Document:

Unassociated Document

EXHIBIT 4.15

 

Dated 20 December 2012

 

PALAU SHIPPING COMPANY INC. and

GUAM SHIPPING COMPANY INC.

as joint and several Borrowers

 

and

 

THE BANKS AND FINANCIAL INSTITUTIONS

listed in Schedule 1

as Lenders

 

and

 

NORDEA BANK FINLAND PLC

London Branch

as Swap Bank

 

and

 

NORDEA BANK FINLAND PLC

London Branch

as Agent and as Security Trustee

 

LOAN AGREEMENT

 

relating to a US$20,000,000 term loan facility to finance part

of the acquisition cost of two dry bulk carriers

"AMPHITRITE" and "POLYMNIA"

  

  

  

 

	
Clause

	
Index

	
Page

	
1

	
Interpretation

	
 1

	
2

	
Facility

	
 14

	
3

	
Position of the lenders, the Swap and the Majority Lenders

	
 15

	
4

	
Drawdown

	
16

	
5

	
Interest

	
17

	
6

	
Interest periods

	
19

	
7

	
Default Interest

	
20

	
8

	
Repayment and Prepayment

	
21

	
9

	
Conditions Predecent

	
23

	
10

	
Representations and Warranties

	
24

	
11

	
General Undertakings

	
26

	
12

	
Corporate Undertakings

	
30

	
13

	
Insurance

	
31

	
14

	
Ship Covenants

	
36

	
15

	
Security Cover

	
41

	
16

	
Payments and Calculations

	
42

	
17

	
Application of Receipts

	
44

	
18

	
Application of Earnings

	
45

	
19

	
Events of Default

	
46

	
20

	
Fees and Expenses

	
51

	
21

	
Indemnities

	
 52

	
22

	
No Set-off or Tax Deduction

	
54

	
23

	
Illegality, etc.

	
 55

	
24

	
Increased Costs

	
56

	
25

	
Set off

	
57

	
26

	
Transfers and changes in Lending Offices

	
 58

	
27

	
Variations and waivers

	
61

	
28

	
Notices

	
 62

	
29

	
Joint and several liability

	
 64

	
30

	
Supplemental

	
66

	
31

	
Law and Jurisdiction

	
66

 

	
Schedule 1 Lenders and Commitments

	
68

	
Schedule 2 Drawdown Notice

	
69

	
Schedule 3 Condition Precedent Documents

	
70

	
Schedule 4 Transfer Certificate

	
73

	
Schedule 5 Designation Notice

	
77

	
Schedule 6 Mandatory Cost formula

	
78

	
Execution pages

	
80

  

  

  

THIS AGREEMENT is made on 20 December 2012 PARTIES

 

	
(1)

	
PALAU SHIPPING COMPANY INC. and GUAM SHIPPING COMPANY INC., as joint and several borrowers (together, the "Borrowers");

 

	
(2)

	
THE BANKS AND FINANCIAL INSTITUTIONS listed in Schedule 1, as Lenders;

 

	
(3)

	
NORDEA BANK FINLAND PLC, London Branch, as Swap Bank;

 

	
(4)

	
NORDEA BANK FINLAND PLC, London Branch, as Agent; and

 

	
(5)

	
NORDEA BANK FINLAND PLC, London Branch, as Security Trustee. 

 

BACKGROUND

 

	
(A)

	
The Lenders have agreed to make available to the Borrowers a term loan facility of $20,000,000 for the purpose of financing part of the aggregate acquisition cost of two dry bulk carriers named "AMPHITRITE" and "POLYMNIA".

 

	
(B)

	
The Swap Bank has agreed to enter into interest rate swap transactions with the Borrowers from time to time to hedge the Borrowers' exposure under this Agreement to interest rate fluctuations.

 

	
(C)

	
The Lenders and the Swap Bank have agreed to share pari passu in the security to be granted to the Security Trustee pursuant to this Agreement.

 

IT IS AGREED as follows:

 

1             INTERPRETATION

 

1.1           Definitions

 

Subject to Clause 1.5, in this Agreement:

 

"Account Pledges" means, together, the Earnings Account Pledges in the Agreed Form and, in the singular, means any of them;

 

"Affected Lender" has the meaning given in Clause 5.7;

 

"Agency and Trust Deed" means the agency and trust deed dated the same date as this Agreement and made between the same parties;

 

"Agent" means Nordea Bank Finland Plc, London Branch, acting in such capacity through its office at City Place House, 55 Basinghall Street, London EC2V 5NB, England, or any successor of it appointed under clause 4.7 of the Agency and Trust Deed;

 

"Agreed Form" means in relation to any document, that document in the form approved in writing by the Agent (acting on the instructions of all the Lenders) or as otherwise approved in accordance with any other approval procedure specified in any relevant provision of any Finance Document;

 

"Applicable Accounts" means, as at the date of calculation or, as the case may be, in respect of an accounting period, the annual audited consolidated accounts and financial statements of the Group or the quarterly unaudited accounts and financial statements of the Group, in each case, which the Guarantor is obliged to deliver to the Agent pursuant to Clause 11.6;

  

  

  

 

"Approved Broker" means Arrow Sale & Purchase (UK) Limited, Breamar Seascope Limited, H. Clarkson & Company Limited, Fearnleys AS, Maersk Brokers K.S., R.S. Platou Shipbrokers AS and Simpson Spence & Young (London) Ltd. or any other any reputable sale and purchase broker approved and appointed by the Agent subject to the prior written consent of the Borrowers;

 

"Approved Charter" means any time charterparty (in the case of Ship B, other than the Initial Charter) having a duration of at least 12 consecutive months or any bareboat charterparty in respect of the Ship (such charters to be entered into with the prior consent of the Agent pursuant to Clause 14.13);

 

"Approved Charterer" means a company approved by the Agent as the charterer of the Ship which is to be a party to the Approved Charter;

 

"Approved Charterparty Assignment" means, in relation to each Approved Charter, a specific deed of assignment of the rights of the Borrower who is a party to that Approved Charter executed or to be executed by that Borrower in favour of the Security Trustee in the Agreed Form and, in the plural, means both of them;

 

"Approved Flag" means the Marshall Islands flag or any other flag that the Agent may, in its absolute discretion, approved that the Ship is registered;

 

"Approved Flag State" means the Republic of the Marshall Islands or any other state in which the Agent may, in its absolute discretion, at the request of the Borrowers, approve that a Ship is registered;

 

"Approved Manager" means, in relation to each Ship, Diana Shipping Services S.A., a company incorporated and existing under the laws of Panama having its registered office at Edificio Universal, Piso 12, Avenida Federico Boyd, Panama, Republic of Panama and maintaining an office at 16 Pendelis Street, 175 64, Palaio Faliro, Greece or any other company which the Agent may, with the authorisation of the Lenders, approve from time to time as the technical and/or commercial manager of each Ship;

 

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

 

	 	
(a)

	
31 December 2012 (or such later date as the Agent may, with the authorisation of the Lenders, agree with the Borrowers); or

 

	 	
(b)

	
if earlier, the date on which the Total Commitments are fully borrowed, cancelled or terminated;

 

"Borrower" means each of Borrower A and Borrower 8, and in the plural means, both of them;

 

"Borrower A" means Palau Shipping Company Inc., a corporation incorporated in the Republic of the Marshall Islands whose registered office is at Trust Company Complex, Ajeltake Road, Ajeltake island, Majuro MH96960, The Marshall Islands;

 

"Borrower B" means Guam Shipping Company Inc., a corporation incorporated in the Republic of the Marshall Islands whose registered office is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro MH96960, The Marshall Islands;

 

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

  

2

  

 

"CISADA" means the United States Comprehensive Iran Sanctions, Accountability and Divestment Act of 2010 as it applies to non-US persons;

 

"Commitment" means, in relation to a Lender, the amount set opposite its name in Schedule 1, or, as the case may require, the amount specified in the relevant Transfer Certificate, as that amount may be reduced, cancelled or terminated in accordance with this Agreement (and "Total Commitments" means the aggregate of the Commitments of all the Lenders);

 

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

 

"Contractual Currency" has the meaning given in Clause 21.5;

 

"Contribution" means, in relation to a Lender, the part of the Loan which is owing to that Lender;

 

"Corporate Guarantee" means a corporate guarantee of the obligations of the Borrowers under this Agreement, the Master Agreement and the other Finance Documents;

 

"Corporate Guarantor" mean Diana Shipping Inc., a corporation domesticated in the Marshall Islands whose registered office is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro MH96960, The Marshall Islands;

 

"Creditor Party" means the Agent, the Security Trustee, the Swap Bank or any Lender, whether as at the date of this Agreement or at any later time;

 

"Designated Transaction" means a Transaction which fulfils the following requirements:

 

	 	
(a)

	
it is entered into by each Borrower pursuant to the Master Agreement with the Swap Bank which, at the time the Transaction is entered into, is also a Lender;

 

	 	
(b)

	
its purpose is the hedging of all or part of each Borrower's exposure under this Agreement to fluctuations in LIBOR arising from the funding of the Loan (or any part thereof) for a period expiring no later than the final Repayment Date; and

 

	 	
(c)

	
it is designated by each Borrower, by delivery by that Borrower to the Agent of a notice of designation in the form set out in Schedule 5, as a Designated Transaction for the purposes of the Finance Documents;

 

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

 

"Drawdown Date" means, in relation to the Loan, the date requested by the Borrowers for the Loan to be advanced, or (as the context requires) the date on which the Loan is actually advanced;

 

"Drawdown Notice" means a notice in the form set out in Schedule 2 (or in any other form which the Agent approves or reasonably requires);

 

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

 

	 	
(a)

	
except to the extent that they fall within paragraph (b);

 

	 	
  

	
(i)

	
all freight, hire and passage moneys;

 

  

3

  

	 	
  

	
(ii)

	
compensation payable to a Borrower or the Security Trustee in the event of requisition of a Ship for hire;

 

	 	
  

	
(iii)

	
remuneration for salvage and towage services;

 

	 	
  

	
(iv)

	
demurrage and detention moneys;

 

	 	
  

	
(v)

	
damages for breach (or payments for variation or termination) of any charterparty or other contract for the employment of a Ship; and

 

	 	
  

	
(vi)

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

 

	 	
(b)

	
if and whenever a Ship is employed on terms whereby any moneys falling within paragraphs (a)(i) to (vi) 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 the Ship;

 

"Earnings Account" means an account in the name of each Borrower with the Agent in London designated "[name of the Borrowed- Earnings Account", or any other account which is designated by the Agent as an Earnings Account for the purposes of this Agreement;

 

"Earnings Account Pledge" means, respect of each Earnings Account, a deed creating security in the Agreed Form;

 

"Environmental Claim" means:

 

	 	
(a)

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

 

	 	
(b)

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

 

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

 

"Environmental Incident" means:

 

	 	
(a)

	
any release of Environmentally Sensitive Material from the Ship; or

 

	 	
(b)

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

 

	 	
(c)

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

  

4

  

"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 19.1; 

 

"Finance Documents" means:

 

	 	
(a)

	
this Agreement;

 

	 	
(b)

	
the Agency and Trust Deed;

 

	 	
(c)

	
the Master Agreement;

 

	 	
(d)

	
the Master Agreement Assignment;

 

	 	
(e)

	
the Corporate Guarantee;

 

	 	
(f)

	
the General Assignments;

 

	 	
(g)

	
the Mortgages;

 

	 	
(h)

	
the Accounts Pledges;

 

	 	
(i)

	
the Shares Pledges;

 

	 	
(j)

	
the Initial Charter Assignment;

 

	 	
(k)

	
the Manager's Undertakings;

 

	 	
(l)

	
any Approved Charterparty Assignment; and

 

	 	
(m)

	
any other document (whether creating a Security Interest or not) which is executed at any time by either Borrower, the Corporate Guarantor, the Approved Manager or any other person as security for, or to establish any form of subordination or priorities arrangement in relation to, any amount payable to the Lenders and/or the Swap Bank under this 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 or dematerialised equivalent 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;

  

5

  

	 	
(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) if the references to the debtor referred to the other person;

 

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

 

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

 

"GAAP" means, at any time, the most recent and updated generally accepted accounting principles in the United States of America;

 

"General Assignment" means, in relation to each Ship, a first priority general assignment of the Earnings, the Insurances and any Requisition Compensation in the Agreed Form and, in the plural, means both of them;

 

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

 

"IACS" means the International Association of Classification Societies;

 

"Initial Charter" means, in respect of Ship B, the time charterparty dated 6 August 2012 made between Borrower B as owner and the Initial Charterer for a period of at least 22 months at a minimum daily charter hire of $10,000;

 

"Initial Charter Assignment" means an assignment of the rights of Borrower B under the Initial Charter in favour of the Agent in the Agreed Form;

 

"Initial Charterer" means Bunge S.A., a company incorporated in Geneva whose registered address is 13 Route de Florissant, 12111 Geneva 12, Switzerland;

 

"Insurances" means, in relation to a Ship:

 

	 	
(a)

	
all policies and contracts of insurance, including entries of the Ship in any protection and indemnity or war risks association, effected in respect of the Ship, its Earnings or otherwise in relation to the Ship whether before, on or after the date of this Agreement; and

 

	 	
(b)

	
all rights and other assets relating to, or derived from, any of the foregoing, including any rights to a return of a premium and any rights in respect of any claim whether or not the relevant policy, contract of insurance or entry has expired on or before the date of this Agreement;

 

"Interest Period" means a period determined in accordance with Clause 6;

 

"ISM Code" means the International Safety Management Code (including the guidelines on its implementation), adopted by the International Maritime Organisation, 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);

 

  

6

  

 

"ISPS Code" means the International Ship and Port Facility Security Code as adopted by the International Maritime Organisation, as the same may be amended or supplemented from time to time;

 

"ISSC" means a valid and current International Ship Security Certificate issued under the ISPS Code;

 

"Lender" means a bank or financial institution listed in Schedule 1 and acting through its branch indicated in Schedule 1 (or through another branch notified to the Agent under Clause 26.14) or its transferee, successor or assign and, in the plural, means all of them;

 

"LIBOR" means, in relation to any period for which an interest rate is to be determined under any provision of a Finance Document:

 

	 	
(a)

	
the applicable Screen Rate; or

 

	 	
(b)

	
if no Screen Rate is available for that period, the rate per annum determined by the Agent to be the arithmetic mean of the rates, as supplied to the Agent at its request, quoted by the Reference Bank to leading banks in the London Interbank Market,

 

as of 11 a.m. (London time) on the Quotation Date for that period for the offering of deposits in the relevant currency and for a period comparable to that period;

 

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

 

"Major Casualty" means, in relation to a Ship, any casualty to that 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 $1,000,000 or the equivalent in any other currency;

 

"Majority Lenders" means:

 

	 	
(a)

	
before the Loan has been advanced, Lenders whose Commitments total 66.67 per cent. of the Total Commitments; and

 

	 	
(b)

	
after the Loan has been advanced, Lenders whose Contributions total 66.67 per cent. of the Loan;

 

"Management Agreement" means, in relation to each Ship, an agreement made or to be made between the Borrower who is the owner of such Ship and the Approved Manager in respect of the commercial and technical management of such Ship in the Agreed Form and, in the plural, means both of them;

 

"Manager's Undertaking" means, in relation to each Ship, a letter of undertaking executed or to be executed by the Approved Manager in favour of the Security Trustee in the Agreed Form agreeing certain matters in relation to the management of that Ship and subordinating the rights of the Approved Manager against that Ship and the Borrower which is the owner thereof to the rights of the Security Trustee under the Finance Documents and, in the plural, means both of them;

 

"Mandatory Cost" means the percentage rate per annum calculated by the Agent in accordance with Schedule 6;

 

"Margin" means 2.90 per cent. per annum;

 

"Market Value" means, in relation to each Ship (and each other Fleet Vessel), the market value thereof determined in accordance with Clause 15.3;

 

  

7

  

 

"Master Agreement" means the master agreement (on the 2002 ISDA (Multicurrency-Crossborder) form) in the Agreed Form made or to be made between (i) the Borrowers and (ii) the Swap Bank or (i) each Borrower and (ii) the Swap Bank and includes all Designated Transactions from time to time entered into and Confirmations from time to time exchanged under such master agreement;

 

"Master Agreement Assignment" means the assignment of the Master Agreement in the Agreed Form;

 

"Mortgage" means, in relation to a Ship, the first preferred Marshall Islands ship mortgage on that Ship in the Agreed Form and, in the plural, means both of them;

 

"Negotiation Period" has the meaning given in Clause 5.10;

 

"Notifying Lender" has the meaning given in Clause 23.1 or Clause 24.1 as the context requires;

 

"Payment Currency" has the meaning given in Clause 21.5; 

 

"Permitted Security Interests" means:

 

	 	
(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;

 

	 	
(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 Borrower in good faith by appropriate steps) and subject, in the case of liens for repair or maintenance, to Clause 14.13(g);

 

	 	
(f)

	
any Security Interest created in favour of a plaintiff or defendant in any proceedings or arbitration as security for costs and expenses where the Borrower is actively prosecuting or defending such proceedings or arbitration in good faith; and

 

	 	
(g)

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

 

"Pertinent Document" means:

 

	 	
(a)

	
any Finance Document;

 

	 	
(b)

	
any policy or contract of insurance contemplated by or referred to in Clause 13 or any other provision of this Agreement or another 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 a Servicing Bank in contemplation of or in connection with any Finance Document or any policy, contract or document falling within paragraphs (b) or (c);

  

8

  

 

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

 

	 	
(a)

	
England and Wales;

 

	 	
(b)

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

 

	 	
(c)

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

 

	 	
(d)

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

 

	 	
(e)

	
a country in which assets of the company (other than securities issued by, or loans to, related companies) having a substantial value are situated, in which the company maintains a branch or 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, whether as main or territorial or ancillary proceedings, or which would have such jurisdiction if their assistance were requested by the courts of a country referred to in paragraphs (b) or (c);

 

"Pertinent Matter" means:

 

	 	
(a)

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

 

	 	
(b)

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

 

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

 

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

 

"Prohibited Person" means any person (whether designated by name or by reason of being included in a class of persons) against whom Sanctions are directed;

 

"Quotation Date" means, in relation to any period for which an interest rate is to be determined under any provision of a Finance Document, the day which is 2 Business Days before the first day of that period, unless market practice differs in the London Interbank Market for a currency, in which case the Quotation Date will be determined by the Agent in accordance with market practice in the London Interbank Market (and if quotations would normally be given by leading banks in the London Interbank Market on more than one day, the Quotation Date will be the last of those days);

 

"Reference Bank" means, subject to Clause 26.16, the London branch of Nordea Bank Finland Plc, London Branch and any of its successors;

 

"Relevant Person" has the meaning given in Clause 19.9;

 

"Repayment Date" means a date on which a repayment is required to be made under Clause 8;

  

9

  

 

"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";

 

"Sanctions" means any sanctions, embargoes, freezing provisions, prohibitions or other restrictions relating to trading, doing business, investment, exporting, financing or making assets available (or other activities similar to or connected with any of the foregoing):

 

	 	
(a)

	
imposed by law or regulation of the United Kingdom, the Council of the European Union, the United Nations or its Security Council;

 

	 	
(b)

	
imposed by CISADA; or

 

	 	
(c)

	
otherwise imposed by any law or regulation by which the Borrower is bound or, as regards a regulation, compliance with which is reasonable in the ordinary course of business of the Borrower and for which a waiver or suspension has not been obtained;

 

"Screen Rate" means, in relation to any period for which an interest rate is to be determined under any provision of a Finance Document, the British Bankers' Association Interest Settlement Rate for the relevant currency and period displayed on Reuters page LIBOR 01 or on any other appropriate page of the Reuters screen. If the agreed page is replaced or service ceases to be available, the Agent may specify another page or service displaying the appropriate rate after consultation with the Borrower and the Lenders;

 

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

 

"Security Interest" means:

 

	 	
(a)

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

 

	 	
(b)

	
the 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 the Corporate Guarantor, the Approved Manager and any other person (except a Creditor Party) 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 Agent notifies the Borrowers, the Security Parties and the other Creditor Parties that:

 

	 	
(a)

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

 

  

10

  

     

	 	
(b)

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

 

	 	
(c)

	
neither a Borrower nor any Security Party has any future or contingent liability under Clause 20, 21 or 22 below or any other provision of this Agreement or another Finance Document; and

 

	 	
(d)

	
the Agent, the Security Trustee and the Majority Lenders do 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 Borrowers 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;

 

"Security Trustee" means Nordea Bank Finland Plc, London Branch, acting in such capacity through its office at City Place House, 55 Basinghall Street, London EC2V 5NB, England, or any successor of it appointed under clause 5 of the Agency and Trust Deed;

 

"Servicing Bank" means the Agent or the Security Trustee;

 

"Shares Pledge" means, in relation to each Borrower, a deed creating security over the share capital of that Borrower in the Agreed Form and, in the plural, means both of them;

 

"Ship A" means the 2012-built bulk carrier vessel of 98,704 deadweight currently registered in the ownership of Borrower A under the Marshall Islands flag under IMO No. 9598660 with the name of "POLYMNIA";

 

"Ship B" means the 2012-built bulk carrier vessel of 98,697 deadweight currently registered in the ownership of Borrower B under the Marshall Islands flag under IMO No. 9599157 with the name of "AMPHITRITE";

 

"Ships" means, together, Ship A and Ship B and, in the singular, means either of them;

 

"SMC" means a safety management certificate issued in respect of each Ship in accordance with Rule 13 of the ISM Code;

 

"Swap Bank" means Nordea Bank Finland Plc, London Branch, acting in such capacity through its office at City Place House, 55 Basinghall Street, London EC2V 5NB, England;

 

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

 

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

 

	 	
(a)

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

 

	 	
(b)

	
any expropriation, confiscation, requisition or acquisition of the 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 1 month redelivered to the full control of the Borrower owning that Ship;

  

11

  

 

	 	
(c)

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

 

	 	
(d)

	
any arrest, capture, seizure or detention of the Ship (including any hijacking or theft) unless it is within 1 month redelivered to the full control of the Borrower owning the Ship;

 

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

 

	 	
(a)

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

 

	 	
(b)

	
in the case of a constructive, compromised, agreed or arranged total loss of the Ship, the earliest 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 Borrower owning the Ship with the Ship's insurers in which the insurers agree to treat the 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 Agent that the event constituting the total loss occurred;

 

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

 

"Transfer Certificate" has the meaning given in Clause 26.2; and

 

"Trust Property" has the meaning given in clause 3.1 of the Agency and Trust Deed.

 

	
1.2

	
Construction of certain terms

 

	
  

	
In this Agreement:

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

"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;

  

12

  

 

"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, in relation to a Ship, all insurances effected, or which the Borrower owning the Ship is obliged to effect, under Clause 13 or any other provision of this Agreement or another 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 protection and indemnity association managed in London, including pollution risks and the proportion (if any) of any sums payable to any other person or persons in case of collision which are not recoverable under the hull and machinery policies by reason of the incorporation in them of clause 6 of the International Hull Clauses (1/11/02 or 1/11/03), clause 8 of the Institute Time Clauses (Hulls) (1/11/95) or clause 8 of the Institute Time Clauses (Hulls) (1/10/83) or the Institute Amended Running Down Clause (1/10/71) or any equivalent provision;

 

"regulation" includes any regulation, rule, official directive, request or guideline (either having the force of law or compliance with which is reasonable in the ordinary course of business of the party concerned) whether or not having the force of law of any governmental, intergovernmental or supranational body, agency, department or regulatory, self-regulatory or other authority or organisation;

 

"subsidiary" has the meaning given in Clause 1.4;

 

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

 

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

 

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

  

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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 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;

 

	
(b)

	
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;

 

	
(c)

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

 

	
(d)

	
Clauses 1.1 to 1.5 apply unless the contrary intention appears.

 

1.6           Headings

 

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

 

2              FACILITY

 

2.1           Amount of facility

  

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Subject to the other provisions of this Agreement, the Lenders shall make available to the Borrowers, in one advance, a term loan facility of $20,000,000 for the purpose of financing part of the aggregate acquisition cost of the Ships.

 

2.2           Lenders' participations in the Loan

 

Subject to the other provisions of this Agreement, each Lender shall participate in the Loan in the proportion which, as at the Drawdown Date, its Commitment bears to the Total Commitments.

 

2.3           Purpose of the Loan

 

The Borrowers undertake with each Creditor Party to use the Loan only for the purpose stated in the preamble to this Agreement.

 

3              POSITION OF THE LENDERS, THE SWAP AND THE MAJORITY LENDERS

 

3.1           Interests of Lenders and Swap Bank several

 

The rights of the Lenders and the Swap Bank under this Agreement and the Master Agreement are several; accordingly:

 

	
(a)

	
each Lender shall be entitled to sue for any amount which has become due and payable by the Borrowers to it under this Agreement; and

 

	
(b)

	
the Swap Bank shall be entitled to sue for any amount which has become due and payable by the Borrowers to it under the Master Agreement,

 

without joining the Agent, the Security Trustee, any other Lender and the Swap Bank as additional parties in the proceedings.

 

3.2           Proceedings by individual Lender or Swap Bank

 

However, without the prior consent of the Majority Lenders, no Lender nor the Swap Bank may bring proceedings in respect of:

 

	
(a)

	
any other liability or obligation of either Borrower or a Security Party under or connected with a Finance Document; or

 

	
(b)

	
any misrepresentation or breach of warranty by either Borrower or a Security Party in or connected with a Finance Document.

 

3.3           Obligations several

 

The obligations of the Lenders and the Swap Bank under this Agreement and of the Swap Bank under the Master Agreement are several; and a failure of a Lender or the Swap Bank to perform its obligations under this Agreement or of the Swap Bank to perform its obligations under the Master Agreement shall not result in:

 

	
(a)

	
the obligations of the other Lenders or (as the case may be) the Swap Bank being increased; nor

 

	
(b)

	
either Borrower, any Security Party or any other Creditor Party being discharged (in whole or in part) from its obligations under any Finance Document,

 

and in no circumstances shall a Lender or the Swap Bank have any responsibility for a failure of another Lender or the Swap Bank to perform its obligations under this Agreement or the Master Agreement.

  

15

  

 

3.4           Parties bound by certain actions of Majority Lenders

 

Every Lender, the Swap Bank, each Borrower and each Security Party shall be bound by:

 

	
(a)

	
any determination made, or action taken, by the Majority Lenders under any provision of a Finance Document;

 

	
(b)

	
any instruction or authorisation given by the Majority Lenders to the Agent or the Security Trustee under or in connection with any Finance Document (subject always to Clause 27.2);

 

	
(c)

	
any action taken (or in good faith purportedly taken) by the Agent or the Security Trustee in accordance with such an instruction or authorisation.

 

3.5           Reliance on action of Agent

 

However, each Borrower and each Security Party:

 

	
(a)

	
shall be entitled to assume that the Majority Lenders have duly given any instruction or authorisation which, under any provision of a Finance Document, is required in relation to any action which the Agent has taken or is about to take; and

 

	
(b)

	
shall not be entitled to require any evidence that such an instruction or authorisation has been given.

 

3.6           Construction

 

In Clauses 3.4 and 3.5 references to action taken include (without limitation) the granting of

 

any waiver or consent, an approval of any document and an agreement to any matter.

 

4              DRAWDOWN

 

4.1           Request for the Loan

 

Subject to the following conditions, the Borrowers may request the Loan to be made by ensuring that the Agent receives a completed Drawdown Notice not later than 11.00 a.m. (London time) 3 Business Days (or such shorter period as the Agent may, in its absolute discretion, agree) prior to the intended Drawdown Date.

 

4.2           Availability

 

The conditions referred to in Clause 4.1 are that:

 

	
(a)

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

 

	
(b)

	
the amount of the Loan shall not exceed $20,000,000;

 

	
(c)

	
the Loan shall be applied in financing part of the acquisition cost of each Ship; and

 

	
(d)

	
the amount of the Loan shall not exceed the Total Commitments.

 

4.3           Notification to Lenders of receipt of a Drawdown Notice

 

The Agent shall promptly notify the Lenders that it has received a Drawdown Notice and shall inform each Lender of:

 

	
(a)

	
the amount of the Loan and the Drawdown Date;

 

	
(b)

	
the amount of that Lender's participation in the Loan; and

  

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(c)           the duration of the first Interest Period.

 

4.4           Drawdown Notice irrevocable

 

A Drawdown Notice must be signed by a director or an authorised representative of each Borrower; and once served, a Drawdown Notice cannot be revoked without the prior consent of the Agent, acting on the authority of the Majority Lenders.

 

4.5           Lenders to make available Contributions

 

Subject to the provisions of this Agreement, each Lender shall, on and with value on the Drawdown Date, make available to the Agent for the account of the Borrowers the amount due from that Lender on the Drawdown Date under Clause 2.2.

 

4.6           Disbursement of the Loan

 

Subject to the provisions of this Agreement, the Agent shall on the Drawdown Date pay to the Borrowers the amounts which the Agent receives from the Lenders under Clause 4.5; and that payment to the Borrowers shall be made:

 

(a)           to the account which the Borrowers specify in the Drawdown Notice; and

 

(b)           in the like funds as the Agent received the payments from the Lenders.

 

4.7           Disbursement of the Loan to third party

 

The payment by the Agent under Clause 4.6 shall constitute the making of the Loan and the Borrowers shall at that time become indebted, as principal and direct obligors, to each Lender in an amount equal to that Lender's Contribution.

 

5              INTEREST

 

5.1           Payment of normal interest

 

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

 

5.2           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 (i) the Margin, (ii) the Mandatory Cost (if any) and (iii) LIBOR for that Interest Period.

 

5.3           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.

 

5.4           Notification of Interest Periods and rates of normal interest

 

The Agent shall notify the Borrowers and each Lender of:

 

(a)           each rate of interest; and

 

(b)           the duration of each Interest Period as soon as reasonably practicable after each is determined.

  

17

  

 

5.5           Obligation of Reference Bank to quote

 

The Reference Bank shall use all reasonable efforts to supply the quotation required of it for the purposes of fixing a rate of interest under this Agreement unless the Reference Bank ceases to be a Lender pursuant to Clause 26.16.

 

5.6           Absence of quotations by Reference Bank

 

If the Reference Bank fails to supply a quotation, the relevant rate of interest shall be set in accordance with the following provisions of this Clause 5.

 

5.7           Market disruption

 

The following provisions of this Clause 5 apply if:

 

	
(a)

	
no Screen Rate is available for an Interest Period and the Reference Bank does not, before 1.00 p.m. (London time) on the Quotation Date, provide quotations to the Agent in order to fix LIBOR; or

 

	
(b)

	
at least 1 Business Day before the start of an Interest Period, a Lender with Contribution amounting to more than 33.3 per cent. of the Loan, may notify the Agent that LIBOR fixed by the Agent would not accurately reflect the cost to those Lenders of funding its respective Contribution (or any part of it) during the Interest Period in the London Interbank Market at or about 11.00 a.m. (London time) on the Quotation Date for the Interest Period; or

 

	
(c)

	
at least 1 Business Day before the start of an Interest Period, the Agent is notified by a Lender (the "Affected Lender") that for any reason it is unable to obtain Dollars in the London Interbank Market in order to fund its Contribution (or any part of it) during the Interest Period.

 

5.8           Notification of market disruption

 

The Agent shall promptly notify the Borrowers and each of the Lenders stating the circumstances falling within Clause 5.7 which have caused its notice to be given.

 

5.9           Suspension of drawdown

 

If the Agent's notice under Clause 5.8 is served before the Loan is made:

 

	
(a)

	
in a case falling within Clauses 5.7(a) or 5.7(b), the Lenders' obligations to make the Loan; and

 

	
(b)

	
in a case falling within Clause 5.7, the Affected Lender's obligation to participate in the Loan, shall be suspended while the circumstances referred to in the Agent's notice continue.

 

5.10        Negotiation of alternative rate of interest

 

If the Agent's notice under Clause 5.5 is served after the Loan is made, the Borrowers, the Agent, the Lenders or (as the case may be) the Affected Lender shall use reasonable endeavours to agree, within 30 days after the date on which the Agent serves its notice under Clause 5.5 (the "Negotiation Period"), an alternative interest rate or (as the case may be) an alternative basis for the Lenders or (as the case may be) the Affected Lender to fund or continue to fund their or its Contribution during the Interest Period concerned.

 

5.11        Application of agreed alternative rate of interest

  

18

  

 

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

 

5.12        Alternative rate of interest in absence of agreement

 

If an alternative interest rate or alternative basis is not agreed within the Negotiation Period, and the relevant circumstances are continuing at the end of the Negotiation Period, then the Agent shall, with the agreement of each Lender or (as the case may be) the Affected Lender, set an interest period and interest rate representing the cost of funding of the Lenders or (as the case may be) the Affected Lender in Dollars or in any available currency of their or its Contribution plus the Margin and the Mandatory Cost (if any); and the procedure provided for by this Clause 5.12 shall be repeated if the relevant circumstances are continuing at the end of the interest period so set by the Agent.

 

5.13        Notice of prepayment

 

If the Borrowers do not agree with an interest rate set by the Agent under Clause 5.12, the Borrowers may give the Agent not less than 15 Business Days' notice of their intention to prepay the Loan at the end of the interest period set by the Agent.

 

5.14        Prepayment; termination of Commitments

 

A notice under Clause 5.13 shall be irrevocable; the Agent shall promptly notify the Lenders or (as the case may require) the Affected Lender of the Borrowers' notice of intended prepayment; and:

 

	
(a)

	
on the date on which the Agent serves that notice, the Total Commitments or (as the case may require) the Commitment of the Affected Lender shall be cancelled; and

 

	
(b)

	
on the last Business Day of the interest period set by the Agent, the Borrowers shall prepay (without premium or penalty) the Loan or, as the case may be, the Affected Lender's Contribution, together with accrued interest thereon at the applicable rate plus the Margin and the Mandatory Cost (if any).

 

5.15        Application of prepayment

 

The provisions of Clause 8 shall apply in relation to the prepayment.

 

6              INTEREST PERIODS

 

6.1          Commencement of Interest Periods

 

The first Interest Period applicable to the Loan shall commence on the Drawdown Date and each subsequent Interest Period shall commence on the expiry of the preceding Interest Period.

 

6.2          Duration of normal Interest Periods

 

Subject to Clauses 6.3 and 6.4, each Interest Period shall be:

 

	
(a)

	
1 or 3 months as notified by the Borrowers to the Agent not later than 11.00 a.m. (London time) 5 Business Days (or such longer period as the Agent and the Borrowers may agree) before the commencement of the Interest Period; or

 

	
(b)

	
3 months, if the Borrowers fail to notify the Agent by the time specified in paragraph (a); or

 

	
(c)

	
such other period as the Agent may, with the authorisation of the Majority Lenders, agree with the Borrowers.

  

19

  

 

6.3          Duration of Interest Periods for repayment instalments

 

In respect of an amount due to be repaid under Clause 8 on a particular Repayment Date, an Interest Period shall end on that Repayment Date.

 

6.4          Non-availability of matching deposits for Interest Period selected

 

If, after the Borrowers have selected and the Lenders have agreed an Interest Period longer than 3 months, any Lender notifies the Agent by 11.00 a.m. (London time) on the third Business Day before the commencement of the Interest Period that it is not satisfied that deposits in Dollars for a period equal to the Interest Period will be available to it in the London Interbank Market when the Interest Period commences, the Interest Period shall be of 3 months.

 

7              DEFAULT INTEREST

 

7.1           Payment of default interest on overdue amounts

 

The Borrowers shall pay interest in accordance with the following provisions of this Clause 7 on any amount payable by the Borrowers under any Finance Document which the Agent, the Security Trustee or the other designated payee does not receive on or before the relevant date, that is:

 

	
(a)

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

 

	
(b)

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

 

	
(c)

	
if such amount has become immediately due and payable under Clause 19.4, the date on which it became immediately due and payable.

 

7.2           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 Agent to be 2 per cent. above:

 

	
(a)

	
in the case of an overdue amount of principal, the higher of the rates set out at Clauses 7.3(a) and (b); or

 

	
(b)

	
in the case of any other overdue amount, the rate set out at Clause 7.3(b).

 

	
7.3

	
Calculation of default rate of interest

 

	
  

	
The rates referred to in Clause 7.2 are:

 

	
(a)

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

 

	
(b)

	
the aggregate of the Margin and the Mandatory Cost (if any) plus, in respect of successive periods of any duration (including at call) up to 3 months which the Agent may select from time to time:

 

	
  

	
(i)

	
LIBOR; or

 

	
  

	
(ii)

	
if the Agent (after consultation with the Reference Bank) determines that Dollar deposits for any such period are not being made available to the Reference Bank by leading banks in the London Interbank Market in the ordinary course of business, a

  

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rate from time to time determined by the Agent by reference to the cost of funds to the Reference Bank from such other sources as the Agent (after consultation with the Reference Bank) may from time to time determine.

7.4           Notification of interest periods and default rates

 

The Agent shall promptly notify the Lenders and the Borrowers of each interest rate determined by the Agent under Clause 7.3 and of each period selected by the Agent for the purposes of paragraph (b) of that Clause; but this shall not be taken to imply that the Borrowers are liable to pay such interest only with effect from the date of the Agent's notification.

 

7.5           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; and the payment shall be made to the Agent for the account of the Creditor Party to which the overdue amount is due.

 

7.6           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.

 

7.7           Application to Master Agreement

 

For the avoidance of doubt, this Clause 7 does not apply to any amount payable under the Master Agreement in respect of any continuing Designated Transaction as to which section 2(e) (Default Interest; Other Amounts) of the Master Agreement shall apply.

 

8              REPAYMENT AND PREPAYMENT

 

8.1           Amount of repayment instalments

 

The Borrowers shall repay the Loan by:

 

	
(a)

	
20 consecutive three-monthly instalments (the "Repayment Instalments" and each a "Repayment Instalment") of $312,500 each; and

 

	
(b)

	
a balloon instalment in the amount of $13,750,000 (the "Balloon Instalment").

 

8.2           Repayment Dates

 

The first Repayment Instalment for the Loan shall be repaid three months after the Drawdown Date (the "First Repayment Date"), each subsequent Repayment Instalment shall be repaid at three-monthly intervals thereafter and the last Repayment Instalment together with the Balloon Instalment shall be repaid on the fifth anniversary of the Drawdown Date.

 

8.3           Final Repayment Date

 

On the final Repayment Date, the Borrowers shall additionally pay to the Agent for the account of the Creditor Parties all other sums then accrued or owing under any Finance Document.

 

8.4           Voluntary prepayment

Subject to the following conditions, the Borrowers may prepay the whole or any part of the Loan on the last day of an Interest Period.

  

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8.5           Conditions for voluntary prepayment

 

The conditions referred to in Clause 8.4 are that:

 

	
(a)

	
a partial prepayment shall be $250,000 or a higher integral multiple of $250,000;

 

	
(b)

	
the Agent has received from the Borrowers at least 7 days' prior written notice specifying the amount to be prepaid and the date on which the prepayment is to be made;

 

	
(c)

	
the Borrowers have provided evidence satisfactory to the Agent that any consent required by either 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 either Borrower or any Security Party has been complied with; and

 

	
(d)

	
the Borrowers have complied with Clause 8.12 on or prior to the date of prepayment.

 

8.6           Effect of notice of prepayment

 

A prepayment notice may not be withdrawn or amended without the consent of the Agent, given with the authorisation of the Majority Lenders, and the amount specified in the prepayment notice shall become due and payable by the Borrowers on the date for prepayment specified in the prepayment notice.

 

8.7           Notification of notice of prepayment

 

The Agent shall notify the Lenders promptly upon receiving a prepayment notice, and shall provide any Lender which so requests with a copy of any document delivered by the Borrowers under Clause 8.5(c).

 

8.8           Mandatory prepayment

 

The Borrowers shall be obliged to prepay the whole of the Relevant Amount if a Ship is sold or becomes a Total Loss:

 

	
(a)

	
in the case of a sale, on or before the date on which the Mortgage on that Ship is released; or

 

	
(b)

	
in the case of a Total Loss, on the earlier of the date falling 180 days after the Total Loss Date and the date of receipt by the Security Trustee of the proceeds of insurance relating to such Total Loss.

 

In this Clause 8.8:

 

"Relevant Amount" means an amount equal to 50 per cent. of the Loan.

 

8.9           Amounts payable on prepayment

 

A prepayment shall be made together with accrued interest (and any other amount payable under Clause 21 or otherwise) in respect of the amount prepaid and, if the prepayment is not made on the last day of an Interest Period together with any sums payable under Clause 21.1(b) but without premium or penalty.

 

8.10        Application of partial prepayment

 

Each partial prepayment made pursuant to Clause 8.4 and 8.8 shall be applied pro rata against the then outstanding Repayment Instalments and the Balloon Instalment or in such other order as the Agent may, in its absolute discretion, determine.

  

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8.11        No reborrowing

 

No amount prepaid may be reborrowed.

 

8.12        Unwinding of Designated Transactions

 

On or prior to any repayment or prepayment of the Loan under this Clause 8 or any other provision of this Agreement, each Borrower shall wholly or partially reverse, offset, unwind or otherwise terminate one or more of the continuing Designated Transactions so that the notional principal amount of the continuing Designated Transactions thereafter remaining does not and will not in the future (taking into account the scheduled amortisation) exceed the amount of the Loan as reducing from time to time thereafter pursuant to Clause 8.1.

 

9              CONDITIONS PREDECENT

 

9.1           Documents, fees and no default

 

Each Lender's obligation to contribute to the Loan is subject to the following conditions precedent:

 

(a)           that, on or before the service of the Drawdown Notice, the Agent receives:

 

	
  

	
(i)

	
the documents described in Part A of Schedule 3 in form and substance satisfactory to the Agent and its lawyers;

 

	
  

	
(ii)

	
the arrangement fee referred to in Clause 20.1;

 

	
(b)

	
that, on the Drawdown Date but prior to the making of the Loan, the Agent receives or is satisfied that it will receive on the making of the Loan the documents described in Part B of Schedule 3 in form and substance satisfactory to it and its lawyers;

 

	
(c)

	
that, on or before the service of the Drawdown Date, the Agent receives payment of any expenses payable pursuant to Clause 20.2 which is due and payable on the Drawdown Date;

 

	
(d)

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

     

	
(i)

	
no Event of Default or Potential Event of Default has occurred or would result from the borrowing of the Loan;

 

	
(ii)

	
the representations and warranties in Clause 10.1 and those of either 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 5.7 has occurred and is continuing; and

 

	
(iv)

	
there has been no material adverse change in the financial condition, state of affairs or prospects of any of the Borrowers (or either of them), the Corporate Guarantor or any other Security Party in the light of which the Agent considers that there is a significant risk that the Borrowers, the Corporate Guarantor or any other Security Party is, or will later become, unable to discharge its liabilities under the Finance Documents to which it is a party as they fall due;

 

	
(e)

	
that, if the ratio set out in Clause 15.1 were applied immediately following the making of the Loan, the Borrowers would not be obliged to provide additional security or prepay part of the Loan under that Clause; and

  

23

  

 

	
(f)

	
that the Agent has received, and found to be acceptable to it, any further opinions, consents, agreements and documents in connection with the Finance Documents which the Agent may, with the authorisation of the Majority Lenders, request by notice to the Borrowers prior to the Drawdown Date.

9.2          Waiver of conditions precedent

 

If the Majority Lenders, at their discretion, permit the Loan to be borrowed before certain of the conditions referred to in Clause 9.1 are satisfied, the Borrowers shall ensure that those conditions are satisfied within 5 Business Days after the Drawdown Date (or such longer period as the Agent may, with the authorisation of the Majority Lenders, specify).

 

10           REPRESENTATIONS AND WARRANTIES

 

10.1        General

 

Each Borrower represents and warrants to each Creditor Party as follows.

 

10.2        Status

 

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

 

10.3        Share capital and ownership

 

Each Borrower has an authorised share capital of Five hundred (500) registered shares with par value of $0,01 each and the legal title and beneficial ownership of all those shares is held, free of any Security Interest or other claim, by the Corporate Guarantor.

 

10.4        Corporate power

 

Each Borrower has the corporate capacity, and has taken all corporate action and obtained all consents necessary for it:

 

	
(a)

	
to register permanently the Ship owned by it in its name under the Approved Flag;

 

	
(b)

	
to execute the Finance Documents to which that Borrower is a party; and

 

	
(c)

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

 

10.5        Consents in force

 

All the consents referred to in Clause 10.4 remain in force and nothing has occurred which makes any of them liable to revocation.

 

10.6        Legal validity; effective Security Interests

 

The Finance Documents to which each Borrower is a party, do now or, as the case may be, will, upon execution and delivery (and, where applicable, registration as provided for in the Finance Documents):

 

	
(a)

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

 

	
(b)

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

  

24

  

 

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

 

10.7        No third party Security Interests

 

Without limiting the generality of Clause 10.6, at the time of the execution and delivery of each Finance Document to which a Borrower is a party:

 

	
(a)

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

 

	
(b)

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

 

10.8        No conflicts

 

The execution by each Borrower of each Finance Document to which it is a party, and the borrowing by that Borrower of the Loan, and its compliance with each Finance Document to which it is a party will not involve or lead to a contravention of:

 

	
(a)

	
any law or regulation; or

 

	
(b)

	
the constitutional documents of that Borrower; or

 

	
(c)

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

 

10.9        No withholding taxes

 

All payments which each Borrower is liable to make under the Finance Documents to which it is a party may be made without deduction or withholding for or on account of any tax payable under any law of any Pertinent Jurisdiction.

 

10.10      No default

 

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

 

10.11      Information

 

All information which has been provided in writing by or on behalf of the Borrowers or any Security Party to any Creditor Party in connection with any Finance Document satisfied the requirements of Clause 11.5; all audited and unaudited accounts which have been so provided satisfied the requirements of Clause 11.7; and there has been no material adverse change in the financial position or state of affairs of either Borrower from that disclosed in the latest of those accounts.

 

10.12      No litigation

 

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

 

10.13      Validity and completeness of the Initial Charter

 

The Initial Charter constitutes valid, binding and enforceable obligations of the Initial Charterer and Borrower B in accordance with its terms; and:

  

25

  

 

	
(a)

	
the copy of the Initial Charter delivered to the Agent before the date of this Agreement is a true and complete copy; and

 

	
(b)

	
other than those amendments and additions to the initial Charter disclosed to the Agent before the date of this Agreement, no amendments or additions to the Initial Charter have been agreed nor has Borrower B or the Initial Charterer waived any of their respective rights under the Initial Charter.

 

10.14      Compliance with certain undertakings

 

At the date of this Agreement, the Borrowers are in compliance with Clauses 11.2, 11.4, 11.9 and 11.13.

 

10.15      Taxes paid

 

Each Borrower has paid all taxes applicable to, or imposed on or in relation to that Borrower, its business or the Ship owned by it.

 

10.16      ISM Code and ISPS Code compliance

 

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

 

10.17      No money laundering

 

Without prejudice to the generality of Clause 2.3, in relation to the borrowing by the Borrowers of the Loan, the performance and discharge of their obligations and liabilities under the Finance Documents, and the transactions and other arrangements affected or contemplated by the Finance Documents to which a Borrower is a party, the Borrowers confirm (1) that they are acting for their own account; (ii) that they will use the proceeds of the Loan for their own benefit, under their full responsibility and exclusively for the purposes specified in this Agreement; and (iii) that the foregoing will not involve or lead to a contravention of any law, official requirement or other regulatory measure or procedure implemented to combat "money laundering" (as defined in Article 1 of Directive 2005/60/EC of the European Parliament and of the Council).

 

10.18      No immunity

 

Neither Borrower, nor any of their assets are entitled to immunity on the grounds of sovereignty or otherwise from any legal action or proceeding (which shall include, without limitation, suit attachment prior to judgement, execution or other enforcement).

 

10.19      Sanctions

 

As regards Sanctions:

 

	
(a)

	
neither Borrower is a Prohibited Person or is owned or controlled by, or acting directly or indirectly on behalf of or for the benefit of, a Prohibited Person and neither Borrower owns or controls a Prohibited Person; and

 

	
(b)

	
no proceeds of the Loan shall be made available, directly or indirectly, to or for the benefit of a Prohibited Person or otherwise shall be, directly or indirectly, applied in a manner or for a purpose prohibited by Sanction.

 

11           GENERAL UNDERTAKINGS

 

11.1        General

  

26

  

Each Borrower undertakes with each Creditor Party to comply with the following provisions of this Clause 11 at all times during the Security Period except as the Agent may, with the authorisation of the Majority Lenders, otherwise permit.

 

11.2        Title; negative pledge

 

Each Borrower will:

 

	
(a)

	
hold the legal title to, and own the entire beneficial interest in the Ship owned by it, the Insurances and Earnings, free from all Security Interests and other interests and rights of every kind, except for those created by the Finance Documents and the effect of assignments contained in the Finance Documents and except for Permitted Security Interests; and

 

	
(b)

	
not create or permit to arise any Security Interest (except for Permitted Security Interests) over any other asset, present or future (including, but not limited to, that Borrower's rights against the Swap Bank under the Master Agreement or all or any part of that Borrower's interest in any amount payable to that Borrower by the Swap Bank under the Master Agreement).

 

11.3        No disposal of assets

 

Neither Borrower will transfer, lease or otherwise dispose of:

 

	
(a)

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

 

	
(b)

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

 

but paragraph (a) does not apply to any charter of a Ship as to which Clause 14.13 applies.

 

11.4        No other liabilities or obligations to be incurred

 

Neither Borrower will incur any liability or obligation except:

 

	
(a)

	
under the Finance Documents to which it is a party;

 

	
(b)

	
liabilities or obligations reasonably incurred in the ordinary course of owning, operating and chartering the Ship; and

 

	
(c)

	
in respect of the Designated Transactions.

 

11.5        Information provided to be accurate

 

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

 

11.6        Provision of financial statements

 

Each Borrower will send or procure that are to be sent to the Agent:

 

(a)           as soon as possible, but in no event later than 180 days after the end of each Financial Year of the Corporate Guarantor the audited annual consolidated accounts for that Financial Year of the Corporate Guarantor (commencing with the accounts for the year ending 31 December 2012);

  

27

  

 

	
(b)

	
as soon as possible, but in no event later than 90 days after 31 March, 30 June, 30 September and 31 December in each Financial Year of the Corporate Guarantor the unaudited quarterly accounts (including, without limitation, updated details regarding balance sheets and cash flow statements) for that Financial Year of the Corporate Guarantor (commencing with the accounts for the 3-month period ending 31 December 2012) certified as to their correctness by the chief financial officer of the Corporate Guarantor; and

 

	
(c)

	
promptly after a request by the Agent, such further financial or other information in respect of the Borrowers, the Ships, the Corporate Guarantor, the other Security Parties and the Group (including, but not limited to, charter arrangements, Financial Indebtedness, operating expenses) as the Agent may require.

 

11.7        Form of financial statements

 

All accounts delivered under Clause 11.6 will:

 

	
(a)

	
be prepared in accordance with all applicable laws and GAAP consistently applied;

 

	
(b)

	
give a true and fair view of the state of affairs of the Group at the date of those accounts and of its profit for the period to which those accounts relate; and

 

	
(c)

	
fully disclose or provide for all significant liabilities of the Group.

 

11.8        Shareholder and creditor notices

 

Each Borrower will send the Agent, at the same time as they are despatched, copies of all communications which are despatched to that Borrower's shareholders or creditors or any class of them.

 

11.9        Consents

 

Each Borrower will maintain in force and promptly obtain or renew, and will promptly send certified copies to the Agent of, all consents required:

 

	
(a)

	
for that Borrower to perform its obligations under any Finance Document to which it is a party;

 

	
(b)

	
for the validity or enforceability of any Finance Document to which it is a party; and

 

	
(c)

	
for that Borrower to continue to own and operate the Ship owned by it, and that Borrower will comply with the terms of all such consents. 

 

11.10      Maintenance of Security Interests

 

Each Borrower will:

 

	
(a)

	
at its own cost, do all that is necessary to ensure that any Finance Document to which it is a party validly creates the obligations and the Security Interests which it purports to create; and

 

	
(b)

	
without limiting the generality of paragraph (a), at its own cost, promptly register, file, record or enrol any Finance Document with any court or authority in all Pertinent Jurisdictions, pay any stamp, registration or similar tax in all Pertinent Jurisdictions in respect of any Finance Document, give any notice or take any other step which, in the opinion of the Majority Lenders, is or has become necessary or desirable for any Finance Document to be valid, enforceable or admissible in evidence or to ensure or protect the priority of any Security Interest which it creates.

  

28

  

11.11     Notification of litigation

 

Each Borrower will provide the Agent with details of any legal or administrative action involving that Borrower, any Security Party, the Approved Manager or the Ship owned by it, the Earnings or the Insurances as soon as such action is instituted or it becomes apparent to that Borrower that it is likely to be instituted, unless it is clear that the legal or administrative action cannot be considered material in the context of any Finance Document.

 

11.12     No amendment to Master Agreement

 

Neither Borrower will agree to any amendment or supplement to, or waive or fail to enforce, the Master Agreement or any of its provisions.

 

11.13     Principal place of business

 

Neither Borrower will establish, or do anything as a result of which it would be deemed to

 

have, a place of business in any country other than the Marshall Islands and Greece.

 

11.14     Confirmation of no default

 

Each Borrower will, within 2 Business Days after service by the Agent of a written request,

 

serve on the Agent a notice which is signed by 2 directors of that Borrower and which:

 

	
(a)

	
states that no Event of Default or Potential Event of Default has occurred; or

 

	
(b)

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

 

The Agent may serve requests under this Clause 11.14 from time to time but only if asked to do so by a Lender or Lenders having Contributions exceeding 10 per cent. of the Loan or (if the Loan hasn't been drawn) Commitments exceeding 10 per cent of the Total Commitments; and this Clause 11.14 does not affect the Borrowers' obligations under Clause 11.15.

 

11.15     Notification of default

 

Each Borrower will notify the Agent as soon as that Borrower becomes aware of:

 

	
(a)

	
the occurrence of an Event of Default or a Potential Event of Default; or

 

	
(b)

	
any matter which indicates that an Event of Default or a Potential Event of Default may have occurred, and will keep the Agent fully up to date with all developments

 

11.16     Provision of further information

 

Each Borrower will, as soon as practicable after receiving the request, provide the Agent with any additional financial or other information relating:

 

	
(a)

	
to the Borrowers, the Group, the Corporate Guarantor, the Ships, the other Fleet Vessels, their Insurances or their Earnings (including, but not limited to, any sales or purchases of any Fleet Vessels, the incurrence of Financial Indebtedness by members of the Group, details of the employment of the Fleet Vessels) as the Agent may require; or

 

	
(b)

	
to any other matter relevant to, or to any provision of, a Finance Document,

  

29

  

 

which may be requested by the Agent, the Security Trustee, the Swap Bank or any Lender at any time.

 

11.17     Provision of copies and translation of documents

 

Each Borrower will supply the Agent with a sufficient number of copies of the documents referred to above to provide 1 copy for each Creditor Party; and if the Agent so requires in respect of any of those documents, the Borrowers will provide a certified English translation prepared by a translator approved by the Agent.

 

11.18     "Know your customer" checks 

 

If:

 

	
(a)

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

 

	
(b)

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

 

	
(c)

	
a proposed assignment or transfer by a Lender of any of its rights and obligations under this Agreement to a party that is not a Lender prior to such assignment or transfer,

 

obliges the Agent or any Lender (or, in the case of paragraph (c), any prospective new Lender) to comply with "know your customer" or similar identification procedures in circumstances where the necessary information is not already available to it, the Borrowers shall promptly upon the request of the Agent or the Lender concerned supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Agent (for itself or on behalf of any Lender) or the Lender concerned (for itself or, in the case of the event described in paragraph (c), on behalf of any prospective new Lender) in order for the Agent, the Lender concerned or, in the case of the event described in paragraph (c), any prospective new Lender to carry out and be satisfied it has complied with all necessary "know your customer" or other similar checks under all applicable laws and regulations pursuant to the transactions contemplated in the Finance Documents.

 

11.19      No amendment to the Initial Charter

 

Each Borrower will ensure that the parties to the Initial Charter will not agree to any amendment or supplement to, or waive or fault to enforce, the Initial Charter or any of its provisions.

 

12           CORPORATE UNDERTAKINGS

 

12.1        General

 

Each Borrower also undertakes with each Creditor Party to comply with the following provisions of this Clause 12 at all times during the Security Period except as the Agent may, with the authorisation of the Majority Lenders, otherwise permit.

 

12.2        Maintenance of status

 

Each Borrower will maintain its separate corporate existence and remain in good standing under the laws of the Marshall Islands.

 

12.3        Negative undertakings

 

Neither Borrower will:

  

30

  

 

	
(a)

	
carry on any business other than the ownership, chartering and operation of the Ship owned by that Borrower; or

 

	
(b)

	
pay any dividend or make any other form of distribution or effect any form of redemption, purchase or return of share capital if an Event of Default has occurred at the relevant time or an Event of Default will result from the payment of a dividend or the making of any other form of distribution; or

 

	
(c)

	
provide any form of credit or financial assistance to:

 

	
  

	
(i)

	
a person who is directly or indirectly interested in that Borrower's share or loan capital; or

 

	
  

	
(ii)

	
any company in or with which such a person is directly or indirectly interested or connected;

 

or enter into any transaction with or involving such a person or company on terms which are, in any respect, less favourable to that Borrower than those which it could obtain in a bargain made at arms' length; or

 

	
(d)

	
save for the account opened by Borrower B with Duetsche Bank AG Finale Deutschlandgeschgt in Hamburg, open or maintain any account with any bank or financial institution except accounts with the Agent and the Security Trustee for the purposes of the Finance Documents; or

 

	
(e)

	
issue, allot or grant any person a right to any shares in its capital or repurchase or reduce its issued share capital; or

 

acquire any shares or other securities other than US or UK Treasury bills and certificates of deposit issued by major North American or European banks, or enter into any transaction in a derivative other than the Designated Transactions; or

 

(g)           enter into any form of amalgamation, merger or de-merger or any form of reconstruction or reorganisation.

 

13           INSURANCE

 

13.1        General

 

Each Borrower also undertakes with each Creditor Party to comply with the following provisions of this Clause 13 at all times during the Security Period except as the Agent may, with the authorisation of the Majority Lenders, otherwise permit.

 

13.2        Maintenance of obligatory insurances

 

Each Borrower shall keep the Ship owned by it insured at the expense of that Borrower against:

 

	
(a)

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

 

	
(b)

	
war risks (including terrorism, piracy and confiscation);

 

	
(c)

	
protection and indemnity risks (other than loss of hire or political risks); and

 

	
(d)

	
any other risks against which the Security Trustee considers, having regard to practices and other circumstances prevailing at the relevant time, it would in the opinion of the Security Trustee be reasonable for that Borrower to insure and which are specified by the Security Trustee by notice to that Borrower.

  

31

  

13.3        Terms of obligatory insurances

 

Each Borrower shall effect such insurances:

 

	
(a)

	
in Dollars;

 

	
(b)

	
in the case of fire and usual marine risks and war risks, (including hull interest and freight interest) in such amount as shall from time to time be approved by the Security Trustee but in any event in an amount not less than the greater of (i) an amount which when aggregated with the insured value of the other Ship then subject to a Mortgage, 120 per cent of the aggregate of the Loan and (ii) the Market Value of the Ship owned by it;

 

	
(c)

	
in the case of hull and machinery policy at an agreed insured value (excluding hull interest and freight interest) in an amount of not less than the greater of (i) 80 per cent. of the Market Value of the Ship owned by it or (ii) an amount which when aggregated with the agreed insured values under all the other hull and machinery policies for the other Ship then subject to a Mortgage is not less than the principal amount of the Loan, Provided that the Borrowers are in compliance with their obligations under paragraph (b) above at all times;

 

	
(d)

	
in the case of oil pollution liability risks, for an aggregate amount equal to the highest level of cover from time to time available under basic protection and indemnity club entry and in the international marine insurance market;

 

	
(e)

	
in relation to protection and indemnity risks in respect of the full tonnage of the Ship;

 

	
(f)

	
on approved terms; and

 

	
(g)

	
through approved brokers and with approved insurance companies and/or underwriters or, in the case of war risks and protection and indemnity risks, in approved war risks and protection and indemnity risks associations.

 

13.4        Further protections for the Creditor Parties

 

In addition to the terms set out in Clause 13.3, each Borrower shall procure that the obligatory insurances effected by it shall:

 

(a)           subject always to paragraph (b), name that Borrower as the sole named assured unless the interest of every other named assured is limited:

 

	
  

	
(i)

	
in respect of any obligatory insuances for hull and machinery and war risks;

 

	
  

	 	
(A)

	
to any provable out-of-pocket expenses that it has incurred and which form part of any recoverable claim on underwriters; and

 

	
  

	 	
(B)

	
to any third party liability claims where cover for such claims is provided by the policy (and then only in respect of discharge of any claims made against it); and

 

	
  

	
(ii)

	
in respect of any obligatory insurances for protection and indemnity risks, to any recoveries it is entitled to make by way of reimbursement following discharge of any third party liability claims made specifically against it

 

and every other named assured has undertaken in writing to the Security Trustee (in such form as it requires) that any deductible shall be apportioned between that Borrower and every other named assured in proportion to the gross claims made or paid by each of them and that it shall do all things necessary and provide all documents, evidence and information to enable the Security Trustee to collect or recover any moneys which at any time become payable in respect of the obligatory insurances;

  

32

  

	
(b)

	
whenever the Security Trustee requires, name (or be amended to name) the Security Trustee as additional named assured for its rights and interests, warranted no operational interest and with full waiver of rights of subrogation against the Security Trustee, but without the Security Trustee thereby being liable to pay (but having the right to pay) premiums, calls or other assessments in respect of such insurance;

 

	
(c)

	
name the Security Trustee as loss payee with such directions for payment as the Security Trustee may specify;

 

	
(d)

	
provide that all payments by or on behalf of the insurers under the obligatory insurances to the Security Trustee shall be made without set-off, counterclaim or deductions or condition whatsoever;

 

	
(e)

	
provide that such obligatory insurances shall be primary without right of contribution from other insurances which may be carried by the Security Trustee or any other Creditor Party; and

 

	
(f)

	
provide that the Security Trustee may make proof of loss if that Borrower fails to do so.

 

	
13.5

	
Renewal of obligatory insurances

 

	
  

	
Each Borrower shall:

 

	
(a)

	
at least 21 days before the expiry of any obligatory insurance effected by it:

         

	
  

	
(i)

	
notify the Security Trustee of the brokers (or other insurers) and any protection and indemnity or war risks association through or with whom that Borrower proposes to renew that obligatory insurance and of the proposed terms of renewal; and

 

	
  

	
(ii)

	
obtain the Security Trustee's approval to the matters referred to in paragraph (i);

 

	
(b)

	
at least 14 days before the expiry of any obligatory insurance, renew that obligatoryinsurance in accordance with the Security Trustee'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 Security Trustee in writing of the terms each conditions of the renewal.

        

13.6        Copies of policies; letters of undertaking

 

Each Borrower shall ensure that all approved brokers provide the Security Trustee with pro forma copies of all policies relating to the obligatory insurances which they are to effect or renew and of a letter or letters of undertaking in a form required by the Security Trustee 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 13.4;

 

	
(b)

	
they will hold such policies, and the benefit of such insurances, to the order of the Security Trustee in accordance with the said loss payable clause;

 

	
(c)

	
they will advise the Security Trustee immediately of any material change to the terms of the obligatory insurances;

 

	
(d)

	
they will notify the Security Trustee, not less than 14 days before the expiry of the obligatory insurances, in the event of their not having received notice of renewal instructions from that Borrower or its agents and, in the event of their receiving instructions to renew, they will promptly notify the Security Trustee of the terms of the instructions; and

  

33

  

 

(e)           they will not set off against any sum recoverable in respect of a claim relating to the Ship owned by that Borrower under such obligatory insurances any premiums or other amounts due to them or any other person whether in respect of that Ship or otherwise, they waive any lien on the policies, or any sums received under them, which they might have in respect of such premiums or other amounts, and they will not cancel such obligatory insurances by reason of non-payment of such premiums or other amounts, and will arrange for a separate policy to be issued in respect of that Ship forthwith upon being so requested by the Security Trustee.

 

13.7        Copies of certificates of entry

 

Each Borrower shall ensure that any protection and indemnity and/or war risks associations in which the Ship owned by it is entered provides the Security Trustee with:

 

	
(a)

	
a certified copy of the certificate of entry for that Ship owned by it;

 

	
(b)

	
a letter or letters of undertaking in such form as may be required by the Security Trustee; and

 

	
(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 that Ship.

 

13.8        Deposit of original policies

 

Each Borrower shall ensure that all policies relating to obligatory insurances effected by it are deposited with the approved brokers through which the insurances are effected or renewed.

 

13.9       Payment of premiums

 

Each Borrower shall punctually pay all premiums or other sums payable in respect of the obligatory insurances effected by it and produce all relevant receipts when so required by the Security Trustee.

 

13.10      Guarantees

 

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

 

13.11      Restrictions on employment

 

Neither Borrower shall employ its Ship, nor shall permit it to be employed, outside the cover provided by any obligatory insurances.

 

13.12     Compliance with terms of insurances

 

Neither Borrower 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 Borrower shall take ail 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 13.6(c)) ensure that the obligatory insurances are not made subject to any exclusions or qualifications to which the Security Trustee has not given its prior approval;

  

34

  

 

	
(b)

	
neither Borrower shall make any changes relating to the classification or classification society or manager or operator of the Ship owned by it approved by the underwriters of the obligatory insurances;

 

	
(c)

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

 

	
(d)

	
neither Borrower shall employ the Ship owned by it, nor allow it to be employed, otherwise than in conformity with the terms and conditions of the obligatory insurances, without first obtaining the consent of the insurers and complying with any requirements (as to extra premium or otherwise) which the insurers specify.

 

13.13     Alteration to terms of insurances

 

Neither Borrower shall make nor agree to any alteration to the terms of any obligatory insurance nor waive any right relating to any obligatory insurance.

 

13.14     Settlement of claims

 

Neither Borrower shall settle, compromise or abandon any claim under any obligatory insurance for Total Loss or for a Major Casualty, and shall do all things necessary and provide all documents, evidence and information to enable the Security Trustee to collect or recover any moneys which at any time become payable in respect of the obligatory insurances.

 

13.15     Provision of copies of communications

 

Each Borrower shall provide the Security Trustee, at the time of each such communication, copies of all written communications between a Borrower and:

 

	
(a)

	
the approved brokers;

 

	
(b)

	
the approved protection and indemnity and/or war risks associations; and

 

	
(c)

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

 

	
  

	
(i)

	
that Borrower'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 Borrower 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.

 

13.16      Provision of information

 

In addition, each Borrower shall promptly provide the Security Trustee (or any persons which it may designate) with any information which the Security Trustee (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 13.17 below or dealing with or considering any matters relating to any such insurances,

  

35

  

 

and the Borrowers shall, forthwith upon demand, indemnify the Security Trustee in respect of all fees and other expenses incurred by or for the account of the Security Trustee in connection with any such report as is referred to in paragraph (a).

 

13.17     Mortgagee's interest insurances

 

The Security Trustee shall be entitled from time to time to effect, maintain and renew a mortgagee's interest marine insurance policy in such amounts, on such terms, through such insurers and generally in such manner as the Security Trustee may from time to time consider appropriate and each Borrower shall upon demand fully indemnify the Creditor Parties in respect of all premiums and other expenses which are incurred in connection with or with a view to effecting, maintaining or renewing any such insurance or dealing with, or considering, any matter arising out of any such insurance.

 

13.18     Review of insurance requirements

 

The Agent shall be entitled to review the requirements of this Clause 13 from time to time in order to take account of any changes in circumstances after the date of this Agreement which the Agent reasonably considers significant and capable of affecting the Borrowers, the Ships and their Insurances (including, without limitation, changes in the availability or the cost of insurance coverage or the risks to which each Borrower may be subject), and may appoint insurance consultants in relation to this review at the cost of that Borrower.

 

13.19     Modification of insurance requirements

 

The Agent shall notify the Borrowers of any proposed modification under Clause 13.18 to the requirements of this Clause 13 which the Agent reasonably considers appropriate in the circumstances, and such modification shall take effect on and from the date it is notified in writing to the relevant Borrower as an amendment to this Clause 13 and shall bind that Borrower accordingly.

 

13.20      Compliance with mortgagee's instructions

 

The Agent shall be entitled (without prejudice to or limitation of any other rights which it may have or acquire under any Finance Document) to require a Ship to remain at any safe port or to proceed to and remain at any safe port designated by the Agent until the Borrower owning that Ship implements any amendments to the terms of the obligatory insurances and any operational changes required as a result of a notice served under Clause 13.19.

 

14           SHIP COVENANTS

 

14.1        General

 

Each Borrower also undertakes with each Creditor Party to comply with the following provisions of this Clause 14 at all times during the Security Period except as the Agent, with the authorisation of the Majority Lenders, may otherwise permit.

 

14.2        Ship's name and registration

 

Each Borrower shall keep the Ship owned by it registered in its name under an Approved Flag; shall not do, omit to do or allow to be done anything as a result of which such registration might be cancelled or imperilled; and shall not change the name or port of registry of the Ship owned by it.

14.3        Repair and classification

  

36

  

 

Each Borrower shall keep the Ship owned by it in a good and safe condition and state of repair:

 

	
(a)

	
consistent with first class ship ownership and management practice;

 

	
(b)

	
so as to maintain the highest class free of overdue recommendations and conditions with a classification society which is a member of [ACS acceptable to the Agent; and

 

	
(c)

	
so as to comply with all laws and regulations applicable to vessels registered at ports in the applicable Approved Flag State or to vessels trading to any jurisdiction to which that Ship may trade from time to time, including but not limited to the ISM Code and the ISPS Code.

 

14.4        Classification society undertaking

 

Each Borrower shall instruct the classification society referred to in Clause 14.3 (and procure that the classification society undertakes with the Security Trustee):

 

(a)           to send to the Security Trustee, following receipt of a written request from the Security

Trustee, certified true copies of all original class records held by the classification society in relation to its Ship;

 

(b)           to allow the Security Trustee (or its agents), at any time and from time to time, to inspect

 

the original class and related records of its Ship at the offices of the classification society and to take copies of them;

 

(c)           to notify the Security Trustee immediately in writing if the classification society:

 

	
  

	
(i)

	
receives notification from that Borrower or any other person that its Ship's classification society is to be changed; or

 

	
  

	
(ii)

	
becomes aware of any facts or matters which may result in or have resulted in a change, suspension, discontinuance, withdrawal or expiry of that Ship's class under the rules or terms and conditions of that Borrower's or its Ship's membership of the classification society; and

 

(d)           following receipt of a written request from the Security Trustee:

 

	
  

	
(i)

	
to confirm that a Borrower is not in default of any of its contractual obligations or liabilities to the classification society and, without limiting the foregoing, that it has paid in full all fees or other charges due and payable to the classification society; or

 

	
  

	
(ii)

	
if a Borrower is in default of any of its contractual obligations or liabilities to the classification society, to specify to the Security Trustee in reasonable detail the facts and circumstances of such default, the consequences of such default, and any remedy period agreed or allowed by the classification society.

 

14.5        Modification

 

Neither Borrower shall make any modification or repairs to, or replacement of, any Ship or equipment installed on it which would or might materially alter the structure, type or performance characteristics of that Ship or materially reduce its value.

 

14.6        Removal of parts

 

Neither Borrower shall remove any material part of any Ship, or any item of equipment installed on, any Ship unless the part or item so removed is forthwith replaced by a suitable part or item which is in the same condition as or better condition than the part or item removed, is free from any Security Interest or any right in favour of any person other than

  

37

  

the Security Trustee and becomes on installation on the relevant Ship the property of the relevant Borrower and subject to the security constituted by the relevant Mortgage Provided that a Borrower may install equipment owned by a third party if the equipment can be removed without any risk of damage to the Ship owned by it.

 

14.7        Surveys

 

Each Borrower shall submit the Ship owned by it regularly to all periodical or other surveys which may be required for classification purposes and, if so required by the Security Trustee provide the Security Trustee, with copies of all survey reports.

 

14.8        Inspection

 

Each Borrower shall permit the Security Trustee (by surveyors or other persons appointed by it for that purpose) to board the Ship owned by it 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.

 

14.9        Prevention of and release from arrest

 

Each Borrower shall promptly discharge:

 

	
(a)

	
all liabilities which give or may give rise to maritime or possessory liens on or claims enforceable against the Ship owned by it, the Earnings or the Insurances;

 

	
(b)

	
all taxes, dues and other amounts charged in respect of the Ship owned by it, the Earnings or the Insurances; and

 

	
(c)

	
all other outgoings whatsoever in respect of the Ship owned by it, the Earnings or the Insurances,

 

and, forthwith upon receiving notice of the arrest of the Ship owned by it, or of its detention in exercise or purported exercise of any lien or claim, that Borrower shall procure its release by providing bail or otherwise as the circumstances may require.

 

  14.10    Compliance with laws etc. 

 

Each Borrower shall:

 

	
(a)

	
comply, or procure compliance with the ISM Code, the ISPS Code, all Environmental Laws and all other laws or regulations relating to the Ship owned by it, its ownership, operation and management or to the business of that Borrower;

 

	
(b)

	
not employ the Ship owned by it 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 and the ISPS Code; and

 

	
(c)

	
in the event of hostilities in any part of the world (whether war is declared or not), not cause or permit the Ship owned by it to enter or trade to any zone which is declared a war zone by any government or by the Ship's war risks insurers unless the prior written consent of the Security Trustee has been given and that Borrower has (at its expense) effected any special, additional or modified insurance cover which the Security Trustee may require.

 

14.11      Provision of information

 

Each Borrower shall promptly provide the Security Trustee with any information which it requests regarding:

 

  

38

  

 

	
(a)

	
the Ship owned by it, its employment, position and engagements;

 

	
(b)

	
the Earnings and payments and amounts due to the master and crew of the Ship owned by it;

 

	
(c)

	
any expenses incurred, or likely to be incurred, in connection with the operation, maintenance or repair of the Ship owned by it and any payments made in respect of that Ship;

 

	
(d)

	
any towages and salvages; and

 

	
(e)

	
its compliance, the Approved Manager's compliance and the compliance of the Ship owned by it with the ISM Code and the ISPS Code,

 

and, upon the Security Trustee's request, provide copies of any current charter relating to the Ship owned by it , of any current charter guarantee and copies of the Borrower's or the Approved Manager's Document of Compliance.

 

14.12      Notification of certain events

 

Each Borrower shall immediately notify the Security Trustee by fax, confirmed forthwith, by letter of:

 

	
(a)

	
any casualty which is or is likely to be or to become a Major Casualty;

 

	
(b)

	
any occurrence as a result of which the Ship owned by it has become or is, by the passing of time or otherwise, likely to become a Total Loss;

 

	
(c)

	
any requirement or recommendation made by any insurer or classification society or by any competent authority which is not immediately complied with;

 

	
(d)

	
any arrest or detention of the Ship owned by it, any exercise or purported exercise of any lien on that Ship or its Earnings or any requisition of that Ship for hire;

 

	
(e)

	
any intended dry docking of the Ship owned by it;

 

	
(f)

	
any Environmental Claim made against that Borrower or in connection with the Ship owned by it, or any Environmental Incident;

 

	
(g)

	
any claim for breach of the ISM Code or the ISPS Code being made against the Borrower, the Approved Manager or otherwise in connection with the Ship owned by it; or

 

	
(h)

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

 

and that Borrower shall keep the Security Trustee advised in writing on a regular basis and in such detail as the Security Trustee shall require of that Borrower's, the Approved Manager's or any other person's response to any of those events or matters.

 

14.13     Restrictions on chartering, appointment of managers etc. 

 

Neither Borrower shall, in relation to the Ship owned by it:

 

	
(a)

	
let that Ship on demise charter for any period;

 

	
(b)

	
other than the Initial Charter in the case of Borrower B, enter into any time or consecutive voyage charter in respect of that Ship for a term which exceeds, or which by virtue of any optional extensions may exceed, 12 months;

  

39

  

 

	
(c)

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

 

	
(d)

	
charter that Ship otherwise than on bona fide arm's length terms at the time when that Ship is fixed;

 

	
(e)

	
appoint a manager of that Ship other than the Approved Manager or agree to any alteration to the terms of the Approved Manager's appointment;

 

	
(f)

	
de activate or lay up that Ship; or

 

	
(g)

	
put that Ship into the possession of any person for the purpose of work being done upon it in an amount exceeding or likely to exceed 1,000,000 (or the equivalent in any other currency) unless that person has first given to the Security Trustee and in terms satisfactory to it a written undertaking not to exercise any lien on that Ship or its Earnings for the cost of such work or for any other reason.

 

14.14     Notice of Mortgage

 

Each Borrower shall keep the relevant Mortgage registered against the Ship owned by it as a valid first priority or 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 that Ship a framed printed notice stating that that Ship is mortgaged by that Borrower to the Security Trustee.

 

14.15     Sharing of Earnings 

 

Neither Borrower shall:

 

	
(a)

	
enter into any agreement or arrangement for the sharing of any Earnings;

 

	
(b)

	
enter into any agreement or arrangement for the postponement of any date on which any Earnings are due; and

 

	
(c)

	
the reduction of the amount of any Earnings or otherwise for the release or adverse alteration of any right of a Borrower to any Earnings.

 

14.16      ISPS Code

 

Each Borrower shall comply with the ISPS Code and in particular, without limitation, shall:

 

	
(a)

	
procure that the Ship owned by that Borrower and the company responsible for that Ship's compliance with the ISPS Code comply with the ISPS Code;

 

	
(b)

	
maintain for that Ship an ISSC; and

 

	
(c)

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

 

14.17      Charterparty Assignment

 

if a Borrower enters into any Approved Charter (subject to obtaining the consent of the Agent in accordance with Clause 14.13(b)), that Borrower shall at the request of the Agent execute in favour of the Security Trustee (and register, if applicable) an Approved Charterparty Assignment and shall:

  

40

  

	
(a)

	
serve notices of the Approved Charterparty Assignment on the Approved Charterer and procure that the Approved Charterer acknowledges such notice in such form as the Agent may approve or require; and

 

	
(b)

	
deliver to the Agent such other documents equivalent to those referred to at paragraphs 3, 4 and 5 of Schedule 3, Part A as the Agent may require.

 

15           SECURITY COVER

 

15.1        Minimum required security cover

 

Clause 15.2 applies if, at any relevant time during the Security Period, the Agent notifies the Borrowers that:

 

	
(a)

	
The aggregate of the Market Values of the Ships; plus

 

	
(b)

	
the net realisable value of any additional security previously provided under this Clause 15, is below 125 per cent of the Loan.

 

15.2        Provision of additional security; prepayment

 

If the Agent serves a notice on the Borrowers under Clause 15.1, the Borrowers shall prepay such part at least of the Loan as will eliminate the shortfall on or before the date falling 1 month after the date on which the Agent's notice is served under Clause 15.1 (the "Prepayment Date") unless at least 1 Business Day before the Prepayment Date the Borrowers have provided additional security which, in the opinion of the Majority Lenders, has a net realisable value at least equal to the shortfall and is documented in such terms as the Agent may, with the authorisation of the Majority Lenders, approve or require.

 

15.3        Valuation of Ships

 

The Market Value of a Ship (or any other Fleet Vessel) at any date during the Security Period is that shown by taking the arithmetic means of two valuations, each valuation to be prepared:

 

(a)           as at a date not more than 14 days previously;

 

(b)           an Approved Broker;

 

	
(c)

	
with or without physical inspection of the Ship (as the Agent may require);

 

	
(d)

	
on the basis of a sale for prompt delivery for cash on normal arm's length commercial terms as between a willing seller and a willing buyer, free of any existing charter or other contract of employment; and

 

	
(e)

	
after deducting the estimated amount of the usual and reasonable expenses which would be incurred in connection with the sale

 

15.4        Value of additional vessel security

 

The net realisable value of any additional security which is provided under Clause 15.2 and which consists of a Security Interest over a vessel shall be that shown by a valuation complying with the requirements of Clause 15.3.

 

15.5        Valuations binding

 

  

41

  

 

Any valuation under Clause 15.2, 15.3 or 15.4 shall be binding and conclusive as regards the Borrowers, as shall be any valuation which the Majority Lenders make of any additional security which does not consist of or include a Security Interest.

 

15.6        Provision of information

 

The Borrowers shall promptly provide the Agent and the Approved Broker acting under Clause 15.3 or 15.4 with any information which the Agent or the Approved Broker may request for the purposes of the valuation; and, if the Borrowers fail to provide the information by the date specified in the request, the valuation may be made on any basis and assumptions which the Approved Broker or the Majority Lenders (or the expert appointed by them) consider prudent.

 

15.7        Payment of valuation expenses

 

Without prejudice to the generality of the Borrowers' obligations under Clauses 20.2, 20.3 and 21.3, the Borrowers shall, on demand, pay the Agent the amount of the fees and expenses of the Approved Broker instructed by the Agent under this Clause and all legal and other expenses incurred by any Creditor Party in connection with any matter arising out of this Clause.

 

15.8        Application of prepayment

 

Clause 8.10 shall apply in relation to any prepayment pursuant to Clause 15.1.

 

16           PAYMENTS AND CALCULATIONS

 

16.1        Currency and method of payments

 

All payments to be made by the Lenders or by either Borrower under a Finance Document shall be made to the Agent or to the Security Trustee, in the case of an amount payable to it:

 

	
(a)

	
by not later than 11.00 a.m. (New York City time) on the due date;

 

	
(b)

	
in same day Dollar funds settled through the New York Clearing House Interbank Payments System (or in such other Dollar funds and/or settled in such other manner as the Agent shall specify as being customary at the time for the settlement of international transactions of the type contemplated by this Agreement);

 

	
(c)

	
in the case of an amount payable by a Lender to the Agent or by either Borrower to the Agent or any Lender, to the account of the Agent at JP Morgan Chase Bank NA, New York (SWIFT CODE: CHASUS33 (Account Nordea Bank Finland plc, London Branch Account No. 400807041, Swift Code: NDEAGB2L)), or to such other account with such other bank as the Agent may from time to time notify to the Borrowers and the other Creditor Parties; and

 

	
(d)

	
in the case of an amount payable to the Security Trustee, to such account as it may from time to time notify to the Borrowers and the other Creditor Parties.

 

16.2        Payment on non-Business Day

 

If any payment by either Borrower under a Finance Document would otherwise fall due on a day which is not a Business Day:

 

	
(a)

	
the due date shall be extended to the next succeeding Business Day; or

 

	
(b)

	
if the next succeeding Business Day falls in the next calendar month, the due date shall be brought forward to the immediately preceding Business Day,

  

42

  

 

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

 

16.3        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.

 

16.4        Distribution of payments to Creditor Parties

 

Subject to Clauses 16.5, 16.6 and 16.7:

 

	
(a)

	
any amount received by the Agent under a Finance Document for distribution or remittance to a Lender, the Swap Bank or the Security Trustee shall be made available by the Agent to that Lender, the Swap Bank or, as the case may be, the Security Trustee by payment, with funds having the same value as the funds received, to such account as the Lender, the Swap Bank or the Security Trustee may have notified to the Agent not less than 5 Business Days previously; and

 

	
(b)

	
amounts to be applied in satisfying amounts of a particular category which are due to the Lenders and/or the Swap Bank generally shall be distributed by the Agent to each Lender and the Swap Bank pro rata to the amount in that category which is due to it.

 

16.5        Permitted deductions by Agent

 

Notwithstanding any other provision of this Agreement or any other Finance Document, the Agent may, before making an amount available to a Lender or the Swap Bank, deduct and withhold from that amount any sum which is then due and payable to the Agent from that Lender or the Swap Bank under any Finance Document or any sum which the Agent is then entitled under any Finance Document to require that Lender or the Swap Bank to pay on demand.

 

16.6        Agent only obliged to pay when monies received

 

Notwithstanding any other provision of this Agreement or any other Finance Document, the Agent shall not be obliged to make available to either Borrower or any Lender or the Swap Bank any sum which the Agent is expecting to receive for remittance or distribution to that Borrower or that Lender or the Swap Bank until the Agent has satisfied itself that it has received that sum.

 

16.7        Refund to Agent of monies not received

 

If and to the extent that the Agent makes available a sum to a Borrower or a Lender or the Swap Bank, without first having received that sum, that Borrower or (as the case may be) the Lender or the Swap Bank concerned shall, on demand:

 

	
(a)

	
refund the sum in full to the Agent; and

 

	
(b)

	
pay to the Agent the amount (as certified by the Agent) which will indemnify the Agent against any funding or other loss, liability or expense incurred by the Agent as a result of making the sum available before receiving it.

 

16.8        Agent may assume receipt

 

Clause 16.7 shall not affect any claim which the Agent has under the law of restitution, and applies irrespective of whether the Agent had any form of notice that it had not received the sum which it made available.

  

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16.9        Creditor Party accounts

 

Each Creditor Party shall maintain accounts showing the amounts owing to it by the Borrowers and each Security Party under the Finance Documents and all payments in respect of those amounts made by the Borrowers and any Security Party.

 

16.10     Agent's memorandum account

 

The Agent shall maintain a memorandum account showing the amounts advanced by the Lenders and all other sums owing to the Agent, the Security Trustee and each Lender from the Borrowers and each Security Party under the Finance Documents and all payments in respect of those amounts made by the Borrowers and any Security Party.

 

16.11      Accounts prima facie evidence

 

If any accounts maintained under Clauses 16.9 and 16.10 show an amount to be owing by a Borrower or a Security Party to a Creditor Party, those accounts shall be prima facie evidence that that amount is owing to that Creditor Party.

 

17           APPLICATION OF RECEIPTS

 

17.1        Normal order of application

 

Except as any Finance Document may otherwise provide, any sums which are received or recovered by any Creditor Party under or by virtue of any Finance Document shall be applied:

 

(a)           FIRST: in or towards satisfaction of any amounts then due and payable under the Finance Documents in the following order and proportions:

 

	
  

	
(i)

	
first, in or towards satisfaction pro rata of all amounts then due and payable to the Creditor Parties under the Finance Documents other than those amounts referred to at paragraphs (ii) and (iii) (including, but without limitation, all amounts payable by either Borrower under Clauses 20, 21 and 22 of this Agreement or by either Borrower or any Security Party under any corresponding or similar provision in any other Finance Document);

 

	
  

	
(ii)

	
secondly, in or towards satisfaction pro rata of any and all amounts of interest or default interest payable to the Creditor Parties under the Finance Documents (and, for this purpose, the expression "interest" shall include any net amount which either Borrower shall have become liable to pay or deliver under section 2(e) (Obligations) of the Master Agreement but shall have failed to pay or deliver to the Swap Bank at the time of application or distribution under this Clause 17); and

 

	
  

	
(iii)

	
thirdly, in or towards satisfaction pro rata of the Loan and the Swap Exposure (in the case of the latter, calculated as at the actual Early Termination Date applying to each particular Designated Transaction, or if no such Early Termination Date shall have occurred, calculated as if an Early Termination Date occurred on the date of application or distribution hereunder);

 

(b)           SECONDLY: in retention of an amount equal to any amount not then due and payable under any Finance Document but which the Agent, by notice to either Borrower, the Security Parties and the other Creditor Parties, states in its opinion will either or may become due and payable in the future and, upon those amounts becoming due and payable, in or towards satisfaction of them in accordance with the provisions of Clause 17.1(a); and

 

(c)           THIRDLY: any surplus shall be paid to the Borrowers or to any other person appearing to be entitled to it.

  

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17.2        Variation of order of application

 

The Agent may, with the authorisation of the Majority Lenders and the Swap Bank, by notice to the Borrowers, the Security Parties and the other Creditor Parties provide for a different manner of application from that set out in Clause 17.1 either as regards a specified sum or sums or as regards sums in a specified category or categories.

 

17.3        Notice of variation of order of application

 

The Agent may give notices under Clause 17.2 from time to time; and such a notice may be stated to apply not only to sums which may be received or recovered in the future, but also to any sum which has been received or recovered on or after the third Business Day before the date on which the notice is served.

 

17.4        Appropriation rights overridden

 

This Clause 17 and any notice which the Agent gives under Clause 17.2 shall override any right of appropriation possessed, and any appropriation made, by either Borrower or any Security Party.

 

18           APPLICATION OF EARNINGS

 

18.1        Payment of Earnings

 

Each Borrower undertakes with each Creditor Party to ensure that, throughout the Security Period (and subject only to the provisions of the General Assignments) all Earnings of the Ship owned by it are paid to the Earnings Account for that Ship.

 

18.2        Location of accounts

 

Each Borrower shall promptly:

 

	
(a)

	
comply with any requirement of the Agent as to the location or re location of its Earnings Account; and

 

	
(b)

	
execute any documents which the Agent specifies to create or maintain in favour of the Security Trustee a Security Interest over (and/or rights of set-off, consolidation or other rights in relation to) its Earnings Account.

 

18.3        Debits for expenses etc.

 

The Agent shall be entitled (but not obliged) from time to time to debit any Earnings Account without prior notice in order to discharge any amount due and payable under Clause 20 or 21 to a Creditor Party or payment of which any Creditor Party has become entitled to demand under Clause 20 or 21.

 

18.4        Borrowers' obligations unaffected

 

The provisions of this Clause 18 do not affect:

 

	
(a)

	
the liability of the Borrowers to make payments of principal and interest on the due dates; or

 

	
(b)

	
any other liability or obligation of the Borrowers or any Security Party under any Finance Document.

18.5        Earnings Accounts balances

  

45

  

 

Subject to the other terms of this Agreement (including, without limitation, the terms of this Clause 18), the monies on the Earnings Account shall be freely available to the Borrowers to be used in accordance with and in compliance with the terms and conditions of this Agreement subject to no Event of Default having occurred.

 

19           EVENTS OF DEFAULT

 

19.1        Events of Default

 

An Event of Default occurs if:

 

(a)           either Borrower or any Security Party fails to pay when due or (if so payable) on demand any sum payable under a Finance Document or under any document relating to a Finance Document; or

 

(b)           any breach occurs of Clause 9.2, 10.18, 10.19, 11.2, 11.3, 11.9, 11.18, 11.19, 12.2, 12.3, 13.2, 13.3, 15.1, 15.2 and [12.4] of the Corporate Guarantee; or

 

(c)           any breach by either Borrower or any Security Party occurs of any provision of a Finance Document (other than a breach covered by paragraphs (a) or (b)) which, in the opinion of the Majority Lenders, is capable of remedy, and such default continues unremedied 10 days after written notice from the Agent requesting action to remedy the same; or

 

(d)           (subject to any applicable grace period specified in the Finance Document) any breach by either Borrower or any Security Party occurs of any provision of a Finance Document (other than a breach falling within paragraphs (a), (b) or (c)); or

 

(e)           any representation, warranty or statement made or repeated by, or by an officer of, the Borrower or a Security Party in a Finance Document or in a Drawdown Notice or any other notice or document relating to a Finance Document is untrue or misleading when it is made or repeated; or

 

(f)            any of the following occurs in relation to any Financial Indebtedness of a Relevant Person (exceeding in aggregate, in the case of the Corporate Guarantor, $10,000,000 and, in the case of any other Relevant Person, $500,000 (or the equivalent in any other currency)):

 

	
  

	
(i)

	
any Financial Indebtedness of a Relevant Person is not paid when due; or

 

	
  

	
(ii)

	
any Financial Indebtedness of a Relevant Person becomes due and payable or capable of being declared due and payable prior to its stated maturity date as a consequence of any event of default; or

 

	
  

	
(iii)

	
a lease, hire purchase agreement or charter creating any Financial Indebtedness of a Relevant Person is terminated by the lessor or owner or becomes capable of being terminated as a consequence of any termination event; or

 

	
  

	
(iv)

	
any overdraft, loan, note issuance, acceptance credit, letter of credit, guarantee, foreign exchange or other facility, or any swap or other derivative contract or transaction, relating to any Financial Indebtedness of a Relevant Person ceases to be available or becomes capable of being terminated as a result of any event of default, or cash cover is required, or becomes capable of being required, in respect of such a facility as a result of any event of default; or

 

	
  

	
(v)

	
any Security Interest securing any Financial Indebtedness of a Relevant Person becomes enforceable; or

 

(g)           any of the following occurs in relation to a Relevant Person:

  

46

  

 

	
  

	
(i)

	
a Relevant Person becomes, in the opinion of the Majority Lenders, 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 or distress in respect of a sum of, or sums aggregating, in the case of

 

	 	
  

	
(A)

	
the Corporate Guarantor, $10,000,000 or more or the equivalent in another currency; and

 

	 	
  

	
(B)

	
any other Relevant Person, $500,000 or more or the equivalent in another currency; or

 

	
  

	
(iii)

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

 

	
  

	
(iv)

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

 

	
  

	
(v)

	
any formal declaration of bankruptcy or any formal statement to the effect that a Relevant Person is insolvent or likely to become insolvent is made by a Relevant Person or by the directors of a Relevant Person or, in any proceedings, by a lawyer acting for a Relevant Person; or

 

	
  

	
(vi)

	
a provisional liquidator is appointed in respect of a Relevant Person, a winding up order is made in relation to a Relevant Person or a winding up resolution is passed by a Relevant Person; or

 

	
  

	
(vii)

	
a resolution is passed, an administration notice is given or filed, an application or petition to a court is made or presented or any other step is taken by (aa) a Relevant Person, (bb) the members or directors of a Relevant Person, (cc) a holder of Security Interests which together relate to all or substantially all of the assets of a Relevant Person, or (dd) a government minister or public or regulatory authority of a Pertinent Jurisdiction for or with a view to the winding up of that or another Relevant Person or the appointment of a provisional liquidator or administrator in respect of that or another Relevant Person, or that or another Relevant Person ceasing or suspending business operations or payments to creditors, save that this paragraph does not apply to a fully solvent winding up of a Relevant Person other than a Borrower or the Corporate Guarantor which is, or is to be, effected for the purposes of an amalgamation or reconstruction previously approved by the Majority Lenders and effected not later than 3 months after the commencement of the winding up; or

 

	
  

	
(viii)

	
an administration notice is given or filed, an application or petition to a court is made or presented or any other step is taken by a creditor of a Relevant Person (other than a holder of Security Interests which together relate to all or substantially all of the assets of a Relevant Person) for the winding up of a Relevant Person or the appointment of a provisional liquidator or administrator in respect of a Relevant Person in any Pertinent Jurisdiction, unless the proposed winding up, appointment of a provisional liquidator or administration is being contested in good faith, on substantial grounds and not with a view to some other insolvency law procedure being implemented instead and either (aa) the application or petition is dismissed or withdrawn within 30 days of being made or presented, or (bb) within 30 days of the administration notice being given or filed, or the other relevant steps being taken, other action is taken which will ensure that there will be no administration and (in both cases (aa) or (bb)) the Relevant Person will continue to carry on business in the ordinary way and without being the subject of any actual, interim or pending insolvency law procedure; or

 

  

47

  

	
  

	
(ix)

	
a Relevant Person or its directors take any steps (whether by making or presenting an application or petition to a court, or submitting or presenting a document setting out a proposal or proposed terms, or otherwise) with a view to obtaining, in relation to that or another Relevant Person, any form of moratorium, suspension or deferral of payments, reorganisation of debt (or certain debt) or arrangement with all or a substantial proportion (by number or value) of creditors or of any class of them or any such moratorium, suspension or deferral of payments, reorganisation or arrangement is effected by court order, by the filing of documents with a court, by means of a contract or in any other way at all; or

 

	
  

	
(x)

	
any meeting of the members or directors, or of any committee of the board or senior management, of a Relevant Person is held or summoned for the purpose of considering a resolution or proposal to authorise or take any action of a type described in paragraphs (iv) to (ix) or a step preparatory to such action, or (with or without such a meeting) the members, directors or such a committee resolve or agree that such an action or step should be taken or should be taken if certain conditions materialise or fail to materialise; or

 

	
  

	
(xi)

	
in a country other than England, any event occurs, any proceedings are opened or commenced or any step is taken which, in the opinion of the Majority Lenders is similar to any of the foregoing; or

 

(h)           either Borrower ceases or suspends carrying on its business or a part of its business which, in the opinion of the Majority Lenders, is material in the context of this Agreement; or

 

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

 

	
  

	
(i)

	
for either Borrower, either corporate Guarantor or any Security Party to discharge any liability under a Finance Document or to comply with any other obligation which the Majority Lenders consider material under a Finance Document;

 

	
  

	
(ii)

	
for the Agent, the Security Trustee, the Lenders or the Swap Bank to exercise or enforce any right under, or to enforce any Security Interest created by, a Finance Document; or

 

(j)            any official consent necessary to enable either Borrower to own, operate or charter the Ship owned by it or to enable either Borrower or any Security Party to comply with any provision which the Majority Lenders consider material of a Finance Document is not granted, expires without being renewed, is revoked or becomes liable to revocation or any condition of such a consent is not fulfilled; or

 

(k)           it appears to the Majority Lenders that, without their prior consent, a change has occurred or probably has occurred after the date of this Agreement in the ownership of any of the shares in a Borrower or the Approved Manager; or

 

(I)            any provision which the Majority Lenders consider material of a Finance Document proves to have been or becomes invalid or unenforceable, or a Security Interest created by a Finance Document proves to have been or becomes invalid or unenforceable or such a Security Interest proves to have ranked after, or loses its priority to, another Security Interest or any other third party claim or interest; or

 

	
(m)

	
the security constituted by a Finance Document is in any way imperilled or in jeopardy; or

 

	
(n)

	
without the prior consent of the Lenders, the shares of the Corporate Guarantor cease to be listed on the New York Stock Exchange; or

 

	
(o)

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

  

48

  

 

	
(p)

	
the Master Agreement is terminated, cancelled, suspended, rescinded or revoked or otherwise ceases to remain in full force and effect for any reason except with the consent of the Swap Bank; or

 

	
(q)

	
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 any Relevant Person; 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 Majority Lenders consider that there is a significant risk that either Borrower or Corporate Guarantor is, or will later become, unable to discharge its liabilities under the Finance Documents as they fall due.

 

19.2        Actions following an Event of Default

 

On, or at any time after, the occurrence of an Event of Default:

 

(a)           the Agent may, and if so instructed by the Majority Lenders, the Agent shall:

 

	
  

	
(i)

	
serve on the Borrowers a notice stating that all or part of the Commitments and of the other obligations of each Lender to the Borrowers under this Agreement are cancelled; and/or

 

	
  

	
(ii)

	
serve on the Borrowers a notice stating that all or part of the Loan together with accrued interest and all other amounts accrued or owing under this Agreement are immediately due and payable or are due and payable on demand; and/or

 

	
  

	
(iii)

	
take any other action which, as a result of the Event of Default or any notice served under paragraph (i) or (ii), the Agent and/or the Lenders are entitled to take under any Finance Document or any applicable law; and/or

    

(b)           the Security Trustee may, and if so instructed by the Agent, acting with the authorisation of the Majority Lenders, the Security Trustee shall take any action which, as a result of the Event of Default or any notice served under paragraph (a) (i) or (ii), the Security Trustee, the Agent and/or the Lenders and/or the Swap Bank are entitled to take under any Finance Document or any applicable law.

 

19.3        Termination of Commitments

 

On the service of a notice under Clause 19.2(a)(i), the Commitments and all other obligations of each Lender to the Borrowers under this Agreement shall be cancelled.

 

19.4        Acceleration of Loan

 

On the service of a notice under Clause 19.2(a)(ii), all or, as the case may be, the part of the Loan specified in the notice together with accrued interest and all other amounts accrued or owing from the Borrowers 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.

 

19.5        Multiple notices; action without notice

The Agent may serve notices under Clauses 19.2(a)(i) and (ii) simultaneously or on different dates and it and/or the Security Trustee may take any action referred to in Clause 19.2 if no

  

49

  

 

such notice is served or simultaneously with or at any time after the service of both or either of such notices.

 

19.6        Notification of Creditor Parties and Security Parties

 

The Agent shall send to each Lender, the Swap Bank, the Security Trustee and each Security Party a copy or the text of any notice which the Agent serves on the Borrowers under Clause 19.2; but the notice shall become effective when it is served on the Borrowers, and no failure or delay by the Agent to send a copy or the text of the notice to any other person shall invalidate the notice or provide either Borrower or any Security Party with any form of claim or defence.

 

19.7        Creditor Party's rights unimpaired

 

Nothing in this Clause shall be taken to impair or restrict the exercise of any right given to individual Lenders or the Swap Bank under a Finance Document or the general law; and, in particular, this Clause is without prejudice to Clause 3.1.

 

19.8        Exclusion of Creditor Party liability

 

No Creditor Party, and no receiver or manager appointed by the Security Trustee, shall have any liability to a Borrower or a Security Party:

 

	
(a)

	
for any loss caused by an exercise of rights under, or enforcement of a Security Interest created by, a Finance Document or by any failure or delay to exercise such a right or to enforce such a Security Interest; or

 

	
(b)

	
as mortgagee in possession or otherwise, for any income or principal amount which might have been produced by or realised from any asset comprised in such a Security Interest or for any reduction (however caused) in the value of such an asset,

 

except that this does not exempt a Creditor Party or a receiver or manager from liability for losses shown to have been directly and mainly caused by the dishonesty or the wilful misconduct of such Creditor Party's own officers and employees or (as the case may be) such receiver's or manager's own partners or employees and any other member of the Group.

 

19.9        Relevant Persons

 

In this Clause 19, a "Relevant Person" means a Borrower, the Corporate Guarantor or a Security Party, and any company which is a subsidiary of the Corporate Guarantor or a Security Party and any other member of the Group but excluding any company which is dormant and the value of whose gross assets is $50,000 or less.

 

19.10      Interpretation

 

In Clause 19.1(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 19.1(g), "petition" includes an application.

 

19.11      Position of Swap Bank

 

Neither the Agent nor the Security Trustee shall be obliged, in connection with any action taken or proposed to be taken under or pursuant to the foregoing provisions of this Clause 19, to have any regard to the requirements of the Swap Bank except to the extent that the Swap Bank is also a Lender.

  

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20           FEES AND EXPENSES

 

20.1        Front-end fee

 

The Borrowers shall pay to the Agent, on the date of this Agreement, a non-refundable arrangement fee at the rate of one point twenty per cent. (1.20%) of the Total Commitments for distribution among the Lenders pro rata to their Commitments.

 

20.2        Costs of negotiation, preparation etc.

 

The Borrowers shall pay to the Agent on its demand the amount of all expenses incurred by the Agent or the Security Trustee in connection with the negotiation, preparation, execution or registration of any Finance Document or any related document or with any transaction contemplated by a Finance Document or a related document.

 

20.3        Costs of variations, amendments, enforcement etc.

 

The Borrowers shall pay to the Agent, on the Agent's demand, for the account of the Creditor Party concerned, the amount of all expenses incurred by a Creditor Party in connection with:

 

	
(a)

	
any amendment or supplement to a Finance Document (required for the continuation of the availability of the Loan), or any proposal for such an amendment to be made;

 

	
(b)

	
any consent or waiver by the Lenders, the Swap Bank, the Majority Lenders or the Creditor Party concerned under or in connection with a Finance Document, or any request for such a consent or waiver;

 

	
(c)

	
the valuation of any security provided or offered under Clause 15 or any other matter relating to such security; or

 

	
(d)

	
where the Security Trustee, in its absolute opinion, considers that there has been a material change to the insurances in respect of a Ship, the review of the insurances of that Ship pursuant to Clause 13.18; and

 

	
(e)

	
any step taken by the Creditor party concerned or the Swap Bank with a view to the protection, exercise or enforcement of any right or Security Interest created by a Finance Document or for any similar purpose.

 

There shall be recoverable under paragraph (d) the full amount of all legal expenses, whether or not such as would be allowed under rules of court or any taxation or other procedure carried out under such rules.

 

20.4        Extraordinary management time

 

The Borrowers shall pay to the Agent on its demand compensation in respect of the reasonable and documented amount of time which the management of either Servicing Bank has spent in connection with a matter covered by Clause 20.3 and which exceeds the amount of time which would ordinarily be spent in the performance of the relevant Servicing Bank's routine functions. Any such compensation shall be based on such reasonable daily or hourly rates as the Agent may notify to the Borrowers and is in addition to any fee paid or payable to the relevant Servicing Bank.

 

20.5        Documentary taxes

 

The Borrowers shall promptly pay any tax payable on or by reference to any Finance Document, and shall, on the Agent's demand, fully indemnify each Creditor Party against any

  

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claims, expenses, liabilities and losses resulting from any failure or delay by the Borrowers to pay such a tax.

 

20.6        Financial Services Authority fees

 

The Borrowers shall pay to the Agent, on the Agent's demand, for the account of the Lender concerned the amounts which the Agent from time to time notifies the Borrowers that a Lender has notified the Agent to be necessary to compensate it for the cost attributable to its Contribution resulting from the imposition from time to time under or pursuant to the Bank of England Act 1998 and/or by the Bank of England and/or by the Financial Services Authority (or other United Kingdom governmental authorities or agencies) of a requirement to pay fees to the Financial Services Authority calculated by reference to liabilities used to fund its Contribution.

 

20.7        Certification of amounts

 

A notice which is signed by 2 officers of a Creditor Party, which states that a specified amount, or aggregate amount, is due to that Creditor Party under this Clause 20 and which indicates (without necessarily specifying a detailed breakdown) the matters in respect of which the amount, or aggregate amount, is due shall be prima facie evidence that the amount, or aggregate amount, is due.

 

21           INDEMNITIES

 

21.1        Indemnities regarding borrowing and repayment of Loan

 

The Borrowers shall fully indemnify the Agent and each Lender on the Agent's demand and the Security Trustee on its demand in respect of all claims, expenses, liabilities and losses which are made or brought against or incurred by that Creditor Party, or which that Creditor Party reasonably and with due diligence estimates that it will incur, as a result of or in connection with:

 

	
(a)

	
the Loan not being borrowed on the date specified in the Drawdown Notice for any reason other than a default by the Lender claiming the indemnity;

 

	
(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 Borrowers to make payment of any amount due under a Finance Document on the due date or, if so payable, on demand (after giving credit for any default interest paid by the Borrowers on the amount concerned under Clause 7); and

 

	
(d)

	
the occurrence of an Event of Default or a Potential Event of Default and/or the acceleration of repayment of the Loan under Clause 19,

 

and in respect of any tax (other than tax on its overall net income) for which a Creditor Party is liable in connection with any amount paid or payable to that Creditor Party (whether for its own account or otherwise) under any Finance Document.

 

21.2        Breakage costs

 

Without limiting its generality, Clause 21.1 covers any claim, expense, liability or loss, including a loss of a prospective profit, incurred by a Lender:

 

	
(a)

	
in liquidating or employing deposits from third parties acquired or arranged to fund or maintain all or any part of its Contribution and/or any overdue amount (or an aggregate amount which includes its Contribution or any overdue amount); and

  

52

  

 

	
(b)

	
in terminating, or otherwise in connection with, any interest and/or currency swap or any other transaction entered into (whether with another legal entity or with another office or department of the Lender concerned) to hedge any exposure arising under this Agreement or that part which the Lender concerned determines is fairly attributable to this Agreement of the amount of the liabilities, expenses or losses (including losses of prospective profits) incurred by it in terminating, or otherwise in connection with, a number of transactions of which this Agreement is one.

21.3        Miscellaneous indemnities

 

The Borrowers shall fully indemnify each Creditor Party severally on their respective demands in respect of all claims, expenses, liabilities and losses which may be made or brought against or incurred by a Creditor Party, 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 Agent, the Security Trustee or any other Creditor Party or by any receiver appointed under a Finance Document; and

 

	
(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 Creditor Party concerned.

 

Without prejudice to its generality, this Clause 21.3 covers any claims, expenses, liabilities and losses which arise, or are asserted, under or in connection with any law relating to safety at sea, the ISM Code, the ISPS Code or any Environmental Law.

 

21.4        Environmental indemnity

 

Without prejudice to its generality, Clause 21.3 covers any claims, demands, proceedings, liabilities, taxes, losses or expenses of every kind which arise, or are asserted, under or in connection with any law relating to safety at sea, pollution or the protection of the environment, the ISM Code or the ISPS Code.

 

21.5        Currency indemnity

 

If any sum due from either Borrower or any Security Party to a Creditor Party under a Finance Document or under any order or judgment relating to a Finance Document has to be converted from the currency in which the Finance Document provided for the sum to be paid (the "Contractual Currency") into another currency (the "Payment Currency") for the purpose of:

 

	
(a)

	
making or lodging any claim or proof against either 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 Borrowers shall indemnify the Creditor Party concerned against the loss arising when the amount of the payment actually received by that Creditor Party is converted at the available rate of exchange into the Contractual Currency.

 

In this Clause 21.5, the "available rate of exchange" means the rate at which the Creditor Party concerned is able at the opening of business (London time) on the Business Day after it

 

  

53

  

receives the sum concerned to purchase the Contractual Currency with the Payment Currency.

 

This Clause 21.5 creates a separate liability of the Borrowers which is distinct from their other liabilities under the Finance Documents and which shall not be merged in any judgment or order relating to those other liabilities.

 

21.6        Application to Master Agreement

 

For the avoidance of doubt, Clause 21.4 does not apply in respect of sums due from a Borrower to the Swap Bank under or in connection with the Master Agreement as to which sums the provisions of section 8 (Contractual Currency) of the Master Agreement shall apply.

 

21.7        Certification of amounts

 

A notice which is signed by 2 officers of a Creditor Party, which states that a specified amount, or aggregate amount, is due to that Creditor Party under this Clause 21 and which indicates (without necessarily specifying a detailed breakdown) the matters in respect of which the amount, or aggregate amount, is due shall be prima facie evidence that the amount, or aggregate amount, is due.

 

21.8        Sums deemed due to a Lender

 

For the purposes of this Clause 21, a sum payable by the Borrowers to the Agent or the Security Trustee for distribution to a Lender shall be treated as a sum due to that Lender.

 

22           NO SET-OFF OR TAX DEDUCTION

 

22.1        No deductions

 

All amounts due from the Borrowers under a Finance Document shall be paid:

 

	
(a)

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

 

	
(b)

	
free and clear of any tax deduction except a tax deduction which a Borrower is required by law to make.

 

22.2        Grossing-up for taxes

 

If a Borrower is required by law to make a tax deduction from any payment:

 

	
(a)

	
that Borrower shall notify the Agent as soon as it becomes aware of the requirement;

 

	
(b)

	
that Borrower shall pay the tax deducted to the appropriate taxation authority promptly, and in any event before any fine or penalty arises; and

 

	
(c)

	
the amount due in respect of the payment shall be increased by the amount necessary to ensure that each Creditor Party receives and retains (free from any liability relating to the tax deduction) a net amount which, after the tax deduction, is equal to the full amount which it would otherwise have received.

 

22.3        Evidence of payment of taxes

 

Within 1 month after making any tax deduction, the Borrower concerned shall deliver to the Agent documentary evidence satisfactory to the Agent that the tax had been paid to the appropriate taxation authority.

  

54

  

 

22.4        Exclusion of tax on overall net income

 

In this Clause 22 "tax deduction" means any deduction or withholding for or on account of any present or future tax except tax on a Creditor Party's overall net income.

 

22.5        Application to Master Agreement

 

For the avoidance of doubt, Clause 22 does not apply in respect of sums due from a Borrower to the Swap Bank under or in connection with the Master Agreement as to which sums the provisions of section 2(d) (Deduction or Withholding for Tax) of the Master Agreement shall apply.

 

23           ILLEGALITY, ETC.

 

23.1        Illegality

 

This Clause 23 applies if a Lender (the "Notifying Lender") notifies the Agent 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 Notifying Lender to maintain or give effect to any of its obligations under this Agreement in the manner contemplated by this Agreement.

 

23.2        Notification of illegality

 

The Agent shall promptly notify the Borrowers, the Security Parties, the Security Trustee and the other Lenders of the notice under Clause 23.1 which the Agent receives from the Notifying Lender.

 

23.3        Prepayment; termination of Commitment

 

On the Agent notifying the Borrowers under Clause 23.2, the Notifying Lender's Commitment shall terminate; and thereupon or, if later, on the date specified in the Notifying Lender's notice under Clause 23.1 as the date on which the notified event would become effective the Borrowers shall prepay the Notifying Lender's Contribution in accordance with Clause 8.

 

23.4        Mitigation

 

If circumstances arise which would result in a notification under Clause 23.1 then, without in any way limiting the rights of the Notifying Lender under Clause 23.3, the Notifying Lender shall use reasonable endeavours to transfer its obligations, liabilities and rights under this Agreement and the Finance Documents to another office or financial institution not affected by the circumstances but the Notifying 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.

 

  

55

  

24           INCREASED COSTS

 

24.1        Increased costs

 

This Clause 24 applies if a Lender (the "Notifying Lender") notifies the Agent that the Notifying Lender 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 (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 or which affects the manner in which the Notifying Lender allocates capital resources to its obligations under this Agreement) which is introduced, or altered, or the interpretation or application of which is altered, after the date of this Agreement,

 

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

 

24.2        Meaning of "increased costs"

 

In this Clause 24, "increased costs" means, in relation to a Notifying Lender:

 

	
(a)

	
an additional or increased cost incurred as a result of, or in connection with, the Notifying Lender having entered into, or being a party to, this Agreement or a Transfer Certificate, of funding or maintaining its Commitment or Contribution or performing its obligations under this Agreement, or of having outstanding all or any part of its Contribution or other unpaid sums;

 

	
(b)

	
a reduction in the amount of any payment to the Notifying Lender under this Agreement or in the effective return which such a payment represents to the Notifying 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 Notifying Lender's Contribution or (as the case may require) the proportion of that cost attributable to the Contribution; 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 Notifying Lender under this Agreement,

 

but not an item attributable to a change in the rate of tax on the overall net income of the Notifying Lender (or a parent company of it) or an item covered by the indemnity for tax in Clause 21.1 or by Clause 22 or an item arising directly out of the implementation or application of or compliance with the "International Convergence of Capital Measurement and Capital Standards, a Revised Framework" published by the Basel Committee on Banking Supervision in June 2004, in the form existing on the date of this Agreement ("Basel II") or any other law or regulation which implements Basel II (whether such implementation, application or compliance is by a government, regulator, Creditor Party or any of its affiliates).

 

For the purposes of this Clause 24.2 the Notifying 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.

 

24.3        Notification to Borrowers of claim for increased costs

 

  

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The Agent shall promptly notify the Borrowers and the Security Parties of the notice which the Agent received from the Notifying Lender under Clause 24.1.

 

24.4        Payment of increased costs

 

The Borrowers shall pay to the Agent, on the Agent's demand, for the account of the Notifying Lender the amounts which the Agent from time to time notifies the Borrowers that the Notifying Lender has specified to be necessary to compensate the Notifying Lender for the increased cost.

 

24.5        Notice of prepayment

 

If the Borrowers are not willing to continue to compensate the Notifying Lender for the increased cost under Clause 24.4, the Borrowers may give the Agent not less than 14 days' notice of its intention to prepay the Notifying Lender's Contribution at the end of an Interest Period.

 

24.6        Prepayment; termination of Commitment

 

A notice under Clause 24.5 shall be irrevocable; the Agent shall promptly notify the Notifying Lender of the Borrowers' notice of intended prepayment; and:

 

	
(a)

	
on the date on which the Agent serves that notice, the Commitment of the Notifying Lender shall be cancelled; and

 

	
(b)

	
on the date specified in its notice of intended prepayment, the Borrowers shall prepay (without premium or penalty) the Notifying Lender's Contribution, together with accrued interest thereon at the applicable rate plus the Margin and the Mandatory Cost (if any).

 

24.7        Application of prepayment

 

Clause 8 shall apply in relation to the prepayment.

 

25           SET OFF

 

25.1        Application of credit balances

 

Each Creditor Party 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 a Borrower at any office in any country of that Creditor Party in or towards satisfaction of any sum then due from that Borrower to that Creditor Party under any of the Finance Documents; and

 

	
(b)

	
for that purpose:

 

	
  

	
(i)

	
break, or alter the maturity of, all or any part of a deposit of that Borrower;

 

	
  

	
(ii)

	
convert or translate all or any part of a deposit or other credit balance into Dollars; and

 

	
  

	
(iii)

	
enter into any other transaction or make any entry with regard to the credit balance which the Creditor Party concerned considers appropriate.

 

25.2        Existing rights unaffected

 

No Creditor Party shall be obliged to exercise any of its rights under Clause 25.1; and those rights shall be without prejudice and in addition to any right of set off, combination of

  

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accounts, charge, lien or other right or remedy to which a Creditor Party is entitled (whether under the general law or any document).

 

25.3        Sums deemed due to a Lender

 

For the purposes of this Clause 25, a sum payable by the Borrowers to the Agent or the Security Trustee for distribution to, or for the account of, a Lender shall be treated as a sum due to that Lender; and each Lender's proportion of a sum so payable for distribution to, or for the account of, the Lenders shall be treated as a sum due to such Lender.

 

25.4        No Security Interest

 

This Clause 25 gives the Creditor Parties a contractual right of set-off only, and does not create any equitable charge or other Security Interest over any credit balance of either Borrower.

 

26           TRANSFERS AND CHANGES IN LENDING OFFICES

 

26.1        Transfer by Borrowers

 

Neither Borrower may, without the consent of the Agent, given on the instructions of all the Lenders transfer any of its rights, liabilities or obligations under any Finance Document.

 

26.2        Transfer by a Lender

 

Subject to Clause 26.4, a Lender (the "Transferor Lender") may at any time, without needing the consent of the Borrowers or any Security Party, cause:

 

	
(a)

	
its rights in respect of all or part of its Contribution; or

 

	
(b)

	
its obligations in respect of all or part of its Commitment; or

 

	
(c)

	
a combination of (a) and (b),

 

to be (in the case of its rights) transferred to, or (in the case of its obligations) assumed by, another bank or financial institution or a trust, fund or other entity which is regularly engaged in or established for the purpose of making, purchasing or investing in loans, securities or other financial assets (a "Transferee Lender") by delivering to the Agent a completed certificate in the form set out in Schedule 4 with any modifications approved or required by the Agent (a "Transfer Certificate") executed by the Transferor Lender and the Transferee Lender.

 

However any rights and obligations of the Transferor Lender in its capacity as Agent or Security Trustee will have to be dealt with separately in accordance with the Agency and Trust Deed.

 

26.3        Transfer Certificate, delivery and notification

 

As soon as reasonably practicable after a Transfer Certificate is delivered to the Agent, it shall (unless it has reason to believe that the Transfer Certificate may be defective):

 

	
(a)

	
sign the Transfer Certificate on behalf of itself, the Borrowers, the Security Parties, the Security Trustee, each of the other Lenders and the Swap Bank;

 

	
(b)

	
on behalf of the Transferee Lender, send to each Borrower and each Security Party letters or faxes notifying them of the Transfer Certificate and attaching a copy of it; and

 

	
(c)

	
send to the Transferee Lender copies of the letters or faxes sent under paragraph (b) above,

  

58

  

but the Agent shall only be obliged to execute a Transfer Certificate delivered to it by the Transferor Lender and the Transferee Lender once it is satisfied it has complied with all necessary "know your customer" or other similar checks under all applicable laws and regulations in relation to the transfer to that Transferee Lender.

 

26.4        Effective Date of Transfer Certificate

 

A Transfer Certificate becomes effective on the date, if any, specified in the Transfer Certificate as its effective date, Provided that it is signed by the Agent under Clause 26.3 on or before that date.

 

26.5        No transfer without Transfer Certificate

 

Except as provided in Clause 26.17, no assignment or transfer of any right or obligation of a Lender under any Finance Document is binding on, or effective in relation to, either Borrower, any Security Party, the Agent or the Security Trustee unless it is effected, evidenced or perfected by a Transfer Certificate.

 

26.6        Lender re-organisation; waiver of Transfer Certificate

 

However, if a Lender enters into any merger, de-merger or other reorganisation as a result of which all its rights or obligations vest in another person (the "successor"), the Agent may, if it sees fit, by notice to the successor and the Borrowers and the Security Trustee waive the need for the execution and delivery of a Transfer Certificate; and, upon service of the Agent's notice, the successor shall become a Lender with the same Commitment and Contribution as were held by the predecessor Lender.

 

26.7        Effect of Transfer Certificate

 

A Transfer Certificate takes effect in accordance with English law as follows:

 

	
(a)

	
to the extent specified in the Transfer Certificate, all rights and interests (present, future or contingent) which the Transferor Lender has under or by virtue of the Finance Documents are assigned to the Transferee Lender absolutely, free of any defects in the Transferor Lender's title and of any rights or equities which either Borrower or any Security Party had against the Transferor Lender;

 

	
(b)

	
the Transferor Lender's Commitment is discharged to the extent specified in the Transfer Certificate;

 

	
(c)

	
the Transferee Lender becomes a Lender with the Contribution previously held by the Transferor Lender and a Commitment of an amount specified in the Transfer Certificate;

 

	
(d)

	
the Transferee Lender becomes bound by all the provisions of the Finance Documents which are applicable to the Lenders generally, including those about pro rata sharing and the exclusion of liability on the part of, and the indemnification of, the Agent and the Security Trustee and, to the extent that the Transferee Lender becomes bound by those provisions (other than those relating to exclusion of liability), the Transferor Lender ceases to be bound by them;

 

	
(e)

	
any part of the Loan which the Transferee Lender advances after the Transfer Certificate's effective date ranks in point of priority and security in the same way as it would have ranked had it been advanced by the transferor, assuming that any defects in the transferor's title and any rights or equities of either Borrower or any Security Party against the Transferor Lender had not existed;

 

	
(f)

	
the Transferee Lender becomes entitled to all the rights under the Finance Documents which are applicable to the Lenders generally, including but not limited to those relating to the

 

  

59

  

 

	 	
 
Majority Lenders and those under Clause 5.7 and Clause 20, and to the extent that the Transferee Lender becomes entitled to such rights, the Transferor Lender ceases to be entitled to them; and

 

	
(g)

	
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, the Transferee Lender shall be entitled to recover damages by reference to the loss incurred by it as a result of the breach or misrepresentation, irrespective of whether the original Lender would have incurred a loss of that kind or amount.

 

The rights and equities of either Borrower or any Security Party referred to above include, but are not limited to, any right of set off and any other kind of cross claim.

 

26.8        Maintenance of register of Lenders

 

During the Security Period the Agent shall maintain a register in which it shall record the name, Commitment, Contribution and administrative details (including the lending office) from time to time of each Lender holding a Transfer Certificate and the effective date (in accordance with Clause 26.4) of the Transfer Certificate; and the Agent shall make the register available for inspection by any Lender, the Security Trustee and the Borrowers during normal banking hours, subject to receiving at least 3 Business Days' prior notice.

 

26.9        Reliance on register of Lenders

 

The entries on that register shall, in the absence of manifest error, be conclusive in determining the identities of the Lenders and the amounts of their Commitments and Contributions and the effective dates of Transfer Certificates and may be relied upon by the Agent and the other parties to the Finance Documents for all purposes relating to the Finance Documents.

 

26.10      Authorisation of Agent to sign Transfer Certificates

 

Each Borrower, the Security Trustee, each Lender and the Swap Bank irrevocably authorise the Agent to sign Transfer Certificates on its behalf.

 

26.11      Registration fee

 

In respect of any Transfer Certificate, the Agent shall be entitled to recover a registration fee of $3,000 from the Transferor Lender or (at the Agent's option) the Transferee Lender.

 

26.12      Sub-participation; subrogation assignment

 

A Lender may sub participate all or any part of its rights and/or obligations under or in connection with the Finance Documents without the consent of, or any notice to, either Borrower, any Security Party, the Agent or the Security Trustee or any other Creditor Party; and the Lenders may assign, in any manner and terms agreed by the Majority Lenders, the Agent and the Security Trustee, all or any part of those rights to an insurer or surety who has become subrogated to them.

 

26.13      Disclosure of information

 

A Lender may disclose to a potential Transferee Lender or sub participant any information which the Lender has received in relation to either Borrower, any Security Party or their affairs under or in connection with any Finance Document, unless the information is clearly of a confidential nature.

 

26.14      Change of lending office

  

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A Lender may change its lending office by giving notice to the Agent and the change shall become effective on the later of:

 

	
(a)

	
the date on which the Agent receives the notice; and

 

	
(b)

	
the date, if any, specified in the notice as the date on which the change will come into effect. 

 

26.15 Notification

 

On receiving such a notice, the Agent shall notify the Borrowers and the Security Trustee; and, until the Agent receives such a notice, it shall be entitled to assume that a Lender is acting through the lending office of which the Agent last had notice.

 

26.16      Replacement of the Reference Bank

 

If the Reference Bank ceases to be a Lender or is unable on a continuing basis to supply quotations for the purposes of Clause 5 then, unless the Borrowers, the Agent and the Majority Lenders otherwise agree, the Agent, acting on the instructions of the Majority Lenders, and after consulting the Borrowers, shall appoint another bank (whether or not a Lender) to be a replacement Reference Bank; and, when that appointment comes into effect, the first mentioned Reference Bank's appointment shall cease to be effective.

 

26.17      Security over Lenders' rights

 

In addition to the other rights provided to Lenders under this Clause 26, each Lender may without consulting with or obtaining consent from either Borrower or any Security Party, at any time charge, assign or otherwise create a Security Interest in or over (whether by way of collateral or otherwise) all or any of its rights under any Finance Document to secure obligations of that Lender including, without limitation:

 

	
(a)

	
any charge, assignment or other Security Interest to secure obligations to a federal reserve or central bank; and

 

	
(b)

	
in the case of any Lender which is a fund, any charge, assignment or other Security Interest granted to any holders (or trustee or representatives of holders) of obligations owed, or securities issued, by that Lender as security for those obligations or securities,

 

except that no such charge, assignment or Security Interest shall:

 

	
  

	
(i)

	
release a Lender from any of its obligations under the Finance Documents or substitute the beneficiary of the relevant charge, assignment or Security Interest for the Lender as a party to any of the Finance Documents; or

 

	
  

	
(ii)

	
require any payments to be made by either Borrower or any Security Party or grant to any person any more extensive rights than those required to be made or granted to the relevant Lender under the Finance Documents.

 

27           VARIATIONS AND WAIVERS

 

27.1        Variations, waivers etc. by Majority Lenders

 

Subject to Clause 27.2, a document shall be effective to vary, waive, suspend or limit any provision of a Finance Document, or any Creditor Party's rights or remedies under such a provision or the general law, only if the document is signed, or specifically agreed to by fax, by the Borrowers, by the Agent on behalf of the Majority Lenders, by the Agent and the Security Trustee in their own rights, and, if the document relates to a Finance Document to which a Security Party is party, by that Security Party.

  

61

  

 

27.2        Variations, waivers etc. requiring agreement of all Lenders.

 

However, as regards the following, Clause 27.1 applies as if the words "by the Agent on behalf of the Majority Lenders" were replaced by the words "by or on behalf of every Lender and the Swap Bank":

 

	
(a)

	
a reduction in the Margin;

 

	
(b)

	
a postponement to the date for, or a reduction in the amount of, any payment of principal, interest, fees or other sum payable under this Agreement;

 

	
(c)

	
an increase in any Lender's Commitment;

 

	
(d)

	
a change to the definition of "Majority Lenders";

 

	
(e)

	
a change to Clause 3 or this Clause 27;

 

	
(f)

	
any release of, or material variation to, a Security Interest, guarantee, indemnity or subordination arrangement set out in a Finance Document; and

 

	
(g)

	
any other change or matter as regards which this Agreement or another Finance Document expressly provides that each Lender's consent is required.

 

27.3        Exclusion of other or implied variations

 

Except for a document which satisfies the requirements of Clauses 27.1 and 27.2 no document, and no act, course of conduct, failure or neglect to act, delay or acquiescence on the part of the Creditor Parties or any of them (or any person acting on behalf of any of them) shall result in the Creditor Parties or any of them (or any person acting on behalf of any of them) being taken to have varied, waived, suspended or limited, or being precluded (permanently or temporarily) from enforcing, relying on or exercising:

 

	
(a)

	
a provision of this Agreement or another Finance Document; or

 

	
(b)

	
an Event of Default; or

 

	
(c)

	
a breach by a Borrower or a Security Party of an obligation under a Finance Document or the general law; or

 

	
(d)

	
any right or remedy conferred by any Finance Document or by the general law,

 

and there shall not be implied into any Finance Document any term or condition requiring any such provision to be enforced, or such right or remedy to be exercised, within a certain or reasonable time.

 

28           NOTICES

 

28.1        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.

 

28.2        Addresses for communications

 

A notice by letter or fax shall be sent:

  

62

  

	
(a)  to the Borrowers:

	
c/o Approved Manager

16 Pendelis Street

175 64 Paleo Fa liro

Athens

Greece

Fax No: +30 210 9470101

 

	
(b)  to the Lender:

	
At the address below its name in Schedule 1 or (as the case may 

require) in the relevant Transfer Certificate.

 

	
(c)  to the Agent:

	
Nordea Bank Finland Plc, London Branch

City Place House

55 Basinghall Street

London EC2V 5NB

England

 

Fax No: + 44 (0) 20 7726 9188

 

	
(d)  to the Security Trustee:

	
Nordea Bank Finland Plc, London Branch

City Place House 

55 Basinghall Street 

London EC2V 5NB 

England

 

Fax No: + 44 (0) 20 7726 9188

 

	
(e)  to the Swap Bank:

	
Nordea Bank Finland Plc, London Branch

City Place House 

55 Basinghall Street 

London EC2V 5NB 

England

 

Fax No: + 44 (0) 20 7726 9188

 

or to such other address as the relevant party may notify the Agent or, if the relevant party is the Agent or the Security Trustee, the Borrowers, the Lenders, the Swap Bank and the Security Parties.

 

28.3        Effective date of notices

 

Subject to Clauses 28.4 and 28.5:

 

	
(a)

	
a notice which is delivered personally or posted shall be deemed to be served, and shall take effect, at the time when it is delivered; and

 

	
(b)

	
a notice which is sent by fax shall be deemed to be served, and shall take effect, 2 hours after its transmission is completed.

 

28.4        Service outside business hours

 

However, if under Clause 28.3 a notice would be deemed to be served:

 

	
(a)

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

 

	
(b)

	
on such a business day, but after 5 p.m. local time,

 

the notice shall (subject to Clause 28.5) be deemed to be served, and shall take effect, at 9 a.m. on the next day which is such a business day.

  

63

  

 

28.5        Illegible notices

 

Clauses 28.3 and 28.4 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.

 

28.6        Valid notices

 

A notice under or in connection with a Finance Document shall not be invalid by reason that its contents or the manner of serving it do not comply with the requirements of this Agreement or, where appropriate, any other Finance Document under which it is served if:

 

	
(a)

	
the failure to serve it in accordance with the requirements of this Agreement or other Finance Document, as the case may be, has not caused any party to suffer any significant loss or prejudice; or

 

	
(b)

	
in the case of incorrect and/or incomplete contents, it should have been reasonably clear to the party on which the notice was served what the correct or missing particulars should have been.

 

28.7        Electronic communication

 

Any communication to be made between the Agent and a Lender or Swap Bank under or in connection with the Finance Documents may be made by electronic mail or other electronic means, if the Agent and the relevant Creditor Party:

 

	
(a)

	
agree that, unless and until notified to the contrary, this is to be an accepted form of communication;

 

	
(b)

	
notify each other in writing of their electronic mail address and/or any other information required to enable the sending and receipt of information by that means; and

 

	
(c)

	
notify each other of any change to their respective addresses or any other such information supplied to them.

 

Any electronic communication made between the Agent and a Lender or the Swap Bank will be effective only when actually received in readable form and, in the case of any electronic communication made by a Creditor Party to the Agent, only if it is addressed in such a manner as the Agent shall specify for this purpose.

 

28.8        English language

 

Any notice under or in connection with a Finance Document shall be in English.

 

28.9        Meaning of "notice"

 

In this Clause 28, "notice" includes any demand, consent, authorisation, approval, instruction, waiver or other communication.

 

29           JOINT AND SEVERAL LIABILITY

 

29.1        General

 

All liabilities and obligations of the Borrowers under this Agreement shall, whether expressed to be so or not, be several and, if and to the extent consistent with Clause 29.2, joint.

29.2        No impairment of Borrower's obligations

  

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The liabilities and obligations of a Borrower shall not be impaired by:

 

	
(a)

	
this Agreement being or later becoming void, unenforceable or illegal as regards any other Borrower;

 

	
(b)

	
any Lender, the Swap Bank or the Security Trustee entering into any rescheduling, refinancing or other arrangement of any kind with any other Borrower;

 

	
(c)

	
any Lender, the Swap Bank or the Security Trustee releasing any other Borrower or any Security Interest created by a Finance Document; or

 

	
(d)

	
any combination of the foregoing.

 

29.3        Principal debtors

 

Each Borrower declares that it is and will, throughout the Security Period, remain a principal debtor for all amounts owing under this Agreement and the Finance Documents and neither Borrower shall in any circumstances be construed to be a surety for the obligations of any other Borrower under this Agreement.

 

29.4        Borrowers' guarantee under the Master Agreement 

 

Each Borrower, unconditionally and irrevocably:

 

	
(a)

	
guarantees as primary obligor and independent and without, in respect of its obligations under this Clause 29.4, any of the rights or defences of a surety, the due payment of all amounts payable by the other Borrower under or in connection with the Master Agreement;

 

	
(b)

	
undertakes to pay to the Agent, on the Agent's demand, any such amount which is not paid by that Borrower when payable; and

 

	
(c)

	
fully indemnifies each Creditor Party, on the Agent's or, as the case may be, that Creditor Party's demand, in respect of all claims, expenses, liabilities and losses which are made or brought against or incurred by that Creditor Party as a result of or in connection with any obligation or liability guaranteed by that Borrower being or becoming unenforceable, invalid, void or illegal; and the amount recoverable under this indemnity shall be equal to the amount which that Creditor Party would otherwise have been entitled to recover.

 

29.5       Waiver of rights and defences

 

Without limiting the generality of Clause 29.4, neither Borrower shall be discharged by, or have any claim against any Creditor Party in respect of:

 

	
(a)

	
any amendment or supplement being made to the Master Agreement;

 

	
(b)

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

 

	
(c)

	
any release or loss (even though negligent) of any right or Security Interest created by 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 Security Interest now being or later becoming void, unenforceable, illegal or invalid or otherwise defective for any reason, including a neglect to register it

  

65

  

29.6        Subordination

 

Subject to Clause 29.7, during the Security Period, neither Borrower shall:

 

	
(a)

	
claim any amount which may be due to it from any other Borrower whether in respect of a payment made, or matter arising out of, this Agreement or any Finance Document, or any matter unconnected with this Agreement or any Finance Document; or

 

	
(b)

	
take or enforce any form of security from any other Borrower for such an amount, or in any other way seek to have recourse in respect of such an amount against any asset of any other Borrower; or

 

	
(c)

	
set off such an amount against any sum due from it to any other Borrower; or

 

	
(d)

	
prove or claim for such an amount in any liquidation, administration, arrangement or similar procedure involving any other Borrower or other Security Party; or

 

	
(e)

	
exercise or assert any combination of the foregoing.

 

29.7        Borrower's required action

 

If during the Security Period, the Agent, by notice to a Borrower, requires it to take any action referred to in paragraphs (a) to (d) of Clause 29.6, in relation to any other Borrower, that Borrower shall take that action as soon as practicable after receiving the Agent's notice.

 

30           SUPPLEMENTAL

 

30.1        Rights cumulative, non-exclusive

 

The rights and remedies which the Finance Documents give to each Creditor Party are:

 

	
(a)

	
cumulative;

 

	
(b)

	
may be exercised as often as appears expedient; and

 

	
(c)

	
shall not, unless a Finance Document explicitly and specifically states so, be taken to exclude or limit any right or remedy conferred by any law.

 

30.2        Severability of provisions

 

If any provision of a Finance Document is or subsequently becomes void, unenforceable or illegal, that shall not affect the validity, enforceability or legality of the other provisions of that Finance Document or of the provisions of any other Finance Document.

 

30.3        Counterparts

 

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

 

30.4        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           LAW AND JURISDICTION

 

31.1        English law

 

  

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This Agreement and any non-contractual obligations arising out of or in connection with it shall be governed by, and construed in accordance with, English law.

 

31.2        Exclusive English jurisdiction

 

Subject to Clause 31.3, the courts of England shall have exclusive jurisdiction to settle any Dispute.

 

31.3        Choice of forum for the exclusive benefit of Creditor Parties

 

Clause 31.2 is for the exclusive benefit of the Creditor Parties, each of which reserves the rights:

 

	
(a)

	
to commence proceedings in relation to any Dispute in the courts of any country other than England and which have or claim jurisdiction to that Dispute; and

 

	
(b)

	
to commence such proceedings in the courts of any such country or countries concurrently with or in addition to proceedings in England or without commencing proceedings in England.

 

Neither Borrower shall commence any proceedings in any country other than England in relation to a Dispute.

 

31.4        Process agent

 

Each Borrower irrevocably appoints Nicolaou & Co (for the attention of Antonis Nicolaou) at its registered office for the time being, presently at 25 Heath Drive, Potters Bar, Herts, EN6 lEN, England, to act as its agent to receive and accept on its behalf any process or other document relating to any proceedings in the English courts which are connected with a Dispute.

 

31.5        Creditor Party rights unaffected

 

Nothing in this Clause 31 shall exclude or limit any right which any Creditor Party may have (whether under the law of any country, an international convention or otherwise) with regard to the bringing of proceedings, the service of process, the recognition or enforcement of a judgment or any similar or related matter in any jurisdiction.

 

31.6        Meaning of "proceedings" and "Dispute"

 

In this Clause 31, "proceedings" means proceedings of any kind, including an application for a provisional or protective measure and a "Dispute" means any dispute arising out of or in connection with this Agreement (including a dispute relating to the existence, validity or termination of this Agreement) or any non-contractual obligation arising out of or in connection with this Agreement.

 

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

  

67

  

 

SCHEDULE 1

 

LENDERS AND COMMITMENTS

 

	
Lender

	
Lending Office

	
Commitment

(US Dollars)

 

	
Nordea Bank Finland plc, 

London Branch

	
City Place House

55 Basinghall Street

London EC2V 5NB 

England

	
20,000,000

	  	  	  

  

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SCHEDULE 2

 

DRAWDOWN NOTICE

 

To:           Nordea Bank Finland Plc, London Branch

City Place House 

55 Basinghall Street 

London EC2V 5NB 

England

 

Attention: [Loans Administration]                                                               

                                                                  

December 2012

 

DRAWDOWN NOTICE

 

1              We refer to the loan agreement (the "Loan Agreement") dated 20 December 2012 and made between ourselves, as joint and several Borrowers, the Lenders referred to therein, and yourselves as Agent, as Security Trustee and as Swap Bank in connection with a facility of US$20,000,000. 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 of Loan: US$20,000,000;

 

	
(b)

	
Drawdown Date: [•] December 2012;

 

	
(c)

	
[Duration of the first Interest Period shall be [1][3] months;] and

 

	
(d)

	
Payment instructions: account in our name and numbered [•] with [•] of [•].

 

3              We represent and warrant that:

 

	
(a)

	
the representations and warranties in Clause 10 of the Loan Agreement would remain true and not misleading if repeated on the date of this notice with reference to the circumstances now existing; and

 

	
(b)

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

 

4              This notice cannot be revoked without the prior consent of the Majority Lenders.

 

[Name of Signatory]

 

Director

for and on behalf of

PALAU SHPIPING COMPANY INC. and

GUAM SHIPPING COMPANY INC.

  

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SCHEDULE 3

 

CONDITION PRECEDENT DOCUMENTS

 

PART A

 

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

 

1              A duly executed original of:

 

(a)           this Agreement;

 

(b)           the Corporate Guarantee;

 

(c)           the Agency and Trust Deed;

 

(d)           the Master Agreement;

 

(e)           the Shares Pledges;

 

(f)   the Master Agreement Assignment; and

 

(g)           the Accounts Pledges.

 

	
2

	
Copies of the certificate of incorporation and constitutional documents of each Borrower, the Corporate Guarantor and any other Security Party.

 

	
3

	
Copies of resolutions of the shareholders and directors of each Borrower and each Security Party (other than the Corporate Guarantor) authorising the execution of each of the Finance Documents to which that Borrower or that Security Party is a party and, in the case of a Borrower, authorising named officers to give the Drawdown Notice.

 

	
4

	
Copies of resolutions of the executive committee of the Corporate Guarantor authorising the execution of each of the Finance Documents to which it is a party.

 

	
5

	
The original of any power of attorney under which any Finance Document is executed on behalf of a Borrower, the Corporate Guarantor or any other Security Party.

 

	
6

	
Copies of all consents which either Borrower, the Corporate Guarantor or any Security Party requires to enter into, or make any payment under, any Finance Document.

 

	
7

	
The originals of any mandates or other documents required in connection with the opening or operation of the Earnings Accounts.

 

	
8

	
Such documents as the Agent may require for its "Know your customer" and other customary money laundering and sanctions and counter-terrorist financing checks.

 

	
9

	
Copy of the Initial Charter and of all documents signed or issued by Borrower B or the Initial Charterer (or both of them) under or in connection with it.

 

	
10

	
Documentary evidence that the agent for service of process named in Clause 30 has acceptd its appointment.

 

	
11

	
Favourable legal opinions from lawyers appointed by the Agent on such matters concerning the laws of Marshall Islands and such other relevant jurisdictions as the Agent may require.

  

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12            If the Agent so requires, in respect of any of the documents referred to above, a certified English translation prepared by a translator approved by the Agent.

 

PART B

 

The following are the documents referred to in Clause 9.1(b) required before the Drawdown Date. In Part B of this Schedule 3, the following definitions have the following meanings:

 

	
(a)

	
"Relevant Borrower" means the Borrower which is the owner of the Relevant Ship; and

 

	
(b)

	
"Relevant Ship" means the Ship which is to be financed by using the proceeds of the Loan being drawn on the Drawdown Date.

 

1              A duly executed original of the Mortgage and the General Assignment relating to the Relevant Ship and, in the case of Ship B, the Initial Charter Assignment (and of each document to be delivered under each of them, including without limitation, an acknowledgement from the Initial Charterer).

 

2              Documentary evidence that:

 

	
(a)

	
the Relevant Ship is definitively and permanently registered in the name of the Relevant Borrower under an Approved Flag;

 

	
(b)

	
the Relevant Ship is in the absolute and unencumbered ownership of the Relevant Borrower save as contemplated by the Finance Documents;

 

	
(c)

	
the Relevant Ship maintains the class specified in Clause 14.3(b);

 

	
(d)

	
the Mortgage relating to the Relevant Ship has been duly registered or recorded against the Relevant Ship as a valid first priority or, as the case may be, preferred statutory ship mortgage in accordance with the laws of the applicable Approved Flag State; and

 

	
(e)

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

 

3              Documents establishing that the Relevant Ship will, as from the Drawdown Date, be managed by the Approved Manager on terms acceptable to the Lenders, together with:

 

	
(a)

	
a copy of the Management Agreement and the Manager's Undertaking duly signed by the Approved Manager; and

 

	
(b)

	
copies of the Approved Manager's Document of Compliance and of the Relevant Ship's Safety Management Certificate (together with any other details of the applicable safety management system which the Agent requires) and ISSC.

 

4              Favourable legal opinions from lawyers appointed by the Agent on such matters concerning the laws of Marshall Islands, the Approved Flag State and such other relevant jurisdictions as the Agent may require.

 

5              At the cost of the Borrowers a favourable opinion from an independent insurance consultant acceptable to the Agent on such matters relating to the insurances for the Ship as the Agent may require.

 

6              If the Agent so requires, in respect of any of the documents referred to above, a certified English translation prepared by a translator approved by the Agent.

  

71

  

 

Each of the documents specified in paragraphs 2, 3, 5 and 9 of Part A and every other copy document delivered under this Schedule shall be certified as a true and up to date copy by a director or the secretary (or equivalent officer) of each Borrower or a qualified lawyer.

  

72

  

 

SCHEDULE 4

 

TRANSFER CERTIFICATE

 

The Transferor and the Transferee accept exclusive responsibility for ensuring that this Certificate and the transaction to which it relates comply with all legal and regulatory requirements applicable to them respectively.

 

To:           Nordea Bank Finland Plc, London Branch for itself and for and on behalf of the Borrower, [each Security Party], the Security Trustee, each Lender and the Swap Bank, as defined in the Loan Agreement referred to below.

 

[●]

 

	
1

	
This Certificate relates to a Loan Agreement (the "Agreement") dated [●] December 2012 and made between (1) Palau Shipping Company Inc. and Guam Shipping Company Inc. as joint and several borrowers (the "Borrowers"), (2) the banks and financial institutions named therein, (3) Nordea Bank Finland Plc, London Branch as Agent, (4) Nordea Bank Finland Plc, London Branch as Security Trustee and (5) Nordea Bank Finland Plc, London Branch as Swap Bank for a loan facility of US$20,000,000.

	
2

	
In this Certificate, terms defined in the Agreement shall, unless the contrary intention appears, have the same meanings when used in this Certificate and:

"Relevant Parties" means the Agent, the Borrower, [each Security Party], the Security Trustee, each Lender and the Swap Bank;

 

"Transferor" means [full name] of [lending office]; and

 

"Transferee" means [full name] of [lending office].

	
3

	
The effective date of this Certificate is [•], Provided that this Certificate shall not come into effect unless it is signed by the Agent on or before that date.

	
4

	
[The Transferor assigns to the Transferee absolutely all rights and interests (present, future or contingent) which the Transferor has as Lender under or by virtue of the Agreement and every other Finance Document in relation to [●] per cent. of its Contribution, which percentage represents $[●].]

	
5

	
[By virtue of this Transfer Certificate and Clause 26 of the Loan Agreement, the Transferor is discharged [entirely from its Commitment which amounts to $[●] [from [S] per cent. of its Commitment, which percentage represents $[●]] and the Transferee acquires a Commitment of $[●].]

	
6

	
The Transferee undertakes with the Transferor and each of the Relevant Parties that the Transferee will observe and perform all the obligations under the Finance Documents which Clause 26 of the Loan Agreement provides will become binding on it upon this Certificate taking effect.

	
7

	
The Agent, at the request of the Transferee (which request is hereby made) accepts, for the Agent itself and for and on behalf of every other Relevant Party, this Certificate as a Transfer Certificate taking effect in accordance with Clause 26 of the Agreement.

	
8

	
The Transferor:

 

 

  

73

  

 

(a)           warrants to the Transferee and each Relevant Party that:

 

	
  

	
(i)

	
the Transferor has full capacity to enter into this transaction and has taken all corporate action and obtained all consents which are required in connection with this transaction; and

 

	
  

	
(ii)

	
this Certificate is valid and binding as regards the Transferor;

 

(b)           warrants to the Transferee that the Transferor is absolutely entitled, free of encumbrances, to all the rights and interests covered by the assignment in paragraph 4; and

 

(c)           undertakes with the Transferee that the Transferor will, at its own expense, execute any documents which the Transferee reasonably requests for perfecting in any relevant jurisdiction the Transferee's title under this Certificate or for a similar purpose.

 

	
9

	
The Transferee:

(a)           confirms that it has received a copy of the Agreement and each of the other Finance Documents;

 

(b)           agrees that it will have no rights of recourse on any ground against either the Transferor, the Agent, the Security Trustee, any Lender or the Swap Bank in the event that:

 

	
  

	
(i)

	
any of the Finance Documents prove to be invalid or ineffective;

 

	
  

	
(ii)

	
either Borrower or any Security Party fails to observe or perform its obligations, or to discharge its liabilities, under any of the Finance Documents; and

 

	
  

	
(iii)

	
it proves impossible to realise any asset covered by a Security Interest created by a Finance Document, or the proceeds of such assets are insufficient to discharge the liabilities of the Borrowers or any Security Party under any of the Finance Documents;

 

(c)           agrees that it will have no rights of recourse on any ground against the Agent, the Security

Trustee, any Lender or the Swap Bank in the event that this Certificate proves to be invalid or ineffective;

 

(d)           warrants to the Transferor and each Relevant Party that:

 

	
  

	
(i)

	
it has full capacity to enter into this transaction and has taken all corporate action and obtained all consents which it needs to take or obtain in connection with this transaction; and

 

	
  

	
(ii)

	
this Certificate is valid and binding as regards the Transferee; and

 

(e)           confirms the accuracy of the administrative details set out below regarding the Transferee.

 

	
10

	
The Transferor and the Transferee each undertake with the Agent and the Security Trustee severally, on demand, fully to indemnify the Agent and/or the Security Trustee in respect of any claim, proceeding, liability or expense (including all legal expenses) which they or either of them may incur in connection with this Certificate or any matter arising out of it, except such as are shown to have been mainly and directly caused by the gross and culpable negligence or dishonesty of the Agent's or the Security Trustee's own officers or employees.

 

	
11

	
The Transferee shall repay to the Transferor on demand so much of any sum paid by the Transferor under paragraph 9 as exceeds one-half of the amount demanded by the Agent or the Security Trustee in respect of a claim, proceeding, liability or expense which was not reasonably foreseeable at the date of this Certificate; but nothing in this paragraph shall

 

  

74

  

affect the liability of each of the Transferor and the Transferee to the Agent or the Security Trustee for the full amount demanded by it.

	
[Name of Transferor]

 

	
[Name of Transferee]

	
By:

 

	
By:

	
Date:

 

	
Date:

 

Agent

 

Signed for itself and for and on behalf of itself as Agent and for every other Relevant Party

 

[Name of Agent] 

 

By:

 

Date:

  

75

  

Administrative Details of Transferee

 

Name of Transferee:

 

Lending Office:

 

Contact Person:

 

(Loan Administration Department):

 

Telephone:

 

Fax:

 

Contact Person

 

(Credit Administration Department):

 

Telephone:

 

Fax:

 

Account for payments:

 

	
Note: 

	
This Transfer Certificate alone may not be sufficient to transfer a proportionate share of the Transferor's interest in the security constituted by the Finance Documents in the Transferor's or Transferee's jurisdiction. It is the responsibility of each Lender to ascertain whether any other documents are required for this purpose.

  

76

  

 

SCHEDULE 5

 

DESIGNATION NOTICE

 

Nordea Bank Finland Plc, London Branch

City Place House

55 Basinghall Street

London EC2V 5NB

England

 

 

[●]

 

Dear Sirs

 

Loan Agreement dated 20 December 2012 made between (i) Palau Shipping Company Inc. and Guam Shipping Company Inc. as joint and several Borrowers, (ii) the Lenders, (iii) yourselves as Swap Bank, Agent and Security Trustee (the "Loan Agreement").

 

We refer to:

 

1       The Loan Agreement;

 

2       the Master Agreement dated [●] 2012 made between ourselves and the Swap Bank; and

 

3       a Confirmation delivered pursuant to the said Master Agreement dated [●] and addressed by [●] to us.

 

In accordance with the terms of the Loan Agreement, we hereby give you notice of the said Confirmation and hereby confirm that the Transaction evidenced by it will be designated as a "Designated Transaction" for the purposes of the Loan Agreement and the Finance Documents.

 

Yours faithfully,

 

 

  

for and on behalf of

 

[PALAU SHIPPING COMPANY INC.][GUAM SHIPPING COMPANY INC.]

  

77

  

 

SCHEDULE 6

 

MANDATORY COST FORMULA

 

	
1

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

	
  

	
 

	
2

	
On the first day of each interest Period (or as soon as possible thereafter) the Agent shall calculate, as a percentage rate, a rate (the "Additional Cost Rate") for each Lender, in accordance with the paragraphs set out below. The Mandatory Cost will be calculated by the Agent as a weighted average of the Lenders' Additional Cost Rates (weighted in proportion to the percentage participation of each Lender in the Loan) and will be expressed as a percentage rate per annum.

	
  

	
 

	
3

	
The Additional Cost Rate for any Lender lending from a lending office in a Participating Member State will be the percentage notified by that Lender to the Agent. This percentage will be certified by that Lender in its notice to the Agent to be its reasonable determination of the cost (expressed as a percentage of that Lender's participation in the Loan made from that lending office) of complying with the minimum reserve requirements of the European Central Bank in respect of loans made from that lending office.

	
  

	
 

	
4

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

 

E x 0.01

300      per cent. per annum

Where:

 

	
 

	E 	
is designed to compensate Lenders for amounts payable under the Fees Rules and is calculated by the Agent as being the average of the most recent rates of charge supplied by the Reference Bank to the Agent pursuant to paragraph 6 below and expressed in pounds per £1,000,000.

 

	
5

	For the purposes of this Schedule:

            

	
(a)

	
"Eligible Liabilities" and "Special Deposits" have the meanings given to them from time to time under or pursuant to the Bank of England Act 1998 or (as may be appropriate) by the Bank of England;

 

	
(b)

	
"Fees Rules" means the rules on periodic fees contained in the FSA Supervision Manual or such other law or regulation as may be in force from time to time in respect of the payment of fees for the acceptance of deposits;

 

	
(c)

	
"Fee Tariffs" means the fee tariffs specified in the Fees Rules under the activity group A.1 Deposit acceptors (ignoring any minimum fee or zero rated fee required pursuant to the Fees Rules but taking into account any applicable discount rate);

  

78

  

 

	
(d)

	
"Participating Member State" means any member state of the European Union that adopts or has adopted the euro as its lawful currency in accordance with legislation of the European Union relating to European Monetary Union; and

 

	
(e)

	
"Tariff Base" has the meaning given to it in, and will be calculated in accordance with, the Fees Rules.

 

6              If requested by the Agent, the Reference Bank shall, as soon as practicable after publication by the Financial Services Authority, supply to the Agent, the rate of charge payable by the Reference Bank to the Financial Services Authority pursuant to the Fees Rules in respect of the relevant financial year of the Financial Services Authority (calculated for this purpose by the Reference Bank as being the average of the Fee Tariffs applicable to the Reference Bank for that financial year) and expressed in pounds per £1,000,000 of the Tariff Base of the Reference Bank.

 

7              Each Lender shall supply any information required by the Agent for the purpose of calculating its Additional Cost Rate. In particular, but without limitation, each Lender shall supply the following information in writing on or prior to the date on which it becomes a Lender:

 

	
(a)

	
the jurisdiction of its lending office; and

 

	
(b)

	
any other information that the Agent may reasonably require for such purpose.

 

Each Lender shall promptly notify the Agent in writing of any change to the information provided by it pursuant to this paragraph.

 

8             The rates of charge of the Reference Bank for the purpose of E above shall be determined by the Agent based upon the information supplied to it pursuant to paragraph 6 above and on the assumption that, unless a Lender notifies the Agent to the contrary, each Lender's obligations in relation to cash ratio deposits and special Deposits are the same as those of a typical bank from its jurisdiction of incorporation with a lending office in the same jurisdiction as its lending office.

 

9             The Agent shall have no liability to any person if such determination results in an Additional Cost Rate which over or under compensates any Lender and shall be entitled to assume that the information provided by any Lender or the Reference Bank pursuant to paragraphs 3, 6 and 7 above is true and correct in all respects.

 

10           The Agent shall distribute the additional amounts received as a result of the Mandatory Cost to the Lenders on the basis of the Additional Cost Rate for each Lender based on the information provided by each Lender and the Reference Bank pursuant to paragraphs 3, 6 and 7 above.

 

11           Any determination by the Agent pursuant to this Schedule in relation to a formula, the Mandatory Cost, an Additional Cost Rate or any amount payable to a Lender shall, in the absence of manifest error, be conclusive and binding on all parties.

 

12           The Agent may from time to time, after consultation with the Borrowers and the Lenders, determine and notify to all parties any amendments which are required to be made to this Schedule in order to comply with any change in law, regulation or any requirements from time to time imposed by the Financial Services Authority or the European Central Bank (or, in any case, any other authority which replaces all or any of its functions) and any such determination shall, in the absence of manifest error, be conclusive and binding on all parties.

  

79

  

 

EXECUTION PAGES

 

 

	
THE BORROWERS

	  	  
	  	  	  
	
SIGNED BY Andreas Michalopoulos

	
)

	
/s/ Andreas Michalopoulos

	  	
)

	  
	
for and on behalf of

	
)

	  
	
PALAU SHIPPING COMPANY INC.

	
)

	  
	
in the presence of:

	
)

	
/s/ Vassiliki Georgopoulos

	  	  	
Vassiliki Georgopoulos

	  	  	
Solicitor

	  	  	
Watson, Farley & Williams

	  	  	
89 Akti Miaouli

	  	  	
Piraeus 185 38 Greece

	  	  	  
	
SIGNED BY Anastassis Margaronis

	
)

	
/s/ Anastassis Margaronis

	  	
)

	  
	
for and on behalf of

	
)

	  
	
GUAM SHIPPING COMPANY INC.

	
)

	  
	
in the presence of:

	
)

	
/s/ Vassiliki Georgopoulos

	  	  	
Vassiliki Georgopoulos

	  	  	
Solicitor

	  	  	
Watson, Farley & Williams

	  	  	
89 Akti Miaouli

	  	  	
Piraeus 185 38 Greece

	  	  	  
	  	  	  
	
THE LENDERS

	  	  
	  	  	  
	
SIGNED BY Erica Lacombe

	
)

	
/s/ Erica Lacombe

	  	
)

	  
	
for and on behalf of

	
)

	  
	
NORDEA BANK FINLAND PLC,

	
)

	  
	
LONDON BRANCH

	
)

	  
	
in the presence of:

	
)

	
/s/ Vassiliki Georgopoulos

	  	  	
Vassiliki Georgopoulos

	  	  	
Solicitor

	  	  	
Watson, Farley & Williams

	  	  	
89 Akti Miaouli

	  	  	
Piraeus 185 38 Greece

	  	  	  
	  	  	  
	
THE AGENT

	  	  
	  	  	  
	
SIGNED BY Erica Lacombe

	
)

	
/s/ Erica Lacombe

	  	
)

	  
	
for and on behalf of

	
)

	  
	
NORDEA BANK FINLAND PLC,

	
)

	  
	
LONDON BRANCH

	
)

	  
	
in the presence of:

	
)

	
/s/ Vassiliki Georgopoulos

	  	  	
Vassiliki Georgopoulos

	  	  	
Solicitor

	  	  	
Watson, Farley & Williams

	  	  	
89 Akti Miaouli

	  	  	
Piraeus 185 38 Greece

	  	  	  
	  	  	  
	
THE SECURITY TRUSTEE

	  	  
	  	  	  
	
SIGNED BY Erica Lacombe

	
)

	
/s/ Erica Lacombe

	  	
)

	  
	
for and on behalf of

	
)

	  
	
NORDEA BANK FINLAND PLC,

	
)

	  
	
LONDON BRANCH

	
)

	  
	
in the presence of:

	
)

	
/s/ Vassiliki Georgopoulos

	  	  	
Vassiliki Georgopoulos

	  	  	
Solicitor

	  	  	
Watson, Farley & Williams

	  	  	
89 Akti Miaouli

	  	  	
Piraeus 185 38 Greece

	  	  	  

 

 

  

80

  

 

	  	  	  
	
THE SWAP BANK

	  	  
	  	  	  
	
SIGNED BY Erica Lacombe

	
)

	
/s/ Erica Lacombe

	  	
)

	  
	
for and on behalf of

	
)

	  
	
NORDEA BANK FINLAND PLC,

	
)

	  
	
LONDON BRANCH

	
)

	  
	
in the presence of:

	
)

	
/s/ Vassiliki Georgopoulos

	  	  	
Vassiliki Georgopoulos

	  	  	
Solicitor

	  	  	
Watson, Farley & Williams

	  	  	
89 Akti Miaouli

	  	  	
Piraeus 185 38 Greece

	  	  	  
	  	  	  

  

81d1368283_ex4-16.htm

Private & Confidential

 

 

Dated 21 June 2012

 

SUPPLEMENTAL AGREEMENT

relating to an (originally)

US$16,125,000 loan

to (originally)

JEMO SHIPPING COMPANY INC.

 

provided by

THE BANKS AND FINANCIAL INSTITUTIONS SET OUT IN SCHEDULE 1

 

Arranger, Agent, Security Agent and Account Bank

NORDEA BANK FINLAND PLC, LONDON BRANCH

 

Swap Provider

NORDEA BANK FINLAND PLC

NORTON ROSE

  

  

  

 

	
Clause

	
Contents

	
Page

	
1

	
Definitions

	
2

	
2

	
Agreement of the Creditors..._

	
4

	
3

	
Assumption of liability and obligations

	
4

	
4

	
Amendments to the Principal Agreement

	
4

	
5

	
Representations and warranties

	
5

	
6

	
Conditions

	
6

	
7

	
Confirmations

	
6

	
8

	
Fees and expenses

	
7

	
9

	
Miscellaneous and notices

	
8

	
10

	
Applicable law

	
8

	
Schedule 1 Names and addresses of the Banks

	
10

	
Schedule 2 Documents and evidence required as conditions precedent

	
11

	
Schedule 3 Form of Amended and Restated Loan Agreement

	
13

	
Schedule 4 Form of ISDA Amendment Agreement

	
14

	
Schedule 5 Form of New Swap Assignment

	
15

	
Schedule 6 Form of New Corporate Guarantee

	
16

	
Schedule 7 Form of New Jemo Mortgage

	
17

	
Schedule 8 Form of New Jemo Deed of Covenant

	
 18

  

  

  

 

THIS SUPPLEMENTAL AGREEMENT is dated 21 June 2012 and made BETWEEN:

 

	
(1)

	
JEMO SHIPPING COMPANY INC., a corporation incorporated in the Republic of the Marshall Islands with its registered office at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Republic of the Marshall Islands MH96960 (the "Original Borrower");

 

	
(2)

	
MANDARINGINA INC., a corporation incorporated in the Republic of the Marshall Islands with its registered office at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Republic of the Marshall Islands MH96960 (the "New Borrower" and, together with the Original Borrower, the "Borrowers");

 

	
(3)

	
THE BANKS AND FINANCIAL INSTITUTIONS whose names and addresses are set out in schedule 1 (together, the "Banks");

 

	
(4)

	
NORDEA BANK FINLAND PLC, LONDON BRANCH, a company incorporated in Finland having its registered office at Aleksanterinkatou 36B, FI-00020 Helsinki, Finland, acting through its branch at 8th Floor, City Place House, 55 Basinghall Street, London EC2V 5NB, England in its capacity as arranger (the "Arranger");

 

	
(5)

	
NORDEA BANK FINLAND PLC, LONDON BRANCH, a company incorporated in Finland having its registered office at Aleksanterinkatou 36B, FI-00020 Helsinki, Finland, acting through its branch at 8th Floor, City Place House, 55 Basinghall Street, London EC2V 5NB, England, in its capacity as agent for the Banks and the Swap Provider (the "Agent");

 

	
(6)

	
NORDEA BANK FINLAND PLC, LONDON BRANCH, a company incorporated in Finland having its registered office at Aleksanterinkatou 36B, FI-00020 Helsinki, Finland, acting through its branch at 8th Floor, City Place House, 55 Basinghall Street, London EC2V 5NB, England, in its capacity as account bank (the "Account Bank");

 

	
(7)

	
NORDEA BANK FINLAND PLC, a company incorporated in Finland having its registered office at Aleksanterinkatou 36B, FI-00020 Helsinki, Finland, acting through its branch at 8th Floor, City Place House, 55 Basinghall Street, London EC2V 5NB, England, in its capacity as swap provider (the "Swap Provider");

 

	
(8)

	
NORDEA BANK FINLAND PLC, LONDON BRANCH, a company incorporated in Finland having its registered office at Aleksanterinkatou 36B, FI-00020 Helsinki, Finland, acting through its branch at 8th Floor, City Place House, 55 Basinghall Street, London EC2V 5NB, England, in its capacity as security agent and trustee for and on behalf of the Agent, the Banks and the Swap Provider (the "Security Agent");

 

	
(9)

	
DIANA SHIPPING INC. a corporation incorporated in the Republic of the Marshall Islands with its registered office at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Republic of the Marshall Islands MH96960 (the "Corporate Guarantor"); and

 

	
(10)

	
DIANA SHIPPING SERVICES S.A. a company established under the laws of the Republic of Panama with its registered agent's registered office at Edificio Universal, Piso 12, Avenida Federico Boyd, Panama (the "Manager").

 

WHEREAS:

 

	
(A)

	
this Agreement is supplemental to the loan agreement dated 7 February 2012 (the "Principal Agreement") made between (1) the Original Borrower as borrower, (2) the Banks, (3) the Agent, (4) the Account Bank, (5) the Arranger, (6) the Security Agent and (7) the Swap Provider relating to a loan of up to Sixteen million one hundred and twenty five thousand Dollars ($16,125,000), of which the principal amount outstanding at the date hereof is Fifteen million eight hundred and seventy three thousand Dollars ($15,873,000), advanced by the Banks to the Original Borrower; and

  

1

  

 

	
(B)

	
this Agreement sets out the terms and conditions upon which the Creditors (as defined below) shall, at the request of the Original Borrower, provide their consent to:

 

	
  

	
(a)

	
the New Borrower becoming an additional borrower under the Principal Agreement and an additional counterparty of the Swap Provider under the Principal Master Agreement (as defined below);

 

	
  

	
(b)

	
the increase and upsizing of the loan amount by Ten million three hundred and twenty five thousand Dollars ($10,325,000), namely from (originally) Sixteen million one hundred and twenty five thousand Dollars ($16,125,000) to an amount of up to Twenty six million four hundred and fifty thousand Dollars ($26,450,000), for the purpose of financing part of the acquisition cost of an additional ship; and

 

	
  

	
(c)

	
certain consequential changes to the Principal Agreement and the Principal Master Agreement (as defined below) in each case required in connection with the above and agreed to by the Borrowers and the Creditors (as defined below).

 

NOW IT IS HEREBY AGREED as follows:

 

	
1

	
Definitions

 

	
1.1

	
Defined expressions

 

Words and expressions defined in the Principal Agreement shall, unless the context otherwise requires or unless otherwise defined herein, have the same meanings when used in this Agreement.

 

	
1.2

	
Definitions

 

In this Agreement, unless the context otherwise requires:

 

"Borrowers" means, together, the Original Borrower and the New Borrower and "Borrower" means either of them;

 

"Creditors" means, together, the Agent, the Account Bank, the Arranger, the Security Agent, the Swap Provider and the Banks and "Creditor" means any of them;

 

"Effective Date" means the date, no later than 25 June 2012, on which the Agent notifies the Borrowers in writing that the Agent has received the documents and evidence specified in clause 6 and schedule 2 in a form and substance satisfactory to it;

 

"ISDA Amendment Agreement" means the amendment agreement to the Principal Master Agreement made or (as the context may require) to be made between the Swap Provider and the Borrowers in the form set out in schedule 4;

 

"Loan Agreement" means the Principal Agreement as amended and restated by this Agreement;

 

"Master Swap Agreement" means the Principal Master Agreement as amended and supplemented by the ISDA Amendment Agreement;

 

"New Corporate Guarantee" means the guarantee executed or (as the context may require) to be executed by the Corporate Guarantor in favour of Security Agent in respect of the obligations of the Borrowers under the Loan Agreement in the form set out in schedule 6;

 

"New Jemo Deed of Covenant" means the deed of covenant in respect of m.v. Leto executed or (as the context may require) to be executed by the Original Borrower in favour of the Security Agent in the form set out in schedule 8;

  

2

  

 

"New Jemo Mortgage" means the first priority Bahamas mortgage in respect of m.v. Leto executed or (as the context may require) to be executed by the Original Borrower in favour of the Security Agent in the form set out in schedule 7;

 

"New Swap Assignment" means the swap assignment executed or (as the context may require) to be executed by the Borrowers and the Security Agent in the form set out in schedule 5.

 

"Principal Master Agreement" means the 2002 ISDA Master Agreement and its schedule both dated as of 7 February 2012 and made between the Original Borrower and the Swap Provider;

 

"Relevant Documents" means this Agreement, the New Corporate Guarantee, the New Swap Assignment, the ISDA Amendment Agreement, the New Jemo Deed of Covenant and the New Jemo Mortgage; and

 

"Relevant Parties" means the Original Borrower, the New Borrower, the Corporate Guarantor and the Manager or, where the context so requires or permits, means any or all of them.

 

	
1.3

	
Principal Agreement

 

References in the Principal Agreement to "this Agreement" shall, with effect from the Effective Date and unless the context otherwise requires, be references to the Principal Agreement as amended by this Agreement and words such as "herein", "hereof', "hereunder", "hereafter", "hereby" and "hereto", where they appear in the Principal Agreement, shall be construed accordingly.

 

	
1.4

	
Headings

 

Clause headings and the table of contents are inserted for convenience of reference only and shall be ignored in the interpretation of this Agreement.

 

	
1.5

	
Construction of certain terms

 

In this Agreement, unless the context otherwise requires:

 

	
1.5.1

	
references to clauses and schedules are to be construed as references to clauses of, and schedules to, this Agreement and references to this Agreement includes its schedules;

 

	
1.5 2

	
references to (or to any specified provision of) this Agreement or any other document shall be construed as references to this Agreement, that provision or that document as in force for the time being and as amended in accordance with terms thereof, or, as the case may be, with the agreement of the relevant parties;

 

	
1.5 3

	
references to a "regulation" include any present or future regulation, rule, directive, requirement, request or guideline (whether or not having the force of law) of any agency, authority, central bank or government department or any self-regulatory or other national or supra-national authority;

 

	
1.5.4

	
words importing the plural shall include the singular and vice versa;

 

	
1.5.5

	
references to a time of day are to London time;

 

	
1.5.6

	
references to a person shall be construed as references to an individual, firm, company, corporation, unincorporated body of persons or any Government Entity;

 

	
1.5.7

	
references to a "guarantee" include references to an indemnity or other assurance against finacial loss including, without limitation, an obligation to purchase assets or services as a consequence of a default by any other person to pay any Indebtedness and "guaranteed" shall be construed accordingly; and

  

3

  

	
1.5.8

	
references to any enactment shall be deemed to include references to such enactment as re-enacted, amended or extended.

 

	
1.6

	
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.

 

	
2

	
Agreement of the Creditors

 

The Creditors, relying upon the representations and warranties on the part of the Relevant Parties contained in clause 5 agree with the Borrowers that, with effect on the Effective Date and subject to the terms and conditions of this Agreement and in particular, but without prejudice to the generality of the foregoing, fulfilment on or before 25 June 2012 of the conditions contained in clause 6 and schedule 2, the Creditors agree:

 

	
2.1

	
to the requests of the Original Borrower set out in Recital (B) above; and

 

	
2.2

	
to the amendment of the Principal Agreement on the terms set out in clause 4.

 

	
3

	
Assumption of liability and obligations

 

	
3.1

	
Additional party

 

It is hereby agreed that, as and with effect from the Effective Date, the New Borrower shall be, and is hereby made, an additional party to the Principal Agreement, as joint and several borrower with the Original Borrower, and the Principal Agreement shall henceforth be construed and treated in all respects as if references therein to "Borrower" included reference to the New Borrower in addition to the Original Borrower.

 

	
3.2

	
Assumption of Liability

 

The New Borrower hereby agrees with the Creditors and the Original Borrower that, as and with effect from the Effective Date, it shall, jointly and severally with the Original Borrower:

 

	
3.2.1

	
be bound by the terms of the Principal Agreement as if the New Borrower had at all times been named therein as a Borrower;

 

	
3.2.2

	
duly and punctually perform all the liabilities and obligations whatsoever from time to time to be performed or discharged by the Original Borrower under the Principal Agreement (and for which the Borrowers hereby agree to be jointly and severally liable); and

 

	
3.2.3

	
without prejudice to the generality of clauses 3.2.1 and 3.2.2, be indebted for the full amount of the Loan, interest therein and all other sums which may be or become due to the Creditors or any of them pursuant to the Principal Agreement.

 

	
4

	
Amendments to the Principal Agreement

 

	
4.1

	
Amendments to the Principal Agreement

 

The Principal Agreement shall, with effect on and from the Effective Date, be (and it is hereby) amended so as to read in accordance with the form of the amended and restated Loan Agreement set out in schedule 3 and will continue to be binding upon each of the parties thereto in accordance with its terms as so amended and restated.

  

4

  

 

	
4.2

	
Continued force and effect

 

Save as amended by this Agreement, the provisions of the Principal Agreement shall continue in full force and effect and each of the Principal Agreement and this Agreement shall, in either case, be read and construed as one instrument.

 

	
5

	
Representations and warranties

 

	
5.1

	
Primary representations and warranties

 

Each of the Relevant Parties represents and warrants to the Creditors that:

 

	
5.1.1

	
Existing representations and warranties

 

the representations and warranties set out in clause 7 of the Principal Agreement and clause 4 of the Corporate Guarantee were true and correct on the date of the Principal Agreement and the Corporate Guarantee, respectively, and are true and correct, including to the extent that they may have been or shall be amended by this Agreement, as if made at the date of this Agreement with reference to the facts and circumstances existing at such date and as if reference therein to "Security Parties" or "Borrower" included reference to the New Borrower;

 

	
5.1.2

	
Corporate power

 

each of the Relevant Parties has power to execute, deliver and perform its obligations under the Relevant Documents to which it is or is to be a party; all necessary corporate, shareholder and other action has been taken by each of the Relevant Parties to authorise the execution, delivery and performance of the Relevant Documents to which it is or is to be a party and no limitation on the powers of the New Borrower to borrow will be exceeded as a result of the New Borrower becoming indebted to the Banks in respect of the Loan pursuant to this Agreement;

 

	
5.1 3

	
Binding obligations

 

the Relevant Documents to which it is or is to be a party constitute valid and legally binding obligations of each of the Relevant Parties enforceable in accordance with their respective terms;

 

	
5.1.4

	
No conflict with other obligations

 

the execution, delivery and performance of the Relevant Documents to which it is or is to be a party by each of the Relevant Parties will not (i) contravene any existing law, statute, rule or regulation or any judgment, decree or permit to which any of the Relevant Parties is subject, (ii) conflict with, or result in any breach of any of the terms of, or constitute a default under, any agreement or other instrument to which any of the Relevant Parties is a party or is subject or by which it or any of its property is bound or (iii) contravene or conflict with any provision of the constitutional documents of any of the Relevant Parties or (iv) result in the creation or imposition of or oblige any of the Relevant Parties to create any Encumbrance (other than a Permitted Encumbrance) on any of the undertaking, assets, rights or revenues of any of the Relevant Parties;

 

	
5 1.5

	
No filings required

 

save for the registration of the New Jemo Mortgage, it is not necessary to ensure the legality, validity, enforceability or admissibility in evidence of any of the Relevant Documents that they or any other instrument be notarised, filed, recorded, registered or enrolled in any court, public office or elsewhere in any Relevant Jurisdiction or that any stamp, registration or similar tax or charge be paid in any Relevant Jurisdiction on or in relation to the Relevant Documents and each of the Relevant Documents is in proper form for its enforcement in the courts of each Relevant Jurisdiction;

  

5

  

 

	
5.1.6

	
Choice of law

 

the choice of English law to govern the Relevant Documents (other than the New Jemo Mortgage), the choice of Bahamian law to govern the New Jemo Mortgage and the submissions by the Relevant Parties to the non-exclusive jurisdiction of the English courts are valid and binding; and

 

	
5.1.7

	
Consents obtained

 

every consent, authorisation, licence or approval of, or registration or declaration to, governmental or public bodies or authorities or courts required by any of the Relevant Parties in connection with the execution, delivery, validity, enforceability or admissibility in evidence of the Relevant Documents to which it is or will become a party or the performance by any of the Relevant Parties of their respective obligations under such documents has been obtained or made and is in full force and effect and there has been no default in the observance of any conditions or restrictions (if any) imposed in, or in connection with, any of the same.

 

	
5.2

	
Repetition of representations and warranties

 

Each of the representations and warranties contained in clause 5.1 of this Agreement, clause 7 of the form of the amended and restated Loan Agreement set out in schedule 3 and clause 4 of the Corporate Guarantee shall be deemed to be repeated by the Borrowers and the Corporate Guarantor, respectively, on the Effective Date as if made with reference to the facts and circumstances existing on such day.

 

	
6

	
Conditions

 

	
6.1

	
Documents and evidence

 

The agreement of the Creditors referred to in clause 2 shall be subject to the receipt by the Agent or its duly authorised representative, on or before 25 June 2012, of the documents and evidence specified in schedule 2 in form and substance satisfactory to the Agent.

 

	
6.2

	
General conditions precedent

 

The agreement of the Creditors referred to in clause 2 shall be further subject to:

 

	
6.2.1

	
the representations and warranties in clause 5 being true and correct on the Effective Date as if each was made with respect to the facts and circumstances existing at such time; and

 

	
6.2.2

	
no Default having occurred and continuing at the time of the Effective Date.

 

	
6.3

	
Waiver of conditions precedent

 

The conditions specified in this clause 6 are inserted solely for the benefit of the Agent and the Banks and may be waived by the Agent (acting on the instructions of the Banks) in whole or in part with or without conditions.

 

	
7

	
Confirmations

 

	
7.1

	
Security Documents

 

Each of the Relevant Parties hereby confirms its consent to the amendments to (i) the Principal Agreement on the terms set out in this Agreement and (ii) the Principal Master Agreement on the terms set out in the ISDA Amendment Agreement, and agrees that:

 

	
7.1.1

	
each of the other Security Documents to which it is a party, and its obligations thereunder, shall remain and continue in full force and effect notwithstanding the said amendments to (i) the Principal Agreement contained in this Agreement (including the increase of the maximum

  

6

  

 

amount of the Loan from $16,125,000 to $26,450,000, interest on such increased amount and any other amount owing to the Creditors in relation to such increased amount) and (ii) the Principal Master Agreement contained in the ISDA Amendment Agreement;

 

	
7.1.2

	
with effect from the Effective Date, the New Borrower shall be and is hereby added as a "Borrower" in each of the other Security Documents to which such Relevant Party is a party and the maximum principal sum of the Loan shall be and is hereby increased from $16,125,000 to $26,450,000 and each such Security Document shall henceforth be construed and treated, and each of the Relevant Parties shall be bound by each of the other Security Documents to which it is a party, in all respects as if (a) the New Borrower was a borrower (on a joint and several basis with the Original Borrower) and (b) the maximum principal sum of the Loan advanced or to be advanced referred to in the other Security Documents were "$26,450,000" instead of "$16,125,000"; and

 

	
7.1.3

	
with effect from the Effective Date, references in any of the Security Documents to which it is a party to:

 

	
  

	
(a)

	
"the Agreement" or "the Loan Agreement" (or equivalent or similar references), shall henceforth be references to the Principal Agreement, as amended and restated by this Agreement and as from time to time hereafter amended and shall also be deemed to include this Agreement and the obligations of the Borrowers hereunder; and

 

	
  

	
(b)

	
the "Master Swap Agreement" (or equivalent or similar references), shall henceforth be references to the Principal Master Agreement as amended by the ISDA Amendment Agreement and as from time to time hereafter amended and shall also be deemed to include the ISDA Amendment Agreement and the obligations of the Borrowers thereunder.

 

	
8

	
Fees and expenses

 

	
8.1

	
Fees

 

The Borrowers agree, jointly and severally, to pay to the Agent for the account of the Arranger, an arrangement fee of $123,900 on the date of this Agreement.

 

	
8.2

	
Expenses

 

The Borrowers agree, jointly and severally, to pay to the Agent on a full indemnity basis on demand all expenses (including legal and out-of-pocket expenses) incurred by the Creditors:

 

	
8.2.1

	
in connection with the negotiation, preparation, execution and, where relevant, registration of this Agreement, the other Relevant Documents and of any amendment or extension of or the granting of any waiver or consent under this Agreement and/or the other Relevant Documents or any such discharge or release documents;

 

	
8.2.2

	
in contemplation of, or otherwise in connection with, the enforcement of, or preservation of any rights under this Agreement and/or the other Relevant Documents or otherwise in respect of the monies owing and obligations incurred under this Agreement and/or the other Relevant Documents,

 

together with interest at the rate referred to in clause 3.4 of the Principal Agreement from the date on which such expenses were incurred to the date of payment (as well after as before judgment).

 

	
8.3

	
Value Added Tax

 

All fees and expenses payable pursuant to this clause 8 shall be paid together with value added tax or any similar tax (if any) properly chargeable thereon. Any value added tax chargeable in respect of any services supplied by the Creditors under this agreement shall, on delivery of the value added tax invoice, be paid in addition to any sum agreed to be paid hereunder.

  

7

  

 

	
8.4

	
Stamp and other duties

 

The Borrowers agree, jointly and severally, to pay to the Agent on demand all stamp, documentary, registration or other like duties or taxes (including any duties or taxes payable by the Creditors or any of them) imposed on or in connection with this Agreement and the other Relevant Documents and shall indemnify the Creditors against any liability arising by reason of any delay or omission by the Original Borrower and the New Borrower to pay such duties or taxes

 

	
9

	
Miscellaneous and notices

 

	
9.1

	
Notices

 

The provisions of clause 17.1 of the Principal Agreement shall extend and apply to the giving or making of notices or demands hereunder as if the same were expressly stated herein and for this purpose any notices to be sent to the Relevant Parties or any of them shall be sent to the same address as the address indicated for the "Borrowers" in the said clause 17.1.

 

	
9.2

	
Counterparts

 

This Agreement may be executed in any number of counterparts and by the different parties on separate counterparts, each of which when so executed and delivered shall be an original but all counterparts shall together constitute one and the same instrument.

 

	
9.3

	
Borrowers' obligations

 

Notwithstanding anything to the contrary contained in this Agreement, the agreements, obligations and liabilities of the Borrowers herein contained are joint and several and shall be construed accordingly. Each of the Borrowers agrees and consents to be bound by this Agreement notwithstanding that the other Borrower which was intended to sign or be bound may not do so or be effectually bound and notwithstanding that this Agreement may be invalid or unenforceable against the other Borrower whether or not the deficiency is known to the Creditors.

 

	
10

	
Applicable law

 

	
10.1

	
Law

 

This Agreement and any non-contractual obligations connected with it are governed by and shall be construed in accordance with English law.

 

	
10.2

	
Submission to jurisdiction

 

Each of the Relevant Parties agrees, for the benefit of the Creditors, that any legal action or proceedings arising out of or in connection with this Agreement or any non-contractual obligations connected with it against any of the Relevant Parties or any of its assets may be brought in the English courts. Each of the Relevant Parties irrevocably and unconditionally submits to the jurisdiction of such courts and irrevocably designates, appoints and empowers Mr Antonis Nicolaou at present of 25 Heath Drive, Potters Bar, Herts EN6 1 EN, England to receive for it and on its behalf, service of process issued out of the English courts in any such legal action or proceedings. The submission to such jurisdiction shall not (and shall not be construed so as to) limit the right of the Creditors or any of them to take proceedings against any of the Relevant Parties in the courts of any other competent jurisdiction nor shall the taking of proceedings in any one or more jurisdictions preclude the taking of proceedings in any other jurisdiction, whether concurrently or not. The parties further agree that only the Courts of England and not those of any other State shall have jurisdiction to determine any claim which any of the Relevant Parties may have against the Creditors or any of them arising out of or in connection with this Agreement.

  

8

  

	
10.3

	
Process agent

 

If Mr Antonis Nikolaou appointed as agent for service of process by the Relevant Parties and referred to in clause 10.2 passes away or cannot be found or is otherwise unable for any reason to act or resigns as agent for service of process, the Relevant Parties hereby undertake within ten (10) days of such event taking place (and the Relevant Parties by way of security hereby irrevocably and unconditionally authorise the Security Agent to do so) to designate, appoint and empower on their behalf, Messrs Cheeswrights (currently of Bankside House, 107 Leadenhall Street, London EC3A 4AF, England) at their then principal place of business in London as substitute process agent of Mr Antonis Nikolaou or another agent on terms acceptable to the Agent.

 

IN WITNESS whereof the parties to this Agreement have caused this Agreement to be duly executed as a deed on the date first above written.

  

9

  

Schedule

 

Names and addresses of the Banks

 

	
Name

	
Lending office and contact details

 

	
Nordea Bank Finland Plc, London Branch

 

	
Lending Office

 

8th Floor, City Place House

55 Basinghall Street

London EC2V 5NB

England

 

Address for Notices

 

8th Floor, City Place House

55 Basinghall Street

London EC2V 5NB

England

 

Fax:           +44 207 726 9188

Attn:           Shipping Department

 

With a copy to:

 

Fax:           +44 207 726 9102

Attn:           Loan Administration

 

 

  

10

  

 

Schedule 2

 

Documents and evidence required as conditions precedent

 

(referred to in clause 6.1)

 

	
1

	
Corporate authorisation

 

in relation to each of the Relevant Parties:

 

	
  

	
(i)

	
Constitutional documents

 

copies certified by an attorney-at-law of each of the Relevant Parties, as a true, complete and up to date copies, of all documents which contain or establish or relate to the constitution of that party or, in the case of the Original Borrower, the Corporate Guarantor and the Manager, a secretary's certificate confirming that there have been no changes or amendments to the constitutional documents certified copies of which were previously delivered to the Agent pursuant to the Principal Agreement;

 

	
  

	
(ii)

	
Resolutions

 

copies of resolutions of each of its board of directors and (except in the case of the Corporate Guarantor) its shareholders/stockholders approving such of the Relevant Documents to which it is or is to be a party and the terms and conditions hereof and thereof and authorising the signature, delivery and performance of each such party's obligations thereunder, certified (in a certificate dated no earlier than five (5) Banking Days prior to the date of this Agreement) by an attorney-at-law of such Relevant Party as:

 

	
  

	
(A)

	
being true and correct;

 

	
  

	
(B)

	
being duly passed at meetings of the directors of such Relevant Party and of the shareholders/stockholders of such Relevant Party, each duly convened and held;

 

	
  

	
(C)

	
not having been amended, modified or revoked; and

 

	
  

	
(D)

	
being in full force and effect

 

together with originals or certified copies of any powers of attorney issued by such Relevant Party pursuant to such resolutions; and

 

	
  

	
(iii)

	
Certificate of incumbency

 

a list of directors and officers of each Relevant Party specifying the names and positions of such persons, certified (in a certificate dated no earlier than five (5) Banking Days prior to the date of this Agreement) by an officer of such Relevant Party to be true, complete and up to date;

 

	
2

	
Relevant Documents

 

each of the Relevant Documents, duly executed;

 

	
3

	
New Jemo Mortgage registration

 

evidence that the New Jemo Mortgage has been registered against m.v. Leto through the relevant Registry;

  

11

  

 

	
4

	
Consents

 

a certificate (dated no earlier than five (5) Banking Days prior to the date of this Agreement) from an officer of each of the Relevant Parties stating that no consents, authorisations, licences or approvals are necessary for such Relevant Party to authorise, or are required by each of the Relevant Parties or any other party (other than the Creditors) in connection with, the execution, delivery, and performance of the Relevant Documents to which they are or will be a party;

 

	
5

	
Financial statements

 

the audited consolidated financial statements of the Group in respect of the financial year ended on 31 December 2011;

 

	
6

	
Legal opinions

 

such favourable legal opinions in relation to the laws of the Republic of the Marshall Islands, Panama, Bahamas and any other jurisdiction as the Agent shall in its reasonable discretion deem appropriate, each in a form acceptable to the Agent in its sole discretion;

 

	
7

	
Process agent

 

an original or certified true copy of a letter from each Relevant Party's agent for receipt of service of proceedings accepting its appointment under this Agreement and each of the Relevant Documents in which it is or is to be appointed as such Relevant Party's agent;

 

	
8

	
Fee

 

evidence that the fee payable under clause 8.1 has been paid in full; and

 

	
9

	
Registration forms

 

such statutory forms duly signed by the Borrowers and any other relevant party to the Relevant Documents as may be required by the Agent to perfect the security contemplated by the Relevant Documents.

  

12

  

Schedule 3

 

Form of Amended and Restated Loan Agreement

 

 

 

  

13

  

 

 

 

Private & Confidential

 

 

 

LOAN AGREEMENT

for a Loan of up to US$26,450,000

to

JEMO SHIPPING COMPANY INC.

and

MANDARINGINA INC.

 

provided by

THE BANKS AND FINANCIAL INSTITUTIONS SET OUT IN SCHEDULE 1

 

Arranger, Agent, Security Agent

and Account Bank

NORDEA BANK FINLAND PLC, LONDON BRANCH

 

Swap Provider

NORDEA BANK FINLAND PLC

NORTON ROSE

  

  

  

 

	
Contents

 

	  
	
Clause

	
Page

	
1

	
Purpose and definitions

	
1

	
2

	
The Total Commitment and the Advances

	
16

	
3

	
Interest and Interest Periods

	
18

	
4

	
Repayment and prepayment

	
20

	
5

	
Fees, commitment commission and expenses

	
22

	
6

	
Payments and taxes; accounts and calculations

	
23

	
7

	
Representations and warranties

	
25

	
8

	
Undertakings

	
31

	
9

	
Conditions

	
 37

	
10

	
Events of Default

	
38

	
11

	
Indemnities

	
42

	
12

	
Unlawfulness and increased costs

	
44

	
13

	
Security, set-off and pro-rata payments

	
45

	
14

	
Operating Accounts

	
47

	
15

	
Assignment, transfer and lending office    48

	
48

	
16

	
Arranger, Agent and Security Agent

	
52

	
17

	
Notices and other matters

	
61

	
18

	
Governing law and jurisdiction

	
64

	  	  
	
Schedule 1 The Banks and their Commitments

	
66

	
Schedule 2 Form of Drawdown Notice

	
67

	
Schedule 3 Documents and evidence required as conditions precedent to the Total Commitment made being

	
68

	
Schedule 4 Form of Transfer Certificate

	
74

	
Schedule 5 Mandatory Cost formula

	
78

  

  

  

THIS AGREEMENT is dated 7 February 2012 as amended and restated by a supplemental agreement dated 21 June 2012 and made BETWEEN:

 

(1)           JEMO SHIPPING COMPANY INC. and MANDARINGINA INC. as joint and several Borrowers;

 

(2)           NORDEA BANK FINLAND PLC, LONDON BRANCH as Arranger, Agent, Security Agent and Account Bank;

 

(3)           THE BANKS AND FINANCIAL INSTITUTIONS whose names are set out in schedule 1 as Banks; and

 

(4)           NORDEA BANK FINLAND PLC as Swap Provider. IT IS AGREED as follows:

 

	
1

	
Purpose and definitions

 

	
1.1

	
Purpose

 

This Agreement sets out the terms and conditions upon and subject to which the Banks agree, according to their several obligations, to make available to the Borrowers, jointly and severally, in two (2) Advances, a loan of up to Twenty six million four hundred and fifty thousand Dollars ($26,450,000) to be used for the purpose of (a) financing part of the acquisition cost of the Ships on or after their Delivery and (b) financing certain fees and expenses payable by the Borrowers in connection with this Agreement.

 

	
1.2

	
Definitions

 

In this Agreement, unless the context otherwise requires:

 

"Account Assignment" means:

 

	
  

	
(a)

	
in relation to the Jemo Ship, the Jemo Operating Account Assignment; or

 

	
  

	
(b)

	
in relation to the Mandaringina Ship, the Mandaringina Operating Account Assignment,

 

and "Account Assignments" means either or both of them;

 

"Account Bank" means Nordea Bank Finland Plc, a company incorporated in Finland with its registered office at Aleksanterinkatou 36B, FI-00020 Helsinki, Finland, acting for the purposes of this Agreement through its branch at 8th Floor, City Place House, 55 Basinghall Street, London EC2V 5NB, England (or of such other address as may last have been notified to the other parties to this Agreement pursuant to clause 17.1.3) or such other bank as may be designated by the Agent as the Account Bank for the purposes of this Agreement and includes its successors in title;

 

"Advance" means each borrowing of a proportion of the Total Commitment by the Borrowers or (as the context may require) the principal amount of such borrowing outstanding from time to time, being the Jemo Advance and the Mandaringina Advance and:

 

	
  

	
(a)

	
in relation to the Jemo Ship, it means the Jemo Advance; or

 

	
  

	
(b)

	
in relation to the Mandaringina Ship, it means the Mandaringina Advance,

 

and "Advances" means either or both of them;

 

"Agent" means Nordea Bank Finland Plc, a company incorporated in Finland with its registered office at Aleksanterinkatou 36B, FI-00020 Helsinki, Finland, acting for the purposes of this Agreement through its branch at 8th Floor, City Place House, 55 Basinghall Street, London

  

1

  

 

EC2V 5NB, England (or of such other address as may last have been notified to the other parties to this Agreement pursuant to clause 17.1.3) or such other person as may be appointed as agent by the Banks and the Swap Provider pursuant to clause 16.13 and includes its successors in title;

 

"Applicable Accounting Principles" means the most recent and up-to-date US GAAP applicable at any relevant time;

 

"Approved Shipbrokers" means, together, H. Clarkson & Co. Ltd. of London, Arrow Sale & Purchase (UK) Limited of London, Braemar Seascope Ltd. of London, Fearnleys A/S of Oslo, RS Platou Shipbrokers of Oslo, Simpson Spence & Young of London and Maersk Brokers K/S of Copenhagen and includes their respective successors in title and "Approved Shipbroker" means any of them;

 

"Arranger" means Nordea Bank Finland Plc, a company incorporated in Finland with its registered office at Aleksanterinkatou 36B, FI-00020 Helsinki, Finland, acting for the purposes of this Agreement through its branch at 8th Floor, City Place House, 55 Basinghall Street, London EC2V 5NB, England (or, of such other address as may last have been notified to the other parties to this Agreement pursuant to clause 17.1.3), as arranger and includes its successors in title;

 

"Banking Day" means a day on which dealings in deposits in Dollars are carried on in the London Interbank Eurocurrency Market and (other than Saturday or Sunday) on which banks are open for business in London, Athens and New York City (or any other relevant place of payment under clause 6);

 

"Banks" means the banks and financial institutions set out in schedule 1 and includes their respective successors in title and Transferee Banks and "Bank" means any of them;

 

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

 

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

 

"Basel II Regulation" means, in relation to a Bank:

 

(a)           any law or regulation implementing the Basel II Accord; or

 

(b)           any Basel II Approach adopted by that Bank,

 

but excludes any law or regulation implementing the Basel III Accord save and to the extent that it is a re-enactment of any law or regulation referred to in paragraph (a) of this definition;

 

"Basel III Accord" means, together, "Basel III: A global regulatory framework for more resilient banks and banking systems" and "Basel III: International framework for liquidity risk measurement, standards and monitoring" both published by the Basel Committee on Banking Supervision on 16th December, 2010, in either case in the form existing on the date of this Agreement;

 

"Basel III Regulation" means any law or regulation implementing the Basel III Accord save and to the extent that it re-enacts a Basel II Regulation;

 

"Borrowed Money" means Indebtedness in respect of (i) money borrowed or raised and debit balances at banks, (ii) any bond, note, loan stock, debenture or similar debt instrument, (iii) acceptance or documentary credit facilities, (iv) receivables sold or discounted (otherwise than on a non-recourse basis), (v) deferred payments for assets or services acquired excluding (1) (in

  

2

  

 

the case of the Borrowers) any sum payable to any trade creditors of the Borrowers or the Ships arising in the ordinary course of business and (2) (in the case of the Corporate Guarantor) any sum payable to any trade creditors of the Corporate Guarantor or any other member of the Group (except the Borrowers) or any of the Fleet Vessels (except the Ships) (vi) finance leases and hire purchase contracts, (vii) swaps, forward exchange contracts, futures and other derivatives and if the agreement under which any such transaction is entered requires netting of mutual liabilities, the Indebtedness for the net amount shall be taken into account as calculated on a "marked to market" basis, (viii) any other transaction (including without limitation forward sale or purchase agreements) having the commercial effect of a borrowing or raising of money or of any of (ii) to (vii) above and (ix) guarantees in respect of Indebtedness of any person falling within any of (i) to (viii) above;

 

"Borrower":

 

(a)           in relation to the Jemo Ship and/or the Jemo Advance, means the Jemo Borrower; or

 

(b)           in relation to the Mandaringina Ship and/or the Mandaringina Advance, means the Mandaringina Borrower,

 

and "Borrowers" means either or both of them;

 

"Borrowers' Security Documents" means, at any relevant time, such of the Security Documents as shall have been executed by either of the Borrowers at such time;

 

"Capital Adequacy Law" means any law or any regulation (whether or not having the force of law, but, if not having the force of law, with which a Bank or, as the case may be, its holding company habitually complies), including (without limitation) those relating to Taxation, capital adequacy, liquidity, reserve assets, cash ratio deposits and special deposits or other banking or monetary controls or requirements which affect the manner in which such Bank allocates capital resources to its obligations hereunder (including, without limitation, those resulting from the implementation or application of or compliance with the Basel II Accord, the Basel III Accord, any Basel II Regulation or any Basel III Regulation);

 

"Casualty Amount" means, in relation to each Ship, One million Dollars ($1,000,000) or its equivalent in any other currency;

 

"Change of Control" means if a person, or persons acting in concert (other than any combination of Permitted Holders) have the right or the ability to control, either directly or indirectly, the affairs or composition of the majority of the board of directors (or equivalent of it) of the Corporate Guarantor or either of the Borrowers any other Security Party at any relevant time;

 

"Charter" means, in relation to a Ship, any time charter, pool agreement or other contract of employment in respect of that Ship with an original term in excess of twelve (12) months (without taking into account any option to extend or renew contained therein) which is entered into by the relevant Borrower as owner of that Ship and any other person as its counterparty thereunder (including the Initial Charter for that Ship);

 

"Charter Assignment" means, in relation to each Ship and any Charter relevant to such Ship, a specific assignment of such Charter executed or (as the context may require) to be executed by the relevant Borrower in favour of the Security Agent in such form as may be agreed by the Borrowers and the Agent;

 

"Charterer" means, in relation to a Ship, any such person which shall enter into a Charter in respect of the relevant Ship as the relevant Borrower's counterparty thereunder, during the Security Period and it includes the Initial Charterer for that Ship;

 

"Classification" means, in relation to each Ship, the highest class available to a vessel of the same type as the relevant Ship with the relevant Classification Society or such other class as the Agent (acting on the instructions of the Majority Banks) shall, at the request of the Borrower

  

3

  

 

owning such Ship, have agreed in writing shall be treated as the Classification in relation to such Ship for the purposes of the relevant Ship Security Documents;

 

"Classification Society" means, in relation to a Ship, Lloyd's Register of Shipping or such other classification society which the Agent (acting on the instructions of the Majority Banks) shall, at the request of the Borrower owning such Ship, have agreed in writing shall be treated as the Classification Society in relation to such Ship for the purposes of the relevant Security Documents;

 

"Code" means the International Management Code for the Safe Operation of Ships and for Pollution Prevention constituted pursuant to Resolution A. 741(18) of the International Maritime Organisation and incorporated into the International Convention for the Safety of Life at Sea 1974 (as amended) and includes any amendments or extensions thereto and any regulation issued pursuant thereto;

 

"Commitment" means, in relation to each Bank, the aggregate amount set out opposite such Bank's name in the column headed "Commitment" in schedule 1, and/or, in the case of a Transferee Bank, the aggregate amount transferred as specified in the relevant Transfer Certificate, as reduced in each case by any relevant term of this Agreement;

 

"Compliance Certificate" means a certificate substantially in the form set out in schedule 1 to the Corporate Guarantee;

 

"Compulsory Acquisition" means, in relation to a Ship, requisition for title or other compulsory acquisition, requisition, appropriation, expropriation, deprivation, forfeiture or confiscation for any reason of such Ship by any Government Entity or other competent authority, whether de jure or de facto, but shall exclude requisition for use or hire not involving requisition of title;

 

"Confirmation" shall have, in relation to any continuing Designated Transaction, the meaning given to it in the Master Swap Agreement;

 

"Contract" means:

 

	
  

	
(a)

	
in relation to the Jemo Ship, the Jemo Contract; or

 

	
  

	
(b)

	
in relation to the Mandaringina Ship, the Mandaringina Contract,

 

	
  

	
and "Contracts" means both of them;

 

"Contribution" means, in relation to each Bank, the principal amount of the Loan owing to such Bank at any relevant time;

 

"Corporate Guarantee" means, together, each of the corporate guarantees executed or (as the context may require) to be executed by the Corporate Guarantor in favour of the Security Agent in such form as is agreed between the Borrowers and the Security Agent;

 

"Corporate Guarantor" means Diana Shipping Inc., a corporation incorporated in the Republic of the Marshall Islands with its registered office at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960, and includes its successors in title;

 

"Creditors" means, together, the Arranger, the Agent, the Security Agent, the Account Bank, the Swap Provider and the Banks and "Creditor" means any of them;

 

"Deed of Covenant" means:

 

(a)           in relation to the Jemo Ship, the Jemo Deed of Covenant; or

 

  

4

  

	
  

	
(b)

	
in relation to the Mandaringina Ship, the Mandaringina Deed of Covenant,

 

and "Deeds of Covenant" means either or both of them;

 

"Default" means any Event of Default or any event or circumstance which with the giving of notice or lapse of time or the satisfaction of any other condition (or any combination thereof) would constitute an Event of Default;

 

"Delivery" means, in relation to each Ship, delivery of such Ship by the relevant Seller to, and the acceptance of the Ship by, the relevant Borrower in accordance with the relevant Contract;

 

"Delivery Date" means, in relation to each Ship, the date on which its Delivery occurs;

 

"Designated Transaction" means a Transaction which is entered into by the Borrowers with the Swap Provider pursuant to the Master Swap Agreement as contemplated by clause 2.9;

 

"DOC" means a document of compliance issued to an Operator in accordance with rule 13 of the Code;

 

"Dollars" and "$" mean the lawful currency of the United States of America and, in respect of all payments to be made under any of the Security Documents, mean funds which are for same day settlement in the New York Clearing House Interbank Payments System (or such other U.S. dollar funds as may at the relevant time be customary for the settlement of international banking transactions denominated in U.S. dollars);

 

"Drawdown Date" means any date, being a Banking Day falling within the Drawdown Period, on which an Advance is, or is to be, drawn down;

 

"Drawdown Notice" means, in relation to each Advance, a notice substantially in the form of schedule 2 in respect of such Advance;

 

"Drawdown Period" means, in relation to each Advance, the period from the date of this Agreement and ending on the earlier of (a) the Termination Date relevant to such Advance, (b) the date on which the aggregate amount of the Advances is equal to the Total Commitment and (c) the date on which the Total Commitment is reduced to zero pursuant to any of the provisions of this Agreement (including clauses 4.3, 10.2 or 12);

 

"Early Termination Date" shall have, in relation to any continuing Designated Transaction, the meaning ascribed to it in the Master Swap Agreement;

 

"Earnings" means, in relation to a Ship, all moneys whatsoever from time to time due or payable to the relevant Borrower during the Security Period arising out of the use or operation of such Ship including (but without limiting the generality of the foregoing) all freight, hire and passage moneys, income arising out of pooling arrangements, compensation payable to such Borrower in event of requisition of the Ship for hire, remuneration for salvage or towage services, demurrage and detention moneys, and damages for breach (or payment for variation or termination) of any charterparty or other contract for the employment of such Ship;

 

"Encumbrance" means any mortgage, charge (whether fixed or floating), pledge, lien, hypothecation, assignment, trust arrangement or security interest or other encumbrance of any kind securing any obligation of any person or any type of preferential arrangement (including without limitation title transfer and/or retention arrangements) having a similar effect;

 

"Environmental Affiliate" means any agent or employee of either Borrower or any other Relevant Party or any person having a contractual relationship with either Borrower or any other Relevant Party in connection with any Relevant Ship or its operation or the carriage of cargo and/or passengers thereon and/or the provision of goods and/or services on or from any Relevant Ship;

  

5

  

 

"Environmental Approval" means any consent, authorisation, licence or approval of any governmental or public body or authorities or courts applicable to any Relevant Ship or its operation or the carriage of cargo and/or passengers thereon and/or the provision of goods and/or services on or from any Relevant Ship required under any Environmental Law;

 

"Environmental Claim" means any and all enforcement, clean-up, removal or other governmental or regulatory actions or orders instituted or completed pursuant to any Environmental Law or any Environmental Approval together with claims made by any third party relating to damage, contribution, loss or injury, resulting from any actual or threatened emission, spill, release or discharge of a Pollutant from any Relevant Ship;

 

"Environmental Laws" means all national, international and state laws, rules, regulations, treaties and conventions applicable to any Relevant Ship pertaining to the pollution or protection of human health or the environment including, without limitation, the carriage of Pollutants and actual or threatened emissions, spills, releases or discharges of Pollutants;

 

"Event of Default" means any of the events or circumstances described in clause 10.1;

 

"Fee Letter" means the fee letter made or (as the context may require) to be made between the Arranger, the Agent and the Jemo Borrower in relation to certain of the fees referred to in clause 5.1,

 

"Final Maturity Date" means;

 

(a)           in relation to the Jemo Advance the earlier of (i) 28 February 2017 and (ii) the date falling sixty (60) months after the Drawdown Date of such Advance; and

 

(b)           in relation to the Mandaringina Advance, the earlier of (i) 29 June 2017 and (ii) the date falling (60) months after the Drawdown Date of such Advance;

 

"Flag State" means:

 

(a)           in relation to the Jemo Ship, the Commonwealth of the Bahamas; or

 

(b)           in relation to the Mandaringina Ship, the Republic of the Marshall Islands,

 

or, in each case, such other state or territory designated in writing by the Agent (acting on the instructions of the Majority Banks), at the request of the Borrower owning such Ship, as being the "Flag State" of such Ship for the purposes of the relevant Ship Security Documents;

 

"Government Entity" means and includes (whether having a distinct legal personality or not) any national or local government authority, board, commission, department, division, organ, instrumentality, court or agency and any association, organisation or institution of which any of the foregoing is a member or to whose jurisdiction any of the foregoing is subject or in whose activities any of the foregoing is a participant;

 

"Group" means the Corporate Guarantor and its Subsidiaries from time to time (and, for the avoidance of doubt, it includes the Borrowers) and "member of the Group" shall be construed accordingly (and, for the avoidance of doubt, it is hereby clarified that Diana Containerships Inc. of the Republic of the Marshall Islands and its own Subsidiaries from time to time are not part of the Group);

 

"Indebtedness" means any obligation for the payment or repayment of money, whether as principal or as surety and whether present or future, actual or contingent;

 

"Initial Charter" means:

 

(a)           in relation to the Jemo Ship, the Initial Jemo Charter; or

  

6

  

(b)           in relation to the Mandaringina Ship, the Initial Mandaringina Charter, 

 

and "Initial Charters" means either or both of them; 

 

"Initial Charterer" means:

 

(a)           in relation to the Jemo Ship, the Initial Jemo Charterer; or

 

(b)           in relation to the Mandaringina Ship, the Initial Mandaringina Charterer,

 

and "Initial Charterers" means either or both of them;

 

"Initial Jemo Charter Assignment" means the Charter Assignment of the Initial Jemo Charter executed or (as the context may require) to be executed by the Jemo Borrower in favour of the Security Agent in such form as may be agreed between the Borrowers and the Agent;

 

"Initial Jemo Charter" means the time charterparty in respect of the Jemo Ship made between the Initial Jemo Charterer and the Jemo Borrower, which contract is, on the date of this Agreement incorporated in a recapitulation e-mail dated 6 December 2011 from the Initial Jemo Charterer's brokers (LSS Brokers, Singapore) to the Jemo Borrower, as the same may be amended and/or novated from time to time with the prior written consent of the Security Agent;

 

"Initial Jemo Charterer" means EDF Trading Ltd. of London and includes its successors in title;

 

"Initial Mandaringina Charter" means the time charterparty in respect of the Mandaringina Ship made between the Initial Mandaringina Charterer and the Mandaringina Borrower, which contract is, on the date of this Agreement incorporated in a recapitulation e-mail dated 5 April 2012 to be documented in more detail in a NYPE 1946 form time-charterparty of even date, as may be amended and/or supplemented from time to time, which recapitulation email is addressed by chartering brokers, Arrow Panamax Athens acting on behalf of the Mandaringina Borrower to the Initial Mandaringina Charterer, as the same may be amended and/or novated from time to time with the prior written consent of the Security Agent;

 

"Initial Mandaringina Charter Assignment" means the Charter Assignment of the Initial Mandaringina Charter executed or (as the context may require) to be executed by the Mandaringina Borrower in favour of the Security Agent in such form as may be agreed between the Borrowers and the Agent;

 

"Initial Mandaringina Charterer" means STX Panocean Co., Ltd. of Seoul, South Korea and includes its successors in title;

 

"Insurances" means, in relation to a Ship, all policies and contracts of insurance (which expression includes all entries of that Ship in a protection and indemnity or war risks association) which are from time to time during the Security Period in place or taken out or entered into by or for the benefit of the Borrower owning such Ship (whether in the sole name of the relevant Borrower, or in the joint names of the relevant Borrower and the Security Agent and/or any other Creditor or otherwise) in respect of such Ship and her Earnings or otherwise howsoever in connection with such Ship and all benefits thereof (including claims of whatsoever nature and return of premiums);

 

"Interest Payment Date" means the last day of an Interest Period;

 

"Interest Period" means, in relation to an Advance, each period for the calculation of interest in respect of such Advance, ascertained in accordance with clauses 3.2 and 3.3;

 

"ISPS Code" means the International Ship and Port Facility Security Code constituted pursuant to resolution A.924(22) of the International Maritime Organization now set out in Chapter XI-2 of the International Convention for the Safety of Life at Sea 1974 (as amended) as adopted by a Diplomatic conference of the International Maritime Organisation on Maritime Security in

  

7

  

December 2002 and includes any amendments or extensions thereto and any regulation issued pursuant thereto;

 

"ISSC" means, in relation to each Ship, an International Ship Security Certificate issued in respect of such Ship pursuant to the ISPS Code;

 

"Jemo Advance" means an Advance of Sixteen million one hundred and twenty five thousand Dollars ($16,125,000) made available to (originally) the Jemo Borrower (but for which, following the Supplemental Agreement, the Mandaringina Borrower is jointly and severally liable) for the purpose of financing part of the acquisition cost of the Jemo Ship by the Jemo Borrower pursuant to the Jemo Contract;

 

"Jemo Borrower" means Jemo Shipping Company Inc., a corporation incorporated in the Republic of the Marshall Islands with its registered office at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands, MH96960 and includes its successors in title;

 

"Jemo Contract" means the memorandum of agreement dated 16 November 2011 and made between the relevant Seller and the Jemo Borrower as the same may be amended from time to time, relating to the sale by the relevant Seller and the purchase by the Jemo Borrower, of the Jemo Ship;

 

"Jemo Contract Price" means the purchase of the Jemo Ship under the Jemo Contract, being Thirty two million two hundred and fifty thousand Dollars ($32,250,000) or such other sum in Dollars as is determined with the terms and conditions of the Jemo Contract to be the purchase price of the Jemo Ship thereunder;

 

"Jemo Deed of Covenant" means each of the deeds of covenant collateral respectively to (1) a mortgage over the Jemo Ship dated 7 February 2012 executed by the Jemo Borrower in favour of the Security Agent and (2) the Jemo Mortgage executed or (as the context may require) to be executed by the Jemo Borrower in favour of the Security Agent in such form as may be agreed between the Borrowers and the Agent;

 

"Jemo Management Agreement" means the agreement made or (as the context may require) to be made between the Jemo Borrower and the Manager approved in writing by the Agent (acting on the instructions of the Majority Banks), providing (inter alia) for the Manager to manage the Jemo Ship;

 

"Jemo Manager's Undertaking" means the undertaking and assignment in respect of the Jemo Ship executed or (as the context may require) to be executed by the Manager in favour of the Security Agent in such form as may be agreed between the Borrowers and the Agent;

 

"Jemo Mortgage" means the first priority Bahamas ship mortgage over the Jemo Ship executed or (as the context may require) to be executed by the Jemo Borrower in favour of the Security Agent in such form as may be agreed between the Borrowers and the Agent;

 

"Jemo Operating Account" means an interest bearing Dollar account of the Jemo Borrower opened by the Jemo Borrower with the Account Bank with account number 0045834302 and includes any sub-accounts thereof and any other account designated in writing by the Agent to be the Jemo Operating Account for the purposes of this Agreement;

 

"Jemo Operating Account Assignment" means a first priority assignment executed or (as the context may require) to be executed by the Jemo Borrower in favour of the Security Agent in respect of the Jemo Operating Account in such form as may be agreed between the Borrowers and the Agent;

 

"Jemo Ship" means the 81,297 dwt, 2010-built dry bulk carrier Leto registered in the ownership of the Jemo Borrower through the relevant Registry under the laws and flag of the relevant Flag State and with IMO Number 9397731, sold and delivered by the relevant Seller to the relevant Borrower under the relevant Contract on the relevant Delivery Date;

  

8

  

 

"LIBOR" means, in relation to any amount and for any period, the offered rate (if any) for deposits of Dollars for such amount and for the period which is:

	
  

	
(a)

	
he rate for such period as displayed on Reuters page LIBOR01 (British Bankers' Association Interest Settlement Rate) (or such other page as may replace such page LIBOR01 on such system or on any other system of the information vendor for the time being designated by the British Bankers' Association to calculate the BBA Interest Settlement Rate (as defined in the British Bankers' Association's Recommended Terms and Conditions("BBAIRS" terms) applicable at the relevant time) at or about 11:00 a.m. (London time) on the Quotation Date for such period; or

	
  

	
 

	
  

	
(b)

	
if on such date no such rate is displayed, the rate (rounded upwards to the nearest 1/16th of one per cent) quoted to the Agent by the Reference Bank at the request of the Agent as the Reference Bank's offered rate for deposits of Dollars in an amount equal or approximately equal to the amount in relation to which LIBOR is to be determined and for a period equivalent to such period to prime banks in the London Interbank Market at or about 11:00 a.m. (London time) on the Quotation Date for such period;

 

"Loan" means the aggregate principal amount owing to the Banks under this Agreement at any relevant time;

 

"Majority Banks" means, at any relevant time, Banks (a) the aggregate of whose Contributions exceeds Sixty six point six six per cent (66.66%) of the Loan or (b) (if no principal amounts are outstanding under this Agreement) the aggregate of whose Commitments exceeds Sixty six point six six per cent (66.66%) of the Total Commitment;

 

"Management Agreement" means:

 

(a)           in relation to the Jemo Ship, the Jemo Management Agreement; or

 

(b)           in relation to the Mandaringina Ship, the Mandaringina Management Agreement, 

 

and "Management Agreements" means either or both of them;

 

"Manager" means, in relation to each Ship, Diana Shipping Services S.A., a corporation incorporated in the Republic of Panama with its registered agent's registered office at Edificio Universal, Piso 12, Avenida Federico Boyd, Panama or any other person approved in writing by the Majority Banks, and includes its successors in title;

 

"Manager's Undertaking" means:

 

(a)           in relation to the Jemo Ship, the Jemo Manager's Undertaking; or

 

(b)           in relation to the Mandaringina Ship, the Mandaringina Manager's Undertaking,

 

and "Manager's Undertakings" means either or both of them;

 

"Mandaringina Advance" means an Advance of up to Ten million three hundred and twenty five thousand Dollars ($10,325,000) made or (as the context may require) to be made available to the Borrowers for the purpose of financing part of the acquisition cost of the Mandaringina Ship by the Mandaringina Borrower pursuant to the Mandaringina Contract;

 

"Mandaringina Borrower" means Mandaringina Inc., a corporation incorporated in the Republic of the Marshall Islands with its registered office at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands, MH96960 and includes its successors in title;

 

"Mandaringina Contract" means the memorandum of agreement dated 30 March 2012 as amended by addendum no.1 dated 3 April 2012, each made between (a) Southern Route Maritime S.A. on behalf of Nissen Kaiunco, Ltd. and Southern Route Maritime S.A. as sellers and (b) the Mandaringina Borrower, as the same may be amended from time to time, relating to

  

9

  

the sale by the sellers and the purchase by the Mandaringina Borrower, of the Mandaringina Ship;

 

"Mandaringina Contract Price" means the purchase of the Mandaringina Ship under the Mandaringina Contract, being Twenty million six hundred and fifty thousand Dollars ($20,650,000) or such other sum in Dollars as is determined with the terms and conditions of the Mandaringina Contract to be the purchase price of the Mandaringina Ship thereunder;

 

"Mandaringina Deed of Covenant" means the general assignment collateral to the Mandaringina Mortgage executed or (as the context may require) to be executed by the Mandaringina Borrower in favour of the Security Agent in such form as may be agreed between the Borrowers and the Agent;

 

"Mandaringina Management Agreement" means the agreement made or (as the context may require) to be made between the Mandaringina Borrower and the Manager approved in writing by the Agent (acting on the instructions of the Majority Banks), providing (inter alia) for the Manager to manage the Mandaringina Ship;

 

"Mandaringina Manager's Undertaking" means the undertaking and assignment in respect of the Mandaringina Ship executed or (as the context may require) to be executed by the Manager in favour of the Security Agent in such form as may be agreed between the Borrowers and the Agent;

 

"Mandaringina Mortgage" means the first preferred Marshall Islands ship mortgage over the Mandaringina Ship executed or (as the context may require) to be executed by the Mandaringina Borrower in favour of the Security Agent in such form as may be agreed between the Borrowers and the Agent;

 

"Mandaringina Operating Account" means an interest bearing Dollar account of the Mandaringina Borrower opened by the Mandaringina Borrower with the Account Bank with account number 0046004602 and includes any sub-accounts thereof and any other account designated in writing by the Agent to be the Mandaringina Operating Account for the purposes of this Agreement;

 

"Mandaringina Operating Account Assignment" means a first priority assignment executed or (as the context may require) to be executed by the Mandaringina Borrower in favour of the Security Agent in respect of the Mandaringina Operating Account in such form as may be agreed between the Borrowers and the Agent

 

"Mandaringina Ship" means the 76,225 dwt, 2005-built dry bulk carrier Melia registered in the ownership of the Mandaringina Borrower through the relevant Registry under the laws and flag of the relevant Flag State and with IMO Number 9286968, sold and delivered by the relevant Seller to the relevant Borrower under the relevant Contract on the relevant Delivery Date;

 

"Mandatory Cost" means, in relation to any period, a percentage calculated by the Agent for such period at an annual rate determined by the application of the formula set out in schedule 5;

 

"Margin" means two point five zero per cent (2.50%) per annum;

 

"Master Swap Agreement" means the agreement made between the Swap Provider and the Borrowers comprising a 2002 ISDA Master Agreement (including its schedule) dated as of 7 February 2012 and made between the Swap Provider and the Jemo Borrower, as amended by an ISDA amendment agreement dated June 2012 and made between the Swap Provider and the Borrowers and includes any Designated Transactions from time to time entered into and any Confirmations (as defined therein) from time to time exchanged thereunder and governed thereby;

  

10

  

 

"Material Adverse Effect" means a material adverse effect:

	
  

	
(a)

	
on the business, assets, nature of assets, operations, prospects, liabilities or condition (financial or otherwise) of any Security Party, any member of the Group or the Group as a whole; or

	
  

	
 

	
  

	
(b)

	
on the ability of any of the Borrower, the Corporate Guarantor, the Manager or any other Security Party to comply with any of their respective obligations under the Security Documents or any of them; or

	
  

	
 

	
  

	
(c)

	
on the legality, validity or enforceability of any of the Security Documents or any of the rights or remedies of the Creditors or any of them thereunder;

 

"month" means a period beginning in one calendar month and ending in the next calendar month on the day numerically corresponding to the day of the calendar month on which it started, provided that (a) if the period started on the last Banking Day in a calendar month or if there is no such numerically corresponding day, it shall end on the last Banking Day in such next calendar month and (b) if such numerically corresponding day is not a Banking Day, the period shall end on the next following Banking Day in the same calendar month but if there is no such Banking Day it shall end on the preceding Banking Day and "months" and "monthly" shall be construed accordingly;

 

"Mortgage" means:

 

(a)           in relation to the Jemo Ship, the Jemo Mortgage; or

 

(b)           in relation to the Mandaringina Ship, the Mandaringina Mortgage, 

 

and "Mortgages" means either or both of them;

 

"Mortgaged Ship" means, at any relevant time, any Ship which is at such time subject to a Mortgage and/or the Earnings, Insurances and Requisition Compensation of which are subject to an Encumbrance pursuant to the relevant Ship Security Documents; and a Ship shall for the purposes of this Agreement be deemed to be a Mortgaged Ship as from whichever shall be the earlier of (a) the drawdown of the Advance relating to that Ship and (b) the date that the Mortgage of that Ship shall have been executed and registered in accordance with this Agreement until whichever shall be the earlier of (i) the payment in full of the amount required by the Agent to be paid pursuant to clause 4.3 following the sale or Total Loss of such Ship and (ii) the date on which all moneys owing under the Security Documents have been repaid in full;

 

"Operating Account" means:

 

(a)           in relation to the Jemo Ship, the Jemo Operating Account; or

 

(b)           in relation to the Mandaringina Ship, the Mandaringina Operating Account,

 

and "Operating Accounts" means either or both of them;

 

"Operator" means any person who is from time to time during the Security Period concerned in the operation of a Ship and falls within the definition of "Compamf set out in rule 1.1.2 of the Code;

 

"Permitted Encumbrance" means any Encumbrance in favour of the Security Agent or any other Creditor created pursuant to the Security Documents and Permitted Liens;

 

"Permitted Holder" means each of Mr Simeon Palios, his wife and any of his direct lineal descendants;

"Permitted Liens" means, in respect of each Ship, any lien on such Ship for master's, officer's or crew's wages outstanding in the ordinary course of trading, any lien on such Ship for salvage

  

11

  

and any ship repairer's or outfitter's possessory lien on such Ship for a sum not (except with the prior written consent of the Agent) exceeding the Casualty Amount for such Ship;

 

"Pollutant" means and includes pollutants, contaminants, toxic substances, oil as defined in the United States Oil Pollution Act of 1990 and all hazardous substances as defined in the United States Comprehensive Environmental Response, Compensation and Liability Act 1980;

 

"Quotation Date" means, in respect of any period in respect of which LIBOR falls to be determined under this Agreement, the day falling two (2) Banking Days before the first day of such period;

 

"Reference Bank" means, in relation to LIBOR and Mandatory Cost, the principal London office of Nordea Bank Finland Plc or of any other bank appointed from time to time by the Agent pursuant to clause 16.21 and includes its successors in title;

 

"Registry" means, in respect of a Ship, such registrar, commissioner or representative of the relevant Flag State who is duly authorised and empowered to register such Ship, the relevant Borrower's title to such Ship and the relevant Mortgage under the laws and flag of the relevant Flag State;

 

"Related Company" of a person means any Subsidiary of such person, any company or other entity of which such person is a Subsidiary and any Subsidiary of any such company or entity;

 

"Relevant Jurisdiction" means any jurisdiction in which or where any Security Party is incorporated, resident, domiciled, has a permanent establishment, carries on, or has a place of business or is otherwise effectively connected;

 

"Relevant Party" means each of the Borrowers and each member of the Group;

 

"Relevant Ship" means the Ships and any other vessel from time to time (whether before or after the date of this Agreement) owned, managed or crewed by, or chartered to, any Relevant Party;

 

"Repayment Dates" means, subject to clause 6.3:

	
  

	
(a)

	
in relation to the Jemo Advance, each of the dates falling at three (3) monthly intervals after the Drawdown Date for such Advance, up to and including the Final Maturity Date for such Advance; or

	
  

	
 

	
  

	
(b)

	
in relation to the Mandaringina Advance, 7 August 2012 and each of the dates falling at three (3) monthly intervals thereafter, up to and including the Final Maturity Date for such Advance;

        

"Requisition Compensation" means, in relation to each Ship, all sums of money or other compensation from time to time payable during the Security Period by reason of the Compulsory Acquisition of such Ship;

 

"Security Agent" means Nordea Bank Finland Plc, a company incorporated in Finland with its registered office at Aleksanterinkatou 36B, FI-00020 Helsinki, Finland acting for the purposes of this Agreement through its branch at 8th Floor, City Place House, 55 Basinghall Street, London EC2V 5NB, England (or of such other address as may last have been notified to the other parties to this Agreement pursuant to clause 17.1.3) or such other person as may be appointed as security agent and trustee by the Banks, the Swap Provider and the Agent pursuant to clause 16.14 and includes its successors in title;

 

"Security Documents" means this Agreement, the Fee Letter, the Master Swap Agreement, the Mortgages, the Deeds of Covenant, the Manager's Undertakings any Charter Assignments, the Corporate Guarantee, the Account Assignments, the Share Pledges, the Swap Assignment, the Trust Deed, the Supplemental Agreement and any other documents as may have been or shall from time to time after the date of this Agreement be executed to guarantee and/or secure all or

  

12

  

any part of the Loan, interest thereon and other moneys from time to time owing by the Borrowers and/or any other Security Party pursuant to this Agreement or any other Security Documents (whether or not any such document also secures moneys from time to time owing pursuant to any other document or agreement);

 

"Security Party" means, together, the Borrowers, the Corporate Guarantor, the Manager or any other person who may at any time be a party to any of the Security Documents (other than the Creditors);

 

"Security Period" means the period commencing on the date of this Agreement and terminating upon discharge of the security created by the Security Documents by payment of all moneys payable thereunder;

 

"Security Requirement" means the amount in Dollars (as certified by the Agent whose certificate shall, in the absence of manifest error, be conclusive and binding on the Borrowers and the other Creditors) which is, at any relevant time, one hundred and twenty five per cent (125%) of the Loan at that time;

 

"Security Value" means the amount in Dollars (as certified by the Agent whose certificate shall, in the absence of manifest error, be conclusive and binding on the Borrowers and the other Creditors) which, at any relevant time, is the aggregate of (a) the market value of the Mortgaged Ships as most recently determined in accordance with clause 8.2.2 and (b) the market value of any additional security for the time being actually provided to the Creditors pursuant to clause 8.2 as most recently determined in accordance with clause 8.2.5;

 

"Seller" means;

	
  

	
(a)

	
in relation to the Jemo Ship, Bowline Shipping S.A. of 80 Broad Street, Monrovia, Republic of Liberia and includes their successors in title; or

	
  

	
 

	
  

	
(b)

	
in relation to the Mandaringina Ship, together, Southern Route Maritime S.A. of Comosa Building, Samuel Lewis Avenue and Manuel Maria Icaza, Panama City, Republic of Panama, and Nissen Kaiunco, Ltd. of Ko 829-1, Kinoura, Hakata-cho, Imabari-City, Ehime Prefecture, Japan,

       

and "Sellers" means either or both of them;

 

"Share Pledge" means, in relation to each Borrower, the share pledge executed or (as the context may require) to be executed by the Corporate Guarantor in favour of the Security Agent in respect of all of the issued shares in such Borrower in such form as is agreed between the Borrowers and the Agent and "Share Pledges" means both of them;

 

"Ship":

	
  

	
(a)

	
in relation to the Jemo Borrower and/or the Jemo Advance, means the Jemo Ship; or

	
  

	
 

	
  

	
(b)

	
in relation to the Mandaringina Borrower and/or the Mandaringina Advance, means the Mandaringina Ship,

   

and "Ships" means either or both of them; "Ship Security Documents":

	
  

	
(a)

	
in respect of the Jemo Ship, means the Jemo Mortgage, the Jemo Deed of Covenant, any relevant Charter Assignment and the Jemo Manager's Undertaking; or

	
  

	
 

	
  

	
(b)

	
in respect of the Mandaringina Ship, means the Mandaringina Mortgage, the Mandaringina Deed of Covenant, any relevant Charter Assignment and the Mandaringina Manager's Undertaking;

        

  

13

  

"SMC" means a safety management certificate issued in respect of a Ship in accordance with rule 13 of the Code;

 

"Subsidiary" of a person means any company or entity directly or indirectly controlled by such person, and for this purpose "control" shall have the meaning given to it in clause 1.4.7;

 

"Supplemental Agreement" means the supplemental agreement dated 21 June 2012 made between the Borrowers, the Manager, the Corporate Guarantor and the Creditors, supplemental to this Agreement;

 

"Swap Assignment" means the assignment executed or (as the context may require) to be executed by the Borrowers in favour of the Security Agent in the form set out in schedule 5 of the Supplemental Agreement;

 

"Swap Exposure" means, as at any relevant time, the total sum certified by the Swap Provider to be the aggregate net amount in Dollars which would, in the absolute discretion of the Swap Provider, be an estimate of what would be payable by the Borrowers to the Swap Provider under (and calculated in accordance with) section 6(e) (Payments on Early Termination) of the Master Swap Agreement if an Early Termination Date had occurred under the Master Swap Agreement at the relevant time in relation to all continuing Designated Transactions thereunder;

 

"Swap Provider" means Nordea Bank Finland Plc, a company incorporated in Finland with its registered office at Aleksanterinkatou 36B, FI-00020 Helsinki, Finland, acting for the purposes of this Agreement and the other Security Documents through its office at 2747 Securities Services, FIN-00020 Nordea, Helsinki, Finland (or of such other address as may last have been notified to the other parties to this Agreement pursuant to clause 17.1.3) and includes its successors in title;

 

"Taxes" includes all present and future taxes, levies, imposts, duties, fees or charges of whatever nature together with interest thereon and penalties in respect thereof and "Taxation" shall be construed accordingly;

 

"Termination Date" means:

 

(a)           in relation to the Jemo Advance, 29 February 2012; or

 

(b)           in relation to the Mandaringina Advance, 30 June 2012,

 

or such other later date as the Borrower may request and the Agent (acting on the instructions of all the Banks) may in its absolute discretion consent to;

 

"Total Commitment" means, at any relevant time, the aggregate of the Commitments of all of the Banks at such time;

 

"Total Loss" in relation to a Ship means:

 

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

 

(b)           the Compulsory Acquisition of such Ship; or

 

	
  

	
(c)

	
the hijacking, theft, piracy, condemnation, capture, seizure, arrest, detention or confiscation of such Ship (other than where the same amounts to the Compulsory Acquisition of such Ship) by a person (including any Government Entity, or persons acting or purporting to act on behalf of a Government Entity), unless such Ship be released and restored to the relevant Borrower from such hijacking, theft, piracy, condemnation, capture, seizure, arrest, detention or confiscation within thirty (30) days after the occurrence thereof;

 

"Transaction" has the meaning given to it in the Master Swap Agreement;

  

14

  

 

"Transfer Certificate" means a certificate substantially in the form set out in schedule 4;

 

"Transferee Bank" has the meaning given to it in clause 15.3; "Transferor Bank" has the meaning given to it in clause 15.3; "Trust Deed" means a trust deed dated 7 February 2012;

 

"Trust Property" means (a) the security, powers, rights, titles, benefits and interests (both present and future) constituted by and conferred on the Security Agent under or pursuant to the Security Documents (including, without limitation, the benefit of all covenants, undertakings, representations, warranties and obligations given, made or undertaken to the Security Agent in the Security Documents); (b) all moneys, property and other assets paid or transferred to or vested in the Security Agent or any agent of the Security Agent or any receiver or received or recovered by the Security Agent or any agent of the Security Agent or any receiver pursuant to, or in connection with, any of the Security Documents whether from any Security Party or any other person; and (c) all money, investments, property and other assets at any time representing or deriving from any of the foregoing, including all interest, income and other sums at any time received or receivable by the Security Agent or any agent of the Security Agent in respect of the same (or any part thereof); and

 

"Underlying Documents" means, together, the Management Agreements, the Contracts, the Initial Charters and any Charters and "Underlying Document" means any of them.

 

	
1.3

	
Headings

 

Clause headings and the table of contents are inserted for convenience of reference only and shall be ignored in the interpretation of this Agreement.

 

	
1.4

	
Construction of certain terms

 

In this Agreement, unless the context otherwise requires:

 

	
1.4.1

	
references to clauses and schedules are to be construed as references to clauses of, and schedules to, this Agreement and references to this Agreement include its schedules;

 

	
1.4.2

	
references to (or to any specified provision of) this Agreement or any other document shall be construed as references to this Agreement, that provision or that document as in force for the time being and as amended in accordance with terms thereof, or, as the case may be, with the agreement of the relevant parties;

 

	
1.4.3

	
references to a "regulation" include any present or future regulation, rule, directive, requirement, request or guideline (whether or not having the force of law) of any agency, authority, central bank or government department or any self-regulatory or other national or supra-national authority and, for the avoidance of doubt, shall include any Basel II Regulation or any Basel III Regulation;

 

	
1.4.4

	
words importing the plural shall include the singular and vice versa;

 

	
1.4.5

	
references to a time of day are to London time;

 

	
1.4.6

	
references to a person shall be construed as references to an individual, firm, company, corporation, unincorporated body of persons or any Government Entity;

 

  

15

  

 

	
1.4.7

	
"control" means, in relation to a body corporate:

          

	
  

	
(a)

	
the power (whether by way of ownership of shares, proxy, contract, agency or otherwise, directly or indirectly) to:

 

	
  

	
(i)

	
cast, or control the casting of, more than 50 per cent of the maximum number of votes that might be cast at a general meeting of such body corporate; or

 

	
  

	
(ii)

	
appoint or remove all, or the majority, of the directors or other equivalent officers of such body corporate; or

 

	
  

	
(iii)

	
give directions with respect to the operating and financial policies of such body corporate with which the directors or other equivalent officers of such body corporate are obliged to comply; or

 

	
  

	
(b)

	
the holding beneficially of more than 50 per cent of the issued share capital of such body corporate (excluding any part of that issued share capital that carries no right to participate beyond a specified amount in a distribution of either profits or capital);

 

	
1.4.8

	
two or more persons are "acting in concert" if, pursuant to an agreement or understanding (whether formal or informal), they actively co-operate, through the acquisition (directly or indirectly) of shares in the Corporate Guarantor by any of them, either directly or indirectly to obtain or consolidate control of the Corporate Guarantor;

 

	
1.4.9

	
references to a "guarantee" include references to an indemnity or other assurance against financial loss including, without limitation, an obligation to purchase assets or services as a consequence of a default by any other person to pay any Indebtedness and "guaranteed" shall be construed accordingly; and

 

	
1.4.10

	
references to any enactment shall be deemed to include references to such enactment as re-enacted, amended or extended.

 

	
1.5

	
Majority Banks

 

Where this Agreement provides for any matter to be determined by reference to the opinion of the Majority Banks or to be subject to the consent or request of the Majority Banks or for any action to be taken on the instructions in writing of the Majority Banks, such opinion, consent, request or instructions shall (as between the Banks) only be regarded as having been validly given or issued by the Majority Banks if all the Banks shall have received prior notice of the matter on which such opinion, consent, request or instructions are required to be obtained and the relevant majority of Banks shall have given or issued such opinion, consent, request or instructions but so that (as between the Borrowers and the Creditors) the Borrowers shall be entitled (and bound) to assume that such notice shall have been duly received by each Bank and that the relevant majority shall have been obtained to constitute Majority Banks whether or not this is in fact the case.

 

	
1.6

	
Banks' Commitment

 

For the purposes of the definition of "Majority Banks" in clause 1.2 and the relevant provisions of the Security Documents, references to the Commitment of a Bank shall, if the Total Commitment has, at any relevant time, been reduced to zero, be deemed to be a reference to the Commitment of that Bank immediately prior to such reduction to zero.

 

	
2

	
The Total Commitment and the Advances

 

	
2.1

	
Agreement to lend

 

The Banks, relying upon each of the representations and warranties in clause 7, agree to lend to the Borrowers, jointly and severally, in two (2) Advances and upon and subject to the terms of this Agreement, the principal sum of up to Twenty six million four hundred and fifty thousand

  

16

  

 

Dollars ($26,450,000). The obligation of each Bank under this Agreement shall be to contribute that proportion of each Advance which, as at the Drawdown Date of such Advance, such Bank's Commitment bears to the Total Commitment.

 

	
2.2

	
Obligations several

 

The obligations of the Banks under this Agreement are several according to their respective Commitments and/or Contributions; the failure of any Bank to perform such obligations or the failure of the Swap Provider to perform its obligations under the Master Swap Agreement shall not relieve any other Creditor or the Borrowers or either of them of any of their respective obligations or liabilities under this Agreement or, as the case may be, the Master Swap Agreement nor shall any Creditor be responsible for the obligations of any other Creditors (except for its own obligations, if any, as a Bank or as a Swap Provider) under this Agreement or the Master Swap Agreement, respectively.

 

	
2.3

	
Interests several

 

Notwithstanding any other term of this Agreement (but without prejudice to the provisions of this Agreement relating to or requiring action by the Majority Banks) the interests of the Creditors are several and the amount due to any Creditor is a separate and independent debt. Each Creditor shall have the right to protect and enforce its rights arising out of this Agreement and it shall not be necessary for any other Creditor to be joined as an additional party in any proceedings for this purpose.

 

	
2.4

	
Drawdown

 

Subject to the terms and conditions of this Agreement, each Advance shall be advanced on the relevant Drawdown Date to the Borrowers following receipt by the Agent from the Borrowers of a Drawdown Notice not later than 10:00 a.m. on the third Banking Day before the proposed Drawdown Date which shall be a Banking Day falling within the Drawdown Period. A Drawdown Notice (a) shall be effective on actual receipt by the Agent and (b) shall, subject as provided in clause 3.6.1, be irrevocable once given.

 

	
2.5

	
Timing and limitation of Advances

 

	
2.5.1

	
The aggregate amount of both Advances shall not exceed the Total Commitment.

 

	
2.5.2

	
The Jemo Advance shall not exceed Sixteen million one hundred and twenty five thousand Dollars ($16,125,000).

 

	
2.5.3

	
The Mandaringina Advance shall not exceed Ten million three hundred and twenty five thousand Dollars ($10,325,000).

 

2.5.4           Each Advance:

 

	
  

	
(a)

	
shall be applied in or towards payment to the relevant Seller of such part of the Contract Price for the Ship relevant to such Advance, which is payable on the Delivery Date for that Ship;

 

	
  

	
(b)

	
shall be drawn down only once the part of the Contract Price referred to in paragraph 2.5.4(a) above has become due and payable; and

 

	
  

	
(c)

	
shall be paid by the Banks to the relevant Seller directly, unless (i) the relevant Borrower has already paid such part of the Contract Price to the relevant Seller when it was due, in which case the relevant Advance (or part thereof) shall be advanced to the Borrowers, or (ii) the relevant Advance exceeds the portion of the Contract Price payable to the relevant Seller on the delivery of the relevant Ship under the relevant Contract, in which case a part of the Advance equal to such portion shall be paid to the relevant Seller and the balance of the Advance shall be advanced to the Borrowers.

  

17

  

 

	
2.6

	
Availability

 

Upon receipt of a Drawdown Notice complying with the terms of this Agreement the Agent shall promptly notify each Bank and, subject to the provisions of clause 9, on the Drawdown Date for the relevant Advance each of the Banks shall make available to the Agent its portion of such Advance for payment by the Agent in accordance with clause 6.2. The Borrowers acknowledge that payment of any Advance or part thereof to the relevant Seller or either Borrower in accordance with clause 6.2, shall satisfy the obligations of the Banks to lend such Advance (or the relevant part thereof) to the Borrowers.

 

	
2.7

	
Termination of Total Commitment

 

Any part of the Total Commitment which remains undrawn and uncancelled by the earlier of (a) the relevant Drawdown Date and (b) the end of the relevant Drawdown Period, shall thereupon be automatically cancelled.

 

	
2.8

	
Application of proceeds

 

Without prejudice to the Borrowers' obligations under clause 8.1.3, no Creditor shall have any responsibility for the application of the proceeds of the Loan or part thereof by the Borrowers or either of them.

 

	
2.9

	
Derivative transactions

 

	
2.9.1

	
If, at any time during the Security Period, the Borrowers wish to enter into interest rate swap or other derivative transactions with the Swap Provider for any purpose whatsoever, including for the benefit of the Group and/or for the purpose of hedging all or any part of their exposure under this Agreement to interest rate fluctuations, they shall advise the Swap Provider in writing.

 

	
2.9.2

	
Any such swap or other derivative transaction shall be concluded with the Swap Provider under the Master Swap Agreement provided however that no such swap or other derivative transaction shall be concluded unless the Swap Provider first agrees to it in writing. For the avoidance of doubt, other than the Swap Provider's agreement in writing referred to in the preceding sentence no prior approval is required by the Borrowers from any other Creditor before concluding any such swap or other derivative transaction. If and when any such swap or other derivative transaction has been concluded, it shall constitute a Designated Transaction, and the Borrowers shall sign a Confirmation with the Swap Provider and advise the Agent promptly after concluding any Designated Transaction.

 

	
3

	
Interest and Interest Periods

 

	
3.1

	
Normal interest rate

 

The Borrowers shall pay interest on each Advance in respect of each Interest Period relating thereto on each Interest Payment Date (or, in the case of Interest Periods of more than three (3) months, by instalments, the first instalment being due three (3) months from the commencement of the Interest Period and the subsequent instalments at intervals of three (3) months thereof or, if shorter, the period from the date of the preceding instalment until the Interest Payment Date relative to such Interest Period) at the rate per annum determined by the Agent to be the aggregate of (a) the Margin, (b) LIBOR for such Interest Period and (c) Mandatory Cost (if any).

 

	
3.2

	
Selection of Interest Periods

 

The Borrowers may by notice received by the Agent not later than 10:00 a.m. on the third Banking Day before the beginning of each Interest Period specify whether such Interest Period shall have a duration of one (1) month, two (2) months, three (3) months, six (6) months or such other period (subject to availability) as the Borrowers may select and the Agent (acting on the instructions of all Banks) may agree.

  

18

  

 

	
3.3

	
Determination of Interest Periods

 

Every Interest Period shall be of the duration required by, or specified by the Borrowers pursuant to, clause 3.2 but so that:

 

	
3.3.1

	
the first Interest Period in respect of each Advance shall commence on the Drawdown Date for such Advance and each subsequent Interest Period for such Advance shall commence on the last day of the previous Interest Period for such Advance;

 

	
3.3.2

	
if any Interest Period for an Advance would otherwise overrun a Repayment Date for such Advance, then, in the case of the last Repayment Date for such Advance, such Interest Period shall end on such Repayment Date, and in the case of any other Repayment Date or Repayment Dates for such Advance, the relevant Advance shall be divided into parts so that there is one part in the amount of the repayment instalment or instalments due on each Repayment Date for such Advance falling during that Interest Period and having an Interest Period ending on the relevant Repayment Date and another part in the amount of the balance of the relevant Advance having an Interest Period ascertained in accordance with clause 3.2 and the other provisions of this clause 3.3; and

 

	
3.3.3

	
if the Borrowers fail to specify the duration of an Interest Period in accordance with the provisions of clause 3.2 and this clause 3.3 such Interest Period shall have a duration of three (3) months or such other period as shall comply with this clause 3.3.

 

	
3.4

	
Default interest

 

If the Borrowers or either of them fail to pay any sum (including, without limitation, any sum payable pursuant to this clause 3.4) on its due date for payment under any of the Security Documents (other than the Master Swap Agreement), the Borrowers shall pay interest on such sum on demand from the due date up to the date of actual payment (as well after as before judgment) at a rate determined by the Agent pursuant to this clause 3.4. The period beginning on such due date and ending on such date of payment shall be divided into successive periods of not more than three (3) months as selected by the Agent each of which (other than the first, which shall commence on such due date) shall commence on the last day of the preceding such period. The rate of interest applicable to each such period shall be the aggregate (as determined by the Agent) of (a) two per cent (2%) per annum, (b) the Margin, (c) LIBOR for such period and (d) Mandatory Cost, if any. Such interest shall be due and payable on the last day of each such period as determined by the Agent and each such day shall, for the purposes of this Agreement, be treated as an Interest Payment Date, provided that if such unpaid sum is an amount of principal which became due and payable by reason of a declaration by the Agent under clause 10.2.2 or a prepayment pursuant to clauses 4.3, 8.2.1(a) or 12.1, on a date other than an Interest Payment Date relating thereto, the first such period selected by the Agent shall be of a duration equal to the period between the due date of such principal sum and such Interest Payment Date and interest shall be payable on such principal sum during such period at a rate of two per cent (2%) above the rate applicable thereto immediately before it shall have become so due and payable. If, for the reasons specified in clause 3.6.1, the Agent is unable to determine a rate in accordance with the foregoing provisions of this clause 3.4, each Bank shall promptly notify the Agent of the cost of funds to such Bank, and interest on any sum not paid on its due date for payment shall be calculated at a rate determined by the Agent to be two per cent (2%) per annum above the aggregate of the Margin and the cost of funds to such Bank (including Mandatory Cost, if any).

 

	
3.5

	
Notification of Interest Periods and interest rate

 

The Agent shall notify the Borrowers and the Banks promptly of the duration of each Interest Period and of each rate of interest (or, as the case may be default interest) determined by it under this clause 3.

  

19

  

 

	
3.6

	
Market disruption; non-availability

 

	
3.6.1

	
If and whenever, at any time prior to the commencement of any Interest Period:

 

	
  

	
(a)

	
the Agent shall have determined (which determination shall, in the absence of manifest error, be conclusive) that adequate and fair means do not exist for ascertaining LIBOR during such Interest Period; or

 

	
  

	
(b)

	
the Reference Bank does not supply the Agent with a quotation for the purposes of calculating LIBOR (where such a quotation is required having regard to paragraph (b) of the definition of "LIBOR" in clause 1.2); or

 

	
  

	
(c)

	
the Agent shall have received notification from Banks whose aggregate Contributions are not less than one third (1/3rd) of the Loan or (prior to the first Drawdown Date) whose aggregate Commitments are not less than one third (1/3rd) of the Total Commitment), that deposits in Dollars are not available to such Banks in the London Interbank Market in the ordinary course of business in sufficient amounts to fund their Commitments or their Contributions for such Interest Period, or that LIBOR does not accurately reflect the cost to such Banks of obtaining such deposits,

 

the Agent shall forthwith give notice (a "Determination Notice") thereof to the Borrowers and to each of the Banks and the Swap Provider. A Determination Notice shall contain particulars of the relevant circumstances giving rise to its issue. After the giving of any Determination Notice the undrawn amount of the Total Commitment shall not be borrowed until notice to the contrary is given to the Borrowers by the Agent.

 

	
3.6.2

	
During the period of ten (10) days after any Determination Notice has been given by the Agent under clause 3.6.1, each Bank shall certify an alternative basis (the "Alternative Basis") for funding its Commitment and/or for maintaining its Contribution. The Alternative Basis may at the relevant Bank's sole and unfettered discretion (without limitation) include alternative interest periods, alternative currencies or alternative rates of interest but shall include a margin above the cost of funds to such Bank (including Mandatory Cost, if any) equivalent to the Margin. The Agent shall calculate the arithmetic mean of the Alternative Bases provided by the relevant Banks (the "Substitute Basis") and certify the same to the Borrowers, the Banks and the Swap Provider. The Substitute Basis so certified shall be binding upon the Borrowers and shall take effect in accordance with its terms from the date specified in the Determination Notice until such time as the Agent notifies the Borrowers that none of the circumstances specified in clause 3.6.1 continues to exist whereupon the normal interest rate fixing provisions of this Agreement shall apply.

 

	
4

	
Repayment and prepayment

 

	
4.1

	
Repayment

 

	
4.1.1

	
The Borrowers shall repay the Jemo Advance by twenty (20) repayment instalments, one such instalment to be repaid on each of the Repayment Dates for such Advance. Subject to the provisions of this Agreement, the amount of each of the first to the nineteenth instalments (inclusive) for the Jemo Advance shall be Two hundred and fifty two thousand Dollars ($252,000) and the amount of the twentieth and final instalment for the Jemo Advance shall be Eleven million three hundred and thirty seven thousand million Dollars ($11,337,000) (comprising a repayment instalment of Two hundred and fifty two thousand Dollars ($252,000) and a balloon payment of Eleven million eighty five thousand Dollars ($11,085,000)).

 

	
4.1.2

	
The Borrowers shall repay the Mandaringina Advance by twenty (20) repayment instalments, one such instalment to be repaid on each of the Repayment Dates for such Advance. Subject to the provisions of this Agreement the amount of each of the first to the nineteenth instalments (inclusive) for the Mandaringina Advance shall be Two hundred and thirty four thousand six hundred and sixty Dollars ($234,660) and the amount of the twentieth and final instalment for the Mandaringina Advance shall be Five million eight hundred and sixty six

  

20

  

thousand four hundred and sixty Dollars ($5,866,460) (comprising a repayment instalment of Two hundred and thirty four thousand six hundred and sixty Dollars ($234,660) and a balloon payment of Five million six hundred and thirty one thousand eight hundred Dollars ($5,631,800)).

 

	
4.1.3

	
If the Total Commitment in respect of any Advance or part thereof is not drawn down in full, the amount of each repayment instalment in respect of such Advance (including the relevant balloon payment) referred to above shall be reduced proportionately.

 

	
4.2

	
Voluntary prepayment

 

The Borrowers may prepay any Advance in whole or in part (being Two hundred and fifty thousand Dollars ($250,000) or any larger sum which is an integral multiple of Two hundred and fifty thousand Dollars ($250,000)), in each case, on any Interest Payment Date relating to the Advance to be repaid, without premium or penalty but subject to clause 11.1 and the other provisions of this clause 4.

 

	
4.3

	
Mandatory prepayment on Total Loss or sale

 

	
4.3.1

	
Before drawdown

 

On a Ship becoming a Total Loss (or suffering damage or being involved in an incident which in the opinion of the Agent may result in such Ship being subsequently determined to be a Total Loss) before the Advance in respect of such Ship is drawn down, the obligations of the Banks to make the Advance for such Ship available shall immediately cease and the Total Commitment shall be reduced by the amount of the Advance for such Ship.

 

	
4.3.2

	
Thereafter

 

On the date falling one hundred and eighty (180) days after that on which a Mortgaged Ship became a Total Loss or, if earlier, on the date upon which the insurance proceeds in respect of such Total Loss are, or Requisition Compensation is, received by the relevant Borrower (or the Security Agent or any other Creditors pursuant to the relevant Ship Security Documents), or immediately prior to the completion of the sale of a Mortgaged Ship by the relevant Borrower to any person, the Borrowers shall prepay to the Agent the outstanding Advance relevant to that Ship in full.

 

	
4.3.3

	
Interpretation

 

For the purposes of this Agreement and the other Security Documents, a Total Loss in respect of a Ship shall be deemed to have occurred:

 

	
  

	
(a)

	
in the case of an actual total loss of a Ship, on the actual date and at the time such Ship was lost or, if such date is not known, on the date on which such Ship was last reported;

 

	
  

	
(b)

	
in the case of a constructive total loss of a Ship, upon the date and at the time notice of abandonment of such Ship is given to the insurers of such Ship for the time being;

 

	
  

	
(c)

	
in the case of a compromised or arranged total loss of a Ship, on the date upon which a binding agreement as to such compromised or arranged total loss has been entered into by the insurers of such Ship;

 

	
  

	
(d)

	
in the case of Compulsory Acquisition of a Ship, on the date upon which the relevant requisition of title or other compulsory acquisition of such Ship occurs; and

 

	
  

	
(e)

	
in the case of hijacking, theft, piracy, condemnation, capture, seizure, arrest, detention or confiscation of a Ship (other than where the same amounts to Compulsory Acquisition of such Ship) by any person (including a Government Entity, or persons purporting to act on behalf of a Government Entity), which deprives the relevant Borrower of the use of such Ship for more than thirty (30) days, upon the expiry of the period of thirty (30) days

  

21

  

after the date upon which the relevant hijacking, theft, piracy, condemnation, capture, seizure, arrest, detention or confiscation occurred.

 

	
4.4

	
Amounts payable on prepayment

 

Any prepayment of all or part of the Loan under this Agreement shall be made together with accrued interest on the amount to be prepaid to the date of such prepayment, any additional amount payable under clause 6.6 or clause 12.2 and all other sums payable by the Borrowers under this Agreement or any of the other Security Documents including, without limitation, any accrued commitment commission and any amounts payable under clause 11.

 

	
4.5

	
Notice of prepayment; reduction of repayment instalments - re-borrowing

 

	
4.5.1

	
No prepayment may be effected under clause 4.2 unless the Borrowers shall have given the Agent at least five (5) Banking Days' prior written notice of their intention to make such prepayment. Every notice of prepayment shall be effective only on actual receipt by the Agent, shall be irrevocable, shall specify the Advance and the amount to be prepaid and shall oblige the Borrowers to make such prepayment on the date specified.

 

	
4.5.2

	
Any amount prepaid pursuant to clause 8.2.1 shall be applied against both Advances proportionately as between them. Any amount prepaid pursuant to clause 4.2 or clause 8.2.1(a) in respect of an Advance shall be applied in reducing the repayment instalments of the relevant Advance under clause 4.1 (including the relevant balloon payment) proportionately.

 

	
4.5.3

	
No amount prepaid under this Agreement may be reborrowed.

 

	
4.5.4

	
The Borrowers may not prepay the Loan or any part thereof save as expressly provided in this Agreement.

 

	
4.6

	
Unwinding of Designated Transactions

 

On or prior to any repayment or prepayment of all or part of the Loan (including, without limitation, pursuant to clauses 4.2, 4.3 or 8.2.1(a) or any other provision of this Agreement), the Borrowers shall, upon the request of the Agent (acting on the instructions of the Banks), wholly or partially reverse, offset, unwind, cancel, close out, net out or otherwise terminate one or more of the continuing Designated Transactions at that time.

 

	
5

	
Fees, commitment commission and expenses

 

	
5.1

	
Fees

 

The Borrowers shall pay to the Agent:

 

	
5.1.1

	
for the account of the Arranger, an arrangement fee of such amount and payable at such time as specified in the Fee Letter and the Supplemental Agreement;

 

	
5.1.2

	
for the account of each Bank (i) if the Drawdown Date of the Jemo Advance occurs by 28 February 2012, on the day falling one day before the Drawdown Date or (ii) if the Drawdown Date of the Jemo Advance does not occur by 28 February 2012, on 28 February 2012 and on the last day of each calendar month thereafter, until the earlier of (a) the Drawdown Date of the Jemo Advance and (b) the Termination Date of the Jemo Advance, and on the earlier of such dates,

 

commitment commission computed from 22 December 2011 (in the case of the first payment of commission) and from the due date of the preceding payment of commission (in the case of each subsequent payment) at the rate of zero point five zero per cent (0.50%) per annum on the daily undrawn amount of such Bank's Commitment in respect of the Jemo Advance.

  

22

  

 

The fees and commissions referred to in this clause 5.1 shall be payable by the Borrowers to the Agent, whether or not any part of the Total Commitment is ever advanced and shall be, in each case, non-refundable.

 

	
5.2

	
Expenses

 

The Borrowers shall pay to the Agent on a full indemnity basis on demand all expenses (including legal, printing and out-of-pocket expenses) incurred by any Creditor:

 

	
5.2.1

	
in connection with the negotiation, preparation, execution and, where relevant, registration of the Security Documents and of any amendment or extension of or the granting of any waiver or consent under, any of the Security Documents and the syndication of the Loan; and

 

	
5.2.2

	
in contemplation of, or otherwise in connection with, the enforcement of, or preservation of any rights under, any of the Security Documents, or otherwise in respect of the moneys owing under any of the Security Documents,

 

together with interest at the rate referred to in clause 3.4 from the date on which such expenses were incurred to the date of payment (as well after as before judgment).

 

	
5.3

	
Value added Tax

 

All fees and expenses payable pursuant to this clause 5 and/or pursuant to the Security Documents shall be paid together with value added tax or any similar tax (if any) properly chargeable thereon. Any value added tax chargeable in respect of any services supplied by the Creditors or any of them under this Agreement shall, on delivery of the value added tax invoice, be paid in addition to any sum agreed to be paid hereunder.

 

	
5.4

	
Stamp and other duties

 

The Borrowers shall pay all stamp, documentary, registration or other like duties or taxes (including any duties or taxes payable by, or assessed on, the Creditors or any of them) imposed on or in connection with any of the Underlying Documents, the Security Documents or the Loan and shall indemnify the Creditors or any of them against any liability arising by reason of any delay or omission by the Borrowers to pay such duties or taxes.

 

	
6

	
Payments and taxes; accounts and calculations

 

	
6.1

	
No set-off or counterclaim

 

The Borrowers acknowledge that in performing their respective obligations under this Agreement, the Banks will be incurring liabilities to third parties in relation to the funding of amounts to the Borrowers, such liabilities matching the liabilities of the Borrowers to the Banks and that it is reasonable for the Banks to be entitled to receive payments from the Borrowers gross on the due date in order that the Banks are put in a position to perform their matching obligations to the relevant third parties. Accordingly, all payments to be made by the Borrowers or either of them under any of the Security Documents shall be made in full, without any set-off or counterclaim whatsoever and, subject as provided in clause 6.6, free and clear of any deductions or withholdings, in Dollars on the due date to the account of the Agent at such bank and in such place as the Agent may from time to time specify for this purpose. Save as otherwise provided in this Agreement or any relevant Security Documents, such payments shall be for the account of all the Banks and the Agent or, as the case may be, the Security Agent shall forthwith distribute such payments in like funds as are received by the Agent or, as the case may be, the Security Agent to the Banks rateably in accordance with their respective Commitment or (following the first drawdown) Contribution, as the case may be.

 

	
6.2

	
Payment by the Banks

 

All sums to be advanced by the Banks to the Borrowers or either of them under this Agreement in respect of the Loan shall be remitted in Dollars on the Drawdown Date for the relevant

  

23

  

Advance to the account of the Agent with such bank as the Agent may have notified to the Banks and shall be paid by the Agent on such date in like funds as are received by the Agent to the account specified in the Drawdown Notice for such Advance.

 

	
6.3

	
Non-Banking Days

 

When any payment under any of the Security Documents would otherwise be due on a day which is not a Banking Day, the due date for payment shall be extended to the next following Banking Day unless such Banking Day falls in the next calendar month in which case payment shall be made on the immediately preceding Banking Day.

 

	
6.4

	
Calculations

 

All interest and other payments of an annual nature under any of the Security Documents shall accrue from day to day and be calculated on the basis of actual days elapsed and a three hundred and sixty (360) day year.

 

	
6.5

	
Certificates conclusive

 

Any certificate or determination of the Agent or the Security Agent or any Bank as to any rate of interest or any other amount pursuant to and for the purposes of any of the Security Documents shall, in the absence of manifest error, be conclusive and binding on the Borrowers and (in the case of a certificate or determination by the Agent or the Security Agent) on the other Creditors.

 

	
6.6

	
Grossing-up for Taxes

 

	
6.6.1

	
If at any time the Borrowers are required to make any deduction or withholding in respect of Taxes from any payment due under any of the Security Documents for the account of any Creditor (or if the Agent or, as the case may be, the Security Agent is required to make any such deduction or withholding from a payment to a Bank), the sum due from the Borrowers in respect of such payment shall be increased to the extent necessary to ensure that, after the making of such deduction or withholding, the relevant Creditor receives on the due date for such payment (and retains, free from any liability in respect of such deduction or withholding), a net sum equal to the sum which it would have received had no such deduction or withholding been required to be made and the Borrowers shall indemnify each Creditor against any losses or costs incurred by it by reason of any failure of the Borrowers to make any such deduction or withholding or by reason of any increased payment not being made on the due date for such payment. The Borrowers shall promptly deliver to the Agent any receipts, certificates or other proof evidencing the amounts (if any) paid or payable in respect of any deduction or withholding as aforesaid.

 

	
6.6.2

	
For the avoidance of doubt, clause 6.6.1 does not apply in respect of sums due from the Borrowers to the Swap Provider under or in connection with the Master Swap Agreement as to which sums the provisions of section 2(d) (Deduction or Withholding for Tax) of the Master Swap Agreement shall apply.

 

	
6.7

	
Loan account

 

Each Bank shall maintain, in accordance with its usual practice, an account or accounts evidencing the amounts from time to time lent by, owing to and paid to it under the Security Documents. The Agent and the Security Agent shall maintain a control account or accounts (which shall be the "Account current" referred to in the Jemo Mortgage) showing the Loan, interest and other sums owing and/or payable by the Borrowers under the Security Documents. Each such control account shall, in the absence of manifest error, be conclusive as to the amount from time to time owing by the Borrowers under the Security Documents.

 

	
6.8

	
Agent may assume receipt

Where any sum is to be paid under this Agreement to the Agent for the account of another person, the Agent may assume that the payment will be made when due and the Agent may (but

  

24

  

 

shall not be obliged to) make such sum available to the person so entitled. If it proves to be the case that such payment was not made to the Agent, then the person to whom such sum was so made available shall on request refund such sum to the Agent together with interest thereon sufficient to compensate the Agent for the cost of making available such sum up to the date of such repayment and the person by whom such sum was payable shall indemnify the Agent for any and all loss or expense which the Agent may sustain or incur as a consequence of such sum not having been paid on its due date.

 

	
6.9

	
Partial payments

 

If, on any date on which a payment is due to be made by the Borrowers under any of the Security Documents, the amount received by the Agent from the Borrowers falls short of the total amount of the payment due to be made by the Borrowers on such date then, without prejudice to any rights or remedies available to the Creditors or any of them under any of the Security Documents, the Agent shall apply the amount actually received from the Borrowers in or towards discharge of the obligations of the Borrowers under the Security Documents in the following order, notwithstanding any appropriation made, or purported to be made, by the Borrowers:

 

	
6.9.1

	
firstly, in or towards payment, on a pro-rata basis, of any unpaid costs, expenses and fees owing to the Arranger, the Agent or the Security Agent under, or in relation to, the Security Documents;

 

	
6.9.2

	
secondly, in or towards payment, on a pro-rata basis, of any unpaid costs, expenses and fees owing to the Banks or the Account Bank under or in relation to, the Security Documents;

 

	
6.9.3

	
thirdly, in or towards payment to the Banks, on a pro-rata basis, of any accrued interest which shall have become due under any of the Security Documents (other than the Master Swap Agreement) but remains unpaid;

 

	
6.9.4

	
fourthly, in or towards payment to the Banks, on a pro-rata basis, for any loss suffered by reason of any such payment in respect of principal not being effected on an Interest Payment Date relating to the part of the Loan prepaid and which amounts are so payable under this Agreement;

 

	
6.9.5

	
fifthly, in or towards payment to the Banks, on a pro rata basis, of any principal in respect of the Loan which shall have become due but remains unpaid;

 

	
6.9.6

	
sixthly, in or towards payment to the Swap Provider of any sums owing to it under the Master Swap Agreement; and

 

	
6.9.7

	
seventhly, towards payment to the relevant person of any other sum which shall have become due under any of the Security Documents but remains unpaid (and, if more than one such sum so remains unpaid, on a pro-rata basis).

 

The order of application set out in clauses 6.9.3 to 6.9.5 may be varied by the Agent if the Banks so direct, without any reference to, or consent or approval from the Borrowers.

 

	
7

	
Representations and warranties

 

	
7.1

	
Continuing representations and warranties

 

The Borrowers jointly and severally represent and warrant to each Creditor that:

 

	
7.1.1

	
Due incorporation

 

the Borrowers and each of the other Security Parties are duly incorporated and validly existing in good standing under the laws of their respective countries of incorporation as limited liability companies or (as the case may be) corporations, and have power to carry on

  

25

  

their respective businesses as they are now being conducted and to own their respective property and other assets;

 

	
7.1.2

	
Corporate power

 

each of the Borrowers has power to execute, deliver and perform its obligations under the Underlying Documents and the Borrowers' Security Documents to which it is or is to be a party and to borrow the Total Commitment and each of the other Security Parties has power to execute and deliver and perform its obligations under the Security Documents and the Underlying Documents to which it is or is to be a party; all necessary corporate, shareholder and other action has been taken to authorise the execution, delivery and performance of the same and no limitation on the powers of either Borrower to borrow will be exceeded as a result of borrowing the Loan or entering into the Master Swap Agreement;

 

	
7.1.3

	
Binding obligations

 

the Underlying Documents and the Security Documents constitute or will, when executed, constitute valid and legally binding obligations of the relevant Security Parties enforceable in accordance with their respective terms;

 

	
7.1.4

	
No conflict with other obligations

 

the execution and delivery of, the performance of their obligations under, and compliance with the provisions of, the Underlying Documents and the Security Documents by the relevant Security Parties will not:

 

	
  

	
(i)

	
contravene any existing applicable law, statute, rule or regulation or any judgment, decree or permit to which either of the Borrowers or any other Security Party is subject;

 

	
  

	
(ii)

	
conflict with, or result in any breach of any of the terms of, or constitute a default under, any agreement or other instrument to which either of the Borrowers or any other Security Party is a party or is subject or by which it or any of its property is bound;

 

	
  

	
(iii)

	
contravene or conflict with any provision of the constitutional documents of either of the Borrowers or any other Security Party or

 

	
  

	
(iv)

	
result in the creation or imposition of or oblige either of the Borrowers or any member of the Group or any other Security Party to create any Encumbrance (other than a Permitted Encumbrance) on any of the undertakings, assets, rights or revenues of either of the Borrowers or any member of the Group or any other Security Party;

 

	
7.1.5

	
No litigation

 

no litigation, arbitration, investigation or proceeding (administrative or otherwise) is taking place, pending or, to the knowledge of the officers of either of the Borrowers, threatened against either of the Borrowers or any member of the Group or any other Security Party which could have a Material Adverse Effect;

 

	
7.1.6

	
No filings required

 

save for the registration of the Mortgages under the laws of the Flag State through the relevant Registries, it is not necessary to ensure the legality, validity, enforceability or admissibility in evidence of any of the Underlying Documents or the Security Documents that they or any other instrument be notarised, filed, recorded, registered or enrolled in any court, public office or elsewhere in any Relevant Jurisdiction or that any stamp, registration or similar tax or charge be paid in any Relevant Jurisdiction on or in relation to any of the Underlying Documents or the Security Documents and each of the Underlying Documents

  

26

  

and the Security Documents is in proper form for its enforcement in the courts of each Relevant Jurisdiction;

 

	
7.1.7

	
Choice of law

 

the choice of English law to govern the Underlying Documents and the Security Documents (other than the Mortgages) and the choice of Bahamian law to govern the Jemo Mortgage and the choice of Marshall Islands law to govern the Mandaringina Mortgage, and the submissions by the Security Parties therein to the non-exclusive jurisdiction of the English courts are valid and binding;

 

	
7.1.8

	
No immunity

 

neither of the Borrowers nor any other Security Party nor any of their respective assets is entitled to immunity on the grounds of sovereignty or otherwise from any legal action or proceeding (which shall include, without limitation, suit, attachment prior to judgement, execution or other enforcement);

 

	
7.1.9

	
Financial statements correct and complete

 

the audited consolidated financial statements of the Group in respect of the financial year ended on 31 December 2010 as delivered to the Agent and/or the Arranger have been prepared in accordance with the Applicable Accounting Principles which have been consistently applied and present fairly and accurately the consolidated financial position of the Group as at such date and the consolidated results of the operations of the Group for the financial year ended on such date and, as at such date, neither the Group nor any member of the Group had any significant liabilities (contingent or otherwise) or any unrealised or anticipated losses which are not disclosed by, or reserved against, or provided for in such financial statements;

 

	
7.1.10

	
Consents obtained

 

every consent, authorisation, licence or approval of, or registration with or declaration to, governmental or public bodies or authorities or courts required by any Security Party to authorise, or required by any Security Party in connection with, the execution, delivery, validity, enforceability or admissibility in evidence of each of the Underlying Documents and each of the Security Documents to which it is a party or the performance by each Security Party of its obligations under the Underlying Documents and the Security Documents to which it is a party, has been obtained or made and is in full force and effect and there has been no default in the observance of any of the conditions or restrictions (if any) imposed in, or in connection with, any of the same;

 

	
7.1.11

	
Shareholdings

 

	
  

	
(a)

	
each of the Borrowers and the Manager is a wholly-owned direct Subsidiary of the Corporate Guarantor; and

 

	
  

	
(b)

	
no less than 18% of the issued share capital and of the issued voting share capital of the Corporate Guarantor is ultimately beneficially owned by Permitted Holders;

 

	
7.1.12

	
Compliance with laws and regulations

 

each of the Borrowers, the Corporate Guarantor and the Manager is in compliance with the terms and conditions of all laws, regulations, agreements, licences and concessions material to the carrying on of its business (including in relation to Taxation);

  

27

  

 

	
7.1.13

	
No Material Adverse Effect

 

no events, conditions, facts or circumstances exist or have arisen or occurred since 31 December 2010, which have had or could reasonably be expected to have a Material Adverse Effect;

 

	
7.1.14

	
Borrowers' own account

 

in relation to the borrowing by the Borrowers of the Loan or any part thereof, the performance and discharge of its obligations and liabilities under the Security Documents and the transactions and other arrangements effected or contemplated by this Agreement, each of the Borrowers is acting for its own account and that the foregoing will not involve or lead to a contravention of any law, official requirement or other regulatory measure or procedure which has been implemented to combat "money laundering" (as defined in Article 1 of the Directive (91/308/EEC) of the Council of the European Communities (as amended)); and

 

	
7.1.15

	
Solvency

 

	
  

	
(a)

	
none of the Borrowers nor any other Relevant Party is unable, or admits or has admitted its inability, to pay its debts or has suspended making payments on any of its debts;

 

	
  

	
(b)

	
none of the Borrowers nor any other Relevant Party by reason of actual or anticipated financial difficulties has commenced, or intends to commence, negotiations with one or more of its creditors with a view to rescheduling any of its Indebtedness;

 

	
  

	
(c)

	
the value of the assets of the Borrowers and the other Relevant Parties is not less than their respective liabilities (taking into account contingent and prospective liabilities); and

 

	
  

	
(d)

	
no moratorium has been, or may, in the reasonably foreseeable future be, declared in respect of any Indebtedness of the Borrowers or any other Relevant Party.

 

	
7.2

	
Initial representations and warranties

 

The Borrowers jointly and severally further represent and warrant to each Creditor that:

 

	
7.2.1

	
Pari passu and subordinated indebtedness

 

	
  

	
(a)

	
the obligations of each Borrower under this Agreement and the Master Swap Agreement and the obligations of the Corporate Guarantor under the Corporate Guarantee are direct, general and unconditional obligations of such Borrower and the Corporate Guarantor, respectively, and rank at least pari passu with all other present and future unsecured and unsubordinated Indebtedness of such Borrower with the exception of any obligations which are mandatorily preferred by law and not by contract;

 

	
  

	
(b)

	
any Indebtedness of the Borrowers or the Corporate Guarantor owing to any of its respective shareholders or other members of the Group is subordinated in all respects to the Borrowers' obligations under this Agreement and the Master Swap Agreement (in the case of the Borrowers) and to the Corporate Guarantor's obligations under the Corporate Guarantee (in the case of the Corporate Guarantor);

 

	
7.2.2

	
No default under other Indebtedness

 

none of the Security Parties is (nor would with the giving of notice or lapse of time or the satisfaction of any other condition or combination thereof be) in breach of or in default under any agreement relating to Indebtedness to which it is a party or by which it may be bound;

 

	
7.2.3

	
Information - full disclosure

 

the information, exhibits and reports furnished by or on behalf of any Security Party to the Agent and/or the Arranger in connection with the negotiation and preparation of the Security

 

  

28

  

 

Documents are true and accurate in all material respects and not misleading and all expressions of opinions contained therein genuinely reflect the opinions of the directors and the senior management of the Borrowers and the Corporate Guarantor and are based on reasonable assumptions, do not omit material facts and all reasonable enquiries have been made to verify the facts and statements contained therein; there are no other facts the omission of which would make any fact or statement therein misleading;

 

	
7.2.4

	
No withholding Taxes

 

no Taxes are imposed by withholding or otherwise on any payment to be made by any Security Party under the Underlying Documents or the Security Documents or are imposed on or by virtue of the execution or delivery by the Security Parties of the Underlying Documents or the Security Documents or any other document or instrument to be executed or delivered under any of the Security Documents;

 

	
7.2.5

	
No Default

 

no Default has occurred and is continuing;

 

	
7.2.6

	
The Ships

 

each Ship will, on the Drawdown Date of the Advance relevant to such Ship, be:

 

	
  

	
(a)

	
in the absolute ownership of the relevant Borrower who will, on and after such Drawdown Date, be the sole, legal and beneficial owner of such Ship;

 

	
  

	
(b)

	
registered in the name of the relevant Borrower under the laws and flag of the relevant Flag State through the relevant Registry;

 

	
  

	
(c)

	
operationally seaworthy and in every way fit for service; and

 

	
  

	
(d)

	
classed with the relevant Classification free of all requirements and recommendations from the relevant Classification Society;

 

	
7.2.7

	
Ships' employment

       

save for the Initial Charters, neither Ship is nor will, on or before the Drawdown Date of the Advance relevant to such Ship, be subject to any charter or contract or to any agreement to enter into any charter or contract which, if entered into after the date of the relevant Mortgage, would have required the consent of the Agent or, as the context may require, the Security Agent or the other Creditors and, on the Drawdown Date of the Advance relevant to such Ship, there will not be any agreement or arrangement whereby the Earnings of such Ship may be shared with any other person;

 

	
7.2.8

	
Freedom from Encumbrances

 

neither of the Ships, nor its Earnings, Insurances or Requisition Compensation nor the Operating Account for such Ship nor any other properties or rights which are, or are to be, the subject of any of the Security Documents nor any part thereof will be, on the Drawdown Date of the Advance relevant to such Ship, subject to any Encumbrance other than the Permitted Encumbrances;

 

	
7.2.9

	
Compliance with Environmental Laws and Approvals

 

           except as may already have been disclosed by the Borrowers in writing to, and acknowledged in writing by, the Agent and/or the Arranger:

 

	
  

	
(a)

	
the Borrowers and the other Relevant Parties and, to the best of the Borrowers' knowledge and belief (having made due enquiry), any of their respective Environmental Affiliates have complied with the provisions of all Environmental Laws;

  

29

  

	
  

	
(b)

	
the Borrowers and the other Relevant Parties and, to the best of the Borrowers' knowledge and belief (having made due enquiry), any of their respective Environmental Affiliates have obtained all Environmental Approvals and is in compliance with all such Environmental Approvals; and

 

	
  

	
(c)

	
neither the Borrowers nor any other Relevant Party nor, to the best of the Borrowers' knowledge and belief (having made due enquiry), any of their respective Environmental Affiliates have received notice of any Environmental Claim that the Borrowers or any other Relevant Party or any such Environmental Affiliate is not in compliance with any Environmental Law or any Environmental Approval;

 

	
7.2.10

	
No Environmental Claims

                    

except as may already have been disclosed by the Borrowers in writing to, and acknowledged in writing by, the Agent and/or the Arranger, there is no Environmental Claim pending or, to the best of the Borrowers' knowledge and belief (having made due enquiry), threatened against either of the Borrowers or either of the Ships or any other Relevant Party or any other Relevant Ship or, to the best of the Borrowers' knowledge and belief (having made due enquiry), any of their respective Environmental Affiliates;

 

	
7.2.11

	
No potential Environmental Claims

                  

except as may already have been disclosed by the Borrowers in writing to, and acknowledged in writing by, the Agent and/or the Arranger, there has been no emission, spill, release or discharge of a Pollutant from either of the Ships or any other Relevant Ship owned by, managed or crewed by or chartered to either of the Borrowers nor, to the best of the Borrowers' knowledge and belief (having made due enquiry), from any Relevant Ship owned, managed or crewed by or chartered to any other Relevant Party which could give rise to an Environmental Claim;

 

 

	
7.2.12

	
Copies true and complete

               

the copies of the Underlying Documents delivered or to be delivered to the Agent pursuant to clause 9.1 are, or will when delivered be, true and complete copies of such documents; such documents constitute valid and binding obligations of the parties thereto enforceable in accordance with their respective terms and there have been no amendments or variations thereof or defaults thereunder;

 

 

	
7.2.13

	
DOC and SMC

                    

on the Drawdown Date of the Advance relevant to a Ship, the Operator will have a DOC for itself and an SMC in respect of such Ship; and

 

 

	
7.2.14

	
ISPS Code

 

on the Drawdown Date of the Advance relevant to a Ship, the Borrower owning such Ship shall have a valid and current ISSC in respect of such Ship and such Ship shall be in compliance with the ISPS Code.

 

7.3           Repetition of representations and warranties

 

On and as of each Drawdown Date and (except in relation to the representations and warranties in clauses 7.1.11 and 7.2) on each Interest Payment Date, the Borrowers shall:

 

	
  

	
(a)

	
be deemed to repeat the representations and warranties in clauses 7.1 and 7.2 as if made with reference to the facts and circumstances existing on such day; and

 

	
  

	
(b)

	
be deemed to further represent and warrant to each of the Creditors that the then latest audited financial statements delivered to the Agent and/or the Security Agent by the Borrowers under clause 8.1.5 of this Agreement and clause 5.1.4 of the Corporate

  

30

  

Guarantee have been prepared in accordance with the Applicable Accounting Principles which have been consistently applied and present fairly and accurately the consolidated financial position of the Group as at the end of the financial period to which the same relate and the consolidated results of the operations of the Group for the financial period to which the same relate and, as at the end of such financial period, neither the Borrowers nor the Corporate Guarantor nor any other member of the Group, nor the Group had any significant liabilities (contingent or otherwise) or any unrealised or anticipated losses which are not disclosed by, or reserved against or provided for in, such financial statements.

 

	
8

	
Undertakings

 

	
8.1

	
General

 

The Borrowers jointly and severally undertake with each Creditor that, from the date of this Agreement and so long as any moneys are owing under any of the Security Documents and while all or any part of the Total Commitment remains outstanding, they will:

 

	
8.1.1

	
Notice of Default and certain other events

 

promptly inform the Agent of any occurrence of which either of them becomes aware which might adversely affect the ability of any Security Party to perform its obligations under any of the Security Documents or the Underlying Documents and, without limiting the generality of the foregoing, and without prejudice to clause 8.1.6, will inform the Agent of any material litigation involving the Group or any member thereof, any Environmental Claim, any discharge of a Pollutant from a Ship or any other Relevant Ship or any other incident which may give rise to an Environmental Claim and of any Default forthwith upon becoming aware thereof and will from time to time, if so requested by the Agent, confirm to the Agent in writing that, save as otherwise stated in such confirmation, no Default has occurred and is continuing;

 

	
8.1.2

	
Consents and licences; compliance with laws and regulations

 

	
  

	
(a)

	
without prejudice to clauses 7.1 and 9, obtain or cause to be obtained, maintain in full force and effect and comply in all material respects with the conditions and restrictions (if any) imposed in, or in connection with, every consent, authorisation, licence or approval of governmental or public bodies or authorities or courts and do, or cause to be done, all other acts and things which may from time to time be necessary or desirable under applicable law for the continued due performance of all the obligations of the Security Parties under each of the Security Documents and the Underlying Documents; and

 

	
  

	
(b)

	
comply and will procure that the Corporate Guarantor will comply, with the terms and conditions of all laws, regulations, agreements, licences and concessions material to the carrying out of its business;

 

	
8.1.3

	
Use of proceeds

 

use the Loan exclusively for the purposes specified in clause 1.1 and clause 2.5;

 

	
8.1.4

	
Pari passu and subordination without prejudice to the provisions of clause 8.3, ensure that:

 

	
  

	
(a)

	
their obligations under this Agreement and the Master Swap Agreement shall at all times rank at least pari passu with all their other present and future unsecured and unsubordinated Indebtedness with the exception of any obligations which are mandatorily preferred by law and not by contract; and

  

31

  

 

	
  

	
(b)

	
their Indebtedness (if any) to their shareholders or any other member of the Group is on terms acceptable to the Agent in its absolute discretion and is and shall remain at all times fully subordinated towards their obligations under this Agreement and the Master Swap Agreement;

 

	
8.1.5

	
Financial statements prepare or cause to be prepared:

 

	
  

	
(a)

	
consolidated financial statements of the Group (comprising a balance sheet statement, an income statement, a cash flow analysis and accompanying notes) in accordance with the Applicable Accounting Principles consistently applied in respect of each financial year (namely, each 12-month period ending on 31 December of each calendar year) and cause the same to be reported on by the Group's auditors;

 

	
  

	
(b)

	
unaudited consolidated financial statements of the Group (comprising a balance sheet statement, an income statement, a cash flow analysis and accompanying notes) in accordance with the Applicable Accounting Principles consistently applied in respect of each financial quarter of each financial year (namely, each 3-month, 6-month, 9-month and 12-month periods (including on a year to date basis), respectively, ending on 31 March, 30 June, 30 September and 31 December of each calendar year),

 

and, in each case, deliver as many copies of the same as the Agent may reasonably require as soon as practicable but not later than:

 

	
  

	
(i)

	
in the case of audited financial statements, one hundred and eighty (180) days after the end of the financial period to which they relate (namely, not later than 30 June of each calendar year);

 

	
  

	
(ii)

	
in the case of unaudited financial statements, ninety (90) days after the end of the financial period to which they relate (namely, not later than 30 June, 30 September, 31 December and 31 March, respectively, of each calendar year);

 

	
8.1.6

	
Valuations and Compliance Certificate

 

	
  

	
(a)

	
at the same time as the Borrowers and/or the Corporate Guarantor provide the Agent and/or the Security Agent with annual audited consolidated financial statements of the Group pursuant to clause 8.1.5 of this Agreement and clause 5.1.4 of the Corporate Guarantee (namely, not later than 30 June of each calendar year) and, if a Default has occurred, at any other time as and when the Agent in its absolute discretion shall require, provide the Agent with valuations of the Ship made in accordance with clause 8.2.2;

 

	
  

	
(b)

	
at the same time as the Borrowers and/or the Corporate Guarantor provide the Agent and/or the Security Agent with consolidated financial statements of the Group pursuant to clause 8.1.5 of this Agreement and clause 5.1.4 of the Corporate Guarantee (namely, not later than 31 March, 30 June, 30 September and 31 December of each calendar year) and, if a Default has occurred, at any other time as and when the Agent in its absolute discretion shall require, deliver to the Agent a Compliance Certificate (including any supporting schedules or other information and evidence as the Agent may require) duly signed by a director and an authorised signatory of each Borrower and the Corporate Guarantor, and otherwise in accordance with clause 5.1.5 of the Corporate Guarantee;

 

	
8.1.7

	
Delivery of report

 

deliver to the Agent as many copies as the Agent may reasonably require of every material report, circular, notice or like document issued by either of the Borrowers to its creditors generally.

  

32

  

	
8.1.8

	
Provision of further information

 

provide the Agent with such financial and other information concerning the Borrowers, the other Security Parties, the Group and its members and their respective affairs (including, without limitation, financial projections of the Group on an annual consolidated basis) as the Agent, any Bank or the Swap Provider (acting through the Agent) may from time to time require and keep the Agent advised regularly of all major financial developments in relation to the Borrowers, the other Security Parties and the Group and its members including, without prejudice to the generality of the foregoing, any vessels sales or purchases and any new borrowings;

 

	
8.1.9

	
Obligations under Security Documents

 

and will procure that each of the other Security Parties will, duly and punctually perform each of the obligations expressed to be assumed by them under the Security Documents and the Underlying Documents;

 

	
8.1.10

	
Compliance with Code

 

and will procure that any Operator will comply with, and ensure that each Ship and any Operator at all times complies with, the requirements of the Code, including (but not limited to) the maintenance and renewal of valid certificates pursuant thereto throughout the Security Period;

 

	
8.1.11

	
Issuance of DOC and SMC

 

and will procure that any Operator will, promptly inform the Agent upon the issuance to any Operator of a DOC and to each Ship of an SMC or the receipt by either of the Borrowers or any Operator of notification that its application for the same has been refused;

 

	
8.1.12

	
Withdrawal of DOC and SMC

 

and will procure that any Operator will, immediately inform the Agent if there is any threatened or actual withdrawal of its Operator's DOC or the SMC in respect of any Ship;

 

	
8.1.13

	
ISPS Code compliance and will procure that the Manager or any Operator will:

 

	
  

	
(a)

	
maintain at all times a valid and current ISSC in respect of each Ship;

 

	
  

	
(b)

	
immediately notify the Agent in writing of any actual or threatened withdrawal, suspension, cancellation or modification of the ISSC in respect of each Ship; and

 

	
  

	
(c)

	
procure that each Ship will comply at all times with the ISPS Code;

 

	
8.1.14

	
Employment

 

without prejudice to the rights of the Creditors under the provisions of the other Security Documents, advise the Agent promptly of any proposed charterparty, pool agreement or other contract of employment in respect of a Ship (including any Charter) having an original duration of twelve (12) months or longer (excluding any optional extensions thereof) and:

 

	
  

	
(a)

	
deliver a certified copy of each such charterparty or other contract to the Agent forthwith after its execution;

 

	
  

	
(b)

	
forthwith following a demand made by the Agent (acting on the instructions of the Majority Banks):

 

  

33

  

	  	  	
(i)

	
procure that the relevant Borrower will execute a specific assignment (in such form as the Agent (acting on the instructions of the Majority Banks in their absolute discretion) may require) of any such charterparty or other contract in favour of the Security Agent and any notice of assignment required in connection therewith; and

 

	  	  	
(ii)

	
procure the service of any such notice of assignment on the relevant charterer or other counterparty of the relevant Borrower, and the acknowledgement of such notice by the relevant charterer or other counterparty;

 

	
  

	
(c)

	
upon the Agent's request deliver to the Agent such documents and evidence of the type referred to in schedule 3, in relation to any such assignment or any other related matter referred to in this clause 8.1.14, as the Agent (acting on the instructions of the Majority Banks in their sole discretion) shall require; and

 

	
  

	
(d)

	
pay on the Agent's demand all legal costs and other costs incurred by the Agent and/or the Banks and/or the Security Agent in connection with or in relation to any such assignment or any other related matter referred to in this clause 8.1.14;

 

	
8.1.15

	
Know your customer information

 

deliver to the Agent such documents and evidence as the Agent shall from time to time require relating to the verification of identity and knowledge of the Agent's or any Bank's, the Account Bank's or any Swap Provider's customers and the compliance by the Agent or any Bank or any Swap Provider or the Account Bank with all necessary "know your customer" or similar checks, always on the basis of applicable laws and regulations or the Agent's or any Bank's or the Swap Provider's or the Account Bank's own internal guidelines, in each case as such laws, regulations or internal guidelines apply from time to time; and

 

	
8.1.16

	
Money laundering

 

ensure that any borrowing by each Borrower and the performance of its obligations hereunder and under the other Security Documents to which each is a party will be for its own account and will not involve any breach by it of any law or regulatory measure relating to money laundering as defined in Article 1 of the directive (2005/60/EC) of the European Parliament and of the Council or any equivalent law or regulatory measure in any other jurisdiction.

 

	
8.2

	
Security value maintenance

 

 

	
8.2.1

	
Security shortfall

 

If at any time the Security Value shall be less than the Security Requirement, the Agent may, and if so directed by the Majority Banks shall, give notice to the Borrowers requiring that such deficiency be remedied and then the Borrowers shall within a period of thirty (30) days of the date of receipt by the Borrowers of the Agent's said notice either:

 

	
  

	
(a)

	
prepay such sum in Dollars as will result in the Security Requirement after such prepayment (taking into account any other repayment of the Loan made between the date of the notice and the date of such prepayment) being equal to the Security Value; or

 

	
  

	
(b)

	
constitute to the satisfaction of the Creditors such further security for the Loan and any amounts owing under the Master Swap Agreement, as shall be acceptable to the Banks, having a value for security purposes (as determined by the Agent in its absolute discretion) at the date upon which such further security shall be constituted which, when added to the Security Value, shall not be less than the Security Requirement as at such date,

 

and the choice between clause 8.2.1(a) and clause 8.2.1(b) shall be at the Borrowers' option.

  

34

  

The provisions of clause 4.4 and any relevant provisions of clause 4.5 shall apply to any prepayments made under clause 8.2.1(a).

 

	
8.2.2

	
Valuation of Mortgaged Ships

 

	
  

	
(a)

	
Each of the Mortgaged Ships shall, for the purposes of this Agreement, be valued in Dollars as and when the Agent shall require (whether for the purpose of testing compliance with clause 8.2.1 or at any other time acting on the instructions of the Majority Banks) by two (2) of the Approved Shipbrokers, selected by the Borrowers or, failing such selection by the Borrowers, selected by the Agent (acting on the instructions of the Majority Banks in their sole discretion). Each such valuation shall not be older than 30 days, shall be addressed to the Agent (with a copy to the Borrowers) and made without, unless required by the Agent, physical inspection, without taking into account the benefit of any charterparty or other engagement concerning such Mortgaged Ship and it shall be made on the basis of a sale for prompt delivery for cash at arm's length on normal commercial terms as between a willing buyer and a willing seller. The arithmetic mean of such two (2) valuations shall constitute the value of such Mortgaged Ship for the purposes of this clause 8.2 and the other provisions of this Agreement and the other Security Documents.

 

	
  

	
(b)

	
The value of each Mortgaged Ship determined in accordance with the provisions of this clause 8.2 shall be binding upon the parties hereto until such time as any further such valuations shall be obtained in respect of such Mortgaged Ship.

 

	
8.2.3

	
Information

 

The Borrowers jointly and severally undertake with each Creditor to supply to the Agent and to any such Approved Shipbrokers such information concerning each Mortgaged Ship and its condition as such Approved Shipbrokers may require for the purpose of making any such valuation.

 

	
8.2.4

	
Costs

 

All costs in connection with the Agent obtaining any valuations of the Mortgaged Ships referred to in clause 8.2.2, any valuation of the Mortgaged Ships referred to in schedule 3 and any valuation either of any additional security for the purposes of ascertaining the Security Value at any time or necessitated by the Borrowers electing to constitute additional security pursuant to clause 8.2.1(b), shall be borne by the Borrowers.

 

	
8.2.5

	
Valuation of additional security

 

For the purpose of this clause 8.2, the market value of any additional security provided or to be provided to the Security Agent shall be determined by the Agent in its absolute discretion without any necessity for the Agent assigning any reason thereto.

 

	
8.2.6

	
Documents and evidence

 

In connection with any additional security provided in accordance with this clause 8.2, the Agent shall be entitled to receive such evidence and documents of the kind referred to in schedule 3 as may in the Agent's opinion, be appropriate and such favourable legal opinions as the Agent shall in its absolute discretion require.

 

	
8.3

	
Negative undertakings

 

The Borrowers jointly and severally undertake with each Creditor that, from the date of this Agreement and so long as any moneys are owing under the Security Documents and while all or any part of the Total Commitment remains outstanding, the Borrowers will not, without the prior written consent of the Agent (acting on the instructions of the Majority Banks):

  

35

  

 

	
8.3.1

	
Negative pledge

 

permit any Encumbrance (other than a Permitted Encumbrance) to subsist, arise or be created or extended over all or any part of their present or future undertakings, assets, rights or revenues to secure or prefer any present or future Indebtedness or other liability or obligation of any Security Party or any other person;

 

	
8.3.2

	
No merger

 

merge or consolidate with any other person or enter into any amalgamation, demerger or corporate reconstruction or redomiciliation of any type;

 

	
8.3.3

	
Disposals

 

sell, transfer, abandon, lend or otherwise dispose of or cease to exercise direct control over any part (being, either alone or when aggregated with all other disposals falling to be taken into account pursuant to this clause 8.3.3, material in the opinion of the Agent in relation to their respective undertaking, assets, rights and revenues of each Borrower taken as a whole) of their respective present or future undertaking, assets, rights or revenues (otherwise than by transfers, sales or disposals for full consideration in the ordinary course of trading but in any event excluding the assets which are subject to security created by the Security Documents), whether by one or a series of transactions related or not;

 

	
8.3.4

	
Other business

 

undertake any business other than the ownership and operation of the Ships and the chartering of the Ships to third parties;

 

	
8.3.5

	
Acquisitions

 

acquire any further assets other than the Ships and rights arising under contracts entered into by or on behalf of the Borrowers in the ordinary course of their business of owning, operating and chartering the Ships;

 

	
8.3.6

	
Other obligations

 

incur any obligations except for obligations arising under the Underlying Documents or the Security Documents or contracts entered into in the ordinary course of their business of owning, operating and chartering the Ships;

 

	
8.3.7

	
No borrowing

 

incur any Borrowed Money except for Borrowed Money pursuant to the Security Documents;

 

	
8.3.8

	
Repayment of borrowings

 

repay the principal of, or pay interest on or any other sum in connection with, any of their Borrowed Money except for Borrowed Money pursuant to the Security Documents;

 

	
8.3.9

	
Guarantees

 

issue any guarantees or indemnities or otherwise become directly or contingently liable for the obligations of any person, firm, or corporation, except pursuant to the Security Documents and except for guarantees or indemnities from time to time required in the ordinary course by any protection and indemnity or war risks association with which a Ship is entered, guarantees required to procure the release of a Ship from any arrest, detention, attachment or levy or guarantees or undertakings required for the salvage of a Ship;

  

36

  

 

	
8.3.10

	
Loans

 

make any loans or grant any credit to any person or agree to do so (save for normal trade credit in the ordinary course of business);

 

	
8.3.11

	
Sureties

 

permit any Indebtedness of either Borrower to any person (other than the Creditors pursuant to the Security Documents) to be guaranteed by any person (save for guarantees or indemnities from time to time required in the ordinary course by any protection and indemnity or war risks association with which a Ship is entered, guarantees required to procure the release of a Ship from any arrest, detention, attachment or levy or guarantees or undertakings required for the salvage of a Ship);

 

	
8.3.12

	
Share capital and distribution

 

purchase or otherwise acquire for value any shares of their capital or distribute any of their present or future assets, undertaking, rights or revenues to any of their shareholders provided however that each Borrower shall be entitled to declare or pay cash dividends to its shareholders, if no Event of Default has occurred and is continuing at the time of declaration or payment of such dividends nor would result from the declaration or payment of such dividends;

 

	
8.3.13

	
Subsidiaries

 

form or acquire any Subsidiaries or make an equity investment in any person;

 

	
8.3.14

	
Constitutional documents

 

change, amend or vary, or agree to permit any change, amendment or variation of, their constitutional documents or any change of their corporate or legal name;

 

	
8.3.15

	
Intra-Group transactions

 

enter into any transactions or agreements with any other member of the Group other than on an arm's length basis and for full consideration;

 

	
8.3.16

	
Designated Transactions

 

enter into any derivative transactions other than Designated Transactions;

 

	
8.3.17

	
Financial Year

 

change, permit or agree to any change in, the way of computation of their financial year; and

 

	
8.3.18

	
Shareholdings

 

change, cause or permit any change in, the legal and/or beneficial ownership of any of the shares in either of the Borrowers or the Manager which would cause any of them to cease to be a wholly-owned direct Subsidiary of the Corporate Guarantor.

 

	
9

	
Conditions

 

	
9.1

	
Documents and evidence

The obligation of each Bank to make its Commitment available shall be subject to the condition that the Agent, or its duly authorised representative, shall have received:

  

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9.1.1

	
on or prior to the giving of the first Drawdown Notice, the documents and evidence specified in Part 1 of schedule 3 in form and substance satisfactory to the Agent; and

 

	
9.1.2

	
on or prior to the drawdown of an Advance for a Ship, the documents and evidence specified in Part 2 of schedule 3 in respect of such Advance and the Ship relevant to it in form and substance satisfactory to the Agent.

 

	
9.2

	
General conditions precedent

 

The obligation of each Bank to contribute to any Advance shall be subject to the further conditions that, at the time of the giving of the Drawdown Notice for such Advance, and at the time of the making of such Advance:

 

	
9.2.1

	
the representations and warranties contained in (i) clauses 7.1, 7.2 and 7.3(b), (ii) clause 4 of the Corporate Guarantee and (iii) clause 3 of each Share Pledge, are true and correct on and as of each such time as if each was made with respect to the facts and circumstances existing at such time; and

 

	
9.2.2

	
no Default shall have occurred and be continuing or would result from the making of such Advance; and

 

	
9.2.3

	
no events, facts, conditions or circumstances shall exist or have arisen or occurred (and neither the Agent nor any Bank shall have become aware of other events, facts, conditions or circumstances not previously known to it), which the Agent (acting on the instructions of the Majority Banks) shall determine, has had or could reasonably be expected to have, a Material Adverse Effect.

 

	
9.3

	
Waiver of conditions precedent

 

The conditions specified in this clause 9 are inserted solely for the benefit of the Banks and may be waived by the Agent (acting on the instructions of the Majority Banks) in whole or in part and with or without conditions.

 

	
10

	
Events of Default

 

	
10.1

	
Events

 

There shall be an Event of Default if:

 

	
10.1.1

	
Non-payment: any Security Party fails to pay any sum payable by it under any of the Security Documents at the time, in the currency and in the manner stipulated in the Security Documents (and so that, for this purpose, sums payable on demand shall be treated as having been paid at the stipulated time if paid within three (3) Banking Days of demand); or

 

	
10.1.2

	
Master Swap Agreement: (a) an Event of Default or Potential Event of Default (in each case as defined in the Master Swap Agreement) has occurred and is continuing with the Borrowers or either of them as the Defaulting Party (as defined in the Master Swap Agreement) under the Master Swap Agreement or (b) an Early Termination Event (as defined in the Master Swap Agreement) has occurred with the Borrowers or either of them as the sole Affected Party (as defined in the Master Swap Agreement) has occurred or has been or will become capable of being effectively designated under the Master Swap Agreement by the Swap Provider, or

 

	
10.1.3

	
Breach of Insurances and certain other obligations: either of the Borrowers or the Manager or any other person fails to obtain and/or maintain the Insurances in respect of either Ship in accordance with the requirements of the relevant Ship Security Documents for such Ship or if any insurer in respect of such Insurances in respect of either Ship cancels such Insurances or disclaims liability by reason, in either case, of mis-statement in any proposal for such Insurances or for any other failure or default on the part of either of the Borrowers or any other person, or either of the Borrowers commits any breach of or omits to

  

38

  

 

observe any of the obligations or undertakings expressed to be assumed by it under clauses 8.2 or 8.3 or the Corporate Guarantor commits any breach of or omits to observe any of the obligations or undertakings expressed to be assumed by it under clauses 5.2 or 5.3 of the Corporate Guarantee; or

 

	
10.1.4

	
Breach of other obligations: any Security Party commits any breach of or omits to observe any of its obligations or undertakings expressed to be assumed by it under any of the Security Documents (other than those referred to in clauses 10.1.1, 10.1.2 and 10.1.3 above) and, in respect of any such breach or omission which in the opinion of the Agent (following consultation with the Banks) is capable of remedy, such action as the Agent (acting on the instructions of the Majority Banks) may require shall not have been taken within thirty (30) days of the Agent notifying the relevant Security Party of such default and of such required action; or

 

	
10.1.5

	
Misrepresentation: any representation or warranty made or deemed to be made or repeated by or in respect of any Security Party in or pursuant to any of the Security Documents or in any notice, certificate or statement referred to in or delivered under any of the Security Documents is or proves to have been incorrect or misleading in any material respect; or

 

	
10.1.6

	
Cross-default: any Borrowed Money of any Security Party or any other Relevant Party is not paid when due or any Borrowed Money of any Security Party or any other Relevant Party becomes (whether by declaration or automatically in accordance with the relevant agreement or instrument constituting the same) due and payable prior to the date when it would otherwise have become due (unless as a result of the exercise by the relevant Security Party or other Relevant Party of a voluntary right of prepayment), or any creditor of any Security Party or any other Relevant Party becomes entitled to declare any such Borrowed Money due and payable or any facility or commitment available to any Security Party or any other Relevant Party relating to Borrowed Money is withdrawn, suspended or cancelled by reason of any default (however described) of the person concerned unless the relevant Security Party or other Relevant Party shall have satisfied the Banks that such withdrawal, suspension or cancellation will not affect or prejudice in any way the relevant Security Party's or other Relevant Party's ability to pay its debts as they fall due and fund its commitments, or any guarantee given by any Security Party or any other Relevant Party in respect of Borrowed Money is not honoured when due and called upon Provided that the amount or aggregate amount at any one time, of all Borrowed Money of any Security Party or any other Relevant Party in relation to which any of the foregoing events shall have occurred and be continuing, is equal to or greater than Ten million Dollars ($10,000,000) or its equivalent in the currency which the same is denominated or payable. For the avoidance of doubt for the purpose of this clause 10.1.6 "Borrowed Money" shall exclude Borrowed Money owing under this Agreement and/or the other Security Documents; or

 

	
10.1.7

	
Legal process: any judgment or order made against any Security Party or other Relevant Party is not stayed or complied with within seven (7) days or a creditor attaches or takes possession of, or a distress, execution, sequestration or other process is levied or enforced upon or sued out against, any of the undertakings, assets, rights or revenues of any Security Party or other Relevant Party and is not discharged within seven (7) days; or

 

	
10.1.8

	
Insolvency: any Security Party or other Relevant Party is unable or admits inability to pay its debts as they fall due; or suspends making payments on any of its debts or announces an intention to do so; or becomes insolvent; or has assets the value of which is less than the value of its liabilities (taking into account contingent and prospective liabilities); or suffers the declaration of a moratorium in respect of any of its Indebtedness; or any corporate action, legal proceedings or other procedure or step is taken in relation to any of the above; or

 

	
10.1.9

	
Reduction or loss of capital: a meeting is convened by any Security Party or other Relevant Party for the purpose of passing any resolution to purchase, reduce or redeem any of its share capital; or

	
10.1.10

	
Winding up: any corporate action, legal proceedings or other procedure or step is taken for the purpose of winding-up any Security Party or other Relevant Party or an order is made or

 

  

39

  

resolution passed for the winding up of any Security Party or other Relevant Party or a notice is issued convening a meeting for the purpose of passing any such resolution; or

 

	
10.1.11

	
Administration: any petition is presented, notice given or other step is taken for the purpose of the appointment of an administrator of any Security Party or other Relevant Party or the Agent believes that any such petition or other step is imminent or an administration order is made in relation to any Security Party or other Relevant Party; or

 

	
10.1.12

	
Appointment of receivers and managers: any administrative or other receiver, liquidator, compulsory manager or other similar officer is appointed of any Security Party or other Relevant Party or any part of its assets and/or undertaking or any other steps are taken to enforce any Encumbrance over all or any part of the assets of any Security Party or other Relevant Party; or

 

	
10.1.13

	
Compositions: any corporate action, legal proceedings or other procedures or steps are taken, or negotiations commenced, by any Security Party or other Relevant Party or by any of its creditors with a view to the general readjustment or rescheduling of all or part of its indebtedness or to proposing any kind of composition, compromise or arrangement involving such person and any of its creditors; or

 

	
10.1.14

	
Analogous proceedings: there occurs, in relation to any Security Party or other Relevant Party, in any country or territory in which any of them carries on business or to the jurisdiction of whose courts any part of their assets is subject, any event which, in the reasonable opinion of the Agent, appears in that country or territory to correspond with, or have an effect equivalent or similar to, any of those mentioned in clauses 10.1.7 to 10.1.13 (inclusive) or any Security Party or other Relevant Party otherwise becomes subject, in any such country or territory, to the operation of any law relating to insolvency, bankruptcy or liquidation; or

 

	
10.1.15

	
Cessation of business: any Security Party or any other Relevant Party suspends or ceases or threatens to suspend or cease to carry on its business; or

 

	
10.1.16

	
Seizure: all or a material part of the undertaking, assets, rights or revenues of, or shares or other ownership interests in, any Security Party or any other Relevant Party are seized, nationalised, expropriated or compulsorily acquired by or under the authority of any government; or

 

	
10.1.17

	
Invalidity: any of the Security Documents shall at any time and for any reason become invalid or unenforceable or otherwise cease to remain in full force and effect, or if the validity or enforceability of any of the Security Documents shall at any time and for any reason be contested by any Security Party which is a party thereto, or if any such Security Party shall deny that it has any, or any further, liability thereunder; or

 

	
10.1.18

	
Unlawfulness: it becomes impossible or unlawful at any time for any Security Party, to fulfil any of the covenants and obligations expressed to be assumed by it in any of the Security Documents or for a Creditor to exercise the rights or any of them vested in it under any of the Security Documents or otherwise; or

 

	
10.1.19

	
Repudiation: any Security Party repudiates any of the Security Documents or does or causes or permits to be done any act or thing evidencing an intention to repudiate any of the Security Documents; or

 

	
10.1.20

	
Encumbrances enforceable: any Encumbrance (other than Permitted Liens) in respect of any of the property (or part thereof) which is the subject of any of the Security Documents becomes enforceable; or

 

	
10.1.21

	
Material Adverse Effect: any event, condition, fact or circumstance occurs, arises or exists which, in the opinion of the Agent (acting on the instructions of the Majority Banks), has had or is reasonably expected to have a Material Adverse Effect; or

  

40

  

 

	
10.1.22

	
Arrest: either Ship is arrested, confiscated, seized, taken in execution, impounded, forfeited, detained in exercise or purported exercise of any possessory lien or other claim or otherwise taken from the possession of the relevant Borrower and such Borrower shall fail to procure the release of such Ship within a period of ten (10) days thereafter; or

 

	
10.1.23

	
Registration: the registration of either Ship under the laws and flag of the relevant Flag State is cancelled or terminated without the prior written consent of the Agent (acting on the instructions of the Majority Banks) or if such registration of such Ship is not renewed at least forty five (45) days prior to the expiry of such registration; or

 

	
10.1.24

	
Unrest: the Flag State of either Ship becomes involved in hostilities or civil war or there is a seizure of power in the Flag State of either Ship by unconstitutional means; or

 

	
10.1.25

	
Environment: either Borrower and/or any other Relevant Party and/or any Security Party fails to comply with any Environmental Law or any Environmental Approval or either of the Ships or any other Relevant Ship is involved in any incident which gives rise or may give rise to an Environmental Claim; or

 

	
10.1.26

	
P&I: either Borrower or the Manager or any other person fails or omits to comply with any requirements of the protection and indemnity association or other insurer with which such Borrower's Ship is entered for insurance or insured against protection and indemnity risks (including oil pollution risks) to the effect that any cover (including, without limitation, any cover in respect of liability for Environmental Claims arising in jurisdictions where such Ship operates or trades) is or may be liable to cancellation, qualification or exclusion at any time; or

 

	
10.1.27

	
Shareholdings: at any time

 

	
  

	
(a)

	
either of the Borrowers or the Manager ceases to be a wholly-owned direct Subsidiary of the Corporate Guarantor; or

 

	
  

	
(b)

	
a Change of Control occurs; or

 

	
10.1.28

	
Operating Accounts: moneys are withdrawn from either of the Operating Accounts other than in accordance with clause 14; or

 

	
10.1.29

	
Manager: either Ship is managed by a person other than the Manager without the prior written consent of the Agent (acting on the instructions of the Majority Banks); or

 

	
10.1.30

	
Licenses, etc: any license, authorisation, consent or approval at any time necessary to enable any Security Party to comply with its obligations under the Security Documents or the Underlying Documents is revoked or withheld or modified or is otherwise not granted or fails to remain in full force and effect or if any exchange control or other law or regulation shall exist which would make any transaction under the Security Documents or the Underlying Documents or the continuation thereof, unlawful or would prevent the performance by any Security Party of any term of any of the Security Documents or the Underlying Documents; or

 

	
10.1.31

	
Listing: the shares of the Corporate Guarantor are de-listed or cease to trade permanently on the New York Stock Exchange; or

 

	
10.1.32

	
Material events: any other event occurs or circumstance arises which, in the opinion of the Agent (acting on the instructions of the Majority Banks), is likely materially and adversely to affect either (i) the ability of any Security Party to perform all or any of its obligations under or otherwise to comply with the terms of any of the Security Documents or any of the Underlying Documents or (ii) the security created by any of the Security Documents.

  

41

  

 

	
10.2

	
Acceleration

 

The Agent may, and if so requested by the Majority Banks shall, without prejudice to any other rights of the Agent, at any time after the happening of an Event of Default by notice to the Borrowers declare that:

 

	
10.2.1

	
the obligation of each Bank to make its Commitment available shall be terminated, whereupon the Total Commitment shall be reduced to zero forthwith; and/or

 

	
10.2.2

	
the Loan and all interest and commitment commission accrued and all other sums payable under the Security Documents have become due and payable, whereupon the same shall, immediately or in accordance with the terms of such notice, become due and payable.

 

	
10.3

	
Demand basis

 

If, pursuant to clause 10.2.2, the Agent declares the Loan to be due and payable on demand, the Agent may (and if so requested by the Majority Banks shall) by written notice to the Borrowers:

 

	
  

	
(a)

	
call for repayment of the Loan on such date as may be specified whereupon the Loan shall become due and payable on the date so specified together with all interest and commitment commission accrued and all other sums payable under this Agreement; or

 

	
  

	
(b)

	
withdraw such declaration with effect from the date specified in such notice.

 

	
10.4

	
Position of Swap Provider

 

Neither the Agent nor the Security Agent shall be obliged, in connection with any action taken or proposed to be taken under or pursuant to the foregoing provisions of this clause 10, to have any regard to the requirements of the Swap Provider except to the extent that the Swap Provider is also a Bank.

 

	
11

	
Indemnities

 

	
11.1

	
Miscellaneous indemnities

 

The Borrowers shall on demand indemnify each Creditor, without prejudice to any of the Creditors' other rights under any of the Security Documents, against any loss (including loss of Margin) or expense which such Creditor shall certify as sustained or incurred by it as a consequence of:

 

	
11.1.1

	
any default in payment by either Borrower of any sum under any of the Security Documents when due; or

 

	
11.1.2

	
the occurrence of any other Event of Default; or

 

	
11.1.3

	
any prepayment of the Loan (or any part thereof) being made under clauses 4.3, 8.2.1(a) or 12.1, or any other repayment or prepayment of the Loan or part thereof being made otherwise than on an Interest Payment Date relating to the part of the Loan prepaid or repaid; or

 

	
11.1.4

	
any Advance not being made for any reason (excluding any default by any Creditor) after the Drawdown Notice for such Advance has been given,

 

including, in any such case, but not limited to, any loss or expense sustained or incurred by a Bank in maintaining or funding its Contribution or, as the case may be, Commitment or any part thereof or in liquidating or re-employing deposits from third parties acquired to effect or maintain its Contribution or, as the case may be, Commitment or any part thereof or any other amount owing to such Bank, or in terminating or reversing, or otherwise in connection with, any open position of a Bank in relation to this Agreement.

  

42

  

 

 

	
11.2

	
Currency indemnity

 

If any sum due from the Borrowers or either of them under any of the Security Documents or any order or judgment given or made in relation thereto has to be converted from the currency (the "first currency") in which the same is payable under the relevant Security Document or under such order or judgment into another currency (the "second currency") for the purpose of (a) making or filing a claim or proof against the Borrowers or either of them, (b) obtaining an order or judgment in any court or other tribunal or (c) enforcing any order or judgment given or made in relation to any of the Security Documents, the Borrowers shall indemnify and hold harmless each Creditor from and against any loss suffered as a result of any difference between: (i) the rate of exchange used for such purpose to convert the sum in question from the first currency into the second currency, and (ii) the rate or rates of exchange at which the relevant Creditor may in the ordinary course of business purchase the first currency with the second currency upon receipt of a sum paid to it in satisfaction, in whole or in part, of any such order, judgment, claim or proof.

 

Any amount due from the Borrowers or either of them under this clause 11.2 shall be due as a separate debt and shall not be affected by judgment being obtained for any other sums due under or in respect of any of the Security Documents and the term "rate of exchange" includes any premium and costs of exchange payable in connection with the purchase of the first currency with the second currency.

 

	
11.3

	
Environmental indemnity

 

The Borrowers shall indemnify each Creditor on demand and hold it harmless from and against all costs, expenses, payments, charges, losses, demands, liabilities, actions, proceedings (whether civil or criminal), penalties, fines, damages, judgements, orders, sanctions or other outgoings of whatever nature which may be suffered, incurred or paid by, or made or asserted against such Creditor at any time, whether before or after the repayment in full of principal and interest under this Agreement, relating to, or arising directly or indirectly in any manner or for any cause or reason whatsoever out of an Environmental Claim made or asserted against such Creditor if such Environmental Claim would not have been, or been capable of being, made or asserted against such Creditor if it had not entered into any of the Security Documents and/or exercised any of its rights, powers and discretions thereby conferred and/or performed any of its obligations thereunder and/or been involved in any of the transactions contemplated by the Security Documents.

 

	
11.4

	
Central Bank or European Central Bank reserve requirements indemnity

 

The Borrowers shall on demand promptly indemnify each Bank against any cost incurred or loss suffered by such Bank as a result of its complying with the minimum reserve requirements of the European Central Bank and/or with respect to maintaining required reserves with the relevant national Central Bank to the extent that such compliance relates to such Bank's Commitment and/or Contribution or deposits obtained by it to fund the whole or part of that Contribution and to the extent such cost or loss is not recoverable by such Bank under clause 12.2.

 

	
11.5

	
General indemnity

 

Each of the Borrowers hereby indemnifies and agrees to hold harmless the Creditors and each of their respective Related Companies and each of their respective officers, directors, employees, agents, advisors and representatives (each, an "Indemnified Party") from and against any and all claims, damages, losses, liabilities, costs, legal and other expenses (altogether the "Losses"), joint or several, that may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or relating to any claim, investigation, litigation or proceeding (or the preparation of any defence with respect thereto) commenced or threatened in relation to the Security Documents or any of them (or the transactions contemplated hereby or thereby) or any use made or proposed to be made with the proceeds of the Loan. This indemnity shall apply whether or not such claims, investigation, litigation or proceeding is brought by the Borrowers or either of them, any other Security Party, any Relevant Party, any of their respective shareholders or creditors, an Indemnified Party or

  

43

  

any other person, or an Indemnified Party is otherwise a party thereto, except to the extent that such Losses are found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party's gross negligence or wilful misconduct.

 

	
12

	
Unlawfulness and increased costs

 

	
12.1

	
Unlawfulness

 

If it is or becomes contrary to any law or regulation for any Bank to contribute to an Advance or to maintain its Commitment or fund its Contribution, such Bank shall promptly, through the Agent, give notice to the Borrowers whereupon (a) the Total Commitment shall be reduced to zero and (b) the Borrowers shall be obliged to prepay the Loan either (i) forthwith or (ii) on a future specified date not being earlier than the latest date permitted by the relevant law or regulation together with interest accrued to the date of prepayment and all other sums payable by the Borrowers under this Agreement and/or the Master Swap Agreement.

 

	
12.2

	
Increased costs

 

If the result of any change in, or in the interpretation or application of, or the introduction of, any Capital Adequacy Law or compliance by a Bank with any Capital Adequacy Law, is to:

 

	
12.2.1

	
subject any Bank to Taxes or change the basis of Taxation of any Bank with respect to any payment under any of the Security Documents (other than Taxes or Taxation on the overall net income, profits or gains of such Bank imposed in the jurisdiction in which its principal or lending office under this Agreement is located); and/or

 

	
12.2.2

	
increase the cost to, or impose an additional cost on, any Bank or its holding company in making or keeping such Bank's Commitment available or maintaining or funding all or part of such Bank's Contribution; and/or

 

	
12.2.3

	
reduce the amount payable or the effective return to any Bank under any of the Security Documents; and/or

 

	
12.2.4

	
reduce any Bank's or its holding company's rate of return on its overall capital by reason of a change in the manner in which it is required to allocate capital resources to such Bank's obligations under any of the Security Documents; and/or

 

	
12.2.5

	
require any Bank or its holding company to make a payment or forego a return on or calculated by reference to any amount received or receivable by such Bank under any of the Security Documents; and/or

 

	
12.2.6

	
require any Bank or its holding company to incur or sustain a loss (including a loss of future potential profits) by reason of being obliged to deduct all or part of its Commitment or its Contribution from its capital for regulatory purposes,

 

then and in each such case (subject to clause 12.3):

 

	
  

	
(a)

	
such Bank shall (through the Agent) notify the Borrowers in writing of such event promptly upon its becoming aware of the same; and

 

	
  

	
(b)

	
the Borrowers shall on demand made at any time, whether or not such Bank's Contribution has been repaid, pay to the Agent for the account of such Bank the amount which such Bank specifies (in a certificate setting forth the basis of the computation of such amount but not including any matters which such Bank or its holding company regards as confidential) is required to compensate such Bank and/or (as the case may be) its holding company for such liability to Taxes, cost, reduction, payment , foregone return or loss.

For the purposes of this clause 12.2 "holding company" means, in relation to a Bank, the company or entity (if any) within the consolidated supervision of which such Bank is included.

 

  

44

  

	
12.3

	
Exception

 

Nothing in clause 12.2 shall entitle any Bank to receive any amount in respect of compensation for any such liability to Taxes, increased or additional cost, reduction, payment, foregone return or loss to the extent that the same (a) is taken into account in calculating Mandatory Cost or (b) is the subject of an additional payment under clause 6.6.

 

	
12.4

	
Mitigation

 

If circumstances arise which would, or would upon the giving of notice, result in an increased payment required to be made by the Borrowers under clause 6.6 or clause 12.2 then, without in any way limiting the obligations of the Borrowers under either of these clauses, the relevant Bank shall, following the Borrowers' request, use reasonable endeavours to transfer its obligations, liabilities and rights under this Agreement and the other Security Documents to another of its offices not affected by the circumstances which gave rise to such increased payment, but no Bank shall be under any obligation to take any such action if in its opinion, to do so would or might:

 

	
12.4.1

	
be prejudicial to such Bank (or, as the case may be, its holding company); or

 

	
12.4.2

	
have an adverse effect on such Bank's or its holding company's business, operations, administration or financial condition; or

 

	
12.4.3

	
involve such Bank or its holding company in any activity which is unlawful or prohibited or any activity that is contrary to, or inconsistent, with any regulation or such Bank's general banking policies; or

 

	
12.4.4

	
involve such Bank or its holding company in any expense (unless indemnified to its satisfaction) or tax disadvantage.

 

	
13

	
Security, set-off and pro-rata payments

 

	
13.1

	
Application of moneys

 

All moneys received by the Creditor under or pursuant to any of the Security Documents and expressed to be applicable in accordance with the provisions of this clause 13.1 shall, if received by a Creditor other than the Agent and the Security Agent, be paid to the Agent for application, and if received by the Agent or the Security Agent shall be applied by the Agent and/or the Security Agent (as the case may be) in the following manner:

 

	
13.1.1

	
first in or towards payment of all unpaid costs, expenses and fees which may be owing to the Arranger, the Agent or the Security Agent under any of the Security Documents;

 

	
13.1.2

	
secondly, in or towards payment of any unpaid costs, expenses and fees payable to the Banks or the Account Bank or any of them;

 

	
13.1.3

	
thirdly, in or towards payment of any arrears of interest owing in respect of the Loan or any

 

	
13.1.4

	
fourthly, in or towards payment to any Bank for any loss suffered by reason of any such payment in respect of principal not being effected on an Interest Payment Date relating to the part of the Loan repaid or prepaid and which amounts are so payable under this Agreement;

 

	
13.1.5

	
fifthly, in or towards repayment of the Loan (whether the same is due and payable or not);

 

	
13.1.6

	
sixthly, in or towards payment to the Swap Provider, on a pro rata basis, of any sums owing to it under the Master Swap Agreement;

  

45

  

 

	
13.1.7

	
seventhly, in or towards payment to any Creditor (other than the Swap Provider) of any other sums owing to it under any of the Security Documents (and if any such sums are owing to more than one Creditor, as between such Creditors on a pro rata basis); and

 

	
13.1.8

	
eighthly, the surplus (if any) shall be paid to the Borrowers or to whomsoever else may be entitled to receive such surplus.

 

	
13.2

	
Pro rata payments

 

	
13.2.1

	
If at any time any Bank (the "Recovering Bank") receives or recovers any amount owing to it by the Borrowers under this Agreement by direct payment, set-off or in any manner other than by payment through the Agent pursuant to clauses 6.1 or 6.9 (not being a payment received from a Transferee Bank or a sub-participant in such Bank's Contribution or any other payment of an amount due to the Recovering Bank for its sole account pursuant to clauses 3.6, 5, 6.6, 11.1, 11.2, 12.1 or 12.2) the Recovering Bank shall, within two (2) Banking Days of such receipt or recovery (a "Relevant Receipt") notify the Agent of the amount of the Relevant Receipt. If the Relevant Receipt exceeds the amount which the Recovering Bank would have received if the Relevant Receipt had been received by the Agent and distributed pursuant to clauses 6.1 or 6.9 (as the case may be) then:

 

	
  

	
(a)

	
within two (2) Banking Days of demand by the Agent, the Recovering Bank shall pay to the Agent an amount equal (or equivalent) to the excess;

 

	
  

	
(b)

	
the Agent shall treat the excess amount so paid by the Recovering Bank as if it were a payment made by the Borrowers and shall distribute the same to the Banks (other than the Recovering Bank) in accordance with clause 6.9; and

 

	
  

	
(c)

	
as between the Borrowers and the Recovering Bank the excess amount so re­distributed shall be treated as not having been paid but the obligations of the Borrowers to the other Banks shall, to the extent of the amount so re-distributed to them, be treated as discharged.

 

	
13.2.2

	
If any part of the Relevant Receipt subsequently has to be wholly or partly refunded by the Recovering Bank (whether to a liquidator or otherwise) each Bank to which any part of such Relevant Receipt was so re-distributed shall on request from the Recovering Bank repay to the Recovering Bank such Bank's pro-rata share of the amount which has to be refunded by the Recovering Bank.

 

	
13.2.3

	
Each Bank shall on request supply to the Agent such information as the Agent may from time to time request for the purpose of this clause 13.2.

 

	
13.2.4

	
Notwithstanding the foregoing provisions of this clause 13.2, no Recovering Bank shall be obliged to share any Relevant Receipt which it receives or recovers pursuant to legal proceedings taken by it to recover any sums owing to it under this Agreement with any other party which has a legal right to, but does not, either join in such proceedings or commence and diligently pursue separate proceedings to enforce its rights in the same or another court (unless the proceedings instituted by the Recovering Bank are instituted by it without prior notice having been given to such party through the Agent).

 

	
13.2.5

	
For the avoidance of doubt it is hereby declared that failure by any Recovering Bank to comply with the provisions of clause 13.2 shall not release any other Recovering Bank from any of its obligations or liabilities under clause 13.2.

 

	
13.3

	
Set-off

 

	
13.3.1

	
Each Borrower authorises the Agent and each Bank (without prejudice to any of the Agent's or such Bank's rights at law, in equity or otherwise), at any time and without notice to such Borrower, to apply any credit balance to which such Borrower is then entitled standing upon any account of such Borrower with any branch of such Bank in or towards satisfaction of any sum due and payable from such Borrower to the Agent or such Bank, as the case may be,

  

46

  

 

under any of the Security Documents. For this purpose, the Agent and each Bank is authorised to purchase with the moneys standing to the credit of such account such other currencies as may be necessary to effect such application.

 

	
13.3.2

	
No Bank shall be obliged to exercise any right given to it by this clause 13.3. Each Bank shall notify the Agent and the Agent shall notify the relevant Borrower forthwith upon the exercise or purported exercise of any right of set-off giving full details in relation thereto and the Agent shall inform the other Banks.

 

	
13.3.3

	
Nothing in this clause 13.3 shall be effective to create a charge or other Encumbrance

 

	
13.4

	
No charge

 

The provisions of this clause 13 shall not, and shall not be construed so as to, constitute a charge or other security interest or Encumbrance by a Creditor over all or any part of a sum received or recovered by it in the circumstances mentioned in clause 13.2.

 

	
14

	
Operating Accounts

 

	
14.1

	
General

 

The Borrowers jointly and severally undertake with each Creditor that they will:

 

	
14.1.1

	
on or before the Drawdown Date of each Advance to be drawn down, open the Operating Account of the Ship relevant to such Advance (and provide the Agent and the Account Bank with any information or documents requested by them under clause 8.1.15 to enable the Account Bank to do so); and

 

	
14.1.2

	
procure that all moneys payable to a Borrower in respect of the Earnings of such Borrower's Ship and any moneys payable to the Borrowers under the Master Swap Agreement shall, unless and until the Agent (acting on the instructions of the Majority Banks) directs to the contrary pursuant to provisions of the relevant Ship Security Documents, be paid to such Borrower's Operating Account Provided however that if any of the moneys paid to either of the Operating Accounts are payable in a currency other than Dollars, the Account Bank shall (and the Borrowers hereby irrevocably and unconditionally instruct the Account Bank to) convert such moneys into Dollars at the Account Bank's spot rate of exchange at the relevant time for the purchase of Dollars with such currency and the term "spot rate of exchange" shall include any premium and costs of exchange payable in connection with the purchase of Dollars with such currency.

 

	
14.2

	
Operating Accounts: withdrawals

 

Unless and until a Default shall occur and be continuing and the Agent (acting on the instructions of the Majority Banks) shall direct to the contrary, each Borrower shall be entitled to withdraw moneys from its Operating Account only for the following purposes:

 

	
14.2.1

	
to pay any amount to the Agent in or towards payments of any instalments of interest or any repayments, reductions or other payments of principal, or any other amounts then payable pursuant to the Security Documents;

 

	
14.2.2

	
to pay the proper and reasonable expenses of its Ship (including management fees under the Management Agreement relevant to its Ship);

 

	
14.2.3

	
to pay the proper and reasonable expenses of administering such Borrower's affairs; and

 

	
14.2.4

	
to make any payments of dividends to the extent permitted by clause 8.3.12 or any other payments on behalf of such Borrower which are not prohibited by this Agreement or any of the other Security Documents.

  

47

  

 

	
14.3

	
Account terms

 

Amounts standing to the credit of the Operating Accounts shall (unless otherwise agreed between the Account Bank and the Borrowers) bear interest at the rates from time to time offered by the Account Bank to its customers for Dollar deposits in comparable amounts for comparable periods. Interest shall accrue on the Operating Accounts from day to day and be calculated on the basis of actual days elapsed and a three hundred and sixty (360) day year and shall be credited to the Operating Accounts at such times as the Account Bank and the Borrowers shall agree.

 

	
14.4

	
Application of Operating Account

 

At any time after the occurrence of an Event of Default, the Agent may, and on the instructions of the Majority Banks shall, without notice to the Borrowers, instruct the Account Bank to apply all moneys then standing to the credit of the Operating Accounts or either of them (together with interest from time to time accruing or accrued thereon) in or towards satisfaction of any sums due to the Creditors or any of them under the Security Documents in the manner specified in clause 13.1.

 

	
14.5

	
Charging of Operating Accounts

 

The Operating Accounts and all amounts from time to time standing to the credit thereof shall be subject to the security constituted and the rights conferred by the Account Assignments.

 

	
15

	
Assignment, transfer and lending office

 

	
15.1

	
Benefit and burden

 

This Agreement shall be binding upon, and enure for the benefit of, the Creditors and the Borrowers and their respective successors in title.

 

	
15.2

	
No assignment by Borrowers

 

Neither Borrower may assign or transfer any of its rights or obligations under this Agreement

 

	
15.3

	
Transfers by Banks

 

Subject to the prior written consent of (a) the Agent and (b) provided no Default has occurred at such time, the Borrowers (the Borrowers' consent not to be unreasonably withheld or delayed), any Bank (the "Transferor Bank") may at any time cause all or any part of its rights, benefits and/or obligations under this Agreement and the Security Documents to be transferred to any other bank or financial institution which, in the reasonable opinion of the Agent, has experience in ship finance (a "Transferee Bank") by delivering to the Agent a Transfer Certificate duly completed and duly executed by the Transferor Bank and the Transferee Bank Provided  however that (a) the Transferor Bank shall pay to the Agent a transfer fee of Three thousand Dollars ($3,000) in respect of any such transfer and (b) the rights, benefits and/or obligations to be transferred under any such transfer shall be in respect of a minimum amount of Ten million Dollars ($10,000,000) of the Transferor Bank's Commitment and/or (as the case may be) Contribution. The consent of the Borrowers referred to above shall not be required in relation to any transfer where the relevant Transferee Bank is another Bank or a Related Company of the relevant Transferor Bank or of another Bank. No such transfer is binding on, or effective in relation to, the Borrowers, the Agent or the other Creditors unless (i) it is effected or evidenced by a Transfer Certificate which complies with the provisions of this clause 15.3 and is signed by or on behalf of the Transferor Bank, the Transferee Bank and the Agent (on behalf of itself, the Borrowers and the other Creditors) and (ii) such transfer of rights under the other Security Documents as the Agent or the Transferee Bank may deem necessary has been effected and registered to the satisfaction of the Agent. Upon signature of any such Transfer Certificate by the Agent, which signature shall be effected as promptly as is practicable after such Transfer Certificate has been delivered to the Agent, and subject to the terms of such Transfer Certificate, such Transfer Certificate shall have effect as set out below.

  

48

  

 

The following further provisions shall have effect in relation to any Transfer Certificate:

 

	
15.3.1

	
a Transfer Certificate may be in respect of a Bank's rights in respect of all, or part of, its Commitment and shall be in respect of the same proportion of its Contribution;

 

	
15.3.2

	
a Transfer Certificate shall only be in respect of rights and obligations of the Transferor Bank in its capacity as a Bank and shall not transfer its rights and obligations as Agent, Security Agent or in any other capacity, as the case may be and such other rights and obligations may only be transferred in accordance with any applicable provisions of this Agreement;

 

	
15.3.3

	
a Transfer Certificate shall take effect in accordance with English law as follows:

 

	
  

	
(a)

	
to the extent specified in the Transfer Certificate, the Transferor Bank's payment rights and all its other rights (other than those referred to in clause 15.3.2 above) under this Agreement are assigned to the Transferee Bank absolutely, free of any defects in the Transferor Bank's title and of any rights or equities which the Borrowers or either of them had against the Transferor Bank;

 

	
  

	
(b)

	
the Transferor Bank's Commitment is discharged to the extent specified in the Transfer Certificate;

 

	
  

	
(c)

	
the Transferee Bank becomes a Bank with a Contribution and a Commitment of the amounts specified in the Transfer Certificate;

 

	
  

	
(d)

	
the Transferee Bank becomes bound by all the provisions of this Agreement and the Security Documents which are applicable to the Banks generally, including those about pro-rata sharing and the exclusion of liability on the part of, and the indemnification of, the Agent, the Security Agent and the Arranger in accordance with the provisions of clause 16 and to the extent that the Transferee Bank becomes bound by those provisions, the Transferor Bank ceases to be bound by them;

 

	
  

	
(e)

	
an Advance or part of an Advance which the Transferee Bank makes after the Transfer Certificate comes into effect ranks in point of priority and security in the same way as it would have ranked had it been made by the Transferor Bank, assuming that any defects in the Transferor Bank's title and any rights or equities of any Security Party against the Transferor Bank had not existed; and

 

	
  

	
(f)

	
the Transferee Bank becomes entitled to all the rights under this Agreement which are applicable to the Banks generally, including but not limited to those relating to the Majority Banks and those under clauses 3.6, 5 and 12 and to the extent that the Transferee Bank becomes entitled to such rights, the Transferor Bank ceases to be entitled to them;

 

	
15.3.4

	
the rights and equities of the Borrowers or of any other Security Party referred to above include, but are not limited to, any right of set-off and any other kind of cross-claim; and

 

	
15.3.5

	
the Borrowers, the Account Bank, the Security Agent, the Swap Provider and the other Creditors hereby irrevocably authorise and instruct the Agent to sign any such Transfer Certificate on their behalf and undertake not to withdraw, revoke or qualify such authority or instruction at any time. Promptly upon its signature of any Transfer Certificate, the Agent shall notify the Borrowers, the Transferor Bank, the Transferee Bank and the other Banks.

 

	
15.4

	
Reliance on Transfer Certificate

 

	
15.4.1

	
The Agent shall be entitled to rely on any Transfer Certificate believed by it to be genuine and correct and to have been presented or signed by the persons by whom it purports to have been presented or signed, and shall not be liable to any of the parties to this Agreement and the Security Documents for the consequences of such reliance.

 

  

49

  

 

	
15.4.2

	
The Agent shall at all times during the continuation of this Agreement maintain a register in which it shall record the name, Commitments, Contributions and administrative details (including the lending office) from time to time of the Banks holding a Transfer Certificate and the date at which the transfer referred to in such Transfer Certificate held by each Bank was transferred to such Bank, and the Agent shall make the said register available for inspection by any Bank, the Security Agent or either Borrower during normal banking hours upon receipt by the Agent of reasonable prior notice requesting the Agent to do so.

 

	
15.4.3

	
The entries on the said register shall, in the absence of manifest error, be conclusive in determining the identities of the Commitments, the Contributions and the Transfer Certificates held by the Banks from time to time and the principal amounts of such Transfer Certificates and may be relied upon by the Agent, the other Creditors and the other Security Parties for all purposes in connection with this Agreement and the Security Documents.

 

	
15.5

	
Transfer fees and expenses

 

If any Bank causes the transfer of all or any part of its rights, benefits and/or obligations under the Security Documents, it shall (or it shall ensure that the relevant Transferee Bank shall) pay to the Agent and/or the Security Agent on demand a transfer fee of $3,000 per transfer for the account of the Agent and all costs, fees and expenses (including, but not limited to, legal fees and expenses), and all value added tax thereon, verified by the Agent or, as the case may be, the Security Agent as having been incurred by it in connection with such transfer.

 

	
15.6

	
Documenting transfers

 

If any Bank assigns all or any part of its rights or transfers all or any part of its rights, benefits and/or obligations as provided in clause 15.3, the Borrowers jointly and severally undertake with each Creditor, immediately on being requested to do so by the Agent and at the cost of the Transferor Bank, to enter into, and procure that the other Security Parties shall (at the cost of the Transferor Bank) enter into, such documents as may be necessary or desirable to transfer to the Transferee Bank all or the relevant part of such Bank's interest in the Security Documents and all relevant references in this Agreement to such Bank shall thereafter be construed as a reference to the Transferor Bank and/or its Transferee Bank (as the case may be) to the extent of their respective interests.

 

	
15.7

	
Sub-participation

 

A Bank may sub-participate all or any part of its rights and/or obligations under the Security Documents without the consent of, or notice to, the Borrowers but with the prior written consent of the Agent (such consent not to be unreasonably withheld) Provided however that the terms of any relevant sub-participation agreement shall provide that the sub-participant shall not exercise (or be entitled to exercise) any direct or indirect control over the voting rights of such Bank under this Agreement and the other Security Documents (such that such Bank shall be entitled to exercise its rights and discharge its obligations under this Agreement and the other Security Documents, without any prior approval or consent of, or any other reference to, the relevant sub-participant).

 

	
15.8

	
Lending office

 

Each Bank shall lend through its office at the address specified in schedule 1 or, as the case may be, in any relevant Transfer Certificate or through any other office of such Bank selected from time to time by such Bank through which such Bank wishes to lend for the purposes of this Agreement. If the office through which a Bank is lending is changed pursuant to this clause 15.8, such Bank shall notify the Agent promptly of such change and the Agent shall notify the Borrowers, the Security Agent, the Swap Provider, the Account Bank and the other Banks.

 

	
15.9

	
Disclosure of information

 

A Bank may, with the prior written consent of the Agent (such consent not to be unreasonably withheld), disclose to a prospective Transferee Bank or to any other person who may propose

 

  

50

  

 

entering into contractual relations with such Bank in relation to this Agreement such information about the Borrowers and the other Security Parties, the Group and any members thereof or any of them as such Bank shall consider appropriate provided that such Bank shall ensure that such information shall be disclosed on a confidential basis to any such person.

 

	
15.10

	
Replacement of a Bank

 

	
15.10.1

	
If at any time:

 

	
  

	
(a)

	
any Bank becomes an Increased Cost Bank; or

 

	
  

	
(b)

	
any Bank becomes a Non-Consenting Bank,

 

then the Borrowers may: (i) on ten (10) Business Days' prior notice to the Agent and that Bank; and (ii) following consultation with the Agent, replace that Bank by causing it to (and that Bank shall) transfer pursuant to this clause 15 all of its rights and obligations under this Agreement and the other Security Documents to another Bank or other person selected by the Borrowers and acceptable to the Agent (acting reasonably) for a purchase price equal to the outstanding principal amount of that Bank's Contribution and all accrued interest and fees and other amounts payable under this Agreement. If the effective date for that transfer is not an Interest Payment Date, then the Borrowers shall, on the transfer date, indemnify the Increased Cost Bank or the Non-Consenting Bank against any loss which it incurs as a result.

 

	
15.10.2

	
The Borrowers shall have no right to replace the Arranger, the Agent, the Account Bank or the Security Agent and none of the foregoing shall create on any Creditor, nor any Creditor shall have, any obligation towards the Borrowers to find a replacement Bank or such other entity. No member of the Group may make any payment or assume any obligation (whether by way of fees, expenses or otherwise) to or on behalf of the replacement Bank as an inducement for the replacement Bank to become a Bank.

 

	
15.10.3

	
The Borrowers may only replace a Non-Consenting Bank or an Increased Cost Bank if that replacement takes place no later than 60 days after:

 

	
  

	
(a)

	
the date on which the Non-Consenting Bank becomes a Non-Consenting Bank; or

 

	
  

	
(b)

	
the date on which the Increased Cost Bank demands payment of the relevant additional amounts.

 

	
15.10.4

	
No Bank replaced under this clause 15.10 may be required to pay or surrender to that replacement Bank or other entity any of the fees received by it.

 

	
15.10.5

	
In the case of a replacement of an Increased Cost Bank, the Borrowers shall pay the relevant additional amounts to that Increased Cost Bank prior to it being replaced and the payment of those additional amounts shall be a condition to replacement.

 

	
15.10.6

	
For the purposes of this clause 15.10:

 

	
  

	
(a)

	
an "Increased Cost Bank" is a Bank to whom the Borrowers become obliged to pay any additional amount under clause 6.6 or clause 12.2 in circumstances where (i) the Borrowers are also obliged to pay such additional amount to other Banks under the same clause and (ii) the additional amounts which such Bank is seeking to recover from the Borrowers under such clause are materially higher than the equivalent amounts sought by the other such Banks under the same clause; and

 

	
  

	
(b)

	
a "Non-Consenting Bank" is a Bank who does not agree to a waiver, consent or amendment where:

 

	
  

	
(i)

	
the Borrowers or the Agent has requested the Banks to consent to a departure from, or waiver of, any provision of the Security Documents or to agree to any amendment thereto;

 

 

  

51

  

	
  

	
(ii)

	
the waiver, consent or amendment in question requires the agreement of the Majority Banks or all the Banks;

 

	
  

	
(iii)

	
a period of not less than 30 days has elapsed from the date the waiver, consent or amendment was requested;

 

	
  

	
(iv)

	
the Majority Banks have agreed to such waiver, consent or amendment; and

 

	
  

	
(v)

	
the Borrowers have notified such Bank that it will treat it as a Non-Consenting Bank.

 

	
16

	
Arranger, Agent and Security Agent

 

	
16.1

	
Appointment of the Agent

 

Each Bank and the Swap Provider irrevocably appoints the Agent as its agent for the purposes of this Agreement and such of the Security Documents to which it may be appropriate for the Agent to be party. By virtue of such appointment, each of the Banks and the Swap Provider hereby authorises the Agent:

 

	
16.1.1

	
to execute such documents as may be approved by the Majority Banks for execution by the Agent; and

 

	
16.1.2

	
(whether or not by or through employees or agents) to take such action on such Bank's or, as the case may be, the Swap Provider's behalf and to exercise such rights, remedies, powers and discretions as are specifically delegated to the Agent by this Agreement and/or any other Security Document, together with such powers and discretions as are reasonably incidental thereto.

 

	
16.2

	
Agent's actions

 

Any action taken by the Agent under or in relation to this Agreement or any of the other Security Documents whether with requisite authority, or on the basis of appropriate instructions, received from the Banks (or as otherwise duly authorised) shall be binding on all the Banks, the Swap Provider and the other Creditors.

 

	
16.3

	
Agent's duties

 

The Agent shall:

 

	
16.3.1

	
promptly notify each Bank of the contents of each notice, certificate or other document received by it from the Borrowers under or pursuant to clauses 8.1.1, 8.1.5 and 8.1.7; and

 

	
16.3.2

	
(subject to the other provisions of this clause 16) take (or instruct the Security Agent to take) such action or, as the case may be, refrain from taking (or authorise the Security Agent to refrain from taking) such action with respect to the exercise of any of its rights, remedies, powers and discretions as agent, as the Majority Banks may direct.

 

	
16.4

	
Agent's rights

 

The Agent may:

 

	
16.4.1

	
in the exercise of any right, remedy, power or discretion in relation to any matter, or in any context, not expressly provided for by this Agreement or any of the other Security Documents, act or, as the case may be, refrain from acting (or authorise the Security Agent to act or refrain from acting) in accordance with the instructions of the Banks, and shall be fully protected in so doing;

	
16.4.2

	
unless and until it shall have received directions from the Majority Banks, take such action or, as the case may be, refrain from taking such action (or authorise the Security Agent to take

  

52

  

or refrain from taking such action) in respect of a Default of which the Agent has actual knowledge as it shall deem advisable in the best interests of the Banks and the Swap Provider (but shall not be obliged to do so);

 

	
16.4.3

	
refrain from acting (or authorise the Security Agent to refrain from acting) in accordance with any instructions of the Banks to institute any legal proceedings arising out of or in connection with this Agreement or any of the other Security Documents until it and/or the Security Agent has been indemnified and/or secured to its satisfaction against any and all costs, expenses or liabilities (including legal fees) which it would or might incur as a result;

 

	
16.4.4

	
deem and treat (a) each Bank as the person entitled to the benefit of the Contribution of such Bank for all purposes of this Agreement unless and until a Transfer Certificate shall have been filed with the Agent pursuant to clause 15.3 and shall have become effective, and (b) the office set opposite the name of each of the Banks in schedule 1 or, as the case may be, in any relevant Transfer Certificate to be such Bank's lending office unless and until a written notice of change of lending office shall have been received by the Agent and the Agent may act upon any such notice unless and until the same is superseded by a further such notice;

 

	
16.4.5

	
rely as to matters of fact which might reasonably be expected to be within the knowledge of any Security Party upon a certificate signed by any director or officer of the relevant Security Party on behalf of the relevant Security Party; and

 

	
16.4.6

	
do anything which is in its opinion necessary or desirable to comply with any law or regulation in any jurisdiction.

 

	
16.5

	
No liability of Arranger or Agent

 

Neither the Arranger nor the Agent nor any of their respective employees and agents shall:

 

	
16.5.1

	
be obliged to make any enquiry as to the use of any of the proceeds of any Advance unless (in the case of the Agent) so required in writing by a Bank, in which case the Agent shall promptly make the appropriate request to the Borrowers; or

 

	
16.5.2

	
be obliged to make any enquiry as to any breach or default by either of the Borrowers or any other Security Party in the performance or observance of any of the provisions of this Agreement or any of the other Security Documents or as to the existence of a Default unless (in the case of the Agent) the Agent has actual knowledge thereof or has been notified in writing thereof by a Bank, in which case the Agent shall promptly notify the Banks of the relevant event or circumstance; or

 

	
16.5.3

	
be obliged to enquire whether or not any representation or warranty made by either of the Borrowers or any other Security Party pursuant to this Agreement or any of the other Security Documents is true; or

 

	
16.5.4

	
be obliged to do anything (including, without limitation, disclosing any document or information) which would, or might in its opinion, be contrary to any law or regulation or be a breach of any duty of confidentiality or otherwise be actionable or render it liable to any person; or

 

	
16.5.5

	
be obliged to account to any Bank or the Swap Provider for any sum or the profit element of any sum received by it for its own account; or

 

	
16.5.6

	
be obliged to institute any legal proceedings arising out of or in connection with this Agreement or any of the other Security Documents other than on the instructions of the Majority Banks; or

 

	
16.5.7

	
be liable to any Bank or the Swap Provider for any action taken or omitted under or in connection with this Agreement or any of the other Security Documents unless caused by its gross negligence or wilful misconduct.

  

53

  

 

For the purposes of this clause 16, neither the Arranger nor the Agent shall be treated as having actual knowledge of any matter of which the corporate finance or any other division outside the agency or loan administration department of the Arranger or the person for the time being acting as the Agent may become aware in the context of corporate finance, advisory or lending activities from time to time undertaken by the relevant Arranger or, as the case may be, the Agent for any Security Party or any other person which may be a trade competitor of any Security Party or may otherwise have commercial interests similar to those of any Security Party.

 

	
16.6

	
Non-reliance on Arranger or Agent

 

Each Bank and the Swap Provider acknowledges that it has not relied on any statement, opinion, forecast or other representation made by the Arranger or the Agent to induce it to enter into this Agreement or any of the other Security Documents and that it has made and will continue to make, without reliance on the Arranger or the Agent and based on such documents as it considers appropriate, its own appraisal of the creditworthiness of the Security Parties and its own independent investigation of the financial condition, prospects and affairs of the Security Parties in connection with the making and continuation of such Bank's Commitment or Contribution under this Agreement. Neither the Arranger nor the Agent shall have any duty or responsibility, either initially or on a continuing basis, to provide any other Creditor with any credit or other information with respect to any Security Party whether coming into its possession before the making of any Advance or at any time or times thereafter other than as provided in clause 16.3.1.

 

	
16.7

	
No responsibility on Arranger or Agent for Borrowers' performance

 

Neither of the Arranger nor the Agent shall have any responsibility or liability to any Bank or the Swap Provider:

 

	
16.7.1

	
on account of the failure of any Security Party to perform its obligations under any of the Security Documents; or

 

	
16.7.2

	
for the financial condition of any Security Party; or

 

	
16.7.3

	
for the completeness or accuracy of any statements, representations or warranties in any of the Security Documents or any document delivered under any of the Security Documents; or

 

	
16.7.4

	
for the execution, effectiveness, adequacy, genuineness, validity, enforceability or admissibility in evidence of any of the Security Documents or of any certificate, report or other document executed or delivered under any of the Security Documents; or

 

	
16.7.5

	
to investigate or make any enquiry into the title of either of the Borrowers or any other Security Party to the Ships or any other security or any part thereof; or

 

	
16.7.6

	
for the failure to register any of the Security Documents with any official or regulatory body or office or elsewhere; or

 

	
16.7.7

	
for taking or omitting to take any other action under or in relation to any of the Security Documents or any aspect of any of the Security Documents; or

 

	
16.7.8

	
on account of the failure of the Security Agent to perform or discharge any of its duties or obligations under the Security Documents; or

 

	
16.7.9

	
otherwise in connection with the Agreement or its negotiation or for acting (or, as the case may be, refraining from acting) in accordance with the instructions of the Banks or the Swap Provider.

 

	
16.8

	
Reliance on documents and professional advice

The Arranger and the Agent shall be entitled to rely on any communication, instrument or document believed by it to be genuine and correct and to have been signed or sent by the

  

54

  

proper person and shall be entitled to rely as to legal or other professional matters on opinions and statements of any legal or other professional advisers selected or approved by it (including those in the Arranger's or, as the case may be, the Agent's employment).

 

	
16.9

	
Other dealings

 

The Arranger and the Agent may, without any liability to account to the Banks or the Swap Provider, accept deposits from, lend money to, and generally engage in any kind of banking or other business with, and provide advisory or other services to, any Security Party or any of its Related Companies or any of the Banks or the Swap Provider as if it were not the Arranger or, as the case may be, the Agent.

 

	
16.10

	
Rights of Agent as Bank; no partnership

 

With respect to its own Commitment and Contribution (if any) the Agent shall have the same rights and powers under the Security Documents as any other Bank and may exercise the same as though it were not performing the duties and functions delegated to it under this Agreement and the term "Banks" shall, unless the context clearly otherwise indicates, include the Agent in its individual capacity as a Bank. This Agreement shall not and shall not be construed so as to constitute a partnership between the parties or any of them.

 

	
16.11

	
Amendments and waivers

 

	
16.11.1

	
Subject to clause 16.11.2, the Agent may, with the consent of the Majority Banks (or if and to the extent expressly authorised by the other provisions of any of the Security Documents) and, if so instructed by the Majority Banks, the Agent shall:

 

	
  

	
(a)

	
agree (or authorise the Security Agent to agree) amendments or modifications to any of the Security Documents with any Security Party; and/or

 

	
  

	
(b)

	
vary or waive breaches of, or defaults under, or otherwise excuse performance of, any provision of any of the other Security Documents by any Security Party (or authorise the Security Agent to do so).

 

Any such action so authorised and effected by the Agent shall be documented in such manner as the Agent shall (with the approval of the Majority Banks) determine, shall be promptly notified to the Banks by the Agent and (without prejudice to the generality of clause 16.2) shall be binding on all the Creditors.

 

	
16.11.2

	
Except with the prior written consent of all the Banks, the Agent shall have no authority on behalf of the Banks or the Swap Provider to agree (or authorise the Security Agent to agree) with any Security Party any amendment or modification to any of the Security Documents or to grant (or authorise the Security Agent to grant) waivers in respect of breaches or defaults or to vary or excuse (or authorise the Security Agent to vary or excuse) performance of or under any of the Security Documents by any Security Party, if the effect of such amendment, modification, waiver or excuse would be to:

 

	
  

	
(a)

	
reduce the Margin;

 

	
  

	
(b)

	
postpone the due date of or reduce the amount of any payment of principal, interest or other amount payable by any Security Party under any of the Security Documents;

 

	
  

	
(c)

	
change the currency in which any amount is payable by any Security Party under any of the Security Documents;

 

	
  

	
(d)

	
increase any Bank's Commitment;

 

	
  

	
(e)

	
extend either Termination Date;

  

55

  

	
  

	
(f)

	
change any provision of any of the Security Documents which expressly or implied requires the approval or consent of all the Banks such that the relevant approval or consent may be given otherwise than with the sanction of all the Banks;

	
  

	
(h)

	
change the order of distribution under clause 6.9 or clause 13.1 or change clause 13.2; change this clause 16.11;

 

	
  

	
(i)

	
change the definition of "Majority Banks" in clause 1.2; or

 

	
  

	
(j)

	
release any Security Party from the security constituted by any Security Document (except as required by the terms thereof or by law) or change the terms and conditions upon which such security or guarantee may be, or is required to be, released.

 

	
16.12

	
Reimbursement and indemnity by Banks

 

Each Bank shall reimburse the Agent (rateably in accordance with such Bank's Commitment or, following the first drawdown, Contribution), to the extent that the Agent is not reimbursed by the Borrowers, for the costs, charges and expenses incurred by the Agent which are expressed to be payable by the Borrowers under clause 5.1 including (in each case) the fees and expenses of legal or other professional advisers. Each Bank shall on demand indemnify the Agent (rateably in accordance with such Bank's Commitment or, following the first drawdown, Contribution) against all liabilities, damages, costs and claims whatsoever incurred by the Agent in connection with any of the Security Documents or the performance of its duties under any of the Security Documents or any action taken or omitted by the Agent under any of the Security Documents, unless such liabilities, damages, costs or claims arise from the Agent's own gross negligence or wilful misconduct.

 

	
16.13

	
Retirement of Agent

 

	
16.13.1

	
The Agent may (having given to the Borrowers, the Swap Provider and each of the Banks not less than thirty (30) days' notice of its intention to do so) retire from its appointment as Agent under this Agreement, provided that no such retirement shall take effect unless there has been appointed by the Banks and the Swap Provider as a successor agent:

 

	
  

	
(a)

	
a Related Company of the Agent nominated by the Agent which the Banks and the Swap Provider hereby irrevocably and unconditionally agree to appoint or, failing such a nomination,

 

	
  

	
(b)

	
a Bank nominated by the Majority Banks or, failing such a nomination,

 

	
  

	
(c)

	
any reputable and experienced bank or financial institution nominated by the retiring Agent; and such successor agent shall have accepted such appointment.

 

Any corporation into which the retiring Agent may be merged or converted or any corporation with which the Agent may be consolidated or any corporation resulting from any merger, conversion, amalgamation, consolidation or other reorganisation to which the Agent shall be a party shall, to the extent permitted by applicable law, be the successor Agent under this Agreement and the other Security Documents without the execution or filing of any document or any further act on the part of any of the parties to this Agreement and the other Security Documents save that notice of any such merger, conversion, amalgamation, consolidation or other reorganisation shall forthwith be given to each Security Party, the Banks and the Swap Provider. Prior to any such successor being appointed, the Agent agrees to consult with the Borrowers as to the identity of the proposed successor and to take account of any reasonable objections which the Borrowers may raise to such successor being appointed.

 

	
16.13.2

	
Upon any such successor as aforesaid being appointed, the retiring Agent shall be discharged from any further obligation under the Security Documents (but shall continue to have the benefit of this clause 16 in respect of any action it has taken or refrained from taking prior to such discharge) and its successor and each of the other parties to this Agreement

  

56

  

 

shall have the same rights and obligations among themselves as they would have had if such successor had been a party to this Agreement in place of the retiring Agent. The retiring Agent shall (at the expense of the Borrowers) provide its successor with copies of such of its records as its successor reasonably requires to carry out its functions under the Security Documents.

 

	
16.14

	
Appointment and retirement of Security Agent

 

	
16.14.1

	
Appointment

 

Each of the Agent, the Swap Provider and the Banks irrevocably appoints the Security Agent as its security agent and trustee for the purposes of this Agreement and the other Security Documents to which the Security Agent is or is to be a party, in each case on the terms set out in this Agreement. By virtue of such appointment, the Agent, the Swap Provider and each of the Banks hereby authorises the Security Agent (whether or not by or through employees or agents) to take such action on its behalf and to exercise such rights, remedies, powers and discretions as are specifically delegated to the Security Agent by this Agreement and/or any of the other Security Documents together with such powers and discretions as are reasonably incidental thereto.

 

	
16.14.2

	
Retirement

 

Without prejudice to clause 16.13, the Security Agent may, having given to the Borrowers and each of the Banks and the Swap Provider not less than fifteen (15) days' notice of its intention to do so, retire from its appointment as Security Agent under this Agreement and any Trust Deed, provided that no such retirement shall take effect unless there has been appointed by the Banks, the Agent and the Swap Provider as a successor security agent and trustee:

 

	
  

	
(a)

	
a Related Company of the Security Agent nominated by the Security Agent which the Banks hereby irrevocably and unconditionally agree to appoint or, failing such nomination,

 

	
  

	
(b)

	
a bank or trust corporation nominated by the Majority Banks or, failing such a nomination,

 

	
  

	
(c)

	
any bank or trust corporation nominated by the retiring Security Agent,

 

and, in any case (i) such successor security agent and trustee shall have duly accepted such appointment by delivering to the Agent (A) written confirmation (in a form acceptable to the Agent) of such acceptance agreeing to be bound by this Agreement in the capacity of Security Agent as if it had been an original party to this Agreement and (B) a duly executed Trust Deed and (ii) such successor security agent and trustee shall have duly entered into, whether with the retiring Security Agent and/or with the Borrowers and the other Security Parties and/or with the Creditors or with any of them, such documents in connection with the Security Documents as the Agent shall require in its absolute discretion.

 

Any corporation into which the retiring Security Agent may be merged or converted or any corporation with which the Security Agent may be consolidated or any corporation resulting from any merger, conversion, amalgamation, consolidation or other reorganisation to which the Security Agent shall be a party shall, to the extent permitted by applicable law, be the successor Security Agent under this Agreement, any Trust Deed and the other Security Documents referred to in clause 16.14.1 without the execution or filing of any document or any further act on the part of any of the parties to this Agreement, any Trust Deed and the other Security Documents save that notice of any such merger, conversion, amalgamation, consolidation or other reorganisation shall forthwith be given to each Security Party, the Banks, the Agent and the Swap Provider.

 

Upon any such successor as aforesaid being appointed, the retiring Security Agent shall be discharged from any further obligation under the Security Documents (but shall continue to

  

57

  

have the benefit of this clause 16 in respect of any action it has taken or refrained from taking prior to such discharge) and its successor and each of the other parties to this Agreement shall have the same rights and obligations among themselves as they would have had if such successor had been a party to this Agreement in place of the retiring Security Agent. The retiring Security Agent shall (at the expense of the Borrowers) provide its successor with copies of such of its records as its successor reasonably requires to carry out its functions under the Security Documents.

 

	
16.15

	
Powers and duties of the Security Agent

 

	
16.15.1

	
The Security Agent shall have no duties, obligations or liabilities to any of the Banks, the Swap Provider or the Agent beyond those expressly stated in any of the Security Documents. Each of the Banks, the Swap Provider and the Agent hereby authorises the Security Agent to enter into and execute:

 

	
  

	
(a)

	
each of the Security Documents to which the Security Agent is or is intended to be a party; and

 

	
  

	
(b)

	
any and all such other Security Documents as may be approved by the Agent in writing (acting on the instructions of the Majority Banks) for entry into by the Security Agent,

 

and, in each and every case, to hold any and all security thereby created upon trust for the Banks, the Swap Provider and the Agent in the manner contemplated by this Agreement.

 

	
16.15.2

	
Subject to clause 16.15.3 the Security Agent may, with the prior consent of the Majority Banks communicated in writing by the Agent, concur with any of the Security Parties to:

 

	
  

	
(a)

	
amend, modify or otherwise vary any provision of the Security Documents to which the Security Agent is or is intended to be a party; or

 

	
  

	
(b)

	
waive breaches of, or defaults under, or otherwise excuse performance of, any provision of the Security Documents to which the Security Agent is or is intended to be a party.

 

Any such action so authorised and effected by the Security Agent shall be promptly notified to the Banks, the Swap Provider and the Agent by the Security Agent and shall be binding on the other Creditors.

 

	
16.15.3

	
The Security Agent shall not concur with any Security Party with respect to any of the matters described in clause 16.11.2 without the consent of all the Banks communicated in writing by the Agent.

 

	
16.15.4

	
The Security Agent shall (subject to the other provisions of this clause 16) take such action or, as the case may be, refrain from taking such action, with respect to any of its rights, powers and discretions as security agent and trustee, as the Agent may direct. Subject as provided in the foregoing provisions of this clause, unless and until the Security Agent shall have received such instructions from the Agent, the Security Agent may, but shall not be obliged to, take (or refrain from taking) such action under or pursuant to the Security Documents referred to in clause 16.15.1 as the Security Agent shall deem advisable in the best interests of the Creditors provided that (for the avoidance of doubt), to the extent that this clause might otherwise be construed as authorising the Security Agent to take, or refrain from taking, any action of the nature referred to in clause 16.15.2- and for which the prior consent of the Banks is expressly required under clause 16.15.3 - clauses 16.15.2 and 16.15.3 shall apply to the exclusion of this clause.

 

	
16.15.5

	
None of the Banks nor the Agent nor the Swap Provider shall have any independent power to enforce any of the Security Documents referred to in clause 16.15.1 or to exercise any rights, discretions or powers or to grant any consents or releases under or pursuant to such Security Documents or any of them or otherwise have direct recourse to the security and/or guarantees constituted by such Security Documents or any of them except through the Security Agent.

  

58

  

	
16.15.6

	
For the purpose of this clause 16, the Security Agent may, rely and act in reliance upon any information from time to time furnished to the Security Agent by the Agent (whether pursuant to clause 16.15.7 or otherwise) unless and until the same is superseded by further such information, so that the Security Agent shall have no liability or responsibility to any party as a consequence of placing reliance on and acting in reliance upon any such information unless the Security Agent has actual knowledge that such information is inaccurate or incorrect.

 

	
16.15.7

	
Without prejudice to the foregoing, each of the Agent, the Swap Provider and the Banks (whether directly or through the Agent) shall provide the Security Agent with such written information as it may reasonably require for the purpose of carrying out its duties and obligations under the Security Documents referred to in clause 16.15.1.

 

	
16.15.8

	
Each Bank shall reimburse the Security Agent (rateably in accordance with such Bank's Commitment or, following the first drawdown, Contribution), to the extent that the Security Agent is not reimbursed by the Borrowers, for the costs, charges and expenses incurred by the Agent which are expressed to be payable by the Borrowers under clause 5.2 including (in each case) the fees and expenses of legal or other professional advisers. Each Bank shall on demand indemnify the Security Agent (rateably in accordance with such Bank's Commitment or, following the first drawdown, Contribution) against all liabilities, damages, costs and claims whatsoever incurred by the Security Agent in connection with any of the Security Documents or the performance of its duties under any of the Security Documents or any action taken or omitted by the Security Agent under any of the Security Documents, unless such liabilities, damages, costs or claims arise from the Security Agent's own gross negligence or wilful misconduct.

 

	
16.16

	
Trust provisions

 

	
16.16.1

	
The trusts constituted or evidenced in or by this Agreement and the Trust Deed shall remain in full force and effect until whichever is the earlier of:

 

	
  

	
(a)

	
the expiration of a period of eighty (80) years from the date of this Agreement; and

 

	
  

	
(b)

	
receipt by the Security Agent of confirmation in writing by the Agent that there is no longer outstanding any Indebtedness (actual or contingent) which is secured or guaranteed or otherwise assured by or under any of the Security Documents,

 

and the parties to this Agreement declare that the perpetuity period applicable to this Agreement and the trusts declared by the Trust Deed shall for the purposes of the Perpetuities and Accumulations Act 1964 be the period of eighty (80) years from the date of this Agreement.

 

	
16.16.2

	
In its capacity as trustee in relation to the Security Documents specified in clause 16.15.1, the Security Agent shall, without prejudice to any of the powers, discretions and immunities conferred upon trustees by law (and to the extent not inconsistent with the provisions of any of those Security Documents), have all the same powers and discretions as a natural person acting as the beneficial owner of such property and/or as are conferred upon the Security Agent by any of those Security Documents.

 

	
16.16.3

	
It is expressly declared that, in its capacity as trustee in relation to the Security Documents specified in clause 16.15.1, the Security Agent shall be entitled to invest moneys forming part of the security and which, in the opinion of the Security Agent, may not be paid out promptly following receipt in the name or under the control of the Security Agent in any of the investments for the time being authorised by law for the investment by trustees of trust moneys or in any other property or investments whether similar to the aforesaid or not or by placing the same on deposit in the name or under the control of the Security Agent as the Security Agent may think fit without being under any duty to diversify its investments and the Security Agent may at any time vary or transpose any such property or investments for or into any others of a like nature and shall not be responsible for any loss due to depreciation in value or otherwise of such property or investments. Any investment of any part or all of the

  

59

  

security may, at the discretion of the Security Agent, be made or retained in the names of nominees.

 

	
16.17

	
Independent action by Creditors

 

None of the Creditors shall enforce, exercise any rights, remedies or powers or grant any consents or releases under or pursuant to, or otherwise have a direct recourse to the security and/or guarantees constituted by any of the Security Documents without the prior written consent of the Majority Banks but, Provided such consent has been obtained, it shall not be necessary for any other Creditor to be joined as an additional party in any proceedings for this purpose.

 

	
16.18

	
Common Agent and Security Agent

 

The Agent and the Security Agent have entered into the Security Documents in their separate capacities (a) as agent for the Banks and the Swap Provider under and pursuant to this Agreement (in the case of the Agent) and (b) as security agent and trustee for the Banks, the Agent and the Swap Provider, under and pursuant to this Agreement, to hold the guarantees and/or security created by the other Security Documents specified in clause 16.15.1 on the terms set out in such Security Documents (in the case of the Security Agent). However, from time to time the Agent and the Security Agent may be the same entity. When the Agent and the Security Agent are the same entity and any Security Document provides for the Agent to communicate with or provide instructions to the Security Agent (and vice versa), it will not be necessary for there to be any such formal communications or instructions on those occasions.

 

	
16.19

	
Co-operation to achieve agreed priorities of application

 

The Banks, the Swap Provider, the Agent and the Account Bank shall co-operate with each other and with the Security Agent and any receiver under the Security Documents in realising the property and assets subject to the Security Documents and in ensuring that the net proceeds realised under the Security Documents after deduction of the expenses of realisation are applied in accordance with clause 13.1.

 

	
16.20

	
Prompt distribution of proceeds

 

Moneys received by any of the Creditors (whether from a receiver or otherwise) pursuant to the exercise of (or otherwise by virtue of the existence of) any rights and powers under or pursuant to any of the Security Documents shall (after providing for all costs, charges, expenses and liabilities and other payments ranking in priority) be paid to the Agent for distribution in accordance with clause 13.1 if such moneys are so received by any of the Creditors other than the Agent or the Security Agent, and if so received by the Agent or the Security Agent, they shall be distributed by the Agent or, as the case may be, the Security Agent, in accordance with clause 13.1. The Agent or, as the case may be, the Security Agent shall make each such application and/or distribution as soon as is practicable after the relevant moneys are received by, or otherwise become available to, the Agent or, as the case may be, the Security Agent save that (without prejudice to any other provision contained in any of the Security Documents) the Agent or, as the case may be, the Security Agent (acting on the instructions of the Majority Banks) or any receiver may credit any moneys received by it to a suspense account for so long and in such manner as the Agent or such receiver may from time to time determine with a view to preserving the rights of the Agent and/or the Security Agent and/or the Account Bank and/or the Swap Provider and/or the Arranger and/or the Banks or any of them to provide for the whole of their respective claims against the Borrowers or any other person liable.

 

	
16.21

	
Change of Reference Bank

 

If the Reference Bank ceases to provide quotations to the Agent for the purposes of determining LIBOR or the Mandatory Cost the Agent may terminate the appointment of such Reference Bank and appoint another bank or financial institution to replace it as the Reference Bank.

  

60

  

 

	
17

	
Notices and other matters

 

	
17.1

	
Notices

 

Every notice, request, demand or other communication under this Agreement or (unless otherwise provided therein) under any of the other Security Documents shall:

 

	
17.1.1

	
be in writing delivered personally or by first-class prepaid letter (airmail if available) or facsimile transmission or other means of telecommunication in permanent written form;

 

	
17.1.2

	
be deemed to have been received, subject as otherwise provided in the relevant Security Document, in the case of a letter, when delivered personally or three (3) days after it has been put in to the post and, in the case of a facsimile transmission or other means of telecommunication in permanent written form, at the time of despatch (provided that if the date of despatch is not a business day in the country of the addressee or if the time of despatch is after the close of business in the country of the addressee it shall be deemed to have been received at the opening of business on the next such business day); and

 

	
17.1.3

	
be sent:

 

	
  

	
(a)

	
if to the Borrowers or either of them at:

 

c/o Diana Shipping Services S.A.

Pendelis 16

Palaio Faliro

175 64 Athens

Greece

Fax no: +30 210 942 4975

Att:         Mr Andreas Michalopoulos

 

	
  

	
(b)

	
if to the Arranger, the Agent, the Security Agent or the Account Bank at:

 

Nordea Bank Finland Plc, London Branch

8th Floor, City Place House

55 Basinghall Street

London EC2V 5NB

England

Fax no: +44 207 726 9188

Att:         Shipping Department

 

with a copy to:

 

Fax no: +44 207 726 9102

Att:         Loan Administration

 

	
  

	
(c)

	
if to a Bank, to its address or facsimile number specified in schedule 1 or, in the case of a Transferee Bank, in any relevant Transfer Certificate; and

 

	
  

	
(d)

	
if to the Swap Provider, to its address or facsimile number specified in paragraph (a) of Part 4 of the Schedule to the Master Swap Agreement,

 

or, in each case, to such other address and/or numbers as is notified by one party to the other parties under this Agreement.

 

	
17.2

	
Notices through the Agent

Every notice, request, demand or other communication under this Agreement to be given by the Borrowers to any other party shall be given to the Agent for onward transmission as appropriate

  

61

  

 

and if such notice, request, demand or other communication is to be given to the Borrowers it shall (except if otherwise provided in the Security Documents) be given through the Agent.

 

	
17.3

	
No implied waivers, remedies cumulative

 

No failure or delay on the part of any Creditor to exercise any power, right or remedy under any of the Security Documents shall operate as a waiver thereof, nor shall any single or partial exercise by any Creditor of any power, right or remedy preclude any other or further exercise thereof or the exercise of any other power, right or remedy. The remedies provided in the Security Documents are cumulative and are not exclusive of any remedies provided by law.

 

	
17.4

	
English language

 

All certificates, instruments and other documents to be delivered under or supplied in connection with any of the Security Documents shall be in the English language or shall be accompanied by a certified English translation upon which the Creditors or any of them shall be entitled to rely.

 

	
17.5

	
Further assurance

 

The Borrowers undertake with the Creditors that the Security Documents shall both at the date of execution and delivery thereof and so long as any moneys are owing under any of the Security Documents be valid and binding obligations of the respective parties thereto and rights of the Agent and each of the Banks enforceable in accordance with their respective terms and that it will, at its expense, execute, sign, perfect and do and will procure the execution signing, perfecting and doing each of the other Security Parties of, any and every such further assurance, document, act or thing as in the reasonable opinion of the Agent may be necessary or desirable for perfecting the security contemplated or constituted by the Security Documents.

 

	
17.6

	
Conflicts

 

In the event of any conflict between this Agreement and any of the other Borrowers' Security Documents (other than the Master Swap Agreement), the provisions of this Agreement shall prevail.

 

	
17.7

	
Borrowers' obligations

 

	
17.7.1

	
Joint and several

 

Notwithstanding anything to the contrary contained in any of the Security Documents, the agreements, obligations and liabilities of the Borrowers herein contained are joint and several and shall be construed accordingly. Each of the Borrowers agrees and consents to be bound by the Security Documents to which it is, or is to be, a party notwithstanding that the other Borrower which is intended to sign or to be bound may not do so or be effectually bound and notwithstanding that any of the Security Documents may be invalid or unenforceable against the other Borrower, whether or not the deficiency is known to any of the Creditors.

 

	
17.7.2

	
Borrowers as principal debtors

 

Each Borrower acknowledges and confirms that it is a principal and original debtor in respect of all amounts which may become payable by the Borrowers in accordance with the terms of this Agreement or any of the other Security Documents and agrees that the Creditors may also continue to treat it as such, whether or not any Creditor is or becomes aware that such Borrower is or has become a surety for the other Borrower.

 

	
17.7.3

	
Indemnity

 

The Borrowers hereby agree jointly and severally to keep the Creditors fully indemnified on demand against all damages, losses, costs and expenses arising from any failure of either Borrower to perform or discharge any purported obligation or liability of a Borrower which would have been the subject of this Agreement or any other Security Document had it been

  

62

  

valid and enforceable and which is not or ceases to be valid and enforceable against a Borrower on any ground whatsoever, whether or not known to a Creditor (including, without limitation, any irregular exercise or absence of any corporate power or lack of authority of, or breach of duty by, any person purporting to act on behalf of a Borrower (or any legal or other limitation, whether under the Limitation Acts or otherwise or any disability or death, bankruptcy, unsoundness of mind, insolvency, liquidation, dissolution, winding up, administration, receivership, amalgamation, reconstruction or any other incapacity of any person whatsoever (including, in the case of a partnership, a termination or change in the composition of the partnership) or any change of name or style or constitution of any Security Party)).

 

	
17.7.4

	
Liability unconditional

 

None of the obligations or liabilities of the Borrowers under this Agreement or any other Security Document shall be discharged or reduced by reason of:

 

	
  

	
(a)

	
the death, bankruptcy, unsoundness of mind, insolvency, liquidation, dissolution, winding-up, administration, receivership, amalgamation, reconstruction or other incapacity of any person whatsoever (including, in the case of a partnership, a termination or change in the composition of the partnership) or any change of name or style or constitution of a Borrower or any other person liable;

 

	
  

	
(b)

	
the Agent (acting on the instructions of the Majority Banks) or the Security Agent granting any time, indulgence or concession to, or compounding with, discharging, releasing or varying the liability of, a Borrower or any other person liable or renewing, determining, varying or increasing any accommodation, facility or transaction or otherwise dealing with the same in any manner whatsoever or concurring in, accepting, varying any compromise, arrangement or settlement or omitting to claim or enforce payment from a Borrower or any other person liable; or

 

	
  

	
(c)

	
anything done or omitted which but for this provision might operate to exonerate the Borrowers or either of them.

 

	
17.7.5

	
Recourse to other security

 

The Creditors shall not be obliged to make any claim or demand or to resort to any Security Document or other means of payment now or hereafter held by or available to it for enforcing this Agreement or any of the Security Documents against a Borrower or any other person liable and no action taken or omitted by any Creditor in connection with any such Security Document or other means of payment will discharge, reduce, prejudice or affect the liability of the Borrowers under this Agreement and the Security Documents to which either of them is, or is to be, a party.

 

	
17.7.6

	
Waiver of Borrowers' rights

 

Each Borrower agrees with each Creditor that, from the date of this Agreement and so long as any moneys are owing under any of the Security Documents and while all or any part of the Total Commitment remains outstanding, it will not, without the prior written consent of the Agent (acting on the instructions of the Majority Banks):

 

	
  

	
(a)

	
exercise any right of subrogation, reimbursement and indemnity against the other Borrower or any other person liable under the Security Documents;

 

	
  

	
(b)

	
demand or accept repayment in whole or in part of any Indebtedness now or hereafter due to such Borrower from the other Borrower or from any other person liable or demand or accept any guarantee, indemnity or other assurance against financial loss or any document or instrument created or evidencing an Encumbrance in respect of the same or dispose of the same;

  

63

  

	
  

	
(c)

	
take any steps to enforce any right against any other Borrower or any other person liable in respect of any such moneys; or

 

	
  

	
(d)

	
claim any set-off or counterclaim against the other Borrower or any other person liable or claiming or proving in competition with any Creditor in the liquidation of any other Borrower or any other person liable or have the benefit of, or share in, any payment from or composition with, the other Borrower or any other person liable or any other Security Document now or hereafter held by any Creditor for any moneys owing under this Agreement or for the obligations or liabilities of any other person liable but so that, if so directed by the Agent, it will prove for the whole or any part of its claim in the liquidation of any other Borrower or other person liable on terms that the benefit of such proof and all money received by it in respect thereof shall be held on trust for the Banks and applied in or towards discharge of any moneys owing under this Agreement in such manner as the Agent (acting on the instructions of the Majority Banks) shall deem appropriate.

 

	
18

	
Governing law and jurisdiction

 

	
18.1

	
Law

 

This Agreement and any non-contractual obligations connected with it are governed by, and shall be construed in accordance with, English law.

 

	
18.2

	
Submission to jurisdiction

 

The Borrowers jointly and severally agree, for the benefit of each of the Creditors, that any legal action or proceedings arising out of or in connection with this Agreement (including any non-contractual obligations connected with it) against the Borrowers or either of them or any of their assets may be brought in the English courts. Each of the Borrowers irrevocably and unconditionally submits to the jurisdiction of such courts and irrevocably designates, appoints and empowers Mr Antonis Nicolaou at present of 25 Heath Drive, Potters Bar, Herts EN6 1EN, England to receive for it and on its behalf, service of process issued out of the English courts in any such legal action or proceedings. The submission to such jurisdiction shall not (and shall not be construed so as to) limit the right of any Creditor to take proceedings against either of the Borrowers in the courts of any other competent jurisdiction nor shall the taking of proceedings in any one or more jurisdictions preclude the taking of proceedings in any other jurisdiction, whether concurrently or not.

 

The parties further agree that only the Courts of England and not those of any other State shall have jurisdiction to determine any claim which either of the Borrowers may have against any Creditor arising out of or in connection with this Agreement (including any non-contractual obligations in connection with it).

 

	
18.3

	
Process agent

 

If Mr Antonis Nikolaou appointed as agent for service of process by the Borrowers and referred to in clause 18.2 passes away or cannot be found or is otherwise unable for any reason to act or resigns as agent for service of process, the Borrowers hereby undertake within ten (10) days of such event taking place (and the Borrowers by way of security hereby irrevocably and unconditionally authorise the Security Agent to do so) to designate, appoint and empower on their behalf, Messrs Cheeswrights (currently of Bankside House, 107 Leadenhall Street, London EC3A 4AF, England) at their then principal place of business in London as substitute process agent of Mr Antonis Nikolaou or another agent on terms acceptable to the Agent.

 

	
18.4

	
Contracts (Rights of Third Parties) Act 1999

No term of this Agreement is enforceable under the provisions of the Contracts (Rights of Third Parties) Act 1999 by a person who is not a party to this Agreement.

  

64

  

IN WITNESS whereof the parties to this Agreement have caused this Agreement to be duly executed on the date first above written.

  

65

  

 

Schedule

 

The Banks and their Commitments

 

	
Name

	
Lending office and contact details

	 	
Commitment $

	 
	  

Nordea Bank Finland Plc, London Branch

	  

Lending office

	 	26,450,000 	 
	 	
 

8th Floor, City Place House

55 Basinghall Street

London EC2V 5NB

England

 

Contact details for notices

 

8th Floor, City Place House

55 Basinghall Street

London EC2V 5NB

England

 

Fax:           +44 207 726 9188

Attn:           Shipping Department

 

With a copy to:

 

Fax:           +44 207 726 9102

Attn:           Loan Administration

 

	 	 	 	 
	
TOTAL COMMITMENT

	 	 	26,450,000	 

  

66

  

 

Schedule 2

Form of Drawdown Notice

(referred to in clause 2.4)

 

To:           Nordea Bank Finland Plc, London Branch

8th Floor, City Place House

55 Basinghall Street

London EC2V 5NB

England

(as Agent)

 

[•] 2012

 

U.S.$26,450,000 Loan

Loan Agreement dated [•] 2012 as amended and restated (together the "Loan Agreement")

 

We refer to the above Loan Agreement and hereby give you notice that we wish to draw down the

 

[Jemo] [Mandaringina] Advance, namely $• on [                                                                                     ] 200[•] and select the first Interest Period in respect thereof to expire on [•]. The funds should be credited to [name and number of account] with [details of bank in New York City].

 

We confirm that:

 

	
(a)

	
no event or circumstance has occurred and is continuing which constitutes a Default;

 

	
(b)

	
the representations and warranties contained in (i) clauses 7.1, 7.2 and 7.3.2 of the Loan Agreement, (ii) clause 4 of the Corporate Guarantee and (iii) clause 3 of each Share Pledge, are true and correct at the date hereof as if made with respect to the facts and circumstances existing at such date;

 

	
(c)

	
the borrowing to be effected by the drawdown of the [Jemo] [Mandaringina] Advance will be within our corporate powers, has been validly authorised by appropriate corporate action and will not cause any limit on our borrowings (whether imposed by statute, regulation, agreement or otherwise) to be exceeded;

 

	
(d)

	
no events, conditions, facts or circumstances exist, have arisen or occurred since 31 December 2010 which have had or could be reasonably expected to have a Material Adverse Effect; and

 

	
(e)

	
we will use the proceeds of the [Jemo] [Mandaringina] Advance for our benefit and under our full responsibility and exclusively for the purpose specified in the Loan Agreement.

 

	
  

	
Words and expressions defined in the Loan Agreement shall have the same meanings where used herein.

 

 

_________________________________

For and on behalf of

JEMO SHIPPING COMPANY INC.

 

 

 

 

_________________________________

For and on behalf of

MANDARINGINA INC.

  

67

  

  

68

  

 

Schedule 3

Documents and evidence required as conditions precedent to the Total

Commitment being made

 

(referred to in clause 9.1)

 

Part 1

 

(Documents and conditions required as conditions precedent to the Total Commitment being made available)

 

	
1

	
Constitutional documents

 

Copies, certified by an officer of each Security Party as true, complete and up to date copies of all documents which contain or establish or relate to the constitution of that Security Party;

 

	
2

	
Corporate authorisations

 

copies of resolutions of the directors and, if required, shareholders of each Security Party approving such of the Underlying Documents and the Security Documents to which such Security Party or such other party is, or is to be, party and authorising the signature, delivery and performance of such Security Party's or such other party's obligations thereunder, certified (in a certificate dated no earlier than five (5) Banking Days prior to the date of this Agreement) by an officer of such Security Party or such other party as

 

	
  

	
(a)

	
being true and correct;

 

	
  

	
(b)

	
being duly passed at meetings of the directors of such Security Party or such other party and, if required, of the shareholders of such Security Party or such other party each duly convened and held;

 

	
  

	
(c)

	
not having been amended, modified or revoked; and

 

	
  

	
(d)

	
being in full force and effect,

 

together with originals or certified copies of any powers of attorney issued by any such Security Party or such other party pursuant to such resolutions;

 

	
3

	
Specimen signatures

 

copies of the signatures of the persons who have been authorised on behalf of each Security Party to sign such of the Underlying Documents and the Security Documents to which such Security Party is, or is to be, party and to give notices and communications, including notices of drawing, under or in connection with the Security Documents, certified (in a certificate dated no earlier than five (5) Banking Days prior to the date of this Agreement) by an officer of such Security Party as being the true signatures of such persons;

 

	
4

	
Certificates of incumbency

 

a list of directors and officers of each Security Party specifying the names and positions of such persons, certified (in a certificate dated no earlier than five (5) Banking Days prior to the date of this Agreement) by an officer of such Security Party to be true, complete and up to date;

  

69

  

 

	
5

	
Borrowers' consents and approvals

 

a certificate (dated no earlier than five (5) Banking Days prior to the date of this Agreement) from an officer of each of the Borrowers that no consents, authorisations, licences or approvals are necessary for that Borrower to authorise or are required by such Borrower in connection with the borrowing by that Borrower of the Loan pursuant to this Agreement or the execution, delivery and performance of that Borrower's Security Documents;

 

	
6

	
Other consents and approvals

 

a certificate (dated no earlier than five (5) Banking Days prior to the date of this Agreement) from an officer of each Security Party (other than the Borrowers) that no consents, authorisations, licences or approvals are necessary for such Security Party to guarantee and/or grant security for the borrowing by the Borrowers of the Total Commitment pursuant to this Agreement and execute, deliver and perform the Security Documents insofar as such Security Party is a party thereto;

 

	
7

	
Certified copies of the Underlying Documents

 

a copy, certified (in a certificate dated no earlier than five (5) Banking Days prior to the date of this Agreement) as a true and complete copy by an officer of the relevant Borrower of each of the Underlying Documents, including:

 

	
  

	
(a)

	
the Jemo Initial Charter, having a tenor of no less than 24 months and a gross daily charter rate of no less than $12,900 per day, to be fully assignable to the Security Agent and otherwise on terms acceptable to the Agent; and

 

	
  

	
(b)

	
the Mandaringina Initial Charter, having a tenor of no less than 11 months and a gross daily charter rate of no less than $10,900 per day, to be fully assignable to the Security Agent and otherwise on terms acceptable to the Agent;

 

	
8

	
Financial statements

 

the audited consolidated financial statements of the Group in respect of the financial year ended on 31 December 2010;

 

	
9

	
Marshall Islands opinion

 

an opinion of Cozen 0' Connor, special legal advisers on matters of Marshall Islands law to the Agent;

 

	
10

	
Further opinions

 

any such further opinion as may be required by the Agent;

 

	
11

	
Security Documents

 

the Fee Letter, the Master Swap Agreement, the Swap Assignment, the Corporate Guarantee, the Account Assignments, the Initial Charter Assignments and the Share Pledges (together with the other documents to be delivered to the Agent pursuant thereto), each duly executed;

 

	
12

	
Borrowers' process agent

 

a letter from each Borrower's agent for receipt of service of proceedings referred to in clause 18.2 accepting its appointment under the said clause and under each of the other Security Documents in which it is or is to be appointed as such Borrower's agent;

  

70

  

 

	
13

	
Corporate Guarantor's process agent

 

a letter from the Corporate Guarantor's agent for receipt of service of proceedings referred to in clause 9.2 of the Corporate Guarantee accepting its appointment under the said clause;

 

	
14

	
Registration forms

 

such statutory forms duly signed by the Borrowers and the other Security Parties as may be required by the Agent to perfect the security contemplated by the Security Documents;

 

	
15

	
Bank account

 

evidence that each of the Operating Accounts has been opened together with mandate forms in respect thereof duly executed and that an amount of at least $10 is standing to the credit thereof;

 

	
16

	
"KYC"

 

such documentation and other evidence as is requested by the Agent in order for the Agent or any Bank or the Account Bank to carry out and be satisfied with the results of all necessary "know your client" or other checks which each such Bank or the Account Bank is required to carry out under any applicable law or legislation or by any regulatory or financial services authority (including in the European Union or the U.S.A.), in relation to the transactions contemplated by this Agreement and to the identity of any parties to this Agreement (other than the Creditors) and their directors, officers, shareholders and ultimate beneficial owners;

 

	
17

	
Fees and commitment commission

 

evidence that any fees and commitment commission due from the Borrowers to any of the Creditors pursuant to the terms of clause 5.1 or any other provision of the Security Documents have been paid in full; and

 

	
18

	
Further conditions precedent

 

such other conditions precedent as the Agent may require.

  

71

  

Part 2

 

Documents and evidence required as conditions precedent to each Advance being made

 

	
1

	
Drawdown notice

 

The Drawdown Notice for the relevant Advance, duly executed;

 

	
2

	
Conditions precedent

 

evidence that the conditions precedent set out in Part 1 of schedule 3 remain fully satisfied;

 

	
3

	
Ships conditions

 

evidence that the Ship (the "Relevant Ship") to which the Advance to be drawn down relates (the "Relevant Advance"):

 

	
  

	
(a)

	
Registration and Encumbrances

 

is permanently or provisionally registered in the name of the relevant Borrower under the laws and flag of the relevant Flag State through the relevant Registry and that the Relevant Ship and its Earnings, Insurances and Requisition Compensation are free of Encumbrances;

 

	
  

	
(b)

	
Classification

 

maintains the relevant Classification as a double-hull ship, free of any requirements and recommendations from the relevant Classification Society; and

 

	
  

	
(c)

	
Insurance

 

is insured in accordance with the provisions of the relevant Ship Security Documents and all requirements of such Ship Security Documents in respect of such insurance have been complied with (including without limitation, confirmation from the protection and indemnity association or other insurer with which the Relevant Ship is, or is to be, entered for insurance or insured against protection and indemnity risks (including oil pollution risks) that any necessary declarations required by the association or insurer for the removal of any oil pollution exclusion have been made and that any such exclusion does not apply to the Relevant Ship);

 

	
4

	
Title and no Encumbrances

 

evidence that the transfer of title to the Relevant Ship from the relevant Seller to the relevant Borrower pursuant to the relevant Contract has been duly recorded with the relevant Registry free from Encumbrances (other than Permitted Encumbrances);

 

	
5

	
Delivery Documents

 

copies certified by a person acceptable to the Agent, of the bill of sale evidencing the relevant Contract Price, the protocol of delivery and acceptance of the Relevant Ship, commercial invoices of the Relevant Ship and any other delivery documents to be exchanged between the relevant Borrower and the relevant Seller under the relevant Contract in respect of the Relevant Ship on its Delivery, each duly executed and exchanged;

 

	
6

	
Security Documents

 

the relevant Ship Security Documents duly executed and delivered;

  

72

  

 

	
7

	
Mortgage registration

 

evidence that the relevant Mortgage over the Relevant Ship has been permanently registered against the Relevant Ship under the laws and flag of the relevant Flag State through the relevant Registry;

 

	
8

	
Notices of assignment

 

copies of duly executed notices of assignment required by the terms of the relevant Ship Security Documents and in the forms prescribed by the relevant Ship Security Documents;

 

	
9

	
Security Parties' process agent

 

a letter from each Security Party's agent for receipt of service of proceedings accepting its appointment under each Ship Security Document for the Relevant Ship in which it is to be appointed as agent for service of process;

 

	
10

	
Registration forms

 

such statutory forms duly signed by the relevant Borrower and the other Security Parties as may be required by the Agent to perfect the security contemplated by the Security Documents;

 

	
11

	
Insurance opinion

 

an opinion from insurance consultants to the Agent at the cost of the Borrowers on the Insurances effected or to be effected in respect of the Relevant Ship upon and following the Drawdown Date of the Relevant Advance;

 

	
12

	
Panamanian opinion

 

an opinion of Patton, Moreno & Asvat, special legal advisers on matters of Panamanian law to the Agent;

 

	
13

	
Bahamas opinion

 

in respect of the Jemo Ship only, an opinion of Lennox Paton, special legal advisers on matters of Bahamian law to the Agent;

 

	
14

	
Marshall Islands opinion

 

an opinion of Cozen 0' Connor, special legal advisers on matters of Marshall Islands law to the Agent;

 

	
15

	
Further opinions

 

any such further opinions as may be required by the Agent;

 

	
16

	
DOC and application for SMC

 

a certified copy of the DOC issued to the Operator for the Relevant Ship and evidence satisfactory to the Agent that the Operator has applied for an SMC for the Relevant Ship to be issued pursuant to the Code;

 

17           ISPS Code Compliance

 

	
  

	
(a)

	
evidence satisfactory to the Agent that the Relevant Ship is subject to a ship security plan which complies with the ISPS Code; and

  

73

  

	
  

	
(b)

	
a copy certified (in a certificate dated no earlier than five (5) Banking Days prior to the Drawdown Date of the Relevant Advance) as a true and complete copy by an officer of the relevant Borrower of the ISSC for the Relevant Ship and the continuous synopsis record required by the ISPS Code in respect of the Relevant Ship:

 

	
18

	
Fees and commissions

 

payment of any fees and commissions due from the Borrowers to the Agent pursuant to the terms of clause 5.1 or any other provision of the Security Documents; and

 

	
19

	
Further conditions precedent

 

such further conditions precedent as the Agent may require.

  

74

  

 

Schedule 4

 

Form of Transfer Certificate

 

(referred to in clause 15.3)

 

TRANSFER CERTIFICATE

 

Banks are advised not to employ Transfer Certificates or otherwise to assign or transfer interests in the Loan Agreement without further ensuring that the transaction complies with all applicable laws and regulations, including the Financial Services and Markets Act 2000 and regulations made thereunder and similar statutes which may be in force in other jurisdictions

 

	
To:

	
NORDEA BANK FINLAND PLC, LONDON BRANCH as agent on its own behalf and on behalf of the Borrowers, the Banks, the Account Bank, the Arranger, the Swap Provider and the Security Agent defined in the Loan Agreement referred to below.

 

[Date]

 

Attention:                      [•]

 

This certificate ("Transfer Certificate") relates to a loan agreement dated [•1 2010 (the "Loan Agreement") and made between (1) Jemo Shipping Company Inc. and Mandaringina Inc. as joint and several borrowers (the "Borrowers"), (2) the banks and financial institutions defined therein as banks (the "Banks"), (3) Nordea Bank Finland Plc, London Branch as Agent, Arranger, Security Agent and Account Bank and (4) Nordea Bank Finland Plc as Swap Provider, in relation to a term loan of up to Twenty six million four hundred and fifty thousand Dollars ($26,450,000). Terms defined in the Loan Agreement shall, unless otherwise defined herein, have the same meanings herein as therein.

 

In this Certificate:

the "Transferor Bank" means [full name] of [lending office]; and the "Transferee Bank" means [full name] of [lending office].

 

	
1

	
The Transferor Bank with full title guarantee assigns to the Transferee Bank absolutely all rights and interests (present, future or contingent) which the Transferor Bank has as a Bank under or by virtue of the Loan Agreement and all the Security Documents in relation to that part of the [Contribution] [Commitment] of the Transferor Bank (or its predecessors in title) details of which are set out below:

 

	
Date of Advance

	
Amount of Advance

	
Transferor Bank’s Contribution]

[Commitment]

to Advance

	
Maturity Date

	  	  	  	  

	
2

	
By virtue of this Transfer Certificate and clause 15 of the Loan Agreement, the Transferor Bank is discharged [entirely from its [Contribution] [Commitment] which amounts to $[       ]] [from [     ] per centum ([ ]%) of its [Contribution] [Commitment] in respect of both Advances], which percentage represents $[]].

  

75

  

	
3

	
The transferee Bank hereby requests the Agent (on behalf of itself, the Borrowers, the Account Bank, the Arranger, the Security Agent, the Swap Provider and the Banks) to accept the executed copies of this Transfer Certificate as being delivered pursuant to and for the purposes of clause 15.3 of the Loan Agreement so as to take effect in accordance with the terms thereof on [date of transfer].

 

	
4

	
The Transferee Bank:

 

	
4.1

	
confirms that it has received a copy of the Loan Agreement and the other Security Documents together with such other documents and information as it has required in connection with the transaction contemplated thereby;

 

	
4.2

	
confirms that it has not relied and will not hereafter rely on the Transferor Bank, the Agent, the Arranger, the Security Agent, the Swap Provider, the Account Bank or the Banks to check or enquire on its behalf into the legality, validity, effectiveness, adequacy, accuracy or completeness of the Loan Agreement, any of the Security Documents or any such documents or information;

 

	
4.3

	
agrees that it has not relied and will not rely on the Transferor Bank, the Agent, the Arranger, the Security Agent, the Swap Provider, the Account Bank or the Banks to assess or keep under review on its behalf the financial condition, creditworthiness, condition, affairs, status or nature of the Borrowers or either of them or any other Security Party (save as otherwise expressly provided therein);

 

	
4.4

	
warrants that it has power and authority to become a party to the Loan Agreement and has taken all necessary action to authorise execution of this Transfer Certificate and to obtain all necessary approvals and consents to the assumption of its obligations under the Loan Agreement and the Security Documents; and

 

	
4.5

	
if not already a Bank, appoints (i) the Agent to act as its agent and (ii) the Security Agent to act as its security agent and trustee, in each case as provided in the Loan Agreement and the Security Documents and agrees to be bound by the terms of the Loan Agreement and the other Security Documents.

 

	
5

	
The Transferor Bank:

 

	
5.1

	
warrants to the Transferee Bank that it has full power to enter into this Transfer Certificate and has taken all corporate action necessary to authorise it to do so;

 

	
5.2

	
warrants to the Transferee Bank that this Transfer Certificate is binding on the Transferor Bank under the laws of England, the country in which the Transferor Bank is incorporated and the country in which its lending office is located; and

 

	
5.3

	
agrees that it will, at its own expense, execute any documents which the Transferee reasonably requests for perfecting in any relevant jurisdiction the Transferee Bank's title under this Transfer Certificate or for a similar purpose.

 

	
6

	
The Transferee Bank hereby undertakes with the Transferor Bank and each of the other parties to the Loan Agreement and the other Security Documents that it will perform in accordance with its terms all those obligations which by the terms of the Loan Agreement and the other Security Documents will be assumed by it after delivery of the executed copies of this Transfer Certificate to the Agent and satisfaction of the conditions (if any) subject to which this Transfer Certificate is expressed to take effect.

 

	
7

	
By execution of this Transfer Certificate on their behalf by the Agent and in reliance upon the representations and warranties of the Transferee Bank, the Borrowers, the Agent, the Arranger, the Security Agent, the Account Bank, the Swap Provider and the Banks accept the Transferee Bank as a party to the Loan Agreement and the Security Documents with respect to all those rights and/or obligations which by the terms of the Loan Agreement and the Security Documents will be assumed by the Transferee Bank (including those about pro-rata sharing and the exclusion of liability on the part of, and the indemnification of, the Agent, the Arranger, the

  

76

  

 

Account Bank, the Swap Provider and the Security Agent as provided by the Loan Agreement) after delivery of the executed copies of this Transfer Certificate to the Agent and satisfaction of the conditions (if any) subject to which this Transfer Certificate is expressed to take effect.

 

	
8

	
None of the Transferor Bank, the Agent, the Arranger, the Security Agent, the Account Bank, the Swap Provider or the Banks:

 

	
8.1

	
makes any representation or warranty nor assumes any responsibility with respect to the legality, validity, effectiveness, adequacy or enforceability of the Loan Agreement or any of the Security Documents or any document relating thereto; or

 

	
8.2

	
assumes any responsibility for the financial condition of the Borrowers or either of them or any other Security Party or any party to any such other document or for the performance and observance by the Borrowers or either of them or any other Security Party or any party to any such other document (save as otherwise expressly provided therein) and any and all such conditions and warranties, whether express or implied by law or otherwise, are hereby excluded (except as aforesaid).

 

	
9

	
The Transferor Bank and the Transferee Bank each undertake that they will on demand fully indemnify the Agent in respect of any claim, proceeding, liability or expense which relates to or results from this Transfer Certificate or any matter concerned with or arising out of it unless caused by the Agent's gross negligence or wilful misconduct, as the case may be.

 

	
10

	
The agreements and undertakings of the Transferee Bank in this Transfer Certificate are given to and for the benefit of and made with each of the other parties to the Loan Agreement and the Security Documents.

 

	
11

	
This Transfer Certificate shall be governed by, and shall be construed in accordance with,

 

	
  

	
English law.

 

	
Transferor Bank

	  	
Transferee Bank

	  
	
By:

	  	  	
By:

	  
	
Dated:

	  	
.

	
Dated:

	  

 

Agent

 

Agreed for and on behalf of itself as Agent, the Arranger, the Borrowers, the Security Agent, the Account Bank, the Swap Provider and the Banks.

 

NORDEA BANK FINLAND PLC, LONDON BRANCH

 

By:___________________________

 

Dated:________________________

 

Note: The execution of this Transfer Certificate alone may not transfer a proportionate share of the Transferor Bank's interest in the security constituted by the Security Documents in the Transferor Bank's or Transferee Bank's jurisdiction. It is the responsibility of the Transferee to ascertain whether any other documents are required to perfect a transfer of such a share in the Transferor Bank's interest in such security in any such jurisdiction and, if so, to seek appropriate advice and arrange for execution of the same.

  

77

  

 

The Schedule

 

Outstanding Contribution: $• 

Commitment: $•

Portion Transferred: •%

 

Administrative Details of Transferee Bank

 

Name of Transferee Bank:

Lending Office: 

Contact Person

(Loan Administration Department):

 

Telephone: 

Telefax No:

 

Contact Person:

 

(Credit Administration Department):

Telephone: Telefax No:

 

Account for payments:

  

78

  

 

Schedule 5

 

Mandatory Cost formula

 

	
1

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

 

	
2

	
On the first day of each Interest Period (or as soon as possible thereafter) the Agent shall calculate, as a percentage rate, a rate (the "Additional Cost Rate") for each Bank, in accordance with the paragraphs set out below. The Mandatory Cost will be calculated by the Agent as a weighted average of the Banks' Additional Cost Rates (weighted in proportion to the percentage participation of each Bank in the Loan or any relevant unpaid sum) and will be expressed as a percentage rate per annum.

 

	
3

	
The Additional Cost Rate for any Bank lending from a lending office in a Participating Member State will be the percentage notified by that Bank to the Agent. This percentage will be certified by that Bank in its notice to the Agent to be its reasonable determination of the cost (expressed as a percentage of that Bank's participation in the Loan or the relevant unpaid sum made from that lending office) of complying with the minimum reserve requirements of the European Central Bank in respect of loans made from that lending office.

 

	
4

	
The Additional Cost Rate for any Bank lending from a lending office in the United Kingdom will be calculated by the Agent as follows:

 

E x 0.01

-------------per cent per annum

    300

 

Where E is designed to compensate Banks for amounts payable under the Fees Rules and is calculated by the Agent as being the average of the most recent rates of charge supplied by the Reference Banks to the Agent pursuant to paragraph 6 below and expressed in pounds per £1,000,000.

 

	
5

	
For the purposes of this Schedule:

 

	
  

	
(a)

	
"Fees Rules" means the rules on periodic fees contained in the FSA Supervision Manual or such other law or regulation as may be in force from time to time in respect of the payment of fees for the acceptance of deposits;

 

	
  

	
(b)

	
"Fee Tariffs" means the fee tariffs specified in the Fees Rules under the activity group A.1 Deposit acceptors (ignoring any minimum fee or zero rated fee required pursuant to the Fees Rules but taking into account any applicable discount rate);

 

	
  

	
(c)

	
"Participating Member State" mans any member of the European Union that adopts or has adopted the euro as its lawful currency in accordance with the legislation of the European Community relating to the Economic and Monetary Union'

 

	
  

	
(d)

	
"Special Deposits" has the meaning given to it from time to time under or pursuant to the Bank of England Act 1998 or (as may be appropriate) by the Bank of England; and

 

	
  

	
(e)

	
"Tariff Base" has the meaning given to it in, and will be calculated in accordance with, the Fees Rule.

 

	
6

	
If requested by the Agent, each Reference Bank shall, as soon as practicable after publication by the Financial Services Authority, supply to the Agent, the rate of charge payable by that Reference Bank to the Financial Services Authority pursuant to the Fees Rules in respect of the

  

79

  

relevant financial year of the Financial Services Authority (calculated for this purpose by that Reference Bank as being the average of the Fee Tariffs applicable to that Reference Bank for that financial year) and expressed in pounds per £1,000,000 of the Tariff Base of that Reference Bank.

 

	
7

	
Each Bank shall supply any information required by the Agent for the purpose of calculating its Additional Cost Rate. In particular, but without limitation, each Bank shall supply the following information on or prior to the date on which it becomes a Bank:

 

	
  

	
(a)

	
the jurisdiction of its lending office; and

 

	
  

	
(b)

	
any other information that the Agent may reasonably require for such purpose.

 

Each Bank shall promptly notify the Agent of any change to the information provided by it pursuant to this paragraph.

 

	
8

	
The rates of charge of each Reference Bank for the purpose of E above shall be determined by the Agent based upon the information supplied to it pursuant to paragraphs 6 and 7 above and on the assumption that, unless a Bank notifies the Agent to the contrary, each Bank's obligations in relation to cash ratio deposits and Special Deposits are the same as those of a typical bank from its jurisdiction of incorporation with a lending office in the same jurisdiction as its lending office.

 

	
9

	
The Agent shall have no liability to any person if such determination results in an Additional Cost Rate which over or under compensates any Bank and shall be entitled to assume that the information provided by any Bank or Reference Bank pursuant to paragraphs 3, 6 and 7 above is true and correct in all respects.

 

	
10

	
The Agent shall distribute the additional amounts received as a result of the Mandatory Cost to the Banks on the basis of the Additional Cost Rate for each Bank based on the information provided by each Bank and each Reference Bank pursuant to paragraphs 3, 6 and 7 above.

 

	
11

	
Any determination by the Agent pursuant to this schedule in relation to a formula, the Mandatory Cost, an Additional Cost Rate or any amount payable to a Bank shall, in the absence of manifest error, be conclusive and binding on all parties to this Agreement.

 

	
12

	
The Agent may from time to time, after consultation with the Borrowers and the Banks, determine and notify to all parties to this Agreement any amendments which are required to be made to this schedule in order to comply with any change in law, regulation or any requirements from time to time imposed by the Bank of England, the Financial Services Authority or the European Central Bank (or, in any case, any other authority which replaces all or any of its functions) and any such determination shall, in the absence of manifest error, be conclusive and binding on all parties to this Agreement.

  

80

  

Schedule 4

 

Form of ISDA Amendment Agreement

  

81

  

 

 

ISDA®

 

International Swaps and Derivatives Association, Inc.

 

AMENDMENT

dated as of                      June 2012

 

to the

 

ISDA MASTER AGREEMENT

 

dated as of 7 February 2012

 

between

 

	
Nordea Bank Finland Plc

("Party A")

 

	
and

	
Jemo Shipping Company Inc. ("Jemo")

Jemo Shipping Company Inc. ("Jemo")

Mandaringina Inc. ("Mandaringina") (each of them individually referred to as "Party B")

 

	  	  	  
	
Established as a limited liability

company

With company number 1680235-8

under the laws of Finland

 

	  	
Jemo is established under the laws of Marshall Islands with company number 42931

 

Mandaringina is established under the laws of Republic of Marshall Islands with companv number 41566

(the "Agreement")

 

The parties have previously entered into the Agreement and have now agreed to amend the Agreement by the terms of this Amendment (this "Amendment").

 

It is understood and agreed that the terms of the Master Agreement, the Schedule and this Amendment will apply to all Transactions made between Party A and Jemo and Mandaringina, respectively, as specified above. The Master Agreement, the Schedule and this Amendment are produced in the form of one single set of physical documents for convenience only. Party A shall be deemed to have entered into the Master Agreement, the Schedule and this Amendment in relation to each of Jemo and Mandaringina, respectively, to the effect that there will from time to time exist one Master Agreement, Schedule, and this Amendment between Party A and Jemo, and one Master Agreement, Schedule, Confirmations and this Amendment between Party A and Mandaringina (each a "Relevant Agreement"). For the avoidance of doubt, each reference to the Agreement will be construed as a reference to each Relevant Agreement, and no Event of Default or Termination Event under one Relevant Agreement will constitute an Event of Default or Termination Event with respect to any other Relevant Agreement, unless so specifically stipulated. Furthermore, the netting and set-off provisions incorporated herein will apply solely to the Transactions entered into pursuant to a Relevant Agreement notwithstanding the fact that such agreements are included in a single set of physical documents.

  

  

  

1           Credit Support Document

 

Part 4(1) in the Schedule to the Agreement shall be deleted in its entirety and replaced with the following:

 

"Credit Support Document. Each of the Security Documents (defined as such in the Loan Agreement) and

the Guarantee dated as of                                                      June 2012 and made between Diana Shipping Inc. with company number 13671 under the laws of the Republic of the Marshall Islands, as the "Guarantor", and Nordea Bank Finland Plc, London Branch as the Security Agent as beneficiary thereof, which constitutes Credit Support Documents, are incorporated by reference in, and made part of, the Agreement and each Conformation as if set forth in full in the Agreement or such Confirmation,"

 

2           Credit Support Provider

 

Part 4(g) in the Schedule to the Agreement shall be deleted in its entirety and replaced with the following: "Credit Support Provider means in relation to Party A: None

 

Credit Support Provider means in relation to Party B as specified in Annex A: Each of the Security Parties (defined as such in the Loan Agreement) and Diana Shipping Inc. with company number 13671 under the laws of the Republic of the Marshall Islands."

 

3           Indemnity

 

Each of Jemo and Mandaringina acknowledges and confirms that they are principal and original debtors in respect of all amounts, which may become payable by either of Jemo and Mandaringina in accordance with the terms of the Relevant Agreement or any of the Transactions under the Relevant Agreement and agrees that Party A may also continue to treat it as such, whether or not Party A is or becomes aware that Jemo or Mandaringina is or has become as surety for the other Borrower.

 

Each of Jemo and Mandaringina hereby agrees jointly and severally to keep the Party A fully indemnified on demand against all damages, losses, costs and expenses arising from any failure of either of Jemo or Madaringina to perform or discharge any purported obligation or liability of Jemo or Mandaringina which would have been the subject of the the Relevant Agreement or the Transactions under the Relevant Agreement had it been valid and enforceable and which is not or ceases to be valid and enforceable against either of Jemo or Mandaringina on any ground whatsoever, whether or not known to Party A (including, without limitation, any irregular exercise or absence of any corporate power or lack of authority of, or breach of duty by, any person purporting to act on behalf of Jemo or Mandaringina, as applicable, (or any legal or other limitation, whether under the Limitation Acts or otherwise or any disability or death, bankruptcy, unsoundness of mind, insolvency, liquidation, dissolution, winding up, administration, receivership, amalgamation, reconstruction or any other incapacity of any person whatsoever (including, in the case of a partnership, a termination or change in the composition of the partnership) or any change of name or style or constitution of Party A)).

 

4           Loan Agreement

 

Part 4(o) in the Schedule to the Agreement shall be deleted in its entirety and replaced with the following:

 

"Loan Agreement. In this Agreement, "Loan Agreement" means a loan agreement dated 7 February 2012

 

(as amended and restated by a supplemental agreement dated                June 2012) providing for (inter alia) an increase of the loan amount, and made between (1) Jemo Shipping Company Inc. and Mandaringina Inc, as joint and several borrowers (therein referred to as the "Borrowers"), (2) Nordea Bank Finland plc, London Branch as arranger, agent (in such capacity the "Agent"), Security Agent and account bank, (3) Nordea Bank

  

  

  

 

Finland plc as swap provider (in such capacity the "Swap Provider") and (4) the banks and financial institutions referred to in schedule 1 thereto as lenders (the "Banks" and, together with the Agent and the Swap Provider, the "Secured Creditors"), whereby the Banks agreed (inter alia) to make available to the Borrowers, upon the terms and conditions therein contained, a term loan of up to $26,450,000."

 

5           Notices

 

Part 4 (a), (Address for notices or communications to Party B), shall be amended by adding the following:

 

	
Mandaringina Inc, address: Attention:

Facsimile No:

	
Telephone:

6           Representations

 

Each party represents to the other party in respect of the Agreement, that all representations made by it pursuant to the Agreement are true and accurate as of the date of this Amendment.

 

7           Miscellaneous

 

	
(a)

	
Entire Agreement; Restatement

 

	
  

	
(i)

	
This Amendment constitutes the entire agreement and understanding of the parties with respect to its subject matter and supersedes all oral communication and prior writings (except as otherwise provided herein) with respect thereto.

 

	
  

	
(ii)

	
Except for any amendment to the Agreement made pursuant to this Amendment, all terms and conditions of the Agreement will continue in full force and effect in accordance with its provisions on the date of this Amendment Agreement. References to the Agreement will be to the Agreement, as amended by this Amendment.

 

	
(b)

	
Amendments. No amendment, modification or waiver in respect of the matters contemplated by this Amendment will be effective unless made in accordance with the terms of the Agreement.

 

	
(c)

	
Counterparts. This Amendment may be executed and delivered in counterparts (including by facsimile transmission), each of which will be deemed an original.

 

	
(d)

	
Headings. The headings used in this Amendment are for convenience of reference only and are not to affect the construction of or to be taken into consideration in interpreting this Amendment,

 

	
(e)

	
Governing Law. This Amendment and any non-contractual obligations arising in connection with it will be governed by and construed in accordance with English law.

  

  

  

 

IN WITNESS THEREOF, the parties have executed this Amendment on the respective dates specified below with effect from the date specified first above of this Amendment.

	
Nordea Bank Finland Plc.

 

	  	
Jemo Shipping Company Inc.

	
By.

	  	
By.

	
Name:

	  	
Name:

	
Title:

	  	
Title:

	
Date

	  	
Date:

 

 

 

 

	  	  	
Mandaringina

 

	  	  	
By.

	  	  	
Name:

Title:

Date:

  

  

  

 

Schedule 5

 

Form of New Swap Assignment

  

  

  

Private & Confidential

 

Dated      June 2012

 

 

JEMO SHIPPING COMPANY INC.          (1)

and

MANDARINGINA INC.

and

NORDEA BANK FINLAND PLC, LONDON BRANCH (2)

 

 

 

SWAP ASSIGNMENT

 

 

 

 

NORTON ROSE

  

  

  

 

Contents

 

	
Clause

	  	
Page

	
1

	
Definitions

	
 1

	
2

	
Covenant to pay and assignment

	
4

	
3

	
Undertakings

	
5

	
4

	
Continuing security and other matters

	
6

	
5

	
Powers of Security Agent to protect security

	
7

	
6

	
Powers of Security Agent on Event of Default

	
7

	
7

	
Attorney

	
7

	
8

	
Further assurance

	
8

	
9

	
Costs and indemnities

	
 8

	
10

	
Remedies cumulative and other provisions

	
8

	
11

	
Notices

	
9

	
12

	
Counterparts

	
9

	
13

	
Borrowers' obligations

	
9

	
14

	
Benefit of this Deed

	
9

	
15

	
Law and jurisdiction

	
9

	
Schedule 1 Form of Notice of Swap Assignment and Acknowledgement

	
11

 

  

  

  

 

THIS DEED OF ASSIGNMENT is dated                                                                           June 2012 and made BETWEEN:

 

	
(1)

	
MANDARINGINA INC. and JEMO SHIPPING COMPANY INC., each a corporation incorporated under the laws of the Republic of the Marshall Islands whose registered office is at Trust Company Complex, Ajeltake Road, Ajeltake Islands, Majuro, Marshall Islands MH96960 (together the "Borrowers"); and

 

	
(2)

	
NORDEA BANK FINLAND PLC, LONDON BRANCH, a company incorporated in Finland whose registered office is at Aleksanterinkatou 36B, F1-00020 Helsinki, Finland acting for the purposes of this Deed through its branch at 8th Floor, City Place House, 55 Basinghall Street, London EC2V 5NB, England, as security agent and trustee for and on behalf of the Secured Creditors (as defined below) (the "Security Agent").

 

WHEREAS:

 

	
(A)

	
by a loan agreement dated 7 February 2012 (the "Principal Agreement") as amended and restated by a supplemental agreement dated    June 2012 (the "Supplemental Agreement" and, together with the Principal Agreement, the "Loan Agreement") and made between (1) the Borrowers as joint and several borrowers, (2) Nordea Bank Finland Plc, London Branch as arranger, agent (in such capacity the "Agent"), Security Agent and account bank, (3) Nordea Bank Finland Plc as swap provider (in such capacity the "Swap Provider") and (4) the banks and financial institutions referred to in schedule 1 thereto as lenders (the "Banks" and, together with the Swap Provider and the Agent, the "Secured Creditors"), the Banks agreed (inter alia) to make available to the Borrowers, upon the terms and conditions therein contained, a loan facility of up to Twenty six million four hundred and fifty thousand United States Dollars (US$26,450,000);

 

	
(B)

	
by an ISDA Master Agreement dated as of 7 February 2012 and made between Jemo Shipping Inc. and the Swap Provider, as amended by an ISDA Amendment Agreement dated      June 2012 and made between the Borrowers and the Swap Provider (together the "Master Swap Agreement") comprising an ISDA Master Agreement (including the Schedule thereto) and the Confirmations (as defined therein) supplemental thereto and any Transactions governed thereby), the Swap Provider agreed the terms and conditions upon which it would enter into one or more (inter alia) interest rate swap or other derivative transactions with the Borrowers, in respect of the Loan, whether in whole or in part (as the case may be) from time to time;

 

	
(C)

	
pursuant to clause 16.14 of the Loan Agreement, each of the Secured Creditors has appointed the Security Agent as its security agent and trustee and pursuant to a Trust Deed dated 7 February 2012 and executed by the Security Agent (as trustee) in favour of the Secured Creditors, the Security Agent agreed to hold, receive, administer and enforce this Deed as security agent and trustee for an on behalf of the Secured Creditors;

 

	
(D)

	
it is a condition precedent to each of the Banks making its Commitment available under the Loan Agreement that the Borrowers as security for (inter alia) their obligations under the Loan Agreement and the Master Swap Agreement shall execute this Deed; and

 

	
(E)

	
this Deed is supplemental to the Loan Agreement and to the security thereby created and is the Swap Assignment referred to in the Loan Agreement.

 

NOW THIS DEED WITNESSETH AND IT IS HEREBY AGREED as follows:

 

	
1

	
Definitions

 

	
1.1

	
Defined expressions

 

Words and expressions defined in the Loan Agreement shall, unless otherwise defined in this Deed, or the context otherwise requires, have the same meanings when used in this Deed.

 

 

  

1

  

 

	
1.2

	
Definitions

 

In this Deed, unless the context otherwise requires:

 

"Agent" includes its successors in title and its replacements;

 

"Assigned Property" means all of the Borrowers' right, title and interest in and to:

 

	
  

	
(a)

	
the Swap Payments; and

 

	
  

	
(b)

	
all Swap Contract Rights;

 

"Banks" includes their respective successors in title and/or Transferee Banks; "Borrowers" includes the successors in title of the Borrowers;

 

"Collateral Instruments" means notes, bills of exchange, certificates of deposit and other negotiable and non-negotiable instruments, guarantees, indemnities and other assurances against financial loss and any other documents or instruments which contain or evidence an obligation (with or without security) to pay, discharge or be responsible directly or indirectly for, any indebtedness or liabilities of the Borrowers or either of them or any other person liable under the Security Documents and includes any documents or instruments creating or evidencing a mortgage, charge (whether fixed or floating), pledge, lien, hypothecation, assignment, trust arrangement or security interest of any kind;

 

"Default" means any Event of Default or any event or circumstance which with the giving of notice or lapse of time or the satisfaction of any other condition (or any combination thereof) would constitute an Event of Default;

 

"Event of Default" means any of the events or circumstances described in clause 10.1 of the Loan Agreement;

 

"Expenses" means the aggregate at any relevant time (to the extent that the same have not been received by the Security Agent) of:

 

	
  

	
(a)

	
all losses, liabilities, costs, charges, expenses, damages and outgoings of whatever nature (including, without limitation, Taxes, repair costs, registration fees and insurance premiums) suffered, incurred or paid by the Security Agent in connection with the exercise of the powers referred to in or granted by the Loan Agreement, the Master Swap Agreement, this Deed or any other of the Security Documents; and

 

	
  

	
(b)

	
interest on all such losses, liabilities, costs, charges, expenses, damages and outgoings from the date on which the same were suffered, incurred or paid by the Security Agent until the date of receipt or recovery thereof (whether before or after judgment) at a rate per annum calculated in accordance with clause 3.4 of the Loan Agreement (as conclusively certified by the Security Agent);

 

"Loan" means the aggregate principal amount owing to the Banks under the Loan Agreement at any relevant time;

 

"Loan Agreement" means the loan agreement dated 7 February 2012 as amended and restated by a supplemental agreement datedJune 2012 mentioned in recital (A) hereto and as the same may be amended and/or supplemented and/or restated and/or novated from time to time;

 

"Master Swap Agreement" means the ISDA master swap agreement dated as of 7 February 2012 and made between Jemo Shipping Inc. and the Swap Provider, as amended by an ISDA Amendment Agreement dated   June 2012 and made between the Swap Provider and the Borrowers mentioned in recital (B) hereto, comprising an ISDA Master Agreement (and a schedule thereto) together with any Confirmations (as defined therein) supplemental thereto

  

2

  

 

and any Transactions governed thereby, and as the same may be amended and/or supplemented and/or restated and/or novated from time to time;

 

"Master Swap Agreement Liabilities" means at any relevant time all liabilities, actual or contingent, present or future, owing to the Swap Provider under the Master Swap Agreement;

 

"Notice of Assignment" means a notice of assignment in the form set out in schedule 1 or in such other form as may from time to time be agreed in writing by the Security Agent;

 

"Outstanding Indebtedness" means the aggregate of the Loan and interest accrued and accruing thereon, the Master Swap Agreement Liabilities and all other sums of money from time to time owing by the Borrowers or either of them to the Security Agent, the Secured Creditors or any of them, whether actually or contingently, present or future, under or pursuant to the Loan Agreement, the Master Swap Agreement and the other Security Documents or any of them;

 

"Security Agent" includes the successors in title and any replacements of the Security Agent;

 

"Security Documents" means the Loan Agreement, the Master Swap Agreement, this Deed and any other such document as is defined in the Loan Agreement as a Security Document or as may have been or may hereafter be executed to guarantee and/or secure all or any part of the Loan, interest thereon, the Master Swap Agreement Liabilities and other moneys from time to time owing by the Borrowers or either of them pursuant to the Loan Agreement and/or the Master Swap Agreement (whether or not any such document also secures moneys from time to time owing pursuant to any other document or agreement);

 

"Security Period" means the period commencing on the date hereof and terminating upon discharge of the security created by the Security Documents by payment of all moneys payable thereunder, whether actually or contingently;

 

"Swap Contract Rights" means all of the rights of the Borrowers under or pursuant to the Master Swap Agreement including (without limitation) the right to receive Swap Payments;

 

"Swap Payments" means all payments made or to be made to the Borrowers or either of them under the Master Swap Agreement by the Swap Provider including (but without prejudice to the generality of the foregoing) all claims for damages in respect of any breach by the Swap Provider of the Master Swap Agreement; and

 

"Swap Provider" includes its successors in title.

 

	
1.3

	
Headings

 

Clause headings and the table of contents are inserted for convenience of reference only and shall be ignored in the interpretation of this Deed.

 

	
1.4

	
Construction of certain terms

 

In this Deed, unless the context otherwise requires:

 

	
1.4.1

	
references to clauses and Schedules are to be construed as references to clauses of and Schedules to this Deed and references to this Deed include its Schedules;

 

	
1.4.2

	
references to (or to any specified provision of) this Deed or any other document shall be construed as references to this Deed, that provision or that document as in force for the time being and as amended in accordance with the terms thereof, or, as the case may be, with the agreement of the relevant parties;

 

	
1.4.3

	
words importing the plural shall include the singular and vice versa;

	
1.4.4

	
references to a person shall be construed as references to an individual, firm, company, corporation, unincorporated body of persons or any Government Entity;

  

3

  

 

	
1.4.5

	
references to a "guarantee" include references to an indemnity or other assurance against financial loss including, without limitation, an obligation to purchase assets or services as a consequence of a default by any other person to pay any Indebtedness and "guaranteed" shall be construed accordingly; and

 

	
1.4.6

	
references to statutory provisions shall be construed as references to those provisions as replaced or amended or re-enacted from time to time.

 

	
1.5

	
Conflict with Loan Agreement

 

This Deed shall be read together with the Loan Agreement but in case of any conflict between the two instruments, the provisions of the Loan Agreement shall prevail.

 

	
2

	
Covenant to pay and assignment

 

	
2.1

	
Covenant to pay

 

The Borrowers hereby jointly and severally covenant that they will pay on demand to the Security Agent for the account of the Secured Creditors and the Security Agent all moneys and discharge all the Outstanding Indebtedness now or hereafter due, owing or incurred to the Security Agent and/or any of the other Creditors under or in connection with the Loan Agreement, the Master Swap Agreement and/or this Deed or any of them when the same become due for payment, whether by acceleration or otherwise.

 

2.2           Assignment

 

By way of security for payment of the Outstanding Indebtedness, the Borrowers with full title guarantee hereby assign absolutely and charge to the Security Agent, and agree to assign absolutely and charge to the Security Agent, all their right, title and interest in and to the Assigned Property and all their benefits and interests present and future therein Provided however that the Swap Payments shall be payable to the Operating Accounts or either of them until such time as a Default shall occur and the Security Agent shall direct to the contrary whereupon the Borrowers shall forthwith, and the Security Agent may at any time thereafter, instruct the persons from whom the Swap Payments are then payable to pay the same to the Security Agent or as it may direct and any Swap Payments then in the hands of the Borrowers' agents shall be deemed to have been received by them for the use and on behalf of the Security Agent.

 

	
2.3

	
Notice

 

The Borrowers hereby jointly and severally covenant and undertake with the Security Agent that they will give a Notice of Assignment in respect of the assignment herein contained to the persons from whom any part of the Assigned Property is or may be due and will procure that the Swap Provider shall deliver to the Security Agent as soon as possible thereafter copies thereof with the acknowledgement thereto duly executed by the Swap Provider.

 

	
2.4

	
Application

 

All moneys received by the Security Agent in respect of:

 

	
2.4.1

	
Swap Payments;

 

	
2.4.2

	
other sums paid by the Swap Provider under the Master Swap Agreement (including sums arising from any arbitration award);

 

	
2.4.3

	
the enforcement of its rights hereunder;

 

	
2.4.4

	
the determination, cancellation or rescission or other termination of the Master Swap Agreement and any Transactions thereunder; or

 

  

4

  

 

	
2.4.5

	
otherwise in respect of the Assigned Property,

 

shall be held by it upon trust in the first place to pay or make good the Expenses and the balance shall be applied in the manner specified in clause 13.1 of the Loan Agreement.

 

	
2.5

	
Shortfalls

 

In the event that the balance referred to in clause 2.4 is insufficient to pay in full the whole of the Outstanding Indebtedness, the Security Agent shall be entitled to collect the shortfall from the Borrowers or any other person liable for the time being therefor.

 

	
2.6

	
Use of Borrowers' name

 

Each Borrower covenants and undertakes with the Security Agent to do or permit to be done each and every act or thing which the Security Agent may from time to time reasonably require to be done for the purpose of enforcing the Security Agent's rights under this Deed and to allow its name to be used as and when reasonably required by the Security Agent for that purpose.

 

	
2.7

	
Reassignment

 

Upon payment and discharge in full of the Outstanding Indebtedness, the Security Agent shall at the request and cost of the Borrowers, promptly reassign the Assigned Property to the Borrowers or as they may direct.

 

	
3

	
Undertakings

 

	
3.1

	
Covenants and undertakings

 

Each Borrower hereby covenants and undertakes with the Security Agent that throughout the Security Period:

 

	
3.1.1

	
Negative undertakings

 

it will not, without the previous written consent of the Security Agent:

 

	
  

	
(a)

	
Variations

 

agree to any variation of the Master Swap Agreement;

 

	
  

	
(b)

	
Release and waivers

 

release the Swap Provider from any of its obligations under the Master Swap Agreement or waive any breach of the Swap Provider's obligations thereunder or consent to any such act or omission of the Swap Provider as would otherwise constitute such breach;

 

	
  

	
(c)

	
Termination

 

terminate any Transaction entered into under the Master Swap Agreement for any reason whatsoever; or

 

	
  

	
(d)

	
Assignments

 

assign or otherwise dispose of the Assigned Property or any part thereof;

 

	
3.1.2

	
Swap Payments

 

it will ensure that any Swap Payments shall be paid to the Operating Accounts or either of them provided that, on the occurrence of a Default each Borrower shall forthwith, and the

  

5

  

 

Security Agent may during such time, instruct the persons from whom any Swap Payments are then payable, to pay the same to the Security Agent or as it may direct and any Swap Payments which are then in the hands of the Borrowers' agents shall be deemed to have been received by them for the use and on behalf of the Security Agent;

 

	
3.1.3

	
Performance of Master Swap Agreement obligations

 

it will perform its obligations under the Master Swap Agreement and use its best endeavours to procure that the Swap Provider shall perform its obligations under the Master Swap Agreement; and

 

	
3.1.4

	
Information

 

it will supply to the Security Agent all reasonable information, accounts and records that may be necessary or of assistance to enable the Security Agent to verify the amounts of all Swap Payments and any other amounts payable under the Master Swap Agreement.

 

	
4

	
Continuing security and other matters

 

	
4.1

	
Continuing security

 

The security created by this Deed shall:

 

	
4.1.1

	
be held by the Security Agent as a continuing security for the payment of the Outstanding Indebtedness and the performance and observance of and compliance with all of the covenants, terms and conditions contained in the Security Documents, express or implied, and that the security so created shall not be satisfied by any intermediate payment or satisfaction of any part of the amount hereby and thereby secured (or by any settlement of accounts between the Borrowers or either of them or any other person who may be liable to the Security Agent and/or any of the other Creditors in respect of the Outstanding Indebtedness or any part thereof and the Security Agent and/or any of the other Creditors);

 

	
4.1.2

	
be in addition to, and shall not in any way prejudice or affect, and may be enforced by the Security Agent without prior recourse to, the security created by any other of the Security Documents or by any present or future Collateral Instruments, right or remedy held by or available to the Security Agent and/or any of the other Creditors or any right or remedy of the Security Agent and/or any of the other Creditors thereunder; and

 

	
4.1.3

	
not be in any way prejudiced or affected by the existence of any of the other Security Documents or any such Collateral Instrument, rights or remedies or by the same becoming wholly or in part void, voidable or unenforceable on any ground whatsoever or by the Security Agent and/or any of the other Creditors dealing with, exchanging, varying or failing to perfect or enforce any of the same, or giving time for payment or performance or indulgence or compounding with any other person liable.

 

	
4.2

	
Rights additional

 

All the rights, powers and remedies vested in the Security Agent hereunder shall be an addition to and not a limitation of any and every other right, power or remedy vested in the Security Agent and/or any of the other Creditors under the Loan Agreement, this Deed, the other Security Documents or any Collateral Instrument or at law and all the rights, powers and remedies so vested in the Security Agent and/or any of the other Creditors may be exercised from time to time and as often as the Security Agent and/or any of the other Creditors may deem expedient.

 

	
4.3

	
No enquiry

The Agent shall not be obliged to make any enquiry as to the nature or sufficiency of any payment received by it under this Deed or to make any claim or take any action to collect any

  

6

  

 

moneys hereby assigned or to enforce any rights or benefits hereby assigned to the Security Agent or to which the Security Agent may at any time be entitled under this Deed.

 

	
4.4

	
Obligations of Borrowers and Security Agent

 

The Borrowers shall remain liable to perform all the obligations assumed by them in relation to the Assigned Property and the Security Agent shall be under no obligation of any kind whatsoever in respect thereof or be under any liability whatsoever in the event of any failure by the Borrowers to perform their obligations in respect thereof.

 

	
5

	
Powers of Security Agent to protect security

 

The Agent shall, without prejudice to its other rights, powers and remedies under any of the Security Documents, be entitled (but not bound) at any time, and as often as may be necessary, to take any such action as it deems necessary for the purpose of protecting or maintaining the security created by this Deed and the other Security Documents, and all Expenses attributable thereto shall be payable by the Borrowers on demand.

 

	
6

	
Powers of Security Agent on Event of Default

 

	
6.1

	
Powers

 

At any time after the occurrence of an Event of Default, the Security Agent shall forthwith become entitled (but not bound) as and when it may see fit, to exercise in relation to the Assigned Property or any part thereof all or any of the rights, powers and remedies possessed by it as assignee and/or chargee of the Assigned Property (whether at law, by virtue of this deed or otherwise) and in particular (without limiting the generality of the foregoing):

 

	
6.1.1

	
to collect, recover, compromise and give a good discharge for, all claims then outstanding or thereafter arising under the Assigned Property or the Master Swap Agreement or any part thereof, and to take over or institute (if necessary using the name of the Borrowers) all such proceedings in connection therewith as the Security Agent thinks fit;

 

	
6.1.2

	
to discharge, compound, release or compromise claims in respect of the Assigned Property or the Master Swap Agreement or any part thereof which have given or may give rise to any charge or lien or other claim on the Assigned Property or any part thereof or which are or may be enforceable by proceedings against the Assigned Property or any part thereof; and

 

	
6.1.3

	
to recover from the Borrower on demand all Expenses incurred or paid by the Security Agent in connection with the exercise of the powers (or any of them) referred to in this clause 6.

 

	
7

	
Attorney

 

	
7.1

	
Appointment

 

By way of security, the Borrowers hereby irrevocably appoint the Security Agent to be their attorney generally for and in the name and on behalf of the Borrowers, and as the act and deed or otherwise of the Borrowers to execute, seal and deliver and otherwise perfect and do all such deeds, assurances, agreements, instruments, acts and things which are required for the full exercise of all or any of the rights, powers or remedies conferred hereby or which may be deemed proper in or in connection with all or any of the purposes aforesaid. The power hereby conferred shall be a general power of attorney under the Powers of Attorney Act 1971, and the Borrowers ratify and confirm, and agree to ratify and confirm, any deed, assurance, agreement, instrument, act or thing which the Security Agent may execute or do pursuant thereto Provided always that such power shall not be exercisable by or on behalf of the Security Agent until the happening of any Event of Default.

  

7

  

 

	
7.2

	
Exercise of power

 

The exercise of such power by or on behalf of the Security Agent shall not put any person dealing with the Security Agent upon any enquiry as to whether any Event of Default has occurred, nor shall such person be in any way affected by notice that no such Event of Default has happened and the exercise by the Security Agent of such power shall be conclusive evidence of the Security Agent's right to exercise the same.

 

	
7.3

	
Filings

 

The Borrowers hereby irrevocably authorise and empower the Security Agent to be their attorney in their name and on their behalf and as its act and deed or otherwise of it to agree the form of and to execute and do all deeds, instruments, acts and things in order to file, record, register or enrol this Deed in any court, public office or elsewhere which the Security Agent may deem necessary or advisable, now or in the future, to ensure the legality, validity, enforceability or admissibility in evidence thereof and any other assurance, document, act or thing required to be executed by the Borrowers pursuant to clause 8.

 

	
8

	
Further assurance

 

The Borrowers hereby further undertake at their own expense from time to time to execute, sign, perfect, do and (if required) register every such further assurance, document, act or thing as in the opinion of the Security Agent may be necessary or desirable for the purpose of more effectually mortgaging and charging the Assigned Property or perfecting the security constituted or intended to be constituted by this Deed.

 

	
9

	
Costs and indemnities

 

	
9.1

	
Costs

 

The Borrowers shall pay to the Security Agent on demand all expenses (including legal fees, fees of insurance advisers, printing, out-of-pocket expenses, stamp duties, registration fees and other duties or charges) together with any value added tax or similar tax payable in respect thereof incurred by the Security Agent and/or any of the Secured Creditors in connection with the exercise or enforcement of, or preservation of any rights under, this Deed or otherwise in respect of the Outstanding Indebtedness and the security therefor or the preparation, completion, execution or registration, release or reassignment of the Loan Agreement, the Master Swap Agreement, this Deed and any of the other Security Documents.

 

	
9.2

	
Security Agent's indemnity

 

The Borrowers hereby jointly and severally, agree and undertake to indemnify the Security Agent against all losses, actions, claims, expenses, demands, obligations and liabilities whatever and whenever arising which may now or hereafter be incurred by the Security Agent and/or any of the Secured Creditors or by any manager, agent, officer or employee for whose liability, act or omission the Security Agent and/or any of the Secured Creditors may be answerable in respect of, in relation to, or in connection with anything done or omitted in the exercise or purported exercise of the powers contained in this Deed or otherwise in connection with such powers or with any part of the Assigned Property or of the Master Swap Agreement or otherwise howsoever in relation to, or in connection with, any of the matters dealt with in this Deed.

 

	
10

	
Remedies cumulative and other provisions

 

	
10.1

	
No implied waivers; remedies cumulative

 

No failure or delay on the part of the Security Agent and/or any of the Secured Creditors to exercise any right, power or remedy vested in it or them under this Deed shall operate as a waiver thereof, nor shall any single or partial exercise by the Security Agent and/or any of the

  

8

  

 

Secured Creditors of any right, power or remedy nor the discontinuance, abandonment or adverse determination of any proceedings taken by the Security Agent and/or any of the Secured Creditors to enforce any right, power or remedy preclude any other or further exercise thereof or proceedings to enforce the same or the exercise of any other right, power or remedy, nor shall the giving by the Security Agent of any consent to any act which by the terms of this Deed requires such consent prejudice the right of the Security Agent to give or withhold consent to the doing of any other similar act. The remedies provided in this Deed are not exclusive of any remedies provided by law.

 

	
10.2

	
Delegation

 

The Agent shall be entitled, at any time and as often as may be expedient, to delegate all or any of the powers and discretions vested in it by this Deed (including the power vested in it by virtue of clause 7) in such manner, upon such terms, and to such persons as the Security Agent may think fit.

 

	
11

	
Notices

 

The provisions of clause 17.1 of the Loan Agreement shall apply mutatis mutandis in respect of any certificate, notice, demand or other communication given or made under this Deed.

 

	
12

	
Counterparts

 

This Deed may be entered into in the form of counterparts, each executed by one of the parties, and, provided each of the parties shall so execute this Deed, each of the executed counterparts, when duly exchanged or delivered, shall be deemed to be an original but, taken together, they shall constitute one instrument.

 

	
13

	
Borrowers' obligations

 

Notwithstanding anything to the contrary contained in this Deed, the agreements, obligations and liabilities of the Borrowers herein contained are joint and several and shall be construed accordingly. The Borrowers agree and consent to be bound by this Deed notwithstanding that any other party who is intended to sign or to be bound may not do so or be effectually bound and notwithstanding that this Deed may be invalid or unenforceable against either Borrower whether or not the deficiency is known to the Security Agent. The Agent shall be at liberty to release either Borrower from this Deed and to compound with or otherwise vary and agree to vary the liability or to grant time and indulgence to make other arrangements with either Borrower without prejudicing or affecting the rights and remedies of the Security Agent against the other Borrower or increasing or otherwise affecting the nature of the obligations of the other Borrower.

 

	
14

	
Benefit of this Deed

 

This Deed shall be binding upon the Borrowers and their respective successors in title and shall enure for the benefit of the Security Agent and its successors in title and/or replacements. The Borrowers expressly acknowledge and accept the provisions of clause 16 of the Agreement and agree that any person who replaces the Security Agent in accordance with such clause shall be entitled to the benefit of this Deed.

 

	
15

	
Law and jurisdiction

 

	
15.1

	
Law

This Deed and any non-contractual obligations connected with this Deed are governed by, and shall be construed in accordance with, English law.

  

9

  

 

	
15.2

	
Submission to jurisdiction

 

For the benefit of the Security Agent, the parties hereto irrevocably agree that any legal action or proceedings in connection with this Deed (including any non-contractual obligations connected with this Deed) may be brought in the English courts, or in the courts of any other country chosen by the Security Agent, each of which shall have jurisdiction to settle any disputes arising out of or in connection with this Deed (including any non-contractual obligations connected with this Deed). The Borrowers irrevocably and unconditionally submit to the jurisdiction of the English courts and the courts of any country chosen by the Security Agent and irrevocably designate, appoint and empower Mr Antonis Nicolaou at present of 25 Heath Drive, Potters Bar, Herts EN6 1EN, England to receive, for them and on their behalf, service of process issued out of the English courts in any legal action or proceedings arising out of or in connection with this Deed (including any non-contractual obligations connected with this Deed). The submission to such jurisdiction shall not (and shall not be construed so as to) limit the right of the Security Agent to take proceedings against the Borrowers or either of them in any other court of competent jurisdiction nor shall the taking of proceedings in any one or more jurisdictions preclude the taking of proceedings in any other jurisdiction, whether concurrently or not.

 

The parties further agree that only the courts of England and not those of any other state shall have jurisdiction to determine any claim which the Borrowers may have against the Security Agent arising out of or in connection with this Deed (including any non-contractual obligations connected with this Deed).

 

	
15.3

	
Process Agent

 

If Mr Antonis Nikolaou appointed as agent for service of process by the Borrowers and referred to in clause 15.2 passes away or cannot be found or is otherwise unable for any reason to act or resigns as agent for service of process, the Borrowers hereby undertake within ten (10) days of such event taking place (and the Borrowers by way of security hereby irrevocably and unconditionally authorise the Security Agent to do so) to designate, appoint and empower on its behalf, Messrs Cheeswrights (currently of Bankside House, 107 Leadenhall Street, London EC3A 4AF, England) at their then principal place of business in London as substitute process agent of Mr Antonis Nikolaou or another agent on terms acceptable to the Security Agent.

 

	
15.4

	
Contracts (Rights of Third Parties) Act 1999

 

No term of this Deed shall be enforceable pursuant to the Contracts (Rights of Third Parties) Act 1999 by a person who is not a party to this Deed.

 

IN WITNESS whereof this Deed has been duly executed as a deed the day and year first above written.

  

10

  

 

Schedule 1

 

Form of Notice of Swap Assignment and Acknowledgement

 

To:         Nordea Bank Finland Plc

      2747 Securities Services 

       FIN-00020 Nordea, Helsinki 

       Finland

      (as Swap Provider)

 

(Date)

 

We refer to the Master Swap Agreement dated [•] 2012 as amended by an ISDA Amendment Agreement dated [•] 2012 (together the "Master Swap Agreement") and made between ourselves and yourselves (the "Swap Provider").

 

NOW WE HEREBY GIVE YOU NOTICE:

 

	
1

	
that, by an Assignment dated Es] 2012 (the "Assignment") made between (1) us, Jemo Shipping Company Inc. and Mandaringina Inc. and (2) Nordea Bank Finland Plc, London Branch (the "Assignee"), we have assigned to the Assignee absolutely and charged with full title guarantee all our rights, title and interest to and in any moneys whatsoever payable to us under the Master Swap Agreement and all other rights and benefits whatsoever accruing to us under the Master Swap Agreement including (but without prejudice to the generality of the foregoing) all claims for damages in respect of any breach by the Swap Provider of the Master Swap Agreement (the "Assigned Property");

 

	
2

	
that the Swap Provider is hereby irrevocably authorised and instructed to pay such moneys as aforesaid to the bank accounts with account numbers [•] and [•] or to either of them, which we have opened with Nordea Bank Finland Plc, London Branch or to such other account as the Assignee may from time to time direct;

 

	
3

	
that the Swap Provider is hereby irrevocably authorised and instructed not to deal with the Assigned Property except on the instructions of the Assignee and to pay all moneys whatsoever now or at any time hereafter due or owing to us under or by virtue of the Assigned Property to the Assignee on request by the Assignee (whose receipt shall be full and sufficient discharge to you for such payment); and

 

	
4

	
that the said Assignment includes provisions that no variations shall be made to the Master Swap Agreement (nor shall the Swap Provider be released from the Swap Provider's obligations thereunder) without the previous written consent of the Assignee and the Assignee shall be under no obligation of any kind whatsoever in respect thereof.

 

The authority and instructions herein contained cannot be revoked or varied by us without the consent of the Assignee.

 

This letter and any non-contractual obligations connected with it are governed by English law.

 

________________________

duly authorised representative

for and on behalf of

JEMO SHIPPING COMPANY INC.

and

MANDARINGINA INC.

 

Dated: [•] 2012

  

11

  

 

To:         Nordea Bank Finland Plc, London Branch

      (as Security Agent)

 

Cc:         Jemo Shipping Company Inc.

      Mandaringina Inc.

 

We acknowledge receipt of the notice set out above and consent to the assignment referred to therein and, in consideration of US$10 and other good and valuable consideration (the receipt and adequacy of which we hereby acknowledge), we hereby undertake with, and confirm to the Assignee as follows:

 

	
(a)

	
to pay all amounts due from us under the Master Swap Agreement in full in Dollars in accordance with the terms of the Master Swap Agreement to the bank accounts referred to in the said notice set out above or to the Assignee or its order;

 

	
(b)

	
to permit the Assignee to enforce all rights and benefits whatsoever accrued or accruing to Jemo Shipping Company Inc. and Mandaringina Inc. (together, the "Borrowers") under the Master Swap Agreement and for this purpose to take over or institute proceedings in respect thereof;

 

	
(c)

	
not, without the prior written consent of the Assignee, to agree to any variation of the Master Swap Agreement; and

 

	
(d)

	
that we have not received any notice of any prior charge, assignment or encumbrance over the Borrowers' right, title and interest in and to the Assigned Property or the Master Swap Agreement and hereby agree not to consent or agree to any other assignment of the Assigned Property or the Master Swap Agreement or the moneys payable by us thereunder and to advise you forthwith of any such attempted assignment, charge or disposal by the Borrowers or either of them that come to our attention.

 

This letter and any non-contractual obligations in connection with it are governed by English law.

 

 

____________________

duly authorised signatory

for and on behalf of

NORDEA BANK FINLAND PLC

(as Swap Provider)

 

Dated: [•1 2012

  

12

  

	
The Borrowers

	  
	
EXECUTED as a DEED

	
)

	
by

	
)

	
for and on behalf of

	
)

	
JEMO SHIPPING COMPANY INC.

	
) Attorney-in-Fact

	
in the presence of:

	
)

	
Witness

Name:

Address:

Occupation:

	  
	
EXECUTED as a DEED

	
)

	
by

	
)

	
for and on behalf of

	
)

	
MANDARINGINA INC.

	
) Attorney-in-Fact

	
in the presence of:

	
)

	
Witness

Name:

Address:

Occupation:

	  
	
The Security Agent

	  
	
EXECUTED as a DEED

	  
	
by

	
)

	
for and on behalf of

	
)

	
NORDEA BANK FINLAND PLC,

	
) Attorney-in-Fact

	
LONDON BRANCH

	
)

	
in the presence of:

	
)

	
Witness

Name:

Address:

Occupation:

	  

  

13

  

Schedule 6

Form of New Corporate Guarantee

 

  

  

  

 

 

Private & Confidential

 

 

 

Dated           June 2012 

 

 

 

 

 

	
                                                                                                         DIANA SHIPPING INC.                      

	
(1)

 

and

 

 

 

	
                                                                                        NORDEA BANK FINLAND PLC, LONDON BRANCH

	
(2)

 

 

 

 

_____________________________

 

CORPORATE GUARANTEE

_____________________________

 

 

NORTON ROSE

 

  

16

  

 

Contents

 

	
Clause

	
 

	
Page

	 	 	 
	 	 	 
	
1

	
Interpretation

	
1

	
2

	
Guarantee

	
4

	
3

	
Payments and Taxes

	
7

	
4

	
Representations and warranties

	
8

	
5

	
Undertakings

	
11

	
6

	
Set-off

	
15

	
7

	
Benefit of this Guarantee

	
16

	
8

	
Notices and other matters

	
16

	
9

	
Law and jurisdiction

	
18

	
Schedule 1 Form of Compliance Certificate

	
19

 

  

  

  

THIS GUARANTEE is dated                                                      June 2012 and made BETWEEN:

 

	
(1)

	
DIANA SHIPPING INC. (the "Guarantor"); and

 

	
(2)

	
NORDEA BANK FINLAND PLC, LONDON BRANCH as security agent and trustee for and on behalf of the Secured Creditors (as defined below) (the "Security Agent").

 

WHEREAS:

 

	
(A)

	
by a loan agreement dated 7 February 2012 as amended and restated by a supplemental agreement dated           June 2012 (together the "Agreement") providing for (inter alia) an increase of the loan amount, and made between (1) Jemo Shipping Company Inc. and Mandaringina Inc. as joint and several borrowers (therein referred to as the "Borrowers"), (2) Nordea Bank Finland Plc, London Branch as arranger, agent (in such capacity the "Agent"), Security Agent and account bank, (3) Nordea Bank Finland Plc as swap provider (in such capacity the "Swap Provider") and (4) the banks and financial institutions referred to in schedule 1 thereto as lenders (the "Banks" and, together with the Agent and the Swap Provider, the "Secured Creditors"), the Banks agreed (inter alia) to make available to the Borrowers, upon the terms and conditions therein contained, a term loan of up to $26,450,000;

 

	
(B)

	
by an ISDA master swap agreement dated as of 7 February 2012 made between Jemo Shipping Company Inc. and the Swap Provider as amended by an ISDA amendment agreement dated             June 2012 made between the Borrowers and the Swap Provider (together the "Master Swap Agreement") (comprising an ISDA Master Agreement (including the Schedule thereto and a credit support annex thereto), the Confirmations (as defined therein) supplemental thereto and any Transactions governed thereby), the Swap Provider agreed the terms and conditions upon which it would enter into (inter alia) one or more interest rate swap or other derivative transactions with the Borrowers in respect of the Loan, whether in whole or in part (as the case may be) from time to time, or otherwise;

 

	
(C)

	
pursuant to clause 16.14 of the Agreement, each of the Secured Creditors has appointed the Security Agent as its security agent and trustee and pursuant to a Trust Deed dated 7 February 2012 and executed by the Security Agent (as trustee) in favour of the Secured Creditors, the Security Agent agreed to hold, receive, administer and enforce this Guarantee for and on behalf of itself and the Secured Creditors; and

 

	
(D)

	
the execution and delivery of this Guarantee (referred to as the Corporate Guarantee in the Agreement) is one of the conditions precedent to each of the Banks making its Commitment available under the Agreement.

 

IT IS AGREED as follows:

 

1              Interpretation

 

	
1.1

	
Defined expressions

 

In this Guarantee, unless the context otherwise requires or unless otherwise defined in this Guarantee, words and expressions defined in the Agreement and used in this Guarantee shall have the same meanings where used in this Guarantee.

 

	
1.2

	
Definitions

 

In this Guarantee, unless the context otherwise requires:

 

"Accounting Information" means (a) the annual audited consolidated financial statements of the Group and (b) the quarterly unaudited consolidated financial statements of the Group, each as provided or (as the context may require) to be provided to the Security Agent in accordance with clause 5.1.4 (and each including, without limitation, a balance sheet, a statement of income and a statement of cash flows and accompanying notes thereto);

 

  

1

  

"Accounting Period" means (a) each financial year of the Guarantor and (b) each financial quarter of each financial year of the Guarantor, for which Accounting Information is required to be delivered pursuant to this Guarantee;

 

"Agent" includes its successors in title and its replacements;

 

"Applicable Accounting Principles" means the most recent and up-to-date US GAAP applicable at any relevant time;

 

"Banks" includes their respective successors in title and Transferee Banks;

 

"Borrowed Money" means Indebtedness in respect of (a) money borrowed or raised and debit balances at banks, (b) any bond, note, loan stock, debenture or similar debt instrument, (c) acceptance or documentary credit facilities, (d) receivables sold or discounted (otherwise than on a non-recourse basis), (e) deferred payments for assets or services acquired excluding any sum payable to any trade creditors of any member of the Group or any Fleet Vessel arising in the ordinary course of business, (f) finance leases and hire purchase contracts, (g) swaps, forward exchange contracts, futures and other derivatives (and if the agreement under which any such transaction is entered requires netting of mutual liabilities, the Indebtedness, for the net amount shall be taken into account as calculated on a "marked to market" basis), (h) any other transaction (including without limitation forward sale or purchase agreements) having the commercial effect of a borrowing or raising of money or of any of (b) to (i) above and (i) guarantees in respect of Indebtedness of any person falling within any of (a) to (h) above;

 

"Cash and Cash Equivalents" means, at any relevant time:

 

	
  

	
(a)

	
cash in hand legally and beneficially owned by any member of the Group; and

 

	
  

	
(b)

	
cash deposits legally and beneficially owned by any member of the Group and which are deposited with (i) any of the Banks, (ii) any other prime deposit taking institution or (iii) any other lender or financial institution approved by the Security Agent,

 

which in each case:

 

	
  

	
   (i)

	
is free from any Encumbrance; and

 

	
  

	
   (ii)

	
is otherwise at the free and unrestricted disposal of the relevant member of the Group by which it is owned,

 

Provided however that restricted cash of the Group which represents minimum liquidity required to be maintained under borrowing arrangements shall be taken into account as "Cash and Cash Equivalents" if and for as long as it is free from Encumbrances;

 

"Collateral Instruments" means notes, bills of exchange, certificates of deposit and other negotiable and non-negotiable instruments, guarantees, indemnities and other assurances against financial loss and any other documents or instruments which contain or evidence an obligation (with or without security) to pay, discharge or be responsible directly or indirectly for, any indebtedness or liabilities of the Borrowers or either of them or any other person liable and includes any documents or instruments creating or evidencing a mortgage, charge (whether fixed or floating), pledge, lien, hypothecation, assignment, trust arrangement or security interest of any kind;

 

"Compliance Certificate" means a certificate in the form set out in schedule 1;

 

"Equity Ratio" means, at any relevant time, the ratio of (a) the Shareholders' Equity to (b) the Total Assets;

 

  

2

  

"Fleet Market Value" means, as of the date of calculation, the aggregate market value of:

 

	
  

	
(a)

	
the Ship, as most recently determined pursuant to valuations obtained by the Agent (at the cost of the Borrowers) and made in accordance with the provisions of clauses 8.1.6 and/or 8.2.2 of the Agreement; and

 

	
  

	
(b)

	
all other Fleet Vessels (other than the Ship), as shown in the then most recent Compliance Certificate delivered to the Security Agent, unless the Security Agent has obtained valuations of the Fleet Vessels under clause 5.1.5 (at the cost of the Guarantor) following the delivery of, and in relation to that Compliance Certificate, in which case the market value of the Fleet Vessels (other than the Ship) shall be that determined by the Security Agent pursuant to such valuations;

 

"Fleet Vessels" means all the vessels (including, but not limited to, the Ship, but excluding vessels under construction which are not yet delivered to a member of the Group) from time to time owned by the members of the Group and "Fleet Vessel" means any of them;

 

"Group" means, together, the Guarantor and its Subsidiaries from time to time (which, for the avoidance of doubt, includes the Borrowers) and "member of the Group" shall only mean the Guarantor or any of its Subsidiaries (and, for the avoidance of doubt, it is hereby clarified that Diana Containerships Inc. of the Republic of the Marshall Islands and its own Subsidiaries from time to time are not part of the Group);

 

"Guarantee" includes each separate or independent stipulation or agreement by the Guarantor contained in this Guarantee;

 

"Guaranteed Liabilities" means all moneys, obligations and liabilities expressed to be guaranteed by the Guarantor in clause 2.1;

 

"Guarantor" includes the successors in title of the Guarantor;

 

"Incapacity" means, in relation to a person, the death, bankruptcy, unsoundness of mind, insolvency, liquidation, dissolution, winding-up, administration, receivership, amalgamation, reconstruction or other incapacity of that person whatsoever (and, in the case of a partnership, includes the termination or change in the composition of the partnership);

 

"Master Swap Agreement" means the ISDA Master Agreement dated 7 February 2012 made between Jemo Shipping Company Inc. and the Swap Provider as amended by an ISDA amendment agreement dated June 2012, made between the Borrowers and the Swap Provider mentioned in recital (B) hereto and comprising an ISDA Master Swap Agreement (including the Schedule thereto and a credit support annex thereto) together with any Confirmations (as defined therein) supplemental thereto and governed thereby and any Transactions governed thereby;

 

"Material Adverse Effect" means a material adverse effect:

 

	
  

	
(a)

	
on the business, assets, nature of assets, operations, prospects, liabilities or condition (financial or otherwise) of any Security Party, any member of the Group or the Group as a whole; or

 

	
  

	
(b)

	
on the ability of any of the Borrowers, the Guarantor, the Manager or any other Security Party to comply with any of their respective obligations under the Security Documents or any of them; or

 

	
  

	
(c)

	
on the legality, validity or enforceability of any of the Security Documents or any of the rights or remedies of the Creditors or any of them thereunder;

 

"Relevant Jurisdiction" means any jurisdiction in which or where the Guarantor is incorporated, resident, domiciled, has a permanent establishment, carries on, or has a place of business or is otherwise effectively connected;

 

  

3

  

"Security Agent" includes the successors in title and replacements of the Security Agent;

 

"Shareholders' Equity" means, at any time, the shareholders' equity for the Group as shown in the then most recent Accounting Information, adjusted at any relevant time to take account of the difference between the aggregate book values of the Fleet Vessels and the Fleet Market Value;

 

"Swap Provider" includes the successors in title of the Swap Provider;

 

"Tangible Net Worth" means, as at any relevant time, the issued share capital of the Guarantor plus reserves of the Group, each as shown in the then most recent Accounting Information but:

 

	
  

	
(a)

	
after adding any credit balance on the Guarantor's relevant consolidated profit and loss account (known as "Retained Earnings"); and

 

	
  

	
(b)

	
after subtracting:

 

	
  

	
(iii)

	
any debit balance on the Guarantor's relevant consolidated profit and loss account (known as "Retained Losses");

 

	
  

	
(iv)

	
any amount shown in the relevant Accounting Information for goodwill, including on consolidation, or any other intangible property;

 

	
  

	
(v)

	
distributions or proposed distributions not provided for in the relevant Accounting Information; and

 

	
  

	
(vi)

	
in the event that the Fleet Market Value is less than the book values of the Fleet Vessels as shown in the relevant Accounting Information, the relevant shortfall; and

 

"Total Assets" means, at any time, the total assets of the Group (as shown in, and calculated in accordance with, the then most recent Accounting Information) adjusted at any relevant time to take account of the difference between the aggregate book values of the Fleet Vessels and the Fleet Market Value.

 

	
1.3

	
Headings

 

Clause headings and the table of contents are inserted for convenience of reference only and shall be ignored in the interpretation of this Guarantee.

 

1.4          Construction of certain terms

 

Clause 1.4 of the Agreement shall apply to this Guarantee as if set out herein.

 

2             Guarantee

 

2.1           Covenant to pay

 

In consideration of (a) the Banks making or continuing loans or advances to, or otherwise giving credit or granting banking facilities or accommodation or granting time to, the Borrowers pursuant to the Agreement, (b) the Swap Provider agreeing to enter into the Master Swap Agreement with the Borrowers and (c) other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by the Guarantor, the Guarantor hereby irrevocably and unconditionally guarantees to pay to the Security Agent, for the account of the Secured Creditors, on demand by the Security Agent all moneys and discharge all obligations and liabilities now or hereafter due, owing or incurred by the Borrowers or either of them to the Secured Creditors or any of them under or pursuant to the Agreement, the Master Swap Agreement and the other Security Documents or any of them, when the same become due for payment or discharge whether by acceleration or otherwise, and whether such moneys, obligations or liabilities are express or implied, present, future or contingent, joint or several,

 

  

4

  

incurred as principal or surety, originally owing to the Secured Creditors or any of them or purchased or otherwise acquired by any of them, denominated in Dollars or in any other currency, or incurred on any banking account or in any other manner whatsoever.

 

Such liabilities shall, without limitation, include interest (as well after as before judgment) to date of payment at such rates and upon such terms as may from time to time be agreed, commission, fees and other charges and all legal and other costs, charges and expenses on a full and unqualified indemnity basis which may be incurred by the Secured Creditors or any of them in relation to any such moneys, obligations or liabilities or generally in respect of the Borrowers or either of them, the Guarantor or any Collateral Instrument.

 

	
2.2

	
Guarantor as principal debtor; indemnity

 

As a separate and independent stipulation, the Guarantor agrees that if any purported obligation or liability of the Borrowers or either of them which would have been the subject of this Guarantee had it been valid and enforceable is not or ceases to be valid or enforceable against the Borrowers or either of them on any ground whatsoever whether or not known to the Security Agent and/or the Secured Creditors or any of them (including, without limitation, any irregular exercise or absence of any corporate power or lack of authority of, or breach of duty by, any person purporting to act on behalf of the Borrowers or either of them or any legal or other limitation, whether under the Limitation Acts or otherwise or any disability or Incapacity or any change in the constitution of the Borrowers) the Guarantor shall nevertheless be liable to the Security Agent in respect of that purported obligation or liability as if the same were fully valid and enforceable and the Guarantor were the principal debtor in respect thereof. The Guarantor hereby agrees to keep the Security Agent fully indemnified on demand against all damages, losses, costs and expenses arising from any failure of the Borrowers or either of them to perform or discharge any such purported obligation or liability.

 

	
2.3

	
Statements of account conclusive

 

Any statement of account, signed as correct by an officer of the Security Agent, showing the amount of the Guaranteed Liabilities shall, in the absence of manifest error, be prima facie evidence against the Guarantor.

 

	
2.4

	
No security taken by Guarantor

 

The Guarantor warrants that it has not taken or received, and undertakes that until all the Guaranteed Liabilities of the Borrowers have been paid or discharged in full, it will not take or receive, the benefit of any security from the Borrowers or either of them or any other person in respect of its obligations under this Guarantee.

 

	
2.5

	
Interest

 

The Guarantor agrees to pay interest on each amount demanded of it under this Guarantee from the date of such demand until payment (as well after as before judgment) at the rate specified in clause 3.4 of the Agreement which shall apply to this Guarantee mutatis mutandis. Such interest shall be compounded at the end of each period determined for this purpose by the Security Agent in the event of it not being paid when demanded but without prejudice to any Secured Creditor's right to require payment of such interest.

 

	
2.6

	
Continuing security and other matters

 

This Guarantee shall:

 

	
2.6.1

	
secure the ultimate balance from time to time owing to the Secured Creditors or any of them by the Borrowers or either of them and shall be a continuing security, notwithstanding any settlement of account or other matter whatsoever;

 

	
2.6.2

	
be in addition to any present or future Collateral Instrument, right or remedy held by or available to the Security Agent or any of the Secured Creditors; and

 

  

5

  

	
2.6.3

	
not be in any way prejudiced or affected by the existence of any such Collateral Instrument, rights or remedies or by the same becoming wholly or in part void, voidable or unenforceable on any ground whatsoever or by the Security Agent or any of the Secured Creditors dealing with, exchanging, varying or failing to perfect or enforce any of the same or giving time for payment or indulgence or compounding with any other person liable.

 

	
2.7

	
Liability unconditional

 

The liability of the Guarantor shall not be affected nor shall this Guarantee be discharged or reduced by reason of:

 

	
2.7.1

	
the Incapacity or any change in the name, style or constitution of the Borrowers or either of them or any other person liable;

 

	
2.7.2

	
the Security Agent or any of the Secured Creditors granting any time, indulgence or concession to, or compounding with, discharging, releasing or varying the liability of, the Borrowers or any other person liable or renewing, determining, varying or increasing any accommodation, facility or transaction or otherwise dealing with the same in any manner whatsoever or concurring in, accepting or varying any compromise, arrangement or settlement or omitting to claim or enforce payment from the Borrowers or either of them or any other person liable; or

 

	
2.7.3

	
any act or omission which would have discharged or affected the liability of the Guarantor had it been a principal debtor instead of a guarantor or by anything done or omitted which but for this provision might operate to exonerate the Guarantor.

 

	
2.8

	
Collateral Instruments

 

Neither the Security Agent nor any of the Secured Creditors shall be obliged to make any claim or demand on the Borrowers or either of them or to resort to any Collateral Instrument or other means of payment now or hereafter held by or available to it before the Security Agent enforcing this Guarantee and no action taken or omitted by the Security Agent or any of the Secured Creditors in connection with any such Collateral Instrument or other means of payment shall discharge, reduce, prejudice or affect the liability of the Guarantor under this Guarantee nor shall the Security Agent or any of the Secured Creditors be obliged to apply any moneys or other property received or recovered in consequence of any enforcement or realisation of any such Collateral Instrument or other means of payment in reduction of the Guaranteed Liabilities.

 

	
2.9

	
Waiver of Guarantor's rights

 

Until all the Guaranteed Liabilities have been paid, discharged or satisfied in full (and notwithstanding payment of a dividend in any liquidation or under any compromise or arrangement) the Guarantor agrees that, without the prior written consent of the Security Agent (acting on the instructions of the Majority Banks), it will not:

 

	
2.9.1

	
exercise its rights of subrogation, reimbursement and indemnity against the Borrowers or either of them or any other person liable;

 

	
2.9.2

	
demand or accept repayment in whole or in part of any Indebtedness now or hereafter due to the Guarantor from the Borrowers or either of them or from any other person liable or demand or accept any Collateral Instrument in respect of the same or dispose of the same;

 

	
2.9.3

	
take any step to enforce any right against the Borrowers or either of them or any other person liable in respect of any Guaranteed Liabilities; or

 

	
2.9.4

	
claim any set-off or counterclaim against the Borrowers or either of them or any other person liable or claim or prove in competition with the Security Agent or any of the Secured Creditors in the liquidation of the Borrowers or either of them or any other person liable or have the benefit of, or share in, any payment from or composition with the Borrowers or either of them or any other person liable or any other Collateral Instrument now or hereafter

 

  

6

  

held by the Security Agent or any of the Secured Creditors for any Guaranteed Liabilities or for the obligations or liabilities of any other person liable but so that, if so directed by the Security Agent, it will prove for the whole or any part of its claim in the liquidation of the Borrowers or either of them or any other person liable on terms that the benefit of such proof and of all money received by it in respect thereof shall be held on trust for the Security Agent and applied in or towards discharge of the Guaranteed Liabilities in such manner as the Security Agent shall deem appropriate.

 

	
2.10

	
Suspense accounts

 

Any moneys received in connection with this Guarantee (whether before or after any Incapacity of the Borrowers or either of them or the Guarantor) may be placed to the credit of a suspense account with a view to preserving the rights of the Security Agent or any of the Secured Creditors to prove for the whole of its claims against the Borrowers or either of them or any other person liable or may be applied in or towards satisfaction of such of the Guaranteed Liabilities as the Security Agent may from time to time conclusively determine in its absolute discretion.

 

	
2.11

	
Settlements conditional

 

Any release, discharge or settlement between the Guarantor and the Security Agent or any of the Secured Creditors shall be conditional upon no security, disposition or payment to the Security Agent or any of the Secured Creditors by the Borrowers or either of them or any other person liable being void, set aside or ordered to be refunded pursuant to any enactment or law relating to bankruptcy, liquidation, administration or insolvency or for any other reason whatsoever and if such condition shall not be fulfilled the Security Agent shall be entitled to enforce this Guarantee subsequently as if such release, discharge or settlement had not occurred and any such payment had not been made.

 

	
2.12

	
Guarantor to deliver up certain property

 

If, contrary to clauses 2.4 or 2.9, the Guarantor takes or receives the benefit of any security or receives or recovers any money or other property, such security, money or other property shall be held on trust for the Security Agent and shall be delivered to the Security Agent on demand.

 

	
2.13

	
Retention of this Guarantee

 

The Security Agent shall be entitled to retain this Guarantee after as well as before the payment or discharge of all the Guaranteed Liabilities for such period as the Security Agent may determine.

 

	
3

	
Payments and Taxes

 

	
3.1

	
No set off or counterclaim

 

All payments to be made by the Guarantor under this Guarantee shall be made in full, without any set-off or counterclaim whatsoever and, subject as provided in clause 3.2, free and clear of any deductions or withholdings, in Dollars on the due date to such account of the Security Agent as it may specify in writing to the Guarantor from time to time.

 

	
3.2

	
Grossing up for Taxes

 

If at any time the Guarantor is required to make any deduction or withholding in respect of Taxes from any payment due under this Guarantee for the account of the Security Agent (or if the Security Agent is required to make any such deduction or withholding from a payment to a Secured Creditor of moneys received under this Guarantee), the sum due from the Guarantor in respect of such payment shall be increased to the extent necessary to ensure that, after the making of such deduction or withholding, the Security Agent or, as the case may be, such Secured Creditor receives on the due date for such payment (and retains, free from any liability in respect of such deduction or withholding) a net sum equal to the sum which it would have

 

  

7

  

received had no such deduction or withholding been required to be made and the Guarantor shall indemnify the Security Agent against any losses or costs incurred by it by reason of any failure of the Guarantor to make any such deduction or withholding or by reason of any increased payment not being made on the due date for such payment. The Guarantor shall promptly deliver to the Security Agent any receipts, certificates or other proof evidencing the amounts (if any) paid or payable in respect of any deduction or withholding as aforesaid.

 

	
3.3

	
Currency indemnity

 

If any sum due from the Guarantor under this Guarantee or any order or judgment given or made in relation hereto has to be converted from the currency (the "first currency") in which the same is payable under this Guarantee or under such order or judgment into another currency (the "second currency") for the purpose of (a) making or filing a claim or proof against the Guarantor, (b) obtaining an order or judgment in any court or other tribunal or (c) enforcing any order or judgment given or made in relation to this Guarantee, the Guarantor shall indemnify and hold harmless the Security Agent from and against any loss suffered as a result of any difference between (i) the rate of exchange used for such purpose to convert the sum in question from the first currency into the second currency and (ii) the rate or rates of exchange at which the Security Agent may in the ordinary course of business purchase the first currency with the second currency upon receipt of a sum paid to it in satisfaction, in whole or in part, of any such order, judgment, claim or proof. Any amount due from the Guarantor under this clause 3.3 shall be due as a separate debt and shall not be affected by judgment being obtained for any other sums due under or in respect of this Guarantee and the term "rate of exchange" includes any premium and costs of exchange payable in connection with the purchase of the first currency with the second currency.

 

	
4

	
Representations and warranties

 

	
4.1

	
Continuing representations and warranties

 

The Guarantor represents and warrants to the Security Agent that:

 

	
4.1.1

	
Due incorporation

 

the Guarantor is duly incorporated and validly existing in good standing under the laws of the Republic of the Marshall Islands as a Marshall Islands corporation and has power to carry on its business as it is now being conducted and to own its property and other assets;

 

	
4.1.2

	
Corporate power

 

the Guarantor has power to execute, deliver and perform its obligations under this Guarantee; all necessary corporate, shareholder and other action has been taken to authorise the execution, delivery and performance of the same and no limitation on the powers of the Guarantor to borrow or give guarantees will be exceeded as a result of this Guarantee;

 

	
4.1.3

	
Binding obligations

 

this Guarantee constitutes valid and legally binding obligations of the Guarantor enforceable in accordance with its terms;

 

	
4.1.4

	
No conflict with other obligations

 

the execution and delivery of, the performance of its obligations under, and compliance with the provisions of, this Guarantee by the Guarantor will not:

 

	
  

	
(a)

	
contravene any existing applicable law, statute, rule or regulation or any judgment, decree or permit to which the Guarantor is subject; or

 

  

8

  

	
  

	
(b)

	
conflict with, or result in any breach of any of the terms of, or constitute a default under, any agreement or other instrument to which the Guarantor is a party or is subject or by which it or any of its property is bound; or

 

	
  

	
(c)

	
contravene or conflict with any provision of the constitutional documents of the Guarantor; or

 

	
  

	
(d)

	
result in the creation or imposition of or oblige the Guarantor to create any Encumbrance (other than a Permitted Encumbrance) on any of the undertaking, assets, rights or revenues of the Guarantor;

 

	
4.1.5

	
No litigation

 

no litigation, arbitration or administrative proceeding is taking place, pending or, to the knowledge of the officers of the Guarantor, threatened against the Guarantor or any other member of the Group or any other Security Party which could have a Material Adverse Effect;

 

	
4.1.6

	
No filings required

 

it is not necessary to ensure the legality, validity, enforceability or admissibility in evidence of this Guarantee that it or any other instrument be notarised, filed, recorded, registered or enrolled in any court, public office or elsewhere in any Relevant Jurisdiction or that any stamp, registration or similar tax or charge be paid in any Relevant Jurisdiction on or in relation to this Guarantee and this Guarantee is in proper form for its enforcement in the courts of each Relevant Jurisdiction;

 

	
4.1.7

	
Choice of law

 

the choice of English law to govern this Guarantee and the submission by the Guarantor to the non-exclusive jurisdiction of the English courts are valid and binding;

 

	
4.1.8

	
No immunity

 

the Guarantor is subject to civil and commercial law with respect of its obligations under this Guarantee and the transactions contemplated thereby constitute private and commercial acts done for private and commercial purposes and neither the Guarantor nor any of its assets is entitled to immunity on the grounds of sovereignty or otherwise from any legal action or proceeding (which shall include, without limitation, suit, attachment prior to judgement, execution or other enforcement);

 

	
4.1.9

	
Consents obtained

 

every consent, authorisation, licence or approval of, or registration with or declaration to, governmental or public bodies or authorities or courts required by the Guarantor to authorise, or required by the Guarantor in connection with, the execution, delivery, validity, enforceability or admissibility in evidence of this Guarantee or the performance by the Guarantor of its obligations under this Guarantee has been obtained or made and is in full force and effect and there has been no default in the observance of any of the conditions or restrictions (if any) imposed in, or in connection with, this Guarantee;

 

	
4.1.10

	
Financial statements correct and complete

 

the unaudited consolidated financial statements of the Group in respect of the financial year ended on 31 December 2010 as delivered to the Agent, have been prepared in accordance with the Applicable Accounting Principles which have been consistently applied and present fairly and accurately the consolidated financial position of the Group as at the date they were prepared and the consolidated results of the operations of the Group for the financial period ended on such date and, as at such date, neither the Guarantor nor any other member of the Group had any significant liabilities (contingent or otherwise) or any unrealised or anticipated

 

  

9

  

losses which are not disclosed by, or reserved against or provided for in, such financial statements;

 

	
4.1.11

	
Shareholdings

 

each of the Borrowers is a wholly owned direct Subsidiary of the Guarantor;

 

	
4.1.12

	
Compliance with laws and regulations

 

the Guarantor is in compliance with the terms and conditions of all laws, regulations, agreements, licences and concessions material to the carrying on of its business (including in relation to Taxation);

 

	
4.1.13

	
No Material Adverse Effect

 

no events, conditions, facts or circumstances exist or have arisen or occurred since 31 December 2010, which have had or could reasonably be expected to have a Material Adverse Effect; and

 

	
4.1.14

	
Taxation

 

	
  

	
(a)

	
the Guarantor is not (and no other member of the Group is) overdue in the filing of any tax returns and the Guarantor is not (and no other member of the Group is) overdue in the payment of any amounts in respect of Taxes (or its equivalent in any other currency);

 

	
  

	
(b)

	
no claims or investigations are being, or are reasonably likely to be, made or conducted against the Guarantor (or any other member of the Group) with respect to Taxes; and

 

	
  

	
(c)

	
the Guarantor (and each other member of the Group) is resident for taxation purposes only in the jurisdiction of its incorporation.

 

	
4.2

	
Initial representations and warranties

 

The Guarantor further represents and warrants to the Security Agent that:

 

	
4.2.1

	
Pari passu and subordinated indebtedness

 

	
  

	
(a)

	
the obligations of the Guarantor under this Guarantee are direct, general and unconditional obligations of the Guarantor and rank at least pari passu with all other present and future unsecured and unsubordinated Indebtedness of the Guarantor except for obligations which are mandatorily preferred by operation of law and not by contract; and

 

	
  

	
(b)

	
any Indebtedness of the Guarantor owing to any of its shareholders or other members of the Group is subordinated in all respects to the Guarantor's obligations under this Guarantee;

 

	
4.2.2

	
No default under other Indebtedness

 

the Guarantor is not (nor would with the giving of notice or lapse of time or the satisfaction of any other condition or combination thereof be) in breach of or in default under any agreement relating to Indebtedness to which it is a party or by which it may be bound;

 

4.2.3        Information

 

the information, exhibits and reports furnished by the Guarantor to the Creditors or any of them in connection with the negotiation and preparation of this Guarantee are true and accurate in all material respects and not misleading, do not omit material facts and all reasonable enquiries have been made to verify the facts and statements contained therein;

 

  

10

  

there are no other facts the omission of which would make any fact or statement therein misleading;

 

	
4.2.4

	
No withholding Taxes

 

no Taxes are imposed by withholding or otherwise on any payment to be made by the Guarantor under this Guarantee or are imposed on or by virtue of the execution or delivery by the Guarantor of this Guarantee or any other document or instrument to be executed or delivered under this Guarantee; and

 

	
4.2.5

	
No Default

 

no Default has occurred and is continuing.

 

	
4.3

	
Repetition of representations and warranties

 

On and as of each Drawdown Date and (except in relation to the representations and warranties in clause 4.2) on each Interest Payment Date, the Guarantor shall:

 

	
4.3.1

	
be deemed to repeat the representations and warranties in clauses 4.1 and 4.2 as if made with reference to the facts and circumstances existing on such day; and

 

	
4.3.2

	
be deemed to further represent and warrant to the Security Agent that the then latest audited consolidated financial statements of the Group delivered to the Security Agent under this Guarantee (if any) have been prepared in accordance with the Applicable Accounting Principles which have been consistently applied and present fairly and accurately the consolidated financial position of the Group as at the end of the financial period to which the same relate and the consolidated results of the operations of the Group for the financial period to which the same relate and, as at the end of such financial period, neither the Guarantor nor any other member of the Group nor the Group as a whole had any significant liabilities (contingent or otherwise) or any unrealised or anticipated losses which are not disclosed by, or reserved against or provided for in, such financial statements.

 

5              Undertakings

 

5.1           General

 

The Guarantor undertakes with the Security Agent that, from the date of this Guarantee and so long as any moneys are owing, whether actually or contingently, under any of the Security Documents (including this Guarantee) and while all or any part of the Total Commitment remains outstanding, it will:

 

5.1.1        Notice of Default and other events

 

promptly inform the Security Agent of any occurrence of which it becomes aware which might adversely affect the ability of any Security Party to perform its obligations under any of the Security Documents or the Underlying Documents and, without limiting the generality of the foregoing and without prejudice to clause 5.1.5, will inform the Security Agent of any Default, forthwith upon becoming aware thereof and will from time to time, if so requested by the Security Agent, confirm to the Security Agent in writing that, save as otherwise stated in such confirmation, no Default has occurred and is continuing;

 

5.1.2        Consents and licences - compliance with laws and regulations

 

	
  

	
(a)

	
without prejudice to clauses 4.1 of this Guarantee, obtain or cause to be obtained, maintain in full force and effect and comply in all material respects with the conditions and restrictions (if any) imposed in, or in connection with, every consent, authorisation, licence or approval of governmental or public bodies or authorities or courts and do, or cause to be done, all other acts and things which may from time to time be necessary or

 

  

11

  

desirable under applicable law for the continued due performance of all the obligations of the Guarantor under this Guarantee; and

 

	
  

	
(b)

	
comply with all laws, regulations, agreements, licences and concessions material to the carrying on of its business (including in relation to Taxation);

 

	
5.1.3

	
Pari passu and subordination

 

without prejudice to the provisions of clause 5.2, ensure that:

 

	
  

	
(a)

	
its obligations under this Guarantee shall, without prejudice to the provisions of clause 5.2 and the security created or intended to be created by the Security Documents to which it is or is to be a party, at all times rank at least pari passu with all its other present and future unsecured and unsubordinated Indebtedness with the exception of any obligations which are mandatorily preferred by law and not by contract; and

 

	
  

	
(b)

	
its Indebtedness (if any) to its shareholders or its Related Companies is on terms acceptable to the Security Agent in its absolute discretion and is and shall remain at all times fully subordinated towards its obligations under this Guarantee;

 

	
5.1.4

	
Financial statements

 

prepare or cause to be prepared:

 

	
  

	
(a)

	
audited consolidated financial statements of the Group (comprising a balance sheet statement, an income statement, a cash flow analysis and accompanying notes) in accordance with the Applicable Accounting Principles consistently applied in respect of each financial year (namely, each 12-month period ending on 31 December of each calendar year) and cause the same to be reported on by the Group's auditors;

 

	
  

	
(b)

	
unaudited consolidated financial statements of the Group (comprising a balance sheet statement, an income statement, a cash flow analysis and accompanying notes) on the same basis as the annual statements in respect of each financial quarter of each financial year (namely, each 3-month, 6-month, 9-month and 12-month period ending on 31 March, 30 June, 30 September and 31 December, respectively, of each calendar year) (including on a year to date basis),

 

and, in each case, deliver to the Security Agent as many copies of the same as the Security Agent may reasonably require as soon as practicable but not later than:

 

	
  

	
(i)

	
in the case of audited financial statements, one hundred and eighty (180) days after the end of the financial period to which they relate (namely, not later than 30 June of each calendar year); and

 

	
  

	
(ii)

	
in the case of unaudited financial statements, ninety (90) days after the end of the financial period to which they relate (namely, not later than 31 March, 30 June, 30 September and 31 December, respectively, of each calendar year); and

 

	
5.1.5

	
Valuations and Compliance Certificate

 

	
  

	
(a)

	
deliver to the Security Agent in sufficient copies for all the Banks, a Compliance Certificate (including any supporting schedules or other information and evidence as the Agent may require) for the relevant Accounting Periods executed by a director and an authorised signatory of the Borrowers and by a director and an authorised signatory of the Guarantor, at the time when any unaudited or audited consolidated financial statements of the Group are delivered to the Agent and/or the Security Agent in accordance with clause 8.1.5 of the Agreement and/or clause 5.1.4 of this Guarantee (namely, not later than 31 March, 30 June, 30 September and 31 December of each calendar year) and, if a Default has occurred, at any other time as and when the Security Agent in its absolute discretion shall require;

 

  

12

  

	
  

	
(b)

	
in the event that, in the Security Agent's opinion (acting on the instructions of the Majority Banks in their absolute discretion) the Fleet Market Value set out in any Compliance Certificate delivered to the Agent and/or the Security Agent delivered under paragraph (a) above, is likely not to reflect the then fair market value of the Fleet Vessels, following the Agent's and/or the Security Agent's written request, deliver or cause to be delivered to the Agent and/or the Security Agent a valuation (dated not earlier than 30 days previously) of each Fleet Vessel (other than the Ship) prepared in accordance with, and in the manner specified in, clause 5.3.3 of this Guarantee (at the cost of the Guarantor).

 

	
5.1.6

	
Delivery of reports

 

deliver to the Security Agent sufficient copies for all the Banks of every report, circular, notice or like document issued by the Guarantor to its shareholders or creditors generally (including filings and reports to any relevant authorities pertaining to the listing of its shares, including NYSE or the SEC of the U.S.A.);

 

	
5.1.7

	
Provision of further information

 

provide the Security Agent with such financial or other information concerning the Borrowers, the other Security Parties, any other Relevant Parties, the Fleet Vessels, the Group and its members and their respective affairs (including, without limitation, financial projections of the Group on an annual consolidated basis) as the Security Agent may from time to time reasonably require and keep the Security Agent advised regularly of all major financial developments in relation to the Borrowers, the other Security Parties, any other Relevant Parties, the Group and its members including, without prejudice to the generality of the foregoing, any vessels' sales or purchases and any new borrowings (except if and to the extent that the same have already been included in the documents provided to the Security Agent under clause 5.1.6); and

 

	
5.1.8

	
Shareholdings

 

be at all times the legal and beneficial owner of 100% of (i) the total issued share capital and (ii) the total issued voting share capital of each Borrower.

 

	
5.2

	
Negative undertakings

 

The Guarantor undertakes with the Security Agent that, from the date of this Guarantee and so long as any moneys are owing under the Security Documents and while all or any part of the Total Commitment remains outstanding, it will not, without the prior written consent of the Security Agent (acting on the instructions of the Majority Banks):

 

	
5.2.1

	
Negative pledge

 

create, cause or permit any Encumbrance (and, for the avoidance of doubt, the granting of guarantees does not constitute an Encumbrance) to subsist, arise or be created or extended over all or any part of its present or future undertaking, assets, rights or revenues or over the shares of the Borrowers, to secure or prefer any present or future Indebtedness or other liability or obligation of any Security Party or any other person (and, for the avoidance of doubt, the undertaking, assets, rights and revenues of the Guarantor's Subsidiaries (except for the shares of the Borrowers) shall not be deemed included in the undertakings, assets, rights and revenues of the Guarantor for the purposes of this clause 5.2.1) Provided however that this clause 5.2.1 shall not limit the ability of the Guarantor to create Encumbrances over any shares of the Guarantor's Subsidiaries (other than the Borrowers);

 

	
5.2.2

	
No merger

 

merge or consolidate with any other person or enter into any demerger, amalgamation or any corporate reconstruction or redomiciliation of any kind;

 

  

13

  

	
5.2.3

	
Other business

 

undertake any business other than that conducted by it at the date of this Guarantee;

 

	
5.2.4

	
Share capital and distribution

 

purchase or otherwise acquire for value any shares of its capital or declare or pay any dividends or distribute any of its present or future assets, undertaking, rights or revenues to any of its shareholders, if at the time of any such action an Event of Default has occurred, or if an Event of Default would occur as a result of the same; and

 

	
5.2.5

	
Financial year, auditors and constitutional documents

 

	
  

	
(a)

	
change, cause, permit or agree to any change in, the way of computation of its financial year;

 

	
  

	
(b)

	
change, permit or agree to any change of its auditors from those existing on the date of this Guarantee; or

 

	
  

	
(c)

	
change, amend or vary, or agree to or permit any change, amendment or variation of or to:

 

	
  

	
(i)

	
its constitutional documents (except for amendments or variations made by the Guarantor for the purposes of any follow-on offering or further equity issuance through the capital markets, and then only such amendments or variations as are customary or necessary for such purpose and appropriate to a public company and provided that any such amendments or variations shall be notified by the Guarantor to the Security Agent in writing shortly after they are made); or

 

	
  

	
(ii)

	
its corporate or legal name.

 

	
5.3

	
Financial undertakings and valuations

 

	
5.3.1

	
The Guarantor undertakes with the Security Agent that, from the date of this Guarantee and so long as any moneys are owing under the Security Documents and while all or any part of the Total Commitment remains outstanding, it will ensure that:

 

	
  

	
(a)

	
Cash and Cash Equivalents

 

the aggregate amount of Cash and Cash Equivalents held in the Group on a consolidated basis shall at all times be not less than $500,000 per Fleet Vessel;

 

	
  

	
(b)

	
Equity Ratio

 

the Equity Ratio shall not at any time be lower than 0.25:1.00; and

 

	
  

	
(c)

	
Tangible Net Worth

 

the Tangible Net Worth at all times shall be not less than $150,000,000;

 

	
5.3.2

	
Interpretation

 

	
  

	
(a)

	
For the purposes of this clause 5.3, all the terms defined in clause 1.2 and used in this clause 5.3 or any other provision of the Security Documents, and other accounting terms used in this clause 5.3, are to be determined on a consolidated basis in respect of the Group, and (except as items are expressly included or excluded in the relevant definition or provision) are used and shall be construed in accordance with the Applicable Accounting Principles consistently applied and as determined from any relevant Accounting Information, Compliance Certificate or any other information available to the Security Agent and/or the Agent at any relevant time.

 

  

14

  

	
  

	
(b)

	
The compliance of the Guarantor with the undertakings set out in clause 5.3.1 shall be determined by the Security Agent in its sole discretion on the basis of calculations made by the Security Agent and/or the Agent whether or not, at that time, any relevant Accounting Information or Compliance Certificate which is due to be delivered, has been actually delivered to the Agent and/or the Security Agent pursuant to clause 5.1.4 of this Guarantee or clause 8.1.5 of the Agreement.

 

	
  

	
(c)

	
Without prejudice to the other terms of this clause 5.3 and, in particular, the time when compliance with the financial undertakings of clause 5.3.1 is to be measured by the Security Agent pursuant to clause 5.3.3, the Guarantor hereby undertakes that the financial undertakings of clause 5.3.1 will be complied with at all times during the whole term of each Accounting Period.

 

	
  

	
(d)

	
For the purposes of this clause 5.3: (i) no item shall be deducted or credited more than once in any calculation; and (ii) any amount expressed in a currency other than Dollars shall be converted into Dollars in accordance with the Applicable Accounting Principles consistently applied.

 

	
5.3.3

	
Valuations

 

	
  

	
(a)

	
Each Fleet Vessel shall, for the purposes of this Guarantee, be valued in Dollars by one (1) of the Approved Shipbrokers selected by the Guarantor or, failing such selection by the Guarantor, selected by the Security Agent in its sole discretion. Each such valuation shall not be older than 30 days from the date delivered to the Security Agent under this Guarantee, shall be addressed to the Security Agent and made without, unless required by the Security Agent, physical inspection and without taking into account the benefit of any charterparty or other engagement concerning the relevant Fleet Vessel and it shall be made on the basis of a sale for prompt delivery for cash at arm's length on normal commercial terms as between a willing buyer and a willing seller. Each such valuation shall constitute the value of a Fleet Vessel for the purposes of this clause 5.3.3 and the other provisions of this Guarantee and the other Security Documents.

 

	
  

	
(b)

	
The value of a Fleet Vessel determined in accordance with the provisions of this clause 5.3.3 shall be binding upon the parties hereto until such time as any further such valuations shall be obtained in respect of that Fleet Vessel.

 

	
  

	
(c)

	
The Guarantor undertakes with the Security Agent to supply to the Security Agent and to any such Approved Shipbroker such information concerning each Fleet Vessel and its condition as such Approved Shipbroker may require for the purpose of making any such valuation.

 

	
  

	
(d)

	
All costs in connection with the Security Agent obtaining any valuations of the Fleet Vessels referred to in this clause 5.3.3, shall be borne by the Guarantor.

 

	
6

	
Set-off

 

The Guarantor authorises the Security Agent, at any time after the occurrence of an Event of Default, to apply any credit balance to which the Guarantor is then entitled on any account of the Guarantor with the Security Agent at any of its branches in or towards satisfaction of any sum then due and payable from the Guarantor to the Security Agent under this Guarantee. For this purpose the Security Agent is authorised to purchase with the moneys standing to the credit of such account such other currencies as may be necessary to effect such application. The Security Agent shall not be obliged to exercise any right given to it by this clause 6. The Security Agent shall notify the Guarantor and the Secured Creditors forthwith upon the exercise or purported exercise of any right of set-off giving full details in relation thereto.

 

  

15

  

	
7

	
Benefit of this Guarantee

 

	
7.1

	
Benefit and burden

 

This Guarantee shall be binding upon the Guarantor and its successors in title and shall enure for the benefit of the Security Agent and its successors in title and/or replacements. The Guarantor expressly acknowledges and accepts the provisions of clause 16 of the Agreement and agrees that any person who replaces the Security Agent in accordance with such clause shall be entitled to the benefit of this Guarantee.

 

	
7.2

	
Changes in constitution or reorganisation of Secured Creditors

 

For the avoidance of doubt and without prejudice to the provisions of clause 7.1, this Guarantee shall remain binding on the Guarantor notwithstanding any change in the constitution of any of the Secured Creditors or the Security Agent or its absorption in, or amalgamation with, or the acquisition of all or part of its undertaking or assets by, any other person, or any reconstruction or reorganisation of any kind, to the intent that this Guarantee shall remain valid and effective in all respects in favour of any successor in title or replacement of the Security Agent in the same manner as if such successor in title or replacement had been named in this Guarantee as a party instead of, or in addition to, the Security Agent.

 

	
7.3

	
No assignment by Guarantor

 

The Guarantor may not assign or transfer any of its rights or obligations under this Guarantee.

 

	
7.4

	
Disclosure of information

 

The Security Agent may, without the consent of the Guarantor (but provided that the Borrowers have in the meantime given their consent in relation to that transfer, if and where the same is required under clause 15.3 of the Agreement), disclose to a prospective replacement of the Security Agent or a Transferee Bank or to any other person who may propose entering into contractual relations with the Security Agent in relation to the Agreement such information about the Guarantor as the Security Agent shall consider appropriate provided that the Security Agent shall ensure that such information shall be disclosed on a confidential basis to any such person.

 

	
8

	
Notices and other matters

 

	
8.1

	
Notice

 

Clauses 17.1 and 17.2 of the Agreement shall apply to this Guarantee as if set out herein and every notice, request, demand or other communication under this Guarantee shall be sent:

 

	
8.1.1

	
if to the Guarantor at:

 

c/o Diana Shipping Services S.A.

Pendelis 16

Palaio Faliro

175 64 Athens

Greece

 

Fax no:       +30 210 942 4075

Tel no:       +30 210 942 4975

Attention: Mr. Andreas Michalopoulos

 

  

16

  

	
8.1.2

	
if to the Security Agent at:

 

Nordea Bank Finland Plc, London Branch

8th Floor, City Place House

55 Basinghall Street

London EC2V 5NB

England

 

Fax No:      +44 207 726 9102

Attention: Loan Administration

 

with a copy to:

 

Fax No:       +44 207 726 9188

Attention:  Shipping Department

 

or to such other address or facsimile number as is notified by the Guarantor or the Security Agent to the other party to this Guarantee.

 

8.2           No implied waivers, remedies cumulative

 

No failure or delay on the part of the Security Agent to exercise any power, right or remedy under this Guarantee shall operate as a waiver thereof, nor shall any single or partial exercise by the Security Agent of any power, right or remedy preclude any other or further exercise thereof or the exercise of any other power, right or remedy. The remedies provided in this Guarantee are cumulative and are not exclusive of any remedies provided by law.

 

8.3           English translations

 

All certificates, instruments and other documents to be delivered under or supplied in connection with this Guarantee shall be in the English language or shall be accompanied by a certified English translation upon which the Security Agent shall be entitled to rely.

 

8.4           Other guarantors

 

The Guarantor agrees to be bound by this Guarantee notwithstanding that any other person intended to execute or to be bound by any other guarantee or assurance under or pursuant to the Agreement may not do so or may not be effectually bound and notwithstanding that such other guarantee or assurance may be determined or be or become invalid or unenforceable against any other person, whether or not the deficiency is known to the Security Agent or any of the Secured Creditors.

 

8.5           Expenses

 

The Guarantor agrees to reimburse the Security Agent on demand for all legal and other costs, charges and expenses on a full and unqualified indemnity basis which may be incurred by the

 

Security Agent in relation to the enforcement of this Guarantee against the Guarantor.

 

8.6           Partial invalidity

 

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

 

8.7           Miscellaneous

 

	
8.7.1

	
This Guarantee contains the entire agreement of the parties and its provisions supersede any and all other prior correspondence and oral negotiation by the parties in respect of the matters regulated by the Guarantee.

 

  

17

  

	
8.7.2

	
This Guarantee shall not be amended or varied in its terms by any oral agreement or representation or in any other manner other than by an instrument in writing of even date herewith or subsequent hereto executed by or on behalf of the parties hereto.

 

	
9

	
Law and jurisdiction

 

	
9.1

	
Law

 

This Guarantee and any non-contractual obligations in connection with it are governed by, and shall be construed in accordance with, English law.

 

	
9.2

	
Submission to jurisdiction

 

The Guarantor agrees for the benefit of the Security Agent that any legal action or proceedings arising out of or in connection with this Guarantee (including any non-contractual obligations in connection with this Guarantee) against the Guarantor or any of its assets may be brought in the English courts, irrevocably and unconditionally submits to the jurisdiction of such courts and irrevocably designates, appoints and empowers Mr Antonis Nicolaou, at present of 25 Health Drive, Potters Bar, Herts EN6 1EN, United Kingdom to receive for it and on its behalf, service of process issued out of the English courts in any such legal action or proceedings. The submission to such jurisdiction shall not (and shall not be construed so as to) limit the right of the Security Agent to take proceedings against the Guarantor in the courts of any other competent jurisdiction, nor shall the taking of proceedings in any one or more jurisdictions preclude the taking of proceedings in any other jurisdiction, whether concurrently or not. The Guarantor further agrees that only the courts of England and not those of any other state shall have jurisdiction to determine any claim which the Guarantor may have against the Security Agent arising out of or in connection with this Guarantee (including any non-contractual obligations in connection with this Guarantee).

 

	
9.3

	
Process agent

 

If Mr Antonis Nikolaou appointed as agent for service of process by the Guarantor and referred to in clause 9.2 passes away or cannot be found or is otherwise unable for any reason to act or resigns as agent for service of process, the Guarantor hereby undertakes within ten (10) days of such event taking place (and the Guarantor by way of security hereby irrevocably and unconditionally authorises the Security Agent to do so) to designate, appoint and empower on its behalf, Messrs Cheeswrights (currently of Bankside House, 107 Leadenhall Street, London EC3A 4AF, England) at their then principal place of business in London as substitute process agent of Mr Antonis Nikolaou or another agent on terms acceptable to the Security Agent.

 

	
9.4

	
Contracts (Rights of Third Parties) Act 1999

 

No term of this Guarantee is enforceable under the provisions of the Contracts (Rights of Third Parties) Act 1999 by a person who is not a party to this Guarantee.

 

IN WITNESS whereof the parties to this Guarantee have caused this Guarantee to be duly executed as a deed on the date first above written.

 

  

18

  

Schedule 1

Form of Compliance Certificate

 

	
To:

	
NORDEA BANK FINLAND PLC, LONDON BRANCH (as Agent and Security Agent)

 

	
From:

	
DIANA SHIPPING INC. and JEMO SHIPPING COMPANY INC. and MANDARINGINA INC.

 

Dated: [●]

 

US$26,450,000 Loan - Loan Agreement dated 7 February 2012 as amended and restated - Corporate Guarantee dated [•] 2012 (the "Corporate Guarantee")

 

Terms defined in the Loan Agreement and the Corporate Guarantee shall have the same meaning when used herein.

 

We refer to clause [5.3.1] of the Corporate Guarantee and hereby certify that, as at [insert date of accounts] and on the date hereof:

 

1             Financial covenants

 

	
  

	
(a)

	
the Cash and Cash Equivalents of the Group on a consolidated basis is $[•], calculated as shown in [Appendix A] versus the required amount of $[•];

 

	
  

	
(b)

	
the Equity Ratio is [•], calculated as shown in [Appendix B] versus the minimum ratio of 0.25:1.00; and

 

	
  

	
(c)

	
[the Tangible Net Worth is $[•], calculated as shown in [Appendix C], versus the minimum required amount of $150,000,000[.][,]

 

[and we hereby confirm that the above comply with the provisions of clause 5.3.1 of the Corporate Guarantee.]

 

2             Share capital and distribution

 

We further refer to clause 5.2.5 of the Guarantee and hereby certify that:

 

	
  

	
(a)

	
during [insert relevant period covered by relevant financial statements] the Guarantor [has] [has not] [declared or paid dividends] to its shareholder [in the amount of $[•]] [insert dividend details for relevant period covered by relevant financial statements][; and

 

	
  

	
(b)

	
[no Event of Default had occurred and was continuing at the time of declaration or payment of such dividends nor will result or has resulted from the declaration or payment of such dividends]].

 

3             Security Requirement

 

We further refer to clause 8.2.1 of the Loan Agreement and hereby certify that, as at [insert date of valuation] and on the date hereof:

 

	 	
[(a)   

	
the Security Value is in the amount of $[•], calculated as shown in [Appendix D]; and

 

	
  

	
(b)

	
the Loan is in the amount of $[•] calculated as shown in [Appendix E]; and

 

	
  

	
(c)

	
[the Security Requirement ratio is [•]%, versus the required ratio of [125]%1 OR [the Security Requirement ratio of 125% is met.]

 

  

19

  

	
4

	
Default

 

[No Default has occurred and is continuing] or

 

[The following Default has occurred and is continuing: [provide details of Default]. [The following steps are being taken to remedy it [provide details of steps being taken to remedy Default]].

 

	
Signed:

	__________________________  
	  	
duly authorised signatory/Director

For and on behalf of:

DIANA SHIPPING INC.

 

	
Signed:

	__________________________  
	  	
duly authorised signatory/Director

For and on behalf of:

JEMO SHIPPING COMPANY INC.

 

	
Signed:

	__________________________  
	  	
duly authorised signatory/Director

For and on behalf of:

MANDARINGINA INC.

  

20

  

 

	
EXECUTED as a DEED

	
)

	  
	
by

	
)

	  
	
for and on behalf of

	
)

	  
	
DIANA SHIPPING INC.

	
)

	
Attorney-in-Fact

	
in the presence of:

	
)

	  

 

 

	  
	
Witness

Name:

Address:

Occupation:

 

 

	
EXECUTED as a DEED

	
)

	  
	
by

	
)

	  
	
for and on behalf of

	
)

	  
	
NORDEA BANK FINLAND PLC, LONDON BRANCH

	
)

	
Attorney-in-Fact

	
in the presence of:

	
)

	  

 

 

	  
	
Witness

Name:

Address:

Occupation:

 

 

  

21

  

Schedule 7

 

Form of New Jemo Mortgage

 

  

  

  

 

  

  

  

 

 

  

  

  

Schedule 8

 

Form of New Jemo Deed of Covenant

 

  

18

  

Private & Confidential

 

 

 

Dated            June 2012

 

 

 

 

 

 

	
                                                                                     JEMO SHIPPING COMPANY INC.

	
(1)

 

 

and

 

 

 

 

	
                                                                                        NORDEA BANK FINLAND PLC, LONDON BRANCH

	
(2)

 

 

 

 

_____________________________

 

DEED OF COVENANT

 

relating to m.v. Leta

 

_____________________________

 

 

NORTON ROSE

 

  

  

  

	
Clause

	
Contents

	
Page

	
1

	
Definitions

	
1

	
2

	
Mortgage and assignment..6

	
6

	
3

	
Covenant to pay

	
7

	
4

	
Continuing security and other matters

	
8

	
5

	
Covenants

	
9

	
6

	
Powers of Mortgagee to protect security and remedy defaults

	
 16

	
7

	
Powers of Mortgagee on Event of Default

	
 16

	
8

	
Application of moneys

	
18

	
9

	
Remedies cumulative and other provisions

	
 19

	
10

	
Costs and indemnity

	
20

	
11

	
Attorney

	
20

	
12

	
Further assurance.

	
21

	
13

	
Notices

	
21

	
14

	
Counterparts

	
22

	
15

	
Severability of provisions

	
22

	
16

	
Law and jurisdiction

	
22

	
Schedule 1 Forms of Loss Payable Clauses

	
24

	
Schedule 2 Form of Notice of Assignment of Insurances

	
26

 

  

  

  

THIS DEED OF COVENANT is dated                                                                           June 2012 and made BETWEEN:

 

	
(1)

	
JEMO SHIPPING COMPANY INC. whose registered office is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960 (the "Owner"); and

 

	
(2)

	
NORDEA BANK FINLAND PLC, LONDON BRANCH of Aleksanterinkatou 36B, FI-00020 Helsinki, Finland, acting for the purposes of this Deed through its office at 8th Floor, City Place House, 55 Basinghall Street, London EC2V 5NB, England as security agent and trustee for and on behalf of the Secured Creditors (as defined below) (the "Mortgagee").

 

WHEREAS:

 

	
(A)

	
the Owner is the sole, absolute and unencumbered, legal and beneficial owner of sixty-four sixty-fourth shares in the Ship described in clause 1.2;

 

	
(B)

	
by a loan agreement dated 7 February 2012 as amended and restated by a supplemental agreement dated       June 2012 (as the same may from time to time be amended, novated, supplemented, extended or replaced) (together the "Loan Agreement") and made between (1) the Owner and Mandaringina Inc. as joint and several borrowers (herein and therein referred to as the "Borrowers"), (2) Nordea Bank Finland Plc, London Branch as arranger, agent (in such capacity the "Agent"), security agent and account bank (in such capacity the "Account Bank"), (3) Nordea Bank Finland Plc as swap provider (in such capacity the "Swap Provider") and (4) the banks and financial institutions referred to in schedule 1 thereto as lenders (the "Banks" and, together with the Swap Provider and the Agent, the "Secured Creditors"), the Banks agreed (inter alia) to make available to the Owner, upon the terms and conditions therein contained, a loan facility of up to Twenty six million four hundred and fifty thousand Dollars ($26,450,000);

 

	
(C)

	
by an ISDA master agreement (including a schedule thereto) dated as of 7 February 2012 and made between the Owner and the Swap Provider, as amended by an ISDA amendment agreement dated

	
June 2012 and made between the Borrowers and the Swap Provider (together the "Master Swap Agreement"), the Swap Provider agreed the terms and conditions upon which it would enter into (inter alia) one or more interest rate swap or other derivative transactions with the Borrowers in respect of the Loan, whether in whole or in part (as the case may be) from time to time;

 

	
(D)

	
pursuant to clause 16.14 of the Loan Agreement, each of the Secured Creditors has appointed the Mortgagee as its security agent and trustee and pursuant to a Trust Deed dated 7 February 201,2 and executed by the Mortgagee (as trustee) in favour of the Secured Creditors, the Mortgagee (referred to in the Loan Agreement as "Security Agent") agreed to hold, receive, administer and enforce this Deed as security agent and trustee for and on behalf of the Secured Creditors;

 

	
(E)

	
the Owner has executed in favour of the Mortgagee a statutory mortgage of even date herewith in account current form constituting a first priority mortgage of sixty-four sixty-fourth shares in the said Ship (the "Mortgage"); and

 

	
(F)

	
this Deed is supplemental to the Mortgage and to the security thereby created and is one of the Jemo Deeds of Covenant referred to in the Loan Agreement but shall nonetheless continue in full force and effect notwithstanding any discharge of the Mortgage.

 

NOW THIS DEED WITNESSES AND IT IS HEREBY AGREED as follows:

 

	
1

	
Definitions

 

	
1.1

	
Defined expressions

 

Words and expressions defined in the Loan Agreement shall, unless the context otherwise requires or unless otherwise defined herein, have the same meanings when used in this Deed.

 

 

  

1

  

	
1.2

	
Definitions

 

In this Deed, unless the context otherwise requires:

 

"Agent" includes its successors in title and its replacements;

 

"Approved Brokers" means such firm of insurance brokers appointed by the Owner, as may from time to time be approved in writing by the Mortgagee for the purposes of this Deed;

 

"Banking Day" means a day on which dealings in deposits in Dollars are carried on in the London Interbank Eurocurrency Market and (other than Saturday or Sunday) on which banks are open for business in London, Athens and New York City (or any other relevant place of payment under the Loan Agreement);

 

"Banks" includes their successors in title and their Transferee Banks;

 

"Casualty Amount" means One million Dollars ($1,000,000) (or the equivalent in any other currency);

 

"Collateral Instruments" means notes, bills of exchange, certificates of deposit and other negotiable and non-negotiable instruments, guarantees, indemnities and other assurances against financial loss and any other documents or instruments which contain or evidence an obligation (with or without security) to pay, discharge or be responsible directly or indirectly for, any indebtedness or liabilities of the Borrowers or either of them or any other person liable and includes any documents or instruments creating or evidencing a mortgage, charge (whether fixed or floating), pledge, lien, hypothecation, assignment, trust arrangement or security interest of any kind;

 

"Default" means any Event of Default or any event or circumstance which with the giving of notice or lapse of time or the satisfaction of any other condition (or any combination thereof) would constitute an Event of Default;

 

"Earnings" means all moneys whatsoever from time to time due or payable to the Owner during the Security Period arising out of the use or operation of the Ship including (but without limiting the generality of the foregoing) all freight, hire and passage moneys, income arising under pooling arrangements, compensation payable to the Owner in the event of requisition of the Ship for hire, remuneration for salvage and towage services, demurrage and detention moneys, damages for breach (or payments for variation or termination) of any charterparty or other contract for the employment of the Ship;

 

"Encumbrance" means any mortgage, charge (whether fixed or floating), pledge, lien, hypothecation, assignment, trust arrangement or security interest or other encumbrance of any kind securing any obligation of any person or any type of preferential arrangement (including without limitation title transfer and/or retention arrangements having a similar effect);

 

"Expenses" means the aggregate at any relevant time (to the extent that the same have not been received or recovered by the Mortgagee or any Receiver) of:

 

	
  

	
(a)

	
all losses, liabilities, costs, charges, expenses, damages and outgoings of whatever nature (including, without limitation, Taxes, repair costs, registration fees and insurance premiums) suffered, incurred or paid by the Mortgagee or any Receiver in connection with the exercise of the powers referred to in or granted by this Deed or otherwise payable by the Owner in accordance with clause 10; and

 

	
  

	
(b)

	
interest on all such losses, liabilities, costs, charges, expenses, damages and outgoings from the date on which the same were suffered, incurred or paid by the Mortgagee or any Receiver until the date of receipt or recovery thereof (whether before or after judgment) at a rate per annum calculated in accordance with clause 3.4 of the Loan Agreement (as conclusively certified by the Mortgagee or such Receiver, as the case may be);

 

  

2

  

"Insurances" means all policies and contracts of insurance (which expression includes all entries of the Ship in a protection and indemnity or war risks association) which are from time to time during the Security Period in place or taken out or entered into by or for the benefit of the Owner (whether in the sole name of the Owner or in the joint names of the Owner and the Mortgagee or otherwise) in respect of the Ship and her Earnings or otherwise howsoever in connection with the Ship and all benefits thereof (including claims of whatsoever nature and return of premiums);

 

"Loan" means the aggregate principal amount advanced and/or to be advanced by the Banks to the Borrowers or either of them pursuant to the Loan Agreement or, as the context may require, the amount thereof at any time outstanding;

 

"Loan Agreement" means the agreement dated 7 February 2012 as amended and restated by a supplemental agreement dated June 2012, mentioned in Recital (B) hereto and as the same may be amended and/or supplemented and/or restated from time to time;

 

"Loss Payable Clauses" means the provisions regulating the manner of payment of sums receivable under the Insurances which are to be incorporated in the relevant insurance documents, such provisions to be in the forms set out in schedule 1, or in such other forms as may from time to time be agreed in writing by the Mortgagee;

 

"Management Agreement" means the management agreement made or (as the context may require) to be made between the Owner and the Manager in a form previously agreed in writing by the Agent providing for (inter alia) the Manager to carry out the technical and commercial management of the Ship;

 

"Manager" means Diana Shipping Services S.A. of Edificio Universal, Piso 12, Avenida Federico Boyd, Panama or any other person approved in writing by the Majority Banks, and includes its successors in title;

 

"Master Swap Agreement" means the agreement as amended and supplemented, referred to in recital (C) hereto and as the same may be amended and/or supplemented and/or restated from time to time;

 

"Master Swap Agreement Liabilities" means at any relevant time the aggregate of all liabilities, actual or contingent, present or future, owing to the Swap Provider under the Master Swap Agreement;

 

"Mortgage" means the statutory mortgage mentioned in Recital (E); "Mortgaged Property" means:

 

	
  

	
(a)

	
the Ship;

 

	
  

	
(b)

	
the Insurances;

 

	
  

	
(c)

	
the Earnings; and

 

	
  

	
(d)

	
any Requisition Compensation;

 

"Mortgagee" includes the successors in title and replacements of the Mortgagee;

 

"Notice of Assignment of Insurances" means a notice of assignment in the form set out in schedule 2 or in such other form as may from time to time be required or agreed in writing by the Mortgagee;

 

"Operating Account" means the Dollar account of the Owner opened by the Owner with the Account Bank with account number 0045834302 and includes any sub-accounts thereof and any other account designated in writing by the Mortgagee to be an Operating Account for the purposes of this Deed;

 

  

3

  

"Outstanding Indebtedness" means the aggregate of the Loan and interest accrued and accruing thereon, the Master Swap Agreement Liabilities, the Expenses and all other sums of money from time to time owing to the Mortgagee and/or the Secured Creditors or any of them, whether actually or contingently, under the Loan Agreement, the Master Swap Agreement and any other Security Documents or any of them;

 

"Owner" includes the successors in title of the Owner;

 

"Port of Registry" means the port of Nassau or such other port of registry in the Commonwealth of the Bahamas approved in writing by the Mortgagee which the Ship is, or is to be registered on, or at any relevant time after, the date hereof;

 

"Receiver" means any receiver and/or manager appointed pursuant to clause 7.2;

 

"Requisition Compensation" means all sums of money or other compensation from time to time payable during the Security Period by reason of the Compulsory Acquisition of the Ship;

 

"Security Documents" means the Loan Agreement, the Master Swap Agreement, this Deed, the Mortgage and any other such document as is defined in the Loan Agreement as a Security Document or as may have been or may hereafter be executed to guarantee and/or secure all or any part of the Loan, interest thereon and other moneys from time to time owing by the Borrowers or either of them or any other Security Party pursuant to the Loan Agreement or the Master Swap Agreement or any other Security Documents (whether or not any such document also secures moneys from time to time owing pursuant to any other document or agreement);

 

"Security Period" means the period commencing on the date hereof and terminating upon discharge of the security created by the Security Documents by payment of all moneys payable thereunder;

 

"Ship" means the 2010-built, 81,297 dwt bulk carrier Leto registered as a Bahamas ship at the Port of Nassau under Official Number 8001721 and IMO Number 9397731 and includes any share or interest therein and her engines, machinery, boats, tackle, outfit, equipment, spare gear, fuel, consumable or other stores, belongings and appurtenances whether on board or ashore and whether now owned or hereafter acquired and also any and all additions, improvements and replacements hereafter made in or to such vessel or any part thereof or in or to her equipment and appurtenances aforesaid;

 

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

 

"Swap Provider" includes its successors in title; and "Total Loss" means:

 

	
  

	
(a)

	
the actual, constructive, compromised or arranged total loss of the Ship; or

 

	
  

	
(b)

	
the Compulsory Acquisition of the Ship; or

 

	
  

	
(c)

	
the hijacking, theft, piracy, condemnation, capture, seizure, arrest, detention or confiscation of the Ship (other than where the same amounts to the Compulsory Acquisition of the Ship) by any person (including a Government Entity, or any persons acting or purporting to act on behalf of a Government Entity), unless the Ship be released and restored to the Owner from such hijacking, theft, piracy, condemnation, capture, seizure, arrest, detention or confiscation within thirty (30) days after the occurrence thereof.

 

  

4

  

	
1.3

	
Insurance terms

 

In clause 5.1.1:

 

	
1.3.1

	
"excess risks" means the proportion (if any) of claims for general average, salvage and salvage charges and under the ordinary collision clause not recoverable in consequence of the value at which the Ship is assessed for the purpose of such claims exceeding her insured value;

 

	
1.3.2

	
"protection and indemnity risks" means the usual risks (including oil pollution and freight, demurrage and defence cover) covered by a United Kingdom protection and indemnity association or a protection and indemnity association which is managed in London (including, without limitation, the proportion (if any) of any sums payable to any other person or persons in case of collision which are not recoverable under the hull and machinery policies by reason of the incorporation in such policies of clause 8 of the Institute Time Clauses (Hulls) (1/11/95) or the Institute Amended Running Down Clause (1/10/71) or any equivalent provision); and

 

	
1.3.3

	
"war risks" includes those risks covered by the standard form of English marine policy with Institute War and Strikes Clauses Hulls - Time (1/11/95) attached or similar cover.

 

	
1.4

	
Construction of Mortgage terms

 

In the Mortgage:

 

	
1.4.1

	
references to "interest" shall be construed as references to interest covenanted to be paid in accordance with clause 3.1.2 and any interest specified in paragraph (b) of the definition of "Expenses" in clause 1.2;

 

	
1.4.2

	
references to "principal" shall be construed as references to all moneys (other than interest) for the time being comprised in the Outstanding Indebtedness;

 

	
1.4.3

	
the term "Account Current" means an account or accounts maintained by the Mortgagee, in accordance with its usual practice, evidencing the amounts from time to time lent by, owing to and paid to it under the Security Documents. Such account or accounts shall, in the absence of manifest error, be conclusive as to the amount from time to time owing by the Owner to the Mortgagee under the Security Documents and any certificate from the Mortgagee as to the amount owing by the Owner under the Security Documents shall be conclusive in the absence of manifest error, and the sum specified in any such certificate shall be the certain and liquidated sum owing by the Owner to the Mortgagee; and

 

	
1.4.4

	
the expression "all sums for the time being owing to the Mortgagee" means the whole of the Outstanding Indebtedness.

 

	
1.5

	
Headings

 

Clause headings and the table of contents are inserted for convenience of reference only and shall be ignored in the interpretation of this Deed.

 

	
1.6

	
Construction of certain terms

 

In this Deed, unless the context otherwise requires:

 

	
1.6.1

	
references to clauses and schedules are to be construed as references to clauses of, and schedules to, this Deed and references to this Deed include its schedules;

 

	
1.6.2

	
references to (or to any specified provision of) this Deed or any other document shall be construed as references to this Deed, that provision or that document as in force for the time being and as amended in accordance with the terms thereof, or, as the case may be, with the agreement of the relevant parties;

 

  

5

  

	
1.6.3

	
words importing the plural shall include the singular and vice versa;

 

	
1.6.4

	
references to a person shall be construed as references to an individual, firm, company, corporation, unincorporated body of persons or any Government Entity;

 

	
1.6.5

	
references to a "guarantee" shall include references to an indemnity or other assurance against financial loss including, without limitation, an obligation to purchase assets or services as a consequence of a default by any other person to pay any Indebtedness and "guaranteed" shall be construed accordingly; and

 

	
1.6.6

	
references to statutory provisions shall be construed as references to those provisions as replaced or amended or re-enacted from time to time.

 

	
1.7

	
Conflict with Loan Agreement

 

This Deed shall be read together with the Loan Agreement but in case of any conflict between the Loan Agreement and this Deed, the provisions of the Loan Agreement shall prevail.

 

	
2

	
Mortgage and assignment

 

	
2.1

	
Mortgage and assignment

 

By way of security for payment of the Outstanding Indebtedness the Owner with full title guarantee hereby mortgages and charges to and in favour of the Mortgagee all its rights, title and interest present and future in and to the Mortgaged Property and, without prejudice to the generality of the foregoing, hereby assigns and agrees to assign to the Mortgagee absolutely all its rights, title and interest in and to the Earnings, the Insurances and any Requisition Compensation, and all its benefits and interests present and future therein. Provided however that:

 

	
2.1.1

	
Earnings

 

the Earnings shall be payable to the Operating Account until such time as a Default shall occur and the Mortgagee shall direct to the contrary, whereupon the Owner shall forthwith, and the Mortgagee may at any time thereafter, instruct the persons from whom the Earnings are then payable to pay the same to the Mortgagee or as it may direct and any Earnings then in the hands of the Owner's brokers or other agents shall be deemed to have been received by them for the use and on behalf of the Mortgagee;

 

	
2.1.2

	
Insurances

 

unless and until a Default shall occur (whereupon all insurance recoveries, other than any moneys payable under any loss of earnings insurance, shall be receivable by the Mortgagee and applied in accordance with clause 8.1 or clause 8.4 (as the case may be)):

 

	
  

	
(a)

	
any moneys payable under the Insurances other than any moneys payable under any loss of earnings insurance, shall be payable in accordance with the terms of the relevant Loss Payable Clause and the Mortgagee will not in the meantime give any notification to the contrary to the insurers as contemplated by the Loss Payable Clauses; and

 

	
  

	
(b)

	
any insurance moneys received by the Mortgagee in respect of any major casualty (as specified in the relevant Loss Payable Clause) shall, unless prior to receipt or whilst such moneys are in the hands of the Mortgagee there shall have occurred a Default (whereupon such insurance monies shall be applied in accordance with clause 8.1 or clause 8.4 (as the case may be)), be paid over to the Owner upon the Owner furnishing evidence satisfactory to the Mortgagee that all loss and damage resulting from such casualty has been properly made good and repaired, and that all repair accounts and other liabilities whatsoever in connection with the casualty have been fully paid and discharged by the Owner, provided however that the insurers with whom the fire and usual marine risks insurances are effected may, in the case of a major casualty, and

 

  

6

  

with the previous consent in writing of the Mortgagee, make payment on account of repairs in the course of being effected; and

 

	
  

	
(c)

	
any moneys payable under any loss of earnings insurance shall be payable in accordance with the terms of the relevant Loss Payable Clause and shall be subject to such provisions of this clause 2 as shall apply to Earnings and the Mortgagee will not give any notification to the insurers as contemplated in such Loss Payable Clause unless and until the Mortgagee shall have become entitled under clause 2.1.1 to direct that the Earnings be paid to the Mortgagee.

 

	
2.2

	
Notice

 

The Owner hereby covenants and undertakes with the Mortgagee that it will from time to time, upon the written request of the Mortgagee, give written notice (in such form as the Mortgagee shall reasonably require) of the assignment herein contained to the persons from whom any part of the Mortgaged Property is or may be due.

 

	
2.3

	
Use of Owner's name

 

The Owner covenants and undertakes with the Mortgagee to do or permit to be done each and every act or thing which the Mortgagee may from time to time require to be done for the purpose of enforcing the Mortgagee's rights under this Deed and to allow its name to be used as and when required by the Mortgagee for that purpose.

 

	
2.4

	
Reassignment

 

Upon payment and discharge in full to the satisfaction of the Mortgagee of the Outstanding Indebtedness, the Mortgagee shall, at the request and cost of the Owner, re-assign the Earnings, the Insurances and any Requisition Compensation to the Owner or as it may direct.

 

	
3.1

	
In consideration of (i) the agreement of the Banks to advance to the Borrowers, subject to the terms of the Loan Agreement, the principal sum of Twenty six million four hundred and fifty thousand Dollars ($26,450,000) pursuant to the Loan Agreement, (ii) the agreement of the Swap Provider to enter into the Master Swap Agreement with the Borrowers and (iii) the advance by the Banks to the Borrowers or either of them on or before the date hereof of the total principal sum of Twenty six million four hundred and fifty thousand Dollars ($26,450,000) (receipt of which sum the Owner hereby acknowledges), the Owner hereby covenants with the Mortgagee:

 

	
3.1.1

	
to repay the Loan by the instalments and on the dates referred to and otherwise in the manner and upon the terms set out in the Loan Agreement;

 

	
3.1.2

	
to pay interest on the Loan and on any overdue interest or other moneys payable under the Loan Agreement, at the rate or rates from time to time applicable thereto on the dates, in the manner and upon the terms set out in the Loan Agreement;

 

	
3.1.3

	
to pay all moneys payable under the Master Swap Agreement at the times and in the manner therein specified; and

 

	
3.1.4

	
to pay all other moneys payable by the Owner under the other Security Documents or any of them at the times and in the manner therein specified.

 

  

7

  

	
4

	
Continuing security and other matters

 

	
4.1

	
Continuing security

 

The security created by the Mortgage and this Deed shall:

 

	
4.1.1

	
be held by the Mortgagee as a continuing security for the payment of the Outstanding Indebtedness and the performance and observance of and compliance with all of the covenants, terms and conditions contained in the Security Documents, express or implied and the security so created shall not be satisfied by any intermediate payment or satisfaction of any part of the amount hereby and thereby secured (or by any settlement of accounts between the Borrowers or the Owner or any other person who may be liable to the Mortgagee or the Secured Creditors or any of them in respect of the Outstanding Indebtedness or any part thereof and the Mortgagee);

 

	
4.1.2

	
be in addition to, and shall not in any way prejudice or affect, and may be enforced by the Mortgagee without prior recourse to, the security created by any of the other Security Documents or by any present or future Collateral Instruments, right or remedy held by or available to the Mortgagee or the Secured Creditors or any right or remedy of the Mortgagee or the Secured Creditors thereunder; and

 

	
4.1.3

	
not be in any way prejudiced or affected by the existence of any of the other Security Documents or any such Collateral Instrument, rights or remedies or by the same becoming wholly or in part void, voidable or unenforceable on any ground whatsoever or by the Mortgagee dealing with, exchanging, varying or failing to perfect or enforce any of the same, or giving time for payment or performance or indulgence or compounding with any other person liable.

 

	
4.2

	
Rights additional

 

All the rights, remedies and powers vested in the Mortgagee hereunder shall be in addition to and not a limitation of any and every other right, power or remedy vested in the Mortgagee or the Secured Creditors under the Loan Agreement, this Deed, the Master Swap Agreement, the other Security Documents or any such Collateral Instrument or at law and that all the powers so vested in the Mortgagee or the Secured Creditors may be exercised from time to time and as often as the Mortgagee or the Secured Creditors may deem expedient.

 

	
4.3

	
No enquiry

 

Neither the Mortgagee nor any Receiver shall be obliged to make any enquiry as to the nature or sufficiency of any payment received by it under the Mortgage and/or this Deed or to make any claim or take any action to collect any moneys hereby assigned or to enforce any rights or benefits hereby assigned to the Mortgagee or to which the Mortgagee may at any time be entitled under the Mortgage and/or this Deed.

 

	
4.4

	
Obligations of Owner and Mortgagee

 

The Owner shall remain liable to perform all the obligations assumed by it in relation to the Mortgaged Property and the Mortgagee shall be under no obligation of any kind whatsoever in respect thereof or be under any liability whatsoever in the event of any failure by the Owner to perform its obligations in respect thereof.

 

	
4.5

	
Discharge of Mortgage

 

Notwithstanding that this Deed is expressed to be supplemental to the Mortgage it shall continue in full force and effect after any discharge of the Mortgage.

 

  

8

  

	
5

	
Covenants

 

	
5.1

	
The Owner hereby covenants with the Mortgagee and undertakes throughout the Security Period:

 

	
5.1.1

	
Insurance

 

	
  

	
(a)

	
Insured risks, amounts and terms

 

to insure and keep the Ship insured free of cost and expense to the Mortgagee and in the sole name of the Owner or, if so required by the Mortgagee, in the joint names of the Owner and the Mortgagee (but without liability on the part of the Mortgagee for premiums or calls):

 

	
  

	
(i)

	
against fire and usual marine risks (including excess risks) and war risks (including without limitation terrorism, piracy and confiscation), on an agreed value basis, in such amounts (but not in any event less than whichever shall be the greater of the market value of the Ship for the time being and of an amount which, when aggregated with the equivalent insurance for the other Mortgaged Ships, shall be equal to at least One hundred and twenty per cent (120%) of the aggregate of (A) the Loan and (B) the Swap Exposure) and upon such terms as shall from time to time be approved in writing by the Mortgagee;

 

	
  

	
(ii)

	
against protection and indemnity risks (including pollution risks for the highest amount in respect of which cover is or may become available for ships of the same type, size, age and flag as the Ship and a freight, demurrage and defence cover) for the full value and tonnage of the Ship (as approved in writing by the Mortgagee) and upon such terms as shall from time to time be approved in writing by the Mortgagee; and

 

	
  

	
(iii)

	
in respect of such other matters of whatsoever nature and howsoever arising as may from time to time be requested by the Mortgagee,

 

and to pay to the Mortgagee the cost (as conclusively certified by the Mortgagee) of (aa) any mortgagee's interest insurance (including, if the Mortgagee shall so require, mortgagee's additional perils (including all P&I risks) coverage) which the Mortgagee may from time to time effect in respect of the Ship upon such terms and in such amounts (not exceeding, when aggregated with the equivalent insurance for the other Mortgaged Ships, One hundred and twenty per cent (120%) of the aggregate of (A) the Loan and (B) the Swap Exposure) as it shall deem desirable; and (bb) any other insurance cover which the Mortgagee may from time to time effect in respect of the Ship and/or in respect of its interest or potential third party liability as mortgagee of the Ship as the Mortgagee shall deem desirable having regard to any limitations in respect of amount or extent of cover which may from time to time be applicable to any of the other insurances referred to in this clause 5.1.1(a);

 

(b)           Approved brokers, insurers and associations

 

to effect the insurances aforesaid in such currency as the Mortgagee may approve and through the Approved Brokers (other than the said mortgagee's interest insurance which shall be effected through brokers nominated by the Mortgagee) and with such insurance companies and/or underwriters as shall from time to time be approved in writing by the Mortgagee; provided however that the insurances against war risks and protection and indemnity risks may be effected by the entry of the Ship with such war risks and protection and indemnity associations as shall from time to time be approved in writing by the Mortgagee;

 

	
  

	
(c)

	
Fleet liens, set-off and cancellation

 

if any of the insurances referred to in clause 5.1.1(a) form part of a fleet cover, to procure that the Approved Brokers shall undertake to the Mortgagee that they shall

 

  

9

  

neither set off against any claims in respect of the Ship any premiums due in respect of other vessels under such fleet cover or any premiums due for other insurances, nor cancel the insurance for reason of non-payment of premiums for other vessels under such fleet cover or of premiums for such other insurances, and shall undertake to issue a separate policy in respect of the Ship if and when so requested by the Mortgagee;

 

	
  

	
(d)

	
Payment of premiums and calls

 

punctually to pay all premiums, calls, contributions or other sums payable in respect of all such insurances and to produce all relevant receipts or other evidence of payment when so required by the Mortgagee;

 

	
  

	
(e)

	
Renewal

 

at least fourteen (14) days before the relevant policies, contracts or entries expire, to notify the Mortgagee of the names of the brokers and/or the war risks and protection and indemnity associations proposed to be employed by the Owner or any other party for the purposes of the renewal of such insurances and of the amounts in which such insurances are proposed to be renewed and the risks to be covered and, subject to compliance with any requirements of the Mortgagee pursuant to this clause 5.1.1, to procure that appropriate instructions for the renewal of such insurances on the terms so specified are given to the Approved Brokers and/or to the approved war risks and protection and indemnity associations at least ten (10) days before the relevant policies, contracts or entries expire, and that the Approved Brokers and/or the approved war risks and protection and indemnity associations will at least seven (7) days before such expiry (or within such shorter period as the Mortgagee may from time to time agree) confirm in writing to the Mortgagee as and when such renewals have been effected in accordance with the instructions so given;

 

	
  

	
(f)

	
Guarantees

 

to arrange for the execution and delivery of such guarantees or indemnities as may from time to time be required by any protection and indemnity or war risks association;

 

	
  

	
(g)

	
Hull policy documents, notices, loss payable clauses and brokers' undertakings

 

to deposit with the Approved Brokers (or procure the deposit of) all slips, cover notes, policies, certificates of entry or other instruments of insurance from time to time issued in connection with such of the insurances referred to in clause 5.1.1(a) as are effected through the Approved Brokers and procure that the interest of the Mortgagee shall be endorsed thereon by incorporation of the relevant Loss Payable Clause and, where the Insurances have been assigned to the Mortgagee, by means of a Notice of Assignment of Insurances (signed by the Owner and by any other assured who shall have assigned its interest in the Insurances to the Mortgagee) and that the Mortgagee shall be furnished with pro forma copies thereof and a letter or letters of undertaking from the Approved Brokers in such form as shall from time to time be required by the Mortgagee;

 

	
  

	
(h)

	
Associations' loss payable clauses, undertakings and certificates

 

to procure that any protection and indemnity and/or war risks associations in which the Ship is for the time being entered shall endorse the relevant Loss Payable Clause on the relevant certificate of entry or policy and shall furnish the Mortgagee with a copy of such certificate of entry or policy and a letter or letters of undertaking in such form as shall from time to time be required by the Mortgagee;

 

	
  

	
(i)

	
Extent of cover and exclusions

 

to take all necessary action and comply with all requirements which may from time to time be applicable to the Insurances (including, without limitation, the making of all requisite declarations within any prescribed time limits and the payment of any additional

 

  

10

  

premiums or calls) so as to ensure that the Insurances are not made subject to any exclusions or qualifications to which the Mortgagee has not given its prior written consent and are otherwise maintained on terms and conditions from time to time approved in writing by the Mortgagee;

 

	
  

	
(j)

	
Correspondence with brokers and associations

 

to provide to the Mortgagee, at the time of each such communication, copies of all written communications between the Owner and the Approved Brokers and approved war risks and protection and indemnity associations which relate to compliance with requirements from time to time applicable to the Insurances including, without limitation, all requisite declarations and payments of additional premiums or calls referred to in clause 5.1.1(i);

 

	
  

	
(k)

	
Independent report

 

if so requested by the Mortgagee, but at the cost of the Owner, to furnish the Mortgagee from time to time with a detailed report signed by an independent firm of marine insurance brokers appointed by the Mortgagee dealing with the insurances maintained on the Ship and stating the opinion of such firm as to the adequacy thereof;

 

	
  

	
(I)

	
Collection of claims

 

to do all things necessary and provide all documents, evidence and information to enable the Mortgagee to collect or recover any moneys which shall at any time become due in respect of the Insurances;

 

	
  

	
(m)

	
Employment of Ship

 

not to employ the Ship or suffer the Ship to be employed otherwise than in conformity with the terms of the Insurances (including any warranties express or implied therein) without first obtaining the consent of the insurers to such employment and complying with such requirements as to extra premium or otherwise as the insurers may prescribe;

 

	
  

	
(n)

	
Application of recoveries

 

to apply all sums receivable under the Insurances which are paid to the Owner in accordance with the Loss Payable Clauses in repairing all damage and/or in discharging the liability in respect of which such sums shall have been received;

 

	
5.1.2

	
Ship's name and registration

 

	
  

	
(a)

	
not to change the name of the Ship without the prior written consent of the Mortgagee;

 

	
  

	
(b)

	
to ensure the Ship is permanently registered as a Bahamas Ship within ninety (90) days of the date hereof;

 

	
  

	
(c)

	
to keep the Ship registered as a Bahamas ship at the Port of Registry;

 

	
  

	
(d)

	
not do or suffer to be done anything, or omit to do anything the doing or omission of which could or might result in such registration being forfeited or imperilled or which could or might result in the Ship being required to be registered otherwise than as a Bahamas ship at the Port of Registry;

 

	
  

	
(e)

	
not to register the Ship or permit its registration under any other flag or at any other port without the prior written consent of the Mortgagee; and

 

	
  

	
(f)

	
if the said registration of the Ship is for a limited period, to renew the registration of the Ship at least forty five (45) days prior to the expiry of such registration and to provide evidence of such renewal to the Mortgagee at least thirty (30) days prior to such expiry;

 

  

11

  

	
5.1.3

	
Repair

 

to keep the Ship in a good and efficient state of repair and procure that all repairs to or replacement of any damaged, worn or lost parts or equipment are effected in such manner (both as regards workmanship and quality of materials) as not to diminish the value of the Ship;

 

	
5.1.4

	
Modification; removal of parts; equipment owned by third parties

 

not without the prior written consent of the Mortgagee to, or suffer any other person to:

 

	
  

	
(a)

	
make any modification to the Ship in consequence of which her structure, type or performance characteristics could or might be materially altered or her value materially reduced; or

 

	
  

	
(b)

	
remove any material part of the Ship or any equipment the value of which is such that its removal from the Ship would materially reduce the value of the Ship without replacing the same with equivalent parts or equipment which are owned by the Owner free from Encumbrances; or

 

	
  

	
(c)

	
install on the Ship any equipment owned by a third party which cannot be removed without causing damage to the structure or fabric of the Ship;

 

	
5.1.5

	
Maintenance of class; compliance with regulations

 

to maintain the Classification as the class of the Ship and to comply with and ensure that the Ship at all times complies with the provisions of the Merchant Shipping Acts and all regulations and requirements (statutory or otherwise) from time to time applicable to vessels registered at the Port of Registry or otherwise applicable to the Ship;

 

	
5.1.6

	
Surveys

 

to submit the Ship to continuous surveys and such periodical or other surveys as may be required for classification purposes and to supply to the Mortgagee copies of all survey reports issued in respect thereof;

 

	
5.1.7

	
Inspection

 

to ensure that the Mortgagee (at the cost of the Owner), by surveyors or other persons appointed by the Mortgagee for such purpose, may board the Ship at all reasonable times for the purpose of inspecting her and to afford all proper facilities for such inspections and for this purpose to give the Mortgagee reasonable advance notice of any intended drydocking of the Ship (whether for the purpose of classification, survey or otherwise);

 

	
5.1.8

	
Prevention of and release from arrest

 

promptly to pay and discharge all debts, damages, liabilities and outgoings whatsoever which have given or may give rise to maritime, statutory or possessory liens on, or claims enforceable against, the Ship, her Earnings or Insurances or any part thereof and, in the event of a writ or libel being filed against the Ship, her Earnings or Insurances or any part thereof, or of any of the same being arrested, attached or levied upon pursuant to legal process or purported legal process or in the event of detention of the Ship in exercise or purported exercise of any such lien or claim as aforesaid, to procure the release of the Ship, her Earnings and Insurances from such arrest, detention attachment or levy or, as the case may be, the discharge of the writ or libel forthwith upon receiving notice thereof by providing bail or procuring the provision of security or otherwise as the circumstances may require;

 

  

12

  

	
5.1.9

	
Employment

 

not to employ the Ship or permit her employment in any manner, trade or business which is forbidden by international law, or which is unlawful or illicit under the law of any relevant jurisdiction, or in carrying illicit or prohibited goods, or in any manner whatsoever which may render her liable to condemnation in a prize court, or to destruction, seizure, confiscation, penalty or sanctions and, in the event of hostilities in any part of the world (whether war be declared or not), not to employ the Ship or permit her employment in carrying any contraband goods, or enter or trade to or to continue to trade in any zone which has been declared a war zone by any Government Entity or by the Ship's war risks insurers unless the prior written consent of the Mortgagee is obtained and such special insurance cover as the Mortgagee may require shall have been effected by the Owner and at its expense;

 

	
5.1.10

	
Information

 

promptly to furnish the Mortgagee with all such information as it may from time to time require regarding the Ship, her employment, position and engagements, particulars of all towages and salvages, and copies of all charters and other contracts for her employment, or otherwise howsoever concerning her;

 

	
5.1.11

	
Notification of certain events to notify the Mortgagee forthwith by fax thereafter confirmed by letter of:

 

	
  

	
(a)

	
any damage to the Ship requiring repairs the cost of which will or might exceed the Casualty Amount;

 

	
  

	
(b)

	
any occurrence in consequence of which the Ship has or may become a Total Loss;

 

	
  

	
(c)

	
any requisition of the Ship for hire;

 

	
  

	
(d)

	
any requirement or recommendation made by any insurer or the Classification Society or by any competent authority which is not, or cannot be, complied with in accordance with its terms;

 

	
  

	
(e)

	
any arrest or detention of the Ship or any exercise or purported exercise of a lien or other claim on the Ship or the Earnings or Insurances or any part thereof;

 

	
  

	
(f)

	
any petition or notice of meeting to consider any resolution to wind up the Owner (or any event analogous thereto under the laws of the place of its incorporation);

 

	
  

	
(g)

	
the occurrence of any Default; or

 

	
  

	
(h)

	
the occurrence of any Environmental Claim against the Owner, the Ship, any other Relevant Party or any other Relevant Ship or any incident, event, or circumstance which may give rise to any such Environmental Claim;

 

	
5.1.12

	
Payment of outgoings and evidence of payments

 

promptly to pay all tolls, dues and other outgoings whatsoever in respect of the Ship and her Earnings and Insurances and to keep proper books of account in respect of the Ship and her Earnings and, as and when the Mortgagee may so require, to make such books available for inspection on behalf of the Mortgagee, and to furnish satisfactory evidence that the wages and allotments and the insurance and pension contributions of the Master and crew are being promptly and regularly paid and that all deductions from crew's wages in respect of any applicable tax liability are being properly accounted for and that the Master has no claim for disbursements other than those incurred by him in the ordinary course of trading on the voyage then in progress;

 

  

13

  

	
5.1.13

	
Encumbrances

 

not without the prior written consent of the Mortgagee (and then only subject to such conditions as the Mortgagee may impose) to create or purport or agree to create or permit to arise or subsist any Encumbrance (other than Permitted Liens) over or in respect of the Ship, any share or interest therein or in any other part of the Mortgaged Property otherwise than to or in favour of the Mortgagee;

 

	
5.1.14

	
Sale or other disposal

 

not without the prior written consent of the Mortgagee (and then only subject to such conditions as the Mortgagee may impose) to sell, agree to sell, transfer, abandon or otherwise dispose of the Ship or any share or interest therein;

 

	
5.1,15

	
Chartering

 

except pursuant to the Initial Charter, not without the prior written consent of the Mortgagee (which the Mortgagee shall have full liberty to withhold) and, if such consent is given, only subject to such conditions as the Mortgagee may impose, to let the Ship:

 

	
  

	
(a)

	
on demise or bareboat charter for any period;

 

	
  

	
(b)

	
by any time or consecutive voyage charter for a term which exceeds or which by virtue of any optional extensions therein contained may exceed twelve (12) months' duration;

 

	
  

	
(c)

	
on terms whereby more than two (2) months' hire (or the equivalent) is payable in advance; or

 

	
  

	
(d)

	
below the market rate prevailing at the time when the Ship is fixed or other than on arm's length terms;

 

	
5.1.16

	
Sharing of Earnings

 

not without the prior written consent of the Mortgagee (and then only subject to such conditions as the Mortgagee may impose) to enter into any agreement or arrangement whereby the Earnings may be shared with any other person;

 

	
5.1.17

	
Payment of Earnings

 

to procure that the Earnings are paid to the Operating Account pursuant to clause 14.1 of the Loan Agreement (or to such other account as the Mortgagee may from time to time agree) and to procure that the same are paid to the Mortgagee at all times if and when the same shall be or shall have become so payable in accordance with the Security Documents after the Mortgagee shall have directed pursuant to clause 2.1.1 that the same shall be no longer receivable by the Owner and that any Earnings which are so payable and which are in the hands of the Owner's brokers or agents are duly accounted for and paid over to the Mortgagee forthwith on demand;

 

	
5.1.18

	
Repairers' liens

 

not without the prior written consent of the Mortgagee to put the Ship into the possession of any person for the purpose of work being done upon her in an amount exceeding or likely to exceed the Casualty Amount unless such person shall first have given to the Mortgagee in terms satisfactory to it, a written undertaking not to exercise any lien on the Ship or the Earnings for the cost of such work or otherwise;

 

  

14

  

	
5.1.19

	
Manager

 

not without the prior written consent of the Mortgagee (acting on the instructions of the Majority Banks) to appoint a manager of the Ship other than the Manager or to terminate, or amend the terms of, the Management Agreement;

 

	
5.1.20

	
Notice of Mortgage

 

to place and at all times and places to retain a properly certified copy of the Mortgage and this Deed (which shall form part of the Ship's documents) on board the Ship with her papers and cause such certified copy of the Mortgage and this Deed to be exhibited to any and all persons having business with the Ship which might create or imply any commitment or encumbrance whatsoever on or in respect of the Ship (other than a lien for crew's wages and salvage) and to any representative of the Mortgagee and to place and keep prominently displayed in the navigation room and in the Master's cabin of the Ship a framed printed notice in plain type reading as follows:

 

"NOTICE OF MORTGAGE

 

This Ship is subject to a first priority mortgage and a deed of covenant in favour of NORDEA BANK FINLAND PLC, LONDON BRANCH of 8th Floor, City Place House, 55 Basinghall Street, London EC2V 5NB, England. Under the said mortgage and deed of covenant, neither the Owner nor any charterer nor the Master of this Ship has any right, power or authority to create, incur or permit to be imposed upon this Ship any commitments or encumbrances whatsoever other than for crew's wages and salvage"

 

and in terms of the said notice it is hereby agreed that save and subject as otherwise herein provided, neither the Owner nor any charterer nor the Master of the Ship nor any other person has any right, power or authority to create, incur or permit to be imposed upon the Ship any lien whatsoever other than for crew's wages and salvage;

 

	
5.1.21

	
Conveyance on default

 

where the Ship is (or is to be) sold in exercise of any power contained in this Deed or otherwise conferred on the Mortgagee, to execute, forthwith upon request by the Mortgagee, such form of conveyance of the Ship as the Mortgagee may require;

 

	
5.1.22

	
Anti-drug abuse

 

without prejudice to clause 5.1.9, to take all necessary and proper precautions to prevent any infringements of the Anti-Drug Abuse Act of 1986 of the United States of America or any similar legislation applicable to the Ship in any jurisdiction in or to which the Ship shall be employed or located or trade or which may otherwise be applicable to the Ship and/or the Owner and, if the Mortgagee shall so require, to enter into a "Carrier Initiative Agreement" with the United States Customs Service and to procure that the same agreement (or any similar agreement hereafter introduced by any Government Entity of the United States of America) is maintained in full force and effect and performed by the Owner;

 

	
5.1.23

	
Compliance with Environmental Laws

 

to comply with, and procure that, all Environmental Affiliates of the Owner comply with, all Environmental Laws including, without limitation, requirements relating to manning and establishment of financial responsibility and to obtain and comply with, and procure that all Environmental Affiliates of the Owner obtain and comply with, all Environmental Approvals; and

 

	
5.1.24

	
Survey reports

 

to deliver to the Mortgagee on the date falling three years after the date of this Deed and on each of the dates falling at twelve (12) months thereafter a report prepared by surveyors or

 

  

15

  

inspectors appointed by the Mortgagee in relation to the seaworthiness and safe operation of the Ship, to produce evidence to the Mortgagee that any recommendations made in such reports have been complied with or will be complied with in accordance with their terms, in full and thereafter to procure that such recommendations are so complied with.

 

6              Powers of Mortgagee to protect security and remedy defaults

 

	
6.1

	
Protective action

 

The Mortgagee shall, without prejudice to its other rights, powers and remedies under any of the Security Documents, be entitled (but not bound) at any time, and as often as may be necessary, to take any such action as it may in its discretion think fit for the purpose of protecting or maintaining the security created by this Deed and the other Security Documents, and all Expenses attributable thereto shall be payable by the Owner on demand.

 

	
6.2

	
Remedy of defaults

 

Without prejudice to the generality of the provisions of clause 6.1:

 

	
6.2.1

	
if the Owner fails to comply with any of the provisions of clause 5.1.1, the Mortgagee shall be entitled (but not bound) to effect and thereafter to maintain all such insurances upon the Ship as in its discretion it may think fit in order to procure the compliance with such provisions or alternatively, to require the Ship (at the Owner's risk) to remain in, or to proceed to and remain in a port designated by the Mortgagee until such provisions are fully complied with;

 

	
6.2.2

	
if the Owner fails to comply with any of the provisions of clauses 5.1.3, 5.1.5 or 5.1.6, the

 

Mortgagee shall be entitled (but not bound) to arrange for the carrying out of such repairs, changes or surveys as it may deem expedient or necessary in order to procure the compliance with such provisions; and

 

	
6.2.3

	
if the Owner fails to comply with any of the provisions of clause 5.1.8, the Mortgagee shall be entitled (but not bound) to pay and discharge all such debts, damages, liabilities and outgoings as are therein mentioned and/or to take any such measures as it may deem expedient or necessary for the purpose of securing the release of the Ship in order to procure the compliance with such provisions,

 

and the Expenses attributable to the exercise by the Mortgagee of any such powers shall be payable by the Owner to the Mortgagee on demand.

 

	
7

	
Powers of Mortgagee on Event of Default

 

	
7.1

	
Powers

 

Upon the happening of any Event of Default, the Mortgagee shall forthwith become entitled by notice given to the Owner and the other Borrower in accordance with the provisions of clause 10.2 of the Loan Agreement and the relevant provisions of the Master Swap Agreement to declare the Outstanding Indebtedness or any part of it to be due and payable immediately or in accordance with such notice, whereupon the Outstanding Indebtedness shall become so due and payable and (whether or not any such notice shall have been given) the Mortgagee shall become forthwith entitled (but not bound) as and when it may see fit, to put into force and exercise in relation to the Mortgaged Property or any part thereof all or any of the rights, powers and remedies possessed by it as mortgagee of the Mortgaged Property (whether at law, by virtue of the Mortgage and this Deed or otherwise) and in particular (without limiting the generality of the foregoing):

 

	
7.1.1

	
to take possession of the Ship;

 

	
7.1.2

	
to require that all policies, contracts, certificates of entry and other records relating to the Insurances (including details of and correspondence concerning outstanding claims) be

 

  

16

  

delivered forthwith to such adjusters and/or brokers and/or other insurers as the Mortgagee may nominate;

 

	
7.1.3

	
to collect, recover, compromise and give a good discharge for, all claims then outstanding or thereafter arising under the Insurances or any of them or in respect of any other part of the Mortgaged Property, and to take over or institute (if necessary using the name of the Owner) all such proceedings in connection therewith as the Mortgagee in its absolute discretion thinks fit, and, in the case of the Insurances, to permit the brokers through whom collection or recovery is effected to charge the usual brokerage therefor;

 

	
7.1.4

	
to discharge, compound, release or compromise claims in respect of the Ship or any other part of the Mortgaged Property which have given or may give rise to any charge or lien or other claim on the Ship or any other part of the Mortgaged Property or which are or may be enforceable by proceedings against the Ship or any other part of the Mortgaged Property;

 

	
7.1.5

	
to sell the Ship or any share or interest therein with or without prior notice to the Owner, and with or without the benefit of any charterparty, and free from any claim by the Owner (whether in admiralty, in equity, at law or by statute) by public auction or private contract, at such place and upon such terms as the Mortgagee in its absolute discretion may determine, with power to postpone any such sale, and without being answerable for any loss occasioned by such sale or resulting from postponement thereof and with power, where the Mortgagee purchases the Ship, to make payment of the sale price by making an equivalent reduction in the amount of the Outstanding Indebtedness in the manner referred to in clause 8.1;

 

	
7.1.6

	
to manage, insure, maintain and repair the Ship, and to employ, sail or lay up the Ship in such manner and for such period as the Mortgagee, in its absolute discretion, deems expedient accounting only for net profits arising from any such employment; and

 

	
7.1.7

	
to recover from the Owner on demand all Expenses incurred or paid by the Mortgagee in connection with the exercise of the powers (or any of them) referred to in this clause 7.1.

 

	
7.2

	
Receiver

 

	
7.2.1

	
Appointment

 

At any time after the Outstanding Indebtedness shall have become due and payable in accordance with a notice given by the Mortgagee to the Owner and the other Borrower pursuant to clause 10.2 of the Loan Agreement, the Mortgagee shall be entitled (but not bound) by writing executed as a deed or under the hand of any Director or officer of the Mortgagee to appoint any person or persons to be a receiver and/or manager of the Mortgaged Property or any part thereof (with power to authorise any joint receiver and/or manager to exercise any power independently of any other joint receiver and/or manager) and may from time to time fix his remuneration, and may remove any receiver and/or manager so appointed and appoint another in his place. Any receiver and/or manager so appointed shall be the agent of the Owner and the Owner shall be solely responsible for his acts or defaults and for his remuneration, and such receiver and/or manager so appointed shall have all powers conferred by the Law of Property Act 1925 without the restrictions contained in sections 93 and 103 of that Act and, in addition, power on behalf of and at the cost of the Owner (notwithstanding any liquidation of the Owner) to do or omit to do anything which the Owner could do or omit to do in relation to the Mortgaged Property or any part thereof and in particular (but without prejudice to the generality of the foregoing) any such receiver and/or manager may exercise all the powers and discretions conferred on the Mortgagee by the Mortgage and this Deed.

 

	
7.2.2

	
Remuneration

 

Any Receiver shall be entitled to remuneration appropriate to the work and responsibilities involved, upon the basis of charging from time to time adopted by the Receiver in accordance with the current practice of his firm or practice, without being limited to the maximum rate specified in section 109(6) of the Law of Property Act 1925.

 

  

17

  

	
7.2.3

	
Liability of mortgagee in possession

 

Neither the Mortgagee nor any Receiver shall be liable as mortgagee in possession in respect of all or any of the Mortgaged Property to account or be liable for any loss upon realisation or for any neglect or default of any nature whatsoever in connection therewith for which a mortgagee in possession may be liable as such.

 

	
7.3

	
Dealings with Mortgagee or Receiver

 

Upon any sale of the Ship or any share or interest therein by the Mortgagee pursuant to clause 7.1.5 or pursuant to clause 11.1, or by any Receiver, the purchaser shall not be bound to see or enquire whether the Mortgagee's power of sale has arisen in the manner provided in this Deed and the sale shall be deemed to be within the power of the Mortgagee (or the Receiver, as the case may be) and the receipt of the Mortgagee (or the Receiver, as the case may be) for the purchase money shall effectively discharge the purchaser who shall not be concerned with the manner of application of the proceeds of sale or be in any way answerable therefor and the sale shall operate to divest the Owner of all rights, title and interest of any nature whatsoever in the Ship and to bar any such interest of the Owner and all persons claiming through or under the Owner.

 

	
8

	
Application of moneys

 

	
8.1

	
Application

 

All moneys received by the Mortgagee or any Receiver in respect of:

 

	
8.1.1

	
sale of the Ship or any share or interest therein;

 

	
8.1.2

	
recovery under the Insurances (other than under any loss of earnings insurance and any such sum or sums as may have been received by the Mortgagee in accordance with the relevant Loss Payable Clause in respect of a major casualty as therein defined and paid over to the Owner as provided in clause 2.1.2(b) or which fall to be otherwise applied under clause 8.4);

 

	
8.1.3

	
Requisition Compensation; and

 

	
8.1.4

	
the employment of the Ship pursuant to the provisions of clause 7.1.6,

 

shall be held by it upon trust in the first place to pay or make good the Expenses and the balance shall:

 

	
  

	
(a)

	
in the case of moneys received in respect of sale of the Ship or recovery under the Insurances in relation to a Total Loss of the Ship or Requisition Compensation:

 

	
  

	
(i)

	
if no Default has occurred, be applied in making such prepayment as is required in accordance with clause 4.3 of the Loan Agreement and any other payments required pursuant to clause 4.4 of the Loan Agreement and the balance, if any, shall be paid to the Owner; or

 

	
  

	
(ii)

	
if a Default has occurred and is continuing but no Event of Default has occurred be retained by the Mortgagee until such time as such Default is remedied and no other Default has occurred and is continuing (whereupon such moneys shall be applied in making such prepayment as is required in accordance with clause 4.3 of the Loan Agreement and any other payments required pursuant to clause 4.4 of the Loan Agreement and the balance, if any, shall be paid to the Owner) and/or shall be applied by the Mortgagee in or towards satisfaction of any sums due and payable by the Owner under the Security Documents or any of them by virtue of payment demanded thereunder, in each case as the Mortgagee (acting on the instructions of the Majority Banks) may in its absolute discretion determine; and

 

  

18

  

	
  

	
(b)

	
if an Event of Default has occurred, be applied by the Mortgagee in the manner specified in clause 13.1 of the Loan Agreement and/or paragraph (a)(ii) above, as the Mortgagee (acting on the instructions of the Majority Banks) may in its absolute discretion determine.

 

	
8.2

	
Shortfalls

 

In the event that the balance referred to in clause 8.1 is insufficient to pay in full the whole of the Outstanding Indebtedness, the Mortgagee or the Receiver, as the case may be, shall be entitled to collect the shortfall from the Owner or any other person liable for the time being therefor.

 

	
8.3

	
Application of Earnings received by Mortgagee or Receiver

 

Any moneys received by the Mortgagee or any Receiver in respect of the Earnings shall:

 

	
8.3.1

	
if received by the Mortgagee, or in the hands of the Mortgagee, after the occurrence of a Default but prior to the occurrence of an Event of Default, be retained by the Mortgagee and shall be paid over by the Mortgagee, to the Operating Account at such times, in such amounts and for such purposes and/or shall be applied by the Mortgagee, in or towards satisfaction of any sums from time to time accruing due and payable by the Owner under the Loan Agreement, the Master Swap Agreement, this Deed, the Mortgage, or any of the other Security Documents or any of them or by virtue of payment demanded thereunder, in each case as the Mortgagee, may in its absolute discretion determine; and

 

	
8.3.2

	
if received by the Mortgagee or any Receiver, or in the hands of the Mortgagee or any Receiver, after the occurrence of an Event of Default, be applied by the Mortgagee or any Receiver, in the manner specified in clause 8.1.and/or clause 8.3.1, as the Mortgagee or any Receiver, may in its absolute discretion determine.

 

	
8.4

	
Application of Insurances received by Mortgagee or Receiver

 

Any moneys received by the Mortgagee or any Receiver in respect of the Insurances (other than in respect of recovery under any loss of earnings insurance or in respect of a Total Loss) shall:

 

	
8.4.1

	
if received by the Mortgagee, or in the hands of the Mortgagee, after the occurrence of a Default but prior to the occurrence of an Event of Default, be retained by the Mortgagee, and shall be paid over by the Mortgagee, to the Owner at such times, in such amounts and for such purposes and/or shall be applied by the Mortgagee, in or towards satisfaction of any sums from time accruing due and payable by the Owner under the Loan Agreement, this Deed, the Mortgage or any of the other Security Documents or any of them or by virtue of payment demanded thereunder, in each case as the Mortgagee, may in its absolute discretion determine;

 

	
8.4.2

	
if received by the Mortgagee or any Receiver, or in the hands of the Mortgagee or any Receiver, after the occurrence of an Event of Default, be applied by the Mortgagee or such Receiver, in the manner specified in clause 8.1 and/or clause 8.4.1, as the Mortgagee or any Receiver, may in its absolute discretion determine.

 

	
9

	
Remedies cumulative and other provisions

 

	
9.1

	
No implied waivers; remedies cumulative

 

No failure or delay on the part of the Mortgagee or the Secured Creditors or any of them to exercise any right, power or remedy vested in it under the Loan Agreement, the Master Swap Agreement, this Deed, the Mortgage or any of the other Security Documents shall operate as a waiver thereof, nor shall any single or partial exercise by the Mortgagee of any right, power or remedy nor the discontinuance, abandonment or adverse determination of any proceedings taken by the Mortgagee to enforce any right, power or remedy preclude any other or further exercise thereof or proceedings to enforce the same or the exercise of any other right, power or remedy nor shall the giving by the Mortgagee of any consent to any act which by the terms of

 

  

19

  

this Deed requires such consent prejudice the right of the Mortgagee to withhold or give consent to the doing of any other similar act. The remedies provided in the Loan Agreement, the Master Swap Agreement, this Deed, the Mortgage and the other Security Documents are cumulative and are not exclusive of any remedies provided by law.

 

	
9.2

	
Delegation

 

The Mortgagee shall be entitled, at any time and as often as may be expedient, to delegate all or any of the powers and discretions vested in it by the Mortgage and this Deed (including the power vested in it by virtue of clause 11) or any of the other Security Documents in such manner, upon such terms, and to such persons as the Mortgagee in its absolute discretion may think fit.

 

	
9.3

	
Incidental powers

 

The Mortgagee shall be entitled to do all acts and things incidental or conducive to the exercise of any of the rights, powers or remedies possessed by it as mortgagee of the Ship (whether at law, under the Mortgage and/or this Deed or otherwise) and in particular (but without prejudice to the generality of the foregoing), upon becoming entitled to exercise any of its powers under clause 7.1, the Mortgagee shall be entitled to discharge any cargo on board the Ship (whether the same shall belong to the Owner or any other person) and to enter into such other arrangements in respect of the Ship, her insurances, management, maintenance, repair, classification and employment in all respects as if the Mortgagee was the owner of the Ship, but without being responsible for any loss incurred as a result of the Mortgagee doing or omitting to do any such acts or things as aforesaid.

 

	
10

	
Costs and indemnity

 

	
10.1

	
Costs

 

The Owner shall pay to the Mortgagee on demand on a full indemnity basis all expenses or liabilities of whatsoever nature (including legal fees, fees of insurance advisers, printing, out-of-pocket expenses, stamp duties, registration fees and other duties or charges) together with any value added tax or similar tax payable in respect thereof, incurred by the Mortgagee in connection with the enforcement of, or preservation of any rights under the Mortgage, this Deed, the Master Swap Agreement, the Loan Agreement or any of the other Security Document, or otherwise in respect of the Outstanding Indebtedness and the security therefor or in connection with the preparation, completion, execution or registration of the Mortgage, this Deed, the Loan Agreement, the Master Swap Agreement or any of the other Security Documents.

 

	
10.2

	
Mortgagee's and Receiver's indemnity

 

The Owner hereby agrees and undertakes to indemnify the Mortgagee and any Receiver against all losses, actions, claims, expenses, demands, obligations and liabilities whatever and whenever arising which may now or hereafter be incurred by the Mortgagee or any such Receiver, or by any manager, agent, officer or employee for whose liability, act or omission it or he may be answerable, in respect of, in relation to, or in connection with anything done or omitted in the exercise or purported exercise of the powers contained in the Mortgage, this Deed, or otherwise in connection therewith and herewith or with any part of the Mortgaged Property or otherwise howsoever in relation to, or in connection with, any of the matters dealt with in the Mortgage or this Deed.

 

	
11

	
Attorney

 

	
11.1

	
Power

 

By way of security, the Owner hereby irrevocably appoints the Mortgagee and any Receiver, jointly and also severally, to be its attorney generally for and in the name and on behalf of the Owner, and as the act and deed or otherwise of the Owner to execute, seal and deliver and otherwise perfect and do all such deeds, assurances, agreements, instruments, acts and things

 

  

20

  

which may be required for the full exercise of all or any of the rights, powers or remedies conferred by the Mortgage, this Deed, the Loan Agreement, the Master Swap Agreement or any of the other Security Documents, or which may be deemed proper in or in connection with all or any of the purposes aforesaid (including, without prejudice to the generality of the foregoing the power to sell, transfer and otherwise dispose of or deal with the Ship or the execution and delivery of a bill of sale of the Ship). The power hereby conferred shall be a general power of attorney under the Powers of Attorney Act 1971, and the Owner ratifies and confirms, and agrees to ratify and confirm, any deed, assurance, agreement, instrument, act or thing which the Mortgagee or the Receiver may execute or do pursuant thereto. Provided always that such power shall not be exercisable by or on behalf of the Mortgagee until the happening of an Event of Default. The parties hereto declare that the mandate hereby granted is so granted in the interest of the Mortgagee and as part of its security.

 

	
11.2

	
Exercise of power

 

The exercise of such power by or on behalf of the Mortgagee or any Receiver shall not put any person dealing with the Mortgagee or the Receiver upon any enquiry as to whether any Event of Default has happened, nor shall such person be in any way affected by notice that no such Event of Default has happened and the exercise by the Mortgagee or the Receiver of such power shall be conclusive evidence of the Mortgagee's or such Receiver's right to exercise the same.

 

	
11.3

	
Filings

 

The Owner hereby irrevocably appoints the Mortgagee and any Receiver jointly and also severally to be its attorney in its name and on its behalf and as its act and deed or otherwise of it, to agree the form of and to execute and do all deeds, instruments, acts and things in order to file, record, register or enrol the Mortgage and/or this Deed in any court, public office or elsewhere which the Mortgagee may in its discretion consider necessary or advisable, now or in the future, to ensure the legality, validity, enforceability or admissibility in evidence thereof and any other assurance, document, act or thing required to be executed by the Owner pursuant to clause 12.

 

	
12

	
Further assurance

 

The Owner hereby further undertakes at its own expense from time to time to execute, sign, perfect, do and (if required) register every such further assurance, document, act or thing as in the opinion of the Mortgagee may be necessary or desirable for the purpose of more effectually mortgaging and charging the Mortgaged Property or perfecting the security constituted or intended to be constituted by the Mortgage and this Deed or contemplated by the Loan Agreement.

 

	
13

	
Notices

 

Every notice, request, demand or other communication under this Deed shall:

 

	
13.1.1

	
be in writing delivered personally or by first class prepaid letter (airmail if available) or facsimile transmission or other means of telecommunication in permanent written form;

 

	
13.1.2

	
be deemed to have been received in the case of a letter, when delivered personally or three (3) days after it has been put in to the post and, in the case of a facsimile transmission or other means of telecommunication in permanent written form, at the time of despatch (provided that if the date of despatch is not a business day in the country of the addressee or if the time of despatch is after the close of business in the country of the addressee it shall be deemed to have been received at the opening of business on the next such business day); and

 

  

21

  

	
13.1.3

	
be sent:

 

	
  

	
(a)

	
if to the Owner at:

 

	
  

	
c/o Diana Shipping Services S.A.

	
  

	
Pendelis 16

	
  

	
Palaio Faliro

	
  

	
175 64 Athens

	
  

	
Greece

	
 

	

Fax no:   +30 210 942 4975

	
  

	
 

	

Att:         Mr Andreas Michalopoulos

 

	
  

	
(b)

	
if to the Mortgagee at:

	
  

	
Nordea Bank Finland Plc, London Branch

	
  

	
8th Floor, City Place House

	
  

	
55 Basinghall Street

	
  

	
London EC2V 5NB

	
  

	
England

	
 

	

Fax no:     +44 207 726 9188

	
  

	
 

	

Att:           Shipping Department

 

with a copy to:

 

Fax no: +44 207 726 9102

Att:       Loan Administration

 

or, in each case, to such other address and/or numbers as is notified by one party to the other parties under this Deed.

 

	
14

	
Counterparts

 

This Deed may be entered into in the form of two counterparts, each executed by one of the parties, and, provided both the parties shall so execute this Deed, each of the executed counterparts, when duly exchanged or delivered, shall be deemed to be an original but, taken together, they shall constitute one instrument.

 

	
15

	
Severability of provisions

 

Each of the provisions in this Deed are severable and distinct from the others, and if at any time one or more such provisions is or becomes invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions of this Deed shall not in any way be affected or impaired thereby.

 

	
16

	
Law and jurisdiction

 

	
16.1

	
Law

 

This Deed and any non-contractual obligations connected with it are governed by, and shall be construed in accordance with, English law.

 

	
16.2

	
Submission to jurisdiction

 

For the benefit of the Mortgagee, the parties hereto irrevocably agree that any legal action or proceedings in connection with the Mortgage and/or this Deed (including any non-contractual obligations connected with the Mortgage and/or this Deed) may be brought in the English courts or in the courts of any other country chosen by the Mortgagee, each of which shall have

 

  

22

  

jurisdiction to settle any disputes arising out of or in connection with the Mortgage and/or this Deed (including any non-contractual obligations connected with the Mortgage and/or this Deed). The Owner irrevocably and unconditionally submits to the jurisdiction of the English courts and the courts of any country chosen by the Mortgagee and irrevocably designates, appoints and empowers Mr Antonis Nicolaou at present of 25 Heath Drive, Potters Bar, Herts EN6 1EN, England to receive, for it and on its behalf, service of process issued out of the English courts in any legal action or proceedings arising out of or in connection with the Mortgage and/or this Deed (including any non-contractual obligations connected with the Mortgage and/or this Deed). The submission to such jurisdiction shall not (and shall not be construed so as to) limit the right of the Mortgagee to take proceedings against the Owner in any other court of competent jurisdiction nor shall the taking of proceedings in any one or more jurisdictions preclude the taking of proceedings in any other jurisdiction, whether concurrently or not. The parties further agree that only the courts of England and not those of any other State shall have jurisdiction to determine any claim which the Owner may have against the Mortgagee arising out of or in connection with the Mortgage and/or this Deed (including any non-contractual obligations connected with the Mortgage and/or this Deed).

 

	
16.3

	
Process agent

 

If Mr Nikolaou appointed as agent for service of process by the Owner and referred to in clause 18.2 passes away or cannot be found or is otherwise unable for any reason to act or resigns as agent for service of process, the Owner herby undertakes within ten (10) days of such event taking place (and the Owner by way of security hereby irrevocably and unconditionally authorises the Mortgagee to do so) to designate, appoint and empower on its behalf, Messrs Cheeswrights (currently of Bankside House, 107 Leadenhall Street, London EC3A 4AF, England) at their then principal place of business in London as substitute process agent of Mr Antonis Nikolaou or another agent on terms acceptable to the Mortgagee.

 

	
16.4

	
Contracts (Rights of Third Parties Act) 1999

 

No term of this Deed is enforceable under the Contracts (Rights of Third Parties) Act 1999 by a person who is not a party to this Deed.

 

IN WITNESS whereof this Deed has been duly executed as a deed the day and year first above written.

 

  

23

  

Schedule 1

 

 

Forms of Loss Payable Clauses

 

	
(A)

	
Hull and machinery (marine and war risks)

 

By a Deed of Covenant dated [•] 2012, JEMO SHIPPING COMPANY INC. of Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960 (the "Owner") has assigned (subject to the prior assignment in favour of Nordea Bank Finland Plc, London Branch contained in the deed of covenant dated [•] 2012) to NORDEA BANK FINLAND PLC, LONDON BRANCH of 8th Floor, City Place House, 55 Basinghall Street, London EC2V 5NB, England (the "Mortgagee"), all the Owner's rights, title and interest in and to all policies and contracts of insurance from time to time taken out or entered into by or for the benefit of the Owner in respect of m.v. Leto and accordingly:

 

	
  

	
(a)

	
all claims hereunder in respect of an actual or constructive or compromised or arranged total loss, and all claims in respect of a major casualty (that is to say any casualty the claim in respect of which exceeds One million Dollars ($1,000,000) (or the equivalent in any other currency) inclusive of any deductible) shall be paid in full to the Mortgagee or to its order; and

 

	
  

	
(b)

	
all other claims hereunder shall be paid in full to the Owner or to its order, unless and until the Mortgagee shall have notified the insurers hereunder to the contrary, whereupon all such claims shall be paid to the Mortgagee or to its order.

 

	
(B)

	
War risks

 

It is noted that NORDEA BANK FINLAND PLC, LONDON BRANCH of 8th Floor, City Place House, 55 Basinghall Street, London EC2V 5NB, England (the "Mortgagee"), is interested as first mortgagee in the subject matter of this insurance. Save as hereinafter provided, all claims (whether in respect of actual, constructive, arranged or compromised total loss or otherwise) which, but for this Loss Payable Clause would be payable to JEMO SHIPPING COMPANY INC. of Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960 (the "Owner") shall (subject to the rights of the Mortgagee under a first priority deed of covenant in favour of the Mortgagee dated [•] 2012) be payable to the Mortgagee, provided always that unless and until notice in writing to the contrary has been received by the Association, claims (other than total loss claims) not exceeding One million Dollars ($1,000,000) (or the equivalent in any other currency) in respect of any one claim shall be paid direct to the Owner or to its order.

 

	
(C)

	
Protection and indemnity risks

 

Payment of any recovery which JEMO SHIPPING COMPANY INC. of Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960 (the "Owner") is entitled to make out of the funds of the Association in respect of any liability, costs or expenses incurred by the Owner, shall be made to the Owner or to its order, unless and until the Association receives notice to the contrary from NORDEA BANK FINLAND PLC, LONDON BRANCH of 8th Floor, City Place House, 55 Basinghall Street, London EC2V 5NB, England (the "Mortgagee"), in which event all recoveries shall thereafter (subject to the rights of the Mortgagee under a first priority deed of covenant in favour of the Mortgagee dated [•] 2012) be paid to the Mortgagee or its order; provided always that no liability whatsoever shall attach to the Association, its Managers or their agents for failure to comply with the latter obligation until the expiry of two clear business days from the receipt of such notice.

 

	
(D)

	
Loss of Earnings

 

By a Deed of Covenant dated [•] 2012, JEMO SHIPPING COMPANY INC. of Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960 (the "Owner") has assigned to NORDEA BANK FINLAND PLC, LONDON BRANCH of 8th Floor, City Place House, 55 Basinghall Street, London EC2V 5NB, England (the "Mortgagee") (subject to the prior assignment in favour of Nordea Bank Finland Plc, London Branch contained in the deed of covenant dated [•] 2012), its rights, title and interest in and to all policies and contracts of insurance from time to time taken out or entered into by or for the benefit of the Owner in respect of m.v. Leto and accordingly all claims hereunder shall be paid in full to [here insert details of Operating Account] unless and until the Mortgage shall have notified the insurers hereunder to the contrary, whereupon in either case all such claims shall be paid to the Mortgagee or its order.

 

  

24

  

Schedule 2

 

Form of Notice of Assignment of Insurances

 

(For attachment by way of endorsement to the Policy)

 

JEMO SHIPPING COMPANY INC. of Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960 the Owner of the m.v. Leto HEREBY GIVES NOTICE that by a Deed of Covenant dated [.] 2012 and entered into by us NORDEA BANK FINLAND PLC, LONDON BRANCH of 8th Floor, City Place House, 55 Basinghall Street, London EC2V 5NB, England, there has been assigned by us to NORDEA BANK FINLAND PLC, LONDON BRANCH as mortgagee (subject to the rights of the Mortgagee under a first priority deed of covenant in favour of the Mortgagee dated [.] 2012) of the said vessel all insurances in respect thereof, including the insurances constituted by the Policy whereon this notice is endorsed.

 

___________________________

Signed

For and on behalf of

JEMO SHIPPING COMPANY INC.

 

Date: [•] 2012

 

  

25

  

 

	
EXECUTED as a DEED

	
)

	  
	
by

	
)

	  
	
for and on behalf of

	
)

	  
	
JEMO SHIPPING COMPANY INC.

	
)

	
Attorney-in-Fact

	
in the presence of:

	
)

	  

 

 

	  
	
Witness

Name:

Address:

Occupation:

 

 

	
EXECUTED as a DEED

	
)

	  
	
by

	
)

	  
	
for and on behalf of

	
)

	  
	
NORDEA BANK FINLAND PLC, LONDON BRANCH

	
)

	
Attorney-in-Fact

	
in the presence of:

	
)

	  

 

 

	  
	
Witness

Name:

Address:

Occupation:

 

  

26

  

Borrowers

 

	
EXECUTED as a DEED byI. ZAFIRAKIS

	
)

	  
	
for and on behalf of

	
)

	
/s/ I. Zafirakis

	
JEMO SHIPPING COMPANY INC.

	
)

	
Attorney-in-Fact

	
in the presence of:

	
)

	  

 

 

	
/s/ Anthi Kekatou

	
Witness

Name: Anthi Kekatou

Address: Norton Rose LLP

Occupation: Solicitor

 

 

	
EXECUTED as a DEED byA. MICHALOPOULOS

	
)

	  
	
for and on behalf of

	
)

	
/s/ A. Michalopoulos

	
MANDARINGINA INC.

	
)

	
Attorney-in-Fact

	
in the presence of:

	
)

	  

 

	
/s/ Anthi Kekatou

	
Witness

Name: Anthi Kekatou

Address: Norton Rose LLP

Occupation: Solicitor

 

 

Creditors

 

	
EXECUTED as a DEED byE. PZOUKALI

	
)

	  
	
for and on behalf of

	
)

	
/s/ E. Pzoukali

	
NORDEA BANK FINLAND PLC, LONDON BRANCH

	
)

	
Attorney-in-Fact

	
as Arranger, Agent, Security Agent, Account Bank and Bank

	
)

	  

 

	
EXECUTED as a DEED byE. PZOUKALI

	
)

	  
	
for and on behalf of

	
)

	
/s/ E. Pzoukali

	
NORDEA BANK FINLAND PLC

	
)

	
Attorney-in-Fact

	
as Swap Provider

	
)

	  

 

Security Parties

 

	
EXECUTED as a DEED by S. PALIOS

	
)

	  
	
for and on behalf of

	
)

	
/s/ S. Palios

	
DIANA SHIPPING INC.

	
)

	
Attorney-in-Fact

	
as Corporate Guarantor

in the presence of:

	
)

	  

 

	
/s/ Anthi Kekatou

	
Witness

Name: Anthi Kekatou

Address: Norton Rose LLP

Occupation: Solicitor

 

  

27

  

 

	
EXECUTED as a DEED byA. MARGARONIS

	
)

	  
	  	
)

	  
	
for and on behalf of

	
)

	
/s/ A. Margaronis

	
DIANA SHIPPING SERVICES S.A.

	
)

	
Attorney-in-Fact

	
as Manager

in the presence of:

	
)

	  

 

	
/s/ Anthi Kekatou

	
Witness

Name: Anthi Kekatou

Address: Norton Rose LLP

Occupation: Solicitor

 

  

28

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