Document:

Exhibit 4.34

 

 

Date 2 March 2004

 

 

KNIGHTSBRIDGE TANKERS LIMITED

as Borrower

 

KTL HAMPSTEAD, INC.

KTL CHELSEA, INC.

KTL MAYFAIR, INC.

KTL CAMDEN, INC.

KTL KENSINGTON, INC.

as New Owners

 

 

- and -

 

 

THE ROYAL BANK OF SCOTLAND plc

as Lender

 

 

LOAN AGREEMENT

 

relating to

a facility of up to US$140,000,000

to finance part of the acquisition costs of

five VLCCs, m.v.’s. “MEGARA”, “MACOMA”,

“MAGDALA”, “MUREX” and “MYRINA”

 

 

WATSON, FARLEY & WILLIAMS

London

 

 

INDEX

 

	
  Clause

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  1

  	
  INTERPRETATION

  	
   

  
	
   

  	
   

  	
   

  
	
  2

  	
  FACILITY

  	
   

  
	
   

  	
   

  	
   

  
	
  3

  	
  DRAWDOWN

  	
   

  
	
   

  	
   

  	
   

  
	
  4

  	
  INTEREST

  	
   

  
	
   

  	
   

  	
   

  
	
  5

  	
  INTEREST PERIODS

  	
   

  
	
   

  	
   

  	
   

  
	
  6

  	
  DEFAULT INTEREST

  	
   

  
	
   

  	
   

  	
   

  
	
  7

  	
  REPAYMENT AND PREPAYMENT

  	
   

  
	
   

  	
   

  	
   

  
	
  8

  	
  MISMATCH BETWEEN LOAN AND TRANSACTIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  9

  	
  CONDITIONS PRECEDENT

  	
   

  
	
   

  	
   

  	
   

  
	
  10

  	
  GUARANTEE

  	
   

  
	
   

  	
   

  	
   

  
	
  11

  	
  REPRESENTATIONS AND WARRANTIES

  	
   

  
	
   

  	
   

  	
   

  
	
  12

  	
  GENERAL UNDERTAKINGS

  	
   

  
	
   

  	
   

  	
   

  
	
  13

  	
  CORPORATE AND FINANCIAL UNDERTAKINGS

  	
   

  
	
   

  	
   

  	
   

  
	
  14

  	
  INSURANCE

  	
   

  
	
   

  	
   

  	
   

  
	
  15

  	
  SHIP COVENANTS

  	
   

  
	
   

  	
   

  	
   

  
	
  16

  	
  SECURITY COVER

  	
   

  
	
   

  	
   

  	
   

  
	
  17

  	
  APPLICATION OF EARNINGS

  	
   

  
	
   

  	
   

  	
   

  
	
  18

  	
  EVENTS OF DEFAULT

  	
   

  
	
   

  	
   

  	
   

  
	
  19

  	
  PAYMENTS AND CALCULATIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  20

  	
  SECURITY

  	
   

  
	
   

  	
   

  	
   

  
	
  21

  	
  APPLICATION

  	
   

  
	
   

  	
   

  	
   

  
	
  22

  	
  FEES AND EXPENSES

  	
   

  
	
   

  	
   

  	
   

  
	
  23

  	
  INDEMNITIES

  	
   

  
	
   

  	
   

  	
   

  
	
  24

  	
  NO SET-OFF OR TAX DEDUCTION

  	
   

  
	
   

  	
   

  	
   

  
	
  25

  	
  ILLEGALITY, ETC

  	
   

  
	
   

  	
   

  	
   

  
	
  26

  	
  INCREASED COSTS

  	
   

  

 

 

	
  27

  	
  SET-OFF

  	
   

  
	
   

  	
   

  	
   

  
	
  28

  	
  ASSIGNMENTS, TRANSFERS AND CHANGES IN LENDING OFFICE

  	
   

  
	
   

  	
   

  	
   

  
	
  29

  	
  VARIATIONS AND WAIVERS

  	
   

  
	
   

  	
   

  	
   

  
	
  30

  	
  NOTICES

  	
   

  
	
   

  	
   

  	
   

  
	
  31

  	
  SUPPLEMENTAL

  	
   

  
	
   

  	
   

  	
   

  
	
  32

  	
  GOVERNING LAW

  	
   

  
	
   

  	
   

  	
   

  
	
  33

  	
  ENFORCEMENT

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 1  DRAWDOWN NOTICE

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 2 
  CONDITION PRECEDENT DOCUMENTS PART A - DRAWDOWN NOTICE

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 2  CONDITIONS
  PRECEDENT DOCUMENTS PART B - DRAWDOWN

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 3  DETAILS OF SHIPS

  	
   

  
	
   

  	
   

  
	
  EXECUTION PAGE

  	
   

  

 

 

	
  APPENDIX A

  	
  FORM OF
  MORTGAGE

  	
   

  
	
  APPENDIX B

  	
  FORM OF
  GENERAL ASSIGNMENT

  	
   

  
	
  APPENDIX C

  	
  FORM OF
  ACCOUNT SECURITY DEED

  	
   

  
	
  APPENDIX D

  	
  FORM OF
  MANAGER’S UNDERTAKING

  	
   

  
	
  APPENDIX E

  	
  FORM OF
  MASTER AGREEMENT SECURITY DEED

  	
   

  

 

 

THIS AGREEMENT is made on
 2 March 2004

 

BETWEEN

 

(1)           KNIGHTSBRIDGE TANKERS LIMITED
a company incorporated in Bermuda whose registered
office is at Par-la-Ville Place, 14 Par-la-Ville Road, Hamilton HM08, Bermuda
(the “Borrower”);

 

(2)           KTL HAMPSTEAD, INC., KTL
CHELSEA, INC., KTL MAYFAIR, INC., KTL CAMDEN, INC. and
KTL
KENSINGTON, INC., each a company incorporated in the Republic of
Liberia whose registered office is at 80 Broad Street, Monrovia, Liberia (each
a “New
Owner” and together the “New Owners”);

 

(3)           THE ROYAL BANK OF SCOTLAND
plc acting through its office at Shipping Business
Centre, 5-10 Great Tower Street, London EC3P 3HX (as “Lender”).

 

BACKGROUND

 

The
Lender has agreed to make available to the Borrower a facility of up to
$140,000,000 for the purpose of enabling the Borrower to advance funds to the
New Owners (newly incorporated special purpose subsidiaries of the Borrower) to
enable each New Owner to finance part of the cost of acquiring a Ship and to
provide working capital to the Borrower.

 

IT IS AGREED as follows:

 

1              INTERPRETATION

 

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

 

“Account
Security Deed”  means
the deed containing, inter alia, a charge in respect of the Operating Account
and the Retention Account executed or to be executed by the Borrower and each
New Owner in favour of the Lender in the form set out in Appendix C;

 

“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
before, or in connection with, the appointment of an administrator;

 

“Advance”
means each of Advance A, Advance B, Advance C, Advance D and Advance E and, in
the plural, means all such Advances;

 

“Advance A”
means the principal amount of the Advance referred to in Clause 3.2(b)(i) made
or to be made by the Lender pursuant to Clause 3 or (as the context requires)
the principal amount thereof for the time being outstanding under this
Agreement;

 

“Advance B”
means the principal amount of the Advance referred to in Clause 3.2(b)(ii) made
or to be made by the Lender pursuant to Clause 3 or (as the context requires)
the principal amount thereof for the time being outstanding under this
Agreement;

 

“Advance C”
means the principal amount of the Advance referred to in Clause 3.2(b)(iii)
made or to be made by the Lender pursuant to Clause 3 or (as the context
requires) the principal amount thereof for the time being outstanding under
this Agreement;

 

“Advance D”
means the principal amount of the Advance referred to in Clause 3.2(b)(iv) made
or to be made by the Lender pursuant to Clause 3 or (as the context requires)
the principal amount thereof for the time being outstanding under this
Agreement;

 

 

“Advance E”
means the principal amount of the Advance referred to in Clause 3.2(b)(v) made
or to be made by the Lender pursuant to Clause 3 or (as the context requires)
the principal amount thereof for the time being outstanding under this
Agreement; and

 

“Approved
Managers”  means, in relation
to each Ship, the commercial and technical managers, respectively, specified
below the name of such Ship in Schedule 3 or any other company or companies
which the Lender may, in its sole and absolute discretion, approve from time to
time as the commercial and/or technical managers of any Ship (and such approval
may be subject to the condition that any technical or commercial managers will
execute a manager’s undertaking on terms and conditions acceptable to the
Lender);

 

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

 

(a)        30 June
2004 (or such later date as the Lender in its discretion may agree with the
Borrower); or

 

(b)        if
earlier, the Drawdown Date in relation to the final Advance or the date on
which the Commitment is cancelled or terminated;

 

“Business Day”  means a day on which banks and financial
markets are open for business in London and, in respect of a day on which a
payment is required to be made under a Finance Document, also in New York City;

 

“Calculation
Period”  means the period
commencing on the date on which the last payment or delivery was made under
Section 2(a)(i) of the Master Agreement with respect to a Transaction (or, in
the case of the first such period, the date the relevant Transaction was
entered into) and ending on the next date upon which such a payment or delivery
is to be made;

 

“Commitment”
means $140,000,000 to the extent not cancelled or reduced under this Agreement;

 

“Conditional
Sale Agreement” means, in relation to each Ship, a conditional sale
agreement dated 25 November 1996 entered into between the relevant Existing
Owner and the Lessor and, in the singular, means any of them;

 

“Conditional
Sale Agreement Transfer” means, in relation to each Ship, an
agreement entered into or to be entered into between the relevant Existing
Owner, the Lessor and the relevant New Owner in respect of the transfer of the
Conditional Sale Agreement from the Lessor to the relevant New Owner and, in
particular, transferring the right of the Lessor to take title of the relevant Ship
from the relevant Existing Owner;

 

“Contractual
Currency”  has the meaning
given in Clause 23.5;

 

“Credit
Support Document”  has the
meaning given to that expression in Section 14 of the Master Agreement;

 

“Credit
Support Provider”  has the
meaning given to that expression in Section 14 of the Master Agreement;

 

“Daylight
Funding Agreement”  means, in
relation to each New Owner, an agreement entered into or to be entered into
among, inter alios, the Lender and that New Owner in respect of a daylight overdraft
facility to be made available by the Lender to that New Owner to enable it to
finance the balance of the purchase consideration of the relevant Vessel in
excess of the amount thereof being financed by the relevant Advance;

 

2

 

“Designated
Flag” means, in relation to each Ship, the flag specified below the
name of each Ship in Schedule 4 as the “New Flag”;

 

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

 

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

 

“Drawdown
Notice”  means a notice in
the form set out in Schedule 1;

 

“Early
Termination Date”  has the
meaning given to that expression in Section 14 of the Master Agreement;

 

“Earnings”
means, in relation to each Ship, all moneys whatsoever which are now, or later
become, payable (actually or contingently) to the New Owner which is the owner
of such Ship at any time during the Security Period and which arise out of the
use or operation of such Ship, including (but not limited to):

 

(a)           all
freight, hire and passage moneys, compensation payable to the New Owner which
is the owner of such Ship in the event of requisition of such 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 such Ship;

 

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

 

(c)           if and
whenever such Ship is employed on terms whereby any moneys falling within
paragraphs (a) or (b) 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 such Ship;

 

“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:

 

(c)        a claim
for damages, compensation, fines, penalties or any other payment of any kind,
whether or not similar to the foregoing;

 

(d)        an order
or direction to take, or not to take, certain action or to desist from or
suspend certain action; and

 

(e)        any form
of enforcement or regulatory action, including the arrest or attachment of any
asset;

 

“Environmental
Incident” means in relation to each Ship:

 

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

 

3

 

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

 

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

 

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

 

“Event of
Default” means any of the events or circumstances described in
Clause 18;

 

“Existing
Lenders” means the financial institutions referred to and defined as
“Banks” in a facility agreement dated 6 February 1997 for US$184,758,844
entered into by the Borrower with such parties and with Goldman Sachs
International as agent (as the role of Goldman Sachs International has since
been transferred to The Royal Bank of Scotland plc);

 

“Existing
Loan Agreement”  means the
facility agreement referred to in the definition of “Existing Lenders” together
with, where the context so requires, the related swap documents;

 

“Existing
Owner” means, in relation to each Ship, the single purpose ship
owning company specified below the name of such Ship in Schedule 4 being in
each case a company incorporated under the laws of the Cayman Islands and, in
the plural, means all of them;

 

“Existing
Swap”  means the ISDA Master
Agreement dated as of 6th February 1997 entered into between the Borrower and
the Existing Swap Counterparty, together with the Schedule thereto and all
confirmations to that Master Agreement;

 

“Existing Swap
Counterparty”  means Goldman Sachs Capital Markets, L.P.;

 

“Fee Letter”  means a letter entered into or to be entered
into between the Lender, the Borrower and the New Owners in respect of a fee
payable to the Lender in connection with this Agreement;

 

“Final Instalment”  means the amount of the Loan equal to Sixty
one million six hundred thousand Dollars ($61,600,000) (as such amount might be
reduced by operation of Clause 7.1(b) or increased by operation of Clause 7.2
(b)) to be repaid on the twenty eighth (28th) and final Repayment Date;

 

“Finance
Documents” means:

 

(a)        this
Agreement;

 

(b)        the
General Assignments;

 

4

 

(c)        the
Manager’s Undertakings;

 

(d)        the
Mortgages;

 

(e)        the
Credit Support Documents;

 

(f)         the
Account Security Deed;

 

(g)        the
Master Agreement Security Deed;

 

(h)        each
Daylight Funding Agreement;

 

(i)         the Fee
Letter; and

 

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

 

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

 

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

 

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

 

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

 

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

 

(e)        under any
foreign exchange transaction, 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 paragraphs (a)
to (e) above if the references to the debtor referred to the other person;

 

“General
Assignment” means, in relation to each Ship, a general assignment of
the Earnings, Insurances and any Requisition Compensation in the form set out
in Appendix B;

 

“Group”  means the Borrower and its subsidiaries from
time to time;

 

“Insurances”
means, in relation to each Ship:

 

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

 

5

 

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

 

“Interest
Period” means a period determined in accordance with Clause 5;

 

“ISM Code”
means the International Safety Management Code (including the guidelines on its
implementation), adopted by the International Maritime Organisation Assembly as
Resolutions A.741 (18) and A.788 (19), as the same may be amended or
supplemented from time to time (and the terms “safety management system”, “Safety
Management Certificate” and “Document of Compliance” have the same
meanings as are given to them in the ISM Code);

 

“Lease
Limited Recourse Provisions”  means,
in relation to each Lease Transaction, those provisions under the applicable
lease agreement, the applicable direct support agreement (between each Existing
Owner, as lessee, the Lessor and SIPC) and the applicable Shell Sub-charter the
effect of which, in summary, is to require SIPC to pay to the Lessor amounts
payable by the relevant Existing Owner under the Lease Transaction and limiting
the Lessor’s recourse to the Existing Owner to, among other things, the amount
so paid by SIPC;

 

“Lease
Transaction”  means, in
relation to each Ship, the lease transaction entered into between the relevant
Existing Owner and the Lessor by way of, among other documents, the relevant
Conditional Sale Agreement and a lease agreement and, in the plural, means all
of them.

 

“Lender”  means The Royal Bank of Scotland plc, a
company incorporated in Scotland having its registered office at 36 St. Andrew
Square, Edinburgh EH2 2YB, Scotland acting through the Shipping Business Centre
at 5-10 Great Tower Street, London EC3P 3HX, England or through any other
branch notified to the Borrower from time to time pursuant to Clause 28.3 and
includes all persons directly or indirectly deriving title under it (whether by
assignment, amalgamation, operation of law or otherwise);

 

“Lessor”  means Calico Leasing (GB) Limited,
previously called Natwest Leasing (GB) Limited, a company incorporated in
England and Wales with company number 1791957;

 

“LIBOR”
means, for an Interest Period or other relevant period:

 

(a)           the
rate per annum equal to the offered quotation for deposits in Dollars for a
period equal to, or as near as possible equal to, that Interest Period or other
relevant period which appears on TELERATE Page 3750 at or about 11.00 a.m.
(London time) on the Quotation Date for that Interest Period or other period
(and, for the purposes of this Agreement, “TELERATE Page 3750” means the
display designated as “page 3750” on the TELERATE Service or such other page as
may replace Page 3750 on that service for the purpose of displaying rates
comparable to that rate or on such other service as may be nominated by the
British Bankers’ Association as the information vendor for the purpose of
displaying British Bankers’ Association Interest Settlement Rates for Dollars);
or

 

(b)           if no
rate is quoted on TELERATE Page 3750, the rate per annum determined by the
Lender to be the rate per annum which leading banks in the London Interbank Market
offer for deposits in Dollars in the London Interbank Market at or about 11.00
a.m. (London time) on the Quotation Date for that Interest Period or other
period for a period equal to that Interest Period or other period and for
delivery on the first Business Day of it;

 

 “Liquid Assets”  means the aggregate of:

 

(a)           cash
in hand (subject to evidence satisfactory to the Lender);

 

6

 

(b)           moneys
standing to the credit of each Operating Account and the Retention Account;

 

(c)           other
bank deposits with the Lender or any other bank with a minimum rating of A2
with Moody’s or A with Standard & Poors;

 

(d)           bonds,
certificates of deposit and other money market instruments, funds or securities
issued or guaranteed by the government (or government agencies) of the United
States of America (subject to such securities being immediately convertible to
cash (subject to evidence satisfactory to the Lender); and

 

(e)           commercial
paper and/or money market funds with a maximum of twelve months maturity and
subject to such securities being immediately convertible to cash and having a
minimum rating of Prime-2 with Moody’s or A-2 with Standard & Poors
(subject to evidence satisfactory to the Lender),

 

in
each case legally and beneficially owned by the Borrower or a New Owner and
(other than the Security Interests in favour of the Lender in respect of each
Operating Account and the Retention Account) free of any Security Interest;

 

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

 

“Loan
Facility” means the loan facility in an amount of up to One hundred
and forty million Dollars ($140,000,000) to be made available by the Lender
under this Agreement in up to five (5) Advances and otherwise subject to and on
the terms and conditions herein contained;

 

“Major
Casualty” means, in relation to a Ship, any casualty to the 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 $2,000,000
or the equivalent in any other currency;

 

“Manager’s
Undertaking”  means an
undertaking executed or to be executed by the initial Approved Manager which is
responsible for the commercial management of the Ships in the form set out in
Appendix D;

 

“Margin” means 1 per cent. per annum;

 

“Master
Agreement”  means the Master
Agreement (on the 1992 ISDA (Multicurrency - Crossborder) form as modified)
entered into by the Lender and the Borrower dated the date of this Agreement,
and includes all transactions from time to time entered into and confirmations
from time to time exchanged under the Master Agreement and any amending,
supplementing or replacement agreements made from time to time;

 

“Master
Agreement Liabilities” 
means, at any relevant time, all liabilities actual or contingent,
present or future, of the Borrower to the Lender under the Master Agreement;

 

“Master
Agreement Security Deed” 
means the deed containing, inter alia, a charge in respect of the Master
Agreement executed or to be executed by the Borrower in favour of the Lender in
the form set out in Appendix E;

 

“Mortgage”  means, in relation to each Ship, the first
preferred ship mortgage on such Ship executed or to be executed by each New
Owner in favour of the Lender in the form set out in Appendix A;

 

“Negotiation
Period” has the meaning given in Clause 4.7;

 

7

 

“New Owner”
means, in relation to each Ship, the single purpose ship owning company
specified below the name of such Ship in Schedule 4 being in each case a
company incorporated under the laws of the country specified in Schedule 4 with
its registered office at the place specified in Schedule 4;

 

“Operating
Account”
means an account in the name of the Borrower with the Lender in London
designated “KNTAOPAC USD1 - Knightsbridge Tankers Operating Account”, or any
other account (with that or another office of the Lender) which is designated
by the Lender as the Operating Account for the purposes of this Agreement;

 

“Party”  means a party to this Agreement and, where
the context permits or requires, a party to a Finance Document and the Master
Agreement;

 

“Payment
Currency” has the meaning given in Clause 23.5;

 

“Permitted
Security Interests” means in relation to each New Owner:

 

(a)        Security
Interests created by the Finance Documents;

 

(b)       liens for
unpaid master’s and 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; and

 

(e)        liens for
master’s disbursements incurred in the ordinary course of trading and any other
lien arising by operation of law or otherwise in the ordinary course of the
operation, repair or maintenance of a Ship, provided such liens do not secure
amounts more than 30 days overdue (unless the overdue amount is being contested
by the relevant New Owner in good faith by appropriate steps) and subject, in
the case of liens for repair or maintenance, to Clause 15.13 (g);

 

(f)        any
possessory liens arising as a result of a Ship being put into the possession of
any person for the purpose of work being done upon it in any amount not
exceeding or likely to exceed $2,000,000 (or equivalent in any other currency),
or such greater amount as the Lender may agree to pursuant to the last
paragraph of Clause 15.13, provided such obligations are met when they fall
due.

 

“Pertinent Document” means:

 

(a)        any
Finance Document;

 

(b)        any
policy or contract of insurance contemplated by, or referred to in, Clause 14
or any other provision of this Agreement or any other Finance Document;

 

(c)        any other
document contemplated by, or referred to in, any Finance Document; and

 

(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;

 

8

 

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

 

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

 

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

 

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

 

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

 

“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 a Finance Document), the
second Business Day before commencement of that Interest Period (or such other
period);

 

“Receiving
Bank”  means American Express
Bank Limited, 3 World Financial Centre, 23rd Floor, New York, NY 10285-2300,
USA or such other bank as may from time to time be notified by the Lender to
the Borrower;

 

“Relevant
Person” has the meaning given to that expression 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”;

 

“Retention
Account” means an account in the name of the Borrower with the
Lender in London designated “KNTAREAC USD1 - Knightsbridge Tankers Retention
Account”, or any other account (with that or another office of the Lender)
which is designated by the Lender as the Retention Account for the purposes of
this Agreement;

 

“Secured
Liabilities” means all liabilities which the Borrower, the New
Owners, the other Security Parties or any of them have, at the date of this
Agreement or at any later time or

 

9

 

times,
under, or in connection with, any Finance Document or the Master Agreement or
any judgment relating to any Finance Document or the Master Agreement; 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), 
pledge, any maritime or other lien, hypothecation, encumbrance, assignment,
trust arrangement, title retention or other distress, execution, attachment,
arrangement or process of any kind having the effect of security or any other
security interest of any kind;

 

(b)        the
security rights of a plaintiff under an action in rem; 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 this paragraph (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 of the New Owners 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 last 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 22, 23 or 24 or any other provision of this Agreement or any other
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;

 

“Shell
Sub-charter”  means, in
relation to each Ship, the sub-charter between the relevant Existing Owner and
SIPC;

 

“Ship”
means each of the VLCCs specified in Schedule 3 to be acquired by the relevant
New Owner and registered in its name under the Designated Flag and, in the
plural, means all such ships;

 

“SIPC”  means Shell International Petroleum Company
Limited, a company incorporated in England and Wales having its registered
office at Shell Centre, London SE1 7NA;

 

“Taxes”  includes all present and future income, corporation
or value-added taxes and all stamp and other taxes and levies, imposts,
deductions, duties, charges and withholdings

 

10

 

whatsoever
together with interest thereon and penalties with respect thereto, if any, and
charges, fees or other amounts made on or in respect thereof (and references to
“Taxation”
shall be construed accordingly);

 

“Title
Transfer Documents”  means,
in relation to each Ship, a document or documents to be entered into between
the relevant Existing Owner and the relevant New Owner transferring title to
the Ship pursuant to the relevant Conditional Sale Agreement Transfer;

 

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

 

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

 

(b)        any
expropriation, confiscation, requisition or acquisition of such Ship, whether
for full consideration, a consideration less than its 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 1 year without any right to an extension)
unless it is within 30 days redelivered to the relevant New Owner’s full
control;

 

(c)        any
arrest, capture, seizure or detention of such Ship (including any hijacking or
theft) unless it is within 30 days redelivered to the relevant New Owner’s full
control;

 

“Total Loss
Date” means, in relation to a Ship:

 

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

 

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

 

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

 

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

 

“Transaction”  means a Transaction as defined in the
introductory paragraph of the Master Agreement.

 

1.2          Construction of certain terms.  In this Agreement:

 

“approved” means, for the purposes of Clause
14, 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;

 

11

 

“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 its 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 order or decree, any form
of delegated legislation, 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 all insurances
effected, or which the New Owner is obliged to effect, under Clause 14.2, any
other provision of this Agreement or any other Finance Document;

 

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

 

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

 

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

 

“protection and indemnity risks” means the
usual risks covered by a member of the International Group of Protection and
Indemnity Associations, 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 entered into pursuant
to Clause 14.2(a) (risks to be covered by obligatory insurances) by reason of
the incorporation in them of clause 8 of the Institute Time Clauses (Hulls)
(1/10/83) or the Institute Time Clauses (Hulls) (1/11/1995) or the Institute
Amended Running Down Clause (1/10/71) or any equivalent provision;

 

“regulation”
includes any regulation, rule, official directive, request or guideline whether
or not having the force of law (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; and

 

“war risks” includes the risk of mines and
all risks excluded from the hull and machinery policies required to be
maintained in accordance with Clause 14.2(a) by clause 23 of the Institute Time
Clauses (Hulls) (1/10/83) or clause 24 of the Institute Time Clauses (Hulls)
(1/11/1995) or any equivalent provision.

 

12

 

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

 

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

 

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

 

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

 

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

 

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

 

(b)           P has
direct or indirect control over a majority of the voting rights attaching 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.  In this Agreement:

 

(a)           references
in Clause 1.1 to a Finance Document or any other document being in the form of
a particular Schedule or Appendix include references to that form with any
modifications to that form which the Lender approves or requires;

 

(b)           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;

 

(c)           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;

 

(d)           words
denoting the singular number shall include the plural and vice versa; and

 

(e)           Clauses
1.1 to 1.4 and the foregoing provisions 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.

 

1.7          Exclusion of restrictive principles of interpretation.  Any principle requiring
any provision of this Agreement or any other Finance Document (including this
Clause 1.7) to be construed narrowly or against the Lender is excluded.

 

13

 

2              FACILITY

 

2.1          Amount of facility.  Subject to the other provisions of this
Agreement and in reliance (inter alia) on the representations and warranties of
the Borrower and the New Owners set out in Clause 11 and the representations
and warranties of the Borrower and the other Security Parties set out in the
other Finance Documents, the Lender shall make a loan facility not exceeding
$140,000,000 available to the Borrower.

 

2.2          The purpose of the Loan Facility shall be:

 

(a)           as to
Twenty eight million United States Dollars (US$28,000,000) to enable the
Borrower to provide funds to the relevant New Owner to part-finance its
purchase of m.v. “MEGARA” under the relevant Conditional Sale Agreement
Transfer;

 

(b)           as to
Twenty eight million United States Dollars (US$28,000,000) to enable the
Borrower to provide funds to the relevant New Owner to part-finance its
purchase of m.v. “MACOMA” from the relevant Existing Owner under the relevant
Conditional Sale Agreement Transfer;

 

(c)           as to
Twenty eight million United States Dollars (US$28,000,000) to enable the
Borrower to provide funds to the relevant New Owner to part-finance its
purchase of m.v. “MAGDALA” from under the relevant Conditional Sale Agreement
Transfer;

 

(d)           as to
Twenty eight million United States Dollars (US$28,000,000) to enable the
Borrower to provide funds to the relevant New Owner to part-finance its
purchase of m.v. “MUREX” from under the relevant Conditional Sale Agreement
Transfer; and

 

(e)           as to
Twenty eight million United States Dollars (US$28,000,000) to enable the
Borrower to provide funds to the relevant New Owner to part-finance its
purchase of m.v. “MYRINA” from under the relevant Conditional Sale Agreement
Transfer.

 

3              DRAWDOWN

 

3.1          Request for advance of Loan.  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) 2 Business
Days before the intended Drawdown Date.

 

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

 

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

 

(b)           the
Lender agrees to make the Loan Facility available to the Borrower in no more
than five (5) Advances as follows:

 

(i)            an
Advance in the amount and for the purpose specified in Clause 2.2(a);

 

(ii)           an
Advance in the amount and for the purpose specified in Clause 2.2(b);

 

(iii)          an
Advance in the amount and for the purpose specified in Clause 2.2(c);

 

(iv)          an
Advance in the amount and for the purpose specified in Clause 2.2(d); and

 

(v)           an
Advance in the amount and for the purpose specified in Clause 2.2(e).

 

3.3          Drawdown Notice irrevocable.  A Drawdown Notice must be signed by a
director of the Borrower, and once served, a Drawdown Notice cannot be revoked
without the prior consent of the Lender.

 

14

 

3.4          Disbursement of Loan.  Subject to the provisions of this Agreement,
the Lender shall on the Drawdown Date make the relevant Advance to the
Borrower; and payment to the Borrower shall be made to the account or accounts
which the Borrower specifies in the Drawdown Notice, which shall be (i) an
account of the Borrower, (ii) an account of the relevant New Owner (for onward
transmission to the Lessor) or (iii) an account of the Lessor to which the
purchase price of the Vessel is to be paid in accordance with the applicable
Conditional Sale Agreement Transfer.

 

3.5          Disbursement of Loan to third party.  For the avoidance of doubt, the payment by
the Lender under Clause 3.4 of the proceeds of an Advance to the account of a
New Owner or of the Lessor shall constitute the making of that Advance to the
Borrower and the Borrower shall at that time become indebted, as principal and
direct obligor, to the Lender in an amount equal to that Advance.

 

3.6          Cancellation of the Commitment.  Any unutilised part of the Commitment shall
be cancelled at the close of business in London on the last day of the
Availability Period.

 

4              INTEREST

 

4.1          Time for 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 in respect of an Interest Period shall be the
aggregate of (a) the Margin and (b) 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:

 

(a)           it 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; or

 

(b)           adequate
and fair means do not exist for ascertaining the rate of interest applicable to
the Loan (or any part thereof) during any Interest Period.

 

4.5          Suspension of drawdown.  If the Lender’s notice under Clause 4.4 is
served before the Loan is made, the Lender’s obligation to make the Loan 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 the Loan is made, the Borrower and the
Lender shall use reasonable endeavours to agree, within the 30 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 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

 

15

 

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 of the
Lender in Dollars (or in any available currency of the Loan) plus the Margin;
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.

 

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 5 Business Days’ notice of its intention to prepay the Loan 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.

 

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

 

5              INTEREST PERIODS

 

5.1          Commencement of Interest Periods.  The first Interest Period in respect of each
Advance shall commence on the Drawdown Date in respect of 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, 5.4 and 5.5 each
Interest Period shall be:

 

(a)           1, 2,
3, 6, 9 or 12 months as notified by the Borrower to the Lender (or such other
period as may be notified by the Borrower to the Lender, and agreed to by the
Lender) not later than 11.00 a.m. (London time) 2 Business Days before the
commencement of the Interest Period; or

 

(b)           3
months, if the Borrower fails to notify the Lender by the time specified in
Clause 5.2(a); or

 

(c)           such
other period as the Lender may agree with the Borrower.

 

5.3          Duration of first Interest Periods.  The first Interest Period in respect of each
Advance shall end on 30 June 2004.  After
that, the Interest Periods in respect of each of the Advances shall begin and
end on the same dates.

 

5.4          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.

 

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

 

16

 

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

 

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 1.5 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 before the relevant
date (but only for any unexpired part of any then current Interest Period);

 

(b)           the
Margin plus, in respect of successive periods of any duration (including at
call) up to 3 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 by it to 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 Clause
6(3)(b); 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.

 

7              REPAYMENT AND PREPAYMENT

 

7.1          Amount of repayment instalments.

 

(a)           The
Borrower shall repay the Loan by twenty-eight (28) consecutive three-monthly
instalments of Two million eight hundred thousand Dollars ($2,800,000) each and
a further instalment (being the Final Instalment) of Sixty one million six
hundred thousand Dollars ($61,600,000) on the same date as the twenty eighth
(28th) and final quarterly instalment.

 

(b)           If the
aggregate amount of the Loan is less than One hundred and forty million Dollars
($140,000,000) the amount of each of such twenty-eight (28) three-monthly
instalments and the Final Instalment shall be reduced pro rata.

 

(c)           The
repayment instalments made in accordance with this Clause 7.1 shall take effect
as among the Advances on a pro rata basis.

 

17

 

7.2          Repayment Dates.

 

(a)           The
first repayment instalment of the Loan shall be repaid on 30 June 2004.  End of the subsequent instalments of the
Loan shall be repaid on dates falling at consecutive three-monthly intervals
thereafter.

 

(b)           The
Borrower may elect to defer the payment of one (1) or two (2) instalments on
the condition and provided that:

 

(i)            no
Event of Default or Potential Event of Default has occurred or is continuing;

 

(ii)           at
least 14 day’s prior written notice has been given to the Lender specifying
which instalment(s) are to be deferred;

 

(iii)          the
deferred instalment(s) shall be repaid on the same date as the Final Instalment
and shall be deemed to form part of the Final Instalment for all purposes of
the Finance Documents;

 

(iv)          the
Borrower shall not be entitled to request that repayment of the first or second
repayment instalments be deferred; and

 

(v)           subject
to the foregoing, the Borrower may elect to defer two (2) instalments at the
same time or on separate occasions.

 

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 to
the Lender under any Finance Document.

 

7.4          Voluntary prepayment.  Subject to the following conditions, the
Borrower may prepay the whole or any part of the Loan on any Business Day.

 

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

 

(a)           a
partial prepayment shall be in a minimum amount of $500,000 or if larger a
whole multiple of $500,000;

 

(b)           the
Lender has received from the Borrower at least 5 days’ prior written notice
specifying the amount to be prepaid and the date on which the prepayment is to
be made;

 

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

 

(d)           the
Borrower shall fully indemnify the Lender on its demand in respect of interest
breakage costs made or incurred by the Lender, or which the Lender estimates
that it will incur as a result of a prepayment.

 

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.  If a Ship is sold or becomes a Total Loss
the Borrower shall prepay the whole of the Advance made for the purpose of
assisting the relevant New Owner to finance the acquisition of that Ship:

 

18

 

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

 

(b)           in the
case of a Total Loss, on the earlier of the date falling 90 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 23 or otherwise) in
respect of the amount prepaid and, if the prepayment is not made on the last
day of an Interest Period or other relevant period together with any sums
payable under Clause 23.1(b) but without premium or penalty.

 

7.9          Application of partial prepayment.  Each partial prepayment shall be applied against
the repayment instalments of the Loan (including the Final Instalment) on a pro
rata basis.

 

7.10        No reborrowing.  No amount repaid or prepaid may be
reborrowed.

 

8              MISMATCH BETWEEN LOAN AND TRANSACTIONS

 

8.1          Full amount of Commitment not borrowed.  If for any reason less than the Commitment
as at the date of this Agreement is advanced under this Agreement but
nonetheless a Transaction in respect of the Commitment as at the date of this
Agreement has been entered into under the Master Agreement then, subject to
Clause 8.3, the Lender shall be entitled but not obliged:

 

(a)           to
amend, supplement, cancel, net out, terminate, liquidate, transfer or assign
all or any part of the rights, benefits and obligations created by the Master
Agreement; and/or

 

(b)           to
obtain or re-establish any hedge or related trading position in any manner and
with any person the Lender in its absolute discretion decides,

 

and,
if the Lender exercises any part of that entitlement, the Borrower’s continuing
obligations under the Master Agreement shall, unless agreed otherwise by the
Lender, be calculated so far as the Lender considers practicable by reference
to the repayment schedule for the Loan taking into account the fact that less
than the full amount of the Commitment as at the date of this Agreement has
been drawndown under this Agreement.

 

8.2          Hedging position following prepayment.  In the case of a prepayment of all or part
of the Loan under this Agreement then, subject to Clause 8.3, the Lender shall
be entitled but not obliged:

 

(a)           to
amend, supplement, cancel, net out, terminate, liquidate, transfer or assign
all or such part of the rights, benefits and obligations created by the Master
Agreement which equate or relate to the part of the Loan so prepaid; and/or

 

(b)           to obtain
or re-establish any hedge or related trading position in any manner and with
any person the Lender in its absolute discretion decides,

 

and,
in the case of a partial prepayment of the Loan and the Lender exercising any
part of that entitlement, the Borrower’s continuing obligations under the
Master Agreement shall, unless agreed otherwise by the Lender, be calculated so
far as the Lender considers practicable by reference to the amended repayment
schedule for the Loan taking account of the fact that the Loan then constitutes
less than the amount drawndown under this Agreement, after taking into
consideration any repayment instalment previously made under Clauses 7.1 and
7.2.

 

19

 

8.3          Obligation to provide additional security.  If:

 

(a)

(i)            other
than as a result of any repayment instalment previously made under Clause 7.1,
the Loan constitutes less than the amount drawndown under this Agreement; or

 

(ii)           less
than the full amount of the Commitment as at the date of this Agreement is
drawndown under this Agreement; and

 

(b)           in
either case following a written request from the Borrower, the Lender in its
absolute discretion agrees that the Borrower may be permitted to maintain all
or part of a Transaction in an amount not wholly matched with, or linked to,
all or part of the Loan,

 

the
Borrower shall, within five (5) Business Days of being notified by the Lender
of such requirement, provide the Lender with, or procure the provision to the
Lender of, such additional security as shall, in the opinion of the Lender, be
adequate to secure the performance of any relevant Transaction.

 

8.4          Form of additional security.  The additional security referred to in
Clause 8.3  shall take such form, be
constituted by such documentation and be entered into by such parties, as the
Lender may, in its absolute discretion, approve or require, and each document
comprising such additional security shall constitute a Credit Support Document.

 

8.5          Indemnity.  The Borrower shall, on the first written demand of the Lender,
indemnify the Lender in respect of all expenses (including the fees of legal
advisers) incurred or sustained by the Lender as a consequence of, or in
relation to, the effecting of any matters or transactions referred to in
Clauses 8.1, 8.2, 8.3 and 8.4.

 

8.6          Consequences of Transactions being terminated.  Without prejudice to or
limitation of the obligations of the Borrower under Clause 8.5, if the Lender
exercises any of its rights under Clauses 8.1 or 8.2 and such exercise results
in all or part of a Transaction being terminated, such termination shall be
treated under the Master Agreement in the same manner as if it were a
Terminated Transaction (as defined in section 14 of the Master Agreement)
effected by the Lender after an Event of Default by the Borrower, and,
accordingly, the Lender shall be permitted to recover from the Borrower a
payment for early termination calculated in accordance with the provisions of
section 6(e)(i) of the Master Agreement.

 

9              CONDITIONS PRECEDENT

 

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

 

(a)           that,
on or before the date on which the first Drawdown Notice is served, the Lender
receives the documents described in Part A of Schedule 2 in form and substance
satisfactory to it and its lawyers;

 

(b)           that,
on or before the Drawdown Date in relation to each Advance, the Lender receives
the documents described in Part B of Schedule 2 in form and substance satisfactory
to it and its lawyers;

 

(c)           that,
on or before the first Drawdown Date, the Lender receives the arrangement fee
referred to in Clause 22.1; and

 

(d)           in
relation to each Advance, that both on the date of the Drawdown Notice and on
the 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 Loan;

 

20

 

(ii)           the
representations and warranties set out in Clauses 11.1 to 11.21 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 4.5 has occurred and is continuing;

 

(e)           that
on the Drawdown Date in relation to any Advance the representations and
warranties set out in Clauses 11.22 to 11.26 would be true and not misleading;

 

(f)            that,
if the ratio set out in Clause 16.2 were applied immediately following the
making of the Loan, the Borrower would not be obliged to provide additional
security or prepay part of the Loan under Clause 16; and

 

(g)           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 request by notice to the Borrower before the
Drawdown Date in relation to any Advance.

 

9.2          Waivers of conditions precedent.  If the Lender, at its discretion, permits
the Loan to be borrowed before certain of the conditions referred to in Clause
9.1 are satisfied, the Borrower shall ensure that those conditions are
satisfied within 14 days after the Drawdown Date (or such longer period as the Lender
may in its sole and absolute discretion, specify).

 

10           GUARANTEE

 

10.1        Guarantee and indemnity.  Each New Owner unconditionally and
irrevocably:

 

(a)           guarantees
the due payment of all amounts payable by the Borrower and each other New Owner
under or in connection with this Agreement, every other Finance Document and
the Master Agreement;

 

(b)           undertakes
to pay to the Lender, on the Lender’s demand, any such amount which is not paid
by the Borrower or any other New Owner when payable; and

 

(c)           fully
indemnifies the Lender on its demand in respect of all claims, expenses,
liabilities and losses which are made or brought against or incurred by the
Lender as a result of or in connection with any obligation or liability
guaranteed by that New Owner being or becoming unenforceable, invalid, void or
illegal; and the amount recoverable under this indemnity shall be equal to the
amount which the Lender would otherwise have been entitled to recover;

 

(all such
amount being collectively called “Guaranteed
Obligations”.)

 

10.2        No limit on number of demands.  The Lender may serve more than one demand
under Clause 10.1.

 

10.3        Principal and independent debtor.  Each New Owner shall be liable under this
Clause 10 as a principal and independent debtor and accordingly it shall not
have, as regards this Clause 10, any of the rights or defences of a surety.

 

10.4        Waiver of rights and defences.  Without limiting the generality of Clause
10.3, each New Owner shall neither be discharged by, nor have any claim against
the Lender in respect of, nor shall the security constituted by the Finance
Documents to which that New Owner is a party be released or impaired by reason
of:

 

21

 

(a)           any
amendment or supplement being made to the Finance Documents or the Master
Agreement;

 

(b)           any
arrangement or concession (including a rescheduling or acceptance of partial
payments) relating to, or affecting, the Finance Documents or the Master
Agreement;

 

(c)           any
release or loss (even though negligent) of any right or Security Interest
created by the Finance Documents or the Master Agreement;

 

(d)           any
failure (even though negligent) promptly or properly to exercise or enforce any
such right or Security Interest, including a failure to realise for its full
market value an asset covered by such a Security Interest; or

 

(e)           any
other Finance Document, the Master Agreement or any Security Interest now being
or later becoming void, unenforceable, illegal or invalid or otherwise
defective for any reason, including a neglect to register it.

 

10.5        Immediate recourse.  Each New Owner waives any right it may have
of first requiring the Lender (or any trustee or agent on its behalf) to
proceed against or enforce any other rights or security or claim payment from
any person before claiming from that New Owner under this Clause 10.

 

10.6        Method of payments.  Any amount due under this Clause 10 shall be
paid:

 

(a)           in
immediately available funds;

 

(b)           to
such account as the Lender may from time to time notify to the relevant New
Owner;

 

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

 

(d)           free
and clear of any tax deduction except a tax deduction which that New Owner is
required by law to make.

 

10.7        Grossing-up for taxes.  If a New Owner is required by law to make a
tax deduction, the amount due to the Lender shall be increased by the amount
necessary to ensure that the Lender receives and retains a net amount which,
after the tax deduction, is equal to the full amount that it would otherwise
have received.

 

10.8        Accrual of interest.  Any amount due under this Clause 10 shall
carry interest after the date on which the Lender demands payment of it until
it is actually paid, unless interest on that same amount also accrues due from
the Borrower or the applicable other New Owner under this Agreement or the
relevant other Finance Document.

 

10.9        Calculation of interest.  Interest under this Clause 10 shall be
calculated and accrue in the same way as interest under Clause 6.

 

10.10      Guarantee extends to interest payable under Agreement.  For the avoidance of doubt,
it is confirmed that this Clause 10 covers all interest payable under this
Agreement, including that payable under Clause 6.

 

10.11      Subordination of rights of New Owner.  All rights which a New Owner at any time has
(whether in respect of this Clause 10 or any other transaction) against the
Borrower or any other New Owner, any other Security Party or their respective
assets shall be fully subordinated to the rights of the Lender under the
Finance Documents and the Master Agreement; 
and in particular, a New Owner shall not:

 

22

 

(a)           claim,
or in a bankruptcy of the Borrower or any other Security Party prove for, any
amount payable to that New Owner by the Borrower or any other Security Party,
whether in respect of this Clause 10 or any other transaction;

 

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

 

(c)           claim
to set-off any such amount against any amount payable by that New Owner to the
Borrower or any other Security Party; or

 

(d)           claim
any subrogation or other right in respect of any Finance Document or the Master
Agreement or any sum received or recovered by the Lender under a Finance
Document or the Master Agreement.

 

10.12      No requirement to commence proceedings.  The Lender will not need to commence any
proceedings under, or enforce any Security Interest created by, Agreement, any
other Finance Document or the Master Agreement before claiming or commencing
proceedings under this Clause 10.

 

10.13      Conclusive evidence of certain matters.  However, as against a New Owner:

 

(a)           any
judgment or order of a court in England or Bermuda in connection with this
Agreement; and

 

(b)           any
statement or admission of the Borrower in connection with this Agreement,

 

shall be binding and
conclusive as to all matters of fact and law to which it relates.

 

10.14      Suspense account.  The Lender may, for the purpose of claiming
or proving in a bankruptcy of the Borrower or any other Security Party, place
any sum received or recovered under or by virtue of this Clause 10 or any
Security Interest connected with it on a separate suspense or other nominal
account without applying it in satisfaction of the Borrower’s obligations under
this Agreement.

 

10.15      Joint and several liability. 
All liabilities and obligations of the New
Owners under this Agreement shall, whether expressed to be so or not, be joint
and several (but so that the liability in respect of the guarantee of each
other New Owner shall be joint and several with the New Owners other than the
New Owner whose liabilities are guaranteed). 
The liabilities and obligations of a New Owner shall not be impaired by:

 

(a)           this
Agreement being or later becoming void, unenforceable or illegal as regards any
other New Owner;

 

(b)           the
Lender entering into any rescheduling, refinancing or other arrangement of any
kind with any other New Owner;

 

(c)           the
Lender releasing any other New Owner or any Security Interest created by a
Finance Document or the Master Agreement; or

 

(d)           any
combination of the foregoing.

 

10.16      New Owner’s Right of Contribution. 
At any time a payment in respect of the
Guaranteed Obligations is made under this Clause 10, the right of contribution
of each New Owner against each other New Owner shall be determined as provided
in the immediately following sentence, with the right of contribution of each
New Owner to be revised and restated as of each date on which a payment (a “Relevant Payment”) is made on the
Guaranteed Obligations under this Clause 10. 
At any time that a Relevant Payment is made by a New Owner that results
in the aggregate payments made by such

 

23

 

New
Owner in respect of the Guaranteed Obligations to and including the date of the
Relevant Payment exceeding such New Owner’s Contribution Percentage (as defined
below) of the aggregate payments made by all New Owners in respect of the
Guaranteed Obligations to and including the date of the Relevant Payment (such
excess, the “Aggregate Excess Amount”),
each such New Owner shall have a right of contribution against each other New
Owner who has made no payment or has made payments in respect of the Guaranteed
Obligations to and including the date of the Relevant Payment in an aggregate
amount less than such other New Owner’s Contribution Percentage of the
aggregate payments made to and including the date of the Relevant Payment by
all New Owners in respect of the Guaranteed Obligations (the aggregate amount
of such deficit, the “Aggregate Deficit Amount”)
in an amount equal to (x) a fraction the numerator of which is the Aggregate
Excess Amount of such New Owner and the denominator of which is the Aggregate
Excess Amount of all New Owners multiplied by (y) the Aggregate Deficit Amount
of such other New Owner.  A New Owner’s
right of contribution pursuant to the preceding sentences shall arise at the
time of each computation, subject to adjustment to the time of each
computation.  As used in this Clause
10:  (i) each New Owner’s “Contribution Percentage” shall mean the
percentage obtained by dividing (x) the Adjusted Net Worth (as defined below)
of such New Owner by (y) the aggregate Adjusted Net Worth of all New Owners;
(ii) the “Adjusted Net Worth” of
each New Owner shall mean the greater of (x) the Net Worth (as defined below)
of such New Owner and (y) zero; and (iii) the “Net Worth” of each New Owner shall mean the amount by which
the fair saleable value of such New Owner’s assets on the date of any Relevant
Payment exceeds its existing debts and other liabilities (including contingent
liabilities, but without giving effect to any Guaranteed Obligations arising
under this Clause 10) on such date. 
Each of the New Owners recognizes and acknowledges that the rights to
contribution arising hereunder shall constitute an asset in favor of the party
entitled to such contribution.  In this
connection, each New Owner has the right to waive its contribution right
against any New Owner to the extent that after giving effect to such waiver
such New Owner would remain solvent, in the determination of the Lender.

 

10.17      No Fraudulent Conveyance.  Each New Owner and the Lender (by its acceptance of the benefits of
the provisions of this Clause 10) hereby confirms that it is its intention that
the provisions of this Clause 10 not constitute a fraudulent transfer or
conveyance for purposes of the Bankruptcy Code, the Uniform Fraudulent
Conveyance Act, the Uniform Fraudulent Transfer Act or any similar law of the
United States of America or any state thereof, or of the Republic of
Liberia.  To effectuate the foregoing
intention, each New Owner and the Lender (by its acceptance of the benefits of
the provisions of this Clause 10) hereby irrevocably agrees that the Guaranteed
Obligations guaranteed by such New Owner shall be limited to such amount as
will, after giving effect to such maximum amount and all other (contingent or
otherwise) liabilities of such New Owner that are relevant under such laws and
after giving effect to any rights to contribution of such New Owner from the
other New Owners pursuant to Clause 10.16 (calculated as if such maximum amount
had been discharged in full by such New Owner) result in the Guaranteed
Obligations of such New Owner in respect of such maximum amount not
constituting a fraudulent transfer or conveyance.

 

11           REPRESENTATIONS AND WARRANTIES

 

11.1        General.  The Borrower and each New Owner represents and warrants to the
Lender as set out in this Clause 11.

 

11.2        Status

 

(a)           The
Borrower and each New Owner is duly incorporated and validly existing and in
good standing under the laws of the jurisdiction of its organisation;

 

(b)           The
Borrower is listed on the NASDAQ stock exchange.

 

24

 

11.3        Share capital and ownership.  Each New Owner has an authorised share
capital of $500 registered shares without par value, all of which shares have
been fully paid, and the legal title and beneficial ownership of all of these
shares is held (free of any Security Interest or other claim) by the Borrower.  The Borrower has no subsidiaries other than
the Existing Owners and the New Owners.

 

11.4        Corporate power and action.  The Borrower and each New Owner has the
corporate capacity, and has taken all corporate or shareholder action and
obtained all consents, licences, approvals and authorisations necessary for it:

 

(a)           in the
case of each New Owner, to execute the relevant Conditional Sale Agreement
Transfer, to purchase and pay for the Ship under the relevant Conditional Sale
Agreement Transfer and to register the relevant Ship in its name under the
Designated flag;

 

(b)           to
execute the Master Agreement and the Finance Documents to which the Borrower or
each New Owner is a party; and

 

(c)           in the
case of the Borrower, to borrow under this Agreement and to make all the
payments contemplated by, and otherwise to comply with, the Master Agreement
and those Finance Documents.

 

11.5        Consents in force.  All the consents referred to in Clause 11.4
remain in force and nothing has occurred which makes any of them liable to revocation.

 

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

 

(a)           constitute
the Borrower’s and each New Owner’s legal, valid and binding obligations
enforceable against the Borrower and each New Owner 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.

 

11.7        No third party Security Interests.  Without limiting the generality of Clause
11.6, at the time of the execution and delivery of each Finance Document to
which it is a party;

 

(a)           the
Borrower and each New Owner 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 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.

 

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

 

(a)           any
law or regulation; or

 

(b)           the
constitutional documents of the Borrower or any New Owner; or

 

(c)           any
contractual or other obligation or restriction which is binding on the Borrower
or any New Owner or any of their respective assets.

 

25

 

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

 

11.10      No default.  No Event of Default or Potential Event of Default has occurred
and is continuing or will result from the purchase of a Ship by the relevant
New Owner, the entry by the Borrower and each New Owner into this Agreement,
the Master Agreement and the other Finance Documents to which it is a party,
the making of the Loan to the Borrower or the performance by the Borrower and
any New Owner of any of their obligations under this Agreement, the Master
Agreement and the other Finance Documents to which they are a party.

 

11.11      Information.  All financial and other information furnished by or on behalf of
the Borrower and any New Owner in connection with the negotiation of this
Agreement and the other Finance Documents or delivered to the Lender pursuant
to this Agreement or any of the other Finance Documents satisfied the
requirements of Clause 12.7.

 

11.12      Audited accounts.  The audited and unaudited accounts which
have been provided in connection with any Finance Document satisfied the
requirements of Clause 12.9 and there has been no material adverse change in
the financial position or state of affairs of the Borrower or any New Owner
from that disclosed in the latest of those accounts.

 

11.13      No litigation.  No legal or administrative action involving the Borrower and any
New Owner (including action relating to any alleged or actual breach of the ISM
Code) has been commenced or taken or, to the knowledge of the Borrower or any
New Owner, is likely to be commenced or taken and neither is there subsisting
any judgment or award given against the Borrower or any New Owner before any
court, board of arbitration or other body which would be likely to have a
material adverse effect on the business or financial position or profitability
of the Borrower or any New Owner.

 

11.14      Registration.  Save for such registrations and filings as are referred to in
this Agreement and the other Finance Documents, it is not necessary for the
legality, validity, enforceability or admissibility in evidence of this
Agreement, the Master Agreement and the other Finance Documents that any of
them or any document relating thereto be registered, filed, recorded or
enrolled with any court or authority in any relevant jurisdiction or that any
stamp, registration or similar Taxes be paid on or in relation to this
Agreement, the Master Agreement or any of the other Finance Documents.

 

11.15      Validity and completeness of certain documents. Each Conditional Sale Agreement Transfer and the corresponding
Title Transfer Documents constitute, or upon execution by the parties thereto,
will constitute valid, binding and enforceable obligations of the parties
thereto in accordance with their respective terms and:

 

(a)           the
copy of each Conditional Sale Agreement Transfer and the corresponding Title
Transfer Documents delivered or to be delivered to the Lender is, or will be, a
true and complete copy;

 

(b)           if the
Conditional Sale Agreement Transfers have been executed on or prior to the date
of this Agreement, no amendments or additions to any Conditional Sale Agreement
Transfer have been agreed;

 

(c)           if the
Conditional Sale Agreement Transfers have been executed on or prior to the date
of this Agreement, none of the Existing Owners, the Lessor or the New Owners
have waived any of their respective rights under the Conditional Sale Agreement
Transfers; and

 

26

 

(d)           each
Conditional Sale Agreement Transfer and the corresponding Title Transfer Documents
have been, or will be, validly entered into pursuant to the agency powers
conferred by the Lessor on each Existing Owner.

 

11.16      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 Existing Owners, the New Owners, the
Lessor, or any other third party in connection with any Conditional Sale
Agreement Transfer or the purchase by a New Owner of a Ship, other than as
disclosed to the Lender in writing on or before the date of this Agreement.

 

11.17      Compliance with certain undertakings.  The Borrower is in compliance with Clauses
12.2, 12.12, 12.17 and 13.8.

 

11.18      Taxes paid.  The Borrower and each New Owner has paid all taxes applicable to,
or imposed on, or in relation to, the Borrower and each New Owner, their
business or the Ships.

 

11.19      ISM Code compliance.  All requirements of the ISM Code as they
relate to the New Owners, the Approved Managers and the Ships have been
complied with and, without limiting the foregoing, the New Owners have complied
with the ISM Code and all other statutory and other requirements relative to
their businesses and in particular have obtained and maintain a valid SMC and
DOC and does not have an established place of business in any part of the
United Kingdom or the United States of America.

 

11.20      No other Financial Indebtedness.  The Borrower and the New Owners are not
liable under or in respect of any Financial Indebtedness other than (i) under
the Conditional Sale Agreement Transfers, this Agreement, the Master Agreement
and the other Finance Documents to which they are a party, (ii) in the case of
each New Owner, Financial Indebtedness owing to the Borrower in respect of the
funding by the Borrower of each New Owner with the proceeds of the relevant
Advance, such further amounts as are necessary to enable each New Owner to
purchase a Ship and such further amounts as the Borrower may advance to a New
Owner from time to time for the purpose of providing working capital, (iii) in
the case of the Borrower, under the Existing Loan Agreement and (iv) such
Financial Indebtedness as shall have been notified to, and approved by, the
Lender on or before the date of this Agreement.  In particular, and without prejudice to the generality of the
foregoing the Borrower and the Existing Owners are not liable in respect of any
Financial Indebtedness (whether actual or contingent) related to or arising out
of the Lease Transactions except for the Lease Limited Recourse Provisions.

 

11.21      No money laundering.  The Borrower and each New Owner is acting
for its own account and the borrowing of the Loan and the performance and
discharge of its obligations and liabilities under this Agreement, the Master
Agreement and the other Finance Documents to which it is a party and other
arrangements effected or contemplated by this Agreement will not involve or
lead to contravention of any law, official, requirement or other regulatory
measure or procedure implemented to combat “money laundering” (as defined in
Article 1 of the Directive (91/308/EEC) of the Council of the European
Community).

 

11.22      Delivery of the Ships.  Each Ship will have been re-delivered by Shell to the relevant
Existing Owner pursuant to the relevant Shell Sub-charter and unconditionally
delivered by the relevant Existing Owner to, and accepted by, the relevant New
Owner pursuant to the relevant Conditional Sale Agreement Transfer and the
corresponding Title Transfer Documents and the full purchase price payable under
the Conditional Sale Agreement Transfer (including an amount in addition to the
part thereof to be financed by way of the relevant Advance) will have been duly
paid to the Lessor.

 

11.23      Registered name and ownership. 
Each Ship is registered in the name of the
relevant New Owner under the Designated Flag and each Ship is in the absolute
and

 

27

 

unencumbered
ownership of the relevant New Owner save as contemplated by this Agreement and
the other Finance Documents.

 

11.24      Class and seaworthiness.  Each Ship is classed specified below the name of such Ship in
Schedule 3, free of all recommendations and qualifications of such
Classification Society (save those notified to, and approved in writing by, the
Lender) and the Ship is operationally seaworthy.

 

11.25      Compliance with law.  Each Ship complies with all relevant laws, regulations and
requirements (statutory or otherwise) as are applicable to:

 

(a)           ships
registered under the Designated Flag; and

 

(b)           a ship
engaged in the same or a similar service as Ships are or are to be engaged.

 

11.26      Mortgage.  The relevant Mortgage is or will be duly registered against the
relevant Ship as a valid first preferred ship mortgage in accordance with the
laws of the Marshall Islands.

 

11.27      Time when representations made.  The representations and warranties in this
Clause are, subject to the final sentence of this Clause 11.27, made on the
date of this Agreement and shall survive the execution of this Agreement and
the making of each Advance.  The
representations and warranties set out in Clauses 11.1 to 11.21 shall, in
addition, be deemed to be repeated on the date on which the Drawdown Notice is
given and at the commencement of each Interest Period, with respect to the
facts and circumstances existing at each such time, as if made at each such
time.  The representation and warranties
set out in Clauses 11.22 to 11.26 shall be made only on the Drawdown Date in
respect of the Advance relative to the relevant Ship.

 

12           GENERAL UNDERTAKINGS

 

12.1        Duration.  The Borrower and each New Owner shall comply with this Clause 12
at all times during the Security Period except as the Lender may otherwise
permit (and the Borrower will procure compliance by each New Owner with each of
the undertakings in this Clause 12 which relate to a New Owner).

 

12.2        Negative pledge.  The Borrower and the New Owners shall not
create, assume or permit to exist any Security Interest upon the Ships, the
Insurances or the Earnings or any of their respective other present or future
assets (including, but not limited to, the Borrower’s rights against the Lender
under the Master Agreement, all or any part of the Borrower’s interest in any
amount payable to the Borrower by the Lender under the Master Agreement or any
of the shares in each New Owner and each Existing Owner) except (i) in the case
of each New Owner, Permitted Security Interests, (ii) in the case of the
Borrower, cash security in favour of the Existing Swap Counterparty in an
amount not exceeding one fifth of the mark-to-market exposure of the Existing
Swap Counterparty on each Drawdown Date and not exceeding $4,500,000 in
aggregate for a period expiring not later than 31 August 2004 or (iii) as
contemplated by the Finance Documents (including, for the avoidance of doubt,
Security Interests securing obligations under the Existing Loan Agreement and
the Existing Swap pending the satisfaction of those obligations as contemplated
by this Agreement).

 

12.3        No disposal of assets.  The Borrower and the New Owners shall not
(voluntarily or involuntarily) sell, convey, transfer, lease, or otherwise
dispose of all or a substantial part of its assets (whether by one transaction
or a series of transactions and whether related or not) and, in particular but
without prejudice to be the generality of the foregoing, the Borrower will not
do any of the foregoing in relation to the shares in each New Owner and each
Existing Owner.

 

28

 

12.4        Books debts.  The Borrower and the New Owners shall not assign or otherwise
dispose of any of their respective book debts.

 

12.5        Compliance with ISM Code.  The Borrower and the New Owners shall comply
with the ISM Code and notify the Lender in writing in the event that either the
DOC or SMC is withdrawn, cancelled or suspended.

 

12.6        Information relating to customers of the Borrower.  The Borrower and the New
Owners shall produce such documents and evidence as the Lender shall from time
to time require, based on applicable law and regulations from time to time and
the Lender’s own internal guidelines from time to time relating to the Lender’s
knowledge of its customers.

 

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

 

12.8        Provision of financial statements.  The Borrower shall send (or procure that there
be sent) to the Lender:

 

(a)           as
soon as possible, but in no event later than 180 days after the end of each
financial year of the Borrower, the audited accounts and financial statements
of the Borrower and the audited, consolidated accounts and financial statements
of the Group for such financial year, such accounts and financial statements to
be prepared in accordance with generally accepted accounting principles in the
United States of America consistently applied, certified as to their correctness
by Deloitte & Touche (or other certified or chartered accountants
acceptable to the Lender); and

 

(b)           as
soon as possible, but in no event later than 60 days after the end of each of
the first three financial quarters of each financial year of the Borrower, the
unaudited accounts and financial statements of the Borrower and the unaudited,
consolidated accounts and financial statements of the Group for such financial
quarter, such accounts and financial statements to be prepared in accordance
with generally accepted accounting principles in the United States of America
consistently applied, certified as to their correctness by the Chief Financial
Officer of the Borrower.

 

12.9        Form of financial statements.  All accounts and financial statements
(audited and unaudited) delivered under Clause 12.8 (a) and (b) will:

 

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

 

(b)           fully
disclose or provide for all significant liabilities of the Borrower and the
Group, respectively.

 

12.10      Provision of other information.  The Borrower and the New Owners shall send
(or procure that there be sent) to the Lender:

 

(a)           promptly
upon the same being entered into (and without the need for any request from the
Lender), a copy of any charterparty for the Ships and any addenda thereto;

 

(b)           as
soon as the same are instituted (or, to the knowledge of the Borrower or a New
Owner, threatened), details of any litigation, arbitration or administrative
proceedings against or involving the Borrower, a New Owner, the Approved
Managers or a Ship (including any actual breach of the ISM Code) which is
likely to have a material adverse effect on the Borrower or a New Owner or the
operation of a Ship;

 

29

 

(c)           promptly
upon being sent, copies of all communications to its shareholders (or any class
of them) and/or creditors generally (or any class of them);

 

(d)           from
time to time, and on demand, such additional financial or other information
(including but not limited to the ISM Code Documentation) relating to the
Borrower or a New Owner and/or a Ship as may be requested by the Lender;

 

(e)           promptly,
upon request by the Lender, evidence satisfactory to the Lender that all Taxes
payable by the Borrower or any New Owner have been paid and discharged in full
when due; and

 

(f)            any
documents filed with the United States Securities and Exchange Commission.

 

12.11      Consents.  The Borrower and each New Owner shall obtain and promptly renew
from time to time, and will promptly furnish certified copies to the Lender of,
all such authorisations, approvals, consents and licences as may be required
under any applicable law or regulation to enable the Borrower and the New
Owners to perform its obligations under this Agreement, the Master Agreement
and the other Finance Documents to which they are a party or required for the
validity or enforceability of this Agreement, the Master Agreement and the
other Finance Documents to which they are a party or required to enable the New
Owners to continue to own and operate the Ships, and the New Owners shall
comply with their terms.

 

12.12      Business. Each New Owner shall not
conduct any business or activity other than the ownership, chartering and
operation of its Ship.

 

12.13      Conditional Sale Agreement Transfer.  The Borrower and the New Owners shall not
agree to any amendment to, or waive or fail to enforce any provisions of, a
Conditional Sale Agreement Transfer. 
The Borrower further undertakes:

 

(a)           whether
or not all or any of the Conditional Sale Agreement Transfers have been
executed at the date of this Agreement, to procure that each Existing Owner
sells and transfers its Ship to the relevant New Owner promptly upon that Ship
being re-delivered pursuant to the Shell Sub-charter, and each New Owner
undertakes so to acquire the relevant Ship; and

 

(b)           to
procure that each Existing Owner enforces its rights against SIPC in respect of
the re-delivery of each Ship pursuant to the Shell sub-charter.

 

12.14      Approved Managers.  Each Ship shall be managed by the Approved
Managers and the New Owners shall not employ a manager of the Ships other than
the Approved Managers, nor change the terms and conditions of the management of
the Ships other than upon such terms and conditions as the Lender shall
approve.  If for any reason ICB Shipping
(Bermuda) Ltd. ceases to be retained as general financial manager of the
Borrower, the Borrower shall appoint a new general financial manager approved
by the Lender, such approval not to be unreasonably withheld.

 

12.15      Confirmation of no default.  The Borrower shall, within 2 Business Days
after service by the Lender of a written request, provide the Lender with a
notice which is signed by 2 directors of the Borrower and which:

 

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

 

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

 

12.16      Notification of default.  The Borrower shall notify the Lender as soon
as the Borrower becomes aware of:

 

30

 

(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 shall keep the Lender fully up-to-date
with all developments.

 

12.17      Principal place of business.  The Borrower and each New Owner shall
maintain its place of business, and keep its corporate documents and records,
at Hamilton, Bermuda; and the Borrower and each New Owner will not establish,
or do anything as a result of which it would be deemed to have, a place of
business in any country other than Bermuda.

 

12.18      Undertaking in favour of agent. 
The Borrower and the New Owners hereby
confirm that the undertaking contained in Clause 12.13 is also given to, and
may be independently relied upon by, The Royal Bank of Scotland plc in its
capacity as agent under the Existing Loan Agreement.

 

13           CORPORATE AND FINANCIAL UNDERTAKINGS

 

13.1        Duration.  The Borrower and each New Owner shall comply with this Clause 13
at all times during the Security Period except as the Lender may otherwise
permit (and the Borrower will procure compliance by each New Owner with each of
the undertakings in this Clause 13 which relate to a New Owner).

 

13.2        Maintenance of corporate status.

 

(a)           The
Borrower and each New Owner shall maintain its corporate status as a body
corporate, duly organised and validly existing and in good standing under the
laws of Bermuda (in the case of the Borrower) and Liberia (in the case of each
New Owner) and neither the Borrower nor any New Owner shall amend, or permit to
be amended, its constitutional documents;

 

(b)           The
Borrower shall remain a listed company on the NASDAQ stock exchange unless the
prior written consent is obtained from the Lender to the contrary.

 

13.3        Share capital.  The Borrower shall not reduce its issued share capital.

 

13.4        No distributions.  The Borrower shall not declare or pay any
dividend or make any other distribution of its assets or profits to any
stockholder unless:

 

(a)           Clause
13.6 will be complied with after the payment of any such dividend or other
distribution;

 

(b)           cashflow
forecasts for the 12 months following the proposed payment (based on
assumptions acceptable to and approved by the Lender) have been delivered to
and approved by the Lender confirming that all operational costs, repayment
instalments under Clause 7 and interest payments under Clause 4 can be met from
the projected income of the Ships;

 

(c)           there
is no deferral in repayment pursuant to Clause 7.2 (b) for the period to which
the dividend or other distribution relates; and

 

(d)           no
Event of Default of Potential Event of Default has occurred and is continuing.

 

13.5        Subsidiaries etc.  The Borrower shall not consolidate or
amalgamate with, or merge into, any other entity and shall not form or acquire
any further subsidiaries (other than the Existing Owners and the New Owners).

 

31

 

13.6        Minimum Liquid Assets.  The Borrower shall at all times throughout
the Security Period ensure that there are Liquid Assets of not less than Ten
million Dollars ($10,000,000).

 

13.7        Prohibition against Borrower granting Financial Indebtedness.  The Borrower
shall not make available to any person any Financial Indebtedness other than
Financial Indebtedness made available by the Borrower to each New Owner by way
of the funding by the Borrower of each New Owner with the proceeds of the
relevant Advance, such further amounts as are necessary to enable each New
Owner to purchase a Ship and such further amounts as the Borrower may advance
to a New Owner from time to time for the purpose of providing working capital.

 

13.8        Prohibition against New Owners granting Financial Indebtedness.  Each New Owner shall not
make available to any person any Financial Indebtedness.

 

13.9        Prohibition against incurring Financial Indebtedness.  The Borrower and each New
Owner shall not incur any Financial Indebtedness nor make any commitment to
incur Financial Indebtedness except:

 

(a)           Under
this Agreement, the Master Agreement and the other Finance Documents;

 

(b)           In the
case of the Borrower, under the Existing Loan Agreement and the Existing Swap
(such Financial Indebtedness to be reduced and ultimately satisfied with the
proceeds of sale of each Ship to a New Owner); or

 

(c)           In the
case of each New Owner, as referred to in (ii) of Clause 11.20; or

 

(d)           In the
ordinary course of business and in an amount not exceeding in aggregate One
million Dollars ($1,000,000) per Ship outstanding at any one time.

 

13.10      Prohibition on requiring further tonnage.  The Borrower and each New
Owner will not acquire, or commit to acquire any ships other than the Ships.

 

13.11      Restrictions on payments.  The Borrower and each New Owner shall not
make any payment to any person except in connection with the administration of the
Borrower and the New Owners or the operation and/or repair of the Ships, the
servicing and repayment of the Loan or as otherwise permitted by, or pursuant
to, this Agreement, the other Finance Documents and the Master Agreement.

 

13.12      Lease Limited Recourse Provisions. 
The Borrower will not, and will procure that
each Existing Owner will not, vary, amend, release or fail to enforce any of
the provisions of the Lease Limited Recourse Provisions.  The Borrower will further procure that each
Existing Owner:

 

(a)           complies
with its obligations under the Lease Limited Recourse Provisions;

 

(b)           maintains
its status as a body corporate, duly organised and validly existing and in good
standing under the laws of the Cayman Islands;

 

(c)           shall
not incur any Financial Indebtedness (other than the Lease Limited Recourse
Provisions); and

 

(d)           will
not grant any Security Interest to any person.

 

13.13      Subordination of rights of Borrower and New Owners.  All rights which
the New Owners and the Borrower at any time may have (whether in respect of
this Agreement or any other transaction) against any New Owner (in the case of
the Borrower) the Borrower (in the case of any New Owner), any Security Party
or their respective assets shall be fully subordinated to the rights of the
Lender under the Finance Documents; in particular:

 

32

 

(a)           the
Borrower shall not:

 

(i)            claim,
or in a bankruptcy of any New Owner or any Security Party or prove for, any
amount payable to the Borrower by any New Owner or any Security Party, whether
in respect of this Agreement, any Finance Document or any other transaction;

 

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

 

(iii)          claim
to set-off any such amount against any amount payable to the Borrower by any
New Owner or any Security Party; or

 

(iv)          claim
any subrogation or other right in respect of any Finance Document or any sum
received or recovered by the Lender under a Finance Document; and

 

(b)           a New
Owner shall not:

 

(i)            claim,
or in bankruptcy of the Borrower, any other New Owner or any other Security
Party or prove for, any amount payable to that New Owner by the Borrower, any
other New Owner or any other Security Party, whether in respect of this
Agreement, any Finance Document or any other transaction;

 

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

 

(iii)          claim
to set-off any such amount against any amount payable to that New Owner by the
Borrower, any other New Owner or any other Security Party; or

 

(iv)          claim
any subrogation or other right in respect of any Finance Document or any sum
received or recovered by the Lender under a Finance Document.

 

14           INSURANCE

 

14.1        General.  The Borrower shall procure that each New Owner will comply with this
Clause 14 in respect of its Ship at all times during the Security Period, and
each New Owner undertakes so to comply, except as the Lender may otherwise
permit.

 

14.2        Risks to be covered by obligatory insurances.  Each New Owner shall keep
its Ship insured at its own expense against:

 

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

 

(b)           war
risks;

 

(c)           protection
and indemnity risks (without any exclusion for any Environmental Incident); and

 

(d)           any
other risks against which the Lender considers, having regard to practices and
other circumstances prevailing at the relevant time, it would be reasonable for
that New Owner to insure and which are specified by the Lender by notice to
that New Owner.

 

14.3        Terms of obligatory insurances.  Each New Owner shall effect the insurances
referred to in Clause 14.2:

 

(a)           in
Dollars;

 

(b)           in the
case of the insurance against fire and usual marine risks and war risks, in
such amounts (but not less than the greater of):

 

33

 

(i)            the
market value of its Ship on the basis of a sale free of charter for prompt
delivery for cash on normal commercial terms and at arms’ length as between a
willing seller and a willing buyer (as conclusively certified by an independent
shipbroker appointed by the Lender); and

 

(ii)           such
amount as, when aggregated with the amount for which the other Ships are
insured, is equal to the Required Percentage of the amount of the Loan,

 

and
upon such terms as shall from time to time be approved in writing by the
Lender.

 

“Required
Percentage”  means 110% or
(i) if only two Ships remain as security for the Loan, 115% or (ii) if only one
Ship remains as security for the Loan, 120%.

 

(c)           in the
case of protection and indemnity, including oil pollution liability risks, for
an aggregate amount equal to the highest amount in respect of which cover is
ordinarily available from protection and indemnity associations that are
members of the International Group of Protection and Indemnity Associations and
in the international marine insurance market;

 

(d)           in
relation to protection and indemnity risks in respect of the Ship’s full
tonnage;

 

(e)           on
terms approved by the Lender;

 

(f)            through
such brokers (the “approved brokers”)
and with such insurance companies and/or underwriters as shall from time to
time be approved in writing by the Lender provided that the insurances in
respect of such war risks and protection and indemnity risks may be effected by
entry of the Ship, on terms approved by the Lender in writing, in war risks and
protection and indemnity risks associations as shall from time to time be
approved in writing by the Lender; and

 

(g)           if so
required by the Lender (but without, as between the relevant New Owner and the
Lender, liability on the part of the Lender for premiums or calls) with the
Lender named as co-assured.

 

14.4        Further protections for the Lender.  In addition to Clause 14.3, the
obligatory insurances shall:

 

(a)           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;

 

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

 

(c)           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;

 

(d)           provide
that such obligatory insurances shall be primary without right of contribution
from other insurances which may be carried by the Lender; and

 

(e)           provide
that the Lender may make proof of loss if the relevant New Owner fails to do
so.

 

34

 

14.5        Renewal of obligatory insurances.  Each New Owner shall:

 

(a)           at
least 21 days before the expiry of any obligatory insurance or contract for
such insurance:

 

(i)            notify
the Lender of the brokers (or other insurers) and any war risks and protection
and indemnity risks association through or with which that New Owner proposes
to renew those insurances and of the proposed terms of renewal; and

 

(ii)           obtain
the Lender’s approval to the matters referred to in paragraph (i);

 

(b)           before
the expiry of any obligatory insurance or contract for such 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.

 

14.6        Copies of policies; letters of undertaking.  Each New Owner shall ensure
that the approved brokers provide the Lender with pro forma copies of all
policies relating to the obligatory insurances which they are to effect or
renew and of a letter of undertaking in a form required by the Lender and
including undertakings by the approved brokers that:

 

(a)           they
will have endorsed on each policy, immediately upon issue, a loss payable
clause and a notice of assignment complying with the provisions of Clause 14.4;

 

(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 or on behalf of the relevant New Owner or its agents
and, in the event of their receiving instructions to renew, they will promptly
notify the Lender of the terms of the instructions;

 

(e)           they
will not set off against any sum recoverable in respect of a claim relating to
the Ship under the obligatory insurances any premiums or other amounts due to
them or any relevant other person whether in respect of the relevant Ship or
otherwise;

 

(f)            they
waive any lien on the policies or on any sums received under them which they
might have in respect of such premiums or other amounts;

 

(g)           they
will not cancel such obligatory insurances by reason of non-payment of such
premiums or other amounts; and

 

(h)           they
will arrange for a separate policy to be issued in respect of the Ship
forthwith upon being so requested by the Lender.

 

14.7        Copies of certificates of entry.  Each New Owner shall ensure that any war
risks and protection and indemnity risks association in which its Ship is
entered provides the Lender with:

 

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

 

(b)           a
letter of undertaking in such form as may be required by the Lender; and

 

35

 

(c)           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 the Ship.

 

14.8        Deposit of original policies.  Each New Owner shall ensure that all
policies relating to obligatory insurances or contracts for such insurances are
deposited with the approved brokers through which the insurances are effected
or renewed.

 

14.9        Payment of premiums.  Each New Owner shall punctually pay all
premiums, calls, contributions or other sums payable in respect of the
obligatory insurances or contracts for such insurances and produce all relevant
receipts when so required by the Lender.

 

14.10      Guarantees.  Each New Owner shall ensure that any guarantees required by a war
risks or protection and indemnity risks association are promptly issued and
remain in full force and effect.

 

14.11      Compliance with terms of insurances.  No New Owner shall do nor omit to do (nor
permit to be done or not to be done) any act or thing which would or might
render any obligatory insurance invalid, void, voidable or unenforceable or
render any sum payable under an obligatory insurance repayable in whole or in
part; and, in particular:

 

(a)           each
New 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 14.7(c)) 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)           no New
Owner shall make any changes relating to the classification or classification
society or manager or operator of its Ship approved by the underwriters of the
obligatory insurances;

 

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

 

(d)           no New
Owner shall employ its Ship, nor allow it to be employed, otherwise than in
conformity with 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.

 

14.12      Alteration to terms of insurances.  No New Owner shall either make or agree to
any alteration to any obligatory insurance nor waive any right relating to any
obligatory insurance.

 

14.13      Settlement of claims.  No New Owner shall settle, compromise or
abandon any claim under any obligatory insurance for a Total Loss or for a
Major Casualty, and shall do all things necessary and shall 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.

 

14.14      Provision of copies of communications.  Each New Owner shall provide the Lender, at
the time of each such communication, copies of all written communications
between that New Owner and:

 

(a)           the
approved brokers; and

 

36

 

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

 

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

 

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

 

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

 

14.15      Provision of information.  In addition, each New 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 14.16 or dealing with or considering any matters relating to any
such insurances,

 

and
the Borrower and the New Owners (jointly and severally) 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).

 

14.16      Mortgagee’s interest and Mortgagee’s interest additional perils
insurances. The Lender shall be entitled from time
to time to effect, maintain and renew a mortgagee’s interest insurance policy
on each Ship and an insurance policy for the benefit of the Lender against the
possible consequences of pollution involving any Ship, including without
limitation, the risk of expropriation or sequestration of any Ship or the imposition
of a lien or encumbrance of any kind having priority to the Security Interests
created by the Mortgage, in an aggregate amount for all the Ships equal to 110%
of the amount of the Loan, on such terms, through such insurers and generally
in such manner as the Lender may from time to time consider appropriate.

 

14.17      Indemnity.  The Borrower and the New Owners (jointly and severally) 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 insurance referred to in Clause 14.16 or dealing
with, or considering, any matter arising out of any such insurance.

 

14.18      Oil Pollution Act.  Each New Owner shall procure and maintain a Certificate of Financial
Responsibility as required by the United States Oil Pollution Act 1990.

 

14.19      Endorsement of mortgagee’s interest.  Without prejudice to Clauses 14.3 and
14.4, each New Owner shall procure the interest of the Lender shall be duly
endorsed upon all slips, cover notes, policies, certificates of entry or other
instruments of insurance issued or to be issued in connection with the
obligatory or other insurances by means of a loss payable and notice of
cancellation clause reflecting the terms of proviso (b) to Clause 3.1 of the
General Assignment and a notice of assignment signed by the relevant New Owner,
each in such form as shall from time to time be approved in writing by the
Lender.

 

14.20      Application of insurances proceeds. 
Each New Owner shall apply all such sums
receivable in respect of the obligatory or other insurances as are paid to the
Lender in accordance with proviso (b)(iii) to Clause 3.1 of the relevant
General Assignment for the

 

37

 

purpose
of making good the loss and fully repairing all damage in respect of which the
insurance moneys shall have been received.

 

14.21      Changing requirements.  The Lender shall be entitled to review the requirements of this
Clause 14 from time to time in order to take account of changes in
circumstances after the date of this Agreement (such changes in circumstances
to include, without limitation, changes in the Ships’ trading patterns, changes
in applicable law and changes in the price and availability of insurance
coverage).  The Lender may notify the
Borrower and the New Owners in writing from time to time of any modification to
the requirements of this Clause 14 which the Lender shall reasonably specify
and any such notification shall be binding on the Borrower and the New Owners
and shall take effect as an amendment to this Clause 14.

 

15           SHIP COVENANTS

 

15.1        General.  The Borrower shall procure that each New Owner shall comply with
this Clause 15 in respect of its Ship at all times during the Security Period,
and each New Owner undertakes so to comply, except as the Lender may otherwise
permit.

 

15.2        Ship’s name and registration.  Each New Owner shall:

 

(a)           keep
its Ship registered in its name under the Designated Flag and current port of
registry;

 

(b)           not do
or allow to be done anything as a result of which such registration might be
cancelled or imperilled; and

 

(c)           not
change the name or port of registry of its Ship.

 

15.3        Classification.  Each New Owner shall keep its Ship 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 its Ship’s present class (as specified below the name of such Ship
in Schedule 4) free of overdue recommendations and conditions affecting its
Ship’s class (other than those notified to, and approved in writing by, the
Lender); and

 

(c)           so as
to comply with all laws and regulations applicable to vessels registered on the
Designated Flag or to vessels trading to any jurisdiction to which its Ship may
trade from time to time, including but not limited to the ISM Code.

 

15.4        Repairs and replacement.  Subject to Clause 15.6, each New Owner shall procure all repairs to,
or replacement of, any damaged, worn or lost parts or equipment be effected in
such manner (both as regards workmanship and quality of materials) so as not
reduce the value of its Ship.

 

15.5        Modification.  No New Owner shall make any modification to its Ship or equipment
installed her which would or might materially alter the structure, type or
performance characteristics of its Ship or materially reduce her value.

 

15.6        Removal of parts.  No New Owner shall remove any material part
of its Ship or any item of equipment installed on its 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, does
not materially reduce the value of its Ship, is free from any Security Interest
or any right in favour of any person other than the Lender and becomes on
installation on its Ship the property of the relevant New Owner and subject to
the security constituted by the relevant Mortgage Provided that a New Owner may install equipment owned by a
third party if the equipment can be removed without any risk of damage to its
Ship.

 

38

 

15.7        Surveys.  Each New Owner shall submit its Ship regularly to all periodic 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.

 

15.8        Inspection.  Each New Owner shall permit the Lender (by surveyors or other
persons appointed by the Lender for that purpose) to board its Ship at all reasonable
times to inspect its condition or to satisfy themselves about proposed or
executed repairs and shall afford all proper facilities for such inspections.

 

15.9        Prevention of and release from arrest.  Each New Owner shall promptly discharge:

 

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

 

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

 

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

 

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

 

15.10      Compliance with laws etc.  Each New Owner shall:

 

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

 

(b)           not
employ its Ship nor allow its employment in any manner contrary to any law or
regulation in any relevant jurisdiction including but not limited to the ISM
Code or in carrying illicit or prohibited goods or in any manner whatsoever
which may render her liable to condemnation in Prize Court or to destruction,
seizure or confiscation; and

 

(c)           in the
event of hostilities in any part of the world (whether war is declared or not),
not cause or permit its Ship to enter or trade to any zone which is declared a
war zone by any government or by the Ship’s war risks insurers unless that New
Owner has (at the New Owner’s expense) effected any special, additional or
modified insurance cover as may be necessary to ensure that the Ship remains
insured in accordance with the provisions of this Agreement.

 

15.11      Provision of information.  Each New Owner shall promptly provide the
Lender with any information which it requests regarding:

 

(a)           its
Ship, its employment, position and engagements;

 

(b)           the
Earnings of its Ship;

 

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

 

(d)           any
expenses incurred, or likely to be incurred, in connection with the operation,
maintenance or repair of its Ship;

 

(e)           any
other payments made in respect of its Ship;

 

(f)            any
towages and salvages;

 

39

 

(g)           the
relevant New Owner’s, the Approved Managers’ or the relevant Ship’s compliance
with the ISM Code,

 

and,
upon the Lender’s request, the relevant New Owner shall provide copies of any
current charter relating to its Ship, of any current charter guarantee and of
its Ship’s Safety Management Certificate and the Document of Compliance.

 

15.12      Notification of certain events.  Each New Owner shall immediately notify the
Lender by fax, confirmed forthwith by letter, of:

 

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

 

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

 

(c)           any
material requirement or recommendation made by any insurer, classification
society or any competent authority in respect of its Ship which is not
immediately complied with;

 

(d)           any
arrest or detention of its Ship, any exercise or purported exercise of any lien
on its Ship or its Earnings or any requisition of its Ship for hire;

 

(e)           any
intended dry docking of its Ship;

 

(f)            any
Environmental Claim made against that New Owner or in connection with its Ship,
or any Environmental Incident;

 

(g)           any
claim for breach of the ISM Code being made against that New Owner, the
Approved Managers or otherwise in connection with its Ship; or

 

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

 

and
that New Owner shall keep the Lender advised in writing on a regular basis and
in such detail as the Lender shall require of that New Owner’s, the Approved
Managers’ or any other person’s response to any of those events or matters.

 

15.13      Restrictions on chartering, appointment of managers etc.  No New Owner shall:

 

(a)           let
its Ship on demise charter for any period (other than by the applicable Shell
Sub-charter);

 

(b)           enter
into any time or consecutive voyage charter in respect of its Ship for a term
which exceeds, or which by virtue of any optional extensions may exceed, 13
months;

 

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

 

(d)           charter
its Ship otherwise than on bona fide arm’s length terms at the time when the
Ship owned by it is fixed;

 

(e)           appoint
a manager of its Ship other than the Approved Managers or agree to any
alteration to the terms of the Approved Managers’ appointment;

 

(f)            de-activate
or lay up its Ship; or

 

(g)           put
its Ship into the possession of any person for the purpose of work being done
upon it in an amount exceeding or likely to exceed $2,000,000 (or the
equivalent in any other currency) unless that person has first given to the
Lender and in terms satisfactory to the

 

40

 

Lender
a written undertaking not to exercise any lien on the Ship or her Earnings for
the cost of such work or for any other reason;

 

(h)           the
Lender shall not unreasonably withhold its consent to the Ship being put into
the possession of any person for the purpose of work being done upon it in an
amount exceeding that set out in sub-clause (g) above and without the written
undertaking referred to therein, having regard to the such factors as the
Lender, acting reasonably, considers relevant at the applicable time.

 

15.14      Notice of Mortgage.  Each New Owner shall keep the relevant
Mortgage registered against its Ship as a valid first preferred 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 its Ship a framed printed notice stating that that Ship is mortgaged by that
New Owner to the Lender.

 

15.15      Sharing of Earnings.  No New Owner shall enter into any agreement
or arrangement for the sharing of any Earnings of its Ship.

 

15.16      Books of account.  Each New Owner shall keep proper books of account in respect of its
Ship and the Earnings of its Ship and, as and when the Lender so requires, the
Borrower shall make such books available for inspection on behalf of the
Lender.

 

15.17      Wages etc.  Each New Owner shall furnish satisfactory evidence that the wages
and allotments and the insurance and pension contributions of the master and
crew of its Ship are being regularly paid and that all deductions from their
wages in respect of tax and/or social security liability are being properly
accounted for and that that Ship’s master has no claim for disbursements other
than those incurred by him in the ordinary course of trading on the voyage then
in progress.

 

16           SECURITY COVER

 

16.1        Duration.  The Borrower shall comply with the following provisions of this
Clause 16 at all times during the Security Period except as the Lender may
otherwise permit.

 

16.2        Minimum required Security Cover.  If, and so often as, the aggregate,
charter-free market value of the Ships (as determined in accordance with
Clauses 16.5 and 16.6) plus the market value of any additional security for the
time being actually provided to the Lender pursuant to Clause 16.3 falls below
125 per cent. of the aggregate of:

 

(a)           the Loan;
and

 

(b)           such
amount (the “Termination Amount”)
as determined by the Lender in its absolute discretion as the amount due from
the Borrower on terminating any Transaction under the Master Agreement in the
same manner as if it were a Terminated Transaction (as defined in Section 14 of
the Master Agreement) effected by the Lender after an Event of Default,

 

the
Borrower shall, within 10 days of being notified by the Lender of such
requirement (which notification shall be conclusive and binding on the Borrower),
comply with Clause 16.3 or 16.4.

 

16.3        Provision of additional security.  Subject to Clause 16.4, on receipt of the
notification referred to in Clause 16.2, the Borrower shall, within 10 days of
receipt of the notification, provide the Lender with, or procure the provision
to the Lender of, such additional security as shall, in the opinion of the
Lender, be adequate to make up such deficiency, which additional security shall
take such form, be constituted by such documentation and be entered into by
such parties as the Lender in its absolute discretion may approve or require.

 

41

 

16.4        Prepayment of Loan.  If the Borrower does not make proposals
satisfactory to the Lender in relation to the additional security referred to
in Clause 16.3 within 5 days of the date of the receipt by the Borrower of the
Lender’s notification referred to in Clause 16.2, the Borrower shall be deemed
to have elected to prepay (subject to, and in accordance with, Clauses 7.5, 7.8,
7.9 and 7.10), such part of the Loan as will ensure that the market value (as
determined in accordance with Clauses 16.5 and 16.6) of the Ships plus the
market value of any additional security for the time being actually provided to
the Lender pursuant to Clause 16.3 is, after such prepayment, at least 125 per
cent. of the aggregate of (a) the Loan and (b) the Termination Amount.

 

16.5        Market value of the Ships.  For the purposes of this Clauses 16.3 and 16.4, the market value of
each Ship shall be determined (at the expense of the Borrower and the New
Owners, jointly and severally) at any time as the Lender may request by
obtaining the arithmetic mean of three valuations, one of which shall be from
an independent sale and purchase shipbroker based in London and nominated by
the Lender and the other two of which shall be by independent sale and purchase
shipbrokers or other experts to be agreed upon by the Borrower and the
Lender.  If the Borrower fails to
nominate two shipbrokers or other experts within five days of a notification in
writing from the Lender to that effect, or if the Borrower and the Lender
cannot within five days agree on the identity of the two shipbrokers or other
experts nominated by the Borrower, the market value of each Ship shall be
determined solely by the valuation provided by the shipbroker or other expert
nominated by the Lender.

 

16.6        Procedure for valuation.  For the purposes of ascertaining the market
value referred to in Clause 16.5, such valuation shall be made with or without
physical inspection of the Ships (as the Lender may require), on the basis of a
sale for prompt delivery for cash at arm’s length on normal commercial terms as
between a willing seller and a willing buyer, free of any existing charter or
other contract of employment.  The
Borrower and the New Owners shall accept the market value determined in
accordance with Clause 16.5 as conclusive evidence of the market value of each
Ship.

 

16.7        Provision of information.  The Borrower and the New Owners shall supply to the Lender and to
any such shipbroker or other expert such information concerning the Ships and
their condition as such shipbroker or other expert may require for the purpose
of making a valuation.

 

16.8        Market value of additional security.  For the purpose of this Clause 16,
the market value of any additional security provided or to be provided to the
Lender shall be determined by the Lender in its absolute discretion without any
necessity for the Lender to assign any reason therefor.  If any additional security provided includes
any vessels the market value of such vessels will be determined in accordance
with Clause 16.5.

 

16.9        Additional documentation.  In connection with any additional security provided in accordance
with this Clause 16, the Lender shall be entitled to receive certified copies
of such documents of the kind referred to in paragraphs 1, 2, 3, 4 and 13 of
Part A of Schedule 2 and such favourable legal opinions as the Lender shall, in
its absolute discretion, require.

 

16.10      Payment of valuation expenses.  Without prejudice to the generality of
Clauses 23.2, 23.3 and 23.4, the Borrower and the New Owners (jointly and
severally) shall, on demand, pay the Lender the amount of the fees and expenses
of any shipbroker or expert instructed by the Lender under this Clause and all
legal and other expenses incurred by the Lender in connection with any matter
arising out of this Clause.

 

17           APPLICATION OF EARNINGS

 

17.1        Duration.  The Borrower shall comply with this Clause 17 at all times during
the Security Period except as the Lender may otherwise permit.

 

42

 

17.2        Location of Accounts.  The Borrower shall comply with any written
requirement of the Lender from time to time as to the location or re-location
of the Operating Account and the Retention Account (or either of them) and
shall, from time to time, enter into such documentation as the Lender may
require in order to create or maintain in favour of the Lender a Security
Interest in the Operating Account and the Retention Account, all at the cost
and expense of the Borrower.

 

17.3        Earnings to Operating Account. 
Subject only to the provisions of each
General Assignment, all the Earnings of each Ship shall be paid to the
Operating Account.

 

17.4        Transfers to Retention Account. 
During each month of the Security Period
(but by no later than, in the case of the first such month, the date falling
fifteen (15) days after the first Drawdown Date and, in the case of each
subsequent month, the same date of that month), these shall be transferred from
the Operating Account to the Retention Account out of the aggregate amount of
Earnings received in the Operating Account during the preceding month:

 

(a)           one
third (1/3rd) of the amount of the repayment instalment specified in Clause 7.1
falling due for payment on the next following Repayment Date (but prior to the
first Repayment Date, the monthly amount shall be such lesser amount as shall
reflect the number of months from the first Drawdown Date to the first Repayment
Date); and

 

(b)           the
relevant fraction of the amount of interest on the Loan falling due on the next
due date for payment of interest under this Agreement or, if smaller, the
relevant fraction of the aggregate of net payments under the Master Agreement
and any balance of interest due under this Agreement; and

 

(c)           the
relevant fraction of any net payment due under the Master Agreement in excess
of the relevant fraction under paragraph (b) above in relation to that part of
the Loan the subject of a Transaction.

 

17.5        Definition of “relevant fraction”.  The expression “relevant fraction” means:

 

(a)           in
relation to an amount of interest on the Loan falling due for payment, a
fraction (which shall be notified by the Lender to the Borrower at the
beginning of each Interest Period) where the numerator is always one and where
the denominator shall always be three; and

 

(b)           in
relation to a net payment due under the Master Agreement, a fraction (as
notified by the Lender to the Borrower) where the numerator is always one and
where the denominator is that number of months in the Calculation Period in
respect of any relevant Transaction under the Master Agreement.

 

17.6        Insufficient Earnings.  If the aggregate amount of Earnings received in the Operating
Account is insufficient in any month for the required transfers to be made in
full from the Operating Account to the Retention Account in accordance with
Clause 17.4, the Borrower and the New Owners (jointly and severally) shall make
up the amount of the insufficiency on demand from the Lender but, without
prejudice to its right to make such demand, the Lender may elect to make up the
whole or any part of such insufficiency by increasing the amount of any
transfer to be made in accordance with Clause 17.4 from the aggregate amount of
Earnings received in the next or subsequent months.

 

17.7        Application of credit balance on Retention Account.  Until the
occurrence of an Event of Default or Potential Event of Default, the Lender
shall:

 

(a)           on
each Repayment Date, apply in accordance with Clause 19.1 the relevant part of
the balance then standing to the credit of the Retention Account as shall be
required to make payment of the repayment instalment specified in Clause 7.1
then due under this Agreement and such application shall constitute
satisfaction to a similar extent and

 

43

 

amount
of the Borrower’s obligations to pay such repayment instalment then due under
this Agreement;

 

(b)           where
no Transaction has been entered into under the Master Agreement or a
Transaction has been entered into under the Master Agreement in respect of part
only of the Loan, on each due date for payment of interest under this
Agreement, apply in accordance with Clause 19.1 the relevant part of the
balance then standing to the credit of the Retention Account as shall be
required to make payment of the interest then due under this Agreement (and not
the subject of a Transaction) and such application shall constitute
satisfaction to a similar extent and amount of the Borrower’s obligations to
pay such interest then due under this Agreement; and

 

(c)           where
a Transaction has been entered into under the Master Agreement, on each date on
which a net payment becomes due for payment by the Borrower under the Master
Agreement, apply in accordance with the Master Agreement the relevant part of
the balance then standing to the credit of the Retention Account as shall be
required to make payment of the net amount then due from the Borrower under the
Master Agreement.

 

17.8        No derogation from the provisions of this Agreement or the Master
Agreement. 
Clause 17.7 shall not, save as expressly provided, in any way affect the
obligation of the Borrower to make payments of principal and interest on the
due dates under this Agreement and payment of any Master Agreement Liabilities
under the Master Agreement in accordance with their respective terms.

 

17.9        Balance on Operating Account. 
Any amounts standing to the credit of the
Operating Account shall, provided that the foregoing provisions of this Clause
17 are complied with and provided that no Event of Default or Potential Event
of Default has occurred, be available to the Borrower for any purpose permitted
by this Agreement.

 

17.10      Interest on Retention Account. 
Any amounts for the time being standing to
the credit of the Retention Account shall bear interest at the rate from time
to time offered by the Lender to its customers for Dollar deposits of similar
amounts and for periods similar to those for which such amounts are likely in
the opinion of the Lender to remain standing to the credit of the Retention
Account.  Such interest shall, provided
that the foregoing provisions of this Clause 17 are complied with and provided
that no Event of Default or Potential Event of Default has occurred, be
released to the Borrower on each Repayment Date.

 

18           EVENTS OF DEFAULT

 

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

 

(a)           the
Borrower, any New Owner or any other Security Party fails to pay when due or,
if payable on demand, within 5 days of the Lender’s demand any sum payable
under a Finance Document or under any document relating to a Finance Document;
or

 

(b)

(i)            any
breach occurs of Clauses 7.7, 8.3, 9.2, 12.2, 12.3, 12.17, 13.7, 13.8, 13.9,
13.10, 14.1, 14.2, 14.3, 14.4, 14.11, 15.2, 15.15 or 17.3; or

 

(ii)           the
Borrower fails to provide additional security or make a prepayment of part of
the Loan in the circumstances referred to in Clauses 16.2, 16.3 and 16.4 within
the time limit prescribed; or

 

(c)           any
breach by the Borrower, any New Owner or any other Security Party occurs of any
provision of a Finance Document (other than a breach covered by Clause 18.1(a)
or (b) if, in the opinion of the Lender, such default is capable of remedy and
such default continues

 

44

 

unremedied
five (5) Business Days after written notice from the Lender requesting action
to remedy the same; or

 

(d)           subject
to any applicable grace period specified in any Finance Document, any breach by
the Borrower, any New Owner or any other Security Party occurs of any provision
of a Finance Document, other than a breach covered by Clause 18.1(a), (b) or
(c);

 

(e)           any
representation, warranty or statement made by, or by an officer of, the
Borrower, any New Owner or any other 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 deemed to be 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 before 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 (other than a
termination of the Lease Transactions solely by reason of the expiry and
non-renewal of the chartering of each Ship by the relevant Existing Owner to
Shell International Petroleum Company Limited); 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 or contract 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:

 

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

 

(ii)           any
assets of a Relevant Person are subject to any form of execution, attachment,
arrest, sequestration, distress or any form of freezing order in respect of a
sum of, or sums aggregating, $1,000,000 or more or the equivalent in another
currency and the same is not released within 14 days; or

 

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

 

(iv)          any
step is taken in relation to the appointment of an administrative receiver of a
Relevant Person; or

 

(v)           an
administrator is appointed (whether by the court or otherwise) in respect of a
Relevant Person;

 

45

 

(vi)          a
resolution is passed, an application to a court is made or any other step is taken
by a creditor of a Relevant Person (other than the holder of Security Interests
which together relate to all or substantially all of the assets of that
Relevant Person) for the appointment of an administrator in respect of that
Relevant Person, unless:

 

(A)           the
proposed administration is being contested in good faith, on substantial
grounds and not with a view to some other insolvency law procedure being
implemented instead;

 

(B)           the
application is dismissed or withdrawn within 30 days of being made; and

 

(C)           that
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

 

(vii)         an
administration notice is given or filed, a resolution is passed, an application to a court is made or any other
step is taken by:

 

(A)          the members of a Relevant Person,

 

(B)           the directors of a Relevant Person, or

 

(C)           a creditor that is a holder of Security Interests which together relate
to all or substantially all of the assets of a Relevant Person,

 

for or with a view to the appointment of an administrator in respect of
that Relevant Person; or

 

(viii)        a resolution is passed, an application to a court is made or any other
step is taken by a government minister or public or regulatory authority of a Pertinent Jurisdiction for or with a view to the appointment of an administrator in respect of
a Relevant Person; or

 

(ix)           a
petition is presented to a court, a resolution is passed, or any other step is
taken for or with a view to the
appointment of a provisional liquidator in respect of a Relevant Person unless:

 

(A)          the
proposed appointment is being contested in good faith, on substantial grounds
and not with a view to some other insolvency law procedure being implemented
instead;

 

(B)           the
petition is dismissed or withdrawn within 30 days of being presented; and

 

(C)           that
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

 

(x)            a
petition is presented to a court, a resolution is passed or any other step is
taken for or with a view to the
winding up of a Relevant Person, save that this paragraph does not apply to a
fully solvent winding up of a Relevant Person other than the Borrower or a
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

 

46

 

(xi)           a
Relevant Person, its directors or, in any proceedings, a lawyer acting for a
Relevant Person makes any formal declaration of bankruptcy or any formal
statement to the effect that that Relevant Person is insolvent or likely to
become insolvent; or

 

(xii)          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 (v) to (xi) above 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

 

(xiii)         in any
country other than England, any event occurs or 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)           a
Relevant Person or its directors petition or apply to a court for, or it or its
directors take any steps to obtain or submit or present a document setting out
the proposed terms of, or any other proposal for, any form of moratorium,
suspension or deferral of payments, reorganisation of its debt (or certain of
its debt), arrangement with all or a substantial proportion (by number or
value) of its creditors or of any class of them or protection in bankruptcy or
any such moratorium, suspension or deferral of payments, reorganisation,
arrangement or protection in bankruptcy 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

 

(i)            the
Borrower, any New Owner or any other Security Party 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

 

(j)            an
encumbrancer takes possession of the whole or, in the opinion of the Lender,
any material part of the assets of the Borrower any New Owner or any other
Security Party or a Security Interest (other than in favour of the Lender) is
levied or enforced upon or sued out against the whole or, in the opinion of the
Lender, a material part of the assets of the Borrower, any New Owner or any
other Security Party; or

 

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

 

(i)            for
the Borrower, any New Owner or any other Security Party to discharge any
liability under a Finance Document or a Conditional Sale Agreement Transfer or
to comply with any other obligation which the Lender considers 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

 

(l)            any
consent necessary to enable any New Owner to own, operate or charter its Ship
or to enable the Borrower, any New Owner or any other Security Party to comply
with any provision which the Lender considers material of a Finance Document or
a Conditional Sale Agreement Transfer 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

 

(m)          if any
person or group of persons acting in concert gains control of the Borrower, and
for this purpose:

 

(i)            “control” 
means the power to direct the management and policies of an entity,
whether through the ownership of more than 49% of voting capital, by contract
or otherwise; and

 

47

 

(ii)           “acting in concert”  means acting together pursuant to an
agreement or understanding (whether formal or informal); or

 

(n)           any
provision which the Lender considers material of a Finance Document or a
Conditional Sale Agreement Transfer 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)           the
Lender gives notice of an Early Termination Date under Section 6(a) of the
Master Agreement; or

 

(q)           a
person entitled to do so gives notice of an Early Termination Date under
Section 6(b)(iv) of the Master Agreement; or

 

(r)            an
Event of Default (as defined in Section 14 of the Master Agreement) occurs; or

 

(s)           the
Master Agreement is terminated, cancelled, suspended, rescinded or revoked or
otherwise ceases to remain in full force and effect for any reason; or

 

(t)            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 any New Owner or a Credit Support Provider; or

 

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

 

in
the light of which the Lender considers that there is a significant risk that
the Borrower or a New Owner or a Credit Support Provider is, or will later
become, unable to discharge its or their liabilities under the Finance
Documents or the Master Agreement 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 and the Master 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 Clause 18.2(a) or (b) the Lender is entitled to take under any
Finance Document, the Master Agreement or any applicable law.

 

18.3        Termination of obligations.  On the service of a notice under
Clause 18.2(a), all the obligations of the Lender to the Borrower under
this Agreement shall terminate.

 

18.4        Acceleration of Loan.  On the service of a notice under Clause
18.2(b), 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.

 

48

 

18.5        Multiple notices; action without notice.  The Lender may serve notices under Clauses
18.2(a) and (b) simultaneously or on different dates and it may take any action
referred to in Clause 18.2 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,
administrator 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, the Master Agreement 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, an administrator, a receiver or manager
from liability for losses shown to have been caused directly and mainly by the
dishonesty or the wilful misconduct of the Lender’s own officers and employees
or (as the case may be) such, administrator’s, receiver’s or manager’s own
partners or employees.

 

18.7        Relevant Persons.  In this Clause 18, a “Relevant Person” means a Credit Support
Provider, the Approved Managers, the Borrower, any New Owner or any other
Security Party, and any company which is a subsidiary of the Borrower or a
Security Party or of which the Borrower or a Security Party is a subsidiary.

 

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           PAYMENTS AND CALCULATIONS

 

19.1        Currency and method of payments.  All payments to be made by the Borrower or a
Security Party to the Lender under a Finance Document shall be made to the
Lender:

 

(a)           by not
later than 11.00 a.m. (London 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)           to the
account of the Lender at the Receiving Bank (Account No 000261123) or to such
other account with such other bank as the Lender may, from time to time, notify
to the Borrower.

 

19.2        Payment on non-Business Day.  If any payment by the Borrower or a Security
Party 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;

 

49

 

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

 

19.3        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.

 

19.4        Lender accounts.  The Lender shall maintain an account showing
the amounts advanced by the Lender and all other sums owing to the Lender from
the Borrower and each Security Party under the Finance Documents and all payments
in respect of those amounts made by the Borrower and any Security Party.

 

19.5        Accounts prima facie evidence.  If the account maintained under Clause 19.4
shows an amount to be owing by the Borrower or a Security Party to the Lender,
that account shall be prima facie evidence that that amount is owing to the
Lender.

 

20           SECURITY

 

Execution of
security.  The Borrower shall execute, deliver and perform the provisions of,
and procure the execution, delivery and performance by the other parties
thereto (other than the Lender) of, the Finance Documents and the provisions
thereof at the times and in the manner provided in the Finance Documents so
that all such documents shall, both at the date of such execution and delivery
and at all times during the Security Period, be valid and binding obligations
of the Borrower and such other parties enforceable in accordance with their
respective terms.

 

21           APPLICATION

 

21.1        Application.  All moneys received by the Lender under the Finance Documents shall
(unless the Lender otherwise requires) be applied by the Lender in the
following manner:

 

FIRST:  in or towards satisfaction of any amounts as
are then accrued due and payable under this Agreement, the Master Agreement and
the other Finance Documents (or any of them) or are then due and payable by
virtue of payment demanded under this Agreement, the Master Agreement or the
other Finance Documents in such order of application as the Lender shall think
fit;

 

SECONDLY:  at the option of the Lender:

 

(a)           in
retention of an amount equal to any amounts which are not then due and payable
under this Agreement, the Master Agreement or any other Finance Document but
which (in the sole and absolute opinion of the Lender) will or may become due
and payable in the future and, upon their becoming due and payable, in or
towards satisfaction thereof in accordance with the foregoing provisions of
this Clause 21.1; and/or

 

(b)           in or
towards prepayment of the Loan in accordance with Clause 7; and

 

THIRDLY:  the surplus (if any) shall be paid to the
Borrower or to whomsoever else may be entitled thereto.

 

21.2        Notice of variation of order of application.  The Lender may, by notice
to the Borrower and the Security Parties, provide for a different order of
application from that set out in Clause 21.1 either as regards a specified
sum or sums or as regards sums in a specified category or categories.

 

21.3        Effect of variation notice.  The Lender may give notices under
Clause 21.2 from time to time; and such a notice may be stated to apply
not only to sums which may be received or

 

50

 

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.

 

21.4        Appropriation rights overridden.  This Clause 21 and any notice which the
Lender gives under Clause 21.2 shall override any right of appropriation
possessed, and any appropriation made, by the Borrower or any Security Party.

 

22           FEES AND EXPENSES

 

22.1        Arrangement and commitment fees.  The Borrower and the New Owners (jointly and
severally) shall pay to the Lender an arrangement fee as set out in the Fee
Letter.

 

22.2        Costs of negotiation, preparation etc.  The Borrower and the New Owners
(jointly and severally) shall reimburse to the Lender on demand all costs, fees
and expenses (including, but not limited to, legal fees and expenses) and Taxes
thereon incurred by the Lender in connection with:

 

(a)           the
negotiation, preparation and execution of this Agreement, the Master Agreement
and the Security Documents and the reports referred to in paragraph 7 of Part A
of Schedule 2 and paragraph 9 of Part B of Schedule 2; and/or

 

(b)           the
preserving or enforcing of, or attempting to preserve or enforce, any of its rights
under this Agreement, the Master Agreement and the other Finance Documents.

 

22.3        Costs of variations, enforcement etc.  The Borrower and the New Owners
(jointly and severally) shall reimburse to the Lender on demand all costs, fees
and expenses (including, but not limited to, legal fees and expenses) and Taxes
thereon incurred by the Lender in connection with:

 

(a)           any
variation of, or supplement to, this Agreement, the Master Agreement and the
other Finance Documents (or any of them); and/or

 

(b)           any
consent or waiver required from the Lender in relation to this Agreement, the
Master Agreement and any other Finance Document, and in each case, regardless
of whether the same is actually implemented, completed or granted.

 

22.4        Stamp and other duties.  The Borrower and the New Owners (jointly and severally) shall pay
promptly all stamp, documentary and other like duties and Taxes to which this
Agreement, the Master Agreement and the other Finance Documents may be subject
or give rise and shall indemnify the Lender on demand against any and all
liabilities with respect to, or resulting from, any delay or omission on the
part of the Borrower to pay any such duties or Taxes.

 

22.5        Authority to debit Operating Account.  The Lender shall, without prejudice
to any other of the provisions of this Agreement, be entitled (but not obliged)
at any time and from time to time (without prior notice) to debit the Operating
Account in order to satisfy amounts payable by the Borrower to the Lender
pursuant to this Clause 22 provided that prior to the occurrence of an Event of
Default or a Potential Event of Default the Lender shall only exercise its
right under this Clause 22.5 if the Borrower has, within 30 days of a
communication from the Lender, either not responded or has indicated, on a bona
fide and reasonable basis, that it contests the amount in question.

 

23           INDEMNITIES

 

23.1        Indemnities regarding borrowing and repayment of Loan.  The Borrower and the New
Owners (jointly and severally) shall fully indemnify the Lender on its demand
in respect of all claims, expenses, liabilities and losses which are made or
brought against or

 

51

 

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 borrowed on the date specified in the 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 (after giving credit for any default interest
paid by the Borrower on the amount concerned under Clause 6);

 

(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.

 

23.2        Breakage costs.  Without limiting its generality, Clause 23.1
covers any claim, expense, liability or loss, including a loss of a prospective
profit or an amount equal to the Margin in the circumstances envisaged in
Clause 23.1(b), incurred or suffered 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, the Master Agreement and 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 a number of transactions
of which this Agreement is one.

 

23.3        Miscellaneous indemnities.  The Borrower and the New Owners (jointly and
severally) 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 administrator or receiver appointed
by the Lender 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 or such administrator’s or receiver’s own partner or employees.

 

23.4        ISM Code and indemnity.  Without prejudice to the generality of
Clause 23.3, the indemnities referred to in Clause 23.3 cover any claims,
expenses, liabilities and losses which arise, or are asserted, under or in
connection with any law relating to safety at sea or the ISM Code.

 

23.5        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:

 

52

 

(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 and the New Owners (jointly and severally) 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.

 

23.6        Meaning of “available rate of exchange”.  In Clause 23.5, the “available rate of exchange” means the rate
at which the Lender 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.

 

23.7        Separate liability.  Clause 23.5 creates a separate liability of
the Borrower and the New Owners (jointly and severally) 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.

 

23.8        Environmental indemnity.  The Borrower and the New Owners (jointly and severally) shall
indemnify the Lender on demand against all costs, expenses, liabilities and
losses sustained or incurred as a result of or in connection with,
Environmental Claims being made against the Lender or otherwise howsoever
arising out of any Environmental Incident

 

23.9        Receiving Bank.  The Borrower and the New Owners (jointly and severally) shall
indemnify the Lender on demand against all costs and expenses paid or incurred
by the Lender arising out of the role of the Receiving Bank in relation to the
Loan.

 

23.10      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 23 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.

 

24           NO SET-OFF OR TAX DEDUCTION

 

24.1        No deductions.  All amounts due from the Borrower or a New Owner under a Finance
Document shall be paid:

 

(a)           without
any form of set-off, cross-claim or condition (including but not limited to,
any set-off, cross claim or condition arising under, or in relation to, or in
connection with, the Master Agreement); and

 

(b)           free
and clear of any Tax Deduction except a Tax Deduction which the Borrower or a
New Owner is required by law to make.

 

24.2        Grossing-up for Taxes.  If the Borrower or a New Owner is required
by law to make a Tax Deduction from any payment:

 

(a)           the
Borrower or the relevant New Owner shall notify the Lender as soon as it
becomes aware of the requirement;

 

(b)           the
Borrower or the relevant New Owner shall pay an amount equal to the Tax
Deduction to the appropriate taxation authority promptly, and in any event
before any fine or penalty arises; and

 

53

 

(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) an amount which, after the Tax Deduction, is
equal to the full amount which it would otherwise have received.

 

24.3        Evidence of payment of Taxes.  Within one month after making any Tax
Deduction, the Borrower or the relevant New Owner shall deliver to the Lender
documentary evidence satisfactory to the Lender that the Tax had been paid to
the appropriate taxation authority.

 

24.4        Exclusion of Tax on overall net income.  In this Clause 24,  “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.

 

24.5        Tax credits.  If the Lender receives for its own account a repayment or credit
in respect of Tax on account of which the Borrower or a New Owner has made an
increased payment under Clause 24.2 it shall pay to the Borrower or the
relevant New Owner a sum equal to the proportion of the repayment or credit
which the Lender allocates to the amount due from the Borrower or the relevant
New Owner in respect of which the Borrower or the relevant New Owner made the
increased payment but:

 

(a)           the
Lender shall not be obliged to allocate to this transaction any part of a Tax
repayment or credit which is referable to a class or number of transactions;

 

(b)           nothing
in this Clause 24.5 shall oblige the Lender to arrange its tax affairs in any
particular manner, to claim any type of relief, credit, allowance or deduction
instead of, or in priority of, another or to make any such claim within any
particular time;

 

(c)           nothing
in this Clause 24.5 shall oblige the Lender to make a payment which would leave
it in a worse position than it would have been in if the Borrower or the
relevant New Owner had not been required to make a Tax deduction from a
payment; and

 

(d)           any
allocation or determination made by the Lender under or in connection with this
Clause 24.5 shall be conclusive and binding on the Borrower and the New Owners.

 

25           ILLEGALITY, ETC

 

25.1        Illegality.  This Clause 25 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.

 

25.2        Notification and effect of illegality.  On the Lender notifying the Borrower under
Clause 25.1, the Commitment shall terminate; and thereupon or, if later,
on the date specified in the Lender’s notice under Clause 25.1 as the date on
which the notified event would become effective the Borrower shall prepay the
Loan in full in accordance with Clause 7.

 

25.3        Mitigation.  If circumstances arise which would result in a notification under
Clause 25.1 then, without in any way limiting the rights of the Lender
under Clause 25.2, 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

 

54

 

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.

 

26           INCREASED COSTS

 

26.1        Increased costs.  This Clause 26 applies if the Lender
notifies the Borrower that it considers that as a result of:

 

(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  (including the
imposition of Taxes on payments under this Agreement, but 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)           complying
with any regulation (including any which relates to capital adequacy or liquidity
controls, which affects the manner in which the Lender allocates capital
resources to its obligations under this Agreement or which is imposed by any
applicable authority such as the Bank of England or the Financial Services
Authority) which is introduced, or altered, or the interpretation or
application of which is altered, after the date of this Agreement,

 

the
Lender (or a parent company of it) has incurred or will incur an increased
cost.

 

26.2        Meaning of “increased costs”.  In this Clause 26, “increased costs” means:

 

(a)           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 or having
taken an assignment of rights under 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

 

(b)           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;

 

(c)           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

 

(d)           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:

 

(i)            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

 

(ii)           an
item covered by the indemnity for Tax in Clause 23.1; or

 

(iii)          an item
covered by the grossing-up provisions in Clause 24.2.

 

55

 

For
the purposes of this Clause 26.2, the Lender may in good faith allocate or
spread costs and/or losses among its assets and liabilities (or any class of
its assets and liabilities) on such basis as it considers appropriate.

 

26.3        Payment of increased costs.  The Borrower and the New Owners (jointly and
severally) shall pay to the Lender, on its 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.

 

26.4        Notice of prepayment.  If the Borrower is not willing to continue
to compensate the Lender for the increased cost under Clause 26.3, the Borrower
may give the Lender not less than 5 days’ notice of its intention to prepay the
Loan at the end of an Interest Period.

 

26.5        Prepayment.  A notice under Clause 26.4 shall be irrevocable; and on the date
specified in its notice of intended prepayment, the Borrower shall prepay
(without premium or penalty) the Loan, together with the aggregate of accrued
interest thereon at the applicable rate, any Mandatory Cost and the Margin.

 

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

 

27           SET-OFF

 

27.1        Application of credit balances.  The Lender may without prior notice:

 

(a)           apply
any balance (whether or not then due) which at any time stands to the credit of
any account in the name of the Borrower or any New Owner at any office of the
Lender in any country in or towards satisfaction of any sum then due from the
Borrower or any New Owner to the Lender under this Agreement, the Master
Agreement or any other Finance Document; and

 

(b)           for
that purpose:

 

(i)            break,
or alter the maturity of, all or any part of a deposit of the Borrower or any
New Owner;

 

(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.

 

27.2        Set-off between this Agreement and the Master Agreement.  If the Borrower
is the defaulting party under the Master Agreement, the Lender, as the
non-defaulting party, may (without prejudice to or limitation of its right of
set-off under section 6(e) of the Master Agreement and its rights under Clause
27.1) at the same time as, or at any time after, the Borrower’s default,
set-off any amount due from the Borrower to the Lender under this Agreement
against any amount due from the Lender to the Borrower under the Master
Agreement and apply the first amount in discharging the second amount.  The effect of any set-off under this Clause
27.2 shall be effective to extinguish or, as the case may require, reduce the
liabilities of the Lender under the Master Agreement.

 

27.3        Existing rights unaffected.  The Lender shall not be obliged to exercise
any of its rights under Clauses 27.1 or 27.2; 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).

 

56

 

27.4        No Security Interest.  This Clause 27 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 or any New
Owner.

 

28           ASSIGNMENTS, TRANSFERS AND CHANGES IN LENDING OFFICE

 

28.1        Successors etc.  This Agreement shall be binding upon and inure to the benefit of the
Lender, the Borrower and each New Owner and their respective successors and
permitted assigns.

 

28.2        Transfer by Borrower and New Owners.  The Borrower and the New Owners may not,
without the consent of the Lender, transfer any of their respective rights,
liabilities or obligations under any Finance Document.

 

28.3        Assignment etc by Lender.  The Lender may, with the consent of the
Borrower, such consent not to be unreasonably withheld, assign or transfer all
or any of the rights and/or obligations and interests which it has under, or by
virtue of, the Finance Documents or change its lending office.  The requirement for the consent of the
Borrower shall not apply in respect of an assignment or transfer to a company
which is in the same group of companies as the Lender.  The Lender shall notify the Borrower and the
New Owners promptly following any such assignment, transfer or change in
lending office.

 

28.4        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.

 

28.5        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 prior notice to, the Borrower
or the New Owners; and the Lender may assign, in any manner and on terms agreed
by it, all or any part of those rights to an insurer or surety which has become
subrogated to them. The Lender shall notify the Borrower and the New Owners
promptly following any such sub-participation or assignment.

 

28.6        Disclosure of information.  The Lender may disclose to a potential
assignee, transferee or sub-participant or any other person who may otherwise
enter into contractual relations with the Lender in relation to this Agreement
or any other Finance Document any information which the Lender has received in
relation to the Borrower and the New Owners and their related entities or their
respective affairs, unless the information is clearly of a confidential nature.

 

29           VARIATIONS AND WAIVERS

 

29.1        Variations, waivers etc. by Lender.  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 or telex, by the Borrower
and the Lender and, if the document relates to a Finance Document to which a
Security Party is party, by that Security Party.

 

29.2        Exclusion of other or implied variations.  Except for a document which
satisfies the requirements of Clause 29.1, 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

 

57

 

varied,
waived, suspended or limited, or being precluded (permanently or temporarily)
from enforcing, relying on or exercising:

 

(a)           a
provision of this Agreement or any other Finance Document; or

 

(b)           an
Event of Default; or

 

(c)           a
breach by the Borrower or a Security Party of an obligation under any 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.

 

30           NOTICES

 

30.1        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.

 

30.2        Addresses for communications.  A notice shall be sent:

 

	
  (a)

  	
  to the Borrower and each New Owner:

  	
  c/o Frontline Management AS

  
	
   

  	
   

  	
  PO Box 1327 Vika

  
	
   

  	
   

  	
  N. 0112 Oslo

  
	
   

  	
   

  	
  Norway

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Fax No: +47 23 11 40 44

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attention: Finance Department

  
	
   

  	
   

  	
   

  
	
  (b)

  	
  to the Lender:

  	
  Shipping Business Centre

  
	
   

  	
   

  	
  5-10 Great Tower Street

  
	
   

  	
   

  	
  London EC3P 3HX

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Fax No: +44
  20 7283 7538

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attention:
  Manager, Ship Finance

  
	
   

  	
   

  	
   

  
	
   

  	
  or to such
  other address as the relevant party may notify the other.

  

 

30.3        Effective date of notices.  Subject to Clauses 30.4 and 30.5:

 

(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;

 

(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.

 

30.4        Service outside business hours.  However, if under Clause 30.3 a notice would
be deemed to be served:

 

(a)           on a
day which is not a business day in the place of receipt; or

 

58

 

(b)           on
such a business day, but after 5 p.m. local time;

 

the
notice shall (subject to Clause 30.5) be deemed to be served, and shall take
effect, at 9 a.m. on the next day which is such a business day.

 

30.5        Illegible notices.  Clauses 30.3 and 30.4 do not apply if the
recipient of a notice notifies the sender within 1 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.

 

30.6        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,
as the case may be, another Finance Document 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.

 

30.7        English language.  Any notice under, or in connection with, a
Finance Document shall be in English or if the Lender so requires, accompanied
by a certified English translation prepared by a translator approved by the
Lender.

 

30.8        Meaning of “notice”.  In this Clause 30, “notice” includes any demand, consent,
authorisation, approval, instruction, waiver or other communication.

 

31           SUPPLEMENTAL

 

31.1        Time.  Time shall be of the essence in this Agreement as regards compliance
by the Borrower of its obligations under this Agreement.

 

31.2        Delay. 
No delay or omission on the part of the Lender in exercising any right,
power or remedy under this Agreement shall impair such right, power or remedy
or be construed as a waiver thereof nor shall any single or partial exercise of
any such right, power or remedy preclude any further exercise thereof or the
exercise of any other right, power or remedy.

 

31.3        Rights cumulative, non-exclusive. 
The rights, powers and remedies herein
provided are cumulative and not exclusive of any rights, powers and remedies
provided by law and may be exercised from time to time and as often as the
Lender deems expedient.

 

31.4        Waiver.  Any waiver by the Lender of any provision of this Agreement or any
consent or approval given by the Lender under this Agreement shall only be
effective if given in writing and then only for the purpose and upon the terms
for which it is given.

 

31.5        Partial invalidity.  If at any time any one or more of the provisions of this Agreement
is or becomes invalid, illegal or unenforceable in any respect under any law or
regulation, the validity, legality and enforceability of the remaining provisions
of this Agreement shall not be in any way affected or impaired thereby.

 

31.6        Duration of obligations.  The obligations of the Borrower under this Agreement shall remain in
full force and effect until the Lender shall have received all amounts due or
to become due to it under this Agreement and under the other Finance Documents
in accordance with this Agreement and of the other Finance Documents.  Without prejudice

 

59

 

to
the foregoing, the obligations of the Borrower and the New Owners under Clauses
6, 23, 24 and 27 shall survive the repayment of the Loan.

 

31.7        Counterparts.  A Finance Document may be executed in any number of counterparts.

 

31.8        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.

 

31.9        Certificates.  A certificate or determination of the Lender as to any matter
provided for in this Agreement or any other Finance Document shall, in the
absence of manifest error, be conclusive and binding on the Borrower.

 

32           GOVERNING LAW

 

This
Agreement is governed by English law.

 

33           ENFORCEMENT

 

33.1        Jurisdiction

 

(a)           Subject
to Clause 33.1(c), the courts of England have exclusive jurisdiction to settle
any dispute arising out of, or in connection with, this Agreement (including a
dispute regarding the existence, validity or termination of this Agreement) (a
“Dispute”).

 

(b)           The
Lender, the Borrower and the New Owners agree that the courts of England are
the most appropriate and convenient courts to settle Disputes and accordingly
none of them will argue to the contrary.

 

(c)           The
Lender shall not be prevented from taking proceedings relating to a Dispute in
any other courts with jurisdiction.  To
the extent allowed by law, the Lender may take concurrent proceedings in any
number of jurisdictions.

 

33.2        Service of process.  Without prejudice to any other mode of service allowed under any
relevant law, the Borrower and each New Owner:

 

(a)           irrevocably
appoints Maritime Recovery Limited currently of 20 Salcott Road, PO Box 239,
London SW11 6DJ as its agent for service of process in relation to any
proceedings before the English courts in connection with any Finance Document;
and

 

(b)           agrees
that failure by a process agent to notify it of the process will not invalidate
the proceedings concerned.

 

THIS AGREEMENT has been entered into on the date stated at the beginning of this
Agreement.

 

60

 

SCHEDULE 1

DRAWDOWN NOTICE

 

 

	
  To:

  	
   

  	
  The Royal
  Bank of Scotland plc,

  
	
   

  	
   

  	
  Shipping
  Business Centre

  
	
   

  	
   

  	
  5-10 Great
  Tower Street

  
	
   

  	
   

  	
  London EC3P
  3HX

  

 

 [•]

 

 

DRAWDOWN
NOTICE

 

1              We refer to the loan agreement (the “Loan Agreement”) dated [•] and made between ourselves, as Borrower, the New Owners (as
defined therein) and yourselves, as Lender, in connection with a facility of up
to US$140,000,000.  Terms defined in the
Loan Agreement have their defined meanings when used in this Drawdown Notice.

 

2              We request to borrow as follows:

 

(a)           Amount:
US$[•];

 

(b)           Drawdown
Date:  [•];

 

(c)           Payment
instructions : account in [our] name [of [•] and numbered [•]with [•]of [•]*.

 

3              We represent and warrant that:

 

(a)           the
representations and warranties in Clauses 11.1 to 11.21 of the Loan Agreement
would remain true and not misleading if repeated on the date of this Drawdown
Notice with reference to the facts and circumstances now existing;

 

(b)           no
Event of Default or Potential Event of Default has occurred or will result from
the borrowing of the Loan.

 

4              This Drawdown Notice cannot be revoked without the prior consent of
the Lender.

 

	
  [Name of Signatory]

  
	
   

  
	
   

  
	
   

  
	
   

  	
   

  	
   

  
	
  [Authorised signatory/Attorney-in-fact]

  
	
  for and on behalf of

  
	
  KNIGHTSBRIDGE TANKERS LIMITED

  

 

* specify details if proceeds of Advance are to be split between more
than one account.

 

61

 

SCHEDULE 2

CONDITION PRECEDENT DOCUMENTS

PART A - DRAWDOWN NOTICE

 

 

The following
are the documents referred to in Clause 9.1(a).

 

1              Copies of the Articles of Incorporation and By-Laws (or equivalent
documents) (and all amendments thereto) of each of the Borrower, the New Owners
and the Existing Owners and any other documents required to be filed or registered
or issued under the laws of Bermuda to establish the incorporation and/or good
standing of the Borrower, under the laws of the Republic of Liberia to
establish the incorporation and/or goodstanding of each of the New Owners or
under the laws of the Cayman Islands to establish the incorporation and/or
goodstanding of each of the Existing Owners.

 

2              Copies of resolutions passed at meetings of the board of directors
of each of the Borrower, the New Owners (and, in the case of each New Owner,
appropriate shareholder authorisation) and the Existing Owners evidencing its
approval of such of this Agreement, the other Finance Documents, the Master
Agreement, the Conditional Sale Agreement Transfers and the Title Transfer
Documents to which each is a party and authorising appropriate officers or
attorneys to execute them and to sign all notices required to be given under
this Agreement, the other Finance Documents on its behalf (or, in the case of
the Conditional Sale Agreement Transfers, ratifying the execution thereof) or
other evidence of such approvals and authorisations as shall be acceptable to
the Lender.

 

3              The original of any power of attorney issued in favour of any person
executing this Agreement, any other Finance Documents, the Master Agreement and
the Conditional Sale Agreement Transfers on behalf of the Borrower, the New
Owners or the Existing Owners.

 

4              Copies of all governmental and other consents, licences, approvals
and authorisations as may be necessary to authorise the performance by the
Borrower, the New Owners and the Existing Owners, of their respective
obligations under those of this Agreement, the other Finance Documents, the
Master Agreement, the Conditional Sale Agreement Transfers and the Title
Transfer Documents to which each is a party and the execution, validity and
enforceability of this Agreement, the other Finance Documents, the Master
Agreement, the Conditional Sale Agreement Transfers and the Title Transfer
Documents.

 

5              Evidence that the Operating Account and the Retention Account have
each been duly opened by the Borrower and that all board resolutions, mandates,
signature cards and other documents or evidence required in connection with the
opening, maintenance and operation of the Operating Account and the Retention
Account have been duly delivered to the Lender.

 

6              A valuation of the Ships, dated not later than ten (10) days before
the first Drawdown Date, and complying with Clause 16.5, showing a charter free
aggregate value for the Ships of not less than $235,000,000.

 

62

 

7              A survey report on terms fully satisfactory to the Lender from an
independent marine surveyor selected by the Lender in respect of the physical
condition of all or any of the Ships (in the Lender’s discretion).  Such survey report will address, amongst
other things, the bed plate cracking problem suffered in the past by three of
the Ships.  The surveyor and the Lender
will be given full access to the class records of the Ships.

 

8              A copy of a management or other agreement between the Borrower and
ICB Shipping (Bermuda) Ltd. in respect of the general management of the
Borrower.

 

9              The Master Agreement and all the Finance Documents (other than the
Mortgage and the General Assignment) duly executed and delivered by the parties
thereto together with all other items and documents required to be delivered
pursuant to the terms thereof, including (but without limitation).

 

10           Evidence and confirmation satisfactory to the Lender as to the
satisfaction or securing of the outstanding swap liabilities of the Borrower
and the Existing Owners to Goldman Sachs International.

 

11           Documentary evidence that the agent for service of process named in
Clause 33 and, where provided for, in any other Finance Document and in the
Master Agreement to which the Borrower or any Security Party is a party has
accepted its appointment for the purpose of the relevant Financial Document
and/or the Master Agreement.

 

12           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.

 

13           Such documents and evidence as the Lender shall require, based on
applicable law and regulations and the Lender’s own internal guidelines,
relating to the Lender’s knowledge of its customers.

 

63

 

SCHEDULE 2

CONDITIONS PRECEDENT DOCUMENTS

PART B - DRAWDOWN

 

 

The following
are the documents referred to in Clause 9.1(b) (in respect of the Ship which is
to be financed by the proceeds of the relevant Advance).

 

1              A duly executed original of the Mortgage and the General Assignment
and of each document to be delivered under or pursuant to each of them.

 

2              A copy of the Conditional Sale Agreement Transfer and the Title
Transfer Documents, in form and substance satisfactory to the Lender.

 

3              A valuation of the Ship, dated not earlier than ten (10) days before
the relevant Drawdown Date, from three independent London sale and purchase
shipbrokers one of which shall be selected by the Lender and the other two to
be jointly selected and agreed upon by the Borrower and the Lender, showing a
charter-free value for the Ship of not less than $47,000,000.

 

4              Documentary evidence (in a form acceptable to the Lender) that:

 

(a)           the
Ship has been unconditionally delivered by the Existing Owner to, and accepted
by, the New Owner under the Conditional Sale Agreement Transfer and the Title
Transfer Documents, and the full purchase price payable under the Conditional
Sale Agreement Transfer (in addition to the part to be financed by the Loan)
has been financed in a manner satisfactory to the Lender and duly paid to the
Lessor and that any mortgage or other security granted over any of the Ships
directly or indirectly in favour of the Existing Lenders has been, or will
forthwith be, discharged;

 

(b)           arrangements
are in place for the proceeds of the Advance to be transferred from the
Borrower or the relevant New Owner to the Lessor and from the Lessor to the
Existing Lenders in satisfaction of the relevant portion of the liabilities
under the Existing Loan Agreement;

 

(c)           the
Ship is definitively and permanently registered in the name of the relevant New
Owner under Marshall Island flag;

 

(d)           the
Ship is in the absolute and unencumbered ownership of the relevant New Owner
save as contemplated by the Finance Documents;

 

(e)           the
Ship maintains the class as specified below the name of such Ship in Schedule
4, free of all overdue recommendations and conditions of such Classification
Society (save for those notified to, and approved in writing by, the Lender) ;

 

(f)            the
Mortgage has been duly recorded against the Ship as a valid first preferred
Marshall Islands ship mortgage in accordance with the laws of the Marshall
Islands;

 

(g)           the
Ship is insured in accordance with this Agreement and all requirements therein
in respect of insurances have been complied with.

 

64

 

5              Documents establishing that the Ship will, as from the relevant
Drawdown Date, be managed by the Approved Managers on terms acceptable to the
Lender, together with:

 

(a)           Manager’s
Undertakings executed by the Approved Managers in favour of the Lender in the
terms required by the Lender agreeing certain matters in relation to the
management of the Ship and subordinating the rights of each Approved Manager
against the Ship and the relevant New Owner to the rights of the Lender under
the Finance Documents; and

 

(b)           copies
of the Approved Managers’ Document of Compliance and of the Ship’s Safety
Management Certificate (together with any other details of the applicable
safety management system which the Lender requires).

 

6              Evidence that the Ship has been deleted from Isle of Man flag free
from all registered Security Interests or, in the alternative, evidence that
the Ship will be so deleted within such period as the Lender shall require and
that, in any event, there are no Security Interests registered against the Ship
on Isle of Man flag.

 

7              A letter from the relevant New Owner to the protection and indemnity
risks association in which the Ship is or is to be entered instructing it to
provide the Lender with a copy of the certificate of entry of the Ship and any
other information relating to the entry of the Ship in such association.

 

8              A written confirmation from the Borrower as to which individuals are
authorised to give verbal and/or written instructions to the Lender on behalf
of the Borrower in respect of the selection of any Interest Period pursuant to
Clause 5.2 of this Agreement.

 

9              Favourable legal opinion from lawyers appointed by the Lender on
such matters concerning the laws of Bermuda, Liberia, the Marshall Islands and
the Cayman Islands and such other relevant jurisdictions as the Lender may
require in relation to, or in connection with, this Agreement, the other
Finance Documents, the Master Agreement, the Conditional Sale Agreement
Transfers and the Title Transfer Documents.

 

10           Evidence that the Lender has received the arrangement fee referred
to in Clause 22.1(a);

 

11           A favourable opinion from an independent insurance consultant
acceptable to the Lender on such matters relating to the insurances for the
Ship as the Lender may require.

 

Each of the documents specified in paragraphs
1, 2, 3 and 4 of Part A and every other copy document delivered under Part B of
this Schedule shall be certified as a true and up to date copy by a director or
the secretary (or equivalent officer) of the Borrower.

 

65

 

SCHEDULE 3

DETAILS OF SHIPS

 

 

 

	
  1

  	
   

  	
  Existing Name of Ship:

  	
   

  	
  “MEGARA”

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  New Name of Ship:

  	
   

  	
  “HAMPSTEAD”

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Existing Flag:

  	
   

  	
  Isle of Man

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Existing Official Number:

  	
   

  	
  729404

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Existing Owner:

  	
   

  	
  Hewlett Tankers LDC

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Class Society and notation:

  	
   

  	
  + 100A1 oil tanker (Double Hull) ESP*I.W.S.
  SPM NAV1 ShipRight (SDA, FDA, CM) + LMC UMS IGS at Lloyd’s Register

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  New Owner:

  	
   

  	
  KTL Hampstead, Inc.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Place of incorporation of New Owner:

  	
   

  	
  Liberia

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Registered office of New Owner:

  	
   

  	
  80 Broad Street, Monrovia, Liberia

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  New Flag:

  	
   

  	
  Marshall Islands

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Commercial Manager:

  	
   

  	
  ICB Shipping (Bermuda) Ltd (with ability to
  sub-contract to Frontline Management (Bermuda) Ltd or Frontline Management
  AS)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Technical Manager:

  	
   

  	
  Thome Ship Management Pte Ltd

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2

  	
   

  	
  Existing Name of Ship:

  	
   

  	
  “MACOMA”

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  New Name of Ship:

  	
   

  	
  “CHELSEA”

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Existing Flag:

  	
   

  	
  Isle of Man

  

 

66

 

	
   

  	
   

  	
  Existing Official Number:

  	
   

  	
  729402

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Existing Owner:

  	
   

  	
  Lawrence Tankers LDC

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Class Society and notation:

  	
   

  	
  + 100A1 oil tanker (Double Hull) ESP*I.W.S.
  SPM NAV1 ShipRight (SDA, FDA, CM) + LMC UMS IGS at Lloyd’s Register

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  New Owner:

  	
   

  	
  KTL Chelsea, Inc.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Place of incorporation of New Owner:

  	
   

  	
  Liberia

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Registered office of New Owner:

  	
   

  	
  80 Broad Street, Monrovia, Liberia

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  New Flag:

  	
   

  	
  Marshall Islands

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Commercial Manager:

  	
   

  	
  ICB Shipping (Bermuda) Ltd (with ability to
  sub-contract to Frontline Management (Bermuda) Ltd or Frontline Management
  AS)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Technical Manager:

  	
   

  	
  V. Ships UK Ltd

  

 

67

 

	
  3

  	
   

  	
  Existing Name of Ship:

  	
   

  	
  “MAGDALA”

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  New Name of Ship:

  	
   

  	
  “MAYFAIR”

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Existing Flag:

  	
   

  	
  Isle of Man

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Existing Official Number:

  	
   

  	
  729403

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Existing Owner:

  	
   

  	
  Cedarhurst Tankers LDC

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Class Society and notation:

  	
   

  	
  + 100A1 oil tanker (Double Hull) ESP*I.W.S.
  SPM NAV1 ShipRight (SDA, FDA, CM) + LMC UMS IGS at Lloyd’s Register

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  New Owner:

  	
   

  	
  KTL Mayfair, Inc.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Place of incorporation of New Owner:

  	
   

  	
  Liberia

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Registered office of New Owner:

  	
   

  	
  80 Broad Street, Monrovia, Liberia

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  New Flag:

  	
   

  	
  Marshall Islands

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Commercial Manager:

  	
   

  	
  ICB Shipping (Bermuda) Ltd (with ability to
  sub-contract to Frontline Management (Bermuda) Ltd or Frontline Management
  AS)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Technical Manager:

  	
   

  	
  Wallem Shipmanagement Limited

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4

  	
   

  	
  Existing Name of Ship:

  	
   

  	
  “MUREX”

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  New Name of Ship:

  	
   

  	
  “CAMDEN”

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Existing Flag:

  	
   

  	
  Isle of Man

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Existing Official Number:

  	
   

  	
  729405

  

 

68

 

	
   

  	
   

  	
  Existing Owner:

  	
   

  	
  Inwood Tankers LDC

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Class Society and notation:

  	
   

  	
  + 100A1 oil tanker (Double Hull) ESP*I.W.S.
  SPM NAV1 ShipRight (SDA, FDA, CM) + LMC UMS IGS at Lloyd’s Register

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  New Owner:

  	
   

  	
  KTL Camden, Inc.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Place of incorporation of New Owner:

  	
   

  	
  Liberia

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Registered office of New Owner:

  	
   

  	
  80 Broad Street, Monrovia, Liberia

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  New Flag:

  	
   

  	
  Marshall Islands

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Commercial Manager:

  	
   

  	
  ICB Shipping (Bermuda) Ltd (with ability to
  sub-contract to Frontline Management (Bermuda) Ltd or Frontline Management
  AS)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Technical Manager:

  	
   

  	
  Wallem Shipmanagement Limited

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5

  	
   

  	
  Existing Name of Ship:

  	
   

  	
  “MYRINA”

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  New Name of Ship:

  	
   

  	
  “KENSINGTON”

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Existing Flag:

  	
   

  	
  Isle of Man

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Existing Official Number:

  	
   

  	
  729406

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Existing Owner:

  	
   

  	
  Woodmere Tankers LDC

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Class Society and notation:

  	
   

  	
  + 100A1 oil tanker (Double Hull) ESP*I.W.S.
  SPM NAV1 ShipRight (SDA, FDA, CM) + LMC UMS IGS at Lloyd’s Register

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  New Owner:

  	
   

  	
  KTL Kensington, Inc.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Place of incorporation of New Owner:

  	
   

  	
  Liberia

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Registered office of New Owner:

  	
   

  	
  80 Broad Street, Monrovia, Liberia

  

 

69

 

	
   

  	
   

  	
  New Flag:

  	
   

  	
  Marshall Islands

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Commercial Manager:

  	
   

  	
  ICB Shipping (Bermuda) Ltd (with ability to
  sub-contract to Frontline Management (Bermuda) Ltd or Frontline Management
  AS)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Technical Manager:

  	
   

  	
  V. Ships UK Ltd

  

 

70

 

EXECUTION PAGE

 

 

	
  BORROWER

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SIGNED by Nicholas Sherriff

  	
  )

  	
  /s/ Nicholas
  Sherriff

  
	
   

  	
  )

  	
   

  
	
  for and on
  behalf of

  	
  )

  	
   

  
	
  KNIGHTSBRIDGE

  	
  )

  	
   

  
	
  TANKERS LIMITED

  	
  )

  	
   

  
	
  in the
  presence of: Kavita Shah

  	
  )

  	
  /s/ Kavita
  Shah

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  NEW OWNERS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SIGNED by Nicholas Sherriff

  	
  )

  	
  /s/ Nicholas
  Sherriff

  
	
   

  	
  )

  	
   

  
	
  for and on
  behalf of

  	
  )

  	
   

  
	
  KTL HAMPSTEAD, INC.

  	
  )

  	
   

  
	
  in the
  presence of: Kavita Shah

  	
  )

  	
  /s/ Kavita
  Shah

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SIGNED by Nicholas Sherriff

  	
  )

  	
  /s/ Nicholas
  Sherriff

  
	
   

  	
  )

  	
   

  
	
  for and on
  behalf of

  	
  )

  	
   

  
	
  KTL CHELSEA, INC.

  	
  )

  	
   

  
	
  in the
  presence of: Kavita Shah

  	
  )

  	
  /s/ Kavita
  Shah

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SIGNED by Nicholas Sherriff

  	
  )

  	
  /s/ Nicholas
  Sherriff

  
	
   

  	
  )

  	
   

  
	
  for and on
  behalf of

  	
  )

  	
   

  
	
  KTL MAYFAIR, INC.

  	
  )

  	
   

  
	
  in the
  presence of: Kavita Shah

  	
  )

  	
  /s/ Kavita
  Shah

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SIGNED by Nicholas Sherriff

  	
  )

  	
  /s/ Nicholas
  Sherriff

  
	
   

  	
  )

  	
   

  
	
  for and on
  behalf of

  	
  )

  	
   

  
	
  KTL CAMDEN, INC.

  	
  )

  	
   

  
	
  in the
  presence of: Kavita Shah

  	
  )

  	
  /s/ Kavita
  Shah

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SIGNED by Nicholas Sherriff

  	
  )

  	
  /s/ Nicholas
  Sherriff

  
	
   

  	
  )

  	
   

  
	
  for and on
  behalf of

  	
  )

  	
   

  
	
  KTL KENSINGTON, INC.

  	
  )

  	
   

  
	
  in the
  presence of: Kavita Shah

  	
  )

  	
  /s/ Kavita
  Shah

  

 

 

71

 

 

	
  LENDER

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SIGNED by Robert J. Manners

  	
  )

  	
  /s/ Robert
  J. Manners

  
	
   

  	
  )

  	
   

  
	
  for and on
  behalf of

  	
  )

  	
   

  
	
  THE ROYAL BANK

  	
  )

  	
   

  
	
  OF SCOTLAND plc

  	
  )

  	
   

  
	
  in the
  presence of: Martin Bennett

  	
  )

  	
  /s/ Martin
  Bennett

  

 

72Exhibit 4.35

 

(Multicurrency-Cross Border)

 

ISDA®

International
Swaps & Derivatives Association, Inc.

 

MASTER AGREEMENT

 

dated as of 2
March 2004

 

The Royal Bank of Scotland plc(“Party A”)  and Knightsbridge Tankers Limited (“Party B”)

 

have entered and/or anticipate entering into one or
more transactions (each a “Transaction”) that are or will be governed by this
Master Agreement, which includes the schedule (the “Schedule”), and the
documents and other confirming evidence (each a “Confirmation”) exchanged between
the parties confirming those Transactions.

 

Accordingly, the parties agree as follows:-

 

1.             Interpretation

 

(a)           Definitions.
The terms defined in Section 14 and in the Schedule will have the meanings
therein specified for the purpose of this Master Agreement.

 

(b)           Inconsistency.
In the event of any inconsistency between the provisions of the Schedule and
the other provisions of this Master Agreement, the Schedule will prevail. In
the event of any inconsistency between the provisions of any Confirmation and
this Master Agreement (including the Schedule), such Confirmation will prevail
for the purpose of the relevant Transaction.

 

(c)           Single Agreement. All Transactions are entered into in reliance on the fact that this
Master Agreement and all Confirmations form a single agreement between the
parties (collectively referred to as this “Agreement”), and the parties would
not otherwise enter into any Transactions.

 

2.             Obligations

 

(a)           General Conditions.

 

(i)  
Each party will make each payment or delivery specified in each
Confirmation to be made by it, subject to the other provisions of this
Agreement.

 

(ii)  
Payments under this Agreement will be made on the due date for value on
that date in the place of the account specified in the relevant Confirmation or
otherwise pursuant to this Agreement, in freely transferable funds and in the
manner customary for payments in the required currency. Where settlement is by
delivery (that is, other than by payment), such delivery will be made for
receipt on the due date in the manner customary for the relevant obligation
unless otherwise specified in the relevant Confirmation or elsewhere in this
Agreement.

 

(iii) 
Each obligation of each party under Section 2(a)(i) is subject to (1)
the condition precedent that no Event of Default or Potential Event of Default
with respect to the other party has occurred and is continuing, (2) the
condition precedent that no Early Termination Date in respect of the relevant
Transaction has occurred or been effectively designated and (3) each other
applicable condition precedent specified in this Agreement.

 

Copyright Ó 1992 by International Swaps
& Derivatives Association, Inc.

 

 

(b)           Change of Account. Either party may change its account for receiving a payment or
delivery by giving notice to the other party at least five Local Business Days
prior to the scheduled date for the payment or delivery to which such change
applies unless such other party gives timely notice of a reasonable objection
to such change.

 

(c)           Netting. If on
any date amounts would otherwise be payable:-

 

(i) in the same currency; and

 

(ii) in respect of the same Transaction,

 

by each party to the other, then, on such date, each
party’s obligation to make payment of any such amount will be payable by one
party exceeds the aggregate amount that would otherwise have been payable by
the other party, replaced by an obligation upon the party by whom the larger
aggregate amount would have been payable to pay to the other party the excess
of the larger aggregate amount over the smaller aggregate amount.

 

The parties may elect in respect of two or more
Transactions that a net amount will be determined in respect of all amounts
payable on the same date in the same currency in respect of such Transactions,
regardless of whether such amounts are payable in respect of the same
Transaction. The election may be made in the Schedule or a Confirmation by
specifying that subparagraph (ii) above will not apply to the Transactions
identified as being subject to the election, together with the starting date
(in which case subparagraph (ii) above will not, or will cease to, apply to
such Transactions from such date).  This
election may be made separately for different groups of Transactions and will
apply separately to each pairing of Offices through which the parties make and
receive payments or deliveries.

 

(d)           Deduction or Withholding for Tax.

 

(i) Gross-Up. All payments under this
Agreement will be made without any deduction or withholding for or on account
of any Tax unless such deduction or withholding is required by any applicable
law, as modified by the practice of any relevant governmental revenue
authority, then in effect. If a party is so required to deduct or withhold,
then that party (“X”) will:-

 

(1) 
promptly notify the other party (“Y”) of such requirement;

 

(2) 
pay to the relevant authorities the full amount required to be deducted
or withheld (including the full amount required to be deducted or withheld from
any additional amount paid by X to Y under this Section 2(d)) promptly upon the
earlier of determining that such deduction or withholding is required or
receiving notice that such amount has been assessed against Y;

 

(3) promptly forward to Y an official
receipt (or a certified copy), or other documentation reasonably acceptable to
Y, evidencing such payment to such authorities; and

 

(4) if such Tax is an Indemnifiable Tax,
pay to Y, in addition to the payment to which Y is otherwise entitled under
this Agreement, such additional amount as is necessary to ensure that the net
amount actually received by Y (free and clear of Indemnifiable Taxes, whether
assessed against X or Y) will equal the full amount Y would have received had
no such deduction or withholding been required. However, X will not be required
to pay any additional amount to Y to the extent that it would not be required
to be paid but for:-

 

(A) the failure by Y to comply with or
perform any agreement contained in Section 4(a)(i), 4(a)(iii) or 4(d); or

 

(B) the failure of a representation made by
Y pursuant to Section 3(f) to be accurate and true unless such failure would
not have occurred but for (I) any action taken by a taxing authority, or
brought in a court of competent jurisdiction, on or after the date on which a
Transaction is entered into (regardless of whether such action is taken or
brought with respect to a party to this Agreement) or (II) a Change in Tax Law.

 

2

 

(ii) Liability. If:-

 

(1) X is required by any applicable law, as
modified by the practice of any relevant governmental revenue authority, to
make any deduction or withholding in respect of which X would not be required
to pay an additional amount to Y under Section 2(d)(i)(4);

 

(2) X does not so deduct or withhold; and

 

(3) a liability resulting from such Tax is
assessed directly against X, then,

 

except to the
extent Y has satisfied or then satisfies the liability resulting from such Tax,
Y will promptly pay to X the amount of such liability (including any related
liability for interest, but including any related liability for penalties only
if Y has failed to comply with or perform any agreement contained in Section
4(a)(i), 4(a)(iii) or 4(d)).

 

(e)           Default Interest; Other Amounts. Prior to the occurrence or effective designation of an Early
Termination Date in respect of the relevant Transaction, a party that defaults
in the performance of any payment obligation will, to the extent permitted by
law and subject to Section 6(c), be required to pay interest (before as well as
after judgment) on the overdue amount to the other party on demand in the same
currency as such overdue amount, for the period from (and including) the
original due date for payment to (but excluding) the date of actual payment, at
the Default Rate. Such interest will be calculated on the basis of daily
compounding and the actual number of days elapsed. If, prior to the occurrence
or effective designation of an Early Termination Date in respect of the
relevant Transaction, a party defaults in the performance of any obligation
required to be settled by delivery, it will compensate the other party on
demand if and to the extent provided for in the relevant Confirmation or
elsewhere in this Agreement.

 

3.             Representations

 

Each party represents to the other party (which
representations will be deemed to be repeated by each party on each date on
which a Transaction is entered into and, in the case of the representations in
Section 3(f), at all times until the termination of this Agreement) that:-

 

(a)           Basic Representations.

 

(i) Status. It is duly organised and validly
existing under the laws of the jurisdiction of its organisation or
incorporation and, if relevant under such laws, in good standing;

 

(ii) 
Powers.
It has the power to execute this Agreement and any other documentation relating
to this Agreement to which it is a party, to deliver this Agreement and any
other documentation relating to this Agreement that it is required by this
Agreement to deliver and to perform its obligations under this Agreement and
any obligations it has under any Credit Support Document to which it is a party
and has taken all necessary action to authorise such execution, delivery and
performance;

 

(iii) No Violation or Conflict. Such execution,
delivery and performance do not violate or conflict with any law applicable to
it, any provision of its constitutional documents, any order or judgment of any
court or other agency of government applicable to it or any of its assets or
any contractual restriction binding on or affecting it or any of its assets;

 

(iv) Consents. All governmental and other
consents that are required to have been obtained by it with respect to this
Agreement or any Credit Support Document to which it is a party have been
obtained and are in full force and effect and all conditions of any such
consents have been complied with; and

 

(v)  Obligations
Binding. Its obligations under this Agreement and any Credit Support
Document to which it is a party constitute its legal, valid and binding
obligations, enforceable in accordance with their respective terms (subject to
applicable bankruptcy, reorganisation, insolvency, moratorium or similar laws
affecting creditors’ rights generally and subject, as to enforceability, to
equitable principles of general application (regardless of whether enforcement
is sought in a proceeding in equity or at law)).

 

3

 

(b)           Absence of Certain Events. No Event of Default or Potential Event of Default or, to its
knowledge, Termination Event with respect to it has occurred and is continuing
and no such event or circumstance would occur as a result of its entering into
or performing its obligations under this Agreement or any Credit Support
Document to which it is a party.

 

(c)           Absence of Litigation. There is not pending or, to its knowledge, threatened against it or
any of its Affiliates any action, suit or proceeding at law or in equity or
before any court, tribunal, governmental body, agency or official or any
arbitrator that is likely to affect the legality, validity or enforceability
against it of this Agreement or any Credit Support Document to which it is a
party or its ability to perform its obligations under this Agreement or such
Credit Support Document.

 

(d)           Accuracy of Specified Information. All applicable information that is furnished in writing by or on
behalf of it to the other party and is identified for the purpose of this
Section 3(d) in the Schedule is, as of the date of the information, true,
accurate and complete in every material respect.

 

(e)           Payer Tax Representation. Each representation specified in the Schedule as being made by it
for the purpose of this Section 3(e) is accurate and true.

 

(f)            Payee Tax Representations. Each representation specified in the Schedule as being made by it
for the purpose of this Section 3(f) is accurate and true.

 

4.             Agreements

 

Each party agrees with the other that, so long as
either party has or may have any obligation under this Agreement or under any
Credit Support Document to which it is a party:-

 

(a)           Furnish Specified Information. It will deliver to the other party or, in certain cases under
subparagraph (iii) below, to such government or taxing authority as the other
party reasonably directs:-

 

(i) any forms, documents or certificates
relating to taxation specified in the Schedule or any Confirmation;

 

(ii) 
any other documents specified in the Schedule or any Confirmation; and

 

(iii) upon reasonable demand by such other
party, any form or document that may be required or reasonably requested in
writing in order to allow such other party or its Credit Support Provider to
make a payment under this Agreement or any applicable Credit Support Document
without any deduction or withholding for or on account of any Tax or with such
deduction or withholding at a reduced rate (so long as the completion,
execution or submission of such form or document would not materially prejudice
the legal or commercial position of the party in receipt of such demand), with
any such form or document to be accurate and completed in a manner reasonably
satisfactory to such other party and to be executed and to be delivered with
any reasonably required certification,

 

in each case by the date specified in the Schedule or
such Confirmation or, if none is specified, as soon as reasonably practicable.

 

(b)           Maintain Authorisations. It will use all reasonable efforts to maintain in full force and
effect all consents of any governmental or other authority that are required to
be obtained by it with respect to this Agreement or any Credit Support Document
to which it is a party and will use all reasonable efforts to obtain any that
may become necessary in the future.

 

(c)           Comply with Laws. It will comply in all material respects with all applicable laws
and orders to which it may be subject if failure so to comply would materially
impair its ability to perform its obligations under this Agreement or any
Credit Support Document to which it is a party.

 

(d)           Tax Agreement.
It will give notice of any failure of a representation made by it under Section
3(f) to be accurate and true promptly upon learning of such failure.

 

(e)           Payment of Stamp Tax. Subject to Section 11, it will pay any Stamp Tax levied or imposed
upon it or in respect of its execution or performance of this Agreement by a
jurisdiction in which it is incorporated,

 

4

 

organised, managed and controlled, or considered to
have its seat, or in which a branch or office through which it is acting for
the purpose of this Agreement is located (“Stamp Tax Jurisdiction”) and will
indemnify the other party against any Stamp Tax levied or imposed upon the
other party or in respect of the other party’ s execution or performance of
this Agreement by any such Stamp Tax Jurisdiction which is not also a Stamp Tax
Jurisdiction with respect to the other party.

 

5.             Events
of Default and Termination Events

 

(a)           Events of Default. The occurrence at any
time with respect to a party or, if applicable, any Credit Support Provider of
such party or any Specified Entity of such party of any of the following events
constitutes an event of default (an “Event of Default”) with respect to such
party:-

 

(i) 
Failure
to Pay or Deliver. Failure by the party to make, when due, any
payment under this Agreement or delivery under Section 2(a)(i) or 2(e) required
to be made by it if such failure is not remedied on or before the third Local
Business Day after notice of such failure is given to the party;

 

(ii) 
Breach
of Agreement. Failure by the party to comply with or perform any
agreement or obligation (other than an obligation to make any payment under
this Agreement or delivery under Section 2(a)(i) or 2(e) or to give notice of a
Termination Event or any agreement or obligation under Section 4(a)(i),
4(a)(iii) or 4(d)) to be complied with or performed by the party in accordance
with this Agreement if such failure is not remedied on or before the thirtieth
day after notice of such failure is given to the party;

 

(iii) Credit Support Default.

 

(1) Failure by the party or any Credit Support
Provider of such party to comply with or perform any agreement or obligation to
be complied with or performed by it in accordance with any Credit Support
Document if such failure is continuing after any applicable grace period has
elapsed;

 

(2) the expiration or termination of such
Credit Support Document or the failing or ceasing of such Credit Support
Document to be in full force and effect for the purpose of this Agreement (in
either case other than in accordance with its terms) prior to the satisfaction
of all obligations of such party under each Transaction to which such Credit
Support Document relates without the written consent of the other party; or

 

(3) the party or such Credit Support
Provider disaffirms, disclaims, repudiates or rejects, in whole or in part, or
challenges the validity of, such Credit Support Document;

 

(iv) Misrepresentation. A representation (other
than a representation under Section 3(e) or (f)) made or repeated or deemed to
have been made or repeated by the party or any Credit Support Provider of such
party in this Agreement or any Credit Support Document proves to have been
incorrect or misleading in any material respect when made or repeated or deemed
to have been made or repeated;

 

(v) Default under Specified Transaction. The
party, any Credit Support Provider of such party or any applicable Specified
Entity of such party (1) defaults under a Specified Transaction and, after
giving effect to any applicable notice requirement or grace period, there
occurs a liquidation of, an acceleration of obligations under, or an early
termination of, that Specified Transaction, (2) defaults, after giving effect
to any applicable notice requirement or grace period, in making any payment or
delivery due on the last payment, delivery or exchange date of, or any payment
on early termination of, a Specified Transaction (or such default continues for
at least three Local Business Days if there is no applicable notice requirement
or grace period) or (3) disaffirms, disclaims, repudiates or rejects, in whole
or in part, a Specified Transaction (or such action is taken by any person or
entity appointed or empowered to operate it or act on its behalf);

 

(vi) Cross Default. If “Cross Default” is
specified in the Schedule as applying to the party, the occurrence or existence
of (1) a default, event of default or other similar condition or event (however

 

5

 

described) in respect of such party, any
Credit Support Provider of such party or any applicable Specified Entity of
such party under one or more agreements or instruments relating to Specified
Indebtedness of any of them (individually or collectively) in an aggregate
amount of not less than the applicable Threshold Amount (as specified in the
Schedule) which has resulted in such Specified Indebtedness becoming, or
becoming capable at such time of being declared, due and payable under such
agreements or instruments, before it would otherwise have been due and payable
or (2) a default by such party, such Credit Support Provider or such Specified
Entity (individually or collectively) in making one or more payments on the due
date thereof in an aggregate amount of not less than the applicable Threshold
Amount under such agreements or instruments (after giving effect to any
applicable notice requirement or grace period);

 

(vii) Bankruptcy. The party, any Credit Support
Provider of such party or any applicable Specified Entity of such party:-

 

(1) is dissolved (other than pursuant to a
consolidation, amalgamation or merger); (2) becomes insolvent or is unable to
pay its debts or fails or admits in writing its inability generally to pay its
debts as they become due; (3) makes a general assignment, arrangement or
composition with or for the benefit of its creditors; (4) institutes or has
instituted against it a proceeding seeking a judgment of insolvency or
bankruptcy or any other relief under any bankruptcy or insolvency law or other
similar law affecting creditors’ rights, or a petition is presented for its winding-up
or liquidation, and, in the case of any such proceeding or petition instituted
or presented against it, such proceeding or petition (A) results in a judgment
of insolvency or bankruptcy or the entry of an order for relief or the making
of an order for its winding-up or liquidation or (B) is not dismissed,
discharged, stayed or restrained in each case within 30 days of the institution
or presentation thereof; (5) has a resolution passed for its winding-up,
official management or liquidation (other than pursuant to a consolidation,
amalgamation or merger); (6) seeks or becomes subject to the appointment of an
administrator, provisional liquidator, conservator, receiver, trustee,
custodian or other similar official for it or for all or substantially all its
assets; (7) has a secured party take possession of all or substantially all its
assets or has a distress, execution, attachment, sequestration or other legal
process levied, enforced or sued on or against all or substantially all its
assets and such secured party maintains possession, or any such process is not
dismissed, discharged, stayed or restrained, in each case within 30 days
thereafter; (8) causes or is subject to any event with respect to it which,
under the applicable laws of any jurisdiction, has an analogous effect to any
of the events specified in clauses (1) to (7) (inclusive); or (9) takes any
action in furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the foregoing acts; or

 

(viii) Merger Without Assumption. The party or
any Credit Support Provider of such party consolidates or amalgamates with, or
merges with or into, or transfers all or substantially all its assets to,
another entity and, at the time of such consolidation, amalgamation, merger or
transfer:-

 

(1) the resulting, surviving or transferee
entity fails to assume all the obligations of such party or such Credit Support
Provider under this Agreement or any Credit Support Document to which it or its
predecessor was a party by operation of law or pursuant to an agreement
reasonably satisfactory to the other party to this Agreement; or

 

(2) the benefits of any Credit Support
Document fail to extend (without the consent of the other party) to the
performance by such resulting, surviving or transferee entity of its
obligations under this Agreement.

 

(b)           Termination Events. The occurrence at any time with respect to a party or, if
applicable, any Credit Support Provider of such party or any Specified Entity
of such party of any event specified below constitutes an Illegality if the
event is specified in (i) below, a Tax Event if the event is specified in (ii)
below or a Tax Event Upon Merger if the event is specified in (iii) below, and,
if specified to be applicable, a Credit Event

 

6

 

Upon Merger if the event is specified pursuant to (iv)
below or an Additional Termination Event if the event is specified pursuant to
(v) below:-

 

(i) Illegality. Due to the adoption of, or any
change in, any applicable law after the date on which a Transaction is entered
into, or due to the promulgation of, or any change in, the interpretation by
any court, tribunal or regulatory authority with competent jurisdiction of any
applicable law after such date, it becomes unlawful (other than as a result of
a breach by the party of Section 4(b)) for such party (which will be the
Affected Party):-

 

(1) to perform any absolute or contingent
obligation to make a payment or delivery or to receive a payment or delivery in
respect of such Transaction or to comply with any other material provision of
this Agreement relating to such Transaction; or

 

(2) to perform, or for any Credit Support
Provider of such party to perform, any contingent or other obligation which the
party (or such Credit Support Provider) has under any Credit Support Document
relating to such Transaction;

 

(ii) Tax Event. Due to (x) any action taken by
a taxing authority, or brought in a court of competent jurisdiction, on or
after the date on which a Transaction is entered into (regardless of whether
such action is taken or brought with respect to a party to this Agreement) or
(y) a Change in Tax Law, the party (which will be the Affected Party) will, or
there is a substantial likelihood that it will, on the next succeeding
Scheduled Payment Date (1) be required to pay to the other party an additional
amount in respect of an Indemnifiable Tax under Section 2(d)(i)(4) (except in
respect of interest under Section 2(e), 6(d)(ii) or 6(e)) or (2) receive a
payment from which an amount is required to be deducted or withheld for or on
account of a Tax (except in respect of interest under Section 2(e), 6(d)(ii) or
6(e)) and no additional amount is required to be paid in respect of such Tax
under Section 2(d)(i)(4) (other than by reason of Section 2(d)(i)(4)(A) or
(B));

 

(iii) Tax Event Upon Merger. The party (the
“Burdened Party”) on the next succeeding Scheduled Payment Date will either (1)
be required to pay an additional amount in respect of an Indemnifiable Tax
under Section 2(d)(i)(4) (except in respect of interest under Section 2(e),
6(d)(ii) or 6(e)) or  (2) receive a
payment from which an amount has been deducted or withheld for or on account of
any Indemnifiable Tax in respect of which the other party is not required to
pay an additional amount (other than by reason of Section 2(d)(i)(4)(A) or
(B)), in either case as a result of a party consolidating or amalgamating with,
or merging with or into, or transferring all or substantially all its assets
to, another entity (which will be the Affected Party) where such action does
not constitute an event described in Section 5(a)(viii);

 

(iv) Credit Event Upon Merger. If “Credit Event
Upon Merger” is specified in the Schedule as applying to the party, such party
(“X”), any Credit Support Provider of X or any applicable Specified Entity of X
consolidates or amalgamates with, or merges with or into, or transfers all or
substantially all its assets to, another entity and such action does not
constitute an event described in Section 5(a)(viii) but the creditworthiness of
the resulting, surviving or transferee entity is materially weaker than that of
X, such Credit Support Provider or such Specified Entity, as the case may be,
immediately prior to such action (and, in such event, X or its successor or
transferee, as appropriate, will be the Affected Party); or

 

(v) Additional  Termination Event. If any
“Additional Termination Event” is specified in the Schedule or any Confirmation
as applying, the occurrence of such event (and, in such event, the Affected
Party or Affected Parties shall be as specified for such Additional Termination
Event in the Schedule or such Confirmation).

 

(c)     Event of
Default and Illegality. If an event or circumstance which would
otherwise constitute or give rise to an Event of Default also constitutes an
Illegality, it will be treated as an Illegality and will not constitute an
Event of Default.

 

7

 

6.             Early
Termination

 

(a)           Right to Terminate Following Event of Default. If at any time an Event of Default with respect to a party (the
“Defaulting Party”) has occurred and is then continuing, the other party (the
“Non-defaulting Party”) may, by not more than 20 days notice to the Defaulting
Party specifying the relevant Event of Default, designate a day not earlier
than the day such notice is effective as an Early Termination Date in respect
of all outstanding Transactions. If, however, “Automatic Early Termination” is
specified in the Schedule as applying to a party, then an Early Termination
Date in respect of all outstanding Transactions will occur immediately upon the
occurrence with respect to such party of an Event of Default specified in
Section 5(a)(vii)(1), (3), (5), (6) or, to the extent analogous thereto, (8), and
as of the time immediately preceding the institution of the relevant proceeding
or the presentation of the relevant petition upon the occurrence with respect
to such party of an Event of Default specified in Section 5(a)(vii)(4) or, to
the extent analogous thereto, (8).

 

(b)           Right to Terminate Following Termination
Event.

 

(i) Notice. If a Termination Event occurs, an
Affected Party will, promptly upon becoming aware of it, notify the other
party, specifying the nature of that Termination Event and each Affected
Transaction and will also give such other information about that Termination
Event as the other party may reasonably require.

 

(ii) Transfer to Avoid Termination Event. If
either an Illegality under Section 5(b)(i)(1) or a Tax Event occurs and there
is only one Affected Party, or if a Tax Event Upon Merger occurs and the
Burdened Party is the Affected Party, the Affected Party will, as a condition
to its right to designate an Early Termination Date under Section 6(b)(iv), use
all reasonable efforts (which will not require such party to incur a loss,
excluding immaterial, incidental expenses) to transfer within 20 days after it
gives notice under Section 6(b)(i) all its rights and obligations under this
Agreement in respect of the Affected Transactions to another of its Offices or
Affiliates so that such Termination Event ceases to exist.

 

 If
the Affected Party is not able to make such a transfer it will give notice to
the other party to that effect within such 20 day period, whereupon the other
party may effect such a transfer within 30 days after the notice is given under
Section 6(b)(i).

 

Any such transfer by a party under this
Section 6(b)(ii) will be subject to and conditional upon the prior written
consent of the other party, which consent will not be withheld if such other
party’s policies in effect at such time would permit it to enter into
transactions with the transferee on the terms proposed.

 

(iii) Two Affected Parties. If an Illegality
under Section 5(b)(i)(1) or a Tax Event occurs and there are two Affected
Parties, each party will use all reasonable efforts to reach agreement within
30 days after notice thereof is given under Section 6(b)(i) on action to avoid
that Termination Event.

 

(iv) Right to Terminate. If:-

 

(1) a transfer under Section 6(b)(ii) or an
agreement under Section 6(b)(iii), as the case may be, has not been effected
with respect to all Affected Transactions within 30 days after an Affected
Party gives notice under Section 6(b)(i); or

 

(2) an Illegality under Section 5(b)(i)(2),
a Credit Event Upon Merger or an Additional Termination Event occurs, or a Tax
Event Upon Merger occurs and the Burdened Party is not the Affected Party,

 

either party in the case of an Illegality,
the Burdened Party in the case of a Tax Event Upon Merger, any Affected Party
in the case of a Tax Event or an Additional Termination Event if there is more
than one Affected Party, or the party which is not the Affected Party in the
case of a Credit Event Upon Merger or an Additional Termination Event if there
is only one Affected Party may, by not more than 20 days notice to the other
party and provided that the relevant Termination Event is then

 

8

 

continuing, designate a day not earlier
than the day such notice is effective as an Early Termination Date in respect
of all Affected Transactions.

 

(c)           Effect of Designation.

 

(i) If notice designating an Early
Termination Date is given under Section 6(a) or (b), the Early Termination Date
will occur on the date so designated, whether or not the relevant Event of
Default or Termination Event is then continuing.

 

(ii) Upon the occurrence or effective
designation of an Early Termination Date, no further payments or deliveries
under Section 2(a)(i) or 2(e) in respect of the Terminated Transactions will be
required to be made, but without prejudice to the other provisions of this
Agreement. The amount, if any, payable in respect of an Early Termination Date
shall be determined pursuant to Section 6(e).

 

(d)           Calculations.

 

(i) Statement. On or as soon as reasonably
practicable following the occurrence of an Early Termination Date, each party
will make the calculations on its part, if any, contemplated by Section 6(e)
and will provide to the other party a statement (1) showing, in reasonable
detail, such calculations (including all relevant quotations and specifying any
amount payable under Section 6(e)) and (2) giving details of the relevant
account to which any amount payable to it is to be paid. In the absence of written
confirmation from the source of a quotation obtained in determining a Market
Quotation, the records of the party obtaining such quotation will be conclusive
evidence of the existence and accuracy of such quotation.

 

(ii) Payment Date. An amount calculated as
being due in respect of any Early Termination Date under Section 6(e) will be
payable on the day that notice of the amount payable is effective (in the case
of an Early Termination Date which is designated or occurs as a result of an
Event of Default and on the day which is two Local Business Days after the day
on which notice of the amount payable is effective (in the case of an Early
Termination Date which is designated as a result of a Termination Event). Such
amount will be paid together with (to the extent permitted under applicable
law) interest thereon (before as well as after judgment) in the Termination
Currency, from (and including) the relevant Early Termination Date to (but
excluding) the date such amount is paid, at the Applicable Rate. Such interest
will be calculated on the basis of daily compounding and the actual number of
days elapsed.

 

(e)           Payments on Early Termination. If an Early Termination Date occurs, the following provisions shall
apply based on the parties’ election in the Schedule of a payment measure,
either “Market Quotation” or “Loss”, and a payment method, either the “First
Method” or the “Second Method”. If the parties fail to designate a payment
measure or payment method in the Schedule, it will be deemed that “Market Quotation”
or the “Second Method”, as the case may be, shall apply. The amount, if any,
payable in respect of an Early Termination Date and determined pursuant to this
Section will be subject to any Set-off.

 

(i) Events of Default. If the Early
Termination Date results from an Event of Default:-

 

(1) First Method and Market Quotation. If the
First Method and Market Quotation apply, the Defaulting Party will pay to the
Non-defaulting Party the excess, if a positive number, of (A) the sum of the
Settlement Amount (determined by the Non-defaulting Party) in respect of the
Terminated Transactions and the Termination Currency Equivalent of the Unpaid
Amounts owing to the Non-defaulting Party over (B) the Termination Currency
Equivalent of the Unpaid Amounts owing to the Defaulting Party.

 

(2) First Method and Loss. If the First Method
and Loss apply, the Defaulting Party will pay to the Non-defaulting Party, if a
positive number, the Non-defaulting Party’s Loss in respect of this Agreement.

 

(3) Second Method and Market Quotation. If the
Second Method and Market Quotation apply, an amount will be payable equal to
(A) the sum of the Settlement Amount (determined by the

 

9

 

Non-defaulting Party) in respect of the
Terminated Transactions and the Termination Currency Equivalent of the Unpaid
Amounts owing to the Non-defaulting Party less (B) the Termination Currency
Equivalent of the Unpaid Amounts owing to the Defaulting Party. If that amount
is a positive number, the Defaulting Party will pay it to the Non-defaulting
Party; if it is a negative number, the Non-defaulting Party will pay the
absolute value of that amount to the Defaulting Party.

 

(4) Second Method and Loss. If the Second
Method and Loss apply, an amount will be payable equal to the Non-defaulting
Party’s Loss .in respect of this Agreement. If that amount is a positive
number, the Defaulting Party will pay it to the Non-defaulting Party; if it is
a negative number, the Non-defaulting Party will pay the absolute value of that
amount to the Defaulting Party.

 

(ii) Termination Events. If the Early
Termination Date results from a Termination Event:-

 

(1) One Affected Party. If there is one
Affected Party, the amount payable will be determined in accordance with Section
6(e)(i)(3), if Market Quotation applies, or Section 6(e)(i)(4), if Loss
applies, except that, in either case, references to the Defaulting Party and to
the Non-defaulting Party will be deemed to be references to the Affected Party
and the party which is not the Affected Party, respectively, and, if Loss
applies and fewer than all the Transactions are being terminated, Loss shall be
calculated in respect of all Terminated Transactions.

 

(2) Two Affected Parties. If there are two
Affected Parties:-

 

(A) if Market
Quotation applies, each party will determine a Settlement Amount in respect of
the Terminated Transactions, and an amount will be payable equal to (I) the sum
of (a) one-half of the difference between the Settlement Amount of the party
with the higher Settlement Amount (“X”) and the Settlement Amount of the party
with the lower Settlement Amount (“Y”) and (b) the Termination Currency
Equivalent of the Unpaid Amounts owing to X less (II) the Termination
Currency Equivalent of the Unpaid Amounts owing to Y; and

 

(B) if Loss
applies, each party will determine its Loss in respect of this Agreement (or,
if fewer than all the Transactions are being terminated, in respect of all
Terminated Transactions) and an amount will be payable equal to one-half of the
difference between the Loss of the party with the higher Loss (“X”) and the
Loss of the party with the lower Loss (“Y”).

 

If the amount
payable is a positive number, Y will pay it to X; if it is a negative number, X
will pay the absolute value of that amount to Y.

 

(iii) Adjustment for Bankruptcy. In
circumstances where an Early Termination Date occurs because “Automatic Early
Termination” applies in respect of a party, the amount determined under this
Section 6(e) will be subject to such adjustments as are appropriate and
permitted by law to reflect any payments or deliveries made by one party to the
other under this Agreement (and retained by such other party) during the period
from the relevant Early Termination Date to the date for payment determined under
Section 6(d)(ii).

 

(iv) Pre-Estimate. The parties agree that if
Market Quotation applies an amount recoverable under this Section 6(e) is a
reasonable pre-estimate of loss and not a penalty. Such amount is payable for
the loss of bargain and the loss of protection against future risks and except
as otherwise provided in this Agreement neither party will be entitled to
recover any additional damages as a consequence of such losses.

 

10

 

7.             Transfer

 

Subject to Section 6(b)(ii), neither this Agreement
nor any interest or obligation in or under this Agreement may be transferred
(whether by way of security or otherwise) by either party without the prior
written consent of the other party, except that:-

 

(a)           a party may make such a
transfer of this Agreement pursuant to a consolidation or amalgamation with, or
merger with or into, or transfer of all or substantially all its assets to,
another entity (but without prejudice to any other right or remedy under this
Agreement); and

 

(b)           a party may make such a
transfer of all or any part of its interest in any amount payable to it from a
Defaulting Party under Section 6(e).

 

Any purported transfer that is not in compliance with
this Section will be void.

 

8.             Contractual
Currency

 

(a)           Payment in the Contractual Currency. Each payment under this Agreement will be made in the relevant
currency specified in this Agreement for that payment (the “Contractual
Currency”). To the extent permitted by applicable law, any obligation to make
payments under this Agreement in the Contractual Currency will not be
discharged or satisfied by any tender in any currency other than the
Contractual Currency, except to the extent such tender results in the actual
receipt by the party to which payment is owed, acting in a reasonable manner
and in good faith in converting the currency so tendered into the Contractual
Currency, of the full amount in the Contractual Currency of all amounts payable
in respect of this Agreement. If for any reason the amount in the Contractual
Currency so received falls short of the amount in the Contractual Currency
payable in respect of this Agreement, the party required to make the payment
will, to the extent permitted by applicable law, immediately pay such additional
amount in the Contractual Currency as may be necessary to compensate for the
shortfall. If for any reason the amount in the Contractual Currency so received
exceeds the amount in the Contractual Currency payable in respect of this
Agreement, the party receiving the payment will refund promptly the amount of
such excess.

 

(b)           Judgments. To
the extent permitted by applicable law, if any judgment or order expressed in a
currency other than the Contractual Currency is rendered (i) for the payment of
any amount owing in respect of this Agreement, (ii) for the payment of any
amount relating to any early termination in respect of this Agreement or (iii)
in respect of a judgment or order of another court for the payment of any
amount described in (i) or (ii) above, the party seeking recovery, after
recovery in full of the aggregate amount to which such party is entitled
pursuant to the judgment or order, will be entitled to receive immediately from
the other party the amount of any shortfall of the Contractual Currency
received by such party as a consequence of sums paid in such other currency and
will refund promptly to the other party any excess of the Contractual Currency
received by such party as a consequence of sums paid in such other currency if
such shortfall or such excess arises or results from any variation between the
rate of exchange at which the Contractual Currency is converted into the
currency of the judgment or order for the purposes of such judgment or order
and the rate of exchange at which such party is able, acting in a reasonable
manner and in good faith in converting the currency received into the
Contractual Currency, to purchase the Contractual Currency with the amount of
the currency of the judgment or order actually received by such party. The term
“rate of exchange” includes, without limitation, any premiums and costs of
exchange payable in connection with the purchase of or conversion into the
Contractual Currency.

 

(c)           Separate Indemnities. To the extent permitted by applicable law, these indemnities
constitute separate and independent obligations from the other obligations in
this Agreement, will be enforceable as separate and independent causes of
action, will apply notwithstanding any indulgence granted by the party to which
any payment is owed and will not be affected by judgment being obtained or
claim or proof being made for any other sums payable in respect of this
Agreement.

 

(d)           Evidence of Loss. For the purpose of this Section 8, it will be sufficient for a
party to demonstrate that it would have suffered a loss had an actual exchange
or purchase been made.

 

11

 

9.             Miscellaneous

 

(a)           Entire Agreement. This Agreement constitutes the entire agreement and understanding
of the parties with respect to its subject matter and supersedes all oral
communication and prior writings with respect thereto.

 

(b)           Amendments. No
amendment, modification or waiver in respect of this Agreement will be
effective unless in writing (including a writing evidenced by a facsimile
transmission) and executed by each of the parties or confirmed by an exchange
of telexes or electronic messages on an electronic messaging system.

 

(c)           Survival of Obligations. Without prejudice to Sections 2(a)(iii) and 6(c)(ii), the
obligations of the parties under this Agreement will survive the termination of
any Transaction.

 

(d)           Remedies Cumulative. Except as provided in this Agreement, the rights, powers, remedies
and privileges provided in this Agreement are cumulative and not exclusive of
any rights, powers, remedies and privileges provided by law.

 

(e)           Counterparts and Confirmations.

 

(i) This Agreement (and each amendment,
modification and waiver in respect of it) may be executed and delivered in
counterparts (including by facsimile transmission), each of which will be
deemed an original.

 

(ii) The parties intend that they are
legally bound by the terms of each Transaction from the moment they agree to
those terms (whether orally or otherwise). A Confirmation shall be entered into
as soon as practicable and may be executed and delivered in counterparts
(including by facsimile transmission) or be created by an exchange of telexes
or by an exchange of electronic messages on an electronic messaging system,
which in each case will be sufficient for all purposes to evidence a binding
supplement to this Agreement. The parties will specify therein or through
another effective means that any such counterpart, telex or electronic message
constitutes a Confirmation.

 

(f)            No Waiver of Rights. A failure or delay in exercising any right, power or privilege in
respect of this Agreement will not be presumed to operate as a waiver, and a
single or partial exercise of any right, power or privilege will not be
presumed to preclude any subsequent or further exercise, of that right, power
or privilege or the exercise of any other right, power or privilege.

 

(g)           Headings. The
headings used in this Agreement are for convenience of reference only and are
not to affect the construction of or to be taken into consideration in
interpreting this Agreement.

 

10.          Offices;
Multibranch Parties

 

(a)           If Section 10(a) is
specified in the Schedule as applying, each party that enters into a
Transaction through an Office other than its head or home office represents to
the other party that, notwithstanding the place of booking office or
jurisdiction of incorporation or organisation of such party, the obligations of
such party are the same as if it had entered into the Transaction through its
head or home office. This representation will be deemed to be repeated by such
party on each date on which a Transaction is entered into.

 

(b)           Neither party may change
the Office through which it makes and receives payments or deliveries for the
purpose of a Transaction without the prior written consent of the other party.

 

(c)           If a party is specified as
a Multibranch Party in the Schedule, such Multibranch Party may make and
receive payments or deliveries under any Transaction through any Office listed
in the Schedule, and the Office through which it makes and receives payments or
deliveries with respect to a Transaction will be specified in the relevant
Confirmation.

 

11.          Expenses

 

A Defaulting Party will, on demand, indemnify and hold
harmless the other party for and against all reasonable out-of-pocket expenses,
including legal fees and Stamp Tax, incurred by such other party by reason of
the enforcement and protection of its rights under this Agreement or any Credit
Support Document 

 

12

 

to which the Defaulting Party is a party or by reason
of the early termination of any Transaction, including, but not limited to,
costs of collection.

 

12.          Notices

 

(a)           Effectiveness.
Any notice or other communication in respect of this Agreement may be given in
any manner set forth below (except that a notice or other communication under
Section 5 or 6 may not be given by facsimile transmission or electronic
messaging system) to the address or number or in accordance with the electronic
messaging system details provided (see the Schedule) and will be deemed
effective as indicated:-

 

(i)  
if in writing and delivered in person or by courier, on the date it is
delivered;

 

(ii) 
if sent by telex, on the date the recipient’ s answerback is received;

 

(iii) if sent by facsimile transmission, on
the date that transmission is received by a responsible employee of the
recipient in legible form (it being agreed that the burden of proving receipt
will be on the sender and will not be met by a transmission report generated by
the sender’s facsimile machine);

 

(iv) if sent by certified or registered
mail (airmail, if overseas) or the equivalent (return receipt requested), on
the date that mail is delivered or its delivery is attempted; or

 

(v) 
if sent by electronic messaging system, on the date that electronic
message is received, unless the date of that delivery (or attempted delivery)
or that receipt, as applicable, is not a Local Business Day or that
communication is delivered (or attempted) or received, as applicable, after the
close of business on a Local Business Day, in which case that communication
shall be deemed given and effective on the first following day that is a Local
Business Day.

 

(b)           Change of Addresses. Either party may by notice to the other change the address, telex
or facsimile number or electronic messaging system details at which notices or
other communications are to be given to it.

 

13.          Governing
Law and Jurisdiction

 

(a)           Governing Law.
This Agreement will be governed by and construed in accordance with the law
specified in the Schedule.

 

(b)           Jurisdiction.
With respect to any suit, action or proceedings relating to this Agreement
(“Proceedings”), each party irrevocably:-

 

(i) submits to the jurisdiction of the
English courts, if this Agreement is expressed to be governed by English law,
or to the non-exclusive jurisdiction of the courts of the State of New York and
the United States District Court located in the Borough of Manhattan in New
York City, if this Agreement is expressed to be governed by the laws of the
State of New York; and

 

(ii) waives any objection which it may have
at any time to the laying of venue of any Proceedings brought in any such
court, waives any claim that such Proceedings have been brought in an
inconvenient forum and further waives the right to object, with respect to such
Proceedings, that such court does not have any jurisdiction over such party.

 

Nothing in this Agreement precludes either party from
bringing Proceedings in any other jurisdiction (outside, if this Agreement is
expressed to be governed by English law, the Contracting States, as defined in
Section 1(3) of the Civil Jurisdiction and Judgments Act 1982 or any
modification, extension or re-enactment thereof for the time being in force)
nor will the bringing of Proceedings in any one or more jurisdictions preclude
the bringing of Proceedings in any other jurisdiction.

 

(c)           Service of Process. Each party irrevocably appoints the Process Agent (if any)
specified opposite its name in the Schedule to receive, for it and on its
behalf, service of process in any Proceedings. If for any

 

13

 

reason any party’s Process Agent is unable to act as
such, such party will promptly notify the other party and within 30 days
appoint a substitute process agent acceptable to the other party. The parties
irrevocably consent to service of process given in the manner provided for
notices in Section 12. Nothing in this Agreement will affect the right of
either party to serve process in any other manner permitted by law.

 

(d)     Waiver of
Immunities. Each party irrevocably waives, to the fullest extent
permitted by applicable law, with respect to itself and its revenues and assets
(irrespective of their use or intended use), all immunity on the grounds of
sovereignty or other similar grounds from (i) suit, (ii) jurisdiction of any
court, (iii) relief by way of injunction, order for specific performance or for
recovery of property, (iv) attachment of its assets  (whether before or after judgment) and (v) execution or
enforcement of any judgment to which it or its revenues or assets might
otherwise be entitled in any Proceedings in the courts of any jurisdiction and
irrevocably agrees, to the extent permitted by applicable law, that it will not
claim any such immunity in any Proceedings.

 

14.          Definitions

 

As used in this Agreement:-

 

“Additional Termination Event” has
the meaning specified in Section 5(b).

 

“Affected Party” has the meaning
specified in Section 5(b).

 

“Affected Transactions” means (a)
with respect to any Termination Event consisting of an Illegality, Tax Event or
Tax Event Upon Merger, all Transactions affected by the occurrence of such
Termination Event and (b) with respect to any other Termination Event, all
Transactions.

 

“Affiliate” means, subject to the
Schedule, in relation to any person, any entity controlled, directly or
indirectly, by the person, any entity that controls, directly or indirectly,
the person or any entity directly or indirectly under common control with the
person. For this purpose, “control” of any entity or person means ownership of
a majority of the voting power of the entity or person.

 

“Applicable Rate” means:-

 

(a) in respect of obligations payable or deliverable
(or which would have been but for Section 2(a)(iii)) by a Defaulting Party, the
Default Rate;

 

(b) in respect of an obligation to pay an amount under
Section 6(e) of either party from and after the date  (determined in accordance with Section 6(d)(ii)) on which that
amount is payable, the Default Rate;

 

(c) in respect of all other obligations payable or
deliverable (or which would have been but for Section 2(a)(iii)) by a
Non-defaulting Party, the Non-default Rate; and

 

(d) in all other cases, the Termination Rate.

 

“Burdened Party” has the meaning
specified in Section 5(b).

 

“Change in Tax Law” means the
enactment, promulgation, execution or ratification of, or any change in or
amendment to, any law (or in the application or official interpretation of any
law) that occurs on or after the date on which the relevant Transaction is
entered into.

 

“consent” includes a consent,
approval, action, authorisation, exemption, notice, filing, registration or
exchange control consent.

 

“Credit Event Upon Merger”  has the meaning specified in Section 5(b).

 

“Credit Support Document” means any
agreement or instrument that is specified as such in this Agreement.

 

“Credit Support Provider” has the
meaning specified in the Schedule.

 

“Default Rate” means a rate per
annum equal to the cost (without proof or evidence of any actual cost) to the
relevant payee (as certified by it) if it were to fund or of funding the
relevant amount plus 1% per annum.

 

14

 

“Defaulting Party” has the meaning
specified in Section 6(a).

 

“Early Termination Date” means the
date determined in accordance with Section 6(a) or 6(b)(iv).

 

“Event of Default” has the meaning
specified in Section 5(a) and, if applicable, in the Schedule.

 

“Illegality” has the meaning
specified in Section 5(b).

 

“lndemnifiable Tax” means any Tax
other than a Tax that would not be imposed in respect of a payment under this
Agreement but for a present or former connection between the jurisdiction of
the government or taxation authority imposing such Tax and the recipient of
such payment or a person related to such recipient (including, without
limitation, a connection arising from such recipient or related person being or
having been a citizen or resident of such jurisdiction, or being or having been
organised, present or engaged in a trade or business in such jurisdiction, or
having or having had a permanent establishment or fixed place of business in
such jurisdiction, but excluding a connection arising solely from such
recipient or related person having executed, delivered, performed its
obligations or received a payment under, or enforced, this Agreement or a
Credit Support Document).

 

“law” includes any treaty, law, rule
or regulation (as modified, in the case of tax matters, by the practice of any
relevant governmental revenue authority) and “lawful” and “unlawful” will be
construed accordingly.

 

“Local Business Day” means, subject
to the Schedule, a day on which commercial banks are open for business
(including dealings in foreign exchange and foreign currency deposits) (a) in
relation to any obligation under Section 2(a)(i), in the place(s) specified in
the relevant Confirmation or, if not so specified, as otherwise agreed by the
parties in writing or determined pursuant to provisions contained, or incorporated
by reference, in this Agreement, (b) in relation to any other payment, in the
place where the relevant account is located and, if different, in the principal
financial centre, if any, of the currency of such payment, (c) in relation to
any notice or other communication, including notice contemplated under Section
5(a)(i), in the city specified in the address for notice provided by the
recipient and, in the case of a notice contemplated by Section 2(b), in the
place where the relevant new account is to be located and (d) in relation to
Section 5(a)(v)(2), in the relevant locations for performance with respect to
such Specified Transaction.

 

“Loss” means, with respect to this
Agreement or one or more Terminated Transactions, as the case may be, and a
party, the Termination Currency Equivalent of an amount that party reasonably
determines in good faith to be its total losses and costs (or gain, in which
case expressed as a negative number) in connection with this Agreement or that
Terminated Transaction or group of Terminated Transactions, as the case may be,
including any loss of bargain, cost of funding or, at the election of such
party but without duplication, loss or cost incurred as a result of its
terminating, liquidating, obtaining or reestablishing any hedge or related
trading position (or any gain resulting from any of them). Loss includes losses
and costs (or gains) in respect of any payment or delivery required to have
been made (assuming satisfaction of each applicable condition precedent on or before
the relevant Early Termination Date and not made, except, so as to avoid
duplication, if Section 6(e)(i)(1) or (3) or 6(e)(ii)(2)(A) applies. Loss does
not include a party’s legal fees and out-of-pocket expenses referred to under
Section 11. A party will determine its Loss as of the relevant Early
Termination Date, or, if that is not reasonably practicable, as of the
earliest date thereafter as is reasonably practicable. A party may (but need
not) determine its Loss by reference to quotations of relevant rates or prices
from one or more leading dealers in the relevant markets.

 

“Market Quotation” means, with
respect to one or more Terminated Transactions and a party making the
determination, an amount determined on the basis of quotations from Reference Market-makers.
Each quotation will be for an amount, if any, that would be paid to such party
(expressed as a negative number) or by such party (expressed as a positive
number) in consideration of an agreement between such party (taking into
account any existing Credit Support Document with respect to the obligations of
such party) and the quoting Reference Market-maker to enter into a transaction
(the “Replacement Transaction”) that would have the effect of preserving for
such party the economic equivalent of any payment or delivery (whether the
underlying obligation was absolute or contingent and assuming the satisfaction
of each applicable condition precedent by the parties under Section 2(a)(i) in
respect of such Terminated Transaction or group of Terminated Transactions that
would, but for the occurrence of the relevant Early Termination Date, have

 

15

 

been required after that date. For this purpose,
Unpaid Amounts in respect of the Terminated Transaction or group of Terminated
Transactions are to be excluded but, without limitation, any payment or
delivery that would, but for the relevant Early Termination Date, have been
required (assuming satisfaction of each applicable condition precedent after
that Early Termination Date is to be included. The Replacement Transaction
would be subject to such documentation as such party and the Reference
Market-maker may, in good faith, agree. The party making the determination (or
its agent) will request each Reference Market-maker to provide its quotation to
the extent reasonably practicable as of the same day and time (without regard
to different time zones) on or as soon as reasonably practicable after the
relevant Early Termination Date. The day and time as of which those quotations
are to be obtained will be selected in good faith by the party obliged to make
a determination under Section 6(e), and, if each party is so obliged, after
consultation with the other. If more than three quotations are provided, the
Market Quotation will be the arithmetic mean of the quotations, without regard
to the quotations having the highest and lowest values. If exactly three such
quotations are provided, the Market Quotation will be the quotation remaining
after disregarding the highest and lowest quotations. For this purpose, if more
than one quotation has the same highest value or lowest value, then one of such
quotations shall be disregarded. If fewer than three quotations are provided,
it will be deemed that the Market Quotation in respect of such Terminated
Transaction or group of Terminated Transactions cannot be determined.

 

“Non-default Rate” means a rate per
annum equal to the cost (without proof or evidence of any actual cost)  to the Non-defaulting Party (as certified by
it) if it were to fund the relevant amount.

 

“Non-defaulting Party” has the
meaning specified in Section 6(a).

 

“Office” means a branch or office of
a party, which may be such party’s head or home office.

 

“Potential Event of Default” means
any event which, with the giving of notice or the lapse of time or both, would
constitute an Event of Default.

 

“Reference Market-makers” means four
leading dealers in the relevant market selected by the party determining a
Market Quotation in good faith (a) from among dealers of the highest credit
standing which satisfy all the criteria that such party applies generally at
the time in deciding whether to offer or to make an extension of credit and (b)
to the extent practicable, from among such dealers having an office in the same
city.

 

“Relevant Jurisdiction” means, with
respect to a party, the jurisdictions (a) in which the party is incorporated,
organised, managed and controlled or considered to have its seat, (b) where an
Office through which the party is acting for purposes of this Agreement is
located, (c) in which the party executes this Agreement and (d) in relation to
any payment, from or through which such payment is made.

 

“Scheduled Payment Date” means a
date on which a payment or delivery is to be made under Section 2(a){i) with
respect to a Transaction.

 

“Set-off” means set-off, offset,
combination of accounts, right of retention or withholding or similar right or
requirement to which the payer of an amount under Section 6 is entitled or
subject (whether arising under this Agreement, another contract, applicable law
or otherwise) that is exercised by, or imposed on, such payer.

 

“Settlement Amount” means, with
respect to a party and any Early Termination Date, the sum of:-

 

(a)           the Termination Currency
Equivalent of the Market Quotations (whether positive or negative) for each
Terminated Transaction or group of Terminated Transactions for which a Market
Quotation is determined; and

 

(b)           such party’s Loss (whether
positive or negative and without reference to any Unpaid Amounts) for each
Terminated Transaction or group of Terminated Transactions for which a Market
Quotation cannot be determined or would not (in the reasonable belief of the
party making the determination) produce a commercially reasonable result.

 

“Specified Entity” has the meaning
specified in the Schedule.

 

16

 

“Specified Indebtedness” means,
subject to the Schedule, any obligation (whether present or future, contingent
or otherwise, as principal or surety or otherwise) in respect of borrowed
money.

 

“Specified Transaction” means,
subject to the Schedule, (a) any transaction (including an agreement with
respect thereto) now existing or hereafter entered into between one party to
this Agreement (or any Credit Support Provider of such party or any applicable
Specified Entity of such party) and the other party to this Agreement (or any
Credit Support Provider of such other party or any applicable Specified Entity
of such other party) which is a rate swap transaction, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction,
currency swap transaction, cross-currency rate swap transaction, currency
option or any other similar transaction (including any option with respect to
any of these transactions), (b) any combination of these transactions and (c)
any other transaction identified as a Specified Transaction in this Agreement
or the relevant confirmation.

 

“Stamp Tax” means any stamp,
registration, documentation or similar tax.

 

“Tax” means any present or future
tax, levy, impost, duty, charge, assessment or fee of any nature (including
interest, penalties and additions thereto) that is imposed by any government or
other taxing authority in respect of any payment under this Agreement other
than a stamp, registration, documentation or similar tax.

 

“Tax Event” has the meaning
specified in Section 5(b).

 

“Tax Event Upon Merger” has the
meaning specified in Section 5(b).

 

“Terminated Transactions” means with
respect to any Early Termination Date (a) if resulting from a Termination
Event, all Affected Transactions and (b) if resulting from an Event of Default,
all Transactions (in either case) in effect immediately before the
effectiveness of the notice designating that Early Termination Date (or, if
“Automatic Early Termination” applies, immediately before that Early Termination
Date).

 

“Termination Currency” has the
meaning specified in the Schedule.

 

“Termination Currency Equivalent”
means, in respect of any amount denominated in the Termination Currency, such
Termination Currency amount and, in respect of any amount denominated in a
currency other than the Termination Currency (the “Other Currency”), the amount
in the Termination Currency determined by the party making the relevant
determination as being required to purchase such amount of such Other Currency
as at the relevant Early Termination Date, or, if the relevant Market Quotation
or Loss (as the case may be), is determined as of a later date, that later
date, with the Termination Currency at the rate equal to the spot exchange rate
of the foreign exchange agent (selected as provided below) for the purchase of
such Other Currency with the Termination Currency at or about 11:00 a.m. (in
the city in which such foreign exchange agent is located) on such date as would
be customary for the determination of such a rate for the purchase of such
Other Currency for value on the relevant Early Termination Date or that later
date. The foreign exchange agent will, if only one party is obliged to make a
determination under Section 6(e), be selected in good faith by that party and otherwise
will be agreed by the parties.

 

“Termination Event” means an
Illegality, a Tax Event or a Tax Event Upon Merger or, if specified to be
applicable, a Credit Event Upon Merger or an Additional Termination Event.

 

“Termination Rate” means a rate per
annum equal to the arithmetic mean of the cost (without proof or evidence of
any actual cost) to each party (as certified by such party) if it were to fund
or of funding such amounts.

 

“Unpaid Amounts” owing to any party
means, with respect to an Early Termination Date, the aggregate of (a) in
respect of all Terminated Transactions, the amounts that became payable (or
that would have become payable but for Section 2(a)(iii)) to such party under
Section 2(a)(i) on or prior to such Early Termination Date and which remain
unpaid as at such Early Termination Date and (b) in respect of each Terminated
Transaction, for each obligation under Section 2(a)(i) which was (or would have
been but for Section 2(a)(iii)) required to be settled by delivery to such
party on or prior to such Early Termination Date and which has not been so
settled as at such Early Termination Date, an amount equal to the fair market
value of that which was (or would have been) required to be delivered as of the
originally scheduled date for delivery, in each case together with (to the
extent permitted under applicable law) interest, in the currency of such
amounts, from (and including) the date such amounts or obligations were or
would have been required to have been paid or performed to (but excluding) such
Early Termination Date, at the Applicable Rate. Such amounts of interest will
be calculated on the basis of daily compounding and the actual number of days
elapsed. The fair market value of any obligation

 

17

 

referred to in clause (b) above shall be reasonably
determined by the party obliged to make the determination under Section 6(e)
or, if each party is so obliged, it shall be the average of the Termination
Currency Equivalents of the fair market values reasonably determined by both
parties.

 

IN WITNESS WHEREOF the parties have executed this
document as a Deed on the respective dates specified below with effect from the
date specified on the first page of this document.

 

	
  The Royal Bank of Scotland plc

  	
  Knightsbridge Tankers Limited

  
	
  (Name of
  Party A)

  	
   

  	
  (Name of
  Party B)

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Robert J. Manners

  	
   

  	
  By:

  	
  /s/ Nicholas Sherriff

  	
   

  
	
   

  	
   

  
	
  Name: Robert J. Manners

  	
  Name: Nicholas Sherriff

  
	
  Title:

  	
  Title:Attorney-in-fact

  
	
  Date: 2 March 2004

  	
  Date:2 March 2004

  
	
   

  	
   

  
	
   

  	
   

  
	
  Witnessed by:

  	
  /s/ Martin Bennett

  	
   

  	
  Witnessed by:

  	
  /s/ Kavita Shah

  	
   

  
	
   

  	
   

  
	
  Name: Martin Bennett

  	
  Name: Kavita Shah

  
	
  Address:

  	
  Address:

  
												

 

18

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