Document:

Exhibit 10(a)

AGREEMENT

by and among

REX RADIO AND TELEVISION, INC., REX ALABAMA,
INC., KELLY & COHEN

APPLIANCES, INC. and STEREO TOWN, INC., as Seller,

REX STORES CORPORATION,

and

APPLIANCE DIRECT, INC., as Purchaser

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AGREEMENT

          THIS
AGREEMENT (this “Agreement”) is made as of the 29th day of January, 2009 (the “Effective
Date”), by and between REX RADIO AND TELEVISION, INC., an Ohio corporation
(“Seller One”), KELLY & COHEN APPLIANCES, INC., an Ohio corporation
(“Seller Two”), and STEREO TOWN, INC., a Georgia corporation (“Seller
Three”), REX ALABAMA, INC., an Ohio corporation (“Seller Four”)
(collectively, Seller One, Seller Two, Seller Three and Seller Four, “Seller”),
REX STORES CORPORATION, a Delaware corporation (“REX Stores”), all
having an address at 2875 Needmore Road, Dayton, OH 45414, and APPLIANCE
DIRECT, INC., a Florida corporation (“Purchaser”), having an address at
397 North Babcock Street, Melbourne, Florida 32935.

RECITALS

	
 

	
 

	
 

	
A. Seller is
 the owner of the Assets (as defined below) and desires to sell the Assets to
 Purchaser, subject to the terms and conditions of this Agreement. 

	
 

	
 

	
 

	
B. Seller is
 the owner of the Properties (as defined below) and desires to lease the
 Properties, subject to the terms and conditions of this Agreement. 

	
 

	
 

	
 

	
C. Purchaser
 desires to purchase the Assets and lease the Properties, subject to the terms
 and conditions of this Agreement. 

          NOW,
THEREFORE, in consideration of the mutual agreements set forth herein and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:

SECTION 1 DEFINITIONS

          The
following capitalized terms shall have the meanings set forth in this Section 1
for all purposes under this Agreement:

          “Agreement”
shall have the meaning set forth in the first paragraph hereof.

          “Appliances”
shall have the meaning set forth in Section 2.1(a).

          “Assets”
shall have the meaning set forth in Section 2.1.

          “Bill
of Sale and Assignment” shall have the meaning set forth in Section
4.2(a)(vii).

          “Business
Day” shall have the meaning set forth in Section 14.10.

          “Closing”“
shall mean the consummation of the transactions described herein as more fully
described in Section 4 below.

          “Closing
Date” shall mean January 30, 2009.

          “Closing
Statement” shall have the meaning set forth in Section 5.1(a).

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          “Creditors’
Rights Statutes” shall have the meaning set forth in Section 6.1(k). 

          “Delivery
Items” shall have the meaning set forth in Section 3.1(a). 

          “Due
Diligence Period” shall have the meaning set forth in Section 3.2. 

          “Effective
Date” shall have the meaning set forth in the first paragraph hereof. 

          “Equipment”
shall have the meaning set forth in Section 2.1(b). 

          “General
Warranty Period” shall have the meaning set forth in Section 3.5. 

          “Governmental
Notices” shall have the meaning set forth in Section 3.1(a)(iv). 

          “Implementation
Date” shall have the meaning set forth in Section 2.6.

          “Implementation
Schedule” shall have the meaning set forth in Section 2.6.

          “Indemnitee”
shall have the meaning set forth in Section 6.4. 

          “Indemnitor”
shall have the meaning set forth in Section 6.4. 

          “Inspections”
shall have the meaning set forth in Section 3.2.

          “Lease”
shall have the meaning set forth in Section 2.2. 

          “Leased
Properties” shall have the meaning set forth in Section 2.3. 

          “Notice”
shall have the meaning set forth in Section 10.

          “Person”
shall mean an individual, corporation, partnership, limited liability company,
association, trust or any other entity or organization, including a government
or political subdivision or any agency or instrumentality thereof.

          “Prohibited
Transaction” shall have the meaning set forth in Section 14.13. 

          “Property”
or “Properties” shall have mean each location listed on Exhibit 2.2.

          “Proposed
Transaction” shall mean the transactions contemplated by this Agreement. 

          “Purchase
Option Agreements” shall have the meaning set forth in Section 6.1(c). 

          “Purchase
Price” shall have the meaning set forth in Section 2.4.

          “Purchaser”
shall have the meaning set forth in the first paragraph hereof. 

          “Required
Consents” shall have the meaning set forth in Section 6.1(g). 

          “Restricted
Parties” shall mean and include REX Stores and each of the Sellers.

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          “REX
Stores” shall have the meaning set forth in the first paragraph hereof.

          “Right
of First Refusal Agreements” shall have the meaning set forth in Section
6.1(c).

          “Seller”
shall have the meaning set forth in the first paragraph hereof.

          “Seller
One” shall have the meaning set forth in the first paragraph hereof.

          “Seller
Three” shall have the meaning set forth in the first paragraph hereof.

          “Seller
Two” shall have the meaning set forth in the first paragraph hereof.

          “Service
Contracts” shall have the meaning set forth in Section 3.1(a)(viii).

          “Sites”
shall mean the sites of each Property identified on Exhibit 2.2 or Exhibit
2.3 attached hereto.

          “Surviving
Obligations” shall mean all obligations of Purchaser or Seller hereunder
that expressly survive the Closing or termination of this Agreement.

          “Wholesale
Cost of Appliance Inventory” shall have the meaning set forth in Section
2.4.

All terms
defined in this Agreement in the singular shall have comparable meanings when
used in the plural and vice versa.

SECTION 2 AGREEMENT TO SELL AND PURCHASE

          2.1
Assets to be Purchased. “Assets” means all right, title and
interest of Seller in, to and under all assets used in or related to the
conduct of Seller’s businesses at each of the Properties or Leased Properties,
including, without limitation:

	
 

	
 

	
 

	
          (a)
 all Whirlpool appliances located at each Site as of the “Implementation Date”
 as hereinafter defined (the “Appliances”); 

	
 

	
 

	
 

	
          (b)
 all furniture, fixtures and equipment (including computer and
 telecommunications equipment and point of sale equipment), furniture and
 furnishings, and other tangible or fixed assets owned by Seller at each of
 the Properties or Leased Properties listed or described on Schedule 2.1(b)
 (the “Equipment”); 

	
 

	
 

	
 

	
          (c)
 all of the Service Contracts and Permits; 

	
 

	
 

	
 

	
          (d)
 Seller’s intangibles rights to any telephone numbers of Seller, permits, guarantees
 and warranties, excluding Seller’s right, title and interest (if any) in and
 to the trade names “REX”, “Rex Radio and Television”, “Rex Television and
 Appliance Centers”, “Rex TV & Appliance Centers”, “rexstores.com”, “Kelly
 & Cohen Appliances”, “Stereo Town”, and “T.V. & Stereo Town” or any
 variation thereof; and 

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          (e)
 all unliquidated warranty claims which Seller may have against any person or
 entity arising out of, or related to, the Appliances.

          “Permits”
means those federal, state, local or other governmental licenses, permits,
consents, approvals and authorizations listed or described on Schedule
2.1(c).

          2.2
Leases. (a) Subject to the terms and conditions of this Agreement, at
Closing, Purchaser shall execute and deliver counterparts of a lease in
the form of Exhibit 2.2(a) attached hereto with Seller, as landlord, and
Purchaser (or its nominee or nominees), as tenant, for the Properties (each, a
“Lease”). The delineation of the Properties and which Property is owned
by Seller One, Seller Two and Seller Three is set forth in Exhibit 2.2
attached hereto. Each Lease shall be for an initial term of six and one quarter
(6.25) years with one (1) five (5) year option to renew. The lease rate shall
be $65,000, $75,000 and $85,000 annually for each Property in first through
third lease years, respectively, year four shall be at the rate of $75,000 and
subsequent years, including years 4, 5 and 6 shall include annual CPI
increases. The lease terms shall be triple net and include a cross default
provision for all the Properties. Each Lease shall grant Purchaser an option to
be exercised once to terminate the leases on up to ten (10) of the Properties,
with not less than six (6) months notice, without penalty, twenty-four (24)
months following commencement of the lease. Upon six (6) months notice prior to
the expiration of the initial terms of 6.25 years, Purchaser may exercise its
option to renew leases as to specific locations on a site by site basis without
limitation on quantity. Each Lease shall include an option for Purchaser to
purchase all of the Properties during the first two (2) years of the lease
term. During the initial six (6) months of the initial term, the option shall
be at a fixed price of $70.00 per square foot and during the following eighteen
(18) months of the initial term at $76.00 per square foot. Seller agrees to
provide Purchaser with financing of eighty percent (80%) loan to cost at an
interest rate equal to WSJ Prime, plus two percent (2%) with an annual interest
rate floor of 6.25% per annum and with an amortization period of twenty years.
Additionally, Seller financing provided herein shall have a balloon of all
unpaid principal at thirty-six (36) months from the closing of the purchase of
the Properties. Purchaser and Seller shall agree that all costs customarily
born by buyer/mortgagors and sellers/mortgagees shall be born by the respective
party based upon the custom of the county and state in which the real property
is located. Purchaser and Seller agree at the request of either party to record
in the applicable public records a memorandum of interest identifying
Purchaser’s option to purchase the Properties. 

          2.3
Leased Properties. Purchaser shall use good faith efforts to negotiate,
subject to the terms and conditions of this Agreement, either (i) an
assumption of Seller’s existing leases (“Assumption”) or (ii) new leases (“New
Lease”) for the properties identified on Exhibit 2.3 attached hereto
(the “Leased Properties”). If Purchaser is successful in negotiating
either an Assumption or a New Lease at Purchaser’s option, such sites shall be
added to the Implementation Schedule and the parties shall execute an amendment
to this Agreement reflecting the revised Implementation Schedule.
Notwithstanding the foregoing, Seller shall have the right, in its sole
discretion, on or after February 28, 2009, to cease operations of any or all of
the Leased Properties and terminate any or all of the employees at each of the
Leased Properties subsequent to February 27, 2009. 

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          2.4
Purchase Price. The aggregate price to be paid for the Assets shall be
the total wholesale cost of Seller’s Whirlpool Appliance inventory as of
the “Implementation Date” as hereinafter defined, as the same may be adjusted
as provided below plus One and 00/100 Dollar ($1.00) (collectively the “Purchase
Price”). Seller’s wholesale cost of its Whirlpool Appliance inventory shall
mean the lesser of (i) Seller’s manufacturer cost, net of all manufacturer
credits, including volume rebate, damage, advertising/co-op credit, etc. or
(ii) Purchaser’s manufacturer cost, net of all manufacturer credits, including
volume rebate, damage, advertising/co-op credit, etc, (the “Wholesale Cost
of Appliance Inventory”), provided, however, any Appliances held in
Seller’s inventory at the Site as of its Implementation Date which have been in
Seller’s inventory for greater than twelve (12) months shall at fifty percent
(50%) of the Wholesale Cost and any Appliance that is deemed “scrap” shall be
retained by Seller. The Wholesale Cost of Appliance Inventory shall be
calculated on behalf of Purchaser and Seller by the manufacturer by providing
the aggregate price to the parties as calculated based upon Seller’s inventory
of Appliance as of the Implementation Date and shall be paid to Seller by the
applicable manufacturer. Purchaser shall, prior to the Closing Date, arrange
any financing arrangements necessary to allow it to purchase the Appliances
directly with the respective manufacturers of such Appliances or through third
party financing such that Seller shall receive a credit or payment from the
respective manufacturers on the Implementation Date on terms acceptable to
Seller. Purchaser and Seller may reach an agreement following closing and
during implementation concerning the Purchaser’s potential purchase of Seller’s
Frigidaire Appliances remaining at each Property or Leased Property as of the
Implementation Date for each Site. Any Appliances held in Seller’s inventory at
the Site as of its Implementation Date which have been in Seller’s inventory
for greater than twelve (12) months shall be re-billed to Purchaser by
manufacture(s) at fifty percent (50%) of the Wholesale Cost. Any appliances in
Seller’s inventory at the Site as of its Implementation Date which are “scrap”
shall be re-billed to Purchaser by the respective manufacturer at a rate of
$0.01 for each scrap Appliance. 

          2.5
Extended Service Plan (“ESP”) Payment. Purchaser agrees to accept
Seller’s customer ESP for Seller’s Frigidaire and Whirlpool appliances
(excluding air conditioners and dehumidifiers). Seller shall pay to Purchaser,
in connection with such assumption as of the Implementation Date, Seller’s profit in the Book Value of Seller’s
Frigidaire and Whirlpool appliances’ ESP for the Properties and Leased Properties (“Seller’s Profit”).
Seller’s Profit shall be equal to Seller’s Book Value (Seller’s reported
liability related to ESP less Seller’s reported commissions as both are shown
on the books and records of Seller in the ordinary course of its business) less
Seller’s cost to transfer the ESP related to the Properties and Leased
Properties (the “ESP Credit”). Seller shall arrange for the transfer of
its entire ESP to a company of its selection. For the purposes of this
provision, Seller’s profit in the Book Value of Seller’s Frigidaire and
Whirlpool appliances shall be allocated on the profit of the overall Seller
portfolio. As of the Implementation Date for each Site, Purchaser shall
place into escrow, pursuant to
an agreement to be mutually acceptable to the parties, with Dinsmore &
Shohl LLP as escrow agent, an amount equal to forty percent (40%) of the ESP
Credit (the “Escrowed Funds”) applicable to that Site. The Escrowed
Funds shall be used to offset Purchaser’s obligation for rent under the Leases
as follows: beginning with the “Rent Commencement Date” as defined in each
Lease, the Escrow Agent shall transfer to Seller, as payment for Purchaser’s
rent obligation under the Lease, an amount equal to the then due monthly rent
for each Lease for which Purchaser’s obligation to pay rent has commenced;
provided that the total of all amounts drawn from the Escrowed Funds shall at
no time exceed that proportion of the Escrowed Funds determined by multiplying the
Escrowed Funds by a 

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fraction, the
numerator of which is all of the Properties which Purchaser has accepted
delivery and possession and the denominator of which is the total number of
Properties.

          2.6
Implementation Schedule. The Properties and Leased Properties shall be
turned over to Purchaser on the date specified (the “Implementation
Date”) on the implementation schedule attached as Exhibit 2.6 hereto
(the “Implementation Schedule”). 

          2.7
Rex Gift Cards. Seller agrees to reimburse Purchaser for those gift
cards issued by Seller which Purchaser honors after the Closing.
Purchaser shall forward to Seller invoices indicating the purchase and amount
of the gift card honored and Seller shall pay the amount of the gift card
honored within thirty (30) days of receipt of the request for reimbursement. 

SECTION 3 SELLER’S DELIVERIES; CONDITIONS
PRECEDENT

          3.1
Seller’s Deliveries.

          (a)
Seller has provided or will provide within five (5) Business Days prior to the
Implementation Date, to Purchaser, to the extent within Seller’s possession or
control, true, correct and complete copies of the following items relating to
the ownership and operation of the Properties being turned over as of such
Implementation Date (collectively, the “Delivery Items”):

	
 

	
 

	
 

	
(i) existing
 engineering or property condition reports; 

	
 

	
 

	
 

	
(ii) permits
 and licenses for the Property, including, without limitation, certificates of
 occupancy, if in Seller’s possession; 

	
 

	
 

	
 

	
(iii) all
 reciprocal easement agreements, operating agreements, development agreements
 and other similar agreements, declarations, deeds and instruments relating to
 the integrated use, operation and maintenance of the Properties and
 properties in the vicinity of, adjacent to, contiguous with, or peripheral to
 the Properties (each, an “REA”); 

	
 

	
 

	
 

	
(iv) copies
 of all notices, correspondence and files from governmental authorities
 relating to the Properties, including notices of building safety, health code
 or environmental violations, and all files related thereto in Seller’s
 possession or control (the “Governmental Notices”); 

	
 

	
 

	
 

	
(v) the
 latest real and personal property tax bills for the Properties and of any
 pending property tax complaints or proceedings; 

	
 

	
 

	
 

	
(vi) any and
 all notices, correspondence, files, pleadings or other documents relevant to
 Purchaser’s evaluation of pending or threatened claims or litigation by any
 Person relating to or affecting the Properties, including, without
 limitation, claims or litigation relating to the REAs and including, without
 limitation, 

-7-

	
 

	
 

	
 

	
information
 regarding pending lawsuits affecting the Properties, even if covered by
 insurance;

	
 

	
 

	
 

	
(vii) all
 warranties or guarantees regarding major systems or structural items
 comprising part of the Properties; and 

	
 

	
 

	
 

	
(viii) all
 service, vendor, equipment leasing, management, development and other
 contracts relating to the operation or maintenance of the Real Property (the
 “Service Contracts”), each as identified on Schedule 3.1(a)(viii)
 attached hereto. 

          3.2
Inspections and Access. At any reasonable time and from time to time
prior to the close of business January __, 2009 (the “Due Diligence
Period”) or earlier termination of this Agreement, Purchaser and its
representatives shall be permitted (i) to enter upon the Properties or Leased
Properties to examine, inspect and investigate the same, and (ii) to access all
books, records, drawings and other documentation relating to the Properties or
the Leased Properties in the possession or control of Seller (collectively, the
“Inspections”). Purchaser agrees to use commercially reasonable efforts
to (1) keep the purpose of the Inspections confidential and (2) not disclose
the existence of or terms of this Agreement to any of Seller’s personnel
located at the retail operations at the Properties or Leased Properties;
provided, however, that the foregoing shall not prohibit any disclosure
required pursuant to any federal or state law or regulation or by governmental
authorities. Seller shall cooperate with Purchaser in conducting the
Inspections, which cooperation shall include, without limitation facilitating
interviews with Leased Property landlords. Seller agrees to respond promptly to
any inquiry which Purchaser may make from time to time, and shall instruct its
property manager and other agents and employees to give specific answers to
Purchaser’s inquiries from time to time relating to the condition and operation
of the Properties. Notwithstanding any other provision of this Agreement, no
Inspections shall constitute a waiver or relinquishment on the part of
Purchaser of its rights under any covenant, condition, representation, or
warranty of Seller under this Agreement. 

          Purchaser
agrees to indemnify, defend and hold Seller harmless from and against any and
all claims, losses or damages suffered or incurred by Seller to the extent
directly resulting from Purchaser’s or its agents’ negligence or willful
misconduct in connection with the Inspections, and Purchaser agrees to restore
any Property damaged by the Inspections to its condition prior to Purchaser’s
Inspections to the extent practicable; provided, however, that Purchaser’s
foregoing obligations shall specifically exclude any damages arising as a
result of Purchaser’s discovery of any condition existing on the Property prior
to Purchaser’s entry on the Property. The provisions of the immediately
preceding sentence of this Section 3.2 shall survive termination of this
Agreement for three hundred sixty five (365) days, if this Agreement shall be
terminated.

          3.3
Additional Conditions to Purchaser’s Obligation to Close. (a) In
addition to all other conditions set forth herein, the obligation of Purchaser
to consummate the transactions contemplated hereunder shall be contingent on
the following:

	
 

	
 

	
 

	
(i) Seller’s
 representations and warranties contained herein shall be true, correct and
 complete in all material respects as of the Closing Date;

-8-

	
 

	
 

	
 

	
(ii) As of
 the Closing Date, the Seller shall have performed its obligations hereunder
 and all deliveries to be made by Seller at Closing have been tendered; 

	
 

	
 

	
 

	
(iii)
 Purchaser shall have negotiated acceptable leases or assignments of leases
 for the Leased Properties; 

	
 

	
 

	
 

	
(iv) At no
 time on or before the Closing Date shall any of the following have occurred
 with respect to Seller and/or REX Stores: (1) the commencement of a case
 under Title 11 of the U.S. Code, or under any other applicable federal or
 state bankruptcy or similar law; (2) the appointment of a trustee or receiver
 of any property interest; (3) an assignment for the benefit of creditors; (4)
 an attachment, execution or other judicial seizure of a substantial property
 interest; or (5) a dissolution or liquidation; 

	
 

	
 

	
 

	
(v) Approval
 by manufacturer(s) of Purchaser’s purchase of the Assets contemplated by this
 Agreement on terms and conditions acceptable to Purchaser in Purchaser’s sole
 and absolute discretion including the determination of the Wholesale Price; 

	
 

	
 

	
 

	
(vi)
 Confirmation by manufacturer(s) of the willingness and ability to supply
 inventory to Purchaser at quantities acceptable to Purchaser for the Sites. 

	
 

	
 

	
 

	
(vii)
 Assignment to Purchaser of all warranties provided by equipment vendors; 

	
 

	
 

	
 

	
(viii)
 Completion of a program in which employees of Purchaser are trained by Seller
 (or Seller’s designee) in the operation and recommended maintenance of
 Seller’s POS system; 

	
 

	
 

	
 

	
(ix) The
 absence of any condition that would render Purchaser incapable of operating a
 store or stores identified on Exhibit 2.2 and Exhibit 2.3; 

	
 

	
 

	
 

	
(x) Receipt
 of all consents and approvals required for the Seller’s sale and transfer to
 Purchaser of the Assets, if applicable; and 

	
 

	
 

	
 

	
(xi)
 Purchaser being satisfied with the level of employee retention at the sites
 sufficient to meet Purchaser’s needs in its sole discretion. 

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(b) If any of
the conditions set forth in Section 3.3(a)(i) through (xii) are not satisfied
on the Closing Date, Purchaser may elect either to (i) terminate this
Agreement, or (ii) to the extent such failure constitutes a default by Seller,
exercise its rights under Section 13. In the event of the termination of this
Agreement pursuant to this Section 3.3, each party shall pay any costs
theretofore incurred by it, whereupon neither party shall have any additional
liability hereunder and this Agreement shall be terminated, except for the
Surviving Obligations.

          3.4
Additional Conditions to Seller’s Obligations to Close. (a) In addition
to all other conditions set forth herein, the obligation of Seller to
consummate the transactions contemplated hereunder shall be contingent on the
following: 

	
 

	
 

	
 

	
(i)
 Purchaser’s representations and warranties contained herein shall be true,
 correct and complete in all material respects as of the Closing Date; and 

	
 

	
 

	
 

	
(ii) As of
 the Closing Date, Purchaser shall have performed its obligations hereunder
 and all deliveries to be made by Purchaser at Closing have been tendered. 

(b) If any of
the conditions set forth in Section 3.4(a)(i) or (ii) are not satisfied on the
Closing Date, Seller may elect either to (i) terminate this Agreement, or (ii)
to the extent such failure constitutes a default by Purchaser, exercise its
rights under Section 13. In the event of the termination of this Agreement
pursuant to this Section 3.4, Purchaser shall promptly return to Seller the
Delivery Items, and each party shall pay any costs theretofore incurred by it,
whereupon neither party shall have any additional liability hereunder and this
Agreement. 

          3.5
Covenants Regarding Property Condition. All materials, Equipment and
systems incorporated at each Property or Leased Property shall be
suitable for use under the normal operating conditions in existence at the Site
at which it is located, and otherwise consistent with and in compliance with
the ordinary use and purpose of the Equipment. The Equipment shall perform its
intended functions. If Purchaser notifies Seller in writing during the General
Warranty Period (as defined below), or no later than thirty (30) days after the
expiration of the General Warranty Period, that a breach of the foregoing
warranty has occurred during the General Warranty Period, Seller shall correct
(or cause to be corrected) the defects and deficiencies promptly at no cost to
Purchaser. The “General Warranty Period” shall be ninety (90) days from
the Implementation Date for the respective Property. The terms “defects” and
deficiencies” shall not include damage arising from Purchaser’s misuse or
negligence, acts of God or normal wear and tear. Seller shall enforce all
corresponding warranties provided by equipment vendors, and if Seller fails to
do so, Purchaser shall have the right to enforce such warranties directly
against the equipment vendors. At Purchaser’s election, Seller shall arrange
for (or enter into and assign to Purchaser at the Closing) long-term service
agreements with respect to major equipment on terms acceptable to Purchaser. 

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SECTION 4 CLOSING

          4.1
Time and Place. The Closing shall be held on the Closing Date in the offices
of counsel to Purchaser or counsel to Purchaser’s lender, or at any
other location mutually acceptable to the parties. 

          4.2
Deliveries.

          (a)
In addition to the items and documents required under other provisions of this
Agreement to be delivered by Seller to Purchaser at or prior to Closing (or the
Implementation Date, as indicated below), Seller (or whichever of Seller One,
Seller Two or Seller Three is identified on Exhibit 1.1 as the owner of
the Site to which such items and documents relate) shall execute and/or deliver
(or cause to be executed and/or delivered) to Purchaser through escrow each of
the following at Closing: 

	
 

	
 

	
 

	
(i) evidence
 of Seller’s authority to consummate the transactions described herein; 

	
 

	
 

	
 

	
(ii) a date-down
 letter for representations and warranties in the form attached hereto as Exhibit
 4.2(a)(ii); 

	
 

	
 

	
 

	
(iii)
 originals of all Delivery Items to the extent in the possession or control of
 Seller; 

	
 

	
 

	
 

	
(iv) on the
 Implementation Date for each Site, the ESP Payment; 

	
 

	
 

	
 

	
(v) the
 Leases; 

	
 

	
 

	
 

	
(vi) on the
 Implementation Date for each Site, one or more bills of sale and assignment
 conveying to Purchaser all of Seller’s right, title and interest in and to
 the Assets, in the form attached hereto as Exhibit 4.2(a)(vi) (the “Bill
 of Sale and Assignment”); and 

	
 

	
 

	
 

	
(vii)
 originals of the Required Consents. 

          (b)
In addition to the items and documents required under other provisions of this
Agreement to be delivered by Purchaser to Seller at or prior to Closing,
Purchaser also shall execute and/or deliver (or cause to be executed and/or
delivered) to Seller through escrow each of the following at Closing: 

	
 

	
 

	
 

	
(i) on the
 Implementation Date for each Site, the ESP Escrow; 

	
 

	
 

	
 

	
(ii)
 evidence of Purchaser’s authority to consummate the transactions described
 herein; 

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(iii) on the
 Implementation Date for each Property, evidence of insurance required under
 the Leases; 

	
 

	
 

	
 

	
(iv) the
 Leases; and 

	
 

	
 

	
 

	
(v) on the
 Implementation Date for each Site, the Bill of Sale and Assignment. 

          (c)
Possession. Seller shall deliver actual possession of the Properties to
Purchaser pursuant to the Implementation Schedule set forth in Schedule
2.6. 

SECTION 5 PRORATIONS/PAYMENT OF PURCHASE
PRICE

          5.1
Prorations and Adjustments.

          (a)
A statement of prorations and other adjustments shall be prepared by Seller for
each Property as of the Implementation Date for that Property in conformity
with the provisions of this Agreement and submitted to Purchaser for review and
approval not less than three (3) Business Days prior to the Implementation Date
for that Property (the “Closing Statement”). For purposes of prorations
and other adjustments under this Section 5, Purchaser shall be deemed the
tenant of a Property as of 12:00 a.m. on the Implementation Date for that
Property. Subject to the foregoing, and in addition to other adjustments that
may be provided for in this Agreement, the following items with respect to each
Property are to be prorated or adjusted, as the case may require, as of the
Implementation Date:

	
 

	
 

	
 

	
(i) With
 respect to each Property, except any Leased Property: 

	
 

	
 

	
 

	
 

	
 

	
        A.
 real estate taxes and assessments; 

	
 

	
 

	
 

	
        B.
 charges and payments to be made by Seller pursuant to any REA encumbering or
 benefiting the Property; 

	
 

	
 

	
 

	
        C.
 water, electric, telephone and all other utility and fuel charges; 

	
 

	
 

	
 

	
        D.
 assignable license and permit fees; and 

	
 

	
 

	
 

	
        E.
 other operating expenses and any other customarily apportioned items. 

	
 

	
 

	
 

	
(ii)
 Generally:

	
 

	
 

	
 

	
 

	
 

	
        A.
 Real estate taxes shall be initially prorated on the basis of 100% of the
 most recent ascertainable bill, but subject to reproration upon issuance of
 the actual bills therefor to effectuate the actual proration. Real estate
 taxes shall be apportioned on the basis of the fiscal period for which
 assessed. If as of the Implementation Date any of the Properties or any

-12-

	
 

	
 

	
 

	
portion
 thereof shall be affected by any special or general assessments which are or
 may become payable in installments of which the first installment is then a
 lien and has become payable, responsibility for the payment of any unpaid
 installments of such assessments which are due prior to the Implementation
 Date shall be allocated to Seller, and Purchaser shall be responsible to pay
 only the installments which are due on or after the Implementation Date, and
 Purchaser or Seller shall make a payment to the other to the extent necessary
 so that the total amount of such special or general assessment is apportioned
 as provided above. Except with respect to general real estate taxes (which
 shall be reprorated upon the issuance of the actual bills, if necessary), any
 proration which must be estimated as of the Implementation Date shall be
 reprorated and finally adjusted as soon as practicable after the
 Implementation Date, with any refunds payable to Seller or Purchaser to be
 made as soon as practicable. Seller shall have the right to prosecute and
 continue to prosecute subsequent to the Implementation Date any tax
 certiorari proceedings for the tax year in which the Implementation Date
 occurs and all prior tax years. Any refunds obtained, net of the reasonable
 expenses incurred in obtaining such refund, with any portion thereof
 allocable to periods subsequent to the date preceding the Implementation
 Date, shall be paid to Purchaser and the remainder to be paid to Seller.

	
 

	
 

	
 

	
          B.
 Water, electric, telephone and all other utility and fuel charges shall be
 prorated ratably on the basis of the last ascertainable bills (and reprorated
 upon receipt of the actual bills or invoices) unless final meter readings and
 final invoices can be obtained. To the extent practicable, Seller shall cause
 meters for utilities to be read not more than ten (10) Business Days prior to
 the Implementation Date.

          (b)
On the Implementation Date, the parties shall execute a Closing Statement for
each Property being turned over to Purchaser which will reflect the prorations
for that Property, including prorated rent under the Lease for that Property
and payment of that portion of the Purchase Price allocable to that Property’s
Whirlpool Appliances inventory as well as an amendment to the Lease specifying
the Rent Commencement date for that Property. 

          (c)
The provisions of this Section 5 shall survive the Closing. 

          5.2
Post Implementation Adjustments. All items to be adjusted, for which
figures are not available as of the Implementation Date, will be adjusted and payment
therefor will be made by Seller to Purchaser or by Purchaser to Seller, as the
case may be, as soon as figures are available after the Implementation Date.
Purchaser or Seller, as appropriate, will deliver simultaneously with such
payment any and all data, information or other backup it may have with respect
to such payment and/or such proration so as to fully indicate to the other
party the calculation of the amount of payment contained therewith. Further, in
the event either Seller or Purchaser determine that an item adjusted as of the
Implementation Date was adjusted incorrectly, Purchaser or Seller, as
appropriate, will deliver to the other party all data, information or other
backup it may have with respect to such incorrect adjustment and the parties

-13-

shall correct
the adjustment with the appropriate party making payment to the party entitled
to such payment.

SECTION 6 REPRESENTATIONS AND WARRANTIES

          6.1
Seller’s Representations and Warranties. Seller represents and warrants to Purchaser as follows:

          (a)
Seller has the legal power, right and authority to enter into this Agreement
and to consummate the transactions contemplated hereby. Neither this Agreement
nor the transactions contemplated hereby will require any approval of the
shareholders of REX Stores. This Agreement and the transactions contemplated
hereby have been approved by the Board of Directors of REX Stores. 

          (b)
Neither the execution and delivery of this Agreement nor the consummation of
the transactions herein contemplated conflict with or result in the material
breach of any terms, conditions or provisions of or constitute a default under,
any bond, note or other evidence of indebtedness or any agreement to which
Seller is a party. 

          (c)
To Seller’s knowledge, no Person other than Purchaser has an option or right of
first refusal to purchase the Assets or any Property or any portion thereof,
except as set forth on Schedule 6.1(c)(i) (the “Purchase Option
Agreements”) and Schedule 6.1(c)(ii) (the “Right of First Refusal
Agreements”). The copies of the Purchase Option Agreements and Right of
First Refusal Agreements delivered by Seller to Purchaser are true,
correct and complete. 

          (d)
To Seller’s knowledge, there is no pending or threatened condemnation action
affecting any Property. 

          (e)
To Seller’s knowledge, except as set forth on Schedule 6.1(e) attached
hereto, there is no action, suit or proceeding pending or, to Seller’s
knowledge, threatened against Seller in any court or by or before any other
governmental agency or instrumentality which would affect any of the Assets,
the Properties or would materially and adversely affect the ability of Seller
to carry out the transactions contemplated by this Agreement. 

          (f)
To Seller’s knowledge, neither Seller nor any other party under any REAs is in
default under any REAs in any material respect. 

          (g)
To Seller’s knowledge after due inquiry, neither this Agreement nor the
transactions contemplated hereby will constitute a breach or violation of, or
default under, or will be modified, restricted or precluded by, the REAs or any
other agreement binding Seller or the Properties, provided that Seller obtains
the consents from the parties identified on Schedule 6.1(g) attached
hereto (the “Required Consents”) in form and substance satisfactory to Purchaser. Neither this Agreement nor the
transactions contemplated hereby
will constitute a breach or violation of, or default under, or will be
modified, restricted or precluded by, or any other agreement to which Seller is
a party or by which Seller or any Property is bound.

          (h)
Seller has obtained or will obtain prior to Closing the Required Consents.

-14-

          (i)
Seller is not required to make any filing with, or to obtain any permit,
authorization, consent or approval of, any governmental or regulatory authority
(including, without limitation, any securities exchange) as a condition to the
execution and delivery or performance of this Agreement and the consummation of
transactions contemplated hereby. 

          (j)
The Assets will be conveyed to Purchaser at Closing free and clear of any and
all liens, encumbrances, charges or adverse interests. 

          (k)
Neither Seller nor any of the entities constituting Seller: (i) is “insolvent”
or will be, after completion of the transactions contemplated hereby, rendered
“insolvent”, as the term “insolvent” is used in the Bankruptcy Code or in the
Uniform Fraudulent Conveyance Act as enacted in either any state in which any
Property is located or the state in which Seller’s principal office is located
(the “Creditors’ Rights Statutes”); (ii) has, or after completion of the
transactions contemplated hereby will be left with, an unreasonably small
capital within the meaning of the Creditors Rights Statutes; (iii) in entering
into and carrying out its obligations hereunder, intends to incur, or believes
that it will incur, debts beyond its ability to satisfy such debts as they
mature within the meaning of the Creditors Rights Statutes; (iv) has commenced
a case under Title 11 of the U.S. Code, or under any other applicable federal
or state bankruptcy or similar law; (v) appointed a trustee or receiver of any
property interest; (vi) made an assignment for the benefit of creditors; (vii)
suffered an attachment, execution or other judicial seizure of a substantial
property interest; (viii) suffered a dissolution or liquidation; or (ix)
suffered the discontinuation of trading of shares on the New York Stock
Exchange; 

          (l)
The representations and warranties of Seller set forth in this Agreement are
true, accurate and complete; and do not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statement therein not misleading. 

Whenever in
this Agreement there is a reference to the “knowledge” of Seller, such term
refers to the actual (as opposed to the constructive or imputed) knowledge,
with no duty to undertake inquiries or investigations, of (i) Stuart Rose,
Chief Executive Officer of REX Stores, and (ii) Douglas Bruggeman, Chief
Financial Office of REX Stores. 

          6.2
Purchaser’s Representations and Warranties. Purchaser hereby represents
and warrants to Seller as follows: 

	
 

	
 

	
 

	
          (a)
 Purchaser has the legal power, right and authority to enter into this
 Agreement and to consummate the transactions contemplated hereby. 

	
 

	
 

	
 

	
          (b)
 Neither the execution and delivery of this Agreement nor the consummation of
 the transactions herein contemplated conflict with or result in the material
 breach of any terms, conditions or provisions of or constitute a default
 under, any bond, note, or other evidence of indebtedness or any agreement to
 which Purchaser is a party. 

	
 

	
 

	
 

	
          (c)
 This Agreement and all other documents and instruments executed by such
 Purchaser pursuant to this Agreement have been duly executed and constitute
 valid 

-15-

	
 

	
 

	
 

	
and binding
 obligations of such Purchaser, enforceable against such Purchaser in
 accordance with its respective terms.

          6.3
Survival. The representations and warranties of Seller and Purchaser set
forth in this Agreement shall be deemed remade as of Closing, and said
representations and warranties as so remade shall survive Closing for a period
of three hundred sixty five (365) days after the Closing Date (other than the
representations made in Sections 6.1(a) and 6.2(a), which shall have no
expiration date), after which all of the representations and warranties of
Seller and Purchaser set forth in this Agreement shall become void and of no
further force or effect. 

          6.4
Indemnification. Seller hereby indemnifies and agrees to defend, hold
harmless and protect Purchaser, each partner or shareholder, as the case
may be, in Purchaser, and their respective officers, directors, members,
shareholders, partners, employees, agents and consultants, from and against any
and all loss, costs, expenses (including reasonable attorneys’ fees),
obligations, liabilities, claims (including any claim for damage to property or
injury to death of any persons), liens, or encumbrances, but not consequential
damages, punitive damages or lost profits, arising from: (i) the Properties and
arising or accruing on or before the Closing Date, including, without
limitation, matters arising under Environmental Laws or relating to Hazardous
Materials; (ii) any act, conduct, omission, contract or commitment of Seller
occurring on or before the Closing Date; or (iii) any material inaccuracy in or
material breach of any representation or warranty of Seller resulting from any
breach or default by Seller under this Agreement, provided the claim for
indemnity was timely made during the survival period set forth in Section 6.3
above. The party claiming indemnification under this Section 6.4 or under
Section 3.2(c), Section 9 or Section 14.14 hereof (the “Indemnitee”)
shall notify the other party (the “Indemnitor”) of any such claim for
indemnification within forty-five (45) days after the Indemnitee receives
notice of the basis for such claim, but failure to notify the Indemnitor shall
in no case limit the obligations of the Indemnitor under this Section 6.4
except to the extent Indemnitor shall be prejudiced by such failure. Should
Indemnitor fail to discharge or undertake to defend against such claim upon
learning of the same, then the Indemnitee may litigate or settle such liability
or submit such liability to arbitration or other alternative dispute resolution
in its reasonable discretion and Indemnitor’s liability shall include, but not
be limited to, the amount of such settlement. The provisions of this Section
6.4 shall survive the Closing for a period of two (2) years, if the Closing
shall occur, and shall survive termination of this Agreement, if this Agreement
shall be terminated. 

SECTION 7 PURCHASE AS-IS

          EXCEPT
FOR THE REPRESENTATIONS AND WARRANTIES OF SELLER EXPRESSLY SET FORTH IN THIS
AGREEMENT, PURCHASER WARRANTS AND ACKNOWLEDGES TO AND AGREES WITH SELLER THAT
PURCHASER IS PURCHASING THE PROPERTIES IN THEIR “AS-IS, WHERE IS” CONDITION
“WITH ALL FAULTS” AS OF THE CLOSING DATE AND SPECIFICALLY AND EXPRESSLY WITHOUT
ANY WARRANTIES, REPRESENTATIONS OR GUARANTEES, EITHER EXPRESS OR IMPLIED, AS TO
THEIR CONDITION, FITNESS FOR ANY PARTICULAR PURPOSE, MERCHANTABILITY, OR ANY
OTHER WARRANTY OF ANY KIND, NATURE, OR TYPE WHATSOEVER FROM OR ON BEHALF OF
SELLER.

-16-

SECTION 8 CLOSING COSTS

          8.1
Seller’s Closing Costs. Seller shall pay the following expenses incurred
in connection with the transactions described herein Seller’s legal
fees. 

          8.2
Purchaser’s Closing Costs. Purchaser shall pay the following expenses
incurred in connection with the transactions described herein: (a)
Purchaser’s legal fees and expenses, (b) the cost to obtain new leases for the
Leased Properties, if any, and (c) the cost to complete any of Purchaser’s due
diligence. 

SECTION 9 BROKERAGE COMMISSIONS

          Seller
and Purchaser each warrant and represent to the other that neither has had any
dealings with any broker, agent or finder relating to the sale of any Property
or the other transactions contemplated hereby except Brown Gibbons Lang &
Company whose fee shall be paid by Seller. Each agrees to indemnify, defend and
hold the other harmless from and against any claim for brokerage commissions,
compensation or fees by any broker, agent or finder in connection the sale of
any Property or the other transactions contemplated hereby resulting from the
acts of the indemnifying party. This Section 9 shall survive the Closing, if
the Closing shall occur, and shall survive termination of this Agreement, if
this Agreement shall be terminated.

SECTION 10 NOTICE

          All
notices, demands and communications (a “Notice”) under this Agreement
shall be delivered or sent by: (a) first class, registered or certified mail,
postage prepaid, return receipt requested, (b) nationally recognized overnight
courier, or (c) facsimile with confirmation of receipt of such facsimile,
addressed to the address of the intended recipient set forth below or to such
other address as either party may designate by notice pursuant to this Section.
Notices shall be deemed given upon receipt or refusal. Any notice may be given
by counsel to the party giving such notice.

	
 

	
 

	
 

	
 

	
Notices to
 Seller:

	
Rex Radio and Television,
 Inc.

	
 

	
 

	
Kelly &
 Cohen Appliances, Inc.

	
 

	
 

	
Stereo Town,
 Inc.

	
 

	
 

	
Rex Alabama,
 Inc.

	
 

	
 

	
2875
 Needmore Road

	
 

	
 

	
Dayton, OH
 45414

	
 

	
 

	
Attn:
 Douglas Bruggeman

	
 

	
 

	
Ph.
 (937)279-3931

	
 

	
 

	
Fax.
 (937)279-8643

	
 

	
 

	
 

	
 

	
With a copy
 to:

	
Dinsmore & Shohl LLP

	
 

	
 

	
10
 Courthouse Plaza SW, Suite 1100

	
 

	
 

	
Dayton, Ohio
 45402

	
 

	
 

	
Attn: Edward
 M. Kress and Karen R. Adams

	
 

	
 

	
Ph.
 (937)449-2830 and (937)449-2825

	
 

	
 

	
Fax.
 (937)463-4947

-17-

	
 

	
 

	
 

	
 

	
Notices to
 Purchaser:

	
Appliance
 Direct, Inc.

	
 

	
 

	
397 N.
 Babcock

	
 

	
 

	
Melbourne,
 Florida 32935

	
 

	
 

	
Attn: Sam
 Pak

	
 

	
 

	
Ph. (321)
 255-3200

	
 

	
 

	
Fax. (321)
 255-5866

	
 

	
 

	
 

	
 

	
With a copy
 to:

	
Schillinger
 & Coleman, P.A.

	
 

	
 

	
1311 Bedford
 Drive, Suite 1

	
 

	
 

	
Melbourne,
 FL 32940

	
 

	
 

	
Christopher
 J. Coleman

	
 

	
 

	
Ph:
 (321)255-3737

	
 

	
 

	
Fax:
 (321)255-3141

SECTION 11 CASUALTY AND CONDEMNATION

          11.1
Casualty. If any Property is damaged by fire or other casualty prior to
the Implementation Date and the cost to repair would exceed twenty-five
percent (25%) of the value of the retail space for such Property, then either
Seller or Purchaser may terminate this Agreement, but only with respect to the
Property that is affected by such casualty, by written notice to Seller given
on or before the earlier of (i) twenty (20) days following such casualty or (ii)
the Implementation Date. In the event of such termination, all exhibits and
schedules hereto and definitions herein shall be deemed modified to remove such
affected Property. If neither Seller or Purchaser are entitled to terminate
this Agreement with respect to the affected Property pursuant to the foregoing
(or otherwise under this Agreement) or, either Seller or Purchaser are so
entitled to terminate this Agreement, but do not elect to do so, then the
Property shall be delivered to Purchaser on the Implementation Date, including,
without limitation, without abatement of the Purchase Price and with Seller’s
delivery of the Lease, executed by Seller, for the affected Property, and
Seller shall assign and transfer to Purchaser on the Implementation Date, without
warranty or recourse, (A) all of Seller’s right, title and interest in and to
all insurance proceeds paid or payable to Seller on account of such fire or
casualty (less Seller’s reasonable costs of collection thereof and, provided
that Seller obtained Purchaser’s prior written approval therefor, the
reasonable amounts spent by Seller toward the restoration or repair of the
Property, as supported by reasonable evidence of such expenditures provided to
Purchaser), and (B) all of Seller’s rights under any contract with respect to
any restoration or repair. Seller shall credit Purchaser the amount of the
deductible except to the extent that Seller has already expended the deductible
on the aforementioned restoration or repair costs, as supported by reasonable
evidence of such expenditures provided to Purchaser. 

          11.2
Condemnation. If a Property or any portion thereof is taken in eminent
domain proceedings prior to the Implementation Date, and if such taking
materially adversely interferes with the value or operation of such Property,
Purchaser may, as its sole and exclusive right and remedy, terminate this
Agreement, but only with respect to the Property that is affected by such
taking, by notice to Seller given on or before the earlier of (a) twenty (20)
days after such taking or (b) the Implementation Date. In the event of such
termination, all exhibits and schedules 

-18-

hereto and
definitions herein shall be deemed modified to remove such affected Property.
If Purchaser is not entitled to or does not elect to so terminate, the Property
shall be delivered to Purchaser on the Implementation Date, including, without
limitation, and Seller shall assign and transfer to Purchaser on the
Implementation Date, without warranty or recourse, all of Seller’s right, title
and interest in and to all condemnation awards paid or payable to Seller on
account of such eminent domain proceedings (if any) less Seller’s reasonable
costs of collection thereof and, provided that Seller obtained Purchaser’s
prior written approval therefor, the reasonable amounts spent by Seller toward
the restoration or repair of the Property, as supported by reasonable evidence
of such expenditures.

SECTION 12 OPERATIONS PRIOR TO CLOSING OR
TERMINATION

          Seller
covenants and agrees with Purchaser that after the date hereof until the
Implementation Date for each Site or termination of this Agreement, Seller
shall conduct its business involving the Properties as follows:

          (a)
Seller shall not transfer title to any Property or create any easements or
mortgages encumbering any Property that will survive past the Implementation
Date. 

          (b)
Subject to 12(c)-(d) below, Seller shall not enter into or amend the Service
Contracts or any other contracts affecting the Properties, other than contracts
entered into in the ordinary course of business and which are cancelable by the
owner of such Property without penalty or fee at or prior to the Implementation
Date. 

          (c)
Seller shall not amend or agree to amend any REA without Purchaser’s prior
written consent, which Purchaser shall not unreasonably withhold or delay, and
Seller shall pay and perform or cause to be paid and performed Seller’s
obligations under the REAs and otherwise comply with the requirements of the
REAs. 

          (d)
Seller shall maintain or cause to be maintained the Properties in the same
condition and repair as existed as of the date Purchaser completes its due
diligence, normal wear and tear and damage by fire or other casualty excepted,
in which case Section 11 of this Agreement shall control. 

          (e)
Seller shall maintain or cause to be maintained the existing casualty,
liability and other insurance policies relating to the Properties that are
currently maintained by Seller as evidenced by the certificate attached hereto
as Exhibit 12(e).

          (f)
Seller shall promptly deliver to Purchaser copies of any (i) notices received
by Seller from any governmental authority alleging any violation of any
applicable law or ordinance with respect to any Property; (ii) notices from the
parties under the REAs alleging any default or default with the giving of
notice or passage of time, or both, on the part of Seller received by Seller;
or (iii) notices from Seller alleging any default or any event which with the
giving of notice or passage of time, or both, constitutes a default on the part
of any party to the Space Leases or REAs; provided, however, that no such
notice alleging a default on the part of any party to the REAs shall be given
by Seller without Purchaser’s prior consent, which Purchaser may withhold in
its sole discretion. 

-19-

          (g)
Seller shall not institute any zoning proceeding affecting any Property without
Purchaser’s prior written consent, which Purchaser may withhold in its sole
discretion. Seller shall regularly communicate with Purchaser regarding the
status of and developments in any pending property tax complaints or
proceedings. Seller shall deliver written notice to Purchaser prior to
instituting any additional property tax complaints or proceedings.

SECTION 13 DEFAULTS AND REMEDIES

          13.1
Seller Defaults. In the event that Seller, on or prior to the Closing
Date, shall default in the performance of its obligations hereunder (other than
de minimis obligations that do not affect the use or value of the transactions
contemplated hereunder in any material respect), Purchaser, as its sole and
exclusive remedy and in lieu of all other rights or remedies otherwise provided
at law or in equity, may either (a) seek specific performance of Seller’s
obligations hereunder, or (b) terminate this Agreement.

          13.2
Purchaser Defaults. In the event that Purchaser, on or prior to the
Closing Date, shall default in the performance of its obligations under
this Agreement (other than de minimis obligations that do not affect the value
of the transactions contemplated hereunder in any material respect), then
Seller, as its sole and exclusive remedy and in lieu of all other rights or
remedies otherwise provided at law or in equity, may terminate this Agreement
and receive and retain the Earnest Money as full and complete liquidated
damages for such default of Purchaser. The parties hereto acknowledge that it
is impossible to estimate more precisely the damages which might be suffered by
Seller upon Purchaser’s default. Seller’s receipt of the Earnest Money is
intended not as a penalty, but as full liquidated damages. The right to retain
such sums as full liquidated damages is Seller’s sole and exclusive remedy in
the event the purchase and sale of the Property is not consummated because of a
default hereunder by Purchaser, and, upon receipt of such sums, Seller hereby
waives and releases any right to (and hereby covenants that it shall not) sue
Purchaser: (i) for specific performance of this Agreement, or (ii) to recover
actual, punitive, consequential, special or exemplary damages in excess of such
sums in connection with any such default. 

          13.3
Dispute Resolution. All disputes that cannot be resolved between the
respective chief executive officers of the Seller and Purchaser shall be
referred to mediation prior to commencement of litigation. Mediation shall be
held in Brevard County, Florida and shall be conducted by a mediator mutually
acceptable by the parties. If the parties are unable to agree on a mediator,
each party shall nominate a Florida Supreme Court Certified Mediator who shall
jointly select the mediator to be appointed as the mediator for the parties. 

SECTION 14 MISCELLANEOUS

          14.1
Entire Agreement; Amendments. This Agreement, together with the exhibits
attached hereto, constitutes the entire agreement of the parties hereto
regarding the purchase and sale of the Properties, and all prior agreements,
understandings, representations and statements, oral or written, including any
so-called offer letters or letters of intent, are hereby merged herein and
superseded hereby. This Agreement may be amended or modified only by an
instrument in writing, signed by the party or parties intended to be bound
thereby.

-20-

          14.2
Time. All parties hereto agree that time is of the essence in the
performance of the provisions of this Agreement. 

          14.3
Counterpart Execution. This Agreement may be executed in one (1) or more counterparts, each of which shall be deemed an
original. The execution of
this Agreement by facsimile signature or other electronic means shall be
binding and enforceable as an original. 

          14.4
Governing Law. This Agreement shall be deemed to be a contract made under the internal laws of the State of Ohio and for all
purposes shall be
governed by and interpreted in accordance with the laws of the State of Ohio. 

          14.5
Assignment; Third Party Beneficiaries. Neither Purchaser or Seller shall
assign any of its rights or delegate any of its obligations under this
Agreement without the prior written consent of the other party. Notwithstanding
this foregoing, without the prior written consent of Seller, Purchaser shall
have the right to designate a nominee or nominees to enter into the Leases,
which nominee shall be an affiliate of Purchaser. Subject to the foregoing,
this Agreement shall inure to the benefit of, and shall be enforceable by and
binding upon, the parties hereto and their respective successors and assigns.
Nothing in this Agreement, expressed or implied, is intended to confer any
rights or remedies upon any Person, other than the parties hereto and, subject
to the restrictions on assignment herein contained, their respective successors
and assigns. 

          14.6
Section Headings. The Section headings contained in this Agreement are
for convenience only and shall in no way enlarge or limit the scope or
meaning of the various and several Sections hereof. 

          14.7
Severability. If any portion of this Agreement is held to be
unenforceable by a court of competent jurisdiction, the remainder of
this Agreement shall remain in full force and effect. 

          14.8
WAIVER OF TRIAL BY JURY. SELLER AND PURCHASER, TO THE EXTENT THEY
MAY LEGALLY DO SO, HEREBY EXPRESSLY WAIVE ANY RIGHT TO TRIAL BY JURY OF ANY
CLAIM, DEMAND, ACTION, CAUSE OF ACTION OR PROCEEDING ARISING UNDER OR WITH
RESPECT TO THIS AGREEMENT, OR IN ANY WAY CONNECTED WITH, OR RELATED TO, OR
INCIDENTAL TO, THE DEALINGS OF THE PARTIES HERETO WITH RESPECT TO THIS
AGREEMENT OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER
NOW EXISTING OR HEREAFTER ARISING, AND IRRESPECTIVE OF WHETHER SOUNDING IN
CONTRACT, TORT, OR OTHERWISE. TO THE EXTENT THEY MAY LEGALLY DO SO, SELLER AND
PURCHASER HEREBY AGREE THAT ANY SUCH CLAIM, DEMAND, ACTION, CAUSE OF ACTION OR
PROCEEDING SHALL BE DECIDED BY A COURT TRIAL WITHOUT A JURY AND THAT ANY PARTY
HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY
COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE OTHER PARTY OR PARTIES HERETO
TO WAIVER OF ITS OR THEIR RIGHT TO TRIAL BY JURY. 

-21-

          14.9
No Waiver. No covenant, term or condition of this Agreement, other than
as expressly set forth herein, shall be deemed to have been waived by
Seller or Purchaser unless such waiver is in writing and executed by Seller or
Purchaser, as the case may be. 

          14.10
Time of Performance. Whenever the time for performance of an obligation
under this Agreement occurs or expires on a day other than a Business
Day, the time for performance thereof shall be extended to the next Business
Day. For the purpose of this Agreement, “Business Day” shall mean any
day other than a Saturday, Sunday, U.S. national holiday or holiday in the
State of Ohio. 

          14.11
Commercially Reasonable Efforts. Between the date of this Agreement and
the Closing Date, REX Stores, Seller and Purchaser shall cooperate with
each other and use commercially reasonable efforts to perform their respective
obligations hereunder and cause to be made the respective deliveries required
to be made by them. 

          14.12
Further Assurances. If at any time any of the parties hereto reasonably
determine that any further assignments, conveyances or assurances are
reasonably necessary or desirable to carry out the provisions hereof and the
transactions contemplated herein, the appropriate parties hereto shall execute
and deliver, or cause to be executed and delivered, any and all proper deeds,
assignments and assurances and to do, or cause to be done, all things
reasonably necessary or proper to carry out fully the provisions hereof. 

          14.13
Non-Solicitation. Seller agrees not to market for a sale, debt
financing, joint venture or other direct or indirect disposition of any
Property or the Properties (each, a “Prohibited Transaction”), negotiate
for any Prohibited Transaction, or accept any offers for a Prohibited
Transaction until the earliest to occur of (a) this Agreement is terminated
with respect to the affected Property pursuant to the terms hereof, or (b) the
termination of this Agreement in its entirety.

          14.14
Joint and Several Liability. The obligations and undertakings of Seller
One, Seller Two and Seller Three and REX Stores under this Agreement are
joint and several. 

          14.15
Press Releases/Announcement to Seller’s Employees. Seller and Purchaser covenant and agree to coordinate press releases
and announcements to
Seller’s employees and third parties regarding this Agreement. 

[signatures on following page]

-22-

          IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
and delivered as of the day and year first above written.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
REX STORES:

	
 

	
PURCHASER:

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
REX STORES CORPORATION,

	
 

	
APPLIANCE DIRECT, INC.,

	
 

	
a Delaware
 corporation

	
 

	
a Florida
 corporation

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
By: 

	
 

	
 

	
 

	
By: 

	
 

	
 

	
 

	
 

	

	
 

	
 

	

	
 

	
 

	
Name:

	
 

	
 

	
Name:

	
 

	
 

	
 

	
 

	
 

	

	
 

	
 

	
 

	

	
 

	
 

	
Title:

	
 

	
 

	
Title:

	
 

	
 

	
 

	
 

	

	
 

	
 

	
 

	

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
SELLER:

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
REX RADIO
 AND TELEVISION, INC.,

	
 

	
 

	
 

	
 

	
 

	
an Ohio
 corporation

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
By: 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	

	
 

	
 

	
 

	
 

	
 

	
Name:

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	

	
 

	
 

	
 

	
 

	
 

	
 

	
Title:

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
KELLY & COHEN
 APPLIANCES, INC.,

	
 

	
 

	
 

	
 

	
 

	
an Ohio
 corporation

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
By: 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	

	
 

	
 

	
 

	
 

	
 

	
Name:

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	

	
 

	
 

	
 

	
 

	
 

	
 

	
Title:

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
STEREO TOWN, INC.,

	
 

	
 

	
 

	
 

	
 

	
a Georgia corporation

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
By: 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	

	
 

	
 

	
 

	
 

	
 

	
Name:

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	

	
 

	
 

	
 

	
 

	
 

	
 

	
Title:

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
REX ALABAMA, INC.,

	
 

	
 

	
 

	
 

	
 

	
an Ohio
 corporation

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
By: 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	

	
 

	
 

	
 

	
 

	
 

	
Name:

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	

	
 

	
 

	
 

	
 

	
 

	
 

	
Title:

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	

	
 

	
 

	
 

	
 

	
 

Exhibit 2.2

Properties

	
 

	
 

	
 

	
 

	
 

	
Lease for

Store Number:

	
 

	
Location:

	
 

	
Landlord

	
 

	
 

	
 

	
 

	
 

	
14

	
 

	
7163 Airport
 Boulevard

	
 

	
 

	
 

	
 

	
Mobile,
 Alabama

	
 

	
Seller One

	
23

	
 

	
Daphne,
 Alabama

	
 

	
Seller One

	
24

	
 

	
Gadsden,
 Alabama

	
 

	
Seller One

	
27

	
 

	
Dothan,
 Alabama

	
 

	
Seller One

	
29

	
 

	
Auburn, Alabama

	
 

	
Seller One

	
102

	
 

	
Florence,
 Alabama

	
 

	
Seller One

	
103

	
 

	
Decatur,
 Alabama

	
 

	
Seller One

	
181

	
 

	
Montgomery,
 Alabama

	
 

	
Seller One

	
139

	
 

	
Springdale,
 Arkansas

	
 

	
Seller One

	
154

	
 

	
Brunswick,
 Georgia

	
 

	
Seller Two

	
208

	
 

	
Pocatello,
 Idaho

	
 

	
Seller One

	
228

	
 

	
Ammon, Idaho

	
 

	
Seller One

	
247

	
 

	
Danville,
 Illinois

	
 

	
Seller Two

	
82

	
 

	
Ottumwa,
 Iowa

	
 

	
Seller Two

	
290

	
 

	
Clinton,
 Iowa

	
 

	
Seller Two

	
11

	
 

	
Baton Rouge,
 Louisiana

	
 

	
Seller One

	
264

	
 

	
Monroe,
 Michigan

	
 

	
Seller One

	
17

	
 

	
Gautier,
 Mississippi

	
 

	
Seller One

	
25

	
 

	
Greenville,
 Mississippi

	
 

	
Seller One

	
137

	
 

	
Meridian,
 Mississippi

	
 

	
Seller One

	
138

	
 

	
Columbus,
 Mississippi

	
 

	
Seller One

	
296

	
 

	
Natchez,
 Mississippi

	
 

	
Seller One

	
127

	
 

	
Vicksburg,
 Mississippi

	
 

	
Seller One

	
293

	
 

	
Lumberton,
 North Carolina

	
 

	
Seller Two

	
12

	
 

	
Lima, Ohio

	
 

	
Seller One

	
170

	
 

	
Middletown,
 Ohio

	
 

	
Seller One

	
201

	
 

	
New
 Philadelphia OH

	
 

	
Seller One

	
298

	
 

	
Troy, Ohio

	
 

	
Seller One

	
318

	
 

	
Ponca City,
 Oklahoma

	
 

	
Seller Three

	
85

	
 

	
New Castle,
 Pennsylvania

	
 

	
Seller Two

	
84

	
 

	
Hermitage,
 Pennsylvania

	
 

	
Seller Two

	
62

	
 

	
Rapid City,
 South Dakota

	
 

	
Seller One

	
184

	
 

	
Chattanooga,
 Tennessee

	
 

	
Seller Two

	
207

	
 

	
Morristown,
 Tennessee

	
 

	
Seller Two

	
195

	
 

	
San Angelo,
 Texas

	
 

	
Seller One**

	
215

	
 

	
Manitowoc,
 Wisconsin

	
 

	
Seller One

	
321

	
 

	
Sheboygan,
 Wisconsin

	
 

	
Seller One

Seller Key:

Seller One:
Rex Radio and Television, Inc.

Seller Two:
Kelly & Cohen Appliances, Inc.

Seller Three:
Stereo Town, Inc. 

** Subject to
termination of existing contract to purchase which is anticipated to be
received on February 3, 2009. 

-2-

Exhibit 2.2(a)

Form of Lease

LEASE

          THIS
LEASE, entered into at Melbourne, Florida as of this _______ day of
_____________, 2009 (“Effective Date”) by and between [[Owner]], a[n]
__________________ (“Landlord”), and _________________________________, a
Florida corporation (“Tenant”). 

WITNESSETH:

          IN
CONSIDERATION of the mutual covenants hereinafter contained, and each act
performed hereunder by either of the parties, Landlord and Tenant agree as
follows: 

SECTION 1 BASIC LEASE PROVISIONS 

1.1 This Article I is an integral part
of this Lease and all of the terms hereof are incorporated into this Lease in
all respects. In addition to the other provisions which are elsewhere defined
in this Lease, the following, whenever used in this Lease, shall have the
meanings set forth in this Article I: 

	
 

	
 

	
 

	
 

	
          (a)
 Premises: Property described on Exhibit B attached hereto and made a part
 hereof, together with all buildings and improvements located thereon. The
 building(s) on the Premises contain _____ square feet of gross floor area.

	
 

	
 

	
 

	
 

	
          (b)
 Tenant’s Trade Name: Appliance Direct.

	
 

	
 

	
 

	
 

	
          (c)
 Permitted Use: the sale at retail of consumer appliances, including, but not
 limited to, refrigerators, freezers, vacuum cleaners, washers, dryers,
 dishwashers, stoves/ovens, microwaves, and such other items as determined by
 Tenant together with related accessories, including attendant warehouse space
 (Article VIII).

	
 

	
 

	
 

	
 

	
          (d)
 Lease Term or Term: Period commencing on Delivery of Possession Date and
 ending on six (6) years and three (3) months thereafter (Article III), plus,
 if and upon any exercise by Tenant of any Renewal Term, such Renewal Term(s)
 that has (have) been exercised.

	
 

	
 

	
 

	
 

	
          (e)
 Rent Commencement Date: The Delivery of Possession Date (Article III).

	
 

	
 

	
 

	
 

	
          (f)
 Expiration Date: Seventy Five months from Rent Commencement Date (Article
 III).

	
 

	
 

	
 

	
 

	
          (g)
 Minimum Rent during Lease Term: See Rent Schedule A (Article IV).

-3-

	
 

	
 

	
 

	
          (h)
 Delivery of Possession Date: [[Possession]] (Article VI).

	
 

	
 

	
 

	
          (i)
 Options to Renew: See Rent Schedule A. One (1) period containing five (5)
 lease years (“Renewal Term”); not less than one hundred eighty (180) days
 prior notice to exercise required.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
(j)

	
Tenant:

	
 

	
397 North
 Babcock Street

	
 

	
 

	
 

	
 

	
Melbourne, Florida
 32935

	
 

	
 

	
 

	
 

	
Attention:

	
 

	
 

	
 

	
 

	
 

	

	
 

	
 

	
 

	
 

	
Federal I.D.
 #

	
 

	
 

	
 

	
 

	
 

	
 

	

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
(k)

	
With Copies:

	
 

	
Schillinger
 & Coleman, P.A.

	
 

	
 

	
 

	
 

	
1311 Bedford
 Drive, Suite 1

	
 

	
 

	
 

	
 

	
Melbourne,
 FL 32940

	
 

	
 

	
 

	
 

	
Attention:
 Christopher J. Coleman

	
 

	
 

	
 

	
 

	
 

	
 

	
(l)

	
Landlord:

	
 

	
 

	
 

	
 

	
 

	
 

	

	
 

	
 

	
 

	
 

	
2875
 Needmore Road

	
 

	
 

	
 

	
 

	
Dayton, Ohio
 45414

	
 

	
 

	
 

	
 

	
Federal I.D.
 #

	
 

	
 

	
 

	
 

	
 

	
 

	

	
 

	
 

	
 

	
 

	
 

	
 

	
(m)

	
With Copies:

	
 

	
Dinsmore
 & Shohl LLP.

	
 

	
 

	
 

	
 

	
10
 Courthouse Plaza SW, Suite 1100

	
 

	
 

	
 

	
 

	
Dayton, Ohio
 45402

	
 

	
 

	
 

	
 

	
Attention:
 Edward M. Kress

	
 

	
 

	
 

	
 

	
 

	
 

	
(n)

	
With Copies:

	
 

	
Schillinger
 & Coleman, P.A.

	
 

	
 

	
 

	
 

	
1311 Bedford
 Drive, Suite 1

	
 

	
 

	
 

	
 

	
Melbourne,
 FL 32904

	
 

	
 

	
 

	
 

	
Christopher
 J. Coleman

	
 

	
 

	
 

	
          (o)
 Related Lease(s): Those leases between [each landlord entity] and [each
 tenant entity] identified on Schedule I(2115) attached hereto and made a part
 hereof.

SECTION 2 PREMISES 

2.1 Landlord leases to Tenant, and
Tenant leases from Landlord, the premises described in Article I(A), Section 1
(“Premises”). 

2.2 Landlord reserves the right to
maintain, repair, and replace utility lines under, over, upon or through the
Premises as may be reasonably necessary or advisable so long as Tenant’s use of
the Premises, including uninterrupted utility service, is not adversely
affected. 

-4-

SECTION 3 TERM 

          A.
The terms and provisions of this Lease (excluding specifically, payment of
Minimum Rent as hereinafter defined) shall become effective on the Effective
Date. The Lease Term shall commence upon the Rent Commencement Date and shall
expire on the Expiration Date, unless sooner terminated. The term “lease year”
shall mean a period of twelve (12) consecutive full calendar months, commencing
upon the Rent Commencement Date. If the Rent Commencement Date does not occur
on the first day of a calendar month, the first lease year shall include any
partial calendar month. 

SECTION 4 RENT 

          Minimum
Rent. Tenant agrees to pay to Landlord, at its office or other place as
Landlord may from time to time designate, as “Minimum Rent” for the Premises
during the Lease Term, without any deduction or setoff, the amount(s) set forth
in Schedule A, in advance, on the first day of each calendar month. Minimum
Rent and Additional Rent (as hereinafter defined) shall be prorated on a per
diem basis (based upon a thirty (30) day calendar month) for any partial month
included in the first lease year. 

          Notwithstanding
Tenant’s obligation to pay Minimum Rent and/or Additional Rent as of the first
day of each month during the Lease Term, in the event that an insolvency,
bankruptcy or similar proceeding is filed by or against Tenant, Tenant shall be
obligated to pay all such Minimum Rent and/or Additional Rent on a ratable
basis from the date of the commencement of any such proceeding through the end
of the month in which such proceeding is commenced. 

SECTION 5 TAXES 

5.1 Real Estate Taxes and Assessments.
Tenant agrees to pay all real estate taxes and assessments, both general and
special, levied and assessed against the land, buildings, and all other
improvements which may be added thereto, or constructed within the tax
parcel(s) comprising the Premises which are due and payable during the term of
this Lease (“Taxes”). The term Taxes shall be further defined as the amount set
forth on any invoice or statement issued by the taxing authority for the Premises
tax parcel(s) which is due and payable by Landlord in the calendar month prior
to the accrual of any penalties and/or interest. 

          Tenant
shall pay the Taxes to the taxing authority and, upon Landlord’s request,
provide Landlord with evidence that the Taxes have been. 

SECTION 6 CONSTRUCTION 

6.1 Landlord’s Work. Landlord shall have
no obligation to (i) perform or cause the performance of construction of any
improvements to the Premises or (ii) remove any of the existing improvements,
including, but not limited to, interior or exterior signage currently located
on the Premises. 

6.2 Delivery of Premises. Landlord shall
deliver possession of the Premises to Tenant on the date indicated on the
implementation schedule by and between Tenant and Rex Stores Corporation which
is attached hereto and made a part hereof as Implementation Schedule B. 

-5-

Tenant accepts
the Premises in an “as is” condition. Tenant hereby acknowledges that, except
as provided in Article VI(C), Landlord has made no representations or
warranties to Tenant with respect to the condition of the Premises or the
working order of any systems or improvements therein existing as of the date of
delivery. 

6.3 Landlord Warranty. Landlord
warrants, for ninety (90) days from the Rent Commencement Date (the “Warranty
Period”) that all materials, equipment and systems incorporated into the
Premises shall be suitable for use under normal operating conditions in
existence at the Premises. If Tenant notifies Landlord in writing during the
Warranty Period, or no later than thirty (30) days after the expiration of the
Warranty Period, that the warranty set forth herein has been breached (it being
acknowledged by Tenant that damage arising from Tenant’s misuse or negligence,
acts of God or ordinary wear and tear are not covered by Landlord’s warranty),
Landlord shall cause such defects or deficiencies to be promptly cured at
Landlord’s cost. 

SECTION 7 UTILITIES/ASSESSMENTS 

7.1 Utility Charges. Commencing on the
Delivery of Possession Date, Tenant shall pay for all utilities provided to or
for the benefit of the Premises, including but not limited to water/sewer,
demand or reservation fees, connection fees, tap fees, gas, electricity, fuel,
light, heat, power, telephone, cable, and trash and garbage removal, together
with all taxes levied or other charges on such utilities and governmental
charges based on utility consumption. Tenant shall, at its sole cost and
expense, pay for the cost of installation of meters for the Premises and any
and all related costs and expenses if such meters do not exist at the Premises
on the date possession of the Premises is made available to Tenant. 

7.2 No Landlord Liability. In no event
shall Landlord be liable for the quality, quantity, failure, or interruption of
the foregoing utility services to the Premises. 

7.3 Tenant shall pay, as Additional
Rent, any amounts invoiced to Landlord for common area, private road or other
similar assessments pursuant to covenants or restrictions of record. 

SECTION 8 USE OF PREMISES BY TENANT 

          Tenant’s
Use of Premises. Tenant shall use the Premises only for the uses set forth in
Article I(A), Section 3, of this Lease and for no other purpose. 

SECTION 9 TENANT’S COVENANTS WITH RESPECT TO
OCCUPANCY 

9.1 Tenant agrees: 

	
 

	
 

	
 

	
          (a)
 To occupy the Premises in a safe and careful manner and in compliance with
 all laws, ordinances, rules, regulations and orders of any governmental
 bodies having jurisdiction over the Premises, and without committing or
 permitting waste;

	
 

	
 

	
 

	
          (b)
 To neither do nor suffer anything to be done or kept in or about the Premises
 which contravenes Landlord’s insurance policies or increases the premiums
 therefor;

-6-

	
 

	
 

	
 

	
          (c) To keep its show or display
 windows, canopy and electric signs lighted until at least 9:00 P.M. local
 time of each day (except Sunday, in which event signs will be lighted until
 7:00 P.M. local time) or until thirty (30) minutes after the close of each
 business day, whichever is the later;

	
 

	
 

	
 

	
          (d) To permit no reproduction of sound
 which is audible outside the Premises nor permit odors to be unreasonably
 dispelled from the Premises;

	
 

	
 

	
 

	
          (e) To place no sign on the exterior
 of the Premises without Landlord’s prior written consent, which consent shall
 not be unreasonably withheld, and in accordance with the requirements of
 Exhibit “B” attached hereto; provided, however, that Landlord hereby consents
 to all such signs that are being displayed as of the Effective Date. Tenant
 shall maintain all signs placed upon the Premises by Tenant in good condition
 and repair. Landlord further agrees to permit Tenant to paint the exterior of
 the Premises Tenant’s trademarked colors as used in the majority of Appliance
 Direct retail stores provided (i) the exterior surface of the Premises is not
 brick, and (ii) Tenant obtains the written consent of any governmental entity
 or third party that may have a right to approve exterior finishes of the
 Premises. Upon vacating the Premises, Tenant agrees to remove all signs
 installed by Tenant and repair all damage caused by such removal in
 accordance with Article IX, Section D, of this Lease;

	
 

	
 

	
 

	
          (f) To place no merchandise, sign or
 other thing of any kind in the vestibule or entry of the Premises or on the
 sidewalks or other areas adjacent thereto;

	
 

	
 

	
 

	
          (g) To keep any rubbish, garbage and
 waste generated by Tenant from the Premises in proper dumpsters provided by
 Tenant adjacent to the Premises until such rubbish, garbage and waste is
 removed from the Premises and to permit no refuse to accumulate around the
 exterior of the Premises;

	
 

	
 

	
 

	
          (h) To permit Landlord free access to
 the Premises at all reasonable times for the purpose of examining or making
 repairs to the Premises that Landlord may deem necessary or desirable for the
 safety or preservation thereof;

	
 

	
 

	
 

	
          (i) Not to permit to be attached or
 recorded against the Premises any lien, encumbrance or charge arising out of
 any work performed or materials furnished by any contractor, mechanic,
 laborer, or materialman for or at the request of Tenant. Tenant will not
 enter into any mortgages, conditional sale, security agreement or like
 instrument nor suffer any other matter or thing whereby the estate, right and
 interest of Landlord in the Premises or any part thereof might be impaired or
 diminished. If any lien or notice of lien on account of an alleged debt of
 Tenant or any notice of contract by a party engaged by Tenant or Tenant’s
 contractor to work on the Premises is filed against the Premises, Tenant
 will, within ten (10) calendar days after notice of the filing thereof, cause
 the same to be discharged of record by payment, deposit, bond, order of a
 court of competent jurisdiction, letter of credit or other adequate security.
 If Tenant fails to cause such lien or notice of lien to be discharged within
 such period, Landlord, its managing agent, or Landlord’s lender, may, but
 shall not be obligated to, discharge the same either by paying the amounts
 claimed to be due or by procuring the discharge of such lien by deposit,

-7-

	
 

	
 

	
 

	
bond or
 otherwise, and Tenant shall, immediately upon demand, reimburse Landlord, its
 managing agent, or Landlord’s lender for any and all costs and expenses
 incurred by Landlord, its managing agent, or Landlord’s lender, to discharge
 such lien including, without limitation, all attorneys’ fees, court costs and
 similar expenses, plus an administrative fee equal to fifteen percent (15%)
 of all out of pocket costs incurred by Landlord, its managing agent, or Landlord’s
 lender. In addition, Tenant shall indemnify and hold Landlord, its managing
 agent, and Landlord’s lender, if any, harmless from and against all loss,
 cost, expense and liability whatsoever (including Landlord’s or its managing
 agent’s cost of defending against the foregoing, such cost to include
 attorneys’ fees) resulting or occurring by reason of any claims or causes of
 actions that may arise as a result of any lien, notice of lien or, claim
 relating to work and/or materials furnished to the Premises at the request of
 Tenant, its employees, agents or contractors;

	
 

	
 

	
 

	
          (j) To comply with all reasonable
 rules and regulations which Landlord may from time to time establish for the
 use and care of the Premises;

	
 

	
 

	
 

	
          (k) To permit Landlord or its agents,
 during the ninety (90) day period preceding the expiration of the Term of
 this Lease, to show the Premises to potential tenants, and to place on the
 Premises notices offering the Premises for lease or sale; and

	
 

	
 

	
 

	
          (l) That it shall make no
 installations upon nor any penetrations through the roof or the exterior
 walls of the Premises without the prior written consent of Landlord;
 provided, however, Landlord hereby consents to any existing installations of
 equipment on the roof or the exterior walls as of the date of Delivery of
 Possession Date. Any unauthorized roof installations or penetrations by
 Tenant shall be subject to immediate removal and repair, at Tenant’s sole
 cost and expense, upon notice from Landlord. Repairs shall be made with
 materials of equal or better quality and by contractors approved by Landlord.

	
 

	
 

	
9.2 Pest Control:

	
 

	
 

	
 

	
          Tenant
 shall, at its sole cost and expense, contract for termite and pest
 extermination services covering the Premises.

	
 

	
 

	
 

	
 

SECTION 10 REPAIRS AND ALTERATIONS 

10.1 Repairs by Landlord. This is a
triple net lease and Landlord has no obligation to maintain, repair or replace
any part or component of the Premises except structural components that affect
the structural integrity of the building’s major components including the roof.
Landlord shall commence or complete necessary repairs promptly and adequately
after written notice from Tenant. 

10.2 Repairs by Tenant. Tenant shall keep
the Premises and any fixtures, facilities, signs or equipment contained
therein, in good condition and repair, ordinary wear and tear excepted,
including, but not limited to, non-structural components, exterior and interior
portions of all doors, door checks and operations, windows, plate glass, and
showcases surrounding the Premises, the heating, air conditioning, electrical,
plumbing and sewer systems, the exterior doors, window frames, all portions of
the store front area, signage, sidewalks and the parking lot. 

-8-

Tenant shall
replace all broken and/or cracked plate and window glass which may become
necessary during the Term of this Lease, and any renewals thereof, excepting
any repairs to items of Landlord’s original construction made necessary by
reason of damage due to fire or other casualty covered by standard fire and
extended coverage insurance. If Tenant fails to commence or complete repairs
promptly and adequately after thirty (30) days prior written notice from
Landlord, Landlord may make or complete said repairs and Tenant shall pay the
cost thereof to Landlord upon demand, together with the sum of ten percent
(10%) of said costs for overhead. The provisions of this Article X, Section B,
shall not apply in the case of damage or destruction by fire or other casualty
or by eminent domain, in which events the obligations of the parties shall be
controlled by either Article XII or Article XIV hereof. 

10.3 Alterations or Improvements by
Tenant. Tenant shall not, without Landlord’s prior written consent, make, nor
permit to be made, any alterations, additions or improvements to the Premises,
which consent Landlord may withhold in its sole discretion. Any alterations
which may be permitted by Landlord shall be based upon plans and specifications
submitted by Tenant and approved by Landlord and upon the condition that Tenant
shall promptly pay all costs, expenses, and charges thereof, shall make such
alterations and improvements in accordance with applicable laws and building
codes and ordinances and in a good and workmanlike manner, and shall fully and
completely indemnify Landlord, its managing agent, and Landlord’s lender
against any mechanic’s lien or other liens or claims in connection with the
making of such alterations, additions, or improvements. Tenant shall promptly
repair any damages to the Premises, or to the buildings of which the Premises
are a part, caused by any alterations, additions or improvements to the
Premises by Tenant. 

10.4 Removal of Improvements and Trade
Fixtures. At the expiration or earlier termination of the Lease Term, all
improvements included in the Premises at the Delivery of Possession Date, all
heating and air conditioning equipment added by Tenant after the Delivery of
Possession Date, and all alterations, additions and other improvements by
Tenant shall become the property of Landlord and shall not be removed from the
Premises. Any trade fixtures, furniture, furnishings, and signs installed in
the Premises by Tenant which remain in the Premises after Tenant vacates the
Premises shall be deemed abandoned by Tenant and Landlord may dispose of such
items as Landlord deems necessary, at Tenant’s cost. Notwithstanding anything
contained to the contrary in this Lease, if Tenant removes such items from the
Premises but fails to repair any damage caused by such removal, Landlord may
make or complete said repairs without providing Tenant notice prior to the
commencement of said repairs. To the extent Landlord exercises self help under
this paragraph, Tenant shall reimburse Landlord the cost thereof upon demand,
together with the sum of ten percent (10%) of said costs for overhead. Tenant’s
obligations under this Article X. Section 4 shall survive the termination of
this Lease. 

SECTION 11 INDEMNITY AND INSURANCE 

11.1 Indemnification by Tenant. Tenant
will indemnify and hold Landlord, its managing agent, and Landlord’s lender
harmless from and against all loss, cost, expense, and liability whatsoever
(including Landlord’s cost of defending against the foregoing, such cost to
include attorney’s fees) resulting or occurring by reason of Tenant’s
construction, use or occupancy of the Premises. 

-9-

11.2 Tenant’s Insurance. Effective as of
the Delivery of Possession Date and continuing throughout the Lease Term and
any extensions or renewals thereof, including, without limitation, any holdover
with or without Landlord’s consent, Tenant shall procure, pay for and keep in
full force and effect, the following types of insurance: 

	
 

	
 

	
 

	
          (a) Commercial General Liability
 Insurance Policy insuring the Premises and Tenant’s use thereof, together
 with contractual liability endorsements covering Tenant’s obligations set
 forth in Article XI, Section A, above, in a form satisfactory to Landlord
 with companies having an A.M. Best Rating or its equivalent of A-VIII or
 better, and with a minimum limit of One Million and 00/100 Dollars
 ($1,000,000.00) on account of bodily injuries to or death or property damage
 for each occurrence and a minimum limit of Two Million Dollars
 ($2,000,000.00) annual general aggregate. The aggregate limit may be
 satisfied through a combination of primary and umbrella/excess liability
 insurance. Such insurance shall also provide that the general aggregate
 limits apply separately to each insured location, if applicable. The
 foregoing policy shall name Landlord and such other parties as Landlord may
 from time to time designate in writing to Tenant as additional insureds under
 Tenant’s insurance policy and shall bear endorsements to the effect that the
 insurer agrees to notify all additional insureds not less than thirty (30)
 days in advance of any modification or cancellation thereof; 

	
 

	
 

	
 

	
          (b) Special Form Cause of Loss Policy
 insuring against fire and such other risks as are, from time to time,
 included in standard extended coverage endorsements (including, but not
 limited to earthquake, flood, boiler and machinery, plate glass, power
 failure, mold, windstorm, terrorism, seepage or leakage), insuring all
 leasehold and building improvements in the Premises which were originally
 constructed by Tenant, Tenant’s stock-in-trade, trade fixtures, furniture,
 furnishings, special equipment, floor and wall coverings, and all other items
 of personal property of Tenant located on or within the Premises, such
 coverage to be in an amount equal to one hundred percent (100%) of the
 replacement cost thereof. The foregoing policy shall name Landlord and such
 other parties as Landlord may from time to time designate in writing to
 Tenant as loss payee under Tenant’s insurance policy and shall bear
 endorsements to the effect that the insurer agrees to notify all loss payees
 not less than thirty (30) days in advance of any modification or cancellation
 thereof; 

	
 

	
 

	
 

	
          (c) Workers’ compensation insurance
 (meeting the requirements of the state workers’ compensation laws) and
 employer liability insurance covering all of Tenant’s employees at the
 Premises. Tenant shall also use good faith efforts to ensure all contractors,
 sub-contractors, vendors, leased employees, and temporary employees are
 properly insured for workers’ compensation; 

	
 

	
 

	
 

	
          (d) Business interruption or loss of
 income insurance in an amount equal to the Minimum Rent, Percentage Rent, if
 any, and any other Additional Rent (hereunder defined) payable under this
 Lease for a minimum period of twelve (12) months; 

	
 

	
 

	
 

	
          (e) Plate glass insurance covering all
 plate glass on the Premises at full replacement value; and, 

-10-

	
 

	
 

	
 

	
          (f) Any insurance policies designated
 necessary by Landlord with regard to Tenant’s, or Tenant’s contractors’
 construction of Tenant’s Work, as well as with regard to the construction of
 alterations including, but not limited to, contingent liability and “all
 risk” builders’ risk insurance. 

	
 

	
 

	
 

	
          Tenant
 shall deposit with Landlord prior to the date of any use or occupancy of the
 Premises by Tenant certificates evidencing Tenant’s compliance with each of
 the required coverages. To the extent that any of the foregoing policies
 shall change in name and/or coverage due to general changes in the insurance industry,
 Tenant shall obtain and maintain the equivalent policies and coverages as are
 then recognized in the insurance industry. 

11.3 Landlord’s Liability. Landlord shall
not be liable (i) for any damage to Tenant’s property located in the Premises,
regardless of the cause of such damage, nor (ii) for any condition of the
Premises whatsoever. 

11.4 Landlord’s Insurance. Effective as
of the Delivery of Possession Date and continuing throughout the Lease Term and
any extensions or renewals thereof, including, without limitation, any holdover
with or without Landlord’s consent, Landlord shall procure and keep in full
force and effect, the following types of insurance: 

	
 

	
 

	
 

	
          (a)
 Landlord, at Tenant’s cost, shall carry insurance under a Special Form Cause
 of Loss Policy (or an equivalent policy that becomes the insurance industry
 standard in the future) on the Premises in an amount equal to at least eighty
 percent (80%) of the insurable value of such improvements, together with
 endorsements insuring against such other risks as Landlord reasonably deems
 appropriate (including, but not limited to, earthquake, flood, boiler and
 machinery, power failure, mold, windstorm, terrorism, seepage or leakage and
 loss of rent) and in such amounts as Landlord deems appropriate. Tenant shall
 pay to Landlord the costs for such insurance within ten (10) days of receipt
 of Landlord’s invoice to Tenant for the premium for such insurance. 

	
 

	
 

	
 

	
          (b)
 Landlord, at Tenant’s cost, shall carry commercial general liability
 insurance with respect to the Premises up to a maximum limit of Seventy-Five
 Million and 00/100 Dollars ($75,000,000). Tenant shall pay to Landlord the
 costs for such insurance, not to exceed Seven Hundred and 00/100 Dollars
 ($700.00) per year, within ten (10) days of receipt of Landlord’s invoice to
 Tenant for the premium for such insurance.

11.5 Mutual Waiver of Subrogation. All
insurance policies required to be carried by either party covering the
Premises, including but not limited to contents, fire, and casualty insurance,
shall to the extent permitted by law expressly waive any right on the part of
the insurer against the other party. The parties hereto agree that their
policies will include such waiver clause or endorsement so long as the same shall
be obtainable without extra cost, or if extra shall be charged therefor, so
long as the other party pays such extra cost. If cost shall be chargeable
therefor, each party shall advise the other thereof and of the amount of extra
cost, and the other party, at its election, may pay the same, but shall not be
obligated to do so. The failure of any insurance policy to include such waiver
clause or endorsement shall not affect the validity of this Lease. Tenant and
Landlord further agree to waive all claims, causes of action and rights 

-11-

of recovery
against the other, and their respective agents, officers, and employees, for
any injury to or death of persons or any damage or destruction of persons,
property or business which shall occur on or about the Premises originating
from any cause whatsoever including the negligence of either party and their
respective agents, officers, and employees to the extent such injury, death or
property damage is required to be covered by a policy or policies maintained by
either Landlord or Tenant pursuant to this Lease. Notwithstanding the above,
Landlord and Tenant agree and acknowledge that the waiver of subrogation herein
contained shall expressly extend to and include any uninsured loss paid by the
insured in the form of a deductible or self-funded retention cost. 

SECTION 12 DAMAGE AND DESTRUCTION 

          In
the event the Premises are damaged by any peril covered by standard policies of
fire and extended coverage insurance, the damage shall, except as hereinafter
provided, promptly be repaired by Landlord, at Landlord’s expense, but, in no
event shall Landlord be required to repair or replace Tenant’s leasehold and
building improvements in the Premises originally constructed by Tenant after
the Delivery of Possession Date, Tenant’s stock-in-trade, trade fixtures,
furniture, furnishings, equipment or personal property, which shall be the
obligation of Tenant to replace to at least equal condition immediately prior
to such damage. In the event (a) the Premises are damaged to the extent of
twenty-five percent (25%) or more of the cost of replacement of the Premises,
or (b) any damage to the Premises occurs during the last three (3) years of the
Term of this Lease, Landlord may elect either to repair or rebuild the Premises
or to terminate this Lease upon giving notice of such election in writing to
Tenant within ninety (90) days after the event causing the damage. If the
casualty, repairing, or rebuilding shall render the Premises untenantable, in
part, a proportionate abatement of the Minimum Rent in proportion to the sales
floor area of the Premises rendered untenantable shall be allowed until the
date Landlord completes the repairs or rebuilding. If the casualty, repairing,
or rebuilding shall render the Premises untenantable, in whole, an abatement of
the Minimum Rent of the Premises shall be allowed until the date Landlord
completes the repairs or rebuilding. 

SECTION 13 ASSIGNING AND SUBLETTING 

          Tenant
shall not assign this Lease nor sublet the Premises or any part thereof,
without in each case the prior written consent of Landlord, which consent
Landlord may withhold in its sole discretion. Notwithstanding the foregoing,
Tenant may assign or sublease this Lease to an affiliated entity provided
however such assignment or sublease shall not relieve Tenant from primary
liability for the performance of Tenant’s obligations under this Lease. Tenant
shall not permit any business to be operated in or from the Premises by any
concessionaire or licensee without the prior written consent of Landlord, which
consent Landlord may withhold in its sole discretion. In the event Tenant shall
request Landlord’s consent to an assignment of this Lease or subletting of the
Premises, Tenant shall pay Landlord, as a condition to obtaining Landlord’s
consent the reasonable costs and expenses incurred by Landlord to review and/or
prepare documents in connection with such assignment or sublease not to exceed
Five Hundred and 00/100 Dollars ($500.00) per request, regardless of whether such
assignment or sublease is consummated by Tenant. No consent by Landlord shall
operate to relieve Tenant from primary liability for the performance of
Tenant’s obligations under this Lease. 

-12-

          Any
sale, assignment, bequest, inheritance, transfer or other disposition of the
ownership of Tenant’s entity which shall result in a change in the effective
control of Tenant including, without limitation, the sale of (a) stock in a
corporate tenant, (b) partnership interests in a partnership tenant, or (c)
member interests in a limited liability company tenant shall be deemed an
assignment of this Lease requiring Landlord’s prior written consent. 

SECTION 14 EMINENT DOMAIN 

          In
the event the Premises or any part thereof shall be taken or condemned either
permanently or temporarily for any public or quasi-public use or purpose by any
authority in appropriate proceedings or by any right of eminent domain, the
entire compensation award thereof, including, but not limited to, all damages
as compensation for diminution in value of the leasehold, reversion and fee,
shall belong to Landlord, without any deduction therefrom for any present or
future estate of Tenant, and Tenant hereby assigns to Landlord all its right,
title, and interest to any such award. Tenant shall have the right to recover
from the condemning authority, but not from Landlord, such compensation as may
be separately awarded to Tenant. 

          In
the event of a taking under the power of eminent domain of (i) more than
twenty-five percent (25%) of the Premises, either Landlord or Tenant shall have
the right to terminate this Lease by notice in writing given within ninety (90)
days after the condemning authority takes possession, in which event all rents
and other charges shall be prorated as of the date of such termination. 

          In
the event of a taking of any portion of the Premises not resulting in a
termination of this Lease, Landlord shall use so much of the proceeds of
Landlord’s award for the Premises as is required therefor to restore the
Premises to a complete architectural unit and this Lease shall continue in
effect with respect to the balance of the Premises, with a reduction of Minimum
Rent in proportion to the portion of the Premises taken. 

SECTION 15 DEFAULT BY TENANT 

          If
(a) Tenant defaults in the payment of Minimum Rent or other charges and such
payment is not made within ten (10) days following Landlord’s written notice
that same is due, provided that in no event shall Landlord be obligated to
provide Tenant with written notice of any monetary default, more than once in
any twelve (12) month period, or (b) if Tenant shall default in the performance
of any other of Tenant’s obligations hereunder and Tenant fails to remedy such
default within thirty (30) days after written notice from Landlord, or such
longer time, but not to exceed an additional sixty (60) days, as may be
reasonably required to cure because of the nature of the default (provided, as
to such longer time, that within the thirty (30) day period Tenant has notified
Landlord that more time reasonably is needed and has undertaken procedures to
cure the default within such thirty (30) day period and that Tenant thereafter
diligently and continuously pursues such effort to completion and promptly responds
to any request from Landlord for updates on Tenant’s progress) or (c) if a
receiver of any property of Tenant on the Premises is appointed, or Tenant’s
interest in the Premises is levied upon by legal process, or Tenant be adjudged
bankrupt and Tenant fails within thirty (30) days to cause the vacation of such
appointment, levy or adjudication, or if Tenant files a voluntary petition in
bankruptcy, disposes of all or substantially all of its assets in bulk, or
makes an assignment for 

-13-

the benefit of
its creditors, or (d) Tenant vacates or abandons the Premises, then and in any
such instance, without further notice to Tenant, or (e) a default occurs under
any of the Related Leases, Landlord shall have the right to exercise any and
all rights or remedies available to Landlord at law, in equity or otherwise,
arising from such default, including but not limited to the right to (i)
terminate this Lease, or (ii) enter upon the Premises without terminating this
Lease and relet the Premises in Landlord’s name for the account of Tenant for
the remainder of the Term upon terms and conditions reasonably acceptable to
Landlord and immediately recover from Tenant any deficiency for the balance of
the Term, plus expenses of reletting. In addition to the foregoing, any time
after such default and the lapse of any applicable notice period, Landlord
shall have the right to make such payments in default or perform such act in
default for the account and at the expense of Tenant, and all unpaid Minimum
Rent, Percentage Rent or other charges which are not paid when due and all sums
paid by Landlord pursuant to this sentence, including reasonable attorneys’
fees as specifically provided below, shall accrue interest at the annual rate
of (i) fifteen percent (15%), or (ii) five percent (5%) above the prime lending
rate of JPMorgan Chase Bank, whichever is greater, which shall constitute
Additional Rent under this Lease and shall be payable upon demand. Landlord
shall use commercially reasonable efforts to mitigate the damages suffered by
Landlord rising from the default by Tenant of any of its obligations under this
Lease. If Tenant shall issue a check to Landlord which is dishonored by
Tenant’s depository bank and returned unpaid for any reason, including without
limitation, due to insufficient funds in Tenant’s checking account, Tenant
shall pay to Landlord in addition to any other rights or remedies available to
Landlord at law, the sum of Seventy-five and 00/100 Dollars ($75.00) for
Landlord’s administrative expense in connection therewith. 

          Tenant’s
failure to pay Rent, Additional Rent, or any other Lease costs when due under
this Lease may cause Landlord to incur unanticipated costs. The exact amount of
such costs is impractical or extremely difficult to ascertain. Such costs may
include, but are not limited to, processing and accounting charges and late
charges that may be imposed on Landlord by any ground lease, mortgage, or deed
of trust encumbering the Premises. Therefore, if Landlord does not receive the
Rent, Additional Rent, or any other Lease costs in full on or before the tenth
(10th) day of the month it becomes due, Tenant shall pay Landlord a late
charge, which shall constitute liquidated damages, equal to Fifty Dollars
($50.00) (“Late Charge”), which shall be paid to Landlord together with such
Rent, Additional Rent, or other Lease costs then in arrears. The parties agree
that such Late Charge represents a fair and reasonable estimate of the cost
Landlord will incur by reason of such late payment. All Late Charges and any
returned check charges shall then become Additional Rent and shall be due and
payable immediately along with such other Rent, Additional Rent, or other Lease
costs then in arrears. Money paid by Tenant to Landlord shall be applied to
Tenant’s account in the following order: (i) to any unpaid Additional Rent,
including, without limitation, Late Charges, returned check charges, legal fees
and/or court costs legally chargeable to Tenant, and then (ii) to unpaid
Minimum Rent. Nothing herein contained shall be construed so as to compel
Landlord to accept any payment of Rent, Additional Rent, or other Lease costs
in arrears or Late Charge or returned check charge should Landlord elect to
apply its rights and remedies available under this Lease or at law or equity in
the event of default hereunder by Tenant. Landlord’s acceptance of Rent,
Additional Rent, or other Lease costs in arrears or Late Charge or returned
check charge pursuant to this clause shall not constitute a waiver of Landlord’s
rights and remedies available under this Lease or at law or equity. 

-14-

          At
any time after the termination of this Lease, Landlord shall be entitled to
additional damages (“Liquidated Damages”), which, at the election of Landlord
shall be either: 

	
 

	
 

	
 

	
          (i) an amount equal to the Minimum
 Rent and Additional Rent (collectively “Rent”), which, but for the
 termination of this Lease, would have become due during the remainder of the
 Lease Term, less the amount of Rent, if any, which Landlord shall receive
 during such period from others to whom the Premises may be rented, in which
 case such Liquidated Damages shall be computed and payable in monthly
 installments, in advance, on the first day of each calendar month following
 termination of this Lease and continuing until the date on which the Lease
 Term would have expired but for such termination, and any suit or action
 brought to collect any such Liquidated Damages for any month shall not in any
 manner prejudice the right of Landlord to collect any Liquidated Damages for
 any subsequent month by a similar proceeding; or 

	
 

	
 

	
 

	
          (ii) an amount equal to the present
 worth (as of the date of such termination) of Rent which, but for the
 termination of this Lease, would have become due during the remainder of the
 Lease Term, less the fair rental value of the Premises in which case such
 Liquidated Damages shall be payable to Landlord in one lump sum on demand and
 shall bear interest of five percent (5%) until paid. For purposes of this
 clause (b), “present worth” shall be computed by discounting such amount to
 present worth at a discount rate equal to one percentage point above the
 discount rate then in effect at the Federal Reserve Bank nearest to the
 location of the Premises. 

          Tenant
agrees to pay to Landlord upon demand, as Additional Rent, a sum equal to all
costs and expenses (including reasonable attorney fees, professional fees,
costs of investigation and disbursements) incurred by Landlord in enforcing any
or all of its rights hereunder, specifically including the cost of collecting
sums due, whether or not an action or proceeding is commenced, or levying and
collecting on any judgment or arbitration award in Landlord’s favor. 

          All rights and
remedies of Landlord herein enumerated shall be cumulative, and none shall
exclude any other remedies allowed at law or in equity. 

	
 

	
 

	
 

	
 

	
(a)

	
Legal
 Expenses. 

	
 

	
 

	
 

	
 

	
          i) In the event that Landlord should
 retain counsel and/or institute any suit against Tenant for violation of or
 to enforce any of the covenants or conditions of this Lease, or should Tenant
 institute any action against Landlord for violation of any covenants or
 conditions of this Lease, or should either party institute a suit against the
 other for a declaration of rights hereunder, or should either party intervene
 in any suit in which the other is a party, to enforce or protect its
 interests or rights hereunder, the prevailing party in any such suit shall be
 entitled to its costs, expenses and reasonable fees to its attorney(s) in
 connection therewith. 

	
 

	
 

	
 

	
          ii) In the event that a bankruptcy
 proceeding is filed by or against Tenant under any chapter of the Bankruptcy
 Code, or Tenant makes an assignment for the benefit of creditors or commences
 or otherwise becomes the subject of any insolvency, receivership or similar
 proceeding, Landlord shall be entitled to recover its reasonable 

-15-

	
 

	
 

	
 

	
attorneys’
 fees and costs incurred in or in connection with any such proceeding from
 Tenant or any trustee, custodian, receiver, assignee or other representative
 acting on its behalf, all of which fees and expenses shall constitute, in
 addition to any other sums due and owing under this Lease (i) an obligation
 of Tenant hereunder, and (ii) a component of any cure claim assertable by
 Landlord under 11 U.S.C. § 365(b) or otherwise. 

SECTION 16 NOTICES 

          Any
notice or consent required to be given by or on behalf of either party to the
other shall be given in writing and mailed by certified mail or by overnight
courier service which provides a receipt, at the addresses stated on Article
I(A), Sections –11-14, of this Lease, or at such other address as may be
specified, from time to time, by notice in the manner herein set forth. Notices
shall be deemed given upon actual receipt or first rejection. 

SECTION 17 MORTGAGE
SUBORDINATION/NON-DISTURBANCE 

          This
Lease, and Tenant’s rights hereunder shall be subject and subordinate to the
lien of any mortgages, ground leases or deeds of trust or other similar
instrument that may now exist or may hereafter be placed upon the Premises and
all renewals, replacements, and extensions thereof without further notice or
action on the part of Landlord or Tenant. Tenant, Landlord and any mortgagee of
Landlord shall execute a Subordination, Non-Disturbance and Attornment
Agreement in recordable form) as a condition of such subordination. Tenant
shall execute and deliver to Landlord within fifteen (15) days from receipt of
Landlord’s request such instruments (including but not limited to a Memorandum
of Lease in recordable form) which may be required by Landlord’s mortgagee or
trustee to evidence such subordination. 

SECTION 18 ESTOPPEL CERTIFICATES 

          At
any time and from time to time, Tenant agrees, upon request in writing from
Landlord, to execute and deliver to Landlord, for the benefit of such persons
as Landlord names in such request, a statement in writing and in substance
satisfactory to Landlord certifying to such of the following information as
Landlord shall request: (i) that this Lease constitutes the entire agreement
between Landlord and Tenant and is unmodified and in full force and effect (or
if there have been modifications, that the same is in full force and effect as
modified and stating the modifications); (ii) the dates to which the Minimum
Rent and other charges hereunder have been paid, and the amount of any security
deposited with Landlord; (iii) that all conditions precedent to this Lease
taking effect have been carried out; (iv) that Tenant has accepted possession,
that the Lease Term has commenced, that Tenant is occupying the Premises, that
Tenant knows of no default under the Lease by Landlord and that there are no
defaults or offsets which Tenant has against enforcement of this Lease by
Landlord; (v) the Rent Commencement Date of this Lease and the Expiration Date
of this Lease; and (vi) that Tenant’s store is open for business, provided such
facts are true and ascertainable. Tenant acknowledges and agrees that Tenant’s
failure to execute and deliver to Landlord any estoppel certificate(s)
requested by Landlord within fifteen (15) days from Tenant’s receipt of
Landlord’s request shall be deemed Tenant’s acknowledgement that the terms and
conditions contained in such estoppel certificate are true and correct and that
such terms and conditions may also be relied upon by any third party or parties
identified in such estoppel certificate. 

-16-

SECTION 19 QUIET ENJOYMENT 

          Landlord
hereby covenants and agrees that if Tenant shall perform all the covenants and
agreements herein stipulated to be performed on Tenant’s part, Tenant shall at
all times during the continuance hereof have the peaceable and quiet enjoyment
and possession of the Premises without any hindrance from Landlord or any
person or persons lawfully claiming the Premises. 

SECTION 20 LIABILITY OF LANDLORD 

          Notwithstanding
anything to the contrary provided in this Lease, it is specifically understood
and agreed, such agreement being a primary consideration for the execution of this
Lease by Landlord, that if Landlord shall fail to perform any covenant, term or
condition of this Lease upon Landlord’s part to be performed and, as a
consequence of such default, Tenant shall recover a money judgment against
Landlord, such judgment shall be satisfied only out of the proceeds of sale
received upon execution of such judgment and levy thereon against the right,
title, and interest of Landlord in the Premises, as the same may then be
encumbered, and neither Landlord nor any of its officers or shareholders shall
be liable for any deficiency. It is understood that in no event shall Tenant
have any right to levy execution against any property of Landlord other than
its interest in the Premises as hereinbefore expressly provided. In the event of
the sale or other transfer of Landlord’s right, title and interest in the
Premises, Landlord shall be released from all liability and obligations under
this Lease. 

SECTION 21 PURCHASE OPTION. 

          Landlord
grants to Tenant the option to purchase the Premises, simultaneously with the
purchase of all of the premises leased pursuant to the Related Leases (it being
a condition of the option granted herein that Tenant exercise its option to
purchase and in fact purchases all of the premises leased pursuant to the
Related Leases), during the first two (2) Lease Years of the Term of this Lease
as provided herein. Tenant shall exercise this option to purchase, if at all,
by giving written notice to Landlord, in the manner and at the address set
forth in Article XVI of this Lease, at least sixty (60) days prior to the
expiration of the second (2nd) Lease Year of the Term (the date
Tenant gives notice of exercise, if any, being referred to as the “Exercise
Date”). 

	
 

	
 

	
 

	
 

	
The purchase
 price of the Premises shall be as follows: 

	
 

	
 

	
 

	
 

	
 

	
If the
 Exercise Date is on or before July 31, 2009:

	
$70.00/square
 foot* 

	
 

	
 

	
 

	
 

	
If the
 Exercise Date is after July 31, 2009 but before January 31, 2011:

	
$76.00/square
 foot* 

* Square
footage of the Premises shall be determined pursuant to BOMA standards. 

The purchase
price for the Premises shall be paid, at Tenant’s option, (i) in cash at the
closing or (ii) with Landlord financing of eighty percent (80%) of the purchase
price, evidenced by a promissory note accruing interest at the greater of (x)
prime rate plus two percent (2%) or (y) six and one-quarter percent (6.25%),
with a twenty (20) year amortization and a balloon payment 

-17-

payable in
three (3) years, and secured by a first mortgage lien on the Premises. At the
closing and upon payment of the purchase price, Landlord shall deliver to
Tenant a transferable and recordable limited or special warranty deed conveying
to Tenant marketable title to the Premises in fee simple, free and clear of all
encumbrances excepting (a) all easements, covenants, conditions and
restrictions of record that do not adversely affect Tenant’s use of the
property as a retail location, (b) all legal highways, (c) building, zoning and
other statutes, ordinances, codes and regulations, (d) real estate taxes not
yet due and payable, and (e) the rights of persons claiming by, through, or
under Tenant. Closing costs shall be paid by the parties in accordance with the
custom for the state where the Premises is located. The date for the closing
for the delivery of the deed by Landlord and the payment of the purchase price
by Tenant shall be within thirty (30) days of the Exercise Date or the first
business day thereafter if such date is a Saturday, Sunday or holiday (such
date being referred to as the “Closing Date”), at a place mutually agreed upon
by the parties. If on the Exercise Date Tenant is in default under this Lease,
or any of the Related Leases, or this Lease, or any of the Related Leases, has
been terminated and is not then in full force and effect, the attempted
exercise of the option shall be void and of no effect. If on the Closing Date,
Tenant is in default under this Lease, or any of the Related Leases, , Tenant
shall cure any such default at or before Closing. 

SECTION 22 MISCELLANEOUS PROVISIONS 

22.1 Accord and Satisfaction. No payment
by Tenant, or anyone occupying the Premises by, through or under Tenant, or
receipt by Landlord of a lesser amount than the rents or any other payment
stated herein or required hereunder shall be deemed to be other than on behalf
of Tenant and on account of the next due rent or any other payment, nor shall
any endorsement or statement on any check or any letter accompanying any check
or payment be deemed an accord and satisfaction, and Landlord may accept such check
or payment without prejudice to Landlord’s right to recover the balance of such
rent or other payment or pursue any other remedy provided for in this Lease or
available at law or in equity. 

22.2 Waiver. No waiver of any condition
or legal right or remedy shall be implied by the failure of Landlord to declare
a forfeiture, or for any other reason, and no waiver of any condition or
covenant shall be valid unless it be in writing signed by Landlord. No waiver
by Landlord with respect to a breach of any condition shall be claimed or
pleaded to excuse a future breach of the same condition or covenant. 

22.3 Broker’s Commission. Tenant warrants
that there are no claims for broker’s commissions or finder’s fees in
connection with its execution of this Lease, and Tenant agrees to indemnify and
save Landlord harmless from any liability that may arise from such claims,
including reasonable attorney’s fees. 

22.4 No Partnership. Landlord does not,
in any way or for any purpose, become a partner of Tenant in the conduct of its
business, or otherwise, or a joint venturer or a member of a joint enterprise
with Tenant. 

22.5 Lease Inures to the Benefit of
Assignees. This Lease and all of the covenants, provisions, and conditions
herein contained shall inure to the benefit of and be binding upon the heirs,
personal representatives, successors and assigns respectively, of the parties
hereto, 

-18-

provided,
however, that no assignment by, from, through, or under Tenant in violation of
the provisions hereof shall vest in the assigns any right, title, or interest
whatsoever. 

22.6 Entire Agreement. This Lease and the
exhibits attached hereto set forth the entire agreement between Landlord and
Tenant, and all prior promises and agreements, oral or written, between them
are merged into this Lease. No amendment to this Lease shall be binding upon
Landlord or Tenant unless in writing. 

22.7 Abandonment, Surrender and Holding
Over. Tenant shall deliver up and surrender to Landlord possession of the
Premises upon the expiration of the Lease Term, or its prior termination for
any reason, in as good condition and repair as the same shall be at the
commencement of said Term (damage by fire and other perils covered by standard
fire and extended coverage insurance and ordinary wear and decay only
excepted). If Tenant remains in possession of the Premises after any
termination of this Lease, Tenant shall be bound by the terms and provisions of
this Lease except that no tenancy or interest in the Premises shall result, but
such holding over shall be an unlawful detainer and all such parties shall be
subject to immediate eviction, and Tenant shall upon demand pay to Landlord, as
liquidated damages, a sum equal to one hundred fifty percent (150%) of the
Minimum Rent payable during the calendar month immediately preceding the
expiration or earlier termination of this Lease for any period during which
Tenant shall hold the Premises after the stipulated Term of this Lease shall
expire or may have terminated. 

22.8 No Option. The submission of this
Lease by Landlord for review by Tenant does not constitute a reservation of or
option for the Premises, and shall vest no right in Tenant. This Lease becomes
effective as a Lease only upon execution and delivery thereof by the parties
hereto. 

22.9 Additional Rent. Any amounts to be
paid by Tenant to Landlord pursuant to the provisions of this Lease, whether
such payments are periodic or recurring, shall be deemed to be “Additional
Rent” and otherwise subject to all provisions of this Lease and of law as to
the default in the payment of rent. 

22.10 Time is of the Essence. Time is of
the essence in the performance of the parties of their obligations hereunder. 

22.11 Severability. In the event that any
provision or section of this Lease is rendered invalid by the decision of any
court or by the enactment of any law, ordinance or regulation, such provision
of this Lease shall be deemed to have never been included therein, and the
balance of this Lease shall continue in effect in accordance with its terms. 

22.12 Option to Renew. Provided Tenant is
not in default under any of the terms and provisions herein contained or any of
the Related Leases, Landlord hereby grants to Tenant the option to renew the
Lease Term for the period(s) set forth in Article I(A), Section 14, commencing
on the day following the expiration of the initial Term. Any such Renewal Term
shall be upon all the terms and conditions as the initial Lease Term, except
that the Minimum Rent shall be increased as set forth on Schedule A. 

-19-

          The
foregoing option to renew shall be exercised by written notice to Landlord
given not less than the number of days set forth in Article I(A), Section 14,
above prior to the expiration of the original Term of this Lease. Tenant’s
option to renew the Term of this Lease is personal to Tenant and may not be
exercised by any other party other than Tenant, nor may Tenant’s option to
renew the Term of this Lease be assigned by Tenant without the prior written
consent of Landlord, which may be granted or withheld in Landlord’s sole
discretion. 

22.13 Option to Terminate. Tenant shall be
permitted a one time option to terminate this Lease and up to nine (9) of the
Related Leases, which option shall be exercised any time prior to January 31,
2011. If Tenant exercises its option, this Lease and the applicable Related
Leases shall terminate at the later of (i) twenty-four (24) months after the
Commencement Date or (ii) six (6) months after the date Tenant gives notice
that it is electing to terminate such Leases (the “Termination Date”). 

22.14 Net Rent. It is the intention of
Landlord and Tenant that the rent herein specified shall be net to Landlord in
each year of the Lease Term hereof, and that no costs, expenses and obligations
relating to the Premises (except as herein specifically provided) shall be paid
by Landlord. 

22.15 Counterparts. This Lease may be
executed in multiple counterparts, each of which shall constitute an original
and all of which taken together shall constitute one and same agreement binding
upon the parties, notwithstanding that all the parties are not signatories to
the same counterpart. In order to facilitate the agreements contemplated by
this Lease, signatures transmitted by facsimile machine or signatures
transmitted via e-mail in a “PDF” format may be used in place of original
signatures on this Lease. Each party intends to be bound by such party’s
facsimile or “PDF” format signature on this Lease, is aware that the other
parties are relying on such party’s facsimile or “PDF” format signature, and
hereby waives any defenses to the enforcement of this Lease based upon the form
of signature. Promptly following any facsimile transmittal or e-mail
transmittal of “PDF” format signatures, the parties shall deliver to the other
parties the original executed Lease by reputable overnight courier to the
addresses shown in Article I(A), Sections –11-14. 

22.16 Consents. With respect to any
provision of this Lease which provides or infers, in effect, that Landlord
shall not unreasonably withhold or unreasonably delay its consent or approval,
Tenant, in no event, shall be entitled to make, nor shall Tenant make, any
claim against Landlord for money damages, and Tenant hereby waives any claim or
assertion by Tenant that Landlord has unreasonably withheld or unreasonably
delayed any consent or approval, but Tenant’s sole remedy shall be an action or
proceeding to enforce any such provision of this Lease, or for specific
performance, injunction or declaratory judgment. 

22.17 Force Majeure. In the event Landlord
or Tenant is prevented or delayed in the performance of any improvement or
repair or fulfilling any other obligation required under this Lease due to
delays caused by fire, catastrophe, strikes or labor trouble, civil commotion,
acts of God, governmental prohibitions or regulation, inability or difficulty
to obtain materials or other causes beyond the performing party’s reasonable
control, the performing party shall, within ten (10) days of the event causing
such delay, provide written notice to the other party of the event causing the
delay and the anticipated period of delay, and the period of such delay shall
be added 

-20-

to the time
for performance thereof. The performing party shall have no liability by reason
of such permitted delays. In the event the performing party fails to provide
notice to the other party of the force majeure delay within such ten (10) day
period, the performing party shall not be excused from the timely performance
of such obligation regardless of the cause. This provision shall not excuse
Tenant from its obligation to pay Minimum Rent, Percentage Rent and Additional
Rent, except when such payment is excused pursuant to other provisions of this
Lease. 

22.18 Payment Under Protest. All rent and
other amounts payable hereunder shall be payable without demand, offset or
deduction. If at any time a dispute shall arise as to any amount or sum of
money to be paid by Tenant to Landlord under the provisions hereof, Tenant
shall make such payment “under protest” and under no circumstances shall Tenant
be entitled to withhold any payment due hereunder. If Tenant makes a payment
“under protest” and it is subsequently determined that Tenant was not obligated
to pay all or a portion of an amount paid “under protest,” Landlord shall
refund to Tenant the portion of the payment made “under protest” which Tenant
was not obligated to pay. 

22.19 Waiver of Trial By Jury. To the
extent permitted by applicable law Landlord and Tenant waive all right to trial
by jury in any claims, action, proceeding or counterclaim by either Landlord or
Tenant against each other or any matter arising out of or in any way connected
with this Lease, the relationship of Landlord and Tenant or Tenant’s use or
occupancy of the Premises. 

22.20 Hazardous Materials. Tenant shall
not permit or cause the presence of Hazardous Materials in, on or under the
Premises. Tenant shall defend, protect, indemnify and hold Landlord harmless
from and against any and all claims, causes of action, liabilities, damages,
costs and expenses, including, without limitation, attorney fees, arising
because of any alleged personal injury, property damage, death, nuisance, loss
of business or otherwise, by Landlord, any employee of Landlord, or from and
against any governmental act or enforcement, arising from or in any way
connected with conditions existing or claimed to exist with respect to
Hazardous Materials (as hereinafter defined) within the Premises which are the
result of Tenant’s use, occupancy or operation of the Premises. As used herein
the term “Hazardous Materials” shall be defined as any hazardous substance,
contaminant, pollutant or hazardous release (as such terms are defined in any
federal, state or local law, rule, regulation or ordinance, including without,
limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended) and other said wastes. In the event Tenant
shall cause or permit the presence of Hazardous Materials in, on or under the
Premises, Tenant shall promptly, at Tenant’s sole cost and expense, take any
and all action necessary (as required by appropriate government authority or
otherwise) to return the areas affected thereby to the condition existing prior
to the presence of any such Hazardous Materials thereon, subject to Landlord’s
prior written consent. The foregoing covenants shall survive termination of
this Lease. 

22.21 Payment By Third Party. In no event
shall Landlord’s acceptance of the payment of Minimum Rent, Percentage Rent or
Additional Rent from any party other than Tenant constitute a release of
Tenant’s primary obligations under this Lease or Landlord’s acceptance of any
other party as an assignee or sublessee of Tenant, regardless of the number of
payments accepted by Landlord or the length of time that said party made such
payments. 

-21-

22.22 Recording. This Lease shall not be
recorded in any public records office or department by Landlord or Tenant. 

22.23 Interpretation. This Lease, and any
riders and exhibits hereto, have been mutually negotiated by Landlord and
Tenant. Any ambiguities will not be interpreted in favor of either party. The
captions contained herein are for convenience and reference only and will not
be deemed as part of this Lease or construed in any manner limiting or
amplifying the terms and provisions of this Lease to which they relate. 

22.24 Certification. Tenant represents and
warrants to Landlord that (i) Tenant is not acting, directly or indirectly, for
or on behalf of any person, group, entity, or nation, named by any Executive
Order or the United States Treasury Department as a “terrorist”, “Specially
Designated National and Blocked Person”, or other banned or blocked person,
group, or nation (collectively, “Banned Persons”) pursuant to any
anti-terrorism law; (ii) Tenant is not engaged in this Lease transaction, or
instigating or facilitating this Lease, directly or indirectly on behalf of any
Banned Person; (iii) Tenant currently does not appear, and throughout the Lease
Term, neither Tenant, nor any officer, director, shareholder, partner, member
or other owner of Tenant shall appear, on any list of Banned Persons; (iv) no
anti-terrorism law prohibits Landlord from doing business with Tenant; (v)
Tenant, its officers, directors, or principal shareholders, partner, member, or
other owner of Tenant, shall not, during the Lease Term, violate any
anti-terrorism laws; and (vi) Tenant, its officers, directors, principal
shareholders, partners or members shall not, during the Lease Term, do business
with any party, individual, or entity that has violated or will violate any
anti-terrorism laws. For purposes of this Lease, “anti-terrorism laws” shall
mean Executive Order 13224 and related regulations promulgated and enforced by
the Office of Foreign Assets Control, the Money Laundering Control Act, the
United States Patriot Act, or any similar law, order, rule or regulation
enacted in the future. Tenant hereby agrees to defend, indemnity, protect, and
hold harmless Landlord from and against any and all claims, damages, losses,
risks, liabilities, fines, penalties, expenses (including attorneys’ fees) and
costs arising from or related to a breach of the foregoing representations and
warranties. The foregoing indemnity obligations of Tenant shall survive the
termination or expiration of this Lease. 

22.25 Governing Law. This Lease will be
governed by the laws of the state in which the Leased Premises is located
without giving effect to principles of conflicts of law. 

22.26 Payment. All payments to be made to
Landlord or Tenant pursuant to the terms of this Lease shall be made in lawful
currency of the United States of America. 

22.27 Exhibits. The following Exhibits are
attached to this Lease and incorporated herein by reference: 

	
 

	
 

	
 

	
Exhibit “B”
 Legal Description of Premises 

	
 

	
 

	
 

	
Exhibit “C”
 Signage Criteria 

-22-

          IN
WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be signed, in
triplicate, as of the date and year first above written.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
WITNESSES AS
 TO LANDLORD:

	
 

	
 

	
 

	
LANDLORD:

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
[[Owner-signature
 block]]

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
(Print Name)

	
 

	
By:

	
 

	
 

	
 

	

	
 

	
 

	
 

	
 

	

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
WITNESSES AS
 TO TENANT:

	
 

	
 

	
 

	
TENANT:

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
[[Account
 Name]]

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
(Print Name)

	
 

	
By:

	
 

	
 

	
 

	

	
 

	
 

	
 

	
 

	

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
By:

	
 

	
 

	
 

	

	
 

	
 

	

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
(Print Name)

	
 

	
 

	
 

	
 

	
(Print Name)

	

	
 

	
 

	
 

	
 

	

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Its:

	
 

	
 

	
 

	

	
 

	
 

	

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
(Print Name)

	
 

	
 

	
 

	
 

	
(Print Name)

	

	
 

	
 

	
 

	
 

	

	
 

	
 

	
 

	
 

	
STATE OF
 OHIO

	
)

	
 

	
)  SS:

	
COUNTY OF
 MONTGOMERY 

	
)

          This
instrument was acknowledged before me this __________ day of ___________,
2009 by ___________________, ___________________ of
__________________________, a(n) __________ corporation, on behalf of the
corporation. 

	
 

	
 

	
 

	
 

	
 

	

	
 

	
 

	
Notary
 Public

	
 

	
 

	
 

	
STATE OF FLORIDA

	
)

	
 

	
 

	
)  SS:

	
 

	
COUNTY OF BREVARD

	
)

	
 

          This
instrument was acknowledged before me this __________ day of _____________,
2009 by Sei Hwan Pak a/k/a Sam Pak, Chief Executive Officer of
__________________________, a Florida corporation, on behalf of the corporation.

	
 

	
 

	
 

	
 

	
 

	

	
 

	
 

	
Notary
 Public

This
Instrument Prepared By: 

Karen R.
Adams, Esq.

Dinsmore & Shohl LLP 

10 Courthouse Plaza SW, Suite 1100

Dayton, Ohio 45402 

-2-

SCHEDULE A

Rent Schedule

	
 

	
 

	
 

	
 

	
 

	
Lease Year

	
 

	
$ Monthly

	
 

	
                     
    $ Annum

	
 

	
 

	
 

	
 

	
 

	
1

	
 

	
$5,416.67

	
 

	
$65,000.00

	
2

	
 

	
$6,250.00

	
 

	
$75,000.00

	
3

	
 

	
$7,083.33

	
 

	
$85,000.00

	
4
 through 6 plus 3 months)

	
 

	
$Annum Rent / 12

	
 

	
$75,000.00
plus applicable
 CPI

Commencing in
Lease Year 4 (the 37th month) and for the next 39 months of the
Primary Term, rent shall adjust as follows: rent shall be an amount per year
equal to the base rent for the immediately prior year multiplied by a fraction,
the numerator of which is the Consumer Price Index for the year immediately
preceding the applicable year of the Primary Term, and the denominator of which
is the Consumer Price Index for the year of the immediately prior year. For
example, if the Consumer Price Index on the immediately prior year was 2 and
the Consumer Price Index in the fourth year of the Primary Term was 2.5, base
rent shall be calculated by multiplying $75,000 by 1.25 (2.5 divided by 2) or
$93,750.00. In no event shall the rent in any year of the Primary Term be less
than the rent during the preceding year. As used in this Lease, the term
“Consumer Price Index” shall mean the “Consumer Price Index for All Urban
Consumers, U.S. City Average, All Items (1982-84 = 100)” as compiled and
published by the Bureau of Labor Statistics of the United States Department of
Labor, or any comparable successor index. Rent adjustments shall continue in
like manner during any Renewal Period with an annual cap of five percent (5%)
for any given annual increase. 

-3-

SCHEDULE I(2119)

Related Leases

	
 

	
 

	
 

	
14

	
 

	
7163 Airport
 Boulevard

	
 

	
 

	
Mobile,
 Alabama

	
23

	
 

	
Daphne,
 Alabama

	
24

	
 

	
Gadsden,
 Alabama

	
27

	
 

	
Dothan,
 Alabama

	
29

	
 

	
Auburn,
 Alabama

	
102

	
 

	
Florence,
 Alabama

	
103

	
 

	
Decatur,
 Alabama

	
181

	
 

	
Montgomery,
 Alabama

	
139

	
 

	
Springdale,
 Arkansas

	
154

	
 

	
Brunswick,
 Georgia

	
208

	
 

	
Pocatello,
 Idaho

	
228

	
 

	
Ammon, Idaho

	
247

	
 

	
Danville,
 Illinois

	
82

	
 

	
Ottumwa,
 Iowa

	
290

	
 

	
Clinton,
 Iowa

	
11

	
 

	
Baton Rouge,
 Louisiana

	
264

	
 

	
Monroe,
 Michigan

	
17

	
 

	
Gautier,
 Mississippi

	
25

	
 

	
Greenville,
 Mississippi

	
137

	
 

	
Meridian,
 Mississippi

	
138

	
 

	
Columbus,
 Mississippi

	
296

	
 

	
Natchez,
 Mississippi

	
127

	
 

	
Vicksburg,
 Mississippi

	
293

	
 

	
Lumberton,
 North Carolina

	
12

	
 

	
Lima, Ohio

	
170

	
 

	
Middletown,
 Ohio

	
201

	
 

	
New
 Philadelphia OH

	
298

	
 

	
Troy, Ohio

	
318

	
 

	
Ponca City,
 Oklahoma

	
85

	
 

	
New Castle,
 Pennsylvania

	
84

	
 

	
Hermitage,
 Pennsylvania

	
62

	
 

	
Rapid City,
 South Dakota

	
184

	
 

	
Chattanooga,
 Tennessee

	
207

	
 

	
Morristown,
 Tennessee

	
195

	
 

	
San Angelo,
 Texas

	
215

	
 

	
Manitowoc,
 Wisconsin

	
321

	
 

	
Sheboygan,
 Wisconsin

-4-

Exhibit 2.3

Leased Properties

[revise based on final list of sites at
closing] 

	
 

	
 

	
 

	
Store
 Number

	
 

	
Location

	
 

	
 

	
 

	
133

	
 

	
Naples,
 Florida

	
44

	
 

	
Ocala,
 Florida

	
68

	
 

	
Tallahassee,
 Florida

	
128

	
 

	
Merritt
 Island, Florida

	
147

	
 

	
Twin Falls,
 Idaho

	
238

	
 

	
Peru,
 Illinois

	
291

	
 

	
Freeport,
 Illinois

	
254

	
 

	
Bradley,
 Illinois

	
324

	
 

	
Tupelo,
 Mississippi

	
56

	
 

	
Great Fails,
 Montana

	
308

	
 

	
Kalispell,
 Montana

	
91

	
 

	
Lakewood,
 New York

	
276

	
 

	
Findlay,
 Ohio

	
202

	
 

	
Sandusky,
 Ohio

	
5

	
 

	
Centerville,
 Ohio

	
172

	
 

	
Defiance,
 Ohio

	
235

	
 

	
Wilkes-Barre,
 Pennsylvania

	
32

	
 

	
Sumter,
 South Carolina

	
273

	
 

	
N. Myrtle
 Beach, South Carolina

	
287

	
 

	
Texarkana,
 Texas

	
194

	
 

	
Odessa,
 Texas

	
196

	
 

	
Midland,
 Texas

	
283

	
 

	
Bristol,
 Virginia

	
233

	
 

	
Danville,
 Virginia

	
306

	
 

	
Walla Walla,
 Washington

	
219

	
 

	
Casper,
 Wyoming

	
218

	
 

	
Cheyenne, Wyoming

	
263

	
 

	
Lake City,
 Florida

	
161

	
 

	
St.
 Augustine, Florida

	
95

	
 

	
La Grange,
 Georgia

	
54

	
 

	
Cumberland,
 Maryland

	
249

	
 

	
Auburn, New
 York

	
257

	
 

	
Olean, New
 York

	
150

	
 

	
Springfield,
 Ohio

	
203

	
 

	
Marion, Ohio

	
166

	
 

	
Orangeburg,
 South Carolina

	
165

	
 

	
Greenwood,
 South Carolina

	
121

	
 

	
Lake
 Jackson, Texas

	
 

	
 

	
 

	
229

	
 

	
Union Gap,
 Washington

	
241

	
 

	
Bluefield,
 West Virginia

	
246

	
 

	
Bridgeport,
 West Virginia

	
240

	
 

	
Morgantown,
 West Virginia

	
46

	
 

	
Gainesville,
 Florida

	
213

	
 

	
Beavercreek,
 Ohio

	
13

	
 

	
Kingsport,
 Tennessee

	
315

	
 

	
Uniontown,
 Pennsylvania

-2-

Exhibit 2.6

Rex - Appliance Direct Implementation
Schedule: 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Lease for

 Store Number:

	
 

	
Location:

	
 

	
Landlord

	
 

	
Week of:*

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
14

	
 

	
7163 Airport
 Boulevard
Mobile, Alabama

	
 

	
Seller One

	
 

	
3

	
23

	
 

	
Daphne,
 Alabama

	
 

	
Seller One

	
 

	
3

	
24

	
 

	
Gadsden,
 Alabama

	
 

	
Seller One

	
 

	
2

	
27

	
 

	
Dothan,
 Alabama

	
 

	
Seller One

	
 

	
1

	
29

	
 

	
Auburn,
 Alabama

	
 

	
Seller One

	
 

	
3

	
102

	
 

	
Florence,
 Alabama

	
 

	
Seller One

	
 

	
2

	
103

	
 

	
Decatur,
 Alabama

	
 

	
Seller One

	
 

	
2

	
181

	
 

	
Montgomery,
 Alabama

	
 

	
Seller One

	
 

	
7

	
139

	
 

	
Springdale,
 Arkansas

	
 

	
Seller One

	
 

	
4

	
46

	
 

	
Gainesville,
 Florida

	
 

	
Seller Three

	
 

	
8

	
154

	
 

	
Brunswick,
 Georgia

	
 

	
Seller Two

	
 

	
6

	
208

	
 

	
Pocatello,
 Idaho

	
 

	
Seller One

	
 

	
5

	
228

	
 

	
Ammon, Idaho

	
 

	
Seller One

	
 

	
5

	
247

	
 

	
Danville,
 Illinois

	
 

	
Seller Two

	
 

	
7

	
82

	
 

	
Ottumwa,
 Iowa

	
 

	
Seller Two

	
 

	
5

	
290

	
 

	
Clinton,
 Iowa

	
 

	
Seller Two

	
 

	
5

	
11

	
 

	
Baton Rouge,
 Louisiana

	
 

	
Seller One

	
 

	
8

	
264

	
 

	
Monroe,
 Michigan

	
 

	
Seller One

	
 

	
7

	
17

	
 

	
Gautier,
 Mississippi

	
 

	
Seller One

	
 

	
3

	
25

	
 

	
Greenville,
 Mississippi

	
 

	
Seller One

	
 

	
4

	
137

	
 

	
Meridian,
 Mississippi

	
 

	
Seller One

	
 

	
3

	
138

	
 

	
Columbus,
 Mississippi

	
 

	
Seller One

	
 

	
4

	
296

	
 

	
Natchez,
 Mississippi

	
 

	
Seller One

	
 

	
4

	
127

	
 

	
Vicksburg,
 Mississippi

	
 

	
Seller One

	
 

	
4

	
293

	
 

	
Lumberton,
 North Carolina

	
 

	
Seller Two

	
 

	
7

	
213

	
 

	
Beavercreek,
 Ohio

	
 

	
Stuart

 Rose/Beavercreek, Inc. 

	
 

	
8

	
12

	
 

	
Lima, Ohio

	
 

	
Seller One

	
 

	
8

	
170

	
 

	
Middletown,
 Ohio

	
 

	
Seller One

	
 

	
8

	
201

	
 

	
New
 Philadelphia OH

	
 

	
Seller One

	
 

	
7

	
298

	
 

	
Troy, Ohio

	
 

	
Seller One

	
 

	
8

	
318

	
 

	
Ponca City,
 Oklahoma

	
 

	
Seller Three

	
 

	
4

	
85

	
 

	
New Castle,
 Pennsylvania

	
 

	
Seller Two

	
 

	
7

	
84

	
 

	
Hermitage,
 Pennsylvania

	
 

	
Seller Two

	
 

	
7

	
62

	
 

	
Rapid City,
 South Dakota

	
 

	
Seller One

	
 

	
5

	
184

	
 

	
Chattanooga,
 Tennessee

	
 

	
Seller Two

	
 

	
6

	
207

	
 

	
Morristown,
 Tennessee

	
 

	
Seller Two

	
 

	
6

	
195

	
 

	
San Angelo,
 Texas

	
 

	
Seller One**

	
 

	
7

	
215

	
 

	
Manitowoc,
 Wisconsin

	
 

	
Seller One

	
 

	
6

	
321

	
 

	
Sheboygan,
 Wisconsin

	
 

	
Seller One

	
 

	
6

Seller Key: 

Seller One:
Rex Radio and Television, Inc. 

Seller Two:
Kelly & Cohen Appliances, Inc. 

Seller Three:
Stereo Town, Inc. 

* First week of
implementation shall be February 23, 2009. 

** Subject to
termination of existing contract to purchase which is anticipated to be
received on February 3, 2009. 

Exhibit 4.2(a)(ii)

Form of Date-Down Letter

CLOSING CERTIFICATE

          __________________________,
a __________ limited liability company (“Seller”), hereby certifies and
confirms for the benefit of ___________________________ (“Purchaser”), that all
representations and warranties made by Seller in the Purchase and Sale
Agreement dated _______________, 2009, by and between Seller and Purchaser, are
true and correct in all material respects as of the date hereof. 

          DATED
as of the ____ day of ________________, 2009. 

	
 

	
 

	
 

	
 

	
 

	

	
 

	
 

	
By:

	
 

	

	
 

	
Name: 

	
 

	

	
 

	
Title:

	
 

	

	
 

Exhibit 4.2(a)(vi)

Form of Bill of Sale and Assignment

[see attachment]

BILL OF SALE AND ASSIGNMENT

          This
BILL OF SALE AND ASSIGNMENT (this “Bill of Sale”) is made and entered into as
of ________ __, 2009, by and between _______________________________, a
___________________ (“Assignor”), and ______________________ _____, a
_________________ (“Assignee”). 

          In
consideration of the sum of Ten Dollars ($10) and other good and valuable
consideration paid by Assignee to Assignor, the receipt and sufficiency of
which are hereby acknowledged, Assignor does hereby assign, transfer, convey
and deliver to Assignee, its successors and assigns, all of Seller’s right
title and interest in and to the Assets, as such terms are defined in the
Agreement, by and between Assignor and Assignee, dated as of ___________, 2009
(the “Purchase Agreement”). 

          Assignor
warrants to Assignee that Assignor owns all right, title and interest in the
Assets free and clear of any lien, security interest or adverse claim. 

[signatures on following page]

          IN
WITNESS WHEREOF, Assignor and Assignee have executed this Bill of Sale as of
the day and year first above written. 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
ASSIGNEE:

	
 

	
ASSIGNOR: 

	
 

	
 

	
 

	

	
 

	

	
 

	
 

	
 

	
By:

	
 

	
By:

	
 

	

	
 

	
 

	

	
 

	
Name:

	
 

	
      Name:

	
 

	
 

	

	
 

	
 

	

	
 

	
Title:

	
 

	
      Title:

	
 

	
 

	

	
 

	
 

	

Schedule 2.1(c)

Permits

Schedule 3.1(a)(viii)

Schedule of Service Contracts

Schedule 6.1(c)(i)

Schedule of Purchase Option Agreements

	
 

	
 

	
 

	
 

	
 

	
Store

 No.

	
 

	
Property Address

	
 

	
Purchase Option Agreement

	

	
 

	

	
 

	

	
201

	
 

	
331 Graft
 Road

 New Philadelphia, OH

 44663

	
 

	
General
 Warranty Deed, by Newtowne Mall Associates Limited Partnership, as grantor,
 to Rex, as grantee, dated August 25, 1993

	
 

	
 

	
 

	
 

	
 

	
207

	
 

	
2550 E.
 Morris Blvd. 

 Morristown, TN 37813

 

	
 

	
Special
 Warranty Deed, by CBL Morristown, Ltd., as grantor, to Kelly & Cohen
 Appliances, Inc., as grantee, dated October 15, 1993

Schedule 6.1(c)(ii)  

Schedule of Right of First Refusal Agreements  

	
 

	
 

	
 

	
 

	
 

	
Store 

 No.

	
 

	
Property Address

	
 

	
Right of First Refusal Agreements

	

	
 

	

	
 

	

	
207

	
 

	
2550 E.
 Morris Blvd.

 Morristown, TN 37813

 

	
 

	
Special
 Warranty Deed, by CBL Morristown, Ltd., as grantor, to Kelly & Cohen
 Appliances, Inc., as grantee, dated October 15, 1993

	
 

	
 

	
 

	
 

	
 

	
264

	
 

	
2313 N.
 Monroe 

 Monroe, MI 48162

 

	
 

	
Grant Deed
 from Frenchtown Square Partnership to Kelly & Cohen, dated c. December 7,
 1999, recorded in Liber 1872, Page 0009.

Schedule 6.1(e)

Schedule of Litigation

NONE

Schedule 6.1(g)

Schedule of Required ConsentsEX-4.8

Exhibit 4.8

Date 23 December 2008

OCEAN BLUE SPIRIT OWNERS INC.

- and -

OCEAN FAITH OWNERS INC.

as joint and several Borrowers

- and -

DVB BANK SE

as Lender

 

LOAN AGREEMENT

 

relating to a loan facility of up to US$30,500,000

to refinance part of the acquisition cost of

the m.ts. “TAMARA” and “TIGANI”

WATSON, FARLEY & WILLIAMS

Piraeus

 

 

INDEX

	 	 	 	 	 	 	 
	Clause	 	 	 	Page
	 
	 	 	 	 	 	 
	1

	 	INTERPRETATION
	 	 	1	 
	 
	 	 	 	 	 	 
	2

	 	FACILITY
	 	 	14	 
	 
	 	 	 	 	 	 
	3

	 	DRAWDOWN
	 	 	14	 
	 
	 	 	 	 	 	 
	4

	 	INTEREST
	 	 	15	 
	 
	 	 	 	 	 	 
	5

	 	INTEREST PERIODS
	 	 	16	 
	 
	 	 	 	 	 	 
	6

	 	DEFAULT INTEREST
	 	 	16	 
	 
	 	 	 	 	 	 
	7

	 	REPAYMENT AND PREPAYMENT
	 	 	17	 
	 
	 	 	 	 	 	 
	8

	 	CONDITIONS PRECEDENT
	 	 	19	 
	 
	 	 	 	 	 	 
	9

	 	REPRESENTATIONS AND WARRANTIES
	 	 	19	 
	 
	 	 	 	 	 	 
	10

	 	GENERAL UNDERTAKINGS
	 	 	21	 
	 
	 	 	 	 	 	 
	11

	 	CORPORATE UNDERTAKINGS
	 	 	24	 
	 
	 	 	 	 	 	 
	12

	 	INSURANCE
	 	 	25	 
	 
	 	 	 	 	 	 
	13

	 	SHIP COVENANTS
	 	 	30	 
	 
	 	 	 	 	 	 
	14

	 	SECURITY COVER
	 	 	33	 
	 
	 	 	 	 	 	 
	15

	 	PAYMENTS AND CALCULATIONS
	 	 	34	 
	 
	 	 	 	 	 	 
	16

	 	APPLICATION OF RECEIPTS
	 	 	35	 
	 
	 	 	 	 	 	 
	17

	 	APPLICATION OF EARNINGS
	 	 	36	 
	 
	 	 	 	 	 	 
	18

	 	EVENTS OF DEFAULT
	 	 	37	 
	 
	 	 	 	 	 	 
	19

	 	FEES AND EXPENSES
	 	 	40	 
	 
	 	 	 	 	 	 
	20

	 	INDEMNITIES
	 	 	41	 
	 
	 	 	 	 	 	 
	21

	 	NO SET-OFF OR TAX DEDUCTION
	 	 	43	 
	 
	 	 	 	 	 	 
	22

	 	ILLEGALITY, ETC
	 	 	43	 
	 
	 	 	 	 	 	 
	23

	 	INCREASED COSTS
	 	 	44	 
	 
	 	 	 	 	 	 
	24

	 	SET-OFF
	 	 	45	 
	 
	 	 	 	 	 	 
	25

	 	TRANSFERS AND CHANGES IN LENDING OFFICE
	 	 	46	 
	 
	 	 	 	 	 	 
	26

	 	VARIATIONS AND WAIVERS
	 	 	46	 

 

 

	 	 	 	 	 	 	 
	Clause	 	 	 	Page
	 
	 	 	 	 	 	 
	27

	 	NOTICES
	 	 	47	 
	 
	 	 	 	 	 	 
	28

	 	JOINT AND SEVERAL LIABILITY
	 	 	48	 
	 
	 	 	 	 	 	 
	29

	 	SUPPLEMENTAL
	 	 	49	 
	 
	 	 	 	 	 	 
	30

	 	LAW AND JURISDICTION
	 	 	49	 
	 
	 	 	 	 	 	 
	SCHEDULE 1 DRAWDOWN NOTICE	 	 	51	 
	 
	 	 	 	 	 	 
	SCHEDULE 2 CONDITION PRECEDENT DOCUMENTS	 	 	52	 
	 
	 	 	 	 	 	 
	EXECUTION PAGE	 	 	56	 

 

 

THIS AGREEMENT is made on 23 December 2008

BETWEEN

	(1)	 	OCEAN BLUE SPIRIT OWNERS INC. and OCEAN FAITH OWNERS INC., each a corporation incorporated in
the Marshall Islands whose registered office is at Trust Company Complex, Ajeltake Road,
Ajeltake Island, Majuro, Marshall Islands MH 96960 (together the “Borrowers” and each a
“Borrower”); and
	 
	(2)	 	DVB BANK SE, acting through its branch at 80 Cheapside, London EC2V 6EE, England (as
“Lender”).

BACKGROUND

The Lender has agreed to make available
to the Borrowers, on a joint and several basis, a loan
facility up to the lesser of (i) US$30,500,000 and (ii) 55 per cent, of the aggregate Initial
Market Value of the Ships for the purpose of refinancing part of the acquisition cost of the m.ts.
“TAMARA” and “TIGANI” acquired by Ocean Blue Spirit Owners Inc. and Ocean Faith Owners Inc.
respectively pursuant to the relevant MOA.

IT IS AGREED as follows:

	1	 	INTERPRETATION
	 
	1.1	 	Definitions. Subject to Clause 1.5, in this Agreement:
	 
	 	 	“Account” means each of the Earnings Accounts and the Retention Account and, in the
plural, means all of them;
	 
	 	 	“Account Bank” means EFG Eurobank Ergasias S.A. acting through its branch at 83 Akti
Miaouli, Piraeus 185 38, Greece or any other first class bank or financial institution
which may be approved by the Lender as the bank or financial institution with which the
Accounts will be opened and maintained;
	 
	 	 	“Account Pledge” means, in relation to each Account, the deed of pledge in respect of that
Account to be executed by the relevant Borrower or, in the case of the Retention Account
Pledge, by the Borrowers in favour of the Lender in such form as the Lender may approve or
require and in the plural means all of them;
	 
	 	 	“Alternative Interest Rate” means the aggregate of (i) the rate the Lender selects from
whatever sources available to it (which selection shall be conclusive, final and binding on
the Borrowers without prejudice to the other provisions of Clause 4), including but not
limited to rates provided through broker’s quotes to be the interest rate on the Loan
during the Disruption Period and (ii) the Margin.
	 
	 	 	“Approved Charter” means, in relation to:

	 	(a)	 	“TAMARA”, the time charterparty dated 7 August 2008 made between the Corporate
Guarantor and the relevant Approved Charterer as amended and supplemented by an
amendment No.l dated 17 October 2008 made between the Corporate Guarantor, that
Approved Charterer and Ocean Blue pursuant to which the Corporate Guarantor nominated
Ocean Blue as the owner of that Ship; and
	 
	 	(b)	 	“TIGANI”, the time charterparty dated 9 October 2008 made between Ocean Faith
and the relevant Approved Charterer,

	 	 	and, in the plural, means both of them;

 

 

	 	 	“Approved Charterer” means, in relation to:

	 	(a)	 	“TAMARA”, Tri-Ocean Heidmar Tankers LLC; and
	 
	 	(b)	 	“TIGANI”, Heidmar Trading LLC,

	 	 	each a corporation incorporated and existing under the laws of the Marshall Islands and, in the
plural, means both of them;
	 
	 	 	“Approved Manager” means, in relation to each Ship, Cardiff Marine Inc., a corporation
incorporated in the Republic of Liberia and maintaining an office (in accordance with Greek law
89) at Omega Building, 80 Kifissias Avenue, Maroussi 151 25, Greece or any other company which
the Lender may approve from time to time as the manager of either Ship;
	 
	 	 	“Approved 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 Lender in such form as the
Lender may approve or require agreeing certain matters in relation to the management of that
Ship and subordinating the rights of the Approved Manager against the Ship and the relevant
Borrower thereof to the rights of the Lender under the Finance Documents and, in the plural,
means any of them;
	 
	 	 	“Availability Period” means the period commencing on the date of this Agreement and ending on:

	 	(a)	 	31 January 2008 (or such later date as the Lender may agree with the Borrowers); or
	 
	 	(b)	 	if earlier, the Drawdown Date or the date on which the Lender’s obligation to advance the
Loan is cancelled or terminated;

	 	 	“Balloon Instalment” has the meaning ascribed to it in Clause 7.1(b);
	 
	 	 	“Borrower” means each of Ocean Blue and Ocean Faith and, in the plural, means both of them;
	 
	 	 	“Business Day” means a day on which banks are open in London, Frankfurt, Athens and Piraeus and,
in respect of a day on which a payment is required to be made under a Finance Document, also in
New York City;
	 
	 	 	“Change of Control” shall occur in relation to the Corporate Guarantor of:

	 	(a)	 	any person (as such term is used in Section 13(d) and 14(d) of the Exchange Act) who as at
the date of this Agreement is not a beneficial owner of the Corporate Guarantor becomes the
beneficial owner (as defined in Rules 13d-3 and 13d-5 of the Exchange Act), directly or
indirectly, of more than 20 per cent, of the total voting power or ownership interest of the
Corporate Guarantor; or
	 
	 	(b)	 	the board of directors of the Corporate Guarantor ceases to consist of a majority of the
directors existing as of the date of this Agreement or directors nominated by at least
two-thirds (2/3) of the then existing directors;

	 	 	“Charterparty Assignment” means, in relation to either Approved Charter or any time charterparty
or contract of affreightment in respect of a Ship of at least 12 months in duration or any
bareboat charter in respect of a Ship and any guarantee of any such charter or other contract of
employment, an assignment of the rights of the Borrower who owns the relevant Ship under any
such Approved Charter, charterparty or contract of affreightment and (if applicable) the
guarantee in respect thereof executed or to be

2

 

	 	 	executed by that Borrower in favour of the Lender, in each case, in such form as the Lender may
approve or require and, in the plural, means all of them;
	 
	 	 	“Commitment” means $30,500,000 as that amount may be reduced, cancelled or terminated in
accordance with this Agreement;
	 
	 	 	“Contractual Currency” has the meaning given in Clause 20.4;
	 
	 	 	“Corporate Guarantee” means a guarantee to be executed by the Corporate Guarantor in favour of
the Lender in such form as the Lender may approve or require;
	 
	 	 	“Corporate Guarantor” means Ocean Freight Inc., a corporation incorporated in the Marshall
Islands whose registered office is at Trust Company Complex, Ajeltake Road Ajeltake Island,
Majuro, Marshall Islands MH 96960;
	 
	 	 	“Deed of Covenant” means, in relation to a Ship, a deed of covenant collateral to the Mortgage
relative to that Ship in such form as the Lender may approve or require and, in the plural,
means both of them;
	 
	 	 	“Disruption Period” means the interest period to be selected by the Lender (which selection
shall be conclusive, final and binding on the Borrowers without prejudice to the other provisions
of Clause 4), which shall commence on the date on which the Lender notifies the Borrowers of the
Applicable Interest Rate in accordance with Clause 4.6 and shall end on the date on which the
Lender notifies the Borrowers that the circumstances referred to in Clause 4.4 have ceased to
apply, during which the interest rate applicable to the Loan will be the Alternative Interest
rate and not LIBOR plus the Margin as a result of the occurrence of any of the circumstances
referred to in Clause 4.4;
	 
	 	 	“Dollars” and “$” means the lawful currency for the time being of the United States of America;
	 
	 	 	“Drawdown Date” means 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 1 (or in any other form which
the Lender approves or reasonably requires);
	 
	 	 	“Earnings” means, in relation to each Ship, all moneys whatsoever which are now, or later become,
payable (actually or contingently) to the Borrower which is the owner of such Ship and which
arise out of the use or operation of such Ship, including (but not limited to):

	 	(a)	 	all freight, hire and passage moneys, compensation payable to that Borrower in the event
of requisition of its Ship for hire, remuneration for salvage and towage services,
demurrage and detention moneys and damages for breach (or payments for variation or
termination) of any charterparty or other contract for the employment of such Ship;
	 
	 	(b)	 	all moneys which are at any time payable under Insurances in respect of loss of earnings;
and
	 
	 	(c)	 	if and whenever such Ship is employed on terms whereby any moneys falling within
paragraphs (a) or (b) are pooled or shared with any other person, that proportion of the
net receipts of the relevant pooling or sharing arrangement which is attributable to such
Ship;

“Earnings Account” means:

3

 

	 	(a)	 	in the case of “TAMARA”, an earnings account in the name of Ocean Blue with the
Account Bank in Piraeus designated “Ocean Blue Spirit Owners Inc. —Earnings Account”;
and
	 
	 	(b)	 	in the case of “TIGANI”, an earnings account in the name of Ocean Faith with the
Account Bank in Piraeus designated “Ocean Faith Owners Inc. — Earnings Account”

or, in either case, any other account (with that or another office of the Account Bank) which is
designated by the Lender as the Earnings Account for the relevant Ship for the purposes of this
Agreement;

“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 a Ship; or
	 
	 	(b)	 	any incident in which Environmentally Sensitive Material is released from a vessel other
than a Ship and which involves a collision between a Ship and such other vessel or some
other incident of navigation or operation, in either case, in connection with which a Ship
is actually or potentially liable to be arrested, attached, detained or injuncted and/or a
Ship and/or a 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 a 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;

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

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

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

“Exchange Act” means The Securities Exchange Act of 1934, as amended;

“Finance Documents” means:

4

 

	 	(a)	 	this Agreement;
	 
	 	(b)	 	the Corporate Guarantee;
	 
	 	(c)	 	the General Assignments;
	 
	 	(d)	 	the Mortgages;
	 
	 	(e)	 	the Deeds of Covenants;
	 
	 	(f)	 	the Accounts Pledges;
	 
	 	(g)	 	the Approved Manager’s Undertakings;
	 
	 	(h)	 	the Shares Pledges;
	 
	 	(i)	 	any Charter Assignment; and
	 
	 	(J)	 	any other document (whether creating a Security Interest or not) which is executed at any
time by the Borrowers (or either of them) or any other person as security for, or to
establish any form of subordination or priorities arrangement in relation to, any amount
payable to the Lender under this Agreement or any of the other documents referred to in this
definition;

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

	 	(a)	 	for principal, interest or any other sum payable in respect of any moneys borrowed or raised
by the debtor;
	 
	 	(b)	 	under any loan stock, bond, note or other security issued by the debtor;
	 
	 	(c)	 	under any acceptance credit, guarantee or letter of credit facility made available to the
debtor;
	 
	 	(d)	 	under a financial lease, a deferred purchase consideration arrangement or any other
agreement having the commercial effect of a borrowing or raising of money by the debtor;
	 
	 	(e)	 	under any foreign exchange transaction, any interest or currency swap or any other kind of
derivative transaction entered into by the debtor or, if the agreement under which any such
transaction is entered into requires netting of mutual liabilities, the liability of the
debtor for the net amount; or
	 
	 	(f)	 	under a guarantee, indemnity or similar obligation entered into by the debtor in respect of
a liability of another person which would fall within (a) to (e) if the references to the
debtor referred to the other person;

“General Assignment” means, in relation to a Ship, a general assignment of the Earnings, the
Insurances and the Requisition Compensation of such Ship to be executed by the relevant Borrower
in favour of the Lender in such form as the Lender may approve or require, and, in the plural
means both of them;

“Group” means the Corporate Guarantor and its subsidiaries (whether direct or indirect and
including, but not limited to, each Borrower and each Shareholder) from time to time during the
Security Period and “member of the Group” shall be construed accordingly;

5

 

“Initial Market Value” means, in relation to a Ship, the Market Value of such Ship determined by
the valuations referred in paragraph 4 of Schedule 2, Part B;

“Insurances” means, in relation to each Ship:

	 	(a)	 	all policies and contracts of insurance, including entries of such Ship in any protection
and indemnity or war risks association, which are effected in respect of such Ship, its
Earnings or otherwise in relation to it; and
	 
	 	(b)	 	all rights and other assets relating to, or derived from, any of the foregoing,
including any rights to a return of a premium;

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

“ISM Code” means, in relation to its application to the Borrowers, the Ships and their operation:

	 	(a)	 	The international Management Code for the Safe Operation of Ships and for Pollution
Prevention, currently known or referred to as the “ISM Code”, adopted by the Assembly of the
International Maritime Organisation by Resolution A.741(18) on 4th November, 1993 and
incorporated on 19th May, 1994 into chapter IX of the International Convention for the
Safety of Life at Sea 1974 (SOLAS 1974); and
	 
	 	(b)	 	all further resolutions, circulars, codes, guidelines, regulations and recommendations
which are now or in the future issued by or on behalf of the International Maritime
Organisation or any other entity with responsibility for implementing the ISM Code,
including without limitation, the ‘Guidelines on implementation or administering of the
International Safety Management (ISM) Code by Administrations’ produced by the
International Maritime Organisation pursuant to Resolution A.788(19) adopted on 25th
November, 1995,

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

“ISM Code Documentation” includes, in relation to a Ship:

	 	(a)	 	the document of compliance (DOC) and safety management certificate (SMC) issued pursuant
to the ISM Code in relation to such Ship within the periods specified by the ISM Code;
	 
	 	(b)	 	all other documents and data which are relevant to the ISM SMS and its implementation and
verification which the Lender may require; and
	 
	 	(c)	 	any other documents which are prepared or which are otherwise relevant to establish and
maintain such Ship’s compliance or the compliance by the Borrower owning such Ship with the
ISM Code which the Lender may require;

“ISM SMS” means, in relation to a Ship, the safety management system for such Ship which is
required to be developed, implemented and maintained under the ISM Code;

“ISPS Code” means the International Ship and Port Facility Security Code constituted pursuant to
resolution A.924(22) of the International Maritime Organisation (“IMO”) now set out in Chapter
XI-2 of the Safety of Life at Sea Convention (SOLAS) 1974 (as amended) and the mandatory ISPS
Code as adopted by a Diplomatic Conference of the IMO on Maritime Security in December 2002 and
includes any amendments or extensions to it and any regulation issued pursuant to it but shall
only apply insofar as it is applicable law in the relevant Ship’s flag state and any
jurisdiction on which such Ship is operated;

6

 

“ISPS Code Documentation” includes:

	 	(a)	 	the International Ship Security Certificate issued pursuant to the ISPS Code in relation
to each Ship within the period specified in the ISPS Code; and
	 
	 	(b)	 	all other documents and data which are relevant to the ISPS Code and its implementation
and verification which the Agent may require;

“Lender” means DVB Bank SE, acting through its branch at 80 Cheapside, London EC2V 6EE, England;

“LIBOR” means for an Interest Period:

	 	(a)	 	the rate per annum equal to the offered quotation for deposits in Dollars for a period
equal to, or as near as possible equal to, the relevant Interest Period which appears on
Reuters BBA Page LIBOR 01 at or about 11.00 a.m. (London time) on the second Business Day
prior to the commencement of that Interest Period (and, for the purposes of this Agreement,
“Reuters BBA Page LIBOR 01” means the display designated as “Reuters BBA Page LIBOR 01” on
the Reuters Money News Service or such other page as may replace BBA Page LIBOR 01 on that
service for the purpose of displaying rates comparable to that rate or on such other
service as may be nominated by the British Bankers’ Association as the information vendor
for the purpose of displaying British Bankers’ Association Interest Settlement Rates for
Dollars); or
	 
	 	(b)	 	if no rate is quoted on Reuters BBA Page LIBOR 01 or the Lender determines that the rate
quoted on Reuters BBA Page LIBOR 01 is lower than the refinancing rates available to the
Lender in its ordinary course of business, including, but not limited to, rates quoted to
the Lender by brokers (such determination being conclusive, final and binding on the
Borrowers) for deposits in Dollars at the relevant time, the applicable rate shall be the
rate the Lender selects from whatever sources available to it (which selection shall be
conclusive, final and binding on the Borrowers), including but not limited to rates
provided through broker’s quotes;

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

“Major Casualty” means any casualty to a Ship in respect of which the claim or the aggregate of
the claims against all insurers, before adjustment for any relevant franchise or deductible,
exceeds $500,000 or the equivalent in any other currency;

“Management Agreement” means, in relation to each Ship, an agreement made or to be made between
(i) the Borrower who is the owner of that Ship and (ii) the relevant Approved Manager in respect
of the commercial or, as the case may be, the technical management of the Ship and, in the
plural, means all of them;

“Margin” means 3 per cent. per annum;

“Market Value” means, in relation to each Ship, the market value of that Ship determined in
accordance with Clause 14.3;

“Market Value Adjusted Total Assets” means, at any time, Total Assets adjusted to reflect the
Market Value of all Fleet Vessels;

“MOA” means:

	 	(a)	 	in relation to “TAMARA”, the memorandum of agreement dated 7 August 2008 entered into
between the Corporate Guarantor as buyer and the relevant Seller as

7

 

	 	 	 	seller as amended and supplemented by an addendum No. 1 dated 7 August 2008 made between
the Corporate Guarantor, the relevant Seller and Ocean Blue pursuant to which the
Corporate Guarantor nominated Ocean Blue as the buyer of that Ship; and
	 
	 	(b)	 	in relation to “TIGANI”, the memorandum of Agreement date 7 August 2008 entered into
between the Corporate Guarantor as buyer and the relevant Seller as amended and
supplemented by an addendum No. 1 dated 9 October 2008 made between the Corporate
Guarantor, the relevant Seller and Ocean Faith, pursuant to which the Corporate Guarantor
nominated Ocean Faith as the buyer of that Ship,

as each may be amended and supplemented and, in the plural, means both of them;

“Mortgage” means, in relation to each Ship, the first priority Maltese statutory mortgage on
that Ship, in such form as the Lender may approve or require and in the plural means both of
them;

“Ocean Blue” means Ocean Blue Spirit Owners Inc., a corporation incorporated in the Marshall
Islands, whose registered office is at Trust Company Complex, Ajeltake Road, Ajeltake Island,
Majuro, Marshall Islands MH 96960;

“Ocean Faith” means Ocean Faith Owners Inc., a corporation incorporated under the laws of
Republic of Marshall Islands with its registered office is at Trust Company Complex, Ajeltake
Road, Ajeltake Island, Majuro, Marshall Islands MH 96960;

“Payment Currency” has the meaning given in Clause 20.4;

“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 Borrower owning such Ship in
good faith by appropriate steps) and subject, in the case of liens for repair or
maintenance, to Clause 13.12(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 a 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:

8

 

	 	(a)	 	any Finance Document;
	 
	 	(b)	 	any policy or contract of insurance contemplated by or referred to in Clause 12 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 the Lender in contemplation
of or in connection with any Finance Document or any policy, contract or document falling
within paragraphs (b) or (c);

“Pertinent Jurisdiction”, in relation to a company, means:

	 	(a)	 	England and Wales;
	 
	 	(b)	 	the country under the laws of which the company is incorporated or formed;
	 
	 	(c)	 	a country in which the company’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 (including, without limitation, the Ships) of the company
(other than securities issued by, or loans to, related companies) having a substantial
value are situated, in which the company maintains a permanent place of business, or in
which a Security Interest created by the company must or should be registered in order to
ensure its validity or priority; and
	 
	 	(f)	 	a country the courts of which have jurisdiction to make a winding up, administration or
similar order in relation to the company or which would have such jurisdiction if their
assistance were requested by the courts of a country referred to in paragraphs (b) or (c);

“Pertinent Matter” means:

	 	(a)	 	any transaction or matter contemplated by, arising out of, or in connection with a
Pertinent Document; or
	 
	 	(b)	 	any statement relating to a Pertinent Document or to a transaction or matter falling
within paragraph (a),

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

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

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

9

 

“Recommendation” means, in relation to “TIGANI” a class recommendation appearing on that Ship’s
current class records regarding a temporary repair of the ballast eductor in the pump room which
is required to be permanently repaired by 30 June 2009;

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

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

“Retention Account” means an account in the joint names of the Borrowers with the Account Bank in
Piraeus (or any other office of the Account Bank) which is designated by the Lender in writing as
the Retention Account with respect to the Borrowers for the purposes of this Agreement);

“Retention Account Pledge” means a pledge agreement creating security in respect of the Retention
Account to be executed by the Borrowers in favour of the Lender in such form as the Lender may
approve or require;

“Secured Liabilities” means all liabilities which the Borrowers, 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, the Shareholders and any
other person (except the Lender) who, as a surety or mortgagor, as a party to any subordination
or priorities arrangement, or in any similar capacity, executes a document falling within the
last paragraph of the definition of “Finance Documents”;

“Security Period” means the period commencing on the date of this Agreement and ending on the
date on which the Lender notifies the Borrowers and the Security Parties that:

	 	(a)	 	all amounts which have become due for payment by each of the Borrowers or any Security
Party under the Finance Documents have been paid;
	 
	 	(b)	 	no amount is owing or has accrued (without yet having become due for payment) under any
Finance Document;

10

 

	 	(c)	 	neither Borrower nor any Security Party has any future or contingent liability under
Clause 19, 20 or 21 or any other provision of this Agreement or another Finance
Document; and
	 
	 	(d)	 	the Lender does not consider that there is a significant risk that any payment or
transaction under a Finance Document would be set aside, or would have to be reversed or
adjusted, in any present or possible future bankruptcy of either 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;

“Seller” means in relation to:

	 	(a)	 	“TAMARA”, Tulip Navigation Limited, a company existing and organised under the laws of
Malta whose registered office is at 5/2 Merchant Street, Valletta, Malta; and
	 
	 	(b)	 	“TIGANI”, Avir Shipping Company Limited a company existing and organised under the laws
Malta whose registered office is at 5/2 Merchant Street, Valletta, Malta,

and in the plural means both of them;

“Shareholder” means, in relation to:

	 	(a)	 	in relation to Ocean Blue, Ocean Blue Spirit Shareholders Inc.;
	 
	 	(b)	 	in relation to Ocean Faith, Ocean Faith Shareholders Inc.,

each being the registered owner of all of the issued share capital of the relevant Borrower and a
corporation incorporated and existing under the laws of the Marshall Islands whose registered
office is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH
96960 and, in the plural, means both of them;

“Shares Pledge” means, in relation to each Borrower, a shares pledge over all of the issued
share capital of that Borrower to be executed by the relevant Shareholder in such form as the
Lender may approve or require and in the plural means all of them;

“Ship” means each of “TAMARA” and “TIGANI” and in the plural means both of them;

“TAMARA” means the 1990-built Aframax tanker of 52,511 gross registered tons and 24,977 net
registered tons, having IMO Number 9002142 registered in the ownership Ocean Blue under Maltese
flag with the name “TAMARA”;

“TIGANI” means the 1991-built Aframax tanker of 52,603 gross registered tons and 24,933 net
registered tons, having IMO Number 9002154 registered in the ownership Ocean Faith under the
Maltese flag with the name “TIGANI”;

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

	 	(a)	 	actual, constructive, compromised, agreed or arranged total loss of such Ship;
	 
	 	(b)	 	any expropriation, confiscation, requisition or acquisition of such Ship, whether for full
consideration, a consideration less than its proper value, a nominal consideration or
without any consideration, which is effected by any government or official authority or by
any person or persons claiming to be or to represent a government or official authority
(excluding a requisition for hire for a fixed period

11

 

	 	 	 	not exceeding 1 year without any right to an extension) unless it is within 1
month redelivered to the full control of the owner owning such ship;
	 
	 	(c)	 	any arrest, capture, seizure or detention of such Ship (including any
hijacking or theft) unless it is within 1 month redelivered to the full control of
the owner owning such ship;

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

	 	(a)	 	in the case of an actual loss of such Ship, the date on which it occurred
or, if that is unknown, the date when such Ship was last heard of;
	 
	 	(b)	 	in the case of a constructive, compromised, agreed or arranged total loss of
such Ship, the 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 such Ship with such Ship’s insurers in which the
insurers agree to treat such Ship as a total loss; and

	 	(c)	 	in the case of any other type of total loss, on the date (or the most likely
date) on which the relevant underwriters consider that the event constituting the
total loss occurred; and

“Underlying Documents” means, together, the MOAs, the Management Agreements and the
Approved Charters.

	1.2	 	Construction of certain terms. In this Agreement:
	 
	 	 	“approved” means, for the purposes of Clause 12, approved in writing by the Lender;
	 
	 	 	“asset” includes every kind of property, asset, interest or right, including any present,
future or contingent right to any revenues or other payment;
	 
	 	 	“company” includes any partnership, joint venture and unincorporated association;
	 
	 	 	“consent” includes an authorisation, consent, approval, resolution, licence, exemption,
filing, registration, notarisation and legalisation;
	 
	 	 	“contingent liability” means a liability which is not certain to arise and/or the amount
of which remains unascertained;
	 
	 	 	“document” includes a deed; also a letter, fax or telex;
	 
	 	 	“excess risks” means, in relation to a Ship the proportion of claims for general average,
salvage and salvage charges not recoverable under the hull and machinery policies in
respect of that Ship in consequence of its insured value being less than the value at
which the Ship is assessed for the purpose of such claims;
	 
	 	 	“expense” means any kind of cost, charge or expense (including all legal costs, charges
and expenses) and any applicable value added or other tax;
	 
	 	 	“law” includes any order or decree, any form of delegated legislation, any treaty or
international convention and any regulation or resolution of the Council of the European
Union, the European Commission, the United Nations or its Security Council;

12

 

“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 12 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 1 of the Institute Time Clauses (Hulls) (1/10/83) or clause 8 of the
Institute Time Clauses (Hulls) (1/11/1995) or the Institute Amended Running Down Clause
(1/10/71) or any equivalent provision;

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

“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 23 of the
Institute Time Clauses (Hulls) (1/10/83) or clause 24 of the Institute Time Clauses
(Hulls) (1/11/1995).

	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:

13

 

	(a)	 	a majority of the issued shares in S (or a majority of the issued shares in S which
carry unlimited rights to capital and income distributions) are directly owned by P or
are indirectly attributable to P; or
	 
	(b)	 	P has direct or indirect control over a majority of the voting rights attaching to the
issued shares of S; or
	 
	(c)	 	P has the direct or indirect power to appoint or remove a majority of the directors of S; or
	 
	(d)	 	P otherwise has the direct or indirect power to ensure that the affairs of S are
conducted in accordance with the wishes of P;
	 
	 	 	and any company of which S is a subsidiary is a parent company of S.
	 
	1.5	 	General Interpretation. In this Agreement:
	 
	(a)	 	references in Clause 1.1 to a Finance Document or any other document being in the form of
a particular appendix include references to that form with any modifications to that form
which the Lender approves or reasonably requires;
	 
	(b)	 	references to, or to a provision of, a Finance Document or any other document are
references to it as amended or supplemented, whether before the date of this Agreement or
otherwise;
	 
	(c)	 	references to, or to a provision of, any law include any amendment, extension,
re-enactment or replacement, whether made before the date of this Agreement or otherwise;
	 
	(d)	 	words denoting the singular number shall include the plural and vice versa; and
	 
	(e)	 	Clauses 1.1 to 1.5 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. Subject to the other provisions of this Agreement, the Lender shall
make available to the Borrowers a loan facility not exceeding $30,500,000 to be drawn in a
single advance.
	 
	2.2	 	Purpose of Loan. Each Borrower undertakes with the Lender to use the Loan only for the
purpose stated in the preamble to this Agreement.
	 
	3	 	DRAWDOWN
	 
	3.1	 	Request for Loan. Subject to the following conditions, the Borrowers may request the Loan
to be advanced by ensuring that the Lender receives a completed Drawdown Notice not later
than 11.00 a.m. (London time) 2 Business Days prior to the intended Drawdown Date (which
shall be a Business Day during the Availability Period).
	 
	3.2	 	Availability. The conditions referred to in Clause 3.1 are that:
	 
	(a)	 	the Drawdown Date has to be a Business Day during the Availability Period;
	 
	(b)	 	the Loan shall be made available in a single amount and any amount undrawn under the Loan
shall be cancelled and may not be borrowed by the Borrowers at a later date; and

14

 

	(c)	 	the Loan shall not exceed the lesser of:

	 	(i)	 	$30,500,000; and
	 
	 	(ii)	 	55 per cent. of the aggregate Initial Market Value of the Ships.

	3.3	 	Drawdown Notice irrevocable. The Drawdown Notice must be signed by a director, officer or
a duly authorised signatory of each Borrower; and once served, the Drawdown Notice cannot be
revoked without the prior consent of the Lender.
	 
	3.4	 	Disbursement of Loan. Subject to the provisions of this Agreement, the Lender shall on
the Drawdown Date, advance the Loan to the Borrowers; and payment to the Borrowers shall be
made to the account which the Borrowers specify in the Drawdown Notice.
	 
	4	 	INTEREST
	 
	4.1	 	Payment of normal interest. Subject to the provisions of this Agreement, interest on the
Loan in respect of each Interest Period shall be paid by the Borrowers on the last day of
that Interest Period.
	 
	4.2	 	Normal rate of interest. Subject to the provisions of this Agreement, the rate of interest
applicable to the Loan in respect of an Interest Period shall be the aggregate of the Margin
and LIBOR for that Interest Period.
	 
	4.3	 	Payment of accrued interest. In the case of an Interest Period longer than 3 months,
accrued interest shall be paid every 3 months during that Interest Period and on the last
day of that Interest Period.
	 
	4.4	 	Notification of market disruption. The Lender shall promptly notify the Borrowers if no rate
is quoted on Reuters BBA Page LIBOR01 or if for any reason the Lender is unable to obtain
Dollars in the London Interbank Market in order to fund the Loan (or any part of it) during
any Interest Period, stating the circumstances which have caused such notice to be given.
	 
	4.5	 	Suspension of drawdown. If the Lender’s notice under Clause 4.4 is served before the Loan
is advanced, the Lender’s obligation to advance the Loan shall be suspended while the
circumstances referred to in the Lender’s notice continue.
	 
	4.6	 	Notification of alternative rate of interest. If the Lender’s notice under Clause 4.4 is
served after the Loan (or any part thereof) is advanced and in respect of that part of the
Loan which has been advanced, the Lender shall promptly notify the Borrowers of the
Alternative Interest Rate which will apply during the Disruption Period.
	 
	4.7	 	Application of Alternative Interest Rate. The Alternative Interest Rate shall take effect
on the date on which the Lender notifies the Borrowers of the Alternative Interest Rate and
this rate will apply to the Loan at all times during the applicable Disruption Period.
	 
	4.8	 	Notice of prepayment. If the Borrowers do not agree with the Applicable Interest Rate set
by the Lender under Clause 4.6, the Borrowers may give the Lender not less than 15 Business
Days’ notice of their intention to prepay the Loan at the end of the Disruption Period.
	 
	4.9	 	Prepayment. A notice under Clause 4.8 shall be irrevocable; and on the last Business Day
of the interest period set by the Lender, the Borrowers shall prepay, subject to the
provisions of clause 7.11, the Loan, together with accrued interest thereon at the
applicable rate plus the Margin.

15

 

	4.10	 	Application of prepayment. The provisions of Clause 7 shall apply in relation to
the prepayment.
	 
	5	 	INTEREST PERIODS
	 
	5.1	 	Commencement of Interest Periods. The first Interest Period applicable to the Loan shall
commence on the Drawdown Date and each subsequent Interest Period shall commence on the
expiry of the preceding Interest Period.
	 
	5.2	 	Duration of normal Interest Periods. Subject to Clauses 5.3 and 5.4, each Interest
Period shall be:
	 
	(a)	 	3, 6, 9 or 12 months as notified by the Borrowers to the Lender not later than 11.00 a.m.
(London time) 2 Business Days before the commencement of the Interest Period; or
	 
	(b)	 	3 months, if the Borrowers fail to notify the Lender by the time specified in paragraph
(a); or
	 
	(c)	 	such other period as the Lender may agree with the Borrowers.
	 
	5.3	 	Duration of Interest Periods for repayment instalments. In respect of an amount due to be
repaid under Clause 7 on a particular Repayment Date, an Interest Period shall end on that
Repayment Date.
	 
	5.4	 	Non-availability of matching deposits for Interest Period selected. If, after the
Borrowers have selected and the Lender has agreed an Interest Period longer than 6 months,
the Lender notifies the Borrowers 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 6
months.
	 
	6	 	DEFAULT INTEREST
	 
	6.1	 	Payment of default interest on overdue amounts. The Borrowers shall pay interest in
accordance with the following provisions of this Clause 6 on any amount payable by the
Borrowers under any Finance Document which the Lender does not receive on or before the
relevant date, that is:
	 
	(a)	 	the date on which the Finance Documents provide that such amount is due for payment; or
	 
	(b)	 	if a Finance Document provides that such amount is payable on demand, the date on which the
demand is served; or
	 
	(c)	 	if such amount has become immediately due and payable under Clause 18.4, the date on which
it became immediately due and payable.
	 
	6.2	 	Default rate of interest. Interest shall accrue on an overdue amount from (and
including) the relevant date until the date of actual payment (as well after as before
judgment) at the rate per annum determined by the Lender to be 2 per cent. above:
	 
	(a)	 	in the case of an overdue amount of principal, the higher of the rates set out at
Clauses 6.3(a) and (b); or
	 
	(b)	 	in the case of any other overdue amount, the rate set out at Clause 6.3(b).
	 
	6.3	 	Calculation of default rate of interest. The rates referred to in Clause 6.2 are:

16

 

	(a)	 	the rate applicable to the overdue principal amount immediately prior to the relevant
date (but only for any unexpired part of any then current Interest Period);
	 
	(b)	 	the Margin plus, in respect of successive periods of any duration (including at call) up to
3 months which the Lender may select from time to time:

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

	6.4	 	Notification of interest periods and default rates. The Lender shall promptly notify the
Borrowers of each interest rate determined by it under Clause 6.3 and of each period selected
by it for the purposes of paragraph (b) of that Clause; but this shall not be taken to imply
that the Borrowers are liable to pay such interest only with effect from the date of the
Lender’s notification.
	 
	6.5	 	Payment of accrued default interest. Subject to the other provisions of this Agreement, any
interest due under this Clause shall be paid on the last day of the period by reference to
which it was determined.
	 
	6.6	 	Compounding of default interest. Any such interest which is not paid at the end of the period
by reference to which it was determined shall thereupon be compounded.
	 
	7	 	REPAYMENT AND PREPAYMENT
	 
	7.1	 	Repayment instalments. The Borrowers shall repay the Loan by
	 
	(a)	 	16 consecutive three-monthly instalments of (i) in the case of the first to fourth
(inclusive) instalments, in the amount of $2,750,000 each, (ii) in the case of the fifth to
eighth (inclusive) instalments, in the amount of $2,312,500 each and (iii) in the case of the
ninth to the sixteenth (inclusive) instalments, in the amount of $1,093,750; and
	 
	(b)	 	a balloon payment of $1,500,000 (the “Balloon Instalment”),
	 
	 	 	Provided that if the Loan advanced to the Borrower on the Drawdown Date is less than
$30,500,000, the undrawn balance shall be applied first in reducing the Balloon Instalment
and any balance shall be applied in reducing each repayment instalment in inverse order of
maturity.
	 
	7.2	 	Repayment Dates. The first repayment instalment shall be repaid on 15 March 2009, each
subsequent repayment instalment shall be repaid at 3-monthly intervals thereafter and the last
instalment shall be repaid, together with the Balloon Instalment, on the date falling on the
fourth anniversary of the Drawdown Date.
	 
	7.3	 	Final Repayment Date. On the final Repayment Date, the Borrowers shall additionally pay to
the Lender all other sums then accrued or owing under any Finance Document.
	 
	7.4	 	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.
	 
	7.5	 	Conditions for voluntary prepayment. The conditions referred to in Clause 7.4 are
that:
	 
	(a)	 	a partial prepayment shall be $500,000 or a multiple of $500,000;

17

 

	(b)	 	the Lender has received from the Borrowers at least 5 Business Days’ prior written
notice specifying the amount to be prepaid and the date on which the prepayment is to be
made; and
	 
	(c)	 	the Borrowers have provided evidence satisfactory to the Lender that any consent
required by the Borrowers 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
affect the Borrowers or any Security Party has been complied with.
	 
	7.6	 	Effect of notice of prepayment. A prepayment notice may not be withdrawn or amended
without the consent of the Lender and the amount specified in the prepayment notice shall
become due and payable by the Borrowers on the date for prepayment specified in the
prepayment notice.
	 
	7.7	 	Mandatory prepayment. The Borrowers shall be obliged to prepay the Relevant Fraction
of the Loan if a Ship is sold or becomes a Total Loss:
	 
	(a)	 	if a Ship is sold, on or before the date on which the sale is completed by delivery of
such Ship to the buyer; or
	 
	(b)	 	if a Ship becomes a total loss, on the earlier of the date falling 90 days after the
Total Loss Date and the date of receipt by the Lender of the proceeds of insurance relating
to such Total Loss,
	 
	 	 	and in this Clause 7.7 “Relevant Fraction” is a fraction whose:

	 	(i)	 	numerator is the Market Value of the Ship being sold or which has become
a Total Loss on the date on which such sale is completed or (as the case may be)
the date on which the Total Loss occurred; and
	 
	 	(ii)	 	denominator is the aggregate Market Value of all the Ships on the date
on which the relevant Ship which are subject to a Mortgage is sold or becomes a
Total Loss.

	7.8	 	Amounts payable on prepayment. A prepayment shall be made together with accrued interest
(and any other amount payable under Clause 20 or otherwise) in respect of the amount prepaid
and, if the prepayment is not made on the last day of an Interest Period, together with any
sums payable under Clauses 20.1(b) and 20.2 but without premium or penalty.
	 
	7.9	 	Application of partial prepayment. Each partial prepayment made pursuant to:
	 
	(a)	 	Clause 7.4 shall be applied first against the Balloon Instalment and thereafter against
the repayment instalments specified in Clause 7.1 outstanding at the time of the partial
prepayment in inverse order of maturity; and
	 
	(b)	 	Clause 7.7 in reducing pro rata against the repayment instalments specified in Clause 7.1
outstanding at the time of the prepayment and the Balloon instalment.
	 
	7.10	 	No reborrowing. No amount prepaid may be reborrowed.
	 
	7.11	 	Prepayment fee. The Borrowers shall pay to the Lender a fee in respect of each
prepayment made pursuant to this Agreement (other than any prepayment made pursuant to
Clause 7.4 if the Loan or any part thereof is refinanced by the Lender, Clause 7.7(b) or
Clause 14.2(b)) as follows:
	 
	(a)	 	where a prepayment is made within the first 24 months following the Drawdown Date
(the “Initial Period”), the fee shall be equal to 1.50 per cent. of the amount prepaid;
and

18

 

	(b)	 	where a prepayment is made within 24 months after the Initial Period, the fee
shall be equal to 1.00 per cent. of the amount prepaid.
	 
	8	 	CONDITIONS PRECEDENT
	 
	8.1	 	Documents, fees and no default. The Lender’s obligation to advance the Loan is
subject to the following conditions precedent:
	 
	(a)	 	that, on or before the service of the Drawdown Notice, the Lender receives the documents
described in Part A of Schedule 2 in form and substance satisfactory to it and its lawyers;
	 
	(b)	 	that, on or before the Drawdown Date, the Lender receives the documents described in Part B
of Schedule 2 in form and substance satisfactory to it and its lawyers;
	 
	(c)	 	that, on or before service of the Drawdown Notice, the Lender has received:

	 	(i)	 	the upfront fee referred to in Clause 19.1(a); and
	 
	 	(ii)	 	any accrued commitment fee due and payable pursuant to Clause 19.1(b);

	(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 and is
continuing or would result from the borrowing of the Loan; and
	 
	 	(ii)	 	the representations and warranties in Clause 9 and those of the Borrower or
any Security Party which are set out in the other Finance Documents would be true and
not misleading if repeated on each of those dates with reference to the circumstances
then existing; and
	 
	 	(iii)	 	none of the circumstances contemplated by Clause 4.4 has occurred and is
continuing;
	 
	 	(iv)	 	there has been no material adverse change in the financial position, state
of affairs or prospects of the Borrowers, the Corporate Guarantor any other Security
Party in the light of which the Lender considers that there is a significant risk
that the Borrowers, the Corporate Guarantor or any other Security Party 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 14.1 were applied immediately following the advance of
the Loan, the Borrowers would not be obliged to provide additional security or prepay part of
the Loan under that Clause; and
	 
	(f)	 	that the Lender has received, and found to be acceptable to it, any further opinions,
consents, agreements and documents in connection with the Finance Documents which the Lender
may reasonably request by notice to the Borrower prior to the relevant Drawdown Date.
	 
	8.2	 	Waivers of conditions precedent. If the Lender, at its discretion, permits the Loan to be
borrowed before certain of the conditions referred to in Clause 8.1 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 Lender may specify).
	 
	9	 	REPRESENTATIONS AND WARRANTIES
	 
	9.1	 	General. Each Borrower represents and warrants to the Lender as follows.

19

 

	9.2	 	Status. Each Borrower is duly incorporated and validly existing and in good
standing under the laws of the Marshall Islands.
	 
	9.3	 	Share capital and ownership. Each Borrower has an authorised share capital of $10,000
divided into 500 shares of $20 each and the legal title and beneficial ownership of all
those shares is held, free of any Security Interest or other claim, by the relevant
Shareholder.
	 
	9.4	 	Corporate power. Each Borrower has the corporate capacity, and has taken all corporate
action and obtained all consents necessary for it:
	 
	(a)	 	to execute the MOA, to purchase and pay for its Ship and register it in its name under
the Maltese flag;
	 
	(b)	 	to execute the Approved Charter to which each Borrower is a party;
	 
	(c)	 	to execute the Finance Documents to which each Borrower is a party; and
	 
	(d)	 	to borrow under this Agreement and to make all the payments contemplated by, and to
comply with, those Finance Documents to which it is a party.
	 
	9.5	 	Consents in force. All the consents referred to in Clause 9.4 remain in force and nothing
has occurred which makes any of them liable to revocation.
	 
	9.6	 	Legal validity; effective Security Interests. The Finance Documents to which 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 the legal, valid and binding obligations of that Borrower 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,
	 
		 	
subject to any relevant insolvency laws affecting creditors’ rights generally.
	 
	9.7	 	No third party Security Interests. Without limiting the generality of Clause 9.6, at the
time of the execution and delivery of each Finance Document:
	 
	(a)	 	each Borrower will have the right to create all the Security Interests which that Finance
Document purports to create; and
	 
	(b)	 	no third party will have any Security Interest (except for Permitted Security Interests)
or any other interest, right or claim over, in or in relation to any asset to which any such
Security Interest, by its terms, relates.
	 
	9.8	 	No conflicts. The execution by each Borrower of each Finance Document to which it is a
party, and the borrowing by the Borrowers of the Loan, and their compliance with each
Finance Document will not involve or lead to a contravention of:
	 
	(a)	 	any law or regulation; or
	 
	(b)	 	the constitutional documents of the Borrowers; or
	 
	(c)	 	any contractual or other obligation or restriction which is binding on the Borrowers or
any of their assets.

20

 

	9.9	 	No withholding taxes. All payments which the Borrowers are liable to make under the
Finance Documents may be made without deduction or withholding for or on account of any
tax payable under any law of any Pertinent Jurisdiction.
	 
	9.10	 	No default. No Event of Default or Potential Event of Default has occurred and is
continuing.
	 
	9.11	 	Information. All information which has been provided in writing by or on behalf of the
Borrowers or any Security Party to the Lender in connection with any Finance Document
satisfied the requirements of Clause 10.5; all audited and unaudited accounts which have
been so provided satisfied the requirements of Clause 10.7; and there has been no material
adverse change in the financial position or state of affairs of either of the Borrowers from
that disclosed in the latest of those accounts.
	 
	9.12	 	No litigation. No legal or administrative action involving either 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 Borrowers’ knowledge, is likely to be commenced or taken
which, in either case, would be likely to have a material adverse effect on either
Borrowers’ financial position or profitability.
	 
	9.13	 	Validity and completeness of the Underlying Documents. The Underlying Documents
constitute valid, binding and enforceable obligations of each of the parties thereto in
accordance with their terms, and:
	 
	(a)	 	the copies of the Underlying Documents delivered to the Lender before the date of this
Agreement are true and complete copies; and
	 
	(b)	 	no amendments or additions to any Underlying Document have been agreed nor has any party
to an Underlying Document waived its rights under the relevant Underlying Document.
	 
	9.14	 	Compliance with certain undertakings. At the date of this Agreement, each of the
Borrowers is in compliance with Clauses 10.2, 10.4, 10.9 and 10.13.
	 
	9.15	 	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.
	 
	9.16	 	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.
	 
	9.17	 	No money laundering. Without prejudice to the generality of Clause 2.2, in relation to
the borrowing by the Borrowers of the Loan, the performance and discharge of its obligations
and liabilities under the Finance Documents, and the transactions and other arrangements
effected or contemplated by the Finance Documents, each Borrower confirms that it is acting
for its own account and that the foregoing will not involve or lead to contravention of any
law, official requirement or other regulatory measure or procedure implemented to combat
“money laundering” (as defined in Article 1 of the Directive (91/308/EEC) of the Council of
the European Communities).
	 
	10	 	GENERAL UNDERTAKINGS
	 
	10.1	 	General. Each Borrower undertakes with the Lender to comply with the following
provisions of this Clause 10 at all times during the Security Period, except as the Lender
may otherwise permit.
	 
	10.2	 	Title; negative pledge. Each Borrower will:

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	(a)	 	hold the legal title to, and own the entire beneficial interest in its Ship, her
Insurances and her 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.
	 
	10.3	 	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.
	 
	10.4	 	No other liabilities or obligations to be incurred. Neither Borrower will incur any
Financial Indebtedness except that incurred under the Finance Documents and that reasonably
incurred in the ordinary course of operating and chartering its Ship.
	 
	10.5	 	Information provided to be accurate. All financial and other information which is
provided in writing by or on behalf of the Borrowers under or in connection with any Finance
Document will be true and not misleading and will not omit any material fact or
consideration.
	 
	10.6	 	Provision of financial statements. The Borrowers will send or procure there are sent to the
Lender:
	 
	(a)	 	as soon as possible, but in no event later than 120 days after the end of each financial
year of the Borrowers and the Corporate Guarantor (commencing with the financial year ending
on 31 December 2008), the:

	 	(i)	 	unaudited prepared individual financial statements of the Borrower for
that financial year; and
	 
	 	(ii)	 	audited consolidated financial statements of the Corporate Guarantor
for that financial year; and

	(b)	 	as soon as possible, but in no event later than 90 days after the end of each 3-month period
in each financial year of the Corporate Guarantor ending on 31 March, 30 June, 30 September
and 31 December (commencing with the 3-month period ending on 31 December 2008) the interim
unaudited consolidated financial statements of the Corporate Guarantor for that 3-month
period.
	 
	10.7	 	Form of financial statements. All accounts (audited and unaudited) delivered under Clause
10.6 will:
	 
	(a)	 	be prepared in accordance with all applicable laws and generally accepted accounting
principles consistently applied;
	 
	(b)	 	give a true and fair view of the state of affairs of each Borrower or, as the case may be,
the Corporate Guarantor and its subsidiaries at the date of those accounts and of profit for
the period to which those accounts relate; and
	 
	(c)	 	fully disclose or provide for all significant liabilities of each Borrower or, as
the case may be, the Corporate Guarantor and its subsidiaries.

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	10.8	 	Shareholders and creditor notices. If an Event of Default or Potential Event of
Default has occurred and is continuing, each Borrower will send the Lender, 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.
	 
	10.9	 	Consents. Each Borrower will maintain in force and promptly obtain or renew, and will
promptly send certified copies to the Lender of, all consents required:
	 
	(a)	 	for each Borrower to perform its obligations under any Finance Document;
	 
	(b)	 	for the validity or enforceability of any Finance Document; and
	 
	(c)	 	for each Borrower to continue to own and operate its Ship,

	 
	 	 	
and the Borrowers will comply with the terms of all such consents.
	 
	10.10	 	Maintenance of Security Interests. Each Borrower will:
	 
	(a)	 	at its own cost, do all that it reasonably can to ensure that any Finance Document
validly creates the obligations and the Security Interests which it purports to create; and
	 
	(b)	 	without limiting the generality of paragraph (a) above, authorise and hereby authorises
the Lender at the cost of the Borrowers to 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 may be or become necessary or
desirable for any Finance Document to be valid, enforceable or admissible in evidence or to
ensure or protect the priority of any Security Interest which it creates.
	 
	10.11	 	Notification of litigation. Each Borrower will provide the Lender with details of any
legal or administrative action involving either Borrower, any Security Party, the Approved
Manager, either Ship, the Earnings or the Insurances as soon as such action is instituted,
unless it is clear that the legal or administrative action cannot be considered material in
the context of any Finance Document.
	 
	10.12	 	No amendment to Underlying Documents. Neither Borrower will agree to any amendment or
supplement to, or waive or fail to enforce, an Underlying Document or any of their respective
provisions.
	 
	10.13	 	Principal place of business. Each Borrower will maintain its place of business, and keep
its corporate documents and records, at the address which has been disclosed by the Borrowers
to the Lender in writing on or prior to the date of this Agreement and neither Borrower will
establish, or do anything as a result of which it would be deemed to have, a place of
business in the United Kingdom or the United States of America.
	 
	10.14	 	Confirmation of no default. Each Borrower will, within 2 Business Days after service by
the Lender of a written request, serve on the Lender a notice which is signed by a director
of each 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.
	 
	10.15	 	Notification of default. Each Borrower will notify the Lender as soon as either
Borrower becomes aware of:
	 
	(a)	 	the occurrence of an Event of Default or a Potential Event of Default; or

23

 

	(b)	 	any matter which indicates that an Event of Default or a Potential Event of
Default may have occurred,
	 
	 	 	and will keep the Lender fully up-to-date with all developments.
	 
	10.16	 	Provision of further information. Each Borrower will, as soon as practicable after
receiving the request, provide the Lender with:
	 
	(a)	 	any additional financial or other information relating to such Borrower, its Ship, the
Earnings, the Insurances, the Approved Manager, the Approved Charterers or the Corporate
Guarantor; or
	 
	(b)	 	any additional financial or other information relating to any other matter relevant to,
or to any provision of, a Finance Document, 
	 
	 	 	which may be requested by the Lender at any time.
	 
	10.17	 	Minimum Liquidity. The Borrowers shall maintain with the Account Bank, throughout the
Security Period in each Earnings Account, an amount of at least $500,000 in respect of each
Ship in freely available cash deposits.
	 
	10.18	 	“Know your customer” requirements. The Borrowers shall provide to the Lender such
documentation and evidence as may be required by it from time to time to comply with
applicable law and regulations and its own internal guidelines in relation to the opening
of bank accounts and the identification of its customers.
	 
	11	 	CORPORATE UNDERTAKINGS
	 
	11.1	 	General. Each Borrower also undertakes with the Lender to comply with the following
provisions of this Clause 11 at all times during the Security Period except as the Lender
may otherwise permit.
	 
	11.2	 	Maintenance of status. Each Borrower will maintain its separate corporate existence and
remain in good standing under the laws of the Marshall Islands.
	 
	11.3	 	Negative undertakings. Neither Borrower will:
	 
	(a)	 	carry on any business other than the ownership, chartering and operation of the Ship
owned by it; or
	 
	(b)	 	provide any form of credit or financial assistance to:

	 	(i)	 	a person who is directly or indirectly interested in such
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 such Borrower than those which it could obtain
in a bargain made at arms’ length;
	 
	(c)	 	open or maintain any account with any bank or financial institution except accounts with
the Lender for the purposes of the Finance Documents;
	 
	(d)	 	issue, allot or grant any person a right to any shares in its capital or repurchase or
reduce its issued share capital;

24

 

	(e)	 	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; or
	 
	(f)	 	enter into any form of amalgamation, merger or de-merger or any form of reconstruction
or reorganisation.
	 
	12	 	INSURANCE
	 
	12.1	 	General. Each Borrower also undertakes with the Lender to comply with the following
provisions of this Clause 12 at all times during the Security Period except as the Lender
may otherwise permit.
	 
	12.2	 	Maintenance of obligatory insurances. Each Borrower shall keep the Ship owned by it
insured at the expense of such Borrower against:
	 
	(a)	 	fire and usual marine risks (including hull and machinery and excess risks);
	 
	(b)	 	war risks;
	 
	(c)	 	protection and indemnity risks;
	 
	(d)	 	freight demurrage and defence risks;
	 
	(e)	 	loss of hire risks; and
	 
	(f)	 	any other risks against which the Lender considers, having regard to practices and other
circumstances prevailing at the relevant time, it would in the opinion of the Lender be
reasonable for such Borrower to insure and which are specified by the Lender by notice to
such Borrower.
	 
	12.3	 	Terms of obligatory insurances. Each Borrower shall effect such insurances:
	 
	(a)	 	not later than 15 Business Days prior to the Drawdown Date;
	 
	(b)	 	in Dollars;
	 
	(c)	 	in the case of fire and usual marine risks and war risks, in an amount on an agreed value
basis at least the greater of (i) an amount, which when aggregated with the insured value of
any other Ship at the relevant time subject to a Mortgage, is equal to 120 per cent. of the
amount of the Loan and (ii) the Market Value of such Ship; and
	 
	(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 and freight demurrage and defence risks, in respect
of the relevant Ship’s full tonnage;
	 
	(f)	 	in relation to loss of hire, in such amounts and for such periods as shall be acceptable to
the Lender in its sole discretion;
	 
	(g)	 	on approved terms; and
	 
	(h)	 	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.

25

 

	12.4	 	Further protections for the Lender. In addition to the terms set out in
Clause 12.3, each Borrower shall procure that the obligatory insurances shall:
	 
	(a)	 	whenever the Lender requires, name (or be amended to name) the Lender as additional named
assured for its rights and interests, warranted no operational interest and with full waiver
of rights of subrogation against the Lender, but without the Lender thereby being liable to
pay (but having the right to pay) premiums, calls or other assessments in respect of such
insurance;
	 
	(b)	 	name the Lender as loss payee with such directions for payment as the Lender may specify;
	 
	(c)	 	provide that all payments by or on behalf of the insurers under the obligatory insurances
to the Lender shall be made without set-off, counterclaim or deductions or condition
whatsoever;
	 
	(d)	 	provide that the insurers shall waive, to the fullest extent permitted by English law,
their entitlement (if any) (whether by statute, common law, equity, or otherwise) to be
subrogated to the rights and remedies of the Lender in respect of any rights or interests
(secured or not) held by or available to the Lender in respect of the Secured Liabilities,
until the Secured Liabilities shall have been fully repaid and discharged, except that the
insurers shall not be restricted by the terms of this paragraph (d) from making personal
claims against persons (other than the relevant Owner or the Lender) in circumstances where
the insurers have fully discharged their liabilities and obligations under the relevant
obligatory insurances;
	 
	(e)	 	provide that such obligatory insurances shall be primary without right of contribution
from other insurances which may be carried by the Lender;
	 
	(f)	 	provide that the Lender may make proof of loss if the relevant Borrower fails to do so;
and
	 
	(g)	 	provide that if any obligatory insurance is cancelled, or if any substantial change is
made in the coverage which adversely affects the interest of the Lender, or if any
obligatory insurance is allowed to lapse for non-payment of premium, such cancellation,
charge or lapse shall not be effective with respect to the Lender for 30 days (or 7 days in
the case of war risks) after receipt by the Lender of prior written notice from the insurers
of such cancellation, change or lapse.
	 
	12.5	 	Renewal of obligatory insurances. Each Borrower shall:
	 
	(a)	 	at least 14 days before the expiry of any obligatory insurance:

	 	(i)	 	notify the Lender of the brokers (or other insurers) and any protection
and indemnity or war risks association through or with whom such Borrower proposes
to renew that obligatory insurance and of the proposed terms of renewal; and
	 
	 	(ii)	 	obtain the Lender’s approval to the matters referred to in paragraph (i) above;

	(b)	 	at least 14 days before the expiry of any obligatory insurance, renew that obligatory
insurance in accordance with the Lender’s approval pursuant to paragraph (a) above; and
	 
	(c)	 	procure that the approved brokers and/or the war risks and protection and indemnity
associations with which such a renewal is effected shall promptly after the renewal notify
the Lender in writing of the terms and conditions of the renewal.

	12.6	 	Copies of policies; letters of undertaking. Each Borrower shall ensure that all approved
brokers provide the Lender with pro forma copies of all policies relating to the

26

 

	 	 	obligatory insurances which they are to effect or renew and of a letter or letters or
undertaking in a form required by the Lender and including undertakings by the approved
brokers that:
	 
	(a)	 	they will have endorsed on each policy, immediately upon issue, a loss payable clause and a
notice of assignment complying with the provisions of Clause 12.4;
	 
	(b)	 	they will hold such policies, and the benefit of such insurances, to the order of the
Lender in accordance with the said loss payable clause;
	 
	(c)	 	they will advise the Lender immediately of any material change to the terms of the
obligatory insurances;
	 
	(d)	 	they will notify the Lender, not less than 14 days before the expiry of the obligatory
insurances, in the event of their not having received notice of renewal instructions from the
relevant Borrower or its agents and, in the event of their receiving instructions to renew,
they will promptly notify the Lender of the terms of the instructions; and
	 
	(e)	 	they will not set off against any sum recoverable in respect of a claim relating to the
relevant Ship under such obligatory insurances any premiums or other amounts due to them or
any other person whether in respect of the relevant Ship or otherwise, they waive any lien on
the policies (including, without limitation, any fleet lien), 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 the relevant Ship forthwith upon
being so requested by the Lender.
	 
	12.7	 	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
Lender with:
	 
	(a)	 	a certified copy of the certificate of entry for such Ship;
	 
	(b)	 	a letter or letters of undertaking in such form as may be required by the Lender;
	 
	(c)	 	where required to be issued under the terms of insurance/indemnity provided by the Borrower’s
protection and indemnity association, a certified copy of each United States of America voyage
quarterly declaration (or other similar document or documents) made by that Borrower in
accordance with the requirements of such protection and indemnity association; and
	 
	(d)	 	a certified copy of each certificate of financial responsibility for pollution by oil or
other Environmentally Sensitive Material issued by the relevant certifying authority in
relation to such Ship.
	 
	12.8	 	Deposit of original policies. Each Borrower shall ensure that all policies relating to
obligatory insurances are deposited with the approved brokers through which the insurances are
effected or renewed.
	 
	12.9	 	Payment of premiums. Each Borrower shall punctually pay all premiums or other sums payable in
respect of the obligatory insurances and produce all relevant receipts when so required by the
Lender.
	 
	12.10	 	Guarantees. 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.

27

 

	12.11	 	Restrictions on employment. Neither Borrower shall employ the Ship owned by it,
nor permit her to be employed, outside the cover provided by any obligatory insurances.
	 
	12.12	 	Compliance with terms of insurances. Each Borrower shall neither 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 all necessary action and comply with all requirements which may
from time to time be applicable to the obligatory insurances, and (without limiting the
obligation contained in Clause 12.7(c)) ensure that the obligatory insurances are not made
subject to any exclusions or qualifications to which the Lender has not given its prior
approval;
	 
	(b)	 	neither Borrower shall make any changes relating to the classification or classification
society or manager or operator of the Ship owned by it unless approved by the underwriters
of the obligatory insurances;
	 
	(c)	 	each Borrower shall make (and promptly supply copies to the Lender of) all quarterly or
other voyage declarations which may be required by the protection and indemnity risks
association in which the Ship owned by it is entered to maintain cover for trading (if
permitted by the Lender) 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 of the Borrowers shall employ its Ship, 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.
	 
	12.13	 	Alteration to terms of insurances. Neither Borrower shall make or agree to any
alteration to the terms of any obligatory insurance nor waive any right relating to any
obligatory insurance.
	 
	12.14	 	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 Lender to
collect or recover any moneys which at any time become payable in respect of the obligatory
insurances.
	 
	12.15	 	Provision of copies of communications. Each Borrower shall provide the Lender, at the
time of each such communication, copies of all written communications between the relevant
Borrower and:
	 
	(a)	 	the approved brokers; and
	 
	(b)	 	the approved protection and indemnity and/or war risks associations; and
	 
	(c)	 	the approved insurance companies and/or underwriters, which relate directly or indirectly
to:

	 	(i)	 	that 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) above relating wholly or partly to the
effecting or maintenance of the obligatory insurances.

28

 

	12.16	 	Provision of information. In addition, each Borrower shall promptly provide the
Lender (or any persons which it may designate) with any information which the Lender (or
any such designated person) requests for the purpose of:
	 
	(a)	 	obtaining or preparing any report from an independent marine insurance broker as to the
adequacy of the obligatory insurances effected or proposed to be effected; and/or
	 
	(b)	 	effecting, maintaining or renewing any such insurances as are referred to in Clause 12.17
below or dealing with or considering any matters relating to any such insurances,
	 
	 	 	and each Borrower shall, forthwith upon written demand, indemnify the Lender in respect
of all fees and other expenses incurred by or for the account of the Lender in
connection with any such report as is referred to in paragraph (a) above.
	 
	12.17	 	Mortgagee’s interest and additional peril insurances. The Lender shall be entitled
from time to time to effect, maintain and renew all or any of the following insurances, on
such terms, through such insurers and generally in such manner as the Lender may from time
to time consider appropriate:
	 
	(a)	 	a mortgagee’s interest marine insurance in an amount equal to 120 per cent. of the Loan
providing for the indemnification of the Lender for any losses under or in connection with
any Finance Document which directly or indirectly result from loss of or damage to a Ship or
a liability of that Ship or of the relevant Borrower, being a loss or damage which is prima
facie covered by an obligatory insurance but in respect of which there is a non-payment (or
reduced payment) by the underwriters by reason of, or on the basis of an allegation
concerning:

	 	(i)	 	any act or omission on the part of the relevant Borrower, of any operator,
charterer, manager or sub-manager of the Ship or of any officer, employee or agent
of that Borrower or of any such person, including any breach of warranty or
condition or any non-disclosure relating to such obligatory insurance;
	 
	 	(ii)	 	any act or omission, whether deliberate, negligent or accidental, or any
knowledge or privity of the relevant Borrower, any other person referred to in
paragraph (i) above, or of any officer, employee or agent of that Borrower or of
such a person, including the casting away or damaging of the Ship owned by it and/or
the Ship owned by it being unseaworthy; and/or
	 
	 	(iii)	 	any other matter capable of being insured against under a mortgagee’s
interest marine insurance policy whether or not similar to the foregoing;

	(b)	 	a mortgagee’s interest additional perils policy in an amount equal to 120 per cent. of the
Loan as may be required by the Lender providing for the indemnification of the Lender
against, among other things, any possible losses or other consequences of any
Environmental Claim, including the risk of expropriation, arrest or any form of detention of
a Ship, the imposition of any Security Interest over that Ship and/or any other matter
capable of being insured against under a mortgagee’s interest additional perils policy
whether or not similar to the foregoing,
	 
	 	 	and the Borrowers shall upon demand fully indemnify the Lender in respect of all
premiums and other expenses which are incurred in connection with or with a view to
effecting, maintaining or renewing any such insurance or dealing with, or considering,
any matter arising out of any such insurance.
	 
	12.18	 	Review of insurance requirements. The Lender shall be entitled to review the requirements
of this Clause 12 from time to time in order to take account of any changes in circumstances
after the date of this Agreement which are, in the opinion of the Lender, significant and
capable of affecting the Borrowers or the Ships and their insurance

29

 

	 	 	(including, without limitation, changes in the availability or the cost of insurance
coverage or the risks to which the Borrowers may be subject), and may appoint insurance
consultants in relation to this review at the cost of the Borrowers.
	 
	12.19	 	Modification of insurance requirements. The Lender shall notify the Borrowers of any
proposed modification under Clause 12.18 to the requirements of this Clause 12 which the
Lender considers appropriate in the circumstances, and such modification shall take effect on
and from the date it is notified in writing to the Borrowers as an amendment to this Clause
12 and shall bind the Borrowers accordingly.
	 
	12.20	 	Compliance with mortgagee’s instructions. The Lender shall be entitled (without
prejudice to or limitation of any other rights which it may have or acquire under any Finance
Document) to require either Ship to remain at any safe port or to proceed to and remain at
any safe port designated by the Lender until the Borrower which is the owner of 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 12.19.
	 
	13	 	SHIP COVENANTS
	 
	13.1	 	General. Each Borrower also undertakes with the Lender to comply with the following
provisions of this Clause 13 at all times during the Security Period except as the Lender may
otherwise permit.
	 
	13.2	 	Ship’s name and registration. Each Borrower shall keep the Ship owned by it registered in
its ownership as a Maltese ship at the port of Valletta; shall not do or allow to be done
anything as a result of which such registration might be cancelled or imperilled; and shall
not change the name or port of registry of a Ship.
	 
	13.3	 	Repair and classification. Each Borrower shall keep the Ship owned by it in a good and safe
condition and state of repair:
	 
	(a)	 	shall advise the Lender in writing by not later than 15 Business Days prior to the Drawdown
Date of the classification society in respect of each Ship;
	 
	(b)	 	consistent with first-class ship ownership and management practice;
	 
	(c)	 	so as to maintain the highest classification available for vessels of the same age, type and
specification as such Ship with an approved classification society which is a member of IACS
(or such other first class classification society as may be approved by the Lender), free of
overdue recommendations (save for the Recommendation which the Borrowers undertake to ensure
that is lifted and satisfied by 30 June 2009 and to provide the Lender with evidence that the
Recommendation has been lifted and satisfied) and requirements affecting such Ship’s class;
and
	 
	(d)	 	so as to comply with all laws and regulations applicable to vessels registered at ports in
Malta or to vessels trading to any jurisdiction to which such Ship may trade from time to
time, including but not limited to the ISM Code, the ISM Code Documentation and the ISPS Code
Documentation.
	 
	13.4	 	Modification. Neither Borrower shall make any modification or repairs to, or replacement
of, the Ship owned by it or equipment installed on such Ship which would or might materially
alter the structure, type or performance characteristics of such Ship or materially reduce its
value.
	 
	13.5	 	Removal of parts. Neither Borrower shall remove any material part of the Ship owned by it,
or any item of equipment installed on such 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

30

 

	 	 	favour of any person other than the Lender and becomes on installation on such Ship the
property of the relevant Borrower and subject to the security constituted by the Mortgage
and if applicable, the Deed of Covenant relative to that Ship Provided that a Borrower
may install equipment owned by a third party if the equipment can be removed without any
risk of damage to its Ship.
	 
	13.6	 	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
Lender, provide the Lenders at the expense of the Borrower, with copies of all survey
reports.
	 
	13.7	 	Inspection. Each Borrower shall permit the Lender (by surveyors or other persons
appointed by it for that purpose) to board the Ship owned by it at the expense of the
Borrowers and 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 (and the Borrowers acknowledge and agree that it is a condition that the first
such inspection will be carried out either prior to, or no later than 3 months after, the
Drawdown Date).
	 
	13.8	 	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, her Earnings or her Insurances;
	 
	(b)	 	all taxes, dues and other amounts charged in respect of the Ship owned by it, her
Earnings or her 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, the relevant Borrower
shall procure its release by providing bail or otherwise as the circumstances may
require.
	 
	13.9	 	Compliance with laws etc. Each of the Borrowers shall:
	 
	(a)	 	comply, or procure compliance with the ISM Code, the ISPS Code, all Environmental Laws
(including, but not limited to, IAAPC) and all other laws or regulations relating to the
Ship owned by it, its ownership, operation and management or to the business of the relevant
Borrowers;
	 
	(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 it to enter or trade to any zone which is declared a war zone by any
government or by such Ship’s war risks insurers unless the prior written consent of the
Lender has been given and the relevant Borrower has (at its expense) effected any special,
additional or modified insurance cover which the Lender may require.
	 
	13.10	 	Provision of information. Each Borrower shall promptly provide the Lender with any
information which it requests regarding:
	 
	(a)	 	the Ship owned by it, its employment, position and engagements;
	 
	(b)	 	the Earnings and payments and amounts due to such Ship’s master and crew;

31

 

	(c)	 	any expenses incurred, or likely to be incurred, in connection with the operation,
maintenance or repair of such Ship and any payments made in respect of such Ship;
	 
	(d)	 	any towages and salvages; and
	 
	(e)	 	the relevant Borrower’s, the Approved Manager’s or such Ship’s compliance with the ISM
Code and the ISPS Code,
	 
	 	 	and, upon the Lender’s request, provide copies of any current charter and any charter
guarantee in relation thereto relating to such Ship, of any current charter guarantee
and of the ISM Code Documentation and ISPS Code Documentation.
	 
	13.11	 	Notification of certain events. Each Borrower shall immediately notify the Lender
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 such Ship or its Earnings or any requisition of such Ship for hire;
	 
	(e)	 	any intended dry docking of the Ship owned by it;
	 
	(f)	 	any Environmental Claim made against the relevant 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 relevant
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 each Borrower shall keep the Lender advised in writing on a regular basis and in
such detail as the Lender shall require of each Borrower’s, the Approved Manager’s or
any other person’s response to any of those events or matters.
	 
	13.12	 	Restrictions on chartering, appointment of managers etc. Neither Borrower shall;
	 
	(a)	 	let the Ship owned by it on demise charter for any period;
	 
	(b)	 	(save under any Approved Charter) enter into any time or consecutive voyage charter in
respect of the Ship owned by it for a term which exceeds, or which by virtue of any optional
extensions may exceed, 12 months;
	 
	(c)	 	enter into any charter in relation to the Ship owned by it under which more than 2
months’ hire (or the equivalent) is payable in advance;
	 
	(d)	 	charter the Ship owned by it otherwise than on bona fide arm’s length terms at the time
when such Ship is fixed;
	 
	(e)	 	appoint a manager of the Ship owned by it other than the Approved Manager or
agree to any alteration to the terms of the Approved Manager’s appointment;

32

 

	(f)	 	de-activate or lay up the Ship owned by it; or
	 
	(g)	 	put the Ship owned by it into the possession of any person for the purpose of work
being done upon her in an amount exceeding or likely to exceed $500,000 (or the equivalent
in any other currency) unless that person has first given to the Lender and in terms
satisfactory to it a written undertaking not to exercise any lien on such Ship or her
Earnings for the cost of such work or for any other reason.
	 
	13.13	 	Notice of Mortgage. Each Borrower shall keep the Mortgage registered against the Ship
owned by it as a valid first priority mortgage, carry on board such Ship a certified copy
of the Mortgage and place and maintain in a conspicuous place in the navigation room and
the Master’s cabin of such Ship a framed printed notice stating that such Ship is mortgaged
by the relevant Borrower to the Lender.
	 
	13.14	 	Sharing of Earnings. Neither Borrower shall enter into any agreement or arrangement
for the sharing of any Earnings.
	 
	13.15	 	Charter Assignment. If any Borrower enters into any charter in respect of its Ship
which is of 12 months or more in duration, or is capable of exceeding 12 months in duration
or into any bareboat charter that Borrower shall execute in favour of the Lender a
Charterparty Assignment in respect of that charter, and shall deliver to the Lender such
other documents equivalent to those referred to at paragraphs 3, 4 and 5 of Schedule 5,
Part A as the Lender may require.
	 
	14	 	SECURITY COVER
	 
	14.1	 	Minimum required security cover. Clause 14.2 applies if the Lender notifies the
Borrowers that:
	 
	(a)	 	the aggregate Market Value of the Ships; plus
	 
	(b)	 	the net realisable value of any additional security previously provided under this Clause
14,
	 
	 	 	is below the Relevant Percentage of the Loan:
	 
	 	 	In this Clause 14.1, “Relevant Percentage” means:

	 	(i)	 	for the period commencing on the date of this Agreement and ending on
the first anniversary thereof (the “First Anniversary”), 140 per cent.;
	 
	 	(ii)	 	for the period commencing on the day after the First Anniversary and
ending on the second anniversary of the date of this Agreement (the “Second
Anniversary”), 145 per cent.;
	 
	 	(iii)	 	for the period commencing on the day after the Second Anniversary and
ending on the third anniversary of the date of this Agreement, 150 per cent.; and
	 
	 	(iv)	 	at all times thereafter, 155 per cent.

	14.2	 	Provision of additional security; prepayment. If the Lender serves a notice on the
Borrowers under Clause 14.1, the Borrowers shall, within 1 month after the date on which
the Lender’s notice is served, either:
	 
	(a)	 	provide, or ensure that a third party provides, additional security which, in the opinion
of the Lender, has a net realisable value at least equal to the shortfall and is documented
in such terms as the Lender may approve or require; or

33

 

	(b)	 	prepay such part (at least) of the Loan as will eliminate the shortfall.
	 
	14.3	 	Valuation of Ships. The Market Value of a Ship at any date is that shown by the average
of two valuations prepared:
	 
	(a)	 	as at a date not more than 14 days previously;
	 
	(b)	 	by an independent sale and purchase shipbroker which the Lender has appointed for the
purpose;
	 
	(c)	 	with or without physical inspection of the relevant Ship (as the Lender may require);
	 
	(d)	 	on the basis of a sale for prompt delivery for cash on normal arm’s length commercial
terms as between a willing seller and a willing buyer;
	 
	(e)	 	free of any existing charter or other contract of employment; and
	 
	(f)	 	after deducting the estimated amount of the usual and reasonable expenses which would be
incurred in connection with the sale.
	 
	14.4	 	Value of additional vessel security. The net realisable value of any additional security
which is provided under Clause 14.2 and which consists of a Security Interest over a vessel
shall be that shown either by way of a valuation complying with the requirements of Clause
14.3.
	 
	14.5	 	Valuations binding. Any valuation under Clause 14.2, 14.3 or 14.4 shall be binding and
conclusive as regards the Borrowers, as shall be any valuation which the Lender makes of any
additional security which does not consist of or include a Security Interest.
	 
	14.6	 	Provision of information. Each Borrower shall promptly provide the Lender and any
Approved Broker or expert acting under Clause 14.4 with any information which the Lender or
the Approved Broker or expert may request for the purposes of the valuation; and, if a
Borrower fails 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 Lender
(or the expert appointed by it) considers prudent.
	 
	14.7	 	Payment of valuation expenses. Without prejudice to the generality of the Borrowers’
obligations under Clauses 19.2, 19.3 and 20.3, each Borrower shall, on demand, pay the
Lender the amount of the fees and expenses of any shipbroker or expert instructed by the
Lender under this Clause and all legal and other expenses incurred by the Lender in
connection with any matter arising out of this Clause.
	 
	14.8	 	Application of prepayment. Clause 7 shall apply in relation to any prepayment pursuant to
Clause 14.2(b).
	 
	14.9	 	Frequency of Valuations. The Borrowers acknowledge and agree that the Lender may
commission valuations of the Ships at such time as it shall deem necessary and, in any
event, not less often than once during each six-month period of the Security Period.
	 
	15	 	PAYMENTS AND CALCULATIONS
	 
	15.1	 	Currency and method of payments.   All payments to be made by the Borrowers to the
Lender under a Finance Document shall be made to the Lender:
	 
	(a)	 	by not later than 11.00 a.m. (London time) on the due date;
	 
	(b)	 	in same day Dollar funds settled through the New York Clearing House Interbank
Payments System (or in such other Dollar funds and/or settled in such other manner as

34

 

	 	 	the Lender shall specify as being customary at the time for the settlement of
international transactions of the type contemplated by this Agreement); and
	 
	(c)	 	to the account of the Lender at HSBC Bank, New York for credit to the account of the
Lender (Account No. 000140139 ref: Oceanfreight FP 3036053), or to such other account with
such other bank as the Lender may from time to time notify to the Borrowers.
	 
	15.2	 	Payment on non-Business Day. If any payment by the Borrowers under a Finance Document
would otherwise fall due on a day which is not a Business Day:
	 
	(a)	 	the due date shall be extended to the next succeeding Business Day; or
	 
	(b)	 	if the next succeeding Business Day falls in the next calendar month, the due date shall
be brought forward to the immediately preceding Business Day,
	 
	 	 	and interest shall be payable during any extension under paragraph (a) at the rate
payable on the original due date.
	 
	15.3	 	Basis for calculation of periodic payments. All interest and any other payments under any
Finance Document which are of an annual or periodic nature shall accrue from day to day and
shall be calculated on the basis of the actual number of days elapsed and a 360 day year.
	 
	15.4	 	Lender accounts. The Lender shall maintain an account showing the amounts advanced by the
Lender and all other sums owing to the 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.
	 
	15.5	 	Accounts prima facie evidence. If the account maintained under Clause 15.4 shows an
amount to be owing by the Borrowers or a Security Party to the Lender, that account shall be
prima facie evidence, save in the case of manifest error, that amount is owing to the
Lender.
	 
	16	 	APPLICATION OF RECEIPTS
	 
	16.1	 	Normal order of application. Except as any Finance Document may otherwise provide, any
sums which are received or recovered by the Lender under or by virtue of any Finance
Document shall be applied:
	 
	(a)	 	FIRST: in or towards satisfaction of any amounts then due and payable under the Finance
Documents in the following proportions:

	 	(i)	 	first, in or towards satisfaction pro rata of all amounts then due and
payable to the Lender under the Finance Documents other than those amounts referred
to at (ii) and (iii) below (including, but without limitation, all amounts payable
by the Borrowers under Clauses 19, 20 and 21 of this Agreement or by the Borrowers
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 Lender under the Finance Document but
shall have failed to pay or deliver to the Lender at the time of application or
distribution under this Clause 16); and
	 
	 	(iii)	 	thirdly, in or towards satisfaction of the Loan;

	(b)	 	SECONDLY: in retention of an amount equal to any amount not then due and payable under any
Finance Document but which the Lender, by notice to the Borrowers and the

35

 

	 	 	Security Parties, states in its opinion will or may become due and payable in the future
and, upon those amounts becoming due and payable, in or towards satisfaction of them in
accordance with the foregoing provisions of this Clause 16.1; and
	 
	(c)	 	THIRDLY: any surplus shall be paid to the Borrowers or to any other person appearing
to be entitled to it.
	 
	16.2	 	Variation of order of application. The Lender may, by notice to the Borrowers and the
Security Parties, provide for a different manner of application from that set out in Clause
16.1 either as regards a specified sum or sums or as regards sums in a specified category or
categories.
	 
	16.3	 	Notice of variation of order of application. The Lender may give notices under Clause
16.2 from time to time; and such a notice may be stated to apply not only to sums which may
be received or recovered in the future, but also to any sum which has been received or
recovered on or after the third Business Day before the date on which the notice is served.
	 
	16.4	 	Appropriation rights overridden. This Clause 16 and any notice which the Lender gives
under Clause 16.2 shall override any right of appropriation possessed, and any appropriation
made, by the Borrowers or any other Security Party.
	 
	17	 	APPLICATION OF EARNINGS
	 
	17.1	 	Payment of Earnings. Each Borrower undertakes with the Lender to ensure that, throughout
the Security Period (and subject only to the provisions of the General Assignments), all the
Earnings in relation to each Ship are paid to the Account in respect of that Ship.
	 
	17.2	 	Monthly retentions. The Borrowers undertake with the Lender to ensure that, throughout
the Security Period commencing on the date falling one month after the Drawdown Date and on
the same day in each subsequent month, there is transferred to the Retention Account out of
the Earnings received in the Earnings Accounts during the preceding calendar month:
	 
	(a)	 	one-third of the amount of the repayment instalment falling due under Clause 7.1 (a) on the
next Repayment Date; and
	 
	(b)	 	the relevant fraction of the aggregate amount of interest on the Loan which is payable on the
next due date for payment of interest under this Agreement.
	 
	 	 	The “relevant fraction” is a fraction of which the numerator is 1 and the denominator the
number of months comprised in the then current Interest Period (or, if the period is
shorter, the number of months from the later of the commencement of the current Interest
Period or the last due date for payment of interest to the next due date for payment of
interest under this Agreement).
	 
	17.3	 	Shortfall in Earnings. If, the aggregate Earnings received in the Earnings Accounts are
insufficient in any month for the required amount to be transferred to the Retention Account
under Clause 17.2, the Borrowers shall make up the amount of the insufficiency on demand from
the Lender.
	 
	17.4	 	Application of retentions. The Lender shall on each Repayment Date and on each due
date for the payment of interest under this Agreement apply in accordance with Clause 15.1 so much of the balance on the Retention Account as equals:
	 
	(a)	 	the repayment instalment due on that Repayment Date; or

36

 

	(b)	 	the amount of interest payable on that interest payment
date,
	 
	 	 	in discharge of the Borrowers’ liability for that repayment instalment or that interest.
	 
	17.5	 	Location of accounts. Each Borrower shall promptly:
	 
	(a)	 	comply with any requirement of the Lender as to the location or re-location of the relevant
Earnings Account or the Retention Account (or any of them); and
	 
	(b)	 	execute any documents which the Lender specifies to create or maintain in favour of the
Lender a Security Interest over the Earnings Accounts or the Retention Account (or any of
them).
	 
	17.6	 	Debits for expenses etc. The Lender shall be entitled (but not obliged) from time to time
to debit the Accounts (or any of them) with prior notice in order to discharge any amount due
and payable (which remains unpaid) to it under Clauses 19 or 20 or payment of which it has
become entitled to demand under Clauses 19 or 20.
	 
	17.7	 	Borrowers’ obligations unaffected. The provisions of this Clause 17 (as distinct from a
distribution effected under Clause 17.2) 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	 	EVENTS OF DEFAULT
	 
	18.1	 	Events of Default. An Event of Default occurs if:
	 
	(a)	 	either Borrower or the Corporate Guarantor 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 Clauses 8.2, 10.2, 10.3, 10.17, 11.2, 11.3, 14.2 or 17.1 or clauses
11.15 and 11.17 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 paragraph (a) or (a) above) if, in the opinion of the
Lender, such default is capable of remedy and such default continues unremedied 14 days after
written notice from the Lender requesting action to remedy the same; or
	 
	(d)	 	(subject to any applicable grace period specified in any Finance Document) any breach by
either Borrower or any Security Party occurs of any provision of a Finance Document (other
than a breach covered by paragraph (a), (b) or (c) above); or
	 
	(e)	 	any representation, warranty or statement made by, or by an officer of, either Borrower or a
Security Party in a Finance Document or in the Drawdown Notice or any other notice or document
relating to a Finance Document is untrue or misleading when it is made; or
	 
	(f)	 	any of the following occurs in relation to any Financial Indebtedness of a Relevant Person
(exceeding in the case of the Corporate Guarantor, $1,000,000 (or the equivalent in any other
currency)) in aggregate:

	 	(i)	 	any Financial Indebtedness of a Relevant Person is not paid when due or,
if so payable, on demand; or

37

 

	 	(ii)	 	any Financial Indebtedness of a Relevant Person becomes due and payable or
capable of being declared due and payable prior to its stated maturity date as a
consequence of any event of default; or
	 
	 	(iii)	 	a lease, hire purchase agreement or charter creating any Financial
Indebtedness of a Relevant Person is terminated by the lessor or owner or becomes capable of being
terminated as a consequence of any termination event; or
	 
	 	(iv)	 	any overdraft, loan, note issuance, acceptance credit, letter of credit,
guarantee, foreign exchange or other facility, or any swap or other derivative
contract or transaction, relating to any Financial Indebtedness of a Relevant Person
ceases to be available or becomes capable of being terminated as a result of any
event of default, or cash cover is required, or becomes capable of being required, in
respect of such a facility as a result of any event of default; or
	 
	 	(v)	 	any Security Interest securing any Financial Indebtedness of a Relevant
Person becomes enforceable; or

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

	 	(i)	 	a Relevant Person becomes, in the opinion of the Lender, unable to pay its
debts as they fall due; or
	 
	 	(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, $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)	 	a Relevant Person makes any formal declaration of bankruptcy or any formal
statement to the effect that it is insolvent or likely to become insolvent, or a
winding up or administration order is made in relation to a Security Party, or the
members or directors of either Borrower or the Corporate Guarantor pass a resolution
to the effect that it should be wound up, placed in administration or cease to carry
on business, save that this paragraph does not apply to a fully solvent winding up of
a Relevant Person other than the Borrower or the Corporate Guarantor which is, or is
to be, effected for the purposes of an amalgamation or reconstruction previously
approved by the Lender and effected not later than 3 months after the commencement of
the winding up; or
	 
	 	(v)	 	a petition is presented in any Pertinent Jurisdiction for the winding up or
administration, or the appointment of a provisional liquidator, of a Relevant Person
unless the petition is being contested in good faith and on substantial grounds and
is dismissed or withdrawn within 30 days of the presentation of the petition; or
	 
	 	(vi)	 	a Relevant Person petitions a court, or presents any proposal for, any form
of judicial or non-judicial suspension or deferral of payments, reorganisation of its
debt (or certain of its debt) or arrangement with all or a substantial proportion (by
number or value) of its creditors or of any class of them or any such suspension or
deferral of payments, reorganisation or arrangement is effected by court order,
contract or otherwise; or
	 
	 	(vii)	 	any meeting of the members or directors of a Relevant Person is summoned for the
purpose of considering a resolution or proposal to authorise or take any action of a
type described in paragraphs (iii), (iv), (v) or (vi) above; or

38

 

	 	(viii)	 	in a Pertinent Jurisdiction other than England, any event occurs or any
procedure is commenced which, in the opinion of the Lender, 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 Lender, is material in the context of this Agreement; or
	 
	(i)	 	it becomes unlawful in any Pertinent Jurisdiction or impossible:

	 	(i)	 	for either Borrower or any Security Party to discharge any liability under a
Finance Document or to comply with any other obligation which the Lender considers
material under a Finance Document; or
	 
	 	(ii)	 	for the Lender to exercise or enforce any right under, or to enforce any
Security Interest created by, a Finance Document; or

	(j)	 	any 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
Lender considers material of a Finance Document or any Underlying 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 Lender that, without its prior written consent, a Change of Control has
occurred after the date of this Agreement; or
	 
	(l)	 	it appears to the Lender that, without its prior written consent, a change has occurred
after the date of this Agreement in the legal ownership of any of the shares in, either
Borrower or in the ultimate control of the voting rights attaching to any of those shares; or
	 
	(m)	 	without the prior written consent of the Lender, Mr Anthony Kandylidis or a company
controlled by him or by a member of his family fails to maintain at least 2,080,000 shares in
the Corporate Guarantor or he ceases to remain a member of the board of directors of the
Corporate Guarantor; or
	 
	(n)	 	any provision which the Lender considers material of a Finance Document proves to have been
or becomes invalid or unenforceable, or a Security Interest created by a Finance Document
proves to have been or becomes invalid or unenforceable or such a Security Interest proves to
have ranked after, or loses its priority to, another Security Interest or any other third
party claim or interest; or
	 
	(o)	 	the security constituted by a Finance Document is in any way imperilled or in jeopardy; or
	 
	(p)	 	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
either Borrower or the Corporate Guarantor; or
	 
	 	(ii)	 	any accident or other event involving either of the Ships or another
vessel, owned, chartered or operated by a Relevant Person,

	 	 	in the light of which the Lender considers that there is a significant risk that either
Borrower or any Security Party is, or will later become, unable to discharge its liabilities
under the Finance Documents as they fall due.
	 
	18.2	 	Actions following an Event of Default. On, or at any time after, the occurrence of an Event
of Default the Lender may:

39

 

	(a)	 	serve on the Borrowers a notice stating that all obligations of the Lender to the
Borrowers under this Agreement are terminated; and/or
	 
	(b)	 	serve on the Borrowers a notice stating that the Loan, all accrued interest and all
other amounts accrued or owing under this Agreement are immediately due and payable or are
due and payable on demand; and/or
	 
	(c)	 	take any other action which, as a result of the Event of Default or any notice served
under paragraph (a) or (b) above, the Lender is entitled to take under any Finance Document
or any applicable law.
	 
	18.3	 	Termination of Commitment. On the service of a notice under Clause 18.2(a) the
Commitment, and, all other obligations of the Lender to the Borrowers under this Agreement
shall terminate.
	 
	18.4	 	Acceleration of Loan. On the service of a notice under Clause 18.2(b), the Loan, all
accrued interest and all other amounts accrued or owing from the Borrowers (or either of
them) or any Security Party under this Agreement and every other Finance Document shall
become immediately due and payable or, as the case may be, payable on
demand.
	 
	18.5	 	Multiple notices; action without notice. The Lender may serve notices under Clauses
18.2(a) and (b) simultaneously or on different dates and it may take any action referred to
in Clause 18.2 if no such notice is served or simultaneously with or at any time after the
service of both or either of such notices.
	 
	18.6	 	Exclusion of Lender liability. Neither the Lender nor any receiver or manager
appointed by the Lender, shall have any liability to the Borrowers (or either of them) or
any other Security Party:
	 
	(a)	 	for any loss caused by an exercise of rights under, or enforcement of a Security Interest
created by, a Finance Document or by any failure or delay to exercise such a right or to
enforce such a Security Interest; or
	 
	(b)	 	as mortgagee in possession or otherwise, for any income or principal amount which might
have been produced by or realised from any asset comprised in such a Security Interest or
for any reduction (however caused) in the value of such an asset,
	 
	 	 	except that this does not exempt the Lender or a receiver or manager from liability for
losses shown to have been caused directly and mainly by the dishonesty, the gross
negligence or the wilful misconduct of the Lender’s own officers and employees or (as
the case may be) such receiver’s or manager’s own partners or employees.
	 
	18.7	 	Relevant Persons. In this Clause 18 a “Relevant Person” means each Borrower, a Security
Party (other than an Approved Manager who is not a member of the Group) 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.
	 
	18.8	 	Interpretation. In Clause 18.1(f) references to an event of default or a termination
event include any event, howsoever described, which is similar to an event of default in a
facility agreement or a termination event in a finance lease; and in Clause 18.1(g)
“petition” includes an application.
	 
	19	 	FEES AND EXPENSES
	 
	19.1	 	Upfront and commitment fees. The Borrowers
shall pay to the Lender:
	 
	(a)	 	on the date of this Agreement an upfront fee of $457,500 (representing 1.50 per
cent, of the Commitment); and

40

 

	(b)	 	a commitment fee at the rate of 0.65 per cent, per annum on the undrawn balance of
the Loan during the period from (and including) the date of this Agreement up to and
including (i) the Drawdown Date and (ii) the last day of the Availability Period, such
commitment fee to be payable every 3 months in arrears and on the earlier of the dates
referred in (i) and (ii) above.
	 
	19.2	 	Costs of negotiation, preparation etc. The Borrowers shall pay to the Lender on its
demand the amount of all reasonable expenses incurred by the Lender in connection with the
negotiation, preparation, execution or registration of any Finance Document or any related
document or with any transaction contemplated by a Finance Document or a related document.
	 
	19.3	 	Costs of variation, amendments, enforcement etc. The Borrowers shall pay to the Lender,
within 5 Business Days of the Lender’s demand, the amount of all reasonable expenses
incurred by the Lender in connection with:
	 
	(a)	 	any amendment or supplement to a Finance Document, or any proposal for such an amendment
to be made;
	 
	(b)	 	any consent or waiver by the Lender 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 14 or any other matter
relating to such security; or
	 
	(d)	 	any step taken by the Lender with a view to the protection, exercise or enforcement of
any right or Security Interest created by a Finance Document or for any similar purpose.
	 
	 	 	There shall be recoverable under paragraph (d) the full amount of all legal expenses,
whether or not such as would be allowed under rules of court or any taxation or other
procedure carried out under such rules.
	 
	19.4	 	Documentary taxes. The Borrowers shall promptly pay any tax payable on or by reference
to any Finance Document, and shall, on the Lender’s demand, fully indemnify the Lender
against any claims, expenses, liabilities and losses resulting from any failure or delay by
the Borrowers (or either of them) to pay such a tax.
	 
	19.5	 	Certification of amounts. A notice which is signed by 2 officers of the Lender, which
states that a specified amount, or aggregate amount, is due to the Lender under this Clause
19 and which indicates (without necessarily specifying a detailed breakdown) the matters in
respect of which the amount, or aggregate amount, is due shall be prima facie evidence, save
in the case of manifest error, that the amount, or aggregate amount, is due.
	 
	20	 	INDEMNITIES
	 
	20.1	 	Indemnities regarding borrowing and repayment of Loan. The Borrowers shall fully indemnify
the Lender on its demand in respect of all claims, expenses, liabilities and losses which
are made or brought against or incurred by the Lender, or which the Lender 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;
	 
	(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;

41

 

	(c)	 	any failure (for whatever reason) by the Borrowers (or either of them) 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 6); and
	 
	(d)	 	the occurrence and/or continuance of an Event of Default or a Potential Event of
Default and/or the acceleration of repayment of the Loan under Clause 18,
	 
	 	 	and in respect of any tax (other than tax on its overall net income) for which the
Lender is liable in connection with any amount paid or payable to the Lender (whether
for its own account or otherwise) under any Finance Document.
	 
	20.2	 	Breakage costs. Without limiting its generality, Clause 20.1 covers any claim, expense,
liability or loss, including a loss of a prospective profit, incurred by the Lender:
	 
	(a)	 	in liquidating or employing deposits from third parties acquired or arranged to fund or
maintain all or any part of the Loan and/or any overdue amount (or an aggregate amount
which includes the Loan or any overdue amount); and
	 
	(b)	 	in terminating, or otherwise in connection with, any interest and/or currency swap or
any other transaction entered into (whether with another legal entity or with another
office or department of the Lender) to hedge any exposure arising under this Agreement or a
number of transactions of which this Agreement is one.
	 
	20.3	 	Miscellaneous indemnities. The Borrowers shall fully indemnify the Lender on its demand
in respect of all claims, expenses, liabilities and losses which may be made or brought
against or incurred by the Lender, in any country, as a result of or in connection with:
	 
	(a)	 	any action taken, or omitted or neglected to be taken, under or in connection with any
Finance Document by the Lender or by any receiver appointed under a Finance Document; 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 Lender.
	 
	 	 	Without prejudice to its generality, this Clause 20.3 covers any claims, expenses,
liabilities and losses which arise, or are asserted, under or in connection with any law
relating to safety at sea, the ISM Code, the ISPS Code or any Environmental Law.
	 
	20.4	 	Currency indemnity. If any sum due from the Borrowers or any Security Party to the
Lender under a Finance Document or under any order or judgment relating to a Finance
Document has to be converted from the currency in which the Finance Document provided for
the sum to be paid (the “Contractual Currency”) into another currency (the “Payment
Currency”) for the purpose of:
	 
	(a)	 	making or lodging any claim or proof against the Borrowers (or either of them) 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,

42

 

	 	 	the Borrowers shall indemnify the Lender against the loss arising when the amount of the
payment actually received by the Lender is converted at the available rate of exchange
into the Contractual Currency.
	 
	 	 	In this Clause 20.4, the “available rate of exchange” means the rate at which the Lender
is able at the opening of business (London time) on the Business Day after it receives
the sum concerned to purchase the Contractual Currency with the Payment Currency.
	 
	 	 	This Clause 20.4 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.
	 
	20.5	 	Certification of amounts. A notice which is signed by 2 officers of the Lender, which
states that a specified amount, or aggregate amount, is due to the Lender under this Clause
20 and which indicates (without necessarily specifying a detailed breakdown) the matters in
respect of which the amount, or aggregate amount, is due shall be prima facie evidence,
save in the case of manifest error, that the amount, or aggregate amount, is due.
	 
	21	 	NO SET-OFF OR TAX DEDUCTION
	 
	21.1	 	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 the Borrowers are
required by law to make.
	 
	21.2	 	Grossing-up for taxes. If the Borrowers are required by law to make a tax deduction
from any payment:
	 
	(a)	 	the Borrowers shall notify the Lender as soon as it becomes aware of the requirement;
	 
	(b)	 	the Borrowers shall pay the tax deducted to the appropriate taxation authority promptly,
and in any event before any fine or penalty arises;
	 
	(c)	 	the amount due in respect of the payment shall be increased by the amount necessary to
ensure that the Lender receives and retains (free from any liability relating to the tax
deduction) a net amount which, after the tax deduction, is equal to the full amount which it
would otherwise have received.
	 
	21.3	 	Evidence of payment of taxes. Within one month after making any tax deduction, the
Borrowers shall deliver to the Lender documentary evidence satisfactory to the Lender that
the tax had been paid to the appropriate taxation authority.
	 
	21.4	 	Exclusion of tax on overall net income. In this Clause 21 “tax deduction” means any
deduction or withholding for or on account of any present or future tax except tax on the
Lender’s overall net income.
	 
	22	 	ILLEGALITY, ETC
	 
	22.1	 	Illegality. This Clause 22 applies if the Lender notifies the Borrowers 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

43

 

	(b)	 	contrary to, or inconsistent with, any regulation,
	 
	 	 	for the Lender to maintain or give effect to any of its obligations under this Agreement
in the manner contemplated by this Agreement.
	 
	22.2	 	Notification and effect of illegality. On the Lender notifying the Borrowers under
Clause 22.1, the Commitment shall terminate; and thereupon or, if later, on the date
specified in the Lender’s notice under Clause 22.1 as the date on which the notified event
would become effective the Borrowers shall prepay the Loan in full in accordance with Clause
7.
	 
	22.3	 	Mitigation. If circumstances arise which would result in a notification under Clause 22.1
then, without in any way limiting the rights of the Lender under Clause 22.2 the Lender
shall use reasonable endeavours to transfer its obligations, liabilities and rights under
this Agreement and the Finance Documents to another office or financial institution not
affected by the circumstances but the Lender shall not be under any obligation to take any
such action if, in its opinion, to do would or might:
	 
	(a)	 	have an adverse effect on its business, operations or financial condition; or
	 
	(b)	 	involve it in any activity which is unlawful or prohibited or any activity that is contrary
to, or inconsistent with, any regulation; or
	 
	(c)	 	involve it in any expense (unless indemnified to its
satisfaction) or tax disadvantage.
	 
	23	 	INCREASED COSTS
	 
	23.1	 	Increased costs. This Clause 23 applies if the Lender notifies the Borrowers that it
considers that as a result of:
	 
	(a)	 	the effect of complying with any law or regulation (including any which relates to capital
adequacy or liquidity controls or which affects the manner in which the Lender allocates
capital resources to its obligations under this Agreement) which is introduced, or altered,
or the interpretation or application of which is altered, after the date of this Agreement;
or
	 
	(b)	 	the implementation or application of or compliance with the “International Convergence of
Capital Measurement and Capital Standards, a Revised Framework” published by the Basel
Committee on Banking Supervision in June 2004 in the form existing on the date of this
Agreement (the “Basel II Accord”) or any other law or regulation implementing the Basel II
Accord or any of the approaches provided for and allowed to be used by banks under or in
connection with the Basel II Accord in each case as from time to time implemented by the
Lender,
	 
	 	 	the Lender (or a parent company of it) has incurred or will incur an “increased cost”.
	 
	23.2	 	Meaning of “increased costs”. In this Clause 23, “increased costs” means:
	 
	(a)	 	an additional or increased cost incurred as a result of, or in connection with, the Lender
having entered into, or being a party to, this Agreement or having taken an assignment of
rights under this Agreement, of funding or maintaining the Commitment or performing its
obligations under this Agreement, or of having outstanding all or any part of the Loan or
other unpaid sums; or
	 
	(b)	 	a reduction in the amount of any payment to the Lender under this Agreement or in the
effective return which such a payment represents to the Lender or on its capital;

44

 

	(c)	 	an additional or increased cost of funding all or maintaining all or any of the
advances comprised in a class of advances formed by or including the Loan or (as the
case may require) the proportion of that cost attributable to the Loan; or
	 
	(d)	 	a liability to make a payment, or a return foregone, which is calculated by reference
to any amounts received or receivable by the Lender under this Agreement;
	 
	 	 	but not an item attributable to a change in the rate of tax on the overall net income of
the Lender (or a parent company of it) or an item covered by the indemnity for tax in
Clause 20.1 or by Clause 21.
	 
	 	 	For the purposes of this Clause 23.2 the Lender may in good faith allocate or spread
costs and/or losses among its assets and liabilities (or any class of its assets and
liabilities) on such basis as it considers appropriate.
	 
	23.3	 	Payment of increased costs. The Borrowers shall pay to the Lender, on its demand, the
amounts which the Lender from time to time notifies the Borrowers that it has specified to
be necessary to compensate it for the increased cost.
	 
	23.4	 	Notice of prepayment. If the Borrowers are not willing to continue to compensate the
Lender for the increased cost under Clause 23.3, the Borrowers may give the Lender not less
than 14 days’ notice of their intention to prepay the Loan at the end of an Interest Period.
	 
	23.5	 	Prepayment. A notice under Clause 23.4 shall be irrevocable; and on the date specified in
its notice of intended prepayment, the Commitment shall terminate and the Borrowers shall
prepay (without premium or penalty) the Loan, together with accrued interest thereon at the
applicable rate plus the Margin.
	 
	23.6	 	Application of prepayment. Clause 7 shall apply in relation to the prepayment.
	 
	24	 	SET-OFF
	 
	24.1	 	Application of credit balances. The Lender may without prior notice:
	 
	(a)	 	apply any balance (whether or not then due) which at any time stands to the credit of any
account in the name of the Borrowers (or either of them) at any office in any country of the
Lender in or towards satisfaction of any sum then due from the Borrowers (or either of them)
to the Lender under any of the Finance Documents; and
	 
	(b)	 	for that purpose:

	 	(i)	 	break, or alter the maturity of, all or any part of a deposit of
the Borrowers (or either of them);
	 
	 	(ii)	 	convert or translate all or any part of a deposit or other credit balance into
Dollars;
	 
	 	(iii)	 	enter into any other transaction or make any entry with regard to
the credit balance which the Lender considers appropriate.

	24.2	 	Existing rights unaffected. The Lender shall not be obliged to exercise any of its rights
under Clause 24.1; and those rights shall be without prejudice and in addition to any right
of set-off, combination of accounts, charge, lien or other right or remedy to which the
Lender is entitled (whether under the general law or any document).
	 
	24.3	 	No Security Interest. This Clause 24 gives the Lender a contractual right of set-off only,
and does not create any equitable charge or other Security Interest over any credit balance
of the Borrowers (or either of them).

45

 

	25	 	TRANSFERS AND CHANGES IN LENDING OFFICE
	 
	25.1	 	Transfer by Borrowers. Neither of the Borrowers may, without the consent of the Lender,
transfer, novate or assign any of its rights, liabilities or obligations under any Finance
Document.
	 
	25.2	 	Assignment by Lender. The Lender may assign or transfer all or any of the rights and
interests which it has under or by virtue of the Finance Documents without the consent of,
but with notice to, the Borrowers.
	 
	25.3	 	Rights of assignee. In respect of any breach of a warranty, undertaking, condition or
other provision of a Finance Document, or any misrepresentation made in or in connection
with a Finance Document, a direct or indirect assignee or transferee of any of the Lender’s
rights or interests under or by virtue of the Finance Documents shall be entitled to recover
damages by reference to the loss incurred by that assignee or transferee as a result of the
breach or misrepresentation irrespective of whether the Lender would have incurred a loss of
that kind or amount.
	 
	25.4	 	Sub-participation; subrogation assignment. The Lender may sub-participate all or any part
of its rights and/or obligations under or in connection with the Finance Documents without
the consent of, or any notice to, the Borrower; and the Lender may assign, in any manner and
terms agreed by it, all or any part of those rights to an insurer or surety who has become
subrogated to them.
	 
	25.5	 	Disclosure of information. The Lender may disclose to a potential assignee or
transferee or sub-participant any information which the Lender has received in relation to
the Borrowers, the Ships, any Security Party or their affairs under or in connection with
any Finance Document, unless the information is clearly of a confidential nature.
	 
	25.6	 	Change of lending office. The Lender may change its lending office by giving notice to
the Borrowers and the change shall become effective on the later of:
	 
	(a)	 	the date on which the Borrowers receive the notice; and
	 
	(b)	 	the date, if any, specified in the notice as the date on which the change will come into
effect.
	 
	26	 	VARIATIONS AND WAIVERS
	 
	26.1	 	Variations, waivers etc. by Lender. A document shall be effective to vary, waive,
suspend or limit any provision of a Finance Document, or the Lender’s rights or remedies
under such a provision or the general law, only if the document is signed, or specifically
agreed to by fax by the Borrowers and the Lender and, if the document relates to a Finance
Document to which a Security Party is party, by that Security Party.
	 
	26.2	 	Exclusion of other or implied variations. Except for a document which satisfies the
requirements of Clause 26.1, no document, and no act, course of conduct, failure or neglect
to act, delay or acquiescence on the part of the Lender (or any person acting on its behalf)
shall result in the Lender (or any person acting on its behalf) being taken to have varied,
waived, suspended or limited, or being precluded (permanently or temporarily) from
enforcing, relying on or exercising:
	 
	(a)	 	a provision of this Agreement or another Finance Document; or
	 
	(b)	 	an Event of Default; or
	 
	(c)	 	a breach by the Borrowers (or either of them) or any other Security Party of an
obligation under a Finance Document or the general law; or

46

 

	(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.
	 
	26.3	 	Capital Markets. In the event the Borrowers and/or the Corporate Guarantor and/or any other
member of the Group or any other affiliate pursues any securities offerings (except for the
current “controlled equity offering” signed in July 2008 with Cantor Fitzgerald), the Lender
or any of its affiliates, will be entitled to act as co-managing underwriter, or equivalent
title, on each such securities offering for which it will be paid 5 per cent, of the
aggregate gross underwriting discounts, commissions and placement fees, until such time as
the Lender, or its affiliate, has received a minimum net payment of $250,000 in respect of
such securities offerings.
	 
	27	 	NOTICES
	 
	27.1	 	General. Unless otherwise specifically provided, any notice under or in connection with
any Finance Document shall be given by letter or fax; and references in the Finance
Documents to written notices, notices in writing and notices signed by particular persons
shall be construed accordingly.
	 
	27.2	 	Addresses for communications. A notice shall be sent:

	 	 	 	 	 
	(a)

	 	to the Borrowers:
	 	c/o the Corporate Guarantor

Omega Building

80 Kifissias Avenue

151 25 Maroussi

Greece
	 
	 	 	 	 
	 

	 	 	 	Fax No: (+30) 210 8090 275

Attn: Mr. Michael Gregos or

Mr. Anthony Kandylidis
	 
	 	 	 	 
	(b)

	 	to the Lender:
	 	DVB Bank SE

80 Cheapside

London EC2V 6EE

England
	 
	 	 	 	 
	 

	 	 	 	Fax No:+44 20 7618 9750

	 	 	or to such other address as the relevant party may notify the other.
	 
	27.3	 	Effective date of notices. Subject to Clauses 27.4 and 27.5:
	 
	(a)	 	a notice which is delivered personally or posted shall be deemed to be served, and shall
take effect, at the time when it is delivered; and
	 
	(b)	 	a notice which is sent by fax shall be deemed to be served, and shall take effect, 2 hours
after its transmission is completed.
	 
	27.4	 	Service outside business hours. However, if under Clause 27.3 a notice would be
deemed to be served:
	 
	(a)	 	on a day which is not a Business Day in the place of receipt; or

47

 

	(b)	 	on such a Business Day, but after 5 p.m. local time,
	 
	 	 	the notice shall (subject to Clause 27.5) be deemed to be served, and shall take effect,
at 9 a.m. on the next day which is such a business day.
	 
	27.5	 	Illegible notices. Clauses 27.3 and 27.4 do not apply if the recipient of a notice
notifies the sender within 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.
	 
	27.6	 	Valid notices. A notice under or in connection with a Finance Document shall not be
invalid by reason that its contents or the manner of serving it do not comply with the
requirements of this Agreement or, where appropriate, any other Finance Document under which
it is served if:
	 
	(a)	 	the failure to serve it in accordance with the requirements of this Agreement or other
Finance Document, as the case may be, has not caused any party to suffer any significant
loss or prejudice; or
	 
	(b)	 	in the case of incorrect and/or incomplete contents, it should have been reasonably clear
to the party on which the notice was served what the correct or missing particulars should
have been.
	 
	27.7	 	Meaning of “notice”. In this Clause 27 “notice” includes any demand, consent,
authorisation, approval, instruction, waiver or other communication.
	 
	28	 	JOINT AND SEVERAL LIABILITY
	 
	28.1	 	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 28.2, joint.
	 
	28.2	 	No impairment of Borrower’s obligations. The liabilities and obligations of each Borrower
shall not be impaired by:
	 
	(a)	 	this Agreement being or later becoming void, unenforceable or illegal as regards the
other Borrower;
	 
	(b)	 	the Lender entering into any rescheduling, refinancing or other arrangement of any kind
with the other Borrower;
	 
	(c)	 	the Lender releasing the other Borrower or any Security Interest created by a Finance
Document; or
	 
	(d)	 	any combination of the foregoing.
	 
	28.3	 	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 the other Borrower under this Agreement.
	 
	28.4	 	Subordination. Subject to Clause 28.5, 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

48

 

	(b)	 	take or enforce any form of security from the 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 the other Borrower; or
	 
	(d)	 	prove or claim for such an amount in any liquidation, administration, arrangement or
similar procedure involving the other Borrower or other Security Party; or
	 
	(e)	 	exercise or assert any combination of the foregoing.
	 
	28.5	 	Borrower’s required action. If during the Security Period, the Lender, by notice to a
Borrower, requires it to take any action referred to in paragraphs ((a)) to ((d)) of Clause
28.4, in relation to any other Borrower, that Borrower shall take that action as soon as
practicable after receiving the Lender’s notice.
	 
	29	 	SUPPLEMENTAL
	 
	29.1	 	Rights cumulative, non-exclusive. The rights and remedies which the Finance Documents
give to the Lender are:
	 
	(a)	 	cumulative;
	 
	(b)	 	may be exercised as often as appears expedient; and
	 
	(c)	 	shall not, unless a Finance Document explicitly and specifically states so, be taken to
exclude or limit any right or remedy conferred by any law.
	 
	29.2	 	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.
	 
	29.3	 	Counterparts. A Finance Document may be executed in any number of counterparts.
	 
	29.4	 	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.
	 
	30	 	LAW AND JURISDICTION
	 
	30.1	 	English law. This Agreement shall be governed by, and construed in accordance with,
English law.
	 
	30.2	 	Exclusive English jurisdiction. Subject to Clause 29.3, the courts of England shall have
exclusive jurisdiction to settle any disputes which may arise out of or in connection with
this Agreement.
	 
	30.3	 	Choice of forum for the exclusive benefit of the Lender. Clause 30.2 is for the exclusive
benefit of the Lender, which reserves the rights:
	 
	(a)	 	to commence proceedings in relation to any matter which arises out of or in connection
with this Agreement in the courts of any country other than England and which have or claim
jurisdiction to that matter; 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.

49

 

	 	 	Neither Borrower shall commence any proceedings in any country other than England in
relation to a matter which arises out of or in connection with this Agreement.
	 
	30.4	 	Process agent. Each Borrower irrevocably appoints Ince Process Agents Limited, for the time
being presently of International House, 1 St. Katherine’s Way, London E1W 1UN, 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 this Agreement.
	 
	30.5	 	Lender’s rights unaffected. Nothing in this Clause 30 shall exclude or limit any right which
the Lender may have (whether under the law of any country, an international convention or
otherwise) with regard to the bringing of proceedings, the service of process, the recognition
or enforcement of a judgment or any similar or related matter in any jurisdiction.
	 
	30.6	 	Meaning of “proceedings”. In this Clause 30, “proceedings” means proceedings of any kind,
including an application for a provisional or protective measure.

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

50

 

SCHEDULE 1

DRAWDOWN NOTICE

	To: 	 	DVB Bank SE 

80 Cheapside 
London EC2V
6EE 
England
	 
	 	 	Attention: [l]

2008

DRAWDOWN NOTICE

	1	 	We refer to the loan agreement (the “Loan Agreement”) dated [l] 2008 and made between us,
as Borrowers, and you, as Lender, in connection with a facility of up to US$30,500,000. Terms
defined in the Loan Agreement have their defined meanings when used in this Drawdown Notice.
	 
	2	 	We request to borrow the Loan as follows:
	 
	(a)	 	Amount: US$30,500,000;
	 
	(b)	 	Drawdown Date:           2008;
	 
	(c)	 	Duration of the first Interest Period shall be [          ] months;
	 
	(d)	 	Payment instructions:
[                                 ]
	 
	3	 	We represent and warrant that:
	 
	(a)	 	the representations and warranties in Clause 9 of the Loan Agreement would remain true and
not misleading if repeated on the date of this notice with reference to the circumstances now
existing;
	 
	(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 Lender.
	 
	5	 	We authorise you to deduct the upfront fee and all accrued commitment fee referred to in
Clause 19.1 from the amount of the Loan.

	 	 	 	 	 
	 

	 	
 
for and on behalf of
	 	 

OCEAN BLUE SPIRIT OWNERS INC. and

OCEAN FAITH OWNERS INC.

51

 

SCHEDULE 2

CONDITION PRECEDENT DOCUMENTS

PART A

The following are the documents referred to in Clause 8.1(a).

	1	 	A duly executed original of each Finance Document (and of each document required to
be delivered under each of them), other than those referred to in Part B.
	 
	2	 	Copies of the certificate of incorporation and constitutional documents of each Borrower
and each Security Party.
	 
	3	 	Copies of resolutions of the shareholders and directors of each Borrower and each
Security Party 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 each Borrower, authorising
named officers to execute the Drawdown Notices and any other notices under this
Agreement and additionally ratifying the execution of the MOA which that Borrower is a
party.
	 
	4	 	The original of any power of attorney under which any Finance Document is executed on
behalf of either Borrower or a Security Party.
	 
	5	 	Copies of all consents which each Borrower or any Security Party requires to enter into, or
make any payment under, any Finance Document to which it is or is to be a party.
	 
	6	 	Copies of each Underlying Document and of all documents signed or issued by the
Borrowers, the Seller or any Approved Charterer (as the case may be) under or in
connection therewith.
	 
	7	 	Evidence that satisfactory to the Lender the Accounts have been opened by the Borrowers
with the Account Bank.
	 
	8	 	Such documents as the Lender may require for its “know your customer” and other
customary money laundering checks.
	 
	9	 	Evidence satisfactory to the Lender that each Borrower is a direct wholly-owned
subsidiary of the relevant Shareholder and an indirect wholly-owned subsidiary of the
Corporate Guarantor.
	 
	10	 	Documentary evidence that the agent for service of process named in Clause 30.4 has
accepted its appointment.
	 
	11	 	Favourable legal opinions from lawyers appointed by the Lender on such matters
concerning the laws of the Marshall Islands, Malta and such other relevant jurisdictions
as the Lender may require.
	 
	12	 	If the Lender so requires, in respect of any of the documents referred to above, a certified
English translation prepared by a translator approved by the Lender.

52

 

PART B

The following are the documents referred to in Clause 8. l(b).

	1	 	A duly executed original of the Mortgage, the Deed of Covenant, the General Assignment
and the Charter Assignment of the relevant Approved Charter (and of each document to
be delivered under each of them) in respect of each Ship.
	 
	2	 	Documentary evidence that:
	 
	(a)	 	each Ship is definitively and permanently registered in the name of the relevant Borrower
under the Maltese flag;
	 
	(b)	 	each Ship is in the absolute and unencumbered ownership of the relevant Borrower which
is the owner thereof save as contemplated by the Finance Documents;
	 
	(c)	 	each Ship maintains the class specified in Clause 13.3(c) free of all recommendations and
conditions (other than the Recommendation) of the relevant classification society;
	 
	(d)	 	the Mortgage relative to each Ship has been duly registered against that Ship as a valid
first priority ship mortgage in accordance with the laws of Malta; and
	 
	(e)	 	each 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 each Ship will, as from its delivery date, be managed by the
Approved Manager on terms acceptable to the Lender, together with:
	 
	(a)	 	the Approved Manager’s Undertaking in respect of that Ship; and
	 
	(b)	 	copies of the document of compliance (DOC), the safety management certificate (SMC)
and the ISSC referred to in paragraph (a) of the definition of the ISM Code
Documentation in respect of each Ship certified as true and in effect by the Borrower
which is the owner thereof.
	 
	4	 	two valuations in respect of each Ship prepared by independent sale and purchase ship
brokers appointed by the Lender, stated to be for the purposes of this Agreement and
prepared in accordance with Clause 14.3 which shows the value of that Ship in an amount
acceptable to the Lender.
	 
	5	 	A favourable opinion (at the cost of the Borrowers) from an independent insurance
consultant acceptable to the Lender on such matters relating to the insurances of the each
Ship as the Lender may require.
	 
	6	 	A confirmation from Nordea Bank Finland plc (“Nordea”), acting in its capacity as agent
for the banks and financial institutions referred to in paragraph (ii) below, satisfactory
to
the Lender that all the parties to the loan agreement dated 12 February 2008 entered into
between (i) the Corporate Guarantor as borrower, (ii) the banks and financial institutions
listed in schedule 1 thereto as lenders, (iii) Nordea Bank Norge ASA as lead arranger and
bookrunner, (iv) Nordea as administrative agent and security trustee in respect of a senior
secured credit facility of up to (originally) $325,000,000 have agreed to amend and
supplement such Loan Agreement in writing to incorporate the amendments set out in the
terms and conditions (excluding the requirement to adjust pricing) as outlined in Exhibit
1 hereto, which have been provided by the Borrowers to the Lender in an email exchange
made between the Lender and the Borrowers on 8 December 2008.

53

 

	7	 	Favourable legal opinions from lawyers appointed by the Lender on such matters concerning
the laws of the Republic of Malta and such other relevant jurisdictions as the Lender may
require.

Every copy document delivered under this Schedule shall be certified as a true and up to date copy
by a director or the secretary (or equivalent officer) of the
relevant Borrower or the legal
counsel of the Borrowers.

54

 

EXHIBIT 1

55

 

From: Management@OceanFreight Inc. <management@oceanfreightinc.com>

To: Urban, Cornelia

Cc: finance@cardiff.gr <finance@cardiff.gr>; Management@OceanFreight

Inc. <management@oceanfreightinc.com>; Illingworth, Peter

Sent: Wed Dec 10 11:26:19 2008

Subject: RE: OCNF — NORDEA LOAN

Dear Conny,

Please find attached one-page agreement reached with Nordea.

As you will notice we will need consent from DVB to register 2nd mortgages to the Tamara
and Tigani in favor of the syndicate.

Trust this will not be a problem.

As we need this consent in order to approach the syndicate please confirm to us this is ok as
soon as possible in order to prepare the relevant coordination agreement.

Feel free to speak with Nordea directly on this. Suggest you speak with Mr. Ronny Bjornadal (Global
Head of Syndication for Nordea) at +4722485281.

Brgds

Anthony Kandylidis

President and CEO

OceanFreight Inc.

 

Address: 80. Kifissias Av., GR

151 25, Amaroussion, Greece

Tel: +30 2106140283

Fax: +30 2106140284

www.oceanfreightinc.com

The
information contained in this email (including any attachments) is confidential and may contain
proprietary information; some or all of which may be legally privileged. It is intended solely for
the use of the named addressee. Access, copying or re-use of the email or any information contained
therein by any other person is not authorized. If you are not the intended recipient please notify
us immediately by returning the email to the originator and delete the message. The Information is
not to be relied upon and is not warranted, including, but not limited, as to completeness,
timeliness or accuracy and is subject to change without notice. All representations and warranties
are expressly disclaimed.

We have taken precautions to minimize the risk of transmitting software viruses, but we advise you
to carry out your own virus checks on any attachment to this message. We cannot accept liability
for any loss or damage caused by software viruses

 

 

DVB Bank SE

London Branch

80 Cheapside

London EC2V 6EE

www.dvbbank.com

Incorporated with limited liability in the Federal Republic of
Germany

Registered Head Office: Frankfurt/Main, Germany

Local Court: Frankfurt/Main, Germany

Reg.-No. HRB 83980

Registered as a branch in England and Wales

Company No: FC021590, Branch No: BR004786

VAT Registration No. GB 722 8632 35

Board of Managing Directors:

Wolfgang F. Driese, Chairman,

Bertrand Grabowski, Dagfinn Lunde

Chairman of the Supervisory Board:

Dr.Thomas Duhnkrack

This message and any attachments are confidential and may also contain
privilege information. If you are not the intended recipient of this e-mail or if you have received
it in error, please notify us immediately by reply e-mail and then delete this message completely
from your system. Any unauthorized copying, disclosure or other use of the information contained in
this e-mail for any purposes is strictly forbidden. Please be aware that this e-mail or its
attachments (if any) may contain viruses or other harmful code which have not been detected by our
anti-virus system.

 

 

OceanFreight Inc.
 $325
Million Credit Facility

Draft Amendment

	 	 	 
	Repayments:

	 	•   Extraordinary repayment of $25 million upon closing of
the DVB financing, however no later than January 31,
2009.

	 
	 	 
	Collateral Maintenance Ratio:

	 	•   Waived until extraordinary repayment of $25 million has
been made, however no later than January 31, 2009

	 
	 	 
	 

	 	•   90% from date of extraordinary repayment of $25 million
until June 29, 2009

	 
	 	 
	 

	 	•   100% from June 30, 2009 until December 30, 2009

	 
	 	 
	 

	 	•   110% from December 31, 2009 until March 30, 2010

	 
	 	 
	 

	 	•   115% from March 31, 2010 until June 29, 2010

	 
	 	 
	 

	 	•   125% thereafter

	 
	 	 
	Additional Financial
Covenants:

	 	•   No dividend payments or any other return of capital to
shareholders including stock buyback.

	 
	 	 
	 

	 	•   No repayment of seller’s credit related to the vessels
Tigani and Tamara until the date falling 18 months after
delivery of the vessels under the MOA, and subject to
compliance with covenants and no event of default having
occurred, provided however that seller’s credit may be
repaid by proceeds from new equity raised after the date
hereof or if the Seller requests payment in OCNF shares.

	 
	 	 
	 

	 	•   No new investments or capital expenditures (other than
maintenance of existing vessels in the ordinary course of
business) unless funded with new equity which may be
levered up to 1:1.

	 
	 	 
	Additional Security:

	 	•   2nd Priority Mortgages on the vessels Tigani and Tamara
behind a $30 million 1st priority loan by DVB Bank,
subject to a satisfactory co-ordination agreement by all
parties.

	 
	 	 
	Margin:

	 	Increase from 130 bps to 200 bps.

 

 

EXECUTION PAGE

	 	 	 
	BORROWERS
	 	 
	 
	 	 
	SIGNED by
	 )	/s/ Alexandros Mylonas 
	 

	 )	 
	for and on behalf of

	 )	 
	OCEAN BLUE SPIRIT OWNERS INC.

	 )	 
	in the presence of:

	 )	 

CHRISTOFOROS BISMPIKOS

SOLICITOR

WATSON, FARLEY & WILLIAMS

2, DEFTERAS MERARCHIAS

PIRAEUS 185 36 — GREECE

	 	 	 
	SIGNED by
	 )	/s/ Alexandros Mylonas 
	 
	 )	 
	for and on behalf of

	 )	 
	OCEAN FAITH OWNERS INC.

	 )	 
	in the presence of:

	 )	 

CHRISTOFOROS BISMPIKOS

SOLICITOR

WATSON, FARLEY & WILLIAMS

2, DEFTERAS MERARCHIAS

PIRAEUS 185 36 — GREECE

	 	 	 
	LENDER
	 	 
	 
	 	 
	SIGNED by
	 )	/s/ George Daleokrassas 
	GEORGE DALEOKRASSAS

	 )	 
	for and on behalf of

	 )	 
	DVB BANK SE

	 )	 
	in the presence of:

	 )	 

CHRISTOFOROS BISMPIKOS

SOLICITOR

WATSON, FARLEY & WILLIAMS

2, DEFTERAS MERARCHIAS

PIRAEUS 185 36 — GREECE

56

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