency of Account as is sufficient to satisfy in full the amount due and that further amount shall be due to the Lender as a separate debt under this Agreement.

 

	
  

	
9.5

	
Increased costs (subject to Clause 9.6 (Exceptions to increased costs))   If, by reason of the introduction of any applicable law, or any change in any applicable law, or any change in the interpretation or administration of any applicable law, or compliance with any request or requirement from any central bank or any fiscal,

 

  

20

  

	
  

	
monetary or other authority occurring after the date of this Agreement (including the implementation or application of or compliance with the Basel II Accord or any other Basel II Regulation (whether such implementation, application or compliance is by any central bank or any fiscal, monetary or other authority, the Lender or the holding company of the Lender)):

 

	
  

	
9.5.1

	
the Lender (or the holding company of the Lender) shall be subject to any Tax with respect to payment of all or any part of the Indebtedness (other than Tax on overall net income); or

 

	
  

	
9.5.2

	
the basis of Taxation of payments to the Lender in respect of all or any part of the Indebtedness shall be changed; or

 

	
  

	
9.5.3

	
any reserve requirements shall be imposed, modified or deemed applicable against assets held by or deposits in or for the account of or loans by any branch of the Lender; or

 

	
  

	
9.5.4

	
the manner in which the Lender allocates capital resources to its obligations under this Agreement and/or the Master Agreement or any ratio (whether cash, capital adequacy, liquidity or otherwise) which the Lender is required or requested to maintain shall be affected; or

 

	
  

	
9.5.5

	
there is imposed on the Lender (or on the holding company of the Lender) any other condition in relation to the Indebtedness or the Finance Documents;

 

and the result of any of the above shall be to increase the cost to the Lender (or to the holding company of the Lender) of the Lender making or maintaining the Loan, or its obligations under the Master Agreement, or to cause the Lender to suffer (in its opinion) a material reduction in the rate of return on its overall capital below the level which it reasonably anticipated at the date of this Agreement and which it would have been able to achieve but for its entering into this Agreement or the Master Agreement, and/or performing its obligations under this Agreement or the Master Agreement, then, subject to Clause 9.6 (Exceptions to increased costs), the Lender shall notify the Borrower and the Borrower shall from time to time pay to the Lender on demand the amount which shall compensate the Lender (or the holding company of the Lender) for such additional cost or reduced return.  A certificate signed by an authorised signatory of the Lender setting out the amount of that payment and the

 

  

21

  

basis of its calculation shall be submitted to the Borrower and shall be conclusive evidence of such amount save for manifest error or on any question of law.

 

For the purposes of this Clause 9.5:

 

"Basel II Accord" means the "International Convergence of Capital Measurement and Capital Standards, a Revised Framework" published by the Basel Committee on Banking Supervision in June 2004 in the form existing on the date of this Agreement;

 

"Basel II Approach" means, in relation to the Lender, either the Standardised Approach or the relevant Internal Ratings Based Approach (each as defined in the Basel II Accord) adopted by the Lender (or its holding company) for the purpose of implementing or complying with the Basel II Accord;

 

"Basel II Regulation" means (a) any law or regulation implementing the Basel II Accord or (b) any Basel II Approach adopted by the Lender; and

 

"holding company" means, in respect of the Lender, the company or entity (if any) within the consolidated supervision of which the Lender is included.

 

	
  

	
9.6

	
Exceptions to increased costs   Clause 9.5 (Increased costs) does not apply to the extent any additional cost or reduced return referred to in that Clause is:

 

9.6.1     compensated for by a payment made under Clause 9.10 (Taxes); or

 

9.6.2     compensated for by a payment made under Clause 17.3 (Grossing-up); or

 

9.6.3     compensated for by the payment of the Mandatory Cost; or

 

9.6.4     attributable to the wilful breach by the Lender (or the holding company of the Lender) of any law or regulation.

 

	
  

	
9.7

	
Events of Default   The Borrower shall indemnify the Lender from time to time on the Lender's written demand against all losses, costs and liabilities incurred or sustained by the Lender as a consequence of any Event of Default.

 

	
  

	
9.8

	
Enforcement costs   The Borrower shall pay to the Lender on the Lender's written demand the amount of all costs and expenses (including legal fees) incurred by the Lender in connection with the enforcement of, or the preservation of any rights under, any Finance Document including (without limitation) any losses, costs and expenses

 

  

22

  

	
  

	
which the Lender may from time to time sustain, incur or become liable for by reason of the Lender being mortgagee of the Vessel and/or a lender to the Borrower, or by reason of the Lender being deemed by any court or authority to be an operator or controller, or in any way concerned in the operation or control, of the Vessel.

 

	
  

	
9.9

	
Other costs   The Borrower shall pay to the Lender on the Lender's written demand the amount of all sums which the Lender may pay or become actually or contingently liable for on account of the Borrower in connection with the Vessel (whether alone or jointly or jointly and severally with any other person) including (without limitation) all sums which the Lender may pay or guarantees which it may give in respect of the Insurances, any expenses incurred by the Lender in connection with the maintenance or repair of the Vessel or in discharging any lien, bond or other claim relating in any way to the Vessel, and any sums which the Lender may pay or guarantees which it may give to procure the release of the Vessel from arrest or detention.

 

	
  

	
9.10

	
Taxes   The Borrower shall pay all Taxes to which all or any part of the Indebtedness or any Finance Document may be at any time subject (other than Tax on the Lender's overall net income) and shall indemnify the Lender on the Lender's written demand against all liabilities, costs, claims and expenses resulting from any omission to pay or delay in paying any such Taxes.

 

	
10  

	
Arrangement Fee

 

The Borrower shall pay to the Lender (unless already paid) a non-refundable arrangement fee in the amount of one hundred thousand Dollars ($100,000), payable on the Drawdown Date.

 

	
11  

	
Security and Application of Moneys

 

	
  

	
11.1

	
Security Documents   As security for the payment of the Indebtedness, the Borrower shall execute and deliver to the Lender or cause to be executed and delivered to the Lender the following documents in such forms and containing such terms and conditions as the Lender shall require:

 

	
  

	
11.1.1

	
a first preferred mortgage over the Vessel;

 

	
  

	
11.1.2

	
a first priority deed or deeds of assignment of the Insurances, Earnings, Requisition Compensation and Charter Rights from the Borrower;

 

  

23

  

	
  

	
11.1.3

	
a guarantee and indemnity from the Guarantor; and

 

	
  

	
11.1.4

	

a first priority deed of charge over the Master Agreement Benefits

 

	
  

	
11.1.4

	
 

 

	
  

	
11.2

	
Earnings Account   The Borrower shall maintain the Earnings Account with the Lender for the duration of the Facility Period free of Encumbrances and rights of set off other than those created by or under the Finance Documents.

 

	
  

	
11.3

	
Earnings   The Borrower shall procure that all Earnings and any Requisition Compensation are credited to the Earnings Account. All payments in connection with the operation of the Vessel shall be effected through the Piraeus branch of the Lender.

 

	
  

	
11.4

	
Application of Earnings Account  Without limitation to Clause 11.5, the Borrower shall procure that there is transferred from the Earnings Account to the Lender:

 

	
  

	
11.4.1

	
on each Repayment Date, the amount of the Repayment Instalment then due; and

 

	
  

	
11.4.2

	
on each Interest Payment Date, the amount of interest then due,

 

and the Borrower irrevocably authorises the Lender to  make those transfers.

 

	
  

	
11.5

	
Minimum Free Liquidity The Borrower shall maintain in the Earnings Account at all times a minimum aggregate positive account balance free of any Encumbrances (other than in favour of the Lender) of not less than five hundred thousand Dollars ($500,000) at all times throughout the Facility Period.

 

	
  

	
11.6

	
Borrower's obligations not affected   If for any reason the amount standing to the credit of the Earnings Account is insufficient to pay any Repayment Instalment or to make any payment of interest when due, the Borrower's obligation to pay that Repayment Instalment or to make that payment of interest shall not be affected.

 

	
  

	
11.7

	
Release of surplus   Any amount remaining to the credit of the Earnings Account following the making of any transfer required by Clause 11.4 (Application of Earnings Account) shall (unless a Default shall have occurred and be continuing) be released to or to the order of the Borrower, provided that Clause 11.5 (Minimum Free Liquidity) is complied with.

 

  

24

  

	
  

	
11.8

	
Restriction on withdrawal   At any time during the Facility Period following the occurrence and during the continuation of a Default, no sum may be withdrawn from the Earnings Account (except in accordance with this Clause 11) without the prior written consent of the Lender.

 

	
  

	
11.9

	
Relocation of Earnings Account   At any time following the occurrence and during the continuation of a Default, the Lender may without the consent of the Borrower and provided the Lender gives prior notice to the Borrower of its intention to do so, relocate the Earnings Account to any other branch of the Lender, without prejudice to the continued application of this Clause 11 and the rights of the Lender under the Finance Documents.

 

	
  

	
11.10

	
Application after acceleration   From and after the giving of notice to the Borrower by the Lender under Clause 14.2 (Acceleration), the Borrower shall procure that all sums from time to time standing to the credit of the Earnings Account are immediately transferred to the Lender for application in accordance with Clause 11.11 (General application of moneys) and the Borrower irrevocably authorises the Lender to make those transfers.

 

	
  

	
11.11

	
General application of moneys   The Borrower, subject to Clause 11.12 (Application of moneys on sale or Total Loss), irrevocably authorises the Lender to apply all sums which the Lender may receive:

 

11.11.1   pursuant to a sale or other disposition of the Vessel or any right, title or interest in the Vessel; or

 

11.11.2   by way of payment of any sum in respect of the Insurances, Earnings or Requisition Compensation; or

 

11.11.3   by way of transfer of any sum from either of the Accounts; or

 

11.11.4   otherwise arising under or in connection with any Security Document,

 

in or towards satisfaction, or by way of retention on account, of the Indebtedness, in such manner as the Lender may determine.

 

	
  

	
11.12

	
Application of moneys on sale or Total Loss   The Borrower irrevocably authorises the Lender to apply all sums which the Lender may receive pursuant to a sale by the Borrower of the Vessel or a Total Loss in or towards satisfaction of the prepayment

 

  

25

  

	
  

	
due and payable by virtue of that sale or Total Loss under Clause 6.3 (Mandatory prepayment on sale or Total Loss), but the Borrower's obligation to make that prepayment shall not be affected if those sums are insufficient to satisfy that obligation.

 

	
  

	
11.13

	
Additional security   If at any time the aggregate of the Market Value and the value of any additional security (such value to be the face amount of the deposit (in the case of cash), determined conclusively by appropriate advisers appointed by the Lender (in the case of other charged assets), and determined by the Lender in its discretion (in all other cases)) for the time being provided to the Lender under this Clause 11.13 is less than (a) one hundred and thirty per cent (130%) of the amount of the Loan then outstanding or if there are any Master Agreement Liabilities (b) one hundred and thirty five per cent (135%) of the aggregate of the amount of the Loan then outstanding and the amount certified by the Lender to be the amount which would be payable by the Borrower to the Lender under the Master Agreement if an Early Termination Date were to occur at that time , the Borrower shall, within thirty (30) days of the Lender's request, at the Borrower's option:

 

	
  

	
11.13.1

	
pay to the Lender or to its nominee a cash deposit in the amount of the shortfall to be secured in favour of the Lender as additional security for the payment of the Indebtedness; or

 

	
  

	
11.13.2

	
give to the Lender other additional security in amount and form acceptable to the Lender in its discretion; or

 

	
  

	
11.13.3

	
prepay the Loan in the amount of the shortfall.

 

Clauses 5.3 (Reborrowing), 6.2 (Voluntary prepayment of Loan) and 6.4 (Restrictions) shall apply, mutatis mutandis, to any prepayment made under this Clause 11.13 and the value of any additional security provided shall be determined as stated above.

 

	
  

	
11.14

	
Determination of Market Value The Market Value of the Vessel, or any Fleet Vessel, shall be conclusively determined to be either (a) the average of two (2) valuations to be obtained from two (2) reputable, independent and first class firm of shipbrokers one appointed by the Borrower and the other appointed by the Lender, both reporting to the Lender, on the basis of sale for prompt delivery for cash, at arm's length on normal commercial terms as between a willing seller and a

 

  

26

  

willing buyer; or (b) in the event that the average of the two values obtained pursuant to the valuations obtained in accordance with (a) above differ by more than fifteen per centum (15%), the average of the aggregate of (i) the values obtained from the two valuations in accordance with (a) above plus (ii) the value certified by a third reputable, independent and first class firm of shipbrokers appointed by the Lender.

 

The Borrower shall be liable for all costs and expenses incurred by the Lender in obtaining valuations for determining the Market Value twice in each year of the Facility Period, unless there is a Default in which case the Borrower shall be liable for all costs and expenses incurred by the Lender in obtaining any number of valuations required by it pursuant to Clause 11.13 and shall reimburse the Lender in respect of all such costs and expenses on demand.

 

	
12  

	
Representations

 

	
  

	
12.1

	
Representations   The Borrower makes the representations and warranties set out in this Clause 12.1 to the Lender on the date of this Agreement.

 

	
  

	
12.1.1

	
Status   Each Security Party (which is not an individual) is a corporation, duly incorporated and validly existing under the law of its jurisdiction of incorporation and has the power to own its assets and carry on its business as it is being conducted.

 

	
  

	
12.1.2

	
Binding obligations   The obligations expressed to be assumed by each Security Party in each Finance Document to which it is a party are legal, valid, binding and enforceable obligations.

 

	
  

	
12.1.3

	
Non-conflict with other obligations   The entry into and performance by each Security Party of, and the transactions contemplated by, the Finance Documents do not conflict with:

 

	
  

	
(a)

	
any law or regulation applicable to that Security Party;

 

	
  

	
(b)

	
the constitutional documents of that Security Party; or

 

	
  

	
(c)

	
any document binding on that Security Party or any of its assets,

 

	
  

	
and in borrowing the Loan, the Borrower is acting for its own account.

 

  

27

  

	
  

	
12.1.4

	
Power and authority  Each Security Party has the power to enter into, perform and deliver, and has taken all necessary action to authorise its entry into, performance and delivery of, the Finance Documents to which it is a party and the transactions contemplated by those Finance Documents.

 

	
  

	
12.1.5

	
Validity and admissibility in evidence   All consents, licences, approvals, authorisations, filings and registrations required or desirable:

 

	
  

	
(a)

	
to enable each Security Party lawfully to enter into, exercise its rights and comply with its obligations in the Finance Documents to which it is a party or to enable the Lender to enforce and exercise all its rights under the Finance Documents; and

 

	
  

	
(b)

	
to make the Finance Documents to which any Security Party is a party admissible in evidence in its jurisdiction of incorporation,

 

have been obtained or effected and are in full force and effect, with the exception only of the registrations referred to in Part II of Schedule 1 (Conditions subsequent).

 

	
  

	
12.1.6

	
Governing law and enforcement   The choice of a particular law as the governing law of any Finance Document expressed to be governed by that law will be recognised and enforced in the jurisdiction of incorporation of each relevant Security Party, and any judgment obtained in the jurisdiction submitted to in any Finance Document will be recognised and enforced in the jurisdiction of incorporation of each relevant Security Party.

 

	
  

	
12.1.7

	
Deduction of Tax   No Security Party is required under the law of its jurisdiction of incorporation to make any deduction for or on account of Tax from any payment it may make under any Finance Document.

 

	
  

	
12.1.8

	
No filing or stamp taxes   Under the law of jurisdiction of incorporation of each relevant Security Party it is not necessary that the Finance Documents be filed, recorded or enrolled with any court or other authority in that jurisdiction or that any stamp, registration or similar tax be paid on or in relation to the Finance Documents or the transactions contemplated by the Finance Documents.

 

  

28

  

	
  

	
12.1.9

	
No default   No Event of Default is continuing or might reasonably be expected to result from the advance of the Loan.

 

	
  

	
12.1.10

	
No misleading information   Any factual information provided by any Security Party to the Lender was true and accurate in all material respects as at the date it was provided.

 

	
  

	
12.1.11

	
Pari passu ranking   The payment obligations of each Security Party under the Finance Documents to which it is a party rank at least pari passu with the claims of all its other unsecured and unsubordinated creditors, except for obligations mandatorily preferred by law applying to companies generally.

 

	
  

	
12.1.12

	
No proceedings pending or threatened   No litigation, arbitration or administrative proceedings of or before any court, arbitral body or agency have been started or (to the best of the Borrower's knowledge threatened) which, if adversely determined, might reasonably be expected to have a materially adverse effect on the business, assets, financial condition or credit worthiness of any Security Party.

 

	
  

	
12.1.13

	
Disclosure of material facts   The Borrower is not aware of any material facts or circumstances which have not been disclosed to the Lender and which might, if disclosed, have adversely affected the decision of a person considering whether or not to make loan facilities of the nature contemplated by this Agreement available to the Borrower.

 

	
  

	
12.1.14

	
No established place of business in the UK or US   No Security Party (other than the Guarantor) has an established place of business in the United Kingdom or the United States of America.

 

	
  

	
12.1.15

	
Completeness of Relevant Documents   The copies of any Relevant Documents provided or to be provided by the Borrower to the Lender in accordance with Clause 3 (Conditions of Utilisation) are, or will be, true and accurate copies of the originals and represent, or will represent, the full agreement between the parties to those Relevant Documents in relation to the subject matter of those Relevant Documents and there are no commissions, rebates, premiums or other payments due or to become due in connection

 

  

29

  

	
  

	
with the subject matter of those Relevant Documents other than in the ordinary course of business or as disclosed to, and approved in writing by, the Lender.

 

	
  

	
12.2

	
Repetition   Each representation and warranty in Clause 12.1 (Representations) is deemed to be repeated by the Borrower by reference to the facts and circumstances then existing on the date of the Drawdown Notice and the first day of each Interest Period.

 

	
13  

	
Undertakings and Covenants

 

The undertakings and covenants in this Clause 13 remain in force for the duration of the Facility Period.

 

13.1       Information undertakings

 

	
  

	
13.1.1

	
Financial statements   The Borrower shall procure that the Guarantor supplies to the Lender the Group's audited consolidated financial statements, as soon as the same become available, but in any event within one hundred and eighty (180) days after the end of its financial year together with a Compliance Certificate, signed by the Chief Financial Officer of the Guarantor, setting out (in reasonable detail) computations as to compliance with Clause 13.2 (Financial covenants) as at the date as at which those financial statements were drawn up.

 

	
  

	
13.1.2

	
Requirements as to financial statements   The set of financial statements delivered by the Guarantor under Clause 13.1.1 (Financial statements):

 

	
  

	
(a)

	
shall be certified by the Chief Financial Officer of the Guarantor as fairly representing its financial condition as at the date as at which those financial statements were drawn up; and

 

	
  

	
(b)

	
shall be prepared using GAAP, accounting practices and financial reference periods consistent with those applied in the preparation of the Original Financial Statements unless, in relation to any set of financial statements, the Guarantor notifies the Lender that there has been a change in GAAP, the accounting practices or reference periods and the Guarantor's auditors deliver to the Lender:

 

  

30

  

	
  

	
(i)

	
a description of any change necessary for those financial statements to reflect the GAAP, accounting practices and reference periods upon which the Original Financial Statements were prepared; and

 

	
  

	
(ii)

	
sufficient information, in form and substance as may be reasonably required by the Lender, to enable the Lender to make an accurate comparison between the financial position indicated in those financial statements and that indicated in the Original Financial Statements.

 

 

	
  

	
13.1.3

	

Interim financial statements  The Borrower shall procure that the Guarantor supplies to the Lender the Group's unaudited quarterly consolidated financial statements for that quarter, in each case as soon as the same become available, but in any event within thirty (30) days after the end of the Accounting Period, together with a Compliance Certificate, signed by the Chief Financial Officer of the Guarantor setting out (in reasonable detail) computations as to compliance with Clause 13.2 (Financial Covenants) as at the date as which those financial statements were drawn  up.

 

	
  

	
13.1.4

	
Information: miscellaneous   The Borrower shall supply to the Lender:

 

	
  

	
(a)

	
promptly upon becoming aware of them, details of any litigation, arbitration or administrative proceedings which are current, threatened or pending against any Security Party, and which might, if adversely determined, have a materially adverse effect on the business, assets, financial condition or credit worthiness of that Security Party;

 

	
  

	
(b)

	
promptly, such further information regarding the financial condition, business and operations of any Security Party as the Lender may reasonably request including, without limitation, cash flow analyses and details of the operating costs of the Vessel;

 

	
  

	
(c)

	
promptly, such further information regarding (i) the borrowing of money by the Group from other lenders or financial institutions, (ii) the sale and purchase of any vessel from the Guarantor or from any

 

  

31

  

	
  

	
if its Subsidiaries, (iii) any charterparties or other contracts of employment in relation to vessels owned (either directly or indirectly) by the Guarantor or any of its Subsidiaries and which will be in force during the Facility Period and (iv) all other major financial developments of the Group.

 

	
  

	
13.1.5

	
Notification of default

 

	
  

	
(a)

	
The Borrower shall notify the Lender of any Default (and the steps, if any, being taken to remedy it) promptly upon becoming aware of its occurrence.

 

	
  

	
(b)

	
Promptly upon a request by the Lender, the Borrower shall supply to the Lender a certificate duly signed by its director or senior officers on its behalf certifying that no Default is continuing (or if a Default is continuing, specifying the Default and the steps, if any, being taken to remedy it).

 

13.1.6       "Know your customer" checks   If:

 

	
  

	
(a)

	
the introduction of or any change in (or in the interpretation, administration or application of) any law or regulation made after the date of this Agreement;

 

	
  

	
(b)

	
any change in the status of the Borrower after the date of this Agreement; or

 

	
  

	
(c)

	
a proposed assignment or transfer by the Lender of any of its rights and obligations under this Agreement,

 

obliges the Lender (or, in the case of (c) above, any prospective new Lender) to comply with "know your customer" or similar identification procedures in circumstances where the necessary information is not already available to it, the Borrower shall promptly, and as soon as is practicable to the Borrower, upon the request of the Lender supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Lender (for itself or, in the case of (c) above, on behalf of any prospective new Lender) in order for the Lender (or, in the case of (c)

 

  

32

  

above, any prospective new Lender) to carry out and be satisfied it has complied with all necessary "know your customer" or other similar checks under all applicable laws and regulations pursuant to the transactions contemplated in the Finance Documents.

 

	
  

	
13.2

	
Financial covenants The Borrower shall procure that the Guarantor shall throughout the Facility Period (on a Group basis) comply with the following financial covenants, to be assessed quarterly on the basis of the Accounting Information:-

 

(a)     the ratio of Total Liabilities to EBITDA shall not exceed 7:1;

 

(b)     the ratio of EBITDA to Group Interest Expense shall be not less than 2.5:1;

 

(c)     the Market Value Adjusted Net Worth shall be at least one hundred million Dollars ($100,000,000);

 

(d)     the  ratio of Total Liabilities to Value Adjusted Total Assets shall be not less than 0.75:1.

 

The expressions used in this Clause 13.2 shall be construed in accordance with GAAP, and for the purposes of this Agreement:

"Accounting Information" means the annual financial statements and/or the quarterly financial statements to be provided by the Guarantor to the Lender in accordance with Clauses 13.1.1 and 13.1.3.

"Accounting Period" means each consecutive period of approximately three (3) months falling during the Facility Period (ending on the last day in March, June, September and December each year) for which quarterly Accounting Information is required to be delivered pursuant to Clause 13.1.1.

"Current Liabilities" means the aggregate (as of the date of calculation) of all liabilities of the Group falling due on demand or within one year, including the portion of Total Long Term Debt falling due on demand or within one year as stated

  

33

  

in the Accounting Information then most recently required to be delivered pursuant to Clause 13.1.1 and/or Clause 13.1.3.

"Debt" means the aggregate  (as of the date of calculation) of all obligations of the Group then outstanding for the payment or repayment of money as stated in the Accounting Information then most recently required to be delivered pursuant to Clause 13.1.1and/or Clause 13.1.3 including, without limitation:

	
  

	
(a)

	
any amounts payable by the Group under leases or similar arrangements over their respective periods;

	
  

	
(b)

	
any credit to the Group from a supplier of goods or under any instalment purchase or other similar arrangement;

	
  

	
(c)

	
the aggregate amount then outstanding of liabilities and obligations of third parties to the extent that they are guaranteed by the Group;

	
  

	
(d)

	
any contingent liabilities (including any taxes or other payments under dispute or arbitration) which have been or, under GAAP, should be recorded in the notes to the Group's financial statements;

 

	
  

	
(e)

	

any deferred tax liabilities; and

 

	
  

	
(f)

	

any other liabilities included as liabilities in the Accounting Information.

 

	
  

	
"EBITDA" means, in respect of each Accounting Period, the consolidated net income of the Group before taxation and after adding back Group Interest Expense, amortisation and depreciation and after deducting any capitalised costs and any interest received or receivable.

"Group Interest Expense" means, in relation to any Accounting Period, all paid or payable interest, acceptance commission, and all other continuing, regular or periodic costs, charges and expenses in the nature of interest (whether paid, payable or capitalised) incurred by the Group in effecting, servicing or maintaining the Financial Indebtedness of the Group to the extent that they are taken into account in calculating the net income of the Group during such Accounting Period.

  

34

  

"Market Value Adjusted Net Worth" means Value Adjusted Total Assets less Value Adjusted Total Liabilities.

"Marketable Securities" means any bonds, stocks, notes or bills payable in a freely convertible and transferable currency and which are listed on a stock exchange acceptable to the Lender.

 

"Total Liabilities" means the aggregate at any time of the Current Liabilities and the Debt (other than Current Liabilities).

"Total Long Term Debt" means the aggregate (as of the date of calculation) of all those component parts of the Debt which fall due or whose final payment is due more than one year after the respective dates of the agreements providing for such component parts of the Debt (including for the avoidance of doubt the current portion of such Debt) as stated in the Accounting Information then most recently required to be delivered pursuant to Clause 13.1.1 and/or 13.1.3.

"Value Adjusted Total Assets" means, at any date, the aggregate of:

	
(a)  

	
the then current market values of all vessels owned by any member of the Group (in the case of the Vessel or any other Fleet Vessel, the Market Value shall be determined by reference only to the most recent valuation of the Vessel or a vessel in accordance with Clause 11.14);

	
(b)  

	
the then current aggregate amount of cash, Marketable Securities (but no other bonds, notes or bills and less any cash or Marketable Securities accounted for in the definition of Value Adjusted Total Liabilities below) and receivables due to the Group (less provision for bad and doubtful debts) as shown in the latest financial statements; and

	
(c)  

	
the book values of all other assets (other than the assets referred to in sub-paragraphs (a) and (b) hereof) as shown in such latest Accounting Information.

  

35

  

"Value Adjusted Total Liabilities" means, at the relevant date and for a particular period, the aggregate of the Total Liabilities of the Group shown in the latest consolidated financial statements for the Group.

13.3        General undertakings

 

 

	
  

	
13.3.1

	
Authorisations   The Borrower shall promptly:

 

	
  

	
(a)

	
obtain, comply with and do all that is necessary to maintain in full force and effect; and

 

	
  

	
(b)

	
supply certified copies to the Lender of,

 

any consent, licence, approval or authorisation required under any law or regulation to enable each Security Party to perform its obligations under the Finance Documents to which it is a party and to ensure the legality, validity, enforceability or admissibility in evidence in the jurisdiction of incorporation of each relevant Security Party of any Finance Document.

 

	
  

	
13.3.2

	

Compliance with laws   The Borrower shall comply in all respects with all laws to which it may be subject, if failure so to comply would materially impair its ability to perform its obligations under the Finance Documents.

 

	
  

	
13.3.3

	

Conduct of business  The Borrower shall carry on and conduct its business in a proper and efficient manner, file all requisite tax returns and pay all tax which becomes due and payable (except where contested in good faith).

 

	
  

	
13.3.4

	
Evidence of good standing   The Borrower will from time to time if requested by the Lender provide the Lender with evidence in form and substance satisfactory to the Lender that the Security Parties and all corporate shareholders of any Security Party remain in good standing.

 

	
  

	
13.3.5

	
Negative pledge and no disposals  The Borrower shall not without the prior written consent of the Lender create nor permit to subsist any Encumbrance or other third party rights over any of its present or future assets or undertaking nor dispose of any of those assets or of all or part of that undertaking, except in the normal course of business in connection with the chartering, operation, maintenance and repair of the Vessel.

 

  

36

  

	
  

	
13.3.6

	
Merger   The Borrower shall not without the prior written consent of the Lender enter into any amalgamation, demerger, merger or corporate reconstruction.

 

	
  

	
13.3.7

	
Change of business   The Borrower shall not without the prior written consent of the Lender make any substantial change to the general nature of its business from that carried on at the date of this Agreement.

 

	
  

	
13.3.8

	
No other business   The Borrower shall not without the prior written consent of the Lender engage in any business other than the ownership, operation, chartering and management of the Vessel.

 

	
  

	
13.3.9

	
No place of business in UK or US  The Borrower shall not have an established place of business in the United Kingdom or the United States of America at any time during the Facility Period.

 

	
  

	
13.3.10

	

No borrowings   The Borrower shall not without the prior written consent of the Lender borrow any money (except for the Loan and unsecured Financial Indebtedness subordinated to the Loan and/or incurred in the normal course of business in connection with the chartering, operation, maintenance and repair of the Vessel) nor incur any obligations under leases.

 

	
  

	
13.3.11

	

No substantial liabilities   Except in the ordinary course of business in connection with the chartering, operation, maintenance and repair of the Vessel, the Borrower shall not without the prior written consent of the Lender incur any liability to any third party which is in the Lender's opinion of a substantial nature.

 

	
  

	
13.3.12

	

No loans or other financial commitments   The Borrower shall not without the prior written consent of the Lender make any loan nor enter into any guarantee or indemnity or otherwise voluntarily assume any actual or contingent liability in respect of any obligation of any other person except for loans made in the ordinary course of business in connection with the chartering, operation or repair of the Vessel.

 

	
  

	
13.3.13

	

No dividends   The Borrower shall not, and shall procure that the Guarantor will not, pay any dividends or make any other distributions to shareholders or issue any new shares if there is an Event of Default existing at the time of, or

 

  

37

  

 

	
  

	
 

	

would result from the making of such payment, the distributions or the issuance.

 

	
  

	
13.3.14

	

Inspection of records   The Borrower will permit the inspection of its financial records and accounts from time to time by the Lender or its nominee.

 

	
  

	
13.3.15

	

No change in Relevant Documents   The Borrower shall procure that, without the prior written consent of the Lender, there shall be no termination of, alteration to, or waiver of any term of, any of the Relevant Documents which are not Finance Documents.

 

	
  

	
13.3.16

	

No dealings with Master Agreement   The Borrower shall not assign, novate or encumber or in any other way transfer any of its rights or obligations under the Master Agreement, nor enter into any Master Agreement unless with the prior written consent of the Lender or enter into any interest rate exchange or hedging agreement with anyone other than the Lender.

 

	
  

	
13.3.17

	

Beneficial ownership The Borrower shall procure that, throughout the Facility Period, the Beneficial Owner remains:

 

(a)     the Chief Executive Officer and/or Chairman of the Board of Directors of the Guarantor; and

 

(b)     the legal and ultimate beneficial owner of all the issued shares in the Manager; and

 

(c)     the legal and beneficial owner of not less than ten per cent (10%) of the issued shares in the Guarantor.

 

	
  

	
13.3.18

	

No change in ownership or control   The Borrower shall not permit any change in its beneficial ownership, control, corporate and legal and business structure from that advised to the Lender at the date of this Agreement without the prior written consent of the Lender.

 

	
  

	
13.3.19

	

No subordination    The Borrower shall ensure that the Indebtedness will not be subordinated in priority of payment to any other present or future Financial Indebtedness.

 

  

38

  

	
  

	
13.3.20

	
Guarantor's capital The Borrower shall procure that the Guarantor shall not reduce its authorised or issued or subscribed capital unless (a) any such reduction relates to the purchase by the Guarantor of its "Class A" common shares representing up to fifteen per cent (15%) of the issued shares of the Guarantor and (b) no Default has occurred or is continuing or no Default will occur and be continuing as a result of such actions taken by the Guarantor.

 

13.4           Vessel undertakings

 

	
  

	
13.4.1

	
No sale of Vessel   The Borrower shall not sell or otherwise dispose of the Vessel or any shares in the Vessel nor agree to do so without the prior written consent of the Lender.

 

	
  

	
13.4.2

	
No chartering after Event of Default   Following the occurrence and during the continuation of an Event of Default the Borrower shall not without the prior written consent of the Lender let the Vessel on charter or renew or extend any charter or other contract of employment of the Vessel (nor agree to do so).

 

	
  

	
13.4.3

	
No change in management   The Borrower shall procure that, without the prior written consent of the Lender, there shall be no termination of, alteration to, or waiver of any term of, the Management Agreement and the Borrower shall not without the prior written consent of the Lender permit the Managers to sub-contract or delegate the commercial or technical management of the Vessel to any third party.

 

	
  

	
13.4.4

	
Registration of Vessel  The Borrower undertakes to maintain the registration of the Vessel under the flag stated in Recital (A) for the duration of the Facility Period unless the Lender agrees otherwise in writing.

 

	
  

	
13.4.5

	
Evidence of current COFR   The Borrower will, if and for so long as the Vessel trades in the United States of America and Exclusive Economic Zone (as defined in the United States Oil Pollution Act 1990), obtain and retain a valid Certificate of Financial Responsibility for the Vessel under that Act, will provide the Lender with evidence of that Certificate, and will comply strictly with the requirements of that Act.

 

  

39

  

	
  

	
13.4.6

	
ISM Code compliance   The Borrower will:

 

	
  

	
(a)

	
procure that the Vessel remains for the duration of the Facility Period subject to a SMS;

 

	
  

	
(b)

	
maintain a valid and current SMC for the Vessel throughout the Facility Period and provide a copy to the Lender;

 

	
  

	
(c)

	
procure that the ISM Company maintains a valid and current DOC throughout the Facility Period and provide a copy to the Lender; and

 

	
  

	
(d)

	
immediately notify the Lender in writing of any actual or threatened withdrawal, suspension, cancellation or modification of the SMC of the Vessel or of the DOC of the ISM Company.

 

	
  

	
13.4.7

	
ISPS Code compliance   The Borrower will:

 

	
  

	
(a)

	
for the duration of the Facility Period comply with the ISPS Code in relation to the Vessel and procure that the Vessel and the ISPS Company comply with the ISPS Code;

 

	
  

	
(b)

	
maintain a valid and current ISSC for the Vessel throughout the Facility Period and provide a copy to the Lender; and

 

	
  

	
(c)

	
immediately notify the Lender in writing of any actual or threatened withdrawal, suspension, cancellation or modification of the ISSC.

 

	
  

	
13.4.8

	
Annex VI compliance   The Borrower will:

 

	
  

	
(a)

	
for the duration of the Facility Period comply with Annex VI in relation to the Vessel and procure that the Vessel's master and crew are familiar with, and that the Vessel complies with, Annex VI;

 

	
  

	
(b)

	
maintain a valid and current IAPPC for the Vessel throughout the Facility Period and provide a copy to the Lender;

 

	
  

	
(c)

	
immediately notify the Lender in writing of any actual or threatened withdrawal, suspension, cancellation or modification of the IAPPC; and

 

  

40

  

 

	
  

	
13.4.9

	

Trading Limits The Borrower will procure that the Vessel does not trade in trading areas prohibited by the government of the Republic of Liberia or by the government of the nationality of the officers and crew of the Vessel.

 

	
14  

	
Events of Default

 

	
  

	
14.1

	
Events of Default   Each of the events or circumstances set out in this Clause 14.1 is an Event of Default.

 

	
  

	
14.1.1

	
Non-payment   The Borrower does not pay on the due date any amount payable by it under a Finance Document at the place at and in the currency in which it is expressed to be payable.

 

	
  

	
14.1.2

	
Other obligations   A Security Party or any other person (except the Lender) does not comply with any provision of any of the Relevant Documents to which that Security Party or person is a party (other than as referred to in Clause 14.1.1 (Non-payment)).

 

No Event of Default under this Clause 14.1.2 will occur if the failure to comply is capable of remedy and is remedied within ten (10) Business Days of the Lender giving notice to the Borrower or the Borrower becoming aware of the failure to comply.

 

	
  

	
14.1.3

	
Misrepresentation   Any representation, warranty or statement made or deemed to be repeated by a Security Party in any Finance Document or any other document delivered by or on behalf of a Security Party under or in connection with any Finance Document is or proves to have been incorrect or misleading in any material respect when made or deemed to be repeated.

 

	
  

	
14.1.4

	
Cross default   Any Financial Indebtedness of a Security Party:

 

	
  

	
(a)

	
is not paid when due or within any originally applicable grace period; or

 

	
  

	
(b)

	
is declared to be, or otherwise becomes, due and payable before its specified maturity as a result of an event of default (however described); or

 

  

41

  

	
  

	
(c)

	
is capable of being declared by a creditor to be due and payable before its specified maturity as a result of such an event.

 

	
  

	
14.1.5

	
Insolvency

 

	
  

	
(a)

	
A Security Party is unable or admits inability to pay its debts as they fall due, suspends making payments on any of its debts or, by reason of actual or anticipated financial difficulties, commences negotiations with one or more of its creditors with a view to rescheduling any of its Financial Indebtedness.

 

	
  

	
(b)

	
The value of the assets of a Security Party is less than its liabilities (taking into account contingent and prospective liabilities).

 

	
  

	
(c)

	
A moratorium is declared in respect of any Financial Indebtedness of a Security Party.

 

	
  

	
14.1.6

	
Insolvency proceedings   Any corporate action, legal proceedings or other procedure or step is taken for:

 

	
  

	
(a)

	
the suspension of payments, a moratorium of any Financial Indebtedness, winding-up, dissolution, administration, bankruptcy or reorganisation (by way of voluntary arrangement, scheme of arrangement or otherwise) of a Security Party);

 

	
  

	
(b)

	
a composition, compromise, assignment or arrangement with any creditor of a Security Party;

 

	
  

	
(c)

	
the appointment of a liquidator, receiver, administrative receiver, administrator, compulsory manager, or trustee or other similar officer in respect of any Security Party or any of its assets; or

 

	
  

	
(d)

	
enforcement of any Encumbrance over any assets of a Security Party,

 

 

  

42

  

 

	
  

	
or any analogous procedure or step is taken in any jurisdiction.

 

	
  

	
14.1.7

	

Creditors' process   Any expropriation, attachment, sequestration, distress or execution affects any asset or assets of a Security Party.

 

	
  

	
14.1.8

	

Change in ownership or control There is any change in the beneficial ownership or control of the Borrower and/or the Guarantor and/or the Managers from that advised to the Lender by the Borrower at the date of this Agreement and as stated in Clause 13.3.17.

 

	
  

	
14.1.9

	

Repudiation   A Security Party or any other person (except the Lender) repudiates any of the Relevant Documents to which that Security Party or person is a party or evidences an intention to do so.

 

	
  

	
14.1.10

	
Impossibility or illegality   Any event occurs which would, or would with the passage of time, render performance of any of the Relevant Documents by a Security Party or any other party to any such document impossible, unlawful or unenforceable by the Lender or a Security Party.

 

	
  

	
14.1.11

	
Conditions subsequent   Any of the conditions referred to in Clause 3.3 (Conditions subsequent) is not satisfied within the time reasonably required by the Lender.

 

	
  

	
14.1.12

	
Revocation or modification of authorisation   Any consent, licence, approval, authorisation, filing, registration or other requirement of any governmental, judicial or other public body or authority which is now, or which at any time during the Facility Period becomes, necessary to enable a Security Party or any other person (except the Lender) to comply with any of its obligations under any of the Relevant Documents is not obtained, is revoked, suspended, withdrawn or withheld, or is modified in a manner which the Lender considers is, or may be, prejudicial to the interests of the Lender, or ceases to remain in full force and effect.

 

	
  

	
14.1.13

	
Curtailment of business   A Security Party ceases, or threatens to cease, to carry on all or a substantial part of its business or, as a result of intervention by or under the authority of any government, the business of a Security Party is wholly or partially curtailed or suspended, or all or a substantial part of the assets or undertaking of a Security Party is seized, nationalised, expropriated or compulsorily acquired.

 

 

  

43

  

 

	 	
14.1.14

	
Reduction of capital   A Security Party reduces its authorised or issued or subscribed capital, save that the Guarantor may reduce its authorised or issued or subscribed capital provided that Clause 13.3.20 (Guarantor's capital) is complied with to the Lender's satisfaction.

 

	
  

	
14.1.15

	
Loss of Vessel   The Vessel suffers a Total Loss or is otherwise destroyed, abandoned, confiscated, forfeited or condemned as prize, or a similar event occurs in relation to any other vessel which may from time to time be mortgaged to the Lender as security for the payment of all or any part of the Indebtedness, except that a Total Loss, or event similar to a Total Loss in relation to any other vessel, shall not be an Event of Default if:

 

	
  

	
(a)

	
the Vessel or other vessel is insured in accordance with the Security Documents; and

 

	
  

	
(b)

	
no insurer has refused to meet or has disputed the claim for Total Loss and it is not apparent to the Lender in its discretion that any such refusal or dispute is likely to occur; and

 

	
  

	
(c)

	
payment of all insurance proceeds in respect of the Total Loss is made in full to the Lender within one hundred and twenty (120) days of the occurrence of the casualty giving rise to the Total Loss in question or such longer period as the Lender may in its discretion agree.

 

	
  

	
14.1.16

	
Challenge to registration   The registration of the Vessel or the Mortgage is contested or becomes void or voidable or liable to cancellation or termination, or the validity or priority of the Mortgage is contested.

 

	
  

	
14.1.17

	
War   The country of registration of the Vessel becomes involved in war (whether or not declared) or civil war or is occupied by any other power and the Lender in its discretion considers that, as a result, the security conferred by the Security Documents is materially prejudiced.

 

 

  

44

  

 

 

	
  

	
14.1.18

	

Master Agreement termination   A notice is given by the Lender under section 6(a) of the Master Agreement, or by any person under section 6(b)(iv) of the Master Agreement, in either case designating an Early Termination Date for the purpose of the Master Agreement, or the Master Agreement is for any other reason terminated, cancelled, suspended, rescinded, revoked or otherwise ceases to remain in full force and effect.

 

	
  

	
14.1.19

	
Notice of termination   The Guarantor gives notice to the Lender to determine its obligations under the Guarantee.

 

	
  

	
14.1.20

	

Material adverse change   Any event or series of events occurs which, in the opinion of the Lender, is likely to have a materially adverse effect on the business, assets, financial condition or credit worthiness of a Security Party.

 

	
  

	
14.1.21

	

Initial Charter  The Initial Charter is terminated, repudiated, cancelled, suspended, rescinded, revoked, amended, supplemented, varied, replaced or otherwise ceases to remain in full force and effect and/or fails to comply with the charter requirements set out in Schedule 1, Part I, clause 2 (a) (v).

 

	
  

	
14.2

	
Acceleration   If an Event of Default is continuing the Lender may by notice to the Borrower:

 

	
  

	
14.2.1

	
declare that the Loan, together with accrued interest, and all other amounts accrued or outstanding under the Finance Documents are immediately due and payable, whereupon they shall become immediately due and payable; and/or

 

	
  

	
14.2.2

	
declare that the Loan is payable on demand, whereupon it shall immediately become payable on demand by the Lender.

 

	
15  

	
Assignment and Sub-Participation

 

	
  

	
15.1

	
Lender's rights   The Lender may, subject to the prior written consent of the Borrower, such consent not to be unreasonably withheld, assign any of its rights under this Agreement or transfer by novation any of its rights and obligations under this Agreement to any other branch of the Lender or to any other bank or financial institution or (for the purpose of a securitisation of the Lender's rights or obligations under the Finance Documents or a similar transaction of broadly equivalent economic effect) to any special purpose vehicle, and may grant sub-participations in all or any part of the Loan.

 

 

  

45

  

 

	
  

	
15.2

	
Borrower's co-operation   The Borrower will co-operate fully with the Lender in connection with any assignment, transfer or sub-participation; will execute and procure the execution of such documents as the Lender may require in that connection; and irrevocably authorises the Lender to disclose to any proposed assignee, transferee or sub-participant (whether before or after any assignment, transfer or sub-participation and whether or not any assignment, transfer or sub-participation shall take place) all information relating to the Security Parties, the Loan, the Relevant Documents and the Vessel which the Lender may in its discretion consider necessary or desirable.

 

	
  

	
15.3

	
Rights of assignee or transferee   Any assignee or transferee of the Lender shall (unless limited by the express terms of the assignment or novation) take the full benefit of every provision of the Finance Documents benefitting the Lender.

 

	
  

	
15.4

	
No assignment or transfer by the Borrower   The Borrower may not assign any of its rights or transfer any of its rights or obligations under the Finance Documents.

 

	
  

	
15.5

	
Securitisation   The Lender may disclose the size and term of the Loan and the name of each of the Security Parties to any investor or potential investor in a securitisation (or similar transaction of broadly equivalent economic effect) of the Lender's rights or obligations under the Finance Documents.

 

	
16  

	
Set-Off

 

	
  

	
16.1

	
Set-off   The Lender may set off any matured obligation due from the Borrower under any Finance Document against any matured obligation owed by the Lender to the Borrower, regardless of the place of payment, booking branch or currency of either obligation.  If the obligations are in different currencies, the Lender may convert either obligation at a market rate of exchange in its usual course of business for the purpose of the set-off.

 

	
  

	
165.2

	
Master Agreement rights   The rights conferred on the Lender by this Clause 166 shall be in addition to, and without prejudice to or limitation of, the rights of netting and set off conferred on the Lender by the Master Agreement.

 

 

 

  

46

  

 

	
17  

	
Payments

 

	
  

	
17.1

	
Payments   Each amount payable by the Borrower under a Finance Document shall be paid to such account at such bank as the Lender may from time to time direct to the Borrower in the Currency of Account and in such funds as are customary at the time for settlement of transactions in the relevant currency in the place of payment.  Payment shall be deemed to have been received by the Lender on the date on which the Lender receives authenticated advice of receipt, unless that advice is received by the Lender on a day other than a Business Day or at a time of day (whether on a Business Day or not) when the Lender in its discretion reasonably considers that it is impossible or impracticable for the Lender to utilise the amount received for value that same day, in which event the payment in question shall be deemed to have been received by the Lender on the Business Day next following the date of receipt of advice by the Lender.

 

	
  

	
17.2

	
No deductions or withholdings   Each payment (whether of principal or interest or otherwise) to be made by the Borrower under a Finance Document shall, subject only to Clause 17.3 (Grossing-up), be made free and clear of and without deduction for or on account of any Taxes or other deductions, withholdings, restrictions, conditions or counterclaims of any nature.

 

	
  

	
17.3

	
Grossing-up   If at any time any law requires (or is interpreted to require) the Borrower to make any deduction or withholding from any payment, or to change the rate or manner in which any required deduction or withholding is made, the Borrower will promptly notify the Lender and, simultaneously with making that payment, will pay to the Lender whatever additional amount (after taking into account any additional Taxes on, or deductions or withholdings from, or restrictions or conditions on, that additional amount) is necessary to ensure that, after making the deduction or withholding, the Lender receives a net sum equal to the sum which the Lender would have received had no deduction or withholding been made.

 

	
  

	
17.4

	
Evidence of deductions   If at any time the Borrower is required by law to make any deduction or withholding from any payment to be made by it under a Finance Document, the Borrower will pay the amount required to be deducted or withheld to the relevant authority within the time allowed under the applicable law and will, no later than thirty (30) days after making that payment, deliver to the Lender an original receipt issued by the relevant authority, or other evidence acceptable to the Lender, evidencing the payment to that authority of all amounts required to be deducted or withheld.

 

 

  

47

  

 

	
  

	
17.5

	
Adjustment of due dates   If any payment or transfer of funds to be made under a Finance Document, other than a payment of interest on the Loan or a payment under the Master Agreement, shall be due on a day which is not a Business Day, that payment shall be made on the next succeeding Business Day (unless the next succeeding Business Day falls in the next calendar month in which event the payment shall be made on the next preceding Business Day).  Any such variation of time shall be taken into account in computing any interest in respect of that payment.

 

	
  

	
17.6

	
Control account   The Lender shall open and maintain on its books a control account in the name of the Borrower showing the advance of the Loan and the computation and payment of interest and all other sums due under this Agreement and the Master Agreement.  The Borrower's obligations to repay the Loan and to pay interest and all other sums due under this Agreement and the Master Agreement shall be evidenced by the entries from time to time made in the control account opened and maintained under this Clause 17.6 and those entries will, in the absence of manifest error, be conclusive and binding.

 

	
18  

	
Notices

 

	
  

	
18.1

	
Communications in writing   Any communication to be made under or in connection with this Agreement shall be made in writing and, unless otherwise stated, may be made by fax or letter.

 

	
  

	
18.2

	
Addresses   The address and fax number (and the department or officer, if any, for whose attention the communication is to be made) of each party to this Agreement for any communication or document to be made or delivered under or in connection with this Agreement are:

 

	
  

	
18.2.1

	
in the case of the Borrower, c/o Paragon Shipping Inc., 15 Karamanli Avenue, 166 73, Voula, Athens, Greece (fax no:+30 210 89 95 086) marked for the attention of Chief Financial Officer; and

 

	
  

	
18.2.2

	
in the case of the Lender, 93 Akti Miaouli, GR-185 38 Piraeus, Greece (fax no: 210 429 0506) marked for the attention of the Head of the Shipping Department.

 

 

 

  

48

  

 

or any substitute address, fax number, department or officer as either party may notify to the other by not less than five (5) Business Days' notice.

 

	
  

	
18.3

	
Delivery   Any communication or document made or delivered by one party to this Agreement to the other under or in connection this Agreement will only be effective:

 

18.3.1           if by way of fax, when received in legible form; or

 

	
  

	
18.3.2

	
if by way of letter, when it has been left at the relevant address or five (5) Business Days after being deposited in the post postage prepaid in an envelope addressed to it at that address;

 

and, if a particular department or officer is specified as part of its address details provided under Clause 18.2 (Addresses), if addressed to that department or officer.

 

Any communication or document to be made or delivered to the Lender will be effective only when actually received by the Lender.

 

	
  

	
18.4

	
English language   Any notice given under or in connection with this Agreement must be in English.  All other documents provided under or in connection with this Agreement must be:

 

	
  

	
18.4.1

	
in English; or

 

	
  

	
18.4.2

	
if not in English, and if so required by the Lender, accompanied by a certified English translation and, in this case, the English translation will prevail unless the document is a constitutional, statutory or other official document.

 

	
19  

	
Partial Invalidity

 

If, at any time, any provision of a Finance Document is or becomes illegal, invalid or unenforceable in any respect under any law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions nor the legality, validity or enforceability of such provision under the law of any other jurisdiction will in any way be affected or impaired.

 

 

  

49

  

 

	
20  

	
Remedies and Waivers

 

No failure to exercise, nor any delay in exercising, on the part of the Lender, any right or remedy under a Finance Document shall operate as a waiver, nor shall any single or partial exercise of any right or remedy prevent any further or other exercise or the exercise of any other right or remedy.  The rights and remedies provided in this Agreement are cumulative and not exclusive of any rights or remedies provided by law.

 

	
21  

	
Miscellaneous

 

	
  

	
21.1

	
No oral variations   No variation or amendment of a Finance Document shall be valid unless in writing and signed on behalf of the Lender.

 

	
  

	
21.2

	
Further assurance   If any provision of a Finance Document shall be invalid or unenforceable in whole or in part by reason of any present or future law or any decision of any court, or if the documents at any time held by or on behalf of the Lender are considered by the Lender for any reason insufficient to carry out the terms of this Agreement, then from time to time the Borrower will promptly, on demand by the Lender, execute or procure the execution of such further documents as in the reasonable opinion of the Lender are necessary to provide adequate security for the repayment of the Indebtedness.

 

	
  

	
21.3

	
Rescission of payments etc.   Any discharge, release or reassignment by the Lender of any of the security constituted by, or any of the obligations of a Security Party contained in, a Finance Document shall be (and be deemed always to have been) void if any act (including, without limitation, any payment) as a result of which such discharge, release or reassignment was given or made is subsequently wholly or partially rescinded or avoided by operation of any law.

 

	
  

	
21.4

	
Certificates   Any certificate or statement signed by an authorised signatory of the Lender purporting to show the amount of the Indebtedness (or any part of the Indebtedness) or any other amount referred to in any Finance Document shall, save for manifest error or on any question of law, be conclusive evidence as against the Borrower of that amount.

 

	
  

	
21.5

	
Counterparts   This Agreement may be executed in any number of counterparts each of which shall be original but which shall together constitute the same instrument.

 

 

 

  

50

  

 

	
  

	
21.6

	
Contracts (Rights of Third Parties) Act 1999   A person who is not a party to this Agreement has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce or to enjoy the benefit of any term of this Agreement.

 

	
22  

	
Law and Jurisdiction

 

	
  

	
22.1

	
Governing law   This Agreement and any non-contractual obligations arising from or in connection with it shall in all respects be governed by and interpreted in accordance with English law.

 

	
  

	
22.2

	
Jurisdiction   For the exclusive benefit of the Lender, the parties to this Agreement irrevocably agree that the courts of England are to have exclusive jurisdiction to settle any dispute (a) arising from or in connection with this Agreement or (b) relating to any non-contractual obligations arising from or in connection with this Agreement and that any proceedings may be brought in those courts.

 

	
  

	
22.3

	
Alternative jurisdictions   Nothing contained in this Clause 22 shall limit the right of the Lender to commence any proceedings against the Borrower in any other court of competent jurisdiction nor shall the commencement of any proceedings against the Borrower in one or more jurisdictions preclude the commencement of any proceedings in any other jurisdiction, whether concurrently or not.

 

	
  

	
22.4

	
Waiver of objections   The Borrower irrevocably waives any objection which it may now or in the future have to the laying of the venue of any proceedings in any court referred to in this Clause 22, and any claim that those proceedings have been brought in an inconvenient or inappropriate forum, and irrevocably agrees that a judgment in any proceedings commenced in any such court shall be conclusive and binding on it and may be enforced in the courts of any other jurisdiction.

 

	
  

	
22.5

	
Service of process   Without prejudice to any other mode of service allowed under any relevant law, the Borrower:

 

	
  

	
22.5.1

	
irrevocably appoints Hill Dickinson Services (London) Ltd of Irongate House, Duke's Place, London, EC3A 7HX, London, England as its agent for service of process in relation to any proceedings before the English courts in connection with this Agreement; and

 

 

  

51

  

 

	
  

	
22.5.2

	
agrees that failure by a process agent to notify the Borrower of the process will not invalidate the proceedings concerned.

 

  

52

  

SCHEDULE 1: Conditions Precedent and Subsequent

 

Part I: Conditions precedent

 

	
1  

	
Security Parties

 

	
  

	
(a)

	
Constitutional Documents   Copies of the constitutional documents of each Security Party together with such other evidence as the Lender may reasonably require that each Security Party is duly incorporated in its country of incorporation and remains in existence with power to enter into, and perform its obligations under, the Relevant Documents to which it is or is to become a party.

 

	
  

	
(b)

	
Certificates of good standing   A certificate of good standing in respect of each Security Party (if such a certificate can be obtained).

 

	
  

	
(c)

	
Board resolutions   A copy of a resolution of the board of directors of each Security Party:

 

	
  

	
(i)

	
approving the terms of, and the transactions contemplated by, the Relevant Documents to which it is a party and resolving that it execute those Relevant Documents; and

 

	
  

	
(ii)

	
authorising a specified person or persons to execute those Relevant Documents (and all documents and notices to be signed and/or despatched under those documents) on its behalf.

 

	
  

	
 (d)

	
Shareholder resolutions   A copy of a resolution signed by all the holders of the issued shares in each Security Party (other than the Guarantor), approving the terms of, and the transactions contemplated by, the Relevant Documents to which that Security Party (other than the Guarantor) is a party.

 

	
  

	
(e)

	
Officer's certificates   A certificate of a duly authorised officer of each Security Party certifying that each copy document relating to it specified in this Part I of Schedule 1 is correct, complete and in full force and effect and setting out the names of the directors, officers and shareholders of that Security Party and the proportion of shares held by each shareholder.

 

	
  

	
(f)

	
Evidence of registration   Where such registration is required or permitted under the laws of the relevant jurisdiction, evidence that the names of the directors, officers and shareholders of each Security Party are duly registered in the companies registry or other registry in the country of incorporation of that Security Party.

 

 

  

53

  

 

	
  

	
(g)

	
Powers of attorney   The notarially attested and legalised power of attorney of each Security Party under which any documents are to be executed or transactions undertaken by that Security Party.

 

	
2

	
Security and related documents

 

	
  

	
(a)

	
Vessel documents   Photocopies, certified as true, accurate and complete by a director or the secretary or the legal advisers of the Borrower, of:

 

	
  

	
(i)

	
the MOA;

 

	
  

	
(ii)

	
such documents as the Lender may reasonably require to evidence the nomination of the Borrower as purchaser of the Vessel pursuant to the MOA;

 

	
  

	
(iii)

	
the bill of sale transferring title in the Vessel to the Borrower free of all encumbrances, maritime liens or other debts;

 

	
  

	
(iv)

	
the protocol of delivery and acceptance evidencing the unconditional physical delivery of the Vessel by the Seller to the Borrower pursuant to the MOA;

 

	
  

	
(v)

	
the Initial Charter, which will be in full force and effect for an unexpired duration of three (3) years excluding any extension options at a gross daily rate of hire of twenty thousand Dollars ($20,000) and a net daily rate of hire of nineteen thousand Dollars ($19,000) and on terms and conditions acceptable to the Lender in its discretion;

 

	
  

	
(vi)

	
the Management Agreement;

 

	
  

	
(vii)

	
the Vessel's current Safety Construction, Safety Equipment, Safety Radio and Load Line Certificates;

 

	
  

	
(viii)

	
(if applicable) evidence of the Vessel's current Certificate of Financial Responsibility issued pursuant to the United States Oil Pollution Act 1990;

 

	
  

	
(ix)

	
the Vessel's current SMC;

 

 

 

  

54

  

 

	
  

	
(x)

	
the ISM Company's current DOC;

 

	
  

	
(xi)

	
the Vessel's current ISSC;

 

	
  

	
(xii)

	
the Vessel's current IAPPC;

 

	
  

	
(xiii)

	
the Vessel's current Tonnage Certificate;

 

	
  

	
  in each case together with all addenda, amendments or supplements.

 

	
  

	
(b)

	
Evidence of Seller's title   Certificate of ownership and encumbrance (or equivalent) issued by the Registrar of Ships (or equivalent official) of the Vessel's current flag confirming that the Vessel is owned by the Seller and free of registered Encumbrances and an undertaking by the Seller to delete the Vessel from its current flag.

 

	
  

	
(c)

	
Evidence of Borrower's title   Evidence that on the Drawdown Date (i) the Vessel will be at least provisionally registered under the flag stated in Recital (A) in the ownership of the Borrower and (ii) the Mortgage will be capable of being registered against the Vessel with first priority.

 

	
  

	
(d)

	
Evidence of insurance   Evidence that the Vessel is insured in the manner required by the Security Documents and that letters of undertaking will be issued in the manner required by the Security Documents, together with (if required by the Lender) the written approval of the Insurances by an insurance adviser appointed by the Lender.

 

	
  

	
(e)

	
Confirmation of class   A Certificate of Confirmation of Class for hull and machinery confirming that the Vessel is classed with the highest class applicable to vessels of her type with Lloyd's Register or such other classification society as may be acceptable to the Lender free of overdue recommendations affecting class.

 

	
  

	
(f)

	
Valuation For the purposes of determining the Maximum Loan Amount, a valuation of the Vessel addressed to the Lender from a broker appointed by the Borrower and acceptable to the Lender (in its discretion) certifying a market value of the Vessel to be conclusively determined by a reputable, independent and first class firm of shipbrokers appointed by the Borrower and approved by the Lender in its absolute discretion and reporting to the Lender on the basis of a charter free sale for prompt delivery for cash at arm's length on normal commercial terms as between a willing seller and a willing buyer.

 

 

  

55

  

 

	
  

	
(g)

	
Security Documents   The Security Documents, together with all other documents required by any of them, including, without limitation, all notices of assignment and/or charge and evidence that those notices will be duly acknowledged by the recipients.

 

	
  

	
(h)

	
Mandates   Such duly signed forms of mandate, and/or other evidence of the opening of the Accounts, as the Lender may require.

 

	
  

	
(i)

	
Managers' confirmation   The written confirmation of the Managers that, throughout the Facility Period unless otherwise agreed by the Lender, they will remain the commercial and technical managers of the Vessel and that they will not, without the prior written consent of the Lender, sub-contract or delegate the commercial or technical management of the Vessel to any third party and confirming in terms acceptable to the Lender that, following the occurrence of an Event of Default, all claims of the Managers against the Borrower shall be subordinated to the claims of the Lender under the Finance Documents.

 

	
  

	
(j)

	
No disputes   The written confirmation of the Borrower that there is no dispute under any of the Relevant Documents as between the parties to any such document.

 

	
  

	
 (k)

	
Other Relevant Documents   Copies of each of the Relevant Documents not otherwise comprised in the documents listed in this Part I of Schedule 1.

 

	
  

	
 (l)

	

Material adverse change   Evidence that no event or series of events have occurred which in the opinion of the Lender are likely to have a materially adverse effect on (i) the circumstances and/or (ii) financial condition, operations or creditworthiness of a Security Party.

 

	
  

	
(m)

	
Compliance Certificate    The duly executed compliance certificate substantially in the form set out in Schedule 4.

 

	
  

	
(n)

	
No event of default A side letter or certificate signed by a director or senior officer of the Borrower on its behalf certifying that no Default has occurred and is continuing.

 

 

  

56

  

 

	
3

	
Legal opinions

 

	
  

	
(a)

	
If a Security Party is incorporated in a jurisdiction other than England and Wales or if any Finance Document is governed by the laws of a jurisdiction other than England and Wales, a legal opinion of the legal advisers to the Lender in each relevant jurisdiction, substantially in the form or forms provided to the Lender prior to signing this Agreement or confirmation satisfactory to the Lender that such an opinion will be given.

 

	
4

	
Other documents and evidence

 

	
  

	
(a)

	
Drawdown Notice   A duly completed Drawdown Notice.

 

	
  

	
(b)

	
Process agent   Evidence that any process agent referred to in Clause 22.5 (Service of process) and any process agent appointed under any other Finance Document has accepted its appointment.

 

	
  

	
(c)

	
Other authorisations   A copy of any other consent, licence, approval, authorisation or other document, opinion or assurance which the Lender reasonably considers to be necessary or desirable (if it has notified the Borrower accordingly) and which are available in connection with the entry into and performance of the transactions contemplated by any of the Relevant Documents or for the validity and enforceability of any of the Relevant Documents.

 

	
  

	
(d)

	
Financial statements   Copies of the Original Financial Statements.

 

	
  

	
(e)

	
Fees   Evidence that the fees, costs and expenses then due from the Borrower under Clause 9 (Indemnities) and Clause 10 (Arrangement Fee) have been paid or will be paid by the Drawdown Date.

 

	
  

	
(f)

	
"Know your customer" documents   Such documentation and other evidence as is reasonably requested by the Lender in order for the Lender to comply with all necessary "know your customer" or similar identification procedures in relation to the transactions contemplated in the Finance Documents including (without limitation) all documents required under Regulation 281/2009 of the Central Bank of Greece.

 

	
  

	
(g)

	
Identity Letter The letter of identity from the Beneficial Owner addressed to the Lender, in form and substance acceptable to the Lender in its discretion.

 

 

  

57

  

 

Part II: Conditions subsequent

 

	
1 

	
Evidence of Borrower's title   Certificate of ownership and encumbrance (or equivalent) issued by the Registrar of Ships (or equivalent official) of the flag stated in Recital (A) confirming that (a) the Vessel is permanently registered under that flag in the ownership of the Borrower, (b) the Mortgage has been registered with first priority against the Vessel and (c) there are no further Encumbrances registered against the Vessel.

 

	
2

	
Deletion by Seller   Evidence that the Vessel has been deleted from its current flag.

 

	
3

	
Letters of undertaking   Letters of undertaking in respect of the Insurances as required by the Security Documents together with copies of the relevant policies or cover notes or entry certificates duly endorsed with the interest of the Lender.

 

	
4

	
Acknowledgements of notices   Acknowledgements of all notices of assignment and/or charge given pursuant to the Security Documents.

 

	
5

	
Legal opinions   Such of the legal opinions specified in Part I of this Schedule 1 as have not already been provided to the Lender.

 

	
6

	
Initial Charter  The Initial Charter, as specified in Part I of this Schedule 1, by no later than thirty (30) days following the Delivery Date, unless it has already been provided to the Lender.

 

 

  

58

  

SCHEDULE 2: Calculation of Mandatory Cost

 

	
1  

	
The Mandatory Cost is an addition to the interest rate to compensate the Lender for the cost of compliance with (a) the requirements of the Bank of England and/or the Financial Services Authority (or, in either case, any other authority which replaces all or any of its functions) or (b) the requirements of the European Central Bank.

 

	
2

	
On the first day of each Interest Period (or as soon as possible thereafter) the Lender shall calculate, as a percentage rate, a rate (the "Additional Cost Rate") in accordance with the paragraphs set out below.

 

	
3

	
The Additional Cost Rate for the Lender if lending from an office in the euro-zone will be the percentage notified by the Lender to the Borrower to be its reasonable determination of the cost (expressed as a percentage of the Loan) of complying with the minimum reserve requirements of the European Central Bank as a result of making the Loan from that office.

 

	
4

	
The Additional Cost Rate for the Lender if lending from an office in the United Kingdom will be calculated by the Lender as follows:

 

(a)           where the Loan is denominated in sterling:

 

	
  

	
BY + S(Y - Z) + F x 0.01 per cent per annum

100 - (B + S)

 

(b)           where the Loan is denominated in any currency other than sterling:

 

	
  

	
F x 0.01 per cent per annum

	 	
300

 

	
  

	
where:

 

	
  

	
B

	
is the percentage of eligible liabilities (assuming these to be in excess of any stated minimum) which the Lender is from time to time required to maintain as an interest free cash ratio deposit with the Bank of England to comply with cash ratio requirements;

 

	
  

	
Y

	
is the percentage rate of interest (excluding the Margin and the Mandatory Cost and, if the Loan is an overdue amount, the additional rate of interest specified in Clause 7.8 (Default interest)) payable for the relevant Interest Period on the Loan;

 

 

  

59

  

 

	
  

	
S

	
is the percentage (if any) of eligible liabilities which the Lender is required from time to time to maintain as interest bearing special deposits with the Bank of England;

 

	
  

	
Z

	
is the interest rate per annum payable by the Bank of England to the Lender on special deposits; and

 

	
  

	
F

	
is the charge payable by the Lender to the Financial Services Authority under paragraph 2.02 or 2.03 (as appropriate) of the Fees Regulations or the equivalent provisions in any replacement regulations (with, for this purpose, the figure for the minimum amount in paragraph 2.02b or such equivalent provision deemed to be zero), expressed in pounds per £1 million of the fee base of the Lender.

 

5           For the purpose of this Schedule:

 

	
  

	
(a)

	
"eligible liabilities" and "special deposits" have the meanings given to them at the time of application of the formula by the Bank of England;

 

	
  

	
(b)

	
"fee base" has the meaning given to it in the Fees Regulations;

 

	
  

	
(c)

	
"Fees Regulations" means the regulations governing periodic fees contained in the Financial Services Authority Fees Manual or such other law or regulation as may be in force from time to time in respect of the payment of fees for the acceptance of deposits.

 

	
6

	
In the application of the formula B, Y, S and Z are included in the formula as figures and not as percentages, e.g. if B = 0.5% and Y = 15%, BY is calculated as 0.5. x 15.  Each rate calculated in accordance with the formula is, if necessary, rounded upward to four decimal places.

 

	
7

	
If a change in circumstances has rendered, or will render, the formula inappropriate, the Lender shall notify the Borrower of the manner in which the Mandatory Cost will subsequently be calculated.  The manner of calculation so notified by the Lender shall, in the absence of manifest error, be binding on the Borrower.

 

  

60

  

SCHEDULE 3: Form of Drawdown Notice

 

	
To:

	
HSBC Bank plc

From:       Eris Shipping S.A.

 2010

Dear Sirs

 

Drawdown Notice

 

We refer to the Loan Agreement dated                      2010   made between ourselves and yourselves (the "Agreement").

 

Words and phrases defined in the Agreement have the same meaning when used in this Drawdown Notice.

 

Pursuant to Clause 4 of the Agreement, we irrevocably request that you advance the sum of [                                                          ] to us on                         20   , which is a Business Day, by paying the amount of the advance in accordance with the MOA.

 

We warrant that the representations and warranties contained in Clause 12.1 of the Agreement are true and correct at the date of this Drawdown Notice and will be true and correct on               20  , that no Default has occurred and is continuing, and that no Default will result from the advance of the sum requested in this Drawdown Notice.

 

We select the period of [       ] months as the first Interest Period.

 

Yours faithfully

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

For and on behalf of

ERIS SHIPPING S.A.

  

61

  

SCHEDULE 4: Form of Compliance Certificate

 

To:          HSBC BANK plc

From:      PARAGON SHIPPING INC.

Dated:

Dear Sirs

Eris Shipping S.A., of the Republic of Liberia – [                  ] secured loan facility agreement dated [                   ] 2010 (the "Agreement")

 

We refer to the Agreement.  This is a Compliance Certificate.  Terms defined in the Agreement have the same meaning when used in this Compliance Certificate unless given a different meaning in this Compliance Certificate.

 

We confirm that:

	
(a)

	
the ratio of Total Liabilities to EBITDA shall not exceed 7:1;

 

	
(b)

	
the ratio of EBITDA to Group Interest Expense shall be not less than 2.5:1;

 

	
(c)

	
the Market Value Adjusted Net Worth shall be at least one hundred million Dollars ($100,000,000);

 

	
(d)

	
the ratio of Total Liabilities to Value Adjusted Total Assets shall be not less than 0.75:1.

 

We confirm that no Default has occurred and is continuing.

	
Signed:

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

	  	
Chief Financial Officer

	  	
of

	  	
Paragon Shipping Inc.

  

62

  

IN WITNESS of which the parties to this Agreement have executed this Agreement the day and year first before written.

 

 

	 SIGNED by	 )	 	 
	 duly authorised for and on behalf 	 )	 	 
	 of ERIS SHIPPING S.A.	 )	 	 

 

 

	SIGNED by	 )	 	 
	 duly authorised for and on behalf 	 )	 	 
	 of HSBC BANK plc	 )	 	 

 

 

  

63d1176172_ex4-35.htm

Exhibit 4.35

Date 28 July  2010

 

PARAGON SHIPPING INC.

as Borrower

- and -

CREDIT SUISSE AG

as Lender

__________________________________

LOAN AGREEMENT

__________________________________

relating to a facility of US$48,000,000 for the acquisition

of two 3,400 teu  panamax container vessels currently

under construction at Blohm & Voss Nordseewerke

and having Builder's hull nos. 418 (tbn "BOX VOYAGER")

and 419 (tbn "BOX TRADER")

 

 

 

 

 

WATSON, FARLEY & WILLIAMS

Piraeus

 

  

  

  

INDEX

 

	
Clause

	  	
Page

	 	 	 	 
	
1

	
INTERPRETATION

	
1

	 
	 	 	 	 
	
2

	
FACILITY

	
15

	 
	 	 	 	 
	
3

	
DRAWDOWN

	
15

	 
	 	 	 	 
	
4

	
INTEREST

	
16

	 
	 	 	 	 
	
5

	
INTEREST PERIODS

	
17

	 
	 	 	 	 
	
6

	
DEFAULT INTEREST

	
18

	 
	 	 	 	 
	
7

	
REPAYMENT AND PREPAYMENT

	
19

	 
	 	 	 	 
	
8

	
CONDITIONS PRECEDENT

	
20

	 
	 	 	 	 
	
9

	
REPRESENTATIONS AND WARRANTIES

	
21

	 
	 	 	 	 
	
10

	
GENERAL UNDERTAKINGS

	
23

	 
	 	 	 	 
	
11

	
CORPORATE UNDERTAKINGS

	
26

	 
	 	 	 	 
	
12

	
INSURANCE

	
28

	 
	 	 	 	 
	
13

	
SHIP COVENANTS

	
33

	 
	 	 	 	 
	
14

	
SECURITY COVER

	
37

	 
	 	 	 	 
	
15

	
PAYMENTS AND CALCULATIONS

	
38

	 
	 	 	 	 
	
16

	
APPLICATION OF RECEIPTS

	
39

	 
	 	 	 	 
	
17

	
APPLICATION OF EARNINGS

	
40

	 
	 	 	 	 
	
18

	
EVENTS OF DEFAULT

	
41

	 
	 	 	 	 
	
19

	
FEES AND EXPENSES

	
45

	 
	 	 	 	 
	
20

	
INDEMNITIES

	
46

	 
	 	 	 	 
	
21

	
NO SET-OFF OR TAX DEDUCTION

	
48

	 
	 	 	 	 
	
22

	
ILLEGALITY, ETC

	
49

	 
	 	 	 	 
	
23

	
INCREASED COSTS

	
49

	 
	 	 	 	 
	
24

	
SET OFF

	
50

	 
	 	 	 	 
	
25

	
TRANSFERS AND CHANGES IN LENDING OFFICE

	
51

	 
	 	 	 	 
	
26

	
VARIATIONS AND WAIVERS

	
52

	 
	 	 	 	 

 

 

  

  

  

 

 

	
27

	
NOTICES

	
53

	 
	 	 	 	 
	
28

	
SUPPLEMENTAL

	
54

	 
	 	 	 	 
	
29

	
LAW AND JURISDICTION

	
54

	 
	 	 	 
	
SCHEDULE 1  DRAWDOWN NOTICE

	
56

	 
	 	 	 
	
SCHEDULE 2  CONDITION PRECEDENT DOCUMENTS

	
57

	 
	 	 	 
	
SCHEDULE 3  MANDATORY COST FORMULA

	
60

	 
	 	 	 
	
SCHEDULE 4  FORM OF COMPLIANCE CERTIFICATE

	
61

	 

 

  

  

  

THIS LOAN AGREEMENT is made on 28 July 2010

BETWEEN:

	
(1)

	
PARAGON SHIPPING INC. being a corporation incorporated in the Republic of the Marshall Islands whose registered office is at Trust Company House, Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands as Borrower.

 

	
(2)

	
CREDIT SUISSE AG acting through its office at St. Alban-Graben 1-3, Basel CH-4002, Switzerland as Lender.

 

BACKGROUND

The Lender has agreed to make available to the Borrower a facility of US$48,000,000 for the purpose of financing or re-financing part of the Contract Price of each Ship.  The facility shall be divided into two Advances of US$24,000,000.

 

IT IS AGREED as follows:

	
1

	
INTERPRETATION

 

	
1.1

	
Definitions.  Subject to Clause 1.5, in this Agreement:

 

"Accounts Pledges" means the Earnings Account Pledges and the Retention Account Pledge;

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

"Applicable Accounts" means, as at the date of calculation or, as the case may be, in respect of an accounting period, the annual audited consolidated accounts and financial statements of the Group or the 6-monthly unaudited accounts and financial statements of the Group, in each case, which the Borrower is obliged to deliver to the Lender pursuant to Clause 10.6;

"Approved Broker"  means any reputable sale and purchase broker, experienced in the container trade, approved or appointed by the Lender;

	
  

	
"Approved Charter"  means any charterparty in respect of a Ship of a duration (or capable of being or exceeding a duration whether for a fixed period or by option for extension) of 12 months or more made on terms and with a charterer acceptable in all respects to the Lender;

	
  

	
"Approved Charter Assignment"  means, in relation to an Approved Charter, a specific deed of assignment of the rights of the relevant Owner in respect of that Approved Charter, in such form as the Lender may approve or require;

	
  

	
"Approved Flag"  means Liberian or such flag as the Lender may, in its sole and absolute discretion, at the request of the Borrower, approve as the flag on which a Ship shall be registered;

	
  

	
"Approved Flag State"  means Liberia or any other country in which the Lender may, in its sole and absolute discretion, at the request of the Borrower, approve that a Ship be registered;

	
  

	
"Approved Manager"  means, in relation to each Ship, Allseas Marine S.A., a corporation organised and existing under the laws of the Republic of Liberia, having its registered office at 80 Broad Street, Monrovia, Liberia and maintaining a ship management office at 15, Karamanli Street, 166 73 Voula, Greece or any other company which the Lender may, at the request of the Borrower, approve from time to time as the technical and/or commercial manager of a Ship;

 

  

  

  

 

	
  

	
"Approved Manager's Undertaking"  means, in relation to a Ship, a letter of undertaking executed or to be executed by the Approved Manager in favour of the Lender, agreeing certain matters in relation to the Approved Manager of that Ship and subordinating its rights against such Ship and the relevant Owner to the rights of the Lender under the Finance Documents, in such form as the Lender may approve or require;

"Ardelia"  means Ardelia Navigation Limited, a corporation incorporated and existing under the laws of the Republic of Liberia and having its registered office at 80 Broad Street, Monrovia, Liberia;

 

	
  

	
"Availability Period"  means the period commencing on the date of this Agreement and ending on 31 August 2010 or, if earlier, the date on which the Loan is fully borrowed, cancelled or terminated;

"Borrower"  means Paragon Shipping Inc., a corporation incorporated and existing under the laws of the Marshall Islands and having its registered office at Trust Company House, Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands;

"Builder"  means [Blohm & Voss Nordseewerke], a company organised and existing under the laws of the Federal Republic of Germany;

	
  

	
"Business Day"  means a day on which banks are open in London, Athens, Basel and in respect of a day on which a payment is required to be made under a Finance Document, also in New York City;

"Commitment"  means an amount of up to $48,000,000 as that amount may be reduced, cancelled or terminated in accordance with this Agreement;

 

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

 

	
  

	
"Contract Price"  means, in relation to each Ship, €40,000,000, being the purchase price payable by the relevant Owner to the Seller pursuant to clause 1 of the relevant MOA in respect of that Ship;

	
  

	
"Contractual Currency"  has the meaning given in Clause 20.5;

	
  

	
"Delivery Date"  means, in relation to a Ship, the date on which title to and possession of that Ship is transferred from the Seller to the relevant Owner pursuant to the relevant MOA;

	
  

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

	
  

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

	
  

	
"Drawdown Notice"  means a notice in the form set out in Schedule 1 (or in any other form which the Lender approves or reasonably requires);

	
  

	
"Earnings"  means, in relation to a Ship, all moneys whatsoever which are now, or later become, payable (actually or contingently) to the relevant Owner or the Lender and which arise out of the use or operation of that Ship, including (but not limited to):

  

2

  

	
  

	
(a)

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

 

	
  

	
(b)

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

 

	
  

	
(c)

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

 

"Earnings Account"  means, in relation to an Owner, an account in the name of that Owner with the Lender in Basel, or any other account (with that or another office of the Lender or with a bank or financial institution other than the Lender) which is designated by the Lender as the Earnings Account with respect to that Owner for the purposes of this Agreement;

"Earnings Account Pledge"  means, in relation to an Earnings Account, a deed of pledge of that Earnings Account, in such form as the Lender may approve or require and, in the plural, means both of them;

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

 

	
  

	
(a)

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

 

	
  

	
(i)

	

all federal, state, local and foreign taxes and tax distributions;

 

	
  

	
(ii)

	

Net Interest Expenses; and

 

	
  

	
(iii)

	

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

 

	
  

	
(b)

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

 

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

 

	
  

	
"Environmental Claim"  means:

	
  

	
(a)

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

 

	
  

	
(b)

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

 

	
  

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

  

3

  

 

	
  

	
"Environmental Incident"  means:

	
  

	
(a)

	
any release of Environmentally Sensitive Material from a Ship; or

 

	
  

	
(b)

	
any incident in which Environmentally Sensitive Material is released from a vessel other than a Ship and which involves a collision between a Ship and such other vessel or some other incident of navigation or operation, in either case, in connection with which a Ship is actually or potentially liable to be arrested, attached, detained or injuncted and/or a Ship or either Owner and/or any operator or manager is at fault or allegedly at fault or otherwise liable to any legal or administrative action; or

 

	
  

	
(c)

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

 

	
  

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

	
  

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

"Eridanus"  means Eridanus Trading Co., a corporation incorporated and existing under the laws of the Republic of Liberia and having its registered office at 80 Broad Street, Monrovia, Liberia;

 

	
  

	
"Event of Default"  means any of the events or circumstances described in Clause 18.1;

	
  

	
"Finance Documents"  means:

	
  

	
(a)

	
this Agreement;

 

	
  

	
(b)

	
the Guarantees;

 

	
  

	
(c)

	
the Master Agreement Assignment;

 

	
  

	
(d)

	
the General Assignments;

 

	
  

	
(e)

	
the Mortgages;

 

	
  

	
(f)

	
the Accounts Pledges;

 

	
  

	
(g)

	
any Approved Charter Assignment;

 

	
  

	
(h)

	
the Approved Manager's Undertakings; and

 

	
  

	
(i)

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

 

  

4

  

 

	
  

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

	
  

	
(a)

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

 

	
  

	
(b)

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

 

	
  

	
(c)

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

 

	
  

	
(d)

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

 

	
  

	
(e)

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

 

	
  

	
(f)

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

 

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

"Fleet Vessels"  means all of the vessels (including, but not limited to, the Ships) from time to time wholly owned by members of the Group (each a "Fleet Vessel");

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

	
  

	
"General Assignment"  means, in relation to a Ship, a general assignment of the Earnings, the Insurances and any Requisition Compensation in respect of that Ship, in such form as the Lender may approve or require and, in the plural, means both of them;

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

	
  

	
"Guarantee"  means, in relation to an Owner, a guarantee to be given by that Owner in favour of the Lender, irrevocably and unconditionally guaranteeing the obligations of the Borrower under this Agreement, the Master Agreement and the other Finance Documents, in such form as the Lender may approve or require and, in the plural, means both of them;

"Hull 418" means the newbuilding panamax container vessel of approximately 3,400 teu, which is being constructed by the Builder for the Seller pursuant to the Hull 418 Shipbuilding Contract with Builder's hull number 418 and upon delivery to be sold by the Seller to Ardelia pursuant to the Hull 418 MOA;

	
  

	
"Hull 418 MOA"  means the memorandum of agreement dated 29 June 2010 (as amended by an addendum no. 1 dated 1 July 2010) and made between Ardelia (as nominee for Allseas Marine S.A.) as buyer and the Seller in respect of the sale of Hull 418 from the Seller to Ardelia, as the same may be amended and/or supplemented from time to time;

  

5

  

	
  

	
"Hull 418 Shipbuilding Contract"  means the shipbuilding contract made between the Builder and the Seller for the construction by the Builder of Hull 418 and its purchase by the Seller, as supplemented and/or amended from time to time;

"Hull 419" means the newbuilding panamax container vessel of approximately 3,400 teu, which is being constructed by the Builder for the Seller pursuant to the Hull 419 Shipbuilding Contract with Builder's hull number 419 and upon delivery to be sold by the Seller to Eridanus pursuant to the Hull 419 MOA;

	
  

	
"Hull 419 MOA"  means the memorandum of agreement dated 29 June 2010 (as amended by an addendum no. 1 dated 1 July 2010) and made between Eridanus (as nominee for Allseas Marine S.A.) as buyer and the Seller in respect of the sale of Hull 419 from the Seller to Eridanus, as the same may be amended and/or supplemented from time to time;

	
  

	
"Hull 419 Shipbuilding Contract"  means the shipbuilding contract made between the Builder and the Seller for the construction by the Builder of Hull 419 and its purchase by the Seller, as supplemented and/or amended from time to time;

	
  

	
"IACS"  means the International Association of Classification Societies;

	
  

	
"Insurances"  means, in relation to a Ship:

	
  

	
(a)

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

 

	
  

	
(b)

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

 

"Interest Expenses"  means, in respect of the relevant period, the aggregate of all interest payable by any member of the Group on any Financial Indebtedness (excluding any amounts owing by one member of the Group to another member of the Group) and any net amounts payable under interest rate hedge agreements;

 

"Interest Period"  means, in relation to an Advance, a period determined in accordance with Clause 5;

	
  

	
"ISM Code"  means, in relation to its application to each Owner, its Ship and its operation:

	
  

	
(a)

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

 

	
  

	
(b)

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

 

	
  

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

	
  

	
"ISM Code Documentation"  includes:

  

6

  

	
  

	
(a)

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

 

	
  

	
(b)

	
all other documents and data which are relevant to the ISM SMS and its implementation and verification which the Lender may require; and

 

	
  

	
(c)

	
any other documents which are prepared or which are otherwise relevant to establish and maintain a Ship's or the relevant Owner's compliance with the ISM Code which the Lender may require;

 

	
  

	
"ISM SMS"  means the safety management system for a Ship which is required to be developed, implemented and maintained under the ISM Code;

"ISPS Code"  means the International Ship and Port Facility Security Code constituted pursuant to resolution A.924 (22) of the International Maritime Organisation ("IMO") adopted by a Diplomatic conference of the IMO on Maritime Security on 13 December 2002 and now set out in Chapter XI-2 of the Safety of Life at Sea Convention (SOLAS) 1974 (as amended) to take effect on 1 July 2004 as the same may be amended, supplemented or superseded from time to time;

 

"ISPS Code Documentation" includes:

 

	
  

	
(a)

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

 

	
  

	
(b)

	
all other documents and data which are relevant to the ISPS Code and its implementation and verification which the Lender may require;

 

	
  

	
"Lender"  means Credit Suisse AG, acting through its office at St. Alban-Graben 1-3, Basel CH-4002, Switzerland (or through another branch notified to the Borrower under Clause 25.6) or its successors or assigns;

 

"Leverage Ratio" means, at any relevant time, the ratio of:

 

	
  

	
(a)

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

 

	
  

	
(b)

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

 

"LIBOR" means, for an Interest Period, the rate per annum determined by the Lender to be the rate at which deposits in Dollars are offered to the Lender by leading banks in the London Interbank Market at the Lender's request at or about 11.00 am (London time) on the Quotation Date for that Interest Period for a period equal to that Interest Period and for delivery on the first Business Day of it;

 

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

 

	
  

	
(a)

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

 

	
  

	
(b)

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

 

  

7

  

 

	
  

	
(c)

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

 

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

 

	
  

	
(i)

	

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

 

	
  

	
(ii)

	

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

 

	
  

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

	
  

	
"Major Casualty"  means any casualty to a Ship in respect of which the claim or the aggregate of the claims against all insurers, before adjustment for any relevant franchise or deductible, exceeds $700,000 or the equivalent in any other currency;

"Major Shareholder"  means the major ultimate beneficial shareholder of the Borrower as disclosed to the Lender prior to the date of this Agreement and acceptable to the Lender in all respects.

"Mandatory Cost" means the percentage rate, which represents the cost to the Lender, relative to the Loan, of compliance with the requirements of the Bank of England, the Financial Services Authority or any other regulatory authority, as determined by the Lender in accordance with the formula detailed in Schedule 3;

 

"Margin"  means 2.75 per cent. per annum;

 

	
  

	
"Market Value" means, in respect of each Ship and each other Fleet Vessel, the market value thereof determined from time to time in accordance with Clause 14.4;

"Market Value Adjusted Net Worth" means Market Value Adjusted Total Assets less Total Debt;

 

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

 

"Master Agreement"  means the master agreement (on 2002 ISDA (Multicurrency - Crossborder) form) made or to be made between the Borrower and the Lender and includes all Transactions from time to time entered into and Confirmations from time to time exchanged thereunder;

 

"Master Agreement Assignment"  means the assignment of the Master Agreement executed or to be executed by the Borrower, in such form as the Lender may approve or require;

 

"MOA"  means either of the Hull 418 MOA or the Hull 419 MOA, and in the plural means both of them;

 

  

8

  

"Mortgage"  means, in relation to a Ship, the first priority or preferred (as the case may be) ship mortgage on that Ship under the applicable Approved Flag, together with any deed of covenant collateral thereto (if applicable), executed by the Owner of that Ship in favour of the Lender, in such form as the Lender may approve or require and, in the plural, means both of them;

 

	
  

	
"Negotiation Period"  has the meaning given in Clause 4.6;

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

 

"Owners"  means, together Ardelia and Eridanus and, in the singular, means either of them;

 

	
  

	
"Payment Currency"  has the meaning given in Clause 20.5;

	
  

	
"Permitted Security Interests"  means:

	
  

	
(a)

	
Security Interests created by the Finance Documents;

 

	
  

	
(b)

	
liens for unpaid crew's wages in accordance with usual maritime practice;

 

	
  

	
(c)

	
liens for salvage;

 

	
  

	
(d)

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

 

	
  

	
(e)

	
liens for master's disbursements incurred in the ordinary course of trading and any other lien arising by operation of law or otherwise in the ordinary course of the trading, chartering, operation, repair or maintenance of a Ship, provided such liens do not secure amounts more than 30 days overdue (unless the overdue amount is being contested by the relevant Owner in good faith by appropriate steps) and subject, in the case of liens for repair or maintenance, to Clause 13.13(g);

 

	
  

	
(f)

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

 

	
  

	
(g)

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

 

"Pertinent Document"  means:

 

	
  

	
(a)

	

any Finance Document;

 

	
  

	
(b)

	

any policy or contract of insurance contemplated by or referred to in Clause 12 of any other provision of this Agreement or another Finance Document;

 

	
  

	
(c)

	
any other document contemplated by or referred to in any Finance Document; and

 

  

9

  

 

 

	
  

	
(d)

	

any document which has been or is at any time sent by or to the Lender in contemplation of or in connection with any Finance Document or any policy, contract or document falling within paragraphs (b) or (c);

 

"Pertinent Jurisdiction", in relation to a company, means:

 

	
  

	
(a)

	
England and Wales;

 

	
  

	
(b)

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

 

	
  

	
(c)

	
a country in which the company has the centre of its main interests or in which the company's central management and control is or has recently been exercised;

 

	
  

	
(d)

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

 

	
  

	
(e)

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

 

	
  

	
(a)

	
a country the courts of which have jurisdiction to make a winding up, administration or similar order in relation to the company, whether as main or territorial or ancillary proceedings, or which would have such jurisdiction if their assistance were requested by the courts of a country referred to in paragraphs (b) or (c);

 

"Pertinent Matter"  means:

 

	
  

	
(a)

	

any transaction or matter contemplated by, arising out of, or in connection with a Pertinent Document; or

 

	
  

	
(b)

	

any statement relating to a Pertinent Document or to a transaction or matter falling within paragraph (a),

 

and covers any such transaction, matter or statement, whether entered into, arising or made at any time before the signing of this Agreement or on or at any time after that signing;

 

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

 

"Quotation Date" means, in relation to any Interest Period (or any other period for which an interest rate is to be determined under any provision of a Finance Document), the day on which quotations would ordinarily be given by leading banks in the London Interbank Market for deposits in the currency in relation to which such rate is to be determined for delivery on the first day of that Interest Period or other period;

 

"Relevant Person"  has the meaning given in Clause 18.7;

 

"Repayment Date"  means a date on which a repayment is required to be made under Clause 7;

 

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

 

  

10

  

"Retention Account" means an account in the name of the Borrower with the Lender in Basel or any other account (with that or another office of the Lender or with a bank or financial institution other than the Lender) which is designated by the Lender as the Retention Account for the purposes of this Agreement;

 

"Retention Account Pledge"  means a deed of pledge of the Retention Account, in such form as the Lender may approve or require;

 

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

 

"Security Interest"  means:

 

	
  

	
(a)

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

 

	
  

	
(b)

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

 

	
  

	
(c)

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

 

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

 

"Security Period"  means the period commencing on the date of this Agreement and ending on the date on which the Lender notifies the Borrower and the Security Parties that:

 

	
  

	
(a)

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

 

	
  

	
(b)

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

 

	
  

	
(c)

	
neither the Borrower nor any Security Party has any future or contingent liability under Clause 19, 20 or 21 below or any other provision of this Agreement or another Finance Document; and

 

	
  

	
(d)

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

 

"Seller"  means [Howaldtswerke-Deutsche Werft GmbH], a company incorporated in the Federal Republic of Germany;

 

  

11

  

"Ships"  means, together, Hull 418 and Hull 419 and, in the singular, means either of them;

 

"Shipbuilding Contracts"  means, together, Hull 418 Shipbuilding Contract and Hull 419 Shipbuilding Contract and, in the singular, means either of them;

 

"Six Months' Debt Service"  means, on any date, the amount of principal and interest in respect of the Financial Indebtedness of the Borrower payable to the Lender during the consecutive 6-month period immediately following such date

 

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

 

"Total Assets" means, as at the relevant date, the aggregate value of all current assets, fixed assets, and other assets and restricted cash of the Group (valued in accordance with GAAP), but excluding any assets held on trust;

 

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

 

"Total Debt" means, as at the date of calculation, the aggregate Financial Indebtedness of the Group;

 

"Total Loss"  means, in relation to a Ship:

 

	
  

	
(a)

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

 

	
  

	
(b)

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

 

	
  

	
(c)

	
any condemnation of that Ship by any tribunal or by any person or person claiming to be a tribunal;

 

	
  

	
(d)

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

 

"Total Loss Date"  means, in relation to a Ship:

 

	
  

	
(a)

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

 

	
  

	
(b)

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

 

	
  

	
(i)

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

 

  

12

  

	
  

	
(ii)

	
the date of any compromise, arrangement or agreement made by or on behalf of the Owner owning that Ship, with the Ship's insurers in which the insurers agree to treat that Ship as a total loss; and

 

	
  

	
(c)

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

 

"Transaction"  has the meaning given in the Master Agreement.

 

	
1.2

	
Construction of certain terms.  In this Agreement:

 

"administration notice"  means a notice appointing an administrator, a notice of intended appointment and any other notice which is required by law (generally or in the case concerned) to be filed with the court or given to a person prior to, or in connection with, the appointment of an administrator;

 

	
  

	
"approved"  means, for the purposes of Clause 13, approved in writing by the Lender;

	
  

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

	
  

	
"company" includes any partnership, joint venture and unincorporated association;

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

	
  

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

	
  

	
"document" includes a deed; also a letter, fax or telex;

	
  

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

	
  

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

	
  

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

	
  

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

 

 

	
  

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

	
  

	
"months"  shall be construed in accordance with Clause 1.3;

	
  

	
"obligatory insurances"  means, in relation to the Ship, all insurances effected, or which the Borrower owning the Ship is obliged to effect, under Clause 12 below or any other provision of this Agreement or another Finance Document;

	
  

	
"parent company"  has the meaning given in Clause 1.4;

  

13

  

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

	
  

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

"protection and indemnity risks" means the usual risks covered by a protection and indemnity association managed in London, including pollution risks and the proportion (if any) of any sums payable to any other person or persons in case of collision which are not recoverable under the hull and machinery policies by reason of the incorporation in them of clause 6 of the International Hull Clauses (1/11/02 or 1/11/03), clause 8 of the Institute Time Clauses (Hulls) (1/11/95) or clause 8 of the Institute Time Clauses (Hulls) (1/10/83) or the Institute Amended Running Down Clause (1/10/71) or any equivalent provision;

 

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

	
  

	
"subsidiary"  has the meaning given in Clause 1.4;

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

	
  

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

"war risks" includes the risk of mines and all risks excluded by clause 29 of the International Hull Clauses (1/11/02 or 1/11/03), clause 24 of the Institute Time Clauses (Hulls) (1/11/95) or clause 23 of the Institute Time Clauses (Hulls) (1/10/83).

 

	
1.3

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

 

	
(a)

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

 

	
(b)

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

 

and "month" and "monthly" shall be construed accordingly.

	
1.4

	
Meaning of "subsidiary". A company (S) is a subsidiary of another company (P) if:

 

	
(a)

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

 

  

14

  

	
(b)

	
P has direct or indirect control over a majority of the voting rights attached to the issued shares of S, or

 

	
(c)

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

 

	
(d)

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

 

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

1.5           General Interpretation.

 

	
(a)

	
In this Agreement:

 

	
  

	
(i)

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

 

	
  

	
(ii)

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

 

	
  

	
(iii)

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

 

	
(b)

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

 

1.6           Headings.  In interpreting a Finance Document or any provision of a Finance Document, all clause, sub-clause and other headings in that and any other Finance Document shall be entirely disregarded.

 

	
2

	
FACILITY

 

	
(a)

	
Amount of facility.  Subject to the other provisions of this Agreement, the Lender shall make available to the Borrower a loan facility of $48,000,000 in two equal Advances of $24,000,000 each.

 

	
2.2

	
Purpose of Loan.  The Borrower undertakes with the Lender to use each Advance only for the purpose of financing or refinancing part of the cost of the relevant Ship.

 

	
3

	
DRAWDOWN

 

	
3.1

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

 

	
3.2

	
Availability.  The conditions referred to in Clause 3.1 are that:

 

	
(a)

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

 

	
(b)

	
the amount of each Advance shall not exceed $24,000,000 and shall be applied in paying the balance of the Contract Price of the relevant Ship being purchased on that Drawdown Date; and

 

	
(c)

	
the aggregate of the Advances shall not exceed the Commitment.

 

  

15

  

	
3.3

	
Drawdown Notice irrevocable.  A Drawdown Notice must be signed by a duly authorised signatory of the Borrower; and once served, a Drawdown Notice cannot be revoked without the prior consent of the Lender.

 

	
3.4

	
Disbursement of Advance.  Subject to the provisions of this Agreement, the Lender shall on each Drawdown Date make the relevant Advance to the Borrower and that payment to the Borrower shall be made to the account which the Borrower specifies in the Drawdown Notice.

 

	
3.5

	
Disbursement of Advance to third party.   The payment by the Lender under Clause 3.4 to the Seller shall constitute the making of the Advance and the Borrower shall thereupon become indebted, as principal and direct obligor, to the Lender in an amount equal to that Advance.

 

	
4

	
INTEREST

 

	
4.1

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

 

	
4.2

	
Normal rate of interest.  Subject to the provisions of this Agreement, the rate of interest on the Loan shall be the aggregate of (i) the Margin, (ii) the Mandatory Cost and (iii) and LIBOR for that Interest Period.

 

	
4.3

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

 

	
4.4

	
Notification of market disruption.  The Lender shall promptly notify the Borrower if for any reason the Lender is unable to obtain Dollars in the London Interbank Market in order to fund the Loan (or any part of it) during any Interest Period, stating the circumstances which have caused such notice to be given.

 

	
4.5

	
Suspension of drawdown.  If the Lender's notice under Clause 4.4 is served before an Advance is made, the Lender's obligation to make that Advance shall be suspended while the circumstances referred to in the Lender's notice continue.

 

	
4.6

	
Negotiation of alternative rate of interest.  If the Lender's notice under Clause 4.4 is served after an Advance is made, the Borrower and the Lender shall use reasonable endeavours to agree, within 25 Business Days after the date on which the Lender serves its notice under Clause 4.4 (the "Negotiation Period"), an alternative interest rate or (as the case may be) an alternative basis for the Lender to fund or continue to fund the Loan during the Interest Period concerned.

 

	
4.7

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

 

	
4.8

	
Alternative rate of interest in absence of agreement.  If an alternative interest rate or alternative basis is not agreed within the Negotiation Period, and the relevant circumstances are continuing at the end of the Negotiation Period, then the Lender shall set an interest period and interest rate representing the cost of funding to the Lender in Dollars or in any available currency of the Loan plus the Margin and the Mandatory Cost (if any); and the procedure provided for by this Clause 4.8 shall be repeated if the relevant circumstances are continuing at the end of the interest period so set by the Lender.

 

  

16

  

	
4.9

	
Notice of prepayment.  If the Borrower does not agree with an interest rate set by the Lender under Clause 4.8, the Borrower may give the Lender not less than 15 Business Days' notice of its intention to prepay at the end of the interest period set by the Lender.

 

	
4.10

	
Prepayment.  A notice under Clause 4.9 shall be irrevocable; and on the last Business Day of the interest period set by the Lender, the Borrower shall prepay (without premium or penalty) the Loan, together with accrued interest thereon at the applicable rate plus the Margin and the Mandatory Cost (if any) and, if the prepayment or repayment is not made on the last day of the interest period set by the Lender, any sums payable under Clause 20.1(b).

 

	
4.11

	
Application of prepayment.  The provisions of Clause 7 shall apply in relation to the prepayment.

 

	
5

	
INTEREST PERIODS

 

	
5.1

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

 

	
5.2

	
Duration of normal Interest Periods.  Subject to Clauses 5.3 and 5.4, each Interest Period in respect of each Advance shall be:

 

	
(a)

	
3, 6, 9 or 12 months as notified by the Borrower to the Lender not later than 11.00 a.m. (Basel time) 3 Business Days before the commencement of the Interest Period;

 

	
(b)

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

 

	
(c)

	
such other period as the Lender may agree with the Borrower.

 

	
5.3

	
Duration of Interest Periods for repayment instalments.  In respect of an amount due to be repaid under Clause 7 on a particular Repayment Date, an Interest Period shall end on that Repayment Date.

 

	
5.4

	
Non-availability of matching deposits for Interest Period selected.  If, after the Borrower has selected an Interest Period longer than 6 months, the Lender notifies the Borrower by 11.00 a.m. (Basel time) on the third Business Day before the commencement of the Interest Period that it is not satisfied that deposits in Dollars for a period equal to the Interest Period will be available to it in the London Interbank Market when the Interest Period commences, the Interest Period shall be of 6 months.

 

	
6

	
DEFAULT INTEREST

 

	
6.1

	
Payment of default interest on overdue amounts.  The Borrower shall pay interest in accordance with the following provisions of this Clause 6 on any amount payable by the Borrower under any Finance Document which the Lender does not receive on or before the relevant date, that is:

 

	
(a)

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

 

	
(b)

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

 

	
(c)

	
if such amount has become immediately due and payable under Clause 18.4, the date on which it became immediately due and payable.

 

  

17

  

	
6.2

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

 

	
(a)

	
in the case of an overdue amount of principal, the higher of the rates set out at Clauses 6.3(a) and (b); or

 

	
(b)

	
in the case of any other overdue amount, the rate set out at Clause 6.3(b).

 

	
6.3

	
Calculation of default rate of interest.  The rates referred to in Clause 6.2 are:

 

	
(a)

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

 

	
(b)

	
the Margin applicable to the overdue amount, the Mandatory Cost (if any) plus, in respect of successive periods of any duration (including at call) up to 6 months which the Lender may select from time to time:

 

	
  

	
(i)

	
LIBOR; or

 

	
  

	
(ii)

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

 

	
6.4

	
Notification of interest periods and default rates.  The Lender shall promptly notify the Borrower of each interest rate determined by it under Clause 6.3 and of each period selected by it for the purposes of paragraph (b) of that Clause; but this shall not be taken to imply that the Borrower is liable to pay such interest only with effect from the date of the Lender's notification.

 

	
6.5

	
Payment of accrued default interest.  Subject to the other provisions of this Agreement, any interest due under this Clause shall be paid on the last day of the period by reference to which it was determined.

 

	
6.6

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

 

	
6.7

	
Application to Master Agreement. For the avoidance of doubt this Clause 6 does not apply to any amount payable under the Master Agreement in respect of any continuing Transaction as to which section 2(e) (Default Interest, Other Amounts) of the Master Agreement shall apply.

 

	
7

	
REPAYMENT AND PREPAYMENT

 

	
7.1

	
Amount of repayment instalments.  The Borrower shall repay each Advance by 40 consecutive quarterly instalments of $400,000 each and a balloon instalment (the "Balloon Instalment") of $8,000,000).

 

	
7.2

	
Repayment Dates.  The first instalment in respect of each Advance shall be repaid on the date falling 3 months after the Drawdown Date of that Advance and the 40th and last instalment together with the Balloon Instalment shall be paid on the date falling on the earlier of (i) the tenth anniversary of such Drawdown Date and (ii) 31 August 2020.

 

	
7.3

	
Final Repayment Date.  On the final Repayment Date, the Borrower shall additionally pay to the Lender all other sums then accrued or owing under any Finance Document.

 

  

18

  

	
7.4

	
Voluntary prepayment.  Subject to the following conditions, the Borrower may prepay the whole or any part of an Advance on the last day of an Interest Period in respect thereof.

 

	
7.5

	
Conditions for voluntary prepayment.  The conditions referred to in Clause 7.4 are that:

 

	
(a)

	
a partial prepayment shall be $800,000 or a higher integral multiple thereof;

 

	
(b)

	
the Lender has received from the Borrower at least 15 days' prior written notice specifying the amount to be prepaid and the date on which the prepayment is to be made (such date shall be the last day of an Interest Period of the relevant Advance); and

 

	
(c)

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

 

	
7.6

	
Effect of notice of prepayment.  A prepayment notice may not be withdrawn or amended without the consent of the Lender, and the amount specified in the prepayment notice shall become due and payable by the Borrower on the date for prepayment specified in the prepayment notice.

 

	
7.7

	
Mandatory prepayment.  The Borrower shall be obliged to prepay an Advance if the Ship relative to that Advance is sold or becomes a Total Loss:

 

	
(a)

	
in the case of a sale, on or before the date on which the sale is completed by delivery of that Ship to the buyer; or

 

	
(b)

	
in the case of a Total Loss, on the earlier of the date falling 120 days after the Total Loss Date and the date of receipt by the Lender of the proceeds of insurance relating to such Total Loss.

 

	
7.8

	
Amounts payable on prepayment.  A prepayment shall be made together with accrued interest (and any other amount payable under Clause 20 or otherwise) in respect of the amount prepaid and, if the prepayment is not made on the last day of an Interest Period together with any sums payable under Clause 20.1(b) but without premium or penalty.

 

	
7.9

	
Application of partial prepayment.  Each partial prepayment shall, unless otherwise agreed by the Lender, be applied pro rata against the then outstanding repayment instalments and the Balloon Instalment for the Advance to which that prepayment relates.

 

	
7.10

	
No reborrowing.  No amount prepaid may be reborrowed.

 

	
7.11

	
Unwinding of Transactions.  On or prior to any repayment or prepayment under this Clause 7 or any other provision of this Agreement, the Borrower shall wholly or partially reverse, offset, unwind or otherwise terminate one or more of the continuing Transactions so that the notional principal amount of the continuing Transactions thereafter remaining does not and will not in the future (taking into account the scheduled amortisation) exceed the amount of the Loan as reducing from time to time thereafter pursuant to Clause 7.1.

 

	
8

	
CONDITIONS PRECEDENT

 

	
8.1

	
Documents, fees and no default.  The Lender's obligation to make an Advance is subject to the following conditions precedent:

 

	
(a)

	
that on or before the date of this Agreement, the Lender receives:

 

  

19

  

 

	
  

	
(i)

	

the documents described in Part A of Schedule 2 in a form and substance satisfactory to the Lender and its lawyers; and

 

	
  

	
(ii)

	
the arrangement fee referred to in Clause 19.1;

 

	
(b)

	
that, on or before the service of the Drawdown Notice in respect of the each Advance, the Lender receives the documents described in Part B of Schedule 2 in form and substance satisfactory to the Lender and its lawyers and evidence that either:

 

	
  

	
(i)

	
the Ship to which the Advance being drawn relates is or will be employed under an Approved Charter from the relevant Delivery Date; or

 

	
  

	
(ii)

	
Borrower has deposited in the Retention Account an amount equal to Six Months' Debt Service in respect of that Advance;

 

	
(c)

	
that, on or before each Drawdown Date, the Lender has received payment of the expenses referred to in Clause 19.2;

 

	
(d)

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

 

	
  

	
(i)

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

 

	
  

	
(ii)

	
the representations and warranties in Clause 9 and those of the Borrower or any Security Party which are set out in the other Finance Documents would be true and not misleading if repeated on each of those dates with reference to the circumstances then existing;

 

	
  

	
(iii)

	
none of the circumstances contemplated by Clause 4.4 has occurred and is continuing;  and

 

	
  

	
(iv)

	
there has been no material adverse change in the financial position, state of affairs or prospects of the Borrower or the Owners in the light of which the Lender considers that there is a significant risk that the Borrower or any Security Party is, or will later become, unable to discharge its liabilities under the Finance Documents to which it is a party as they fall due; and

 

	
(e)

	
that, if the ratio set out in Clause 14.1 were applied immediately following the making of an Advance, the Borrower would not be obliged to provide additional security or prepay part of the Loan under that Clause; and

 

	
(f)

	
that the Lender has received, and found to be acceptable to it, any further opinions, consents, agreements and documents in connection with the Finance Documents which the Lender may reasonably request by notice to the Borrower prior to the relevant Drawdown Date.

 

	
8.2

	
Waiver of conditions precedent.  If the Lender at its discretion, permits an Advance to be borrowed before certain of the conditions referred to in Clause 8.1 are satisfied, the Borrower shall ensure that those conditions are satisfied within 5 Business Days after the relevant Drawdown Date (or such longer period as the Lender may specify).

 

	
9

	
REPRESENTATIONS AND WARRANTIES

 

	
9.1

	
General.  The Borrower represents and warrants to the Lender as follows.

 

	
9.2

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

 

  

20

  

	
9.3

	
Share capital and ownership.  The Borrower has an authorised share capital divided into 780,000,000 registered shares of $0.001, 51,233,033 of which shares have been issued fully paid.

 

	
9.4

	
Corporate power.  The Borrower (or in the case of paragraph (a), each Owner) has the corporate capacity, and has taken all corporate action and obtained all consents necessary for it:

 

	
(a)

	
to enter into the MOA to which it is a party, to purchase and pay for the relevant Ship and register that Ship in its name under an Approved Flag;

 

	
(b)

	
to execute the Finance Documents to which it is a party and the Master Agreement; and

 

	
(c)

	
to borrow under this Agreement, to enter into Transactions under the Master Agreement and to make all the payments contemplated by, and to comply with, those Finance Documents to it is a party and the Master Agreement.

 

	
9.5

	
Consents in force.  All the consents referred to in Clause 9.4 remain in force and nothing has occurred which makes any of them liable to revocation.

 

	
9.6

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

 

	
(a)

	
constitute the Borrower's legal, valid and binding obligations enforceable against the Borrower in accordance with their respective terms; and

 

	
(b)

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

 

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

	
9.7

	
No third party Security Interests.  Without limiting the generality of Clause 9.6, at the time of the execution and delivery of each Finance Document to which the Borrower is a party:

 

	
(a)

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

 

	
(b)

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

 

	
9.8

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

 

	
(a)

	
any law or regulation; or

 

	
(b)

	
the constitutional documents of the Borrower; or

 

	
(c)

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

 

  

21

  

	
9.9

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

 

	
9.10

	
No default.  No Event of Default or Potential Event of Default has occurred.

 

	
9.11

	
Information.  All information which has been provided in writing by or on behalf of the Borrower or any Security Party to the Lender in connection with any Finance Document satisfied the requirements of Clause 10.5; all audited and unaudited accounts which have been so provided satisfied the requirements of Clause 10.7; and there has been no material adverse change in the financial position or state of affairs of the Borrower from that disclosed in the latest of those accounts.

 

	
9.12

	
No litigation.  No legal or administrative action involving the Borrower (including action relating to any alleged or actual breach of the ISM Code or the ISPS Code) has been commenced or taken or, to the Borrower's knowledge, is likely to be commenced or taken.

 

9.13        Validity and completeness of MOAs.

 

	
(a)

	
The copies of the MOAs delivered to the Lender before the date of this Agreement are true and complete copies;

 

	
(b)

	
each MOA constitutes valid, binding and enforceable obligations of the Seller and the Owner which is a party to it in accordance with its terms; and

 

	
(c)

	
other than those amendments and additions to the MOAs disclosed to the Lender before the date of this Agreement, no amendments or additions to either MOA have been agreed nor has either Owner or the Seller waived any of their respective rights under the MOAs.

 

	
9.14

	
No rebates etc.  There is no agreement or understanding to allow or pay any rebate, premium, commission, discount or other benefit or payment (howsoever described) to the Owners, the Seller or any third party in connection with the purchase by the Owners of the Ships, other than as disclosed to the Lender in writing on or prior to the date of this Agreement.

 

	
9.15

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

 

	
9.16

	
Compliance with certain undertakings.  At the date of this Agreement, the Borrower is in compliance with Clauses 10.2, 10.4, 10.9 and 10.13.

 

	
9.17

	
ISM Code and ISPS Code compliance.  All requirements of the ISM Code and the ISPS Code as they relate to the Borrower, the Owners, the Approved Manager and the Ships have been complied with.

 

	
9.18

	
No money laundering.  Without prejudice to the generality of Clause 2.2, in relation to the borrowing by the Borrower of the Loan, the performance and discharge of its obligations and liabilities under the Finance Documents, and the transactions and other arrangements effected or contemplated by the Finance Documents to which the Borrower is a party, the Borrower confirms (i) that it is acting for its own account, (ii) that it will use the proceeds of the Loan for its own benefit, under its full responsibility and exclusively for the purposes specified in this Agreement and (iii) that the foregoing will not involve or lead to contravention of any law, official requirement or other regulatory measure or procedure implemented to combat "money laundering" (as defined in Article 1 of the Directive 2005/60/EC of the European Parliament and of the Council).

 

  

22

  

	
9.19

	
No immunity.  The Borrower is not, nor is any of its assets entitled to immunity on the grounds of sovereignty or otherwise from any legal action or proceeding (which shall include, without limitation, suit, attachment prior to judgement, execution or other enforcement).

 

	
10

	
GENERAL UNDERTAKINGS

 

	
10.1

	
General.  The Borrower undertakes with the Lender to comply with the following provisions of this Clause 10 at all times during the Security Period except as the Lender may otherwise permit.

 

	
10.2

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

 

	
(a)

	
hold the legal title to, and own the entire beneficial interest in, each Owner, free from all Security Interests and other interests and rights of every kind, except for those created by the Finance Documents;

 

	
(b)

	
procure that each Owner will not create or permit to arise any Security Interest over any other asset, present or future other than in the normal course of its business of acquiring, financing and operating vessels; and

 

	
(c)

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

 

	
10.3

	
No disposal of assets.  The Borrower will procure that each Owner will not transfer, lease or otherwise dispose of

 

	
(a)

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

 

	
(b)

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

 

	
10.4

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

 

	
(a)

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

 

	
(b)

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

 

	
(c)

	
(in the case of each Owner) incurred in the normal course of its business of trading, chartering, operating, maintaining and repairing its Ship.

 

	
10.5

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

 

	
10.6

	
Provision of financial statements.  The Borrower will send or procure there are sent to the Lender:

 

	
(a)

	
as soon as possible, but in no event later than 180 days after the end of each Financial Year:

 

  

23

  

 

	
  

	
(i)

	

the audited consolidated annual accounts of the Group for that Financial Year (commencing with accounts for the year ending 31 December 2010); and

 

	
  

	
(ii)

	
the unaudited annual accounts of each Owner; and

 

	
(b)

	
as soon as possible, but in no event later than 90 days after the end of each 6-month period in each Financial Year of the Borrower:

 

	
  

	
(i)

	
the unaudited consolidated accounts of the Group for that 6-month period certified as to their correctness by the chief financial officer of the Borrower; and

 

	
  

	
(ii)

	
the unaudited accounts of each Owner for that 6 month period certified as to their correctness by an officer of that Owner,

 

promptly after each request by the Lender, such further financial information about theBorrower, the Ships and the Owners (including, but not limited to, charter arrangements,Financial Indebtedness and operating expenses) as the Lender may require.

 

	
10.7

	
Form of financial statements.  All accounts (audited and unaudited) delivered under Clause 10.6 will:

 

	
(a)

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

 

	
(b)

	
give a true and fair view of the state of affairs of the relevant person at the date of those accounts and of its profit for the period to which those accounts relate; and

 

	
(c)

	
fully disclose or provide for all significant liabilities of the relevant person and its subsidiaries.

 

	
10.8

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

 

	
(a)

	
for the Borrower to perform its obligations under any Finance Document to which it is party or the Master Agreement;

 

	
(b)

	
for the validity or enforceability of any Finance Document to which it is party or the Master Agreement; and

 

	
(c)

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

 

and the Borrower will comply (or procure compliance, as the case may be) with the terms of all such consents.

	
10.9

	
Maintenance of Security Interests.  The Borrower will:

 

	
(a)

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

 

	
(b)

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

 

	
10.10

	
Notification of litigation.  The Borrower will provide the Lender with details of any legal or administrative action involving the Borrower, any Security Party, the Approved Manager or the Ships, their Earnings or their Insurances as soon as such action is instituted or becomes apparent to the Borrower that it is likely to be instituted, unless it is clear that the legal or administrative action cannot be considered material in the context of any Finance Document.

 

  

24

  

 

	
10.11

	
No amendment to MOA.  The Borrower will procure that neither Owner will agree to any amendment or supplement to, or waive or fail to enforce, the MOA to which it is a party or any of its provisions.

 

	
10.12

	
Principal place of business.  The Borrower will maintain its place of business, and keep its corporate documents and records, at the address stated at Clause 27.2(a); and the Borrower will not establish, nor do anything as a result of which it would be deemed to have, a place of business in any country other than the Marshall Islands and Greece.

 

	
10.13

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

 

	
(a)

	
states that no Event of Default or Potential Event of Default has occurred; or

 

	
(b)

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

 

	
  

	
The Lender may serve requests under this Clause 10.14 from time to time; this Clause 10.14 does not affect the Borrower's obligations under Clause 10.15.

	
10.14

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

 

	
(a)

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

 

	
(b)

	
any matter which indicates that an Event of Default or a Potential Event of Default may have occurred,

 

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

	
10.15

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

 

	
(a)

	
to the Borrower, the Group, the Fleet Vessels, the Ships, their Insurances, their Earnings or the Owners (including, but not limited to, any sales or purchases of Fleet Vessels, the incurrence of Financial Indebtedness, the refinancing or restructuring of any loan or credit facilities and details of the employment of the Fleet Vessels) as the Lender may require; or

 

	
(b)

	
to any other matter relevant to, or to any provision of, a Finance Document,

 

which may be requested by the Lender at any time.

	
10.16

	
Provision of copies and translation of documents.  If the Lender so requires, the Borrower will supply the Lender with a certified English translation in respect of any of those documents referred to above, such translation to be prepared by a translator approved by the Lender.

 

	
10.17

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

 

  

25

  

	
10.18

	
"Know your customer" checks.  If:

 

	
(a)

	
the introduction of or any change in (or in the interpretation, administration or application of) any law or regulation made after the date of this Agreement;

 

	
(b)

	
any change in the status of the Borrower or any Security Party after the date of this Agreement; or

 

	
(c)

	
a proposed assignment or transfer by the Lender of any of its rights and obligations under this Agreement to a party that is not a Lender prior to such assignment or transfer,

 

obliges the Lender (or, in the case of paragraph (c), any prospective new Lender) to comply with "know your customer" or similar identification procedures in circumstances where the necessary information is not already available to it, the Borrower shall promptly upon the request of the Lender supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Lender (for itself or, in the case of the event described in paragraph (c), on behalf of any prospective new Lender) in order for the Lender or, in the case of the event described in paragraph (c), any prospective new Lender to carry out and be satisfied it has complied with all necessary "know your customer" or other similar checks under all applicable laws and regulations pursuant to the transactions contemplated in the Finance Documents.

	
11

	
CORPORATE UNDERTAKINGS

 

	
11.1

	
General.  The Borrower also undertakes with the Lender to comply with the following provisions of this Clause 11 at all times during the Security Period except as the Lender may otherwise permit.

 

	
11.2

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

 

	
11.3

	
Negative undertakings.  The Borrower will not:

 

	
(a)

	
change the nature of its business; or

 

	
(b)

	
pay any dividend or make any other form of distribution or effect any form of redemption, purchase or return of share capital if an Event of Default has occurred and has not been remedied or an Event of Default will result from the payment of a dividend or the making of any other form of distribution; or

 

	
(c)

	
provide any form of credit or financial assistance to:

 

	
  

	
(i)

	
a person who is directly or indirectly interested in the Borrower's share or loan capital; or

 

	
  

	
(ii)

	
any company in or with which such a person is directly or indirectly interested or connected,

 

	
  

	
or enter into any transaction with or involving such a person or company on terms which are, in any respect, less favourable to the Borrower than those which it could obtain in a bargain made at arms' length;

	
(d)

	
for the avoidance of doubt, subject to the provisions of Clause 11.3(b) the Borrower is permitted at any time, in such manner and as many times as it deems fit to pay dividend or make any other form of distribution or effect any form of redemption, purchase or return of share capital.

 

  

26

  

	
(e)

	
allow either Owner to open or maintain, any account with any bank or financial institution except accounts with the Lender for the purposes of the Finance Documents;

 

	
(f)

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

 

	
(g)

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

 

	
(h)

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

 

	
11.4

	
Subordination of rights of Borrower. All rights which the Borrower at any time has against either Owner or its assets shall be fully subordinated to the rights of the Lender under the Finance Documents; and in particular, the Borrower shall not during the Security Period:

 

	
(a)

	
claim, or in a bankruptcy of either Owner prove for, any amount payable to the Borrower by either Owner, whether in respect of this or any other transaction;

 

	
(b)

	
take or enforce any Security Interest for any such amount; or

 

	
(c)

	
claim to set-off any such amount against any amount payable by the Borrower to either Owner.

 

	
11.5

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

 

	
(a)

	
the ratio of  EBITDA to Interest Expenses shall not be less than 2.5:1;

 

	
(b)

	
the Market Value Adjusted Net Worth of the Group shall not be less than $100,000,000;

 

	
(c)

	
there is available to the Borrower and all the other members of the Group an amount of not less than $500,000 per Ship (excluding, for the avoidance of doubt, any amount standing to the credit of the Retention Account which has been transferred thereto in accordance with Clause 17.2 or any other restricted account) in Liquid Assets of which, all amounts in respect of the Ships, shall be held in the Earnings Accounts;

 

	
(d)

	
the Leverage Ratio shall not exceed 0.75:1; and

 

	
(e)

	
the ratio of Total Debt to EBITDA, on a trailing 12-month basis, shall not exceed 7:1.

 

	
11.6

	
Compliance Check.  Compliance with the undertakings contained in Clause 11.5 shall be determined in each Financial Year:

 

	
(a)

	
at the time the Lender receives the audited consolidated accounts of the Group and the unaudited consolidated accounts of the Group (pursuant to Clauses 10.6(a) and 10.6(b) respectively), by reference to the unaudited consolidated accounts in the case of the first three financial quarters in each Financial Year and for the fourth financial quarter in each Financial Year, initially by reference to the unaudited consolidated accounts for the relevant fourth quarter and, once available, by reference to the audited consolidated accounts for that Financial Year of the Group; and

 

	
(b)

	
at any other time as the Lender may reasonably request.

 

At the same time as it delivers the consolidated accounts referred to in this Clause 11.6, the Borrower shall deliver to the Lender a Compliance Certificate, in the form set out in Schedule 4, demonstrating its compliance (or not, as the case may be) with the provisions of Clause 11.5 signed by the chief financial officer of the Borrower.

 

  

27

  

 

	
12

	
INSURANCE

 

	
12.1

	
General.  The Borrower undertakes with the Lender to procure that each Owner will comply with the following provisions of this Clause 12 at all times during the Security Period (following delivery of the relevant Ship) except as the Lender may otherwise permit.

 

	
12.2

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

 

	
(a)

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

 

	
(b)

	
war risks; and

 

	
(c)

	
protection and indemnity risks; and

 

	
(d)

	
any other risks against which the Lender considers, having regard to practices and other circumstances prevailing at the relevant time, it would in the opinion of the Lender be reasonable for the Owner to insure and which are specified by the Lender by notice to the Owner.

 

	
12.3

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

 

	
(a)

	
in Dollars;

 

	
(b)

	
in the case of fire and usual marine risks and war risks, in such amounts as shall from time to time be approved by the Lender but in any event in an amount not less than the greater of (i) the Market Value of the Ship owned by that Owner for the time being and (ii) an amount which, when aggregated to the insured value of any other Ship subject to a Mortgage, is at least equal to 120 per cent. of the aggregate of the amount of the Loan and the Swap Exposure;

 

	
(c)

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

 

	
(d)

	
in relation to protection and indemnity risks in respect of the full value and tonnage of the Ship owned by that Owner;

 

	
(e)

	
on such terms as shall from time to time be approved in writing by the Lender (including, without limitation, a blocking and trapping clause); and

 

	
(f)

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

 

12.4        Further protections for the Lender.  In addition to the terms set out in Clause 12.3, the Borrower shall procure that the obligatory insurances shall:

 

	
(a)

	
subject always to paragraph (b), name the relevant Owner as the sole named assured unless the interest of every other named assured is limited:

 

	
  

	
(i)

	
in respect of any obligatory insurances for hull and machinery and war risks;

 

  

28

  

 

 

	
  

	
(A)

	
to any provable out-of-pocket expenses that it has incurred and which form part of any recoverable claim on underwriters; and

 

	
  

	
(B)

	
to any third party liability claims where cover for such claims is provided by the policy (and then only in respect of discharge of any claims made against it); and

 

	
  

	
(ii)

	
in respect of any obligatory insurances for protection and indemnity risks, to any recoveries it is entitled to make by way of reimbursement following discharge of any third party liability claims made specifically against it;

 

and every other named assured has undertaken in writing to the Lender (in such form as it requires) that any deductible shall be apportioned between the relevant Owner and every other named assured in proportion to the gross claims made or paid by each of them and that it shall do all things necessary and provide all documents, evidence and information to enable the Lender to collect or recover any moneys which at any time become payable in respect of the obligatory insurances;

 

	
(b)

	
in the case of any obligatory insurances against any risks other than protection and indemnity risks, and whenever the Lender requires, name (or be amended to name) the Lender as additional named assured for its rights and interests, warranted no operational interest and with full waiver of rights of subrogation against the Lender, but without the Lender thereby being liable to pay (but having the right to pay) premiums, calls or other assessments in respect of such insurance;

 

	
(c)

	
name the Lender as loss payee with such directions for payment as the Lender may specify;

 

	
(d)

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

 

	
(e)

	
provide that such obligatory insurances shall be primary without right of contribution from other insurances which may be carried by the Lender; and

 

	
(f)

	
provide that the Lender may make proof of loss if the Borrower or an Owner fails to do so.

 

	
12.5

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

 

	
(a)

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

 

	
  

	
(i)

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

 

	
  

	
(ii)

	
obtain the Lender's approval to the matters referred to in paragraph (i);

 

	
(b)

	
at least 14 days before the expiry of any obligatory insurance, renew that obligatory insurance in accordance with the Lender's approval pursuant to paragraph (a); and

 

	
(c)

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

 

	
12.6

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

 

  

29

  

 

	
(a)

	
they will have endorsed on each policy, immediately upon issue, a loss payable clause and a notice of assignment complying with the provisions of Clause 12.4;

 

	
(b)

	
they will hold such policies, and the benefit of such insurances, to the order of the Lender in accordance with the said loss payable clause;

 

	
(c)

	
they will advise the Lender immediately of any material change to the terms of the obligatory insurances;

 

	
(d)

	
they will notify the Lender, not less than 14 days before the expiry of the obligatory insurances, in the event of their not having received notice of renewal instructions from that Owner or the Lender and, in the event of their receiving instructions to renew, they will promptly notify the Lender of the terms of the instructions; and

 

	
(e)

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

 

	
12.7

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

 

	
(a)

	
a certified copy of the certificate of entry for that Ship; and

 

	
(b)

	
a letter or letters of undertaking in such form as may be required by the Lender; and

 

	
(c)

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

 

	
(d)

	
a certified copy of each certificate of financial responsibility for pollution by oil or other Environmentally Sensitive Material issued by the relevant certifying authority in relation to that Ship.

 

	
12.8

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

 

	
12.9

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

 

	
12.10

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

 

  

30

  

	
12.11

	
Restrictions on employment.  The Borrower shall procure that neither Owner shall employ the Ship owned by it, nor shall permit her to be employed, outside the cover provided by any obligatory insurances.

 

	
12.12

	
Compliance with terms of insurances.  The Borrower shall procure that neither Owner does or omits to do (or permits to be done or not to be done) any act or thing which would or might render any obligatory insurance invalid, void, voidable or unenforceable or render any sum payable thereunder repayable in whole or in part; and in particular:

 

	
(a)

	
the Borrower shall procure that each Owner shall take all necessary action and comply with all requirements which may from time to time be applicable to the obligatory insurances, and (without limiting the obligation contained in Clause 12.7(c) above) ensure that the obligatory insurances are not made subject to any exclusions or qualifications to which the Lender has not given its prior approval;

 

	
(b)

	
the Borrower shall procure that each Owner shall not make any changes relating to the classification or classification society or manager or operator of the Ship approved by the underwriters of the obligatory insurances;

 

	
(c)

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

 

	
(d)

	
the Borrower shall procure that neither Owner shall employ the Ship owned by it, nor shall allow it to be employed, otherwise than in conformity with the terms and conditions of the obligatory insurances, without first obtaining the consent of the insurers and complying with any requirements (as to extra premium or otherwise) which the insurers specify.

 

	
12.13

	
Alteration to terms of insurances.  The Borrower shall procure that neither Owner shall either make or agree to any alteration to the terms of any obligatory insurance or waive any right relating to any obligatory insurance without the prior written consent of the Lender, which consent not be unreasonably withheld.

 

	
12.14

	
Settlement of claims.  The Borrower shall procure that neither Owner shall not settle, compromise or abandon any claim under any obligatory insurance for Total Loss or for a Major Casualty, and shall do all things necessary and provide all documents, evidence and information available to it to enable the Lender to collect or recover any moneys which at any time become payable in respect of the obligatory insurances.

 

	
12.15

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

 

	
(a)

	
the approved brokers; and

 

	
(b)

	
the approved protection and indemnity and/or war risks associations; and

 

	
(c)

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

 

	
  

	
(i)

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

 

  

31

  

	
  

	
(ii)

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

 

	
12.16

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

 

	
(a)

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

 

	
(b)

	
effecting, maintaining or renewing any such insurances as are referred to in Clause 12.17 below or dealing with or considering any matters relating to any such insurances,

 

	
  

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

	
12.17

	
Mortgagee's interest, insurance policy.  The Lender shall be entitled from time to time to effect, maintain and renew a policy mortgagee's interest marine insurance policy in such amounts, on such terms, through such insurers and generally in such manner as the Lender may from time to time consider appropriate and the Borrower shall upon demand fully indemnify the Lender in respect of all premiums and other expenses which are incurred in connection with or with a view to effecting, maintaining or renewing any such insurance or dealing with, or considering, any matter arising out of any such insurance.

 

	
12.18

	
Review of insurance requirements.  The Lender shall be entitled to review the requirements of this Clause 12 from time to time in order to take account of any changes in circumstances after the date of this Agreement which are, in the opinion of the Lender, significant and capable of affecting either Owner or either Ship and its or their insurance (including, without limitation, changes in the availability or the cost of insurance coverage or the risks to which the Owners may be subject), and may appoint insurance consultants in relation to this review at the cost of the Borrower.

 

	
12.19

	
Modification of insurance requirements.  The Lender shall notify the Borrower of any proposed modification under Clause 12.18 to the requirements of this Clause 12 which the Lender reasonably consider appropriate in the circumstances, and such modification shall take effect on and from the date it is notified in writing to the Borrower as an amendment to this Clause 12 and shall bind the Borrower accordingly.

 

	
12.20

	
Compliance with mortgagee's instructions.  The Lender shall be entitled (without prejudice to or limitation of any other rights which it may have or acquire under any Finance Document) to require a Ship to remain at any safe port or to proceed to and remain at any safe port designated by the Lender until the relevant Owner implements any amendments to the terms of the obligatory insurances and any operational changes required as a result of a notice served under Clause 12.19.

 

	
13

	
SHIP COVENANTS

 

	
13.1

	
General.  The Borrower also undertakes with the Lender to procure that each Owner complies with the following provisions of this Clause 13 at all times during the Security Period (following delivery of the relevant Ship) except as the Lender may otherwise permit.

 

	
13.2

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

 

  

32

  

 

	
13.3

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

 

	
(a)

	
consistent with first-class ship ownership and management practice;

 

	
(b)

	
so as to maintain the highest class, free of overdue recommendations and conditions, with a classification society which is a member of IACS and acceptable to the Lender; and

 

	
(c)

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

 

	
13.4

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

 

	
(a)

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

 

	
(b)

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

 

	
(c)

	
to notify the Lender immediately in writing if the classification society:

 

	
  

	
(i)

	
receives notification from an Owner or any person that a Ship's classification society is to be changed;  or

 

	
  

	
(ii)

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

 

	
(d)

	
following receipt of a written request from the Lender:

 

	
  

	
(i)

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

 

	
  

	
(ii)

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

 

	
13.5

	
Modification.  The Borrower shall procure that neither Owner shall make any modification or repairs to, or replacement of, either Ship or equipment installed on her which would or might materially alter the structure, type or performance characteristics of that Ship or materially reduce her value.

  

33

  

 

 

	
13.6

	
Removal of parts.  The Borrower shall procure that neither Owner shall remove any material part of either Ship, or any item of equipment installed on, either Ship unless the part or item so removed is forthwith replaced by a suitable part or item which is in the same condition as or better condition than the part or item removed, is free from any Security Interest or any right in favour of any person other than the Lender and becomes on installation on the relevant Ship the property of the relevant Owner and subject to the security constituted by the Mortgage and, as the case may be, the Deed of Covenant applicable to the Ship  Provided that an Owner may install equipment owned by a third party if the equipment can be removed without any risk of damage to the Ship owned by it.

 

	
13.7

	
Surveys.  The Borrower shall procure that each Owner shall submit the Ship owned by it regularly to all periodical or other surveys which may be required for classification purposes and, if so required by the Lender, provide the Lender with copies of all survey reports.

 

	
13.8

	
Inspection.  The Borrower shall procure that each Owner shall permit the Lender (by surveyors or other persons appointed by it for that purpose) to board the Ship owned by it at all reasonable times to inspect her condition or to satisfy themselves about proposed or executed repairs and shall afford all proper facilities for such inspections.  Provided that unless an Event of Default or Potential Event of Default has occurred, the Borrower shall not have to pay for more than 1 inspection per Ship in each calendar year.

 

	
13.9

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

 

	
(a)

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

 

	
(b)

	
all taxes, dues and other amounts charged in respect of the Ship owned by it, the Earnings or the Insurances; and

 

	
(c)

	
all other outgoings whatsoever in respect of the Ship owned by it, the Earnings or the Insurances,

 

	
  

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

	
13.10

	
Compliance with laws etc.  The Borrower shall procure that each Owner shall:

 

	
(a)

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

 

	
(b)

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

 

	
(c)

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

 

	
13.11

	
Provision of information.  The Borrower shall procure that each Owner shall promptly provide the Lender with any information which the Lender request regarding:

 

	
(a)

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

 

  

34

  

	
(b)

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

 

	
(c)

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

 

	
(d)

	
any towages and salvages; and

 

	
(e)

	
that Owner's, the Approved Manager's or the relevant Ship's compliance with the ISM Code and the ISPS Code,

 

	
  

	
and, upon the Lender's request, provide copies of any current charter relating to a Ship, of any current charter guarantee and copies of that Owner's or the Approved Manager's Document of Compliance.

	
13.12

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

 

	
(a)

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

 

	
(b)

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

 

	
(c)

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

 

	
(d)

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

 

	
(e)

	
any intended dry docking of the Ship owned by it;

 

	
(f)

	
any Environmental Claim made against that Borrower or in connection with the Ship owned by it, or any Environmental Incident;

 

	
(g)

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

 

	
(h)

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

 

	
  

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

	
13.13

	
Restrictions on chartering, appointment of managers  etc.  The Borrower shall procure that neither Owner shall:

 

	
(a)

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

 

	
(b)

	
enter into any time or consecutive voyage charter in respect of the Ship owned by it for a term which exceeds, or which by virtue of any optional extensions may exceed, 12 months;

 

	
(c)

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

 

  

35

  

	
(d)

	
charter the Ship owned by it otherwise than on bona fide arm's length terms at the time when the Ship is fixed;

 

	
(e)

	
appoint a manager of the Ship owned by it other than the Approved Manager or agree to any material alteration to the terms of the Approved Manager's appointment without the prior written of the Lender, which consent shall not be reasonably withheld;

 

	
(f)

	
de-activate or lay up the Ship owned by it; or

 

	
(g)

	
put the Ship owned by it into the possession of any person for the purpose of work being done upon her in an amount exceeding or likely to exceed $700,000 (or the equivalent in any other currency) unless that person has first given to the Lender and in terms satisfactory to it a written undertaking not to exercise any lien on that Ship or her Earnings for the cost of such work or otherwise.

 

	
13.14

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

 

	
13.15

	
Sharing of Earnings.   The Borrower shall procure that neither Owner shall:

 

	
(a)

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

 

	
(b)

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

 

	
(c)

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

 

	
13.16

	
ISPS Code.  The Borrower procure that each Owner shall comply with the ISPS Code and in particular, without limitation, shall:

 

	
(a)

	
procure that each Ship and the company responsible for each Ship's compliance with the ISPS Code comply with the ISPS Code; and

 

	
(b)

	
maintain for the Ship an ISSC; and

 

	
(c)

	
notify the Lender immediately in writing of any actual or threatened withdrawal, suspension, cancellation or modification of the ISSC.

 

	
13.17

	
Approved Charter Assignment.  If either Owner enters into any Approved Charter (subject to obtaining the consent of the Lender in accordance with Clause 13.13(b)), the Borrower shall procure that the relevant Owner shall, at the request of the Lender, execute in favour of the Lender an Approved Charter Assignment and shall:

 

	
(a)

	
serve notice of the Approved Charter Assignment on the charterer and procure that the charterer acknowledges such notice in such form as the Lender may approve or require; and

 

	
(b)

	
deliver to the Lender such other documents equivalent to those referred to at paragraphs 3, 4 and 5 of Schedule 2, Part A as the Lender may require.

 

  

36

  

	
14

	
SECURITY COVER

 

	
14.1

	
Provision of additional security cover; prepayment of Loan.  The Borrower undertakes with the Lender that, if the Lender notifies the Borrower that:

 

	
(a)

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

 

	
(b)

	
the net realisable value of any additional security previously provided under this Clause 14,

 

	
  

	
is at any time below 130 per cent. of the aggregate of the Loan and Swap Exposure, the Borrower will, within 20 Business Days after the date on which the Lender's notice is served, either:

	
  

	
(i)

	
provide, or ensure that a third party provides, additional security which, in the opinion of the Lender, has a net realisable value at least equal to the shortfall and which consists of either (a) cash pledged to the Lender or (b) a Security Interest (including, but not limited to, a first priority or preferred (as the case may be) mortgage over another vessel), covering such asset or assets and documented in such terms as the Lender may, approve or require; or

 

	
  

	
(ii)

	
prepay in accordance with Clause 7 such part (at least) of the Loan as will eliminate the shortfall.

 

	
14.2

	
Meaning of additional security.  In Clause 14.1 "security" means a Security Interest over an asset or assets (whether securing the Borrower's liabilities under the Finance Documents or a guarantee in respect of those liabilities), or a guarantee, letter of credit or other security in respect of the Borrower's liabilities under the Finance Documents.

 

	
14.3

	
Requirement for additional documents.  The Borrower shall not be deemed to have complied with Clause 14.1 (i) above until the Lender has received in connection with the additional security certified copies of documents of the kinds referred to in paragraphs 3, 4 and 5 of Schedule 2, Part A and such legal opinions in terms acceptable to the Lender from such lawyers as they may select.

 

	
14.4

	
Valuation of Ship.  The Market Value of a Ship (or any other Fleet Vessel) at any date is that shown by the average of two valuations, each valuation to be prepared:

 

	
(a)

	
as at a date not more than 14 days previously;

 

	
(b)

	
by an Approved Broker;

 

	
(c)

	
with or without physical inspection of the relevant Ship (as the Lender may require);

 

	
(d)

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

 

	
(e)

	
after deducting the estimated amount of the usual and reasonable expenses which would be incurred in connection with the sale.

 

	
14.5

	
Value of additional security.  The net realisable value of any additional security which is provided under Clause 14.1 and which consists of a Security Interest over a vessel shall be that shown by a valuation complying with the requirements of Clause 14.4.

 

	
14.6

	
Valuations binding.  Any valuation under Clause 14.1(i), 14.4 or 14.5 shall be binding and conclusive as regards the Borrower, as shall be any valuation which the Lender makes of a security which does not consist of or include a Security Interest.

 

  

37

  

	
14.7

	
Provision of information.  The Borrower shall promptly provide the Lender and any Approved Broker or expert acting under Clause 14.4 or 14.5 with any information which the Lender or the Approved Broker or expert may request for the purposes of the valuation; and, if the Borrower fails to provide, or procure the provision of, the information by the date specified in the request, the valuation may be made on any basis and assumptions which the Approved Broker or the Lender (or the expert appointed by them) consider prudent.

 

	
14.8

	
Payment of valuation expenses.  Without prejudice to the generality of the Borrower's obligations under Clauses 19.2, 19.3 and 20.3, the Borrower shall, on demand, pay the Lender the amount of the reasonable fees and expenses of any Approved Broker or expert instructed by the Lender under this Clause and all reasonable legal and other expenses incurred by the Lender in connection with any matter arising out of this Clause.  Provided that, so long as no Event of Default or Potential Event of Default has occurred or any valuation obtained would entitle the Lender to serve a notice pursuant to Clause 14.1, the Borrower shall not be obliged to pay any such fees or expenses in respect of more than two sets of valuations per Ship (or other Fleet Vessel) in any calendar year.

 

	
15

	
PAYMENTS AND CALCULATIONS

 

	
15.1

	
Currency and method of payments.  All payments to be made by the Borrower to the Lender under a Finance Document shall be made:

 

	
(a)

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

 

	
(b)

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

 

	
(c)

	
the account of the Lender with a bank in New York as the Lender may from time to time notify to the Borrower.

 

	
15.2

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

 

	
(a)

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

 

	
(b)

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

 

	
  

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

	
15.3

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

 

	
15.4

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

 

	
15.5

	
Accounts prima facie evidence.  If any accounts maintained under Clause 15.4 show an amount to be owing by the Borrower or a Security Party to the Lender, those accounts shall, absent manifest error, be prima facie evidence that that amount is owing to the Lender.

 

  

38

  

	
16

	
APPLICATION OF RECEIPTS

 

	
16.1

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

 

	
(a)

	
FIRST: in or towards payment pro rata of any unpaid fees, costs and expenses of the Lender under the Finance Documents or the Master Agreement;

 

	
(b)

	
SECONDLY: in or towards payment pro rata of any accrued interest or commission due but unpaid under this Agreement or the Master Agreement;

 

	
(c)

	
THIRDLY: in or towards payment pro rata of any principal due but unpaid under this Agreement and all amounts due under the Master Agreement in such order of application and/or in such proportions as the Lender may specify by notice to the Borrower;

 

	
(d)

	
FOURTHLY: in or towards payment pro rata of any other amounts due but unpaid under any Finance Document or the Master Agreement;

 

	
(e)

	
FIFTHLY: in retention of an amount equal to any amount not then due and payable under any Finance Document or the Master Agreement but which the Lender, by notice to the Borrower and the Security Parties, states in its opinion will or may become due and payable in the future and, upon those amounts becoming due and payable, in or towards satisfaction of them in accordance with the provisions of Clause 16.1(a), 16.1(b), 16.1(c) and 16.1(d); and

 

	
(f)

	
SIXTHLY: any surplus shall be paid to the Borrower or to any other person appearing to be entitled to it.

 

	
16.2

	
Variation of order of application.  The Lender may by notice to the Borrower and the Security Parties provide for a different manner of application from that set out in Clause 16.1 either as regards a specified sum or sums or as regards sums in a specified category or categories.

 

	
16.3

	
Notice of variation of order of application.  The Lender may give notices under Clause 16.2 from time to time; and such a notice may be stated to apply not only to sums which may be received or recovered in the future, but also to any sum which has been received or recovered on or after the third Business Day before the date on which the notice is served.

 

	
16.4

	
Appropriation rights overriden.  This Clause 16 and any notice which the Lender gives under Clause 16.2 shall override any right of appropriation possessed, and any appropriation made, by the Borrower or any Security Party.

 

	
17

	
APPLICATION OF EARNINGS

 

	
17.1

	
Payment of Earnings.  The Borrower undertakes with the Lender to ensure that, throughout the Security Period (subject only to the provisions of the General Assignments), all the Earnings of a Ship are paid to the Earnings Account for that Ship.

 

	
17.2

	
Monthly retentions.  The Borrower undertakes with the Lender to ensure that, in each calendar month of the Security Period commencing on the date falling 1 month after each Drawdown Date and thereafter on the same day of each subsequent month, there is transferred to the Retention Account out of the Earnings received in the Earning Accounts during the preceding calendar month:

 

	
(a)

	
one-third of the amount of the repayment instalment in respect of each Advance falling due under Clause 7 on the next Repayment Date; and

 

  

39

  

	
(b)

	
the relevant fraction of the aggregate amount of interest on the Loan which is payable on the next due date for payment of interest under this Agreement.

 

The "relevant fraction" is a fraction of which the numerator is 1 and the denominator the number of months comprised in the then current Interest Period (or, if the period is shorter, the number of months from the later of the commencement of the current Interest Period or the last due date for payment of interest to the next due date for payment of interest under this Agreement).

 

	
17.3

	
Shortfall in Earnings.  If the aggregate Earnings received in the Earnings Accounts are insufficient in any month for the required amount to be transferred to the Retention Account under Clause 17.2, the Borrower shall make up the amount of the insufficiency on demand from the Lender; but, without thereby prejudicing the Lender's right to make such demand at any time, the Lender may permit the Borrower to make up all or part of the insufficiency by increasing the amount of any transfer under Clause 17.2 from the Earnings received in the next or subsequent months.

 

	
17.4

	
Application of retentions.  Until an Event of Default or a Potential Event of Default occurs, the Lender shall on each Repayment Date and on each due date for the payment of interest under this Agreement apply in accordance with Clause 16.1 so much of the balance on the Retention Account as equals:

 

	
(a)

	
the repayment instalment due on that Repayment Date; or

 

	
(b)

	
the amount of interest payable on that interest payment date,

 

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

 

	
17.5

	
Location of accounts.  The Borrower shall promptly:

 

	
(a)

	
comply with any requirement of the Lender as to the location or re-location of the Earnings Accounts and the Retention Account (or any of them); and

 

	
(b)

	
execute any documents which the Lender specifies to create or maintain in favour of the Lender a Security Interest over (and/or rights of set-off, consolidation or other rights in relation to) the Earnings Accounts and the Retention Account.

 

	
17.6

	
Debits for expenses etc.  The Lender shall be entitled (but not obliged) from time to time to debit either Earnings Account with prior written notice to the Borrower in order to discharge any amount due and payable to it under Clause 19 or 20 or payment of which it has become entitled to demand under Clause 19 or 20.

 

	
17.7

	
Borrower's obligations unaffected.  The provisions of this Clause 17 (as distinct from a distribution effected under Clause 17.4) do not affect:

 

	
(a)

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

 

	
(b)

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

 

17.8        Release of debt service.  If, following the delivery of a Ship:

 

	
(a)

	
the Borrower has deposited, pursuant to Clause 8.1(b)(ii), an amount equal to Six Months' Debt Service in the Retention Account; and

 

  

40

  

 

	
(b)

	
an Approved Charter is subsequently entered into in respect of the Ship, the Lender shall, upon receipt of an Approved Charter Assignment (and all other documents referred to in Clause 13.17) and subject to no Event of Default or Potential Event of Default being in existence at the relevant time, release to the Borrower any part of the Six Months' Debt Service standing to the credit of the Retention Account that has not already been applied in accordance with Clause 16.

 

	
18

	
EVENTS OF DEFAULT

 

	
18.1

	
Events of Default.  An Event of Default occurs if:

 

	
(a)

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

 

	
(b)

	
any breach occurs of Clause 8.2, 10.2, 10.3, 11.2, 11.3, 11.5, 12.2, 12.3, 14.1 or 17.1; or

 

	
(c)

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

 

	
(d)

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

 

	
(e)

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

 

	
(f)

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

 

	
  

	
(i)

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

 

	
  

	
(ii)

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

 

	
  

	
(iii)

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

 

	
  

	
(iv)

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

 

	
  

	
(v)

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

 

	
(g)

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

 

	
  

	
(i)

	
a Relevant Person becomes, in the opinion of the Lender, unable to pay its debts as they fall due; or

 

  

41

  

	
  

	
(ii)

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

 

	
  

	
(iii)

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

 

	
  

	
(iv)

	
an administrator is appointed (whether by the court or otherwise) in respect of a Relevant Person; or

 

	
  

	
(v)

	
any formal declaration of bankruptcy or any formal statement to the effect that a Relevant Person is insolvent or likely to become insolvent is made by a Relevant Person or by the directors of a Relevant Person or, in any proceedings, by a lawyer acting for a Relevant Person; or

 

	
  

	
(vi)

	
a provisional liquidator is appointed in respect of a Relevant Person, a winding up order is made in relation to a Relevant Person or a winding up resolution is passed by a Relevant Person; or

 

	
  

	
(vii)

	
a resolution is passed, an administration notice is given or filed, an application or petition to a court is made or presented or any other step is taken by (aa) a Relevant Person, (bb) the members or directors of a Relevant Person, (cc) a holder of Security Interests which together relate to all or substantially all of the assets of a Relevant Person, or (dd) a government minister or public or regulatory authority of a Pertinent Jurisdiction for or with a view to the winding up of that or another Relevant Person or the appointment of a provisional liquidator or administrator in respect of that or another Relevant Person, or that or another Relevant Person ceasing or suspending business operations or payments to creditors, save that this paragraph does not apply to a fully solvent winding up of a Relevant Person other than the Borrower or any other Security Party which is, or is to be, effected for the purposes of an amalgamation or reconstruction previously approved by the Lender and effected not later than 3 months after the commencement of the winding up; or

 

	
  

	
(viii)

	
an administration notice is given or filed, an application or petition to a court is made or presented or any other step is taken by a creditor of a Relevant Person (other than a holder of Security Interests which together relate to all or substantially all of the assets of a Relevant Person) for the winding up of a Relevant Person or the appointment of a provisional liquidator or administrator in respect of a Relevant Person in any Pertinent Jurisdiction, unless the proposed winding up, appointment of a provisional liquidator or administration is being contested in good faith, on substantial grounds and not with a view to some other insolvency law procedure being implemented instead and either (aa) the application or petition is dismissed or withdrawn within 30 days of being made or presented, or (bb) within 30 days of the administration notice being given or filed, or the other relevant steps being taken, other action is taken which will ensure that there will be no administration and (in both cases (aa) or (bb)) the Relevant Person will continue to carry on business in the ordinary way and without being the subject of any actual, interim or pending insolvency law procedure; or

 

	
  

	
(ix)

	
a Relevant Person or its directors take any steps (whether by making or presenting an application or petition to a court, or submitting or presenting a document setting out a proposal or proposed terms, or otherwise) with a view to obtaining, in relation to that or another Relevant Person, any form of moratorium, suspension or deferral of payments, reorganisation of debt (or certain debt) or arrangement with all or a substantial proportion (by number or value) of creditors or of any class of them or any such moratorium, suspension or deferral of payments, reorganisation or arrangement is effected by court order, by the filing of documents with a court, by means of a contract or in any other way at all; or

 

  

42

  

 

	
  

	
(x)

	
any meeting of the members or directors, or of any committee of the board or senior management, of a Relevant Person is held or summoned for the purpose of considering a resolution or proposal to authorise or take any action of a type described in paragraphs (iv) to (ix) or a step preparatory to such action, or (with or without such a meeting) the members, directors or such a committee resolve or agree that such an action or step should be taken or should be taken if certain conditions materialise or fail to materialise; or

 

	
  

	
(xi)

	
in a Pertinent Jurisdiction other than England, any event occurs, any proceedings are opened or commenced or any step is taken which, in the opinion of the Lender is similar to any of the foregoing; or

 

	
(h)

	
the Borrower or an Owner ceases or suspends carrying on its business or a part of its business which, in the opinion of the Lender, is material in the context of this Agreement; or

 

	
(i)

	
it becomes unlawful in any Pertinent Jurisdiction or impossible:

 

	
  

	
(i)

	
for the Borrower or any Security Party to discharge any liability under a Finance Document or to comply with any other obligation which the Lender consider material under a Finance Document; or

 

	
  

	
(ii)

	
for the Lender to exercise or enforce any right under, or to enforce any Security Interest created by, a Finance Document; or

 

	
(j)

	
any consent necessary to enable either Owner to own, operate or charter the Ship owned by it or to enable either Owner, the Borrower or any other Security Party to comply with any provision which the Lender considers material of a Finance Document or the relevant MOA is not granted, expires without being renewed, is revoked or becomes liable to revocation or any condition of such a consent is not fulfilled; or

 

	
(k)

	
either (i) the Major Shareholder ceases to own at least 10 per cent. of the share capital of the Borrower, or (ii) any person unaffiliated to the Major Shareholder (in the opinion of the Lender) acquires more than 49 per cent. of the share capital of the Borrower, without the prior written consent of the Lender; or

 

	
(l)

	
either (i) the Major Shareholder ceases to be the Chairman and CEO of the Borrower or (ii) there is a change in the composition of the board of directors or significant change (in the opinion of the Lender) in the executive management of the Borrower, without the prior written consent of the Lender; or

 

	
(m)

	
the shares of the Borrower cease to be listed on the New York Stock Exchange; or

 

	
(n)

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

 

	
(o)

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

 

	
(p)

	
an Event of Default (as defined in Section 14 of the Master Agreement);

 

  

43

  

	
(q)

	
the Master Agreement is terminated, cancelled, suspended, rescinded or revoked or otherwise ceases to remain in full force and effect for any reason except with the consent of the Lender; or

 

	
(r)

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

 

	
  

	
(i)

	
a change in the financial position, state of affairs or prospects of the Borrower or an Owner; or

 

	
  

	
(ii)

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

 

in the light of which the Lender reasonably considers that there is a significant risk that the Borrower or an Owner is, or will later become, unable to discharge its liabilities under the Finance Documents as they fall due.

	
18.2

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

 

	
(a)

	
serve on the Borrower a notice stating that all obligations of the Lender to the Borrower under this Agreement are terminated; and/or

 

	
(b)

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

 

	
(c)

	
take any other action which, as a result of the Event of Default or any notice served under paragraph (a) or (b) above, the Lender is entitled to take under any Finance Document or any applicable law.

 

	
18.3

	
Termination of Commitment.  On the service of a notice under paragraph (a) of Clause 18.2, the Commitment and all other obligations of the Lender to the Borrower under this Agreement shall terminate.

 

	
18.4

	
Acceleration of Loan.  On the service of a notice under paragraph (b) of Clause 18.2, the Loan, all accrued interest and all other amounts accrued or owing from the Borrower or any Security Party under this Agreement and every other Finance Document shall become immediately due and payable or, as the case may be, payable on demand.

 

	
18.5

	
Multiple notices; action without notice.  The Lender may serve notices under paragraphs (a) and (b) of Clause 18.2 simultaneously or on different dates and it and if the Lender may take any action referred to in that Clause if no such notice is served or simultaneously with or at any time after the service of both or either of such notices.

 

	
18.6

	
Exclusion of Lender liability.  Neither the Lender, nor any receiver or manager appointed by the Lender, shall have any liability to the Borrower or a Security Party:

 

	
(a)

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

 

	
(b)

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

 

	
  

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

  

44

  

 

	
18.7

	
Relevant Persons.  In this Clause 18 a "Relevant Person" means the Borrower, a Security Party and any other member of the Group.

 

	
18.8

	
Interpretation.  In Clause 18.1(f) references to an event of default or a termination event include any event, howsoever described, which is similar to an event of default in a facility agreement or a termination event in a finance lease; and in Clause 18.1(g) "petition" includes an application.

 

	
19

	
FEES AND EXPENSES

 

	
19.1

	
Arrangement fee.  The Borrower shall pay to the Lender on the date of this Agreement a non-refundable arrangement fee of $384,000.

 

	
19.2

	
Costs of negotiation, preparation etc.  The Borrower shall pay to the Lender on its demand the amount of all expenses incurred by the Lender in connection with the negotiation, preparation, execution or registration of any Finance Document or any related document or with any transaction contemplated by a Finance Document or a related document.

 

	
19.3

	
Costs of variations, amendments, enforcement etc.  The Borrower shall pay to the Lender, on the Lender's demand, the amount of all expenses incurred by the Lender in connection with:

 

	
(a)

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

 

	
(b)

	
any consent or waiver by the Lender under or in connection with a Finance Document, or any request for such a consent or waiver;

 

	
(c)

	
the valuation of any security provided or offered under Clause 14 or any other matter relating to such security;

 

	
(d)

	
where the Lender, in its absolute opinion, considers that there has been a material change to the insurances in respect of either Ship, the review of the insurances or either Ship pursuant to Clause 12.18; and

 

	
(e)

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

 

	
  

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

	
19.4

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

 

	
19.5

	
Certification of amounts.  A notice which is duly signed by two officers of the Lender, which states that a specified amount, or aggregate amount, is due to the Lender under this Clause 19 and which indicates (without necessarily specifying a detailed breakdown) the matters in respect of which the amount, or aggregate amount, is due shall be prima facie evidence that the amount, or aggregate amount, is due.

 

  

45

  

	
20

	
INDEMNITIES

 

	
20.1

	
Indemnities regarding borrowing and repayment of Loan.  The Borrower shall fully indemnify the Lender on the Lender's demand in respect of all expenses, liabilities and losses which are incurred by the Lender, or which the Lender reasonably and with due diligence estimates that it will incur, as a result of or in connection with:

 

	
(a)

	
an Advance not being made on the date specified in a Drawdown Notice for any reason other than a default by the Lender;

 

	
(b)

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

 

	
(c)

	
any failure (for whatever reason) by the Borrower to make payment of any amount due under a Finance Document on the due date or, if so payable, on demand (after giving credit for any default interest paid by the Borrower on the amount concerned under Clause 6); and

 

	
(d)

	
the occurrence and/or continuance of an Event of Default or a Potential Event of Default and/or the acceleration of repayment of the Loan under Clause 18,

 

	
  

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

	
20.2

	
Breakage costs.  Without limiting its generality, Clause 20.1 covers any liability, expense or loss, including a loss of a prospective profit, incurred by the Lender:

 

	
(a)

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

 

	
(b)

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

 

	
20.3

	
Miscellaneous indemnities.  The Borrower shall fully indemnify the Lender on its demand in respect of all claims, expenses, liabilities and losses which may be made or brought against or incurred by the Lender, in any country, as a result of or in connection with:

 

	
(a)

	
any action taken, or omitted or neglected to be taken, under or in connection with any Finance Document by the Lender or by any receiver appointed under a Finance Document;

 

	
(b)

	
any other Pertinent Matter;

 

other than claims, expenses, liabilities and losses which are shown to have been directly and mainly caused by the dishonesty or wilful misconduct of the officers or employees of the Lender.

	
  

	
Without prejudice to its generality, this Clause 20.3 covers any claims, expenses, liabilities and losses which arise, or are asserted, under or in connection with any law relating to safety at sea, the ISM Code, the ISPS Code or any Environmental Law..

  

46

  

	
20.4

	
Environmental Indemnity.  Without prejudice to its generality, Clause 20.3 covers any claims, demands, proceedings, liabilities, taxes, losses or expenses of every kind which arise, or are asserted, under or in connection with any law relating to safety at sea, pollution or the protection of the environment, the ISM Code or the ISPS Code.

 

	
20.5

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

 

	
(a)

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

 

	
(b)

	
obtaining an order or judgment from any court or other tribunal; or

 

	
(c)

	
enforcing any such order or judgment,

 

	
  

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

	
  

	
In this Clause 20.5, the "available rate of exchange" means the rate at which the Lender concerned is able at the opening of business (London time) on the Business Day after it receives the sum concerned to purchase the Contractual Currency with the Payment Currency.

	
  

	
This Clause 20.5 creates a separate liability of the Borrower which is distinct from its other liabilities under the Finance Documents and which shall not be merged in any judgment or order relating to those other liabilities.

	
20.6

	
Application of Master Agreement.   For the avoidance of doubt, Clause 20.5 does not apply in respect of sums due from the Borrower to the Lender under or in connection with the Master Agreement as to which sums the provisions of Section 8 (Contractual Currency) of the Master Agreement shall apply.

 

	
20.7

	
Certification of amounts.  A notice which is signed by 2 officers of the Lender, which states that a specified amount, or aggregate amount, is due to the Lender under this Clause 20 and which indicates (without necessarily specifying a detailed breakdown) the matters in respect of which the amount, or aggregate amount, is due shall be prima facie evidence that the amount, or aggregate amount, is due.

 

	
21

	
NO SET-OFF OR TAX DEDUCTION

 

	
21.1

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

 

	
(a)

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

 

	
(b)

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

 

	
21.2

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

 

	
(a)

	
the Borrower shall notify the Lender as soon as it becomes aware of the requirement;

 

  

47

  

	
(b)

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

 

	
(c)

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

 

	
21.3

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

 

	
21.4

	
Exclusion of tax on overall net income.  In this Clause 21 "tax deduction" means any deduction or withholding for or on account of any present or future tax except tax on the Lender's overall net income.

 

	
21.5

	
Application of Master Agreement.  For the avoidance of doubt, Clause 21 does not apply in respect of sums due from the Borrower under or in connection with the Master Agreement as to which sums the provisions of Section 2(d) (Deduction or Withholding for Tax) of the Master Agreement shall apply.

 

	
22

	
ILLEGALITY, ETC

 

	
22.1

	
Illegality.  This Clause 22 applies if the Lender notifies the Borrower that it has become, or will with effect from a specified date, become:

 

	
(a)

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

 

	
(b)

	
contrary to, or inconsistent with, any regulation,

 

	
  

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

	
22.2

	
Notification and effect of illegality.  On the Lender notifying the Borrower under Clause 22.1, the Commitment shall terminate; and thereupon or, if later, on the date specified in the Lender's notice under Clause 22.1 as the date on which the notified event would become effective, the Borrower shall prepay the Loan in full in accordance with Clause 7.

 

	
22.3

	
Mitigation.  If circumstances arise which would result in a notification under Clause 22.1 then, without in any way limiting the rights of the Lender under Clause 22.3, the Lender shall use reasonable endeavours to transfer its obligations, liabilities and rights under this Agreement and the Finance Documents to another office or financial institution not affected by the circumstances but the Lender shall not be under any obligation to take any such action if, in its opinion, to do would or might:

 

	
(a)

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

 

	
(b)

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

 

	
(c)

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

 

	
23

	
INCREASED COSTS

 

	
23.1

	
Increased costs.  This Clause 23 applies if the Lender notifies the Borrower that the Lender considers that as a result of:

 

  

48

  

	
(a)

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

 

	
(b)

	
the effect of complying with any law or regulation (including any which relates to capital adequacy or liquidity controls or which affects the manner in which the Lender allocates capital resources to its obligations under this Agreement), which is introduced, or altered, or the interpretation or application of which is altered, after the date of this Agreement; or

 

	
(c)

	
if the result of the implementation or application of or compliance with the "International Convergence of Capital Measurement and Capital Standards, a Revised Framework" published by the Basel Committee on Banking Supervision in June 2004 in the form existing on the date of this Agreement (the "Basel II Accord") or any other  law or regulation implementing the Basel II Accord or any of the approaches provided for and allowed to be used by banks under or in connection with the Basel II Accord in each case as from time to time implemented by the Lender (whether such implementation, application or compliance is by a government, regulator, supervisory authority, the Lender or its holding company),

 

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

 

	
  

	
(i)

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

 

	
  

	
(ii)

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

 

	
  

	
(iii)

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

 

	
  

	
(iv)

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

 

but not an item attributable to a change in the rate of tax on the overall net income of the Lender (or a parent company of it) or an item covered by the indemnity for tax in Clause 20.1 or by Clause 21.

 

	
  

	
For the purposes of this Clause 23.1 the Lender may in good faith allocate or spread costs and/or losses among its assets and liabilities (or any class thereof) on such basis as it considers appropriate.

	
23.2

	
Payment of increased costs.  The Borrower shall pay to the Lender, on the Lender's demand, the amounts which the Lender from time to time notifies the Borrower that it has specified to be necessary to compensate it for the increased cost.

 

	
23.3

	
Notice of prepayment.  If the Borrower is not willing to continue to compensate the Notifying Lender for the increased cost under Clause 23.2, the Borrower may give the Lender not less than 15 days' notice of its intention to prepay the Loan at the end of an Interest Period.

 

  

49

  

	
23.4

	
Prepayment; termination of Commitment.  A notice under Clause 23.3 shall be irrevocable; and on the date specified in the Borrower's notice of intended prepayment, the Commitment shall be cancelled and the Borrower shall prepay (without premium or penalty but, in any event, including any increased costs) the Loan together with accrued interest thereon at the applicable rate plus the Margin.

 

	
23.5

	
Application of prepayment.  Clause 7 shall apply in relation to the prepayment.

 

	
24

	
SET-OFF

 

	
24.1

	
Application of credit balances.  The Lender may, following the occurrence of an Event of Default, and without prior notice:

 

	
(a)

	
apply any balance (whether or not then due) which at any time stands to the credit of any account in the name of the Borrower at any office in any country of the Lender in or towards satisfaction of any sum then due from the Borrower to the Lender under any of the Finance Documents; and

 

	
(b)

	
for that purpose:

 

	
  

	
(i)

	
break, or alter the maturity of, all or any part of a deposit of the Borrower;

 

	
  

	
(ii)

	
convert or translate all or any part of a deposit or other credit balance into Dollars; and

 

	
  

	
(iii)

	
enter into any other transaction or make any entry with regard to the credit balance which the Lender considers appropriate.

 

	
24.2

	
Existing rights unaffected.  The Lender shall not be obliged to exercise any of its rights under Clause 24.1; and those rights shall be without prejudice and in addition to any right of set-off, combination of accounts, charge, lien or other right or remedy to which the Lender is entitled (whether under the general law or any document).

 

	
24.3

	
No Security Interest.  This Clause 24 gives the Lender a contractual right of set-off only, and does not create any equitable charge or other Security Interest over any credit balance of the Borrower.

 

	
25

	
TRANSFERS AND CHANGES IN LENDING OFFICE

 

	
25.1

	
Transfer by Borrower.  The Borrower may not, without the prior written consent of the Lender:

 

	
(a)

	
transfer any of its rights or obligations under any Finance Document; or

 

	
(b)

	
enter into any merger, de-merger or other reorganisation, or carry out any other act, as a result of which any of its rights or liabilities would vest in, or pass to, another person.

 

	
25.2

	
Assignment by Lender.  The Lender may assign all or any of the rights and interests which it has under or by virtue of the Finance Documents without the consent of the Borrower.

 

	
25.3

	
Rights of assignee.  In respect of any breach of a warranty, undertaking, condition or other provision of a Finance Document, or any misrepresentation made in or in connection with a Finance Document, a direct or indirect assignee of any of the Lender's rights or interests under or by virtue of the Finance Documents shall be entitled to recover damages by reference to the loss incurred by that assignee as a result of the breach or misrepresentation irrespective of whether the Lender would have incurred a loss of that kind or amount.

 

  

50

  

	
25.4

	
Sub-participation; subrogation assignment.  The Lender may sub-participate all or any part of its rights and/or obligations under or in connection with the Finance Documents without the consent of, or any notice to, the Borrower or any Security Party and the Lender may assign, all or any part of those rights to an insurer or surety who has become subrogated to them.

 

	
25.5

	
Disclosure of information.  The Lender may disclose to a potential assignee or sub-participant any information which the Lender has received in relation to the Borrower, any Security Party or their affairs under or in connection with any Finance Document, unless the information is clearly of a confidential nature.

 

	
25.6

	
Change of lending office.  The Lender may change its lending office by giving notice to the Borrower and the change shall become effective on the later of:

 

	
(a)

	
the date on which the Borrower receives the notice; and

 

	
(b)

	
the date, if any, specified in the notice as the date on which the change will come into effect,

 

provided that such change shall not prejudice or adversely affect the rights and obligations of the Borrower and the other Security Parties arising in connection with this Agreement and the other Finance Documents.

 

	
25.7

	
Security over Lender's rights.  In addition to the other rights provided to the Lender under this Clause 25, the Lender may without consulting with or obtaining consent from the Borrower or any Security Party, at any time charge, assign or otherwise create a Security Interest in or over (whether by way of collateral or otherwise) all or any of its rights under any Finance Document to secure obligations of the Lender including, without limitation:

 

	
(a)

	
any charge, assignment or other Security Interest to secure obligations to a federal reserve or central bank; and

 

	
(b)

	
if the Lender is a fund, any charge, assignment or other Security Interest granted to any holders (or trustee or representatives of holders) of obligations owed, or securities issued, by the Lender as security for those obligations or securities;

 

except that no such charge, assignment or Security Interest shall:

 

	
  

	
(i)

	
release the Lender from any of its obligations under the Finance Documents or substitute the beneficiary of the relevant charge, assignment or Security Interest for the Lender as a party to any of the Finance Documents; or

 

	
  

	
(ii)

	
require any payments to be made by the Borrower or any Security Party or grant to any person any more extensive rights than those required to be made or granted to the Lender under the Finance Documents.

 

	
26

	
VARIATIONS AND WAIVERS

 

	
26.1

	
Variations, waivers etc. by Lender.  Subject to Clause 26.2, a document shall be effective to vary, waive, suspend or limit any provision of a Finance Document, or the Lender's rights or remedies under such a provision or the general law, only if the document is signed, or specifically agreed to by fax, by the Borrower and by the Lender and, if the document relates to a Finance Document to which a Security Party is party, by that Security Party.

 

	
26.2

	
Exclusion of other or implied variations.  Except for a document which satisfies the requirements of Clauses 26.1 no document, and no act, course of conduct, failure or neglect to act, delay or acquiescence on the part of the Lender (or any person acting on its behalf) shall result in the Lender (or any person acting on its behalf) being taken to have varied, waived, suspended or limited, or being precluded (permanently or temporarily) from enforcing, relying on or exercising:

 

  

51

  

 

	
(a)

	
a provision of this Agreement or another Finance Document; or

 

	
(b)

	
an Event of Default; or

 

	
(c)

	
a breach by the Borrower or a Security Party of an obligation under a Finance Document or the general law; or

 

	
(d)

	
any right or remedy conferred by any Finance Document or by the general law,

 

	
  

	
and there shall not be implied into any Finance Document any term or condition requiring any such provision to be enforced, or such right or remedy to be exercised, within a certain or reasonable time.

	
27

	
NOTICES

 

	
27.1

	
General.  Unless otherwise specifically provided, any notice under or in connection with any Finance Document shall be given by letter or fax; and references in the Finance Documents to written notices, notices in writing and notices signed by particular persons shall be construed accordingly.

 

	
27.2

	
Addresses for communications.  A notice shall be sent:

 

	
(a)

	
to the Borrower:

	
Paragon Shipping Inc.

15 Karamanli Street

166 73 Voula

Greece

 

Fax No: +(30) 210 899 5085

 

Attn: the Chief Financial Officer

 

	
(b)

	
to the Lender: 

	
Credit Suisse AG

St. Alban-Graben 1-3

Basel CH-4002

Switzerland

Fax No: +41 61266 7939

Attn: Lydia Lampadaridou

 

	
  

	
or to such other address as the relevant party may notify the other.

	
27.3

	
Effective date of notices.  Subject to Clauses 27.4 and 27.5:

 

	
(a)

	
a notice which is delivered personally or posted shall be deemed to be served, and shall take effect, at the time when it is delivered; and

 

	
(b)

	
a notice which is sent by fax shall be deemed to be served, and shall take effect, 2 hours after its transmission is completed.

 

	
27.4

	
Service outside business hours.  However, if under Clause 27.3 a notice would be deemed to be served:

 

  

52

  

	
(a)

	
on a day which is not a business day in the place of receipt; or

 

	
(b)

	
on such a business day, but after 5 p.m. local time,

 

	
  

	
the notice shall (subject to Clause 27.5) be deemed to be served, and shall take effect, at 9 a.m. on the next day which is such a business day.

	
27.5

	
Illegible notices.  Clauses 27.3 and 27.4 do not apply if the recipient of a notice notifies the sender within one hour after the time at which the notice would otherwise be deemed to be served that the notice has been received in a form which is illegible in a material respect.

 

	
27.6

	
Valid notices.  A notice under or in connection with a Finance Document shall not be invalid by reason that its contents or the manner of serving it do not comply with the requirements of this Agreement or, where appropriate, any other Finance Document under which it is served if:

 

	
(a)

	
the failure to serve it in accordance with the requirements of this Agreement or other Finance Document, as the case may be, has not caused any party to suffer any significant loss or prejudice;  or

 

	
(b)

	
in the case of incorrect and/or incomplete contents, it should have been reasonably clear to the party on which the notice was served what the correct or missing particulars should have been.

 

	
27.7

	
English language.  Any notice under or in connection with a Finance Document shall be in English.

 

	
27.8

	
Meaning of "notice".  In this Clause "notice" includes any demand, consent, authorisation, approval, instruction, waiver or other communication.

 

	
28

	
SUPPLEMENTAL

 

	
28.1

	
Rights cumulative, non-exclusive.  The rights and remedies which the Finance Documents give to the Lender are:

 

	
(a)

	
cumulative;

 

	
(b)

	
may be exercised as often as appears expedient; and

 

	
(c)

	
shall not, unless a Finance Document explicitly and specifically states so, be taken to exclude or limit any right or remedy conferred by any law.

 

	
28.2

	
Severability of provisions.  If any provision of a Finance Document is or subsequently becomes void, unenforceable or illegal, that shall not affect the validity, enforceability or legality of the other provisions of that Finance Document or of the provisions of any other Finance Document.

 

	
28.3

	
Third party rights.  A person who is not a party to this Agreement has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce or to enjoy the benefit of any term of this Agreement.

 

	
28.4

	
Counterparts.  A Finance Document may be executed in any number of counterparts.

 

	
29

	
LAW AND JURISDICTION

 

	
29.1

	
English law.  This Agreement and any non-contractual obligations arising out of or in connection with it shall be governed by, and construed in accordance with, English law.

 

  

53

  

	
29.2

	
Exclusive English jurisdiction.  Subject to Clause 29.3, the courts of England shall have exclusive jurisdiction to settle any Dispute.

 

	
29.3

	
Choice of forum for the exclusive benefit of the Lender.  Clause 29.2 is for the exclusive benefit of the Lender, which reserves the right:

 

	
(a)

	
to commence proceedings in relation to any Dispute in the courts of any country other than England and which have or claim jurisdiction to that Dispute; and

 

	
(b)

	
to commence such proceedings in the courts of any such country or countries concurrently with or in addition to proceedings in England or without commencing proceedings in England.

 

	
  

	
The Borrower shall not commence any proceedings in any country other than England in relation to a Dispute.

	
29.4

	
Process Agent.  The Borrower irrevocably appoints Hill Dickinson Services (London) Ltd.. at their office for the time being, presently at Duke's Place, London EC3A 7HS, England, to act as its process agent to receive and accept on its behalf any process or other document relating to any proceedings in the English courts which are connected with this Agreement.

 

	
29.5

	
Lender rights unaffected.  Nothing in this Clause 29 shall exclude or limit any right which the Lender may have (whether under the law of any country, an international convention or otherwise) with regard to the bringing of proceedings, the service of process, the recognition or enforcement of a judgment or any similar or related matter in any jurisdiction.

 

	
29.6

	
Meaning of "proceedings" and "Dispute".  In this Clause 29, "proceedings" means proceedings of any kind, including an application for a provisional or protective measure and "Dispute" means any dispute arising out of or in connection with this Agreement (including a dispute relating to the existence, validity or termination of this Agreement) or any non-contractual obligation arising out of or in connection with this Agreement.

 

THIS AGREEMENT has been entered into on the date stated at the beginning of this Agreement.

  

54

  

SCHEDULE 1

 

 

DRAWDOWN NOTICE

 

To:          Credit Suisse AG

St. Alban-Graben 1-3

Basel CH-4002

Switzerland

Fax No: +41 61266 7939

Attention: Loans Administration                                                                                                                                [l] 2010

 

 

DRAWDOWN NOTICE

 

 

	
1

	
We refer to the loan agreement (the "Loan Agreement") dated [l] 2010 and made between us, the Borrower and you, the Lender, in connection with a facility of up to US$48,000,000.  Terms defined in the Loan Agreement have their defined meanings when used in this Drawdown Notice.

 

	
2

	
We request to borrow the [first][second] Advance as follows:

 

	
(a)

	
Amount: US$24,000,000;

 

	
(b)

	
Drawdown Date:  [l];

 

	
(c)

	
Duration of the first Interest Period shall be [l] months;

 

	
(d)

	
Payment instructions : account of [l] and numbered [l] with [l] of [l].

 

	
3

	
We represent and warrant that:

 

	
(a)

	
the representations and warranties in Clause 9 of the Loan Agreement would remain true and not misleading if repeated on the date of this notice with reference to the circumstances now existing; and

 

	
(b)

	
no Event of Default or Potential Event of Default has occurred or will result from the borrowing of the Loan.

 

	
4

	
This notice cannot be revoked without your prior consent.

 

	
5

	
We authorise you to deduct any fees accrued and outstanding pursuant to in Clause 19 from the amount of the Advance.

 

________________________________

Attorney-in-Fact

for and on behalf of

PARAGON SHIPPING INC.

  

55

  

SCHEDULE 2

 

 

CONDITION PRECEDENT DOCUMENTS

 

In this Schedule 2 "Relevant Ship" means, in relation to an Advance, the Ship which is to be part-financed by that Advance.

PART A

The following are the documents referred to in Clause 8.1(a).

	
1

	
A duly executed original of each Guarantee, the Master Agreement, the Master Agreement Assignment and the Accounts Pledges (and of each document require to be delivered pursuant thereto).

 

	
2

	
Certified copies of the certificate of incorporation and constitutional documents of the Borrower and each Owner.

 

	
3

	
Copies of resolutions of the shareholders and directors of the Borrower and each Owner authorising the execution of each of the Finance Documents to which the Borrower or that Owner is a party and, in the case of the Borrower, authorising named officers to give the Drawdown Notices and other notices under this Agreement and in the case of each Owner ratifying the execution of the MOA to which it is a party.

 

	
4

	
The original of any power of attorney under which any Finance Document is executed on behalf of the Borrower or each Owner.

 

	
5

	
Copies of all consents which the Borrower or any Security Party requires to enter into, or make any payment under, any Finance Document or either MOA.

 

	
6

	
Copies of each MOA and all amendments and supplements thereto and of all documents signed or issued by the relevant Owner or the Seller (or any of them) under or in connection with it, each evidencing the Contract Price of the Ship being built pursuant to it.

 

	
7

	
The originals of any mandates or other documents required in connection with the opening or operation of the Accounts.

 

	
8

	
Such documentary evidence as the Lender and its legal advisers may require in relation to the due authorisation and execution by the Seller of the MOAs and of all the documents to be executed by the Seller in connection with them.

 

	
9

	
Documentary evidence that the agent for service of process named in Clause 29 has accepted its appointment.

 

	
10

	
Disclosure of the identity of the Major Shareholder.

 

	
11

	
Any documents required by the Lender in respect of the Borrower, each Owner and any other Security Party to satisfy the Lender's "know your customer" requirements.

 

	
12

	
Favourable legal opinions from lawyers appointed by the Lender on such matters concerning the laws of the Marshall Islands and Liberia and such other relevant jurisdictions as the Lender may require.

 

If the Lender so requires, in respect of any of the documents referred to above, a certified English translation prepared by a translator approved by the Lender.

 

  

56

  

PART B

 

The following are the documents referred to in Clause 8.1(e).

	
1

	
A duly executed original of the Mortgage, the General Assignment and the Approved Charter Assignment (if applicable) in respect of the Relevant Ship (and of each document to be delivered under each of them).

 

	
2

	
Documentary evidence that:

 

	
(a)

	
the Relevant Ship has been unconditionally delivered by the Seller to, and accepted by, the relevant Owner under the relevant MOA, and the full purchase price payable under that MOA (in addition to the part being financed by the relevant Advance) has been duly paid by the relevant Owner, together with a copy of each of the documents to be delivered by the Seller to the relevant Owner under the MOA (including but not limited to, the bill of sale, the protocol of delivery and acceptance and the assignment of the warranties in favour of the relevant Owner under the relevant Shipbuilding Contract);

 

	
(b)

	
the Relevant Ship is definitively and permanently registered in the name of the relevant Owner under an Approved Flag;

 

	
(c)

	
the Relevant Ship is in the absolute and unencumbered ownership of the relevant Owner save as contemplated by the Finance Documents;

 

	
(d)

	
the Relevant Ship maintains the highest available class with a first-class classification society which is a member of IACS and acceptable to the Lender,) free of all overdue recommendations and conditions of such classification society;

 

	
(e)

	
the Mortgage in respect of the Relevant Ship has been duly registered against the Relevant Ship as a valid first preferred or priority ship mortgage in accordance with the laws of the Approved Flag State;

 

	
(f)

	
the Relevant Ship is insured in accordance with the provisions of this Agreement and all requirements therein in respect of insurances have been complied with; and

 

	
(g)

	
the Relevant Ship has been delivered to, and accepted by, the relevant charterer pursuant to an Approved Charter with a term of at least 12 months from the relevant Delivery Date.

 

	
6

	
Documents establishing that the Relevant Ship will, as from its Delivery Date, be managed by the Approved Manager on terms acceptable to the Lender, together with:

 

	
(a)

	
the Approved Manager's Undertaking in respect of the Relevant Ship;

 

	
(b)

	
copies of the Approved Manager's document of compliance (DOC) and the safety management certificate (SMC) referred to in paragraph (a) of the definition of the ISM Code Documentation certified as true and in effect by the relevant Owner and the Approved Manager; and

 

	
(c)

	
a copy of the International Ship Security Certificate for the Relevant Ship certified as true and in effect by the relevant Owner and the Approved Manager.

 

	
7

	
A valuation of the Relevant Ship to be determined by an Approved Broker selected by the Lender in accordance with Clause 14.4 and addressed to the Lender dated no earlier than 14 days prior to the Delivery Date for the Relevant Ship.

 

  

57

  

	
8

	
A copy of the Approved Charter in respect of the Relevant Ship or (as the case may be) evidence satisfactory to the Lender that Six Months' Debt Service has been deposited in the Retention Account.

 

	
9

	
A favourable opinion (at the cost of the Borrower) from an independent insurance consultant acceptable to the Lender on such matters relating to the insurances for the Relevant Ship as the Lender may require.

 

	
10

	
Favourable legal opinions from lawyers appointed by the Lender on such matters concerning the laws of the applicable Approved Flag State and such other relevant jurisdictions as the Lender may require

 

Every copy document delivered under this Schedule shall be certified as a true and up to date copy by a director or the secretary (or equivalent officer) of the relevant Owner.

 

  

58

  

SCHEDULE 3

 

MANDATORY COST FORMULA

 

	
1

	
The Mandatory Cost is an addition to the interest rate to compensate the Lender for the cost of compliance with (a) the requirements of the Financial Services Authority (or any other authority which replaces all or any of its functions) or (b) the requirements of the European Central Bank.

 

	
2

	
On the first day of each Interest Period (or as soon as possible thereafter) the Lender shall calculate, as a percentage rate, a rate (the "Additional Cost Rate") for the Lender, in accordance with the paragraphs set out below.  The Mandatory Cost will be calculated by the Lender as a weighted average of the Lender's Additional Cost Rates and will be expressed as a percentage rate per annum.

 

	
3

	
The Additional Cost Rate for the Lender lending from a lending office in a Participating Member State will be the percentage certified by the Lender to be its reasonable determination of the cost of complying with the minimum reserve requirements of the European Central Bank in respect of loans made from that lending office.

 

	
4

	
The Additional Cost Rate for the Lender lending from a lending office in the United Kingdom will be calculated by the Lender as follows:

 

 

	  	
E x 0.01

	
 per cent. per annum

	  	
300

Where:

 

	
  

	
E

	
is designed to compensate the Lender for amounts payable under the Fees Rules and is calculated by the Lender as being the average of the most recent rates of charge supplied to the Lender pursuant to paragraph 6 below and expressed in pounds per £1,000,000.

 

	
5

	
For the purposes of this Schedule:

 

	
(a)

	
"Special Deposits"  has the meaning given to it from time to time under or pursuant to the Bank of England Act 1998 or (as may be appropriate) by the Bank of England;

 

	
(b)

	
"Fees Rules"  means the rules on periodic fees contained in the FSA Supervision Manual or such other law or regulation as may be in force from time to time in respect of the payment of fees for the acceptance of deposits;

 

	
  

	
"Fee Tariffs"  means the fee tariffs specified in the Fees Rules under the activity group A.1 Deposit acceptors (ignoring any minimum fee or zero rated fee required pursuant to the Fees Rules but taking into account any applicable discount rate);

 

	
(a)

	
"Participating Member State"  means any member state of the European Union that adopts or has adopted the euro as its lawful currency in accordance with legislation of the European Union relating to European Monetary Union; and

 

	
(b)

	
"Tariff Base"  has the meaning given to it in, and will be calculated in accordance with, the Fees Rules.

 

  

59

  

	
6

	
If the Lender is lending from a lending office in the United Kingdom shall, as soon as practicable after publication by the Financial Services Authority,  calculate the rate of charge payable by the Lender to the Financial Services Authority pursuant to the Fees Rules in respect of the relevant financial year of the Financial Services Authority (calculated for this purpose by the Lender as being the average of the Fee Tariffs applicable to the Lender for that financial year) and expressed in pounds per £1,000,000 of the Tariff Base of the Lender.

 

	
7

	
The Lender shall confirm the jurisdiction of its lending office on or prior to the date on which it makes available an Advance:

 

	
8

	
Unless the Lender notifies to the contrary, the Lender's obligations in relation to cash ratio deposits and Special Deposits are the same as those of a typical bank from its jurisdiction of incorporation with a lending office in the same jurisdiction as its lending office.

 

	
9

	
Any determination by the Lender pursuant to this Schedule in relation to a formula, the Mandatory Cost, an Additional Cost Rate or any amount payable to the Lender shall, in the absence of manifest error, be conclusive and binding on all parties.

 

The Lender may from time to time, after consultation with the Borrower determine and notify to all parties any amendments which are required to be made to this Schedule in order to comply with  any change in law, regulation or any requirements from time to time imposed by the Financial Services Authority or the European Central Bank (or, in any case, any other authority which replaces all or any of its functions) and any such determination shall, in the absence of manifest error, be conclusive and binding on the Borrower

  

60

  

SCHEDULE 4

 

FORM OF COMPLIANCE CERTIFICATE

 

To:          Credit Suisse AG

St. Alban-Graben 1-3

Basel CH-4002

Switzerland

Date: [l]

Dear Sirs,

We refer to a loan agreement dated [l] 2010 (the "Loan Agreement") made between (1) Paragon Shipping Inc. as borrower and (2) yourselves as lender.

Words and expressions defined in the Loan Agreement shall have the same meaning when used in this compliance certificate.

We enclose with this certificate a copy of the [unaudited consolidated accounts for the Group for the 6-month period ended [l]]/[the audited consolidated annual accounts of the Group for the year ended [l]].  The accounts (i) have been prepared in accordance with all applicable laws and GAAP consistently applied, (ii) give a true and fair view of the state of affairs of the Group at the date of the accounts and of its profit for the period to which the accounts relate and (iii) fully disclose or provide for all significant liabilities of the Group.

We also enclose copies of the valuations of all the Fleet Vessels which were used in calculating the Market Adjusted Total Assets of the Group as at [l].

The Borrower represents that no Event of Default has occurred as at the date of this certificate [except for the following matter or event [set out all material details of matter or event]].  In addition as of [l], the Borrower confirms compliance with the financial covenants set out in Clause 11.5 of the Loan Agreement for the 6 months ending as at the date to which the enclosed accounts are prepared.

We now certify that, as at [l]:

	
(a)

	
the ratio of  EBITDA to Interest Expenses is [l]:1;

 

	
(b)

	
the Market Value Adjusted Net Worth of the Group is $[l];

 

	
(c)

	
Liquid Assets available to the Group are $[l] in aggregate;

 

	
(d)

	
the Leverage Ratio is [l]:1; and

 

	
(e)

	
ratio of Total Debt to EBITDA.

 

This Certificate shall be governed by, and construed in accordance with, English law.

 

 

___________________________

[l]

Chief Financial Officer of

PARAGON SHIPPING INC.

  

61

  

EXECUTION PAGE

BORROWER

SIGNED by                                           )

for and on behalf of                             )

PARAGON SHIPPING INC.             )

in the presence of:                               )

LENDER

SIGNED by                                           )

for and on behalf of                             )

CREDIT SUISSE AG                          )

in the presence of:                               )

  

62

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