Document:

Exhibit 10.3

 

OFFICER IPO FORM

 

STOCK OPTION AGREEMENT

PURSUANT TO THE

CAVAN MARITIME LIMITED

2005 EQUITY INCENTIVE PLAN

 

AGREEMENT, made as of the
     day of                                     ,
2005, by and between Cavan Maritime Limited, a Marshall Islands corporation
(the “Company”), and                          
(the “Optionee”).

 

1.                                       Grant
of Option.  The Company hereby grants
to the Optionee, pursuant to the Company’s 2005 Equity Incentive Plan (the “Plan”),
an option (the “Option”) to purchase               
shares of the Company’s common stock, $.001 par value (the “Common Stock”), at
a purchase price per share of $             .

 

2.                                       Tax
Status of Option.  The Option is not
intended to qualify as an “incentive stock option” under Section 422 of
the Internal Revenue Code of 1986, as amended.

 

3.                                       Term
of Option.  The term of the Option
shall be for a period of ten (10) years from the date hereof, subject to
earlier termination as provided herein.

 

4.                                       Vesting
of Option.

 

(a)                                  Except
as otherwise provided herein and subject to the Optionee remaining in the
continuous employ of, or other service with, the Company or any of its
subsidiaries or affiliates (collectively, the “Company Group”) through each
applicable vesting date, the Option shall become vested and exercisable as to                    
of the shares of Common Stock covered hereby on                    
beginning in                   .

 

(b)                                 Notwithstanding
anything in this Section 4 to the contrary, in the event the Optionee
terminates his employment for Good Reason during the twelve month period
following a Change in Control (as defined herein) the Option shall become fully
vested and exercisable.  As used herein,
a termination by the Optionee “for Good Reason” shall mean that (i) the
Company has materially diminished the duties and responsibilities of the
Optionee then in effect immediately prior to the Change in Control or (ii) the
Company has required the Optionee to relocate his principal place of employment
to a location more than fifty miles from its location immediately prior to the
Change in Control.  A “Change in Control”
of the Company shall be deemed to have occurred upon any of the following:

 

(i)                                     there
occurs (x) any consolidation or merger in which the Company is not the
continuing or surviving entity or pursuant to which shares of the

 

 

Common Stock would
be converted into cash, securities or other property, other than (1) a
consolidation or merger of the Company in which the holders of the Common Stock
immediately prior to the consolidation or merger have the same proportionate
ownership of common stock of the surviving corporation immediately after the
consolidation or merger, or (2) a consolidation or merger which would
result in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (by being converted into voting securities of
the continuing or surviving entity) more than fifty percent (50%) of the
combined voting power of the voting securities of the surviving or continuing
entity immediately after such consolidation or merger and which would result in
the members of the Board immediately prior to such consolidation or merger
(including, for this purpose, any individuals whose election or nomination for
election was approved by a vote of at least two-thirds of such members),
constituting a majority of the board of directors (or equivalent governing
body) of the surviving or continuing entity immediately after such
consolidation or merger, or (y) any sale, lease, exchange or other transfer (in
one transaction or a series of related transactions) of all or substantially
all the Company’s assets;

 

(ii)                                  the
Company’s shareholders approve any plan or proposal for the liquidation or
dissolution of the Company;

 

(iii)                               any
person, other than Wexford or its affiliates, 
(as such term is used in Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”)) shall become
the beneficial owner (within the meaning of Rule 13d-3 under the Exchange
Act) of forty percent (40%) or more of the Common Stock other than pursuant to
a plan or arrangement entered into by such person and the Company; or

 

(iv)                              during
any period of two (2) consecutive years, individuals who at the beginning
of such period constitute the entire Board shall cease for any reason to
constitute a majority of the Board unless the election or nomination for
election by the Company’s shareholders of each new director was approved by a
vote of at least two-thirds of the directors then still in office who were
directors at the beginning of the period.

 

5.                                       Effect
of Termination of Employment or other Service.

 

(a)                                  Termination
by Reason of Death, Disability or Retirement.  If the Optionee’s employment or other service
with the Company Group is terminated due to his or her death, Disability (as
hereinafter defined) or Retirement (as hereinafter defined), then (i) any
portion of the Option that is exercisable on the date of termination shall
remain exercisable by the Optionee (or, in the event of death, the Optionee’s
beneficiary) during the one year period following the date of termination but
in no event after expiration of the stated term hereof and, to the extent not
exercised during such period, shall thereupon terminate, provided that, in the
event of a termination due to Disability, if the Optionee dies during such
one-year period, then the deceased recipient’s beneficiary may exercise the
Option, to the extent exercisable by the deceased recipient immediately prior
to his or her death, for a period of one year following the date of death but
in no event after expiration of the stated term hereof, and (ii) any
portion of the

 

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Option
that is not exercisable on the date of termination shall thereupon terminate.  “Disability” means the Optionee’s absence
from employment or other service for at least one hundred eighty (180) days in
any twelve (12) month period as a result of his or her incapacity due to
physical or mental illness.  “Retirement”
means the Optionee’s voluntary termination of employment or other service when
no ground for termination for Cause exists and (A) the Optionee has
attained age sixty (60), (B) the Optionee as attained age fifty-five (55)
and completed at least ten (10) years of employment or other service with
the Company Group, or (C) the Optionee has attained age fifty (50) and the
Committee specifically determines that the termination of the Optionee’s
employment or other service constitutes a “Retirement” for purposes hereof.

 

(b)                                 Termination
for Cause.  If the Optionee’s
employment or other service is terminated by the Company Group for Cause, then,
notwithstanding anything to the contrary contained herein, the Option (whether
or not otherwise exercisable) shall immediately terminate and cease to be
exercisable.  As used herein, a
termination by the Company “for Cause” shall mean that the Optionee has (i) willfully
or materially refused to perform a material part of his duties, (ii) acted
fraudulently or dishonestly in his relations with the Company, (iii) committed
larceny, embezzlement, conversion or any other act involving the
misappropriation of Company funds or assets in the course of his employment, or
(iv) been indicted or convicted of any felony or other crime involving an
act of moral turpitute.

 

(c)                                  Other
Termination.  If the Optionee’s
employment or other service with the Company Group terminates for any other
reason (other than those described in Section 5(a)(i) or 5(a)(ii) above)
or no reason, then: (i) any portion of the Option that is exercisable on
the date of termination shall remain exercisable by the Optionee during the
thirty (30) day period following the date of termination but in no event after
expiration of the stated term hereof and, to the extent not exercised during
such period, shall thereupon terminate, and (ii) any portion of the Option
that is not exercisable on the date of termination shall thereupon terminate.

 

6.                                       Method
of Exercise.  Once vested and
exercisable, the Option may be exercised in whole or in part by delivering to
the Secretary of the Company (a) a written notice specifying the number of
shares of Common Stock to be purchased and (b) payment of the aggregate
exercise price of the shares of Common Stock so purchased in cash or its
equivalent, and any taxes due thereon in accordance with Section 14 of the
Plan.  If the Common Stock is publicly
traded, payment, in whole or in part, of the exercise price of the Option may
also be made by means of a cashless exercise procedure approved by the
Committee.

 

7.                                       Rights
as a Shareholder.  No shares of
Common Stock shall be issued hereunder until full payment for such shares has
been made and any other exercise conditions have been fully satisfied.  The Optionee shall have no rights as a shareholder
with respect to any shares covered by the Option until the date such shares are
reflected as having been issued to the Optionee on the Company’s records.  No adjustment shall be made for dividends or
distributions or the granting of other rights for which the record date is
prior to the date such shares are issued.

 

8.                                       Nontransferability.  The Option is not assignable or transferable
other than to a beneficiary designated to receive the Option upon the Optionee’s
death in a manner acceptable to the Company or by will or the laws of descent
and distribution, and the Option shall be exercisable during the lifetime of
the Optionee only by the Optionee (or, in the event of the

 

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Optionee’s
incapacity, the Optionee’s legal representative or guardian).  Any attempt by the Optionee or any other
person claiming against, through or under the Optionee to cause the Option or
any part of it to be transferred or assigned in any manner and for any purpose
shall be null and void and without effect upon the Company, the Optionee or any
other person.

 

9.                                       Lock-Up.  The Optionee shall not during the period
commencing on the date of the final prospectus relating to the Company’s
initial public offering and ending on the date specified by the Company and the
managing underwriter (but not to exceed one hundred eighty (180) days) (a) lend,
offer, pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase, or otherwise transfer or dispose of, directly or indirectly, any
shares of Common Stock, or (b) enter into any swap or other arrangement
that transfers to another, in whole or in part, any of the economic
consequences of ownership of the shares of Common Stock.  The foregoing provisions of this Section 9
shall apply only to the Company’s initial public offering of equity securities
and shall not apply to the sale of any shares to an underwriter pursuant to an
underwriting agreement.

 

10.                                 Adjustments
Upon Changes in Capitalization.  Upon
a Change in Capitalization (as defined in the Plan), an equitable substitution
or adjustment may be made in the kind, number and/or exercise price of shares
or other property subject to the Option as may be determined by the Committee,
in its sole discretion.  Without limiting
the generality of the foregoing, in connection with a Change in Capitalization,
the Committee may provide, in its sole discretion, for the cancellation of the
Option in exchange for payment in cash or other property of the Fair Market
Value of the shares of Common Stock covered by the Option (whether or not
otherwise vested or exercisable), reduced by the exercise price of the Option.

 

11.                                 Provisions
of the Plan Control.  This Agreement
is subject to all the terms, conditions and provisions of the Plan and to such
rules, regulations and interpretations as may be established or made by the
Committee acting within the scope of its authority and responsibility under the
Plan.  The Optionee acknowledges receipt
of a copy of the Plan prior to execution of this Agreement.  The applicable provisions of the Plan shall
govern in any situation where this Agreement is silent or where the applicable
provisions of this Agreement are contrary to or not reconcilable with such Plan
provisions.

 

12.                                 Compliance
with Law.  Shares of Common Stock
shall not be issued pursuant to the exercise of the Option unless such exercise
and the issuance and delivery of such shares pursuant thereto shall comply with
all relevant provisions of law, including, without limitation, the Securities
Act of 1933, as amended, the Exchange Act and the requirements of any stock
exchange or market upon which the Common Stock may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.  The Committee may require
each person acquiring shares of Common Stock to represent to and agree with the
Company in writing that such person is acquiring the shares without a view to
distribution thereof.  All certificates
for shares of Common Stock delivered hereunder shall be subject to such
stock-transfer orders and other restrictions as the Committee may deem
advisable under the rules, regulations, and other requirements of the
Securities and Exchange Commission, any stock exchange or market upon which the
Common Stock may then be listed, and any applicable federal or state securities
law.  The Committee may cause a legend or
legends to be placed on any such certificates to make appropriate reference to
such restrictions.

 

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13.                                 Miscellaneous.  This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to its principles of conflict of laws. 
This Agreement constitutes the entire agreement between the parties with
respect to the subject matter hereof and may not be amended, except as provided
in the Plan, other than by a written instrument executed by the parties hereto.

 

(Signature Page Follows)

 

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IN WITNESS WHEREOF, this
Agreement has been executed as of the date first above written.

 

	
   

  	
  CAVAN MARITIME LIMITED

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  [Name of Optionee]

  

 

6Exhibit 10.4

 

ADMINISTRATIVE SERVICES AGREEMENT

 

AGREEMENT dated
as of                              ,
2005 between CAVAN MARITIME LIMITED, a
corporation incorporated under the laws of the Republic of the Marshall Islands
(hereinafter referred to as the “Company” and collectively with its
subsidiaries and affiliates as the “Company Group”), and WEXFORD CAPITAL
LLC, a Connecticut limited liability company (hereinafter referred
to as “Wexford”).

 

W I T N E S S E T
H

 

WHEREAS, the
Company wishes to retain Wexford to undertake the management and administration
of the business of the Company Group on the terms and conditions set forth
herein and Wexford agrees to provide such management and administration;

 

NOW, THEREFORE,
in consideration of the foregoing premises and other good and valuable
consideration, the receipt and legal sufficiency of which the parties hereby acknowledge,
the parties agree as follows:

 

1.                                       Retention
of Wexford.

 

(a)                                  Direct
Services.  Wexford hereby agrees to provide
the Company Group with the following services (the “Direct Services”), as
further set forth herein: (a) general management, oversight and
administration of the Company Group’s business, (b) corporate accounting
and internal controls, (c) investor relations, (d) cash management and
strategic financial planning, (e) Securities and Exchange Commission (“SEC”)
compliance, controls and financial reporting, and (f) strategic advice in
connection with the purchase, construction, financing or refinancing, maintenance,
repair or operation any vessels or other assets of the Company Group (the “Vessels”).

 

(b)                                 Supervisory
Services.  In addition to performing
the Direct Services, Wexford shall be responsible for the following services,
which Wexford shall obtain on behalf of the Company Group and shall supervise
(the “Supervisory Services”):  (g) technical
operation of the Vessels (including without limitation maintaining, crewing and
insurance) (“Technical Operation”), (h) commercial operation of the
Vessels (including without limitation arranging charters and other related
business (other than Technical Operation and other than financing or
refinancing pursuant to Section 1(f)) (“Commercial Operation”) and (i) compliance
with any Operational Regulations (as defined below).  In addition as part of the Supervisory
Services, Wexford shall retain accountants for the Company Group and shall
supervise an annual audit of the Company Group. 
The parties agree that in providing the Supervisory Services Wexford
shall cause the Company or the Company Group, at the expense of the Company or the
Company Group, as the case may be, to enter into contracts or agreements with
the third party providers for such services and that Wexford’s responsibility
shall be limited to selecting such providers on behalf of the Company or the
Company Group, as the case may be, and general oversight and supervision of
such

 

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providers.

 

2.                                       Duties
and Services of Wexford.

 

(a)                                  Employees.  During the term of this Agreement, Wexford
will designate officers of the Company Group to serve at the pleasure of the
Board of Directors of the Company (the “Board”).

 

Employees of Wexford (“Employees”) shall serve,
if elected, as officers (including Chief Executive Officer and Chief Financial
Officer) of, and perform services with respect to, the Company Group.  Wexford shall cause the Employees to devote
such time and effort to the business of the Company Group as shall be
reasonably necessary to perform the duties and services set forth in this Section 2;
provided, however, that the Employees shall not be precluded from
engaging in other business activities. 
The Employees shall not receive any additional compensation from the
Company Group for holding any office or serving as an officer of the Company
Group.  All duties and services of the
Employees shall be rendered at the offices of Wexford subject to reasonable
travel requirements.

 

Unless otherwise expressly provided for in this
Agreement, all matters pertaining to the employment of the Employees are the
sole responsibility of Wexford, which shall in all respects be the employer of
such Employees.  At no time shall the
employees of Wexford, any independent contractors engaged by Wexford and/or the
employees of any such independent contractors be considered employees of the
Company Group.  Wexford shall be
responsible for complying with all federal, state and local labor and tax laws
and regulations with respect to its employees. 
This Agreement is not one of agency between Wexford and any entity of the
Company Group, but one with Wexford engaged independently in the business of
providing management and administrative services as an independent
contractor.  All employment arrangements
are therefore solely Wexford’s concern, and no entity of the Company Group shall
have any liability with respect thereto except as otherwise expressly set forth
herein.

 

(b)                                 Day-to-Day
Administration.  Subject to the
direction of the Board, the Company Group hereby delegates to Wexford (and
Wexford hereby accepts such delegation) responsibility for overseeing the
day-to-day management and administration of the business of the Company Group
in accordance with sound management practices. 
Wexford shall be responsible for supervising all of the Company Group’s
employees and officers and among other things shall have the right to hire or
fire any officer or employee of the Company Group with or without cause.  Wexford shall have the right to cause the
Company Group to hire lawyers, accountants and other professional advisors and
consultants.

 

(c)                                  Bank
Accounts, Securities Accounts, Cash Management.  Wexford shall open bank accounts and
securities accounts for the Company Group, and shall designate persons with
signature authority with respect to such accounts.  Wexford shall invest the Company Group’s cash
and liquid assets in accordance with sound management practices.

 

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(d)                                 Maintenance
of Insurance. Wexford shall, on behalf of the Company Group, be responsible
to procure and maintain in full force and effect at all times necessary or
appropriate liability and other insurance as is customary and appropriate under
the circumstances, under policies, in amounts and with carriers to be approved
by the Company, subject to the below requirements, including without limitation
directors’ and officers’ liability insurance in an amount of five million
dollars (U.S.$5,000,000) or such greater amount as may be designated by the
Board.  The cost of all premiums for such
insurance coverage shall be the responsibility of the Company.  All insurance policies shall be maintained in
the name of the relevant entity of the Company Group.

 

Wexford shall promptly provide copies of all insurance
policies or certificates thereof and related material to the Company or to such
director or officer, as the case may be, as well as written notice of any
changes in such policies.  Wexford shall
promptly investigate and make a full written report to the Company or such
director or officer, as the case may be, and all applicable insurance carriers
as to any and all actual or alleged incidents for which a claim may properly be
made under any such policies, and shall prosecute all claims and prepare any
and all other reports required by any insurance company in connection
therewith.

 

(e)                                  Government
Compliance.  Wexford shall use its
best efforts to ensure that the Company Group complies with all material laws,
ordinances, orders, rules, relations and requirements of all federal, state,
and municipal governments, courts, administrative agencies or any other body
exercising the functions similar to those of any of the foregoing which may be
applicable to the Company Group, including applicable SEC rules and
regulations, subject to the final sentence of this Section 2(e) (collectively
the “Regulations”).  Wexford shall
notify the Board immediately upon receipt of notice of (i) any material
threatened or pending governmental orders, proceedings or lawsuit involving the
Company Group and (ii) any material violations relating to the use or
maintenance of the Company Group’s assets. 
For the avoidance of doubt, as part of the Supervisory Services, Wexford
shall supervise compliance with any Regulations, treaties, conventions, codes, standards,
permitting, licensing, certifications or other legal, regulatory or
administrative requirements (whether the same be international, national, statewide,
regional, local, in respect of any port authority or other body or otherwise)
in respect of operation of the Vessels(the “Operational Regulations”),
including without limitation any maritime, environmental, pollution or safety
Regulations.

 

(f)                                    Books
and Records.  Wexford shall, on
behalf of the Company Group, keep and maintain true and accurate corporate
minute books (but only with respect to meetings to which Wexford is invited in
sufficient time to send a representative to attend) and books of account in
accordance with applicable law and generally accepted accounting principles on
an accrual basis.  Wexford shall maintain
accurate records of all funds received and disbursed in connection with the
provision of Wexford’s services hereunder and such records, together with all
supportive and underlying documentation, shall be available for the Company
Group’s inspection at all times at Wexford’s offices.  Wexford shall not dispose of any books or
records relating to the Company Group except upon receipt of the prior written

 

3

 

approval of Company.  Wexford shall maintain such control over
accounting and financial transactions as is reasonably expected to protect the Company
Group and its assets from theft, error or fraudulent activity.

 

All books, cards, registers, receipts, documents,
warranties, insurance policies, contracts, leases, violations, loan documents,
correspondence, plans and specifications, and any other papers or the
information contained therein which are in any manner connected with the
management, operation, servicing or administration of the Company Group (the “Corporate
Documents”) are the sole property of the Company Group, and shall be
delivered to the Company or any other entity of the Company Group, in the
latter case with respect to the Corporate Documents of such entity, at any time
upon the Company’s or such entity’s request and at its expense.  Such Corporate Documents shall be deemed
confidential and will not be published, transmitted or released by Wexford to
any party, other that to its attorneys, accountants and as otherwise may be
required by law, without the prior written consent of the Company or as
otherwise required by law, subpoena or other legal process.

 

The covenants and agreements of Wexford contained in
this Section 2(f) (other than in the first, second and last sentences
of the first paragraph hereof) shall survive any termination (with or without
cause) of this Agreement.

 

(g)                                 Reporting.  Wexford shall provide the Company with
regular reports no less frequently than once each calendar quarter providing
information with respect to all material actions undertaken by Wexford pursuant
to the terms of this Agreement and other material events relating to the Company
Group.

 

(h)                                 Right
of First Refusal.  During the initial
and any extended term of this Agreement (the “First Refusal Period”),
Wexford shall give the Company a right of first refusal with respect to any purchase,
lease or similar investment opportunities in Capesize, Panamax, Handymax or
Handysize vessels (“Dry Bulk Ships”) presented to or originated by Wexford or the
Company Group (each an “Opportunity”). 
During the First Refusal Period, Wexford shall notify the Company of
each Opportunity by sending the Company a written notice describing such
Opportunity in sufficient detail to allow the Company to make an investment
decision.  If within a fifteen (15)
Business Day (as defined below) period following its receipt of such notice the
Company either (x) notifies Wexford in writing that the Company declines to
invest in such Opportunity or (y) fails to respond to such notice, then Wexford
shall have the right to invest in such Opportunity or direct such investment to
its affiliates or any other person or entity on substantially the same terms
and conditions set forth in the notice. 
If the person originating the Opportunity has indicated to Wexford that
a decision about whether to invest in such Opportunity must be made on an
expedited basis, Wexford shall inform the Company in writing of such shorter
time period, and the Company will use reasonable efforts to make an investment
decision on such expedited basis so as to allow Wexford sufficient time to
decide whether to pursue such Opportunity in the event that the Company
declines to pursue same.  If the terms
and conditions of any Opportunity shall materially improve from those set forth
in any notice, then Wexford shall so advise the Company in an additional
written notice, and the Company shall have an additional ten (10)

 

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Business Day (as defined
below) period to elect to invest in such Opportunity on such improved terms and
conditions.  Wexford acknowledges and
agrees that to the extent the Company determines not to pursue an Opportunity,
the approval of the Company’s “independent directors”, as such term is defined
in Rule 4200 of the Nasdaq Stock Market, shall be required before Wexford
shall pursue such Opportunity.  Notwithstanding
the foregoing, Wexford shall not be required to present any Opportunity to the Company
that constitutes an investment of any nature whatsoever in (a) a
publicly-held company or any derivative transactions relating or indexed to the
equity or debt of a publicly-held company or (b) any investment
opportunity that does not relate to Dry Bulk Ships.  “Business Day”, for the purposes of
this Agreement, means a day on which commercial banks in New York, New York,
United States of America, are not authorized or required to by law to close.

 

3.                                       Authority
of Wexford; Limitations.

 

(a)                                  Subject
to the remaining provisions of this Section 3 and the direction of the
Board, Wexford shall have full discretion and authority pursuant to this
Agreement to perform the duties and services specified in Section 2 hereof
in such manner as Wexford reasonably considers appropriate.  In furtherance of the foregoing, each entity
of the Company Group hereby designates and appoints Wexford as its agent and
attorney-in-fact, with full power and authority and without further approval of
any entity of the Company Group (subject to the provisions of this Section 3),
for purposes of accomplishing on its behalf any of the foregoing matters or any
matters which are properly the subject matter of this Agreement.  Wexford may execute, in the name and on
behalf of each entity of the Company Group all such documents and take all such
other actions which Wexford reasonably considers necessary or advisable to
carry out its duties hereunder, subject to the provisions of this Section 3.

 

(b)                                 All
actions of Wexford made pursuant to the authority granted by the Company Group
hereunder (including without limitation in Section 3(a) hereof) shall
at all times be subject to (i) applicable law, (ii) the certificate
of incorporation and by-laws (the “Corporate Charter Documents”) of the
Company or such other the Company Group entity, as the case may be, and (iii) any
limitation or restriction on such authority determined by the Board; provided
that the Board shall not place any limitation or restriction on such authority
that is contrary to the terms or spirit of this Agreement.

 

(c)                                  At
the written request of Wexford, the Company promptly shall deliver such
resolutions of the Board as may be appropriate in connection with any action of
Wexford authorized hereunder or any transaction authorized hereby entered into
by Wexford on behalf of the Company Group.

 

(d)                                 Wexford
acknowledges receipt of copies of the Corporate Charter Documents as in effect
on the date hereof.  Notwithstanding any
provision of this Agreement to the contrary, Wexford agrees not to effect, or
commit the Company Group to effect, any transaction (or series thereof)
required under such Corporate Charter Documents or applicable law to be
approved by the Board or the stockholders of the Company or any other

 

5

 

the Company Group entity,
as the case may be, without first obtaining such approval in accordance therewith.

 

4.                                       Compensation;
Reimbursement of Expenses.

 

(a)                                  Reimbursable
Expenses; Reimbursement.  The Company
shall reimburse Wexford for all of its direct and indirect third party costs
properly allocated to the performance of its duties and services, including
without limitation any legal, administrative or similar fees and disbursements
incurred by Wexford in respect of the Company Group (whether such fees or
disbursements are incurred in-house or from third parties).  In addition, the Company shall pay all fees
and disbursements charged by third parties that are retained by Wexford or the
Company Group to provide services related to Technical Operations, Commercial
Operations or Operational Regulations or other services for or on behalf of the
Company Group.

 

In the event that Wexford provides services to the
Company Group, beyond those that Wexford is required to provide under this
Agreement and that would otherwise be provided by a third party, Wexford has
the right to charge the Company Group an additional fee for such services; provided
that such fee is comparable to or less than the fee that would have been
charged by such third party and provided  further that the payment
of such fee has been approved by the Board.

 

The Company shall reimburse Wexford for the cost of an
Errors and Omissions Insurance Policy in an amount not to exceed five million
dollars (U.S.$5,000,000), covering the services to be provided by Wexford
hereunder and with the costs incurred by Wexford in obtaining a fidelity bond
relating to such services.

 

Wexford shall provide a written statement to the
Company (the “Statement”) monthly as soon as practicable following the
end of each month during the term hereof, and following the expiration or
earlier termination hereof, for the expenses reimbursed for the month or other
period last ended or, in the case of expiration or termination, all unbilled
reimbursable expenses.  The Company shall
have ten (10) Business Days to dispute in good faith any amount claimed in
the Statement or any other written presentment of expenses, after which such
amount shall be deemed correct and payable to Wexford within five (5) Business
Days; provided that if there is a dispute the parties agree to work
amicably to promptly determine the correct amount.

 

(b)                                 Compensation.  As compensation for the services to be
performed by Wexford under this Agreement during the initial term thereof, the
Company shall pay Wexford (i) an annual base management fee of one million
five hundred thousand dollars (U.S.$1,500,000) per annum (the “Base
Management Fee”), payable quarterly in advance, and (ii) an additional
management fee (the “Supplemental Management Fee”) of fourteen thousand dollars
(U.S.$14,000) per month per each vessel owned, leased or otherwise employed by the
Company Group in addition to a base fleet of six (6) vessels (which may be
six (6) vessels owned on the date hereof or any other fleet of six (6) vessels)
(each such

 

6

 

additional vessel being
an “Additional Vessel”), payable quarterly in advance; provided
that if the number of Additional Vessels has increased or decreased during any
quarter, Wexford or the Company, as applicable, shall reimburse the other at
the end of such quarter for the ratable portion, on a daily basis, of the
Supplemental Management Fee that reflects such increase or decrease.  If the term of this Agreement is extended
pursuant to Section 8, Wexford and the Company shall agree on the terms of
the Base Management Fee and Supplemental Management Fees for such extension
period, which shall in no case be less than those contemplated in this Section 4(a).

 

(c)                                  Management
Options.  The Company agrees to
create a stock option plan pursuant to which the Company will issue options to
Wexford to purchase shares of common stock of the Company (the “Management
Options”) representing a six percent (6%) ownership interest on a fully
diluted basis (subject to adjustment for stock splits, dividends and the like)
as of the completion of the initial registered public offering of the Company’s
common stock (the “IPO”).   The Management
Options will vest in 1/36 equal amounts at the end of each calendar month during
the initial term of this Agreement; provided that the Management Options
will be deemed fully vested upon termination by Wexford for cause or by the
Company other than for cause pursuant to Section 8.  The exercise price for the Management Options
shall be the per share price as of the IPO. 
Issuance of the options shall be in accordance with all applicable
securities laws.

 

If the term of this Agreement is extended pursuant to Section 8,
Wexford and the Company shall agree on the number and price of Management
Options to be issued for such extension period, which will vest ratably over
the course of such period and be exercisable at the earlier of the end of such
period or termination by Wexford for cause or by the Company other than for
cause pursuant to Section 8.

 

(d)                                 Board
Fees.  Any officers or employees of
Wexford who serve as members of the Board shall be entitled to receive whatever
fees, stock options, reimbursements or other compensation or benefits are paid
to other members of the Board.  At the
request of Wexford, such amounts may be paid to Wexford instead of to such
officers or employees of Wexford.

 

(e)                                  Audits.  The Company reserves the right to conduct
examinations of, and to audit, with five (5) Business Days’ notification,
the books and records maintained by Wexford with respect to its reimbursable
expenses under this Agreement.  Such
examinations and audits may be performed at Wexford’s offices if the books and
records are maintained at Wexford’s offices or, at the option of the Company
and at the expense of the Company, duplicate sets of such books and records
shall be delivered for audit to the Company at a place designated by the
Company.  If the audit reveals errors in
record keeping or in the amount of reimbursable expenses paid by the Company,
Wexford shall immediately correct the same and shall promptly inform the
Company in writing of the action taken to correct such errors and shall make
such adjustment to the reimbursable expenses paid by the Company as shall be
appropriate.  Audits conducted by the
Company or its designees shall be an expense of the Company.  The right to audit the books and records
maintained by

 

7

 

Wexford shall survive the
expiration or earlier termination of this Agreement.

 

5.                                       Representations.

 

(a)                                  The
Company hereby agrees, represents and warrants to Wexford that:

 

(i)                                     The
retention of Wexford as provided hereunder has been authorized by the Board;
and

 

(ii)                                  This
Agreement has been duly authorized by appropriate action and when executed and
delivered will be a legal, valid and binding agreement of the Company,
enforceable in accordance with its terms, and the Company will deliver to
Wexford such evidence of such authority as Wexford may reasonably require,
whether by way of a certified resolution or otherwise.

 

(b)                                 Wexford
hereby agrees, represents and warrants to the Company that:

 

(i)                                     this
Agreement has been duly authorized by appropriate action and when executed and
delivered will be a legal, valid and binding agreement of Wexford, enforceable
in accordance with its terms, and Wexford will deliver to the Company such
evidence of such authority as the Company may reasonably require, whether by
way of a certified resolution or otherwise;

 

(ii)                                  neither
it nor any Employee is party to any agreement inconsistent with the terms of
this Agreement; and

 

(iii)                               it
has or will have available to it, pursuant to contract or otherwise, the
services of such persons as may be necessary to provide its services hereunder.

 

(c)                                  The
representations and warranties herein shall be continuing during the term of
this Agreement, and if at any time during the term of this Agreement any event
has occurred which would make any of the foregoing representations and
warranties untrue or inaccurate in any material respect, the Company or
Wexford, as the case may be, will promptly notify the other of such event and
the facts related thereto.

 

6.                                       Exculpation;
Indemnification.

 

(a)                                  None
of Wexford or any of its affiliates or their respective members, officers,
directors, partners, employees and agents including without limitation the
Employees, (each, an “Indemnified Party”) shall be liable to the Company
Group (or its officers or shareholders) (i) for mistakes of judgment or
for action or inaction or for losses due to such mistakes, action or inaction
so long as such person acted honestly and in good faith and reasonably believed
that his conduct was in the best interests of the Company Group, (ii) for
losses due to the negligence, dishonesty or bad faith of any agent of the
Company Group who was selected, engaged, employed or retained by any
Indemnified Party

 

8

 

on behalf of the Company
Group, provided that such Indemnified Party exercised reasonable care in
selecting, engaging, employing or retaining such agent and such Indemnified
Party has not caused such agent to be entitled to indemnification by the
Company Group for recklessness, bad faith, gross negligence or willful
misconduct, or (iii) for any action or inaction which such person
reasonably believed was unrelated to the Company Group or related to the
provision of services to an entity other than the Company Group.  Each Indemnified Party may consult with
counsel and accountants in respect of the affairs of the Company Group and be
fully protected and justified in any action or inaction which is taken in good
faith reliance upon the advice or opinion of such counsel or accountants,
provided that they shall have been selected with reasonable care.  Notwithstanding any of the foregoing to the
contrary, the provisions of this Section 6(a) shall not be construed
to relieve (or attempt to relieve) any Indemnified Party of any liability, to
the extent (but only to the extent) that such liability may not be waived,
modified or limited under applicable law, but shall be construed so as to
effectuate the provisions of Section 6(a) to the fullest extent
permitted by law.

 

(b)                                 To
the fullest extent permitted by law, the Company shall indemnify and hold
harmless each Indemnified Party from and against any loss or expense suffered
or sustained by an Indemnified Party with respect to events occurring on or
after the date hereof by reason of the fact that he or it is or was an
Indemnified Party, including without limitation any judgment, settlement,
reasonable attorneys’ fees and other costs and expenses incurred in connection
with the defense of any actual or threatened action or proceeding
(collectively, “Losses”). To the fullest extent permitted by law, the Company shall
promptly advance to any Indemnified Party reasonable attorney’s fees and other
costs and expenses incurred in connection with the defense of any action or
proceeding for which such person may be entitled to indemnification.  In the event that such advance is made by the
Company, the Indemnified Party shall agree to reimburse the Company for such
fees, costs and expenses to the extent that it was not entitled to
indemnification under this Section 6(b) and as otherwise required by
law.

 

(c)                                  The
provisions of this Section 6 shall survive any termination of this
Agreement.

 

(d)                                 The
determination that an Indemnified Party did not act honestly and in good faith
with a view to the best interests of the Company Group or, in the case of
criminal proceedings, such Indemnified Party had reasonable cause to believe
that such conduct was unlawful shall be made only in a final judgment by a
court of competent jurisdiction (not subject to further appeal).

 

(e)                                  In
order to provide for just and equitable contribution, if a claim for
indemnification pursuant to this Agreement is made but there is a final
judgment by a court of competent jurisdiction (not subject to further appeal)
that such indemnification may not be enforced in such case, even though the
express provisions hereof provide for indemnification in such case, then (i) the
Company Group, on the one hand, and the Indemnified Party, on the other hand,
shall contribute to the Losses to which such Indemnified Party may be subject
in

 

9

 

accordance with the
relative benefits received by the Company Group, on the one hand, and such
Indemnified Party, on the other hand, or, (ii) if the allocation provided
by clause (i) above is not permitted by applicable law, in such proportion
as is appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the Company Group, on the
one hand, and such Indemnified Party, on the other hand, in connection with the
statements, acts or omissions which resulted in such Losses, and the relevant
equitable considerations shall also be considered.  The relative benefits received by the Company
Group, on the one hand, and the Indemnified Party, on the other hand, shall be
deemed to be in the same respective proportions as gross annual income earned by
the Company Group during the relevant year and the annual Base Management Fee
and Supplemental Management Fee payable to Wexford during such year; provided
that under no circumstances shall the Indemnified Parties be collectively
responsible for any contribution in excess of the amount received by Wexford as
compensation under this Agreement during the relevant year.

 

(f)                                    In
respect of any payment that the Company is obligated to make to Wexford under
this Agreement, including without limitation under this Section 6, the
other entities of the Company Group shall be secondarily liable, on a joint and
several basis, for any amount that either the Company or any receiver in
bankruptcy, as the case may be, either (i) refuses to pay, (ii) is
unable to pay, on a current basis, due to insolvency, bankruptcy or the like,
or (iii) is barred from paying by a court or otherwise, provided that such
other entity or entities are not likewise barred.

 

7.                                       Independent
Contractor.

 

For the purposes of this Agreement, Wexford shall be
an independent contractor and not an employee of any entity of the Company
Group, and no entity of the Company Group shall be deemed to be a partner,
shareholder or co-venturer with Wexford or any of its affiliates or clients.

 

8.                                       Term
and Termination.

 

(a)                                  This
Agreement shall commence on the date hereof and shall continue in effect for
three (3) years from the date hereof unless terminated prior thereto or
extended therefrom for one or more years by mutual agreement of the parties in
writing (the “Expiration Date”). 
Any extension of this Agreement must be made by the parties in writing
as of a date not less than six (6) months prior to the then applicable
Expiration Date.

 

(b)                                 The
Company, by resolution of its Board, may terminate this Agreement without cause
upon sixty (60) days’ prior written notice to Wexford or (ii) for cause
immediately upon notice to Wexford.  The
occurrence of any of the following events, without limitation, shall be deemed “cause”
for termination by the Company of this Agreement:

 

(i)                                     a
final determination by a court of competent jurisdiction, not

 

10

 

subject to further review
or appeal, that Wexford committed fraud or engaged in willful misconduct in
relation to the performance of its responsibilities under the terms of this
Agreement; or

 

(ii)                                  the
indictment or conviction of Wexford of a felony.

 

(c)                                  Wexford
may terminate this Agreement for cause upon twenty (20) days’ prior written
notice to the Company for any material breach of this Agreement.  A material breach for the purposes of this Section 8(c) includes
without limitation any failure by the Company to pay an indemnity or other
amount when due, if the Company has been notified in writing of such failure
and has been given a period of two (2) Business Days in addition to any
applicable grace period to cure such failure; provided that,  for the avoidance of doubt, although Wexford
shall have no obligation to inform any entity of the Company Group, other than the
Company, of such failure to pay, it shall not be a material breach of this
Agreement if another entity of the Company Group pays such amount in full on
behalf of the Company or on its own behalf within the time period contemplated
above.

 

(d)                                 In
the event that (i) the Company terminates this Agreement other than for
cause, or (ii) Wexford terminates this Agreement for cause, in each case
as provided in this Section 8, then (x) Wexford shall be entitled to
immediate payment of (A) any unpaid balance of the Base Management Fee and
the Supplemental Management Fee and (B) the Base Management Fee and the
Supplemental Management Fee in the amounts that each would have otherwise come
due during the remainder of the term of this Agreement, provided that in such
case the Supplemental Management Fee shall be calculated based upon the number
of Additional Vessels at the date of such termination, and (y) the Management
Options issued pursuant to Section 4(c) shall be deemed immediately
and fully vested.

 

(e)                                  Upon
termination of this Agreement, the Company Group shall accept the resignations,
if tendered, of officers and directors of the Company Group who are Employees.

 

9.                                       Miscellaneous.

 

(a)                                  Notices.  All notices required to be delivered under
this Agreement shall be in writing and shall be given by certified or
registered mail, postage prepaid, return receipt requested, or by recognized
overnight courier, such as Federal Express or Airborne Express, or by
facsimile, and shall be deemed to be given on the third business day following
the date of posting in a United States Post Office or one day after delivery to
the overnight courier or, in the case of facsimiles, upon receipt, and shall be
addressed to the [The Company]’s Notice Address or Wexford’s Notice Address (as
such terms are defined below).  Either
party may, by notice as aforesaid actually received, designate a different
address or addresses for communications intended for it.

 

The term “the Company’s Notice Address” shall mean:

 

11

 

Cavan Maritime Limited

c/o Wexford Capital LLC

411 West Putnam Avenue

Greenwich, Connecticut 06830

Attn:                    Board
of Directors

Fax No.:  203-862-7490

 

The term “Wexford’s Notice Address” shall mean:

 

Wexford Capital LLC

411 West Putnam Avenue

Greenwich, Connecticut 06830

Attn:                    Frederick
B. Simon

Fax No.:  203-862-7320

 

and

 

Attn:                    General
Counsel

Fax No.:  203-862-7312

 

(b)                                 Assignment.  No party may assign any of its rights
hereunder without prior written consent of the other party.

 

(c)                                  Successors.  This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns and no other person shall have any right or
obligation under this Agreement except as specifically set forth herein.

 

(d)                                 Governing
Law.  This Agreement shall be
governed by and construed in accordance with the laws of the State of New York
(without giving effect to the principles of conflicts of law thereof, other
than Sections 5-1401 and 5-1402 of the New York General Obligations Law)
applicable to contracts made and to be entirely performed therein, except that
matters relating to the corporate governance of the Company Group shall be
governed by the Marshall Islands Business Corporation Act.

 

(e)                                  Jurisdiction
And Waiver of Jury Trial.  Each of the parties hereby irrevocably and
unconditionally consents to the jurisdiction of any New York State court or
federal court of the United States of America sitting in New York County, and
any appellate court from any thereof, and irrevocably agrees that all actions
or proceedings arising out of or relating to this Agreement or the transactions
contemplated hereby shall be litigated exclusively in such Courts, and each of
the parties hereby irrevocably and unconditionally agrees that all claims in
respect of any such action or proceeding may be heard and determined in any
such New York State court or, to the fullest extent permitted by law, in such
federal court.  Each of the parties
agrees not to commence any legal proceeding related hereto except in such
Court.  Each of the parties irrevocably
waives any objection which it

 

12

 

may
now or hereafter have to the laying of the venue of any such proceeding in any
such Court and hereby further irrevocably and unconditionally waives and agrees
not to plead or claim in any such Court that any such action, suit or
proceeding bought in any such court has been brought in an inconvenient
forum.  Each of the parties irrevocably
waives any right it may have to a trial by jury in any such action, suit or
proceeding.  Each of the parties agrees
that the prevailing party in any action or proceeding arising out of or
relating to this Agreement or the transactions contemplated hereby shall be
entitled to recover its reasonable fees and expenses in connection therewith,
including without limitation legal fees. 
Each of the parties hereto agrees that a final non-appealable judgment
in any such action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other manner provided by
law.

 

(f)                                    Agent
for Service of Process.  The Company
hereby appoints Corporation Service Company with an office on the date hereof
at 50 Weston Street, Hartford, Connecticut 06120-1537 as its agent to receive
on behalf of itself and its property services of copies of the summons and
complaint and any other process which may be served in any such action or
proceeding.  Such service may be made by
mailing or delivering a copy of such process to the Company in care of the
process agent at the above address, and the Company hereby irrevocably
authorizes and directs the process agent to accept such service on its behalf.

 

(g)                                 Waiver
and Amendment.  Except as otherwise
expressly provided herein, no provision hereof may be waived, amended or
otherwise modified except by a written agreement signed by each of the parties
hereto which, in the case of the Company, shall be approved by the Company’s “independent
directors”.  No waiver of any of the
provisions of this Agreement shall be deemed to constitute a waiver of any
other provision whether or not similar nor shall any waiver constitute a
continuing waiver.

 

(h)                                 Confidentiality.  Each
party shall use the same level of care it uses to protect its own confidential
or proprietary material to keep the information disclosed to it concerning the
Company Group or any transactions
contemplated by this Agreement and not otherwise publicly available
confidential and shall not disclose to any person any provision of or
information regarding this Agreement without the consent of each other party,
unless such disclosure is otherwise required by applicable law, any
governmental authority or any listing or exchange rules to which such
party or a subsidiary or affiliate of such party may be subject or pursuant to
any judicial proceeding; provided that each party may disclose such
information to its directors, officers and employees (subject to such person’s
execution of a customary nondisclosure agreement), auditors, regulatory
authorities, accountants, counsel and consultants.

 

(i)                                     Entire
Agreement.  This Agreement embodies
the entire agreement and understanding between the parties hereto with respect
to the subject matter hereof and superseded all prior agreements and
understandings relating thereto.

 

(j)                                     Construction.  Any reference to a section is a reference to such section

 

13

 

in this Agreement.  Whenever the
singular number is used in this Agreement and when required by the context, the
same shall include the plural and vice versa, and the masculine gender shall
include the feminine and neuter genders and vice versa.

 

(k)                                  Pronouns and Plurals.  Whenever
the context may require, any pronoun used in this Agreement shall include the
corresponding masculine, feminine or neuter forms and the singular form of
nouns, pronouns and verbs shall include the plural and vice versa.

 

(l)                                     Severability.  If any provision of this Agreement shall be
invalid, illegal or unenforceable, to the extent permitted by law, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.

 

(m)                               Headings.  The headings of this Agreement are for
purposes of reference only and shall not limit or otherwise affect the meaning
hereof.

 

(n)                                 Counterparts.  This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.

 

IN WITNESS WHEREOF,
the parties hereto have caused this Agreement to be duly executed as of the
date first above written.

 

 

	
  CAVAN MARITIME LIMITED

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  
	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  WEXFORD CAPITAL LLC

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  
	
  Title:

  	
   

  
						

 

14

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