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As filed with the Securities and Exchange Commission on September 19, 2006.
Registration No. 333-            

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549

FORM F-1
 REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

Danaos Corporation
 (Exact name of Registrant as Specified in Its Charter)

Republic of The Marshall Islands 
(State or Other Jurisdiction of
Incorporation or Organization)	 	4412 
(Primary Standard Industrial
Classification Code Number)	 	N/A 
(I.R.S. Employer
Identification Number)	
Danaos Corporation
Attn: Dr. John Coustas
14 Akti Kondyli
185 45 Piraeus
Greece
(011-30-210-419 6480)
 (Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
Morgan, Lewis & Bockius LLP
Attn: Stephen P. Farrell
101 Park Avenue
New York, New York 10178
(212) 309-6000
 (Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)

Stephen P. Farrell	 	John T. Gaffney	
Morgan, Lewis & Bockius LLP	 	Cravath, Swaine & Moore LLP	
101 Park Avenue	 	Worldwide Plaza	
New York, New York 10178	 	825 Eighth Avenue	
(212) 309-6050	 	New York, New York 10019	
(telephone number)	 	(212) 474-1000	
(212) 309-6001	 	(telephone number)	
(facsimile number)	 	(212) 474-3700	
 	 	(facsimile number)	

                   Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.

                  If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.     o
                  If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.     o
                  If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.     o
                  If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.     o
                  If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box.     o

CALCULATION OF REGISTRATION FEE

Title of Each Class of
Securities to Be Registered	 	Amount to
be Registered(1)	 	Proposed Maximum
Offering Price
Per Security(2)	 	Proposed Maximum
Aggregate
Offering Price(1)(2)	 	Amount of
Registration Fee	
	
Common Stock, including preferred stock purchase rights, par value $0.01(1)	 	11,787,500	 	$22.00	 	$259,325,000	 	$27,750	
	
(1)
Includes common stock issuable upon exercise of the underwriters' overallotment option. Rights to purchase preferred stock initially will trade together with the common stock. The value attributable to the rights, if any, will be reflected in the price of the common stock.

(2)
Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act.

                   The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

Subject to Completion,
Preliminary Prospectus dated September 19, 2006
The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
P R O S P E C T U S
10,250,000 Shares

Danaos Corporation
Common Stock

              This is the initial public offering of our common stock. All of the shares of common stock being sold in this offering are being sold by Danaos Corporation.
              We expect the public offering price to be between $20.00 and $22.00 per share. Currently, no public market exists for the shares. Our common stock has been approved for listing on the New York Stock Exchange, subject to official notice of issuance, under the symbol "DAC."
               Investing in our common stock involves risks that are described in the "Risk Factors" section beginning on page 10 of this prospectus.

 	 	Per Share
	 	Total
	
Public offering price	 	$	 	 	$	 	
Underwriting discount	 	$	 	 	$	 	
Proceeds, before expenses, to Danaos Corporation	 	$	 	 	$	 	
              The underwriters may also purchase up to an additional 1,537,500 shares at the public offering price, less the underwriting discount, within 30 days from the date of this prospectus to cover overallotments.
              Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
              The shares of common stock will be ready for delivery on or about                        , 2006.

Merrill Lynch & Co.	 	Citigroup	

 	Dahlman Rose & Company	 	

Jefferies & Company	

 	
Fortis Securities LLC	

 	
Nomura International	

The date of this prospectus is                        , 2006.

 
 TABLE OF CONTENTS

 	 	Page
	
PROSPECTUS SUMMARY	 	1	
RISK FACTORS	 	10	
FORWARD-LOOKING STATEMENTS	 	31	
DIVIDEND POLICY	 	32	
USE OF PROCEEDS	 	33	
CAPITALIZATION	 	34	
DILUTION	 	35	
SELECTED CONSOLIDATED FINANCIAL DATA	 	36	
PRO FORMA FINANCIAL INFORMATION	 	39	
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	 	43	
THE INTERNATIONAL SHIPPING INDUSTRY	 	70	
BUSINESS	 	95	
ENVIRONMENTAL AND OTHER REGULATIONS	 	111	
MANAGEMENT	 	116	
PRINCIPAL STOCKHOLDERS	 	122	
OUR MANAGER AND MANAGEMENT RELATED AGREEMENTS	 	123	
RELATED PARTY TRANSACTIONS	 	127	
DESCRIPTION OF INDEBTEDNESS	 	129	
SHARES ELIGIBLE FOR FUTURE SALE	 	138	
DESCRIPTION OF CAPITAL STOCK	 	140	
MARSHALL ISLANDS COMPANY CONSIDERATIONS	 	147	
TAX CONSIDERATIONS	 	151	
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION	 	162	
UNDERWRITING	 	163	
LEGAL MATTERS	 	168	
EXPERTS	 	168	
WHERE YOU CAN FIND ADDITIONAL INFORMATION	 	168	
INDUSTRY DATA	 	169	
ENFORCEABILITY OF CIVIL LIABILITIES	 	169	
GLOSSARY OF SHIPPING TERMS	 	170	
INDEX TO FINANCIAL STATEMENTS	 	F-1	

              You should rely only on the information contained in this prospectus. We have not, and the underwriters have not, authorized any other person to provide you with different information. If anyone provides you with different information, you should not rely on it. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus. Our business, financial condition, results of operations and prospects may have changed since that date. Information contained on our website does not constitute part of this prospectus.
i

 
 PROSPECTUS SUMMARY
               This section summarizes material information that appears later in this prospectus and is qualified in its entirety by the more detailed information and financial statements included elsewhere in this prospectus. This summary may not contain all of the information that may be important to you. As an investor or prospective investor, you should carefully review the entire prospectus, including the risk factors and the more detailed information that appears later.
               We use the term "Panamax" to refer to vessels capable of transiting the Panama Canal and "Post-Panamax" to refer to vessels with a beam of more than 32.31 meters that cannot transit the Panama Canal. We use the term "twenty foot equivalent unit," or "TEU," the international standard measure of containers, in describing the capacity of our containerships. We use the term "deadweight tons," or "dwt," in describing the size of drybulk carriers. For the definition of certain shipping terms used in this prospectus, see the "Glossary of Shipping Terms" at the end of the prospectus. Unless otherwise indicated, all references to currency amounts in this prospectus are in U.S. dollars, all share numbers give effect to a 88,615-for-1 stock split effected September 18, 2006 and containership fleet data as of dates prior to February 2007 does not give effect to the expected sale of the APL England, which we expect to deliver to its current charterer in February 2007.
 
 Business Overview
              We are an international owner of containerships, chartering our vessels to many of the world's largest liner companies. Our current fleet of 27 containerships aggregating 116,115 TEUs makes us among the ten largest containership charter owners in the world, based on total TEU capacity. Our strategy is to charter our containerships under multi-year, fixed-rate time charters to a geographically diverse group of liner companies, including many of the largest such companies globally, as measured by TEU capacity. Currently, these customers include Maersk, COSCO, Hapag-Lloyd, CMA-CGM, Hyundai, APL-NOL, Norasia, Yang Ming, Wan Hai and China Shipping. Our charters range from two and a half to 12 years, which provides us with stable cash flows and high utilization rates. The average remaining duration of the charters for our containership fleet, including 16 contracted vessels for which we have arranged charters, will be 10.6 years as of October 1, 2006 (weighted by aggregate contracted charter hire).
              Our company has a long history of operating and investing in the shipping industry. We are principally owned by the Coustas Family. Dimitris Coustas, the father of our chief executive officer, John Coustas, first invested in shipping in 1963 and founded our manager, Danaos Shipping Company Limited, or Danaos Shipping, in 1972. After assuming management of our company in 1987, John Coustas has focused our strategy on building a large, modern containership fleet to serve the container shipping industry. We believe we are well positioned to continue to grow our business and benefit from the growth in the container shipping industry, which grew at a compound annual rate in excess of 10.0% between 2003 and 2005. Since early 1993, under John Coustas' leadership, our containership fleet has grown from three multi-purpose vessels with a capacity of 2,395 TEUs to our current fleet of 27 containerships with a capacity of 116,115 TEUs, representing a compounded annual growth rate in TEU capacity of approximately 34.8%. This growth has occurred through multiple shipping cycles and, we believe, has resulted from the broad range of relationships we have developed and the quality of service provided to our customers, as well as our ability to exploit market opportunities during different periods in the charter market cycle.
              Consistent with our strategy of pursuing attractive growth opportunities, we currently have newbuilding contracts or purchase agreements for 16 additional containerships aggregating 84,704 TEUs, which represent an approximate 72.9% growth in the TEU capacity of our containership fleet. We expect the newbuildings to be delivered to us during the remainder of 2006, in 2007, in the second
1

half of 2008 and in 2009. We also expect to benefit from the trend of liner companies contracting for containership capacity directly from charter owners such as us.
              While our focus is on the containership sector, in 2002 we made an investment in the drybulk sector when we believed there was a significant opportunity to capitalize on the cyclicality and volatility inherent in that market. In August 2006, however, we agreed to sell the six 1994-built drybulk carriers in our fleet, with an aggregate capacity of 342,158 dwt, for an aggregate of $143.5 million to a single purchaser, which is not affiliated with us. We expect to deliver these vessels to the purchaser as each vessel's respective charter expires over the next six to eight months. During the time prior to delivery, we will continue to operate the vessels and, accordingly, receive the revenues and incur the expenses associated with such operation. We intend to reinvest in the drybulk sector with the acquisition of more recently built drybulk carriers with configurations better suited to employment in the current drybulk charter market within the next several months, subject to market conditions, including the availability of suitable vessels to purchase. We have not yet identified any specific drybulk carriers to purchase.
 
 Our Fleet
              Our containership fleet consists of 43 vessels, of which 27 are current vessels and 16 are to be delivered to us through 2009. Several of our current vessels were built within the last five years by Samsung Heavy Industries Co. Ltd. ("Samsung"), one of the largest container shipyards, using the latest in design innovations. Also, nine of our newbuildings are expected to be delivered by Samsung between November 2006 and the first half of 2009. In addition, five of our newbuildings are expected to be delivered by Sungdong Shipbuilding & Marine Engineering Co., Ltd. ("Sungdong") during 2009. Furthermore, each secondhand vessel we have acquired, as well as the two 2004-built vessels we have contracted to purchase, has been subjected to rigorous inspection by our manager prior to acquisition. We maintain the quality of our fleet through regular inspections of our vessels and a comprehensive maintenance program. All of our containerships have a record of low unscheduled off-hire days and we believe our customers seek to charter our ships based upon our reputation for safety and reliability.
              Our newbuilding contracts with Samsung are for one 9,580 TEU containership expected to be delivered in November 2006, two 4,253 TEU containerships expected to be delivered in the second half of 2007, four 4,253 TEU containerships expected to be delivered in the second half of 2008 and two 4,253 TEU containerships expected to be delivered in the first half of 2009. Our newbuilding contracts with Sungdong are for five 6,500 TEU containerships expected to be delivered during 2009. Our secondhand purchase agreements are for two 4,300 TEU containerships, built in 2004, which we expect to be delivered in the first and second half of 2007, respectively. We have arranged 12-year chartering agreements for the two secondhand containerships expected to be delivered to us by the end of 2007 and for each of the 14 newbuilding containerships expected to be delivered to us by the end of 2009. The average age (weighted by TEU capacity) of the vessels in our containership fleet will be approximately 11.4 years as of October 1, 2006 and, following the delivery of all of our contracted vessels by the end of 2009, the average age (weighted by TEU capacity) of our containership fleet will be approximately 9.1 years, assuming no vessel dispositions, other than the sale of the APL England , or further acquisitions.
              Four of the containerships in our current fleet, which have an aggregate capacity of 22,024 TEUs, are subject to arrangements pursuant to which the charterer has the option to purchase each vessel at stipulated prices on specified dates falling between 2007 and 2010. The option for one of these vessels, the APL England , has recently been exercised, which will decrease the size of our fleet. If the remaining three purchase options were to be exercised, the size of our fleet would be further decreased, and as a result our revenues and results of operations would be adversely affected.
              We refer to our 16 containerships expected to be delivered to us between November 2006 and December 2009 as our contracted vessels and, collectively with our current fleet of 27 containerships, as our combined containership fleet. After delivery of our contracted vessels, assuming no vessel
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dispositions, other than the sale of the APL England , or further acquisitions, our combined containership fleet will have 195,313 TEU in total capacity.
              The following table presents the composition of our containership fleet by charter type and capacity.

 	 	As of October 1, 2006
	 	As of January 1, 2010(1)(2)
	
 	 	 	 	Total Capacity
	 	 	 	 	 	Total Capacity
	 	 	
 	 	Number
	 	TEU
	 	dwt
	 	Average
Age
(years)(3)
	 	Number
	 	TEU
	 	dwt
	 	Average
Age
(years)(3)
	
Time Charter:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Post-Panamax	 	10	 	62,493	 	767,382	 	5.5	 	15	 	99,067	 	1,207,726	 	5.3	
 	Panamax	 	13	 	41,218	 	576,852	 	15.3	 	23	 	83,842	 	1,090,194	 	10.3	
Bareboat:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Panamax	 	4	 	12,404	 	195,512	 	28.2	 	4	 	12,404	 	195,512	 	31.5	
 	 		 		 		 		 		 		 		 		
 	Total	 	27	 	116,115	 	1,539,746	 	11.4	 	42	 	195,313	 	2,493,432	 	9.1	

(1)
Assuming no vessel dispositions, other than the sale of the APL England, or acquisitions beyond our contracted vessels.
(2)
Does not include one 5,506 TEU containership in our current fleet, the APL England . The charterer of this vessel has exercised an option to purchase this vessel from us upon expiration of its current charter in February 2007. Three other containerships in our fleet, with an aggregate capacity of 16,518 TEUs, which are included are also subject to options to acquire such vessels on specified dates falling between 2007 and 2010.
(3)
Weighted by TEU capacity.
 
 Our Competitive Strengths
              We believe that we possess a number of competitive strengths that will allow us to capitalize on growth opportunities in the containership sector, including:
              Long Standing Relationships with Leading Liner Companies.     We charter our containerships to a diverse customer group consisting of the world's largest liner companies, including the top five such companies, as measured by TEU capacity. In the past we have had successful chartering relationships with 22 of the 25 largest liner companies, as measured by TEU capacity, which we believe will benefit us in the future as we continue to grow our fleet. The strength of these relationships and our proven track record of performance have facilitated our ability to enter into multi-year charters with our customers that extend as long as 12 years, with option periods that extend thereafter. Although we believe these relationships assist us in our chartering efforts, if demand for containership capacity decreases or if additional containership capacity becomes available, our business and profitability may be adversely affected.
              Stability of Cash Flows Through Multi-Year Charters.     All of the containerships in our combined fleet are or, upon their delivery to us, will be subject to multi-year, fixed-rate time charters having initial terms that range from two and a half to 12 years. As of October 1, 2006, the average remaining duration of the charters for our combined containership fleet will be 10.6 years (weighted by aggregate contracted charter hire). Our multi-year charters allow us to maintain a high proportion of contracted cash flows, while their staggered maturities permit us to conduct regular rechartering activity in varying rate environments. If, however, the charter market is depressed when a relatively high concentration of our vessels' charters expire, such as in 2007 when we expect to have to recharter eight of the vessels in our fleet, we could be forced to recharter a significant portion of our fleet at reduced rates.
              Reputation for Operational Excellence and Technology Leadership.     Our manager has been operating containerships since 1984 and has been recognized for implementing advanced technology and innovative processes in order to provide reliable and efficient services. Our manager's and our operational excellence and reliability have resulted in less than 13 total off-hire days for our entire fleet during 2005 other than for scheduled drydockings and special surveys. Our manager was awarded the
3

Lloyds Technical Innovation Award in 2004, and the ship management software developed by our software affiliate, Danaos Management Consultants, is a widely deployed third-party ship management package in the shipping industry.
              Strong Record of Long-Term Growth.     Since early 1993 we have grown our fleet from three multi-purpose vessels to our current fleet of 27 containerships. We have been successful at acquiring vessels throughout varying shipping cycles over the past 12 years. We have increased our containership fleet at an annual compound growth rate (in TEU capacity) of approximately 34.8% since 1993 by, among other things, negotiating private purchases from our liner company customers and contracting for newbuildings that incorporate the latest in design innovations. We have also contracted for 16 additional containerships with a total capacity of 84,704 TEUs, to be delivered to us between November 2006 and December 2009 that represent an approximate 72.9% growth in the TEU capacity of our containership fleet. The option to purchase one 5,506 TEU containership in our current fleet, the APL England , has, however, recently been exercised, which will decrease the size of our fleet. If the options to purchase three other containerships in our current fleet, which have an aggregate capacity of 16,518 TEUs, were to be exercised by their current charterer, with specified acquisition dates falling between 2007 and 2010, the size of our fleet and our revenues and profitability would be further decreased.
              Strong Financial Results and Flexibility.     Our history of profitable operations has given us strong financial results and enabled us to grow our company. For the year ended December 31, 2005, we generated operating revenues of $241.4 million, net income of $122.9 million and EBITDA of $171.0 million. For the six months ended June 30, 2006, we generated operating revenues of $114.5 million, net income of $44.4 million and EBITDA of $73.8 million. After giving effect to the application of the proceeds of this offering and the financing of our contracted vessels upon execution of the new senior revolving credit facilities, we expect to have in excess of $500.0 million of undrawn availability. We believe that this financing capacity, together with our policy of retaining a portion of our cash flows, will afford us financial flexibility and allow us to continue to make selective acquisitions.
              An investment in our common stock involves risks. We urge you to consider carefully the factors set forth in the section of this prospectus entitled "Risk Factors" beginning on page 10.
 
 Our Business Strategies
              Our primary objectives are to profitably grow our business, increase distributable cash flow per share and maximize value to our stockholders by pursuing the following strategies:
              Provide a High Level of Customer Service.     We will continue to focus on being a high-quality, cost-efficient provider of ships and vessel services and on maintaining a high level of service for our customers. We have successfully chartered our vessels to 22 of the 25 largest liner companies as measured by TEU capacity, many of which, we believe, consider us to be one of their preferred providers. We believe that our focus on customer service and our technology leadership enhances our relationships with our charterers.
              Maintain a Diverse Portfolio of Charters.     We will continue to charter our containership assets to a large number of leading liner companies in order to maintain a portfolio of time charters that is highly diverse from a customer, geographic and maturity perspective. We believe our strategy reduces our revenue concentration, minimizes our exposure to any one customer and allows us to recharter our vessels during any particular period in the charter market cycle.
              Actively Acquire Newly Built and Secondhand Vessels.     Given our broad customer relationships and our strong financial flexibility, we believe we are well positioned to take advantage of growth in the industry. We acquired one 4,651 TEU secondhand vessel on March 23, 2006, took delivery of one 9,580 TEU newbuilding on September 8, 2006 and we currently have 14 newbuilding contracts and two
4

secondhand acquisition contracts that will increase the size of our containership fleet by 84,704 TEUs, or approximately 72.9%, between November 2006 and December 2009. We believe we will have significant financial flexibility to pursue additional growth through selective acquisitions. We also believe our manager's reputation and history as a leading ship operator positions us as an attractive provider to liner companies, giving us opportunities to acquire secondhand vessels that we can subsequently charter to our customers.
              Continue to Invest in Larger Containerships.     We expect to continue to focus on acquiring larger containerships. We believe that larger containerships are attractive to many of our customers because these vessels are able to benefit from economies of scale and constitute the core of the vessels providing their liner services. As a result, larger vessels are attractive investments because many of our customers prefer chartering such vessels for longer periods of time over chartering smaller capacity vessels, which provides us with longer term stable cash flows and reduces our residual vessel value exposure.
 
 Our Manager
              Our operations are managed by Danaos Shipping, our manager, under the supervision of our officers and our board of directors. We believe our manager has built a strong reputation in the shipping community by providing customized, high-quality operational services in an efficient manner for both new and older vessels. We have a management agreement pursuant to which our manager and its affiliates provide us and our subsidiaries with technical, administrative and certain commercial services for an initial term expiring on December 31, 2008, with automatic one-year renewals for an additional 12 years at our option. Our manager has agreed not to provide management services to any other entities without the prior approval of our board of directors, other than under the limited circumstances described under "Business—Management of our Fleet," to entities controlled by our chief executive officer, Dr. Coustas. Our manager is regarded as an innovator in operational and technological aspects in the international shipping community. We believe our manager derives its strong technological capabilities from employing highly educated professionals, participating and taking a leading role in European Community research projects related to shipping, and from its close affiliation to Danaos Management Consultants, a leading ship-management software and services company. Our manager is ultimately owned by Danaos Investments Limited as Trustee of the 883 Trust, which we refer to as the Coustas Family Trust. Danaos Investments Limited, a corporation wholly-owned by our chief executive officer, is the protector (which is analogous to a trustee) of the Coustas Family Trust, of which Dr. Coustas and other members of the Coustas family are beneficiaries. The Coustas Family Trust is also our largest stockholder.
 
 Corporate Information
              We are a corporation domesticated in the Republic of The Marshall Islands on October 7, 2005 after having been incorporated as a Liberian company in 1998 in connection with the consolidation of our assets under Danaos Holdings Limited. In connection with our domestication in the Marshall Islands we changed our name from Danaos Holdings Limited to Danaos Corporation. Our manager, Danaos Shipping, was founded by Dimitris Coustas in 1972 and since that time it has continuously provided seaborne transportation services under the management of the Coustas family. Dr. John Coustas, our chief executive officer, assumed responsibility for our management in 1987. Dr. Coustas has focused our business on chartering containerships to liner companies and has overseen the expansion of our fleet from three multi-purpose vessels in 1987 to the 27 containerships comprising our current containership fleet.
              We maintain our principal executive offices at 14 Akti Kondyli, 185 45 Piraeus, Greece. Our telephone number at that address is 30 210 419 6480.
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 The Offering

Common stock offered	 	10,250,000 shares.	

 	
11,787,500 shares, if the underwriters exercise their overallotment option in full.	

Common stock outstanding immediately after offering	
 	
54,557,500 shares.	

Use of proceeds	
 	
We estimate that the net proceeds of this offering will be $198.2 million based on an assumed initial public offering price of $21.00 per share of common stock and after deducting the underwriting discount and the estimated expenses payable by us related to this offering. We intend to use the net proceeds of this offering to repay outstanding indebtedness under certain of our credit facilities. See "Use of Proceeds."	

Dividends	
 	
We intend to pay quarterly dividends of $0.44 per share, or $1.76 per share per year, of common stock following the closing of this offering. We expect to pay the first dividend in February 2007. Declaration and payment of any dividend is subject to the discretion of our board of directors.	

NYSE listing	
 	
Our common stock has been approved for listing on the New York Stock Exchange, subject to official notice of issuance, under the symbol "DAC."	

Risk factors	
 	
Investment in our common stock involves a high degree of risk. You should carefully read and consider the information set forth under the heading "Risk Factors" and all other information set forth in this prospectus before investing in our common stock.	
              Each share of our common stock includes one right that, under certain circumstances, will entitle the holder to purchase from us a unit consisting of one-thousandth of a preferred share at a purchase price of $25.00 per unit, subject to specified adjustments.
              Unless we indicate otherwise or the context otherwise requires, all information in this prospectus assumes that the underwriters do not exercise their overallotment option.
6

 
 Summary Consolidated Financial Data
              The summary consolidated financial data set forth below as of December 31, 2004 and 2005 and for the years ended December 31, 2003, 2004 and 2005 have been derived from our audited consolidated financial statements which are included in this prospectus. The summary consolidated financial data set forth below as of June 30, 2006 and for the six months ended June 30, 2005 and 2006 have been derived from our unaudited interim consolidated financial statements for such periods included in this prospectus. We believe the unaudited financial data reflects all adjustments, consisting solely of normal recurring adjustments, necessary for the fair presentation of our financial position and results of operations for the interim periods presented. Share data give effect to a 88,615-for-1 stock split effected September 18, 2006.
              This information should be read together with, and is qualified in its entirety by, our consolidated financial statements and the notes thereto included elsewhere in this prospectus. You should also read "Management's Discussion and Analysis of Financial Condition and Results of Operations."

 	 	Year Ended December 31,
	 	Six Months Ended June 30,
	 	
 	 	2003
	 	2004
	 	2005
	 	2005
	 	2006
	 	
 	 	In thousands, except per share data
	 	
STATEMENT OF INCOME	 	 	 	 	 	 	 	 	 	 	 	
 	Operating revenues	 	$146,118	 	$208,268	 	$241,381	 	$124,398	 	$114,535	 	
 	Voyage expenses	 	(5,031	)	(6,314	)	(7,525	)	(3,456	)	(3,364	)	
 	Vessel operating expenses	 	(41,860	)	(46,247	)	(53,883	)	(24,423	)	(29,406	)	
 	Depreciation	 	(29,201	)	(31,694	)	(27,114	)	(13,532	)	(14,214	)	
 	Amortization of deferred drydocking and special survey costs	 	(1,279	)	(2,096	)	(3,922	)	(1,630	)	(2,491	)	
 	Bad debt expense	 	(67	)	(429	)	(200	)	(82	)	(194	)	
 	General and administrative expenses	 	(4,132	)	(4,050	)	(5,058	)	(2,082	)	(3,502	)	
 	Gain/(loss) on sale of vessels	 	6,765	 	7,667	 	—	 	—	 	14,954	 	
 	 		 		 		 		 		 	
 	 	Income from operations	 	71,313	 	125,105	 	143,679	 	79,193	 	76,318	 	
 	 		 		 		 		 		 	
 	Interest income	 	1,207	 	2,638	 	6,345	 	3,319	 	2,087	 	
 	Interest expense	 	(8,792	)	(11,559	)	(23,415	)	(10,119	)	(14,841	)	
 	Other finance costs, net	 	(406	)	1,424	 	(7,081	)	(4,357	)	2,493	 	
 	Other income/(expense), net	 	647	 	1,076	 	491	 	16	 	(15,346	)	
 	(Loss)/gain on fair value of derivatives	 	(4,115	)	(2,225	)	2,831	 	4,501	 	(6,331	)	
 	 		 		 		 		 		 	
 	Total other income/(expenses), net	 	(11,459	)	(8,646	)	(20,829	)	(6,640	)	(31,938	)	
 	 		 		 		 		 		 	
 	 	 	Net income	 	$59,854	 	$116,459	 	$122,850	 	$72,553	 	$44,380	 	
 	 		 		 		 		 		 	
 	Basic and diluted net income per share of common stock	 	$1.35	 	$2.63	 	$2.77	 	$1.64	 	$1.00	 	
 	Basic and diluted weighted average number of shares	 	44,308	 	44,308	 	44,308	 	44,308	 	44,308	 	

OTHER FINANCIAL DATA	

 	

 	

 	

 	Net cash provided by operating activities	 	85,218	 	129,056	 	162,235	 	84,103	 	72,932	 	
 	Net cash used in investing activities	 	(226,435	)	(154,747	)	(40,538	)	(12,371	)	(52,669	)	
 	Net cash (used in)/provided by financing activities	 	187,332	 	45,133	 	(180,705	)	3,296	 	(26,647	)	
 	Net increase/(decrease) in cash and cash equivalents	 	46,115	 	19,442	 	(59,008	)	75,028	 	(6,384	)	

OTHER DATA	

 	

 	

 	

 	EBITDA (unaudited)(1)	 	$97,919	 	$159,170	 	$170,956	 	$94,515	 	$73,839	 	
7

 
 	 	As of December 31,
	 	 	
 			 	As of June 30,
2006
	
 	 	2004
	 	2005
			
BALANCE SHEET DATA	 	 	 	 	 	 	
 	Total current assets	 	$129,540	 	$64,012	 	$46,799	
 	Total assets	 	1,005,981	 	945,758	 	1,016,245	
 	Total current liabilities	 	77,602	 	70,484	 	76,706	
 	Total long-term debt, including current portion	 	601,400	 	666,738	 	639,224	
 	Total stockholders' equity	 	384,468	 	262,725	 	307,105	

(1)
EBITDA represents net income before interest, income tax expense, depreciation and amortization. However, EBITDA is not a recognized measurement under U.S. generally accepted accounting principles, or "GAAP." We believe that the presentation of EBITDA is useful to investors because it is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry. We also believe that EBITDA is useful in evaluating our ability to service additional debt and make capital expenditures. In addition, we believe that EBITDA is useful in evaluating our operating performance and liquidity position compared to that of other companies in our industry because the calculation of EBITDA generally eliminates the effects of financings, income taxes and the accounting effects of capital expenditures and acquisitions, items which may vary for different companies for reasons unrelated to overall operating performance and liquidity.

EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

•
EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments;

•
EBITDA does not reflect the interest expense or the cash requirements necessary to service interest or principal payments on our debt;

•
EBITDA does not reflect changes in or cash requirements for our working capital needs; and

•
other companies in our industry may calculate EBITDA differently than we do, limiting its usefulness as a comparative measure.

Because of these limitations, EBITDA should not be considered a measure of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our GAAP results and using EBITDA only supplementally.
8

The following table sets forth a reconciliation of net cash from operating activities and net income to EBITDA (unaudited) for the periods presented:

 	 	Year Ended December 31,
	 	Six Months Ended June 30,
	 	
 	 	2003
	 	2004
	 	2005
	 	2005
	 	2006
	 	
 	 	Dollars in thousands
	 	
Reconciliation of Net Cash from Operating Activities to EBITDA (unaudited):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash provided by operating activities	 	$	85,218	 	$	129,056	 	$	162,235	 	$84,103	 	$72,932	 	
 	Net increase/(decrease) in current assets	 	 	(3,487	)	 	15,243	 	 	(21,719	)	(18,375	)	4,205	 	
 	Net increase/(decrease) in current liabilities	 	 	1,938	 	 	(5,602	)	 	7,027	 	15,120	 	(28,606	)	
 	Net interest cost add back	 	 	7,585	 	 	8,921	 	 	17,070	 	6,800	 	12,754	 	
 	Amortization of finance costs	 	 	—	 	 	—	 	 	(101	)	(33	)	(87	)	
 	Written off amount of drydocking/special survey	 	 	—	 	 	—	 	 	—	 	—	 	(259	)	
 	Payments for drydocking/special survey	 	 	2,475	 	 	5,159	 	 	4,505	 	2,989	 	3,942	 	
 	Gain on sale of vessels	 	 	6,765	 	 	7,667	 	 	—	 	—	 	14,954	 	
 	Change in fair value of derivative instruments	 	 	(2,575	)	 	(1,274	)	 	1,939	 	3,911	 	(6,372	)	
 	Change in fair value of hedged debt	 	 	—	 	 	—	 	 	—	 	—	 	376	 	
 	 		 		 		 		 		 	
EBITDA (unaudited)	 	$	97,919	 	$	159,170	 	$	170,956	 	$94,515	 	$73,839	 	
 	 		 		 		 		 		 	
Reconciliation of Net Income to EBITDA (unaudited):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	 	$	59,854	 	$	116,459	 	$	122,850	 	$72,553	 	$44,380	 	
 	Depreciation	 	 	29,201	 	 	31,694	 	 	27,114	 	13,532	 	14,214	 	
 	Amortization of deferred drydocking and special survey costs	 	 	1,279	 	 	2,096	 	 	3,922	 	1,630	 	2,491	 	
 	Interest income	 	 	(1,207	)	 	(2,638	)	 	(6,345	)	(3,319	)	(2,087	)	
 	Interest expense	 	 	8,792	 	 	11,559	 	 	23,415	 	10,119	 	14,841	 	
 	 		 		 		 		 		 	
EBITDA (unaudited)	 	$	97,919	 	$	159,170	 	$	170,956	 	$94,515	 	$73,839	 	
 	 		 		 		 		 		 	
9

 
 RISK FACTORS
               Any investment in our common stock involves a high degree of risk. You should consider carefully the following risk factors, as well as the other information contained in this prospectus, before making an investment in our common stock. Any of the risk factors described below could significantly and negatively affect our business, financial condition or operating results, which may reduce our ability to pay dividends and lower the trading price of our common stock. You may lose all or part of your investment .
Risks Inherent in Our Business
Our growth depends upon continued growth in demand for containerships. The ocean-going container shipping industry may be at or near the peak of its upward trend and charter hire rates are at or near historical highs. These factors may lead to reductions and volatility in charter hire rates and profitability.
              The ocean-going container shipping industry is both cyclical and volatile in terms of charter hire rates and profitability. Over the past few months charter-hire rates have dropped significantly. The industry's upward trend may have passed its peak, as charter hire rates have been falling from recent historically high levels. In the future, rates may contract further. Fluctuations in charter rates result from changes in the supply and demand for ship capacity and changes in the supply and demand for the major products internationally transported by containerships. Although in the last few decades there has been a trend toward liner companies chartering-in containership capacity from charter owners, such as us, if this trend changes, demand for our containerships could be reduced. This and other factors affecting the supply and demand for containerships and supply and demand for products shipped in containers are outside of our control, and the nature, timing and degree of changes in industry conditions are unpredictable.
              The factors that influence demand for containership capacity include:
•
supply and demand for products suitable for shipping in containers;

•
changes in global production of products transported by containerships;

•
the distance container cargo products are to be moved by sea;

•
the globalization of manufacturing;

•
global and regional economic and political conditions;

•
developments in international trade;

•
changes in seaborne and other transportation patterns, including changes in the distances over which container cargoes are transported;

•
environmental and other regulatory developments;

•
currency exchange rates; and

•
weather.

              The factors that influence the supply of containership capacity include:
•
the number of newbuilding deliveries;

•
the scrapping rate of older containerships;

•
the price of steel and other raw materials;

•
changes in environmental and other regulations that may limit the useful life of containerships;
10

•
the number of containerships that are out of service; and

•
port congestion.
              Our ability to recharter our containerships upon the expiration or termination of their current charters and the charter rates payable under any renewal or replacement charters will depend upon, among other things, the prevailing state of the containership charter market. If the charter market is depressed when our vessels' charters expire, we may be forced to recharter our vessels at reduced rates or even possibly a rate whereby we incur a loss, which may reduce our earnings or make our earnings volatile. The same issues will exist if we acquire additional vessels and attempt to obtain multi-year time charter arrangements as part of our acquisition and financing plan.
Due to our lack of diversification following the sale of our drybulk carriers, adverse developments in our containership transportation business could reduce our ability to meet our payment obligations and our profitability.
              In August 2006, we agreed to sell the six drybulk carriers in our fleet, with an aggregate capacity of 342,158 dwt, for an aggregate of $143.5 million. Pursuant to the terms of this agreement, we expect to deliver these vessels to the purchaser, which is not affiliated with us, as each vessel's respective charter expires over the next six to eight months. During the time prior to delivery, we will continue to operate the vessels and, accordingly, receive the revenues and incur the expenses associated with such operation. We intend to reinvest in the drybulk sector of the shipping industry within the next several months, subject to market conditions, including the availability of more recently built and suitably configured vessels. We have not yet, however, identified any specific drybulk carriers to purchase. During the period after the delivery to the purchaser of the six drybulk carriers and until we acquire replacement drybulk carriers, we will rely exclusively on the cash flow generated from our charters that operate in the containership sector of the shipping industry. Due to our lack of diversification, an adverse development in the container shipping industry would have a significantly greater impact on our financial condition and results of operations than if we maintained more diverse assets or lines of business.
An economic slowdown in the Asia Pacific region could have a material adverse effect on our business, financial position and results of operations.
              A number of the port calls made by our vessels are in the Asia Pacific region. As a result, a negative change in economic conditions in any Asia Pacific country, particularly in China or Japan, may have an adverse effect on our business and results of operations, as well as our future prospects. In particular, in recent years, China has been one of the world's fastest growing economies in terms of gross domestic product. We cannot assure you that such growth will be sustained or that the Chinese economy will not experience negative growth in the future. Moreover, any slowdown in the economies of the United States, the European Union or certain Asian countries may adversely effect economic growth in China and elsewhere. Our business, financial position and results of operations, as well as our future prospects, would likely be materially and adversely affected by an economic downturn in any of these countries.
Charter hire rates in the drybulk sector were recently near historically high levels and future growth will depend on continued economic growth in the world economy that exceeds the capacity of the growing world drybulk fleet's ability to match it.
              The drybulk shipping sector, which we anticipate reinvesting in within the next several months, is cyclical with attendant volatility in profitability, charter rates and vessel values. Charter hire rates for the drybulk sector reached near historically high levels in late 2004 and then declined significantly during 2005. We anticipate that future demand for any as yet unidentified drybulk carriers in which we
11

invest, and in turn the future charter hire rates for any drybulk carriers we acquire, will be dependent upon continued economic growth in the world's economy, particularly in China and India, and will be influenced by seasonal and regional changes in demand and changes in the capacity of the world's drybulk fleet. We believe the capacity of the world's drybulk fleet will increase and there can be no assurance that economic growth will continue. A decline in demand for commodities transported in drybulk carriers or an increase in supply of drybulk carriers could cause a decline in charter hire rates which could have a material adverse effect on the return on any investment we make in the drybulk sector.
An over-supply of containership capacity may lead to reductions in charter hire rates and profitability.
              The market supply of containerships has been increasing, and the number of containerships on order have recently reached historic highs. These newbuildings are expected to begin being delivered in significant numbers at the beginning of 2007. An over-supply of containership capacity may result in a reduction of charter hire rates. If such a reduction occurs upon the expiration or termination of our containerships' current charters, such as during 2007, when we expect to have to charter eight of the vessels in our fleet, we may only be able to recharter those containerships at reduced or unprofitable rates or we may not be able to charter our vessels at all.
We may have difficulty properly managing our growth through acquisitions of additional vessels.
              We intend to grow our business by ordering newbuildings and through selective acquisitions of additional vessels. Our future growth will primarily depend on:
•
locating and acquiring suitable vessels;

•
identifying and consummating vessel acquisitions or joint ventures relating to vessel acquisitions;

•
enlarging our customer base;

•
managing our expansion;

•
the operations of the shipyard building any newbuildings we may order; and

•
obtaining required financing on acceptable terms.
              During periods in which charter hire rates are high, vessel values generally are high as well, and it may be difficult to consummate vessel acquisitions at favorable prices. In addition, growing any business by acquisition presents numerous risks, such as managing relationships with customers and integrating newly acquired assets into existing infrastructure. We cannot give any assurance that we will be successful in executing our growth plans or that we will not incur significant expenses and losses in connection with our future growth efforts.
Delays in deliveries of our additional 14 newbuilding containerships or the two secondhand containerships we have agreed to acquire could harm our operating results.
              The additional 14 newbuilding and two secondhand containerships we have agreed to acquire are expected to be delivered to us at various times between November 2006 and December 2009. Delays in the delivery of these vessels, or any other newbuildings we may order or secondhand vessels we may agree to acquire, would delay our receipt of revenues under the arranged time charters and could possibly result in the cancellation of those time charters, and therefore adversely affect our anticipated results of operations.
12

              The delivery of the newbuildings could be delayed because of, among other things:
•
work stoppages or other labor disturbances or other events that disrupt the operations of the shipyard building the vessels;

•
quality or engineering problems;

•
changes in governmental regulations or maritime self-regulatory organization standards;

•
lack of raw materials;

•
bankruptcy or other financial crisis of the shipyard building the vessel;

•
our inability to obtain requisite financing or make timely payments;

•
a backlog of orders at the shipyard building the vessel;

•
hostilities, political or economic disturbances in the countries where the containerships are being built;

•
weather interference or catastrophic event, such as a major earthquake or fire;

•
our requests for changes to the original vessel specifications;

•
shortages of or delays in the receipt of necessary construction materials, such as steel;

•
our inability to obtain requisite permits or approvals; or

•
a dispute with the shipyard building the vessel.
              The delivery of the secondhand containerships we have agreed to acquire could be delayed because of, among other things, hostilities or political disturbances, non-performance of the purchase agreement with respect to the vessels by the seller, our inability to obtain requisite permits, approvals or financing or damage to or destruction of the vessels while being operated by the seller prior to the delivery date.
Certain of our containerships are subject to purchase options held by the current charterer of the vessels, which, if exercised, could reduce the size of our containership fleet and reduce our future revenues.
              The charters with respect to the APL England , the APL Scotland, the APL Holland and the APL Belgium include an option for the charterer, APL-NOL, to purchase each vessel in February 2007, May 2007, July 2007 and January 2008, respectively, each at a price of $44.0 million or in February 2009, May 2009, July 2009 and January 2010, respectively, each at a price of $39.0 million. APL-NOL has recently exercised its option to purchase the APL England and is expected to take delivery of the vessel in February 2007. Although when negotiated, the option exercise prices with respect to these vessels reflected expected market prices, which approximated the vessels' book values net of depreciation, at the time the options became exercisable, we currently believe that the $44.0 million and $39.0 million option exercise prices will be below the fair market value of the vessels at the time the options become exercisable. If APL-NOL were to exercise these options with respect to the three remaining vessels, the size of our fleet would be reduced and, we may be unable to replace these vessels at a cost equal to the option prices paid by APL-NOL. As a result, our revenues and results of operations would be adversely affected.
Operating older vessels may result in increased operating costs and reduced fleet utilization.
              In general, the costs to maintain a vessel in good operating condition increase with the age of the vessel. Older vessels are typically less fuel-efficient than more recently constructed vessels due to improvements in engine technology.
13

              Governmental regulations, safety and other equipment standards related to the age of vessels may require expenditures for alterations or the addition of new equipment to some of our vessels, and may restrict the type of activities in which these vessels may engage. We cannot assure you that, as our vessels age, market conditions will justify such expenditures or will enable us to profitably operate our vessels during the remainder of their estimated useful lives.
Over time, containership values may fluctuate substantially and, if these values are lower at a time when we are attempting to dispose of a vessel, we may incur a loss.
              Containership values can fluctuate substantially over time due to a number of different factors, including:
•
prevailing economic conditions in the markets in which containerships operate;

•
a substantial or extended decline in world trade;

•
increases in the supply of containership capacity;

•
prevailing charter rates; and

•
the cost of retrofitting or modifying existing ships, as a result of technological advances in vessel design or equipment, changes in applicable environmental or other regulations or standards, or otherwise.
              In the future, if the market values of our vessels deteriorate significantly, we may be required to record an impairment charge in our financial statements, which could adversely affect our results of operations. If a charter terminates, we may be unable to re-charter the vessel at an acceptable rate and, rather than continue to incur costs to maintain and finance the vessel, may seek to dispose of it. Our inability to dispose of the containership at a reasonable price could result in a loss on its sale and adversely affect our results of operations and financial condition.
Our growth depends on our ability to expand relationships with existing charterers and to obtain new time charterers, for which we will face substantial competition.
              One of our principal objectives is to acquire additional containerships in conjunction with entering into additional multi-year, fixed-rate time charters for these ships. The process of obtaining new multi-year time charters is highly competitive and generally involves an intensive screening process and competitive bids, and often extends for several months. Container shipping charters are awarded based upon a variety of factors relating to the vessel operator, including:
•
shipping industry relationships and reputation for customer service and safety;

•
container shipping experience and quality of ship operations (including cost effectiveness);

•
quality and experience of seafaring crew;

•
the ability to finance containerships at competitive rates and financial stability in general;

•
relationships with shipyards and the ability to get suitable berths;

•
construction management experience, including the ability to obtain on-time delivery of new ships according to customer specifications;

•
willingness to accept operational risks pursuant to the charter, such as allowing termination of the charter for force majeure events; and

•
competitiveness of the bid in terms of overall price.
14

              We expect substantial competition from a number of experienced companies, including state-sponsored entities and major shipping companies. Some of these competitors have significantly greater financial resources than we do, and can therefore operate larger fleets and may be able to offer better charter rates. We anticipate that an increasing number of marine transportation companies will enter the containership sector, including many with strong reputations and extensive resources and experience. This increased competition may cause greater price competition for time charters. As a result of these factors, we may be unable to expand our relationships with existing customers or to obtain new customers on a profitable basis, if at all, which would have a material adverse effect on our business, results of operations and financial condition and our ability to pay dividends to our stockholders.
We may have more difficulty entering into multi-year, fixed-rate time charters if a more active short-term or spot container shipping market develops.
              One of our principal strategies is to enter into multi-year, fixed-rate containership time charters in both strong and weak charter rate environments, although in weaker charter rate environments we would generally expect to target somewhat shorter charter terms of three to six years. As more vessels become available for the spot or short-term market, we may have difficulty entering into additional multi-year, fixed-rate time charters for our containerships due to the increased supply of containerships and the possibility of lower rates in the spot market and, as a result, our cash flows may be subject to instability in the long-term. A more active short-term or spot market may require us to enter into charters based on changing market rates, as opposed to contracts based on a fixed rate, which could result in a decrease in our cash flows and net income in periods when the market for container shipping is depressed or insufficient funds are available to cover our financing costs for related containerships.
In the highly competitive international container shipping industry and, following reinvestment by us in the drybulk sector, drybulk shipping industry, we may not be able to compete for charters with new entrants or established companies with greater resources.
              We employ our 27 containerships, and expect to employ any drybulk carriers we acquire in the future, in highly competitive markets that are capital intensive and highly fragmented. Competition arises primarily from other vessel owners, some of whom, particularly in the drybulk sector, have substantially larger fleets than we do.
              Competition for the transportation of drybulk cargoes can be intense and depends upon price, location, size, age, condition and acceptability of the vessel and its managers to the charterers. Due in part to the highly fragmented market, competitors with greater resources could enter the market and operate larger fleets through consolidations or acquisitions and may be able to offer more competitive prices and vessels.
              A number of our competitors in the containership sector have been financed by the German KG (Kommanditgesellschaft) system, which provided tax benefits to private investors. Although the German tax law has been amended recently to significantly restrict the tax benefits to taxpayers who invest after November 5, 2005, the tax benefits afforded to all investors in the KG-financed entities will continue to be significant, and such entities will continue to be attractive investments. These tax benefits allow the KG-financed entities more flexibility in offering lower charter rates to liner companies. As a result of the flexibility to offer lower charter rates, KG-financed containership owners comprise a substantial portion of the containership charter market. Further, since the charter rate is generally considered to be one of the principal factors in a charterer's decision to charter a vessel, the rates offered by these sizeable competitors can reduce the rates throughout the charter market.
15

We depend upon a limited number of customers for a large part of our revenues. The loss of these customers could adversely affect our financial performance.
              Our customers in the containership sector consist of a limited number of liner operators. The percentage of our revenues derived from these customers has varied in past years. In the past several years APL-NOL, Hanjin Shipping and HMM Korea have represented substantial amounts of our revenue. In 2004, 30% of our revenues were generated by two customers, APL-NOL and HMM Korea and during 2005, two customers, APL-NOL and Korea Lines Corp., generated 28% of our revenues. We expect that a limited number of liner companies may continue to generate a substantial portion of our revenues. If these liner operators cease doing business or do not fulfill their obligations under the charters for our vessels, our results of operations and cash flows could be adversely affected. Further, if we encounter any difficulties in our relationships with these charterers, our results of operations, cash flows and financial condition could be adversely affected.
We will derive substantially all of our revenues from time charters and the loss of any time charter could result in a significant loss of revenue and cash flows.
              Most of our vessels are chartered to charterers under long-term time charters, and these charterers' payments will be our primary source of operating cash flow.
              We could lose a charterer or the benefits of a time charter if:
•
the charterer fails to make charter payments to us because of its financial inability, disagreements with us, defaults on a payment or otherwise;

•
the charterer exercises certain specific limited rights to terminate the charter; or

•
the charterer terminates the charter because the ship fails to meet certain guaranteed speed and fuel consumption requirements and we are unable to rectify the situation or otherwise reach a mutually acceptable settlement.
              If we lose a time charter, we may be unable to re-deploy the related vessel on terms as favorable to us. In the worst case, we may not receive any revenues from that vessel, but we may be required to pay expenses necessary to maintain the vessel in proper operating condition.
              The loss of any of our charterers, time charters or vessels, or a decline in payments under our charters, could have a material adverse effect on our business, results of operations and financial condition and our ability to pay dividends to our stockholders.
Our ability to pay dividends may be limited by the amount of cash we generate from operations following the payment of fees and expenses, by the establishment of any reserves and by additional factors unrelated to our profitability.
              We intend to pay regular quarterly dividends. The amount of dividends we will be able to pay will depend upon the amount of cash we generate from our operations. We may not, however, have sufficient cash available each quarter to pay dividends, as a result of insufficient levels of profit, restrictions on the payment of dividends and the decisions of our management and directors. The amount of cash we will have available for dividends may fluctuate based upon, among other things:
•
the rates we obtain from our charters as well as the rates obtained upon the expiration of our existing charters;

•
the level of our operating costs;

•
the number of unscheduled off-hire days and the timing of, and number of days required for, scheduled drydocking of our containerships;
16

•
vessel acquisitions and related financings, such as restrictions in our credit facilities and in any future debt programs;

•
prevailing global and regional economic and political conditions;

•
the effect of governmental regulations and maritime self-regulatory organization standards on the conduct of our business; and

•
changes in the basis of taxation of our activities in various jurisdictions.
              The actual amount of cash we will have available for dividends will also depend on many factors, including:
•
changes in our operating cash flows, capital expenditure requirements, working capital requirements and other cash needs;

•
our fleet expansion strategy and associated uses of our cash and our financing requirements;

•
modification or revocation of our dividend policy by our board of directors;

•
the amount of any cash reserves established by our board of directors; and

•
restrictions under Marshall Islands law.
              The amount of cash we generate from our operations may differ materially from our net income or loss for the period, which will be affected by non-cash items. We may incur other expenses or liabilities that could reduce or eliminate the cash available for distribution as dividends. Our credit facilities also restrict our ability to declare and pay dividends if an event of default has occurred and is continuing or if the payment of the dividend would result in an event of default. In addition, Marshall Islands law generally prohibits the payment of dividends other than from surplus (retained earnings and the excess of consideration received for the sale of stock above the par value of the stock), or while a company is insolvent or if it would be rendered insolvent by the payment of such a dividend, and any such dividend may be discontinued at the discretion of our board of directors. As a result of these and the other factors mentioned above, we may pay dividends during periods when we record losses and may not pay dividends during periods when we record net income.
We are a holding company and we depend on the ability of our subsidiaries to distribute funds to us in order to satisfy our financial obligations and to make dividend payments.
              We are a holding company and our subsidiaries conduct all of our operations and own all of our operating assets. We have no significant assets other than the equity interests in our subsidiaries. As a result, our ability to make dividend payments depends on our subsidiaries and their ability to distribute funds to us. The ability of a subsidiary to make these distributions could be affected by a claim or other action by a third party, including a creditor, or by the law of their respective jurisdictions of incorporation which regulates the payment of dividends by companies. If we are unable to obtain funds from our subsidiaries, our board of directors may exercise its discretion not to declare or pay dividends. We do not intend to seek to obtain funds from other sources to pay dividends.
Our credit facilities or other financing arrangements contain restrictive covenants that may limit our liquidity and our ability to expand our fleet.
              Our credit facilities impose, and our future financing arrangements may impose, operating and financial restrictions on us. These restrictions may limit our ability to:
•
incur additional indebtedness;

•
create liens on our assets;

•
sell capital stock of our subsidiaries;

•
make investments;

•
engage in mergers or acquisitions;
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•
pay dividends; or

•
make capital expenditures.
              Certain of our credit facilities require us to maintain specified financial ratios and satisfy financial covenants. These financial ratios and covenants include requirements that we:
•
maintain stockholders' equity of at least $250.0 million;

•
ensure that the aggregate market value of the vessels in our fleet exceeds 145.0% of our net consolidated debt at all times;

•
maintain adjusted stockholders' equity in excess of 30.0% of our total assets;

•
ensure that our outstanding bank debt does not exceed 75.0% of the aggregate value of our vessels mortgaged under the relevant credit facility;

•
maintain at least $30.0 million in cash or cash equivalents; and

•
maintain a ratio of EBITDA to net interest expense of no less than 2.5 to 1.0.
              The covenants described above are those contained in our existing credit facilities. The covenants that will be contained in our new senior credit facilities differ slightly. See "Description of Indebtedness" for more information about our existing credit facilities and our new senior credit facilities.
              A failure to meet our payment and other obligations could lead to defaults under our secured credit facilities. Our lenders could then accelerate our indebtedness and foreclose on the vessels in our fleet securing those credit facilities. The loss of these vessels would have a material adverse effect on our operating results and financial condition.
In 2005, we declared and paid dividends comprising a substantial portion of our cash on hand as of December 31, 2005. As a result, we have limited cash reserves and would need to seek financing should any circumstance arise that required significant liquid resources prior to completion of this offering or our obtaining the new senior revolving credit facilities we intend to obtain.
              In 2005, we paid dividends of $244.6 million to our existing stockholders from our retained earnings which comprised a substantial portion of our cash on hand as of December 31, 2005. As a result, our principal source of cash reserves is our earnings since that time. We do not currently have a revolving credit facility. Accordingly, should circumstances arise that require significant liquid resources prior to the completion of this offering or prior to our obtaining the new senior revolving credit facilities, we would have to obtain a loan providing these funds from other lenders, from our existing credit facilities, from our existing stockholders or other sources. There can be no assurance that we would be able to obtain such financing on favorable terms or at all, and our business and results of operations could be adversely affected by this lack of liquidity.
We will be exposed to fluctuations in the value of the British pound if the put options with respect to certain vessels in our containership fleet are not exercised and if recent changes in U.K. law have the expected adverse affect on our counterparties to the transaction if the put option is exercised.
              We have entered into leasing arrangements with respect to five containerships in our current fleet, the CSCL Europe , the CSCL America , the Maersk Derby (ex P&O Nedlloyd Caracas ), the Vancouver Express (ex P&O Nedlloyd Caribbean ) and the CSCL Pusan (ex HN 1559) and one of the containerships under construction, the HN 1561 . Pursuant to these arrangements, a partnership, formed by a Lloyds Bank subsidiary, its major stockholder, and subsidiaries of Allocean Maritime Limited, holds legal title to the vessels and has a put option upon an event of default, the total loss of the vessel or 6 1 / 2 years into the term of the lease to sell its 99.996% interest in the partnership owning the vessel to Allco Finance (UK) Limited. Allco Finance (UK) Limited then has the option to put such interest to us and has written an option in favor of us (with a substantially similar exercise price) to acquire
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such interest, each of which options are exercisable only after the Lloyds Bank subsidiary has exercised its put option.
              As part of these leasing arrangements, we made a deposit with The Royal Bank of Scotland as issuer of a letter of credit that supports our purchase obligations with respect to each of these vessels. In relation to this deposit we will receive a pre-set amount, denominated in British pounds, which is expected to represent, after 6 1 / 2 years, approximately 75% of the original purchase price of each vessel should the put option to sell these vessels not be exercised. If the value of the British pound declines against the dollar we may receive less compensation for these vessels than anticipated. Although we have entered into forward contracts to economically hedge our exposure to currency fluctuations in connection with certain aspects of the leasing transactions, we have not hedged against fluctuations in the value of the British pound against the dollar with respect the value of the deposit to which we would be entitled if the put option is not exercised. As a result, our operating results could be affected if the value of the British pound against the dollar were to deteriorate at the time these amounts were available to us.
              If the put options are not exercised we would also be entitled to charter-in the vessels for an additional 12 years at rates adjusted to market no less than every two years at our option, rather than at the nominal rate in effect for the first 6 1 / 2 years of the leasing arrangement. In this case we would also expect to exercise options that would entitle us to approximately 49% of the amount in excess fees over the pre-set level of the charter-in rate. However, under these arrangements and depending on market conditions, we may, for certain periods, be forced to pay higher rates to charter-in these vessels than those at which we charter these vessels to our customers. As a result, we could operate these vessels at a loss and our net income could be adversely affected.
              On April 7, 2006, new legislation was proposed in the United Kingdom that is expected to result in a claw-back or recapture of certain of the benefits that were expected to be available to the counterparties to these transactions at their inception. This legislation was enacted on July 19, 2006. Accordingly, the put option price is expected to be increased to compensate the counterparties for the loss of these benefits. We currently expect the increase in the put option price we will be obligated to pay if the put is exercised will be approximately £46 million pounds ($80 million), although the increase in this put price could vary. In the three months ended June 30, 2006, we recognized an expense of approximately $13 million, which is the amount by which we currently expect the increase in the put price to exceed the cash benefits we expect to receive, and had expected to retain, from these transactions.
Because we generate all of our revenues in United States dollars but incur a significant portion of our expenses in other currencies, exchange rate fluctuations could hurt our results of operations.
              We generate all of our revenues in United States dollars and for the year ended December 31, 2005 and the six months ended June 30, 2006, we incurred approximately 42% and 40%, respectively, of our vessels' expenses in currencies other than United States dollars. This difference could lead to fluctuations in net income due to changes in the value of the United States dollar relative to the other currencies, in particular the Euro. Expenses incurred in foreign currencies against which the United States dollar falls in value could increase, thereby decreasing our net income. We have not hedged these risks. Our operating results could suffer as a result.
Our manager has pled guilty to one count of negligent discharge of oil from the Henry (ex APL Guatemala) and one count of obstruction of justice, based on a charge of attempted concealment of the source of the discharge. Any violation of the terms under our plea agreement, or any penalties or heightened environmental compliance plan requirements imposed as a result of any alleged discharge from any other vessel in our fleet calling at U.S. ports could negatively affect our operations and business.
              In the summer of 2001, one of our vessels, the Henry (ex APL Guatemala), experienced engine damage at sea, which resulted in an accumulation of oil and oily water in the vessel's engine room. The
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U.S. Coast Guard found oil in the overboard discharge pipe from the vessel's oily water separator. Subsequently, on July 2, 2001, when the vessel was at anchor in Long Beach, California, representatives of our manager notified authorities of the presence of oil on the water on the starboard side of the vessel. On July 3, 2001, oil was found in an opening through which seawater is taken in to cool the vessel's engines. The U.S. Attorney's Office for the Central District of California conducted a criminal investigation into both of these matters that shifted from the conditions observed in June 2001 to the July 2 release and the events that followed it. Our manager has entered into a plea agreement with the U.S. Attorney, on behalf of the government, which was filed with the U.S. District Court on June 20, 2006, pursuant to which our manager agreed to plead guilty to one count of negligent discharge of oil and one count of obstruction of justice, based on a charge of attempted concealment of the source of the discharge. Consistent with the government's practice in similar cases, our manager has agreed to develop and implement a third-party consultant monitored environmental compliance plan and to designate an internal corporate compliance manager. This compliance plan would require our manager to prepare an environmental compliance plan manual for approval by such third-party environmental consultant and the U.S. government. The program would also require our manager to arrange for, fund and complete a series of audits of its fleet management offices and of waste streams of the vessels it manages, including all of the vessels in our fleet that call at U.S. ports, as well as an independent, third-party focused environmental compliance plan audit. Our manager also agreed to a probation period of three years under the plea agreement. Our manager has agreed to pay an aggregate of $500,000 in penalties in connection with the charges of negligent discharge and obstruction of justice under the plea agreement, with half of the penalties to be applied to community service projects that will benefit, restore or preserve the environment and ecosystems in the central California area. On August 14, 2006, the court accepted our manager's guilty plea to the two counts, subject to a formal sentencing hearing scheduled for October 23, 2006 as of the date of this prospectus. Any violation of this environmental compliance plan or of the terms of our manager's probation or any penalties, restitution or heightened environmental compliance plan requirements that are imposed relating to alleged discharges in any other action involving our fleet or our manager could negatively affect our operations and business.
We are subject to regulation and liability under environmental laws that could require significant expenditures and affect our cash flows and net income.
              Our business and the operation of our vessels are materially affected by environmental regulation in the form of international, national, state and local laws, regulations, conventions and standards in force in international waters and the jurisdictions in which our vessels operate, as well as in the country or countries of their registration, including those governing the management and disposal of hazardous substances and wastes, the cleanup of oil spills and other contamination, air emissions, water discharges and ballast water management. Because such conventions, laws, and regulations are often revised, we cannot predict the ultimate cost of complying with such requirements or the impact thereof on the resale price or useful life of our vessels. Additional conventions, laws and regulations may be adopted that could limit our ability to do business or increase the cost of doing business and which may materially and adversely affect our operations. We are required by various governmental and quasi-governmental agencies to obtain certain permits, licenses, certificates and financial assurances with respect to our operations. Many environmental requirements are designed to reduce the risk of pollution, such as oil spills, and our compliance with these requirements can be costly.
              Environmental requirements can also affect the resale value or useful lives of our vessels, could require a reduction in cargo capacity, ship modifications or operational changes or restrictions, could lead to decreased availability of insurance coverage for environmental matters or result in the denial of access to certain jurisdictional waters or ports, or detention in certain ports. Under local, national and foreign laws, as well as international treaties and conventions, we could incur material liabilities, including cleanup obligations and natural resource damages liability, in the event that there is a release
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of petroleum or other hazardous material from our vessels or otherwise in connection with our operations. We could also become subject to personal injury or property damage claims relating to the release of hazardous materials associated with our existing or historic operations. Violations of, or liabilities under, environmental requirements can result in substantial penalties, fines and other sanctions, including in certain instances, seizure or detention of our vessels.
              The operation of our vessels is also affected by the requirements set forth in the IMO's International Management Code for the Safe Operation of Ships and Pollution Prevention, or the ISM Code. The ISM Code requires shipowners and bareboat charterers to develop and maintain an extensive "Safety Management System" that includes the adoption of a safety and environmental protection policy setting forth instructions and procedures for safe operation and describing procedures for dealing with emergencies. Failure to comply with the ISM Code may subject us to increased liability, may decrease available insurance coverage for the affected ships, and may result in denial of access to, or detention in, certain ports.
              In addition, in complying with existing environmental laws and regulations and those that may be adopted, we may incur significant costs in meeting new maintenance and inspection requirements and new restrictions on air emissions from our containerships, in developing contingency arrangements for potential spills and in obtaining insurance coverage. Government regulation of vessels, particularly in the areas of safety and environmental requirements, can be expected to become stricter in the future and could require us to incur significant capital expenditures on our vessels to keep them in compliance, or even to scrap or sell certain vessels altogether. As a result of accidents such as the November 2002 oil spill relating to the loss of the m.t. Prestige , a 26-year old single-hull product tanker unrelated to us, we believe that regulation of the shipping industry will continue to become more stringent and more expensive for us and our competitors. Substantial violations of applicable requirements or a catastrophic release of bunker fuel from one of our vessels could have a material adverse impact on our financial condition, results of operations and our ability to pay dividends to our stockholders. For additional information on these and other environmental requirements, you should carefully review the information contained in "Environmental and Other Regulations."
Increased inspection procedures, tighter import and export controls and new security regulations could cause disruption of our containership business and of the business of any drybulk carriers we acquire in the future.
              International container and drybulk shipping are subject to security and customs inspection and related procedures in countries of origin, destination, and certain trans-shipment points. These inspection procedures can result in cargo seizure, delays in the loading, offloading, trans-shipment, or delivery of containers, and the levying of customs duties, fines or other penalties against exporters or importers and, in some cases, charterers and charter owners.
              Since the events of September 11, 2001, United States authorities have more than doubled container inspection rates to over 5% of all imported containers. Government investment in non-intrusive container scanning technology has grown and there is interest in electronic monitoring technology, including so-called "e-seals" and "smart" containers, that would enable remote, centralized monitoring of containers during shipment to identify tampering with or opening of the containers, along with potentially measuring other characteristics such as temperature, air pressure, motion, chemicals, biological agents and radiation.
              It is unclear what changes, if any, to the existing inspection procedures will ultimately be proposed or implemented, or how any such changes will affect the industry. It is possible that such changes could impose additional financial and legal obligations, including additional responsibility for inspecting and recording the contents of containers. Changes to the inspection procedures and container and drybulk security could result in additional costs and obligations on carriers and may, in certain cases, render the shipment of certain types of goods by container uneconomical or impractical. Additional costs may arise from current inspection procedures or future proposals may not be fully recoverable from customers through higher rates or security surcharges.
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Governments could requisition our vessels during a period of war or emergency, resulting in loss of earnings.
              A government of a ship's registry could requisition for title or seize our vessels. Requisition for title occurs when a government takes control of a ship and becomes the owner. Also, a government could requisition our containerships for hire. Requisition for hire occurs when a government takes control of a ship and effectively becomes the charterer at dictated charter rates. Generally, requisitions occur during a period of war or emergency. Government requisition of one or more of our vessels may negatively impact our revenues and results of operations.
Terrorist attacks and international hostilities could affect our results of operations and financial condition.
              Terrorist attacks such as the attacks on the United States on September 11, 2001, and the continuing response of the United States to these attacks, as well as the threat of future terrorist attacks, continue to cause uncertainty in the world financial markets and may affect our business, results of operations and financial condition. The recent conflict in Iraq may lead to additional acts of terrorism, regional conflict and other armed conflicts around the world, which may contribute to further economic instability in the global financial markets. These uncertainties could also adversely affect our ability to obtain additional financing on terms acceptable to us, or at all.
              Terrorist attacks targeted at sea vessels, such as the October 2002 attack in Yemen on the VLCC Limburg , a ship not related to us, may in the future also negatively affect our operations and financial condition and directly impact our containerships or our customers. Future terrorist attacks could result in increased volatility of the financial markets in the United States and globally and could result in an economic recession affecting the United States or the entire world. Any of these occurrences could have a material adverse impact on our operating results, revenue and costs.
              Changing economic, political and governmental conditions in the countries where we are engaged in business or where our vessels are registered could affect us. In addition, future hostilities or other political instability in regions where our vessels trade could also affect our trade patterns and adversely affect our operations and performance.
Risks inherent in the operation of ocean-going vessels could affect our business and reputation, which could adversely affect our expenses, net income and stock price.
              The operation of ocean-going vessels carries inherent risks. These risks include the possibility of:
•
marine disaster;

•
environmental accidents;

•
grounding, fire, explosions and collisions;

•
cargo and property losses or damage;

•
business interruptions caused by mechanical failure, human error, war, terrorism, political action in various countries, or adverse weather conditions;

•
work stoppages or other labor problems with crew members serving on our vessels, substantially all of whom are unionized and covered by collective bargaining agreements; and

•
piracy.
              Such occurrences could result in death or injury to persons, loss of property or environmental damage, delays in the delivery of cargo, loss of revenues from or termination of charter contracts, governmental fines, penalties or restrictions on conducting business, higher insurance rates, and damage to our reputation and customer relationships generally. Any of these circumstances or events could increase our costs or lower our revenues, which could result in reduction in the market price of our shares of common stock. The involvement of our vessels in an environmental disaster may harm our reputation as a safe and reliable vessel owner and operator.
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Our insurance may be insufficient to cover losses that may occur to our property or result from our operations due to the inherent operational risks of the shipping industry.
              The operation of any vessel includes risks such as mechanical failure, collision, fire, contact with floating objects, property loss, cargo loss or damage and business interruption due to political circumstances in foreign countries, hostilities and labor strikes. In addition, there is always an inherent possibility of a marine disaster, including oil spills and other environmental mishaps. There are also liabilities arising from owning and operating vessels in international trade. We procure insurance for our fleet against risks commonly insured against by vessel owners and operators. Our current insurance includes (i) hull and machinery insurance covering damage to our vessels' hull and machinery from, among other things, contact with free and floating objects, (ii) war risks insurance covering losses associated with the outbreak or escalation of hostilities and (iii) protection and indemnity insurance (which includes environmental damage and pollution insurance) covering third-party and crew liabilities such as expenses resulting from the injury or death of crew members, passengers and other third parties, the loss or damage to cargo, third-party claims arising from collisions with other vessels, damage to other third-party property, pollution arising from oil or other substances and salvage, towing and other related costs and loss of hire insurance for the CSCL Europe , the CSCL America , the CSCL Pusan (ex HN 1559) and the HN 1561 .
              We can give no assurance that we are adequately insured against all risks or that our insurers will pay a particular claim. Even if our insurance coverage is adequate to cover our losses, we may not be able to obtain a timely replacement vessel in the event of a loss. Under the terms of our credit facilities, we will be subject to restrictions on the use of any proceeds we may receive from claims under our insurance policies. Furthermore, in the future, we may not be able to obtain adequate insurance coverage at reasonable rates for our fleet. We may also be subject to calls, or premiums, in amounts based not only on our own claim records but also the claim records of all other members of the protection and indemnity associations through which we receive indemnity insurance coverage for tort liability. Our insurance policies also contain deductibles, limitations and exclusions which, although we believe are standard in the shipping industry, may nevertheless increase our costs.
              In addition, we do not carry loss of hire insurance (other than for the CSCL Europe , the CSCL America , the CSCL Pusan (ex HN 1559) and the HN 1561 to satisfy our loan agreement requirements). Loss of hire insurance covers the loss of revenue during extended vessel off-hire periods, such as those that occur during an unscheduled drydocking due to damage to the vessel from accidents. Accordingly, any loss of a vessel or any extended period of vessel off-hire, due to an accident or otherwise, could have a material adverse effect on our business, results of operations and financial condition and our ability to pay dividends to our stockholders.
Maritime claimants could arrest our vessels, which could interrupt our cash flows.
              Crew members, suppliers of goods and services to a vessel, shippers of cargo and other parties may be entitled to a maritime lien against that vessel for unsatisfied debts, claims or damages. In many jurisdictions, a maritime lienholder may enforce its lien by arresting a vessel through foreclosure proceedings. The arrest or attachment of one or more of our vessels could interrupt our cash flows and require us to pay large sums of money to have the arrest lifted.
              In addition, in some jurisdictions, such as South Africa, under the "sister ship" theory of liability, a claimant may arrest both the vessel that is subject to the claimant's maritime lien and any "associated" vessel, which is any vessel owned or controlled by the same owner. Claimants could try to assert "sister ship" liability against one vessel in our fleet for claims relating to another of our ships.
The aging of our fleet may result in increased operating costs in the future, which could adversely affect our earnings.
              In general, the cost of maintaining a vessel in good operating condition increases with the age of the vessel. As our fleet ages, we will incur increased costs. Older vessels are typically less fuel
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efficient and more costly to maintain than more recently constructed vessels due to improvements in engine technology. Cargo insurance rates also increase with the age of a vessel, making older vessels less desirable to charterers. Governmental regulations and safety or other equipment standards related to the age of a vessel may also require expenditures for alterations or the addition of new equipment to our vessels and may restrict the type of activities in which our vessels may engage. Although our current fleet of 27 containerships will have an average age (weighted by TEU capacity) of approximately 11.4 years as of October 1, 2006, we cannot assure you that, as our vessels age, market conditions will justify such expenditures or will enable us to profitably operate our vessels during the remainder of their expected useful lives.
Compliance with safety and other requirements imposed by classification societies may be very costly and may adversely affect our business.
              The hull and machinery of every commercial vessel must be classed by a classification society authorized by its country of registry. The classification society certifies that a vessel is safe and seaworthy in accordance with the applicable rules and regulations of the country of registry of the vessel and the Safety of Life at Sea Convention, and all vessels must be awarded ISM certification.
              A vessel must undergo annual surveys, intermediate surveys and special surveys. In lieu of a special survey, a vessel's machinery may be on a continuous survey cycle, under which the machinery would be surveyed periodically over a five-year period. Each of the vessels in our fleet is on a special survey cycle for hull inspection and a continuous survey cycle for machinery inspection.
              If any vessel does not maintain its class or fails any annual, intermediate or special survey, and/or loses its certification, the vessel will be unable to trade between ports and will be unemployable, and we could be in violation of certain covenants in our existing loan agreements. This would negatively impact our operating results and financial condition.
Our business depends upon certain employees who may not necessarily continue to work for us.
              Our future success depends to a significant extent upon our chief executive officer, Dr. John Coustas, and certain members of our senior management and that of our manager. Dr. Coustas has substantial experience in the container and drybulk shipping industries and has worked with us and our manager for many years. He and others employed by us and our manager are crucial to the execution of our business strategies and to the growth and development of our business. If the individuals were no longer to be affiliated with us or our manager, or if we were to otherwise cease to receive advisory services from them, we may be unable to recruit other employees with equivalent talent and experience, and our business and financial condition may suffer as a result.
The provisions in our employment arrangements with our chief executive officer restricting his ability to compete with us, like restrictive covenants generally, may not be enforceable.
              In connection with his employment agreement with us, Dr. Coustas, our chief executive officer, has entered into a restrictive covenant agreement with us under which he is precluded during the term of his employment and for one year thereafter from owning and operating drybulk ships or containerships larger than 2,500 TEUs and from acquiring or investing in a business that owns or operates such vessels. Courts generally do not favor the enforcement of such restrictions, particularly when they involve individuals and could be construed as infringing on their ability to be employed or to earn a livelihood. Our ability to enforce these restrictions, should it ever become necessary, will depend upon the circumstances that exist at the time enforcement is sought. We cannot be assured that a court would enforce the restrictions as written by way of an injunction or that we could necessarily establish a case for damages as a result of a violation of the restrictive covenants.
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We depend on our manager to operate our business.
              Pursuant to the management agreement and the individual ship management agreements, our manager and its affiliates may provide us with certain of our officers and will provide us with technical, administrative and certain commercial services (including vessel maintenance, crewing, purchasing, shipyard supervision, insurance, assistance with regulatory compliance and financial services). Our operational success will depend significantly upon our manager's satisfactory performance of these services. Our business would be harmed if our manager failed to perform these services satisfactorily. In addition, if the management agreement were to be terminated or if its terms were to be altered, our business could be adversely affected, as we may not be able to immediately replace such services, and even if replacement services were immediately available, the terms offered could be less favorable than the ones currently offered by our manager.
              Our ability to compete for and enter into new time charters and to expand our relationships with our existing charterers will depend largely on our relationship with our manager and its reputation and relationships in the shipping industry. If our manager suffers material damage to its reputation or relationships, it may harm our ability to:
•
renew existing charters upon their expiration;

•
obtain new charters;

•
successfully interact with shipyards during periods of shipyard construction constraints;

•
obtain financing on commercially acceptable terms;

•
maintain satisfactory relationships with our charterers and suppliers; or

•
successfully execute our business strategies.

              If our ability to do any of the things described above is impaired, it could have a material adverse effect on our business and affect our profitability.
Our manager is a privately held company and there is little or no publicly available information about it.
              The ability of our manager to continue providing services for our benefit will depend in part on its own financial strength. Circumstances beyond our control could impair our manager's financial strength, and because it is a privately held company, information about its financial strength is not available. As a result, an investor in our stock might have little advance warning of problems affecting our manager, even though these problems could have a material adverse effect on us. As part of our reporting obligations as a public company, we will disclose information regarding our manager that has a material impact on us to the extent that we become aware of such information.
We are a Marshall Islands corporation, and the Marshall Islands does not have a well developed body of corporate law.
              Our corporate affairs are governed by our articles of incorporation and bylaws and by the Marshall Islands Business Corporations Act, or BCA. The provisions of the BCA are similar to provisions of the corporation laws of a number of states in the United States. However, there have been few judicial cases in the Republic of The Marshall Islands interpreting the BCA. The rights and fiduciary responsibilities of directors under the law of the Republic of The Marshall Islands are not as clearly established as the rights and fiduciary responsibilities of directors under statutes or judicial precedent in existence in certain U.S. jurisdictions. Stockholder rights may differ as well. While the BCA does specifically incorporate the non-statutory law, or judicial case law, of the State of Delaware and other states with substantially similar legislative provisions, our public stockholders may have more difficulty in protecting their interests in the face of actions by the management, directors or controlling stockholders than would stockholders of a corporation incorporated in a U.S. jurisdiction. For more information with respect to how stockholder rights under Marshall Islands law compare with stockholder rights under Delaware law, please read "Marshall Islands Company Considerations."
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It may be difficult to enforce service of process and enforcement of judgments against us and our officers and directors.
              We are a Marshall Islands corporation, and our executive offices are located outside of the United States in Piraeus, Greece. A majority of our directors and officers reside outside of the United States, and a substantial portion of our assets and the assets of our officers and directors are located outside of the United States. As a result, you may have difficulty serving legal process within the United States upon us or any of these persons. You may also have difficulty enforcing, both in and outside of the United States, judgments you may obtain in the U.S. courts against us or these persons in any action, including actions based upon the civil liability provisions of U.S. federal or state securities laws.
              There is also substantial doubt that the courts of the Marshall Islands or Greece would enter judgments in original actions brought in those courts predicated on U.S. federal or state securities laws.
Risks Relating to the Offering
There is no guarantee that an active and liquid public market will develop for you to resell our common stock.
              Prior to this offering, there has not been a public market for our common stock. A liquid trading market for our common stock may not develop. If an active, liquid trading market does not develop, you may have difficulty selling any of our common stock you buy. The initial public offering price will be determined in negotiations between the representatives of the underwriters and us and may not be indicative of prices that will prevail in the trading market.
              The price of our common stock after this offering may be volatile, and may fluctuate due to factors including:
•
actual or anticipated fluctuations in quarterly and annual results;

•
fluctuations in the containership market or, for periods following our reinvestment in the drybulk sector, the drybulk market;

•
mergers and strategic alliances in the shipping industry;

•
market conditions in the shipping industry;

•
changes in government regulations;

•
shortfalls in our operating results from levels forecasted by securities analysts;

•
payment of dividends;

•
announcements concerning us or our competitors;

•
the general state of the securities market; and

•
other developments affecting us, our industry or our competitors.
              The containership and drybulk sectors of the shipping industry have been highly unpredictable and volatile. The market price for our common stock may also be volatile. Consequently, you may not be able to sell our common stock at prices equal to or greater than those that you pay in this offering.
We will be a "controlled company" under the New York Stock Exchange rules, and as such we are entitled to exemption from certain New York Stock Exchange corporate governance standards, and you may not have the same protections afforded to stockholders of companies that are subject to all of the New York Stock Exchange corporate governance requirements.
              After the consummation of this offering, our current stockholders will continue to control a majority of our outstanding common stock. As a result, we will be a "controlled company" within the meaning of the New York Stock Exchange corporate governance standards. Under the New York Stock Exchange rules, a company of which more than 50% of the voting power is held by another company or group is a "controlled company" and may elect not to comply with certain New York Stock
26

Exchange corporate governance requirements, including (1) the requirement that a majority of the board of directors consist of independent directors, (2) the requirement that the nominating committee be composed entirely of independent directors and have a written charter addressing the committee's purpose and responsibilities, (3) the requirement that the compensation committee be composed entirely of independent directors and have a written charter addressing the committee's purpose and responsibilities and (4) the requirement of an annual performance evaluation of the nominating and corporate governance and compensation committees. Following this offering, we may utilize these exemptions. As a result, non-independent directors, including members of our management who also serve on our board of directors, may serve on the compensation or the nominating and corporate governance committees of our board of directors which, among other things, fix the compensation of our management, make stock and option awards and resolve governance issues regarding our company. Accordingly, in the future you may not have the same protections afforded to stockholders of companies that are subject to all of the New York Stock Exchange corporate governance requirements.
If we do not implement all required accounting practices and policies, we may be unable to provide the required financial information in a timely and reliable manner.
              Prior to this offering, as a privately held company, we did not adopt the financial reporting practices and policies required of a publicly traded company. Implementation of these practices and policies could disrupt our business, distract our management and employees and increase our costs. If we fail to develop and maintain effective controls and procedures, we may be unable to provide the financial information that a publicly traded company is required to provide in a timely and reliable fashion. Any such delays or deficiencies could limit our ability to obtain financing, either in the public capital markets or from private sources, and could thereby impede our ability to implement our growth strategies. In addition, any such delays or deficiencies could result in failure to meet the requirements for continued listing of our common stock on the New York Stock Exchange, which would adversely affect the liquidity of our common stock.
You will incur immediate and substantial dilution as a result of this offering and may experience additional dilution in the future.
              We expect the initial public offering price per share of our common stock to be substantially higher than the pro forma net tangible book value per share of our outstanding common stock. As a result, you would incur immediate and substantial dilution of $11.91 per share, representing the difference between the assumed initial public offering price of $21.00 per share and our pro forma as adjusted net tangible book value per share on June 30, 2006. In addition, purchasers of our common stock in this offering will have contributed approximately 70.3% of the aggregate price paid by all purchasers of our common stock, but will own only approximately 18.8% of the shares outstanding after this offering. Please read "Dilution" for a more detailed description of how dilution may affect you.
Future sales of our common stock could cause the market price of our common stock to decline.
              Sales of a substantial number of shares of our common stock in the public market following this offering, or the perception that these sales could occur, may depress the market price for our common stock. These sales could also impair our ability to raise additional capital through the sale of our equity securities in the future.
              Although we do not currently have any plans to sell additional shares of our common stock, we may issue additional shares of our common stock in the future and our stockholders may elect to sell large numbers of shares held by them from time to time. The number of shares of common stock available for sale in the public market will be limited by restrictions applicable under securities laws and agreements that we and our executive officers, directors and existing stockholders have entered into with the underwriters of this offering. Subject to certain exceptions, these agreements generally
27

restrict us and our executive officers, directors and existing stockholders from directly or indirectly offering, selling, pledging, hedging or otherwise disposing of our equity securities or any security that is convertible into or exercisable or exchangeable for our equity securities and from engaging in certain other transactions relating to such securities for a period of 180 days (730 days in the case of our chief executive officer, John Coustas, and the Coustas Family Trust) after the date of this prospectus without the prior written consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated and Citigroup Global Markets Inc.
The Coustas Family Trust, our principal existing stockholder, will control the outcome of matters on which our stockholders are entitled to vote following this offering and its interests may be different from yours.
              The Coustas Family Trust, under which our chief executive officer is both a beneficiary, together with other members of the Coustas Family, and the protector (which is analogous to a trustee), through Danaos Investments Limited, a corporation wholly-owned by Dr. Coustas, will own, directly or indirectly, approximately 80.0% of our outstanding common stock after this offering, assuming the underwriters do not exercise their overallotment option. This stockholder will be able to control the outcome of matters on which our stockholders are entitled to vote, including the election of our entire board of directors and other significant corporate actions. The interests of this stockholder may be different from yours.
Anti-takeover provisions in our organizational documents could make it difficult for our stockholders to replace or remove our current board of directors or could have the effect of discouraging, delaying or preventing a merger or acquisition, which could adversely affect the market price of the shares of our common stock.
              Several provisions of our articles of incorporation and bylaws could make it difficult for our stockholders to change the composition of our board of directors in any one year, preventing them from changing the composition of our management. In addition, the same provisions may discourage, delay or prevent a merger or acquisition that stockholders may consider favorable.
              These provisions:
•
authorize our board of directors to issue "blank check" preferred stock without stockholder approval;

•
provide for a classified board of directors with staggered, three-year terms;

•
prohibit cumulative voting in the election of directors;

•
authorize the removal of directors only for cause and only upon the affirmative vote of the holders of at least 66 2 / 3 % of the outstanding stock entitled to vote for those directors;

•
prohibit stockholder action by written consent unless the written consent is signed by all stockholders entitled to vote on the action;

•
establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted on by stockholders at stockholder meetings; and

•
restrict business combinations with interested stockholders.
              We have adopted a stockholder rights plan pursuant to which our board of directors may cause the substantial dilution of the holdings of any person that attempts to acquire us without the approval of our board of directors.
              These anti-takeover provisions, including the provisions of our prospective stockholder rights plan, could substantially impede the ability of public stockholders to benefit from a change in control and, as a result, may adversely affect the market price of our common stock and your ability to realize any potential change of control premium.
28

Tax Risks
              In addition to the following risk factors, you should read "Tax Considerations—Marshall Islands Tax Considerations," "Tax Considerations—Liberian Tax Considerations," and "Tax Considerations—United States Federal Income Tax Considerations" for a more complete discussion of expected material Marshall Islands, Liberian and U.S. federal income tax consequences of owning and disposing of our common stock.
We may have to pay tax on U.S.-source income, which would reduce our earnings.
              Under the United States Internal Revenue Code of 1986, as amended, 50% of the gross shipping income of a ship owning or chartering corporation, such as ourselves, that is attributable to transportation that begins or ends, but that does not both begin and end, in the United States is characterized as U.S.-source shipping income and as such is subject to a 4% U.S. federal income tax without allowance for deduction, unless that corporation qualifies for exemption from tax under Section 883 of the Code and the Treasury Regulations promulgated thereunder.
              We expect that we will qualify for this statutory tax exemption and we currently intend to take this position for U.S. federal income tax return reporting purposes. However, there are factual circumstances beyond our control that could cause us to lose the benefit of this tax exemption for 2006 or subsequent years and thereby become subject to U.S. federal income tax on our U.S.-source income. For example, following this offering, 5% stockholders are expected to own the majority of our outstanding stock. This would preclude us from being eligible for the Section 883 exemption based on the trading of our stock unless we can establish that 5% stockholders that are qualified stockholders for purposes of Section 883 (and who comply with specified certification requirements) own, directly or under applicable attribution rules, a sufficient portion of the shares held by our 5% stockholders so as to preclude the shares held by the 5% stockholders that are not so owned from representing 50% or more of our stock for more than half of the number of days during the taxable year. There can be no assurance that a sufficient number of our stockholders will be qualified stockholders for purposes of Section 883 to enable us to continue to be eligible for the Section 883 exemption.
              If we or our subsidiaries are not entitled to this exemption under Section 883 for any taxable year, we or our subsidiaries would be subject for those years to a 4% U.S. federal income tax on our gross U.S. source shipping income. The imposition of this taxation could have a negative effect on our business and would result in decreased earnings available for distribution to our stockholders. Many of our charters contain provisions that obligate the charterers to reimburse us for the 4% gross basis tax on our U.S. source shipping income.
If we were treated as a "passive foreign investment company," certain adverse U.S. federal income tax consequences could result to U.S. stockholders.
              A foreign corporation will be treated as a "passive foreign investment company," or PFIC, for U.S. federal income tax purposes if at least 75% of its gross income for any taxable year consists of certain types of "passive income," or at least 50% of the average value of the corporation's assets produce or are held for the production of those types of "passive income." For purposes of these tests, "passive income" includes dividends, interest, and gains from the sale or exchange of investment property and rents and royalties other than rents and royalties that are received from unrelated parties in connection with the active conduct of a trade or business. For purposes of these tests, income derived from the performance of services does not constitute "passive income." U.S. stockholders of a PFIC are subject to a disadvantageous U.S. federal income tax regime with respect to the income derived by the PFIC, the distributions they receive from the PFIC, and the gain, if any, they derive from the sale or other disposition of their shares in the PFIC. If we are treated as a PFIC for any taxable year, we will provide information to U.S. stockholders to enable them to make certain elections to alleviate certain of the adverse U.S. federal income tax consequences that would arise as a result of holding an interest in a PFIC.
29

              While there are legal uncertainties involved in this determination, our special U.S. tax counsel, White & Case LLP, is of the opinion that we should not be treated as a PFIC based on our representations to them regarding, among other things, the terms of certain of our leasing arrangements and our projected income and assets for the taxable year ending 2006. There is no assurance that the nature of our assets, income and operations will not change in the future or that we can avoid being treated as a PFIC in the future.
The enactment of proposed legislation could affect whether dividends paid by us constitute qualified dividend income eligible for the preferential rate.
              Legislation has been introduced in the United States Senate that would deny the preferential rate of federal income tax currently imposed on qualified dividend income with respect to dividends received from a non-U.S. corporation, unless the non-U.S. corporation either is eligible for benefits of a comprehensive income tax treaty with the United States or is created or organized under the laws of a foreign country which has a comprehensive income tax system. Because the Marshall Islands has not entered into a comprehensive income tax treaty with the United States and imposes only limited taxes on corporations organized under its laws, it is unlikely that we could satisfy either of these requirements. Consequently, if this legislation were enacted in its current form the preferential rate of federal income tax discussed at "United States Federal Income Tax Considerations—United States Federal Income Taxation of United States Holders—Distributions" may no longer be applicable to dividends received from us. As of the date of this prospectus, it is not possible to predict with certainty whether or in what form the proposed legislation will be enacted.
If the regulations regarding the exemption from Liberian taxation for non-resident corporations issued by the Liberian Ministry of Finance were found to be invalid, the net income and cash flows of our Liberian subsidiaries and therefore our net income and cash flows, would be materially reduced.
              A number of our subsidiaries are incorporated under the laws of the Republic of Liberia. The Republic of Liberia enacted a new income tax act effective as of January 1, 2001 (the "New Act") which does not distinguish between the taxation of "non-resident" Liberian corporations, such as our Liberian subsidiaries, which conduct no business in Liberia and were wholly exempt from taxation under the income tax law previously in effect since 1977, and "resident" Liberian corporations which conduct business in Liberia and are, and were under the prior law, subject to taxation.
              In 2004, the Liberian Ministry of Finance issued regulations exempting non-resident corporations engaged in international shipping, such as our Liberian subsidiaries, from Liberian taxation under the New Act retroactive to January 1, 2001. It is unclear whether these regulations, which ostensibly conflict with the express terms of the New Act adopted by the Liberian legislature, are valid. However, the Liberian Ministry of Justice issued an opinion that the new regulations are a valid exercise of the regulatory authority of the Ministry of Finance. The Liberian Ministry of Finance has not at any time since January 1, 2001 sought to collect taxes from any of our Liberian subsidiaries.
              If our Liberian subsidiaries were subject to Liberian income tax under the New Act, they would be subject to tax at a rate of 35% on their worldwide income. As a result, their, and subsequently our, net income and cash flows would be materially reduced. In addition, as the ultimate stockholder of the Liberian subsidiaries, we would be subject to Liberian withholding tax on dividends paid by our Liberian subsidiaries at rates ranging from 15% to 20%, which would limit our access to funds generated by the operations of our subsidiaries and further reduce our income and cash flows.
30

 
 FORWARD-LOOKING STATEMENTS
              Our disclosure and analysis in this prospectus concerning our operations, cash flows, and financial position include forward-looking statements. Statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as "expects," "anticipates," "intends," "plans," "believes," "estimates," "projects," "forecasts," "will," "may," "potential," "should," and similar expressions are forward-looking statements. Although these statements are based upon assumptions we believe to be reasonable based upon available information, including projections of revenues, operating margins, earnings, cash flows, working capital and capital expenditures, they are subject to risks and uncertainties that are described more fully in this prospectus in the section titled "Risk Factors." These forward-looking statements represent our estimates and assumptions only as of the date of this prospectus and are not intended to give any assurance as to future results. As a result, you are cautioned not to rely on any forward-looking statements. Forward-looking statements appear in a number of places in this prospectus. These risks and uncertainties include, but are not limited to:
•
future operating or financial results;

•
pending acquisitions, business strategies and expected capital spending;

•
operating expenses, availability of crew, number of off-hire days, drydocking requirements and insurance costs;

•
general market conditions and shipping market trends, including charter rates and factors affecting supply and demand;

•
our financial condition and liquidity, including our ability to obtain additional financing in the future to fund capital expenditures, acquisitions and other general corporate activities;

•
our expectations about the availability of ships to purchase, the time that it may take to construct new ships, or the useful lives of our ships;

•
our continued ability to enter into multi-year, fixed-rate time charters with our customers;

•
our expectations relating to dividend payments and our ability to make such payments;

•
our ability to leverage to our advantage our manager's relationships and reputation in the containership and drybulk shipping sectors of the international shipping industry;

•
changes in governmental rules and regulations or actions taken by regulatory authorities;

•
potential liability from future litigation; and

•
other factors discussed in the section titled "Risk Factors."
              We expressly disclaim any obligation to update or revise any of these forward-looking statements, whether because of future events, new information, a change in our views or expectations, or otherwise. We make no prediction or statement about the performance of our common stock.
31

 
 
 DIVIDEND POLICY
              We intend to pay quarterly dividends of $0.44 per share, or $1.76 per share per year, following the closing of this offering. We expect to pay the first dividend in February 2007. There can be no assurance, however, that we will pay regular quarterly dividends in the future.
              We currently intend to pay dividends in amounts that will allow us to retain a portion of our cash flows to fund vessel, fleet or company acquisitions that we expect to be accretive to earnings and cash flows, and for debt repayment and drydocking costs, as determined by management and our board of directors. Declaration and payment of any dividend is subject to the discretion of our board of directors. The timing and amount of dividend payments will be dependent upon our earnings, financial condition, cash requirements and availability, fleet renewal and expansion, restrictions in our credit facilities, the provisions of Marshall Islands law affecting the payment of distributions to stockholders and other factors. The payment of dividends is not guaranteed or assured, and may be discontinued at any time at the discretion of our board of directors. There can be no assurance that dividends will be paid in the anticipated amounts and frequency set forth in this prospectus. Our ability to pay dividends may be limited by the amount of cash we can generate from operations following the payment of fees and expenses and the establishment of any reserves as well as additional factors unrelated to our profitability. We are a holding company, and we depend on the ability of our subsidiaries to distribute funds to us in order to satisfy our financial obligations and to make dividend payments. See "Risk Factors—Risks Inherent in Our Business" for a discussion of the risks related to our ability to pay dividends.
              We paid dividends of $244.6 million to our existing stockholders from our retained earnings in 2005. Investors in this offering are not entitled to receive any portion of these dividends.
32

 
 
 USE OF PROCEEDS
              We estimate that the net proceeds of this offering will be $198.2 million based on an assumed initial public offering price of $21.00 per share, which is the mid-point of the expected offering price range set forth on the cover page of this prospectus, and after deducting the underwriting discount and the estimated expenses payable by us related to this offering. The net proceeds from this offering are expected to be used to repay outstanding indebtedness of $99.1 million under our credit facility with The Royal Bank of Scotland and to repay outstanding indebtedness of $99.1 million under our credit facility with Aegean Baltic Bank. Our current Royal Bank of Scotland and Aegean Baltic Bank credit facilities have maturity dates of October 15, 2013 and June 30, 2013, respectively, and bear interest at rates of LIBOR plus 0.8% and LIBOR plus 0.825%, respectively. These borrowings were used to repay $311.0 million of existing indebtedness in 2005 incurred under prior credit facilities with various lenders in order to finance the acquisition of vessels in our current fleet, and to provide working capital.
              Assuming, however, that prior to the closing of this offering we enter into new credit facilities, one with The Royal Bank of Scotland and one with Aegean Baltic Bank S.A. and HSH Nordbank AG, as we anticipate, we will refinance the outstanding indebtedness under our existing credit facilities with The Royal Bank of Scotland and Aegean Baltic Bank S.A. with borrowings under these new credit facilities. In that case, we would apply the net proceeds of this offering to repay $99.1 million of indebtedness incurred under the new Royal Bank of Scotland credit facility and $99.1 million of indebtedness under the new Aegean Baltic-Nordbank credit facility. The new Royal Bank of Scotland and the new Aegean Baltic-Nordbank credit facilities will each have an interest rate of LIBOR plus 0.75%.
33

 
 CAPITALIZATION
              The following table sets forth our consolidated capitalization at June 30, 2006, on:
•
an actual basis, giving effect to the 88,615-for-1 stock split effected September 18, 2006; and

•
on an adjusted basis, giving effect to the issuance and sale of the shares of common stock offered hereby at an assumed initial public offering price of $21.00 per share and the repayment of a portion of our outstanding indebtedness with the net proceeds of the offering as described in "Use of Proceeds."
              There has been no material change in our capitalization between June 30, 2006 and the date of this prospectus as adjusted as described above.
              This information should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," and our consolidated financial statements and the related notes thereto included elsewhere in this prospectus.

 	 	At June 30, 2006
	
 	 	Actual
	 	As Adjusted
	
 	 	Dollars in thousands
	
Debt:	 	 	 	 	
Current portion of secured long-term debt	 	$54,302	 	$54,302	
Total long-term secured debt, net of current portion	 	584,922	 	386,722	
 	 		 		
Total debt	 	$639,224	 	$441,024	

Stockholders' equity:	

 	
 	
Common stock, par value $.01 per share; 200,000,000 shares authorized on an actual basis and on an as adjusted basis; 44,307,500 shares issued and outstanding on an actual basis and 54,557,500 shares issued and outstanding on an as adjusted basis(1)	 	443	 	546	
Additional paid-in capital	 	90,529	 	288,626	
Retained earnings	 	216,133	 	216,133	
 	 		 		
 	Total stockholders' equity	 	307,105	 	505,305	
 	 		 		
 	 	Total capitalization	 	$946,329	 	$946,329	

(1)
Immediately prior to effecting the 88,615-for-1 stock split on September 18, 2006, we increased the number of authorized shares of our common stock from 100,000 to 200,000,000.
34

 
 
 DILUTION
              As of June 30, 2006, we had net adjusted tangible book value of $297.0 million, or $6.70 per share, after giving effect to the 88,615-for-1 stock split effected on September 18, 2006. After giving effect to the sale of 10,250,000 shares of common stock at a price of $21.00 per share, which is the mid-point of the expected range of $20.00 to $22.00 per share in this offering, deducting the estimated underwriting discounts and commissions and estimated offering expenses, and assuming that the underwriters' overallotment option is not exercised, the pro forma net tangible book value as of June 30, 2006, would have been $495.7 million or $9.09 per share. This represents an immediate appreciation in net tangible book value of $2.39 per share to existing stockholders and an immediate dilution of net tangible book value of $11.91 per share to new investors. The following table illustrates the pro forma per share dilution and appreciation as of June 30, 2006:

Assumed initial public offering price per share	 	$	21.00	
Adjusted net tangible book value per share as of June 30, 2006	 	 	6.70	
Increase in net tangible book value attributable to new investors in this offering	 	 	2.39	
 	 		
Pro forma adjusted net tangible book value per share after giving effect to this offering	 	 	9.09	
 	 		
Dilution per share to new investors	 	$	11.91	
 	 		
              Net tangible book value per share of our common stock is determined by dividing our tangible net worth, which consists of tangible assets less liabilities, by the number of shares of our common stock outstanding. Dilution is determined by subtracting the net tangible book value per share of common stock after this offering from the public offering price per share. Dilution per share to new investors would be $11.62 if the underwriters exercised in full their overallotment option.
              The following table summarizes, on a pro forma basis as of June 30, 2006, the differences between the number of shares of common stock acquired from us, the total amount paid and the average price per share paid by the existing holders of shares of common stock and by you in this offering, based upon an assumed initial public offering price of $21.00 per share (the mid-point of the initial public offering price range of $20.00 to $22.00 per share).

 	 	Pro Forma Shares
Outstanding
	 	 	 	 	 	 	
  			 	Total Consideration
	 	 	
 					 	Average Price
Per Share
	
 	 	Number
	 	Percentage
	 	Amount
	 	Percentage
			
 	 	(in thousands except percentages and per share data)
	
Existing stockholders	 	44,308	 	81.2	%	$90,972	 	29.7	%	$2.05	
 	 		 		 		 		 		
New investors	 	10,250	 	18.8	%	$215,250	 	70.3	%	$21.00	
 	 		 		 		 		 		
Total	 	54,558	 	100	%	$306,222	 	100	%	$5.61	
 	 		 		 		 		 		
35

 
 SELECTED CONSOLIDATED FINANCIAL DATA
              The selected consolidated financial data set forth below as of December 31, 2004 and 2005 and for the years ended December 31, 2003, 2004 and 2005 have been derived from our audited consolidated financial statements which are included in this prospectus. The selected consolidated financial data set forth below as of December 31, 2003 and for the year ended December 31, 2002 have been derived from our audited consolidated financial statements, which are not included in this prospectus. The selected consolidated financial data set forth below as of June 30, 2006 and for the six months ended June 30, 2005 and 2006 have been derived from our unaudited interim consolidated financial statements for such periods included in this prospectus. We believe the unaudited financial data reflects all adjustments, consisting solely of normal recurring adjustments, necessary for the fair presentation of our financial position and results of operations for the interim periods presented. We have not included our financial data for the year ended December 31, 2001 because we believe converting our financial statements for that year from International Financial Reporting Standards to U.S. generally accepted accounting principles would involve unreasonable effort and expense due to the complexity of such conversion. In addition, since our containership fleet at that time, measured by TEU capacity, was approximately half of its current size, financial information for that year would be of only limited relevance. Share data give effect to a 88,615-for-1 stock split effected September 18, 2006.
              This information should be read together with, and is qualified in its entirety by, our consolidated financial statements and the notes thereto included elsewhere in this prospectus. You should also read "Management's Discussion and Analysis of Financial Condition and Results of Operations."

 	 	Year Ended December 31,
	 	Six Months Ended June 30,
	 	
 	 	2002
	 	2003
	 	2004
	 	2005
	 	2005
	 	2006
	 	
 	 	In thousands, except per share data
	 	
STATEMENT OF INCOME	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Operating revenues	 	$103,939	 	$146,118	 	$208,268	 	$241,381	 	$124,398	 	$114,535	 	
 	Voyage expenses	 	(3,400	)	(5,031	)	(6,314	)	(7,525	)	(3,456	)	(3,364	)	
 	Vessel operating expenses	 	(31,692	)	(41,860	)	(46,247	)	(53,883	)	(24,423	)	(29,406	)	
 	Depreciation	 	(24,567	)	(29,201	)	(31,694	)	(27,114	)	(13,532	)	(14,214	)	
 	Amortization of deferred drydocking and special survey costs	 	(857	)	(1,279	)	(2,096	)	(3,922	)	(1,630	)	(2,491	)	
 	Bad debt expense	 	(893	)	(67	)	(429	)	(200	)	(82	)	(194	)	
 	General and administrative expenses	 	(3,281	)	(4,132	)	(4,050	)	(5,058	)	(2,082	)	(3,502	)	
 	Gain/(loss) on sale of vessels	 	(2,198	)	6,765	 	7,667	 	—	 	—	 	14,954	 	
 	 		 		 		 		 		 		 	
 	 	Income from operations	 	37,051	 	71,313	 	125,105	 	143,679	 	79,193	 	76,318	 	
 	 		 		 		 		 		 		 	
 	Interest income	 	1,382	 	1,207	 	2,638	 	6,345	 	3,319	 	2,087	 	
 	Interest expense	 	(8,952	)	(8,792	)	(11,559	)	(23,415	)	(10,119	)	(14,841	)	
 	Other finance costs, net	 	(699	)	(406	)	1,424	 	(7,081	)	(4,357	)	2,493	 	
 	Other income/(expense), net	 	281	 	647	 	1,076	 	491	 	16	 	(15,346	)	
 	(Loss)/gain on fair value of derivatives	 	—	 	(4,115	)	(2,225	)	2,831	 	4,501	 	(6,331	)	
 	 		 		 		 		 		 		 	
 	Total other income/(expenses), net	 	(7,988	)	(11,459	)	(8,646	)	(20,829	)	(6,640	)	(31,938	)	
 	 		 		 		 		 		 		 	
 	 	 	Net income	 	$29,063	 	$59,854	 	$116,459	 	$122,850	 	$72,553	 	$44,380	 	
 	 		 		 		 		 		 		 	
 	Basic and diluted net income per share of common stock	 	$0.66	 	$1.35	 	$2.63	 	$2.77	 	$1.64	 	$1.00	 	
 	Basic and diluted weighted average number of shares	 	44,308	 	44,308	 	44,308	 	44,308	 	44,308	 	44,308	 	

OTHER FINANCIAL DATA	

 	

 	

 	

 	
 	
 	Net cash provided by operating activities	 	95,420	 	85,218	 	129,056	 	162,235	 	84,103	 	72,932	 	
 	Net cash used in investing activities	 	(165,915	)	(226,435	)	(154,747	)	(40,538	)	(12,371	)	(52,669	)	
 	Net cash (used in)/provided by financing activities	 	64,670	 	187,332	 	45,133	 	(180,705	)	3,296	 	(26,647	)	
 	Net increase/(decrease) in cash and cash equivalents	 	(5,825	)	46,115	 	19,442	 	(59,008	)	75,028	 	(6,384	)	

OTHER DATA	

 	

 	

 	

 	
 	
 	EBITDA (unaudited)(1)	 	$62,057	 	$97,919	 	$159,170	 	$170,956	 	$94,515	 	$73,839	 	
36

 
 	 	As of December 31,
	 	 	
 			 	As of June 30,
2006
	
 	 	2003
	 	2004
	 	2005
			
BALANCE SHEET DATA	 	 	 	 	 	 	 	 	
 	Total current assets	 	$102,543	 	$129,540	 	$64,012	 	$46,799	
 	Total assets	 	837,017	 	1,005,981	 	945,758	 	1,016,245	
 	Total current liabilities	 	60,983	 	77,602	 	70,484	 	76,706	
 	Total long-term debt, including current portion	 	532,071	 	601,400	 	666,738	 	639,224	
 	Total stockholders' equity	 	288,666	 	384,468	 	262,725	 	307,105	

(1)
EBITDA represents net income before interest, income tax expense, depreciation and amortization. However, EBITDA is not a recognized measurement under U.S. generally accepted accounting principles, or "GAAP." We believe that the presentation of EBITDA is useful to investors because it is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry. We also believe that EBITDA is useful in evaluating our ability to service additional debt and make capital expenditures. In addition, we believe that EBITDA is useful in evaluating our operating performance and liquidity position compared to that of other companies in our industry because the calculation of EBITDA generally eliminates the effects of financings, income taxes and the accounting effects of capital expenditures and acquisitions, items which may vary for different companies for reasons unrelated to overall operating performance and liquidity.

EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

•
EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments;

•
EBITDA does not reflect the interest expense or the cash requirements necessary to service interest or principal payments on our debt;

•
EBITDA does not reflect changes in or cash requirements for our working capital needs; and

•
other companies in our industry may calculate EBITDA differently than we do, limiting its usefulness as a comparative measure.

Because of these limitations, EBITDA should not be considered a measure of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our GAAP results and using EBITDA only supplementally.
37

The following table sets forth a reconciliation of net cash from operating activities and net income to EBITDA (unaudited) for the periods presented:

 	 	Year Ended December 31,
	 	Six Months Ended June 30,
	 	
 	 	2002
	 	2003
	 	2004
	 	2005
	 	2005
	 	2006
	 	
 	 	Dollars in thousands
	 	
Reconciliation of Net Cash from Operating Activities to EBITDA (unaudited):	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash provided by operating activities	 	$95,420	 	$85,218	 	$129,056	 	$162,235	 	$84,103	 	$72,932	 	
 	Net increase/(decrease) in current assets	 	9,678	 	(3,487	)	15,243	 	(21,719	)	(18,375	)	4,205	 	
 	Net increase/(decrease) in current liabilities	 	(49,587	)	1,938	 	(5,602	)	7,027	 	15,120	 	(28,606	)	
 	Net interest cost add back	 	7,570	 	7,585	 	8,921	 	17,070	 	6,800	 	12,754	 	
 	Amortization of finance costs	 	—	 	—	 	—	 	(101	)	(33	)	(87	)	
 	Written off amount of drydocking/special survey	 	—	 	—	 	—	 	—	 	—	 	(259	)	
 	Payments for drydocking/special survey	 	1,174	 	2,475	 	5,159	 	4,505	 	2,989	 	3,942	 	
 	Gain/(loss) on sale of vessels	 	(2,198	)	6,765	 	7,667	 	—	 	—	 	14,954	 	
 	Change in fair value of derivative instruments	 	—	 	(2,575	)	(1,274	)	1,939	 	3,911	 	(6,372	)	
 	Change in fair value of hedged debt	 	—	 	—	 	—	 	—	 	—	 	376	 	
 	 		 		 		 		 		 		 	
EBITDA (unaudited)	 	$62,057	 	$97,919	 	$159,170	 	$170,956	 	$94,515	 	$73,839	 	
 	 		 		 		 		 		 		 	
Reconciliation of Net Income to EBITDA (unaudited):	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	 	$29,063	 	$59,854	 	$116,459	 	$122,850	 	$72,553	 	$44,380	 	
 	Depreciation	 	24,567	 	29,201	 	31,694	 	27,114	 	13,532	 	14,214	 	
 	Amortization of deferred drydocking and special survey costs	 	857	 	1,279	 	2,096	 	3,922	 	1,630	 	2,491	 	
 	Interest income	 	(1,382	)	(1,207	)	(2,638	)	(6,345	)	(3,319	)	(2,087	)	
 	Interest expense	 	8,952	 	8,792	 	11,559	 	23,415	 	10,119	 	14,841	 	
 	 		 		 		 		 		 		 	
EBITDA (unaudited)	 	$62,057	 	$97,919	 	$159,170	 	$170,956	 	$94,515	 	$73,839	 	
 	 		 		 		 		 		 		 	
38

 
 PRO FORMA FINANCIAL INFORMATION
              We have entered into an agreement to sell the six drybulk carriers in our fleet for an aggregate of $143.5 million to a single purchaser. We intend to reinvest in the drybulk sector within the next several months, subject to market conditions, including the availability of more recently built and suitably configured vessels. We have not yet, however, identified any specific drybulk carriers to purchase. We also entered into a new management agreement, which provides for a different fee structure as of July 1, 2005 than was previously in effect. The unaudited pro forma statements of income for the year ended December 31, 2005 and the six months ended June 30, 2006 give effect to the following events as if they had occurred on January 1, 2005, while the unaudited pro forma balance sheet as of June 30, 2006 gives effect to the following events as if they had occurred on June 30, 2006:
•
the sale of our drybulk carriers, including the Sofia III which was sold during the second quarter of 2006;

•
the entry into the new management agreement; and

•
projected annual expenses of $2.6 million related to being a public company, including officer and director remuneration.
This pro forma financial information does not give effect to the newbuilding or secondhand vessels we have agreed to acquire, including any revenues from those that already have committed charters. Pro forma share data give effect to a 88,615-for-1 stock split effected September 18, 2006.
              The unaudited pro forma financial information is provided for illustrative purposes only and does not represent what our results of operations or financial position would actually have been if the transactions had in fact occurred on those dates and is not representative of our results of operations or financial position for any future periods. Investors are cautioned not to place undue reliance on this unaudited pro forma financial information.
39

Unaudited Pro Forma Balance Sheet as of June 30, 2006

 	 	Six Months Ended June 30, 2006
	
 	 		 	Adjustments
Drybulk Carriers(1)
	 	Pro Forma
	
 	 	Dollars in thousands, except share data
	
 ASSETS	 	 	 	 	 	 	 	 	 	

CURRENT ASSETS	

 	

 	

 	
 	Cash and cash equivalents	 	$	31,616	 	$	43,186	(2)	$	74,802	
 	Restricted cash	 	 	12	 	 	 	 	 	12	
 	Accounts receivable, net	 	 	1,826	 	 	 	 	 	1,826	
 	Inventories	 	 	2,622	 	 	 	 	 	2,622	
 	Prepaid expenses	 	 	1,152	 	 	 	 	 	1,152	
 	Due from related parties	 	 	5,193	 	 	 	 	 	5,193	
 	Other current assets	 	 	4,378	 	 	 	 	 	4,378	
 	 		 	 	 	 		
 	Total current assets	 	 	46,799	 	 	 	 	 	89,985	
 	 		 	 	 	 		
NON-CURRENT ASSETS	 	 	 	 	 	 	 	 	 	
 	Fixed assets, net	 	 	715,482	 	 	(55,688	)(3)	 	659,794	
 	Advances for vessel acquisitions	 	 	12,350	 	 	 	 	 	12,350	
 	Advances for vessels under construction	 	 	231,097	 	 	 	 	 	231,097	
 	Deferred charges, net	 	 	10,141	 	 	(997	)(4)	 	9,144	
 	Other assets	 	 	376	 	 	 	 	 	376	
 	 		 	 	 	 		
 	Total non-current assets	 	 	969,446	 	 	 	 	 	912,761	
 	 		 	 	 	 		
 	Total assets	 	$	1,016,245	 	 	 	 	$	1,002,746	
 	 		 	 	 	 		
LIABILITIES AND STOCKHOLDERS' EQUITY	 	 	 	 	 	 	 	 	 	

CURRENT LIABILITIES	

 	

 	

 	
 	Accounts payable	 	$	6,825	 	 	 	 	$	6,825	
 	Accrued liabilities	 	 	4,260	 	 	 	 	 	4,260	
 	Long-term debt, current portion	 	 	54,302	 	 	(13,081	)(5)	 	41,221	
 	Related party loans	 	 	5,000	 	 	 	 	 	5,000	
 	Unearned revenue	 	 	6,319	 	 	 	 	 	6,319	
 	 		 	 	 	 		
 	Total current liabilities	 	 	76,706	 	 	 	 	 	63,625	

LONG-TERM LIABILITIES	

 	

 	

 	
 	Long-term debt, net of current portion	 	 	584,922	 	 	(85,733	)(5)	 	499,189	
 	Unearned revenue, net of current portion	 	 	11,622	 	 	 	 	 	11,622	
 	Other liabilities	 	 	35,890	 	 	 	 	 	35,890	
 	 		 	 	 	 		
 	Total long-term liabilities	 	 	632,434	 	 	 	 	 	546,701	
 	 		 	 	 	 		
 	Total liabilities	 	 	709,140	 	 	 	 	 	610,326	
 	 		 	 	 	 		
STOCKHOLDERS' EQUITY	 	 	 	 	 	 	 	 	 	
 	Common stock (200,000,000 common shares, par value $.01, authorized and 44,307,500 common shares, issued and outstanding as of June 30, 2006)	 	 	443	 	 	 	 	 	443	
 	Additional paid-in capital	 	 	90,529	 	 	 	 	 	90,529	
 	Retained earnings	 	 	216,133	 	 	85,315	(6)	 	301,448	
 	 		 	 	 	 		
 	Total stockholders' equity	 	 	307,105	 	 	 	 	 	392,420	
 	 		 	 	 	 		
 	Total liabilities and stockholders' equity	 	$	1,016,245	 	 	 	 	$	1,002,746	
 	 		 	 	 	 		
40

(1)
Each of the adjustments set forth under "Drybulk Carriers" relates only to the exclusion of the six drybulk carriers from our fleet. As the Sofia III was sold during the second quarter of 2006, no adjustment with respect thereto is necessary under "Drybulk Carriers", as the effect of such sale has already been reflected in the balance sheet as of June 30, 2006. Our new management agreement was already in effect during the six months ended June 30, 2006 and therefore no adjustments with respect thereto are included.
(2)
This adjustment represents the net proceeds from the sale of the six drybulk carriers remaining after deducting $98.8 million, the amount of indebtedness under our existing credit facility with The Royal Bank of Scotland attributable to the six drybulk carriers mortgaged thereunder as set forth in our accounts as of June 30, 2006. See note (5) below.
(3)
This adjustment represents the elimination of the aggregate fixed asset values for the six drybulk carriers as set forth in our accounts as of June 30, 2006.
(4)
This adjustment represents the elimination of deferred drydocking expenses associated with the six drybulk carriers as set forth in our accounts as of June 30, 2006.
(5)
These adjustments reflect a reduction in indebtedness under our existing credit facility with The Royal Bank of Scotland attributable to the six drybulk carriers mortgaged thereunder as set forth in our accounts as of June 30, 2006. We have reduced indebtedness by this amount due to the contractual obligation to repay this amount to The Royal Bank of Scotland under our credit facility under which the drybulk carriers are mortgaged in order for the mortgages on the six drybulk carriers to be released, thereby allowing the sale of the vessels fee of encumbrances.
(6)
This adjustment represents the gain from the sale of the six drybulk carriers, as measured by the aggregate net proceeds to be received from the sale less the book value of the drybulk carriers as set forth in our accounts as of June 30, 2006.
Unaudited Pro Forma Statements of Income for the Year Ended December 31, 2005 and the Six Months Ended June 30, 2006

 	 	Year Ended December 31, 2005
	 	Six Months Ended June 30, 2006
	 	
 	 	 	 	Adjustments
	 	 	 	 	 	Adjustments
	 	 	 	
 	 		 	Drybulk Carriers(1)
	 	Other
	 	Pro Forma
	 		 	Drybulk Carriers(1)
	 	Other
	 	Pro Forma
	 	
 	 	In thousands, except per share data
	 	
OPERATING REVENUES	 	$241,381	 	$	(65,495	)	 	 	$175,886	 	$114,535	 	$	(18,634	)	 	 	$95,901	 	

OPERATING EXPENSES	

 	

 	

 	

 	

 	

 	
 	
 	Voyage expenses	 	(7,525	)	 	3,643	 	(631	)(4)	(4,513	)	(3,364	)	 	954	 	 	 	(2,410	)	
 	Vessel operating expenses	 	(53,883	)	 	8,142	 	 	 	(45,741	)	(29,406	)	 	4,119	 	 	 	(25,287	)	
 	Depreciation	 	(27,114	)	 	4,174	 	 	 	(22,940	)	(14,214	)	 	2,009	 	 	 	(12,205	)	
 	Amortization of deferred dry-docking and special survey costs	 	(3,922	)	 	1,284	 	 	 	(2,638	)	(2,491	)	 	650	 	 	 	(1,841	)	
 	Bad debts expense	 	(200	)	 	164	 	 	 	(36	)	(194	)	 	56	 	 	 	(138	)	
 	General and administrative expenses	 	(5,058	)	 	1,144	 	(3,157	)(5)	(7,071	)	(3,502	)	 	609	 	(650	)(6)	(3,543	)	
 	Gain/(Loss) on sale of vessels	 	—	 	 	 	 	 	 	—	 	14,954	 	 	(14,954	)(2)	 	 	—	 	
 	 		 	 	 	 	 	 		 		 	 	 	 	 	 		 	
Income From Operations	 	143,679	 	 	 	 	 	 	92,947	 	76,318	 	 	 	 	 	 	50,477	 	
 	 		 	 	 	 	 	 		 		 	 	 	 	 	 		 	
OTHER INCOME (EXPENSE):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Interest income	 	6,345	 	 	 	 	 	 	6,345	 	2,087	 	 	 	 	 	 	2,087	 	
 	Interest expense	 	(23,415	)	 	4,225	 	 	 	(19,190	)	(14,841	)	 	2,980	 	 	 	(11,861	)	
 	Other finance costs, net	 	(7,081	)	 	120	 	 	 	(6,961	)	2,493	 	 	48	 	 	 	2,541	 	
 	Other income/(expenses), net	 	491	 	 	(761	)	 	 	(270	)	(15,346	)	 	(987	)(3)	 	 	(16,333	)	
 	(Loss)/gain on fair value of derivatives	 	2,831	 	 	 	 	 	 	2,831	 	(6,331	)	 	 	 	 	 	(6,331	)	
 	 		 	 	 	 	 	 		 		 	 	 	 	 	 		 	
Total Other Income (Expenses), net	 	(20,829	)	 	 	 	 	 	(17,245	)	(31,938	)	 	 	 	 	 	(29,897	)	
 	 		 	 	 	 	 	 		 		 	 	 	 	 	 		 	
Net Income	 	$122,850	 	 	 	 	 	 	$75,702	 	$44,380	 	 	 	 	 	 	$20,580	 	
 	 		 	 	 	 	 	 		 		 	 	 	 	 	 		 	
Earnings per share	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic and diluted net income per share	 	$2.77	 	 	 	 	 	 	$1.71	 	$1.00	 	 	 	 	 	 	$0.46	 	
 	 		 	 	 	 	 	 		 		 	 	 	 	 	 		 	
Basic and diluted weighted average numbers of shares	 	44,308	 	 	 	 	 	 	44,308	 	44,308	 	 	 	 	 	 	44,308	 	

(1)
Each of the adjustments set forth under "Drybulk Carriers" relates to the exclusion of the drybulk carriers in our fleet during these periods, including the Sofia III which was sold during the second quarter of 2006. The adjustments to "Operating revenues" reflect the exclusion of the actual revenues earned, and the adjustments to "Voyage expenses" and "Vessel operating expenses" reflect the exclusion of the actual expenses incurred, in connection with operating the drybulk
41

carriers during the periods presented, as derived from our accounts. The adjustments to "Depreciation" and "Amortization of deferred dry-docking and special survey costs" reflect the elimination of such items associated with the drybulk carriers, as derived from our accounts for these periods. The adjustments to "General and administrative expenses" and "Bad debt expense" reflect the elimination of such expenses associated with the drybulk carriers as derived from our accounts for these periods. The adjustments to "Interest expense" are derived from our accounts for these periods, and reflect a reduction in indebtedness under our existing credit facility with The Royal Bank of Scotland attributable to the six drybulk carriers mortgaged thereunder. We have reduced indebtedness by this amount due to the contractual obligation to repay this amount to The Royal Bank of Scotland under our credit facility under which the drybulk carriers are mortgaged, in order for the mortgages on the six drybulk carriers to be released, thereby allowing the sale of the vessels free of encumbrances. "Other finance costs, net" and "Other income/(expenses), net" represent the elimination of such expenses and net costs related to the drybulk carriers as derived from our accounts for these periods.
(2)
This adjustment to "Gain/(Loss) on sale of vessels" reflects the elimination of the gain of $15.0 million for the six months ended June 30, 2006 for the sale of the Sofia III to a third party drybulk operator for $27.5 million in the second quarter of 2006, representing a gain of $15.0 million over the acquisition cost of such vessel as depreciated to the time of sale.
(3)
This adjustment reflects the exclusion of "Other income / expenses, net" for our drybulk carriers, as derived from our accounts, primarily representing the exclusion of funds amounting to $1.5 million due to payments we received upon termination of a lawsuit relating to one of the drybulk carriers we have agreed to sell, offset in part by $0.51 million of other expenses associated with the drybulk carriers.
(4)
For the period from May 1, 2004 to June 30, 2005 we did not pay a commission on freight, charter hire, ballast bonus and demurrage to any party. Adjustments to "Voyage Expenses" set forth under "Adjustments-Other" are comprised of the 0.75% commission paid on all freight, charter hire, ballast bonus and demurrage payable under the new management agreement and a commission equal to 0.5% for any vessel bought or sold, excluding newbuilding contracts, under the new management agreement.
(5)
Adjustments to "General and administrative expenses" set forth under "Adjustments—Other" represent the difference between the general and administrative expenses that have been recorded in our accounts (comprised of a monthly management fee paid to our manager, Danaos Shipping, of $2,750 for the management of our affairs and a management fee of $150 to $500 per day for each vessel in our fleet depending on its size and charter arrangements) and our General and administrative expenses on a pro forma basis for the new management agreement. These adjustments to General and administrative expenses do not account for the sale of the drybulk carriers, the effect of which on General and administrative expenses is set forth under "Adjustments—Drybulk Carriers." The components of our General and administrative expenses on a pro forma basis are as follows:
•
a vessel management fee of $500 per day per vessel on a time charter;
•
a vessel management fee of $250 per day per vessel on a bareboat charter;
•
a daily management fee of $500 for providing commercial, chartering and administrative services to us; and
•
projected public company related expenses of $2.6 million per annum.
(6)
Our new management agreement was in effect during the six months ended June 30, 2006 and, accordingly, all pro forma adjustments set forth under "Adjustments—Other" for such period relate solely to projected public company expenses, less remuneration expenses which were actually incurred in the period.

For the year ended December 31, 2005, voyage expenses and general and administrative expenses increased $0.6 million and $3.2 million, respectively, to illustrate the impact of the new management agreement had it been in effect on January 1, 2005, as well as the impact of projected public company expenses, including additional remuneration expense, had we been a public company on January 1, 2005. For the six months ended June 30, 2006, general and administrative expenses increased $0.65 million to illustrate the impact of projected public company expenses.
42

 
 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
               The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes, and the financial and other information included elsewhere in this prospectus. Among other things, those financial statements include more detailed information regarding the basis of presentation for the following information. The financial statements have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP, and are presented in U.S. dollars.
               This discussion contains forward-looking statements based on assumptions about our future business. Our actual results may differ from those contained in the forward-looking statements and such differences may be material. Please read "Forward-Looking Statements."
Overview
              Our business is to provide international seaborne transportation services by operating vessels primarily in the containership sector of the shipping industry. Our fleet currently consists of 27 containerships. In August 2006, we agreed to sell the six drybulk carriers in our fleet, with an aggregate capacity of 342,158 dwt, for an aggregate of $143.5 million. Pursuant to the terms of this agreement, we expect to deliver these vessels to the purchaser, which is not affiliated with us, as each vessel's respective charter expires over the next six to eight months. During the time prior to delivery, we will continue to operate the vessels and, accordingly, receive the revenues and incur the expenses associated with such operation. We intend to reinvest in the drybulk sector with the acquisition of more recently built drybulk carriers with configurations better suited to employment in the current drybulk charter market within the next several months, subject to market conditions, including the availability of suitable vessels to purchase. In anticipation of our reinvestment in this sector, our manager intends to retain its employees dedicated to our drybulk operations. In addition, our new senior secured credit facilities with RBS and with Aegean Baltic Bank and HSH Nordbank will provide, in accordance with the terms of the commitment letters we have entered into for those facilities, for the use of borrowings to finance the acquisition of drybulk carriers as well as containerships. We have not yet, however, identified any specific drybulk carriers to purchase.
              We deploy our containerships on multi-year, fixed-rate time charters to take advantage of the stable cash flows and high utilization rates typically associated with multi-year time charters. Our containership fleet is currently comprised of 23 containerships employed on time charters and four containerships employed on bareboat charters. Time-chartered containerships are generally employed on multi-year charters to large liner companies that charter-in vessels on a multi-year basis as part of their business expansion strategies. We deployed the six drybulk carriers we have agreed to sell primarily under short-term time charters of up to one year in the spot market to take advantage of market opportunities.
              The average number of containerships and drybulk carriers in our fleet for the last three years ended December 31, 2005 and for the six months ended June 30, 2005 and 2006 are set forth in the table below.
Average Number of Vessels in Our Fleet

 	 	Year Ended December 31,
	 	Six Months Ended
June 30,
	
 	 	2003
	 	2004
	 	2005
	 	2005
	 	2006
	
Average number of containerships	 	20.4	 	24.0	 	25.0	 	25.0	 	25.5	
Average number of drybulk carriers	 	7.9	 	7.0	 	7.0	 	7.0	 	6.7	
43

              We have newbuilding contracts with Samsung for an additional nine containerships, which consist of one 9,580 TEU vessel expected to be delivered in November 2006, two 4,253 TEU vessels expected to be delivered in the second half of 2007, four 4,253 TEU vessels expected to be delivered in the second half of 2008 and two 4,253 TEU vessels expected to be delivered in the first half of 2009. We have also entered into newbuilding contracts with Sungdong Shipbuilding & Marine Engineering Co., Ltd., or Sungdong, for an additional five 6,500 TEU containerships expected to be delivered during 2009, and we have agreed to acquire two 4,300 TEU containerships, built in 2004, which we expect to be delivered in the first and second half of 2007, respectively. After delivery of these 16 containerships, our containership fleet will have a total capacity of 195,313 TEU, assuming we do not dispose of any of our vessels, other than the APL England , or acquire any additional vessels.
              Our containership fleet is currently under time charters with 10 charterers including Maersk, COSCO, Hapag-Lloyd, CMA-CGM, Hyundai, APL-NOL, Norasia, Yang Ming, Wan Hai and China Shipping. In addition, we have arranged 12-year time charters with China Shipping for the two 9,580 TEU newbuildings expected to be delivered to us later this year, with Yang Ming for the two 4,253 TEU newbuildings expected to be delivered in the second half of 2007 and for the two secondhand, 2004-built, 4,300 TEU containerships expected to be delivered to us in 2007, and with Zim Integrated Shipping Services for the four 4,253 TEU newbuildings expected to be delivered to us throughout the second half of 2008 and for the two 4,253 TEU newbuildings expected to be delivered to us in the first half of 2009. We have also chartered each of the five 6,500 TEU containerships expected to be delivered during 2009 to CMA-CGM for 12 years at a net daily charter rate of $34,350.
Purchase Options
              The charters with respect to the APL England , the APL Scotland , the APL Holland and the APL Belgium include an option for the charterer, APL-NOL, to purchase each vessel in February 2007, May 2007, July 2007 and January 2008, respectively, each for $44.0 million or in February 2009, May 2009, July 2009 and January 2010, respectively, each for $39.0 million. APL-NOL recently exercised the option to purchase the APL England from us for $44.0 million upon expiration of the current charter in February 2007. In each case, the option to purchase the vessel must be exercised six months prior to the acquisition dates described in the preceding sentence. We currently believe that the $44.0 million and $39.0 million option prices will be below the fair market value of the vessels at the time the options become exercisable. If APL-NOL were to exercise these options with respect to any or all of the remaining three vessels, the size of our fleet would be reduced.
Our Manager
              Our operations are managed by Danaos Shipping, our manager, under the supervision of our management and our board of directors. We have a management agreement pursuant to which our manager and its affiliates provide us and our subsidiaries with technical, administrative and certain commercial services for an initial term expiring on December 31, 2008, with automatic one-year renewals for an additional 12 years at our option. Our manager is ultimately owned by Danaos Investments Limited as Trustee of the 883 Trust, which we refer to as the Coustas Family Trust. Danaos Investments Limited, a corporation wholly-owned by our chief executive officer, is the protector (which is analogous to a trustee) of the Coustas Family Trust, of which Dr. Coustas and other members of the Coustas family are beneficiaries. The Coustas Family Trust is also our largest stockholder.
Factors Affecting Our Results of Operations
              Our financial results are largely driven by the following factors:
•
Number of Vessels in Our Fleet.     The number of vessels in our fleet is the primary factor in determining the level of our revenues. Aggregate expenses also increase as the size of our
44

fleet increases. Vessel acquisitions and dispositions will have a direct impact on the number of vessels in our fleet. An option to purchase one of the containerships in our current fleet, the APL England , was recently exercised with delivery scheduled for February 2007 which will decrease the size of our fleet. In addition, if the purchase options with respect to three other containerships in our current fleet are exercised the size of our fleet will be further decreased.
•
Drybulk Fleet.     In August 2006, we agreed to sell the six drybulk carriers in our fleet, with an aggregate capacity of 342,158 dwt, for an aggregate of $143.5 million. Pursuant to the terms of this agreement, we expect to deliver these vessels to the purchaser, which is not affiliated with us, as each vessel's respective charter expires over the next six to eight months. During the time prior to delivery, we will continue to operate the vessels and, accordingly, receive the revenues and incur the expenses associated with such operation. We have decided to sell these vessels due to the opportunity to sell all six drybulk carriers in one transaction at the high vessel valuations prevailing in the drybulk sector, which is inherently volatile in terms of both charter rates and vessel valuations, combined with the advancing age and less than optimum configuration of our drybulk fleet. We intend to reinvest in the drybulk sector with the acquisition of more recently built drybulk carriers with configurations better suited to employment in the current drybulk charter market within the next several months, subject to market conditions, including the availability of suitable vessels to purchase. In anticipation of this, our manager intends to retain its employees dedicated to our drybulk operations. In addition, our new senior secured credit facilities with RBS and with Aegean Baltic Bank and HSH Nordbank will provide, in accordance with the terms of the commitment letters we have entered into for those facilities, for the use of borrowings to finance the acquisition of drybulk carriers as well as containerships. We have not yet, however, identified any specific drybulk carriers to purchase. We intend to use the proceeds from the sale of the six drybulk carriers to repay indebtedness and fund contracted and future vessel acquisitions in the container and drybulk sectors. We received payment of 10% of the aggregate sale price of the six drybulk vessels upon entering into the sales agreement. The remaining 90% of the sale price is payable throughout the next six to eight months upon delivery of each vessel to the purchaser upon expiration of each vessel's current charter. Our drybulk operations contributed approximately 27.1% of our revenues for the year ended December 31, 2005 and approximately 16.3% of our revenues for the six months ended June 30, 2006.

•
Charter Rates.     Aside from the number of vessels in our fleet, the charter rates we obtain for these vessels, particularly for our containerships, are the principal drivers of our revenues. Charter rates are based primarily on demand for capacity as well as the available supply of containership capacity and, with respect to the drybulk carriers we have agreed to sell as well as the drybulk carriers we acquire in the future, drybulk capacity, at the time we enter into the charters for our vessels. As a result of macroeconomic conditions affecting trade flow between ports served by liner companies and economic conditions in the industries which use liner shipping services, charter rates can fluctuate significantly. Although the multi-year charters on which we deploy our containerships make us less susceptible to cyclical containership charter rates than vessels operated on shorter-term charters, we are exposed to varying charter rate environments when our current chartering arrangements expire and we seek to deploy our containerships under new charters. The staggered maturities of our containership charters also reduce our exposure to any one stage in the shipping cycle.
Unlike our containerships, we deployed our drybulk carriers on short-term time charters in the spot market. Drybulk charter rates in the spot market are volatile and fluctuate on a seasonal and year-to-year basis. The fluctuations are caused by imbalances in the availability of cargoes for shipment and the number of vessels available at any given time to transport
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these cargoes. The charter rates we are able to obtain for the containerships in our fleet, and were able to obtain for the drybulk carriers we have agreed to sell as well as drybulk carriers we acquire in the future, are also affected by competition for charters from a number of experienced shipping companies based upon price, customer relationships, operating expertise, professional reputation and size, age and condition of the vessel. Any adjustment in containership charter rates or, for periods following our reinvestment in the drybulk sector, drybulk carrier charter rates, would affect our financial results.
•
Utilization of Our Fleet.     Due to the multi-year charters under which they are operated, our containerships have consistently been deployed at or near full utilization. Nevertheless the amount of time our vessels spend in drydock undergoing repairs or undergoing maintenance and upgrade work affects our results of operations. Historically, our fleet has had a limited number of off-hire days. For example, there were less than 13 total off-hire days for our entire fleet during 2005 other than for scheduled drydockings and special surveys. However, an increase in annual off-hire days could reduce our utilization. For the periods prior to their sale, we deployed the drybulk carriers we have agreed to sell on short-term time charters. The efficiency with which suitable employment is secured, the ability to minimize off-hire days and the amount of time spent positioning vessels also affects our results of operations. Furthermore, for the periods prior to the sale of the drybulk carriers, our results of operations were affected by the amount of time spent by such vessels making off-hire voyages to embarkment points for their next hired voyages, both due to the lack of hire revenue earned during such voyages as well as due to the costs, which are borne by us, of such voyages. If the utilization patterns of our containership fleet changes our financial results would be affected.

•
Expenses.     Our ability to control our fixed and variable expenses, including those for commission expenses, crew wages and related costs, the cost of insurance, expenses for repairs and maintenance, the cost of spares and consumable stores, tonnage taxes and other miscellaneous expenses also affects our financial results. In addition, factors beyond our control, such as developments relating to market premiums for insurance and the value of the U.S. dollar compared to currencies in which certain of our expenses, primarily crew wages, are denominated can cause our vessel operating expenses to increase.
Operating Revenues
              Our operating revenues are driven primarily by the number of vessels in our fleet, the number of operating days during which our vessels generate revenues and the amount of daily charter hire that our vessels earn under time charters which, in turn, are affected by a number of factors, including our decisions relating to vessel acquisitions and dispositions, the amount of time that we spend positioning our vessels, the amount of time that our vessels spend in drydock undergoing repairs, maintenance and upgrade work, the age, condition and specifications of our vessels and the levels of supply and demand in the containership charter market, and for the periods prior to the sale of the drybulk carriers and following our reinvestment in the drybulk sector, the drybulk charter market. Vessels operating in the spot market, such as the drybulk carriers we have agreed to sell, generate revenues that are less predictable but can allow increased profit margins to be captured during periods of improving charter rates.
              Revenues from long-term time charters, primarily relating to our containership operations, comprised approximately 72.9% of our revenues for the year ended December 31, 2005 and 83.7% of our revenues for the six months ended June 30, 2006. The revenues relating to our multi-year charters will be affected by the delivery dates of our contracted containerships and any additional vessels subject to multi-year charters we may acquire in the future, as well as by the disposition of any such vessel in our fleet. Our revenues will also be affected if any of our charterers cancel a multi-year charter. Each
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of our current vessel construction agreements and secondhand vessel acquisition agreements has a contracted delivery date. A change in the date of delivery of a vessel will impact our revenues and results of operations. Our multi-year charter agreements have been contracted in varying rate environments and expire at different times. Generally, we do not employ our vessels under voyage charters under which a shipowner, in return for a fixed sum, agrees to transport cargo from one or more loading ports to one or more destinations and assumes all vessel operating costs and voyage expenses.
              Our expected revenues, based on contracted charter rates, from our current charter arrangements for our containerships having initial terms of more than 12 months is shown by class size in the below table. Although these expected revenues are based on contracted charter rates, any contract is subject to performance by the counterparties. If the charterers are unable to make charter payments to us, our results of operations and financial condition will be materially adversely affected.
Contracted Revenue From Multi-Year Charters as of December 31, 2005(1)
(amounts in millions of U.S. dollars)

Vessel
type/size
	 	Number of
Vessels(2)(3)
	 	1 year
(2006)
	 	1 to 3
years
(2007-2008)
	 	3 to 5
years
(2009-2010)
	 	5 to 10
years
(2011-2015)
	 	More than 10
years
(2016-2021)
	 	Total
	
Post-Panamax	 	16	 	 	$83.8	 	$	154.4	 	$	216.8	 	$	554.9	 	$	433.0	 	$	1,442.9	
Panamax	 	27	 	 	118.0	 	 	206.1	 	 	230.2	 	 	440.6	 	 	382.1	 	 	1,377.0	
 	 		 		 		 		 		 		 		
Total	 	43	 	$	201.8	 	$	360.5	 	$	447.0	 	$	995.5	 	$	815.1	 	$	2,819.9	

(1)
Annual revenue calculations are based on an assumed 358 revenue days per annum.
(2)
Includes one 4,651 TEU vessel delivered to us on March 23, 2006; one 9,580 TEU vessel delivered to us on September 8, 2006; one 9,580 TEU newbuilding expected to be delivered in November 2006; two 4,253 TEU newbuildings expected to be delivered in the second half of 2007; two 4,300 TEU vessels, built in 2004, one of which is expected to be delivered in the first half of 2007 and the other of which is expected to be delivered in the second half of 2007; four 4,253 TEU newbuildings expected to be delivered to us during the second half of 2008; and two 4,253 TEU newbuildings expected to be delivered to us in the first half of 2009.
(3)
Includes four 5,506 TEU containerships, the APL England , the APL Scotland , the APL Holland and the APL Belgium , which are subject to options for the charterer to purchase each vessel in February 2007, May 2007, July 2007 and January 2008, respectively, each for $44.0 million, and in February 2009, May 2009, July 2009 and January 2010, respectively, each for $39.0 million. Accordingly, no revenue with respect to the APL England , the APL Scotland , the APL Holland and the APL Belgium is included in the table following February 2007, May 2007, July 2007 and January 2008, respectively. APL-NOL has recently exercised its option to purchase the APL England from us for $44.0 million upon expiration of its current charter in February 2007.
              The revenues from short-term charters primarily relate to the operation of the drybulk carriers we have sold or agreed to sell, and comprised approximately 27.1% of our revenues for the year ended December 31, 2005 and approximately 16.3% of our revenues for the six months ended June 30, 2006. Vessels operating in the spot market generate revenues that are less predictable than vessels on period charters, although this chartering strategy can enable vessel-owners to capture increased profit margins during periods of improvements in charter rates. Deployment of vessels in the spot market creates exposure, however, to the risk of declining charter rates, which may be higher or lower than those rates at which a vessel could have been time chartered for a longer period.
Voyage Expenses
              Voyage expenses include port and canal charges, bunker (fuel) expenses, address commissions and brokerage commissions. Under multi-year time charters and bareboat charters, such as those on which we charter our containerships and under short-term time charters, such as those on which we chartered the drybulk carriers we have agreed to sell, the charterers bear the voyage expenses other
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than brokerage and address commissions. As such, voyage expenses represent a relatively small portion of our vessels' overall expenses.
              From time to time, in accordance with industry practice and in respect of the charters for our containerships we pay brokerage commissions of approximately 0.5% to 2.5% of the total daily charter hire rate under the charters to unaffiliated ship brokers associated with the charterers, depending on the number of brokers involved with arranging the charter. We also pay address commissions of up to 3.75% to some of our charterers. We also from time to time paid such commissions with respect to the drybulk carriers we have agreed to sell.
              Further, until March 2004, we paid a commission of 0.45% on all freight, charter hire, ballast bonus and demurrage for each vessel in our fleet to Nedlloyd Schiffsmakler, which was until that time performing chartering services for our fleet. We did not pay a commission with respect to freight, charter hire, ballast bonus and demurrage during the period from March 2004 to June 30, 2005. Since July 1, 2005, we have paid and will pay commissions to our manager of 0.75% on all freight, charter hire, ballast bonus and demurrage for each vessel. If we had continued to pay this commission to Nedlloyd Schiffsmakler, we would have had additional voyage expenses of $0.6 million for a total of $8.1 million for the year ended December 31, 2005, an 8.0% increase compared to our actual voyage expenses for that period of $7.5 million. Our manager will also receive a commission of 0.5% based on the contract price of any vessel bought or sold by it on our behalf, excluding newbuilding contracts.
Vessel Operating Expenses
              Vessel operating expenses include crew wages and related costs, the cost of insurance, expenses for repairs and maintenance, the cost of spares and consumable stores, tonnage taxes and other miscellaneous expenses. Aggregate expenses increase as the size of our fleet increases. Factors beyond our control, some of which may affect the shipping industry in general, including, for instance, developments relating to market premiums for insurance, may also cause these expenses to increase. In addition, a substantial portion of our vessel operating expenses, primarily crew wages, are in currencies other than the U.S. dollar and any gain or loss we incur as a result of the U.S. dollar fluctuating in value against these currencies is included in vessel operating expenses. We fund our manager monthly in advance with amounts it will need to pay our fleet's vessel operating expenses.
              Under multi-year time charters, such as those on which we charter 23 of the containerships in our current fleet, and under short-term time charters, such as those on which we chartered the drybulk carriers we have agreed to sell, we pay for vessel operating expenses. Under bareboat charters, such as those on which we charter four of the containerships in our current fleet, our charterers bear most vessel operating expenses, including the costs of crewing, insurance, surveys, drydockings, maintenance and repairs.
Amortization of Deferred Drydocking and Special Survey Costs
              We capitalize the total costs associated with drydockings, special surveys and intermediate surveys and amortize these costs on a straight-line basis over 30 months.
Depreciation
              We depreciate our containerships, and the drybulk carriers for the periods prior to their sale, on a straight-line basis over their estimated remaining useful economic lives. Historically, we estimated this to be 25 years. As of January 1, 2005, we determined the estimated useful lives of our containerships to be 30 years, whereas for drybulk carriers we continued to estimate their useful lives to be 25 years. Depreciation is based on cost, less the estimated scrap value of the vessels.
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General and Administrative Expenses
              Historically, while we were a privately-owned company, we paid Danaos Shipping, our manager, a monthly management fee of $2,750 for the management of our affairs. We also paid our manager a fixed management fee of $150 to $500 per day for each vessel in our fleet depending on its size and the charter arrangements. In order to bring the fees we pay to our manager to a level similar to those that would be paid to a third-party manager we adjusted the fees we pay to our manager as of July 1, 2005.
              From July 1, 2005 to December 31, 2008, we have paid and will pay our manager a fee of $500 per day for providing its commercial, chartering and administrative services, a daily management fee of $250 per vessel per day for its technical management of vessels on bareboat charter and $500 per vessel per day for the remaining vessels in our fleet, pro rated for the calendar days we own each vessel. We will also pay our manager a flat fee of $400,000 per newbuilding vessel for the on-premises supervision of our newbuilding contracts by selected engineers and others of its staff.
              Our consolidated financial statements for prior periods show our results of operations as a private company when we did not pay any compensation to our directors and officers other than amounts corresponding to dividends, and compensation paid to our officers, but not directors, during the six months ended June 30, 2006. After the completion of this offering we will be a public company and we expect to incur additional general and administrative expenses going forward as a public company. We expect that the primary components of general and administrative expenses, other than the management fees described above, will consist of the expenses associated with being a public company, which include the preparation of disclosure documents, legal and accounting costs, incremental director and officer liability insurance costs, director and executive compensation and costs related to compliance with the Sarbanes-Oxley Act of 2002. For purposes of the "Pro Forma Financial Information" set forth in this prospectus, we have projected that annual public company related expenses will amount to $2.6 million.
              The increase in fees under our management agreement, together with our projected public company related expenses and officer and director remuneration, would have resulted in additional general and administrative expenses of $3.16 million, for a total of $8.22 million, for the year ended December 31, 2005, a 62.5% increase compared to the actual general and administrative expenses of $5.06 million.
Interest Expense, Interest Income and Other Finance Costs
              We incur interest expense on outstanding indebtedness under our existing credit facilities which we include in interest expenses. We also incurred financing costs in connection with establishing those facilities, which is included in our finance costs. Further, we earn interest on cash deposits in interest bearing accounts and on interest bearing securities, which we include in interest income. We will incur additional interest expense in the remainder of 2006 and in the future on our outstanding borrowings and under future borrowings. For a description of our existing credit facilities and our new senior revolving credit facilities, please read "Description of Indebtedness."
Results of Operations
Six months ended June 30, 2006 compared to the six months ended June 30, 2005
              During the six months ended June 30, 2006, we had an average of 25.5 containerships and 6.7 drybulk carriers in our fleet. During the six months ended June 30, 2005, we had an average of 25.0 containerships and 7.0 drybulk carriers in our fleet. We took delivery of one 4,651 TEU containership on March 23, 2006 and sold one drybulk carrier on May 12, 2006.
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Operating Revenue
              Operating revenue decreased 8.0%, or $9.9 million, to $114.5 million in the six months ended June 30, 2006, from $124.4 million in the six months ended June 30, 2005. The decrease was a result of a $21.5 million decrease in revenue generated by our drybulk carriers, which are deployed on short-term time charters, because of the lower charter rates our drybulk carriers earned during the period, which was offset in part by the $11.6 million increase in revenues generated by escalations in contractual charter rates in accordance with the terms of existing charters for certain of our containerships as well as the addition of the MOL Confidence , a 4,651 TEU containership, to our fleet on March 23, 2006.
Voyage Expenses
              Voyage expenses were $3.4 million in the six months ended June 30, 2006, representing a decrease of $0.1 million, or 2.9%, from $3.5 million in the six months ended June 30, 2005. Commissions charged by related and third parties in the six months ended June 30, 2006 amounted to $3.1 million, an increase of $0.4 million, or 14.8%, compared to $2.7 million in the six months ended June 30, 2005.
Vessel Operating Expenses
              Vessel operating expenses increased 20.5%, or $5.0 million, to $29.4 million in the six months ended June 30, 2006, from $24.4 million in the six months ended June 30, 2005. This increase was due to a general increase in running costs per vessel experienced by the industry, and the slight increase in the average number of vessels in our fleet during the six months ended June 30, 2006.
Amortization of Deferred Drydocking and Special Survey Costs
              Amortization of deferred drydocking and special survey costs expense increased 56.3%, or $0.9 million, to $2.5 million in the six months ended June 30, 2006, from $1.6 million in the six months ended June 30, 2005. This was due to the costs of drydocking and special surveys conducted for five of our vessels in the six months ended June 30, 2006 but not in the six months ended June 30, 2005.
Depreciation
              Depreciation expense increased 5.2%, or $0.7 million, to $14.2 million in the six months ended June 30, 2006, from $13.5 million for the six months ended June 30, 2005. The increase in depreciation expense was due to the slight increase in the average number of vessels in our fleet during the six months ended June 30, 2006.
General and Administrative Expenses
              General and administrative expenses increased 66.7%, or $1.4 million, to $3.5 million in the six months ended June 30, 2006 from $2.1 million in the six months ended June 30, 2005, reflecting $0.75 million of management fees we paid in respect of the vessels in our fleet during the six months ended June 30, 2006 pursuant to our new management agreement, which was not in effect during the six months ended June 30, 2005, and $0.65 million of additional remuneration expense which was not applicable in the six months ended June 30, 2005.
Interest Expense, Interest Income, and Other Finance (Costs) Income, Net
              Interest expense increased $4.7 million, or 46.5%, to $14.8 million in the six months ended June 30, 2006, from $10.1 million in the six months ended June 30, 2005. Interest income was $2.1 million for the six months ended June 30, 2006, a decrease of $1.2 million, from $3.3 million for
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the six months ended June 30, 2005, and other finance income (costs), net, increased $6.9 million, to income of $2.5 million in the six months ended June 30, 2006, from a cost of $(4.4) million in the six months ended June 30, 2005. The change in interest expense was primarily due to the increase in interest rates to which our indebtedness, on which we paid interest, was subject and the increase in daily average indebtedness of approximately $32.2 million resulting from our debt refinancing in 2005, which impacted the full six months ended June 30, 2006 while it only impacted part of the six months ended June 30, 2005. The difference in other finance income (costs), net, was due to foreign exchange differences in respect of the forward contracts related to the leasing arrangements for the CSCL Europe , the CSCL America , the Maersk Derby (ex P&O Nedlloyd Caracas ), the Vancouver Express (ex P&O Nedlloyd Caribbean ), the CSCL Pusan (ex HN 1559) and the HN 1561 , which during the six months ended June 30, 2006 were a gain of $2.8 million while in the six months ended June 30, 2005 were a loss of $4.1 million. The decrease in interest income was due to the decreased daily average bank deposits on which we earned interest, offset in part by higher interest rates. See "—Credit Facilities."
Gain/(loss) on sale of vessels
              Gain/(loss) on sale of vessels of $15.0 million for the six months ended June 30, 2006 reflects the sale of the Sofia III to a third party drybulk operator for $27.5 million, representing a gain of $15.0 million over the acquisition cost of such vessel as depreciated to the time of sale.
Other income/(expense), net
              Other income/(expense), net of $(15.3) million for the six months ended June 30, 2006 included an expense of approximately $13 million related to the expected increase in the put option price we will be obligated to pay under the leasing arrangements for the CSCL Europe , the CSCL America , the Maersk Derby (ex P&O Nedlloyd Caracas ), the Vancouver Express (ex P&O Nedlloyd Caribbean ), the CSCL Pusan (ex HN 1559) and the HN 1561 , if the put option is exercised 6 1 / 2 years into the lease terms, as described under "—Leasing Arrangements", as well as expenses of $(0.9) million for revaluation of the pound sterling liability related to these leasing arrangements and $(2.8) million for an accounting reversal relating to these leasing arrangements, offset in part by funds received upon termination of an unrelated lawsuit.
Year ended December 31, 2005 compared to year ended December 31, 2004
              During 2005, we had an average of 25.0 containerships and 7.0 drybulk carriers in our fleet. During 2004, we had an average of 24.0 containerships and 7.0 drybulk carriers in our fleet. We sold one 3,029 TEU containership in January 2004 and took delivery of one 4,253 TEU containership in each of March and April 2004, and one 8,468 TEU containership in each of August and November 2004.
Operating Revenue
              Operating revenue increased 15.9%, or $33.1 million, to $241.4 million in 2005, from $208.3 million in 2004. The increase was due to $20.0 million in revenue generated by the additional operating days of four new vessels, consisting of two 4,253 TEU containerships and two 8,468 TEU containerships acquired during 2004, which were operated for a greater number of days in 2005. Each of the 4,253 TEU vessels were chartered at daily rates of $20,600 and each of the 8,468 TEU vessels were chartered at daily rates of $29,500. In addition, $7.2 million in revenue was generated from the higher charter rates obtained by rechartering certain of our remaining containerships and $5.9 million in revenue was generated from the higher rates our drybulk carriers earned during the period.
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Voyage Expenses
              Voyage expenses were $7.5 million in 2005, representing an increase of $1.2 million, or 19.0%, from $6.3 million in 2004. Commissions charged by related and third parties in 2005 amounted to $6.1 million, an increase of $1.0 million, or 19.6%, compared to $5.1 million in 2004. In March 2004 we ceased paying a commission of 0.45% on all freight, charter hire, ballast bonus and demurrage for each vessel in our fleet to Nedlloyd Schiffsmakler, which was until that time performing chartering services for our fleet.
Vessel Operating Expenses
              Vessel operating expenses increased 16.7%, or $7.7 million, to $53.9 million in 2005, from $46.2 million in 2004. Approximately $4.0 million of the increase was due to the increase in the average number of vessels in our fleet in 2005, compared to 2004, and approximately $3.6 million of the increase was due to a general increase in running costs per vessel experienced by the industry.
Amortization of Deferred Drydocking and Special Survey Costs
              Amortization of deferred drydocking and special survey costs expense increased $1.8 million to $3.9 million in 2005, from $2.1 million in 2004. This was primarily due to the costs of drydockings and special surveys conducted for ten vessels in our fleet in 2004, which we began to amortize in the second half of 2004. Therefore these costs are reflected for all of 2005, but only part of 2004.
Depreciation
              Depreciation expense decreased 14.5%, or $4.6 million, to $27.1 million in 2005, from $31.7 million in 2004. The decrease resulted primarily from the change in our depreciation policy which became effective as of January 1, 2005 and decreased depreciation expense by $7.7 million in 2005, which was partially offset by increased depreciation of $3.1 million relating to the additional operating days in 2005 with respect to two 4,253 TEU and two 8,468 TEU containerships acquired in 2004.
General and Administrative Expenses
              General and administrative expenses increased 24.4%, or $1.0 million, to $5.1 million in 2005 from $4.1 million in 2004, reflecting the higher average number of containerships in our fleet during 2005 for which we paid management fees, and the new management agreement which came into effect beginning on July 1, 2005.
Interest Expense, Interest Income, and Other Finance Costs, Net
              Interest expense increased $11.8 million, or 101.7%, to $23.4 million in 2005, from $11.6 million in 2004, while interest income increased 142.3%, or $3.7 million, to $6.3 million in 2005, from $2.6 million in 2004, and other finance costs, net, increased $8.5 million from a gain of $1.4 million in 2004 to a cost of $7.1 million in 2005. The change in interest expense was primarily due to the increase in interest rates to which our indebtedness, on which we paid interest, was subject and the increase in average indebtedness of approximately $67.4 million resulting from our debt refinancing in 2005. The increase in other finance costs, net, was due to foreign exchange differences in respect of the forward contracts related to the leasing arrangements for the CSCL Europe , the CSCL America , the Maersk Derby (ex P&O Nedlloyd Caracas ), the Vancouver Express (ex P&O Nedlloyd Caribbean ), the CSCL Pusan (ex HN 1559) and the HN 1561 , which were a loss of $6.5 million during 2005. The increase in interest income was primarily due to accreted interest income on the present value of the cash inflows associated with the leasing arrangements for the CSCL Europe , the CSCL America , the Maersk Derby (ex P&O Nedlloyd Caracas ), the Vancouver Express (ex P&O Nedlloyd Caribbean ), the CSCL Pusan (ex HN 1559) and the HN 1561 , which represented a net increase of $1.4 million during
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2005. The remaining $2.3 million increase in interest income was due to higher interest rates and higher average levels of cash deposits in our bank accounts in 2005. See "—Credit Facilities."
Year ended December 31, 2004 compared to year ended December 31, 2003
              During 2004, we had an average of 24.0 containerships and 7.0 drybulk carriers in our fleet. During 2003, we had an average of 20.4 containerships and 7.9 drybulk carriers in our fleet. We sold one 3,029 TEU containership in January 2004 and took delivery of one 4,253 TEU containership in each of March and April 2004 and of one 8,468 TEU containership in each of August and November 2004. We took delivery of one 3,098 TEU containership in May 2003, two 4,651 TEU containerships in May 2003 and four 3,101 TEU containerships in July 2003. We sold one 3,029 TEU containership in July 2003 and one drybulk carrier in November 2003 (with capacity of 42,248 dwt).
Operating Revenue
              Operating revenue increased 42.6%, or $62.2 million, to $208.3 million for 2004, from $146.1 million for 2003. The increase resulted primarily from the additional $11.1 million in revenue generated by the two 4,253 TEU containerships we acquired during 2004, which were each chartered at daily rates of $20,600, and to a lesser extent from the $5.5 million in revenue generated by the two 8,468 TEU containerships we acquired later in 2004, which were each chartered at daily rates of $29,500. In addition, our operating revenue increased in 2004 as a result of the higher charter rates obtained by rechartering certain of our remaining containerships, which contributed $20.5 million in revenue during the year ended December 31, 2004, and the higher rates our drybulk carriers earned during the period which contributed $25.1 million in revenue during the year ended December 31, 2004.
Voyage Expenses
              Voyage expenses were $6.3 million for 2004, representing an increase of $1.3 million, or 26.0% from $5.0 million for 2003, reflecting the addition of the two 4,253 TEU vessels we acquired during 2004 and to a lesser extent the addition of the two 8,468 TEU containerships we acquired later in 2004. Commissions charged by related and third parties included in operating expenses amounted to $5.0 million for 2004, an increase of $1.0 million, or 25.0%, compared to $4.0 million for 2003. In March 2004, we ceased paying a commission of 0.45% on all freight, charter hire, ballast bonus and demurrage for each vessel in our fleet to Nedlloyd Schiffsmakler, which was until that time performing chartering services for our fleet.
Vessel Operating Expenses
              Vessel operating expenses increased 10.3%, or $4.3 million, to $46.2 million for 2004, from $41.9 million for 2003. The increase was primarily due to the $2.1 million in vessel operating expenses related to the two 4,253 TEU containerships we acquired during 2004 and to a lesser extent the $1.1 million in vessel operating expenses related to the two 8,468 TEU containerships we acquired later in 2004 and $1.1 million attributable to a general increase in the running costs per vessel experienced by the industry.
Amortization of Deferred Drydocking and Special Survey Costs
              Amortization of deferred drydocking and special survey costs expense increased $0.8 million to $2.1 million for 2004, from $1.3 million in 2003. The change between 2003 and 2004 was primarily due to amortization of the costs of drydockings and special surveys for 10 vessels in our fleet which were conducted in 2004 and which we began to amortize in the second half of 2004.
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Depreciation
              Depreciation expense on our vessels increased 8.6%, or $2.5 million, to $31.7 million for 2004, from $29.2 million for 2003. The increase was due to $1.6 million in depreciation expense with respect to the two 4,253 TEU containerships we acquired during 2004 and to a lesser extent the $1.1 million in depreciation expense with respect to the two 8,468 TEU containerships we acquired later in 2004.
General and Administrative Expenses
              General and administrative expenses were $4.1 million for both 2004 and 2003. The absence of change was due to the additional management fees associated with the four new containerships we acquired in 2004 being offset in 2004 by the $122,800, $84,400 and $164,250 decreases in fees payable due to, respectively, the sale of one drybulk carrier, one containership in late 2003 and one containership in early 2004.
Interest Expense, Interest Income, and Other Finance Costs, Net
              Interest expense increased 31.8%, or $2.8 million, to $11.6 million for 2004, from $8.8 million for 2003, while interest income increased 116.7%, or $1.4 million, to $2.6 million for 2004 from $1.2 million for 2003. Other finance costs, net, decreased by $1.8 million, from a $0.4 million cost in 2003 to a $1.4 million gain in 2004. The increase in interest income in 2004 compared to 2003 was due to accreted interest income on the present value of the cash inflows associated with the leasing arrangements for the CSCL Europe , the CSCL America , the Maersk Derby (ex P&O Nedlloyd Caracas ), the Vancouver Express (ex P&O Nedlloyd Caribbean ), the CSCL Pusan (ex HN 1559) and the HN 1561 , which represented a net increase of $1.2 million during 2004, while the increase in interest expense was due primarily to the increase in our outstanding indebtedness on which interest was payable. The decrease in other finance costs, net, was due to foreign exchange differences in respect of the forward contracts related to the leasing arrangements for the CSCL Europe , the CSCL America , the Maersk Derby (ex P&O Nedlloyd Caracas ), the Vancouver Express (ex P&O Nedlloyd Caribbean ), the CSCL Pusan (ex HN 1559) and the HN 1561 , of $1.6 million during 2004.
Seasonality
              Our containerships operate under multi-year charters and therefore are not subject to the effect of seasonal variations in demand. The drybulk carrier market is subject to moderate seasonality and is typically stronger in the quarters ending September 30 and December 31 in anticipation of increased consumption of coal and other raw materials in the northern hemisphere during the winter months. In addition, unpredictable weather patterns in these months tend to disrupt vessel scheduling and supplies of certain drybulk commodities.
Liquidity and Capital Resources
              Historically, our principal source of funds has been equity provided by our stockholders, operating cash flows and long-term bank borrowings. Our principal use of funds has been capital expenditures to establish, grow and maintain our fleet, comply with international shipping standards, environmental laws and regulations and to fund working capital requirements.
              Our primary short-term liquidity needs are to fund our vessel operating expenses. Our medium-term liquidity needs primarily relate to the purchase of the 16 additional containerships for which we have contracted. Our long-term liquidity needs primarily relate to additional vessel acquisitions in the containership and drybulk sectors and debt repayment. We anticipate that our primary sources of funds will be cash from our committed credit facilities, the proceeds from the sale of the six drybulk carriers in our fleet, the proceeds from the sale of the APL England , cash from operations, debt and, possibly, equity financings, although we do not currently have any specific plans
54

with respect to any future equity financing. We believe that these sources of funds, even absent any future equity financings, will be sufficient to meet our liquidity needs in the foreseeable future since our contracted revenue together with the new senior revolving credit facilities should be sufficient to meet our currently projected liquidity needs.
              We, as guarantor, and certain of our vessel-owning subsidiaries, as borrowers, have entered into a $144.0 million credit facility with the Export-Import Bank of Korea and Fortis Capital with respect to one of the vessels in our fleet, the CSCL Pusan (ex HN 1559 ), and one of our contracted vessels, the HN 1561 . As of June 30, 2006, we had incurred indebtedness of $126.9 million under this credit facility as described in "—Credit Facilities" and made payments from cash on hand of $37.9 million, each in connection with progress payments for these vessels. In connection with the delivery of the CSCL Pusan ( ex HN 1559 ) on September 8, 2006 we drew down an additional $7.7 million under this credit facility to fund a portion of the final installment payment on this vessel. We intend to finance a portion of the acquisition of each of our other 15 contracted vessels and to refinance certain of our existing senior credit facilities with borrowings under two additional new senior revolving credit facilities for which we have signed commitment letters. In addition, we have borrowed an aggregate amount of $75.0 million ($15.0 million with respect to each vessel) under a new credit facility with Seasonal Maritime Corporation, dated August 14, 2006, to partially finance the acquisition of the five 6,500 TEU newbuildings we ordered on July 26, 2006.
              In August 2006, we agreed to sell the six drybulk carriers in our fleet, with an aggregate capacity of 342,158 dwt, for an aggregate of $143.5 million. Pursuant to the terms of this agreement, we expect to deliver these vessels to the purchaser, which is not affiliated with us, as each vessel's respective charter expires over the next six to eight months. We intend to use the proceeds from this sale to repay indebtedness and fund contracted and future vessel acquisitions. We received payment of 10% of the aggregate sale price of the six drybulk vessels upon entering into the sales agreement. The remaining 90% of the sale price is payable throughout the next six to eight months upon delivery of each vessel to the purchaser upon expiration of each vessel's current charter.
              APL-NOL has recently exercised its option to purchase the APL England from us for $44.0 million upon the expiration of its current charter in February 2007.
              Under our current multi-year charters, we have contracted revenues of $106.6 million for the period from July 1, 2006 to December 31, 2006, $193.2 million for 2007 and $167.3 million for 2008.
              We intend, following this offering, to pay a quarterly dividend of $0.44 per share, or $1.76 per share per year. Our dividend policy will impact our future liquidity needs, however, we currently intend to pay dividends in amounts that will allow us to retain a portion of our cash flows to fund vessel, fleet or company acquisitions that we expect to be accretive to earnings and cash flows, and for debt repayment and drydocking costs, as determined by management and our board of directors.
              We declared and paid dividends of $244.6 million to our existing stockholders from our retained earnings in 2005. Investors in this offering will not receive any portion of this dividend.
              We have signed commitment letters with Aegean Baltic Bank S.A. and HSH Nordbank AG and with The Royal Bank of Scotland with respect to two new senior secured non-amortizing revolving credit facilities to refinance our existing senior secured indebtedness with those lenders, as well as to finance a portion of our contracted fleet and any future vessel acquisitions. After giving effect to the application of the net proceeds of this offering and the financing of our contracted vessels upon execution of these new senior revolving credit facilities, we expect to have in excess of $500.0 million of undrawn availability.
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Net Cash Provided by Operating Activities
              Net cash flows provided by operating activities decreased 13.3%, or $11.2 million, to $72.9 million in the six months ended June 30, 2006, compared to $84.1 million for the six months ended June 30, 2005, and increased 25.6%, or $33.1 million, to $162.2 million in 2005, from $129.1 million in 2004. For the six months ended June 30, 2006, the decrease was primarily a result of a reduction of $9.9 million in operating revenues. The increase in 2005 was primarily attributable to the additional operating days in 2005 of two 4,253 TEU and two 8,468 TEU containerships acquired in 2004, which contributed $17.1 million in net cash, and the higher recharter rates our drybulk carriers were able to command, which contributed $5.2 million in net cash. Net cash flows provided by operating activities increased 51.5%, or $43.9 million, to $129.1 million for 2004, from $85.2 million for 2003. The increase in 2004 was due to the addition of two 4,253 TEU containerships ($9.0 million), and two 8,468 TEU containerships ($4.3 million) during 2004, higher charter rates obtained by rechartering certain of our remaining containerships ($10.3 million) and the higher rates our drybulk carriers earned during the period ($20.3 million).
Net Cash Used in Investing Activities
              Net cash flows used in investing activities were $(52.7) million in the six months ended June 30, 2006 compared to $(12.4) million in the six months ended June 30, 2005 and were $(40.5) million in 2005 and $(154.7) million in 2004, respectively. The difference between the six months ended June 30, 2006 and 2005 period results primarily reflects the acquisition of the MOL Confidence on March 23, 2006. Net cash flows used in investing activities were $(154.7) million in 2004 and $(226.4) million in 2003, reflecting the fact that no funds were used during 2004 to acquire secondhand vessels, including advances for such vessel acquisitions, which more than offset an increase of $18.9 million in funds used in connection with progress payments for newbuildings during 2004.
Net Cash Provided by/(Used in) Financing Activities
              Net cash flows provided by financing activities were $(26.6) million in the six months ended June 30, 2006 compared to $3.3 million in the six months ended June 30, 2005 and were $(180.7) million and $45.1 million in 2005 and 2004, respectively. The six months ended June 30, 2006 and 2005 period results primarily reflect borrowings of $30.4 million for the acquisition of one of the containerships in our fleet, the MOL Confidence, and the repayment of $56.6 million of debt. Net cash flows provided by financing activities were $45.1 million in 2004 and $187.3 million for 2003, reflecting, primarily, reduced drawdowns under our credit facilities of $90.2 million, and increased repayments of indebtedness of $28.1 million.
Credit Facilities
              We, as guarantor, and certain of our subsidiaries, as borrowers, have entered into a number of credit facilities in connection with financing the acquisition of certain vessels in our fleet, as well as one of our contracted vessels, the HN 1561 . We have also, as described below, signed commitment letters with Aegean Baltic Bank S.A. and HSH Nordbank AG and with The Royal Bank of Scotland with respect to two new senior secured non-amortizing revolving credit facilities, under which we intend to
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finance the acquisition of each of our other 15 contracted vessels and refinance some of our existing indebtedness with those lenders. The following summarizes certain terms of our existing credit facilities:

Lender(1)
	 	Available
Principal
Amount
	 	Outstanding
Principal
Amount(2)
	 	Interest Rate
	 	Maturity
	 	Remaining Repayment
Installments
	
HSH NORDBANK(3)	 	—	 	$51.0 million	 	LIBOR + 0.775%	 	Due March 2014	 	31 quarterly installments: $1.0 million
Balloon: $20.0 million	

KEXIM(4)	
 	
—	
 	
$106.7 million	
 	
FIXED at 5.0125%	
 	
Due November 2016	
 	
40 quarterly installments: $2.6 million
Plus installments of $1.0 million, $1.3 million and $0.69 million payable in August 2016, September 2016 and November 2016, respectively.	

KEXIM-FORTIS(5)	
 	
$17.1 million	
 	
$126.9 million	
 	
FIXED at 5.02%	
 	
12 years (from delivery of vessels)	
 	
First semi-annual installment: $2.8 million
2nd-24th quarterly installments: $5.6 million
Final semi-annual installment: $2.9 million
Balloon: $9.0 million	

AEGEAN BALTIC BANK(6)	
 	
—	
 	
$179.1 million	
 	
LIBOR + 0.825%	
 	
Due June 2013	
 	
27 quarterly installments: $4.2 million
Balloon: $66.4 million	

THE ROYAL BANK OF SCOTLAND(7)	
 	
—	
 	
$175.5 million	
 	
LIBOR + 0.80%	
 	
Due October 2013	
 	
First 6 semi-annual installments: $12.25
8th-16th installments: $8.5 million
Balloon: $34.0 million	

The following vessels in our fleet are unencumbered: the Hyundai Duke , the Norasia Hamburg , the YM Yantian , the YM Milano , the Victory I , the Henry , the Independence , the CMA CGM Elbe , the CMA CGM Kalamata , the CMA CGM Komodo , the Pacific Bridge , the Eagle Express and the MOL Confidence. In accordance, however, with the terms of the commitment letter we have entered into with RBS for a new senior secured credit facility described below under "—New Credit Facilities," we intend to mortgage the Norasia Hamburg, the YM Yantian, the YM Milano , the Victory I and the MOL Confidence under such new senior secured credit facility.
(1)
We entered into an unsecured $75.0 million loan agreement, dated August 14, 2006, with Seasonal Maritime Corporation, which is described more fully under "Description of Indebtedness—Our Credit Facilities—Seasonal Maritime Corporation Credit Facility." Interest on the outstanding principal amount of this loan accrues at a rate of LIBOR plus 1.0% per annum, with a maturity date of six months after execution of the loan agreement, subject to an option for an additional six months repayment term for the borrower. We also entered into a $30.4 million loan agreement, dated March 14, 2006, among Seasonal Maritime Corporation, as lender, a subsidiary of ours, as borrower, and us, as guarantor. We repaid $25.4 million of the amount borrowed under this loan agreement on June 16, 2006, leaving $5.0 million outstanding as of June 30, 2006, which amount was repaid in August 2006.
(2)
As of June 30, 2006.
(3)
Our credit facility with HSH Nordbank AG is collateralized by mortgages and other security relating to the Vancouver Express (ex P&O Nedlloyd Caribbean) and the Maersk Derby (ex P&O Nedlloyd Caracas ).
(4)
Our KEXIM credit facility is collateralized by mortgages and other security relating to the CSCL Europe and the CSCL America.
(5)
Our KEXIM-FORTIS credit facility is collateralized by mortgages and other security relating to the CSCL Pusan (ex HN 1559) and the HN 1561 , which we expect to take delivery of in November 2006. The maximum credit facility amount is $144.0 million. As indicated in the above table, we have not fully drawn down this credit facility, and as of June 30, 2006
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$17.1 million remained available to us for future borrowings. In connection with the delivery to us of the CSCL Pusan (ex HN 1559) on September 8, 2006 we drew down an additional $7.7 million, leaving $9.4 million available to us for future borrowings. The borrowings under Tranche A of this credit facility attributable to the CSCL Pusan ( ex  HN 1559) will be repayable in 24 semi-annual installments of $2.8 million each, commencing on March 15, 2007, and the repayment of the borrowings under Tranche B attributable to the CSCL Pusan ( ex  HN 1559) will consist of a balloon payment of $4.5 million payable with the final installment of Tranche A on September 8, 2018. The repayment schedule of the portion of the borrowings attributable to the HN 1561 under this credit facility will be determined upon delivery of the HN 1561 .
(6)
Our credit facility with Aegean Baltic Bank S.A. is collateralized by mortgages and other security relating to the APL England, the APL Scotland, the APL Belgium and the Hyundai Commodore.
(7)
Our credit facility with The Royal Bank of Scotland is collateralized by mortgages and other security relating to the S.A. Sederberg , the S.A. Winterberg, the S.A. Helderberg, the Maersk Constantia and the APL Holland, as well as the Fivos , the Alexandra I, the Dimitris C, the Roberto C, the Maria C , and the MV Achilleas , which we have agreed to sell. Upon our delivery of these vessels to the purchaser, we currently intend to replace these vessels as collateral under this credit facility with certain of our unencumbered vessels, which are described above.
              Our existing credit facilities contain financial covenants requiring us to:
•
maintain stockholders' equity of at least $250.0 million (except for the KEXIM-Fortis credit facility, which requires at least $100.0 million);

•
maintain an aggregate market value of the vessels in our fleet in excess of 145.0% of our net consolidated debt;

•
maintain adjusted stockholders' equity in excess of 30.0% of our total assets;

•
maintain a ratio of EBITDA to net interest expense of no less than 2.5 to 1.0;

•
maintain cash and cash equivalents in an amount of no less than $30.0 million (except for the Eurobank and KEXIM-Fortis credit facilities, which require at least $20.0 million); and

•
ensure that our outstanding bank debt does not exceed 75.0% of the aggregate market value of our vessels mortgaged thereunder.
              As of June 30, 2006, we were in compliance with each of these financial ratio requirements and financial covenants. The covenants described above are those contained in our existing credit facilities. The covenants that will be contained in our new senior credit facilities are described in general below. For additional information regarding our existing credit facilities see "Description of Indebtedness."
New Credit Facilities
              We have signed commitment letters with Aegean Baltic Bank S.A. and HSH Nordbank AG and with The Royal Bank of Scotland with respect to two new senior secured non-amortizing revolving credit facilities to partially refinance our existing senior secured indebtedness with those lenders and to partially finance planned and future vessel acquisitions.
New RBS Credit Facility
              We, as borrower, and certain of our vessel-owning subsidiaries, as guarantors, have signed a commitment letter with The Royal Bank of Scotland for a new senior revolving credit facility in the aggregate amount of up to $700.0 million, which we refer to as the new RBS credit facility. The new RBS credit facility will be divided into two revolving credit tranches, Tranche A and Tranche B. Tranche A of the credit facility will be made available in four advances. Advance 1 of Tranche A will be in an amount of up to $100.0 million and collateralized by the APL Holland and the MOL Confidence . Advance 2 will be in an amount of up to $22.0 million and collateralized by mortgages and other security relating to the S.A. Sederberg , the S.A. Winterberg , the S.A. Helderberg and the Maersk Constantia . Advance 3 will be in an amount of up to $46.0 million and collateralized by mortgages and other security relating to the YM Yantain and Norasia Hamburg . Advance 4 will be in an amount of up to $32.0 million and collateralized by mortgages and other security relating to the Victory I and the YM
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Milano . We intend to use the borrowings under Tranche A for working capital and to refinance outstanding indebtedness under our existing credit facility with RBS, which is currently collateralized by mortgages and other security relating to APL Holland , the S.A. Sederberg , the S.A. Winterberg , the S.A. Helderberg and the Maersk Constantia , as well as the Fivos , the Alexandra I , the Dimitris C , the Roberto C , the Maria C , and the MV Achilleas , which we have agreed to sell. Tranche B of the new RBS credit facility will be for a maximum amount of $500.0 million. Tranche B may be used to provide financing for a portion of our contracted fleet, future vessel acquisitions in the container or drybulk sectors, or our other ship financing or corporate activities. The revolving period will commence upon the first drawdown under Tranche A and will have a duration of five years. The interest rate on the new RBS credit facility will be 0.75% over LIBOR.
              Sixty-six months after the first drawdown, the available credit limit under Advance 1 of Tranche A will be reduced by six semi-annual reductions of $11.5 million, and a balloon reduction of $31.0 million together with the last reduction. Six months after the first drawdown, the available credit limit under Advance 2 of Tranche A will be reduced by four semi-annual reductions of $0.75 million, and a balloon reduction of $19.0 million together with the last reduction. Eighteen months after the first drawdown, the available credit limit under Advance 3 of Tranche A will be reduced by four semi-annual reductions of $9.5 million, and a balloon reduction of $8.0 million together with the last reduction. Six months after the first drawdown, the available credit limit under Advance 4 of Tranche A will be reduced by four semi-annual reductions of $6.5 million, and a balloon reduction of $6.0 million together with the last reduction. Each advance made under Tranche B for the financing of a newbuilding will have a term of 10 years from the first drawdown, and there will be no reductions in the available credit limit under each advance until five years after the first drawdown under Tranche A. Six months after this five-year period ends, the available credit limit under each advance will likewise be reduced by equal semi-annual reductions, together with a balloon reduction equal to the balloon reduction that will be payable as though Tranche B were a 10-year loan repayable on an 18-year straight-line basis. Advances under Tranche B for the purchase of secondhand vessels have similar repayment terms, with slightly shorter time periods for repayment, depending upon the age of the vessel.
              The new RBS credit facility will contain financial covenants requiring us to:
•
ensure that the aggregate market value of the vessels mortgaged under the new credit facility exceeds 125.0% of the aggregate outstanding principal amount thereunder at all times;

•
maintain liquidity in the amount of at least $30.0 million;

•
ensure that our net worth exceeds $400.0 million;

•
ensure that our total liabilities, at all times, will be no more than 70.0% of the market value of our adjusted total assets; and

•
maintain operating cash flow, defined as EBITDA, of at least 250.0% of net consolidated interest expense.
              The new RBS credit facility will also contain customary covenants that will require us to maintain adequate insurance coverage and obtain the consent of RBS before we incur any new indebtedness that is secured by the mortgaged vessels. It will also require that our chief executive officer, Dr. Coustas, or members of his family, control at least 51.0% of our outstanding capital stock and that the vessels mortgaged under the facility are at all times managed by our manager. In addition, we and our subsidiaries will not be permitted under the new RBS credit facility to pay dividends if there is a breach of covenant or an event of default.
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New Aegean Baltic-Nordbank Credit Facility
              We, as borrower, and certain of our vessel-owning subsidiaries, as guarantors, have signed a commitment letter with Aegean Baltic Bank S.A. and HSH Nordbank AG for a new revolving and term loan credit facility in the aggregate amount of $700.0 million, which we refer to as the new Aegean Baltic-Nordbank credit facility. The new Aegean Baltic-Nordbank credit facility will be divided into two revolving credit tranches, Tranche A and Tranche B. Tranche A of the credit facility will be for a committed amount of $200.0 million and will be collateralized by mortgages and other security relating to the APL Belgium , the APL England , the APL Scotland and the Hyundai Commodore. We intend to use the borrowings under Tranche A to refinance outstanding indebtedness under our existing credit facility with Aegean Baltic Bank, which is currently collateralized by mortgages and other security relating to these same vessels. Tranche B of the new Aegean Baltic-Nordbank credit facility will be for a maximum amount of $500.0 million. Tranche B is to be used to provide financing for future vessel acquisitions, or other ship financing or corporate activities. The interest rate on the new Aegean Baltic-Nordbank credit facility will be 0.75% over LIBOR. The revolving period will commence upon signing of this credit facility and will have a duration of five years. The loan will be repayable in up to 20 consecutive quarterly installments beginning in 2011 and a balloon payment, if applicable, together with the last payment due in 2016.
              The new Aegean Baltic-Nordbank credit facility will contain financial covenants requiring us to:
•
maintain liquidity in the amount of at least $30.0 million;

•
ensure that our net worth, prior to this offering, exceeds $250.0 million, and after this offering, exceeds $400.0 million;

•
ensure that our total liabilities will, at all times, be no more than 70.0% of the market value of our adjusted total assets; and

•
maintain operating cash flow, defined as EBITDA, of at least 250.0% of net consolidated interest expense.

              We expect that the new Aegean Baltic-Nordbank credit facility will also contain customary covenants that will require us to maintain adequate insurance coverage and obtain the lenders' consent before we incur any new indebtedness that is secured by the mortgaged vessels. In addition, we and our subsidiaries will not be permitted to pay dividends under our new Aegean Baltic-Nordbank credit facility if there is an event of default. Under our new Aegean Baltic-Nordbank credit facility, we and our subsidiaries are not permitted to change our manager, or to allow a change in our ownership, a merger with another entity or a corporate reorganization, without the prior written consent of the lenders. In addition, following this offering, we will not be permitted to de-list from the New York Stock Exchange or be privatized without the prior written consent of our lenders. Events of default under this credit facility include a material adverse change in our business condition and the failure of the Coustas Family to continue to own, directly or indirectly, at least 50% of the voting power of our outstanding capital stock.
Leasing Arrangements
              We have entered into leasing arrangements with a subsidiary of Lloyds Bank, Allco Finance Limited, a U.K.-based financing company, Allco Finance (UK) Limited, a U.K.-based financing company, and Allocean Maritime Limited, or AML, a U.K.-based ship financing company, with respect to five containerships in our current fleet, the CSCL Europe , the CSCL America , the Maersk Derby (ex P&O Nedlloyd Caracas ) and the Vancouver Express (ex P&O Nedlloyd Caribbean ) and the CSCL Pusan (ex HN 1559) , and one of the containerships under construction, the HN 1561 . As part of these leasing arrangements, a separate limited partnership formed by a Lloyds Bank subsidiary (which provides the financing) and the Allco companies purchased each of these vessels. We charter-in these vessels from
60

AML, which charters them in from the applicable partnership, and sub-charter the vessels to liner companies. We pay a fixed rate, which during the first 6 1 / 2  years of the leasing arrangements is a nominal amount, to charter-in these vessels from AML and we, in turn, are entitled to retain all of the charter revenue we earn from sub-chartering these vessels to our liner company customers.
              Under the terms of these leasing arrangements, upon an event of default, total loss of the vessel or 6 1 / 2  years into the term of the lease, which will fall on April 14, 2011 with respect to the CSCL Europe , the CSCL America , the Maersk Derby (ex P&O Nedlloyd Caracas ) and the Vancouver Express (ex P&O Nedlloyd Caribbean ), and will fall on April 14, 2013 with respect to the CSCL Pusan (ex HN 1559) and the HN 1561 , the Lloyds Bank subsidiary has a put option to sell its 99.996% interest in the partnership owning each respective vessel to Allco Finance (UK) Limited. Allco Finance (UK) Limited has the option to put such interest to us and has written an option in favor of us (with a substantially similar exercise price) to acquire such interest. Each of Allco Finance (UK) Limited's put option to us and our purchase option are exercisable only if the Lloyds Bank subsidiary has exercised its put option.
              If, however, the put option is not exercised we would be entitled to charter-in the vessels for an additional 12 years at rates adjusted to market no less than every two years at our option, rather than at the nominal rate in effect for the first 6 1 / 2  years of the leasing arrangement. In that case we would also expect to exercise options that would entitle us to approximately 49% of the amount in excess of a pre-set level of the charter-in rate. Further, we would continue to be entitled to retain all of the charter revenue we earn from chartering-out these vessels to our liner company customers. As part of the leasing arrangements, we made a deposit with respect to each of these vessels denominated in British pounds, in an amount expected to represent, after 6 1 / 2  years, approximately 75% of the original purchase price of the applicable vessel. This cash deposit with The Royal Bank of Scotland collateralizes the entire amount of a letter of credit issued by The Royal Bank of Scotland to secure our obligation to pay the put option price. If the put option is not exercised and, as a result, the letter of credit with respect to any of these vessels is not called, this deposit would be returned to us.
              On April 7, 2006, new legislation was proposed in the United Kingdom that is expected to result in a claw-back or recapture of certain of the benefits that were expected to be available to the counterparties to these transactions at their inception. This legislation was enacted on July 19, 2006. Accordingly, the put option price is expected to be increased to compensate the counterparties for the loss of these benefits. We currently expect the increase in the put option price we will be obligated to pay if the put is exercised will be approximately £46 million pounds ($80 million), although the increase in this put price could vary. In the three months ended June 30, 2006, we recognized an expense of approximately $13 million, which is the amount by which we currently expect the increase in the put price to exceed the cash benefits we expect to receive, and had expected to retain, from these transactions.
              We currently have operational control over these six vessels. Even if the put option is not exercised, we will continue to have operational control over each of these vessels under the terms of the leasing arrangements during the period we charter-in these vessels from AML. We consider each of the vessels subject to these leasing arrangements to be an asset for our financial reporting purposes, and each vessel is reflected as such in our consolidated financial statements included elsewhere herein.
              As part of the leasing arrangements we have agreed to financial covenants with a subsidiary of Lloyds Bank requiring us to:
•
maintain adjusted stockholders' equity of at least $100.0 million;

•
ensure that adjusted stockholders' equity exceeds 30% of our total assets;

•
maintain at least $5.0 million in cash or cash equivalents;

•
ensure that our outstanding indebtedness does not exceed 75% of the aggregate market value of the vessels subject to the leasing arrangements; and
61

•
ensure that the aggregate market value of the vessels in our fleet exceeds 145% of our net consolidated debt at all times.
              The leasing arrangements also include covenants that require the current stockholders of Danaos Corporation to continue to hold at least 60% of its outstanding capital stock and that we continue to own, directly or indirectly, all of the share capital of our subsidiaries that charter-in the vessels subject to the respective leasing arrangements. Under the leasing arrangements, we are not restricted from paying dividends so long as we remain in compliance with the covenants set forth in the preceding sentence and the last two bullet points above, our adjusted stockholders' equity exceeds 35% of our total assets, we maintain cash and cash equivalents of $20.0 million and we maintain a ratio of EBITDA to net interest expense of no less than 2.5 to 1.0.
Contractual Obligations
              Our contractual obligations as of December 31, 2005 were:

 	 	Payments Due by Period
	
 	 	Total
	 	Less than
1 year
(2006)
	 	1-3 years
(2007-
2008)
	 	3-5 years
(2009-
2010)
	 	More than
5 years
(After
January 1,
2011)
	
 	 	Dollars in thousands
	
Long-term debt obligations	 	$687,413	 	$58,865	 	$133,638	 	$122,388	 	$372,522	
 	Interest on long-term debt obligations(1)	 	209,414	 	31,068	 	67,946	 	51,883	 	58,517	
Payments to our manager(2)	 	25,626	 	8,527	 	17,099	 	—	 	—	
Vessel purchase agreements:	 	 	 	 	 	 	 	 	 	 	
 	Newbuilding contracts(3)	 	128,780	 	23,780	 	105,000	 	—	 	—	
 	Vessel acquisition agreements(4)	 	111,150	 	—	 	111,150	 	—	 	—	
 	 		 		 		 		 		
Total(5)	 	$1,162,383	 	$122,240	 	$434,833	 	$174,271	 	$431,039	

(1)
We expect to be obligated to make the interest payments set forth in the above table with respect to our long-term debt obligations. The interest payments are based on an assumed LIBOR rate of 5.5% with respect to the Eurobank, HSH Nordbank, Aegean Baltic and RBS credit facilities. See "—Credit Facilities" and "Description of Indebtedness."
(2)
Under our management agreement with Danaos Shipping, from July 1, 2005 to December 31, 2008, we have paid and will pay it $250 per vessel per day for vessels on a bareboat charter and $500 per vessel per day for the remaining vessels in our fleet. We also pay our manager $500 per day for providing certain commercial, chartering and administrative services. As of December 31, 2005 we had a fleet of 32 vessels, which increased to 33 vessels with the delivery of one secondhand vessel on March 23, 2006 and decreased back to 32 vessels with the sale of one drybulk carrier, the Sofia III, on May 12, 2006, increased to 33 vessels upon the delivery of the CSCL Pusan (ex HN 1559) to us on September 8, 2006 and will decrease to 27 vessels with the sale, as agreed in August 2006, of six drybulk carriers upon expiration of the vessels' respective charters over the next six to eight months and to 26 vessels with the sale of the APL England to APL-NOL upon expiration of its current charter in February 2007. Our fleet will increase, assuming no further vessel dispositions, with the expected delivery of one newbuilding in November 2006, one secondhand vessel in the first half of 2007, two newbuildings and one secondhand vessel in the second half of 2007, four newbuildings in the second half of 2008, four newbuildings during the first half of 2009 and three newbuildings during the second half of 2009. After December 31, 2008, these fees will be adjusted annually by agreement between us and our manager. In addition, we also will pay our manager a commission of 0.75% of the gross freight, demurrage and charter hire collected from the employment of our ships, 0.5% of the contract price of any vessels bought or sold on our behalf and $400,000 per newbuilding vessel for the supervision of newbuilding contracts. We expect to be obligated to make the payments set forth in the above table under our management agreement over the initial term which expires on December 31, 2008, based on our currently contracted revenue, as reflected above under "—Factors Affecting Our Results of Operations—Operating Revenues," and our currently anticipated vessel acquisitions and dispositions and chartering arrangements described in this prospectus. No interest is payable with respect to these obligations if paid on a timely basis, therefore no interest payments are included in these amounts.
(3)
The $8.39 million portion of the purchase price for the CSCL Pusan (ex HN 1559) that remained unpaid as of December 31, 2005 was paid upon the delivery of the vessel to us on September 8, 2006. Of the purchase price for the HN 1561 of $83.9 million, $8.39 million remains unpaid. This amount is payable upon delivery of the vessel, which is expected to occur in
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November 2006. Of the total combined purchase price for the HN 1639 and the HN 1640 , expected to be delivered in the second half of 2007, $112.0 million of $140.0 million remains payable. No interest is payable with respect to these obligations if paid on a timely basis, therefore no interest payments are included in the table. On March 28, 2006 we entered into contracts with Samsung for the construction of four 4,253 TEU vessels, the HN 1670, the HN 1671, the HN 1672 and the HN 1673 , which are expected to be delivered to us throughout the second half of 2008 at a price of $63.8 million each. Of the aggregate $255.2 million purchase price for the HN 1670, the HN 1671, the HN 1672 and the HN 1673, $51.04 million was payable within one year of December 31, 2005, of which an aggregate of $25.52 million ($6.38 million with respect to each vessel) was paid as deposits on March 28, 2006. The remaining $204.16 million is payable at specified times between March 28, 2006 and December 31, 2008. On May 12, 2006 we entered into contracts with Samsung for the construction of two 4,253 TEU vessels, the HN 1698 and the HN 1699 , which are expected to be delivered to us in the first half of 2009 at a price of $63.8 million each. Of the aggregate $127.6 million purchase price for the HN 1698 and the HN 1699, $12.76 million ($6.38 million with respect to each vessel) was payable within one year of December 31, 2005, which amount was paid as deposits on May 22, 2006. The remaining $114.84 million is payable at specified times between May 22, 2006 and June 30, 2009. On July 26, 2006 we entered into contracts with Sungdong for the construction, at a price of $91.5 million each, of five 6,500 TEU vessels, the HN S4001, the HN S4002, the HN S4003, the HN S4004 and the HN S4005, which are expected to be delivered to us during 2009. Of the aggregate $457.5 million purchase price for these vessels , $91.5 million ($18.3 million with respect to each vessel) was paid in August 2006. The remaining $366.0 million is payable at specified times between July 2008 and December 31, 2009. We have borrowed $75.0 million of the $91.5 million payment due in August 2006 under a new credit facility with Seasonal Maritime Corporation, dated August 14, 2006. Interest on the outstanding principal amount of this loan accrues at a rate of LIBOR plus 1.0% per annum.
(4)
On March 17, 2005 we entered into contracts to acquire two secondhand 4,300 TEU vessels built in 2004 for $61.75 million each. We expect these two vessels, the E.R. Auckland and the E.R. Wellington , to be delivered in the first and second halves of 2007, respectively. Of the aggregate $123.5 million purchase price for the E.R. Auckland and the E.R. Wellington, $111.15 million remains unpaid. No interest is payable with respect to this obligation if paid on a timely basis, therefore no interest payments are included in this amount. In addition, on February 17, 2006 we entered into a contract to acquire one secondhand 4,651 TEU vessel, built in 1994, for $40.5 million. This vessel, the MOL Confidence , was delivered on March 23, 2006. Of the $40.5 million purchase price for the MOL Confidence, $4.1 million (10%) was paid as a down payment on February 24, 2006, and the remaining $36.5 million was paid upon delivery of the vessel to us on March 23, 2006 and $30.4 million of this purchase price was funded under a loan agreement, dated March 14, 2006, between Seasonal Maritime Corporation, as lender, a subsidiary of ours, as borrower, and us, as guarantor. See "Related Party Transactions—MOL Confidence." We repaid $25.4 million of the amount borrowed under this loan agreement on June 16, 2006, leaving $5.0 million outstanding as of June 30, 2006, which amount was repaid in August 2006. Interest on the outstanding principal amount of this loan accrued at a rate of LIBOR plus 1.0% per annum.
(5)
Does not include amounts which are expected to be payable to a subsidiary of Lloyds Bank in connection with the leasing arrangements for the CSCL Europe , the CSCL America , the Maersk Derby (ex P&O Nedlloyd Caracas ), the Vancouver Express (ex P&O Nedlloyd Caribbean ), the CSCL Pusan (ex HN 1559) and the HN 1561, described in note 7 to our consolidated financial statements for the six months ended June 30, 2006 and note 9(b) to our consolidated financial statements for the three years ended December 31, 2005 included elsewhere herein. These amounts would be payable on April 14, 2011 with respect to the CSCL Europe, the CSCL America , the Maersk Derby (ex P&O Nedlloyd Caracas ) and the Vancouver Express (ex P&O Nedlloyd Caribbean) and on April 14, 2013 with respect to the CSCL Pusan (ex HN 1559) and the HN 1561.
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              Giving effect to the transactions described in the footnotes to the above table, our contractual obligations as of December 31, 2005 would have been as follows:

 	 	Payments Due by Period
	
 	 	Total
	 	Less than
1 year
(2006)
	 	1-3 years
(2007-
2008)
	 	3-5 years
(2009-
2010)
	 	More than
5 years
(After
January 1,
2011)
	
 	 	Dollars in thousands
	
Long-term debt obligations	 	$762,413	 	$58,865	 	$208,638	 	$122,388	 	$372,522	
 	Interest on long-term debt obligations(1)	 	211,509	 	32,858	 	68,251	 	51,883	 	58,517	
Payments to our manager(2)	 	25,626	 	8,527	 	17,099	 	—	 	—	
Vessel purchase agreements:	 	 	 	 	 	 	 	 	 	 	
 	Newbuilding contracts(3)	 	894,080	 	104,080	 	405,110	 	384,890	 	—	
 	Vessel acquisition agreements	 	111,150	 	—	 	111,150	 	—	 	—	
 	 		 		 		 		 		
Total(4)	 	$2,004,778	 	$204,330	 	$810,248	 	$559,161	 	$431,039	

(1)
We expect to be obligated to make the interest payments set forth in the above table with respect to our long-term debt obligations. The "Less than one year" data are derived from actual data for the period up to June 30, 2006, while for subsequent periods the interest payments are based on an assumed LIBOR rate of 5.5% with respect to the Eurobank, HSH Nordbank, Aegean Baltic, RBS and Seasonal Maritime credit facilities. See "—Credit Facilities" and "Description of Indebtedness."
(2)
Under our management agreement with Danaos Shipping, from July 1, 2005 to December 31, 2008, we have paid and will pay it $250 per vessel per day for vessels on a bareboat charter and $500 per vessel per day for the remaining vessels in our fleet. We also pay our manager $500 per day for providing certain commercial, chartering and administrative services. As of December 31, 2005 we had a fleet of 32 vessels, which increased to 33 vessels with the delivery of one secondhand vessel on March 23, 2006 and decreased back to 32 vessels with the sale of one drybulk carrier, the Sofia III, on May 12, 2006, increased to 33 vessels upon the delivery of the CSCL Pusan (ex  HN 1559 ) on September 8, 2006 and will decrease to 27 vessels with the sale, as agreed in August 2006, of six drybulk carriers upon expiration of the vessels' respective charters over the next six to eight months and to 26 vessels with the sale of the APL England to APL-NOL upon the expiration of its current charter in February 2007. Our fleet will increase, assuming no further vessel dispositions, with the expected delivery of one newbuilding in November 2006, one secondhand vessel in the first half of 2007, two newbuildings and one secondhand vessel in the second half of 2007, four newbuildings in the second half of 2008, four newbuildings during the first half of 2009 and three newbuildings during the second half of 2009. After December 31, 2008, these fees will be adjusted annually by agreement between us and our manager. In addition, we also will pay our manager a commission of 0.75% of the gross freight, demurrage and charter hire collected from the employment of our ships, 0.5% of the contract price of any vessels bought or sold on our behalf and $400,000 per newbuilding vessel for the supervision of newbuilding contracts. We expect to be obligated to make the payments set forth in the above table under our management agreement over the initial term which expires on December 31, 2008, based on our currently contracted revenue, as reflected above under "—Factors Affecting Our Results of Operations—Operating Revenues," and our currently anticipated vessel acquisitions and dispositions and chartering arrangements described in this prospectus. No interest is payable with respect to these obligations if paid on a timely basis, therefore no interest payments are included in these amounts.
(3)
Does not include $75.0 million paid in August 2006 as a portion of the initial payments due in August 2006 under new building contracts for the HN S4001 , the HN S4002 , the HN S4003 , the HN S4004 and the HN S4005 , which amount was borrowed from Seasonal Maritime Corporation in August 2006 and is reflected in "Long-term debt obligations" with the related interest payments reflected in "Interest on long-term debt obligations."
(4)
Does not include amounts which are expected to be payable to a subsidiary of Lloyds Bank in connection with the leasing arrangements for the CSCL Europe , the CSCL America , the Maersk Derby (ex P&O Nedlloyd Caracas ), the Vancouver Express (ex P&O Nedlloyd Caribbean ), the CSCL Pusan (ex  HN 1559 ) and the HN 1561, described in note 7 to our consolidated financial statements for the six months ended June 30, 2006 and note 9(b) to our consolidated financial statements for the three years ended December 31, 2005 included elsewhere herein. These amounts would be payable on April 14, 2011 with respect to the CSCL Europe, the CSCL America , the Maersk Derby (ex P&O Nedlloyd Caracas ) and the Vancouver Express (ex P&O Nedlloyd Caribbean) and on April 14, 2013 with respect to the CSCL Pusan (ex  HN 1559 ) and the HN 1561.
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Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk
              In connection with certain of our credit facilities under which we pay a fixed rate of interest, we entered into interest rate swap agreements designed to decrease our financing cash outflows by taking advantage of the relatively lower interest rate environment in recent years. We have recognized these derivative instruments on the balance sheet at their fair value. Pursuant to the adoption of our Risk Management Accounting Policy, and after putting in place the formal documentation required by SFAS 133 in order to designate these swaps as hedging instruments, as of June 15, 2006, these interest rate swaps qualified for hedge accounting, and, accordingly, since that time, only hedge ineffectiveness amounts arising from the differences in the change in fair value of the hedging instrument and the hedged item are recognized in our earnings. Assessment and measurement of prospective and retrospective effectiveness for these interest rate swaps will be performed on a quarterly basis, on the financial statement and earnings reporting dates. Prior to June 15, 2006, we recognized changes in the fair value of the interest rate swaps in current period earnings as these interest rate swap agreements did not qualify as hedging instruments under the requirements in the accounting literature described below because we had not adopted a hedging policy. These changes would occur due to changes in market interest rates for debt with substantially similar credit risk, payment profile and terms. We have not held or issued derivative financial instruments for trading or other speculative purposes.
              The commitment letters we have signed with respect to our new Aegean Baltic-Nordbank credit facility and our new RBS credit facility each provide that we may enter into similar interest rate swap agreements in connection with these credit facilities as well.
              Set forth below is a table of our interest rate swap arrangements as of December 31, 2005 and June 30, 2006.

 	 	 	 	 	 	 	 	 	 	 	 	Fair value
	 	
 	 	 	 	 	 	Notional
Amount on
Effective
Date
	 	 	 	 			 	
Counter-party
	 	Effective
Date
	 	Termination
Date
			 	Contracted
Rate
	 	Swap
Rate
	 	December 31,
2005
	 	June 30,
2006
	 	
 	 	(Dollars in thousands)
	 	
RBS	 	12/15/2004	 	8/27/2016	 	$	60,528	 	5.01% p.a.	 	LIBOR plus 0.84% p.a.	 	$	(1,608	)	$	(3,225	)	
RBS	 	11/17/2004	 	11/2/2016	 	$	62,342	 	5.01% p.a.	 	LIBOR plus 0.86% p.a.	 	 	(1,724	)	 	(3,396	)	
 	 	 	 	 	 	 	 	 	 	 	 	 		 		 	
Total fair value	 	 	 	 	 	 	 	 	 	 	 	 	$	(3,332	)	$	(6,621	)	
 	 	 	 	 	 	 	 	 	 	 	 	 		 		 	
              SFAS 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS 137, "Accounting for Derivative Instruments and Hedging Activities—Deferral of the Effective Date of SFAS 133," and SFAS 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities," which has been effective for us since January 1, 2001, established accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities. They require that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. If certain conditions are met, a derivative may be specifically designated as a hedge, the objective of which is to match the timing of gain or loss recognition on the hedging derivative with the recognition of (i) the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk or (ii) the earnings effect of the hedged forecasted transaction. For a derivative not designated as a hedging instrument, the gain or loss is recognized in income in the period of change.
Foreign Currency Exchange Risk
              We generate all of our revenues in U.S. dollars, but for the year ended December 31, 2005 and the six months ended June 30, 2006 we incurred approximately 42% and 40%, respectively, of our expenses in currencies other than U.S. dollars. As of June 30, 2006, approximately 41% of our
65

outstanding accounts payable were denominated in currencies other than the U.S. dollar (mainly in Euro). We have not entered into derivative instruments to hedge the foreign currency translation of assets or liabilities or foreign currency transactions other than as described below with respect to expected inflows in connection with the leasing transactions with respect to vessels in our fleet and we do not use financial instruments for trading or other speculative purposes. We have recognized these financial instruments on our balance sheet at their fair value. These foreign currency forward contracts did not qualify as hedging instruments until June 30, 2006, and thus, we have recognized changes in their fair value in our current period earnings. As of July 1, 2006 these foreign currency forward contracts qualify for hedge accounting and, accordingly, since that time changes in the fair value of these instruments are not recognized in current period earnings.
              In connection with the leasing arrangements with respect to five containerships in our current fleet, the CSCL Europe , the CSCL America , the Maersk Derby (ex P&O Nedlloyd Caracas ), the Vancouver Express (ex P&O Nedlloyd Caribbean ) and the CSCL Pusan (ex HN 1559), and one 9,580 TEU containership under construction, the HN 1561 , we are entitled to a predetermined amount denominated in British pounds, expected to be equal to approximately 75% of the original purchase price of each vessel, if the put option to sell the equity interest in the partnership which owns these vessels to an entity which can be controlled by us at our option is not exercised with respect to any or all of these vessels. If the value of the British pound declines against the dollar we may have to make provision in our financial statements for foreign currency exchange loss. Although we have entered into forward contracts to economically hedge our exposure to currency fluctuations in connection with certain aspects of the leasing transactions as described below, we have not hedged against fluctuations in the value of the British pound against the dollar with respect the value of the deposit to which we would be entitled if the put option is not exercised, and as a result our operating results could be affected if the value of the British pound against the dollar were to deteriorate at the time the deposits are returned to us.
              We entered into foreign currency forward contracts in 2004 to economically hedge our exposure to fluctuations of anticipated cash inflows in British pounds relating to the leasing arrangements. Under the contracts, we will convert £29.7 million of cash inflows to U.S. dollars at the time of maturity (in the years from 2006 to 2012). These contracts do not qualify for hedge accounting under SFAS 133.
              The total fair value change of the forward contracts as of December 31, 2005 and June 30, 2006 is shown in our income statement in "Gain/(loss) on fair value of derivatives" and amounted to a gain of $3.7 million and a loss of $3.1 million, respectively. On our consolidated balance sheet a related asset is shown under "Non current assets—other assets" and amounted to $1.4 million as of December 31, 2005 whereas as of June 30, 2006 a related liability is shown under "Long term liabilities—other liabilities" and amounted to $1.7 million.
Off-Balance Sheet Arrangements
              We do not have any other transactions, obligations or relationships that could be considered material off-balance sheet arrangements.
Critical Accounting Policies
              We prepare our consolidated financial statements in accordance with U.S. GAAP, which requires us to make estimates in the application of our accounting policies based on our best assumptions, judgments and opinions. We base these estimates on the information currently available to us and on various other assumptions we believe are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. Following is a discussion of the accounting policies that involve a high degree of judgment and the methods of their application. For a further description of our material accounting policies, please read note 2 to our consolidated financial statements included elsewhere in this prospectus.
66

Purchase of Vessels
              Vessels are stated at cost, which consists of the contract purchase price and any material expenses incurred upon acquisition (improvements and delivery expenses). Subsequent expenditures for conversions and major improvements are also capitalized when they appreciably extend the life, increase the earning capacity or improve the efficiency or safety of the vessels. Otherwise we charge these expenditures to expenses as incurred. Our financing costs incurred during the construction period of the vessels are included in vessels' cost.
              The vessels that we acquire in the secondhand market are treated as a business combination to the extent that such acquisitions include continuing operations and business characteristics, such as management agreements, employees and customer base, otherwise we treat an acquisition of a secondhand vessel as a purchase of assets. Where we identify any intangible assets or liabilities associated with the acquisition of a vessel purchased on the secondhand market, we record all identified tangible and intangible assets or liabilities at fair value. Fair value is determined by reference to market data and the discounted amount of expected future cash flows. We have in the past acquired certain vessels in the secondhand market. These acquisitions were considered to be acquisitions of assets. Certain vessels in our fleet that were purchased in the secondhand market were acquired with existing charters. We determined that the existing charter contracts for these vessels, other than the charter for the MOL Confidence , not have a material separate fair value and, therefore, we recorded such vessels at their fair value, which equaled the consideration paid. In respect of the existing time charter for the MOL Confidence , we identified a liability of $14.6 million, which we recorded as unearned revenue in "Current Liabilities—Unearned Revenue" and "Long-Term Liabilities—Unearned Revenue, net of current portion" on our balance sheet for the existing charter, which will be amortized over the remaining period of the time charter.
              The determination of the fair value of acquired assets and assumed liabilities requires us to make significant assumptions and estimates of many variables, including market charter rates, expected future charter rates, future vessel operating expenses, the level of utilization of our vessels and our weighted average cost of capital. The use of different assumptions could result in a material change in the fair value of these items, which could have a material impact on our financial position and results of operations.
Lease Arrangements
              Although we do not own four of the containerships in our current fleet which may be sold to us pursuant to a put option, we consider these vessels to be owned by us for financial reporting purposes since the vessels are under our operational control and we retain risks associated with ownership. We reflect the indebtedness under which the vessels are mortgaged as a liability on our balance sheet. However, if any holder of the put options elects not to exercise its option, we would no longer treat the applicable vessels as owned by us for financial reporting purposes. As a result, our balance sheet assets and liabilities, as well as the provisions we may make for depreciation and amortization in our financial statements related to these vessels, would be affected.
Revenue Recognition
              Our revenues and expenses are recognized on the accrual basis. Revenues are generated from bareboat hire and time charters. Bareboat hire revenues are recorded over the term of the hire on a straight-line basis. Time charter revenues are recorded over the term of the charter as service is provided. Unearned revenue includes revenue received in advance.
              We have been a member of a pool arrangement with respect to two drybulk carriers, the Alexandra I and the MV Achilleas , which we have agreed to sell. The resulting net revenues of the pool are distributed as time charter hire to each participant in accordance with the pool earning points of the individual vessels in the pool adjusted for any off-hire amount. Distributions of time charter hire to us have been made every two weeks according to the pooling arrangement. An amount not exceeding
67

four weeks' time charter hire for each of our vessels in the pool was permitted to be withheld from us as working capital for the pool. For the periods prior to the sale of these vessels, revenue related to the pooling arrangements is recognized only when all contingencies under the agreements are resolved.
Special Survey and Drydocking Costs
              We follow the deferral method of accounting for special survey and drydocking costs. Actual costs incurred are deferred and are amortized on a straight-line basis over the period until the next scheduled survey, which is two and a half years. If special survey or drydocking is performed prior to the scheduled date, the remaining unamortized balances are immediately written-off.
Vessel Lives
              Our vessels represent our most significant assets and we state them at our historical cost, which includes capitalized interest during construction and other construction, design, supervision and predelivery costs, less accumulated depreciation. We depreciate our containerships, and for the periods prior to their sale, our drybulk carriers, on a straight-line basis over their estimated remaining useful economic lives. Historically, we estimated this to be 25 years. As of January 1, 2005, we determined that the estimated useful lives of our containerships is 30 years, whereas for drybulk carriers we continued to estimate their useful lives to be 25 years. Depreciation is based on cost less the estimated scrap value of the vessels. Should certain factors or circumstances cause us to revise our estimate of vessel service lives in the future, depreciation expense could be materially lower or higher. Such factors include, but are not limited to, the extent of cash flows generated from future charter arrangements, changes in international shipping requirements, and other factors many of which are outside of our control.
Impairment of Long-lived Assets
              We evaluate the net carrying value of our vessels for possible impairment when events or conditions exist that cause us to question whether the carrying value of the vessels will be recovered from future undiscounted net cash flows. An impairment charge would be recognized in a period if the fair value of the vessels was less than their carrying value. Considerations in making such an impairment evaluation would include comparison of current carrying value to anticipated future operating cash flows, expectations with respect to future operations, and other relevant factors.
Recent Accounting Pronouncements
              In November 2004 the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") 151, "Inventory Costs—An Amendment of ARB No. 43, Chapter 4" (SFAS 151), which clarifies that abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage) should be recognized as a current period expense. In addition, this statement requires that allocation of fixed production overhead to the costs of conversion be based on the normal capacity of the production facilities. SFAS 151 is effective for fiscal years beginning after June 15, 2005, as applicable to us as of January 1, 2006. We do not believe that the implementation of this standard has had or will have a material impact on our financial position, results of operations or cash flows.
              In December 2004, the FASB issued SFAS 153 "Exchanges of Non-Monetary Assets—An Amendment to APB 29" (SFAS 153). APB 29 had stated that all exchanges of non-monetary assets should be recorded at fair value except in a number of situations, including where the exchange is in relation to similarly productive assets. SFAS 153 amends APB 29 to eliminate the exception for non-monetary exchanges of similar productive assets and replaces it with a general exception for exchanges for non-monetary assets that do not have commercial substance. A non-monetary transaction has commercial substance where the future cash flows of the business will be expected to change significantly as a result of the exchange. The provisions of this statement will be effective for
68

non-monetary exchanges occurring in fiscal periods beginning after June 15, 2005, as applicable to us as of January 1, 2006. We do not believe that the implementation of this standard has had or will have a material impact on our financial position, results of operations or cash flows.
              In December 2004, the FASB issued SFAS 123 (Revised) "Share Based Payments" (SFAS 123(R)), which required companies to expense the value of employee stock option schemes and similar awards based on the grant date fair value of the award. SFAS 123(R) eliminates the option to use APB 25's intrinsic method of accounting for valuation of share options and similar awards as provided by SFAS 123 as originally issued. SFAS 123(R) is effective for public companies for interim and annual financial periods beginning after June 15, 2005 and we will implement it as of January 1, 2006. In March 2005, the SEC released Staff Accounting Bulletin No. 107 "Share Based Payment" (SAB 107), which provides interpretive guidance related to the interaction between SFAS 123(R) and certain SEC rules and regulations. It also provides the SEC staff's views regarding valuation of share based payment arrangements. SFAS 123(R) is applicable to us as of January 1, 2006. We believe that the adoption of this standard will have an effect on our financial position, results of operations or cash flows, as a result of future grants of options or share based payments.
              In May 2005, the FASB issued SFAS 154, "Accounting Changes and Error Corrections—A Replacement to APB 20 and FASB Statement 3" (SFAS 154). APB 20 required that voluntary changes in accounting principles be recognized by including in net income for the period of the change the cumulative effect of changing to the new accounting principle. SFAS 154 requires retrospective application to prior periods' financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. Further when it is impracticable to determine the period-specific effects of an accounting change on one or more individual prior periods presented, SFAS 154 requires that the new accounting principle be applied to the balances of assets and liabilities as of the beginning of the earliest period for which retrospective application is practicable and that a corresponding adjustment be made to the opening balance of retained earnings (or other appropriate components of equity or net assets in the statement of financial position) for that period rather than being reported in an income statement. When it is impracticable to determine the cumulative effect of applying a change in accounting principle to all prior periods, SFAS 154 requires that the new accounting principle be applied as if it were adopted prospectively from the earliest date practicable. The provisions of this statement shall be effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. We do not believe that the implementation of this standard has had or will have a material impact our financial position, results of operations or cash flows.
              In February 2006, the FASB issued Statement of Financial Accounting Standards No. 155 (SFAS 155) "Accounting for Certain Hybrid Instruments—an amendment of FASB Statements No. 133 and 140." SFAS 155 amends SFAS 133 to permit fair value measurement for certain hybrid financial instruments that contain an embedded derivative, provides additional guidance on the applicability of SFAS 133 and SFAS 140 to certain financial instruments and subordinated concentrations of credit risk. SFAS 155 is effective for the first fiscal year that begins after September 15, 2006. We do not expect the adoption of this standard to have a material effect on our consolidated financial statements. The provisions of this statement will be effective for us for the fiscal year beginning on January 1, 2007.
              In March 2006, the FASB issued Statement of Financial Accounting Standards No. 156 (SFAS 156) "Accounting for Servicing of Financial Assets—an amendment of FASB Statement No. 140". SFAS 156 amends SFAS 140 requiring that all separately recognized servicing assets and liabilities be measured at fair value, if practicable. SFAS 156 also permits, but does not require, the subsequent measurement of servicing assets and liabilities. SFAS 156 is effective for the first fiscal year that begins after September 15, 2006. We do not expect the adoption of this standard to have a material effect on our consolidated financial statements. The provisions of this statement will be effective for us for the fiscal year beginning on January 1, 2007.
69

 
 THE INTERNATIONAL SHIPPING INDUSTRY
               The information and data contained in this prospectus relating to the containership industry and the drybulk shipping industry has been provided by Clarkson Research Services Limited, or CRS, and is taken from CRS' databases, Containerisation International, Container Intelligence Monthly, World Shipyard Monitor, Dry Bulk Trade Outlook, Container Intelligence Quarterly, Shipping Review and Outlook, Oil and Tanker Trade Outlook and the MDS Transmodal Databank. CRS also supplementally consulted other sources, including Fearnley's Review 2004 (February 2005), Lloyd's Register World Fleet Statistics 2003 (2004), The Drewry Monthly, The Financial Times, The Containership Market in 2004 by Barry Rogliano Salles and Maersk Broker. We do not have any knowledge that the information provided by CRS is inaccurate in any material respect. While we refer in this prospectus to all vessels capable of transiting the Panama Canal as "Panamax "vessels, for purposes of this section CRS considers containerships capable of transiting the Panama Canal which have capacities of less than 3,000 TEUs to be in different classes from Panamax, specifically "Sub-Panamax" (2,000 TEU to 2,999 TEU) and "Handy" (1,000 TEU to 1,999 TEU).
Introduction
              Shipping is a global industry and its prospects are closely tied to the level of economic activity in the world. The maritime shipping industry is fundamental to international trade because it is the only practicable and cost effective means of transporting large volumes of many essential commodities and finished goods. Shipping markets are highly competitive and ship charter hire rates are very sensitive to changes in demand for and supply of capacity, and are consequently volatile. There are four main segments in the shipping industry, namely tankers, which carry such cargo as crude oil, petroleum products, etc.; bulk carriers, which carry coal, grain, etc; containerships, which carry only containers; and gas tankers, which carry mostly LPG and LNG. According to the latest available figures, in 2005 total annual world seaborne trade was estimated at 7.2 billion metric tonnes, of which drybulk cargoes amounted to 2.6 billion tonnes and oil cargoes amounted to 2.6 billion tonnes. The following table illustrates the evolution of the various categories of cargoes that comprise world seaborne trade. Global container trade exhibited the highest annual growth rate during the period shown, at 9.9%, which was well above the annual growth rate of world seaborne trade of 3.8%.
World Seaborne Trade, million tonnes

 	 	1990
	 	1995
	 	2000
	 	2005
	 	Avg. growth p.a.%
	 	
Container	 	246	 	389	 	628	 	1,016	 	9.9	%	
Crude Oil & Products	 	1,603	 	1,860	 	2,174	 	2,555	 	3.2	%	
Dry Bulk	 	1,598	 	1,784	 	2,040	 	2,558	 	3.2	%	
LPG	 	28	 	34	 	39	 	37	 	1.9	%	
LNG	 	60	 	69	 	104	 	142	 	5.9	%	
Other	 	625	 	727	 	931	 	930	 	2.7	%	
 	 		 		 		 		 		 	
Total	 	4,160	 	4,862	 	5,915	 	7,237	 	3.8	%	

Source: Clarkson Research, September 2006. Average percentage growth based on 1990-2005. 2005 figures estimated.
              The world deep sea cargo ship fleet comprises approximately 24,000 ships with a total capacity of approximately 940 million dwt. The following table shows that, measured by dwt, at the beginning of September 2006, the world deep sea orderbook was approximately equal to 29% of the existing world deep sea fleet. The orderbooks for containerships (approximately 48% of the existing fleet), and LNG carriers (approximately 84% of the existing fleet), each constituted more than 45% of the respective existing fleets for these sectors, measured by dwt.
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World Deep Sea Fleet

 	 	Fleet
	 	Orderbook
	 	
 	 	No.
	 	mill. dwt
	 	% of dwt
	 	No.
	 	mill. dwt
	 	% of flt
	 	% of dwt
	 	
Containerships	 	3,848	 	121.8	 	12.9	%	1,286	 	58.1	 	21.1	%	47.7	%	
Tankers >10,000 dwt	 	4,197	 	357.7	 	37.9	%	1,427	 	118.7	 	43.0	%	33.2	%	
Tankers <10,000 dwt	 	2,050	 	10.3	 	1.1	%	302	 	1.7	 	0.6	%	16.9	%	
Bulkers	 	6,271	 	358.8	 	38.0	%	877	 	72.7	 	26.4	%	20.3	%	
LPG Carriers	 	1,019	 	11.8	 	1.2	%	193	 	4.7	 	1.7	%	40.1	%	
LNG Carriers	 	213	 	14.4	 	1.5	%	136	 	12.1	 	4.4	%	83.9	%	
Other	 	6,546	 	68.6	 	20.2	%	2,029	 	65.8	 	23.9	%	34.6	%	
 	 		 		 		 		 		 		 		 	
Total	 	24,144	 	943.3	 	100.0	%	4,964	 	275.7	 	100.0	%	29.2	%	

Source: Clarkson Research, September 2006.
The Container Shipping Market
              Container shipping is responsible for the movement of a wide range of goods from one part of the world to another in a unitized form. Participants in the container shipping industry include "liner" companies, who operate container shipping services, containership owners, often known as charter owners, who own containerships and charter them out to the operators, and shippers who require the seaborne movement of containerized goods. Container shipping represents an important and increasingly significant part of the global seaborne movement of goods. In 2005, global container trade stood at an estimated 105 million TEU. 1 As of September 1, 2006, the global containership fleet contained 3,848 fully cellular 2 containerships, with a total standing slot capacity 3 of almost 9.0 million TEU, while the total container capable fleet capacity stood at almost 11.0 million TEU.
              The range of containership owners is diverse, including liner companies, which are often significant corporate entities, and charter owners, who are often part of wider groups involved in other shipping activities. Shipowning generally requires a relatively high level of capital investment. Ownership of the Panamax and above sized sector is less fragmented than the ownership of smaller vessels. There are a large number of charter owners who own a small number of containerships, with over 200 owning just one or two containerships, and the average age of the worldwide containership fleet as of September 1, 2006 was 11.3 years. The six containerships scrapped in 2004 with an average age of 30.4 years indicates that some ships are able to operate for more than 30 years. No containerships were scrapped in 2005.
              Growth in the liner shipping market has been relatively rapid in comparison with other major shipping sectors such as tankers and bulk carriers. In terms of loaded containers moved from origin to destination, estimated global container trade increased from 50.8 million TEU in 1997 to 105.2 million TEU in 2005, a compound average annual growth rate 4 of 9.5%. In the last three years demand for container shipping has accelerated strongly, with estimated growth in world container trade reaching 11.6% in 2003, 13.4% in 2004 and 10.1% in 2005.

(1)
A measure of container cargo or container capacity units, TEU = twenty foot equivalent unit.
(2)
Equipped with fixed cell guides for containers throughout.
(3)
Nominal static ship container capacity.
(4)
All period growth rates are compound average growth rates unless stated otherwise.
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World Container Trade & Annual Growth

Source: Clarkson Research, September 2006.
              Global container trade is spread over a range of long-haul, regional, and intra-regional routes. The "mainlane" container trades on the major East-West routes are the world's largest in terms of volume, with the Transpacific forming the world's largest container trade, with 17% of the total volume in 2005, followed by the Far East-Europe trade and the Transatlantic. In addition to these trades, there are "intermediate" trades on the mainlane East-West corridor serving the Middle East and the Indian Sub-Continent. North-South trades form the second layer of the global liner network, connecting the Northern hemisphere with South America, Africa and Australasia. Additionally, there are also important intra-regional container trades, for example, intra-Asia or intra-Europe.
World Seaborne Container Trade

 	 	 	 	2003
	 	% share
	 	2004
	 	% share
	 	2005
	 	% share
	 	2006
	 	% share
	 	
 	 	 	 	Estimated, million TEU
	 	
Transpacific	 	eastbound	 	9.7	 	11.5	%	11.4	 	11.9	%	13.0	 	12.3	%	14.7	 	12.7	%	
 	 	growth	 	 	 	 	 	17.3	%	 	 	14.1	%	 	 	13.5	%	 	 	
 	 	westbound	 	4.6	 	5.4	%	4.9	 	5.1	%	5.4	 	5.1	%	5.8	 	5.0	%	
 	 	growth	 	 	 	 	 	6.8	%	 	 	10.2	%	 	 	8.0	%	 	 	
Far East-Europe	 	westbound	 	6.4	 	7.6	%	7.5	 	7.9	%	8.4	 	8.0	%	9.5	 	8.2	%	
 	 	growth	 	 	 	 	 	16.5	%	 	 	12.4	%	 	 	13.0	%	 	 	
 	 	eastbound	 	3.1	 	3.7	%	3.5	 	3.7	%	3.7	 	3.5	%	4.0	 	3.4	%	
 	 	growth	 	 	 	 	 	14.1	%	 	 	5.1	%	 	 	7.7	%	 	 	
Transatlantic	 	westbound	 	3.1	 	3.6	%	3.2	 	3.4	%	3.3	 	3.1	%	3.4	 	3.0	%	
 	 	growth	 	 	 	 	 	5.0	%	 	 	2.3	%	 	 	4.3	%	 	 	
 	 	eastbound	 	2.3	 	2.7	%	2.5	 	2.6	%	2.6	 	2.5	%	2.7	 	2.3	%	
 	 	growth	 	 	 	 	 	7.2	%	 	 	6.4	%	 	 	1.8	%	 	 	
 	 	 	 		 		 		 		 		 		 		 		 	
Other Trades	 	 	 	55.1	 	65.4	%	62.6	 	65.5	%	68.8	 	65.4	%	76.0	 	65.4	%	
 	 	growth	 	 	 	 	 	13.5	%	 	 	9.9	%	 	 	10.5	%	 	 	
 	 	 	 		 		 		 		 		 		 		 		 	
Global Total	 	84.3	 	 	 	95.6	 	 	 	105.2	 	 	 	116.2	 	 	 	
 	 	growth	 	 	 	 	 	13.4	%	 	 	10.1	%	 	 	10.4	%	 	 	

Source: Clarkson Research, September 2006.
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              The Transpacific and the Far East-Europe are the world's two largest container trade routes. In recent years, it has been Chinese trade routes which have driven most of the increase in volumes out of Asia. Chinese trade remains the key factor behind expanding container trade. In 2005, estimated trade volumes on the Eastbound Transpacific trade route grew by 14.1%, and on the Westbound Far East-Europe trade grew by 12.4%. In addition to the impact of China on global container trade, other recent growth areas include trade out of Brazil, trade in and out of Russia and the Baltic, and the intra-Asian trade, which has also been largely influenced by growth in Chinese trade.
              There are limitations and risks to the projections shown in the table above, dependent on future developments in the world economy and global trade patterns. The projections take into account widely available forecasts on the global economy, and just as world economic outlook risks exist, so do risks to the container trade scenarios presented here.
              The demand for containership capacity is dependent on the volume of traffic on the world's container trades. Effective demand is also dependent on trade distance, with longer distance trades generating greater demand for capacity in terms of "TEU-miles', absorbing a greater level of dynamic capacity to move each unit of containerized cargo. Container trade is also seasonal, with the peak season running from the late summer through autumn in the build up to the world's peak consumption period.
              Although this seasonality is felt more sharply in container trade volumes than on the containership charter market, the charter market remains volatile. The volatility of charter rates results from changes in the supply of, and demand for, charter owners' capacity. The degree of charter rate volatility has varied among different sizes of containerships and charter rates for smaller vessels have generally tended to be less volatile. The containership charter market has also been cyclical with periods of relative over-supply of capacity alternating with periods when demand grew more rapidly than available capacity. During each of these periods, the charter market has remained competitive, with charterers seeking competitive rates from a range of owners.
Containership Supply
              Global container trade is served by a large fleet of container carrying vessels. The most significant part of this fleet is the fully cellular containerships, which as of September 1, 2006, comprised 81% of global available TEU capacity among 3,848 ships. The remainder of the container capable fleet is made up of a range of non-fully cellular ship types, including Multi-Purpose Vessels (MPPs), Roll-On Roll-Off vessels (Ro-Ros) and numerous General Cargo ships, which often have container carrying capacity.
              The container carrying fleet has responded to rapid demand growth. Overall container capable standing slot capacity expanded at an annual average of 8.0% in the period 1997-2005, driven mainly by growth of the fully cellular containership fleet, which more than doubled in capacity during the same period of time. As of September 1, 2006, total capacity in the overall container capable fleet was 11.04 million TEU, with a total of 10,738 container capable ships. The capacity of the fully cellular containership fleet grew at an average of 10.6% per annum in the period 1997-2005.
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Global Container Capable Capacity

 	 	 	 	2003
	 	% share
	 	2004
	 	% share
	 	2005
	 	% share
	 	2006
	 	% share
	 	
 	 	 	 	Thousand TEU, start year
	 	
Fully Cellular Containerships	 	6,002.5	 	75.3	%	6,537.5	 	76.7	%	7,177.2	 	78.0	%	8,117.8	 	79.8	%	
 	 	growth	 	 	 	 	 	8.9	%	 	 	9.8	%	 	 	13.1	%	 	 	
Multi-Purpose Vessels	 	962.2	 	12.1	%	984.2	 	11.5	%	1,018.0	 	11.1	%	1,051.5	 	10.3	%	
 	 	growth	 	 	 	 	 	2.3	%	 	 	3.4	%	 	 	3.3	%	 	 	
Ro-Ros	 	356.0	 	4.5	%	354.7	 	4.2	%	356.4	 	3.9	%	355.6	 	3.5	%	
 	 	growth	 	 	 	 	 	-0.4	%	 	 	0.5	%	 	 	-0.2	%	 	 	
General Cargo Ships	 	109.6	 	1.4	%	95.6	 	1.1	%	91.9	 	1.0	%	89.4	 	0.9	%	
 	 	growth	 	 	 	 	 	-12.8	%	 	 	-3.9	%	 	 	-2.7	%	 	 	
 	 	 	 		 		 		 		 		 		 		 		 	
Other	 	543.1	 	6.8	%	556.9	 	6.5	%	563.7	 	6.1	%	561.3	 	5.5	%	
 	 	growth	 	 	 	 	 	2.5	%	 	 	1.2	%	 	 	-0.4	%	 	 	
 	 	 	 		 		 		 		 		 		 		 		 	
Total	 	7,973.4	 	 	 	8,528.9	 	 	 	9,207.2	 	 	 	10,175.6	 	 	 	
 	 	growth	 	 	 	 	 	7.0	%	 	 	8.0	%	 	 	10.5	%	 	 	

Source: Clarkson Research, September 2006.
              The fully cellular containership fleet is made up of a wide range of ships from below 500 TEU in capacity to 8,000 TEU and above. At the top end of the scale are the "Deep Sea" containerships of 3,000 TEU and above, which are generally responsible for servicing the mainlane East-West trade routes. These ships are designated as Panamax or Post-Panamax according to their ability to transit the Panama Canal based on their physical dimensions. "Intermediate" containerships are between 1,000 TEU and 2,999 TEU in capacity and generally serve intermediate, North-South, and in some cases intra-regional, trade routes. Ships below 1,000 TEU in capacity are the "Feeder" containerships generally operated on an intra-regional basis, often relaying or "feeding" cargo within a region from or to main port hubs served by mainlane trade routes. A large proportion of the growth in containership capacity in recent years has been in the Panamax and Post-Panamax "Deep Sea" segments. Panamax fleet capacity rose from 1.12 million TEU at the beginning of 1998 to 2.43 million TEU as of September 1, 2006, while Post-Panamax capacity increased from 0.38 million TEU to 2.91 million TEU over the same period.
World Fully Cellular Containership Fleet

Type
	 	Container capacity
	 	Ships
	 	Million TEU
	
Deep Sea	 	3000 TEU & above	 	1,070	 	5.34	
Intermediate	 	1000-2999 TEU	 	1,630	 	2.97	
Feeder	 	100-999 TEU	 	1,148	 	0.65	
 	 	 	 		 		
Total	 	 	 	3,848	 	8.96	

Source: Clarkson Research, September 2006.
Orderbook
              As of September 1, 2006, the containership orderbook contained 1,286 ships, with an aggregate 4.65 million TEU, and represented 52% of the existing fleet in terms of capacity. For containerships with capacity of 3,000 TEU or greater, this figure was approximately 67%, with 314 Post-Panamax and 287 Panamax containerships on order at shipyards.
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Containership Orderbook

 	 	 	 	Orderbook
	 	Year of Delivery:
	
 	 	 	 	Total
Ships
	 	Total
000s TEU
	 	% Share
of o/book
	 	2006
000s TEU
	 	2007
000s TEU
	 	2008
000s TEU
	 	2009/10
000s TEU
	
Deep Sea	 	3000 TEU & above	 	601	 	3,593.7	 	77.2	%	319.6	 	960.8	 	1172.7	 	1140.7	
Intermediate	 	1000-2999 TEU	 	488	 	909.7	 	19.5	%	133.7	 	330.2	 	319.4	 	126.4	
Feeder	 	0-999 TEU	 	197	 	149.7	 	3.2	%	40.1	 	57.6	 	40.2	 	11.9	
 	 	 	 		 		 	 	 		 		 		 		
Total	 	 	 	1,286	 	4,653.1	 	 	 	493.3	 	1,348.5	 	1,532.3	 	1,279.0	

Source: Clarkson Research, September 2006.
The Charter Market
              The containership charter market is playing an increasingly important role in the container shipping industry as a whole. Historically, a significant share of the world's containership capacity had been owned by the liner companies operating container shipping services. More recently, these operators have chosen to charter-in a larger proportion of the capacity that they operate. This remaining containership capacity is controlled by ship owning companies, which use the "charter market" to charter their vessels out to the liner companies. These are often referred to as "charter owners."
              The rapid growth in fully cellular containership capacity has been driven by increases in contracting of containerships. Charter owners have increased their share of the fleet in recent years, and have been responsible for a substantial share of investment in containerships and contracted containership capacity.
Estimated Total Investment In Containership Contracting

Source: Clarkson Research, September 2006.
              With regard to removals from the worldwide containership fleet, the sale for demolition of capacity has generally been fairly insignificant relative to additions to the worldwide fleet. A substantial number of containerships have operated for more than 25 years. As of September 1, 2006, the containership fleet contained 371 ships built in 1980 or earlier (representing 9.6% of the worldwide fleet measured by total number of containerships), with 0.35 million TEU in capacity (3.9% of the
75

worldwide fleet) and 125 ships built in 1975 or earlier. The average age of containerships worldwide at the beginning of September 2006 was 11.3 years.
The Market and Outlook
              The containership freight market is expressed by the rate paid by shippers to move containers on various routes within the global liner network. The graph below shows the development of indicative freight rates on the peak legs of the mainlane trades, i.e . out of Asia on the Transpacific and Far East-Europe routes, and Westbound on the Transatlantic route. In general, from early 2002 through early 2005 container freight rates were mainly on an upward trend, bolstered by relatively rapid increases in demand. However, from mid-2005 into early 2006, container freight rates out of Asia, and to Europe in particular, saw some downward movement.
Mainlane Container Freight Rates

Source: Containerisation International.
              Looking ahead, in 2006 expansion in world container trade is estimated to reach a double-digit percentage for the fifth consecutive year. Taking into account trade volume estimates and historical relationships between trade patterns and container trade flows, it is estimated that container trade grew by 10.1% in 2005 and it is estimated that it will grow by 10.4% in 2006. On the supply side, fully cellular containership capacity alone is estimated to have increased by 13.1% in 2005, and is estimated to grow by 15.6% in 2006, in line with the heavy containership delivery schedule for 2006, while capacity in the overall container capable fleet is estimated to have increased by 10.5% in 2005 and is estimated to grow by 12.9% in 2006.
              There are limitations and risks to these scenarios, dependent on future developments in the world economy and global trade patterns and the development of ordering, deliveries and demolitions in the future. For example, in 2001, the growth in container shipping demand was only 2.5%, which was well below historical average growth rates. At the same time, the containership orderbook represented over 30% of the global containership fleet in terms of capacity at the beginning of that year. The impact of the differential between growth in demand and supply on the container freight market and the containership charter market was sharply negative, pushing rates acutely downwards in both cases.
The Post-Panamax and Panamax Containership Sectors
              The containership markets are served by a range of ship sizes, and the worldwide containership fleet has grown rapidly in recent years. A large amount of the capacity growth has been provided by
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the largest sectors of the fleet. These are the Deep Sea containerships of 3,000 TEU and above, which make up the Post-Panamax and Panamax sectors. Almost 70% of the growth in TEU capacity in the worldwide containership fleet between the beginning of 1996 and the beginning of 2006 was recorded in these two sectors.
Post-Panamax
              The Post-Panamax containership sector is made up of containerships with large dimensions such that they are unable to transit the Panama Canal. As a result of their physical size, these ships are generally restricted to operating on two trade routes only, the Transpacific, between Asia and the U.S. West Coast, and the Far East/Europe. They can also operate on a combination of the two routes. These two routes are the world's two largest container trade routes, and Post-Panamax containerships are responsible for the carriage of a large amount of the volumes on these two routes.
              At the beginning of September 2006 there were 455 Post-Panamax containerships in the worldwide fleet, with another 287 on order at shipyards. The ships on order comprise approximately 78% of the TEU capacity of the ships in the existing worldwide fleet. The largest Post-Panamax ships in the worldwide fleet at the beginning of September 2006 had over 9,000 TEU in capacity (with one ship recorded as having 11,000 TEU), while on the orderbook there were containerships with 10,000 to 11,000 TEU in capacity. Consistent demand growth on the Transpacific and Far East/Europe trade routes has led to increased demand for new Post-Panamax capacity, and total Post-Panamax capacity has grown in response from 0.15 million TEU at the beginning of 1996 to 2.41 million TEU at the beginning of 2006. Large containerships have remained attractive to liner companies as a result of the lower cost of operation per unit that they can offer.
 
 Post-Panamax Containership Fleet & Orderbook

 	 	 	 	 	 	Year of Delivery:
	
 	 	Current
Fleet
	 	 			
 			 	Orderbook
	 	2006
	 	2007
	 	2008
	 	2009/10
	
No. of Ships	 	455	 	287	 	28	 	65	 	97	 	97	
Thousand TEU	 	2,912.6	 	2,260.0	 	209.7	 	519.2	 	733.0	 	798.1	

Source: Clarkson Research, September 2006.
              At the beginning of September 2006, the global Post-Panamax containership fleet had an average age of 4.5 years. Ninety-two per cent of Post-Panamax capacity was less than 10 years old. The average draft of Post-Panamax containerships was 13.9 meters, the average loa was 298.4 meters and the average beam was 40.9 meters. The average speed of Post-Panamax containerships was 25.1 knots.
Post-Panamax Containership Fleet Age Profile

Source: Clarkson Research, June 2006.
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               Demand for new containerships has increased in recent years, and because the supply of shipbuilding capacity has been relatively tight, the newbuilding price for a Post-Panamax containership increased steadily from approximately $60 million at the beginning of 2003, to over $100 million for a 6,200 TEU ship at the end of April 2005. This number then declined slightly to approximately $89 million at the end of November 2005, and increased again to approximately $101 million at the end of August 2006. Given that the market for Post-Panamax containership chartering is not highly transparent, with most charters arranged on a long-term basis in conjunction with a newbuilding contract, it is difficult to provide an accurate assessment of the development of time charter hire for Post-Panamax containerships.
Post-Panamax Containership Prices

Source: Clarkson Research, September 2006.
Panamax
              The Panamax containership sector is made up of containerships of 3,000 TEU and above in capacity, with dimensions such that they are able to transit the Panama Canal. As a result, these ships are more flexible than the Post-Panamax containerships, and largely operate on the three mainlane trade routes—the Transpacific, the Far East/Europe and the Transatlantic. On the Transpacific, they are able to operate from Asia to the U.S. East Coast as well as the U.S. West Coast. Panamax containerships are not exclusive to these routes, however, and some ships with over 3,000 TEU operate on trade routes elsewhere in the global liner network.
              At the beginning of September 2006 there were 615 Panamax containerships in the global fleet, with another 314 on order. Panamax capacity on order equalled approximately 55% of the capacity in the existing worldwide fleet, with 27 ships on order for delivery throughout the remainder of 2006, 105 for delivery in 2007, and 182 for delivery in 2008 and later. Increased demand for Far East-U.S. East Coast services has provided growing demand for Panamax containerships.
78

Panamax Containership Fleet & Orderbook

 	 	 	 	 	 	Year of Delivery:
	
 	 	Current
Fleet
	 	 			
 			 	Orderbook
	 	2006
	 	2007
	 	2008
	 	2009/10
	
No. of Ships	 	615	 	314	 	27	 	105	 	103	 	79	
Thousand TEU	 	2,429.2	 	1,333.8	 	109.9	 	441.6	 	439.7	 	342.6	

Source: Clarkson Research, September 2006.
              At the beginning of September 2006, the worldwide Panamax containership fleet had an average age of 9.0 years. Sixty-one per cent of Panamax capacity was less than 10 years old, and 82% was less than 15 years old. The average draft of Panamax containerships was 12.5 meters, the average loa was 269.6 meters and the average beam 32.2 was meters. The average speed of Panamax containerships was 23.3 knots.
Panamax Containership Fleet Age Profile

Source: Clarkson Research, September 2006.
              On the back of rising demand for containership capacity and limited supply growth, Panamax containership time charter rates rose from early 2002 through 2003 and 2004, before some downward movement starting in May 2005 which stabilized in March 2006.
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Panamax Containership Time Charter Rates

Source: Clarkson Research, September 2006.
Note: Based on 6-12 month time charter.
              Due to rising demand for Panamax newbuilding and secondhand capacity, shipbuilding capacity supply and demand and time charter earnings available, Panamax containership prices increased in 2003 and 2004, before some downward movement starting in the summer of 2005, followed by a return to a slight upwards movement from February to August 2006.
Panamax Containership Prices

Source: Clarkson Research, September 2006.
The Containership Charter and Sale & Purchase Market
Overview
              As of September 1, 2006, it is estimated that 2,029 out of 3,848 fully cellular containerships in the global fleet were owned by charter owners. The share of total capacity 5 operated by the top 10 liner companies which was chartered-in increased from about 15% at the beginning of 1993 to approximately 50% at the beginning of August 2006, as liner companies have increasingly turned to other sources for capital investment in ships and increasing funds have become available to charter owners for investment in new containerships (largely in Germany). Liner companies have faced a number of alternative demands on their capital in addition to ships themselves, and moreover, often find a
80

portfolio of owned and chartered capacity to be the most suitable to their requirements. In terms of charter hire revenue, the containership charter market amounted to an estimated total value of $13.9 billion in 2004, and an estimated $17.8 billion in 2005, 6 based on prevailing time charter rate levels. The value of the charter market as a whole, however, fluctuates with containership charter rates and is open to risks and limitations as discussed above. Activity in the containership sale and purchase market has also increased over recent years, from around 100,000 TEU in reported sales in 1996 to over 380,000 TEU in 2004 and almost 240,000 TEU in 2005.

(5)
Includes all container capable "liner" capacity.

(6)
Estimated total charter hire revenue before operating and financing costs. Estimate based on charter owner capacity, average daily rate per TEU for 6-12 month time charter, across a range of containership types, and 360 days per year.
Chartered-In Capacity Share of Top 10 Line Operators

Source: Clarkson Research, industry sources, September 2006.
              A substantial part of the containership charter market is focused on containerships of 4,500 TEU or less, and the large majority of charter market activity in this sector is the time charter 7 business, with charter periods ranging from a period of months to three years or more. However, in other instances, and generally in the case of larger Panamax and Post-Panamax containerships, the charter owner will contract a containership newbuilding at a shipyard, which is then chartered out to one of the major liner companies on a long-term time charter which could be for a period of up to 10 or 12 years or more in duration.
(7)
In which the charterer hires the vessel from the owner at a per day time charter rate.
              Charter owners have increased their share of the worldwide fleet in recent years, and have been responsible for a substantial share of investment in containerships and contracted containership capacity. The table below shows the estimated investment in the containership fleet as a whole and by size sector, and the share of estimated investment attributable to charter owners. In the five-year period of 2001-2005, charter owners invested on average $9.1 billion in new containership contracts each year. The estimated level of investment in containerships with a capacity of 1,000 TEU and above by charter owners exceeded $10.0 billion in each of 2003, 2004 and 2005, indicative of the increasing role of charter owners in the overall provision of larger containership capacity. The value of investment in containerships, however, fluctuates with containership newbuilding prices, the development of which is open to certain risks and limitations in terms of the demand for new ships, as well as shipbuilding industry supply and demand factors.
81

 
 Estimated Containership Investment (in billions)

 	 	 	 	2001
	 	2002
	 	2003
	 	2004
	 	2005
	 	2006 ytd
	 	
Deep Sea	 	Charter Owner	 	$1.9	 	$1.4	 	$9.8	 	$5.4	 	$3.9	 	$7.6	 	
3,000+ TEU	 	Total	 	$4.2	 	$3.1	 	$18.4	 	$16.9	 	$17.9	 	$15.7	 	
 	 	Charter Owner %	 	45	%	44	%	53	%	32	%	22	%	48	%	
 	 	 	 		 		 		 		 		 		 	
Intermediate	 	Charter Owner	 	$1.2	 	$0.3	 	$3.6	 	$5.0	 	$7.0	 	$2.9	 	
1,000-2,999	 	Total	 	$1.9	 	$1.0	 	$4.3	 	$6.3	 	$9.7	 	$3.5	 	
 	 	Charter Owner %	 	63	%	29	%	84	%	80	%	72	%	83	%	
 	 	 	 		 		 		 		 		 		 	
Feeder	 	Charter Owner	 	$0.5	 	$0.4	 	$1.1	 	$1.3	 	$2.7	 	$0.9	 	
0-999 TEU	 	Total	 	$0.7	 	$0.5	 	$1.4	 	$1.3	 	$3.6	 	$1.0	 	
 	 	Charter Owner %	 	71	%	79	%	75	%	102	%	77	%	86	%	
 	 	 	 		 		 		 		 		 		 	
Total	 	Charter Owner	 	$3.6	 	$2.0	 	$14.5	 	$11.7	 	$13.7	 	$11.4	 	
 	 	Total	 	$6.8	 	$4.6	 	$24.1	 	$24.4	 	$31.2	 	$20.3	 	
 	 	Charter Owner %	 	53	%	45	%	60	%	48	%	44	%	56	%	

Note: Estimated investment based on date of contract, capacity contracted and average per TEU newbuilding prices across a range of containership types. Based on best available historical ownership data.
Source: Clarkson Research, September 2006.
Time Charter Rate Development
              In the containership charter market, there was significant upward movement in time charter rates from the beginning of 2002 until mid-2005. Demand for containership capacity driven by increases in global container trade underpinned this upward market movement, and the market recovered from the falls seen in 2001 to levels beyond previous market highs. Containership economies of scale mean that the daily time charter rate per TEU for a larger containership is smaller than for a ship with lower TEU capacity. The development of estimated 6-12 month time charter rates 8 for selected geared 9 and gearless containerships are shown in the following table.
8
Based on market assessments by H. Clarkson and Co. Ltd. brokers
9
Geared vessels have their own cranes for the purpose of loading and unloading containers, while gearless vessels do not.
 
 Containership Time Charter Rates

$/day, annual avg.
	 	2003
	 	2004
	 	2005
	 	2006 (ytd)
	
4,400 TEU gearless	 	30,125	 	43,375	 	43,000	 	34,188	
3,500 TEU gearless	 	25,667	 	35,621	 	38,427	 	28,188	
2,750 TEU gearless	 	22,125	 	33,850	 	34,813	 	23,875	
2,000 TEU gearless	 	15,883	 	26,267	 	28,750	 	19,344	
1,700 TEU geared	 	13,817	 	23,108	 	27,146	 	18,431	

Source: Clarkson Research, September 2006.
              As of the beginning of September 2006, the charter rate for a 4,400 TEU containership was approximately $33,000 per day. From the end of April 2005, containership time charter rates declined until the spring of 2006, with the rate for a 4,400 TEU vessel falling from an average of $50,000 per day at the beginning of May 2005 to approximately $32,500 per day in February 2006, before moving back upwards through the end of April 2006 to approximately $35,000 per day. It remained at that level until the end of July 2006 before falling to $33,000 per day in August 2006. In general, containership charter rates remained, at the beginning of September 2006, above both the previous peak levels of
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2000 and historical averages. At the beginning of September 2006 the charter rate for a 3,500 TEU vessel was approximately $27,500 per day, compared to a historical average in the period 1993 to 2005 of $25,555 per day.
              The time charter rate development series featured in the graph below do not cover the very largest containerships of 8,000 TEU and above, or the smaller Post-Panamax ships. These vessels are not currently chartered on the "liquid" 10 charter market. When owned by charter owners they are generally ordered as new from a shipyard and chartered out to containership operators on long-term time charters in tandem with the arrangement of the newbuilding. As such, development of time charter rates for these ships do not form part of the transparent charter market, and assessments for standard deals cannot generally be meaningfully tracked.
10
The liquid market means the relatively transparent market in which containership chartering is generally conducted. Post-Panamax containership chartering is often connected to a newbuilding arrangement, and is not always included as part of this market.
11
Reported fixtures for fully cellular containerships identified and collected by CRS.
              Along with the positive movements in containership charter rates throughout 2003, 2004 and the first half of 2005, the market also saw an increase in average charter time periods. A fixture is the term used to denote the agreement of a new charter. The average time period of reported fixtures 11 increased from 11.2 months in January 2003 to 33.8 months in January 2005, reflecting the charter owners' ability to push for longer charter periods in a strong market for containerships. In August 2006 the average period of reported fixtures was 16.1 months, having fallen to 11.5 months in November 2005 when the charter market was moving downwards, and picked back up again to 31.1 months in May 2006, before dropping again through June to August. The average period across reported fixtures observed on the transparent charter market, however, is generally substantially shorter than the charter periods seen for many large containership newbuildings chartered by charter owners to liner companies.
              During 2003 and 2004 the volume of reported fixtures was relatively high, but as demand continued to grow, and a greater number of ships were committed for increasingly longer periods, the lack of supply caused the volume of fixtures to slow during 2005 and the first eight months of 2006.
 
 Containership Time Charter Daily Rates Per TEU

Source: Clarkson Research, September 2006.
              The charter owner containership sector is also subject to the development of containership newbuilding prices, which reflect the cost of the acquisition of new containerships by owners from the
83

shipyards. The graph below shows the development of containership newbuilding prices 12 for three sizes of containerships, expressed in dollars per TEU. Since early 2003 newbuilding prices have risen significantly. The total newbuilding price for a theoretical 2,750 TEU containership increased from $29.5 million at the beginning of 2003 to $52.0 million at the beginning of September 2006. Over the same period, for a theoretical 4,600 TEU containership, the newbuilding price rose from $45.0 million to $72.5 million, while the newbuilding price for a theoretical 6,200 TEU containership increased from $60.0 million to $101.0 million. Economies of scale in containership building mean that the cost per TEU involved in building larger containerships is smaller than the cost for ships with smaller TEU capacity.
12
These newbuilding prices are based on market assessments by H. Clarkson & Co. Ltd. brokers. They can vary as to country of build, delivery date and ship specification.
 
 Containership Newbuilding Price Development

Source: Clarkson Research, September 2006.
              The charter owner containership orderbook as of September 1, 2006, was 2.03 million TEU, representing 47.7% of the existing charter owner fleet in terms of capacity. For containerships with a capacity of 3,000 TEU or greater, this figure was 52.4%. As of September 1, 2006, the charter owner orderbook contained 0.30 million TEU for delivery in 2006, 0.65 million TEU for 2007 delivery, and 1.08 million TEU for delivery in 2008 and later.
              The table below shows the containership orderbook in terms of total estimated investment by charter owners.
 
 Charter Owner Containership Orderbook

 	 	 	 	 	 	Year of Delivery:
	 	
 	 	 	 	Total
Orderbook
Thousand TEU
	 	2006
000 TEU
	 	2007
000 TEU
	 	2008
000 TEU
	 	2009/10
000 TEU
	 	
Deep Sea	 	3,000 TEU & above	 	1,229.1	 	156.3	 	346.8	 	249.3	 	476.8	 	
Intermediate	 	1,000-2,999 TEU	 	683.6	 	109.9	 	258.5	 	244.0	 	71.2	 	
Feeder	 	0-999 TEU	 	115.8	 	36.2	 	43.2	 	25.4	 	11.0	 	
 	 	 	 		 		 		 		 		 	
Total	 	2,028.5	 	302.4	 	648.5	 	518.7	 	558.9	 	
 	 	 	 		 		 		 		 		 	
% of Current Charter Owner Fleet TEU	 	47.7	%	7.1	%	15.3	%	12.2	%	13.1	%	

Based on best available ownership data.
Source: Clarkson Research, September 2006.
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The Secondhand Containership Market
              As the containership charter market is playing an increasingly important role in the container shipping industry as a whole, the market for the sale and purchase of secondhand containerships has also expanded. The amount of the world's containership capacity owned by liner companies has diminished as liner companies have been willing to charter-in ships from charter owners, whose increased containership ownership has been the result of contracting newbuildings and acquiring containerships on the secondhand market. Activity on the secondhand market for containerships has grown steadily in recent years from relatively low volumes of activity previously. The liquidity of the secondhand sales market is much greater for small and medium-sized containerships than for large vessels. Only 153 of 996 of the secondhand containership sales recorded in the period 1996-2005 involved ships with 3,000 TEU or more in capacity. A portion of this activity has been constituted by the sale of containerships by liner companies to charter owners. These sales have commonly been accompanied by "time charter back" provisions whereby the liner company sells the vessel, removing the asset from its balance sheet, then, as part of the transaction, arranges a time charter of the vessel from the party to which it has sold the ship.
 
 Secondhand Containership Sales Activity

Source: Clarkson Research, September 2006.
              Containership secondhand sales activity rose from 89 ships with 114,243 TEU sold in 1996 to 212 ships with 381,418 TEU sold in 2004. In 2005 a total of 110 ships with 239,690 TEU in capacity were sold. In the first eight months of 2006, 63 containerships with capacity of 155,148 TEU were sold in the secondhand market. While secondhand containership sales volumes show some volatility, it is clear that there has been an upward trend in market activity overall, although volumes in 2005 were down significantly from those in 2004.
              The following graph shows the development of secondhand prices for five year old containerships. Trends in secondhand prices for older containerships typically move according to similar cycles.
85

 
 Containership Secondhand Price Development

Source: Clarkson Research, September 2006.
Competition in the Container Shipping Market
              There is competition in the containership charter market between a number of classes of industry participants satisfying the demand for containership capacity. Charter owners compete against liner companies themselves (operator owners such as Maersk, MSC and Evergreen), who own container carrying vessels, for the services that they provide. This differs somewhat from the traditional tanker and bulk carrier shipping sectors where owners provide tonnage to charterers who are mainly cargo interests or operators, less inclined to take part in ownership. Containership-owning liner companies are often significant corporate entities, while charter owners are often part of wider groups involved in activities such as ship financing, management or broking. Charter owners are numerous, with over 360 owning containerships as of September 1, 2006.
              Within the charter owner grouping, there is a range of types of shipowner. The largest share of the charter owner containership fleet is owned by German shipowners (examples in the table below include NSB Niederelbe, E.R. Schiffahrt, and Reederei C-P Offen). German owners in total accounted for 61% of the fully cellular containerships in the worldwide charter owner fleet as of September 1, 2006, as well as 73% of the containerships on order to charter owners.
 
 Top Containership Charter Owners by TEU Capacity

 	 	Ships
	 	TEU
	 	Avg. size
	
NSB Niederelbe	 	85	 	353,554	 	4,159	
E.R. Schiffahrt	 	65	 	291,778	 	4,489	
Reederei C.-P. Offen	 	63	 	236,887	 	3,760	
Costamare	 	50	 	192,151	 	3,843	
Peter Dohle	 	69	 	174,584	 	2,530	
Zodiac Maritime	 	42	 	163,896	 	3,902	
NVA Norddeutsche	 	31	 	121,195	 	3,910	
Rickmers Reederei	 	57	 	117,135	 	2,055	
Danaos	 	26	 	106,535	 	4,098	
Seaspan Container Lines	 	18	 	90,278	 	5,015	
Kaisho Shipping	 	14	 	82,416	 	5,887	
F Laeisz	 	23	 	76,378	 	3,321	
Gebab	 	25	 	73,825	 	2,953	
Leonhardt & Blumberg	 	40	 	71,608	 	1,790	
Hanseatic Lloyd	 	23	 	71,099	 	3,091	
Shoei Kisen	 	23	 	69,159	 	3,007	
 	 	 	 	 	 	 	
86

 
Ofer Group	 	22	 	67,661	 	3,076	
Schulte Group	 	33	 	62,974	 	1,908	
Dr. Peters	 	24	 	59,917	 	2,497	
Hansa Treuhand	 	16	 	58,823	 	3,676	
Hermann Buss	 	41	 	52,547	 	1,282	
J-P Schluter	 	23	 	51,424	 	2,236	
Oskar Wehr	 	20	 	47,505	 	2,375	
Ch. F. Ahrenkiel	 	21	 	46,084	 	2,194	
Klaus Oldendorff	 	23	 	41,805	 	1,818	

Source: Clarkson Research, September 2006, and industry sources.
              A large number of the ships owned by these companies have been financed by the German KG 13 system, which provides tax benefits to private investors in certain shipowning companies. KG equity houses are generally responsible for collecting the funds. In some instances they are part of German shipowning and management groups, and in others they are separate operations working with external shipowning or management companies within Germany. While scheduled changes to the structure of the KG system eliminating the tax benefit (derived from accelerated asset depreciation) to investors have been implemented, KG houses are expected to continue to promote significant investment in ships through the German tonnage tax system. Other identifiable charter owner groupings include Greek owners (of which Danaos is an example), and also include companies using other financing schemes such as Scandinavian KS financing.
13
KG stands for "Kommanditgesellschaft".
              Container shipping demand growth in the future, while open to risks and limitations already detailed, will require the liner shipping companies to further grow their containership capacity. As a result, although that demand could be subject to risks and limitations, the provision of containerships to the market by charter owners maintains the potential for expansion in the future.
 
 Top Liner Operators by TEU in Service

Source: CRS and industry sources, September 2006.
87

The Drybulk Shipping Market
              Drybulk cargoes are used in many basic industries and in construction, and can be divided into major bulk commodities and minor bulk commodities. Major bulks consist of iron ore, coal and grains. 14 Minor bulks cover a wide variety of commodities, such as forest products, iron and steel products, fertilizers, agricultural products, non-ferrous ores, minerals and petcoke, cement, other construction materials and salt.
14
Grains include wheat, coarse grains and soybeans. Clarkson Research includes bauxite, alumina, and phosphate rock as major bulk commodities in published reports but for the purposes of this document it includes only iron ore, coal and grain.
              The chartering of vessels for a specified period of time or to carry a specific cargo is an integral part of the market for seaborne transportation of drybulk cargoes. The charter market is highly competitive. Competition is based primarily on the offered charter rate, the location, technical specification and quality of the vessel and the reputation of the vessel's manager. Typically, the charterparty agreements are based on standard industry terms, which are used to streamline the negotiation and documentation processes. The most common types of employment structures for a drybulk carrier are shown in the table below.

Spot Market	 	In the spot market the vessel earns income for each individual voyage. Earnings are dependent on prevailing market conditions at the time the vessel is fixed, which can be highly volatile. Idle time between voyages is possible depending on the availability of cargo and position of the vessel. Vessels operating on the spot market generate revenues that are often more volatile than those from other types of shipping.	

Contract of Affreightment	
 	
Contracts of affreightment (CoA) are agreements by vessel owners to carry quantities of a specific cargo on a particular route or routes over a given period of time using vessels of the owners' choice within specified restrictions. In a CoA the owner is not required to use a specific vessel to transport the cargo, but instead may use any qualified vessel in its fleet.	

Time Charter	
 	
A time charter is a contract for the hire of a vessel for a certain period of time, with the vessel owner being responsible for providing the crew and paying operating costs. The charterer is responsible for fuel and other voyage costs. A time charter is comparable to an operating lease.	

Bareboat Charter	
 	
Under bareboat charter , the vessel owner charters the vessel to another company (the charterer) for a pre-agreed period and daily rate. The charterer is responsible for operating the vessel and for payment of the charter rates. A bareboat charter is comparable to a finance lease.	

Pool Employment	
 	
In pool employment the vessel is part of a fleet of similar vessels, brought together by their owners in order to exploit efficiencies and benefit from a profit sharing mechanism. The operator of the pool sources different cargo shipment contracts and directs the vessels in an efficient way to service these contractual obligations. Pools can benefit from profit and loss sharing effects and the benefits of potentially less idle time through coordination of vessel movements, but vessels sailing in a pool will also be vulnerable to adverse market conditions.	
              Charter rates are strongly influenced by the demand for, and supply of, vessel capacity because of the highly competitive nature of the charter market. Bulk carrier charter hire rates are very sensitive to these changes in demand and supply and consequently are volatile.
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Drybulk Demand
              Bulk carrier demand is a product of (a) the amount of cargo transported, multiplied by (b) the distance over which this cargo is transported. As illustrated in the chart below, world seaborne trade in drybulk cargoes grew from approximately 1.6 billion tonnes in 1990 to approximately 2.6 billion tonnes in 2005, an average growth of 3.2% per annum. Since 1998, this growth has accelerated to 4.4% per annum. The distance over which the various drybulk commodities are transported is determined by seaborne trading and distribution patterns, which are principally influenced by the locations of production and consumption and their relative growth rates, as well as changes in regional prices of raw materials and manufactures such as coal, grain, and steel products.

Source: Clarkson Research, September 2006.
Note: 2005 figures estimated.
              While the drybulk trade has grown on a global basis, the relative importance of the Asia Pacific region as a key driver of the growth in that trade has increased, in part reflecting the globalization of trade and outsourcing of the manufacturing process. The main driver of growth in Asia Pacific trade in drybulk cargoes, primarily for iron ore imports, has been China. Chinese iron ore imports multiplied by approximately five times between 1999 and 2005, from around 55 million tonnes in 1999 to an estimated 275 million tonnes in 2005, a compounded average growth rate of 31% per annum. The rapid increase in Chinese iron ore imports alone accounted for an estimated 33% of the overall growth in global drybulk trade over the last six years. Certain drybulk trades exhibit levels of seasonality, depending on seasonal supply or demand factors, such as the production of grain or demand for coal.
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Drybulk Supply
              The drybulk carrier fleet is generally divided into four major vessel types based on carrying capacity as illustrated in the table below.

Class of
Drybulk
Carriers
	 	Cargo Capacity
(dwt)
	 	Fleet
(No. of Ships)
	 	Typical Use
	
Capesize	 	>100,000	 	688	 	Long haul iron ore and coal transportation for use in the steel industry and power stations.	
Panamax	 	60,000-100,000	 	1,365	 	Typically carry coal and grains as well as a number of industrial metals such as alumina and bauxite. Also involved in iron ore and minor bulk trades.	
Handymax	 	40,000-60,000	 	1,464	 	Primarily employed carrying steel and forest products, grain, coal, cement, fertilizer, sugar and minerals.	
Handysize	 	10,000-40,000	 	2,754	 	Carry variety of bulk cargoes. Often employed on short haul trades.	
Source: Clarkson Research, September 2006.
Note: Excludes combination carriers and Great-Lakes-only vessels. Includes vessels above 10,000 dwt only.
              The supply of drybulk carriers is a function of new bulk carrier deliveries, scrapping and loss of tonnage. The level of newbuilding orders is a function primarily of newbuilding prices in relation to current and anticipated charter market conditions. Typically, delivery of a bulk carrier occurs within 12 to 36 months after ordering. The cost of a newbuilding is affected by a number of factors, including overall demand for varying types of large seagoing vessels, shipyard capacity and costs of raw materials, such as steel. As of September 1, 2006, the world bulk carrier orderbook was 72.7 million dwt, a 129% increase since the end of 2002.
              At any point in time, the level of scrapping activity is affected by, among other factors, current and expected charter rate conditions, scrap prices, the age profile of the fleet, the levels of secondhand values in relation to scrap values, as well as operating, repair and survey costs and the impact of regulations. Aging vessels typically require substantial repairs and maintenance to conform to industry standards, including repairs made in connection with periodic surveys by classification societies and dry-docking. With regard to drybulk carrier ownership, barriers to entry are relatively low, for example, in comparison to the operation of a liner company.
 
 Age and Size of the World Drybulk Carrier Fleet

 	 	 	 	 	 	Fleet
	 	 	 	 	 	Orderbook
	 	
Class
	 	Size (dwt)
	 	No.
	 	Million dwt
	 	% of Flt.
	 	Avg. Age
	 	No.
	 	Million dwt
	 	% of Flt.
	 	
Capesize	 	Over 100,000	 	688	 	116.4	 	32.4	%	11.2	 	170	 	34.1	 	29.3	%	
Panamax	 	60-99,999	 	1,365	 	99.0	 	27.6	%	11.5	 	232	 	18.7	 	18.8	%	
Handymax	 	40-59,999	 	1,464	 	69.7	 	19.4	%	11.4	 	256	 	13.7	 	19.6	%	
Handysize	 	10-39,999	 	2,754	 	73.6	 	20.5	%	19.7	 	219	 	6.2	 	8.5	%	
 	 	 	 		 		 		 		 		 		 		 	
Total	 	 	 	6,271	 	358.8	 	100.0	%	15.0	 	877	 	72.7	 	20.3	%	

Source: Clarkson Research, September 2006.
Note: Includes vessels above 10,000 dwt only. Excludes combination carriers and Great-Lakes-only vessels.
Average age based on number of vessels. Orderbook percentage of fleet based on dwt.
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 World Drybulk Carrier Fleet Age Profile

Source: Clarkson Research, September 2006.
              The ownership structure of the drybulk carrier fleet is relatively fragmented, with 1,276 owners controlling the 6,271 ships in the worldwide fleet. Even the largest owners control only a small proportion of the worldwide fleet, with the largest group, COSCO, controlling 319 ships with 19.0 million dwt, just 5.3% of the total fleet as measured by dwt. The second largest owning group, Mitsui OSK Lines, controls just 3.2% of the worldwide drybulk fleet. In total, the 20 largest owning groups control 28.4% of the global fleet as measured by dwt.
Panamax & Handymax Drybulk Carriers
              Panamax drybulk carriers engage in long and medium-haul trade in several commodities. The underlying demand for Panamax vessels is driven by three industries: steel production, thermal power generation and grain. The majority of iron ore, coal and grain shipments supply the two major importing regions of East Asia and Europe. Panamax iron ore and coal shipments are sourced primarily from Australia, South Africa and the Americas, with additional sourcing from Indonesia and China, while the main grain loading areas are the U.S. Gulf / West Coast, South America and Australia.
              The average age of a Panamax bulk carrier was 11.5 years as of September 1, 2006. However, due to the strength of the charter market, owners have been reluctant to remove ships from the market. There were no Panamax bulker demolition sales in 2004, and only three in 2005, and the average age of Panamax bulk carriers sold for demolition in that year was 30.1 years.
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Panamax Drybulk Carrier Fleet Age Profile

Source: Clarkson Research, September 2006.
              Because of their size and versatility, Handysize/Handymax drybulk carriers are able to service a large number of ports that are inaccessible to larger and ungeared ships. As a result, Handysize/Handymax drybulk carriers ship a wide range of cargo, including major bulks such as coal, iron ore and grain, as well as the numerous commodities that fall into the minor bulk category, particularly steel and scrap, sugar and fertilizer. Traditionally Handymax trade has been dominated by grain exports from the United States and South America, with delivery in Asia and Europe, and steel trade between Europe and Asia, in addition to the carriage of coal and iron ore on both long haul and coastal routes. However, China's economic expansion has added significant new demand, with shipments of iron ore from India and finished steel from the Black Sea and Japan now accounting for a considerable level of trade. Handysize vessels are employed primarily in short-haul trades.
              As of September 1, 2006 there were 1,464 Handymax drybulk carriers in the world drybulk carrier fleet, accounting for an aggregate of 69.7 million dwt and approximately 19% of the world drybulk carrier cargo capacity of vessels larger than 10,000 dwt. This fleet has grown at a rate of between 2.3% and 9.1% over the past six years and has an orderbook for newbuildings equivalent to 19.6% of the current worldwide fleet. The average age of the worldwide fleet is 11.4 years.
Handymax Drybulk Carrier Fleet Age Profile

Source: Clarkson Research, September 2006.
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The Charter Market
              The drybulk industry has been highly unpredictable, experiencing volatility of charter rates and vessel values resulting from changes in the supply of, and demand for, drybulk cargoes. The degree of charter rate volatility has varied over time and among different sizes of drybulk carriers. Freight rates for large vessels tend to be more volatile, on average, due to their reliance on a few key commodities and routes. The monthly average trip charter rates for Panamax and Handymax vessels since 1994 are shown in the graph below. In August 2006, the monthly average Panamax trip charter rate was $27,500 per day, significantly below the March 2004 peak of $43,563 per day, but 97% above the average for the period shown. In August 2006, the monthly average Handymax trip charter rate was $22,994 per day, significantly below the March 2004 peak of $34,891 per day, but 87% above the average for the period shown.
Handymax and Panamax Average Trip Charter Rates

Source: Clarkson Research, September 2006.
Note: Average trip charter rates refer to the monthly average of weekly rates for Panamax and Handymax vessels across four routes as defined in Clarkson Research's "Shipping Intelligence Weekly."
              Secondhand vessel values tend to be highly correlated with the freight market. The graph above illustrates that freight rates for these ships have fallen from recent peaks but are still above the long-term historical levels. A similar trend occurs with the secondhand values. As of the end of August 2006, the estimated value of a five-year old 73,000 dwt Panamax drybulk carrier was $41 million, down from the peak in April 2005, but 84% above the historical average for the period shown. As of the end of August 2006, the estimated value of a five-year old 45,000 dwt Handymax bulk carrier was $34 million, down 7% from the peak in April 2005, but 76% above the historical average for the period shown.
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Handymax and Panamax Secondhand Vessels Prices

Source: Clarkson Research, September 2006.
Note: Secondhand value time series composed of subjective monthly price assessments by Clarksons brokers and refer to changing vessel specification over time, such as increasing vessel size.
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 BUSINESS
Overview
              We are an international owner of containerships, chartering our vessels to many of the world's largest liner companies. We currently have a fleet of 27 containerships aggregating 116,115 TEUs, making us among the ten largest containership charter owners in the world, based on total TEU capacity. Our strategy is to charter our containerships under multi-year, fixed-rate time charters to a geographically diverse group of liner companies, including many of the largest such companies globally, as measured by TEU capacity. Currently, these customers include Maersk, COSCO, Hapag-Lloyd, CMA-CGM, Hyundai, APL-NOL, Norasia, Yang Ming, Wan Hai and China Shipping. Our charters range from two and a half to 12 years, which provides us with stable cash flows and high utilization rates. The average remaining duration of the charters for our containership fleet, including 16 contracted vessels for which we have arranged charters, will be 10.6 years as of October 1, 2006 (weighted by aggregate contracted charter hire). In August 2006, we agreed to sell the six drybulk carriers in our fleet, with an aggregate capacity of 342,158 dwt, for an aggregate of $143.5 million. Pursuant to the terms of this agreement, we expect to deliver these vessels to the purchaser, which is not affiliated with us, as each vessel's respective charter expires over the next six to eight months. During the time prior to delivery, we will continue to operate the vessels and, accordingly, receive the revenues and incur the expenses associated with such operation. We intend to reinvest in the drybulk sector with the acquisition of more recently built drybulk carriers with configurations better suited to employment in the current drybulk charter market within the next several months, subject to market conditions, including the availability of suitable vessels to purchase. In anticipation of our reinvestment in this sector, our manager intends to retain its employees dedicated to our drybulk operations. In addition, our new senior secured credit facilities with RBS and with Aegean Baltic Bank and HSH Nordbank will provide, in accordance with the terms of the commitment letters we have entered into for those facilities, for the use of borrowings to finance the acquisition of drybulk carriers as well as containerships. We have not yet, however, identified any specific drybulk carriers to purchase.
              Our company has a long history of operating and investing in the shipping industry. We are principally owned by the Coustas Family. Dimitris Coustas, the father of our chief executive officer, John Coustas, first invested in shipping in 1963 and founded our manager, Danaos Shipping Company Limited, or Danaos Shipping, in 1972. After assuming management of our company in 1987, John Coustas has focused our strategy on building a large, modern containership fleet to serve the container shipping industry. Since early 1993, under John Coustas' leadership, our containership fleet has grown from three multi-purpose vessels with a capacity of 2,395 TEUs to our current fleet of 27 containerships with a capacity of 116,115 TEUs, representing a compounded annual growth rate in TEU capacity of approximately 34.8%. This growth has occurred through multiple shipping cycles and, we believe, has resulted from the broad range of relationships we have developed and the quality of service provided to our customers, as well as our ability to exploit market opportunities during periods when there have been lower market demand and prices for containerships. Consistent with our strategy of pursuing attractive growth opportunities, we currently have newbuilding contracts or purchase agreements for 16 additional containerships, aggregating 84,704 TEUs, which are expected to be delivered to us between November 2006 and December 2009.
              Our company operates through a number of subsidiaries incorporated in Liberia, Cyprus or Singapore, all of which are wholly-owned and either directly or indirectly own the vessels in our fleet.
Market Opportunity
              We believe we are well positioned to continue to grow our business and benefit from the growth in the container shipping industry, which grew at a compound annual rate in excess of 10.0% between 2003 and 2005. We believe the growth in the containership industry has resulted from an increase in worldwide trade volume, caused in part by increased manufacturing of goods in Asia that
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are being consumed globally. We expect to continue to benefit from the growth in the container shipping industry. Additionally, we also expect to continue to benefit from the trend of liner companies contracting for containership capacity directly from charter owners, like us, which has resulted in charter owners increasing their share of the global containership fleet. As of the beginning of 2006, the largest ten liner companies chartered-in almost 50% of the TEU capacity they deployed from charter owners, an increase from the 15% chartered-in as of the beginning of 1993.
Our Competitive Strengths
              We are one of the world's ten largest containership charter owners as measured by TEU capacity. We have a combined fleet of 43 containerships and we believe that we possess a number of competitive strengths that will allow us to capitalize on the growth opportunities in the containership sector, including:
              Long Standing Relationships with Leading Liner Companies.     We charter our containerships to a diverse customer group consisting of the world's largest liner companies, as measured by TEU capacity. Currently, our containership customers include Maersk, COSCO, Hapag-Lloyd, CMA-CGM, Hyundai, APL-NOL, Norasia, Yang Ming, Wan Hai and China Shipping. In the past we have had successful chartering relationships with 22 of the 25 largest liner companies, as measured by TEU capacity, which we believe will benefit us in the future as we continue to grow our fleet. The strength of these long-standing relationships and our proven track record of performance have facilitated our ability to enter into multi-year charters with our customers that extend as long as 12 years with option periods that extend thereafter. These long-standing relationships have positioned us to enter into privately negotiated purchases of vessels from these customers which, given the relative scarcity of containerships in the secondhand market, provides us with a valuable source from which to acquire secondhand containerships.
              Stability of Cash Flows Through Multi-Year Charters.     All of the containerships in our combined fleet are, or upon their delivery to us will be, subject to multi-year, fixed-rate time charters that range from two and a half to 12 years. Furthermore, as we have added larger vessels to our fleet, the average duration of our time charters has increased. As of October 1, 2006, the average remaining duration of the charters for our combined containership fleet will be 10.6 years (weighted by aggregate contracted charter hire). Our multi-year charters allow us to maintain a high proportion of contracted cash flows, while their staggered maturities permit us to conduct regular rechartering activity in varying rate environments.
              Reputation for Operational Excellence and Technology Leadership.     We believe that we are able to secure multi-year charters extending up to 12 years with the top liner companies in part because we and Danaos Shipping, our manager, have a strong operating track record. Our manager has been operating containerships since 1984 and has been recognized for implementing advanced technology and innovative processes in order to provide reliable and efficient services. Our manager's and our operational excellence and reliability have resulted in less than 13 total off-hire days for our entire fleet during 2005 other than for scheduled drydockings and special surveys. Our manager's internet-based, on-board communications system was awarded the Lloyds Technical Innovation Award in 2004, and the ship management software developed by our software affiliate is a widely deployed third-party ship management package in the shipping industry.
              Strong Record of Long-Term Growth.     Since early 1993 we have grown our fleet from three multi-purpose vessels with an aggregate capacity of 2,395 TEUs to our current fleet of 27 containerships, which have a total capacity of 116,115 TEUs. We have been successful at acquiring vessels throughout varying shipping cycles over the past 12 years, making purchases and contracting for newbuildings at points of market weakness as well as during periods characterized by higher charter rates and vessel values. Despite the relative scarcity of containerships in the secondhand market, we
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have increased our containership fleet at an annual compound growth rate (in TEU capacity) of approximately 34.8% since 1993 by, among other things, negotiating private purchases from our liner company customers as well as contracting for newbuildings that incorporate the latest in design innovations. We have contracted for 16 additional containerships with a total capacity of 84,704 TEUs to be delivered to us between November 2006 and December 2009. These 16 vessels represent an approximate 72.9% growth in the TEU capacity of our containership fleet.
              Strong Financial Results and Flexibility.     Our long history of profitable operations has given us strong financial results and enabled us to grow our company. For the year ended December 31, 2005, we generated operating revenues of $241.4 million, net income of $122.9 million and EBITDA of $171.0 million. For the six months ended June 30, 2006, we generated operating revenues of $114.5 million, net income of $44.4 million and EBITDA of $73.8 million. After giving effect to the application of the proceeds of this offering and the financing of our contracted vessels, upon execution of the new senior revolving credit facilities we expect to have in excess of $500.0 million of undrawn availability. We believe that this available financing capacity, together with our policy of retaining a portion of our cash flows, will afford us financial flexibility throughout various shipping cycles and allow us to continue to make selective acquisitions.
Our Business Strategies
              Our primary objectives are to profitably grow our business, increase distributable cash flow per share and maximize value to our stockholders by pursuing the following strategies:
              Provide a High Level of Customer Service.     We will continue to focus on being a high-quality, cost-efficient provider of ships and vessel services and on maintaining a high level of service for our customers that allows them to provide high-quality integrated logistics solutions in the marketplace. We believe that our focus on customer service and our technology leadership enhances our relationships with our charterers. We have successfully chartered our vessels to 22 of the 25 largest liner companies by TEU capacity, many of which, we believe, consider us to be one of their preferred providers.
              Maintain a Diverse Portfolio of Charters.     We will continue to charter our containership assets to a large number of leading liner companies in order to maintain a portfolio of time charters that is highly diverse from a customer, geographic and maturity perspective. Our charters have terms that range from two and a half to 12 years and our liner company customers are geographically diverse with headquarters and operations based throughout the world. These customers are based in China, Taiwan, Singapore, Germany, France and Denmark. We believe our strategy reduces our revenue concentration, minimizes our exposure to any one customer and allows us to recharter our vessels during any particular period in the charter market cycle.
              Actively Acquire Newly Built and Secondhand Vessels.     Given our broad customer relationships and our strong financial flexibility, we believe we are well positioned to take advantage of growth in the industry. We acquired one 4,651 TEU secondhand vessel on March 23, 2006, took delivery of one 9,580 TEU newbuilding on September 8, 2006 and we currently have 14 newbuilding contracts and two secondhand acquisition contracts that will increase the size of our containership fleet by 84,704 TEUs, or approximately 72.9%, between November 2006 and December 2009, assuming no vessel dispositions, other than the sale of the APL England , or further vessel acquisitions. In addition to the vessels already contracted and coming into service, we believe we will have significant financial flexibility to pursue growth through additional selective acquisitions. We will continue to seek multi-year charters to provide newbuildings to customers seeking to expand their services. We also believe our manager's reputation and long history as a leading ship operator positions us as an attractive provider to liner companies, giving us opportunities to acquire secondhand vessels that we can subsequently charter to our customers.
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              Continue to Invest in Larger Containerships.     We expect to continue to focus on acquiring larger containerships. We believe that larger containerships are more attractive to our customers because these vessels are able to benefit from economies of scale and constitute the core of the vessels providing their liner services. As a result, larger vessels are attractive investments because our customers prefer chartering them for longer periods of time over chartering smaller TEU capacity vessels, providing us with longer term stable cash flows and reducing our residual vessel value exposure.
Fleet
General
              We deploy our containership fleet principally under multi-year charters with major liner companies that operate regularly scheduled routes between large commercial ports. Our containership fleet is currently comprised of 23 containerships deployed on time charters and four containerships deployed on bareboat charters. The average age (weighted by TEU) of the 27 vessels in our containership fleet will be approximately 11.4 years as of October 1, 2006 and, upon delivery of all of our contracted vessels as of the end of 2009, the average age (weighted by TEU) of the 42 vessels in our containership fleet will be approximately 9.1 years. As of October 1, 2006, the average remaining duration of the charters for our containership fleet, including 16 contracted vessels for which we have arranged charters, will be 10.6 years (weighted by aggregate contracted charter hire).
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Characteristics
              The table below provides additional information about our current fleet of 27 containerships, each of which is a cellular containership.

Vessel Name
	 	Year
Built
	 	Vessel
Size
(TEU)
	 	Time Charter
Term(1)
	 	Expiration of
Charter(1)
	 	Daily
Charter
Rate (in
thousands)
	 	Charterer
	
Post-Panamax	 	 	 	 	 	 	 	 	 	 	 	 	 	
CSCL Pusan (ex HN 1559)(2)	 	2006	 	9,580	 	12 years	 	September 2018	 	$	34.0	 	China Shipping	
CSCL America(3)	 	2004	 	8,468	 	12 years	 	November 2016	 	 	29.5	 	China Shipping	
CSCL Europe(3)	 	2004	 	8,468	 	12 years	 	August 2016	 	 	29.5	 	China Shipping	
APL Belgium(4)	 	2002	 	5,506	 	6 years	 	January 2008	 	 	25.5	 	APL-NOL	
APL England(4)(5)	 	2001	 	5,506	 	6 years	 	February 2007	 	 	25.5	 	APL-NOL	
APL Holland(4)	 	2001	 	5,506	 	6 years	 	July 2007	 	 	25.5	 	APL-NOL	
APL Scotland(4)	 	2001	 	5,506	 	6 years	 	May 2007	 	 	25.5	 	APL-NOL	
Hyundai Commodore	 	1992	 	4,651	 	8 years	 	May 2013	 	 	20.0	 	Hyundai	
Hyundai Duke	 	1992	 	4,651	 	8 years	 	April 2013	 	 	20.0	 	Hyundai	
MOL Confidence	 	1994	 	4,651	 	6.5 years	 	October 2012	 	 	20.8	 	Hyundai	
Panamax	 	 	 	 	 	 	 	 	 	 	 	 	 	
Maersk Derby (ex P&O Nedlloyd Caracas)(6)	 	2004	 	4,253	 	5 years	 	April 2009	 	 	20.6	 	Maersk	
Vancouver Express (ex P&O Nedlloyd Caribbean)(7)	 	2004	 	4,253	 	5 years	 	March 2009	 	 	20.6	 	Maersk	
Norasia Hamburg	 	1989	 	3,908	 	5 years	 	February 2008	 	 	20.8	 	COSCO	
YM Yantian(8)	 	1989	 	3,908	 	5 years	 	September 2011	 	 	30.5	 	Yang Ming	
YM Milano	 	1988	 	3,129	 	3 years	 	January 2007	 	 	23.5	 	Yang Ming	
Victory I	 	1988	 	3,098	 	3 years	 	July 2007	 	 	25.1	 	Norasia	
Independence	 	1986	 	3,045	 	3 years	 	June 2007	 	 	23.6	 	Wan Hai	
Henry	 	1986	 	3,039	 	3 years	 	May 2007	 	 	23.6	 	Wan Hai	
CMA CGM Elbe	 	1991	 	2,917	 	5 years	 	August 2010	 	 	20.4	 	CMA-CGM	
CMA CGM Kalamata	 	1991	 	2,917	 	5 years	 	August 2010	 	 	20.4	 	CMA-CGM	
CMA CGM Komodo	 	1991	 	2,917	 	5 years	 	August 2010	 	 	20.4	 	CMA-CGM	
Pacific Bridge	 	1984	 	2,130	 	3 years	 	March 2008	 	 	27.0	 	Hapag-Lloyd	
Eagle Express	 	1977	 	1,704	 	2.5-3 years	 	October 2007	 	 	22.0	 	Hapag-Lloyd	

Panamax

 	

 	
Bareboat
Charter Term(1)

 	

 	
 	
Maersk Constantia(9)	 	1979	 	3,101	 	2.0 years	 	April 2008	 	 	10.0	 	Maersk	
S.A. Helderberg(9)	 	1977	 	3,101	 	2.0 years	 	December 2007	 	 	10.0	 	Maersk	
S.A. Sederberg(9)	 	1978	 	3,101	 	2.0 years	 	January 2008	 	 	10.0	 	Maersk	
S.A. Winterberg(9)	 	1978	 	3,101	 	2.0 years	 	March 2008	 	 	10.0	 	Maersk	

(1)
Earliest date charters could expire. Most charters include options to extend their term.
(2)
Daily charter rate for the first six years of the charter. The daily charter rate for the seventh through twelfth years of the charter is $35,400.
(3)
Daily charter rate for the first six years of the charter. The daily charter rate for seventh through twelfth years of the charter is $29,800.
(4)
Daily charter rate for the first five years of the charter. The daily charter rate is $26,800 for the sixth year of the charter.
(5)
The charterer of this vessel, APL-NOL, has exercised its option to purchase this vessel from us for $44.0 million upon expiration of the current charter in February 2007.
(6)
The charter for this vessel is with P&O Nedlloyd, a subsidiary of Maersk. On December 16, 2005, the P&O Nedlloyd Caracas was renamed the Maersk Derby at the request of P&O Nedlloyd.
(7)
The charter for this vessel is with P&O Nedlloyd, a subsidiary of Maersk. On December 23, 2005, the P&O Nedlloyd Caribbean was renamed the Maersk Deva at the request of P&O Nedlloyd. On January 28, 2006, the Maersk Deva was renamed the Vancouver Express at the request of P&O Nedlloyd.
(8)
In September 2003, we agreed with Yang Ming to charter this vessel until September 14, 2006. We subsequently agreed to charter, beginning on September 14, 2006, the YM Yantian to Yang Ming under a five-year time charter with a charter rate of $30,500 per day, with an option for a two month extension.
(9)
The charter for this vessel is with Safmarine, a subsidiary of Maersk.
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              Our contracted vessels have been or are being built based upon designs from Samsung, Hyundai Heavy Industries and Sungdong Shipbuilding & Marine Engineering Co., Ltd. In some cases designs are enhanced by us and our manager, Danaos Shipping, in consultation with the charterers of the vessels and two classification societies, Det Norske Veritas and the Lloyds Register of Shipping. These designs, which include certain technological advances, make the containerships efficient with respect to both voyage speed and loading capability when compared to many vessels operating in the containership sector. The 9,580 TEU vessel we have contracted for is capable of speeds of 25.2 knots on design drafts, which would make it among the fastest containerships afloat.
              Our contracted vessels consist of 14 containerships currently under construction and two 2004-built secondhand containerships. The specifications of our contracted vessels are as follows:

Newbuildings
	 	Year
Built
	 	Vessel
Size
(TEU)
	 	Expected
Delivery
Date(1)
	 	Time
Charter
Term
	 	Expiration
of Charter
	 	Daily
Charter
Rate (in
thousands)
	 	Charterer
	
HN 1561	 	2006	 	9,580	 	November 2006	 	12 years	 	2018	 	$	34.0	(2)	China Shipping	
HN 1639	 	2007	 	4,253	 	September 2007	 	12 years	 	2019	 	 	26.1	 	Yang Ming	
HN 1640	 	2007	 	4,253	 	November 2007	 	12 years	 	2019	 	 	26.1	 	Yang Ming	
HN 1670	 	2008	 	4,253	 	July 2008	 	12 years	 	2020	 	 	22.8	 	Zim	
HN 1671	 	2008	 	4,253	 	September 2008	 	12 years	 	2020	 	 	22.8	 	Zim	
HN 1672	 	2008	 	4,253	 	November 2008	 	12 years	 	2020	 	 	22.8	 	Zim	
HN 1673	 	2008	 	4,253	 	December 2008	 	12 years	 	2020	 	 	22.8	 	Zim	
HN 1698	 	2009	 	4,253	 	March 2009	 	12 years	 	2021	 	 	22.8	 	Zim	
HN S4001	 	2009	 	6,500	 	April 2009	 	12 years	 	2021	 	 	34.4	 	CMA-CGM	
HN 1699	 	2009	 	4,253	 	June 2009	 	12 years	 	2021	 	 	22.8	 	Zim	
HN S4002	 	2009	 	6,500	 	June 2009	 	12 years	 	2021	 	 	34.4	 	CMA-CGM	
HN S4003	 	2009	 	6,500	 	August 2009	 	12 years	 	2021	 	 	34.4	 	CMA-CGM	
HN S4004	 	2009	 	6,500	 	October 2009	 	12 years	 	2021	 	 	34.4	 	CMA-CGM	
HN S4005	 	2009	 	6,500	 	December 2009	 	12 years	 	2021	 	 	34.4	 	CMA-CGM	

Secondhand

 	

 	

 	

 	

 	
E.R. Auckland	 	2004	 	4,300	 	March 2007	 	12 years	 	2019	 	 	27.8	(3)	Yang Ming	
E.R. Wellington	 	2004	 	4,300	 	September-October 2007	 	12 years	 	2019	 	 	27.8	(3)	Yang Ming	

(1)
Although the expected delivery dates are as set forth in the table above, the contracted delivery dates for our contracted vessels are as follows: HN 1561 —January 31, 2007; HN 1639 —September 30, 2007; HN 1640 —November 30, 2007; HN 1670— July 31, 2008; HN 1671 —September 30, 2008; HN 1672 —November 30, 2008; HN 1673 —December 31, 2008; HN 1698— March 31, 2009; HN 1699— June 30, 2009; E.R. Auckland— March 2007 ; E.R. Wellington —September 15, 2007 to October 15, 2007; HN S4001 —April 30, 2009; HN S4002 —June 30, 2009; HN S4003 —August 31, 2009; HN S4004 —October 31, 2009; HN S4005 —December 31, 2009.
(2)
Daily charter rate for the first six years of the charter. The daily charter rate for seventh through twelfth years of the charter is $34,500.
(3)
Daily charter rate for the first four years of the charter. The daily charter rate for fifth through twelfth years of the charter is $26,300.

Containership Charterers
              As the container shipping industry has grown, the major liner companies have increasingly contracted for containership capacity. Our diverse group of customers in the containership sector currently include Maersk, COSCO, Hapag-Lloyd, CMA-CGM, Hyundai, APL-NOL, Norasia, Yang Ming, Wan Hai and China Shipping. Nine of these customers are publicly listed companies and one other of these customers has investment grade rated securities by Moody's according to Bloomberg LP. In addition, we have arranged multi-year, fixed-rate charters with certain of these customers, as well as with Zim Integrated Shipping Services ("Zim"), a state-owned Israeli entity, for each of the 16 additional containerships we have agreed to purchase. Our 9,580 TEU newbuilding will be chartered to China Shipping, our two 4,253 TEU newbuildings expected to be delivered in the second half of 2007
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will be chartered to Yang Ming, and our four 4,253 TEU newbuildings expected to be delivered in the second half of 2008 and two 4,253 TEU newbuildings expected to be delivered in the first half of 2009 will be chartered to Zim, each under 12-year charters and our five 6,500 TEU newbuildings expected to be delivered during 2009 will be chartered to CMA-CGM, each under 12-year charters. The two 4,300 TEU secondhand vessels we have agreed to purchase will be subject to existing charters at the time of delivery, which will have remaining terms of three months. We have agreed to charter these vessels to Yang Ming under 12-year agreements commencing immediately upon the expiration of the charters to which the vessels will be subject at the time of their delivery.
              The containerships in our combined containership fleet are or, upon their delivery to us, will be deployed under multi-year, fixed-rate time charters having initial terms that range from two and a half to 12 years. These charters expire at staggered dates ranging from January 2007 to December 2021, with no more than 12 expiring in any 12-month period. The staggered expiration of the multi-year, fixed-rate charters for our vessels, is both a strategy pursued by our management and a result of the growth in our fleet over the past several years. We believe the staggered expiration dates provide us with stable cash flows and high utilization rates and should mitigate the impact a downturn in the containership sector might have on our revenues and our ability to fully employ our containership fleet in the future. Under our time charters, the charterer pays voyage expenses such as port, canal and fuel costs and we pay for vessel operating expenses, which include crew costs, provisions, deck and engine stores, lubricating oil, insurance, maintenance and repairs. We are also responsible for each vessel's intermediate and special survey costs.
              Under the time charters, when the vessel is "off-hire" or not available for service, the charterer is generally not required to pay the hire rate, and we are responsible for all costs. A vessel generally will be deemed to be off-hire if there is an occurrence preventing the full working of the vessel due to, among other things, operational deficiencies, drydockings for repairs, maintenance or inspection, equipment breakdown, delays due to accidents, crewing strikes, labor boycotts, noncompliance with government water pollution regulations or alleged oil spills, arrests or seizures by creditors or our failure to maintain the vessel in compliance with required specifications and standards. In addition, under our time charters, if any vessel is off-hire for more than a certain amount of time (generally between 10-20 days), the charterer has a right to terminate the charter agreement for that vessel. Charterers also have the right to terminate the time charters in various other circumstances, including but not limited to, outbreaks of war or a change in ownership of the vessel's owner or manager without the charterer's approval.
Leasing Arrangements—CSCL Europe, CSCL America, Maersk Derby (ex P&O Nedlloyd Caracas ) , Vancouver Express (ex P&O Nedlloyd Caribbean ) , CSCL Pusan (ex HN 1559) and HN 1561
              We have entered into leasing arrangements with a subsidiary of Lloyds Bank, Allco Finance Limited, a U.K.-based financing company, Allco Finance UK Limited, a U.K.-based financing company, and Allocean Maritime Limited, or AML, a U.K.-based ship financing company, with respect to five containerships in our current fleet, the CSCL Europe , the CSCL America , the Maersk Derby (ex P&O Nedlloyd Caracas ), the Vancouver Express (ex P&O Nedlloyd Caribbean ) and the CSCL Pusan (ex HN 1559) , and one of the containerships under construction, the HN 1561 . As part of these leasing arrangements, a separate limited partnership formed by a Lloyds Bank subsidiary (which provides the financing) and the Allco companies purchased each of these vessels. We charter-in these vessels from AML, which charters them in from the applicable partnership, and we then sub-charter the vessels to liner companies. We pay a fixed rate, which during the first 6 1 / 2 years of the leasing arrangements is a nominal amount, to charter-in these vessels from AML and we, in turn, are entitled to retain all of the charter revenue we earn from sub-chartering these vessels to our liner company customers.
              Under the terms of these leasing arrangements, upon an event of default, total loss of the vessel or 6 1 / 2  years into the term of the lease, which will fall on April 14, 2011 with respect to the
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CSCL Europe , the CSCL America , Maersk Derby (ex P&O Nedlloyd Caracas ) and the Vancouver Express (ex P&O Nedlloyd Caribbean) , and will fall on April 14, 2013 with respect to the CSCL Pusan (ex HN 1559) and the HN 1561 , the Lloyds Bank subsidiary has a put option to sell its 99.996% interest in the partnership owning each respective vessel to Allco Finance (UK) Limited. Allco Finance (UK) Limited has the option to put such interest to us and has written an option in favor of us (with a substantially similar exercise price) to acquire such interest. Each of Allco Finance (UK) Limited's put option to us and our purchase option are exercisable only if the Lloyds Bank subsidiary has exercised its put option.
              If, however, the put option is not exercised we would be entitled to charter-in the vessels for an additional 12 years at rates adjusted to market no less than every two years at our option, rather than at the nominal rate in effect for the first 6 1 / 2  years of the leasing arrangement. In that case we would also expect to exercise options that would entitle us to approximately 49% of the amount in excess of a pre-set level of the charter-in rate. Further, we would continue to be entitled to retain all of the charter revenue we earn from chartering-out these vessels to our liner company customers. As part of the leasing arrangements, we made a deposit with respect to each of these vessels, which is denominated in British pounds, in an amount expected to represent, after 6 1 / 2  years, approximately 75% of the original purchase price of the applicable vessel. This cash deposit with The Royal Bank of Scotland collateralizes the entire amount of a letter of credit issued by The Royal Bank of Scotland to secure our obligation to pay the put option price. If the put option is not exercised and, as a result, the letter of credit with respect to any of these vessels is not called, this deposit would be returned to us.
              On April 7, 2006, new legislation was proposed in the United Kingdom that is expected to result in a claw-back or recapture of certain of the benefits that were expected to be available to the counterparties to these transactions at their inception. This legislation was enacted on July 19, 2006. Accordingly, the put option price is expected to be increased to compensate the counterparties for the loss of these benefits. We currently expect the increase in the put option price we will be obligated to pay if the put is exercised will be approximately £46 million pounds ($80 million), although the increase in this put price could vary. In the three months ended June 30, 2006, we recognized an expense of approximately $13 million, which is the amount by which we currently expect the increase in the put price to exceed the cash benefits we expect to receive, and had expected to retain, from these transactions.
              We currently have operational control over these six vessels. Even if the put option is not exercised, we will continue to have operational control over each of these vessels under the terms of the leasing arrangements during the period we charter-in these vessels from AML. We consider each of the vessels subject to these leasing arrangements to be an asset for our financial reporting purposes, and each vessel is reflected as such in our consolidated financial statements included elsewhere herein.
Purchase Options—APL England, APL Scotland, APL Holland and APL Belgium
              The charters with respect to the APL England , the APL Scotland , the APL Holland and the APL Belgium include options for the charterer, APL-NOL, to purchase each vessel for $44.0 million in February 2007, May 2007, July 2007 and January 2008, respectively, or for $39.0 million in February 2009, May 2009, July 2009 and January 2010, respectively. In each case, the option to purchase the vessel must be exercised six months prior to the acquisition dates described in the foregoing sentence. We currently believe that the $44.0 million and $39.0 million option prices will be below the fair market value of the vessels at the time the options become exercisable. APL-NOL has recently exercised its option to purchase the APL England from us for $44.0 million upon the expiration of its current charter in February 2007. If APL-NOL were to exercise these options with respect to any or all of the other three vessels, the size of our fleet would be further reduced.
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Drybulk Carriers
              In August 2006, we agreed to sell the six drybulk carriers in our fleet, with an aggregate capacity of 342,158 dwt, for an aggregate of $143.5 million. Pursuant to the terms of this agreement, we expect to deliver these vessels to the single purchaser, which is not affiliated with us, and receive final payment, as each vessel's respective charter expires over the next six to eight months, as set forth in the table below.

Vessel
	 	Year
Built
	 	Vessel
Size
(dwt)
	 	Type of
Carrier
	 	Charter Type
	 	Charter Expiry
Range(1)
	 	Daily
Charter
Rate (in
thousands)
	 	Charterer
	 	Sale
Price (in
millions)(3)
	
Fivos	 	1994	 	69,659	 	Panamax	 	Time charter	 	Oct. 16, 2006 to Jan. 15, 2007	 	$	19.0	 	Cargill	 	$25.5	
Dimitris C	 	1994	 	43,814	 	Handymax	 	Time charter	 	Nov. 1, 2006 to Jan. 30, 2007	 	 	19.0	 	OBC London	 	22.25	
Alexandra I	 	1994	 	69,090	 	Panamax	 	Pool participation	 	Dec. 15, 2006 to Jan. 15, 2007	 	 	21.0	(2)	Baumarine Pool	 	25.0	
Maria C	 	1994	 	45,205	 	Handymax	 	Time charter	 	Nov. 17, 2006 to Feb. 18, 2007	 	 	20.0	 	KLC	 	22.5	
Roberto C	 	1994	 	45,210	 	Handymax	 	Time charter	 	Dec. 4, 2006 to Mar. 5, 2007	 	 	19.5	 	STX Panocean	 	22.75	
MV Achilleas	 	1994	 	69,180	 	Panamax	 	Pool participation	 	Feb. 16, 2007 to Apr. 18, 2007	 	 	21.5	(2)	Baumarine Pool	 	25.5	

(1)
Sets forth the earliest date on which the current charter is scheduled to expire and the latest date to which, at the charterer's option, the current charter may be extended. Each vessel will be sold upon expiration of its respective charter.
(2)
Based on Baumarine forecasts, contained in the pool report of July 2006 . This rate is not fixed for the entire charter period but rather changes every month according to actual pool results.
(3)
Price at which we have agreed to sell vessel upon expiration of current charter. We received payment of 10% of the aggregate sale price of the vessels upon entering into the sale agreement. The remaining 90% of the sale price is payable throughout the next six to eight months upon delivery of each vessel to the purchaser upon expiration of each vessel's current charter.
              During the time prior to the respective deliveries of the drybulk carriers to the purchaser, we will continue to operate the vessels and, accordingly, receive the revenues and incur the expenses associated with such operation. We decided to sell these vessels due to the opportunity to sell all six 1994-built drybulk carriers in one transaction at the high vessel valuations prevailing in the drybulk sector, which is inherently volatile in terms of both charter rates and vessel valuations, combined with the advancing age and less than optimum configuration of our drybulk fleet. We intend to reinvest in the drybulk sector with the acquisition of more recently built drybulk carriers with configurations better suited to employment in the current drybulk charter market within the next several months, subject to market conditions, including the availability of suitable vessels to purchase. In anticipation of this, our manager intends to retain its employees dedicated to our drybulk operations. In addition, our new senior secured credit facilities with RBS and with Aegean Baltic Bank and HSH Nordbank will provide, in accordance with the terms of the commitment letters we have entered into for those facilities, for the use of borrowings to finance the acquisition of drybulk carriers as well as containerships. We have not yet, however, identified any specific drybulk carriers to purchase. We intend to use the proceeds from the sale of the six drybulk carriers to repay indebtedness and fund contracted and future vessel acquisitions in the containership and drybulk sectors.
              Under the short-term time charters on which the drybulk carriers we have agreed to sell are deployed, the charterer pays voyage expenses such as port, canal and fuel costs and we pay for vessel operating expenses, which include crew costs, provisions, deck and engine stores, lubricating oil, insurance, maintenance and repairs. We are also responsible for each vessel's intermediate and special survey costs during the term of the charter. The Baumarine pool is a group of Panamax class drybulk carriers managed by Klaveness Commercial Management, a subsidiary of the Norwegian shipping group
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Torvald Klaveness Group. Under the pool agreement, Klaveness Commercial Management charters in and subsequently trades each of the drybulk carriers comprising the pool in the spot market. We operate two vessels, the Alexandra I and the MV Achilleas , in the Baumarine spot chartering pool. Under this pooling arrangement, we receive payments from Baumarine in an amount equal to the rate of hire forecasted for the upcoming month, which amount is later adjusted in accordance with the actual results for such month, and we pay a brokers commission of 0.625% of revenues received to Baumarine. The pooling arrangements with respect to the Alexandra I and the MV Achilleas expire on December 15, 2006 (subject to extension to January 15, 2007 by Klaveness Commercial Management) and February 16, 2007 (subject to extension to April 18, 2007 by Klaveness Commercial Management), respectively, and we may withdraw the Alexandra I upon 30 days' notice at any time and the MV Achilleas beginning in September 2006 upon 30 days' notice.
Management of Our Fleet
              Our chief executive officer, chief operating officer and chief financial officer provide strategic management for our company while these officers also supervise, in conjunction with our board of directors, the management of these operations by Danaos Shipping, our manager. We have a management agreement pursuant to which our manager and its affiliates provide us and our subsidiaries with technical, administrative and certain commercial services for an initial term expiring on December 31, 2008, with automatic one year renewals for an additional 12 years at our option. Our manager reports to us and our board of directors through our chief executive officer, chief operating officer and chief financial officer.
              Our manager is regarded as an innovator in operational and technological aspects in the international shipping community. Danaos Shipping's strong technological capabilities derive from employing highly educated professionals, its participation and assumption of a leading role in European Community research projects related to shipping, and its close affiliation to Danaos Management Consultants, a leading ship-management software and services company. Danaos Management Consultants provides software services to two of our charterers, CMA-CGM and P&O Nedlloyd.
              Danaos Shipping achieved early ISM certification of its container fleet in 1995, well ahead of the deadline, and was the first Greek company to receive such certification from Det Norske Veritas, a leading classification society. In 2004, Danaos Shipping received the Lloyd's List Technical Innovation Award for advances in internet-based telecommunication methods for vessels. Danaos Shipping maintains the quality of its service by controlling directly the selection and employment of seafarers through its crewing offices in Piraeus, Greece as well as in Odessa and Mariupol in Ukraine. Investments in new facilities in Greece by Danaos Shipping enable enhanced training of seafarers and highly reliable infrastructure and services to the vessels.
              Historically, Danaos Shipping only infrequently managed vessels other than those in our fleet and currently it does not actively manage any other companies' vessels other than providing certain management services to Palmosa Shipping Corporation, in which our chief executive officer has an investment. Danaos Shipping also does not arrange the employment of other vessels and has agreed that, during the term of our management agreement, it will not provide any management services to any other entity without our prior written approval, other than with respect to Palmosa Shipping Corporation and other entities controlled by Dr. Coustas, our chief executive officer, which do not operate within the containership (larger than 2,500 TEUs) or drybulk sectors of the shipping industry or in the circumstances described below. Other than Palmosa Shipping Corporation, Dr. Coustas does not currently control any such vessel-owning entity. We believe we will derive significant benefits from our exclusive relationship with Danaos Shipping, our administrative, technical, and commercial manager.
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              Dr. Coustas has also personally agreed to the same restrictions on the provision, directly or indirectly, of management services during the term of our management agreement. In addition, our chief executive officer (other than in his capacities with us) and our manager have separately agreed not, during the term of our management agreement and for one year thereafter, to engage, directly or indirectly, in (i) the ownership or operation of containerships of larger than 2,500 TEUs or (ii) the ownership or operation of any drybulk carriers or (iii) the acquisition of or investment in any business involved in the ownership or operation of containerships of larger than 2,500 TEUs or any drybulk carriers. Notwithstanding these restrictions, if our independent directors decline the opportunity to acquire any such containerships or to acquire or invest in any such business, our chief executive officer will have the right to make, directly or indirectly, any such acquisition or investment during the four-month period following such decision by our independent directors, so long as such acquisition or investment is made on terms no more favorable than those offered to us. In this case, our chief executive officer and our manager will be permitted to provide management services to such vessels.
              Under our management agreement, Danaos Shipping will manage our fleet for an initial term that expires at the end of 2008. The management agreement automatically renews for a one-year period and will be extended in additional one-year increments if we do not provide 12 months' notice of termination. For providing its commercial, chartering and administrative services our manager receives a fee of $500 per day. For its technical management of our ships, our manager receives a management fee of $250 per vessel per day for vessels on bareboat charter and $500 per vessel per day for the remaining vessels in our fleet under the first three years of our agreement, each pro rated for the number of calendar days we own each vessel. Thereafter these fees will be adjusted annually by agreement between us and our manager. For its chartering services rendered to us by its Hamburg-based office, our manager also receives a commission of 0.75% on all freight, charter hire, ballast bonus and demurrage for each vessel. Further, our manager receives a commission of 0.5% based on the contract price of any vessel bought or sold by it on our behalf, excluding newbuilding contracts. We will also pay our manager a flat fee of $400,000 per newbuilding vessel, which we will capitalize, for the on premises supervision of our newbuilding contracts by selected engineers and others of its staff.
Competition
              We operate in markets that are highly competitive and based primarily on supply and demand. Generally, we compete for charters based upon price, customer relationships, operating expertise, professional reputation and size, age and condition of the vessel. Competition for providing containership and drybulk carrier services comes from a number of experienced shipping companies. In the containership sector, these companies include Zodiac Maritime and Costamare. A number of our competitors in the containership sector have been financed by the German KG (Kommanditgesellschaft) system, which was based on tax benefits provided to private investors. While the German tax law has been amended recently to significantly restrict the tax benefits available to taxpayers who invest after November 5, 2005, the tax benefits afforded to all investors in the KG-financed entities will continue to be significant and such entities will continue to be attractive investments. These tax benefits allow these KG-financed entities to be more flexible in offering lower charter rates to liner companies.
              The containership sector of the international shipping industry is characterized by the significant time necessary to develop the operating expertise and professional reputation necessary to obtain and retain customers and the relative scarcity of secondhand containerships, necessitating reliance on newbuildings which can take a number of years to complete. We focus on larger TEU capacity containerships, which we believe have fared better than smaller vessels during global downturns in the containership sector. We believe larger containerships, even older containerships if well maintained, provide us with increased flexibility and more stable cash flows than smaller TEU capacity containerships.
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              In the past, we have been able to address the scarcity of secondhand containerships available for acquisition in the open market though the acquisition of containerships from our liner company customers in privately negotiated sales. In connection with these acquisitions we then typically charter back the vessels to these customers. We believe the opportunity to make these privately negotiated acquisitions was available to us due to our strong customer relations, which we do not believe new entrants have.
              We have also competed, and following reinvestment in the drybulk sector will compete, in the drybulk sector, which is characterized by relatively low barriers to entry. According to Clarkson Research Services Limited, ownership of drybulk carriers is highly fragmented and is divided among hundreds of drybulk carrier owners, many of which have larger fleets of drybulk carriers than we are likely to acquire. We attempt to exploit the cyclicality and volatility inherent in the drybulk market. We believe the stability afforded by our containership operations gives us the capability to compete in the drybulk sector by allowing us to take advantage of our ability to operate with higher leverage ratios than most drybulk owners are able to do.
              For a more detailed description of our competitive environment, please read "The International Shipping Industry—Competition in the Container Shipping Market" and "The International Shipping Industry—The Drybulk Shipping Market—Drybulk Supply," respectively.
Crewing and Employees
              At the completion of this offering, we will have three shore-based employees, our chief executive officer, our chief financial officer and our chief operating officer. As of June 30, 2006, 717 people served on board the vessels in our fleet and Danaos Shipping, our manager, employed approximately 71 people, all of whom were shore-based. In addition, our manager is responsible for recruiting, either directly or through a crewing agent, the senior officers and all other crew members for our vessels. We believe the streamlining of crewing arrangements through our manager ensures that all of our vessels will be crewed with experienced crews that have the qualifications and licenses required by international regulations and shipping conventions.
Permits and Authorizations
              We are required by various governmental and other agencies to obtain certain permits, licenses and certificates with respect to our vessels. The kinds of permits, licenses and certificates required by governmental and other agencies depend upon several factors, including the commodity being transported, the waters in which the vessel operates, the nationality of the vessel's crew and the age of a vessel. All permits, licenses and certificates currently required to permit our vessels to operate have been obtained. Additional laws and regulations, environmental or otherwise, may be adopted which could limit our ability to do business or increase the cost of doing business.
Inspection by Classification Societies
              Every seagoing vessel must be "classed" by a classification society. The classification society certifies that the vessel is "in class," signifying that the vessel has been built and maintained in accordance with the rules of the classification society and complies with applicable rules and regulations of the vessel's country of registry and the international conventions of which that country is a member. In addition, where surveys are required by international conventions and corresponding laws and ordinances of a flag state, the classification society will undertake them on application or by official order, acting on behalf of the authorities concerned.
              The classification society also undertakes on request other surveys and checks that are required by regulations and requirements of the flag state. These surveys are subject to agreements made in each individual case and/or to the regulations of the country concerned.
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              For maintenance of the class, regular and extraordinary surveys of hull and machinery, including the electrical plant, and any special equipment classed are required to be performed as follows:
              Annual Surveys.     For seagoing ships, annual surveys are conducted for the hull and the machinery, including the electrical plant, and where applicable, on special equipment classed at intervals of 12 months from the date of commencement of the class period indicated in the certificate.
              Intermediate Surveys.     Extended annual surveys are referred to as intermediate surveys and typically are conducted two and one-half years after commissioning and each class renewal. Intermediate surveys may be carried out on the occasion of the second or third annual survey.
              Class Renewal Surveys.     Class renewal surveys, also known as special surveys, are carried out on the ship's hull and machinery, including the electrical plant, and on any special equipment classed at the intervals indicated by the character of classification for the hull. During the special survey, the vessel is thoroughly examined, including audio-gauging to determine the thickness of the steel structures. Should the thickness be found to be less than class requirements, the classification society would prescribe steel renewals. The classification society may grant a one-year grace period for completion of the special survey. Substantial amounts of funds may have to be spent for steel renewals to pass a special survey if the vessel experiences excessive wear and tear. In lieu of the special survey every four or five years, depending on whether a grace period is granted, a shipowner has the option of arranging with the classification society for the vessel's hull or machinery to be on a continuous survey cycle, in which every part of the vessel would be surveyed within a five-year cycle. At an owner's application, the surveys required for class renewal may be split according to an agreed schedule to extend over the entire period of class. This process is referred to as continuous class renewal.
              The following table lists the next drydockings and special surveys scheduled for the vessels in our current containership fleet:

Vessel Name
	 	Special Survey
	 	Drydocking
	
Henry	 	October 31, 2006	 	August 31, 2009	
CMA CGM Elbe	 	December 31, 2006	 	August 31, 2009	
APL Belgium	 	January 31, 2007	 	November 17, 2006	
Victory I	 	June 5, 2007	 	January 5, 2009	
Hyundai Commodore	 	June 9, 2007	 	June 9, 2010	
Pacific Bridge	 	June 30, 2007	 	June 30, 2007	
MOL Confidence	 	July 25, 2007	 	November 30, 2006	
Hyundai Duke	 	October 23, 2007	 	August 21, 2010	
S.A. Helderberg	 	November 18, 2007	 	December 30, 2007	
Eagle Express	 	March 31, 2008	 	March 31, 2008	
S.A. Sederberg	 	May 22, 2008	 	March 28, 2008	
YM Milano	 	August 31, 2008	 	August 31, 2008	
S.A. Winterberg	 	January 30, 2009	 	January 18, 2008	
Maersk Constantia	 	February 9, 2009	 	May 5, 2008	
Vancouver Express (ex P&O Nedlloyd Caribbean)	 	March 15, 2009	 	March 15, 2009	
Maersk Derby (ex P&O Nedlloyd Caracas)	 	April 30, 2009	 	April 30, 2009	
YM Yantian	 	July 31, 2009	 	March 31, 2009	
Norasia Hamburg	 	August 31, 2009	 	September 30, 2007	
CSCL Europe	 	August 26, 2009	 	August 26, 2009	
CSCL America	 	November 11, 2009	 	November 18, 2009	
CMA CGM Kalamata	 	March 31, 2010	 	February 28, 2007	
APL England*	 	February 28, 2011	 	February 28, 2011	
Independence	 	March 20, 2011	 	September 16, 2008	
APL Scotland	 	May 31, 2011	 	January 31, 2007	
APL Holland	 	July 31, 2011	 	February 11, 2011	
CMA CGM Komodo	 	August 31, 2011	 	July 31, 2009	
CSCL Pusan (ex HN 1559)	 	September 1, 2011	 	August 1, 2011	

*
APL-NOL has exercised its option to purchase this vessel from us upon expiration of the current charter in February 2007.
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              All areas subject to surveys as defined by the classification society are required to be surveyed at least once per class period, unless shorter intervals between surveys are otherwise prescribed. The period between two subsequent surveys of each area must not exceed five years.
              Most vessels are also drydocked every 30 to 36 months for inspection of their underwater parts and for repairs related to such inspections. If any defects are found, the classification surveyor will issue a "recommendation" which must be rectified by the shipowner within prescribed time limits.
              Most insurance underwriters make it a condition for insurance coverage that a vessel be certified as "in class" by a classification society which is a member of the International Association of Classification Societies. All of our vessels are certified as being "in class" by Lloyds Register of Shipping, Bureau Veritas, NKK, Det Norske Veritas, the American Bureau of Shipping and RINA SpA.
Risk of Loss and Liability Insurance
General
              The operation of any vessel includes risks such as mechanical failure, collision, property loss, cargo loss or damage and business interruption due to political circumstances in foreign countries, hostilities and labor strikes. In addition, there is always an inherent possibility of marine disaster, including oil spills and other environmental mishaps, and the liabilities arising from owning and operating vessels in international trade. OPA, which imposes virtually unlimited liability upon owners, operators and demise charterers of vessels trading in the United States exclusive economic zone for certain oil pollution accidents in the United States, has made liability insurance more expensive for shipowners and operators trading in the United States market.
              While we maintain hull and machinery insurance, war risks insurance, protection and indemnity coverage for our containership fleet and, in addition, freight, demurrage and defense coverage for the drybulk carriers we have agreed to sell in amounts that we believe to be prudent to cover normal risks in our operations, we may not be able to maintain this level of coverage throughout a vessel's useful life. Furthermore, while we believe that our insurance coverage will be adequate, not all risks can be insured, and there can be no guarantee that any specific claim will be paid, or that we will always be able to obtain adequate insurance coverage at reasonable rates.
              Dr. John Coustas, our chief executive officer, is a member of the Board of Directors of The Swedish Club, our primary provider of insurance, including a substantial portion of our hull & machinery, war risk and protection and indemnity insurance.
Hull & Machinery, Loss of Hire and War Risks Insurance
              We maintain marine hull and machinery and war risks insurance, which covers the risk of particular average, general average, 4/4ths collision liability, contact with fixed and floating objects (FFO) and actual or constructive total loss in accordance with Swedish conditions for all of our vessels. Our vessels will each be covered up to at least their fair market value after meeting certain deductibles per incident per vessel.
              We carry a minimum loss of hire coverage only with respect to the CSCL America , the CSCL Europe , the CSCL Pusan (ex HN 1559) and the HN 1561 to cover standard requirements of KEXIM, the bank providing financing for our acquisition of these vessels. We do not and will not obtain loss of hire insurance covering the loss of revenue during extended off-hire periods for the other vessels in our fleet because we believe that this type of coverage is not economical and is of limited value to us, in part because historically our fleet has had a very limited number of off-hire days.
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Protection and Indemnity Insurance
              Protection and indemnity insurance covers our third-party and crew liabilities in connection with our shipping activities. This includes third-party liability, crew liability and other related expenses resulting from the injury or death of crew, passengers and other third parties, the loss or damage to cargo, third-party claims arising from collisions with other vessels, damage to other third-party property, pollution arising from oil or other substances and salvage, towing and other related costs, including wreck removal. Our protection and indemnity insurance, other than our 4/4ths collision and fixed and floating object insurance (which is covered under our hull insurance policy), is provided by mutual protection and indemnity associations, or P&I associations. Insurance provided by P&I associations is a form of mutual indemnity insurance. Unless otherwise provided by the international conventions that limit the liability of shipowners and subject to the "capping" discussed below, our coverage under insurance provided by the P&I associations, except for pollution, will be unlimited.
              Our protection and indemnity insurance coverage in accordance with the International Group of P&I Club Agreement for pollution will be $1.0 billion per vessel per incident. Our P&I war risk coverage will be $500.0 million per vessel per incident. The fourteen P&I associations that comprise the International Group insure approximately 90% of the world's commercial blue-water tonnage and have entered into a pooling agreement to reinsure each association's liabilities. As a member of a P&I association, which is a member of the International Group, we will be subject to calls payable to the associations based on the International Group's claim records as well as the claim records of all other members of the individual associations.
Legal Proceedings
              In the summer of 2001, one of our vessels, the Henry ( ex APL Guatemala) , experienced engine damage at sea, which resulted in an accumulation of oil and oily water in the vessel's engine room. After the vessel arrived in Long Beach, California, in June 2001, it was inspected by the U.S. Coast Guard. The Coast Guard found oil in the overboard discharge pipe from the vessel's oily water separator. Our manager posted bonds to cover potential civil penalties for alleged violations of MARPOL regulations. The Coast Guard subsequently referred the matter to the U.S. Attorney's Office for the Central District of California for a criminal investigation into whether members of the vessel's crew bypassed systems designed to prevent discharges of oil to the water. On June 29, 2001, pursuant to a short-term International Oil Pollution Prevention Certificate, our manager pumped oily bilge water from the vessel's engine room into tanks aboard the vessel for subsequent lawful disposal.
              On July 2, 2001, when the vessel was at anchor in Long Beach, California, representatives of our manager notified authorities of the presence of oil on the water on the starboard side of the vessel. On July 3, 2001, divers retained by our manager found oil in the vessel's starboard sea chest (an opening through which sea water is taken in to cool the engines). The diving service removed and containerized the oily water in the sea chest for subsequent disposal.
              Our manager has posted a total of $241,000 in bonds to cover potential civil penalties for the incidents of June and July 2001. As of the date of this prospectus, no civil penalties have been assessed.
              The U.S. Attorney's criminal investigation shifted from the conditions observed in June 2001 to the July 2 release and the events that followed it. Our manager has entered into a plea agreement with the U.S. Attorney, on behalf of the government, which was filed with the U.S. District Court on June 20, 2006, pursuant to which our manager agreed to plead guilty to one count of negligent discharge of oil and one count of obstruction of justice, based on a charge of attempted concealment of the source of the discharge. Consistent with the government's practice in similar cases, our manager has agreed to develop and implement a third-party consultant monitored environmental compliance plan and to designate an internal corporate compliance manager. This compliance plan would require our manager to prepare an environmental compliance plan manual for approval by such third-party
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environmental consultant and the U.S. government. The program would also require our manager to arrange for, fund and complete a series of audits of its fleet management offices and of waste streams of the vessels it manages, including all of the vessels in our fleet that call at U.S. ports, as well as an independent, third-party focused environmental compliance plan audit. Our manager also agreed to a probation period of three years under the plea agreement. Our manager has agreed to pay an aggregate of $500,000 in penalties in connection with the charges of negligent discharge and obstruction of justice under the plea agreement, with half of the penalties to be applied to community service projects that will benefit, restore or preserve the environment and ecosystems in the central California area. On August 14, 2006, the court accepted our manager's guilty plea to the two counts, subject to a formal sentencing hearing scheduled for October 23, 2006 as of the date of this prospectus.
              In the five years since the detention of the Henry ( ex APL Guatemala) , our vessels have not been subject to any other detentions or enforcement proceedings involving alleged releases of oil. Our manager has already begun preparation of a proactive management program designed to prevent future non-compliance.
              We have not been involved in any legal proceedings that we believe may have a significant effect on our business, financial position, results of operations or liquidity, and we are not aware of any proceedings that are pending or threatened that may have a material effect on our business, financial position, results of operations or liquidity. From time to time, we may be subject to legal proceedings and claims in the ordinary course of business, principally personal injury and property casualty claims. We expect that these claims would be covered by insurance, subject to customary deductibles. However, those claims, even if lacking merit, could result in the expenditure of significant financial and managerial resources.
Properties
              We have no freehold or leasehold interest in any real property. We occupy office space at 14 Akti Kondyli, 185 45 Piraeus, Greece that is owned by our manager, Danaos Shipping, and which is provided to us as part of the services we receive under our management agreement.
Exchange Controls
              Under Marshall Islands and Greek law, there are currently no restrictions on the export or import of capital, including foreign exchange controls or restrictions that affect the remittance of dividends, interest or other payments to non-resident holders of our common stock.
110

 
 ENVIRONMENTAL AND OTHER REGULATIONS
              Government regulation significantly affects the ownership and operation of our vessels. They are subject to international conventions, national, state and local laws, regulations, convention and standards in force in international waters and the countries in which our vessels may operate or are registered, including those governing the management and disposal of hazardous substances and wastes, the cleanup of oil spills and other contamination, air emissions, water discharges and ballast water management. These laws and regulations include the U.S. Oil Pollution Act of 1990, the U.S. Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), the U.S. Clean Water Act, the International Convention for Prevention of Pollution from Ships, regulations adopted by the IMO and the European Union, various volatile organic compound air emission requirements and various Safety of Life at Sea (SOLAS) amendments, as well as other regulations described below. Compliance with these laws, regulations and other requirements entails significant expense, including vessel modifications and implementation of certain operating procedures.
              A variety of governmental and private entities subject our vessels to both scheduled and unscheduled inspections. These entities include the local port authorities (U.S. Coast Guard, harbor master or equivalent), classification societies, flag state administration (country of registry) and charterers, particularly terminal operators. Certain of these entities require us to obtain permits, licenses and certificates for the operation of our vessels. Failure to maintain necessary permits or approvals could require us to incur substantial costs or temporarily suspend operation of one or more of our vessels.
              We believe that the heightened level of environmental and quality concerns among insurance underwriters, regulators and charterers is leading to greater inspection and safety requirements on all vessels and may accelerate the scrapping of older vessels throughout the industry. Increasing environmental concerns have created a demand for vessels that conform to the stricter environmental standards. We are required to maintain operating standards for all of our vessels that will emphasize operational safety, quality maintenance, continuous training of our officers and crews and compliance with U.S. and international regulations. We believe that the operation of our vessels is in substantial compliance with applicable environmental laws and regulations; however, because such laws and regulations are frequently changed and may impose increasingly stricter requirements, such future requirements may limit our ability to do business, increase our operating costs, force the early retirement of our vessels, and/or affect their resale value, all of which could have a material adverse effect on our financial condition and results of operations.
Environmental Regulation—International Maritime Organization ("IMO")
              Our vessels are subject to standards imposed by the International Maritime Organization, or "IMO" (the United Nations agency for maritime safety and the prevention of pollution by ships). The IMO has adopted regulations that are designed to reduce pollution in international waters, both from accidents and from routine operations. These regulations address oil discharges, ballasting and unloading operations, sewage, garbage, and air emissions. For example, Annex III of the International Convention for the Prevention of Pollution from Ships ("MARPOL") regulates the transportation of marine pollutants, and imposes standards on packing, marking, labeling, documentation, stowage, quantity limitations and pollution prevention. These requirements have been expanded by the International Maritime Dangerous Goods Code, which imposes additional standards for all aspects of the transportation of dangerous goods and marine pollutants by sea.
              In September 1997, the IMO adopted Annex VI to the International Convention for the Prevention of Pollution from Ships to address air pollution from vessels. Annex VI, which came into effect on May 19, 2005, sets limits on sulfur oxide and nitrogen oxide emissions from vessel exhausts and prohibits deliberate emissions of ozone depleting substances, such as chlorofluorocarbons.
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Annex VI also includes a global cap on the sulfur content of fuel oil and allows for special areas to be established with more stringent controls on sulfur emissions. Annex VI has been ratified by some, but not all IMO member states, including the Marshall Islands. Pursuant to a Marine Notice issued by the Marshall Islands Maritime Administrator as revised in March 2005, vessels flagged by the Marshall Islands that are subject to Annex VI must, if built before the effective date, obtain an International Air Pollution Prevention Certificate evidencing compliance with Annex VI not later than either the first dry docking after May 19, 2005, but no later than May 19, 2008. All vessels subject to Annex VI and built after May 19, 2005 must also have this Certificate. We have obtained International Oil Pollution Prevention certificates for all of our vessels, and believe that maintaining compliance with Annex VI will not have an adverse financial impact on the operation of our vessels. Additional or new conventions, laws and regulations may be adopted that could adversely affect our ability to manage our vessels.
              The operation of our vessels is also affected by the requirements set forth in the IMO's International Management Code for the Safe Operation of Ships and Pollution Prevention, which were adopted in July 1998 ("ISM Code"). The ISM Code requires shipowners and bareboat charterers to develop and maintain an extensive "Safety Management System" that includes the adoption of a safety and environmental protection policy setting forth instructions and procedures for safe operation and describing procedures for dealing with emergencies. The ISM Code requires that vessel operators obtain a Safety Management Certificate for each vessel they operate. This certificate evidences compliance by a vessel's management with code requirements for a Safety Management System. No vessel can obtain a certificate unless its operator has been awarded a document of compliance, issued by each flag state, under the ISM Code. The failure of a shipowner or bareboat charterer to comply with the ISM Code may subject such party to increased liability, decrease available insurance coverage for the affected vessels and result in a denial of access to, or detention in, certain ports. Currently, each of the vessels in our fleet is ISM code-certified. However, there can be no assurance that such certification will be maintained indefinitely.
Environmental Regulation—The U.S. Oil Pollution Act of 1990 ("OPA")
              The U.S. Oil Pollution Act of 1990, or OPA, established an extensive regulatory and liability regime for the protection and cleanup of the environment from oil spills. OPA applies to discharges of any oil from a vessel, including discharges of fuel and lubricants. OPA affects all owners and operators whose vessels trade in the United States, its territories and possessions or whose vessels operate in U.S. waters, which includes the United States' territorial sea and its two hundred nautical mile exclusive economic zone. While we do not carry oil as cargo, we do carry fuel oil (or "bunkers") in our vessels, making our vessels subject to the OPA requirements.
              Under OPA, vessel owners, operators and bareboat charterers are "responsible parties" and are jointly, severally and strictly liable (unless the discharge of pollutants results solely from the act or omission of a third party, an act of God or an act of war) for all containment and clean-up costs and other damages arising from discharges or threatened discharges of pollutants from their vessels. OPA defines these other damages broadly to include:
•
natural resources damage and the costs of assessment thereof;

•
real and personal property damage;

•
net loss of taxes, royalties, rents, fees and other lost revenues;

•
lost profits or impairment of earning capacity due to property or natural resources damage; and

•
net cost of public services necessitated by a spill response, such as protection from fire, safety or health hazards, and loss of subsistence use of natural resources.
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              Amendments to OPA signed into law on July 11, 2006 increased the limits of the liability of responsible parties to the greater of $950 per gross ton or $800,000 per non-tank vessel (subject to periodic adjustment for inflation). These limits of liability do not apply if an incident was directly caused by violation of applicable U.S. federal safety, construction or operating regulations or by a responsible party's gross negligence or willful misconduct, or if the responsible party fails or refuses to report the incident or to cooperate and assist in connection with oil removal activities.
              We currently maintain, for each of our vessels, oil pollution liability coverage insurance in the amount of $1 billion per incident. In addition, we carry hull and machinery and protection and indemnity insurance to cover the risks of fire and explosion. Given the relatively small amount of bunkers our vessels carry, we believe that a spill of oil from the vessels would not be catastrophic. However, under certain circumstances, fire and explosion could result in a catastrophic loss. While we believe that our present insurance coverage is adequate, not all risks can be insured, and there can be no guarantee that any specific claim will be paid, or that we will always be able to obtain adequate insurance coverage at reasonable rates. If the damages from a catastrophic spill exceeded our insurance coverage, it would a severe effect on us and could possibly result in our insolvency.
              OPA requires owners and operators of vessels to establish and maintain with the United States Coast Guard evidence of financial responsibility sufficient to meet their potential liabilities under the OPA. In December 1994, the U.S. Coast Guard implemented regulations requiring evidence of financial responsibility in the amount of $900 per gross ton, which includes the then-applicable OPA limitation on liability of $600 per gross ton and the U.S. CERCLA liability limit of $300 per gross ton. We expect that the U.S. Coast Guard will increase the amount of required evidence of financial responsibility to $1,250 per gross ton, to reflect the increase in liability limits under OPA as described above. Under the U.S. Coast Guard regulations implementing OPA, vessel owners and operators may evidence their financial responsibility by showing proof of insurance, surety bond, self-insurance, or guaranty. Under the OPA regulations, an owner or operator of a fleet of vessels is required only to demonstrate evidence of financial responsibility in an amount sufficient to cover the vessels in the fleet having the greatest maximum liability under OPA.
              The U.S. Coast Guard's regulations concerning certificates of financial responsibility provide, in accordance with OPA, that claimants may bring suit directly against an insurer or guarantor that furnishes certificates of financial responsibility. In the event that such insurer or guarantor is sued directly, it is prohibited from asserting any contractual defense that it may have had against the responsible party and is limited to asserting those defenses available to the responsible party and the defense that the incident was caused by the willful misconduct of the responsible party. Certain organizations, which had typically provided certificates of financial responsibility under pre-OPA 90 laws, including the major protection and indemnity organizations, have declined to furnish evidence of insurance for vessel owners and operators if they are subject to direct actions or required to waive insurance policy defenses. This requirement may have the effect of limiting the availability of the type of coverage required by the Coast Guard and could increase the costs of obtaining this insurance for us and our competitors.
              The U.S. Coast Guard's financial responsibility regulations may also be satisfied by evidence of surety bond, guaranty or by self-insurance. Under the self-insurance provisions, the shipowner or operator must have a net worth and working capital, measured in assets located in the United States against liabilities located anywhere in the world, that exceeds the applicable amount of financial responsibility. We have complied with the U.S. Coast Guard regulations by providing a financial guaranty evidencing sufficient self-insurance.
              Title VII of the Coast Guard and Maritime Transportation Act of 2004 (the "CGMTA") recently amended OPA to require the owner or operator of any non-tank vessel of 400 gross tons or more, that carries oil of any kind as a fuel for main propulsion, including Bunkers, to prepare and
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submit a response plan for each vessel on or before August 8, 2005. Previous law was limited to vessels that carry oil in bulk as cargo. The vessel response plans include detailed information on actions to be taken by vessel personnel to prevent or mitigate any discharge or substantial threat of such a discharge of oil from the vessel due to operational activities or casualties.
              OPA specifically permits individual states to impose their own liability regimes with regard to oil pollution incidents occurring within their boundaries, and some states have enacted legislation providing for unlimited liability for oil spills. In some cases, states, which have enacted such legislation, have not yet issued implementing regulations defining vessels owners' responsibilities under these laws. We intend to comply with all applicable state regulations in the ports where our vessels call.
Environmental Regulation—CERCLA
              The U.S. Comprehensive Environmental Response, Compensation, and Liability Act, or CERCLA, governs spills or releases of hazardous substances other than petroleum or petroleum products. CERCLA imposes joint and several liability, without regard to fault, on the owner or operator of a ship, vehicle or facility from which there has been a release, along with other specified parties. Costs recoverable under CERCLA include cleanup and removal costs, natural resource damages and governmental oversight costs. Liability under CERCLA is generally limited to the greater of $300 per gross ton or $0.5 million per vessel carrying non-hazardous substances ($5.0 million for vessels carrying hazardous substances), unless the incident is caused by gross negligence, willful misconduct or a violation of certain regulations, in which case liability is unlimited. In December 1994, the U.S. Coast Guard implemented regulations requiring evidence of financial responsibility in the amount of $900 per gross ton, which includes the OPA limitation on liability of $600 per gross ton and the CERCLA liability limit of $300 per gross ton. We expect that the U.S. Coast Guard will increase the amount of required evidence of financial responsibility to $1,250 per gross ton, to reflect the increase in liability limits under OPA as described above.
Environmental Regulation—The Clean Water Act
              The U.S. Clean Water Act, or CWA, prohibits the discharge of oil or hazardous substances in navigable waters and imposes strict liability in the form of penalties for any unauthorized discharges. The CWA also imposes substantial liability for the costs of removal, remediation and damages and compliments the remedies available under the more recent OPA and CERCLA, discussed above. Currently, under U.S. Environmental Protection Agency, or EPA, regulations that have been in place since 1978, vessels are exempt from the requirement to obtain CWA permits for the discharge in U.S. ports of ballast water and other substances incidental to the normal operation of vessels. However, on March 30, 2005, the United States District Court for the Northern District of California ruled in Northwest Environmental Advocate v. EPA , 2005 U.S. Dist. LEXIS 5373, that EPA exceeded its authority in creating an exemption for ballast water. On September 18, 2006, the court issued an order granting permanent injunctive relief to the plaintiffs, invalidating the blanket exemption in EPA's regulations for all discharges incidental to the normal operation of a vessel as of September 30, 2008, and directing EPA to develop a system for regulating all discharges from vessels by that date. Under the court's ruling, owners and operators of vessels visiting U.S. ports would be required to comply with the CWA permitting program to be developed by EPA or face penalties. Although EPA will likely appeal this decision, if the court's order is ultimately upheld, we will incur certain costs to obtain CWA permits for our vessels. While we do not believe that the costs associated with obtaining such permits would be material, it is difficult to predict the overall impact of CWA permitting requirements on the business.
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Environmental Regulation—Other Environmental Initiatives
              The European Union is considering legislation that will affect the operation of vessels and the liability of owners for oil pollution. It is difficult to predict what legislation, if any, may be promulgated by the European Union or any other country or authority.
              The U.S. National Invasive Species Act, or NISA, was enacted in 1996 in response to growing reports of harmful organisms being released into U.S. ports through ballast water taken on by ships in foreign ports. Under NISA, the U.S. Coast Guard adopted regulations in July 2004 imposing mandatory ballast water management practices for all vessels equipped with ballast water tanks entering U.S. waters. These requirements can be met by performing mid-ocean ballast exchange, by retaining ballast water on board the ship, or by using environmentally sound alternative ballast water management methods approved by the U.S. Coast Guard. (However, mid-ocean ballast exchange is mandatory for ships heading to the Great Lakes or Hudson Bay, or vessels engaged in the foreign export of Alaskan North Slope crude oil.) Mid-ocean ballast exchange is the primary method for compliance with the Coast Guard regulations, since holding ballast water can prevent ships from performing cargo operations upon arrival in the United States, and alternative methods are still under development. Vessels that are unable to conduct mid-ocean ballast exchange due to voyage or safety concerns may discharge minimum amounts of ballast water (in areas other than the Great Lakes and the Hudson River), provided that they comply with record keeping requirements and document the reasons they could not follow the required ballast water management requirements. The Coast Guard is developing a proposal to establish ballast water discharge standards, which could set maximum acceptable discharge limits for various invasive species, and/or lead to requirements for active treatment of ballast water.
              At the international level, the IMO adopted an International Convention for the Control and Management of Ships' Ballast Water and Sediments in February 2004 (the "BWM Convention"). The Convention's implementing regulations call for a phased introduction of mandatory ballast water exchange requirements (beginning in 2009), to be replaced in time with mandatory concentration limits. The BWM Convention will not enter into force until 12 months after it has been adopted by 30 states, the combined merchant fleets of which represent not less than 35% of the gross tonnage of the world's merchant shipping.
              If the mid-ocean ballast exchange is made mandatory throughout the United States or at the international level, or if water treatment requirements or options are instituted, the cost of compliance could increase for ocean carriers. Although we do not believe that the costs of compliance with a mandatory mid-ocean ballast exchange would be material, it is difficult to predict the overall impact of such a requirement on the business.
115

 
 MANAGEMENT
Directors and Executive Officers
              The following table sets forth information regarding our directors and executive officers. The business address of each of our executive officers and directors listed below is 14 Akti Kondyli, 185 45 Piraeus, Greece. Our telephone number at that address is +30 210 419 6480. Our board of directors will be elected annually on a staggered basis, and each elected director will hold office for a three-year term. All of our current directors or nominees for director, other than Dr. John Coustas, Iraklis Prokopakis and Dimitri J. Andritsoyiannis, have been determined by our board of directors to be independent. Officers are elected from time to time by vote of our board of directors and hold office until a successor is elected.

Name
	 	Age
	 	Position
	
Dr. John Coustas	 	50	 	President and CEO and Class I Director	
Iraklis Prokopakis	 	55	 	Vice President, Treasurer and Chief Operating Officer and Class II Director	
Dimitri J. Andritsoyiannis	 	41	 	Vice President and Chief Financial Officer and Class III Director	
Andrew B. Fogarty	 	61	 	Class II Director Nominee*	
Miklós Konkoly-Thege	 	63	 	Class III Director Nominee*	
Myles R. Itkin	 	58	 	Class I Director Nominee*	
Robert A. Mundell	 	74	 	Class I Director Nominee*	

*
Has agreed to join our board of directors upon completion of this offering.
              The term of our Class I directors expires in 2009, the term of our Class II directors expires in 2008 and the term of our Class III directors expires in 2007.
               Dr. John Coustas is our President, Chief Executive Officer and a member of our board of directors. Dr. Coustas has over 25 years of experience in the shipping industry. Dr. Coustas assumed management of our company in 1987 from his father, Dimitris Coustas, who founded Danaos Shipping in 1972, and has been responsible for our corporate strategy and the management of our affairs since that time. Dr. Coustas is also a member of the board of directors of Danaos Management Consultants, The Swedish Club, the Union of Greek Shipowners and the Cyprus Union of Shipowners. Dr. Coustas holds a degree in Marine Engineering from National Technical University of Athens as well as a Master's degree in Computer Science and a Ph.D in Computer Controls from Imperial College, London.
               Iraklis Prokopakis is our Vice President, Treasurer, Chief Operating Officer and a member of our board of directors. Mr. Prokopakis joined us in 1998 and has over 30 years of experience in the shipping industry. Prior to entering the shipping industry, Mr. Prokopakis was a captain in the Hellenic Navy. He holds a Bachelor of Science in Mechanical Engineering from Portsmouth University in the United Kingdom, a Master's degree in Naval Architecture and a Ship Risk Management Diploma from the Massachusetts Institute of Technology in the United States and a post-graduate diploma in business studies from the London School of Economics. Mr. Prokopakis also has a Certificate in Operational Audit of Banks from the Management Center Europe in Brussels and a Safety Risk Management Certificate from Det Norske Veritas.
               Dimitri J. Andritsoyiannis is our Vice President, Chief Financial Officer and a member of our board of directors. Mr. Andritsoyiannis joined us in September 2005 and has over 15 years of experience in finance and banking. Prior to joining us, Mr. Andritsoyiannis served as director of investment banking and as a member of the board of Alpha Finance, the investment banking arm of Greece's largest independent bank. During his years with Alpha Finance from the early 1990s until
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joining us, Mr. Andritsoyiannis led a variety of financings, mergers and acquisitions, restructurings, privatizations and public offerings both in Greece and abroad. Mr. Andritsoyiannis holds a degree in Economics and Political Science from the Economic University of Athens, an MBA in finance from Columbia University as well as a post-graduate diploma in ship risk management from the Massachusetts Institute of Technology.
               Andrew B. Fogarty has agreed to join our board of directors upon completion of this offering. Mr. Fogarty has over 16 years of experience in the transportation industry. After a career in government, including as Secretary of Transportation for the Commonwealth of Virginia, since 1989 Mr. Fogarty has held various executive positions with CSX Corporation or its predecessors, including as Senior Vice President—Corporate Services of CSX Corporation from 2001 to 2005, and his current position as Special Assistant to the Chairman of CSX since early 2006. Previously, Mr. Fogarty also held the positions of President and CEO of CSX World Terminals, and Senior Vice President and Chief Financial Officer of Sea-Land Service, Inc. CSX is one of the world's leading transportation companies providing rail, intermodal and rail-to-truck transload services. Mr. Fogarty is the former chairman and current member of the board of directors of the National Defense Transportation Association and a fellow of the National Academy of Public Administration. He holds a Bachelor of Arts from Hofstra University, a Master's of Public Administration from the Nelson A. Rockefeller College of Public Affairs & Policy at the State University of New York, and a Ph.D. from Florida State University.
               Myles R. Itkin has agreed to join our board of directors upon completion of this offering. Mr. Itkin is the Executive Vice President, Chief Financial Officer and Treasurer of Overseas Shipholding Group, Inc. ("OSG"), in which capacities he has served, with the exception of a promotion from Senior Vice President to Executive Vice President in 2006, since 1995. Prior to joining OSG in June 1995, Mr. Itkin was employed by Alliance Capital Management L.P. as Senior Vice President of Finance. Prior to that, he was Vice President of Finance at Northwest Airlines, Inc. Mr. Itkin joined the board of directors of the U.K. P&I Club earlier this year. Mr. Itkin holds a Bachelor's degree from Cornell University and an MBA from New York University.
               Miklós Konkoly-Thege has agreed to join our board of directors upon completion of this offering. Mr. Konkoly-Thege began at Det Norske Veritas ("DNV"), a ship classification society, in 1984. From 1984 through 2002, Mr. Konkoly-Thege served in various capacities with DNV including Chief Operating Officer, Chief Financial Officer and Corporate Controller, Head of Corporate Management Staff and Head of Business Areas. Mr. Konkoly-Thege became President and Chairman of the Executive Board of DNV in 2002 and served in that capacity until his retirement in May 2006. Mr. Konkoly-Thege is a member of the board of directors of Wilhelmsen Maritime Services Holding AS. Mr. Konkoly-Thege holds a Master of Science degree in civil engineering from Technische Universität Hannover, Germany and an MBA from the University of Minnesota.
               Dr. Robert A. Mundell has agreed to join our board of directors upon completion of this offering. Dr. Mundell is the University Professor of Economics at Columbia University. Dr. Mundell's principal occupation since 1967 has been as a member of the faculty of Columbia University. Dr. Mundell has served as a member of the board of directors of Olympus Corporation since 2005. Since 2003, Dr. Mundell has also served as Chairman of the Word Executive Institute in Beijing, China. He has been an adviser to a number of international agencies and organizations including the United Nations, the IMF, the World Bank, the Government of Canada, several governments in Latin America and Europe, the Federal Reserve Board and the U.S. Treasury. In 1999 Dr. Mundell received the Nobel Prize in Economics. Dr. Mundell holds a Bachelor's degree from the University of British Columbia, a Master's degree from the University of Washington and a Ph.D. from the Massachusetts Institute of Technology.
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Compensation of Directors and Senior Management
              We did not pay our directors prior to this offering. Beginning in the fiscal year ending December 31, 2006, non-executive directors will receive annual fees in the amount of $50,000, plus reimbursement for their out-of-pocket expenses.
              Prior to 2006, our chief executive officer, chief operating officer and chief financial officer did not receive any compensation from us. During the six months ended June 30, 2006, we paid these executive officers an aggregate amount of $650,000 on an annualized basis. Following this offering, we will pay these executive officers compensation which is expected to be in an aggregate amount of $1.3 million on an annual basis. Pursuant to the employment agreements we will enter into with these officers as described below, from time to time we may pay any bonus component of this compensation in the form of restricted stock, stock options or other awards under our equity compensation plan, which is described below under "—Equity Compensation Plan."
Committees of the Board of Directors
Audit Committee
              Upon consummation of this offering, our audit committee will consist of Myles R. Itkin, Andrew B. Fogarty and Miklós Konkoly-Thege. We believe that Myles R. Itkin qualifies as an audit committee "financial expert," as such term is defined in Regulation S-K. The audit committee will be responsible for (1) the hiring or termination of independent auditors and approving any non-audit work performed by such auditor, (2) approving the overall scope of the audit, (3) assisting the board in monitoring the integrity of our financial statements, the independent accountant's qualifications and independence, the performance of the independent accountants and our internal audit function and our compliance with legal and regulatory requirements, (4) annually reviewing an independent auditors' report describing the auditing firms' internal quality-control procedures, any material issues raised by the most recent internal quality-control review, or peer review, of the auditing firm, (5) discussing the annual audited financial and quarterly statements with management and the independent auditor, (6) discussing earnings press releases, as well as financial information and earning guidance provided to analysts and rating agencies, (7) discussing policies with respect to risk assessment and risk management, (8) meeting separately, periodically, with management, internal auditors and the independent auditor, (9) reviewing with the independent auditor any audit problems or difficulties and managements' response, (10) setting clear hiring policies for employees or former employees of the independent auditors, (11) annually reviewing the adequacy of the audit committee's written charter, (12) handling such other matters that are specifically delegated to the audit committee by the board of directors from time to time, (13) reporting regularly to the full board of directors and (14) evaluating the board of directors' performance.
Compensation Committee
              Upon consummation of this offering, our compensation committee will consist of Andrew B. Fogarty, Miklós Konkoly-Thege and Iraklis Prokopakis. The compensation committee will be responsible for (1) reviewing key employee compensation policies, plans and programs, (2) reviewing and approving the compensation of our chief executive officer and other executive officers, (3) developing and recommending to the board of directors compensation for board members, (4) reviewing and approving employment contracts and other similar arrangements between us and our executive officers, (5) reviewing and consulting with the chief executive officer on the selection of officers and evaluation of executive performance and other related matters, (6) administration of stock plans and other incentive compensation plans, (7) overseeing compliance with any applicable compensation reporting requirements of the SEC, (8) retaining consultants to advise the committee on executive compensation practices and policies and (9) handling such other matters that are specifically delegated to the compensation committee by the board of directors from time to time.
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Nominating and Corporate Governance Committee
              Upon consummation of this offering, our nominating and corporate governance committee will consist of Dimitri J. Andritsoyiannis, Myles R. Itkin and Dr. Robert A. Mundell. The nominating and corporate governance committee will be responsible for (1) developing and recommending criteria for selecting new directors, (2) screening and recommending to the board of directors individuals qualified to become executive officers, (3) overseeing evaluations of the board of directors, its members and committees of the board of directors and (4) handling such other matters that are specifically delegated to the nominating and corporate governance committee by the board of directors from time to time.
Codes of Conduct and Ethics
              Prior to consummation of this offering, the board of directors will approve and adopt a Code of Business Conduct and Ethics for all officers and employees, a Code of Conduct for the Chief Executive Officer and Senior Financial Officers and a Code of Ethics for Directors, copies of which will be available on our website and upon written request by our stockholders at no cost.
Employment Agreements
Employment Agreement with Dr. John Coustas
              Our president and chief executive officer, Dr. John Coustas, has entered into an employment agreement with us. The employment agreement provides that Dr. Coustas receives an annual base salary subject to increases at the discretion of the compensation committee of our board of directors. Dr. Coustas is also eligible for annual bonuses as determined by the compensation committee, and the employment agreement provides that any bonus may be paid in whole or in part with awards under our equity compensation plan. Pursuant to the employment agreement, Dr. Coustas is required to devote such time and attention to our business and affairs as is reasonably necessary to the duties of his position, and otherwise may devote a portion of his time and attention to our affiliates and to other ventures he controls or in which he invests in accordance with the terms of the non-competition agreement he has entered into with us as described below. The initial term of the agreement will expire on December 31, 2012, however, unless written notice is provided 120 days prior to a termination date, the agreement will automatically extend for additional successive one-year terms.
              The terms of the employment agreement also provide for the payment of severance of two times his annual salary plus bonus (based on an average of the prior three years), as well as continued benefits, if any, for 24 months if we terminate Dr. Coustas without "cause," as defined in the agreement, or he terminates his employment with 30 days' notice for "good reason," as defined in the agreement. In addition, Dr. Coustas will receive a pro rata bonus for the year in which the termination occurs. If such termination without cause or resignation for good reason occurs within two years of a "change of control," as defined in the agreement, Dr. Coustas would be entitled to the greater of (a) $800,000 or (b)(i)(A) the total amount of his salary and bonus (based on an average of the prior three years), plus (B) the value on the date of grant of any equity grants made under our equity compensation plan during that three-year period (which, for stock options, will be the Black-Scholes value), (ii) multiplied by three, as well as continued benefits, if any, for 36 months.
              Dr. Coustas has also entered into a non-competition agreement with us that prohibits his direct or indirect ownership or operation of containerships of larger than 2,500 TEUs or drybulk carriers, and the provision, directly or indirectly, of commercial or technical management services to vessels in these sectors of the shipping industry or to entities owning such vessels, other than in the limited circumstances described under "Our Manager and Management Related Agreements—Non-competition." The terms of the employment agreement also prohibit Dr. Coustas from soliciting or attempting to solicit our employees or customers during the two-year period following termination of his employment.
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Employment Agreement with Iraklis Prokopakis
              Our vice president, treasurer and chief operating officer, Iraklis Prokopakis, has entered into an employment agreement with us. The employment agreement provides that Mr. Prokopakis receives an annual base salary subject to increases at the discretion of the compensation committee of our board of directors. Mr. Prokopakis is also eligible for annual bonuses as determined by the compensation committee, and the employment agreement provides that any bonus may be paid in whole or in part with awards under our equity compensation plan. Pursuant to the employment agreement, Mr. Prokopakis is required to devote his full business time and attention to our business and affairs, although he may, as directed by our chief executive officer or board of directors, devote a portion of his time and attention to our affiliates. The initial term of the agreement will expire on December 31, 2012, however, unless written notice is provided 120 days prior to a termination date, the agreement will automatically extend for additional successive one-year terms.
              The terms of the employment agreement also provide for the payment of severance of two times his annual salary plus bonus (based on an average of the prior three years), as well as continued benefits, if any, for 24 months if we terminate Mr. Prokopakis without "cause," as defined in the agreement, or he terminates his employment with 30 days' notice for "good reason," as defined in the agreement. In addition, Mr. Prokopakis will receive a pro rata bonus for the year in which the termination occurs. If such termination without cause or resignation for good reason occurs within two years of a "change of control," as defined in the agreement, Mr. Prokopakis would be entitled to the greater of (a) $800,000 or (b)(i)(A) the total amount of his salary and bonus (based on an average of the prior three years), plus (B) the value on the date of grant of any equity grants made under our equity compensation plan during that three-year period (which, for stock options, will be the Black-Scholes value), (ii) multiplied by three, as well as continued benefits, if any, for 36 months.
              The terms of the employment agreement also prohibit Mr. Prokopakis from soliciting or attempting to solicit our employees or customers during the two-year period following termination of his employment, and from being substantially involved in the management or operation of containerships of larger than 2,500 TEUs or drybulk carriers, if such business is one of our competitors, during the term of the agreement.
Employment Agreement with Dimitri J. Andritsoyiannis
              Our vice president and chief financial officer, Dimitri J. Andritsoyiannis, has entered into an employment agreement with us. The employment agreement provides that Mr. Andritsoyiannis receives an annual base salary subject to increases at the discretion of the compensation committee of our board of directors. Mr. Andritsoyiannis is also eligible for annual bonuses as determined by the compensation committee, and the employment agreement provides that any bonus may be paid in whole or in part with awards under our equity compensation plan. Pursuant to the employment agreement, Mr. Andritsoyiannis is required to devote his full business time and attention to our business and affairs, although he may, as directed by our chief executive officer or board of directors, devote a portion of his time and attention to our affiliates. The initial term of the agreement will expire on December 31, 2012, however, unless written notice is provided 120 days prior to a termination date, the agreement will automatically extend for additional successive one-year terms.
              The terms of the employment agreement also provide for the payment of severance of two times his annual salary plus bonus (based on an average of the prior three years), as well as continued benefits, if any, for 24 months if we terminate Mr. Andritsoyiannis without "cause," as defined in the agreement, or he terminates his employment with 30 days' notice for "good reason," as defined in the agreement. In addition, Mr. Andritsoyiannis will receive a pro rata bonus for the year in which the termination occurs. If such termination without cause or resignation for good reason occurs within two years of a "change of control," as defined in the agreement, Mr. Andritsoyiannis would be entitled to the greater of (a) $800,000 or (b)(i)(A) the total amount of his salary and bonus (based on an average
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of the prior three years), plus (B) the value on the date of grant of any equity grants made under our equity compensation plan during that three-year period (which, for stock options, will be the Black-Scholes value), (ii) multiplied by three, as well as continued benefits, if any, for 36 months.
              The terms of the employment agreement also prohibit Mr. Andritsoyiannis from soliciting or attempting to solicit our employees or customers during the two-year period following termination of his employment, and from being substantially involved in the management or operation of containerships of larger than 2,500 TEUs or drybulk carriers, if such business is one of our competitors, during the term of the agreement.
Equity Compensation Plan
              We have adopted an equity compensation plan, which we refer to as the Plan. The Plan will generally be administered by the compensation committee of our board of directors, except that the full board may act at any time to administer the Plan, and authority to administer any aspect of the Plan may be delegated by our board of directors or by the compensation committee to an executive officer or to any other person. The Plan allows the plan administrator to grant awards of shares of our common stock or the right to receive or purchase shares of our common stock (including options to purchase common stock, restricted stock and stock units, bonus stock, performance stock, and stock appreciation rights) to our employees, directors or other persons or entities providing significant services to us or our subsidiaries, and also provides the plan administrator with the authority to reprice outstanding stock options or other awards. The actual terms of an award, including the number of shares of common stock relating to the award, any exercise or purchase price, any vesting, forfeiture or transfer restrictions, the time or times of exercisability for, or delivery of, shares of common stock, will be determined by the plan administrator and set forth in a written award agreement with the participant. Any options granted under the Plan will be accounted for in accordance with SFAS 123(R).
              The aggregate number of shares of our common stock for which awards may be granted under the Plan cannot exceed 6% of the number of shares of our common stock issued and outstanding at the time any award is granted. Awards made under the Plan that have been forfeited (including our repurchase of shares of common stock subject to an award for the price, if any, paid to us for such shares of common stock, or for their par value) or cancelled or have expired, will not be treated as having been granted for purposes of the preceding sentence.
              The Plan requires that the plan administrator make an equitable adjustment to the number, kind and exercise price per share of awards in the event of our recapitalization, reorganization, merger, spin-off, share exchange, dividend of common stock, liquidation, dissolution or other similar transaction or event. In addition, the plan administrator will be permitted to make adjustments to the terms and conditions of any awards in recognition of any unusual or nonrecurring events. Unless otherwise set forth in an award agreement, any awards outstanding under the Plan will vest upon a "change of control," as defined in the Plan. Our board of directors may, at any time, alter, amend, suspend, discontinue or terminate the Plan, except that any amendment will be subject to the approval of our stockholders if required by applicable law, regulation or stock exchange rule and that, without the consent of the affected participant under the Plan, no action may materially impair the rights of such participant under any awards outstanding under the Plan. The Plan will automatically terminate ten years after it has been most recently approved by our stockholders.
121

 
 PRINCIPAL STOCKHOLDERS
              The following table sets forth information regarding the beneficial ownership of our common stock as of the date of this prospectus and after giving effect to this offering, by:
•
each of our executive officers;

•
each of our directors and director nominees;

•
all of our executive officers, directors and director nominees as a group; and

•
each holder known to us to beneficially own more than five percent of our common stock.
              All of our stockholders, including the stockholders listed in this table, are entitled to one vote for each share of common stock held. As of the date of this prospectus, none of the shares of our outstanding common stock is held in the United States.

Identity of Person or Group
	 	Number of Shares
of Common Stock
$.01 par value
	 	Percentage of
Common Stock
Before Offering
	 	Number of
Shares of
Common Stock
Owned After
Offering
	 	Percentage of
Common Stock
After Offering(1)
	 	
Officers and Directors:	 	 	 	 	 	 	 	 	 	
John Coustas(2)	 	43,687,195	 	98.6	%	43,687,195	 	80.0	%	
Iraklis Prokopakis	 	443,075	 	1.0	%	443,075	 	*	 	
Dimitri J. Andritsoyiannis	 	177,230	 	*	 	177,230	 	*	 	
Andrew B. Fogarty(3)	 	—	 	—	 	—	 	—	 	
Myles R. Itkin(3)	 	—	 	—	 	—	 	—	 	
Miklós Konkoly-Thege(3)	 	—	 	—	 	—	 	—	 	
Robert A. Mundell(3)	 	—	 	—	 	—	 	—	 	

5% Beneficial Owners:	

 	

 	

 	
Danaos Investments Limited as Trustee of the 883 Trust(4)	 	43,687,195	 	98.6	%	43,687,195	 	80.0	%	
All executive officers, directors and director nominees as a group (7 persons)	 	44,307,500	 	100.0	%	44,307,500	 	81.2	%	

*
Less than 1%.

(1)
Assumes the underwriters do not exercise their overallotment option.
(2)
By virtue of shares owned indirectly through Danaos Investments Limited as Trustee of the 883 Trust, which is our principal stockholder. The protector (which is analogous to a trustee) of such trust is Danaos Investments Limited, a company wholly-owned by Dr. Coustas, which has voting and dispositive control over the shares held by the trust. The beneficiaries of the trust are Dr. Coustas and other members of his family. The address of this beneficial owner is 14 Akti Kondyli, 185 45 Piraeus, Greece.
(3)
Has agreed to join our board of directors following this offering.
(4)
The protector (which is analogous to a trustee) of such trust is Danaos Investments Limited, a company wholly-owned by Dr. Coustas, and the beneficiaries of the trust are Dr. Coustas and other members of his family. The address of this beneficial owner is 14 Akti Kondyli, 185 45 Piraeus, Greece.
122

 
 OUR MANAGER AND MANAGEMENT RELATED AGREEMENTS
General
              Our manager is ultimately owned by Danaos Investments Limited as Trustee of the 883 Trust, which we refer to as the Coustas Family Trust. Danaos Investments Limited, a corporation wholly-owned by our chief executive officer, is the protector (which is analogous to a trustee) of the Coustas Family Trust, of which Dr. Coustas and other members of the Coustas family are beneficiaries. The Coustas Family Trust is also our largest stockholder. Our manager has provided services to our vessels since 1972 and continues to provide technical, administrative and certain commercial services which support our business, as well as comprehensive ship management services such as technical supervision and commercial management, including chartering our vessels pursuant to a management agreement which was amended and restated as of September 18, 2006. As of June 30, 2006, our manager employed 71 shore staff.
Management Agreement
              Under our management agreement, our manager is responsible for providing us with technical, administrative and certain commercial services, which include the following:
•
technical services , which include managing day-to-day vessel operations, performing general vessel maintenance, ensuring regulatory compliance and compliance with the law of the flag of each vessel and of the places where the vessel operates, ensuring classification society compliance, supervising the maintenance and general efficiency of vessels, arranging the hire of qualified officers and crew, training, transportation, insurance of the crew (including processing all claims), performing normally scheduled drydocking and general and routine repairs, arranging insurance for vessels (including marine hull and machinery, protection and indemnity and risks insurance), purchasing stores, supplies, spares, lubricating oil and maintenance capital expenditures for vessels, appointing supervisors and technical consultants and providing technical support, shoreside support, shipyard supervision, and attending to all other technical matters necessary to run our business;

•
administrative services , which include, in each case, at the direction of our chief executive officer, chief operating officer and chief financial officer, assistance with the maintenance of our corporate books and records, payroll services, assistance with the preparation of our tax returns and financial statements, assistance with corporate and regulatory compliance matters not related to our vessels, procuring legal and accounting services (including the preparation of all necessary budgets for submission to us), assistance in complying with United States and other relevant securities laws, human resources, cash management and bookkeeping services, development and monitoring of internal audit controls, disclosure controls and information technology, assistance with all regulatory and reporting functions and obligations, furnishing any reports or financial information that might be requested by us and other non-vessel related administrative services, assistance with office space, providing legal and financial compliance services, overseeing banking services (including the opening, closing, operation and management of all of our accounts including making deposits and withdrawals reasonably necessary for the management of our business and day-to-day operations), arranging general insurance and director and officer liability insurance (at our expense), providing all administrative services required for subsequent debt and equity financings and attending to all other administrative matters necessary to ensure the professional management of our business (our manager provides these administrative services at its own cost and in return therefore receives the commercial, chartering and administrative services fees); and
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•
commercial services , which include chartering our vessels, assisting in our chartering, locating, purchasing, financing and negotiating the purchase and sale of our vessels, supervising the design and construction of newbuildings, and such other commercial services as we may reasonably request from time to time (our manager provides these commercial services at its own cost and in return therefore receives the commercial, chartering and administrative services fees).
Reporting Structure
              Our manager reports to us and our board of directors through our chief executive officer, chief operating officer and chief financial officer. Under our management agreement, our chief executive officer, chief operating officer and chief financial officer may direct the manager to remove and replace any officer or any person who serves as the head of a business unit of our manager. Furthermore, our manager will not remove any person serving as an officer or senior manager without the prior written consent of our chief executive officer, chief operating officer and chief financial officer.
Compensation of Our Manager
              For providing its commercial, chartering and administrative services, our manager receives a fee of $500 per day. For the management of our ships, our manager receives a management fee of $250 per vessel per day for vessels on bareboat charter and $500 per vessel per day for the remaining vessels in our fleet for the first three years of our agreement, pro rated for the calendar days we own each vessel. After three years, these fees will be adjusted annually through mutual agreement between us and our manager. Should we be unable to agree with our manager as to the new fees, the rate for the next year will be set at an amount that will maintain our manager's average profit margin for the immediately preceding three years. Our manager also receives a commission of 0.75% on all gross freight, charter hire, ballast bonus and demurrage with respect to each vessel in our fleet. We also pay our manager a commission of 0.5% based on the contract price of any vessel bought or sold by it on our behalf and a flat fee of $400,000 per newbuilding vessel for the supervision of our newbuilding contracts. We believe these fees and commissions are no more than the rates we would need to pay an unaffiliated third party to provide us with these management services.
              We also advance, on a monthly basis, all technical vessel operating expenses with respect to each vessel in our fleet to enable our manager to arrange for the payment of such expenses on our behalf. To the extent the amounts advanced are greater or less than the actual vessel operating expenses of our fleet for a quarter, our manager or us, as the case may be, will pay the other the difference at the end of such quarter, although our manager may instead choose to credit such amount against future vessel operating expenses to be advanced for future quarters.
Term and Termination Rights
              Subject to the termination rights described below, the initial term of the management agreement expires on December 31, 2008. The management agreement automatically renews for a one-year period and will be extended in additional one-year increments until December 31, 2020, at which point the agreement will expire. In addition to the termination provisions outlined below, we are able to terminate the contract at any point after the initial term upon 12 months' notice to our manager.
              Our Manager's Termination Rights.     Our manager may terminate the management agreement prior to the end of its term in the two following circumstances:
•
First , if any moneys payable by us shall not have been paid within 60 business days of payment having been demanded in writing; or
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•
Second, if at any time we materially breach the agreement and the matter is unresolved within 60 days after we are given written notice from our manager.
              Our Termination Rights.     We may terminate the management agreement prior to the end of its term in the two following circumstances upon providing the respective notice:
•
First , if at any time our manager neglects or fails to perform its principal duties and obligations in any material respect and the matter is unresolved within 20 days after our manager receives written notice of such neglect or failure from us; or

•
Second, if any moneys payable by the manager under or pursuant to the management agreement are not promptly paid or accounted for in full within 10 business days by the manager in accordance with the provisions of the management agreement.
              We also may terminate the management agreement immediately under any of the following circumstances:
•
First , if either we or our manager ceases to conduct business, or all or substantially all of the properties or assets of either such party is sold, seized or appropriated;

•
Second, if either we or our manager files a petition under any bankruptcy law, makes an assignment for the benefit of its creditors, seeks relief under any law for the protection of debtors or adopts a plan of liquidation, or if a petition is filed against us or our manager seeking to declare us or it an insolvent or bankrupt and such petition is not dismissed or stayed within 40 business days of its filing, or if our company or the manager admits in writing its insolvency or its inability to pay its debts as they mature, or if an order is made for the appointment of a liquidator, manager, receiver or trustee of our company or the manager of all or a substantial part of its assets, or if an encumbrancer takes possession of or a receiver or trustee is appointed over the whole or any part of the manager's or our company's undertaking, property or assets or if an order is made or a resolution is passed for our manager's or our winding up;

•
Third, if a distress, execution, sequestration or other process is levied or enforced upon or sued out against our manager's property which is not discharged within 20 business days;

•
Fourth, if the manager ceases or threatens to cease wholly or substantially to carry on its business otherwise than for the purpose of a reconstruction or amalgamation without insolvency previously approved by us; or

•
Fifth , if either our manager or we are prevented from performing any obligations under the management agreement by any cause whatsoever of any nature or kind beyond the reasonable control of us or our manager respectively for a period of two consecutive months or more.
              In addition, we may terminate any applicable ship management agreement in any of the following circumstances:
•
First , if we or any subsidiary of ours ceases to be the owner of the vessel covered by such ship management agreement by reason of a sale thereof, or if we or any subsidiary of ours ceases to be registered as the owner of the vessel covered by such ship management agreement;

•
Second, if a vessel becomes an actual or constructive or compromised or arranged total loss or an agreement has been reached with the insurance underwriters in respect of the vessel's constructive, compromised or arranged total loss or if such agreement with the insurance underwriters is not reached or it is adjudged by a competent tribunal that a constructive loss of the vessel has occurred;
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•
Third , if the vessel covered by such ship management agreement is requisitioned for title or any other compulsory acquisition of the vessel occurs, otherwise than by requisition by hire; or

•
Fourth, if the vessel covered by such ship management agreement is captured, seized, detained or confiscated by any government or persons acting or purporting to act on behalf of any government and is not released from such capture, seizure, detention or confiscation within 20 business days.
Non-competition
              Our manager has agreed that, during the term of the management agreement, it will not provide any management services to any other entity without our prior written approval, other than with respect to Palmosa Shipping Corporation and other entities controlled by Dr. Coustas, our chief executive officer, which do not operate within the containership (larger than 2,500 TEUs) or drybulk sectors of the shipping industry or in the circumstances described below. Other than Palmosa Shipping Corporation, Dr. Coustas does not currently control any such vessel-owning entity. Dr. Coustas has also personally agreed to the same restrictions on the provision, directly or indirectly, of management services during this period. In addition, our chief executive officer (other than in his capacities with us) and our manager have separately agreed not, during the term of our management agreement and for one year thereafter, to engage, directly or indirectly, in (i) the ownership or operation of containerships of larger than 2,500 TEUs or (ii) the ownership or operation of any drybulk carriers or (iii) the acquisition of or investment in any business involved in the ownership or operation of containerships larger than 2,500 TEUs or drybulk carriers. Notwithstanding these restrictions, if our independent directors decline the opportunity to acquire any such containerships or drybulk carriers or to acquire or invest in any such business, our chief executive officer will have the right to make, directly or indirectly, any such acquisition or investment during the four-month period following such decision by our independent directors, so long as such acquisition or investment is made on terms no more favorable than those offered to us. In this case, our chief executive officer and our manager will be permitted to provide management services to such vessels.
Sale of Our Manager
              Our manager has agreed that it will not transfer, assign, sell or dispose of all or a significant portion of its business that is necessary for the services our manager performs for us without the prior written consent of our board of directors. Furthermore, in the event of any proposed sale of our manager, we have a right of first refusal to purchase our manager. This prohibition and right of first refusal is in effect throughout the term of the management agreement and for a period of one year following the expiry or termination of the management agreement. Our chief executive officer, John Coustas, or any trust established for the Coustas family (under which John Coustas and/or a member of his family is a beneficiary), is required, unless we expressly permit otherwise, to own 80% of our manager's outstanding capital stock during the term of the management agreement and 80% of the voting power of our manager's outstanding capital stock. In the event of any breach of these requirements, we would be entitled to purchase the capital stock of our manager owned by John Coustas or any trust established for the Coustas family (under which John Coustas and/or a member of his family is a beneficiary).
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 RELATED PARTY TRANSACTIONS
Management Related Agreements
              For a description of our management agreement, please read "Our Manager and Management Related Agreements." We believe the fees and commissions set forth in the management agreement are no more than the rates we would pay an unaffiliated third party to provide us with management services.
Our Manager
              Our manager is ultimately owned by Danaos Investments Limited as Trustee of the 883 Trust, which we refer to as the Coustas Family Trust. Danaos Investments Limited, a corporation wholly-owned by our chief executive officer, is the protector (which is analogous to a trustee) of the Coustas Family Trust, of which Dr. Coustas and other members of the Coustas family are beneficiaries. The Coustas Family Trust is also our largest stockholder.
The Swedish Club
              Dr. John Coustas, our chief executive officer, is a member of the board of directors of The Swedish Club, our primary provider of insurance, including a substantial portion of our hull & machinery, war risk and protection and indemnity insurance. During the year ended December 31, 2005 and the six months ended June 30, 2006, we paid premiums of $3.5 million in the aggregate and $1.7 million in the aggregate, respectively, to The Swedish Club under these insurance policies.
Danaos Management Consultants
              Our chief executive officer, John Coustas, co-founded and has a 50.0% ownership interest in Danaos Management Consultants, which provides the ship management software deployed on the vessels in our fleet to our manager on a complementary basis. Dr. Coustas does not participate in the day-to-day management of Danaos Management Consultants.
Payment of Dividend
              During 2005 we paid dividends of $244.6 million to our existing stockholders from our retained earnings. Investors in this offering are not entitled to receive any portion of these dividends.
Sofia III
              On November 3, 2003, Reynolds Enterprises S.A., our subsidiary and the registered owner of the AIFOS , sold the vessel to Magellan Marine Inc., an entity then affiliated with us by virtue of being wholly-owned by our ultimate principal stockholder, Protector Holdings Inc. Magellan Marine Inc. then bareboat chartered the vessel, which was renamed the Sofia III, to Lito Navigation Inc., our subsidiary. The sale of the AIFOS to Magellan Marine Inc. was undertaken because such vessel was not intended to be in a pool in which it otherwise would have been included. On December 31, 2004, the bareboat charter was terminated and all of the outstanding capital stock of Magellan Marine Inc. was registered to Lito Navigation Inc. Magellan Marine Inc. is the vessel-owning subsidiary of the Sofia III and Lito Navigation Inc., which is wholly-owned by us, is the sole stockholder of Magellan Marine Inc. Each of these transactions was consummated for no consideration. On April 24, 2006, we sold the Sofia III to a third-party drybulk operator for $27.5 million and delivered the vessel to the buyer on May 12, 2006.
Palmosa Shipping Corporation
              Our chief executive officer has a 26.0% economic interest, and 51.0% of the voting power, in Palmosa Shipping Corporation, or Palmosa. Palmosa currently owns one feeder containership which
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provides transport between liner vessels and smaller ports in the Mediterranean not directly served by liner vessels. Palmosa does not provide feeder or any other services to us or our fleet. Our manager arranges crewing for Palmosa on a complementary basis in order to gain access to information regarding the vessel's maintenance and repair, off hire days, responses to unexpected events arising during voyages, and other factors that are considered to be indicative of crewing performance. This allows our manager to monitor the operational quality of Palmosa's vessels, which operate under entirely Ukranian crews arranged by our manager, thereby providing our manager with insight into the quality of these crews compared to differently constituted crews.
Offices
              We occupy office space that is owned by our manager, Danaos Shipping, and which is provided to us as part of the services we receive under our management agreement.
Seasonal Maritime Corporation
              Seasonal Maritime Corporation, an entity wholly-owned by our chief executive officer, funded $30.4 million of the $40.5 million acquisition price of the MOL Confidence under a loan agreement, dated March 14, 2006, among Seasonal Maritime Corporation, as lender, a subsidiary of ours, as borrower, and us, as guarantor. The interest rate for this loan was LIBOR plus 1.0% per annum, with a maturity date of six months after execution of the loan agreement, subject to an option for an additional six months repayment term for the borrower. In addition, a flat fee of $70,125 was paid upon execution of the loan agreement and a commitment fee of 0.50% per annum was payable quarterly on any undrawn amount, commencing March 14, 2006. On June 16, 2006, we repaid $25.4 million of the amount borrowed under this loan agreement, leaving $5.0 million outstanding as of June 30, 2006, which amount was repaid in August 2006. This loan was secured by a general assignment of income from the MOL Confidence and an assignment of insurance receivables with respect to the vessel.
              We have borrowed an aggregate amount of $75.0 million ($15.0 million with respect to each vessel) under an unsecured loan agreement, dated August 14, 2006, with Seasonal Maritime Corporation to partially finance the acquisition of the five 6,500 TEU newbuildings we ordered on July 26, 2006. This loan bears interest at a rate of LIBOR plus 1.0% per annum and matures six months after execution of the loan agreement, with an option for an additional six months repayment term for the borrower. In addition, a flat fee of $112,500 was paid upon execution of the loan agreement and a commitment fee of 0.30% per annum is payable quarterly on any undrawn amount, commencing August 14, 2006. We intend to repay this loan after we enter into our new RBS and Aegean Baltic-HSH Nordbank credit facilities.
              We believe the fees and interest payable under these loan agreements are no less favorable than those we could obtain in arm's-length negotiations with an unrelated third party.
Det Norske Veritas
              Until May 2006, Mr. Miklós Konkoly-Thege, who has agreed to join our board of directors following this offering, was President and Chairman of the Executive Board of Det Norske Veritas, which provides vessel classification services to us. During the year ended December 31, 2005 and the six months ended June 30, 2006, we paid $0.6 million and $0.3 million, respectively, to Det Norske Veritas for these services.
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 DESCRIPTION OF INDEBTEDNESS
Our Credit Facilities
HSH Nordbank Credit Facility
              On December 17, 2002, we, as guarantor, and certain of our vessel-owning subsidiaries, as borrowers, entered into a $60.0 million credit facility with HSH Nordbank AG and Dresdner Bank, which we refer to as the HSH Nordbank credit facility, with a term of 10 years to finance a portion of the purchase price of the Vancouver Express (ex P&O Nedlloyd Caribbean ) and the Maersk Derby (ex P&O Nedlloyd Caracas ). As of June 30, 2006, $51.0 million was outstanding under this credit facility.
              The interest rate on the HSH Nordbank credit facility is LIBOR plus 0.775%. Beginning on June 11, 2004, we began repaying the principal amount of this loan, which is payable in 40 consecutive quarterly installments of $1.0 million together with a balloon payment of $20.0 million payable with the final installment.
KEXIM Credit Facility
              On May 13, 2003, we, as guarantor, and certain of our vessel-owning subsidiaries, as borrowers, entered into a $124.4 million credit facility with the Export-Import Bank of Korea, which we refer to as our KEXIM credit facility, for a term of 12 years to finance a portion of the purchase price of the CSCL Europe and the CSCL America. As of June 30, 2006, $106.7 million was outstanding under this credit facility.
              Interest on borrowings under the KEXIM credit facility accrues at a rate of 5.0125%, which includes a fee of 0.3725% per annum. Beginning on December 15, 2004, we began repaying the principal amount of this loan in 48 consecutive quarterly installments of $2.6 million (except for the first installment of $1.5 million) plus installments of $1.3 million, $1.0 million and $0.69 million payable in August 2016, September 2016 and November 2016, respectively.
              In connection with our KEXIM facility, on November 15, 2004, we entered into an interest rate hedging transaction with The Royal Bank of Scotland. The transaction is an amortizing interest rate swap, with the end result being the conversion of the fixed rate payable on the loan to a floating rate (U.S. dollar LIBOR). The notional amortizing schedule of the swap exactly mirrors the amortization schedule of the above loan.
KEXIM-Fortis Credit Facility
              On January 29, 2004, we, as guarantor, and certain of our vessel-owning subsidiaries, as borrowers, entered into a $144.0 million credit facility with the Export-Import Bank of Korea and Fortis Capital, which we refer to as the KEXIM-Fortis credit facility, repayable over 12 years commencing with the delivery of two newbuildings, which secure the KEXIM-Fortis credit facility, to finance a portion of the purchase price of those newbuildings. One of these newbuildings, the CSCL Pusan (ex HN 1559), was delivered to us on September 8, 2006, the other newbuilding, which we refer to as the HN 1561 , is expected to be delivered to us in November 2006. As of June 30, 2006, $126.9 million was outstanding under this credit facility and $17.1 million of undrawn availability remained available ($16.2 million available under Tranche A and $0.9 million available under Tranche B) to us for future borrowings. On September 8, 2006, we drew down $7.7 of this available amount to fund the final installment payment for the CSCL Pusan (ex HN 1559) , which was due upon delivery to us of this vessel, leaving $9.4 million of availability remaining for borrowings ($8.95 million under Tranche A and $0.45 million under Tranche B).
              The KEXIM-Fortis credit facility is organized in two tranches, Tranche A and Tranche B. Each of Tranche A and Tranche B is comprised of two parts. One part of Tranche A, consisting of
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$67.5 million, and Tranche B, consisting of $4.5 million, is attributable to the CSCL Pusan (ex HN 1559) . The second part of Tranche A, consisting of $67.5 million, and Tranche B, consisting of $4.5 million, is attributable to the HN 1561 . The portion of Tranche A attributable to the CSCL Pusan (ex  HN 1559 ) will be repayable in 24 semi-annual installments of $2.8 million each, commencing on March 15, 2007. The portion of Tranche B attributable to the CSCL Pusan (ex HN 1559) will consist of a ballon payment of $4.5 million payable with the final installment of Tranche A on September 8, 2018. The actual repayment schedule for the portion of Tranche A attributable to the HN 1561 will be determined upon delivery of the vessel, based on the principal amount drawn down as of June 30, 2006 and the contracted delivery date of the HN 1561 , the portion of Tranche A attributable to the HN 1561 will repayable in 24 semi-annual installments of $2.8 million each, commencing on March 15, 2007. The portion of Tranche B attributable to the HN 1561 will consist of a ballon payment of $4.5 payable with the final installment of Tranche A, based on the HN 1561 's contracted delivery date, in March 2019.
              Interest on borrowings under both tranches of the KEXIM-Fortis credit facility accrues at a rate of 5.02%, which includes a fee of 0.27% per annum. In addition, a commitment fee of 0.30% per annum has been accruing on the undrawn balance of Tranche A since February 2, 2004, the date of the first drawing thereunder, and a commitment fee of 0.50% per annum has been accruing on the undrawn balance of Tranche B since January 29, 2004.
Aegean Baltic Credit Facility
              On March 18, 2005, we, as guarantor, and certain of our vessel-owning subsidiaries, as borrowers, entered into a $200.0 million credit facility with Aegean Baltic Bank S.A. and HSH Nordbank AG, among others, which we refer to as the Aegean Baltic credit facility, with a term of eight years to refinance a portion of our then-existing senior secured indebtedness and to provide additional liquidity for working capital purposes. Our Aegean Baltic credit facility is collateralized by mortgages and other security relating to the APL Belgium, the APL England, the APL Scotland and the Hyundai Commodore . As of June 30, 2006, $179.1 million was outstanding under this credit facility.
              The interest rate on the Aegean Baltic credit facility is LIBOR plus 0.825%, which includes an agency fee of 0.05% per annum. Beginning on June 30, 2005, we began repaying the principal amount of the loan which is payable in 32 consecutive quarterly installments each in the amount of $4.175 million, together with a balloon payment of $66.4 million payable with the final installment. We paid an arrangement fee of 0.05% of the total commitments under the credit facility in the amount of $0.10 million and an underwriting fee of 0.20% of the total commitments under the credit in the amount of $0.40 million on March 18, 2005, the closing date.
RBS Credit Facility
              On April 11, 2005, we, as guarantor, and certain of our vessel-owning subsidiaries, as borrowers, entered into a $200.0 million credit facility with The Royal Bank of Scotland, which we refer to as our RBS credit facility, for a term of eight years to refinance a portion of our then-existing senior secured indebtedness and to provide additional liquidity for working capital purposes. Our RBS credit facility is collateralized by mortgages and other security relating to the S.A. Sederberg , the S.A. Winterberg, the S.A. Helderberg, the Maersk Constantia and the APL Holland, as well as the Fivos , the Alexandra I, the Dimitris C, the Roberto C, the Maria C , and the MV Achilleas , which we have agreed to sell. Upon our delivery of these vessels to the purchaser, we currently intend to replace these vessels as collateral under this credit facility with certain of our unencumbered vessels. Our unencumbered vessels currently are the Hyundai Duke , the Norasia Hamburg , the YM Yantian , the YM Milano , the Victory I , the Henry , the Independence , the CMA CGM Elbe , the CMA CGM Kalamata , the CMA CGM Komodo , the Pacific Bridge , the Eagle Express and the MOL Confidence . In accordance, however, with the terms of the commitment letter we have entered into with RBS for a new senior secured credit facility described below under "—New Credit Facilities," which we intend to use in part to repay amounts
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outstanding under this existing credit facility with RBS, we intend to mortgage the Norasia Hamburg, the YM Yantian, the YM Milano , the Victory I and the MOL Confidence under such new senior secured credit facility. As of June 30, 2006, $175.5 million was outstanding under this credit facility.
              Interest on borrowings under our RBS credit facility accrues at a rate of LIBOR plus 0.8%. The first two of the 16 semi-annual installment payments of the outstanding principal amount of the loan were paid on October 17, 2005 and April 18, 2006, respectively. The next six installments will be in the amount of $12.25 million and the remaining installments will be in the amount of $8.5 million, with a balloon payment of $34.0 million payable with the final installment. We paid a lender fee of $0.25 million at the closing of this credit facility.
Seasonal Maritime Corporation Credit Facility
              We borrowed an aggregate amount of $75.0 million ($15.0 million with respect to each vessel) under an unsecured loan agreement, dated August 14, 2006, with Seasonal Maritime Corporation to partially finance the acquisition of the five 6,500 TEU newbuildings we ordered on July 26, 2006. This loan bears interest at a rate of LIBOR plus 1.0% per annum and matures six months after execution of the loan agreement, with an option for an additional six months repayment term for the borrower. In addition, a flat fee of $112,500 was paid upon execution of the loan agreement and a commitment fee of 0.30% per annum is payable quarterly on any undrawn amount, commencing August 14, 2006.
              We believe the fees and interest payable under this loan agreement are no less favorable than those we could obtain in arm's-length negotiations with an unrelated third party. We intend to repay this loan in full after we enter into our new RBS and Aegean Baltic credit facilities with the proceeds thereof.
Covenants and Events of Default
              In computing our stockholders' equity, each of our credit facilities permits the use of the market value of the vessels in our fleet rather than the value at which such vessels are recorded in our consolidated financial statements, which results in higher stockholders' equity, for purposes of measuring compliance with the covenants under our credit facilities. In the following description of our loan covenants, we refer to stockholders' equity computed in this manner as "adjusted stockholders' equity."
HSH Nordbank, KEXIM and KEXIM-Fortis Credit Facilities
              Our KEXIM-Fortis credit facility contains financial covenants requiring us to:
•
maintain adjusted stockholders' equity of at least $100.0 million;

•
ensure that adjusted stockholders' equity exceeds 30.0% of our total assets;

•
maintain at least $20.0 million in cash or cash equivalents;

•
maintain a ratio of EBITDA to net interest expense of no less than 2.5 to 1.0;

•
ensure that the aggregate market value of the vessels in our fleet exceeds 145.0% of our net consolidated debt at all times; and

•
ensure that our outstanding bank debt does not exceed 75.0% of the aggregate value of our vessels mortgaged thereunder.
              As of June 30, 2006, our adjusted stockholders' equity was $990.5 million, our adjusted stockholders' equity was 58.3% of our total assets, our cash and cash equivalents were $31.6 million, our ratio of EBITDA to net interest expense was 5.8 to 1.0 and the aggregate market value of the vessels in our fleet was 269.0% of our net consolidated debt. As of June 30, 2006, the ratio of our
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outstanding indebtedness under the KEXIM-Fortis credit facility to the market value of our vessels mortgaged thereunder was 39.1%. Our credit facility with KEXIM-Fortis also contains covenants that require us to maintain adequate insurance coverage and obtain each of the banks' consent before incurring additional indebtedness secured by the mortgaged vessels.
              The KEXIM-Fortis credit facility does not restrict our ability to pay dividends so long as our retention account, an account we are required to maintain with Fortis Bank N.V. containing our retained earnings relating to the vessels securing the loans, has been fully funded and we are not in default of any provisions of the credit facility, each of which requirements we are currently in compliance with.
              The HSH Nordbank credit facility contains financial covenants requiring us to:
•
maintain adjusted stockholders' equity of at least $250.0 million;

•
ensure that adjusted stockholders' equity exceeds 30.0% of our total assets;

•
ensure that the aggregate market value of the vessels in our fleet exceeds 145.0% of our net consolidated debt at all times; and

•
ensure that our outstanding debt does not exceed 75.0% of the aggregate value of our vessels mortgaged thereunder.
              As of June 30, 2006, our adjusted stockholders' equity was $990.5 million, our adjusted stockholders' equity was 58.3% of our total assets, our cash and cash equivalents were $31.6 million and the aggregate market value of the vessels in our fleet was 269.0% of our net consolidated debt. As of June 30, 2006, the ratio of our outstanding indebtedness under the HSH Nordbank credit facility to the value of our vessels mortgaged thereunder was 39.1%. The KEXIM credit facility does not include any financial covenants other than those related to the payment of dividends described in the next paragraph. The HSH Nordbank credit facility contains covenants that will require us to maintain adequate insurance coverage and obtain the banks' consent before we incur new indebtedness that is secured by the mortgaged vessels.
              The HSH Nordbank facility does not restrict us from paying dividends so long as we maintain cash and cash equivalents of $30.0 million and maintain a ratio of EBITDA to net interest expense of no less than 2.5 to 1.0. As of June 30, 2006, we had cash and cash equivalents of $31.6 million and our ratio of EBITDA to net interest expense was 5.8 to 1.0. The KEXIM credit facility does not restrict our ability to pay dividends so long as (i) our retention account, an account we are required to maintain with RBS containing our retained earnings relating to the vessels securing the loans, has been fully funded and (ii) we are not in default of any provisions of the credit facility. We are currently in compliance with both of these provisions.
              The events of default under the HSH Nordbank, KEXIM and KEXIM-Fortis credit facilities, include: (a) non-payment of an amount on the date it is due at the place and in the currency in which the payment is expressed as payable; (b) breach of covenants or undertakings; (c) any material misrepresentation; (d) cross-default and other material indebtedness (giving effect to any applicable grace periods); (e) the occurrence of a bankruptcy or insolvency event or proceedings leading thereto; (f) creditors' process; (g) the cessation or threat to cease carrying on all or substantially all of our business; (h) repudiation of any document relating to the credit facility; or (i) the occurrence of an event which is likely to have a material adverse effect.
              Additional events of default under the KEXIM-Fortis credit facility include: (a) breach of the guarantor; (b) failure to pay any final judgment or any final order given by a court of competent jurisdiction; or (c) if any security document ceases to be valid or ceases to provide a perfected first priority security interest.
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              Additional events of default under the HSH Nordbank and the KEXIM credit facilities include: (a) change of control or ownership; (b) the revocation of any consent, license, approval or other document which is necessary to enable us to comply with our obligations; (c) illegality or impossibility; (d) the reduction of capital; (e) the loss of a vessel without payment in full from the insurance proceeds; (f) revocation or modification of any consent, license, approval or other document which is necessary to enable us to comply with our obligations; (g) the cessation or threat to cease carrying on all or substantially all of our business; (h) the reduction of capital; and (i) the sale, transfer, disposal or other encumbrance of a vessel mortgaged thereunder, or any interest or share therein, is sold, transferred, disposed of or encumbered other than as permitted under the credit facility.
              The events of default under the HSH Nordbank facility also include: (a) a challenge to the registration of a vessel; (b) a notice of termination is given by the swap bank under the master agreement; (c) the country of registration of a vessel becoming involved in hostilities or war so that the security is materially prejudiced; and (d) the arrest or detention of a vessel without prompt release, or any loss of control or possession of a vessel for more than 30 days.
Aegean Baltic and RBS Credit Facilities
              The Aegean Baltic and the RBS credit facilities contain financial covenants requiring us to:
•
maintain adjusted stockholders' equity of at least $250.0 million;

•
ensure that adjusted stockholders' equity exceeds 30% of our total assets;

•
ensure that our outstanding indebtedness does not exceed 75% of the aggregate market value of the vessels mortgaged under such credit facility;

•
maintain at least $30.0 million in cash or cash equivalents;

•
ensure that the aggregate market value of the vessels in our fleet exceeds 145% of our net consolidated debt at all times; and

•
maintain a ratio of EBITDA to net interest expense of no less than 2.5 to 1.0.
              As of June 30, 2006, our adjusted stockholders' equity was $990.5 million, our adjusted stockholders' equity was 58.3% of our total assets, our cash and cash equivalents were $31.6 million, and the aggregate market value of the vessels in our fleet including vessels under construction was 269.0% of our net consolidated debt. As of June 30, 2006, the ratio of our outstanding indebtedness under the Aegean Baltic credit facility and the RBS credit facility to the value of our vessels mortgaged thereunder was 39.1% and 39.1%, respectively. The Aegean Baltic and the RBS credit facilities also contain covenants that will require us to maintain adequate insurance coverage and obtain the banks' consent before we incur new indebtedness that is secured by the mortgaged vessels.
              The Aegean Baltic and the RBS credit facilities do not restrict us from paying dividends so long as we maintain cash and cash equivalents of $30.0 million and maintain a ratio of EBITDA to net interest expense of no less than 2.5 to 1.0. As of June 30, 2006, we had cash and cash equivalents of $31.6 million and our ratio of EBITDA to net interest expense was 5.8 to 1.0.
              The events of default under the Aegean Baltic and the RBS credit facilities include: (a) non-payment of an amount on the date it is due at the place and in the currency in which the payment is expressed as payable; (b) breach of covenants or undertakings; (c) cross-default or other material indebtedness (giving effect to any applicable grace periods); (d) the occurrence of a bankruptcy or insolvency event or proceedings leading thereto; (e) creditors' process; (f) change of control or ownership; (g) repudiation of any document relating to the credit facility; (h) the revocation or modification of any consent, license, approval or other document which is necessary to enable us to comply with our obligations; (i) the cessation or threat to cease carrying on all or substantially all of
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our business; (j) the reduction of capital; (k) the loss of a vessel without payment in full from the insurance proceeds; (l) a challenge to the registration of a vessel; (m) a notice of termination given by the swap bank under the master agreement; (n) the occurrence of a material adverse change; (o) the country of registration of a vessel becoming involved in hostilities or war so that the security is materially prejudiced; (p) any material misrepresentation; (q) arrest or detention of a vessel without prompt release, or any loss of control or possession of a vessel for more than 30 days; or (r) a vessel, or any interest or share therein, is sold, transferred, disposed of or encumbered other than as permitted under the credit facility.
Leasing Arrangements
              In addition to the covenants contained in our credit facilities, as part of the leasing arrangements with respect to five containerships in our current fleet, the CSCL Europe , the CSCL America , the Maersk Derby (ex P&O Nedlloyd Caracas ), the Vancouver Express (ex P&O Nedlloyd Caribbean ) and the CSCL Pusan (ex HN 1559) , and one of the containerships under construction, the HN 1561, we have agreed to financial covenants with a subsidiary of Lloyds Bank requiring us to:
•
maintain adjusted stockholders' equity of at least $100.0 million;

•
ensure that adjusted stockholders' equity exceeds 30% of our total assets;

•
maintain at least $5.0 million in cash or cash equivalents;

•
ensure that our outstanding indebtedness does not exceed 75% of the aggregate market value of the vessels mortgaged under such credit facility; and

•
ensure that the aggregate market value of the vessels in our fleet exceeds 145% of our net consolidated debt at all times.
              The leasing arrangements also include covenants that the current stockholders of Danaos Corporation continue to hold at least 60.0% of its outstanding capital stock and that we continue to own, directly or indirectly, all of the share capital of our subsidiaries that charter-in the respective vessels, subject to the respective leasing arrangements. Under the leasing arrangements we are not restricted from paying dividends so long as we remain in compliance with the covenants set forth in the preceding sentence and the last two bullet points above, our adjusted stockholders' equity exceeds 35.0% of our total assets, we maintain cash and cash equivalents of $20.0 million and we maintain a ratio of EBITDA to net interest expense of no less than 2.5 to 1.0.
New Credit Facilities
              We have signed commitment letters with Aegean Baltic Bank S.A. and HSH Nordbank AG and with The Royal Bank of Scotland with respect to two new senior secured non-amortizing revolving credit facilities to partially refinance our existing senior secured indebtedness with these lenders and to partially finance planned and future vessel acquisitions.
New RBS Credit Facility
              We, as borrower, and certain of our vessel-owning subsidiaries, as guarantors, have signed a commitment letter with The Royal Bank of Scotland for a new senior revolving credit facility in the aggregate amount of up to $700.0 million, which we refer to as the new RBS credit facility. The new RBS credit facility will be divided into two revolving credit tranches, Tranche A and Tranche B. Tranche A of the credit facility will be made available in four advances. Advance 1 of Tranche A will be in an amount of up to $100.0 million and collateralized by mortgages and other security relating to the APL Holland and the MOL Confidence . Advance 2 will be in an amount of up to $22.0 million and collateralized by mortgages and other security relating to the S.A. Sederberg , the S.A. Winterberg , the
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S.A. Helderberg and the Maersk Constantia . Advance 3 will be in an amount of up to $46.0 million and collateralized by mortgages and other security relating to the YM Yantain and Norasia Hamburg. Advance 4 will be in an amount of up to $32.0 million and collateralized by mortgages and other security relating to the Victory I and the YM Milano . We intend to use the borrowings under Tranche A for working capital and to refinance outstanding indebtedness under our existing credit facility with RBS, which is currently collateralized by mortgages and other security relating to the APL Holland , the S.A. Sederberg , the S.A. Winterberg , the S.A. Helderberg and the Maersk Constantia , as well as the Fivos , the Alexandra I , the Dimitris C , the Roberto C , the Maria C , and the MV Achilleas , which we have agreed to sell. Tranche B of the new RBS credit facility will be for a maximum amount of $500.0 million. Tranche B may be used to provide financing for a portion of our contracted fleet, future vessel acquisitions in the container or drybulk sectors, or our other ship financing or corporate activities. The revolving period will commence upon the first drawdown under Tranche A and would have a duration of five years.
              Sixty-six months after the first drawdown the available credit limit under Advance 1 of Tranche A will be reduced by six semi-annual reductions of $11.5 million, and a balloon reduction of $31.0 million together with the last reduction. Six months after the first drawdown, the available credit limit under Advance 2 of Tranche A will be reduced by four semi-annual reductions of $0.75 million, and a balloon reduction of $19.0 million together with the last reduction. Eighteen months after the first drawdown, the available credit limit under Advance 3 of Tranche A will be reduced by four semi-annual reductions of $9.5 million, and a balloon reduction of $8.0 million together with the last reduction. Six months after the first drawdown, the available credit limit under Advance 4 of Tranche A will be reduced by four semi-annual reductions of $6.5 million, and a balloon reduction of $6.0 million together with the last reduction. Each advance made under Tranche B for the financing of a newbuilding would have a term of 10 years from the first drawdown, and there would be no reductions in the available credit limit under each advance until five years after the first drawdown under Tranche A. Six months after this five-year period ends, the available credit limit under each advance would likewise be reduced by equal semi-annual reductions, together with a balloon reduction equal to the balloon reduction that would have been payable as though Tranche B were a 10-year loan repayable on an 18-year straight-line basis. Advances under Tranche B for the purchase of secondhand vessels have similar repayment terms, with slightly shorter time periods for repayment, depending upon the age of the vessel.
              The interest rate on the new RBS credit facility will be 0.75% over LIBOR. A fee of $0.25 million was payable upon the acceptance of the offer letter with an additional fee of $0.25 million due upon the signing of the credit facility. In addition, a commitment fee of 0.3% per annum will accrue on the amount of the undrawn balance of Tranche A, which will be payable quarterly in arrears. We will also be required to pay a 0.175% fee on each drawdown under Tranche B. Should utilization drop below 50.0% at any time, the commitment fee would increase to 0.35%. A guarantee commission in the amount of 0.75% per annum on any guarantees issued will be payable quarterly in advance for each undivided three-month period.
              The new RBS credit facility will contain financial covenants requiring us to:
•
ensure that the aggregate market value of the vessels mortgaged under the new credit facility exceeds 125% of the aggregate outstanding principal amount thereunder at all times;

•
maintain liquidity in the amount of at least $30.0 million;

•
ensure that our net worth exceeds $400.0 million;

•
ensure that our total liabilities, at all times, will be no more than 70% of the market value of our adjusted total assets; and
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•
maintain operating cash flow, defined as EBITDA, of at least 250% of net consolidated interest expense.
              The new RBS credit facility will also contain customary covenants that will require us to maintain adequate insurance coverage and obtain the consent of RBS before we incur any new indebtedness that is secured by the mortgaged vessels. It will also require that our chief executive officer, Dr. Coustas, or members of his family, control at least 51.0% of our outstanding capital stock and that the vessels mortgaged under the facility are at all times managed by our manager. In addition, we and our subsidiaries will not be permitted under the new RBS credit facility to pay dividends if there is a breach of covenant or an event of default.
New Aegean Baltic-Nordbank Credit Facility
              We, as borrower, and certain of our vessel-owning subsidiaries, as guarantors, have signed a commitment letter with Aegean Baltic Bank S.A. and HSH Nordbank AG for a new revolving and term loan credit facility in the aggregate amount of $700.0 million, which we refer to as the new Aegean Baltic-Nordbank credit facility. The new Aegean Baltic-Nordbank credit facility will be divided into two revolving credit tranches, Tranche A and Tranche B. Tranche A of the credit facility will be for a committed amount of $200.0 million and will be collateralized by mortgages and other security relating to the APL Belgium , the APL England , the APL Scotland and the Hyundai Commodore. We intend to use the borrowings under Tranche A to refinance outstanding indebtedness under our existing credit facility with Aegean Baltic Bank, which is currently collateralized by mortgages and other security relating to these same vessels. Tranche B of the new Aegean Baltic-Nordbank credit facility will be for a maximum amount of $500.0 million. Tranche B is to be used to provide financing for future vessel acquisitions, or other ship financing or corporate activities. The interest rate on the new Aegean Baltic-Nordbank credit facility will be 0.75% over LIBOR.
              The revolving period will commence upon signing of this credit facility and will have a duration of five years. The loan will be repayable in up to 20 consecutive quarterly installments beginning in 2011 and a balloon payment, if applicable, together with the last payment due in 2016. An arrangement fee of 0.15% on Tranche A and 0.075% on Tranche B is also payable, half of which was paid upon the acceptance of the commitment letter and the remaining half of which will be paid upon the execution of the final credit facility documentation. In addition, a commitment fee of 0.3% per annum will accrue on the amount of the undrawn balance of Tranche A, which will be payable quarterly in arrears. We will pay a 0.175% fee on each drawdown under Tranche B. Should utilization drop below 50.0% at any time, the commitment fee will increase to 0.35%. An agency fee will be payable in an amount equal to the greater of $0.10 million or 0.05% per annum on the amounts outstanding, payable quarterly in arrears.
              The new Aegean Baltic-Nordbank credit facility will contain financial covenants requiring us to:
•
maintain liquidity in the amount of at least $30.0 million;

•
ensure that our net worth, prior to this offering, exceeds $250.0 million, and after this offering, exceeds $400.0 million;

•
ensure that our total liabilities will, at all times, be no more than 70% of the market value of our adjusted total assets; and

•
maintain operating cash flow, defined as EBITDA, of at least 250.0% of net consolidated interest expense.
              We expect that the new Aegean Baltic-Nordbank credit facility will also contain customary covenants that will require us to maintain adequate insurance coverage and obtain the lenders' consent before we incur any new indebtedness that is secured by the mortgaged vessels. In addition, we and our
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subsidiaries will not be permitted to pay dividends under our new Aegean Baltic-Nordbank credit facility if there is an event of default. Under our new Aegean Baltic-Nordbank credit facility, we and our subsidiaries are not permitted to change our manager, or to allow a change in our ownership, a merger with another entity or a corporate reorganization, without the prior written consent of the lenders. In addition, following this offering, we will not be permitted to de-list from the New York Stock Exchange or be privatized without the prior written consent of our lenders. Events of default under this credit facility include a material adverse change in our business condition and the failure of the Coustas Family to continue to own, directly or indirectly, at least 50% of the voting power of our outstanding capital stock.
Interest Rate Swap Agreements
              In connection with the KEXIM credit facility, under which we pay a fixed rate of interest, on November 15, 2004 we entered into an interest rate hedging transaction with The Royal Bank of Scotland for the notional amount of $62.3 million, on December 15, 2004 we entered into an interest rate swap with The Royal Bank of Scotland for $60.5 million and on April 26, 2005 we entered into an interest rate swap with The Royal Bank of Scotland for $20.0 million (terminated on October 26, 2005 with a net gain of $43,908), each designed to decrease our financing cash outflows by taking advantage of the relatively lower interest rate environment in recent years. In the past, we have also entered into interest swap agreements in connection with certain of our other credit, which were also designed to decrease our financing cash outflows by taking advantage of relatively low interest rate environments. We have recognized these derivative instruments on the balance sheet at their fair value. As of June 15, 2006, these interest rate swaps qualified for hedge accounting and, accordingly, since that time, only differences arising from the change in fair value of the hedging instrument and the hedged item are recognized in our earnings as a result of hedge ineffectiveness. Prior to June 15, 2006, we recognized changes in the fair value of the interest rate swaps in current period earnings as these interest rate swap agreements did not qualify as hedging instruments under the requirements in the accounting literature because we had not adopted a hedging policy. These changes would occur due to changes in market interest rates for debt with substantially similar credit risk, payment profile and terms. We have not held or issued derivative financial instruments for trading or other speculative purposes.
              The commitment letters we have signed with respect to our new Aegean Baltic-Nordbank credit facility and our new RBS credit facility each provide that we may enter into similar interest rate swap agreements in connection with these credit facilities as well.
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 SHARES ELIGIBLE FOR FUTURE SALE
              Upon completion of this offering, we will have 54,557,500 shares of common stock outstanding or 56,095,000 shares if the underwriters' overallotment option is exercised in full. Of these shares, only the 10,250,000 shares sold in this offering, or 11,787,500 shares if the underwriters' overallotment option is exercised in full, will be freely transferable in the United States without restriction under the Securities Act, except for any shares purchased by one of our "affiliates," which will be subject to the resale limitations of Rule 144 under the Securities Act. After the consummation of this offering, our existing stockholders will continue to own 44,307,500 shares of common stock which were acquired in private transactions not involving a public offering and these shares are therefore treated as "restricted securities" for purposes of Rule 144. The restricted securities held by our existing stockholders, officers and directors will be subject to the underwriters' 180-day lock-up agreement and, in the case of our chief executive officer, John Coustas, and the Coustas Family Trust, the underwriters' 730-day lock-up agreement. These agreements do not apply to transfers to immediate family or donees who receive such securities as bona fide gifts; provided that such transferees agree to substantially the same transfer restrictions on the securities they receive. Restricted securities may not be resold except in compliance with the registration requirements of the Securities Act or under an exemption from those registration requirements, such as the exemptions provided by Rule 144, Regulation S and other exemptions under the Securities Act.
              In general, under Rule 144 as currently in effect, a person or persons whose shares are aggregated, who owns shares that were acquired from the issuer or an affiliate at least one year ago, would be entitled to sell within any three-month period, a number of shares that does not exceed the greater of (i) 1% of the then outstanding shares of our common stock, which would be approximately 54,557 shares immediately after this offering, or (ii) an amount equal to the average weekly reported volume of trading in shares of our common stock on all national securities exchanges and/or reported through the automated quotation system of registered securities associations during the four calendar weeks preceding the date on which notice of the sale is filed with the SEC. Sales in reliance on Rule 144 are also subject to other requirements regarding the manner of sale, notice and availability of current public information about us. A person or persons whose shares are aggregated, who is not deemed to have been one of our affiliates at any time during the 90 days immediately preceding the sale may sell restricted securities in reliance on Rule 144(k) without regard to the limitations described above, provided that two years have expired since the later of the date on which the same restricted securities were acquired from us or one of our affiliates. As defined in Rule 144, an "affiliate" of an issuer is a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, that same issuer.
              Our directors and officers and our existing stockholders have agreed during the period beginning from the date of the prospectus and continuing to and including the date 180 days after the date of this prospectus, not to offer, sell, contract to sell or otherwise dispose of any of our securities which are substantially similar to the common stock or which are convertible or exchangeable into securities which are substantially similar to the common stock, without the prior written consent of Merrill Lynch Pierce, Fenner & Smith Incorporated and Citigroup Global Markets Inc. In addition, our chief executive officer, John Coustas, and the Coustas Family Trust have agreed not to offer, pledge, sell, contract to sell, or transfer directly or indirectly 100% of their shares for a period of 730 days following the completion of this offering. These agreements do not apply to transfers to immediate family or donees who receive such securities as bona fide gifts; provided that such transferees agree to substantially the same transfer restrictions on the securities they receive.
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              As a result of these lock-up agreements and rules of the Securities Act, the restricted shares will be available for sale in the public market, subject to certain volume and other restrictions, as mentioned above, as follows:

Days After the Date of this Prospectus
	 	Number of Shares
Eligible for Sale
	 	Comment
	
Date of prospectus	 	0	 	Shares not locked up and eligible for sale freely or under Rule 144.	

180 days	
 	
620,305	
 	
Lock-up of officers and directors and our existing stockholders released; shares will be eligible for sale subject to compliance with Rule 144.	

730 days	
 	
44,307,500	
 	
Lock-up relating to the shares held by John Coustas and the Coustas Family Trust; shares will be eligible for sale.	
              Prior to this offering, there has been no public market for our common stock, and no reliable prediction can be made as to the effect, if any, that future sales or the availability of shares for sale will have on the market price of our common stock prevailing from time to time. Nevertheless, sales of substantial amounts of our common stock in the public market, including shares issued upon the exercise of options that may be granted under any employee stock option or employee stock award plan of ours, or the perception that those sales may occur, could adversely affect prevailing market prices for our common stock.
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 DESCRIPTION OF CAPITAL STOCK
              Under our articles of incorporation, our authorized capital stock consists of 200,000,000 shares of common stock, $.01 par value per share, of which 44,307,500 shares are issued and outstanding and fully paid, and 5,000,000 shares of blank check preferred stock, $.01 par value per share, of which 1,000,000 shares have been designated Series A Participating Preferred Stock in connection with our adoption of a stockholder rights plan as described below under "—Stockholder Rights Plan". All of our shares of stock are in registered form.
Common Stock
              As of the date of this prospectus, we have 44,307,500 shares of common stock outstanding. Upon consummation of this offering, we will have outstanding 54,557,500 shares of common stock or 56,095,000 shares if the underwriters' overallotment option is exercised in full, out of 200,000,000 shares authorized to be issued. Each outstanding share of common stock entitles the holder to one vote on all matters submitted to a vote of stockholders. Subject to preferences that may be applicable to any outstanding shares of preferred stock, holders of shares of common stock are entitled to receive ratably all dividends, if any, declared by our board of directors out of funds legally available for dividends. Holders of common stock do not have conversion, redemption or preemptive rights to subscribe to any of our securities. All outstanding shares of common stock are, and the shares to be sold in this offering when issued and paid for will be, fully paid and nonassessable. The rights, preferences and privileges of holders of shares of common stock are subject to the rights of the holders of any shares of preferred stock which we may issue in the future.
              There were 500 shares of common stock outstanding on October 7, 2005, the date our company was domesticated in the Republic of The Marshall Islands. On September 18, 2006 we effected a 88,615-for-1 stock split.
Other Matters
              Our Articles of Incorporation and Bylaws.     Our purpose is to engage in any lawful act or activity relating to the business of chartering, rechartering or operating containerships, drybulk carriers or other vessels or any other lawful act or activity customarily conducted in conjunction with shipping, and any other lawful act or activity approved by the board of directors. Our articles of incorporation and bylaws do not impose any limitations on the ownership rights of our stockholders.
              Under our bylaws, annual stockholder meetings will be held at a time and place selected by our board of directors. The meetings may be held in or outside of the Marshall Islands. Special meetings may be called by the board of directors or, at the request of the holders of a majority of our issued and outstanding stock entitled to vote on the matters proposed to be considered at such meeting, or by our secretary. Our board of directors may set a record date between 15 and 60 days before the date of any meeting to determine the stockholders that will be eligible to receive notice and vote at the meeting.
              Directors.     Our directors are elected by a plurality of the votes cast at each annual meeting of the stockholders by the holders of shares entitled to vote in the election. There is no provision for cumulative voting.
              The board of directors may change the number of directors to not less than two, nor more than 15, by a vote of a majority of the entire board. Each director shall be elected to serve until the third succeeding annual meeting of stockholders and until his or her successor shall have been duly elected and qualified, except in the event of death, resignation or removal. A vacancy on the board created by death, resignation, removal (which may only be for cause), or failure of the stockholders to elect the entire class of directors to be elected at any election of directors or for any other reason, may be filled only by an affirmative vote of a majority of the remaining directors then in office, even if less than a quorum, at any special meeting called for that purpose or at any regular meeting of the board
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of directors. The board of directors has the authority to fix the amounts which shall be payable to the members of our board of directors for attendance at any meeting or for services rendered to us.
              Dividends.     Our board of directors has adopted a dividend policy, effective upon closing of the offering, which reflects an intention to pay a quarterly dividend of $0.44 per share, or $1.76 per share per year, subject to the limitations discussed below.
              We currently intend to pay dividends in amounts that will allow us to retain a portion of our cash flows to fund vessel, fleet or company acquisitions that we expect to be accretive to earnings and cash flows, and for debt repayment and drydocking costs, as determined by management and our board of directors. The timing and amount of dividend payments will be dependent upon our earnings, financial condition, cash requirements and availability, fleet renewal and expansion, restrictions in our credit facilities, the provisions of Marshall Islands law affecting the payment of distributions to stockholders and other factors. The payment of dividends is not guaranteed or assured, and may be discontinued at any time at the discretion of our board of directors. There can be no assurance that dividends will be paid in the anticipated amounts and frequency set forth in this prospectus. Our ability to pay dividends may be limited by the amount of cash we can generate from operations following the payment of fees and expenses and the establishment of any reserves as well as additional factors unrelated to our profitability. We are a holding company, and we depend on the ability of our subsidiaries to distribute funds to us in order to satisfy our financial obligations and to make dividend payments. See "Risk Factors—Risks Inherent in Our Business" for a discussion of the risks related to our ability to pay dividends. Marshall Islands law generally prohibits the payment of dividends other than from surplus or while a company is insolvent or if it would be rendered insolvent upon the payment thereof.
              Dissenters' Rights of Appraisal and Payment.     Under the Marshall Islands Business Corporations Act, or the BCA, our stockholders have the right to dissent from various corporate actions, including any merger or sale of all or substantially all of our assets not made in the usual course of our business, and to receive payment of the fair value of their shares. In the event of any further amendment of our articles of incorporation, a stockholder also has the right to dissent and receive payment for his or her shares if the amendment alters certain rights in respect of those shares. The dissenting stockholder must follow the procedures set forth in the BCA to receive payment. In the event that we and any dissenting stockholder fail to agree on a price for the shares, the BCA procedures involve, among other things, the institution of proceedings in the high court of the Republic of The Marshall Islands in which our Marshall Islands office is situated or in any appropriate jurisdiction outside the Marshall Islands in which our shares are primarily traded on a local or national securities exchange. The value of the shares of the dissenting stockholder is fixed by the court after reference, if the court so elects, to the recommendations of a court-appointed appraiser.
              Stockholders' Derivative Actions.     Under the BCA, any of our stockholders may bring an action in our name to procure a judgment in our favor, also known as a derivative action, provided that the stockholder bringing the action is a holder of common stock both at the time the derivative action is commenced and at the time of the transaction to which the action relates.
              Anti-takeover Provisions of our Charter Documents.     Several provisions of our articles of incorporation and bylaws may have anti-takeover effects. These provisions are intended to avoid costly takeover battles, lessen our vulnerability to a hostile change of control and enhance the ability of our board of directors to maximize stockholder value in connection with any unsolicited offer to acquire us. However, these anti-takeover provisions, which are summarized below, could also discourage, delay or prevent (1) the merger or acquisition of our company by means of a tender offer, a proxy contest or otherwise, that a stockholder may consider in its best interest and (2) the removal of incumbent officers and directors.
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Blank Check Preferred Stock
              Under the terms of our articles of incorporation, our board of directors has authority, without any further vote or action by our stockholders, to issue up to 5,000,000 shares of blank check preferred stock, of which 1,000,000 shares have been designated Series A Participating Preferred Stock in connection with our adoption of a stockholder rights plan as described below under "—Stockholder Rights Plan". Our board of directors may issue shares of preferred stock on terms calculated to discourage, delay or prevent a change of control of our company or the removal of our management.
Classified Board of Directors
              Our articles of incorporation provide for a board of directors serving staggered, three-year terms. Approximately one-third of our board of directors will be elected each year. This classified board provision could discourage a third party from making a tender offer for our shares or attempting to obtain control of our company. It could also delay stockholders who do not agree with the policies of the board of directors from removing a majority of the board of directors for two years.
Election and Removal of Directors
              Our articles of incorporation and bylaws prohibit cumulative voting in the election of directors. Our bylaws require parties other than the board of directors to give advance written notice of nominations for the election of directors. Our bylaws also provide that our directors may be removed only for cause and only upon the affirmative vote of the holders of at least 66 2 / 3 % of the outstanding shares of our capital stock entitled to vote for those directors. These provisions may discourage, delay or prevent the removal of incumbent officers and directors.
Calling of Special Meetings of Stockholders
              Our bylaws provide that special meetings of our stockholders may be called by our board of directors or, at the request of holders of a majority of the common stock entitled to vote at such meeting, by our secretary.
Advance Notice Requirements for Stockholder Proposals and Director Nominations
              Our bylaws provide that stockholders seeking to nominate candidates for election as directors or to bring business before an annual meeting of stockholders must provide timely notice of their proposal in writing to the corporate secretary.
              Generally, to be timely, a stockholder's notice must be received at our principal executive offices not less than 90 days nor more than 120 days prior to the first anniversary date of the previous year's annual meeting. Our bylaws also specify requirements as to the form and content of a stockholder's notice. These provisions may impede stockholders' ability to bring matters before an annual meeting of stockholders or to make nominations for directors at an annual meeting of stockholders.
Business Combinations
              Although the BCA does not contain specific provisions regarding "business combinations" between companies organized under the laws of the Marshall Islands and "interested stockholders," we have included these provisions in our articles of incorporation. Specifically, our articles of incorporation prohibit us from engaging in a "business combination" with certain persons for three years following the date the person becomes an interested stockholder. Interested stockholders generally include:
•
any person who is the beneficial owner of 15% or more of our outstanding voting stock; or
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•
any person who is our affiliate or associate and who held 15% or more of our outstanding voting stock at any time within three years before the date on which the person's status as an interested stockholder is determined, and the affiliates and associates of such person.
              Subject to certain exceptions, a business combination includes, among other things:
•
certain mergers or consolidations of us or any direct or indirect majority-owned subsidiary of ours;

•
any sale, lease, exchange, mortgage, pledge, transfer or other disposition of our assets or of any subsidiary of ours having an aggregate market value equal to 10% or more of either the aggregate market value of all assets of us, determined on a consolidated basis, or the aggregate value of all the outstanding stock of us;

•
certain transactions that result in the issuance or transfer by us of any stock of the corporation to the interested stockholder;

•
any transaction involving us or any of our subsidiaries that has the effect of increasing the proportionate share of any class or series of stock, or securities convertible into any class or series of stock, of ours or any such subsidiary that is owned directly or indirectly by the interested stockholder or any affiliate or associate of the interested stockholder; and

•
any receipt by the interested stockholder of the benefit directly or indirectly (except proportionately as a stockholder) of any loans, advances, guarantees, pledges or other financial benefits provided by or through us.
              These provisions of our articles of incorporation do not apply to a business combination if:
•
before a person became an interested stockholder, our board of directors approved either the business combination or the transaction in which the stockholder became an interested stockholder;

•
upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of our voting stock outstanding at the time the transaction commenced, other than certain excluded shares;

•
at or following the transaction in which the person became an interested stockholder, the business combination is approved by our board of directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of the holders of at least 66 2 / 3 % of our outstanding voting stock that is not owned by the interest stockholder;

•
the stockholder was or became an interested stockholder prior to the consummation of the initial public offering of our common stock under the Securities Act;

•
a stockholder became an interested stockholder inadvertently and (i) as soon as practicable divests itself of ownership of sufficient shares so that the stockholder ceases to be an interested stockholder; and (ii) would not, at any time within the three-year period immediately prior to a business combination between our company and such stockholder, have been an interested stockholder but for the inadvertent acquisition of ownership; or

•
the business combination is proposed prior to the consummation or abandonment of and subsequent to the earlier of the public announcement or the notice required under our articles of incorporation which (i) constitutes one of the transactions described in the following sentence; (ii) is with or by a person who either was not an interested stockholder during the previous three years or who became an interested stockholder with the approval of the board; and (iii) is approved or not opposed by a majority of the members of the board of directors then in office (but not less than one) who were directors prior to any
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person becoming an interested stockholder during the previous three years or were recommended for election or elected to succeed such directors by a majority of such directors. The proposed transactions referred to in the preceding sentence are limited to:
(i)
a merger or consolidation of our company (except for a merger in respect of which, pursuant to the BCA, no vote of the stockholders of our company is required);

(ii)
a sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions), whether as part of a dissolution or otherwise, of assets of our company or of any direct or indirect majority-owned subsidiary of our company (other than to any direct or indirect wholly-owned subsidiary or to our company) having an aggregate market value equal to 50% or more of either that aggregate market value of all of the assets of our company determined on a consolidated basis or the aggregate market value of all the outstanding shares; or

(iii)
a proposed tender or exchange offer for 50% or more of our outstanding voting stock.
Stockholder Rights Plan
General
              Each share of our common stock includes a right that entitles the holder to purchase from us a unit consisting of one-thousandth of a share of our Series A participating preferred stock at a purchase price of $25.00 per unit, subject to specified adjustments. The rights are issued pursuant to a rights agreement between us and American Stock Transfer & Trust Company, as rights agent. Until a right is exercised, the holder of a right will have no rights to vote or receive dividends or any other stockholder rights.
              The rights may have anti-takeover effects. The rights will cause substantial dilution to any person or group that attempts to acquire us without the approval of our board of directors. As a result, the overall effect of the rights may be to render more difficult or discourage any attempt to acquire us. Because our board of directors can approve a redemption of the rights or a permitted offer, the rights should not interfere with a merger or other business combination approved by our board of directors. The adoption of the rights agreement was approved by our existing stockholders prior to this offering.
              We have summarized the material terms and conditions of the rights agreement and the rights below. For a complete description of the rights, we encourage you to read the rights agreement, which we have filed as an exhibit to the registration statement of which this prospectus is a part.
Detachment of the Rights
              The rights are attached to all certificates representing our outstanding common stock and will attach to all common stock certificates we issue prior to the rights distribution date that we describe below. The rights are not exercisable until after the rights distribution date and will expire at the close of business on the tenth anniversary date of the adoption of the rights plan, unless we redeem or exchange them earlier as described below. The rights will separate from the common stock and a rights distribution date will occur, subject to specified exceptions, on the earlier of the following two dates:
•
10 days following a public announcement that a person or group of affiliated or associated persons or an "acquiring person" has acquired or obtained the right to acquire beneficial ownership of 15% or more of our outstanding common stock; or
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•
10 business days following the start of a tender or exchange offer that would result, if closed, in a person becoming an "acquiring person."
              Existing stockholders and their affiliates are excluded from the definition of "acquiring person" for purposes of the rights, and therefore their ownership or future share acquisitions cannot trigger the rights. Specified "inadvertent" owners that would otherwise become an acquiring person, including those who would have this designation as a result of repurchases of common stock by us, will not become acquiring persons as a result of those transactions.
              Our board of directors may defer the rights distribution date in some circumstances, and some inadvertent acquisitions will not result in a person becoming an acquiring person if the person promptly divests itself of a sufficient number of shares of common stock.
              Until the rights distribution date:
•
our common stock certificates will evidence the rights, and the rights will be transferable only with those certificates; and

•
any new shares of common stock will be issued with rights and new certificates will contain a notation incorporating the rights agreement by reference.
              As soon as practicable after the rights distribution date, the rights agent will mail certificates representing the rights to holders of record of common stock at the close of business on that date. After the rights distribution date, only separate rights certificates will represent the rights.
              We will not issue rights with any shares of common stock we issue after the rights distribution date, except as our board of directors may otherwise determine.
Flip-In Event
              A "flip-in event" will occur under the rights agreement when a person becomes an acquiring person. If a flip-in event occurs and we do not redeem the rights as described under the heading "—Redemption of Rights" below, each right, other than any right that has become void, as described below, will become exercisable at the time it is no longer redeemable for the number of shares of common stock, or, in some cases, cash, property or other of our securities, having a current market price equal to two times the exercise price of such right.
              If a flip-in event occurs, all rights that then are, or in some circumstances that were, beneficially owned by or transferred to an acquiring person or specified related parties will become void in the circumstances the rights agreement specifies.
Flip-Over Event
              A "flip-over event" will occur under the rights agreement when, at any time after a person has become an acquiring person:
•
we are acquired in a merger or other business combination transaction; or

•
50% or more of our assets, cash flows or earning power is sold or transferred.
              If a flip-over event occurs, each holder of a right, other than any right that has become void as we describe under the heading "—Flip-In Event" above, will have the right to receive the number of shares of common stock of the acquiring company having a current market price equal to two times the exercise price of such right.
Antidilution
              The number of outstanding rights associated with our common stock is subject to adjustment for any stock split, stock dividend or subdivision, combination or reclassification of our common stock
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occurring prior to the rights distribution date. With some exceptions, the rights agreement does not require us to adjust the exercise price of the rights until cumulative adjustments amount to at least 1% of the exercise price. It also does not require us to issue fractional shares of our preferred stock that are not integral multiples of one one-hundredth of a share, and, instead we may make a cash adjustment based on the market price of the common stock on the last trading date prior to the date of exercise. The rights agreement reserves us the right to require, prior to the occurrence of any flip-in event or flip-over event that, on any exercise of rights, that a number of rights must be exercised so that we will issue only whole shares of stock.
Redemption of Rights
              At any time until 10 days after the date on which the occurrence of a flip-in event is first publicly announced, we may redeem the rights in whole, but not in part, at a redemption price of $.01 per right. The redemption price is subject to adjustment for any stock split, stock dividend or similar transaction occurring before the date of redemption. At our option, we may pay that redemption price in cash, shares of common stock or any other consideration our board of directors may select. The rights are not exercisable after a flip-in event until they are no longer redeemable. If our board of directors timely orders the redemption of the rights, the rights will terminate on the effectiveness of that action.
Exchange of Rights
              We may, at our option, exchange the rights (other than rights owned by an acquiring person or an affiliate or an associate of an acquiring person, which have become void), in whole or in part. The exchange must be at an exchange ratio of one share of common stock per right, subject to specified adjustments at any time after the occurrence of a flip-in event and prior to:
•
any person other than our existing stockholders becoming the beneficial owner of common stock with voting power equal to 50% or more of the total voting power of all shares of common stock entitled to vote in the election of directors; or

•
the occurrence of a flip-over event.
Amendment of Terms of Rights
              While the rights are outstanding, we may amend the provisions of the rights agreement only as follows:
•
to cure any ambiguity, omission, defect or inconsistency;

•
to make changes that do not adversely affect the interests of holders of rights, excluding the interests of any acquiring person; or

•
to shorten or lengthen any time period under the rights agreement, except that we cannot change the time period when rights may be redeemed or lengthen any time period, unless such lengthening protects, enhances or clarifies the benefits of holders of rights other than an acquiring person.
              At any time when no rights are outstanding, we may amend any of the provisions of the rights agreement, other than decreasing the redemption price.
Registrar and Transfer Agent
              The registrar and transfer agent for our common stock is American Stock Transfer & Trust Company.
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 MARSHALL ISLANDS COMPANY CONSIDERATIONS
              Our corporate affairs are governed by our articles of incorporation and bylaws and by the Business Corporation Act of the Republic of The Marshall Islands, or BCA. The provisions of the BCA resemble provisions of the corporation laws of a number of states in the United States. While the BCA provides that it is to be in interpreted according to the laws of the State of Delaware and other states with substantially similar legislative provisions, there have been few, if any, court cases interpreting the BCA in the Marshall Islands and we can not predict whether Marshall Islands courts would reach the same conclusions as United States courts. Thus, you may have more difficulty in protecting your interests in the face of actions by the management, directors or controlling stockholders than would stockholders of a corporation incorporated in a United States jurisdiction which has developed a substantial body of case law. The following table provides a comparison between the statutory provisions of the BCA and the Delaware General Corporation Law relating to stockholders' rights:

Marshall Islands
	 	Delaware
	
Stockholder Meetings	

•	
 	
Held at a time and place as designated in the bylaws.	
 	
•	
 	
May be held at such time or place as designated in the certificate of incorporation or the bylaws, or if not so designated, as determined by the Board of Directors.	
•	 	May be held within or without the Marshall Islands.	 	•	 	May be held within or without Delaware.	
•	 	Notice:	 	•	 	Notice:	
 	 	•	 	Whenever stockholders are required to take action at a meeting, written notice shall state the place, date and hour of the meeting and indicate that it is being issued by or at the direction of the person calling the meeting.	 	 	 	•	 	Whenever stockholders are required to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, if any, date and hour of the meeting, and the means of remote communication, if any.	
 	 	•	 	A copy of the notice of any meeting shall be given personally or sent by mail not less than 15 nor more than 60 days before the meeting.	 	 	 	•	 	Written notice shall be given not less than 10 nor more than 60 days before the meeting.	

Stockholder's Voting Rights	

•	
 	
Any action required to be taken by meeting of stockholders may be taken without meeting if consent is in writing and is signed by all the stockholders entitled to vote.	
 	
•	
 	
Stockholders may act by written consent to elect directors.	
•	 	Any person authorized to vote may authorize another person to act for him by proxy.	 	•	 	Any person authorized to vote may authorize another person or persons to act for him by proxy.	
•	 	Unless otherwise provided in the articles of incorporation, a majority of shares entitled to vote constitutes a quorum. In no event shall a quorum consist of fewer than one third of the shares entitled to vote at a meeting.	 	•	 	For non-stock companies, certificate of incorporation or bylaws may specify the number of members to constitute a quorum. In the absence of this, one-third of the members shall constitute a quorum.	

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•	 	When a quorum is once present to organize a meeting, it is not broken by the subsequent withdrawal of any stockholders.	 	•	 	For stock corporations, certificate of incorporation or bylaws may specify the number to constitute a quorum but in no event shall a quorum consist of less than one-third of shares entitled to vote at a meeting. In the absence of such specifications, a majority of shares entitled to vote shall constitute a quorum.	
•	 	The articles of incorporation may provide for cumulative voting in the election of directors.	 	•	 	The certificate of incorporation may provide for cumulative voting.	
•	 	Any two or more domestic corporations may merge into a single corporation if approved by the board and if authorized by a majority vote of the holders of outstanding shares at a stockholder meeting.	 	•	 	Any two or more corporations existing under the laws of the state may merge into a single corporation pursuant to a board resolution and upon the majority vote by stockholders of each constituent corporation at an annual or special meeting.	
•	 	Any sale, lease, exchange or other disposition of all or substantially all the assets of a corporation, if not made in the corporation's usual or regular course of business, once approved by the board, shall be authorized by the affirmative vote of two-thirds of the shares of those entitled to vote at a stockholder meeting.	 	•	 	Every corporation may at any meeting of the board sell, lease or exchange all or substantially all of its property and assets as its board deems expedient and for the best interests of the corporation when so authorized by a resolution adopted by the holders of a majority of the outstanding stock of a corporation entitled to vote.	
•	 	Any domestic corporation owning at least 90% of the outstanding shares of each class of another domestic corporation may merge such other corporation into itself without the authorization of the stockholders of any corporation.	 	•	 	Any corporation owning at least 90% of the outstanding shares of each class of another corporation may merge the other corporation into itself and assume all of its obligations without the vote or consent of stockholders; however, in case the parent corporation is not the surviving corporation, the proposed merger shall be approved by a majority of the outstanding stock of the parent corporation entitled to vote at a duly called stockholder meeting.	
•	 	Any mortgage, pledge of or creation of a security interest in all or any part of the corporate property may be authorized without the vote or consent of the stockholders, unless otherwise provided for in the articles of incorporation.	 	•	 	Any mortgage or pledge of a corporation's property and assets may be authorized without the vote or consent of stockholders, except to the extent that the certificate of incorporation otherwise provides.	

Directors	

•	
 	
Board must consist of at least one member.	
 	
•	
 	
Board must consist of at least one member.	
•	 	Number of members can be changed by an amendment to the bylaws, by the stockholders, or by action of the board.	 	•	 	Number of board members shall be fixed by the bylaws, unless the certificate of incorporation fixes the number of directors.	
 	 	 	 	 	 	 	 	 	 	 	
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•	 	If the board is authorized to change the number of directors, it can only do so by a majority of the entire board and so long as no decrease in the number shall shorten the term of any incumbent director.	 	•	 	If the number of directors is fixed by the certificate of incorporation, a change in the number shall be made only by an amendment of the certificate.	
•	 	Removal:	 	•	 	Removal:	
 	 	•	 	Any or all of the directors may be removed for cause by vote of the stockholders.	 	 	 	•	 	Any or all of the directors may be removed, with or without cause, by the holders of a majority of the shares entitled to vote unless the certificate of incorporation otherwise provides.	
 	 	•	 	If the articles of incorporation or the bylaws so provide, any or all of the directors may be removed without cause by vote of the stockholders.	 	 	 	•	 	In the case of a classified board, stockholders may effect removal of any or all directors only for cause.	

Dissenter's Rights of Appraisal	

•	
 	
Stockholder's have a right to dissent from a merger or sale of all or substantially all assets not made in the usual course of business, and receive payment of the fair value of their shares.	
 	
•	
 	
With limited exceptions, appraisal rights are available for the shares of any class or series of stock of a corporation in a merger or consolidation.	
•	 	A holder of any adversely affected shares who does not vote on or consent in writing to an amendment to the articles of incorporation has the right to dissent and to receive payment for such shares if the amendment:	 	 	 	 	 	 	
 	 	•	 	alters or abolishes any preferential right of any outstanding shares having preference; or	 	 	 	 	 	 	
 	 	•	 	creates, alters, or abolishes any provision or right in respect to the redemption of any outstanding shares; or	 	 	 	 	 	 	
 	 	•	 	alters or abolishes any preemptive right of such holder to acquire shares or other securities; or	 	 	 	 	 	 	
 	 	•	 	excludes or limits the right of such holder to vote on any matter, except as such right may be limited by the voting rights given to new shares then being authorized of any existing or new class.	 	 	 	 	 	 	

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Stockholder's Derivative Actions	

•	
 	
An action may be brought in the right of a corporation to procure a judgment in its favor, by a holder of shares or of voting trust certificates or of a beneficial interest in such shares or certificates. It shall be made to appear that the plaintiff is such a holder at the time of bringing the action and that he was such a holder at the time of the transaction of which he complains, or that his shares or his interest therein devolved upon him by operation of law.	
 	
•	
 	
In any derivative suit instituted by a stockholder or a corporation, it shall be averred in the complaint that the plaintiff was a stockholder of the corporation at the time of the transaction of which he complains or that such stockholder's stock thereafter devolved upon such stockholder by operation of law.	
•	 	Complaint shall set forth with particularity the efforts of the plaintiff to secure the initiation of such action by the board or the reasons for not making such effort.	 	 	 	 	
•	 	Such action shall not be discontinued, compromised or settled, without the approval of the High Court of the Republic.	 	 	 	 	
•	 	Reasonable expenses including attorney's fees may be awarded if the action is successful.	 	 	 	 	
•	 	Corporation may require a plaintiff bringing a derivative suit to give security for reasonable expenses if the plaintiff owns less than 5% of any class of stock and the shares have a value of less than $50,000.	 	 	 	 	
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 TAX CONSIDERATIONS
              The following is a discussion of the material Marshall Islands, Liberian and United States federal income tax considerations relevant to an investment decision by a potential investor with respect to the common stock. This discussion does not purport to deal with the tax consequences of owning common stock to all categories of investors, some of which, such as dealers in securities, banks, thrifts or other financial institutions, insurance companies, regulated investment companies, tax-exempt organizations, United States expatriates, persons that hold our common stock as part of a straddle, conversion transaction or hedge, persons deemed to sell our common stock under the constructive sale provisions of the Internal Revenue Code of 1986, or the Code, investors that are subject to the alternative minimum tax, investors whose functional currency is not the United States dollar and investors that own, actually or under applicable constructive ownership rules, 10% or more of our common stock, may be subject to special rules. This discussion deals only with holders who purchase common stock in connection with this offering and hold the common stock as a capital asset. You are encouraged to consult your own tax advisors concerning the overall tax consequences arising in your own particular situation under United States federal, state, local or foreign law of the ownership of common stock.
Marshall Islands Tax Considerations
              In the opinion of Watson, Farley & Williams (New York) LLP, our counsel as to matters of the laws of the Republic of The Marshall Islands, the following are the material Marshall Islands tax consequences of our activities to us and to holders of our common stock who do not reside in, maintain offices in or engage in business in the Marshall Islands.
              We are a Marshall Islands corporation. Because we do not, and we do not expect that we will, conduct business or operations in the Marshall Islands, and because all documentation related to this offering will be executed outside of the Marshall Islands, under current Marshall Islands law we are not subject to tax on income or capital gains and you will not be subject to Marshall Islands taxation or withholding on dividends and other distributions, including upon a return of capital, we make to you as a stockholder. In addition, you will not be subject to Marshall Islands stamp, capital gains or other taxes on the purchase, ownership or disposition of common stock, and you will not be required by the Republic of The Marshall Islands to file a tax return relating to the common stock.
              Each prospective stockholder is urged to consult their tax counsel or other advisor with regard to the legal and tax consequences, under the laws of pertinent jurisdictions, including the Marshall Islands, of their investment in us. Further, it is the responsibility of each stockholder to file all state, local and non-U.S., as well as U.S. federal tax returns that may be required of them.
Liberian Tax Considerations
              In the opinion of Watson, Farley & Williams (New York) LLP, our counsel as to matters of the laws of the Republic of Liberia, the following are the material Liberian tax consequences of the activities of our Liberian subsidiaries.
              The Republic of Liberia enacted a new income tax act effective as of January 1, 2001 (the "New Act"). In contrast to the income tax law previously in effect since 1977, the New Act does not distinguish between the taxation of "non-resident" Liberian corporations, such as our Liberian subsidiaries, which conduct no business in Liberia and were wholly exempt from taxation under the prior law, and "resident" Liberian corporations which conduct business in Liberia and are (and were under the prior law) subject to taxation.
              In 2004, the Liberian Ministry of Finance issued regulations exempting non-resident corporations engaged in international shipping, such as our Liberian subsidiaries, from Liberian taxation under the New Act retroactive to January 1, 2001. It is unclear whether these regulations,
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which ostensibly conflict with the provisions of the New Act, are a valid exercise of the regulatory authority of the Liberian Ministry of Finance such that the regulations can be considered unquestionably enforceable. However, an opinion dated December 23, 2004 addressed by the Minister of Justice and Attorney General of the Republic of Liberia to The LISCR Trust Company stated that the regulations are a valid exercise of the regulatory authority of the Ministry of Finance. The Liberian Ministry of Finance has not at any time since January 1, 2001 sought to collect taxes from any of our Liberian subsidiaries.
              If, however, our Liberian subsidiaries were subject to Liberian income tax under the New Act, they would be subject to tax at a rate of 35% on their worldwide income. As a result, their, and subsequently our, net income and cash flow would be materially reduced. In addition, as the ultimate shareholder of the Liberian subsidiaries we would be subject to Liberian withholding tax on dividends paid by our Liberian subsidiaries at rates ranging from 15% to 20%.
United States Federal Income Tax Considerations
              The following discussion, except with respect to our status as a "passive foreign investment company" for any period and the discussion under the heading "—PFIC Status and Material U.S. Federal Tax Consequences," represents the opinion of Morgan, Lewis & Bockius LLP regarding the material United States federal income tax consequences to us of our activities and, subject to the limitations referred to above under "Tax Considerations," to holders of our common stock. The discussion below with respect to our status as a "passive foreign investment company" and the material United States federal income tax consequences to United States Holders, as defined below, of a "passive foreign investment company," including the discussion under the heading "—PFIC Status and Material U.S. Federal Tax Consequences," represents the opinion of White & Case LLP, our special U.S. tax counsel. Morgan, Lewis & Bockius LLP is rendering no opinion regarding our qualification as a passive foreign investment company for any period. In rendering its opinion Morgan, Lewis & Bockius LLP is relying upon representations that we have made to it regarding our organization, our historic, current and anticipated assets, income and activities and the ownership and trading of our shares and representations that it has received from John Coustas, our chief executive officer, regarding the ownership of the shares of Protector Holdings Inc. and, indirectly, of our shares and certain other matters. If any of such representations are incorrect, then the conclusions expressed herein may be adversely affected. Morgan, Lewis & Bockius LLP is rendering no opinion regarding the laws of the Marshall Islands, Liberia, Cyprus or Singapore. The following discussion of United States federal income tax matters is based on the Code, judicial decisions, administrative pronouncements, and existing and proposed regulations issued by the United States Department of the Treasury, all of which are in effect and available and subject to change, possibly with retroactive effect. The discussion below is based, in part, on the description of our business as described in "Business" above and assumes that we conduct our business as described in that section. Except as otherwise noted, this discussion is based on the assumption that we will not maintain an office or other fixed place of business within the United States. We have no current intention of maintaining such an office. References in this discussion to "we" and "us" are to Danaos Corporation and its subsidiaries on a consolidated basis, unless the context otherwise requires.
United States Federal Income Taxation of Our Company
Taxation of Operating Income: In General
              Unless exempt from United States federal income taxation under the rules discussed below, a foreign corporation is subject to United States federal income taxation in respect of any income that is derived from the use of vessels, from the hiring or leasing of vessels for use on a time, operating or bareboat charter basis, from the participation in a pool, partnership, strategic alliance, joint operating agreement or other joint venture it directly or indirectly owns or participates in that generates such
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income, or from the performance of services directly related to those uses, which we refer to as "shipping income," to the extent that the shipping income is derived from sources within the United States. For these purposes, 50% of shipping income that is attributable to transportation that begins or ends, but that does not both begin and end, in the United States constitutes income from sources within the United States, which we refer to as "United States-source shipping income."
              Shipping income attributable to transportation that both begins and ends in the United States is generally considered to be 100% from sources within the United States. We do not expect to engage in transportation that produces income which is considered to be 100% from sources within the United States.
              Shipping income attributable to transportation exclusively between non-United States ports is generally considered to be 100% derived from sources outside the United States. Shipping income derived from sources outside the United States will not be subject to any United States federal income tax.
              In the absence of exemption from tax under Section 883, our gross United States-source shipping income, unless determined to be effectively connected with the conduct of a United States trade or business, as described below, would be subject to a 4% tax imposed without allowance for deductions as described below.
Exemption of Operating Income from United States Federal Income Taxation
              Under Section 883 of the Code, for taxable years after 2005 we will be exempt from United States federal income taxation on our United States-source shipping income if:
(1)
we are organized in a foreign country (our "country of organization") that grants an "equivalent exemption" to corporations organized in the United States; and

(2)
either
(A)    more than 50% of the value of our stock is owned, directly or indirectly, by individuals who are "residents" of our country of organization or of another foreign country that grants an "equivalent exemption" to corporations organized in the United States, which we refer to as the "50% Ownership Test"; or
(B)    our stock is "primarily and regularly traded on an established securities market" in our country of organization, in another country that grants an "equivalent exemption" to United States corporations, or in the United States, which we refer to as the "Publicly-Traded Test."
              Morgan, Lewis & Bockius LLP is rendering no opinion regarding the laws of the Marshall Islands, Liberia, Cyprus or Singapore. We believe, based on Revenue Ruling 2001-48, 2001-2 C.B. 324, and, in the case of the Marshall Islands, an exchange of notes between the United States and the Marshall Islands, 1990-2 C.B. 321, in the case of Liberia, an exchange of notes between the United States and Liberia, 1988-1 C.B. 463, in the case of Cyprus, an exchange of notes between the United States and Cyprus, 1989-2 C.B. 332 and, in the case of Singapore, an exchange of notes between the United States and Singapore, 1990-2 C.B. 323, (each an "Exchange of Notes") that the Marshall Islands, Liberia, Cyprus and Singapore, the jurisdictions in which we and our ship-owning subsidiaries are incorporated, grant an "equivalent exemption" to United States corporations. Based on advice received from Marshall Islands counsel, we believe that the Marshall Islands continues to honor the Exchange of Notes and that, since the date the Exchange of Notes with the Marshall Islands was entered into, the tax law of the Marshall Islands has not changed so as to be inconsistent with the Exchange of Notes with the United States. Therefore, we believe that, for taxable years after 2005, we will be exempt from United States federal income taxation with respect to our United States-source shipping income if either the 50% Ownership Test or the Publicly-Traded Test is met. For taxable years
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following this offering, it may be difficult to satisfy the 50% Ownership Test due to the widely-held ownership of our stock. Our ability to satisfy the Publicly-Traded Test is discussed below.
              The Section 883 regulations provide, in pertinent part, that stock of a foreign corporation will be considered to be "primarily traded" on an established securities market in a particular country if the number of shares of each class of stock that are traded during any taxable year on all established securities markets in that country exceeds the number of shares in each such class that are traded during that year on established securities markets in any other single country. For taxable years following the completion of our offering, we anticipate that our common stock, which will be the sole class of our issued and outstanding stock, will be "primarily traded" on the New York Stock Exchange.
              Under the regulations, our common stock will be considered to be "regularly traded" on an established securities market if one or more classes of our stock representing more than 50% of our outstanding shares, by total combined voting power of all classes of stock entitled to vote and total value, is listed on the market. We refer to this as the listing threshold. Since our common stock will be our sole class of stock we anticipate that we will satisfy the listing requirement for taxable years following the completion of our offering.
              It is further required that with respect to each class of stock relied upon to meet the listing threshold (i) such class of the stock is traded on the market, other than in minimal quantities, on at least 60 days during the taxable year or 1 / 6 of the days in a short taxable year; and (ii) the aggregate number of shares of such class of stock traded on such market is at least 10% of the average number of shares of such class of stock outstanding during such year or as appropriately adjusted in the case of a short taxable year. We believe we will satisfy the trading frequency and trading volume tests for taxable years following the completion of our offering. Even if this were not the case, the regulations provide that the trading frequency and trading volume tests will be deemed satisfied if, as we expect to be the case with our common stock for taxable years following the completion of our offering, such class of stock is traded on an established market in the United States and such stock is regularly quoted by dealers making a market in such stock.
              Notwithstanding the foregoing, the regulations provide, in pertinent part, that a class of our stock will not be considered to be "regularly traded" on an established securities market for any taxable year in which 50% or more of such class of our outstanding shares of the stock is owned, actually or constructively under specified stock attribution rules, on more than half the days during the taxable year by persons who each own 5% or more of the value of such class of our outstanding stock, which we refer to as the "5 Percent Override Rule."
              For purposes of being able to determine the persons who own 5% or more of our stock, or "5% Stockholders," the regulations permit us to rely on those persons that are identified on Schedule 13G and Schedule 13D filings with the United States Securities and Exchange Commission, or the "SEC," as having a 5% or more beneficial interest in our common stock. The regulations further provide that an investment company which is registered under the Investment Company Act of 1940, as amended, will not be treated as a 5% Stockholder for such purposes.
              We anticipate that more than 50% of our shares of common stock will be owned by 5% stockholders immediately following the offering. In such circumstances, we will be subject to the 5% Override Rule unless we can establish that among the shares included in the closely-held block of our shares of common stock are a sufficient number of shares of common stock that are owned or treated as owned by "qualified stockholders" that the shares of common stock included in such block that are not so treated could not constitute 50% or more of the shares of our common stock for more than half the number of days during the taxable year. In order to establish this, such qualified stockholders would have to comply with certain documentation and certification requirements designed to substantiate their identity as qualified stockholders. For these purposes, a "qualified stockholder" includes (i) an individual that owns or is treated as owning shares of our common stock and is a
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resident of a jurisdiction that provides an exemption that is equivalent to that provided by Section 883 of the Code and (ii) certain other persons. There can be no assurance that we will not be subject to the 5 Percent Override Rule with respect to any taxable year following the completion of our offering.
              We expect that following the offering, approximately 80.0% of our shares (77.9% if the underwriters' overallotment option is exercised) will be treated, under applicable attribution rules, as owned by the Coustas Family Trust whose ownership of our shares will be attributed, during his lifetime, to John Coustas, our chief executive officer, for purposes of Section 883. Dr. Coustas has entered into an agreement with us regarding his compliance, and the compliance of certain entities that he controls and through which he owns our shares, with the certification requirements designed to substantiate status as qualified stockholders. In certain circumstances, including circumstances where Dr. Coustas ceases to be a "qualified stockholder" or where the Coustas Family Trust transfers some or all of our shares that it holds, Dr Coustas's compliance, and the compliance of certain entities that he controls or through which he owns our shares, with the terms of the agreement with us will not enable us to satisfy the requirements for the benefits of Section 883. Following Dr. Coustas's death, there can be no assurance that our shares that are treated, under applicable attribution rules, as owned by the Coustas Family Trust will be treated as owned by a "qualified stockholder" or that any "qualified stockholder" to whom ownership of all or a portion of such ownership is attributed will comply with the ownership certification requirements under Section 883.
              To the extent the benefits of Section 883 are unavailable, our U.S.-source shipping income, to the extent not considered to be "effectively connected" with the conduct of a United States trade or business, as described below, would be subject to a 4% tax imposed by Section 887 of the Code on a gross basis, without the benefit of deductions. Since, under the sourcing rules described above, we expect that no more than 50% of our shipping income would be treated as being derived from United States sources, we expect that the maximum effective rate of United States federal income tax on our gross shipping income would never exceed 2% under the 4% gross basis tax regime. Many of our charters contain provisions obligating the charter to reimburse us for amounts paid in respect of the 4% tax with respect to the activities of the vessel subject to the charter.
              To the extent the benefits of the Section 883 exemption are unavailable and our United States-source shipping income is considered to be "effectively connected" with the conduct of a United States trade or business, as described below, any such "effectively connected" U.S.-source shipping income, net of applicable deductions, would be subject to the United States federal corporate income tax currently imposed at rates of up to 35%. In addition, we may be subject to the 30% "branch profits" taxes on earnings effectively connected with the conduct of such trade or business, as determined after allowance for certain adjustments, and on certain interest paid or deemed paid attributable to the conduct of our United States trade or business.
              Our U.S.-source shipping income, other than leasing income, will be considered "effectively connected" with the conduct of a United States trade or business only if:
•
we have, or are considered to have, a fixed place of business in the United States involved in the earning of shipping income; and

•
substantially all (at least 90%) of our U.S.-source shipping income, other than leasing income, is attributable to regularly scheduled transportation, such as the operation of a vessel that follows a published schedule with repeated sailings at regular intervals between the same points for operatings that begin or end in the United States.
              Our U.S.-source shipping income from leasing will be considered "effectively connected" with the conduct of a U.S. trade or business only if:
•
we have, or are considered to have a fixed place of business in the United States that is involved in the meaning of such leasing income; and
155

•
substantially all (at least 90%) of our U.S.-source shipping income from leasing is attributable to such fixed place of business.
              For these purposes, leasing income is treated as attributable to a fixed place of business where such place of business is a material factor in the realization of such income and such income is realized in the ordinary course of business carried on through such fixed place of business. Based on the foregoing and on the expected mode of our shipping operations and other activities, we believe that none of our U.S.-source shipping income will be "effectively connected" with the conduct of a U.S. trade or business.
United States Taxation of Gain on Sale of Vessels
              Regardless of whether we qualify for exemption under Section 883, we will not be subject to United States federal income taxation with respect to gain realized on a sale of a vessel, provided the sale is considered to occur outside of the United States under United States federal income tax principles. In general, a sale of a vessel will be considered to occur outside of the United States for this purpose if title to the vessel, and risk of loss with respect to the vessel, pass to the buyer outside of the United States. It is expected that any sale of a vessel will be so structured that it will be considered to occur outside of the United States unless any gain from such sale is expected to qualify for exemption under Section 883.
United States Federal Income Taxation of United States Holders
              As used herein, the term "United States Holder" means a beneficial owner of common stock that is a United States citizen or resident, United States corporation or other United States entity taxable as a corporation, an estate the income of which is subject to United States federal income taxation regardless of its source, or a trust if a court within the United States is able to exercise primary jurisdiction over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust.
              If a partnership holds our common stock, the tax treatment of a partner will generally depend upon the status of the partner and upon the activities of the partnership. If you are a partner in a partnership holding our common stock, you are encouraged to consult your tax advisor.
Distributions
              Subject to the discussion of passive foreign investment companies below, any distributions made by us with respect to our common stock to a United States Holder will generally constitute dividends, which may be taxable as ordinary income or "qualified dividend income" as described in more detail below, to the extent of our current or accumulated earnings and profits, as determined under United States federal income tax principles. Distributions in excess of our earnings and profits will be treated first as a nontaxable return of capital to the extent of the United States Holder's tax basis in his common stock on a dollar for dollar basis and thereafter as capital gain. Because we are not a United States corporation, United States Holders that are corporations will not be entitled to claim a dividends received deduction with respect to any distributions they receive from us. Dividends paid with respect to our common stock will generally be treated as "passive income" (or "passive category income" for taxable years beginning after December 31, 2006) or, in the case of certain types of United States Holders, "financial services income" (which will be treated as "general category income" income for taxable years beginning after December 31, 2006) for purposes of computing allowable foreign tax credits for United States foreign tax credit purposes.
              Dividends paid on our common stock to a United States Holder who is an individual, trust or estate (a "United States Individual Holder") should be treated as "qualified dividend income" that is taxable to such United States Individual Holders at preferential tax rates (through 2010) provided that (1) the common stock is readily tradable on an established securities market in the United States (such
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as the New York Stock Exchange); (2) we are not a passive foreign investment company, or PFIC, for the taxable year during which the dividend is paid or the immediately preceding taxable year (see the discussion below under "—PFIC Status and Material U.S. Federal Tax Consequences"); and (3) the United States Individual Holder owns the common stock for more than 60 days in the 121-day period beginning 60 days before the date on which the common stock becomes ex-dividend. Special rules may apply to any "extraordinary dividend". Generally, an extraordinary dividend is a dividend in an amount which is equal to or in excess of ten percent of a stockholder's adjusted basis (or fair market value in certain circumstances) in a share of common stock paid by us. If we pay an "extraordinary dividend" on our common stock that is treated as "qualified dividend income," then any loss derived by a United States Individual Holder from the sale or exchange of such common stock will be treated as long-term capital loss to the extent of such dividend. There is no assurance that any dividends paid on our common stock will be eligible for these preferential rates in the hands of a United States Individual Holder. Any dividends paid by us which are not eligible for these preferential rates will be taxed to a United States Individual Holder at the standard ordinary income rates.
              Legislation was recently introduced in the United States Senate that would deny the preferential rate of federal income tax currently imposed on qualified dividend income with respect to dividends received from a non-U.S. corporation, unless the non-U.S. corporation either is eligible for the benefits of a comprehensive income tax treaty with the United States or is created or organized under the laws of a foreign country which has a comprehensive income tax system. Because the Marshall Islands has not entered into a comprehensive income tax treaty with the United States and imposes only limited taxes on corporations organized under its laws, it is unlikely that we could satisfy either of these requirements. Consequently, if this legislation were enacted in its current form the preferential rate of federal income tax described above may no longer be applicable to dividends received from us. As of the date hereof, it is not possible to predict with certainty whether or in what form the proposed legislation will be enacted.
Sale, Exchange or other Disposition of Common Stock
              Assuming we do not constitute a PFIC for any taxable year, a United States Holder generally will recognize taxable gain or loss upon a sale, exchange or other disposition of our common stock in an amount equal to the difference between the amount realized by the United States Holder from such sale, exchange or other disposition and the United States Holder's tax basis in such stock. Such gain or loss will be treated as long-term capital gain or loss if the United States Holder's holding period is greater than one year at the time of the sale, exchange or other disposition. Such capital gain or loss will generally be treated as United States-source income or loss, as applicable, for United States foreign tax credit purposes. A United States Holder's ability to deduct capital losses is subject to certain limitations.
PFIC Status and Material U.S. Federal Tax Consequences
              Special United States federal income tax rules apply to a United States Holder that holds stock in a foreign corporation classified as a passive foreign investment company, or PFIC, for United States federal income tax purposes. In general, we will be treated as a PFIC in any taxable year in which, after applying certain look-through rules, either:
•
at least 75% of our gross income for such taxable year consists of passive income (e.g., dividends, interest, capital gains and rents derived other than in the active conduct of a rental business); or

•
at least 50% of the average value of our assets during such taxable year produce, or are held for the production of, passive income.

              For purposes of determining whether we are a PFIC, we will be treated as earning and owning our proportionate share of the income and assets, respectively, of any of our subsidiary corporations in
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which we own at least 25% of the value of the subsidiary's stock. Income earned, or deemed earned, by us in connection with the performance of services will not constitute passive income. By contrast, rental income will generally constitute "passive income" unless we are treated under specific rules as deriving our rental income in the active conduct of a trade or business.
              While there are legal uncertainties involved in this determination, our special United States tax counsel, White & Case LLP, is of the opinion that we should not be treated as a PFIC for the taxable year ended December 31, 2005 or the taxable year ending December 31, 2006, based upon our representations to them regarding, among other things, the economics of the leasing arrangements entered into with respect to the CSCL Europe , the CSCL America , the Maersk Derby (ex P&O Nedlloyd Caracas ), the Vancouver Express (ex P&O Nedlloyd Caribbean ) and the CSCL Pusan (ex HN 1559) , and one of the containerships under construction, the HN 1561, and our projected income and assets for the taxable year ending 2006. Based on the foregoing, White & Case LLP has concluded that, although there is no legal authority directly on point, the put options granted by Allco Finance (UK) Limited to a subsidiary of Lloyds Bank and the put options granted by us to Allco Finance (UK) Limited with respect to certain interests in the vessel-owning partnerships should not be treated as exercised on the date such options were granted. Consequently, we should not be treated as owning such vessels for U.S. federal income tax purposes.
              White & Case LLP has also concluded that, although there is no legal authority directly on point, the gross income that we derive from time chartering activities of our subsidiaries should constitute services income rather than rental income. Consequently, such income should not constitute passive income and the vessels that we or our subsidiaries operate in connection with the production of such income should not constitute passive assets for purposes of determining whether we are a PFIC. White & Case LLP believes that there is legal authority supporting this position consisting of case law and IRS pronouncements concerning the characterization of income derived from time charters as services income for other tax purposes. However, in the absence of any legal authority specifically relating to the statutory provisions governing PFICs, the IRS or a court could disagree with this opinion. No assurance can be given that this result will not occur. In addition, although we intend to conduct our affairs in a manner to avoid being classified as a PFIC, we cannot assure you that the nature of our assets, income and operations will not change in the future, or that we can avoid being treated as a PFIC in the future.
              As discussed more fully below, if we were to be treated as a PFIC for any taxable year, a United States Holder would be subject to different taxation rules depending on whether the United States Holder makes an election to treat us as a "Qualified Electing Fund," which election we refer to as a "QEF election." As an alternative to making a QEF election, a United States Holder should be able to make a "mark-to-market" election with respect to our common stock, as discussed below.
Taxation of United States Holders Making a Timely QEF Election
              If a United States Holder makes a timely QEF election, which United States Holder we refer to as an "Electing Holder," for United States federal income tax purposes each year the Electing Holder must report his, her or its pro-rata share of our ordinary earnings and our net capital gain, if any, for our taxable year that ends with or within the taxable year of the Electing Holder, regardless of whether or not distributions were received from us by the Electing Holder. The Electing Holder's adjusted tax basis in the common stock would be increased to reflect taxed but undistributed earnings and profits. Distributions of earnings and profits that had been previously taxed would result in a corresponding reduction in the adjusted tax basis in the common stock and would not be taxed again once distributed. An Electing Holder would generally recognize capital gain or loss on the sale, exchange or other disposition of our common stock. A United States Holder would make a QEF election with respect to any year that our company is treated as a PFIC by filing one copy of IRS Form 8621 with his, her or its United States federal income tax return and a second copy in accordance
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with the instructions to such form. If we were to become aware that we were to be treated as a PFIC for any taxable year, we would notify all United States Holders of such treatment and would provide all necessary information to any United States Holder who requests such information in order to make the QEF election described above.
Taxation of United States Holders Making a "Mark-to-Market" Election
              Alternatively, if we were to be treated as a PFIC for any taxable year and, as we anticipate, our common stock is treated as "marketable stock," a United States Holder would be allowed to make a "mark-to-market" election with respect to our common stock, provided the United States Holder completes and files IRS Form 8621 in accordance with the relevant instructions and related Treasury Regulations. If that election is made, the United States Holder generally would include as ordinary income in each taxable year the excess, if any, of the fair market value of the common stock at the end of the taxable year over such holder's adjusted tax basis in the common stock. The United States Holder also would be permitted an ordinary loss in respect of the excess, if any, of the United States Holder's adjusted tax basis in the common stock over its fair market value at the end of the taxable year, but only to the extent of the net amount previously included in income as a result of the mark-to-market election. A United States Holder's tax basis in his, her or its common stock would be adjusted to reflect any such income or loss amount. Gain realized on the sale, exchange or other disposition of our common stock would be treated as ordinary income, and any loss realized on the sale, exchange or other disposition of the common stock would be treated as ordinary loss to the extent that such loss does not exceed the net mark-to-market gains previously included by the United States Holder.
Taxation of United States Holders Not Making a Timely QEF or Mark-to-Market Election
              Finally, if we were treated as a PFIC for any taxable year, a United States Holder who does not make either a QEF election or a "mark-to-market" election for that year, whom we refer to as a "Non-Electing Holder," would be subject to special rules with respect to (1) any excess distribution (i.e., the portion of any distributions received by the Non-Electing Holder on our common stock in a taxable year in excess of 125% of the average annual distributions received by the Non-Electing Holder in the three preceding taxable years, or, if shorter, the Non-Electing Holder's holding period for the common stock) and (2) any gain realized on the sale, exchange or other disposition of our common stock. Under these special rules:
•
the excess distribution or gain would be allocated ratably over the Non-Electing Holder's aggregate holding period for the common stock;

•
the amount allocated to the current taxable year would be taxed as ordinary income; and

•
the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class of taxpayer for that year, and an interest charge for the deemed deferral benefit would be imposed with respect to the resulting tax attributable to each such other taxable year.
              If a Non-Electing Holder who is an individual dies before January 1, 2010, while owning our common stock, such holder's successor generally will not receive a step-up in tax basis with respect to such stock.
              Under recently issued temporary regulations, if a United States Holder held our common stock during a period when we were treated as a PFIC but the United States Holder did not have a QEF election in effect with respect to us, then in the event that we failed to qualify as a PFIC for a subsequent taxable year, the United States Holder could elect to cease to be subject to the rules described above with respect to those shares by making a "deemed sale" or, in certain circumstances, a "deemed dividend" election with respect to our common stock. If the United States Holder makes a
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deemed sale election, the United States Holder will be treated, for purposes of applying the rules described in the preceding paragraph, as having disposed of our common stock for their fair market value on the last day of the last taxable year for which we qualified as a PFIC (the "termination date"). The United States Holder would increase his, her or its basis in such common stock by the amount of the gain on the deemed sale described in the preceding sentence. Following a deemed sale election, the United States Holder would not be treated, for purposes of the PFIC rules, as having owned the common stock during a period prior to the termination date when we qualified as a PFIC.
              If we were treated as a "controlled foreign corporation" for United States tax purposes for the taxable year that included the termination date, then a United States Holder could make a deemed dividend election with respect to our common stock. If a deemed dividend election is made, the United States Holder is required to include in income as a dividend his, her or its pro rata share (based on all of our stock held by the United States Holder, directly or under applicable attribution rules, on the termination date) of our post-1986 earnings and profits as of the close of the taxable year that includes the termination date (taking only earnings and profits accumulated in taxable years in which we were a PFIC into account). The deemed dividend described in the preceding sentence is treated as an excess distribution for purposes of the rules described in the second preceding paragraph. The United States Holder would increase his, her or its basis in our common stock by the amount of the deemed dividend. Following a deemed dividend election, the United States Holder would not be treated, for purposes of the PFIC rules, as having owned the common stock during a period prior to the termination date when we qualified as a PFIC. For purposes of determining whether the deemed dividend election is available, we will generally be treated as a controlled foreign corporation for a taxable year when, at any time during that year, United States persons, each of whom owns, directly or under applicable attribution rules, common stock having 10% or more of the total voting power of our common stock, in the aggregate own, directly or under applicable attribution rules, shares representing more than 50% of the voting power or value of our common stock.
              A deemed sale or deemed dividend election must be made on the United States Holder's original or amended return for the shareholder's taxable year that includes the termination date and, if made on an amended return, such amended return must be filed not later than the date that is three years after the due date of the original return for such taxable year. Special rules apply where a person is treated, for purposes of the PFIC rules, as indirectly owning our common stock.
United States Federal Income Taxation of "Non-United States Holders"
              A beneficial owner of common stock that is not a United States Holder and is not treated as a partnership for United States federal income tax purposes is referred to herein as a "Non-United States Holder."
Dividends on Common Stock
              Non-United States Holders generally will not be subject to United States federal income tax or withholding tax on dividends received from us with respect to our common stock, unless that income is effectively connected with the Non-United States Holder's conduct of a trade or business in the United States. If the Non-United States Holder is entitled to the benefits of a United States income tax treaty with respect to those dividends, that income generally is taxable only if it is attributable to a permanent establishment maintained by the Non-United States Holder in the United States.
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Sale, Exchange or Other Disposition of Common Stock
              Non-United States Holders generally will not be subject to United States federal income tax or withholding tax on any gain realized upon the sale, exchange or other disposition of our common stock, unless:
•
the gain is effectively connected with the Non-United States Holder's conduct of a trade or business in the United States. If the Non-United States Holder is entitled to the benefits of an income tax treaty with respect to that gain, that gain generally is taxable only if it is attributable to a permanent establishment maintained by the Non-United States Holder in the United States; or

•
the Non-United States Holder is an individual who is present in the United States for 183 days or more during the taxable year of disposition and other conditions are met.
              If the Non-United States Holder is engaged in a United States trade or business for United States federal income tax purposes, the income from the common stock, including dividends and the gain from the sale, exchange or other disposition of the stock that is effectively connected with the conduct of that trade or business will generally be subject to regular United States federal income tax in the same manner as discussed in the previous section relating to the taxation of United States Holders. In addition, in the case of a corporate Non-United States Holder, such holder's earnings and profits that are attributable to the effectively connected income, which are subject to certain adjustments, may be subject to an additional branch profits tax at a rate of 30%, or at a lower rate as may be specified by an applicable income tax treaty.
Backup Withholding and Information Reporting
              In general, dividend payments, or other taxable distributions, made within the United States to a noncorporate United States holder will be subject to information reporting requirements and backup withholding tax if such holder:
•
fails to provide an accurate taxpayer identification number;

•
is notified by the Internal Revenue Service that you have failed to report all interest or dividends required to be shown on your federal income tax returns; or

•
in certain circumstances, fails to comply with applicable certification requirements.
              Non-United States Holders may be required to establish their exemption from information reporting and backup withholding by certifying their status on IRS Form W-8BEN, W-8ECI or W-8IMY, as applicable.
              If a holder sells our common stock to or through a United States office or broker, the payment of the proceeds is subject to both United States backup withholding and information reporting unless the holder certifies that it is a non-United States person, under penalties of perjury, or the holder otherwise establishes an exemption. If a holder sells our common stock through a non-United States office of a non-United States broker and the sales proceeds are paid outside the United States then information reporting and backup withholding generally will not apply to that payment. However, United States information reporting requirements, but not backup withholding, will apply to a payment of sales proceeds, even if that payment is made outside the United States, if a holder sells our common stock through a non-United States office of a broker that is a United States person or has some other contacts with the United States.
              Backup withholding tax is not an additional tax. Rather, a holder generally may obtain a refund of any amounts withheld under backup withholding rules that exceed such stockholder's income tax liability by filing a refund claim with the Internal Revenue Service.
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  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
              We estimate the expenses in connection with the issuance and distribution of our common stock in this offering, other than underwriting discounts and commissions, as follows:

SEC Registration Fee	 	$	27,750	
Printing and Engraving Expenses	 	 	120,000	
Legal Fees and Expenses	 	 	1,500,000	
Accountants' Fees and Expenses	 	 	750,000	
NYSE Fee	 	 	250,000	
NASD Fee	 	 	26,450	
Transfer Agent's Fees and Expenses	 	 	15,000	
Miscellaneous Costs	 	 	369,550	
 	 		
Total	 	$	3,058,750	
 	 		
162

 
 UNDERWRITING
              Merrill Lynch, Pierce, Fenner & Smith Incorporated and Citigroup Global Markets Inc. are acting as joint bookrunning managers of the offering and as representatives of each of the underwriters named below. Subject to the terms and conditions described in an underwriting agreement among us and the underwriters, we have agreed to sell to the underwriters, and the underwriters severally have agreed to purchase from us, the number of shares listed opposite their names below.

 	Underwriters
	 	Number of
Shares
	
Merrill Lynch, Pierce, Fenner & Smith
                      Incorporated	 	 	
Citigroup Global Markets Inc.	 	 	
Dahlman Rose & Company, LLC	 	 	
Jefferies & Company, Inc.	 	 	
Fortis Securities LLC	 	 	
Nomura International plc	 	 	
 	 	 		
 	Total	 	10,250,000	
 	 	 		
              The underwriters have agreed to purchase all of the shares sold under the underwriting agreement if any of these shares are purchased. If an underwriter defaults, the underwriting agreement provides that the purchase commitments of the nondefaulting underwriters may be increased or the underwriting agreement may be terminated.
              We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the underwriters may be required to make in respect of those liabilities.
              The underwriters are offering the shares, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters by their counsel, including the validity of the shares, and other conditions contained in the underwriting agreement, such as the receipt by the underwriters of officer's certificates and legal opinions. The underwriters reserve the right to withdraw or cancel offers to the public and to reject orders in whole or in part.
              The representatives have advised us that the underwriters propose initially to offer the shares to the public at the initial public offering price on the cover of this prospectus and to dealers at that price less a concession not in excess of $            per share. The underwriters may allow, and the dealers may reallow, a discount not in excess of $            per share to other dealers. After the initial public offering, the public offering price, concession and discount may be changed.
              The following table shows the public offering price, underwriting discount and proceeds before expenses to Danaos Corporation. The information assumes either no exercise or full exercise by the underwriters of their overallotment options.

 	 	Per Share
	 	Without Option
	 	With Option
	
Public offering price	 	$	 	 	$	 	 	$	 	
Underwriting discount	 	$	 	 	$	 	 	$	 	
Proceeds, before expenses, to Danaos Corporation	 	$	 	 	$	 	 	$	 	
              The expenses of the offering, not including the underwriting discount, are estimated at $3.1 million and are payable by Danaos Corporation.
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              We have granted options to the underwriters to purchase up to additional shares at the public offering price less the underwriting discount. The underwriters may exercise these options for 30 days from the date of this prospectus solely to cover any overallotments. If the underwriters exercise these options, each will be obligated, subject to conditions contained in the purchase agreement, to purchase a number of additional shares proportionate to that underwriter's initial amount reflected in the above table.
              Together with our directors, our officers and our other stockholders, we have agreed, with exceptions, not to sell or transfer any shares of our common stock for 180 days after the date of this prospectus without first obtaining the written consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated and Citigroup Global Markets Inc. We, our directors, our officers and our other stockholders, have agreed, as applicable, not directly or indirectly, to:
•
offer, pledge, sell or contract to sell any shares of common stock;

•
sell any option or contract to purchase any shares of common stock;

•
purchase any option or contract to sell any shares of common stock;

•
grant any option, right or warrant for the sale of any shares of common stock;

•
lend or otherwise dispose of or transfer any shares of common stock;

•
request or demand that we file a registration statement related to the common stock; or

•
enter into any swap or other agreement that transfers, in whole or in part, the economic consequence of ownership of any shares of common stock whether any such swap or transaction is to be settled by delivery of shares or other securities, in cash or otherwise.
              These lock-up provisions apply to our common stock and to securities convertible into or exchangeable or exercisable for or repayable with our common stock. These provisions also apply to common stock owned now or acquired later by such persons or for which such persons later acquire the power of disposition.
              In addition, our chief executive officer, John Coustas, and the Coustas Family Trust have agreed not to offer, pledge, sell, contract to sell, or transfer directly or indirectly 100% of their shares for a period of 730 days following the completion of this offering. This agreement, and the lock-up agreement with our other directors, officers and other stockholders, does not apply to transfers to immediate family or donees who receive such securities as bona fide gifts; provided that such transferees agree to substantially the same transfer restrictions on the securities they receive.
              Our common stock has been approved for listing on the New York Stock Exchange, subject to official notice of issuance, under the symbol "DAC." In order to meet the requirements for listing on the New York Stock Exchange, the underwriters have undertaken to sell a minimum number of shares to a minimum number of beneficial owners as required by the New York Stock Exchange.
              Before this offering, there has been no public market for our common stock. The initial public offering price will be determined through negotiations among us and the representatives. In addition to prevailing market conditions, the factors to be considered in determining the initial public offering price are:
•
the valuation multiples of publicly traded companies that the representatives believe to be comparable to us;

•
our financial information;

•
the history of, and the prospects for, our company and the industry in which we compete;
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•
an assessment of our management, its past and present operations, and the prospects for, and timing of, our future revenues;

•
the present state of our development; and

•
the above factors in relation to market values and various valuation measures of other companies engaged in activities similar to ours.
              An active trading market for the shares may not develop. It is also possible that after the offering the shares will not trade in the public market at or above the initial public offering price.
              The underwriters do not expect to sell more than 5% of the shares in the aggregate to accounts over which they exercise discretionary authority.
              Until the distribution of the shares is completed, SEC rules may limit underwriters and selling group members from bidding for and purchasing our common stock. However, the representatives may engage in transactions that stabilize the price of the common stock, such as bids or purchases to peg, fix or maintain that price.
              If the underwriters create a short position in the common stock in connection with the offering, i.e. , if they sell more shares than are listed on the cover of this prospectus, the representatives may reduce that short position by purchasing shares in the open market. The representatives may also elect to reduce any short position by exercising all or part of the overallotment options described above. Purchases of the common stock to stabilize its price or to reduce a short position may cause the price of the common stock to be higher than it might be in the absence of such purchases.
              The representatives may also impose a penalty bid on underwriters and selling group members. This means that if the representatives purchase shares in the open market to reduce the underwriters' short position or to stabilize the price of such shares, they may reclaim the amount of the selling concession from the underwriters and selling group members who sold those shares. The imposition of a penalty bid may also affect the price of the shares in that it discourages resales of those shares.
              Neither we nor any of the underwriters makes any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the common stock. In addition, neither we nor any of the underwriters makes any representation that the representatives or the lead managers will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice.
              A prospectus in electronic format may be made available by one or more of the underwriters. The representatives may agree to allocate a number of shares to underwriters for sale to their online brokerage account holders. The representatives will allocate shares to underwriters that may make Internet distributions on the same basis as other allocations. In addition, shares may be sold by the underwriters to securities dealers who resell shares to online brokerage account holders.
              In relation to each member state of the European Economic Area that has implemented the Prospectus Directive (each, a relevant member state), with effect from and including the date on which the Prospectus Directive is implemented in that relevant member state (the relevant implementation date), an offer of common stock described in this prospectus may not be made to the public in that relevant member state prior to the publication of a prospectus in relation to the common stock that has been approved by the competent authority in that relevant member state or, where appropriate, approved in another relevant member state and notified to the competent authority in that relevant member state, all in accordance with the Prospectus Directive, except that, with effect from and
165

including the relevant implementation date, an offer of securities may be offered to the public in that relevant member state at any time:
•
to any legal entity that is authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities or

•
to any legal entity that has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than €43,000,000 and (3) an annual net turnover of more than €50,000,000, as shown in its last annual or consolidated accounts or

•
in any other circumstances that do not require the publication of a prospectus pursuant to Article 3 of the Prospectus Directive.
              Each purchaser of common stock described in this prospectus located within a relevant member state will be deemed to have represented, acknowledged and agreed that it is a "qualified investor" within the meaning of Article 2(1)(e) of the Prospectus Directive.
              For purposes of this provision, the expression an "offer to the public" in any relevant member state means the communication in any form and by any means of sufficient information on the terms of the offer and the securities to be offered so as to enable an investor to decide to purchase or subscribe the securities, as the expression may be varied in that member state by any measure implementing the Prospectus Directive in that member state, and the expression "Prospectus Directive" means Directive 2003/71/EC and includes any relevant implementing measure in each relevant member state.
              The sellers of the common stock have not authorized and do not authorize the making of any offer of common stock through any financial intermediary on their behalf, other than offers made by the underwriters with a view to the final placement of the common stock as contemplated in this prospectus. Accordingly, no purchaser of the common stock, other than the underwriters, is authorized to make any further offer of the common stock on behalf of the sellers or the underwriters.
              This prospectus is only being distributed to, and is only directed at, persons in the United Kingdom that are qualified investors within the meaning of Article 2(1)(e) of the Prospectus Directive ("Qualified Investors") that are also (i) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order") or (ii) high net worth entities, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as "relevant persons"). This prospectus and its contents are confidential and should not be distributed, published or reproduced (in whole or in part) or disclosed by recipients to any other persons in the United Kingdom. Any person in the United Kingdom that is not a relevant person should not act or rely on this document or any of its contents.
              Neither this prospectus nor any other offering material relating to the common stock described in this prospectus has been submitted to the clearance procedures of the Autorité des Marchés Financiers or by the competent authority of another member state of the European Economic Area and notified to the Autorité des Marchés Financiers. The common stock has not been offered or sold and will not be offered or sold, directly or indirectly, to the public in France. Neither this prospectus nor any other offering material relating to the common stock has been or will be:
•
released, issued, distributed or caused to be released, issued or distributed to the public in France; or

•
used in connection with any offer for subscription or sale of the common stock to the public in France.
166

Such offers, sales and distributions will be made in France only:
•
to qualified investors ( investisseurs qualifiés ) and/or to a restricted circle of investors ( cercle restreint d'investisseurs ), in each case investing for their own account, all as defined in, and in accordance with, Article L.411-2, D.411-1, D.411-2, D.734-1, D.744-1, D.754-1 and D.764-1 of the French Code monétaire et financier ; or

•
to investment services providers authorized to engage in portfolio management on behalf of third parties; or

•
in a transaction that, in accordance with article L.411-2-II-1°-or-2°-or 3° of the French Code monétaire et financier and article 211-2 of the General Regulations ( Règlement Général ) of the Autorité des Marchés Financiers, does not constitute a public offer ( appel public à l'épargne ).
              The common stock may be resold directly or indirectly, only in compliance with Articles L.411-1, L.411-2, L.412-1 and L.621-8 through L.621-8-3 of the French Code monétaire et financier .
              The common stock has not been offered or sold and will not be offered or sold, directly or indirectly, to the public in The Republic of The Marshall Islands.
Credit Facility with Fortis Capital
              An affiliate of Fortis Securities LLC, one of the underwriters in this offering, is one of the lenders to one of our subsidiaries under a credit facility in the amount of $144.0 million, of which $126.9 million was outstanding as of June 30, 2006. We have paid customary fees and expenses in the ordinary course of business with respect to this facility but do not intend to use any proceeds from this offering to repay any amounts outstanding under this credit facility. Any proceeds of this offering used to repay existing indebtedness will be allocated to our credit facilities with The Royal Bank of Scotland and with Aegean Baltic Bank and HSH Nordbank. See "Use of Proceeds." For a description of the respective credit facilities, see "Description of Indebtedness."
167

 
 
 LEGAL MATTERS
              The validity of the common stock offered by this prospectus, the matter of enforcement of judgments in the Marshall Islands, Marshall Islands tax considerations and Liberian tax considerations will be passed upon for us by Watson, Farley & Williams (New York) LLP. United States legal matters, other that certain tax matters which will be passed upon for us by White & Case LLP, related to this offering will be passed upon for us by Morgan, Lewis & Bockius LLP, New York, New York. Certain matters relating to U.S. federal income taxation will be passed upon for us by White & Case LLP. The underwriters have been represented by Cravath, Swaine & Moore LLP, New York, New York.
 
 EXPERTS
              The consolidated financial statements of Danaos Corporation as of December 31, 2004 and 2005, and for each of the years in the three-year period ended December 31, 2005, included in this prospectus have been so included in reliance on the audit report of PricewaterhouseCoopers S.A., an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.
              The section in this prospectus entitled "The International Shipping Industry" has been reviewed by Clarkson Research Services Limited, which has confirmed to us that it accurately describes the international containership and drybulk shipping markets, as indicated in the consent of Clarkson Research Services Limited filed as an exhibit to the registration statement on Form F-1 under the Securities Act of which this prospectus is a part.
 
 WHERE YOU CAN FIND ADDITIONAL INFORMATION
              We have filed with the SEC a registration statement on Form F-1 under the Securities Act with respect to the common stock offered hereby. For the purposes of this section, the term registration statement means the original registration statement and any and all amendments including the schedules and exhibits to the original registration statement or any amendment. This prospectus does not contain all of the information set forth in the registration statement we filed. For further information regarding us and the common stock offered in this prospectus, you may desire to review the full registration statement, including the exhibits. The registration statement, including its exhibits and schedules, may be inspected and copied at the public reference facilities maintained by the SEC at 100 F Street, NE, Room 1580, Washington, D.C. 20549. You may obtain information on the operation of the public reference room by calling 1-202-551-8909, and you may obtain copies at prescribed rates from the Public Reference Section of the SEC at its principal office in Washington, D.C. 20549. The SEC maintains a website (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC.
              We will furnish holders of common stock with annual reports containing audited financial statements and a report by our independent registered public accounting firm, and intend to make available quarterly reports containing selected unaudited financial data for the first three quarters of each fiscal year. The audited financial statements will be prepared in accordance with GAAP and those reports will include a "Management's Discussion and Analysis of Financial Condition and Results of Operations" section for the relevant periods. As a "foreign private issuer," we will be exempt from the rules under the Exchange Act prescribing the furnishing and content of proxy statements to stockholders, but will be required to furnish those proxy statements to stockholders under New York Stock Exchange rules. Those proxy statements are not expected to conform to Schedule 14A of the proxy rules promulgated under the Exchange Act. In addition, as a "foreign private issuer," we will be exempt from the rules under the Exchange Act relating to short-swing profit reporting and liability.
168

 
 INDUSTRY DATA
              Clarkson Research Services Limited, or CRS, has provided us with industry statistical and graphical information contained in the section of this prospectus entitled "The International Shipping Industry" relating to the container and drybulk shipping industries. We do not have any knowledge that the information provided by CRS is inaccurate in any material respect. CRS has advised us that this information is drawn from its database and other sources and that: (a) some information in CRS's database is derived from estimates or subjective judgments; (b) the information in the databases of other maritime data collection agencies may differ from the information in CRS's database, and (c) while CRS has taken reasonable care in the compilation of the statistical and graphical information and believes it to be accurate and correct, data compilation is subject to limited audit and validation procedures.
 
 ENFORCEABILITY OF CIVIL LIABILITIES
              We are a Marshall Islands corporation and our executive offices are located outside of the United States in Piraeus, Greece. A majority of our directors and officers and some of the experts in this prospectus reside outside the United States. In addition, a substantial portion of our assets and the assets of our directors, officers and experts are located outside of the United States. As a result, you may have difficulty serving legal process within the United States upon us or any of these persons. You may also have difficulty enforcing, both in and outside of the United States, judgments you may obtain in U.S. courts against us or these persons in any action, including actions based upon the civil liability provisions of U.S. federal or state securities laws.
              Furthermore, there is substantial doubt that the courts of the Marshall Islands or Greece would enter judgments in original actions brought in those courts predicated on U.S. federal or state securities laws.
169

 
 GLOSSARY OF SHIPPING TERMS
              The following are definitions of certain terms that are commonly used in the shipping industry and in this prospectus.
              Address commission.     Commission payable by the shipowner to the charterer, expressed as a percentage of the freight or hire. Although this commission was sought by charterers as a means of reducing the freight or hire, these are capable of being adjusted or increased by the shipowner to allow for it.
              Annual survey.     The inspection of a ship pursuant to international conventions, by a classification society surveyor, on behalf of the flag state, that takes place every year.
              Ballast.     A voyage during which the vessel is not laden with cargo.
              Bareboat charter.     A charter of a ship under which the shipowner is usually paid a fixed amount of charterhire for a certain period of time during which the charterer is responsible for the voyage expenses and vessel operating expenses of the ship and for the management of the ship, including crewing.
              Beam.     The width of a vessel at its widest point; breadth.
              Bunkers.     Heavy fuel and diesel oil used to power a ship's engines.
              Charter.     The hire of a ship for a specified period of time or a particular operating to carry a cargo from a loading port to a discharging port. The contract for a charter is commonly called a charter party.
              Charter-in.     A lease of a vessel by which the owners of a vessel sublet or let the entire vessel, or some principal part of the vessel, to another party that uses the vessel for its own account under its charge.
              Charter owner.     Owners of containerships that charter vessels to shipping service operators, known as liner companies, rather than directly operating container shipping services for shippers.
              Charterer.     The party that hires a ship for a period of time.
              Charter hire.     A sum of money paid to the shipowner by a charterer for the use of a ship. Charter hire paid under an operating charter is also known as "freight."
              Classification society.     An independent organization that certifies that a ship has been built and maintained according to the organization's rules for that type of ship and complies with the applicable rules and regulations of the country of the ship's registry and the international conventions of which that country is a member. A ship that receives its certification is referred to as being "in-class."
              Deadweight Ton—"dwt."     A unit of a vessel's capacity for cargo, fuel oil, stores and crew, measured in tons. A vessel's dwt or total deadweight is the total weight the vessel can carry when loaded to a particular load line.
              Draft.     The depth of a vessel below the waterline, loaded to full dwt capacity.
              Drybulk.     Non-liquid cargoes of commodities shipped in an unpackaged state.
              Drybulk carriers.     Vessels that are specially designed and built to carry large volumes of drybulk.
              Drydocking.     The removal of a ship from the water for inspection and repair of those parts of a ship that are below the water line. During drydockings, which are required to be carried out
170

periodically, certain mandatory classification society inspections are carried out and relevant certifications are issued. Drydockings for containerships are generally required once every five years, as part of a Special Survey.
              Feeder.     A vessel which is part of a cargo network in which the larger, faster vessels only call at the major ports at both ends of the area being covered and the smaller ports are served by the smaller feeder vessels which transfer the cargo to and from the major port terminals. This process keeps the larger vessels filled closer to capacity and spares them the expense and loss of time loading and unloading cargo in the smaller ports.
              Fully cellular containership.     A vessel specifically designed to carry ISO standard containers, with cell-guides under deck and necessary fittings and equipment on deck.
              Gear.     On-board equipment used to load and unload vessels.
              Geared.     A vessel outfitted with equipment to load and unload its cargo.
              Gearless.     A vessel that lacks its own equipment to load and unload cargo.
              General cargo ship.     This older type of cargo ship generally has "tween decks for mixed general cargo, tanks for liquid cargo, and maybe some refrigerated capacity. Also has deep holds for bulk cargo. Usually the hatch openings are too small for below deck container stowage, but containers can be stacked on the deck. The general cargo ship often has its own cranes and derricks for loading and discharging cargo.
              Handymax.     A drybulk carrier of approximately 40,000 dwt to 60,000 dwt.
              Handysize.     A drybulk carrier of approximately 10,000 dwt to 40,000 dwt.
              Hull.     Shell or body of a ship.
              IMO.     International Maritime Organization, a United Nations agency that issues international standards for shipping.
              Intermediate survey.     The inspection of a ship by a classification society surveyor that takes place 24 to 36 months after each Special Survey.
              Liner company.     A company that operates ocean carriers that carry many different cargoes on the same voyage on regular schedules.
              LNG.     Liquid natural gas.
              LOA.     Length overall.
              LPG.     Liquid petroleum gas.
              Multipurpose ship or MPP.     A newer version of general cargo ship with holds designed for container stowage. The holds generally have "tween decks and containers can be stacked and lashed onto the hatch covers. The MPP is still capable of carrying breakbulk cargoes, and bulk cargoes. Some are also equipped with tanks for liquid cargoes. It generally also has its own cranes and derricks, sometimes with heavy lift capability.
              Newbuilding.     A new ship under construction or just completed.
              Off-hire.     The period in which a ship is not available for service under a time charter and, accordingly, the charterer generally is not required to pay the hire rate. Off-hire periods can include days spent on repairs, drydocking and surveys, whether or not scheduled.
171

              Orderbook.     A reference to outstanding orders for the construction of vessels.
              Panamax.     A vessel capable of transiting the Panama Canal.
              Post-Panamax.     A vessel with a beam of more than 33 meters that cannot transit the Panama Canal.
              Protection and indemnity insurance.     Insurance obtained through a mutual association formed by shipowners to provide liability indemnification protection from various liabilities to which they are exposed in the course of their business, and which spreads the liability costs of each member by requiring contribution by all members in the event of a loss.
              Ro-Ro.     Roll-On Roll-Off vessels. These vessels are designed for wheeled or tracked cargo that can load itself onboard. Cargo generally drives onto through decks via ramps, rather than being lifted through hatches.
              Scrapping.     The sale of a ship as scrap metal.
              Sister ships.     Ships of the same class and specifications typically built at the same shipyard.
              Special survey.     The inspection of a ship by a classification society surveyor that takes place every five years, as part of the recertification of the ship by a classification society.
              Spot market.     The market for charters of vessels with durations of less than one year.
              Standing slot capacity.     Nominal static ship container capacity.
              TEU.     Twenty-foot equivalent unit, the international standard measure for containers and containership capacity.
              Time charter.     A charter under which the shipowner hires out a ship for a specified period of time. The shipowner is responsible for providing the crew and paying vessel operating expenses while the charterer is responsible for paying the voyage expenses and additional operating insurance. The shipowner is paid charterhire, which accrues on a daily basis.
              Ton and tonnes.     Each means metric tons.
              Vessel operating expenses.     The costs of operating a ship, primarily consisting of crew wages and associated costs, insurance premiums, management fees, lubricants and spare parts and repair and maintenance costs. Vessel operating expenses exclude fuel cost, port expenses, agents' fees, canal dues and extra war risk insurance.
              Voyage operating expenses.     Voyage operating expenses include port and canal charges and bunker (fuel) expenses, address commissions and brokerage commissions.
172

 
 
 INDEX TO FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm	 	F-2	

Consolidated Balance Sheets as of December 31, 2004 and 2005	
 	
F-3	

Consolidated Statements of Income for the Years Ended December 31, 2003, 2004 and 2005	
 	
F-4	

Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 2003, 2004 and 2005	
 	
F-5	

Consolidated Statements of Cash Flows for the Years Ended December 31, 2003, 2004 and 2005	
 	
F-6	

Notes to the Consolidated Financial Statements	
 	
F-7	

Consolidated Balance Sheets as of December 31, 2005 and June 30, 2006 (Unaudited)	
 	
F-29	

Consolidated Statements of Income for the Six Months Ended June 30, 2005 (Unaudited) and 2006 (Unaudited)	
 	
F-30	

Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2005 (Unaudited) and June 30, 2006 (Unaudited)	
 	
F-31	

Notes to the Consolidated Financial Statements	
 	
F-32	
F-1

 
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Danaos Corporation
              We have audited the accompanying consolidated balance sheets of Danaos Corporation, formerly Danaos Holdings Inc, (the "Company") and its subsidiaries as of December 31, 2005 and December 31, 2004, and the related consolidated statements of income, stockholders' equity and cash flows for the years ended December 31, 2005, 2004 and 2003. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
              We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
              In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Danaos Corporation and its subsidiaries at December 31, 2005 and December 31, 2004, and the results of their operations and their cash flows for the years ended December 31, 2005, 2004 and 2003 in conformity with accounting principles generally accepted in the United States of America.
PricewaterhouseCoopers S.A.
April 28, 2006
(except for note 19b which is as of
September 18, 2006)
Piraeus, Greece
F-2

 
 DANAOS CORPORATION

CONSOLIDATED BALANCE SHEETS

(Expressed in thousands of United States Dollars)

 	 	 	 	Years ended December 31,
	
 	 	Notes
	 	2004
	 	2005
	
 ASSETS	 	 	 	 	 	 	 	 	
CURRENT ASSETS	 	 	 	 	 	 	 	 	
 	Cash and cash equivalents	 	 	 	$	97,008	 	$	38,000	
 	Restricted cash	 	3	 	 	6,320	 	 	724	
 	Accounts receivable, net	 	 	 	 	2,574	 	 	14,107	
 	Inventories	 	 	 	 	2,747	 	 	2,591	
 	Prepaid expenses	 	 	 	 	1,390	 	 	870	
 	Due from related parties	 	13	 	 	818	 	 	4,544	
 	Net investment in finance lease, current portion	 	9	 	 	3,694	 	 	860	
 	Other current assets	 	8	 	 	14,989	 	 	2,316	
 	 	 	 		 		
 	Total current assets	 	 	 	 	129,540	 	 	64,012	

NON-CURRENT ASSETS	

 	

 	

 	Fixed assets, net	 	4,12	 	$	681,336	 	$	654,222	
 	Advances for vessel acquisitions	 	 	 	 	—	 	 	12,350	
 	Advances for vessels under construction	 	5	 	 	127,912	 	 	161,375	
 	Accounts receivable in respect of lease agreements, net of current portion	 	9	 	 	60,828	 	 	44,619	
 	Net investment in finance lease, net of current portion	 	9	 	 	860	 	 	—	
 	Deferred charges, net	 	6	 	 	5,505	 	 	7,758	
 	Other assets	 	 	 	 	—	 	 	1,422	
 	 	 	 		 		
 	Total non-current assets	 	 	 	 	876,441	 	 	881,746	
 	 	 	 		 		
 	Total assets	 	 	 	$	1,005,981	 	$	945,758	

LIABILITIES AND STOCKHOLDERS' EQUITY	

 	

 	

CURRENT LIABILITIES	

 	

 	

 	Accounts payable	 	7	 	$	5,564	 	$	6,065	
 	Accrued liabilities	 	10	 	 	6,094	 	 	2,905	
 	Long-term debt, current portion	 	12	 	 	61,338	 	 	57,521	
 	Unearned revenue	 	 	 	 	4,606	 	 	3,993	
 	 	 	 		 		
 	Total current liabilities	 	 	 	 	77,602	 	 	70,484	
 	 	 	 		 		
LONG-TERM LIABILITIES	 	 	 	 	 	 	 	 	
 	Long-term debt, net of current portion	 	12	 	$	540,062	 	$	609,217	
 	Other liabilities	 	11	 	 	3,849	 	 	3,332	
 	 	 	 		 		
 	Total long-term liabilities	 	 	 	 	543,911	 	 	612,549	
 	 	 	 		 		
 	Total liabilities	 	 	 	$	621,513	 	$	683,033	
 	 	 	 		 		
 	Commitments and Contingencies	 	18	 	 	—	 	 	—	

STOCKHOLDERS' EQUITY	

 	

 	

 	Preferred stock (5,000,000 preferred shares, par value $.01, authorized and not issued in 2005 and in 2004, 0 preferred shares authorized, not issued or outstanding)	 	 	 	 	—	 	 	—	
 	Common stock (200,000,000 common shares, par value $.01, authorized and 44,307,500 common shares, par value $.01, issued and outstanding in 2005, and in 2004, 44,307,500 common shares, par value $.01, issued, authorized and outstanding)	 	19	 	 	443	 	 	443	
 	Additional paid-in capital	 	 	 	 	90,529	 	 	90,529	
 	Retained earnings	 	 	 	 	293,496	 	 	171,753	
 	 	 	 		 		
 	Total stockholders' equity	 	 	 	 	384,468	 	 	262,725	
 	 	 	 		 		
 	Total liabilities and stockholders' equity	 	 	 	$	1,005,981	 	$	945,758	
 	 	 	 		 		
The accompanying notes are an integral part of these consolidated financial statements
F-3

 
 
 DANAOS CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(Expressed in thousands of United States Dollars, except share and per share amounts)

 	 	 	 	Years ended December 31,
	 	
 	 	Notes
	 	2003
	 	2004
	 	2005
	 	
OPERATING REVENUES	 	17	 	$	146,118	 	$	208,268	 	$	241,381	 	

OPERATING EXPENSES:	

 	

 	

 	

 	
 	Voyage expenses	 	 	 	 	(5,031	)	 	(6,314	)	 	(7,525	)	
 	Vessel operating expenses	 	 	 	 	(41,860	)	 	(46,247	)	 	(53,883	)	
 	Depreciation	 	4	 	 	(29,201	)	 	(31,694	)	 	(27,114	)	
 	Amortization of deferred drydocking and special survey costs	 	6	 	 	(1,279	)	 	(2,096	)	 	(3,922	)	
 	Bad debts expense	 	 	 	 	(67	)	 	(429	)	 	(200	)	
 	General and administration expenses	 	 	 	 	(4,132	)	 	(4,050	)	 	(5,058	)	
 	Gain/(Loss) on sale of vessels	 	 	 	 	6,765	 	 	7,667	 	 	—	 	
 	 	 	 		 		 		 	
Income From Operations	 	 	 	 	71,313	 	 	125,105	 	 	143,679	 	

OTHER INCOME (EXPENSE):	

 	

 	

 	

 	
 	Interest income	 	 	 	 	1,207	 	 	2,638	 	 	6,345	 	
 	Interest expenses	 	 	 	 	(8,792	)	 	(11,559	)	 	(23,415	)	
 	Other finance costs, net	 	 	 	 	(406	)	 	1,424	 	 	(7,081	)	
 	Other income/expense, net	 	 	 	 	647	 	 	1,076	 	 	491	 	
 	Gain/(Loss) on fair value of derivatives	 	 	 	 	(4,115	)	 	(2,225	)	 	2,831	 	
 	 	 	 		 		 		 	
Total Other Income (Expenses), net	 	 	 	 	(11,459	)	 	(8,646	)	 	(20,829	)	

Net Income	

 	
 $	
59,854	
 	
$	
116,459	
 	
$	
122,850	

EARNINGS PER SHARE	

 	

 	

 	

 	
 	Basic and diluted net income per share	 	 	 	$	1.35	 	$	2.63	 	$	2.77	 	
 	 	 	 		 		 		 	
 	Basic and diluted weighted average number of shares	 	 	 	 	44,308	 	 	44,308	 	 	44,308	 	
 	 	 	 		 		 		 	
The accompanying notes are an integral part of these consolidated financial statements
F-4

 
 DANAOS CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

(Expressed in thousands of United States Dollars)

 	 	Share
Capital
	 	Paid in
Capital
	 	Retained
Earnings
	 	Total
	 	
Balance as of January 1, 2003	 	$	443	 	$	88,098	 	$	137,045	 	$	225,586	 	
 	 		 		 		 		 	
Changes during the year ended December 31, 2003	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	 	 	—	 	 	—	 	 	59,854	 	 	59,854	 	
Contributions/(Distributions)	 	 	—	 	 	10,726	 	 	—	 	 	10,726	 	
Dividends	 	 	—	 	 	—	 	 	(7,500	)	 	(7,500	)	
 	 		 		 		 		 	
Balance as of December 31, 2003	 	 	443	 	 	98,824	 	 	189,399	 	 	288,666	 	

Changes during the year ended December 31, 2004	

 	

 	

 	

 	
 	
Net Income	 	 	—	 	 	—	 	 	116,459	 	 	116,459	 	
Contributions/(Distributions)	 	 	—	 	 	(8,295	)	 	—	 	 	(8,295	)	
Dividends	 	 	—	 	 	—	 	 	(12,362	)	 	(12,362	)	
 	 		 		 		 		 	
Balance as of December 31, 2004	 	 	443	 	 	90,529	 	 	293,496	 	 	384,468	 	

Changes during the year ended December 31, 2005	

 	

 	

 	

 	
 	
Contributions/(Distributions)	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net Income	 	 	—	 	 	—	 	 	122,850	 	 	122,850	 	
Dividends	 	 	—	 	 	—	 	 	(244,593	)	 	(244,593	)	
 	 		 		 		 		 	
Balance as of December 31, 2005	 	$	443	 	$	90,529	 	$	171,753	 	$	262,725	 	
 	 		 		 		 		 	
The accompanying notes are an integral part of these consolidated financial statements
F-5

 
 
 DANAOS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in thousands of United States Dollars)

 	 	Years ended December 31,
	 	
 	 	2003
	 	2004
	 	2005
	 	
Cash Flows from Operating Activities:	 	 	 	 	 	 	 	 	 	 	
Net income	 	$	59,854	 	$	116,459	 	$	122,850	 	
Adjustments to reconcile net income to net cash provided by operating activities	 	 	 	 	 	 	 	 	 	 	
 	Depreciation	 	 	29,201	 	 	31,694	 	 	27,114	 	
 	Amortization of deferred drydocking and special survey costs	 	 	1,279	 	 	2,096	 	 	3,922	 	
 	Amortization of finance costs	 	 	—	 	 	—	 	 	101	 	
 	Payments for drydocking/special survey	 	 	(2,475	)	 	(5,159	)	 	(4,505	)	
 	Loss/(Gain) on sale of vessels	 	 	(6,765	)	 	(7,667	)	 	—	 	
 	Change in fair value of derivative instruments	 	 	2,575	 	 	1,274	 	 	(1,939	)	

(Increase)/Decrease in:	

 	

 	

 	
 	
 	Accounts receivable	 	 	49	 	 	(2,773	)	 	4,676	 	
 	Prepaid expenses	 	 	21	 	 	(753	)	 	520	 	
 	Inventories	 	 	(29	)	 	(1,092	)	 	156	 	
 	Net investment in finance lease	 	 	3,303	 	 	3,494	 	 	3,694	 	
 	Other current assets	 	 	143	 	 	(14,119	)	 	12,673	 	

Increase/(Decrease) in:	

 	

 	

 	
 	
 	Due from related parties	 	 	(7,932	)	 	3,043	 	 	(3,726	)	
 	Accounts payable	 	 	3,451	 	 	(1,012	)	 	501	 	
 	Accrued liabilities	 	 	773	 	 	2,676	 	 	(3,189	)	
 	Unearned revenue	 	 	1,770	 	 	895	 	 	(613	)	
 	 		 		 		 	
 	Net Cash provided by Operating Activities	 	 	85,218	 	 	129,056	 	 	162,235	 	
 	 		 		 		 	
Cash Flows from Investing Activities:	 	 	 	 	 	 	 	 	 	 	
 	Vessel acquisitions including advances for vessel acquisitions	 	 	(99,825	)	 	—	 	 	(12,350	)	
 	Vessels under construction	 	 	(151,224	)	 	(170,128	)	 	(28,188	)	
 	Proceeds from sale of vessels	 	 	24,614	 	 	15,381	 	 	—	 	
 	 		 		 		 	
 	Net Cash used in Investing Activities	 	 	(226,435	)	 	(154,747	)	 	(40,538	)	
 	 		 		 		 	
Cash Flows from Financing Activities:	 	 	 	 	 	 	 	 	 	 	
 	Proceeds from long-term debt	 	 	239,350	 	 	149,167	 	 	400,000	 	
 	Payments of long-term debt	 	 	(54,718	)	 	(82,754	)	 	(339,937	)	
 	Contributions from stockholders	 	 	10,726	 	 	—	 	 	—	 	
 	Distributions to stockholders	 	 	—	 	 	(8,295	)	 	—	 	
 	Dividends paid	 	 	(7,500	)	 	(12,362	)	 	(244,593	)	
 	Deferred finance costs	 	 	—	 	 	—	 	 	(791	)	
 	Deferred public offering costs	 	 	—	 	 	—	 	 	(980	)	
 	Decrease/(increase) of restricted cash	 	 	(526	)	 	(623	)	 	5,596	 	
 	 		 		 		 	
 	Net Cash (used in)/provided by Financing Activities	 	 	187,332	 	 	45,133	 	 	(180,705	)	
 	 		 		 		 	
Net Increase/(Decrease) in Cash and Cash Equivalents	 	 	46,115	 	 	19,442	 	 	(59,008	)	
 	 		 		 		 	
 	Cash and Cash Equivalents, Beginning of Year	 	 	31,451	 	 	77,566	 	 	97,008	 	
 	 		 		 		 	
 	Cash and Cash Equivalents, End of Year	 	$	77,566	 	$	97,008	 	$	38,000	 	
 	 		 		 		 	
Supplementary Cash Flow information	 	 	 	 	 	 	 	 	 	 	
Cash paid for interest	 	$	8,203	 	$	11,084	 	$	24,283	 	
 	 		 		 		 	
Non-cash capitalized interest on vessels under construction	 	$	1,572	 	$	2,916	 	$	5,275	 	
 	 		 		 		 	
The accompanying notes are an integral part of these consolidated financial statements
F-6

 
 DANAOS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1 Basis of Presentation and General Information
              The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP"). The reporting and functional currency of the Company is the United States Dollar.
              Danaos Corporation ("Danaos"), formerly Danaos Holdings Limited, was formed on December 7, 1998 under the laws of Liberia and is presently the sole owner of all outstanding shares of the companies (the "Danaos Subsidiaries") listed below. Danaos Holdings Limited was redomiciled in the Marshall Islands on October 7, 2005. In connection with the redomiciliation, the Company changed its name to Danaos Corporation. On October 14, 2005 the Company filed and the Marshall Islands accepted Amended and Restated Articles of Incorporation. Under the Amended and Restated Articles of Incorporation, the authorized capital stock of Danaos Corporation increased to 100,000 shares of common stock with a par value of $0.01 and 1,000 shares of preferred stock with a par value of $0.01. On September 18, 2006, the Company filed and Marshall Islands accepted Amended and Restated Articles of Incorporation. Under the Amended and Restated Articles of Incorporation, the authorized capital stock of Danaos Corporation increased to 200,000,000 shares of common stock with a par value of $0.01 and 5,000,000 shares of preferred stock with a par value of $0.01. See note 19 for additional information regarding stockholders' equity.
              The Company's vessels operate worldwide, carrying containers and dry cargo for many of the world's leading charterers. The Company manages its operations from its offices in Piraeus, Greece.
              The Company's principal business is the acquisition and operation of vessels. Danaos conducts its operations through the vessel owning subsidiaries whose principal activity is the ownership and operation of container and dry cargo type vessels (see note 2) that are under the exclusive management of a related party of the Company (see note 13).
              The consolidated financial statements have been prepared to reflect the consolidation of the companies listed below. The historical balance sheets and results of operations of the companies listed below have been reflected in the consolidated balance sheets and consolidated statements of income, cash flows and stockholders' equity at and for each period since their respective incorporation dates.
              The consolidated companies are referred to as "Danaos," or "the Company."
              As of December 31, 2005, Danaos included the vessel owning companies listed below:

Company
	 	Date of
Incorporation
	 	Vessel Name
	 	Vessel Type
	 	Year
Built
	 	DWT
	 	TEU
	
Deleas Shipping Ltd.	 	July 28, 1987	 	Pacific Bridge	 	Container	 	1984	 	—	 	2,130	

Seasenator Shipping Ltd.	
 	
June 7, 1996	
 	
Norasia Hamburg	
 	
Container	
 	
1989	
 	
—	
 	
3,908	

Seacaravel Shipping Ltd.	
 	
June 7, 1996	
 	
YM Yantian	
 	
Container	
 	
1989	
 	
—	
 	
3,908	

Peninsula Maritime Inc.	
 	
June 10, 1997	
 	
Eagle Express	
 	
Container	
 	
1978	
 	
—	
 	
1,704	

Appleton Navigation S.A.	
 	
May 12, 1998	
 	
CMA CGM Komodo	
 	
Container	
 	
1991	
 	
—	
 	
2,917	

Geoffrey Shipholding Ltd.	
 	
September 22, 1997	
 	
CMA CGM Kalamata	
 	
Container	
 	
1990	
 	
—	
 	
2,917	

Lacey Navigation Inc.	
 	
March 5, 1998	
 	
CMA CGM Elbe	
 	
Container	
 	
1991	
 	
—	
 	
2,917	

Saratoga Trading S.A.	
 	
May 8, 1998	
 	
YM Milano	
 	
Container	
 	
1998	
 	
—	
 	
3,129	

Tyron Enterprises S.A.	
 	
January 26, 1999	
 	
Henry	
 	
Container	
 	
1986	
 	
—	
 	
3,039	

F-7

 

Ferrous Shipping (Private) Ltd.	
 	
December 6, 2000	
 	
APL England	
 	
Container	
 	
2001	
 	
—	
 	
5,506	

Cobaltium Shipping (Private) Ltd.	
 	
December 6, 2000	
 	
APL Scotland	
 	
Container	
 	
2001	
 	
—	
 	
5,506	

Lissos Shipping (Private) Ltd.	
 	
February 16, 2001	
 	
APL Holland	
 	
Container	
 	
2001	
 	
—	
 	
5,506	

Orchid Navigation Corp.	
 	
May 20, 1996	
 	
Dimitris C	
 	
Dry cargo	
 	
1994	
 	
43,814	
 	
—	

Roberto C Maritime Inc.	
 	
February 19, 2002	
 	
Roberto C	
 	
Dry cargo	
 	
1994	
 	
45,210	
 	
—	

Alexandra Navigation Inc.	
 	
March 5, 2002	
 	
Alexandra I	
 	
Dry cargo	
 	
1994	
 	
69,090	
 	
—	

Mercator Shipping Inc.	
 	
April 4, 2002	
 	
MV Achilleas	
 	
Dry cargo	
 	
1994	
 	
69,180	
 	
—	

Ortelius Maritime Inc.	
 	
April 4, 2002	
 	
Fivos	
 	
Dry cargo	
 	
1994	
 	
69,659	
 	
—	

Independence Navigation Inc.	
 	
October 9, 2002	
 	
Independence	
 	
Container	
 	
1986	
 	
—	
 	
3,045	

Maria C Maritime Inc.	
 	
February 19, 2002	
 	
Maria C	
 	
Dry cargo	
 	
1994	
 	
45,205	
 	
—	

Bounty Investment Inc.	
 	
October 3, 1997	
 	
MSC Noa (sold March 2002)	
 	
Container	
 	
1985	
 	
—	
 	
—	

Lato Shipping (Private) Ltd.	
 	
February 16, 2001	
 	
APL Belgium	
 	
Container	
 	
2002	
 	
—	
 	
5,506	

Victory Shipholding Inc.	
 	
October 9, 2002	
 	
Victory I	
 	
Container	
 	
1988	
 	
—	
 	
3,098	

Duke Marine Inc.	
 	
April 14, 2003	
 	
Hyundai Duke	
 	
Container	
 	
1992	
 	
—	
 	
4,651	

Commodore Marine Inc.	
 	
April 14, 2003	
 	
Hyundai Commodore	
 	
Container	
 	
1992	
 	
—	
 	
4,651	

Helderberg Maritime Inc.	
 	
June 11, 2003	
 	
S.A. Helderberg	
 	
Container	
 	
1977	
 	
—	
 	
3,101	

Sederberg Maritime Inc.	
 	
June 11, 2003	
 	
S.A. Sederberg	
 	
Container	
 	
1978	
 	
—	
 	
3,101	

Winterberg Maritime Inc.	
 	
June 11, 2003	
 	
S.A. Winterberg	
 	
Container	
 	
1978	
 	
—	
 	
3,101	

Constantia Maritime Inc.	
 	
June 11, 2003	
 	
Maersk Constantia	
 	
Container	
 	
1979	
 	
—	
 	
3,101	

Magellan Marine Inc.	
 	
September 29, 2003	
 	
Sofia III	
 	
Dry cargo	
 	
1998	
 	
69,146	
 	
—	

Containers Services Inc.	
 	
May 30, 2002	
 	
Vancouver Express (ex P&O Nedlloyd Caribbean)	
 	
Container	
 	
2004	
 	
—	
 	
4,253	

Containers Lines Inc.	
 	
May 30, 2002	
 	
Maersk Derby (ex P&O Nedlloyd Caracas)	
 	
Container	
 	
2004	
 	
—	
 	
4,253	

Oceanew Shipping Ltd.	
 	
January 3, 2002	
 	
CSCL Europe	
 	
Container	
 	
2004	
 	
—	
 	
8,468	

Oceanprize Navigation Ltd.	
 	
January 20, 2003	
 	
CSCL America	
 	
Container	
 	
2004	
 	
—	
 	
8,468	

Vessels under contract	

 	

 	

 	

 	
Auckland Marine Inc.	 	January 27, 2005	 	E.R. Auckland	 	Container	 	2004	 	—	 	4,300	

Wellington Marine Inc.	
 	
January 27, 2005	
 	
E.R. Wellington	
 	
Container	
 	
2004	
 	
—	
 	
4,300	
 	 	 	 	 	 	 	 	 	 	 	 	 	
F-8

 

Vessels under construction	

 	

 	

 	

 	
Ramona Marine Co. Ltd.	 	February 21, 2003	 	Hull No. 1561	 	Container	 	2006	*	—	 	9,580	

Karlita Shipping Co. Ltd.	
 	
February 21, 2003	
 	
Hull No. 1559	
 	
Container	
 	
2006	
*	
—	
 	
9,580	

Seacarriers Services Inc.	
 	
June 28, 2005	
 	
Hull No. 1639	
 	
Container	
 	
2007	
*	
—	
 	
4,253	

Seacarriers Lines Inc.	
 	
June 28, 2005	
 	
Hull No. 1640	
 	
Container	
 	
2007	
*	
—	
 	
4,253	

*
Estimated completion date
2 Significant Accounting Policies
              Principles of Consolidation:     The accompanying consolidated financial statements represent the consolidation of the accounts of the Company and its wholly owned subsidiaries. The subsidiaries are fully consolidated from the date on which control is transferred to the Company. They are de-consolidated from the date that control ceases. The Company also consolidates entities that are determined to be variable interest entities as defined in Financial Accounting Standards Board ("FASB") Interpretation No. 46(R) are also consolidated if it determines that it is the primary beneficiary. Inter-company transaction balances and unrealized gains on transactions between the companies are eliminated.
              Use of Estimates:     The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
              Foreign Currency Translation:     The functional currency of the Company is the U.S. dollar. Transactions involving other currencies during the year are converted into U.S. dollars using the exchange rates in effect at the time of the transaction. On the balance sheet dates, monetary assets and liabilities denominated in other currencies are translated to reflect the current exchange rates. Resulting gains or losses are reflected in the accompanying consolidated statements of income.
              Cash and Cash Equivalents:     Cash and cash equivalents consist of current, call, time deposits and certificates of deposit with original maturity of three months or less which are not restricted for use or withdrawal.
              Restricted Cash:     Cash restricted accounts include retention and restricted deposit accounts. Certain of the Company's loan agreements require the Company to deposit one-third of quarterly and one-sixth of the semi-annual principal installments and interest installments, respectively, due on the outstanding loan balance monthly in a retention account. On the rollover settlement date, both principal and interest are paid from the retention account.
              There are also restricted deposits in order to secure letters of guarantee, which are restricted for use as general working capital.
F-9

              Accounts Receivable:     The amount shown as Accounts Receivable at each balance sheet date includes estimated recoveries from charterers for hire and demurrage billings, net of allowance for doubtful accounts. An estimate is made of the allowance for doubtful accounts based on a review of all outstanding amounts at each period, and an allowance is made for any accounts which management believes are not recoverable. Bad debts are written off in the year in which they are identified. No allowance for doubtful accounts has been taken in any period included in these financial statements.
              Insurance:     Insurance claims represent the claimable expenses, net of deductibles, which are expected to be recovered from insurance companies. Any costs to complete the claims are included in accrued liabilities. The Company accounts for the cost of possible additional call amounts under its insurance arrangements in accordance with the FASB Statement of Financial Accounting Standards ("SFAS") 5 "Accounting for Contingencies" based on the Company's historical experience and the historical experience of the shipping industry. There were no calls and no call expenses for the years ended December 31, 2003, 2004 and 2005, and no amounts accrued in the financial statements on December 31, 2004 and 2005.
              Prepaid Expenses and Inventories:     Prepaid expenses consist mainly of insurance expenses and inventories, which consist of bunkers, lubricants and provisions remaining on board the vessels at each period end, which are valued at the lower of market value or cost as determined using the weighted average method.
              Financing Costs:     Fees incurred for obtaining new loans are deferred and amortized over the loans' respective repayment periods using the effective interest rate method. These charges are included in the balance sheet line item Deferred Charges. Any unamortized balance of costs relating to loans repaid or refinanced is expensed in the period the repayment or refinancing is made subject to the provisions of EITF 96-19, "Debtor's Accounting for a Modification or Exchange of Debt Instrument" regarding debt extinguishment.
              Vessels' Cost:     Vessels are stated at cost, which consists of the contract purchase price and any material expenses incurred upon acquisition (improvements and delivery expenses). Subsequent expenditures for conversions and major improvements are also capitalized when they appreciably extend the life, increase the earning capacity or improve the efficiency or safety of the vessels. Otherwise these expenditures are charged to expenses as incurred. Financing costs incurred during the construction period of the vessels are included in vessels' cost.
              Vessels acquired in the secondhand market are treated as a business combination to the extent that such acquisitions include continuing operations and business characteristics such as management agreements, employees and customer base. Otherwise these are treated as purchase of assets. Where the Company identifies any intangible assets or liabilities associated with the acquisition of a vessel purchased in the secondhand market, the Company records all identified tangible and intangible assets or liabilities at fair value. Fair value is determined by reference to market data and the discounted amount of expected future cash flows. The Company has acquired certain vessels in the secondhand market. These acquisitions were considered to be acquisitions of assets. Certain vessels in the Company's fleet that were purchased in the secondhand market were acquired with existing charters. The Company determined that the existing charter contracts did not have a material separate fair value. Thus, such vessels were recorded at their fair value which equaled the consideration paid.
F-10

              Vessels' Depreciation:     The cost of the Company's vessels is depreciated on a straight-line basis over the vessels' remaining economic useful lives after considering the estimated residual value. Management had estimated the useful life of the Company's vessels to be 25 years from the year built. As of January 1, 2005, the Company changed prospectively the estimated useful life of the container vessels to be 30 years. The change in estimate was based both on the Company's experience and the current practice in the shipping industry. As a result of the change, depreciation expenses for the year ended December 31, 2005 decreased by $4.5 million.
              Accounting for Special Survey and Drydocking Costs:     The Company follows the deferral method of accounting for special survey and drydocking costs, whereby actual costs incurred are deferred and are amortized on a straight-line basis over the period until the next scheduled survey, which is two and a half years. If special survey or drydocking is performed prior to the scheduled date, the remaining unamortized balances are immediately written off.
              The amortization periods reflect the estimated useful economic life of the deferred charge, which is the period between each special survey and drydocking.
              Impairment of Long-lived Assets:     SFAS 144 "Accounting for the Impairment or Disposal of Long-lived Assets" addresses financial accounting and reporting for the impairment or disposal of long-lived assets. The Company adopted SFAS 144 as of January 1, 2002. The standard requires that long-lived assets and certain identifiable intangibles held and used or disposed of by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. If the future net cash flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the asset's carrying value and fair value. No events or changes in circumstances have occurred in the periods presented that would lead to a review for impairment.
              Pension and Retirement Benefit Obligations-Crew:     The crew on board the companies' vessels serve in such capacity under short-term contracts (usually up to nine months) and accordingly, the vessel-owning companies are not liable for any pension or post retirement benefits.
              Accounting for Revenue and Expenses:     Revenues and expenses are recognized on a straight-line basis and on an accrual basis. Revenues are generated from bareboat hire and time charters. Bareboat hire revenues are recorded over the term of the hire on a straight-line basis. Time charter revenues are recorded over the term of the charter as service is provided. Unearned revenue includes revenue received in advance.
              The Company is a member of a pool arrangement with respect to the Alexandra I . The resulting net revenues of the pool are distributed as time charter hire to each participant in accordance with the pool earning points of the individual pool vessels, adjusted for any off hire amount. Distributions of time charter hire to the Company are made every two weeks according to the agreement. An amount not exceeding four weeks' time charter hire for the vessel may be withheld from the Company as working capital for the pool. The Company recognizes revenue related to the pooling arrangements only when all contingencies under the agreements are resolved.
              General and Administrative Expenses:     General and administrative expenses include management fees paid to the vessels' manager (see note 13).
F-11

              Repairs and Maintenance:     All repair and maintenance expenses including major overhauling and underwater inspection expenses are charged against income incurred and are included in vessel operating expenses in the accompanying consolidated statements of income.
              Dividends:     Dividends are recorded in the Company's financial statements in the period in which they are approved by the Company's stockholders.
              Segment Reporting:     The Company reports financial information and evaluates its operations by total charter revenues. The Company does not have discrete financial information to evaluate the operating results for each such type of charter. Although revenue can be identified for these types of charters, management cannot and does not identify expenses, profitability or other financial information for these charters. As a result, management, including the chief operating decision makers, reviews operating results solely by revenue per day and operating results of the fleet, and thus the Company has determined that it operates under one reportable segment.
              Derivative Instruments:     The Company enters into interest rate swap contracts and forward exchange rate contracts to create economic hedges for its interest rate risks and its exposure to currency exchange risk on certain foreign currency receivables (see also note 15). However, in the reported periods, these derivatives do not qualify as hedge instruments for accounting purposes under SFAS 133 "Accounting for Derivative Instruments and Hedging Activities." Accordingly, the Company presents these financial instruments at their fair value, and recognizes the fair value changes thereto in the income statement.
              Net Income Per Share:     The Company has presented net income per share for all periods presented based on the number of outstanding shares of common stock of Danaos Corporation at the reported periods taking into account any stock splits. There are no dilutive or potentially dilutive securities, accordingly there is no difference between basic and diluted net income per share.
              Recent Accounting Developments:     In November 2004, the FASB issued SFAS 151, "Inventory Costs—an amendment of ARB No. 43, Chapter 4" ("SFAS 151"), which clarifies that abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage) should be recognized as a current period expense. In addition, this Statement requires that allocation of fixed production overhead to the costs of conversion be based on the normal capacity of the production facilities. SFAS 151 is effective for fiscal years beginning after June 15, 2005, as applicable to the Company as of January 1, 2006. Management does not believe that the implementation of this standard will have a material impact on the financial position, results of operations or cash flows.
              In December 2004, the FASB issued SFAS 153 "Exchanges of Non-Monetary Assets—An Amendment to APB 29" ("SFAS 153"). APB 29 had stated that all exchanges of non-monetary assets should be recorded at fair value except in a number of situations, including where the exchange is in relation to similarly productive assets. SFAS 153 amends APB 29 to eliminate the exception for non-monetary exchanges of similar productive assets and replaces it with a general exception for exchanges for non-monetary assets that do not have commercial substance. A non-monetary transaction has commercial substance where the future cash flows of the business will be expected to change significantly as a result of the exchange. The provisions of this statement will be effective for non-monetary exchanges occurring in fiscal periods beginning after June 15, 2005, as applicable to the Company as of January 1, 2006. Management does not believe that the implementation of this standard will have a material impact on the financial position, results of operations or cash flows.
F-12

              In December 2004, the FASB issued SFAS 123 (Revised) "Share Based Payments" (SFAS123(R)), which requires companies to expense the value of employee stock option schemes and similar awards based on the grant date fair value of the award. SFAS 123(R) eliminates the option to use APB 25's intrinsic method of accounting for valuation of share options and similar awards as provided by SFAS 123 as originally issued. In March 2005, the SEC released Staff Accounting Bulletin No. 107 "Share-Based Payment" ("SAB 107"), which provides interpretive guidance related to the interaction between SFAS 123(R) and certain SEC rules and regulations. It also provides the SEC staff's views regarding valuation of share-based payment arrangements. SFAS 123(R) will be applicable to the Company as of January 1, 2006. Management believes that the adoption of this standard will have an effect on the Company's financial position, results of operations or cash flows as a result of future grants of options or share based payments.
              In May 2005, the FASB issued SFAS 154, "Accounting Changes and Error Corrections—a replacement to APB 20 and FASB Statement 3." APB 20 required that voluntary changes in accounting principles be recognized by including the cumulative effect of changing to the new accounting principle in net income for the period of the change. SFAS 154 requires retrospective application of changes in accounting principle to prior periods' financial statements, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. Further when it is impracticable to determine the period-specific effects of an accounting change on one or more individual prior periods presented, SFAS 154 requires that the new accounting principle be applied to the balances of assets and liabilities as of the beginning of the earliest period for which retrospective application is practicable, and that a corresponding adjustment be made to the opening balance of retained earnings (or other appropriate components of equity or net assets in the statement of financial position) for that period rather than being reported in an income statement. When it is impracticable to determine the cumulative effect of applying a change in accounting principle to all prior periods, SFAS 154 requires that the new accounting principle be applied as if it were adopted prospectively from the earliest date practicable. The provisions of this statement shall be effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005, and will be applicable to the Company as of January 1, 2006. Management does not believe that the implementation of this standard will have a material impact on the financial position, results of operations or cash flows.
3 Restricted Cash
              Restricted cash is comprised as follows:

 	 	Retention
	 	Restricted
Deposits
	 	Total
	
December 31, 2004	 	$	5,531	 	$	789	 	$	6,320	

December 31, 2005	
 	
$	
642	
 	
$	
82	
 	
$	
724	
F-13

 
4 Vessels
              Vessels' cost and accumulated depreciation and changes thereto are as follows:

 	 	Vessel Cost
	 	Accumulated Depreciation
	 	Net Book Value(b)
	 	
January 1, 2004	 	$	621,931	 	$	(109,719	)	$	512,212	 	
Additions	 	 	233,126	 	 	(31,694	)	 	201,432	 	
Disposals	 	 	—	 	 	10	 	 	10	 	
Decrease in vessels' values in respect of lease arrangements(a)	 	 	(32,318	)	 	—	 	 	(32,318	)	
 	 		 		 		 	
December 31, 2004	 	$	822,739	 	$	(141, 403	)	$	681,336	 	
Additions	 	 	—	 	 	(27,114	)	 	(27,114	)	
 	 		 		 		 	
December 31, 2005	 	$	822,739	 	$	(168,517	)	$	654,222	 	
 	 		 		 		 	
              The residual value of the fleet was estimated at $121.4 million as of December 31, 2005 and 2004.
a)
Vessels with a cost of $200.2 million and net book value of $191.4 million on December 31, 2005 are subject to certain leasing arrangements as explained in Other lease arrangements in note 9b.

b)
Includes four container vessels with a net book value of $46.7 million, $46.7 million, $46.8 million, and $46.5 million at December 31, 2005, for which the charterers have the option to purchase the vessels in February 2007, June 2007, July 2007 and January 2008, respectively, each for $44.0 million and in February 2009, June 2009, July 2009 and January 2010, respectively, each for $39.0 million.
5 Advances for Vessels Under Construction
a)
Advances for vessels under construction are as follows:

 	 	December 31,
	 	
 	 	2004
	 	2005
	 	
Advance payments for vessels	 	$	8,390	 	$	22,390	 	

Progress payments for vessels	

142,744	

156,744	

Decrease in vessels under construction values in respect of lease arrangements (note 9b)	

(27,272	
)	
 	
(27,272	
)	

Capitalized interest	

2,916	

8,191	

Other vessel related costs	

1,134	

1,322	

Total	
 	
$	
127,912	
 	
$	
161,375	

In
November 2003, the Company entered into two agreements with Samsung Heavy Industries Co. Ltd. for the construction of two container vessels of 9,580 TEU each with expected deliveries October and December 2006, respectively. The construction cost of the new vessels will amount to approximately $167.8 million, of which $144.0 million will be financed from the proceeds of a long-term bank loan. The shipbuilding contracts provide
F-14

for stage payments of two installments of $4.2 million each by November 25, 2003, two installments of $4.2 million each by December 1, 2003, two installments of $67.1 million each by January 31, 2004 and two final installments of $8.4 million each upon delivery of the vessels.
The
loan mentioned above will be drawn down in two or more tranches so as to coincide with the scheduled delivery payments. The loan will be repayable after drawdown in twenty-four semi-annual installments of $5.6 million plus a balloon payment of $9.0 million payable with the last installment. The interest rate of this loan is 5.02%.

On
November 30, 2004 the Company entered into leasing arrangements for the two vessels under construction, as outlined in note 9b.

The
Company entered into two construction contracts in July 2005 with Samsung Heavy Industries Co. Ltd. for two containerships (the HN 1639 and the HN 1640 ) of 4,253 TEU each. An advance of $14.0 million ($7.0 million for each vessel) was paid on July 11, 2005. The total cost of each vessel is $70.0 million. The expected delivery dates for the HN 1639 and the HN 1640 are September 30, 2007 and November 30, 2007, respectively.

b)
Advances for vessels under construction and transfers to vessels' cost in 2004 and 2005 were as follows:

Balance as of January 1, 2004	 	$	215,266	 	
Additions	 	 	173,044	 	
Decrease in vessels under construction values in respect of lease arrangements (note 9b)	 	 	(27,272	)	
Transfers to vessels' cost	 	 	(233,126	)	
 	 		 	
Balance as of December 31, 2004	 	$	127,912	 	
Additions	 	 	33,463	 	
 	 		 	
Balance as of December 31, 2005	 	$	161,375	 	
 	 		 	
6 Deferred Charges
              Deferred charges consist of the following:

 	 	Drydocking and
Special Survey
	 	Finance
Costs
	 	Public
offering costs
	 	Total Deferred
Charges
	 	
Amortized balance on January 1, 2004	 	$	2,442	 	 	—	 	 	—	 	$	2,442	 	
Additions	 	 	5,159	 	 	—	 	 	—	 	 	5,159	 	
Amortization for the year	 	 	(2,096	)	 	—	 	 	—	 	 	(2,096	)	
 	 		 		 		 		 	
Amortized balance on December 31, 2004	 	$	5,505	 	 	—	 	 	—	 	$	5,505	 	
 	 		 		 		 		 	
Additions	 	 	4,505	 	 	791	 	 	980	 	 	6,276	 	
Amortization for the year	 	 	(3,922	)	 	(101	)	 	—	 	 	(4,023	)	
 	 		 		 		 		 	
Amortized balance on December 31, 2005	 	$	6,088	 	$	690	 	$	980	 	$	7,758	 	
 	 		 		 		 		 	
F-15

 
7 Accounts Payable
              Accounts payable is comprised of the following:

 	 	December 31,
	
 	 	2004
	 	2005
	
Suppliers, repairers	 	$	4,520	 	$	5,159	
Insurers, agents, brokers	 	 	735	 	 	624	
Other creditors	 	 	309	 	 	282	
 	 		 		
 	Total	 	$	5,564	 	$	6,065	
 	 		 		
8 Other Current Assets
              Other current assets includes insurance claims arising from hull and machinery damages or other insured risks which have been submitted to insurance adjusters or are currently being compiled. All amounts are net of applicable deductibles. The deposit presented as of December 31, 2004 represents a deposit made by the Company for the lease arrangement described in note 9b, which was repaid to the Company in 2005.

 	 	December 31,
	
 	 	2004
	 	2005
	
Insurance claims	 	$	704	 	$	652	
Deposit	 	 	12,832	 	 	—	
Other	 	 	1,453	 	 	1,664	
 	 		 		
 	Total	 	$	14,989	 	$	2,316	
 	 		 		
9 Lease Arrangements
a)
Investment in capital lease

              On March 8, 2002, Achaios Shipping Limited, the vessel owning subsidiary of the MSC NOA at that time, entered into a bareboat hire purchase contract with Rhexia Holdings Inc., a subsidiary of MSC, at a daily hire rate of $10,695. The charter is a binding non-cancellable lease agreement which transfers the ownership of the vessel to the charterers upon expiration of the contract in March 2006 for the sum of $1. The terms of the contract meet the requirements of classification as a sales-types capital lease and accordingly, a loss of $2.4 million was recorded at its inception.
F-16

              As of December 31, 2004 and 2005, the total investment in this lease was as follows:

 	 	December 31,
	 	
 	 	2004
	 	2005
	 	
Total minimum lease payment	 	$	15,625	 	$	15,625	 	
Less: Amount collected up to period end	 	 	(10,909	)	 	(14,759	)	
 	 		 		 	
Future minimum lease payments	 	 	4,716	 	 	866	 	
Less: Amount representing interest	 	 	(162	)	 	(6	)	
 	 		 		 	
Present value of net minimum lease payments	 	 	4,554	 	 	860	 	
Less: Current maturity	 	 	(3,694	)	 	(860	)	
 	 		 		 	
Net investment in finance lease, net of current portion	 	$	860	 	$	—	 	
 	 		 		 	
b)
Other lease arrangements
              During 2004, the Company entered into a structured transaction with third parties affecting four vessels in its current fleet and two vessels under construction, whereby such vessels were acquired by counterparties to the transaction which then time chartered the vessels to the Company for a period of 6 1 / 2 years. At the end of this 6 1 / 2 -year period, the counterparties have rights to require the Company to reacquire the vessels for approximately 75% of the vessels' initial book value. The cost of building the vessels has been financed with bank loans arranged by the Company. The vessels have been acquired by the counterparties for the same amount that it cost to have them constructed. No gain or loss was recognized thereon. The consideration with respect to the acquisition of these vessels is being held in a deposit account that is not under the control of the Company. The Company is entitled to receive a series of cash payments of amounts released from the deposit which are expected to equal, in the aggregate, approximately 25% of the initial deposit over the 6 1 / 2 years. The excess of these payments above the Company's payment obligations with respect to chartering-in these vessels is expected to amount to £46 million ($79.6 million). If the counterparties do not exercise their rights to require the Company to reacquire the vessels, the Company would have the right to charter-in the vessels for up to an additional 12 years during which period the Company would be entitled to 49% of the charter revenues in excess of a pre-set base level of the charter-in rate. In such a case, the remaining amount on deposit would be payable to the Company. If the Company is required to reacquire the vessels, ownership of the vessels would revert to the Company and the remaining deposit would be used for the price of reacquiring the vessels. The Company expects that the counterparties will exercise their rights to require the Company to reacquire the vessels.
              The Company has not accounted for the transactions as sale and lease-backs because the consideration for the vessels is not under the Company's control. The vessels are shown as fixed assets on the books of the Company. The Company reduced the cost basis of the vessels and hulls at inception with the present value of the future cash inflows amounting to $59.6 million (£31.9 million), $32.3 million and $27.3 million for the vessels and for the hulls, respectively, and has recognized this amount as a receivable in respect of the lease arrangements. The receivable balance is being reduced by the actual cash inflows over the 6 1 / 2 -year term. The discount rates used in the present value calculation range from 4.2% to 4.9%, reflecting the GBP applicable interest rate at the time of the inception of the transactions. See also note 20 "Subsequent Events" regarding such lease arrangements.
              In addition, the Company has entered into forward currency contracts to convert £29.7 million of cash inflows to U.S. dollars at the time of maturity. See note 15 for details.
F-17

              The maturities of the actual cash inflows (undiscounted) as of December 31, 2004 and 2005 are as follows:

 	 	December 31, 2004
	 	December 31, 2005
	
2005—current portion	 	$	1,641	 	$	—	
2006	 	 	12,233	 	 	12,233	
2007	 	 	15,396	 	 	15,396	
2008	 	 	11,173	 	 	11,173	
2009	 	 	6,950	 	 	6,950	
Thereafter	 	 	19,397	 	 	19,397	
 	 		 		
Total receivable	 	$	66,790	 	$	65,149	
 	 		 		
              Under this transaction the Company has guaranteed, for the term of the lease contracts, that the counterparties will retain all of their expected economic benefits in the event of changes in the underlying assumptions of the agreement. Such assumptions include certain dates, payment amounts, interest rates, corporate tax rates, references to U.K. tax laws and related conditions under which the Company will be required to act. Because of the many assumptions relied upon and their potential for change, the Company is not able to estimate the maximum potential amount of future payments that it would be required to make under the guarantee. The terms of the guarantee do not provide for limitation to the maximum potential future payments under the guarantee.
              The contracts do not have any recourse provisions that would enable the Company to recover from third parties any of the amounts to be paid under the guarantee and no assets are held as collateral or by third parties that, upon the occurrence of any triggering event or condition under the guarantee, the Company could obtain and liquidate to recover all or a portion of the amounts to be paid under the guarantee.
              Currently, the Company has not recorded a liability for its obligations under the guarantee because it deems the fair value of the guarantees issued in connection with the transaction to be immaterial. The assumptions used in this calculation have remained constant in 2004 and 2005.
              See also note 20 "Subsequent Events" regarding expected changes in tax legislation effecting such lease arrangements.
10 Accrued Liabilities
              Accrued liabilities consist of the following:

 	 	December 31,
	
 	 	2004
	 	2005
	
Accrued payroll	 	$	813	 	$	754	
Accrued interest	 	 	1,764	 	 	896	
Accrued expenses	 	 	3,517	 	 	1,255	
 	 		 		
 	 	$	6,094	 	$	2,905	
 	 		 		
11 Other Liabilities
              Other liabilities consist of the following:

 	 	December 31,
	
 	 	2004
	 	2005
	
Fair value of derivatives	 	$	3,849	 	$	3,332	
 	 		 		
 	 	$	3,849	 	$	3,332	
 	 		 		
F-18

 
12 Long Term Debt
a)
Long term debt as of December 31, 2004 and December 31, 2005 consists of the following bank loans:

Bank Loans as of
Dec. 31, 2004
Lender
	 	Balance
December 31,
2004
	 	Bank Loans as of
Dec. 31, 2005
Lender
	 	Balance
December 31, 2005
	 	Current
Portion
	 	Long Term
Portion
	
Landesbank Schleswing-Holstein, Girozentrale and EuroFinance Development SA	 	$	102,409	 	Aegean Baltic Bank HSH Nordbank (Joint arrangers & co-underwriters) and Citibank Dresdner Bank ABN Amro DVB Bank Credit Suisse	 	$	187,475	 	$	16,700	 	$	170,775	

Landesbank	

8,000	

 	
 	
—	

—	

—	

Deutsche Schiffsbank Aktiengesellschaft	

11,930	

 	
 	
—	

—	

—	

Deutsche Schiffsbank Aktiengesellschaft	

37,600	

 	
 	
—	

—	

—	

Nedship Bank NV and National Bank of Greece	

35,299	

 	
 	
—	

—	

—	

The Royal Bank of Scotland	

53,074	
 	
The Royal Bank of Scotland	

187,750	

24,500	

163,250	

The Royal Bank of Scotland	

13,000	

 	
 	
—	

—	

—	

EFG Eurobank Ergasias	

5,728	
 	
EFG Eurobank Ergasias	

3,296	

1,952	

1,344	

Nedship Bank NV	

14,000	

 	
 	
—	

—	

—	

Deutsche Schiffsbank Aktiengesselschaft	

22,440	

 	
 	
—	

—	

—	

HSH Nordbank	

57,000	
 	
HSH Nordbank	

53,000	

4,000	

49,000	

The Export-Import Bank of Korea ("KEXIM")	

122,870	
 	
The Export-Import Bank of Korea ("KEXIM")	

111,892	

10,369	

101,523	

The Export-Import Bank of Korea ("KEXIM") & FORTIS Bank	

118,050	
 	
The Export-Import Bank of Korea ("KEXIM") & FORTIS Bank	

123,325	

—	

123,325	

 	

 	

 	

	
 	 	$	601,400	 	 	 	$	666,738	 	$	57,521	 	$	609,217	
 	 		 	 	 		 		 		
F-19

b)
The repayment terms of the loans outstanding as of December 31, 2005 were as follows:

Lender
	 	Interest Rate /Vessel
	 	Remaining Repayments
	
The Royal Bank of Scotland	 	0.8% p.a. over LIBOR
Dimitris C
Alexandra I
Roberto C
Maria C
MV Achilleas
Fivos
Sofia III
S.A. Helderberg
S.A. Sederberg
S.A.Winterberg
Maersk Constantia
APL Holland	 	Concerns a loan facility of $200.0 million advanced to the companies in order to refinance certain of their vessels. The outstanding loan facility on December 31, 2005 is payable in seven consecutive semi-annual installments of $12.3 million each, plus eight consecutive semi-annual installments of $8.5 million each, plus a balloon payment of $34.0 million payable with the last installment in 2013.	

Aegean Baltic
Bank (formerly Landesbank)	
 	
0.825% p.a. over LIBOR
APL England
APL Scotland
APL Belgium
Hyundai Commodore	
 	
Concerns a loan facility of $200.0 million advanced to the companies in order to refinance their vessels. The outstanding loan facility on December 31, 2005 is payable in 29 quarterly installments of $4.2 million each plus a balloon payment of $66.4 million payable with the last installment in 2013.	

KEXIM	
 	
5.0125% p.a. Fixed
CSCL America
CSCL Europe	
 	
Concerns a loan facility of $124.4 million advanced to the vessel owning companies in order to partially finance the acquisition of their vessels. The outstanding balance as of December 31, 2005 is payable in 42 quarterly installments of $2.6 million plus installments of $1.0 million, $1.3 million and $0.69 million payable in August 2016, September 2016 and November 2016, respectively.	
 	 	 	 	 	
F-20

 

KEXIM-Fortis	
 	
5.02% p.a. Fixed
Hull 1559
Hull 1561	
 	
Concerns a loan facility of up to $144.0 million advanced to the vessel owning companies in order to partially finance their acquisition of their new vessels. The amount drawn down up to December 31, 2005 was $123.3 million. Repayment of the loan will start upon delivery of the vessels, estimated to be in October 2006 for the Hull 1559 and December 2006 for the Hull 1561 . The loan facility is payable in 25 semi-annual installments of $5.6 million plus a balloon payment of $9.0 million payable with the last installment.	

HSH Nordbank	
 	
0.775% p.a. over LIBOR Vancouver Express (ex P&O Nedlloyd Caribbean) Maersk Derby (ex P&O Nedlloyd Caracas)	
 	
Concerns a loan facility of $60.0 million advanced to the vessel owning companies in order to partially finance the construction of their vessels. The outstanding loan facility on December 31, 2005 is payable in 33 consecutive quarterly installments of $1.0 million each, plus a balloon payment of $20.0 million payable with the last installment in March 2014.	

EFG Eurobank Ergasias	
 	
1.0625% p.a. over LIBOR MSC Noa	
 	
Concerns a loan facility of $17.5 million advanced to the vessel owning companies in order to partially finance the acquisition of two vessels at that time. The outstanding loan facility on December 31, 2005 is payable in 12 consecutive quarterly installments, the first three of $0.61 million each and the remaining eight of $0.31 million plus a balloon payment of $0.45 million payable with the last installment in August 2008.	
F-21

d)
The annual repayments of the above loans, net of current maturities, as of December 31, 2005 were as follows:

 	 	December 31, 2005
	
2006	 	$	—	
2007	 	 	56,081	
2008	 	 	56,401	
2009	 	 	51,819	
Thereafter	 	 	444,916	
 	 		
Total long-term debt	 	$	609,217	
 	 		
e)
All of the loans referred to in paragraph (a) above are collateralized by first and second preferred mortgages over the vessels financed, general assignment of all hire freights, income and earnings, the assignment of their insurance policies, as well as any proceeds from the sale of mortgaged vessels and the corporate guarantee of Danaos Corporation.

f)
The loan agreements also include positive and negative covenants for the Company, the most significant of which are the maintenance of operating accounts, minimum cash deposits and minimum market values. The borrowers are further restricted from incurring additional indebtedness, changing the vessels' flags and distributing earnings without the prior consent of the lender. In addition the Company must maintain the following covenants: Fixed asset to Net Debt ratio over 1.45, Minimum cash and cash equivalents of $30 million, EBITDA to interest over 2.5, maintain stockholders' equity (as defined in the agreements) at a minimum of $250 million except for certain banks which require a minimum of $100 million and maintain stockholders' equity in excess of 30% of total assets (as defined in the agreements).

g)
The weighted average effective interest rates on long-term borrowings for the periods ended December 31, 2005 and 2004 were 4.32% and 2.29%, respectively.

h)
In the first half of 2005 the Company extinguished certain loans and refinanced certain loans with two fleet loans, a syndicated loan arranged by Aegean Baltic Bank and a loan with The Royal Bank of Scotland of $200.0 million each, as follows:

i)
In April 2005, the loans outstanding on December 31, 2004 for the vessels YM Yantian, Norasia Hamburg, CMA CGM Kalamata, CMA CGM Elbe, CMA CGM Komodo, MOL Independence, Victory I and Hyundai Duke amounting to $121.3 million were fully repaid and their mortgages were released.

ii)
In April 2005 the loan facilities outstanding on December 31, 2004 for the following vessels were refinanced by a syndicated loan arranged by Aegean Baltic
F-22

Bank and led by HSH Nordbank of $200.0 million with the indebtedness under this new facility allocated among the vessels as follows:

Vessel
	 	Debt Allocation
	
APL England	 	$	54,000	
APL Scotland	 	 	54,000	
APL Belgium	 	 	56,000	
Hyundai Commodore	 	 	36,000	
 	 		
 	 	$	200,000	
 	 		
iii)
In April 2005 the loan facilities for the following vessels were refinanced by a loan facility with The Royal Bank of Scotland of $200.0 million with the indebtedness under this new facility allocated among the vessels as follows:

Vessel
	 	Debt Allocation
	
S.A. Sederberg	 	$	7,660	
S.A. Winterberg	 	 	7,660	
S.A. Helderberg	 	 	6,360	
Maersk Constantia	 	 	8,000	
APL Holland	 	 	48,675	
Fivos	 	 	18,315	
Alexandra I	 	 	18,315	
Dimitris C	 	 	15,325	
Roberto C	 	 	15,325	
Maria C	 	 	15,325	
MV Achilleas	 	 	18,360	
Sofia III	 	 	20,680	
 	 		
 	 	$	200,000	
 	 		
              The modification of terms for the refinanced loans was not considered substantial for accounting purposes.
13 Related Party Transactions
              Management Services:     Pursuant to a ship management agreement between each of the vessel owning companies and Danaos Shipping Company Limited (the "Manager"), the Manager acts as the fleet's technical manager responsible for (i) recruiting qualified officers and crews, (ii) managing day to day vessel operations and relationships with charterers, (iii) purchasing of stores, supplies and new equipment for the vessels, (iv) performing general vessel maintenance, reconditioning and repair, including commissioning and supervision of shipyards and subcontractors of drydock facilities required for such work, (v) ensuring regulatory and classification society compliance, (vi) performing operational budgeting and evaluation, (vii) arranging financing for vessels and (viii) providing accounting, treasury and finance services and (ix) providing information technology software and hardware in the support of the Company's processes.
F-23

              Prior to July 1, 2005, the Company paid its manager a monthly management fee of $2,750 for the management of its affairs. The Company also paid a fixed management fee of $150 to $500 per day for each vessel in its fleet depending on its size and type of charterparty. As of July 1, 2005 the new management contract provides for a fee of $500 per day. In addition, the manager receives a management fee of $250 per vessel per day for vessels on bareboat charter and $500 per vessel per day for the remaining vessels in the fleet, pro rated for the calendar days each vessel is owned. The manager also receives a commission of 0.75% on gross freight, charter hire, ballast bonus and demurrage with respect to each vessel in the fleet and a commission of 0.5% based on the contract price of any vessel bought or sold by the manager on its behalf (excluding newbuildings), and a flat fee of $400,000 per newbuilding vessel for the supervision of newbuilding contracts.
              For the services rendered, the Manager charged each vessel a daily fee ranging from $150 to $500. Management fees in 2005 amounted to approximately $5.0 million (2004: $4.0 million, 2003: $4.1 million).The related expenses are shown under General and Administrative Expenses on the Statement of Income.
              The Company pays monthly advances on account of the above management fees. Related party balances presented among current assets represent amounts due from the Manager at balance sheet dates.
14 Taxes
              Under the laws of the countries of the Company's ship owning subsidiaries' incorporation and/or vessels' registration, the Company's ship operating subsidiaries are not subject to tax on international shipping income, however, they are subject to registration and tonnage taxes, which have been included in Vessel Operating Expenses in the accompanying consolidated Statements of Income.
              Pursuant to the U.S. Internal Revenue Code (the "Code"), U.S.-source income from the international operation of ships is generally exempt from U.S. tax if the company operating the ships meets certain requirements. Among other things, in order to qualify for this exemption, the company operating the ships must be incorporated in a country which grants an equivalent exemption from income taxes to U.S. corporations. All of the Company's ship-operating subsidiaries satisfy these initial criteria. In addition, these companies must be more than 50% owned by individuals who are residents, as defined, in the countries of incorporation or another foreign country that grants an equivalent exemption to U.S. corporations. These companies also currently satisfy the more than 50% beneficial ownership requirement. In addition, should the beneficial ownership requirement not be met, the management of the Company believes that by virtue of a special rule applicable to situations where the ship operating companies are beneficially owned by a publicly traded company like the Company, the more than 50% beneficial ownership requirement can also be satisfied based on the trading volume and the anticipated widely-held ownership of the Company's shares, but no assurance can be given that this will remain so in the future, since continued compliance with this rule is subject to factors outside of the Company's control.
15 Financial Instruments
              The principal financial assets of the Company consist of cash and cash equivalents, trade receivables and other assets. The principal financial liabilities of the Company consist of long-term bank loans and accounts payable.
F-24

              Interest Rate Risk:     Interest rate risk arises on bank borrowings. The Company monitors the interest rate on borrowings closely to ensure that the borrowings are maintained at favorable rates. The interest rates relating to the long-term loans are disclosed in note 12.
              Concentration of Credit Risk:     Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash, trade accounts receivable and derivatives. The Company places its temporary cash investments, consisting mostly of deposits, with high credit qualified financial institutions. The Company performs periodic evaluations of the relative credit standing of those financial institutions that are considered in the Company's investment strategy. The Company does not require collateral on these financial instruments. The Company is exposed to credit risk in the event of non-performance by counterparties to derivative instruments, however, the Company limits this exposure by diversifying among counterparties with high credit ratings. Credit risk with respect to trade accounts receivable is generally diversified due to the large number of entities comprising the Company's charterer base and their dispersion across many geographic areas.
              Fair Value:     The carrying amounts reflected in the accompanying consolidated balance sheets of financial assets and liabilities excluding long-term bank loans approximate their respective fair values due to the short maturity of these instruments. The fair values of long-term floating rate bank loans approximate the recorded values, generally due to their variable interest rates. The fair value of the swap agreements equates to the amount that would be paid by the Company to cancel the swaps.
              Interest Rate Swaps:     The off-balance sheet risk in outstanding swap agreements involves both the risk of a counter-party not performing under the terms of the contract and the risk associated with changes in market value. The Company monitors its positions, the credit ratings of counterparties and the level of contracts it enters into with any one party. The counterparties to these contracts are major financial institutions. The Company has a policy of entering into contracts with parties that meet stringent qualifications and, given the high level of credit quality of its derivative counter-parties, the Company does not believe it is necessary to obtain collateral arrangements.
              The Company has entered into interest rate swap agreements with the following details:

Counter-
party
	 	Effective
Date
	 	Termination
Date
	 	Notional
Amount
on
Effective
Date
	 	Contracted
Rate
	 	Swap
Rate
	 	Fair Value
Dec. 31, 2004
	 	Fair Value
Dec. 31, 2005
	 	
HSH NORDBANK	 	1/30/2004	 	1/10/2005	 	$	100,000	 	2.88% p.a.	 	2.13% p.a.	 	$	(1,260	)	$	—	 	
RBS	 	12/15/2004	 	8/27/2016	 	$	60,528	 	5.01% p.a.	 	LIBOR plus 0.84% p.a.	 	$	(152	)	$	(1,608	)	
RBS	 	11/17/2004	 	11/2/2016	 	$	62,342	 	5.01% p.a.	 	LIBOR plus 0.86% p.a.	 	$	(151	)	$	(1,724	)	
 	 	 	 	 	 	 	 	 	 	 	 	 		 		 	
Total fair value	 	 	 	 	 	 	 	 	 	 	 	 	$	(1,563	)	$	(3,332	)	
 	 	 	 	 	 	 	 	 	 	 	 	 		 		 	
              These interest rate swaps are designed to economically hedge the fair value of the fixed rate loan facilities against fluctuations in the market interest rate. These interest rate swaps do not qualify for hedge accounting under SFAS 133.
F-25

              The total fair value change of the interest rate swaps as of December 31, 2005 indicated above is shown in the Income Statement in Gain/(Loss) on Fair Value of Derivatives. The related liability is shown under Other Liabilities in the Balance Sheet.
              The Company entered into foreign currency forward contracts in 2004 to economically hedge its exposure to fluctuations of its anticipated cash inflows in U.K. Pounds relating to certain lease arrangements as explained in note 9b. Under the contracts the Company will convert £29.7 million of cash inflows to U.S. dollars at the time of maturity (in the years from 2006 to 2012). These contracts do not qualify for hedge accounting under SFAS 133.
              The total fair value change of the forward contracts as of December 31, 2004 and 2005 is shown in the Income Statement in Gain/(Loss) on Fair Value of Derivatives and amounts to $(2.3) million and $3.7 million respectively. A related liability is shown under Other Liabilities (long-term) in the Balance Sheet and amounts to US$ 2.3 million as of December 31, 2004 and a related asset is shown under Other Assets (long-term) in the Balance Sheet and amounted to $1.4 million as of December 31, 2005.
16 Operating Revenue
              Revenue from significant customers (constituting more than 10% of total revenue), are as follows:

 	 	Years ended December 31,
	 	
Charterer
			 	
	 	2003
	 	2004
	 	2005
	 	
APL	 	30	%	19	%	16	%	
HMM Korea	 	Under 10	%	11	%	Under 10	%	
Korea Lines Corp.	 	Under 10	%	Under 10	%	12	%	
17 Revenue by Geographic Location

 	 	Years ended December 31,
	
Continent
			
	 	2003
	 	2004
	 	2005
	
AUSTRAL—ASIA	 	$	98,090	 	$	120,082	 	$	154,043	
AMERICA	 	 	14,332	 	 	17,286	 	 	3,266	
EUROPE	 	 	33,696	 	 	70,900	 	 	84,072	
 	 		 		 		
Total Revenue	 	$	146,118	 	$	208,268	 	$	241,381	
 	 		 		 		
F-26

 
18 Commitments and Contingencies
Commitments
              The Company, as of December 31, 2004 and December 31, 2005, had outstanding commitments of approximately $16.8 and $128.8 million respectively for the construction of four container vessels, with Samsung Heavy Industries Co. Ltd., as follows:

 	 	TEU
	 	Contract Price
	 	Outstanding Commitments as of December 31, 2004
	 	Outstanding Commitments as of December 31, 2005
	
Hull 1559	 	9,580	 	$	83,900	 	$	8,390	 	$	8,390	
Hull 1561	 	9,580	 	$	83,900	 	$	8,390	 	$	8,390	
Hull 1639	 	4,253	 	$	70,000	 	$	—	 	$	56,000	
Hull 1640	 	4,253	 	$	70,000	 	$	—	 	$	56,000	
 	 		 		 		 		
 	 	27,666	 	$	307,800	 	$	16,780	 	$	128,780	
 	 		 		 		 		
Contingencies
              The Company was contingently liable for letters of guarantee amounting to $82,000 as of December 31, 2005 (2004: 789,000) issued by The Royal Bank of Scotland. These are secured by restricted deposits (see also note 3).
              There are no material legal proceedings to which the Company is a party or to which any of its properties are the subject, or other contingencies that the Company is aware of, other than routine litigation incidental to the Company's business. In the opinion of management, the disposition of the aforementioned lawsuits should not have a significant effect on the Company's results of operations, financial position and cash flows.
19 Stockholders' Equity
19a.        On October 14, 2005 the Company filed and the Marshall Islands accepted Amended and Restated Articles of Incorporation. Under the Amended and Restated Articles of Incorporation, the authorized capital stock of Danaos Corporation increased to 100,000 shares of common stock with a par value of $0.01 and 1,000 shares of preferred stock with a par value of $0.01.
              As a result of loan covenants, the Company may have limitations on distributions of profits (see note 12).
19b.        On September 18, 2006 the Company filed and Marshall Islands accepted an Amended and Restated Articles of Incorporation. Under the Amended and Restated Articles of Incorporation, the authorized capital stock of Danaos Corporation increased to 200,000,000 shares of common stock with a par value of $.01 and 5,000,000 shares of preferred stock with a par value of $.01.
              Additionally, on September 18, 2006, the Company effected a 88,615-for-1 split of its issued and outstanding common stock. All common stock amounts (and per share amounts) in the accompanying financial statements have been adjusted to reflect the 88,615-for-1 stock split. In the accompanying consolidated balance sheets, the Company has adjusted its stockholders' equity accounts by increasing the stated capital and decreasing the additional paid-in capital by $443,070 as of December 31, 2005 and $443,075 as of December 31, 2004 to reflect the increase in outstanding shares
F-27

from 500 shares par value $.01 and $0 as of December 31, 2005 and 2004, respectively, to 44,307,500 shares par value $.01. In the accompanying consolidated statements of income, basic and diluted net income per share and weighted average number of shares have been adjusted for all periods presented. In the accompanying consolidated statements of stockholders' equity, the Company has adjusted the balance of its stated capital and paid-in capital for all periods presented to reflect the stock split.
20 Subsequent Events
              On February 17, 2005 the Company signed a Memorandum of Agreement to purchase the MOL Confidence , a vessel of 4,651 TEU and 61,152 DWT and built in 1994 for an amount of $40.5 million. The vessel was delivered on March 23, 2006. The vessel was purchased with a long-term charter attached which will be accounted for separately. Seasonal Maritime Corporation, an entity wholly-owned by the Company's chief executive officer, has funded $30.4 million of the $40.5 million acquisition price of the MOL Confidence under a loan agreement, dated March 14, 2006, among Seasonal Maritime Corporation, as lender, a subsidiary of the Company, as borrower, and the Company, as guarantor. This loan bears interest at a rate of LIBOR plus 1.0% per annum and matures six months after execution of the loan agreement, with an option for an additional six months repayment term for the borrower.
              The Company's credit facility with EFG Eurobank Ergasias S.A., which was collateralized by mortgages and other security relating to the MSC Noa , was repaid in full on March 7, 2006.
              The Company entered into four construction contracts on March 28, 2006 with Samsung Heavy Industries Co. Ltd. for four containerships (the HN 1670 , the HN 1671 , the HN 1672 and the HN 1673 ) of 4,253 TEU each. The contract price of each vessel is $63.8 million. The expected delivery dates are July 2008, October 2008, November 2008 and December 2008, respectively. The Company paid an advance of $25.2 million on April 5, 2006 in relation to these contracts. The Company has agreed to charter each of these containerships under 12-year charters at a daily charter rate of $22,675.
              Following proposed changes to U.K. law contained in the draft U.K. Finance Bill published on April 7, 2006, it is expected that the interests of the Company's counterparties to the transaction described in note 9b will be adversely affected. As a result the Company estimates that if the put is ultimately exercised it will be required to pay back an estimated amount of $80 million at the end of the leases. The difference between the estimated liability and the undiscounted cash inflows of $67 million is intended to be expensed in the second quarter of 2006, the period during which it first became probable that the draft U.K. Finance Bill proposed on April 7, 2006 would be enacted. At the same time the Company expects that the original vessels' cost base will be reconstituted and the receivable in respect of the lease agreement will be written off. The difference between the reconstitution of the vessels' cost and the write-off of the receivable will be recognized as a liability which will be increased with subsequent cash inflows in contemplation of a repayment of the all the cash inflows received from the arrangements.
              On April 24, 2006, the Company agreed to sell the Sofia III to a third-party drybulk operator for $27.5 million.
F-28

 
 DANAOS CORPORATION

CONSOLIDATED BALANCE SHEETS

(Expressed in thousands of United States Dollars except for share data)

 	 	Notes
	 	December 31,
2005
	 	June 30,
2006
	
 	 	 	 	 	 	(unaudited)
	
ASSETS	 	 	 	 	 	 	 	 	
CURRENT ASSETS	 	 	 	 	 	 	 	 	
 	Cash and cash equivalents	 	 	 	$	38,000	 	$	31,616	
 	Restricted cash	 	 	 	 	724	 	 	12	
 	Accounts receivable, net	 	 	 	 	14,107	 	 	1,826	
 	Inventories	 	 	 	 	2,591	 	 	2,622	
 	Prepaid expenses	 	 	 	 	870	 	 	1,152	
 	Due from related parties	 	9	 	 	4,544	 	 	5,193	
 	Net investment in finance lease, current portion	 	 	 	 	860	 	 	—	
 	Other current assets	 	6	 	 	2,316	 	 	4,378	
 	 	 	 		 		
 	Total current assets	 	 	 	 	64,012	 	 	46,799	
 	 	 	 		 		
NON-CURRENT ASSETS	 	 	 	 	 	 	 	 	
 	Fixed assets, net	 	3	 	 	654,222	 	 	715,482	
 	Advances for vessel acquisitions	 	 	 	 	12,350	 	 	12,350	
 	Advances for vessels under construction	 	4	 	 	161,375	 	 	231,097	
 	Accounts receivable in respect of lease agreements, net of current portion	 	7	 	 	44,619	 	 	—	
 	Deferred charges, net	 	5	 	 	7,758	 	 	10,141	
 	Other assets	 	 	 	 	1,422	 	 	376	
 	 	 	 		 		
 	Total non-current assets	 	 	 	 	881,746	 	 	969,446	
 	 	 	 		 		
 	Total assets	 	 	 	$	945,758	 	$	1,016,245	
 	 	 	 		 		
LIABILITIES AND STOCKHOLDERS' EQUITY	 	 	 	 	 	 	 	 	
CURRENT LIABILITIES	 	 	 	 	 	 	 	 	
 	Accounts payable	 	 	 	$	6,065	 	$	6,825	
 	Accrued liabilities	 	 	 	 	2,905	 	 	4,260	
 	Long-term debt, current portion	 	 	 	 	57,521	 	 	54,302	
 	Related party loans	 	9	 	 	—	 	 	5,000	
 	Unearned revenue	 	3	 	 	3,993	 	 	6,319	
 	 	 	 		 		
 	Total current liabilities	 	 	 	 	70,484	 	 	76,706	
 	 	 	 		 		
LONG-TERM LIABILITIES	 	 	 	 	 	 	 	 	
 	Long-term debt, net of current portion	 	 	 	 	609,217	 	 	584,922	
 	Unearned revenue, net of current portion	 	3	 	 	—	 	 	11,622	
 	Other liabilities	 	8	 	 	3,332	 	 	35,890	
 	 	 	 		 		
 	Total long-term liabilities	 	 	 	 	612,549	 	 	632,434	
 	 	 	 		 		
 	Total liabilities	 	 	 	 	683,033	 	 	709,140	
 	 	 	 		 		
 	Commitments and Contingencies	 	11	 	 	—	 	 	—	
STOCKHOLDERS' EQUITY	 	 	 	 	 	 	 	 	
 	Preferred stock (5,000,000 preferred shares, par value $.01, authorized and not issued)	 	 	 	 	—	 	 	—	
 	Common stock (200,000,000 common shares, par value $.01, authorized, and 44,307,500 common shares, par value $.01, issued and outstanding as of December 31, 2005 and June 30, 2006)	 	 	 	 	443	 	 	443	
 	Additional paid-in capital	 	 	 	 	90,529	 	 	90,529	
 	Retained earnings	 	 	 	 	171,753	 	 	216,133	
 	 	 	 		 		
 	Total stockholders' equity	 	 	 	 	262,725	 	 	307,105	
 	 	 	 		 		
 	Total liabilities and stockholders' equity	 	 	 	$	945,758	 	$	1,016,245	
 	 	 	 		 		
The accompanying notes are an integral part of these consolidated financial statements
F-29

 
 
 DANAOS CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(Expressed in thousands of United States Dollars except for share data)

 	 	 	 	Six months ended June 30,
	 	
 	 	Notes
	 	2005
	 	2006
	 	
 	 	 	 	(unaudited)
	 	
OPERATING REVENUES	 	 	 	$	124,398	 	$	114,535	 	
OPERATING EXPENSES:	 	 	 	 	 	 	 	 	 	
 	Voyage expenses	 	 	 	 	(3,456	)	 	(3,364	)	
 	Vessel operating expenses	 	 	 	 	(24,423	)	 	(29,406	)	
 	Depreciation	 	3	 	 	(13,532	)	 	(14,214	)	
 	Amortization of deferred drydocking and special survey costs	 	5	 	 	(1,630	)	 	(2,491	)	
 	Bad debts expense	 	 	 	 	(82	)	 	(194	)	
 	General and administration expenses	 	 	 	 	(2,082	)	 	(3,502	)	
 	Gain/(loss) on sale of vessel	 	12	 	 	—	 	 	14,954	 	
 	 	 	 		 		 	
Income From Operations	 	 	 	 	79,193	 	 	76,318	 	
 	 	 	 		 		 	
OTHER INCOME (EXPENSE):	 	 	 	 	 	 	 	 	 	
 	Interest income	 	 	 	 	3,319	 	 	2,087	 	
 	Interest expense	 	 	 	 	(10,119	)	 	(14,841	)	
 	Other finance (costs) income, net	 	 	 	 	(4,357	)	 	2,493	 	
 	Other income (expenses), net	 	 	 	 	16	 	 	(15,346	)	
 	Gain/(Loss)/ on fair value of derivatives	 	 	 	 	4,501	 	 	(6,331	)	
 	 	 	 		 		 	
Total Other Income (Expense), net	 	 	 	 	(6,640	)	 	(31,938	)	
 	 	 	 		 		 	
Net Income	 	 	 	$	72,553	 	$	44,380	 	
 	 	 	 		 		 	
EARNINGS PER SHARE	 	 	 	 	 	 	 	 	 	
 	Basic and diluted net income per share	 	 	 	$	1.64	 	$	1.00	 	
 	 	 	 		 		 	
 	Basic and diluted weighted average number of shares	 	 	 	 	44,308	 	 	44,308	 	
 	 	 	 		 		 	
The accompanying notes are an integral part of these consolidated financial statements
F-30

 
 DANAOS CORPORATION

STATEMENTS OF CASH FLOWS

(Expressed in thousands of United States Dollars)

 	 	Six months ended June 30,
	 	
 	 	2005
	 	2006
	 	
 	 	(unaudited)
	 	
Cash Flows from Operating Activities:	 	 	 	 	 	 	 	
Net income	 	$	72,553	 	$	44,380	 	

Adjustments to reconcile net income to net cash provided by operating activities	

 	

 	
 	
 	Depreciation	 	 	13,532	 	 	14,214	 	
 	Amortization of deferred drydocking and special survey costs	 	 	1,630	 	 	2,491	 	
 	Written off amount of drydocking/special survey	 	 	—	 	 	259	 	
 	Amortization of finance costs	 	 	33	 	 	87	 	
 	Payments for drydocking/special survey	 	 	(2,989	)	 	(3,942	)	
 	Loss/(Gain) on sale of vessels	 	 	—	 	 	(14,954	)	
 	Change in fair value of derivative instruments	 	 	(3,911	)	 	6,372	 	
 	Change in fair value of hedged debt	 	 	—	 	 	(376	)	

(Increase)/Decrease in:	

 	

 	
 	
 	Accounts receivable	 	 	3,395	 	 	(2,690	)	
 	Prepaid expenses	 	 	306	 	 	(282	)	
 	Inventories	 	 	335	 	 	(31	)	
 	Net investment in finance lease	 	 	1,821	 	 	860	 	
 	Other assets, short and long term	 	 	12,518	 	 	(2,062	)	

Increase/(Decrease) in:	

 	

 	
 	
 	Due from related parties	 	 	(10,324	)	 	(649	)	
 	Accounts payable	 	 	402	 	 	760	 	
 	Accrued liabilities	 	 	(3,329	)	 	1,355	 	
 	Other liabilities	 	 	—	 	 	27,608	 	
 	Unearned revenue (including long-term)	 	 	(1,869	)	 	(468	)	
 	 		 		 	
 	Net Cash provided by Operating Activities	 	 	84,103	 	 	72,932	 	
 	 		 		 	
Cash Flows from Investing Activities:	 	 	 	 	 	 	 	
 	Vessel acquisitions including advances for vessel acquisitions	 	 	(12,350	)	 	(40,584	)	
 	Proceeds from vessel's sale	 	 	—	 	 	26,798	 	
 	Vessels under construction	 	 	(21	)	 	(38,883	)	
 	 		 		 	
 	Net Cash used in Investing Activities	 	 	(12,371	)	 	(52,669	)	
 	 		 		 	
Cash Flows from Financing Activities:	 	 	 	 	 	 	 	
 	Proceeds from long-term debt	 	 	400,000	 	 	—	 	
 	Proceeds from related party loans	 	 	—	 	 	30,375	 	
 	Payments of long-term debt	 	 	(310,937	)	 	(31,081	)	
 	Payments of related party loans	 	 	—	 	 	(25,375	)	
 	Dividends paid	 	 	(86,433	)	 	—	 	
 	Deferred finance costs	 	 	(791	)	 	(338	)	
 	Deferred public offering costs	 	 	—	 	 	(940	)	
 	Decrease/(increase) of restricted cash	 	 	1,457	 	 	712	 	
 	 		 		 	
 	Net Cash provided by/(used in) Financing Activities	 	 	3,296	 	 	(26,647	)	
 	 		 		 	
Net Increase/(decrease) in Cash and Cash Equivalents	 	 	75,028	 	 	(6,384	)	
 	 		 		 	
 	Cash and Cash Equivalents, Beginning of Period	 	 	97,008	 	 	38,000	 	
 	 		 		 	
 	Cash and Cash Equivalents, End of Period	 	$	172,036	 	$	31,616	 	
 	 		 		 	
 	Supplementary Cash Flow information	 	 	 	 	 	 	 	
 	Cash paid for interest	 	 	11,368	 	 	15,082	 	
 	Non-cash capitalized interest on vessels under construction	 	 	2,309	 	 	3,567	 	
 	Non-cash lease liability related to vessel acquisition	 	 	—	 	 	14,416	 	
The accompanying notes are an integral part of these consolidated financial statements
F-31

 
 DANAOS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1 Basis of Presentation and General Information
              The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP"). The reporting and functional currency of the Company is the United States Dollar.
              The interim financial data as of June 30, 2006 and for the six months ended June 30, 2006 and 2005 is unaudited; however, in the opinion of the Company, the interim data includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for the interim periods.
              Danaos Corporation ("Danaos"), formerly Danaos Holdings Limited, was formed on December 7, 1998 under the laws of Liberia and is presently the sole owner of all outstanding shares of the companies (the "Danaos Subsidiaries") listed below. Danaos Holdings Limited was redomiciled in the Marshall Islands on October 7, 2005. In connection with the redomiciliation, the Company changed its name to Danaos Corporation.
              The Company's vessels operate worldwide, carrying containers and dry cargo for many of the world's leading charterers. The Company manages its operations from its offices in Piraeus, Greece.
              The Company's principal business is the acquisition and operation of vessels. Danaos conducts its operations through the vessel-owning subsidiaries whose principal activity is the ownership and operation of container and dry cargo type vessels (see note 2) that are under the exclusive management of a related party of the Company (see note 9).
              The consolidated financial statements have been prepared to reflect the consolidation of the companies listed below. The historical balance sheets and results of operations of the companies listed below have been reflected in the consolidated balance sheets and consolidated statements of income, cash flows and stockholders' equity at and for each period since their respective incorporation dates.
              The consolidated companies are referred to as "Danaos," or "the Company."
              As of June 30, 2006, Danaos included the vessel-owning companies listed below:

Company
	 	Date of
Incorporation
	 	Vessel Name
	 	Vessel
Type
	 	Year Built
	 	DWT
	 	TEU
	
Deleas Shipping Ltd.	 	July 28, 1987	 	Pacific Bridge	 	Container	 	1984	 	—	 	2,130	

Seasenator Shipping Ltd.	
 	
June 7, 1996	
 	
Norasia Hamburg	
 	
Container	
 	
1989	
 	
—	
 	
3,908	

Seacaravel Shipping Ltd.	
 	
June 7, 1996	
 	
YM Yantian	
 	
Container	
 	
1989	
 	
—	
 	
3,908	

Peninsula Maritime Inc.	
 	
June 10, 1997	
 	
Eagle Express	
 	
Container	
 	
1978	
 	
—	
 	
1,704	

Appleton Navigation S.A.	
 	
May 12, 1998	
 	
CMA CGM Komodo	
 	
Container	
 	
1991	
 	
—	
 	
2,917	

Geoffrey Shipholding Ltd.	
 	
September 22, 1997	
 	
CMA CGM Kalamata	
 	
Container	
 	
1990	
 	
—	
 	
2,917	

Lacey Navigation Inc.	
 	
March 5, 1998	
 	
CMA CGM Elbe	
 	
Container	
 	
1991	
 	
—	
 	
2,917	
 	 	 	 	 	 	 	 	 	 	 	 	 	
F-32

 

Saratoga Trading S.A.	
 	
May 8, 1998	
 	
YM Milano	
 	
Container	
 	
1998	
 	
—	
 	
3,129	

Tyron Enterprises S.A.	
 	
January 26, 1999	
 	
Henry	
 	
Container	
 	
1986	
 	
—	
 	
3,039	

Ferrous Shipping (Private) Ltd.	
 	
December 6, 2000	
 	
APL England	
 	
Container	
 	
2001	
 	
—	
 	
5,506	

Cobaltium Shipping (Private) Ltd.	
 	
December 6, 2000	
 	
APL Scotland	
 	
Container	
 	
2001	
 	
—	
 	
5,506	

Lissos Shipping (Private) Ltd.	
 	
February 16, 2001	
 	
APL Holland	
 	
Container	
 	
2001	
 	
—	
 	
5,506	

Orchid Navigation Corp.	
 	
May 20, 1996	
 	
Dimitris C	
 	
Dry cargo	
 	
1994	
 	
43,814	
 	
—	

Roberto C Maritime Inc.	
 	
February 19, 2002	
 	
Roberto C	
 	
Dry cargo	
 	
1994	
 	
45,210	
 	
—	

Alexandra Navigation Inc.	
 	
March 5, 2002	
 	
Alexandra I	
 	
Dry cargo	
 	
1994	
 	
69,090	
 	
—	

Mercator Shipping
Inc.	
 	
April 4, 2002	
 	
MV Achilleas	
 	
Dry cargo	
 	
1994	
 	
69,180	
 	
—	

Ortelius Maritime Inc.	
 	
April 4, 2002	
 	
Fivos	
 	
Dry cargo	
 	
1994	
 	
69,659	
 	
—	

Independence Navigation Inc.	
 	
October 9, 2002	
 	
Independence	
 	
Container	
 	
1986	
 	
—	
 	
3,045	

Maria C Maritime
Inc.	
 	
February 19, 2002	
 	
Maria C	
 	
Dry cargo	
 	
1994	
 	
45,205	
 	
—	

Lato Shipping (Private) Ltd.	
 	
February 16, 2001	
 	
APL Belgium	
 	
Container	
 	
2002	
 	
—	
 	
5,506	

Victory Shipholding Inc.	
 	
October 9, 2002	
 	
Victory I	
 	
Container	
 	
1988	
 	
—	
 	
3,098	

Duke Marine Inc.	
 	
April 14, 2003	
 	
Hyundai Duke	
 	
Container	
 	
1992	
 	
—	
 	
4,651	

Commodore Marine Inc.	
 	
April 14, 2003	
 	
Hyundai Commodore	
 	
Container	
 	
1992	
 	
—	
 	
4,651	

F-33

 

Helderberg Maritime Inc.	
 	
June 11, 2003	
 	
S.A. Helderberg	
 	
Container	
 	
1977	
 	
—	
 	
3,101	

Sederberg Maritime Inc.	
 	
June 11, 2003	
 	
S.A. Sederberg	
 	
Container	
 	
1978	
 	
—	
 	
3,101	

Winterberg Maritime Inc.	
 	
June 11, 2003	
 	
S.A. Winterberg	
 	
Container	
 	
1978	
 	
—	
 	
3,101	

Constantia Maritime Inc.	
 	
June 11, 2003	
 	
Maersk Constantia	
 	
Container	
 	
1979	
 	
—	
 	
3,101	

Containers Services Inc.	
 	
May 30, 2002	
 	
Vancouver Express (ex P&O Nedlloyd Caribbean)	
 	
Container	
 	
2004	
 	
—	
 	
4,253	

Containers Lines Inc.	
 	
May 30, 2002	
 	
Maersk Derby (ex P&O Nedlloyd Caracas)	
 	
Container	
 	
2004	
 	
—	
 	
4,253	

Oceanew Shipping
Ltd.	
 	
January 3, 2002	
 	
CSCL Europe	
 	
Container	
 	
2004	
 	
—	
 	
8,468	

Oceanprize Navigation Ltd.	
 	
January 20, 2003	
 	
CSCL America	
 	
Container	
 	
2004	
 	
—	
 	
8,468	

Auckland Marine Inc.	
 	
January 27, 2005	
 	
ER Auckland	
 	
Container	
 	
2004**	
 	
—	
 	
4,300	

Wellington Marine
Inc.	
 	
January 27, 2005	
 	
ER Wellington	
 	
Container	
 	
2004***	
 	
—	
 	
4,300	

Federal Marine Inc.	
 	
February 14, 2006	
 	
MOL Confidence	
 	
Container	
 	
1994	
 	
—	
 	
4,651	

Vessels under construction	

 	

 	

 	

 	

Ramona Marine Co. Ltd.	
 	
February 21, 2003	
 	
Hull No. 1561	
 	
Container	
 	
2006*	
 	
—	
 	
9,580	

Karlita Shipping Co. Ltd.	
 	
February 21, 2003	
 	
Hull No. 1559	
 	
Container	
 	
2006*	
 	
—	
 	
9,580	

Seacarriers Services Inc.	
 	
June 28, 2005	
 	
Hull No. 1639	
 	
Container	
 	
2007*	
 	
—	
 	
4,253	

Seacarriers Lines Inc.	
 	
June 28, 2005	
 	
Hull No. 1640	
 	
Container	
 	
2007*	
 	
—	
 	
4,253	

Bayview Shipping Inc.	
 	
March 22, 2006	
 	
Hull No. 1670	
 	
Container	
 	
2008*	
 	
50,500	
 	
4,250	
 	 	 	 	 	 	 	 	 	 	 	 	 	
F-34

 

Channelview Shipping Inc.	
 	
March 22, 2006	
 	
Hull No. 1671	
 	
Container	
 	
2008*	
 	
50,500	
 	
4,250	

Balticsea Marine Inc.	
 	
March 22, 2006	
 	
Hull No. 1672	
 	
Container	
 	
2008*	
 	
50,500	
 	
4,250	

Continent Marine Inc	
 	
March 22, 2006	
 	
Hull No. 1673	
 	
Container	
 	
2008*	
 	
50,500	
 	
4,250	

Medsea Marine Inc	
 	
May 8, 2006	
 	
Hull No. 1698	
 	
Container	
 	
2009*	
 	
50,500	
 	
4,250	

Blacksea Marine Inc	
 	
May 8, 2006	
 	
Hull No. 1699	
 	
Container	
 	
2009*	
 	
50,500	
 	
4,250	

*
Estimated completion date

**
Scheduled to be delivered to the Company in March 2007.

***
Scheduled to be delivered to the Company in September 2007.
2 Significant Accounting Policies
              Principles of Consolidation:     The accompanying consolidated financial statements represent the consolidation of the accounts of the Company and its wholly-owned subsidiaries. The subsidiaries are fully consolidated from the date on which control is transferred to the Company. They are de-consolidated from the date that control ceases. The Company also consolidates entities that are determined to be variable interest entities as defined in Financial Accounting Standards Board ("FASB") Interpretation No. 46(R) if it determines that it is the primary beneficiary. Inter-company transaction balances and unrealized gains on transactions between the companies are eliminated.
              Use of Estimates:     The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
              Foreign Currency Translation:     The functional currency of the Company is the U.S. dollar. Transactions involving other currencies during the year are converted into U.S. dollars using the exchange rates in effect at the time of the transaction. On the balance sheet dates, monetary assets and liabilities denominated in other currencies are translated to reflect the current exchange rates. Resulting gains or losses are reflected in the accompanying consolidated statements of income.
              Cash and Cash Equivalents:     Cash and cash equivalents consist of current, call, time deposits and certificates of deposit with original maturity of three months or less which are not restricted for use or withdrawal.
              Restricted Cash:     Cash restricted accounts include retention and restricted deposit accounts. Certain of the Company's loan agreements require the Company to deposit one-third of quarterly and one-sixth of the semi-annual principal installments and interest installments, respectively, due on the
F-35

outstanding loan balance monthly in a retention account. On the rollover settlement date, both principal and interest are paid from the retention account.
              There are also restricted deposits in order to secure letters of guarantee which are restricted for use as general working capital.
              Accounts Receivable:     The amount shown as Accounts Receivable at each balance sheet date includes estimated recoveries from charterers for hire and demurrage billings, net of allowance for doubtful accounts. An estimate is made of the allowance for doubtful accounts based on a review of all outstanding amounts at each period, and an allowance is made for any accounts which management believes are not recoverable. Bad debts are written off in the year in which they are identified. No allowance for doubtful accounts has been taken in any period included in these financial statements.
              Insurance:     Insurance claims represent the claimable expenses, net of deductibles, which are expected to be recovered from insurance companies. Any costs to complete the claims are included in accrued liabilities. The Company accounts for the cost of possible additional call amounts under its insurance arrangements in accordance with FASB Statement of Financial Accounting Standards ("SFAS") 5 "Accounting for Contingencies" based on the Company's historical experience and the historical experience of the shipping industry.
              Prepaid Expenses and Inventories:     Prepaid expenses consist mainly of insurance expenses and inventories, which consist of bunkers, lubricants and provisions remaining on board the vessels at each period end, which are valued at the lower of market value or cost as determined using the weighted average method.
              Financing Costs:     Fees incurred for obtaining new loans are deferred and amortized over the loans' respective repayment periods using the effective interest rate method. These charges are included in the balance sheet line item Deferred Charges. Any unamortized balance of costs relating to loans repaid or refinanced is expensed in the period the repayment or refinancing is made subject to the provisions of EITF 96-19, "Debtor's Accounting for a Modification or Exchange of Debt Instrument" regarding debt extinguishment.
              Vessels' Cost:     Vessels are stated at cost, which consists of the contract purchase price and any material expenses incurred upon acquisition (improvements and delivery expenses). Subsequent expenditures for conversions and major improvements are also capitalized when they appreciably extend the life, increase the earning capacity or improve the efficiency or safety of the vessels. Otherwise these expenditures are charged to expenses as incurred. Financing costs incurred during the construction period of the vessels are included in vessels' cost.
              Vessels acquired in the secondhand market are treated as a business combination to the extent that such acquisitions include continuing operations and business characteristics such as management agreements, employees and customer base. Otherwise these are treated as purchase of assets. Where the Company identifies any intangible assets or liabilities associated with the acquisition of a vessel purchased on the secondhand market, the Company records all identified tangible and intangible assets or liabilities at fair value. Fair value is determined by reference to market data and the discounted amount of expected future cash flows. The Company has acquired certain vessels in the secondhand market. These acquisitions were considered to be acquisitions of assets. Certain vessels in the Company's fleet that were purchased on the secondhand market were acquired with existing charters.
F-36

              Vessels' Depreciation:     The cost of the Company's vessels is depreciated on a straight-line basis over the vessels' remaining economic useful lives after considering the estimated residual value. Management had estimated the useful life of the Company's vessels to be 25 years from the year built. As of January 1, 2005, the Company changed prospectively the estimated useful life of the container vessels to be 30 years. The change in estimate was based both on the Company's experience and the current practice in the shipping industry .
              Accounting for Special Survey and Drydocking Costs:     The Company follows the deferral method of accounting for special survey and drydocking costs, whereby actual costs incurred are deferred and are amortized on a straight-line basis over the period until the next scheduled survey, which is two and a half years. If special survey or drydocking is performed prior to the scheduled date, the remaining unamortized balances are immediately written off.
              The amortization periods reflect the estimated useful economic life of the deferred charge, which is the period between each special survey and drydocking.
              Impairment of Long-lived Assets:     SFAS 144 "Accounting for the Impairment or Disposal of Long-lived Assets" addresses financial accounting and reporting for the impairment or disposal of long-lived assets. The Company adopted SFAS 144 as of January 1, 2002. The standard requires that long-lived assets and certain identifiable intangibles held and used or disposed of by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. If the future net cash flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the asset's carrying value and fair value. No events or changes in circumstances have occurred in the periods presented that would lead to a review for impairment.
              Pension and Retirement Benefit Obligations-Crew:     The crew on board the companies' vessels serve in such capacity under short-term contracts (usually up to nine months) and accordingly, the vessel-owning companies are not liable for any pension or post retirement benefits.
              Accounting for Revenue and Expenses:     Revenues and expenses are recognized on a straight-line basis and on an accrual basis. Revenues are generated from bareboat hire and time charters. Bareboat hire revenues are recorded over the term of the hire on a straight-line basis. Time charter revenues are recorded over the term of the charter as service is provided. Unearned revenue includes revenue received in advance.
              The Company is a member of a pool arrangement with respect to the MV Achilleas and the Alexandra I . The resulting net revenues of the pool are distributed as time charter hire to each participant in accordance with the pool earning points of the individual pool vessels, adjusted for any off hire amount. Distributions of time charter hire to the Company are made every two weeks according to the agreement. An amount not exceeding four weeks' time charter hire for the vessel may be withheld from the Company as working capital for the pool. The Company recognizes revenue related to the pooling arrangements only when all contingencies under the agreements are resolved.
              General and Administrative Expenses:     General and administrative expenses include management fees paid to the vessels' manager (see note 9).
F-37

              Repairs and Maintenance:     All repair and maintenance expenses including major overhauling and underwater inspection expenses are charged against income incurred and are included in vessel operating expenses in the accompanying consolidated statements of income.
              Dividends:     Dividends are recorded in the Company's financial statements in the period in which they are approved by the Company's stockholders.
              Segment Reporting:     The Company reports financial information and evaluates its operations by total charter revenues. The Company does not have discrete financial information to evaluate the operating results for each such type of charter. Although revenue can be identified for these types of charters, management cannot and does not identify expenses, profitability or other financial information for these charters. As a result, management, including the chief operating decision makers, reviews operating results solely by revenue per day and operating results of the fleet, and thus the Company has determined that it operates under one reportable segment.
              Derivative Instruments:     The Company enters into interest rate swap contracts and forward exchange rate contracts to create economic hedges for its interest rate risks and its exposure to currency exchange risk on certain foreign currency receivables. When such derivatives do not qualify for hedge accounting under SFAS 133 "Accounting for Derivative Instruments and Hedging Activities", the Company presents these financial instruments at their fair value, and recognizes the fair value changes thereto in the income statement. When the derivatives do qualify for hedge accounting, depending upon the nature of the hedge, changes in the fair value of derivatives are either offset against the fair value of assets, liabilities or firm commitments through income, or recognized in other comprehensive income (loss) until the hedged item is recognized in income. The ineffective portion of a derivative's change in fair value is immediately recognized in income.
              Net Income Per Share:     The Company has presented net income per share for all periods presented based on the number of outstanding shares of common stock of Danaos Corporation at the reported periods taking into account any stock splits. There are no dilutive or potentially dilutive securities, accordingly there is no difference between basic and diluted net income per share.
              Recent Accounting Developments:     In November 2004, the FASB issued SFAS 151, "Inventory Costs—an amendment of ARB No. 43, Chapter 4" ("SFAS 151"), which clarifies that abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage) should be recognized as a current period expense. In addition, this Statement requires that allocation of fixed production overhead to the costs of conversion be based on the normal capacity of the production facilities. SFAS 151 is effective for fiscal years beginning after June 15, 2005, as applicable to the Company as of January 1, 2006. Management does not believe that the implementation of this standard has had a material impact on the financial position, results of operations or cash flows.
              In December 2004, the FASB issued SFAS 153 "Exchanges of Non-Monetary Assets—An Amendment to APB 29" ("SFAS 153"). APB 29 had stated that all exchanges of non-monetary assets should be recorded at fair value except in a number of situations, including where the exchange is in relation to similarly productive assets. SFAS 153 amends APB 29 to eliminate the exception for non-monetary exchanges of similar productive assets and replaces it with a general exception for exchanges for non-monetary assets that do not have commercial substance. A non-monetary transaction has commercial substance where the future cash flows of the business will be expected to change
F-38

significantly as a result of the exchange. The provisions of this statement will be effective for non-monetary exchanges occurring in fiscal periods beginning after June 15, 2005, as applicable to the Company as of January 1, 2006. Management does not believe that the implementation of this standard has had a material impact on the financial position, results of operations or cash flows.
              In December 2004, the FASB issued SFAS 123 (Revised) "Share Based Payments" (SFAS123(R)), which requires companies to expense the value of employee stock option schemes and similar awards based on the grant date fair value of the award. SFAS 123(R) eliminates the option to use APB 25's intrinsic method of accounting for valuation of share options and similar awards as provided by SFAS 123 as originally issued. In March 2005, the SEC released Staff Accounting Bulletin No. 107 "Share-Based Payment" ("SAB 107"), which provides interpretive guidance related to the interaction between SFAS 123(R) and certain SEC rules and regulations. It also provides the SEC staff's views regarding valuation of share-based payment arrangements. SFAS 123(R) will be applicable to the Company as of January 1, 2006. Management believes that the adoption of this standard will have an effect on the Company's financial position, results of operations or cash flows as a result of future grants of options of share based payments.
              In May 2005, the FASB issued SFAS 154, "Accounting Changes and Error Corrections—a replacement to APB 20 and FASB Statement 3." APB 20 required that voluntary changes in accounting principles be recognized by including the cumulative effect of changing to the new accounting principle in net income for the period of the change. SFAS 154 requires retrospective application of changes in accounting principle to prior periods' financial statements, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. Further when it is impracticable to determine the period-specific effects of an accounting change on one or more individual prior periods presented, SFAS 154 requires that the new accounting principle be applied to the balances of assets and liabilities as of the beginning of the earliest period for which retrospective application is practicable, and that a corresponding adjustment be made to the opening balance of retained earnings (or other appropriate components of equity or net assets in the statement of financial position) for that period rather than being reported in an income statement. When it is impracticable to determine the cumulative effect of applying a change in accounting principle to all prior periods, SFAS 154 requires that the new accounting principle be applied as if it were adopted prospectively from the earliest date practicable. The provisions of this statement shall be effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005, and will be applicable to the Company as of January 1, 2006. Management does not believe that the implementation of this standard has had a material impact on the financial position, results of operations or cash flows.
              In February 2006, the FASB issued Statement of Financial Accounting Standards No. 155 (SFAS 155) "Accounting for Certain Hybrid Instruments—an amendment of FASB Statements No. 133 and 140." SFAS 155 amends SFAS 133 to permit fair value measurement for certain hybrid financial instruments that contain an embedded derivative, provides additional guidance on the applicability of SFAS 133 and SFAS 140 to certain financial instruments and subordinated concentrations of credit risk. SFAS 155 is effective for the first fiscal year that begins after September 15, 2006. The adoption of this Accounting Standard is not expected to have an effect on our consolidated financial statements. This statement will be effective for the Company for the fiscal year beginning on January 1, 2007.
              In March 2006, the FASB issued Statement of Financial Accounting Standards No. 156 (SFAS 156) "Accounting for Servicing of Financial Assets—an amendment of FASB Statement
F-39

No. 140". SFAS 156 amends SFAS 140 requiring that all separately recognized servicing assets and liabilities be measured at fair value, if practicable. SFAS 156 also permits, but does not require, the subsequent measurement of servicing assets and liabilities. SFAS 156 is effective for the first fiscal year that begins after September 15, 2006. The adoption of this Accounting Standard is not expected to have an effect on our consolidated financial statements. This statement will be effective for the Company for the fiscal year beginning on January 1, 2007.
3 Vessels
              Vessels' cost and accumulated depreciation and changes thereto are as follows:

 	 	Vessel Cost
	 	Accumulated Depreciation
	 	Net Book Value(b,c)
	 	
January 1, 2005	 	$	822,739	 	$	(141,403	)	$	681,336	 	
Additions	 	 	—	 	 	(27,114	)	 	(27,114	)	
 	 		 		 		 	
December 31, 2005	 	$	822,739	 	$	(168,517	)	$	654,222	 	
Additions(a),(c)	 	 	87,318	 	 	(14,214	)	 	73,104	 	
Disposals	 	 	(14,225	)	 	2,381	 	 	(11,844	)	
 	 		 		 		 	
June 30, 2006	 	$	895,832	 	$	(180,350	)	$	715,482	 	
 	 		 		 		 	
              The residual value (estimated scrap value at the end of the vessels' useful lives) of the fleet was estimated at $121.3 as of June 30, 2006 and $121.4 million as of December 31, 2005.
a)
Vessels with a cost of $232.5 million and net book value of $220.8 million on June 30, 2006 are subject to certain arrangements as explained in other lease arrangements in note 7.

b)
Includes four container vessels with a net book value of $45.8 million, $45.8 million, $46.0 million, and $45.7 million at June 30, 2006, for which the charterers have the option to purchase the vessels in February 2007, June 2007, July 2007 and January 2008, respectively, each for $44.0 million and in February 2009, June 2009, July 2009 and January 2010, respectively, each for $39.0 million.

c)
On March 23, 2006, the Company purchased the MOL Confidence, a vessel of 4,651 TEU and 61,152 DWT, built in 1994 for an amount of $40.5 million. The vessel was purchased in the secondhand market and was acquired with an existing charter with a $20,750 daily rate for a period of 6.5 years, ending in 2012. The value of the vessel on a charter free basis has been valued at $55.0 million from two independent valuators. The Company has identified a liability of $14.6 million which will be amortized over the period of the time charter. (Refer also to note 9). This amount is included in the financial statement lines Unearned revenue, short and long term.
F-40

 
4 Advances for Vessels Under Construction
a)
Advances for vessels under construction are as follows:

 	 	December 31,
2005
	 	June 30,
2006
	
Advance payments for vessels	 	$	22,390	 	$	60,670	
Progress payments for vessels	 	 	156,744	 	 	156,744	
Decrease in vessels under construction values in respect of lease arrangements (note 7)	 	 	(27,272	)	 	—	
Capitalized interest	 	 	8,191	 	 	11,758	
Other vessel related costs	 	 	1,322	 	 	1,925	
 	 		 		
Total	 	$	161,375	 	$	231,097	
 	 		 		
In
November 2003, the Company entered into two agreements with Samsung Heavy Industries Co. Ltd. for the construction of two container vessels of 9,580 TEU each with expected deliveries in September and November 2006, respectively. The construction cost of the new vessels will amount to approximately $167.8 million, of which $144.0 million will be financed from the proceeds of a long-term bank loan. The shipbuilding contracts provide for stage payments of two installments of $4.2 million each by November 25, 2003, two installments of $4.2 million each by December 1, 2003, two installments of $67.1 million each by January 31, 2004 and two final installments of $8.4 million each upon delivery of the vessels.

The
loan mentioned above will be drawn down in two or more tranches so as to coincide with the scheduled delivery payments. The loan will be repayable after drawdown in twenty-four semi-annual installments of $5.6 million plus a balloon payment of $9.0 million, payable with the last installment. The interest rate of this loan is 5.02%.

On
November 30, 2004 the Company entered into leasing arrangements for the two vessels under construction, as outlined in note 7.

The
Company entered into two construction contracts in July 2005 with Samsung Heavy Industries Co. Ltd. for two containerships (the HN 1639 and the HN 1640 ) of 4,253 TEU each. An advance of $14.0 million ($7.0 million for each vessel) was paid on July 11, 2005. The total cost of each vessel is $70.0 million. The expected delivery dates for the HN 1639 and the HN 1640 are September 30, 2007 and November 30, 2007, respectively.

The
Company entered into four construction contracts on March 28, 2006 with Samsung Heavy Industries Co. Ltd. for four containerships (the HN 1670 , the HN 1671 , the HN 1672 and the HN 1673 ) of 4,253 TEU each. The contract price of each vessel is $63.8 million. The expected delivery dates are July 2008, October 2008, November 2008 and December 2008, respectively. The Company paid an advance of $25.2 million on April 5, 2006 in relation to these contracts. The Company has agreed to charter each of these containerships under 12-year charters at a daily charter rate of $22,785.
F-41

The
Company entered into two construction contracts on May 12, 2006 with Samsung Heavy Industries Co. Ltd. for two containerships (the HN 1698 and the HN 1699 ) of 4,253 TEU each. The contract price of each vessel is $63.8 million. The expected delivery dates are March 2009 and June 2009, respectively. The Company paid an advance of $12.76 million on May 22, 2006 in relation to these contracts. The Company has agreed to charter each of these containerships under 12-year charters at a daily charter rate of $22,785.

b)
Advances for vessels under construction and transfers to vessels' cost as of December 31, 2005 and June 30, 2006 were as follows:

Balance as of January 1, 2005	 	$	127,912	
Additions	 	 	33,463	
 	 		
Balance as of December 31, 2005	 	 	161,375	
Additions	 	 	69,722	
 	 		
Balance as of June 30, 2006	 	$	231,097	
 	 		
5 Deferred Charges
              Deferred charges consist of the following:

 	 	Drydocking and
Special Survey
	 	Finance
Costs
	 	Public
Offering Costs
	 	Total Deferred
Charges
	 	
Balance on January 1, 2005	 	$	5,505	 	—	 	—	 	$	5,505	 	
Additions	 	 	4,505	 	791	 	980	 	 	6,276	 	
Amortization for the year	 	 	(3,922	)	(101	)	—	 	 	(4,023	)	
 	 		 		 		 		 	
Balance on December 31, 2005	 	$	6,088	 	690	 	980	 	$	7,758	 	
 	 		 		 		 		 	
Additions	 	 	3,942	 	338	 	940	 	 	5,220	 	
Written off amount of drydocking	 	 	(259	)	—	 	—	 	 	(259	)	
Amortization for the year	 	 	(2,491	)	(87	)	—	 	 	(2,578	)	
 	 		 		 		 		 	
Balance on June 30, 2006	 	 	$7,280	 	$941	 	$1,920	 	$	10,141	 	
 	 		 		 		 		 	
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6 Other Current Assets
              Other current assets includes insurance claims arising from hull and machinery damages or other insured risks which have been submitted to insurance adjusters or are currently being compiled. All amounts are net of applicable deductibles.

 	 	December 31,
2005
	 	June 30,
2006
	
Insurance claims	 	$	652	 	$	1,706	
Other	 	 	1,664	 	 	2,672	
 	 		 		
 	Total	 	$	2,316	 	$	4,378	
 	 		 		
7 Lease Arrangements
              During 2004, the Company entered into a structured transaction with third parties affecting four vessels in its current fleet and two vessels under construction whereby such vessels were acquired by counterparties to the transaction which then time chartered the vessels to the Company for a period of 6 1 / 2 years. At the end of this 6 1 / 2 -year period, the counterparties have rights to require the Company to reacquire the vessels for approximately 75% of the vessels' initial book value. The cost of building the vessels has been financed with bank loans arranged by the Company. The vessels have been acquired by the counterparties for the same amount that it cost to have them constructed. No gain or loss was recognized thereon. The consideration with respect to the acquisition of these vessels is being held in a deposit account that is not under the control of the Company. The Company is entitled to receive a series of cash payments of amounts released from the deposit which are expected to equal, in the aggregate, approximately 25% of the initial deposit over the 6 1 / 2 years. The excess of these payments above the Company's payment obligations with respect to chartering-in these vessels is expected to amount to £46 million ($79.6 million). If the counterparties do not exercise their rights to require the Company to reacquire the vessels, the Company would have the right to charter-in the vessels for up to an additional 12 years during which period the Company would be entitled to 49% of the charter revenues in excess of a pre-set base level of the charter-in rate. In such a case, the remaining amount on deposit would be payable to the Company. If the Company is required to reacquire the vessels, ownership of the vessels would revert to the Company and the remaining deposit would be used for the price of reacquiring the vessels. The Company expects that the counterparties will exercise their rights to require the Company to reacquire the vessels.
              The Company has not accounted for the transactions as sale and lease-backs because the consideration for the vessels is not under the Company's control. The vessels are shown as fixed assets on the books of the Company. The Company reduced the cost basis of the vessels and hulls at inception with the present value of the future cash inflows amounting to $59.6 million (£31.9 million), $32.3 million and $27.3 million for the vessels and for the hulls, respectively, and has recognized this amount as a receivable in respect of the lease arrangements. The receivable balance is being reduced by the actual cash inflows over the 6 1 / 2 year term. The discount rates used in the present value calculation range from 4.2% to 4.9%, reflecting the GBP applicable interest rate at the time of the inception of the transactions.
              Following proposed changes to U.K. law contained in the draft U.K. Finance Bill published on April 7, 2006, it is expected that the interests of the Company's counterparties to the transaction described above will be adversely affected. As a result the Company estimates that if the put is
F-43

ultimately exercised it will be required to pay back an estimated amount of $80 million at the end of the leases. The difference between the estimated liability and the undiscounted cash inflows of $67 million amounting to $13 million was expensed in the second quarter of 2006, the period during which it first became probable that the draft U.K. Finance Bill proposed on April 7, 2006 would be enacted. At the same time the Company reconstituted the original vessels' and hulls cost amounting to $32.3 million and $27.3 million, respectively, and wrote-off the remaining receivable in respect of the lease agreement amounting to $48.5 million. The Company also recognized a liability of $27.6 million consisting of the portion of the cash inflows received to date from the lease arrangements of $14.6 million and an amount of $13 million as noted above. This liability will be increased with subsequent cash inflows in contemplation of a repayment of the estimated amount of $80 million at the end of the leases.
              In addition, the Company has entered into forward currency contracts to convert £29.7 million of cash inflows to U.S. dollars at the time of maturity.
8 Other Liabilities
              Other liabilities consist of the following:

 	 	December 31,
2005
	 	June 30,
2006
	
Fair value of swaps	 	$	3,332	 	$	6,621	
Fair value of forwards	 	 	—	 	 	1,661	
Other liability in respect of lease arrangement (note 7)	 	 	—	 	 	27,608	
 	 		 		
Total	 	$	3,332	 	$	35,890	
 	 		 		
9 Related Party Transactions
              Management Services:     Pursuant to a ship management agreement between each of the vessel owning companies and Danaos Shipping Company Limited (the "Manager"), the Manager acts as the fleet's technical manager responsible for (i) recruiting qualified officers and crews, (ii) managing day to day vessel operations and relationships with charterers, (iii) purchasing of stores, supplies and new equipment for the vessels, (iv) performing general vessel maintenance, reconditioning and repair, including commissioning and supervision of shipyards and subcontractors of drydock facilities required for such work, (v) ensuring regulatory and classification society compliance, (vi) performing operational budgeting and evaluation, (vii) arranging financing for vessels, (viii) providing accounting, treasury and finance services and (ix) providing information technology software and hardware in support of the Company's processes.
              Prior to July 1, 2005, the Company paid its manager a monthly management fee of $2,750 for the management of its affairs. The Company also paid a fixed management fee of $150 to $500 per day for each vessel in its fleet depending on its size and type of charterparty. As of July 1, 2005 the new management contract provides for a fee of $500 per day. In addition, the Manager receives a management fee of $250 per vessel per day for vessels on bareboat charter and $500 per vessel per day for the remaining vessels in the fleet, pro rated for the calendar days each vessel is owned. The Manager also receives a commission of 0.75% on gross freight, charter hire, ballast bonus and
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demurrage with respect to each vessel in the fleet and a commission of 0.5% based on the contract price of any vessel bought or sold by the Manager on its behalf (excluding newbuildings), and a flat fee of $400,000 per newbuilding vessel for the supervision of newbuilding contracts.
              For the services rendered, the Manager charged each vessel with a daily fee ranging from $250 to $500. Management fees for the six month period ended June 30, 2006 amounted to approximately $3.5 million (December 31, 2005: $5.0 million). The related expenses are shown under General and Administrative Expenses on the Statement of Income.
              The Company pays monthly advances on account of the above management fees. Related party balances presented among current assets represent amounts due from the Manager at balance sheet dates.
              Related party loan: On March 14, 2006 the Company entered into a new loan agreement with Seasonal Maritime Corporation, a related party, which amounted to $30.375 million and was payable within a six- month period. On June 16, 2006, the Company repaid $25.375 million of the amount outstanding under the loan facility. The outstanding loan balance as of June 30, 2006 is $5.0 million. The loan bears interest at a margin of 1% pa over LIBOR.
10 Financial Instruments
              The principal financial assets of the Company consist of cash and cash equivalents, trade receivables and other assets. The principal financial liabilities of the Company consist of long-term bank loans and accounts payable.
              Interest Rate Risk:     Interest rate risk arises on bank borrowings. The Company monitors the interest rate on borrowings closely to ensure that the borrowings are maintained at favorable rates.
              Concentration of Credit Risk:     Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash, trade accounts receivable and derivatives. The Company places its temporary cash investments, consisting mostly of deposits, with high credit qualified financial institutions. The Company performs periodic evaluations of the relative credit standing of those financial institutions that are considered in the Company's investment strategy. The Company does not require collateral on these financial instruments. The Company is exposed to credit risk in the event of non-performance by counterparties to derivative instruments, however, the Company limits this exposure by diversifying among counterparties with high credit ratings. Credit risk with respect to trade accounts receivable is generally diversified due to the large number of entities comprising the Company's charterer base and their dispersion across many geographic areas.
              Fair Value:     The carrying amounts reflected in the accompanying consolidated balance sheets of financial assets and liabilities excluding long-term bank loans approximate their respective fair values due to the short maturity of these instruments. The fair values of long-term floating rate bank loans approximate the recorded values, generally due to their variable interest rates. The fair value of the swap agreements equates to the amount that would be paid by the Company to cancel the swaps.
              Interest Rate Swaps:     The off-balance sheet risk in outstanding swap agreements involves both the risk of a counter-party not performing under the terms of the contract and the risk associated with changes in market value. The Company monitors its positions, the credit ratings of counterparties and
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the level of contracts it enters into with any one party. The counterparties to these contracts are major financial institutions. The Company has a policy of entering into contracts with parties that meet stringent qualifications and, given the high level of credit quality of its derivative counter-parties, the Company does not believe it is necessary to obtain collateral arrangements.
              The Company has entered into interest rate swap agreements with the following details:

Counter-party
	 	Effective
Date
	 	Termination
Date
	 	Notional
Amount on
Effective
Date
	 	Contracted
Rate
	 	Swap
Rate
	 	Fair value
Dec 31, 2005
	 	Fair value
June 30, 2006
	 	
RBS	 	12/15/2004	 	8/27/2016	 	$	60,528	 	5.01% p.a.	 	LIBOR plus 0.84% p.a.	 	$	(1,608	)	$	(3,225	)	
RBS	 	11/17/2004	 	11/2/2016	 	$	62,342	 	5.01% p.a.	 	LIBOR plus 0.86% p.a.	 	$	(1,724	)	$	(3,396	)	
 	 	 	 	 	 	 	 	 	 	 	 	 		 		 	
Total fair value	 	 	 	 	 	 	 	 	 	 	 	 	$	(3,332	)	$	(6,621	)	
 	 	 	 	 	 	 	 	 	 	 	 	 		 		 	
              These interest rate swaps are designed to economically hedge the fair value of the fixed rate loan facilities against fluctuations in the market interest rate. Pursuant to the adoption of the Company's Risk Management Accounting Policy, and after putting in place the formal documentation required by SFAS 133 in order to designate these swaps as hedging instruments, as of June 15, 2006, these interest rate swaps qualified for hedge accounting, and, accordingly, since that time, only hedge ineffectiveness amounts arising from the differences in the change in fair value of the hedging instrument and the hedged item are recognized in the Company's earnings. Assessment and measurement of prospective and retrospective effectiveness for these interest rate swaps will be performed on a quarterly basis, on the financial statement and earnings reporting dates.
              The total fair value change of the interest rate swaps as of June 30, 2006 amounted to $3,289. Of this amount, $2,913 is included in the Income Statement in Gain/(Loss) on Fair Value of Derivatives and reflects the change in fair value of interest rate swaps from January 1, 2006 until June 15, 2006, and $376 is the fair value adjustment of the underlying hedged debt and is shown in Other assets (long-term). The related liability is shown under Other Liabilities in the Balance Sheet.
              The Company entered into foreign currency forward contracts in 2004 to economically hedge its exposure to fluctuations of its anticipated cash inflows in U.K. Pounds relating to certain lease arrangements as explained in note 7. Under the contracts the Company will convert £29.7 million of cash inflows to U.S. dollars at the time of maturity (in the years from 2006 to 2012). These contracts do not qualify for hedge accounting under SFAS 133.
              The total fair value change of the forward contracts as of December 31, 2005 and June 30, 2006 is shown in the Income Statement in Gain/ (Loss) on Fair Value of Derivatives and amounts to $3.7 million and $(3.1) million, respectively. A related asset is shown under Other Assets (long-term) in the Balance Sheet and amounts to $1.4 million as of December 31, 2005 and a related liability of $1.7 million is shown under Other Liabilities as of June 30, 2006.
F-46

11 Commitments and Contingencies
Commitments
              The Company, as of December 31, 2005 and June 30, 2006, had outstanding commitments of approximately $128.8 and $473.3 million, respectively, for the construction of ten container vessels, with Samsung Heavy Industries Co. Ltd., as follows:

 	 	TEU
	 	Contract Price
	 	Outstanding Commitments as of December 31, 2005
	 	Outstanding Commitments as of June 30,2006
	
Hull 1559	 	9,580	 	$	83,900	 	$	8,390	 	$	8,390	
Hull 1561	 	9,580	 	$	83,900	 	$	8,390	 	$	8,390	
Hull 1639	 	4,253	 	$	70,000	 	$	56,000	 	$	56,000	
Hull 1640	 	4,253	 	$	70,000	 	$	56,000	 	$	56,000	
Hull 1670	 	4,250	 	$	63,800	 	 	—	 	$	57,420	
Hull 1671	 	4,250	 	$	63,800	 	 	—	 	$	57,420	
Hull 1672	 	4,250	 	$	63,800	 	 	—	 	$	57,420	
Hull 1673	 	4,250	 	$	63,800	 	 	—	 	$	57,420	
Hull 1698	 	4,250	 	$	63,800	 	 	—	 	$	57,420	
Hull 1699	 	4,250	 	$	63,800	 	 	—	 	$	57,420	
 	 		 		 		 		
 	 	53,166	 	$	690,600	 	$	128,780	 	$	473,300	
 	 		 		 		 		
              On June 29, 2006 the Company signed a commitment letter with Aegean Baltic Bank and HSH Nordbank for a senior revolving and term loan facility of up to $700 million. The loan facility will be fully repaid on the earlier of the tenth anniversary from the signing date or December 31, 2016. This revolving credit facility shall be non-amortizing for the first five years and shall be repayable thereafter in 20 consecutive quarterly installments and a final balloon payment together with the last scheduled installment. The Company expects to sign the final loan agreement during September 2006.
Contingencies
              There are no material legal proceedings to which the Company is a party or to which any of its properties are the subject, or other contingencies that the Company is aware of, other than routine litigation incidental to the Company's business. In the opinion of management, the disposition of the aforementioned lawsuits should not have a significant effect on the Company's results of operations, financial position and cash flows.
12 Sale of Vessel
              The Gain/(loss) on sale of vessels of $15.0 million for the six months ended June 30, 2006 reflects the sale of the Sofia III to a third party drybulk operator for $27.5 million, representing a gain of $15.0 million over the acquisition cost of such vessel as depreciated to the time of sale.
13 Subsequent Events
              On July 26, 2006, the Company entered into newbuilding contracts with Sungdong Shipbuilding & Marine Engineering Co., Ltd. for five 6,500 TEU containerships, the HN S4001 , the HN S4002 , the HN S4003 , the HN S4004 and the HN S4005 , for $91.5 million each.
F-47

              On July 19, 2006, the U.K. law described in note 7 in connection with the leasing arrangements for certain of the Company's vessels was enacted.
              In August 2006, the Company agreed to sell the Fivos , the Alexandra I, the Dimitris C, the Roberto C, the Maria C and the MV Achilleas to a third-party drybulk operator for an aggregate of $143.5 million.
              On August 14, 2006 the Company signed a commitment letter with The Royal Bank of Scotland for a senior revolving and term loan facility of up to $700 million. The loan facility will be fully repaid on the earlier of the tenth anniversary from the signing date or December 31, 2016. The Company expects to sign the final loan agreement during September 2006.
              On August 14, 2006 the Company entered into a new loan agreement with Seasonal Maritime Corporation, a related party, which amounted to $75.0 million and is payable within a six-month period from such date. The loan bears interest at a margin of 1% pa over LIBOR.
              On September 8, 2006, the Company took delivery of the CSCL Pusan (ex HN 1559) .
              APL-NOL has exercised its option to purchase the APL England from the Company for $44.0 million upon expiration of its current charter in February 2007.
              On September 18, 2006, the Company filed and the Marshall Islands accepted Amended and Restated Articles of Incorporation. Under the Amended and Restated Articles of Incorporation, the authorized capital stock of Danaos Corporation increased to 200,000,000 shares of common stock with a par value of $0.01 and 5,000,000 shares of preferred stock with a par value of $0.01.
              Additionally, on September 18, 2006, the Company effected an 88,615-for-1 split of its outstanding common stock. All common stock amounts (and per share amounts) in the accompanying financial statements have been adjusted to reflect the 88,615-for-1 stock split. In the accompanying consolidated balance sheets, the Company has adjusted its stockholders' equity accounts as of December 31, 2005 and June 30, 2006 by increasing the stated capital and decreasing the additional paid-in capital by $443,070 to reflect the increase in outstanding shares from 500 shares par value $.01 to 44,307,500 shares par value $.01. In the accompanying consolidated statements of income, basic and diluted net income per share and weighted average number of shares have been adjusted for all periods presented.
F-48

              Through and including                        , 2006 (the 25th day after the date of this prospectus), all dealers effecting transactions in our common stock, whether or not participating in the offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
10,250,000 Shares

Danaos Corporation
Common Stock

P R O S P E C T U S

Merrill Lynch & Co.
Citigroup
Dahlman Rose & Company
Jefferies & Company
Fortis Securities LLC
Nomura International
                          , 2006

 
 PART II

INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 6. Indemnification of Directors and Officers.
              The Registrant is a Marshall Islands corporation. Section 60 of the Business Corporations Act of the Republic of the Marshall Islands (the "BCA") provides that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director or officer of the corporation, or is or was serving at the request of the corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of no contest, or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe his conduct was unlawful.
              A Marshall Islands corporation also has the power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director or officer of the corporation, or is or was serving at the request of the corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by him or in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the corporation unless and only to the extent that the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the court shall deem proper.
              To the extent that a director or officer of a Marshall Islands corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in the preceding paragraph, or in the defense of a claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. Expenses incurred in defending a civil or criminal action, suit or proceeding may be paid in advance of the final disposition of such action, suit or proceeding as authorized by the board of directors in the specific case upon receipt of an undertaking by or on behalf of the director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the corporation as authorized under Section 60 of the BCA.
              Section 60 of the BCA also permits a Marshall Islands corporation to purchase and maintain insurance on behalf of any person who is or was a director or officer of the corporation or is or was serving at the request of the corporation as a director or officer against any liability asserted against him and incurred by him in such capacity whether or not the corporation would have the power to indemnify him against such liability under the provisions of Section 60 of the BCA. In this regard, the Registrant has entered into employment agreements with its chief executive officer, chief operating officer and chief financial officer which provide that the Registrant will maintain directors' and officers'
II-1

liability insurance policies during the term of such executive's employment and for five years thereafter at a level, and on terms and conditions, no less favorable than the coverage the Registrant provides other similarly-situated executives so long as such coverage is available from the carrier and does not increase the cost of such policy by more than 10% per annum.
              The indemnification and advancement of expenses provided by, or granted pursuant to, Section 60 of the BCA are not exclusive of any other rights to which those seeking indemnification and advancement of expenses may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person's official capacity and as to action in another capacity while holding such office. In this regard, the Registrant's Bylaws provide that such expenses (including attorneys' fees) incurred by former directors and officers may be so paid upon such terms and conditions, if any, as the Registrant deems appropriate, and the board of directors may authorize the Registrant's legal counsel to represent a present or former director or officer in any action, suit or proceeding, whether or not the Registrant is a party to such action, suit or proceeding. The Registrant's Bylaws further provide for indemnification of directors and officers on the basis described above as being permitted by Section 60 of the BCA and provide, to the extent authorized from time to time by the board of directors of the Registrant, rights to indemnification and to the advancement of expenses to employees and agents of the corporation similar to those conferred to directors and officers of Registrant.
              The Articles of Incorporation of the Registrant provide that no director shall have personal liability to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, but the liability of a director is not limited or eliminated (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders; (ii) for acts or omissions not undertaken in good faith or which involve intentional misconduct or a knowing violation of law; or (iii) for any transaction from which the director derived an improper personal benefit.
Item 7. Recent Sales of Unregistered Securities.
              On September 18, 2006, we issued 43,686,702 shares, 443,070 shares, and 177,228 shares, respectively, of our common stock to our existing stockholders, Danaos Investments Limited as Trustee for the 883 Trust, Iraklis Prokopakis and Dimitri J. Andritsoyiannis, pursuant to a 88,615-for-1 stock split, effected as a stock dividend. Each of these issuances was exempt from registration as a transaction that did not involve an offer or sale and, in any event, as transactions not involving an offering in the United States under Regulation S of the Securities Act.
Item 8. Exhibits and Financial Statement Schedules.
(a)
Exhibits

Exhibit
Number
	 	Description
	
1.1	 	Form of Underwriting Agreement	
3.1	 	Amended and Restated Articles of Incorporation	
3.2	 	Amended and Restated Bylaws	
4.1	 	Specimen of Share Certificate	
5.1	 	Opinion of Watson, Farley & Williams (New York) LLP, Marshall Islands counsel, as to the validity of the common stock being issued	
5.2	 	Opinion of Morgan, Lewis & Bockius LLP, United States counsel to Danaos Corporation, with respect to New York law	
8.1	 	Opinion of Morgan, Lewis & Bockius LLP, United States counsel to Danaos Corporation, with respect to certain tax matters	
 	 	 	
II-2

 
8.2	 	Opinion of Watson, Farley & Williams (New York) LLP, Marshall Islands and Liberian counsel, with respect to certain tax matters	
8.3	 	Opinion of White & Case LLP, special United States tax counsel to Danaos Corporation, with respect to certain tax matters	
10.1	 	Amended and Restated Management Agreement between Danaos Shipping Company Limited and Danaos Corporation	
10.2	 	Form of Management Agreement between Danaos Shipping Company Limited and our vessel-owning subsidiaries (See Appendix I to Exhibit 10.1)	
10.3	 	Form of Restrictive Covenant Agreement between Danaos Corporation and Dr. John Coustas	
10.4	 	Stockholder Rights Agreement	
10.5	 	2006 Equity Compensation Plan	
10.6	 	Loan Agreement and Supplemental Agreement, dated December 17, 2002 and April 21, 2005 respectively, with Aegean Baltic Bank S.A. and HSH Nordbank AG	
10.7	 	Loan Agreement, dated May 13, 2003, with the Export-Import Bank of Korea	
10.8	 	Loan Agreement, dated January 29, 2004, with the Export-Import Bank of Korea and Fortis Capital Corp.	
10.9	 	Loan Agreement, dated March 18, 2005, with Aegean Baltic Bank S.A.	
10.10	 	Loan Agreement, dated April 11, 2005, with The Royal Bank of Scotland	
10.11	 	Loan Agreement, dated August 14, 2006, with Seasonal Maritime Corporation	
10.12	 	Secondary Put and Call Agreement, dated February 18, 2004, with Allco Finance (UK) Limited with respect to the Maersk Derby (ex P&O Nedlloyd Caracas)	
10.13	 	Secondary Put and Call Agreement, dated February 18, 2004, with Allco Finance (UK) Limited with respect to the Vancouver Express (ex P&O Nedlloyd Caribbean)	
10.14	 	Secondary Put and Call Agreement, dated March 11, 2004, with Allco Finance (UK) Limited with respect to the CSCL America	
10.15	 	Secondary Put and Call Agreement, dated March 11, 2004, with Allco Finance (UK) Limited with respect to the CSCL Europe	
10.16	 	Secondary Put and Call Agreement, dated November 30, 2004, with Allco Finance (UK) Limited with respect to the CSCL Pusan (ex HN 1559)	
10.17	 	Secondary Put and Call Agreement, dated November 30, 2004, with Allco Finance (UK) Limited with respect to the HN 1561	
10.18	 	Shipbuilding Contract, dated November 18, 2003, with Samsung Heavy Industries Co. Ltd. for the HN 1561	
10.19	 	Shipbuilding Contract, dated June 30, 2005, with Samsung Heavy Industries Co., Ltd. for the HN 1639	
10.20	 	Shipbuilding Contract, dated June 30, 2005, with Samsung Heavy Industries Co., Ltd. for the HN 1640	
10.21	 	Shipbuilding Contract, dated March 28, 2006, with Samsung Heavy Industries Co., Ltd. for the HN 1670	
10.22	 	Shipbuilding Contract, dated March 28, 2006, with Samsung Heavy Industries Co., Ltd. for the HN 1671	
10.23	 	Shipbuilding Contract, dated March 28, 2006, with Samsung Heavy Industries Co., Ltd. for the HN 1672	
10.24	 	Shipbuilding Contract, dated March 28, 2006, with Samsung Heavy Industries Co., Ltd. for the HN 1673	

II-3

 
10.25	 	Shipbuilding Contract, dated May 12, 2006, with Samsung Heavy Industries Co., Ltd. for the HN 1698	
10.26	 	Shipbuilding Contract, dated May 12, 2006, with Samsung Heavy Industries Co., Ltd. for the HN 1699	
10.27	 	Shipbuilding Contract, dated July 26, 2006, with Sungdong Shipbuilding & Marine Engineering Co., Ltd. for the HN S4001	
10.28	 	Shipbuilding Contract, dated July 26, 2006, with Sungdong Shipbuilding & Marine Engineering Co., Ltd. for the HN S4002	
10.29	 	Shipbuilding Contract, dated July 26, 2006, with Sungdong Shipbuilding & Marine Engineering Co., Ltd. for the HN S4003	
10.30	 	Shipbuilding Contract, dated July 26, 2006, with Sungdong Shipbuilding & Marine Engineering Co., Ltd. for the HN S4004	
10.31	 	Shipbuilding Contract, dated July 26, 2006, with Sungdong Shipbuilding & Marine Engineering Co., Ltd. for the HN S4005	
10.32	 	Memorandum of Agreement, dated February 7, 2005, with Schiffartsgesellschaft GmbH & Co. KG for the E.R. Auckland	
10.33	 	Memorandum of Agreement, dated February 7, 2005, with Schiffartsgesellschaft GmbH & Co. KG for the E.R. Wellington	
10.34	 	Memorandum of Agreement, dated August 14, 2006, for the sale of the Fivos	
10.35	 	Memorandum of Agreement, dated August 14, 2006, for the sale of the Alexandra I	
10.36	 	Memorandum of Agreement, dated August 14, 2006, for the sale of the Dimitris C	
10.37	 	Memorandum of Agreement, dated August 14, 2006, for the sale of the Roberto C	
10.38	 	Memorandum of Agreement, dated August 14, 2006, for the sale of the Maria C	
10.39	 	Memorandum of Agreement, dated August 14, 2006, for the sale of the MV Achilleas	
21.1	 	Subsidiaries	
23.1	 	Consent of Independent Registered Public Accounting Firm	
23.2	 	Consent of Morgan, Lewis & Bockius LLP (included in Exhibit 5.2 and Exhibit 8.1)	
23.3	 	Consent of Watson, Farley & Williams (New York) LLP, Marshall Islands Counsel (included in Exhibits 5.1 and 8.2)	
23.4	 	Consent of Watson, Farley & Williams (New York) LLP, Liberian Counsel (included in Exhibit 8.2)	
23.5	 	Consent of White & Case LLP (included in Exhibit 8.3)	
23.6	 	Consent of Clarkson Research Services Limited	
23.7	 	Consent of Andrew B. Fogarty, Nominee for Director	
23.8	 	Consent of Myles R. Itkin, Nominee for Director	
23.9	 	Consent of Miklós Konkoly-Thege, Nominee for Director	
23.10	 	Consent of Dr. Robert A. Mundell, Nominee for Director	
24.1	 	Power of Attorney (included on signature page)	
II-4

 
Item 9. Undertakings.
              The undersigned registrant hereby undertakes:
              (1)   To provide to the underwriters at the closing specified in the underwriting agreement, shares certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.
              (2)   That for purposes of determining any liability under the Securities Act of 1933, as amended (the "Act"), the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in the form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) under the Act shall be deemed to be part of this registration statement as of the time it was declared effective.
              (3)   That for the purpose of determining any liability under the Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
              (4)   Each prospectus filed pursuant to Rule 424(b) as part of this registration statement, other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in this registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in this registration statement or any prospectus that is part of this registration statement or made in a document incorporated or deemed incorporated by reference into this registration statement or any prospectus that is part of this registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in this registration statement or prospectus that was part of this registration statement or made in any such document immediately prior to such date of first use.
              (5)   That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities:
              The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i)
Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;

(ii)
Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;

(iii)
The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and

(iv)
Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

              (6)   That insofar as indemnification for liabilities arising under the Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
II-5

 
 SIGNATURES
              Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form F-l and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Piraeus, Greece on September 19, 2006.

 	 	DANAOS CORPORATION	

 	
By:	
 	
 	 	 	/s/   JOHN COUSTAS       

Name: John Coustas
Title: President and Chief Executive Officer	
              KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of John Coustas, Iraklis Prokopakis and Dimitri J. Andritsoyiannis, his true and lawful attorney-in-fact and agent, with full powers of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any or all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully for all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute, may lawfully do or cause to be done by virtue hereof.
              Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons on September 19, 2006 in the capacities indicated.

Signature
	 	Title

 	

 	
 	
/s/   JOHN COUSTAS       

John Coustas	 	President, Chief Executive Officer and Director (Principal Executive Officer)	 	 	

/s/   IRAKLIS PROKOPAKIS       

Iraklis Prokopakis	
 	
Vice President, Treasurer, Chief Operating Officer and Director	

/s/   DIMITRI J. ANDRITSOYIANNIS       

Dimitri J. Andritsoyiannis	
 	
Vice President, Chief Financial Officer and Director (Principal Financial and Accounting Officer)	

II-6

 
 Authorized Representative
              Pursuant to the requirement of the Securities Act of 1933, the undersigned, the duly undersigned representative in the United States of the Registrant, has signed this registration statement in the City of Newark, State of Delaware, on September 19, 2006.

 	 	PUGLISI & ASSOCIATES	

 	
By:	
/s/ Donald J. Puglisi

Name: Donald J. Puglisi
Title: Managing Director	
II-7

 
 EXHIBIT INDEX

Exhibit
Number
	 	Description
	
1.1	 	Form of Underwriting Agreement	

3.1	
 	
Amended and Restated Articles of Incorporation, as amended	

3.2	
 	
Amended and Restated Bylaws	

4.1	
 	
Specimen of Share Certificate	

5.1	
 	
Opinion of Watson, Farley & Williams (New York) LLP, Marshall Islands counsel, as to the validity of the common stock being issued	

5.2	
 	
Opinion of Morgan, Lewis & Bockius LLP, United States counsel to Danaos Corporation, as to New York law	

8.1	
 	
Opinion of Morgan, Lewis & Bockius LLP, United States counsel to Danaos Corporation, with respect to certain tax matters	

8.2	
 	
Opinion of Watson, Farley & Williams (New York) LLP, Marshall Islands and Liberian counsel, with respect to certain tax matters	

8.3	
 	
Opinion of White & Case LLP, special United States tax counsel to Danaos Corporation, with respect to certain tax matters	

10.1	
 	
Amended and Restated Management Agreement between Danaos Shipping Company Limited and Danaos Corporation	

10.2	
 	
Form of Management Agreement between Danaos Shipping Company Limited and our vessel-owning subsidiaries (See Appendix I to Exhibit 10.1)	

10.3	
 	
Form of Restrictive Covenant Agreement between Danaos Corporation and Dr. John Coustas	

10.4	
 	
Stockholder Rights Agreement	

10.5	
 	
2006 Equity Compensation Plan	

10.6	
 	
Loan Agreement and Supplemental Agreement, dated December 17, 2002 and April 21, 2005 respectively, with Aegean Baltic Bank S.A. and HSH Nordbank AG	

10.7	
 	
Loan Agreement, dated May 13, 2003, with the Export-Import Bank of Korea	

10.8	
 	
Loan Agreement, dated January 29, 2004, with the Export-Import Bank of Korea and Fortis Capital Corp.	

10.9	
 	
Loan Agreement, dated March 18, 2005, with Aegean Baltic Bank S.A.	

10.10	
 	
Loan Agreement, dated April 11, 2005, with The Royal Bank of Scotland	

10.11	
 	
Loan Agreement, dated August 14, 2006, with Seasonal Maritime Corporation	

10.12	
 	
Secondary Put and Call Agreement, dated February 18, 2004, with Allco Finance (UK) Limited with respect to the Maersk Derby (ex P&O Nedlloyd Caracas)	

10.13	
 	
Secondary Put and Call Agreement, dated February 18, 2004, with Allco Finance (UK) Limited with respect to the Vancouver Express (ex P&O Nedlloyd Caribbean)	

10.14	
 	
Secondary Put and Call Agreement, dated March 11, 2004, with Allco Finance (UK) Limited with respect to the CSCL America	

10.15	
 	
Secondary Put and Call Agreement, dated March 11, 2004, with Allco Finance (UK) Limited with respect to the CSCL Europe	

10.16	
 	
Secondary Put and Call Agreement, dated November 30, 2004, with Allco Finance (UK) Limited with respect to the CSCL Pusan (ex HN 1559)	

10.17	
 	
Secondary Put and Call Agreement, dated November 30, 2004, with Allco Finance (UK) Limited with respect to the HN 1561	

10.18	
 	
Shipbuilding Contract, dated November 18, 2003, with Samsung Heavy Industries Co. Ltd. for the HN 1561	

10.19	
 	
Shipbuilding Contract, dated June 30, 2005, with Samsung Heavy Industries Co., Ltd. for the HN 1639	

10.20	
 	
Shipbuilding Contract, dated June 30, 2005, with Samsung Heavy Industries Co., Ltd. for the HN 1640	

10.21	
 	
Shipbuilding Contract, dated March 28, 2006, with Samsung Heavy Industries Co., Ltd. for the HN 1670	

10.22	
 	
Shipbuilding Contract, dated March 28, 2006, with Samsung Heavy Industries Co., Ltd. for the HN 1671	

10.23	
 	
Shipbuilding Contract, dated March 28, 2006, with Samsung Heavy Industries Co., Ltd. for the HN 1672	

10.24	
 	
Shipbuilding Contract, dated March 28, 2006, with Samsung Heavy Industries Co., Ltd. for the HN 1673	

10.25	
 	
Shipbuilding Contract, dated May 12, 2006, with Samsung Heavy Industries Co., Ltd. for the HN 1698	

10.26	
 	
Shipbuilding Contract, dated May 12, 2006, with Samsung Heavy Industries Co., Ltd. for the HN 1699	

10.27	
 	
Shipbuilding Contract, dated July 26, 2006, with Sungdong Shipbuilding & Marine Engineering Co., Ltd. for the HN S4001	

10.28	
 	
Shipbuilding Contract, dated July 26, 2006, with Sungdong Shipbuilding & Marine Engineering Co., Ltd. for the HN S4002	

10.29	
 	
Shipbuilding Contract, dated July 26, 2006, with Sungdong Shipbuilding & Marine Engineering Co., Ltd. for the HN S4003	

10.30	
 	
Shipbuilding Contract, dated July 26, 2006, with Sungdong Shipbuilding & Marine Engineering Co., Ltd. for the HN S4004	

10.31	
 	
Shipbuilding Contract, dated July 26, 2006, with Sungdong Shipbuilding & Marine Engineering Co., Ltd. for the HN S4005	

10.32	
 	
Memorandum of Agreement, dated February 7, 2005, with Schiffartsgesellschaft GmbH & Co. KG for the E.R. Auckland	

10.33	
 	
Memorandum of Agreement, dated February 7, 2005, with Schiffartsgesellschaft GmbH & Co. KG for the E.R. Wellington	

10.34	
 	
Memorandum of Agreement, dated August 14, 2006, for the sale of the Fivos	

10.35	
 	
Memorandum of Agreement, dated August 14, 2006, for the sale of the Alexandra I	

10.36	
 	
Memorandum of Agreement, dated August 14, 2006, for the sale of the Dimitris C	

10.37	
 	
Memorandum of Agreement, dated August 14, 2006, for the sale of the Roberto C	

10.38	
 	
Memorandum of Agreement, dated August 14, 2006, for the sale of the Maria C	

10.39	
 	
Memorandum of Agreement, dated August 14, 2006, for the sale of the MV Achilleas	

21.1	
 	
Subsidiaries	

23.1	
 	
Consent of Independent Registered Public Accounting Firm	

23.2	
 	
Consent of Morgan, Lewis & Bockius LLP (included in Exhibit 5.2 and Exhibit 8.1)	

23.3	
 	
Consent of Watson, Farley & Williams (New York) LLP, Marshall Islands Counsel (included in Exhibits 5.1 and 8.2)	

23.4	
 	
Consent of Watson, Farley & Williams (New York) LLP, Liberian Counsel (included in Exhibit 8.2)	

23.5	
 	
Consent of White & Case LLP (included in Exhibit 8.3)	

23.6	
 	
Consent of Clarkson Research Services Limited	

23.7	
 	
Consent of Andrew B. Fogarty, Nominee for Director	

23.8	
 	
Consent of Myles R. Itkin, Nominee for Director	

23.9	
 	
Consent of Miklós Konkoly-Thege, Nominee for Director	

23.10	
 	
Consent of Dr. Robert A. Mundell, Nominee for Director	

24.1	
 	
Power of Attorney (included on signature page)	

QuickLinks
 TABLE OF CONTENTS
 PROSPECTUS SUMMARY
Business Overview
Our Fleet
Our Competitive Strengths
Our Business Strategies
Our Manager
Corporate Information
 The Offering
 Summary Consolidated Financial Data
 RISK FACTORS
 FORWARD-LOOKING STATEMENTS
DIVIDEND POLICY
USE OF PROCEEDS
 CAPITALIZATION
DILUTION
 SELECTED CONSOLIDATED FINANCIAL DATA
 PRO FORMA FINANCIAL INFORMATION
 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 THE INTERNATIONAL SHIPPING INDUSTRY
Post-Panamax Containership Fleet & Orderbook
 Estimated Containership Investment (in billions)
Containership Time Charter Rates
Containership Time Charter Daily Rates Per TEU
Containership Newbuilding Price Development
Charter Owner Containership Orderbook
Secondhand Containership Sales Activity
Containership Secondhand Price Development
Top Containership Charter Owners by TEU Capacity
Top Liner Operators by TEU in Service
 Age and Size of the World Drybulk Carrier Fleet
World Drybulk Carrier Fleet Age Profile
 BUSINESS
 ENVIRONMENTAL AND OTHER REGULATIONS
 MANAGEMENT
 PRINCIPAL STOCKHOLDERS
OUR MANAGER AND MANAGEMENT RELATED AGREEMENTS
 RELATED PARTY TRANSACTIONS
DESCRIPTION OF INDEBTEDNESS
 SHARES ELIGIBLE FOR FUTURE SALE
DESCRIPTION OF CAPITAL STOCK
 MARSHALL ISLANDS COMPANY CONSIDERATIONS
 TAX CONSIDERATIONS
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
 UNDERWRITING
LEGAL MATTERS
EXPERTS
WHERE YOU CAN FIND ADDITIONAL INFORMATION
INDUSTRY DATA
ENFORCEABILITY OF CIVIL LIABILITIES
 GLOSSARY OF SHIPPING TERMS
 INDEX TO FINANCIAL STATEMENTS
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 DANAOS CORPORATION CONSOLIDATED BALANCE SHEETS (Expressed in thousands of United States Dollars)
DANAOS CORPORATION CONSOLIDATED STATEMENTS OF INCOME (Expressed in thousands of United States Dollars, except share and per share amounts)
 DANAOS CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (Expressed in thousands of United States Dollars)
DANAOS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Expressed in thousands of United States Dollars)
 DANAOS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DANAOS CORPORATION CONSOLIDATED BALANCE SHEETS (Expressed in thousands of United States Dollars except for share data)
DANAOS CORPORATION CONSOLIDATED STATEMENTS OF INCOME (Expressed in thousands of United States Dollars except for share data)
 DANAOS CORPORATION STATEMENTS OF CASH FLOWS (Expressed in thousands of United States Dollars)
 DANAOS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 PART II INFORMATION NOT REQUIRED IN THE PROSPECTUS
 SIGNATURES
 Authorized Representative
 EXHIBIT INDEX
 
Exhibit 1.1
 
DANAOS CORPORATION
(a Marshall Islands corporation)
10,250,000 Shares of Common Stock
PURCHASE AGREEMENT
Dated:  [•], 2006

 
DANAOS CORPORATION
(a Marshall Islands corporation)
10,250,000 Shares of Common Stock
(Par Value $.01 Per Share)
PURCHASE AGREEMENT
[•], 2006

MERRILL LYNCH & CO.	 	 	
Merrill Lynch, Pierce, Fenner & Smith	 	 	
 	Incorporated	 	 	
 	 	 	
CITIGROUP GLOBAL MARKETS INC.	 	 	
as Representatives of the several Underwriters	 	 	
c/o Merrill Lynch & Co.	 	Merrill Lynch & Co.	
Merrill Lynch, Pierce, Fenner & Smith	 	 	
 	Incorporated	 	 	
4 World Financial Center	 	 	
New York, New York 10080	 	 	
Ladies and Gentlemen:
Danaos Corporation, a Marshall Islands corporation (the “Company”), confirms its agreement with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated (“Merrill Lynch”) and Citigroup Global Markets Inc. (“Citigroup”), and each of the other Underwriters named in Schedule A hereto (collectively, the “Underwriters”, which term shall also include any underwriter substituted as hereinafter provided in Section 10 hereof), for whom Merrill Lynch and Citigroup are acting as representatives (in such capacity, the “Representatives”), with respect to (i) the issue and sale by the Company, and the purchase by the Underwriters, acting severally and not jointly, of the respective numbers of shares of Common Stock, par value $.01 per share, of the Company (“Common Stock”) set forth in Schedule A and (ii) the grant by the Company to the Underwriters, acting severally and not jointly, of the option described in Section 2(b) hereof to purchase all or any part of 1,537,500 additional shares of Common Stock to cover overallotments, if any.  The aforesaid 10,250,000 shares of Common Stock (the “Initial Securities”) to be purchased by the Underwriters and all or any part of the 1,537,500 shares of Common Stock subject to the option described in Section 2(b) hereof (the “Option Securities”) are hereinafter called, collectively, the “Securities”.
The Company understands that the Underwriters propose to make a public offering of the Securities as soon as the Representatives deem advisable after this Agreement has been executed and delivered.
The Company has filed with the Securities and Exchange Commission (the “Commission”) a registration statement on Form F-1 (No. 333-[•]), including the related preliminary prospectus or prospectuses, covering the registration of the Securities under the Securities Act of 1933, as amended (the “1933 Act”).  Promptly after execution and delivery of this Agreement, the Company will prepare and file a prospectus in accordance with the provisions of Rule 430A (“Rule 430A”) of the rules and regulations

 
of the Commission under the 1933 Act (the “1933 Act Regulations”) and paragraph (b) of Rule 424 (“Rule 424(b)”) of the 1933 Act Regulations.  The information included in such prospectus that was omitted from such registration statement at the time it became effective but that is deemed to be part of such registration statement at the time it became effective pursuant to paragraph (b) of Rule 430A is referred to as “Rule 430A Information”.  Each prospectus used before such registration statement became effective, and any prospectus that omitted the Rule 430A Information, that was used after such effectiveness and prior to the execution and delivery of this Agreement, is herein called a “preliminary prospectus”.  Such registration statement, including the amendments thereto, the exhibits and any schedules thereto, at the time it became effective, and including the Rule 430A Information, is herein called the “Registration Statement”.  Any registration statement filed pursuant to Rule 462(b) of the 1933 Act Regulations is herein referred to as the “Rule 462(b) Registration Statement”, and after such filing the term “Registration Statement” shall include the Rule 462(b) Registration Statement.  The final prospectus in the form first furnished to the Underwriters for use in connection with the offering of the Securities is herein called the “Prospectus”.  For purposes of this Agreement, all references to the Registration Statement, any preliminary prospectus, the Prospectus or any amendment or supplement to any of the foregoing shall be deemed to include the copy filed with the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval system (“EDGAR”).
SECTION 1.  Representations and Warranties.   (a)   Representations and Warranties by the Company.   Each of the Company and, with respect to Sections 1(a)(vi), 1(a)(ix), 1(a)(xii), 1(a)(xiii), 1(a)(xviii), 1(a)(xix), 1(a)(xxi), 1(a)(xxiv), 1(a)(xl), 1(a)(xli) and 1(a)(xlii) insofar as the statements in such sections relate to Danaos Shipping Company Limited (the “Manager”), the Manager represent and warrant to each Underwriter as of the date hereof, the Applicable Time referred to in Section 1(a)(i) hereof, as of the Closing Time referred to in Section 2(c) hereof, and as of each Date of Delivery (if any) referred to in Section 2(b) hereof, and agrees with each Underwriter, as follows:
(i)  Compliance with Registration Requirements.   Each of the Registration Statement, any Rule 462(b) Registration Statement and any post-effective amendment thereto has become effective under the 1933 Act and no stop order suspending the effectiveness of the Registration Statement, any Rule 462(b) Registration Statement or any post-effective amendment thereto has been issued under the 1933 Act and no proceedings for that purpose have been instituted or are pending or, to the knowledge of the Company, are contemplated by the Commission, and any request on the part of the Commission for additional information has been complied with.
At the respective times the Registration Statement, any Rule 462(b) Registration Statement and any post-effective amendments thereto became effective and at the Closing Time (and, if any Option Securities are purchased, at the Date of Delivery), the Registration Statement, the Rule 462(b) Registration Statement and any amendments and supplements thereto complied and will comply in all material respects with the requirements of the 1933 Act and the 1933 Act Regulations and did not and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading.  Neither the Prospectus nor any amendments or supplements thereto (including any prospectus wrapper), at the time the Prospectus or any such amendment or supplement was issued and at the Closing Time (and, if any Option Securities are purchased, at the Date of Delivery), included or will include an untrue statement of a material fact or omitted or will omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.
As of the Applicable Time (as defined below), neither (x) the Issuer General Use Free Writing Prospectus(es) (as defined below) issued at or prior to the Applicable Time and the Statutory Prospectus (as defined below) as of the Applicable Time and the information included in paragraph 1 of Schedule B hereto, all considered together (collectively, the “General Disclosure Package”), nor (y) any individual

2

 
Issuer Limited Use Free Writing Prospectus (as defined below), when considered together with the General Disclosure Package, included any untrue statement of a material fact or omitted to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.
As used in this subsection and elsewhere in this Agreement:
“Applicable Time” means [•]:00 [a/p]m (Eastern time) on [INSERT DATE] or such other time as agreed by the Company and Merrill Lynch.
“Issuer Free Writing Prospectus” means any “issuer free writing prospectus”, as defined in Rule 433 of the 1933 Act Regulations (“Rule 433”), relating to the Securities that (i) is required to be filed with the Commission by the Company, (ii) is a “road show that is a written communication” within the meaning of Rule 433(d)(8)(i) whether or not required to be filed with the Commission or (iii) is exempt from filing pursuant to Rule 433(d)(5)(i) because it contains a description of the Securities or of the offering that does not reflect the final terms, in each case in the form filed or required to be filed with the Commission or, if not required to be filed, in the form required to be retained in the Company’s records pursuant to Rule 433(g).
“Issuer General Use Free Writing Prospectus” means any Issuer Free Writing Prospectus that is intended for general distribution to prospective investors (other than a Bona Fide Electronic Road Show (as defined below)), as evidenced by its being specified in Schedule E hereto.
“Issuer Limited Use Free Writing Prospectus” means any Issuer Free Writing Prospectus that is not an Issuer General Use Free Writing Prospectus.
“Statutory Prospectus” as of any time means the prospectus relating to the Securities that is included in the Registration Statement immediately prior to that time, including any document incorporated by reference therein.
The Company has made available a “ bona fide electronic road show”, as defined in Rule 433, in compliance with Rule 433(d)(8)(ii) (the “Bona Fide Electronic Road Show”) such that no filing of any “road show” (as defined in Rule 433(h)) is required in connection with the offering of the Securities.
Each Issuer Free Writing Prospectus, as of its issue date and at all subsequent times through the completion of the public offer and sale of the Securities or until any earlier date that the issuer notified or notifies Merrill Lynch as described in Section 3(e), did not, does not and will not include any information that conflicted, conflicts or will conflict with the information contained in the Registration Statement or the Prospectus, and any preliminary or other prospectus deemed to be a part thereof that has not been superseded or modified.
The representations and warranties in this subsection shall not apply to statements in or omissions from the Registration Statement or the General Disclosure Package (including, without limitation, the Prospectus or any Issuer Free Writing Prospectus) made in reliance upon and in conformity with written information furnished to the Company by any Underwriter through Merrill Lynch expressly for use therein.
Each preliminary prospectus (including the prospectus filed as part of the Registration Statement as originally filed or as part of any amendment thereto) complied when so filed in all material respects with the 1933 Act Regulations and each preliminary prospectus and the Prospectus delivered to the Underwriters for use in connection with this offering was identical to the electronically transmitted
 
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copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.
At the time of filing the Registration Statement, any 462(b) Registration Statement and any post-effective amendments thereto and at the date hereof, the Company was not and is not an “ineligible issuer”, as defined in Rule 405 of the 1933 Act Regulations.
(ii)  Independent Accountants.   The accountants who certified the financial statements and supporting schedules included in the General Disclosure Package and the Registration Statement are independent public accountants as required by the 1933 Act and the 1933 Act Regulations.
(iii)  No Restrictions.   There are no restrictions on subsequent transfers of the Securities under the laws of the Republic of The Marshall Islands.
(iv)  Financial Statements.   The financial statements included in the Registration Statement, the General Disclosure Package and the Prospectus, together with the related schedules and notes thereto, present fairly the financial position of the Company and its consolidated subsidiaries (as defined below) at the dates indicated and the statement of operations, stockholders’ equity and cash flows of the Company and its consolidated subsidiaries for the periods specified, and said financial statements, have been prepared in conformity with generally accepted accounting principles (“GAAP”) applied on a consistent basis throughout the periods involved.  The supporting schedules, if any, present fairly in accordance with GAAP the information required to be stated therein.  The selected financial data and the summary financial information included in the Prospectus present fairly the information shown therein and have been compiled on a basis consistent with that of the audited financial statements included in the Registration Statement.  The pro forma financial information under the heading “Pro Forma Financial Information” included in the Registration Statement, the General Disclosure Package and the Prospectus presents fairly the information shown therein, has been prepared in accordance with the Commission’s rules and guidelines with respect to pro forma financial statements and has been properly compiled on the bases described therein, the assumptions used in the preparation thereof are reasonable and the adjustments used therein are appropriate to give effect to the transactions and circumstances referred to therein.
(v)  No Material Adverse Change in Business.   Since the respective dates as of which information is given in the Registration Statement, the General Disclosure Package and the Prospectus, except as otherwise stated therein, (A) there has been no material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business (a “Material Adverse Effect”), (B) there have been no transactions entered into by the Company or any of its subsidiaries, other than those in the ordinary course of business, which are material with respect to the Company and its subsidiaries considered as one enterprise, and (C) there has been no dividend or distribution of any kind declared, paid or made by the Company on any class of its capital stock.
(vi)  Good Standing of the Company.   The Company is validly existing as a corporation in good standing under the laws of the Republic of The Marshall Islands and the Manager has been duly organized in and is validly existing as a corporation in good standing under the laws of the Republic of Cyprus, each has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the General Disclosure Package and the Prospectus and to enter into and perform its respective obligations under this Agreement, and each of the Company and the Manager is duly qualified as a foreign corporation to transact business and is in good standing in each other jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the
 
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conduct of business, except where the failure to so qualify or to be in good standing would not result in a Material Adverse Effect.
(vii)  Good Standing of Subsidiaries.   Each subsidiary of the Company incorporated under the laws of the Republic of Liberia or the Republic of Cyprus is in good standing in its respective jurisdiction and each subsidiary of the Company incorporated under the laws of the Republic of Liberia, the Republic of Cyprus, or the Republic of Singapore (each a “Subsidiary” and, collectively, the “Subsidiaries”) has been duly organized and is validly existing as a corporation under the laws of the jurisdiction of its incorporation, has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the General Disclosure Package and the Prospectus and is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure to so qualify or to be in good standing would not result in a Material Adverse Effect or except as otherwise disclosed in the General Disclosure Package and the Registration Statement. All of the issued and outstanding capital stock of each such Subsidiary has been duly authorized and validly issued, is fully paid and non-assessable and is owned by the Company, directly or through subsidiaries, free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity, and none of the outstanding shares of capital stock of any Subsidiary was issued in violation of the preemptive or similar rights of any security holder of such Subsidiary.  The only subsidiaries of the Company are the Subsidiaries listed on Exhibit 21.1 to the Registration Statement.
(viii)  Capitalization.   The authorized, issued and outstanding capital stock of the Company is as set forth in the Prospectus and the Statutory Prospectus in the column entitled “Actual” under the caption “Capitalization”.  The shares of issued and outstanding capital stock of the Company have been duly authorized and validly issued and are fully paid and non-assessable and none of the outstanding shares of capital stock of the Company were issued in violation of the preemptive or other similar rights of any stockholder of the Company.
(ix)  Authorization of Agreement.   This Agreement has been duly authorized, executed and delivered by the Company and, with the respect to Section 1(a), the Manager.
(x)  Authorization and Description of Securities.   The Securities to be purchased by the Underwriters from the Company have been duly authorized for issuance and sale to the Underwriters pursuant to this Agreement and, when issued and delivered by the Company pursuant to this Agreement against payment of the consideration set forth herein, will be validly issued and fully paid and non-assessable.  The Common Stock conforms to all statements relating thereto contained in the General Disclosure Package and the Prospectus and such description conforms to the rights set forth in the instruments defining the same, no holder of the Securities will be subject to personal liability by reason of being such a holder, and the issuance of the Securities is not subject to the preemptive or other similar rights of any stockholder of the Company.
(xi)  Absence of Defaults and Conflicts.   Neither the Company nor any of its subsidiaries is in violation of its respective charter or bylaws or in default in the performance or observance of any obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which it or any of them may be bound, or to which any of the property or assets of the Company or any Subsidiary is subject (collectively, “Agreements and Instruments”), except for such defaults that would not result in a Material Adverse Effect, and the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated herein and in the General Disclosure Package and the Registration Statement (including the issuance and sale of the Securities and the use of the proceeds from the sale of the Securities as described in the Prospectus and
 
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the Statutory Prospectus under the caption “Use of Proceeds”), and compliance by the Company with its obligations hereunder have been duly authorized by all necessary corporate action and do not and will not, whether with or without the giving of notice or passage of time or both, conflict with or constitute a breach of, or default or Repayment Event (as defined below) under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any Subsidiary pursuant to, the Agreements and Instruments (except for such conflicts, breaches, defaults or Repayment Events or liens, charges or encumbrances that would not result in a Material Adverse Effect), nor will such action result in any violation of the provisions of the charter or bylaws of the Company or any Subsidiary or any applicable law, statute, rule, regulation, judgment, order, writ or decree of any government, government instrumentality or court, domestic or foreign, having jurisdiction over the Company or any Subsidiary or any of their assets, properties or operations.  As used herein, a “Repayment Event” means any event or condition which gives the holder of any note, debenture or other evidence of indebtedness (or any person acting on such holder’s behalf), the right to require the repurchase, redemption or repayment of all or a portion of such indebtedness by the Company or any Subsidiary.
(xii)  Absence of Labor Dispute.   No labor dispute with the employees of the Company, the Manager, any of the Company’s affiliates or any Subsidiary exists or, to the knowledge of the Company, is imminent, and neither the Company nor the Manager is aware of any existing or imminent labor disturbance by the employees of any of its or any Subsidiary’s or the Manager’s principal suppliers, manufacturers, customers or contractors, which, in any case, would result in a Material Adverse Effect.
(xiii)  Absence of Proceedings.   Other than as disclosed in the General Disclosure Package and the Registration Statement, there is no action, suit, proceeding, inquiry or investigation before or brought by any court or governmental agency or body, domestic or foreign, now pending, or, to the knowledge of the Company or the Manager, threatened, against or affecting the Company, the Manager or any Subsidiary, which is required to be disclosed in the General Disclosure Package and the Registration Statement, or which might result in a Material Adverse Effect, or which might materially and adversely affect the properties or assets thereof or the consummation of the transactions contemplated in this Agreement or the performance by the Company or the Manager (if applicable) of its obligations hereunder.  The aggregate of all pending legal or governmental proceedings to which the Company or any Subsidiary is a party or of which any of their respective property or assets is the subject which are not described in the General Disclosure Package and the Registration Statement, including ordinary routine litigation incidental to the business, could not result in a Material Adverse Effect.
(xiv)  Accuracy of Exhibits.   There are no contracts or documents which are required to be described in the General Disclosure Package, the Registration Statement or the Prospectus or to be filed as exhibits thereto which have not been so described or filed as required.
(xv)  Possession of Intellectual Property.   The Company, its subsidiaries and, to the Company’s knowledge, Danaos Management Consultants, own, share the right to use or possess, or can acquire on reasonable terms, adequate patents, patent rights, licenses, inventions, copyrights, know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures), trademarks, service marks, trade names or other intellectual property (collectively, “Intellectual Property”), necessary to carry on the business now operated by them, and neither the Company nor any of the Company’s subsidiaries, nor, to the Company’s knowledge, Danaos Management Consultants, has received any notice or is otherwise aware of any infringement of or conflict with asserted rights of others with respect to any Intellectual Property or of any facts or circumstances which would render any Intellectual Property invalid or inadequate to protect the interests of the Company, Danaos Management Consultants, or any of the Company’s subsidiaries, and which
 
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infringement or conflict (if the subject of any unfavorable decision, ruling or finding) or invalidity or inadequacy, singly or in the aggregate, would result in a Material Adverse Effect.
(xvi)  Absence of Further Requirements.   No filing with, or authorization, approval, consent, license, order, registration, qualification or decree of, any court or governmental authority or agency is necessary or required for the performance by the Company of its obligations hereunder, in connection with the offering, issuance or sale of the Securities hereunder or the consummation of the transactions contemplated by this Agreement, except such as have been already obtained or as may be required under the 1933 Act or the 1933 Act Regulations or state securities laws.
(xvii)  Absence of Manipulation.   Neither the Company nor any affiliate of the Company has taken, nor will the Company or any affiliate take, directly or indirectly, any action which is designed to or which has constituted or which would be expected to cause or result in stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Securities.
(xviii)  Possession of Licenses and Permits.   The Company, each Subsidiary, and the Manager possess such permits, licenses, approvals, consents and other authorizations (collectively, “Governmental Licenses”) issued by the appropriate federal, state, local or foreign regulatory agencies or bodies necessary to conduct the business now operated by them, except where the failure so to possess would not, singly or in the aggregate, result in a Material Adverse Effect; the Company, each Subsidiary, and the Manager are in compliance with the terms and conditions of all such Governmental Licenses, except where the failure so to comply would not, singly or in the aggregate, result in a Material Adverse Effect; all of the Governmental Licenses are valid and in full force and effect, except when the invalidity of such Governmental Licenses or the failure of such Governmental Licenses to be in full force and effect would not, singly or in the aggregate, result in a Material Adverse Effect; and neither the Company, any of the Subsidiaries, nor the Manager has received any notice of proceedings relating to the revocation or modification of any such Governmental Licenses which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would result in a Material Adverse Effect.
(xix)  Title to Property.   The Company, its subsidiaries and the Manager have good and marketable title to all real property owned by them, in each case, free and clear of all mortgages, pledges, liens, security interests, claims, restrictions or encumbrances of any kind except such as (A) are described in the General Disclosure Package and the Prospectus or (B) do not, singly or in the aggregate, materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company, any of its subsidiaries or the Manager, and all of the leases and subleases material to the business of the Company, its subsidiaries and the Manager, considered as one enterprise, and under which the Company, any of its subsidiaries or the Manager holds properties described in the General Disclosure Package and the Prospectus, are in full force and effect, and neither the Company, the Manager, nor any Subsidiary has any notice of any material claim of any sort that has been asserted by anyone adverse to the rights of the Company, the Manager or any Subsidiary under any of the leases or subleases mentioned above, or affecting or questioning the rights of the Company or any Subsidiary to the continued possession of the leased or subleased premises under any such lease or sublease.
(xx)  Investment Company Act.   The Company is not required, and upon the issuance and sale of the Securities as herein contemplated and the application of the net proceeds therefrom as described in the General Disclosure Package and the Prospectus will not be required, to register as an “investment company” under the Investment Company Act of 1940, as amended (the “1940 Act”).
(xxi)  Environmental Laws.   Except as described in the General Disclosure Package and the Registration Statement and except as would not, singly or in the aggregate, result in a Material Adverse Effect, (A) neither the Company, any of the Subsidiaries, nor the Manager is in violation of any federal,
 
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state, local or foreign statute, law, rule, regulation, ordinance, code, policy or rule of common law or any judicial or administrative interpretation thereof, including any judicial or administrative order, consent, decree or judgment, relating to pollution or protection of human health, the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata) or wildlife, including, without limitation, laws and regulations relating to the release or threatened release of chemicals, pollutants, contaminants, wastes, toxic substances, hazardous substances, petroleum or petroleum products, asbestos-containing materials or mold (collectively, “Hazardous Materials”), or to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials (collectively, “Environmental Laws”), (B) the Company, the Subsidiaries and the Manager have all permits, authorizations and approvals required under any applicable Environmental Laws and are each in compliance with their requirements, (C) there are no pending or threatened administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of noncompliance or violation, investigation or proceedings relating to any Environmental Law against the Company, any of the Subsidiaries or the Manager, (D) there are no events or circumstances that would reasonably be expected to form the basis of an order for clean-up or remediation, or an action, suit or proceeding by any private party or governmental body or agency, against or affecting the Company, any of the Subsidiaries or the Manager, relating to Hazardous Materials or any Environmental Laws, (E) neither the Company, any of the Subsidiaries nor the Manager has been named as a “potentially responsible party” under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, (F) there has been no storage, generation, transportation, handling, treatment, disposal, discharge, emission or other release of any kind of toxic or other wastes or other hazardous substances by, due to, or caused by the Company, any Subsidiary or the Manager (or, to the Company’s knowledge, upon any other entity for whose acts or omissions the Company is or may liable) upon any other property now or previously owned or leased by the Company, any Subsidiary or the Manager, or upon any other property, which would be a violation of or give rise to any liability under any applicable law, rule, regulation, order, judgment, decree or permit (including any applicable regulations and standards adopted by the International Maritime Organization) relating to pollution or protection of human health and the environment, (G) there has been no disposal, discharge, emission or other release of any kind onto such property or into the environment surrounding such property, of any toxic or other wastes or other hazardous substances with respect to which the Company, any Subsidiary or the Manager has knowledge and (H) neither the Company, the Manager, nor any Subsidiary has agreed to assume, undertake or provide indemnification for any liability or any other person under any Environmental Law, including any obligation for cleanup or remedial action, other than by operation of law or due to the Company’s membership in any mutual protection and indemnity association, except in each case as described in the General Disclosure Package, the Registration Statement and the Prospectus.
(xxii)  Effect of Environmental Laws.   The Company has reviewed the effect of Environmental Laws on the business, operations and properties of the Company and its subsidiaries.  On the basis of such review, the Company has reasonably concluded that such associated costs and liabilities would not, singly or in the aggregate, reasonably be expected to have a Material Adverse Effect, except as set forth in or contemplated in the General Disclosure Package, the Registration Statement and the Prospectus (exclusive of any supplement thereto).
(xxiii)  Registration Rights.   There are no persons with registration rights or other similar rights to have any securities registered pursuant to the Registration Statement or otherwise registered by the Company under the 1933 Act.
(xxiv)  Enforceability of Operative Agreements.   Each of (A) the management agreement (the “Management Agreement”) between the Company and the Manager, (B) the new credit agreements, aggregating $1.4 billion, described in the General Disclosure Package and the Prospectus among, inter alia, the Company and The Royal Bank of Scotland and Aegean Baltic Bank and HSH Nordbank, (the
 
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“Credit Agreements”) [subject to definitive documentation being executed prior to closing] and (C) the executive employment agreements between the Company and Dimitri Andritsoyiannis (the “Andritsoyiannis Employment Agreement”), between the Company and Iraklis Prokopakis (the “Prokopakis Employment Agreement”), and between the Company and John Coustas (the “Coustas Employment Agreement”) and the related restrictive covenant agreement among, inter alia, John Coustas and the Company (the “Coustas Restrictive Covenant Agreement” and collectively, the documents in clauses (A) through (C) of this subsection, the “Operative Agreements”), has been duly authorized, validly executed and delivered by the Company, the Manager, their respective affiliates, as the case may be, and the individuals signatory to such agreements.  Each of the Operative Agreements is a valid and binding agreement of each such party enforceable against each such party in accordance with its terms, subject to (x) applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws relating to or affecting creditors’ rights generally and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) and (y) public policy, applicable law relating to fiduciary duties and indemnification and an implied covenant of good faith and fair dealing.
(xxv)  Registration of Vessels.   Each of the vessels described in the General Disclosure Package, the Registration Statement and the Prospectus and listed on Schedule D hereto as owned by certain of the Company’s subsidiaries (other than the fourteen newbuilding vessels (Hulls 1639, 1640, 1561, 1670, 1671, 1672, 1673, 1698, 1699, S4001, S4002, S4003, S4004 and S4005) and two secondhand vessels which the Company has agreed to acquire (Hull S178 ex E.R. Auckland and Hull S179, ex E.R. Wellington)), has been duly registered in the name of the entity that owns it under the laws and regulations and flag of the nation of its registration and no other action is necessary to establish and perfect such entity’s title to and interest in any of the vessels as against any charterer or third party and all of the vessels described in the General Disclosure Package, the Registration Statement and the Prospectus as owned by a Subsidiary of the Company are owned directly by such Subsidiary of the Company free and clear of all liens, claims, security interests or other encumbrances, except such as are described in or contemplated by the General Disclosure Package, the Registration Statement and the Prospectus.
(xxvi)  Dividends and Distributions.   Except as set forth in the General Disclosure Package, the Registration Statement and the Prospectus, the Company is not prohibited, directly or indirectly, from paying any dividends, from making any other distribution, from repaying any loans or advances or from transferring any of its property or assets.  All dividends and other distributions declared and payable on the shares of capital stock of the Company may, under the current laws and regulations of the Republic of The Marshall Islands and any political subdivisions thereof, be paid in United States dollars and may be freely transferred out of the Republic of The Marshall Islands, and all such dividends and other distributions will not be subject to withholding or other taxes under the laws and regulations of the Republic of The Marshall Islands and are otherwise free and clear of any other tax, withholding or deduction and without the necessity of obtaining any consents, approvals, authorizations, orders, licenses, registrations, clearances and qualifications of or with any court or governmental agency or body in the Republic of The Marshall Islands.
(xxvii)  Distributions from Subsidiaries.   Except as disclosed in the General Disclosure Package and the Registration Statement, there are no encumbrances or restrictions on the ability of any Subsidiary (A) to pay dividends or make other distributions on such Subsidiary’s capital stock or to pay any indebtedness to the Company, (B) to make loans or advances or pay any indebtedness to the Company or (C) to transfer any of its property or assets to the Company.
(xxviii)  Accounting Controls.   The Company and its subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurances that (A) transactions are executed in accordance with management’s general or specific authorization, (B) transactions are recorded as
 
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necessary to permit preparation of financial statements in conformity with GAAP and to maintain accountability for assets, (C) access to assets is permitted only in accordance with management’s general or specific authorization and (D) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.  Except as described in the General Disclosure Package, the Registration Statement and the Prospectus, since the end of the Company’s most recent audited fiscal year, there has been (1) no material weakness in the Company’s internal controls over financial reporting (whether or not remediated) and (2) no change in the Company’s internal controls over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal controls over financial reporting.
(xxix)  Compliance with the Sarbanes-Oxley Act.   The Company has taken all necessary actions to ensure that, upon the effectiveness of the Registration Statement, it will be in compliance with all provisions of the Sarbanes-Oxley Act of 2002 and all rules and regulations promulgated thereunder or implementing the provisions thereof (the “Sarbanes-Oxley Act”) that are then in effect and which the Company is required to comply with as of the effectiveness of the Registration Statement, and is actively taking steps to ensure that it will be in compliance with other provisions of the Sarbanes-Oxley Act not currently in effect, upon the effectiveness of such provisions, or which will become applicable to the Company at all times after the effectiveness of the Registration Statement.
(xxx)  Taxes.   No capital gains, income, withholding or other taxes are payable by or on behalf of the Underwriters to the Republic of Greece or the Republic of The Marshall Islands (assuming that none of the Underwriters are carrying on business or conducting transactions in the Republic of The Marshall Islands), or to any political subdivision or taxing authority thereof or therein in connection with the sale and delivery by the Company of the Securities to or for the respective accounts of the Underwriters or the sale and delivery by the Underwriters of the Securities to the initial purchasers thereof.
(xxxi)  Payment of Taxes.   All United States federal income tax returns of the Company and its subsidiaries required by law to be filed have been filed and all taxes shown by such returns or otherwise assessed, which are due and payable, have been paid, except assessments against which appeals have been or will be promptly taken and as to which adequate reserves have been provided. The United States federal income tax returns of the Company through the fiscal year ended December 31, 2004 have been filed and no assessment in connection therewith has been made against the Company. The Company and its subsidiaries have filed all other tax returns that are required to have been filed by them pursuant to applicable foreign, state, local or other law except insofar as the failure to file such returns would not result in a Material Adverse Effect, and has paid all taxes due pursuant to such returns or pursuant to any assessment received by the Company and its subsidiaries, except for such taxes, if any, as are being contested in good faith and as to which adequate reserves have been provided. The charges, accruals and reserves on the books of the Company in respect of any income and corporation tax liability for any years not finally determined are adequate to meet any assessments or re-assessments for additional income tax for any years not finally determined, except to the extent of any inadequacy that would not result in a Material Adverse Effect.
(xxxii)  Transfer Taxes.   There are no documentary, stamp or other issuance or transfer taxes or duties or similar fees or charges under U.S. federal law or the laws of any U.S. state, the Republic of The Marshall Islands (assuming that none of the Underwriters are carrying on business or conducting transactions in the Republic of The Marshall Islands), Liberia, Greece, Singapore or Cyprus, or any political subdivision of any thereof, required to be paid in connection with the execution and delivery of this Agreement or the issuance by the Company of the Securities, or the sale and delivery by the Company of the Securities to or for the respective accounts of the Underwriters or the sale and delivery by the Underwriters of the Securities to the initial purchasers thereof.
 
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(xxxiii)  Insurance.   The Company and its subsidiaries carry or are entitled to the benefits of insurance, with financially sound and reputable insurers, in such amounts and covering such risks as the Company reasonably considers adequate for the conduct of its business and the value of its properties and as is generally maintained by companies of established repute engaged in the same or similar business, and all such insurance is in full force and effect.  There are no material claims by or on behalf of the Company or any Subsidiary under any such policy or instrument as to which any insurance company is denying liability or defending under a reservation of rights clause and neither the Company nor any of the Subsidiaries is currently required to make any payment, or is aware of any facts which would require the Company or any Subsidiary to make any payment, in respect of a call by, or a contribution to, any insurance club.  Further, the Company has no reason to believe that it or any Subsidiary will not be able (A) to renew its existing insurance coverage as and when such policies expire or (B) to obtain comparable coverage from similar institutions as may be necessary or appropriate to conduct its business as now conducted and at a cost that would not result in a Material Adverse Change.  Neither of the Company nor any Subsidiary has been denied any insurance coverage which it has sought or for which it has applied.
(xxxiv)  Passive Foreign Investment Company Status.   The Company does not believe it is a passive foreign investment company (“PFIC”) within the meaning of Section 1297(a) of the United States Internal Revenue Code of 1986, as amended, and does not intend to knowingly take any action that would or would be likely to result in it becoming a PFIC.
(xxxv)  Foreign Private Issuer Status.   The Company is a “foreign private issuer” as defined in Rule 405 of the 1933 Act.
(xxxvi)  Statistical and Market-Related Data.   Any statistical and market-related data included in the General Disclosure Package, the Registration Statement and the Prospectus are based on or derived from sources that the Company believes to be reliable and accurate, and the Company or Clarkson Research Services Limited has obtained the written consent to the use of such data from such sources.
(xxxvii)  Certain Relationships and Related Transactions.   No relationship, direct or indirect, exists between or among any of the Company or its subsidiaries, on the one hand, and any director, officer, stockholder, customer or supplier of the Company, or its subsidiaries or any affiliate of the Company, on the other hand, which is required to be described in the General Disclosure Package, the Registration Statement or the Prospectus which is not so described as required.  There are no outstanding loans, advances (except normal advances for business expenses in the ordinary course of business) or guarantees of indebtedness by the Company to or for the benefit of any of the officers or directors of the Company or any of their respective family members, except as disclosed in the General Disclosure Package, the Registration Statement and the Prospectus.  The Company has not, in violation of the Sarbanes-Oxley Act, directly or indirectly, including through a Subsidiary, extended or maintained credit, arranged for the extension of credit, or renewed an extension of credit, in the form of a personal loan to or for any director or executive officer of the Company.
(xxxviii)  Commissions and Fees.   Except as disclosed in the General Disclosure Package, the Registration Statement and the Prospectus, there are no contracts, agreements or understandings between the Company and any person that would give rise to a valid claim against the Company or any Underwriter for a brokerage commission, finder’s fee or other like payment in connection with the transactions contemplated by this Agreement, the General Disclosure Package, the Registration Statement and the Prospectus or, to the Company’s knowledge, any arrangements, agreements, understandings, payments or issuance with respect to the Company or any of its officers, directors, shareholders, partners, employees, subsidiaries or affiliates that may affect the Underwriters’ compensation as determined by the National Association of Securities Dealers, Inc. (“NASD”).
 
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(xxxix)  No Association with NASD.   Neither the Company nor any of its affiliates directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, or is a person associated with (within the meaning of Article I (dd) of the bylaws of the NASD), any member firm of the NASD.
(xl)  Foreign Corrupt Practices Act.   Neither the Company nor, to the knowledge of the Company or the Manager, any director, officer, agent, employee, affiliate or other person acting on behalf of the Company or any of its subsidiaries is aware of or has taken any action, directly or indirectly, that would result in a violation by such persons of the Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder (the “FCPA”), including, without limitation, making use of the mails or any means or instrumentality of interstate commerce corruptly in furtherance of an offer, payment, promise to pay or authorization of the payment of any money, or other property, gift, promise to give, or authorization of the giving of anything of value to any “foreign official” (as such term is defined in the FCPA) or any foreign political party or official thereof or any candidate for foreign political office, in contravention of the FCPA and the Company and, to the knowledge of the Company and the Manager, its affiliates and subsidiaries have conducted their businesses in compliance with the FCPA and have instituted and maintain policies and procedures designed to ensure, and which are reasonably expected to continue to ensure, continued compliance therewith.
(xli)  Money Laundering Laws.   The operations of the Company and its subsidiaries are and have been conducted at all times in compliance with any applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money laundering statutes of all jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental agency (collectively, the “Money Laundering Laws”), and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Manager, the Company or any of its subsidiaries with respect to the Money Laundering Laws is pending or, to the best knowledge of the Company, threatened.
(xlii)  OFAC.   Neither the Company nor, to the knowledge of the Company or the Manager, any director, officer, agent, employee, affiliate or person acting on behalf of the Company is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”), and the Company will not directly or indirectly use the proceeds of the offering, or lend, contribute or otherwise make available such proceeds to any Subsidiary, joint venture partner or other person or entity, for the purpose of financing the activities of any person currently subject to any U.S. sanctions administered by OFAC.
(xliii)  Immunity.   Neither the Company, its subsidiaries, nor any of their properties or assets has any immunity from the jurisdiction of any court or from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution or otherwise) under the laws of the United States, the Republic of The Marshall Islands, Greece, Liberia, Singapore or Cyprus or any political subdivisions thereof.
(xliv)  Forward Looking Statements.   Each “forward-looking statement” (within the meaning of Section 27A of the 1933 Act or Section 21E of the 1934 Act) contained in the General Disclosure Package, the Registration Statement and the Prospectus has been made or reaffirmed with a reasonable basis and has been disclosed in good faith.
(b)   Officer’s Certificates.   Any certificate signed by any officer of the Company or any of its subsidiaries delivered to the Representatives or to counsel for the Underwriters shall be deemed a representation and warranty by the Company to each Underwriter as to the matters covered thereby.
 
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SECTION 2.  Sale and Delivery to Underwriters; Closing.   (a)   Initial Securities.   On the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Company agrees to sell to each Underwriter, severally and not jointly, and each Underwriter, severally and not jointly, agrees to purchase from the Company, at the price per share set forth in Schedule B, the number of Initial Securities set forth in Schedule A opposite the name of such Underwriter, plus any additional number of Initial Securities which such Underwriter may become obligated to purchase pursuant to the provisions of Section 10 hereof, bears to the total number of Initial Securities, subject, in each case, to such adjustments among the Underwriters as the Representatives in their sole discretion shall make to eliminate any sales or purchases of fractional securities.
(b)   Option Securities.   In addition, on the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Company hereby grants an option to the Underwriters, severally and not jointly, to purchase up to an additional 1,537,500 shares of Common Stock at the price per share set forth in Schedule B, less an amount per share equal to any dividends or distributions declared by the Company and payable on the Initial Securities but not payable on the Option Securities.  The option hereby granted will expire 30 days after the date hereof and may be exercised in whole or in part from time to time only for the purpose of covering overallotments which may be made in connection with the offering and distribution of the Initial Securities upon notice by Merrill Lynch to the Company setting forth the number of Option Securities as to which the several Underwriters are then exercising the option and the time and date of payment and delivery for such Option Securities.  Any such time and date of delivery (a “Date of Delivery”) shall be determined by Merrill Lynch, but shall not be later than seven full business days after the exercise of said option, nor in any event prior to the Closing Time, as hereinafter defined.  If the option is exercised as to all or any portion of the Option Securities, each of the Underwriters, acting severally and not jointly, will purchase that proportion of the total number of Option Securities then being purchased which the number of Initial Securities set forth in Schedule A opposite the name of such Underwriter bears to the total number of Initial Securities, subject in each case to such adjustments as Merrill Lynch in its discretion shall make to eliminate any sales or purchases of fractional shares.
(c)   Payment.   Payment of the purchase price for, and delivery of certificates for the Initial Securities shall be made at the offices of Cravath, Swaine & Moore LLP, at Worldwide Plaza, 825 Eighth Avenue, New York, New York 10019, or at such other place as shall be agreed upon by the Representatives and the Company, at 9:00 A.M. (Eastern time) on the third (fourth, if the pricing occurs after 4:30 P.M. (Eastern time) on any given day), business day after the date hereof (unless postponed in accordance with the provisions of Section 10 hereof), or such other time not later than ten business days after such date as shall be agreed upon by the Representatives and the Company (such time and date of payment and delivery being herein called “Closing Time”).
In addition, in the event that any or all of the Option Securities are purchased by the Underwriters, payment of the purchase price for, and delivery of certificates for, such Option Securities shall be made at the above-mentioned offices, or at such other place as shall be agreed upon by the Representatives and the Company, on each Date of Delivery as specified in the notice from the Representatives to the Company.
Payment shall be made to the Company by wire transfer of immediately available funds to a bank account designated by the Company, against delivery to the Representatives for the respective accounts of the Underwriters of certificates for the Securities to be purchased by them.  It is understood that each Underwriter has authorized the Representatives, for its account, to accept delivery of, receipt for, and make payment of the purchase price for, the Initial Securities and the Option Securities, if any, which it has agreed to purchase.  Merrill Lynch, individually and not as representative of the Underwriters, may (but shall not be obligated to) make payment of the purchase price for the Initial Securities or the Option
 
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Securities, if any, to be purchased by any Underwriter whose funds have not been received by the Closing Time or the relevant Date of Delivery, as the case may be, but such payment shall not relieve such Underwriter from its obligations hereunder.
(d)   Denominations; Registration.   Certificates for the Initial Securities and the Option Securities, if any, shall be in such denominations and registered in such names as the Representatives may request in writing at least one full business day before the Closing Time or the relevant Date of Delivery, as the case may be.  The certificates for the Initial Securities and the Option Securities, if any, will be made available for examination and packaging by the Representatives in The City of New York not later than 10:00 A.M. (Eastern time) on the business day prior to the Closing Time or the relevant Date of Delivery, as the case may be.
SECTION 3.  Covenants of the Company.   The Company covenants with each Underwriter as follows:
(a)   Compliance with Securities Regulations and Commission Requests.   The Company, subject to Section 3(b), will comply with the requirements of Rule 430A and will notify the Representatives immediately, and confirm the notice in writing, (i) when any post-effective amendment to the Registration Statement shall become effective, or any supplement to the Prospectus or any amended Prospectus shall have been filed, (ii) of the receipt of any comments from the Commission, (iii) of any request by the Commission for any amendment to the Registration Statement or any amendment or supplement to the Prospectus or for additional information, (iv) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or of any order preventing or suspending the use of any preliminary prospectus, or of the suspension of the qualification of the Securities for offering or sale in any jurisdiction, or of the initiation or threatening of any proceedings for any of such purposes or of any examination pursuant to Section 8(e) of the 1933 Act concerning the Registration Statement and (v) if the Company becomes the subject of a proceeding under Section 8A of the 1933 Act in connection with the offering of the Securities.  The Company will effect the filings required under Rule 424(b), in the manner and within the time period required by Rule 424(b) (without reliance on Rule 424(b)(8)), and will take such steps as it deems necessary to ascertain promptly whether the form of prospectus transmitted for filing under Rule 424(b) was received for filing by the Commission and, in the event that it was not, it will promptly file such prospectus.  The Company will make every reasonable effort to prevent the issuance of any stop order and, if any stop order is issued, to obtain the lifting thereof at the earliest possible moment.
(b)   Filing of Amendments and Exchange Act Documents.   The Company will give the Representatives notice of its intention to file or prepare any amendment to the Registration Statement (including any filing under Rule 462(b)) or any amendment, supplement or revision to either the prospectus included in the Registration Statement at the time it became effective or to the Prospectus, and will furnish the Representatives with copies of any such documents a reasonable amount of time prior to such proposed filing or use, as the case may be, and will not file or use any such document to which the Representatives or counsel for the Underwriters shall object.  The Company has given the Representatives notice of any filings made pursuant to the 1934 Act or 1934 Act Regulations within 48 hours prior to the Applicable Time, the Company will give the Representatives notice of its intention to make any such filing from the Applicable Time to the Closing Time and will furnish the Representatives with copies of any such documents a reasonable amount of time prior to such proposed filing, as the case may be, and will not file or use any such document to which the Representatives or counsel for the Underwriters shall object.
(c)   Delivery of Registration Statements.   The Company has furnished or will deliver to the Representatives and counsel for the Underwriters, without charge, signed copies of the Registration
 
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Statement as originally filed and of each amendment thereto (including exhibits filed therewith or incorporated by reference therein) and signed copies of all consents and certificates of experts, and will also deliver to the Representatives, without charge, a conformed copy of the Registration Statement as originally filed and of each amendment thereto (without exhibits) for each of the Underwriters.  The copies of the Registration Statement and each amendment thereto furnished to the Underwriters will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.
(d)   Delivery of Prospectuses.   The Company has delivered to each Underwriter, without charge, as many copies of each preliminary prospectus as such Underwriter reasonably requested, and the Company hereby consents to the use of such copies for purposes permitted by the 1933 Act.  The Company will furnish to each Underwriter, without charge, during the period when the Prospectus is required to be delivered under the 1933 Act, such number of copies of the Prospectus (as amended or supplemented) as such Underwriter may reasonably request.  The Prospectus and any amendments or supplements thereto furnished to the Underwriters will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.
(e)   Continued Compliance with Securities Laws.   The Company will comply with the 1933 Act and the 1933 Act Regulations so as to permit the completion of the distribution of the Securities as contemplated in this Agreement and in the Prospectus.  If at any time when a prospectus is required by the 1933 Act to be delivered in connection with sales of the Securities, any event shall occur or condition shall exist as a result of which it is necessary, in the opinion of counsel for the Underwriters or for the Company, to amend the Registration Statement or amend or supplement the Prospectus in order that the Prospectus will not include any untrue statements of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading in the light of the circumstances existing at the time it is delivered to a purchaser, or if it shall be necessary, in the opinion of such counsel, at any such time to amend the Registration Statement or amend or supplement the Prospectus in order to comply with the requirements of the 1933 Act or the 1933 Act Regulations, the Company will promptly prepare and file with the Commission, subject to Section 3(b), such amendment or supplement as may be necessary to correct such statement or omission or to make the Registration Statement or the Prospectus comply with such requirements, and the Company will furnish to the Underwriters such number of copies of such amendment or supplement as the Underwriters may reasonably request.  If at any time following issuance of an Issuer Free Writing Prospectus there occurred or occurs an event or development as a result of which such Issuer Free Writing Prospectus conflicted or would conflict with the information contained in the Registration Statement relating to the Securities or included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances prevailing at that subsequent time, not misleading, the Company will promptly notify Merrill Lynch and will promptly amend or supplement, at its own expense, such Issuer Free Writing Prospectus to eliminate or correct such conflict, untrue statement or omission.
(f)    Blue Sky Qualifications.   The Company will use its best efforts, in cooperation with the Underwriters, to qualify the Securities for offering and sale under the applicable securities laws of such jurisdictions as the Representatives may designate and to maintain such qualifications in effect for a period of not less than one year from the later of the effective date of the Registration Statement and any Rule 462(b) Registration Statement; provided , however , that the Company shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation or as a dealer in securities in any jurisdiction in which it is not so qualified or to subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject.
 
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(g)   Rule 158.   The Company will timely file such reports pursuant to the Securities Exchange Act of 1934 (the “1934 Act”) as are necessary in order to make generally available to its security holders as soon as practicable an earnings statement for the purposes of, and to provide to the Underwriters the benefits contemplated by, the last paragraph of Section 11(a) of the 1933 Act.
(h)   Use of Proceeds.   The Company will use the net proceeds received by it from the sale of the Securities in the manner specified in the Prospectus and the Statutory Prospectus under “Use of Proceeds”.
(i)    Listing.   The Company will use its best efforts to effect the listing of the Common Stock (including the Securities) on the New York Stock Exchange.
(j)    Restriction on Sale of Securities.   During a period of 180 days from the date of the Prospectus the Company will not, without the prior written consent of Merrill Lynch and Citigroup, (i) directly or indirectly, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or otherwise transfer or dispose of any share of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock or file any registration statement under the 1933 Act with respect to any of the foregoing or (ii) enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of the Common Stock, whether any such swap or transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise.  The foregoing sentence shall not apply to the Securities to be sold hereunder or to the registration of the shares of Common Stock reserved under the Company’s existing equity compensation plan or to the issuance by the Company of shares of its Common Stock or grant of options or other incentive awards under the Company’s existing equity compensation plan.  Notwithstanding the foregoing, if (A) during the last 17 days of the 180-day restricted period the Company issues an earnings release or material news or a material event relating to the Company occurs or (B) prior to the expiration of the 180-day restricted period, the Company announces that it will release earnings results or becomes aware that material news or a material event will occur during the 16-day period beginning on the last day of the 180-day restricted period, the restrictions imposed in this clause (j) shall continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event.
(k)   Reporting Requirements.   The Company, during the period when the Prospectus is required to be delivered under the 1933 Act, will file all documents required to be filed with the Commission pursuant to the 1934 Act within the time periods required by the 1934 Act and the rules and regulations of the Commission thereunder.
(l)    Issuer Free Writing Prospectuses .  The Company represents and agrees that, unless it obtains the prior consent of the Representatives, and each Underwriter represents and agrees that, unless it obtains the prior consent of the Company and the Representatives, it has not made and will not make any offer relating to the Securities that would constitute an “issuer free writing prospectus”, as defined in Rule 433, or that would otherwise constitute a “free writing prospectus”, as defined in Rule 405, required to be filed with the Commission. Any such free writing prospectus consented to by the Representatives or by the Company and the Representatives, as the case may be, is hereinafter referred to as a “Permitted Free Writing Prospectus”.  The Company represents that it has treated or agrees that it will treat each Permitted Free Writing Prospectus as an “issuer free writing prospectus”, as defined in Rule 433, and has complied and will comply with the requirements of Rule 433 applicable to any Permitted Free Writing Prospectus, including timely filing with the Commission where required, legending and record keeping.
 
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SECTION 4.  Payment of Expenses.   (a)   Expenses.   The Company will pay or cause to be paid all expenses incident to the performance of its obligations under this Agreement, including (i) the preparation, printing and filing of the Registration Statement (including financial statements and exhibits) as originally filed and of each amendment thereto, (ii) the preparation, printing and delivery to the Underwriters of this Agreement, any Agreement among Underwriters and such other documents as may be required in connection with the offering, purchase, sale, issuance or delivery of the Securities, (iii) the preparation, issuance and delivery of the certificates for the Securities to the Underwriters, including any stock or other transfer taxes and any stamp or other duties payable upon the sale, issuance or delivery of the Securities to the Underwriters, (iv) the fees and disbursements of the Company’s counsel, accountants and other advisors, (v) the qualification of the Securities under securities laws in accordance with the provisions of Section 3(f) hereof, including filing fees and the reasonable fees and disbursements of counsel for the Underwriters in connection therewith and in connection with the preparation of the Blue Sky Survey and any supplement thereto, (vi) the printing and delivery to the Underwriters of copies of each preliminary prospectus, any Permitted Free Writing Prospectus and of the Prospectus and any amendments or supplements thereto and any costs associated with electronic delivery of any of the foregoing by the Underwriters to investors, (vii) the preparation, printing and delivery to the Underwriters of copies of the Blue Sky Survey and any supplement thereto, (viii) the fees and expenses of any transfer agent or registrar for the Securities, (ix) the costs and expenses of the Company relating to investor presentations on any “road show” undertaken in connection with the marketing of the Securities, including without limitation, expenses associated with the production of road show slides and graphics, fees and expenses of any consultants engaged in connection with the road show presentations, travel and lodging expenses of the representatives and officers of the Company and any such consultants, and the cost of aircraft and other transportation chartered in connection with the road show, (x) the filing fees incident to, and the reasonable fees and disbursements of counsel to the Underwriters in connection with, the review by the NASD of the terms of the sale of the Securities and (xi) the fees and expenses incurred in connection with the listing of the Securities on the New York Stock Exchange.
(b)   Termination of Agreement.   If this Agreement is terminated by the Representatives in accordance with the provisions of Section 5, Section 9(a)(i) or Section 11 hereof, the Company shall reimburse the Underwriters for all of their out-of-pocket expenses, including the reasonable fees and disbursements of counsel for the Underwriters.
SECTION 5.  Conditions of Underwriters’ Obligations.   The obligations of the several Underwriters hereunder are subject to the accuracy of the representations and warranties of the Company and the Manager (if applicable) contained in Section 1 hereof or in certificates of any officer of the Company or any Subsidiary of the Company delivered pursuant to the provisions hereof, to the performance by the Company of its covenants and other obligations hereunder, and to the following further conditions:
(a)   Effectiveness of Registration Statement.   The Registration Statement, including any Rule 462(b) Registration Statement, has become effective and at Closing Time no stop order suspending the effectiveness of the Registration Statement shall have been issued under the 1933 Act or proceedings therefor initiated or threatened by the Commission, and any request on the part of the Commission for additional information shall have been complied with to the reasonable satisfaction of counsel to the Underwriters.  A prospectus containing the Rule 430A Information shall have been filed with the Commission in the manner and within the time frame required by Rule 424(b) without reliance on Rule 424(b)(8) or a post-effective amendment providing such information shall have been filed and declared effective in accordance with the requirements of Rule 430A.
(b)   Opinion of Counsel for Company.   At Closing Time, the Representatives shall have received the favorable opinions, dated as of Closing Time, in form and substance satisfactory to counsel for the
 
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Underwriters, together with signed or reproduced copies of such letters for each of the other Underwriters, of each of the following counsel:
(i)  Morgan, Lewis & Bockius LLP, U.S. counsel for the Company, to the effect set forth in Exhibit A-I hereto and to such further effect as counsel to the Underwriters may reasonably request;
(ii)  White & Case LLP, special U.S. tax counsel for the Company, to the effect set forth in Exhibit A-II hereto and to such further effect as counsel to the Underwriters may reasonably request;
(iii)  Watson, Farley & Williams (New York) LLP, special counsel for the Company with respect to matters of Marshall Islands law, to the effect set forth in Exhibit A-III hereto and to such further effect as counsel to the Underwriters may reasonably request;
(iv)  Watson, Farley & Williams (New York) LLP, special counsel to the Company with respect to matters of Liberian law, to the effect set forth in Exhibit A-IV hereto and to such further effect as counsel to the Underwriters may reasonably request;
(v)  Allen & Gledhill, special counsel to the Company with respect to matters of Singapore law, to the effect set forth in Exhibit A-V hereto and to such further effect as counsel to the Underwriters may reasonably request;
(vi)  Montanios & Montanios, special counsel to the Company with respect to matters of Cypriot law, to the effect set forth in Exhibit A-VI hereto and to such further effect as counsel to the Underwriters may reasonably request;
(vii)  Watson, Farley & Williams (London) LLP, special counsel to the Company with respect to matters of English law, to the effect set forth in Exhibit A-VII hereto and to such further effect as counsel to the Underwriters may reasonably request;
(viii)  Theo V. Sioufas Law Offices, special counsel to the Company with respect to matters of Greek law, to the effect set forth in Exhibit A-VIII hereto and to such further effect as counsel to the Underwriters may reasonably request; and
(ix)  Graham, Thompson & Company, special counsel to the Company with respect to matters of Bahama Law, to the effect set forth in Exhibit A-IX and to such further effect as counsel to the Underwriters may reasonably request.
(c)           Opinion of Counsel for Underwriters.   At Closing Time, the Representatives shall have received the opinion and letter, dated as of Closing Time, of Cravath, Swaine & Moore LLP, counsel for the Underwriters, together with signed or reproduced copies of such opinion and letter for each of the other Underwriters in form and substance satisfactory to the Representatives. In giving such opinion such counsel may rely, as to all matters governed by the laws of jurisdictions other than the law of the State of New York and the federal law of the United States, upon the opinions of counsel satisfactory to the Representatives.  Such counsel may also state that, insofar as such opinion involves factual matters, they have relied, to the extent they deem proper, upon certificates of officers of the Company, its subsidiaries and certificates of public officials.
(d)           Officers’ Certificate.   At Closing Time, there shall not have been, since the date hereof or since the respective dates as of which information is given in the Prospectus or the General Disclosure Package, any material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company and its subsidiaries, considered as one enterprise, whether or
 
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not arising in the ordinary course of business, and the Representatives shall have received a certificate of the President or a Vice President of the Company and of the chief financial or chief accounting officer of the Company, dated as of Closing Time, to the effect that (i) there has been no such material adverse change, (ii) the representations and warranties in Section 1(a) hereof are true and correct with the same force and effect as though expressly made at and as of Closing Time, (iii) the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied at or prior to Closing Time, and (iv) no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose have been instituted or are pending or, to their knowledge, contemplated by the Commission.
(e)   Accountant’s Comfort Letter.   At the time of the execution of this Agreement, the Representatives shall have received from PricewaterhouseCoopers S.A. a letter dated such date, in form and substance satisfactory to the Representatives, together with signed or reproduced copies of such letter for each of the other Underwriters containing statements and information of the type ordinarily included in accountants’ “comfort letters” to underwriters with respect to the financial statements and certain financial information contained in the Registration Statement, any preliminary prospectus and the Prospectus.
(f)    Bring-down Comfort Letter.   At Closing Time, the Representatives shall have received from PricewaterhouseCoopers S.A. a letter, dated as of Closing Time, to the effect that they reaffirm the statements made in the letter furnished pursuant to subsection (e) of this Section, except that the specified date referred to shall be a date not more than three business days prior to Closing Time.
(g)   Approval of Listing.   At or prior to the time of execution of this Agreement, the Securities shall have been approved for listing on the New York Stock Exchange, subject only to official notice of issuance.
(h)   No Objection.   The NASD has confirmed that it has not raised any objection with respect to the fairness and reasonableness of the underwriting terms and arrangements.
(i)    Lock-up Agreements.   At the date of this Agreement, the Representatives shall have received an agreement substantially in the form of Exhibit B hereto signed by the persons listed on Schedule C hereto.
(j)    Conditions to Purchase of Option Securities.   In the event that the Underwriters exercise their option provided in Section 2(b) hereof to purchase all or any portion of the Option Securities, the representations and warranties of the Company and the Manager (if applicable) contained herein and the statements in any certificates furnished by the Company or any Subsidiary of the Company hereunder shall be true and correct as of each Date of Delivery and, at the relevant Date of Delivery, the Representatives shall have received:
(i)            Officers’ Certificate.   A certificate, dated such Date of Delivery, of the Chief Executive Officer of the Company and of the Chief Financial Officer of the Company confirming that the certificate delivered at the Closing Time pursuant to Section 5(d) hereof remains true and correct as of such Date of Delivery.
(ii)           Opinion of Counsel for Company.   The favorable opinion of Morgan, Lewis & Bockius LLP, U.S. counsel for the Company, together with the favorable opinions of White & Case LLP, special U.S. tax counsel for the Company, Watson, Farley & Williams (New York) LLP, special counsel for the Company with respect to matters of Marshall Islands law, Watson, Farley & Williams (New York) LLP, special counsel for the Company with respect to matters of

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Liberian law, Allen & Gledhill, special counsel for the Company with respect to matters of Singapore law, Montanios & Montanios, special counsel for the Company with respect to matters of Cypriot law, Watson, Farley & Williams (London) LLP, special counsel for the Company with respect to matters of English law, Theo V. Sioufas Law Offices, special counsel for the Company with respect to matters of Greek law, in form and substance satisfactory to counsel for the Underwriters, and Graham, Thompson & Company, special counsel for the Company with respect to matters of Bahama Law, in form and substance satisfactory to counsel for the Underwriters, dated such Date of Delivery, relating to the Option Securities to be purchased on such Date of Delivery and otherwise to the same effect as the opinion required by Section 5(b) hereof.
(iii)          Opinion of Counsel for Underwriters.   The favorable opinion and letter of Cravath, Swaine & Moore LLP, counsel for the Underwriters, dated such Date of Delivery, relating to the Option Securities to be purchased on such Date of Delivery and otherwise to the same effect as the opinion required by Section 5(c) hereof.
(iv)          Bring-down Comfort Letter.   A letter from PricewaterhouseCoopers S.A., in form and substance satisfactory to the Representatives and dated such Date of Delivery, substantially in the same form and substance as the letter furnished to the Representatives pursuant to Section 5(e) hereof, except that the “specified date” in the letter furnished pursuant to this paragraph shall be a date not more than five days prior to such Date of Delivery.
(k)   Additional Documents.   At Closing Time and at each Date of Delivery, counsel for the Underwriters shall have been furnished with such documents and opinions as they may require for the purpose of enabling them to pass upon the issuance and sale of the Securities as herein contemplated, or in order to evidence the accuracy of any of the representations or warranties, or the fulfillment of any of the conditions, herein contained, and all proceedings taken by the Company in connection with the issuance and sale of the Securities as herein contemplated shall be satisfactory in form and substance to the Representatives and counsel for the Underwriters.
(l)    Termination of Agreement.   If any condition specified in this Section shall not have been fulfilled when and as required to be fulfilled, this Agreement, or, in the case of any condition to the purchase of Option Securities, on a Date of Delivery which is after the Closing Time, the obligations of the several Underwriters to purchase the relevant Option Securities, may be terminated by the Representatives by notice to the Company at any time at or prior to Closing Time or such Date of Delivery, as the case may be, and such  termination shall be without liability of any party to any other party except as provided in Section 4 and except that Sections 1, 6, 7 and 8 shall survive any such termination and remain in full force and effect.
SECTION 6.  Indemnification.   (a)   Indemnification of Underwriters.   The Company agrees to indemnify and hold harmless each Underwriter, its affiliates, as such term is defined in Rule 501(b) under the 1933 Act (each, an “Affiliate”), its selling agents and each person, if any, who controls any Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act as follows:
(i)            against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or any amendment thereto), including the Rule 430A Information or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading or arising out of any untrue statement or alleged untrue statement of a material fact included in any preliminary prospectus, any Issuer Free Writing Prospectus or the Prospectus (or any amendment or supplement thereto),

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or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading;
(ii)           against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission; provided that (subject to Section 6(d) below) any such settlement is effected with the written consent of the Company;
(iii)          against any and all expense whatsoever, as incurred (including the fees and disbursements of counsel chosen by Merrill Lynch), reasonably incurred in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under (i) or (ii) above; provided , however , that this indemnity agreement shall not apply to any loss, liability, claim, damage or expense to the extent arising out of any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to the Company by any Underwriter through Merrill Lynch expressly for use in the Registration Statement (or any amendment thereto), including the Rule 430A Information, or any preliminary prospectus, any Issuer Free Writing Prospectus  or the Prospectus (or any amendment or supplement thereto).
(b)   Indemnification of Company, Directors and Officers.   Each Underwriter severally agrees to indemnify and hold harmless the Company, its directors, each of its officers who signed the Registration Statement, and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, against any and all loss, liability, claim, damage and expense described in the indemnity contained in subsection (a) of this Section, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Registration Statement (or any amendment thereto), including the Rule 430A Information or any preliminary prospectus, any Issuer Free Writing Prospectus or the Prospectus (or any amendment or supplement thereto) in reliance upon and in conformity with written information furnished to the Company by such Underwriter through Merrill Lynch expressly for use therein.
(c)   Actions against Parties; Notification.   Each indemnified party shall give notice as promptly as reasonably practicable to each indemnifying party of any action commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify an indemnifying party shall not relieve such indemnifying party from any liability hereunder to the extent it is not materially prejudiced as a result thereof and in any event shall not relieve it from any liability which it may have otherwise than on account of this indemnity agreement.  In the case of parties indemnified pursuant to Section 6(a) above, counsel to the indemnified parties shall be selected by Merrill Lynch, and, in the case of parties indemnified pursuant to Section 6(b) above, counsel to the indemnified parties shall be selected by the Company.  An indemnifying party may participate at its own expense in the defense of any such action; provided , however , that counsel to the indemnifying party shall not (except with the consent of the indemnified party) also be counsel to the indemnified party.  In no event shall the indemnifying parties be liable for fees and expenses of more than one counsel (in addition to any local counsel) separate from their own counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances.  No indemnifying party shall, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever in

21

 
respect of which indemnification or contribution could be sought under this Section 6 or Section 7 hereof (whether or not the indemnified parties are actual or potential parties thereto), unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising out of such litigation, investigation, proceeding or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party.
(d)   Settlement without Consent if Failure to Reimburse.   If at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by Section 6(a)(ii) effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have received notice of the terms of such settlement at least 30 days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement.
SECTION 7.  Contribution.   If the indemnification provided for in Section 6 hereof is for any reason unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, liabilities, claims, damages or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount of such losses, liabilities, claims, damages and expenses incurred by such indemnified party, as incurred, (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Underwriters on the other hand from the offering of the Securities pursuant to this Agreement or (ii) if the allocation provided by clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand and of the Underwriters on the other hand in connection with the statements or omissions which resulted in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company on the one hand and the Underwriters on the other hand in connection with the offering of the Securities pursuant to this Agreement shall be deemed to be in the same respective proportions as the total net proceeds from the offering of the Securities pursuant to this Agreement (before deducting expenses) received by the Company and the total underwriting discount received by the Underwriters, in each case as set forth on the cover of the Prospectus, bear to the aggregate initial public offering price of the Securities as set forth on the cover of the Prospectus.
The relative fault of the Company on the one hand and the Underwriters on the other hand shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company or by the Underwriters, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.
The Company and the Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 7.  The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an indemnified party and referred to above in this Section 7 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement or omission or alleged omission.
 
22

 
Notwithstanding the provisions of this Section 7, no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such Underwriter has otherwise been required to pay by reason of any such untrue or alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls an Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act and each Underwriter’s Affiliates and selling agents shall have the same rights to contribution as such Underwriter, and each director of the Company, each officer of the Company who signed the Registration Statement, and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as the Company.  The Underwriters’ respective obligations to contribute pursuant to this Section 7 are several in proportion to the number of Initial Securities set forth opposite their respective names in Schedule A hereto and not joint.
SECTION 8.  Representations, Warranties and Agreements to Survive.   All representations, warranties and agreements contained in this Agreement or in certificates of officers of the Company, any of the Subsidiaries or the Manager (if applicable) submitted pursuant hereto, shall remain operative and in full force and effect regardless of (i) any investigation made by or on behalf of any Underwriter or its affiliates or selling agents, any person controlling any Underwriter, its officers or directors, any person controlling the Company or any person controlling the Manager and (ii) delivery of and payment for the Securities.
SECTION 9.  Termination of Agreement.   (a)   Termination; General.   The Representatives may terminate this Agreement, by notice to the Company, at any time at or prior to Closing Time (i) if there has been, since the time of execution of this Agreement or since the respective dates as of which information is given in the Prospectus or General Disclosure Package, any material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business, or (ii) if there has occurred any material adverse change in the financial markets in the United States or the international financial markets, any outbreak of hostilities or escalation thereof or other calamity or crisis or any change or development involving a prospective change in national or international political, financial or economic conditions, in each case the effect of which is such as to make it, in the judgment of the Representatives, impracticable or inadvisable to market the Securities or to enforce contracts for the sale of the Securities, or (iii) if trading in any securities of the Company has been suspended or materially limited by the Commission or the New York Stock Exchange, or if trading generally on the American Stock Exchange or the New York Stock Exchange or in the Nasdaq National Market has been suspended or materially limited, or minimum or maximum prices for trading have been fixed, or maximum ranges for prices have been required, by any of said exchanges or by such system or by order of the Commission, the National Association of Securities Dealers, Inc. or any other governmental authority, or (iv) a material disruption has occurred in commercial banking or securities settlement or clearance services in the United States or (v) if a banking moratorium has been declared by Federal or New York authorities.
(b)   Liabilities.   If this Agreement is terminated pursuant to this Section, such termination shall be without liability of any party to any other party except as provided in Section 4 hereof, and provided further that Sections 1, 6, 7 and 8 shall survive such termination and remain in full force and effect.

23

 
SECTION 10.  Default by One or More of the Underwriters.   If one or more of the Underwriters shall fail at Closing Time or a Date of Delivery to purchase the Securities which it or they are obligated to purchase under this Agreement (the “Defaulted Securities”), the Representatives shall have the right, within 24 hours thereafter, to make arrangements for one or more of the non-defaulting Underwriters, or any other underwriters, to purchase all, but not less than all, of the Defaulted Securities in such amounts as may be agreed upon and upon the terms herein set forth; if, however, the Representatives shall not have completed such arrangements within such 24-hour period, then:
(i)            if the number of Defaulted Securities does not exceed 10% of the number of Securities to be purchased on such date, each of the non-defaulting Underwriters shall be obligated, severally and not jointly, to purchase the full amount thereof in the proportions that their respective underwriting obligations hereunder bear to the underwriting obligations of all non-defaulting Underwriters, or
(ii)           if the number of Defaulted Securities exceeds 10% of the number of Securities to be purchased on such date, this Agreement or, with respect to any Date of Delivery which occurs after the Closing Time, the obligation of the Underwriters to purchase and of the Company to sell the Option Securities to be purchased and sold on such Date of Delivery shall terminate without liability on the part of any non-defaulting Underwriter.
No action taken pursuant to this Section shall relieve any defaulting Underwriter from liability in respect of its default.
In the event of any such default which does not result in a termination of this Agreement or, in the case of a Date of Delivery which is after the Closing Time, which does not result in a termination of the obligation of the Underwriters to purchase and the Company to sell the relevant Option Securities, as the case may be, either the Representatives or the Company shall have the right to postpone Closing Time or the relevant Date of Delivery, as the case may be, for a period not exceeding seven days in order to effect any required changes in the Registration Statement or Prospectus or in any other documents or arrangements.  As used herein, the term “Underwriter” includes any person substituted for an Underwriter under this Section 10.
SECTION 11.  Tax Disclosure.   Notwithstanding any other provision of this Agreement, immediately upon commencement of discussions with respect to the transactions contemplated hereby, the Company (and each employee, representative or other agent of the Company) may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the transactions contemplated by this Agreement and all materials of any kind (including opinions or other tax analyses) that are provided to the Company relating to such tax treatment and tax structure.  For purposes of the foregoing, the term “tax treatment” is the purported or claimed federal income tax treatment of the transactions contemplated hereby, and the term “tax structure” includes any fact that may be relevant to understanding the purported or claimed federal income tax treatment of the transactions contemplated hereby.
SECTION 12.  Notices.   All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed or transmitted by any standard form of telecommunication.  Notices to the Underwriters shall be directed to the Representatives at Merrill Lynch, Pierce, Fenner & Smith Incorporated, 4 World Financial Center, New York, New York 10080, Attention of Global Origination Counsel, and notices to the Company shall be directed to it at 14 Akti Kondyli, 185 45 Piraeus, Greece, Attention of John Coustas.

24

 
SECTION 13.  No Advisory or Fiduciary Relationship.   The Company acknowledges and agrees that (a) the purchase and sale of the Securities pursuant to this Agreement, including the determination of the public offering price of the Securities and any related discounts and commissions, is an arm’s length commercial transaction between the Company and the several Underwriters, (b) in connection with the offering contemplated hereby and the process leading to such transaction each Underwriter is and has been acting solely as a principal and is not the agent or fiduciary of the Company or its respective stockholders, creditors, employees or any other party, (c) no Underwriter has assumed or will assume an advisory or fiduciary responsibility in favor of the Company with respect to the offering contemplated hereby or the process leading thereto (irrespective of whether such Underwriter has advised or is currently advising the Company on other matters) and no Underwriter has any obligation to the Company with respect to the offering contemplated hereby except the obligations expressly set forth in this Agreement, (d) the Underwriters and their respective affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Company and (e) the Underwriters have not provided any legal, accounting, regulatory or tax advice with respect to the offering contemplated hereby and the Company.
SECTION 14.  Parties.   This Agreement shall each inure to the benefit of and be binding upon the Underwriters, the Company and their respective successors.  Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any person, firm or corporation, other than the Underwriters, the Company and their respective successors and the controlling persons and officers and directors referred to in Sections 6 and 7 and their heirs and legal representatives, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein contained.  This Agreement and all conditions and provisions hereof are intended to be for the sole and exclusive benefit of the Underwriters, the Company and their respective successors, and said controlling persons and officers and directors and their heirs and legal representatives, and for the benefit of no other person, firm or corporation.  No purchaser of Securities from any Underwriter shall be deemed to be a successor by reason merely of such purchase.
SECTION 15.  GOVERNING LAW.   THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 16.  TIME.   TIME SHALL BE OF THE ESSENCE OF THIS AGREEMENT. EXCEPT AS OTHERWISE SET FORTH HEREIN, SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.
SECTION 17.  Jurisdiction .  The Company agrees that any suit, action or proceeding against the Company brought by any Underwriter, the directors, officers, employees and agents of any Underwriter, or by any person who controls any Underwriter, arising out of or based upon this Agreement or the transactions contemplated hereby may be instituted in any New York Court, and waives any objection which it may now or hereafter have to the laying of venue of any such proceeding, and irrevocably submits to the non-exclusive jurisdiction of such courts in any suit, action or proceeding.  The Company has appointed Morgan, Lewis & Bockius LLP as its authorized agent (the “ Authorized Agent ”) upon whom process may be served in any suit, action or proceeding arising out of or based upon this Agreement or the transactions contemplated herein which may be instituted in any New York Court, by any Underwriter, the directors, officers, employees and agents of any Underwriter, or by any person who controls any Underwriter, and expressly accepts the non-exclusive jurisdiction of any such court in respect of any such suit, action or proceeding.  The Company hereby represents and warrants that the Authorized Agent has accepted such appointment and has agreed to act as said agent for service of process, and the Company agrees to take any and all action, including the filing of any and all documents that may be necessary to continue such appointment in full force and effect as aforesaid.  Service of process upon the Authorized Agent shall be deemed, in every respect, effective service of process upon

25

 
the Company.  Notwithstanding the foregoing, any action arising out of or based upon this Agreement may be instituted by any Underwriter, the directors, officers, employees and agents of any Underwriter, or by any person who controls any Underwriter, in any court of competent jurisdiction in the Republic of the Marshall Islands.
                The provisions of this Section 17 shall survive any termination of this Agreement, in whole or in part.
SECTION 18.  Counterparts.   This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same Agreement.
SECTION 19.  Effect of Headings.   The Section headings herein are for convenience only and shall not affect the construction hereof.
 
26

 
If the foregoing is in accordance with your understanding of the agreement among the Company, the Underwriters, and, with respect to the representations and warranties contained in Sections 1(a)(vi), 1(a)(ix), 1(a)(xii), 1(a)(xiii), 1(a)(xviii), 1(a)(xix), 1(a)(xxi), 1(a)(xxiv), 1(a)(xl), 1(a)(xli) and 1(a)(xlii) hereof insofar as the statements in such sections relate to the Manager, the Manager, please sign and return to the Company a counterpart hereof, whereupon this instrument, along with all counterparts, will become a binding agreement among the Company, the Underwriters and, with respect to the representations and warranties contained in Sections 1(a)(vi), 1(a)(ix), 1(a)(xii), 1(a)(xiii), 1(a)(xviii), 1(a)(xix), 1(a)(xxi), 1(a)(xxiv), 1(a)(xl), 1(a)(xli) and 1(a)(xlii) hereof insofar as the statements in such sections relate to the Manager, the Manager, in accordance with its terms.

 	Very truly yours,	

 	$!.!/3 #/20/2!4)/.	

 	By	 	 	
 	 	 	 	
 	 	Title:	

 	$!.!/3 3()00).' #/-0!.9 ,)-)4%$	

 	By	 	
 	 	 	 	
 	 	Title:	 	

CONFIRMED AND ACCEPTED,	 	
 	as of the date first above written:	 	

MERRILL LYNCH & CO.	 	
MERRILL LYNCH, PIERCE, FENNER & SMITH	 	
 	INCORPORATED	 	 	
CITIGROUP GLOBAL MARKETS INC.	 	

By:	MERRILL LYNCH, PIERCE, FENNER & SMITH	 	
 	INCORPORATED	 	 	

By	 	 	 	
 	Authorized Signatory	 	 	

By:	CITIGROUP GLOBAL MARKETS INC.	 	

By	 	 	 	
 	Authorized Signatory	 	 	

 
For themselves and as Representatives of the other Underwriters named in Schedule A hereto.
 
27

 
SCHEDULE A

Name of Underwriter	 	Number of
Initial Securities	
Merrill Lynch, Pierce, Fenner & Smith	 	 	
 	Incorporated	 	 	
Citigroup Global Markets Inc.	 	 	
Dahlman Rose & Company, LLC	 	 	
Jefferies & Company, Inc.	 	 	
Fortis Securities LLC	 	 	
Nomura International plc	 	 	

 	 	 	
Total	 	10,250,000	

 
Sch. A-1

 
SCHEDULE B
DANAOS CORPORATION
10,250,000 Shares of Common Stock
(Par Value $.01 Per Share)
1.              The initial public offering price per share for the Securities, determined as provided in said Section 2, shall be $ l .
2.              The purchase price per share for the Securities to be paid by the several Underwriters shall be $ l , being an amount equal to the initial public offering price set forth above less $ l per share; provided that the purchase price per share for any Option Securities purchased upon the exercise of the overallotment option described in Section 2(b) shall be reduced by an amount per share equal to any dividends or distributions declared by the Company and payable on the Initial Securities but not payable on the Option Securities.

Sch. B-1

 
SCHEDULE C
List of persons and entities
subject to lock-up
 
John Coustas
Iraklis Prokopakis
Dimitri Andritsoyiannis
Danaos Investments Limited as Trustee of the 883 Trust
 Other Directors and Officers

 
Sch. C-1

 
SCHEDULE D

Vessel Name	 	Owning Entity	 	Jurisdiction of 
Incorporation	 	Jurisdiction of
Registration	
MOL Confidence	 	Federal Marine Inc.	 	Liberia	 	Cyprus	
Eagle Express	 	Peninsula Maritime Inc.	 	Liberia	 	Bahamas	
Pacific Bridge	 	Deleas Shipping Ltd.	 	Cyprus	 	Cyprus	
YM Yantian	 	Seacaravel Shipping Ltd.	 	Cyprus	 	Cyprus	
Norasia Hamburg	 	Seasenator Shipping Ltd.	 	Cyprus	 	Cyprus	
YM Milano	 	Saratoga Trading S.A.	 	Liberia	 	Greece	
CMA CGM Kalamata	 	Geoffrey Shipholding Ltd.	 	Liberia	 	Greece	
CMA CGM Elbe	 	Lacey Navigation Inc.	 	Liberia	 	Greece	
CMA CGM Komodo	 	Appleton Navigation S.A.	 	Liberia	 	Greece	
Henry	 	Tyron Enterprises S.A.	 	Liberia	 	Greece	
APL England 1	 	Ferrous Shipping (Private) Ltd.	 	Singapore	 	Singapore	
APL Scotland	 	Cobaltium Shipping (Private) Ltd.	 	Singapore	 	Singapore	
APL Holland	 	Lissos Shipping (Private) Ltd.	 	Singapore	 	Singapore	
APL Belgium	 	Lato Shipping (Private) Ltd.	 	Singapore	 	Singapore	
Dimitris C  1	 	Orchid Navigation Corp.	 	Liberia	 	Cyprus	
Roberto C  1	 	Roberto C Maritime Inc.	 	Liberia	 	Cyprus	
Maria C  1	 	Maria C Maritime Inc.	 	Liberia	 	Cyprus	
Alexandra I  1	 	Alexandra Navigation Inc.	 	Liberia	 	Cyprus	
Vancouver Express	 	Containers Services Inc.  2	 	Cyprus	 	Cyprus	
Maersk Derby	 	Containers Lines Inc. 2	 	Cyprus	 	Cyprus	
MV Achilleas  1	 	Mercator Shipping Inc.	 	Liberia	 	Cyprus	
Fivos   1	 	Ortelius Maritime Inc.	 	Liberia	 	Cyprus	
Independence	 	Independence Navigation Inc.	 	Liberia	 	Cyprus	
Victory I	 	Victory Shipholding Inc.	 	Liberia	 	Cyprus	
CSCL Europe	 	Oceanew Shipping Ltd. 2	 	Cyprus	 	Cyprus	
CSCL America	 	Oceanprize Navigation Ltd. 2	 	Cyprus	 	Cyprus	
Hyundai Duke	 	Duke Marine Inc.	 	Liberia	 	Greece	
Hyundai Commodore	 	Commodore Marine Inc.	 	Liberia	 	Greece	
S.A. Helderberg	 	Helderberg Maritime Inc.	 	Liberia	 	Bahamas	
S.A. Sederberg	 	Sederberg Maritime Inc.	 	Liberia	 	Bahamas	
S.A. Winterberg	 	Winterberg Maritime Inc.	 	Liberia	 	Bahamas	
Maersk Constantia	 	Constantia Maritime Inc.	 	Liberia	 	Bahamas	
CSCL Pusan	 	Karlita Shipping Company Ltd. 2	 	Cyprus	 	Cyprus	
Hull 1561	 	Ramona Marine Company Ltd. 2, 3	 	Cyprus	 	 	
HN S178 ex E.R. Auckland	 	Auckland Marine Inc. 3	 	Liberia	 	 	
HN S179 ex E.R. Wellington	 	Wellington Marine Inc. 3	 	Liberia	 	 	
Hull 1639	 	Seacarriers Services Inc. 3	 	Liberia	 	 	
Hull 1640	 	Seacarriers Lines Inc. 3	 	Liberia	 	 	
Hull 1670	 	Bayview Shipping Inc. 3	 	Liberia 2	 	 	
Hull 1671	 	Channelview Marine Inc. 3	 	Liberia 2	 	 	
Hull 1672	 	Balticsea Marine Inc. 3	 	Liberia 2	 	 	
Hull 1673	 	Continent Marine Inc. 3	 	Liberia 2	 	 	
Hull 1698	 	Medsea Marine Inc. 3	 	Liberia 2	 	 	
Hull 1699	 	Blacksea Marine Inc. 3	 	Liberia 2	 	 	

 
 
Sch. D-1

 

Vessel Name	 	Owning Entity	 	Jurisdiction of 
Incorporation	 	Jurisdiction of
Registration	
Hull S4001	 	Boxcarrier (No. 1) Corp.	 	Liberia	 	 	
Hull S4002	 	Boxcarrier (No. 2) Corp.	 	Liberia	 	 	
Hull S4003	 	Boxcarrier (No. 3) Corp.	 	Liberia	 	 	
Hull S4004	 	Boxcarrier (No. 4) Corp.	 	Liberia	 	 	
Hull S4005	 	Boxcarrier (No. 5) Corp.	 	Liberia	 	 	

 

 

 

 

 

1                     Entity has agreed to sell vessel upon expiration of its current charter.
2                     Entity does not have legal title to such vessel.  Entity charters-in the vessel, which vessel is subject to certain leasing arrangements.
3                     Entity has contracted to acquire the vessel but is not currently the holder of legal title.

 
 
Sch. D-2

SCHEDULE E
[SPECIFY EACH ISSUER GENERAL USE FREE WRITING PROSPECTUS]

 

 

 

 

 
 
Sch. E-1

 
Exhibit A-1
Form of Opinion of
Morgan, Lewis & Bockius LLP

 

 

 

 

 

 
 
Exh. A-I 1

EXHIBIT A-II
Form of Opinion of
White & Case LLP

 

 

 

 

 

 
Exh. A-II 1

EXHIBIT A-III
 
Form of Opinion of
Watson, Farley & Williams (New York) LLP

 

 

 

 
Exh. A-III 1

 
EXHIBIT A-IV
 
Form of Opinion of
Watson, Farley, & Williams (New York) LLP

 

 

 

 

 

 
Exh. A-IV 1

EXHIBIT A-V
 
Form of Opinion of
 
Allen & Gledhill

 

 

 

 

 
 
Exh. A-V 1

EXHIBIT A-VI
 
Form of Opinion of
 
Montanios & Montanios

 

 

 

 

 

 

 
 
Exh. A-VI 1

 
EXHIBIT A-VII
 
Form of Opinion of
Watson, Farley & Williams

 

 

 

 

 

Exh. A-VII 1

EXHIBIT A-VIII
 
Form of Opinion of
Theo V. Sioufas Law Offices

 

 

 

 

 

 

 

 

 
 
Exh. A-VIII 1

 
 
EXHIBIT A-IX
 
Form of Opinion of
Graham, Thompson & Company

 

 

 

 

 

 

 

 

 
 
Exh. A-IX 1

 
EXHIBIT B
 
[Form of lock-up from directors, officers or other stockholders pursuant to Section 5(i)]
 
[•], 2006

MERRILL LYNCH & CO.	 	 	
Merrill Lynch, Pierce, Fenner & Smith	 	 	
 	Incorporated,	 	 	
 	 	 	
CITIGROUP GLOBAL MARKETS INC.	 	 	
as Representatives of the several	 	 	
Underwriters to be named in the	 	 	
within-mentioned Purchase Agreement	 	 	
c/o Merrill Lynch & Co.	 	 	
 	Merrill Lynch, Pierce, Fenner & Smith	 	 	
 	Incorporated	 	 	
 	 	 	 	
4 World Financial Center	 	 	
New York, New York 10080	 	 	

 	Re:	Proposed Public Offering by Danaos Corporation	 	
Dear Sirs:
The undersigned, a stockholder [and an officer and/or director] of Danaos Corporation, a Marshall Islands corporation (the “Company”), understands that Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated (“Merrill Lynch”) and Citigroup Global Markets Inc. (“Citigroup”) propose to enter into a Purchase Agreement (the “Purchase Agreement”) with the Company providing for the public offering of shares (the “Securities”) of the Company’s Common Stock, par value $.01 per share (the “Common Stock”).  In recognition of the benefit that such an offering will confer upon the undersigned as a stockholder [and an officer and/or director] of the Company, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the undersigned agrees with each underwriter to be named in the Purchase Agreement that, during a period of [180/730] days from the date of the Purchase Agreement, the undersigned will not, without the prior written consent of Merrill Lynch and Citigroup, directly or indirectly, (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant for the sale of, or otherwise dispose of or transfer any shares of the Company’s Common Stock or any securities convertible into or exchangeable or exercisable for Common Stock, whether now owned or hereafter acquired by the undersigned or with respect to which the undersigned has or hereafter acquires the power of disposition, or file, or cause to be filed, any registration statement under the Securities Act of 1933, as amended, with respect to any of the foregoing (collectively, the “Lock-Up Securities”) or (ii) enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of the Lock-Up Securities, whether any such swap or transaction is to be settled by delivery of Common Stock or other securities, in cash or otherwise.
Notwithstanding the foregoing, if:
(1)           during the last 17 days of the [180/730]-day lock-up period, the Company issues an earnings release or material news or a material event relating to the Company occurs; or

Exh. B-1

 
(2)           prior to the expiration of the [180/730]-day lock-up period, the Company announces that it will release earnings results or becomes aware that material news or a material event will occur during the 16-day period beginning on the last day of the [180/730]-day lock-up period,
the restrictions imposed by this lock-up agreement shall continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event , as applicable, unless Merrill Lynch and Citigroup waive, in writing, such extension.
 
The undersigned hereby acknowledges and agrees that written notice of any extension of the [180/730]-day lock-up period pursuant to the previous paragraph will be delivered by Merrill Lynch and Citigroup to the Company (in accordance with Section 12 of the Purchase Agreement) and that any such notice properly delivered will be deemed to have been given to, and received by, the undersigned. The undersigned further agrees that, prior to engaging in any transaction or taking any other action that is subject to the terms of this lock-up agreement during the period from the date of this lock-up agreement to and including the 34 th day following the expiration of the initial [180/730]-day lock-up period , it will give notice thereof to the Company and will not consummate such transaction or take any such action unless it has received written confirmation from the Company that the [180/730]-day lock-up period (as may have been extended pursuant to the previous paragraph) has expired.
Notwithstanding the foregoing, the undersigned may transfer shares of Common Stock (or any securities convertible into, exercisable for, or exchangeable for Common Stock) (i) as a bona fide gift or gifts, provided that the donee or donees thereof agree to be bound by the restrictions set forth herein, (ii) to any trust for the direct or indirect benefit of the undersigned or the immediate family of the undersigned; provided that the trustee of the trust agrees to be bound by the restrictions set forth herein, and provided further that any such transfer shall not involve a disposition for value, or (iii) to any third party granted an interest in the undersigned’s will or under the laws of descent, provided that the donee agrees to be bound in writing by the restrictions set forth herein.  For purposes of this Agreement, “immediate family” shall mean any relationship by blood, marriage or adoption, not more remote than first cousin.  In addition, notwithstanding the foregoing, if the undersigned is a corporation, business trust, association, limited liability company, partnership, limited liability partnership or other entity (individually, an “ Entity ”), the undersigned may transfer the capital stock of the Company to any Entity which is directly or indirectly controlled by, or is under common control with the undersigned; provided , however , that in any such case, it shall be a condition to the transfer that the transferee execute an agreement stating that the transferee is receiving and holding such capital stock subject to the provisions of this Agreement and there shall be no further transfer of such capital stock except in accordance with this Agreement, and provided further that any such transfer shall not involve a disposition for value.
The undersigned also agrees and consents to the entry of stop transfer instructions with the Company’s transfer agent and registrar against the transfer of the Lock-Up Securities except in compliance with the foregoing restrictions.

 	Very truly yours,	

 	Signature:	 	 	

 	Print Name:	 	 	

 	

Exh. B-2

 
Exhibit 3.1
 
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
DANAOS CORPORATION

PURSUANT TO THE MARSHALL ISLANDS BUSINESS CORPORATIONS ACT
￠
Danaos Corporation (the “Corporation”), a corporation organized and existing under the Marshall Islands Business Corporations Act (“BCA”), certifies:
 
I. The name of the Corporation is
 
DANAOS CORPORATION
 
II. The date of filing of the Corporation’s Articles of Domestication and Articles of Incorporation with the Office of the Registrar of Corporations of the Republic of the Marshall Islands was October 7, 2005. The Articles of Incorporation were amended and restated on October 14, 2005 and Articles of Amendment were filed with the Registrar of Corporations of the Republic of the Marshall Islands on September 14, 2006. The Company was previously incorporated in the Republic of Liberia on December 7, 1998.
 
III. Pursuant to Section 93 of the BCA, these Amended and Restated Articles of Incorporation include an amendment of Section FOURTH and a restatement of Section SIXTH.
 
IV. These Amended and Restated Articles of Incorporation were duly adopted in accordance with the provisions of Sections 88(1) and 93 of the BCA, the Board of Directors of the Corporation having adopted resolutions by unanimous written consent in accordance with Section 55(4) of the BCA setting forth and declaring advisable that these Amended and Restated Articles of Incorporation be adopted in their entirety. In lieu of a meeting and a vote of the stockholders of the Corporation, unanimous written consent to these Amended and Restated Articles of Incorporation has been given by the holders of all of the outstanding stock of the Corporation in accordance with Section 67 of the BCA

 
and such consent has been filed with the minutes of the proceedings of stockholders of the Corporation.
 
V. The Articles of Incorporation of the Corporation are hereby amended and restated in their entirety to read as follows:
 
FIRST:             The name of the Corporation shall be:
 
DANAOS CORPORATION
￠
SECOND:        The purpose of the Corporation is to engage in any lawful act or activity relating to the business of chartering, rechartering or operating containerships, drybulk carriers or other vessels or any other lawful act or activity customarily conducted in conjunction with shipping, and any other lawful act or activity approved by the Board of Directors.
 
THIRD:           The registered address of the Corporation in the Marshall Islands is Trust Company Complex, Ajeltake Island, Ajeltake Road, Majuro, Marshall Islands MH96960. The name of the Corporation’s registered agent at such address is The Trust Company of the Marshall Islands, Inc. However, the Board of Directors may establish branches, offices or agencies in any place in the world and may appoint legal representatives anywhere in the world.
 
FOURTH:       The aggregate number of shares of stock that the Corporation is authorized to issue is two hundred five million (205,000,000) shares with a par value of one cent (US $0.01), consisting of two hundred million (200,000,000) shares of common stock with a par value of one cent (US $0.01) (“Common Stock”) and five million (5,000,000) shares of preferred stock with a par value of one cent (US $0.01) (the “Preferred Stock”).
 
(a)            Preferred Stock . The designations and the powers, preferences and rights, and the qualifications, limitations or restrictions thereof, in respect of the Preferred Stock are as follows:
 
The Board of Directors is expressly authorized, by resolution or resolutions, to provide, out of the unissued shares of the Preferred Stock, for series of the Preferred Stock. The Board of Directors has authority to fix, by resolution or resolutions, the following provisions of the shares thereof:
 
(i)  the designation of such series, the number of shares that constitute such series and the stated value thereof if different from the par value thereof;
 
(ii)  whether the shares of such series shall have voting rights, in addition to any voting rights provided by law, and, if so, the terms of such voting rights (which may be special voting rights), whether the shares of such series shall have one vote per share or less than one vote per share, whether the holders of such series shall be entitled to vote on certain matters as a separate class (which for such purpose may be comprised solely of such series or of such series and one or more other series or classes of stock of the Corporation), whether all the shares of such series entitled to vote on a particular matter shall be deemed to be voted on such matter in the manner that a specified portion of the voting power of the shares of such series or separate class are voted and the relation which such voting rights shall bear to the voting rights of any other class or any other series of this class;
 
(iii)  the annual dividend rate (or method of determining such rate), if any, payable on such series, the basis on which such holders shall be entitled to receive dividends (which may
 
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include, without limitation, a right to receive such dividends or distributions as may be declared on the shares of such series by the board of directors of the Corporation, a right to receive such dividends or distributions, or any portion or multiple thereof, as may be declared on the Common Stock or any other class of stock or, in addition to or in lieu of any other right to receive dividends, a right to receive dividends at a particular rate or at a rate determined by a particular method, in which case such rate or method of determining such rate may be set forth), the form of such dividend, the conditions and the dates upon which such dividends shall be payable, and the preference or relation which such dividends shall bear to the dividends payable on any other class or any other series of this class;
 
(iv)  whether dividends on the shares of such series shall be cumulative and, in the case of shares of a series having cumulative dividend rights, the date or dates (or method of determining the date or dates) from which dividends on the shares of such series shall be cumulative;
 
(v)  whether the shares of such series shall be subject to redemption in whole or in part, at the option of the Corporation or at the option of the holder or holders thereof or upon the happening of a specified event or events  and, if so, the times, the prices therefor (in cash, securities or other property or a combination thereof) and any other terms and conditions of such redemption;
 
(vi)  the amount or amounts payable upon shares of such series upon, and the rights of the holders of such series in, the voluntary or involuntary liquidation, dissolution or windingup of the Corporation and the relative rights of priority, if any, of payment of the shares of such series;
 
(vii)  whether the shares of such series shall be subject to the operation of a retirement or sinking fund and, if so, the extent to which and the manner in which any such retirement or sinking fund shall be applied to the purchase or redemption of the shares of such series for retirement or other corporate purposes and the terms and provisions relative to the operation thereof, including the price or prices (in cash, securities or other property or a combination thereof), the period or periods within which and any other terms and conditions upon which the shares of such series shall be redeemed or purchased, in whole or in part, pursuant to the operation of such retirement or sinking find;
 
(viii)  whether the shares of such series shall be convertible into, or exchangeable for, at the option of the holder or the Corporation or upon the happening of a specified event, shares of stock of any other class or of any other series of this class or any other securities or property of the Corporation or any other entity, and, if so, the price or prices (in cash, securities or other property or a combination thereof) or the rate or rates of conversion or exchange and the method, if any, of adjusting the same;
 
(ix) the limitations and restrictions, if any, to be effective while any shares of such series are outstanding upon the payment of dividends or the making of other distributions on, and upon the purchase, redemption or other acquisition by the Corporation of, the Common Stock, any other series of the Preferred Stock or any other class of capital stock;
 
(x)  the conditions or restrictions, if any, upon the creation of indebtedness of the Corporation or upon the issue of any additional stock, including additional shares of such series or of any other series of the Preferred Stock or of any other class of capital stock; and
 
(xi)  any other powers, preferences or rights, or any qualifications, limitations or restrictions thereof.
 
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Except as otherwise provided by such resolution or resolutions, all shares of the Preferred Stock shall be of equal rank. All shares of any one series of the Preferred Stock shall be identical in all respects with all other shares of such series, except that shares of any one series issued at different times may differ as to the dates from which dividends thereon shall be cumulative.
 
Except as otherwise provided by such resolution or resolutions, all shares of Preferred Stock that are converted, redeemed, repurchased, exchanged or otherwise acquired by the Corporation shall be cancelled and retired and shall not be reissued.
 
For all purposes, these Amended and Restated Articles of Incorporation shall include each statement of designation (if any) setting forth the terms of a series of Preferred Stock.
 
Except as otherwise required by law or provided in a statement of designation establishing the voting powers, designations, preferences and relative, participating, optional or other rights, if any, or the qualifications, limitations or restrictions of the relevant series, holders of Common Stock, as such, shall not be entitled to vote on any amendment of these Amended and Restated Articles of Incorporation that alters or changes the powers, preferences, rights or other terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together with the holders of one or more other series of Preferred Stock, to vote thereon as a separate class pursuant to these Amended and Restated Articles of Incorporation or pursuant to the BCA as then in effect.
 
(b)            Options, Warrants and Other Rights. The Board of Directors of the Corporation is authorized to create and issue options, warrants and other rights from time to time entitling the holders thereof to purchase securities or other property of the Corporation or of any other entity, including any class or series of stock of the Corporation or of any other entity and whether or not in connection with the issuance or sale of any securities or other property of the Corporation, for such consideration (if any), at such times and upon such other terms and conditions as may be determined or authorized by the Board of Directors and set forth in one or more agreements or instruments. Among other things and without limitation, such terms and conditions may provide for the following:
 
(i) adjusting the number or exercise price of such options, warrants or other rights or the amount or nature of the securities or other property receivable upon exercise thereof in the event of a subdivision or combination of any securities, or a recapitalization, of the Corporation, the acquisition by any person of beneficial ownership of securities representing more than a designated percentage of the voting power of any outstanding series, class or classes of securities, a change in ownership of the Corporation’s securities or a merger, statutory share exchange, consolidation, reorganization, sale of assets or other occurrence relating to the Corporation or any of its securities, and restricting the ability of the Corporation to enter into an agreement with respect to any such transaction absent an assumption by another party or parties thereto of the obligations of the Corporation under such options, warrants or other rights;
 
(ii) restricting, precluding or limiting the exercise, transfer or receipt of such options, warrants or other rights by any person that becomes the beneficial owner of a designated percentage of the voting power of any outstanding series, class or classes of securities of the Corporation or any direct or indirect transferee of such a person, or invalidating or voiding such options, warrants or other rights held by any such person or transferee; and
 
(iii) permitting the Board of Directors (or certain directors specified or qualified by the terms of the governing instruments of such options, warrants or other rights) to redeem, repurchase, terminate or exchange such options, warrants or other rights.
 
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This paragraph shall not be construed in any way to limit the power of the board of directors of the Corporation to create and issue options, warrants or other rights.
 
(c)  Preemptive and Similar Rights. Except as otherwise provided in a statement of designation establishing the terms of a series of Preferred Stock, no holder of shares of the Corporation shall, by reason thereof, have any preemptive or other preferential right to acquire, by subscription or otherwise, any unissued or treasury stock of the Corporation, or any other share of any class or series of the Corporation’s shares to be issued because of an increase in the authorized capital stock of the Corporation, or any bonds, certificates of indebtedness, debentures or other securities convertible into shares of the Corporation. However, the Board of Directors may issue or dispose of any such unissued or treasury stock, or any such additional authorized issue of new shares or securities convertible into shares upon such terms as the Board of Directors may, in its discretion, determine, without offering to stockholders then of record, or any class of stockholders, any thereof, on the same terms or any terms.
 
FIFTH:            The Corporation shall have every power which a corporation now or hereafter organized under the BCA may have.
 
SIXTH:            There shall be a minimum of two (2) directors and a maximum of fifteen (15) directors who shall constitute the Board of Directors of the Corporation. The number of directors constituting the Board of Directors shall be fixed from time to time by the Board of Directors.
 
Effective as of the annual meeting of stockholders in 2006, the directors of the Corporation shall be divided into three classes, each of which will consist, as nearly as may be possible, of one-third of the total number of directors constituting the entire Board of Directors. The initial term of office of the first such class of directors shall expire at the annual meeting of stockholders in 2009, the initial term of office of the second such class of directors shall expire at the annual meeting of stockholders in 2008, and the initial term of office of the third such class of directors shall expire at the annual meeting of stockholders in 2007, with each such class of directors to hold office until their successors have been duly elected and qualified. At the annual meeting of stockholders in 2006, the stockholders shall designate which directors elected at such meeting will be in the first, second or third classes of directors of the Corporation. At each annual meeting of stockholders, directors elected to succeed the directors whose terms expire at such annual meeting shall be elected to hold office for a term expiring at the annual meeting of stockholders in the third year following the year of their election and until their successors have been duly elected and qualified. If the number of directors is changed, any increase or decrease shall be apportioned among the classes in such manner as the board of directors or stockholders of the Corporation shall determine, but no decrease in the number of directors may shorten the term of any incumbent director.
 
No director who is part of any such class of directors may be removed except both for cause and with the affirmative vote of the holders of not less than sixty-six and two-thirds percent (66-2/3%) of the voting power of all outstanding shares of stock of the Corporation entitled to vote generally in the election of directors, considered for this purpose as a single class.
 
Vacancies and newly created directorships resulting from any increase in the authorized number of directors or from any other cause (other than vacancies and newly created directorships which the holders of any class or classes of stock or series thereof are expressly entitled by these Amended and Restated Articles of Incorporation to fill) shall be filled by, and only by, a vote of not less than the majority of the directors then in office, although less than a quorum, or by the sole remaining director. Any director appointed to fill a vacancy or a newly created directorship shall hold office until the annual
 
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meeting of stockholders next succeeding his or her appointment without regard to classification of the director which such director replaced, and until his or her successor is elected and qualified or until his or her earlier resignation or removal.
 
Notwithstanding the foregoing, in the event that the holders of any class or series of Preferred Stock of the Corporation shall be entitled, voting separately as a class, to elect any directors of the Corporation, then the number of directors that may be elected by such holders voting separately as a class shall be in addition to the number otherwise fixed pursuant to resolution of the board of directors of the Corporation. Except as otherwise provided in the terms of such class or series, (i) the terms of the directors elected by such holders voting separately as a class shall expire at the annual meeting of stockholders next succeeding their election without regard to the classification of other directors and (ii) any director or directors elected by such holders voting separately as a class may be removed, with or without cause, by the holders of sixty-six and two-thirds percent (66-2/3%) of the voting power of all outstanding shares of stock of the Corporation entitled to vote separately as a class in an election of such directors.
 
Cumulative voting, as defined in Section 71(2) of the BCA, shall not be used to elect directors. Notwithstanding any other provisions of these Amended and Restated Articles of Incorporation or the bylaws of the Corporation (and notwithstanding the fact that some lesser percentage may be specified by law, these Amended and Restated Articles of Incorporation or the bylaws of the Corporation), the affirmative vote of the holders of sixty-six and two-thirds percent (66-2/3%) or more of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors (considered for this purpose as one class) shall be required to amend, alter, change or repeal this Article SIXTH.
 
No director of the Corporation shall have personal liability to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director; provided, however, that this paragraph shall not eliminate or limit the liability of a director: (i) for any breach of the director’s duty of loyalty to the Corporation or its stockholders; (ii) for acts or omissions not undertaken in good faith or which involve intentional misconduct or a knowing violation of law; or (iii) for any transaction from which the director derived an improper personal benefit.
 
SEVENTH:  (a)  The Corporation may not engage in any Business Combination with any Interested Stockholder for a period of three years following the time of the transaction in which the person became an Interested Stockholder, unless:
 
(1)            prior to such time, the Board of Directors of the Corporation approved either the Business Combination or the transaction which resulted in the stockholder becoming an Interested Stockholder; or
 
(2)            upon consummation of the transaction which resulted in the stockholder becoming an Interested Stockholder, the Interested Stockholder owned at least eighty-five percent (85%) of the voting stock of the Corporation outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares outstanding those shares owned (i) by persons who are directors and also officers and (ii) employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer, provided, however, that pursuant to an offer made to all stockholders if any such transaction involves the purchase of voting stock from any stockholder of the Corporation, an offer to purchase such shares shall have been or be made to all stockholders of the Corporation on substantially the same terms and provisions
 
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offered to such stockholder; or
 
(3)            at or subsequent to such time, the Business Combination is approved by the Board of Directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least sixty-six and two-thirds percent (66-2/3%) of the outstanding voting stock that is not owned by the Interested Stockholder; or
 
(4)            the stockholder was or became an Interested Stockholder prior to the consummation of the initial public offering of the Corporation’s Common Stock under the United States Securities Act of 1933, as amended.
 
(b)            The restrictions contained in this section shall not apply if:
 
(1)            A stockholder becomes an Interested Stockholder inadvertently and (i) as soon as practicable divests itself of ownership of sufficient shares so that the stockholder ceases to be an Interested Stockholder; and (ii) would not, at any time within the three-year period immediately prior to a Business Combination between the Corporation and such stockholder, have been an Interested Stockholder but for the inadvertent acquisition of ownership; or
 
(2)            The Business Combination is proposed prior to the consummation or abandonment of and subsequent to the earlier of the public announcement or the notice required hereunder of a proposed transaction which (i) constitutes one of the transactions described in the following sentence; (ii) is with or by a person who either was not an Interested Stockholder during the previous three years or who became an Interested Stockholder with the approval of the Board; and (iii) is approved or not opposed by a majority of the members of the Board then in office (but not less than one) who were Directors prior to any person becoming an Interested Stockholder during the previous three years or were recommended for election or elected to succeed such Directors by a majority of such Directors. The proposed transactions referred to in the preceding sentence are limited to:
 
(i)             a merger or consolidation of the Corporation (except for a merger in respect of which, pursuant to the BCA, no vote of the stockholders of the Corporation is required);
 
(ii)            a sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions), whether as part of a dissolution or otherwise, of assets of the Corporation or of any direct or indirect majority-owned subsidiary of the Corporation (other than to any direct or indirect wholly-owned subsidiary or to the Corporation) having an aggregate market value equal to fifty percent (50%) or more of either that aggregate market value of all of the assets of the Corporation determined on a consolidated basis or the aggregate market value of all the outstanding shares; or
 
(iii)           a proposed tender or exchange offer for fifty percent (50%) or more of the outstanding voting stock of the Corporation.
 
The Corporation shall give not less than twenty (20) days notice to all Interested
 
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Stockholders prior to the consummation of any of the transactions described in clause (i) or (ii) of section (b)(2) of this Article SEVENTH.
 
(c)            For the purpose of this Article SEVENTH only, the term:
 
(1)            “Affiliate” means a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, another person.
 
(2)            “Associate,” when used to indicate a relationship with any person, means: (i) Any corporation, partnership, unincorporated association or other entity of which such person is a director, officer or partner or is, directly or indirectly, the owner of twenty percent (20%) or more of any class of voting stock; (ii) any trust or other estate in which such person has at least a twenty percent (20%) beneficial interest or as to which such person serves as trustee or in a similar fiduciary capacity; and (iii) any relative or spouse of such person, or any relative of such spouse, who has the same residence as such person.
 
(3)            “Business Combination,” when used in reference to the Corporation and any Interested Stockholder of the Corporation, means:
 
(i)             Any merger or consolidation of the Corporation or any direct or indirect majority-owned subsidiary of the Corporation with (A) the Interested Stockholder or any of its affiliates, or (B) with any other corporation, partnership, unincorporated association or other entity if the merger or consolidation is caused by the Interested Stockholder;
 
(ii)            Any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions), except proportionately as a stockholder of the Corporation, to or with the Interested Stockholder, whether as part of a dissolution or otherwise, of assets of the Corporation or of any direct or indirect majority-owned subsidiary of the Corporation which assets have an aggregate market value equal to ten percent (10%) or more of either the aggregate market value of all the assets of the Corporation determined on a consolidated basis or the aggregate market value of all the outstanding shares of the Corporation;
 
(iii)           Any transaction which results in the issuance or transfer by the Corporation or by any direct or indirect majority-owned subsidiary of the Corporation of any shares, or any share of such subsidiary, to the Interested Stockholder or any affiliate or associate of the Interested Stockholder, except: (A) pursuant to the exercise, exchange or conversion of securities exercisable for, exchangeable for or convertible into shares, or shares of any such subsidiary, which securities were outstanding prior to the time that the Interested Stockholder became such; (B) pursuant to a merger with a direct or indirect wholly-owned subsidiary of the Corporation solely for purposes of forming a holding company; (C) pursuant to a dividend or distribution paid or made, or the exercise, exchange or conversion of securities exercisable for, exchangeable for or convertible into shares, or shares of any such subsidiary, which security is distributed, pro rata to all holders of a class
 
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or series of shares subsequent to the time the Interested Stockholder became such; (D) pursuant to an exchange offer by the Corporation to purchase shares made on the same terms to all holders of said shares; or (E) any issuance or transfer of shares by the Corporation; provided however, that in no case under items (C)-(E) of this subparagraph shall there be an increase in the Interested Stockholder’s and/or its affiliates’ and associates’ proportionate share of the any class or series of shares;
 
(iv)           Any transaction involving the Corporation or any direct or indirect majority-owned subsidiary of the Corporation which has the effect, directly or indirectly, of increasing the proportionate share of any class or series of shares, or securities convertible into any class or series of shares, or shares of any such subsidiary, or securities convertible into such shares, which is owned by the Interested Stockholder or any affiliate or associate of the Interested Stockholder, except as a result of immaterial changes due to fractional share adjustments or as a result of any purchase or redemption of any shares not caused, directly or indirectly, by the Interested Stockholder; or
 
(v)            Any receipt by the Interested Stockholder of the benefit, directly or indirectly (except proportionately as a stockholder of the Corporation), of any loans, advances, guarantees, pledges or other financial benefits (other than those expressly permitted in subparagraphs (i)-(iv) of this paragraph) provided by or through the Corporation or any direct or indirect majority-owned subsidiary of the Corporation.
 
(4)            “Control” including the terms “controlling,” “controlled by” and “under common control with,” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting stock, by contract or otherwise. A person who is the owner of twenty percent (20%) or more of the outstanding voting stock of any corporation, partnership, unincorporated association or other entity shall be presumed to have control of such entity, in the absence of proof by a preponderance of the evidence to the contrary. Notwithstanding the foregoing, a presumption of control shall not apply where such person holds voting stock, in good faith and not for the purpose of circumventing this provision, as an agent, bank, broker, nominee, custodian or trustee for one or more owners who do not individually or as a group have control of such entity.
 
(5)            “Interested Stockholder” means any person (other than the Corporation and any direct or indirect majority-owned subsidiary of the Corporation) that (i) is the owner of fifteen percent (15%) or more of the outstanding voting stock of the Corporation, or (ii) is an affiliate or associate of the Corporation and was the owner of fifteen percent (15%) or more of the outstanding voting stock of the Corporation at any time within the three-year period immediately prior to the date on which it is sought to be determined whether such person is an Interested Stockholder; and the affiliates and associates of such person; provided, however, that the term “Interested Stockholder” shall not include any person whose ownership of shares in excess of the fifteen percent (15%) limitation set forth herein is the result of action taken solely by the Corporation; provided that such person shall be an Interested Stockholder if thereafter such person acquires
 
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additional shares of voting stock of the Corporation, except as a result of further Corporation action not caused, directly or indirectly, by such person. For the purpose of determining whether a person is an Interested Stockholder, the voting stock of the Corporation deemed to be outstanding shall include voting stock deemed to be owned by the person through application of paragraph (8) below, but shall not include any other unissued shares which may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise.
 
(6)            “Person” means any individual, corporation, partnership, unincorporated association or other entity.
 
(7)            “Voting stock” means, with respect to any corporation, shares of any class or series entitled to vote generally in the election of directors and, with respect to any entity that is not a corporation, any equity interest entitled to vote generally in the election of the governing body of such entity.
 
(8)            “Owner” including the terms “own” and “owned,” when used with respect to any shares, means a person that individually or with or through any of its affiliates or associates:
 
(i)             Beneficially owns such shares, directly or indirectly; or
 
(ii)            Has (A) the right to acquire such shares (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding, or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise; provided, however, that a person shall not be deemed the owner of shares tendered pursuant to a tender or exchange offer made by such person or any of such person’s affiliates or associates until such tendered shares is accepted for purchase or exchange; or (B) the right to vote such shares pursuant to any agreement, arrangement or understanding; provided, however, that a person shall not be deemed the owner of any shares because of such person’s right to vote such shares if the agreement, arrangement or understanding to vote such shares arises solely from a revocable proxy or consent given in response to a proxy or consent solicitation made to 10 or more persons; or
 
(iii)           Has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting (except voting pursuant to a revocable proxy or consent as described in item (B) of subparagraph (ii) of this paragraph), or disposing of such shares with any other person that beneficially owns, or whose affiliates or associates beneficially own, directly or indirectly, such shares.
 
(d)            Any amendment of this Article SEVENTH shall not be effective until 12 months after the approval of such amendment at a meeting of the stockholders of the Corporation and shall not apply to any Business Combination between the Corporation and any person who became an Interested Stockholder of the Corporation at or prior to the time of such approval.
 
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(e)            Notwithstanding any other provisions of these Amended and Restated Articles of Incorporation or the bylaws of the Corporation (and notwithstanding the fact that some lesser percentage may be specified by law, these Amended and Restated Articles of Incorporation or the bylaws of the Corporation), the affirmative vote of the holders of sixty-six and two-thirds percent (66-2/3%) or more of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors (considered for this purpose as one class) shall be required to amend, alter, change or repeal this Article SEVENTH.
 
EIGHTH:                 If a meeting of stockholders is adjourned for lack of quorum on two successive occasions, at the next and any subsequent adjournment of the meeting there must be present either in person or by proxy stockholders of record holding at least forty-percent (40%) of the issued and outstanding stock and entitled to vote at such meeting in order to constitute a quorum.
 
NINTH:                   The Corporation may transfer its corporate domicile from the Marshall Islands to any other place in the world.
 
[Remainder of page intentionally left blank.]
 
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IN WITNESS WHEREOF, Danaos Corporation has caused these Amended and Restated Articles of Incorporation to be signed as of the      day of September 2006, by its President, who hereby affirms and acknowledges, under penalty of perjury, that these Amended and Restated Articles of Incorporation are the act and deed of the Corporation and that the facts stated herein are true.

 	DANAOS CORPORATION	
 	 	
 	By:	/s/ John Coustas	 	
 	 	Title: President and	
 	 	Chief Executive Officer	
 
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EXHIBIT 3.2
DANAOS CORPORATION
AMENDED AND RESTATED BYLAWS
As Adopted October 14 , 2005
ARTICLE I
OFFICES
The principal place of business of the Corporation shall be at such place or places as the directors shall from time to time determine.  The Corporation may also have an office or offices at such other places within or without the Marshall Islands as the Board of Directors (the “Board”) may from time to time appoint or the business of the Corporation may require.
ARTICLE II
STOCKHOLDERS
Section 1.               Annual Meeting .  The annual meeting of stockholders of the Corporation shall be held on such day and at such time and place within or without the Marshall Islands as the Board may determine, for the purpose of electing directors and for transacting such other business as may properly be brought before the meeting.
Section 2.               Special Meetings .  A special meeting of the stockholders may be called at any time by the Board or, at the request of the holders of a majority of Corporation’s issued and outstanding stock entitled to vote on the matters proposed to be considered at such meeting, by the Secretary of the Corporation.  Except as may be set forth in the Articles of Incorporation, no other person or persons are permitted to call a special meeting.  No business may be conducted at the special meeting other than such business as may be properly brought before the meeting.  If the Chairman of the special meeting determines that business was not properly brought before the special meeting, the Chairman shall declare to the meeting that the business was not properly brought before the meeting and such business shall not be transacted.
Section 3.               Notice of Meetings .  Notice of every annual and special meeting of stockholders, other than any meeting the giving of notice of which is otherwise prescribed by law or the Articles of Incorporation, stating the date, time, place and purpose thereof, and in the case of special meetings, the name of the person or persons at whose direction the notice is being issued, shall be given personally (including by telephone) or sent by mail, telegraph, cablegram, telex, telecopy, electronic mail or other means deemed appropriate by the Board at least fifteen (15) but not more than sixty (60) days before such meeting, to each stockholder of record entitled to vote thereat and to each stockholder of record who, by reason of any action proposed at such meeting would be entitled to have his or her shares appraised if such action were taken, and the notice shall include a statement of that purpose and to that effect.  If mailed, notice shall be deemed to have been given when deposited in the mail, directed to the stockholder at his, her or its address as the same appears on the record of stockholders of the Corporation or at such address as to which the stockholder has given notice to the Secretary.  Notice of a meeting need not be given to any stockholder who submits a signed waiver of notice, whether before or after the meeting, or who attends the meeting without protesting prior to the conclusion thereof the lack of notice to him or her.

 
Section 4.               Adjournments .  Whether or not a quorum shall be present, any meeting of stockholders, annual or special, may adjourn from time to time to reconvene at the same or some other place, and notice need not be given of any such adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken.  At the adjourned meeting the Corporation may transact any business which might have been transacted at the original meeting.  If the meeting is adjourned for lack of quorum, notice of the new meeting shall be given to each stockholder of record entitled to vote at the meeting.  If after an adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record on the new record date entitled to notice in Section 3 of this Article II.  The Board of Directors may postpone any meeting of stockholders or cancel any special meeting of stockholders by public announcement or disclosure prior to the time scheduled for the meeting; provided, however, that a special meeting of stockholders called at the request of the stockholders shall not be postponed or cancelled without an affirmative vote of the holders of at least a majority of the issued and outstanding stock entitled to vote at such meeting.
Section 5.               Quorum .  At all meetings of stockholders, except as otherwise expressly provided by law or the Articles of Incorporation, there must be present either in person or by proxy stockholders of record holding at least a majority of the shares issued and outstanding and entitled to vote at such meetings in order to constitute a quorum, but if less than a quorum is present, a majority of those shares present either in person or by proxy shall have power to adjourn any meeting until a quorum shall be present.  Notwithstanding the previous sentence, at any meeting of stockholders at which the holders of any class of stock of the Corporation shall be entitled to vote separately as a class, the holders of a majority in number of the total outstanding shares of such class, present in person or represented by proxy, shall constitute a quorum for purposes of such class vote unless the representation of a different number of shares of such class shall be required by law, by the Articles of Incorporation or by these bylaws.
                Notwithstanding the foregoing, if a meeting of stockholders is adjourned for lack of quorum on two successive occasions, at the next and any subsequent adjournment of the meeting there must be present either in person or by proxy stockholders of record holding at least forty-percent (40%) of the issued and outstanding stock and entitled to vote at such meeting in order to constitute a quorum.
 
Section 6.               Organization .  The Chief Executive Officer or, in the absence of the Chief Executive Officer, the Chairman of the Board, if there is a Chairman of the Board, shall call all meetings of the stockholders to order, and shall act as chairman of such meetings.  In the absence of the Chief Executive Officer and the Chairman of the Board, the members of the Board of Directors who are present shall elect a chairman of the meeting.
                The Secretary of the Corporation shall act as secretary of all meetings of the stockholders; and in the absence of the Secretary, the Chairman of the meeting may appoint any person to act as secretary of the meeting.  It shall be the duty of the Secretary of the Corporation to prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of stockholders entitled to vote at such meeting, arranged in alphabetical order and showing the address of each stockholder and the number of shares registered in the name of each stockholder.
 
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Section 7.               Voting .  At any meeting of stockholders, with respect to a matter for which a stockholder is entitled to vote, each such stockholder shall be entitled to one vote for each share it holds, except as otherwise expressly provided by law or in the Articles of Incorporation.  Each stockholder may exercise such voting right either in person or by proxy; provided, however, that no proxy shall be valid after the expiration of eleven months from the date such proxy was authorized unless otherwise provided in the proxy.  A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in the law of the Marshall Islands to support an irrevocable power.  A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by filing an instrument in writing revoking the proxy or another duly executed proxy bearing a later date with the Secretary of the Corporation.  If a quorum is present, and except as otherwise expressly provided by law or the Articles of Incorporation and except with respect to the election of directors, the affirmative vote of a majority of the shares of stock represented at the meeting shall be the act of the stockholders.  Subject to the rights of the holders of any series of preferred stock of the Corporation, directors shall be elected by a plurality of the votes cast at a meeting of stockholders by the stockholders entitled to vote in the election.
                Shares of the stock of the Corporation belonging to the Corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation is held, directly or indirectly, by the Corporation, shall neither be entitled to vote nor be counted for quorum purposes.
Section 8.               Voting Procedures and Inspectors .  The Corporation may, in advance of any meeting of stockholders, appoint one or more inspectors of election to act at the meeting and make a written report thereof.  Each inspector, before entering upon the discharge of the duties of inspector, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of such person’s ability.
                The inspectors shall ascertain the number of shares outstanding and the voting power of each; determine the shares represented at the meeting and the validity of proxies and ballots; count all votes and ballots; determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by them; and certify their determination of the number of shares represented at the meeting, and their count of all votes and ballots.
Section 9.               Consent of Stockholders in Lieu of Meeting .  Any action required or permitted to be taken by the stockholders of the Corporation, or any action which may be taken at a meeting of the stockholders, may be taken without a meeting if a consent in writing, setting forth the actions so taken, is signed by all the stockholders entitled to vote with respect to the subject matter thereof.  Such consent shall have the same effect as a unanimous vote of stockholders, and may be stated as such in any articles or documents filed with a Registrar of Corporations.
                The consent shall be delivered to the Corporation by delivery to its registered office in the Marshall Islands, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded.  Delivery made to the Corporation’s registered office shall be made by hand or by certified or registered mail, return receipt requested.
 
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Section 10.             Fixing of Record Date .  For the purpose of determining the stockholders entitled to notice of and to vote at any meeting of stockholders, or to express consent to or dissent from any proposal without a meeting, or for any other action, the Board may fix a time not more than sixty (60) days prior to the date of for any such determination of stockholders, nor, in the case of a meeting of stockholders, less than fifteen (15) days before the date of such meeting.
Section 11.             Advance Notice of Stockholder Nominees for Director and Other Stockholder Proposals .  The matters to be considered and brought before any meeting of stockholders of the Corporation, including the nomination and election of directors, shall be limited to only those matters that are brought properly before the meeting in compliance with the procedures set forth in this Section 11 of Article II.
                In order to be properly brought before any annual meeting of stockholders, a matter must be (i) specified in the notice of annual meeting given by or at the direction of the Board, (ii) otherwise brought before the annual meeting by or at the direction of the Board, or (iii) brought before the annual meeting in the manner specified in this Section 11 of Article II by a stockholder who holds of record stock of the Corporation entitled to vote at the annual meeting on such matter (including any election of directors), or by a person who holds such stock through a nominee or “street name” holder of record of such stock and can demonstrate to the Corporation such indirect ownership of, and such person’s right to vote, such stock.
                In addition to any other requirements under applicable law, the Articles of Incorporation and these bylaws, persons nominated by stockholders for election as directors of the Corporation, and any other proposals by stockholders, shall be properly brought before an annual meeting of stockholders only if notice of any such matter to be presented by a stockholder at such meeting (a “Stockholder Notice”), is delivered to the Secretary at the principal executive office of the Corporation not less than ninety (90) nor more than one hundred and twenty (120) days prior to the first anniversary date of the annual meeting for the preceding year.  If (and only if) an annual meeting of stockholders is not scheduled to be held within a period that commences thirty (30) days before and ends thirty (30) days after such an anniversary date (an annual meeting date outside such period being referred to herein as an “Other Meeting Date”), the Stockholder Notice shall be given in the manner provided in these bylaws by the later of (i) the close of business on the ninetieth (90th) day prior to such Other Meeting Date or (ii) the close of business on the tenth (10th) day following the date on which such Other Meeting Date is first publicly announced or disclosed by the Corporation.
                Any stockholder who wishes to nominate a person for election as a director of the Corporation at an annual meeting of stockholders shall deliver, as part of the Stockholder Notice, a statement in writing setting forth the name of the person to be nominated, the number and class of all shares of stock of the Corporation the person owns of record and beneficially, as reported to the stockholder by the person, the information regarding the person that would be required to be included in a proxy statement by the rules and regulations of the U.S. Securities and Exchange Commission (assuming such rules and regulations were applicable) for a nominee for election as a director, the person’s signed consent to serve as a director of the Corporation if elected, the stockholder’s name and address, the number and class of all shares of stock of the Corporation that the stockholder owns of record and beneficially and, in the case of a person who holds the stock through a nominee or “street name” holder of record, evidence establishing the person’s
 
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indirect ownership of the stock and right to vote the stock for the election of directors at the meeting.
                Any stockholder who gives a Stockholder Notice of any matter (other than a nomination for director) proposed to be brought before an annual meeting of stockholders shall deliver, as part of the Stockholder Notice, the text of the proposal to be presented and a brief written statement of the reasons why the stockholder favors the proposal and setting forth the stockholder’s name and address, the number and class of all shares of stock of the Corporation the stockholder owns of record and beneficially, any material interest of such stockholder in the matter proposed (other than as a stockholder), if applicable and, in the case of a person who holds stock through a nominee or “street name” holder of record, evidence establishing the person’s indirect ownership of the stock and right to vote the stock on the matter proposed at the annual meeting.
                As used in these bylaws, shares “beneficially owned” shall mean all shares which a person is deemed to beneficially own pursuant to Rules 13d-3 and 13d-5 under the U.S. Securities Exchange Act of 1934, as amended.  If a stockholder is entitled to vote only for a specific class or category of directors at an annual or special meeting of stockholders, the stockholder’s right to nominate a person for election as a director at the meeting shall be limited to such class or category of directors.
                Notwithstanding any provision of this Section 11 of Article II to the contrary, in the event that the number of directors to be elected to the Board at the next annual meeting of stockholders is increased by virtue of an increase in the size of the Board and either all of the nominees for director at the next annual meeting of stockholders or the size of the increased Board is not publicly announced or disclosed by the Corporation at least one hundred (100) days prior to the first anniversary of the preceding year’s annual meeting, a Stockholder Notice shall also be considered timely hereunder, but only with respect to nominees to stand for election at the next annual meeting as the result of any new positions created by such increase, if it is delivered to the Secretary at the principal place of business of the Corporation not later than the close of business on the tenth (10th) day following the first day on which all such nominees or the size of the increased Board of Directors shall have been publicly announced or disclosed by the Corporation.
                Except as provided in the immediately following sentence, no matter shall be properly brought before a special meeting of stockholders unless the matter shall have been brought before the meeting pursuant to the Corporation’s notice of such meeting or, in the case of special meetings called at the request of the stockholders, the matter shall have been specified in a Stockholder Notice delivered with the request from the stockholders for such meeting to be called. In the event the Corporation calls a special meeting of stockholders for the purpose of electing a director to the Board, any stockholder entitled to vote for the election of such director at such meeting may nominate a person for election to such position as is specified in the notice of such meeting, but only if the Stockholder Notice required by this Section 11 of Article II shall be delivered to the Secretary of the Corporation at the principal place of business of the Corporation not later than the close of business on the tenth (10th) day following the first day on which the date of the special meeting and either the names of all nominees proposed by the
 
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Board of Directors to be elected at such meeting or the number of directors to be elected shall have been publicly announced or disclosed.
                For purposes of this Section 11 of Article II, a matter shall be deemed to have been “publicly announced or disclosed” if the matter is disclosed in a press release reported by the (i) Dow Jones News Service, the Associated Press or a comparable U.S. national news service or (ii) in a document publicly filed by the Corporation with the U.S. Securities and Exchange Commission.
                In no event shall the adjournment of an annual meeting or a special meeting of stockholders, or any announcement thereof, commence a new period for the giving of notice as provided in this Section 11.  This Section 11 of Article II shall not apply to any nomination of a director in an election in which only the holders of a particular class of stock of the Corporation (the holders of which may vote by written consent under the Articles of Incorporation), or a series thereof, are entitled to vote (unless otherwise provided in the terms of such stock).
                The chairman of any meeting of stockholders, in addition to making any other determinations that may be appropriate to the conduct of the meeting, shall have the power and duty to determine whether notice of nominees and other matters proposed to be brought before a meeting have been duly given in the manner provided in this Section 11 of Article II and, if not so given, shall direct and declare at the meeting that such nominees and other matters shall not be considered.
ARTICLE III
DIRECTORS
Section 1.               Number and Term of Office .  The affairs, business and property of the Corporation shall be managed by a Board to consist of such number of directors as shall be fixed from time to time by a resolution passed by a majority of the Board, subject to the Amended and Restated Articles of Incorporation of the Corporation.  Except as otherwise provided by law or in Section 3 of this Article III, the directors of the Corporation shall be elected at each annual meeting of stockholders, to replace those directors whose terms expire at such annual meeting.  Except as otherwise provided in Section 1 or Section 3 of this Article III, each Director shall be elected to serve until the third succeeding annual meeting of stockholders and until his or her successor shall have been duly elected and qualified, except in the event of his or her death, resignation, removal or the earlier termination of his or her term of office.  No decrease in the number of directors shall shorten the term of any incumbent director.  The directors need not be residents of the Marshall Islands or stockholders of the Corporation.  Corporations may, to the extent permitted by law, be elected or appointed directors.
Section 2.               Removal .  Any or all of the directors may be removed, with cause by the affirmative vote of holders of sixty-six and two-thirds percent (66-2/3%) of the voting power of all the outstanding shares of stock of the Corporation entitled to vote generally in the election of directors, considered for this purpose as a single class.  Notwithstanding the previous sentence, whenever any director shall have been elected by the holders of any class of stock of the Corporation voting separately as a class under the provisions of the Articles of Incorporation,
 
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such director may be removed and the vacancy filled only by the holders of sixty-six and two-thirds percent (66-2/3%) of the voting power of that class of stock voting separately as a class.
                Except as provided in the Articles of Incorporation, vacancies caused by any such removal or any vacancy caused by the death or resignation of any director or for any other reason, and any newly created directorship resulting from any increase in the authorized number of directors, may be filled by, and only by, the affirmative vote of a majority of the directors then in office, although less than a quorum, and any director so elected to fill any such vacancy or newly created directorship shall hold office until the director’s successor is elected and qualified or until the director’s earlier resignation or removal.  No director may be removed without cause by either the stockholders or the Board.
Section 3.               Vacancies .  Vacancies in the Board occurring by death, resignation, creation of new directorship, failure of the stockholders to elect the whole class of directors required to be elected at any annual election of directors or for any other reason, including removal of directors for cause, shall be filled only by the affirmative vote of a majority of the remaining directors then in office, although less than a quorum, at any special meeting called for that purpose or at any regular meeting of the Board.  Any director appointed to fill a vacancy or a newly created directorship pursuant to this Section 3 of Article III shall hold office until the annual meeting of stockholders next succeeding his or her appointment, and until his or her successor is elected and qualified or until his or her earlier resignation or removal.
Section 4.               Regular meetings .  Regular meetings of the Board may be held at such time and place, within or without the Marshall Islands, as may be determined by resolution of the Board.  No notice shall be required for any regular meeting. Except as otherwise provided by law, any business may be transacted at any regular meeting of the Board.
Section 5.               Special meeting .  Special meetings of the Board may be called from time to time by the Chairman, the Chief Executive Officer, or any officer of the Corporation who is also a director.  The Chief Executive Officer or the Secretary shall call a special meeting of the Board upon written request directed to either of them by any two directors stating the time, place and purpose of such special meeting.  Special meetings of the Board shall be held on a date and at such time and at such place, within or without the Marshall Islands, as may be designated in the notice thereof by the officer calling the meeting.
Section 6.               Notice of Special Meetings .  Notice of the date, time and place of each special meeting of the Board shall be given to each Director at least forty-eight (48) hours prior to such meeting, unless the notice is given orally or delivered in person, in which case it shall be given at least twenty-four (24) hours prior to such meeting.  For the purpose of this section, notice shall be deemed to be duly given to a Director if given to him or her personally (including by telephone), or if such notice be delivered to such Director by mail, telegraph, cablegram, telex, teleprinter, telecopy, electronic mail or other electronic means to his or her last known address. Notice of a meeting need not be given to any Director who submits a signed waiver of notice, whether before or after the meeting, or who attends the meeting without protesting, prior to the conclusion thereof, the lack of notice to him or her.
 
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Section 7.               Quorum .  Subject to the provisions of Section 3 of this Article III, a majority of the directors at the time in office (but, unless the Board shall consist solely of one director, in no case less than one-third of total number of directors nor less than two directors), present in person or by proxy or communications equipment, shall constitute a quorum for the transaction of business.
Section 8.               Organization .  The Chairman of the Board or, in the absence of the Chairman of the Board, the Chief Executive Officer or, in the absence of the Chief Executive Officer, the Chief Operating Officer shall preside at all meetings of the Board of Directors.  In the absence of the Chairman of the Board, the Chief Executive Officer and the Chief Operating Officer, a Chairman shall be elected from among the Directors present.  The Secretary of the Corporation shall act as secretary of all meetings of the directors.  In the absence of the Secretary of the Corporation, the Chairman may appoint any person to act as secretary of the meeting.
Section 9.               Interested Directors .  No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board or committee thereof which authorizes the contract or transaction, or solely because his or her or their votes are counted for such purpose, if: (i) the material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the Board or the committee and the Board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors or, if the votes of the disinterested directors are insufficient to constitute an act of the Board as defined in Section 55 of the Marshall Islands Business Corporations Act (the “BCA”), by a unanimous vote of the disinterested directors or (ii) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board or a committee thereof by the affirmative vote of a majority of the disinterested directors, if the votes of the disinterested directors are insufficient to constitute an act of the Board as defined in Section 55 of the BCA, by a unanimous vote of the disinterested directors.  Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board or of a committee which authorizes the contract or transaction.
Section 10.             Voting .  The vote of the majority of the directors, present in person or by proxy or by means of communications equipment, at a meeting at which a quorum is present shall be the act of the directors.
                Unless otherwise restricted by the Articles of Incorporation or by these bylaws, any action required or permitted to be taken at any meeting of the Board, or of any committee thereof, may be taken without a meeting if all members of the Board, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee, as the case may be.
Section 11.             Compensation of Directors and Members of Committees .  The Board may from time to time, in its discretion, fix the amounts which shall be payable in cash or in securities to members of the Board and to members of any committee, for attendance at the meetings of the
 
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Board or of such committee and for services rendered to the Corporation.  Directors shall be reimbursed for their reasonable expenses incurred in attending such meetings or otherwise in performing their duties as Directors.  No such payment or reimbursement shall preclude any Directors from serving the Corporation in any other capacity and receiving compensation therefor.
ARTICLE IV
COMMITTEES
Section 1.               Standing Committees .  In accordance with, and to the extent required by, applicable legal, regulatory and stock exchange listing requirements (the “Requirements”), the Board shall have the following standing committees: (a) an Audit Committee, (b) a Compensation Committee, and (c) a Nominating and Corporate Governance Committee (the “Standing Committees”), and such other committees as may be required from time to time by the Requirements.  The Compensation and Nominating and Corporate Governance Committees shall be composed of at least a majority of “Independent Directors” within the meaning of the Requirements applicable to such committees, and the Audit Committee shall be composed entirely of Independent Directors.  Each Standing Committee shall consist of such minimum number of directors as may be mandated by the Requirements and shall have a written charter, which shall be approved by the Board and state the purpose and authority of such committee.  Standing Committee charters shall be reviewed not less frequently than annually to reflect the activities of the respective committees, changes in applicable Requirements, and other relevant considerations, and proposed revisions to such charters shall be approved by the Board.  The Nominating and Corporate Governance Committee shall be responsible, after taking into account the desires of individual Board members, for making recommendations to the Board with respect to the assignment of directors to the Standing Committees.  After reviewing the Nominating and Corporate Governance Committee’s recommendations, the Board shall be responsible for appointing committee members and designating committee chairs on an annual basis.  The Nominating and Corporate Governance Committee shall annually review committee assignments with a view toward balancing the benefits derived from continuity against the benefits derived from the diversity of experience and viewpoints of the various directors, subject in any case with the applicable Requirements.
Section 2.               Executive and Other Committees .  The Board may, by resolution or resolutions passed by a majority of the entire Board, designate from among its members, and in addition to the mandatory Standing Committees, an executive committee to consist of one or more of the directors of the Corporation, which, to the extent provided in said resolution or resolutions, or in these bylaws, shall have and may exercise, to the extent permitted by law, the powers of the Board in the management of the business and affairs of the Corporation, and may have power to authorize the seal of the Corporation to be affixed to all papers which may require it; provided, however, that no such committee shall have the power or authority to (i) submit to stockholders of any action that requires stockholders’ approval by law, (ii) fill a vacancy in the Board or in a committee thereof, (iii) fix compensation of the directors for serving on the Board ofany other committee, (iv) amend or repeal any bylaw or adopt any new bylaw, or (v) amend or repeal any resolution of the entire Board which by its terms shall not be so amendable or repealable.  In
 
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addition, the Board may designate from among its members other committees to consist of one or more of the directors of the Corporation, each of which shall perform such functions and have such authority and powers as shall be delegated to such committee by said resolution or resolutions or as provided for in these bylaws subject to the prohibitions on the delegation of power and authority set forth in the preceding sentence.
Section 3.               Membership and Rules .  Members of any Board committee shall hold office for such period as may be prescribed by the vote of the entire Board, subject, however, to removal at any time by the vote of the Board.  Vacancies in membership of such committees shall be filled by vote of the Board.  Committees may adopt their own rules of procedures and may meet at stated times or on such notice as they may determine.  Each committee shall keep a record of its proceedings and report the same to the Board when required.
ARTICLE V
OFFICERS
Section 1.               Number and Designation .  The officers of the Corporation shall include a Chief Executive Officer and a Secretary and may include a Chairman of the Board, one or more Vice Chairmen of the Board, a President, a Chief Operating Officer, a Treasurer, a Chief Financial Officer, one or more Vice-Presidents and such other officers, if any, as the Board may deem necessary.  Officers may be of any nationality and need not be residents of the Marshall Islands.  The officers shall be elected annually by the Board at its first meeting following the annual election of directors, but in the event of the failure of the Board to so elect any officer, such officer may be elected at any subsequent meeting of the Board.  The salaries of officers and any other compensation paid to them shall be fixed from time to time by the Board.  The Board may at any meeting elect additional officers.  Each officer shall hold office at the pleasure of the Board and may hold more than one office.  Any officer may be removed by the Board at any time with or without cause.  Any vacancy in an office may be filled by the Board at any regular or special meeting.  No officer of the Corporation, who also served as a director of the Corporation, shall continue to serve as an officer of the Corporation following his or her removal as a director of the Corporation by a vote of the stockholders of the Corporation.
                In addition to the powers and duties of the officers of the Corporation as set forth in these bylaws, the officers shall have such authority and shall perform such duties as from time to time may be determined by the Board.
Section 2.               Chief Executive Officer .  The Board shall designate one of the officers of the Corporation to be the Chief Executive Officer of the Corporation.  Subject to the control of the Board, the Chief Executive Officer shall have general charge and control of all the business and affairs of the Corporation and shall have all powers and shall perform all duties incident to the position of Chief Executive Officer which may be required by law and such other duties as are required by the Board.  The Chief Executive Officer shall make reports to the Board and to the stockholders, and shall see that all orders and resolutions of the Board and of any committee thereof are carried into effect.  The Chief Executive Officer shall preside at all meetings of the stockholders and shall have such other powers and perform such other duties as may from time to time be assigned by these bylaws or by the Board of Directors.
 
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Section 3.               Chief Operating Officer .  The Board of Directors may designate one of the officers of the Corporation to be the Chief Operating Officer of the Corporation. Subject to the control of the Board of Directors and the Chief Executive Officer, the Chief Operating Officer shall have general charge and control of all the operations of the Corporation and shall have all powers and shall perform all duties incident to the position of Chief Operating Officer.  The Chief Operating Officer shall act in a general executive capacity and assist the Chief Executive Officer in the administration and operation of the Corporation’s business and general supervision of its policies and affairs.  The Chief Operating Officer shall perform the duties of the Chief Executive Officer in the absence of the Chief Executive Officer.  The Chief Operating Officer shall have such other powers and perform such other duties as may from time to time be assigned by these bylaws or by the Board of Directors or the Chief Executive Officer.
Section 4.               Chief Financial Officer .  The Board may designate one of the officers of the Corporation to be the Chief Financial Officer of the Corporation.  Subject to the control of the Board and the Chief Executive Officer, the Chief Financial Officer shall have general charge and control of the financial affairs of the Corporation and shall have all powers and shall perform all duties incident to the position of Chief Financial Officer.  The Chief Financial Officer shall act in a general executive capacity and assist the Chief Executive Officer in the administration and operation of the Corporation’s financial affairs.  The Chief Financial Officer shall have such other powers and perform such other duties as may from time to time be assigned by these bylaws or by the Board of Directors or the Chief Executive Officer.
 
Section 5.               Chairman and Vice Chairmen of the Board .  The Board may elect a Chairman of the Board from among its members.  The Chairman of the Board shall preside at all meetings of the Board and shall have all powers and may perform all duties incident to the office of Chairman of the Board which shall be required by law and shall have such other powers and perform such other duties as shall from time to time be assigned by these bylaws or by the Board.  The Board of Directors also may elect one or more Vice-Chairmen to act in the place of the Chairman upon his or her absence or inability to act.
Section 6.               President and Vice Presidents .  The Board of Directors may elect a President and one or more Vice Presidents of the Corporation.  Subject to the control of the Board of Directors and the Chief Executive Officer, the President and each Vice President shall have all powers and shall perform all duties incident to their respective offices which may be required by law and shall have such other powers and perform such other duties as may from time to time be assigned by these bylaws or by the Board of Directors or the Chief Executive Officer.
Section 7.               Secretary .  The Board shall elect a Secretary who shall act as Secretary of all meetings of the stockholders and of the Board at which he or she is present, shall have supervision over the giving and serving of notices of the Corporation, shall be the custodian of the corporate records and of the corporate seal of the Corporation, and shall be empowered to affix the corporate seal to those documents the execution of which, on behalf of the Corporation under its seal, is duly authorized and when so affixed may attest the same.  The Secretary shall also exercise such powers and perform such other duties as may be assigned to him or her by the Board or the President.
 
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Section 8.               Treasurer .  The Board may elect a Treasurer who shall have general supervision over the care and custody of the funds, securities, and other valuable effects of the Corporation and shall deposit the same or cause the same to be deposited in the name of the Corporation in such depositories as the Board may designate, shall disburse the funds of the Corporation as may be ordered by the Board, shall have supervision over the accounts of all receipts and disbursements of the Corporation, and shall, whenever required by the Board, render or cause to be rendered financial statements of the Corporation. The Treasurer shall have the power and perform the duties usually incident to the office of Treasurer, and shall have such powers and perform such other duties as may be assigned to him or her by the Board or President.
Section 9.               Other Officers .  The Board may elect other officers of the Corporation who may exercise such powers and perform such duties as may be assigned to them by the Board or the Chief Executive Officer.
Section 10.             Bond .  The Board shall have power to the extent permitted by law to require any officer, agent or employee of the Corporation to give bond for the faithful discharge of his or her duties in such form and with such surety as the Board may deem advisable.
ARTICLE VI
CERTIFICATES FOR SHARES
Section 1.               Form and Issuance .  The shares of the Corporation shall be represented by certificates in form meeting the requirements of law, and not inconsistent with the Articles of Incorporation, and approved by the Board, unless the Board provides, by resolution, that some or all shares of any or all classes or series of stock shall be uncertificated.  Certificates shall be signed by the Chairman of the Board, the President or Chief Executive Officer or a Vice-President and by the Secretary or any Assistant Secretary or the Treasurer or any Assistant Treasurer.  These signatures may be facsimiles if the certificate is countersigned by a transfer agent or registered by a registrar other than the Corporation itself or its employee.
Section 2.               Transfer .  The Board shall have the power and authority to make such rules and regulations as it may deem expedient concerning the issuance, registration and transfer of certificates representing shares of the Corporation’s stock, and may appoint transfer agents and registrars thereof.
Section 3.               Loss of Stock Certificates .  The Board may direct a new certificate of stock to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost or destroyed upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost or destroyed.  When authorizing such issue of a new certificate or certificates, the Board may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost or destroyed certificate or certificates, or his or her legal representative, to advertise the same in such manner as it shall require and/or give the Corporation a bond in such sum as it may direct indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost or destroyed.
 
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ARTICLE VII
DIVIDENDS
Section 1.               Declaration and Form .  Subject to the provisions of the Articles of Incorporation, dividends may be declared in conformity with applicable law by, and at the discretion of, the Board at any regular or special meeting.  Dividends may be declared and paid in cash, stock or other property of the Corporation.
Section 2.               Record Date .  The Board may fix a time not exceeding sixty (60) days preceding the date fixed for the payment of any dividend, the making of any distribution, the allotment of any rights or the taking of any other action, as a record time for the determination of the stockholders entitled to receive any such dividend, distribution, or allotment or for the purpose of such other action.
ARTICLE VIII
INDEMNIFICATION
Section 1.               Nature of Indemnity .  The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation), by reason of the fact that the person is or was or has agreed to become a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director, officer, partner, manager, trustee or in any other capacity for another corporation, partnership, joint venture, limited liability company, trust, employee benefit plan or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person or on his or her behalf in connection with such action, suit or proceeding and any appeal therefrom, if the person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful.  The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his or her conduct was unlawful.
                The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by or in the right of the Corporation to procure judgment in its favor by reason of the fact that the person is or was or has agreed to become a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director, officer, partner, manager, trustee or in any other capacity for another corporation, partnership, joint venture, limited liability company, trust, employee benefit plan or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit, and except that no
 
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indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the courts of the Marshall Islands or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the  circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the courts of the Marshall Islands or such other court shall deem proper.
 
Section 2.               Successful Defense .  To the extent that a present or former director or officer of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Section 1 of this Article VIII or in defense of any claim, issue or matter therein, he or she shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by him or her in connection therewith.
Section 3.               Determination that Indemnification is Proper .  Any indemnification of a present or former director or officer of the Corporation under Section 1 of this Article VIII (unless ordered by a court) shall be made by the Corporation unless a determination is made that indemnification of the person is not proper in the circumstances because he or she has not met the applicable standard of conduct set forth in Section 1 of this Article VIII.  Any such determination shall be made with respect to a person who is a director or officer at the time of the determination (i) by a majority vote of the directors who are not parties to such action, suit or proceeding, even though less than a quorum, or (ii) by a committee of such directors designated by  majority vote of such directors, even though less than a quorum, or (iii) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion, or (iv) by the stockholders.
Section 4.               Advance Payment of Expenses .  Unless the Board of Directors otherwise determines in a specific case, expenses, including attorneys’ fees, incurred by a person who is a director or officer at the time in defending a civil or criminal or administrative or investigative action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the director or officer to repay such amount if it shall ultimately be determined that he or she is not entitled to be indemnified by the Corporation as authorized in this Article VIII.  Such expenses (including attorneys’ fees) incurred by former directors and officers may be so paid upon such terms and conditions, if any, as the Corporation deems appropriate.  The Board of Directors may authorize the Corporation’s legal counsel to represent a present or former director or officer in any action, suit or proceeding, whether or not the Corporation is a party to such action, suit or proceeding.
Section 5.               Survival; Preservation of Other Rights .  The foregoing indemnification provisions shall be deemed to be a contract between the Corporation and each director and officer who serves in any such capacity at any time while these provisions as well as the relevant provisions of the BCA are in effect and any repeal or modification thereof shall not affect any right or obligation then existing with respect to any state of facts then or previously existing or any action, suit, or proceeding previously or thereafter brought or threatened based in whole or in part upon any such state of facts.  Such a contract right may not be modified retroactively without the consent of such director or officer.
 
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                The rights to indemnification and advancement of expenses provided by this Article VIII shall not be deemed exclusive of any other rights to which a person seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, insurance policy, vote of stockholders or disinterested directors or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office, and shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administrators of such a person.  The Corporation may enter into an agreement with any of its directors or officers, providing for indemnification and advancement of expenses, including attorneys fees, that may change, enhance, qualify or limit any right to indemnification or advancement of expenses created by this Article VIII.
Section 6.               Severability .  f this Article VIII or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify each present or former director or officer as to costs, charges and expenses (including attorneys’ fees), judgment, fines and amounts paid in settlement with respect to any action, suit or proceeding, whether civil, criminal, administrative or investigative, including an action by or in the right of the Corporation, to the fullest extent permitted by any applicable portion of this Article VIII that shall not have been invalidated and to the fullest extent permitted by applicable law.
Section 7.               Subrogation .  In the event of payment of indemnification to a person described in Section 1 of this Article VIII, the Corporation shall be subrogated to the extent of such payment to any right of recovery such person may have and such person, as a condition of receiving indemnification from the Corporation, shall execute all documents and do all things that the Corporation may deem necessary or desirable to perfect such right of recovery, including the execution of such documents necessary to enable the Corporation effectively to enforce any such recovery.
Section 8.               No Duplication of Payments .  The Corporation shall not be liable under this Article VIII to make any payment in connection with any claim made against a person described in Section 1 of this Article VIII to the extent such person has otherwise received payment (under any insurance policy, bylaw, agreement or otherwise) of the amounts otherwise payable as indemnity hereunder.
Section 9.               Insurance .  The Corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director or officer against any liability asserted against such person and incurred by such person in such capacity whether or not the Corporation would have the power to indemnify such person against such liability by law or under the provisions of these bylaws.
Section 10.             Indemnification of Employees and Agents .  The Corporation may, to the extent authorized from time to time by the Board of Directors, provide rights to indemnification and to the advancement of expenses to employees and agents of the Corporation similar to those conferred in this Article VIII to directors and officers of the Corporation.
 
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ARTICLE IX
CORPORATE SEAL
                Form .  The Seal of the Corporation, if any, shall be circular in form, with the name of the Corporation in the circumference and such other appropriate legend as the Board may from time to time determine.
ARTICLE X
FISCAL YEAR
                Fiscal Year .  The fiscal year of the Corporation shall be such period of twelve consecutive months as the Board may by resolution designate.
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 1.               Checks, Notes, Etc .  All checks, drafts, bills of exchange, acceptances, notes or other obligations or orders for the payment of money shall be signed and, if so required by the Board, countersigned by such officers of the Corporation and other persons as the Board from time to time shall designate.
Checks, drafts, bills of exchange, acceptances, notes, obligations and orders for the payment of money made payable to the Corporation may be endorsed for deposit to the credit of the Corporation with a duly authorized depository by the Chairman of the Board, the President, any Vice President, the Treasurer, any Assistant Secretary, the Controller, any Assistant Controller and such other officers or persons, if any, as the Board of Directors from time to time may designate.
 
Section 2.               Loans .  No loans and no renewals of any loans shall be contracted on behalf of the Corporation except as authorized by the Board.  When authorized so to do, any officer or agent of the Corporation may effect loans and advances for the Corporation from any bank, trust company or other institution or from any firm, corporation or individual, and for such loans and advances may make, execute and deliver promissory notes, bonds or other evidences of indebtedness of the Corporation.  Such authority may be general or confined to specific instances.
Section 3.               Contracts .  The Board may authorize any officer, employee or agent to execute and deliver, in the name and on behalf of the Corporation, agreements, bonds, contracts, deeds, mortgages, security agreements and other instruments, either for the Corporation’s own account or in a fiduciary or other capacity, and, if appropriate, to affix the seal of the Corporation thereto.  The grant of such authority by the Board or any such officer may be general or confined to specific instances.
Section 4.               Waivers of Notice .  Whenever any notice whatever is required to be given by law, by the Articles of Incorporation or by these bylaws to any person or persons, a waiver thereof in
 
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writing or by electronic transmission by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent thereto.
ARTICLE XII
AMENDMENTS
                Amendments .  These bylaws and any amendment thereof may be altered, amended or repealed, or new bylaws may be adopted, by the holders of sixty-six and two-thirds percent (66-2/3%) or more of the outstanding stock of the Corporation entitled to vote generally for the election of directors, at any annual meeting or at any special meeting; provided, in the case of any special meeting, that notice of such proposed alteration, amendment, repeal or adoption is included in the notice of the meeting.
 
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EXHIBIT 4.1

 	 	Common Stock	
 
Number	 	 
Shares	
 	 	 	
 	Incorporated under the Laws of the Republic of The Marshall Islands	CUSIP  Y1968P 10 5	
 	 	See Reverse for	
 	 	Certain Definitions	

DANAOS CORPORATION

This is to certify that	 	
 
is the owner of                                                fully-paid and non-assessable Share(s) of Common Stock, par value $0.01 each, of Danaos Corporation transferable on the books of the Corporation by the holder hereof in person or by duly authorized attorney upon surrender of this Certificate properly endorsed.
 
This certificate is not valid unless countersigned and registered by the Transfer Agent and Registrar.  Witness the facsimile seal of the Corporation and facsimile signatures of its duly authorized officers.
Dated:

 	 	 	 	
Chief Executive Officer, President or Vice President	 	Secretary or Assistant Secretary	
 
COUNTERSIGNED AND REGISTERED:
AMERICAN STOCK TRANSFER & TRUST COMPANY
TRANSFER AGENT AND REGISTRAR
(New York, N.Y.)

 
The Corporation will furnish without charge to each shareholder, who so requests a statement of the number of shares constituting each class or series of stock and the designation thereof, and a copy of the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitation or restrictions of such preferences and/or rights. Such requests shall be made to the Corporation’s Secretary at the principal executive offices of the Corporation.
 
THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER HEREOF TO CERTAIN RIGHTS AS SET FORTH IN A STOCKHOLDERS RIGHTS AGREEMENT BETWEEN DANAOS CORPORATION AND AMERICAN STOCK TRANSFER & TRUST COMPANY, AS THE RIGHTS AGENT, DATED AS OF September ___, 2006, (THE “RIGHTS AGREEMENT”), THE TERMS OF WHICH ARE HEREBY INCORPORATED HEREIN BY REFERENCE AND A COPY OF WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF DANAOS CORPORATION UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT, SUCH RIGHTS WILL BE EVIDENCED BY SEPARATE CERTIFICATES AND WILL NO LONGER BE EVIDENCED BY THIS CERTIFICATE.  DANAOS CORPORATION WILL MAIL TO THE HOLDER OF THIS CERTIFICATE A COPY OF THE RIGHTS AGREEMENT WITHOUT CHARGE AFTER RECEIPT OF A WRITTEN REQUEST THEREFOR.  UNDER CERTAIN CIRCUMSTANCES SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS ISSUED TO, OR HELD BY, ANY PERSON WHO IS, WAS OR BECOMES AN ACQUIRING PERSON OR ANY AFFILIATE OR ASSOCIATE THEREOF (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT), WHETHER CURRENTLY HELD BY OR ON BEHALF OF SUCH PERSON OR BY ANY SUBSEQUENT HOLDER, MAY BECOME NULL AND VOID.
 
  The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations:

TEN COM	 	as tenants in common	UNIF GIFT MIN ACT	 	Custodian	 	
TEN ENT	 	as tenants by the entireties	 	(Cust)	 	(Minor)	
JT TEN	 	as joint tenants with right	 	 	
 	 	      of survivorship and not as	 	under Uniform Gifts to Minors	
 	 	      tenants in common	 	Act	 	
 	 	 	 	 	(State)	

Additional abbreviations may also be used though not in the above list.
 
                For value received,                                            hereby sell, assign and transfer unto
 
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE

(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)	

 	shares	
of the capital stock represented by the within Certificate, and do hereby irrevocably constitute and appoint	
 	
 	Attorney	
to transfer the said stock on the books of the within named Corporation with full power of substitution in the premises.	

Dated	 	 	 	 	
 	 	 	 	
 	 	NOTICE:	THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.	
 
SIGNATURE(S) GUARANTEED:

THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.

 

 	Exhibit 5.1	
 	 	
 	Watson, Farley & Williams (New York) LLP	
 	100 Park Avenue	
 	New York, New York 10017	
 	Tel (212) 922 2200	
 	Fax (212) 922 1512	
 
September 19, 2006
 
Danaos Corporation
14 Akti Kondyli
185 45 Piraeus

 
Danaos Corporation

Dear Sirs:
 
We have acted as special counsel as to matters of the law of the Republic of The Marshall Islands (“ Marshall Islands Law ”) to Danaos Corporation (the “ Company ”) in connection with the Company’s Registration Statement on Form F-1 (the “ Registration Statement ”) filed by the Company with the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended (the “ Act ”), and the rules and regulations thereunder, with respect to the issuance and sale by the Company of up to 11,787,500 shares (the “ Shares ”) of common stock, par value $0.01 per share, of the Company, including 1,537,500 Shares that may be sold pursuant to the exercise of an over-allotment option, and related preferred stock purchase rights (the “ Rights ”) under a Stockholder Rights Agreement dated as of September 18, 2006 (the “ Stockholder Rights Agreement ”) between the Company and American Stock Transfer & Trust Company, as rights agent.
 
In so acting, we have examined originals, or copies, certified or otherwise identified to our satisfaction, of (i) the Registration Statement and the prospectus (the “ Prospectus ”) included therein, (ii) the purchase agreement (the “ Purchase Agreement ”) to be executed among the Company and the underwriters named therein in the form filed by the Company as an exhibit to the Registration Statement, (iii) the Stockholder Rights Agreement, and (iv) originals, or copies certified or otherwise identified to our satisfaction, of all such records of the Company, agreements and other documents, certificates of public officials, officers and representatives of the Company and other appropriate persons, and such other documents as we have deemed necessary as a basis for the opinions hereinafter expressed.  In such examination, we have assumed without independent investigation, the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity with the original documents of all documents submitted to us as photostatic or facsimile copies, and the accuracy of the factual representations made to us by officers and other representatives of the Company.  We have also assumed the power, authority and legal right of all parties (other than the Company) to the Purchase Agreement and the

 

 
Stockholder Rights Agreement to enter into and perform their respective obligations thereunder and the due authorization, execution and delivery of such documents by such parties.
 
This opinion is limited to Marshall Islands Law as of the date hereof.  In rendering our opinion in Paragraph E below we have, with your permission, relied on the opinion addressed to you dated the date hereof of Morgan, Lewis & Bockius LLP, U.S. counsel to the Company, with respect to the Stockholder Rights Agreement.  In rendering our opinion as to the valid existence in good standing of the Company, we have relied solely on a Certificate of Goodstanding issued by the Registrar of Corporations of the Republic of The Marshall Islands on the date hereof.
 
Based on the foregoing and having regard to legal considerations which we deem relevant, we are of the opinion that:
 
A.            The Company is a corporation domesticated, validly existing and in good standing under the law of the Republic of The Marshall Islands.
 
B.            The Company has the corporate power and authority to enter into, execute, deliver and perform the Stockholder Rights Agreement.
 
C.            The Company has duly authorized the Shares and the issuance thereof, and upon due execution and delivery of the Purchase Agreement by the parties thereto in the form filed by the Company as an exhibit to the Registration Statement, when the Shares are issued and delivered against payment therefor in accordance with the terms of the Purchase Agreement, the Registration Statement and Prospectus, the Shares will be validly issued, fully paid and non-assessable.
 
D.            The Company has duly authorized the execution and delivery of the Stockholder Rights Agreement and the issuance of the Rights, and has duly executed and delivered the Stockholder Rights Agreement.
 
E.                                       When issued in accordance with the terms of the Stockholder Rights Agreement, the Rights will have been validly issued and will constitute valid and binding obligations of the Company.
 
Our opinion in Paragraph E above is subject to the qualification that the rights and remedies of any party to the Stockholder Rights Agreement (a) may be limited by bankruptcy, reorganization, insolvency, moratorium or other similar laws affecting generally the enforcement of creditors’ rights from time to time in effect, and (b) are subject to general principles of equity (regardless of whether such rights and remedies are considered in a proceeding in equity or at law), including application by a court of competent jurisdiction of principles of good faith, fair dealing, commercial reasonableness, materiality, unconscionability and conflict with public policy or other similar principles.
 
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We consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to our name in the Prospectus.  In giving such consent, we do not admit that we are in the category of persons whose consent is required under Section 7 of the Act.
 
Very truly yours,
 
Watson, Farley & Williams (New York) LLP
 
/s/ Watson, Farley & Williams (New York) LLP
 
3

 
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178

 
 
                                                                                                                                September 19, 2006

Danaos Corporation
14 Akti Kondyli
185 45 Piraeus
Greece
 
              Re:  Danaos Corporation, Registration Statement on Form F-1
 
Ladies and Gentlemen:
 
We have acted as U.S. counsel to Danaos Corporation, a Marshall Islands corporation (the “Company”), in connection with the filing of the referenced Registration Statement (the “Registration Statement”) under the Securities Act of 1933, as amended (the “Act”), with the Securities and Exchange Commission (the “SEC”).  The Registration Statement relates to the proposed offering and sale of up to 11,787,500 shares of common stock, par value US$0.01 per share, of the Company (the “Shares”) and related preferred stock purchase rights (the “Rights”).
In connection with this opinion letter, we have examined the Registration Statement, and originals, or copies certified or otherwise identified to our satisfaction, of the Stockholders Rights Agreement (the “Stockholder Rights Agreement”) made and entered into as of September 18, 2006 by and between the Company and American Stock Transfer & Trust Company, as Rights Agent (the “Rights Agent”), and such other documents, records and other instruments of the Company as we have deemed appropriate for purposes of the opinion set forth herein.
We have assumed the genuineness of all signatures, the legal capacity of all natural persons, the authenticity of the documents submitted to us as originals, the conformity with the originals of all documents submitted to us as certified, facsimile or photostatic copies and the authenticity of the originals of all documents submitted to us as copies.

Danaos Corporation
September 19, 2006
Page 2
 
We have also assumed for purposes of our opinion that (i) the Rights Agent has the requisite organizational and legal power and authority to enter into and perform its obligations under the Stockholders Rights Agreement, (ii) the Stockholders Rights Agreement has been duly authorized, executed and delivered by the Rights Agent and (iii) the Stockholders Rights Agreement constitutes a valid and binding obligation of the Rights Agent.  For purposes of our opinion, we have, with your permission, relied upon the opinion addressed to you dated the date hereof from Watson, Farley & Williams (New York) LLP, to the effect that (i) the Company is a corporation domesticated and validly existing under the laws of the Republic of The Marshall Islands, (ii) the Company has the requisite organizational and legal power and authority to enter into and perform its obligations under the Stockholders Rights Agreement, (iii) the Shares have been duly authorized and, when issued and delivered against payment therefore as contemplated in the Registration Statement, will be validly issued, fully paid and non-assessable, (iv) the Stockholders Rights Agreement and the issuance of the Rights in respect of the Shares have been duly authorized by the Company, and (v) the Stockholders Rights Agreement has been duly executed and delivered by the Company.
Based upon the foregoing, we are of the opinion that when issued in accordance with the terms of the Stockholder Rights Agreement, the Rights will constitute valid and binding obligations of the Company.
The opinions expressed herein are subject to bankruptcy, insolvency, fraudulent transfer and other similar laws affecting the rights and remedies of creditors generally and general principles of equity.
The opinions expressed herein are limited to the laws of the State of New York, and we express no opinion with respect to the laws of any other state or jurisdiction.
We hereby consent to the use of this opinion as Exhibit 5.2 to the Registration Statement and to the reference to us under the heading “Legal Matters” in the prospectus included in the Registration Statement.  In giving such consent, we do not thereby admit that we are acting within the category of persons whose consent is required under Section 7 of the Act or the rules and regulations of the SEC thereunder.
 
                                                                                                                Very truly yours,
 
                                                                                                                /s/ Morgan, Lewis & Bockius LLP

 
Exhibit 8.1

 	Morgan, Lewis & Bockius LLP	
 	101 Park Avenue	
 	New York, New York 10178	
 	 	
September 19, 2006
Danaos Corporation
14 Akti Kondyli
185 45 Praeus
Greece
 
Ladies and Gentlemen:
We have acted as United States tax counsel to Danaos Corporation, a corporation organized under the laws of the Marshall Islands (the “Company”), in connection with the preparation and filing with the Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended (the “1933 Act”), by the Company of a Registration Statement on Form F-1 (the “Registration Statement”).  Pursuant to the Registration Statement, the Company is offering 10,250,000 shares of its common stock (not including shares to be sold upon exercise of the underwriters’ over-allotment option).
We hereby confirm that, subject to the qualifications set forth therein and under the heading “Tax Considerations”, the discussion contained in the Registration Statement under the heading “United States Federal Income Tax Considerations”, other than the statements under the heading “PFIC Status and Material U.S. Federal Tax Consequences” and statements regarding the Company’s status as a “passive foreign investment company” for United States federal tax purposes for any period, insofar as such discussion describes United States federal income tax law, is accurate in all material respects.  In rendering this opinion we are relying upon the accuracy of representations made to us by the Company and Dr. John Coustas, including representations regarding the organization of the Company and its subsidiaries, their assets, income and activities and the ownership, trading and quotation of their shares.  This opinion is limited to United States federal income tax law and is based upon United States federal income tax law as in effect on the date hereof.
IRS Circular 230 Disclosure — To ensure compliance with Internal Revenue Service Circular 230, we inform you that any U.S. federal tax advice contained herein does not deal with a taxpayer’s particular circumstances.  Further, it was written in support of the promotion, marketing or recommending of the transaction or matter described herein.  This opinion was not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code. Taxpayers should consult their own tax advisors regarding the tax consequences to them of their own particular circumstances.

 
We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to our firm in the Registration Statement under the heading “United States Federal Income Tax Considerations.”  In giving such consent, we do not thereby concede that we are within the category of persons whose consent is required under Section 7 of the 1933 Act, as amended, or the rules and regulations of the Commission thereunder.
 
Very truly yours,
/s/ Morgan, Lewis & Bockius LLP
 
2

 
Exhibit 8.2

 	 	Watson, Farley & Williams (New York) LLP	
 	 	100 Park Avenue	
 	 	New York, New York 10017	
 	 	Tel (212) 922 2200	
 	 	Fax (212) 922 1512	

September 19 , 2006
 
Danaos Corporation
14 Akti Kondyli
185 45 Piraeus

 

Danaos Corporation

Dear Sirs:
 
You have requested our opinion regarding the consequences of Marshall Islands taxation and Liberian taxation to Danaos Corporation (the “ Company ”) and the holders of common stock of the Company.
 
In rendering our opinion as to such tax consequences, we have examined such documents as we have deemed necessary, including the Registration Statement and the prospectus (the “ Prospectus ”) included therein (such Registration Statement, as amended at the effective date thereof, being referred to herein as the “ Registration Statement ”) filed by the Company on Form F-1 with the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended (the “ Act ”), and the rules and regulations thereunder, with respect to the issuance and sale by the Company of up to 11,787,500 shares of common stock of the Company.  We also have obtained such additional information as we have deemed relevant and necessary, including originals, or copies certified or otherwise identified to our satisfaction, of all such records of the Company, agreements and other documents, certificates of public officials, officers and representatives of the Company and other appropriate persons, and such other documents as we have deemed necessary as a basis for the opinions hereinafter expressed.  In such examinations, we have assumed without independent investigation, (a) the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as photostatic or facsimile copies, and the authenticity of the originals of such copies and (b) the accuracy of the factual representations made to us by officers and other representatives of the Company.
 
This opinion is limited to the law of the Republic of The Marshall Islands and the law of the Republic of Liberia and is as of the effective date of the Registration Statement.  Capitalized terms not defined herein have the meanings ascribed to them in the Registration Statement.

 
 
Based on the facts as set forth in the Prospectus and, in particular, on the representations, covenants, assumptions, conditions and qualifications described under the caption “Tax Considerations” therein, and having regard to legal considerations which we deem relevant, we hereby confirm that the opinions attributed to Watson, Farley & Williams (New York) LLP set forth in the Prospectus under the captions “Tax Considerations-Marshall Islands Tax Considerations” and “Tax Considerations-Liberian Tax Considerations” are the opinions of Watson, Farley & Williams (New York) LLP and accurately state our views as to the tax matters discussed therein.  In addition, such opinions fairly present the information expected to be relevant to holders of the common stock of the Company offered pursuant to the Prospectus and fairly summarize the matters referred to therein.
 
Our opinions as set forth in the Prospectus are based on the current provisions of Marshall Islands law and Liberian law, which may be changed at any time with retroactive effect.  No opinion is expressed on any matters other than those specifically referred to above.
 
We consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to our name in the Prospectus under the captions “Tax Considerations-Marshall Islands Tax Considerations” and “Tax Considerations-Liberian Tax Considerations”.  In giving such consent, we do not admit that we are in the category of persons whose consent is required under Section 7 of the Act.
 
Very truly yours,

/s/ Watson, Farley & Williams (New York) LLP
 
Watson, Farley & Williams (New York) LLP
 
2

 
Exhibit 8.3
[LETTERHEAD OF WHITE & CASE LLP]
September 19, 2006
Danaos Corporation
14 Akti Kondyli
185 45 Piraeus
Greece

Re:	Initial Public Offering of the Common Stock of Danaos Corporation—PFIC Status	 	
 
Ladies and Gentlemen:
We have acted as special U.S. federal income tax counsel with respect to certain matters in connection with the preparation of the Registration Statement on Form F-1 (the “Registration Statement”) relating to the registered public offering of the common stock of Danaos Corporation (“Danaos”).  This opinion is being delivered in connection with Danaos’ Registration Statement to which this opinion appears as an exhibit.
 
In rendering this opinion, we have assumed that the representations made to us by Danaos for purposes of this opinion are true, complete and correct.
 
We have examined the originals, or duplicates or certified or conformed copies, of such records, documents, certificates or other instruments and made such other inquiries as we have deemed necessary or appropriate to enable us to render the opinion set forth below. In such examination, we have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as duplicates or certified or conformed copies, and the authenticity of the originals of such latter documents. We have not, however, undertaken any independent investigation of any factual matter set forth in any of the foregoing.
 
Our opinion is based on the Internal Revenue Code of 1986, as amended, Treasury Regulations, administrative interpretations, and judicial precedents, each as in effect and available on the date hereof. If there is any subsequent change in the applicable law or regulations, if there are subsequently any new applicable administrative or judicial interpretations of the law or regulations, or if there are any changes in the facts or circumstances, the opinion expressed herein may become inapplicable.

 

September 19, 2006
 
Subject to the foregoing and the qualifications and limitations stated herein and in the Registration Statement, the statements in the Registration Statement under the heading “United States Federal Income Tax Considerations — PFIC Status and Material U.S. Federal Tax Consequences” and the statements regarding Danaos’ status as a “passive foreign investment company” for U.S. federal income tax purposes for any period, to the extent they constitute matters of U.S. federal income tax law and legal conclusions with respect thereto, are accurate in all material respects, and our opinion set forth in such section is confirmed.
 
We hereby consent to the filing of this opinion as Exhibit 8.3 to the Registration Statement, and to the references to our firm name therein. In giving such consent, we do not admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission
promulgated thereunder.
Very truly yours,
/s/ White & Case LLP
 
2

 
EXHIBIT 10.1

 

 

DANAOS CORPORATION

 
 
- and -

 
 
DANAOS SHIPPING COMPANY LIMITED

 

 

 
 
________________________________
 
AMENDED AND RESTATED MANAGEMENT AGREEMENT
________________________________

 

 

 
INDEX

Section	 	Page	
 	 	 	
1	INTERPRETATION	1	
2	APPOINTMENT	2	
3	THE OWNER’S GENERAL OBLIGATIONS	3	
4	THE MANAGER’S GENERAL OBLIGATIONS	3	
5	CREW SERVICES	6	
6	TECHNICAL SERVICES	7	
7	COMMERCIAL SERVICES	8	
8	CHARTERING SERVICES	9	
9	ADMINISTRATIVE SERVICES	10	
10	INSURANCE	12	
11	FEES AND EXPENSES	12	
12	BUDGETS, CORPORATE PLANNING AND EXPENSES	14	
13	LIABILITY AND INDEMNITY	15	
14	RIGHTS OF THE MANAGER, RESTRICTIONS ON THE MANAGER’S AUTHORITY, AND NON-COMPETE PROVISIONS	16	
15	AVAILABILITY OF OFFICERS	18	
16	TERMINATION OF THE AGREEMENT	18	
17	SALE AND RIGHT OF FIRST REFUSAL	20	
18	NOTICES	21	
19	APPLICABLE LAW AND JURISDICTION	21	
20	ARBITRATION	22	
21	MISCELLANEOUS	22	
 
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THIS AMENDED AND RESTATED MANAGEMENT AGREEMENT is made on the 18th day of September 2006,
 
BY AND BETWEEN:
 
(1)           DANAOS CORPORATION , a company organized and existing under the laws of the Republic of the Marshall Islands (the “ Owner ”); and
 
(2)           DANAOS SHIPPING COMPANY LIMITED , a company organized and existing under the laws of the Republic of Cyprus (the “ Manager ”).
 
WHEREAS:
 
(A)          The Owner has a number of wholly owned subsidiaries identified on Schedule A hereto, as such Schedule A may be amended from time to time (the “ Shipowning Subsidiaries ”), each of which owns either a containership or a drybulk carrier (the “ Vessels ”) and certain other direct and indirect subsidiaries identified on Schedule B hereto, as such Schedule B may be amended from time to time (together with the Shipowning Subsidiaries, the “ Subsidiaries ”).
 
(B)           The Manager has the benefit of expertise in the containerized cargo vessel industry and in technical and commercial management of containerships and drybulk carriers and administration of shipping companies generally.
 
(C)           The Owner and the Manager entered into a Management Agreement, made December 16, 2005 and effective July 1, 2005 (the “2005 Management Agreement” ), pursuant to which the Manager has represented the Group (as defined below) in its dealings with third parties and provided technical, commercial, administrative and certain other services to the Group as specified therein in connection with the management and administration of the business of the Group.
 
(D)          The Owner and the Manager desire to amend and restate the terms and conditions of the 2005 Management Agreement and to adopt this Agreement to supersede and replace the 2005 Management Agreement as the agreement pursuant to which the Manager represents the Group in its dealings with third parties and provides technical, commercial, administrative and certain other services to the Group as specified herein in connection with the management and administration of the business of the Group.
 
NOW, THEREFORE, THE PARTIES HEREBY AGREE:
1               INTERPRETATION
1.1           In this Agreement, unless the context otherwise requires:

“Average Profit Margin” is defined as the ratio of net income for the year divided by the gross revenue (excluding extraordinary items) as derived from the applicable year end audited financial statements.
“ Board of Directors ” means the board of directors of the Owner as the same may be constituted from time to time.
“ Business Days ” means a day (excluding Saturdays and Sundays) on which banks are open for business in Athens, Greece; London, United Kingdom; Cyprus; and New York, New York.
“ Containership ” means any ocean-going vessel that is intended to be used primarily to transport containers or is being used to primarily transport containers.
“ Drybulk Carrier ” means any ocean-going vessel that is intended to be used primarily to transport non-liquid cargoes of commodities shipped in an unpackaged state.
“ Executive Officers ” means the Chief Executive Officer, the Chief Operating Officer (or equivalent) and the Chief Financial Officer of the Owner.
“ Group ” means, at any time, the Owner and the Subsidiaries at such time taking into account the Schedule A and Schedule B in effect at such time and “member of the Group” shall be construed accordingly.
“ ISM Code ” means the International Management Code for the Safe Operation of Ships and for Pollution Prevention as adopted by the International Maritime Organization (IMO) by resolution A.741(18) or any subsequent amendment thereto.
“ Newbuilding ” means a new ship under construction or just completed.
“STCW 95” means the International Convention on Standards of Training, Certification and Watchkeeping for Seafarers, 1978, as amended in 1995 or any subsequent amendment thereto.
1.2           The headings of this Agreement are for ease of reference and do not limit or otherwise affect the meaning hereof.
1.3           All the terms of this Agreement, whether so expressed or not, shall be binding upon the parties hereto and their respective successors and assigns.
1.4           In the event of any conflict between this Agreement and any Shipmanagement Agreement (as defined below), the provisions of this Agreement shall prevail.
1.5           Unless otherwise specified, all references to money refer to the legal currency of the United States of America.
1.6           Unless the context otherwise requires, words in the singular include the plural and vice versa.
 
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2               APPOINTMENT
2.1           The Manager is hereby appointed by the Owner as the technical, commercial and administrative manager of the Group and hereby accepts such appointment on the terms and conditions of this Agreement.
2.2           With effect from the date hereof and continuing unless and until terminated as provided herein, the Owner hereby appoints the Manager and the Manager hereby agrees to act as the Manager of each Vessel.
2.3           The Manager undertakes to use its best endeavors to provide its management services specified in Sections 5, 6, 7, 8, 9 and 10 of this Agreement (collectively the “ Management Services ”), on behalf of the Owner in accordance with sound ship management practice.
2.4           The Manager may, with the consent of the Owner, appoint any person or entity (a “ Submanager ”) at any time throughout the duration of this Agreement to discharge any of the Manager’s duties.
2.5           The Manager covenants with the Owner to ensure that each Submanager shall at all times properly exercise and perform the powers, rights and duties so conferred on it.  The Manager’s power to delegate performance of any provision of the Agreement hereunder is without prejudice to the Manager’s liability to the Owner to perform such Agreement with the intention that the Manager shall remain responsible to the Owner for the due and timely performance of all duties and responsibilities of the Manager hereunder.
3               THE OWNER’S GENERAL OBLIGATIONS
3.1           The Owner shall notify the Manager as soon as possible of any change in the Group as a result of the purchase of any Vessel or Newbuilding, the sale of any Vessel, the purchase or sale of any direct or indirect subsidiary, the creation or divestiture of any subsidiary, or any other structural change and shall promptly amend Schedule A and Schedule B hereto, as applicable, to be reflective of any such change.   Such amended Schedule A or Schedule B shall be effective on any such day as mutually agreed by the Owner and the Manager, which date shall be no later than five calendar days after delivery of such amended Schedule A or Schedule B to the Manager by the Owner.
4               THE MANAGER’S GENERAL OBLIGATIONS
4.1           The Manager shall, on behalf of the Group, attend to the day-to-day management of the Vessels in accordance with sound technical and commercial shipping industry standards.
 
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4.2           In the exercise of its duties hereunder, the Manager shall act fully in accordance with the reasonable policies, guidelines and instructions from time to time communicated to it by the Group and serve the Group faithfully and diligently in the performance of this Agreement, exercising all due care, loyalty, skill and diligence to carry out its duties under this Agreement according to sound technical and commercial shipping industry standards.
4.3           For each Vessel now or hereinafter owned by any member of the Group, the Owner shall cause each Subsidiary to enter with the Manager into a contract substantially in the form attached hereto as Appendix I (each a “ Shipmanagement Agreement ” and collectively the “ Shipmanagement Agreements ”), with such alterations and additions as are appropriate (provided, that any alterations or additions which materially vary from such form shall require the approval of the Board of Directors of the Owner), and the Manager shall act and do all and/or any of the following acts or things described in this Agreement and each Shipmanagement Agreement in the name and/or on behalf of the Owner and/or its Subsidiaries in all parts of the world directly or through its agents.
4.4           For each Vessel sold or scrapped by any Subsidiary, the Owner shall cause each such Subsidiary to terminate promptly thereafter its applicable Shipmanagement Agreement with the Manager and the Manager agrees to terminate promptly such Shipmanagement Agreement accordingly.  Should the Owner decide not to extend the term of this Agreement pursuant to Section 16 hereof, the Manager shall continue to handle all outstanding matters relating to the sale or scrapping of the Group’s Vessels for as long as the Owner requires and in such case the management fee will be reduced by two-thirds (2/3) for the period following the expiration of the stated term of this Agreement.
4.5           The Manager acknowledges that the services it will provide pursuant to the Shipmanagement Agreements are not limited to the services described in such agreements and are instead as set forth in this Agreement.
4.6           In the performance of this Agreement, the Manager shall protect the interests of the Group in all matters directly or indirectly relating to the Vessels.
4.7           The Manager shall ensure that all material property of the Group is clearly identified as such, held separately from the property of the Manager and, where applicable, in safe custody.
4.8           The Manager shall ensure that adequate manpower is employed by it to perform its obligations under this Agreement.
4.9           During the term hereof (as provided in Section 16.1 of this Agreement), the Manager shall provide the Management Services to the Group, subject always to the objectives and policies of the Owner and each applicable member of the Group, in each case, as established from time to time by their authorized representative and notified to the Manager.
 
4

4.10         Notwithstanding anything to the contrary contained in this Agreement or the Shipmanagement Agreements, the Manager agrees that any and all decisions of a material nature relating to the Owner, any Subsidiary or any Vessel shall be reserved to the Owner, such decisions including, but not being limited to:
(a)                                   the purchase and/or sale of shares in a company or other assets of a material nature;
(b)                                  the purchase or formation of subsidiaries;
(c)                                   the entry into guarantees or loans or other forms of financing and any and all financial undertakings and commitments connected therewith;
(d)                                  the entry into and/or termination or amendment of any contractual relationships; and
(e)                                   the presentation, negotiation, settlement, prosecution or defense of any claim, demand or petition for an amount exceeding $250,000 or its equivalent.
4.11         During the term hereof, the Manager shall do all in its power to promote the business of the Group in accordance with the directions of the authorized representative of the respective member of the Group and shall at all times use its best efforts in all respects to conform to and comply with the lawful directions, regulations and recommendations made by such authorized representative, and in the absence of any specific directions, regulations and recommendations as aforesaid and subject to the terms and conditions of this Agreement, shall provide general administrative and advisory services in connection with the management of the business of the Group.
4.12         The Manager, in the performance of its responsibilities under this Agreement, shall be entitled to have regard to its overall responsibilities in relation to the management of its clients, which shall be restricted to the Group, and in particular, without prejudice to the generality of the foregoing, the Manager shall be entitled to allocate available resources and services in such manner as in the prevailing circumstances the Manager considers to be fair and reasonable, subject always to the discretion of any Executive Officer or other authorized representative of the Owner.
4.13         The Manager, in the performance of its responsibilities under this Agreement, shall ensure that any purchases of products or services from any affiliates, any Submanager or any other related entity shall be on terms no less favorable to the Manager than the market prices for products or services that the Manager could obtain on an arm’s-length basis from unrelated third parties.
4.14         During the term hereof, the Manager agrees that, other than as provided in this Section 4.14, it will provide the services in this Agreement to the Group on an exclusive basis and it will not provide any Management Services or other services contemplated herein to any entity without receiving the prior written approval of the Owner, other than:
(a)                                   the Owner and each Subsidiary;
 
5

(b)                                  any entity or vessel directly or indirectly owned or controlled, in whole or in part, or operated by John Coustas, Danaos Investments Limited as the Trustee for the 883 Trust (the “ Coustas Trust ”), Protector Holdings Inc. or Seasonal Maritime Corporation (collectively, the “ Coustas Entities ”) (or any (i) current or future beneficiaries of the Coustas Trust, (ii) entities beneficially owned by such beneficiaries or the Coustas Entities or (iii) other trusts established for the benefit of such beneficiaries or the Coustas Entities); provided, that, any such direct or indirect interest in any (x) Drybulk Carrier or Containership of larger than 2,500 TEU or (y) entity owning a Drybulk Carrier or a Containership of larger than 2,500 TEU, shall have been acquired in accordance with Section 3 of the Restrictive Covenant Agreement by and between the Owner and each of the Coustas Entities and attached hereto as Appendix III (the “ Restrictive Covenant Agreement ”); and
(c)                                   Palmosa Shipping Corporation and its subsidiaries.
For the avoidance of doubt, nothing in this Section 4.14 shall be construed to restrict the Manager from providing any Management Services or other services contemplated herein to any entity or vessel directly or indirectly owned or controlled, in whole or in part, or operated by any Coustas Entity (or any (i) current or future beneficiaries of the Coustas Family Trust, (ii) entities beneficially owned by such beneficiaries or the Coustas Entities or (iii) other trusts established for the benefit of such beneficiaries or the Coustas Entities), other than Containerships of larger than 2,500 TEUs or Drybulk Carriers or any entity or business involved in shipping sectors other than Containerships of larger than 2,500 TEUs or Drybulk Carriers (which can be provided services in accordance with the terms of this Section 4.14).
 
4.15         The Manager shall at all times maintain and keep true and correct accounts and shall make the same available for inspection and auditing by the Owner or any Subsidiary at such times as may be mutually agreed.
 
4.16         The Manager agrees that the Owner shall have the right at any time to inspect any Vessel for any reason the Owner considers necessary.
 
4.17         Where the Manager is providing technical management services in accordance with Section 6.1, the Manager shall procure that the requirements of the law of the flag of each Vessel are satisfied and the Manager shall in particular be deemed to be the “Company” as defined by the ISM Code, assuming the responsibility for the operation of the Vessel and taking over the duties and responsibilities imposed by the ISM Code when applicable.
 
6

5                                          CREW SERVICES
5.1                                  The Manager shall provide a suitably qualified crew and related services for each of the Vessels as required by each applicable member of the Group in accordance with the STCW 95 requirements including the following:
(a)                                   selecting and engaging the Vessel’s crew, including payroll arrangements, pension administration, and insurances for the crew in accordance with Section 10;
(b)                                  ensuring that the laws of the flag of each Vessel and all places where each Vessel trades are satisfied in respect of manning levels, rank, qualification and certification of the crew and employment regulations, including statutory withholding tax requirements, social insurance requirements, discipline and other requirements;
(c)                                   ensuring that all members of the crew have passed a medical examination with a qualified doctor certifying that they are fit for the duties for which they are engaged and are in possession of valid medical certificates issued in accordance with appropriate flag state requirements and, in the absence of applicable flag state requirements, the medical certificate shall be dated not more than three months prior to the respective crew members leaving their country of domicile and shall be maintained for the duration of their service on board the Vessel;
(d)                                  ensuring that the crew shall have a command of the English language of a sufficient standard to enable them to perform their duties safely;
(e)                                   arranging the transportation of the crew, including repatriation, board and lodging as and when required at rates and types of accommodations as customary in the industry;
(f)                                     training of the crew and supervising their efficiency;
(g)                                  keeping and maintaining full and complete records of any labor agreements which may be entered into with the crew and reporting to the Owner reasonably promptly after notice or knowledge thereof is received of any change or proposed change in labor agreements or other regulations relating to the crew and conducting union negotiations;
(h)                                  supervising discipline, discharge, and other terms of employment including administering the Owner’s and the Manager’s drug and alcohol policy in respect of the crew and enforcing appropriate standing orders;
(i)                                      handling all details and negotiating the settlement of any and all claims of the crew, including those arising out of accidents, sickness or death, loss of personal effects, disputes under articles or contracts of enlistment, policies of insurance and fines;
 
7

(j)                                      ensuring that any concerns of any customer with respect to the master or any of the officers or other crew are appropriately investigated in a timely manner, communicating the results of such investigations to the Owner and if appropriate the customer, and if such concerns are well-founded, ensuring that any appropriate remedial actions are taken without delay;
(k)                                   keeping and maintaining all administrative and financial records relating to the crew as required by any law and any labor or collective agreements of the Owner, and rendering to the Owner any and all reports; and
(l)                                      performing any other function in connection with the crew as may be requested by the Owner or necessary for the management of the business.
6                                          TECHNICAL SERVICES
6.1                                  The Manager shall provide for all technical management services necessary for the operation of each Vessel, which include, but are not limited to, the following functions:
(a)                                   providing competent personnel to supervise the maintenance and general efficiency of each Vessel;
(b)                                  arranging and supervising dry-dockings, repairs, alterations and upkeep of the Vessels to the standards required by the Group to ensure that each Vessel will comply with all requirements and recommendations of the classification society and with the laws and regulations of the country of registry of each Vessel and of the places where each Vessel trades;
(c)                                   arranging and purchasing the supply of necessary provisions, stores, spares, lubricating oil supplies and equipment for each Vessel;
(d)                                  appointing and paying surveyors and technical consultants and other support for each Vessel as the Manager may consider from time to time to be necessary and arranging surveys associated with the commercial operation of each Vessel;
(e)                                   developing, implementing and maintaining a Safety Management System (SMS) in accordance with the ISM Code and system security in accordance with ISPS Code for both the Manager and each of the Vessels under management;
(f)                                     arranging for the payment of all ordinary charges incurred in connection with the management of each Vessel, including, but not limited to, all canal tolls, port charges, any amounts due to any governmental authority with respect to the crew and all duties and taxes in respect of cargo or freight (whether levied against the Vessel, the Owner or the Group) and arranging for, and arranging payment for, any and all material licenses, permits, franchises, registrations and similar
 
8

authorizations of any governmental authority which are necessary and used in the operation of the Vessels;
(g)                                  procuring and arranging for port entrance and clearance, pilots, Vessel agents, consular approvals and other services necessary or desirable for the management and safe operation of each Vessel;
(h)                                  performing all usual and customary duties concerned with the loading and discharging of cargoes at all ports including providing technical and shore-side support for the Vessels, handling of each Vessel while in ports or transiting canals and arranging for the prompt dispatch of each Vessel from loading and discharge ports in accordance with any instructions and for transit through canals;
(i)                                      reporting to the Owner of each Vessel’s movement, position at sea, arrival and departure dates, major casualties and damages received or caused by each Vessel;
(j)                                      informing the Group promptly of any major release or discharge of oil or other hazardous material not in compliance with any laws;
(k)                                   maintaining each Vessel in such condition as to be acceptable to major charterers’ vetting standards, if required;
(l)                                      providing the Owner with a copy of any Vessel inspection reports, valuations, surveys, and other similar reports prepared by ship brokers, valuators, surveyors, and classification societies; and
(m)                                arranging for employment of counsel and the investigation, follow-up and negotiating of the settlement of all claims arising in connection with the operation of each Vessel.
7                                          COMMERCIAL SERVICES
7.1                                  The Manager shall provide certain commercial services to the Group, which includes, but is not limited to, the following functions :
(a)                                   performing class records review and physical inspections and, at the request of the Owner, making recommendations to the Owner with respect to any additional vessel being considered for purchase by the Owner;
(b)                                  at the request and under the direction of the Owner, certain administrative services in connection with the purchase or sale of a Vessel by the Owner or any member of the Group;
(c)                                   at the request of the Owner, certain services in connection with the Owner or any Subsidiary taking physical delivery of a Vessel; and
 
9

(d)                                  at the request of the Owner, performing any other functions necessary to assist the Owner with any Vessel sale or purchase or Newbuilding.
8                                          CHARTERING SERVICES
8.1                                  The Manager shall provide certain chartering services to the Group, including the following:
(a)                                   at the direction of the Owner, seeking and negotiating employment for each Vessel under voyage or period charters or under any other form of contract;
(b)                                  arranging of the proper payment to the Owner or its nominee of all hire and/or freight revenues or other moneys of whatsoever nature to which the Owner may be entitled arising out of the employment of or otherwise in connection with the Vessel;
(c)                                   providing voyage estimates and accounts and calculating of hire, freights, demurrage and/or dispatch moneys due from or due to the charterers of the Vessel;
(d)                                  furnishing the crew of each Vessel with appropriate voyage instructions and monitoring voyage performance while using best efforts to achieve the most economical, efficient and quick dispatch of each Vessel between ports and at ports and terminals;
(e)                                   appointing agents;
(f)                                     appointing stevedores;
(g)                                  arranging surveys associated with the commercial operation of the Vessel;
(h)                                  using due diligence to ensure that each Vessel will be employed between safe ports, safe anchorages and safe berths, so far as this can be established by exercising due diligence;
(i)                                      arranging the scheduling of each Vessel according to the terms of the Vessel’s employment;
(j)                                      carrying out all necessary communications with shippers, charterers and others involved with the receiving and handling of each Vessel at the loading and discharging ports, including sending any notices required under the terms of the Vessels’ employment;
(k)                                   preparing, issuing or causing to be issued to shippers the customary freight contracts, cargo receipts, bills of lading, shippers’ customary bills or other documents required under the terms of the Vessels’ employment;
 
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(l)                                      invoicing on behalf of the Owner all freights and other sums due to the Owner and accounts receivables arising from the operation of the Vessels, making any and all claims for moneys due to the Owner and issuing releases upon receipt of payment or settlement of such claims; and
(m)                                preparing off-hire statements and/or hire statements including obtaining port documents and expense supports necessary for such calculation.
9                                          ADMINISTRATIVE SERVICES
9.1                                  The Manager shall provide certain general administrative services to the Group, including the following:
(a)                                   keeping all books and records of things done and transactions performed on behalf of any member of the Group as it may require from time to time, including liaising with accountants, lawyers and other professional advisors;
(b)                                  except as otherwise contemplated herein, representing any member of the Group generally in its dealings and relations with third parties;
(c)                                   maintaining the general ledgers of the Group, reconciliation of the Group’s bank accounts, preparation of periodic financial statements, including those required for governmental and regulatory or self-regulatory agency filings and reports to shareholders, and the provision of related data processing services;
(d)                                  providing assistance in the preparation of periodic and other reports, proxy statements, registration statements and other documents and reports required by applicable law or the rules of any securities exchange or inter-dealer quotation system on which the securities of the Owner or any member of the Group may be listed or quoted;
(e)                                   preparing and providing all audited financial statements and tax returns required by any law or regulatory authority and developing, maintaining and monitoring internal audit controls, disclosure controls and information technology for the Group;
(f)                                     preparing reports concerning the performance of the services hereunder and the performance of third parties with whom any member of the Group has contractual relationships and furnishing advice and recommendations with respect to all aspects of the business affairs of such member of the Group;
(g)                                  providing all legal services to ensure the Group is in compliance with all laws, including all relevant securities laws, and ensuring that the Group owns or possesses all licenses, patents, copyrights and trademarks which are necessary and used in the operation of its business;
 
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(h)                                  providing for the presentation, negotiation, settlement, prosecution or defense of any claim, demand or petition on behalf of any member of the Group arising in connection with the business of any member of the Group for an amount not exceeding $250,000 or its equivalent, including the pursuit by any member of the Group of any rights of indemnification or reimbursement;
(i)                                      providing assistance and advice to the Group with respect to financing, including the monitoring and administration of the compliance with any applicable financing terms and conditions in effect with investors, banks or other financial institutions;
(j)                                      assisting with arranging board meetings, director accommodation and travel for board meetings, and preparing meeting materials and detailed papers and agendas for scheduled meetings of the Board of Directors or any company in the Group (and any and all committees thereof) that, where applicable, contain such information as is reasonably available to the Manager to enable the Board of Directors (and any such committees) to base their opinion;
(k)                                   preparing or causing to be prepared reports to be considered by the Board of Directors (or any applicable committee thereof) in accordance with the Group’s internal policies and procedures on any acquisition, investment or sale of any part of the business;
(l)                                      administering payroll services, benefits and directors fees, as applicable, for any employee, officer or director of the Group;
(m)                                handling all administrative and clerical matters in respect of (i) the calling and arrangement of all annual and/or special meetings of shareholders, (ii) the preparation of all materials (including notices of meetings and information circulars) in respect thereof and (iii) the submission of all such materials to the Owner in sufficient time prior to the dates upon which they must be mailed, filed or otherwise relied upon so that the Owner has full opportunity to review, approve, execute and return them to the Manager for filing or mailing or other disposition as the Owner may require or direct;
(n)                                  providing, at the request and under the direction of the Owner, such communications to the transfer agent for the Owner as may be necessary or desirable;
(o)                                  providing, at the request of the Owner, all documentation and records related to the Safety Management System (SMS) and/or the Crew, which the Owner needs in order to demonstrate compliance with the ISM Code and STCW 95 or to defend a claim against a third party; and
(p)                                  providing any such other administrative services as the Owner, the authorized Executive Officers or any other representative the Owner may request and the Manager may agree to provide from time to time.
 
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10                                   INSURANCE
10.1                            The Manager shall arrange such insurances as the Owner shall have instructed and agreed upon, including the following:
(a)                                   providing and purchasing hull and machinery insurance (including crew negligence), excess liabilities insurance, protection and indemnity insurance including pollution risk insurance (entered for each Vessel’s full gross tonnage), crew insurance and war insurance;
(b)                                  providing and purchasing all other insurances for each Vessel in accordance with the best practices of prudent owners of vessels of a similar type to each Vessel in amounts and on terms that are in accordance with industry practice;
(c)                                   providing the Owner with a copy of any Vessel insurance claims and any reports prepared by insurers; and
(d)                                  ensuring all premiums and calls on the Owner’s insurance are paid in a timely fashion.
11                                   FEES AND EXPENSES
11.1                            In consideration of the Manager providing the Management Services to the Group, the Owner shall pay the Manager the following fees:
(a)                                   a Vessel management fee of $500 per day per Vessel other than those described in 11.1(b) below, payable monthly in arrears (pro-rated for the number of days that the Owner (or any Subsidiary) owns or charters-in each Vessel during each month);
(b)                                  a Vessel management fee of $250 per day per Vessel on a bareboat charter payable monthly in arrears (pro-rated for the number of days that the Owner (or any Subsidiary) owns or charters-in each Vessel during each month);
(c)                                   a daily management fee of $500 for providing the commercial, chartering and administrative services, payable monthly in arrears (the fees in clauses (a) through (c) of this Section 11.1 being collectively referred to herein as the “ Management Fee ”);
(d)                                  a commission fee equal to 0.75% calculated on the gross freight, demurrage, charter hire and ballast bonus obtained for the employment of each Vessel on contracts or charter parties entered into with respect to such Vessels during the term of this Agreement, payable to the Manager monthly in arrears, only to the extent such freight, demurrage, charter hire and ballast bonus, as the case may be, is paid or otherwise collected;
 
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(e)                                   a commission equal to 0.5% calculated on the price set forth in the memorandum of agreement of any Vessel bought or sold for or on behalf of the Owner or any Subsidiary, payable upon final delivery to the Owner or Subsidiary as applicable; and
(f)                                     a flat fee of $400,000 for the services by the Manager set forth in the form of Supervision Agreement attached in Appendix II hereto with respect to each Newbuilding of the Owner or any Subsidiary payable upon final delivery of such Newbuilding to the Owner or Subsidiary, as applicable.
11.2                            The Management Fee will be fixed throughout the Initial Term. For each Subsequent Term (as defined in Section 16 below), the Management Fee will be set at a mutually agreed upon rate between the Owner and the Manager no later than 30 days prior to the commencement of the relevant Subsequent Term.  The Owner and the Manager will attempt to set the Management Fee for any Subsequent Term at a sufficient level so that the Manager’s Average Profit Margin during any such Subsequent Term will be no less than its Average Profit Margin during each of the three immediately preceding fiscal years.
11.3                            If the Owner and the Manager are unable to agree on the Management Fee for any Subsequent Term (each a “ Fee Disputed Subsequent Term ”), the Management Fee will be equal to the Management Fee in place during the prior year.  At the end of each Fee Disputed Subsequent Term, the Manager may submit its audited financial statements prepared in accordance with GAAP for the Fee Disputed Subsequent Term and each of the prior three fiscal years immediately prior to the Fee Disputed Subsequent Term (the “ Comparative Period ”) to the Owner for reconciliation.  The audited financial statements will set forth in comparative form the average revenues and expenses for the Fee Disputed Subsequent Term and the Comparative Period and will be certified by one of the Manager’s financial officers. If the Manager is able to demonstrate to the Owner that its Average Profit Margin for the Comparative Period was greater than its Average Profit Margin during the Fee Disputed Subsequent Term, the Owner will pay to the Manager an amount required to rectify such shortfall.  If the Manager is unable to demonstrate to the Owner that its Average Profit Margin for the Comparative Period was greater than its Average Profit Margin during the Fee Disputed Subsequent Term, no payment to the Manager will be made.
11.4                            In addition to providing the Management Services in exchange for the Management Fee, the Manager shall, at no cost to any member of the Group, provide its office accommodation, office staff (including secretarial, accounting and administrative assistance), facilities and stationery, and shall pay for all printing, postage, domestic telephone and all other usual office expenses incurred by it as the Manager in or about the provision of the Management Services.
11.5                         The Manager hereby acknowledges that it will provide the Management Services to the Group in Sections 7, 8, 9 and 10 hereof at its own cost in exchange for the Management Fee and other fees it receives under this Section 11, and shall pay for all of
 
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its own expenses and costs incurred by it as the Manager in providing such Management Services.
12            BUDGETS, CORPORATE PLANNING AND EXPENSES
12.1         On or before October 31 of each year the Manager will prepare and submit to the Executive Officers a detailed draft budget for the next fiscal year in a format acceptable to the Executive Officers which will include (i) a statement of estimated revenue and expenses in providing the Management Services to the Group and (ii) a proposed budget for capital expenditures, repairs or alterations, including proposed expenditures in respect of dry-docking, together with an analysis as to when and why such replacements, improvements, renovations or expenditures may be required (collectively, the “ Draft Budget ”).
12.2         For a period of thirty (30) days after receipt of the Draft Budget, the Executive Officers, from time to time, may request further details and submit written comments on the Draft Budget.  If the Executive Officers do not agree with any term thereof, they will, within the same thirty (30) day period, give the Manager notice of any inquiries to the Draft Budget, which notice will include the list of items under consideration (the “Questioned Items” ) and a proposal for the resolution of each such Questioned Item.  The Executive Officers and the Manager will endeavor to resolve any such differences between them with respect to the Questioned Items.
12.3         By December 10 of the relevant year, the Manager will prepare and deliver to the Owner a revised budget that has been approved by the Executive Officers (the “ Approved Budget ”).  All expenses incurred by the Manager under the terms of this Agreement on behalf of any member of the Group under the Approved Budget may be debited against the account of the respective member of the Group, but shall in any event remain payable by the Owner to the Manager on demand.
12.4         Any increase or change to the Approved Budget in excess of 7.5% shall require the written approval of two Executive Officers.  Any expenses incurred by the Manager in excess of the Approved Budget will not be reimbursed or payable to the Manager.
12.5         The Manager shall produce a monthly comparison between budgeted and actual expenditures to the Executive Officers.  The Manager shall also maintain the records of all costs and expenses incurred, including any invoices, receipts and supplementary materials as are necessary or proper for the settlement of accounts.
12.6         In the event the Executive Officers and the Manager dispute any specific expense or invoice within the Approved Budget and are unable to resolve their dispute within ten (10) Business Days, then the dispute shall be referred for resolution by a firm of independent accountants of nationally recognized standing reasonably satisfactory to each of the Manager and the Executive Officers (the “ Accounting Referee ”) which shall determine the disputed amounts within thirty (30) days of the referral of such dispute to such Accounting Referee.   The determination of the Accounting Referee shall not require
 
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the Owner to pay more than the amount in dispute.  The fees and expenses of the Accounting Referee shall be borne equally by the Owner and the Manager.
12.7         Insofar as any moneys are collected by the Manager under the terms of this Agreement (other than moneys payable by the Owner to the Manager), such moneys and any interest thereon shall be held to the credit of the relevant member of the Group in a separate bank account in the name thereof, but operated by the Manager.
12.8         On or before the first day of each month during the term of this Agreement, the Owner shall advance to the Manager all amounts budgeted for the operation of each of the Vessels for such month.  At the end of each calendar quarter, the Manager shall preliminarily reconcile the amounts advanced to it by the Owner with the amounts actually expended by it for the operation of each of the Vessels, and the Manager shall remit to the Owner, or credit to the Owner amounts to be advanced to it hereunder for future months, any unused portion of the amounts previously advanced by the Owner, or the Owner shall pay to the Manager any amounts properly expended by the Manager for the Vessels in excess of the amounts previously advanced by the Owner.  The Owner and Manager will reconcile any amounts due to the Owner by the Manager or amounts due to the Manager by the Owner for each fiscal year of the Owner as promptly as practicable following the close of each such fiscal year.
13            LIABILITY AND INDEMNITY
13.1         Subject to Section 16.2(i) neither any member of the Group nor the Manager shall be under any liability for any failure to perform any of their obligations hereunder by reason of Force Majeure.  “Force Majeure” shall mean any cause whatsoever of any nature or kind beyond the reasonable control of any member of the Group or the Manager, including, without limitation, acts of God, acts of civil or military authorities, acts of war or public enemy, acts of any court, regulatory agency or administrative body having jurisdiction, insurrections, riots, strikes or other labor disturbances, embargoes or other causes of a similar nature.
13.2         Subject to Section 13.1, the Manager shall be under no liability whatsoever to any member of the Group for any loss, damage, delay or expense of whatsoever nature, whether direct or indirect, and howsoever arising in the course of the performance of this Agreement, unless and to the extent that the same is proved to have resulted from (i) the gross negligence or wilful default of the Manager, its employees, agents or any Submanager or (ii) any breach of this Agreement by the Manager or any Submanager.
13.3         Except to the extent that the Manager would be liable under Section 13.2, the Owner hereby undertakes to keep the Manager and its employees, agents and the Submanager indemnified and to hold them harmless against all actions, proceedings, claims, demands or liabilities whatsoever and howsoever arising which may be brought against them or incurred or suffered by them arising out of or in connection with the performance of this Agreement, and against and in respect of all costs, losses, damages and expenses (including legal costs and expenses on a full indemnity basis) which the
 
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Manager, its employees, agents or the Submanager may suffer or incur (either directly or indirectly) in the course of the performance of this Agreement.
13.4         The Manager will indemnify and save harmless the Owner and each other Subsidiary in the Group, and their respective current and former directors, officers, employees, subcontractors and current and future affiliates, from and against any and all costs, losses, damages and expenses (including legal costs and expenses on a full indemnity basis) which the Owner, any other company in the Group or any of their employees or agents may suffer as a result of (i) any losses incurred or suffered related to any liabilities or obligations that the Manager or any Submanager has agreed to pay or for which the Manager is otherwise responsible under this Agreement, (ii) the gross negligence or any willful default by the Manager, its employees, agents or any Submanager or (iii) any breach of this Agreement by the Manager or any Submanager.
13.5         It is hereby expressly agreed that no employee or agent of the Manager (including any sub-contractor from time to time employed by the Manager) shall in any circumstances whatsoever be under any liability whatsoever to any member of the Group for any loss, damage or delay whatsoever kind arising or resulting directly or indirectly from any act, neglect or default on his part while acting in the course of or in connection with his employment and, without prejudice to the generality of the foregoing provisions in this Section 13, every exemption, limitation, condition and liberty herein contained and every right, exemption from liability, defense and immunity of whatsoever nature applicable to the Manager or to which the Manager is entitled hereunder shall also be available and shall extend to protect every such employee or agent of the Manager acting as aforesaid and for the purpose of all the foregoing provisions of this Section 13 the Manager is or shall be deemed to be acting as agent or trustee on behalf of and for the benefit of all persons who are or might be their servants or agents from time to time (including sub-contractors as aforesaid) and all such persons shall to this extent be or be deemed to be parties to this Agreement.  Nothing in this Section 13.5 shall be construed so as to limit any liability the Manager may have to the Group under Section 13.2 hereof.
14            RIGHTS OF THE MANAGER, RESTRICTIONS ON THE MANAGER’S AUTHORITY, AND NON-COMPETE PROVISIONS
14.1         Except as may be expressly provided in this Agreement, the Manager shall be an independent contractor and not the agent of the Owner or any other member of the Group and shall have no right or authority to incur any obligation on behalf of any member of the Group or to bind any member of the Group in any way whatsoever. Nothing in this Agreement shall be deemed to make the Manager or any of its subsidiaries or employees an employee, joint venturer or partner of any member of the Group.
14.2         The Owner acknowledges that the Manager shall have no responsibility hereunder, direct or indirect, with regard to the formulation of the business plans, policies, management or strategies (financial, tax, legal or otherwise) of any member of the Group, which is solely the responsibility of each respective member of the Group. Each member of the Group shall set its corporate policies independently through its
 
17

respective board of directors and executive officers and nothing contained herein shall be construed to relieve such directors or officers of each respective member of the Group from the performance of their duties or to limit the exercise of their powers.
14.3                            Notwithstanding the other provisions of this Agreement:
(a)                                   the Manager may act with respect to a member of the Group upon any advice, resolutions, requests, instructions, recommendations, direction or information obtained from such member of the Group or any banker, accountant, broker, lawyer or other person acting as agent of or adviser to such member of the Group and the Manager shall incur no liability to such member of the Group for anything done or omitted or suffered in good faith in reliance upon such advice, instruction, resolution, recommendation, direction or information made or given by such member of the Group or its agents, in the absence of gross negligence or wilful misconduct by the Manager or its servants, and shall not be responsible for any misconduct, mistake, oversight, error or judgment, neglect, default, omission, forgetfulness or want of prudence on the part of any such banker, accountant, broker, lawyer, agent or adviser or other person as aforesaid;
(b)                                  the Manager shall not be under any obligation to carry out any request, resolution, instruction, direction or recommendation of any member of the Group or its agents if the performance thereof is or would be illegal or unlawful; and
(c)                                   the Manager shall incur no liability to any member of the Group for doing or failing to do any act or thing which it shall be required to do or perform or forebear from doing or performing by reason of any provision of any law or any regulation or resolution made pursuant thereto or any decision, order or judgment of any court or any lawful request, announcement or similar action of any person or body exercising or purporting to exercise the legitimate authority of any government or of any central or local governmental institution in each case where the above entity has jurisdiction.
14.4         During the term of this Agreement and for a period of one year from the date of actual termination of this Agreement, the Manager and any affiliate of the Manager (other than a Coustas Entity (or any (i) current or future beneficiaries of the Coustas Trust, (ii) entities beneficially owned by such beneficiaries or the Coustas Entities or (iii) other trusts established for the benefit of such beneficiaries or the Coustas Entities) in accordance with Section 3 of the Restrictive Covenant Agreement) shall be prohibited from, directly or indirectly, engaging in (i) the ownership or operation of Containerships larger than 2,500 TEUs, (ii) the ownership or operation of any Drybulk Carriers and (iii) the acquisition of or investment in any business involved in the ownership or operation of Containerships larger than 2,500 TEUs or Drybulk Carriers.
 
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15 ￠￠￠￠￠￠￠￠￠￠ AVAILABILITY OF OFFICERS
15.1         The Executive Officers will be directly employed by the Owner outside of this Agreement.
15.2         The Manager shall make available to the Owner all such other officers, managers or employees that the Owner and the Manager agree shall be made available.
15.3         The Executive Officers are entitled to direct the Manager to remove and replace any individual serving as an officer or any senior manager serving as head of a business unit from such position.  Furthermore, the Manager agrees that it will not remove any individuals serving as officers or senior managers from their respective positions without the prior written consent of the Executive Officers.  If any officer or senior manager who is made available to the Owner by the Manager resigns, is terminated or otherwise vacates his office, the Manager shall, as soon as practicable after acceptance of any resignation or after termination, use reasonable best efforts to identify suitable candidates for replacement of such officer.
15.4         The Owner may employ directly any other officers, senior managers or employees as it may deem necessary that will not be subject to this Agreement.
15.5         The Manager will report to the Owner and the Board of Directors through the Executive Officers.
16            TERMINATION OF THE AGREEMENT
16.1         This Agreement shall be effective as of the date hereof and, subject to Sections 16.2, 16.3, 16.4 and 16.5, shall continue until December 31, 2008 (the “ Initial Term ”).  Thereafter the term of this Agreement shall be extended on a year-to-year basis for twelve additional years (each a “ Subsequent Term ”) unless the Owner, at least twelve months prior to the end of the then current term, gives written notice to the Manager that it wishes to terminate this Agreement at the end of the then current term.   In no event will the term of this Agreement extend beyond December 31, 2020.
16.2         The Owner shall be entitled to terminate this Agreement by notice in writing to the Manager if:
(a)            the Manager neglects or fails to perform its principal duties and obligations under this Agreement in any material respect, and such neglect or failure is not remedied within twenty (20) Business Days after written notice of the same is given to the Manager by the Owner; or
(b)            any money payable by the Manager under or pursuant to this Agreement is not promptly paid or accounted for in full within ten (10) Business Days by the Manager in accordance with the provisions of this Agreement.
16.3         The Owner shall be entitled to terminate this Agreement immediately if:
 
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(a)                                   the Owner or the Manager ceases to conduct business, or all or substantially all of the properties or assets of either such party is sold, seized or appropriated;
(b)                                  the Owner or the Manager files a petition under any bankruptcy law, makes an assignment for the benefit of its creditors, seeks relief under any law for the protection of debtors or adopts a plan of liquidation, or if a petition is filed against the Owner or the Manager seeking to have it declared an insolvent or a bankrupt and such petition is not dismissed or stayed within forty (40) Business Days of its filing, or if the Owner or Manager shall admit in writing its insolvency or its inability to pay its debts as they mature, or if an order is made for the appointment of a liquidator, manager, receiver or trustee of the Owner or Manager of all or a substantial part of its assets, or if an encumbrancer takes possession of or a receiver or trustee is appointed over the whole or any part of the Manager’s or Owner’s undertaking, property or assets or if an order is made or a resolution is passed for the Manager’s or Owner’s winding up;
(c)                                   a distress, execution, sequestration or other process is levied or enforced upon or sued out against the Manager’s property which is not discharged within twenty (20) Business Days;
(d)                                  the Manager ceases or threatens to cease wholly or substantially to carry on its business otherwise than for the purpose of a reconstruction or amalgamation without insolvency previously approved by the Owner; or
(e)                                   either the Manager or the Owner is prevented from performing its obligations hereunder by reasons of Force Majeure for a period of two (2) consecutive months or more.
16.4                            In addition to the provisions in Section 16.2 and 16.3, the Owner shall also be entitled to terminate any applicable Shipmanagement Agreement if:
(a)                                   the Owner or any Subsidiary ceases to be the owner of a Vessel by reason of a sale thereof or the Owner or any Subsidiary ceases to be registered as the Owner of a Vessel;
(b)                                  a Vessel becomes an actual or constructive or compromised or arranged total loss or an agreement has been reached with the underwriters in respect of the Vessel’s constructive, compromised or arranged total loss or if such agreement with the underwriters is not reached or it is adjudged by a competent tribunal that a constructive loss of the Vessel has occurred;
(c)                                   a Vessel is requisitioned for title or any other compulsory acquisition of a Vessel occurs, otherwise than by requisition by hire; or
(d)                                  a Vessel is captured, seized, detained or confiscated by any government or persons acting or purporting to act on behalf of any government and is not released from such capture, seizure, detention or confiscation within twenty (20) Business Days.
 
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16.5                            The Manager shall be entitled to terminate this Agreement by notice in writing to the Owner:
(a)                                   if any moneys payable by the Owner under this Agreement shall not have been duly paid within sixty (60) Business Days of payment having been demanded by the Manager in writing; or
(b)                                  if the Owner defaults in the performance of any other of its material obligations under this Agreement and fails to remedy such default within sixty (60) Business Days after being given notice in writing by the Manager to remedy the same.
16.6         Upon the effective date of termination pursuant to this Section 16, the Manager shall promptly terminate its service hereunder as may be required in order to minimize any interruption to the business of the members of the Group.
16.7         Upon termination, the Manager shall, as promptly as possible, submit a final accounting of funds received and disbursed under this Agreement and of any remaining Management Fee due from the Owner, calculated pro rata to the date of termination, and any undisbursed funds of any member of the Group in the Manager’s possession or control will be paid by the Manager as directed by such member of the Group promptly upon the Manager’s receipt of all sums then due it under this Agreement, if any.
16.8         Upon termination of this Agreement, the Manager shall release to the Owner the originals where possible, or otherwise certified copies, of all such accounts and all documents specifically relating to each Vessel or the provision of Management Services for each Vessel.
16.9         The provisions of Section 13 shall survive any termination of this Agreement.
17            SALE AND RIGHT OF FIRST REFUSAL
17.1         Unless expressly permitted by the Board of Directors of the Owner pursuant to Sections 17.2 and 17.3 below, during the term of this Agreement, John Coustas and/or any trust established for the Coustas family, under which John Coustas and/or members of his family are beneficiaries will collectively (i) own at least 80% of the outstanding capital stock of the Manager and (ii) hold at least 80% of the voting power of the outstanding capital stock of the Manager, considered for this purpose as a single class; if this provision is breached, the Owner shall have the right to purchase the capital stock of the Manager owned by John Coustas or any trust established for the Coustas family, under which John Coustas and/or members of his family are beneficiaries, at its fair market value.
17.2         Throughout the duration of this Agreement and for one (1) year period following the expiry or termination of this Agreement, the Manager is prohibited from transferring, assigning, selling or disposing of a significant portion or all of its assets or property that is necessary for the performance of its services under this Agreement and under any
 
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Shipmanagement Agreement to any other party without the prior written consent of the Board of Directors.
17.3         In the event that the Board of Directors permits the Manager to transfer, assign, sell or dispose of any assets or property pursuant to Section 17.2 above, the Manager hereby grants to the Owner a right of first refusal on any such proposed transfer, assignment, sale or disposition.  The right of first refusal contained in this Section 17.3 is in effect during the term of this Agreement and shall extend for a one (1) year period following the expiry or termination of this Agreement.
17.4         The Owner and the Manager shall have a period of 30 days to reach an agreement for the proposed sale, transfer, assignment or disposition of all or part of the Manager’s assets pursuant to Section 17.3 above.  If no such agreement with respect to a sale is concluded within 30 days, then the Manager may transfer or sell such assets to any other third party provided that the sale is made on terms no less favorable than those last proposed by the Manager to the Owner.
17.5         The Owner and the Manager acknowledge that all potential transfers pursuant to this Section 17 are subject to obtaining any and all written consents of governmental authorities and other non-affiliated third parties.
18            NOTICES
18.1         All notices, consents and other communications hereunder, or necessary to exercise any rights granted hereunder, shall be in writing, sent either by prepaid registered mail or telefax, and will be validly given if delivered on a Business Day to an individual at the following address:
Danaos Corporation
14 Akti Kondyli
185 45 Piraeus
Greece
Attention: Chief Executive Officer
 
Danaos Shipping Company Limited
14 Akti Kondyli
185 45 Piraeus
Greece
Attention: Chief Executive Officer
19            APPLICABLE LAW AND JURISDICTION
19.1         This Agreement shall be governed by, and construed in accordance with, the laws of England. The parties hereto submit to the exclusive jurisdiction of the courts of England in connection with any claim arising out of or in connection with this Agreement.
 
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20            ARBITRATION
20.1         All disputes arising out of this Agreement shall be arbitrated in London in the following manner.  One arbitrator is to be appointed by each of the parties hereto and a third by the two so chosen.  Their decision or that of any two of them shall be final and, for the purpose of enforcing any award, this Agreement may be made a rule of the court.  The arbitrators shall be commercial persons, conversant with shipping matters.   Such arbitration is to be conducted in accordance with the rules of the London Maritime Arbitrators Association terms current at the time when the arbitration proceedings are commenced and in accordance with the Arbitration Act 1996 or any statutory modification or re-enactment thereof.
20.2         In the event that the Owner or the Manager shall state a dispute and designate an arbitrator, in writing, the other party shall have twenty (20) Business Days to designate its own arbitrator.  Upon failure to do so, the arbitrator appointed by the other party can render an award hereunder.
20.3         Until such time as the arbitrators finally close the hearings, either party shall have the right by written notice served on the arbitrators and on the other party to specify further disputes or differences under this Agreement for hearing and determination.
20.4         The arbitrators may grant any relief, and render an award, which they or a majority of them deem just and equitable and within the scope of the Agreement of the parties, including but not limited to the posting of security.   Awards pursuant to this Section 20 may include costs, including a reasonable allowance for attorneys’ fees, and judgments may be entered upon any award made herein in any court having jurisdiction.
21            MISCELLANEOUS
21.1         This Agreement constitutes the sole understanding and agreement of the parties hereto with respect to the subject matter hereof and supersedes all prior agreements or understandings, written or oral, with respect thereto. This Agreement may not be amended, waived or discharged except by an instrument in writing executed by the party against whom enforcement of such amendment, waiver or discharge is sought.
21.2         During the term hereof, the Manager will not provide services hereunder through, or otherwise cause any member of the Group to have, an office or fixed place of business in the United States, and shall take reasonable steps not to cause income of any member of the Group to be subject to tax in any taxing jurisdiction, including the United States, the United Kingdom and Greece.
21.3         This Agreement may be executed in one or more written counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument.
 
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IN WITNESS whereof the undersigned have executed this Agreement as of the date first above written.

SIGNED by Iraklis Prokopakis	) /s/ Iraklis Prokopakis	
for and on behalf of	)	
DANAOS CORPORATION	)	
in the presence of:	)	
 	 	
SIGNED by Efstathios Sfiris	) /s/ Efstathios Sfiris	
for and on behalf of	)	
DANAOS SHIPPING COMPANY LIMITED	)	
in the presence of:	)	

24

 
SCHEDULE A
SHIPOWNING SUBSIDIARIES

Shipowning Subsidiary	 	Vessel Name	 	Jurisdiction	
Alexandra Navigation Inc.	 	Alexandra I	 	Liberia	
Appleton Navigation S.A.	 	CMA CGM Komodo	 	Liberia	
Auckland Marine Inc.	 	ER Auckland	 	Liberia	
Balticsea Marine Inc.	 	HN 1673	 	Liberia	
Bayview Shipping Inc.	 	HN 1671	 	Liberia	
Blacksea Marine Inc.	 	HN 1699	 	Liberia	
Boxcarrier (No.1) Corp.	 	HN S4001	 	Liberia	
Boxcarrier (No.2) Corp.	 	HN S4002	 	Liberia	
Boxcarrier (No.3) Corp.	 	HN S4003	 	Liberia	
Boxcarrier (No.4) Corp.	 	HN S4004	 	Liberia	
Boxcarrier (No.5) Corp.	 	HN S4005	 	Liberia	
Channelview Marine Inc.	 	HN 1672	 	Liberia	
Cobaltium Shipping (Private) Ltd.	 	APL Scotland	 	Singapore	
Commodore Marine Inc.	 	Hyundai Commodore	 	Liberia	
Constantia Maritime Inc.	 	Maersk Constantia	 	Liberia	
Continent Maritime Inc.	 	HN 1670	 	Liberia	
Deleas Shipping Limited	 	Pacific Bridge	 	Cyprus	
Duke Marine Inc.	 	Hyundai Duke	 	Liberia	
Federal Marine Inc.	 	MOL Confidence	 	Liberia	
Ferrous Shipping (Private) Ltd.	 	APL England	 	Singapore	
Geoffrey Shipholding Limited	 	CMA CGM Kalamata	 	Liberia	
Helderberg Maritime Inc.	 	S.A. Helderberg	 	Liberia	

 

Shipowning Subsidiary	 	Vessel Name	 	Jurisdiction	
Independence Navigation Inc.	 	Independence	 	Liberia	
Lacey Navigation Inc.	 	CMA CGM Elbe	 	Liberia	
Lato Shipping (Private) Ltd.	 	APL Belgium	 	Singapore	
Lissos Shipping (Private) Ltd.	 	APL Holland	 	Singapore	
Maria C Maritime Inc.	 	Maria C	 	Liberia	
Medsea Marine Inc.	 	HN 1698	 	Liberia	
Mercator Shipping Inc.	 	MV Achilleas	 	Liberia	
Orchid Navigation Corporation	 	Dimitris C	 	Liberia	
Ortelius Maritime Inc.	 	Fivos	 	Liberia	
Peninsula Maritime Inc.	 	Eagle Express	 	Liberia	
Roberto C Maritime Inc.	 	Roberto C	 	Liberia	
Saratoga Trading S.A.	 	YM Milano	 	Liberia	
Seacaravel Shipping Limited	 	YM Yantian	 	Cyprus	
Seacarriers Lines Inc.	 	HN 1640	 	Liberia	
Seacarriers Services Inc.	 	HN 1639	 	Liberia	
Seasenator Shipping Limited	 	Norasia Hamburg	 	Cyprus	
Sederberg Maritime Inc.	 	S.A. Sederberg	 	Liberia	
Tyron Enterprises S.A.	 	Henry	 	Liberia	
Victory Shipholding Inc.	 	Victory I	 	Liberia	
Wellington Marine Inc.	 	ER Wellington	 	Liberia	
Winterberg Maritime Inc.	 	S.A. Winterberg	 	Liberia	
Lease Subsidiaries	 	Vessel Name	 	Jurisdiction	
Containers Lines Inc.	 	Maersk Derby	 	Liberia	
Containers Services Inc.	 	Vancouver Express	 	Liberia	

 

Shipowning Subsidiary	 	Vessel Name	 	Jurisdiction	
Karlita Shipping Company Limited	 	HN 1561	 	Cyprus	
Oceanew Shipping Limited	 	CSCL Europe	 	Cyprus	
Oceanprize Navigation Limited	 	CSCL America	 	Cyprus	
Ramona Marine Company Limited	 	HN 1559	 	Cyprus	

SCHEDULE B
NON-SHIPOWNING SUBSIDIARIES(1)

Non-Shipowning Subsidiary	Shipowning Subsidiaries Owned	Jurisdiction	
Baker International S.A.	Ortelius Maritime Inc.	Liberia	
 	Seasenator Shipping Limited	 	
 	Seacarriers Services Inc.	 	
Bayard Maritime Ltd.	Appleton Navigation S.A.	Liberia	
 	Mercator Shipping Inc.	 	
 	Oceanprize Navigation Limited	 	
 	Seacaravel Shipping Limited	 	
Bounty Investment Inc.	Saratoga Trading S.A.	Liberia	
 	Victory Shipholding Inc.	 	
Cobaltium Shipping Inc.	Cobaltium Shipping (Private) Ltd.	Liberia	
Erato Navigation Inc.	Commodore Marine Inc.	Liberia	
 	Constantia Maritime Inc.	 	
 	Duke Marine Inc.	 	
 	Helderberg Maritime Inc.	 	
 	Oceanew Shipping Limited	 	
 	Peninsula Maritime Inc.	 	
 	Roberto C Maritime Inc.	 	
 	Sederberg Maritime Inc.	 	
 	Winterberg Maritime Inc.	 	
Ferrous Shipping Inc.	Ferrous Shipping (Private) Ltd.	Liberia	

(1)           To be updated by Danaos.

 

Non-Shipowning Subsidiary	Shipowning Subsidiaries Owned	Jurisdiction	
Lito Navigation Inc.	Alexandra Navigation Inc.	Liberia	
 	Lacey Navigation Inc.	 	
 	Magellan Marine Inc.	 	
Lydia Inc	Container Lines Inc.	Liberia	
 	Wellington Marine Inc.	 	
 	Geoffrey Shipholding Limited	 	
Sapfo Navigation Inc.	Independence Navigation Inc.	Liberia	
 	Maria C Maritime Inc.	 	
 	Orchid Navigation Corporation	 	
 	Ramona Marine Company Limited	 	
Strondium Shipping Inc.	Lissos Shipping (Private) Ltd.	Liberia	
Titanium Holdings Inc.	Lato Shipping (Private) Ltd.	Liberia	
Tully Enterprises S.A.	Deleas Shipping Limited	Liberia	
 	Karlita Shipping Company Limited	 	
 	Seacaravel Shipping Limited	 	
 	Seacarriers Lines Inc.	 	
 	Seasenator Shipping Limited	 	
 	Tyron Enterprises S.A.	 	
Westwood Marine S.A.	Containers Services Inc.	Liberia	
 	Auckland Marine Inc.	 	
 	Deleas Shipping Limited	 	

APPENDIX I
FORM OF SHIPMANAGEMENT AGREEMENT

1. Date of Agreement
	 	 	
2. Owners (name, place of registered office and law of registry)

	 	3. Managers (name, place of registered office and law of registry)	
ANNEX A // Subsidiary	 	DANAOS SHIPPING CO. LTD	
Name	 	Name	
Liberia / Cyprus / Singapore	 	14 AKTI KONDYLI, 185 45 PIRAEUS, GREECE	
Place of registered office	 	Place of registered office	
Cyprus / Panama / Singapore / Greece / Bahamas	 	Cyprus	
Law of registry
	 	Law of registry	
4. Day and year of commencement of Agreement (Section 16*) 
	 	 	
5. Crew Management (state “yes” or “no” as agreed) (Section 5*) 

 YES	 	6. Technical Management (state “yes” or “no” as agreed) (Section 6*) 
 YES	
7. Commercial Management (state “yes” or “no” as agreed) (Section 7*) 

 YES	 	8. Insurance Arrangements (state “yes” or “no” as agreed) (Section 10*) 
 YES	
9. Accounting Services (state “yes” or “no” as agreed) (Section 9*) 

 YES	 	10. Sale or purchase of the Vessel (state “yes” or “no” as agreed) (Section 11.1(e)*) 
 YES	
11. Provisions (state “yes” or “no” as agreed) (Section 6*) 

 YES	 	12. Bunkering (state “yes” or “no” as agreed) 

 YES	
13. Chartering Services Period (only to be filled in if “yes” stated in Box 7) (Section 11.1(d)*) 
 YES	 	14. Owner’s Insurance (Section 10*) 

 YES	
15. Management Fee (state annual amount) (Section 11*) 

	 	16. Severance Costs (state maximum amount) 

 N/A	
17. Day and year of termination of Agreement ( Section 16*) 

	 	18. Law and Arbitration (Sections 19, 20*) 

 English Law; exclusive jurisdiction of the Courts of England	
19. Notices (state postal and cable address, telex and telefax number for serving notice and communication to the Owners) (Section 18*)
 
 Subsidiary. Same as box 20.	 	20. Notices (state postal and cable address, telex and telefax number for serving notice and communication to the Managers) (Section 18*) 

 DANAOS SHIPPING CO. LTD. 
 14 Akti Kondyli, 185 45 Piraeus, Greece 
 Tel: 210 4196400 Fax: 210 4220855 
 Tlx: 212133 DECU GR 
 E-mail: danship@danaos.gr	
*References are to the Management Agreement, dated            , 2005, between Danaos Corporation and Danas Shipping Company Limited, as amended from time to time.
 
It is mutually agreed between the party stated in Box 2 and the party stated in Box 3 that this Agreement consists of Part I (the foregoing) and Part I I (the Management Agreement, dated            , 2005, between Danaos Corporation and Danas Shipping Company Limited, as amended from time to time) as well as Annex “A” (Details of Vessel) and each party agrees to be bound by both Part I and Part II hereto.

Signature(s) (Owners)	Signature(s) (Managers)

 
 
ANNEX “A” (DETAILS OF VESSEL OR VESSELS) TO
SHIP MANAGEMENT AGREEMENT

Date of Agreement:
 
Name of Vessel(s):
 
Particulars of Vessel(s):
 
DETAILS                              Vessel
 
Owner
Type
Class
Port of Registry
Year Built
Builder                                  Vessel’s details
LOA
Breadth Moulded
GRT
NRT
M/E Maker Type

APPENDIX II
FORM OF SUPERVISION AGREEMENT
 
THIS AGREEMENT is made the _____ day of                         20     
 
BETWEEN :
 
(1)                             DANAOS CORPORATION ( or a subsidiary company to be nominated) a company incorporated under the laws of the Marshall Islands whose registered office is Trust Company Complex, Ajeltake Island, Ajeltake Road, Majuro, Marshall Islands MH96960 and whose principal place of business is at 14 Akti Kondyli, 185 45 Piraeus, Greece (the “ Owner ”) {if different from the Buyer under the Shipbuilding Contract otherwise Owner to be the same with the Buyer as herein defined}
(2)                             DANAOS SHIPPING CO. LTD.    a company incorporated under the laws of Cyprus whose registered office is at 21 P. Katelaris Street, 504 Libra House, Nicosia 1097 and whose principal place of business is at 14 Akti Kondyli, 185 45 Piraeus, Greece (the “ Construction Supervisor ”).
WHEREAS :
By a shipbuilding contract dated                 and made between                 (the “ Builder ”) and                             (the “ Buyer ”) (the “ Shipbuilding Contract ”) the Builder agreed to construct, to the order of the Buyer, and sell to the Buyer, a            TEU container vessel, known during construction as Hull No.            and to be named                          (the “ Vessel ”);
IT IS NOW AGREED as follows:
1 ￠￠￠￠￠￠￠￠￠￠￠￠￠ DEFINITIONS
1.1           Except as otherwise defined herein, all terms defined in the Shipbuilding Contract shall have the same respective meanings when used herein.
1.2           In this Agreement, unless the context otherwise requires, the following expressions shall have the following meanings:
“ Business Day ” means:
(i)                                          in relation to a payment which is to be made hereunder or under any other document, a day, other than a Saturday or Sunday or a public holiday, on which major retail banks in London and New York, and (in respect of any payments which are to be made to the Builder) …………., are open for non-automated customer services; and

(ii)                                       in any other case, a day, other than a Saturday or Sunday or a public holiday, on which major retail banks in London and Athens are open for non-automated customer services.
“ Building Period ” means the period from the execution of this agreement to and including the date of delivery of the Vessel pursuant to the Shipbuilding Contract.
“ Buyer’s Supplies ” means all of the items to be furnished by the Buyer in accordance with Article ….. of the Shipbuilding Contract.
“ Spares ” means the items to be designated as spares by the parties hereto at the time of the delivery of the Vessel.
2 ￠￠￠￠￠￠￠￠￠￠￠￠￠￠￠￠￠￠￠￠￠￠￠￠￠￠￠￠￠￠￠￠￠￠ ￠￠￠￠￠ APPOINTMENT
2.1                                  The Owner hereby appoint the Construction Supervisor and the Construction Supervisor hereby agrees to act as the Owner’s supervisor towards the Builder and as the “Owner’s Representative” under the Shipbuilding Contract for the duration of the Building Period and to perform the duties and rights which rest with the Owner regarding the construction and delivery of the Vessel in accordance with all of the provisions of the Shipbuilding Contract. The Owner shall be responsible for, inter alia , determining the general policy of supervision of construction of the Vessel and the scope of activities of the Construction Supervisor and, in the performance of its duties under this Agreement, the Construction Supervisor shall at all times act strictly in accordance with any instructions or directions given to it by the Owner regarding such general policy or, in the absence of such instructions or directions, in accordance with the standards of a prudent supervisor providing services of the type to be provided under this Agreement, having due regard to the Owner’s interest. Any instructions so given shall be consistent with the nature and scope of the supervision services required to be performed by the Construction Supervisor under this Agreement and shall not require the Construction Supervisor to do or omit to do anything which may be contrary to any applicable law of any jurisdiction or which is inconsistent or contrary to any of the rights and duties of the Owner under the Shipbuilding Contract.
2.2                                  Specific powers and duties of the Construction Supervisor
Without prejudice to the generality of the appointment made under Clause 2.1, and (where applicable) by way of addition to the rights, powers and duties so conferred, the Construction Supervisor shall, subject to this Clause 2 and to

 
Clauses 3 and 4, have and be entrusted with the following rights, powers and duties in relation to the Shipbuilding Contract:
(a)                                       under Article …, to review, comment on, agree and approve the lists of plans and the drawings referred to; to attend the testing of the Vessel’s machinery, outfitting and equipment and to request any tests or inspections which the Construction Supervisor may consider appropriate or desirable and to review and comment on the results of all tests and inspections; to carry out such inspections and give such advice or suggestions to the Builder as the Construction Supervisor may consider appropriate or desirable; and to give notice to the Builder in the event that the Construction Supervisor discovers any construction, material or workmanship which the Construction Supervisor believes does not or will not conform to the requirements of the  Shipbuilding Contract and the specifications;
(b)                                      under Article …. to appoint a representative of the Construction Supervisor for the purposes specified in that Article;
(c)                                       if any alteration or addition to the Shipbuilding Contract becomes obligatory or desirable, to consult with the Builder and make recommendations to the Owner as to whether or not acceptance should be given to any proposal notified to the Owner by the Builder;
(d)                                      under Article … to request and agree to any minor alterations, additions, or modifications to the Vessel or the specification and any substitute materials pursuant to Article … which the Construction Supervisor may consider appropriate or desirable, provided that if the cost of such variations or substitute materials would have the effect of altering the Contract Price (as defined in the Shipbuilding Contract) by more than five per cent (5%) from the Contract Price on the date hereof or the amount of any of the installments of the Contract Price due under the  Shipbuilding Contract, the Construction Supervisor shall notify the same to the Owner in writing; to receive from and transmit to the Builder information relating to the requirements of the classification society and to give instructions and agree with the Builder regarding alterations, additions, or changes in connection with such requirements; and to approve the substitution of materials as requested by the Builder;
(e)                                       under Article …., to attend and witness the trials of the Vessel;

(f)                                         to determine whether the Vessel has been designed, constructed, equipped and completed in accordance with, and complies with, the Shipbuilding Contract and the Specifications and Plans (as defined in the Shipbuilding Contract); under Article .., Paragraph .., to give the Builder a notice of acceptance or (as the case may be) rejection of the Vessel, to require or request any further test and inspection of the Vessel, and to give and receive any further or other notice relative to such matters and generally to advise the Owner in respect of all such matters;
(g)                                      to sign together with the Owner any protocols as to sea trials, consumable stores, delivery and acceptance or otherwise, having first ascertained the appropriateness of so doing;
(h)                                      to accept on behalf of the Owner the documents specified in Article …., Paragraph … to be delivered by the Builder at Delivery and to confirm receipt thereof to the Owner;
(i)                                          to give and receive on behalf of the Owner any notice contemplated by the  Shipbuilding Contract, provided that the Construction Supervisor shall not have authority to give on behalf of the Owner any notice which the Owner may be entitled to give to cancel, repudiate or rescind the Shipbuilding Contract without the prior written consent of the Owner; and
(j)                                          to purchase all Buyer’s Supplies as agent of the Owner and supply and deliver the same together with all necessary specifications, plans, drawings, instruction books, manuals, test reports and certificates to the Builder under Article …., and provide to the Owner a list of all such Buyer’s Supplies as soon as possible.
2.3                            The Construction Supervisor shall discharge its responsibilities under this Clause 2 as the Owner’s agent.
2.4                            The costs of supplying and delivering Buyer’s Supplies pursuant to Article …. shall be reimbursed by the Owner on Delivery against supporting invoices from the Construction Supervisor which the Construction Supervisor shall supply to the Owner  at the same time as the notice to be given pursuant to Clause 3(c)(i).
3                                    CONSTRUCTION SUPERVISOR’S DUTIES REGARDING CONSTRUCTION
The Construction Supervisor undertakes with the Owner with respect to the Shipbuilding Contract:

(a)                                       to notify the Owner in writing promptly on becoming aware of any likely change to any of the dates on which any installment under the Shipbuilding Contract is expected to be due;
(b)                                      to (i) notify the Owner in writing of the expected date on which the launching or, as the case may be, sea trials of the Vessel is or are to take place and (ii) promptly on the same day as the launching or, as the case may be, sea trials of the Vessel takes or take place to confirm that the launching or, as the case may be, sea trials of the Vessel has or have taken place and, where relevant, that the amount specified in such confirmation is due and payable;
(c)                                       to (i) advise the Owner in writing, four (4) Business Days prior to the date on which the delivery installment under the Shipbuilding Contract is anticipated to become due, of the times and amounts of payments to be made to the Builder under the Shipbuilding Contract and the amount due to the Construction Supervisor for Buyer’s Supplies and (ii) promptly confirm the same on the day on which such installment becomes due (and being the date the same is required to be paid to the account referred to in Article……, Paragraph…… of the Shipbuilding Contract);
(d)                                      not to accept the Vessel or delivery of the Vessel on the Owner’s behalf without the Owner’s prior written approval and unless the Construction Supervisor shall have previously certified to the Owner in writing, in the form of the certificate set out in Schedule 1 to this Agreement, that:
(i)                         the Vessel has been duly completed and is ready for delivery to and acceptance by the Owner in or substantially in accordance with the Shipbuilding Contract and the Specifications and Plans;
(ii)                      there is, to the best of the Construction Supervisor’s knowledge and belief having made due enquiry with the Builder, no lien or encumbrance on the Vessel other than the lien in favor of the Builder in respect of the delivery installment of the Contract Price due in accordance with Article ….;
(iii)                   the Vessel is safe and undamaged; and
(iv)                  the Vessel is recommended for classification by the …………… (and the Construction Supervisor shall attach to its certificate the provisional certificate of …………………recommending such classification of the Vessel or a duplicate or photocopy of such

 
provisional certificate or otherwise provide evidence of such classification to the Owner);
(e)                                       on receipt thereof from the Builder promptly to deliver the documents specified in Article …., Paragraph … to the Owner or as the Owner may direct; and
(f)                                         not without the prior written approval of the Owner to request of or agree with the Builder any material alterations, additions or modifications to the Vessel.
4                                    CONSTRUCTION SUPERVISOR’S GENERAL OBLIGATIONS
4.1                            The Construction Supervisor undertakes to the Owner, with respect to the exercise and performance of its rights, powers and duties as the Owner’s representative under this Agreement, as follows:
(a)                                       it will well and faithfully serve the Owner as Owner’s agent and will at all times use its best endeavors to protect and promote all of the interests and the welfare of the Owner in relation to the Vessel including, without limitation, its design, construction, fitting out and purchase;
(b)                                      it will ensure the due and punctual observance and performance of all conditions, duties and obligations imposed on the Owner by the Shipbuilding Contract (other than to pay the Contract Price) and will not without the prior written consent of the Owner:
(i)                         exercise any rights of the Owner to cancel, repudiate or rescind the Shipbuilding Contract; or
(ii)                      waive, modify or suspend any provision of the Shipbuilding Contract if as a result of such waiver, modification or suspension the Owner will or may suffer any adverse consequences;
(c)                                       it will use its best endeavors to ensure the observance and performance by the Builder of all conditions, duties and obligations imposed on the Builder by the Shipbuilding Contract;
(d)                                      it will at its own expense keep all necessary and proper books, accounts, records and correspondence files relating to its duties and activities under this Agreement and shall send quarterly reports to the Owner concerning the progress of the design and construction of the Vessel and keep the

 
Owner promptly informed of any deviations from the building program; and
(e)                                       it will ensure that any employee(s) of the Construction Supervisor appointed by the Construction Supervisor as representative(s) of the Construction Supervisor for the purpose of Article …. shall have appropriate technical qualifications and experience in relation to the construction of ships of the same type as the Vessel and shall be familiar with good international shipbuilding practices.
5                                    INSURANCE
The Construction Supervisor undertakes to keep its representatives at the Builder’s premises or on board the Vessel fully insured against all loss, damages or injuries incurred or suffered by any of them and agrees that the Owner shall not in any respect be liable or responsible for any loss or damage caused by any such persons to the Builder or the Builder’s equipment and the Construction Supervisor undertakes to keep its representatives, the Builder and the Owner fully and effectively indemnified against any liability, loss or claim for any such damage or injuries even to the extent that the same are not fully recovered under the terms of any policy or proceeds of insurance or were not caused by the gross negligence of the Builder or its employees, agents or sub-contractors.
6                                    FEES
In consideration of the performance of the duties assigned to the Construction Supervisor in this Agreement the Owner shall pay to the Construction Supervisor the sum of USD$400,000 for its total supervision costs in connection with the supervision of the construction of the Vessel, and any expenses incurred under the Shipbuilding Contract against presentation of supporting invoices from the Construction Supervisor which the Construction Supervisor shall supply to the Owner at the same time as the notice to be given pursuant to Clause 3(c)(i).  The construction supervision fee shall include all costs which are incurred by the Construction Supervisor in connection with the ordinary exercise and performance by the Construction Supervisor of the rights, powers and duties entrusted to it pursuant to this Agreement.
7                                    COMMENCEMENT - TERMINATION
This Agreement shall come into effect on……………….and shall continue until delivery of the Vessel to the Owner by the Builder.
This Agreement may, however, be terminated with immediate effect by the Owner in the event that the Construction Supervisor is in material default of its obligations hereunder

and/or in the event that the Shipbuilding Contract is cancelled or terminated.  The Construction Supervisor shall in the event of immediate termination not be entitled to receive any payment in respect of the fees and other amounts described in Clause 6.
8                                    LIABILITIES
Neither the Owner nor the Construction Supervisor shall be under any liability for any failure to perform any of their obligations hereunder by reason of any cause whatsoever beyond their control.
Without prejudice to the foregoing, the Construction Supervisor shall be under no liability whatsoever for any loss, damage, delay or expense of whatever nature, whether direct or indirect (including but not limited to loss of profit arising out of or in connection with detention of or delay of the Vessel) and however arising in the course of performance of its duties under this Agreement, unless the same is proved to have resulted solely from the negligence or willful misconduct of the Construction Supervisor.
9 ￠￠￠￠￠￠￠￠￠￠￠ ￠ EMPLOYEES
9.1           None of the employees and/or sub-contractors of the Construction Supervisor shall constitute, for the purposes of this Agreement, sub-agents of the Owner. The Construction Supervisor in its capacity as employer and contractor (and not in its capacity as agent for the Owner), shall (a) be responsible for the salaries, expenses and costs in respect of each of its employees and sub-contractors (not in its capacity as agent for the Owner) and (b) indemnify its employees and sub-contractors for any liabilities and losses incurred by such employees and sub-contractors. For the avoidance of doubt, the Owner shall not be liable for any liabilities, losses, costs or expenses incurred by the Construction Supervisor in its capacity as employer and contractor.
10                                   GOVERNING LAW - JURISDICTION
10.1         This Agreement shall be governed by and be construed in accordance with English law.
10.2         The Construction Supervisor agrees, for the benefit of the Owner, that any legal action or proceedings arising out of or in connection with this Agreement shall be brought in the English courts and hereby irrevocably and unconditionally submits to the jurisdiction of such courts.  The submission to such jurisdiction shall not (and shall not be construed so as to) limit the competent jurisdiction nor shall the taking of proceedings in any one or more jurisdictions preclude the taking of proceedings in any other jurisdiction, whether concurrently or not.

10.3                     The Construction Supervisor agrees that the process by which any proceedings are begun under this Agreement may be served on it by being delivered in connection with any proceedings in England, to ……….  If this appointment ceases to be effective, the Construction Supervisor shall immediately appoint a further person in England to accept service of process on its behalf in England.  Nothing contained herein shall affect the right to serve process in any other manner permitted by law.
11                             COUNTERPARTS
This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument.
12 ￠￠￠￠￠￠￠￠￠￠￠￠￠￠￠￠￠￠￠￠￠￠￠￠￠￠￠ NOTICES
12.1                      Every notice or other communication under this Agreement shall:
(a)                                        be in writing delivered personally or by first-class prepaid letter (airmail if available) or facsimile transmission or other means of telecommunication (other than telex) in permanent written form;
(b)                                       be deemed to have been received, in the case of a letter, when delivered personally or three (3) days after it has been put into the post and, in the case of a facsimile transmission or other means of telecommunication (other than telex) in permanent written form, at the time of dispatch (provided that if the date of dispatch is a Saturday or Sunday or a public holiday in the country of the addressee or if the time of dispatch is after the close of business in the country of the addressee it shall be deemed to have been received at the opening of business on the next day which is not a Saturday or Sunday or public holiday); and
(c)                                       be sent:
(i)                         To the Construction Supervisor at:
Danaos Shipping Co. Ltd
14 Akti Kondyli
185 45 Piraeus
Greece
Facsimile No.: +30 210 42 20 855
Attention:  Legal Department
 
(ii)                      To the Owner at:
Danaos Corporation
14 Akti Kondyli

 
185 45 Piraeus
Greece
Facsimile No.: +30 210 42 20 855
Attention:  Legal Department
 
or to such other address and/or numbers for a party as is notified by such party to the other party under this Agreement.
 
12.2                      Each communication and document made or delivered by one party to another pursuant to this Agreement shall be in the English language.
13                             CONTRACT (RIGHTS OF THIRD PARTIES) ACT 1999
A person who is not a party to this Agreement has no right under the Contract (Rights of Third Parties) Act 1999 to enforce any term of this Agreement.
IN WITNESS of which this Agreement has been duly executed the day and year first before written.
For the Owner

For the Construction Supervisor

SCHEDULE 1
FORM OF CONSTRUCTION CERTIFICATE
 
[On the headed notepaper of the Construction Supervisor]
 
[Vessel Owner] (the “ Owner ”)
[Address]
Facsimile: [                  ]
Attention: [                  ]
                                                                                                                                Date: _________________
 
Dear Sirs,
 
[Name of Builder] (the “Builder”), [Name of Vessel] (the “Vessel”)
 
We refer to the construction supervision agreement dated [                  ] between the Owner and us (the “ Supervision Agreement ”).
Words and expression defined in the Supervision Agreement (whether expressly or by incorporation by reference to another document) shall have the same meaning where used in this certificate.
We hereby certify, pursuant to Clause 3(d) of the Supervision Agreement, as follows:
(i)            the Vessel has been duly completed and is ready for delivery to and acceptance by the Owner in or substantially in accordance with the Shipbuilding Contract and the Specifications and Plans;
(ii)           there is, to the best of our knowledge and belief having made due enquiry with the Builder, no lien or encumbrance on the Vessel other than the lien in favor of the Builder in respect of the deliver installment of the Contract Price due in accordance with Article [  ];
(iii)          The Vessel is safe and undamaged; and
(iv)          The vessel is recommended for classification by [Name of the classification society] (the “Classification Society”).

With respect to paragraph (iv) above, please find attached to this certificate the provisional certificate of the Classification Society recommending such classification of the Vessel / a duplicate or photocopy of the provisional certificate of the Classification Society recommending such classification of the Vessel / the following evidence of the Classification Society’s recommendation of such classification of the Vessel  [  ].
Yours faithfully
 
………………………………..
for and on behalf of
DANAOS SHIPPING COMPANY LIMITED

 
Exhibit 10.3

DANAOS CORPORATION,
 
DR. JOHN COUSTAS,
 
PROTECTOR HOLDINGS INC.,
 
SEASONAL MARITIME CORPORATION
 
- and -

DANAOS INVESTMENTS LIMITED AS THE
TRUSTEE FOR THE 883 TRUST

 
RESTRICTIVE COVENANT AGREEMENT

 

 
THIS RESTRICTIVE COVENANT AGREEMENT is made on the [ • ] day of September 2006,
 
BY AND BETWEEN:
 
(1)                                   DANAOS CORPORATION , a Marshall Islands corporation (“ DC ”);
 
(2)                                   DR. JOHN COUSTAS , in his individual capacity (“ Dr. Coustas ”);
 
(3)                                   PROTECTOR HOLDINGS INC. , a Liberian corporation (“Protector Holdings”) ;
 
(4)                                   SEASONAL MARITIME CORPORATION, a Liberian corporation (“Seasonal Maritime”) ; and
 
(5)                                   DANAOS INVESTMENTS LIMITED AS TRUSTEE FOR THE 883 TRUST (the “ Coustas Family Trust ” and, together with Dr. John Coustas, Protector Holdings and Seasonal Maritime, the “ Coustas Entities ”).
 
WHEREAS:
 
(A)           Pursuant to the Amended and Restated Management Agreement by and between DC and Danaos Shipping Company Limited, a Cypriot corporation (the “ Manager ”), made [ • ], 2006 (the “ Management Agreement ”), the Manager has agreed to provide certain management services to DC on an exclusive basis, restrict certain competitive activities and grant a right of first refusal to DC to purchase its assets and properties upon the occurrence of certain events, all as described therein.
 
(B)            Each of the Coustas Entities directly or indirectly owns capital stock of the Manager.
 
(C)            On or about the date hereof, Dr. Coustas will enter into an executive employment agreement with DC (the “ Employment Agreement ”), pursuant to the terms of which Dr. Coustas will agree to serve as Chief Executive Officer and President of DC.
 
(D)           DC wishes to (i) limit the activities of Dr. Coustas, and the other Coustas Entities, on the terms and conditions set out in this Agreement to prohibit certain activities that may compete with the business of DC, (ii) ensure that the Coustas Entities collectively maintain ownership of at least 80% of the capital stock of the Manager and (iii) ensure that the Coustas Entities will not allow the Manager to violate certain of its obligations under the Management Agreement.
 
NOW, THEREFORE, in consideration of the terms and conditions set forth below, and other good and valuable consideration (the receipt and sufficiency of which is hereby acknowledged), the parties hereto agree as follows:
 
1                                          INTERPRETATION
￠
1.1            In this Agreement, unless the context otherwise requires:
 
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(a)                                   “ Board of Directors ” means the board of directors of DC as the same may be constituted from time to time.
 
(b)                                  “ Containership ” means any ocean-going vessel that is intended to be used primarily to transport containers or is being used to primarily transport containers.
 
(c)                                   “ Danaos Group ” means, at any time, DC and its subsidiaries at such time and “member of the Group” shall be construed accordingly.
 
(d)                                  “ Drybulk Carrier ” means any ocean-going vessel that is intended to be used primarily to transport non-liquid cargoes of commodities shipped in an unpackaged state.
 
(e)                                   “ Independent Directors ” means those members of the Board of Directors that qualify as independent directors within the meaning of Rule 10A-3 promulgated under the U.S. Securities Exchange Act of 1934 and the listing criteria of the New York Stock Exchange.
 
1.2            The headings of this Agreement are for ease of reference and do not limit or otherwise affect the meaning hereof.
 
1.3            All the terms of this Agreement, whether or not so expressed, shall be binding upon the parties hereto and their respective successors and assigns.
 
1.4            Unless the context otherwise requires, words in the singular include the plural and vice versa.
 
2                                          ACKNOWLEDGEMENT AND REPRESENTATION
￠
2.1            Each of the Coustas Entities acknowledges he or it has received and reviewed the Management Agreement.
 
2.2            Each of the Coustas Entities hereby represents and warrants that as of the date of this Agreement, collectively the Coustas Entities (a) own at least 80% of the capital stock of the Manager and (b) hold at least 80% of the voting power of the outstanding capital stock of the Manager considered for this purpose as a single class.
 
3                                          NON-COMPETITION
￠
3.1            During the term of the Management Agreement and for a period of one (1) year from the date of actual termination of the Management Agreement, the Coustas Entities shall not, subject to Section 3.2 hereof, directly or indirectly, engage in (a) the ownership or operation of Containerships of larger than 2,500 TEUs, (b) the ownership or operation of any Drybulk Carriers or (c) the acquisition of or investment in any business involved in the ownership or operation of Containerships of larger than 2,500 TEUs or Drybulk Carriers.
 
3.2            Notwithstanding the foregoing, if a majority of the Independent Directors declines to pursue any opportunity for the benefit of DC or any of its subsidiaries (a) to acquire or invest in any business involved in the ownership or operation of Containerships of larger than 2,500 TEUs
 
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or Drybulk Carriers or (b) to acquire a Containership of larger than 2,500 TEUs or a Drybulk Carrier, then any Coustas Entity (or any (i) current or future beneficiaries of the Coustas Family Trust, (ii) entities beneficially owned by such beneficiaries or the Coustas Entities or (iii) other trusts established for the benefit of such beneficiaries or the Coustas Entities) shall be permitted, directly or indirectly, to acquire any such Containership or Drybulk Carrier or acquire or invest in any such business; provided that, such acquisition or investment is completed (x) no later than the four-month anniversary of the date on which the Independent Directors declined to pursue such acquisition or investment and (y) on terms no more favorable to the acquiring or investing, as the case may be, party than those offered to DC and declined by the Independent Directors.
 
For the avoidance of doubt, nothing in this Agreement shall be construed to restrict the ability of any Coustas Entity (or any (i) current or future beneficiaries of the Coustas Family Trust, (ii) entities beneficially owned by such beneficiaries or the Coustas Entities or (iii) other trusts established for the benefit of such beneficiaries or the Coustas Entities) to acquire or invest in any vessel other than Containerships of larger than 2,500 TEUs or Drybulk Carriers.
 
4                                          MANAGEMENT SERVICES
￠
4.1            During the term of the Management Agreement, Dr. Coustas shall not personally provide, or establish, advise or assist any entity providing, commercial, crewing, technical, chartering or administrative vessel management services substantially similar to those the Manager provides under the Management Agreement to any owner and operator of Containerships of larger than 2,500 TEUs or Drybulk Carriers, other than members of the Danaos Group and Palmosa Shipping Corporation and its subsidiaries without receiving the prior written approval of a majority of the Independent Directors.
 
4.2            During the term of the Management Agreement, none of the Coustas Entities shall, directly or indirectly, own any interest in any entity which provides commercial, crewing, technical, chartering or administrative vessel management services substantially similar to those the Manager provides under the Management Agreement to any owner and operator of Containerships of larger than 2,500 TEUs or Drybulk Carriers, other than members of the Danaos Group and Palmosa Shipping Corporation and its subsidiaries, without receiving the prior written approval of a majority of the Independent Directors.
 
4.3            The restrictions set forth in Sections 4.1 and 4.2 hereof shall not apply with respect to Containerships larger than 2,500 TEUs, Drybulk Carriers or entities which any Coustas Entity (or any (i) current or future beneficiaries of the Coustas Family Trust, (ii) entities beneficially owned by such beneficiaries or the Coustas Entities or (iii) other trusts established for the benefit of such beneficiaries or the Coustas Entities) acquires or invests in pursuant to Section 3.2 hereof.
 
5                                          CONTROL OF MANAGER
￠
5.1            Unless expressly permitted by a majority of the Independent Directors, during the term of the Management Agreement, the Coustas Entities will at all times, directly or indirectly, collectively (a) own at least 80% of the outstanding capital stock of the Manager and (b) hold at least 80% of the voting power of the outstanding capital stock of the Manager, considered for this purpose as a single class.
 
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5.2            Each of the Coustas Entities hereby agrees to offer and, if such offer is accepted by DC, to sell the capital stock of the Manager owned by it to DC at the then fair market value of such capital stock if the provision set forth in Section 5.1 hereof is breached.
 
5.3            For the avoidance of doubt, DC acknowledges that (a) the restriction set forth in Section 5.1 hereof shall not be construed so as to limit transfers of capital stock of the Manager to (i) current or future beneficiaries of the Coustas Family Trust, (ii) entities beneficially owned by such beneficiaries or the Coustas Entities or (iii) other trusts established for the benefit of such beneficiaries or the Coustas Entities and (b) any such transfers shall not trigger DC’s purchase right pursuant to Section 5.2 hereof; provided , that any such transferee agrees to be bound by the restrictions set forth herein (including, without limitation, in Sections 3 and 4 hereof) pursuant to an agreement acceptable in form and substance to a majority of the Independent Directors.
 
6                                          COVENANT COMPLIANCE OF MANAGER
￠
6.1            The Coustas Entities shall not allow the Manager to violate the covenants contained in Section 4.14, Section 14.4 and Sections 17.1 through 17.5 of the Management Agreement, and will cause the Manager to observe the right of first refusal requirement set forth in Section 17.3 of the Management Agreement.
 
7                                          NOTICES
￠
7.1            All notices, consents and other communications hereunder, or necessary to exercise any rights granted hereunder, shall be in writing, sent either by prepaid registered mail or telefax, and will be validly given if delivered on a business day to a party at its respective address set forth below:
 
Danaos Corporation
14 Akti Kondyli
185 45 Piraeus
Greece
Attention: [Chief Executive Officer]
 
Dr. John Coustas
[c/o Danaos Corporation
14 Akti Kondyli
185 45 Piraeus
Greece
Attention: Dr. John Coustas]
 
Protector Holdings Inc.
[c/o Danaos Corporation
14 Akti Kondyli
185 45 Piraeus
Greece
Attention: Dr. John Coustas]
 
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Seasonal Maritime Corporation
[c/o Danaos Corporation
14 Akti Kondyli
185 45 Piraeus
Greece
Attention: Dr. John Coustas]
 
Danaos Investments Limited as the Trustee for the 883 Trust
[c/o Danaos Corporation
14 Akti Kondyli
185 45 Piraeus
Greece
Attention: Dr. John Coustas]
 
8                                          APPLICABLE LAW AND JURISDICTION
￠
8.1            This Agreement shall be governed by, and construed in accordance with, the laws of England. The parties hereto submit to the exclusive jurisdiction of the courts of England in connection with any claim arising out of or in connection with this Agreement.
 
9                                          ARBITRATION
 
9.1            All disputes arising out of this Agreement shall be arbitrated in London in the following manner. One arbitrator is to be appointed by DC, a second by the Coustas Entities and a third by the two so chosen. Their decision or that of any two of the arbitrators shall be final and, for the purpose of enforcing any award, this Agreement may be made a rule of the court. The arbitrators shall be commercial persons, conversant with shipping matters. Such arbitration is to be conducted in accordance with the rules of the London Maritime Arbitrators Association terms current at the time when the arbitration proceedings are commenced and in accordance with the Arbitration Act 1996 or any statutory modification or re-enactment thereof.
 
9.2            In the event that DC or the Coustas Entities shall state a dispute and designate an arbitrator, in writing, the other party shall have twenty (20) business days to designate its own arbitrator. Upon failure to do so, the arbitrator appointed by the other party can conduct the arbitration and render an award hereunder.
 
9.3            Until such time as the arbitrators finally close the hearings, either of DC or the Coustas Entities shall have the right by written notice served on the arbitrators and on the other party to specify further disputes or differences under this Agreement for hearing and determination.
 
9.4            The arbitrators may grant any relief, and render an award, which they or a majority of them deem just and equitable and within the scope of the Agreement of the parties, including but not limited to the posting of security. Awards pursuant to this Section 9 may include costs, including a reasonable allowance for attorneys’ fees, and judgments may be entered upon any award made herein in any court having jurisdiction.
 
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10                                   MISCELLANEOUS
￠
10.1          This Agreement constitutes the sole understanding and agreement of the parties hereto with respect to the subject matter hereof and supersedes all prior agreements or understandings, written or oral, with respect thereto, with the exception of the Management Agreement. This Agreement may not be amended, waived or discharged except by an instrument in writing executed by the party against whom enforcement of such amendment, waiver or discharge is sought.
 
10.2          It is the desire and intent of the parties hereto that the provisions of this Agreement be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any particular provision of this Agreement is adjudicated to be invalid or unenforceable, such provision will be deemed amended to delete therefrom the portion thus adjudicated as invalid or unenforceable, such deletion to apply only with respect to the operation of such provision in the particular jurisdiction in which such adjudications is made.
 
10.3          This Agreement may be executed in one or more written counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument.
 
[Remainder of page intentionally left blank.]
 
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IN WITNESS whereof the undersigned have executed this Agreement as of the date first above written.

SIGNED by Dimitri J. Andritsoyiannis	
for and on behalf of	
DANAOS CORPORATION	

 	 	

SIGNED by	
DR. JOHN COUSTAS	

 	 	

SIGNED by Efstathios Sfiris	
for and on behalf of	
PROTECTOR HOLDINGS INC.	

 	 	

SIGNED by Efstathios Sfiris	
for and on behalf of	
SEASONAL MARITIME CORPORATION	

 	 	

SIGNED by Dr. John Coustas	
for and on behalf of	
DANAOS INVESTMENTS LIMITED AS THE	
TRUSTEE FOR THE 883 TRUST	

 	 	

 
[Signature page to Restrictive Covenant Agreement]

 
Exhibit 10.4
 
STOCKHOLDERS RIGHTS AGREEMENT
 
This Stockholders Rights Agreement (this “ Rights Agreement ”) is made and entered into as of September 18, 2006, by and between Danaos Corporation, a Marshall Islands corporation (the “ Company ”), and American Stock Transfer & Trust Company, as Rights Agent (the “ Rights Agent ”).
 
WHEREAS, the Board of Directors of the Company (the “ Board ”) has (a) authorized and declared a grant of one right (the “ Right ”) for each share of the Company’s common stock, par value U.S.$.01 per share (the “ Common Stock ”), held of record as of the Close of Business (as hereinafter defined) on September 25, 2006 (the “ Record Date ”) and (b) has further authorized the issuance of one Right in respect of each share of Common Stock that shall become outstanding (i) at any time between the Record Date and the earliest of the Distribution Date, the Redemption Date or the Final Expiration Date (as such terms are hereinafter defined) or (ii) upon the exercise or conversion, prior to the earlier of the Redemption Date or the Final Expiration Date, of any option or other security exercisable for or convertible into shares of Common Stock, which option or other such security is outstanding on the Distribution Date; and
 
WHEREAS, each Right represents the right of the holder thereof to purchase one one-thousandth of a share of Series A Participating Preferred Stock (as such number may hereafter be adjusted pursuant to the provisions hereof), upon the terms and subject to the conditions set forth herein, having the rights, preferences and privileges set forth in the Statement of Designation of Series A Participating Preferred Stock, attached hereto as Exhibit A.
 
NOW THEREFORE, in consideration of the premises and the mutual agreements set forth herein, the parties hereby agrees as follows:
 
1.              Certain Definitions .
 
“ Acquiring Person ” shall mean any Person who or which, together with all Affiliates and Associates of such Person, shall be the Beneficial Owner of 15% or more of the shares of Common Stock then outstanding, but shall not include (i) the Company, (ii) any Subsidiary of the Company, (iii) any employee benefit plan of the Company or of any Subsidiary of the Company, or any entity holding shares of Common Stock for or pursuant to the terms of any such plan or (iv) an Exempted Person. Notwithstanding the foregoing, no Person shall be deemed to be an Acquiring Person as the result of an acquisition of shares of Common Stock by the Company which, by reducing the number of shares outstanding, increases the proportionate number of shares beneficially owned by such Person to 15% or more of the shares of Common Stock of the Company then outstanding; provided, however, that a Person who (i) becomes the Beneficial Owner of 15% or more of the shares of Common Stock of the Company then outstanding by reason of share purchases by the Company and (ii) then after such share purchases by the Company, becomes the Beneficial Owner of any additional shares of Common Stock of the Company (other than pursuant to a dividend or distribution paid or made by the Company on the outstanding shares of Common Stock in shares of Common Stock or pursuant to a split or subdivision of the outstanding shares of Common Stock) representing one percent or more of the Common Stock then outstanding, such Person shall be deemed to be an Acquiring

 
Person unless upon becoming the Beneficial Owner of such additional shares of Common Stock of the Company such Person does not beneficially own 15% or more of the shares of Common Stock of the Company then outstanding. Notwithstanding the foregoing, (i) if the Company’s Board of Directors determines in good faith that a Person who would otherwise be an “Acquiring Person,” as defined herein, has become such inadvertently (including, without limitation, because (A) such Person was unaware that it beneficially owned a percentage of the shares of Common Stock that would otherwise cause such Person to be an “Acquiring Person,” as defined herein, or (B) such Person was aware of the extent of the shares of Common Stock it beneficially owned but had no actual knowledge of the consequences of such beneficial ownership under this Agreement) and without any intention of changing or influencing control of the Company, and if such Person divested or divests as promptly as practicable a sufficient number of shares of Common Stock so that such Person would no longer be an “Acquiring Person,” as defined herein, then such Person shall not be deemed to be or to have become an “Acquiring Person” for any purposes of this Agreement; and (ii) if, as of the date hereof, any Person is the Beneficial Owner of 15% or more of the shares of Common Stock outstanding, such Person shall not be or become an “Acquiring Person,” as defined herein, unless and until such time as such Person shall become the Beneficial Owner of additional shares of Common Stock (other than pursuant to a dividend or distribution paid or made by the Company on the outstanding shares of Common Stock in shares of Common Stock or pursuant to a split or subdivision of the outstanding shares of Common Stock), unless, upon becoming the Beneficial Owner of such additional shares of Common Stock, such Person is not then the Beneficial Owner of 15% or more of the shares of Common Stock then outstanding.
 
“ Adjustment Fraction ” shall have the meaning set forth in Section 11(a)(i) hereof.
 
“ Affiliate ” and “ Associate ” shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Exchange Act, as in effect on the date of this Agreement.
 
A Person shall be deemed the “ Beneficial Owner ” of and shall be deemed to “Beneficially Own” any securities:
 
(i)             which such Person or any of such Person’s Affiliates or Associates beneficially owns, directly or indirectly, for purposes of Section 13(d) of the Exchange Act and Rule 13d-3 thereunder (or any comparable or successor law or regulation);
 
(ii)            which such Person or any of such Person’s Affiliates or Associates has (A) the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (other than customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities), or upon the exercise of conversion rights, exchange rights, rights (other than the Rights), warrants or options, or otherwise; provided, however, that a Person shall not be deemed pursuant to this subsection (ii)(A) to be the Beneficial Owner of, or to beneficially own, (1) securities tendered pursuant to a tender or exchange offer made by or on behalf of such Person or any of such Person’s Affiliates or
 
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Associates until such tendered securities are accepted for purchase or exchange, or (2) securities which a Person or any of such Person’s Affiliates or Associates may be deemed to have the right to acquire pursuant to any merger or other acquisition agreement between the Company and such Person (or one or more of its Affiliates or Associates) if such agreement has been approved by the Board of Directors of the Company prior to there being an Acquiring Person; or (B) the right to vote pursuant to any agreement, arrangement or understanding; provided , however , that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, any security under this subsection (ii)(B) if the agreement, arrangement or understanding to vote such security (1) arises solely from a revocable proxy or consent given to such Person in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable rules and regulations of the Exchange Act and (2) is not also then reportable on Schedule 13D under the Exchange Act (or any comparable or successor report); or
 
(iii)           which are beneficially owned, directly or indirectly, by any other Person (or any Affiliate or Associate thereof) with which such Person or any of such Person’s Affiliates or Associates has any agreement, arrangement or understanding, whether or not in writing (other than customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities) for the purpose of acquiring, holding, voting (except to the extent contemplated by the proviso to subsection (ii)(B) above) or disposing of any securities of the Company; provided, however, that in no case shall an officer or director of the Company be deemed (x) the Beneficial Owner of any securities beneficially owned by another officer or director of the Company solely by reason of actions undertaken by such persons in their capacity as officers or directors of the Company or (y) the Beneficial Owner of securities held of record by the trustee of any employee benefit plan of the Company or any Subsidiary of the Company for the benefit of any employee of the Company or any Subsidiary of the Company, other than the officer or director, by reason of any influence that such officer or director may have over the voting of the securities held in the plan.
 
“ Business Day ” shall mean any day other than a Saturday, Sunday or a day on which banking institutions in New York are authorized or obligated by law or executive order to close.
 
“ Close of Business ” on any given date shall mean 5:00 P.M., New York time, on such date; provided, however, that if such date is not a Business Day it shall mean 5:00 P.M., New York time, on the next succeeding Business Day.
 
“ Common Stock ” shall have the meaning set forth in the preamble. Common Stock when used with reference to any Person other than the Company shall mean the capital stock (or equity interest) with the greatest voting power of such other Person or, if such other Person is a Subsidiary of another Person, the Person or Persons which ultimately control such first-mentioned Person.
 
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“ Common Stock Equivalents ” shall have the meaning set forth in Section 11(a)(iii) hereof.
 
“ Company ” shall have the meaning set forth in the preamble, subject to the terms of Section 13(a)(iii)(c) hereof.
 
“ Current Per Share Market Price ” of any security (a “ Security ” for purposes of this definition), for all computations other than those made pursuant to Section 11(a)(iii) hereof, shall mean the average of the daily closing prices per share of such Security for the thirty (30) consecutive Trading Days immediately prior to such date, and for purposes of computations made pursuant to Section 11(a)(iii) hereof, the Current Per Share Market Price of any Security on any date shall be deemed to be the average of the daily closing prices per share of such Security for the ten (10) consecutive Trading Days immediately prior to such date; provided , however , that in the event that the Current Per Share Market Price of the Security is determined during a period following the announcement by the issuer of such Security of (i) a dividend or distribution on such Security payable in shares of such Security or securities convertible into such shares or (ii) any subdivision, combination or reclassification of such Security, and prior to the expiration of the applicable thirty (30) Trading Day or ten (10) Trading Day period, after the ex-dividend date for such dividend or distribution, or the record date for such subdivision, combination or reclassification, then, and in each such case, the Current Per Share Market Price shall be appropriately adjusted to reflect the current market price per share equivalent of such Security. The closing price for each day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Security is not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Security is listed or admitted to trading or, if the Security is not listed or admitted to trading on any national securities exchange, the last sale price or, if such last sale price is not reported, the average of the high bid and low asked prices in the over-the-counter market, as reported by Nasdaq or such other system then in use, or, if on any such date the Security is not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Security selected by the Board of Directors of the Company. If on any such date no market maker is making a market in the Security, the fair value of such shares on such date as determined in good faith by the Board of Directors of the Company shall be used. If the Preferred Shares are not publicly traded, the Current Per Share Market Price of the Preferred Shares shall be conclusively deemed to be the Current Per Share Market Price of the shares of Common Stock as determined pursuant to this definition, as appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof, multiplied by 1000. If the Security is not publicly held or so listed or traded, Current Per Share Market Price shall mean the fair value per share as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes.
 
“ Current Value ” shall have the meaning set forth in Section 11(a)(iii) hereof.
 
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“ Danaos Group ” shall mean Danaos Shipping Company Limited, Danaos Management Consultants, Dr. John Koustas, Protector Holdings Inc., Danaos Investments Limited as Trustee for the 883 Trust, any other trusts or entities established for the benefit of Dr. John Koustas or members of his family, any other entities wholly-owned by Dr. John Koustas and members of this family, and each of their respective Affiliates and Associates.
 
“ Distribution Date ” shall mean the earlier of (i) the Close of Business on the tenth day after the Shares Acquisition Date (or, if the tenth day after the Shares Acquisition Date occurs before the Record Date, the Close of Business on the Record Date) or (ii) the Close of Business on the tenth Business Day (or such later date as may be determined by action of the Company’s Board of Directors) after the date that a tender or exchange offer by any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or of any Subsidiary of the Company, or any Person or entity organized, appointed or established by the Company for or pursuant to the terms of any such plan or an Exempted Person) is first published or sent or given within the meaning of Rule 14d-2(a) of the General Rules and Regulations under the Exchange Act, if, assuming the successful consummation thereof, such Person would be an Acquiring Person.
 
“ Equivalent Shares ” shall mean Preferred Shares and any other class or series of capital stock of the Company which is entitled to the same rights, privileges and preferences as the Preferred Shares.
 
“ Exchange Act ” shall mean the U.S. Securities Exchange Act of 1934, as amended.
 
“ Exchange Ratio ” shall have the meaning set forth in Section 24(a) hereof.
 
“ Exempted Person ” shall mean each member of the Danaos Group.
 
“ Exercise Price ” shall have the meaning set forth in Section 4(a) hereof.
 
“ Expiration Date ” shall mean the earliest to occur of: (i) the Close of Business on the Final Expiration Date, (ii) the Redemption Date, or (iii) the time at which the Board of Directors orders the exchange of the Rights as provided in Section 24 hereof.
 
“ Final Expiration Date ” shall mean September 18, 2016.
 
“ Nasdaq ” shall mean the National Association of Securities Dealers, Inc. Automated Quotations System.
 
“ Person ” shall mean any individual, firm, corporation or other entity, and shall include any successor (by merger or otherwise) of such entity.
 
“ Post-event Transferee ” shall have the meaning set forth in Section 7(e) hereof.
 
“ Preferred Shares ” shall mean shares of Series A Participating Preferred Stock, U.S.$0.01 par value, of the Company.
 
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“ Pre-event Transferee ” shall have the meaning set forth in Section 7(e) hereof.
 
“ Principal Party ” shall have the meaning set forth in Section 13(b) hereof.
 
“ Record Date ” shall have the meaning set forth in the recitals at the beginning of this Rights Agreement.
 
“ Redemption Date ” shall have the meaning set forth in Section 23(a) hereof.
 
“ Redemption Price ” shall have the meaning set forth in Section 23(a) hereof.
 
“ Rights Agent ” shall mean American Stock Transfer &Trust Company, or its successor or replacement as provided in Sections 19 and 21 hereof.
 
“ Rights Certificate ” shall mean a certificate substantially in the form attached hereto as Exhibit B.
 
“ Section 11(a)(ii) Trigger Date ” shall have the meaning set forth in Section 11(a)(iii) hereof.
 
“ Section 13 Event ” shall mean any event described in clause (i), (ii) or (iii) of Section 13(a) hereof.
 
“ Securities Act ” shall mean the U.S. Securities Act of 1933, as amended.
 
“ Shares Acquisition Date ” shall mean the first date of public announcement (which, for purposes of this definition, shall include, without limitation, a report filed pursuant to Section 13(d) under the Exchange Act) by the Company or an Acquiring Person that an Acquiring Person has become such; provided that, if such Person is determined not to have become an Acquiring Person as defined herein, then no Shares Acquisition Date shall be deemed to have occurred.
 
“ Spread ” shall have the meaning set forth in Section 11(a)(iii) hereof.
 
“ Subsidiary ” of any Person shall mean any corporation or other entity of which an amount of voting securities sufficient to elect a majority of the directors or Persons having similar authority of such corporation or other entity is beneficially owned, directly or indirectly, by such Person, or any corporation or other entity otherwise controlled by such Person.
 
“ Substitution Period ” shall have the meaning set forth in Section 11(a)(iii) hereof.
 
“ Summary of Rights ” shall mean a summary of this Agreement substantially in the form attached hereto as
Exhibit C.
 
“ Total Exercise Price ” shall have the meaning set forth in Section 4(a) hereof.
 
“ Trading Day ” shall mean a day on which the principal national securities exchange on which a referenced security is listed or admitted to trading is open for the
 
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transaction of business or, if a referenced security is not listed or admitted to trading on any national securities exchange, a Business Day.
 
A “ Triggering Event ” shall be deemed to have occurred upon any Person, becoming an Acquiring Person.
 
2.              Appointment of Rights Agent . The Company hereby appoints the Rights Agent to act as agent for the Company and the holders of the Rights (who, in accordance with Section 3 hereof, shall prior to the Distribution Date also be the holders of the shares of Common Stock) in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment. The Company may from time to time appoint such co-Rights Agents as it may deem necessary or desirable.
 
3.              Issuance of Rights Certificates .
 
(a)            Until the Distribution Date, (i) the Rights will be evidenced (subject to the provisions of Sections 3(b) and 3(c) hereof) by the certificates for shares of Common Stock registered in the names of the holders thereof (which certificates shall also be deemed to be Rights Certificates) and not by separate Rights Certificates and (ii) the right to receive Rights Certificates will be transferable only in connection with the transfer of shares of Common Stock. Until the earlier of the Distribution Date or the Expiration Date, the surrender for transfer of certificates for shares of Common Stock shall also constitute the surrender for transfer of the Rights associated with the shares of Common Stock represented thereby. As soon as practicable after the Distribution Date, the Company will prepare and execute, the Rights Agent will countersign, and the Company will send or cause to be sent (and the Rights Agent will, if requested, send) by first-class, postage-prepaid mail, to each record holder of shares of Common Stock as of the Close of Business on the Distribution Date, at the address of such holder shown on the records of the Company, a Rights Certificate evidencing one Right for each share of Common Stock so held, subject to adjustment as provided herein. In the event that an adjustment in the number of Rights per share of Common Stock has been made pursuant to Section 11 hereof, then at the time of distribution of the Rights Certificates, the Company shall make the necessary and appropriate rounding adjustments (in accordance with Section 14(a) hereof) so that Rights Certificates representing only whole numbers of Rights are distributed and cash is paid in lieu of any fractional Rights. As of the Distribution Date, the Rights will be evidenced solely by such Rights Certificates and may be transferred by the transfer of the Rights Certificates as permitted hereby, separately and apart from any transfer of shares of Common Stock, and the holders of such Rights Certificates as listed in the records of the Company or any transfer agent or registrar for the Rights shall be the record holders thereof.
 
(b)            On the Record Date or as soon as practicable thereafter, the Company will send a copy of the Summary of Rights by first-class, postage-prepaid mail, to each record holder of shares of Common Stock as of the Close of Business on the Record Date that requests a Summary of the Rights, at the address of such holder shown on the records of the Company’s transfer agent and registrar. With respect to certificates for shares of Common Stock outstanding as of the Record Date, until the Distribution Date, the Rights will be evidenced by such certificates registered in the names of the holders thereof together with the Summary of Rights. Until the Distribution Date (or, if earlier, the Expiration Date), the surrender for transfer of any
 
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certificate for shares of Common Stock outstanding on the Record Date, with or without a copy of the Summary of Rights, shall also constitute the transfer of the Rights associated with the shares of Common Stock represented thereby.
 
(c)            Unless the Board of Directors by resolution adopted at or before the time of the issuance of any shares of Common Stock specifies to the contrary, Rights shall be issued in respect of all shares of Common Stock that are issued after the Record Date but prior to the earlier of the Distribution Date or the Expiration Date or, in certain circumstances provided in Section 22 hereof, after the Distribution Date. Certificates representing such shares of Common Stock shall also be deemed to be certificates for Rights, and shall bear the following legend:
 
THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER HEREOF TO CERTAIN RIGHTS AS SET FORTH IN A STOCKHOLDERS RIGHTS AGREEMENT BETWEEN DANAOS CORPORATION AND AMERICAN STOCK TRANSFER & TRUST COMPANY, AS THE RIGHTS AGENT, DATED AS OF SEPTEMBER 18, 2006, (THE “RIGHTS AGREEMENT”), THE TERMS OF WHICH ARE HEREBY INCORPORATED HEREIN BY REFERENCE AND A COPY OF WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF DANAOS CORPORATION UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT, SUCH RIGHTS WILL BE EVIDENCED BY SEPARATE CERTIFICATES AND WILL NO LONGER BE EVIDENCED BY THIS CERTIFICATE. DANAOS CORPORATION WILL MAIL TO THE HOLDER OF THIS CERTIFICATE A COPY OF THE RIGHTS AGREEMENT WITHOUT CHARGE AFTER RECEIPT OF A WRITTEN REQUEST THEREFOR. UNDER CERTAIN CIRCUMSTANCES SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS ISSUED TO, OR HELD BY, ANY PERSON WHO IS, WAS OR BECOMES AN ACQUIRING PERSON OR ANY AFFILIATE OR ASSOCIATE THEREOF (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT), WHETHER CURRENTLY HELD BY OR ON BEHALF OF SUCH PERSON OR BY ANY SUBSEQUENT HOLDER, MAY BECOME NULL AND VOID.
 
With respect to such certificates containing the foregoing legend, until the earlier of (i) the Distribution Date or (ii) the Expiration Date, the Rights associated with the shares of Common Stock represented by such certificates shall be evidenced by such certificates alone, and the surrender for transfer of any such certificate shall also constitute the transfer of the Rights associated with the shares of Common Stock represented thereby.
 
(d)            In the event that the Company purchases or acquires any shares of Common Stock after the Record Date but prior to the Distribution Date, any Rights associated with such shares of Common Stock shall be deemed canceled and retired so that the Company shall not be entitled to exercise any Rights associated with the shares of Common Stock which are no longer outstanding.
 
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4.              Form of Rights Certificates .
 
(a)            The Rights Certificates (and the forms of election to purchase shares of Common Stock and of assignment to be printed on the reverse thereof) shall be substantially in the form of Exhibit B hereto and may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange or a national market system, on which the Rights may from time to time be listed or included, or to conform to usage. Subject to the provisions of Section 11 and Section 22 hereof, the Rights Certificates, whenever distributed, shall be dated as of the Record Date (or in the case of Rights issued with respect to shares of Common Stock issued by the Company after the Record Date, as of the date of issuance of such shares of Common Stock) and on their face shall entitle the holders thereof to purchase such number of one-thousandths of a Preferred Share as shall be set forth therein at the price set forth therein (such exercise price per one one-thousandth of a Preferred Share being hereinafter referred to as the “Exercise Price” and the aggregate Exercise Price of all Preferred Shares issuable upon exercise of one Right being hereinafter referred to as the “ Total Exercise Price ”), but the number and type of securities purchasable upon the exercise of each Right and the Exercise Price shall be subject to adjustment as provided herein.
 
(b)            Any Rights Certificate issued pursuant to Section 3(a) or Section 22 hereof that represents Rights beneficially owned by: (i) an Acquiring Person or any Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee after the Acquiring Person becomes such or (iii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee prior to or concurrently with the Acquiring Person becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person to holders of equity interests in such Acquiring Person or to any Person with whom such Acquiring Person has any continuing agreement, arrangement or understanding regarding the transferred Rights or (B) a transfer which the Company’s Board of Directors has determined is part of a plan, arrangement or understanding which has as a primary purpose or effect avoidance of Section 7(e) hereof, and any Rights Certificate issued pursuant to Section 6 or Section 11 hereof upon transfer, exchange, replacement or adjustment of any other Rights Certificate referred to in this sentence, shall contain (to the extent feasible) the following legend:
 
THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF THE RIGHTS AGREEMENT.
 
5.              Countersignature and Registration .
 
(a)            The Rights Certificates shall be executed on behalf of the Company by its Chief Executive Officer, its Chief Operating Officer, its Chief Financial Officer, its President or
 
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any Vice President, either manually or by facsimile signature, and by the Secretary or an Assistant Secretary of the Company, either manually or by facsimile signature, and shall have affixed thereto the Company’s seal (if any) or a facsimile thereof. The Rights Certificates shall be manually countersigned by the Rights Agent and shall not be valid for any purpose unless countersigned. In case any officer of the Company who shall have signed any of the Rights Certificates shall cease to be such officer of the Company before countersignature by the Rights Agent and issuance and delivery by the Company, such Rights Certificates, nevertheless, may be countersigned by the Rights Agent and issued and delivered by the Company with the same force and effect as though the person who signed such Rights Certificates on behalf of the Company had not ceased to be such officer of the Company; and any Rights Certificate may be signed on behalf of the Company by any person who, at the actual date of the execution of such Rights Certificate, shall be a proper officer of the Company to sign such Rights Certificate, although at the date of the execution of this Rights Agreement any such person was not such an officer.
 
(b)            Following the Distribution Date, the Rights Agent will keep or cause to be kept, at its office designated for such purposes, books for registration and transfer of the Rights Certificates issued hereunder. Such books shall show the names and addresses of the respective holders of the Rights Certificates, the number of Rights evidenced on its face by each of the Rights Certificates and the date of each of the Rights Certificates.
 
6.              Transfer, Split Up, Combination and Exchange of Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates .
 
(a)            Subject to the provisions of Sections 7(e), 14 and 24 hereof, at any time after the Close of Business on the Distribution Date, and at or prior to the Close of Business on the Expiration Date, any Rights Certificate or Rights Certificates may be transferred, split up, combined or exchanged for another Rights Certificate or Rights Certificates, entitling the registered holder to purchase a like number of one-thousandths of a Preferred Share (or, following a Triggering Event, other securities, cash or other assets, as the case may be) as the Rights Certificate or Rights Certificates surrendered then entitled such holder to purchase. Any registered holder desiring to transfer, split up, combine or exchange any Rights Certificate or Rights Certificates shall make such request in writing delivered to the Rights Agent, and shall surrender the Rights Certificate or Rights Certificates to be transferred, split up, combined or exchanged at the office of the Rights Agent designated for such purpose. Neither the Rights Agent nor the Company shall be obligated to take any action whatsoever with respect to the transfer of any such surrendered Rights Certificate until the registered holder shall have completed and signed the certificate contained in the form of assignment on the reverse side of such Rights Certificate and shall have provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Company shall reasonably request. Thereupon the Rights Agent shall, subject to Sections 7(e), 14 and 24 hereof, countersign and deliver to the person entitled thereto a Rights Certificate or Rights Certificates, as the case may be, as so requested. The Company may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer, split up, combination or exchange of Rights Certificates.
 
(b)            Upon receipt by the Company and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Rights Certificate,
 
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and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to them, and, at the Company’s request, reimbursement to the Company and the Rights Agent of all reasonable expenses incidental thereto, and upon surrender to the Rights Agent and cancellation of the Rights Certificate if mutilated, the Company will make and deliver a new Rights Certificate of like tenor to the Rights Agent for delivery to the registered holder in lieu of the Rights Certificate so lost, stolen, destroyed or mutilated.
 
7.              Exercise of Rights; Exercise Price; Expiration Date of Rights .
 
(a)            Subject to Sections 7(e), 23(b) and 24(b) hereof, the registered holder of any Rights Certificate may exercise the Rights evidenced thereby (except as otherwise provided herein) in whole or in part at any time after the Distribution Date and prior to the Close of Business on the Expiration Date by surrender of the Rights Certificate, with the form of election to purchase on the reverse side thereof duly executed, to the Rights Agent at the office of the Rights Agent designated for such purpose, together with payment of the Exercise Price for each one-thousandth of a Preferred Share (or, following a Triggering Event, other securities, cash or other assets as the case may be) as to which the Rights are exercised.
 
(b)            The Exercise Price for each one-thousandth of a Preferred Share issuable pursuant to the exercise of a Right shall initially be twenty-five U.S. Dollars (U.S.$25.00), shall be subject to adjustment from time to time as provided in Sections 11 and 13 hereof and shall be payable in lawful money of the United States of America in accordance with paragraph (c) below.
 
(c)            Upon receipt of a Rights Certificate representing exercisable Rights, with the form of election to purchase duly executed, accompanied by payment of the Exercise Price for the number of one-thousandths of a Preferred Share (or, following a Triggering Event, other securities, cash or other assets as the case may be) to be purchased and an amount equal to any applicable transfer tax required to be paid by the holder of such Rights Certificate in accordance with Section 9(e) hereof, the Rights Agent shall, subject to Section 20(k) hereof, thereupon promptly (i) (A) requisition from any transfer agent of the Preferred Shares (or make available, if the Rights Agent is the transfer agent for the Preferred Shares) a certificate or certificates for the number of one-thousandths of a Preferred Share (or, following a Triggering Event, other securities, cash or other assets as the case may be) to be purchased and the Company hereby irrevocably authorizes its transfer agent to comply with all such requests or (B) if the Company shall have elected to deposit the total number of one-thousandths of a Preferred Share (or, following a Triggering Event, other securities, cash or other assets as the case may be) issuable upon exercise of the Rights hereunder with a depositary agent, requisition from the depositary agent depositary receipts representing such number of one-thousandths of a Preferred Share (or, following a Triggering Event, other securities, cash or other assets as the case may be) as are to be purchased (in which case certificates for the Preferred Shares (or, following a Triggering Event, other securities, cash or other assets as the case may be) represented by such receipts shall be deposited by the transfer agent with the depositary agent) and the Company hereby directs the depositary agent to comply with such request, (ii) when appropriate, requisition from the Company the amount of cash to be paid in lieu of issuance of fractional shares in accordance with Section 14 hereof, (iii) after receipt of such certificates or depositary receipts, cause the same to be delivered to or upon the order of the registered holder of such Rights Certificate,
 
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registered in such name or names as may be designated by such holder and (iv) when appropriate, after receipt thereof, deliver such cash to or upon the order of the registered holder of such Rights Certificate. The payment of the Exercise Price (as such amount may be reduced (including to zero) pursuant to Section 11(a)(iii) hereof) and an amount equal to any applicable transfer tax required to be paid by the holder of such Rights Certificate in accordance with Section 9(e) hereof, may be made in cash or by certified bank check, cashier’s check or bank draft payable to the order of the Company. In the event that the Company is obligated to issue securities of the Company other than Preferred Shares, pay cash and/or distribute other property pursuant to Section 11(a) hereof, the Company will make all arrangements necessary so that such other securities, cash and/or other property are available for distribution by the Rights Agent, if and when appropriate.
 
(d)            In case the registered holder of any Rights Certificate shall exercise less than all the Rights evidenced thereby, a new Rights Certificate evidencing Rights equivalent to the Rights remaining unexercised shall be issued by the Rights Agent to the registered holder of such Rights Certificate or to his or her duly authorized assigns, subject to the provisions of Section 14 hereof.
 
(e)            Notwithstanding anything in this Agreement to the contrary, from and after the first occurrence of a Triggering Event, any Rights beneficially owned by (i) an Acquiring Person or an Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee after the Acquiring Person becomes such (a “ Post-Event Transferee ”), (iii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee prior to or concurrently with the Acquiring Person becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person to holders of equity interests in such Acquiring Person or to any Person with whom the Acquiring Person has any continuing agreement, arrangement or understanding regarding the transferred Rights or (B) a transfer which the Company’s Board of Directors has determined is part of a plan, arrangement or understanding which has as a primary purpose or effect the avoidance of this Section 7(e) (a “ Pre-Event Transferee ”) or (iv) any subsequent transferee receiving transferred Rights from a Post-Event Transferee or a Pre-Event Transferee, either directly or through one or more intermediate transferees, shall become null and void without any further action and no holder of such Rights shall have any rights whatsoever with respect to such Rights, whether under any provision of this Agreement or otherwise. The Company shall use all reasonable efforts to ensure that the provisions of this Section 7(e) and Section 4(b) hereof are complied with, but shall have no liability to any holder of Rights Certificates or to any other Person as a result of its failure to make any determinations with respect to an Acquiring Person or any of such Acquiring Person’s Affiliates, Associates or transferees hereunder.
 
(f)             Notwithstanding anything in this Agreement to the contrary, neither the Rights Agent nor the Company shall be obligated to undertake any action with respect to a registered holder upon the occurrence of any purported exercise as set forth in this Section 7 unless such registered holder shall, in addition to having complied with the requirements of Section 7(a), have (i) completed and signed the certificate contained in the form of election to purchase set forth on the reverse side of the Rights Certificate surrendered for such exercise and
 
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(ii) provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Company shall reasonably request.
 
8.              Cancellation and Destruction of Rights Certificates . All Rights Certificates surrendered for the purpose of exercise, transfer, split up, combination or exchange shall, if surrendered to the Company or to any of its agents, be delivered to the Rights Agent for cancellation or in canceled form, or, if surrendered to the Rights Agent, shall be canceled by it, and no Rights Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Agreement. The Company shall deliver to the Rights Agent for cancellation and retirement, and the Rights Agent shall so cancel and retire, any Rights Certificate purchased or acquired by the Company otherwise than upon the exercise thereof. The Rights Agent shall deliver all canceled Rights Certificates to the Company, or shall, at the written request of the Company, destroy such canceled Rights Certificates, and in such case shall deliver a certificate of destruction thereof to the Company.
 
9.              Reservation and Availability of Preferred Shares .
 
(a)            The Company covenants and agrees that it will use its best efforts to cause to be reserved and kept available out of its authorized and unissued Preferred Shares not reserved for another purpose (and, following the occurrence of a Triggering Event, out of its authorized and unissued shares of Common Stock and/or other securities), the number of Preferred Shares (and, following the occurrence of the Triggering Event, Common Stock and/or other securities) that will be sufficient to permit the exercise in full of all outstanding Rights.
 
(b)            If the Company shall hereafter list any of its Preferred Shares on a national securities exchange, then so long as the Preferred Shares (and, following the occurrence of a Triggering Event, shares of Common Stock and/or other securities) issuable and deliverable upon exercise of the Rights may be listed on such exchange, the Company shall use its best efforts to cause, from and after such time as the Rights become exercisable (but only to the extent that it is reasonably likely that the Rights will be exercised), all shares reserved for such issuance to be listed on such exchange upon official notice of issuance upon such exercise.
 
(c)            The Company shall use its best efforts to (i) file, as soon as practicable following the earliest date after the first occurrence of a Triggering Event in which the consideration to be delivered by the Company upon exercise of the Rights is described in Section 11(a)(ii) or Section 11(a)(iii) hereof, or as soon as is required by law following the Distribution Date, as the case may be, a registration statement under the Securities Act with respect to the securities purchasable upon exercise of the Rights on an appropriate form, (ii) cause such registration statement to become effective as soon as practicable after such filing and (iii) cause such registration statement to remain effective (with a prospectus at all times meeting the requirements of the Securities Act) until the earlier of (A) the date as of which the Rights are no longer exercisable for such securities and (B) the date of expiration of the Rights. The Company may temporarily suspend, for a period not to exceed ninety (90) days after the date set forth in clause (i) of the first sentence of this Section 9(c), the exercisability of the Rights in order to prepare and file such registration statement and permit it to become effective. Upon any such suspension, the Company shall issue a public announcement and notify the Rights Agent that the exercisability of the Rights has been temporarily suspended, as well as a public announcement
 
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and notification to the Rights Agent at such time as the suspension is no longer in effect. The Company will also take such action as may be appropriate under, or to ensure compliance with, the securities or “blue sky” laws of the various states in connection with the exercisability of the Rights. Notwithstanding any provision of this Agreement to the contrary, the Rights shall not be exercisable in any jurisdiction, unless the requisite qualification in such jurisdiction shall have been obtained, or an exemption therefrom shall be available, and until a registration statement has been declared effective.
 
(d)            The Company covenants and agrees that it will take all such action as may be necessary to ensure that all Preferred Shares (or other securities of the Company) delivered upon exercise of Rights shall, at the time of delivery of the certificates for such securities (subject to payment of the Exercise Price), be duly and validly authorized and issued and fully paid and nonassessable shares.
 
(e)            The Company further covenants and agrees that it will pay when due and payable any and all federal and state transfer taxes and charges which may be payable in respect of the original issuance or delivery of the Rights Certificates or of any Preferred Shares (or other securities of the Company) upon the exercise of Rights. The Company shall not, however, be required to pay any transfer tax which may be payable in respect of any transfer or delivery of Rights Certificates to a person other than, or the issuance or delivery of certificates or depositary receipts for the Preferred Shares (or other securities of the Company) in a name other than that of, the registered holder of the Rights Certificate evidencing Rights surrendered for exercise or to issue or to deliver any certificates or depositary receipts for Preferred Shares (or other securities of the Company) upon the exercise of any Rights until any such tax shall have been paid (any such tax being payable by the holder of such Rights Certificate at the time of surrender) or until it has been established to the Company’s satisfaction that no such tax is due.
 
10.            Record Date . Each Person in whose name any certificate for a number of one-thousandths of a Preferred Share (or other securities of the Company) is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of Preferred Shares (or other securities of the Company) represented thereon, and such certificate shall be dated, the date upon which the Rights Certificate evidencing such Rights was duly surrendered and payment of the Total Exercise Price with respect to which the Rights have been exercised (and any applicable transfer taxes) was made; provided, however, that if the date of such surrender and payment is a date upon which the transfer books of the Company are closed, such Person shall be deemed to have become the record holder of such shares on, and such certificate shall be dated, the next succeeding Business Day on which the transfer books of the Company are open. Prior to the exercise of the Rights evidenced thereby, the holder of a Rights Certificate shall not be entitled to any rights of a holder of Preferred Shares (or other securities of the Company) for which the Rights shall be exercisable, including, without limitation, the right to vote, to receive dividends or other distributions or to exercise any preemptive rights, and shall not be entitled to receive any notice of any proceedings of the Company, except as provided herein.
 
11.            Adjustment of Exercise Price, Number of Shares or Number of Rights . The Exercise Price, the number and kind of shares or other property covered by each Right and the
 
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number of Rights outstanding are subject to adjustment from time to time as provided in this Section 11.
 
(a)            (i)             Notwithstanding anything in this Agreement to the contrary, in the event the Company shall at any time after the date of this Agreement (A) declare a dividend on the Preferred Shares payable in Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C) combine the outstanding Preferred Shares (by reverse stock split or otherwise) into a smaller number of Preferred Shares, or (D) issue any shares of its capital stock in a reclassification of the Preferred Shares (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving corporation), then, in each such event, except as otherwise provided in this Section 11 and Section 7(e) hereof:  (1) the Exercise Price in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination or reclassification shall be adjusted so that the Exercise Price thereafter shall equal the result obtained by dividing the Exercise Price in effect immediately prior to such time by a fraction (the “ Adjustment Fraction ”), the numerator of which shall be the total number of Preferred Shares (or shares of capital stock issued in such reclassification of the Preferred Shares) outstanding immediately following such time and the denominator of which shall be the total number of Preferred Shares outstanding immediately prior to such time; provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company issuable upon exercise of such Right; and (2) the number of one-thousandths of a Preferred Share (or share of such other capital stock) issuable upon the exercise of each Right shall equal the number of one-thousandths of a Preferred Share (or share of such other capital stock) as was issuable upon exercise of a Right immediately prior to the occurrence of the event described in clauses (A)-(D) of this Section 11(a)(i), multiplied by the Adjustment Fraction; provided , however , that, no such adjustment shall be made pursuant to this Section 11(a)(i) to the extent that there shall have simultaneously occurred an event described in clause (A), (B), (C) or (D) of Section 11(n) with a proportionate adjustment being made thereunder. Each share of Common Stock that shall become outstanding after an adjustment has been made pursuant to this Section 11(a)(i) shall have associated with it the number of Rights, exercisable at the Exercise Price and for the number of one-thousandths of a Preferred Share (or shares of such other capital stock) as one share of Common Stock has associated with it immediately following the adjustment made pursuant to this Section 11(a)(i).
 
(ii)            Subject to Section 24 of this Agreement, in the event a Triggering Event shall have occurred, then promptly following such Triggering Event each holder of a Right, except as provided in Section 7(e) hereof, shall thereafter have the right to receive for each Right, upon exercise thereof in accordance with the terms of this Agreement and payment of the Exercise Price in effect immediately prior to the occurrence of the Triggering Event, in lieu of a number of one-thousandths of a Preferred Share, such number of shares of Common Stock of the Company as shall equal the result obtained by multiplying the Exercise Price in effect immediately prior to the occurrence of the Triggering Event by the number of one-thousandths of a Preferred Share for which a Right was exercisable (or would have been exercisable if the Distribution Date had occurred) immediately prior to the first occurrence of a Triggering Event, and dividing that product by 50% of the Current Per Share Market Price for shares of Common Stock on the date of occurrence of the Triggering Event; provided , however , that the Exercise Price and the number of shares of Common Stock of the Company so receivable upon exercise of a Right shall be subject to further adjustment as appropriate in
 
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accordance with Section 11(e) hereof to reflect any events occurring in respect of the shares of Common Stock of the Company after the occurrence of the Triggering Event.
 
(iii)           In lieu of issuing shares of Common Stock in accordance with Section 11(a)(ii) hereof, the Company may, if the Company’s Board of Directors determines that such action is necessary or appropriate and not contrary to the interest of holders of Rights and, in the event that the number of shares of Common Stock which are authorized by the Company’s Certificate of Incorporation but not outstanding or reserved for issuance for purposes other than upon exercise of the Rights are not sufficient to permit the exercise in full of the Rights, or if any necessary regulatory approval for such issuance has not been obtained by the Company, the Company shall: (A) determine the excess of (1) the value of the shares of Common Stock issuable upon the exercise of a Right (the “ Current Value ”) over (2) the Exercise Price (such excess, the “ Spread ”) and (B) with respect to each Right, make adequate provision to substitute for such shares of Common Stock, upon exercise of the Rights, (1) cash, (2) a reduction in the Exercise Price, (3) other equity securities of the Company (including, without limitation, shares or units of shares of any series of preferred stock which the Company’s Board of Directors has deemed to have the same value as Common Stock (such shares or units of shares of preferred stock are herein called “ Common Stock Equivalents ”)), except to the extent that the Company has not obtained any necessary stockholder or regulatory approval for such issuance, (4) debt securities of the Company, except to the extent that the Company has not obtained any necessary stockholder or regulatory approval for such issuance, (5) other assets or (6) any combination of the foregoing, having an aggregate value equal to the Current Value, where such aggregate value has been determined by the Company’s Board of Directors based upon the advice of a nationally recognized investment banking firm selected by the Company’s Board of Directors; provided, however, if the Company shall not have made adequate provision to deliver value pursuant to clause (B) above within thirty (30) days following the later of (x) the first occurrence of a Triggering Event and (y) the date on which the Company’s right of redemption pursuant to Section 23(a) expires (the later of (x) and (y) being referred to herein as the “ Section 11(a)(ii) Trigger Date ”), then the Company shall be obligated to deliver, upon the surrender for exercise of a Right and without requiring payment of the Exercise Price, Common Stock (to the extent available), except to the extent that the Company has not obtained any necessary stockholder or regulatory approval for such issuance, and then, if necessary, cash, which shares and/or cash have an aggregate value equal to the Spread. If the Company’s Board of Directors shall determine in good faith that it is likely that sufficient additional Common Stock could be authorized for issuance upon exercise in full of the Rights or that any necessary regulatory approval for such issuance will be obtained, the thirty (30) day period set forth above may be extended to the extent necessary, but not more than ninety (90) days after the Section 11(a)(ii) Trigger Date, in order that the Company may seek stockholder approval for the authorization of such additional shares or take action to obtain such regulatory approval (such period, as it may be extended, the “ Substitution Period ”). To the extent that the Company determines that some action need be taken pursuant to the first and/or second sentences of this Section 11(a)(iii), the Company (x) shall provide, subject to Section 7(e) hereof, that such action shall apply uniformly to all outstanding Rights and (y) may suspend the exercisability of the Rights until the expiration of the Substitution Period in order to seek any authorization of additional shares, to take any action to obtain any required regulatory approval and/or to decide the appropriate form of distribution to be made pursuant to such first sentence and to determine the value thereof. In the event of any such suspension, the Company shall issue a public announcement stating that the
 
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exercisability of the Rights has been temporarily suspended, as well as a public announcement at such time as the suspension is no longer in effect. For purposes of this Section 11(a)(iii), the value of the Common Stock shall be the Current Per Share Market Price of the Common Stock on the Section 11(a)(ii) Trigger Date and the value of any Common Stock Equivalent shall be deemed to have the same value as the Common Stock on such date.
 
(b)            In case the Company shall, at any time after the date of this Agreement, fix a record date for the issuance of rights, options or warrants to all holders of Preferred Shares entitling such holders (for a period expiring within forty-five (45) calendar days after such record date) to subscribe for or purchase Preferred Shares or Equivalent Shares or securities convertible into Preferred Shares or Equivalent Shares at a price per share (or having a conversion price per share, if a security convertible into Preferred Shares or Equivalent Shares) less than the then Current Per Share Market Price of the Preferred Shares or Equivalent Shares on such record date, then, in each such case, the Exercise Price to be in effect after such record date shall be determined by multiplying the Exercise Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of Preferred Shares and Equivalent Shares (if any) outstanding on such record date, plus the number of Preferred Shares or Equivalent Shares, as the case may be, which the aggregate offering price of the total number of Preferred Shares or Equivalent Shares, as the case may be, to be offered or issued (and/or the aggregate initial conversion price of the convertible securities to be offered or issued) would purchase at such current market price, and the denominator of which shall be the number of Preferred Shares and Equivalent Shares (if any) outstanding on such record date, plus the number of additional Preferred Shares or Equivalent Shares, as the case may be, to be offered for subscription or purchase (or into which the convertible securities so to be offered are initially convertible); provided , however , that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company issuable upon exercise of one Right. In case such subscription price may be paid in a consideration part or all of which shall be in a form other than cash, the value of such consideration shall be as determined in good faith by the Company’s Board of Directors, whose determination shall be described in a statement filed with the Rights Agent and shall be binding on the Rights Agent and the holders of the Rights. Preferred Shares and Equivalent Shares owned by or held for the account of the Company shall not be deemed outstanding for the purpose of any such computation. Such adjustment shall be made successively whenever such a record date is fixed, and in the event that such rights, options or warrants are not so issued, the Exercise Price shall be adjusted to be the Exercise Price which would then be in effect if such record date had not been fixed.
 
(c)            In case the Company shall, at any time after the date of this Agreement, fix a record date for the making of a distribution to all holders of the Preferred Shares or of any class or series of Equivalent Shares (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing or surviving corporation) of evidences of indebtedness or assets (other than a regular quarterly cash dividend, if any, or a dividend payable in Preferred Shares) or subscription rights, options or warrants (excluding those referred to in Section 11(b)), then, in each such case, the Exercise Price to be in effect after such record date shall be determined by multiplying the Exercise Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the Current Per Share Market Price of a Preferred Share or an Equivalent Share on such record date, less the fair market value
 
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per Preferred Share or Equivalent Share (as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent) of the portion of the cash, assets or evidences of indebtedness so to be distributed or of such subscription rights or warrants applicable to a Preferred Share or Equivalent Share, as the case may be, and the denominator of which shall be such Current Per Share Market Price of a Preferred Share or Equivalent Share on such record date; provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company issuable upon exercise of one Right. Such adjustments shall be made successively whenever such a record date is fixed, and in the event that such distribution is not so made, the Exercise Price shall be adjusted to be the Exercise Price which would have been in effect if such record date had not been fixed.
 
(d)            Notwithstanding anything to the contrary, no adjustment in the Exercise Price shall be required unless such adjustment would require an increase or decrease of at least 1% in the Exercise Price; provided, however, that any adjustments which by reason of this Section 11(d) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 11 shall be made to the nearest cent or to the nearest ten-thousandth of a share of Common Stock or other share or one hundred-thousandth of a Preferred Share, as the case may be. Notwithstanding the first sentence of this Section 11(d), any adjustment required by this Section 11 shall be made no later than the earlier of (i) three (3) years from the date of the transaction which requires such adjustment or (ii) the Expiration Date.
 
(e)            If as a result of an adjustment made pursuant to Section 11(a) or 13(a) hereof, the holder of any Right thereafter exercised shall become entitled to receive any shares of capital stock other than Preferred Shares, thereafter the number of such other shares so receivable upon exercise of any Right and, if required, the Exercise Price thereof, shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Preferred Shares contained in Sections 11(a), 11(b), 11(c), 11(d), 11(g), 11(h), 11(i), 11(j), 11(k) and 11(l), and the provisions of Sections 7, 9, 10, 13 and 14 with respect to the Preferred Shares shall apply on like terms to any such other shares.
 
(f)             All Rights originally issued by the Company subsequent to any adjustment made to the Exercise Price hereunder shall evidence the right to purchase, at the adjusted Exercise Price, the number of one-thousandths of a Preferred Share purchasable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein.
 
(g)            Unless the Company shall have exercised its election as provided in Section 11(h), upon each adjustment of the Exercise Price as a result of the calculations made in Section 11(b) and (c), each Right outstanding immediately prior to the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted Exercise Price, that number of Preferred Shares (calculated to the nearest one hundred-thousandth of a share) obtained by (i) multiplying (x) the number of Preferred Shares covered by a Right immediately prior to this adjustment, by (y) the Exercise Price in effect immediately prior to such adjustment of the Exercise Price, and (ii) dividing the product so obtained by the Exercise Price in effect immediately after such adjustment of the Exercise Price.
 
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(h)            The Company may elect on or after the date of any adjustment of the Exercise Price as a result of the calculations made in Section 11(b) or (c) to adjust the number of Rights, in substitution for any adjustment in the number of Preferred Shares purchasable upon the exercise of a Right. Each of the Rights outstanding after such adjustment of the number of Rights shall be exercisable for the number of one-thousandths of a Preferred Share for which a Right was exercisable immediately prior to such adjustment. Each Right held of record prior to such adjustment of the number of Rights shall become that number of Rights (calculated to the nearest one hundred-thousandth) obtained by dividing the Exercise Price in effect immediately prior to adjustment of the Exercise Price by the Exercise Price in effect immediately after adjustment of the Exercise Price. The Company shall make a public announcement of its election to adjust the number of Rights, indicating the record date for the adjustment, and, if known at the time, the amount of the adjustment to be made. This record date may be the date on which the Exercise Price is adjusted or any day thereafter, but, if the Rights Certificates have been issued, shall be at least ten (10) days later than the date of the public announcement. If Rights Certificates have been issued, upon each adjustment of the number of Rights pursuant to this Section 11(h), the Company shall, as promptly as practicable, cause to be distributed to holders of record of Rights Certificates on such record date Rights Certificates evidencing, subject to Section 14 hereof, the additional Rights to which such holders shall be entitled as a result of such adjustment, or, at the option of the Company, shall cause to be distributed to such holders of record in substitution and replacement for the Rights Certificates held by such holders prior to the date of adjustment, and upon surrender thereof, if required by the Company, new Rights Certificates evidencing all the Rights to which such holders shall be entitled after such adjustment. Rights Certificates so to be distributed shall be issued, executed and countersigned in the manner provided for herein (and may bear, at the option of the Company, the adjusted Exercise Price) and shall be registered in the names of the holders of record of Rights Certificates on the record date specified in the public announcement.
 
(i)             Irrespective of any adjustment or change in the Exercise Price or the number of Preferred Shares issuable upon the exercise of the Rights, the Rights Certificates theretofore and thereafter issued may continue to express the Exercise Price per one one-thousandth of a Preferred Share and the number of one-thousandths of a Preferred Share which were expressed in the initial Rights Certificates issued hereunder.
 
(j)             Before taking any action that would cause an adjustment reducing the Exercise Price below the par or stated value, if any, of the number of one-thousandths of a Preferred Share issuable upon exercise of the Rights, the Company shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue as fully paid and nonassessable shares such number of one-thousandths of a Preferred Share at such adjusted Exercise Price.
 
(k)            In any case in which this Section 11 shall require that an adjustment in the Exercise Price be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event the issuing to the holder of any Right exercised after such record date of the number of one-thousandths of a Preferred Share and other capital stock or securities of the Company, if any, issuable upon such exercise over and above the number of one-thousandths of a Preferred Share and other capital stock or securities of the Company, if any, issuable upon such exercise on the basis of the Exercise Price in effect prior to
 
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such adjustment; provided , however , that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder’s right to receive such additional shares (fractional or otherwise) upon the occurrence of the event requiring such adjustment.
 
(l)             Notwithstanding anything in this Section 11 to the contrary, prior to the Distribution Date, the Company shall be entitled to make such reductions in the Exercise Price, in addition to those adjustments expressly required by this Section 11, as and to the extent that it in its sole discretion shall determine to be advisable in order that any (i) consolidation or subdivision of the Preferred Shares or Common Stock, (ii) issuance wholly for cash of any Preferred Shares or Common Stock at less than the current market price, (iii) issuance wholly for cash of Preferred Shares or Common Stock or securities which by their terms are convertible into or exchangeable for Preferred or Common Stock, (iv) stock dividends or (v) issuance of rights, options or warrants referred to in this Section 11, hereafter made by the Company to holders of its Preferred Shares or Common Stock shall not be taxable to such stockholders.
 
(m)           The Company covenants and agrees that, after the Distribution Date, it will not, except as permitted by Sections 23, 24 or 27 hereof, take (or permit to be taken) any action if at the time such action is taken it is reasonably foreseeable that such action will diminish substantially or otherwise eliminate the benefits intended to be afforded by the Rights.
 
(n)            In the event the Company shall at any time after the date of this Agreement (A) declare a dividend on the Common Stock payable in shares of Common Stock, (B) subdivide the outstanding shares of Common Stock, (C) combine the outstanding Common Stock (by reverse stock split or otherwise) into a smaller number of shares of Common Stock, or (D) issue any shares of its capital stock in a reclassification of the shares of Common Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving corporation), then, in each such event, except as otherwise provided in Section 11(a) and Section 7(e) hereof: (1) each share of Common Stock (or shares of capital stock issued in such reclassification of the Common Stock) outstanding immediately following such time shall have associated with it the number of Rights as were associated with one share of Common Stock immediately prior to the occurrence of the event described in clauses (A)-(D) above; (2) the Exercise Price in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination or reclassification shall be adjusted so that the Exercise Price thereafter shall equal the result obtained by multiplying the Exercise Price in effect immediately prior to such time by a fraction, the numerator of which shall be the total number of shares of Common Stock outstanding immediately prior to the event described in clauses (A)-(D) above, and the denominator of which shall be the total number of shares of Common Stock outstanding immediately after such event; provided , however , that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company issuable upon exercise of such Right; and (3) the number of one-thousandths of a Preferred Share (or shares of such
 
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other capital stock) issuable upon the exercise of each Right outstanding after such event shall equal the number of one- thousandths of a Preferred Share (or shares of such other capital stock) as were issuable with respect to one Right immediately prior to such event. Each share of Common Stock that shall become outstanding after an adjustment has been made pursuant to this Section 11(n) shall have associated with it the number of Rights, exercisable at the Exercise Price and for the number of one-thousandths of a Preferred Share (or shares of such other capital stock) as one share of Common Stock has associated with it immediately following the adjustment made pursuant to this Section 11(n). If an event occurs which would require an adjustment under both this Section 11(n) and Section 11(a)(ii) hereof, the adjustment provided for in this Section 11(n) shall be in addition to, and shall be made prior to, any adjustment required pursuant to Section 11(a)(ii) hereof.
 
12.            Certificate of Adjusted Exercise Price or Number of Shares . Whenever an adjustment is made as provided in Sections 11 and 13 hereof, the Company shall promptly (a) prepare a certificate setting forth such adjustment and a brief statement of the facts accounting for such adjustment, (b) file with the Rights Agent and with each transfer agent for the Preferred Shares a copy of such certificate and (c) if a Distribution Date has occurred, mail a brief summary thereof to each holder of a Rights Certificate in accordance with Section 26 hereof. Notwithstanding the foregoing sentence, the failure of the Company to make such certification or give such notice shall not affect the validity of such adjustment or the force or effect of the requirement for such adjustment. The Rights Agent shall be fully protected in relying on any such certificate and on any adjustment contained therein and shall not be deemed to have knowledge of such adjustment unless and until it shall have received such certificate.
 
13.            Consolidation, Merger or Sale or Transfer of Assets or Earning Power .
 
(a)            In the event that, following a Triggering Event, directly or indirectly:
 
(i)             the Company shall consolidate with, or merge with and into, any other Person (other than a wholly-owned Subsidiary of the Company in a transaction the principal purpose of which is to change the state of incorporation of the Company and which complies with Section 11(m) hereof);
 
(ii)            any Person shall consolidate with the Company, or merge with and into the Company and the Company shall be the continuing or surviving corporation of such consolidation or merger and, in connection with such merger, all or part of the shares of Common Stock shall be changed into or exchanged for stock or other securities of any other person (or the Company); or
 
(iii)           the Company shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise transfer), in one or more transactions, assets or earning power aggregating 50% or more of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to any other Person or Persons (other than the Company or one or more of its wholly owned Subsidiaries in one or more transactions, each of which individually (and together) complies with Section 11(m) hereof),
 
then, concurrently with and in each such case:
 
(a)            each holder of a Right (except as provided in Section 7(e) hereof) shall thereafter have the right to receive, upon the exercise thereof, at a price equal to the Total Exercise Price applicable immediately prior to the occurrence of the Section 13 Event in accordance with the terms of this Agreement, such number of
 
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validly authorized and issued, fully paid, nonassessable and freely tradeable shares of Common Stock of the Principal Party (as hereinafter defined), free of any liens, encumbrances, rights of first refusal or other adverse claims, as shall be equal to the result obtained by dividing such Total Exercise Price by 50% of the Current Per Share Market Price of the shares of Common Stock of such Principal Party on the date of consummation of such Section 13 Event, provided, however, that the Exercise Price and the number of shares of Common Stock of such Principal Party so receivable upon exercise of a Right shall be subject to further adjustment as appropriate in accordance with Section 11(e) hereof;
 
(b)            such Principal Party shall thereafter be liable for, and shall assume, by virtue of such Section 13 Event, all the obligations and duties of the Company pursuant to this Agreement;
 
(c)            the term “Company” shall thereafter be deemed to refer to such Principal Party, it being specifically intended that the provisions of Section 11 hereof shall apply only to such Principal Party following the first occurrence of a Section 13 Event;
 
(d)            such Principal Party shall take such steps (including, but not limited to, the reservation of a sufficient number of its Common Stock) in connection with the consummation of any such transaction as may be necessary to ensure that the provisions hereof shall thereafter be applicable, as nearly as reasonably may be, in relation to its shares of Common Stock thereafter deliverable upon the exercise of the Rights; and
 
(e)            upon the subsequent occurrence of any consolidation, merger, sale or transfer of assets or other extraordinary transaction in respect of such Principal Party, each holder of a Right shall thereupon be entitled to receive, upon exercise of a Right and payment of the Total Exercise Price as provided in this Section 13(a), such cash, shares, rights, warrants and other property which such holder would have been entitled to receive had such holder, at the time of such transaction, owned the shares of Common Stock of the Principal Party receivable upon the exercise of such Right pursuant to this Section 13(a), and such Principal Party shall take such steps (including, but not limited to, reservation of shares of stock) as may be necessary to permit the subsequent exercise of the Rights in accordance with the terms hereof for such cash, shares, rights, warrants and other property.
 
(f)             For purposes hereof, the “earning power” of the Company and its Subsidiaries shall be determined in good faith by the Company’s Board of Directors on the basis of the operating
 
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earnings of each business operated by the Company and its Subsidiaries during the three fiscal years preceding the date of such determination (or, in the case of any business not operated by the Company or any Subsidiary during three full fiscal years preceding such date, during the period such business was operated by the Company or any Subsidiary).
 
(b)            For purposes of this Agreement, the term “ Principal Party ” shall mean:
 
(i)             in the case of any transaction described in clause (i) or (ii) of Section 13(a) hereof: (A) the Person that is the issuer of the securities into which the shares of Common Stock are converted in such merger or consolidation, or, if there is more than one such issuer, the issuer the shares of Common Stock of which have the greatest aggregate market value of shares outstanding, or (B) if no securities are so issued, (x) the Person that is the other party to the merger, if such Person survives said merger, or, if there is more than one such Person, the Person the shares of Common Stock of which have the greatest aggregate market value of shares outstanding or (y) if the Person that is the other party to the merger does not survive the merger, the Person that does survive the merger (including the Company if it survives) or (z) the Person resulting from the consolidation; and
 
(ii)            in the case of any transaction described in clause (iii) of Section13(a) hereof, the Person that is the party receiving the greatest portion of the assets or earning power transferred pursuant to such transaction or transactions, or, if more than one Person that is a party to such transaction or transactions receives the same portion of the assets or earning power so transferred and each such portion would, were it not for the other equal portions, constitute the greatest portion of the assets or earning power so transferred, or if the Person receiving the greatest portion of the assets or earning power cannot be determined, whichever of such Persons is the issuer of shares of Common Stock having the greatest aggregate market value of shares outstanding; provided , however , that in any such case described in the foregoing clause (b)(i) or (b)(ii), if the shares of Common Stock of such Person are not at such time or have not been continuously over the preceding 12-month period registered under Section 12 of the Exchange Act, then (1) if such Person is a direct or indirect Subsidiary of another Person the shares of Common Stock of which are and have been so registered, the term “Principal Party” shall refer to such other Person, or (2) if such Person is a Subsidiary, directly or indirectly, of more than one Person, the Common Stock of which are and have been so registered, the term “Principal Party” shall refer to whichever of such Persons is the issuer of shares of Common Stock having the greatest aggregate market value of shares outstanding, or (3) if such Person is owned, directly or indirectly, by a joint venture formed by two or more Persons that are not owned, directly or indirectly by the same Person, the rules set forth in clauses (1) and (2) above shall apply to each of the owners having an interest in the venture as if the Person owned by the joint venture was a Subsidiary of both or all of such joint venturers, and the Principal Party in each such case shall bear the
 
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obligations set forth in this Section 13 in the same ratio as its interest in such Person bears to the total of such interests.
 
(c)                                   The Company shall not consummate any Section 13 Event unless the Principal Party shall have a sufficient number of authorized shares of Common Stock that have not been issued or reserved for issuance to permit the exercise in full of the Rights in accordance with this Section 13 and unless prior thereto the Company and such issuer shall have executed and delivered to the Rights Agent a supplemental agreement confirming that such Principal Party shall, upon consummation of such Section 13 Event, assume this Agreement in accordance with Sections 13(a) and 13(b) hereof, that all rights of first refusal or preemptive rights in respect of the issuance of shares of Common Stock of such Principal Party upon exercise of outstanding Rights have been waived, that there are no rights, warrants, instruments or securities outstanding or any agreements or arrangements which, as a result of the consummation of such transaction, would eliminate or substantially diminish the benefits intended to be afforded by the Rights and that such transaction shall not result in a default by such Principal Party under this Agreement, and further providing that, as soon as practicable after the date of such Section 13 Event, such Principal Party will:
 
(i)                                      prepare and file a registration statement under the Securities Act with respect to the Rights and the securities purchasable upon exercise of the Rights on an appropriate form, use its best efforts to cause such registration statement to become effective as soon as practicable after such filing and use its best efforts to cause such registration statement to remain effective (with a prospectus at all times meeting the requirements of the Securities Act) until the Expiration Date, and similarly comply with applicable state securities laws;
 
(ii)                                   use its best efforts to list (or continue the listing of) the Rights and the securities purchasable upon exercise of the Rights on a national securities exchange or to meet the eligibility requirements for quotation on Nasdaq and list (or continue the listing of) the Rights and the securities purchasable upon exercise of the Rights on Nasdaq; and
 
(iii)                                deliver to holders of the Rights historical financial statements for such Principal Party which comply in all respects with the requirements for registration on Form F-1 (or any successor form) under the Securities Act.
 
In the event that at any time after the occurrence of a Triggering Event some or all of the Rights shall not have been exercised at the time of a transaction described in this Section 13, the Rights which have not theretofore been exercised shall thereafter be exercisable in the manner described in Section 13(a) (without taking into account any prior adjustment required by Section 11(a)(ii)).
 
(d)                                  In case the “Principal Party” for purposes of Section 13(b) hereof has provision in any of its authorized securities or in its certificate of incorporation or by-laws or other instrument governing its corporate affairs, which provision would have the effect of (i) causing such Principal Party to issue (other than to holders of Rights pursuant to Section 13 hereof), in connection with, or as a consequence of, the consummation of a Section 13 Event, shares of Common Stock or Equivalent Shares of such Principal Party at less than the then
 
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Current Per Share Market Price thereof or securities exercisable for, or convertible into, shares of Common Stock or Equivalent Shares of such Principal Party at less than such then Current Per Share Market Price, or (ii) providing for any special payment, tax or similar provision in connection with the issuance of the shares of Common Stock of such Principal Party pursuant to the provisions of Section 13 hereof, then, in such event, the Company hereby agrees with each holder of Rights that it shall not consummate any such transaction unless prior thereto the Company and such Principal Party shall have executed and delivered to the Rights Agent a supplemental agreement providing that the provision in question of such Principal Party shall have been canceled, waived or amended, or that the authorized securities shall be redeemed, so that the applicable provision will have no effect in connection with or as a consequence of, the consummation of the proposed transaction.
 
(e)                                   The Company covenants and agrees that it shall not, at any time after the Distribution Date, effect or permit to occur any Section 13 Event, if (i) at the time or immediately after such Section 13 Event there are any rights, warrants or other instruments or securities outstanding or agreements in effect which would substantially diminish or otherwise eliminate the benefits intended to be afforded by the Rights, (ii) prior to, simultaneously with or immediately after such Section 13 Event, the stockholders of the Person who constitutes, or would constitute, the “Principal Party” for purposes of Section 13(b) hereof shall have received a distribution of Rights previously owned by such Person or any of its Affiliates or Associates or (iii) the form or nature of organization of the Principal Party would preclude or limit the exercisability of the Rights.
 
(f)                                     The provisions of this Section 13 shall similarly apply to successive mergers or consolidations or sales or other transfers.
 
14.                                  Fractional Rights and Fractional Shares .
 
(a)                                   The Company shall not be required to issue fractions of Rights or to distribute Rights Certificates which evidence fractional Rights. In lieu of such fractional Rights, there shall be paid to the registered holders of the Rights Certificates with regard to which such fractional Rights would otherwise be issuable, an amount in cash equal to the same fraction of the current market value of a whole Right. For the purposes of this Section 14(a), the current market value of a whole Right shall be the closing price of the Rights for the Trading Day immediately prior to the date on which such fractional Rights would have been otherwise issuable, as determined pursuant to this Agreement.
 
(b)                                  The Company shall not be required to issue fractions of Preferred Shares (other than fractions that are integral multiples of one one-thousandth of a Preferred Share) upon exercise of the Rights or to distribute certificates which evidence fractional Preferred Shares (other than fractions that are integral multiples of one one-thousandth of a Preferred Share). Interests in fractions of Preferred Shares in integral multiples of one one-thousandth of a Preferred Share may, at the election of the Company, be evidenced by depositary receipts, pursuant to an appropriate agreement between the Company and a depositary selected by it; provided, that such agreement shall provide that the holders of such depositary receipts shall have all the rights, privileges and preferences to which they are entitled as beneficial owners of the Preferred Shares represented by such depositary receipts. In lieu of fractional Preferred
 
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Shares that are not integral multiples of one one-thousandth of a Preferred Share, the Company shall pay to the registered holders of Rights Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market value of a Preferred Share. For purposes of this Section 14(b), the current market value of a Preferred Share shall be one thousand times the closing price of a share of Common Stock (as determined pursuant to the terms hereof) for the Trading Day immediately prior to the date of such exercise.
 
(c)                                   The Company shall not be required to issue fractions of shares of Common Stock or to distribute certificates which evidence fractional shares of Common Stock upon the exercise or exchange of Rights. In lieu of such fractional shares of Common Stock, the Company shall pay to the registered holders of Rights Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market value of a share of Common Stock. For purposes of this Section 14(c), the current market value of a share of Common Stock shall be the closing price of a share of Common Stock (as determined pursuant to the terms hereof) for the Trading Day immediately prior to the date of such exercise.
 
(d)                                  The holder of a Right by the acceptance of the Right expressly waives his or her right to receive any fractional Rights or any fractional shares (other than fractions that are integral multiples of one one-thousandth of a Preferred Share) upon exercise of a Right.
 
15.                                  Rights of Action . All rights of action in respect of this Agreement, excepting the rights of action given to the Rights Agent under Section 18 hereof, are vested in the respective registered holders of the Rights Certificates (and, prior to the Distribution Date, the registered holders of the shares of Common Stock); and any registered holder of any Rights Certificate (or, prior to the Distribution Date, of the shares of Common Stock), without the consent of the Rights Agent or of the holder of any other Rights Certificate (or, prior to the Distribution Date, of the shares of Common Stock), may, in his or her own behalf and for his or her own benefit, enforce, and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, his or her right to exercise the Rights evidenced by such Rights Certificate in the manner provided in such Rights Certificate and in this Agreement. Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Agreement and will be entitled to specific performance of the obligations under, and injunctive relief against actual or threatened violations of, the obligations of any Person subject to this Agreement.
 
16.                                  Agreement of Rights Holders . Every holder of a Right, by accepting the same, consents and agrees with the Company and the Rights Agent and with every other holder of a Right that:
 
(a)                                   prior to the Distribution Date, the Rights will be transferable only in connection with the transfer of the shares of Common Stock;
 
(b)                                  after the Distribution Date, the Rights Certificates are transferable only on the registry books of the Rights Agent if surrendered at the principal office or offices of the
 
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Rights Agent designated for such purposes, duly endorsed or accompanied by a proper instrument of transfer and with the appropriate forms and certificates fully executed; and
 
(c)                                   subject to Sections 6(a) and 7(f) hereof, the Company and the Rights Agent may deem and treat the person in whose name the Rights Certificate (or, prior to the Distribution Date, the associated Common Stock certificate) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Rights Certificates or the associated Common Stock certificate made by anyone other than the Company or the Rights Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent shall be affected by any notice to the contrary.
 
17.                                  Rights Certificate Holder Not Deemed a Stockholder . No holder, as such, of any Rights Certificate shall be entitled to vote, receive dividends or be deemed for any purpose to be the holder of the Preferred Shares or any other securities of the Company which may at any time be issuable on the exercise of the Rights represented thereby, nor shall anything contained herein or in any Rights Certificate be construed to confer upon the holder of any Rights Certificate, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders (except as provided in Section 25 hereof), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by such Rights Certificate shall have been exercised in accordance with the provisions hereof.
 
18.                                  The Rights Agent .
 
(a)                                   The Company agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder and, from time to time, on demand of the Rights Agent, its reasonable expenses and counsel fees and other disbursements incurred in the administration and execution of this Agreement and the exercise and performance of its duties hereunder. The Company also agrees to indemnify the Rights Agent for, and to hold it harmless against, any loss, liability or expense, incurred without negligence, bad faith or willful misconduct on the part of the Rights Agent, for anything done or omitted by the Rights Agent in connection with the acceptance and administration of this Agreement, including the costs and expenses of defending against any claim of liability in the premises. In no event will the Rights Agent be liable for special, indirect, incidental or consequential loss or damage of any kind whatsoever, even if the Rights Agent has been advised of the possibility of such loss or damage.
 
(b)                                  The Rights Agent shall be protected and shall incur no liability for, or in respect of any action taken, suffered or omitted by it in connection with, its administration of this Agreement in reliance upon any Rights Certificate or certificate for the Preferred Shares or shares of Common Stock or for other securities of the Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, statement or other paper or document reasonably believed by it to be genuine and to be signed, executed and, where necessary, verified or acknowledged, by the proper Person or Persons, or otherwise upon the advice of counsel as set forth in Section 20 hereof.
 
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19.                                  Merger or Consolidation or Change of Name of Rights Agent . Any corporation into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any corporation succeeding to the corporate trust business of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto; provided, however, that such corporation would be eligible for appointment as a successor Rights Agent under the provisions of Section 21 hereof. In case at the time such successor Rights Agent shall succeed to the agency created by this Agreement, any of the Rights Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of the predecessor Rights Agent and deliver such Rights Certificates so countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned, any successor Rights Agent may countersign such Rights Certificates either in the name of the predecessor Rights Agent or in the name of the successor Rights Agent; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement. In case at any time the name of the Rights Agent shall be changed and at such time any of the Rights Certificates shall have been countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver Rights Certificates so countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned, the Rights Agent may countersign such Rights Certificates either in its prior name or in its changed name; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement.
 
20.                                  Duties of Rights Agent . The Rights Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which the Company and the holders of Rights Certificates, by their acceptance thereof, shall be bound:
 
(a)                                   The Rights Agent may consult with legal counsel (who may be legal counsel for the Company), and the written advice or opinion of such counsel shall be full and complete authorization and protection to the Rights Agent as to any action taken or omitted by it in good faith and in accordance with such written advice or opinion.
 
(b)                                  Whenever in the performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter (including, without limitation, the identity of any Acquiring Person and the determination of Current Per Share Market Price) be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by any one of the Chairman of the Board, the Chief Executive Officer, the President, any Vice President, the Chief Financial Officer, the Secretary or any Assistant Secretary of the Company and delivered to the Rights Agent; and such certificate shall be full authorization to the Rights Agent for any action taken or suffered in good faith by it under the provisions of this Agreement in reliance upon such certificate.
 
(c)                                   The Rights Agent shall be liable hereunder to the Company and any other Person only for its own negligence, bad faith or willful misconduct.
 
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(d)                                  The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Rights Certificates (except its countersignature thereof) or be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by the Company only.
 
(e)                                   The Rights Agent shall not be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution hereof by the Rights Agent) or in respect of the validity or execution of any Rights Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Rights Certificate; nor shall it be responsible for any change in the exercisability of the Rights or any adjustment in the terms of the Rights (including the manner, method or amount thereof) provided for in Sections 3, 11, 13, 23 or 24, or the ascertaining of the existence of facts that would require any such change or adjustment (except with respect to the exercise of Rights evidenced by Rights Certificates after receipt by the Rights Agent of a certificate furnished pursuant to Section 12 describing such change or adjustment); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any Preferred Shares to be issued pursuant to this Agreement or any Rights Certificate or as to whether any Preferred Shares will, when issued, be validly authorized and issued, fully paid and nonassessable.
 
(f)                                     The Company agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Agreement.
 
(g)                                  The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from any one of the Chairman of the Board, the Chief Executive Officer, the President, any Vice President, the Chief Financial Officer, the Secretary or any Assistant Secretary of the Company, and to apply to such officers for advice or instructions in connection with its duties, and it shall not be liable for any action taken or suffered by it in good faith in accordance with instructions of any such officer or for any delay in acting while waiting for those instructions. Any application by the Rights Agent for written instructions from the Company may, at the option of the Rights Agent, set forth in writing any action proposed to be taken or omitted by the Rights Agent under this Rights Agreement and the date on and/or after which such action shall be taken or such omission shall be effective. The Rights Agent shall not be liable for any action taken by, or omission of, the Rights Agent in accordance with a proposal included in any such application on or after the date specified in such application (which date shall not be less than five (5) Business Days after the date any officer of the Company actually receives such application, unless any such officer shall have consented in writing to an earlier date) unless, prior to taking any such action (or the effective date in the case of an omission), the Rights Agent shall have received written instructions in response to such application specifying the action to be taken or omitted.
 
(h)                                  The Rights Agent and any stockholder, director, officer or employee of the Rights Agent may buy, sell or deal in any of the Rights or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it
 
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were not Rights Agent under this Agreement. Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Company or for any other legal entity.
 
(i)                                      The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys or agents, and the Rights Agent shall not be answerable or accountable for any act, default, neglect or misconduct of any such attorneys or agents or for any loss to the Company resulting from any such act, default, neglect or misconduct, provided reasonable care was exercised in the selection and continued employment thereof.
 
(j)                                      No provision of this Agreement shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of its rights if there shall be reasonable grounds for believing that repayment of such funds or adequate indemnification against such risk or liability is not reasonably assured to it.
 
(k)                                   If, with respect to any Rights Certificate surrendered to the Rights Agent for exercise or transfer, the certificate attached to the form of assignment or form of election to purchase, as the case may be, has either not been completed or indicates an affirmative response to clause 1 and/or 2 thereof, the Rights Agent shall not take any further action with respect to such requested exercise or transfer without first consulting with the Company.
 
21.                                  Change of Rights Agent . The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Agreement upon thirty (30) days’ written notice mailed to the Company and to each transfer agent of the Preferred Shares and the Common Stock by registered or certified mail, and to the holders of the Rights Certificates by first-class mail. The Company may remove the Rights Agent or any successor Rights Agent upon thirty (30) days’ written notice, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the Preferred Shares and the Common Stock by registered or certified mail, and to the holders of the Rights Certificates by first-class mail. If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Rights Agent. If the Company shall fail to make such appointment within a period of thirty (30) days after giving notice of such removal or after receiving written notice of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Rights Certificate (who shall, with such notice, submit his or her Rights Certificate for inspection by the Company), then the registered holder of any Rights Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, shall be a corporation organized and doing business under the laws of the United States or of any state of the United States, in good standing, which is authorized under such laws to exercise corporate trust or stockholder services powers and is subject to supervision or examination by federal or state authority and which has at the time of its appointment as Rights Agent a combined capital and surplus of at least U.S.$100 million. After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for
 
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the purpose. Not later than the effective date of any such appointment, the Company shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Preferred Shares and the Common Stock, and mail a written notice thereof to the registered holders of the Rights Certificates. Failure to give any notice provided for in this Section 21, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be.
 
22.                                  Issuance of New Rights Certificates . Notwithstanding any of the provisions of this Agreement or of the Rights to the contrary, the Company may, at its option, issue new Rights Certificates evidencing Rights in such form as may be approved by its Board of Directors to reflect any adjustment or change in the Exercise Price and the number or kind or class of shares or other securities or property purchasable under the Rights Certificates made in accordance with the provisions of this Agreement. In addition, in connection with the issuance or sale of shares of Common Stock following the Distribution Date and prior to the redemption or expiration of the Rights, the Company (a) shall, with respect to shares of Common Stock so issued or sold pursuant to the exercise of stock options or under any employee plan or arrangement or upon the exercise, conversion or exchange of other securities of the Company outstanding at the date hereof or upon the exercise, conversion or exchange of securities hereinafter issued by the Company and (b) may, in any other case, if deemed necessary or appropriate by the Board of Directors of the Company, issue Rights Certificates representing the appropriate number of Rights in connection with such issuance or sale; provided , however , that (i) no such Rights Certificate shall be issued and this sentence shall be null and void ab initio if, and to the extent that, such issuance or this sentence would create a significant risk of or result in material adverse tax consequences to the Company or the Person to whom such Rights Certificate would be issued or would create a significant risk of or result in such options’ or employee plans’ or arrangements’ failing to qualify for otherwise available special tax treatment and (ii) no such Rights Certificate shall be issued if, and to the extent that, appropriate adjustment shall otherwise have been made in lieu of the issuance thereof.
 
23.                                  Redemption .
 
(a)                                   The Company may, at its option and with the approval of the Board of Directors, at any time prior to the Close of Business on the earlier of (i) the close of business on the tenth day following the Shares Acquisition Date and (ii) the Final Expiration Date, redeem all but not less than all the then outstanding Rights at a redemption price of U.S. $0.01 per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (such redemption price being herein referred to as the “ Redemption Price ”) and the Company may, at its option, pay the Redemption Price either in shares of Common Stock (based on the Current Per Share Market Price thereof at the time of redemption) or cash. Such redemption of the Rights by the Company may be made effective at such time, on such basis and with such conditions as the Board of Directors in its sole discretion may establish. The date on which the Board of Directors elects to make the redemption effective shall be referred to as the “ Redemption Date ”.
 
(b)                                  Immediately upon the action of the Board of Directors of the Company ordering the redemption of the Rights, evidence of which shall have been filed with the Rights
 
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Agent, and without any further action and without any notice, the right to exercise the Rights will terminate and the only right thereafter of the holders of Rights shall be to receive the Redemption Price. The Company shall promptly give public notice of any such redemption; provided , however , that the failure to give or any defect in, any such notice shall not affect the validity of such redemption. Within ten (10) days after the action of the Board of Directors ordering the redemption of the Rights, the Company shall give notice of such redemption to the Rights Agent and the holders of the then outstanding Rights by mailing such notice to all such holders at their last addresses as they appear upon the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the transfer agent for the Common Stock. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of redemption will state the method by which the payment of the Redemption Price will be made. Neither the Company nor any of its Affiliates or Associates may redeem, acquire or purchase for value any Rights at any time in any manner other than that specifically set forth in this Section 23 or in Section 24 hereof, and other than in connection with the purchase of shares of Common Stock prior to the Distribution Date.
 
24.                                  Exchange .
 
(a)                                   Subject to applicable laws, rules and regulations, and subject to subsection 24(c) below, the Company may, at its option, by action of the Board of Directors, at any time after the occurrence of a Triggering Event, exchange all or part of the then outstanding and exercisable Rights (which shall not include Rights that have become void pursuant to the provisions of Section 7(e) hereof) for shares of Common Stock at an exchange ratio of one share of Common Stock per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (such exchange ratio being hereinafter referred to as the “ Exchange Ratio ”). Notwithstanding the foregoing, the Board of Directors shall not be empowered to effect such exchange at any time after any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or any such Subsidiary, or any entity holding Common Stock for or pursuant to the terms of any such plan or an Exempted Person), together with all Affiliates and Associates of such Person, becomes the Beneficial Owner of 50% or more of the Common Stock then outstanding.
 
(b)                                  Immediately upon the action of the Board of Directors ordering the exchange of any Rights pursuant to Section 24(a) and without any further action and without any notice, the right to exercise such Rights shall terminate and the only right thereafter of a holder of such Rights shall be to receive that number of shares of Common Stock equal to the number of such Rights held by such holder multiplied by the Exchange Ratio. The Company shall give public notice of any such exchange; provided, however, that the failure to give, or any defect in, such notice shall not affect the validity of such exchange. The Company shall mail a notice of any such exchange to all of the holders of such Rights at their last addresses as they appear upon the registry books of the Rights Agent. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of exchange will state the method by which the exchange of the shares of Common Stock for Rights will be effected and, in the event of any partial exchange, the number of Rights which will be exchanged. Any partial exchange shall be effected pro rata based on the number of Rights (other than Rights which have become void pursuant to the provisions of Section 7(e) hereof) held by each holder of Rights.
 
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(c)                                   In the event that there shall not be sufficient shares of Common Stock issued but not outstanding or authorized but unissued to permit any exchange of Rights as contemplated in accordance with Section 24(a), the Company shall either take such action as may be necessary to authorize additional shares of Common Stock for issuance upon exchange of the Rights or alternatively, at the option of a majority of the Board of Directors, with respect to each Right (i) pay cash in an amount equal to the Current Value (as hereinafter defined), in lieu of issuing shares of Common Stock in exchange therefor, or (ii) issue debt or equity securities or a combination thereof, having a value equal to the Current Value, in lieu of issuing shares of Common Stock in exchange for each such Right, where the value of such securities shall be determined by a nationally recognized investment banking firm selected by majority vote of the Board of Directors, or (iii) deliver any combination of cash, property, shares of Common Stock and/or other securities having a value equal to the Current Value in exchange for each Right. For purposes of this Section 24(c) only, the Current Value shall mean the product of the Current Per Share Market Price of shares of Common Stock on the date of the occurrence of the event described above in subparagraph (a), multiplied by the number of shares of Common Stock for which the Right otherwise would be exchangeable if there were sufficient shares available. To the extent that the Company determines that some action need be taken pursuant to clauses (i), (ii) or (iii) of this Section 24(c), the Board of Directors may temporarily suspend the exercisability of the Rights for a period of up to sixty (60) days following the date on which the event described in Section 24(a) shall have occurred, in order to seek any authorization of additional shares of Common Stock and/or to decide the appropriate form of distribution to be made pursuant to the above provision and to determine the value thereof. In the event of any such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended.
 
(d)                                  The Company shall not be required to issue fractions of shares of Common Stock or to distribute certificates which evidence fractional shares of Common Stock. In lieu of such fractional shares of Common Stock, there shall be paid to the registered holders of the Rights Certificates with regard to which such fractional shares of Common Stock would otherwise be issuable, an amount in cash equal to the same fraction of the current market value of a whole share of Common Stock (as determined pursuant to the terms hereof).
 
(e)                                   The Company may, at its option, by majority vote of the Board of Directors, at any time before any Person has become an Acquiring Person, exchange all or part of the then outstanding Rights for rights of substantially equivalent value, as determined reasonably and with good faith by the Board of Directors, based upon the advice of one or more nationally recognized investment banking firms.
 
(f)                                     Immediately upon the action of the Board of Directors ordering the exchange of any Rights pursuant to subsection 24(e) of this Section 24 and without any further action and without any notice, the right to exercise such Rights shall terminate and the only right thereafter of a holder of such Rights shall be to receive that number of rights in exchange therefor as has been determined by the Board of Directors in accordance with subsection 24(e) above. The Company shall give public notice of any such exchange; provided, however, that the failure to give, or any defect in, such notice shall not affect the validity of such exchange. The Company shall mail a notice of any such exchange to all of the holders of such Rights at their last addresses as they appear upon the registry books of the transfer agent for the shares of
 
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Common Stock of the Company. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of exchange will state the method by which the exchange of the Rights will be effected.
 
25.                                  Notice of Certain Events .
 
(a)                                   In case the Company shall propose to effect or permit to occur any Triggering Event or Section 13 Event, the Company shall give notice thereof to each holder of Rights in accordance with Section 26 hereof at least twenty (20) days prior to occurrence of such Triggering Event or such Section 13 Event.
 
(b)                                  In case any Triggering Event or Section 13 Event shall occur, then, in any such case, the Company shall as soon as practicable thereafter give to each holder of a Rights Certificate, in accordance with Section 26 hereof, a notice of the occurrence of such event, which shall specify the event and the consequences of the event to holders of Rights under Sections 11(a)(ii) and 13 hereof.
 
26.                                  Notices . Notices or demands authorized by this Agreement to be given or made by the Rights Agent or by the holder of any Rights Certificate to or on the Company shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Rights Agent) as follows:
 
Danaos Corporation
14 Akti Kondyli
185 45
Piraeus, Greece

Attention:  Chief Executive Officer
 
with a copy to:
 
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178
Attention:  Stephen P. Farrell
 
Subject to the provisions of Section 21 hereof, any notice or demand authorized by this Agreement to be given or made by the Company or by the holder of any Rights Certificate to or on the Rights Agent shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Company) as follows:
 
American Stock Transfer & Trust Company
59 Maiden Lane
New York, New York 10038
 
Notices or demands authorized by this Agreement to be given or made by the Company or the Rights Agent to the holder of any Rights Certificate shall be sufficiently given or made if sent by
 
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first-class mail, postage prepaid, addressed to such holder at the address of such holder as shown on the registry books of the Company.
 
27.                                  Supplements and Amendments . Prior to the occurrence of a Distribution Date, the Company may supplement or amend this Agreement in any respect without the approval of any holders of Rights and the Rights Agent shall, if the Company so directs, execute such supplement or amendment. From and after the occurrence of a Distribution Date, the Company and the Rights Agent may from time to time supplement or amend this Agreement without the approval of any holders of Rights in order to (i) cure any ambiguity or omission, (ii) correct or supplement any provision contained herein which may be defective or inconsistent with any other provisions herein, (iii) shorten or lengthen any time period hereunder or (iv) to change or supplement the provisions hereunder in any manner that the Company may deem necessary or desirable and that shall not adversely affect the interests of the holders of Rights (other than an Acquiring Person or an Affiliate or Associate of an Acquiring Person); provided, this Agreement may not be supplemented or amended to lengthen, pursuant to clause (iii) of this sentence, (A) a time period relating to when the Rights may be redeemed at such time as the Rights are not then redeemable or (B) any other time period unless such lengthening is for the purpose of protecting, enhancing or clarifying the rights of, and/or the benefits to, the holders of Rights (other than an Acquiring Person or an Affiliate or Associate of an Acquiring Person). Upon the delivery of a certificate from an appropriate officer of the Company that states that the proposed supplement or amendment is in compliance with the terms of this Section 27, the Rights Agent shall execute such supplement or amendment. Prior to the Distribution Date, the interests of the holders of Rights shall be deemed coincident with the interests of the holders of shares of Common Stock.
 
28.                                  Successors . All the covenants and provisions of this Agreement by or for the benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder.
 
29.                                  Determinations and Actions by the Board of Directors, etc . For all purposes of this Agreement, any calculation of the number of shares of Common Stock outstanding at any particular time, including for purposes of determining the particular percentage of such outstanding shares of Common Stock of which any Person is the Beneficial Owner, shall be made in accordance with the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act. The Board of Directors of the Company shall have the exclusive power and authority to administer this Agreement and to exercise all rights and powers specifically granted to the Board, or the Company, or as may be necessary or advisable in the administration of this Agreement, including, without limitation, the right and power to (i) interpret the provisions of this Agreement and (ii) make all determinations deemed necessary or advisable for the administration of this Agreement (including a determination to redeem or not redeem the Rights or to amend the Agreement). All such actions, calculations, interpretations and determinations (including, for purposes of clause (y) below, all omissions with respect to the foregoing) which are done or made by the Board in good faith, shall (x) be final, conclusive and binding on the Company, the Rights Agent, the holders of the Rights Certificates and all other parties and (y) not subject the Board to any liability to the holders of the Rights.
 
30.                                  Benefits of this Agreement . Nothing in this Agreement shall be construed to give to any Person other than the Company, the Rights Agent and the registered holders of the Rights
 
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Certificates (and, prior to the Distribution Date, the shares of Common Stock) any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent and the registered holders of the Rights Certificates (and, prior to the Distribution Date, the shares of Common Stock).
 
31.                                  Severability . If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated; provided , however , that notwithstanding anything in this Agreement to the contrary, if any such term, provision, covenant or restriction is held by such court or authority to be invalid, void or unenforceable and the Board of Directors of the Company determines in its good faith judgment that severing the invalid language from this Agreement would adversely affect the purpose or effect of this Agreement, the right of redemption set forth in Section 23 hereof shall be reinstated and shall not expire until the Close of Business on the tenth day following the date of such determination by the Board of Directors.
 
32.                                  Governing Law . This Agreement and each Right and each Rights Certificate issued hereunder shall be deemed to be a contract made under the laws of New York and for all purposes shall be governed by and construed in accordance with the laws of such jurisdiction applicable to contracts to be made and performed entirely within such jurisdiction.
 
33.                                  Counterparts . This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.
 
34.                                  Descriptive Headings . Descriptive headings of the several Sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof.
 
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
 
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IN WITNESS WHEREOF, the parties have executed this Stockholders Rights Agreement as of the date first written above.

 	DANAOS CORPORATION	
 	 	
 	By:	/s/ John Koustas	 	
 	 	Name: John Koustas	 	
 	 	Title:  President and CEO	 	

 	AMERICAN STOCK & TRUST
COMPANY	
 	 	
 	By:	/s/ Herbert J. Lemmer	 	
 	 	Name:  Herbert J. Lemmer	 	
 	 	Title:    Vice President	 	

 
[Signature Page to Stockholders Rights Agreement]

 
Exhibit A
 
STATEMENT OF DESIGNATION OF RIGHTS, PREFERENCES AND PRIVILEGES OF SERIES A PARTICIPATING PREFERRED STOCK OF DANAOS CORPORATION
 
The undersigned,                               and                          do hereby certify:
 
1.                                                                                        That they are the duly elected and acting President and Secretary, respectively, of Danaos Corporation, a Marshall Islands corporation (the “ Company ”).
 
2.                                                                                        That pursuant to the authority conferred by the Company’s Amended and Restated Articles of Incorporation, the Company’s Board of Directors on September    , 2006 adopted the following resolution designating and prescribing the relative rights, preferences and limitations of the Company’s Series A Participating Preferred Stock:
 
RESOLVED, that pursuant to the authority vested in the Board of Directors (the “ Board ”) of the Company by the Articles of Incorporation, the Board hereby establishes a series of preferred stock, par value U.S. $0.01 per share, and fixes the designation and certain powers, preferences and other special rights of the shares of such series, and certain qualifications, limitations and restrictions thereon, as follows:
 
“Section 1.                                       Designation and Amount . The shares of such series shall be designated as “ Series A Participating Preferred Stock ”. The Series A Participating Preferred Stock shall have a par value of U.S. $0.01 per share, and the number of shares constituting such series shall initially be 1,000,000, which number the Board may from time to time increase or decrease (but not below the number then outstanding).
 
Section 2.                                             Proportional Adjustment . In the event the Company shall at any time after the issuance of any share or shares of Series A Participating Preferred Stock (i) declare any dividend on the common stock of the Company, par value U.S. $0.01 per share (the “ Common Stock ”), payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the Company shall simultaneously effect a proportional adjustment to the number of outstanding shares of Series A Participating Preferred Stock.
 
Section 3.                                             Dividends and Distributions .
 
(a)                                   Subject to the prior and superior right of the holders of any shares of any series of preferred stock ranking prior and superior to the shares of Series A Participating Preferred Stock with respect to dividends, the holders of shares of Series A Participating Preferred Stock shall be entitled to receive when, as and if declared by the Board out of funds legally available for the purpose, quarterly dividends payable in cash on the last day of March, June, September and December in each year (each such date being referred to herein as a “ Quarterly Dividend Payment Date ”), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Participating Preferred Stock, in an amount per share (rounded to the nearest cent) equal to 1,000 times the aggregate per share amount of all cash dividends, and 1,000 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend payable in shares
 
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of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Participating Preferred Stock.
 
(b)                                  The Company shall declare a dividend or distribution on the Series A Participating Preferred Stock as provided in paragraph (a) above immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock).
 
(c)                                   Dividends shall begin to accrue on outstanding shares of Series A Participating Preferred Stock from the Quarterly Dividend Payment Date immediately preceding the date of issue of such shares of Series A Participating Preferred Stock, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A Participating Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Participating Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board may fix a record date for the determination of holders of shares of Series A Participating Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be no more than 30 days prior to the date fixed for the payment thereof.
 
Section 4.                                             Voting Rights . The holders of shares of Series A Participating Preferred Stock shall have the following voting rights:
 
(d)                                  Each share of Series A Participating Preferred Stock shall entitle the holder thereof to 1,000 votes on all matters submitted to a vote of the stockholders of the Company.
 
(e)                                   Except as otherwise provided herein or required by law, the holders of shares of Series A Participating Preferred Stock and the holders of shares of Common Stock shall vote together as one class on all matters submitted to a vote of stockholders of the Company.
 
(f)                                     Except as otherwise provided herein or required by law, holders of Series A Participating Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action.
 
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Section 5.                                             Certain Restrictions .
 
(a)                                   The Company shall not declare any dividend on, make any distribution on, or redeem or purchase or otherwise acquire for consideration any shares of Common Stock after the first issuance of a share or fraction of a share of Series A Participating Preferred Stock unless concurrently therewith it shall declare a dividend on, make a distribution on, or redeem or purchase or otherwise acquire for consideration the Series A Participating Preferred Stock as required by Section 3 hereof.
 
(b)                                  Whenever quarterly dividends or other dividends or distributions payable on the Series A Participating Preferred Stock as provided in Section 3 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Participating Preferred Stock outstanding shall have been paid in full, the Company shall not (i) declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Participating Preferred Stock; (ii) declare or pay dividends on, make any other distributions on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with Series A Participating Preferred Stock, except dividends paid ratably on the Series A Participating Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Participating Preferred Stock, provided that the Company may at any time redeem, purchase or otherwise acquire shares of any such parity stock in exchange for shares of any stock of the Company ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A Participating Preferred Stock; (iv) purchase or otherwise acquire for consideration any shares of Series A Participating Preferred Stock, or any shares of stock ranking on a parity with the Series A Participating Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board) to all holders of such shares upon such terms as the Board, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes.
 
(c)                                   The Company shall not permit any subsidiary of the Company to purchase or otherwise acquire for consideration any shares of stock of the Company unless the Company could, under paragraph (a) of this Section 5, purchase or otherwise acquire such shares at such time and in such manner.
 
Section 6.                                             Reacquired Shares . Any shares of Series A Participating Preferred Stock purchased or otherwise acquired by the Company in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of preferred stock and may be reissued as part of a new series of preferred stock to be created by resolution or resolutions of the Board, subject to the conditions and restrictions on issuance set forth herein and, in the Articles of Incorporation, as then amended.
 
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Section 7.                                             Liquidation, Dissolution or Winding Up . Upon any liquidation, dissolution or winding up of the Company, the holders of shares of Series A Participating Preferred Stock shall be entitled to receive an aggregate amount per share equal to 1,000 times the aggregate amount to be distributed per share to holders of shares of Common Stock plus an amount equal to any accrued and unpaid dividends on such shares of Series A Participating Preferred Stock.
 
Section 8.                                             Consolidation, Merger, etc . In case the Company shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case the shares of Series A Participating Preferred Stock shall at the same time be similarly exchanged or changed in an amount per share equal to 1,000 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged.
 
Section 9.                                             No Redemption . The shares of Series A Participating Preferred Stock shall not be redeemable.
 
Section 10.                                       Ranking . The Series A Participating Preferred Stock shall rank junior to all other series of the Company’s preferred stock as to the payment of dividends and the distribution of assets, unless the terms of any such series shall provide otherwise.
 
Section 11.                                       Amendment . The Articles of Incorporation of the Company shall not be further amended in any manner which would materially alter or change the powers, preference or special rights of the Series A Participating Preferred Stock so as to affect them adversely without the affirmative vote of the holders of a majority of the outstanding shares of Series A Participating Preferred Stock, voting separately as a class.
 
Section 12.                                       Fractional Shares . Series A Participating Preferred Stock may be issued in fractions of a share which shall entitle the holder, in proportion to such holder’s fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series A Participating Preferred Stock.”
 
RESOLVED FURTHER, that the Board hereby authorizes and directs the President or any Vice President and the Secretary or any Assistant Secretary of this Company to prepare and file a Statement of Designation of Rights, Preferences and Privileges in accordance with the foregoing resolution and the provisions of Marshall Islands law and to take such actions as they may deem necessary or appropriate to carry out the intent of the foregoing resolution.
 
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
 
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We further declare, under penalty of perjury, that the foregoing Statement of Designation is the act and deed of the Company and that the facts stated therein are true and correct.
 
Executed at                       on  September           , 2006.

 	 	 	
 	President	

 	Secretary	
 
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Exhibit B
 
[FORM OF RIGHTS CERTIFICATE]
 
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Exhibit C
 
SUMMARY OF RIGHTS

Distribution and Transfer of Rights:	 	 	
 	 	 	
Distribution Date:	 	The rights will separate from the common stock and become exercisable after (1) the tenth day after a person or group acquires ownership of 15% or more of the company’s common stock or (2) the 10th business day (or such later date as determined by the company’s board of directors) after a person or group announces a tender or exchange offer which would result in that person or group holding 15% or more of the company’s common stock	
 	 	 	
Preferred Stock Purchaseable Upon
Exercise of Rights:	 	On the Distribution Date, each holder of a right will be entitled to purchase for U.S.$ [   ] (the “ Exercise Price ”) a fraction (1/1000th) of one share of the company’s preferred stock which has similar economic terms as one share of common stock.	
 	 	 	
Flip-in:	 	If an acquiring person (an “ Acquiring Person ”) acquires more than 15% of the company’s common stock then each holder of a right (except that acquiring person) will be entitled to buy at the Exercise Price, a number of shares of the company’s common stock which has a then current market value of twice the Exercise Price.	
 	 	 	
Flip-over:	 	If after an Acquiring Person acquires more than 15% of the company’s common stock, the company merges into another company (either as the surviving corporation or as the disappearing entity) or the company sells more than 50% of its assets or earning power, then each holder of a right (except for those owned by the Acquiring Person) will be entitled to purchase at the Exercise Price, a number of shares of common stock of the surviving entity which has a then current market value of twice the Exercise Price.	
 	 	 	
Exchange Provision:	 	Any time after the date an Acquiring Person obtains more than 15% of the company’s common stock and before that Acquiring Person acquires more than 50% of the company’s outstanding common stock, the company may exchange each right owned	
 
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 	 	by all other rights holders, in whole or in part, for one share of the company’s common stock.	
 	 	 	
Redemption of Rights:	 	The company can redeem the rights at any time prior to a public announcement that a person has acquired ownership of 15% or more of the company’s common stock.	
 	 	 	
Expiration of Rights:	 	The rights expire on the earliest of (1) September    , 2016 or (2) the exchange or redemption of the rights as described above.	
 	 	 	
Amendment of Terms of Rights:	 	The terms of the rights and the Stockholder Rights Plan may be amended without the consent of the rights holders at any time on or prior to the Distribution Date. After the Distribution Date, the terms of the rights and the Stockholder Rights Plan may be amended to make changes, which do not adversely affect the rights of the rights holders (other than the Acquiring Person).	
 	 	 	
Voting Rights:	 	The rights will not have any voting rights.	
 	 	 	
Anti-dilution Provisions:	 	The rights will have the benefit of certain customary anti-dilution protection.	
 
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Exhibit 10.5
 
DANAOS CORPORATION
 
2006 EQUITY COMPENSATION PLAN
 
1.                                        Purpose of the Plan
 
The purpose of this 2006 Equity Compensation Plan (the “Plan”) is to advance the interests of the Company and its stockholders by providing a means (a) to attract, retain, and reward directors, officers, other employees and persons who provide services to the Company and its Subsidiaries and directors, officers and employees of any Management Company, (b) to link compensation to measures of the Company’s performance in order to provide additional incentives, including stock-based incentives and cash-based incentives, to such persons for the creation of stockholder value, and (c) to enable such persons to acquire or increase a proprietary interest in the Company in order to promote a closer identity of interests between such persons and the Company’s stockholders.
 
2.                                        Definitions
 
Capitalized terms used in the Plan and not defined elsewhere in the Plan shall have the meaning set forth in this Section.
 
2.1                                  “Award” means a compensatory award made pursuant to the Plan pursuant to which a Participant receives, or has the opportunity to receive Shares or cash.
 
2.2                                  “Award Agreement” means a written document prescribed by the Committee and provided to a Participant evidencing the grant of an Award under the Plan.
 
2.3                                  “Beneficiary” means the person(s) or trust(s) entitled by will or the laws of descent and distribution to receive any rights with respect to an Award that survive such Participant’s death provided that if at the time of a Participant’s death, the Participant had on file with the Committee a written designation of a person(s) or trust(s) to receive such rights, then such person(s) (if still living at the time of the Participant’s death) or trust(s) shall be the “Beneficiary” for purposes of the Plan.
 
2.4                                  “Board” means the Board of Directors of the Company.
 
2.5                                  “Change of Control” shall mean the occurrence of any of the following:
 
(a) any “person” (as such term is used in Sections 3(a)(9) and 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) or “group” (within the meaning of Section 13(d)(3) of the Exchange Act), other than (i) the Company, or (ii) John Koustas or entities which he directly or indirectly controls (as defined in Rule 12b-2 under the Exchange Act) or which are established for his benefit or the benefit of members of his family, acquiring “beneficial ownership” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of more than fifty percent (50%) of the Voting Stock of the Company;
 
(b) the sale of all or substantially all of the Company’s assets in one or more related transactions to a “person” (as such term is used in Sections 3(a)(9) and 13(d) of the Exchange Act) other than such a
 
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sale (x) to a subsidiary of the Company which does not involve a change in the equity holdings of the Company or (y) to John Koustas or entities which he directly or indirectly controls or which are established for his benefit or the benefit of members of his family;
 
(c) any merger, consolidation, reorganization or similar event of the Company, as a result of which the holders of the Voting Stock of the Company immediately prior to such merger, consolidation, reorganization or similar event do not directly or indirectly hold at least fifty-one percent (51%) of the Voting Stock of the surviving entity;
 
(d) a majority of the members of the Board of Directors are no longer Continuing Directors; as used herein, a “Continuing Director” means any member of the Board of Directors who was a member of such Board of Directors on the date hereof and any person who becomes a director subsequent to such date whose election or nomination for election was supported by a majority of  the directors who then comprised the Continuing Directors; or
 
(e) the Company adopts any plan of liquidation or dissolution providing for the distribution of all or substantially all of its assets.
 
For purposes of the Change of Control definition, the “Company” shall include any entity that succeeds to all or substantially all of the business of the Company and “Voting Stock” shall mean capital stock of any class or classes having general voting power, in the absence of specified contingencies, to elect the directors of a corporation.
 
2.6                                  “Committee” means the Compensation Committee of the Board or such other committee appointed by the Board to administer the Plan or the Board, where the Board is acting as the Committee or performing the functions of the Committee, as set forth in Section 3.
 
2.7                                  “Company” means Danaos Corporation, a corporation domiciled in the Republic of The Marshall Islands.
 
2.8                                  “Management Company” means any company that is providing administrative, commercial, technical or maritime services to, or for the benefit of, the Company, its subsidiaries and their vessels.
 
2.9                                  “Participant” means any person who has been granted an Award under the Plan.
 
2.10                            “Shares” means shares of common stock of the Company and such other securities as may be substituted or resubstituted for Shares pursuant to Section 6.
 
2.11                            “Subsidiary” means an entity that is, either directly or through one or more intermediaries, controlled by the Company.
 
3.                                        Administration
 
3.1                                  Committee . The Plan shall be administered by the Committee. Other provisions of the Plan notwithstanding, the Board may perform any function of the Committee under the Plan, and that authority specifically reserved to the Board under the terms of the Plan, the Company’s Articles of Incorporation, By-Laws, or applicable law shall be exercised by the Board and not by the Committee. The Board shall serve as the Committee in respect of any Awards made to any director of the Company who is not otherwise employed by the Company.
 
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3.2                                  Powers and Duties of Committee. In addition to the powers and duties specified elsewhere in the Plan, the Committee shall have full authority and discretion to:
 
(a)                                   adopt, amend, suspend, and rescind such rules and regulations and appoint such agents as the Committee may deem necessary or advisable to administer the Plan;
 
(b)                                  correct any defect or supply any omission or reconcile any inconsistency in the Plan and to construe and interpret the Plan and any Award, rules and regulations, Award Agreement, or other instrument hereunder;
 
(c)                                   make determinations relating to eligibility for and entitlements in respect of Awards, and to make all factual findings related thereto; and
 
(d)                                  make all other decisions and determinations as may be required under the terms of the Plan or as the Committee may deem necessary or advisable for the administration of the Plan. All determinations and decisions of the Committee shall be final and binding upon a Participant or any person claiming any rights under the Plan from or through any Participant, and the Participant or such other person may not further pursue his or her claim in any court of law or equity or other arbitral proceeding.
 
(e)                                   Delegation by Committee . Except to the extent prohibited by applicable law or the applicable rules of a stock exchange, the Committee may delegate, on such terms and conditions as it determines in its sole and absolute discretion, to one or more senior executives of the Company (i) the authority to make grants of Awards to officers (other than executive officers), employees of the Company, employees of any Subsidiary and employees of any Management Company and (ii) other administrative responsibilities. Any such allocation or delegation may be revoked by the Committee at any time.
 
3.3                                  Limitation of Liability . Each member of the Committee shall be entitled to, in good faith, rely or act upon any report or other information furnished to him by any officer or other employee of the Company or any Subsidiary, the Company’s independent registered public accountants, or any executive compensation consultant, legal counsel, or other professional retained by the Company to assist in the administration of the Plan. No member of the Committee, nor any officer or employee of the Company acting on behalf of the Committee, shall be personally liable for any action, determination, or interpretation taken or made in good faith with respect to the Plan, and all members of the Committee and any officer or employee of the Company acting on behalf of the Committee or members thereof shall, to the extent permitted by law, be fully indemnified and protected by the Company with respect to any such action, determination, or interpretation.
 
4.                                        Limitations on Awards
 
4.1                                  Aggregate Number of Shares Available for Awards. The aggregate number of Shares for which Awards may be granted under this Plan shall not exceed 6% of the number of Shares issued and outstanding at the time any Award is granted. Awards made under this Plan which are forfeited (including a repurchase or cancellation of Shares subject thereto by the Company in exchange for the price, if any, paid to the Company for such Shares, or for their par or other nominal value), cancelled or have expired, shall be disregarded for purposes of the preceding sentence.
 
4.2                                  Type of Shares Deliverable . The Shares delivered in connection with Awards may consist, in whole or in part, of authorized and unissued Shares, or Shares acquired in the market for the account of a Participant.
 
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5.                                        Awards
 
5.1                                  Eligibility . The Committee shall have the discretion to select Award recipients from among the following categories of eligible recipients: (i) individuals who are employees (including officers) of the Company, any Subsidiary or any Management Company, (ii) individuals who are members of the Board and not otherwise employed by the Company, any Subsidiary or any Management Company, (iii) any other individual who provides substantial personal services to the Company or any Subsidiary, (iv) any individual who has agreed to become an employee of the Company or a Subsidiary or any Management Company, provided that no such person may receive any payment or exercise any right relating to an Award until such person has commenced employment, and (v) individuals formerly employed by the Company or any Subsidiary as compensation in respect of their employment with the Company or any Subsidiary.
 
5.2                                  Type of Awards . The Committee shall have the discretion to determine the type of Awards to be granted under the Plan. Such Awards may be in a form payable in either Shares or cash, including, but not limited to, options to purchase Shares, restricted Shares, bonus Shares, appreciation rights, share units, performance units and dividend equivalents. The Committee is authorized to grant Awards as a bonus, or to grant Awards in lieu of obligations of the Company or any Subsidiary to pay cash or grant other awards under other plans or compensatory arrangements (including under any employment agreement), to the extent permitted by such other plans or arrangements. Shares issued pursuant to an Award in the nature of a purchase right (e.g., options) shall be purchased for such consideration, paid for at such times, by such methods, and in such forms, including cash, Shares, other Awards, or other consideration, as the Committee shall determine.
 
5.3                                  Terms and Conditions of Awards. The Committee shall determine the size of each Award to be granted (including, where applicable, the number of Shares to which an Award will relate), and all other terms and conditions of each such Award (including, but not limited to, any exercise price, grant price, or purchase price, any restrictions or conditions relating to transferability, forfeiture, exercisability, or settlement of an Award, and any schedule or performance conditions for the lapse of such restrictions or conditions, and accelerations or modifications thereof, based in each case on such considerations as the Committee shall determine). The Committee may determine whether, to what extent, and under what circumstances an Award may be settled, or the exercise price of an Award may be paid, in cash, Shares, other Awards, or other consideration, or an Award may be canceled, forfeited, or surrendered.
 
5.4                                  Option Repricing . As to any Award granted as an option to purchase Shares or an appreciation right payable in Shares, the Committee is authorized to subsequently reduce the applicable exercise price relating to such Award, or take such other action as may be considered a repricing of such Award under generally accepted accounting principles.
 
5.5                                  Stand-Alone, Additional, Tandem, and Substitute Awards. Awards granted under the Plan may, in the discretion of the Committee, be granted either alone or in addition to, in tandem with, or in substitution or exchange for, any other Award or any award granted under another plan of the Company, any Subsidiary, any Management Company or any business entity to be acquired by the Company or a Subsidiary, or any other right of a Participant to receive payment from the Company or any Subsidiary, including under any employment agreement, and in granting a new Award, the Committee may determine that the value of any surrendered Award or award may be applied to reduce the exercise price of any option or appreciation right or purchase price of any other Award.
 
5.6                                  Vesting Upon a Change of Control . Unless otherwise set forth in an Award Agreement, Awards will vest upon a Change of Control, and any time periods, conditions or contingencies relating to the exercise or realization of, or lapse of restrictions under, any Award shall be automatically accelerated or waived so that if no exercise of the Award is required, the Award may be realized in full at the time of the occurrence of the Change of Control or if exercise of the Award is required, the Award may be exercised at the occurrence of the Change of Control.
 
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6.                                        Adjustments
 
In the event of any change in the outstanding Shares by reason of a stock dividend, stock split or reverse stock split or by reason of a combination, reorganization, recapitalization, merger, amalgamation, consolidation, spin-off or reclassification affecting the outstanding Shares, (i) the maximum number of Shares available for Awards, (ii) the maximum number of Shares that any individual participating in the Plan may be granted in any year, (iii) the number of Shares covered by outstanding awards, (iv) the kind of Shares issued under the Plan and outstanding Awards, and (v) the price per share of outstanding Awards shall be equitably adjusted by the Committee, as the Committee deems appropriate, to reflect any increase or decrease in the number of, or change in the kind or value of, issued Shares to preclude, to the extent practicable, the enlargement or dilution of rights and benefits under Awards; provided, however , that any fractional shares resulting from such adjustment shall be eliminated. In addition, the Committee shall have discretion to make the foregoing equitable adjustments in any circumstances in which an adjustment is not mandated by this Section 6 or applicable law, including in the event of a Change of Control, and is authorized to make adjustments in the terms and conditions of, and the criteria included in, Awards (including cancellation of Awards in exchange for the intrinsic (i.e., in-the-money) value, if any, of the vested portion thereof, substitution of Awards using securities or other obligations of a successor or other entity, acceleration of the expiration date for Awards, or adjustment to performance goals in respect of Awards) in recognition of unusual or nonrecurring events affecting the Company, any Subsidiary or any business unit, or the financial statements of the Company or any Subsidiary, or in response to changes in applicable laws, regulations, or accounting principles. Notwithstanding the foregoing, if any such event will result in the acquisition of all or substantially all of the Company’s outstanding Shares or assets, then if the document governing such acquisition ( e.g. , merger agreement) specifies the treatment of outstanding Awards, such treatment shall govern without the need for any action by the Committee; provided, however, that if the treatment of outstanding Awards specified in such document conflicts with the terms of an Award Agreement or any employment agreement of a Participant relating to outstanding Awards, then the Committee shall make such adjustment as it deems appropriate to preclude, to the extent practicable, the enlargement or dilution of the economic rights and benefits under such Awards. Any adjustments determined by the Committee shall be final, binding and conclusive.
 
7.                                        General Provisions
 
7.1                                  Compliance with Laws and Obligations . The Company shall not be obligated to issue or deliver Shares in connection with any Award or take any other action under the Plan in a transaction subject to the registration requirements of any applicable securities law, any requirement under any listing agreement between the Company and any securities exchange or automated quotation system, or any other law, regulation, or contractual obligation of the Company, until the Company is satisfied that such laws, regulations, and other obligations of the Company have been complied with in full. Certificates representing Shares issued under the Plan will be subject to such stop-transfer orders and other restrictions as may be applicable under such laws, regulations, and other obligations of the Company, including any requirement that a legend or legends be placed thereon.
 
7.2                                  Limitations on Transferability . Awards and other rights under the Plan will not be transferable by a Participant except to a Beneficiary in the event of the Participant’s death (to the extent any such Award, by its terms, survives the Participant’s death), and, if exercisable, shall be exercisable during the lifetime of a Participant only by such Participant or his guardian or legal representative; provided, however , that such Awards and other rights may be transferred during the lifetime of the Participant, for purposes of the Participant’s estate planning or other purposes consistent with the purposes of the Plan (as determined by the Committee), and may be exercised by such transferees in accordance with the terms of such Award, but only if and to the extent permitted by the Committee. Awards and other rights under the Plan may not be pledged, mortgaged, hypothecated, or otherwise encumbered, and shall not be subject to the claims of creditors. A
 
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Beneficiary, transferee, or other person claiming any rights under the Plan from or through any Participant shall be subject to all terms and conditions of the Plan and any Award Agreement applicable to such Participant, except as otherwise determined by the Committee, and to any additional terms and conditions deemed necessary or appropriate by the Committee.
 
7.3                                  No Right to Continued Employment; Leaves of Absence . Neither the Plan, the grant of any Award, nor any other action taken hereunder shall be construed as giving any employee, consultant, director, or other person the right to be retained in the employ or service of the Company, any of its Subsidiaries or any Management Company (for the vesting period or any other period of time), nor shall it interfere in any way with the right of the Company or any of its Subsidiaries, or the right of any Management Company, to terminate any person’s employment or service at any time. Unless otherwise specified in the applicable Award Agreement, (i) an approved leave of absence shall not be considered a termination of employment or service for purposes of an Award under the Plan, (ii) any Participant who is employed by or performs services for a Subsidiary shall be considered to have terminated employment or service for purposes of an Award under the Plan if such Subsidiary is sold or no longer qualifies as a Subsidiary of the Company, unless such Participant remains employed by the Company or another Subsidiary and (iii) any Participant who is employed by, or serves as a director of, a Management Company shall be considered to have terminated employment or service for purposes of an Award under the Plan if such Management Company no longer provides services to the Company.
 
7.4                                  Taxes . The Company and any Subsidiary is authorized to withhold from any delivery of Shares in connection with an Award, any other payment relating to an Award, or any payroll or other payment to a Participant, amounts of withholding and other taxes due or potentially payable in connection with any transaction involving an Award, and to take such other action as the Committee may deem advisable to enable the Company, its Subsidiaries and Participants to satisfy obligations for the payment of withholding taxes and other tax obligations relating to any Award. This authority shall include authority to withhold Shares or receive or accept Shares by way of repurchase, Participant services, or other consideration and to make cash payments in respect thereof in satisfaction of withholding tax obligations.
 
7.5                                  Changes to the Plan and Awards . The Board may amend, suspend, discontinue, or terminate the Plan or the Committee’s authority to grant Awards under the Plan without the consent of stockholders or Participants, except that any amendment shall be subject to the approval of the Company’s stockholders at or before the next annual meeting of stockholders for which the record date is after the date of such Board action if such stockholders approval is required by any applicable law, regulation or stock exchange rule, and the Board may otherwise, in its discretion, determine to submit other such amendments to stockholders for approval; provided, however , that, without the consent of an affected Participant, no such action may materially impair the rights of such Participant under any Award theretofore granted. The Committee may amend, suspend, discontinue, or terminate any Award theretofore granted and any Award Agreement relating thereto; provided, however , that, without the consent of an affected Participant, no such action may materially impair the rights of such Participant under such Award. Any action taken by the Committee pursuant to Section 6 shall not be treated as an action described in this Section 7.5.
 
7.6                                  No Right to Awards; No Shareholder Rights . No Participant or other person shall have any claim to be granted any Award under the Plan, and there is no obligation for uniformity of treatment of Participants, employees, consultants, or directors. No Award shall confer on any Participant any of the rights of a shareholder of the Company unless and until Shares are duly issued or transferred and delivered to the Participant in accordance with the terms of the Award.
 
7.7                                  Unfunded Status of Awards; Creation of Trusts . The Plan is intended to constitute an “unfunded” plan for incentive and deferred compensation. With respect to any payments not yet made to a
 
6

 
Participant pursuant to an Award, nothing contained in the Plan or any Award shall give any such Participant any rights that are greater than those of a general creditor of the Company; provided, however , that the Committee may authorize the creation of trusts or make other arrangements to meet the Company’s obligations under the Plan to deliver cash, Shares, other Awards, or other consideration pursuant to any Award, which trusts or other arrangements shall be consistent with the “unfunded” status of the Plan unless the Committee otherwise determines.
 
7.8                                  Nonexclusivity of the Plan . Neither the adoption of the Plan by the Board nor the submission of the Plan or of any amendment to stockholders for approval shall be construed as creating any limitations on the power of the Board to adopt such other compensatory arrangements as it may deem desirable, including the granting of awards otherwise than under the Plan, and such arrangements may be either applicable generally or only in specific cases.
 
7.9                                  Successors and Assigns . The Plan and Award Agreements may be assigned by the Company to any successor to the Company’s business. The Plan and any applicable Award Agreement shall be binding on all successors and assigns of the Company and a Participant, including any permitted transferee of a Participant, the Beneficiary or estate of such Participant and the executor, administrator or trustee of such estate, or any receiver or trustee in bankruptcy or representative of the Participant’s creditors.
 
7.10                            Governing Law . The Plan and all Award Agreements shall be governed by and construed in accordance with the laws of the Republic of the Marshall Islands, without giving effect to any choice of law or conflict of law provision or rule that would cause the application of the laws of any jurisdiction other than the Republic of the Marshall Islands.
 
7.11                            Severability of Provisions . If any provision of the Plan shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions hereof, and the Plan shall be construed and enforced as if such provisions had not been included.
 
7.12                            Plan Termination . Unless earlier terminated by the Board, the Plan shall terminate on the day before the tenth anniversary of the later of the date the Company’s stockholders originally approved the Plan (September      , 2006) or the date of any subsequent shareholder approval of the Plan. Upon any such termination of the Plan, no new authorizations of grants of Awards may be made, but then-outstanding Awards shall remain outstanding in accordance with their terms, and the Committee otherwise shall retain its full powers under the Plan with respect to such Awards.
 
7

 
Exhibit 10.6
 
Dated 17th December 2002

CONTAINERS SERVICES INC.
-and-
CONTAINERS LINES INC.
as Borrowers
 
-and-
 
THE BANKS AND FINANCIAL INSTITUTIONS
listed in Schedule 1
as Banks
 
-and-
 
AEGEAN BALTIC BANK S.A.
as Agent
 
-and-
 
HSH NORDBANK AG
as Paying Agent and Security Trustee

 
FINANCIAL AGREEMENT

 
relating to short and long-term loan facilities
of up to US$ 60,000,000 in aggregate
to assist in partly financing the construction and acquisition of two 4,300 TEU container vessels under
construction at Samsung Heavy Industries Ltd.
having Builder’s Hull Numbers 1455 and 1456

 
CONTENTS

CLAUSE	 	 	
 	 	 	
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2

 

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￠	￠		
SCHEDULE 1	91	
THE BANKS AND THEIR COMMITMENTS	91	
SCHEDULE 2	92	
NOTICE OF DRAWDOWN	92	
SCHEDULE 3	93	
FORM OF TRANSFER CERTIFICATE	93	
 
3

 
THIS AGREEMENT is made on the 17th day of December 2002
 
BETWEEN
 
1                                          (a)      CONTAINERS SERVICES INC. , a corporation organised and existing under the laws of the Republic of Liberia having its registered office at 80, Broad Street, Monrovia, Republic of Liberia (“ Containers Services ”); and
 
(b)      CONTAINERS LINES INC. , a corporation organised and existing under the laws of the Republic of Liberia having its registered office at 80, Broad Street, Monrovia, Republic of Liberia (“ Containers Lines ” and together with Containers Services “ the Borrowers ”),
 
as joint and several borrowers;
 
2                                         THE BANKS listed in Schedule 1 as lenders (together “ the Banks ”) as lenders;
 
3                                         AEGEAN BALTIC BANK S.A. of 28, Diligianni Street, Kifissia 145 62, Athens, Republic of Greece (“ the Agent ”) as agent;
 
4                                         HSH NORDBANK AG (the successor by way of merger of LANDESBANK SCHLESWIG-HOLSTEIN GIROZENTRALE and HAMBURGISCHE LANDESBANK ) of Gerhart – Hauptmann – Platz – 50, D-20095, Hamburg the Federal Republic of Germany (“ the Paying Agent ” and “ the Security Trustee ”) in its capacity as paying agent and security trustee; and
 
5                                         HSH NORDBANK AG (the successor by way of merger of LANDESBANK SCHLESWIG-HOLSTEIN GIROZENTRALE and HAMBURGISCHE LANDESBANK ) of Gerhart – Hauptmann – Platz – 50, D-20095, Hamburg the Federal Republic of Germany (“ the Swap Agent ”) as party to the Master Agreement (as hereinafter defined).
 
1                                         PURPOSE AND DEFINITIONS
 
1.1           This Agreement sets out the terms and conditions on which the Banks have agreed to make available to the Borrowers as joint and several borrowers certain loan facilities not exceeding in aggregate US$ 60,000,000 which will be made available to the Borrowers to assist in part financing the construction and acquisition of the Vessels.
 
1.2           In this Agreement the following terms shall have the following meanings unless the context otherwise requires -
 
4

 
“ Additional Construction Costs ” means in respect of a Vessel, any increase in the Contract Price under Article II paragraph 2 of the relevant Shipbuilding Contract;
 
“ Additional Construction Expenses ” means together (i) the Additional Construction Costs and (ii) any expenses incurred by the relevant Borrower during the construction period of the relevant Vessel related to its construction, supervision and delivery and being additional to the Contract Price and the Additional Construction Costs in respect thereof and (iii) interest due and payable under this Agreement in respect of the relevant Pre-delivery Advance and accrued until the Drawdown Date of the relevant Post-Delivery Junior Facility Advance, as stated in the relevant Statement of Additional Construction Expenses;
 
“ Advance ” or “ Advances ” means, save as otherwise provided herein, an advance or advances of a Facility made or to be made by the Banks hereunder;
 
“ Advance A ” means the Pre-Delivery Facility Advance related to Newbuilding A and referred to in Clause 4.3(a);
 
“ Advance B ” means the Pre-Delivery Facility Advance related to Newbuilding B referred to in Clause 4.3(b);
 
“ Advance C ” means the Post-Delivery Senior Facility Advance related to Newbuilding A referred to in Clause 4.4(a);
 
“ Advance C Balloon Payment ” has the meaning given in Clause 12.2.1;
 
“ Advance C Maturity Date ” means the date falling 10 years after Drawdown Date of Advance C;
 
“ Advance C Repayment Instalments ” has the meaning given in Clause 12.2.1;
 
“ Advance D ” means the Post-Delivery Senior Facility Advance related to Newbuilding B referred to in Clause 4.4(b);
 
“ Advance D Balloon Payment ” has the meaning given in Clause 12.2.2;
 
“ Advance D Maturity Date ” means the date falling 10 years after Drawdown Date of Advance D;
 
“ Advance D Repayment Instalments ” has the meaning given in Clause 12.2.2;
 
“ Advance E ” means the Post-Delivery Junior Facility Advance related to Newbuilding A and referred to in Clause 4.5(a);
 
5

 
“ Advance E Balloon Payment ” has the meaning given in Clause 12.3.1;
 
“ Advance E Maturity Date ” means the date falling 10 years after Drawdown Date of Advance E;
 
“ Advance E Repayment Instalments ” has the meaning given in Clause 12.3.1;
 
“ Advance F ” means the Post-Delivery Junior Facility Advance related to Newbuilding B and referred to in Clause 4.5(b);
 
“ Advance F Balloon Payment ” has the meaning given in Clause 12.3.2;
 
“ Advance F Maturity Date ” means the date falling 10 years after Drawdown Date of Advance F;
 
“ Advance F Repayment Instalments ” has the meaning given in Clause 12.3.2;
 
“AML Time Charter” means, in respect of a Vessel, the time charter entered or to be entered into between the Bareboat Charterer and the relevant Borrower;
 
“ Applicable Accounting Principles ” means those accounting principles, standards and practices on which preparation of the Financial Statements are based, which are International Accounting Standards and Principles and practices or such other generally accepted international accounting principles, standards and practices adopted by Danaos and Danaos Shipping Co. Ltd after the date hereof and notified to the Agent and accepted by the Agent;
 
“ Applicable Margin ” means:
 
(a)            in respect of the Pre-Delivery Facility One point Twenty Five per cent (1.25%) per annum;
 
(b)            in respect of the Post-Delivery Senior Facility Zero point Seven hundred Seventy Five per cent (0.775%) per annum; and
 
(c)            in respect of the Post-Delivery Junior Facility Zero point Seven hundred Seventy Five per cent (0.775%) per annum;
 
“ Approved Brokers ” means the insurance brokers appointed by the Bareboat Charterer with the Security Trustee’s prior approval;
 
6

 
“ Approved Currency ” means any currency other than Dollars which is freely transferable and convertible into Dollars and in which deposits are freely available to the Banks in the London and/or Luxembourg Interbank Eurocurrency Market;
 
“ Approved Management Agreement ” means the management agreement for each Vessel made or to be made between the Bareboat Charterer and the Manager on terms acceptable to the Agent;
 
“ Auditors ” means a first class firm of international accountants to be approved by the Agent;
 
“ Availability Period ” means for each Facility the period commencing from the date of this Agreement and ending on the Final Availability Date in respect thereof;
 
“ Balloon Payments ” means collectively the Advance C Balloon Payment, the Advance D Balloon Payment, the Advance E Balloon Payment and the Advance F Balloon Payment and in the singular means any of them;
 
“ Bank ” means:
 
(a)            a bank or a financial institution listed in Schedule 1 and acting through its branch indicated in Schedule 1 (or through another branch notified to the Agent in accordance with Clause 34.14); or
 
(b)            a direct or indirect assignee of such bank or financial institution or of a successor of it; or
 
(c)            a direct or indirect successor of an assignee such as is mentioned in (b) unless any of the foregoing has assigned all of its rights and novated all its obligations and liabilities under the Finance Documents;
 
“Bareboat Charterer” means Allocean Maritime Container (No.3) Limited, a company incorporated under the laws of England and Wales (registered number 4806608) whose registered office is at Ground Floor, 40 Queen Street, London EC4R 1DD;
 
“Bareboat Charter” means, in respect of a Vessel, the bareboat charter entered or to be entered into between the relevant Owner and the Bareboat Charterer;
 
“ Broken Funding Costs ” means any amount that the Paying Agent may certify as necessary to compensate the Banks for any loss (other than Taxes) incurred or to be incurred by them as a consequence of repayment in respect of funds borrowed (or committed to be borrowed) or deposits taken (or committed to be taken) from third parties in connection with the
 
7

 
commitment of the Banks in the Facilities, or in liquidating or re-employing such funds or deposits for the remaining part of the then current Interest Period;
 
“ Business Day ” means a day on which banks and financial markets are open for business in all of New York, London, Athens and Hamburg and any other financial centre which the Paying Agent may deem appropriate for the operation of the provisions of this Agreement;
 
“ Charter ” means, in respect of a Vessel, the time charterparty dated 22nd July 2003 made between the relevant Borrower and the Charterer;
 
“ Charter Assignment Agreements ” means collectively the time charter assignment agreements in respect of the Charter and the Earnings between each of the Borrowers and the Security Trustee in form and substance satisfactory to the Creditors in their sole discretion;
 
“ Charterer ” means P & O Nedlloyd B.V.;
 
“ Classification Society ” means Det Norske Veritas or such other classification society as the Agent and the Security Trustee may approve in writing, such approval not to be unreasonably withheld;
 
“ Commitment ” means in relation to a Bank the amount set out opposite its name in Schedule 1 (in respect of each Facility) as reduced or cancelled by any relevant term of this Agreement;
 
“Containers Lines Deposit Account” means the account held with the Royal Bank of Scotland, designated “Containers Lines Deposit Account” with account number 98091625 in the name of Containers Lines.
 
“Containers Lines Earnings Account” means the interest-bearing deposit account number 110 154 021 in the name of Containers Lines to be maintained throughout the Security Period with the Paying Agent in Hamburg, the Federal Republic of Germany, such account to include any substitute account or revised account or revised designation or number whatsoever;
 
“Containers Lines Earnings Account Charge ” means the charge granted by Containers Lines, in favour of the Security Trustee in respect of the Container Lines Earnings Account in form and substance satisfactory to the Security Trustee in its absolute discretion.
 
“Containers Lines Second Priority Deposit Account Charge ” means the second priority charge granted by Containers Lines, in favour of the Security Trustee in respect of the Container Lines Deposit Account in form and substance satisfactory to the Security Trustee in its absolute discretion.
 
8

 
“Containers Services Deposit Account” means the account held with the Royal Bank of Scotland, designated “Containers Services Deposit Account” with account number 98091672 in the name of the Containers Services.
 
“Containers Services Earnings Account” means the interest-bearing deposit account number 110 154 043 in the name of Containers Services to be maintained throughout the Security Period with the Paying Agent in Hamburg, the Federal Republic of Germany, such account to include any substitute account or revised account or revised designation or number whatsoever;
 
“Containers Services Earnings Account Charge ” means the charge granted by Containers Services, in favour of the Security Trustee in respect of the Container Services Earnings Account in form and substance satisfactory to the Security Trustee in its absolute discretion.
 
“Containers Services Second Priority Deposit Account Charge ” means the second priority charge granted by Containers Services, in favour of the Security Trustee in respect of the Container Services Deposit Account in form and substance satisfactory to the Security Trustee in its absolute discretion.
 
“ Contract Price ” means the contract price of the relevant Vessel as set out in Article II.1 of each of the relevant Shipbuilding Contracts;
 
“ Creditor Borrower ” has the meaning given in Clause 2.6;
 
“ Creditors ” means at any time each of the Parties to the Finance Documents other than the Obligors;
 
“ Credit Support Document ” means any document described as such in the Master Agreement and, where the context permits, any other document referred to in any credit support document which has the effect of creating an Encumbrance in favour of the Security Trustee or the Swap Agent in its capacity as a party to the Master Agreement;
 
“ Credit Support Provider ” means any person (other than the Borrowers) described as such in the Master Agreement;
 
“ Currency Equivalent ” means, as at any date upon which any part of either or both Post- Delivery Facilities is denominated in one Approved Currency and is to be converted (actually or notionally) into another Approved Currency as provided in this Agreement, the amount of the relevant currency required for the purchase of the Existing Currency with the New Currency converted at the applicable Forward Rate of Exchange derived from Forward F/X Contracts maturing on such date or, if none, at the Spot Rate of Exchange;
 
9

 
“ Currency Tranches ” means, in relation to each Post-Delivery Facility, at any time, such part of such Post-Delivery Facility which is denominated in Approved Currencies and, in case such part of either or both Post-Delivery Facilities are denominated in two such Approved Currencies, “Currency Tranche” means each part of each Post-Delivery Facility which is denominated in one Approved Currency;
 
“ Danaos ” means Danaos Holdings Limited, a company duly formed and validly existing under the laws of the Republic of Liberia with its registered office at 80, Broad Street, Monrovia in the Republic of Liberia;
 
“ Danaos Guarantee ” means the guarantee dated 17 th December, 2002 granted by Danaos to the Security Trustee, the Agent, the Paying Agent, and the other Creditors in substantially in form and substance satisfactory to the Creditors in their sole discretion (as the same may have been amended from time to time);
 
“ Debt Proceeds ” means (i) any proceeds from the enforcement of any of the Security Documents, and (ii) following an Event of Default any moneys standing to the credit of the Borrowers in the Earnings Accounts, in each case where such monies do not constitute Proceeds;
 
“ Debtor Borrower ” has the meaning given in Clause 2.6;
 
“Declarations of Trust” means each of the declarations of trust made by the relevant Owner in favour of the relevant Partnership conferring upon the relevant Partnership a beneficial interest in the relevant Vessel and all other assets of the relevant Owner and Declaration of Trust means either of them.
 
“Deeds of Counter-Indemnity” means each the counter-indemnity granted by the Sponsor in favour of the Security Trustee.
 
“ Default Rate ” means the aggregate of (i) LIBOR, (ii) the Applicable Margin and (iii) Two per cent (2%) per annum;
 
“ Delivery Date ” means the date on which Samsung is to deliver to the relevant Owner the relevant Vessel pursuant to Article VII paragraph 1 of the respective Shipbuilding Contract;
 
“Deposit Accounts” means together the Containers Services Deposit Account and the Containers Lines Deposit Account and “ Deposit Account ” means either of them.
 
“Deposit Bank” means the Royal Bank of Scotland plc of 135 Bishopsgate, London, EC3M 3LR.
 
10

 
“ Distribution Monies ” means:
 
(a)            any monies received by any of the Creditors, the Paying Agent, the Agent or the Security Trustee (or by any receiver or similar person appointed by any of them) from an Enforcement Action, or from the proceeds or dissolution or liquidation of any of the Obligors or the distribution of its assets among its creditors (however such liquidation or distribution may occur);
 
(b)            any monies received by the Creditors or the Paying Agent, or the Agent or the Security Trustee as named insured, loss payee, beneficiary or assignee of any insurance polices of either of the Bareboat Charterers in consequence of or after any Enforcement Action;
 
“ Dollar Reference Amount ” means, when the whole or part of either or both Post-Delivery Facilities is, for the time being, denominated in Dollars, the outstanding principal amount thereof and, in relation to a Currency Tranche, the amount of Dollars which would have been outstanding if such Currency Tranche had been advanced in and always thereafter remained denominated in Dollars, as it would have been reduced from time to time by repayments and prepayments (except for prepayment made under Clause 8.3) under this Agreement if the same had been made in Dollars;
 
“ Drawdown Date ” means the Business Day on which an Advance is advanced to the Borrowers;
 
“ Early Termination Date ” shall have the meaning attributed thereto in the Master Agreement;
 
“ Earnings ” means all freights, charter hires and any other amounts whatsoever which may at any time be earned by, or become payable to or for the account of the Borrowers or their agents arising out of or as a result of the or operation of the Vessels by the Borrowers or their agents, or under or in relation to any charterparties, contract of carriage or other contract (including a salvage or towage contract) for the use, operation of the Vessels, together with all payments for the variation of any such contract, all damages for any breach of any such contract, all general average and salvage remuneration and all compensation receivable in respect of any requisition for hire;
 
“ Earnings Accounts ” means together the Containers Services Earnings Account and the Containers Lines Earnings Account and “ Earnings Account ” means either of them.
 
“ Earnings Account Charges ” means together the Containers Services Earnings Account Charge and the Containers Lines Earnings Account Charge.
 
11

 
“ Encumbrance ” means any mortgage, charge (whether fixed or floating), pledge, lien, hypothecation, assignment, trust agreement or security interest or other encumbrance of any kind securing any obligation of any person or having the effect of conferring security or any type of preferential agreement (including without limitation, title transfer and/or retention arrangements having a similar effect);
 
“ Enforcement Action ” shall mean any of the following actions taken by any of the Creditors, by means of an instruction to the Security Trustee, by the Instructing Group or otherwise;
 
(a)            accelerating the due date of any liability of the Borrowers;
 
(b)            commencing to enforce, or enforcing any Finance Documents;
 
(c)            commencing to enforce or instructing the Security Trustee to commence to enforce, the Finance Documents or any of them, or exercising any power under any Finance Document;
 
(d)            taking any other action against any of the Obligors or their assets or threatening any other action against any of the Obligors or their assets, the taking of which could materially affect the common interests of the Creditors;
 
“ Environmental Approvals ” means any permit, licence, approval, ruling, certification, exemption or other authorisation relating to the Vessels required under applicable Environmental Laws;
 
“ Environmental Claim ”  means:
 
(a)            any claim by, or directive from, any applicable governmental, judicial or other regulatory authority alleging breach of, or non-compliance with, any Environmental Laws or Environmental Approvals or otherwise howsoever relating to or arising out of an Environmental Incident; or
 
(b)            any claim by any other person howsoever relating to or arising out of an Environmental Incident
 
and, in each such case, “claim” shall mean a claim for damages, clean-up costs, compliance, remedial action or otherwise;
 
“ Environmental Incident ” means:
 
(a)            any release, discharge, disposal or emission of Material of Environmental Concern by or from a Vessel;
 
12

 
(b)            any incident in which Material of Environmental Concern is released, discharged, disposed of, or emitted by or from a ship other than a Vessel and which involves collision between a Vessel and such other ship or some other incident of navigation or operation, in either case, where a Vessel or manager of the relevant Vessels is or are actually or allegedly at fault or otherwise liable (in whole or in part); or
 
(c)            any incident in which Material of Environmental Concern is released, discharged, disposed of, or emitted by or from a ship other than the Vessels and where the Vessels are actually or potentially liable to be arrested or attached as a result and/or where the Borrower or the managers of the Vessels is or are actually or allegedly at fault or otherwise liable (in whole or in part);
 
“ Environmental Laws ” means all national and international laws, ordinances, rules, regulations, rules of common law, conventions and agreements whatsoever pertaining to pollution or protection of human health or the environment (including, without limitation, the United States Oil Pollution Act of 1990 and any comparable laws of the individual States of the United States of America);
 
“ Event of Default ” means any of the events listed in Clause 23;
 
“ Existing Currency ” means, in relation to any conversion between Approved Currencies to be made under Clause 8, the Approved Currency in which the relevant part of the relevant Post-Delivery Facility is denominated before conversion;
 
“ Facilities ” means together the Pre-Delivery Facility and the Post-Delivery Facilities granted by the Banks under Clause 2.1 and in the singular means any of them;
 
“ Final Availability Date ” means:
 
(a)            in the case of a Pre-Delivery Facility Advance:  30 th December 2003; and
 
(b)            in case of a Post-Delivery Senior Facility Advance:  30 th December 2004; and
 
(c)            in the case of a Post Delivery Junior Facility Advance:  30th December 2004;
 
(or in any such case, such later date as the Agent may agree with the authorisation of the Banks);
 
“ Finance Documents ” means:
 
(a)            this Agreement;
 
13

 
(b)            the Security Documents;
 
(c)            the Supplemental Agreement;
 
(d)            the Supplemental Agreement No.2;
 
(e)            the Intercreditor Deed;
 
(f)             the Multipartite Agreement; and
 
(g)            any other document (whether creating an Encumbrance or not) which is executed any time by a Borrower 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 Creditors under this Agreement or any of the documents referred to in this definition;
 
“ Financial Statements ” means the audited annual consolidated financial statements of the Group together with the audited annual financial statements of Danaos Shipping Co. Ltd each comprising of a statement of income, balance sheet, cash flow statement and relative notes;
 
“ Forward F/X Contracts ” means together contracts to be concluded between the Borrowers and the Swap Agent pursuant to the Master Agreement for forward purchase of one Relevant Currency with another, as referred to in Clause 8.4 and, in the singular, means any one of such contracts;
 
“ Forward Rate of Exchange ” means the rate quoted by the Swap Agent for the forward purchase of one Relevant Currency with another Relevant Currency;
 
“ F/X Transaction ” means a Transaction entered into between the Swap Agent and the Borrowers pursuant to the Master Agreement for the express purpose of hedging all or part of the Borrowers currency risk under this Agreement and in respect of monies held in the Deposit Account;
 
“ General Assignments ” means each of the assignments entered or to be entered into by the relevant Partnership, the General Partner, the relevant Owner and the Security Trustee in respect of the Assigned Property (as such term is defined therein);
 
“ General Partner ” means Allco Finance Limited;
 
“ Group ” means Danaos, the Borrowers and all other Subsidiaries of Danaos and “members of the Group” shall be construed accordingly;
 
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“ Hedging Transaction ” means a Transaction entered into between the Swap Agent and the Borrowers pursuant to the Master Agreement for the express purpose of hedging all or part of the Borrowers’ interest rate risk pursuant to this Agreement;
 
“ Indebtedness ” means together the Pre-Delivery Facility Indebtedness, the Post Delivery Senior Facility Indebtedness, the Post Delivery Junior Facility Indebtedness and the Master Agreement Liabilities;
 
“ Instructing Group ”  means:
 
(a)            subject to (b) below, all the Banks, the aggregate of whose Commitments (as reduced pursuant to the relevant provisions of this Agreement) equals or exceeds seventy-five per cent (75%) of the Total Commitments; and
 
(b)            if any Bank transfers its Commitment (in part or in whole) pursuant to Clause 34 (Assignments) its reduced Commitment shall be used in the calculation in (a) above;
 
“ Insurance Documents ” means all slips, contracts, policies, certificates of entry or other insurance documents evidencing or constituting the Insurances;
 
“ Insurances ” means all policies and contracts of insurance (including all entries of each of the Vessels in a protection and indemnity and war risks association) or such other arrangements by way of insurance which are from time to time taken out or entered into in respect of or in connection with the Vessels and the Earnings of the Vessels pursuant to Clause 22 of this Agreement and all benefits of such insurances, including all claims of whatsoever nature and return of premiums;
 
“ Insurers ” means the underwriters, insurance companies and mutual insurance associations with or by which the Insurances are effected;
 
“ Intercreditor Deed ” means the deed entered into or to be entered into between the Investor, Danaos and the Security Trustee;
 
“ Interest Determination Date ” means the date of determination of an Interest Rate by the Paying Agent for the relevant Interest Period;
 
“ Interest Payment Date ” means the last day of any Interest Period save that in the case of any Interest Period of more than three (3) months duration, the Interest Payment Dates shall be each of the dates falling at consecutive three (3) monthly intervals after the commencement thereof and the last day thereof provided that if any such date is not a Business Day the relevant Interest Payment Date shall be the next succeeding day which is a Business Day
 
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unless such next succeeding Business Day falls in another calendar month in which event the relevant Interest Payment Date shall be the immediately preceding Business Day;
 
“ Interest Period ” means each of the successive periods determined in accordance with Clause 6 of this Agreement;
 
“ Interest Rate ” means in respect of each Facility the aggregate of (a) the Applicable Margin and (b) LIBOR;
 
“ Investor ” means Lloyds TSB Equipment Leasing (No 6) Limited, company number 04440302, whose registered office is at 25 Gresham Street, London, EC2V 7HN.
 
“ ISM Code ” means:
 
(a)            ‘The International Management Code for the Safe Operation of Ships and for Pollution Prevention’, currently known or referred to as the ‘ISM Code’, adopted by the Assembly of the International Maritime Organisation by Resolution A.741(18) on 4 November 1993 and incorporated on 19 May 1994 into chapter IX of the International Convention for the Safety of Life at Sea 1974 (SOLAS 1974); and
 
(b)            all further resolutions, circulars, codes, guidelines, regulations and recommendations which are now or in the future issued by or on behalf of the International Maritime Organisation or any other entity with responsibility for implementing the ISM Code, including without limitation, the ‘Guidelines on implementation or administering of the International Safety Management (ISM) Code by Administrations’ produced by the International Maritime Organisation pursuant to Resolution A.788(19) adopted on 25 November 1995,
 
as the same may be amended, supplemented or replaced from time to time;
 
“ ISM Code Documentation ” includes the document of compliance ( DOC )and safety management certificate ( SMC ) issued pursuant to the ISM Code in relation to each Vessel within the periods specified by the ISM Code.
 
“ ISM Responsible Person ” means -
 
(a)            each and every person who has assumed responsibility for the operation of either Vessel and has agreed to take over or is required to assume responsibility for the performance or observance of the duties and responsibilities imposed by the ISM Code; and
 
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(b)            each and every person ashore who is a ‘designated person’ for the purposes of the ISM Code with direct access to the highest level of management of the Bareboat Charterer or operator and who, in that capacity, has under the ISM Code responsibility and authority which includes -
 
(i)             monitoring the safety and pollution prevention aspects of the operation of the relevant Vessel; and
 
(ii)           ensuring that adequate resources and shore-based support are supplied,
 
as required under the ISM Code.” ISPS Code ” means the International Ship and Port Facility Security Code adopted by the International Maritime Organization Assembly as the same may have been or may be amended or supplemented from time to time;
 
“ ISPS Code Documentation ” includes the ISSC issued pursuant to the ISPS Code in relation to each Vessel within the periods specified by the ISPS Code.
 
“ L/C Bank ” means The Royal Bank of Scotland plc of 135 Bishopsgate, London EC3M 3UR;
 
“ Letter of Credit means the letter of credit provided by the L/C Bank to the Investor;
 
“ LIBOR ” in relation to any period means the arithmetic mean (rounded upwards, if not already such a multiple, to the nearest whole multiple of one sixteenth of one per cent) of the offered rates which appear on Telerate Page 3750 at or about 11.00 a.m. (London time) two (2) Business Days prior to the commencement of that period or other relevant period provided that if at that time there are no such rates for such deposits it means the rate determined by the Paying Agent in consultation with the Banks to be that which expresses as a percentage rate per annum the cost to them of obtaining such deposits for the relevant periods from whatever sources they may select;
 
“ Loan to Value Ratio ” shall have the meaning given to that term in Clause 19.2;
 
“ Manager ’ s Undertaking ” means each undertaking given by the Manager to the Security Trustee in form and substance satisfactory to the Creditors in their sole discretion;
 
“ Manager ” means Allocean Maritime Limited, a company incorporated in England & Wales having its registered office at Ground Floor, 40 Queen Street, London EC4R 1DD;
 
“ Master Agreement ” means an agreement made or to be made between the Swap Agent and the Borrowers comprising an ISDA Ma ster Agreement, Schedules thereto and each Confirmation (as defined therein) supplemental thereto and includes any Transactions or other
 
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contracts (including without limitation any Forward F/X Contracts) between the Swap Agent and the Borrowers entered into on (inter alia) the terms of such agreement;
 
“ Master Agreement Liabilities ” means, at any relevant time, all liabilities of the Borrowers to the Swap Agent under or pursuant to the Master Agreement, whether actual or contingent, present or future;
 
“ Material of Environmental Concern ” means oil, oil products and any other substance including any chemical, gas or other hazardous or noxious substance) which is (or is capable or being or becoming) polluting toxic or hazardous;
 
“ Mortgages ” means in respect of a Vessel together the first priority mortgage and deed of covenants collateral thereto to be executed and delivered by the relevant Owner in favour of the Security Trustee acting for and on behalf of the Creditors, in form and substance satisfactory to the Creditors in their sole discretion;
 
“Multipartite Deeds” means each of the deeds entered or to be entered between the Security Trustee, the relevant Borrower, the L/C Bank and the Deposit Bank.
 
“ New Currency ” means, in relation to any conversion between Approved Currencies to be made under Clause 8, the Approved Currency in which the relevant part of the relevant Post-Delivery Facility is denominated after conversion;
 
“ Newbuilding A ” means the fully cellular container vessel having hull no. 1455 being constructed by Samsung pursuant to the Shipbuilding Contract A;
 
“ Newbuilding B ” means the fully cellular container vessel having hull no. 1456 being constructed by Samsung pursuant to the Shipbuilding Contract B;
 
“ Notice of Drawdown ” means the written notice in the form set out in Schedule 2;
 
“ Nomination Date ” means the Business Day which is three (3) Business Days prior to the commencement of an Interest Period;
 
“ Notional Amount ” means in respect of any Hedging Transaction, the Notional Amount as defined in the Confirmation (as defined in the Master Agreement) relating to that Hedging Transaction;
 
“ Novation Agreement ” means in respect of a Vessel, the agreement dated 18 th February 2004 entered into by the relevant Borrower, the relevant Owner and Samsung whereby the parties agreed that the relevant Vessel would be delivered to the relevant Owner;
 
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“ Obligors ” means together the Borrowers and Danaos;
 
“ Owners ” means each of Ocean Caribbean Limited and Ocean Caracas Limited;
 
“ Partnership ” means each of the Ocean Caribbean Limited Partnership, and the Ocean Caracas Limited Partnership each a limited partnership in England under the Limited Partnerships Act 1907 whose principal place of business is at 5th Floor, 40 Queen Street, London EC4R 1DD acting by the General Partner;
 
“ Party ” means in relation to any document, a party to that document;
 
“ Permitted Encumbrance ” means:
 
(a)            any Encumbrance referred to in the Finance Documents; and
 
(b)            any lien on any Vessel for crew’s wages or salvage or otherwise arising in the normal course of trading and being regularly settled, the total amount of such lien or liens not to be material in the sole opinion of the Agent in relation to any security created in favour of the Security Trustee or the Creditors pursuant to the Finance Documents;
 
“ Post-Delivery Advances ” means together the Post-Delivery Senior Facility Advances and the Post-Delivery Junior Facility Advances and in the singular means any of them;
 
“ Post-Delivery Facilities ” means together the Post-Delivery Senior Facility and the Post-Delivery Junior Facility and in the singular means either of them;
 
“ Post-Delivery Junior Facility ” means the principal amount of the aggregate of the Advances under the Post-Delivery Junior Facility from time to time outstanding;
 
“ Post-Delivery Junior Facility Advances ” means together Advance E and Advance F and in the singular means either of them;
 
“ Post-Delivery Junior Facility Indebtedness ” means any and all moneys, liabilities and obligations (whether actual or contingent, whether existing or hereafter arising, whether or not for the payment of money, and including, without limitation, Broken Funding Costs (if any), and any obligation or liability to pay damages) which are now or which may at any time and from time to time hereafter be due, owing, payable or incurred or expressed to be due, owing, payable or incurred from the Borrowers (whether as principal, surety or otherwise) to the Agent and/or Paying Agent and/or Security Trustee and/or the Post-Delivery Junior Lenders under this Agreement and the other Finance Documents and related to the Post-Delivery Junior Facility;
 
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“ Post-Delivery Junior Lenders ” means together those Banks providing the Post-Delivery Junior Facility or any part thereof;
 
“ Post-Delivery Senior Facility ” means the principal amount of the aggregate of the Advances under the Post-Delivery Senior Facility from time to time outstanding;
 
“ Post-Delivery Senior Facility Advances ” means together Advance C and Advance D and in the singular means either of them;
 
“ Post-Delivery Senior Facility Indebtedness ” means any and all moneys, liabilities and obligations (whether actual or contingent, whether existing or hereafter arising, whether or not for the payment of money, and including, without limitation, Broken Funding Costs (if any), and any obligation or liability to pay damages) which are now or which may at any time and from time to time hereafter be due, owing, payable or incurred or expressed to be due, owing, payable or incurred from the Borrowers (whether as principal, surety or otherwise) to the Agent and/or Paying Agent and/or Security Trustee and/or the Post-Delivery Senior Lenders under this Agreement and the other Finance Documents and related to the Post-Delivery Senior Facility;
 
“ Post-Delivery Senior Lenders ” means together those Banks providing the Post-Delivery Senior Facility or any part thereof;
 
“ Potential Event of Default ” means any event which may become with the giving of notice or passage of time or other condition, or any combination of the foregoing, an Event of Default;
 
“ Pre-Delivery Advances ” means together Advance A and Advance B and in the singular means either of them;
 
“ Pre-Delivery Facility ” means the principal amount of the aggregate of the Advances under the Pre-Delivery Facility from time to time outstanding;
 
“ Pre-Delivery Facility Indebtedness ” means any and all moneys, liabilities and obligations (whether actual or contingent, whether existing or hereafter arising, whether or not for the payment of money, and including, without limitation, Broken Funding Costs (if any), and any obligation or liability to pay damages) which are now or which may at any time and from time to time hereafter be due, owing, payable or incurred or expressed to be due, owing, payable or incurred from the Borrowers (whether as principal, surety or otherwise) to the Agent and/or Paying Agent and/or Security Trustee and/or the Banks under this Agreement and the other Finance Documents and related to the Pre-Delivery Facility;
 
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“ Pre-Delivery Lenders ” means together those Banks providing the Pre-Delivery Facility or any part thereof;
 
“ Proceeds ” shall have the meaning given thereto in the Intercreditor Deed;
 
“ Protection and Indemnity Risks ” means the usual risks covered by a protection and indemnity association that is a member of the International Group of Protection and Indemnity Associations, including the proportion not otherwise recoverable in case of collision under the ordinary running-down clause;
 
“ Put Option Agreements ” means each of the put option agreement entered or to be entered into between the Sponsor and the Investor under which the Investor may, in certain circumstances, require the Sponsor to purchase (on a limited recourse basis) its interest in the relevant Partnership.
 
“ Refund Guarantees ” means together the refund guarantees dated February 2004 by the Refund Guarantors pursuant to the Shipbuilding Contracts and in the singular means any of them;
 
“ Refund Guarantors ” means the Export-Import Bank of Korea of Seoul, Korea;
 
“ Relevant Currency ” means Dollars and/or the Approved Currency in which the Post-Delivery Facilities or either of them or any part thereof are or will be denominated (as the case may be) at the relevant time;
 
“ Repayment Date ” means each of the dates referred to in Clauses 12.1.1, 12.1.2, 12.2.1, 12.2.2, 12.3.1 and 12.3.2;
 
“ Repayment Instalments ” means together the Advance C Repayment Instalments, the Advance D Repayment Instalments, the Advance E Repayment Instalments and the Advance F Repayment Instalments and in the singular means any of them;
 
“ Samsung ” means Samsung Heavy Industries Co., Ltd, having its registered office at  647-9, Yoksam-Dong, Kangnam-ku, Seoul, Republic of Korea;
 
“Second Priority Deposit Account Charges ” means together the Containers Services Second Priority Deposit Account Charge and the Containers Lines Second Priority Deposit Account Charge;
 
“ Security Documents ” means the Manager’s Undertakings, the Earnings Account Charges, the Danaos Guarantee, the General Assignments, the Second Priority Deposit Account Charges, the Mortgages, the Charter Assignment Agreements, the Deeds of
 
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Counter-Indemnity, the Master Agreement, the Credit Support Documents, and any other agreement or document that may be executed at any time by the Borrowers or any other person as security for all or any part of the Indebtedness;
 
“ Security Period ” means the period commencing with the execution of this Agreement and ending on the date on which the Indebtedness is repaid in full to the Banks and the Swap Agent to the full satisfaction of the Agent and the Security Trustee;
 
“ Senior Debt ” means together the Pre-Delivery Senior Facility Indebtedness and the Post-Delivery Facility Senior Indebtedness;
 
“ Senior Lenders ” means together the Pre-Delivery Lenders and the Post-Delivery Senior Lenders;
 
“ Shipbuilding Contract A ” means the shipbuilding contract dated 31 st May 2002 entered into between Samsung and Container Services as amended by a supplemental agreement dated 31st May, 2002 as novated by the Novation Agreement for the construction and completion of Newbuilding A at a contract price of US$ 36,050,000 (subject to adjustment in accordance with the Shipbuilding Contract);
 
“ Shipbuilding Contract B ” means the shipbuilding contract dated 31 st May 2002 entered into between Samsung and Container Lines as amended by a supplemental agreement dated 31st May, 2002 as novated by the Novation Agreement for the construction and completion of Newbuilding B at a contract price of US$ 36,050,000 (subject to adjustment in accordance with the Shipbuilding Contract);
 
“ Shipbuilding Contracts ” means collectively Shipbuilding Contract A and Shipbuilding Contract B and singularly either of them;
 
“ Sponsor ” means Allco Finance (UK) Limited, a company registered in England & Wales with company number 02818852 whose registered office is at 5th Floor, 40 Queen Street, London, EC4R 1DD;
 
“ Spot Rate of Exchange ” means the spot rate (based on the market rate prevailing in the London Interbank Market) quoted by the Swap Agent at or about 11.00 a.m. (London time) on the second or, in the case of Japanese Yen, third Business Day before the date for purchase of one Approved Currency with another Approved Currency;
 
“ Statement of Additional Construction Expenses ” means a statement from the Borrowers to the Agent setting out any Additional Construction Expenses that relate to a Vessel;
 
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“ Subject Documents ” means all of the Finance Documents, the Refund Guarantees, the Shipbuilding Contracts, the Novation Agreements, the Bareboat Charters, the AML Time Charters, the Charters, the Approved Management Agreements (none to be amended, varied, supplemented or modified without the consent of the Agent and the Security Trustee) and together with any other instruments, document or memorandum, scheduled to any of the documents referred to above, and any notice, consent or acknowledgement referred to in or required pursuant to any of the documents referred to above and any document, instrument or memorandum which secures any of the obligations of the Borrowers under this Agreement or under any other Subject Document;
 
“ Subsidiary ” means a body corporate from time to time of which another (a) has direct or indirect control, or (b) owns directly or indirectly more than fifty (50) per cent. of the share capital or similar right of ownership (and in this definition “ control ” means the power to direct the management and the policies of a body corporate, whether through the ownership of voting capital, by contract or otherwise);
 
“Supplemental Agreement” means the agreement dated 18 th February 2004 entered into between the parties hereto;
 
“ Supplemental Agreement No.2 ” means the agreement dated [ l ], 2005 entered into between the parties hereto and Danaos;
 
“ Taxes ” means any present or future tax, levy, impost, duty, charge, fee, deduction or withholding of any nature and whatever called, by whomsoever, on whomsoever and wherever imposed, levied, collected, withheld or assessed (other than taxes on the overall net income of the Banks) and “ Tax ” and “ Taxation ” shall be construed accordingly;
 
“ Termination Event ” shall have the meaning attributed thereto in the Master Agreement;
 
“ Total Commitments ” means in relation to the Banks, the aggregate for the time being of their respective Commitments in respect of each Facility;
 
“ Total Construction Cost ” means in respect of a Vessel, the aggregate of (i) the Contract Price as per Article II paragraph 1 of the Shipbuilding Contract (ii) the Additional Construction Costs and (iii) the Additional Construction Expenses;
 
“ Total Loss ” means, in respect of a Vessel:
 
(a)            the actual or constructive or compromised or arranged or agreed total loss of such Vessel; and
 
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(b)            the requisition for title or other compulsory acquisition of such Vessel, other than requisition for hire; and
 
(c)            the capture, seizure, arrest, detention or confiscation of such Vessel by any government or by a person acting or purporting to act on behalf of any government where such Vessel is not released or discharged within sixty (60) days or such lesser period provided in the Vessel’s Insurances;
 
“ Tranche ” means such part of each Post-Delivery Advance requested by and made available to the Borrowers and/or continued in a Relevant Currency;
 
“ Transaction ” means a transaction entered into between the Swap Agent and the Borrowers and governed by the Master Agreement;
 
“ Transfer Certificate ” means a certificate substantially in the form set out in Schedule 3 signed by a Bank and a Transferee whereby:
 
(i)             such Bank seeks to procure the transfer to such Transferee of all or a part of the Bank’s rights and obligations hereunder, subject to and upon the terms and conditions set out in Clause 34; and;
 
(ii)            such Transferee undertakes to perform the obligations it will assume as a result of delivery of such certificate to the Agent as contemplated in Clause 34.5;
 
“ Transferee ” means a bank to which a Bank seeks to transfer all or part of its rights and obligations in accordance with Clause 34;
 
“ Trust Property ” means collectively -
 
(i)             the security, powers, rights, titles, benefits and interests (both present and future) constituted by and conferred on the Security Trustee under or pursuant to the Finance Documents (including, without limitation, the benefit of all covenants and undertakings given in the Finance Documents);
 
(ii)            all moneys, property and other assets paid or transferred to or vested in the Security Trustee (or any agent of the Security Trustee) or received or recovered by the Agent and/or the Paying Agent (or any agent of the Agent and/or the Paying Agent) pursuant to, or in connection with, any of the Finance Documents; and
 
(iii)          all rights, benefits, interests, money, investments, property, and other assets at any time representing or deriving from any of the foregoing, including all interest, income
 
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and other sums at any time received or receivable by the Security Trustee (or any agent of the Secu rity Trustee) in respect of the same (or any part thereof);
 
“ US$ ” or “ Dollars ” means the lawful currency for the time being of the United States of America;
 
“ Vessels ” means together Newbuilding A and the Newbuilding B and in the singular either of them;
 
“ War Risks ” means the risk of any hostile acts, mines or torpedoes and all risks excluded by F.C. & S Clauses 24 - 26 (inclusive) of the Institute Time Clauses (Hulls) (1.11.95) (or any equivalent provision);
 
1.3           In this Agreement references to the “ Agent ”, “ Swap Agent ”, “ Paying Agent ”, “ Security Trustee ”, or any “ Bank ” shall be construed so as to include its and any subsequent successors, assigns, transferees and sub-participants in accordance with their respective interests.
 
1.4           In this Agreement references to periods of ‘months’ shall mean a period beginning in one calendar month and ending in the next calendar month on the day numerically corresponding to the day of the calendar month in which such period started and (a) if such numerically corresponding day is not a Business Day, such period shall end on the next following Business Day in the same calendar month, or if there is no such Business Day, such period shall end on the preceding Business Day and (b) if there is no numerically corresponding day in the next calendar month then such period shall end on the last Business Day in that calendar month (and ‘month’ and ‘monthly’ shall be construed accordingly).
 
1.5           In this Agreement unless the context otherwise requires -
 
1.5.1        clause headings and sub-headings are inserted for convenience only and shall not affect the construction of the Agreement and unless otherwise specified, all references to Clauses and Schedules are to clauses of, and schedules to, this Agreement;
 
1.5.2        words importing the singular shall include the plural and vice versa;
 
1.5.3        fees, costs and expenses shall be exclusive of any value added tax or similar tax (if any) which shall accordingly be payable in addition;
 
1.5.4        any reference to agreements, documents or instruments includes a reference to that agreement, document or instrument as amended, supplemented, substituted, novated or assigned from time to time;
 
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1.5.5        references to persons include any individual, partnership, firm, trust, body corporate, government, governmental body, authority, agency, unincorporated body of persons or association;
 
1.5.6        a reference to any enactment or statutory provision include any enactment or statutory provision which amends, extends, consolidates or replaces the same or which has been amended, extended, consolidated or replaced by the same and shall include any orders, regulations, codes of practice, instruments or other subordinated legislation made under the relevant enactment or statutory provision;
 
1.5.7        the words ‘herein’, ‘hereto’ and ‘hereunder’ refer to this Agreement as a whole and not to the particular Clause or Schedule in which the words may be used;
 
1.5.8        the liquidation, winding-up or dissolution of a company or body corporate or the appointment of a receiver, manager or administrator of or in relation to a company or body corporate or any of its assets shall be construed so as to include any equivalent or analogous proceedings under the law of the jurisdiction in which it is incorporated or any jurisdiction in which it carries on business or has assets or liabilities.
 
1.5.9        unless expressly provided to the contrary in a Finance Document, a person who is not a party to a Finance Document may not enforce any of its terms under the Contracts (Rights of Third Parties) Act 1999 and notwithstanding any term of any Finance Document, the consent of any third party is not required for any variation (including any release or compromise of any liability) or termination of that Finance Document.
 
2              THE FACILITIES
￠
2.1           The Banks hereby agree to make available to the Borrowers, upon the terms and subject to the conditions of this Agreement, the Facilities in an aggregate amount not exceeding at any time Sixty million Dollars (US$60,000,000) comprising -
 
(i)             prior to the advance of the term loan facilities referred to in paragraphs (ii) and (iii) below, a facility of up to Forty Nine million Dollars (US$49,000,000) (“ the Pre-Delivery Facility ”) which shall be divided in two Advances of up to Twenty Four million Five hundred thousand Dollars  (US$ 24,500,000) each (each called “ a Pre-Delivery Facility Advance ”);
 
(ii)            a term loan facility of up to Forty Five million Dollars (US$ 45,000,000) (the “ Post Delivery Senior Facility ”) which shall be made available in two advances of up to Twenty Two million Five hundred thousand Dollars (US$22,500,000) (each a “ Post -Delivery Senior Facility Advance ”); and
 
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(iii)          a term loan facility of up to Fifteen million Dollars (US$15,000,000) ( the “ Post Delivery Junior Facility ”) which shall be made available in two advances of up to Seven million Five hundred thousand Dollars (US$7,500,000) each (each a “ Post-Delivery Junior Facility Advance ”).
 
2.2           The Borrowers shall use the entire proceeds of -
 
2.2.1        Each Pre-Delivery Facility Advance to finance and/or refinance up to Eighty Seven point Five per cent (87.5%) of the second predelivery instalment payable or paid pursuant to the terms of the Shipbuilding Contract related to each Vessel; and
 
2.2.2        Each Post-Delivery Senior Facility Advance to refinance partly the Pre-Delivery Facility Advance related to such Vessel, provided however that such Post-Delivery Senior Facility Advance shall not exceed the lower of (a) sixty per cent (60%) of the Total Construction Cost of the relevant Vessel and (b) Twenty Two million Five hundred thousand Dollars (US$22,500,000); and
 
2.2.3        Each Post-Delivery Junior Facility Advance to (i) refinance the remaining balance of the Pre-Delivery Facility Advance not refinanced by the Post-Delivery Senior Facility Advance related to such Vessel (ii) finance the payment of monies into the Deposit Account in an amount equal to the on-delivery instalment payable by the relevant Owner under the relevant Shipbuilding Contract and (iii) partly finance the Additional Construction Expenses incurred in connection with the relevant Vessel, provided however that each Post-Delivery Junior Facility Advance shall not exceed the lower of (a) twenty per cent (20%) of the Total Construction Cost of the relevant Vessel and (b) Seven million Five hundred thousand Dollars (US$7,500,000).
 
2.3           Subject to the terms of this Agreement, the Banks shall make Advances under the Facilities to the Borrowers on the Drawdown Dates.
 
2.4           All the liabilities and obligations of the Borrowers under this Agreement shall, whether expressed to be so or not, be joint and several so that each Borrower shall be jointly and severally responsible with the other Borrower for all liabilities and obligations of the Borrowers under this Agreement and so that such liabilities and obligations shall not be impaired by -
 
1.             any failure of this Agreement to be legal, valid, binding and enforceable in relation to any of the Borrowers whether as a result of lack of corporate capacity, due authorisation, effective execution or otherwise;
 
2.             any giving of time, forbearance, indulgence, waiver or discharge in relation to any of the Borrowers or to any other party of the Security Documents; or
 
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3.             any other matter or event whatsoever which might have the effect of impairing all or any of the liabilities and obligations of any of the Borrowers.
 
2.5           Each of the Borrowers declares that it is and will, throughout the Security Period, remain a principal debtor for all amounts owing under this Agreement and none of the Borrowers shall in any circumstances be construed to be a surety for the obligations of the other Borrower hereunder.
 
2.6           Until all sums owing to the Banks by the Borrowers under this Agreement and the Security Documents have been paid in full none of the Borrowers (hereinafter called a “ Creditor Borrower ”) will without the prior written consent of the Agent ask, demand, sue for, take or receive from any member of the Group (or any of them) (hereinafter called a “ Debtor Borrower ”) by set-off or any other manner the whole or any part of all present and future sums, liabilities and obligations payable or owing by the Debtor Borrower to the Creditor Borrower whether actual or contingent jointly or severally or otherwise howsoever so long as any present and future sums, liabilities and obligations whatsoever payable or owing by the Borrowers (or any of them) pursuant to the Finance Documents or any of them or otherwise whatsoever, whether actual or contingent jointly or severally or otherwise howsoever).
 
3              AVAILABILITY – COMMITMENTS BY THE BANKS – POSITION OF THE CREDITORS AND THE INSTRUCTING GROUP
￠
3.1           Subject as herein provided -
 
(1)            the Pre-Delivery Facility is available to the Borrowers for drawing during the Availability Period relating thereto in two (2) Advances (namely Advance A and Advance B);
 
(2)            the Post-Delivery Senior Facility is available for drawing during the Availability Period relating thereto in two (2) Advances (namely Advance C and Advance D); and
 
(3)            the Post Delivery Junior Facility is available for drawing during the Availability Period relating thereto in two (2) Advances (namely Advance E and Advance F).
 
Any part of any Advance which remains undrawn at the close of business in Hamburg on the expiration of the relevant Availability Period shall be automatically cancelled.
 
3.2           The Banks severally agree with the Borrowers to make each Facility available in the proportionate amount of their Commitments to the Total Commitments in respect of such Facility or any part thereof on the terms and conditions set out in this Agreement. In the event that any Bank fails to make available its Commitment in respect of any Facility
 
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neither the Agent, Paying Agent, nor the other Banks shall be liable to the Borrowers to make available all or any part of such Commitment nor to compensate the Borrowers for such failure.
 
3.3           Notwithstanding any other term of this Agreement, the interests of the Creditors are several and the aggregate of the amounts outstanding at any time hereunder or under the other Finance Documents from the Borrowers to each Creditor is a separate and independent debt; accordingly each Creditor shall be entitled to sue for any amount which has become due and payable by the Borrowers to it under this Agreement without joining the Agent, the Paying Agent, the Security Trustee or any other Lender as additional parties in the proceedings.
 
3.4           However, without the prior consent of the Instructing Group, a Creditor may not bring proceedings in respect of:
 
(a)            any other liability or obligation of any Obligor under or connected with a Finance Document; or
 
(b)            any misrepresentation or breach of warranty by any Obligor in or connected with a Finance Document.
 
3.5           The obligations of the Creditors under this Agreement and the other Finance Documents are several; and a failure of a Creditor to perform its obligations under this Agreement or any other Finance Documents shall not result in:
 
(a)            the obligations of the other Banks being increased; nor
 
(b)            any Obligor or any other Creditor being discharged (in whole or in part)
 
from its obligations under any Finance Document;
 
and in no circumstances shall a Creditor have any responsibility for a failure of another Creditor to perform its obligations under this Agreement or any other Finance Documents.
 
3.6           Every Creditor and each Obligor shall be bound by:
 
(a)            any determination made, or action taken, by the Instructing Group under any provision of a Finance Document;
 
(b)            any instruction or authorisation given by the Instructing Group to the Agent, the Paying Agent or the Security Trustee under or in connection with any Finance Document;
 
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(c)            any action taken (or in good faith purportedly taken) by the Agent, the Paying Agent or the Security Trustee in accordance with such an instruction or authorisation.
 
3.7           However, the Borrowers and each other Obligor:
 
(a)            shall be entitled to assume that the Instructing Group has duly given any instruction or authorisation which, under any provision of a Finance Document, is required in relation to any action which the Agent has taken or is about to take; and
 
(b)            shall not be entitled to require any evidence that such an instruction or authorisation has been given.
 
3.8           In Clauses 3.6 and 3.7 references to action taken include (without limitation) the granting of any waiver or consent, an approval of any document and an agreement to any matter.
 
3.9           Nothing contained in this Agreement and no action taken by the Creditors pursuant to this Agreement or under the other Finance Documents shall be deemed to constitute the Creditors as a partnership, association, joint venture or other entity.
 
4              NOTICE OF DRAWDOWN
￠
4.1           The Borrowers may make a request for an Advance by sending to the Agent a duly completed Notice of Drawdown subject to the conditions in this Clause 4.
 
4.2           All Advances shall be subject to the following conditions being complied with to the Agent’s and the Security Trustee’s satisfaction -
 
4.2.1        on the Drawdown Date of the relevant Advance the conditions precedent set out in Clause 18 have either been satisfied or have been waived by the Agent and the Security Trustee (whether with or without conditions) and the undertakings in Clause 21 so far as they are relevant on the respective Drawdown Date have at all times been complied with; and
 
4.2.2        on the date of the Notice of Drawdown and on the Drawdown Date of the relevant Advance no Event of Default or Potential Event of Default has occurred and is continuing or might result from such Advance being paid to the Borrowers; and
 
4.2.3        on the date of the Notice of Drawdown in respect of the relevant Advance the representations and warranties set out in Clause 16 (updated mutatis mutandis to the relevant Drawdown Date) are true and correct; and
 
4.2.4        the Agent shall have received the Notice of Drawdown in respect of the relevant Advance not later than 11.00 a.m. (London time) on the third (3rd) Business Day prior to the Drawdown
 
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Date (or such shorter period as may be agreed by the Agent) from the Borrowers setting out the proposed Drawdown Date.
 
4.3           The Borrowers may make a request for a Pre-Delivery Facility Advance by sending to the Agent a duly completed Notice of Drawdown, subject that the Pre-Delivery Facility Advances may only be made as follows -
 
(a)            by Advance A in the amount of up to Twenty Four million Five hundred thousand Dollars (US$24,500,000) to finance or refinance part of the amounts due or paid to Samsung under Article II Paragraph(4)(b) of the Shipbuilding Contract A; and
 
(b)            by Advance B in the amount of Twenty Four million Five hundred thousand Dollars (US$24,500,000) to finance or refinance part of the amounts due or paid to Samsung under Article II Paragraph (4)(b) of the Shipbuilding Contract B;
 
4.4           The Borrowers may make a request for a Post-Delivery Senior Facility Advance by sending to the Agent a duly completed Notice of Drawdown, subject that the Post-Delivery Senior Facility Advances may only be made as follows:
 
(a)            by Advance C in the amount of up to Twenty Two million Five hundred thousand Dollars (US$22,500,000) to be applied for the purpose of Clause 2.2.2; and
 
(b)            by Advance D in the amount of up to Twenty Two million Five hundred thousand Dollars (US$22,500,000) to be applied for the purpose of Clause 2.2.2.;
 
4.5           The Borrowers may make a request for a Post-Delivery Junior Facility Advance by sending to the Agent a duly completed Notice of Drawdown, subject that the Post-Delivery Junior Facility Advances may only be made as follows:
 
(a)            by Advance E in the amount of up to Seven million Five hundred thousand Dollars (US$7,500,000) to be applied for the purpose of Clause 2.2.3; and
 
(b)            by Advance F in the amount of up to Seven million Five hundred thousand Dollars (US$7,500,000) to be applied for the purpose of Clause 2.2.3.;
 
4.6           It shall be a condition of the Borrowers making a request for a Post-Delivery Junior Facility Advance that a request for the Post-Delivery Senior Facility Advance related to the same Vessel has been made.
 
4.7           Where the Borrowers make a request for a Post-Delivery Junior Facility Advance or part thereof then the making of such Advance shall be subject to:
 
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(a)            the Agent receiving from the Borrowers on or before the date of the relevant Notice of Drawdown, a Statement of Additional Construction Expenses approved by the Agent which shall be in form and substance satisfactory to the Agent and the Agent may request such further information as the Agent may reasonably require to support the said Statement of Additional Construction Expenses; and
 
(b)            a copy of the notice from Samsung under the relevant Shipbuilding Contract that the Additional Construction Costs are due, shall be served on the Agent together with the said Statement of Additional Construction Expenses such notice to be certified by the Borrowers to be a true and complete copy, and the Borrowers shall certify that Samsung can properly give such notice and that it has been properly given under the terms of the relevant Shipbuilding Contract.
 
4.8           A Notice of Drawdown once made shall be irrevocable and the Borrowers appoint each other for the purpose of executing a Notice of Drawdown so that any one Borrower executing a Notice of Drawdown binds all Borrowers to the Notice of Drawdown so executed.
 
4.9           The Paying Agent and/or the Banks shall consolidate any Advances made under each of the Post-Delivery Senior Facility and the Post-Delivery Junior Facility.
 
5              INTEREST
￠
5.1           On each Interest Payment Date the Borrowers shall pay to the Paying Agent, for the account of the Banks, for the period elapsed accrued interest at the Interest Rate on the amount of each Facility in the Relevant Currency.
 
5.2           Interest shall be calculated on the basis of the actual number of days elapsed and a three hundred and sixty (360) day year or on such basis as the Paying Agent may determine in accordance with market practice in relation to the Relevant Currency.
 
5.3           Each determination of an Interest Rate hereunder shall be promptly notified by the Paying Agent to the Borrowers and the Banks.
 
6              INTEREST PERIODS
￠
6.1           Subject to Clause 6.2, the Interest Periods shall be periods of a duration of one (1), three (3), six (6) or nine (9) months (or such other Periods as the Paying Agent and the Borrowers may agree) as selected by the Borrowers by written notice to be received by the Agent not later than 11.00 a.m. (London time) on the relevant Nomination Date.
 
6.2           Notwithstanding the provisions of Clause 6.1 -
 
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6.2.1        the first Interest Period of an Advance shall commence on the Drawdown Date of such Advance and each subsequent Interest Period shall commence on the expiry of the preceding Interest Period in respect thereof;
 
6.2.2        if any Interest Period would otherwise end on a day which is not a Business Day, that Interest Period shall be extended to the next succeeding day which is a Business Day unless such next succeeding Business Day falls in another calendar month in which event the Interest Period shall end upon the immediately preceding Business Day;
 
6.2.3        if any Interest Period commences on the last Business Day in a calendar month or if there is no numerically corresponding day in the month in which that Interest Period ends, that Interest Period shall end on the last Business Day in that later month;
 
6.2.4        where any Repayment Date in respect of an Advance occurs other than at the end of an Interest Period relating thereto there shall in respect of that part of such Advance equivalent to the amount of the Repayment Instalment falling due on such Repayment Date be a separate Interest Period expiring on such Repayment Date and the Interest Rate relating to such part shall be fixed separately;
 
6.2.5        the Borrowers shall not be permitted to select different Interest Periods in respect of the Post-Delivery Facilities; and
 
6.2.6        if the Borrowers fail to select an Interest Period in accordance with the above, such Interest Period shall be of three (3) months duration or of such other duration as the Paying Agent may in its sole discretion select.
 
7              HEDGING TRANSACTIONS
￠
7.1           The Swap Agent and the Borrowers may, subject to the prior written consent of Security Trustee and the Investor (unless the Security Trustee shall agree that the consent of the Investor is not required, with the Security Trustee’s decision and consent to be given in its absolute discretion) during the Security Period enter, into one or more Hedging Transactions pursuant to the Master Agreement, the terms and conditions of each of which are or will be specified in a Confirmation sent by the Swap Agent to the Borrowers.
 
7.2           If an Advance is for any reason not advanced to the Borrowers on or before its Final Availability Date and the Swap Agent and the Borrowers have entered into any Hedging Transactions on or before that Final Availability Date, for the purposes of the Master Agreement an Additional Termination Event (as defined in the Master Agreement) (with the Swap Agent as the Affected Party) shall be deemed to have occurred on that Final Availability Date.
 
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7.3           Any Hedging Transactions in respect of the Post-Delivery Facilities shall be apportioned pro rata between them;
 
7.4           If the aggregate amount of an Advance or a Facility actually advanced by the Banks to the Borrowers is less than the Notional Amount  (or the aggregate Notional Amounts) of the Hedging Transactions entered into on or before the last Drawdown Date, the obligations of the Borrowers in respect of those Hedging Transactions shall, unless otherwise agreed by the Swap Agent, be calculated so far as the Swap Agent considers it practicable to do so, by reference to a Notional Amount (or aggregate Notional Amounts) equal to the amount of the Advance or the Facility actually advanced, reduced (if appropriate) on each Repayment Date by the amount of the Repayment Instalment due on that Repayment Date, adjusted if necessary in accordance with Clauses 12.1, 12.2.5 or 12.3.5 as the case may be.
 
7.5           If the Borrowers, subject always to Clause 10 prepay part of an Advance or a Facility (whether pursuant to Clause 10, Clause 9 or any other provision of this Agreement) and the amount of an Advance or a Facility remaining outstanding after the application of that prepayment is less than the Notional Amount (or the aggregate Notional Amounts) of the Hedging Transactions then in effect (reduced, if appropriate, in accordance with the Confirmations relating to those Hedging Transactions), the obligations of the Borrowers in respect of those Hedging Transactions shall, unless otherwise agreed by the Swap Agent, be calculated, so far as the Swap Agent considers it practicable to do so, by reference to a Notional Amount (or aggregate Notional Amounts) equal to the amount of that Advance or Facility remaining outstanding after application of the prepayment in question, reduced on each Repayment Date by the amount of the Repayment Instalment due on that Repayment Date after taking into account the application of the prepayment.
 
7.6           In order to give effect to Clauses 7.3 and 7.4, or in the event of voluntary or mandatory prepayment by the Borrowers of the whole of the Facilities, the Borrowers irrevocably authorise the Swap Agent to amend restructure, unwind, cancel, net out, terminate, liquidate, transfer or assign any of the rights and/or obligations created pursuant to the Master Agreement in respect of those Hedging Transactions, and/or to enter into any other interest rate exchange and/or hedging transaction or commitment with the Borrowers or with any other counterparty approved by the Swap Agent.
 
7.7           If the exercise of the Swap Agent’s rights under Clause 7.5 results in the termination of any Transaction, that Hedging Transaction shall for the purposes of the Master Agreement (including, without limitation section 6(e)(i) of the Master Agreement) be treated as a Terminated Transaction (as defined in the Master Agreement) resulting from an Event of Default by the Borrowers.
 
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7.8           The Borrowers will indemnify the Swap Agent from time to time on demand in respect of all liabilities, losses, costs or expenses suffered, incurred or sustained by the Swap Agent arising in any way in relation to the exercise by the Swap Agent of its rights under this Clause, or arising in any way from any other termination, cancellation, unwinding or restructuring of any transaction, together (in each case) with interest at the Default Rate (applicable to the Post-Delivery Junior Facility Indebtedness) from the date of the Swap Agent’s demand until the date on which the Swap Agent receives payment or reimbursement, before or after an relevant judgement.
 
8              ALTERNATIVE AND FORWARD CURRENCY OPTIONS
￠
8.1           (a)          (i)              Except in the circumstances described in Clause 8.1(g) (in which case the provisions of such Clause shall apply), at the commencement of any Interest Period in relation to any Post-Delivery Advance the Borrowers, by written request to the Paying Agent given not later than 10.00 a.m. (Hamburg time) two (2) Business Days before the commencement of such Interest Period, may request that, from the time of commencement of such Interest Period, part of the Post-Delivery Facilities be converted from one Relevant Currency to another Relevant Currency as specified in such notice, such request to be subject at all times to the consent of the Paying Agent (in its absolute discretion)
 
(ii)           Upon receipt of each such notice, the Paying Agent shall either reject the Borrowers’ request made pursuant to Clause 8.1(a)(i) above or it shall notify each of the Banks, giving each of them full details of the conversion request.
 
(b)            Subject only to:
 
(i)             at all times thirty percent (30%) of the Post-Delivery Facilities being denominated in Dollars;
 
(ii)           the total Post-Delivery Facilities being denominated in not more than three Relevant Currencies, one of which must be Dollars, and
 
(iii)          any amount in any Approved Currency outstanding under the Post-Delivery Facilities being not less than twenty percent (20%) of the total amount outstanding thereunder;
 
(iv)          no Event of Default then having occurred and being continuing
 
the amount in respect of the Post-Delivery Facilities which the Borrowers have requested to be converted from one Relevant Currency to another Relevant Currency
 
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shall be converted by the Banks in accordance with the Borrowers’ request (subject always to the consent of the Paying Agent) with effect from the commencement of the relevant Interest Period.
 
(c)            Each conversion hereunder shall be made at a rate which is the Spot Rate of Exchange unless such conversion has already been made under a Forward F/X Contract or series of Forward F/X Contracts maturing on such date, in which case the applicable Forward Rate of Exchange shall apply.
 
(d)         (i)               Each conversion under this Clause 8.1 shall made by the Borrowers being deemed to make a notional repayment of the relevant part of the Post-Delivery Facilities which is to be converted and the Banks being deemed to make a new advance in the New Currency of such sum, after taking account of scheduled repayments due to be made in the Existing Currency under Clause 12 and any mandatory prepayment under Clause 8.3.
 
(ii)           The proceeds of each such new advance shall be deemed to be used to purchase the amount due in the Existing Currency which is necessary so that the Borrowers may make the deemed repayment of the part of the Post-Delivery Facilities which is being converted. However, the Borrowers remain indebted to the Banks for the advance made in the New Currency, which shall continue to form part of the Post-Delivery Facilities as more particularly described in Clause 8.3(b).
 
(e)            Each amount requested by the Borrowers to be converted in the manner described above shall be apportioned pro rata to each of the Post-Delivery Advances (or following consolidation pro rata to each of the Post-Delivery Facilities).
 
(f)         (i)                If the Paying Agent does not receive a notice in accordance with Clause 8.1(a)(i) the relevant part of the Post-Delivery Facilities shall remain denominated in the Relevant Currency in which it was denominated during the then current Interest Period in respect thereof.
 
(ii)           If the Borrowers have requested that any Currency Tranche should remain denominated in or be converted to an Approved Currency for the next Interest Period but the requirements of Clause 8.1(b) would not then be complied with, then such Currency Tranche shall be denominated in Dollars for the next Interest Period.
 
(g)         (i)               In relation to Forward F/X Contracts which mature at the end of any Interest Period, it is agreed (and the Borrowers hereby irrevocably agree and direct) that, subject to Clause 8.1(b), conversions shall be made in respect of the
 
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necessary parts of the Post-Delivery Facilities into each Relevant Currency so as to enable the Borrowers to meet their obligations under each such maturing Forward F/X Contract.
 
(ii)           The Agent shall notify each of the Banks no later than 11.00 a.m. (London time) three (3) Business Days before the end of the relevant Interest Period of the conversion(s) to be made under this Clause 8.1(g).
 
8.2           The Borrowers’ obligations shall be to make all payments in respect of principal of all parts of the Post-Delivery Facilities and interest thereon and other payments under this Agreement in the Relevant Currency in which the Post-Delivery Facilities or part thereof is for the time being denominated.
 
8.3          (a)            If on any Repayment Date the Paying Agent determines that:
 
(i)             the consolidated aggregate of the Currency Equivalent in Dollars of all of the Currency Tranches, taking into account all Forward F/X Contracts then maturing, PLUS
 
(ii)            the remaining part (if any) of the Post-Delivery Facilities in Dollars, PLUS OR (AS THE CASE MAY BE) MINUS
 
(iii)          the net sum (if any) which the Swap Agent certifies would then be payable by the Borrowers to the Swap Agent or (as applicable) by the Swap Agent to the Borrowers if an Early Termination Date were then to occur in respect of all Forward F/X Contracts maturing after such Repayment Date
 
is more than 105% of the aggregate of:
 
(A)           the Dollar Reference Amount of the Post-Delivery Facilities at that time (after taking account of any scheduled repayment then due under Clause 12); and
 
(B)           the value of any additional security provided in accordance with this Clause.
 
a mandatory prepayment shall be made at the end of the current Interest Period in respect of the Post-Delivery Facilities of a sum sufficient to reduce the aggregate of the amounts detailed in clauses (i), (ii) and (iii) above to an amount equal to no more than 100% of the aggregate of the amounts detailed in clauses (A) and (B) above. However, before such prepayment is made, at the Borrowers’ request the Agent shall give the Borrowers the opportunity, within two (2) Business Days after being requested to do so, to provide alternative additional security acceptable to the Agent (to which the provisions of Clause 19 shall apply) so as to ensure that, after taking
 
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into account all such additional security, the aggregate of the amounts detailed in clauses (i), (ii) and (iii) above to an amount equal to no more than 100% of the aggregate of the amounts detailed in clauses (A) and (B) above.
 
(b)            It is agreed that the conversion operations contemplated by Clauses 8.1 and 8.3(a) constitute only a banking mechanism and that such operations shall not constitute or be construed as a novation or a repayment of all or any part of the Post –Delivery Facilities or the grant of new loans. The Borrowers agree that the security to be constituted by all the Security Documents shall secure both the initial amount of all parts of each of the Post-Delivery Facilities and all advances made by the Banks to effect such conversions.
 
Notwithstanding and without prejudice to the validity of the foregoing, the Borrowers shall at the Agent’s request sign such amendments to any of the Security Documents as the Agent may reasonably require to preserve their validity.
 
8.4        In case of any mandatory prepayment under Clauses 8.1 and/or 8.3 the sum to be prepaid shall be apportioned first pro rata between all Balloon Payments of the Post-Delivery Advances (or following consolidation pro rata between the Balloon Payments of the Post-Delivery Facilities) and thereafter, shall be apportioned pro rata between the Repayment Instalments due on each remaining Repayment Date for each Post-Delivery Advance (or following consolidation each Post-Delivery Facility) in inverse order of maturity.
 
8.5          (a)            Subject to all applicable provisions of the Master Agreement and subject also to no Event of Default then having occurred, the Borrowers, for hedging purposes in relation to the Borrower’s obligations in respect of the Post-Delivery Facilities and as described herebelow and as may be approved by the Swap Agent, may conclude Forward F/X Contracts with the Swap Agent:
 
(i)             to make forward purchases of Relevant Currencies, in amounts and currencies corresponding to all or part of the Post-Delivery Facilities but which may not, in any circumstances (after having taken account of the concluding matched Forward F/X Contracts as is described in paragraph 8.5(a) (ii) below) exceed the amount of the Post-Delivery Facilities; and
 
(ii)           to make forward purchases in the Relevant Currency or Currencies required by the Borrowers to match their obligations under existing Forward F/X Contracts.
 
Unless otherwise agreed by the Swap Agent, each such Forward F/X Contract shall mature no later than the date of expiry of the then current Interest Period applicable to the relevant part of the Post-Delivery Facilities.
 
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(b)            It is agreed that the sums which the Swap Agent makes available under Forward F/X Contracts which mature at the time of a conversion under Clause 8.1 shall be applied in or towards repayment of the sums due to be repaid in respect of the corresponding part of the Post-Delivery Facilities at the time of such conversion. The sums to be re-advanced by the Banks at that time under Clause 8.1 shall be applied in or towards meeting the Borrowers’ corresponding payment obligations to the Swap Agent under such Forward F/X Contracts.
 
The Borrowers irrevocably authorise and direct that each such application shall be made as aforesaid.
 
8.6           All costs and expenses, losses and currency risks arising from the exercise by the Borrowers of the multicurrency option and from entering into Forward F/X Contracts, including all losses stemming from any conversion made under Clause 8.1, shall be for the account of the Borrowers and shall, subject to the provisions of this Agreement, be reflected in the amount of the Post-Delivery Facilities to which they relate and/or the Master Agreement Liabilities (as the case may be).
 
9              SUBSTITUTE BASIS
￠
9.1           If a Bank determines (which determination shall be conclusive) that -
 
9.1.1        at 11.00 a.m. (London time) on any Interest Determination Date such Bank was not being offered by banks in the London and/or Luxembourg Interbank Eurocurrency Market (in the option of such Bank) deposits in the Relevant Currency or Currencies in the required amount and for the required period; or
 
9.1.2        such deposits are not available by reason of circumstances affecting the London and/or Luxembourg Interbank Eurocurrency Market (in the option of such Bank); or
 
9.1.3        such deposits are not available to such Bank in such market; or
 
9.1.4        adequate and reasonable means do not or will not exist for such Bank to ascertain the Interest Rate applicable to the next succeeding Interest Period; or
 
9.1.5        the Relevant Currency or Currencies will not or may not continue to be freely convertible or transferable, then, and in any such case the Agent shall give notice of any such event to the Borrowers and, in case any of the above occurs on the Interest Determination Date prior to the Drawdown Date of any Post-Delivery Advance, such Post-Delivery Advance for the first Interest Period in respect thereof shall be denominated in another Relevant Currency to be agreed between the Borrowers and the Banks; provided that if the Banks and the Borrowers
 
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do not agree on such alternative Relevant Currency then the relevant Post-Delivery Advance will be made available to the Borrowers in Dollars.
 
9.2           If, however, any of the events described in Clause 9.1 occurs on any other Interest Determination Date relative to any of the Facilities or any part thereof, then the duration of the relevant Interest Period shall be up to one (1) month and during such Interest Period the Interest Rate applicable to the relevant Facility or the relevant part thereof shall be the rate per annum determined by the Banks rounded upwards to the nearest whole multiple of one sixteenth per cent (1/16th%) above the cost (expressed as a percentage rate per annum) to the Banks of funding the amount of each Facility during such Interest Period.
 
9.3           During such Interest Period the Borrowers and the Banks shall negotiate in good faith in order to agree an Interest Rate and Interest Period satisfactory to the Borrowers and the Banks to be substituted for those which but for the occurrence of any such event as specified in this Clause would have applied or redenominate the relevant Facility or the relevant part thereof in a different currency or currencies which is freely convertible and transferable and in which deposits are available to the Banks for determining the Interest Rate. If the Borrowers and the Banks are unable to agree on such an Interest Rate and Interest Period or such different currency by the day which is two (2) Banking Days before the end of the Interest Period referred to above, the Borrowers shall repay the relevant Facility or Facilities or the relevant part thereof together with accrued interest thereon at the Interest Rate set out above together with all other amounts due under this Agreement relative to such Facility or Facilities but without any prepayment fee, on the last day of such Interest Period.
 
10            PREPAYMENT
￠
10.1         The Borrowers may prepay the whole or any part of the Facilities or any of them on any Business Day, provided that -
 
10.1.1     the Agent shall have received from the Borrowers not less than thirty (30) days prior notice of their intention to make such prepayment, the amount of such prepayment and the date on which such prepayment is to be made;
 
10.1.2     the amount of any partial prepayment shall be not less than Two million Dollars (US$ 2,000,000) or a multiple thereof;
 
10.1.3     no amount prepaid under this Agreement may be reborrowed;
 
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10.1.4     each prepayment under this Agreement shall be made together with accrued interest on the amount prepaid and all other amounts then due and payable under this Agreement and/or any of the Security Documents together with any Broken Funding Costs.
 
10.2         Any amount of a Facility prepaid pursuant to this Agreement (except for prepayment made pursuant to Clause 8.3) shall be applied to reduce the outstanding Balloon Payments and Repayment Instalments in respect thereof on a pro-rata basis
 
10.3         In the event of a Total Loss of a Vessel or the sale or other disposal of a Vessel (subject always to the prior written consent of the Agent and the Security Trustee) the Borrowers must prepay the Post-Delivery Advances in respect of that Vessel. Any Proceeds shall be applied in accordance with Clause 10.8 of the Intercreditor Deed and any other amounts paid by the Borrowers in satisfaction of the prepayment obligation shall be applied in accordance with Clause 10.4.
 
10.4         On the occurrence of any of the events referred to in Clause 10.3 in respect of either Vessel the other prepayment amounts and amounts received by the Security Trustee under Clause 10.8 of the Intercreditor Deed shall be paid by the Security Trustee to the Paying Agent and applied by the Paying Agent as follows -
 
FIRST : in payment of the Agent and/or, Paying Agent and/or the Security Trustee and/or the Banks of all losses, costs, charges, fees (including without limitation legal fees) including interest thereon that they may have incurred in connection with the exercise of their powers under this Agreement and the Security Documents;
 
SECOND :
 
(i)             if any such event occurs prior to the repayment of the Pre-Delivery Facility Advance relating to such Vessel, in mandatory prepayment of the Pre-Delivery Facility Advance relating to such Vessel; and
 
(ii)           if any such event occurs after the repayment of the Pre-Delivery Facility relating to such Vessel, in mandatory prepayment of the Repayment Instalments and the Balloon Payment of all Post-Delivery Advances pursuant to which such Vessel was financed on a pro rata basis and thereafter towards payment of such part of the Master Agreement Liabilities as the Swap Agent may require; and
 
THIRD : subject to no Event of Default or Potential Event of Default having occurred, any balance shall be paid to the Borrowers.
 
The payments to the Security Trustee under Clause 10.8 of the Intercreditor Deed shall be made (a) immediately upon completion of any such sale or other disposal; or (b) within one
 
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hundred and eighty (180) days after the occurrence of such Total Loss (or such longer period as the Agent and the Security Trustee may agree).
 
10.5         For the purposes of Clause 10.3 and 10.4 an actual Total Loss shall be deemed to have occurred at the actual date and time the Vessel was lost but in the event of the date of the loss being unknown then the actual Total Loss shall be deemed to have occurred on the date on which such Vessel was last reported and a constructive Total Loss shall be deemed to have occurred at the date and time when notice of abandonment of the relevant Vessel is given to its Insurers for the time being (provided a claim for such constructive Total Loss is admitted by such Insurers) or is subsequently adjudged by a competent court of law or arbitration tribunal to have occurred and a compromised, agreed or arranged Total Loss shall be deemed to have occurred on the date of the relevant compromise, agreement or arrangement.
 
10.6         The Borrowers shall on the first written demand of the Agent indemnify the Agent, the Paying Agent, the Security Trustee and the Banks in respect of all loss, cost and expense (including but not limited to Broken Funding Costs and the fees of legal advisers) incurred or sustained by the Agent, the Paying Agent, the Security Trustee and/or the Banks as a consequence of or in relation to the effecting of any matters or transactions referred to in this Clause 10.
 
10.7         Any notice of prepayment given by the Borrowers under this Agreement shall be irrevocable and the Borrowers shall be bound to prepay in accordance with each such notice.
 
10.8         The Borrowers may not prepay all or any part of a Facility except in accordance with the express terms of this Agreement.
 
11            EARNINGS ACCOUNTS
￠
11.1         Each of the Borrowers (without prejudice to the terms of the relevant Earnings Account Charge and the relevant Charter Assignment Agreement) hereby agree that all the Earnings relating to its Vessel shall be assigned to the Security Trustee, and that all the relevant Borrower’s Earnings shall be paid into the relevant Earnings Account which shall be charged to the Security Trustee by the relevant Earnings Account Charges.
 
11.2         Unless and until the Security Trustee gives notice to a Borrower that it requires that the relevant Earnings to be paid directly to the Security Trustee (which notice may only be given in accordance with the terms of the relevant Earnings Account Charge), all amounts in the relevant Earnings Account shall be applied towards the payment of fees and costs that are due and payable by the relevant Borrower to the Agent, Paying Agent,
 
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Security Trustee and/or the Banks and any balance thereafter remaining in the relevant Earnings Account shall be available to the relevant Borrower.
 
11.3         On each Repayment Date each Borrower shall transfer from the relevant Earnings Account to the Paying Agent an amount equal to the Repayment Instalment payable on that date by that Borrower and on each Interest Payment Date each Borrower shall transfer from the relevant Earnings Account to the Paying Agent an amount equal to the interest payable under Clause 5 on that date by that Borrower.
 
12            REPAYMENT
￠
12.1         Repayment of the Pre-Delivery Facility
 
12.1.1     Advance A shall be fully repaid to the Banks by the Borrowers in one amount in Dollars on the earlier of: (a) the Drawdown Date of Advance C and (b) the Final Availability Date of the Post-Delivery Senior Facility.
 
12.1.2     Advance B shall be fully repaid to the Banks by the Borrowers in one amount in Dollars on the earlier of (a) the Drawdown Date of Advance D and (b) the Final Availability Date of the Post-Delivery Senior Facility.
 
12.2         Repayment of the Post-Delivery Senior Facility
 
12.2.1     Advance C shall be repaid to the Banks by the Borrowers by forty (40) consecutive quarterly repayment instalments of US$375,000 each (“ the Advance C Repayment Instalment ”) and a final payment equal to the outstanding balance of Advance C (“ the Advance C Balloon Payment ”), payable together with the fortieth (40th) Advance C Repayment Instalment, the first such Advance C Repayment Instalment being due and payable three (3) months after the Advance C Drawdown Date and the succeeding thirty-nine at quarterly intervals thereafter and Advance C shall be repaid in full by the Advance C Maturity Date in any event.
 
12.2.2     Advance D shall be repaid to the Banks by the Borrowers by forty (40) consecutive quarterly repayment instalments of US$375,000 each (“ the Advance D Repayment Instalment ”) and a final payment equal to the outstanding balance of Advance D (“ the Advance D Balloon Payment ”), payable together with the fortieth (40th) Advance D Repayment Instalment, the first such Advance D Repayment Instalment being due and payable three (3) months after the Advance D Drawdown Date and the succeeding thirty-nine at quarterly intervals thereafter and Advance D shall be repaid in full by the Advance D Maturity Date in any event.
 
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12.2.3     The Paying Agent may require that any Post-Delivery Senior Facility Repayment Instalment be due on a day otherwise than as provided in Clauses 12.2.1 and 12.2.2 so that Advance C Repayment Instalments and Advance D Repayment Instalment may be consolidated provided that nothing in this Clause shall require the Borrowers to pay a Post-Delivery Senior Facility Repayment Instalment earlier than provided in Clauses 12.2.1 and 12.2.2.
 
12.2.4     Where either of Advance C and Advance D has not been fully drawn down at the Final Availability Date in respect thereof then the relevant outstanding Repayment Instalments and Balloon Payments shall be reduced proportionately by the relevant amount.
 
12.3         Repayment of the Post-Delivery Junior Facility
 
12.3.1     Advance E shall be repaid to the Banks by the Borrowers by forty (40) consecutive quarterly repayment instalments of US$125,000 each (“ Advance E Repayment Instalment ”) and a final payment equal to the outstanding balance of Advance E (“ the Advance E Balloon Payment ”) payable together with the fortieth (40th) Advance E Repayment Instalment, the first such Advance E Repayment Instalment being due and payable three months after the Advance E Drawdown Date and the succeeding thirty-nine at quarterly intervals thereafter and Advance E shall be repaid in full by the Advance E Maturity Date in any event.
 
12.3.2     Advance F shall be repaid to the Banks by the Borrowers by forty (40) consecutive quarterly repayment instalments of US$125,000 each (“ Advance F Repayment Instalment ”) and a final payment equal to the outstanding balance of Advance F (“ the Advance F Balloon Payment ”) payable together with the fortieth (40th) Advance F Repayment Instalment, the first such Advance F Repayment Instalment being due and payable three months after the Advance F Drawdown Date and the succeeding thirty-nine at quarterly intervals thereafter and Advance F shall be repaid in full by the Advance F Maturity Date in any event.
 
12.3.3     The Paying Agent may require that any Post-Delivery Junior Facility Repayment Instalment be due on a day otherwise than as provided in Clauses 12.3.1 and 12.3.2 so that Advance E Repayment Instalments and Advance F Repayment Instalment may be consolidated provided that nothing in this Clause shall require the Borrowers to pay the a Post-Delivery Junior Facility Repayment Instalment earlier than provided in Clauses 12.3.1 and 12.3.2.
 
12.3.4     Where either of Advance E and Advance F has not been fully drawn down at the Final Availability Date then the relevant outstanding Repayment Instalments and Balloon Payments shall be reduced proportionately by the relevant amount.
 
12.4         Each repayment or prepayment of the Post-Delivery Facilities or, as the case may be, any part thereof shall be made in the currency in which the Post-Delivery Facilities or, as the case may be, the relevant part thereof was outstanding on the relevant Repayment Date or, as the case may be, the date of prepayment (in such proportions as between the currencies in which the
 
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Post-Delivery Facilities, is denominated at the time of the relevant repayment or prepayment as the Tranche or Tranches in the one currency bear to the Tranche or Tranches in the other currency) and on the basis of the Spot Rate of Exchange applicable to such Repayment Date or date of prepayment.
 
13            EVIDENCE OF DEBT
￠
The Paying Agent and each Bank shall maintain in accordance with their usual practice accounts evidencing the amounts from time to time lent and owing hereunder and in any legal action or proceedings arising out of or in connection with this Agreement and/or the Security Documents the entries made in such accounts shall be conclusive evidence (absent manifest error) of the existence and the amounts of the liabilities of the Borrowers hereunder and/or thereunder.
 
14            PAYMENTS
￠
14.1         All amounts payable under this Agreement and/or the Security Documents by the Borrowers, including amounts payable under this Clause 14, shall be paid in full to the Paying Agent on behalf of the Banks without set-off or counterclaim or retention and free and clear of and without any deduction or withholding for or on account of any Taxes or any charges or otherwise present or future. In the event that the Borrowers are required by law to make any such deduction or withholding from any payment hereunder, then the Borrowers shall forthwith pay to the Paying Agent such additional amount as will result in the immediate receipt by the Paying Agent of the full amount which would have been received hereunder had no such deduction or withholding been made, but if any Bank shall be or become entitled to any Tax credit or relief in respect of any Tax which is deducted from any payment by the Borrowers and if that Bank in its sole determination actually receives (and is entitled to retain) a benefit from such Tax credit or relief in its country of domicile, incorporation or residence, such Bank shall, subject to any laws or regulations applicable thereto, pay to the Paying Agent for the benefit of the Borrowers after such benefit is effectively received by such Bank such amounts (which shall be conclusively certified by such Bank) as shall ensure that the net amount actually retained by such Bank is equal to the amount which would have been retained if there had been no such deduction and the Borrowers shall immediately forward to the Paying Agent official receipts of the relevant taxation or other authority or other evidence acceptable to the Paying Agent of the amount deducted or withheld as aforesaid, provided that in the event that it shall be illegal for the Borrowers to pay such additional amount as is referred to in this Clause 14.1 then the Indebtedness shall be repayable by the Borrowers to the Banks on demand. Nothing in this Clause 14.1 shall interfere with the right of the Paying Agent or the Banks to arrange their respective tax affairs in whatever manner they think fit.
 
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14.2         All payments which are to be made in Dollars by the Borrowers under this Agreement and/or the Security Documents shall be made in Dollars in immediately available and freely transferable and convertible funds not later than 10.00 a.m. New York time on the date upon which the relevant payment is due to such bank and as the Paying Agent may from time to time nominate by written notice to the Borrowers; and where payments are to be made in an Approved Currency then the payment shall be made in such Approved Currency and in immediately available, freely transferable, cleared funds to such account with such bank as the Paying Agent may have specified for this purpose.
 
14.3         The Borrowers authorise the Paying Agent and the Banks to apply any credit balance to which the Borrowers are entitled on any account of the Borrowers with the Paying Agent, or the relevant Bank (other than any account which will be opened and administered hereunder) in satisfaction of any sum due and payable from the Borrowers to the Paying Agent, or such Bank hereunder but unpaid; for this purpose, the Paying Agent or such Bank is authorised to purchase with the moneys standing to the credit of any such account such other currencies as may be necessary to effect such application. Neither the Paying Agent nor any Bank shall be obliged to exercise any right given to it by this Clause 14.3.
 
14.4         In the event of a failure by the Borrowers to pay any amount on the date on which such amount is due and payable pursuant to this Agreement and/or the Security Documents and irrespective of any notice by the Paying Agent or any other person to the Borrowers in respect of such failure, the Borrowers shall pay interest on such amount on demand from the date of such failure up to the date of actual payment (as well after as before judgment) at the applicable Default Rate for such period as the Paying Agent may select at or about 11.00 a.m. (London time) on the Business Day immediately following that on which the Paying Agent becomes aware of the failure and, for so long as the failure continues, at such rate as shall be recalculated on the same basis thereafter.
 
14.5         Any interest which shall have accrued under Clause 14.4 in respect of an unpaid sum shall be due and payable and shall be paid by the Borrowers at the end of the period by reference to which it is calculated or such other date or dates as the Paying Agent may specify by written notice to the Borrowers.
 
14.6         Without prejudice to the foregoing and irrespective of any notice by the Paying Agent or any other person to the Borrowers in respect of the Borrowers’ failure to make any payment when due, the Borrowers shall indemnify the Paying Agent and each Bank against any damages, losses or expenses (including losses incurred in paying overdraft interest or in liquidating or employing deposits from third parties acquired to make, fund or maintain the Commitment of each Bank or the Facilities or any part thereof) which the Paying Agent and the Banks may sustain or incur as a consequence of the failure by the
 
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Borrowers to pay any amount when due and payable under this Agreement and/or the Security Documents and/or as a consequence of the occurrence of any Event of Default.
 
14.7         The Borrowers undertake to indemnify the Agent, the Paying Agent, the Security Trustee and the Banks against any loss incurred by the Agent, the Paying Agent, the Security Trustee and the Banks as a result of any judgment or order being given or made for the payment of any amount due under this Agreement and/or the Security Documents and such judgment or order being expressed in a currency other than that in which the payment was due or payable under this Agreement and/or the Security Documents and as a result of any variation having occurred in rates of exchange between the date on which the currency is converted for the purpose of such judgment or order and the date of actual payment thereof. This indemnity shall constitute a separate and independent liability of the Borrowers and shall continue in force and effect notwithstanding any such judgment or order as aforesaid.
 
14.8         Any prepayment or repayment of principal made or deemed to be made under this Agreement shall, if made otherwise than at the end of an Interest Period relative to the amounts prepaid or repaid, be made together with accrued interest thereon and such additional amount (if any) as the Paying Agent may certify as necessary to compensate the Banks for any damages or losses, as the case may be, incurred or to be incurred by the Banks in connection with such prepayment or repayment (including but not limited to loss of profit and losses on account of funds borrowed in order to make, fund or maintain the Commitment or the Facilities or any part thereof prepaid or repaid).
 
14.9         If the Borrowers give a Notice of Drawdown pursuant to Clause 4 and the Banks make arrangements on the basis of such notice to acquire the Relevant Currency in the London or Luxembourg Interbank Eurocurrency Market to fund any one or more of the Facilities or any part of them and the Borrowers are not permitted or otherwise fail to borrow in accordance with such Notice of Drawdown (either on account of any condition precedent not being fulfilled or otherwise) the Borrowers shall indemnify the Banks against any damages, losses or expenses which the Banks may incur (either directly or indirectly) as a consequence of the failure by the Borrowers to borrow in accordance with the Notice of Drawdown.
 
15            CHANGE OF CIRCUMSTANCES
￠
15.1         If -
 
15.1.1     any law, regulation, treaty or official directive (whether or not having the force of law) or the interpretation thereof by any authority charged with the administration thereof  (of which the Banks at the date of execution of this Agreement are not aware):
 
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(a)            subjects any Bank to any Tax with respect to payments of principal or interest in connection with the Facilities or any other amount payable hereunder (other than Tax assessed, levied or collected on the overall net income of such Bank); or
 
(b)            changes the basis of Taxation of payments to any Bank of principal or interest in connection with the Facilities or of any other amount payable hereunder (other than a change in the rate of Tax on the overall net income of such Bank); or
 
(c)            imposes, modifies or deems applicable any reserve and/or special deposit requirements against or in respect of assets or liabilities of, or deposits with or for the account of, or loans or credit extended by, any office of any Bank; or
 
(d)            imposes on any Bank any other condition affecting this Agreement, its Commitment or the Facilities or any part thereof or their funding; or
 
15.1.2     any Bank complies with any request, law, regulation or directive from any applicable fiscal or monetary authority (whether or not having the force of law), and as a result of any of the foregoing either directly or indirectly -
 
(a)            the cost to any Bank of making, funding or maintaining its Commitment in respect of the Facilities or any of them is increased; or
 
(b)            the amount of principal, interest or other amount payable to any Bank or the effective return to such Bank hereunder is reduced; or
 
(c)            any Bank makes any payment or losses any interest or other return calculated by reference to the gross amount of any sum receivable by it from the Borrowers hereunder,
 
then and in each such case upon demand from time to time the Borrowers shall pay to the Paying Agent for account of the relevant Bank such amount as shall compensate the relevant Bank for such increased cost, reduction, payment or lost interest or other return. If the Bank is entitled to make a claim pursuant to this Clause 15, the Agent shall notify the Borrowers of the event by reason of which they are so entitled. The Agent shall submit to the Borrowers a certificate setting out details of the event giving rise to such compensation, the amount thereof and the manner in which it has been calculated and in the absence of manifest error such certificate shall be conclusive.
 
15.2         If any amount payable by the Borrowers hereunder and/or under the Security Documents whether in respect of principal, interest or otherwise or any recipient of any such amount by reason of its receiving such amount is or becomes subject at any time to Taxation in the United Kingdom, the Federal Republic of Germany or the Grand Duchy of
 
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Luxembourg, the Republic of Liberia, the Republic of Cyprus, or the Republic of Greece, the Borrowers will indemnify any such recipient of such amount in respect of such Tax liability so that such recipient receives or retains a net sum equal to the amount it would have received or retained had there been no such Tax liability but if such recipient shall be or becomes entitled to any Tax credit or relief in respect of any such Tax liability or deduction and if the recipient in its sole determination actually receives (and is entitled to retain) a benefit from such Tax credit or relief in its country of domicile, incorporation or residence, that recipient shall, subject to any laws or regulations applicable thereto, pay to the Borrowers after such benefit is effectively received by that recipient such amount (which shall be conclusively certified by that recipient) as shall ensure that the net amount actually retained by that recipient is equal to the amount which would have been retained if there had been no such liability or deduction. In addition the Borrowers shall indemnify the Bank and each recipient of any sum payable by the Borrowers under this Agreement and/or under the Security Documents against any liability for Taxes in the United Kingdom, the Federal Republic of Germany or the Republic of Cyprus or the Republic of Greece, imposed on any of them or on any agent, branch, employee, representative or representative office of any of them by virtue of the negotiation, preparation or execution of this Agreement and/or the Security Documents, the performance of any duty or discharge of any liability hereunder and/or under the Security Documents or the receipt of any payment hereunder and/or under the Security Documents. Nothing in this Clause 15.2 shall interfere with the right of the Agent, Paying Agent, Security Trustee or the Banks to arrange their respective tax affairs in whatever manner they think fit.
 
15.3         Notwithstanding anything to the contrary herein contained, if any change in law, regulation or treaty or in the interpretation or application thereof by any authority charged with the administration thereof shall make it unlawful for the Paying Agent or the Banks to make, fund or maintain the Commitment of each Bank or the Facilities the Agent may, by written notice thereof to the Borrowers, declare that the Bank’s duty to provide the Borrowers with the Commitment or the Facilities shall be terminated forthwith whereupon the Borrowers will prepay forthwith (or if permitted by law on the next following Interest Payment Date) the Facilities together with all interest accrued thereon and all fees and other amounts payable to the Banks hereunder (including, but not limited to, Broken Funding Costs). The Banks’ duties and liabilities hereunder and their Commitment shall be cancelled on the giving of such notice. In any such event, but without prejudice to the aforesaid liability of the Borrowers to prepay the Facilities, the Borrowers, the Agent and the Banks shall negotiate in good faith with a view to agreeing the terms for making the Facilities available from another jurisdiction, or funding the Facilities from alternative sources, or otherwise restructuring the Facilities on a basis which is not unlawful. If the said terms are not agreed within thirty (30) days then the negotiations shall forthwith terminate.
 
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16            REPRESENTATIONS AND WARRANTIES
￠
16.1         The Borrowers hereby jointly and severally represent and warrant to each other party of this Agreement that -
 
16.1.1     each Borrower is a corporation duly formed and validly existing under the laws of the Republic of Liberia and has the power and authority to own its assets and carry on business in each jurisdiction in which it owns assets or carries on business.
 
16.1.2     each Borrower has the power to enter into this Agreement and into the Security Documents to which it is a party and to perform and discharge its duties and liabilities hereunder and thereunder and to borrow hereunder and it has taken all necessary action (whether corporate or otherwise) required to authorise the execution, delivery and performance of this Agreement and such Security Documents and the borrowings to be made hereunder;
 
16.1.3     the execution, delivery and performance of this Agreement and the Security Documents, to which the Borrowers are a party, will not violate or exceed the powers granted to the Borrowers by, or any provision of, any law or regulation in any jurisdiction to which the Borrowers are subject, any order or decree of any governmental agency or court of or in any jurisdiction to which the Borrowers are subject, the articles of incorporation and by-laws of the Borrowers or any mortgage, deed, contract or agreement to which the Borrowers are a party and which is binding upon the Borrowers or their assets, and will not cause any Encumbrance to arise over or attach to all or any part of its revenues or assets nor require the Borrowers to create any such Encumbrance other than any Encumbrance to be created hereunder;
 
16.1.4     all consents, licences, approvals, registrations, authorisations or declarations (including, without limitation, all foreign exchange approvals) in any jurisdiction to which the Borrowers are subject required to enable the Borrowers to borrow hereunder and lawfully to enter into and perform and discharge their duties and liabilities under this Agreement and the Subject Documents, to ensure that the duties and liabilities of the Borrowers hereunder and thereunder are legal, valid and enforceable in accordance with the terms of this Agreement and the terms of the Subject Documents respectively and to make this Agreement and the Subject Documents admissible in evidence in such aforesaid jurisdictions, have been obtained or made and are in full force and effect;
 
16.1.5     this Agreement and each of the Subject Documents, to which the Borrowers are a party, constitute the legal, valid, binding and unconditional duties and liabilities of the Borrowers, enforceable against the Borrowers in accordance with the terms thereof save as provided by any bankruptcy, insolvency or similar laws of general application;
 
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16.1.6     no Borrower has failed to pay when due any material amount or to perform any material duty under the provisions of any agreement relating to indebtedness to which it is a party or by which it may be bound and no event has occurred and is continuing which constitutes, or which with the giving of notice or lapse of time or both would constitute, a material breach or default by the Borrowers under any such agreement;
 
16.1.7     no litigation or administrative proceedings before or of any court, arbitration tribunal or governmental authority are pending or, to the knowledge of the Borrowers, is threatened against any of the Borrowers or their assets which might have a material adverse effect on the business, assets or financial condition of any Borrower or the Borrowers’ ability to perform and discharge their duties and liabilities hereunder and under the Security Documents to which they are a party;
 
16.1.8     the Financial Statements are complete and correct and present fairly the position of the Group and Danaos Shipping Co. Ltd respectively as of such date and the results of the operations of the Group ended on such date, and have been prepared in accordance with the Applicable Accounting Principles consistently applied and give a true and fair view of the financial condition, assets and liabilities of the Group and Danaos Shipping Co. Ltd respectively at the date to which such Financial Statements have been prepared and since that date there has been no adverse change in the financial conditions of the business, assets or operation of the Group, taken as a whole, which may have a material adverse affect on the Group’s ability to comply with their respective duties hereunder;
 
16.1.9     the information provided to the Agent in relation to this transaction is true and correct in all material respects and does not omit any information necessary to make any of the information so provided not misleading;
 
16.1.10   it is not necessary or advisable to ensure the legality, validity, enforceability or admissibility in evidence of this Agreement and the Security Documents (with the exception of the Mortgages and the Deeds of General Assignment) that any of them be filed, recorded or enrolled with any governmental authority or agency or that they be stamped with any stamp, registration or similar transaction tax;
 
16.2         The Borrowers hereby further represent and warrant to the Banks that on the Drawdown Date for each Post-Delivery Advance and with reference to the Vessel to be delivered on that day -
 
16.2.1     such Vessel will have been unconditionally delivered by Samsung and accepted by the relevant Owner pursuant to the relevant Shipbuilding Contract and the full amount of the delivery instalment payable under the relevant Shipbuilding Contract (including any amount in addition to the part thereof to be financed by way of the relevant Advance) will have been duly paid to Samsung;
 
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16.2.2     such Vessel will be duly registered in the name of the relevant Owner under a flag acceptable to the Banks;
 
16.2.3     such Vessel will be in the absolute and unencumbered ownership of the relevant Owner subject only to the relevant Declaration of Trust and Permitted Encumbrances save as contemplated by this Agreement and the Security Documents;
 
16.2.4     such Vessel will have been unconditionally delivered by the relevant Owner to the Bareboat Charterer and accepted by the Bareboat Charterer under the Bareboat Charter;
 
16.2.5     such Vessel will have been unconditionally delivered by the Bareboat Charterer to the relevant Borrower and accepted by the relevant Borrower under the AML Time Charter;
 
16.2.6     such Vessel will have been unconditionally delivered by the relevant Borrower to the Charterer and accepted by the Charterer under the Charter;
 
16.2.7     such Vessel will maintain the class 1A1 ‘Container Vessel’ with the Classification Society free of all recommendations and qualifications of the Classification Society;
 
16.2.8     such Vessel will be operationally seaworthy;
 
16.2.9     such Vessel will comply with all relevant laws, regulations and requirements (statutory or otherwise), including without limitation, the ISM Code, the ISPS Code, the ISM Code Documentation and the ISPS Code Documentation as is applicable to (i) ships registered under the law of the flag it will be flying and (ii) engaged in the same or a similar service as such Vessel is or is to be engaged;
 
16.2.10   the relevant Mortgage will have been duly recorded against such Vessel as a valid first priority ship mortgage in accordance with the laws of its flag;
 
16.2.11   such Vessel will be insured in accordance with the provisions of the relevant Mortgage and this Agreement in respect of Insurances will have been complied with;
 
16.2.12   such Vessel will be managed by the Manager under the terms of the Approved Management Agreement, relating thereto;
 
16.2.13   the Bareboat Charterer, the Manager and the relevant Owner shall have complied with the provisions of all Environmental Laws in respect of such Vessel;
 
16.2.14   the Bareboat Charterer, the Manager and the relevant Owner shall have obtained all Environmental Approvals and are in compliance with all such Environmental Approvals in respect of such Vessel;
 
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16.2.15   the Bareboat Charterer, the Manager and the relevant Owner shall have not received notice of any Environmental Claim that alleges that any of the Bareboat Charterer, the Manager or the Owners is not in compliance with any Environmental Law or any Environmental Approval in respect of the Vessels or either of them;
 
16.2.16   there shall be no Environmental Claim pending against the Bareboat Charterer, the Manager or the relevant Owner and/or the relevant Vessel; and
 
16.2.17   no Environmental Incident shall have occurred which could or might give rise to any Environmental Claim against the Bareboat Charterer, the Manager or the relevant Owner and/or the relevant Vessel.
 
16.3         The Borrowers further jointly and severally represent, warrant and confirm to each other party of this Agreement that:
 
16.3.1     they are the beneficiaries (within the meaning of Section 8 of the Germany Money Laundering Act) (Gesetz über das Aufspüren von Gewinnen aus schweren Straftaten (Geldwäschegesetz)) of each part of the Facilities to be made available to them hereunder; and
 
16.3.2     they will promptly inform the Banks (by written notice to the Agent) if they or either of them is not, or ceases to be, such beneficiary(ies) and will then set down in writing the name(s) and the address(es) of the relevant beneficiary(ies).
 
16.4         The representations and warranties of the Borrowers insofar as they relate to the Borrowers set out in Clause 16.1, 16.2 and 16.3 above shall survive the execution of this Agreement and shall be deemed to be repeated on each Drawdown Date and each Repayment Date with respect to the facts and circumstances existing at each such time as if made at such time and the representations and warranties insofar as the relate to any other party set out in Clause 16.1, 16.2 and 16.3 above shall survive the execution of this Agreement and shall be deemed to be repeated on each Drawdown Date with respect to the facts and circumstances existing at each such time as if made at such time.
 
17            SECURITIES
￠
17.1         The Borrowers hereby agree that the Security Documents shall secure the due payment of the Indebtedness.
 
17.2         It is agreed that the Facilities together with interest, costs and all other amounts due hereunder and all Master Agreement Liabilities shall be secured with first priority under the Security Documents.
 
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18            CONDITIONS PRECEDENT
￠
18.1         The obligation of the Banks to make any Advance under the Pre-Delivery Facility available to the Borrowers shall be subject to the condition that the Agent and the Security Trustee shall have received the following documents and evidence in all respects in form and substance satisfactory to the Agent and the Security Trustee and their legal advisers on or before the date on which a Notice of Drawdown of the first Advance of the Pre-Delivery Facility is sent by the Borrowers -
 
(a)            copies of the Articles of Incorporation and by-laws (or equivalent documents) (and all amendments thereto) of each of the Borrowers any other documents required to be filed or registered or issued under the laws of the Republic of Liberia to establish the incorporation or good standing of each of the Borrowers under the laws of the Republic of Liberia;
 
(b)            copies of resolutions passed at separate meetings of the board of directors and shareholders of each of the Borrowers evidencing approval of such of this Agreement, the Shipbuilding Contracts and the Subject Documents to which each is a party and authorising appropriate officers or attorneys to execute the same and to sign all notices required to be given hereunder or thereunder on its behalf or other evidence of such approvals and authorisations as shall be acceptable to the Agent and the Security Trustee;
 
(c)            the original of any power of attorney issued in favour of any person executing this Agreement or any of the Subject Documents related to the Pre-Delivery Facility on behalf of each of the Borrowers;
 
(d)            evidence that the Earnings Account of each relevant Borrower have been duly opened by each relevant Borrower and that all board resolutions, mandates, signature cards and other documents or evidence required in connection with the opening, maintenance and operation of such Accounts have been duly delivered to the Paying Agent;
 
(e)            a list specifying the directors and officers of each of the Borrowers (together with their specimen signatures) and specifying the authorised and issued share capital of each of the Borrowers;
 
(f)             copies of all governmental and other consents, licences, approvals and authorisations as may be necessary to authorise the performance by the Borrowers of their respective obligations under those of this Agreement, the Shipbuilding Contracts and the Subject Documents related to the Pre-Delivery Facility to which each is a party and the
 
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execution, validity and enforceability of this Agreement, the Shipbuilding Contracts and the Subject Documents related to the Pre-Delivery Facility;
 
(g)            all the Subject Documents duly executed and delivered by the parties thereto together with all other items and documents required to be delivered pursuant to the terms thereof,
 
(h)            certified copies of the Shipbuilding Contracts and the originals of each of the Refund Guarantees together with such evidence as the Agent or the Security Trustee and its legal advisers reasonably shall require in relation to the due authorisation and execution by Samsung of the Shipbuilding Contracts and all documents to be executed by Samsung pursuant thereto and by the Refund Guarantors of the Refund Guarantees;
 
(i)             evidence that the Manager has been appointed as technical supervisor under the Shipbuilding Contracts and has accepted its appointment;
 
(j)             evidence that the agent for service of process named in Clause 38 has accepted its appointment for the purposes of this Agreement and the Subject Documents;
 
(k)            favourable legal opinions from lawyers appointed by the Agent and the Security Trustee on such matters concerning the laws of Liberia, Greece, Cyprus, England, and Korea in relation to or in connection with this Agreement, the Subject Documents, or any of them;
 
(l)             evidence that the Paying Agent has received the arrangement fee referred to in Clause 26.1 and all accrued fees payable pursuant to Clause 26.2;
 
(m)           evidence that an amount equal to the amount of each relevant Advance is due and payable or it has been paid by the relevant Borrower under the relevant Shipbuilding Contract; and
 
(n)            evidence that any amount to be paid in respect of the Second Pre-Delivery Instalment under the relevant Shipbuilding Contract other than the proceed of the relevant Advance has been paid by the relevant Borrower.
 
18.2         Each of the documents specified in sub-clauses (a), (b), (d) and (e) above shall be certified as a true and up-to-date copy by a Director or Secretary (or equivalent officer) or legal counsel of the relevant Borrower.
 
18.3         The obligation of the Banks to make any Post-Delivery Advance to the Borrowers shall be subject to the condition that the Agent and the Security Trustee shall have received
 
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the following documents and evidence relating to the Vessel to be delivered on such day in all respects in form and substance satisfactory to the Agent and the Security Trustee and their legal advisers on or before the relevant Drawdown Date -
 
18.3.1     the Security Documents relating to the relevant Borrower and the relevant Vessel duly executed and delivered by the parties thereto together with all other items and documents required to be delivered pursuant to the terms thereof, including (but without limitation) insurance notices of assignment, acknowledgements and letters of undertaking pursuant to the Security Documents relating to such Vessel;
 
18.3.2     each Earnings Account Charge, each General Assignment, each Charter Assignment Agreement, each Intercreditor Deed, each Second Priority Deposit Account Charge; each Deed of Counter-Indemnity, each Put Option Agreement, each Declaration of Trust, duly executed and delivered by the parties thereto together with all other items and documents required to be delivered pursuant to the terms thereof, including (but without limitation) notices of assignment, acknowledgements and letters of undertaking pursuant to such documents;
 
18.3.3     evidence that -
 
(a)            the relevant Vessel has been unconditionally delivered by Samsung to, and accepted by, the relevant Owner pursuant to the relevant Shipbuilding Contract together with evidence that the full amount of the delivery instalment payable under such Shipbuilding Contract (including any amount in addition to the part thereof to be financed by way of the relevant Advance) has been duly paid;
 
(b)            the relevant Vessel is duly registered in the name of the relevant Owner under a flag approved by the Banks;
 
(c)            the relevant Vessel is in the absolute and unencumbered ownership of the relevant Owner, subject only to the relevant Declaration of Trust and Permitted Encumbrances, save as contemplated by this Agreement and the relevant Subject Documents;
 
(d)            the relevant Vessel has been unconditionally delivered by the relevant Owner to the Bareboat Charterer and accepted by the Bareboat Charterer under the Bareboat Charter;
 
(e)            the relevant Vessel has been unconditionally delivered by the Bareboat Charterer to the relevant Borrower and accepted by the relevant Borrower under the AML Time Charter;
 
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(f)             the relevant Vessel has been unconditionally delivered by the relevant Borrower to the Charterer and accepted by the Charterer under the Charter;
 
(g)            the relevant Vessel maintains the class 1A1 “Container Vessel” with the Classification Society free of all recommendations and qualifications of the Classification Society (other than those which have been or are being complied with in accordance with their terms and which are not by their terms overdue for compliance);
 
(h)            the relevant Mortgage has been duly recorded against the relevant Vessel as a valid first priority ship mortgage in accordance with the laws of the flag its is flying; and
 
(i)             the relevant Vessel is insured in accordance with this Agreement and that all requirements therein in respect of Insurances have been complied with;
 
18.3.4     letters from the relevant Owner to the protection and indemnity association in which the relevant Vessel is or is to be entered instructing them to provide the Security Trustee with a copy of the certificate of entry of such Vessel and any other information relating to the entry of such Vessel in such protection and indemnity association;
 
18.3.5     such further favourable legal opinions from lawyers appointed by the Agent and the Security Trustee on such matters concerning the laws of England, Liberia, Cyprus and Korea as the Agent and the Security Trustee may require; and
 
18.3.6     evidence of payment to Samsung of all amounts due by the relevant Owner (other than amounts financed pursuant to this Agreement) in respect of each Shipbuilding Contract;
 
18.3.7     the statement of Additional Construction Expenses;
 
18.3.8     evidence that at the time of the drawdown of the Advances of the Post-Delivery Senior Facility and the Post-Delivery Junior Facility related to a Vessel, the aggregate of all such Advances made shall not exceed the lower of (i) Thirty million Dollars (US$ 30,000,000) and (ii) eighty per cent (80%) of the Total Construction Cost of such Vessel;
 
18.3.9     copies of the provisional DOC and the provisional SMC issued pursuant to the ISM Code in respect of the relevant Vessel with full copies of such documents to be provided as soon as practicable after the relevant Delivery Date and in any event within 6 months of the relevant Delivery Date;
 
18.3.10   copies of all documents issued pursuant to the ISPS Code, including without limitation a valid International Ship Security Certificate ( ISSC );
 
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18.3.11   copies of the Subject Documents;
 
18.3.12   evidence satisfactory to the Security Trustee that immediately after the delivery of the relevant Vessel, the relevant Deposit Account shall each have adequate funds standing to its credit to satisfy the Loan to Value Ratio;
 
18.3.13   evidence satisfactory to the Security Trustee that the relevant Earnings Account has been opened and that an amount equal to at least US$1 is deposited in that account.
 
18.3.14   a favourable opinion from an independent insurance consultant acceptable to the Agent and the Security Trustee on such matters relating to the Insurances for the Vessels as the Agent and the Security Trustee may require and evidence satisfactory to the Security Trustee that such Insurances are in place;
 
18.4         The obligation of the Banks to make any Advance is subject to the following further conditions -
 
18.4.1     that both at the date of the relevant Notice of Drawdown and on the relevant Drawdown Date -
 
(a)            no Event of Default or Potential Event of Default has occurred and is continuing or might result from the making of the relevant Advance; and
 
(b)            the representations and warranties of the Borrowers in Clause 16 and the representations and warranties of the Borrowers and other parties to the Subject Documents set out in the Subject Documents are true and accurate as of each such date, as if made on each such date with reference to the facts then subsisting; and
 
(c)            none of the circumstances specified in Clause 23 (Events of Default) has occurred and is continuing.
 
18.4.2     the Agent and the Security Trustee have received, and found to be satisfactory to them in all respects, such further opinions, consents, agreements and documents in connection with this Agreement and the Subject Documents as the Agent and the Security Trustee may request by notice to the Borrowers prior to such Drawdown Date.
 
19            MAINTENANCE OF SECURITY
￠
19.1         If the Agent and the Security Trustee reasonably require, at any time and from time to time (but not more often than every six (6) months), the Vessels shall be valued in Dollars by a firm of shipbrokers chosen from Maersk Brokers K/S or Howe Robinson or Menz Decker (or such other firm of shipbrokers as approved by the Agent) nominated by
 
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the Borrowers such valuations to be made without physical inspection (unless otherwise required by the Agent), and on the basis of an arm’s-length purchase by a willing buyer from a willing seller and without taking into account any charterparty. The fees of the firm of shipbrokers appointed to give such valuation and all other costs arising in connection with the obtaining of any such valuations shall be paid by the Borrowers.
 
19.2         If at any time after the delivery of Newbuilding B or after the expiry of the Availability Period applicable to the Post-Delivery Advances the aggregate of (i) the values of the Vessels then subject to a Mortgage determined pursuant to Clause 19.1 plus (ii) the value of any additional security (valued in accordance with normal banking practice) previously provided to the Security Trustee pursuant to this Clause, is less than one hundred and twenty percent (120%) of the aggregate of (a) the part of the Facilities denominated in Dollars, plus (b)  the aggregate Currency Equivalent in Dollars at the time of all Currency Tranches plus (iii) the net sum which the Swap Agent certifies would then be payable by the Borrowers if an Early Termination Date in respect of all Forward F/X Contracts were then to occur, plus (iv) any other sums which the Swap Agent certifies would then be payable under the Master Agreement (the “ Loan to Value Ratio ”), then the Borrowers shall within ten (10) Business Days of receipt of a notice from the Agent advising the Borrowers of the amount of such deficiency (which notice shall be conclusive)  either (a) provide to the Security Trustee additional security (valued in accordance with normal banking practice) which shall in all respects be satisfactory to the Agent and the Security Trustee (after consultation with the Banks) which additional security shall take such form, be constituted by such documentation and be entered into between such parties as the Agent may approve or require or (b) prepay forthwith such part of the Indebtedness as will ensure that the security coverage ratio of one hundred and twenty percent (120%) calculated in the manner described above is reinstated.
 
20            FINANCIAL AND OTHER INFORMATION
￠
20.1         The Borrowers undertake to supply the Agent with sufficient copies of -
 
20.1.1     within one hundred and eighty (180) days of the end of each fiscal year, the Financial Statements, starting with the 2001 Financial Statements, of the Borrowers and Danaos Shipping Co. Ltd prepared in accordance with Applicable Accounting Principles;
 
20.1.2     such other information with regard to the business, properties or condition, financial or otherwise, of the Borrowers as the Agent may from time to time reasonably request.
 
20.2         The Borrowers undertake to permit or procure the permission for the Agent to inspect at reasonable times and take copies of all resolutions and decisions of the Borrowers and all books of accounts and business records of the Borrowers and all documents relating to
 
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the Vessels and to permit the Agent by itself or by its agents) to audit the books of account of the Borrowers at the Borrowers’ cost and expense.
 
20.3         The Borrowers undertake that they will obtain promptly at any time and from time to time such registrations, licenses, consents and approvals as may be required in respect of this Agreement and the Security Documents under any applicable law or regulation to enable them to perform their duties hereunder and thereunder and promptly supply the Agent and the Security Trustee with copies thereof.
 
20.4         The Borrowers hereby irrevocably -
 
20.4.1     agree and shall procure that the Owners and the Bareboat Charterer agree that the Agent and the Security Trustee, or their authorised representatives may, without prior notification, communicate directly with the Classification Society concerning maintenance, repair, classification and seaworthiness of the Vessels, and to the same extent with any regulatory authority having jurisdiction over the Vessels;
 
20.4.2     undertake to unconditionally authorise, or to procure the unconditional authorisation of the Classification Society or regulatory authority, at the request of the Agent and the Security Trustee, to give information to them, or their authorised representatives and to conduct inspections and surveys of the Vessels, as if requested by the Borrowers;
 
provided that the Agent and the Security Trustee will not, without prior consultation with the Borrowers, take any action under this Clause 20.4 unless an Event of Default or Potential Event of Default has occurred.
 
21            UNDERTAKINGS
￠
21.1         The Borrowers hereby undertake with the Agent and the Security Trustee and the Banks that throughout the Security Period the Borrowers shall or shall, where relevant, procure that the Owners or as the case may be, the Bareboat Charterer shall -
 
21.1.1     maintain the corporate existence of the Borrowers under the laws of the Republic of Liberia and comply with all relevant legislation applicable to them;
 
21.1.2     not appoint a manager of the Vessels other than the Manager;
 
21.1.3     execute any further document required by the Security Trustee in order to perfect or complete the security created by the Security Documents;
 
21.1.4     promptly notify the Agent in writing of any Event of Default or any Potential Event of Default;
 
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21.1.5     promptly inform the Agent of any occurrence of which they become aware which might adversely affect their ability to perform and discharge their duties and liabilities under this Agreement and/or the Subject Documents;
 
21.1.6     not, without the prior written consent of the Agent and the Security Trustee, dissolve, merge into or consolidate with any other company or partnership;
 
21.1.7     not amend, modify, vary or supplement or terminate or agree to any amendment, modification, variation or supplement or cancellation of any of the Shipbuilding Contracts, Refund Guarantees, Approved Management Agreements, Charters, Bareboat Charters, AML Time Charters, Novation Agreements, Declarations of Trust or the Put Option Agreements;
 
21.1.8     not engage in any business or activity, apart from the ownership and operation of the Vessels and activities ancillary thereto as permitted by this Agreement and the Security Documents;
 
21.1.9     ensure that at all times the claims of the Agent, Paying Agent, Security Trustee, the Banks and the Swap Agent against them under this Agreement and/or the Security Documents rank at least pari passu with the claims of all their other unsecured creditors save those whose claims are preferred by any bankruptcy, insolvency or other similar laws of general application;
 
21.1.10   not make any advances, grant any credit (save in the routine course of their day-to-day business) or give any guarantee or indemnity to or for the benefit of any person or otherwise voluntarily assume any liability, whether actual or contingent, in respect of any obligations of any person without the express written consent of the Agent and the Security Trustee (such consent not to be unreasonably withheld);
 
21.1.11   not issue any further shares or alter any rights attaching to their issued shares in existence at the date of this Agreement;
 
21.1.12   not sell, lease, transfer or otherwise dispose of, by one or more transactions or series of transactions (whether related or not), the whole or any part of their other assets;
 
21.1.13   save in the ordinary course of business, not incur any indebtedness other than the Facilities without the prior written consent of the Agent and the Security Trustee (such consent not to be unreasonably withheld);
 
21.1.14   not amend their memorandum and articles of association or other constitutional documents;
 
21.1.15   procure that the respective Vessels are kept registered under the laws of such register as the Agent and the Security Trustee may approve in writing such approval not to be unreasonably
 
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withheld and not do or suffer to be done anything whereby the registration may be forfeited or imperilled;
 
21.1.16   not, save as contemplated in the Security Documents, the Declarations of Trust, create, incur or permit to subsist any Encumbrance over the Vessels, the Earnings or the Insurances or all or any of the present or future assets of the Borrowers (other than any Permitted Encumbrance) which shall be promptly discharged or if disputed shall be diligently contested;
 
21.1.17   not at any time represent to a third party that the Agent and/or the Security Trustee and/or the Banks are carrying cargo in the Vessels or are in any way connected or associated with an operation or carriage being undertaken by them or have any operational interest in the Vessels;
 
21.1.18   not, without the prior written consent of the Agent and the Security Trustee, voyage or time charter the Vessels or place them under contract for employment (a) for any period which when aggregated with any optional periods of extension contained in the said charter or contract, would exceed thirteen (13) months or (b) at a charter rate which is below the market rate at the time of the charter fixture other than the AML Charters, the Bareboat Charters and the Charters;
 
21.1.19   not without the prior written consent of the Agent and the Security Trustee demise charter the Vessels for any period whatsoever other than pursuant to the Bareboat Charter;
 
21.1.20   not without the prior written consent of the Agent put the Vessels into the possession of any person for the purpose of work being done upon her in an amount exceeding or likely to exceed US$1,000,000 (or the equivalent in any other currency) unless the Borrowers shall have satisfied the Agent that the cost of such work is fully recoverable under the Insurances (save for any applicable deductible) or such person shall first have given to the Agent and in terms satisfactory to it a written undertaking not to exercise any lien on the Vessels or her Earnings or Insurances for the cost of such work or otherwise;
 
21.1.21   give the Agent reasonable prior notice of any dry-docking of the Vessels so that the Agent (if it so requires) can arrange for a representative to be present;
 
21.1.22   notify the Agent of any intended laying-up or de-activation of the Vessels;
 
21.1.23   authorise the Classification Society and all other regulatory authorities to disclose to the Agent and the Security Trustee after the occurrence of an Event of Default or Potential Event of Default any information or documents requested by the Agent and the Security Trustee relating to the classification, repair, maintenance or seaworthiness of the Vessels;
 
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21.1.24   ensure copies of the following certificates have been received by the Agent if so requested by the Agent: the Class Annual and Intermediate, Remote Control Systems Classification, Machinery Classification, Hull Classification, Cargo Gear Annual, Loadline Annual, Safety Construction Annual and Safety Equipment Annual Certificate, Safety Radio Equipment Annual, Safe Manning Certificate, Oil Pollution Certificate, Certificate of Financial Responsibility, Confirmation of Vessel Response Plan and International Tonnage Certificate;
 
21.1.25   provide the Agent with copies of the SMC, the DOC and the ISSC duly issued to the Bareboat Charterer, and the Vessels pursuant to the ISM Code and the ISPS Code respectively;
 
21.1.26   keep, or procure that there is kept, on board the Vessels a copy of all relevant ISM Code Documentation and ISPS Code Documentation;
 
21.1.27   as soon as any Borrower becomes aware inform the Agent immediately should the DOC and/or the SMC and/or the ISSC be cancelled, rescinded, suspended or amended in any way;
 
21.1.28   notify the Agent promptly upon being made aware thereof upon the occurrence of-
 
(i)             any Environmental Claim against the Borrowers, the Manager, the Owners, the Bareboat Chartereror the Vessels;
 
(ii)            any Environmental Incident which may give rise to an Environmental Claim which could or might materially affect the interests of the Borrowers, the Manager, the Owners, the Bareboat Charterer or any of them;
 
(iii)          any claim for breach of the ISM Code or the ISPS Code being made against the Borrowers or either of them, an ISM Responsible Person, the Manager, the Owners, the Bareboat Charterer or otherwise in connection with the Vessels or either of them; and
 
(iv)           any other matter, event or incident actual or threatened, the effect of which would lead to the ISM Code or the ISPS Code not being complied with;
 
and the Borrowers shall keep the agent advised in writing on a regular basis and in such detail as the Agent shall require, of the relevant Borrower’s, the ISM Responsible Person’s, the Bareboat Charterer’s, the Manager’s or any other person’s proposed or actual response to any of those events or matters;
 
21.1.29   permit, or procure that the Agent and the Security Trustee shall have the right at any time on reasonable notice to inspect or survey the Vessels or instruct a duly authorised independent surveyor to carry out such survey on its behalf to ascertain the condition of the Vessels and satisfy itself that the Vessels are being properly repaired and maintained, provided that such
 
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inspections shall not unreasonably interfere with the Vessels’ running or operation (the costs of such inspection or survey shall be payable by the Borrowers);
 
21.1.30   promptly provide the Agent and the Security Trustee with information concerning the classification, status and insurance of the Vessels from time to time as and when so required in writing by the Agent and the Security Trustee;
 
21.1.31   execute and deliver to the Agent and the Security Trustee such documents of transfer as the Agent and the Security Trustee may require in the event of sale of the Vessels pursuant to any power of sale contained in the Mortgages or which the Agent and the Security Trustee may have in law;
 
21.1.32   provide the Agent and the Security Trustee with a transcript of the register relating to the Vessels issued by the relevant registry of the Vessels and a copy of the entries in the relevant Company’s registers relative to the Borrowers when so requested by the Agent and the Security Trustee; and
 
21.1.33   upon becoming aware notify the Agent and the Security Trustee immediately by telefax of any recommendation or requirement imposed by the Classification Society, the Insurers or by any other competent authority that is not complied with in accordance with its terms;
 
21.1.34   carry on board each Vessel with the Vessel’s papers a properly certified copy of the relevant Mortgage and exhibit the same to any person having a legal interest in, or having business with, each Vessel and to any representative of the Agent and the Security Trustee, and place and keep prominently in the Chart Room and in the Master’s cabin of each Vessel a framed notice printed in plain type of such size that the paragraph of reading matter shall cover a space not less than six inches wide and nine inches high reading as follows -
 
“NOTICE OF MORTGAGE
 
This Vessel is owned by [        ] and is subject to a [          ]. Under the terms of said Mortgage, neither the Owner, nor the Master nor any other person has any right, power or authority to create, incur or permit to be imposed upon this Vessel any other lien whatsoever other than for crew’s wages and salvage”
 
21.1.35   pay when due and payable all taxes, assessments, levies, governmental charges, fines and penalties lawfully imposed on and enforceable against the Vessels unless contested in good faith by the Borrowers and/or the Owners by the appropriate proceedings;
 
21.1.36   if any writ or proceedings shall be issued against any Vessel or if any Vessel shall be otherwise attached, arrested or detained by any proceeding in any court or tribunal or by any
 
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government or other authority, immediately notify the Agent and the Security Trustee thereof by telefax confirmed by letter and within thirty (30) days thereafter cause that Vessel to be released;
 
21.1.37   not cause or permit the Vessels to be operated 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 not to engage in any unlawful trade or carry any cargo that will expose the Vessels to penalty, forfeiture or capture and in the event of hostilities in any part of the world (whether a war be declared or not) not employ the Vessels or voluntarily suffer their employment in carrying any contraband goods;
 
21.1.38   promptly pay all tolls, dues and outgoings in respect of the Vessels and all wages, allotments, insurance and pension contributions of the Master and crew of the Vessels when due and make all deductions from the wages in respect of any tax liability, accounting to the relevant authority for them and if the Agent at any time has reasonable cause to believe that such payments may not be being made, to produce to the Agent at its request evidence confirming that all such amounts have been paid when due;
 
21.1.39   at all times maintain the Vessels in a seaworthy condition and in good running order and repair in accordance with first class ship ownership and ship management practice and keep the Vessels in such condition as will entitle them to be classed 1A1 Container Vessel with the Classification Society (as may be amended by the Classification Society) free of all recommendations and qualifications (other than those which have been or are being complied with in accordance with their terms and which are not by their terms overdue for compliance), to follow any interim operational provisos to such recommendations and qualifications and when so requested to provide the Agent and the Security Trustee with a certificate issued by the Classification Society confirming that such classification is maintained;
 
21.1.40   submit the Vessels regularly to such periodical or other surveys as may be required for classification purposes and, if so required by the Agent and the Security Trustee in writing, supply to the Agent and the Security Trustee copies of all survey reports issued in respect thereof;
 
21.1.41   at all times comply with all legal requirements whether imposed by enactment, regulation, common law or otherwise and have on board the Vessels as and when legally required valid certificates showing compliance therewith;
 
21.1.42   comply or procure that the Manager or any charterer of the Vessels will at all times comply with the ISM Code and the ISPS Code, all Environmental Laws and all other laws and regulations relating to the Vessels, their ownership, operation and management or to the business of the Borrowers;
 
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21.1.43   hold or procure that the Bareboat Charterer holds the DOC, the SMC and the ISSC;;
 
21.1.44   not permit any alterations to be made in the structure, type or speed of the Vessels which materially reduce the value of the Vessels (unless such removal or alteration is required by statute or by the Classification Society) without the prior written consent of the Agent and the Security Trustee which shall not unreasonably be withheld;
 
21.1.45   in the event of requisition of the Vessels or either of them by any government authority, execute any assignment that the Agent and the Security Trustee may request in relation to any and all amounts which such government authority shall be liable to pay as compensation for the Vessels or for her use and if received by the relevant Owner or the Bareboat Charterer to procure that such Owner pay such amounts immediately to the Borrowers who shall pay such amounts to the Paying Agent, provided that if such requisition applies only to the use of the Vessels the provisions of this Clause 21.1.45 shall not apply if there has been no Event of Default.
 
21.1.46   ensure that at all times during the Security Period, the balance of monies standing to the credit of each of the Deposit Accounts when aggregated shall be in an amount at least equal to 105% of the Post-Delivery Facilities.
 
21.2         The Borrowers shall duly observe and perform all of the covenants, obligations and conditions which are required to be observed and performed on their part under this Agreement and each of the Security Documents to which they are a party and shall use their best endeavours to procure that all covenants, obligations and conditions required to be observed and performed, and undertakings made, by any of the other parties (other than the Agent and/or the Banks) under any of the Security Documents shall be observed and complied with in their entirety.
 
21.3         Without prejudice to the terms of this Agreement or any of the Security Documents, the Borrowers will promptly inform the Agent of any litigation or arbitration in any Court or before any tribunal in which they are involved.
 
22            INSURANCE UNDERTAKINGS
￠
22.1         The Borrowers hereby undertake with the Agent and the Security Trustee or shall procure from the Owners or the Bareboat Charterers that, from the date of delivery of each relevant Vessel and thereafter, throughout the Security Period, at their own expense and upon such terms and conditions, in such amounts and with such Insurers as shall from time to time be approved in writing by the Security Trustee and, if so required by the Security Trustee (but without, as between the Security Trustee and the Borrowers, the Owners or the Bareboat Charterer’s liability on the part of the Security Trustee for premiums or calls) with the Security Trustee named as co-assured -
 
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22.1.1     to insure and keep insured the Vessels in Dollars or such other currency as may be approved in writing by the Security Trustee (such approval not to be unreasonably withheld), in the full insurable value of the Vessels but in no event for an aggregate amount less than one hundred and twenty per cent (120%) of the Indebtedness against fire and usual marine (including Excess Risks) and War Risks covered by hull and machinery policies;
 
22.1.2     to enter the Vessels in the name of the Bareboat Charterer for their full value and tonnage against all Protection and Indemnity Risks in a protection and indemnity association approved by the Security Trustee with unlimited liability if available otherwise with the least limited liability for the time being US$1,000,000,000 in relation to oil pollution risks and to comply with the rules of such protection and indemnity association from time to time in effect and if so requested by the Security Trustee to obtain excess oil spillage and pollution insurance in excess of the limit of the protection and indemnity association with the highest possible cover;
 
22.1.3     if the Vessels enter the territorial waters of the USA (or other jurisdiction having legislation similar to the US Oil Pollution Act 1990) for any reason whatsoever to take out such additional insurance to cover such risks as may be necessary in order to obtain a Certificate of Financial Responsibility from the United States Coastguard;
 
22.1.4     to pay to the Security Trustee upon first demand all premiums and other amounts payable by the Security Trustee in effecting mortgagees’ interest insurance policy in the name of the Security Trustee (substantially based on German Conditions) in relation to the Vessels in an amount of not less than one hundred and ten per cent (110%) of the Indebtedness, upon such terms and conditions and with such insurers as the Security Trustee may require;
 
22.1.5     to pay to the Security Trustee upon first demand all premiums and other amounts payable by the Security Trustee in effecting a mortgagees interest insurance (additional perils, pollution) policy in relation to the Vessel in the name of the Security Trustee, upon such terms and conditions and with such insurers as the Security Trustee may require and in an aggregate amount of not less than one hundred and ten per cent (110%) of the Indebtedness in the event that the relevant Vessel enters into the territorial waters of the United States of America (or other jurisdiction having legislation similar to the US Oil Pollution Act 1990);
 
22.1.6     to effect such additional Insurances that shall (in the reasonable opinion of the Security Trustee) be necessary or advisable.
 
22.2         The Borrowers further undertake with the Security Trustee or shall procure that the Owners or the Bareboat Charterer undertakes, during the Security Period:
 
22.2.1     to renew the Insurances at least ten (10) days before the relevant Insurances expire (or give the Security Trustee evidence satisfactory to it that such Insurances will be renewed upon their stated expiry dates) and to procure that the Approved Brokers or the Insurers (as the case
 
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may be) shall promptly confirm in writing to the Security Trustee the terms and conditions of such renewal as and when the same occurs;
 
22.2.2     punctually to pay all premiums, calls, contributions or other sums payable in respect of the Insurances and to produce evidence of payment when so required in writing by the Security Trustee;
 
22.2.3     to arrange for the execution of such guarantees as may from time to time be required by any Protection and Indemnity or War Risks association;
 
22.2.4     to procure that the Insurance Documents shall be deposited with the Approved Brokers or the Insurers (as the case may be) and that the Approved Brokers or the Insurers (as the case may be) shall provide the Security Trustee with pro forma copies thereof and shall issue to the Security Trustee a letter or letters of undertaking in such form as the Security Trustee shall reasonably require;
 
22.2.5     to procure that the Protection and Indemnity and/or War Risks associations in which the Vessels are entered shall provide the Security Trustee with a letter or letters of undertaking in such form as may be reasonably required by the Security Trustee and shall provide the Security Trustee with a copy of the certificate of entry and, if so requested by the Security Trustee, a copy of each certificate of financial responsibility for pollution by oil or other substances issued by such Protection and Indemnity and/or War Risks association in relation to the Vessels;
 
22.2.6     to procure that the interest of the Security Trustee is endorsed on the Insurance Documents by means of a Notice of Assignment in the form in Schedule 1 to the Insurance Assignment Agreements or such other form as the Security Trustee may require and that the Insurance Documents (including all certificates of entry in any Protection and Indemnity and/or War Risks association) shall contain a loss payable clause during the Security Period in the form in Schedule 2 or Schedule 3 (as may be appropriate) to the Insurance Assignment Agreements or such other form as the Security Trustee may require;
 
22.2.7     to procure that the Insurance Documents shall provide that the lien or set off for unpaid premiums or calls shall be limited to only the premiums or calls due in relation to the Insurances on the Vessels and the Insurers shall not cancel any of the Insurances by reason of non-payment of premium or calls due in respect of other vessels or in respect of other insurances and for fourteen (14) days prior written notice to be given to the Security Trustee by the Insurers (such notice to be given even if the Insurers have not received an appropriate enquiry from the Security Trustee) in the event of cancellation or termination of the Insurances and in the event of the non-payment of the premium or calls, the right to pay the said premium or calls within a reasonable time;
 
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22.2.8     promptly to provide the Security Trustee with full information regarding any casualties or damage to the Vessels in an amount in excess of US$1,000,000 or in consequence whereof the Vessels have become or may become a Total Loss;
 
22.2.9     at the reasonable request in writing of the Security Trustee to provide the Security Trustee, at the Owners’ cost (but not more often than once in every twelve (12) months), with a detailed report issued by a firm of marine insurance brokers or consultants appointed by the Owners, the Bareboat Charterers and/or the Borrowers and approved by the Security Trustee in relation to the Insurances;
 
22.2.10   not to do any act nor voluntarily suffer nor permit any act to be done whereby any Insurance shall or may be suspended or avoided and not to suffer nor permit the Vessels to engage in any voyage nor to carry any cargo not permitted under the Insurances in effect without first obtaining the Insurers’ consent for such voyage or the carriage of such cargo and complying with such requirements as to extra premiums or otherwise as the Insurers may prescribe;
 
22.2.11   not to employ the Vessels, or offer the Vessels to be employed, otherwise than in conformity with the terms of the Insurance Documents (including any express or implied warranties they contain), without first obtaining the Insurers’ consent to such other employment and complying with such requirements as to extra premiums or otherwise as the Insurers may prescribe, or arranging for additional insurance;
 
22.2.12   (without limitation to the generality of the foregoing) in particular not to permit the Vessels to enter or trade to any zone which is declared a war zone by any government or by the Vessels’ War Risks Insurers unless there shall have been effected by the Bareboat Charterer and at their expense such special insurance or the consent of the Insurers to enter or trade into such zone is obtained and the relevant Bareboat Charterer is complying with such requirements as to extra premiums or otherwise as the Insurers may prescribe;
 
22.2.13   to procure that all amounts payable under the Insurances are paid in accordance with the relevant loss payable clause under Clause 22.2.6 and subject always to the terms of the Intercreditor Deed, to apply all amounts as are paid to the Bareboat Charterer for the purpose of making good the loss and fully repairing all damage in respect of which the said amounts shall have been received; and
 
22.2.14   should the Vessels be laid up for any period, to arrange ‘lay-up’ insurances for the Vessels during such period, at their own cost and upon such terms and conditions, in such amounts and with such Insurers as shall from time to time be approved in writing by the Security Trustee.
 
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23            EVENTS OF DEFAULT
￠
23.1         Each of the following events shall constitute an Event of Default (whether such event shall occur or come about voluntarily or involuntarily or by operation of law or regulation or pursuant to, or in compliance with any judgment, decree or order of any court or other authority) -
 
23.1.1     the Borrowers shall fail to pay when due any amount (whether in respect of principal, interest or otherwise) under this Agreement or any of the Security Documents to which they are a party on the due date;
 
23.1.2     any representation, warranty or statement made by any party (other than the Agent, Paying Agent, Security Trustee and the Banks) in this Agreement or in the Security Documents or any certificate, statement or opinion delivered or made hereunder or under the Security Documents or in connection herewith or with the Security Documents shall be incorrect or inaccurate when made in any material respect;
 
23.1.3     an event of default or a potential event of default under any of the Subject Documents (as defined therein) (other than the Management Agreements and the Bareboat Charters) has occurred provided always that if such event has occurred as a consequence of a default by a party to the Subject Documents (other than a Finance Document and other than by an Obligor), the Security Trustee shall, for a period of thirty (30) days neither terminate the chartering of the relevant Vessel nor attempt to re-possess the relevant Vessel or exercise any rights of disposition in relation thereto, provided that (i) in the opinion of the Security Trustee, any delay in the enforcement by the Security Trustee of its rights and privileges is not likely to adversely affect the rights of the Security Trustee and (ii) the Obligors shall continue to fulfil all other of their obligations under the Subject Documents during such period;
 
23.1.4     an event of default or a potential event of default under either of the Bareboat Charters (as defined therein) has occurred, which event of default or potential event of default is not remedied within thirty (30) days of the date of its occurrence to the satisfaction of the Security Trustee (in its absolute discretion) provided always that such event of default or potential event of default shall constitute an immediate Event of Default if (i) the parties to the Intercreditor Deed do not, or cease to, consult in accordance with the provisions of Clause 31 of the Intercreditor Deed, or (ii) the Security Trustee is of the opinion that the delay in declaring an Event of Default and thereafter the enforcement by the Security Trustee of its rights and privileges is likely to adversely affect the rights of the Security Trustee, or (iii) the Obligors or any of them cease to fulfil any of their obligations under the Subject Documents during such period;
 
23.1.5     any party to this Agreement or a Finance Document (other than the Security Trustee, the Agent, the Banks and the Paying Agent) does not punctually perform or observe any other
 
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term of this Agreement or the Finance Documents unless (i) such non-compliance is capable of remedy and (ii) is remedied either fourteen (14) days after the Agent and the Security Trustee shall have given to the Borrowers notice of such failure, or in the case of any failure punctually to perform or to observe the provisions of any of Clauses 21.1.6, 21.1.10, 21.1.11, 21.1.13 or 21.1.14, thirty (30) days after the Agent and the Security Trustee shall have given to the Borrowers notice of such failure. The Borrowers acknowledge that for the purposes of paragraph (i) above, non-compliance with the following provisions of this Agreement shall not be capable of remedy:
 
(a)            Clause 21.1.15; and
 
(b)            Clause 22 (Insurances);
 
23.1.6     a breach of any of the obligations owed to the Security Trustee under the Multipartite Deed;
 
23.1.7     except where contested in good faith by the appropriate proceedings, any other indebtedness of the Borrowers shall become due and payable or, with the giving of notice or lapse of time or both, capable of being declared due and payable, prior to its stated maturity by reason of any circumstance entitling the creditor(s) thereof to declare such indebtedness due and payable and such indebtedness is not paid within fourteen (14) days thereof;
 
23.1.8     any of the Borrowers, the Owner, the Bareboat Charterer, the L/C Bank (or any replacement bank providing a letter of credit) or (prior to the release or discharge of the Second Deposit Charge) the Deposit Bank (or any replacement bank holding the Borrowers’ deposit accounts) shall enter into voluntary or involuntary bankruptcy, liquidation or dissolution, or shall become insolvent, or an administrator, administrative receiver, receiver or liquidator shall be appointed of all or a material part of their undertakings or assets or proceedings are commenced by or against them under any reorganisation, arrangement, readjustment of debts, dissolution or liquidation law or regulation;
 
23.1.9     the Borrowers shall cease or threaten to cease to carry on their business;
 
23.1.10   there shall be a transfer or disposal of all or a substantial part of the assets of the Borrowers, whether by one or a series of transactions, related or not;
 
23.1.11   the Security Documents or any of them shall cease, in whole or in part, to be valid, binding and enforceable;
 
23.1.12   If a notice is sent by the Swap Agent under Section 6(a) of the Master Agreement, or by any person under section 6(b)(iv) of the Master Agreement, in either case designating an Early Termination Date (as defined in the Master Agreement) for the purposes of the Master
 
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Agreement, or if the Master Agreement is for any other reason terminated, cancelled, suspended, rescinded, revoked or otherwise ceases to remain in full force and effect;
 
23.1.13   any Vessel is arrested or detained and such arrest or detention is not released within fourteen (14) days, or an order for the sale of any Vessel is made by a court of competent jurisdiction or the Owners cease to retain possession and/or control of any Vessel for a period in excess of thirty (30) days provided that it shall not be an Event of Default if the detention or loss of possession of any Vessel results in the Vessel becoming a Total Loss under the Insurances or any Vessel is requisitioned for title and the requisitioning authority pays the requisition compensation to the Paying Agent and the Security Trustee within sixty (60) days of the date of detention or loss of possession;
 
23.1.14   the Owners sell, transfer, dispose of or encumber any Vessel or any interest or share therein, or agree so to do (other than Permitted Encumbrances) without the Borrowers obtaining the prior written consent of the Agent and the Security Trustee;
 
23.1.15   there is a considerable deterioration in the financial position of the Borrowers which in the reasonable opinion of the Agent and the Security Trustee is likely to affect the ability of the Borrowers to pay all amounts due from time to time under this Agreement and/or the Security Documents;
 
23.1.16   any governmental or other consent, licence or authority required to make this Agreement and/or the Security Documents legal, valid, binding, enforceable and admissible in evidence or required to enable the Borrowers to perform their duties and discharge their liabilities hereunder or under the Security Documents is withdrawn or ceases to be in full force and effect unless the Borrowers procure that such consent, licence or authority is reinstated or re-issued to the satisfaction of the Agent and the Security Trustee within fifteen (15) days of the said withdrawal or cessation;
 
23.1.17   any Vessel is a Total Loss and the Paying Agent and the Security Trustee shall not have received within ninety (90) days following the occurrence of the Total Loss (or such earlier date as the Total Loss claim is paid) from the Insurers the insurance proceeds paid in conformity with the terms of Clauses 10.3 and 10.4.
 
23.1.18   the Shipbuilding Contracts or the Refund Guarantees are rescinded or terminated for any reason whatsoever;
 
23.1.19   any Shipbuilding Contract is amended or varied in any material (in the opinion of the Agent and the Security Trustee) way without the prior written consent of the Agent and the Security Trustee;
 
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23.1.20   the relevant Owner does not accept delivery of the relevant Vessel when tendered for delivery by Samsung;
 
23.1.21   a Vessel is not delivered to the relevant Owner by the Final Availability Date of the Post-Delivery Advances; or
 
23.1.22   the Refund Guarantors fail to pay under any Refund Guarantee.
 
23.2         Upon the occurrence of an Event of Default and at any time thereafter, the Agent may by notice to the Borrowers -
 
(a)            declare the Indebtedness immediately due and payable whereupon the same shall become so payable; and/or
 
(b)            by written notice to the Borrowers declare that the Commitment of the Banks shall be cancelled, whereupon the same shall be cancelled.
 
23.3         The Agent and the Security Trustee may take any other action, exercise any other right or pursue any other remedy conferred upon the Agent and the Security Trustee by this Agreement and/or the Security Documents or by any applicable law or regulation or otherwise as a consequence of such Event of Default.
 
24            PROCEEDS AND APPLICATION
￠
24.1         All Proceeds received by the Agent and/or the Paying Agent shall be paid to the Security Trustee who shall apply such funds in accordance with the provisions of Clause 10.8 of the Intercreditor Deed. Subject to the provisions of Clause 10.4, all amounts received by the Security Trustee pursuant to Clause 10.8 of the Intercreditor Deed for and on behalf of the Creditors and all Debt Proceeds shall, notwithstanding anything to the contrary whether express or implied in any of the Security Documents, be applied and divided as follows:
 
24.1.1     First: in satisfying claims which at law rank in priority to sums owing under or in respect of any of the Finance Documents;
 
24.1.2     Secondly: in paying all proper costs, charges and expenses incurred by the Agent or the Paying Agent or the Security Trustee or any other Creditor in the enforcement of the Finance Documents or any part thereof, or in respect of the dissolution or liquidation of the relevant Obligor or otherwise in collecting the Distribution Monies.
 
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24.1.3     Thirdly: in paying to the Senior Lenders interest, fees and other amounts, excluding unpaid principal, due and payable in respect of the Senior Debt including but not limited to Broken Funding Costs.
 
24.1.4     Fourthly: in paying to the Senior Lenders the principal due in respect of the Senior Debt pro-rata in the proportion which the total principal amount outstanding in respect of each of the Pre-Delivery Facility or the Post-Delivery Senior Facility (as the case may be) bearing to the total principal amount outstanding in respect of the Senior Debt.
 
24.1.5     Fifthly: in paying to the Post-Delivery Junior Lenders interest, fees and the amounts, excluding unpaid principal, due and payable in respect of the Post-Delivery Junior Facility Indebtedness including but not limited to Broken Funding Costs;
 
24.1.6     Sixthly: in paying to the Post-Delivery Junior Lenders the principal, due in respect of the Post-Delivery Junior Facility Indebtedness;
 
24.1.7     Seventhly:  in paying to the Swap Agent any and all amounts which many be owing to it under the Master Agreement;
 
24.1.8     Eightly: once the Indebtedness has been repaid to the Creditors to the full satisfaction of the Agent, the Paying Agent and the Security Trustee, then any balances shall be paid to the Borrowers.
 
24.2         If any Proceeds or Debt Proceeds recovered by the Agent, Paying Agent and the Security Trustee have to be repaid by the Agent, Paying Agent and the Security Trustee on the ground of unfair or fraudulent preference or on any other ground, the Agent, Paying Agent the Security Trustee and the Creditors shall have the same rights hereunder and/or under the other Finance Documents against the Borrowers as if such amounts had never been applied in payment of the Indebtedness.
 
25            FEES
￠
25.1         The Borrowers shall pay to the Paying Agent for the account of the Banks and the Agent an arrangement fee in respect of the Facilities of Two hundred Forty thousand Dollars (US$ 240,000) on the date of execution of this Agreement.
 
25.2         The Borrowers shall pay to the Paying Agent the following agency fees throughout the Security Period:
 
(a)            in respect of the Pre-Delivery Facility Nine Thousand three hundred and Seventy Five Dollars (US$ 9,375)  for each three month period commencing on the earlier of (i) the
 
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Drawdown Date of the first Advance of the Pre-Delivery Facility and (ii) 1 st January 2003 and payable quarterly in advance; and
 
(b)            in respect of each of the Post-Delivery Senior Facility and the Post-Delivery Junior Facility an amount equal to zero point zero Five per cent (0.05%) per annum on the aggregate amount outstanding under the Post-Delivery Senior Facility and the Post-Delivery Junior Facility commencing on the date of drawdown of the first Advance of the Post-Delivery Senior Facility and payable quarterly in advance.
 
25.3         During the Availability Period the Borrowers shall pay to the Agent for the account of the Banks a commitment fee of zero point three percent (0.3%) on the aggregate amount of the Post-Delivery Facilities which is from time to time available and has not been drawndown from the date of this Agreement until the expiry of the Availability Period relating thereto less any amounts drawndown under the Pre-Delivery Facilities, such fee to be payable quarterly in arrears.
 
26            EXPENSES
￠
26.1         The Borrowers shall reimburse the Agent, the Paying Agent, the Security Trustee and the Banks on demand for all reasonable charges and expenses incurred by the Agent, the Paying Agent, the Security Trustee and the Banks in connection with the preparation, negotiation and conclusion of this Agreement and the Security Documents (including, but not limited to, all costs and expenses of the Agent, the Paying Agent, the Security Trustee and the Banks in connection with the assignment, transfer and sub-participation of their rights under this Agreement) including fees and expenses of legal advisers and reasonable out-of-pocket expenses.
 
26.2         The Borrowers shall reimburse the Agent, the Paying Agent, the Security Trustee and the Banks on demand for all charges and expenses (including legal fees) incurred by the Agent and/or the Paying Agent and/or the Security Trustee and/or the Banks in or in connection with the exercise of the Agent’s and the Paying Agent’s and the Security Trustee’s and/or the Banks’ rights and powers under this Agreement and the Security Documents (including but not limited to the fees and charges of auditors, brokers, surveyors and legal counsel instructed by the Agent and/or the Paying Agent and/or the Security Trustee and/or the Banks) and with the actual, attempted or purported enforcement of, or preservation of rights under, this Agreement or the Security Documents.
 
27            INDEMNITY
￠
The Borrowers hereby undertake and agree to indemnify the Agent, the Paying Agent, the Security Trustee and the Banks, upon their first demand, from and against any losses, costs or
 
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expenses (including legal expenses) which they incur in consequence of any Event of Default including (but without limitation) all losses, premiums and penalties incurred or to be incurred in liquidating or redeploying deposits made by third parties or funds acquired or arranged to effect or maintain the Facilities or any part thereof.
 
28            STAMP DUTIES
￠
The Borrowers shall pay any and all stamp, registration and similar taxes and charges of whatsoever nature which may be payable or determined to be payable on, or in connection with, the execution, registration, notarisation, performance or enforcement of this Agreement or the Security Documents. The Borrowers shall indemnify the Agent, the Paying Agent, the Security Trustee and the Banks against any and all liabilities with respect to or resulting from delay or omission on the part of the Borrowers to pay any such taxes.
 
29            NO WAIVER
￠
No failure to exercise and no delay in exercising on the part of the Agent, the Paying Agent, the Security Trustee and the Banks any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege preclude any other or future exercise thereof, or the exercise of any other right, power or privilege. The rights, powers and remedies herein provided are cumulative and not exclusive of any rights, powers or remedies provided by law.
 
30            PARTIAL INVALIDITY
￠
In the event that any term or condition of this Agreement is rendered or declared illegal, invalid or inoperative in whole or in part by any statute, rule or regulation or any decision of any court or tribunal of competent jurisdiction then such determination or declaration shall neither affect nor impair the validity of any other term or condition of this Agreement which (save as aforesaid) will remain in full force and effect nor the legality, validity or enforceability of such term or condition under the law of any other jurisdiction.
 
31            THE AGENT, THE PAYING AGENT, THE SECURITY TRUSTEE, AND THE BANKS
￠
31.1         Each Bank (which, for the purpose of this Clause, shall include the Swap Agent in its capacity as party to the Master Agreement) irrevocably appoints the Agent as its agent in connection with the administration of the Facilities, the Paying Agent in connection with all payments and repayments of the Indebtedness and the Security Trustee for the purposes of the Finance Documents and authorises each of them (whether or not by or through employees or agents) to take such action on such Bank’s behalf and to exercise such rights, remedies, powers and discretion’s as are specifically delegated to them by
 
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this Agreement and the Finance Documents, together with such powers and discretion’s as are reasonably incidental thereto. The Agent, the Paying Agent and the Security Trustee shall not however, have any duties, obligations or liabilities to the Banks beyond those expressly stated in this Agreement and the other Finance Documents.
 
31.2         The Agent shall:
 
(a)            promptly send to each Bank details of each communication received by it from the Borrowers under this Agreement or any other Finance Document, except that details of any communication relating to a Bank shall be sent only to that Bank as appropriate;
 
(b)            promptly send to each Bank a copy of any legal opinion delivered under this Agreement or any other Finance Document and of any document or information received by it under Clause 20 ;
 
(c)            subject to the other provisions of this Clause 31, act in accordance with any instructions from the Instructing Group or, if so instructed by the Instructing Group, refrain from exercising a right, power or discretion vested in it under this Agreement or any other Finance Document ; and
 
(d)            have only those duties, obligations and responsibilities, of an administrative nature, expressly specified in this Agreement and the other Finance Documents .
 
31.3         The Paying Agent shall:
 
(a)            subject to the other provisions of this Clause 31, act in accordance with any instructions from the Instructing Group or, if so instructed by the Instructing Group, refrain from exercising a right, power or discretion vested in it under this Agreement and the other Finance Documents; and
 
(b)            immediately upon receipt of any Proceeds, pay such sums to the Security Trustee for application in accordance with the provisions of Clause 10.8 of the Intercreditor Deed;
 
(c)            immediately upon receipt of any Debt Proceeds, pay such sums to the Security Trustee for application in accordance with the provisions of Clause 24.1,
 
31.4         have only those duties, obligations and responsibilities expressly specified in this Agreement and the other Finance Documents. The Security Trustee shall -
 
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(a)            subject to the other provisions of this Clause 31, act in accordance with any instructions from the Instructing Group or, if so instructed by the Instructing Group, refrain from exercising a right, power or discretion vested in it under this Agreement or the other Finance Documents;
 
(b)            have only those duties, obligations and responsibilities expressly specified in this Agreement and the other Finance Documents.
 
31.5         Each of the Agent, the Paying Agent and the Security Trustee may:
 
(a)            perform any of its functions under this Agreement and the other Finance Documents by or through its personnel or agents;
 
(b)            refrain from doing anything under this Agreement and the other Finance Documents until it has received instructions from the Instructing Group as to whether (and, if it is to be, the way in which) it is to be done and shall in all cases be fully protected when acting, or (if so instructed) refraining from acting, in accordance with instructions from the Instructing Group;
 
(c)            treat (a) each Bank as the person entitled to repayment of the Facilities of which it is a lender and the Swap Agent as the person entitled to the payment of all Master Agreement Liabilities unless all or part of the relevant Banks’ Commitment has been transferred to another bank (or the Agent has received notice of assignment of all or part of it) in accordance with Clause 33 whereupon such other bank shall be entitled to repayment of its share in the Commitment and (b) the office notified by each Bank to the Agent for this purpose before the signing of this Agreement (or, as the case may be, set out in the relevant Transfer Certificate) as its facility office unless the Agent has received from such Bank or such other bank a notice of change of facility office. Each of the Agent, Paying Agent and the Security Trustee may act on any such certificate until it is superceded by a further transfer;
 
(d)            refrain from disclosing any document or information if such disclosure (and may refrain from doing anything which) would or might in its opinion be contrary to any law, be a breach of any duty of secrecy or confidentiality or otherwise render it liable to any person and may do anything which is in its opinion necessary to comply with any law and the Borrowers acknowledge that each of the Agent, the Paying Agent and the Security Trustee may release such information to such parties it is required to pursuant to the terms of the Intercreditor Deeds;
 
(e)            assume that no Event of Default or Potential Event of Default has occurred unless an officer of the Agent, the Paying Agent or the Security Trustee (as the case may be) acquires actual knowledge to the contrary; and
 
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(f)             refrain from taking any step (or further step) to protect or enforce the rights of any person under this Agreement and the other Finance Documents until it has been indemnified (or received confirmation that it will be so indemnified) and/or secured to its satisfaction against any and all costs, losses, expenses or liabilities (including legal fees) which it would or might sustain or incur as a result.
 
31.6         Each of the Agent, Paying Agent and the Security Trustee may:
 
(a)            rely on any communication, certificate, legal opinion or other document believed by it to be genuine;
 
(b)            rely as to any matter of fact which might reasonably be expected to be within the knowledge of any person on a statement by or on behalf of that person;
 
(c)            obtain and pay for such legal or other expert advice or services as may to it seem necessary or desirable and rely on any such advice;
 
(d)            provide to any person engaged to provide expert advice or services in connection with this Agreement and the other Finance Documents, copies of all information in its possession or to which it is entitled under or in connection with this Agreement and the other Finance Documents; and
 
(e)            retain for its own benefit and without liability to account any fee or other sum receivable by it for its own account.
 
31.7         The Security Trustee hereby accepts its appointment and constitution under this Clause 31 as trustee in relation to the Trust Property and the Finance Documents with effect from the date of this Agreement and irrevocably acknowledges and declares that from such date it holds the same on trust for the Banks and that it shall apply, and deal with, the Trust Property in accordance with the provisions of this Agreement.
 
31.8         The trusts constituted or evidenced by this Agreement shall remain in full force and effect until whichever is the earlier of the expiration of a period of eighty (80) years from the date of this Agreement and the expiration of the Security Period.
 
31.9         The Agent or Security Trustee may not, except to the extent expressly authorised by the other provisions of this Agreement or any Finance Document, agree amendments or modifications to any of the Finance Documents.
 
31.10       With respect to any sums due to the Security Trustee for its own account under this Agreement and/or the other Finance Documents, the Agent, the Paying Agent and the Security Trustee shall have the same rights and powers under this Agreement as the
 
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Banks and may exercise the same as though it were not performing the duties and functions delegated to it under this Agreement and the term “ Bank ” shall, unless the context clearly otherwise indicates, include the Agent, Paying Agent and the Security Trustee in its individual capacity.
 
31.11       The Agent, which for the purpose of this Clause shall include the Paying Agent and the Security Trustee shall not  -
 
31.11.1   be obliged to request any certificate or opinion under this Agreement or any of the other Finance Documents unless (in the case of the Agent) so required in writing by any Bank, in which case the Agent shall promptly make the appropriate request or be obliged to make any enquiry as to any default in the performance or observance of any of the provisions of this Agreement or the other Finance Documents or as to the existence of an Event of Default unless (in the case of the Agent) the Agent has actual knowledge thereof or has been notified in writing thereof by the Banks, in which case the Agent shall promptly notify the Banks of the relevant event or circumstance; or
 
31.11.2   be liable to any Bank for any action taken or omitted under or in connection with this Agreement and the other Finance Documents unless caused by its gross negligence or wilful misconduct.
 
31.12       The Agent and/or Security Trustee shall (subject to its being indemnified to its satisfaction) take such action or, as the case may be, refrain from taking such action with respect to any Event of Default of which the Agent and/or Security Trustee has actual knowledge, as the Instructing Group may reasonably direct.
 
31.13       Each Bank acknowledges that it has not relied on any statement, opinion, forecast or other representation made by the Agent to induce it to enter into this Agreement and/or the other Finance Documents and that it has made and will continue to make, without reliance on the Agent and based on such documents as it considers appropriate, its own appraisal of the creditworthiness of the Borrowers and its own independent investigation of the financial condition and affairs of the Borrowers in connection with the making and continuation of the Facilities under this Agreement and/or the execution of the Master Agreement. The Agent shall not have any duty or responsibility, either initially or on a continuing basis, to provide the Banks with any credit or other information with respect to the Borrowers.
 
31.14       Neither the Agent, nor the Paying Agent nor the Security Trustee shall have any responsibility to any Bank on account of the failure of the Borrowers to perform or to procure the performance of their obligations under this Agreement and/or the other Finance Documents or for the financial condition of the Borrowers or for the completeness or accuracy of any statements, representations or warranties in this
 
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Agreement and/or the other Finance Documents or any document delivered under this Agreement and/or the other Finance Documents or for the execution, effectiveness, adequacy, genuineness, validity, enforceability or admissibility in evidence of this Agreement and/or the other Finance Documents or of any certificate, report or other document executed or delivered under this Agreement and/or the Security Documents or otherwise in connection with the Facilities and/or the Master Agreement Liabilities made available pursuant to this Agreement or its negotiation or for acting (or, as the case may be, refraining from acting) in accordance with the instructions of the Instructing Group. The Agent, the Paying Agent and the Security Trustee shall be entitled to rely on any communication, instrument or document believed by it to be genuine and correct and to have been signed or sent by the proper person and shall be entitled to rely as to legal or other professional matters on opinions and statements of any legal or other professional advisers.
 
31.15       The Agent, the Paying Agent and the Security Trustee may, without any liability to account to the Banks, accept deposits from, lend money to, and generally engage in any kind of banking or trust business with, the Borrowers or any Bank as if it were not the Agent, Paying Agent and the Security Trustee.
 
31.16       Each Bank shall reimburse the Agent and the Security Trustee in the proportion borne by its commitment to the Total Commitments, for the charges and expenses incurred by the Agent and/or Security Trustee in connection with the negotiation, preparation, syndication, execution and, where relevant, registration of this Agreement and the other Finance Documents and/or in contemplation of, or otherwise in connection with, the enforcement of, or the preservation of any rights under, or in carrying out its duties under, the Agreement and the Security Documents including (in each case) the fees and expenses of legal or other professional advisers. Each Bank shall indemnify the Agent, Paying Agent and the Security Trustee in the proportion borne by its Commitment to the Total Commitments against all liabilities, damages, costs and claims whatsoever incurred by the Agent and/or the Security Trustee in connection with this Agreement and the Security Documents or any action taken or omitted by the Agent, the Paying Agent and the Security Trustee under this Agreement and the Security Documents, unless such liabilities, damages, costs or claims arise from the Agent’s and/or the Security Trustee’s own gross negligence or wilful misconduct.
 
31.17       The Agent, the Paying Agent and the Security Trustee shall have full power to determine all questions and doubts arising in relation to the interpretation or application of any of the provisions of this Agreement or any of the Security Documents as it affects the Agent, Paying Agent and the Security Trustee and every such determination (whether made upon a question actually raised or implied in the acts or proceedings of the Agent and the Security Trustee) shall be conclusive.
 
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31.18       In its capacity as trustee in relation to the Finance Documents and in relation to the Trust Property, the Security Trustee -
 
31.18.1   shall, without prejudice to any of the powers, discretions and immunities conferred upon trustees by law (and to the extent not inconsistent with the provisions of this Agreement or any of the other Finance Documents), have all the same powers and discretions as a natural person acting as the beneficial owner of such property and/or as are conferred upon the Security Trustee by this Agreement and/or any other Finance Document provided that the Security Trustee may only exercise such powers and discretions to the extent that the Security Trustee is authorised so to exercise the same in accordance with the provisions of this Agreement and/or any other Finance Document;
 
31.18.2   shall be entitled to invest moneys forming part of the Trust Property and which, in the opinion of the Security Trustee may not be paid out promptly following receipt in the name or under the control of the Security Trustee in any of the investments for the time being authorised by law for the investment by trustees of trust moneys or in any other property or investments whether similar to the aforesaid or not or by placing the same on deposit in the name or under the control of the Security Trustee as the Security Trustee may think fit without being under any duty to diversify its investments and the Agent may at any time vary or transpose any such property or investments for or into any others of a like nature and shall not be responsible for any loss due to depreciation in value or otherwise of such property or investments (and on the basis that any investment of any part or all of the Trust Property may, at the discretion of the Security Trustee be made or retained in the names of nominees); and
 
31.18.3   may, in the conduct of its obligations under and in respect of the Finance Documents (otherwise than in relation to its right to make any declaration, determination or decision), instead of acting personally, employ and pay any agent (whether being a lawyer or any other person) to transact or concur in transacting any business and to do or concur in doing any acts required to be done by the Security Trustee (including the receipt and payment of money) on the basis that -
 
(a)            any such agent engaged in any profession or business shall be entitled to be paid all usual professional and other charges for business transacted and acts done by him or any partner or employee of his in connection with such trusts; and
 
(b)            the Security Trustee shall not be bound to supervise, or be responsible for any loss incurred by reason of any act or omission of any such agent if the Security Trustee shall have exercised reasonable care in the selection of such agent.
 
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32            RETIREMENT OF THE AGENT, PAYING AGENT AND THE SECURITY TRUSTEE
￠
32.1         Each of the Agent, the Paying Agent and the Security Trustee may and if requested by the Instructing Group shall (which the Instructing Group may only request if they have good cause to do so) retire its appointment under this Agreement and the other Finance Documents at any time without assigning any reason thereof or by giving not less than 30 days prior written notice to that effect to each of the other parties hereto, provided that no such retirement shall be effective until a successor for such Agent, Paying Agent and the Security Trustee is appointed in accordance with the following provisions of this Clause 32 -
 
32.1.1     if the Agent (which for the purpose of this clause shall refer to any one of the Agent or the Paying Agent or the Security Trustee, as the case may be) gives notice of its retiring pursuant to sub-clause 32.1, during the period of such notice -
 
(a)            the retiring Agent may appoint as successor Agent a banking corporation or financial institution or related company owned by such retiring Agent by at least 50% or a banking corporation or financial institution or related company owned by one of the Banks by at least 50%, without requiring for such appointment the prior written consent and/or consultation of the Instructing Group and/or the Borrowers, or such appointment not being applicable;
 
(b)            the Instructing Group may appoint as successor Agent any of the Banks, or failing such appointment;
 
(c)            the retiring Agent may appoint as successor Agent any reputable and experienced bank or financial institution or related company approved by the Instructing Group, with the prior consultation of the Borrowers;
 
33.1.2     if during the period of such notice no successor is so appointed pursuant to sub-clauses 32.1.1(a), (b) and (c), the retiring Agent may appoint a successor Agent itself any reputable and experienced bank or financial institution nominated by the Agent after consultation with the Borrowers;
 
and either the provisions of Clause 32.1.1 or 32.1.2 have been complied with.
 
32.2         Upon any such successor as aforesaid being appointed, the retiring Agent, Paying Agent or Security Trustee shall be discharged from any further obligation under this Agreement and the other Finance Documents and its successor and each of the other parties to this Agreement and/or the other Finance Documents shall have the same rights and obligations among themselves as they would have had if such successor had been a party
 
83

 
to this Agreement and/or the other Finance Documents in place of the retiring Agent or Paying Agent or Security Trustee and the parties to this Agreement and/or the other Finance Documents and the successor agent, successor paying agent and the security trustee shall, prior to such retirement, execute such amendments to this Agreement and/or the other Finance Documents as may be necessary as a result of such substitution.
 
33            ASSIGNMENTS AND TRANSFERS
￠
33.1         This Agreement shall be binding upon and enure to the benefit of each party hereto and its successors and permitted assigns and transferees;
 
33.2         No Borrower (in any of its capacities) shall be entitled to assign or transfer all or any of its rights, benefits and obligations hereunder or under the Subject Documents;
 
33.3         Any Bank may at any time assign to any one or more banks or other financial institutions all or any part of such Bank’s rights and benefits hereunder or transfer in accordance with Clause 33.5 all or any part of such Bank’s rights, benefits and obligations to any bank or financial institution provided that (a) (except in the case of such an assignment or transfer to an affiliate of such Bank) no such assignment or transfer may be made without the prior written consent of the Borrowers (any such consent not to be unreasonably withheld) and (b) no such assignment or transfer shall be made if the result thereof, at the time of such assignment or transfer or immediately thereafter, would be that the Borrowers would be liable to pay an additional amount or amounts pursuant to Clause 15.1 or 15.2 (Taxes) which additional amount or amounts would not have been payable had no such assignment or transfer occurred, unless the assignee or Transferee accepts responsibility to reimburse that Borrower for any additional amount or amounts;
 
33.4         If any Bank assigns all or any of its rights and benefits hereunder in accordance with Clause 33.3, then, unless and until the assignee has undertaken to all the other parties hereto that it shall be under the same obligations towards each of them as it would have been under if it had been party hereto, the other parties hereto shall not be obliged to recognise such assignee as having the rights against each of them which it would have had if it had been a party hereto;
 
33.5         Subject to the provisions of Clauses 33.6, 33.7 and 33.8, if any Bank wishes to transfer all or any part of its Commitment as contemplated in Clause 33.3, then such transfer may be effected by the delivery to the Agent of a duly completed and duly executed Transfer Certificate (together with the related consent from the Borrowers) and upon the later of the date of receipt by the Agent of such Transfer Certificate and the date of transfer specified therein:
 
84

 
(i)             the Commitment of such Bank party to such Transfer Certificate shall be reduced by the amount expressed in such Transfer Certificate to be transferred to the Transferee;
 
(ii)            the Transferee party to such Transfer Certificate shall become a party hereto as a Bank entitled to the rights and liable to observe the obligations of a Bank with a Commitment equal to the amount expressed in such Transfer Certificate to be transferred to such Transferee; and
 
(iii)          the other parties hereto shall acquire the same rights and benefits (including but not limited to rights in the trust declared by the Security Trustee in Clause 33) and assume the same obligations between themselves vis-à-vis the Transferee as they would have acquired and assumed had such Transferee been an original party hereto as the Bank with a Commitment equal to the amount expressed in such Transfer Certificate to be transferred to the Transferee.
 
33.6         Each of the parties hereto confirms that (a) the delivery to a Transferee of a Transfer Certificate signed by a Bank constitutes an irrevocable offer by each of the parties hereto to accept such Transferee (subject to the conditions set out herein) as a Bank party hereto with the rights and obligations so expressed to be transferred and (b) such offer may be accepted by such Transferee by the execution of such Transfer Certificate by such Transferee and (c) the provisions of this Agreement shall apply to the contract between the parties thereto arising as a result of the acceptance of such offer;
 
33.7         the Transferee and all other relevant parties undertake to execute all further documents, at the expense of the Transferee, to give effect and validity to the required transfer of all interests in the Trust Property and Security Documents in consequence of the Transfer Certificate;
 
33.8         Any transfer pursuant to this Clause 33 of part of a Bank’s Commitment shall be in a minimum amount of US$3,000,000 and an integral multiple of US$1,000,000;
 
33.9         On the date on which a transfer takes effect pursuant to this Clause 34 the Transferee in respect of such transfer shall pay to the Agent for its own account a fee of US$500;
 
33.10       The Agent and the Security Trustee shall not be obliged to accept any Transfer Certificate received by it hereunder and no such Transfer Certificate may take effect on any day on or after the receipt by the Agent of a Notice Drawdown and prior to the relevant Drawdown Date;
 
85

 
33.11       The Agent shall promptly notify the Borrowers of the receipt by it of any Transfer Certificate, identifying in such notice the parties thereto in their respective capacities and the portion of the Commitment transferred (as specified in such Transfer Certificate); and
 
33.12       The Agent shall be fully entitled to rely on any Transfer Certificate delivered to it in accordance with the foregoing provisions which is complete and regular on its face as regards its contents and purportedly signed on behalf of the relevant Bank and the Transferee and shall have no liability or responsibility to any party as a consequence of placing reliance upon and acting in accordance with any such Transfer Certificate;
 
33.13       Any Bank may provide or disclose to any actual or potential Transferee or assignee or to any person who may otherwise enter into contractual relations with such Bank in relation to this Agreement, a copy of this Agreement, copies of all information provided by the Borrowers pursuant to each Subject Document to which they are party, details of drawings made by the Borrowers thereunder, information regarding the performance of the Borrowers of its obligations thereunder;
 
33.14       A Bank may change its lending office by giving notice to the Agent and the change shall become effective on the later of:
 
(a)            on the date of which the Agent receives a notice; and
 
(b)            the date, if any, specified in the notice as the date on which the change shall come into effect.
 
33.15       On receiving such a notice, the Agent shall notify the Borrowers, the Paying Agent and the Security Trustee and until the Agent receives such a notice, it shall be entitled to assume that a Bank is acting through its lending office of which the Agent last had notice.
 
34            LANGUAGE
￠
34.1         Each document, instrument, certificate or statement referred to herein or to be delivered hereunder by the Borrowers shall, if not in the German or English language, be accompanied by an English translation thereof certified by the Borrowers, which translation shall prevail in the case of conflict with the non-English or non-German version.
 
35            NON-IMMUNITY
￠
35.1         The Borrowers do not have any right of immunity from set-off, suit or execution, attachment or other legal process under the laws of England or any other jurisdiction.
 
86

 
35.2         The exercise by the Borrowers of their rights and performance and discharge of their duties and liabilities hereunder will constitute commercial acts done and performed for private and commercial purposes.
 
35.3         To the extent that the Borrowers may in any jurisdiction, in which proceedings may at any time be taken for the enforcement of this Agreement and/or any of the Security Documents, claim for themselves or their assets immunity from suit, judgment, execution, attachment (whether in aid of execution, before judgment or otherwise) or other legal process, and to the extent that in any such jurisdiction there may be attributed to themselves or their assets any such immunity (whether or not claimed), the Borrowers hereby irrevocably agree not to claim and hereby irrevocably waive any such immunity to the full extent permitted by the laws of such jurisdiction.
 
36            NOTICES
￠
36.1         Every notice, demand or other communication under this Agreement shall be in writing and may be given or made by telefax.
 
36.2         Any notices or other documents to be served on the Borrowers hereunder or pursuant hereto may be served on the Manager and are to be addressed to c/o Danaos Shipping Company Limited, 57, Akti Miaouli, 185 36 Piraeus, Greece facsimile no, +30 210 429-3592 telex no. 212133 DECU GR and, in the case of a telefax, shall be deemed to have been received at the time it is sent (provided it is in business hours in the place of receipt otherwise the next Business Day in the place of receipt and that an error free transmission slip is issued on completion of transmission) and, in the case of a letter, shall be effective on the actual receipt thereof by the Borrowers.
 
36.3         Any notices or other documents to be sent to the Agent shall be sent to it at 28, Diligianni Street, 145 62 Kifissia, Greece, facsimile no. +30 210  6234192-3 and, in the case of a telefax, shall be deemed to have been received at the time it is sent (provided it is in business hours in the place of receipt otherwise the next Business Day in the place of receipt and that an error free transmission slip is issued on completion of transmission) and, in the case of a letter, shall be effective on the actual receipt thereof by the Agent.
 
36.4         Any notice or other document to be sent to the Paying Agent and for the Security Trustee shall be sent to it at Gerhart–Hauptmann–Platz–50, D-20095, Hamburg, Germany, facsimile no. +49 40 3333 34118 and, in the case of a telefax, shall be deemed to have been received at the time it is sent (provided it is in business hours in the place of receipt otherwise the next Business Day in the place of receipt and that an error free transmission slip is issued on completion of transmission) and, in the case of a letter, shall be effective on the actual receipt thereof by the Agent.
 
87

 
37            APPLICABLE LAW AND JURISDICTION
￠
37.1         This Agreement shall be governed by and construed in accordance with the laws of England.
 
37.2         Any legal action or proceedings arising out of or in connection with this Agreement and the other Finance Documents may be brought in the English Courts. The Borrowers hereby accept for themselves and their assets and revenues generally and unconditionally the jurisdiction of the aforesaid courts. The submission to such jurisdiction shall not (and shall not be construed so as to) limit the right of the Agent, the Paying Agent and the Security Trustee to bring any legal action or proceedings with respect to this Agreement in any competent jurisdiction and/or the competent court where the Vessel may be found. The Borrowers hereby irrevocably waive any objection they may now or hereafter have to the selection of venue of any such action or proceedings and any claim they may have that such action or proceedings have been brought in an inconvenient forum. Nothing herein contained shall affect the right of the Agent and the Security Trustee to serve process in any other manner permitted by law.
 
38            AGENT FOR SERVICE OF PROCESS
￠
38.1         The Borrowers jointly authorise and appoint SH Process Agents Limited currently located at One St Pauls Churchyard, London EC4M 8SH (or such other person being a firm of solicitors in England as they may from time to time substitute by notice to the Agent) to accept service of all legal process arising out of or connected with this Agreement and each of the other Finance Documents of which they are party and service on such person (or substitute) shall be deemed to be service on the Borrowers. Except upon a substitution the Borrowers shall not revoke any such authority or appointment and shall at all times maintain an agent for service of process in England and if any such agent ceases for any reason to be an agent for this purpose shall forthwith appoint another agent and advise the Agent accordingly.
 
39            THIS AGREEMENT AND THE OTHER FINANCE DOCUMENTS
￠
In case of any conflict between the provisions of this Agreement and any of the other Finance Documents the provisions of this Agreement shall prevail.
 
40            COUNTERPARTS
￠
This Agreement shall be executed in any number of counterparts, each of which shall constitute an original.
 
88

 
AS WITNESS the hands of the duly authorised representatives of the parties hereto the day and year first before written.

BORROWERS	 	
 	 	
Signed by	)	
 	)	
 	 	)	
the duly authorised attorney-in-fact	)	
for and on behalf of	)	
Containers Services Inc.	)	
in the presence of -	)	

Signed by	)	
 	)	
 	 	)	
the duly authorised attorney-in-fact	)	
for and on behalf of	)	
Containers Lines Inc.	)	
in the presence of -	)	

AGENT	 	
 	 	
Signed by	)	
 	)	
 	 	)	
the duly authorised attorney-in-fact	)	
for and on behalf of Aegean Baltic Bank S.A.	)	
in the presence of -	)	

PAYING AGENT AND SECURITY TRUSTEE	
 	
Signed by	)	
 	)	
 	 	)	
the duly authorised attorney-in-fact	)	
for and on behalf of	)	
 
89

 

HSH NORDBANK AG	)	
in the presence of -	)	
 	 	
BANK	 	
 	 	
Signed by	)	
 	)	
 	 	)	
the duly authorised attorney-in-fact	)	
for and on behalf of	)	
HSH NORDBANK AG	)	
in the presence of -	)	

PARTY TO THE MASTER AGREEMENT	
 	
Signed by	)	
 	)	
 	 	)	
the duly authorised attorney-in-fact	)	
for and on behalf of	)	
HSH NORDBANK AG	)	
in the presence of -	)	
 
90

 
SCHEDULE 1
￠
THE BANKS AND THEIR COMMITMENTS
￠
Pre-Delivery Facility

NAME OF BANK	 	COMMITMENT	 	
 	 	 	 	
HSH NORDBANK AG	 	US$	49,000,000	 	

Post-Delivery Senior Facility

NAME OF BANK	 	COMMITMENT	 	
 	 	 	 	
HSH NORDBANK AG	 	US$	45,000,000	 	

Post-Delivery Junior Facility

NAME OF BANK	 	COMMITMENT	 	
 	 	 	 	
HSH NORDBANK AG	 	US$	15,000,000	 	

91

 
SCHEDULE 2
￠
NOTICE OF DRAWDOWN
￠
Dated [                 ] 2002
 
To:           [Insert name of Agent]
 
[Insert address of Agent]
 
Dear Sirs
 
FINANCIAL AGREEMENT DATED [           ] 2002
 
We refer to the above Agreement and hereby give you this Drawdown Notice in accordance with Clause 4 thereof.
 
We hereby give you notice that we wish an Advance be made as follows: [amount] [date] the proceeds of the Advance to be transferred to [account] [Bank details].
 
Terms defined in the Agreement shall have the same meanings when used in this Notice of Drawdown.

Yours faithfully	

 	 	
For and on behalf	
[                           ]	
 
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SCHEDULE 3
￠
FORM OF TRANSFER CERTIFICATE
￠
To:           [Agent]
 
TRANSFER CERTIFICATE
 
relating to the agreement (the ‘Agreement’) dated                   2002 made between (1) Containers Services Inc. and Containers Lines Inc.., (2) Aegean Baltic Bank S.A. as Agent (3) HSH Nordbank AG (as Paying Agent and Security Trustee) (4) HSH Nordbank AG, (as Bank). Terms defined in the Agreement shall bear the same meaning herein.
 
1.           Transferor (the ‘Bank’) hereby confirms the accuracy of the summary of its Commitment in the Agreement set out in the Schedule below and requests [Transferee] (the ‘Transferee’) to accept and procure the transfer to the Transferee of the portion of such Commitment specified in the Schedule by counter-signing and delivering this Transfer Certificate to the Agent at its address for the service of notices specified in the Agreement.
 
2.           The Transferee hereby requests the Agent to accept this transfer Certificate as being delivered to the Agent pursuant to and for the purposes of Clause 31 and Clause 33 (Assignments) of the Agreement so as to take effect in accordance with the terms thereof on the date of receipt by it of this Transfer Certificate or (if later) on [specify date of transfer] subject only to the provisions of the Agreement.
 
3.           The Transferee confirms that it has received from the Bank a copy of the Agreement together with such other documents and information as it has required in connection with this transaction and that it has not relied and will not hereafter rely on the Bank or any other party to the Agreement to check or enquire on its behalf into the legality, validity, effectiveness, adequacy, accuracy or completeness of any such documents or information and further agrees that it has not relied and will not rely on the Bank or any other party to the Agreement to assess or keep under review on its behalf the financial condition, creditworthiness, condition, affairs, status or nature of each Borrower or any other party to the Agreement.
 
4.           Execution of this Transfer Certificate by the Transferee constitutes its representation to the Bank and all other parties to the Agreement that it has power to become a party to the Agreement as a Bank on the terms herein and therein set out, has taken all necessary steps to authorise execution and delivery of this Transfer Certificate.
 
5.           The Transferee hereby undertakes with the Bank and each of the other parties to the Agreement that it will perform in accordance with their terms all those obligations which by the terms of the Agreement will be assumed by it after delivery of this Transfer Certificate to the Agent and
 
93

 
satisfaction of the conditions subject to which this Transfer Certificate is expressed to take effect.
 
6.           The Bank makes no representation or warranty and assumes no responsibility with respect to the legality, validity, effectiveness, adequacy or enforceability of the Agreement or any document relating thereto and assumes no responsibility for the financial condition of each Borrower or any other party to the Agreement or for the performance and observance by each Borrower or any other such party of any of its obligations under the Agreement or any document relating thereto and any and all such conditions and warranties, whether express or implied by law or otherwise, are hereby excluded.
 
7.           The Bank hereby gives notice that nothing herein or in the Agreement (or any document relating thereto) shall oblige the bank to (i) accept a re-transfer from the Transferee of the whole or any part of its rights, benefits and/or obligations under the Agreement transferred pursuant hereto or (ii) support any losses directly or indirectly sustained or incurred by the Transferee for any reason whatsoever including, without limitation, the non-performance by each Borrower or any other party to the Agreement (or any document relating thereto) of its obligations under any such document. The Transferee hereby acknowledges the absence of any such obligation as is referred to in (i) or (ii) above.
 
8.           This Transfer Certificate and the rights and obligations of the parties hereunder shall be governed by and construed in accordance with English law.
 
Notes:
 
(i)             A transfer fee of US$500 is payable by the Transferee to the Agent for its own account on the date upon which the transfer takes effect.
 
(ii)            The Borrowers written consent to the transfer is delivered to the Agent with this Transfer Certificate.
 
AS WITNESS the hands of the authorised signatures of the parties hereto on the date appearing below.
 
94

 
THE SCHEDULE

Commitment	Portion Transferred	
 	 	
[Transferor]	[Transferee]	
 	 	
By:	By:	
 	 	
Date:	Date:	
 
Administrative Details of Transferee

Facility Office:	 	
 	 	
Contact Name:	 	
 	 	
Account for payments in dollars:	 	
 	 	
Account for payments in sterling:	 	
 	 	
Account for payments in Euros:	 	
 	 	
Telephone:	 	
 	 	
Telex:	 	
 	 	
Telefax	 	
 
95

Allen & Overy LLP
￠
%8%#54)/. 6%23)/.
￠
3500,%-%.4!, !'2%%-%.4

DATED 21 APRIL, 2005
 
BETWEEN
 
CONTAINER SERVICES INC. and CONTAINERS LINES INC.
as Borrowers
 
AND
 
DANAOS HOLDINGS LIMITED
as Guarantor
 
AND
 
The BANKS AND FINANCIAL INSTITUTIONS listed in Schedule 1
as Banks
 
AND
 
AEGEAN BALTIC BANK S.A.
as Agent
 
AND
 
HSH NORDBANK AG
as Paying Agent and Security Trustee
 
relating to a FINANCIAL AGREEMENT
dated 17th December 2002 and amended and restated pursuant to a
Supplemental Agreement dated 18th February, 2004
 
1

 
CONTENTS

 	Page	
Clause	 	
1.	Interpretation	3	
2.	Conditions Precedent	4	
3.	Amendments	4	
4.	Representations	4	
5.	Consents	5	
6.	Miscellaneous	5	
7.	Governing law	5	
8.	Enforcement	5	
 	 	 	
Schedules	 	
1.	The Banks and their Commitments	7	
2.	Restated Financial Agreement	8	
3.	Amendments to Danaos Guarantee	9	
4.	Conditions precedent documents	11	

SIGNATORIES	13	
 
2

 
THIS AGREEMENT is dated 21 April, 2005 between:
 
(1)                                   CONTAINERS SERVICES INC. and CONTAINERS LINES INC. each being a corporation organised and existing under the laws of the Republic of Liberia each having its registered office at 80 Broad Street, Monrovia, Liberia (the Borrowers );
 
(2)                                   DANAOS HOLDINGS LIMITED a corporation organised and existing under the laws of the Republic of Liberia, having its registered office at 80 Broad Street, Monrovia, Liberia (the Guarantor );
 
(3)                                   HSH NORDBANK AG as paying agent and security trustee (in this capacity the Security Trustee ).
 
(4)                                   The BANKS listed in Schedule 1 (the Banks ); and
 
(5)                                   AEGEAN BALTIC BANK S.A. of 28, Diligianni Street, Kifissia 14562, Athens, Republic of Greece (the Agent) .
 
BACKGROUND
 
(A)                               This Agreement is supplemental to and amends a financial agreement dated 17th December, 2002 between, the Borrowers, the Security Trustee, the Banks, the Agent and the Paying Agent as previously amended and restated by a supplemental agreement dated 18 th February, 2004 between the parties hereto (the Financial Agreement ).
 
(B)                                 This Agreement is supplemental to and amends a guarantee agreement dated 17th December, 2002 between the Security Trustee, the Banks, the Agent and the Paying Agent (the Danaos Guarantee ).
 
(C)                                 The Borrowers have requested that the Security Trustee agree to certain amendments to the Financial Agreement and to the Danaos Guarantee and accordingly the parties have agreed to amend the Financial Agreement and the Danaos Guarantee on the terms set out in this Agreement.
 
IT IS AGREED as follows:
 
1.                                       INTERPRETATION
￠
1.1                                Definitions
 
In this Agreement:
 
(a)                                   Effective Date means  the date upon which the Agent has issued the notification referred to in Clause 2.1 (Conditions Precedent) or such other date as the Borrowers and the Agent may agree.
 
(b)                                  Fee Letter means any letter entered into by reference to this Agreement between the Paying Agent and the Borrowers setting out the amount of certain fees referred to in this Agreement.
 
(c)                                   Capitalised terms defined in the Financial Agreement have, unless expressly defined in this Agreement, the same meaning in this Agreement.
 
(d)                                  References in the Financial Agreement to this Agreement and expressions of similar import shall be deemed to be references to the Financial Agreement as amended and restated by this Agreement and to this Agreement.
 
3

 
(e)                                   References in the Danaos Guarantee to this Guarantee and expressions of similar import shall be deemed to be references to the Danaos Guarantee as amended by this Agreement and to this Agreement.
 
(f)                                     The provisions of Clause 1.2 (Construction) of the Financial Agreement apply to this Agreement as though they were set out in full in this Agreement except that references to the Financial Agreement are to be construed as references to this Agreement.
 
2.                                       CONDITIONS PRECEDENT
￠
2.1                                  The provisions of Clause 3 (Amendments) shall take effect on and from the date that the Agent notifies the Borrowers, the Guarantor and the Banks that it has received all of the documents and evidence set out in Schedule 4 (Conditions precedent documents) in form and substance satisfactory to the Agent and the Security Trustee. The Agent must give this notification to the Borrowers, the Guarantor and the Banks promptly upon being so satisfied.
 
2.2                                  If the Effective Date has not occurred by the date falling 30 days after the date of this Agreement or such other date as may be agreed between the parties, the Financial Agreement and the Danaos Guarantee will not be amended in the manner contemplated by this Agreement.
 
3.                                       AMENDMENTS
￠
(a)                                   Subject as set out below, the Financial Agreement will be amended from the Effective Date so that it reads as if it were restated in the form set out in Schedule 2 (Restated Financial Agreement).
 
(b)                                  Subject as set out below, the Danaos Guarantee will be amended from the Effective Time as more particulary described in Schedule 3 (Amendments to Danaos Guarantee).
 
4.                                       REPRESENTATIONS
￠
4.1                                Representations
 
The representations set out in this Clause are made by each of the Borrowers and the Guarantor on the date of this Agreement to each Creditor.
 
4.2                                Powers and authority
 
It has the power to enter into and perform, and has taken all necessary action to authorise the entry into and performance of this Agreement and the transactions contemplated by this Agreement.
 
4.3                                Legal validity
 
Subject to any general principles of law limiting its obligations and specifically referred to in any legal opinion delivered under Schedule 4 (Conditions precedent documents), this Agreement constitutes its legally binding, valid and enforceable obligation.
 
4.4                                Non-conflict
 
The entry into and performance by it of, and the transactions contemplated by, this Agreement do not and will not conflict with:
 
(a)                                   any law or regulation applicable to it; or
 
(b)                                  conflict with its or, in respect of the Guarantor any of its Subsidiaries’ constitutional documents; or
 
4

 
(c)                                   conflict with any document which is binding on it or , in respect of the Guarantor any of its Subsidiaries, or any of its or, in respect of the Guarantor its Subsidiaries’ assets.
 
4.5                                Authorisations
 
All authorisations required by it in connection with the entry into, performance, validity and enforceability of, and the transactions contemplated by, this Agreement have been obtained or effected (as appropriate) and are in full force and effect.
 
4.6                                Financial Agreement and Danaos Guarantee
 
The representations set out in Clause 16 (Representations and Warranties) of the Financial Agreement in respect of the Borrowers and Schedule 3 of the Danaos Guarantee in respect of the Guarantor are true as if made on the date of this Agreement and as if references to the Financial Agreement are references to the Financial Agreement, as amended and restated by this Agreement, and as is references to the Danaos Guarantee are references to the Danaos Guarantee as amended by this Agreement, with reference to the facts and circumstances then existing.
 
5.                                       CONSENTS
￠
(a)                                   Each of the Borrowers and the Guarantor confirms its consent to the amendment and restatement of the Financial Agreement as contemplated by this Agreement and, with effect from the Effective Date, confirms that in respect of any security which has been created or guarantee which has been given in favour of the Security Trustee as agent and trustee for each Creditor under a Finance Document, that security or guarantee includes all the liabilities and obligations of the Creditor to the Creditors under the Finance Documents as amended.
 
(b)                                  For avoidance of doubt, the Guarantor confirms and acknowledges that the Danaos Guarantee (as amended pursuant to this Agreement) remains in full force and effect notwithstanding the amendment and restatement of the Financial Agreement pursuant to this Agreement.
 
6.                                       MISCELLANEOUS
￠
(a)                                   Each of this Agreement, the Financial Agreement, as amended by this Agreement, and the Danaos Guarantee, as amended by this Agreement, is a Finance Document.
 
(b)                                  Subject to the terms of this Agreement, the Financial Agreement will remain in full force and effect and the Financial Agreement and this Agreement will be read and construed as one document.
 
(c)                                   Subject to the terms of this Agreement, the Danaos Guarantee will remain in full force and effect and the Danaos Guarantee and this Agreement will be read and construed as one document.
 
(d)                                  The Borrowers agree to pay the Paying Agent a restructuring fee for Banks in the manner agreed in the Fee Letter between the Paying Agent and the Borrowers.
 
7.                                       GOVERNING LAW
￠
This Agreement is governed by English law.
 
8.                                       ENFORCEMENT
￠
8.1                                Jurisdiction
 
(a)                                  The English courts have jurisdiction to settle any dispute in connection with any Finance Document.
 
5

 
(b)                                  The English courts are the most appropriate and convenient courts to settle any such dispute.
 
(c)                                   This Clause is for the benefit of the Creditors only. To the extent allowed by law, the Creditors may take:
 
(i)                                      proceedings in any other court; and
 
(ii)                                   concurrent proceedings in any number of jurisdictions.
 
8.2                                Service of process
 
(a)                                   Each of the Borrowers and the Guarantor irrevocably appoints SH Process Agents Limited of One St Paul’s Churchyard, London, EC4M 8SH as its agent under the Finance Documents to which it is a party for service of process in any proceedings before the English courts.
 
(b)                                  If any person appointed as process agent is unable for any reason to act as agent for service of process, the Borrowers and the Guarantor must immediately appoint another agent on terms acceptable to the Security Trustee. Failing this, the Security Trustee may appoint another agent for this purpose.
 
(c)                                   Each of the Borrowers and the Guarantor agree that failure by a process agent to notify it of any process will not invalidate the relevant proceedings.
 
(d)                                  This Clause does not affect any other method of service allowed by law.
 
8.3                                Waiver of immunity
 
Each of the Borrowers and the Guarantor irrevocably and unconditionally:
 
(a)                                   agrees not to claim any immunity from proceedings brought by a Creditor against it in relation to a Finance Document and to ensure that no such claim is made on its behalf;
 
(b)                                  consents generally to the giving of any relief or the issue of any process in connection with those proceedings; and
 
(c)                                   waives all rights of immunity in respect of it or its assets.
 
This Agreement has been entered into on the date stated at the beginning of this Agreement.
 
6

 
SCHEDULE 1
￠
THE BANKS AND THEIR COMMITMENTS
￠
Pre-Delivery Facility

NAME OF BANK	 	COMMITMENT	 	
 	 	 	 	
HSH Nordbank AG	 	US$	49,000,000	 	

Post-Delivery Senior Facility

NAME OF BANK	 	COMMITMENT	 	
 	 	 	 	
HSH Nordbank AG	 	US$	20,000,000	 	
 	 	 	 	
Dresdner Bank AG	 	US$	25,000,000	 	
 
Post-Delivery Junior Facility

NAME OF BANK	 	COMMITMENT	 	
 	 	 	 	
HSH Nordbank AG	 	US$	15,000,000	 	

7

 
SCHEDULE 2
￠
RESTATED FINANCIAL AGREEMENT
 
8

 
SCHEDULE 3
￠
AMENDMENTS TO DANAOS GUARANTEE
￠
As of and with effect from the Effective Time the Danaos Guarantee shall be amended as follows:
 
1.                                        The definition of “ Group Vessel ” and “ Group Vessels ” in Schedule 3 to the Danaos Guarantee shall be amended by deleting the words “collectively the Vessels and any other vessels including vessels under construction or owned or, in the case of a vessel under construction, ordered by” and inserting the words “the vessels owned by and registered (or to be owned by and registered) in the name of”;
 
2.                                        The definition of “ Group Vessels Values ” in Schedule 3 to the Danaos Guarantee shall be amended by deleting the words “(which shall consist of the acquisition price for each Group Vessel, all material expense incurred in the acquisition (including the cost of financing) and subsequent expenditures which appreciably extend the life, increase the earning capacity or improve the efficiency or safety of the Group Vessel, less depreciation computed in accordance with the Applicable Accounting Principles)-” and inserting the words “determined in accordance with the Applicable Accounting Principles.”;
 
3.                                        The definition of “ Liquid Funds ” in Schedule 3 to the Danaos Guarantee shall be amended by deleting the word “Encumbrances” in paragraph (a) and inserting the words “Security Interest (other than a Security Interest created under a Bank Credit Agreement)” and deleting the words “rated at least as having an investment grade A1 and is free of any Encumbrances” in paragraph (b) and inserting the words “free of any Security Interest (other than a Security Interest created under a Bank Credit Agreement)”;
 
4.                                        The definition of “ Net Consolidated Indebtedness ” in Schedule 3 to the Danaos Guarantee shall be amended by deleting the words “the amount of” and deleting the words “reduced by an amount of US$5,000,000”;
 
5.                                        The definition of “ Net Worth ” in Schedule 3 to the Danaos Guarantee shall be deleted in its entirety and replaced with the words “means, in respect of the relevant period, the Total Shareholders Equity as defined by the Applicable Accounting Principles”;
 
6.                                        The definition of “ Pro Forma ” in Schedule 3 to the Danaos Guarantee shall be amended by deleting the words “paragraph 3(h)(iii)(2)” and inserting the words “paragraph 3(h)(ii)(1)”;
 
7.                                        The following new definition shall be inserted into Schedule 3 to the Danaos Guarantee:
 
““ Security Interest ” means
 
(a)                                   a mortgage, charge (whether fixed or floating) or pledge, any maritime or other lien or any other security interest of any kind;
 
(b)                                  the rights of the plaintiff under an action in rem in which the asset concerned has been arrested or a writ has been issued or similar step taken; and
 
(c)                                   any arrangement entered into by a person (A) the effect of which is to place another person (B) in a position which is similar, in economic terms, to the position in which B would have been had it 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;”
 
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8.                                        The definition of “ Tangible Fixed Assets ” in Schedule 3 to the Danaos Guarantee shall be amended by deleting the word “Tangible” from the definition and deleting the word “tangible” before the words “fixed assets” and all references to “Tangible Fixed Assets” in Schedule 3 to the Danaos Guarantee will be construed to be references to “Fixed Assets”.
 
9.                                        The definition of “ Total Oustanding Debt ” in Schedule 3 to the Danaos Guarantee shall be deleted in its entirety and replaced with the following and replaced with the words “means, in respect of the relevant period, the aggregate amount of principal due under the Bank Credit Agreements less cash held with banks or other financial institutions and any other short-term investments over which, in each case, a Bank Credit Agreement has created a Security Interest”;
 
10.                                  Clause 3(c)(i) of Schedule 3 to the Danaos Guarantee will be amended by deleting the words “shall be at least” and inserting the words “will always exceed”;
 
11.                                  Clause 3(c)(ii) of Schedule 3 to the Danaos Guarantee will be amended by deleting the value “100,000,000” and inserting the value “250,000,000”;
 
12.                                  Clauses 3(c)(v), (vi) and (vii) of Schedule 3 to the Danaos Guarantee shall be deleted in their entirety;
 
13.                                  Clause 3(h) of Schedule 3 to the Danaos Guarantee shall be amended by inserting the words “, nor permit any Subsidiary to “ after the words “without the Banks’ consent to”;
 
14.                                  Clause 3(h)(i) of Schedule 3 to the Danaos Guarantee shall be deleted in its entirety and replaced by the words “incur additional Financial Indebtedness”;
 
15.                                  Clause 3(h)(ii) and (iii) of Schedule 3 to the Danaos Guarantee shall be deleted in their entirety and the following new Clause 3(h)(ii) shall be inserted:
 
“(ii)                             declare or pay any dividend or other distribution to shareholders
 
unless after the effectuation of the events stated under 3(h)(i) and 3(h)(ii) as the case may be –
 
(1)                               the ratio of EBITDA to the Net Interest Expenses would be at least 2.50 to 1 on a Pro Forma Basis for the period immediately preceding the date thereof for which Financial Statements are available; and
 
(2)                                the Liquid funds of the Group would not be less than US$30,000,000”.
 
16.                                  The following new Clause 3(k) shall be inserted into Schedule 3 to the Danaos Guarantee:
 
“to procure that all the capital stock of the Borrowers is owned directly or indirectly by the Guarantor and that the present shareholders of the Guarantor shall maintain at all times beneficial ownership or control, directly or indirectly, of at least sixty per centum (60%) of each Borrower’s capital stock.”
 
17.                                  The following new Clause 3(l) shall be inserted into Schedule 3 to the Danaos Guarantee:
 
“without limitation to Clause 3(k), not, without the prior written consent of the Security Trustee, to sell, transfer, lend, lease or otherwise dispose of (in any such case otherwise than for full consideration in the ordinary course of trading) any of its shares in any Borrower or the whole or, in the opinion of the Security Trustee, any substantial part of its business, property or assets, whether by a single transaction or by a series of transactions (related or not).”
 
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SCHEDULE 4
￠
CONDITIONS PRECEDENT DOCUMENTS
￠
1.                                        A copy of the constitutional documents of the Borrowers or, if the Security Trustee and the Agent already have a copy, a certificate of an authorised signatory of each of the Borrowers confirming that the copy in the Security Trustee’s and Agent’s possession is still correct, complete and in full force and effect as at a date no earlier than the date of this Agreement.
 
2.                                        A copy of a resolution of the board of directors of each of the Borrowers (or a committee of its board of directors) approving the terms of, and the transactions contemplated by, this Agreement.
 
3.                                        If applicable, a copy of a resolution of the board of directors of each of the Borrowers establishing the committee referred to in paragraph 2 above.
 
4.                                        A certificate of an authorised signatory of each of the Borrowers certifying that each copy document specified in this Schedule is correct, complete and in full force and effect as at a date no earlier than the date of this Agreement.
 
5.                                        A copy of any other authorisation or other document, opinion or assurance which the Security Trustee or the Agent has notified the Borrowers is necessary or desirable in connection with the entry into and performance of, and the transactions contemplated by, this Agreement or for the validity and enforceability of this Agreement.
 
6.                                        A copy of the constitutional documents of the Guarantor or, if the Security Trustee and the Agent already has a copy, a certificate of an authorised signatory of the Guarantor confirming that the copy in the Security Trustee’s and the Agent’s possession is still correct, complete and in full force and effect as at a date no earlier than the date of this Agreement.
 
7.                                        A copy of a resolution of the board of directors of the Guarantor (or a committee of its board of directors) approving the terms of, and the transactions contemplated by, this Agreement.
 
8.                                        If applicable, a copy of a resolution of the board of directors of the Guarantor establishing the committee referred to in paragraph 7 above.
 
9.                                        A certificate of an authorised signatory of the Guarantor certifying that each copy document specified in this Schedule is correct, complete and in full force and effect as at a date no earlier than the date of this Agreement.
 
10.                                  A copy of any other authorisation or other document, opinion or assurance which the Security Trustee or the Agent has notified the Guarantor is necessary or desirable in connection with the entry into and performance of, and the transactions contemplated by, this Agreement or for the validity and enforceability of this Agreement.
 
11.                                  A duly executed original of the Fee Letter.
 
12.                                  Deeds of release and reassignment of the Retention Account Charges.
 
13.                                  A legal opinion of Allen & Overy, English legal advisers to the Security Trustee and the Agent addressed to the Creditors.
 
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14.                                  A legal opinion of Seward & Kissel, Liberian legal advisers to the Security Trustee and the Agent, addressed to the Creditors.
 
15.                                  A duly executed original of a supplemental agreement in relation to the Deeds of Counter-Indemnity between the Sponsor and the Security Trustee.
 
16.                                  A letter from the Guarantor to the Sponsor and Security Trustee consenting to the amendments to each of the Deeds of Counter Indemnity.
 
17.                                  A letter from Lloyds TSB Equipment Leasing (No. 6) Limited to the Sponsor and Security Trustee consenting to the amendments to each of the Deeds of Counter Indemnity.
 
18.                                  Confirmation from the Agent of receipt of the fees described in the Fee Letter together with such amount of costs and expenses incurred by the Creditors (including, without limitations, by way of legal fees) as shall be advised to the Borrowers by the Security Trustee.
 
19.                                  A letter from SH Process Agents Limited agreeing to its appointment as process agent for the Borrower and the Guarantor under the Finance Documents.
 
12

 
Exhibit 10.6
 
SIGNATORIES

Borrowers	 	
 	 	
CONTAINERS SERVICES INC.	 	
 	 	
By:	 [ILLEGIBLE]	 	 	 	

CONTAINERS LINES INC.	 	
 	 	
By:	 [ILLEGIBLE]	 	 	 	

Paying Agent and Security Trustee	 	
 	 	
HSH NORDBANK AG	 	
 	 	
By:	/s/ Oliver Brandt	 	/s/ Gunnar Kordes	 	
 	 	
The Guarantor	 	
 	 	
DANAOS HOLDINGS LIMITED	 	
 	 	
By:	 [ILLEGIBLE]	 	 	 	

The Agent	 	
 	 	
AEGEAN BALTIC BANK S.A,	 	
 	 	
By:	 	

Banks	 	
 	 	
HSH NORDBANK AG	 	
 	 	
By:	/s/ Oliver Brandt	 	/s/ Gunnar Kordes	 	
 	 	
DRESDNER BANK AG	 	
 	 	
By:	 	 	 	 	

13

 
Exhibit 10.7
 
AGREEMENT
 
DATED MAY 13, 2003

US$127,856,000
CREDIT FACILITY
 
FOR
 
OCEANEW SHIPPING LIMITED
OCEANPRIZE NAVIGATION LIMITED
 
WITH
 
THE EXPORT-IMPORT BANK OF KOREA
as Lender

London

 
CONTENTS

Clause	 	 	 	Page	
 	 	 	 	 	
1.	 	Interpretation	 	1	
2.	 	Facility	 	19	
3.	 	Conditions Precedent	 	19	
4.	 	Utilisation	 	20	
5.	 	Repayment	 	21	
6.	 	Prepayment and Cancellation	 	22	
7.	 	Interest	 	25	
8.	 	Terms	 	26	
9.	 	Market Disruption	 	26	
10.	 	Taxes	 	27	
11.	 	Increased Costs	 	29	
12.	 	Earnings, Retention and Operating Expenses Accounts	 	29	
13.	 	Payments	 	32	
14.	 	Representations	 	33	
15.	 	Information Covenants	 	38	
16.	 	General Covenants	 	39	
17.	 	Valuation	 	54	
18.	 	Default	 	55	
19.	 	Evidence and Calculations	 	60	
20.	 	Fees	 	60	
21.	 	Indemnities and Break Costs	 	61	
22.	 	Expenses	 	63	
23.	 	Waiver of Consequential Damages	 	63	
24.	 	Amendments and Waivers	 	63	
25.	 	Changes to the Parties	 	64	
26.	 	Disclosure of Information	 	66	
27.	 	Set-Off	 	67	
28.	 	Severability	 	67	
29.	 	Counterparts	 	67	
30.	 	Notices	 	67	
31.	 	Language	 	69	
32.	 	Governing Law	 	69	
33.	 	Enforcement	 	69	

 

Schedules	 	 	 	 	
 	 	 	 	 	
1.	 	The Borrowers and the Vessels	 	71	
2.	 	Initial Conditions Precedent Documents	 	72	
3.	 	Delivery Date Conditions Precedent Documents	 	75	
4.	 	Form of Request	 	78	
 	 	Part 1	Form of Request	 	78	
 	 	Part 2	Payment Advice	 	80	
5.	 	Form of Transfer Certificate	 	81	
6.	 	Repayment Schedule	 	83	
7.	 	Annual Compliance Certificate	 	86	
8.	 	Incidental Vessel Costs	 	87	

 
THIS AGREEMENT is dated May 13, 2003
 
BETWEEN :
 
(1)            THE COMPANIES listed in Schedule 1, each of which is a company incorporated according to the law of the country indicated against its name in Schedule 1, with registered office at the address indicated against its name in Schedule 1 (each a Borrower and together the Borrowers ); and
 
(2)            THE EXPORT-IMPORT BANK OF KOREA as lender of 16-1 Yoido-dong, Youngdeungpo-gu, Seoul 150-996, Korea (the Lender ).
 
IT IS AGREED as follows:
 
1.              INTERPRETATION
￠
1.1           Definitions
 
In this Agreement:
 
Accounts means together the Earnings Accounts,  the Retention Accounts and the Operating Expenses Accounts.
 
Account Bank means the Royal Bank of Scotland plc of acting through its branch at Akti Miaouli Str G1, Piraeus 185 IC, Greece or any other bank or financial institution with which, with the prior written consent of the Lender, any of the Accounts are at any time held.
 
Affiliate means a Subsidiary or a Holding Company of a person or any other Subsidiary of that Holding Company.
 
Agreement means this credit agreement, including any schedules or appendices hereto, as amended from time to time.
 
Annual Compliance Certificate means the form of certificate attached at Schedule 7.
 
AML Time Charter means, in respect of a Vessel, the time charter entered or to be entered into between the Bareboat Charterer and the relevant Borrower.
 
AML Time Charter Assignments means together the deeds of assignment of the AML Time Charters granted by the relevant Borrower in favour of the Lender together with any and all notices and acknowledgments entered into in connection therewith and AML Time Charter Assignment means either of them.
 
Applicable Law means any or all applicable law (whether civil, criminal or administrative), common law, statute, statutory instrument, treaty, convention, regulation, directive, by-law, demand, decree, ordinance, injunction, resolution, order, judgment, rule, permit, licence or restriction (in each case having the force of law) and codes of practice or conduct, circulars and guidance notes generally accepted and applied by the global container shipping industry, in each case of any government, quasi-government, supranational, federal, state or local government, statutory or regulatory body, court, agency or association relating to all laws, rules, directives and regulations, national or international, public or private in any applicable jurisdiction from time to time.
 
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Approved Valuers means such independent reputable shipbrokers nominated by the Borrowers and approved by the Lender from time to time.
 
Availability Period means, in respect of a Loan, the period from and including the date of this Agreement to and including the Delivery Date of the relevant Vessel.
 
Bareboat Charter means, in respect of a Vessel, the bareboat charter entered or to be entered into between the relevant Owner and the Bareboat Charterer.
 
Bareboat Charterer means Allocean Maritime Container (No.3) Limited, a company incorporated under the laws of England and Wales (registered number 4806608) whose registered office is at Ground Floor, 40 Queen Street, London EC4R 1DD.
 
Break Costs means the amount (if any) which the Lender is entitled to receive under this Agreement as compensation if any part of a Loan or overdue amount is prepaid other than on the last day of a Term for such Loan or overdue amount as determined pursuant to Clause 21.3 hereof.
 
Builder means Samsung Heavy Industries Co. Ltd, a corporation organised and existing under the laws of the Republic of Korea with its registered office at Samsung Yoksam Building, 647-9, Yoksam-Dong, Kangnam-Ku, Seoul, Korea.
 
Business Day means a day (other than a Saturday or a Sunday) on which banks are open for general business in London, England, New York, United States of America, Seoul, Korea and Athens, Greece.
 
Charter Assignment Agreements means together each of the deeds of assignment entered or to be entered into between the Bareboat Charterer and the relevant Owner together with any and all notices and acknowledgments entered into in connection therewith and Charter Assignment Agreement means either of them.
 
Charterer means China Shipping (Group) Company or any substitute charterer from time to time in accordance with the provisions of Clause 16.25.
 
Confidentiality Undertaking means a confidentiality undertaking in a form agreed between the relevant Borrower and the Lender.
 
Contract Price means in respect of either Vessel, the lower of (i) the amount specified in Article II Clause 1 of the Shipbuilding Contract for that Vessel as the contract price as at the date of that Shipbuilding Contract without adjustment and (ii) the total amount actually paid to the Builder by the relevant Owner under that Shipbuilding Contract.
 
Danaos means Danaos Holdings Limited of 80 Broad Street, Monrovia, Liberia.
 
Danaos Group means Danaos and its Subsidiaries.
 
Date of Total Loss means, in respect of a Vessel, the date of Total Loss of that Vessel which date shall be deemed to have occurred:
 
(a)            in the case of an actual total loss, on the actual date and at the time that Vessel was lost or, if such date is not known, on the date on which that Vessel was last reported;
 
2

 
(b)            in the case of a constructive total loss, upon the date and at the time notice of abandonment is given to the Insurers for the time being (provided a claim for total loss is admitted by such Insurers) or, if such Insurers do not forthwith admit such a claim, at the date and at the time at which either a total loss is subsequently admitted by the Insurers or a total loss is subsequently adjudged by a competent court of law or arbitration tribunal to have occurred;
 
(c)            in the case of a compromised, agreed or arranged total loss, on the date upon which a binding agreement as to such compromised, agreed or arranged total loss has been entered into by the Insurers;
 
(d)            in the case of requisition for title or other compulsory acquisition, on the date upon which the relevant requisition for title or other compulsory acquisition occurs; and
 
(e)            in the case of capture, seizure, arrest, detention, requisition for hire or confiscation by any government or by persons acting or purporting to act on behalf of any government which deprives the Borrower or, as the case may be, the Charterer of the use of that Vessel for more than 60 days, upon the expiry of the period of 60 days after the date upon which the relevant capture, seizure, arrest, detention, requisition or confiscation occurred.
 
Debt Service Reserve Account means a bank account opened or to be opened in the name of a Borrower with the Account Bank and designated “ Name of Borrower ” – Debt Service Reserve Account.
 
Debt Service Reserve Account Charges means  a fixed charge in respect of all monies standing to the credit from time to time of a Debt Service Reserve Account to be entered into by a Borrower in a form and substance satisfactory to the Lender together with any and all notices and acknowledgements entered into in connection therewith.
 
Declarations of Trust means together each of the declarations of trust made by the relevant Owner in favour of the relevant Partnership conferring upon the relevant Partnership a beneficial interest in the relevant Vessel and all other assets of the relevant Owner and Declaration of Trust means either of them.
 
Deeds of Counter-Indemnity means together each of the deeds of counter-indemnity granted by the Sponsor in favour of the Lender and Deed of Counter-Indemnity means either of them.
 
Default means:
 
(a)            an Event of Default; or
 
(b)            an event which would be (with the expiry of a grace period, the giving of notice or the making of any determination under the Finance Documents or any combination of them) an Event of Default.
 
Delivery Date means, in respect of a Vessel, the date of actual delivery of that Vessel to the relevant Owner under the terms of  the relevant Shipbuilding Contract.
 
Delivery Date Instalment means, in respect of a Vessel, the amount due and payable by the relevant Owner in accordance with the Shipbuilding Contract relating to that Vessel on or one (1) Business Day prior to the relevant Delivery Date under that Shipbuilding Contract.
 
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Deposit Accounts means together the Oceanew Deposit Account and the Oceanprize Deposit Account and Deposit Account means either of them.
 
Deposit Bank means the Royal Bank of Scotland plc of 135 Bishopsgate, London, EC3M 3LR.
 
Dollars or US$ means the lawful currency for the time being of the United States of America.
 
Drawing means, in respect of a Loan under the Facility, the amount of each advance made by the Lender.
 
Earnings means, in respect of a Vessel, all present and future moneys and claims which are earned by or become payable to or for the account of the relevant Borrower in connection with the operation of that Vessel and including but not limited to:
 
(a)            freights, passage and hire moneys (howsoever earned);
 
(b)            remuneration for salvage and towage services;
 
(c)            demurrage and detention moneys;
 
(d)            all moneys and claims in respect of the requisition for hire of that Vessel; or
 
(e)            payments received in respect of off-hire insurance.
 
Earnings Accounts means together the two bank accounts one to be opened by each of the Borrowers with the Account Bank and designated “ name of Borrower ” – Earnings Account and Earnings Account means either of them.
 
Earnings Account Charges means together the two charges each in respect of all monies standing to the credit from time to time of one of the Earnings Accounts, one entered into by each of the Borrowers together with any and all notices and acknowledgements entered into in connection therewith and Earnings Account Charge means either of them.
 
Environment means:
 
(a)            any land including, without limitation, surface land and sub-surface strata, sea bed or river bed under any water (as referred to below) and any natural or man-made structures;
 
(b)            water including, without limitation, coastal and inland waters, surface waters, ground waters and water in drains and sewers; and
 
(c)            air including, without limitation, air within buildings and other natural or man-made structures above or below ground.
 
Environmental Affiliate means each Borrower, each Owner, the Bareboat Charterer, Danaos and the Manager together with their respective employees and, during the Post-Delivery Period in respect of any activities undertaken in relation to either of the Vessels by persons for whom they are responsible under any Applicable Law.
 
Environmental Approvals means any permit, licence, approval, ruling, variance, exemption or other authorisation required under applicable Environmental Laws.
 
4

 
Environmental Claim means any claim by any person or persons or any governmental, judicial or regulatory authority which arises out of any breach, contravention or violation of Environmental Law or of the existence of any liability or potential liability arising from such breach, contravention or violation or the presence of Hazardous Material in contravention of Environmental Laws.  In this context, 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 by any governmental, judicial or regulatory authority, and any form of enforcement or regulatory action.
 
Environmental Laws means any or all Applicable Law relating to or concerning:
 
(a)            pollution or contamination of the Environment, any ecological system or any living organisms which inhabit the Environment or any ecological system;
 
(b)            the generation, manufacture, processing, distribution, use (including abuse), treatment, storage, disposal, transport or handling of Hazardous Materials; and
 
(c)            the emission, leak, release, spill or discharge into the Environment of noise, vibration, dust, fumes, gas, odours, smoke, steam effluvia, heat, light, radiation (of any kind), infection, electricity or any Hazardous Material and any matter or thing capable of constituting a nuisance or an actionable tort or breach of statutory duty of any kind in respect of such matters,
 
including, without limitation, the following laws of the United States of America: the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, the Hazardous Materials Transportation Act, as amended, the Oil Pollution Act of 1990, as amended, the Resource Conservation and Recovery Act, as amended, and the Toxic Substances Control Act, as amended, together, in each case, with the regulations promulgated and the guidance issued pursuant thereto.
 
Equity Contribution means, in respect of a Vessel, an amount equal to US$15,982,000 to be contributed by the Borrower towards the cost of acquiring that Vessel.
 
Equity Contribution Side Letter means the letter setting out the manner in which adjustments to the Equity Contribution shall be dealt with.
 
Event of Default means an event specified as such in Clause 18 of this Agreement.
 
Excess Risks means, in respect of a Vessel:
 
(a)            the proportion of claims for general average, salvage and salvage charges which are not recoverable as a result of the value at which that Vessel is assessed for the purpose of such claims exceeding her hull and machinery insured value; and
 
(b)            collision liabilities not recoverable in full under the hull and machinery insurance by reason of those liabilities exceeding such proportion of the insured value of that Vessel as is covered by the hull and machinery insurance.
 
Exposure Fee means the fee payable by each Borrower pursuant to Clause 20.1.
 
Facility means the credit facility made available under this Agreement.
 
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Facility Office means the office through which the Lender will perform its obligations under this Agreement from time to time, which, as at the date of this Agreement, is Seoul, Korea.
 
Final Maturity Date means, in respect of a Loan, the day which is the twelfth anniversary of the Delivery Date of the Vessel to which that Loan relates.
 
Finance Document means:
 
(a)            this Agreement;
 
(b)            a Security Document;
 
(c)            the Manager’s Undertaking;
 
(d)            the Supplemental Agreement;
 
(e)            the Intercreditor Deed;
 
(f)             the Multipartite Deed;
 
(g)            the Second Deposit Charge Side Letter;
 
(h)            a Transfer Certificate; and
 
(i)             any other document designated as such by the Lender and the Borrowers.
 
Financial Indebtedness means any indebtedness for or in respect of:
 
(a)            moneys borrowed;
 
(b)            any acceptance credit;
 
(c)            any bond, note, debenture, loan stock or other similar instrument;
 
(d)            any redeemable preference share;
 
(e)            any finance or capital lease;
 
(f)             receivables sold or discounted (otherwise than on a non-recourse basis);
 
(g)            the acquisition cost of any asset to the extent payable after its acquisition or possession by the party liable where the deferred payment is arranged primarily as a method of raising finance or financing the acquisition of that asset;
 
(h)            any derivative transaction protecting against or benefiting from fluctuations in any rate or price (and, except for non-payment of an amount, the then mark to market value of the derivative transaction will be used to calculate its amount);
 
(i)             any other transaction (including any forward sale or purchase agreement) which has the commercial effect of a borrowing;
 
(j)             any counter-indemnity obligation in respect of any guarantee, indemnity, bond, letter of credit or any other instrument issued by a bank or financial institution; or
 
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(k)            any guarantee, indemnity or similar assurance against financial loss of any person.
 
First Priority Deposit Account Charge means each of the first priority deposit agreement and deposit charge granted by the relevant Borrower in respect of the relevant Deposit Account.
 
First Required Amount means, in respect of a Vessel, that amount which from the Delivery Date of that Vessel until the last day of the second year after the Delivery Date of that Vessel is 110 per cent. of the aggregate of the outstanding Loan relating to that Vessel.
 
Forex Guarantee means the guarantee and indemnity granted by Danaos in favour of the Lender in respect of the Forex Obligations of each of the Borrowers.
 
Forex Obligations means, in respect of a Borrower, the obligations of that Borrower pursuant to Clause 2.3 of the relevant Second Priority Deposit Account Charge.
 
General Assignments means together each of the assignments entered or to be entered into by the relevant Partnership (acting by its General Partner), the relevant Owner and the Lender in respect of the Assigned Property (as such term is defined therein) together with any and all notices and acknowledgments entered into in connection therewith and General Assignment means either of them.
 
General Partner means Allco Finance Limited.
 
Hazardous Material means any element or substance, whether natural or artificial, and whether consisting of gas, liquid, solid or vapour, whether on its own or in any combination with any other element or substance, which is listed, identified, defined or determined by any Environmental Law or other Applicable Law to be, to have been, or to be capable of being or becoming harmful to mankind or any living organism or damaging to the Environment, including, without limitation, oil (as defined in the United States Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended).
 
Holding Company means a holding company within the meaning of section 736 of the Companies Act 1985.
 
Incidental Costs means, in respect of a Vessel, the Incidental Vessel Costs and the Incidental Loan Costs.
 
Incidental Loan Costs means, in respect of a Vessel, the exposure fee payable in accordance with Clause 20.1, the commitment fee payable in accordance with Clause 20.2, the management fee payable in accordance with Clause 20.3, and interest calculated and payable in accordance with Clause 7.1(a).
 
Incidental Vessel Costs means, in respect of a Vessel, costs paid or in respect of costs arising or to be paid after the Delivery Date, to be paid in connection with that Vessel in excess of the Contract Price, in respect of those items detailed in Schedule 8 for which supporting invoices or receipts have been provided to the Lender or, in respect of costs to be paid after the Delivery Date, pro-forma invoices, and which are, in respect of each item, in an aggregate amount not exceeding the amount detailed against that item in Schedule 8.
 
Increased Cost means:
 
(a)            an additional or increased cost;
 
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(b)            a reduction in the rate of return under a Finance Document or on its overall capital; or
 
(c)            a reduction of an amount due and payable under any Finance Document,
 
which is incurred or suffered by the Lender or any of its Subsidiaries but only to the extent attributable to the Lender having entered into any Finance Document or funding or performing its obligations under any Finance Document.
 
Instalment means in respect of each Shipbuilding Contract an amount due and payable by the relevant Owner under the terms of that Shipbuilding Contract.
 
Insurers means the underwriters or insurance companies with whom any Obligatory Insurances are effected and the managers of any protection and indemnity or war risks association in which either of the Vessels may at any time be entered.
 
Intercreditor Deed means the deed entered into or to be entered into between the Investor, Danaos and the Lender.
 
Investor means Lloyds TSB Equipment Leasing (No.6) Limited, company number 04440302, whose registered office is at 25 Gresham Street, London EC2V 7HN.
 
ISM Code means the International Safety Management Code (including the guidelines on its implementation), adopted by the International Maritime Organization Assembly as Resolutions A.741(18) and A.788(19), as the same may have been or may be amended or supplemented from time to time.  The terms “safety management system”, “Safety Management Certificate”, “Document of Compliance” and “major non-conformity” shall have the same meanings as are given to them in the ISM Code.
 
ISPS Code means the International Ship and Port Facility Security Code adopted by the International Maritime Organization Assembly as the same may have been or may be amended or supplemented from time to time.
 
Korea means the Republic of Korea.
 
L/C Bank means the Royal Bank of Scotland plc of 135 Bishopsgate, London EC3M 3UR.
 
Letter of Credit means the letter of credit provided by the L/C Bank to the Investor.
 
LIBOR means for a Term of any Loan or overdue amount:
 
(a)            the applicable Screen Rate; or
 
(b)            if no Screen Rate is available for the relevant currency or Term of that Loan or overdue amount, the arithmetic mean (rounded upward to four decimal places) of the rates, as supplied to the Lender at its request, quoted by the Reference Bank to leading banks in the London interbank market,
 
as of 11.00 a.m. on the second London Business Day before the start of the Term for the offering of deposits in the currency of that Loan or overdue amount for a period comparable to that Term.
 
Loans means together Vessel Loan 1 and Vessel Loan 2 (each a Loan ).
 
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London Business Day means a day (other than a Saturday or a Sunday) on which banks are open for business in London.
 
Losses means each and every liability, loss, charge, claim, demand, action, proceeding, damage, judgment, order or other sanction, enforcement, penalty, fine, fee, commission, interest, lien, salvage, general average, cost and expense of whatsoever nature suffered or incurred by or imposed on the Lender.
 
Manager means Allocean Maritime Limited having its registered office at Ground Floor, 40 Queen Street, London EC4R 1DD, a company incorporated according to the laws of England and Wales or such other professional manager or managers as may be approved by the Lender from time to time.
 
Manager’s Undertaking means a letter of undertaking to be issued by the Manager to the Lender confirming it shall not make a claim to security ranking ahead of the Lender’s security in respect of a Vessel in form and substance satisfactory to the Lender.
 
Material Adverse Effect means a material adverse effect on:
 
(a)            the business, condition (financial or otherwise) or operations of any of the Borrowers;
 
(b)            the ability of any Borrower to perform its obligations under any Finance Document; or
 
(c)            the validity or enforceability of any Finance Document.
 
Maximum Available Loan Amount means, in respect of a Vessel, sixty-three million nine hundred and twenty eight thousand dollars (US$63,928,000).
 
Maximum Facility Amount means one hundred and twenty seven million eight hundred and fifty six thousand Dollars (US$127,856,000,000).
 
Mortgage means, in respect of a Vessel, the first priority Republic of Cyprus ship mortgage and deed of covenant collateral thereto to be given by the relevant Owner of that Vessel in favour of the Lender on the Delivery Date.
 
Multipartite Deeds means together each of the deeds entered or to be entered between the Lender, the relevant Borrower, the L/C Bank and the Deposit Bank and Multipartite Deed means either of them.
 
Novation Agreement means, in respect of a Vessel, the agreement dated             March 2004 entered into by the relevant Borrower, the relevant Owner and the Builder whereby the parties agreed that the relevant Vessel would be delivered to the relevant Owner.
 
Obligatory Insurances means in respect of each Vessel:
 
(a)            all contracts and policies of insurance and all entries in clubs and/or associations which are from time to time required to be effected and maintained in accordance with this Agreement in respect of each of the Vessels; and
 
(b)            all benefits under the contracts, policies and entries under paragraph (a) above and all claims in respect of them and the return of premiums.
 
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Oceanew means Oceanew Shipping Limited.
 
Oceanew Deposit Account means the account held with the Deposit Bank, designated “OCEASHIP GBP” with account number 98091818 in the name of  Oceanew.
 
Oceanew Second Priority Deposit Account Charge ” means the second priority charge granted by Oceanew in favour of the Lender in respect of the Oceanew Deposit Account in form and substance satisfactory to the Lender in its absolute discretion.
 
Oceanprize means Oceanprize Navigation Limited.
 
Oceanprize Deposit Account” means the account held with the Deposit Bank, designated “OCEANAVI GBP” with account number 98091850 in the name of the Oceanprize.
 
Oceanprize Second Priority Deposit Account Charge ” means the second priority charge granted by Oceanprize in favour of the Lender in respect of the Oceanprize Deposit Account in form and substance satisfactory to the Lender in its absolute discretion.
 
Operating Expenses means, in respect of a Vessel, expenses properly and reasonably incurred by the Borrower of that Vessel in connection with the operation, employment, maintenance, repair and insurance of that Vessel (whether by way of payment of the operating expenses element of charterhire under the relevant AML Time Charter or otherwise).
 
Operating Expenses Accounts means together the two bank accounts one to be opened by each of the Borrowers with the Account Bank and designated “ Name of Borrower ” – Operating Expenses Account and Operating Expenses Account means either of them.
 
Operating Expenses Account Charges means together the two charges each in respect of all monies standing to the credit from time to time of one of the Operating Expenses Accounts one to be entered into by each of the Borrowers together with any and all notices and acknowledgements entered into in connection therewith and Operating Expenses Account Charge means either of them.
 
Original Financial Statements means the audited financial statements of Danaos for the year ended 2001.
 
Owners means each of Ocean Container (No.1) Limited and Ocean Container (No.2) Limited and Owner means either of them.
 
Owners Pledges of Shares means together the two pledges each in respect of the issued share capital of an Owner to be granted by the relevant Partnership acting by the General Partner in favour of the Lender and Owners Pledge of Shares means either of them.
 
Partnerships means together each of the Ocean Container (No.1) Limited Partnership, and the Ocean Container (No.2) Limited Partnership each a limited partnership in England under the Limited Partnerships Act 1907 whose principal place of business is at 5th Floor, 40 Queen Street, London EC4R 1DD acting by the General Partner and Partnership means either of them.
 
Party means a party to this Agreement or any Finance Document or any Related Contract.
 
Permitted Liens means, in respect of a Vessel:
 
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(a)            Security Interests created by the Security Documents;
 
(b)            Security Interests created by the Second Security Documents and the Third Security Documents (as each such term is defined under the Intercreditor Deed);
 
(c)            liens for unpaid crew’s wages including wages of the master and stevedores employed by the Vessel, outstanding in the ordinary course of trading for not more than one calendar month after the due date for payment;
 
(d)            liens for salvage;
 
(e)            liens for classification or scheduled dry docking or for necessary repairs to that Vessel whose aggregate cost does not exceed US$3,000,000 at any one time in respect of that Vessel;
 
(f)             liens for collision,
 
(g)            liens for master’s disbursements incurred in the ordinary course of trading, and
 
(h)            statutory and common law liens of carriers, warehousemen, mechanics, suppliers, materials men, repairers or other similar liens, including maritime liens, in each case arising in the ordinary course of business, outstanding for not more than one month whose aggregate value does not exceed US$500,000,
 
in the case of paragraphs (b) to (g) inclusive provided that the amounts which give rise to such liens are paid when due or, if not paid when due are being disputed in good faith by appropriate proceedings (and for the payment of which adequate reserves or security are at the relevant time maintained or provided), provided further that such proceedings, whether by payment of adequate security into Court or otherwise, do not give rise to a material risk of the relevant Vessel or any interest therein being seized, sold, forfeited or otherwise lost or of criminal liability on the Lender.
 
Pledges of Shares means together the two pledges each in respect of the issued share capital of a Borrower to be granted by Bayard Maritime Limited in respect of Oceanprize and Erato Navigation Inc. in respect of Oceanew in favour of the Lender and Pledge of Shares means either of them.
 
Post-Delivery Interest Rate means 4.64 per cent. per annum.
 
Post-Delivery Period means, in respect of a Vessel, the period from the Delivery Date of that Vessel until the Final Maturity Date of the Loan which relates to that Vessel.
 
Pre-delivery Margin means 0.8 per cent. per annum.
 
Pre-delivery Period means, in respect of a Vessel, the period from the date of the first Drawing under this Agreement in respect of the Loan relating to that Vessel, to the Delivery Date of that Vessel.
 
Proceeds means:
 
(i)             any Final Disposition Proceeds;
 
(ii)            any Total Loss Proceeds;
 
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(iii)           any and all other proceeds of enforcement of, or moneys otherwise payable to the Lender under the Security Documents;
 
(iv)           any moneys received by the Lender from any chartering of the Vessel by the Lender (after the termination of the chartering of the Vessel pursuant to Clause 34.2 of the Bareboat Charter) prior to the Final Disposition thereof;
 
(v)            all other moneys which by the terms of any Transaction Document (other than the Intercreditor Deed) or any Other Transaction Documents are expressed to be payable to the Lender or the Proceeds Account for application pursuant to the Intercreditor Deed;
 
where each capitalised terms used above shall have the meaning given to that term in the relevant Intercreditor Deed.
 
Put Option Agreements means each of the put option agreements entered or to be entered into between the Sponsor and the Investor under which the Investor may, in certain circumstances, require the Sponsor  to purchase (on a limited recourse basis) its interest in the relevant Partnership and Put Option Agreement means either of them.
 
Quarter Day means each of 15th March, 15th June, 15th September or 15th December in each year provided always that such date is a Business Day.
 
Reference Bank means KEXIM Bank (UK) Limited.
 
Refund Guarantee means, in respect of a Vessel, the refund guarantee issued by the Refund Guarantor in favour of the Relevant Owner dated March 2004 or such other refund guarantee as may replace the same from time to time (with the approval of the Lender).
 
Refund Guarantor means The Export-Import Bank of Korea, Seoul, Korea.
 
Related Contracts means any or all of the following (as the context requires):
 
(a)            the Refund Guarantees;
 
(b)            the Shipbuilding Contracts;
 
(c)            the Novation Agreements;
 
(d)            the Bareboat Charters;
 
(e)            the AML Time Charters;
 
(f)             the Time Charters;
 
(g)            the Charterer’s Assignments;
 
(h)            the Declarations of Trust;
 
(i)             the Letters of Credit;
 
(j)             the First Priority Deposit Charges; and
 
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(k)            the Vessel Management Agreements.
 
Release means an emission, spill, release or discharge into or upon the air, surface water, groundwater, or soils of any Hazardous Materials for which any of the Environmental Affiliates has any liability under Environmental Law, except in accordance with a valid Environmental Approval.
 
Repayment Date means, in respect of a Loan, each of the forty eight (48) dates which fall on the Quarter Days as detailed in the Repayment Schedule.  In the event that the Delivery Date of a Vessel to which a Loan relates is a Quarter Day, the first repayment date in respect of that Loan shall be the next Quarter Day.  If the Delivery Date of a Vessel to which a Loan relates falls on any day other than a Quarter Day, the first repayment date of that Loan shall be the second Quarter Day after the Delivery Date of the Vessel to which that Loan relates.  In any event, the final Repayment Date shall fall on the Final Maturity Date.
 
Repayment Instalment means, in respect of a Loan, each instalment for repayment of that Loan in accordance with the relevant Repayment Schedule.
 
Repayment Schedule means the schedule of Repayment Dates as detailed in Schedule 6 (Repayment Schedule), to be replaced as required in accordance with Clause 5.1(b).
 
Request means a request made by a Borrower for a Drawing, substantially in the form of  Schedule 4 (Form of Request).
 
Required Amount means, as the context may require, the relevant First Required Amount, Second Required Amount or Third Required Amount.
 
Required Insurance Amount means, in respect of a Vessel, 120 per cent. of the aggregate of the outstanding Loan relating to that Vessel.
 
Requisition Compensation means, in respect of a Vessel, all moneys or other compensation payable by reason of requisition for title to, or other compulsory acquisition of, that Vessel including requisition for hire.
 
Retention Accounts means together the two bank accounts one to be opened by each of the Borrowers with the Account Bank and designated [“ name of Borrower ”] – Retention Account and Retention Account means either of them.
 
Retention Account Charges means together the two fixed charges each in respect of all monies standing to the credit from time to time of one of the Retention Accounts granted or to be granted by each of the Borrowers in favour of the Lender together with any and all notices and acknowledgements entered into in connection therewith and Retention Account Charge means either of them .
 
Retention Period means, in respect of a Loan, each period commencing, in the case of the first such period, on the Delivery Date of the Vessel to which that Loan relates and, in the case of each other such period, on a Repayment Date and ending on the next Repayment Date during the Post-Delivery Period or, in the case of the final such period, the Final Maturity Date.
 
Screen Rate means, for LIBOR, the British Bankers Association Interest Settlement Rate (if any) and in respect of a Term, the percentage rate per annum for a period substantially the same as the relevant Term displayed on page 3750 of the Telerate screen.  If the relevant page
 
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is replaced or the service ceases to be available, the Lender may specify another page or service displaying the appropriate rate.
 
Second Deposit Charges means together the Oceanew Second Priority Deposit Account Charge and the Oceanprize Deposit Account Charge.
 
Second Deposit Charge Side Letter means the side letter provided by the General Partner to the Lender confirming its obligations in respect of the Second Deposit Charges.
 
Second Required Amount means, in respect of a Vessel, that amount which from the  first day of the third year after the Delivery Date of that Vessel until the last day of the fourth year after the Delivery Date of that Vessel is 120 per cent. of the aggregate of the outstanding Loan relating to that Vessel.
 
Secured Liabilities means all present and future obligations and liabilities (actual or contingent) of the Borrowers to the Lender under or in connection with any Finance Document.
 
Security Agreements means:
 
(i)             the Mortgages;
 
(ii)            the Pledges of Shares;
 
(iii)           the Owners Pledges of Shares;
 
(iv)           the Time Charter and Earnings Assignments;
 
(v)            the Forex Guarantee;
 
(vi)           the General Assignments;
 
(vii)          the Second Priority Deposit Account Charges;
 
(viii)         the Deeds of Counter-Indemnity;
 
(ix)            the Support Letter;
 
(x)             the Earnings Account Charges;
 
(xi)            the Debt Service Reserve Account Charges;
 
(xii)           the Retention Account Charges;
 
(xiii)          the Operating Expenses Account Charges;
 
(xiv)         the AML Time Charter Assignments;
 
(xv)          the Standby Letter of Credit; and
 
(xvi)         any other document designated as such in writing by the Borrowers and the Lender.
 
Security Assets means any asset which is the subject of a Security Interest created by a Security Document.
 
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Security Document means:
 
(a)            each Security Agreement; and
 
(b)            any other document evidencing or creating security over any asset of a Borrower to secure any obligation of a Borrower to the Lender under the Finance Documents.
 
Security Interest means any mortgage, pledge, lien, charge, assignment, hypothecation or security interest or any other agreement or arrangement having a similar effect.
 
Shipbuilding Contract means, in respect of a Vessel, the agreement between the Builder and Seaspan (Cyprus) Limited dated 25th December, 2002 and which has been assigned to, and the obligations of which have been assumed by the relevant Borrower pursuant to an assignment agreement dated 23rd January, 2004 made between Seaspan (Cyprus) Limited and the relevant Borrower which assignment has been acknowledged by the Builder by its countersignature of the notice of assignment dated 11th May, 2003 pursuant to which the Builder agreed to build and deliver that Vessel to the relevant Borrower and which has been novated to the relevant Owner by the Novation Agreement.
 
Sponsor means Allco Finance (UK) Limited, a company registered in England & Wales with company number 02818852 whose registered office is at 5th Floor, 40 Queen Street, London, EC4R 1DD.
 
Standby L/C Bank means the Royal Bank of Scotland plc acting through its branch at Akti Miaouli Stre. G1, Piraeus, Greece or such other bank as shall be acceptable to the Lender from time to time.
 
Standby Letter of Credit means the letter of credit to the value of US$1,400,000 to be issued to the Lender by the Standby L/C Bank on the Delivery Date, or such other letter of credit issued by the Standby L/C Bank to the Lender in form and substance satisfactory to the Lender from time to time.
 
Subsidiary means:
 
(a)            a subsidiary within the meaning of section 736 of the Companies Act 1985; and
 
(b)            unless the context otherwise requires, a subsidiary undertaking within the meaning of section 258 of the Companies Act 1985.
 
Supplemental Agreement means the agreement dated March 2004 entered into between the parties hereto.
 
Support Letter means the letter of support to be granted by Danaos in favour of the Lender.
 
Tax means any tax, levy, impost, duty or other charge or withholding of a similar nature (including, without limitation, any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same).
 
Tax Deduction means a deduction or withholding for or on account of Tax made from a payment under a Finance Document by a payer for or on account of Tax imposed on that payer by any jurisdiction from which such payment is made or within which such payment arises.
 
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Tax Payment means a payment made by a Borrower to the Lender in any way relating to a Tax Deduction or under any indemnity given by that Borrower in respect of Tax under any Finance Document.
 
Term means each period determined under this Agreement by reference to which interest payable on a Loan or, as the case may be, a Drawing under a Loan, or an overdue amount is calculated.
 
Third Required Amount means, in respect of a Vessel, that amount which from the first day of the fifth year after the Delivery Date of that Vessel until the Final Maturity Date is 130 per cent. of the aggregate of the outstanding Loan relating to that Vessel.
 
Time Charter means, in respect of a Vessel, the time charterparty dated 25th December, 2002 entered into by Seaspan (Cyprus) Limited or its nominee and the Charterer which has been assigned to, and the obligations of which have been assumed by the relevant Borrower pursuant to an assignment agreement dated 4th February, 2003 made between Seaspan (Cyprus) Limited and the relevant Borrower (the Time Charter Assignment) which assignment has been acknowledged by the Charterer by its countersignature of the notice of assignment dated 28th March, 2003 (the Time Charter Assignment Notice ) or such other time charterparty entered into from time to time in connection with this Agreement.
 
Time Charter and Earnings Assignment means, in respect of a Vessel, the assignment of the Time Charter and the Earnings granted or to be granted by the Borrower in respect of that Vessel in favour of the Lender together with any and all notices and acknowledgements entered into in connection therewith.
 
Total Loss means in relation to a Vessel:
 
(a)            actual, constructive, compromised, agreed or arranged total loss of that Vessel;
 
(b)            requisition for title or other compulsory acquisition of that Vessel otherwise than by requisition for hire;
 
(c)            capture, seizure, arrest, detention, or confiscation of that Vessel by any government or by persons acting or purporting to act on behalf of any government which deprives the Borrower or as the case may be the Charterer of the use of that Vessel for more than 30 days after that occurrence; and
 
(d)            requisition for hire of that Vessel by any government or by persons acting or purporting to act on behalf of any government which deprives the Borrower or as the case may be the Charterer of the use of that Vessel for a period of 60 days, other than a charter of the Vessel to a government or government agency approved by the relevant Borrower and by the Lender.
 
Transfer Certificate means the form of certificate attached at Schedule 5.
 
Utilisation Date means each date on which the Facility or any part thereof is utilised.
 
Vessel 1 means the 8,100 TEU vessel to be constructed in accordance with the relevant Shipbuilding Contract with Hull Number 1489.
 
Vessel 2 means the 8,100 TEU vessel to be constructed in accordance with the relevant Shipbuilding Contract with Hull Number 1490.
 
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Vessels means together Vessel 1 and Vessel 2, being the Vessels detailed in Schedule 1 and Vessel means either of them.
 
Vessel Cost means, in respect of each Vessel the total of (i) the Contract Price and (ii) the Incidental Costs, such amount not to exceed US$79,910,000.
 
Vessel Loan 1 means such part of the Facility as is drawndown in respect of the acquisition of Vessel 1 and is in the maximum principal amount of the lesser of:
 
(i)             80 per cent. of the Vessel Cost of Vessel 1, and
 
(ii)            when aggregated with Vessel Loan 2, the Maximum Facility Amount,
 
or the principal amount thereof from time to time outstanding under this Agreement.
 
Vessel Loan 2 means such part of the Facility as is drawndown in respect of the acquisition of Vessel 2 and is in the maximum principal amount of the lesser of:
 
(i)             80 per cent. of the Vessel Cost of Vessel 2; and
 
(ii)            when aggregated with Vessel Loan 1, the Maximum Facility Amount.
 
or the principal amount thereof from time to time outstanding under this Agreement.
 
Vessel Management Agreement means, in respect of a Vessel, the management agreement entered into or to be entered into between, the Manager and the Bareboat Charterer.
 
1.2           Construction
 
(a)            In this Agreement, unless the contrary intention appears, a reference to:
 
(i)             an amendment includes a supplement, novation, restatement or re-enactment and amended will be construed accordingly;
 
assets includes present and future properties, revenues and rights of every description;
 
an authorisation includes an authorisation, consent, approval, resolution, licence, exemption, filing, registration or notarisation;
 
disposal means a sale, transfer, grant, lease or other disposal, whether voluntary or involuntary, and dispose will be construed accordingly;
 
indebtedness includes any obligation (whether incurred as principal or as surety) for the payment or repayment of money;
 
a person includes any individual, company, corporation, unincorporated association or body (including a partnership, trust, joint venture or consortium), government, state, agency, organisation or other entity whether or not having separate legal personality and their successors in title, permitted assigns and permitted transferees;
 
a regulation includes any regulation, rule, official directive, request or guideline (whether or not having the force of law but, if not having the force of law, being of a
 
17

 
type with which any person to which it applies is accustomed to comply) of any governmental, inter-governmental or supranational body, agency, department or regulatory, self-regulatory or other authority or organisation;
 
(ii)            a currency is a reference to the lawful currency for the time being of the relevant country;
 
(iii)           a Default being outstanding means that it has not been cured, remedied or waived;
 
(iv)           a provision of law is a reference to that provision as extended, applied, amended or re-enacted and includes any subordinate legislation;
 
(v)            a Clause, a Subclause or a Schedule is a reference to a clause or subclause of, or a schedule to, this Agreement;
 
(vi)           a Finance Document or another document is a reference to that Finance Document or other document as amended; and
 
(vii)          a time of day is a reference to London time.
 
(b)            Unless the contrary intention appears, a reference to a month or months is a reference to a period starting on one day in a calendar month and ending on the numerically corresponding day in the next calendar month or the calendar month in which it is to end, except that:
 
(i)             if the numerically corresponding day is not a Business Day, the period will end on the next Business Day in that month (if there is one) or the preceding Business Day (if there is not);
 
(ii)            if there is no numerically corresponding day in that month, that period will end on the last Business Day in that month; and
 
(iii)           notwithstanding sub-paragraph (i) above, a period which commences on the last Business Day of a month will end on the last Business Day in the next month or the calendar month in which it is to end, as appropriate.
 
(c)            Unless expressly provided to the contrary in a Finance Document, a person who is not a party to a Finance Document may not enforce any of its terms under the Contracts (Rights of Third Parties) Act 1999 and notwithstanding any term of any Finance Document, the consent of any third party is not required for any variation (including any release or compromise of any liability) or termination of that Finance Document.
 
(d)            Unless the contrary intention appears or unless the context otherwise permits:
 
(i)             a reference to a Party will not include that Party if it has ceased to be a Party under this Agreement;
 
(ii)            a word or expression used in any other Finance Document or in any notice given in connection with any Finance Document has the same meaning in that Finance Document or notice as in this Agreement; and
 
(iii)           any obligation of a Borrower under the Finance Documents which is not a payment obligation remains in force in accordance with its terms for so long as any payment obligation of a Borrower is or may be outstanding under the Finance Documents.
 
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(e)            Joint and several liability
 
(i)             All obligations, covenants, representations, warranties and undertakings in or pursuant to the Finance Documents assumed, given, made or entered into by the Borrowers shall, unless otherwise expressly provided, be assumed, given, made or entered into by the Borrowers jointly and severally.
 
(ii)            Each of the Borrowers agrees that any rights which it may have at any time during the term of the Facility by reason of the performance of its obligations under the Finance Documents to be indemnified by the other Borrower and/or to take the benefit of any security taken by the Lender pursuant to the Finance Documents shall be exercised in such manner and on such terms as the Lender may require or as provided in this Agreement.  Each of the Borrowers agrees to hold any sums received by it as a result of its having exercised any such right on trust for the Lender absolutely.
 
(iii)           Each of the Borrowers agrees that it will not at any time during the term of the Facility claim any set-off or counterclaim against the other Borrower in respect of any liability owed to it by that other Borrower under or in connection with the Finance Documents, nor prove in competition with the Lender in any liquidation of (or analogous proceeding in respect of) the other Borrower in respect of any payment made under the Finance Documents or in respect of any sum which includes the proceeds of realisation of any security held by the Lender for the repayment of the Loans.
 
(f)             The headings in this Agreement do not affect its interpretation.
 
2.              FACILITY
￠
2.1           Facility and Purpose
 
Subject to the terms of this Agreement, the Lender makes available to the Borrowers a term loan facility in a maximum aggregate amount equal to the Maximum Facility Amount.  The term loan facility shall be made available in two Loans (Vessel Loan 1 and Vessel Loan 2, each of which shall be made available to the relevant Borrower).  Each Loan shall be capable of being drawn, up to the maximum amount of the relevant Vessel Loan, on the dates described in Clause 4.2(a).
 
2.2           Loans
 
Each Loan may be used only in or towards assisting with financing the cost of acquiring  the Vessel to which it relates and such other items and costs as are included in the relevant Vessel Cost.
 
2.3           No obligation to monitor
 
The Lender is not obliged to monitor or verify the utilisation of any Loan.
 
3.              CONDITIONS PRECEDENT
￠
3.1           Conditions precedent and subsequent documents
 
(a)            A Request in respect of a Drawing under a Loan may not be given until the Lender has notified the Borrower that it has received all of the documents and evidence set out in
 
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Schedule 2 (Initial Conditions Precedent Documents) in form and substance satisfactory to the Lender.  The Lender must give this notification to the relevant Borrower promptly upon being so satisfied.
 
(b)            On or before the date falling 60 days from the date of this Agreement, the Borrowers shall provide to the Lender all documents set out in Schedule 2 (Conditions Subsequent to first Drawing) in form and substance satisfactory to the Lender.
 
(c)            A Request representing the amount of a Delivery Date Instalment may not be given until the Lender has notified the relevant Borrower that it has received all of the documents and evidence set out in Schedule 3 (Delivery Date Conditions Precedent Documents ) and Schedule 2 (Conditions Subsequent to first Drawing) in form and substance satisfactory to the Lender or that it expects to receive outstanding documents or evidence on or before the relevant Delivery Date.  The Lender must give this notification to the relevant Borrower promptly upon being so satisfied.
 
3.2           Further conditions precedent
 
The obligations of the Lender to advance any Loan are subject to the further conditions precedent that on both the date of the Request and the Utilisation Date for that Loan:
 
(a)            the representations made under Clause 14 are correct in all material respects; and
 
(b)            no Default is outstanding or would result from the Drawing.
 
4.              UTILISATION
￠
4.1           Giving of Requests
 
(a)            Each Borrower may borrow its relevant Loan by giving to the Lender a duly completed Request in respect of a Drawing under that Loan.
 
(b)            Unless the Lender otherwise agrees, the latest time for receipt by the Lender of a duly completed Request is 11.00 a.m., Seoul time, three Business Days prior to the proposed date for the borrowing.
 
(c)            Each Request is irrevocable.
 
4.2           Completion of Requests
 
A Request for a Drawing under a Loan will not be regarded as having been duly completed unless:
 
(a)            the Utilisation Date is a Business Day falling within the Availability Period and is a date which either (i) falls on or after the date on which the relevant Instalment under the relevant Shipbuilding Contract falls due or (ii) in respect of a Request for Incidental Costs only, is the last day of a Term;
 
(b)            in respect of a Drawing under a Loan:
 
(i)             in respect of the first Drawing it is in an amount not exceeding the aggregate of (x) the balance of the amount of the Instalments paid or payable to the Builder after deducting therefrom an amount equal to the Equity Contribution
 
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and (y) the Incidental Vessel Costs in respect of the relevant Vessel on the relevant Utilisation Date;
 
(ii)            in respect of a Drawing other than the Drawing referred to in paragraph (i) and the Drawing of the Delivery Date Instalment, it is in an amount not exceeding the Incidental Vessel Costs in respect of the relevant Vessel on the relevant Utilisation Date less the amount of any such Incidental Vessel Costs which have been reimbursed in an earlier Drawing;
 
(iii)           in respect of the Drawing on the Delivery Date, it is in an amount not exceeding the aggregate of (x) the balance of the amount of the Instalment payable to the Builder on the Delivery Date, and (y) the Incidental Vessel Costs not taken into account under sub-paragraphs (i) and (ii) above and (z) an amount equal to the reduction (if any) in the Equity Contribution calculated in accordance with the Equity Contribution Side Letter, in respect of the relevant Vessel on the relevant Utilisation Date;
 
(iv)           the amount requested for the Drawing in respect of Incidental Vessel Costs when aggregated with any other amount in respect of Incidental Vessel Costs drawndown under the Loan and any amounts capitalised or to be capitalised on the proposed Utilisation Date pursuant to Clause 4.3 in respect of Incidental Loan Costs, does not exceed US$6,910,000;
 
(v)            the amount requested for the Drawing does not exceed, when aggregated with (x) existing Drawings under that Loan, (y) the amounts to be drawndown under any other Request under that Loan issued for drawdown on the proposed Utilisation Date and (z) any amounts capitalised or to be capitalised on the proposed Utilisation Date pursuant to Clause 4.3 in respect of Incidental Loan Costs for that Loan, the Maximum Available Loan Amount; and
 
(c)            the proposed Term complies with this Agreement.
 
Only one Drawing may be requested in a Request.
 
4.3           Capitalisation of Incidental Loan Costs
 
To the extent that the amount of any incidental Loan Costs to be capitalised does not exceed, when aggregated with the Drawings already made, and amounts already capitalised under the relevant Loan, the Maximum Available Loan Amount:
 
(a)            On the date of the first Drawing under a Loan, the management fee relating to that Loan, calculated in accordance with Clause 20.3 shall be capitalised and added to the principal amount of the Loan outstanding on that date.
 
(b)            During the Pre-Delivery Period, in respect of a Vessel, the Exposure Fee, the commitment fee payable in accordance with Clause 20.2 and interest calculated and payable in accordance with Clause 7.1(a), relating to that Vessel, shall accrue on the Loan relating to that Vessel and shall, on the last day of each Term during the Pre-Delivery Period, be capitalised and added to the principal amount of the Loan outstanding.
 
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5.              REPAYMENT
￠
5.1           Repayment of the Loans
 
(a)            The Borrowers must repay each Loan by 48 consecutive Repayment Instalments on each Repayment Date for that Loan in accordance with the Repayment Schedule.
 
(b)            The Lender shall notify the Borrowers of any change in the amount or the timing of any Repayment Instalment, as soon as practicable after the Delivery Date for the relevant Vessel.  In the event of any such notification, the Lender shall replace the relevant Repayment Schedule attached at Schedule 6 with a new Repayment Schedule reflecting the correct Repayment Instalments and the correct Repayment Dates and promptly provide a copy thereof to the Borrowers.
 
(c)            In any event, each Loan shall be repaid in full on the Final Maturity Date.
 
6.              PREPAYMENT AND CANCELLATION
￠
6.1           Mandatory prepayment - illegality
 
If it becomes, or to the knowledge of the Lender is to become, unlawful in any jurisdiction for the Lender to perform any of its obligations as contemplated by this Agreement or a Finance Document or to fund or maintain one or more of the Loans (the Event of Illegality ), the Lender shall notify the Borrowers. The Borrowers and the Lender shall thereafter consult with each other in good faith for a period of thirty (30) days or in the event that the Event of Illegality takes effect before the expiration of 30 days, for the maximum number of days available before the Event of Illegality takes effect with a view to restructuring the Facility in such a way as to avoid the effect of the Event of Illegality.  If agreement cannot be reached between the parties within this period, the Borrowers shall repay the relevant Loan or Loans to the Lender on the last day of the Term for each relevant Loan which is current at the time the Lender notifies the Borrowers or, if earlier, the date specified by the Lender in the notice delivered to the Owners (being no earlier than the last day of any applicable grace period permitted by Applicable Law).
 
6.2           Mandatory prepayment – change of control of Danaos
 
(a)            The Borrowers must promptly notify the Lender if any of them becomes aware of any person or group of persons acting in concert gaining control of Danaos from Mr John Coustas and his immediate family, be it direct or indirect.
 
(b)            After notification under paragraph (a) above or if the Lender otherwise becomes aware of the same, the Lender may, by notice to the Borrowers delivered to the Borrowers within 30 days of such notification:
 
(i)             cancel the Facility; and
 
(ii)            declare all outstanding Loans to be promptly, and in any event within 60 days of such declaration due and payable.
 
Any such notice will take effect in accordance with its terms.
 
(c)            In paragraph (a) above:
 
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control has the meaning given to it in section 416 of the Income and Corporation Taxes Act 1988; and
 
acting in concert has the meaning given to it in the City Code on Takeovers and Mergers.
 
6.3           Mandatory prepayment- Change of control of the Charterer
 
(a)            The Borrowers must promptly notify the Lender if any of them becomes aware of any person or group of persons acting in concert gaining control of the Charterer, be it direct or indirect.
 
(b)            After notification under paragraph (a) above or if the Lender otherwise becomes aware of the same in respect of the Charterer, the Lender may undertake a credit review, in good faith, of the terms of this Agreement. The Lender’s determination pursuant to the credit review shall be made in the Lender’s absolute discretion and the Lender shall inform the Borrowers upon having reached such determination.  In the event that the Lender does not find the results of the credit review satisfactory, the Lender shall be entitled to require any amendments to this Agreement which, in its absolute discretion, it may consider appropriate.
 
(c)            After notification by the Lender to the Borrowers of the results of its determination the Borrowers shall within a period of 90 days from the date of the Lender’s notification, during which time no Event of Default may occur or be continuing, either:
 
(i)             comply with the requirements of the Lender’s credit review; or
 
(ii)            prepay all outstanding Loans.
 
(d)            In paragraph (a) above:
 
control and acting in concert shall have the meaning given to them in Clause 6.2(c).
 
6.4           Mandatory prepayment - Sale or Total Loss of a Vessel
 
(a)            The Borrowers shall be obliged to prepay the whole of the Loan then outstanding in relation to a Vessel in the following circumstances and at the following times:
 
(i)             if that Vessel is sold, on or before the date on which the sale is completed by delivery of that Vessel to a buyer;
 
(ii)            if there is a Total Loss, on the earlier of the date falling 90 days after the Date of Total Loss and the date of receipt by the Lender of the proceeds of insurance relating to such Total Loss;
 
(iii)           if the Shipbuilding Contract relating to that Vessel is terminated in circumstances where the Refund Guarantee is payable, upon the date of receipt of the monies under the Refund Guarantee;
 
(iv)           if the Shipbuilding Contract relating to that Vessel is terminated in circumstances other than those referred to in paragraph (iii), on the date of its termination.
 
(b)            In the event that a mandatory prepayment obligation arises under Clause 6.4(a) upon a sale or Total Loss of a Vessel or in the event of a termination of a Shipbuilding Contract, the Lender shall be entitled to procure immediate valuations of the remaining Vessel in accordance with Clause 17, at no cost to the Lender. In the event that such valuations show that the relevant
 
23

 
Required Amount is not satisfied, the Borrowers shall be obliged to apply the balance of any funds received by the Borrowers pursuant to the relevant Intercreditor Deed to the extent required to ensure that the relevant Required Amount is satisfied. Any balance of funds received by the Borrowers pursuant to the relevant Intercreditor Deed after such application shall be available to the relevant Borrower. In the event that the funds received pursuant to the relevant Intercreditor Deed are not adequate to ensure that the relevant Required Amount is satisfied, the Borrowers shall be obliged to pay an amount equal to such shortfall to the Lenders no later than 5 Business Days after receipt of notification from the Lender of details of the amount required to satisfy the Required Amount.
 
6.5           Voluntary prepayment
 
(a)            A Borrower may, by giving not less than sixty days’ prior notice to the Lender, prepay a Loan in whole or from time to time in part on a Repayment Date.
 
(b)            A prepayment must be in a minimum amount or multiple of US$3,000,000.
 
(c)            Unless the Lender otherwise agrees, any voluntary prepayment under this Clause 6.5 shall be applied against the Repayment Instalments of the relevant Loan in the inverse order of their maturity.
 
6.6           Automatic cancellation
 
The obligation of the Lender to advance the undrawn amount of a Loan will be automatically cancelled at the close of business on the last day of the relevant Availability Period.
 
6.7           Voluntary cancellation
 
(a)            The Borrowers may, by giving not less than ten Business Days’ prior notice to the Lender, cancel the unutilised portion of the Facility in whole or in part.
 
(b)            Partial cancellation of the Facility must be in a minimum amount or multiple of US$1,000,000.
 
6.8           Voluntary prepayment and cancellation
 
(a)            If one or more of the Borrowers is, or will be, required to pay to the Lender a Tax Payment or an Increased Cost, the relevant Borrower(s) may, while the requirement continues, give notice to the Lender requesting prepayment and cancellation in respect of the relevant Loan(s).
 
(b)            After notification under paragraph (a) above the relevant Borrower(s) must repay or prepay the Loan(s).
 
(c)            The date for repayment or prepayment of the Loan(s) will be the last day of the Term of each relevant Loan which is current at the time of the notice from the Borrower(s) or, if earlier, the date specified by the Borrower(s) in the notice delivered to the Lender.
 
6.9           Partial prepayment of  Loans
 
(a)            Except where this Clause 6 expressly provides otherwise any partial prepayment of a Loan will be applied against the remaining Repayment Instalments in respect of that Loan, in the inverse order of their maturity.
 
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(b)            Upon any such partial prepayment, the Lender shall replace the relevant Repayment Schedule attached at Schedule 6 with a new Repayment Schedule reflecting the correct Repayment Instalments and promptly provide a copy thereof to the relevant Borrower.
 
(c)            No amount of a Loan prepaid under this Agreement may subsequently be re-borrowed.
 
6.10         Miscellaneous provisions
 
(a)            Any notice of prepayment and/or cancellation under this Agreement is irrevocable and must specify the relevant date(s).
 
(b)            All prepayments under this Agreement must be made with accrued interest on the amount prepaid.  A prepayment made other than in accordance with Clause 6.1, Clause 6.2, Clause 6.3 and Clause 6.4(a)(ii) shall be subject to a prepayment fee equal to 0.5% of the amount of principal prepaid.  All prepayments shall also be subject to Break Costs.
 
(c)            No prepayment or cancellation is allowed except in accordance with the express terms of this Agreement.
 
7.              INTEREST
￠
7.1           Calculation of interest
 
(a)            The rate of interest on each Loan for each Term during the Pre-Delivery Period is the percentage rate per annum equal to the aggregate of the applicable:
 
(i)             Pre-Delivery Margin;
 
(ii)            the Exposure Fee; and
 
(iii)           LIBOR
 
(b)            The rate of interest on each Loan for each Term during the Post-Delivery Period shall be 5.0125 per cent. being the aggregate of:
 
(i)             Post-Delivery Interest Rate; and
 
(ii)            the Exposure Fee.
 
(c)            Interest shall be calculated by reference to the actual number of days elapsed and on the basis of a year of 360 days.  Interest shall accrue from and including the first day of each Term to but excluding the last day of such Term.
 
7.2           Payment of interest
 
Except where it is provided to the contrary in this Agreement, the Borrowers must pay accrued interest and Exposure Fee on each Loan on the last day of each Term.  During the Pre-Delivery Period in respect of a Vessel, interest and the Exposure Fee shall accrue on the basis set out in Clause 7.1 above and shall, on the last day of each Term during the Pre-Delivery Period, be capitalised and added to the principal amount of the Loan outstanding.
 
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7.3           Interest on overdue amounts
 
(a)            If the Borrowers fail to pay any amount payable by them under the Finance Documents, they must immediately on demand by the Lender pay interest on the overdue amount from its due date up to the date of actual payment, both before, on and after judgment.
 
(b)            Interest on an overdue amount is payable at a rate determined by the Lender to be two per cent. per annum above the rate which would have been payable if the overdue amount had, during the period of non-payment, constituted a Loan of the overdue amount.  For this purpose, the Lender may (acting reasonably):
 
(i)             select successive Terms of any duration of up to three months;
 
(ii)            during the Pre-Delivery Period, determine the appropriate day to calculate LIBOR;
 
(c)            Notwithstanding paragraph (b) above, if the overdue amount is a principal amount of a Loan and becomes due and payable prior to the last day of its current Term, then:
 
(i)             the first Term for that overdue amount will be the unexpired portion of that Term; and
 
(ii)            the rate of interest on the overdue amount for that first Term will be two per cent. per annum above the rate then payable on that Loan.
 
After the expiry of the first Term for that overdue amount, the rate on the overdue amount will be calculated in accordance with paragraph (b) above.
 
(d)            Interest (if unpaid) on an overdue amount will be compounded with that overdue amount at the end of each of its Terms but will remain immediately due and payable.
 
7.4           Notification of rates of interest
 
In respect of a Vessel, during the Pre-delivery Period, the Lender must promptly notify the Borrowers of the determination of a rate of interest under this Agreement.
 
8.              TERMS
￠
8.1           Selection
 
(a)            Each Loan has successive Terms.
 
(b)            Each Term shall be of a period of three months subject always to the provisions of Clauses 8.2, 8.3 and 8.4.
 
8.2           Consolidation
 
The first Term for a Drawing under a Loan will commence on the date that Drawing is made and each subsequent Term shall commence on the last day of the previous Term.  Each Term for such a Drawing during the Pre-Delivery Period will be of three months’ duration (subject to Clause 8.3) provided always that the first Term for the second and subsequent Drawings under a Loan shall end on the last day of the current Term for existing Drawings under that Loan and each Term during the Post-Delivery Period will end on the next Repayment Date for that Loan or, in the case of the final Term for a Loan, on the Final Maturity Date.
 
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8.3           End of Term on Delivery Date
 
If a Term in relation to a Loan or a Drawing under a Loan would otherwise overrun the Delivery Date of the Vessel to which the relevant Loan relates, it will be shortened so that it ends on the Delivery Date of that Vessel.  Each subsequent Term will be ascertained in accordance with Clause 8.2.
 
8.4           No overrunning the Final Maturity Date
 
If a Term would otherwise overrun the Final Maturity Date, it will be shortened so that it ends on the Final Maturity Date.
 
8.5           Other adjustments
 
The Lender and the Borrowers may enter into such other arrangements as they may agree for the adjustment of Terms and the consolidation and/or splitting of Loans.
 
9.              MARKET DISRUPTION
￠
9.1           Failure of the Reference Bank to supply a rate
 
If LIBOR is to be calculated by reference to the Reference Bank but if the Reference Bank is unable to supply a rate by 11:00 a.m. on the second Business Day before the first day of the relevant Term, the applicable LIBOR will be calculated in accordance with Clause 9.2.
 
9.2           Market disruption
 
(a)            A market disruption event shall arise where,
 
(i)             the Reference Bank is unable to supply a rate by 11:00 a.m. on the second Business Day before the first day of the relevant Term; or
 
(ii)            the cost of Dollar deposits to the Lender exceeds LIBOR.
 
(b)            The Lender must promptly notify the Borrowers of a market disruption event.
 
(c)            After notification under paragraph (b) above, the rate of interest on the affected Loan for the relevant Term will be the aggregate of the applicable:
 
(i)             Pre-delivery Margin;
 
(ii)            Exposure Fee; and
 
(iii)           the rate notified by the Lender to the Borrowers as soon as practicable, and in any event before interest is due to be paid in respect of that Term, to be that which expresses as a percentage rate per annum the cost to the Lender of funding the Loan from whatever source it may reasonably select.
 
9.3           Alternative basis of interest or funding
 
If a market disruption event occurs and the Lender or the Borrowers so require, the Borrowers and the Lender must enter into negotiations for a period of not more than 30 days with a view
 
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to agreeing an alternative basis for determining the rate of interest and/or funding for the affected Loan and any future Loan.
 
10.           TAXES
￠
10.1         Tax gross-up
 
(a)            Each Borrower must make all payments to be made by it under the Finance Documents without any Tax Deduction, unless a Tax Deduction is required by an Applicable Law.
 
(b)            If a Tax Deduction is required by an Applicable Law to be made by a Borrower, the amount of the payment due from the Borrower will be increased to an amount which (after making the Tax Deduction) leaves an amount equal to the payment which would have been due if no Tax Deduction had been required.
 
(c)            If a Borrower is required to make a Tax Deduction, that Borrower must make the minimum Tax Deduction and must make any payment required in connection with that Tax Deduction within the time allowed by the Applicable Law.
 
(d)            Within 15 days of making either a Tax Deduction or a payment required in connection with a Tax Deduction or, if later, forthwith following receipt of the same, the Borrower making that Tax Deduction or payment must deliver to the Lender original tax receipts (or certified copies thereof) evidencing satisfactorily to the Lender that the Tax Deduction has been made or (as applicable) the appropriate payment has been paid to the relevant taxing authority.
 
10.2         Tax Indemnity
 
Without prejudice to the provisions of 10.1 (Tax Gross Up), if the Lender is required to make any payment on account of Tax (not being a Tax imposed on the net income of its Facility Office by the jurisdiction in which it is incorporated or in which its Facility Office is located or on the capital of the Lender employed in such jurisdiction) on any sum received or receivable hereunder (including, without limitation, any sum received or receivable under this Clause 10.2) or any liability in respect of any such payment is asserted, imposed, levied or assessed against the Lender, each Borrower shall, upon demand of the Lender promptly indemnify the Lender against such payment or liability, together with any interest, penalties and expenses payable or incurred in connection therewith.
 
10.3         Tax Credit
 
If the Lender determines in its absolute discretion, acting in good faith, that it has received, realised, utilised and retained a Tax benefit by reason of any deduction or withholding in respect of which a Borrower has made an increased payment or paid a compensating sum under this Clause 10 the Lender shall, provided it has received all amounts which are then due and payable by the Borrowers under any of the provisions of this Agreement and the other Finance Documents, pay to the Borrowers (to the extent that the Lender can do so without prejudicing the amount of that benefit and the right of the Lender to obtain any other benefit, relief or allowance which may be available to it), such amount, if any, as the Lender shall determine in its absolute discretion acting in good faith, will leave the Lender in no better and no worse position than it would have been in if the deduction or withholding had not been required and so that it retains no benefit as a result of the receipt of such deduction.
 
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10.4         Confidentiality of Tax Affairs
 
If the Lender intends to make a claim pursuant to Clause 10.2 (Tax Indemnity) it shall, as soon as reasonably practicable after becoming aware that it may be entitled to make a claim under Clause 10.2, notify each Borrower of the event by reason of which it is entitled to do so, provided that nothing herein shall require the Lender to disclose any confidential information relating to the organisation of its affairs.
 
10.5         Stamp taxes
 
Each Borrower must pay and indemnify the Lender against any stamp duty, registration or other similar Tax payable by the Lender in connection with the entry into, performance or enforcement of any Finance Document, except for any such Tax payable in connection with the entry into a Transfer Certificate.
 
10.6         Value added taxes
 
Any amount (including costs and expenses) payable under a Finance Document by a Borrower is exclusive of any value added tax or any other Tax of a similar nature which might be chargeable in connection with that amount.  If any such Tax is chargeable, the Borrower must pay to the Lender (in addition to and at the same time as paying that amount) an amount equal to the amount of that Tax.
 
11.           INCREASED COSTS
￠
11.1         Increased Costs
 
Except as provided below in this Clause 11, each Borrower must pay to the Lender the amount of any Increased Cost incurred by the Lender or its Subsidiaries as a result of:
 
(a)            the introduction of, or any change in, or any change in the interpretation or application of, any law or regulation; or
 
(b)            compliance with any law or regulation,
 
made after the date of this Agreement.
 
11.2         Exceptions
 
A Borrower need not make any payment for an Increased Cost to the extent that the Increased Cost is:
 
(a)            compensated for under another Clause or would have been but for an exception to that Clause;
 
(b)            a Tax on the Lender or any of its Subsidiaries; or
 
(c)            attributable to the Lender or any of its Subsidiaries wilfully failing to comply with any law or regulation.
 
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11.3         Claims
 
If the Lender intends to make a claim for an Increased Cost it must notify the Borrowers promptly of the circumstances giving rise to, and the amount of, the claim.
 
11.4         Mitigation
 
(a)            The Lender must, in consultation with the Borrowers, use its best endeavours to mitigate any circumstances which arise and which result or would result in any Increased Cost being payable to the Lender;
 
(b)            Each Borrower must indemnify the Lender for all costs and expenses reasonably incurred by the Lender as a result of any step taken by it under Clause 11.4(a) above.
 
(c)            The Lender is not obliged to take any step under this subclause if, in the opinion of the Lender (acting reasonably), to do so might be prejudicial to it in any material respect and is not otherwise capable of being compensated under paragraph (b).
 
12.           EARNINGS, RETENTION AND OPERATING EXPENSES ACCOUNTS
￠
12.1         Maintenance of accounts
 
The Borrowers shall maintain the Earnings Accounts, the Retention Accounts and the Operating Expenses Accounts with the Account Bank until the Final Maturity Date free of Security Interests and rights of set-off other than as created by or pursuant to the Security Documents.
 
12.2         Earnings
 
Each of the Borrowers shall procure that there is credited to the relevant Earnings Account for the Vessel chartered by that Borrower all Earnings for the Vessel chartered by that Borrower.
 
12.3         Transfers to Retention Accounts
 
In respect of each Loan, upon payment of any Earnings into the relevant Earnings Account (an Earnings Deposit Date ) the relevant Borrower shall procure that there is transferred from the relevant Earnings Account for the Vessel which is the subject of that Loan (and irrevocably authorise the Lender to instruct the Account Bank to transfer from the relevant Earnings Account) to the relevant Retention Account an amount calculated in accordance with the following formula:
 
a               =               A              X              n/N
 
where:
 
a=             the relevant amount of the Earnings to be transferred to that Retention Account out of the relevant Earnings Account;
 
A=           amount required to repay the principal, interest and Exposure Fee payable on the next Repayment Date or, in the final Retention Period, the Final Maturity Date in respect of the Loan to which the Earnings Account relates;
 
N=            the number of days in a Retention Period; and
 
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n=            actual number of days elapsed from (and including) the immediately preceding Earning Deposit Date in the Retention Period or the first day of the Retention Period (where there is no preceding Earning Deposit Date in a Retention Period) up to (but excluding) the Earning Deposit Date.
 
PROVIDED ALWAYS that on the last Earning Deposit Date for a Retention Period, and, if there remains a shortfall, on the last day of a Retention Period there shall be transferred to the relevant Retention Account out of the relevant Earnings Account an amount (taking into account the existing balance of the relevant Retention Account) required to repay the principal, interest and Exposure Fee payable in respect of that Loan on the next Repayment Date or, as the case may be, the Final Maturity Date in full.
 
12.4         Additional payments to Retention Accounts
 
If for any reason the amount standing to the credit of the relevant Earnings Account shall be insufficient to make any transfer to the relevant Retention Account required by Clause 12.3, the Borrowers shall, without demand, procure that there is credited to the relevant Retention Account, within 5 Business Days of the date on which the relevant amount would have been transferred from the Earnings Account, an amount equal to the amount of the shortfall.
 
12.5         Application of Retention Accounts
 
The relevant Borrower shall procure that there is transferred from the relevant Retention Account (and irrevocably authorise the Lender to instruct the Account Bank to transfer from the relevant Retention Account) to the Lender in respect of each Loan:
 
(a)            on each Repayment Date for that Loan, the amount of the Repayment Instalment for that Loan then due; and
 
(b)            on the last day of each Term of that Loan, the amount of interest and Exposure Fee then due on that Loan.
 
12.6         Payment to Debt Service Reserve Accounts
 
In the event that a Borrower proposes to make a payment of dividends in accordance with Clause 16.8 and does not intend to provide to the Lender a letter of credit in accordance with Clause 16.8(ii)(b), then prior to the payment of such dividends or such other distribution as the Borrower may be entitled to make, the Borrower shall be required to open a Debt Service Reserve Account and shall be required to pay into such account an amount equal to the amount of interest and Exposure Fee payable at the end of the current Term.  Immediately thereafter the relevant Borrower shall execute the Debt Service Reserve Account Charge.
 
If the relevant Borrower has credited to the Debt Service Reserve Account an amount equal to the amount specified in Clause 16.8(ii)(a), then provided that no Event of Default has occurred and is continuing, the Lender shall, on the Business Day following each Repayment Date, instruct the Account Bank to release to the Operating Expenses Account for the relevant Vessel an amount equal to the difference between (i) the aggregate of the amount paid in respect of interest and Exposure Fee on the relevant Loan on such Repayment Date and (ii) the amount payable in respect of interest and Exposure Fee on the relevant Loan on the next Repayment Date.
 
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12.7         Borrowers’ obligations not affected
 
If for any reason the amount standing to the credit of the Retention Accounts shall be insufficient to pay any Repayment Instalment or to make any payment of interest when due, the Borrowers’ obligation to pay that Repayment Instalment or to make that payment of interest shall not be affected.
 
12.8         Release of surplus
 
The Lender shall instruct the Account Bank to release to the Operating Expenses Account for the relevant Vessel any amount remaining to the credit of the relevant Earnings Account following the making of any transfer required by Clause 12.3 (unless an Event of Default shall have occurred and be continuing).  Thereafter, the relevant Borrower shall be entitled to withdraw sums of money standing to the credit of the Operating Expenses Account in the following circumstances (i) in and towards payment of any Operating Expenses; (ii) in the event of a reduction in the relevant Borrower’s Equity Contribution, an amount equal to such reduction, (iii) an amount equal to any late payment of Earnings made to the Earnings Account of the relevant Borrower after the Borrower has funded the transfer from the Earnings Account required by Clause 12.3; (iv) distribution to shareholders in accordance with and subject to Clause 16.8 and (v) in or towards a voluntary prepayment of the relevant Loan in accordance with Clause 6.5 (Voluntary prepayment).
 
12.9         Restriction on withdrawal
 
During the term of the Facility no sum may be withdrawn from any of the Earnings Accounts or the Retention Accounts (except in accordance with this Clause 12) without the prior written consent of the Lender.
 
13.           PAYMENTS
￠
13.1         Place
 
Unless a Finance Document specifies that payments under it are to be made in another manner, all payments by a Borrower under the Finance Documents must be made to the Lender to its account no. 04-029-695 with Deutsche Bank Trust Company Americas, New York, the United States of America or such other account in the United States of America as it may notify to that Borrower for this purpose by not less than five Business Days’ prior notice.
 
13.2         Funds
 
Payments under the Finance Documents to the Lender must be made for value on the due date at such times and in such funds as the Lender may specify to the Borrower concerned as being customary at the time for the settlement of transactions in the relevant currency in the place for payment.
 
13.3         Distribution
 
The Lender may apply any amount received by it from any of the Borrowers in or towards payment (on the date and in the currency and funds of receipt) of any amount due from the Borrowers under the Finance Documents or in or towards the purchase of any amount of any currency to be so applied.
 
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13.4         Currency
 
All amounts payable under the Finance Documents are payable in Dollars provided always that amounts payable in respect of costs and expenses are payable in the currency in which those costs and expenses are incurred.
 
13.5         No set-off or counterclaim
 
All payments made by a Borrower under the Finance Documents must be made without set-off or counterclaim.
 
13.6         Business Days
 
(a)            If a payment under the Finance Documents is due on a day which is not a Business Day, the due date for that payment will instead be the next Business Day in the same calendar month (if there is one) or the preceding Business Day (if there is not).
 
(b)            During any extension of the due date for payment of any principal under this Agreement interest is payable on that principal at the rate payable on the original due date.
 
13.7         Payments
 
Except to the extent otherwise provided in any Finance Document any and all  Proceeds received by the Lender shall be applied in accordance with Clause 10.8 of the relevant Intercreditor Deed. Any amounts received by the Lender under Clause 10.8 of the Intercreditor Deed and any and all other proceeds of the enforcement of the security conferred by the Security Agreements shall be applied as follows:
 
(i)             first , in or towards payment of all costs and expenses whatsoever, incurred or to be incurred by the Lender in connection with such enforcement;
 
(ii)            second , in or towards payment of any unpaid fees, costs and expenses of the Lender under the Finance Documents;
 
(iii)           third , in or towards payment of any accrued but unpaid interest under the Finance Documents;
 
(iv)           fourth in or towards payment of any Break Costs due but unpaid under the Finance Documents;
 
(v)            fifth , in or towards payment of any principal amount due but unpaid under the Finance Documents;
 
(vi)           sixth , in or towards payment to the Lender of any other amounts which are or may become owing by any of the Borrowers to the Lender under the Finance Documents;
 
(vii)          seventh , after all amounts payable or which may become payable under the Finance Documents have been paid in full and the Finance Documents have been discharged in or towards payment of the surplus if any, to the relevant Borrower or other persons entitled thereto.
 
This Subclause will override any appropriation made by a Borrower.
 
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13.8         Timing of payments
 
If a Finance Document does not provide for when a particular payment is due, that payment will be due within three Business Days of demand by the Lender.
 
14.           REPRESENTATIONS
￠
14.1         Representations
 
The representations set out in this Clause are made, unless otherwise stated, by each of the Borrowers to the Lender.
 
14.2         Status
 
(a)            It is a limited liability company, duly incorporated and validly existing under the laws of  the Republic of Cyprus.
 
(b)            It and each of its Subsidiaries has the power to own and hold on charter its assets and carry on its business as it is being conducted.
 
(c)            It is wholly owned by the Sponsor.
 
14.3         Powers and authority
 
It has the power to enter into and perform, and has taken all necessary action to authorise the entry into and performance of, the Finance Documents to which it is or will be a party and the transactions contemplated by those Finance Documents.
 
14.4         Legal validity
 
Subject to any general principles of law limiting its obligations and referred to in any legal opinion required under this Agreement, each Finance Document to which it is a party is its legally binding, valid and enforceable obligation.
 
14.5         Non-conflict
 
The entry into and performance by it of, and the transactions contemplated by, the Finance Documents to which it is a party do not conflict in any material respect with:
 
(a)            any law or regulation applicable to it;
 
(b)            its or any of its Subsidiaries’ constitutional documents; or
 
(c)            any document which is binding upon it or any of its Subsidiaries or any of its or its Subsidiaries’ assets.
 
14.6         No default
 
(a)            No Default is outstanding or will result from the execution of, or the performance of any transaction contemplated by, any Finance Document; and
 
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(b)            No other event is outstanding which constitutes a default under any document which is binding on it or any of its Subsidiaries or any of its or its Subsidiaries’ assets to an extent or in a manner which is reasonably likely to have a Material Adverse Effect.
 
14.7         Authorisations
 
Except for registration of the Mortgages at the Cyprus Ships Registry, any Security Agreement creating a charge over Security Assets of the Borrowers or either of them at the Cyprus Companies Registry and of any relevant Security Agreement under the Companies Act 1985, all authorisations required by it in connection with the entry into, performance, validity and enforceability of, and the transactions contemplated by, the Finance Documents have been obtained or effected (as appropriate) and are in full force and effect.
 
14.8         Financial statements
 
The audited financial statements of the Borrowers and Danaos most recently delivered to the Lender (which at the date of this Agreement, are the Original Financial Statements) together with any other financial information supplied to the Lender by the Borrowers:
 
(a)            have been prepared in accordance with accounting principles and practices generally accepted in its jurisdiction of incorporation, consistently applied; and
 
(b)            fairly represent its financial condition (consolidated, if applicable) as at the date to which they were drawn up,
 
except, in each case, as disclosed to the contrary in those financial statements.
 
14.9         No material adverse change
 
There has been no material adverse change in the business, condition (financial or otherwise) or operations of the Borrowers, or either of them, or any member of the Danaos Group since 31st December, 2002, or if incorporated after 31st December, 2002, since the date of incorporation or following the receipt by the Lender of an Annual Compliance Certificate, since the date of the then latest Annual Compliance Certificate.  Insofar as this representation relates to the members of the Danaos Group (other than the Borrowers) it is given on the date of this Agreement and each Utilisation Date only.
 
14.10       Litigation
 
No litigation, arbitration or administrative proceedings of or before any court, arbitral body or agency (including, but not limited to, investigative proceedings) which, if adversely determined, might reasonably be expected to have a Material Adverse Effect have (to the best of its knowledge and belief) been started or threatened against the Borrowers or either of them, or any member of the Danaos Group.  Insofar as this representation relates to the members of the Danaos Group (other than the Borrowers) it is given on the date of this Agreement and each Utilisation Date only.
 
14.11       Pari passu ranking
 
Its payment obligations under the Finance Documents rank at least pari passu with all its other present and future unsecured payment obligations, except for obligations mandatorily preferred by law applying to companies generally.
 
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14.12       Taxes on payments
 
All amounts payable by it to the Lender under the Finance Documents and the Related Contracts may be made without any Tax Deduction.
 
14.13       Stamp duties
 
Except as notified in writing to and accepted by the Lender no stamp or registration duty or similar Tax or charge is payable in its jurisdiction of incorporation in respect of any Finance Document or Related Contract.
 
14.14       Environment
 
Except as may already have been disclosed by a Borrower in writing to the Lender:
 
(a)            each Borrower and the Environmental Affiliates have without limitation complied with the provisions of all applicable Environmental Laws in relation to each Vessel;
 
(b)            each Borrower and the Environmental Affiliates have obtained all requisite Environmental Approvals in relation to each Vessel and are in compliance with such Environmental Approvals;
 
(c)            no Borrower nor any of the Environmental Affiliates has received notice of any Environmental Claim in relation to the relevant Vessel which alleges that such Borrower is not in compliance with applicable Environmental Laws in relation to such Vessel or Environmental Approvals in relation to such Vessel;
 
(d)            there is no Environmental Claim in relation to either Vessel pending or threatened which is such that a first class owner or operator of vessels such as the Vessels making all due enquiries and complying in all respects with its obligations under the ISM Code ought to have known about; and
 
(e)            there has been no Release of Hazardous Materials by or in respect of either Vessel about which a first class owner or operator of vessels such as the Vessels making all due enquiries and complying in all respects with its obligations under the ISM Code ought to have known about.
 
14.15       Security Interests
 
No Security Interest exists over its or any of its Subsidiary’s assets which would cause a breach of Clause 16.5 (Security Interests).
 
14.16       Security Assets
 
Each Borrower is solely and absolutely entitled to the Security Assets over which it has or will create any Security Interest pursuant to the Security Documents to which it is a party, or will be, a party and there is no agreement or arrangement under which it is obliged to share any proceeds of or derived from such Security Assets with any third party.
 
14.17       ISM Code compliance
 
On each Delivery Date, each Owner  and the Bareboat Charterer is in full compliance with the ISM Code in respect of its Vessel.
 
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14.18       ISPS Code Compliance
 
On each Delivery Date, each Owner and the Bareboat Charterer  is in full compliance with the ISPS Code in respect of its Vessel.
 
14.19       No amendments to Related Contracts
 
Other than as notified to and agreed by the Lender in writing, there have been no amendments to any of the Related Contracts.
 
14.20       Money Laundering
 
Any borrowing by any Borrower and the performance of its obligations hereunder and under the other Finance Documents to which it is a party will be for its own account and will not involve any breach by it of any law or regulatory measure relating to money laundering as defined in Article 1 of the Directive (91/308/EEC) of the Council of the European Communities or any equivalent law or regulatory measure in any other jurisdiction.
 
14.21       Insolvency
 
(a)            No Borrower, nor any member of the Danaos Group is unable, or admits or has admitted its inability, to pay its debts or has suspended making payments on any of its debts.
 
(b)            No Borrower nor any member of the Danaos Group, by reason of actual or anticipated financial difficulties has commenced, or intends to commence, negotiations with one or more of its creditors with a view to rescheduling any of its Financial Indebtedness.
 
(c)            The value of the assets of each Borrower, and each member of the Danaos Group is not less than its liabilities (taking into account contingent and prospective liabilities).
 
(d)            No moratorium has been, or may, in the reasonably foreseeable future be, declared in respect of any indebtedness of any Borrower or any member of the Danaos Group.
 
14.22       Immunity
 
(a)            The execution by it of each Finance Document to which it is a party constitutes, and the exercise by it of its rights and performance of its obligations under each such Finance Document will constitute, private and commercial acts performed for private and commercial purposes.
 
(b)            It will not be entitled to claim immunity from suit, execution, attachment or other legal process in any proceedings taken in its jurisdiction of incorporation in relation to any Finance Document.
 
14.23       No adverse consequences
 
(a)            It is not necessary under the laws of its jurisdiction of incorporation:
 
(i)             in order to enable the Lender to enforce its rights under any Finance Document; or
 
(ii)            by reason of the execution of any Finance Document or the performance by it of its obligations under any Finance Document,
 
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that the Lender should be licensed, qualified or otherwise entitled to carry on business in its jurisdiction of incorporation; and
 
(b)            The Lender will not be deemed to be resident, domiciled or carrying on business in its jurisdiction of incorporation by reason only of the execution, performance and/or enforcement of any Finance Document.
 
14.24       Jurisdiction/governing law
 
(a)            Its:
 
(i)             irrevocable submission under this Agreement to the jurisdiction of the courts of England;
 
(ii)            agreement that this Agreement is governed by English law; and
 
(iii)           agreement not to claim any immunity to which it or its assets may be entitled,
 
are legal, valid and binding under the laws of its jurisdiction of incorporation; and
 
(b)            Any judgment obtained in England will be recognised and be enforceable by the courts of its jurisdiction of incorporation, subject to any statutory or other conditions of such jurisdiction.
 
14.25       Times for making representations
 
(a)            The representations set out in this Clause are made by each Borrower on the date of this Agreement.
 
(b)            Unless a representation is expressed to be given at a specific date, each representation is deemed to be repeated by each relevant Party during the Pre-delivery Period in respect of the relevant Vessel on each Utilisation Date and during the Post Delivery Period in respect of the relevant Vessel, annually on each anniversary of the first Utilisation Date by the relevant Borrower only when such relevant Borrower shall provide to the Lender an Annual Compliance Certificate.
 
(c)            When a representation is repeated, it is applied to the circumstances existing at the time of repetition.
 
15.           INFORMATION COVENANTS
￠
15.1         Financial statements
 
(a)            Each Borrower must supply and must procure that Danaos supplies to the Lender:
 
(i)             its audited financial statements for each of its financial years ending after the date hereof;
 
(ii)            its interim unaudited financial statements for the first half-year of each of its financial years; and
 
(iii)           if and to the extent a Borrower or Danaos is required by any Applicable Law to produce quarterly financial statements, the quarterly financial statements for that
 
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Borrower as the case may be for the first and third quarters of each of its financial years.
 
(b)            Each Borrower must procure that the Charterer supplies to the Lender its audited financial statements for each of its financial years ending after the date hereof.
 
(c)            All financial statements must be supplied as soon as they are available and:
 
(i)             in the case of audited financial statements, within 180 days;
 
(ii)            in the case of interim semi-annual financial statements, within 90 days; and
 
(iii)           in the case of interim quarterly financial statements, within 60 days;
 
of the end of the relevant financial period.
 
15.2         Form of financial statements
 
(a)            Each Borrower and Danaos must ensure that each set of its financial statements supplied under this Agreement gives (if audited) a true and fair view of, or (if unaudited) fairly represents, the financial condition (consolidated or otherwise) of the relevant person as at the date to which those financial statements were drawn up.
 
(b)            Each Borrower and Danaos must notify the Lender of any change to the basis on which its audited financial statements are prepared.
 
(c)            If requested by the Lender, each Borrower must supply or procure that the following are supplied to the Lender:
 
(i)             a full description of any change notified under paragraph (b) above; and
 
(ii)            sufficient information to enable the Lender to make a proper comparison between the financial position shown by the set of financial statements prepared on the changed basis and its most recent audited consolidated financial statements delivered to the Lender under this Agreement.
 
(d)            If requested by the Lender, each Borrower and Danaos must enter into discussions for a period of not more than 30 days with a view to agreeing any amendments required to be made to this Agreement to place the Lender in the same position as it would have been in if the change had not happened.
 
(e)            If no agreement is reached under paragraph (d) above on the required amendments to this Agreement, each Borrower must ensure that its auditors certify those amendments; the certificate of the auditors will be, in the absence of manifest error, binding on all the Parties.
 
15.3         Access to Books and Records
 
Upon the request of the Lender, each Borrower shall provide the Lender and any of its representatives, professional advisors and contractors with access to and permit inspection of its books and records, in each case at reasonable times and upon reasonable notice.
 
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15.4         Information - miscellaneous
 
Each Borrower, must supply to the Lender:
 
(a)            copies of all documents despatched by it to its creditors generally or any class of them at the same time as they are despatched;
 
(b)            promptly upon becoming aware of them, details of any litigation, arbitration or administrative proceedings which are current, threatened or pending against it and which might, if adversely determined, have a Material Adverse Effect; and
 
(c)            promptly on request, such further information regarding the financial condition and operations of a Borrower as the Lender may reasonably request.
 
15.5         Notification of Default
 
(a)            Unless the Lender has already been so notified, each Borrower must notify the Lender of any Default (and the steps, if any, being taken to remedy it) promptly upon becoming aware of its occurrence.
 
(b)            Promptly on request by the Lender but not more often than once in each period of 12 months, unless the Lender, acting reasonably, believes an Event of Default has occurred and is continuing (in which event the Lender shall be entitled to make such requests as and when it considers it appropriate to do so), each Borrower must supply to the Lender a certificate, signed by two of its authorised signatories on its behalf, certifying that no Default is outstanding or, if a Default is outstanding, specifying the Default and the steps, if any, being taken to remedy it.
 
15.6         Year end
 
The Borrowers may not change their financial year end.
 
16.           GENERAL COVENANTS
￠
16.1         General
 
Each of the Borrowers agrees to be bound by the covenants set out in this Clause relating to it, or where relevant, agrees to procure that the Bareboat Charterer will be bound.
 
16.2         Authorisations
 
Each Borrower must promptly obtain, maintain and comply, in all material respects, with the terms of any authorisation required under any Applicable Law to enable it to perform its obligations under, or for the validity or enforceability of, any Finance Document.
 
16.3         Compliance with laws
 
Each Borrower must comply and must procure that the Manager, the Owners and the Bareboat Charterer each complies in all respects with all Applicable Laws to which it is subject where failure to do so is reasonably likely to have a Material Adverse Effect.
 
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16.4         Pari passu ranking
 
Each Borrower must ensure that its payment obligations under the Finance Documents rank at least pari passu with all its other present and future unsecured payment obligations, except for obligations mandatorily preferred by law applying to companies generally.
 
16.5         Security Interests
 
Each Borrower shall not, and the Borrowers shall procure that the Manager, the Owners and the Bareboat Charterer do not create or permit to subsist any Security Interest over the Obligatory Insurances or any other Security Assets or any Related Contract other than:
 
(a)            Permitted Liens; or
 
(b)            with the prior written consent of the Lender.
 
16.6         Disposals
 
(a)            Except as provided below, no Borrower may, either in a single transaction or in a series of transactions and whether related or not, dispose of all or any part of its assets.
 
(b)            Paragraph (a) does not apply to any disposal made in the ordinary course of trading of the disposing entity.
 
16.7         No other business  assets or Financial Indebtedness
 
No Borrower shall engage in any business other than the direct or indirect ownership, operation and chartering of the relevant Vessel or any business incidental thereto nor shall any Borrower own any asset other than any asset incidental to the operation and chartering of the relevant Vessel, nor shall any Borrower incur any Financial Indebtedness other than the Financial Indebtedness contemplated by this Agreement and any other short term indebtedness not exceeding, when aggregated with such other Financial Indebtedness of that Borrower, US$1,000,000 incurred in the ordinary course of business solely for the purpose of funding Operating Expenses.
 
16.8         Payment of dividends
 
No Borrower shall pay any dividends or make any other distributions to shareholders or issue any new shares unless it has available surplus funds which, under Applicable Law and accounting principles in its jurisdiction of incorporation it is entitled to distribute as dividends and where the following conditions are satisfied:
 
(i)             the Standby Letter of Credit is in place and continues to be in full force and effect; and
 
(ii)            it either (a) pays an amount equal to the amount of interest and Exposure Fee payable at the end of the current Term into the relevant Debt Service Reserve Account in accordance with Clause 12.6 or (b) provides a letter of credit in an amount equal to the amount of interest and Exposure Fee payable at the end of the current Term to the Lender in form and substance satisfactory to the Lender;
 
(iii)           its Retention Account is fully funded in accordance with Clauses 12.3 and 12.4; and
 
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(iv)           no Default has occurred and is continuing.
 
16.9         Change of business
 
(a)            Each Borrower must ensure that no change is made to the general nature of its business from that carried on at the date of this Agreement.
 
(b)            Each Borrower must maintain its place of business, and keep its corporate documents and records, at the address stated opposite its name in Schedule 1, and the Borrowers will not establish, or do anything as a result of which it would be deemed to have, a place of business in any country other than the Republic of Cyprus.
 
16.10       Mergers
 
None of the Borrowers shall enter into any amalgamation, demerger, merger or reconstruction otherwise than under an intra-group re-organisation on a solvent basis or other transaction agreed by the Lender.
 
16.11       Security
 
Each Borrower:
 
(a)            will procure that the relevant Mortgage is on the Delivery Date, and continues to be, registered as a first priority mortgage with the Cyprus Ships Registry;
 
(b)            will procure that the Mortgage and any other security conferred on the Lender under any Security Document is registered as a first priority interest with the relevant authorities within the period prescribed by the Applicable Laws and is maintained and perfected with the relevant authorities;
 
(c)            will at its own cost, do all that it can to ensure that any Finance Document validly creates the obligations and Security Interests which it purports to create; and
 
(d)            without limiting the generality of paragraph (a) above, will at its own cost, promptly register, file, record or enrol, or procure the registration, filing, recording or enrolment of any Finance Document with any court or authority, pay, or procure the payments of any stamp, registration or similar tax payable in respect of any Finance Document, give, or procure the giving of any notice or take any other step which, in the reasonable opinion of the Lender, is or has become necessary or desirable for any Finance Document to be valid, enforceable or admissible in evidence or to ensure or protect the priority of any Security Interest which it creates.
 
16.12       Registration of the Vessels
 
Each Borrower shall procure that the relevant Owner shall :
 
(a)            procure and maintain with effect from the Delivery Date of the relevant Vessel, the valid and effective provisional registration of the Vessel under the flag of the Republic of Cyprus and shall effect permanent registration of the Vessel within 3 months from the relevant Delivery Date, or such other flag of equivalent reputation as is satisfactory to the Lender in its absolute discretion, and shall ensure nothing is done or omitted by which the registration of the Vessels would or might be defeated or imperilled; and
 
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(b)            not change the name or port of registration of the Vessels without the prior written consent of the Lender (such consent not to be unreasonably withheld).
 
16.13       Partial prepayments or additional security
 
(a)            If and so often as, at any time on or after the Delivery Date of the first Vessel to be delivered until the date falling on the last day of the second year after the Delivery Date of the first Vessel to be delivered, the market value of either of the delivered Vessels (determined in accordance with Clause 17) shall be less than the First Required Amount in respect of that Vessel, the Borrowers will, within thirty Business Days of the request of the Lender to do so, either (i) prepay such amount of the Loan relating to that Vessel as will ensure that the market value of that Vessel (determined as aforesaid) is not less than the First Required Amount in respect of that Vessel; or (ii) provide or cause to be provided to the Lender such additional security as may be satisfactory to the Lender acting in good faith but otherwise in its entire discretion. Clauses 6.9 and 6.10 shall apply, mutatis mutandis , to any prepayment made pursuant to this Clause save that no prepayment fee equal to 0.5% of the amount of principal shall be payable.  Any prepayment made in accordance with Clause 16.13(a)(i) shall be applied against the Repayment Instalments of the relevant Loan in the inverse order of their maturity.
 
(b)            If and so often as, at any time on or after the date falling on the last day of the second year after the Delivery Date of the first Vessel until the date falling on the last day of the fourth year after the Delivery Date of the first Vessel, the market value of either of the delivered Vessels (determined in accordance with Clause 17) shall be less than the Second Required Amount in respect of that Vessel, the Borrowers will, within thirty Business Days of the request of the Lender to do so, either (i) prepay such amount of the Loan relating to that Vessel as will ensure that the market value of that Vessel (determined as aforesaid) is not less than the Second Required Amount in respect of that Vessel or (ii) provide or cause to be provided to the Lender such additional security as may be satisfactory to the Lender acting in good faith but otherwise in its entire discretion.  Clauses 6.9 and 6.10 shall apply, mutatis mutandis , to any prepayment made pursuant to this Clause save that no prepayment fee equal to 0.5% of the amount of principal shall be payable.  Any prepayment made in accordance with Clause 16.13(b)(i) shall be applied against the Repayment Instalments of that Loan in the inverse order of their maturity.
 
(c)            If and so often as, at any time on or after the date falling on the last day of the fourth year after the Delivery Date of the first Vessel until the Final Maturity Date, the market value of either of the delivered Vessels (determined in accordance with Clause 17) shall be less than the Third Required Amount in respect of that Vessel, the Borrowers will, within thirty Business Days of the request of the Lender to do so either (i) prepay such amount of the Loan relating to that Vessel as will ensure that the market value of that Vessel (determined as aforesaid) is not less than the Third Required Amount in respect of that Vessel or (ii) provide or cause to be provided to the Lender such additional security as may be satisfactory to the Lender acting in good faith but otherwise in its entire discretion.  Clauses 6.9 and 6.10 shall apply, mutatis mutandis , to any prepayment made pursuant to this Clause save that no prepayment fee equal to 0.5% of the amount of principal shall be payable Any such prepayment made in accordance with Clause 16.13(c)(i) shall be applied against the Repayment Instalments of that Loan in the inverse order of their maturity.
 
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16.14       Classification and repair
 
Each Borrower will, and will procure that the Manager, the Owners and the Bareboat Charterer will, at all times after the Delivery Date:
 
(a)            ensure that the Vessels are surveyed from time to time as required by the classification society in which the Vessel is for the time being entered and maintain and preserve the Vessel in good working order and repair, ordinary wear and tear excepted, and in any event in such condition as will entitle each to the classification of 100AI Containership, Shipright (SDA, FDA, CM)* IWS, @ LMC, UMS, SCM, EP, CAC NAVI or, if such classification is not available with the highest equivalent classification available, with Lloyds Register of Shipping, (or to the equivalent classification in another internationally recognised classification society of like standing acceptable to the Lender), free of all overdue requirements and recommendations of that classification society;
 
(b)            procure that all repairs to or replacement of any damaged, worn or lost parts or equipment shall be effected in such manner (both as regards workmanship and quality of materials) as not to diminish the value of the Vessels;
 
(c)            not remove any material part of either of the Vessels, or any item of equipment installed on either of the Vessels unless the part or item so removed is forthwith replaced by a suitable part or item which is in the same condition as or better condition than the part or item removed, is free from any Security Interest or any right in favour of any person other than the Lender and becomes on installation on that Vessel the property of the Owner and subject to the security constituted by the relevant Security Document(s) provided that the Owner may install and remove equipment owned by a third party if the equipment can be removed without any risk of damage to a Vessel;
 
(d)            ensure that each Vessel complies with all Applicable Laws from time to time applicable to vessels registered under the laws and flag of the Republic of Cyprus or such other flag, under which the Vessels may be registered from time to time in accordance with this Agreement; and
 
(e)            not without the prior written consent of the Lender (such consent not to be unreasonably withheld) cause or permit to be made any substantial change in the structure, type or performance characteristics of either of the Vessels and provide notification of such substantial changes in structure, type or performance characteristics of either of the Vessels to the Lender and furthermore provide confirmation to the Lender that such substantial change in structure, type or performance characteristics of either of the Vessels shall not result in a breach of any covenant under this Agreement.
 
16.15       Lawful and Safe Operation
 
Each Borrower will, and will procure that the Manager, the Owners and the Bareboat Charterer will, at all times after the Delivery Date:
 
(a)            operate each Vessel and cause each of the Vessels to be operated in a manner consistent in all material respects with any and all  laws, regulations, treaties and conventions (and all rules and regulations issued thereunder) from time to time applicable to the Vessel;
 
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(b)            not cause or permit either of the Vessels to trade with, or within the territorial waters of any country in which her safety may be imperilled by exposure to piracy, terrorism, arrest, requisition, confiscation, forfeiture, seizure, destruction or condemnation as prize;
 
(c)            not cause or permit either of the Vessels to be employed in any manner which will or may give rise to any reasonable degree of likelihood that such Vessel would be liable to requisition, confiscation, forfeiture, seizure, destruction or condemnation as prize;
 
(d)            not cause or permit either of the Vessels to be employed in any trade or business which is forbidden by international law or is illicit or in carrying illicit or prohibited goods;
 
(e)            in the event of hostilities in any part of the world (whether war be declared or not) not cause or permit either of the Vessels to be employed in carrying any contraband goods and that she does not trade in any zone after it has been declared a war zone by any authority or by any of that Vessel’s war risks insurers unless that Vessel’s insurers shall have confirmed to the relevant Owner that such Vessel is held covered under the Obligatory Insurances for the voyage(s) in question; and
 
(f)             not charter either of the Vessels or permit either of the Vessels to serve under any contract of affreightment with any foreign country or national of any foreign country which is specified by legislation or regulations of Korea or any other jurisdiction in which the Facility Office is located and such that, if the earnings or any part of earnings were derived from such charter or affreightment, that fact would render any Finance Document or the security conferred by the Security Documents unlawful.
 
16.16       Repair of the Vessels
 
Each Borrower will not and will procure that the Manager, the Owners and the Bareboat Charterer will not, at any time after the Delivery Date, of a relevant Vessel put either of the Vessels into the possession of any person for the purpose of work being done upon her beyond the amount of US$3,000,000 (or equivalent), other than for classification or scheduled dry docking unless such person shall have given an undertaking to the Lender not to exercise any lien on that Vessel or Obligatory Insurances for the cost of that work or otherwise.
 
16.17       Arrests and Liabilities
 
Each Borrower will, and will procure that the Manager, the Owners and the Bareboat Charterer will, at all times after the Delivery Date of a Vessel:
 
(a)            pay and discharge all obligations and liabilities whatsoever which have given or may give rise to liens (other than liens arising in the ordinary course of operation of either of the Vessels in each case for amounts the payment of which is not yet due or, if due and payable, is being disputed in good faith by appropriate proceeding (and for the payment of which adequate reserves have been provided or are and continue to be available)) on or claims enforceable against either of the Vessels and take all reasonable steps to prevent a threatened arrest of either of the Vessels;
 
(b)            notify the Lender promptly in writing of the levy of any distress on either of the Vessels or her arrest, detention, seizure, condemnation as prize, compulsory acquisition or requisition for title or use and (save in the case of compulsory acquisition or requisition for title or use) obtain her release within 21 days;
 
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(c)            pay and discharge when due all dues, taxes, assessments, governmental charges, fines and penalties lawfully imposed on or in respect of either of the Vessels or the relevant Borrower, the Manager, the relevant Owner or the Bareboat Charterer except those which are being disputed in good faith by appropriate proceedings (and for the payment of which adequate reserves have been provided or are and continue to be available) and provided that the continued existence of such dues, taxes, assessments, governmental charges, fines or penalties does not give rise to any reasonable degree of likelihood that the Vessel would be liable to arrest, requisition, confiscation, forfeiture, seizure, destruction or condemnation as prize; and
 
(d)            pay and discharge all other obligations and liabilities whatsoever in respect of either of the Vessels and the Obligatory Insurances except those which are being disputed in good faith by appropriate proceedings (and for the payment of which adequate reserves have been provided or are and continue to be available) and provided that the continued existence of those obligations and liabilities in respect of either of the Vessels and the Obligatory Insurances does not give rise to any reasonable degree of likelihood that either of the Vessels would be liable to arrest, requisition, confiscation, forfeiture, seizure, destruction or condemnation as prize and provided always that each Vessel remains properly managed and insured at all times in accordance with the terms of this Agreement.
 
16.18       Related Contracts
 
The Borrowers shall not and shall procure that the Manager, the Owners and the Bareboat Charterer shall not, take any action, enter into any document or agreement or omit to take any action or to enter into any document or agreement which would, or could reasonably be expected to, cause any Related Contract to cease to remain in full force and effect and shall use all reasonable endeavours to procure that each other party to any Related Contract does not take any action, enter into any document or agreement or omit to take any action or to enter into any document or agreement which would, or could reasonably be expected to, cause any Related Contract to cease to remain in full force and effect.
 
16.19       Environment
 
Each of the Borrowers shall, and shall procure that the Manager, the Owners and the Bareboat Charterer shall, at all times after the Delivery Date of a Vessel:
 
(a)            comply with all applicable Environmental Laws including, without limitation, requirements relating to the establishment of financial responsibility (and shall require that all Environmental Affiliates of each Borrower comply with all applicable Environmental Laws and obtain and comply with all required Environmental Approvals, which Environmental Laws and Environmental Approvals relate to either  of the Vessels or her operation or her carriage of cargo); and
 
(b)            promptly upon the occurrence of any of the following events, provide to the Lender a certificate of an officer of the relevant Borrower or of the relevant Borrower’s agents specifying in detail the nature of the event concerned:
 
(i)             the receipt by the Borrower or any Environmental Affiliate (where the Borrower has knowledge of the receipt) of any Environmental Claim; or
 
(ii)            any Release of Hazardous Materials.
 
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16.20       Information regarding the Vessels
 
Each Borrower shall, and shall procure that the Manager, the Owners and the Bareboat Charterer shall, at all times after the relevant Delivery Date:
 
(a)            promptly notify the Lender of the occurrence of any accident, casualty or other event which has caused or resulted in or may cause or result in its Vessel being or becoming a Total Loss;
 
(b)            promptly notify the Lender of any requirement or recommendation made by any Insurer or classification society or by any competent authority which is not complied with in a timely manner;
 
(c)            promptly notify the Lender of any intended dry docking of either of the Vessels;
 
(d)            promptly notify the Lender of any Environmental Claim being made in connection with either of the Vessels or its operation;
 
(e)            promptly notify the Lender of any claim for breach of the ISM Code being made in connection with either of the Vessels or its operation;
 
(f)             promptly notify the Lender of any claim for breach of the ISPS Code being made in connection with any of the Vessels or its operation;
 
(g)            give to the Lender from time to time on request such information as the Lender may reasonably require regarding either of the Vessels, her employment, position and engagements;
 
(h)            provide the Lender with copies of the classification certificate of the Vessels and of all periodic damage or survey reports on either of the Vessels which the Lender may reasonably request;
 
(i)             promptly furnish the Lender with full information of any casualty or other accident or damage to either of the Vessels involving an amount in excess of US$3,000,000 (or equivalent):
 
(j)             give to the Lender and its duly authorised representatives reasonable access to either of the Vessels for the purpose of conducting on board inspections and/or surveys of the Vessel and pay the reasonable expenses incurred by the Lender in connection with the inspections and/or surveys provided that, unless a Default has occurred and is continuing, such inspections and/or surveys shall not take place at the expense of the Borrower and the Lender shall co-operate with the Borrower in respect of the timing for and the place where such surveys take place in order to minimise disruption to the activities of either of the Vessels; and
 
(k)            if the Lender reasonably believes an Event of Default may have occurred, furnish to the Lender from time to time upon reasonable request certified copies of the ship’s log in respect of either of the Vessels.
 
16.21       Provision of further information
 
Each Borrower shall, and shall procure that the Manager , the Owners and the Bareboat Charterer shall, as soon as practicable following receipt of a request by the Lender, provide
 
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the Lender with any additional or further financial or other information relating to either of the Vessels, the Obligatory Insurances or to any other matter relevant to, or to any provision of, a Finance Document which the Lender may reasonably request.
 
16.22       Management
 
Each Borrower shall, and shall procure that the Manager, the Owners and the Bareboat Charterer shall, ensure that at all times after the relevant Delivery Date:
 
(a)            the relevant Vessel is managed by the Manager; and
 
(b)            the Manager shall not terminate or materially vary the terms of its management or appoint an alternative manager, provided that the Bareboat Charterer  shall be entitled so to do with the prior written consent of the Lender.
 
However, in the event that the Manager’s appointment as manager of either one of the Vessels ceases or is terminated in circumstances where it was not possible for the Bareboat Charterer to obtain the prior written consent of the Lender, the relevant Borrower shall promptly and in any event within 10 days from the date of the termination of the Manager’s appointment, provide to the Lender details of a replacement manager, such manager to be satisfactory to the Lender.
 
16.23       Proceeds from sale or Total Loss of a Vessel
 
(a)            Each Borrower shall procure that the proceeds from a sale or Total Loss of the relevant Vessel shall immediately upon receipt by the Owner or a Borrower be paid to the Lender for application in accordance with the relevant provisions of the relevant Intercreditor Deed and the provisions of Clause 13.7.
 
(b)            For and so long as an Owner or a Borrower holds any such proceeds as referred to in paragraph (a) it shall do so on trust for the Lender.
 
16.24       Charters
 
(a)            The Borrowers shall not and shall procure that neither of the Owners nor the Bareboat Charterer will let either of the Vessels on demise, consecutive voyage or voyage charter for any period without the consent of the Lender such consent not to be unreasonably withheld other than the AML Charters, the Bareboat Charters and the Time Charters.
 
(b)            Each Borrower shall be entitled to let its Vessel, in accordance with the terms of the Time Charter PROVIDED always that:
 
(i)             the Borrower shall remain liable under any time charter to perform all the obligations assumed by it under the Time Charter;
 
(ii)            the Lender shall not be under any obligations or liability under any time charter or liable to make any payment under that time charter;  and
 
(iii)           the Lender shall not be obliged to enforce against any charterer any term of any time charter, or to make any enquiries as to the nature or sufficiency of any payment received by the Lender.
 
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(c)            If so required by the Lender each of the Borrowers shall exercise its respective rights to extend the charter period in respect of the relevant Vessel beyond the Initial Charter Period (as such term is defined in the AML Time Charters) for such period as the Lender may require, all in accordance with the provisions of Clause 32.1 of the AML Time Charters.
 
16.25       Substitution of Charterer
 
(a)            At all times during the Post-Delivery Period, the Borrowers shall advise the Lender of any of the following events;
 
(i)             any breach by the Charterer of the terms of a Time Charter of which the relevant Borrower becomes aware;
 
(ii)            the termination of a Time Charter by either the relevant Borrower or the Charterer;
 
(iii)           as soon as it becomes aware of such event, the occurrence of an event of cross default of the nature referred to in Clause 18.5 in respect of the Charterer, PROVIDED always that such event shall not arise in respect of the Charterer where the aggregate amount of the relevant Financial Indebtedness of the Charterer is less than US$50,000,000 or its equivalent; or
 
(iv)           as soon as it becomes aware of such event, the occurrence of an insolvency event of the nature referred to in Clause 18.6, 18.7 or 18.8 in respect of the Charterer.
 
Upon the occurrence of any such event the Lender shall be entitled to require that the relevant Borrower exercises all of its rights under the relevant Time Charter including, where applicable, the termination of the Time Charter in respect of the relevant Vessel.
 
(b)            In the event of a termination of a Time Charter in accordance with Clause 16.25(a) or otherwise, the relevant Borrower shall within 45 days of such termination either:
 
(i)             propose by written notice to the Lender, a substitute charterer; or
 
(ii)            prepay the outstanding Loan in respect of that Vessel, together with accrued interest and all other amounts accrued under the Finance Documents in respect of that Vessel in accordance with Clause 6.
 
provided always that, until either a substitute charterer is in place or the Loan has been prepaid, the Borrower shall on each date which would, had the Time Charter not terminated, have been an Earnings Deposit Date, deposit in the relevant Earnings Account an amount equal to the amount which would have been required, on that date, to have been transferred to the relevant Retention Account.  Such deposit by the Borrower shall be treated as Earnings and Clause 12 shall apply thereto on that basis. If the Borrower fails to make such deposit into the Earnings Account, the Borrowers’ rights in Clause 16.25 shall immediately cease and the Lender shall be entitled to treat such failure to pay (after any applicable grace period) as an Event of Default.
 
(c)            In the event that the relevant Borrower proposes a substitute charterer in accordance with Clause 16.25(b), the Lender shall then be required to undertake a credit review, in good faith but in a manner which it considers appropriate, of the terms of this Agreement.  The Lender shall be entitled, as part of the credit review process for a valuation to be carried out in respect of the relevant Vessel in accordance with Clause 17 (Valuation) except that the provisions of Clause 17.1(b) shall not apply and the valuation shall be carried out on both a with and
 
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without charter basis.  The Lender’s determination pursuant to the credit review shall be made in the Lender’s absolute discretion and the Lender shall inform the Borrowers upon having reached such determination.  In the event that the Lender does not find the results of the credit review satisfactory, the Lender shall be entitled to require any amendments to the Agreement which, in its absolute discretion, it may consider appropriate.
 
(d)            After notification by the Lender to the relevant Borrower of the results of its determination the relevant Borrower shall within a period of 60 days from the date of the Lender’s notification, during which time no Event of Default may occur or be continuing either:
 
(i)             comply with the requirements of the Lender’s credit review; or
 
(ii)            prepay the outstanding Loan in respect of that Vessel, together with accrued interest and all other amounts accrued under the Finance Documents in respect of the Vessel in accordance with Clause 6.
 
(e)            In the event the relevant Borrower enters into a substitute charter in accordance with Clause 16.25(c) or 16.25(d), the Borrower shall execute an assignment of time charter and earnings in the same form (mutatis mutandis) as the Time Charter and Earnings Assignment together with all notices and acknowledgements thereto.
 
16.26       Scope of Obligatory Insurances
 
Each Borrower shall or shall procure that the Owners or the Bareboat Charterers, in respect of each Vessel:
 
(a)            obtain the Builder’s compliance with the Builder’s Risk Insurances as detailed in Article XVII of each Shipbuilding Contract.
 
(b)            at all times after the relevant Delivery Date keep the Vessel insured in the Required Insurance Amount, in Dollars in the name of the relevant Owner and the Bareboat Charter or (if the Lender so requires) in the joint names of the relevant Owner the Lender and the Bareboat Charter without the Lender being liable but having the right to pay premiums, through brokers approved by the Lender against fire and usual marine risks (including hull and machinery and Excess Risks) with approved underwriters or insurance companies approved by the Lender and by policies in form and content approved by the Lender;
 
(c)            at all times after the relevant Delivery Date keep that Vessel insured in the Required Insurance Amount in the same manner as above against war risks (including risks of mines and all risks, whether or not regarded as war risks, London Blocking and Trapping Addendum and Lost Vessel Clause, excepted by the free of capture and seizure clauses in the standard form of Lloyds marine policy) either:
 
(i)             with underwriters or insurance companies approved by the Lender and by policies in form and content approved by the Lender; or
 
(ii)            by entering the relevant Vessel in an approved war risks association,
 
and for the avoidance of doubt, such war risks insurance will include protection and indemnity liability up to at least the Required Insurance Amount, excluding any liability in respect of death, injury or damage to crew;
 
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(d)            at all times after the relevant Delivery Date keep that Vessel entered in respect of her full value and tonnage in an approved protection and indemnity association against all risks as are normally covered by such protection and indemnity association (including pollution risks and the proportion not recoverable in case of collision under the running down clause inserted in the ordinary Lloyds policies), such cover for pollution risks to be for:
 
(i)             a minimum amount of US$1,000,000,000 or such other amount of cover against pollution risks as shall at any time be comprised in the basic entry of each Vessel with either a protection and indemnity association which is an acceptable member of either the International Group of protection and indemnity associations (or any successor organisation designated by the Lender for this purpose) or the International Group (or such successor organisation) itself; or
 
(ii)            if the International Group or any such successor ceases to exist or ceases to provide or arrange any cover for pollution risks (or any supplemental cover for pollution risks over and above that afforded by the basic entry of each Vessel with its protection and indemnity association), such aggregate amount of cover against pollution risks as shall be available on the open market and by basic entry with a protection and indemnity association for ships of the same type, size, age and flag as each respective Vessel,
 
provided that, if any Vessel has ceased trading or is in lay up and in either case has unloaded all cargo, the level of pollution risks cover afforded by ordinary protection and indemnity cover available through a member of the International Group or such successor organisation or, as the case may be, on the open market in such circumstances shall be sufficient for such purposes;
 
(e)            at all times after either of the Vessels is let on charter, maintain in full force and effect off-hire insurance in respect of that Vessel with underwriters or insurance companies approved by the Lender in form and content approved by the Lender; and
 
(f)             at all times after the Delivery Date, whenever either Vessel is trading to Japanese territorial waters and when so required by the Lender, maintain in full force and effect social responsibility insurance in respect of the Vessel with underwriters or insurance companies approved by the Lender and by policies in form and content approved by the Lender provided always that a first class owner or operator of vessels such as the Vessels would maintain such social responsibility insurance.
 
16.27       Mortgagee’s interest and additional perils insurances
 
The Lender shall, in respect of each Vessel, be entitled from time to time to effect from the Delivery Date, maintain and renew all or any of the following insurances in the relevant Required Insurance Amount, and on such terms, through such insurers and in such manner as the Lender may from time to time consider appropriate:
 
(a)            a mortgagee’s interest marine insurance 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 Vessel or a liability of a Vessel or a 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
 
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payment) by the underwriters by reason of, or on the basis of any allegation concerning:
 
(i)             any act or omission on the part of an Owner or the Bareboat Charterer or a Borrower, of any operator or manager of any Vessel or of any officer, employee or agent of an Owner or the Bareboat Charterer 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 an Owner or the Bareboat Charterer or any other person referred to in paragraph (i) above, or of any officer, employee or agent of an Owner or the Bareboat Charterer or of such a person, including the casting away or damaging of any Vessel and/or any Vessel 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)            where any Vessel is trading into the waters of the United States of America or any other jurisdiction which in the future introduces unlimited liability regimes, a mortgagee’s interest additional perils policy providing for the indemnification of the Lender against, amongst other things, any Losses or other consequences of any Environmental Claim, including the risk of expropriation, arrest or any form of detention of any Vessel, or the imposition of any Security Interest over any Vessel and/or any other matter capable of being insured against under a mortgagee’s interest additional perils (pollution) policy whether or not similar to the foregoing,
 
and the Borrowers shall upon demand fully indemnify the Lender in respect of all premiums 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.
 
16.28       Obligatory Insurances
 
Without prejudice to its obligations under Clause 16.26 (Scope of Obligatory Insurances), each Borrower will or shall procure that the Manager or the Bareboat Charterer will:
 
(a)            not without the prior consent of the Lender alter any Obligatory Insurance nor make, do, consent or agree to any act or omission which would or might render any Obligatory Insurance invalid, void, voidable or unenforceable or render any sum paid out under any Obligatory Insurance repayable in whole or in part;
 
(b)            not cause or permit any Vessel to be operated in any way inconsistent with the provisions or warranties of, or implied in, or outside the cover provided by, any Obligatory Insurance or to be engaged in any voyage or to carry any cargo not permitted by any Obligatory Insurances without first covering the relevant Vessel in the relevant Required Insurance Amount and her freights for an amount approved by the Lender in Dollars or another approved currency with approved insurers;
 
(c)            duly and punctually pay all premiums, calls, contributions or other sums of money from time to time payable in respect of any Obligatory Insurance;
 
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(d)            renew all Obligatory Insurances at least 14 days before the relevant policies or contracts expire and procure that the approved brokers and/or war risks and protection and indemnity clubs and associations shall promptly confirm in writing to the Lender as and when each renewal is effected;
 
(e)            forthwith upon the effecting of any Obligatory Insurance, give written notice of the insurance to the Lender stating the full particulars (including the dates and amounts) of the insurance, and on request produce the receipts for each sum paid by it pursuant to paragraph (c) above;
 
(f)             not settle, release, compromise or abandon any claim in respect of any Total Loss unless the Lender is satisfied that such release, settlement compromise or abandonment will not prejudice its interests under or in relation to any Finance Document;
 
(g)            arrange for the execution and delivery of such guarantees as may from time to time be required by any protection and indemnity or war risks club or association;
 
(h)            procure that the interest of the  Lender is noted on all policies of insurance;
 
(i)             procure that a loss payee provision in the form scheduled to the relevant Bareboat Charter and reflecting the provisions of Clause 16.29 (Application of Insurance Proceeds) is endorsed on all policies of insurance;
 
(j)             obtain from the relevant insurance brokers and P&I Club letters and undertakings in  form and substance satisfactory to the Lender; and
 
(k)            in the event that an Owner, a Borrower or the Bareboat Charterer receives payment of any moneys under the General Assignment, save as provided in the loss payable clauses scheduled to the relevant Bareboat Charter, forthwith pay over the same to the Lender and until paid over such moneys shall be held in trust for the Lender by a Borrower, the Owner or the Bareboat Charterer, as the case may be.
 
16.29       Application of Insurance Proceeds
 
(a)            All sums receivable in respect of the Obligatory Insurances after the occurrence of an Event of Default shall be paid to the Lender and the Lender shall apply them in accordance with the relevant provisions of the relevant Intercreditor Deed and thereafter in accordance with Clause 13.7 (Payments).
 
(b)            Subject to paragraph (a) above:
 
(i)             each sum receivable in respect of a major casualty (being any casualty in respect of which the claim or the aggregate of the claims exceeds US$3,000,000 (or its equivalent)), other than in respect of protection and indemnity risk insurances, shall be paid to the Lender; and
 
(ii)            the insurance moneys received by the Lender in respect of any such major casualty shall be paid:
 
(A)           to the person to whom the relevant liability shall have been incurred; or
 
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(B)            upon a Borrower furnishing evidence satisfactory to the Lender that all loss and damage resulting from the casualty has been properly made good and repaired, to the Owner or, at the option of the Lender, to the person by whom any repairs have been or are to be effected.
 
(iii)           The receipt by any such person referred to in paragraph (A) and (B) of paragraph (ii) above shall be a full and sufficient discharge of the same to the Lender.
 
(c)            Subject to paragraph (a) above, each sum receivable in respect of the Obligatory Insurances (insofar as the same are hull and machinery or war risks insurances) which does not exceed US$3,000,000 or its equivalent shall be paid in full to the Bareboat Charterer or to its order and shall be applied by it for the purpose of making good the loss and fully repairing all damage in respect of which the receivable shall have been collected.
 
(d)            Subject to paragraph (a) above, each sum receivable in respect of protection and indemnity risk Obligatory Insurances shall be paid direct to the person to whom the liability, to which that sum relates, was incurred, or to the Bareboat Charterer in reimbursement to it of moneys expended in satisfaction of such liability.
 
(e)            Subject to paragraph (a), each sum receivable in respect of off-hire insurance shall be paid into the relevant Earnings Account and shall be applied in accordance with the provisions of Clause 12.
 
(f)             Notwithstanding any other provision in this Clause 16.29, all sums receivable in respect of Obligatory Insurances relating to a Total Loss shall be applied in accordance with the relevant provisions of the relevant Intercreditor Deed and thereafter in accordance with Clause 13.7 (Payments).
 
16.30       Power of Lender to Insure
 
If an Owner, the Borrowers or the Bareboat Charterer fails to effect and keep in force Obligatory Insurances in accordance with this Agreement, it shall be permissible, but not obligatory, for the Lender to effect and keep in force insurance or insurances in the amounts required under this Agreement and entries in a protection and indemnity association or club and, if it deems necessary or expedient, to insure the war risks upon either Vessel, and the Borrowers will reimburse the Lender for the costs of so doing.
 
16.31       ISM Code
 
Each Borrower shall, and shall procure that the Manager, the Owners and the Bareboat Charterer shall:
 
(a)            at all times after the Delivery Date of a Vessel comply, and be responsible for compliance by itself and by such Vessel, with the ISM Code;
 
(b)            at all times after the Delivery Date of a Vessel ensure that:
 
(i)             the Vessel has a valid Safety Management Certificate;
 
(ii)            the Vessel is subject to a safety management system which complies with the ISM Code; and
 
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(iii)           there is a valid Document of Compliance for the Vessel, which is held on board the Vessel,
 
and shall deliver to the Lender, on or before the Delivery Date in respect of that Vessel, a copy of a valid Safety Management Certificate and a valid Document of Compliance in respect of the relevant Vessel, in each case duly certified by an officer of the Owner of that Vessel;
 
(c)            promptly notify the Lender of any actual or, upon becoming aware of the same, threatened withdrawal of an applicable Safety Management Certificate or Document of Compliance;
 
(d)            promptly notify the Lender of the identity of the person ashore designated for the purposes of paragraph 4 of the ISM Code and of any change in the identity of that person; and
 
(e)            promptly upon becoming aware of the same notify the Lender of the occurrence of any accident or major non-conformity requiring action under the ISM Code.
 
16.32       ISPS Code
 
Each Borrower shall, and shall procure that the relevant Manager the Owners and the Bareboat Charterer shall, at all times after the Delivery Date of a Vessel:
 
(a)            comply and be responsible for compliance by itself and by such Vessel with the ISPS Code;
 
(b)            ensure that:
 
(i)             the Vessel has a valid International Ship Security Certificate;
 
(ii)            the Vessel’s security system and its associated security equipment comply with section 19.1 of Part A of the ISPS Code;
 
(iii)           the Vessel’s security system and its associated security equipment comply in all respects with the applicable requirements of Chapter XI-2 of SOLAS and Part A of the ISPS Code; and
 
(iv)           an approved ship security plan is in place.
 
16.33       No amendment to Related Contracts
 
The Borrowers shall not and shall procure that the Owners and the Bareboat Charterer shall not, amend or agree to any amendment to the Related Contracts without the prior written consent of the Lender, subject always to the provisions of Clause 8.2 of the Multipartite Deed.
 
17.           VALUATION
￠
17.1         Valuation
 
For the purposes of this Clause 17:
 
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(a)            the value of either Vessel shall be the mean average of two valuations each certified in Dollars and carried out by two of the Approved Valuers, reporting to the Lender on the basis of sale for prompt delivery of the Vessel for cash (free of Security Interests) at arm’s-length on normal commercial terms as between willing seller and buyer;
 
(b)            any valuation shall be on a with charter basis provided always that if the Time Charter terminates, the Lender shall be entitled to require a further valuation of the relevant Vessel on a without charter basis. Such valuation shall be at the expense of the Borrowers notwithstanding the provisions of Clause 17.2(e); and
 
(c)            there shall be deducted from any value or valuation the amount which is owing or might become owing and which is secured on the asset concerned by any prior or equal ranking Security Interest (other than in favour of the Lender to secure the Secured Liabilities).
 
17.2         Delivery of Valuations
 
(a)            In respect of a Vessel, the Borrower will from the Delivery Date of such Vessel procure one valuation per annum from two of the Approved Valuers prepared in accordance with Clause  17.1 (Valuation).
 
(b)            The Borrowers will procure in favour of the Lender and the Approved Valuers all such information, facilities and rights of inspection as they may reasonably (having regard to the use and operation of the relevant Vessel) require in order to effect such valuations.
 
(c)            Subject to Clause 17.2(e) below, all valuations shall be, as between the Borrowers and the Lender at the expense of the relevant Borrower.
 
(d)            The Lender shall be entitled to require that the relevant Borrower procure a valuation in respect of a Vessel at any time during the Post-Delivery Period.  In the event that such valuation shows that the value of any of the Vessels does not reach the relevant Required Amount as required under Clause 16.13 (a), (b) or, as the case may be, (c), the provisions of that Clause shall apply.
 
(e)            In the event that a valuation procured by the Lender pursuant to Clause 17.2(d) does show that the value of the Vessels reaches the relevant Required Amount as required under Clause  16.13 (a), (b) or, as the case may be, (c), such valuation shall be at the expense of the Lender.
 
(f)             If an Event of Default has occurred and is continuing, the relevant Borrower shall be liable to pay for up to five valuations of any Vessel (one from each of the Approved Valuers) under Clause 17.2(a) in any one calendar year.
 
(g)            Any valuation under this Clause 17 shall be binding and conclusive (save for manifest error).
 
18.           DEFAULT
￠
18.1         Events of Default
 
Each of the events set out in this Clause is an Event of Default.
 
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18.2         Non-payment
 
A Borrower does not pay on the due date any amount payable by it under the Finance Documents in the manner required under the Finance Documents, unless the non-payment:
 
(a)            is caused by technical or administrative error; and
 
(b)            is remedied within three Business Days of the due date.
 
18.3         Breach of other obligations
 
(a)            A Borrower does not comply with any term of Clause 16 (General Covenants), unless the non-compliance;
 
(i)             is capable of remedy; and
 
(ii)            is remedied within 14 days of the earlier of the Lender giving notice and the Borrower becoming aware of the non-compliance.
 
The Borrower acknowledges that for the purposes of paragraph (i) above, non-compliance with the following provisions of this Agreement shall not be capable of remedy;
 
(i)             Clause 3.1(b) (Conditions Precedent and Subsequent Documents);
 
(ii)            Clause 16.11(a) and (b) (Security), but in respect of sub-paragraph (b) only in so far as it relates to the Mortgage, the General Assignment, the Time Charter and Earnings Assignment, the Second Priority Deposit Account Charge and the Deed of Counter-Indemnity;
 
(iii)           Clause 16.12(a) (Registration of Vessels); and
 
(iv)           Clause 16.26(b),(c) and (d) (Scope of Obligatory Insurances) .
 
(b)            Subject to paragraph (c) below, any Party (other than the Lender) does not comply with any other term of the Finance Documents or the Related Contracts (other than the Vessel Management Agreements and the Bareboat Charters) not already referred to in this Clause which the Lender considers to be material, unless the non-compliance:
 
(i)             is capable of remedy; and
 
(ii)            is remedied within 14 days of the earlier of the Lender giving notice and the relevant Party becoming aware of the non-compliance.
 
(c)            Any Party (other than the Lender) does not comply with any other term of the Management Agreements or the Bareboat Charter which the Lender considers to be material, unless the non-compliance:
 
(i)             is capable of remedy; and
 
(ii)            is remedied within 30 days of the earlier of the Lender giving notice and the relevant Party becoming aware of the non-compliance.
 
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provided always that (i) in the opinion of the Lender, any delay in the enforcement by the Lender of its rights and privileges is not likely to adversely affect the rights of the Lender and (ii) the Borrowers shall continue to fulfil all other of their obligations under the Finance Documents and the Related Contracts during such period;
 
(d)            The termination or expiry without renewal of either of the Bareboat Charters or either of the AML Time Charters
 
(e)            A Borrower does not serve an extension notice on AML under the AML Time Charter by the date falling 5 days before the last day on which it is able to serve such notice in accordance with the provisions of Clause 32 of the AML Time Charter.
 
18.4         Misrepresentation
 
A representation made or repeated by a Borrower (or by any other Party other than the Lender) in any Finance Document or in any document delivered by or on behalf of a Borrower under any Finance Document is incorrect in any respect which the Lender considers to be material when made or deemed to be repeated, unless the circumstances giving rise to the misrepresentation:
 
(a)            are capable of remedy; and
 
(b)            are remedied within fourteen days of the earlier of the Lender giving notice and the relevant Party becoming aware of the misrepresentation.
 
18.5         Cross-default
 
Any of the following occurs in respect of a Borrower, or any other member of the Danaos Group:
 
(a)            any of its Financial Indebtedness is not paid when due (after the expiry of any originally applicable grace period);
 
(b)            any of its Financial Indebtedness:
 
(i)             becomes prematurely due and payable;
 
(ii)            is placed on demand; or
 
(iii)           is capable of being declared by a creditor to be prematurely due and payable or being placed on demand,
 
in each case, as a result of an event of default (howsoever described) and after the expiry of any applicable grace period; or
 
(c)            any commitment for its Financial Indebtedness is cancelled or suspended as a result of an event of default (howsoever described),
 
unless the aggregate amount of Financial Indebtedness falling within paragraphs (a)-(c) above is less than US$5,000,000 or its equivalent (in the case of a Borrower) or US$20,000,000 or its equivalent (in the case of any other member of the Danaos Group).
 
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18.6         Insolvency
 
Any of the following occurs in respect of a Borrower or any other member of the Danaos Group:
 
(a)            it is, or is deemed for the purposes of any Applicable Law to be, unable to pay its debts as they fall due or insolvent;
 
(b)            it admits its inability to pay its debts as they fall due;
 
(c)            it suspends making payments on any of its debts or announces an intention to do so;
 
(d)            by reason of actual or anticipated financial difficulties, it begins negotiations with any creditor for the rescheduling of any of its indebtedness; or
 
(e)            a moratorium is declared in respect of any of its indebtedness.
 
If a moratorium occurs in respect of a Borrower or any other member of the Danaos Group, the ending of the moratorium will not remedy any Event of Default caused by the moratorium.
 
18.7         Insolvency proceedings
 
(a)            Except as provided below, any of the following occurs in respect of a Borrower or any other member of the Danaos Group, the Owners, the L/C Bank (or any replacement bank providing a letter of credit) or prior to the release or discharge of the Second Deposit Charge, the Deposit Bank (or any replacement bank holding the Deposit Accounts), the Bareboat Charterer:
 
(i)             any step is taken with a view to a moratorium, a composition, assignment or similar arrangement with any of its creditors;
 
(ii)            a meeting of its shareholders, directors or other officers is convened for the purpose of considering any resolution to petition for or to file documents with a court for  its winding-up, administration or dissolution or any such resolution is passed;
 
(iii)           any person presents a petition, or files documents with a court  for its winding-up, administration or dissolution;
 
(iv)           an order for its winding-up, administration or dissolution is made;
 
(v)            any liquidator, trustee in bankruptcy, judicial custodian, compulsory manager, receiver, administrative receiver, administrator or similar officer is appointed in respect of it or any of its assets;
 
(vi)           its directors, shareholders or other officers request the appointment of, or give notice of their intention to appoint a liquidator, trustee in bankruptcy, judicial custodian, compulsory manager, receiver, administrative receiver, administrator or similar officer; or
 
(vii)          any other analogous step or procedure is taken in any jurisdiction.
 
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(b)            Paragraph (a) above does not apply to a frivolous or vexatious petition for winding-up presented by a creditor which is being contested in good faith and with due diligence and is discharged or struck out within fourteen days.
 
18.8         Creditors’ process
 
Any attachment, sequestration, distress, execution or analogous event affects any asset(s) of a Borrower, or any other member of the Danaos Group, having an aggregate value of five Million Dollars (US$5,000,000) or its equivalent (in the case of a Borrower) and US$20,000,000 or its equivalent (in the case of any other member of the Danaos Group), and is not discharged within fourteen days.
 
18.9         Cessation of business
 
A Borrower or any other member of the Danaos Group ceases, or threatens to cease, to carry on business except as a result of any disposal not prohibited under this Agreement.
 
18.10       Failure to pay final judgment
 
A Borrower or any other member of the Danaos Group fails to comply with or pay any sum due from it under any final judgement or any final order made or given by any court of competent jurisdiction.
 
18.11       Effectiveness of Finance Documents
 
(a)            It is or becomes unlawful for any Borrower or any other Party (other than the Lender) to perform any of its obligations under the Finance Documents which the Lender considers material.
 
(b)            Any Finance Document is not effective or is alleged by the relevant Borrower to be ineffective for any reason.
 
(c)            Any Finance Document is not effective or is alleged by any Party (other than the Lender or a Borrower) to be ineffective for any reason and in any respect which the Lender considers to be material.
 
(d)            A Borrower repudiates a Finance Document or evidences an intention to repudiate a Finance Document.
 
(e)            Any Party (other than a Lender) repudiates any material provision of a Finance Document or evidences an intention to repudiate any material provision of a Finance Document.
 
18.12       Material adverse change
 
Any event or series of events occurs in respect of a Borrower which, in the reasonable opinion of the Lender, is likely to have a Material Adverse Effect.
 
18.13       Invalidity of Security Documents
 
Any of the Security Documents ceases to be valid or any of those Security Documents creating a Security Interest in favour of the Lender ceases to provide a perfected first priority security interest in favour of the Lender.
 
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18.14       Acceleration
 
If an Event of Default is outstanding, the Lender may, by notice to the Borrowers:
 
(a)            cancel the undrawn, uncancelled amount of the Maximum Facility Amount; and/or
 
(b)            declare that all or part of any amounts outstanding under the Finance Documents are:
 
(i)             immediately due and payable; and/or
 
(ii)            payable on demand by the Lender.
 
Any notice given under this Subclause will take effect in accordance with its terms.
 
19.           EVIDENCE AND CALCULATIONS
￠
19.1         Accounts
 
Accounts maintained by the Lender in connection with this Agreement are conclusive (save for manifest error) evidence of the matters to which they relate for the purpose of any litigation or arbitration proceedings.
 
19.2         Certificates and determinations
 
Any certification or determination by the Lender of a rate or amount under the Finance Documents will be, in the absence of manifest error, conclusive evidence of the matters to which it relates.
 
19.3         Calculations
 
Any interest or fee accruing under this Agreement accrues from day to day and is calculated on the basis of the actual number of days elapsed and a year of 360 days or otherwise, depending on what the Lender determines is market practice.
 
20.           FEES
￠
20.1         Exposure fee
 
(a)            Each Borrower must pay to the Lender an exposure fee calculated at the rate of 0.3725% per annum in respect of all amounts drawn under their respective Loan.
 
(b)            The exposure fee in respect of each Loan shall accrue from the first Drawing under that Loan and shall be payable as part of the interest payment in accordance with Clause 7.
 
20.2         Commitment fee
 
(a)            The Borrowers must pay a commitment fee calculated at the rate of 0.3 per cent. per annum on the undrawn, uncancelled amount of each Maximum Available Loan Amount.  The commitment fee shall accrue from the earlier of (i) the date falling 60 days of the date of this Agreement and (ii) the date of the first Drawing under the relevant Loan.
 
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(b)            Accrued commitment fee is payable quarterly in arrears on the last day of each Term.  Accrued commitment fee on that part of any Maximum Available Loan Amount which is cancelled is payable to the Lender on the date such part of such Loan(s) is cancelled in full.
 
20.3         Management fee
 
(a)            The Borrowers must pay to the Lender a one time management fee calculated at the rate of 0.3% of the amount of each Maximum Available Loan Amount.
 
(b)            The management fee shall be payable on the date of the first Drawing under the relevant Loan and shall be capitalised and added to the principal amount of the Loan outstanding on that date.
 
20.4         Refund of fees
 
The fees referred to in this Clause 20 shall not be refunded under any circumstances whatsoever once they have been paid to the Lender.
 
21.           INDEMNITIES AND BREAK COSTS
￠
21.1         Currency indemnity
 
(a)            Each of the Borrowers shall, as an independent obligation and within 3 Business Days of demand, indemnify the Lender against any cost, loss or liability which the Lender incurs as a consequence of:
 
(i)             the Lender receiving an amount in respect of a Borrower’s liability under the Finance Documents; or
 
(ii)            that liability being converted into a claim, proof, judgment or order,
 
in a currency other than the currency in which the amount is expressed to be payable under the relevant Finance Document.
 
(b)            Each of the Borrowers waives any right it may have in any jurisdiction to pay any amount under the Finance Documents in a currency other than that in which it is expressed to be payable.
 
21.2         Other indemnities
 
(a)            Each of the Borrowers shall, as an independent obligation and within 3 Business Days of demand, indemnify the Lender against any cost, loss or liability which the Lender incurs as a consequence of:
 
(i)             the occurrence of any Event of Default;
 
(ii)            any failure by a Borrower to pay any amount due under a Finance Document on its due date;
 
(iii)           (other than by reason of negligence or default by the Lender) a Loan not being made after a Request has been delivered for that Loan; or
 
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(iv)           a Loan (or part of a Loan) not being prepaid in accordance with a notice of prepayment.
 
The liability of the Borrowers in each case includes any cost, loss or expense on account of funds borrowed, contracted for or utilised to fund any amount payable under any Finance Document, any amount repaid or prepaid or any Loan.
 
(b)            Each Borrower must indemnify against any cost, loss or liability incurred by the Lender as a result of:
 
(i)             investigating any event which the Lender reasonably believes to be a Default; or
 
(ii)            acting or relying on any notice from any Party which the Lender reasonably believes to be genuine, correct and appropriately authorised.
 
(c)            Each Borrower must indemnify and hold the Lender harmless on a full indemnity basis, from and against each and every Loss:
 
(i)             arising directly or indirectly out of or in any way connected with the ownership, possession, performance, transportation, management, sale, import to or export from any jurisdiction, control, use or operation, registration, navigation, certification, classification, management, manning, provisioning, the provision of bunkers and lubricating oils, testing, design, condition, delivery, acceptance, leasing, sub-leasing, chartering, insurance, maintenance, repair, service, modification, refurbishment, drydocking, survey, conversion, overhaul, replacement, removal, repossession, return, redelivery, storage, sale, disposal, the complete or partial removal, decommissioning, making safe, destruction, abandonment or loss by either of the Borrowers or any other person of either of the Vessels or caused by either of the Vessels becoming a wreck or an obstruction to navigation, whether or not such Liability may be attributable to any defect in either of the Vessels or to the design, construction or use thereof or from any maintenance, service, repair, drydocking, overhaul, inspection or for any other reason whatsoever (whether similar to any of the foregoing or not), and regardless of when the same shall arise and whether or not either of the Vessels (or any part thereof) is in possession or control of the relevant Borrower or  the Manager or any other person and whether or not the same is in United Kingdom waters or abroad;
 
(ii)            arising directly or indirectly out of or in any way connected with any Release of Hazardous Material, any Environmental Claim, or any breach of an Environmental Law or the terms and conditions of an Environmental Approval;
 
(iii)           as a consequence of any claim that any design, article or material in either of the Vessels or any part thereof or relating thereto or the operation or use thereof constitutes an infringement of patent, copyright, design or other proprietary right; or
 
(iv)           in preventing or attempting to prevent the arrest, seizure, taking in execution, requisition, impounding, forfeiture or detention of either of the Vessels or in securing or attempting to secure the release of either of the Vessels.
 
21.3         Break Costs
 
(a)            Each Borrower must pay to the Lender its Break Costs in accordance with this Agreement.
 
(b)            Break Costs are the amount (if any) determined by the Lender by which:
 
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(i)             the interest which the Lender would have received for the period from the date of receipt of payment of a Loan or an overdue amount to the last day of the current Term for that Loan or overdue amount if the principal or overdue amount received had been paid on the last day of that Term;
 
exceeds
 
(ii)            the amount which the Lender would be able to obtain by placing an amount equal to the amount received by it on deposit with a leading bank in the appropriate interbank market for a period starting on the Business Day following receipt and ending on the last day of the applicable Term.
 
(c)            The Lender must supply to the Borrowers details of the amount of any Break Costs claimed by it under this Clause.
 
22.           EXPENSES
 
22.1         Initial costs
 
The Borrowers must pay to the Lender the amount of all reasonable costs and expenses (including legal fees) incurred by it in connection with (but not limited to) the negotiation, preparation, printing and execution of the Finance Documents.
 
22.2         Subsequent costs
 
The Borrowers must pay to the Lender the amount of all costs and expenses (including legal fees) incurred by it in connection with:
 
(a)            the negotiation, preparation, printing and execution of any Finance Document executed after the date of this Agreement; and
 
(b)            any amendment, waiver or consent requested by or on behalf of an Owner or specifically allowed by this Agreement.
 
The Borrowers shall not be required to bear the amount of any costs and expenses (including legal fees) incurred by the Lender or the New Lender (as that term is defined in Clause 25.2) in connection with any voluntary transfer made by the Lender under this Agreement or any of the Security Agreements.  In the event that the Lender is required to undertake any such transfers as a result of the provisions of Clause 11.4 (Mitigation) any costs of the Lender or the New Lender arising out of such transfer shall be payable by the Borrowers.
 
22.3         Enforcement costs
 
The Borrowers must pay to the Lender the amount of all costs and expenses (including legal fees) incurred by it in connection with the enforcement or attempted enforcement of, or the preservation or attempted preservation of any rights under, any Finance Document.
 
23.           WAIVER OF CONSEQUENTIAL DAMAGES
￠
In no event shall the Lender be liable on any theory of liability for any special, indirect, consequential or punitive damages and each Borrower hereby waives, releases and agrees (for itself and on behalf of its Subsidiaries) not to sue upon any such claim for any such damages,
 
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unless caused by the fraud, wilful default or recklessness of the Lender in performance of any of its obligations under this Agreement or any of the Finance Documents.
 
24.           AMENDMENTS AND WAIVERS
￠
24.1         Procedure
 
Except as provided in this Clause, no term of the Finance Documents may be amended or waived without the agreement of the Borrowers and the Lender.
 
24.2         Change of currency
 
If a change in any currency of a country occurs (including where there is more than one currency or currency unit recognised at the same time as the lawful currency of a country), the Finance Documents will be amended to the extent the Lender (acting reasonably and after consultation with the Borrowers) determines is necessary to reflect the change.
 
24.3         Waivers and remedies cumulative
 
The rights of the Lender under the Finance Documents:
 
(a)            may be exercised as often as necessary;
 
(b)            are cumulative and not exclusive of its rights under the general law; and
 
(c)            may be waived only in writing and specifically.
 
Delay in exercising or non-exercise of any right is not a waiver of that right.
 
25.           CHANGES TO THE PARTIES
￠
25.1         Assignments and transfers by Borrowers
 
The Borrowers may not assign or transfer any of their respective rights and obligations under the Finance Documents without the prior consent of the Lender.
 
25.2         Assignments and transfers by Lender
 
(a)            The Lender may, subject to the following provisions of this Subclause, at any time assign or transfer (including by way of novation) any of its rights and obligations under this Agreement to (i) any commercial bank organized under the laws of any country that is a member of the OECD or has concluded special lending arrangements with the International Monetary Fund Associated with its General Arrangements to Borrow, or a political subdivision of any such country, and having total assets in excess of US$300,000,000 so long as such bank is acting through a branch or agency located in the country in which it is organized or another country that is described in this clause (i); or (ii) the central bank of any country that is a member of the OECD; (iii) any Chinese bank having total assets in excess of US$300,000,000 (iv) any finance company, insurance company or other financial institution or fund (whether a corporation, partnership, trust or other entity) that is engaged in making, purchasing or otherwise investing in commercial loans in the ordinary course of its business and has total assets in excess of US$300,000,000; and (v) any other person approved by the Lender and the
 
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Owners, such approval not to be unreasonably withheld (the New Lender ), provided always that:
 
(i)             each assignment or transfer shall be uniform, and not a varying percentage of all rights and obligations under this Agreement;
 
(ii)            each assignment or transfer shall not result in increased liability to the Borrowers;
 
(iii)           the Lender shall provide to the Borrowers details of the proposed new lenders at least 7 Business Days prior to the proposed transfer date. The Borrowers shall be entitled to object to the identity of any one or more of the proposed new lenders on such list (such objections to be made on reasonable grounds). The Lender shall be entitled to effect a transfer or assignment to any proposed new lender on such list to which the Borrowers have not objected on reasonable grounds within such 7 Business Day period;
 
(iv)           at no time shall the number of New Lenders and the Lender exceed 8; and
 
(v)            at all times, the Lender shall act as agent and security trustee in respect of the transaction.
 
(b)            A transfer of obligations will be effective only if either:
 
(i)             the obligations are novated in accordance with the following provisions of this Clause 25; or
 
(ii)            the New Lender confirms to the Lender and the Borrowers in form and substance reasonably satisfactory to the Lender and the Borrowers that it is bound by the terms of this Agreement.
 
(c)            On the transfer becoming effective in this manner the Lender will be released from its obligations under this Agreement to the extent that they are transferred to the New Lender.
 
(d)            Any reference in this Agreement to the Lender includes a New Lender but excludes the Lender if no amount is or may be owed to or by it under this Agreement.
 
25.3         Procedure for transfer by way of novations
 
(a)            In this Subclause:
 
Transfer Date means, for a Transfer Certificate, the later of:
 
(i)             the proposed Transfer Date specified in that Transfer Certificate; and
 
(ii)            the date on which the Lender executes that Transfer Certificate.
 
(b)            A novation is effected if the Lender and the New Lender execute a duly completed Transfer Certificate;
 
(c)            On the Transfer Date:
 
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(i)             the New Lender will assume the rights and obligations of the Lender expressed to be the subject of the novation in the Transfer Certificate in substitution for the Lender; and
 
(ii)            the Lender will be released from those obligations and cease to have those rights.
 
25.4         Limitation of responsibility of Lender
 
(a)            Unless expressly agreed to the contrary, the Lender is not responsible to a New Lender for:
 
(i)             the legality, validity, effectiveness, completeness, accuracy, adequacy or enforceability of any Finance Document or any other document;
 
(ii)            the financial condition of any Borrower;
 
(iii)           the performance and observance by any Borrower of its obligations under the Finance Documents or any other documents; or
 
(iv)           the accuracy of any statement or information (whether written or oral) made in or supplied in connection with any Finance Document,
 
and any representations or warranties implied by law are excluded.
 
(b)            Each New Lender confirms to the Lender that it:
 
(i)             has made, and will continue to make, its own independent appraisal of all risks arising under or in connection with the Finance Documents (including the financial condition and affairs of each Borrower and its related entities and the nature and extent of any recourse against any Party or its assets) in connection with its participation in this Agreement; and
 
(ii)            has not relied exclusively on any information supplied to it by the Lender in connection with any Finance Document.
 
(c)            Nothing in any Finance Document requires the Lender to:
 
(i)             accept a re-transfer from a New Lender of any of the rights and obligations assigned or transferred under this Clause; or
 
(ii)            support any losses incurred by the New Lender by reason of the non-performance by a Borrower of its obligations under any Finance Document or otherwise.
 
25.5         Costs resulting from change of Lender or Facility Office
 
If:
 
(a)            the Lender assigns or transfers any of its rights and obligations under the Finance Documents or changes its Facility Office; and
 
(b)            as a result of circumstances existing at the date the assignment, transfer or change occurs, a Borrower would be obliged to pay a Tax Payment or an Increased Cost,
 
67

 
then, unless the assignment, transfer or change is made by the Lender to mitigate any circumstances giving rise to a Tax Payment, Increased Cost or a right to be prepaid and/or cancelled by reason of illegality, the relevant Borrower need only pay that Tax Payment or Increased Cost to the same extent that it would have been obliged to if no assignment, transfer or change had occurred.
 
26.           DISCLOSURE OF INFORMATION
￠
The Lender may disclose to any of its Affiliates or any other person who has not been objected to by the Borrowers pursuant to Clause 25.2(a)(ii):
 
(a)            to (or through) whom the Lender assigns or transfers (or may potentially assign or transfer) all or any of its rights and obligations under this Agreement;
 
(b)            with (or through) whom the Lender enters into (or may potentially enter into) any sub-participation in relation to, or any other transaction under which payments are to be made by reference to, this Agreement or a Borrower;
 
(c)            to whom, and to the extent that, information is required to be disclosed by any Applicable Law; or
 
(d)            to its and the Borrowers’ professional advisors,
 
any information about a Borrower, any other member of the Danaos Group, or the Finance Documents as the Lender shall consider appropriate if, in relation to paragraphs (a) and (b) above, the person to whom the information is to be given has entered into a  Confidentiality Undertaking.  Except as provided in this clause, the Lender may not disclose any information about an Owner, any other member of the Danaos Group, or the Finance Documents to any person.
 
27.           SET-OFF
￠
The Lender may set off any matured obligation owed to it by either of the Borrowers under the Finance Documents against any obligation (whether or not matured) owed by the Lender to that Borrower, regardless of the place of payment, booking branch or currency of either obligation.  If the obligations are in different currencies, the Lender may convert either obligation at a market rate of exchange in its usual course of business for the purpose of the set-off.
 
28.           SEVERABILITY
￠
If a term of a Finance Document is or becomes illegal, invalid or unenforceable in any jurisdiction, that shall not affect:
 
(a)            the legality, validity or enforceability in that jurisdiction of any other term of the Finance Documents; or
 
(b)            the legality, validity or enforceability in other jurisdictions of that or any other term of the Finance Documents.
 
68

 
29.           COUNTERPARTS
￠
Each Finance Document may be executed in any number of counterparts and by facsimile provided that original signed copies are provided within a reasonable period of time thereafter.  This has the same effect as if the signatures on the counterparts were on a single copy of the Finance Document.
 
30.           NOTICES
￠
30.1         In writing
 
(a)            Any communication in connection with a Finance Document must be in writing and, unless otherwise stated, may be given in person, by post, fax or, e-mail or by any other electronic communication approved by the Lender;
 
(b)            For the purpose of the Finance Documents, an electronic communication will be treated as being in writing.
 
(c)            Unless it is agreed to the contrary, any consent or agreement required under a Finance Document must be given in writing.
 
30.2         Contact details
 
(a)            Except as provided below, the contact details of each Party for all communications in connection with the Finance Documents are those notified by that Party for this purpose to the Lender on or before the date it becomes a Party.
 
(b)            The contact details of the Borrowers for this purpose are:
 
Address:                 10 Skopa Street,
Tribune House P.C.
1075 Nicosia, Cyprus
 
Fax number:            +357 227 61542
Attention:               Mr. S. Karydes
 
with a copy to each of:
 
Address:                 Danaos Shipping Co. Ltd
57 Akti Miaouli,
185 36 Piraeus
Greece
 
Fax number:            +30 210 4293592
Attention:               Mr. I. Prokopakis
 
(c)            The contact details of the Lender for this purpose are:
 
Address:                 16-1 Yoido-dong
Youngdeungpo-gu
Seoul 150-996, Korea
Fax number:            +82 2 3779 6745
 
69

 
Attention:               Head of Ship Financing Team III/Ship Financing Department
 
(d)            A Party may change its contact details by giving five Business Days’ notice to the Lender or (in the case of the Lender) to the other Parties.
 
(e)            Where a Party nominates a particular department or officer to receive a communication, a communication will not be effective if it fails to specify that department or officer.
 
30.3         Effectiveness
 
(a)            Except as provided below, any communication in connection with a Finance Document will be deemed to be given as follows:
 
(i)             if delivered in person, at the time of delivery;
 
(ii)            if posted, five days after being deposited in the post, postage prepaid, in a correctly addressed envelope;
 
(iii)           if by fax, when received in legible form; and
 
(iv)           if by e-mail or any other electronic communication, when received in legible form.
 
(b)            A communication given under paragraph (a) above but received on a non-working day or after business hours in the place of receipt will only be deemed to be given on the next working day in that place.
 
(c)            A communication to the Lender will only be effective on actual receipt by it.
 
30.4         Entire Agreement
 
This Agreement and the other Finance Documents entered into pursuant to this Agreement contain the whole agreement between the parties relating to the transactions contemplated by this Agreement and supersede all previous agreements between the parties relating to such transactions.
 
31.           LANGUAGE
￠
(a)            Any notice given in connection with a Finance Document must be in English.
 
(b)            Any other document provided in connection with a Finance Document must be:
 
(i)             in English; or
 
(ii)            (unless the Lender otherwise agrees) accompanied by a certified English translation.  In this case, the English translation prevails unless the document is a statutory or other official document.
 
32.           GOVERNING LAW
￠
This Agreement is governed by English law.
 
70

 
33.           ENFORCEMENT
￠
33.1         Jurisdiction
 
(a)            The English courts have jurisdiction to settle any dispute in connection with any Finance Document.
 
(b)            The English courts are the most appropriate and convenient courts to settle any such dispute.
 
(c)            This Clause is for the benefit of the Lender only.  To the extent allowed by law, the Lender may take:
 
(i)             proceedings in any other court; and
 
(ii)            concurrent proceedings in any number of jurisdictions.
 
33.2         Service of process
 
(a)            Each of the Borrowers irrevocably appoints SH Process Agents Limited of One, St Pauls Churchyard, London, EC4M as its agent under the Finance Documents for service of process in any proceedings before the English courts.
 
(b)            If any person appointed as process agent is unable for any reason to act as agent for service of process, the relevant Borrower or Borrowers must immediately appoint another agent on terms acceptable to the Lender.  Failing this, the Lender may appoint another agent for this purpose.
 
(c)            Each of the Borrowers agree that failure by a process agent to notify it of any process will not invalidate the relevant proceedings.
 
(d)            This Clause does not affect any other method of service allowed by law.
 
33.3         Waiver of immunity
 
The Borrowers each irrevocably and unconditionally:
 
(a)            agrees not to claim any immunity from proceedings brought by the Lender against it in relation to a Finance Document and to ensure that no such claim is made on its behalf;
 
(b)            consents generally to the giving of any relief or the issue of any process in connection with those proceedings; and
 
(c)            waives all rights of immunity in respect of it or its assets.
 
THIS AGREEMENT has been entered into on the date stated at the beginning of this Agreement.
 
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SCHEDULE 1
￠
THE BORROWERS AND THE VESSELS

Name of
Borrower	 	Country of
Incorporation	 	Registered Office	 	Hull Number	 	Flag of Vessel	 	
 	 	 	 	 	 	 	 	 	 	
Oceanew Shipping Limited	 	Republic of Cyprus	 	10 Skopa Street,
Tribune House, P.C.
1075 Nicosia, Cyprus	 	1489	 	Republic of Cyprus	 	
 	 	 	 	 	 	 	 	 	 	
Oceanprize Navigation Limited	 	Republic of Cyprus	 	10 Skopa Street,
Tribune House, P.C.
1075 Nicosia, Cyprus	 	1490	 	Republic of Cyprus	 	
 
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SCHEDULE 2
￠
INITIAL CONDITIONS PRECEDENT DOCUMENTS
￠
1.              Owners
 
(a)            A certified copy* of the constitutional documents of each Borrower together with an up to date Certificate of Goodstanding dated no more than ten Business Days prior to the first Utilisation Date.
 
(b)            A certified copy* of a resolution of the board of directors of each Borrower:
 
(i)             approving the terms of, and the transactions contemplated by, each Finance Document and each Related Contract to which each Borrower is a party and resolving that it executes each such Finance Document and each Related Contract, then to be executed;
 
(ii)            authorising a specified person or persons to execute each Finance Document and each Related Contract on its behalf to which it is a party, then to be executed; and
 
(iii)           authorising a specified person or persons, on its behalf, to sign and/or despatch all other documents and notices to be signed and/or despatched by it under or in connection with each Finance Document and each Related Contract to which it is a party, then to be executed.
 
(c)            A specimen of the signature of each person authorised by the resolution referred to in paragraph 1(b) above.
 
(d)            A certified copy* of all other resolutions, consents, licences, exemptions and filings, corporate, official or otherwise which the Lender may reasonably require in connection with this Agreement or any other Finance Document.
 
2.              Finance Documents and Related Contracts
 
(a)            A duly executed original of this Agreement.
 
(b)            A duly executed original of each of the Time Charter and Earnings Assignments.
 
(c)            A duly executed original of the Pledges of Shares, together with all certificates in respect of the Shares, undated letters of resignation by each of the directors and officers of the Borrowers and all (if any) unissued share or stock certificates of the Borrowers.
 
(d)            A duly executed original of the Support Letter.
 
(e)            A duly executed original of the Equity Contribution Side Letter.
 
(f)             A certified copy* of each of the Refund Guarantees.
 
(g)            A certified copy* of each Shipbuilding Contract, duly executed.
 
(h)            A certified copy* of each Time Charter, duly executed.
 
73

 
(i)             A certified copy* of each Refund Guarantee Assignment, duly executed.
 
(j)             A certified copy of each Refund Guarantee Assignment Notice, duly executed and certified by a director of Seaspan (Cyprus) Limited.
 
(k)            A certified copy * of each Shipbuilding Contract Assignment, duly executed.
 
(l)             A certified copy of each Shipbuilding Contract Assignment Notice, duly executed and certified by a director of Seaspan (Cyprus) Limited.
 
(m)           A certified copy * of each Time Charter Assignment, duly executed.
 
(n)            A certified copy of each Time Charter Assignment Notice, duly executed and certified by a director of Seaspan (Cyprus) Limited.
 
(o)            Duly executed originals of all notices of assignment required to be served under each Security Document referred to above and faxed copies of the acknowledgements thereof (where it is not possible to provide originals of the same, with such originals to follow as soon as practicable after the first Utilisation Date), duly executed by each relevant counterparty.
 
3.              Other documents
 
(a)            A copy of any other authorisation or other document, opinion or assurance which the Lender considers to be necessary or desirable in connection with the entry into and performance of, and the transactions contemplated by, any Finance Document or any Related Contract or for the validity and enforceability of any Finance Document or any Related Contract.
 
(b)            A letter from Danaos Management Consultants (UK) Limited agreeing to its appointment as process agent for the Borrowers under the Finance Documents.
 
(c)            A letter from China Shipping (UK) Co., Ltd. agreeing to its appointment as process agent for the Charterer in respect of the acknowledgement of the Time Charter and Earnings Assignment.
 
(d)            Evidence satisfactory to the Lender of receipt by the Builder from the Borrowers of the Equity Contribution in respect of the relevant Loan.
 
4.              Legal opinions
 
(a)            A legal opinion of Allen & Overy, London office, English legal advisers to the Lender, addressed to the Lender.
 
(b)            A legal opinion of Chrysses & Demetriades, Cypriot legal advisors to the Lender, addressed to the Lender, in respect of the Borrowers.
 
(c)            A legal opinion of King & Wood, Chinese legal advisors to the Lender.
 
5.              Other Requirements

*               Each certified copy document must be certified by a director, officer or duly authorised attorney of the relevant Borrower as being true and complete as at a date no earlier than the date of the Request for a first Drawing.
 
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CONDITIONS SUBSEQUENT TO FIRST DRAWING
￠
The Lender shall require the following documentation from the Borrowers within a period of 60 days from the date of the first Drawing.
 
1.              Finance Documents
 
(a)            A duly executed original of each Earnings Account Charge.
 
(b)            A duly executed original of each Operating Expenses Account Charge.
 
(c)            A duly executed original of each Retention Account Charge.
 
(d)            Duly executed originals of all notices required under each Security Document referred to in (a) to (c) inclusive above.
 
2.              Legal Opinions
 
(a)            A legal opinion of Pologiorgis, Babalis, Troullinos & Mavrou Greek legal advisors to the Lender.
 
3.              Other
 
(a)           A letter from Danaos Management Consultants (UK) Limited agreeing to its appointment as process agent for the Borrowers in respect of the documents detailed in 1(a) to (c) inclusive above.
 
75

 
SCHEDULE 3
￠
DELIVERY DATE CONDITIONS PRECEDENT DOCUMENTS
￠
At the time of delivery of each Vessel, the Lender shall require the following documentation from the relevant Borrower:-
 
1.              Borrower
 
(a)            A certified copy of the constitutional documents of the Borrower or a certificate of the Borrower certifying that such documents have not been amended since the first Drawing.
 
(b)            A certified copy of a resolution of the board of directors of the Borrower (unless such a resolution in relation to the issues below is still in force):
 
(i)             authorising a specified person or persons to execute such necessary documentation as is required to permit the Borrower to take physical possession of the relevant Vessel from the Bareboat Charterer; and
 
(ii)            authorising a specified person or persons, on its behalf, to sign or despatch all documents and notices to be signed or despatched as necessary to take physical possession of the relevant Vessel from the Bareboat Charterer.
 
(c)            A specimen of the signature of each person authorised by the resolution referred to in paragraphs (b) and (c) above.
 
2.              Documents
 
(a)            A duly executed original of the relevant Mortgage.
 
(b)            A duly executed original of the Vessel Management Agreement Assignment.
 
(c)            A duly executed original of the Standby Letter of Credit together with evidence satisfactory to the Lender of its due execution.
 
(d)            A duly executed original of the Manager’s Undertaking.
 
(e)            A certified copy * of the Vessel Management Agreement, duly executed.
 
(f)             A copy of any other authorisation or other document, opinion or assurance which the Lender considers to be necessary or desirable in connection with the entry into and performance of, and the transactions contemplated by, the Security Documents or for the validity and enforceability of any of those documents.
 
3.              The Vessel to be delivered
 
(a)            Evidence that:
 
(i)             the title to the Vessel is held by the Owner free of all Security Interests other than Permitted Liens;
 
76

 
(ii)            Confirmation acceptable to the Lender that the Owner has accepted the Vessel pursuant to the terms of the relevant Shipbuilding Contract and executed a protocol of delivery and acceptance.
 
(iii)           Confirmation acceptable to the Lender that the Bareboat Charterer has accepted the Vessel pursuant to the terms of the relevant Bareboat Charter and executed an acceptance certificate.
 
(iv)           Confirmation acceptable to the Lender that the Borrower has accepted the Vessel pursuant to the terms of the relevant AML Time Charter and executed an acceptance certificate.
 
(v)            Confirmation acceptable to the Lender that the Charterer has accepted the Vessel pursuant to the terms of the relevant Time Charter and executed an acceptance certificate.
 
(vi)           the Vessel is provisionally registered in the name of the Owner, as appropriate, as a Republic of Cyprus flag ship at the port of Limassol;
 
(vii)          the Mortgage in respect of the Vessel has been duly recorded in the Republic of Cyprus Registry of Ships and constitutes a first priority security interest over the Vessel and that all taxes and fees payable to the Republic of Cyprus Registry of Ships in respect of the Vessel have been paid in full; and
 
(b)            A certified copy* of:
 
(i)             a classification certificate in respect of the Vessel showing the Vessel to be in class without recommendation, condition or qualification or, in the event that this is not available, a faxed copy with a certified copy to follow as soon as practicable after the relevant Delivery Date;
 
(ii)            a valid Interim Safety Management Certificate for the Vessel or, in the event that this is not available, a faxed copy with a certified copy to follow as soon as practicable after the relevant Delivery Date;
 
(iii)           a valid Document of Compliance; and
 
(iv)           a valid International Ship Security Certificate
 
(c)            A copy of the commercial invoice in respect of the Vessel.
 
(d)            A copy of the builder’s certificate in respect of the Vessel.
 
4.              Insurance
 
(a)            A certified copy of all current insurance policies in respect of the Vessel.
 
(b)            A duly executed and, where necessary, notarised notice of assignment (and acknowledgement of the same) of the Obligatory Insurances in respect of the Vessel duly executed by the Owner substantially in the form provided for in the General Assignment.
 
(c)            Fax confirmation from each broker, insurer and club concerned with the Obligatory Insurances of the Vessel that:
 
77

 
(i)             the relevant cover is in effect;
 
(ii)            they will accept notice of assignment of the Obligatory Insurances in favour of the Lender and execute an acknowledgement of the notice in the form required by the Lender;
 
(iii)           they will restrict their lien for unpaid premiums under any fleet policy to unpaid premiums in respect of that Vessel only;
 
(iv)           they will issue a letter of undertaking in the current LIBA form (in the case of Lloyds brokers), in the form provided for in the General Assignment (in the case of non-Lloyds brokers and insurers other than clubs) or in their current standard form (in the case of clubs);
 
(v)            they will accept endorsement of a loss payable clause on the policies in the form provided for in the General Assignment (in the case of brokers and insurers other than clubs) or will note the interest of the Lender in the entry for the Vessel by way of a loss payable clause in their current standard form (in the case of clubs); and
 
(vi)           they are not aware of any mortgage, charge, assignment or other encumbrance affecting the Obligatory Insurances with which they are concerned (other than any previously disclosed by the Borrower to the Lender in writing).
 
Confirmation from the Lender of its satisfaction with a final insurance report prepared by Marsh Insurance Brokers.
 
5.              Legal Opinions
 
(a)            A legal opinion of Allen & Overy, London office, English legal advisers to the Lender.
 
(b)            A legal opinion of the Republic of Cyprus legal advisers or such other jurisdiction as may be chosen to be the flag of a Vessel to the Lender.
 
(c)            A legal opinion of Lee & Co, Korean legal advisers  to the Lender.

*               Each certified copy document must be certified by a director, officer or duly authorised attorney of the Borrower as being true and complete as at a date no earlier than the Delivery Date of a Vessel.
 
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SCHEDULE 4
￠
FORM OF REQUEST
￠
PART 1
￠
FORM OF REQUEST

To:	 	The Export-Import Bank of Korea	 	 	
 	 	 	 	 	
From:	 	[The relevant Borrower]	 	 	
 	 	 	 	 	
Date:	 	[                           ]	 	 	
 
US$127,856,000 Credit Agreement dated                    , 2003
Hull No. 1489, 1490
 
1.              We wish to borrow a Drawing under a Loan from you as follows:
 
(a)            Utilisation Date:                   [                                  ]
 
(b)            Amount/currency:               [                                  ]
 
Loan 1/Loan 2

Amount payable to the Builder towards the Instalment under Shipbuilding Contract:	 	US$[       ]	
 	 	 	
Amount payable in respect of Incidental Vessel Costs as set out below (as supported by the relevant invoices:	 	US$[        ]	
 	 	 	
(a)	 	Details of item:	 	US$[        ]	
 	 	 	 	 	
(b)	 	Details of item:	 	US$[        ]	
 	 	 	 	 	
Total drawdown:	 	US$[        ]	
 
2.              Payment Instructions:         to include provisions that:
 
(i)             amount of Instalment payable under the relevant Shipbuilding Contract to be payable to the Builder’s account.
 
(ii)            Incidental Costs to be credited to the relevant Operating Expenses Account.

* Delete as appropriate.
 
3.              We confirm that each condition specified in Clause 3.2 (Further conditions precedent) is satisfied on the date of this Request.
 
79

 

By:	
 	 	
BORROWER	
 	
Authorised Signatory	
 
80

 
PART 2
￠
PAYMENT ADVICE
￠

To:	 	[The relevant Borrower]	
 	 	 	
From:	 	The Export-Import Bank of Korea	
 	 	 	
Date:	 	[               ]	
 
US$127,856,000 Credit Agreement dated                     , 2003
 
Hull No. 1489/1490
 
1.              Further to receipt of your request dated [     ] and attached hereto, requesting the advance of a Drawing under a Loan we confirm that all amounts have been advanced in accordance with the requirements of the attached Request.
 
81

 
SCHEDULE 5
￠
FORM OF TRANSFER CERTIFICATE
￠

To:	 	The Borrowers	
 	 	 	
From:	 	[THE EXISTING BANK] and [THE NEW BANK]	
 	 	 	
Date:	 	[               ]	
 
US$127,856,000 Credit Agreement dated                     , 2003
 
Hull No. 1489, 1490
 
We refer to Clause 25.3 (Procedure for transfer by way of novations).
 
1.              We [               ] (the Existing Bank ) and [                      ] (the New Bank ) agree to the Existing Bank and the New Bank novating all the Existing Bank’s rights and obligations referred to in the Schedule in accordance with Clause 25.3. (Procedure for transfer by way of novations).
 
2.              The specified date for the purposes of Clause 25.3(a) is [date of novation].
 
3.              The Facility Office and address for notices of the New Bank for the purposes of Clause 30.2 (Contact details) are set out in the Schedule.
 
4.              This Novation Certificate is governed by English law.
 
THE SCHEDULE
 
Rights and obligations to be novated
 
[Choose one of the following options (a) to (d):
 
(a)            all of the rights and obligations of the Existing Lender in respect of the Facility - principal amount US$[      ].
 
(b)            all of the rights and obligations of the Existing Lender in respect of Vessel Loan [    ] [and Vessel Loan [   ]] -principal amount US$[      ].
 
(c)            the principal amount of US$[      ] in respect of each of the Loans and all the rights and obligations attached to the same-total principal amount US$[      ].
 
(d)            the principal amount of US$[      ] in respect of [each of] Vessel Loan [    ] [and Vessel Loan [    ] and [    ]] and all the rights and obligations attached to the same.
 
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[ New Bank ]	 	
 	 	
[Facility Office Address for notices]	 	

[Existing Bank]	[New Bank]	 	
 	 	 	
By:	By:	 	
 	 	 	
Date:	Date:	 	
 
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SCHEDULE 6
￠
REPAYMENT SCHEDULE
 
Hull No. 1489

 	 	 	 	 	 	 	 	 	 	Interest Rate :	 	5.0125%	 	
 	 	Principal	 	Interest	 	Days	 	Total	 	Outstanding	 	Repayment Date	 	
 	 	 	 	 	 	 	 	 	 	63,928,000.00	 	2004-09-20	 	
1	 	2,590,084.71	 	1,566,591.15	 	176	 	4,156,675.86	 	61,337,915.29	 	2005-03-15	 	
2	 	1,331,833.33	 	785,721.65	 	92	 	2,117,554.98	 	60,006,081.95	 	2005-06-15	 	
3	 	1,331,833.33	 	768,661.24	 	92	 	2,100,494.57	 	58,674,248.62	 	2005-09-15	 	
4	 	1,331,833.33	 	743,431.25	 	91	 	2,075,264.58	 	57,342,415.29	 	2005-12-15	 	
5	 	1,331,833.33	 	718,572.14	 	90	 	2,050,405.47	 	56,010,581.95	 	2006-03-15	 	
6	 	1,331,833.33	 	717,479.99	 	92	 	2,049,313.32	 	54,678,748.62	 	2006-06-15	 	
7	 	1,331,833.33	 	700,419.58	 	92	 	2,032,252.91	 	53,346,915.29	 	2006-09-15	 	
8	 	1,331,833.33	 	675,931.34	 	91	 	2,007,764.67	 	52,015,081.95	 	2006-12-15	 	
9	 	1,331,833.33	 	651,813.99	 	90	 	1,983,647.32	 	50,683,248.62	 	2007-03-15	 	
10	 	1,331,833.33	 	649,238.33	 	92	 	1,981,071.66	 	49,351,415.29	 	2007-06-15	 	
11	 	1,331,833.33	 	632,177.92	 	92	 	1,964,011.25	 	48,019,581.95	 	2007-09-15	 	
12	 	1,331,833.33	 	608,431.44	 	91	 	1,940,264.77	 	46,687,748.62	 	2007-12-15	 	
13	 	1,331,833.33	 	591,556.47	 	91	 	1,923,389.80	 	45,355,915.29	 	2008-03-15	 	
14	 	1,331,833.33	 	580,996.67	 	92	 	1,912,830.00	 	44,024,081.95	 	2008-06-15	 	
15	 	1,331,833.33	 	563,936.26	 	92	 	1,895,769.59	 	42,692,248.62	 	2008-09-15	 	
16	 	1,331,833.33	 	540,931.54	 	91	 	1,872,764.87	 	41,360,415.29	 	2008-12-15	 	
17	 	1,331,833.33	 	518,297.70	 	90	 	1,850,131.03	 	40,028,581.95	 	2009-03-15	 	
18	 	1,331,833.33	 	512,755.01	 	92	 	1,844,588.34	 	38,696,748.62	 	2009-06-15	 	
19	 	1,331,833.33	 	495,694.60	 	92	 	1,827,527.93	 	37,364,915.29	 	2009-09-15	 	
20	 	1,331,833.33	 	473,431.64	 	91	 	1,805,264.97	 	36,033,081.95	 	2009-12-15	 	
21	 	1,331,833.33	 	451,539.55	 	90	 	1,783,372.88	 	34,701,248.62	 	2010-03-15	 	
22	 	1,331,833.33	 	444,513.35	 	92	 	1,776,346.68	 	33,369,415.29	 	2010-06-15	 	
23	 	1,331,833.33	 	427,452.94	 	92	 	1,759,286.27	 	32,037,581.95	 	2010-09-15	 	
24	 	1,331,833.33	 	405,931.73	 	91	 	1,737,765.06	 	30,705,748.62	 	2010-12-15	 	
25	 	1,331,833.33	 	384,781.41	 	90	 	1,716,614.74	 	29,373,915.29	 	2011-03-15	 	
26	 	1,331,833.33	 	376,271.69	 	92	 	1,708,105.02	 	28,042,081.95	 	2011-06-15	 	
27	 	1,331,833.33	 	359,211.28	 	92	 	1,691,044.61	 	26,710,248.62	 	2011-09-15	 	
28	 	1,331,833.33	 	338,431.83	 	91	 	1,670,265.16	 	25,378,415.29	 	2011-12-15	 	
29	 	1,331,833.33	 	321,556.85	 	91	 	1,653,390.18	 	24,046,581.95	 	2012-03-15	 	
30	 	1,331,833.33	 	308,030.03	 	92	 	1,639,863.36	 	22,714,748.62	 	2012-06-15	 	
31	 	1,331,833.33	 	290,969.62	 	92	 	1,622,802.95	 	21,382,915.29	 	2012-09-15	 	
32	 	1,331,833.33	 	270,931.93	 	91	 	1,602,765.26	 	20,051,081.95	 	2012-12-15	 	
33	 	1,331,833.33	 	251,265.12	 	90	 	1,583,098.45	 	18,719,248.62	 	2013-03-15	 	
34	 	1,331,833.33	 	239,788.37	 	92	 	1,571,621.70	 	17,387,415.29	 	2013-06-15	 	
35	 	1,331,833.33	 	222,727.95	 	92	 	1,554,561.28	 	16,055,581.95	 	2013-09-15	 	
36	 	1,331,833.33	 	203,432.02	 	91	 	1,535,265.35	 	14,723,748.62	 	2013-12-15	 	
37	 	1,331,833.33	 	184,506.97	 	90	 	1,516,340.30	 	13,391,915.29	 	2014-03-15	 	
38	 	1,331,833.33	 	171,546.71	 	92	 	1,503,380.04	 	12,060,081.95	 	2014-06-15	 	
39	 	1,331,833.33	 	154,486.29	 	92	 	1,486,319.62	 	10,728,248.62	 	2014-09-15	 	
40	 	1,331,833.33	 	135,932.12	 	91	 	1,467,765.45	 	9,396,415.29	 	2014-12-15	 	
41	 	1,331,833.33	 	117,748.82	 	90	 	1,449,582.15	 	8,064,581.95	 	2015-03-15	 	
 
84

 

42	 	1,331,833.33	 	103,305.05	 	92	 	1,435,138.38	 	6,732,748.62	 	2015-06-15	 	
43	 	1,331,833.33	 	86,244.63	 	92	 	1,418,077.96	 	5,400,915.29	 	2015-09-15	 	
44	 	1,331,833.33	 	68,432.22	 	91	 	1,400,265.55	 	4,069,081.95	 	2015-12-15	 	
45	 	1,331,833.33	 	51,557.24	 	91	 	1,383,390.57	 	2,737,248.62	 	2016-03-15	 	
46	 	1,331,833.33	 	35,063.39	 	92	 	1,366,896.72	 	1,405,415.29	 	2016-06-15	 	
47	 	1,331,833.33	 	18,002.97	 	92	 	1,349,836.30	 	73,581.95	 	2016-09-15	 	
48	 	73,581.95	 	51.22	 	5	 	73,633.17	 	- 0	 	2016-09-20	 	
Total	 	63,928,000.00	 	19,919,783.21	 	 	 	83,847,783.21	 	 	 	 	 	
 
Note) could be changed depending on the Delivery Date and Business Day
 
85

 
Hull No. 1490

 	 	 	 	 	 	 	 	 	 	Interest Rate :	 	5.0125%	 	
 	 	Principal	 	Interest	 	Days	 	Total	 	Outstanding	 	Repayment Date	 	
 	 	 	 	 	 	 	 	 	 	63,928,000.00	 	2004-12-20	 	
1	 	2,590,489.01	 	1,575,492.24	 	177	 	4,165,981.25	 	61,337,510.99	 	2005-06-15	 	
2	 	1,331,833.33	 	785,716.47	 	92	 	2,117,549.80	 	60,005,677.66	 	2005-09-15	 	
3	 	1,331,833.33	 	760,301.10	 	91	 	2,092,134.43	 	58,673,844.32	 	2005-12-15	 	
4	 	1,331,833.33	 	735,256.61	 	90	 	2,067,089.94	 	57,342,010.99	 	2006-03-15	 	
5	 	1,331,833.33	 	734,535.23	 	92	 	2,066,368.56	 	56,010,177.66	 	2006-06-15	 	
6	 	1,331,833.33	 	717,474.81	 	92	 	2,049,308.14	 	54,678,344.32	 	2006-09-15	 	
7	 	1,331,833.33	 	692,801.20	 	91	 	2,024,634.53	 	53,346,510.99	 	2006-12-15	 	
8	 	1,331,833.33	 	668,498.46	 	90	 	2,000,331.79	 	52,014,677.66	 	2007-03-15	 	
9	 	1,331,833.33	 	666,293.57	 	92	 	1,998,126.90	 	50,682,844.32	 	2007-06-15	 	
10	 	1,331,833.33	 	649,233.15	 	92	 	1,981,066.48	 	49,351,010.99	 	2007-09-15	 	
11	 	1,331,833.33	 	625,301.29	 	91	 	1,957,134.62	 	48,019,177.66	 	2007-12-15	 	
12	 	1,331,833.33	 	608,426.32	 	91	 	1,940,259.65	 	46,687,344.32	 	2008-03-15	 	
13	 	1,331,833.33	 	598,051.91	 	92	 	1,929,885.24	 	45,355,510.99	 	2008-06-15	 	
14	 	1,331,833.33	 	580,991.49	 	92	 	1,912,824.82	 	44,023,677.66	 	2008-09-15	 	
15	 	1,331,833.33	 	557,801.39	 	91	 	1,889,634.72	 	42,691,844.32	 	2008-12-15	 	
16	 	1,331,833.33	 	534,982.17	 	90	 	1,866,815.50	 	41,360,010.99	 	2009-03-15	 	
17	 	1,331,833.33	 	529,810.25	 	92	 	1,861,643.58	 	40,028,177.66	 	2009-06-15	 	
18	 	1,331,833.33	 	512,749.83	 	92	 	1,844,583.16	 	38,696,344.32	 	2009-09-15	 	
19	 	1,331,833.33	 	490,301.49	 	91	 	1,822,134.82	 	37,364,510.99	 	2009-12-15	 	
20	 	1,331,833.33	 	468,224.02	 	90	 	1,800,057.35	 	36,032,677.66	 	2010-03-15	 	
21	 	1,331,833.33	 	461,568.59	 	92	 	1,793,401.92	 	34,700,844.32	 	2010-06-15	 	
22	 	1,331,833.33	 	444,508.17	 	92	 	1,776,341.50	 	33,369,010.99	 	2010-09-15	 	
23	 	1,331,833.33	 	422,801.59	 	91	 	1,754,634.92	 	32,037,177.66	 	2010-12-15	 	
24	 	1,331,833.33	 	401,465.88	 	90	 	1,733,299.21	 	30,705,344.32	 	2011-03-15	 	
25	 	1,331,833.33	 	393,326.93	 	92	 	1,725,160.26	 	29,373,510.99	 	2011-06-15	 	
26	 	1,331,833.33	 	376,266.51	 	92	 	1,708,099.84	 	28,041,677.66	 	2011-09-15	 	
27	 	1,331,833.33	 	355,301.68	 	91	 	1,687,135.01	 	26,709,844.32	 	2011-12-15	 	
28	 	1,331,833.33	 	338,426.71	 	91	 	1,670,260.04	 	25,378,010.99	 	2012-03-15	 	
29	 	1,331,833.33	 	325,085.27	 	92	 	1,656,918.60	 	24,046,177.66	 	2012-06-15	 	
30	 	1,331,833.33	 	308,024.85	 	92	 	1,639,858.18	 	22,714,344.32	 	2012-09-15	 	
31	 	1,331,833.33	 	287,801.78	 	91	 	1,619,635.11	 	21,382,510.99	 	2012-12-15	 	
32	 	1,331,833.33	 	267,949.59	 	90	 	1,599,782.92	 	20,050,677.66	 	2013-03-15	 	
33	 	1,331,833.33	 	256,843.61	 	92	 	1,588,676.94	 	18,718,844.32	 	2013-06-15	 	
34	 	1,331,833.33	 	239,783.19	 	92	 	1,571,616.52	 	17,387,010.99	 	2013-09-15	 	
35	 	1,331,833.33	 	220,301.88	 	91	 	1,552,135.21	 	16,055,177.66	 	2013-12-15	 	
36	 	1,331,833.33	 	201,191.44	 	90	 	1,533,024.77	 	14,723,344.32	 	2014-03-15	 	
37	 	1,331,833.33	 	188,601.95	 	92	 	1,520,435.28	 	13,391,510.99	 	2014-06-15	 	
38	 	1,331,833.33	 	171,541.53	 	92	 	1,503,374.86	 	12,059,677.66	 	2014-09-15	 	
39	 	1,331,833.33	 	152,801.97	 	91	 	1,484,635.30	 	10,727,844.32	 	2014-12-15	 	
40	 	1,331,833.33	 	134,433.29	 	90	 	1,466,266.62	 	9,396,010.99	 	2015-03-15	 	
41	 	1,331,833.33	 	120,360.29	 	92	 	1,452,193.62	 	8,064,177.66	 	2015-06-15	 	
42	 	1,331,833.33	 	103,299.87	 	92	 	1,435,133.20	 	6,732,344.32	 	2015-09-15	 	
43	 	1,331,833.33	 	85,302.07	 	91	 	1,417,135.40	 	5,400,510.99	 	2015-12-15	 	
44	 	1,331,833.33	 	68,427.09	 	91	 	1,400,260.42	 	4,068,677.66	 	2016-03-15	 	
45	 	1,331,833.33	 	52,118.63	 	92	 	1,383,951.96	 	2,736,844.32	 	2016-06-15	 	
46	 	1,331,833.33	 	35,058.21	 	92	 	1,366,891.54	 	1,405,010.99	 	2016-09-15	 	
47	 	1,331,833.33	 	17,802.17	 	91	 	1,349,635.50	 	73,177.66	 	2016-12-15	 	
48	 	73,177.66	 	50.94	 	5	 	73,228.60	 	- 0	 	2016-12-20	 	
Total	 	63,928,000.00	 	19,922,688.68	 	 	 	83,850,688.68	 	 	 	 	 	
 
Note) could be changed depending on the Delivery Date and Business Day
 
86

 
SCHEDULE 7
￠
ANNUAL COMPLIANCE CERTIFICATE
￠

To:	 	The Export-Import Bank of Korea	
 	 	 	
From:	 	[Borrower]	
 
US$127,856,000 Credit Agreement dated          , 2003
 
(the Credit Agreement) Hull No. 1489/1490
 
1.              Terms defined in the Credit Agreement have the same meaning in this Certificate.
 
2.              I/We hereby certify that [no Default has occurred and is continuing or is outstanding] [a Default under Clause [     ] of [ specify document ] is outstanding and the following steps are being taken to remedy it [               ].

Yours faithfully,	
 	
[                                          ]	
 	
President	
 	
[or]	

 	
[Senior Officer]	
 	
and	

 	
[Senior Officer]	

Except as set out below, the representation set out in Clause 14 of the Credit Agreement are deemed to be repeated as at the date hereof.
 
87

 
SCHEDULE 8
￠
INCIDENTAL VESSEL COSTS
￠
(Per vessel)

 	 	US$	 	
 	 	 	 	
1.	Lashings	 	900,000	 	
 	 	 	 	 	
2.	Supervision during Construction	 	320,000	 	
 	 	 	 	 	
3.	Delivery Ceremony	 	50,000	 	
 	 	 	 	 	
4.	Port fees on delivery	 	30,000	 	
 	 	 	 	 	
5.	Pre-delivery stores/supplies	 	600,000	 	
 	 	 	 	 	
6.	Lubricants	 	800,000	 	
 	 	 	 	 	
7.	Legal fees	 	150,000	 	
 
88

 
Exhibit 10.7
 
SIGNATORIES
￠

OCEANEW SHIPPING LIMITED	
 	
By:	

OCEANPRIZE NAVIGATION LIMITED	
 	
By:	

the Lender	
 	
THE EXPORT-IMPORT BANK OF KOREA	
 	
By:	
 
89

 
SCHEDULE 2
 
CONDITIONS PRECEDENT DOCUMENTS

 
SIGNATORIES

Borrowers	 	
 	 	
OCEANEW SHIPPING LIMITED	 	
 	 	
By:	/s/ Arlene Payne, Attorney-in-fact	 	 	

and	 	

OCEANPRIZE NAVIGATION UNITED	 	
 	 	
By:	/s/ Arlene Payne, Attorney-in-fact	 	 	

Lender	 	
 	 	
THE EXPORT-IMPORT BANK OF KOREA	 	
 	 	
By:	/s/ Sunghwan Choi	 	 	

 

Exhibit 10.8
 
EXECUTION VERSION

AGREEMENT

DATED 29TH JANUARY, 2004

US$144,000,000
CREDIT FACILITY
 
FOR
 
KARLITA SHIPPING COMPANY LIMITED
And
RAMONA MARINE COMPANY LIMITED

GUARANTEED BY
 
DANAOS HOLDINGS LIMITED

ARRANGED BY
 
THE EXPORT-IMPORT BANK OF KOREA AND FORTIS CAPITAL CORP.

WITH
 
FORTIS CAPITAL CORP.
as Facility Agent

 
LONDON

 
CONTENTS

Clause	 	Page	
 	 	 	
1.	Interpretation	4	
2.	Facility	24	
3.	Conditions Precedent	25	
4.	Utilisation	26	
5.	Repayment	27	
6.	Prepayment and Cancellation	28	
7.	Interest	31	
8.	Terms	33	
9.	Market Disruption	34	
10.	Taxes	35	
11.	Increased Costs	36	
12.	Earnings, Retention and Operating Expenses Accounts	37	
13.	Payments	39	
14.	Guarantee and Indemnity	41	
15.	Representations	43	
16.	Information Covenants	48	
17.	General Covenants	50	
18.	Financial Covenants of the Guarantor	66	
19.	Valuation	69	
20.	Default	70	
21.	Security	74	
22.	The Administrative Parties	77	
23.	Evidence and Calculations	81	
24.	Fees	81	
25.	Indemnities and Break Costs	82	
26.	Expenses	84	
27.	Waiver of Consequential Damages	85	
28.	Amendments and Waivers	85	
29.	Changes to the Parties	86	
30.	Disclosure of Information	89	
31.	Set-Off	89	
32.	Pro Rata Sharing	90	
33.	Severability	91	
34.	Counterparts	91	
35.	Notices	91	
36.	Language	93	
37.	Governing Law	93	
38.	Enforcement	93	

 
Schedules

1.	Original Parties	95	
2.	Initial Conditions Precedent Documents	97	
3.	Delivery Date Conditions Precedent Documents	100	
4.	Form of Request	103	
5.	Form of Transfer Certificate	106	
6.	Repayment Schedule	108	
7.	Annual Compliance Certificate	110	
8.	Incidental Vessel Costs	112	

Signatories	113	

 
THIS AGREEMENT is dated 29th January, 2004
 
BETWEEN :
 
(1)            THE COMPANIES listed in Part 1 of Schedule 1, each of which is a company incorporated according to the law of the country indicated against its name in Schedule 1, with registered office at the address indicated against its name in Part 1 of Schedule 1 (each a Borrower and together the Borrowers );
 
(2)            DANAOS HOLDINGS LIMITED which is incorporated according to the laws of Liberia with its registered office at 80 Broad Street, Monrovia, Liberia (the Guarantor );
 
(3)            THE EXPORT-IMPORT BANK OF KOREA and FORTIS CAPITAL CORP. as joint arrangers (in this capacity the Arrangers );
 
(4)            THE FINANCIAL INSTITUTIONS listed in Part 2 of Schedule 1 (Original Parties) as original lenders (the Original Lenders ); and
 
(5)            FORTIS CAPITAL CORP. as facility agent (in this capacity the Facility Agent ).
 
IT IS AGREED as follows:
 
1.              INTERPRETATION
 
1.1           Definitions
 
In this Agreement:
 
Accounts means together the Earnings Accounts, the Retention Accounts and the Operating Expenses Accounts.
 
Account Bank means Fortis Bank (Nederland) N.V. whose registered office is situated at Coolsingel 93, 3012 AE Rotterdam, The Netherlands or any other bank or financial institution with which, with the prior written consent of the Facility Agent (acting in accordance with the instructions of the Majority Lenders), any of the Accounts are at any time held.
 
Administrative Party means the Arrangers or the Facility Agent.
 
Affiliate means a Subsidiary or a Holding Company of a person or any other Subsidiary of that Holding Company.
 
Agreement means this credit agreement, including any schedules or appendices hereto, as amended from time to time.
 
AML Time Charter means, in respect of a Vessel, the time charter entered or to be entered into between the Bareboat Charterer and the relevant Borrower.
 
AML Time Charter Assignments means together the deeds of assignment of the AML Time Charters granted by the relevant Borrower in favour of the Facility Agent together with any and all notices and acknowledgments entered into in connection therewith and AML Time Charter Assignment means either of them.
 
Annual Compliance Certificate means the form of certificate attached at Schedule 7.
 
4

 
Applicable Law means any or all applicable law (whether civil, criminal or administrative), common law, statute, statutory instrument, treaty, convention, regulation, directive, by-law, demand, decree, ordinance, injunction, resolution, order, judgment, rule, permit, licence or restriction (in each case having the force of law) and codes of practice or conduct, circulars and guidance notes generally accepted and applied by the global container shipping industry, in each case of any government, quasi-government, supranational, federal, state or local government, statutory or regulatory body, court, agency or association relating to all laws, rules, directives and regulations, national or international, public or private in any applicable jurisdiction from time to time.
 
Approved Valuers means two such independent reputable shipbrokers one of which shall be nominated by the Borrowers and one of which shall be nominated by the Facility Agent (acting in accordance with the instructions of the Majority Lenders) from time to time.
 
Availability Period means, in respect of a Loan, the period from and including the date of this Agreement to and including the Delivery Date of the relevant Vessel.
 
Bareboat Charter means, in respect of a Vessel, the bareboat charter entered or to be entered into between the relevant Owner and the Bareboat Charterer.
 
Bareboat Charterer means Allocean Maritime Container (No.3) Limited, a company incorporated under the laws of England and Wales (registered number 4806608) whose registered office is at Ground Floor, 40 Queen Street, London EC4R 1DD.
 
Break Costs means the amount (if any) which a Lender is entitled to receive under this Agreement as compensation if any part of a Loan or overdue amount is prepaid other than on the last day of a Term for such Loan or overdue amount as determined pursuant to Clause 25.3 hereof.
 
Builder means Samsung Heavy Industries Co. Ltd., a corporation organised and existing under the laws of the Republic of Korea with its registered office at Samsung Yoksam Building, 647-9, Yoksam-Dong, Kangnam-Ku, Seoul, Korea 135-080.
 
Business Day means a day (other than a Saturday or a Sunday) on which banks are open for general business in London, England, New York, United States of America, Seoul, Korea, Athens, Greece and Amsterdam, Holland.
 
Charter Assignment Agreements means together each of the deeds of assignment entered or to be entered into between the Bareboat Charterer and the relevant Owner together with any and all notices and acknowledgments entered into in connection therewith and Charter Assignment Agreement means either of them.
 
Charterer means China Shipping (Group) Company or any substitute charterer from time to time in accordance with the provisions of Clause 17.25.
 
Commitment means:
 
(a)            for an Original Lender, the amount set opposite its name in Part 2 of Schedule 1 (Original Parties) under the heading “ Commitments ” and the amount of any other commitment to advance funds under this Agreement, it acquires; and
 
(b)            for any other Lender, the amount of any commitment to advance funds under this Agreement, it acquires,
 
5

 
to the extent not cancelled, transferred or reduced under this Agreement.
 
Confidentiality Undertaking means a confidentiality undertaking in a form agreed between the relevant Borrower and the Facility Agent.
 
Contract Price means in respect of either Vessel, the lower of (i) the amount specified in Article II Clause 1 of the Shipbuilding Contract for that Vessel as the contract price as at the date of that Shipbuilding Contract without adjustment and (ii) the total amount actually paid to the Builder by the relevant Owner under that Shipbuilding Contract.
 
Danaos Group means the Guarantor and its Subsidiaries.
 
Date of Total Loss means, in respect of a Vessel, the date of Total Loss of that Vessel which date shall be deemed to have occurred:
 
(a)            in the case of an actual total loss, on the actual date and at the time that Vessel was lost or, if such date is not known, on the date on which that Vessel was last reported;
 
(b)            in the case of a constructive total loss, upon the date and at the time notice of abandonment is given to the Insurers for the time being (provided a claim for total loss is admitted by such Insurers) or, if such Insurers do not forthwith admit such a claim, at the date and at the time at which either a total loss is subsequently admitted by the Insurers or a total loss is subsequently adjudged by a competent court of law or arbitration tribunal to have occurred;
 
(c)            in the case of a compromised, agreed or arranged total loss, on the date upon which a binding agreement as to such compromised, agreed or arranged total loss has been entered into by the Insurers;
 
(d)            in the case of requisition for title or other compulsory acquisition, on the date upon which the relevant requisition for title or other compulsory acquisition occurs; and
 
(e)            in the case of capture, seizure, arrest, detention, requisition for hire or confiscation by any government or by persons acting or purporting to act on behalf of any government which deprives the Borrower or, as the case may be, the Charterer of the use of that Vessel for more than 60 days, upon the expiry of the period of 60 days after the date upon which the relevant capture, seizure, arrest, detention, requisition or confiscation occurred.
 
Declarations of Trust means together each of the declarations of trust made by the relevant Owner in favour of the relevant Partnership conferring upon the relevant Partnership a beneficial interest in the relevant Vessel and all other assets of the relevant Owner and Declaration of Trust means either of them.
 
Deeds of Counter-Indemnity means together each of the deeds of counter-indemnity granted by the Sponsor in favour of the Facility Agent and Deed of Counter-Indemnity means either of them.
 
Default means:
 
(a)            an Event of Default; or
 
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(b)            an event which would be (with the expiry of a grace period, the giving of notice or the making of any determination under the Finance Documents or any combination of them) an Event of Default.
 
Delivery Date means, in respect of a Vessel, the date of actual delivery of that Vessel to the relevant Owner under the terms of the relevant Shipbuilding Contract.
 
Delivery Date Instalment means, in respect of a Vessel, the amount due and payable by the relevant Owner in accordance with the Shipbuilding Contract relating to that Vessel on or one (1) Business Day prior to the relevant Delivery Date under that Shipbuilding Contract.
 
Deposit Accounts means together the Karlita Deposit Account and the Ramona Deposit Account and Deposit Account means either of them.
 
Deposit Bank means the Royal Bank of Scotland plc of 135 Bishopsgate, London, EC3M 3LR.
 
Dollars or US$ means the lawful currency for the time being of the United States of America.
 
Drawing means, in respect of a Loan under the Facility, the amount of each advance made by the Lenders.
 
Earnings means, in respect of a Vessel, all present and future moneys and claims which are earned by or become payable to or for the account of the relevant Borrower in connection with the operation of that Vessel and including but not limited to:
 
(a)            freights, passage and hire moneys (howsoever earned);
 
(b)            remuneration for salvage and towage services;
 
(c)            demurrage and detention moneys;
 
(d)            all moneys and claims in respect of the requisition for hire of that Vessel; or
 
(e)            payments received in respect of off-hire insurance.
 
Earnings Accounts means together the two bank accounts opened by each of the Borrowers with the Account Bank and designated “ Name of Borrower ” – Earnings Account and Earnings Account means either of them.
 
Earnings Account Charges means together the two charges each in respect of all monies standing to the credit from time to time of one of the Earnings Accounts one entered into by each of the Borrowers together with any and all notices and acknowledgements entered into in connection therewith and Earnings Account Charge means either of them.
 
Environment means:
 
(a)            any land including, without limitation, surface land and sub-surface strata, sea bed or river bed under any water (as referred to below) and any natural or man-made structures;
 
(b)            water including, without limitation, coastal and inland waters, surface waters, ground waters and water in drains and sewers; and
 
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(c)            air including, without limitation, air within buildings and other natural or man-made structures above or below ground.
 
Environmental Affiliate means each Borrower, each Owner, the Guarantor, the Bareboat Charterer and the Manager together with their respective employees and, during the Post-Delivery Period in respect of any activities undertaken in relation to either of the Vessels by persons for whom they are responsible under any Applicable Law, such persons.
 
Environmental Approvals means any permit, licence, approval, ruling, variance, exemption or other authorisation required under applicable Environmental Laws.
 
Environmental Claim means any claim by any person or persons or any governmental, judicial or regulatory authority which arises out of any breach, contravention or violation of Environmental Law or of the existence of any liability or potential liability arising from such breach, contravention or violation or the presence of Hazardous Material in contravention of Environmental Laws. In this context, 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 by any governmental, judicial or regulatory authority, and any form of enforcement or regulatory action.
 
Environmental Laws means any or all Applicable Law relating to or concerning:
 
(a)            pollution or contamination of the Environment, any ecological system or any living organisms which inhabit the Environment or any ecological system;
 
(b)            the generation, manufacture, processing, distribution, use (including abuse), treatment, storage, disposal, transport or handling of Hazardous Materials; and
 
(c)            the emission, leak, release, spill or discharge into the Environment of noise, vibration, dust, fumes, gas, odours, smoke, steam effluvia, heat, light, radiation (of any kind), infection, electricity or any Hazardous Material and any matter or thing capable of constituting a nuisance or an actionable tort or breach of statutory duty of any kind in respect of such matters,
 
including, without limitation, the following laws of the United States of America: the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, the Hazardous Materials Transportation Act, as amended, the Oil Pollution Act of 1990, as amended, the Resource Conservation and Recovery Act, as amended, and the Toxic Substances Control Act, as amended, together, in each case, with the regulations promulgated and the guidance issued pursuant thereto.
 
Equity Contribution means, in respect of each Vessel, an amount equal to US$18,000,000 to be contributed by the Borrower towards the cost of acquiring that Vessel.
 
Equity Contribution Side Letter means the letter setting out the manner in which adjustments to the Equity Contribution shall be dealt with.
 
Event of Default means an event specified as such in Clause 20 of this Agreement.
 
Excess Risks means, in respect of a Vessel:
 
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(a)            the proportion of claims for general average, salvage and salvage charges which are not recoverable as a result of the value at which that Vessel is assessed for the purpose of such claims exceeding her hull and machinery insured value; and
 
(b)            collision liabilities not recoverable in full under the hull and machinery insurance by reason of those liabilities exceeding such proportion of the insured value of that Vessel as is covered by the hull and machinery insurance.
 
Exposure Fee means the fee payable by each Borrower pursuant to Clause 24.1.
 
Facility means the credit facility made available under this Agreement.
 
Facility Office means in respect of a Lender, the office through which that Lender will perform its obligations under this Agreement from time to time, which at the date of this Agreement is, in respect of each of the Original Lenders, the address set out opposite its name in Part 2 of Schedule 1 or such other address as a Lender may notify to the Facility Agent from time to time.
 
Fee Letter means any letter entered into by reference to this Agreement between one or more Administrative Parties and the Borrowers setting out the amount of certain fees referred to in this Agreement.
 
Final Maturity Date means, in respect of a Loan, the day which is the twelfth anniversary of the Delivery Date of the Vessel to which that Loan relates.
 
Finance Document means:
 
(a)            this Agreement;
 
(b)            a Security Document;
 
(c)            the Fee Letter;
 
(d)            the Manager’s Undertaking;
 
(e)            the Supplemental Agreement;
 
(f)             the Intercreditor Deed;
 
(g)            the Multipartite Deed;
 
(h)            the Second Deposit Charge Side Letter;
 
(i)             a Transfer Certificate; and
 
(j)             any other document designated as such by the Facility Agent and the Borrowers.
 
Finance Party means a Lender or an Administrative Party.
 
Financial Indebtedness means any indebtedness for or in respect of:
 
(a)            moneys borrowed;
 
(b)            any acceptance credit;
 
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(c)            any bond, note, debenture, loan stock or other similar instrument;
 
(d)            any redeemable preference share;
 
(e)            any finance or capital lease;
 
(f)             receivables sold or discounted (otherwise than on a non-recourse basis);
 
(g)            the acquisition cost of any asset to the extent payable after its acquisition or possession by the party liable where the deferred payment is arranged primarily as a method of raising finance or financing the acquisition of that asset;
 
(h)            any derivative transaction protecting against or benefiting from fluctuations in any rate or price (and, except for non-payment of an amount, the then mark to market value of the derivative transaction will be used to calculate its amount);
 
(i)             any other transaction (including any forward sale or purchase agreement) which has the commercial effect of a borrowing;
 
(j)             any counter-indemnity obligation in respect of any guarantee, indemnity, bond, letter of credit or any other instrument issued by a bank or financial institution; or
 
(k)            any guarantee, indemnity or similar assurance against financial loss of any person.
 
First Priority Deposit Account Charge means each of the first priority deposit agreement and deposit charges granted by the relevant Borrower in respect of the relevant Deposit Account.
 
First Required Amount means, in respect of a Vessel, that amount which from the Delivery Date of that Vessel until the last day of the third year after the Delivery Date of that Vessel is 110 per cent. of the aggregate of the outstanding Loan relating to that Vessel.
 
Forex Obligations means, in respect of a Borrower, the obligations of that Borrower pursuant to Clause 2.3 of the relevant Second Priority Deposit Account Charge.
 
General Assignments means together each of the assignments entered or to be entered into by the relevant Partnership (acting by its General Partner), the relevant Owner and the Facility Agent in respect of the Assigned Property (as such term is defined therein) together with any and all notices and acknowledgments entered into in connection therewith and General Assignment means either of them.
 
General Partner means Allco Finance Limited.
 
Half-Year Date means each of 15 th March and 15 th September in each year provided always that such date is a Business Day.
 
Hazardous Material means any element or substance, whether natural or artificial, and whether consisting of gas, liquid, solid or vapour, whether on its own or in any combination with any other element or substance, which is listed, identified, defined or determined by any Environmental Law or other Applicable Law to be, to have been, or to be capable of being or becoming harmful to mankind or any living organism or damaging to the Environment, including, without limitation, oil (as defined in the United States Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended).
 
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Holding Company means a holding company within the meaning of section 736 of the Companies Act 1985.
 
Incidental Costs means, in respect of a Vessel, the Incidental Vessel Costs and the Incidental Loan Costs.
 
Incidental Loan Costs means, in respect of a Vessel, the exposure fee payable in accordance with Clause 24.1, the commitment fee payable in accordance with Clause 24.2, the management fee payable in accordance with Clause 24.3, the Arranger’s fee payable in accordance with Clause 24.4 and interest calculated and payable in accordance with Clause 7.1(a) and 7.1(b).
 
Incidental Vessel Costs means, in respect of a Vessel, costs paid, or in respect of costs arising or to be paid after the Delivery Date, to be paid, by the Borrower in connection with that Vessel in excess of the Contract Price, in respect of those items detailed in Schedule 8 for which supporting invoices or receipts have been provided to the Facility Agent or, in respect of costs to be paid after the Delivery Date, pro-forma invoices, and which are, in respect of each item, in an aggregate amount not exceeding the amount detailed against that item in Schedule 8.
 
Increased Cost means:
 
(a)            an additional or increased cost;
 
(b)            a reduction in the rate of return under a Finance Document or on its overall capital; or
 
(c)            a reduction of an amount due and payable under any Finance Document,
 
which is incurred or suffered by a Finance Party or any of its Affiliates but only to the extent attributable to that Finance Party having entered into any Finance Document or funding or performing its obligations under any Finance Document.
 
Instalment means in respect of each Shipbuilding Contract an amount due and payable by the relevant Owner under the terms of that Shipbuilding Contract.
 
Insurers means the underwriters or insurance companies with whom any Obligatory Insurances are effected and the managers of any protection and indemnity or war risks association in which either of the Vessels may at any time be entered.
 
Intercreditor Deed means the deed entered into or to be entered into between the Investor, the Guarantor and the Facility Agent.
 
Investor means Lloyds TSB Equipment Leasing (No.6) Limited, company number 04440302, whose registered office is at 25 Gresham Street, London EC2V 7HN.
 
ISM Code means the International Safety Management Code (including the guidelines on its implementation), adopted by the International Maritime Organization Assembly as Resolutions A.741(18) and A.788(19), as the same may have been or may be amended or supplemented from time to time. The terms “safety management system”, “Safety Management Certificate”, “Document of Compliance” and “major non-conformity” shall have the same meanings as are given to them in the ISM Code.
 
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ISPS Code means the International Ship and Port Facility Security Code adopted by the International Maritime Organization Assembly as the same may have been or may be amended or supplemented from time to time.
 
Karlita means Karlita Shipping Company Limited.
 
Karlita Deposit Account means the account held with the Deposit Bank, designated “Karlita Shipping Company Limited” with account number 98091222 in the name of Karlita.
 
Karlita Second Priority Deposit Account Charge means the second priority charge granted by Karlita in favour of the Facility Agent in respect of the Karlita Deposit Account in form and substance satisfactory to the Facility Agent (acting on the instructions of the Majority Lenders).
 
KEXIM means The Export-Import Bank of Korea.
 
Korea means the Republic of Korea.
 
L/C Bank means the Royal Bank of Scotland plc of 135 Bishopsgate, London EC3M 3UR.
 
Letter of Credit means the letter of credit provided by the L/C Bank to the Investor.
 
Lender means:
 
(a)            an Original Lender; or
 
(b)            any person which becomes a party to this Agreement after the date of this Agreement pursuant to Clause 29.2;
 
and Lenders means all of them.
 
LIBOR means for a Term of any Loan or overdue amount:
 
(a)            the applicable Screen Rate; or
 
(b)            if no Screen Rate is available for the relevant currency or Term of that Loan or overdue amount, the arithmetic mean (rounded upward to four decimal places) of the rates, as supplied to the Facility Agent at its request, quoted by the Reference Banks to leading banks in the London interbank market,
 
as of 11.00 a.m. on the second London Business Day before the start of the Term for the offering of deposits in the currency of that Loan or overdue amount for a period comparable to that Term.
 
Loans means together Vessel Loan 1 and Vessel Loan 2 (each a Loan ).
 
London Business Day means a day (other than a Saturday or a Sunday) on which banks are open for business in London.
 
Losses means each and every liability, loss, charge, claim, demand, action, proceeding, damage, judgment, order or other sanction, enforcement, penalty, fine, fee, commission, interest, lien, salvage, general average, cost and expense of whatsoever nature suffered or incurred by or imposed on the Lenders.
 
Majority Lenders means:
 
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(a)            for the period commencing on the date of this Agreement until the date which falls five years from the date of the first Drawing, Lenders:
 
(i)             whose share in the outstanding Loans and whose undrawn Commitments then aggregate not less than 80 per cent. of the aggregate of all the outstanding Loans and the undrawn Commitments of all the Lenders;
 
(ii)            if there is no Loan then outstanding, whose undrawn Commitments then aggregate not less than 80 per cent. of the Total Commitments; or
 
(iii)           if there is no Loan then outstanding and the Total Commitments have been reduced to zero, whose Commitments aggregated not less than 80 per cent. of the Total Commitments immediately before the reduction; and
 
(b)            for the period commencing on the day falling after the fifth anniversary of the date of the first Drawing, Lenders:
 
(i)             whose share in the outstanding Loans and whose undrawn Commitments then aggregate not less than 67 per cent. of the aggregate of all the outstanding Loans and the undrawn Commitments of all the Lenders;
 
(ii)            if there is no Loan then outstanding, whose undrawn Commitments then aggregate not less than 67 per cent. of the Total Commitments; or
 
(iii)           if there is no Loan then outstanding and the Total Commitments have been reduced to zero, whose Commitments aggregated not less than 67 per cent. of the Total Commitments immediately before the reduction,
 
provided always that, in the case of each of paragraph (a) and paragraph (b), at any time the Majority Lenders must include KEXIM.
 
Manager means Allocean Maritime Limited having its registered office at Ground Floor, 40 Queen Street, London EC4R 1DD, a company incorporated according to the laws of England and Wales or such other professional manager or managers as may be approved by the Facility Agent (acting in accordance with the instructions of the Majority Lenders) from time to time.
 
Manager’s Undertaking means a letter of undertaking to be issued by the Manager to the Facility Agent confirming it shall not make a claim to security ranking ahead of the Lenders’ security in respect of a Vessel in form and substance satisfactory to the Facility Agent.
 
Material Adverse Effect means a material adverse effect on:
 
(a)            the business condition (financial or otherwise) or operations of any of the Obligors;
 
(b)            the ability of any Obligor to perform its obligations under any Finance Document; or
 
(c)            the validity or enforceability of any Finance Document.
 
Maximum Available Loan Amount means, in respect of a Vessel, the lesser of 80% of the Vessel Cost and seventy two million Dollars (US$72,000,000) being the total of the Maximum Available Tranche A Loan Amount and the Maximum Available Tranche B Loan Amount.
 
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Maximum Available Tranche A Loan Amount means, in respect of a Vessel, the lesser of 75% of the Vessel Cost and sixty seven million five hundred thousand Dollars (US$67,500,000).
 
Maximum Available Tranche B Loan Amount means, in respect of a Vessel, the lesser of 5% of the Vessel Cost and four million five hundred thousand Dollars (US$4,500,000).
 
Maximum Facility Amount means one hundred and forty four million Dollars (US$144,000,000) being the aggregate of the Maximum Available Loan Amounts for each Loan.
 
Maximum Tranche A Facility Amount means the lesser of 75% of the aggregate Vessel Cost of the Vessels and one hundred and thirty five million (US$135,000,000).
 
Maximum Tranche B Facility Amount means the lesser of 5% of the aggregate Vessel Cost of the Vessels and nine million Dollars (US$9,000,000).
 
Mortgage means, in respect of a Vessel, the first priority Republic of Cyprus ship mortgage and deed of covenant collateral thereto to be given by the relevant Owner of that Vessel in favour of the Facility Agent on the Delivery Date.
 
Multipartite Deeds means together each of the deeds entered or to be entered between the Facility Agent, the relevant Borrower, the L/C Bank and the Deposit Bank and Multipartite Deed means either of them.
 
Novation Agreement means, in respect of a Vessel, the agreement dated November, 2004 entered into by the relevant Borrower, the relevant Owner and the Builder whereby the parties agreed that the relevant Vessel would be delivered to the relevant Owner.
 
Obligatory Insurances means in respect of each Vessel:
 
(a)            all contracts and policies of insurance and all entries in clubs and/or associations which are from time to time required to be effected and maintained in accordance with this Agreement in respect of each of the Vessels; and
 
(b)            all benefits under the contracts, policies and entries under paragraph (a) above and all claims in respect of them and the return of premiums.
 
Obligor means the Guarantor or a Borrower.
 
Operating Expenses means, in respect of a Vessel, expenses properly and reasonably incurred by the Borrower of that Vessel in connection with the operation, employment, maintenance, repair and insurance of that Vessel (whether by way of payment of the operating expenses element of charterhire under the relevant AML Time Charter or otherwise).
 
Operating Expenses Accounts means together the two bank accounts one to be opened by each of the Borrowers with the Account Bank and designated “ Name of Borrower ” – Operating Expenses Account and Operating Expenses Account means either of them.
 
Operating Expenses Account Charges means together the two charges each in respect of all monies standing to the credit from time to time of one of the Operating Expenses Accounts, one to be entered into by each of the Borrowers together with any and all notices and acknowledgements entered into in connection therewith and Operating Expenses Account Charge means either of them.
 
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Original Financial Statements means the audited financial statements of the Guarantor for the year ended 2003.
 
Owners means each of Carpasso Shipping Company Limited, subsequently to be named Ocean Container (No.3) Limited and Lucota Marine Company Limited, subsequently to be named Ocean Container (No.4) Limited and Owner means either of them.
 
Owners Pledges of Shares means together the two pledges each in respect of the issued share capital of an Owner to be granted by the relevant Partnership acting by the General Partner in favour of the Facility Agent and Owners Pledge of Shares means either of them.
 
Partnerships means together each of the Ocean Container (No.3) Partnership, and the Ocean Container (No.4) Partnership each a limited partnership in England under the Limited Partnerships Act 1907 whose principal place of business is at 5th Floor, 40 Queen Street, London EC4R 1DD acting by the General Partner and Partnership means either of them.
 
Party means a party to this Agreement or any Finance Document.
 
Permitted Liens means, in respect of a Vessel:
 
(a)            Security Interests created by the Security Documents;
 
(b)            Security Interests created by the Second Security Documents and the Third Security Documents (as each such term is defined under the Intercreditor Deed);
 
(c)            liens for unpaid crew’s wages including wages of the master and stevedores employed by the Vessel, outstanding in the ordinary course of trading for not more than one calendar month after the due date for payment;
 
(d)            liens for salvage;
 
(e)            liens for classification or scheduled dry docking or for necessary repairs to that Vessel whose aggregate cost does not exceed US$3,000,000 at any one time in respect of that Vessel;
 
(f)             liens for collision;
 
(g)            liens for master’s disbursements incurred in the ordinary course of trading; and
 
(h)            statutory and common law liens of carriers, warehousemen, mechanics, suppliers, materials men, repairers or other similar liens, including maritime liens, in each case arising in the ordinary course of business, outstanding for not more than one month whose aggregate value does not exceed US$500,000,
 
in the case of paragraphs (b) to (g) inclusive provided that the amounts which give rise to such liens are paid when due or, if not paid when due are being disputed in good faith by appropriate proceedings (and for the payment of which adequate reserves or security are at the relevant time maintained or provided), provided further that such proceedings, whether by payment of adequate security into Court or otherwise, do not give rise to a material risk of the relevant Vessel or any interest therein being seized, sold, forfeited or otherwise lost or of criminal liability on any Finance Party.
 
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Pledges of Shares means together the two pledges each in respect of the issued share capital of a Borrower to be granted by the Shareholders in favour of the Facility Agent and Pledge of Shares means either of them.
 
Post-Delivery Tranche A Interest Rate means 4.75 per cent. per annum.
 
Post-Delivery Tranche B Margin means 1.25 per cent. per annum.
 
Post-Delivery Period means, in respect of a Vessel, the period from the Delivery Date of that Vessel until the Final Maturity Date of the Loan which relates to that Vessel.
 
Pre-Delivery Margin means either the Pre-Delivery Tranche A Margin or the Pre-Delivery Tranche B Margin as applicable.
 
Pre-Delivery Period means, in respect of a Vessel, the period from the date of the first Drawing under this Agreement in respect of the Loan relating to that Vessel, to the Delivery Date of that Vessel.
 
Pre-Delivery Tranche A Margin means 0.8 per cent. per annum.
 
Pre-Delivery Tranche B Margin means 1.07 per cent. per annum.
 
Pro Rata Share means:
 
(a)            for the purpose of determining a Lender’s share in a utilisation of the Facility, the proportion which its Commitment bears to the Total Commitments; and
 
(b)            for any other purpose on a particular date:
 
(i)             the proportion which a Lender’s share of the Loans (if any) bears to both the Loans;
 
(ii)            if there is no Loan outstanding on that date, the proportion which its Commitment bears to the Total Commitments on that date; or
 
(iii)           if the Total Commitments have been cancelled, the proportion which its Commitment bore to the Total Commitments immediately before being cancelled.
 
Proceeds means:
 
(i)             any Final Disposition Proceeds;
 
(ii)            any Total Loss Proceeds;
 
(iii)           any and all other proceeds of enforcement of, or moneys otherwise payable to the Facility Agent under the Security Documents;
 
(iv)           any moneys received by the Facility Agent from any chartering of the Vessel by the Facility Agent (after the termination of the chartering of the Vessel pursuant to Clause 34.2 of the Bareboat Charter) prior to the Final Disposition thereof;
 
(v)            all other moneys which by the terms of any Transaction Document (other than the Intercreditor Deed) or any Other Transaction Documents are expressed to be payable
 
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to the Facility Agent or the Proceeds Account for application pursuant to the Intercreditor Deed;
 
where each capitalised terms used above shall have the meaning given to that term in the relevant Intercreditor Deed.
 
Put Option Agreements means each of the put option agreements entered or to be entered into between the Sponsor and the Investor under which the Investor may, in certain circumstances, require the Sponsor to purchase (on a limited recourse basis) its interest in the relevant Partnership and Put Option Agreement means either of them.
 
Ramona means Ramona Marine Company Limited.
 
Ramona Deposit Account means the account held with the Deposit Bank, designated “Ramona Marine Company Limited” with account number 98091133 in the name of Ramona.
 
Ramona Second Priority Deposit Account Charge means the second priority charge granted by Ramona in favour of the Facility Agent in respect of the Ramona Deposit Account in form and substance satisfactory to the Facility Agent (acting on the instructions of the Majority Lenders).
 
Reference Banks means the Facility Agent, KEXIM Bank (UK) Limited and any other bank or financial institution appointed as such by the Facility Agent (acting on the instructions of the Majority Lenders) under this Agreement.
 
Refund Guarantee means, in respect of a Vessel, the refund guarantee dated 21 st November, 2003 and issued by the Refund Guarantor in favour of the relevant Borrower or such other refund guarantee as may replace the same from time to time (with the approval of the Facility Agent (acting on the instructions of the Majority Lenders)).
 
Refund Guarantor means The Export-Import Bank of Korea, Seoul, Korea.
 
Related Contracts means any or all of the following (as the context requires):
 
(a)            the Refund Guarantees;
 
(b)            the Shipbuilding Contracts;
 
(c)            the Novation Agreements;
 
(d)            the Bareboat Charters;
 
(e)            the AML Time Charters;
 
(f)             the Time Charters;
 
(g)            the Charterer’s Assignments;
 
(h)            the Declarations of Trust;
 
(i)             the Letters of Credit;
 
(j)             the First Priority Deposit Charges; and
 
(k)            the Vessel Management Agreements.
 
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Release means an emission, spill, release or discharge into or upon the air, surface water, groundwater, or soils of any Hazardous Materials for which any of the Environmental Affiliates has any liability under Environmental Law, except in accordance with a valid Environmental Approval.
 
Repayment Date means, in respect of a Loan, each date which is a Tranche A Repayment Date.
 
Repayment Instalment means, in respect of a Loan, each instalment which is a Tranche A Repayment Instalment payable for repayment of that Loan in accordance with the relevant Repayment Schedule.
 
Repayment Schedule  means the schedule of Repayment Dates as detailed in Schedule 6 (Repayment Schedule), to be replaced as required in accordance with Clause 5.1(b).
 
Request means a request made by a Borrower for a Drawing, substantially in the form of Schedule 4 (Form of Request).
 
Required Amount means, as the context may require, the relevant First Required Amount, Second Required Amount or Third Required Amount.
 
Required Insurance Amount means, in respect of a Vessel, 120 per cent. of the aggregate of the outstanding Loan relating to that Vessel.
 
Requisition Compensation means, in respect of a Vessel, all moneys or other compensation payable by reason of requisition for title to, or other compulsory acquisition of, that Vessel including requisition for hire.
 
Retention Accounts means together the two bank accounts one to be opened by each of the Borrowers with the Account Bank and designated “ Name of Borrower ” – Retention Account and Retention Account means either of them.
 
Retention Account Charges means together the two fixed charges each in respect of all monies standing to the credit from time to time of one of the Retention Accounts, one granted or to be granted by each of the Borrowers in favour of the Facility Agent together with any and all notices and acknowledgements entered into in connection therewith and Retention Account Charge means either of them.
 
Retention Period means, in respect of a Loan, each period which is either (or both) a Tranche A Retention Period and/or Tranche B Retention Period.
 
Screen Rate means, for LIBOR, and in respect of a Term, the percentage rate per annum for a period substantially the same as the relevant Term displayed on page 3750 of the Telerate screen. If the relevant page is replaced or the service ceases to be available, the Facility Agent may specify another page or service displaying the appropriate rate.
 
Second Deposit Charges means together the Karlita Second Priority Deposit Account Charge and the Ramona Second Priority Deposit Account Charge.
 
Second Deposit Charge Side Letter means the side letter provided by the General Partner to the Facility Agent confirming its obligations in respect of the Second Deposit Charges.
 
Second Required Amount means, in respect of a Vessel, that amount which from the first day of the fourth year after the Delivery Date of that Vessel until the last day of the fifth year
 
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after the Delivery Date of that Vessel is 120 per cent. of the aggregate of the outstanding Loan relating to that Vessel.
 
Secured Liabilities means all present and future obligations and liabilities (actual or contingent) of the Borrowers to the Finance Parties or any of them under or in connection with any Finance Document.
 
Security Agreements means:
 
(i)             the Mortgages;
 
(ii)            the General Assignments;
 
(iii)           the Pledges of Shares;
 
(iv)           the Owners Pledges of Shares;
 
(v)            the Time Charter and Earnings Assignments;
 
(vi)           the Second Priority Deposit Account Charges;
 
(vii)          the Deeds of Counter-Indemnity;
 
(viii)         the Earnings Account Charges;
 
(ix)            the Retention Account Charges;
 
(x)             the Operating Expenses Account Charges;
 
(xi)            the AML Time Charter Assignments; and
 
(xii)           any other document designated as such in writing by the Obligors and the Facility Agent.
 
Security Assets means any asset which is the subject of a Security Interest created by a Security Document.
 
Security Document means:
 
(a)            each Security Agreement; and
 
(b)            any other document evidencing or creating security over any asset of a Borrower to secure any obligation of a Borrower to the Finance Parties or any of them under the Finance Documents.
 
Security Interest means any mortgage, pledge, lien, charge, assignment, hypothecation or security interest or any other agreement or arrangement having a similar effect.
 
Shareholders means together Sapfo Navigation Inc., whose registered office is Broad Street, 80, Monrovia, Liberia (the sole shareholder of Ramona) and Tully Enterprises S.A. whose registered office is 80 Broad Street, Monrovia, Liberia (the sole shareholder of Karlita) and Shareholder means either of them.
 
Shipbuilding Contract means, in respect of a Vessel, the agreement between the Builder and the relevant Borrower dated 18th November, 2003 pursuant to which the Builder agreed to
 
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build and deliver that Vessel to the relevant Borrower and which has been novated to the relevant Owner by the Novation Agreement.
 
Sponsor means Allco Finance (UK) Limited, a company registered in England & Wales with company number 02818852 whose registered office is at 5th Floor, 40 Queen Street, London, EC4R 1DD.
 
Subsidiary means:
 
(a)            a subsidiary within the meaning of section 736 of the Companies Act 1985; and
 
(b)            unless the context otherwise requires, a subsidiary undertaking within the meaning of section 258 of the Companies Act 1985.
 
Supplemental Agreement means the agreement dated                  November, 2004 entered into between the parties hereto.
 
Tax means any tax, levy, impost, duty or other charge or withholding of a similar nature (including, without limitation, any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same).
 
Tax Deduction means a deduction or withholding for or on account of Tax made from a payment under a Finance Document by a payer for or on account of Tax imposed on that payer by any jurisdiction from which such payment is made or within which such payment arises.
 
Tax Payment means a payment made by an Obligor to a Finance Party in any way relating to a Tax Deduction or under any indemnity given by that Obligor in respect of Tax under any Finance Document.
 
Term means each period determined under this Agreement by reference to which interest payable on a Loan or, as the case may be, a Drawing under a Loan, or an overdue amount is calculated.
 
Third Required Amount means, in respect of a Vessel, that amount which from the first day of the sixth year after the Delivery Date of that Vessel until the Final Maturity Date is 130 per cent. of the aggregate of the outstanding Loan relating to that Vessel.
 
Time Charter means, in respect of a Vessel, the time charterparty dated 18th November, 2003 entered into by the relevant Borrower and the Charterer or such other time charterparty entered into from time to time by the Borrower in respect of a Vessel.
 
Time Charter and Earnings Assignment means, in respect of a Vessel, the assignment of the Time Charter and the Earnings granted or to be granted by the Borrower in respect of that Vessel in favour of the Facility Agent together with any and all notices and acknowledgements entered into in connection therewith.
 
Total Commitments means the aggregate of the Commitments of all the Lenders.
 
Total Loss means in relation to a Vessel:
 
(a)            actual, constructive, compromised, agreed or arranged total loss of that Vessel;
 
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(b)            requisition for title or other compulsory acquisition of that Vessel otherwise than by requisition for hire;
 
(c)            capture, seizure, arrest, detention, or confiscation of that Vessel by any government or by persons acting or purporting to act on behalf of any government which deprives the Borrower or as the case may be the Charterer of the use of that Vessel for more than 60 days after that occurrence; and
 
(d)            requisition for hire of that Vessel by any government or by persons acting or purporting to act on behalf of any government which deprives the Borrower or as the case may be the Charterer of the use of that Vessel for a period of 60 days, other than a charter of the Vessel to a government or government agency approved by the relevant Borrower and by the Facility Agent (acting on the instructions of the Majority Lenders).
 
Tranche A Lenders means the lenders detailed in Part 2 of Schedule 1 as Tranche A Lenders together with any New Lenders in respect of a Tranche A Loan.
 
Tranche A Loan means, in respect of a Vessel, all monies advanced to the Borrowers by the Tranche A Lenders.
 
Tranche A Repayment Date means, in respect of a Tranche A Loan, each of the twenty five (25) dates specified , in the case of Vessel 1, in Part 1 of the Repayment Schedule and in the case of Vessel 2, in Part 2 of the Repayment Schedule, and in each such case the first Repayment Date shall be the day which is the next Half-Year Date falling after the Delivery Date of that Vessel. The final Tranche A Repayment Date shall fall on the Final Maturity Date.
 
Tranche A Repayment Instalment means in respect of a Tranche A Loan, each instalment which is payable for repayment of that Loan in accordance with the relevant Repayment Schedule.
 
Tranche A Retention Period means, in respect of a Tranche A Loan, each period commencing, in the case of the first such period, on the Delivery Date of the Vessel to which that Tranche A Loan relates and, in the case of each other such period, on a Tranche A Repayment Date and ending on the next Tranche A Repayment Date or, in the case of the final such period, the Final Maturity Date.
 
Tranche B Lenders means the lenders detailed in Part 2 of Schedule 1 as Tranche B Lenders together with any New Lenders in respect of a Tranche B Loan.
 
Tranche B Loan means, in respect of a Vessel, all monies advanced to the Borrowers by the Tranche B Lenders.
 
Tranche B Retention Period means, in respect of a Tranche B Loan, each period commencing, in the case of the first such period, on the Delivery Date of the Vessel to which that Tranche B Loan relates and, in the case of each other such period, on a Tranche A Repayment Date and ending on the next Tranche A Repayment Date or, in the case of the final such period, the Final Maturity Date.
 
Transfer Certificate means a certificate, substantially in the form of Schedule 5 (Form of Transfer Certificate), with such amendments as the Facility Agent and the Borrowers may approve or reasonably require or any other form agreed between the Facility Agent and the Borrowers.
 
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Utilisation Date means each date on which the Facility or any part thereof is utilised.
 
Vessel 1 means the 9,600 TEU vessel to be constructed in accordance with the relevant Shipbuilding Contract with Hull Number 1559.
 
Vessel 2 means the 9,600 TEU vessel to be constructed in accordance with the relevant Shipbuilding Contract with Hull Number 1561.
 
Vessels means together Vessel 1 and Vessel 2, being the vessels detailed in Part 1 of Schedule 1 and Vessel means either of them.
 
Vessel Cost means, in respect of each Vessel the total of (i) the Contract Price and (ii) the Incidental Costs, such amount not to exceed US$90,000,000.
 
Vessel Loan 1 means such part of the Facility as is drawndown in respect of the acquisition of Vessel 1 and is in the maximum principal amount of the lesser of:
 
(i)             80 per cent. of the Vessel Cost of Vessel 1, and
 
(ii)            when aggregated with Vessel Loan 2, the Maximum Facility Amount,
 
or the principal amount thereof from time to time outstanding under this Agreement.
 
Vessel Loan 2 means such part of the Facility as is drawndown in respect of the acquisition of Vessel 2 and is in the maximum principal amount of the lesser of:
 
(i)             80 per cent. of the Vessel Cost of Vessel 2; and
 
(ii)            when aggregated with Vessel Loan 1, the Maximum Facility Amount,
 
or the principal amount thereof from time to time outstanding under this Agreement.
 
Vessel Management Agreement means, in respect of a Vessel, the management agreement entered into or to be entered into between, the Manager and the Bareboat Charterer.
 
1.2           Construction
 
(a)            In this Agreement, unless the contrary intention appears, a reference to:
 
(i)             an amendment includes a supplement, novation, restatement, re-enactment or increases in the amount of the facilities granted hereunder and amended will be construed accordingly;
 
assets includes present and future properties, revenues and rights of every description;
 
an authorisation includes an authorisation, consent, approval, resolution, licence, exemption, filing, registration or notarisation;
 
disposal means a sale, transfer, grant, lease or other disposal, whether voluntary or involuntary, and dispose will be construed accordingly;
 
indebtedness includes any obligation (whether incurred as principal or as surety) for the payment or repayment of money;
 
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a person includes any individual, company, corporation, unincorporated association or body (including a partnership, trust, joint venture or consortium), government, state, agency, organisation or other entity whether or not having separate legal personality and their successors in title, permitted assigns and permitted transferees;
 
a regulation includes any regulation, rule, official directive, request or guideline (whether or not having the force of law but, if not having the force of law, being of a type with which any person to which it applies is accustomed to comply) of any governmental, inter-governmental or supranational body, agency, department or regulatory, self-regulatory or other authority or organisation;
 
(ii)            a currency is a reference to the lawful currency for the time being of the relevant country;
 
(iii)           a Default being outstanding means that it has not been cured, remedied or waived;
 
(iv)           a provision of law is a reference to that provision as extended, applied, amended or re-enacted and includes any subordinate legislation;
 
(v)            a Clause, a Subclause or a Schedule is a reference to a clause or subclause of, or a schedule to, this Agreement;
 
(vi)           a Finance Document or another document is a reference to that Finance Document or other document as amended;
 
(vii)          a time of day is a reference to London time; and
 
(viii)         words importing the plural shall include the singular and vice versa..
 
(b)            Unless the contrary intention appears, a reference to a month or months is a reference to a period starting on one day in a calendar month and ending on the numerically corresponding day in the next calendar month or the calendar month in which it is to end, except that:
 
(i)             if the numerically corresponding day is not a Business Day, the period will end on the next Business Day in that month (if there is one) or the preceding Business Day (if there is not);
 
(ii)            if there is no numerically corresponding day in that month, that period will end on the last Business Day in that month; and
 
(iii)           notwithstanding sub-paragraph (i) above, a period which commences on the last Business Day of a month will end on the last Business Day in the next month or the calendar month in which it is to end, as appropriate.
 
(c)            Unless expressly provided to the contrary in a Finance Document, a person who is not a party to a Finance Document may not enforce any of its terms under the Contracts (Rights of Third Parties) Act 1999 and notwithstanding any term of any Finance Document, the consent of any third party is not required for any variation (including any release or compromise of any liability) or termination of that Finance Document.
 
(d)            Unless the contrary intention appears or unless the context otherwise permits:
 
(i)             a reference to a Party will not include that Party if it has ceased to be a Party under this Agreement;
 
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(ii)            a word or expression used in any other Finance Document or in any notice given in connection with any Finance Document has the same meaning in that Finance Document or notice as in this Agreement; and
 
(iii)           any obligation of a Borrower under the Finance Documents which is not a payment obligation remains in force in accordance with its terms for so long as any payment obligation of a Borrower is or may be outstanding under the Finance Documents.
 
(e)            Joint and several liability
 
(i)             All obligations, covenants, representations, warranties and undertakings in or pursuant to the Finance Documents assumed, given, made or entered into by the Borrowers shall, unless otherwise expressly provided, be assumed, given, made or entered into by the Borrowers jointly and severally.
 
(ii)            Each of the Borrowers agrees that any rights which it may have at any time during the term of the Facility by reason of the performance of its obligations under the Finance Documents to be indemnified by the other Borrower and/or to take the benefit of any security taken by the Facility Agent pursuant to the Finance Documents shall be exercised in such manner and on such terms as the Facility Agent may require or as provided in this Agreement. Each of the Borrowers agrees to hold any sums received by it as a result of its having exercised any such right on trust for the Facility Agent absolutely.
 
(iii)           Each of the Borrowers agrees that it will not at any time during the term of the Facility claim any set-off or counterclaim against the other Borrower in respect of any liability owed to it by that other Borrower under or in connection with the Finance Documents, nor prove in competition with any of the Finance Parties in any liquidation of (or analogous proceeding in respect of) the other Borrower in respect of any payment made under the Finance Documents or in respect of any sum which includes the proceeds of realisation of any security held by the Facility Agent for the repayment of the Loans.
 
(f)             The headings in this Agreement do not affect its interpretation.
 
2.              FACILITY
 
2.1           Facility and Purpose
 
Subject to the terms of this Agreement, the Lenders make available to the Borrowers a term loan facility in a maximum aggregate amount equal to the Maximum Facility Amount. The term loan facility shall be made available in two Loans (Vessel Loan 1 and Vessel Loan 2, each of which shall be made available to the relevant Borrower). Each Loan shall be capable of being drawn, up to the maximum amount of the relevant Vessel Loan, on the dates described in Clause 4.2(a).
 
2.2           Loans
 
Each Loan may be used only in or towards assisting with financing the cost of acquiring the Vessel to which it relates and such other items and costs as are included in the relevant Vessel Cost.
 
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2.3           No obligation to monitor
 
No Finance Party is obliged to monitor or verify the utilisation of any Loan.
 
2.4           Nature of a Finance Party’s rights and obligations
 
Unless otherwise agreed by all the Finance Parties:
 
(a)            the obligations of a Finance Party under the Finance Documents are several;
 
(b)            failure by a Finance Party to perform its obligations does not affect the obligations of any other Party under the Finance Documents;
 
(c)            no Finance Party is responsible for the obligations of any other Finance Party under the Finance Documents;
 
(d)            the rights of a Finance Party under the Finance Documents are separate and independent rights;
 
(e)            a Finance Party may, except as otherwise stated in the Finance Documents, separately enforce those rights; and
 
(f)             a debt arising under the Finance Documents to a Finance Party is a separate and independent debt.
 
3.              CONDITIONS PRECEDENT
 
3.1           Conditions precedent documents
 
(a)            A Request in respect of a Drawing under a Loan may not be given until the Facility Agent has notified the Borrowers and the Lenders that it has received all of the documents and evidence set out in Schedule 2 (Initial Conditions Precedent Documents) in form and substance satisfactory to the Facility Agent (acting in accordance with the instructions of the Majority Lenders). The Facility Agent must give this notification to the relevant Borrower and the Lenders promptly upon receiving such instructions.
 
(b)            A Request representing the amount of a Delivery Date Instalment may not be given until the Facility Agent has notified the relevant Borrower and the Lenders that it has received all of the documents and evidence set out in Schedule 3 (Delivery Date Conditions Precedent Documents) and Schedule 2 (Conditions Subsequent to first Drawing) in form and substance satisfactory to the Facility Agent or that it expects to receive outstanding documents or evidence on or before the relevant Delivery Date (in each case acting in accordance with the instructions of the Majority Lenders). The Facility Agent must give this notification to the relevant Borrower and the Lenders promptly upon receiving such instructions.
 
3.2           Further conditions precedent
 
The obligations of each Lender to advance either Loan are subject to the further conditions precedent that on both the date of the Request and the Utilisation Date for that Loan:
 
(a)            the representations made under Clause 15 are correct in all material respects; and
 
(b)            no Default is outstanding or would result from the Drawing.
 
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4.              UTILISATION
 
4.1           Giving of Requests
 
(a)            Each Borrower may borrow its relevant Loan by giving to the Facility Agent a duly completed Request in respect of a Drawing under that Loan.
 
(b)            Unless the Facility Agent otherwise agrees, the latest time for receipt by the Facility Agent of a duly completed Request is 11.00 a.m., Seoul time, three Business Days prior to the proposed date for the borrowing.
 
(c)            Each Request is irrevocable.
 
4.2           Completion of Requests
 
A Request for a Drawing under a Loan will not be regarded as having been duly completed unless:
 
(a)            the Utilisation Date is a Business Day falling within the Availability Period and is a date which either (i) falls on or after the date on which the relevant Instalment under the relevant Shipbuilding Contract falls due or (ii) in respect of a Request for Incidental Costs only is the last day of a Term and such request is submitted with the relevant original invoices and/or receipts (or, in the case of costs to be paid after the Delivery Date, pro-forma invoices) relating to such costs;
 
(b)            in respect of a Drawing under a Loan:
 
(i)             in respect of the first Drawing it is in an amount not exceeding the aggregate of (x) the balance of the amount of the Instalments paid or payable to the Builder after deducting therefrom an amount equal to the Equity Contribution and (y) the Incidental Vessel Costs in respect of the relevant Vessel on the relevant Utilisation Date;
 
(ii)            in respect of a Drawing other than the Drawing referred to in paragraph (i) and the Drawing of the Delivery Date Instalment, it is in an amount not exceeding the Incidental Vessel Costs in respect of the relevant Vessel on the relevant Utilisation Date less the amount of any such Incidental Vessel Costs which have been reimbursed to the relevant Borrower in an earlier Drawing;
 
(iii)           in respect of the Drawing on the Delivery Date, it is in an amount not exceeding the aggregate of (x) the balance of the amount of the Instalment payable to the Builder on the Delivery Date, and (y) the Incidental Vessel Costs not taken into account under sub-paragraphs (i) and (ii) above and (z) an amount equal to the reduction (if any) in the Equity Contribution calculated in accordance with the Equity Contribution Side Letter, in respect of the relevant Vessel on the relevant Utilisation Date;
 
(iv)           the amount requested for the Drawing in respect of Incidental Vessel Costs or Incidental Loan Costs, when aggregated with any other amount in respect of Incidental Vessel Costs and Incidental Loan Costs drawndown under the Loan and any amounts capitalised or to be capitalised on the proposed Utilisation Date pursuant to Clause 4.3(a) in respect of Incidental Loan Costs, does not exceed US$6,100,000 in aggregate;
 
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(v)            the amount requested for the Drawing does not exceed, when aggregated with (x) existing Drawings under that Loan, (y) the amounts to be drawndown under any other Request under that Loan issued for drawdown on the proposed Utilisation Date and (z) any amounts capitalised or to be capitalised on the proposed Utilisation Date pursuant to Clause 4.3(a) in respect of Incidental Loan Costs for that Loan, the Maximum Available Loan Amount;
 
(c)            it requests that the amount of the Drawing shall be drawn pro-rata between the Tranche A Loan and the Tranche B Loan; and
 
(d)            the proposed Term complies with this Agreement.
 
Only one Drawing may be requested in a Request.
 
4.3           Capitalisation of Incidental Loan Costs
 
(a)            To the extent that the amount of any Incidental Loan Costs to be capitalised does not exceed, when aggregated with the Drawings already made, and amounts already capitalised under the relevant Loan, the Maximum Available Loan Amount then, during the Pre-Delivery Period, in respect of a Vessel, the Exposure Fee payable in accordance with Clause 24.1, the commitment fee payable in accordance with Clause 24.2 and interest calculated and payable in accordance with Clause 7.1(a), relating to that Vessel, shall, unless otherwise requested in writing by the Borrowers to the Facility Agent (in which case the Borrowers shall immediately irrevocably and unconditionally pay such fees and interest in cash to the Facility Agent), accrue on the Loan relating to that Vessel and shall, on the last day of each Term during the Pre-Delivery Period, be capitalised and added to the principal amount of the Loan outstanding on a pro-rata basis between Tranche A and Tranche B. The Arranger’s fee payable in accordance with Clause 24.4 relating to a Vessel shall accrue on the Loan relating to that Vessel and shall, on the date of the first Drawing in respect of that Loan, be capitalised and added to the principal amount of the Loan outstanding.
 
(b)            To the extent that any amount of any relevant Incidental Loan Cost is not capitalised in accordance with Clause 4.3(a) above but is instead paid by a Borrower in cash, then that Borrower may, during the Availability Period, request an amount for Drawing under the relevant Loan equal to the amount of such Incidental Loan Cost, subject to compliance with the provisions of Clause 4.2(b)(iv) above. The amount so drawn shall, on the relevant Utilisation Date, be capitalised and added to the principal amount of the Loan outstanding.
 
5.              REPAYMENT
 
5.1           Repayment of the Loans
 
(a)            The Borrowers must repay Tranche A of each Loan by 25 consecutive Repayment Instalments to the Facility Agent on each Repayment Date for that Loan in accordance with the relevant Repayment Schedule.
 
(b)            The Facility Agent shall notify the Borrowers and the Lenders of any change in the amount or the timing of any Repayment Instalment, as soon as practicable after the Delivery Date for the relevant Vessel. In the event of any such notification, the Facility Agent shall replace the relevant Repayment Schedule attached at Schedule 6 with a new Repayment Schedule reflecting the correct Repayment Instalments and the correct Repayment Dates and promptly provide a copy thereof to the Borrowers and the Lenders. In any event, Tranche A of each Loan shall be repaid in full on the Final Maturity Date for that Loan.
 
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(c)            The Borrowers must repay Tranche B of each Loan on the Final Maturity Date for that Loan.
 
6.              PREPAYMENT AND CANCELLATION
 
6.1           Mandatory prepayment - illegality
 
(a)            If it becomes, or to the knowledge of any Lender is to become, unlawful in any jurisdiction for a Lender to perform any of its obligations as contemplated by this Agreement or a Finance Document or to fund or maintain its share in one or both of the Loans (the Event of Illegality ), that Lender shall notify the Facility Agent and the Borrowers.
 
(b)            After notification under paragraph (a) above, the Owners and that Lender shall thereafter consult with each other in good faith for a period of thirty (30) days or in the event that the Event of Illegality takes effect before the expiration of 30 days, for the maximum number of days available before the Event of Illegality takes effect with a view to restructuring the Facility in such a way as to avoid the effect of the Event of Illegality.
 
(c)            If agreement cannot be reached between the parties within the period specified in paragraph (b) above, the Borrowers shall repay the share of that Lender in the relevant Loan or Loans on the date specified in paragraph (d) below and the Commitment of that Lender will be immediately cancelled.
 
(d)            The date for repayment of a Lender’s share in a Loan or Loans will be:
 
(i)             the last day of the current Term of that Loan; or
 
(ii)            if earlier the date specified by that Lender in the notice delivered to the Borrowers (being no earlier than the last day of any applicable grace period permitted by Applicable Law).
 
6.2           Mandatory prepayment – change of control of the Guarantor
 
(a)            The Obligors must promptly notify the Facility Agent if any of them becomes aware of any person or group of persons acting in concert gaining control of the Guarantor from Mr. John Coustas and his immediate family, be it direct or indirect.
 
(b)            After notification under paragraph (a) above or if the Facility Agent otherwise becomes aware of the same, the Facility Agent may (acting on the instructions of the Majority Lenders), by notice to the Lenders and the Borrowers delivered to the Borrowers within 30 days of such notification:
 
(i)             cancel the Facility; and
 
(ii)            declare all outstanding Loans to be promptly, and in any event within 60 days of such declaration, due and payable.
 
Any such notice will take effect in accordance with its terms.
 
(c)            In paragraph (a) above:
 
control has the meaning given to it in section 416 of the Income and Corporation Taxes Act 1988; and
 
acting in concert has the meaning given to it in the City Code on Takeovers and Mergers.
 
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6.3           Mandatory prepayment- Change of control of the Charterer
 
(a)            The Borrowers must promptly notify the Facility Agent if any of them becomes aware of any person or group of persons acting in concert gaining control of the Charterer, be it direct or indirect.
 
(b)            After notification under paragraph (a) above or if the Facility Agent otherwise becomes aware of the same in respect of the Charterer, each of the Lenders may undertake a credit review of the Charterer in the context of the terms of this Agreement. In carrying out the credit review and reaching a conclusion, the Lenders shall act in good faith but otherwise in their absolute discretion.
 
(c)            In order to reach a conclusion that the credit of the Charterer under its new ownership is acceptable, any Lender may require amendments to this Agreement. Any such amendments required by any Lender shall apply in respect of all amounts outstanding in respect of each Loan.
 
(d)            The Facility Agent shall inform the Borrowers, once the Lenders have concluded their credit review, of the result including details of any amendments required to this Agreement which the Borrowers must comply with.
 
(e)            If the result of the credit review is that one or more of the Lenders does not accept the credit of the Charterer under its new ownership, the Borrowers shall be required, within a period of 90 days from the date of the Facility Agent’s notification or immediately upon the occurrence of an Event of Default which is continuing, to prepay all outstanding Loans.
 
(f)             If the result of the credit review is that each of the Lenders is prepared to accept the credit of the Charterer under its new ownership, either with or without amendments to this Agreement or compliance with further conditions by the Borrowers, the Borrowers shall within a period of 90 days from the date of the Facility Agent’s notification, (during which time no Event of Default may occur or be continuing), either:
 
(i)             comply with the requirements of the Lenders’ credit review, if any; or
 
(ii)            prepay the Loans if the Borrowers do not accept the new requirements.
 
(g)            In paragraph (a) above:
 
control and acting in concert shall have the meaning given to them in Clause 6.2(c).
 
6.4           Mandatory prepayment – Non-delivery, Sale or Total Loss of a Vessel
 
(a)            The Borrowers shall be obliged to prepay the whole of the Loan then outstanding in relation to a Vessel in the following circumstances and at the following times:
 
(i)             if that Vessel is sold, on or before the date on which the sale is completed by delivery of that Vessel to a buyer;
 
(ii)            if there is a Total Loss (whether before or after the Delivery Date), on the earlier of the date falling 90 days after the Date of Total Loss and the date of receipt by the Facility Agent of the proceeds of insurance relating to such Total Loss;
 
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(iii)           if the Shipbuilding Contract relating to that Vessel is terminated in circumstances where the Refund Guarantee is payable, upon the date of receipt of the monies under the Refund Guarantee; or
 
(iv)           if the Shipbuilding Contract relating to that Vessel is terminated in circumstances other than those referred to in paragraph (iii), on the date of its termination.
 
(b)            In the event that a mandatory prepayment obligation arises under Clause 6.4(a) for whatever reason, the Facility Agent shall be entitled to procure immediate valuations of the remaining Vessel in accordance with Clause 19, at the cost of the Borrowers. In the event that such valuations show that the relevant Required Amount is not satisfied, the Borrowers shall be obliged to apply the balance of any funds received by the Borrowers pursuant to the relevant Intercreditor Deed to the extent required to ensure that the relevant Required Amount is satisfied. Any balance of funds received by the Borrowers pursuant to the relevant Intercreditor Deed after such application shall be available to the relevant Borrower. In the event that the funds received pursuant to the relevant Intercreditor Deed are not adequate to ensure that the relevant Required Amount is satisfied, the Borrowers shall be obliged to pay an amount equal to such shortfall to the Facility Agent no later than 5 Business Days after receipt of notification from the Facility Agent of details of the amount required to satisfy the Required Amount.
 
6.5           Voluntary prepayment
 
(a)            A Borrower may, by giving not less than thirty days’ prior notice to the Facility Agent, prepay a Loan in whole or from time to time in part on a Repayment Date.
 
(b)            A prepayment must (i) be in a minimum amount of US$10,000,000, and (ii) be in integral multiples of US$5,000,000.
 
(c)            Unless the Facility Agent otherwise agrees, any voluntary prepayment under this Clause 6.5 shall be applied against the Repayment Instalments of the relevant Loan in the inverse order of their maturity and shall be applied pro-rata in respect of the amounts outstanding to the Tranche A Lenders and the Tranche B Lenders.
 
6.6           Automatic cancellation
 
The Commitment of each of the Lenders will be automatically cancelled at the close of business on the last day of the relevant Availability Period.
 
6.7           Voluntary cancellation
 
(a)            The Borrowers may, by giving not less than ten Business Days’ prior notice to the Facility Agent, cancel the unutilised amount of the Total Commitments in whole or in part.
 
(b)            Partial cancellation of the Total Commitments must be in a minimum amount or multiple of US$1,000,000.
 
(c)            Any cancellation in part will be applied against the Commitment of each Lender pro rata.
 
6.8           Voluntary prepayment and cancellation
 
(a)            If either or both of the Borrowers is, or will be, required to pay to a Lender a Tax Payment or an Increased Cost, the relevant Borrower(s) may, while the requirement continues, give notice to the Facility Agent requesting prepayment and cancellation in respect of that Lender.
 
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(b)            After notification under paragraph (a) above:
 
(i)             the relevant Borrower(s) must repay or prepay that Lender’s share in each Loan made to it on the date specified in paragraph (c) below; and
 
(ii)            the Commitment of that Lender will be immediately cancelled.
 
(c)            The date for repayment or prepayment of a Lender’s share in a Loan(s) will be the last day of the Term of each relevant Loan which is current at the time of the notice from the Borrower(s) or, if earlier, the date specified by the Borrower(s) in the notice delivered to the Facility Agent.
 
6.9           Partial prepayment of Loans
 
(a)            Except where this Clause 6 expressly provides otherwise any partial prepayment of a Loan will be applied against the remaining Repayment Instalments in respect of that Loan, in the inverse order of their maturity and shall be applied pro-rata in respect of the amounts outstanding to the Tranche A Lenders and the Tranche B Lenders.
 
(b)            Upon any such partial prepayment, the Facility Agent shall replace the relevant Repayment Schedule attached at Schedule 6 with a new Repayment Schedule reflecting the correct Repayment Instalments and promptly provide a copy thereof to the relevant Borrower.
 
(c)            No amount of a Loan prepaid under this Agreement may subsequently be re-borrowed.
 
6.10         Miscellaneous provisions
 
(a)            Any notice of prepayment and/or cancellation under this Agreement is irrevocable and must specify the relevant date(s).
 
(b)            All prepayments under this Agreement must be made with accrued interest on the amount prepaid. A prepayment of a Tranche A Loan made other than in accordance with Clause 6.1, Clause 6.2, Clause 6.3 and Clause 6.4(a)(ii), to (iv) inclusive shall be subject to a prepayment fee equal to 0.5% of the amount of principal of the relevant Tranche A Loan prepaid. All prepayments shall also be subject to Break Costs.
 
(c)            No prepayment or cancellation is allowed except in accordance with the express terms of this Agreement.
 
7.              INTEREST
 
7.1           Calculation of interest
 
(a)            The rate of interest on each Tranche A Loan for each Term during the Pre-Delivery Period is the percentage rate per annum equal to the aggregate of the applicable:
 
(i)             Pre-Delivery Tranche A Margin;
 
(ii)            Exposure Fee; and
 
(iii)           LIBOR (together, the Pre-Delivery Tranche A Interest Rate ).
 
(b)            The rate of interest on each Tranche B Loan for each Term during the Pre-Delivery Period is the percentage rate per annum equal to the aggregate of the applicable:
 
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(i)             Pre-Delivery Tranche B Margin; and
 
(ii)            LIBOR (together, the Pre-Delivery Tranche B Interest Rate ).
 
(c)            The rate of interest on each Loan for each Term during the Post-Delivery Period shall be:
 
(i)             in respect of a Tranche A Loan, 5.02 per cent. being the aggregate of:
 
(A)           Post-Delivery Tranche A Interest Rate; and
 
(B)            Exposure Fee (together, the Tranche A Interest Rate ); and
 
(ii)            in respect of a Tranche B Loan, the percentage rate per annum equal to the aggregate of:
 
(A)           LIBOR; and
 
(B)            Post-Delivery Tranche B Margin (together, the Tranche B Interest Rate) .
 
(d)            Interest shall be calculated by reference to the actual number of days elapsed and on the basis of a year of 360 days. Interest shall accrue from and including the first day of each Term to but excluding the last day of such Term.
 
7.2           Payment of interest
 
Except where it is provided to the contrary in this Agreement, the Borrowers must pay accrued interest and, in respect of a Tranche A Loan, the Exposure Fee on each Loan on the last day of each Term. During the Pre-Delivery Period in respect of a Vessel, interest and, in respect of a Tranche A Loan, Exposure Fee shall accrue on the basis set out in Clause 7.1 above and shall, on the last day of each Term during the Pre-Delivery Period, be capitalised and added to the principal amount of the Loan outstanding.
 
7.3           Interest on overdue amounts
 
(a)            If the Obligors fail to pay any amount payable by them under the Finance Documents, they must immediately on demand by the Facility Agent pay interest on the overdue amount from its due date up to the date of actual payment, both before, on and after judgment.
 
(b)            If the overdue amount is a principal amount of a Tranche A Loan or is an amount accruing in respect of interest or Exposure Fee on a Tranche A Loan and becomes due and payable prior to the last day of its current Term, then:
 
(i)             the first Term for that overdue amount will be the unexpired portion of that Term; and
 
(ii)            the rate of interest on the overdue amount for that first Term will be two per cent per annum above the Pre-Delivery Tranche A Interest Rate or the Tranche A Interest Rate, as applicable.
 
After the expiry of the first Term for that overdue amount, the rate on the overdue amount will be calculated in accordance with paragraph (d) below.
 
(c)            If the overdue amount is a principal amount of a Tranche B Loan or is an amount accruing in respect of interest on a Tranche B Loan and becomes due and payable prior to the last day of its current Term, then:
 
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(i)             the first Term for that overdue amount will be the unexpired portion of that Term; and
 
(ii)            the rate of interest on the overdue amount for that first Term will be two per cent per annum above the Pre-Delivery Tranche B Interest Rate or the Tranche B Interest Rate, as applicable.
 
After the expiry of the first Term for that overdue amount, the rate on the overdue amount will be calculated in accordance with paragraph (d) below.
 
(d)            In respect of any amounts outstanding other than in accordance with paragraph (b) and (c) above, interest on such overdue amount is payable at a rate determined by the Facility Agent to be two per cent. per annum above the Tranche A Interest Rate. For this purpose, the Facility Agent may (acting reasonably) select successive Terms of any duration of up to six months.
 
(e)            Interest (if unpaid) on an overdue amount will be compounded with that overdue amount at the end of each of its Terms but will remain immediately due and payable.
 
7.4           Notification of rates of interest
 
In respect of a Vessel, during the Pre-Delivery Period, and in respect of Tranche B, during the Post-Delivery Period, the Facility Agent must promptly notify each relevant Party of the determination of a rate of interest under this Agreement.
 
8.              TERMS
 
8.1           Selection
 
(a)            Each Loan has successive Terms.
 
(b)            Each Term shall be for a period of six months subject always to the provisions of Clauses 8.2, 8.3 and 8.4 below.
 
8.2           Consolidation
 
The first Term for a Drawing under a Loan will commence on the date that Drawing is made and each subsequent Term shall commence on the last day of the previous Term. Each Term for such Drawing during the Pre-Delivery Period will be of six months’ duration (subject to Clause 8.3) provided always that:
 
(i)             the first Term for the second and subsequent Drawings under a Loan shall end on the last day of the current Term for existing Drawings under that Loan and on the last day of the current Term for any existing Drawings under the other Loan;
 
(ii)            the first Term for the first Drawing under the second Loan to be drawn will end on the last day of the current Term for any existing Drawings under the other Loan; and
 
(iii)           each Term during the Post-Delivery Period will end on the next Repayment Date for that Loan or, in the case of the final Term for a Loan, on the Final Maturity Date.
 
8.3           End of Term on Delivery Date
 
If a Term in relation to a Loan or a Drawing under a Loan would otherwise overrun the Delivery Date of the Vessel to which the relevant Loan relates, it will be shortened so that it
 
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ends on the Delivery Date of that Vessel. Each subsequent Term will be ascertained in accordance with Clause 8.2.
 
8.4           No overrunning the Final Maturity Date
 
If a Term would otherwise overrun the Final Maturity Date, it will be shortened so that it ends on the Final Maturity Date.
 
8.5           Other adjustments
 
The Facility Agent and the Borrowers may enter into such other arrangements as they may agree for the adjustment of Terms and the consolidation and/or splitting of Loans.
 
9.              MARKET DISRUPTION
 
9.1           Failure of the Reference Banks to supply a rate
 
If LIBOR is to be calculated by reference to the Reference Banks but if the Reference Banks are unable to supply a rate by 11:00 a.m. on the second Business Day before the first day of the relevant Term, the applicable LIBOR will be calculated in accordance with Clause 9.2.
 
9.2           Market disruption
 
(a)            A market disruption event shall arise where,
 
(i)             no, or only one, Reference Bank supplies a rate by 11:00 a.m. on the second Business Day before the first day of the relevant Term; or
 
(ii)            the Facility Agent receives by close of business on the second Business Day before the first day of the relevant Term notification from any Lender or Lenders whose shares in the relevant Loan (or, as the case may be, in the Post-Delivery Period, the relevant Tranche B Loan) exceed 30% of that Loan that the cost to them of obtaining matching deposits in the relevant interbank market is in excess of LIBOR for the relevant Term.
 
(b)            The Facility Agent must promptly notify the Borrowers and the Lenders of a market disruption event.
 
(c)            After notification under paragraph (b) above, the rate of interest on the affected Loan for the relevant Term will, during the Pre-Delivery Period be the aggregate of the applicable:
 
(i)             Pre-Delivery Margin;
 
(ii)            the rate notified to the Facility Agent by that Lender as soon as practicable, and in any event before interest is due to be paid in respect of that Term, to be that which expresses as a percentage rate per annum the cost to that Lender of funding the Loan from whatever source it may reasonably select; and
 
(iii)           with respect to the Tranche A Loan only, Exposure Fee.
 
(d)            After notification under paragraph (b) above, the rate of interest on the affected Tranche B Loan for the relevant Term will, during the Post-Delivery Period be the aggregate of the applicable:
 
(i)             Post-Delivery Tranche B Margin; and
 
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(ii)            the rate notified to the Facility Agent by that Lender as soon as practicable, and in any event before interest is due to be paid in respect of that Term, to be that which expresses as a percentage rate per annum the cost to that Lender of funding the Tranche B Loan from whatever source it may reasonably select.
 
9.3           Alternative basis of interest or funding
 
(a)            If a market disruption event occurs and the Facility Agent or the Borrowers so require, the Borrowers and the Facility Agent must enter into negotiations for a period of not more than 30 days with a view to agreeing an alternative basis for determining the rate of interest and/or funding for the affected Loan and any future Loan.
 
(b)            Any alternative basis agreed will be, with the prior written consent of all the Lenders, binding on all the Parties hereto.
 
10.           TAXES
 
10.1         Tax gross-up
 
(a)            Each Obligor must make all payments to be made by it under the Finance Documents without any Tax Deduction, unless a Tax Deduction is required by an Applicable Law.
 
(b)            If a Tax Deduction is required by an Applicable Law to be made by an Obligor or, as the case may be the Facility Agent, the amount of the payment due from the Obligor will be increased or, as the case may be, the Obligor shall make an additional payment, so that the amount (after making the Tax Deduction) received by the recipient is equal to the payment which would have been due if no Tax Deduction had been required.
 
(c)            If an Obligor is required to make a Tax Deduction, that Obligor must make the minimum Tax Deduction and must make any payment required in connection with that Tax Deduction within the time allowed by the Applicable Law.
 
(d)            Within 15 days of making either a Tax Deduction or a payment required in connection with a Tax Deduction or, if later, forthwith following receipt of the same, the Obligor making that Tax Deduction or payment must deliver to the Facility Agent for the relevant Finance Party, documents or other information (or certified copies thereof) evidencing satisfactorily to that Finance Party (acting reasonably) that the Tax Deduction has been made or (as applicable) the appropriate payment has been paid to the relevant taxing authority.
 
10.2         Tax Indemnity
 
Without prejudice to the provisions of 10.1 (Tax gross-up), if any Lender is required to make any payment on account of Tax (not being a Tax imposed on the net income of a Lender or its Facility Office by the jurisdiction in which it is incorporated, or the jurisdiction in which its Facility Office is located or on the capital of that Lender employed in such jurisdiction or jurisdictions) on any sum received or receivable hereunder (including, without limitation, any sum received or receivable under this Clause 10.2) or any liability in respect of any such payment is asserted, imposed, levied or assessed against a Lender, each Obligor shall, upon demand of the Facility Agent promptly indemnify that Lender against such payment or liability, together with any interest, penalties and expenses payable or incurred in connection therewith.
 
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10.3         Tax Credit
 
If a Lender or, as the case may be, the Facility Agent determines in its absolute discretion, acting in good faith, that it has received, realised, utilised and retained a Tax benefit by reason of any deduction or withholding in respect of which an Obligor has made an increased payment or paid a compensating sum under this Clause 10 that Lender or, as the case may be, the Facility Agent shall, provided it has received all amounts which are then due and payable by the Obligors under any of the provisions of this Agreement and the other Finance Documents, pay to the Obligors (to the extent that that Lender or, as the case may be, the Facility Agent can do so without prejudicing the amount of that benefit and the right of that Lender, or as the case may be, the Facility Agent to obtain any other benefit, relief or allowance which may be available to it), such amount, if any, as that Lender, or as the case may be, the Facility Agent shall determine in its absolute discretion acting in good faith, will leave that Lender, or as the case may be, the Facility Agent in no better and no worse position than it would have been in if the deduction or withholding had not been required and so that it retains no benefit as a result of the receipt of such deduction.
 
10.4         Confidentiality of Tax Affairs
 
If a Lender intends to make a claim pursuant to Clause 10.2 (Tax Indemnity) it shall, as soon as reasonably practicable after becoming aware that it may be entitled to make a claim under Clause 10.2, notify each Borrower of the event by reason of which it is entitled to do so, provided that nothing herein shall require that Lender to disclose any confidential information relating to the organisation of its affairs.
 
10.5         Stamp taxes
 
Each Borrower must pay and indemnify each Finance Party against any stamp duty, registration or other similar Tax payable by that Finance Party in connection with the entry into, performance or enforcement of any Finance Document, except for any such Tax payable in connection with the entry into a Transfer Certificate.
 
10.6         Value added taxes
 
Any amount (including costs and expenses) payable under a Finance Document by an Obligor is exclusive of any value added tax or any other Tax of a similar nature which might be chargeable in connection with that amount. If any such Tax is chargeable, the Obligor must pay to the relevant Finance Party (in addition to and at the same time as paying that amount) an amount equal to the amount of that Tax.
 
11.           INCREASED COSTS
 
11.1         Increased Costs
 
Except as provided below in this Clause 11, each Borrower must pay to a Finance Party the amount of any Increased Cost incurred by that Finance Party or its Affiliates as a result of:
 
(a)            the introduction of, or any change in, or any change in the interpretation or application of, any law or regulation; or
 
(b)            compliance with any law or regulation,
 
made after the date of this Agreement.
 
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11.2         Exceptions
 
A Borrower need not make any payment for an Increased Cost to the extent that the Increased Cost is:
 
(a)            compensated for under another Clause or would have been but for an exception to that Clause;
 
(b)            a Tax on the relevant Finance Party or any of its Affiliates; or
 
(c)            attributable to the relevant Finance Party or any of its Affiliates wilfully failing to comply with any law or regulation.
 
11.3         Claims
 
If a Finance Party intends to make a claim for an Increased Cost it must notify the Borrowers promptly of the circumstances giving rise to, and the amount of, the claim.
 
11.4         Mitigation
 
(a)            Each Finance Party must, in consultation with the Borrowers, use its best endeavours to mitigate any circumstances which arise and which result or would result in any Increased Cost being payable to that Finance Party;
 
(b)            Each Borrower must indemnify that Finance Party for all costs and expenses reasonably incurred by that Finance Party as a result of any step taken by it under Clause 11.4(a) above.
 
(c)            A Finance Party is not obliged to take any step under this Subclause if, in the opinion of that Finance Party (acting reasonably), to do so might be prejudicial to it in any material respect and is not otherwise capable of being compensated under paragraph (b).
 
12.           EARNINGS, RETENTION AND OPERATING EXPENSES ACCOUNTS
 
12.1         Maintenance of accounts
 
The Borrowers shall maintain the Earnings Accounts, the Retention Accounts and the Operating Expenses Accounts with the Account Bank until the Final Maturity Date, free of Security Interests and rights of set-off other than as created by or pursuant to the Security Documents.
 
12.2         Earnings
 
Each of the Borrowers shall procure that there is credited to the relevant Earnings Account for the Vessel chartered by that Borrower all Earnings for the Vessel chartered by that Borrower.
 
12.3         Transfers to Retention Accounts
 
In respect of each Loan, upon payment of any Earnings into the relevant Earnings Account (an Earnings Deposit Date ) the relevant Borrower shall procure that there is transferred from the relevant Earnings Account for the Vessel which is the subject of that Loan (and irrevocably authorise the Facility Agent to instruct the Account Bank to transfer from the relevant Earnings Account) to the relevant Retention Account an amount calculated in accordance with the following formula:
 
a               =               A              X              n/N
 
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where:
 
a=             the relevant amount of the Earnings to be transferred to that Retention Account out of the relevant Earnings Account;
 
A=           the amount required to repay (i) in the case of the relevant Tranche A Loan, the principal, interest and Exposure Fee and (ii) in the case of the relevant Tranche B Loan, interest payable on the next Repayment Date in respect of the Loan to which the Earnings Account relates or, in the final Retention Period, the amount required to repay (x) in the case of the relevant Tranche A Loan, the principal, interest and Exposure Fee and (y) in the case of the relevant Tranche B Loan, principal and interest payable on the Final Maturity Date in respect of the Loan to which the Earnings Account relates;
 
N=            the number of days in a Retention Period; and
 
n=            actual number of days elapsed from (and including) the immediately preceding Earning Deposit Date in the Retention Period or the first day of the Retention Period (where there is no preceding Earning Deposit Date in a Retention Period) up to (but excluding) the Earning Deposit Date.
 
PROVIDED ALWAYS that on the last Earnings Deposit Date for a Retention Period and, if there remains a shortfall, on the last day of a Retention Period there shall be transferred to the relevant Retention Account out of the relevant Earnings Account an amount (taking into account the existing balance of the relevant Retention Account) required to repay (i) in the case of the relevant Tranche A Loan, the principal, interest and Exposure Fee and (ii) in the case of the relevant Tranche B Loan, interest payable in respect of that Loan on the next Repayment Date or, in the final Retention Period, the amount required to repay (x) in the case of the relevant Tranche A Loan, the principal, interest and Exposure Fee and (y) in the case of the relevant Tranche B Loan, principal and interest payable on the Final Maturity Date in respect of the Loan to which the Earnings Account relates.
 
12.4         Additional payments to Retention Accounts
 
If for any reason the amount standing to the credit of the relevant Earnings Account shall be insufficient to make any transfer to the relevant Retention Account required by Clause 12.3, the Borrowers shall, without demand, procure that there is credited to the relevant Retention Account, within 5 Business Days of the date on which the relevant amount would have been transferred from the Earnings Account, an amount equal to the amount of the shortfall.
 
12.5         Application of Retention Accounts
 
The relevant Borrower shall procure that there is transferred from the relevant Retention Account (and irrevocably authorise the Facility Agent to instruct the Account Bank to transfer from the relevant Retention Account) to the Facility Agent in respect of each Loan:
 
(a)            on each Repayment Date for that Loan, the amount of the Repayment Instalment for that Loan then due and, in the case of the Final Maturity Date, the outstanding balance of the relevant Tranche B Loan; and
 
(b)            on the last day of each Term of that Loan, the amount of interest and, in respect of a Tranche A Loan, Exposure Fee then due on that Loan.
 
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12.6         Borrowers’ obligations not affected
 
If for any reason the amount standing to the credit of the Retention Accounts shall be insufficient to pay any Repayment Instalment or to make any payment of interest or the Exposure Fee when due, the Borrowers’ obligation to pay that Repayment Instalment or to make that payment of interest or the Exposure Fee shall not be affected.
 
12.7         Release of surplus
 
The Facility Agent shall instruct the Account Bank to release to the Operating Expenses Account for the relevant Vessel any amount remaining to the credit of the relevant Earnings Account following the making of any transfer required by Clause 12.3 (unless an Event of Default shall have occurred and be continuing). Thereafter, the relevant Borrower shall be entitled to withdraw sums of money standing to the credit of the Operating Expenses Account in the following circumstances: (i) in and towards payment of any Operating Expenses; (ii) in the event of a reduction in the relevant Borrower’s Equity Contribution, an amount equal to such reduction, (iii) an amount equal to any late payment of Earnings made to the Earnings Account of the relevant Borrower after the Borrower has funded the transfer from the Earnings Account required by Clause 12.3; (iv) distribution to shareholders in accordance with and subject to Clause 17.8 and (v) in or towards a voluntary prepayment of the relevant Loan in accordance with Clause 6.5 (Voluntary prepayment).
 
12.8         Restriction on withdrawal
 
During the term of the Facility, no sum may be withdrawn from any of the Earnings Accounts or the Retention Accounts (except in accordance with this Clause 12) without the prior written consent of the Facility Agent (acting on the instructions of the Majority Lenders).
 
13.           PAYMENTS
 
13.1         Place
 
Unless a Finance Document specifies that payments under it are to be made in another manner, all payments by a Party (other than the Facility Agent) under the Finance Documents must be made to the Facility Agent to its account no. 0011624418 with JP Morgan Chase, New York, ABA No. 021 000 021 for the credit of Fortis Capital Corp. or such other account in the United States of America as the Facility Agent may notify to that Party for this purpose by not less than five Business Days’ prior notice.
 
13.2         Funds
 
Payments under the Finance Documents to the Facility Agent must be made for value on the due date at such times and in such funds as the Facility Agent may specify to the Party concerned as being customary at the time for the settlement of transactions in the relevant currency in the place for payment.
 
13.3         Distribution
 
(a)            Each payment received by the Facility Agent under the Finance Documents for another Party must, except as provided below, be made available by the Facility Agent to that Party by payment (as soon as practicable after receipt) to its account with such office or bank as it may notify to the Facility Agent for this purpose by not less than five Business Days’ prior notice.
 
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(b)            The Facility Agent may apply any amount received by it from any of the Obligors in or towards payment (on the date and in the currency and funds of receipt) of any amount due from the Obligors under the Finance Documents or in or towards the purchase of any amount of any currency to be so applied.
 
(c)            Where a sum is paid to the Facility Agent under this Agreement for another Party, the Facility Agent is not obliged to pay that sum to that Party until it has established that it has actually received it. However, the Facility Agent may assume that the sum has been paid to it, and, in reliance on that assumption, make available to that Party a corresponding amount. If it transpires that the sum has not been received by the Facility Agent, that Party must immediately on demand by the Facility Agent refund any corresponding amount made available to it together with interest on that amount from the date of payment to the date of receipt by the Facility Agent at a rate calculated by the Facility Agent to reflect its cost of funds.
 
13.4         Currency
 
All amounts payable under the Finance Documents are payable in Dollars provided always that amounts payable in respect of costs and expenses are payable in the currency in which those costs and expenses are incurred.
 
13.5         No set-off or counterclaim
 
All payments made by an Obligor under the Finance Documents must be made without set-off or counterclaim.
 
13.6         Business Days
 
(a)            If a payment under the Finance Documents is due on a day which is not a Business Day, the due date for that payment will instead be the next Business Day in the same calendar month (if there is one) or the preceding Business Day (if there is not).
 
(b)            During any extension of the due date for payment of any principal under this Agreement interest is payable on that principal at the rate payable on the original due date.
 
13.7         Payments
 
(a)            If any Administrative Party receives a payment insufficient to discharge all the amounts then due and payable by the Borrowers under the Finance Documents, then, except to the extent otherwise provided in any Finance Document any and all Proceeds received by the Facility Agent shall be applied in accordance with clause 10.8 of the relevant Intercreditor Deed. Any amounts received by the Facility Agent under clause 10.8 of the Intercreditor Deed and any and all other proceeds of the enforcement of the security conferred by the Security Agreements, shall be applied by the Administrative Party towards the obligations of the Borrowers under the Finance Documents in the following order:
 
(i)             first , in or towards payment pro-rata of all costs and expenses whatsoever, incurred or to be incurred by the Finance Parties in connection with such enforcement;
 
(ii)            second , in or towards payment pro-rata of any unpaid fees, costs and expenses of the Finance Parties under the Finance Documents;
 
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(iii)           third , in or towards payment pro-rata of any accrued but unpaid interest under the Finance Documents (including, in the case of Tranche A, any accrued but unpaid Exposure Fee);
 
(iv)           fourth in or towards payment pro-rata of any Break Costs due but unpaid under the Finance Documents;
 
(v)            fifth , in or towards payment pro-rata of any principal amount due but unpaid under the Finance Documents;
 
(vi)           sixth , in or towards payment pro-rata to the Finance Parties of any other amounts which are or may become owing by any of the Borrowers to any of the Finance Parties under the Finance Documents; and
 
(vii)          seventh , after all amounts payable or which may become payable under the Finance Documents have been paid in full and the Finance Documents have been discharged, in or towards payment of the surplus if any, to the relevant Borrower or other persons entitled thereto.
 
(b)            The Facility Agent must, if so directed by all the Lenders, vary the order set at subparagraphs 13.7(a)(ii) to 13.7(a)(vi) above.
 
(c)            This Subclause will override any appropriation made by a Borrower.
 
13.8         Timing of payments
 
If a Finance Document does not provide for when a particular payment is due, that payment will be due within three Business Days of demand by the relevant Finance Party.
 
14.           GUARANTEE AND INDEMNITY
 
14.1         Guarantee and indemnity
 
The Guarantor irrevocably and unconditionally:
 
(a)            guarantees to each Finance Party punctual performance by each Borrower of all its obligations and liabilities under the Finance Documents (including, without limitation, the Forex Obligations);
 
(b)            undertakes with each Finance Party that, whenever a Borrower does not pay any amount, or perform any obligation, when due under any Finance Document, the Guarantor must immediately on demand by the Facility Agent pay that amount, or perform that obligation, as if it were the principal obligor; and
 
(c)            indemnifies each Finance Party immediately on demand against any loss or liability suffered by that Finance Party if any obligation or liability guaranteed by it is or becomes unenforceable, invalid or illegal; the amount of the loss or liability under this indemnity will be equal to the amount the Finance Party would otherwise have been entitled to recover.
 
14.2         Continuing guarantee
 
This guarantee is a continuing guarantee and will extend to the ultimate balance of all sums payable, or any obligation or liability to be performed, by any Borrower under the Finance
 
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Documents, regardless of any intermediate payment, performance or discharge in whole or in part.
 
14.3         Reinstatement
 
(a)            If any discharge (whether in respect of the obligations of any Borrower or any security for those obligations or otherwise) or arrangement is made in whole or in part on the faith of any payment, security or other disposition which is avoided or must be restored on insolvency, liquidation or otherwise without limitation, the liability of the Guarantor under this Clause will continue as if the discharge or arrangement had not occurred.
 
(b)            Each Finance Party may concede or compromise any claim that any payment, security or other disposition is liable to avoidance or restoration.
 
14.4         Waiver of defences
 
The obligations of the Guarantor under this Clause will not be affected by any act, omission or thing which, but for this provision, would reduce, release or prejudice any of its obligations under this Clause (whether or not known to it or any Finance Party). This includes:
 
(a)            any time or waiver granted to, or composition with, any person;
 
(b)            any release of any person under the terms of any composition or arrangement;
 
(c)            the taking, variation, compromise, exchange, renewal or release of, or refusal or neglect to perfect, take up or enforce, any rights against, or security over assets of, any person;
 
(d)            any non-presentation or non-observance of any formality or other requirement in respect of any instrument or any failure to realise the full value of any security;
 
(e)            any incapacity or lack of power, authority or legal personality of or dissolution or change in the members or status of any person;
 
(f)             any amendment (however fundamental) of a Finance Document or any other document or security; or
 
(g)            any unenforceability, illegality, invalidity or non-provability of any obligation of any person under any Finance Document or any other document or security.
 
14.5         Immediate recourse
 
The Guarantor waives any right it may have of first requiring any Finance Party (or any trustee or agent on its behalf) to proceed against or enforce any other right or security or claim payment from any person before claiming from the Guarantor under this Clause.
 
14.6         Appropriations
 
Until all amounts which may be or become payable by the Borrowers under the Finance Documents have been irrevocably paid in full, each Finance Party (or any trustee or agent on its behalf) may without affecting the liability of the Guarantor under this Clause:
 
(a)            refrain from applying or enforcing any other moneys, security or rights held or received by that Finance Party (or any trustee or agent on its behalf) in respect of those amounts; or
 
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(b)            apply and enforce them in such manner and order as it sees fit (whether against those amounts or otherwise); and
 
(c)            hold in an interest-bearing suspense account any moneys received from the Guarantor or on account of the Guarantor’s liability under this Clause.
 
14.7         Non-competition
 
Unless:
 
(a)            all amounts which may be or become payable by the Borrowers under the Finance Documents have been irrevocably paid in full; or
 
(b)            the Facility Agent otherwise directs,
 
the Guarantor will not, after a claim has been made or by virtue of any payment or performance by it under this Clause:
 
(i)             be subrogated to any rights, security or moneys held, received or receivable by any Finance Party (or any trustee or agent on its behalf);
 
(ii)            be entitled to any right of contribution or indemnity in respect of any payment made or moneys received on account of the Guarantor’s liability under this Clause;
 
(iii)           claim, rank, prove or vote as a creditor of any Borrower or its estate in competition with any Finance Party (or any trustee or agent on its behalf); or
 
(iv)           receive, claim or have the benefit of any payment, distribution or security from or on account of any Borrower, or exercise any right of set-off as against any Borrower.
 
The Guarantor must hold in trust for and immediately pay or transfer to the Facility Agent for the Finance Parties any payment or distribution or benefit of security received by it contrary to this Clause or in accordance with any directions given by the Facility Agent under this Clause.
 
14.8         Additional security
 
This guarantee is in addition to and is not in any way prejudiced by any other security now or subsequently held by any Finance Party.
 
15.           REPRESENTATIONS
 
15.1         Representations
 
The representations set out in this Clause are made, unless otherwise stated, by each of the Obligors to the Finance Parties.
 
15.2         Status
 
(a)            It is a limited liability company, duly incorporated and validly existing under the laws of, in the case of the Borrowers, the Republic of Cyprus and, in the case of the Guarantor, Liberia.
 
(b)            It and each of its Subsidiaries has the power to own and hold on charter its assets and carry on its business as it is being conducted.
 
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(c)            Each of the Borrowers is wholly owned by one of the Shareholders each of which are in turn wholly owned by the Guarantor.
 
15.3         Powers and authority
 
It has the power to enter into and perform, and has taken all necessary action to authorise the entry into and performance of, the Finance Documents to which it is or will be a party and the transactions contemplated by those Finance Documents.
 
15.4         Legal validity
 
Subject to any general principles of law limiting its obligations and referred to in any legal opinion required under this Agreement, each Finance Document to which it is a party is its legally binding, valid and enforceable obligation.
 
15.5         Non-conflict
 
The entry into and performance by it of, and the transactions contemplated by, the Finance Documents to which it is a party do not conflict in any material respect with:
 
(a)            any law or regulation applicable to it;
 
(b)            its or any of its Subsidiaries’ constitutional documents; or
 
(c)            any document which is binding upon it or any of its Subsidiaries or any of its or its Subsidiaries’ assets.
 
15.6         No default
 
(a)            No Default is outstanding or will result from the execution of, or the performance of any transaction contemplated by, any Finance Document; and
 
(b)            No other event is outstanding which constitutes a default under any document which is binding on it or any of its Subsidiaries or any of its or its Subsidiaries’ assets to an extent or in a manner which is reasonably likely to have a Material Adverse Effect.
 
15.7         Authorisations
 
Except for registration of the Mortgages at the Cyprus Ships Registry, of any Security Agreement creating a charge over Security Assets of the Borrowers or either of them at the Cyprus Companies Registry and of any relevant Security Agreement under the Companies Act 1985 all authorisations required by it in connection with the entry into, performance, validity and enforceability of, and the transactions contemplated by, the Finance Documents have been obtained or effected (as appropriate) and are in full force and effect.
 
15.8         Financial statements
 
The audited financial statements of the Obligors most recently delivered to the Facility Agent (which at the date of this Agreement are the Original Financial Statements) together with any other financial information supplied to the Facility Agent by the Obligors:
 
(a)            have been prepared in accordance with accounting principles and practices generally accepted in its jurisdiction of incorporation, consistently applied; and
 
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(b)            fairly represent its financial condition (consolidated, if applicable) as at the date to which they were drawn up,
 
except, in each case, as disclosed to the contrary in those financial statements.
 
15.9         No material adverse change
 
There has been no material adverse change in the business, condition (financial or otherwise) or operations of the Obligors, or any of them, or any member of the Danaos Group since 31st December, 2002 or, if incorporated after 31st December, 2002, since the date of incorporation or following the receipt by the Facility Agent of an Annual Compliance Certificate, since the date of the then latest Annual Compliance Certificate. Insofar as this representation relates to the members of the Danaos Group other than the Obligors it is given on the date of this Agreement and each Utilisation Date only.
 
15.10       Litigation
 
No litigation, arbitration or administrative proceedings of or before any court, arbitral body or agency (including, but not limited to, investigative proceedings) which, if adversely determined, might reasonably be expected to have a Material Adverse Effect have (to the best of its knowledge and belief) been started or threatened against the Obligors or any of them, or any member of the Danaos Group. Insofar as this representation relates to the members of the Danaos Group other than the Obligors it is given on the date of this Agreement and each Utilisation Date only.
 
15.11       Pari passu ranking
 
Its payment obligations under the Finance Documents rank at least pari passu with all its other present and future unsecured payment obligations, except for obligations mandatorily preferred by law applying to companies generally.
 
15.12       Taxes on payments
 
All amounts payable by it to the Facility Agent under the Finance Documents and the Related Contracts may be made without any Tax Deduction.
 
15.13       Stamp duties
 
Except as notified in writing to and accepted by the Facility Agent no stamp or registration duty or similar Tax or charge is payable in its jurisdiction of incorporation in respect of any Finance Document or Related Contract.
 
15.14       Environment
 
Except as may already have been disclosed by a Borrower in writing to the Facility Agent:
 
(a)            each Borrower and its Environmental Affiliates have without limitation complied with the provisions of all applicable Environmental Laws in relation to each Vessel;
 
(b)            each Borrower and its Environmental Affiliates have obtained all requisite Environmental Approvals in relation to each Vessel and are in compliance with such Environmental Approvals;
 
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(c)            no Borrower nor any of its Environmental Affiliates has received notice of any Environmental Claim in relation to the relevant Vessel which alleges that such Borrower is not in compliance with applicable Environmental Laws in relation to such Vessel or Environmental Approvals in relation to such Vessel;
 
(d)            there is no Environmental Claim in relation to either Vessel pending or threatened which is such that a first class owner or operator of vessels such as the Vessels making all due enquiries and complying in all respects with its obligations under the ISM Code ought to have known about; and
 
(e)            there has been no Release of Hazardous Materials by or in respect of either Vessel about which a first class owner or operator of vessels such as the Vessels making all due enquiries and complying in all respects with its obligations under the ISM Code ought to have known about.
 
15.15       Security Interests
 
No Security Interest exists over its or any of its Subsidiary’s assets which would cause a breach of Clause 17.5 (Security Interests).
 
15.16       Security Assets
 
Each Borrower is solely and absolutely entitled to the Security Assets over which it has or will create any Security Interest pursuant to the Security Documents to which it is a party, or will be, a party and there is no agreement or arrangement under which it is obliged to share any proceeds of or derived from such Security Assets with any third party.
 
15.17       ISM Code compliance
 
On each Delivery Date, each Owner and the Bareboat Charterer is in full compliance with the ISM Code in respect of its Vessel.
 
15.18       ISPS Code Compliance
 
On each Delivery Date, each Owner and the Bareboat Charterer is in full compliance with the ISPS Code in respect of its Vessel.
 
15.19       No amendments to Related Contracts
 
Other than as notified to and agreed by the Facility Agent in writing, there have been no amendments to any of the Related Contracts.
 
15.20       Money Laundering
 
Any borrowing by any Borrower and the performance of its obligations hereunder and under the other Finance Documents to which it is a party will be for its own account and will not involve any breach by it of any law or regulatory measure relating to money laundering as defined in Article 1 of the Directive (91/308/EEC) of the Council of the European Communities or any equivalent law or regulatory measure in any other jurisdiction.
 
15.21       Insolvency
 
(a)            No Obligor, nor any member of the Danaos Group is unable, or admits or has admitted its inability, to pay its debts or has suspended making payments on any of its debts.
 
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(b)            No Obligor nor any member of the Danaos Group, by reason of actual or anticipated financial difficulties has commenced, or intends to commence, negotiations with one or more of its creditors with a view to rescheduling any of its Financial Indebtedness.
 
(c)            The value of the assets of each Obligor, and each member of the Danaos Group is not less than its liabilities (taking into account contingent and prospective liabilities).
 
(d)            No moratorium has been, or may, in the reasonably foreseeable future be, declared in respect of any indebtedness of any Obligor or any member of the Danaos Group.
 
15.22       Immunity
 
(a)            The execution by it of each Finance Document to which it is a party constitutes, and the exercise by it of its rights and performance of its obligations under each such Finance Document will constitute, private and commercial acts performed for private and commercial purposes.
 
(b)            It will not be entitled to claim immunity from suit, execution, attachment or other legal process in any proceedings taken in its jurisdiction of incorporation in relation to any Finance Document.
 
15.23       No adverse consequences
 
(a)            It is not necessary under the laws of its jurisdiction of incorporation:
 
(i)             in order to enable the Facility Agent to enforce its rights under any Finance Document; or
 
(ii)            by reason of the execution of any Finance Document or the performance by it of its obligations under any Finance Document,
 
that the Facility Agent should be licensed, qualified or otherwise entitled to carry on business in its jurisdiction of incorporation; and
 
(b)            The Facility Agent will not be deemed to be resident, domiciled or carrying on business in its jurisdiction of incorporation by reason only of the execution, performance and/or enforcement of any Finance Document.
 
15.24       Jurisdiction/governing law
 
(a)            Its:
 
(i)             irrevocable submission under this Agreement to the jurisdiction of the courts of England;
 
(ii)            agreement that this Agreement is governed by English law; and
 
(iii)           agreement not to claim any immunity to which it or its assets may be entitled,
 
are legal, valid and binding under the laws of its jurisdiction of incorporation; and
 
(b)            Any judgment obtained in England will be recognised and be enforceable by the courts of its jurisdiction of incorporation, subject to any statutory or other conditions of such jurisdiction.
 
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15.25       Times for making representations
 
(a)            The representations set out in this Clause are made by each Obligor on the date of this Agreement.
 
(b)            Unless a representation is expressed to be given at a specific date, each representation given by each Obligor is deemed to be repeated by each Obligor during the Pre-Delivery Period in respect of the relevant Vessel on each Utilisation Date and during the Post Delivery Period in respect of the relevant Vessel, annually on each anniversary of the first Utilisation Date when the relevant Borrower and the Guarantor shall provide to the Facility Agent an Annual Compliance Certificate.
 
(c)            When a representation is repeated, it is applied to the circumstances existing at the time of repetition.
 
16.           INFORMATION COVENANTS
 
16.1         Financial statements
 
(a)            Each Obligor must supply to the Facility Agent in sufficient copies for all the Lenders:
 
(i)             its audited financial statements for each of its financial years ending after the date hereof;
 
(ii)            its interim unaudited financial statements for the first half-year of each of its financial years; and
 
(iii)           if and to the extent an Obligor is required by any Applicable Law to produce quarterly financial statements, the quarterly financial statements for that Obligor as the case may be for the first and third quarters of each of its financial years.
 
(b)            The Guarantor must supply to the Facility Agent in sufficient copies for all the Lenders:
 
(i)             the audited consolidated financial statements of the Danaos Group for each of the Danaos Group’s financial years ending after the date hereof;
 
(ii)            the interim unaudited consolidated financial statements of the Danaos Group for the first half year of each of the Danaos Group’s financial; and
 
(iii)           if and to the extent the Danaos Group is required by any Applicable Law to produce quarterly consolidated financial statements, the quarterly consolidated financial statements for the Danaos Group for the first and third quarters of each of its financial years.
 
(c)            Each Borrower must procure that the Charterer supplies to the Facility Agent its audited financial statements for each of its financial years ending after the date hereof.
 
(d)            All financial statements must be supplied as soon as they are available and:
 
(i)             in the case of audited financial statements, within 180 days;
 
(ii)            in the case of interim semi-annual financial statements, within 120 days; and
 
(iii)           in the case of interim quarterly financial statements, within 60 days,
 
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of the end of the relevant financial period.
 
16.2         Form of financial statements
 
(a)            Each Obligor must ensure that each set of financial statements supplied by it under this Agreement gives (if audited) a true and fair view of, or (if unaudited) fairly represents, the financial condition (consolidated or otherwise) of the relevant person as at the date to which those financial statements were drawn up.
 
(b)            Each Obligor must notify the Facility Agent of any change to the basis on which the audited financial statements supplied by it are prepared.
 
(c)            If requested by the Facility Agent, each Obligor must supply or procure that the following are supplied to the Facility Agent:
 
(i)             a full description of any change notified under paragraph (b) above; and
 
(ii)            sufficient information to enable the Facility Agent to make a proper comparison between the financial position shown by the set of financial statements prepared on the changed basis and the most recent audited consolidated financial statements delivered by that Obligor to the Facility Agent under this Agreement.
 
(d)            If requested by the Facility Agent, each Obligor must enter into discussions for a period of not more than 30 days with a view to agreeing any amendments required to be made to this Agreement to place the Facility Agent in the same position as it would have been in if the change had not happened.
 
(e)            If no agreement is reached under paragraph (d) above on the required amendments to this Agreement, each Obligor must ensure that its auditors certify those amendments; the certificate of the auditors will be, in the absence of manifest error, binding on all the Parties.
 
16.3         Access to Books and Records
 
Upon the request of the Facility Agent, each Obligor shall provide the Facility Agent and any of its representatives, professional advisors and contractors with access to and permit inspection of its books and records, in each case at reasonable times and upon reasonable notice.
 
16.4         Information - miscellaneous
 
Each Obligor must supply to the Facility Agent in sufficient copies for all the Lenders:
 
(a)            copies of all documents despatched by it to its creditors generally or any class of them at the same time as they are despatched;
 
(b)            promptly upon becoming aware of them, details of any litigation, arbitration or administrative proceedings which are current, threatened or pending against it and which might, if adversely determined, have a Material Adverse Effect; and
 
(c)            promptly on request, such further information, in sufficient copies for all the Lenders, regarding the financial condition and operations of an Obligor as the Facility Agent may reasonably request.
 
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16.5         Notification of Default
 
(a)            Unless the Facility Agent has already been so notified, each Obligor must notify the Facility Agent of any Default (and the steps, if any, being taken to remedy it) promptly upon becoming aware of its occurrence.
 
(b)            Promptly on request by the Facility Agent but not more often than once in each period of 12 months, unless the Facility Agent, acting reasonably, believes an Event of Default has occurred and is continuing (in which event the Facility Agent shall be entitled to make such requests as and when it considers it appropriate to do so), each Borrower must, and the Guarantor shall procure that each Borrower shall, supply to the Facility Agent a certificate, signed by two of its authorised signatories on its behalf, certifying that no Default is outstanding or, if a Default is outstanding, specifying the Default and the steps, if any, being taken to remedy it.
 
16.6         Year end
 
The Obligors may not change their financial year-end.
 
17.           GENERAL COVENANTS
 
17.1         General
 
Each of the Obligors agrees to be bound by the covenants set out in this Clause relating to it, or where relevant, agrees to procure that the Bareboat Charterer will be bound.
 
17.2         Authorisations
 
Each Obligor must promptly obtain, maintain and comply, in all material respects, with the terms of any authorisation required under any Applicable Law to enable it to perform its obligations under, or for the validity or enforceability of, any Finance Document.
 
17.3         Compliance with laws
 
Each Obligor must comply, and must procure that the Manager, the Owners and the Bareboat Charterer each complies in all respects with all Applicable Laws to which it is subject where failure to do so is reasonably likely to have a Material Adverse Effect.
 
17.4         Pari passu ranking
 
Each Obligor must ensure that its payment obligations under the Finance Documents rank at least pari passu with all its other present and future unsecured payment obligations, except for obligations mandatorily preferred by law applying to companies generally.
 
17.5         Security Interests
 
Each Borrower shall not (and the Guarantor shall procure that each Borrower shall not), and the Obligors shall procure that the Manager, the Owners and the Bareboat Charterer do not, create or permit to subsist any Security Interest over the Obligatory Insurances or any other Security Assets or any Related Contract other than:
 
(a)            Permitted Liens; or
 
(b)            with the prior written consent of the Facility Agent (acting on the instructions of the Majority Lenders).
 
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17.6         Disposals
 
(a)            Except as provided below, no Borrower may, either in a single transaction or in a series of transactions and whether related or not, dispose of all or any part of its assets unless (i) such assets are being replaced by that Borrower on a like-for-like basis or are being sold by that Borrower on normal commercial terms and on an arm’s length basis, and (iii) any such disposal is not, in the reasonable opinion of the Majority Lenders, likely to have a Material Adverse Effect.
 
(b)            Paragraph (a) does not apply to any disposal made in the ordinary course of trading of the disposing entity.
 
(c)            The Guarantor shall not, without the prior written consent of the Facility Agent (acting on the instructions of the Majority Lenders) sell, transfer, lend, lease or otherwise dispose of (in any such case otherwise than for full consideration in the ordinary course of trading) any of its shares in any Shareholder or the whole or, in the opinion of the Facility Agent, any substantial part of its business, property, assets, whether by a single transaction or by a series of transactions (related or not).
 
17.7         No other business assets or Financial Indebtedness
 
No Borrower shall, and the Guarantor shall procure that no Borrower shall, engage in any business other than the direct or indirect ownership, operation and chartering of the relevant Vessel or any business incidental thereto nor shall any Borrower (and the Guarantor shall procure that no Borrower shall) own any asset other than any asset incidental to the operation and chartering of the relevant Vessel, nor shall any Borrower (and the Guarantor shall procure that no Borrower shall) incur any Financial Indebtedness other than the Financial Indebtedness contemplated by this Agreement and any other short term indebtedness not exceeding, when aggregated with such other Financial Indebtedness of that Borrower, US$1,000,000 incurred in the ordinary course of business solely for the purpose of funding Operating Expenses.
 
17.8         Payment of dividends
 
No Borrower shall, and the Guarantor shall procure that no Borrower shall, pay any dividends or make any other distributions to shareholders or issue any new shares unless it has available surplus funds which, under Applicable Law and accounting principles in its jurisdiction of incorporation it is entitled to distribute as dividends and where the following conditions are satisfied:
 
(a)            its Retention Account is fully funded in accordance with Clause 12.4; and
 
(b)            no Default has occurred and is continuing.
 
17.9         Change of business
 
(a)            Each Borrower must (and the Guarantor shall procure that each Borrower shall) ensure that no change is made to the general nature of its business from that carried on at the date of this Agreement.
 
(b)            Each Borrower must (and the Guarantor shall procure that each Borrower shall) maintain its place of business, and keep its corporate documents and records, at the address stated opposite its name in Schedule 1, and the Borrowers will not establish, or do anything as a
 
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result of which it would be deemed to have, a place of business in any country other than the Republic of Cyprus.
 
(c)            The Guarantor shall not, without the prior written consent of the Facility Agent (acting on the instructions of the Majority Lenders), make any change in the nature of its business which would, in the opinion of the Facility Agent, materially alter the nature of its business from that existing at the date of this Agreement.
 
17.10       Mergers
 
None of the Obligors shall enter into any amalgamation, demerger, merger or reconstruction otherwise than under an intra-group re-organisation on a solvent basis or other transaction agreed by the Facility Agent.
 
17.11       Security
 
Each Borrower (and the Guarantor shall procure that each Borrower):
 
(a)            will procure that the relevant Mortgage is on the Delivery Date, and continues to be, registered as a first priority mortgage with the Cyprus Ships Registry;
 
(b)            will procure that the Mortgage and any other security conferred under any Security Document is registered as a first priority interest with the relevant authorities within the period prescribed by the Applicable Laws and is maintained and perfected with the relevant authorities;
 
(c)            will at its own cost, do all that it can to ensure that any Finance Document validly creates the obligations and Security Interests which it purports to create; and
 
(d)            without limiting the generality of paragraph (a) above, will at its own cost, promptly register, file, record or enrol any Finance Document with any court or authority, pay any stamp, registration or similar tax payable in respect of any Finance Document, give any notice or take any other step which, in the reasonable opinion of the Facility Agent, is or has become necessary or desirable for any Finance Document to be valid, enforceable or admissible in evidence or to ensure or protect the priority of any Security Interest which it creates.
 
17.12       Registration of the Vessels
 
Each Borrower shall (and the Guarantor shall procure that each Borrower shall) and shall procure that the relevant Owner shall:
 
(a)            procure and maintain with effect from the Delivery Date of the relevant Vessel, the valid and effective provisional registration of the Vessel under the flag of the Republic of Cyprus and shall effect permanent registration of the Vessel within 2 months from the relevant Delivery Date, or such other flag of equivalent reputation as is satisfactory to the Facility Agent (acting on the instructions of the Majority Lenders) in its absolute discretion, and shall ensure nothing is done or omitted by which the registration of the Vessels would or might be defeated or imperilled; and
 
(b)            not change the name or port of registration of the Vessels without the prior written consent of the Facility Agent (acting on the instructions of the Majority Lenders) (such consent not to be unreasonably withheld).
 
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17.13       Partial prepayments or additional security
 
(a)            If and so often as, at any time on or after the Delivery Date of the first Vessel to be delivered until the date falling on the last day of the third year after the Delivery Date of the first Vessel to be delivered, the market value of either of the delivered Vessels (determined in accordance with Clause 19) shall be less than the First Required Amount in respect of that Vessel, the Borrowers will (and the Guarantor shall procure that the Borrowers will), within thirty days of the request of the Facility Agent to do so, either (i) prepay such amount of the Loan relating to that Vessel as will ensure that the market value of that Vessel (determined as aforesaid) is not less than the First Required Amount in respect of that Vessel; or (ii) provide or cause to be provided to the Facility Agent such additional security as may be satisfactory to each of the Lenders acting in good faith but otherwise in their absolute discretion. Clauses 6.9 and 6.10 shall apply, mutatis mutandis , to any prepayment made pursuant to this Clause save that no prepayment fee equal to 0.5% of the amount of principal of the Tranche A Loan shall be payable. Any prepayment made in accordance with Clause 17.13(a)(i) shall be applied against the Repayment Instalments of the relevant Loan in the inverse order of their maturity.
 
(b)            If and so often as, at any time on or after the date falling on the last day of the third year after the Delivery Date of the first Vessel until the date falling on the last day of the fifth year after the Delivery Date of the first Vessel, the market value of either of the delivered Vessels (determined in accordance with Clause 19) shall be less than the Second Required Amount in respect of that Vessel, the Borrowers will (and the Guarantor shall procure that the Borrowers will), within thirty days of the request of the Facility Agent to do so, either (i) prepay such amount of the Loan relating to that Vessel as will ensure that the market value of that Vessel (determined as aforesaid) is not less than the Second Required Amount in respect of that Vessel or (ii) provide or cause to be provided to the Facility Agent such additional security acceptable to each of the Lenders acting in good faith but otherwise in their entire discretion. Clauses 6.9 and 6.10 shall apply, mutatis mutandis , to any prepayment made pursuant to this Clause save that no prepayment fee equal to 0.5% of the amount of principal of the Tranche A Loan shall be payable. Any prepayment made in accordance with Clause 17.13(b)(i) shall be applied against the Repayment Instalments of that Loan in the inverse order of their maturity.
 
(c)            If and so often as, at any time on or after the date falling on the last day of the fifth year after the Delivery Date of the first Vessel until the Final Maturity Date, the market value of either of the delivered Vessels (determined in accordance with Clause 19) shall be less than the Third Required Amount in respect of that Vessel , the Borrowers will (and the Guarantor shall procure that the Borrowers will), within thirty days of the request of the Facility Agent to do so either (i) prepay such amount of the Loan relating to that Vessel as will ensure that the market value of that Vessel (determined as aforesaid) is not less than the Third Required Amount in respect of that Vessel or (ii) provide or cause to be provided to the Facility Agent such additional security acceptable to each of the Lenders acting in good faith but otherwise in their entire discretion. Clauses 6.9 and 6.10 shall apply, mutatis mutandis , to any prepayment made pursuant to this Clause save that no prepayment fee equal to 0.5% of the amount of principal of the Tranche A Loan shall be payable Any such prepayment made in accordance with Clause 17.13(c)(i) shall be applied against the Repayment Instalments of that Loan in the inverse order of their maturity.
 
17.14       Classification and repair
 
Each Borrower will (and the Guarantor shall procure that each Borrower will), and will procure that the Manager, the Owners and the Bareboat Charterer will, at all times after the Delivery Date:
 
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(a)            ensure that the Vessels are surveyed from time to time as required by the classification society in which the Vessel is for the time being entered and maintain and preserve the Vessel in good working order and repair, ordinary wear and tear excepted, and in any event in such condition as will entitle each to the classification of 100A1 Containership, Shipright (SDA, FDA, CM)* IWS, @ LMC, UMS, SCM, EP, CAC NAVI or, if such classification is not available with the highest equivalent classification available, with Lloyds Register of Shipping, (or to the equivalent classification in another internationally recognised classification society of like standing acceptable to the Facility Agent (acting on the instructions of the Majority Lenders)), free of all overdue requirements and recommendations of that classification society;
 
(b)            procure that all repairs to or replacement of any damaged, worn or lost parts or equipment shall be effected in such manner (both as regards workmanship and quality of materials) as not to diminish the value of the Vessels;
 
(c)            not remove any material part of either of the Vessels, or any item of equipment installed on either of the Vessels unless the part or item so removed is forthwith replaced by a suitable part or item which is in the same condition as or better condition than the part or item removed, is free from any Security Interest or any right in favour of any person other than the Facility Agent and becomes on installation on that Vessel the property of the Owner and subject to the security constituted by the relevant Security Document(s) provided that the Owner may install and remove equipment owned by a third party if the equipment can be removed without any risk of damage to a Vessel;
 
(d)            ensure that each Vessel complies with all Applicable Laws from time to time applicable to vessels registered under the laws and flag of the Republic of Cyprus or such other flag, under which the Vessels may be registered from time to time in accordance with this Agreement; and
 
(e)            not without the prior written consent of the Facility Agent (acting on the instructions of the Majority Lenders)), (such consent not to be unreasonably withheld) cause or permit to be made any substantial change in the structure, type or performance characteristics of either of the Vessels and provide notification of such substantial changes in structure, type or performance characteristics of either of the Vessels to the Facility Agent and furthermore provide confirmation to the Facility Agent that such substantial change in structure, type or performance characteristics of either of the Vessels shall not result in a breach of any covenant under this Agreement.
 
17.15       Lawful and Safe Operation
 
Each Borrower will (and the Guarantor shall procure that each Borrower will), and will procure that the Manager, the Owners and the Bareboat Charterer will, at all times after the Delivery Date:
 
(a)            operate each Vessel and cause each of the Vessels to be operated in a manner consistent in all material respects with any and all laws, regulations, treaties and conventions (and all rules and regulations issued thereunder) from time to time applicable to the Vessel;
 
(b)            not cause or permit either of the Vessels to trade with, or within the territorial waters of any country in which her safety may be imperilled by exposure to piracy,
 
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terrorism, arrest, requisition, confiscation, forfeiture, seizure, destruction or condemnation as prize;
 
(c)            not cause or permit either of the Vessels to be employed in any manner which will or may give rise to any reasonable degree of likelihood that such Vessel would be liable to requisition, confiscation, forfeiture, seizure, destruction or condemnation as prize;
 
(d)            not cause or permit either of the Vessels to be employed in any trade or business which is forbidden by international law or is illicit or in carrying illicit or prohibited goods;
 
(e)            in the event of hostilities in any part of the world (whether war be declared or not) not cause or permit either of the Vessels to be employed in carrying any contraband goods and that she does not trade in any zone after it has been declared a war zone by any authority or by any of that Vessel’s war risks insurers unless that Vessel’s insurers shall have confirmed to the relevant Owner that such Vessel is held covered under the Obligatory Insurances for the voyage(s) in question; and
 
(f)             not charter either of the Vessels or permit either of the Vessels to serve under any contract of affreightment with any foreign country or national of any foreign country which is specified by legislation or regulations of Korea or any other jurisdiction in which a Facility Office is located and such that, if the earnings or any part of earnings were derived from such charter or affreightment, that fact would render any Finance Document or the security conferred by the Security Documents unlawful.
 
17.16       Repair of the Vessels
 
Each Borrower will not (and the Guarantor shall procure that each of the Borrowers will not) and will procure that the Manager, the Owners and the Bareboat Charterer will not, at any time after the Delivery Date of a relevant Vessel, put either of the Vessels into the possession of any person for the purpose of work being done upon her beyond the amount of US$3,000,000 (or equivalent), other than for classification or scheduled dry docking unless such person shall have given an undertaking to the Facility Agent not to exercise any lien on that Vessel or Obligatory Insurances for the cost of that work or otherwise.
 
17.17       Arrests and Liabilities
 
Each Borrower will (and the Guarantor shall procure that each Borrower will), and will procure that the Manager, the Owners and the Bareboat Charterer will, at all times after the Delivery Date of a Vessel:
 
(a)            pay and discharge all obligations and liabilities whatsoever which have given or may give rise to liens (other than liens arising in the ordinary course of operation of either of the Vessels in each case for amounts the payment of which is not yet due or, if due and payable, is being disputed in good faith by appropriate proceeding (and for the payment of which adequate reserves have been provided or are and continue to be available)) on or claims enforceable against either of the Vessels and take all reasonable steps to prevent a threatened arrest of either of the Vessels;
 
(b)            notify the Facility Agent promptly in writing of the levy of any distress on either of the Vessels or her arrest, detention, seizure, condemnation as prize, compulsory acquisition or requisition for title or use and (save in the case of compulsory acquisition or requisition for title or use) obtain her release within 21 days;
 
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(c)            pay and discharge when due all dues, taxes, assessments, governmental charges, fines and penalties lawfully imposed on or in respect of either of the Vessels or the relevant Borrower, the Manager, the relevant Owner or the Bareboat Charterer except those which are being disputed in good faith by appropriate proceedings (and for the payment of which adequate reserves have been provided or are and continue to be available) and provided that the continued existence of such dues, taxes, assessments, governmental charges, fines or penalties does not give rise to any reasonable degree of likelihood that the Vessel would be liable to arrest, requisition, confiscation, forfeiture, seizure, destruction or condemnation as prize; and
 
(d)            pay and discharge all other obligations and liabilities whatsoever in respect of either of the Vessels and the Obligatory Insurances except those which are being disputed in good faith by appropriate proceedings (and for the payment of which adequate reserves have been provided or are and continue to be available) and provided that the continued existence of those obligations and liabilities in respect of either of the Vessels and the Obligatory Insurances does not give rise to any reasonable degree of likelihood that the Vessel would be liable to arrest, requisition, confiscation, forfeiture, seizure, destruction or condemnation as prize and provided always that each Vessel remains properly managed and insured at all times in accordance with the terms of this Agreement.
 
17.18       Related Contracts
 
The Borrower shall not (and the Guarantor shall procure that each Borrower shall not) and the Manager, the Owners and the Bareboat Charterer shall not, take any action, enter into any document or agreement or omit to take any action or to enter into any document or agreement which would, or could reasonably be expected to, cause any Related Contract to cease to remain in full force and effect and shall use all reasonable endeavours to procure that each other party to any Related Contract does not take any action, enter into any document or agreement or omit to take any action or to enter into any document or agreement which would, or could reasonably be expected to, cause any Related Contract to cease to remain in full force and effect.
 
17.19       Environment
 
Each of the Borrower shall (and the Guarantor shall procure that each Borrower shall), and shall procure that the Manager, the Owners and the Bareboat Charterer shall, at all times after the Delivery Date of a Vessel:
 
(a)            comply with all applicable Environmental Laws including, without limitation, requirements relating to the establishment of financial responsibility (and shall require that all Environmental Affiliates of each Borrower comply with all applicable Environmental Laws and obtain and comply with all required Environmental Approvals, which Environmental Laws and Environmental Approvals relate to either of the Vessels or her operation or her carriage of cargo); and
 
(b)            promptly upon the occurrence of any of the following events, provide to the Facility Agent a certificate of an officer of the relevant Borrower or of the relevant Borrower’s agents specifying in detail the nature of the event concerned:
 
(i)             the receipt by the Borrower or any Environmental Affiliate (where the Borrower has knowledge of the receipt) of any Environmental Claim; or
 
(ii)            any Release of Hazardous Materials.
 
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17.20       Information regarding the Vessels
 
Each Borrower shall (and the Guarantor shall procure that each Borrower shall), and shall procure that the Manager, the Owners and the Bareboat Charterer shall, at all times after the relevant Delivery Date:
 
(a)            promptly notify the Facility Agent of the occurrence of any accident, casualty or other event which has caused or resulted in or may cause or result in its Vessel being or becoming a Total Loss;
 
(b)            promptly notify the Facility Agent of any requirement or recommendation made by any Insurer or classification society or by any competent authority which is not complied with in a timely manner;
 
(c)            promptly notify the Facility Agent of any intended dry docking of either of the Vessels;
 
(d)            promptly notify the Facility Agent of any Environmental Claim being made in connection with either of the Vessels or its operation;
 
(e)            promptly notify the Facility Agent of any claim for breach of the ISM Code being made in connection with either of the Vessels or its operation;
 
(f)             promptly notify the Facility Agent of any claim for breach of the ISPS Code being made in connection with any of the Vessels or its operation;
 
(g)            give to the Facility Agent from time to time on request such information, in sufficient copies for all the Lenders, as the Facility Agent may reasonably require regarding either of the Vessels, her employment, position and engagements;
 
(h)            provide the Facility Agent with copies of the classification certificate of the Vessels and of all periodic damage or survey reports on either of the Vessels which the Facility Agent may reasonably request;
 
(i)             promptly furnish the Facility Agent with full information of any casualty or other accident or damage to either of the Vessels involving an amount in excess of US$3,000,000 (or equivalent);
 
(j)             give to the Facility Agent and its duly authorised representatives reasonable access to either of the Vessels for the purpose of conducting on board inspections and/or surveys of the Vessel and pay the reasonable expenses incurred by the Facility Agent in connection with the inspections and/or surveys provided that, unless a Default has occurred and is continuing, such inspections and/or surveys shall not take place at the expense of the Borrower and the Facility Agent shall co-operate with the Borrower in respect of the timing for and the place where such surveys take place in order to minimise disruption to the activities of either of the Vessels; and
 
(k)            if the Facility Agent reasonably believes an Event of Default may have occurred, furnish to the Facility Agent from time to time upon reasonable request certified copies of the ship’s log in respect of either of the Vessels.
 
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17.21                  Provision of further information
 
Each Obligor shall, and shall procure that the Manager, the Owners and the Bareboat Charterer shall, as soon as practicable following receipt of a request by the Facility Agent, provide the Facility Agent, with sufficient copies for all the Lenders, with any additional or further financial or other information relating to either of the Vessels, the Obligatory Insurances or to any other matter relevant to, or to any provision of, a Finance Document which the Facility Agent may reasonably request.
 
17.22                  Management
 
Each Borrower shall (and the Guarantor shall procure that each Borrower shall), and shall procure that the Manager, the Owner and the Bareboat Charterer shall, ensure that at all times after the relevant Delivery Date:
 
(a)                                   the relevant Vessel is managed by the Manager; and
 
(b)                                  the Manager shall not terminate or materially vary the terms of its management or appoint an alternative manager, provided that the Bareboat Charterer shall be entitled so to do with the prior written consent of the Facility Agent (acting on the instructions of the Majority Lenders).
 
However, in the event that the Manager’s appointment as manager of either one of the Vessels ceases or is terminated in circumstances where it was not possible for the Bareboat Charterer to obtain the prior written consent of the Facility Agent, the relevant Borrower shall promptly and in any event within 10 days from the date of the termination of the Manager’s appointment, provide to the Facility Agent details of a replacement manager, such manager to be satisfactory to the Facility Agent (acting on the instructions of the Majority Lenders) .
 
17.23                  Proceeds from sale or Total Loss of a Vessel
 
(a)                                   Each Borrower shall (and the Guarantor shall procure that each Borrower shall) procure that the proceeds from a sale or Total Loss of the relevant Vessel shall immediately upon receipt by the Owner or a Borrower be paid to the Facility Agent for application in accordance with the relevant provisions of the relevant Intercreditor Deed and the provisions of Clause 13.7.
 
(b)                                  For and so long as an Owner or a Borrower holds any such proceeds as referred to in paragraph (a) it shall do so on trust for the Facility Agent.
 
17.24                  Charters
 
(a)                                   No Borrower will (and the Guarantor shall procure that no Borrower will) and shall procure that neither of the Owners nor the Bareboat Charterer will let either of the Vessels on demise, consecutive voyage or voyage charter for any period without the consent of the Facility Agent (acting on the instructions of the Majority Lenders) such consent not to be unreasonably withheld other than the AML Time Charters, the Bareboat Charters and the Time Charters .
 
(b)                                  Each Borrower shall be entitled to let its Vessel, in accordance with the terms of the Time Charter PROVIDED always that:
 
(i)                                      the Borrower shall remain liable under any time charter to perform all the obligations assumed by it under the Time Charter;
 
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(ii)                                   the Facility Agent shall not be under any obligations or liability under any time charter or liable to make any payment under that time charter; and
 
(iii)                                the Facility Agent shall not be obliged to enforce against any charterer any term of any time charter, or to make any enquiries as to the nature or sufficiency of any payment received by the Facility Agent.
 
(c)                                   If so required by the Facility Agent (acting in accordance with the instructions of the Majority Lenders) each of the Borrowers shall exercise its respective rights to extend the charter period in respect of the relevant Vessel beyond the Initial Charter Period (as such term is defined in the AML Time Charters) for such period as the Facility Agent may require, all in accordance with the provisions of Clause 32.1 of the AML Time Charters.
 
17.25                  Substitution of Charterer
 
(a)                                   At all times during the Post-Delivery Period, the Borrowers shall (and the Guarantor shall procure that each Borrower shall) advise the Facility Agent of any of the following events:
 
(i)                                      any breach by the Charterer of the terms of a Time Charter of which the relevant Borrower becomes aware;
 
(ii)                                   the termination of a Time Charter by either the relevant Borrower or the Charterer;
 
(iii)                                as soon as it becomes aware of such event, the occurrence of an event of cross default of the nature referred to in Clause 20.6 in respect of the Charterer, PROVIDED always that such event shall not arise in respect of the Charterer where the aggregate amount of the relevant Financial Indebtedness of the Charterer is less than US$50,000,000 or its equivalent; or
 
(iv)                               as soon as it becomes aware of such event, the occurrence of an insolvency event of the nature referred to in Clause 20.7, 20.8 or 20.9 in respect of the Charterer.
 
Upon the occurrence of any such event the Facility Agent shall be entitled (acting on the instructions of the Majority Lenders) to require that the relevant Borrower exercises all of its rights under the relevant Time Charter including, where applicable, the termination of the Time Charter in respect of the relevant Vessel.
 
(b)                                  In the event of a termination of a Time Charter in accordance with Clause 17.25(a) or otherwise, the relevant Borrower shall within 45 days of such termination:
 
(i)                                      propose by written notice to the Facility Agent, a substitute charterer; or
 
(ii)                                   prepay the outstanding Loan in respect of that Vessel, together with accrued interest and all other amounts accrued under the Finance Documents in respect of that Vessel in accordance with Clause 6,
 
provided always that, until either a substitute charterer is in place or the Loan has been prepaid, the Borrower shall on each date which would, had the Time Charter not terminated, have been an Earnings Deposit Date, deposit in the relevant Earnings Account an amount equal to the amount which would have been required, on that date, to have been transferred to the relevant Retention Account. Such deposit by the Borrower shall be treated as Earnings and Clause 12 shall apply thereto on that basis. If the Borrower fails to make such deposit into the Earnings Account, the Borrowers’ rights in Clause 17.25 shall immediately cease and
 
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the Facility Agent shall be entitled to treat such failure to pay (after any applicable grace period) as an Event of Default.
 
(c)                                   In the event that the relevant Borrower proposes a substitute charterer in accordance with Clause 17.25(b), each of the Lenders shall then be required to undertake a credit review in good faith but in a manner which it considers appropriate. The Lenders shall be entitled, as part of the credit review process to ask for a valuation to be carried out in respect of the relevant Vessel in accordance with Clause 19 (Valuation) except that the provisions of Clause 19.1(b) shall not apply and the valuation shall be carried out on both a with and without charter basis. Each of the Lender’s determination pursuant to the credit review shall be made in the Lender’s absolute discretion.
 
(d)                                  In order to reach a conclusion that the credit of the substitute charterer is acceptable, any Lender may require amendments to this Agreement . Any such amendments required by any Lender shall apply in respect of all amounts outstanding in respect of each Loan.
 
(e)                                   The Facility Agent shall inform the Borrowers, once the Lenders have concluded their credit review, of the result including details of any amendments required to this Agreement which the Borrowers must comply with.
 
(f)                                     If the result of the credit review is that one or more of the Tranche A Lenders does not accept the credit of the substitute charterer, the Borrowers shall be required, within a period of 60 days from the date of the Facility Agent’s notification or immediately upon the occurrence of an Event of Default which is continuing, to prepay all outstanding Tranche A Loans.
 
(g)                                  If the result of the credit review is that one or more of the Tranche B Lenders does not accept the credit of the substitute charterer, the Borrowers shall be required, within a period of 60 days from the date of the Facility Agent’s notification or immediately upon the occurrence of an Event of Default which is continuing, prepay all outstanding Tranche B Loans.
 
(h)                                  If the result of the credit review is that each of the Lenders is prepared to accept the credit of the substitute charterer either with or without amendments to this Agreement , the Borrowers shall within a period of 60 days from the date of the Facility Agent’s notification or immediately upon the occurrence of an Event of Default which is continuing, either:
 
(i)                                      comply with the requirements of the Lenders’ credit review, if any; or
 
(ii)                                   prepay the remaining outstanding Tranche A Loan or Tranche B Loan, or both, as applicable, together with accrued interest and all other amounts accrued under the Finance Documents in respect of that Loan, if the Borrowers do not accept the new requirements, in the case of the Tranche A Loan, of any Tranche A Lender and, in the case of the Tranche B Loan, of any Tranche B Lender.
 
(i)                                      In the event that the relevant Borrower enters into a substitute charter in accordance with Clause 17.25(c) or Clause 17.25(h), the Borrower shall execute an assignment of time charter and earnings in the same form ( mutatis mutandis ) as the Time Charter and Earnings Assignment together with all notices and acknowledgements thereto.
 
17.26                  Scope of Obligatory Insurances
 
Each Borrower will (and the Guarantor shall procure that each Borrower will) and shall procure that the Owners or the Bareboat Charterers will, in respect of each Vessel:
 
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(a)                                   procure the Builder’s compliance with the Builder’s Risk Insurances as detailed in Article XVII of each Shipbuilding Contract.
 
(b)                                  at all times after the relevant Delivery Date keep that Vessel insured in the Required Insurance Amount, in Dollars in the name of the relevant Owner and the Bareboat Charterer or (if the Facility Agent so requires) in the joint names of the relevant Owner, the Bareboat Charterer and the Facility Agent without the Facility Agent being liable but having the right to pay premiums, through brokers approved by the Facility Agent (acting on the instructions of the Majority Lenders) against fire and usual marine risks (including hull and machinery and Excess Risks) with approved underwriters or insurance companies approved by the Facility Agent (acting on the instructions of the Majority Lenders) and by policies in form and content approved by the Facility Agent (acting on the instructions of the Majority Lenders);
 
(c)                                   at all times after the relevant Delivery Date keep that Vessel insured in the Required Insurance Amount in the same manner as above against war risks (including risks of mines and all risks, whether or not regarded as war risks, London Blocking and Trapping Addendum and Lost Vessel Clause, excepted by the free of capture and seizure clauses in the standard form of Lloyds marine policy) either:
 
(i)                                      with underwriters or insurance companies approved by the Facility Agent (acting on the instructions of the Majority Lenders) and by policies in form and content approved by the Facility Agent (acting on the instructions of the Majority Lenders); or
 
(ii)                                   by entering the relevant Vessel in an approved war risks association,
 
and for the avoidance of doubt, such war risks insurance will include protection and indemnity liability up to at least the Required Insurance Amount, excluding any liability in respect of death, injury or damage to crew;
 
(d)                                  at all times after the relevant Delivery Date keep that Vessel entered in respect of her full value and tonnage in an approved protection and indemnity association against all risks as are normally covered by such protection and indemnity association (including pollution risks and the proportion not recoverable in case of collision under the running down clause inserted in the ordinary Lloyds policies), such cover for pollution risks to be for:
 
(i)                                      a minimum amount of US$1,000,000,000 or such other amount of cover against pollution risks as shall at any time be comprised in the basic entry of each Vessel with either a protection and indemnity association which is an acceptable member of either the International Group of protection and indemnity associations (or any successor organisation designated by the Facility Agent for this purpose) or the International Group (or such successor organisation) itself; or
 
(ii)                                   if the International Group or any such successor ceases to exist or ceases to provide or arrange any cover for pollution risks (or any supplemental cover for pollution risks over and above that afforded by the basic entry of each Vessel with its protection and indemnity association), such aggregate amount of cover against pollution risks as shall be available on the open market and by basic entry with a protection and indemnity association for ships of the same type, size, age and flag as each respective Vessel,
 
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provided that, if either Vessel has ceased trading or is in lay up and in either case has unloaded all cargo, the level of pollution risks cover afforded by ordinary protection and indemnity cover available through a member of the International Group or such successor organisation or, as the case may be, on the open market in such circumstances shall be sufficient for such purposes;
 
(e)                                   at all times after either of the Vessels is let on charter, maintain in full force and effect off-hire insurance in respect of that Vessel with underwriters or insurance companies approved by the Facility Agent (acting on the instructions of the Majority Lenders) in form and content approved by the Facility Agent (acting on the instructions of the Majority Lenders); and
 
(f)                                     at all times after the Delivery Date, whenever either Vessel is trading to Japanese territorial waters and when so required by the Facility Agent (acting on the instructions of the Majority Lenders), maintain in full force and effect social responsibility insurance in respect of the Vessel with underwriters or insurance companies approved by the Facility Agent (acting on the instructions of the Majority Lenders) and by policies in form and content approved by the Facility Agent (acting on the instructions of the Majority Lenders), provided always that a first class owner or operator of vessels such as the Vessels would maintain such social responsibility insurance.
 
17.27                  Mortgagee’s interest and additional perils insurances
 
The Facility Agent shall, in respect of each Vessel, be entitled from time to time to effect from the Delivery Date, maintain and renew all or any of the following insurances in the relevant Required Insurance Amount, and on such terms, through such insurers and in such manner as the Facility Agent (acting on the instructions of the Majority Lenders) may from time to time consider appropriate:
 
(a)                                   a mortgagee’s interest marine insurance providing for the indemnification of the Finance Parties for any Losses under or in connection with any Finance Document which directly or indirectly result from loss of or damage to a Vessel or a liability of a Vessel or a 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 any allegation concerning:
 
(i)                                      any act or omission on the part of an Owner or the Manager or the Bareboat Charterer or a Borrower, of any other operator or manager of any Vessel or of any officer, employee or agent of an Owner or the Manager or the Bareboat Charterer 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 an Owner or the Manager or the Bareboat Charterer or any other person referred to in paragraph (i) above, or of any officer, employee or agent of an Owner or the Manager or the Bareboat Charterer or of such a person, including the casting away or damaging of any Vessel and/or any Vessel 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;
 
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(b)                                  where any Vessel is trading into the waters of the United States of America or any other jurisdiction which in the future introduces unlimited liability regimes, a mortgagee’s interest additional perils policy providing for the indemnification of the Finance Parties against, amongst other things, any Losses or other consequences of any Environmental Claim, including the risk of expropriation, arrest or any form of detention of any Vessel, or the imposition of any Security Interest over any Vessel and/or any other matter capable of being insured against under a mortgagee’s interest additional perils (pollution) policy whether or not similar to the foregoing,
 
and the Borrowers shall (and the Guarantor shall procure that each Borrower shall) upon demand fully indemnify the Facility Agent in respect of all premiums 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.
 
17.28                  Obligatory Insurances
 
Without prejudice to its obligations under Clause 17.26 (Scope of Obligatory Insurances), each Borrower will (and the Guarantor shall procure that each Borrower will) or procure that the Manager or the Bareboat Charterer will:
 
(a)                                   not without the prior consent of the Facility Agent (acting on the instructions of the Majority Lenders) alter any Obligatory Insurance nor make, do, consent or agree to any act or omission which would or might render any Obligatory Insurance invalid, void, voidable or unenforceable or render any sum paid out under any Obligatory Insurance repayable in whole or in part;
 
(b)                                  not cause or permit any Vessel to be operated in any way inconsistent with the provisions or warranties of, or implied in, or outside the cover provided by, any Obligatory Insurance or to be engaged in any voyage or to carry any cargo not permitted by any Obligatory Insurances without first covering the relevant Vessel in the relevant Required Insurance Amount and her freights for an amount approved by the Facility Agent (acting on the instructions of the Majority Lenders) in Dollars or another approved currency with the approved insurers;
 
(c)                                   duly and punctually pay all premiums, calls, contributions or other sums of money from time to time payable in respect of any Obligatory Insurance;
 
(d)                                  renew all Obligatory Insurances at least 14 days before the relevant policies or contracts expire and procure that the approved brokers and/or war risks and protection and indemnity clubs and associations shall promptly confirm in writing to the Facility Agent as and when each renewal is effected;
 
(e)                                   forthwith upon the effecting of any Obligatory Insurance, give written notice of the insurance to the Facility Agent stating the full particulars (including the dates and amounts) of the insurance, and on request produce the receipts for each sum paid by it pursuant to paragraph (c) above;
 
(f)                                     not settle, release, compromise or abandon any claim in respect of any Total Loss unless the Facility Agent (acting on the instructions of the Majority Lenders) is satisfied that such release, settlement compromise or abandonment will not prejudice the interests of the Finance Parties under or in relation to any Finance Document;
 
(g)                                  arrange for the execution and delivery of such guarantees as may from time to time be required by any protection and indemnity or war risks club or association;
 
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(h)                                  procure that the interest of the Facility Agent is noted on all policies of insurance;
 
(i)                                      procure that a loss payee provision in the form scheduled to the relevant Bareboat Charter and reflecting the provisions of Clause 17.29 (Application of Insurance Proceeds) is endorsed on all policies of insurance;
 
(j)                                      obtain from the relevant insurance brokers and P&I Club letters and undertakings in form and substance satisfactory to the Facility Agent (acting in accordance with the instructions of the Majority Lenders); and
 
(k)                                   in the event that an Owner, a Borrower or the Bareboat Charterer receives payment of any moneys under the General Assignment, save as provided in the loss payable clauses scheduled to the relevant Bareboat Charter, forthwith pay over the same to the Facility Agent and until paid over such moneys shall be held in trust for the Facility Agent by a Borrower, the Owner or the Bareboat Charterer, as the case may be.
 
17.29                  Application of Insurance Proceeds
 
(a)                                   All sums receivable in respect of the Obligatory Insurances after the occurrence of an Event of Default shall be paid to the Facility Agent and the Facility Agent shall apply them in accordance with the relevant provisions of the relevant Intercreditor Deed and thereafter in accordance with Clause 13.7 (Payments).
 
(b)                                  Subject to paragraph (a) above:
 
(i)                                      each sum receivable in respect of a major casualty (being any casualty in respect of which the claim or the aggregate of the claims exceeds US$3,000,000 (or its equivalent)), other than in respect of protection and indemnity risk insurances, shall be paid to the Facility Agent; and
 
(ii)            the insurance moneys received by the Facility Agent in respect of any such major casualty shall be paid:
 
(A)           to the person to whom the relevant liability shall have been incurred; or
 
(B)            upon a Borrower furnishing evidence satisfactory to the Facility Agent that all loss and damage resulting from the casualty has been properly made good and repaired, to the Owner or, at the option of the Facility Agent, to the person by whom any repairs have been or are to be effected.
 
(iii)           The receipt by any such person referred to in paragraph (A) and (B) of paragraph (ii) above shall be a full and sufficient discharge of the same to the Facility Agent.
 
(c)            Subject to paragraph (a) above, each sum receivable in respect of the Obligatory Insurances (insofar as the same are hull and machinery or war risks insurances) which does not exceed US$3,000,000 or its equivalent shall be paid in full to the Bareboat Charterer or to its order and shall be applied by it for the purpose of making good the loss and fully repairing all damage in respect of which the receivable shall have been collected.
 
(d)            Subject to paragraph (a) above, each sum receivable in respect of protection and indemnity risk Obligatory Insurances shall be paid direct to the person to whom the liability, to which that sum relates, was incurred, or to the Bareboat Charterer in reimbursement to it of moneys expended in satisfaction of such liability.
 
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(e)            Subject to paragraph (a), each sum receivable in respect of off-hire insurance shall be paid into the relevant Earnings Account and shall be applied in accordance with the relevant provisions of the relevant Intercreditor Deed and thereafter in accordance with Clause 12.
 
(f)             Notwithstanding any other provision in this Clause 17.29, all sums receivable in respect of Obligatory Insurances relating to a Total Loss shall be applied in accordance with Clause 13.7 (Payments).
 
17.30       Power of Facility Agent to Insure
 
If an Owner, the Borrowers or the Bareboat Charterer fails to effect and keep in force Obligatory Insurances in accordance with this Agreement, it shall be permissible, but not obligatory, for the Facility Agent (acting on the instructions of the Majority Lenders) to effect and keep in force insurance or insurances in the amounts required under this Agreement and entries in a protection and indemnity association or club and, if it deems necessary or expedient, to insure the war risks upon either Vessel, and the Borrowers will reimburse the Facility Agent for the costs of so doing.
 
17.31       ISM Code
 
Each Borrower shall (and the Guarantor will procure that each Borrower shall), and shall procure that the Manager, the Owners and the Bareboat Charterer shall:
 
(a)            at all times after the Delivery Date of a Vessel comply, and be responsible for compliance by itself and by such Vessel, with the ISM Code;
 
(b)            at all times after the Delivery Date of a Vessel ensure that:
 
(i)             the Vessel has a valid Safety Management Certificate;
 
(ii)            the Vessel is subject to a safety management system which complies with the ISM Code; and
 
(iii)           there is a valid Document of Compliance for the Vessel, which is held on board the Vessel,
 
and shall deliver to the Facility Agent, on or before the Delivery Date in respect of that Vessel, a copy of a valid Safety Management Certificate and a valid Document of Compliance in respect of the relevant Vessel, in each case duly certified by an officer of the Owner of that Vessel;
 
(c)            promptly notify the Facility Agent of any actual or, upon becoming aware of the same, threatened withdrawal of an applicable Safety Management Certificate or Document of Compliance;
 
(d)            promptly notify the Facility Agent of the identity of the person ashore designated for the purposes of paragraph 4 of the ISM Code and of any change in the identity of that person; and
 
(e)            promptly upon becoming aware of the same notify the Facility Agent of the occurrence of any accident or major non-conformity requiring action under the ISM Code.
 
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17.32       No amendment to Related Contracts
 
The Borrower shall not (and the Guarantor shall procure that neither Borrower shall), and shall procure that the Owners and the Bareboat Charterer shall not, amend or agree to any amendment to the Related Contracts without the prior written consent of the Facility Agent (acting in accordance with the instructions of the Majority Lenders), subject always to the provisions of clause 8.2 of the Multipartite Deed.
 
17.33       ISPS Code
 
Each Borrower shall (and the Guarantor will procure that each Borrower shall), and shall procure that the Manager, the Owners and the Bareboat Charterer shall, at all times after the Delivery Date of a Vessel:
 
(a)            comply and be responsible for compliance by itself and by such Vessel with the ISPS Code;
 
(b)            ensure that:
 
(i)             the Vessel has a valid International Ship Security Certificate;
 
(ii)            the Vessel’s security system and its associated security equipment comply with section 19.1 of Part A of the ISPS Code;
 
(iii)           the Vessel’s security system and its associated security equipment comply in all respects with the applicable requirements of Chapter XI-2 of SOLAS and Part A of the ISPS Code; and
 
(iv)           an approved ship security plan is in place.
 
17.34       Financial Covenants of the Guarantor
 
The Guarantor shall promptly notify in writing the Facility Agent of the entry into by the Guarantor of any Bank Credit Agreement (as such term is defined in Clause 18.2 below) which is entered into on or after the date of this Agreement.
 
18.           FINANCIAL COVENANTS OF THE GUARANTOR
 
18.1         Undertakings
 
The Guarantor undertakes that:
 
(a)            Net Worth will not be less than US$100,000,000;
 
(b)            the ratio of Tangible Fixed Assets to Net Consolidated Indebtedness will not be less than 1.45:1;
 
(c)            the ratio of Outstanding Bank Debt to Ship Values will not be more than 0.75:1;
 
(d)            Net Worth will always exceed 30% of Total Assets;
 
(e)            the Liquid Funds of the Danaos Group would not be less than US$20,000,000; and
 
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(f)             the ratio of EBITDA to Net Interest Expenses would be at least 2.5:1 on a Pro Forma Basis for the period immediately preceding the date thereof for which Financial Statements are available.
 
18.2         Definitions
 
The calculation of ratios and percentages in Clauses 18.1 and 18.2 shall be determined on a consolidated basis, in accordance with the Applicable Accounting Principles and by reference to the financial statements (the Financial Statements ) of the Danaos Group, which shall be the later of (i) the audited combined financial statements of the Danaos Group for the period ending 31 December 2002 or (ii) the last set of annual audited consolidated financial statements of the Guarantor, but so that:
 
Applicable Accounting Principles means those accounting principles, standards and practices on which the preparation of the audited combined financial statements of the Danaos Group for the period ending 31st December, 2002 were based or such other generally accepted accounting principles, standards and practices adopted by the Guarantor after the date hereof and notified to the Facility Agent (acting on the instructions of the Majority Lenders).
 
Bank Credit Agreement means any bank credit agreement or similar facility entered into by a member of the Danaos Group whether on, before or after the date of this Agreement.
 
Consolidated Indebtedness means, in respect of the relevant period, the aggregate amount of Financial Indebtedness (including current maturities) due by the members of the Danaos Group (other than any such Financial Indebtedness owing by any member of the Danaos Group to another member of the Danaos Group).
 
Current Assets means, in respect of the relevant period, the aggregate amount of cash and cash equivalents, receivables due to any member of the Danaos Group by a person who is not a member of the Danaos Group with a maturity of less than one year and inventories.
 
EBITDA means, in respect of the relevant period, the aggregate amount of consolidated pre-tax profits of the Danaos Group before extraordinary or exceptional items, depreciation, interest, repayment of capital as rental under finance leases and similar charges payable.
 
Liquid Funds means, in respect of the relevant period, the aggregate of:
 
(i)             cash in hand or held with banks or other financial institutions which is free of any Security Interest; and
 
(ii)            any other short-term financial investment which is free of any Security Interest.
 
Net Consolidated Indebtedness means, in respect of the relevant period, Consolidated Indebtedness less Liquid Funds;
 
Net Interest Expenses means, in respect of the relevant period:
 
(i)             the aggregate on a consolidated basis of all interest incurred by any member of the Danaos Group (excluding any amounts owing by one member of the Danaos Group to another member of the Danaos Group)
 
less
 
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(ii)            the aggregate of interest receivable by any member of the Danaos Group on Liquid Funds,
 
in each case accrued (and whether or not actually paid) during such period.
 
Net Worth means, in respect of the relevant period, the aggregate of:
 
(i)             the amount paid up or credited as paid up on the issued share capital of the Guarantor (other than any redeemable share capital);
 
(ii)            the amount standing to the credit of the consolidated capital and revenue reserves of the Danaos Group; and
 
(iii)           the amount standing to the credit of the Danaos Group’s consolidated profit and loss account
 
but adjusted by:
 
(i)             deducting any amount attributable to good will or any other intangible asset; and
 
(ii)            reflecting any variation in the interest of the Guarantor in any other member of the Danaos Group since the date of the latest balance sheet.
 
Outstanding Bank Debt means, in respect of the relevant period, the aggregate amount of principal due under the Bank Credit Agreements less cash held with banks or other financial institutions and any other short term investment of an equivalent liquidity and risk-free nature as cash over which, in each case, a Bank Credit Agreement has created a Security Interest.
 
Pro Forma Basis means, for the purposes of Clause 18.1(f), giving pro forma effect to:
 
(i)             any acquisition or sale of a person, business or asset and any related incurrence, repayment or refinancing of a Financial Indebtedness or other related transactions, which would otherwise be accounted for under the Applicable Accounting Principles; or
 
(ii)            any incurrence, repayment or refinancing of any Financial Indebtedness and the application of the proceeds therefrom,
 
as if the same was realised on the first day of the immediately preceding period for which Financial Statements are available, in accordance with the Applicable Accounting Principles.
 
For the purposes of this definition:
 
(a)            in the case of the acquisition of a Ship by a member of the Danaos Group pursuant to a memorandum of agreement (or similar agreement) or the delivery of a Ship to a member of the Danaos Group pursuant to a shipbuilding contract during the relevant period, if historical earnings (losses) of such Ship are not available to the Guarantor, the Guarantor shall give pro forma effect to the earnings (losses) of such Ship as if such Ship was acquired on the first day of the immediately preceding period for which Financial Statements are available by basing such earnings (losses) on:
 
(i)             the revenues to be earned from any binding charter, lease or like arrangement which will be applicable to any such Ship less a good faith estimate of the
 
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operating costs of such Ship (including, without limitation, management fees); or
 
(ii)            with respect to any such Ship not subject to such arrangement, the earnings (losses) for the applicable period of the most comparable Ship of any member of the Danaos Group (as determined in the reasonable judgment of a responsible financial officer of the Guarantor) or, in the absence of a comparable Ship, based on industry average earnings (losses) for comparable vessels (as determined in the reasonable judgment of a responsible financial officer of the Guarantor); and
 
(b)            in the case of an acquisition of a person, business or asset, the Guarantor shall give pro forma effect to the amount of income or earnings relating thereto, and the amount of Net Interest Expenses associated with any Financial Indebtedness issued in connection therewith (as determined in the reasonable judgment of a responsible financial officer of the Guarantor).
 
Ship and Ships means the vessels owned by and registered (or to be owned by and registered) in the name of the Guarantor or any of its Subsidiaries or operated by the Guarantor or any of its Subsidiaries pursuant to a lease or other operating agreement constituting a capital lease obligation, in each case with all related equipment and any additions or improvements.
 
Ship Values means, in respect of the relevant period, the aggregate book value of the Ships (which shall consist of the contract price for each Ship, all material expense incurred in the acquisition (including the costs of financing) and subsequent expenditures which appreciably extend the life, increase the earning capacity or improve the efficiency or safety of the Ship, less depreciation computed in accordance with the Applicable Accounting Principles).
 
Tangible Fixed Assets means, in respect of the relevant period, the aggregate of the Ship Values and the value on a consolidated basis of all other tangible fixed assets of the Danaos Group (less depreciation computed in accordance with the Applicable Accounting Principles).
 
Total Assets means the aggregate of Current Assets and Tangible Fixed Assets.
 
19.           VALUATION
 
19.1         Valuation
 
For the purposes of this Clause 19:
 
(a)            the value of either Vessel shall be the mean average of two valuations each certified in Dollars and carried out by two of the Approved Valuers, reporting to the Facility Agent on the basis of sale for prompt delivery of the Vessel for cash (free of Security Interests) at arm’s-length on normal commercial terms as between willing seller and buyer;
 
(b)            any valuation shall be on a charter-free basis; and
 
(c)            there shall be deducted from any value or valuation the amount which is owing or might become owing and which is secured on the asset concerned by any prior or equal ranking Security Interest (other than in favour of the Facility Agent to secure the Secured Liabilities).
 
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19.2         Delivery of valuations
 
(a)            In respect of a Vessel, the Borrower will from the Delivery Date of such Vessel procure in favour of the Facility Agent one valuation per annum from two of the Approved Valuers prepared in accordance with Clause 19.1 (Valuation).
 
(b)            The Borrowers will procure in favour of the Facility Agent and the Approved Valuers all such information, facilities and rights of inspection as they may reasonably (having regard to the use and operation of the relevant Vessel) require in order to effect such valuations.
 
(c)            Subject to Clause 19.2(e) below, all valuations shall be at the expense of the relevant Borrower.
 
(d)            The Facility Agent shall be entitled to require that the relevant Borrower provide a valuation in respect of a Vessel at any time during the Post-Delivery Period. In the event that such valuation shows that the value of that Vessel does not reach the relevant Required Amount as required under Clause 17.13 (a), (b) or, as the case may be, (c), the provisions of that Clause shall apply.
 
(e)            In the event that a valuation procured by the Facility Agent pursuant to Clause 19.2(d) does show that the value of that Vessel reaches the relevant Required Amount as required under Clause 17.13 (a), (b) or, as the case may be, (c), such valuation shall be at the expense of the Facility Agent.
 
(f)             If an Event of Default has occurred and is continuing, the relevant Borrower shall be liable to pay for up to five valuations of either Vessel (one from each of the Approved Valuers) under Clause 19.2(a) in any one calendar year.
 
(g)            Any valuation under this Clause 19 shall be binding and conclusive (save for manifest error).
 
20.           DEFAULT
 
20.1         Events of Default
 
Each of the events set out in this Clause is an Event of Default.
 
20.2         Non-payment
 
An Obligor does not pay on the due date any amount payable by it under the Finance Documents in the manner required under the Finance Documents, unless the non-payment:
 
(a)            is caused by technical or administrative error; and
 
(b)            is remedied within three Business Days of the due date.
 
20.3         Breach of other obligations
 
(a)            An Obligor does not comply with any term of Clause 17 (General Covenants) unless the non-compliance;
 
(i)             is capable of remedy; and
 
(ii)            is remedied within 14 days of the earlier of the Facility Agent giving notice and the Obligor becoming aware of the non-compliance.
 
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The Obligor acknowledges that for the purposes of paragraph (i) above, non-compliance with the following provisions of this Agreement shall not be capable of remedy:
 
(i)             Clause 17.11(a) and 17.11(b) (Security), but in respect of sub-paragraph (b) only insofar as it relates to the Mortgage, the General Assignment, the Time Charter and Earnings Assignment, the Second Priority Deposit Account Charge and the Deed of Counter-Indemnity;
 
(ii)            Clause 17.12(a) (Registration of the Vessels); and
 
(iii)           Clause 17.26(b), (c) and (d) (Scope of Obligatory Insurances).
 
(b)            Subject to paragraph (c) below, any Party (other than a Finance Party) does not comply with any other term of the Finance Documents or the Related Contracts (other than the Vessel Management Agreements and the Bareboat Charters) not already referred to in this Clause which the Facility Agent (acting on the instructions of the Majority Lenders) considers to be material, unless the non-compliance:
 
(i)             is capable of remedy; and
 
(ii)            is remedied within 14 days of the earlier of the Facility Agent giving notice and the relevant Party becoming aware of the non-compliance.
 
(c)            Any Party (other than a Finance Party) does not comply with any other term of the Vessel Management Agreements or the Bareboat Charter which the Facility Agent (acting on the instructions of the Majority Lenders) considers to be material, unless the non-compliance:
 
(i)             is capable of remedy; and
 
(ii)            is remedied within 30 days of the earlier of the Facility Agent giving notice and the relevant Party becoming aware of the non-compliance.
 
provided always that (i) in the opinion of the Facility Agent, any delay in the enforcement by the Facility Agent of its rights and privileges is not likely to adversely affect the rights of the Lenders and (ii) the Borrowers shall continue to fulfil all other of their obligations under the Finance Documents and the Related Contracts during such period;
 
(d)            The termination or expiry without renewal of either of the Bareboat Charters or either of the AML Time Charters;
 
(e)            A Borrower does not serve an extension notice on AML under the AML Time Charter by the date falling 5 days before the last day on which it is able to serve such notice in accordance with the provisions of clause 32 of the AML Time Charter.
 
20.4         Breach by Guarantor of its financial covenants
 
The Guarantor does not comply with any term of Clause 18 (Financial Covenants of the Guarantor).
 
20.5         Misrepresentation
 
A representation made or repeated by an Obligor (or by any other Party other than a Finance Party) in any Finance Document or in any document delivered by or on behalf of any Obligor under any Finance Document is incorrect in any respect which the Facility Agent (acting on
 
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the instructions of the Majority Lenders) considers to be material when made or deemed to be repeated, unless the circumstances giving rise to the misrepresentation:
 
(a)            are capable of remedy; and
 
(b)            are remedied within fourteen days of the earlier of the Facility Agent giving notice and the relevant Party becoming aware of the misrepresentation.
 
20.6         Cross-default
 
Any of the following occurs in respect of an Obligor, or any other member of the Danaos Group:
 
(a)            any of its Financial Indebtedness is not paid when due (after the expiry of any originally applicable grace period);
 
(b)            any of its Financial Indebtedness:
 
(i)             becomes prematurely due and payable;
 
(ii)            is placed on demand; or
 
(iii)           is capable of being declared by a creditor to be prematurely due and payable or being placed on demand,
 
in each case, as a result of an event of default (howsoever described) and after the expiry of any applicable grace period; or
 
(c)            any commitment for its Financial Indebtedness is cancelled or suspended as a result of an event of default (howsoever described),
 
unless the aggregate amount of Financial Indebtedness falling within paragraphs (a)-(c) above is less than US$5,000,000 or its equivalent (in the case of a Borrower) or US$20,000,000 or its equivalent (in the case of the Guarantor or any other member of the Danaos Group).
 
20.7         Insolvency
 
Any of the following occurs in respect of an Obligor or any other member of the Danaos Group:
 
(a)            it is, or is deemed for the purposes of any Applicable Law to be, unable to pay its debts as they fall due or insolvent;
 
(b)            it admits its inability to pay its debts as they fall due;
 
(c)            it suspends making payments on any of its debts or announces an intention to do so;
 
(d)            by reason of actual or anticipated financial difficulties, it begins negotiations with any creditor for the rescheduling of any of its indebtedness; or
 
(e)            a moratorium is declared in respect of any of its indebtedness.
 
If a moratorium occurs in respect of any Obligor or any other member of the Danaos Group, the ending of the moratorium will not remedy any Event of Default caused by the moratorium.
 
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20.8         Insolvency proceedings
 
(a)            Except as provided below, any of the following occurs in respect of an Obligor or any other member of the Danaos Group, the Owners, the L/C Bank (or any replacement bank providing a letter of credit) or prior to the release or discharge of the Second Deposit Charge, the Deposit Bank (or any replacement bank holding the Deposit Accounts) or the Bareboat Charterer:
 
(i)             any step is taken with a view to a moratorium, a composition, assignment or similar arrangement with any of its creditors;
 
(ii)            a meeting of its shareholders, directors or other officers is convened for the purpose of considering any resolution to petition for or to file documents with a court for its winding-up, administration or dissolution or any such resolution is passed;
 
(iii)           any person presents a petition, or files documents with a court for its winding-up, administration or dissolution;
 
(iv)           an order for its winding-up, administration or dissolution is made;
 
(v)            any liquidator, trustee in bankruptcy, judicial custodian, compulsory manager, receiver, administrative receiver, administrator or similar officer is appointed in respect of it or any of its assets;
 
(vi)           its directors, shareholders or other officers request the appointment of, or give notice of their intention to appoint a liquidator, trustee in bankruptcy, judicial custodian, compulsory manager, receiver, administrative receiver, administrator or similar officer; or
 
(vii)          any other analogous step or procedure is taken in any jurisdiction.
 
(b)            Paragraph (a) above does not apply to a frivolous or vexatious petition for winding-up presented by a creditor which is being contested in good faith and with due diligence and is discharged or struck out within fourteen days.
 
20.9         Creditors’ process
 
Any attachment, sequestration, distress, execution or analogous event affects any asset(s) of an Obligor, or any other member of the Danaos Group, having an aggregate value of five Million Dollars (US$5,000,000) or its equivalent (in the case of a Borrower) and US$20,000,000 or its equivalent (in the case of the Guarantor or any other member of the Danaos Group), and is not discharged within fourteen days.
 
20.10       Cessation of business
 
An Obligor or any other member of the Danaos Group ceases, or threatens to cease, to carry on business except as a result of any disposal not prohibited under this Agreement.
 
20.11       Failure to pay final judgment
 
An Obligor or any other member of the Danaos Group fails to comply with or pay any sum due from it under any final judgement or any final order made or given by any court of competent jurisdiction.
 
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20.12       Effectiveness of Finance Documents
 
(a)            It is or becomes unlawful for any Obligor or any other Party (other than a Finance Party) to perform any of its obligations under the Finance Documents which the Facility Agent (acting on the instructions of the Majority Lenders) considers material.
 
(b)            Any Finance Document is not effective or is alleged by the relevant Obligor to be ineffective for any reason.
 
(c)            Any Finance Document is not effective or is alleged by any Party (other than a Finance Party) to be ineffective for any reason and in any respect which the Facility Agent (acting on the instructions of the Majority Lenders) considers to be material.
 
(d)            An Obligor repudiates a Finance Document or evidences an intention to repudiate a Finance Document.
 
(e)            Any Party (other than a Finance Party) repudiates any material provision of a Finance Document or evidences an intention to repudiate any material provision of a Finance Document.
 
20.13       Material adverse change
 
Any event or series of events occurs in respect of an Obligor which, in the reasonable opinion of the Majority Lenders, is likely to have a Material Adverse Effect.
 
20.14       Invalidity of Security Documents
 
Any of the Security Documents ceases to be valid or any of those Security Documents creating a Security Interest in favour of the Facility Agent ceases to provide a perfected first priority security interest in favour of the Facility Agent.
 
20.15       Acceleration
 
If an Event of Default is outstanding, the Facility Agent may (and if the Majority Lenders so instruct it, shall), by notice to the Borrowers:
 
(a)            cancel the undrawn, uncancelled amount of the Maximum Facility Amount; and/or
 
(b)            declare that all or part of any amounts outstanding under the Finance Documents are:
 
(i)             immediately due and payable; and/or
 
(ii)            payable on demand by the Facility Agent.
 
Any notice given under this Subclause will take effect in accordance with its terms.
 
21.           SECURITY
 
21.1         Facility Agent as trustee
 
Unless expressly provided to the contrary herein or in any Finance Document and except as otherwise required by Applicable Law, the Facility Agent holds any security created by a Security Document on trust for the Finance Parties.
 
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21.2         Responsibility
 
The Facility Agent is not liable or responsible to any other Finance Party for:
 
(a)            any failure in perfecting or protecting the security created by any Security Document;
 
(b)            any other action taken or not taken by it in connection with any Security Document,
 
unless directly caused by its gross negligence or wilful misconduct.
 
21.3         Title
 
The Facility Agent may accept, without enquiry, the title (if any) a Borrower may have to any asset over which security is intended to be created by any Security Document.
 
21.4         Possession of documents
 
The Facility Agent is not obliged to hold in its own possession any Security Document, title deed or other document in connection with any asset over which security is intended to be created by a Security Document.
 
21.5         Investments
 
Except as otherwise provided in any Security Document, all moneys received by the Facility Agent under a Security Document may be invested in the name of, or under the control of, the Facility Agent in any investments selected by the Facility Agent (acting on the instructions of the Majority Lenders). Additionally, those moneys may be placed on deposit in the name of, or under the control of, the Facility Agent at any bank or institution (including itself) and upon such terms as it may think fit (acting on the instructions of the Majority Lenders).
 
21.6         Approval
 
Each Finance Party confirms its approval of each Security Document.
 
21.7         Release of security
 
(a)            If a disposal of any asset subject to security created by a Security Document is made to a person (which is and will remain) outside the Danaos Group in the following circumstances:
 
(i)             the disposal is allowed by the terms of the Finance Documents and will not result or could not reasonably be expected to result in any breach of any term of any Finance Document;
 
(ii)            the disposal is being made at the request of the Facility Agent in circumstances where any security created by the Security Documents has become enforceable; or
 
(iii)           the disposal is being effected by enforcement of a Security Document,
 
and, in any such case the Facility Agent is satisfied that, the relevant Loan will be prepaid in full in accordance with Clause 6.4(a)(i) at the time of the disposal, the asset being disposed of will be released from any security over it created by a Security Document. However, the proceeds of any disposal (or an amount corresponding to them) must be applied in accordance with the requirements of the Finance Documents (if any).
 
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(b)            If the Facility Agent is satisfied that a release is allowed under this Subclause, the Facility Agent must execute (at the request and expense of the relevant Borrower) any document which is reasonably required to achieve that release. Each other Finance Party irrevocably authorises the Facility Agent to execute any such document.
 
21.8         Co-security Agent
 
(a)            The Facility Agent may appoint a separate security agent or a co-security agent in any jurisdiction outside the United States of America:
 
(i)             if the Facility Agent considers that without the appointment the interests of the Lenders under the Finance Documents might be materially and adversely affected;
 
(ii)            for the purpose of complying with any law, regulation or other condition in any jurisdiction; or
 
(iii)           for the purpose of obtaining or enforcing a judgment or enforcing any Finance Document in any jurisdiction.
 
(b)            Any appointment under this Subclause will only be effective if the security agent or co-security agent confirms to the Facility Agent and the Borrowers in form and substance satisfactory to the Facility Agent that it is bound by the terms of this Agreement as if it were the Facility Agent.
 
(c)            The Facility Agent may remove any security agent or co-security agent appointed by it and may appoint a new security agent or co-security agent in its place.
 
(d)            The Borrowers must pay to the Facility Agent any reasonable remuneration paid by the Facility Agent to any security agent or co-security agent appointed by it, together with any related costs and expenses properly incurred by the security agent or co-security agent.
 
21.9         Parallel Debt
 
Each Obligor hereby irrevocably and unconditionally undertakes to pay to the Facility Agent amounts equal to any amounts owing by such Obligor (whether owed as borrower of a facility or as joint and several obligor) to the relevant Finance Parties under the Finance Documents as and when the same fall due for payment thereunder, so that the Facility Agent shall be the obligee of such covenant to pay and shall be entitled to claim performance thereof in its own name and not as agent acting on behalf of the relevant Finance Parties. The Obligors and the Facility Agent acknowledge that for this purpose such obligations of the Obligors are several and are separate and independent from, and without prejudice to, the identical obligations which the Obligors have to the Finance Parties under the relevant Finance Documents, provided that this shall not, at the same time, result in any Obligor incurring an aggregate obligation to any such Finance Parties under the Finance Documents. To this end and without prejudice to the foregoing, it is agreed that (i) the amounts due and payable by any Obligor under this Clause 21.9 (the Parallel Debt ) shall be decreased to the extent that such Obligor paid any amounts to the Finance Parties or any of them in respect of the Secured Liabilities and vice versa and (ii) the Parallel Debt shall not exceed the aggregate of the corresponding obligations which any Obligor has to the Finance Parties under the Finance Documents.
 
Nothing in this Clause shall in any way negate, affect or increase the obligations of any Obligor to any Finance Parties under the Finance Documents in respect of the Secured Liabilities. For the purpose of this Clause the Facility Agent acts in its own name and on behalf of itself and not as agent or representative of any other party hereto and any security
 
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granted to the Facility Agent to secure the Parallel Debt is granted to the Facility Agent in its capacity as creditor of the Parallel Debt and solely for the purpose referred to above.
 
21.10       Dutch Security
 
The Facility Agent shall obtain any Security Interest provided under or pursuant to a Security Document governed by Dutch law (the Dutch Security ) in its own name.
 
The Facility Agent shall have full and unrestricted entitlement to and authority in respect of the Dutch Security, provided that it shall be under an obligation to exercise such rights (and perform such obligations) in accordance with the contractual undertakings set out in any Finance Document.
 
22.           THE ADMINISTRATIVE PARTIES
 
22.1         Appointment and duties of the Facility Agent
 
(a)            Save as provided in Clause 21.10, each Finance Party (other than the Facility Agent) irrevocably appoints the Facility Agent to act as its agent under the Finance Documents.
 
(b)            Each Finance Party irrevocably authorises the Facility Agent to:
 
(i)             perform the duties and to exercise the rights, powers and discretions that are specifically given to it under the Finance Documents, together with any other incidental rights, powers and discretions; and
 
(ii)            execute each Finance Document expressed to be executed by the Facility Agent.
 
(c)            The Facility Agent has only those duties which are expressly specified in the Finance Documents. Those duties are solely of a mechanical and administrative nature.
 
22.2         Role of the Arrangers
 
Except as specifically provided in the Finance Documents, the Arrangers in their capacity as Arrangers have no obligations of any kind to any other Party in connection with any Finance Document.
 
22.3         No fiduciary duties
 
Except as specifically provided in a Finance Document, nothing in the Finance Documents makes an Administrative Party a trustee or fiduciary for any other Party or any other person. No Administrative Party need hold in trust any moneys paid to it for a Party or be liable to account for interest on those moneys.
 
22.4         Individual position of an Administrative Party
 
(a)            If it is also a Lender, each Administrative Party has the same rights and powers under the Finance Documents as any other Lender and may exercise those rights and powers as though it were not an Administrative Party.
 
(b)            Each Administrative Party may:
 
(i)             carry on any business with any Obligor or its related entities (including acting as an agent or a trustee for any other financing); and
 
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(ii)            retain any profits or remuneration it receives under the Finance Documents or in relation to any other business it carries on with any Obligor or its related entities.
 
22.5         Reliance
 
The Facility Agent may:
 
(a)            rely on any notice or document believed by it to be genuine and correct and to have been signed by, or with the authority of, the proper person;
 
(b)            rely on any statement made by any person regarding any matters which may reasonably be assumed to be within his knowledge or within his power to verify;
 
(c)            engage, pay for and rely on professional advisers selected by it; and
 
(d)            act under the Finance Documents through its personnel and agents.
 
22.6         Majority Lenders’ instructions
 
(a)            The Facility Agent is fully protected if it acts on the instructions of the Majority Lenders in the exercise of any right, power or discretion or any matter not expressly provided for in the Finance Documents. Any such instructions given by the Majority Lenders will be binding on all the Lenders. In the absence of instructions, then unless the Finance Documents expressly provide that the Facility Agent acts on the instructions of the Majority Lenders in exercising the relevant right, power or discretion, the Facility Agent may act as it considers to be in the best interests of all the Lenders.
 
(b)            Each Lender acknowledges and confirms it shall act in a reasonable manner when reaching any decision as to the exercise or non-exercise of any right, power or discretion by the Facility Agent.
 
(c)            The Facility Agent may assume that unless it has received notice to the contrary, any right, power, authority or discretion vested in any Party or the Majority Lenders has not been exercised.
 
(d)            The Facility Agent is not authorised to act on behalf of a Lender (without first obtaining that Lender’s consent) in any legal or arbitration proceedings in connection with any Finance Document.
 
(e)            The Facility Agent may require the receipt of security satisfactory to it, whether by way of payment in advance or otherwise, against any liability or loss which it may incur in complying with the instructions of the Majority Lenders.
 
22.7         Responsibility
 
(a)            No Administrative Party is responsible to any other Finance Party for the adequacy, accuracy or completeness of:
 
(i)             any Finance Document or any other document; or
 
(ii)            any statement or information (whether written or oral) made in or supplied in connection with any Finance Document.
 
(b)            Without affecting the responsibility of any Obligor for information supplied by it or on its behalf in connection with any Finance Document, each Lender confirms that it:
 
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(i)             has made, and will continue to make, its own independent appraisal of all risks arising under or in connection with the Finance Documents (including the financial condition and affairs of each Obligor and its related entities and the nature and extent of any recourse against any Party or its assets); and
 
(ii)            has not relied exclusively on any information provided to it by any Administrative Party in connection with any Finance Document.
 
22.8         Exclusion of liability
 
(a)            The Facility Agent is not liable or responsible to any other Finance Party for any action taken or not taken by it in connection with any Finance Document, unless directly caused by its gross negligence or wilful misconduct.
 
(b)            No Party (other than the Facility Agent) may take any proceedings against any officer, employee or agent of the Facility Agent in respect of any claim it might have against the Facility Agent or in respect of any act or omission of any kind by that officer, employee or agent in connection with any Finance Document. Any officer, employee or agent of the Facility Agent may rely on this Subclause and enforce its terms under the Contracts (Rights of Third Parties) Act 1999.
 
22.9         Default
 
(a)            The Facility Agent is not obliged to monitor or enquire whether a Default has occurred. The Facility Agent is not deemed to have knowledge of the occurrence of a Default.
 
(b)            If the Facility Agent:
 
(i)             receives notice from a Party referring to this Agreement, describing a Default and stating that the event is a Default; or
 
(ii)            is aware of the non-payment of any principal or interest or any fee payable to a Lender under this Agreement,
 
it must promptly notify the Lenders.
 
22.10       Information
 
(a)            The Facility Agent must promptly forward to the person concerned the original or a copy of any document which is delivered to the Facility Agent by a Party for that person.
 
(b)            Except where a Finance Document specifically provides otherwise, the Facility Agent is not obliged to review or check the adequacy, accuracy or completeness of any document it forwards to another Party.
 
(c)            Except as provided above, the Facility Agent has no duty:
 
(i)             either initially or on a continuing basis to provide any Lender with any credit or other information concerning the risks arising under or in connection with the Finance Documents (including any information relating to the financial condition or affairs of any Obligor or its related entities or the nature or extent of recourse against any Party or its assets) whether coming into its possession before, on or after the date of this Agreement; or
 
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(ii)            unless specifically requested to do so by a Lender in accordance with a Finance Document, to request any certificate or other document from any Obligor.
 
(d)            In acting as the Facility Agent, the agency division of the Facility Agent is treated as a separate entity from its other divisions and departments. Any information acquired by the Facility Agent which, in its opinion, is acquired by it otherwise than in its capacity as the Facility Agent may be treated as confidential by the Facility Agent and will not be treated as information possessed by the Facility Agent in its capacity as such.
 
(e)            Each Obligor irrevocably authorises the Facility Agent to disclose to the other Finance Parties any information which is received by it in its capacity as the Facility Agent.
 
22.11       Indemnities
 
(a)            Without limiting the liability of any Obligor under the Finance Documents, each Lender must indemnify the Facility Agent for that Lender’s Pro Rata Share of any loss or liability incurred by the Facility Agent in acting as the Facility Agent, except to the extent that the loss or liability is caused by the Facility Agent’s gross negligence or wilful misconduct.
 
(b)            The Facility Agent may deduct from any amount received by it for a Lender any amount due to the Facility Agent from that Lender under a Finance Document but unpaid.
 
22.12       Compliance
 
Each Administrative Party may refrain from doing anything (including disclosing any information) which might, based on the reasonable opinion of its legal counsel, constitute a breach of any law or regulation or be otherwise actionable at the suit of any person, and may do anything which, in its opinion, is necessary or desirable to comply with any law or regulation.
 
22.13       Resignation of the Facility Agent
 
(a)            The Facility Agent may resign by giving written notice to the Lenders and the Obligors, in which case the Majority Lenders shall appoint a successor facility agent of which the Obligors approve, such approval not to be unreasonably withheld or delayed.
 
(b)            If no successor Facility Agent has been appointed under paragraph (a) above within 30 days after notice of resignation was given, the Facility Agent may appoint a successor Facility Agent.
 
(c)            The resignation of the Facility Agent and the appointment of any successor facility agent will both become effective only when the successor facility agent notifies all the Parties that it accepts its appointment. On giving the notification, the successor facility agent will succeed to the position of the Facility Agent and the term Facility Agent will mean the successor facility agent.
 
(d)            The retiring Facility Agent must, at its own cost, make available to the successor Facility Agent such documents and records and provide such assistance as the successor Facility Agent may reasonably request for the purposes of performing its functions as the Facility Agent under the Finance Documents.
 
(e)            Upon its resignation becoming effective, this Clause will continue to benefit the retiring Facility Agent in respect of any action taken or not taken by it in connection with the Finance
 
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Documents while it was the Facility Agent, and, subject to paragraph (d) above, it will have no further obligations in its capacity as Facility Agent under any Finance Document.
 
(f)                                     The Majority Lenders may, by notice to the Facility Agent, require it to resign under paragraph (a) above.
 
22.14                  Relationship with Lenders
 
(a)                                   The Facility Agent may treat each Lender as a Lender, entitled to payments under this Agreement and as acting through its Facility Office(s) until it has received not less than five Business Days’ prior notice from that Lender to the contrary.
 
(b)                                  The Facility Agent may at any time, and must if requested to do so by the Majority Lenders, convene a meeting of the Lenders.
 
(c)                                   The Facility Agent must keep a register of all the Parties and supply any other Party with a copy of the register on request. The register will include each Lender’s Facility Office(s) and contact details for the purposes of this Agreement.
 
22.15                  Notice period
 
Where this Agreement specifies a minimum period of notice to be given to the Facility Agent, the Facility Agent may, at its discretion, accept a shorter notice period.
 
23.                                EVIDENCE AND CALCULATIONS
 
23.1                         Accounts
 
Accounts maintained by the Facility Agent in connection with this Agreement are conclusive (save for manifest error) evidence of the matters to which they relate for the purpose of any litigation or arbitration proceedings.
 
23.2                         Certificates and determinations
 
Any certification or determination by the Facility Agent of a rate or amount under the Finance Documents will be, in the absence of manifest error, conclusive evidence of the matters to which it relates.
 
23.3                         Calculations
 
Any interest or fee accruing under this Agreement accrues from day to day and is calculated on the basis of the actual number of days elapsed and a year of 360 days or otherwise, depending on what the Facility Agent determines is market practice.
 
24.                                FEES
 
24.1                         Exposure fee
 
(a)                                   Each Borrower must pay to the Facility Agent an exposure fee calculated at the rate of 0.27 per cent. per annum in respect of all amounts drawn under each Tranche A Loan.
 
(b)                                  The Exposure Fee in respect of each Tranche A Loan shall accrue from the first Drawing under that Tranche A Loan and shall be payable as part of the interest payment in accordance with Clause 7.
 
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24.2         Commitment fee
 
(a)            Each Borrower must pay to the Facility Agent for and on behalf of the Lenders a commitment fee calculated at the rate of:
 
(i)             0.30% per annum on the undrawn, uncancelled amount of each Maximum Available Tranche A Loan Amount; and
 
(ii)            0.50% per annum on the undrawn uncancelled amount of each Maximum Available Tranche B Loan Amount.
 
The commitment fee shall (i) in the case of the Tranche A Loan Amount, accrue from the earlier of (A) the date falling 60 days after the date of this Agreement, and (B) the date of the first Drawing under the relevant Loan, and (ii) in the case of the Tranche B Loan Amount, accrue from the date of this Agreement.
 
(b)            Accrued commitment fee is payable semi-annually in arrears on the last day of each Term. Accrued commitment fee on that part of any Maximum Available Loan Amount which is cancelled is payable to the Facility Agent for a Lender on the date that Lender’s Commitment is cancelled in full.
 
24.3         Management fee
 
The Borrowers must pay to the Facility Agent for KEXIM a management fee in the manner agreed in the Fee Letter between the Facility Agent and the Borrowers.
 
24.4         Arranger’s fee
 
The Borrowers must pay to the Facility Agent an Arranger’s fee in the manner agreed in the Fee Letter between the Facility Agent and the Borrowers.
 
24.5         Refund of fees
 
The fees referred to in this Clause 24 and the Fee Letter shall not be refunded under any circumstances whatsoever once they have been paid.
 
25.           INDEMNITIES AND BREAK COSTS
 
25.1         Currency indemnity
 
(a)            Each of the Borrowers shall, as an independent obligation and within 3 Business Days of demand, indemnify each Finance Party against any cost, loss or liability which that Finance Party incurs as a consequence of:
 
(i)             that Finance Party receiving an amount in respect of a Borrower’s liability under the Finance Documents; or
 
(ii)            that liability being converted into a claim, proof, judgment or order,
 
in a currency other than the currency in which the amount is expressed to be payable under the relevant Finance Document.
 
(b)            Each of the Borrowers waives any right it may have in any jurisdiction to pay any amount under the Finance Documents in a currency other than that in which it is expressed to be payable.
 
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25.2         Other indemnities
 
(a)            Each of the Borrowers shall, as an independent obligation and within 3 Business Days of demand, indemnify each Finance Party against any cost, loss or liability which that Finance Party incurs as a consequence of:
 
(i)             the occurrence of any Event of Default;
 
(ii)            any failure by a Borrower to pay any amount due under a Finance Document on its due date;
 
(iii)           (other than by reason of negligence or default by that Finance Party) a Loan not being made after a Request has been delivered for that Loan; or
 
(iv)           a Loan (or part of a Loan) not being prepaid in accordance with a notice of prepayment.
 
The liability of the Borrowers in each case includes any cost, loss or expense on account of funds borrowed, contracted for or utilised to fund any amount payable under any Finance Document, any amount repaid or prepaid or any Loan.
 
(b)            Each Borrower must indemnify against any cost, loss or liability incurred by any Finance Party as a result of:
 
(i)             investigating any event which that Finance Party reasonably believes to be a Default; or
 
(ii)            acting or relying on any notice from any Party which that Finance Party reasonably believes to be genuine, correct and appropriately authorised.
 
(c)            Each Borrower must indemnify and hold each Finance Party harmless on a full indemnity basis, from and against each and every Loss:
 
(i)             arising directly or indirectly out of or in any way connected with the ownership, possession, performance, transportation, management, sale, import to or export from any jurisdiction, control, use or operation, registration, navigation, certification, classification, management, manning, provisioning, the provision of bunkers and lubricating oils, testing, design, condition, delivery, acceptance, leasing, sub-leasing, chartering, insurance, maintenance, repair, service, modification, refurbishment, drydocking, survey, conversion, overhaul, replacement, removal, repossession, return, redelivery, storage, sale, disposal, the complete or partial removal, decommissioning, making safe, destruction, abandonment or loss by either of the Borrowers or any other person of either of the Vessels or caused by either of the Vessels becoming a wreck or an obstruction to navigation, whether or not such liability may be attributable to any defect in either of the Vessels or to the design, construction or use thereof or from any maintenance, service, repair, drydocking, overhaul, inspection or for any other reason whatsoever (whether similar to any of the foregoing or not), and regardless of when the same shall arise and whether or not either of the Vessels (or any part thereof) is in possession or control of the relevant Borrower or the Manager or any other person and whether or not the same is in United Kingdom waters or abroad;
 
(ii)            arising directly or indirectly out of or in any way connected with any Release of Hazardous Material, any Environmental Claim, or any breach of an Environmental Law or the terms and conditions of an Environmental Approval;
 
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(iii)           as a consequence of any claim that any design, article or material in either of the Vessels or any part thereof or relating thereto or the operation or use thereof constitutes an infringement of patent, copyright, design or other proprietary right; or
 
(iv)           in preventing or attempting to prevent the arrest, seizure, taking in execution, requisition, impounding, forfeiture or detention of either of the Vessels or in securing or attempting to secure the release of either of the Vessels.
 
25.3         Break Costs
 
(a)            Each Borrower must pay to each Lender its Break Costs in accordance with this Agreement.
 
(b)            In respect of a Tranche B Lender, Break Costs are the amount (if any) determined by the relevant Lender by which:
 
(i)             the interest which that Lender would have received for the period from the date of receipt of payment of a Loan or an overdue amount to the last day of the current Term for that Loan or overdue amount if the principal or overdue amount received had been paid on the last day of that Term;
 
exceeds
 
(ii)            the amount which that Lender would be able to obtain by placing an amount equal to the amount received by it on deposit with a leading bank in the appropriate interbank market for a period starting on the Business Day following receipt and ending on the last day of the applicable Term.
 
(c)            Each Lender must supply to the Borrowers details of the amount of any Break Costs claimed by it under this Clause.
 
26.           EXPENSES
 
26.1         Initial costs
 
The Borrowers must pay to each Finance Party the amount of all reasonable costs and expenses (including legal fees) incurred by it in connection with (but not limited to) the negotiation, preparation, printing and execution of the Finance Documents.
 
26.2         Subsequent costs
 
The Borrowers must pay to each Finance Party the amount of all costs and expenses (including legal fees) incurred by it in connection with:
 
(a)            the negotiation, preparation, printing and execution of any Finance Document executed after the date of this Agreement; and
 
(b)            any amendment, waiver or consent requested by or on behalf of an Owner or specifically allowed by this Agreement.
 
The Borrowers shall not be required to bear the amount of any costs and expenses (including legal fees) incurred by a Lender or a New Lender (as that term is defined in Clause 29.2) in connection with any voluntary transfer made by a Lender under this Agreement or any of the Security Agreements. In the event that a Lender is required to undertake any such transfers as
 
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a result of the provisions of Clause 11.4 (Mitigation) any costs of that Lender or a New Lender arising out of such transfer shall be payable by the Borrowers.
 
26.3         Enforcement costs
 
The Borrowers must pay to each Finance Party the amount of all costs and expenses (including legal fees) incurred by it in connection with the enforcement or attempted enforcement of, or the preservation or attempted preservation of any rights under, any Finance Document.
 
27.           WAIVER OF CONSEQUENTIAL DAMAGES
 
In no event shall any Finance Party be liable on any theory of liability for any special, indirect, consequential or punitive damages and each Obligor hereby waives, releases and agrees (for itself and on behalf of its Subsidiaries) not to sue upon any such claim for any such damages, unless caused by the fraud, wilful default or recklessness of the relevant Finance Party in performance of any of its obligations under this Agreement or any of the Finance Documents.
 
28.           AMENDMENTS AND WAIVERS
 
28.1         Procedure
 
(a)            Except as provided in this Clause, no term of the Finance Documents may be amended or waived without the agreement of the Borrowers and the Majority Lenders. The Facility Agent may effect, on behalf of any Finance Party, an amendment or waiver allowed under this Clause.
 
(b)            The Facility Agent must promptly notify the other Parties of any amendment or waiver effected by it under paragraph (a) above. Any such amendment or waiver is binding on all the Parties.
 
28.2         Exceptions
 
(a)            An amendment or waiver which relates to:
 
(i)             the definition of Majority Lenders in Clause 1.1 (Definitions);
 
(ii)            an extension of the date of payment of any amount to a Lender under the Finance Documents;
 
(iii)           a reduction in the amount of any payment of principal, interest, fee or other amount payable to a Lender under the Finance Documents;
 
(iv)           an increase in, or an extension of, a Commitment or the Total Commitments;
 
(v)            a release of an Obligor;
 
(vi)           a term of a Finance Document which expressly requires the consent of each Lender;
 
(vii)          the right of a Lender to assign or transfer its rights or obligations under the Finance Documents; or
 
(viii)         this Clause,
 
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may only be made with the consent of all the Lenders and the Borrowers such consent not to be unreasonably withheld or delayed.
 
(b)            An amendment or waiver which relates to a reduction in the Pre-Delivery Tranche A Margin, Exposure Fee or the Tranche A Interest Rate may only be made with the consent of all the Tranche A Lenders and the Borrowers.
 
(c)            An amendment or waiver which relates to a reduction in the Pre-Delivery Tranche B Margin or Post-Delivery Tranche B Margin may only be made with the consent of all the Tranche B Lenders and the Borrowers.
 
(d)            An amendment or waiver which relates to the rights or obligations of an Administrative Party may only be made with the consent of that Administrative Party and the Borrowers.
 
28.3         Change of currency
 
If a change in any currency of a country occurs (including where there is more than one currency or currency unit recognised at the same time as the lawful currency of a country), the Finance Documents will be amended to the extent the Facility Agent (acting reasonably and on the instructions of the Majority Lenders and after consultation with the Borrowers) determines is necessary to reflect the change.
 
28.4         Waivers and remedies cumulative
 
The rights of each Finance Party under the Finance Documents:
 
(a)            may be exercised as often as necessary;
 
(b)            are cumulative and not exclusive of its rights under the general law; and
 
(c)            may be waived only in writing and specifically.
 
Delay in exercising or non-exercise of any right is not a waiver of that right.
 
29.           CHANGES TO THE PARTIES
 
29.1         Assignments and transfers by Obligors
 
The Obligors may not assign or transfer any of their respective rights and obligations under the Finance Documents without the prior consent of all the Lenders.
 
29.2         Assignments and transfers by Lenders
 
(a)            A Lender (the Existing Lender ) may, subject to the following provisions of this Subclause, at any time assign or transfer (including by way of novation) any of its rights and obligations under this Agreement to (i) any commercial bank organized under the laws of any country that is a member of the OECD or has concluded special lending arrangements with the International Monetary Fund Associated with its General Arrangements to Borrow, or a political subdivision of any such country, and having total assets in excess of US$300,000,000 so long as such bank is acting through a branch or agency located in the country in which it is organized or another country that is described in this Subclause (i); or (ii) the central bank of any country that is a member of the OECD; or (iii) any Chinese bank having total assets in excess of US$300,000,000; or (iv) any finance company, insurance company or other financial institution or fund (whether a corporation, partnership, trust or
 
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other entity) that is engaged in making, purchasing or otherwise investing in commercial loans in the ordinary course of its business and has total assets in excess of US$300,000,000; or (v) any other person approved by the Lenders and the Owners, such approval not to be unreasonably withheld (the New Lender ), provided always that:
 
(i)             each assignment or transfer shall be uniform, and not a varying percentage of all rights and obligations under this Agreement;
 
(ii)            each assignment or transfer shall not result in increased liability to the Borrowers;
 
(iii)           the Facility Agent shall provide to the Borrowers details of the proposed new lenders at least 7 Business Days prior to the proposed transfer date. The Borrowers shall be entitled to object to the identity of any one or more of the proposed new lenders on such list (such objections to be made on reasonable grounds). The relevant Existing Lender shall be entitled to effect a transfer or assignment to any proposed new lender on such list to which the Borrowers have not objected on reasonable grounds within such 7 Business Day period;
 
(iv)           at no time shall the number of Tranche A Lenders exceed 8;
 
(v)            at no time shall the number of Tranche B Lenders exceed 2 unless the prior written consent of the Borrowers is obtained (such consent not to be unreasonably withheld).
 
(b)            A transfer of obligations will be effective only if either:
 
(i)             the obligations are novated in accordance with the following provisions of this Clause 29; or
 
(ii)            the New Lender confirms to the Facility Agent and the Borrowers in form and substance reasonably satisfactory to the Facility Agent and the Borrowers that it is bound by the terms of this Agreement.
 
(c)            On the transfer becoming effective in this manner the relevant Existing Lender will be released from its obligations under this Agreement to the extent that they are transferred to the New Lender.
 
(d)            Any reference in this Agreement to a Lender includes a New Lender but excludes a Lender if no amount is or may be owed to or by it under this Agreement.
 
29.3         Procedure for transfer by way of novations
 
(a)            In this Subclause:
 
Transfer Date means, for a Transfer Certificate, the later of:
 
(i)             the proposed Transfer Date specified in that Transfer Certificate; and
 
(ii)            the date on which the Facility Agent executes that Transfer Certificate.
 
(b)            A novation is effected if:
 
(i)             the Existing Lender and the New Lender deliver to the Facility Agent a duly completed Transfer Certificate; and
 
(ii)            the Facility Agent executes it.
 
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(c)            On the Transfer Date:
 
(i)             the New Lender will assume the rights and obligations of the Existing Lender expressed to be the subject of the novation in the Transfer Certificate in substitution for the Existing Lender; and
 
(ii)            the Existing Lender will be released from those obligations and cease to have those rights.
 
(d)            Each Party (other than the Existing Lender and the New Lender) irrevocably authorises the Facility Agent to execute any duly completed Transfer Certificate on its behalf.
 
29.4         Limitation of responsibility of Existing Lender
 
(a)            Unless expressly agreed to the contrary, an Existing Lender is not responsible to a New Lender for:
 
(i)             the legality, validity, effectiveness, completeness, accuracy, adequacy or enforceability of any Finance Document or any other document;
 
(ii)            the financial condition of any Borrower;
 
(iii)           the performance and observance by any Borrower of its obligations under the Finance Documents or any other documents; or
 
(iv)           the accuracy of any statement or information (whether written or oral) made in or supplied in connection with any Finance Document,
 
and any representations or warranties implied by law are excluded.
 
(b)            Each New Lender confirms to the Existing Lender that it:
 
(i)             has made, and will continue to make, its own independent appraisal of all risks arising under or in connection with the Finance Documents (including the financial condition and affairs of each Borrower and its related entities and the nature and extent of any recourse against any Party or its assets) in connection with its participation in this Agreement; and
 
(ii)            has not relied exclusively on any information supplied to it by the Existing Lender in connection with any Finance Document.
 
(c)            Nothing in any Finance Document requires an Existing Lender to:
 
(i)             accept a re-transfer from a New Lender of any of the rights and obligations assigned or transferred under this Clause; or
 
(ii)            support any losses incurred by the New Lender by reason of the non-performance by a Borrower of its obligations under any Finance Document or otherwise.
 
29.5         Costs resulting from change of Lender or Facility Office
 
If:
 
(a)            a Lender assigns or transfers any of its rights and obligations under the Finance Documents or changes its Facility Office; and
 
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(b)            as a result of circumstances existing at the date the assignment, transfer or change occurs, a Borrower would be obliged to pay a Tax Payment or an Increased Cost,
 
then, unless the assignment, transfer or change is made by a Lender to mitigate any circumstances giving rise to a Tax Payment, Increased Cost or a right to be prepaid and/or cancelled by reason of illegality, the relevant Borrower need only pay that Tax Payment or Increased Cost to the same extent that it would have been obliged to if no assignment, transfer or change had occurred.
 
29.6         Changes to the Reference Banks
 
If a Reference Bank (or, if a Reference Bank is not a Lender, the Lender of which it is an Affiliate) ceases to be a Lender, the Facility Agent must (in consultation with the Borrowers) appoint another Lender or an Affiliate of a Lender to replace that Reference Bank.
 
30.           DISCLOSURE OF INFORMATION
 
Each Finance Party may disclose to:
 
(a)            any of its Affiliates; or
 
(b)            any other person who:
 
(i)             has not been objected to by the Borrowers pursuant to Clause 29.2(a)(ii):
 
(ii)            to (or through) whom an Existing Lender assigns or transfers (or may potentially assign or transfer) all or any of its rights and obligations under this Agreement;
 
(iii)           with (or through) whom a Lender enters into (or may potentially enter into) any sub-participation in relation to, or any other transaction under which payments are to be made by reference to, this Agreement or a Borrower; or
 
(iv)           to whom, and to the extent that, information is required to be disclosed by any Applicable Law; or
 
(c)            any other Finance Party; or
 
(d)            its and the Obligors’ professional advisors,
 
any information about an Obligor, any other member of the Danaos Group, or the Finance Documents as that Finance Party shall consider appropriate if, in relation to paragraphs (i) to (iii) inclusive above, the person to whom the information is to be given has entered into a Confidentiality Undertaking. Except as provided in this Clause, a Lender may not disclose any information about an Obligor, any other member of the Danaos Group, or the Finance Documents to any person.
 
31.           SET-OFF
 
A Finance Party may set off any matured obligation owed to it by any of the Obligors under the Finance Documents against any obligation (whether or not matured) owed by that Finance Party to that Obligor, regardless of the place of payment, booking branch or currency of either obligation. If the obligations are in different currencies, that Finance Party may convert either
 
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obligation at a market rate of exchange in its usual course of business for the purpose of the set-off.
 
32.           PRO RATA SHARING
 
32.1         Redistribution
 
If any amount owing by a Borrower under this Agreement to a Lender (the recovering Lender ) is discharged by payment, set-off or any other manner other than through the Facility Agent under this Agreement (a recovery ), then:
 
(a)            the recovering Lender must, within three Business Days, supply details of the recovery to the Facility Agent;
 
(b)            the Facility Agent must calculate whether the recovery is in excess of the amount which the recovering Lender would have received if the recovery had been received by the Facility Agent under this Agreement; and
 
(c)            the recovering Lender must pay to the Facility Agent an amount equal to the excess (the redistribution ).
 
32.2         Effect of redistribution
 
(a)            The Facility Agent must treat a redistribution as if it were a payment by the relevant Borrower under this Agreement and distribute it among the Lenders, other than the recovering Lender, accordingly.
 
(b)            When the Facility Agent makes a distribution under paragraph (a) above, the recovering Lender will be subrogated to the rights of the Finance Parties which have shared in that redistribution.
 
(c)            If and to the extent that the recovering Lender is not able to rely on any rights of subrogation under paragraph (b) above, the relevant Borrower will owe the recovering Lender a debt which is equal to the redistribution, immediately payable and of the type originally discharged.
 
(d)            If:
 
(i)             a recovering Lender must subsequently return a recovery, or an amount measured by reference to a recovery, to a Borrower; and
 
(ii)            the recovering Lender has paid a redistribution in relation to that recovery,
 
each Finance Party must reimburse to the recovering Lender all or the appropriate portion of the redistribution paid to that Finance Party, together with interest for the period while it held the redistribution. In this event, the subrogation in paragraph (b) above will operate in reverse to the extent of the reimbursement.
 
32.3         Exceptions
 
Notwithstanding any other term of this Clause, a recovering Lender need not pay a redistribution to the extent that:
 
(a)            it would not, after the payment, have a valid claim against the relevant Borrower in the amount of the redistribution; or
 
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(b)            it would be sharing with another Finance Party any amount which the recovering Lender has received or recovered as a result of legal or arbitration proceedings, where:
 
(i)             the recovering Lender notified the Facility Agent of those proceedings; and
 
(ii)            the other Finance Party had an opportunity to participate in those proceedings but did not do so or did not take separate legal or arbitration proceedings as soon as reasonably practicable after receiving notice of them.
 
33.           SEVERABILITY
 
If a term of a Finance Document is or becomes illegal, invalid or unenforceable in any jurisdiction, that shall not affect:
 
(a)            the legality, validity or enforceability in that jurisdiction of any other term of the Finance Documents; or
 
(b)            the legality, validity or enforceability in other jurisdictions of that or any other term of the Finance Documents.
 
34.           COUNTERPARTS
 
Each Finance Document may be executed in any number of counterparts and by facsimile provided that original signed copies are provided within a reasonable period of time thereafter. This has the same effect as if the signatures on the counterparts were on a single copy of the Finance Document.
 
35.           NOTICES
 
35.1         In writing
 
(a)            Any communication in connection with a Finance Document must be in writing and, unless otherwise stated, may be given in person, by post, fax or e-mail or by any other electronic communication approved by the Facility Agent;
 
(b)            For the purpose of the Finance Documents, an electronic communication will be treated as being in writing.
 
(c)            Unless it is agreed to the contrary, any consent or agreement required under a Finance Document must be given in writing.
 
35.2         Contact details
 
(a)            Except as provided below, the contact details of each Party for all communications in connection with the Finance Documents are those notified by that Party for this purpose to the Facility Agent on or before the date it becomes a Party.
 
(b)            The contact details of the Borrowers for this purpose are:
 
Address:                Kyriakou Matsi 11,
Nikis Centre, 8 th Floor,
P.C. 1080 Nicosia, Cyprus
 
Fax number:            +357 227 61542
 
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Attention:               Mr. S. Karydes
 
with a copy to:
 
Address:                 Danaos Shipping Co. Ltd
Akti Kondyli 14,
185 45 Piraeus
Greece
 
Fax number:            +30 210 4220855
Attention:                Mr. I. Prokopakis
 
(c)            The contact details of the Guarantor for this purpose are:
 
Address:                 Danaos Shipping Co. Ltd
Akti Kondyli 14,
185 45 Piraeus
Greece
 
Fax number:            +30 210 4220855
Attention:                Mr. I. Prokopakis
 
(d)            The contact details of the Facility Agent for this purpose are:
 
Address:                 Fortis Capital Corp.
3 Stamford Plaza
301 Tresser Boulevard
Stamford CT 06901
USA
 
Fax number:            +1 203 705 5890
Attention:                Agency Department / Loan Administration
 
(e)            A Party may change its contact details by giving five Business Days’ notice to the Facility Agent or (in the case of the Facility Agent) to the other Parties.
 
(f)             Where a Party nominates a particular department or officer to receive a communication, a communication will not be effective if it fails to specify that department or officer.
 
35.3         Effectiveness
 
(a)            Except as provided below, any communication in connection with a Finance Document will be deemed to be given as follows:
 
(i)             if delivered in person, at the time of delivery;
 
(ii)            if posted, five days after being deposited in the post, postage prepaid, in a correctly addressed envelope;
 
(iii)           if by fax, when received in legible form; and
 
(iv)           if by e-mail or any other electronic communication, when received in legible form.
 
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(b)            A communication given under paragraph (a) above but received on a non-working day or after business hours in the place of receipt will only be deemed to be given on the next working day in that place.
 
(c)            A communication to the Facility Agent will only be effective on actual receipt by it.
 
35.4         Obligor
 
All communications under the Finance Documents to or from an Obligor must be sent through the Facility Agent.
 
35.5         Entire Agreement
 
This Agreement and the other Finance Documents entered into pursuant to this Agreement contain the whole agreement between the parties relating to the transactions contemplated by this Agreement and supersede all previous agreements between the parties relating to such transactions.
 
36.           LANGUAGE
 
(a)            Any notice given in connection with a Finance Document must be in English.
 
(b)            Any other document provided in connection with a Finance Document must be:
 
(i)             in English; or
 
(ii)            (unless the Facility Agent otherwise agrees) accompanied by a certified English translation. In this case, the English translation prevails unless the document is a statutory or other official document.
 
37.           GOVERNING LAW
 
This Agreement is governed by English law.
 
38.           ENFORCEMENT
 
38.1         Jurisdiction
 
(a)            The English courts have jurisdiction to settle any dispute in connection with any Finance Document.
 
(b)            The English courts are the most appropriate and convenient courts to settle any such dispute.
 
(c)            This Clause is for the benefit of the Facility Agent and the Lenders only. To the extent allowed by law, the Facility Agent and/or the Lenders may take:
 
(i)             proceedings in any other court; and
 
(ii)            concurrent proceedings in any number of jurisdictions.
 
38.2         Service of process
 
(a)            Each of the Obligors irrevocably appoints SH Process Agents Limited of One, St Pauls Churchyard, London EC4M 8SH as its agent under the Finance Documents for service of process in any proceedings before the English courts.
 
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(b)            If any person appointed as process agent is unable for any reason to act as agent for service of process, the relevant Obligor or Obligors must immediately appoint another agent on terms acceptable to the Facility Agent. Failing this, the Facility Agent may appoint another agent for this purpose.
 
(c)            Each of the Obligors agree that failure by a process agent to notify it of any process will not invalidate the relevant proceedings.
 
(d)            This Clause does not affect any other method of service allowed by law.
 
38.3         Waiver of immunity
 
The Obligors each irrevocably and unconditionally:
 
(a)            agrees not to claim any immunity from proceedings brought by a Finance Party against it in relation to a Finance Document and to ensure that no such claim is made on its behalf;
 
(b)            consents generally to the giving of any relief or the issue of any process in connection with those proceedings; and
 
(c)            waives all rights of immunity in respect of it or its assets.
 
THIS AGREEMENT has been entered into on the date stated at the beginning of this Agreement.
 
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SCHEDULE 1
 
ORIGINAL PARTIES
 
PART 1
 
THE BORROWERS AND THE VESSELS

Name of
Borrower	 	Country of
Incorporation	 	Registered Office	 	Hull Number	 	Flag of Vessel	
 	 	 	 	 	 	 	 	 	
Karlita Shipping
Company Limited	 	Republic of Cyprus	 	Kyriakou Matsi 11,
Nikis Centre, 8 th
Floor, 1080 Nicosia,
Cyprus	 	1559	 	Republic of Cyprus	
 	 	 	 	 	 	 	 	 	
Ramona Marine
Company Limited	 	Republic of Cyprus	 	Kyriakou Matsi 11,
Nikis Centre, 8 th
Floor, 1080 Nicosia,
Cyprus	 	1561	 	Republic of Cyprus	
 
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PART 2
 
ORIGINAL LENDERS

Name of Original Lender	 	Tranche A
Commitments
(US$)	 	Tranche B
Commitments
(US$)	 	Facility Office	
 	 	 	 	 	 	 	
The Export Import Bank of Korea	 	135,000,000	 	 	 	16-1 Yoido-dong,
Youngdeungpo-gu, Seoul, 150-
996, Korea	
 	 	 	 	 	 	 	
Fortis Bank (Nederland) N.V.	 	 	 	9,000,000	 	Coolsingel 93, 3012 AE
Rotterdam, The Netherlands	
 
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SCHEDULE 2
 
INITIAL CONDITIONS PRECEDENT DOCUMENTS
 
1.              Obligors
 
(a)            A certified copy* of the constitutional documents of each Obligor and each Shareholder together with an up to date Certificate of Goodstanding dated no more than ten Business Days prior to the first Utilisation Date.
 
(b)            A certified copy* of a resolution of the board of directors of each Obligor and each Shareholder:
 
(i)             approving the terms of, and the transactions contemplated by, each Finance Document and each Related Contract to which each Obligor or, as the case may be, each Shareholder is a party and resolving that it executes each such Finance Document and each Related Contract, then to be executed;
 
(ii)            authorising a specified person or persons to execute each Finance Document and each Related Contract on its behalf to which it is a party, then to be executed; and
 
(iii)           authorising a specified person or persons, on its behalf, to sign and/or despatch all other documents and notices to be signed and/or despatched by it under or in connection with each Finance Document and each Related Contract to which it is a party, then to be executed.
 
(c)            A specimen of the signature of each person authorised by the resolution referred to in paragraph 1(b) above.
 
(d)            A certified copy* of all other resolutions, consents, licences, exemptions and filings, corporate, official or otherwise which the Facility Agent may reasonably require in connection with this Agreement or any other Finance Document.
 
2.              Finance Documents and Related Contracts
 
(a)            A duly executed original of this Agreement.
 
(b)            A duly executed original of each of the General Assignments.
 
(c)            A duly executed original of each of the Time Charter and Earnings Assignments.
 
(d)            Duly executed originals of the Pledges of Shares, together with all certificates in respect of the Shares, undated letters of resignation by each of the directors and officers of the Owners and all (if any) unissued share or stock certificates of the Owners.
 
(e)            A duly executed original of each Earnings Account Charge.
 
(f)             A duly executed original of each Operating Expenses Account Charge.
 
(g)            A duly executed original of each Retention Account Charge.
 
(h)            A duly executed original of the Equity Contribution Side Letter.
 
(i)             A duly executed original of the Fee Letter.
 
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(j)             A certified copy* of each of the Refund Guarantees.
 
(k)            A certified copy* of each Shipbuilding Contract, duly executed.
 
(l)             A certified copy* of each Time Charter, duly executed.
 
(m)           Duly executed originals of all notices of assignment required to be served under each Security Document referred to above and faxed copies of the acknowledgements thereof (where it is not possible to provide originals of the same, with such originals to follow as soon as practicable after the first Utilisation Date), duly executed by each relevant counterparty.
 
3.              Other documents
 
(a)            A copy of any other authorisation or other document, opinion or assurance which the Facility Agent considers to be necessary or desirable in connection with the entry into and performance of, and the transactions contemplated by, any Finance Document or any Related Contract or for the validity and enforceability of any Finance Document or any Related Contract.
 
(b)            A letter from Danaos Management Consultants (UK) Limited agreeing to its appointment as process agent for the Obligors under the Finance Documents.
 
(c)            A letter from China Shipping (UK) Co., Ltd agreeing to its appointment as process agent for the Charterer in respect of the acknowledgement of the Time Charter and Earnings Assignment.
 
(d)            Evidence satisfactory to the Facility Agent of receipt by the Builder from the Borrowers of the Equity Contribution in respect of the relevant Loan.
 
(e)            The consolidated audited financial statements of the Danaos Group for the year ending December 2002, together with any other financial information requested by the Facility Agent and/or KEXIM.
 
4.              Legal opinions
 
(a)            A legal opinion of Allen & Overy, London office, English legal advisers to the Lenders, addressed to the Facility Agent as agent for and on behalf of itself and the Lenders.
 
(b)            A legal opinion of Chrysses, Demetriades & Co, Cypriot legal advisors to the Lenders, addressed to the Facility Agent as agent for and on behalf of itself and the Lenders, in respect of the Borrowers.
 
(c)            A legal opinion of King & Wood, Chinese legal advisors to the Lenders, addressed to the Facility Agent as agent for and on behalf of itself and the Lenders, in respect of the Charterer.
 
(d)            A legal opinion of Seward & Kissel, New York, Liberian legal advisors to the Lenders, addressed to the Facility Agent as agent for and on behalf of itself and the Lenders, in respect of the Guarantor.
 
(e)            A legal opinion of Allen & Overy, Amsterdam office, Dutch legal advisors to the Lenders, addressed to the Facility Agent as agent for and on behalf of itself and the Lenders in respect of the Security Documents referred to paragraph 2(e), (f) and (g) above.
 
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5.              Other Requirements
 
(a)            Receipt by the Facility Agent for KEXIM of the management fee as detailed in Clause 24.3.

*               Each certified copy document must be certified by a director, officer or duly authorised attorney of the relevant Borrower as being true and complete as at a date no earlier than the date of the Request for a first Drawing.
 
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SCHEDULE 3
 
DELIVERY DATE CONDITIONS PRECEDENT DOCUMENTS
 
At the time of delivery of each Vessel, the Facility Agent shall require the following documentation from the relevant Borrower:-
 
1.              Borrower
 
(a)            A certified copy of the constitutional documents of the Borrower or a certificate of the Borrower certifying that such documents have not been amended since the first Drawing.
 
(b)            A certified copy of a resolution of the board of directors of the Borrower (unless such a resolution in relation to the issues below is still in force):
 
(i)             authorising a specified person or persons to execute such necessary documentation as is required to permit the Borrower to take physical possession of the relevant Vessel from the Bareboat Charterer; and
 
(ii)            authorising a specified person or persons, on its behalf, to sign or despatch all documents and notices to be signed or despatched as necessary to take physical possession of the relevant Vessel from the Bareboat Charterer.
 
(c)            A specimen of the signature of each person authorised by the resolution referred to in paragraphs (b)(i) and (ii) above.
 
2.              Documents
 
(a)            A duly executed original of the relevant Mortgage;
 
(b)            A duly executed original of the Manager’s Undertaking;
 
(c)            A duly executed original of the relevant Vessel Management Agreement Assignment;
 
(d)            A certified copy of the Vessel Management Agreement, duly executed; and
 
(e)            A copy of any other authorisation or other document, opinion or assurance which the Facility Agent considers to be necessary or desirable in connection with the entry into and performance of, and the transactions contemplated by, the Security Documents or for the validity and enforceability of any of those documents.
 
3.              The Vessel to be delivered
 
(a)            Evidence that:
 
(i)             the title to the Vessel is held by the Owner free of all Security Interests other than Permitted Liens;
 
(ii)            Confirmation acceptable to the Facility Agent that the Owner has accepted the Vessel pursuant to the terms of the relevant Shipbuilding Contract and executed a protocol of delivery and acceptance.
 
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(iii)           Confirmation acceptable to the Facility Agent that the Bareboat Charterer has accepted the Vessel pursuant to the terms of the relevant Bareboat Charter and executed an acceptance certificate.
 
(iv)           Confirmation acceptable to the Facility Agent that the Borrower has accepted the Vessel pursuant to the terms of the relevant AML Time Charter and executed an acceptance certificate.
 
(v)            Confirmation acceptable to the Facility Agent that the Charterer has accepted the Vessel pursuant to the terms of the relevant Time Charter and executed an acceptance certificate.
 
(vi)           the Vessel is provisionally registered in the name of the Owner, as appropriate, as a Republic of Cyprus flag ship at the port of Limassol;
 
(vii)          the Mortgage in respect of the Vessel has been duly recorded in the Republic of Cyprus Registry of Ships and constitutes a first priority security interest over the Vessel and that all taxes and fees payable to the Republic of Cyprus Registry of Ships in respect of the Vessel have been paid in full;
 
(viii)         evidence that the Vessel is subject to a safety management system which complies with the ISM Code; and
 
(ix)            evidence that the Vessel is subject to a ship security plan which complies with the ISPS Code.
 
(b)            A certified copy* of:
 
(i)             a classification certificate in respect of the Vessel showing the Vessel to be in class without recommendation, condition or qualification or, in the event that this is not available, a faxed copy with a certified copy to follow as soon as practicable after the relevant Delivery Date;
 
(ii)            a valid Interim Safety Management Certificate for the Vessel or, in the event that this is not available, a faxed copy with a certified copy to follow as soon as practicable after the relevant Delivery Date;
 
(iii)           a valid International Ship Security Certificate; and
 
(iv)           a valid Document of Compliance.
 
(c)            A copy of the US Customs Sea Carrier initiative agreement (as such an agreement is described in each of the Time Charters) duly executed by each of the Owners.
 
(d)            A copy of the commercial invoice in respect of the Vessel.
 
(e)            A copy of the builder’s certificate in respect of the Vessel.
 
4.              Insurance
 
(a)            A certified copy of all current insurance policies in respect of the Vessel.
 
(b)            A duly executed and, where necessary, notarised notice of assignment (and acknowledgement of the same) of the Obligatory Insurances in respect of the Vessel duly executed by the Owner substantially in the form provided for in the General Assignment.
 
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(c)            Fax confirmation from each broker, insurer and club concerned with the Obligatory Insurances of the Vessel that:
 
(i)             the relevant cover is in effect;
 
(ii)            they will accept notice of assignment of the Obligatory Insurances in favour of the Facility Agent and execute an acknowledgement of the notice in the form required by the Facility Agent;
 
(iii)           they will restrict their lien for unpaid premiums under any fleet policy to unpaid premiums in respect of that Vessel only;
 
(iv)           they will issue a letter of undertaking in the current LIBA form (in the case of Lloyds brokers), in the form provided for in the General Assignment (in the case of non-Lloyds brokers and insurers other than clubs) or in their current standard form (in the case of clubs);
 
(v)            they will accept endorsement of a loss payable clause on the policies in the form provided for in the General Assignment (in the case of brokers and insurers other than clubs) or will note the interest of the Facility Agent in the entry for the Vessel by way of a loss payable clause in their current standard form (in the case of clubs); and
 
(vi)           they are not aware of any mortgage, charge, assignment or other encumbrance affecting the Obligatory Insurances with which they are concerned (other than any previously disclosed by the Borrower to the Facility Agent in writing).
 
(d)            Confirmation from the Facility Agent of its satisfaction with a final insurance report prepared by Marsh Insurance Brokers.
 
5.              Legal Opinions
 
(a)            A legal opinion of Allen & Overy, London office, English legal advisers to the Lenders, addressed to the Facility Agent as agent for and on behalf of itself and the Lenders.
 
(b)            A legal opinion of the Republic of Cyprus legal advisers, or such other jurisdiction as may be chosen to be the flag of a Vessel, to the Lenders, addressed to the Facility Agent as agent for and on behalf of itself and the Lenders.

*               Each certified copy document must be certified by a director, officer or duly authorised attorney of the Borrower as being true and complete as at a date no earlier than the Delivery Date of a Vessel.
 
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SCHEDULE 4
 
PART 1
 
FORM OF REQUEST
 
To:           Fortis Capital Corp. as Facility Agent
 
From:       [ The relevant Borrower ]
 
Date:        [                         ]
 
US$144,000,000 Credit Agreement dated 29th January, 2004 (the Credit Agreement ) 
Hull No. 1559/1661
 
1.              We wish to borrow a Drawing under a Loan from you as follows:
 
(a)            Utilisation Date:                    [                                         ]
 
(b)            Amount/currency:                [                                         ]
 
Loan 1/Loan 2*
 
Amount payable to the Builder towards the Instalment under
Shipbuilding Contract:                                                                                         US$[       ]
 
Amount payable in respect of Incidental Vessel Costs
as set out below (as supported by the relevant invoices):                            US$[        ]
 
(a)            Details of item:                                                                       US$[        ]
 
(b)            Details of item:                                                                       US$[        ]

Total drawdown:                                                                                                   US$[          ]
 
2.              Payment Instructions:
 
To include provisions that:
 
(i)             amount of Instalment payable under the relevant Shipbuilding Contract to be payable to the Builder’s account.
 
(ii)            Incidental Costs to be credited to the relevant Operating Expenses Account.

* Delete as appropriate.
 
3.              We confirm that each condition specified in Clause 3.2 (Further conditions precedent) of the Credit Agreement is satisfied on the date of this Request.
 
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By:

 	 	
BORROWER	
 
Authorised Signatory
 
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PART 2
 
PAYMENT ADVICE
 
To:           [ The relevant Borrower ]
 
From:       Fortis Capital Corp. as Facility Agent
 
Date:        [               ]
 
US$144,000,000 Credit Agreement dated 29th January, 2004
 
Hull No. 1559/1661
 
Further to receipt of your request dated [     ] and attached hereto requesting the advance of a Drawing under a Loan, we confirm that all amounts have been advanced in accordance with the requirements of the attached Request.

 	 	
 	
For and on behalf of Fortis Capital Corp. as Facility Agent	
 
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SCHEDULE 5
 
FORM OF TRANSFER CERTIFICATE
 
To:           The Borrowers
 
From:       [ THE EXISTING BANK ] and [ THE NEW BANK ]
 
Date: [               ]
 
US$144,000,000 Credit Agreement dated 29th January, 2004 (the Credit Agreement )
 
Hull No. 1559/1661
 
We refer to Clause 29.3 (Procedure for transfer by way of novations) of the Credit Agreement.
 
1.              We [               ] (the Existing Bank ) and [                      ] (the New Bank ) agree to the Existing Bank and the New Bank novating all the Existing Bank’s rights and obligations referred to in the Schedule in accordance with Clause 29.3 (Procedure for transfer by way of novations).
 
2.              The specified date for the purposes of Clause 29.3(a) is [ date of novation ].
 
3.              The Facility Office and address for notices of the New Bank for the purposes of Clause 35.2 (Contact details) are set out in the Schedule.
 
4.              This Novation Certificate is governed by English law.
 
THE SCHEDULE
 
Rights and obligations to be novated
 
[ Choose one of the following options (a) to (d) :]
 
(a)            all of the rights and obligations of the Existing Lender in respect of the Facility - principal amount US$[      ].
 
(b)            all of the rights and obligations of the Existing Lender in respect of Vessel Loan [    ] [and Vessel Loan [   ]] -principal amount US$[      ].
 
(c)            the principal amount of US$[      ] in respect of each of the Loans and all the rights and obligations attached to the same-total principal amount US$[      ].
 
(d)            the principal amount of US$[      ] in respect of [each of] Vessel Loan [    ] [and Vessel Loan [    ]] and all the rights and obligations attached to the same.
 
106

 
[ New Bank ]
 
[ Facility Office Address for notices ]

[ Existing Bank ]	 	[ New Bank ]	
 	 	 	
By:	 	By:	
 	 	 	
Date:	 	Date:	
 
The Transfer Date is confirmed by the Facility Agent as [                               ].
 
FORTIS CAPITAL CORP.
 
By:
 
107

 
SCHEDULE 6
 
REPAYMENT SCHEDULE
 
PART 1

Vessel Hull No. 1559	 	 	 	 	
 	 	Interest rate :	 	4.75%	 	
 	 	Exposure Margin :	 	0.2700%	 	

 	 	Principal
Repayment	 	Interest	 	Exposure
Fee	 	No.
of
Days	 	Total
Instalment	 	Outstanding
Balance	 	Repayment
Date	 	
 	 	 	 	 	 	 	 	 	 	 	 	67,500,000.00	 	2006-10-31	 	
1	 	2,097,720.99	 	1,202,343.75	 	68,343.75	 	135	 	3,368,408.49	 	65,402,279.01	 	2007-03-15	 	
2	 	2,812,500.00	 	1,587,821.99	 	90,255.14	 	184	 	4,490,577.13	 	62,589,779.01	 	2007-09-15	 	
3	 	2,812,500.00	 	1,503,023.99	 	85,435.04	 	182	 	4,400,959.03	 	59,777,279.01	 	2008-03-15	 	
4	 	2,812,500.00	 	1,451,259.49	 	82,492.64	 	184	 	4,346,252.13	 	56,964,779.01	 	15/09/08	 	
5	 	2,812,500.00	 	1,360,429.68	 	77,329.68	 	181	 	4,250,259.36	 	54,152,279.01	 	2009-03-15	 	
6	 	2,812,500.00	 	1,314,696.99	 	74,730.14	 	184	 	4,201,927.13	 	51,339,779.01	 	2009-09-15	 	
7	 	2,812,500.00	 	1,226,093.75	 	69,693.75	 	181	 	4,108,287.50	 	48,527,279.01	 	2010-03-15	 	
8	 	2,812,500.00	 	1,178,134.49	 	66,967.64	 	184	 	4,057,602.13	 	45,714,779.01	 	2010-09-15	 	
9	 	2,812,500.00	 	1,091,757.81	 	62,057.81	 	181	 	3,966,315.62	 	42,902,279.01	 	2011-03-15	 	
10	 	2,812,500.00	 	1,041,571.99	 	59,205.14	 	184	 	3,913,277.13	 	40,089,779.01	 	2011-09-15	 	
11	 	2,812,500.00	 	962,711.49	 	54,722.54	 	182	 	3,829,934.03	 	37,277,279.01	 	2012-03-15	 	
12	 	2,812,500.00	 	905,009.49	 	51,442.64	 	184	 	3,768,952.13	 	34,464,779.01	 	2012-09-15	 	
13	 	2,812,500.00	 	823,085.93	 	46,785.93	 	181	 	3,682,371.86	 	31,652,279.01	 	2013-03-15	 	
14	 	2,812,500.00	 	768,446.99	 	43,680.14	 	184	 	3,624,627.13	 	28,839,779.01	 	2013-09-15	 	
15	 	2,812,500.00	 	688,750.00	 	39,150.00	 	181	 	3,540,400.00	 	26,027,279.01	 	2014-03-15	 	
16	 	2,812,500.00	 	631,884.49	 	35,917.64	 	184	 	3,480,302.13	 	23,214,779.01	 	2014-09-15	 	
17	 	2,812,500.00	 	554,414.06	 	31,514.06	 	181	 	3,398,428.12	 	20,402,279.01	 	2015-03-15	 	
18	 	2,812,500.00	 	495,321.99	 	28,155.14	 	184	 	3,335,977.13	 	17,589,779.01	 	2015-09-15	 	
19	 	2,812,500.00	 	422,398.99	 	24,010.04	 	182	 	3,258,909.03	 	14,777,279.01	 	2016-03-15	 	
20	 	2,812,500.00	 	358,759.49	 	20,392.64	 	184	 	3,191,652.13	 	11,964,779.01	 	2016-09-15	 	
21	 	2,812,500.00	 	285,742.18	 	16,242.18	 	181	 	3,114,484.36	 	9,152,279.01	 	2017-03-15	 	
22	 	2,812,500.00	 	222,196.99	 	12,630.14	 	184	 	3,047,327.13	 	6,339,779.01	 	2017-09-15	 	
23	 	2,812,500.00	 	151,406.25	 	8,606.25	 	181	 	2,972,512.50	 	3,527,279.01	 	2018-03-15	 	
24	 	2,812,500.00	 	85,634.49	 	4,867.64	 	184	 	2,903,002.13	 	714,779.01	 	2018-09-15	 	
25	 	714,779.01	 	21,408.62	 	1,216.91	 	46	 	737,404.54	 	0.00	 	2018-10-31	 	
Total	 	67,500,000.00	 	20,334,305.38	 	 	 	 	 	88,990,150.00	 	 	 	 	 	
 
Note) Subject to actual Delivery Date and Business Day convention.
 
108

 
PART 2

Vessel Hull No. 1561	 	 	 	 	
 	 	 	 	 	
 	 	Interest rate :	 	4.75%	 	
 	 	Exposure Margin :	 	0.2700%	 	

 	 	Principal
Repayment	 	Interest	 	Exposure
Fee	 	No.
of
Days	 	Total
Instalment	 	Outstanding
Balance	 	Repayment
Date	 	
 	 	 	 	 	 	 	 	 	 	 	 	67,500,000.00	 	2007-01-31	 	
1	 	668,162.98	 	382,968.75	 	21,768.75	 	43	 	1,072,900.48	 	66,831,837.02	 	15/03/07	 	
2	 	2,812,500.00	 	1,622,528.48	 	92,227.93	 	184	 	4,527,256.41	 	64,019,337.02	 	2007-09-15	 	
3	 	2,812,500.00	 	1,537,353.24	 	87,386.39	 	182	 	4,437,239.63	 	61,206,837.02	 	2008-03-15	 	
4	 	2,812,500.00	 	1,485,965.98	 	84,465.43	 	184	 	4,382,931.41	 	58,394,337.02	 	2008-09-15	 	
5	 	2,812,500.00	 	1,394,570.31	 	79,270.31	 	181	 	4,286,340.62	 	55,581,837.02	 	2009-03-15	 	
6	 	2,812,500.00	 	1,349,403.48	 	76,702.93	 	184	 	4,238,606.41	 	52,769,337.02	 	2009-09-15	 	
7	 	2,812,500.00	 	1,260,234.37	 	71,634.37	 	181	 	4,144,368.74	 	49,956,837.02	 	2010-03-15	 	
8	 	2,812,500.00	 	1,212,840.98	 	68,940.43	 	184	 	4,094,281.41	 	47,144,337.02	 	2010-09-15	 	
9	 	2,812,500.00	 	1,125,898.43	 	63,998.43	 	181	 	4,002,396.86	 	44,331,837.02	 	2011-03-15	 	
10	 	2,812,500.00	 	1,076,278.48	 	61,177.93	 	184	 	3,949,956.41	 	41,519,337.02	 	2011-09-15	 	
11	 	2,812,500.00	 	997,040.74	 	56,673.89	 	182	 	3,866,214.63	 	38,706,837.02	 	2012-03-15	 	
12	 	2,812,500.00	 	939,715.98	 	53,415.43	 	184	 	3,805,631.41	 	35,894,337.02	 	2012-09-15	 	
13	 	2,812,500.00	 	857,226.56	 	48,726.56	 	181	 	3,718,453.12	 	33,081,837.02	 	2013-03-15	 	
14	 	2,812,500.00	 	803,153.48	 	45,652.93	 	184	 	3,661,306.41	 	30,269,337.02	 	2013-09-15	 	
15	 	2,812,500.00	 	722,890.62	 	41,090.62	 	181	 	3,576,481.24	 	27,456,837.02	 	2014-03-15	 	
16	 	2,812,500.00	 	666,590.98	 	37,890.43	 	184	 	3,516,981.41	 	24,644,337.02	 	2014-09-15	 	
17	 	2,812,500.00	 	588,554.68	 	33,454.68	 	181	 	3,434,509.36	 	21,831,837.02	 	2015-03-15	 	
18	 	2,812,500.00	 	530,028.48	 	30,127.93	 	184	 	3,372,656.41	 	19,019,337.02	 	2015-09-15	 	
19	 	2,812,500.00	 	456,728.24	 	25,961.39	 	182	 	3,295,189.63	 	16,206,837.02	 	2016-03-15	 	
20	 	2,812,500.00	 	393,465.98	 	22,365.43	 	184	 	3,228,331.41	 	13,394,337.02	 	2016-09-15	 	
21	 	2,812,500.00	 	319,882.81	 	18,182.81	 	181	 	3,150,565.62	 	10,581,837.02	 	2017-03-15	 	
22	 	2,812,500.00	 	256,903.48	 	14,602.93	 	184	 	3,084,006.41	 	7,769,337.02	 	2017-09-15	 	
23	 	2,812,500.00	 	185,546.87	 	10,546.87	 	181	 	3,008,593.74	 	4,956,837.02	 	2018-03-15	 	
24	 	2,812,500.00	 	188,622.23	 	10,721.68	 	184	 	3,011,843.91	 	4,956,837.02	 	2018-09-15	 	
25	 	2,144,337.02	 	90,255.74	 	5,130.32	 	138	 	2,239,723.08	 	0.00	 	2019-01-31	 	
Total	 	67,500,000.00	 	20,444,649.37	 	 	 	 	 	89,106,766.17	 	 	 	 	 	
 
Note) Subject to actual Delivery Date and Business Day convention.
 
109

 
SCHEDULE 7
 
ANNUAL COMPLIANCE CERTIFICATE
 
To:           The Export-Import Bank of Korea
 
From:       [ Borrower and Guarantor ]
 
US$144,000,000 Credit Agreement dated 29th January, 2004 (the Credit Agreement )
 
Hull No. 1559/1661
 
1.              Terms defined in the Credit Agreement have the same meaning in this Certificate.
 
2.              The Borrower hereby certifies that [no Default has occurred and is continuing or is outstanding] [a Default under Clause [     ] of [ specify document ] is outstanding and the following steps are being taken to remedy it [               ].
 
3.              Except as set out below, the representations set out in Clause 15 of the Credit Agreement are deemed to be repeated as at the date hereof.
 
[           ].
 
4.              The Guarantor confirms that as at [ relevant testing date ]:
 
(a)            Net Worth is not less than US$100,000,000;
 
(b)            the ratio of Tangible Fixed Assets to Net Consolidated Indebtedness is not less than 1.45:1;
 
(c)            the ratio of Outstanding Bank Debt to Ship Values is not more than 0.75:1;
 
(d)            Net Worth exceeds 30% of Total Assets;
 
(e)            the Liquid Funds of the Group would not be less than $20,000,000; and
 
(f)             the ratio of EBITDA to Net Interest Expenses would be at least 2.5:1 on a Pro Forma Basis for the period immediately preceding the date thereof for which Financial Statements are available.
 
5.              The Guarantor sets out below calculations establishing the figures in paragraph 4 above:
 
[                        ].
 
Yours faithfully,
 
For and on behalf of [ relevant Borrower ]

[                                               ]
 
President
 
110

 
[or]

 
[ Senior Officer ]
 
and

 
[ Senior Officer ]
 
and
 
For and on behalf of Danaos Holdings Limited

[                                               ]
 
President
 
[or]

 
[ Senior Officer ]
 
and

 
[ Senior Officer ]
 
111

 
SCHEDULE 8
 
INCIDENTAL VESSEL COSTS
 
Per Vessel

 	 	 	 	US$	 	
 	 	 	 	 	 	
1.	 	Lashings	 	1,000,000	 	
 	 	 	 	 	 	
2.	 	Supervision during Construction	 	320,000	 	
 	 	 	 	 	 	
3.	 	Delivery Ceremony	 	50,000	 	
 	 	 	 	 	 	
4.	 	Port fees on Delivery	 	30,000	 	
 	 	 	 	 	 	
5.	 	Pre-Delivery stores / supplies	 	600,000	 	
 	 	 	 	 	 	
6.	 	Lubricants, HFO, Chemicals	 	800,000	 	
 	 	 	 	 	 	
7.	 	Legal fees	 	90,000	 	
 	 	 	 	 	 	
8.	 	Spares by Owners	 	1,040,000	 	
 
112

Exh. 10.8
SIGNATORIES

Owners	
 	
KARLITA SHIPPING COMPANY LIMITED	
 	
By:     /s/ Zoe Lappa - Papamattheou	

RAMONA MARINE COMPANY LIMITED	
 	
By:      /s/ Zoe Lappa - Papamattheou	

Guarantor	
 	
DANAOS HOLDINGS LIMITED	
 	
By:      /s/ Zoe Lappa - Papamattheou	

Original Lenders	
 	
THE EXPORT-IMPORT BANK OF KOREA	
 	
By:	

FORTIS BANK (NEDERLAND) N.V.	
 	
By:	

The Facility Agent	
 	
FORTIS CAPITAL CORP.	
 	
By:     /s/ David Smith	

 
113

 
Exhibit 10.9
 
48.001
 
DATED 18 MARCH 2005

LATO SHIPPING (PRIVATE) LTD.
FERROUS SHIPPING (PRIVATE) LTD.
COBALTIUM SHIPPING (PRIVATE) LTD.
COMMODORE MARINE INC.
(as Borrowers)
- and -
AEGEAN BALTIC BANK S.A.
HSH NORDBANK AG
CITIBANK INTERNATIONAL PLC
DRESDNER BANK AKTIENGESELLSCHAFT IN HAMBURG
ABN AMRO BANK N.V.
DVB BANK AG
CREDIT SUISSE
(as Lenders)
- and -
AEGEAN BALTIC BANK S.A.
(as Agent)
- and -
AEGEAN BALTIC BANK S.A.
 (as Security Agent)
- and -
AEGEAN BALTIC BANK S.A.
HSH NORDBANK AG
(as Joint Arrangers)
- and -
AEGEAN BALTIC BANK S.A.
HSH NORDBANK AG
(as Co-Underwriters)
- and -
HSH NORDBANK A.G.
(as Swap Bank)

 
US$200,000,000 SECURED
LOAN AGREEMENT

 
“APL BELGIUM”
“APL ENGLAND”
“APL SCOTLAND”
“HYUNDAI COMMODORE”
 
STEPHENSON HARWOOD
One St. Paul’s Churchyard
London EC4M 8SH
Tel: 020 7329 4422
Fax: 020 7329 7100
Ref: 48.001

 
CONTENTS

 	 	 	Page	 	
 	 	 	 	 	
1	 	Definitions and Interpretation	4	 	
 	 	 	 	 	
2	 	The Loan and its Purpose	19	 	
 	 	 	 	 	
3	 	Conditions of Utilisation	19	 	
 	 	 	 	 	
4	 	Advance	21	 	
 	 	 	 	 	
5	 	Repayment	21	 	
 	 	 	 	 	
6	 	Prepayment	22	 	
 	 	 	 	 	
7	 	Interest	24	 	
 	 	 	 	 	
8	 	The Master Agreement	26	 	
 	 	 	 	 	
9	 	Alternative currency options	29	 	
 	 	 	 	 	
10	 	Indemnities	32	 	
 	 	 	 	 	
11	 	Fees	35	 	
 	 	 	 	 	
12	 	Security and Application of Moneys	35	 	
 	 	 	 	 	
13	 	Representations	41	 	
 	 	 	 	 	
14	 	Undertakings and Covenants	44	 	
 	 	 	 	 	
15	 	Events of Default	55	 	
 	 	 	 	 	
16	 	Assignment and Sub-Participation	60	 	
 	 	 	 	 	
17	 	The Agent, the Security Agent and the other Creditor Parties	63	 	
 	 	 	 	 	
18	 	Set-Off	71	 	
 	 	 	 	 	
19	 	Payments	72	 	
 	 	 	 	 	
20	 	Notices	74	 	

 

21	 	Partial Invalidity	75	
 	 	 	 	
22	 	Remedies and Waivers	75	
 	 	 	 	
23	 	Joint and several liability	76	
 	 	 	 	
24	 	Miscellaneous	77	
 	 	 	 	
25	 	Law and Jurisdiction	79	
 	 	 	 	
SCHEDULE 1: The Lenders and the Commitments	 	 	81	
 	 	 	 	
SCHEDULE 2: Conditions Precedent and Subsequent	 	 	84	
 	 	 	 	
SCHEDULE 3: Form of Drawdown Notice	 	 	89	
 	 	 	 	
SCHEDULE 4: Form of Transfer Certificate	 	 	90	
 	 	 	 	
SCHEDULE 5: Form of Covenant Compliance Certificate	 	 	93	

2

 
LOAN AGREEMENT
 
Dated: 18 March 2005
 
BETWEEN:
 
(1)            LATO SHIPPING (PRIVATE) LTD. (“Lato”), FERROUS SHIPPING (PRIVATE) LTD. (“Ferrous”), and COBALTIUM SHIPPING (PRIVATE) LTD. (“Cobaltium”), each a company incorporated under the laws of the Republic of Singapore whose registered office is at 20 Raffles Place, #09-01, Ocean Towers, Singapore (048620), and COMMODORE MARINE INC. (“Commodore”) , a company incorporated under the laws of the Republic of Liberia whose registered office is at 80 Broad Street, Monrovia, Liberia (together the   ” Borrowers ” and each a “ Borrower ”) jointly and severally; and
 
(2)            the banks listed in Schedule 1, each acting through its office at the address indicated against its name in Schedule 1 (together the “ Lenders ” and each a “ Lender ”);
 
(3)            AEGEAN BALTIC BANK S.A. , acting as agent through its office at 28 Diligianni Street, 145 62 Kifissia, Greece (in that capacity the “ Agent ”); and
 
(4)            AEGEAN BALTIC BANK S.A. , acting as security agent through its office at 28 Diligianni Street, 145 62 Kifissia, Greece (in that capacity the “ Security Agent ”).
 
(5)            AEGEAN BALTIC BANK S.A. , acting through its office at 28 Diligianni Street, 145 62 Kifissia, Greece, and HSH NORDBANK AG , acting through its office at Gerhart-Hauptmann-Platz 50, 20095 Hamburg, Federal Republic of Germany as joint arrangers (in that capacity, the “Joint Arrangers” ); and
 
(6)            AEGEAN BALTIC BANK S.A. , acting through its office at 28 Diligianni Street, 145 62 Kifissia, Greece, and HSH NORDBANK AG , acting through its office at Gerhart-Hauptmann-Platz 50, 20095 Hamburg, Federal Republic of Germany as co-underwriters (in that capacity, the “Co-Underwriters” ); and
 
(7)            HSH NORDBANK AG, acting through its office at Gerhart-Hauptmann-Platz 50, 20095 Hamburg, Federal Republic of Germany, as swap bank (in that capacity, the “Swap Bank” ).
 
3

 
WHEREAS:
 
(A)           Each Borrower owns the Vessel which is registered in its ownership, and registered under the flag, specified below in the definition of “Vessels”.
 
(B)            Each of the Lenders has agreed to advance to the Borrowers on a joint and several basis its Commitment (aggregating, with all the other Commitments), an amount equal to the lower of up to (i) two hundred million Dollars ($200,000,000) and (ii) seventy five per centum (75%) of the aggregate Market Value of all the Vessels to assist the Borrowers to refinance certain existing indebtedness and to provide additional liquidity to the Group for working capital purposes and shall be made available in up to four Drawings (one per Vessel) each for an amount not exceeding seventy five per centum (75%) of the Market Value of the Vessel to which the Drawing in question relates.
 
IT IS AGREED  as follows:
 
1               Definitions and Interpretation
 
1.1            In this Agreement:
 
“ Accounts Charge ” means the deed of charge referred to in Clause 12.1.4.
 
“ Administration” has the meaning given to it in paragraph 1.1.3 of the ISM Code.
 
“ APL ” means APL (Bermuda) Ltd. a company incorporated under the laws of Bermuda.
 
“ Applicable Accounting Principles ” means, in the case of the Group Statements, those accounting principles, standards and practices on which the Original Group Statements were based, in accordance with IAS principles, or such other generally accepted accounting principles, standards and practices adopted by the Group from time to time and notified to the Agent, provided that in the case of such notification to the Agent the auditors of the Group deliver to the Agent sufficient information, in form and substance as may be reasonably required by the Agent, to enable the Agent to make an accurate comparison between the financial position indicated in the Group Statements in question and that indicated in the Original Group Statements. If necessary, upon any change of the Applicable Accounting Principles, the Borrowers shall enter into good
 
4

 
faith discussions with the Majority Lenders with the view to re-adjust the Financial Covenants provided for in Clause 14.2
 
“Approved Currency” means any currency other than Dollars which is freely transferable and convertible into Dollars and in which deposits are freely available to the Lenders in the London Interbank Eurocurrency Market;
 
“ Assignments ” means the deeds of assignment from the Borrowers referred to in Clause 12.1.2.
 
“ Availability Termination Date ” means 23 March 2005 or such later date as the Lenders may in their discretion agree.
 
“ Break Costs ” means all sums payable by the Borrowers from time to time under Clause 10.3.
 
“ Business Day ” means a day (other than a Saturday or Sunday) on which banks are open for general business in New York, London, Athens, Piraeus, Frankfurt, Hamburg and Basel, and which is a day on which the Trans-European Automated Real Time Gross Settlement Express Transfer Payment System (TARGET) is operating.
 
“ Charters ” means the time charter dated 19 August 1999, in the case of “APL ENGLAND” and “APL SCOTLAND” (as each is supplemented and amended by addenda numbered 1 to 7 (inclusive) thereto, and as the same may be further supplemented and amended from time to time), and the time charter dated 30 November 1999, in the case of “APL BELGIUM” (as supplemented and amended by addenda numbered 1 to 4 (inclusive) thereto, and as the same may be further supplemented and amended from time to time), each made between (a) the relevant Borrower, as owner of that Vessel, and whose obligations have been guaranteed by the Managers, and (b) APL, as charterer, and whose obligations have been guaranteed by NOL, and the time charter dated 14 April 2003, in the case of “HYUNDAI COMMODORE” (as supplemented and amended by addenda numbered 1 thereto, and as the same may be further supplemented and amended from time to time) made between the relevant Borrower, as owner, and HMM, as charterer and “ Charter ” means any one of them.
 
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“ Charterer ” means, in the case of “APL BELGIUM”, “APL ENGLAND” and “APL SCOTLAND”, APL and, in the case of “HYUNDAI COMMODORE”, means HMM.
 
“ Commitment ” means, in relation to each Lender, the amount of the Loan which that Lender agrees to advance to the Borrower as its several liability as indicated against the name of that Lender in Schedule 1 and/or, where the context permits, the amount of the Loan advanced by that Lender and remaining outstanding.
 
“ Confirmation ” means a Confirmation exchanged, or deemed exchanged, between the Swap Bank and the Borrowers as contemplated by the Master Agreement.
 
“ converted ” means, for the purposes of Clause 9, actually or notionally (as the context may require) converted by the Lenders at the Spot Rate of Exchange, and the words “ convert ” and “ conversion ” shall be interpreted accordingly.
 
“ Covenant Compliance Certificate ” means a certificate substantially in the form set out in Schedule 5.
 
“ Creditor Documents ” means the Finance Documents and the Master Agreement Documents and “ Creditor Document ” means any one of them.
 
“Creditor Parties” means the Finance Parties and the Swap Bank and “ Creditor Party ” means any one of them.
 
“ Credit Support Document ” means any document described as such in the Master Agreement and, where the context permits, any other document referred to in any Credit Support Document which has the effect of creating an Encumbrance in favour of the Swap Bank.
 
“ Currency of Account ” means, in relation to any payment to be made to a Creditor Party under a Creditor Document, the currency in which that payment is required to be made by the terms of that Creditor Document.
 
“Currency Equivalent” means, as at any date upon which any part of the Loan is denominated in one Relevant Currency and is to be converted into another Relevant Currency as provided in this Agreement, the amount of the relevant
 
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currency required for the purchase of the Existing Currency with the New Currency converted at the Spot Rate of Exchange.
 
“Currency Tranches” means, in relation to the Loan, at any time such part of the Loan which is denominated in Approved Currencies and, in case such part of the Loan is denominated in two such Approved Currencies, “ Currency Tranche ” means each part of the Loan which is denominated into one Approved Currency.
 
“ Deeds of Covenants ” means the deeds of covenants referred to in Clause 12.1.1.
 
“ Default ” means an Event of Default or any event or circumstance specified in Clause 15.1 which would (with the expiry of a grace period, the giving of notice, the making of any determination under the Creditor Documents or any combination of any of the foregoing) be an Event of Default.
 
“Default Rate” means interest calculated in accordance with Clause 7.8.
 
“Distribution Monies” means:
 
(a)             any monies received by any of the Creditor Parties (or by any receiver or similar person appointed by any of them) from an Enforcement Action, or from the proceeds or dissolution or liquidation of any of the Security Parties or distribution of its assets among its creditors (however such liquidation or distribution may occur);
 
(b)            any monies received by the Creditor Parties as named insured, loss payee, beneficiary or assignee of any insurance policies of any of the Security Parties in consequence of or after any Enforcement Action.
 
“ DOC ” means, in relation to the ISM Company, a valid Document of Compliance issued for the ISM Company by the Administration under paragraph 13.2 of the ISM Code.
 
“ Dollars ” and “ $ ” each means available and freely transferable and convertible funds in lawful currency of the United States of America.
 
“Dollar Reference Amount” means, when the whole or part of the Loan is for the time being denominated in Dollars, the outstanding principal amount thereof and, in relation to a Currency Tranche, the amount of Dollars which would have been outstanding if such Currency Tranche had been advanced in and always
 
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thereafter remained denominated in Dollars, as it would have been reduced from time to time by repayments and prepayments (except for prepayment made under Clause 9.6) under this Agreement if the same had been made in Dollars.
 
“ Drawdown Date ” means the date on which the relevant Drawing is advanced under Clause 4.
 
“ Drawdown Notice ” means a notice substantially in the form set out in Schedule 3.
 
“ Drawing ” means any part of the Loan advanced or to be advanced pursuant to a Drawdown Notice and “ Drawings ” means more than one of them.
 
“ Early Termination Date ” shall have the meaning attributed thereto in the Master Agreement.
 
“ Earnings ” means all hires, freights (including, without limitation, under and pursuant to any time charterparty or other contract of employment), pool income and other sums payable to or for the account of a Borrower in respect of a Vessel including (without limitation) all remuneration for salvage and towage services, demurrage and detention moneys, contributions in general average, compensation in respect of any requisition for hire, and damages and other payments (whether awarded by any court or arbitral tribunal or by agreement or otherwise) for breach, termination or variation of any contract for the operation, employment or use of a Vessel.
 
“ Earnings Account ” means the bank account with number 0100134-52-01-1 to be opened in the joint names of the Borrowers with the Agent and to be maintained throughout the Facility Period, such account to include any substitute account or revised designation or number whatsoever.
 
“ Encumbrance ” means a mortgage, charge, assignment, pledge, lien, or other security interest securing any obligation of any person or any other agreement or arrangement having a similar effect.
 
“Enforcement Action” means any of the following actions taken by any of the Creditor Parties by means of an instruction to the Security Agent, by the Majority Lenders or otherwise;
 
(a)            accelerating the due date of any liability of the Borrowers;
 
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(b)            commencing to enforce or enforcing any of the Creditor Documents;
 
(c)            commencing or instructing the Security Agent or the Swap Bank to commence to enforce, or to enforce, the Creditor Documents or any of them or exercising any power under any Creditor Document;
 
(d)            taking any other action against any of the Security Parties or their assets or threatening any other action against any of the Security Parties or their assets the taking of which could materially affect the common interests of the Creditor Parties.
 
“ Event of Default ” means any of the events or circumstances set out in Clause 15.1.
 
“ Existing Currency ” means, in relation to any conversion between Relevant Currencies to be made under Clause 9, the Relevant Currency in which the relevant part of the Loan is denominated before conversion.
 
“ Facility Period ” means the period beginning on the date of this Agreement and ending on the date when the whole of the Indebtedness has been paid in full and the Security Parties have ceased to be under any further actual or contingent liability to the Creditor Parties under or in connection with any of the Creditor Documents.
 
“ Fee Letter ” means the letter dated 21 December 2004 between the Agent and the Borrowers setting out the fees referred to in Clause 11.
 
“ Finance Documents ” means this Agreement, the Security Documents, the Fee Letter and any other document designated as such by the Agent and the Borrowers and “ Finance Document ” means any one of them.
 
“ Finance Parties ” means the Agent, the Security Agent, the Lenders, the Joint Arrangers and the Co-Underwriters and “ Finance Party ” means any one of them.
 
“ Financial Indebtedness ” means any obligation for the payment or repayment of money, whether present or future, actual or contingent, in respect of:
 
(a)            moneys borrowed;
 
(b)            any acceptance credit;
 
(c)            any bond, note, debenture, loan stock or similar instrument;
 
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(d)            any finance or capital lease;
 
(e)            receivables sold or discounted (other than on a non-recourse basis);
 
(f)             deferred payments for assets or services;
 
(g)            any derivative transaction protecting against or benefiting from fluctuations in any rate or price (and, when calculating the value of any derivative transaction, only the marked to market value shall be taken into account);
 
(h)            any amount raised under any other transaction (including any forward sale or purchase agreement) having the commercial effect of a borrowing;
 
(i)             any counter-indemnity obligation in respect of a guarantee, indemnity, bond, standby or documentary letter of credit or any other instrument issued by a bank or financial institution; and
 
(j)             the amount of any liability in respect of any guarantee or indemnity for any of the items referred to in paragraphs (a) to (i) above.
 
“Group” means the Guarantor, the Borrowers, and all other Subsidiaries of the Guarantor and “member of the Group” shall be construed accordingly.
 
“ Group Statements ” means the annual audited consolidated financial statements of the Group prepared in accordance with Applicable Accounting Principles.
 
“ Guarantee ” means the guarantee and indemnity referred to in Clause 12.1.3.
 
“ Guarantor ” means Danaos Holdings Limited of Liberia, a company incorporated under the laws of the Republic of Liberia whose registered office is at 80 Broad Street, Monrovia, Liberia, being a holding company having, inter alia, the Borrowers under its full ownership and control, and/or (where the context permits) any other company or person who shall at any time during the Facility Period give to the Lenders or to the Security Agent on their behalf a guarantee and/or indemnity for the repayment of all or part of the Indebtedness.
 
“ Hedging Transaction ” means a Transaction entered into between the Swap Bank and the Borrowers pursuant to the Master Agreement for the express purpose of hedging all or part of the Borrowers’ interest rate risk in respect of any Interest
 
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Period longer than twelve (12) months’ duration and/or any foreign exchange rate risk under this Agreement.
 
“ HMM ” means Hyundai Merchant Marine Inc. a company incorporated under the laws of the Republic of Liberia, whose registered office is at 80 Broad Street, Monrovia, Republic of Liberia.
 
“ IAS ” means generally accepted international accounting principles, standards and practices currently adopted by the Group.
 
“ Indebtedness ” means the aggregate from time to time of the amount of the Junior Indebtedness and the amount of the Senior Indebtedness.
 
“ Insurances ” means all policies and contracts of insurance (including all entries in protection and indemnity or war risks associations) which are from time to time taken out or entered into in respect of a Vessel or her increased value or her Earnings and (where the context permits) all benefits thereof, including all claims of any nature and returns of premium.
 
“ Interest Payment Date ” means each date for the payment of interest in accordance with Clause 7.7.
 
“ Interest Period ” means each period for the determination and payment of interest selected by the Borrowers or agreed or selected by the Agent pursuant to Clause 7.
 
“ ISM Code ” means the International Management Code for the Safe Operation of Ships and for Pollution Prevention.
 
“ ISM Company ” means, at any given time, the company responsible for a Vessel’s compliance with the ISM Code under paragraph 1.1.2 of the ISM Code.
 
“ ISPS Code ” means the International Ship and Port Facility Security Code.
 
“ ISPS Company ” means, at any given time, the company responsible for a Vessel’s compliance with the ISPS Code.
 
“ ISSC ” means a valid international ship security certificate for a Vessel issued under the ISPS Code.
 
“ Junior Indebtedness ” means the aggregate from time to time of the amount of the Master Agreement Liabilities outstanding; all accrued and unpaid interest on the
 
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Master Agreement Liabilities; all other sums of any nature (together with all accrued and unpaid interest on any of those sums) payable to the Swap Bank under the Master Agreement Documents; any damages payable as a result of any breach by any of the Security Parties of any of the Master Agreement Documents; and any damages or other sums payable as a result of any of the obligations of any of the Security Parties under or pursuant to any of the Master Agreement Documents being disclaimed by a liquidator or any other person.
 
“ LIBOR ” means:
 
(a)            the applicable Screen Rate; or
 
(b)            (if no Screen Rate is available for any Interest Period) the rate per annum determined by the Agent to be the arithmetic mean (rounded upwards, if necessary, to the nearest one-sixteenth of one per cent) of the rates per annum notified to the Agent by each Lender as the rate at which deposits in the Relevant Currency are offered to that Lender by leading banks in the London Interbank Eurocurrency Market at that Lender’s request,
 
at 11.00 a.m. two (2) Business Days before the first day of the relevant Interest Period for the offering of deposits in the Relevant Currency in an amount comparable to the Loan (or any relevant part of the Loan) and for a period comparable to the relevant Interest Period.
 
“ Loan ” means the aggregate amount from time to time advanced by the Lenders to the Borrowers under Clause 4 or, where the context permits, the amount advanced and for the time being outstanding.
 
“ Majority Lenders ” means a Lender or Lenders whose aggregate Commitments comprise at least seventy five per cent (75%) of the aggregate of all the Commitments.
 
“ Management Agreements ” means the agreements for the commercial and/or technical management of the Vessels each made between the relevant Borrower and the Managers and with the following dates:
 
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Name of Vessel	 	Date of Management Agreement	 	
 	 	 	 	
“APL BELGIUM”	 	16 February 2001	 	
 	 	 	 	
“APL ENGLAND”	 	7 September 1999	 	
 	 	 	 	
“APL SCOTLAND”	 	7 September 1999	 	
 	 	 	 	
“HYUNDAI COMMODORE”	 	14 April 2003	 	
 
and “ Management Agreement ” means any one of them.
 
“ Managers ” means Danaos Shipping Co. Ltd., a company incorporated under the laws of the Republic of Cyprus whose registered office is at Libra House, P. Katelari Street, Nicosia, Cyprus or such other commercial and/or technical managers of the Vessels nominated by the Borrowers as the Agent may approve.
 
“ Managers’ Undertaking ” means the managers’ confirmation for each Vessel specified in Part 1 of Schedule 2.
 
“ Margin ” means zero point seven seven five per cent (0.775%) per annum.
 
“ Market Value ” means, in respect of each Vessel, the market value of that Vessel determined in accordance with Clause 12.13 on the basis of the two valuations for that Vessel obtained pursuant to Part I of Schedule 2.
 
“ Master Agreement ” means any ISDA Master Agreement (or any other form of master agreement relating to interest or currency exchange transactions) entered into between the Swap Bank and the Borrowers during the Facility Period, including each Schedule to any Master Agreement and each Confirmation exchanged pursuant to any Master Agreement.
 
“Master Agreement Documents” means the Master Agreement, and any Credit Support Documents.
 
“ Master Agreement Liabilities ” means, at any relevant time, all liabilities of the Borrowers to the Swap Bank under or pursuant to the Master Agreement and any other Credit Support Documents, whether actual or contingent, present or future.
 
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“ Maximum Drawing Amount ” means an amount of the Loan not exceeding seventy five per centum (75%) of the Market Value of the Vessel to which the Drawing in question relates.
 
“ Maximum Loan Amount ” means the lower of (i) two hundred million Dollars ($200,000,000) and (ii) seventy five per centum (75%) of the aggregate of the Market Value of all the Vessels.
 
“ Mortgages ” means the preferred and statutory mortgages referred to in Clause 12.1.1 together with the Deeds of Covenants and “ Mortgage ” means any one of them.
 
“New Currency” means, in relation to any conversion between Relevant Currencies to be made under Clause 9, the Relevant Currency in which the relevant part of the Loan is denominated after conversion.
 
“NOL” means Neptune Orient Lines Ltd., a company incorporated under the laws of Singapore.
 
“ Original Group Statements ” means the Group Statements for the financial year ending 31 December 2004.
 
“Party” means in relation to any document, a party to that document.
 
“ Permitted Encumbrance ” means any Encumbrance which has the prior written approval of the Agent, or any liens for current crews’ wages and salvage and liens incurred in the ordinary course of trading a Vessel up to an aggregate amount at any time not exceeding ten per cent (10%) of the charter-free market value of that Vessel determined in accordance with Clause 12.13 Provided that the aggregate amount of the Permitted Encumbrance and the Indebtedness does not a any time exceed eighty per centum (80%) of the charter-free market value of all the Vessels determined in accordance with Clause 12.13.
 
“ Proportionate Share ” means, in the case of a Lender, at any time, the proportion which a Lender’s Commitment (whether or not advanced) then bears to the aggregate Commitments of all the Lenders (whether or not advanced).
 
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“Relevant Currency” means Dollars and/or the Approved Currency in which the Loan or any part thereof is or will be denominated (as the case may be) at the relevant time.
 
“ Relevant Documents ” means the Creditor Documents and the Management Agreements.
 
“ Repayment Date ” means the date for payment of any Repayment Instalment in accordance with Clause 5.1.
 
“ Repayment Instalment ” means any instalment of the Loan to be repaid by the Borrowers under Clause 5.1.
 
“ Requisition Compensation ” means all compensation or other money which may from time to time be payable to a Borrower as a result of a Vessel being requisitioned for title or in any other way compulsorily acquired (other than by way of requisition for hire).
 
“ Screen Rate ” means in relation to LIBOR, the British Bankers’ Association Interest Settlement Rate for the relevant currency and period displayed on the appropriate page of the Reuters screen. If the agreed page is replaced or the service ceases to be available, the Agent may specify another page or service displaying the appropriate rate after consultation with the Borrowers and the Lenders.
 
“ Security Documents ” means this Agreement, the Mortgages, the Deeds of Covenants, the Assignments, the Guarantee, the Accounts Charge, the Managers’ Undertakings or (where the context permits) any one or more of them and any other agreement or document which may at any time be executed by any person as security for the payment of all or any part of the Indebtedness and “ Security Document ” means any one of them.
 
“ Security Parties ” means the Borrowers, the Guarantor and any other person who may at any time during the Facility Period be liable for, or provide security for, all or any part of the Indebtedness, and “ Security Party ” means any one of them.
 
“ Senior Indebtedness ” means the aggregate from time to time of the amount of the Loan outstanding; all accrued and unpaid interest on the Loan; all other sums of any nature (together with all accrued and unpaid interest on any of those sums) payable to any of the Finance Parties under the Finance Documents; any damages
 
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payable as a result of any breach by any of the Security Parties of any of the Finance Documents; and any damages or other sums payable as a result of any of the obligations of any of the Security Parties under or pursuant to any of the Finance Documents being disclaimed by a liquidator or any other person.
 
“ SMC ” means a valid safety management certificate issued for a Vessel by or on behalf of the Administration under paragraph 13.7 of the ISM Code.
 
“ SMS ” means a safety management system for a Vessel developed and implemented in accordance with the ISM Code.
 
“ Spot Rate of Exchange ”  means the spot rate (based on the market rate prevailing in the London Interbank Eurocurrency Market) quoted by the Agent at or about 11.00 a.m. on the second Business Day before the date for purchase of one Relevant Currency with another Relevant Currency.
 
“Subsidiary” means a body corporate from time to time of which another (a) has direct or indirect control, or (b) owns directly or indirectly more than fifty (50) per cent of the share capital or similar right of ownership (and in this definition “ control ” means the power to direct the management and the policies of a body corporate, whether through the ownership of voting capital, by contract or otherwise).
 
“Subsidiaries” means the direct and indirect subsidiaries of the Guarantor;
 
“ Tax ” means any tax, levy, impost, duty or other charge or withholding of a similar nature (including any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same).
 
“ Total Loss ” means:
 
(a)            an actual, constructive, arranged, agreed or compromised total loss of a Vessel; or
 
(b)            the requisition for title or compulsory acquisition of a Vessel by any government or other competent authority (other than by way of requisition for hire); or
 
(c)            the capture, seizure, arrest, detention or confiscation of a Vessel by any government or by persons acting or purporting to act on behalf of any
 
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government, unless that Vessel is released and returned to the possession of the relevant Borrower within one month after the capture, seizure, arrest, detention or confiscation in question.
 
“Total Loss Date” means, in relation to each Vessel:
 
(a)            in the case of an actual loss of such Vessel, the date on which it occurred or, if that is unknown, the date when such Vessel was last heard of;
 
(b)            in the case of a constructive, compromised, agreed or arranged total loss of such Vessel, 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 relevant Borrower with such Vessel’s insurers in which the insurers agree to treat such Vessel as a total loss.
 
“ Transaction ” means a transaction entered into between the Swap Bank and the Borrowers governed by the Master Agreement.
 
“ Transfer Certificate ” means a certificate substantially in the form set out in Schedule 4 or any other form agreed between the Agent, the Borrowers, the transferor and the transferee.
 
“ Transfer Date ”, in relation to any Transfer Certificate, the later of:
 
(a)            the proposed Transfer Date specified in the Transfer Certificate; and
 
(b)            the date on which the Agent executes the Transfer Certificate.
 
“ Trust Property ” means:
 
(a)            all benefits derived by the Security Agent from Clause 17; and
 
(b)            all benefits arising under (including, without limitation, all proceeds of the enforcement of) each of the Security Documents,
 
with the exception of any benefits arising solely for the benefit of the Security Agent.
 
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“ Vessels ” means the following vessels, and everything now or in the future belonging to them on board and ashore, currently registered under the respective flags set out below in the ownership of the respective Borrower set out below and “ Vessel ” means any one of them:

Name of Vessel	 	Flag	 	Borrower	 	
 	 	 	 	 	 	
“APL BELGIUM”	 	Singapore	 	Lato	 	
 	 	 	 	 	 	
“APL ENGLAND”	 	Singapore	 	Ferrous	 	
 	 	 	 	 	 	
“APL SCOTLAND”	 	Singapore	 	Cobaltium	 	
 	 	 	 	 	 	
“HYUNDAI COMMODORE”	 	Greek	 	Commodore	 	
 
1.2            In this Agreement:
 
1.2.1         words denoting the plural number include the singular and vice versa;
 
1.2.2         words denoting persons include corporations, partnerships, associations of persons (whether incorporated or not) or governmental or quasi-governmental bodies or authorities and vice versa;
 
1.2.3         references to Recitals, Clauses and Schedules are references to recitals, clauses and schedules to or of this Agreement;
 
1.2.4         references to this Agreement include the Recitals and the Schedules;
 
1.2.5         the headings and contents page(s) are for the purpose of reference only, have no legal or other significance, and shall be ignored in the interpretation of this Agreement;
 
1.2.6         references to any document (including, without limitation, to all or any of the Relevant Documents) are, unless the context otherwise requires, references to that document as amended, supplemented, novated or replaced from time to time;
 
1.2.7         references to statutes or provisions of statutes are references to those statutes, or those provisions, as from time to time amended, replaced or re-enacted;
 
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1.2.8         references to any Creditor Party include its successors, transferees and assignees;
 
1.2.9         a time of day (unless otherwise specified) is a reference to London time; and
 
1.2.10       words and expressions defined in the Master Agreement, unless the context otherwise requires, have the same meaning.
 
1.3            Offer letter
 
This Agreement supersedes the terms and conditions contained in any correspondence (except the Fee Letter) relating to the subject matter of this Agreement exchanged between any Creditor Party and the Borrowers or their representatives prior to the date of this Agreement.
 
2               The Loan and its Purpose
 
2.1            Amount    Subject to the terms of this Agreement, the Lenders agree to make available to the Borrowers on a joint and several basis a term loan not exceeding the Maximum Loan Amount.
 
2.2            Obligations of Creditor Parties  The obligations of each Creditor Party under the Creditor Documents are several. Failure by a Creditor Party to perform its respective obligations under the Creditor Documents does not affect the obligations of any other party to the Creditor Documents. The Creditor Parties are not responsible for each other’s obligations under the Creditor Documents.
 
2.3            Purpose   The Borrowers shall apply the Loan for the purposes referred to in Recital (B).
 
2.4            Monitoring    No Creditor Party is bound to monitor or verify the application of any amount borrowed under this Agreement.
 
3               Conditions of Utilisation
 
3.1            Conditions precedent   The Borrowers are not entitled to have any Drawing advanced, or to enter into any Hedging Transactions, unless the Agent has received all of the documents and other evidence listed in Part I of Schedule 2, save that references in Section 2 of that Part I to “the Vessel” or to any person or
 
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document relating to a Vessel shall be deemed to relate solely to any Vessel specified in the relevant Drawdown Notice or to any person or document relating to that Vessel respectively.
 
3.2            Further conditions precedent   The Lenders will only be obliged to advance a Drawing, if on the date of the Drawdown Notice and on the proposed Drawdown Date:
 
3.2.1         no Default is continuing or would result from the advance of that Drawing; and
 
3.2.2         the representations made by the Borrowers under Clause 13 are true in all material respects.
 
3.3            Drawing limit    The Lenders will only be obliged to advance a Drawing if that Drawing will not increase the Loan to a sum in excess of the Maximum Loan Amount nor result in more than seventy five per cent (75%) of the Market Value of the Vessel to which that Drawing relates being advanced for that Vessel.
 
3.4            Conditions subsequent    The Borrowers undertake to deliver or to cause to be delivered to the Agent on, or as soon as practicable after, the relevant Drawdown Date the additional documents and other evidence listed in Part II of Schedule 2, save that references in that Part II to “the Vessel” or to any person or document relating to a Vessel shall be deemed to relate solely to any Vessel specified in the relevant Drawdown Notice or to any person or document relating to that Vessel respectively.
 
3.5            No Waiver    If the Lenders in their sole discretion agree to advance a Drawing to the Borrowers before all of the documents and evidence required by Clause 3.1 have been delivered to or to the order of the Agent, the Borrowers undertake to deliver all outstanding documents and evidence to or to the order of the Agent no later than thirty (30) days after the relevant Drawdown Date or within such other reasonable period specified by the Agent.
 
The advance of a Drawing under this Clause 3.5 shall not be taken as a waiver of the Lenders’ right to require production of all the documents and evidence required by Clause 3.1.
 
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3.6            Form and content    All documents and evidence delivered to the Agent under this Clause 3 shall:
 
3.6.1         be in form and substance acceptable to the Agent; and
 
3.6.2         if required by the Agent, be certified, notarised, legalised or attested in a manner acceptable to the Agent.
 
4               Advance
 
4.1            Drawdown Request    The Borrowers may request a Drawing to be advanced in one amount on any Business Day prior to the Availability Termination Date by delivering to the Agent a duly completed Drawdown Notice not more than ten (10) and not fewer than three (3) Business Days before the proposed Drawdown Date.
 
4.2            Lenders’ participation   Subject to Clauses 2 and 3, the Agent shall promptly notify each Lender of the receipt of a Drawdown Notice, following which each Lender shall advance its Proportionate Share of the relevant Drawing to the Borrowers through the Agent on the relevant Drawdown Date.
 
5               Repayment
 
5.1            Repayment of Loan    The Borrowers agree to repay the Loan to the Agent for the account of the Lenders by thirty two consecutive quarterly instalments each in the sum of four million one hundred and seventy five thousand Dollars ($4,175,000) (or the equivalent converted at the Spot Rate of Exchange into the Relevant Currency in which the Loan, or the relevant part thereof, is then denominated) together with a balloon payment of sixty six million four hundred thousand Dollars ($66,400,000) (or the equivalent converted at the Spot Rate of Exchange into the Relevant Currency in which the Loan, or the relevant part thereof, is then denominated) (the “ Balloon ”) payable together with the thirty second and final Repayment Instalment, the first instalment falling due on the date which is three calendar months after the Availability Termination Date and subsequent instalments falling due at consecutive intervals of three calendar months thereafter.
 
5.2            Reduction of Repayment Instalments    If the aggregate amount advanced to the Borrowers is less than the Maximum Loan Amount, the amount of each
 
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Repayment Instalment, including the Balloon, shall be reduced pro rata to the amount actually advanced.
 
5.3            Reborrowing   The Borrowers may not reborrow any part of the Loan which is repaid or prepaid.
 
6               Prepayment
 
6.1            Illegality   If it becomes unlawful in any jurisdiction for a Lender to perform any of its obligations as contemplated by this Agreement or to fund or maintain the Loan:
 
6.1.1         that Lender shall promptly notify the Agent of that event;
 
6.1.2         upon the Agent notifying the Borrowers, the Commitment of that Lender (to the extent not already advanced) will be immediately cancelled; and
 
6.1.3         the Borrowers shall repay that Lender’s Commitment (to the extent already advanced) on the last day of the current Interest Period or, if earlier, the date specified by that Lender in the notice delivered to the Agent and notified by the Agent to the Borrowers (being no earlier than the last day of any applicable grace period permitted by law) and the remaining Repayment Instalments shall be reduced pro rata; and
 
w ithout prejudice to the liability of the Borrowers to prepay the Loan in accordance with this Clause 6.1, the Borrowers and the Finance Parties shall negotiate in good faith with a view to agreeing the terms for making the Loan available from another jurisdiction, or funding the Loan from alternative sources, or otherwise restructuring the Loan on a basis which is not unlawful. If the said terms are not agreed within thirty (30) days then the negotiations shall forthwith terminate and the Borrowers shall immediately prepay the Loan in accordance with the foregoing provisions of this Clause 6.1.
 
6.2            Voluntary prepayment of Loan    The Borrowers may prepay the whole or any part of the Loan (but, if in part, being an amount that reduces the Loan by a minimum amount of two million Dollars ($2,000,000) (or the equivalent converted at the Spot Rate of Exchange into the Relevant Currency in which the Loan, or the relevant part thereof, is then denominated)) subject as follows:
 
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6.2.1         they give the Agent not less than thirty (30) Business Days’ (or such shorter period as the Agent may agree) prior notice;
 
6.2.2         no prepayment may be made until after the Availability Termination Date; and
 
6.2.3         prepayment is made on the last day of any Interest Period for the Loan; and
 
6.2.4         any prepayment under this Clause 6.2 shall be applied pro rata in prepayment of the remaining Repayment Instalments including the Balloon.
 
6.3            Mandatory prepayment on sale or Total Loss    If a Vessel is sold by a Borrower or becomes a Total Loss, the Borrowers shall, simultaneously with any such sale or on the earlier of the date falling one hundred and twenty (120) days after the Total Loss Date and the date of receipt by the Security Trustee of the proceeds of insurance relating to such Total Loss make a prepayment of the Loan in an amount equivalent to the higher of:-
 
6.3.1         the same proportion of the Loan then outstanding as the market value of that Vessel, determined in accordance with Clause 12.13, bears to the aggregate of:-
 
(a)            the market values of all the Vessels, determined in accordance with Clause 12.13; and
 
(b)             the value of any additional security for the time being provided under Clause 12.14 (such values to be determined in accordance with Clause 12.14); and
 
6.3.2         the amount necessary to ensure continuing compliance with Clause 12.14.
 
Any such prepayment shall be applied in accordance with Clause 6.2.3.
 
6.4            Restrictions   Any notice of prepayment given under this Clause 6 shall be irrevocable and, unless a contrary indication appears in this Agreement, shall specify the date or dates upon which the relevant prepayment is to be made and the amount of that prepayment.
 
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Any prepayment under this Agreement shall be made together with accrued interest on the amount prepaid and, subject to any Break Costs and without premium or penalty.
 
If the Agent receives a notice under this Clause 6 it shall promptly forward a copy of that notice to the Borrowers or the Lenders, as appropriate.
 
7               Interest
 
7.1            Interest Periods    The period during which the Loan shall be outstanding under this Agreement shall be divided into consecutive Interest Periods of one, three, six, nine or twelve months’ duration, as selected by the Borrowers by written notice to the Agent not later than 11.00 a.m. on the third Business Day before the beginning of the Interest Period in question, or such other duration as may be agreed by the Agent (acting on the instructions of all the Lenders and subject to availability).
 
7.2            Commencement of Interest Periods . The first Interest Period applicable to a Drawing shall commence on the Drawdown Date applicable to it and each subsequent Interest Period for it shall commence on the expiry of the preceding Interest Period but provided that after the last Drawing the Interest Periods for all Drawings shall be consolidated so that they start and terminate simultaneously with the Interest Period for the first Drawing.
 
7.3            Interest Periods to meet Repayment Dates   If an Interest Period would otherwise expire after the next Repayment Date, there shall be a separate Interest Period for a part of the Loan equal to the relevant Repayment Instalment which shall expire on the next Repayment Date and the Interest Period determined shall apply only to the balance of the Loan.
 
7.4            Non-Business Days    If an Interest Period would otherwise end on a day which is not a Business Day, that Interest Period will instead end on the next Business Day in that calendar month (if there is one) or the preceding Business Day (if there is not).
 
7.5            Interest rate    During each Interest Period interest shall accrue on the Loan at the rate determined by the Agent to be the aggregate of (a) the Margin and (b) LIBOR.
 
7.6            Failure to select Interest Period   If the Borrowers at any time fail to select or agree an Interest Period in accordance with Clause 7.1, the interest rate applicable
 
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after the expiry of the then current Interest Period shall be the rate determined by the Agent in accordance with Clause 7.5 for an Interest Period of such duration (not exceeding three months) as the Agent may select.
 
7.7            Accrual and payment of interest   Interest shall accrue from day to day, shall be calculated on the basis of a 360 day year and the actual number of days elapsed (or, in any circumstance where market practice differs, in accordance with the prevailing market practice) and shall be paid by the Borrowers to the Agent for the account of the Lenders on the last day of each Interest Period and, if the Interest Period is longer than three months, on the dates falling at three monthly intervals after the first day of that Interest Period.
 
7.8             Default interest   If a Borrower fails to pay any amount payable by it under a Creditor Document on its due date, interest shall accrue on the overdue amount from the due date up to the date of actual payment (both before and after judgment) at a rate which is two per cent (2%) higher than the rate which would have been payable if the overdue amount had, during the period of non-payment, constituted the Loan, or, as the context may require, the Master Agreement Liabilities, in the currency of the overdue amount for successive Interest Periods, each selected by the Agent, in the case of the Loan, or the Swap Bank, in the case of the Master Agreement Liabilities (acting reasonably). Any interest accruing under this Clause 7.8 shall be immediately payable by that Borrower on demand by the Agent, in the case of the Loan, or on demand by the Swap Bank, in the case of the Master Agreement Liabilities. If unpaid, any such interest will be compounded with the overdue amount at the end of each Interest Period applicable to that overdue amount, in the case of the Loan, or at such periods as the Swap Bank may require, in the case of the Master Agreement Liabilities, but will remain immediately due and payable.
 
7.9            Changes in market circumstances   If at any time the Agent determines (which determination shall be final and conclusive and binding on the Borrowers) that, by reason of changes affecting the London Interbank Eurocurrency Market, adequate and fair means do not exist for determining the rate of interest on the Loan for any Interest Period:
 
7.9.1         the Agent shall give notice to the Lenders and the Borrowers of the occurrence of such event; and
 
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7.9.2         the rate of interest on each Lender’s Commitment for that Interest Period shall be the rate per annum which is the sum of:
 
(a)            the Margin; and
 
(b)            the rate notified to the Agent by that Lender as soon as practicable, and in any event before interest is due to be paid in respect of that Interest Period, to be that which expresses as a percentage rate per annum the cost to that Lender of funding its Commitment from whatever source it may reasonably select,
 
PROVIDED THAT if the resulting rate of interest on any Commitment is not acceptable to the Borrowers:
 
7.9.3         the Agent on behalf of all the Lenders will negotiate with the Borrowers in good faith with a view to modifying this Agreement to provide a substitute basis, which is acceptable to all the Lenders, for determining the rate of interest which is financially a substantial equivalent to the basis provided for in this Agreement;
 
7.9.4         any substitute basis agreed pursuant to Clause 7.9.3 shall be binding on all the parties to this Agreement and shall apply to all Commitments; and
 
7.9.5         if, within thirty (30) days of the giving of the notice referred to in Clause 7.9.1, the Borrowers and the Agent fail to agree in writing on a substitute basis for determining the rate of interest, the Borrowers will immediately prepay the relevant Commitment, together with any Break Costs, and the remaining Repayment Instalments shall be reduced pro rata.
 
7.10          Determinations conclusive   The Agent shall promptly notify the Borrowers of the determination of a rate of interest under this Clause 7 and each such determination shall (save in the case of manifest error) be final and conclusive.
 
8               The Master Agreement
 
8.1            Applicability   The Borrowers may enter into Hedging Transactions Provided that:-
 
8.1.1         Hedging Transactions may only be concluded in relation to the Loan; and
 
8.1.2         Hedging Transactions are secured by the Creditor Documents.
 
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8.2            Subordination – agreement of Swap Bank   The Swap Bank agrees with the Finance Parties that, at all times during the Facility Period, all rights and powers of the Swap Bank in respect of the Junior Indebtedness and all rights and powers of the Swap Bank against the Borrowers, the Vessels and any property secured and/or assigned pursuant to the Finance Documents or otherwise shall be fully subordinated to all rights and powers of the Finance Parties in respect of the Senior Indebtedness and all rights, powers, discretions and remedies of any Finance Party under or pursuant to the Finance Documents.
 
8.3            Subordination – agreement of Borrowers  The Borrowers agree that their obligations in respect of the Junior Indebtedness are, and shall throughout the Facility Period be, subordinated to their obligations in respect of the Senior Indebtedness.
 
8.4            No amendments to Master Agreement Documents The Swap Bank and the Borrowers each undertake not to vary or amend the terms of any of the Master Agreement Documents during the Facility Period without the prior written consent of the Agent.
 
8.5            Amount of Senior Indebtedness Any certificate or statement signed by an authorised signatory of the Agent or the Security Agent purporting to show the amount of the Senior Indebtedness (or any part of the Senior Indebtedness) or any other amount referred to in any of the Finance Documents shall, save for manifest error or on any question of law, be conclusive evidence as against the Borrowers and the Swap Bank of that amount.
 
8.6            Priority  The Swap Bank agrees that the Finance Documents shall throughout the Facility Period constitute a continuing security for the whole of the Senior Indebtedness, which security shall be senior in priority to the Junior Indebtedness, notwithstanding that any of the Senior Indebtedness may have arisen after the execution and/or registration of any of the Master Agreement Documents and notwithstanding any fluctuations in the amount of the Senior Indebtedness.
 
8.7            Covenants of the Swap Bank  The Swap Bank covenants with the Finance Parties that during the Facility Period:
 
8.7.1         it will not take any steps to enforce any of its rights under or pursuant to the Creditor Documents without having first obtained the prior written consent of the Agent;
 
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8.7.2         it will not take any proceedings to place the Borrowers, or any of them, into liquidation, administration or receivership nor take any analogous steps without having obtained the prior written consent of the Agent;
 
8.7.3         it will not contest nor attempt to contest the security constituted by, or any of the rights of any Finance Party under or pursuant to, the Finance Documents.
 
8.8            No prejudice to Finance Documents  The Swap Bank undertakes to the Finance Parties that the Swap Bank has not entered into, and will not at any time during the Facility Period enter into, any arrangement in respect of the Master Agreement Documents, or any transactions related to or contemplated by the Master Agreement Documents, as a result of which the Finance Documents or the security and other rights constituted and conferred on any Finance Party by the Finance Documents are, or may be, prejudiced.
 
8.9            Notice to third parties  The Swap Bank undertakes to the Finance Parties that the Swap Bank will not at any time during the Facility Period give any notice to any third party inconsistent with the rights and powers of any Finance Party under or pursuant to the Finance Documents.
 
8.10          Finance Parties’ rights   The Finance Parties may at any time and from time to time without prejudicing their rights under or pursuant to the Finance Documents and subject to notifying the Swap Bank:
 
8.10.1       subject to the provisions of Clause 17.4, amend, supplement, novate or replace any of the Finance Documents or agree to do so; or
 
8.10.2       assign, novate, transfer or grant participations in the Senior Indebtedness or their rights under or pursuant to the Finance Documents.
 
8.11          Exercise of Finance Parties’ rights  No failure to exercise, nor delay in exercising, on the part of any Finance Party, any right or remedy under or pursuant to any of the Finance Documents, nor any actual or alleged course of dealing between any Finance Party and the Borrowers, shall operate as a waiver of, or acquiescence in, any default on the part of the Borrowers unless expressly agreed to do so in writing by the Agent, nor shall any single or partial exercise by any Finance Party of any right or remedy preclude any other or further exercise of
 
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that right or remedy, or the exercise by any Finance Party of any other right or remedy.
 
8.12          No assignment by Swap Bank  The Swap Bank shall not assign nor transfer any of its right, title or interest in any of the Master Agreement Documents, nor grant any participation in the Junior Indebtedness to any party other than in accordance with Clause 16.
 
8.13          Consents and Approvals  Where any act requires the consent or approval of the Agent under the terms of any of the Finance Documents and the same or a similar act requires the consent or approval of the Swap Bank under any of the Master Agreement Documents, the consent or approval of the Agent shall be deemed also to constitute the consent or approval of the Swap Bank under the Master Agreement Documents.
 
9               Alternative currency options
 
9.1            Request to convert  At the commencement of any Interest Period the Borrowers, by written notice to the Agent given not later than 10.00 a.m. (Athens time) three (3) Business Days before the commencement of such Interest Period, may request that, from the time of commencement of such Interest Period, part of the Loan be converted from one Relevant Currency to another Relevant Currency as specified in such notice.               Upon receipt of each such notice, the Agent shall immediately notify each of the Lenders, giving each of them full details of the conversion request.
 
9.2            Restrictions to conversion   Subject only to:-
 
9.2.1         at all times thirty percent (30%) of the Loan being denominated in Dollars;
 
9.2.2         the total Loan being denominated in not more than three Relevant Currencies, one of which must be Dollars, and
 
9.2.3         any amount in any Approved Currency outstanding under the Loan being not less than twenty percent (20%) of the total amount outstanding thereunder;
 
9.2.4         no Event of Default then having occurred and being continuing
 
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the amount in respect of the Loan which the Borrowers have requested to be converted from one Relevant Currency to another Relevant Currency shall be converted by the Lenders in accordance with the Borrowers’ request with effect from the commencement of the relevant Interest Period.
 
9.3            Notional repayment  Each conversion under this Clause 9 shall made by the Borrowers being deemed to make a notional repayment of the relevant part of the Loan which is to be converted and the Lenders being deemed to make a new advance in the New Currency of such sum, after taking account of scheduled repayments due to be made in the Existing Currency under Clause 5 and any mandatory prepayment under Clauses 9.6 or 9.7.
 
The proceeds of each such new advance shall be deemed to be used to purchase the amount due in the Existing Currency which is necessary so that the Borrowers may make the deemed repayment of the part of the Loan which is being converted. However, the Borrowers shall remain indebted to the Lenders for the advance made in the New Currency, which shall continue to form part of the Loan as more particularly described in Clause 9.8.
 
9.4            Notice  If the Agent does not receive a notice in accordance with Clause 9.1 the relevant part of the Loan shall remain denominated in the Relevant Currency in which it was denominated during the then current Interest Period in respect thereof.
 
If the Borrowers have requested that any Currency Tranche should remain denominated in or be converted to an Approved Currency for the next Interest Period but the requirements of Clause 9.2 would not then be complied with, then such Currency Tranche shall be denominated in Dollars for the next Interest Period.
 
9.5            Borrowers’ obligations  The Borrowers’ obligation shall be to make all payments in respect of principal of all parts of the Loan and interest thereon and other payments under this Agreement in the Relevant Currency in which the Loan or part thereof is for the time being denominated and at the Spot Rate of Exchange applicable at such time.
 
9.6            Mandatory prepayment  If on any Repayment Date the Agent determines that:
 
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( a)             the consolidated aggregate of the Currency Equivalent in Dollars of all of the Currency Tranches, PLUS
 
(b)            the remaining part (if any) of the Loan in Dollars,
 
is more than 105% of the aggregate of:
 
(c)            the Dollar Reference Amount of the Loan at that time; and
 
(d)            the value of any additional security provided in accordance with this Clause 9.6;
 
then, subject only as hereinafter provided, a prepayment of the Loan shall be made on that Repayment Date of a sum sufficient to reduce the aggregate amounts referred to in this Clause 9.6 (a) and (b) to 100% of the aggregate amounts referred to in this Clause 9.6 (c) and (d). However, before such prepayment is made, at the Borrowers’ request the Agent shall give the Borrowers the opportunity, within five (5) Business Days after being requested to do so, to provide alternative additional security acceptable to the Agent (to which the provisions of Clauses 12.13 and 12.14 shall apply) so as to ensure that, after taking into account all such additional security, such 100% limit is not exceeded.
 
9.7              Conversion to Dollars  If the whole of the Loan is converted into Dollars and the Loan is more than 100% of the Dollar Reference Amount of the Loan at that time then, at the date of such conversion, a prepayment of the Loan shall be made of a sum sufficient to reduce the amount of the Loan to 100% of the Dollar Reference Amount of the Loan at that time. If the Loan, when converted in full to Dollars, is less than 100% of the Dollar Reference Amount of the Loan at that time, then the Borrowers will not be permitted to re-borrow any part of the Loan.
 
9.8            Conversion as banking mechanism  It is agreed that the conversion operations contemplated by Clause 9 constitute only a banking mechanism and that such operations shall not constitute or be construed as a novation or a repayment of all or any part of the Loan or the grant of new loans. The Borrowers agree that the security to be constituted by all the Finance Documents shall secure both the initial amount of all parts of the Loan and all advances made by the Lenders to effect such conversions.
 
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Nothwithstanding and without prejudice to the validity of the foregoing, the Borrowers shall at the Agent’s request sign such amendments to any of the Security Documents as the Agent may reasonably require to preserve their validity.
 
9.9            Event of Default  After the occurrence of an Event of Default the Borrowers shall not be permitted to exercise their rights under this Clause 9 and from the Interest Period following the occurrence of an Event of Default the Loan may be denominated only in Dollars if and when the Agent should so decide, in its sole discretion and at the expense of the Borrowers.
 
10            Indemnities
 
10.1          Transaction expenses   The Borrowers will, within fourteen (14) days of the Agent’s written demand, pay the Agent (on behalf of the Creditor Parties) the amount of all costs and expenses (including legal fees and Value Added Tax or any similar or replacement tax if applicable) incurred by the Creditor Parties or any of them in connection with:
 
10.1.1       the negotiation, preparation, printing, execution and registration of the Creditor Documents (whether or not any Creditor Document is actually executed or registered and whether or not all or any part of the Loan is advanced or any Hedging Transaction is made);
 
10.1.2       any amendment, addendum or supplement to any Creditor Document (whether or not completed); and
 
10.1.3       any other document which may at any time be required by a Creditor Party to give effect to any Creditor Document or which a Creditor Party is entitled to call for or obtain under any Creditor Document.
 
10.2          Funding costs    The Borrowers shall indemnify each Creditor Party on demand against all losses and costs incurred or sustained by that Creditor Party if, for any reason, a Drawing is not advanced to the Borrower after the relevant Drawdown Notice has been given to the Agent, or is advanced on a date other than that requested in the Drawdown Notice (unless, in either case, as a result of any default by a Creditor Party).
 
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10.3          Break Costs    The Borrower shall indemnify each Creditor Party on demand against all costs, losses, premiums or penalties incurred by that Creditor Party as a result of its receiving any prepayment of all or any part of the Loan (whether pursuant to Clause 6 or otherwise) on a day other than the last day of an Interest Period for the Loan or relevant part of the Loan, or any other payment under or in relation to the Creditor Documents on a day other than the due date for payment of the sum in question, including (without limitation) any losses or costs incurred by that Creditor Party in liquidating or re-employing deposits from third parties acquired to effect or maintain all or any part of the Loan, and any liabilities, expenses or losses incurred by the Swap Bank in terminating or reversing, or otherwise in connection with, any Hedging Transaction or any other interest rate and/or currency swap, transaction or arrangement entered into by that Creditor Party to hedge any exposure arising under this Agreement and/or the Master Agreement, or in terminating or reversing, or otherwise in connection with, any open position arising under this Agreement and/or the Master Agreement.
 
10.4          Currency indemnity   In the event of a Creditor Party receiving or recovering any amount payable under a Creditor Document in a currency other than the Currency of Account, and if the amount received or recovered is insufficient when converted into the Currency of Account at the date of receipt to satisfy in full the amount due, the Borrowers shall, on the Agent’s written demand, pay to the Agent for the account of the relevant Creditor Party such further amount in the Currency of Account as is sufficient to satisfy in full the amount due and that further amount shall be due to the Agent on behalf of the relevant Creditor Party as a separate debt under this Agreement.
 
10.5          Increased costs   If, by reason of the introduction of any law, or any change in any law, or any change in the interpretation or administration of any law, or compliance with any request or requirement from any central bank or any fiscal, monetary or other authority occurring after the date of this Agreement:
 
10.5.1       a Creditor Party (or the holding company of a Creditor Party) shall be subject to any Tax with respect to payment of all or any part of the Indebtedness; or
 
10.5.2       the basis of Taxation of payments to a Creditor Party in respect of all or any part of the Indebtedness shall be changed; or
 
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10.5.3       any reserve requirements shall be imposed, modified or deemed applicable against assets held by or deposits in or for the account of or loans by any branch of a Creditor Party; or
 
10.5.4       the manner in which a Creditor Party allocates capital resources to its obligations under this Agreement and/or the Master Agreement or any ratio (whether cash, capital adequacy, liquidity or otherwise) which a Creditor Party is required or requested to maintain shall be affected; or
 
10.5.5       there is imposed on a Creditor Party (or on the holding company of a Creditor Party) any other condition in relation to the Indebtedness or the Creditor Documents;
 
and the result of any of the above shall be to increase the cost to a Creditor Party (or to the holding company of a Creditor Party) of that Creditor Party making or maintaining its Commitment, or its obligations under the Master Agreement, or to cause a Creditor Party to suffer (in its opinion) a material reduction in the rate of return on its overall capital below the level which it reasonably anticipated at the date of this Agreement and which it would have been able to achieve but for its entering into this Agreement or the Master Agreement, and/or performing its obligations under this Agreement or the Master Agreement, the Creditor Party affected shall notify the Agent and the Borrowers shall from time to time pay to the Agent on demand for the account of that Creditor Party the amount which shall compensate that Creditor Party (or the relevant holding company) for such additional cost or reduced return. A certificate signed by an authorised signatory of that Creditor Party setting out the amount of that payment and the basis of its calculation shall be submitted to the Borrowers and shall be conclusive evidence of such amount save for manifest error or on any question of law.
 
10.6          Events of Default   The Borrowers shall indemnify each Creditor Party from time to time on demand against all losses, costs and liabilities incurred or sustained by that Creditor Party as a consequence of any Event of Default.
 
10.7          Enforcement costs    The Borrowers shall pay to each Creditor Party on demand the amount of all costs and expenses (including legal fees) incurred by that Creditor Party in connection with the enforcement of, or the preservation of any rights under, any Creditor Document including (without limitation) any losses, costs and expenses which that Creditor Party may from time to time sustain, incur or become
 
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liable for by reason of that Creditor Party being mortgagee of a Vessel and/or a lender to the Borrowers, or by reason of that Creditor Party being deemed by any court or authority to be an operator or controller, or in any way concerned in the operation or control, of a Vessel.
 
10.8          Other costs    The Borrowers shall pay to each Creditor Party on demand the amount of all sums which that Creditor Party may pay or become actually or contingently liable for on account of a Borrower in connection with a Vessel (whether alone or jointly or jointly and severally with any other person) including (without limitation) all sums which that Creditor Party may pay or guarantees which it may give in respect of the Insurances, any expenses incurred by that Creditor Party in connection with the maintenance or repair of a Vessel or in discharging any lien, bond or other claim relating in any way to a Vessel, and any sums which that Creditor Party may pay or guarantees which it may give to procure the release of a Vessel from arrest or detention.
 
10.9          Taxes   The Borrowers shall pay all Taxes to which all or any part of the Indebtedness or any Creditor Document may be at any time subject and shall indemnify the Creditor Parties on demand against all liabilities, costs, claims and expenses resulting from any omission to pay or delay in paying any such Taxes.
 
11            Fees
 
The Borrowers shall pay to the Agent the underwriting fee, the arrangement fee and the agency fee in the amount, at the times and for distribution in the manner agreed in a Fee Letter.
 
12            Security and Application of Moneys
 
12.1          Security Documents    As security for the payment of the Indebtedness, the Borrowers shall execute and deliver to the Security Agent or cause to be executed and delivered to the Security Agent the following documents in such forms and containing such terms and conditions as the Security Agent shall require:
 
12.1.1       first preferred or, as the context may require, statutory mortgages over the Vessels together with, in the case of each statutory mortgage a collateral deed of covenants;
 
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12.1.2       first priority deeds of assignment of the Insurances, Earnings and Requisition Compensation of the Vessels;
 
12.1.3       a guarantee and indemnity from the Guarantor;
 
12.1.4       a first priority deed of charge over the Earnings Account and all amounts from time to time standing to the credit of the Earnings Account; and
 
12.1.5       a manager’s confirmation in respect of each Vessel.
 
12.2          Earnings Account   The Borrowers shall maintain the Earnings Account with the Agent for the duration of the Facility Period free of Encumbrances and rights of set off other than those created by or under the Finance Documents. Interest shall accrue on a daily basis on any balance from time to time on the Earnings Account at a rate of interest determined by the Agent in its discretion as the rate of interest payable to its customers on deposits in the same currency and of similar amount and maturity, and shall be credited to the appropriate Earnings Account.
 
12.3          Earnings   The Borrowers shall procure that all Earnings and any Requisition Compensation for all the Vessels are credited to the Earnings Account.
 
12.4          Application of Earnings Account   The Borrowers shall procure that there is transferred from the Earnings Account, to the Agent:
 
12.4.1       on each Repayment Date, the amount of the Repayment Instalment then due; and
 
12.4.2       on each Interest Payment Date, the amount of interest then due,
 
and the Borrowers irrevocably authorise the Agent to make those transfers.
 
12.5          Borrower’s obligations not affected   If for any reason the amount standing to the credit of the Earnings Account is insufficient to pay any Repayment Instalment or to make any payment of interest when due, the Borrowers’ obligations to pay that Repayment Instalment, or to make that payment of interest shall not be affected.
 
12.6          Release of surplus   Any amount remaining to the credit of the Earnings Account following the making of any transfer required by Clause 12.4 shall (unless an Event of Default shall have occurred and be continuing) be released to or to the order of the Borrowers.
 
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12.7          Restriction on withdrawal   During the Facility Period no sum may be withdrawn from the Earnings Account (except in accordance with this Clause 12) without the prior written consent of the Agent.
 
12.8          Relocation of Earnings Account   At any time during the Facility Period, the Agent may without the consent of the Borrowers relocate the Earnings Account to any other branch of the Agent without prejudice to the continued application of this Clause 12 and the rights of the Creditor Parties under the Finance Documents.
 
12.9          Application after acceleration   From and after the giving of notice to the Borrowers by the Agent under Clause 15.2, the Borrowers shall procure that all sums from time to time standing to the credit of the Earnings Account are immediately transferred to the Agent for application in accordance with Clause 12.10 and the Borrowers irrevocably authorise the Agent to make those transfers.
 
12.10        General application of moneys – Security Documents  After an Event of Default has occurred each Borrower irrevocably authorises the Creditor Parties to apply all sums which any of them may receive under or in connection with the Finance Documents:
 
12.10.1     pursuant to a sale or other disposition of its Vessel or any right, title or interest in its Vessel; or
 
12.10.2     by way of payment of any sum in respect of the Insurances, Earnings or Requisition Compensation of its Vessel; or
 
12.10.3     by way of transfer of any sum from the Earnings Account; or
 
12.10.4     otherwise arising under or in connection with any Security Document,
 
in or towards satisfaction, or by way of retention on account, of the Indebtedness, in the following manner:-
 
12.10.5       FIRST: in or towards satisfaction of any amounts then due and payable to the Finance Parties under the Finance Documents, or any of them, in the following order of application:-
 
(a)          in satisfying claims which at law rank in priority to sums owing under or in respect of any of the Finance Documents;
 
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(b)          in paying to the Finance Parties all proper costs, charges and expenses incurred by the Finance Parties in the enforcement of the Finance Documents, or any part thereof, or in respect of the dissolution or liquidation of the relevant Security Party or otherwise in collecting the Distribution Monies;
 
(c)          in paying to the Finance Parties interest, fees and other amounts, excluding unpaid principal, due and payable in respect of the Senior Indebtedness including but not limited to Break Costs;
 
(d)          in paying to the Lenders the principal due in respect of the Senior Indebtedness pro-rata in the proportion which the total principal amount outstanding in respect of the Senior Indebtedness bears in relation to each of their Commitments;
 
or, if the Agent (acting with the authorisation of the Majority Lenders) may specify, in such other proportions and/or such other rankings, as the Agent may require by notice to the Borrowers and the other Security Parties;
 
12.10.6       SECONDLY: in retention of an amount equal to any amount not then due and payable under Clause 12.10.5, but which the Agent, by notice to the Borrowers and other 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 Clause 12.10.5;
 
12.10.7       THIRDLY: in or towards satisfaction of any amounts then due and payable to the Swap Bank in respect of the Junior Indebtedness, or any part thereof, in such order of application and/or such proportions as the Swap Bank may specify by notice to the Agent, Borrowers and other Security Parties;
 
12.10.8       FOURTHLY: in retention of an amount equal to any amount not then due and payable to the Swap Bank in respect of the Junior Indebtedness,  or any part thereof, but which the Swap Bank, by notice to the Borrowers and other Security Parties, states in its opinion will or may become due and
 
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payable in the future and, upon those amounts becoming due and payable, in or towards satisfaction of them in accordance with Clause 12.10.7;
 
12.10.9       FIFTHLY: any surplus shall be paid to the Borrowers or other person appearing to be entitled to it.
 
12.11        General application of moneys – Master Agreement Documents  After an Event of Default has occurred, each Borrower irrevocably authorises the Swap Bank to apply all sums which it may receive in respect of any Hedging Transaction (unless netted out, assigned or otherwise transferred to the Swap Bank in accordance with the provisions of the Master Agreement) or under or in connection with any Master Agreement Document in or towards satisfaction, or by way of retention on account, of the Indebtedness, in the following manner:-
 
12.11.1     FIRST: in or towards satisfaction of any amounts then due and payable to the Swap Bank in respect of the Junior Indebtedness, or any part thereof, in such order of application and/or such proportions as the Swap Bank may specify by notice to the Agent, the Borrowers and the other Security Parties;
 
12.11.2     SECONDLY: in retention of an amount equal to any amount not then due and payable to the Swap Bank in respect of the Junior Indebtedness, or any part thereof, but which the Swap Bank, by notice to the Agent, the Borrowers and other 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 Clause 12.11.1;
 
12.11.3     THIRDLY: in or towards satisfaction of any amounts then due and payable under Clause 12.10.5;
 
12.11.4     FOURTHLY: in retention of an amount necessary to satisfy the requirements of Clause 12.10.6;
 
12.11.5     FIFTHLY: in accordance with Clause 12.10.9.
 
12.12        Application of moneys on sale or Total Loss   Each Borrower irrevocably authorises the Agent and the Security Agent to apply all sums which either of them may receive pursuant to a sale by that Borrower of its Vessel or a Total Loss of its
 
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Vessel in or towards satisfaction of the prepayment due and payable by virtue of that sale or Total Loss under Clause 6.3, but the Borrowers’ obligation to make that prepayment shall not be affected if those sums are insufficient to satisfy that obligation.
 
12.13        Vessel valuations If the Agent and/or the Security Agent reasonably require, at any time and from time to time (but not more often than once during each consecutive period of six (6) months during the Facility Period and not less than once during each consecutive period of twelve (12) months during the Facility Period (in each case at the expense of the Borrowers) and with the first such period commencing on the first Drawdown Date or as many times as the Creditor Parties may reasonably require (acting through the Agent) during such period (at their expense) or, in the case of a Default or Event of Default which is continuing, at any time and from time to time as the Agent may require in its discretion (in each case at the expense of the Borrowers)), the Vessels shall be valued in Dollars by taking the average of the valuations provided by two firms of shipbrokers chosen by the Borrowers from Maersk Brokers K/S; Howe Robinson; Simpson, Spence & Young; R.S. Platou; Arrow; and Clarkson’s or such other firm(s) of shipbrokers nominated by the Borrowers and approved by the Agent from time to time (or, if not nominated by the Borrowers within five (5) Business Days of the Agent’s first request in writing, such firm(s) of shipbrokers nominated by the Agent in its discretion from time to time) such valuations shall be addressed to the Agent and shall be made without physical inspection (unless otherwise required by the Agent), and on the basis of an arm’s-length purchase by a willing buyer from a willing seller and without taking into account any charterparty. The fees of the firm of shipbrokers appointed to give such valuations and all other costs arising in connection with the obtaining of any such valuations shall be paid by the Borrowers.
 
12.14        Additional security   If at any time the aggregate of the market value of the Vessels (such market value to be determined in accordance with Clause 12.13) and the value of any additional security (such value to be the face amount of the deposit in the case of cash), determined conclusively by appropriate advisers appointed by the Agent (in the case of other charged assets), and determined by the Agent in its discretion (in all other cases)) for the time being provided to the Security Agent under this Clause 12.14 is less than one hundred and twenty per cent (120%) of the aggregate of (i) the consolidated aggregate of the Currency Equivalent in Dollars of
 
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all the Currency Tranches and (ii) the remaining part of the Loan in Dollars and (iii) the Master Agreement Liabilities then the Borrowers shall, within thirty (30) days of the Agent’s request, at the Borrowers’ option:
 
12.14.1         pay to the Security Agent or to its nominee a cash deposit in the amount of the shortfall to be secured in favour of the Security Agent as additional security for the payment of the Indebtedness; or
 
12.14.2         give to the Security Agent other additional security in amount and form acceptable to the Security Agent in its discretion; or
 
12.14.3         prepay the amount of the Indebtedness which will ensure that the aggregate of the market value of the Vessels (determined as stated above) and the value of any such additional security (valued as stated above) is not less than one hundred and twenty per cent (120%) of the aggregate of (i) the consolidated aggregate of the Currency Equivalent in Dollars of all the Currency Tranches and (ii) the remaining part of the Loan in Dollars and (iii) the Master Agreement Liabilities,
 
Clauses 5.3, 6.2.3 and 6.4 shall apply, mutatis mutandis , to any prepayment made under this Clause 12.14 and the value of any additional security provided shall be determined as stated above.
 
13            Representations
 
13.1          Representations    The Borrowers make the representations and warranties set out in this Clause 13.1 to each Creditor Party on the date of this Agreement.
 
13.1.1       Status   Each Security Party (which is not an individual) is a corporation, duly incorporated and validly existing under the law of its jurisdiction of incorporation and has the power to own its assets and carry on its business as it is being conducted.
 
13.1.2       Binding obligations   The obligations expressed to be assumed by each Security Party in each Creditor Document to which it is a party are legal, valid, binding and enforceable obligations.
 
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13.1.3       Non-conflict with other obligations   The entry into and performance by each Security Party of, and the transactions contemplated by, the Creditor Documents do not conflict with:
 
(a)            any law or regulation applicable to that Security Party;
 
(b)            the constitutional documents of that Security Party; or
 
(c)            any document binding on that Security Party or any of its assets,
 
and in borrowing the Loan and entering into any Hedging Transactions, the Borrowers are acting for their own account.
 
13.1.4       Power and authority   Each Security Party has the power to enter into, perform and deliver, and has taken all necessary action to authorise its entry into, performance and delivery of, the Creditor Documents to which it is a party and the transactions contemplated by those Creditor Documents.
 
13.1.5       Validity and admissibility in evidence   All consents, licences, approvals, authorisations, filings and registrations required or desirable:
 
(a)            to enable each Security Party lawfully to enter into, exercise its rights and comply with its obligations in the Creditor Documents to which it is a party or to enable each Creditor Party to enforce and exercise all its rights under the Creditor Documents; and
 
(b)            to make the Creditor Documents to which any Security Party is a party admissible in evidence in its jurisdiction of incorporation,
 
have been obtained or effected and are in full force and effect, with the exception only of the registrations referred to in Part II of Schedule 2.
 
13.1.6       Governing law and enforcement   The choice of English law as the governing law of any Creditor Document expressed to be governed by English law or, in the case of the relevant Creditor Documents, Greek or Singapore law, will be recognised and enforced in the jurisdiction of incorporation of each relevant Security Party, and any judgment obtained in England or, in the case of the relevant Creditor Documents, Greece or Singapore, in relation to any such Creditor Document will be recognised
 
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and enforced in the jurisdiction of incorporation of each relevant Security Party.
 
13.1.7       Deduction of Tax   No Security Party is required under the law of its jurisdiction of incorporation to make any deduction for or on account of Tax from any payment it may make under any Creditor Document.
 
13.1.8       No filing or stamp taxes   Under the law of jurisdiction of incorporation of each relevant Security Party it is not necessary that the Creditor Documents be filed, recorded or enrolled with any court or other authority in that jurisdiction or that any stamp, registration or similar tax be paid on or in relation to the Creditor Documents or the transactions contemplated by the Creditor Documents.
 
13.1.9       No default   No Event of Default is continuing or might reasonably be expected to result from the advance of any Drawing and/or the entering into of any Hedging Transaction.
 
13.1.10     No misleading information   Any factual information provided by any Security Party to any Creditor Party was true and accurate in all material respects as at the date it was provided.
 
13.1.11     Pari passu ranking   The payment obligations of each Security Party under the Creditor Documents to which it is a party rank at least pari passu with the claims of all its other unsecured and unsubordinated creditors, except for obligations mandatorily preferred by law applying to companies generally.
 
13.1.12     No proceedings pending or threatened   No litigation, arbitration or administrative proceedings of or before any court, arbitral body or agency have been started or (to the best of the Borrowers’ knowledge threatened) which, if adversely determined, might reasonably be expected to have a materially adverse effect on the business, assets, financial condition or credit worthiness of any Security Party.
 
13.1.13     Disclosure of material facts   The Borrowers are not aware of any material facts or circumstances which have not been disclosed to the Agent and which might, if disclosed, have adversely affected the decision of a person considering whether or not to make loan and/or hedging
 
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facilities of the nature contemplated by this Agreement and the Master Agreement available to the Borrowers.
 
13.1.14     No established place of business in the UK or US    No Security Party has an established place of business in the United Kingdom or the United States of America.
 
13.1.15     Completeness of Relevant Documents   The copies of any Relevant Documents provided or to be provided by the Borrowers to the Agent in accordance with Clause 3 are, or will be, true and accurate copies of the originals and represent, or will represent, the full agreement between the parties to those Relevant Documents in relation to the subject matter of those Relevant Documents and there are no commissions, rebates, premiums or other payments due or to become due in connection with the subject matter of those Relevant Documents other than in the ordinary course of business or as disclosed to, and approved in writing by, the Agent.
 
13.2          Repetition   Each representation and warranty in Clause 13.1 is deemed to be repeated by the Borrowers by reference to the facts and circumstances then existing on the date of each Drawdown Notice and the first day of each Interest Period.
 
13.3          German money laundering act . The Borrowers confirm that they are the beneficiaries (within the meaning of section 8 of the German Money Laundering Act (Gesetz über das Aufspüren von Gewinnen aus schweren Straftaten (Geldwäschegesetz)) of the Loan and any Hedging Transactions, and that they will promptly inform the Agent in writing if they are not or cease to be the beneficiary and will then set down in writing the name and the address of the beneficiary.
 
14            Undertakings and Covenants
 
The undertakings and covenants in this Clause 14 remain in force for the duration of the Facility Period.
 
14.1          Information Undertakings
 
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14.1.1       Financial statements   The Borrowers shall supply to the Agent, and shall procure that the Managers supply to the Agent, as soon as the same become available, but in any event within one hundred and eighty (180) days after the end of each financial year of the Borrowers and the Managers, each Borrower’s and the Managers’ annual audited financial statements and the Group Statements for that financial year, commencing with the financial statements for 2004.
 
14.1.2       Requirements as to financial statements   Each set of financial statements delivered under Clause 14.1.1 shall be prepared using:-
 
(a)            generally accepted accounting principles, in the case of the annual audited financial statements for the Borrowers and the Managers; and
 
(b)            Applicable Accounting Principles, in the case of the Group Statements.
 
14.1.3       Information: miscellaneous   The Borrowers shall supply to the Agent:
 
(a)            all documents dispatched by any Borrower:-
 
(i)             to its creditors generally; and
 
(ii)            if there is no Event of Default, to its shareholders (or any class of them) which that Borrower is required to despatch at law; and
 
(iii)           if there is an Event of Default which is continuing, all documents dispatched by that Borrower to its shareholders (or any class of them);
 
in each case at the same time as they are dispatched;
 
(b)            promptly upon becoming aware of them, details of any litigation, arbitration or administrative proceedings which are current, threatened or pending against any Security Party, and which might, if adversely determined, have a materially adverse effect on the business, assets, financial condition or credit worthiness of that Security Party; and
 
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(c)            promptly, such further information regarding the financial condition, business and operations of any Security Party as the Agent may reasonably request including, without limitation, cash flow analyses and details of the operating costs of any Vessel.
 
14.1.4       Notification of default
 
(a)            The Borrowers shall notify the Agent of any Default (and the steps, if any, being taken to remedy it) promptly upon becoming aware of its occurrence.
 
(b)            Promptly upon a request by the Agent, each Borrower shall supply to the Agent a certificate signed by two of its directors or senior officers on its behalf certifying that no Default is continuing (or if a Default is continuing, specifying the Default and the steps, if any, being taken to remedy it).
 
14.1.5       “Know your customer” checks   If:
 
(a)            the introduction of or any change in (or in the interpretation, administration or application of) any law or regulation made after the date of this Agreement;
 
(b)            any change in the status of a Borrower after the date of this Agreement; or
 
(c)            a proposed assignment or transfer by a Creditor Party of any of its rights and obligations under this Agreement to a party that is not a Lender prior to such assignment or transfer,
 
obliges the Creditor Party (or, in the case of (c) above, any prospective new Creditor Party) to comply with “know your customer” or similar identification procedures in circumstances where the necessary information is not already available to it, the Borrowers shall promptly upon the request of the Agent supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Agent (for itself or on behalf of any Creditor Party or, in the case of (c) above, on behalf of any prospective new
 
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Creditor Party) in order for the Agent or that Creditor Party (or, in the case of (c) above, any prospective new Creditor Party) to carry out and be satisfied it has complied with all necessary “know your customer” or other similar checks under all applicable laws and regulations pursuant to the transactions contemplated in the Creditor Documents.
 
14.2          Financial covenants
 
14.2.1       Undertaking   The Borrowers undertake that throughout the Facility Period:
 
The amount of total Net Worth will not be less than $250,000,000;
 
                The ratio of Fixed Assets to Net Consolidated Indebtedness will not be less than 1.45:1;
 
                The ratio of Outstanding Bank Debt to Vessel Values will not be more than 0.75:1; and
 
Net Worth will always exceed 30% of Total Assets;
 
14.2.2       Limitations on Incurrence of Financial Indebtedness The Borrowers will procure that, during the Facility Period, the Guarantor will not and will not permit any Subsidiary to (i) incur additional Financial Indebtedness or (ii) declare or pay any dividend or other distribution to shareholders unless immediately after giving effect thereto:
 
(a)             the Liquid Funds of the Group would not be less than $30,000,000; and
 
(b)            the ratio of EBITDA to Net Interest Expenses would be at least 2.5:1 on a Pro Forma Basis for the period immediately preceding the date thereof for which Group Statements are available.
 
14.2.3       Definitions The calculation of ratios and percentages in Clauses 14.2.1 and 14.2.2 shall be determined on the basis of the latest Group Statements, but so that:
 
(a)             “Bank Credit Agreement” means any bank credit agreement or similar facility entered into at any time by a member of the Group;
 
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(b)            “Consolidated Indebtedness” means, in respect of the relevant period, the aggregate amount of Financial Indebtedness (including current maturities) due by the members of the Group (other than any such Financial Indebtedness owing by any member of the Group to another member of the Group);
 
(c)             “Current Assets” means, in respect of the relevant period, the aggregate amount of cash and cash equivalents, receivables due to any member of the Group by a person who is not a member of the Group with a maturity of less than one year and inventories;
 
(d)            “ EBITDA” means, in respect of the relevant period, the aggregate amount of consolidated pre-tax profits of the Group before extraordinary or exceptional items, depreciation, interest, rentals under finance leases and similar charges payable;
 
(e)             “Financial Indebtedness” means, in relation to any member of the Group, a liability of the debtor:
 
(i)              for principal, interest or any other sum payable in respect of any moneys borrowed or raised by the debtor;
 
(ii)             under any loan, bond, note or other debt security issued by the debtor;
 
(iii)            under any acceptance credit, guarantee or letter of credit facility made available to the debtor other than in the ordinary course of business;
 
(iv)          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;
 
(v)            under any interest or currency swap or any other kind of derivative transaction entered into by the debtor or, if the agreement under which any such transaction is entered into requires netting of mutual liabilities, the liability of the debtor for the net amount; and
 
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(vi)           under a guarantee, indemnity or similar obligation entered into by the debtor in respect of a liability of another person which would fall within (i) to (v) if the references to the debtor referred to the other person (unless such other person is a member of the Group and the said liability of that other person was incurred in conformity with Clause 14.2.2);
 
(f)             “Fixed Assets” means, in respect of the relevant period, the aggregate of the Vessel Values and the value on a consolidated basis of all other fixed assets of the Group (less depreciation computed in accordance with the Applicable Accounting Principles);
 
(g)           “Liquid Funds” means, in respect of the relevant period, the aggregate of:
 
(i)              cash in hand or held with banks or other financial institutions which is free of any Security Interest (other than a Security Interest created under a Bank Credit Agreement); and
 
(ii)            any other short-term financial investments which is free of any Security Interest (other than a Security Interest created under a Bank Credit Agreement);
 
(h)           “Net Consolidated Indebtedness” means, in respect of the relevant period, Consolidated Indebtedness less Liquid Funds;
 
(i)            “Net Interest Expenses” means, in respect of the relevant period:
 
(i)             the aggregate on a consolidated basis of:
 
(A)          all interest incurred by any member of the Group (excluding any amounts owing by one member of the Group to another member of the Group); and
 
(B)           any net amounts payable under interest rate hedge agreements
 
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LESS
 
(ii)            the aggregate of:
 
(A)            interest receivable by any member of the Group on Liquid Funds; and
 
(B)            any net amounts receivable under interest rate hedge agreements, in each case accrued (and whether or not actually paid) during such period;
 
(j)              “Net Worth” means, in respect of the relevant period, the Total Shareholders Equity as defined by the Applicable Accounting Principles.
 
(k)             “Outstanding Bank Debt” means, in respect of the relevant period, the aggregate amount of principal due under the Bank Credit Agreements less cash held with banks or other financial institutions and any other short-term investments over which, in each case, a Bank Credit Agreement has created a Security Interest;
 
(l)            “Pro Forma Basis” means, for the purposes of Clause 14.2.2(b), giving pro forma effect to:
 
(i)              any acquisition or sale of a person, business or asset and any related incurrence, repayment or refinancing of a Financial Indebtedness or other related transactions, which would otherwise be accounted for under the Applicable Accounting Principles; or
 
(ii)             any incurrence, repayment or refinancing of any Financial Indebtedness and the application of the proceeds therefrom;
 
as if the same was realised on the first day of the immediately preceding period for which Financial Statements are available, in accordance with the Applicable Accounting Principles.
 
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For the purposes of this definition:
 
(A)           in the case of the acquisition of a Vessel by a member of the Group pursuant to a memorandum of agreement (or similar agreement) or the delivery of a Vessel to a member of the Group pursuant to a shipbuilding contract during the relevant period, if historical earnings (losses) of such Vessel are not available to the Guarantor, the Guarantor shall give pro forma effect to the earnings (losses) of such Vessel as if such Vessel was acquired on the first day of the immediately preceding period for which Financial Statements are available by basing such earnings (losses) on:
 
(1)           the revenues to be earned from any binding charter, lease or like arrangement which will be applicable to any such Vessel less a good faith estimate of the operating costs of such Vessel (including, without limitation, management fees); or
 
(2)           with respect of any such Vessel not subject to such arrangement, the earnings (losses) for the applicable period of the most comparable Vessel of any member of the Group (as determined in the reasonable judgment of a responsible financial officer of the Guarantor) or, in the absence of a comparable Vessel, based on industry average earning (losses) for comparable vessels (as determined in the reasonable judgment of a responsible financial officer of the Guarantor); and
 
(B)            in the case of an acquisition of a person, business or asset, the Guarantor shall give pro forma effect to the amount of income or earnings relating thereto, and the amount of Net Interest Expenses associated with any Financial Indebtedness issued in connection therewith (as determined in the reasonable judgment of a responsible financial office of the Guarantor);
 
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(m)            “Security Interest” means:
 
(i)             a mortgage, charge (whether fixed or floating) or pledge, any maritime or other lien or any other security interest of any kind;
 
(ii)            the rights of the plaintiff under an action in rem in which the asset concerned has been arrested or a writ has been issued or similar step taken; and
 
(iii)           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 it held a security interest over an asset of A; but this paragraph (iii) 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;
 
(n)            “Total Assets” means the aggregate of Current Assets and Fixed Assets;
 
(o)            “Vessel” and “Vessels” means for the purposes of this Clause 14.2 the vessels owned by and registered (or to be owned by and registered) in the name of the Guarantor or any of the Subsidiaries or operated by the Guarantor or any of the Subsidiaries pursuant to a lease or other operating agreement constituting a capital lease obligation, in each case with all related equipment and any additions or improvements; and
 
(p)            “ Vessel Values” means, in respect of the relevant period, the aggregate book value of the Vessels determined in accordance with the Applicable Accounting Principles
 
14.2.4       Currency  For the purposes of this Clause 14.2 any amount expressed in a currency other than Dollars shall (unless the Agent otherwise agrees) be converted into Dollars in accordance with the Applicable Accounting Principles.
 
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14.2.5       Covenant Compliance Certificate  The Borrowers will provide the Agent with a Covenant Compliance Certificate in respect of compliance by the Borrowers of Clauses 14.2.1 and 14.2.2 at such times as the Agent may reasonably require, in its discretion but at least once during each calendar year.
 
14.3 General undertakings
 
14.3.1       Authorisations   The Borrowers shall promptly:
 
(a)            obtain, comply with and do all that is necessary to maintain in full force and effect; and
 
(b)            supply certified copies to the Agent of,
 
any consent, licence, approval or authorisation required under any law or regulation to enable each Security Party to perform its obligations under the Creditor Documents to which it is a party and to ensure the legality, validity, enforceability or admissibility in evidence in the jurisdiction of incorporation of each relevant Security Party of any Creditor Document.
 
14.3.2       Compliance with laws   Each Borrower shall comply in all respects with all laws to which it may be subject, if failure so to comply would materially impair its ability to perform its obligations under the Creditor Documents.
 
14.3.3       Conduct of business   Each Borrower shall carry on and conduct its business in a proper and efficient manner, file all requisite tax returns and pay all tax which becomes due and payable (except where contested in good faith).
 
14.3.4       Evidence of good standing    The Borrowers will from time to time if requested by the Agent provide the Agent with evidence in form and substance satisfactory to the Agent that the Security Parties and all corporate shareholders of any Security Party remain in good standing.
 
14.3.5       Negative pledge and no disposals   No Borrower shall create nor permit to subsist any Encumbrance or other third party rights (other than a Permitted Encumbrance) over any of its present or future assets or
 
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undertaking nor dispose of any those assets or of all or part of that undertaking.
 
14.3.6       Merger   No Borrower shall enter into any amalgamation, demerger, merger or corporate reconstruction.
 
14.3.7       Change of business   No Borrower shall make any substantial change to the general nature of its business from that carried on at the date of this Agreement.
 
14.3.8       No change in ownership or control  No Borrower shall permit any change in its beneficial ownership or control from that advised to the Agent at the date of this Agreement and shall procure that all the capital stock of the Borrowers is owned directly or indirectly by the Guarantor and that the present shareholders of the Guarantor shall maintain at all times beneficial ownership or control, directly or indirectly, of at least sixty per centum (60%) of each Borrower’s capital stock.
 
14.3.9       No other business   No Borrower shall engage in any business other than the ownership, operation, chartering and management of its Vessel.
 
14.3.10     No place of business in UK or US   No Borrower shall have an established place of business in the United Kingdom or the United States of America at any time during the Facility Period.
 
14.3.11     No borrowings   No Borrower shall without the prior written consent of the Agent borrow any money (except for the Loan and unsecured Financial Indebtedness subordinated to the Loan) nor incur any obligations under leases.
 
14.3.12     No substantial liabilities   Except in the ordinary course of business, no Borrower shall without the prior written consent of the Agent incur any liability to any third party which is in the Agent’s opinion of a substantial nature.
 
14.3.13     No loans or other financial commitments   No Borrower shall without the prior written consent of the Agent make any loan nor enter into any guarantee or indemnity or otherwise voluntarily assume any actual or contingent liability in respect of any obligation of any other person nor
 
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encumber its Vessel with an Encumbrance except loans made in the ordinary course of business in connection with the chartering, operation or repair of its Vessel.
 
14.3.14     Inspection of records   Each Borrower will permit the inspection of its financial records and accounts from time to time by the Agent or its nominee.
 
14.3.15     No change in Relevant Documents   The Borrowers shall procure that, without the prior written consent of the Agent, there shall be no termination of, alteration to, or waiver of any term of, any of the Relevant Documents which are not Creditor Documents.
 
15            Events of Default
 
15.1          Events of Default    Each of the events or circumstances set out in this Clause 15.1 is an Event of Default.
 
15.1.1       Non-payment   The Borrowers do not pay on the due date any amount payable by them under a Creditor Document at the place at and in the currency in which it is expressed to be payable.
 
No Event of Default under this Clause 15.1.1 will occur if non-payment is caused by technical and/or administrative error and the payment is received within three (3) days of the due date of such payment at the place and in the currency in which it is expressed to be payable.
 
15.1.2       Other obligations   A Security Party or any other person (except a Creditor Party) does not comply with any provision of any of the Relevant Documents to which that Security Party or person is a party (other than as referred to in Clause 15.1.1).
 
No Event of Default under this Clause 15.1.2 will occur if the failure to comply, if capable of remedy, is remedied within ten (10) Business Days of the Agent giving notice to the Borrowers or the Borrowers becoming aware of the failure to comply.
 
15.1.3       Misrepresentation   Any representation, warranty or statement made or deemed to be repeated by a Security Party in any Creditor Document or
 
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any other document delivered by or on behalf of a Security Party under or in connection with any Creditor Document is or proves to have been incorrect or misleading in any material respect when made or deemed to be repeated.
 
No Event of Default under this Clause 15.1.3 will occur in respect of any innocent misrepresentation which, if capable of remedy, is remedied within ten (10) Business Days of its occurrence, unless such innocent misrepresentation takes place on a Drawdown Date.
 
15.1.4       Cross default   Any of the following occurs in respect of a Security Party:
 
(a)            any of its Financial Indebtedness is not paid when due; or
 
(b)            any of its Financial Indebtedness:
 
(i)            becomes prematurely due and payable; or
 
(ii)           is placed on demand; or
 
(iii)           is capable of being declared to be permanently due and payable or being placed on demand, in each case, as a result of an event of default (howsoever described); or
 
(c)             any commitment for its Financial Indebtedness is cancelled or suspended as a result of an event of default (howsoever described).
 
No Event of Default will occur under (a), (b) or (c) of this Clause 15.1.4 in respect of any Financial Indebtedness of the Guarantor which at any time is for an amount, in aggregate, less than ten million Dollars ($10,000,000).
 
15.1.5        Insolvency    A Security Party is unable or admits inability to pay its debts as they fall due,  suspends  making  payments  on any of its debts or, by reason of actual or anticipated financial difficulties, commences negotiations with one or more of its creditors with a view to rescheduling any of its Financial Indebtedness or becomes otherwise insolvent.
 
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15.1.6       Insolvency proceedings   Any corporate action, legal proceedings or other procedure or step is taken for:
 
(a)            the winding-up, dissolution, administration, bankruptcy or reorganisation (by way of voluntary arrangement, scheme of arrangement or otherwise) of a Security Party;
 
(b)            the appointment of a liquidator, receiver, administrative receiver, administrator, compulsory manager, or trustee or other similar officer in respect of any Security Party or any of its assets; or
 
(c)            enforcement of any Encumbrance over any assets of a Security Party,
 
or any analogous procedure or step is taken in any jurisdiction.
 
15.1.7       Creditors’ process  Any expropriation, attachment, sequestration, distress or execution affects any asset or assets of a Security Party.
 
No Event of Default will occur under this Clause 15.1.7 if the expropriation, attachment, sequestration, distress or execution affects any asset of the Guarantor, and the aggregate amount in respect thereof is, in the opinion of the Agent, for a value which is less than ten million Dollars ($10,000,000).
 
15.1.8       Change in ownership or control of a Borrower   There is any change in the beneficial ownership or control of a Borrower from that advised to the Agent by the Borrowers at the date of this Agreement.
 
15.1.9       Repudiation   A Security Party or any other person  repudiates any of the Relevant Documents to which that Security Party or person is a party or evidences an intention to do so.
 
15.1.10       Impossibility or illegality   Any event occurs which would, or would with the passage of time, render performance of any of the Relevant Documents by a Security Party or any other party to any such document impossible, unlawful or unenforceable by a Creditor Party or a Security Party.
 
15.1.11       Conditions subsequent   Any of the conditions referred to in Clause 3.4 is not satisfied within the time reasonably required by the Agent.
 
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15.1.12       Revocation or modification of authorisation   Any consent, licence, approval, authorisation, filing, registration or other requirement of any governmental, judicial or other public body or authority which is now, or which at any time during the Facility Period becomes, necessary to enable a Security Party or any other person (except a Creditor Party) to comply with any of its obligations under any of the Relevant Documents is not obtained, is revoked, suspended, withdrawn or withheld, or is modified in a manner which the Agent considers is, or may be, prejudicial to the interests of a Creditor Party, or ceases to remain in full force and effect.
 
15.1.13     Curtailment of business   A Borrower ceases, or threatens to cease, to carry on all or a substantial part of its business or, as a result of intervention by or under the authority of any government, the business of a Borrower is wholly or partially curtailed or suspended, or all or a substantial part of the assets or undertaking of a Borrower is seized, nationalised, expropriated or compulsorily acquired.
 
15.1.14     Reduction of capital   A Security Party reduces its authorised or issued or subscribed capital and, in the opinion of the Agent, such reduction has a material adverse effect on the Security Party in question.
 
15.1.15      Loss of Vessel   A Vessel suffers a Total Loss and payment of all insurance proceeds in respect of the Total Loss is not made in full to the Security Agent in accordance with Clause 6.3.
 
15.1.16     Challenge to registration   The registration of a Vessel or a Mortgage is contested or becomes void or voidable or liable to cancellation or termination, or the validity or priority of a Mortgage is contested.
 
No Event of Default under this Clause 15.1.16 will occur if any contesting of the Vessel or Mortgage ceases within ten (10) Business Days of its commencement or the voidability, or liability to cancellation or termination of the Mortgage is remedied within ten (10) Business Days of the date that such voidability or liability to cancellation or termination arose or if the registration of a Vessel or Mortgage becomes void and the relevant Borrower and the Security Agent have effected the re-registration of the Vessel and its Mortgage under another register acceptable to the Agent in its discretion  and the Borrowers have provided the Agent with such
 
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equivalent additional documents and evidence mutatis mutandis to those specified at Part I, 1(a) to (h) inclusive, and Part I, 2 (a) to (f) (inclusive), (g), (h) and 3 (a)  of Schedule 2 as the Agent may require in its discretion.
 
15.1.17     War   The country of registration of a Vessel becomes involved in war (whether or not declared) or civil war or is occupied by any other power and the Agent in its discretion considers that, as a result, the security conferred by any of the Security Documents is materially prejudiced.
 
No Event of Default under this Clause 15.1.17 will occur if the country of  registration of a Vessel ceases to be at war (whether or not declared) or civil war or ceases to be occupied by another power within ten (10) Business Days of the occurrence of the event in question, or the Borrower in question has within ten (10) Business Days of the occurrence of the event in question reflagged the Vessel with another country of registration acceptable to the Agent in its discretion and the Borrowers have provided the Agent with such equivalent additional documents and evidence to that specified at Part I, 1(a) to (h) inclusive, and Part I, 2 (a) to (f) (inclusive), (h), (j) and 3 (a) of Schedule 2 as the Agent may require in its discretion.
 
15.1.18     Master Agreement termination   A notice is given by the Swap Bank under section 6(a) of the Master Agreement, or by any person under section 6(b)(iv) of the Master Agreement, in either case designating an Early Termination Date for the purpose of the Master Agreement, or the Master Agreement is for any other reason terminated, cancelled, suspended, rescinded, revoked or otherwise ceases to remain in full force and effect.
 
15.1.19     Notice of termination   The Guarantor gives notice to the Security Agent to determine its obligations under the Guarantee.
 
15.1.20     Material adverse change    Any event or series of events occurs which, in the reasonable opinion of the Agent, is likely to have a materially adverse effect on the business, assets, financial condition or credit worthiness of a Security Party.
 
15.2          Acceleration   If an Event of Default is continuing the Agent may by notice to the Borrowers:
 
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15.2.1       declare that the Loan, together with accrued interest, and all other amounts accrued or outstanding under the Finance Documents are immediately due and payable, whereupon they shall become immediately due and payable; and/or
 
15.2.2       declare that the Loan is payable on demand, whereupon it shall immediately become payable on demand by the Agent; and
 
the security constituted by the Security Documents shall become immediately enforceable and the Agent and the  Security Agent (on behalf of the other Creditor Parties) in respect of the Finance Documents and the Swap Bank (in respect of the Master Agreement Documents) shall be entitled to exercise all or any of the rights, powers, discretions and remedies vested in them by the Creditor Documents, or any of them, without any requirement for any court order or declaration that an Event of Default has occurred, and the rights of the Creditor Parties will be in addition to and without prejudice to all other rights, powers, discretions and remedies to which they may be entitled, whether by statute or otherwise.
 
16            Assignment and Sub-Participation
 
16.1          Creditor Parties’ rights
 
16.1.1      A Lender may grant sub-participations in all or any part of its Commitment; and
 
16.1.2      Upon written notice from the Agent to the Security Parties, a Creditor Party may assign any of its rights under this Agreement (and the other Creditor Documents) or transfer by novation any of its rights and obligations under this Agreement (and the other Creditor Documents) to any other branch of that Creditor Party or to any of its subsidiaries or to its holding company or to a subsidiary of its holding company or, subject to the prior written agreement of all the Security Parties (such agreement not to be unreasonably withheld by any of the Security Parties), to any other bank or financial institution. If the Security Parties, (or any of them) do not agree to such assignment or transfer, the Security Parties shall notify the Agent of their objection to such proposed transfer or assignment within five (5) days of receiving notice from the Agent and shall, by not later than the date
 
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falling fifteen (15) days after such notice from the Agent, prepay the portion of the Loan that would have been subject to such transfer or assignment. Clauses 5.3, 6.2.3 and 6.4, shall apply to such prepayment.
 
16.1.3       The Swap Bank may not assign any of its rights under the Master Agreement or transfer by novation any of its rights and obligations under the Master Agreement to any other bank or financial institution, except to another branch of the Swap Bank and/or to another Finance Party.
 
16.2          Borrowers’ co-operation   The Borrowers will co-operate fully with a Creditor Party in connection with any assignment, transfer or sub-participation by that Creditor Party, and which is permitted in accordance with Clause 16.1; will execute and procure the execution of such documents as that Creditor Party may require in that connection; and irrevocably authorise any Creditor Party to disclose to any proposed assignee, transferee or sub-participant or any person or party who may enter into contractual relations with that Creditor Party (whether before or after any assignment, transfer or sub-participation and whether or not any assignment, transfer or sub-participation shall take place) all information relating to the Security Parties, the Loan, the Relevant Documents, and the Vessels which any Creditor Party may in its discretion consider necessary or desirable.
 
16.3          Rights of assignee   Any assignee of a Creditor Party shall (unless limited by the express terms of the assignment) take the full benefit of every provision of the Creditor Documents benefiting that Creditor Party PROVIDED THAT  an assignment will only be effective on notification by the Agent to that Creditor Party and the assignee that the Agent is satisfied it has complied with all necessary “Know your customer” or other similar checks under all applicable laws and regulations in relation to the assignment to the assignee.
 
16.4          Transfer Certificates   If a Creditor Party wishes to transfer any of its rights and obligations under or pursuant to this Agreement, it may do so by delivering to the Agent a duly completed Transfer Certificate, in which event on the Transfer Date:
 
16.4.1       to the extent that that Creditor Party seeks to transfer its rights and obligations, the Borrowers (on the one hand) and that Creditor Party (on the other) shall be released from all further obligations towards the other;
 
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16.4.2       the Borrowers (on the one hand) and the transferee (on the other) shall assume obligations towards the other identical to those released pursuant to Clause 16.4.1; and
 
16.4.3       the Creditor Parties and the transferee shall have the same rights and obligations between themselves as they would have had if the transferee had been an original party to this Agreement as a Lender
 
PROVIDED THAT the Agent shall only be obliged to execute a Transfer Certificate once:
 
16.4.4       it is satisfied it has complied with all necessary “know your customer” or other similar checks under all applicable laws and regulations in relation to the transfer to the transferee; and
 
16.4.5       the transferee (if it is not another branch, subsidiary, holding company or other subsidiary of the holding company of the Transferor) has paid to the Agent for its own account a transfer fee of two thousand Dollars ($2,000).
 
The Agent shall, as soon as reasonably practicable after it has executed a Transfer Certificate, send to the Borrowers a copy of that Transfer Certificate.
 
16.5          Finance Documents   Unless otherwise expressly provided in any Finance Document or otherwise expressly agreed between a Creditor Party and any proposed transferee and notified by that Creditor Party to the Agent on or before the relevant Transfer Date, there shall automatically be assigned to the transferee with any transfer of a Creditor Party’s rights and obligations under or pursuant to this Agreement the rights of that Creditor Party under or pursuant to the Finance Documents (other than this Agreement) which relate to the portion of that Creditor Party’s rights and obligations transferred by the relevant Transfer Certificate.
 
16.6          No assignment or transfer by the Borrowers    No Borrower may assign any of its rights or transfer any of its rights or obligations under the Creditor Documents.
 
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17            The Agent, the Security Agent and the other Creditor Parties
 
17.1          Appointment
 
17.1.1       Each Creditor Party appoints the Agent to act as its agent under and in connection with the Finance Documents and appoints the Security Agent to act as its security agent for the purpose of the Security Documents.
 
17.1.2       Each Creditor Party authorises the Agent and the Security Agent to exercise the rights, powers, authorities and discretions specifically given to them under or in connection with the Finance Documents together with any other incidental rights, powers, authorities and discretions.
 
17.1.3       Except where the context otherwise requires, references in this Clause 17 to the “ Agent ” shall mean the Agent and the Security Agent individually and collectively.
 
17.2          Authority   Each Creditor Party irrevocably authorises the Agent (subject to Clauses 17.4 and 17.20):
 
17.2.1       to execute any Finance Document (other than this Agreement) on its behalf;
 
17.2.2       to collect, receive, release or pay any money on its behalf;
 
17.2.3       acting on the instructions from time to time of the Majority Lenders to give or withhold any waivers, consents or approvals under or pursuant to any Finance Document or amend the terms of any Finance Document;
 
17.2.4       acting on the instructions from time to time of the Majority Lenders to exercise, or refrain from exercising, any discretions under or pursuant to any Finance Document; and
 
17.2.5       to enforce any Finance Document on its behalf.
 
The Agent shall have no duties or responsibilities as agent or as security agent other than those expressly conferred on it by the Finance Documents and shall not be obliged to act on any instructions from the Creditor Parties or the Majority Lenders if to do so would, in the opinion of the Agent, be contrary to any provision of the Finance Documents or to any law, or would expose the Agent to any actual or potential liability to any third party.

 
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17.3          Trust    The Security Agent agrees and declares, and each of the other Creditor Parties acknowledges, that, subject to the terms and conditions of this Clause 17.3, the Security Agent holds the Trust Property on trust for the Creditor Parties absolutely. Each of the other Creditor Parties agrees that the obligations, rights and benefits vested in the Security Agent shall be performed and exercised in accordance with this Clause 17.3. The Security Agent shall have the benefit of all of the provisions of this Agreement benefiting it in its capacity as security agent for the Creditor Parties, and all the powers and discretions conferred on trustees by the Trustee Act 1925 (to the extent not inconsistent with this Agreement). In addition:
 
17.3.1       the Security Agent and any attorney, agent or delegate of the Security Agent may indemnify itself or himself out of the Trust Property against all liabilities, costs, fees, damages, charges, losses and expenses sustained or incurred by it or him in relation to the taking or holding of any of the Trust Property or in connection with the exercise or purported exercise of the rights, trusts, powers and discretions vested in the Security Agent or any other such person by or pursuant to the Security Documents or in respect of anything else done or omitted to be done in any way relating to the Security Documents;
 
17.3.2       the Creditor Parties agree that the perpetuity period applicable to the trusts declared by this Agreement shall be the period of eighty years from the date of this Agreement.
 
17.4           Limitations on authority   Except with the prior written consent of all the Creditor Parties, the Agent shall not be entitled to:
 
17.4.1       release or vary any security given for the Borrowers’ obligations under this Agreement; nor
 
17.4.2       waive the payment of any sum of money payable by any Security Party under the Finance Documents; nor
 
17.4.3       change the meaning of the expressions “ Majority Lenders ” or “ Margin ” or “ Availability Termination Date ”; nor
 
17.4.4       approve the identity of the Guarantor; nor
 
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17.4.5       exercise, or refrain from exercising, any discretion, or give or withhold any consent, the exercise or giving of which is, by the terms of this Agreement, expressly reserved to the Lenders; nor
 
17.4.6       extend the due date for the payment of any sum of money payable by any Security Party under any Finance Document; nor
 
17.4.7       take or refrain from taking any step if the effect of such action or inaction may lead to the increase of the obligations of a Lender under any Finance Document; nor
 
17.4.8       agree to change the currency in which any sum is payable under any Finance Document (other than in accordance with the terms of the relevant Finance Document); nor
 
17.4.9       agree to amend this Clause 17.4.
 
17.5          Liability   Neither the Agent nor any of its directors, officers, employees or agents shall be liable to the Creditor Parties for anything done or omitted to be done by the Agent under or in connection with any of the Relevant Documents unless as a result of the Agent’s gross negligence or wilful misconduct.
 
17.6          Acknowledgement   Each Creditor Party acknowledges that:
 
17.6.1       it has not relied on any representation made by the Agent or any of the Agent’s directors, officers, employees or agents or by any other person acting or purporting to act on behalf of the Agent to induce it to enter into any Creditor Document;
 
17.6.2       it has made and will continue to make without reliance on the Agent, and based on such documents and other evidence as it considers appropriate, its own independent investigation of the financial condition and affairs of the Security Parties in connection with the making and continuation of the Loan and any Master Agreement Liabilities;
 
17.6.3       it has made its own appraisal of the creditworthiness of the Security Parties; and
 
17.6.4       the Agent shall not have any duty or responsibility at any time to provide it with any credit or other information relating to any Security Party
 
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unless that information is received by the Agent pursuant to the express terms of a Finance Document.
 
Each Creditor Party agrees that it will not assert nor seek to assert against any director, officer, employee or agent of the Agent or against any other person acting or purporting to act on behalf of the Agent any claim which it might have against them in respect of any of the matters referred to in this Clause 17.6.
 
17.7          Limitations on responsibility   The Agent shall have no responsibility to any Security Party or to any Creditor Party on account of:
 
17.7.1       the failure of a Creditor Party or of any Security Party to perform any of its obligations under a Creditor Document; nor
 
17.7.2       the financial condition of any Security Party; nor
 
17.7.3       the completeness or accuracy of any statements, representations or warranties made in or pursuant to any Creditor Document, or in or pursuant to any document delivered pursuant to or in connection with any Creditor Document; nor
 
17.7.4       the negotiation, execution, effectiveness, genuineness, validity, enforceability, admissibility in evidence or sufficiency of any Creditor Document or of any document executed or delivered pursuant to or in connection with any Creditor Document.
 
17.8          The Agent’s rights   The Agent may:
 
17.8.1       assume that all representations or warranties made or deemed repeated by any Security Party in or pursuant to any Finance Document are true and complete, unless, in its capacity as the Agent, it has acquired actual knowledge to the contrary;
 
17.8.2       assume that no Default has occurred unless, in its capacity as the Agent, it has acquired actual knowledge to the contrary;
 
17.8.3       rely on any document or notice believed by it to be genuine;
 
17.8.4       rely as to legal or other professional matters on opinions and statements of any legal or other professional advisers selected or approved by it;
 
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17.8.5       rely as to any factual matters which might reasonably be expected to be within the knowledge of any Security Party on a certificate signed by or on behalf of that Security Party; and
 
17.8.6       refrain from exercising any right, power, discretion or remedy unless and until instructed to exercise that right, power, discretion or remedy and as to the manner of its exercise by the Creditor Parties (or, where applicable, by the Majority Lenders) and unless and until the Agent has received from the Creditor Parties any payment which the Agent may require on account of, or any security which the Agent may require for, any costs, claims, expenses (including legal and other professional fees) and liabilities which it considers it may incur or sustain in complying with those instructions.
 
17.9          The Agent’s duties   The Agent shall:
 
17.9.1       if requested in writing to do so by a Creditor Party, make enquiry and advise the Creditor Parties as to the performance or observance of any of the provisions of any Finance Document by any Security Party or as to the existence of an Event of Default; and
 
17.9.2       inform the Creditor Parties promptly of any Event of Default of which the Agent has actual knowledge; and
 
17.9.3       distribute to the Creditor Parties promptly any information supplied to the Agent by the Borrowers under and pursuant to Clause 14.1.3.
 
17.10        No deemed knowledge   The Agent shall not be deemed to have actual knowledge of the falsehood or incompleteness of any representation or warranty made or deemed repeated by any Security Party or actual knowledge of the occurrence of any Default unless a Creditor Party or a Security Party shall have given written notice thereof to the Agent in its capacity as the Agent. Any information acquired by the Agent other than specifically in its capacity as the Agent shall not be deemed to be information acquired by the Agent in its capacity as the Agent.
 
17.11        Other business   The Agent may, without any liability to account to the Creditor Parties, generally engage in any kind of banking or trust business with a Security Party or with a Security Party’s subsidiaries or associated companies or with a Creditor Party as if it were not the Agent.
 
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17.12        Indemnity   The Lenders shall, promptly on the Agent’s request, reimburse the Agent in their respective Proportionate Shares, for, and keep the Agent fully indemnified in respect of all liabilities, damages, costs and claims sustained or incurred by the Agent in connection with the Finance Documents, or the performance of its duties and obligations, or the exercise of its rights, powers, discretions or remedies under or pursuant to any Finance Document, to the extent not paid by the Security Parties and not arising solely from the Agent’s gross negligence or wilful misconduct.
 
17.13        Employment of agents   In performing its duties and exercising its rights, powers, discretions and remedies under or pursuant to the Finance Documents, the Agent shall be entitled to employ and pay agents to do anything which the Agent is empowered to do under or pursuant to the Finance Documents (including the receipt of money and documents and the payment of money) and to act or refrain from taking action in reliance on the opinion of, or advice or information obtained from, any lawyer, banker, broker, accountant, valuer or any other person believed by the Agent in good faith to be competent to give such opinion, advice or information.
 
17.14        Distribution of payments   Without limitation to Clauses 12.10 and 12.11 and subject to Clause 17.15, the Agent shall pay promptly to the order of each Lender its Proportionate Share of every sum of money received by the Agent pursuant to the Finance Documents and shall pay promptly to the order of each Creditor Party every other sum of money received by the Agent pursuant to the Finance Documents and which may be due to that Creditor Party and until so paid each such amount shall be held by the Agent on trust absolutely for that Lender or Creditor Party, as the case may be.
 
17.15        Distribution of fees  Any amounts payable pursuant to Clause 11 and/or any Fee Letter and any amounts which, by the terms of the Finance Documents, shall be paid to the Agent for the account of the Agent alone or, as the context may require, specifically for the account of one or more of the Creditor Parties shall not be distributed in accordance with Clause 17.14 but will be held by the Agent for its own benefit or , as the context may require transferred by the Agent to the relevant Creditor Party.
 
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17.16        Reimbursement   The Agent shall have no liability to pay any sum to a Creditor Party until it has itself received payment of that sum. If, however, the Agent does pay any sum to a Creditor Party on account of any amount prospectively due to that Creditor Party pursuant to Clause 17.14 before it has itself received payment of that amount, and the Agent does not in fact receive payment within five (5) Business Days after the date on which that payment was required to be made by the terms of the Finance Documents, that Creditor Party will, on demand by the Agent, refund to the Agent an amount equal to the amount received by it, together with an amount sufficient to reimburse the Agent for any amount which the Agent may certify that it has been required to pay by way of interest on money borrowed to fund the amount in question during the period beginning on the date on which that amount was required to be paid by the terms of the Finance Documents and ending on the date on which the Agent receives reimbursement.
 
17.17        Redistribution of payments   Unless otherwise agreed between the Agent and the other Creditor Parties, if at any time a Creditor Party receives or recovers by way of set-off, the exercise of any lien or otherwise from any Security Party, any sum due from that Security Party to any of the Creditor Parties under the Finance Documents (the amount received by such Creditor Party being referred to in this Clause 17.17 and in Clause 17.18 as the “ Received Amount ”) then:
 
17.17.1     that Creditor Party shall promptly notify the Agent (which shall promptly notify each other Creditor Party);
 
17.17.2     that Creditor Party shall pay to the Agent an amount equal to the Received Amount within ten (10) days of its receipt or recovery of the Received Amount; and
 
17.17.3     the Agent shall treat that payment as if it were a payment by the Security Party in question on account of the sum due from that Security Party to the Creditor Parties and shall account to the Creditor Parties in respect of the Received Amount in accordance with the provisions of Clause 17.14.
 
However, if a Creditor Party has commenced any legal proceedings to recover sums owing to it under the Finance Documents and, as a result of, or in connection with, those proceedings has received a Received Amount, the Agent shall not distribute any of that Received Amount to any other Creditor Party which had been notified of the proceedings and had the legal right to, but did not, join those proceedings or
 
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commence and diligently prosecute separate proceedings to enforce its rights in the same or another court.
 
17.18        Rescission of Received Amount   If all or any part of any Received Amount is rescinded or must otherwise be restored to any Security Party or to any other third party, the relevant Creditor Parties which have received any part of that Received Amount by way of distribution from the Agent pursuant to Clauses 17.14 and 17.17 shall repay to the Agent the full amount of that Received Amount and the Agent shall return to the account of the Creditor Party which originally received or recovered the Received Amount, such amount which has been rescinded or must otherwise be restored to the Security Party in question, and the balance of the Received Amount shall be redistributed by the Agent in accordance with Clause 17.14.
 
17.19        Proceedings   Each of the Creditor Parties and the Agent shall notify one another of the proposed commencement of any legal proceedings under any Finance Document prior to their commencement.
 
17.20        Instructions   Where the Agent is authorised or directed to act or refrain from acting in accordance with the instructions of the Creditor Parties, or any of them, or of the Majority Lenders, each of the Creditor Parties or the Majority Lenders, as the context may require, shall provide the Agent with instructions within three (3) Business Days of the Agent’s request (which request may be made orally or in writing). If a Creditor Party does not provide the Agent with instructions within that period, that Creditor Party shall be bound by the decision of the Agent. Nothing in this Clause 17.20 shall limit the right of the Agent to take, or refrain from taking, any action without obtaining the instructions of the Creditor Party, or the Majority Lenders, as the context may require, if the Agent in its discretion considers it necessary or appropriate to take, or refrain from taking, such action in order to preserve the rights of the Creditor Parties under or in connection with the Finance Documents. In that event, the Agent will notify the Creditor Parties of the action taken by it as soon as reasonably practicable, and the Creditor Parties agree to ratify any action taken by the Agent pursuant to this Clause 17.20.
 
17.21        Payments    All amounts payable to a Creditor Party under this Clause 17 shall be paid to such account at such bank as that Creditor Party may from time to time direct in writing to the Agent.
 
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17.22        “Know your customer” checks   Each Creditor Party shall promptly upon the request of the Agent supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Agent (for itself) in order for the Agent to carry out and be satisfied it has complied with all necessary “know your customer” or other similar checks under all applicable laws and regulations pursuant to the transactions contemplated in the Finance Documents.
 
17.23        Resignation   Subject to a successor being appointed in accordance with this Clause 17.23, the Agent may resign as agent and/or security agent at any time without assigning any reason by giving to the Borrowers and the Creditor Parties notice of its intention to do so, in which event the following shall apply:
 
17.23.1     the Creditor Parties may within thirty (30) days after the date of the Agent’s notice appoint a successor to act as agent and/or security agent or, if they fail to do so, the Agent may appoint any other bank or financial institution as its successor;
 
17.23.2     the resignation of the Agent shall take effect simultaneously with the appointment of its successor on written notice of that appointment being given to the Borrowers, and the Creditor Parties;
 
17.23.3     the Agent shall thereupon be discharged from all further obligations as agent and/or security agent but shall remain entitled to the benefit of the provisions of this Clause 17; and
 
17.23.4     the Agent’s successor and each of the other parties to this Agreement shall have the same rights and obligations amongst themselves as they would have had if that successor had been a party to this Agreement.
 
17.24        No fiduciary relationship   Except as provided in Clauses 17.3 and 17.14, the Agent shall not have any fiduciary relationship with or be deemed to be a trustee of or for a Creditor Party and nothing contained in any Finance Document shall constitute a partnership between any two or more Creditor Parties Bank or between the Agent and any Creditor Party.
 
18            Set-Off
 
A Creditor Party may set off any matured obligation due from the Borrowers under any Creditor Document (to the extent beneficially owned by that Creditor Party) against any
 
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matured obligation owed by that Creditor Party to any Borrower, regardless of the place of payment, booking branch or currency of either obligation. If the obligations are in different currencies, that Creditor Party may convert either obligation at a market rate of exchange in its usual course of business for the purpose of the set-off. Sums received by a Creditor Party under and pursuant to this Clause 18 shall be applied in accordance with  Clause 12.10 and/or Clause 12.11 (as the context may require).
 
19            Payments
 
19.1          Payments   Each amount payable by a Borrower under a Creditor Document shall be paid to such account at such bank as the Agent (in the case of a Finance Document) or the Swap Bank (in the case of a Master Agreement Document) may from time to time direct to the Borrowers in the Currency of Account and in such funds as are customary at the time for settlement of transactions in the relevant currency in the place of payment. Payment shall be deemed to have been received by the Agent or the Swap Bank, as the context may require, on the date on which the Agent or the Swap Bank receives authenticated advice of receipt, unless that advice is received by the Agent or the Swap Bank on a day other than a Business Day or at a time of day (whether on a Business Day or not) when the Agent or the Swap Bank in its discretion considers that it is impossible or impracticable for the Agent or the Swap Bank to utilise the amount received for value that same day, in which event the payment in question shall be deemed to have been received by the Agent or the Swap Bank on the Business Day next following the date of receipt of advice by the Agent.
 
19.2          No deductions or withholdings   Each payment (whether of principal or interest or otherwise) to be made by a Borrower under a Creditor Document shall, subject only to Clause 19.3, be made free and clear of and without deduction for or on account of any Taxes or other deductions, withholdings, restrictions, conditions or counterclaims of any nature.
 
19.3          Grossing-up   If at any time any law requires (or is interpreted to require) a Borrower to make any deduction or withholding from any payment, or to change the rate or manner in which any required deduction or withholding is made, the Borrowers will promptly notify the Agent (in the case of a Finance Document) or the Swap Bank (in the case of a Master Agreement Document) and, simultaneously with that payment, will pay to the Agent (in the case of a Finance Document) or the
 
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Swap Bank (in the case of a Master Agreement Document) whatever additional amount (after taking into account any additional Taxes on, or deductions or withholdings from, or restrictions or conditions on, that additional amount) is necessary to ensure that, after the deduction or withholding, the relevant Creditor Parties receive a net sum equal to the sum which they would have received had no deduction or withholding been made.
 
19.4          Evidence of deductions   If at any time a Borrower is required by law to make any deduction or withholding from any payment to be made by it under a Creditor Document, that Borrower will pay the amount required to be deducted or withheld to the relevant authority within the time allowed under the applicable law and will, no later than thirty (30) days after making that payment, deliver to the Agent (in the case of a Finance Document) or the Swap Bank (in the case of a Master Agreement Document) an original receipt issued by the relevant authority, or other evidence acceptable to the Agent (in the case of a Finance Document) or the Swap Bank (in the case of a Master Agreement Document), evidencing the payment to that authority of all amounts required to be deducted or withheld.
 
19.5          Adjustment of due dates   If any payment or transfer of funds to be made under a Creditor Document, other than a payment of interest on the Loan, shall be due on a day which is not a Business Day, that payment shall be made on the next succeeding Business Day (unless the next succeeding Business Day falls in the next calendar month in which event the payment shall be made on the next preceding Business Day). Any such variation of time shall be taken into account in computing any interest in respect of that payment.
 
19.6          Control Account    The Agent shall open and maintain on its books a control account in the names of the Borrowers showing the advance of the Loan and the computation and payment of interest and all other sums due under this Agreement. The Borrowers’ obligations to repay the Loan and to pay interest and all other sums due under this Agreement shall be evidenced by the entries from time to time made in the control account opened and maintained under this Clause 19.6 and those entries will, in the absence of manifest error, be conclusive and binding.
 
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20            Notices
 
20.1          Communications in writing   Any communication to be made under or in connection with this Agreement shall be made in writing and, unless otherwise stated, may be made by fax or letter.
 
20.2          Addresses   The address and fax number (and the department or officer, if any, for whose attention the communication is to be made) of each party to this Agreement for any communication or document to be made or delivered under or in connection with this Agreement are:
 
20.2.1       in the case of the Borrowers, c/o Danaos Shipping Co. Ltd., Akti Kondyli 14, 185 45 Piraeus, Greece (fax no: +30 210 422 0855) marked for the attention of Legal Department;
 
20.2.2       in the case of each Lender, those appearing opposite its name in Schedule 1;
 
20.2.3       in the case of the Agent, the Security Agent, and Aegean Baltic Bank S.A., acting in its capacity as Joint Arranger and/or Co-underwriter, 28 Diligianni Street, 145 62 Kifissa, Greece (fax no: +30 210 623 4192-3) marked for the attention of Business Development;
 
20.2.4       in the case of HSH Nordbank AG, acting in its capacity as Joint Arranger, and/or Co-underwriter, and/or Swap Bank, Gerhart-Hauptmann-Platz 50, 20095 Hamburg, Federal Republic of Germany (fax no: +49 40 333 334 118) marked for the attention [                        ];
 
or any substitute address, fax number, department or officer as any party may notify to the Agent (or the Agent may notify to the other parties, if a change is made by the Agent) by not less than five (5) Business Days’ notice.
 
20.3          Delivery   Any communication or document made or delivered by one party to this Agreement to another under or in connection this Agreement will only be effective:
 
20.3.1       if by way of fax, when received in legible form; or
 
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20.3.2       if by way of letter, when it has been left at the relevant address or five (5) Business Days after being deposited in the post postage prepaid in an envelope addressed to it at that address;
 
and, if a particular department or officer is specified as part of its address details provided under Clause 20.2, if addressed to that department or officer.
 
Any communication or document to be made or delivered to a Creditor Party will be effective only when actually received by that Creditor Party.
 
All notices from or to the Borrowers shall be sent through the Agent.
 
20.4          Notification of address and fax number   Promptly upon receipt of notification of an address, fax number or change of address, pursuant to Clause 20.2 or changing its own address or fax number, the Agent shall notify the other parties to this Agreement.
 
20.5          English language   Any notice given under or in connection with this Agreement must be in English. All other documents provided under or in connection with this Agreement must be:
 
20.5.1       in English; or
 
20.5.2       if not in English, and if so required by the Agent, accompanied by a certified English translation and, in this case, the English translation will prevail unless the document is a constitutional, statutory or other official document.
 
21            Partial Invalidity
 
If, at any time, any provision of a Creditor Document is or becomes illegal, invalid or unenforceable in any respect under any law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions nor the legality, validity or enforceability of such provision under the law of any other jurisdiction will in any way be affected or impaired.
 
22            Remedies and Waivers
 
No failure to exercise, nor any delay in exercising, on the part of any Creditor Party, any right or remedy under a Creditor Document shall operate as a waiver, nor shall any single
 
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or partial exercise of any right or remedy prevent any further or other exercise or the exercise of any other right or remedy. The rights and remedies provided in this Agreement and the Master Agreement are cumulative and not exclusive of any rights or remedies provided by law.
 
23            Joint and several liability
 
23.1          Nature of liability   The representations, warranties, covenants, obligations and undertakings of the Borrowers contained in this Agreement and the Master Agreement shall be joint and several so that each Borrower shall be jointly and severally liable with all the Borrowers for all of the same and such liability shall not in any way be discharged, impaired or otherwise affected by:
 
23.1.1       any forbearance (whether as to payment or otherwise) or any time or other indulgence granted to any other Borrower or any other Security Party under or in connection with any Creditor Document;
 
23.1.2       any amendment, variation, novation or replacement of any other Creditor Document;
 
23.1.3       any failure of any Creditor Document to be legal valid binding and enforceable in relation to any other Borrower or any other Security Party for any reason;
 
23.1.4       the winding-up or dissolution of any other Borrower or any other Security Party;
 
23.1.5       the release (whether in whole or in part) of, or the entering into of any compromise or composition with, any other Borrower or any other Security Party; or
 
23.1.6       any other act, omission, thing or circumstance which would or might, but for this provision, operate to discharge, impair or otherwise affect such liability.
 
23.2          No rights as surety   Until the Indebtedness has been unconditionally and irrevocably paid and discharged in full, each Borrower agrees that it shall not, by virtue of any payment made under this Agreement or the Master Agreement on account of the Indebtedness or by virtue of any enforcement by a Creditor Party of
 
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its rights under this Agreement or, in the case of the Swap Bank, under the Master Agreement or by virtue of any relationship between, or transaction involving, the relevant Borrower and any other Borrower or any other Security Party:
 
23.2.1       exercise any rights of subrogation in relation to any rights, security or moneys held or received or receivable by a Creditor Party or any other person; or
 
23.2.2       exercise any right of contribution from any other Borrower or any other Security Party under any Creditor Document; or
 
23.2.3       exercise any right of set-off or counterclaim against any other Borrower or any other Security Party; or
 
23.2.4       receive, claim or have the benefit of any payment, distribution, security or indemnity from any other Borrower or any other Security Party; or
 
23.2.5       unless so directed by the Agent or, in the case of the Master Agreement, the Swap Bank (when the relevant Borrower will prove in accordance with such directions), claim as a creditor of any other Borrower or any other Security Party in competition with any Creditor Party;
 
and each Borrower shall hold in trust for the Creditor Parties and forthwith pay or transfer (as appropriate) to the Agent or, in the case of the Master Agreement, the Swap Bank any such payment (including an amount equal to any such set-off), distribution or benefit of such security, indemnity or claim in fact received by it.
 
24            Miscellaneous
 
24.1          No oral variations   No variation or amendment of a Creditor Document shall be valid unless in writing and signed on behalf of all the Creditor Parties (in the case of the Finance Documents) or the Swap Bank (in the case of the Master Agreement Documents).
 
24.2          Further Assurance   If any provision of a Creditor Document shall be invalid or unenforceable in whole or in part by reason of any present or future law or any decision of any court, or if the documents at any time held by or on behalf of the Creditor Parties or any of them are considered by the Creditor Parties, in the case of the Finance Documents, or the Swap Bank, in the case of the Master Agreement
 
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Documents, for any reason insufficient to carry out the terms of this Agreement and/or the Master Agreement,then from time to time the Borrowers will promptly, on demand by the Agent or, in the case of the Master Agreement, promptly on demand by the Swap Bank, execute or procure the execution of such further documents as in the opinion of the Creditor Parties and the Swap Bank are necessary to provide adequate security for the repayment of the Indebtedness.

24.3          Rescission of payments etc.   Any discharge, release or reassignment by a Creditor Party of any of the security constituted by, or any of the obligations of a Security Party contained in, a Creditor Document shall be (and be deemed always to have been) void if any act (including, without limitation, any payment) as a result of which such discharge, release or reassignment was given or made is subsequently wholly or partially rescinded or avoided by operation of any law.
 
24.4          Certificates   Any certificate or statement signed by an authorised signatory of the Agent purporting to show the amount of the Indebtedness or the Senior Indebtedness (or any part of the Indebtedness or the Senior Indebtedness) or any other amount referred to in any Finance Document or any certificate or statement signed by an authorised signatory of the Swap Bank purporting to show the amount of the Junior Indebtedness (or any part of the Junior Indebtedness) or any amount referred to in any Master Agreement Document shall, save for manifest error or on any question of law, be conclusive evidence as against the Borrowers of that amount.
 
24.5          Counterparts   This Agreement may be executed in any number of counterparts each of which shall be original but which shall together constitute the same instrument.
 
24.6          Contracts (Rights of Third Parties) Act 1999   A person who is not a party to this Agreement has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce or to enjoy the benefit of any term of this Agreement.
 
24.7          Disclaimer for unencoded e-mails  All information related or connected to this Agreement and the Master Agreement and the Loan and any Hedging Transactions made by the Creditor Parties and their respective credit decisions and all negotiations related or connected to the drafting and drawing up of any of the Creditor Documents, any other security documents and any transaction document may be made or given by any of the Creditor Parties, their respective
 
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lawyers and any other consultants inter se and otherwise by e-mail. The Borrowers, the Creditor Parties and their respective lawyers and agents confirm their awareness of, and accept, the material risks generally related to communications by e-mail.
 
24.8          Conflict  In the event of there being any conflict between this Agreement and any of the other Creditor Documents, the provisions of this Agreement shall prevail.
 
25            Law and Jurisdiction
 
25.1          Governing law   This Agreement shall in all respects be governed by and interpreted in accordance with English law.
 
25.2          Jurisdiction   For the exclusive benefit of the Creditor Parties, the parties to this Agreement irrevocably agree that the courts of England are to have jurisdiction to settle any disputes which may arise out of or in connection with this Agreement and that any proceedings may be brought in those courts.
 
25.3          Alternative jurisdictions   Nothing contained in this Clause 25 shall limit the right of the Creditor Parties to commence any proceedings against the Borrowers in any other court of competent jurisdiction nor shall the commencement of any proceedings against the Borrowers in one or more jurisdictions preclude the commencement of any proceedings in any other jurisdiction, whether concurrently or not.
 
25.4          Waiver of objections   Each Borrower irrevocably waives any objection which it may now or in the future have to the laying of the venue of any proceedings in any court referred to in this Clause 25, and any claim that those proceedings have been brought in an inconvenient or inappropriate forum, and irrevocably agrees that a judgment in any proceedings commenced in any such court shall be conclusive and binding on it and may be enforced in the courts of any other jurisdiction.
 
25.5          Service of process   Without prejudice to any other mode of service allowed under any relevant law, each Borrower:
 
25.5.1       irrevocably appoints Danaos Management Consultants of 4 Staple Inn, Holborn, London WC1V 7QU, England as its agent for service of process in relation to any proceedings before the English courts in connection with this Agreement; and
 
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25.5.2       Irrevocably appoints Ms Zoe Lappa, Attorney-at-law, of c/o Danaos Shipping Co. Ltd., 14 Akti Kondyli, Piraeus, Greece, Fax No. +30 210 42 20 855 Tel. No. +30 210 41 96 400 as agent to accept service in Greece (hereinafter referred to as the “ Greek Process Agent ”) upon whom any judicial process in Greece may be served and any notice, request, demand or other communication under this Agreement or any of the other Creditor Documents. In the event that the Greek Process Agent (or any substitute process agent notified to the Agent and the Borrowers in accordance with the foregoing) cannot be found at the address specified above (or, as the case may be, notified to the Agent), which will be conclusively proved by a deed of a process server that the Greek Process Agent cannot be found at such address, any process notice, request, demand or other communication to be sent to the Borrowers may be validly effected upon the District Attorney of the First Instance Court of Piraeus.
 
25.5.3       agrees that failure by a process agent to notify any Borrower of the process will not invalidate the proceedings concerned.
 
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SCHEDULE 1: The Lenders and the Commitments

The Lenders	 	The Commitments	 	
 	 	 	 	
AEGEAN BALTIC BANK S.A.	 	$	4,000,000	 	
28 Diligianni Street	 	 	 	
145 62 Kifissia	 	 	 	
Greece	 	 	 	
Fax number: +30 210 623 4192	 	 	 	
Attention: Business Development	 	 	 	
 	 	 	 	
HSH NORDBANK AG	 	$	51,000,000	 	
Gerhart-Hauptmann-Platz 50	 	 	 	
20095 Hamburg	 	 	 	
The Federal Republic of Germany	 	 	 	
Fax number: +49 40 333 334 118	 	 	 	
Attention: Greek Desk	 	 	 	
 	 	 	 	
CITIBANK INTERNATIONAL PLC, GREECE BRANCH	 	$	45,000,000	 	
47-49 Akti Miaouli Str.	 	 	 	
18536 Piraeus	 	 	 	
Greece	 	 	 	
Fax number: +30 210 4292 806	 	 	 	
Attention: George Kakoulidis	 	 	 	
 
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DRESDNER BANK AKTIENGESELLSCHAFT IN HAMBURG	 	$	40,000,000	 	
Jungfernstieg 22	 	 	 	
20349 Hamburg	 	 	 	
The Federal Republic of Germany	 	 	 	
Fax number: +49 40 3501 4007	 	 	 	
Attention: Thomas Witte, Dr. Christian Hennig	 	 	 	
 	 	 	 	
ABN AMRO BANK N.V.	 	$	20,000,000	 	
330 Thisseos Ave.	 	 	 	
10110 Athens	 	 	 	
Greece	 	 	 	
Fax number: +30 210 940 5327	 	 	 	
Attention: Dimitris Sfakianakis	 	 	 	
 	 	 	 	
DVB BANK AG	 	$	20,000,000	 	
Friedrich-Ebert-Anlage 2-14	 	 	 	
D-60325 Frankfurt am Main	 	 	 	
The Federal Republic of Germany	 	 	 	
Fax number: +49 699 7504 444	 	 	 	
Attention: Loans Administration Department	 	 	 	
With a copy of the notices to:	 	 	 	
DVB Bank AG, Representative Office, Greece	 	 	 	
Fax number: +30 210 429 1284	 	 	 	
Attention: Eri Tsironi	 	 	 	
 
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CREDIT SUISSE	 	$	20,000,000	 	
St. Alban-Graben 1-3	 	 	 	
4002 Basle	 	 	 	
Switzerland	 	 	 	
Fax number: +41 61 266 7939	 	 	 	
Attention: Ship Finance / Meike Mättig	 	 	 	
 
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SCHEDULE 2: Conditions Precedent and Subsequent
 
Part I: Conditions precedent
 
1               Security Parties
 
(a)            Constitutional Documents    Copies of the constitutional documents of each Security Party together with such other evidence as the Agent may reasonably require that each Security Party is duly incorporated in its country of  incorporation and remains in existence with power to enter into, and perform its obligations under, the Relevant Documents to which it is or is to become a party.
 
(b)            Certificates of good standing    A certificate of good standing in respect of each Security Party (if such a certificate can be obtained).
 
(c)            Board resolutions   A copy of a resolution of the board of directors of each Security Party:
 
(i)             approving the terms of, and the transactions contemplated by, the Relevant Documents to which it is a party and resolving that it execute those Relevant Documents; and
 
(ii)            authorising a specified person or persons to execute those Relevant Documents (and all documents and notices to be signed and/or despatched under those documents) on its behalf.
 
(d)            Specimen signatures   A specimen of the signature of each person authorised by the resolutions referred to in paragraph (c) above.
 
(e)            Shareholder resolutions   A copy of a resolution signed by all the holders of the issued shares in each Security Party, approving the terms of, and the transactions contemplated by, the Relevant Documents to which that Security Party is a party.
 
(f)             Officer’s certificates   A certificate of a duly authorised officer of each Security Party certifying that each copy document relating to it specified in this Part I of Schedule 2 is correct, complete and in full force and effect as at a date no earlier than the date of this Agreement and setting out the names of the directors, officers
 
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and shareholders of that Security Party and the proportion of shares held by each shareholder.
 
(g)            Evidence of registration   Where such registration is required or permitted under the laws of the relevant jurisdiction, evidence that the names of the directors, officers and shareholders of each Security Party are duly registered in the companies registry or other registry in the country of incorporation of that Security Party.
 
(h)            Powers of attorney   The notarially attested and legalised power of attorney of each Security Party under which any documents are to be executed or transactions undertaken by that Security Party.
 
2               Security and related documents
 
(a)            Vessel documents   Photocopies, certified as true, accurate and complete by  director or the secretary or the legal advisers of the Borrower, of:
 
(i)             the Charter of the Vessel together with evidence that it is in force on the Drawdown Date;
 
(ii)            the Management Agreement;
 
(iii)           the Vessel’s current Safety Construction, Safety Equipment, Safety Radio and Load Line Certificates;
 
(iv)           the Vessel’s current Certificate of Financial Responsibility issued pursuant to the United States Oil Pollution Act 1990;
 
(v)            the Vessel’s current SMC;
 
(vi)           the ISM Company’s current DOC;
 
(vii)          the Vessel’s current ISSC;
 
(viii)         the Vessel’s current Tonnage Certificate;
 
(ix)            the Borrower’s current Carrier Initiative Agreement with the United States’ Customs Service;
 
in each case together with all addenda, amendments or supplements.
 
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(b)            Evidence of Borrower’s title   Evidence that on the Drawdown Date (i) the Vessel will be permanently registered under the flag stated in Recital (A) in the ownership of the Borrower and (ii) the Mortgage will be capable of being registered against the Vessel with first priority.
 
(c)            Evidence of insurance   Evidence that the Vessel is insured in the manner required by the Security Documents and that letters of undertaking will be issued in the manner required by the Security Documents, together with (if required by the Agent) the written approval of the Insurances by an insurance adviser appointed by the Agent.
 
(d)            Confirmation of class   A Certificate of Confirmation of Class for hull and machinery confirming that the Vessel is classed with the highest class applicable to vessels of her type with Lloyd’s Register of Shipping or such other IACS classification society as may be acceptable to the Agent free of overdue recommendations and/or notations affecting class.
 
(e)            Valuation    Two valuations of the Vessel addressed to the Agent from two brokers referred to in Clause 12.13 each certifying a value for the Vessel, and assessed in accordance with Clause 12.13.
 
(f)             Security Documents   The Mortgage and the Assignments in respect of the Vessel, the Guarantee and the Accounts Charge, together with all other documents required by any of them, including, without limitation, all notices of assignment and/or charge and evidence that those notices will be duly acknowledged by the recipients.
 
(g)            Mandates    Such duly signed forms of mandate, and/or other evidence of the opening of the  Earnings Account, as the Agent and the Swap Bank may require.
 
(h)            Managers’ confirmation   The written confirmation of the Managers that, throughout the Facility Period unless otherwise agreed by the Agent, they will remain the commercial and technical managers of the Vessel and that they will not, without the prior written consent of the Agent, sub-contract or delegate the commercial or technical management of the Vessel to any third party and confirming in terms acceptable to the Agent that, following the occurrence of an Event of Default, all claims of the Managers against the Borrower shall be subordinated to the claims of the Creditor Parties under the Creditor Documents.
 
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(i)             No disputes   The written confirmation of the Borrower that there is no dispute under any of the Relevant Documents as between the parties to any such document.
 
(j)             Other Relevant Documents    Copies of each of the Relevant Documents not otherwise comprised in the documents listed in this Part I of Schedule 2.
 
3               Legal opinions
 
(a)            If a Security Party is incorporated in a jurisdiction other than England and Wales or if any Creditor Document is governed by the laws of a jurisdiction other than England and Wales, a legal opinion of the legal advisers to the Lenders in each relevant jurisdiction, substantially in the form or forms provided to the Agent prior to signing this Agreement or confirmation satisfactory to the Agent that such an opinion will be given.
 
4               Other documents and evidence
 
(a)            Drawdown Notice   A duly completed Drawdown Notice.
 
(b)            Process agent   Evidence that any process agent referred to in Clause 25.5 and any process agent appointed under any other Creditor Document has accepted its appointment.
 
(c)            Other authorisations   A copy of any other consent, licence, approval, authorisation or other document, opinion or assurance which the Agent considers to be necessary or desirable (if it has notified the Borrowers accordingly) in connection with the entry into and performance of the transactions contemplated by any of the Relevant Documents or for the validity and enforceability of any of the Relevant Documents.
 
(d)            Fees   Evidence that the fees, costs and expenses then due from the Borrowers under Clause 10 and Clause 11 have been paid or will be paid by the relevant Drawdown Date.
 
(e)            “Know your customer” documents    Such documentation and other evidence as is reasonably requested by the Agent in order for the Lenders to comply with all necessary “know your customer” or similar identification procedures in relation to the transactions contemplated in the Creditor Documents.
 
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Part II: Conditions subsequent
 
1               Evidence of Borrower’s title   Certificate of ownership and encumbrance (or equivalent) issued by the Registrar of Ships (or equivalent official) of the flag stated in Recital (A) confirming that (a) the Vessel is permanently registered under that flag in the ownership of the Borrower, (b) the Mortgage has been registered with first priority against the Vessel and (c) there are no further Encumbrances registered against the Vessel.
 
2               Letters of undertaking   Letters of undertaking in respect of the Insurances as required by the Security Documents together with copies of the relevant policies or cover notes or entry certificates duly endorsed with the interest of the Security Agent.
 
3               Acknowledgements of notices    Acknowledgements of all notices of assignment and/or charge given pursuant to any Security Documents received by the Agent pursuant to Part I of this Schedule 2.
 
4               Legal opinions   Such of the legal opinions specified in Part I of this Schedule 2 as have not already been provided to the Agent.
 
5               Companies Act registrations    Evidence that the prescribed particulars of any Security Documents received by the Agent pursuant to Part I of this Schedule 2 have been delivered to the Registrar of Companies of Singapore within the statutory time limit.
 
6               Master’s receipt    The master’s receipt for any Mortgage in respect of a Greek flag Vessel.
 
7               Re-execution of Greek Mortgage  Upon the execution of a transfer certificate pursuant to Clause 16.1, a notarial deed of assignment in respect of any Greek Mortgage will be  duly executed by all the Lenders, the Swap Bank and the Transferee and recorded at the Greek Ships’ Registry and a relevant Greek legal opinion shall be provided to the Agent, together with equivalent documents and evidence to that specified at Part I 1 (a) to (h) inclusive, and Part I, 2 (c).
 
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SCHEDULE 3: Form of Drawdown Notice
 
To:           AEGEAN BALTIC BANK S.A.
 
From:       LATO SHIPPING (PRIVATE) LTD.
FERROUS SHIPPING (PRIVATE) LTD.
COBALTIUM SHIPPING (PRIVATE) LTD.
COMMODORE MARINE INC.
[Date]
 
Dear Sirs,
 
Drawdown Notice
 
We refer to the Loan Agreement dated                            200  made between, amongst others, ourselves and yourselves (the “ Agreement ”).
 
Words and phrases defined in the Agreement have the same meaning when used in this Drawdown Notice.
 
Pursuant to Clause 4.1 of the Agreement, we irrevocably request that you advance a Drawing in the sum of [                                                                       ] to us on                                        200  , which is a Business Day, by paying the amount of the Drawing in respect of the Vessel named [                                            ] in the following manner [         ].
 
We warrant that the representations and warranties contained in Clause 13.1 of the Agreement are true and correct at the date of this Drawdown Notice and will be true and correct on               200 , that no Default has occurred and is continuing, and that no Default will result from the advance of the Drawing requested in this Drawdown Notice.
 
[We select the period of [       ] months as the first Interest Period.]

Yours faithfully	

 	
For and on behalf of	
 
LATO SHIPPING (PRIVATE) LTD.
FERROUS SHIPPING (PRIVATE) LTD.
COBALTIUM SHIPPING (PRIVATE) LTD.
COMMODORE MARINE INC.
 
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SCHEDULE 4: Form of Transfer Certificate
 
To:           AEGEAN BALTIC BANK S.A.
 
TRANSFER CERTIFICATE
 
This transfer certificate relates to a secured loan facility agreement (as from time to time amended, varied, supplemented or novated  the “ Loan Agreement ”) dated                      200 , on the terms and subject to the conditions of which a secured loan facility of up to $200,000,000 was made available to LATO SHIPPING (PRIVATE) LTD., FERROUS SHIPPING (PRIVATE) LTD., COBALTIUM SHIPPING (PRIVATE) LTD. and COMMODORE MARINE INC. on a joint and several basis, by a syndicate of banks on whose behalf you act as agent and security agent.
 
1               Terms defined in the Loan Agreement shall, unless otherwise expressly indicated, have the same meaning when used in this certificate. The terms “ Transferor ” and “ Transferee ” are defined in the schedule to this certificate.
 
2               The Transferor:
 
2.1            confirms that the details in the Schedule under the heading “ Transferor’s Commitment ” accurately summarise its Commitment; and
 
2.2            requests the Transferee to accept by way of novation the transfer to the Transferee of the amount of the Transferor’s Commitment specified in the Schedule by counter-signing and delivering this certificate to the Agent at its address for communications specified in the Loan Agreement.
 
3               The Transferee requests the Agent to accept this certificate as being delivered to the Agent pursuant to and for the purposes of clause 16.1 of the Loan Agreement so as to take effect in accordance with the terms of that clause on the Transfer Date specified in the Schedule.
 
4               The Agent confirms its acceptance of this certificate for the purposes of clause 16.4 of the Loan Agreement.
 
5               The Transferee confirms that:
 
5.1            it has received a copy of the Loan Agreement together with all other information which it has required in connection with this transaction;
 
90

 
5.2            it has not relied and will not in the future rely on the Transferor or any other party to the Loan Agreement to check or enquire on its behalf into the legality, validity, effectiveness, adequacy, accuracy or completeness of any such information; and
 
5.3            it has not relied and will not in the future rely on the Transferor or any other party to the Loan Agreement to keep under review on its behalf the financial condition, creditworthiness, condition, affairs, status or nature of any Security Party.
 
6               Execution of this certificate by the Transferee constitutes its representation and warranty to the Transferor and to all other parties to the Loan Agreement that it has the power to become a party to the Loan Agreement as a Lender on the terms of the Loan Agreement and has taken all steps to authorise execution and delivery of this certificate.
 
7               The Transferee undertakes with the Transferor and each of the other parties to the Loan Agreement that it will perform in accordance with their terms all those obligations which by the terms of the Loan Agreement will be assumed by it after delivery of this certificate to the Agent and the satisfaction of any conditions subject to which this certificate is expressed to take effect.
 
8               The Transferor makes no representation or warranty and assumes no responsibility with respect to the legality, validity, effectiveness, adequacy or enforceability of any Creditor Document or any document relating to any Creditor Document, and assumes no responsibility for the financial condition of any Creditor Party or for the performance and observance by any Security Party of any of its obligations under any Creditor Document or any document relating to any Creditor Document and any conditions and warranties implied by law are expressly excluded.
 
9               The Transferee acknowledges that nothing in this certificate or in the Loan Agreement shall oblige the Transferor to:
 
9.1            accept a re-transfer from the Transferee of the whole or any part of the rights, benefits and/or obligations transferred pursuant to this certificate; or
 
9.2            support any losses directly or indirectly sustained or incurred by the Transferee for any reason including, without limitation, the non-performance by any party to any Creditor Document of any obligations under any Creditor Document.
 
10             The address and fax number of the Transferee for the purposes of clause 20 of the Loan Agreement are set out in the Schedule.
 
91

 
11             This certificate may be executed in any number of counterparts each of which shall be original but which shall together constitute the same instrument.
 
12             This certificate shall be governed by and interpreted in accordance with English law.
 
THE SCHEDULE
 
1               Transferor :
 
2               Transferee :
 
3               Transfer Date (not earlier that the fifth Business Day after the date of delivery of the Transfer Certificate to the Agent):
 
4               Transferor’s Commitment :
 
5               Amount transferred :
 
6               Transferee’s address and fax number for the purposes of clause 20 of the Loan Agreement :

[ name of Transferor ]	 	[ name of Transferee ]	
 	 	 	
By:	 	By:	
 	 	 	
Date:	 	Date:	

[ Agent ] as Agent	 	 	
 	 	 	
By:	 	 	
 	 	 	
Date:	 	 	
 
92

 
SCHEDULE 5: Form of Covenant Compliance Certificate
 
COVENANT COMPLIANCE CERTIFICATE
 
To:           AEGEAN BALTIC BANK S.A.
 
This covenant compliance certificate relates to a secured loan facility agreement (as from time to time amended, varied, supplemented or novated  the “ Loan Agreement ”) dated                                                         2005 , on the terms and subject to the conditions of which a secured loan facility of up to $200,000,000 was made available to LATO SHIPPING (PRIVATE) LTD., FERROUS SHIPPING (PRIVATE) LTD., COBALTIUM SHIPPING (PRIVATE) LTD. and COMMODORE MARINE INC. on a joint and several basis, by a syndicate of banks on whose behalf you act as agent and security agent.
 
We give this Covenant Compliance Certificate as required under Clause 14.2 of the Agreement. Terms used in this Covenant Compliance Certificate have the meanings given to them in the Agreement. .
 
The covenant calculations below are made on the basis of the Group Statements, as of, and in respect of the 12 months period ending on [   ]
 
Agreement             Covenant determination / Minimum Compliance                               Actual as of [    ]
 
Clause
 
14.2.1                       Net Worth  > $250,000,000
14.2.1                       Fixed Assets to Net Consolidated Indebtedness > 1.45:1
14.2.1                       Outstanding Bank Debt to Vessel Values < 0.75:1
14.2.1                       Net Worth to Total Assets > 1.30:1
14.2.2                       Liquid Funds > 30,000,000
14.2.2                       EBITDA to Net Interest Expenses > 2.5:1
 
It is hereby certified, by the undersigned, that there are no known, Events of Default or Potential Events of Default as of this date. Furthermore, it is hereby certified that the above representations and undertakings contained in the Agreement are true and correct and fulfilled at the time hereof with reference to the facts now subsisting.
 
93

 

Yours faithfully,	 	Yours faithfully,	 	

 	 	 	 	 	 	
for and on behalf of	 	 	for and on behalf of	 	 	
LATO SHIPPING (PRIVATE) LTD.	 	DANAOS HOLDINGS LIMITED	 	
FERROUOS SHIPPING (PRIVATE) LTD.	 	 	 	
COBALTIUM SHIPPING (PRIVATE) LTD.	 	 	 	
COMMODORE MARINE INC.	 	 	 	

Date:	 	Date:	 	
 	 	 	 	
Enclosure:	Financial Statements as per [      ]	 	 	 	

94

Exh. 10.9
IN WITNESS  of which the parties to this Agreement have executed this Agreement the day and
year first before written.

SIGNED by Iraklis Prokopakis	)	/s/ Iraklis Prokopakis	
duly authorised for and on behalf	)	 	
of LATO SHIPPING (PRIVATE) LTD.	)	 	

SIGNED by Iraklis Prokopakis	)	/s/ Iraklis Prokopakis	
duly authorised for and on behalf	)	 	
of FERROUS SHIPPING (PRIVATE) LTD.	)	 	

SIGNED by Iraklis Prokopakis	)	/s/ Iraklis Prokopakis	
duly authorised for and on behalf	)	 	
of COBALTIUM SHIPPING (PRIVATE)	)	 	
LTD.	)	 	

SIGNED by Iraklis Prokopakis	)	/s/ Iraklis Prokopakis	
duly authorised for and on behalf	)	 	
of COMMODORE MARINE INC.	)	 	
 	 	 	
 Theodore Afthonides	 	 	
SIGNED by Doerek Berkenbusch	)	/s/ Theodore Afthonides	
duly authorised for and on behalf	)	/s/ Doerek Berkenbusch	
of AEGEAN BALTIC BANK S.A. (as a Lender)	)	 	

SIGNED by Nigel Bowen - Morris	)	/s/ Nigel Bowen - Morris	
duly authorised for and on behalf	)	 	
of HSH NORDBANK AG (as a Lender)	)	 	

SIGNED by George Kakoulidis	)	/s/ George Kakoulidis	
duly authorised for and on behalf	)	 	
of CITIBANK INTERNATIONAL PLC	)	 	
( as a Lender)	)	 	

SIGNED by Nigel Bowen - Morris	)	/s/ Nigel Bowen - Morris	
duly authorised for and on behalf	)	 	
of DRESDNER BANK AKTIENGESELLSCHAFT	)	 	
IN HAMBURG	 	 	
(as a Lender)	 	 	
 
95

Exh. 10.9

 Dimitris Sfakianakis	 	 	
SIGNED by Eva Athanassaki	)	/s/ Dimitris Sfakianakis	
duly authorised for and on behalf	)	/s/ Eva Athanassaki	
of ABN AMRO BANK N.V. (as a Lender)	)	 	

SIGNED by Nigel Bowen - Morris	)	/s/ Nigel Bowen - Morris	
duly authorised for and on behalf	)	 	
of DVB BANK AG (as a Lender)	)	 	

SIGNED by Nigel Bowen - Morris	)	/s/ Nigel Bowen - Morris	
duly authorised for and on behalf	)	 	
of CREDIT SUISSE (as a Lender)	)	 	
 	 	 	
 Theodore Afthonides	 	 	
SIGNED by Doerek Berkenbusch	)	/s/ Theodore Afthonides	
duly authorised for and on behalf	)	/s/ Doerek Berkenbusch	
of AEGEAN BALTIC BANK S.A. (as the Agent)	)	 	
 	 	 	
 Theodore Afthonides	 	 	
SIGNED by Doerek Berkenbusch	)	/s/ Theodore Afthonides	
duly authorised for and on behalf	)	/s/ Doerek Berkenbusch	
of AEGEAN BALTIC BANK S.A.	)	 	
(as the Security Agent)	)	 	
 	 	 	
 Theodore Afthonides	 	 	
SIGNED by Doerek Berkenbusch	)	/s/ Theodore Afthonides	
duly authorised for and on behalf	)	/s/ Doerek Berkenbusch	
of AEGEAN BALTIC BANK S.A.	)	 	
(as Joint Arranger)	)	 	

SIGNED by Nigel Bowen - Morris	)	/s/ Nigel Bowen - Morris	
duly authorised for and on behalf	)	 	
of HSH NORDBANK AG	)	 	
(as Joint Arranger)	)	 	
 	 	 	
 Theodore Afthonides	 	 	
SIGNED by Doerek Berkenbusch	)	/s/ Theodore Afthonides	
duly authorised for and on behalf	)	/s/ Doerek Berkenbusch	
of AEGEAN BALTIC BANK S.A.	)	 	
(as Co-Underwriter)	)	 	
 
96

Exh. 10.9

SIGNED by Nigel Bowen - Morris	)	/s/ Nigel Bowen - Morris	
duly authorised for and on behalf	)	 	
of HSH NORDBANK AG	)	 	
(as Co-Underwriter)	)	 	

SIGNED by Nigel Bowen - Morris	)	/s/ Nigel Bowen - Morris	
duly authorised for and on behalf	)	 	
of HSH NORDBANK AG	)	 	
(as Swap Bank)	)	 	
 
97

 
Exhibit 10.10
 
01.186
 
DATED 11 April 2005

ORTELIUS MARITIME INC.
SEDERBERG MARITIME INC.
WINTERBERG MARITIME INC.
HELDERBERG MARITIME INC.
CONSTANTIA MARITIME INC.
ALEXANDRA NAVIGATION INC.
ORCHID NAVIGATION CORPORATION
ROBERTO C. MARITIME INC.
MARIA C. MARITIME INC.
MERCATOR SHIPPING INC.
MAGELLAN MARINE INC.
LISSOS SHIPPING (PRIVATE) LTD.
(as Borrowers)
 
- and -
 
THE ROYAL BANK OF SCOTLAND plc
(as Lender)

 
US$200,000,000 SECURED
LOAN AGREEMENT

 
m.v. “FIVOS”
m.v. “S.A. SEDERBERG”
m.v. “S.A. WINTERBERG”
m.v. “S.A. HELDERBERG”
m.v. “MAERSK CONSTANTIA”
m.v. “ALEXANDRA I”
m.v. “DIMITRIS C”
m.v. “ROBERTO C”
m.v. “MARIA C”
m.v. “ACHILLEAS”
m.v. “SOFIA III”
m.v. “APL HOLLAND”
 
STEPHENSON HARWOOD
One St. Paul’s Churchyard
London EC4M 8SH
Tel: 020 7329 4422
Fax: 020 7329 7100
Ref: 01.186

 
CONTENTS

 	 	Page	
 	 	 	
1	Definitions and Interpretation	5	
 	 	 	
2	The Loan and its Purpose	20	
 	 	 	
3	Conditions of Utilisation	20	
 	 	 	
4	Advance	21	
 	 	 	
5	Repayment	22	
 	 	 	
6	Prepayment	22	
 	 	 	
7	Interest	24	
 	 	 	
8	The Master Agreement	27	
 	 	 	
9	Alternative currency options	29	
 	 	 	
10	Indemnities	31	
 	 	 	
11	Fee	35	
 	 	 	
12	Security and Application of Moneys	35	
 	 	 	
13	Representations	39	
 	 	 	
14	Undertakings and Covenants	42	
 	 	 	
15	Events of Default	53	
 	 	 	
16	Assignment and Sub-Participation	58	
 	 	 	
17	Set-Off	59	
 	 	 	
18	Payments	60	
 	 	 	
19	Notices	61	
 	 	 	
20	Partial Invalidity	62	
 	 	 	
21	Remedies and Waivers	63	

 

22	Joint and several liability	63	
 	 	 	
23	Miscellaneous	64	
 	 	 	
24	Law and Jurisdiction	65	
 	 	 	
SCHEDULE 1: Conditions Precedent and Subsequent	67	
Part I: Conditions precedent	67	
Part II: Conditions subsequent	72	
 	 	
SCHEDULE 2: Calculation of Mandatory Cost	73	
 	 	
SCHEDULE 3: Form of Drawdown Notice	75	
 	 	
SCHEDULE 4: Form of Covenant Compliance Certificate	77	
 	 	
SCHEDULE 5: List of Vessels and Vessel information	79	
 	 	
SCHEDULE 6: Managers and Management Agreements	80	

 
LOAN AGREEMENT
 
Dated: 11 April 2005
 
BETWEEN:
 
(1)                                   ORTELIUS MARITIME INC. (“Ortelius”), SEDERBERG MARITIME INC. (“Sederberg”), WINTERBERG MARITIME INC. (“Winterberg”), HELDERBERG MARITIME INC. (“Helderberg”), CONSTANTIA MARITIME INC. (“Constantia”), ALEXANDRA NAVIGATION INC. (“Alexandra”), ORCHID NAVIGATION CORPORATION (“Orchid”), ROBERTO C. MARITIME INC. (“Roberto”), MARIA C. MARITIME INC. (“Maria”), MERCATOR SHIPPING INC. (“Mercator”), MAGELLAN MARINE INC. (“Magellan”) each a company incorporated under the laws of the Republic of Liberia whose registered office is at 80 Broad Street, Monrovia, Republic of Liberia and LISSOS SHIPPING (PRIVATE) LTD. (“Lissos”), a company incorporated under the laws of Singapore whose registered office is at 20 Raffles Place, #09-01 Ocean Towers, Singapore 048620 (together the   ” Borrowers ” and each a “ Borrower ”) jointly and severally; and
 
(2)                                   THE ROYAL BANK OF SCOTLAND plc , having its registered office at 36 St. Andrew Square, Edinburgh, EH2 2YB, Scotland, acting through its office at 45 Akti Miaouli, GR-185 10, Piraeus, Greece (the “ Lender ”).
 
WHEREAS:
 
(A)                               Each Borrower owns the Vessel which is registered in its name under the relevant flag specified below in the definition of “Vessels”.
 
(B)                                 The Lender has agreed to advance to the Borrowers on a joint and several basis an amount equal to the lower of up to (i) $200,000,000 and (ii) 71% of the aggregate Market Values of all the Vessels to assist the Borrowers, in an amount of up to $101,400,000, in refinancing all existing indebtedness to the Lender and DVB Nedship Bank and, in an amount of up to $98,600,000, to provide additional liquidity to the Group and shall be made available in up to two Drawings, each for an amount not exceeding 71% of the aggregate Market Value of the Vessel(s) to which the Drawing in question relates, in accordance with Clause 3.3.

 
IT IS AGREED   as follows:
 
1                                          Definitions and Interpretation
 
1.1                                  In this Agreement:
 
“ Accounts ” means the Earnings Accounts and the Forward Freight Account.
 
“ Accounts Charge ” means the deed of charge referred to in Clause 12.1.4.
 
“ Administration” has the meaning given to it in paragraph 1.1.3 of the ISM Code.
 
“APL” means APL (Bermuda) Ltd., a company incorporated under the laws of Bermuda, with its registered office at Cedar House, 41 Cedar Avenue, Hamilton, Bermuda.
 
“ Applicable Accounting Principles ” means, in the case of the Group Statements, those accounting principles, standards and practices on which the Original Group Statements were based, in accordance with IAS principles, or such other generally accepted accounting principles, standards and practices adopted by the Group from time to time and notified to the Lender, provided that in the case of such notification to the Lender the auditors of the Group deliver to the Lender sufficient information, in form and substance as may be reasonably required by the Lender, to enable the Lender to make an accurate comparison between the financial position indicated in the Group Statements in question and that indicated in the Original Group Statements. If necessary, upon any change of the Applicable Account Principles, the Borrowers shall enter into good faith discussions with the Lender with the view to re-adjust the Financial Covenants provided for in Clause 14.2.
 
“ Approved Currency ” means any currency other than Dollars which is freely transferable and convertible into Dollars and in which deposits are freely available to the Lender in the London Interbank Eurocurrency Market.
 
“ Assignments ” means the deeds of assignment from the Borrowers referred to in Clause 12.1.2.
 
“ Availability Termination Date ” means 15 April 2005 or such later date and upon such amended terms and conditions as the Lender may in its discretion agree.

 
“ Bareboat Charter Assignments ” means the deeds of assignment from the Borrowers to in Clause 12.1.5.
 
“ Bareboat Charterer ” means Safmarine Container Lines N.V., a company incorporated under the laws of Belgium with its registered office at De Gerlachekaai 20, 2000 Antwerp, Belgium.
 
“Bareboat Charters” means:-
 
(a)                                   in respect of “S.A. SEDERBERG”, the bareboat charter dated 5 April 2002 (as supplemented and amended by addenda numbered 1 and 2 thereto) made between the Bareboat Charterer, as bareboat charterer, and MC Robin, as original owner (whose obligations thereunder were guaranteed by MC Shipping), as transferred to Sederberg, as owner, under an Agreement for the Transfer of Charter dated 17 June 2003, and whose obligations as owner are guaranteed by the Managers; and
 
(b)                                  in respect of “S.A. WINTERBERG”, the bareboat charter dated 5 April 2002 (as supplemented and amended by addenda numbered 1 and 2 thereto) made between the Bareboat Charterer, as bareboat charterer, and MC Eagle, as original owner (whose obligations thereunder were guaranteed by MC Shipping), as transferred to Winterberg, as owner, under an Agreement for the Transfer of Charter dated 17 June 2003, and whose obligations as owner are guaranteed by the Managers; and
 
(c)                                   in respect of “S.A. HELDERBERG”, the bareboat charter dated 5 April 2002 (as supplemented and amended by addenda numbered 1 and 2 thereto) made between the Bareboat Charterer, as bareboat charterer, and Canary, as original owner (whose obligations thereunder were guaranteed by MC Shipping), as transferred to Helderberg, as owner, under an Agreement for the Transfer of Charter dated 17 June 2003, and whose obligations as owner are guaranteed by the Managers; and
 
(d)                                  in respect of “MAERSK CONSTANTIA”, the bareboat charter dated 5 April 2002 (as supplemented and amended by addenda numbered 1 and 2 thereto) made between the Bareboat Charterer, as bareboat charterer, and MC Seagull, as original owner (whose obligations thereunder were guaranteed by MC Shipping), as transferred to Constantia, as owner,

 
under an Agreement for the Transfer of Charter dated 17 June 2003, and whose obligations as owner thereunder are guaranteed by the Managers.
 
and “ Bareboat Charter ” means any one of them.
 
“ Break Costs ” means all sums payable by the Borrowers from time to time under Clause 10.3.
 
“ Business Day ” means a day (other than a Saturday or Sunday) on which banks are open for general business in New York, London and Piraeus and which is a day on which the Trans European Automated Real Time Settlement Express Transfer Payment System (TARGET) is operating.
 
“Cargill” means Cargill International S.A., a company incorporated under the laws of Switzerland of Geneva, Switzerland.
 
“Charters” means the Bareboat Charters and the Time Charters, and “ Charter ” means any one of them.
 
“Charterers” means the Bareboat Charterer and the Time Charterers, and “ Charterer ” means any one of them.
 
“Charter Rights” means all rights and benefits whatsoever accruing to the Owner under or arising out of a Charter (other than the Charter Earnings) including (but not limited to) the right of the Owner to have the Charterer take the Vessel on charter pursuant to the Charter.
 
“ converted ” means, the purposes of Clause 9, actually or notionally (as the context may require) converted by the Lender at the Spot Rate of Exchange, and the words, “ convert ” and “ conversion ” shall be interpreted accordingly.
 
“ Covenant Compliance Certificate ” means a certificate substantially in the form set out in Schedule 4.
 
“ Credit Support Document ” means any document described as such in the Master Agreement and, where the context permits, any other document referred to in any Credit Support Document which has the effect of creating an Encumbrance in favour of the Lender.

 
 
“ Credit Support Provider ” means any person (other than a Borrower) described as such in the Master Agreement.
 
“ Confirmation ” means a Confirmation exchanged, or deemed exchanged, between the Lender and the Borrowers as contemplated by the Master Agreement.
 
“ Currency of Account ” means, in relation to any payment to be made to the Lender under a Finance Document, the currency in which that payment is required to be made by the terms of that Finance Document.
 
“ Currency Equivalent ” means, as at any date upon which any part of the Loan is denominated in one Relevant Currency and is to be converted into another Relevant Currency as provided in this Agreement, the amount of the relevant currency required for the purchase of the Existing Currency with the New Currency converted at the Spot Rate of Exchange.
 
“ Currency Tranches ” means, in relation to the Loan, at any time such part of the Loan which is denominated in Approved Currencies and, in case such part of the Loan is denominated in two such Approved Currencies, “ Currency Tranche ” means each part of the Loan which is denominated into one Approved Currency.
 
“ Deeds of Covenants ” means the deeds of covenants referred to in Clause 12.1.1.
 
“ Default ” means an Event of Default or any event or circumstance specified in Clause 15.1 which would (with the expiry of a grace period, the giving of notice, the making of any determination under the Finance Documents or any combination of any of the foregoing) be an Event of Default.
 
“ DOC ” means, in relation to the ISM Company, a valid Document of Compliance issued for the ISM Company by the Administration under paragraph 13.2 of the ISM Code.
 
“ Dollars ” and “ $ ” each means available and freely transferable and convertible funds in lawful currency of the United States of America.
 
“ Dollar Reference Amount ” means, when the whole or part of the Loan is for the time being denominated in Dollars, the outstanding principal amount thereof and, in relation to a Currency Tranche, the amount of Dollars which would have been outstanding if such Currency Tranche had been advanced in and always thereafter

 
remained denominated in Dollars, as it would have been reduced from time to time by repayments and prepayments (except for prepayment made under Clause 9.6) under this Agreement if the same had been made in Dollars.
 
“ Drawdown Date ” means the date on which the relevant Drawing is advanced under Clause 4.
 
“ Drawdown Notice ” means a notice substantially in the form set out in Schedule 3.
 
“ Drawing ” means any part of the Loan advanced or to be advanced pursuant to a Drawdown Notice and “ Drawings ” means more than one of them.
 
“ Earnings ” means all hires, freights (including, without limitation, under and pursuant to any charter or other contract of employment), pool income and other sums payable to or for the account of a Borrower and/or the Bareboat Charterer in respect of a Vessel including (without limitation) all remuneration for salvage and towage services, demurrage and detention moneys, contributions in general average, compensation in respect of any requisition for hire, and damages and other payments (whether awarded by any court or arbitral tribunal or by agreement or otherwise) for breach, termination or variation of any contract for the operation, employment or use of a Vessel.
 
“ Earnings Account ” means the bank account opened or to be opened in the name of the Managers with the Lender and designated “Danaos Shipping Co. Ltd. - Earnings Account”.
 
“ Encumbrance ” means a mortgage, charge, assignment, pledge, lien, or other security interest securing any obligation of any person or any other agreement or arrangement having a similar effect.
 
“ Event of Default ” means any of the events or circumstances set out in Clause 15.1.
 
“ Existing Currency ” means, in relation to any conversion between Relevant Currencies to be made under Clause 9, the Relevant Currency is which the relevant part of the Loan is denominated before conversion.
 
“ Facility Period ” means the period beginning on the date of this Agreement and ending on the date when the whole of the Indebtedness has been paid in full and the

 
Security Parties have ceased to be under any further actual or contingent liability to the Lender under or in connection with the Finance Documents.
 
“ Finance Documents ” means this Agreement, the Master Agreement, the Security Documents, and any other document designated as such by the Lender and the Borrowers and “ Finance Document ” means any one of them.
 
“ Financial Indebtedness ” means any obligation for the payment or repayment of money, whether present or future, actual or contingent, in respect of:
 
(a)                                   moneys borrowed;
 
(b)                                  any acceptance credit;
 
(c)                                   any bond, note, debenture, loan stock or similar instrument;
 
(d)                                  any finance or capital lease;
 
(e)                                   receivables sold or discounted (other than on a non-recourse basis);
 
(f)                                     deferred payments for assets or services;
 
(g)                                  any derivative transaction protecting against or benefiting from fluctuations in any rate or price (and, when calculating the value of any derivative transaction, only the marked to market value shall be taken into account);
 
(h)                                  any amount raised under any other transaction (including any forward sale or purchase agreement) having the commercial effect of a borrowing;
 
(i)                                      any counter-indemnity obligation in respect of a guarantee, indemnity, bond, standby or documentary letter of credit or any other instrument issued by a bank or financial institution; and
 
(j)                                      the amount of any liability in respect of any guarantee or indemnity for any of the items referred to in paragraphs (a) to (i) above.
 
“Forward Freight Account” means the blocked bank account opened or to be opened in the name of the Managers with the Lender and designated “RBS/Danaos Shipping Co. Ltd. – Forward Freight Account”.

 
“ Forward Freight Transaction ” means a Transaction entered into between the Lender and the Borrowers in respect of the Earnings of a Vessel.
 
“Group” means the Guarantor, the Borrowers, and all other Subsidiaries of the Guarantor and “member of the Group” shall be construed accordingly.
 
“ Group Statements ” means the annual audited consolidated financial statements of the Group prepared in accordance with Applicable Accounting Principles.
 
“ Guarantee ” means the guarantee and indemnity referred to in Clause 12.1.3.
 
“ Guarantor ” means Danaos Holdings Limited, a company incorporated under the laws of the Republic of Liberia whose registered office is at 80 Broad Street, Monrovia, Liberia, being a holding company having, inter alia, the Borrowers under its full ownership and control and (where the context permits) any other guarantor who shall at any time during the Facility Period give to the Lender a guarantee and/or indemnity for the repayment of all or part of the Indebtedness.
 
“ Hedging Transaction ” means a Transaction entered into between the Lender and the Borrowers pursuant to the Master Agreement for the express purpose of hedging all or part of the Borrowers’ interest rate risk pursuant to this Agreement.
 
“HMM” means Hyundai Merchant Marine Inc. a company incorporated under the laws of the Republic of Liberia, whose registered office is at 80 Broad Street, Monrovia, Republic of Liberia.
 
“ IAS ” means generally accepted international accounting principles, standard and practices currently adopted by the Group.
 
“ Indebtedness ” means the aggregate from time to time of the amount of the loan outstanding; all accrued and unpaid interest on the Loan; all other sums of any nature (together with all accrued and unpaid interest on any of those sums) payable to the Lender under the Finance Documents; any damages payable as a result of any breach by any of the Security Parties of any of the Finance Documents; and any damages or other sums payable as a result of any of the obligations of any of the Security Parties under or pursuant to any of the Finance Documents being disclaimed by a liquidator or any other person.

 
“ Insurances ” means all policies and contracts of insurance (including all entries in protection and indemnity or war risks associations) which are from time to time taken out or entered into in respect of a Vessel or her increased value or her Earnings and (where the context permits) all benefits thereof, including all claims of any nature and returns of premium.
 
“ Interest Payment Date ” means each date for the payment of interest in accordance with Clause 7.7.
 
“ Interest Period ” means each period for the determination and payment of interest selected by the Borrowers or agreed or selected by the Lender pursuant to Clause 7.
 
“ ISM Code ” means the International Management Code for the Safe Operation of Ships and for Pollution Prevention.
 
“ ISM Company ” means, at any given time, the company responsible for a Vessel’s compliance with the ISM Code under paragraph 1.1.2 of the ISM Code.
 
“ ISPS Code ” means the International Ship and Port Facility Security Code.
 
“ ISPC Company ” means, at any given time, the company responsible for a Vessel’s compliance with the ISPS Code.
 
“ ISSC ” means a valid international ship security certificate for a Vessel issued under the ISPS Code.
 
“KLC” means Korea Line Corporation, a company incorporated under the laws of South Korea.
 
“ Loan ” means the aggregate amount from time to time advanced by the Lender to the Borrowers under Clause 4 or, where the context permits, the amount advanced and for the time being outstanding.
 
“ Management Agreements ” means the agreements for the commercial and/or technical management of the Vessels each with the date set-out adjacent to the Vessel in question in Schedule 6 each made between the relevant Borrower and the Managers and “ Management Agreement ” means any one of them.
 
“ Managers ” means Danaos Shipping Co. Ltd., a company incorporated under the laws of the Republic of Cyprus whose registered office is at Libra House,

 
P. Katelari Street, Nicosia, Cyprus, or such other commercial and/or technical managers of the Vessels nominated by the Borrowers as the Lender may approve.
 
“ Manager’s Undertaking ” means the manager’s confirmation and undertaking for each Vessel referred to in Clause 12.1.6.
 
“ Mandatory Cost ” means the percentage rate per annum calculated by the Lender in accordance with Schedule 2.
 
“ Margin ” means zero point eight per cent (0.8%) per annum.
 
“ Market Value ” means, in respect of each Vessel, the market value of that Vessel determined in accordance with the valuation for that Vessel specified in Part 2 of Schedule 1.
 
“ Master Agreement ” means any ISDA Master Agreement (or any other form of master agreement relating to interest or forward freight transactions) entered into between the Lender and the Borrowers during the Facility Period, including each Schedule to any Master Agreement and each Confirmation exchanged pursuant to any Master Agreement.
 
“Master Agreement Liabilities” means, at any relevant time, all liabilities of the Borrowers to the Lender under or pursuant to the Master Agreement, whether actual or contingent, present or future.
 
“ Maximum Loan Amount ” means two hundred million Dollars ($200,000,000).
 
“ MC Canary ” means MC Canary Shipping Company Limited, a company incorporated under the laws of the Bahamas with its registered office at Nassau, Bahamas.
 
“ MC Eagle ” means MC Eagle Shipping Limited, a company incorporated under the laws of the Bahamas with its registered office at Nassau, Bahamas.
 
“ MC Robin ” means MC Robin Shipping Company Limited, a company incorporated under the laws of the Bahamas with its registered office at Nassau, Bahamas.

 
“ MC Seagull ” means MC Seagull Shipping Company Limited, a company incorporated under the laws of the Bahamas with its registered office at Nassau, Bahamas.
 
“ MC Shipping ” means MC Shipping Inc., a company incorporated under the laws of Bermuda with its registered office at Richmond House, 12 Parlaville Road, Hamilton, HM CX, Bermuda.
 
“ Mortgages ” means the preferred and statutory mortgages referred to in Clause 12.1.1 together, where applicable, with the Deeds of Covenants and “ Mortgage ” means any one of them.
 
“ New Currency ” means, in relation to any conversion between Relevant Currencies to be made under Clause 9, the Relevant Currency in which the relevant part of the Loan is denominated after conversion.
 
“ NOL ” means Neptune Orient Lines Ltd., a company incorporated under the laws of the Republic of Singapore, with its registered office at 456 Alexandra Road, # 06-00 NOL Building, Singapore 119 962.
 
“ Notional Amount ”, in respect of any Hedging Transaction, means the Notional Amount as defined in the Confirmation relating to that Hedging Transaction.
 
“ Original Group Statements ” means the Group Statements for the financial year ended 31 December 2003.
 
“ Permitted Encumbrance ” means any Encumbrance which has the prior written approval of the Lender, or any liens for current crews’ wages and salvage and liens incurred in the ordinary course of trading a Vessel up to an aggregate amount at any time not exceeding ten per cent (10%) of the charter-free market value of that Vessel determined in accordance with Clause 12.13 Provided that the aggregate amount of the Permitted Encumbrance and the Indebtedness does not a any time exceed seventy one per centum (71%) of the charter-free market value of all the Vessels determined in accordance with Clause 12.13.
 
“RBS Group” means the Bank and all other subsidiaries (as defined in Section 736 Companies Act 1985) of The Royal Bank of Scotland Group plc and “member of the Group” shall be interpreted accordingly.

 
“ RBS LIBOR ” means, for an Interest Period, the rate per annum at which deposits in Dollars in an amount approximately equal to the amount of the Loan are (or would have been) offered by the Lender to leading banks in the London Interbank Dollar Market at or about 11.00 a.m. (London time) on the second Business Day prior to the commencement of such Interest Period, in each case for a period equal to such Interest Period and for delivery on the first Business Day thereof.
 
“ Relevant Currency ” means Dollars and/or the Approved Currency in which the Loan or any part thereof is or will be denominated (as the case may be) at the relevant time.
 
“ Relevant Documents ” means the Finance Documents, the Charters, the Management Agreements, the Managers’ confirmation specified in Part I of Schedule 1.
 
“ Relevant Interest Rate ” means RBS LIBOR or, in the case where a Transaction is to be, or has been, entered into under the Master Agreement and the Borrowers have not made an election pursuant to Clause 7.10, TELERATE;
 
“ Repayment Date ” means the date for payment of any Repayment Instalment in accordance with Clause 5.1.
 
“ Repayment Instalment ” means any instalment of the Loan to be repaid by the Borrowers under Clause 5.1.
 
“ Requisition Compensation ” means all compensation or other money which may from time to time be payable to a Borrower and/or the Bareboat Charterer as a result of a Vessel being requisitioned for title or in any other way compulsorily acquired (other than by way of requisition for hire).
 
“ Security Documents ” means the Mortgages, the Deeds of Covenants, the Assignments, the Guarantee, the Accounts Charge, the Managers’ Undertakings, the Bareboat Charter Documents, the Master Agreement, any other Credit Support Documents or (where the context permits) any one or more of them and any other agreement or document which may at any time be executed by any person as security for the payment of all or any part of the Indebtedness and “ Security Document ” means any one of them.

 
“ Security Parties ” means the Borrowers, the Guarantor, the Bareboat Charterer (but only to the extent of the Bareboat Charterer’s obligations under the Bareboat Charters), any other Credit Support Provider and any other person who may at any time during the Facility Period be liable for, or provide security for, all or any part of the Indebtedness, and “ Security Party ” means any one of them.
 
“ SMC ” means a valid safety management certificate issued for a Vessel by or on behalf of the Administration under paragraph 13.7 of the ISM Code.
 
“ SMS ” means a safety management system for a Vessel developed and implemented in accordance with the ISM Code.
 
“ Spot Rate of Exchange ” means the spot rate (based on the market rate prevailing in the London Interbank Eurocurrency Market) quoted by the Lender at or about 11.00 a.m. on the second Business Day before the date for purchase of one Relevant Currency with another Relevant Currency.
 
“ Subsidiary ” means a body corporate from time to time of which another (a) has direct or indirect control, or (b) owns directly or indirectly more than fifty (50) per cent of the share capital or similar right of ownership (and in this definition “control” means the power to direct the management and the policies of a body corporate, whether through the ownership of voting capital, by contract or otherwise).
 
“Subsidiaries” means the direct and indirect subsidiaries of the Guarantor.
 
“ Tax ” means any tax, levy, impost, duty or other charge or withholding of a similar nature (including any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same).
 
“ Telerate ” 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 the Relevant Telerate Page 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, “ the Relevant Telerate Page ”, means, in the case of Dollars, the display designated as “page 3750” or in the case of an Approved Currency the

 
display designated as “page 3740” on the Telerate Service or such other page as may replace page 3750 or page 3740 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 the Relevant Telerate Page, the rate per annum determined by the Lender to be the rate per annum which leading banks in the London Interbank Market offer for deposits in Dollars or the relevant Approved Currency in the London Interbank Market at or about 11.00 a.m. (London time) on the second Business Day prior to the commencement of that Interest Period, in each case for a period equal to that Interest Period and for delivery on the first Business Day of it.
 
“ Telerate Page(s) 3740 or 3750 ” means the display(s) designated as page 3740 or page 3750 on the Telerate Service (or such other page(s) as may replace page(s) 3740 or 3750 on that service or such other service as may be nominated by the British Bankers’ Association (including the Reuters Screen) as the information vendor for the purposes of displaying British Bankers’ Association’s interest settlement rates for the relevant currency).
 
“ Time Charter ” means:-
 
(a)                               in respect of “FIVOS”, the time charter dated 2 October 2003 made between Nedlloyd Schiftsmakler GMBH as agents for Ortelius, as owner, and Transfield, as charterer; and
 
(b)                              in respect of “ALEXANDRA I”, the time charter existing at the time of this Agreement made between Alexandra, as owner, and the Time Charterer as charterer; and
 
(c)                               in respect of “DIMITRIS C.”, the time charter dated 10 September 2003 (as supplemented and amended by addenda numbered 1 and 2 thereto) made between Orchid, as owner, and KLC, as charterer; and
 
(d)                              in respect of “ROBERTO C.”, the time charter dated 15 May 2003 (as supplemented and amended by addenda numbered 1 to 3 (inclusive) thereto made between Roberto, as owner, and HMM, as charterer; and

 
(e)                               in respect of “MARIA C.”, the time charter dated 9 June 2004 (as supplemented and amended by addenda number 1 thereto) made between Maria, as owner, and KLC, as charterer; and
 
(f)                                 in respect of “ACHILLEAS”, the time charter dated 3 December 2004 made between Mercator, as owner, and Cargill, as charterer; and
 
(g)                              in respect of “SOFIA III”, the time charter dated 17 November 2004 made between Lito Navigation Inc. on behalf of Magellan, as owner, and Western Bulk, as charterer; and
 
(h)                              in respect of “APL HOLLAND”, the time charter dated 5 April 2002 (as supplemented and amended by addenda numbered 1 to 4 (inclusive) thereto) made between the Managers, on behalf of Lissos, as owner, and APL, as charterer, as transferred to Lissos, as owner, under addendum number 1 thereto dated 29 June 2001, the obligations of Lissos, as owner, being guaranteed by the Managers, and the obligations of APL, as charterer, being guaranteed by MOL.
 
“ Total Loss ” means:
 
(a)                                   an actual, constructive, arranged, agreed or compromised total loss of a Vessel; or
 
(b)                                  the requisition for title or compulsory acquisition of a Vessel by any government or other competent authority (other than by way of requisition for hire); or
 
(c)                                   the capture, seizure, arrest, detention or confiscation of a Vessel by any government or by persons acting or purporting to act on behalf of any government, unless that Vessel is released and returned to the possession of the relevant Borrower or the Bareboat Charterer within one month after the capture, seizure, arrest, detention or confiscation in question.
 
“ Transaction ” means a transaction entered into between the Lender and the Borrowers governed by the Master Agreement.
 
“Transfield” means Transfield Shipping Inc., a company incorporated under the laws of the Republic of Panama.

 
“ Vessels ” means the vessels referred to in Schedule 5, and everything now or in the future belonging to them on board and ashore, registered under the respective flags set out in Schedule 5 in the ownership of the respective Borrowers set out Schedule 5 and with the relevant approximate capacity information and year of build set out Schedule 5 and “ Vessel ” means any one of them.
 
1.2                               In this Agreement:
 
1.2.1                         words denoting the plural number include the singular and vice versa;
 
1.2.2                         words denoting persons include corporations, partnerships, associations of persons (whether incorporated or not) or governmental or quasi-governmental bodies or authorities and vice versa;
 
1.2.3                         references to Recitals, Clauses and Schedules are references to recitals, clauses and schedules to or of this Agreement;
 
1.2.4                         references to this Agreement include the Recitals and the Schedules;
 
1.2.5                         the headings and contents page(s) are for the purpose of reference only, have no legal or other significance, and shall be ignored in the interpretation of this Agreement;
 
1.2.6                         references to any document (including, without limitation, to all or any of the Relevant Documents) are, unless the context otherwise requires, references to that document as amended, supplemented, novated or replaced from time to time;
 
1.2.7                         references to statutes or provisions of statutes are references to those statutes, or those provisions, as from time to time amended, replaced or re-enacted;
 
1.2.8                         references to the Lender include its successors, transferees and assignees;
 
1.2.9                         a time of day (unless otherwise specified) is a reference to London time; and
 
1.2.10                   words and expressions defined in the Master Agreement, unless the context otherwise requires, have the same meaning.

 
1.3                                  Offer letter
 
This Agreement supersedes the terms and conditions contained in any correspondence relating to the subject matter of this Agreement exchanged between the Lender and the Borrowers or their representatives prior to the date of this Agreement.
 
2                                          The Loan and its Purpose
 
2.1                                  Amount    Subject to the terms of this Agreement, the Lender agrees to make available to the Borrowers on a joint and several basis a term loan in an aggregate amount not exceeding the Maximum Loan Amount.
 
2.2                                  Purpose   The Borrowers shall apply the Loan for the purposes referred to in Recital (B).
 
2.3                                  Monitoring    The Lender shall not be bound to monitor or verify the application of any amount borrowed under this Agreement.
 
3                                          Conditions of Utilisation
 
3.1                                  Conditions precedent   The Borrowers are not entitled to have any Drawing advanced, or to enter into any Transactions, unless the Lender has received all of the documents and other evidence listed in Part I of Schedule 1, save that references in Section 2 of that Part I to “the Vessel” or to any person or document relating to a Vessel shall be deemed to relate solely to any Vessel specified in the relevant Drawdown Notice or to any person or document relating to that Vessel respectively.
 
3.2                                  Further conditions precedent    The Lender will only be obliged to advance a Drawing if on the date of the Drawdown Notice and on the proposed Drawdown Date:
 
3.2.1                         no Default is continuing or would result from the advance of that Drawing; and
 
3.2.2                         the representations made by the Borrowers under Clause 13 are true in all material respects.
 
3.3                                  Drawing limit    The Lender will only be obliged to make the Loan available in up to two Drawings and will only obliged to advance a Drawing if that Drawing

 
will not increase the Loan to a sum in excess of the Maximum Loan Amount nor result in more than seventy one per cent (71%) of the aggregate Market Value of all the Vessels to which that Drawing relates being advanced for those Vessels.
 
3.4                                  Conditions subsequent    The Borrowers undertake to deliver or to cause to be delivered to the Lender on, or as soon as practicable after, the relevant Drawdown Date the additional documents and other evidence listed in Part II of Schedule 1, save that references in that Part II to “the Vessel” or to any person or document relating to a Vessel shall be deemed to relate solely to any Vessel specified in the relevant Drawdown Notice or to any person or document relating to that Vessel respectively.
 
3.5                                  No Waiver    If the Lender in its sole discretion agrees to advance a Drawing to the Borrowers before all of the documents and evidence required by Clause 3.1 have been delivered to or to the order of the Lender, the Borrowers undertake to deliver all outstanding documents and evidence to or to the order of the Lender no later than thirty (30) days after the relevant Drawdown Date.
 
The advance of a Drawing under this Clause 3.5 shall not be taken as a waiver of the Lender’s right to require production of all the documents and evidence required by Clause 3.1.
 
3.6                                  Form and content    All documents and evidence delivered to the Lender under this Clause 3 shall:
 
3.6.1                         be in form and substance acceptable to the Lender; and
 
3.6.2                         if required by the Lender, be certified, notarised, legalised or attested in a manner acceptable to the Lender.
 
4                                          Advance
 
The Borrowers may request a Drawing to be advanced in one amount on any Business Day prior to the Availability Termination Date by delivering to the Lender a duly completed Drawdown Notice not more than ten (10) and not fewer than three (3) Business Days before the proposed Drawdown Date.

 
5                                          Repayment
 
5.1                                  Repayment of Loan    The Borrowers agree to repay the Loan to the Lender by sixteen (16) consecutive half-yearly instalments the first eight such instalments each in the sum of twelve million two hundred and fifty thousand Dollars ($12,250,000) and the next eight such instalments each in the sum of eight million five hundred thousand Dollars ($8,500,000) together with a balloon instalment of thirty four million Dollars ($34,000,000) payable together with the sixteenth and final instalment (the “ Balloon ”), the first instalment falling due on the date which is six calendar months after the last Drawdown Date and subsequent instalments falling due at consecutive intervals of six calendar months thereafter.
 
5.2                                  Reduction of Repayment Instalments    If the aggregate amount advanced to the Borrowers is less than the Maximum Loan Amount, the amount of each Repayment Instalment, including the Balloon, shall be reduced pro rata to the amount actually advanced.
 
5.3                                  Reborrowing   The Borrowers may not reborrow any part of the Loan which is repaid or prepaid.
 
6                                          Prepayment
 
6.1                                  Illegality   If it becomes unlawful in any jurisdiction for the Lender to perform any of its obligations as contemplated by this Agreement or to fund or maintain the Loan:
 
6.1.1                         the Lender shall promptly notify the Borrowers of that event; and
 
6.1.2                         the Borrowers shall repay the Loan (to the extent already advanced) on the last day of the current Interest Period or, if earlier, the date specified by the Lender in the notice delivered to the Borrowers (being no earlier than the last day of any applicable grace period permitted by law).
 
W ithout prejudice to the liability of the Borrowers to prepay the Loan in accordance with this Clause 6.1, the Borrowers and the Lender shall negotiate in good faith with a view to agreeing the terms for making the Loan available from another jurisdiction, or funding the Loan from alternative sources, or otherwise restructuring the Loan on a basis which is not unlawful. If the said terms are not agreed within thirty (30) days then the negotiations shall forthwith terminate and

 
the Borrowers shall immediately prepay the Loan in accordance with the foregoing provisions of this Clause 6.1.
 
6.2                                  Voluntary prepayment of Loan   The Borrowers may prepay the whole or any part of the Loan (but, if in part, being an amount that reduces the Loan by a minimum amount of five hundred thousand Dollars ($500,000)) (or the equivalent converted at the Spot Rate of Exchange into the Relevant Currency in which the Loan, or the relevant part thereof, is then denominated) subject as follows:
 
6.2.1                         they give the Lender not less than thirty (30) Business Days’ (or such shorter period as the Lender may agree) prior notice;
 
6.2.2                         no prepayment may be made until after the Availability Termination Date; and
 
6.2.3                         any prepayment under this Clause 6.2 shall satisfy the obligations under Clause 5.1, including the Balloon, in the order of their maturity or in inverse order of their maturity, at the Borrowers’ option.
 
6.3                                  Mandatory prepayment on sale or Total Loss    If a Vessel is sold by a Borrower or becomes a Total Loss, the Borrowers shall, simultaneously with any such sale or on the earlier of the date falling one hundred and twenty (120) days after the occurrence of the casualty giving rise to such Total Loss and the date of receipt by the Lender of the proceeds of insurance relating to such Total Loss make a prepayment of the Loan in an amount equivalent to the higher of:-
 
6.3.1                         the same proportion of the Loan then outstanding as the market value of that Vessel, determined in accordance with Clause 12.13, bears to the aggregate of:-
 
(a)                                    the market values of all the Vessels, determined in accordance with Clause 12.13; and
 
(b)                                     the value of any additional security for the time being provided under Clause 12.14 (such values to be determined in accordance with Clause 12.14); and
 
6.3.2                         the amount necessary to ensure continuing compliance with Clause 12.14.

 
Any such prepayment under this Clause 6.3 shall satisfy the obligations under Clause 5.1, including the Balloon, in inverse order of their maturity.
 
6.4                                  Restrictions   Any notice of prepayment given under this Clause 6 shall be irrevocable and, unless a contrary indication appears in this Agreement, shall specify the date or dates upon which the relevant prepayment is to be made and the amount of that prepayment.
 
Any prepayment under this Agreement shall be made together with accrued interest on the amount prepaid and, subject to any Break Costs, without premium or penalty.
 
7                                          Interest
 
7.1                                  Interest Periods    The period during which the Loan shall be outstanding under this Agreement shall be divided into consecutive Interest Periods of three, six or twelve months’ duration, as selected by the Borrowers by written notice to the Lender not later than 11.00 a.m. on the third Business Day before the beginning of the Interest Period in question, or such other duration as may be agreed by the Lender in its discretion.
 
7.2                                  Commencement of Interest Periods The first Interest Period applicable to a Drawing shall commence on the Drawdown Date for that Drawing and each subsequent Interest Period for that Drawing shall commence on the expiry of the preceding Interest Period; after the Drawdown Date for the second Drawing the Interest Periods for both Drawings shall be consolidated so that the Interest Period for the second Drawing shall start and terminate simultaneously with the Interest Period for the first Drawing.
 
7.3                                  Interest Periods to meet Repayment Dates   If an Interest Period would otherwise expire after the next Repayment Date, there shall be a separate Interest Period for a part of the Loan equal to the relevant Repayment Instalment which shall expire on the next Repayment Date and the Interest Period determined shall apply only to the balance of the Loan.
 
7.4                                  Non-Business Days    If an Interest Period would otherwise end on a day which is not a Business Day, that Interest Period will instead end on the next Business Day in that calendar month (if there is one) or the preceding Business Day (if there is not).

 
7.5                                  Interest rate    During each Interest Period interest shall accrue on the Loan at the rate determined by the Lender to be the aggregate of (a) the Margin and, (b) the Relevant Interest Rate and (c) the Mandatory Cost, if any.
 
7.6                                  Failure to select Interest Period   If the Borrowers at any time fail to select or agree an Interest Period in accordance with Clause 7.1, the interest rate applicable after the expiry of the then current Interest Period shall be the rate determined by the Lender in accordance with Clause 7.5 for an Interest Period of such duration (not exceeding six months) as the Lender may select.
 
7.7                                  Accrual and payment of interest   Interest shall accrue from day to day, shall be calculated on the basis of a 360 day year and the actual number of days elapsed (or, in any circumstance where market practice differs, in accordance with the prevailing market practice) and shall be paid by the Borrowers to the Lender on the last day of each Interest Period and, if the Interest Period is longer than six months, on the dates falling at six monthly intervals after the first day of that Interest Period.
 
7.8                                      Default interest   If a Borrower fails to pay any amount payable by it under a Finance Document on its due date, interest shall accrue on the overdue amount from the due date up to the date of actual payment (both before and after judgment) at a rate which is two per cent (2%) higher than the rate which would have been payable and if the overdue amount had, during the period of non-payment, constituted the Loan in the currency of the overdue amount for successive Interest Periods, each selected by the Lender (acting reasonably).  Any interest accruing under this Clause 7.8 shall be immediately payable by that Borrower on demand by the Lender.  If unpaid, any such interest will be compounded with the overdue amount at the end of each Interest Period applicable to that overdue amount but will remain immediately due and payable.
 
7.9                                  Changes in market circumstances   If at any time the Lender determines (which determination shall be final and conclusive and binding on the Borrowers) that, by reason of changes affecting the London Interbank Eurocurrency Market, adequate and fair means do not exist for determining the rate of interest on the Loan for any Interest Period:
 
7.9.1                         the Lender shall give notice to the Borrowers of the occurrence of such event; and

 
7.9.2                         the rate of interest on the Loan for that Interest Period shall be the rate per annum which is the sum of:
 
(a)                                   the Margin;
 
(b)                                  the rate which expresses as a percentage rate per annum the cost to the Lender of funding the Loan from whatever source it may reasonably select; and
 
(c)                                   the Mandatory cost, if any,
 
PROVIDED THAT if the resulting rate of interest is not acceptable to the Borrowers:
 
7.9.3                         the Lender will negotiate with the Borrowers in good faith with a view to modifying this Agreement to provide a substitute basis for determining the rate of interest which is financially a substantial equivalent to the basis provided for in this Agreement;
 
7.9.4                         any substitute basis agreed pursuant to Clause 7.9.3 shall be binding on the parties to this Agreement; and
 
7.9.5                         if, within thirty (30) days of the giving of the notice referred to in Clause 7.9.1, the Borrowers and the Lender fail to agree in writing on a substitute basis for determining the rate of interest, the Borrowers will immediately prepay the Loan, together with any Break Costs.
 
7.10                                                                            Relevant interest rate
 
7.10.1                   In the event that a Transaction is to be entered into under the Master Agreement then (subject to Clause 7.10.2 below) the Relevant Interest Rate for each and every Interest Period applicable to that part of the Loan the subject of the Transaction (commencing with the first Interest Period relating to such Transaction) shall be TELERATE.
 
7.10.2                   The Borrowers may elect for the Relevant Interest Rate for each and every Interest Period applicable to that part of the Loan the subject of a Transaction (commencing with the first Interest Period relating to such Transaction) to be RBS LIBOR rather than TELERATE provided that such election (which shall be irrevocable) is notified in writing by the Borrowers

 
to the Lender not later than 11.00 a.m. (London time) two Business Days prior to the commencement of such first Interest Period (or such other period as the Lender, in its sole and absolute discretion, may agree).
 
7.11                           Determinations conclusive   The Lender shall promptly notify the Borrowers of the determination of a rate of interest under this Clause 7 and each such determination shall (save in the case of manifest error) be final and conclusive.
 
8                                          The Master Agreement
 
8.1                                  Purpose  The Lender and the Borrowers have entered, and/or may during the Facility Period enter, into one or more Transactions pursuant to a Master Agreement, the terms and conditions of each of which are or will be specified in a Confirmation sent by the Lender to the Borrowers.
 
8.2                                  Additional Termination Event   If the Loan is for any reason not advanced to the Borrowers on or before the Availability Termination Date, and the Lender and the Borrowers have entered into any Hedging Transactions on or before the Availability Termination Date, for the purposes of the Master Agreement an Additional Termination Event (with the Lender as the Affected Party) shall be deemed to have occurred on the Availability Termination Date.
 
8.3                                  Adjustment of Notional Amounts   If the aggregate amount of the Loan actually advanced by the Lender to the Borrowers is less than the Notional Amount (or the aggregate Notional Amounts) of the Hedging Transactions entered into on or before the last Drawdown Date, the obligations of the Borrowers in respect of those Hedging Transactions shall, unless otherwise agreed by the Lender, be calculated and reduced, so far as the Lender considers it practicable to do so, by reference to a Notional Amount (or aggregate Notional Amounts) equal to the amount of the Loan actually advanced, reduced on each Repayment Date by the amount of the Repayment Instalment due on that Repayment Date, adjusted if necessary in accordance with Clause 8.2.
 
8.4                                  Effect of prepayment  If the Borrowers, subject always to Clause 6, prepay part of the Loan (whether pursuant to Clause 6, Clause 12.14 or any other provision of this Agreement), and the amount of the Loan remaining outstanding after application of that prepayment is less than the Notional Amount (or the aggregate Notional Amounts) of the Hedging Transactions then in effect (reduced, if

 
appropriate, in accordance with the Confirmations relating to those Hedging Transactions), the obligations of the Borrowers in respect of those Hedging Transactions shall, unless otherwise agreed by the Lender, be calculated, so far as the Lender considers it practicable to do so, by reference to a Notional Amount (or aggregate Notional Amounts) equal to the amount of the Loan remaining outstanding after application of the prepayment in question, reduced on each Repayment Date by the amount of the Repayment Instalment due on that Repayment Date after taking into account the application of the prepayment.
 
8.5                                  Authority  In order to give effect to Clauses 8.3 and 8.4, or in the event of voluntary or mandatory prepayment by the Borrowers of the whole of the Loan, the Borrowers irrevocably authorises the Lender to amend, restructure, unwind, cancel, net out, terminate, liquidate, transfer or assign any of the rights and/or obligations created pursuant to the Master Agreement in respect of those Hedging Transactions, and/or to enter into any other interest rate exchange and/or hedging transaction or commitment with the Borrowers or with any other counterparty approved by the Bank.
 
8.6                                  Termination of Transactions   If the exercise of the Lender’s rights under Clause 8.5 results in the termination of any Transaction, that Transaction shall, for the purposes of the Master Agreement (including, without limitation, section 6(e)(i) of the Master Agreement) be treated as a Terminated Transaction resulting from an Event of Default by the Borrowers.
 
8.7                                   Indemnity  The Borrowers will indemnify the Lender from time to time on demand in respect of all liabilities, losses, costs or expenses suffered, incurred or sustained by the Lender arising in any way in relation to the exercise by the Lender of its rights under this Clause 8, or arising in any way from any other termination, cancellation, unwinding or restructuring of any Transaction, together (in each case) with interest in accordance with Clause 7.8 from the date of the Bank’s demand until the date on which the Lender receives payment or reimbursement, before or after any relevant judgment.
 
8.8                                  Event of Default  After the occurrence of an Event of Default the Borrowers shall not be permitted to exercise their rights under this Clause 8 and shall indemnify the Lender in accordance with Clause 8.7.

 
9                                          Alternative currency options
 
9.1                                  Request to convert At the commencement of any Interest Period the Borrowers, by written notice to the Lender given not later than 10.00 a.m. (Piraeus time) three (3) Business Days before the commencement of such Interest Period, may request that, from time of commencement of such Interest Period, part of the Loan be converted from one Relevant Currency to another Relevant Currency as specified in such notice and at the Spot Rate of Exchange.
 
9.2                                  Restrictions to conversion Subject only to:-
 
9.2.1                  at all times thirty percent (30%) of the Loan being denominated in Dollars;
 
9.2.2                  the total Loan being denominated in not more than three Relevant Currencies, one of which must be Dollars, and
 
9.2.3                  any amount in any Approved Currency outstanding under the Loan being not less than ten percent (10%) of the total amount outstanding thereunder;
 
9.2.4                  no Event of Default then having occurred and being continuing
 
the amount in respect of the Loan which the Borrowers have requested to be converted from one Relevant Currency to another Relevant Currency shall be converted by the Lender in accordance with the Borrowers’ request with effect from the commencement of the relevant Interest Period.
 
9.3                                  Notional repayment Each conversion under this Clause 9 shall made by the Borrowers being deemed to make a notional repayment of the relevant part of the Loan which is to be converted and the Lenders being deemed to make a new advance in the New Currency of such sum, after taking account of scheduled repayments due to be made in the Existing Currency under Clause 5 and any mandatory prepayment under Clauses 9.6 or 9.7.
 
The proceeds of each such new advance shall be deemed to be used to purchase the amount due in the Existing Currency which is necessary so that the Borrowers may make the deemed repayment of the part of the Loan which is being converted. However, the Borrowers shall remain indebted to the Lender for the advance made in the New Currency, which shall continue to form part of the Loan as more particularly described in Clause 9.8.

 
9.4                                  Notice If the Lender does not receive a notice in accordance with Clause 9.1 the relevant part of the Loan shall remain denominated in the Relevant Currency in which it was denominated during the then current Interest Period in respect thereof.
 
If the Borrowers have requested that any Currency Tranche should remain denominated in or be converted to an Approved Currency for the next Interest Period but the requirements of Clause 9.2 would not then be complied with, then such Currency Tranche shall be denominated in Dollars for the next Interest Period.
 
9.5                                  Borrowers’ obligations The Borrowers’ obligation shall be to make all payments in respect of principal of all parts of the Loan and interest thereon and other payments under this Agreement in the Relevant Currency in which the Loan or part thereof is for the time being denominated and at the Spot Rate of Exchange applicable at such time.
 
9.6                                  Mandatory prepayment If and so often as at any time the Lender determines that:
 
(a)                            the consolidated aggregate of the Currency Equivalent in Dollars of all of the Currency Tranches, PLUS
 
(b)                           the remaining part (if any) of the Loan in Dollars,
 
is more than 110% of the aggregate of:
 
(c)                                    the Dollar Reference Amount of the Loan at that time; and less
 
(d)                       the value of any additional security provided in accordance with this Clause 9.6;
 
then, subject only as hereinafter provided, a prepayment of the Loan shall be made on that Repayment Date of a sum sufficient to reduce the aggregate amounts referred to in this Clause 9.6 (a) and (b) to 100% of the aggregate amounts referred to in this Clause 9.6 (c) and (d). However, before such prepayment is made, at the Borrowers’ request the Lender shall give the Borrowers the opportunity, within five (5) Business Days after being requested to do so, to provide alternative additional security acceptable to the Lender (to which

 
the provisions of Clauses 12.13 and 12.14 shall apply) so as to ensure that, after taking into account all such additional security, such 100% limit is not exceeded.
 
9.7                                  Conversion to Dollars If the whole of the Loan is converted into Dollars and the Loan is more than 100% of the Dollar Reference Amount of the Loan at that time then, at the date of such conversion, a prepayment of the Loan shall be made of a sum sufficient to reduce the amount of the Loan to 100% of the Dollar Reference Amount of the Loan at that time. If the Loan, when converted in full to Dollars, is less than 100% of the Dollar Reference Amount of the Loan at that time, then the Borrowers will not be permitted to re-borrow any part of the Loan.
 
9.8                                  Conversion as banking mechanism It is agreed that the conversion operations contemplated by Clause 9 constitute only a banking mechanism and that such operations shall not constitute or be construed as a novation or a repayment of all or any part of the Loan or the grant of new loans. The Borrowers agree that the security to be constituted by all the Security Documents shall secure both the initial amount of all parts of the Loan and all advances made by the Lender to effect such conversions.
 
Nothwithstanding and without prejudice to the validity of the foregoing, the Borrowers shall at the Lender’s request sign such amendments to any of the Security Documents as the Lender may reasonably require to preserve their validity.
 
9.9                                  Event of Default After the occurrence of an Event of Default the Borrowers shall not be permitted to exercise their rights under this Clause 9 and from the Interest Period following the occurrence of an Event of Default the Loan may be denominated only in Dollars if and when the Lender should so decide, in its sole discretion and at the expense of the Borrowers.
 
10                                   Indemnities
 
10.1                            Documentation expenses   The Borrowers will, within fourteen (14) days of the Lender’s written demand, pay the Lender the amount of all costs and expenses (including legal fees and Value Added Tax or any similar or replacement tax if applicable) incurred by the Lender in connection with:
 
10.1.1                   the negotiation, preparation, printing, execution and registration of the Finance Documents (whether or not any Finance Document is actually

 
executed or registered and whether or not all or any part of the Loan is advanced or any Transaction is made);
 
10.1.2                   any amendment, addendum or supplement to any Finance Document (whether or not completed); and
 
10.1.3                   any other document which may at any time be required by the Lender to give effect to any Finance Document or which the Lender is entitled to call for or obtain under any Finance Document.
 
10.2                            Funding costs    The Borrowers shall indemnify the Lender on demand against all losses and costs incurred or sustained by the Lender if, for any reason, a Drawing is not advanced to the Borrowers after the relevant Drawdown Notice has been given to the Lender, or is advanced on a date other than that requested in the Drawdown Notice (unless, in either case, as a result of any default by the Lender).
 
10.3                            Break Costs    The Borrowers shall indemnify the Lender on demand against all costs, losses, premiums or penalties incurred by the Lender as a result of its receiving any prepayment of all or any part of the Loan (whether pursuant to Clause 6, Clause 8, Clause 9 or otherwise) on a day other than the last day of an Interest Period for the Loan or relevant part of the Loan, or any other payment under or in relation to the Finance Documents on a day other than the due date for payment of the sum in question, including (without limitation) any losses or costs incurred in liquidating or re-employing deposits from third parties acquired to effect or maintain all or any part of the Loan, and any liabilities, expenses or losses incurred by the Lender in terminating or reversing, or otherwise in connection with, any Transaction or any other interest rate and/or currency swap, transaction or arrangement entered into by the Lender to hedge any exposure arising under this Agreement, or in terminating or reversing, or otherwise in connection with, any open position arising under this Agreement or the Master Agreement and, in the case of any prepayment of any part of the Loan, includes payment to the Lender of an amount equal to the Margin on the amount of the Loan prepaid from the date of such prepayment until the end of the then current Interest Period (both dates inclusive).
 
10.4                            Currency indemnity   In the event of the Lender receiving or recovering any amount payable under a Finance Document in a currency other than the Currency of Account, and if the amount received or recovered is insufficient when converted

 
into the Currency of Account at the date of receipt to satisfy in full the amount due, the Borrowers shall, on the Lender’s written demand, pay to the Lender such further amount in the Currency of Account as is sufficient to satisfy in full the amount due and that further amount shall be due to the Lender as a separate debt under this Agreement.
 
10.5                            Increased costs   If, by reason of the introduction of any law, or any change in any law, or any change in the interpretation or administration of any law, or compliance with any request or requirement from any central bank or any fiscal, monetary or other authority occurring after the date of this Agreement:
 
10.5.1                   the Lender (or the holding company of the Lender) shall be subject to any Tax with respect to payment of all or any part of the Indebtedness; or
 
10.5.2                   the basis of Taxation of payments to the Lender in respect of all or any part of the Indebtedness shall be changed; or
 
10.5.3                   any reserve requirements shall be imposed, modified or deemed applicable against assets held by or deposits in or for the account of or loans by any branch of the Lender except to the extent included in the Mandatory Cost; or
 
10.5.4                   the manner in which the Lender allocates capital resources to its obligations under this Agreement and/or the Master Agreement or any ratio (whether cash, capital adequacy, liquidity or otherwise) which the Lender is required or requested to maintain shall be affected; or
 
10.5.5                   there is imposed on the Lender (or on the holding company of the Lender) any other condition in relation to the Indebtedness or the Finance Documents;
 
and the result of any of the above shall be to increase the cost to the Lender (or to the holding company of the Lender) of the Lender making or maintaining the Loan, or its obligations under the Master Agreement, or to cause the Lender to suffer (in its opinion) a material reduction in the rate of return on its overall capital below the level which it reasonably anticipated at the date of this Agreement and which it would have been able to achieve but for its entering into this Agreement or the Master Agreement, and/or performing its obligations under this Agreement or the Master Agreement, the Lender shall notify the Borrowers and the Borrowers shall

 
from time to time pay to the Lender on demand the amount which shall compensate the Lender (or the holding company of the Lender) for such additional cost or reduced return.  A certificate signed by an authorised signatory of the Lender setting out the amount of that payment and the basis of its calculation shall be submitted to the Borrowers and shall be conclusive evidence of such amount save for manifest error or on any question of law.
 
10.6                            Events of Default   The Borrowers shall indemnify the Lender from time to time on demand against all losses, costs and liabilities incurred or sustained by the Lender as a consequence of any Event of Default.
 
10.7                            Enforcement costs    The Borrowers shall pay to the Lender on demand the amount of all costs and expenses (including legal fees) incurred by the Lender in connection with the enforcement of, or the preservation of any rights under, any Finance Document including (without limitation) any losses, costs and expenses which the Lender may from time to time sustain, incur or become liable for by reason of the Lender being mortgagee of a Vessel and/or a lender to the Borrowers, or by reason of the Lender being deemed by any court or authority to be an operator or controller, or in any way concerned in the operation or control, of a Vessel (including, without limitation, any and all costs and expenses resulting from any oil pollution incident).
 
10.8                            Other costs    The Borrowers shall pay to the Lender on demand the amount of all sums which the Lender may pay or become actually or contingently liable for on account of a Borrower in connection with a Vessel (whether alone or jointly or jointly and severally with any other person) including (without limitation) all sums which the Lender may pay or guarantees which it may give in respect of the Insurances, any expenses incurred by the Lender in connection with the maintenance or repair of a Vessel or in discharging any lien, bond or other claim relating in any way to a Vessel, and any sums which the Lender may pay or guarantees which it may give to procure the release of a Vessel from arrest or detention.
 
10.9                            Taxes   The Borrowers shall pay all Taxes to which all or any part of the Indebtedness or any Finance Document may be at any time subject and shall indemnify the Lender on demand against all liabilities, costs, claims and expenses resulting from any omission to pay or delay in paying any such Taxes.

 
11                                   Fee
 
The Borrowers shall pay to the Lender a fee of two hundred and fifty thousand Dollars ($250,000) on the date of this Agreement.
 
12                                   Security and Application of Moneys
 
12.1                            Security Documents    As security for the payment of the Indebtedness, the Borrowers shall execute and deliver to the Lender or cause to be executed and delivered to the Lender the following documents in such forms and containing such terms and conditions as the Lender shall require:
 
12.1.1                   first preferred or statutory mortgage over each of the Vessels, together with collateral deeds of covenants in the case of each statutory mortgage;
 
12.1.2                   first priority deeds of assignment of the Insurances, Earnings, Charter Rights and Requisition Compensation of the Vessels from the Borrowers;
 
12.1.3                   a guarantee and indemnity from the Guarantor;
 
12.1.4                   a first priority deed of charge over the Accounts and all amounts from time to time standing to the credit of the Accounts;
 
12.1.5                   a first priority deed of assignment of the Bareboat Charters; and
 
12.1.6                   undertakings from the Managers of each Vessel.
 
12.2                            Accounts  The Borrowers shall procure that the Managers shall open or maintain the Accounts with the Lender for the duration of the Facility Period free of Encumbrances and rights of set off other than those created by or under the Finance Documents.  Interest shall accrue on a daily basis on any balance from time to time on the Accounts at a rate of interest determined by the Lender in its discretion as the rate of interest payable to its customers on deposits in the same currency and of similar amount and maturity, and shall be credited to the appropriate Account.
 
12.3                            Earnings   The Borrowers shall procure that all Earnings and any Requisition Compensation for each Vessel are credited to the Earnings Account.
 
12.4                            Application of Earnings Account   The Borrowers shall procure that there is transferred from the Earnings Account, to the Lender:

 
12.4.1                   on each Repayment Date, the amount of the Repayment Instalment then due; and
 
12.4.2                   on each Interest Payment Date, the amount of interest then due,
 
and the Borrowers irrevocably authorise the Lender to make those transfers.
 
12.5                            Additional payments to Earnings Account  If for any reason the amount standing to the credit of the Earnings Account is insufficient to make any transfer to the Lender required by Clause 12.4, the Borrowers shall, without demand, procure that there is credited to the Lender, on the date on which the relevant amount would have been transferred from the Earnings Account an amount equal to the amount of the shortfall.
 
12.6                            Borrowers’ obligations not affected   If for any reason the amount standing to the credit of the Earnings Account is insufficient to pay any Repayment Instalment or to make any payment of interest when due, the Borrowers’ obligation to pay that Repayment Instalment or to make that payment of interest shall not be affected.
 
12.7                            Release of surplus   Any amount remaining to the credit of the Earnings Account following the making of any transfer required by Clause 12.4 may (unless a Default shall have occurred and be continuing) be released to or to the order of the Managers or the relevant Borrower.
 
12.8                            Restriction on withdrawal   During the Facility Period no sum may be withdrawn from the Earnings Account (except in accordance with this Clause 12) without the prior written consent of the Lender.
 
12.9                            Relocation of Accounts   At any time during the Facility Period the Lender may, without the consent of the Borrowers or the Managers, relocate the Accounts to any other branch of the Lender, without prejudice to the continued application of this Clause 12 and the rights of the Lender under the Finance Documents.
 
12.10                      Application after acceleration   From and after the giving of notice to the Borrowers by the Lender under Clause 15.2, the Borrowers shall procure that all sums from time to time standing to the credit of any of the Accounts are immediately transferred to the Lender for application in accordance with Clause 12.11 and the Borrowers irrevocably authorise the Lender to make those transfers.

 
12.11                      General application of moneys    Each Borrower, subject to Clause 12.12, irrevocably authorises the Lender to apply all sums which the Lender may receive:
 
12.11.1             pursuant to a sale or other disposition of its Vessel or any right, title or interest in its Vessel; or
 
12.11.2             by way of payment of any sum in respect of the Insurances, Earnings or Requisition Compensation of its Vessel; or
 
12.11.3             by way of transfer of any sum from any of the Accounts; or
 
12.11.4             otherwise arising under or in connection with any Security Document,
 
in or towards satisfaction, or by way of retention on account, of the Indebtedness, in the following manner:
 
FIRST:   in or towards satisfaction of any amounts as are then accrued due and payable under the Finance Documents (or any of them) or are then due and payable by virtue of payment demanded under the Finance Documents (or any of them) in such order of application as the Lender shall think fit;
 
SECONDLY:  at the option of the Lender (i) in retention of an amount equal to any amounts which are not then accrued due and payable under the Finance Documents (or any of them) or are not then due and payable by virtue of payment demanded under the Finance Documents (or any of them) but which (in the sole and absolute opinion of the Lender) will or may become due and payable in the future and, upon the same becoming due and payable, in or towards satisfaction thereof in accordance with the foregoing provisions of this Clause 12.11; and
 
THIRDLY:  the surplus (if any) shall be paid to the Borrowers or to whomsoever else may be entitled thereto.
 
12.12                     Application of moneys on sale or Total Loss   Each Borrower irrevocably authorises the Lender to apply all sums which the Lender may receive pursuant to a sale by that Borrower of its Vessel or a Total Loss of its Vessel in or towards satisfaction of the prepayment due and payable by virtue of that sale or Total Loss under Clause 6.3, but the Borrowers’ obligation to make that prepayment shall not be affected if those sums are insufficient to satisfy that obligation.

 
12.13                       Vessel valuations If the Lender reasonably requires, at any time and from time to time (but not more often than once during each consecutive period of six (6) months during the Facility Period, and with the first such period commencing on the first Drawdown Date), or, in the case of a Default or Event of Default which is continuing, at any time and from time to time as the Lender may require in its discretion, the Vessels shall be valued in Dollars by taking the average of the valuations provided by two firms of shipbrokers chosen by the Borrowers from Howe Robinson; Simpson, Spence & Young; Arrow Sale & Purchase (UK) Limited; H. Clarkson & Co. Limited; Braemar Seascope; Galbraith’s Limited; or such other firm(s) of shipbrokers nominated by the Borrowers and approved by the Lender from time to time (or, if not nominated by the Borrowers within five (5) Business Days of the Lender’s first request in writing, nominated by the Lender in its discretion from time to time) such valuations shall be addressed to the Lender and made without physical inspection (unless otherwise required by the Lender), and on the basis of an arm’s-length purchase by a willing buyer from a willing seller and without taking into account any charterparty.  The fees of the firm of shipbrokers appointed to give such valuations and all other costs arising in connection with the obtaining of any such valuations shall be paid by the Borrowers.
 
12.14                      Additional security   If at any time the aggregate of the market value of the Vessels (such market value to be conclusively determined in accordance with Clause 12.13) and the value of any additional security (such value to be the face amount of the deposit (in the case of cash), determined conclusively by appropriate advisers appointed by the Lender (in the case of other charged assets), and determined by the Lender in its discretion (in all other cases)) for the time being provided to the Lender under this Clause 12.14 is less than one hundred and twenty per cent (120%) of the aggregate of (a) the consolidated aggregate of the Currency Equivalent in Dollars of all the Currency Tranches and (b) the remaining part of the Loan in Dollars and (c) the Notional Amount or actual cost (if any) of terminating a Confirmation or a Transaction and (d) the cost of any other Master Agreement Liabilities the Borrowers shall, within thirty (30) days of the Lender’s request, at the Borrowers’ option:
 
12.14.2                         pay to the Lender or to its nominee a cash deposit in the amount of the shortfall to be secured in favour of the Lender as additional security for the payment of the Indebtedness; or

 
12.14.3                         give to the Lender other additional security in amount and form acceptable to the Lender in its discretion; or
 
12.14.4                         prepay the amount of the Indebtedness which will ensure that the aggregate of the market value of the Vessels (determined as stated above) and the value of any such additional security is not less than one hundred and twenty per cent (120%) of the aggregate of (a) the consolidated aggregate of the Currency Equivalent in Dollars of all the Currency Tranches and (b) the remaining part of the Loan in Dollars and (c) the Notional Amount or actual cost (if any) of terminating a Confirmation or a Transaction and (d) the cost of any other Master Agreement Liabilities.
 
Clauses 5.3 and 6.4 shall apply, mutatis mutandis , to any prepayment made under this Clause 12.14 and any prepayment under this Clause 12.14 shall satisfy the obligations under Clause 5.1, including the Balloon, in inverse order of their maturity, and the value of any additional security provided shall be determined as stated above.
 
13                                   Representations
 
13.1                            Representations    The Borrowers make the representations and warranties set out in this Clause 13.1 to the Lender on the date of this Agreement.
 
13.1.1                   Status   Each Security Party (which is not an individual) is a corporation, duly incorporated and validly existing under the law of its jurisdiction of incorporation and has the power to own its assets and carry on its business as it is being conducted.
 
13.1.2                   Binding obligations   The obligations expressed to be assumed by each Security Party in each Finance Document to which it is a party are legal, valid, binding and enforceable obligations.
 
13.1.3                   Non-conflict with other obligations   The entry into and performance by each Security Party of, and the transactions contemplated by, the Finance Documents do not conflict with:
 
(a)                                   any law or regulation applicable to that Security Party;
 
(b)                                  the constitutional documents of that Security Party; or

 
 
(c)                                   any document binding on that Security Party or any of its assets,
 
and in borrowing the Loan, the Borrowers are acting for their own account.
 
13.1.4                   Power and authority   Each Security Party has the power to enter into, perform and deliver, and has taken all necessary action to authorise its entry into, performance and delivery of, the Finance Documents to which it is a party and the transactions contemplated by those Finance Documents.
 
13.1.5                   Validity and admissibility in evidence   All consents, licences, approvals, authorisations, filings and registrations required or desirable:
 
(a)                                   to enable each Security Party lawfully to enter into, exercise its rights and comply with its obligations in the Finance Documents to which it is a party or to enable the Lender to enforce and exercise all its rights under the Finance Documents; and
 
(b)                                  to make the Finance Documents to which any Security Party is a party admissible in evidence in its jurisdiction of incorporation,
 
have been obtained or effected and are in full force and effect, with the exception only of the registrations referred to in Part II of Schedule 1.
 
13.1.6                   Governing law and enforcement   The choice of English law as the governing law of any Finance Document expressed to be governed by English law will be recognised and enforced in the jurisdiction of incorporation of each relevant Security Party, and any judgment obtained in England in relation to any such Finance Document will be recognised and enforced in the jurisdiction of incorporation of each relevant Security Party.
 
13.1.7                   Deduction of Tax   No Security Party is required under the law of its jurisdiction of incorporation to make any deduction for or on account of Tax from any payment it may make under any Finance Document.
 
13.1.8                   No filing or stamp taxes   Under the law of jurisdiction of incorporation of each relevant Security Party it is not necessary that the Finance

 
Documents (other than the Security Documents) be filed, recorded or enrolled with any court or other authority in that jurisdiction or that any stamp, registration or similar tax be paid on or in relation to the Finance Documents or the transactions contemplated by the Finance Documents.
 
13.1.9                   No default   No Event of Default is continuing or might reasonably be expected to result from the advance of any Drawing and/or the entering into of any Transactions.
 
13.1.10             No misleading information   Any factual information provided by any Security Party to the Lender was true and accurate in all material respects as at the date is was provided.
 
13.1.11             Pari passu ranking   The payment obligations of each Security Party under the Finance Documents to which it is a party rank at least pari passu with the claims of all its other unsecured and unsubordinated creditors, except for obligations mandatorily preferred by law applying to companies generally.
 
13.1.12             No proceedings pending or threatened   No litigation, arbitration or administrative proceedings of or before any court, arbitral body or agency have been started or (to the best of the Borrowers’ knowledge threatened) which, if adversely determined, might reasonably be expected to have a materially adverse effect on the business, assets, financial condition or credit worthiness of any Security Party.
 
13.1.13             Disclosure of material facts   The Borrowers are not aware of any material facts or circumstances which have not been disclosed to the Lender and which might, if disclosed, have adversely affected the decision of a person considering whether or not to make loan and/or hedging facilities of the nature contemplated by this Agreement available to the Borrowers.
 
13.1.14             No established place of business in the UK or US    No Security Party has an established place of business in the United Kingdom or the United States of America.
 
13.1.15             Completeness of Relevant Documents   The copies of any Relevant Documents provided or to be provided by the Borrowers to the Lender in accordance with Clause 3 are, or will be, true and accurate copies of the

 
originals and represent, or will represent, the full agreement between the parties to those Relevant Documents in relation to the subject matter of those Relevant Documents and there are no commissions, rebates, premiums or other payments due or to become due in connection with the subject matter of those Relevant Documents other than in the ordinary course of business or as disclosed to, and approved in writing by, the Lender.
 
13.2                            Repetition   Each representation and warranty in Clause 13.1 is deemed to be repeated by the Borrowers by reference to the facts and circumstances then existing on the date of each Drawdown Notice and the first day of each Interest Period.
 
14                                   Undertakings and Covenants
 
The undertakings and covenants in this Clause 14 remain in force for the duration of the Facility Period.
 
14.1                            Information Undertakings
 
14.1.1                   Financial statements   The Borrowers shall supply to the Lender, and shall procure that the Managers and the Guarantor supply to the Lender, as soon as the same become available, but in any event within one hundred and eighty (180) days after the end of each of their financial years, each Borrower’s and the Managers’ and the Guarantor’s annual audited financial statements and the Group Statements for that financial year, commencing with the financial statements and Group Statements for 2003.
 
14.1.2                   Requirements as to financial statements   Each set of financial statements delivered under Clause 14.1.1 shall be prepared using:
 
(a)                                   generally accepted accounting principles, in the case of the Borrowers, the Managers and the Guarantor; and
 
(b)                                  Applicable Accounting Principles, in the case of the Group Statements.

 
14.1.3                   Information: miscellaneous   The Borrowers shall supply to the Lender:
 
(a)                                   such management information as may be reasonably required by the Lender;
 
(b)                                  all documents dispatched by any Borrower:-
 
(i)                                    to its creditors generally; and
 
(ii)                                 if there is no Event of Default, to its shareholders (or any class of them) which that Borrower is required to despatch at law; and
 
(iii)                              if there is an Event of Default which is continuing, all documents dispatched by that Borrower to its shareholders (or any class of them);
 
in each case at the same time as they are dispatched;
 
(c)                                   promptly upon becoming aware of them, details of any litigation, arbitration or administrative proceedings which are current, threatened or pending against any Security Party, and which might, if adversely determined, have a materially adverse effect on the business, assets, financial condition or credit worthiness of that Security Party; and
 
(d)                                  promptly, such further information regarding the financial condition, business and operations of any Security Party as the Lender may reasonably request including, without limitation, cash flow analyses and details of the operating costs of any Vessel.
 
14.1.4                   Notification of default
 
(a)                                   The Borrowers shall notify the Lender of any Default (and the steps, if any, being taken to remedy it) promptly upon becoming aware of its occurrence.
 
(b)                                  Promptly upon a request by the Lender, each Borrower shall supply to the Lender a certificate signed by two of its directors or senior officers on its behalf certifying that no Default is

 
continuing (or if a Default is continuing, specifying the Default and the steps, if any, being taken to remedy it).
 
14.1.5                   “Know your customer” checks   If:
 
(a)                                   the introduction of or any change in (or in the interpretation, administration or application of) any law or regulation made after the date of this Agreement;
 
(b)                                  any change in the status of a Borrower after the date of this Agreement; or
 
(c)                                   a proposed assignment or transfer by the Lender of any of its rights and obligations under this Agreement,
 
obliges the Lender (or, in the case of (c) above, any prospective new Lender) to comply with “know your customer” or similar identification procedures in circumstances where the necessary information is not already available to it, the Borrowers shall promptly upon the request of the Lender supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Lender (for itself or, in the case of (c) above, on behalf of any prospective new Lender) in order for the Lender (or, in the case of (c) above, any prospective new Lender) to carry out and be satisfied it has complied with all necessary “know your customer” or other similar checks under all applicable laws and regulations pursuant to the transactions contemplated in the Finance Documents.
 
14.2                            Financial covenants
 
14.2.1                    Undertaking   The Borrowers undertake that throughout the Facility Period:
 
(a)                                      they will procure that the Guarantor will own 100% of all the share capital of all the Borrowers;
 
(b)                                     the amount of total Net Worth will not be less than $250,000,000;
 
(c)                                      the ratio of Fixed Assets to Net Consolidated Indebtedness will not be less than 1.45:1;

 
(d)                                     the ratio of Outstanding Bank Debt to Vessel Values will not be more than 0.75:1; and
 
(e)                                      Net Worth will always exceed 30% of Total Assets.
 
14.2.2                    Limitations on Incurrence of Financial Indebtedness The Borrowers will procure that, during the Facility Period, the Guarantor will not, and will not permit any Subsidiary to, (i) incur additional Financial Indebtedness or (ii) declare or pay any dividend or other distribution to shareholders unless immediately after giving effect thereto:
 
(a)                                    the Liquid Funds of the Group would not be less than $30,000,000; and
 
(b)                                   the ratio of EBITDA to Net Interest Expenses would be at least 2.5:1 on a Pro Forma Basis for the period immediately preceding the date thereof for which Group Statements are available.
 
14.2.3                    Definitions The calculation of ratios and percentages in Clauses 14.2.1 and 14.2.2 shall be determined on the basis of the latest Group Statements, but so that:
 
(a)                                   “Bank Credit Agreement” means any bank credit agreement or similar facility entered into at any time by a member of the Group.
 
(b)                                  “Consolidated Indebtedness” means, in respect of the relevant period, the aggregate amount of Financial Indebtedness (including current maturities) due by the members of the Group (other than any such Financial Indebtedness owing by any member of the Group to another member of the Group);
 
(c)                                   “Current Assets” means, in respect of the relevant period, the aggregate amount of cash and cash equivalents, receivables due to any member of the Group by a person who is not a member of the Group with a maturity of less than one year and inventories;
 
(d)                                  “ EBITDA” means, in respect of the relevant period, the aggregate amount of consolidated pre-tax profits of the Group extraordinary

 
or exceptional items, depreciation, interest, rentals under finance leases and similar charges payable;
 
(e)                                   “Financial Indebtedness” means, in relation to any member of the Group, a liability of the debtor:
 
(i)                                       for principal, interest or any other sum payable in respect of any moneys borrowed or raised by the debtor;
 
(ii)                                    under any loan, bond, note or other debt security issued by the debtor;
 
(iii)                                 under any acceptance credit, guarantee or letter of credit facility made available to the debtor other than in the ordinary course of business;
 
(iv)                             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;
 
(v)                                under any interest or currency swap or any other kind of derivative transaction entered into by the debtor or, if the agreement under which any such transaction is entered into requires netting of mutual liabilities, the liability of the debtor for the net amount; and
 
(vi)                             under a guarantee, indemnity or similar obligation entered into by the debtor in respect of a liability of another person which would fall within (i) to (v) if the references to the debtor referred to the other person (unless such other person is a member of the Group and the said liability of that other person was incurred in conformity with this Clause 14.2.3);
 
(f)                                            “Fixed Assets” means, in respect of the relevant period, the aggregate of the Vessel Values and the value on a consolidated basis of all other fixed assets of the Group (less depreciation

 
computed in accordance with the Applicable Accounting Principles);
 
(g)                                 “Liquid Funds” means, in respect of the relevant period, the aggregate of:
 
(i)                                       cash in hand or held with banks or other financial institutions which is free of any Security Interest (other than a Security Interest created under a Bank Credit Agreement); and
 
(ii)                                 any other short-term financial investments which is free of any Security Interest (other than a Security Interest created under a Bank Credit Agreement);
 
(h)                                   “Net Consolidated Indebtedness” means, in respect of the relevant period, Consolidated Indebtedness less Liquid Funds;
 
(i)                                       “Net Interest Expenses” means, in respect of the relevant period:
 
(i)                                       the aggregate on a consolidated basis of:
 
(A)                                 all interest incurred by any member of the Group (excluding any amounts owing by one member of the Group to another member of the Group); and
 
(B)                                   any net amounts payable under interest rate hedge agreements
 
LESS
 
(ii)                                   the aggregate of:
 
(A)                                 interest receivable by any member of the Group on Liquid Funds; and
 
(B)                                   any net amounts receivable under interest rate hedge agreements, in each case accrued (and whether or not actually paid) during such period;

 
(j)                                       “Net Worth” means, in respect of the relevant period, the Total Shareholders Equity as defined by the Applicable Accounting Principles.
 
(k)                                    “Outstanding Bank Debt” means, in respect of the relevant period, the aggregate amount of principal due under the Bank Credit Agreements less cash held with banks or other financial institutions and any other short-term investments over which, in each case, a Bank Credit Agreement has created a Security Interest;
 
(l)                                       “Pro Forma Basis” means, for the purposes of Clause 14.2.2(b), giving pro forma effect to:
 
(i)                                       any acquisition or sale of a person, business or asset and any related incurrence, repayment or refinancing of a Financial Indebtedness or other related transactions, which would otherwise be accounted for under the Applicable Accounting Principles; or
 
(ii)                                 any incurrence, repayment or refinancing of any Financial Indebtedness and the application of the proceeds therefrom.
 
As if the same was realised on the first day of the immediately preceding period for which Financial Statements are available, in accordance with the Applicable Accounting Principles.
 
For the purposes of this definition:
 
(A)                               in the case of the acquisition of a Vessel by a member of the Group pursuant to a memorandum of agreement (or similar agreement) or the delivery of a Vessel to a member of the Group pursuant to a shipbuilding contract during the relevant period, if historical earnings (losses) of such Vessel are not available to the Guarantor, the Guarantor shall give pro forma effect to the earnings (losses) of such Vessel as if such Vessel was acquired on the first day of the immediately preceding period for which Group

 
Statements are available by basing such earnings (losses) on:
 
(1)                                   the revenues to be earned from any binding charter, lease or like arrangement which will be applicable to any such Vessel less a good faith estimate of the operating costs of such Vessel (including, without limitation, management fees); or
 
(2)                                   with respect of any such Vessel not subject to such arrangement, the earnings (losses) for the applicable period of the most comparable Vessel of any member of the Group (as determined in the reasonable judgment of a responsible financial officer of the Guarantor) or, in the absence of a comparable Vessel, based on industry average earning (losses) for comparable vessels (as determined in the reasonable judgment of a responsible financial officer of the Guarantor); and
 
(B)                                  in the case of an acquisition of a person, business or asset, the Guarantor shall give pro forma effect to the amount of income or earnings relating thereto, and the amount of Net Interest Expenses associated with any Financial Indebtedness issued in connection therewith (as determined in the reasonable judgment of a responsible financial office of the Guarantor);
 
(m)                                 “Security Interest” means:
 
(i)                                       a mortgage, charge (whether fixed or floating) or pledge, any maritime or other lien or any other security interest of any kind;
 
(ii)                                    the rights of the plaintiff under an action in rem in which the asset concerned has been arrested or a writ has been issued or similar step taken; and

 
(iii)                                 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 it held a security interest over an asset of A; but this paragraph (iii) 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;
 
(n)                                   “Total Assets” means the aggregate of Current Assets and Fixed Assets;
 
(o)                                   “Vessel” and “Vessels” means for the purposes of this Clause 14.2 the vessels owned by and registered (or to be owned by and registered) in the name of the Guarantor or any of the Subsidiaries or operated by the Guarantor or any of the Subsidiaries pursuant to a lease or other operating agreement constituting a capital lease obligation, in each case with all related equipment and any additions or improvements; and
 
(p)                                   “ Vessel Values” means, in respect of the relevant period, the aggregate book value of the Vessels determined in accordance with the Applicable Accounting Principals.
 
14.2.4                    Currency  For the purposes of this Clause 14.2 any amount expressed in a currency other than Dollars shall (unless the Lender otherwise agrees) be converted into Dollars in accordance with the Applicable Accounting Principles.
 
14.2.5                    Covenant Compliance Certificate  The Borrowers will provide the Lender with a Covenant Compliance Certificate in respect of compliance by the Borrowers of Clauses 14.2.1 and 14.2.2 at such times as the Lender may reasonably require, in its discretion but at least once during each calendar year.
 
14.3                            General undertakings
 
14.3.1                    Authorisations   The Borrowers shall promptly:

 
14.3.1.1obtain, comply with and do all that is necessary to maintain in full force and effect; and
 
14.3.1.2supply certified copies to the Lender of,
 
any consent, licence, approval or authorisation required under any law or regulation to enable each Security Party to perform its obligations under the Finance Documents to which it is a party and to ensure the legality, validity, enforceability or admissibility in evidence in the jurisdiction of incorporation of each relevant Security Party of any Finance Document.
 
14.3.2                   Compliance with laws   Each Borrower shall comply in all respects with all laws to which it may be subject, if failure so to comply would materially impair its ability to perform its obligations under the Finance Documents.
 
14.3.3                   Conduct of business   Each Borrower shall carry on and conduct its business in a proper and efficient manner, file all requisite tax returns and pay all tax which becomes due and payable (except where contested in good faith).
 
14.3.4                   Evidence of good standing    The Borrowers will from time to time if requested by the Lender provide the Lender with evidence in form and substance satisfactory to the Lender that the Security Parties and all corporate shareholders of any Security Party remain in good standing.
 
14.3.5                   Negative pledge and no disposals   No Borrower shall without the prior written consent of the Lender create nor permit to subsist any Encumbrance or other third party rights (other than a Permitted Encumbrance) over any of its present or future assets or undertaking nor dispose of any those assets or of all or part of that undertaking.
 
14.3.6                   Merger   No Borrower shall without the prior written consent of the Lender enter into any amalgamation, demerger, merger or corporate reconstruction.
 
14.3.7                   Change of business   No Borrower shall without the prior written consent of the Lender make any substantial change to the general nature of its business from that carried on at the date of this Agreement.

 
14.3.8                   No change in ownership or control No Borrower shall permit any change in its beneficial ownership or control from that advised to the Lender at the date of this Agreement and shall procure that all the capital stock of the Borrowers is owned directly or indirectly by the Guarantor and that the present shareholders of the Guarantor shall maintain at all times beneficial ownership or control, directly or indirectly, of at least sixty per centum (60%) of each Borrower’s capital stock.
 
14.3.9                   No other business   No Borrower shall without the prior written consent of the Lender engage in any business other than the ownership, operation, chartering and management of its Vessel.
 
14.3.10             No place of business in UK or US   No Borrower shall have an established place of business in the United Kingdom or the United States of America at any time during the Facility Period.
 
14.3.11             No borrowings   No Borrower shall without the prior written consent of the Lender borrow any money (except for the Loan and unsecured Financial Indebtedness subordinated to the Loan) nor incur any obligations under leases.
 
14.3.12             No substantial liabilities   Except in the ordinary course of business, no Borrower shall without the prior written consent of the Lender incur any liability to any third party which is in the Lender’s opinion of a substantial nature.
 
14.3.13             No loans or other financial commitments   No Borrower shall without the prior written consent of the Lender make any loan nor enter into any guarantee or indemnity or otherwise voluntarily assume any actual or contingent liability in respect of any obligation of any other person except for loans made in the ordinary course of business in connection with the chartering, operation or repair of its Vessel.
 
14.3.14             Inspection of records   Each Borrower will permit the inspection of its financial records and accounts from time to time by the Lender or its nominee.
 
14.3.15             No change in Relevant Documents   The Borrowers shall procure that, without the prior written consent of the Lender, there shall be no

 
termination of, alteration to, or waiver of any term of, any of the Relevant Documents which are not Finance Documents.
 
14.3.16             No dealings with Master Agreement   No Borrower shall assign, novate or encumber or in any other way transfer any of its rights or obligations under the Master Agreement, nor enter into any interest rate exchange or hedging agreement with anyone other than the Lender.
 
14.3.17             No purchase of vessel   No Borrower shall purchase any vessel or any shares in a vessel and the Borrowers shall keep the Lender fully informed of any actual or proposed purchase by any company (other than the Borrowers) within the same beneficial ownership and control as the Borrowers at the earliest opportunity and, in the any event, at regular intervals of not more than three (3) months during the Facility Period, with the first such period of three months commencing on the first Drawdown Date.
 
15                                   Events of Default
 
15.1                            Events of Default    Each of the events or circumstances set out in this Clause 15.1 is an Event of Default.
 
15.1.1                   Non-payment   The Borrowers do not pay on the due date any amount payable by them under a Finance Document at the place at and in the currency in which it is expressed to be payable.
 
No Event of Default under this Clause 15.1.1 will occur if non payment is caused by technical and/or administrative error and the payment is received within three (3) days of the due date of such payment at the place and in the currency in which it is expressed to be payable.
 
15.1.2                   Other obligations   A Security Party or any other person (except the Lender) does not comply with any provision of any of the Relevant Documents to which that Security Party or person is a party (other than as referred to in Clause 14.1.1).
 
No Event of Default under this Clause 15.1.2 will occur if the failure to comply is capable of remedy and is remedied within five (5) Business

 
Days of the Lender giving notice to the Borrowers or the Borrowers becoming aware of the failure to comply.
 
15.1.3                   Misrepresentation   Any representation, warranty or statement made or deemed to be repeated by a Security Party in any Finance Document or any other document delivered by or on behalf of a Security Party under or in connection with any Finance Document is or proves to have been incorrect or misleading in any material respect when made or deemed to be repeated.
 
No Event of Default under this Clause 15.1.3 will occur in respect of any innocent misrepresentation which, if capable of remedy, is remedied within ten (10) Business Days of its occurrence, unless such innocent misrepresentation takes place on a Drawdown Date.
 
15.1.4                   Cross default   Any Financial Indebtedness of a Security Party:
 
(a)                                   is not paid when due or within any originally applicable grace period; or
 
(b)                                  is declared to be, or otherwise becomes, due and payable before its specified maturity as a result of an event of default (however described); or
 
(c)                                   is capable of being declared by a creditor to be due and payable before its specified maturity as a result of such an event.
 
No Event of Default will occur under (a), (b) or (c) of this Clause 15.1.4 in respect of any Financial Indebtedness of the Guarantor which at any time is for an amount, in aggregate, less than ten million Dollars ($10,000,000).

 
15.1.5                   Insolvency  A Security Party is unable or admits inability to pay its debts as they fall due, suspends making payments on any of its debts or, by reason of actual or anticipated financial difficulties, commences negotiations with one or more of its creditors with a view to rescheduling any of its Financial Indebtedness or becomes otherwise insolvent.
 
15.1.6                   Insolvency proceedings   Any corporate action, legal proceedings or other procedure or step is taken for:
 
(a)                                   the winding-up, dissolution, administration, bankruptcy or reorganisation (by way of voluntary arrangement, scheme of arrangement or otherwise) of a Security Party;
 
(b)                                  the appointment of a liquidator, receiver, administrative receiver, administrator, compulsory manager, or trustee or other similar officer in respect of any Security Party or any of its assets; or
 
(c)                                   enforcement of any Encumbrance over any assets of a Security Party,
 
or any analogous procedure or step is taken in any jurisdiction.
 
15.1.7                   Creditors’ process   Any expropriation, attachment, sequestration, distress or execution affects any asset or assets of a Security Party.
 
No Event of Default will occur under this Clause 15.1.7 if the expropriation, attachment, sequestration, distress or execution affects any asset of the Guarantor, and the aggregate amount in respect thereof is, in the opinion of the Lender, for a value which is less than ten million Dollars ($10,000,000).
 
15.1.8                   Change in ownership or control of a Borrower   There is any change in the beneficial ownership or control of a Borrower from that advised to the Lender by the Borrowers at the date of this Agreement.
 
15.1.9                   Repudiation   A Security Party or any other person repudiates any of the Relevant Documents to which that Security Party or person is a party or evidences an intention to do so.

 
15.1.10     Impossibility or illegality   Any event occurs which would, or would with the passage of time, render performance of any of the Relevant Documents by a Security Party or any other party to any such document impossible, unlawful or unenforceable by the Lender or a Security Party.
 
15.1.11     Conditions subsequent   Any of the conditions referred to in Clause 3.4 is not satisfied within the time reasonably required by the Lender.
 
15.1.12     Revocation or modification of authorisation   Any consent, licence, approval, authorisation, filing, registration or other requirement of any governmental, judicial or other public body or authority which is now, or which at any time during the Facility Period becomes, necessary to enable a Security Party or any other person (except the Lender) to comply with any of its obligations under any of the Relevant Documents is not obtained, is revoked, suspended, withdrawn or withheld, or is modified in a manner which the Lender considers is, or may be, prejudicial to the interests of the Lender, or ceases to remain in full force and effect.
 
15.1.13     Curtailment of business   A Security Party ceases, or threatens to cease, to carry on all or a substantial part of its business or, as a result of intervention by or under the authority of any government, the business of a Security Party is wholly or partially curtailed or suspended, or all or a substantial part of the assets or undertaking of a Security Party is seized, nationalised, expropriated or compulsorily acquired.
 
15.1.14     Reduction of capital   A Security Party reduces its authorised or issued or subscribed capital.
 
15.1.15     Loss of Vessel   A Vessel suffers a Total Loss and payment of all insurance proceeds in respect of the Total Loss is not made in full to the Lender in accordance with Clause 6.3.
 
15.1.16     Challenge to registration   The registration of a Vessel or a Mortgage is contested or becomes void or voidable or liable to cancellation or termination, or the validity or priority of a Mortgage is contested.
 
No Event of Default under this Clause 15.1.16 will occur if any contesting of the Vessel or Mortgage ceases within ten (10) Business Days of its commencement or the voidability, or liability to cancellation or termination

 
of the Mortgage is remedied within ten (10) Business Days of the date that such voidability or liability to cancellation or termination arose or if the registration of a Vessel or Mortgage becomes void and the relevant Borrower and the Lender have effected the re-registration of the Vessel and its Mortgage under another register acceptable to the Lender in its discretion  and the Borrowers have provided the Lender with such equivalent additional documents and evidence mutatis mutandis to those specified at Part I, 1(a) to (h) inclusive, and Part I, 2 (a) to (f) (inclusive), (g), (h), (j) and 3 (a)  of Schedule 2 as the Lender may require in its discretion.
 
15.1.17             War   The country of registration of a Vessel becomes involved in war (whether or not declared) or civil war or is occupied by any other power and the Lender in its discretion considers that, as a result, the security conferred by any of the Security Documents is materially prejudiced.
 
No Event of Default under this Clause 15.1.17 will occur if the country of registration of a Vessel ceases to be at war (whether or not declared) or civil war or ceases to be occupied by another power within ten (10) Business Days of the occurrence of the event in question, or the Borrower in question has within ten (10) Business Days of the occurrence of the event in question reflagged the Vessel with another country of registration acceptable to the Lender in its discretion and the Borrowers have provided the Lender with a new mortgage and assignment for the Vessel (substantially in the form and substance to the Mortgage and Assignment for the Vessel) and with such equivalent additional documents and evidence to that specified at Part I, 1(a) to (h) inclusive, and Part I, 2 (a) to (f) (inclusive), (h), (j) and 3 (a) of Schedule 2 as the Lender may require in its discretion.
 
15.1.18             Master Agreement termination   A notice is given by the Lender under section 6(a) of the Master Agreement, or by any person under section 6(b)(iv) of the Master Agreement, in either case designating an Early Termination Date for the purpose of the Master Agreement, or the Master Agreement is for any other reason terminated, cancelled, suspended, rescinded, revoked or otherwise ceases to remain in full force and effect.

 
15.1.19                   Notice of termination   The Guarantor gives notice to the Lender to determine its obligations under the Guarantee.
 
15.1.20             Material adverse change    Any event or series of events occurs which, in the reasonable opinion of the Lender, is likely to have a materially adverse effect on the business, assets, financial condition or credit worthiness of a Security Party.
 
15.2                            Acceleration   If an Event of Default is continuing the Lender may by notice to the Borrowers:
 
15.2.1                   declare that the Loan, together with accrued interest, and all other amounts accrued or outstanding under the Finance Documents are immediately due and payable, whereupon they shall become immediately due and payable; and/or
 
15.2.2                   declare that the Loan is payable on demand, whereupon it shall immediately become payable on demand by the Lender.
 
16                                   Assignment and Sub-Participation
 
16.1                            Lender’s rights   The Lender may with the prior consent of the Borrowers, such consent not to be unreasonably withheld, assign any of its rights under this Agreement or transfer by novation any of its rights and obligations under this Agreement to any other branch of the Lender or any other member of the RBS Group or to any other bank or financial institution, and may grant sub-participations in all or any part of the Loan.
 
16.2                            Borrowers’ co-operation   The Borrowers will co-operate fully with the Lender or any other member of the RBS Group in connection with any assignment, transfer or sub-participation; will execute and procure the execution of such documents as the Lender or any other member of the RBS Group may require in that connection; and irrevocably authorise the Lender to disclose to any proposed assignee, transferee or sub-participant (whether before or after any assignment, transfer or sub-participation and whether or not any assignment, transfer or sub-participation shall take place) all information relating to the Security Parties, the Loan, the Relevant Documents and the Vessels which the Lender may in its discretion consider necessary or desirable.

 
16.3                            Rights of assignee or transferee   Any assignee or transferee of the Lender shall (unless limited by the express terms of the assignment or novation) take the full benefit of every provision of the Finance Documents benefitting the Lender.
 
16.4                            No assignment or transfer by the Borrowers    No Borrower may assign any of its rights or transfer any of its rights or obligations under the Finance Documents.
 
17                                   Set-Off
 
17.1                            Set-off The Borrowers irrevocably authorise the Lender at any time after all or any part of the Indebtedness shall have become due and payable to set off without notice any liability of the Borrowers to the Lender (whether present or future, actual or contingent, and irrespective of the branch or office, currency or place of payment) against any credit balance from time to time standing on either of the Accounts (whether current or otherwise and whether or not subject to notice) with any branch of the Lender and/or the RBS Group in or towards satisfaction of the Indebtedness and, in the name of the Lender and/or any other member of the RBS Group or the Borrowers, to do all acts (including, without limitation, converting or exchanging any currency) and execute all documents which may be required to effect such application.  If the obligations are in different currencies, the Lender may convert either obligation at a market rate of exchange in its usual course of business for the purpose of the set-off.
 
17.2                            Lien  The Lender shall have a lien on and be entitled to retain and realise as additional security for the repayment of the Indebtedness any cheques, drafts, bills, notes or negotiable or non-negotiable instruments and any stocks, shares or marketable or other securities and property of any kind of the Borrowers (or of the Lender or any other member of the RBS Group as agent or nominee of the Borrowers) from time to time held by the Lender or any other member of the RBS Group, whether for safe custody or otherwise.
 
17.3                            Master Agreement rights   The rights conferred on the Lender by this Clause 16 shall be in addition to, and without prejudice to or limitation of, the rights of netting and set off conferred on the Lender by the Master Agreement.  The Borrowers acknowledge that the Lender shall be under no obligation to make any payment to the Borrowers under the Master Agreement if, at the time that payment becomes due, an Event of Default or Termination Event (as those terms are respectively defined in the Master Agreement) shall have occurred.

 
18                                   Payments
 
18.1                            Payments   Each amount payable by a Borrower under a Finance Document shall be paid to such account at such bank as the Lender may from time to time direct to the Borrowers in the Currency of Account and in such funds as are customary at the time for settlement of transactions in the relevant currency in the place of payment.  Payment shall be deemed to have been received by the Lender on the date on which the Lender receives authenticated advice of receipt, unless that advice is received by the Lender on a day other than a Business Day or at a time of day (whether on a Business Day or not) when the Lender in its discretion considers that it is impossible or impracticable for the Lender to utilise the amount received for value that same day, in which event the payment in question shall be deemed to have been received by the Lender on the Business Day next following the date of receipt of advice by the Lender.
 
18.2                            No deductions or withholdings   Each payment (whether of principal or interest or otherwise) to be made by a Borrower under a Finance Document shall, subject only to Clause 18.3, be made free and clear of and without deduction for or on account of any Taxes or other deductions, withholdings, restrictions, conditions or counterclaims of any nature.
 
18.3                            Grossing-up   If at any time any law requires (or is interpreted to require) a Borrower to make any deduction or withholding from any payment, or to change the rate or manner in which any required deduction or withholding is made, the Borrowers will promptly notify the Lender and, simultaneously with that payment, will pay to the Lender whatever additional amount (after taking into account any additional Taxes on, or deductions or withholdings from, or restrictions or conditions on, that additional amount) is necessary to ensure that, after the deduction or withholding, the Lender receives a net sum equal to the sum which the Lender would have received had no deduction or withholding been made.
 
18.4                            Evidence of deductions   If at any time a Borrower is required by law to make any deduction or withholding from any payment to be made by it under a Finance Document, that Borrower will pay the amount required to be deducted or withheld to the relevant authority within the time allowed under the applicable law and will, no later than thirty (30) days after making that payment, deliver to the Lender an original receipt issued by the relevant authority, or other evidence acceptable to the

 
Lender, evidencing the payment to that authority of all amounts required to be deducted or withheld.
 
18.5                            Adjustment of due dates    If any payment or transfer of funds to be made under a Finance Document, other than a payment of interest on the Loan or a payment under the Master Agreement, shall be due on a day which is not a Business Day, that payment shall be made on the next succeeding Business Day (unless the next succeeding Business Day falls in the next calendar month in which event the payment shall be made on the next preceding Business Day).  Any such variation of time shall be taken into account in computing any interest in respect of that payment.
 
18.6                            Control Account    The Lender shall open and maintain on its books a control account in the names of the Borrowers showing the advance of the Loan and the computation and payment of interest and all other sums due under this Agreement.  The Borrowers’ obligations to repay the Loan and to pay interest and all other sums due under this Agreement shall be evidenced by the entries from time to time made in the control account opened and maintained under this Clause 18.6 and those entries will, in the absence of manifest error, be conclusive and binding.
 
19                                   Notices
 
19.1                            Communications in writing   Any communication to be made under or in connection with this Agreement shall be made in writing and, unless otherwise stated, may be made by fax or letter.
 
19.2                            Addresses   The address and fax number (and the department or officer, if any, for whose attention the communication is to be made) of each party to this Agreement for any communication or document to be made or delivered under or in connection with this Agreement are:
 
19.2.1                   in the case of the Borrowers, c/o Danaos Shipping Co. Ltd., currently of Akti Kondyli 14, 185 45 Piraeus, Greece (fax no:+30 210 422 0855) marked for the attention of: Legal Department; and
 
19.2.2                   in the case of the Lender, to its address at the head of this Agreement (fax no: +30 210 459 6650) marked for the attention of: Shipping Finance Department;

 
or any substitute address, fax number, department or officer as either party may notify to the other by not less than five (5) Business Days’ notice.
 
19.3                            Delivery   Any communication or document made or delivered by one party to this Agreement to the other under or in connection this Agreement will only be effective:
 
19.3.1                   if by way of fax, when received in legible form; or
 
19.3.2                   if by way of letter, when it has been left at the relevant address or five (5) Business Days after being deposited in the post postage prepaid in an envelope addressed to it at that address; or
 
19.3.3                   if by way of personal delivery, at the time of delivery at the relevant address;
 
and, if a particular department or officer is specified as part of its address details provided under Clause 19.2, if addressed to that department or officer.
 
Any communication or document to be made or delivered to the Lender will be effective only when actually received by the Lender.
 
19.4                            English language   Any notice given under or in connection with this Agreement must be in English.  All other documents provided under or in connection with this Agreement must be:
 
19.4.1                   in English; or
 
19.4.2                   if not in English, and if so required by the Lender, accompanied by a certified English translation and, in this case, the English translation will prevail unless the document is a constitutional, statutory or other official document.
 
20                                   Partial Invalidity
 
If, at any time, any provision of a Finance Document is or becomes illegal, invalid or unenforceable in any respect under any law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions nor the legality, validity or enforceability of such provision under the law of any other jurisdiction will in any way be affected or impaired.

 
21                                   Remedies and Waivers
 
No failure to exercise, nor any delay in exercising, on the part of the Lender, any right or remedy under a Finance Document shall operate as a waiver, nor shall any single or partial exercise of any right or remedy prevent any further or other exercise or the exercise of any other right or remedy.  The rights and remedies provided in this Agreement are cumulative and not exclusive of any rights or remedies provided by law.
 
22                                   Joint and several liability
 
22.1                            Nature of liability   The representations, warranties, covenants, obligations and undertakings of the Borrowers contained in this Agreement shall be joint and several so that each Borrower shall be jointly and severally liable with all the Borrowers for all of the same and such liability shall not in any way be discharged, impaired or otherwise affected by:
 
22.1.1                   any forbearance (whether as to payment or otherwise) or any time or other indulgence granted to any other Borrower or any other Security Party under or in connection with any Finance Document;
 
22.1.2                   any amendment, variation, novation or replacement of any other Finance Document;
 
22.1.3                   any failure of any Finance Document to be legal valid binding and enforceable in relation to any other Borrower or any other Security Party for any reason;
 
22.1.4                   the winding-up or dissolution of any other Borrower or any other Security Party;
 
22.1.5                   the release (whether in whole or in part) of, or the entering into of any compromise or composition with, any other Borrower or any other Security Party; or
 
22.1.6                   any other act, omission, thing or circumstance which would or might, but for this provision, operate to discharge, impair or otherwise affect such liability.
 
22.2                            No rights as surety   Until the Indebtedness has been unconditionally and irrevocably paid and discharged in full, each Borrower agrees that it shall not, by

 
virtue of any payment made under this Agreement, or any of the other Security Documents, on account of the Indebtedness or by virtue of any enforcement by the Lender of its rights under this Agreement or by virtue of any relationship between, or transaction involving, the relevant Borrower and any other Borrower or any other Security Party:
 
22.2.1                   exercise any rights of subrogation in relation to any rights, security or moneys held or received or receivable by the Lender or any other person; or
 
22.2.2                   exercise any right of contribution from any other Borrower or any other Security Party under any Finance Document; or
 
22.2.3                   exercise any right of set-off or counterclaim against any other Borrower or any other Security Party; or
 
22.2.4                   receive, claim or have the benefit of any payment, distribution, security or indemnity from any other Borrower or any other Security Party; or
 
22.2.5                   unless so directed by the Lender (when the relevant Borrower will prove in accordance with such directions), claim as a creditor of any other Borrower or any other Security Party in competition with the Lender
 
and each Borrower shall hold in trust for the Lender and forthwith pay or transfer (as appropriate) to the Lender any such payment (including an amount equal to any such set-off), distribution or benefit of such security, indemnity or claim in fact received by it.
 
23                                   Miscellaneous
 
23.1                            No oral variations   No variation or amendment of a Finance Document shall be valid unless in writing and signed on behalf of the Lender.
 
23.2                            Further Assurance   If any provision of a Finance Document shall be invalid or unenforceable in whole or in part by reason of any present or future law or any decision of any court, or if the documents at any time held by or on behalf of the Lender are considered by the Lender for any reason insufficient to carry out the terms of this Agreement, then from time to time the Borrowers will promptly, on demand by the Lender, execute or procure the execution of such further documents

 
as in the opinion of the Lender are necessary to provide adequate security for the repayment of the Indebtedness.
 
23.3                            Rescission of payments etc.   Any discharge, release or reassignment by the Lender of any of the security constituted by, or any of the obligations of a Security Party contained in, a Finance Document shall be (and be deemed always to have been) void if any act (including, without limitation, any payment) as a result of which such discharge, release or reassignment was given or made is subsequently wholly or partially rescinded or avoided by operation of any law.
 
23.4                            Certificates   Any certificate or statement signed by an authorised signatory of the Lender purporting to show the amount of the Indebtedness (or any part of the Indebtedness) or any other amount referred to in any Finance Document shall, save for manifest error or on any question of law, be conclusive evidence as against the Borrowers of that amount.
 
23.5                            Counterparts   This Agreement may be executed in any number of counterparts each of which shall be original but which shall together constitute the same instrument.
 
23.6                            Contracts (Rights of Third Parties) Act 1999   A person who is not a party to this Agreement has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce or to enjoy the benefit of any term of this Agreement.
 
24                                   Law and Jurisdiction
 
24.1                            Governing law   This Agreement shall in all respects be governed by and interpreted in accordance with English law.
 
24.2                            Jurisdiction   For the exclusive benefit of the Lender, the parties to this Agreement irrevocably agree that the courts of England are to have jurisdiction to settle any disputes which may arise out of or in connection with this Agreement and that any proceedings may be brought in those courts.
 
24.3                            Alternative jurisdictions   Nothing contained in this Clause 24 shall limit the right of the Lender to commence any proceedings against the Borrowers in any other court of competent jurisdiction nor shall the commencement of any proceedings against the Borrowers in one or more jurisdictions preclude the commencement of any proceedings in any other jurisdiction, whether concurrently or not.

 
24.4                            Waiver of objections   Each Borrower irrevocably waives any objection which it may now or in the future have to the laying of the venue of any proceedings in any court referred to in this Clause 24, and any claim that those proceedings have been brought in an inconvenient or inappropriate forum, and irrevocably agrees that a judgment in any proceedings commenced in any such court shall be conclusive and binding on it and may be enforced in the courts of any other jurisdiction.
 
24.5                            Service of process   Without prejudice to any other mode of service allowed under any relevant law, each Borrower:
 
24.5.1                   irrevocably appoints Danaos Management Consultants of 4, Staple Inn, Holborn, London WC1V 7QV, England as its agent for service of process in relation to any proceedings before the English courts in connection with this Agreement; and
 
24.5.2                   agrees that failure by a process agent to notify any Borrower of the process will not invalidate the proceedings concerned.

 
SCHEDULE 1: Conditions Precedent and Subsequent
 
Part I: Conditions precedent
 
1                                          Security Parties
 
(a)                                   Constitutional Documents    Copies of the constitutional documents of each Security Party together with such other evidence as the Lender may reasonably require that each Security Party is duly incorporated in its country of  incorporation and remains in existence with power to enter into, and perform its obligations under, the Relevant Documents to which it is or is to become a party.
 
(b)                                  Certificates of good standing    A certificate of good standing in respect of each Security Party (if such a certificate can be obtained).
 
(c)                                   Board resolutions   A copy of a resolution of the board of directors of each Security Party:
 
(i)                                      approving the terms of, and the transactions contemplated by, the Relevant Documents to which it is a party and resolving that it execute those Relevant Documents; and
 
(ii)                                   authorising a specified person or persons to execute those Relevant Documents (and all documents and notices to be signed and/or despatched under those documents) on its behalf.
 
(d)                                  Specimen signatures   A specimen of the signature of each person authorised by the resolutions referred to in paragraph (c) above.
 
(e)                                   Shareholder resolutions   A copy of a resolution signed by all the holders of the issued shares in each Security Party, approving the terms of, and the transactions contemplated by, the Relevant Documents to which that Security Party is a party.
 
(f)                                     Officer’s certificates   A certificate of a duly authorised officer of each Security Party certifying that each copy document relating to it specified in this Part I of Schedule 1 is correct, complete and in full force and effect as at a date no earlier than the date of this Agreement and setting out the names of the directors, officers and shareholders of that Security Party and the proportion of shares held by each shareholder.

 
(g)                                  Evidence of registration   Where such registration is required or permitted under the laws of the relevant jurisdiction, evidence that the names of the directors, officers and shareholders of each Security Party are duly registered in the companies registry or other registry in the country of incorporation of that Security Party.
 
(h)                                  Powers of attorney   The notarially attested and legalised power of attorney of each Security Party under which any documents are to be executed or transactions undertaken by that Security Party.
 
2                                          Security and related documents
 
(a)                                   Vessel documents   Photocopies, certified as true, accurate and complete by a director or the secretary or the legal advisers of the Borrower, of:
 
(i)                                      the Bareboat Charter and Time Charter, if applicable, for the Vessel, or any other contract of employment for the Vessel which will be in force on the Drawdown Date and, in the case of the Drawing relating to “APL HOLLAND”, evidence that the Time Charter provides for a daily net employment rate of $25,500 until July 2006;
 
(ii)                                   the Management Agreement;
 
(iii)                                the Vessel’s current Safety Construction, Safety Equipment, Safety Radio and Load Line Certificates;
 
(iv)                               the Vessel’s current Certificate of Financial Responsibility issued pursuant to the United States Oil Pollution Act 1990;
 
(v)                                  the Vessel’s current SMC;
 
(vi)                               the ISM Company’s current DOC;
 
(vii)                            the Vessel’s current ISSC;
 
(viii)                         the Vessel’s current Tonnage Certificate;
 
(ix)                                 the Borrower’s current Carrier Initiative Agreement with the United States’ Customs Service;

 
(x)                                    evidence, acceptable to the Lender in its discretion, of the Vessel’s light displacement tonnage;
 
in each case together with all addenda, amendments or supplements.
 
(b)                                  Evidence of Borrower’s title   Evidence that on the Drawdown Date (i) the Vessel is permanently registered under the flag stated in Recital (A) in the ownership of the Borrower and (ii) its Mortgage will be capable of being registered against the Vessel with first priority and that arrangements for refinancing the existing indebtedness referred to in Recital (B) have been made.
 
(c)                                   Evidence of insurance  Evidence that the Vessel is, or will from the Drawdown Date, be insured in the manner required by the relevant Security Documents (Hellenic Hull/Corvette cover not being acceptable) and that letters of undertaking will be issued in the manner required by the relevant Security Documents, together with (if required by the Lender) the written approval of the Insurances by an insurance adviser appointed by the Lender (the fees of any such insurance advised to be borne by the Borrower on the Lender’s first demand in writing).
 
(d)                                  Confirmation of class A certificate of confirmation of class for hull and machinery confirming that the Vessel is classed +100 A1 + LMC with Lloyds Register of Shipping being the highest class applicable to vessels of her type with Lloyd’s Register of Shipping or the equivalent with another classification society acceptable to the Lender in its discretion, and free of all recommendations and qualifications (except to the extent agreed by the Lender in writing).
 
(e)                                   Survey report   A report by a surveyor instructed by the Lender to inspect the Vessel confirming that the condition of the Vessel is in all respects acceptable to the Lender.
 
(f)                                     Valuation    A valuation of the Vessel addressed to the Lender from an independent ship broker acceptable to the Lender certifying a value for each Vessel, assessed in such manner as the Lender may require, acceptable to the Lender, and for a minimum aggregate amount for all the Vessels of not less than $288,300,000.

 
(g)                                  Security Documents   The Mortgage and the Assignments in respect of the Vessel, the Guarantee, the Accounts Charge, the Manager’s Undertaking and any other Credit Support Documents, together with all other documents required by any of them, including, without limitation, all notices of assignment and/or charge and evidence that those notices will be duly acknowledged by the recipients.
 
(h)                                  Mandates    Such duly signed forms of mandate, and/or other evidence of the opening of the Accounts, as the Lender may require.
 
(i)                                      No disputes   The written confirmation of the Borrowers that there is no dispute under any of the Relevant Documents as between the parties to any such document.
 
(j)                                      Other Relevant Documents    Copies of each of the Relevant Documents not otherwise comprised in the documents listed in this Part I of Schedule 1.
 
(k)                                   Mortgagees’ Insurances  Evidence of the Lender being covered under the Mortgagees’ Insurances for an amount of not less than one hundred and twenty per centum (120%) of the Loan and at the expense of the Borrowers and to be borne by the Borrowers at the Lender’s first demand in writing.
 
3                                          Legal opinions
 
(a)                                   If a Security Party is incorporated in a jurisdiction other than England and Wales or if any Finance Document is governed by the laws of a jurisdiction other than England and Wales, a legal opinion of the legal advisers to the Lender in each relevant jurisdiction, substantially in the form or forms provided to the Lender prior to signing this Agreement or confirmation satisfactory to the Lender that such an opinion will be given.
 
4                                          Other documents and evidence
 
(a)                                   Drawdown Notice   A duly completed Drawdown Notice.
 
(b)                                  Process agent   Evidence that any process agent referred to in Clause 24.5 and any process agent appointed under any other Finance Document has accepted its appointment.
 
(c)                                   Other authorisations   A copy of any other consent, licence, approval, authorisation or other document, opinion or assurance which the Lender considers to be necessary or desirable (if it has notified the Borrowers accordingly) in

 
connection with the entry into and performance of the transactions contemplated by any of the Relevant Documents or for the validity and enforceability of any of the Relevant Documents.
 
(d)                                  Financial statements   Copies of the Original Financial Statements of each Borrower and the Group Statements.
 
(e)                                   Fees   Evidence that the fees, costs and expenses then due from the Borrowers under Clause 10 (Indemnities) and Clause 11 (Fee) have been paid or will be paid by the relevant Drawdown Date.
 
(f)                                     “Know your customer” documents    Such documentation and other evidence as is reasonably requested by the Lender in order for the Lender to comply with all necessary “know your customer” or similar identification procedures in relation to the transactions contemplated in the Finance Documents.

 
Part II: Conditions subsequent
 
1                                           Evidence of Borrower’s title   Certificate of ownership and encumbrance (or equivalent) issued by the Registrar of Ships (or equivalent official) of the flag stated in the definition “ Vessel ” contained in Clause 1.1 confirming that (a) the Vessel is permanently registered under that flag in the ownership of the Borrower, (b) the Mortgage has been registered with first priority against the Vessel and (c) there are no further Encumbrances registered against the Vessel.
 
2                                           Letters of undertaking   Letters of undertaking in respect of the Insurances as required by the Security Documents together with copies of the relevant policies or cover notes or entry certificates duly endorsed with the interest of the Lender.
 
3                                           Acknowledgements of notices    Acknowledgements of all notices of assignment and/or charge given pursuant to any Security Documents received by the Lender pursuant to Part I of this Schedule 1.
 
4                                           Legal opinions   Such of the legal opinions specified in Part I of this Schedule 1 as have not already been provided to the Lender.
 
5                                           Master’s receipt    If applicable, the master’s receipt for the Mortgage.
 
6                                           Companies Act registrations  Evidence that the prescribed particulars of any Security Documents received by the Agent pursuant to Part I of this Schedule 2 have been delivered to the Registrar of Companies of Singapore within the statutory time limit.
 
7                                           “Know your customer” documents    Such further documentation and other evidence as is reasonably requested by the Lender during the Facility Period in order for the Lender to comply with all necessary “know your customer” or similar identification procedures in relation to the transactions contemplated in the Finance Documents.

 
SCHEDULE 2: Calculation of Mandatory Cost
 
1                                           The Mandatory Cost is an addition to the interest rate to compensate the Lender for the cost of compliance with (a) the requirements of the Bank of England and/or the Financial Services Authority (or, in either case, any other authority which replaces all or any of its functions) or (b) the requirements of the European Central Bank.
 
2                                           On the first day of each Interest Period (or as soon as possible thereafter) the Lender shall calculate, as a percentage rate, a rate (the “Additional Cost Rate” ) in accordance with the paragraphs set out below.
 
3                                           The Additional Cost Rate for the Lender if lending from an office in the euro-zone will be the percentage notified by the Lender to the Borrowers to be its reasonable determination of the cost (expressed as a percentage of the Loan) of complying with the minimum reserve requirements of the European Central Bank as a result of making the Loan from that office.
 
4                                           The Additional Cost Rate for the Lender if lending from an office in the United Kingdom will be calculated by the Lender as follows:
 
(a)                                   where the Loan is denominated in sterling:

BY + S(Y - Z) + F x 0.01 per cent per annum	
100 - (B + S)	 	
 
(b)                                  where the Loan is denominated in any currency other than sterling:

F x 0.01 per cent per annum	
300	 	
 
where:
 
B                                         is the percentage of eligible liabilities (assuming these to be in excess of any stated minimum) which the Lender is from time to time required to maintain as an interest free cash ratio deposit with the Bank of England to comply with cash ratio requirements;
 
Y                                         is the percentage rate of interest (excluding the Margin and the Mandatory Cost and, if the Loan is an overdue amount, the additional rate of interest specified in of Clause 7.8) payable for the relevant Interest Period on the Loan;

 
S                                          is the percentage (if any) of eligible liabilities which the Lender is required from time to time to maintain as interest bearing special deposits with the Bank of England;
 
Z                                         is the interest rate per annum payable by the Bank of England to the Lender on special deposits; and
 
F                                          is the charge payable by the Lender to the Financial Services Authority under paragraph 2.02 or 2.03 (as appropriate) of the Fees Regulations or the equivalent provisions in any replacement regulations (with, for this purpose, the figure for the minimum amount in paragraph 2.02b or such equivalent provision deemed to be zero), expressed in pounds per £1 million of the fee base of the Lender.
 
5                                           For the purpose of this Schedule:
 
(a)                                   “ eligible liabilities ” and “ special deposits ” have the meanings given to them at the time of application of the formula by the Bank of England;
 
(b)                                  “ fee base ” has the meaning given to it in the Fees Regulations;
 
(c)                                   “ Fees Regulations ” means the regulations governing periodic fees contained in the FSA Supervision Manual or such other law or regulation as may be in force from time to time in respect of the payment of fees for the acceptance of deposits.
 
6                                           In the application of the formula B, Y, S and Z are included in the formula as figures and not as percentages, e.g. if B = 0.5% and Y = 15%, BY is calculated as 0.5. x 15.  Each rate calculated in accordance with the formula is, if necessary, rounded upward to four decimal places.
 
7                                           If a change in circumstances has rendered, or will render, the formula inappropriate, the Lender shall notify the Borrowers of the manner in which the Mandatory Cost will subsequently be calculated.  The manner of calculation so notified by the Lender shall, in the absence of manifest error, be binding on the Borrowers.

 
SCHEDULE 3: Form of Drawdown Notice
 
To:                               THE ROYAL BANK OF SCOTLAND plc
 
From:                   ORTELIUS MARITIME INC.
SEDERBERG MARITIME INC.
WINTERBERG MARITIME INC.
HELDERBERG MARITIME INC.
CONSTANTIA MARITIME INC.
ALEXANDRA NAVIGATION INC.
ORCHID NAVIGATION CORPORATION
ROBERTO C. MARITIME INC.
MARIA C. MARITIME INC.
MERCATOR SHIPPING INC.
MAGELLAN MARINE INC.
LISSOS SHIPPING (PRIVATE) LTD.
 
[Date]
 
Dear Sirs,
 
Drawdown Notice
 
We refer to the Loan Agreement dated                      2005  made between ourselves and yourselves (the “ Agreement ”).
 
Words and phrases defined in the Agreement have the same meaning when used in this Drawdown Notice.
 
Pursuant to Clause 4 of the Agreement, we irrevocably request that you advance a Drawing in the sum of [                                                    ] to us on                                         2005, which is a Business Day, by paying the amount of the Drawing in respect of the Vessel[s] named [                               ] to the Earnings Account.
 
We warrant that the representations and warranties contained in Clause 13.1 of the Agreement are true and correct at the date of this Drawdown Notice and will be true and correct on               2005, that no Default has occurred and is continuing, and that no Default will result from the advance of the Drawing requested in this Drawdown Notice.
 
[We select the period of [       ] months as the first Interest Period.]

 

Yours faithfully	

 	 	 	
 
For and on behalf of
 
ORTELIUS MARITIME INC.
SEDERBERG MARITIME INC.
WINTERBERG MARITIME INC.
HELDERBERG MARITIME INC.
CONSTANTIA MARITIME INC.
ALEXANDRA NAVIGATION INC.
ORCHID NAVIGATION CORPORATION
ROBERTO C. MARITIME INC.
MARIA C. MARITIME INC.
MERCATOR SHIPPING INC.
MAGELLAN MARINE INC.
LISSOS SHIPPING (PRIVATE) LTD.

 
SCHEDULE 4: Form of Covenant Compliance Certificate
 
COVENANT COMPLIANCE CERTIFICATE
 
To:                               THE ROYAL BANK OF SCOTLAND plc
 
This covenant compliance certificate relates to a secured loan facility agreement (as from time to time amended, varied, supplemented or novated  the “ Loan Agreement ”) dated                                 2005 , on the terms and subject to the conditions of which a secured loan facility of up to $200,000,000 was made available to ORTELIUS MARITIME INC., SEDERBERG MARITIME INC., WINTERBERG MARITIME INC., HELDERBERG MARITIME INC., CONSTANTIA MARITIME INC., ALEXANDRA NAVIGATION INC., ORCHID NAVIGATION CORPORATION, ROBERTO C. MARITIME INC., MARIA C. MARITIME INC., MERCATOR SHIPPING INC., MAGELLAN MARINE INC. and LISSOS SHIPPING (PRIVATE) LTD. on a joint and several basis, by the Lender.
 
We give this Covenant Compliance Certificate as required under Clause 14.2 of the Agreement. Terms used in this Covenant Compliance Certificate have the meanings given to them in the Agreement.
 
The covenant calculations below are made on the basis of the Group Statements, as of, and in respect of the 12 months period ending on [     ]
 
Agreement                                    Covenant determination / Minimum Compliance                              Actual as of [    ]
 
Clause

14.2.1	 	Net Worth > $250,000,000	
 	 	 	
14.2.1	 	Fixed Assets to Net Consolidated Indebtedness > 1.45:1	
 	 	 	
14.2.1	 	Outstanding Bank Debt to Vessel Values < 0.75:1	
 	 	 	
14.2.1	 	Net Worth to Total Assets > 1.30:1	
 	 	 	
14.2.2	 	Liquid Funds > 30,000,000	
 	 	 	
14.2.2	 	EBITDA to Net Interest Expenses > 2.5:1	
 
It is hereby certified, by the undersigned, that there are no known, Events of Default or Potential Events of Default as of this date. Furthermore, it is hereby certified that the above representations and undertakings contained in the Agreement are true and correct and fulfilled at the time hereof with reference to the facts now subsisting.

 

Yours faithfully,	Yours faithfully,	

 	 	 	 	
for and on behalf of	for and on behalf of	
ORTELIUS MARITIME INC.	DANAOS HOLDINGS LIMITED	
SEDERBERG MARITIME INC.	 	
WINTERBERG MARITIME INC.	 	
HELDERBERG MARITIME INC.	 	
CONSTANTIA MARITIME INC.	 	
ALEXANDRA NAVIGATION INC.	 	
ORCHID NAVIGATION CORPORATION	 	
ROBERTO C. MARITIME INC.	 	
MARIA C. MARITIME INC.	 	
MERCATOR SHIPPING INC.	 	
MAGELLAN MARINE INC.	 	
LISSOS SHIPPING (PRIVATE) LTD.	 	

Date:	Date:	
 	 	
Enclosure:       Financial Statements as per [    ]	 	

 
SCHEDULE 5: List of Vessels and Vessel information

Name of Vessel	 	Type of
Vessel	 	Borrower	 	Flag	 	Dwt	 	Lwt	 	TEU	 	Year built	 	
 	 	 	 	 	 	 	 	(approx)	 	(approx)	 	(approx)	 	 	 	
“FIVOS”	 	Bulk Carrier	 	Ortelius	 	Panama	 	69,659	 	9,661	 	N/A	 	1994	 	
“S.A. SEDERBERG”	 	Container	 	Sederberg	 	Bahamas	 	48,878	 	22,970	 	3,101	 	1978	 	
“S.A. WINTERBERG”	 	Container	 	Winterberg	 	Bahamas	 	48,878	 	22,913	 	3,101	 	1978	 	
“S.A. HELDERBERG”	 	Container	 	Helderberg	 	Bahamas	 	48,878	 	22,970	 	3,101	 	1977	 	
“MAERSK CONSTANTIA”	 	Container	 	Constantia	 	Bahamas	 	48,878	 	22,905	 	3,101	 	1979	 	
“ALEXANDRA I”	 	Bulk Carrier	 	Alexandra	 	Panama	 	69,000	 	9,759	 	N/A	 	1994	 	
“DIMITRIS C”	 	Bulk Carrier	 	Orchid	 	Panama	 	43,815	 	8,737	 	N/A	 	1994	 	
“ROBERTO C”	 	Bulk Carrier	 	Roberto	 	Panama	 	45,210	 	7,634	 	N/A	 	1994	 	
“MARIA C”	 	Bulk Carrier	 	Maria	 	Panama	 	45,000	 	7,639	 	N/A	 	1994	 	
“ ACHILLEAS”	 	Bulk Carrier	 	Mercator	 	Panama	 	69,000	 	9,674	 	N/A	 	1994	 	
“SOFIA III”	 	Bulk Carrier	 	Magellan	 	Panama	 	69,146	 	11,351	 	N/A	 	1998	 	
“APL HOLLAND”	 	Container	 	Lissos	 	Singapore	 	67,500	 	N/A	 	5,500	 	2001	 	

 
SCHEDULE 6: Vessel s and dates of Management Agreements

Management Agreement
  Date	 	Vessel	
10/07/2002	 	“FIVOS”	
 	 	“S.A. SEDERBERG”	
 	 	“S.A. WINTERBERG”	
 	 	“S.A HELDERBERG”	
 	 	“MAERSK CONTANTIA”	
06/03/2002	 	“ALEXANDRA I”	
18/02/2002	 	“DIMITRIS C”	
20/02/2002	 	“ROBERTO C”	
25/02/2002	 	“MARIA C”	
08/07/2002	 	“ACHILLEAS”	
31/12/2004	 	“SOFIA III”	
16/12/2001	 	“APL HOLLAND”	

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

SIGNED   by Zoe Lappa-Papamattheou	)   /s/ Zoe Lappa-Papamattheou	
duly authorised for and on behalf	)	
of ORTELIUS MARITIME INC.	)	

SIGNED   by Zoe Lappa-Papamattheou	)   /s/ Zoe Lappa-Papamattheou	
duly authorised for and on behalf	)	
of SEDERBERG MARITIME INC.	)	

SIGNED   by Zoe Lappa-Papamattheou	)   /s/ Zoe Lappa-Papamattheou	
duly authorised for and on behalf	)	
of WINTERBERG MARITIME INC.	)	

SIGNED   by Zoe Lappa-Papamattheou	)   /s/ Zoe Lappa-Papamattheou	
duly authorised for and on behalf	)	
of HELDERBERG	)	
MARITIME INC.	)	

SIGNED   by Zoe Lappa-Papamattheou	)   /s/ Zoe Lappa-Papamattheou	
duly authorised for and on behalf	)	
of CONSTANTIA	)	
MARITIME INC.	)	

SIGNED   by Zoe Lappa-Papamattheou	)   /s/ Zoe Lappa-Papamattheou	
duly authorised for and on behalf	)	
of ALEXANDRA NAVIGATION INC.	)	

SIGNED   by Zoe Lappa-Papamattheou	)   /s/ Zoe Lappa-Papamattheou	
duly authorised for and on behalf	)	
of ORCHID NAVIGATION	)	
CORPORATION	)	

SIGNED   by Zoe Lappa-Papamattheou	)   /s/ Zoe Lappa-Papamattheou	
duly authorised for and on behalf	)	
of ROBERTO C. MARITIME INC.	)	

SIGNED   by Zoe Lappa-Papamattheou	)   /s/ Zoe Lappa-Papamattheou	
duly authorised for and on behalf	)	
of MARIA C. MARITIME INC.	)	

 

SIGNED   by Zoe Lappa-Papamattheou	)   /s/ Zoe Lappa-Papamattheou	
duly authorised for and on behalf	)	
of MERCATOR SHIPPING INC.	)	

SIGNED   by Zoe Lappa-Papamattheou	)   /s/ Zoe Lappa-Papamattheou	
duly authorised for and on behalf	)	
of M AGELLAN MARINE INC.	)	

SIGNED   by Zoe Lappa-Papamattheou	)   /s/ Zoe Lappa-Papamattheou	
duly authorised for and on behalf	)	
of LISSOS SHIPPING (PRIVATE) LTD.	)	

SIGNED   by Fotis Bratimos	)   /s/ Fotis Bratimos	
duly authorised for and on behalf	)	
of THE ROYAL BANK OF SCOTLAND plc	)	

 

Exhibit 10.11
 
LOAN AGREEMENT
Date: 14 th August 2006

Borrower	:	Danaos Corporation of Trust Company Complex, Ajeltake Island, Ajeltake Road, Majuro, Marshall Islands MH96960.	
 	 	 	
Amount	:	Up to US Dollars 75 MM (United States Dollar Seventy-Five Million only)	
 	 	 	
Purpose	:	Bridge loan to partly finance the payment of the pre-delivery installments to Sungdong Shipbuilding & Marine Engineering Co., Ltd. (the “Builder”) for the construction of Hull Nos. S4001, S4002, S4003, S4004 and S4005 (collectively the “Vessels”), currently being constructed by the Builder.

 The loan amount will be an amount of up to USD 75 MM (United States Dollar Seventy-Five Million only)	
 	 	 	
Lender	:	Seasonal Maritime Corporation of 80 Broad Street, Monrovia, Liberia.	
 	 	 	
Interest rate	:	1.0% p.a. over 3 or 6 months LIBOR or longer at the Borrower’s option subject to market availability and the Lender’s consent. Interest shall be payable at least quarterly in arrears.	
 	 	 	
Front end fee:	 	0.15% of the amount advanced, payable prior to advancement.	
 	 	 	
Commitment fee	:	0.30% per annum on any undrawn amount under the facility, payable quarterly in arrears, starting from the date of execution of the Loan Agreement.	
 	 	 	
Interest rate and fee computation	:	Interest, premium, penalties and fees to be calculated on the exact number of days over a 360 days year basis.	
 	 	 	
Repayment	:	Bullet in 6 (six) Months. Option 6 (six) Months.	
 	 	 	
Final maturity date	:	Not later than 6 (six) months + 6 (six) months Bullet	
 	 	 	
Security	:	Corporate Guarantee by the Borrower.	
 	 	 	
Events of Default	:	Usual events of default for a facility of this nature including cross default and material adverse change regarding Danaos Corporation.	
 	 	 	
Conditions precedent	:	Funds will not be made available to the Borrower if there is a material adverse change in the financial	

 

 	 	condition and operations of the Borrower and/or the Guarantor and/or the Group.	
 	 	 	
Taxation	:	The Borrower will pay principal, interest and fees free and clear of any and all taxes, stamp dues, duties or other levies or charges of any kind whatsoever in favor of any government, authority or any other entity, applicable to this Loan Agreement.
	
Governing Law	:	English law.	
 	 	 	
Documentation required	 	Will include but not be restricted to:	
prior to	 	 	
drawdown	:	1.                Presentation of Builder’s request for the payment of the 1 st installment and copies of the Refundment Guarantees.	
 	 	 	
 	 	2.                Executed Corporate Guarantee by the Borrower.	
 	 	 	
Costs and expenses	:	All costs in connection with the above and the subsequent monitoring and control thereof of the Loan Agreement, including all legal fees, consultant and surveyor fees are to be borne by the Borrower.	

For the Lender	 	For the Borrower	 	

/s/ John Coustas	 	/s/ Dimitri Andritsoyiannis	 	

 

Exhibit 10.12

	 	LIMITED LIABILITY PARTNERSHIP	

 
ALLCO FINANCE (UK) LIMITED
 
and
 
DANAOS HOLDINGS LIMITED

 
SECONDARY PUT AND CALL AGREEMENT

 

CONTENTS

Clause	 	Page	
 	 	 	
1.	Definitions	1	
 	 	 	
2.	The Put Option	4	
 	 	 	
3.	The First Call Option	5	
 	 	 	
4.	The Second Call Option	5	
 	 	 	
5.	Exercise Of Option	5	
 	 	 	
6.	Power Of Attorney	6	
 	 	 	
7.	Representations And Warranties	7	
 	 	 	
8.	INDEMNITY	7	
 	 	 	
9.	Payment And Taxes	8	
 	 	 	
10.	Tax Notification	10	
 	 	 	
11.	Sponsor’s Covenants	11	
 	 	 	
12.	Incorporation Of Terms	12	
 	 	 	
13.	Contracts (Rights Of Third Parties) Act 1999	12	
 	 	 	
14.	Process Agent	12	
 	 	 	
SCHEDULE 1	FORM OF PUT OPTION NOTICE	14	
 	 	￠	
SCHEDULE 2	FORM OF FIRST CALL OPTION NOTICE	16	
 	 	￠	
SCHEDULE 3	FORM OF SECOND CALL OPTION NOTICE	18	

 
THIS AGREEMENT is made the 18 th day of February 2004
 
BETWEEN :
 
(1)                             ALLCO FINANCE (UK) LIMITED , a limited company registered in England, whose registered office is at 5th Floor, 40 Queen Street, London EC4R 1DD (the “ Sponsor ”); and
 
(2)                             DANAOS HOLDINGS LIMITED , a company incorporated under the laws of The Republic of Liberia, whose registered office is at 80 Broad Street, Monrovia, The Republic of Liberia and whose principal place of business is at Akti Miaouli 57, 185 36 Piraeus, Greece (the “ Guarantor ”).
 
WHEREAS :
 
(A)                         The Partners have formed the Partnership as a limited partnership by a partnership agreement of even date herewith (the “ Partnership Agreement ”) between Allco Finance Limited as general partner (the “ General Partner ”) and Lloyds TSB Equipment Leasing (No.6) Limited (the “ Investor ”) and the Sponsor as limited partners to make Capital Contributions thereto so that the Partnership may (a) provide the Owner with the funds to purchase the Vessel and (b) conduct Partnership Business.
 
(B)                           The Sponsor has granted to the Investor various put options in respect of the Investor’s interest in the Partnership under the Put Option Agreement.
 
(C)                           The Guarantor has agreed to grant to the Sponsor certain put options in respect of the Sponsor’s Partnership Interest, and in return for which the Sponsor has agreed to consult with the Guarantor prior to exercising any of its rights as a limited partner with a view to protecting the interests of the Guarantor as a potential future partner in the Partnership.
 
(D)                          The Sponsor in return has agreed to grant the Guarantor certain call options in respect of the Sponsor’s Partnership Interest.
 
IT IS NOW AGREED as follows:
 
1.                                  DEFINITIONS
 
1.1                            Except as otherwise defined in this Agreement, all terms defined in the Secondary Put Agreement shall have the same respective meanings when used in this Agreement.
 
1.2                            In this Agreement, unless the context otherwise requires, the following expressions shall have the following meanings:
 
“ Act ” means the Limited Partnerships Act 1907.
 
“ Business Day ” means a day other than a Saturday or Sunday or a public holiday, on which the major retail banks in London, and Athens are open for non-automated customer services.
 
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“ Capital Contribution ” means, in relation to a Partner, any contribution that such Partner makes to the capital of the Partnership pursuant to Clause 4 of the Partnership Agreement.
 
“ Early Put Option ” has the meaning ascribed to that expression in the Put Option Agreement.
 
“ Encumbrance ” means any right, title or interest of any person and shall, without limiting the generality of the foregoing, include any retention of title (for security purposes), right of possession or detention, mortgage, charge, lien, pledge, encumbrance, lease or other bailment, demise charter of the Vessel, statutory right in rem, hypothecation, attachment, levy, claim or set-off (other than any right of set-off arising in favour of a banker by operation of law which has not been exercised) or any other security interest whatsoever, howsoever and wheresoever created or arising.
 
“ First Call Option ” has the meaning ascribed to that expression in Clause 3.1.
 
“ First Call Option Date ” means any Business Day specified in the First Call Option Notice.
 
“ First Call Option Notice ” means a notice substantially in the form set out in Schedule 2.
 
“ First Call Option Price ” means an amount of fifty thousand pounds (£50,000) together with the amount of any Capital Contribution actually paid by the Sponsor and representing its Residual Partnership Interest except in the case of a Sponsor Insolvency Event, in which case the First Call Option Price will be such amount as was paid by the Sponsor for its Residual Partnership Interest.
 
“ Option Date ” means any or all of the First Call Option Date, the Second Call Option Date or the Put Option Date as the context may require.
 
“ Option Interest ” has the meaning ascribed to that expression in the Secondary Put Agreement.
 
“ Option Price ” means any or all of the First Call Option Price, the Second Call Option Price or the Residual Interest Put Option Price as the context may require.
 
“ Owner ” means Ocean Caracas Limited whose registered office is at Diagoras House, 16P. Catelaris Street, 7 th Floor, 1097 Nicosia, Republic of Cyprus and whose principal place of business is at 5 th Floor, 40 Queen Street, London EC4R 1DD.
 
“ Partners ” means each of the General Partner, the Sponsor and the Investor and their respective and any subsequent successors, transferees and assigns and the expression “ Partner ” shall be construed accordingly.
 
“ Put Option ” has the meaning ascribed to that expression in Clause 2.1.
 
“ Put Option Agreement ” means the put option agreement entered or to be entered into between the Investor and the Sponsor under which the Investor may, in certain
 
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circumstances, require the Sponsor to purchase (on a limited recourse basis) its interest in the Partnership.
 
“ Put Option Date ” means any Business Day specified in the Put Option Notice.
 
“ Put Option Notice ” means a notice substantially in the form set out in Schedule 1.
 
“ Residual Interest Put Option Price ” means an amount of one thousand pounds (£1000) together with the amount of any Capital Contribution actually paid by the Sponsor and representing its Residual Partnership Interest.
 
“ Residual Partnership Interest ” means the Sponsor’s interest in the Partnership other than the Option Interest.
 
“ Secondary Put Agreement ” means the secondary put agreement entered or to be entered into between the Sponsor and the Guarantor under which the Guarantor has granted certain put option rights to the Sponsor in respect of the whole of the Sponsor’s interest in the Partnership.
 
“ Second Call Option ” has the meaning ascribed to that expression in Clause 4.1.
 
“ Second Call Option Date : means:
 
(a)                                       any Business Day on or after 14 April 2011;
 
(b)                                      any Business Day on or after the date on which a default by the Sponsor under this Agreement or a Sponsor Insolvency Event has occurred and is continuing; or
 
(c)                                       any Business Day following the exercise of the Early Put Option by the Investor.
 
“ Second Call Option Notice ” means a notice substantially in the form set out in Schedule 3.
 
“ Second Call Option Price ” means an amount equal to the Put Option Price as defined in the Secondary Put Agreement plus ten thousand pounds (£10,000).
 
“ Sponsor Insolvency Event ” means any of the following:
 
(a)                                       the Sponsor is unable or admits inability to pay its debts as they fall due or the Sponsor becomes insolvent or stops or suspends making payments (whether of principal or interest) with respect or all or any class of its debts or announces an intention to do so; or
 
(b)                                      any corporate action, legal proceedings or other procedure is presented or other step is taken for the purpose of winding up the Sponsor (and which petition or other step is not withdrawn within 14 days of such presentation or, as the case may be, such step being taken) or an order is made or resolution passed for the winding up of the Sponsor or a notice is issued convening a meeting for the purpose of passing any such resolution other than in the
 
3

 
context of a solvent reorganisation which has the prior written approval of the Guarantor; or
 
(c)                                       any petition is presented, notice given or other step is taken for the purpose of the appointment of an administrator of the Sponsor or the Guarantor reasonably believes that any such petition or other step is imminent or an administration order is made in relation to the Sponsor; or
 
(d)                                      any administrative or other receiver is appointed of the Sponsor or any part of its assets and/or undertaking or any other steps are taken to enforce any Encumbrance over all or any part of the assets of the Sponsor; or
 
(e)                                       there occurs, in relation to the Sponsor, in any country or territory in which it carries on business or to the jurisdiction of whose courts any part of its assets are subject, any event which, in the reasonable opinion of the Guarantor, appears in that country or territory to correspond with, or have an effect equivalent or similar to, any of those mentioned in (a) to (d) above or the Sponsor otherwise becomes subject, in any such country or territory, to the operation of any law relating to insolvency, bankruptcy or liquidation (unless, in relation to any litigation involving the Sponsor can demonstrate to the satisfaction of the Guarantor that any proceedings in respect of such litigation are frivolous, vexatious or an abuse of the process of the court or relate to a claim to which the Sponsor has a good defence and which is being contested in good faith by the Sponsor).
 
“ Tax ” means all present and future taxes, charges, imposts, duties, levies of any kind whatsoever (whether levied by deduction, withholding or otherwise), or any amount payable on account of or as security for any of the foregoing, payable at the instance of or imposed by any statutory, governmental, international, state, federal, provincial, local or municipal authority, agency, body or department whatsoever or any central bank, monetary agency or European Union institution, in each case whether in the United Kingdom or elsewhere, together with any penalties, additions, fines, surcharges or interest relating thereto and “ Taxes ”, “ Taxation ” and cognate expressions shall be construed accordingly.
 
2.                                  THE PUT OPTION
 
2.1                            In consideration of the payment of ten pounds (£10) by the Sponsor to the Guarantor and for other good and valuable consideration (the receipt and adequacy of which the Guarantor hereby acknowledges), the Guarantor hereby grants to the Sponsor the option (i) at any time to require the Guarantor to purchase from the Sponsor up to fifty per cent. (50%) of the Residual Partnership Interest and (ii) at any time after the Put Option Date (as defined in the Secondary Put Agreement) to require the Guarantor to purchase from the Sponsor the Residual Partnership Interest in accordance with the provisions of this Agreement (the “ Put Option ”).
 
2.2                            The Sponsor shall be entitled, but not obliged, at any time to exercise the Put Option at the Residual Interest Put Option Price by serving a Put Option Notice on the Guarantor
 
4

 
specifying the Put Option Date and upon the service of such Put Option Notice, the Guarantor shall be obliged to purchase and the Sponsor shall be obliged to sell the Residual Partnership Interest on the Put Option Date for the Residual Partnership Interest Put Option Price and otherwise in accordance with the provisions of Clause 5 provided however that the Guarantor may nominate a third party to take the transfer in its place.
 
3.                                  THE FIRST CALL OPTION
 
3.1                            In consideration of the payment of ten pounds (£10) by the Guarantor to the Sponsor and for other good and valuable consideration (the receipt and adequacy of which the Sponsor hereby acknowledges), the Sponsor hereby grants the Guarantor the option (i) at any time to require the Sponsor to sell and transfer to the Guarantor up to fifty per cent. (50%) of the Residual Partnership Interest and (ii) at any time after the Put Option Date (as defined in the Secondary Put Agreement) to require the Sponsor to sell and transfer to the Guarantor the Residual Partnership Interest in accordance with the provisions of this Agreement  (the “ First Call Option ”).
 
3.2                            The Guarantor shall be entitled, but not obliged, at any time to exercise the First Call Option by serving a First Call Option Notice on the Sponsor specifying the relevant First Call Option Date and upon service of such First Call Option Notice, the Sponsor shall be obliged to sell to the Guarantor the Residual Partnership Interest on the First Call Option Date for the First Call Option Price and otherwise in accordance with the provisions of Clause 5 provided however that the Guarantor may nominate a third party to take the transfer in its place.
 
4.                                  THE SECOND CALL OPTION
 
4.1                            In consideration of the payment of ten pounds (£10) by the Guarantor to the Sponsor and for other good and valuable consideration (the receipt and adequacy of which the Sponsor hereby acknowledges), the Sponsor hereby grants the Guarantor the option to require the Sponsor to sell and transfer to the Guarantor the Option Interest in accordance with the provisions of this Agreement on any Second Call Option Date (the “ Second Call Option ”).
 
4.2                            The Guarantor shall be entitled, but not obliged, to exercise the Second Call Option immediately after service of notice by the Investor pursuant to the Put Option Agreement by serving a Second Call Option Notice on the Sponsor specifying the relevant Second Call Option Date and the Second Call Option Price and upon service of such Second Call Option Notice, the Sponsor shall be obliged to sell the Option Interest to the Guarantor on the Second Call Option Date for the Second Call Option Price and otherwise in accordance with the provisions of Clause 5 provided however that the Guarantor may nominate a third party to take the transfer in its place.
 
5.                                  EXERCISE OF OPTION
 
5.1                            Each of the Put Option and the First Call Option may be exercised in respect of any portion of the Residual Partnership Interest at the relevant Option Price which shall be
 
5

 
proportionally reduced. If a Put Option or a First Call Option is exercised in respect of a portion of the Residual Partnership Interest, the Residual Partnership Interest shall be reduced by the portion in respect of which a Put Option or a First Call Option, as the case may be, has been exercised, and each of the Put Option and the First Call Option shall continue to be available in respect of the Residual Partnership Interest so reduced.
 
5.2                            If the Sponsor exercises a Put Option, or if the Guarantor exercises a First Call Option or the Second Call Option, then upon the Guarantor paying the relevant Option Price on the relevant Option Date in accordance with the terms of Clause 2.2 or Clause 3.2 and Clause 5.1 or Clause 4.2, as the case may be, the sale and purchase of the relevant portion of the Residual Partnership Interest or the Option Interest, as the case may be, shall be concluded by the Guarantor procuring:
 
5.2.1                             the filing by the General Partner of a duly completed LP6 detailing the transfer of the relevant portion of the Sponsor’s interest in the Partnership to the Guarantor in accordance with Section 9(1)(d) of the Act;
 
5.2.2                             the submission of a notice of the transfer by the General Partner for publication in the London Gazette pursuant to Section 10 of the Act or such other publication referred to in Clause 15.3 of the Partnership Agreement; and
 
5.2.3                             the execution by the Sponsor, the General Partner, the Guarantor and any other members of the Partnership at the relevant time of the deed of accession in the form of the schedule to the Partnership Agreement.
 
5.3                            If after the service of the Second Call Option Notice but before the Second Call Option Date the Sponsor serves a put option notice pursuant to Clause 2.2 of the Secondary Put Agreement, then such put option notice shall supersede the Second Call Option Notice.
 
5.4                            The Sponsor covenants with the Guarantor that if it receives a First Call Option Notice or a Second Call Option Notice, as the case may be, from the Guarantor it shall take all reasonable steps to ensure that such First Call Option Notice or Second Call Option Notice, as the case may be, is securely stored outside the United Kingdom and provide information on request of the Guarantor as to its whereabouts and safekeeping.
 
5.5                            The Guarantor covenants with the Sponsor that if it receives a Put Option Notice from the Sponsor it shall take all reasonable steps to ensure that such Put Option Notice is securely stored outside the United Kingdom and provide information on request of the Sponsor as to its whereabouts and safekeeping.
 
6.                                  POWER OF ATTORNEY
 
6.1                            The Guarantor hereby by way of security irrevocably appoints the Sponsor to be its true and lawful attorney (with full power to appoint substitute attorneys and to revoke the appointment thereof at any time) and in its name, on its behalf and as its act and
 
6

 
deed to execute, deliver and perfect all documents (including, without limitation, the documents referred to in Clause 5.2) and do all things that the Sponsor may consider to be requisite for (a) carrying out any obligation imposed on the Guarantor under this Agreement in connection with the purchase of the Residual Partnership Interest contemplated herein or (b) exercising any of the rights conferred on the Sponsor by this Agreement or by law. The Guarantor hereby ratifies and confirms and agrees to ratify and confirm all things done and all documents executed by the Sponsor in the exercise of this power of attorney provided always that this power of attorney shall only be exercisable by the Sponsor if the Guarantor shall have failed to perform its obligations hereunder in a timely manner.
 
6.2                            The Sponsor hereby by way of security irrevocably appoints the Guarantor to be its true and lawful attorney (with full power to appoint substitute attorneys and to revoke the appointment thereof at any time) and in its name, on its behalf and as its act and deed to execute, deliver and perfect all documents and do all things that the Guarantor may consider to be requisite for (a) carrying out any obligation imposed on the Sponsor under this Agreement in connection with the purchase of the Residual Partnership Interest and/or the Option Interest contemplated herein or (b) exercising any of the rights conferred on the Guarantor by this Agreement or by law. The Sponsor hereby ratifies and confirms and agrees to ratify and confirm all things done and all documents executed by the Guarantor in the exercise of this power of attorney provided always that this power of attorney shall only be exercisable by the Guarantor if the Sponsor shall have failed to perform its obligations hereunder in a timely manner.
 
7.                                  REPRESENTATIONS AND WARRANTIES
 
The representations and warranties of each party hereto set out in Clause 5 of the Secondary Put Agreement shall apply ( mutatis mutandis ) to this Agreement as though the same were set out herein. Each party hereto acknowledges that the other party hereto has entered into this Agreement in full reliance on such representations and warranties being true and accurate as at the date hereof.
 
8.                                  INDEMNITY
 
8.1                            In consideration of the payment of ten pounds (£10) by the Sponsor to the Guarantor (receipt of which the Guarantor hereby acknowledges) and for other good and valuable consideration the Guarantor irrevocably and unconditionally agrees to indemnify the Sponsor on demand against any loss suffered by it if any obligation of the Guarantor hereunder is or becomes unenforceable, invalid or illegal.
 
8.2                            The obligations of the Guarantor under this Clause 8 will not be affected by any matter which, without this provision, would affect any of its obligations under this Clause 8 including, but without limitation, the following:
 
8.2.1                             any change in or amendment, compromise or release of, this Agreement or any other document or security; and
 
7

 
8.2.2                             any adjustment, discharge, inability to prove or other similar circumstance affecting any obligation of the Guarantor under this Agreement because of any insolvency proceedings or any applicable law, treaty, court order or other regulation binding upon the Guarantor. Each of the Guarantor’s obligations will for the purposes of this Clause 8 be read as if any such circumstance had not arisen.
 
9.                                  PAYMENT AND TAXES
 
9.1                            All payments to be made by the Guarantor under this Agreement shall be made in full, without any set-off or counterclaim whatsoever and free and clear of all deductions or withholdings whatsoever save only as may be required by law for value on the day on which payment is due.
 
9.2                            If at any time the Guarantor is required to make any deduction or withholding in respect of Taxes from any payment due under this Agreement, it shall pay the full amount required to be deducted or withheld to the relevant taxation or other authority within the time allowed for such payment under applicable law and the sum due from the Guarantor in respect of such payment shall be increased to the extent necessary to ensure that, after the making of such deduction or withholding, the Sponsor receives on the due date for such payment (and retains, free from any liability in respect of such deduction or withholding), a net sum equal to the sum which it would have received had no such deduction or withholding been required to be made and the Guarantor and shall indemnify the Sponsor against any losses or costs incurred by it by reason of any failure of the Guarantor to make any such deduction or withholding or by reason of any increased payment not being made on the due date for such payment. The Guarantor shall promptly deliver to the Sponsor any receipts, certificates or other proof evidencing the amounts (if any) paid or payable in respect of any deduction or withholding as aforesaid.
 
9.3                            If, following any such deduction or withholding as is referred to in Clause 8.2 from any payment by the Guarantor, the Sponsor shall receive or be granted a credit against or remission for any Taxes payable by it, the Sponsor shall, subject to the Guarantor having made any increased payment in accordance with Clause 8.2 and to the extent that the Sponsor can do so without prejudicing the retention of the amount of such credit or remission and without prejudice to the right of the Sponsor to obtain any other relief or allowance which may be available to it, reimburse the Guarantor with such amount as the Sponsor shall acting in its absolute discretion certify to be the proportion of such credit or remission as will leave the Sponsor (after such reimbursement) in no worse position than it would have been in had there been no such deduction or withholding from the payment by the Guarantor as aforesaid. Such reimbursement shall be made forthwith upon the Sponsor certifying that the amount of such credit or remission has been received by it. Nothing contained in this Agreement shall oblige the Sponsor to rearrange its tax affairs or to disclose any information regarding its tax affairs and computations. Without prejudice to the generality of the foregoing, the Guarantor shall not, by virtue of this Clause 8.3 be entitled to enquire about the Sponsor’s tax affairs.
 
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9.4                            Without prejudice to the foregoing provisions of this Clause 8, if the Sponsor is required to make any payment on account of Tax (not being a Tax imposed on and calculated by reference to the net income or a capital gain of the Sponsor by the jurisdiction in which it is incorporated other than any such Tax (including in respect of any balancing charge) imposed as a consequence of the exercise of the Put Option, the First Call Option or the Second Call Option (after taking into account the acquisition by the Sponsor of the Option Interest or the Residual Partnership Interest as the case may be) or otherwise on or in relation to any sum received or receivable or deemed to be received or receivable hereunder by the Sponsor (including any sum received or receivable or deemed to be received or receivable under this Clause 8) or any liability in respect of any such payment is asserted, imposed, levied or assessed against the Sponsor, the Guarantor shall, upon demand of the Sponsor, promptly indemnify the Sponsor against such payment or liability, together with any interest, penalties, costs and expenses payable or incurred in connection therewith (except to the extent that such interest penalties, costs or expenses have been incurred by the Sponsor’s gross negligence or wilful misconduct) by making to the Sponsor such payment as is necessary to ensure that the Sponsor receives a sum net of such Tax equal to the sum which it would have received had no such Tax been imposed.
 
9.5                            If the Guarantor is required to indemnify the Sponsor pursuant to Clause 8.5 or a Tax arises in respect of which the Guarantor has an obligation under this Clause 8, then, without in any way limiting, reducing or otherwise qualifying any rights or obligations of the Sponsor, the Sponsor shall promptly upon becoming aware of the same notify the Guarantor thereof and, in consultation in good faith with the Guarantor, for a period of up to sixty (60) days from the date of such notification, the Sponsor shall take such steps at the request and expense of the Guarantor as may be open to it to mitigate the effects of such circumstances on the Guarantor including, without limiting the generality of the foregoing by using all reasonable endeavours to transfer its rights and obligations under this Agreement to another office or to a subsidiary or an affiliate of the Sponsor or to another institution, in each case not affected by the relevant circumstances  provided that the Sponsor shall not be under any obligation to take or continue to take any such action or other steps if the Guarantor is in breach of this Agreement or if in its reasonable opinion, acting in good faith, to do so would have a material adverse effect on its business, operations or financial condition or the financial basis under which, inter alia , this Agreement has been entered into or would entail any cost or expense to the Sponsor (unless, in the case of any adverse effect on such financial basis, or cost or expense, the Sponsor shall have been indemnified or otherwise secured to its satisfaction).
 
9.6
 
9.6.1                             If a claim shall be made by the Sponsor for any Tax for which the Guarantor may be required to indemnify the Sponsor pursuant to Clause 8.2 or Clause 8.5, and under applicable law of the taxing jurisdiction the Guarantor is allowed to contest directly such Tax in its own name, then without prejudice to the obligation of the Guarantor to pay any sum due to the Sponsor pursuant to this Clause 8 on its due date, the Guarantor shall be permitted, at
 
9

 
is expense and in its own name, and with the prior written consent of the Sponsor, to contest the imposition of such claim.
 
9.6.2                             If the Guarantor is prevented by applicable law from validly contesting such claim in its own name or if it is necessary for the Sponsor to join in or assist in the contesting by the Guarantor of any claim, upon request of the Guarantor supported by an opinion of counsel selected by the Guarantor reasonably acceptable to the Sponsor confirming that there is a reasonable basis for contesting the validity, applicability or amount of such Taxes, the Sponsor shall, subject to sub-clause 8.7.3, in good faith, at the Guarantor’s expense, contest or assist in contesting the imposition of such Tax. After considering any views offered by the Sponsor and the Sponsor’s counsel concerning the forum in which a claim is most likely to be favourably resolved, the Guarantor may in its sole discretion select the forum for such consent and determine whether any such contest shall be by (a) resisting payment of such Tax, (b) paying such Tax under protest, (c) paying such Tax and seeking a refund or other repayment thereof or (d) seeking a reduction in the amount of such Tax.
 
9.6.3                             In no event shall the Sponsor be required to contest nor shall the Sponsor be required to join in or assist in contesting the imposition of any such Tax:
 
(a)                      if the Sponsor reasonably believes that to do so would be prejudicial to its interest;
 
(b)                     unless the Guarantor shall have agreed to pay the Sponsor on demand, and indemnify the Sponsor from, all reasonable costs and expenses that the Sponsor incurs in contesting or assisting in contesting such claim or arising out of or relating to such contest or assistance (including, but not limited to, all reasonable out-of-pocket costs, expenses, losses, reasonable legal and accounting fees, disbursements, penalties and interest); and
 
(c)                      if such contest shall be conducted in a manner requiring the prior payment of the claim by the Sponsor or, if the Guarantor shall request the Sponsor to make payment thereof pursuant to sub-clauses (b) or (c) of Clause 8.7.2 unless the Guarantor shall have advanced to the Sponsor sufficient funds (on an interest free basis) (and if such payment results in Taxable income to the Sponsor in respect of which the Sponsor does not receive a corresponding deduction, on an after tax basis) to make such payment.
 
10.                            TAX NOTIFICATION
 
If, at any time, the Guarantor is required by law to make any deduction or withholding from any sum payable by it hereunder (or if thereafter there is any change in the rates at which or the manner in which such deductions or withholdings are calculated), the Guarantor (as the case may be) shall promptly notify the Sponsor.
 
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11.                            SPONSOR’S COVENANTS
 
Subject to the proviso below, the Sponsor hereby covenants:
 
11.1.1                       to take all steps reasonably required by the Guarantor in writing, at no cost to the Guarantor, to preserve or protect its interest in the Residual Partnership Interest and the Option Interest;
 
11.1.2                       to perform its obligations under the Put Option Agreement and the Limited Partnership Agreement;
 
11.1.3                       to enforce and exercise its rights and remedies under the Put Option Agreement and the Limited Partnership as reasonably required by the Guarantor;
 
11.1.4                       to notify the Guarantor of any notices, demands, requests or communications received by the Sponsor under or pursuant to the Put Option Agreement;
 
11.1.5                       to involve the Guarantor (to the extent it is entitled to do so in accordance with the terms of the Put Option Agreement) in all consultations and discussions between the Sponsor and Investor that are undertaken by way of exercise of the Sponsor’s consultation rights under the terms of the Put Option Agreement;
 
11.1.6                       not to give any consent, waiver or approval under the Put Option Agreement or take any other action in writing in connection with the Residual Partnership Interest or the Option Interest which in each case would (to the Sponsor’s actual knowledge) materially adversely affect their value
 
PROVIDED that:
 
(1)                     the above covenants, obligations and restrictions shall only apply if and to the extent that such covenants, obligations and restrictions are necessary or reasonably required to the Guarantor’s enjoyment and exercise of its rights, powers, remedies and benefits hereunder and under the Secondary Put Agreement or relevant to the amount or timing of any payment or other obligation or liability of the Guarantor hereunder or under the Secondary Put Agreement to protect and preserve the enjoyment of the interest of the Guarantor in the Residual Partnership Interest and Option Interest and the rights and benefits intended to be conferred thereby;
 
(2)                     the Sponsor is indemnified and secured (in manner and form reasonably acceptable to the Sponsor) for all costs, liabilities and losses that the Sponsor may incur as a result of taking any such steps as the Guarantor may require pursuant to Clauses 11.1.1; and
 
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(3)                     the Sponsor shall not be required to take any action or step pursuant to this Clause 11 if doing so shall (or is reasonably likely to) (i) cause the Sponsor to be in breach of any of its obligations under any of the Transaction Documents; or (ii) be unlawful.
 
12.                            INCORPORATION OF TERMS
 
The provisions of Clause 11 ( Assignment ), Clause 12 ( Notices ), Clause 13 ( Counterparts ) and Clause 14 ( Law and Jurisdiction ) of the Secondary Put Agreement shall be incorporated into this Agreement as if set out in full herein and as if references therein to “ this Agreement ” are references to this Agreement.
 
13.                            CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999
 
A person who is not a party to this Agreement has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this Agreement.
 
14.                            PROCESS AGENT
 
The Guarantor agrees that the process by which any proceedings are begun under this Agreement may be served on it by being delivered in connection with any proceedings in England, to SH Process Agents Limited, of One, St Paul’s Churchyard, London, EC4M 8SH. If this appointment ceases to be effective the Guarantor shall immediately appoint a further person in England to accept service of process on its behalf in England. Nothing contained herein shall affect the right to serve process in any other manner permitted by law.
 
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IN WITNESS of which this Agreement has been duly executed on the day and year first before written.

Guarantor:	
 	
DANAOS HOLDINGS LIMITED	
 	
By: /s/ David Metzger	

 	
Sponsor:	
 	
ALLCO FINANCE (UK) LIMITED	
 	
By: [Illegible]	
 
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SCHEDULE 1
FORM OF PUT OPTION NOTICE
 
Danaos Holdings Limited
Akti Miaouli 57
185 36 Piraeus
Greece
 
Attention:            Legal Department
 
Dear Sirs
 
The Ocean Caracas Limited Partnership (the “Partnership”)
 
We refer to the secondary put and call agreement relating to the Residual Partnership Interest between ourselves and yourself on [                   ] (the “ Secondary Put and Call Agreement ”). Terms defined in the Secondary Put and Call Agreement (except where defined herein) shall have the same respective meanings herein.
 
This Notice is the Put Option Notice for the purposes of the Secondary Put and Call Agreement. We hereby exercise our option contained in Clause 2.1 of the Secondary Put and Call Agreement, being the Put Option in respect of [ ]% of the Residual Partnership Interest and hereby notify you that the Put Option Date shall be [ ] and the Residual Interest Put Option Price shall be [ ].
 
This Notice shall be governed by and construed in accordance with English law. Please acknowledge safe receipt of this Notice.

Yours faithfully	

 	 	
For and on behalf of	
ALLCO FINANCE (UK) LIMITED	
 
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We acknowledge safe receipt of this Notice of which this is a copy.

 	
 	 	
For and on behalf of	
DANAOS HOLDINGS LIMITED	
 
15

 
SCHEDULE 2
FORM OF FIRST CALL OPTION NOTICE
 
Allco Finance (UK) Limited
c/o Allco (Leasing) Europe Ltd.
Lord Coutanche House
66-68 Esplanade
St. Helier
Jersey JE4 8SZ

Attention: The Directors
 
Dear Sirs
 
The Ocean Caracas Limited Partnership (the “Partnership”)
 
We refer to the secondary put and call agreement relating to the Residual Partnership Interest between ourselves and yourself on [                          ] (the “ Secondary Put and Call Agreement ”). Terms defined in the Secondary Put and Call Agreement (except where defined herein) shall have the same respective meanings herein.
 
This Notice is the First Call Option Notice for the purposes of the Secondary Put and Call Agreement. We hereby exercise our option contained in Clause 3.1 of the Secondary Put and Call Agreement, being the First Call Option in respect of [ ]% of the Residual Partnership Interest and hereby notify you that the First Call Option Date shall be [ ] and the First Call Option Price shall be [ ].
 
This Notice shall be governed by and construed in accordance with English law. Please acknowledge safe receipt of this Notice.

Yours faithfully	

For and on behalf of	
DANAOS HOLDINGS LIMITED	
 
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We acknowledge safe receipt of this Notice of which this is a copy.	

 	 	
For and on behalf of	
ALLCO FINANCE (UK) LIMITED	
 
17

 
SCHEDULE 3                      
FORM OF SECOND CALL OPTION NOTICE
 
Allco Finance (UK) Limited
c/o Allco (Leasing) Europe Ltd.
Lord Coutanche House
66-68 Esplanade
St. Helier
Jersey JE4 8SZ
 
Attention: The Directors
 
Dear Sirs
 
The Ocean Caracas Limited Partnership (the “Partnership”)
 
We refer to the secondary put and call agreement relating to our interest in the Partnership entered into between ourselves and yourself on [              ] (the “ Secondary Put and Call Agreement ”). Terms defined in the Secondary Put and Call Agreement (except where defined herein) shall have the same respective meanings herein.
 
This Notice is the Second Call Option Notice for the purposes of the Secondary Put and Call Option Agreement. We hereby exercise our option contained in Clause 4.1 of the Secondary Put and Call Agreement, being the Second Call Option and hereby notify you that:
 
1.                                        the Second Call Option Date shall be [ ]; and
 
2.                                        the Second Call Option Price is [ ] pounds (£[ ]).
 
This Notice shall be governed by and construed in accordance with English law. Please acknowledge safe receipt of this Notice.

Yours faithfully	

For and on behalf of	
DANAOS HOLDINGS LIMITED	
 
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We acknowledge safe receipt of this Notice of which this is a copy.

 	 	
For and on behalf of	
ALLCO FINANCE (UK) LIMITED	
 
19

 
Exhibit 10.13

	 	LIMITED LIABILITY PARTNERSHIP	

 
 
ALLCO FINANCE (UK) LIMITED
 
and
 
DANAOS HOLDINGS LIMITED

 
SECONDARY PUT AND CALL AGREEMENT

 

 
CONTENTS

Clause	 	Page	
 	 	 	
1.	Definitions	1	
 	 	 	
2.	The Put Option	4	
 	 	 	
3.	The First Call Option	5	
 	 	 	
4.	The Second Call Option	5	
 	 	 	
5.	Exercise Of Option	5	
 	 	 	
6.	Power Of Attorney	6	
 	 	 	
7.	Representations And Warranties	7	
 	 	 	
8.	INDEMNITY	7	
 	 	 	
9.	Payment And Taxes	8	
 	 	 	
10.	Tax Notification	10	
 	 	 	
11.	Sponsor’s Covenants	11	
 	 	 	
12.	Incorporation Of Terms	12	
 	 	 	
13.	Contracts (Rights Of Third Parties) Act 1999	12	
 	 	 	
14.	Process Agent	12	
 	 	 	
SCHEDULE 1	FORM OF PUT OPTION NOTICE	14	
 	 	￠	
SCHEDULE 2	FORM OF FIRST CALL OPTION NOTICE	16	
 	 	￠	
SCHEDULE 3	FORM OF SECOND CALL OPTION NOTICE	18	

 
THIS AGREEMENT is made the 18 th day of February 2004
 
BETWEEN :
 
(1)                             ALLCO FINANCE (UK) LIMITED , a limited company registered in England, whose registered office is at 5th Floor, 40 Queen Street, London EC4R 1DD (the “ Sponsor ”); and
 
(2)                             DANAOS HOLDINGS LIMITED , a company incorporated under the laws of The Republic of Liberia, whose registered office is at 80 Broad Street, Monrovia, The Republic of Liberia and whose principal place of business is at Akti Miaouli 57, 185 36 Piraeus, Greece (the “ Guarantor ”).
 
WHEREAS :
 
(A)                         The Partners have formed the Partnership as a limited partnership by a partnership agreement of even date herewith (the “ Partnership Agreement ”) between Allco Finance Limited as general partner (the “ General Partner ”) and Lloyds TSB Equipment Leasing (No.6) Limited (the “ Investor ”) and the Sponsor as limited partners to make Capital Contributions thereto so that the Partnership may (a) provide the Owner with the funds to purchase the Vessel and (b) conduct Partnership Business.
 
(B)                           The Sponsor has granted to the Investor various put options in respect of the Investor’s interest in the Partnership under the Put Option Agreement.
 
(C)                           The Guarantor has agreed to grant to the Sponsor certain put options in respect of the Sponsor’s Partnership Interest, and in return for which the Sponsor has agreed to consult with the Guarantor prior to exercising any of its rights as a limited partner with a view to protecting the interests of the Guarantor as a potential future partner in the Partnership.
 
(D)                          The Sponsor in return has agreed to grant the Guarantor certain call options in respect of the Sponsor’s Partnership Interest.
 
IT IS NOW AGREED as follows:
 
1.                                  DEFINITIONS
 
1.1                            Except as otherwise defined in this Agreement, all terms defined in the Secondary Put Agreement shall have the same respective meanings when used in this Agreement.
 
1.2                            In this Agreement, unless the context otherwise requires, the following expressions shall have the following meanings:
 
“ Act ” means the Limited Partnerships Act 1907.
 
“ Business Day ” means a day other than a Saturday or Sunday or a public holiday, on which the major retail banks in London, and Athens are open for non-automated customer services.
 
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“ Capital Contribution ” means, in relation to a Partner, any contribution that such Partner makes to the capital of the Partnership pursuant to Clause 4 of the Partnership Agreement.
 
“ Early Put Option ” has the meaning ascribed to that expression in the Put Option Agreement.
 
“ Encumbrance ” means any right, title or interest of any person and shall, without limiting the generality of the foregoing, include any retention of title (for security purposes), right of possession or detention, mortgage, charge, lien, pledge, encumbrance, lease or other bailment, demise charter of the Vessel, statutory right in rem, hypothecation, attachment, levy, claim or set-off (other than any right of set-off arising in favour of a banker by operation of law which has not been exercised) or any other security interest whatsoever, howsoever and wheresoever created or arising.
 
“ First Call Option ” has the meaning ascribed to that expression in Clause 3.1.
 
“ First Call Option Date ” means any Business Day specified in the First Call Option Notice.
 
“ First Call Option Notice ” means a notice substantially in the form set out in Schedule 2.
 
“ First Call Option Price ” means an amount of fifty thousand pounds (£50,000) together with the amount of any Capital Contribution actually paid by the Sponsor and representing its Residual Partnership Interest except in the case of a Sponsor Insolvency Event, in which case the First Call Option Price will be such amount as was paid by the Sponsor for its Residual Partnership Interest.
 
“ Option Date ” means any or all of the First Call Option Date, the Second Call Option Date or the Put Option Date as the context may require.
 
“ Option Interest ” has the meaning ascribed to that expression in the Secondary Put Agreement.
 
“ Option Price ” means any or all of the First Call Option Price, the Second Call Option Price or the Residual Interest Put Option Price as the context may require.
 
“ Owner ” means Ocean Caribbean Limited whose registered office is at Diagoras House, 16P. Catelaris Street, 7 th Floor, 1097 Nicosia, Republic of Cyprus and whose principal place of business is at 5 th Floor, 40 Queen Street, London EC4R 1DD.
 
“ Partners ” means each of the General Partner, the Sponsor and the Investor and their respective and any subsequent successors, transferees and assigns and the expression “ Partner ” shall be construed accordingly.
 
“ Put Option ” has the meaning ascribed to that expression in Clause 2.1.
 
“ Put Option Agreement ” means the put option agreement entered or to be entered into between the Investor and the Sponsor under which the Investor may, in certain
 
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circumstances, require the Sponsor to purchase (on a limited recourse basis) its interest in the Partnership.
 
“ Put Option Date ” means any Business Day specified in the Put Option Notice.
 
“ Put Option Notice ” means a notice substantially in the form set out in Schedule 1.
 
“ Residual Interest Put Option Price ” means an amount of one thousand pounds (£1000) together with the amount of any Capital Contribution actually paid by the Sponsor and representing its Residual Partnership Interest.
 
“ Residual Partnership Interest ” means the Sponsor’s interest in the Partnership other than the Option Interest.
 
“ Secondary Put Agreement ” means the secondary put agreement entered or to be entered into between the Sponsor and the Guarantor under which the Guarantor has granted certain put option rights to the Sponsor in respect of the whole of the Sponsor’s interest in the Partnership.
 
“ Second Call Option ” has the meaning ascribed to that expression in Clause 4.1.
 
“ Second Call Option Date : means:
 
(a)                                       any Business Day on or after 14 April 2011;
 
(b)                                      any Business Day on or after the date on which a default by the Sponsor under this Agreement or a Sponsor Insolvency Event has occurred and is continuing; or
 
(c)                                       any Business Day following the exercise of the Early Put Option by the Investor.
 
“ Second Call Option Notice ” means a notice substantially in the form set out in Schedule 3.
 
“ Second Call Option Price ” means an amount equal to the Put Option Price as defined in the Secondary Put Agreement plus ten thousand pounds (£10,000).
 
“ Sponsor Insolvency Event ” means any of the following:
 
(a)                                       the Sponsor is unable or admits inability to pay its debts as they fall due or the Sponsor becomes insolvent or stops or suspends making payments (whether of principal or interest) with respect or all or any class of its debts or announces an intention to do so; or
 
(b)                                      any corporate action, legal proceedings or other procedure is presented or other step is taken for the purpose of winding up the Sponsor (and which petition or other step is not withdrawn within 14 days of such presentation or, as the case may be, such step being taken) or an order is made or resolution passed for the winding up of the Sponsor or a notice is issued convening a meeting for the purpose of passing any such resolution other than in the
 
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context of a solvent reorganisation which has the prior written approval of the Guarantor; or
 
(c)                                       any petition is presented, notice given or other step is taken for the purpose of the appointment of an administrator of the Sponsor or the Guarantor reasonably believes that any such petition or other step is imminent or an administration order is made in relation to the Sponsor; or
 
(d)                                      any administrative or other receiver is appointed of the Sponsor or any part of its assets and/or undertaking or any other steps are taken to enforce any Encumbrance over all or any part of the assets of the Sponsor; or
 
(e)                                       there occurs, in relation to the Sponsor, in any country or territory in which it carries on business or to the jurisdiction of whose courts any part of its assets are subject, any event which, in the reasonable opinion of the Guarantor, appears in that country or territory to correspond with, or have an effect equivalent or similar to, any of those mentioned in (a) to (d) above or the Sponsor otherwise becomes subject, in any such country or territory, to the operation of any law relating to insolvency, bankruptcy or liquidation (unless, in relation to any litigation involving the Sponsor can demonstrate to the satisfaction of the Guarantor that any proceedings in respect of such litigation are frivolous, vexatious or an abuse of the process of the court or relate to a claim to which the Sponsor has a good defence and which is being contested in good faith by the Sponsor).
 
“ Tax ” means all present and future taxes, charges, imposts, duties, levies of any kind whatsoever (whether levied by deduction, withholding or otherwise), or any amount payable on account of or as security for any of the foregoing, payable at the instance of or imposed by any statutory, governmental, international, state, federal, provincial, local or municipal authority, agency, body or department whatsoever or any central bank, monetary agency or European Union institution, in each case whether in the United Kingdom or elsewhere, together with any penalties, additions, fines, surcharges or interest relating thereto and “ Taxes ”, “ Taxation ” and cognate expressions shall be construed accordingly.
 
2.                                  THE PUT OPTION
 
2.1                            In consideration of the payment of ten pounds (£10) by the Sponsor to the Guarantor and for other good and valuable consideration (the receipt and adequacy of which the Guarantor hereby acknowledges), the Guarantor hereby grants to the Sponsor the option (i) at any time to require the Guarantor to purchase from the Sponsor up to fifty per cent. (50%) of the Residual Partnership Interest and (ii) at any time after the Put Option Date (as defined in the Secondary Put Agreement) to require the Guarantor to purchase from the Sponsor the Residual Partnership Interest in accordance with the provisions of this Agreement (the “ Put Option ”).
 
2.2                            The Sponsor shall be entitled, but not obliged, at any time to exercise the Put Option at the Residual Interest Put Option Price by serving a Put Option Notice on the Guarantor
 
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specifying the Put Option Date and upon the service of such Put Option Notice, the Guarantor shall be obliged to purchase and the Sponsor shall be obliged to sell the Residual Partnership Interest on the Put Option Date for the Residual Partnership Interest Put Option Price and otherwise in accordance with the provisions of Clause 5 provided however that the Guarantor may nominate a third party to take the transfer in its place.
 
3.                                  THE FIRST CALL OPTION
 
3.1                            In consideration of the payment of ten pounds (£10) by the Guarantor to the Sponsor and for other good and valuable consideration (the receipt and adequacy of which the Sponsor hereby acknowledges), the Sponsor hereby grants the Guarantor the option (i) at any time to require the Sponsor to sell and transfer to the Guarantor up to fifty per cent. (50%) of the Residual Partnership Interest and (ii) at any time after the Put Option Date (as defined in the Secondary Put Agreement) to require the Sponsor to sell and transfer to the Guarantor the Residual Partnership Interest in accordance with the provisions of this Agreement  (the “ First Call Option ”).
 
3.2                            The Guarantor shall be entitled, but not obliged, at any time to exercise the First Call Option by serving a First Call Option Notice on the Sponsor specifying the relevant First Call Option Date and upon service of such First Call Option Notice, the Sponsor shall be obliged to sell to the Guarantor the Residual Partnership Interest on the First Call Option Date for the First Call Option Price and otherwise in accordance with the provisions of Clause 5 provided however that the Guarantor may nominate a third party to take the transfer in its place.
 
4.                                  THE SECOND CALL OPTION
 
4.1                            In consideration of the payment of ten pounds (£10) by the Guarantor to the Sponsor and for other good and valuable consideration (the receipt and adequacy of which the Sponsor hereby acknowledges), the Sponsor hereby grants the Guarantor the option to require the Sponsor to sell and transfer to the Guarantor the Option Interest in accordance with the provisions of this Agreement on any Second Call Option Date (the “ Second Call Option ”).
 
4.2                            The Guarantor shall be entitled, but not obliged, to exercise the Second Call Option immediately after service of notice by the Investor pursuant to the Put Option Agreement by serving a Second Call Option Notice on the Sponsor specifying the relevant Second Call Option Date and the Second Call Option Price and upon service of such Second Call Option Notice, the Sponsor shall be obliged to sell the Option Interest to the Guarantor on the Second Call Option Date for the Second Call Option Price and otherwise in accordance with the provisions of Clause 5 provided however that the Guarantor may nominate a third party to take the transfer in its place.
 
5.                                  EXERCISE OF OPTION
 
5.1                            Each of the Put Option and the First Call Option may be exercised in respect of any portion of the Residual Partnership Interest at the relevant Option Price which shall be
 
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proportionally reduced. If a Put Option or a First Call Option is exercised in respect of a portion of the Residual Partnership Interest, the Residual Partnership Interest shall be reduced by the portion in respect of which a Put Option or a First Call Option, as the case may be, has been exercised, and each of the Put Option and the First Call Option shall continue to be available in respect of the Residual Partnership Interest so reduced.
 
5.2                            If the Sponsor exercises a Put Option, or if the Guarantor exercises a First Call Option or the Second Call Option, then upon the Guarantor paying the relevant Option Price on the relevant Option Date in accordance with the terms of Clause 2.2 or Clause 3.2 and Clause 5.1 or Clause 4.2, as the case may be, the sale and purchase of the relevant portion of the Residual Partnership Interest or the Option Interest, as the case may be, shall be concluded by the Guarantor procuring:
 
5.2.1                             the filing by the General Partner of a duly completed LP6 detailing the transfer of the relevant portion of the Sponsor’s interest in the Partnership to the Guarantor in accordance with Section 9(1)(d) of the Act;
 
5.2.2                             the submission of a notice of the transfer by the General Partner for publication in the London Gazette pursuant to Section 10 of the Act or such other publication referred to in Clause 15.3 of the Partnership Agreement; and
 
5.2.3                             the execution by the Sponsor, the General Partner, the Guarantor and any other members of the Partnership at the relevant time of the deed of accession in the form of the schedule to the Partnership Agreement.
 
5.3                            If after the service of the Second Call Option Notice but before the Second Call Option Date the Sponsor serves a put option notice pursuant to Clause 2.2 of the Secondary Put Agreement, then such put option notice shall supersede the Second Call Option Notice.
 
5.4                            The Sponsor covenants with the Guarantor that if it receives a First Call Option Notice or a Second Call Option Notice, as the case may be, from the Guarantor it shall take all reasonable steps to ensure that such First Call Option Notice or Second Call Option Notice, as the case may be, is securely stored outside the United Kingdom and provide information on request of the Guarantor as to its whereabouts and safekeeping.
 
5.5                            The Guarantor covenants with the Sponsor that if it receives a Put Option Notice from the Sponsor it shall take all reasonable steps to ensure that such Put Option Notice is securely stored outside the United Kingdom and provide information on request of the Sponsor as to its whereabouts and safekeeping.
 
6.                                  POWER OF ATTORNEY
 
6.1                            The Guarantor hereby by way of security irrevocably appoints the Sponsor to be its true and lawful attorney (with full power to appoint substitute attorneys and to revoke the appointment thereof at any time) and in its name, on its behalf and as its act and deed to execute, deliver and perfect all documents (including, without limitation, the documents referred to in Clause 5.2) and do all things that the Sponsor may consider
 
6

 
to be requisite for (a) carrying out any obligation imposed on the Guarantor under this Agreement in connection with the purchase of the Residual Partnership Interest contemplated herein or (b) exercising any of the rights conferred on the Sponsor by this Agreement or by law. The Guarantor hereby ratifies and confirms and agrees to ratify and confirm all things done and all documents executed by the Sponsor in the exercise of this power of attorney provided always that this power of attorney shall only be exercisable by the Sponsor if the Guarantor shall have failed to perform its obligations hereunder in a timely manner.
 
6.2                            The Sponsor hereby by way of security irrevocably appoints the Guarantor to be its true and lawful attorney (with full power to appoint substitute attorneys and to revoke the appointment thereof at any time) and in its name, on its behalf and as its act and deed to execute, deliver and perfect all documents and do all things that the Guarantor may consider to be requisite for (a) carrying out any obligation imposed on the Sponsor under this Agreement in connection with the purchase of the Residual Partnership Interest and/or the Option Interest contemplated herein or (b) exercising any of the rights conferred on the Guarantor by this Agreement or by law. The Sponsor hereby ratifies and confirms and agrees to ratify and confirm all things done and all documents executed by the Guarantor in the exercise of this power of attorney provided always that this power of attorney shall only be exercisable by the Guarantor if the Sponsor shall have failed to perform its obligations hereunder in a timely manner.
 
7.                                  REPRESENTATIONS AND WARRANTIES
 
The representations and warranties of each party hereto set out in Clause 5 of the Secondary Put Agreement shall apply ( mutatis mutandis ) to this Agreement as though the same were set out herein. Each party hereto acknowledges that the other party hereto has entered into this Agreement in full reliance on such representations and warranties being true and accurate as at the date hereof.
 
8.                                  INDEMNITY
 
8.1                            In consideration of the payment of ten pounds (£10) by the Sponsor to the Guarantor (receipt of which the Guarantor hereby acknowledges) and for other good and valuable consideration the Guarantor irrevocably and unconditionally agrees to indemnify the Sponsor on demand against any loss suffered by it if any obligation of the Guarantor hereunder is or becomes unenforceable, invalid or illegal.
 
8.2                            The obligations of the Guarantor under this Clause 8 will not be affected by any matter which, without this provision, would affect any of its obligations under this Clause 8 including, but without limitation, the following:
 
8.2.1                             any change in or amendment, compromise or release of, this Agreement or any other document or security; and
 
8.2.2                             any adjustment, discharge, inability to prove or other similar circumstance affecting any obligation of the Guarantor under this Agreement because of any
 
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insolvency proceedings or any applicable law, treaty, court order or other regulation binding upon the Guarantor. Each of the Guarantor’s obligations will for the purposes of this Clause 8 be read as if any such circumstance had not arisen.
 
9.                                  PAYMENT AND TAXES
 
9.1                            All payments to be made by the Guarantor under this Agreement shall be made in full, without any set-off or counterclaim whatsoever and free and clear of all deductions or withholdings whatsoever save only as may be required by law for value on the day on which payment is due.
 
9.2                            If at any time the Guarantor is required to make any deduction or withholding in respect of Taxes from any payment due under this Agreement, it shall pay the full amount required to be deducted or withheld to the relevant taxation or other authority within the time allowed for such payment under applicable law and the sum due from the Guarantor in respect of such payment shall be increased to the extent necessary to ensure that, after the making of such deduction or withholding, the Sponsor receives on the due date for such payment (and retains, free from any liability in respect of such deduction or withholding), a net sum equal to the sum which it would have received had no such deduction or withholding been required to be made and the Guarantor and shall indemnify the Sponsor against any losses or costs incurred by it by reason of any failure of the Guarantor to make any such deduction or withholding or by reason of any increased payment not being made on the due date for such payment. The Guarantor shall promptly deliver to the Sponsor any receipts, certificates or other proof evidencing the amounts (if any) paid or payable in respect of any deduction or withholding as aforesaid.
 
9.3                            If, following any such deduction or withholding as is referred to in Clause 8.2 from any payment by the Guarantor, the Sponsor shall receive or be granted a credit against or remission for any Taxes payable by it, the Sponsor shall, subject to the Guarantor having made any increased payment in accordance with Clause 8.2 and to the extent that the Sponsor can do so without prejudicing the retention of the amount of such credit or remission and without prejudice to the right of the Sponsor to obtain any other relief or allowance which may be available to it, reimburse the Guarantor with such amount as the Sponsor shall acting in its absolute discretion certify to be the proportion of such credit or remission as will leave the Sponsor (after such reimbursement) in no worse position than it would have been in had there been no such deduction or withholding from the payment by the Guarantor as aforesaid. Such reimbursement shall be made forthwith upon the Sponsor certifying that the amount of such credit or remission has been received by it. Nothing contained in this Agreement shall oblige the Sponsor to rearrange its tax affairs or to disclose any information regarding its tax affairs and computations. Without prejudice to the generality of the foregoing, the Guarantor shall not, by virtue of this Clause 8.3 be entitled to enquire about the Sponsor’s tax affairs.
 
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9.4                            Without prejudice to the foregoing provisions of this Clause 8, if the Sponsor is required to make any payment on account of Tax (not being a Tax imposed on and calculated by reference to the net income or a capital gain of the Sponsor by the jurisdiction in which it is incorporated other than any such Tax (including in respect of any balancing charge) imposed as a consequence of the exercise of the Put Option, the First Call Option or the Second Call Option (after taking into account the acquisition by the Sponsor of the Option Interest or the Residual Partnership Interest as the case may be) or otherwise on or in relation to any sum received or receivable or deemed to be received or receivable hereunder by the Sponsor (including any sum received or receivable or deemed to be received or receivable under this Clause 8) or any liability in respect of any such payment is asserted, imposed, levied or assessed against the Sponsor, the Guarantor shall, upon demand of the Sponsor, promptly indemnify the Sponsor against such payment or liability, together with any interest, penalties, costs and expenses payable or incurred in connection therewith (except to the extent that such interest penalties, costs or expenses have been incurred by the Sponsor’s gross negligence or wilful misconduct) by making to the Sponsor such payment as is necessary to ensure that the Sponsor receives a sum net of such Tax equal to the sum which it would have received had no such Tax been imposed.
 
9.5                            If the Guarantor is required to indemnify the Sponsor pursuant to Clause 8.5 or a Tax arises in respect of which the Guarantor has an obligation under this Clause 8, then, without in any way limiting, reducing or otherwise qualifying any rights or obligations of the Sponsor, the Sponsor shall promptly upon becoming aware of the same notify the Guarantor thereof and, in consultation in good faith with the Guarantor, for a period of up to sixty (60) days from the date of such notification, the Sponsor shall take such steps at the request and expense of the Guarantor as may be open to it to mitigate the effects of such circumstances on the Guarantor including, without limiting the generality of the foregoing by using all reasonable endeavours to transfer its rights and obligations under this Agreement to another office or to a subsidiary or an affiliate of the Sponsor or to another institution, in each case not affected by the relevant circumstances  provided that the Sponsor shall not be under any obligation to take or continue to take any such action or other steps if the Guarantor is in breach of this Agreement or if in its reasonable opinion, acting in good faith, to do so would have a material adverse effect on its business, operations or financial condition or the financial basis under which, inter alia , this Agreement has been entered into or would entail any cost or expense to the Sponsor (unless, in the case of any adverse effect on such financial basis, or cost or expense, the Sponsor shall have been indemnified or otherwise secured to its satisfaction).
 
9.6
 
9.6.1                             If a claim shall be made by the Sponsor for any Tax for which the Guarantor may be required to indemnify the Sponsor pursuant to Clause 8.2 or Clause 8.5, and under applicable law of the taxing jurisdiction the Guarantor is allowed to contest directly such Tax in its own name, then without prejudice to the obligation of the Guarantor to pay any sum due to the Sponsor pursuant to this Clause 8 on its due date, the Guarantor shall be permitted, at
 
9

 
is expense and in its own name, and with the prior written consent of the Sponsor, to contest the imposition of such claim.
 
9.6.2                             If the Guarantor is prevented by applicable law from validly contesting such claim in its own name or if it is necessary for the Sponsor to join in or assist in the contesting by the Guarantor of any claim, upon request of the Guarantor supported by an opinion of counsel selected by the Guarantor reasonably acceptable to the Sponsor confirming that there is a reasonable basis for contesting the validity, applicability or amount of such Taxes, the Sponsor shall, subject to sub-clause 8.7.3, in good faith, at the Guarantor’s expense, contest or assist in contesting the imposition of such Tax. After considering any views offered by the Sponsor and the Sponsor’s counsel concerning the forum in which a claim is most likely to be favourably resolved, the Guarantor may in its sole discretion select the forum for such consent and determine whether any such contest shall be by (a) resisting payment of such Tax, (b) paying such Tax under protest, (c) paying such Tax and seeking a refund or other repayment thereof or (d) seeking a reduction in the amount of such Tax.
 
9.6.3                             In no event shall the Sponsor be required to contest nor shall the Sponsor be required to join in or assist in contesting the imposition of any such Tax:
 
(a)                      if the Sponsor reasonably believes that to do so would be prejudicial to its interest;
 
(b)                     unless the Guarantor shall have agreed to pay the Sponsor on demand, and indemnify the Sponsor from, all reasonable costs and expenses that the Sponsor incurs in contesting or assisting in contesting such claim or arising out of or relating to such contest or assistance (including, but not limited to, all reasonable out-of-pocket costs, expenses, losses, reasonable legal and accounting fees, disbursements, penalties and interest); and
 
(c)                      if such contest shall be conducted in a manner requiring the prior payment of the claim by the Sponsor or, if the Guarantor shall request the Sponsor to make payment thereof pursuant to sub-clauses (b) or (c) of Clause 8.7.2 unless the Guarantor shall have advanced to the Sponsor sufficient funds (on an interest free basis) (and if such payment results in Taxable income to the Sponsor in respect of which the Sponsor does not receive a corresponding deduction, on an after tax basis) to make such payment.
 
10.                            TAX NOTIFICATION
 
If, at any time, the Guarantor is required by law to make any deduction or withholding from any sum payable by it hereunder (or if thereafter there is any change in the rates at which or the manner in which such deductions or withholdings are calculated), the Guarantor (as the case may be) shall promptly notify the Sponsor.
 
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11.                            SPONSOR’S COVENANTS
 
Subject to the proviso below, the Sponsor hereby covenants:
 
11.1.1                       to take all steps reasonably required by the Guarantor in writing, at no cost to the Guarantor, to preserve or protect its interest in the Residual Partnership Interest and the Option Interest;
 
11.1.2                       to perform its obligations under the Put Option Agreement and the Limited Partnership Agreement;
 
11.1.3                       to enforce and exercise its rights and remedies under the Put Option Agreement and the Limited Partnership as reasonably required by the Guarantor;
 
11.1.4                       to notify the Guarantor of any notices, demands, requests or communications received by the Sponsor under or pursuant to the Put Option Agreement;
 
11.1.5                       to involve the Guarantor (to the extent it is entitled to do so in accordance with the terms of the Put Option Agreement) in all consultations and discussions between the Sponsor and Investor that are undertaken by way of exercise of the Sponsor’s consultation rights under the terms of the Put Option Agreement;
 
11.1.6                       not to give any consent, waiver or approval under the Put Option Agreement or take any other action in writing in connection with the Residual Partnership Interest or the Option Interest which in each case would (to the Sponsor’s actual knowledge) materially adversely affect their value
 
PROVIDED that:
 
(1)                     the above covenants, obligations and restrictions shall only apply if and to the extent that such covenants, obligations and restrictions are necessary or reasonably required to the Guarantor’s enjoyment and exercise of its rights, powers, remedies and benefits hereunder and under the Secondary Put Agreement or relevant to the amount or timing of any payment or other obligation or liability of the Guarantor hereunder or under the Secondary Put Agreement to protect and preserve the enjoyment of the interest of the Guarantor in the Residual Partnership Interest and Option Interest and the rights and benefits intended to be conferred thereby;
 
(2)                     the Sponsor is indemnified and secured (in manner and form reasonably acceptable to the Sponsor) for all costs, liabilities and losses that the Sponsor may incur as a result of taking any such steps as the Guarantor may require pursuant to Clauses 11.1.1; and
 
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(3)                     the Sponsor shall not be required to take any action or step pursuant to this Clause 11 if doing so shall (or is reasonably likely to) (i) cause the Sponsor to be in breach of any of its obligations under any of the Transaction Documents; or (ii) be unlawful.
 
12.                            INCORPORATION OF TERMS
 
The provisions of Clause 11 ( Assignment ), Clause 12 ( Notices ), Clause 13 ( Counterparts ) and Clause 14 ( Law and Jurisdiction ) of the Secondary Put Agreement shall be incorporated into this Agreement as if set out in full herein and as if references therein to “ this Agreement ” are references to this Agreement.
 
13.                            CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999
 
A person who is not a party to this Agreement has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this Agreement.
 
14.                            PROCESS AGENT
 
The Guarantor agrees that the process by which any proceedings are begun under this Agreement may be served on it by being delivered in connection with any proceedings in England, to SH Process Agents Limited, of One, St Paul’s Churchyard, London, EC4M 8SH ref 41-26417. If this appointment ceases to be effective the Guarantor shall immediately appoint a further person in England to accept service of process on its behalf in England. Nothing contained herein shall affect the right to serve process in any other manner permitted by law.
 
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IN WITNESS of which this Agreement has been duly executed on the day and year first before written.

 

Guarantor:	
 	
DANAOS HOLDINGS LIMITED	
 	
By: /s/ David Metzger	

 	
Sponsor:	
 	
ALLCO FINANCE (UK) LIMITED	
 	
By: [Illegible]	
 
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SCHEDULE 1
FORM OF PUT OPTION NOTICE
 
Danaos Holdings Limited
Akti Miaouli 57
185 36 Piraeus
Greece
 
Attention:        Legal Department
 
Dear Sirs
 
The Ocean Caribbean Limited Partnership (the “Partnership”)
 
We refer to the secondary put and call agreement relating to the Residual Partnership Interest between ourselves and yourself on [                         ] (the “ Secondary Put and Call Agreement ”). Terms defined in the Secondary Put and Call Agreement (except where defined herein) shall have the same respective meanings herein.
 
This Notice is the Put Option Notice for the purposes of the Secondary Put and Call Agreement. We hereby exercise our option contained in Clause 2.1 of the Secondary Put and Call Agreement, being the Put Option in respect of [ ]% of the Residual Partnership Interest and hereby notify you that the Put Option Date shall be [ ] and the Residual Interest Put Option Price shall be [ ].
 
This Notice shall be governed by and construed in accordance with English law. Please acknowledge safe receipt of this Notice.

Yours faithfully	

 	 	
For and on behalf of	
ALLCO FINANCE (UK) LIMITED	
 
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We acknowledge safe receipt of this Notice of which this is a copy.

 	
 	 	
For and on behalf of	
DANAOS HOLDINGS LIMITED	
 
15

 
SCHEDULE 2
FORM OF FIRST CALL OPTION NOTICE
 
Allco Finance (UK) Limited
c/o Allco (Leasing) Europe Ltd.
Lord Coutanche House
66-68 Esplanade
St. Helier
Jersey JE4 8SZ

Attention: The Directors
 
Dear Sirs
 
The Ocean Caribbean Limited Partnership (the “Partnership”)
 
We refer to the secondary put and call agreement relating to the Residual Partnership Interest between ourselves and yourself on [                             ] (the “ Secondary Put and Call Agreement ”). Terms defined in the Secondary Put and Call Agreement (except where defined herein) shall have the same respective meanings herein.
 
This Notice is the First Call Option Notice for the purposes of the Secondary Put and Call Agreement. We hereby exercise our option contained in Clause 3.1 of the Secondary Put and Call Agreement, being the First Call Option in respect of [ ]% of the Residual Partnership Interest and hereby notify you that the First Call Option Date shall be [ ] and the First Call Option Price shall be [ ].
 
This Notice shall be governed by and construed in accordance with English law. Please acknowledge safe receipt of this Notice.

Yours faithfully	

For and on behalf of	
DANAOS HOLDINGS LIMITED	
 
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We acknowledge safe receipt of this Notice of which this is a copy.

 	
 	 	
For and on behalf of	
ALLCO FINANCE (UK) LIMITED	
 
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SCHEDULE 3
FORM OF SECOND CALL OPTION NOTICE
 
Allco Finance (UK) Limited
c/o Allco (Leasing) Europe Ltd.
Lord Coutanche House
66-68 Esplanade
St. Helier
Jersey JE4 8SZ
 
Attention: The Directors
 
Dear Sirs
 
The Ocean Caribbean Limited Partnership (the “Partnership”)
 
We refer to the secondary put and call agreement relating to our interest in the Partnership entered into between ourselves and yourself on [          ] (the “ Secondary Put and Call Agreement ”). Terms defined in the Secondary Put and Call Agreement (except where defined herein) shall have the same respective meanings herein.
 
This Notice is the Second Call Option Notice for the purposes of the Secondary Put and Call Option Agreement. We hereby exercise our option contained in Clause 4.1 of the Secondary Put and Call Agreement, being the Second Call Option and hereby notify you that:
 
1.                                        the Second Call Option Date shall be [ ]; and
 
2.                                        the Second Call Option Price is [ ] pounds (£[ ]).
 
This Notice shall be governed by and construed in accordance with English law. Please acknowledge safe receipt of this Notice.

Yours faithfully	

For and on behalf of	
DANAOS HOLDINGS LIMITED	
 
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We acknowledge safe receipt of this Notice of which this is a copy.

 	
 	 	
For and on behalf of	
ALLCO FINANCE (UK) LIMITED	
 
19

 
Exhibit 10.14

	 	LIMITED LIABILITY PARTNERSHIP	

 
 
ALLCO FINANCE (UK) LIMITED
 
and
 
DANAOS HOLDINGS LIMITED

 

SECONDARY PUT AND CALL AGREEMENT

 

 
CONTENTS

Clause	 	Page	
 	 	 	
1.	Definitions	1	
 	 	 	
2.	The Put Option	4	
 	 	 	
3.	The First Call Option	5	
 	 	 	
4.	The Second Call Option	5	
 	 	 	
5.	Exercise Of Option	6	
 	 	 	
6.	Power Of Attorney	7	
 	 	 	
7.	Representations And Warranties	7	
 	 	 	
8.	INDEMNITY	7	
 	 	 	
9.	Payment And Taxes	8	
 	 	 	
10.	Tax Notification	11	
 	 	 	
11.	Sponsor’s Covenants	11	
 	 	 	
12.	Incorporation Of Terms	12	
 	 	 	
13.	Contracts (Rights Of Third Parties) Act 1999	12	
 	 	 	
14.	Process Agent	12	
 	 	 	
SCHEDULE 1	FORM OF PUT OPTION NOTICE	14	
 	 	￠	
SCHEDULE 2	FORM OF FIRST CALL OPTION NOTICE	16	
 	 	￠	
SCHEDULE 3	FORM OF SECOND CALL OPTION NOTICE	18	

 
THIS AGREEMENT is made the 11 th day of March 2004
 
BETWEEN :
 
(1)                             ALLCO FINANCE (UK) LIMITED , a limited company registered in England, whose registered office is at 5th Floor, 40 Queen Street, London EC4R 1DD (the “ Sponsor ”); and
 
(2)                             DANAOS HOLDINGS LIMITED , a company incorporated under the laws of The Republic of Liberia, whose registered office is at 80 Broad Street, Monrovia, The Republic of Liberia and whose principal place of business is at Akti Miaouli 57, 185 36 Piraeus, Greece (the “ Guarantor ”).
 
WHEREAS :
 
(A)                         The Partners have formed the Partnership as a limited partnership by a partnership agreement of even date herewith (the “ Partnership Agreement ”) between Allco Finance Limited as general partner (the “ General Partner ”) and Lloyds TSB Equipment Leasing (No.6) Limited (the “ Investor ”) and the Sponsor as limited partners to make Capital Contributions thereto so that the Partnership may (a) provide the Owner with the funds to purchase the Vessel and (b) conduct Partnership Business.
 
(B)                           The Sponsor has granted to the Investor various put options in respect of the Investor’s interest in the Partnership under the Put Option Agreement.
 
(C)                           The Guarantor has agreed to grant to the Sponsor certain put options in respect of the Sponsor’s Partnership Interest, and in return for which the Sponsor has agreed to consult with the Guarantor prior to exercising any of its rights as a limited partner with a view to protecting the interests of the Guarantor as a potential future partner in the Partnership.
 
(D)                          The Sponsor in return has agreed to grant the Guarantor certain call options in respect of the Sponsor’s Partnership Interest.
 
IT IS NOW AGREED as follows:
 
1.                                  DEFINITIONS
 
1.1                            Except as otherwise defined in this Agreement, all terms defined in the Secondary Put Agreement shall have the same respective meanings when used in this Agreement.
 
1.2                            In this Agreement, unless the context otherwise requires, the following expressions shall have the following meanings:
 
“ Act ” means the Limited Partnerships Act 1907.
 
“ Business Day ” means a day other than a Saturday or Sunday or a public holiday, on which the major retail banks in London, and Athens are open for non-automated customer services.
 
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“ Capital Contribution ” means, in relation to a Partner, any contribution that such Partner makes to the capital of the Partnership pursuant to Clause 4 of the Partnership Agreement.
 
“ Early Put Option ” has the meaning ascribed to that expression in the Put Option Agreement.
 
“ Encumbrance ” means any right, title or interest of any person and shall, without limiting the generality of the foregoing, include any retention of title (for security purposes), right of possession or detention, mortgage, charge, lien, pledge, encumbrance, lease or other bailment, demise charter of the Vessel, statutory right in rem, hypothecation, attachment, levy, claim or set-off (other than any right of set-off arising in favour of a banker by operation of law which has not been exercised) or any other security interest whatsoever, howsoever and wheresoever created or arising.
 
“ First Call Option ” has the meaning ascribed to that expression in Clause 3.1.
 
“ First Call Option Date ” means any Business Day specified in the First Call Option Notice.
 
“ First Call Option Notice ” means a notice substantially in the form set out in Schedule 2.
 
“ First Call Option Price ” means an amount of fifty thousand pounds (£50,000) together with the amount of any Capital Contribution actually paid by the Sponsor and representing its Residual Partnership Interest except in the case of a Sponsor Insolvency Event, in which case the First Call Option Price will be such amount as was paid by the Sponsor for its Residual Partnership Interest.
 
“ Option Date ” means any or all of the First Call Option Date, the Second Call Option Date or the Put Option Date as the context may require.
 
“ Option Interest ” has the meaning ascribed to that expression in the Secondary Put Agreement.
 
“ Option Price ” means any or all of the First Call Option Price, the Second Call Option Price or the Residual Interest Put Option Price as the context may require.
 
“ Owner ” means Ocean Container (No.2) Limited whose registered office is at Diagoras House, 16P. Catelaris Street, 7 th Floor, 1097 Nicosia, Republic of Cyprus and whose principal place of business is at 5 th Floor, 40 Queen Street, London EC4R 1DD.
 
“ Partners ” means each of the General Partner, the Sponsor and the Investor and their respective and any subsequent successors, transferees and assigns and the expression “ Partner ” shall be construed accordingly.
 
“ Put Option ” has the meaning ascribed to that expression in Clause 2.1.
 
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“ Put Option Agreement ” means the put option agreement entered or to be entered into between the Investor and the Sponsor under which the Investor may, in certain circumstances, require the Sponsor to purchase (on a limited recourse basis) its interest in the Partnership.
 
“ Put Option Date ” means any Business Day specified in the Put Option Notice.
 
“ Put Option Notice ” means a notice substantially in the form set out in Schedule 1.
 
“ Residual Interest Put Option Price ” means an amount of one thousand pounds (£1000) together with the amount of any Capital Contribution actually paid by the Sponsor and representing its Residual Partnership Interest.
 
“ Residual Partnership Interest ” means the Sponsor’s interest in the Partnership other than the Option Interest.
 
“ Secondary Put Agreement ” means the secondary put agreement entered or to be entered into between the Sponsor and the Guarantor under which the Guarantor has granted certain put option rights to the Sponsor in respect of the whole of the Sponsor’s interest in the Partnership.
 
“ Second Call Option ” has the meaning ascribed to that expression in Clause 4.1.
 
“ Second Call Option Date : means:
 
(a)                                       any Business Day on or after 14 April 2011;
 
(b)                                      any Business Day on or after the date on which a default by the Sponsor under this Agreement or a Sponsor Insolvency Event has occurred and is continuing; or
 
(c)                                       any Business Day following the exercise of the Early Put Option by the Investor.
 
“ Second Call Option Notice ” means a notice substantially in the form set out in Schedule 3.
 
“ Second Call Option Price ” means an amount equal to the Put Option Price as defined in the Secondary Put Agreement plus ten thousand pounds (£10,000).
 
“ Sponsor Insolvency Event ” means any of the following:
 
(a)                                       the Sponsor is unable or admits inability to pay its debts as they fall due or the Sponsor becomes insolvent or stops or suspends making payments (whether of principal or interest) with respect or all or any class of its debts or announces an intention to do so; or
 
(b)                                      any corporate action, legal proceedings or other procedure is presented or other step is taken for the purpose of winding up the Sponsor (and which petition or other step is not withdrawn within 14 days of such presentation or, as the case may be, such step being taken) or an order is made or resolution
 
3

 
passed for the winding up of the Sponsor or a notice is issued convening a meeting for the purpose of passing any such resolution other than in the context of a solvent reorganisation which has the prior written approval of the Guarantor; or
 
(c)                                       any petition is presented, notice given or other step is taken for the purpose of the appointment of an administrator of the Sponsor or the Guarantor reasonably believes that any such petition or other step is imminent or an administration order is made in relation to the Sponsor; or
 
(d)                                      any administrative or other receiver is appointed of the Sponsor or any part of its assets and/or undertaking or any other steps are taken to enforce any Encumbrance over all or any part of the assets of the Sponsor; or
 
(e)                                       there occurs, in relation to the Sponsor, in any country or territory in which it carries on business or to the jurisdiction of whose courts any part of its assets are subject, any event which, in the reasonable opinion of the Guarantor, appears in that country or territory to correspond with, or have an effect equivalent or similar to, any of those mentioned in (a) to (d) above or the Sponsor otherwise becomes subject, in any such country or territory, to the operation of any law relating to insolvency, bankruptcy or liquidation (unless, in relation to any litigation involving the Sponsor can demonstrate to the satisfaction of the Guarantor that any proceedings in respect of such litigation are frivolous, vexatious or an abuse of the process of the court or relate to a claim to which the Sponsor has a good defence and which is being contested in good faith by the Sponsor).
 
“ Tax ” means all present and future taxes, charges, imposts, duties, levies of any kind whatsoever (whether levied by deduction, withholding or otherwise), or any amount payable on account of or as security for any of the foregoing, payable at the instance of or imposed by any statutory, governmental, international, state, federal, provincial, local or municipal authority, agency, body or department whatsoever or any central bank, monetary agency or European Union institution, in each case whether in the United Kingdom or elsewhere, together with any penalties, additions, fines, surcharges or interest relating thereto and “ Taxes ”, “ Taxation ” and cognate expressions shall be construed accordingly.
 
2.                                  THE PUT OPTION
 
2.1                            In consideration of the payment of ten pounds (£10) by the Sponsor to the Guarantor and for other good and valuable consideration (the receipt and adequacy of which the Guarantor hereby acknowledges), the Guarantor hereby grants to the Sponsor the option (i) at any time to require the Guarantor to purchase from the Sponsor up to fifty per cent. (50%) of the Residual Partnership Interest and (ii) at any time after the Put Option Date (as defined in the Secondary Put Agreement) to require the Guarantor to purchase from the Sponsor the Residual Partnership Interest in accordance with the provisions of this Agreement (the “ Put Option ”).
 
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2.2                            The Sponsor shall be entitled, but not obliged, at any time to exercise the Put Option at the Residual Interest Put Option Price by serving a Put Option Notice on the Guarantor specifying the Put Option Date and upon the service of such Put Option Notice, the Guarantor shall be obliged to purchase and the Sponsor shall be obliged to sell the Residual Partnership Interest on the Put Option Date for the Residual Partnership Interest Put Option Price and otherwise in accordance with the provisions of Clause 5 provided however that the Guarantor may nominate a third party to take the transfer in its place.
 
3.                                  THE FIRST CALL OPTION
 
3.1                            In consideration of the payment of ten pounds (£10) by the Guarantor to the Sponsor and for other good and valuable consideration (the receipt and adequacy of which the Sponsor hereby acknowledges), the Sponsor hereby grants the Guarantor the option (i) at any time to require the Sponsor to sell and transfer to the Guarantor up to fifty per cent. (50%) of the Residual Partnership Interest and (ii) at any time after the Put Option Date (as defined in the Secondary Put Agreement) to require the Sponsor to sell and transfer to the Guarantor the Residual Partnership Interest in accordance with the provisions of this Agreement  (the “ First Call Option ”).
 
3.2                            The Guarantor shall be entitled, but not obliged, at any time to exercise the First Call Option by serving a First Call Option Notice on the Sponsor specifying the relevant First Call Option Date and upon service of such First Call Option Notice, the Sponsor shall be obliged to sell to the Guarantor the Residual Partnership Interest on the First Call Option Date for the First Call Option Price and otherwise in accordance with the provisions of Clause 5 provided however that the Guarantor may nominate a third party to take the transfer in its place.
 
4.                                  THE SECOND CALL OPTION
 
4.1                            In consideration of the payment of ten pounds (£10) by the Guarantor to the Sponsor and for other good and valuable consideration (the receipt and adequacy of which the Sponsor hereby acknowledges), the Sponsor hereby grants the Guarantor the option to require the Sponsor to sell and transfer to the Guarantor the Option Interest in accordance with the provisions of this Agreement on any Second Call Option Date (the “ Second Call Option ”).
 
4.2                            The Guarantor shall be entitled, but not obliged, to exercise the Second Call Option immediately after service of notice by the Investor pursuant to the Put Option Agreement by serving a Second Call Option Notice on the Sponsor specifying the relevant Second Call Option Date and the Second Call Option Price and upon service of such Second Call Option Notice, the Sponsor shall be obliged to sell the Option Interest to the Guarantor on the Second Call Option Date for the Second Call Option Price and otherwise in accordance with the provisions of Clause 5 provided however that the Guarantor may nominate a third party to take the transfer in its place.
 
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5.                                  EXERCISE OF OPTION
 
5.1                            Each of the Put Option and the First Call Option may be exercised in respect of any portion of the Residual Partnership Interest at the relevant Option Price which shall be proportionally reduced. If a Put Option or a First Call Option is exercised in respect of a portion of the Residual Partnership Interest, the Residual Partnership Interest shall be reduced by the portion in respect of which a Put Option or a First Call Option, as the case may be, has been exercised, and each of the Put Option and the First Call Option shall continue to be available in respect of the Residual Partnership Interest so reduced.
 
5.2                            If the Sponsor exercises a Put Option, or if the Guarantor exercises a First Call Option or the Second Call Option, then upon the Guarantor paying the relevant Option Price on the relevant Option Date in accordance with the terms of Clause 2.2 or Clause 3.2 and Clause 5.1 or Clause 4.2, as the case may be, the sale and purchase of the relevant portion of the Residual Partnership Interest or the Option Interest, as the case may be, shall be concluded by the Guarantor procuring:
 
5.2.1                             the filing by the General Partner of a duly completed LP6 detailing the transfer of the relevant portion of the Sponsor’s interest in the Partnership to the Guarantor in accordance with Section 9(1)(d) of the Act;
 
5.2.2                             the submission of a notice of the transfer by the General Partner for publication in the London Gazette pursuant to Section 10 of the Act or such other publication referred to in Clause 15.3 of the Partnership Agreement; and
 
5.2.3                             the execution by the Sponsor, the General Partner, the Guarantor and any other members of the Partnership at the relevant time of the deed of accession in the form of the schedule to the Partnership Agreement.
 
5.3                            If after the service of the Second Call Option Notice but before the Second Call Option Date the Sponsor serves a put option notice pursuant to Clause 2.2 of the Secondary Put Agreement, then such put option notice shall supersede the Second Call Option Notice.
 
5.4                            The Sponsor covenants with the Guarantor that if it receives a First Call Option Notice or a Second Call Option Notice, as the case may be, from the Guarantor it shall take all reasonable steps to ensure that such First Call Option Notice or Second Call Option Notice, as the case may be, is securely stored outside the United Kingdom and provide information on request of the Guarantor as to its whereabouts and safekeeping.
 
5.5                            The Guarantor covenants with the Sponsor that if it receives a Put Option Notice from the Sponsor it shall take all reasonable steps to ensure that such Put Option Notice is securely stored outside the United Kingdom and provide information on request of the Sponsor as to its whereabouts and safekeeping.
 
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6.                                  POWER OF ATTORNEY
 
6.1                            The Guarantor hereby by way of security irrevocably appoints the Sponsor to be its true and lawful attorney (with full power to appoint substitute attorneys and to revoke the appointment thereof at any time) and in its name, on its behalf and as its act and deed to execute, deliver and perfect all documents (including, without limitation, the documents referred to in Clause 5.2) and do all things that the Sponsor may consider to be requisite for (a) carrying out any obligation imposed on the Guarantor under this Agreement in connection with the purchase of the Residual Partnership Interest contemplated herein or (b) exercising any of the rights conferred on the Sponsor by this Agreement or by law. The Guarantor hereby ratifies and confirms and agrees to ratify and confirm all things done and all documents executed by the Sponsor in the exercise of this power of attorney provided always that this power of attorney shall only be exercisable by the Sponsor if the Guarantor shall have failed to perform its obligations hereunder in a timely manner.
 
6.2                            The Sponsor hereby by way of security irrevocably appoints the Guarantor to be its true and lawful attorney (with full power to appoint substitute attorneys and to revoke the appointment thereof at any time) and in its name, on its behalf and as its act and deed to execute, deliver and perfect all documents and do all things that the Guarantor may consider to be requisite for (a) carrying out any obligation imposed on the Sponsor under this Agreement in connection with the purchase of the Residual Partnership Interest and/or the Option Interest contemplated herein or (b) exercising any of the rights conferred on the Guarantor by this Agreement or by law. The Sponsor hereby ratifies and confirms and agrees to ratify and confirm all things done and all documents executed by the Guarantor in the exercise of this power of attorney provided always that this power of attorney shall only be exercisable by the Guarantor if the Sponsor shall have failed to perform its obligations hereunder in a timely manner.
 
7.                                  REPRESENTATIONS AND WARRANTIES
 
The representations and warranties of each party hereto set out in Clause 5 of the Secondary Put Agreement shall apply ( mutatis mutandis ) to this Agreement as though the same were set out herein. Each party hereto acknowledges that the other party hereto has entered into this Agreement in full reliance on such representations and warranties being true and accurate as at the date hereof.
 
8.                                  INDEMNITY
 
8.1                            In consideration of the payment of ten pounds (£10) by the Sponsor to the Guarantor (receipt of which the Guarantor hereby acknowledges) and for other good and valuable consideration the Guarantor irrevocably and unconditionally agrees to indemnify the Sponsor on demand against any loss suffered by it if any obligation of the Guarantor hereunder is or becomes unenforceable, invalid or illegal.
 
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8.2                            The obligations of the Guarantor under this Clause 8 will not be affected by any matter which, without this provision, would affect any of its obligations under this Clause 8 including, but without limitation, the following:
 
8.2.1                             any change in or amendment, compromise or release of, this Agreement or any other document or security; and
 
8.2.2                             any adjustment, discharge, inability to prove or other similar circumstance affecting any obligation of the Guarantor under this Agreement because of any insolvency proceedings or any applicable law, treaty, court order or other regulation binding upon the Guarantor. Each of the Guarantor’s obligations will for the purposes of this Clause 8 be read as if any such circumstance had not arisen.
 
9.                                  PAYMENT AND TAXES
 
9.1                            All payments to be made by the Guarantor under this Agreement shall be made in full, without any set-off or counterclaim whatsoever and free and clear of all deductions or withholdings whatsoever save only as may be required by law for value on the day on which payment is due.
 
9.2                            If at any time the Guarantor is required to make any deduction or withholding in respect of Taxes from any payment due under this Agreement, it shall pay the full amount required to be deducted or withheld to the relevant taxation or other authority within the time allowed for such payment under applicable law and the sum due from the Guarantor in respect of such payment shall be increased to the extent necessary to ensure that, after the making of such deduction or withholding, the Sponsor receives on the due date for such payment (and retains, free from any liability in respect of such deduction or withholding), a net sum equal to the sum which it would have received had no such deduction or withholding been required to be made and the Guarantor and shall indemnify the Sponsor against any losses or costs incurred by it by reason of any failure of the Guarantor to make any such deduction or withholding or by reason of any increased payment not being made on the due date for such payment. The Guarantor shall promptly deliver to the Sponsor any receipts, certificates or other proof evidencing the amounts (if any) paid or payable in respect of any deduction or withholding as aforesaid.
 
9.3                            If, following any such deduction or withholding as is referred to in Clause 8.2 from any payment by the Guarantor, the Sponsor shall receive or be granted a credit against or remission for any Taxes payable by it, the Sponsor shall, subject to the Guarantor having made any increased payment in accordance with Clause 8.2 and to the extent that the Sponsor can do so without prejudicing the retention of the amount of such credit or remission and without prejudice to the right of the Sponsor to obtain any other relief or allowance which may be available to it, reimburse the Guarantor with such amount as the Sponsor shall acting in its absolute discretion certify to be the proportion of such credit or remission as will leave the Sponsor (after such reimbursement) in no worse position than it would have been in had there been no such deduction or withholding from the payment by the Guarantor as aforesaid. Such
 
8

 
reimbursement shall be made forthwith upon the Sponsor certifying that the amount of such credit or remission has been received by it. Nothing contained in this Agreement shall oblige the Sponsor to rearrange its tax affairs or to disclose any information regarding its tax affairs and computations. Without prejudice to the generality of the foregoing, the Guarantor shall not, by virtue of this Clause 8.3 be entitled to enquire about the Sponsor’s tax affairs.
 
9.4                            Without prejudice to the foregoing provisions of this Clause 8, if the Sponsor is required to make any payment on account of Tax (not being a Tax imposed on and calculated by reference to the net income or a capital gain of the Sponsor by the jurisdiction in which it is incorporated other than any such Tax (including in respect of any balancing charge) imposed as a consequence of the exercise of the Put Option, the First Call Option or the Second Call Option (after taking into account the acquisition by the Sponsor of the Option Interest or the Residual Partnership Interest as the case may be) or otherwise on or in relation to any sum received or receivable or deemed to be received or receivable hereunder by the Sponsor (including any sum received or receivable or deemed to be received or receivable under this Clause 8) or any liability in respect of any such payment is asserted, imposed, levied or assessed against the Sponsor, the Guarantor shall, upon demand of the Sponsor, promptly indemnify the Sponsor against such payment or liability, together with any interest, penalties, costs and expenses payable or incurred in connection therewith (except to the extent that such interest penalties, costs or expenses have been incurred by the Sponsor’s gross negligence or wilful misconduct) by making to the Sponsor such payment as is necessary to ensure that the Sponsor receives a sum net of such Tax equal to the sum which it would have received had no such Tax been imposed.
 
9.5                            If the Guarantor is required to indemnify the Sponsor pursuant to Clause 8.5 or a Tax arises in respect of which the Guarantor has an obligation under this Clause 8, then, without in any way limiting, reducing or otherwise qualifying any rights or obligations of the Sponsor, the Sponsor shall promptly upon becoming aware of the same notify the Guarantor thereof and, in consultation in good faith with the Guarantor, for a period of up to sixty (60) days from the date of such notification, the Sponsor shall take such steps at the request and expense of the Guarantor as may be open to it to mitigate the effects of such circumstances on the Guarantor including, without limiting the generality of the foregoing by using all reasonable endeavours to transfer its rights and obligations under this Agreement to another office or to a subsidiary or an affiliate of the Sponsor or to another institution, in each case not affected by the relevant circumstances  provided that the Sponsor shall not be under any obligation to take or continue to take any such action or other steps if the Guarantor is in breach of this Agreement or if in its reasonable opinion, acting in good faith, to do so would have a material adverse effect on its business, operations or financial condition or the financial basis under which, inter alia , this Agreement has been entered into or would entail any cost or expense to the Sponsor (unless, in the case of any adverse effect on such financial basis, or cost or expense, the Sponsor shall have been indemnified or otherwise secured to its satisfaction).
 
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9.6
 
9.6.1                             If a claim shall be made by the Sponsor for any Tax for which the Guarantor may be required to indemnify the Sponsor pursuant to Clause 8.2 or Clause 8.5, and under applicable law of the taxing jurisdiction the Guarantor is allowed to contest directly such Tax in its own name, then without prejudice to the obligation of the Guarantor to pay any sum due to the Sponsor pursuant to this Clause 8 on its due date, the Guarantor shall be permitted, at is expense and in its own name, and with the prior written consent of the Sponsor, to contest the imposition of such claim.
 
9.6.2                             If the Guarantor is prevented by applicable law from validly contesting such claim in its own name or if it is necessary for the Sponsor to join in or assist in the contesting by the Guarantor of any claim, upon request of the Guarantor supported by an opinion of counsel selected by the Guarantor reasonably acceptable to the Sponsor confirming that there is a reasonable basis for contesting the validity, applicability or amount of such Taxes, the Sponsor shall, subject to sub-clause 8.7.3, in good faith, at the Guarantor’s expense, contest or assist in contesting the imposition of such Tax. After considering any views offered by the Sponsor and the Sponsor’s counsel concerning the forum in which a claim is most likely to be favourably resolved, the Guarantor may in its sole discretion select the forum for such consent and determine whether any such contest shall be by (a) resisting payment of such Tax, (b) paying such Tax under protest, (c) paying such Tax and seeking a refund or other repayment thereof or (d) seeking a reduction in the amount of such Tax.
 
9.6.3                             In no event shall the Sponsor be required to contest nor shall the Sponsor be required to join in or assist in contesting the imposition of any such Tax:
 
(a)                      if the Sponsor reasonably believes that to do so would be prejudicial to its interest;
 
(b)                     unless the Guarantor shall have agreed to pay the Sponsor on demand, and indemnify the Sponsor from, all reasonable costs and expenses that the Sponsor incurs in contesting or assisting in contesting such claim or arising out of or relating to such contest or assistance (including, but not limited to, all reasonable out-of-pocket costs, expenses, losses, reasonable legal and accounting fees, disbursements, penalties and interest); and
 
(c)                      if such contest shall be conducted in a manner requiring the prior payment of the claim by the Sponsor or, if the Guarantor shall request the Sponsor to make payment thereof pursuant to sub-clauses (b) or (c) of Clause 8.7.2 unless the Guarantor shall have advanced to the Sponsor sufficient funds (on an interest free basis) (and if such payment results in Taxable income to the Sponsor in respect of which the Sponsor does not
 
10

 
receive a corresponding deduction, on an after tax basis) to make such payment.
 
10.                            TAX NOTIFICATION
 
If, at any time, the Guarantor is required by law to make any deduction or withholding from any sum payable by it hereunder (or if thereafter there is any change in the rates at which or the manner in which such deductions or withholdings are calculated), the Guarantor (as the case may be) shall promptly notify the Sponsor.
 
11.                            SPONSOR’S COVENANTS
 
Subject to the proviso below, the Sponsor hereby covenants:
 
11.1.1                       to take all steps reasonably required by the Guarantor in writing, at no cost to the Guarantor, to preserve or protect its interest in the Residual Partnership Interest and the Option Interest;
 
11.1.2                       to perform its obligations under the Put Option Agreement and the Limited Partnership Agreement;
 
11.1.3                       to enforce and exercise its rights and remedies under the Put Option Agreement and the Limited Partnership as reasonably required by the Guarantor;
 
11.1.4                       to notify the Guarantor of any notices, demands, requests or communications received by the Sponsor under or pursuant to the Put Option Agreement;
 
11.1.5                       to involve the Guarantor (to the extent it is entitled to do so in accordance with the terms of the Put Option Agreement) in all consultations and discussions between the Sponsor and Investor that are undertaken by way of exercise of the Sponsor’s consultation rights under the terms of the Put Option Agreement;
 
11.1.6                       not to give any consent, waiver or approval under the Put Option Agreement or take any other action in writing in connection with the Residual Partnership Interest or the Option Interest which in each case would (to the Sponsor’s actual knowledge) materially adversely affect their value
 
PROVIDED that:
 
(1)                     the above covenants, obligations and restrictions shall only apply if and to the extent that such covenants, obligations and restrictions are necessary or reasonably required to the Guarantor’s enjoyment and exercise of its rights, powers, remedies and benefits hereunder and under the Secondary Put Agreement or relevant to the amount or timing of any payment or other obligation or liability of the Guarantor hereunder or under the Secondary Put Agreement to protect and preserve the enjoyment of the interest of the Guarantor
 
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in the Residual Partnership Interest and Option Interest and the rights and benefits intended to be conferred thereby;
 
(2)                     the Sponsor is indemnified and secured (in manner and form reasonably acceptable to the Sponsor) for all costs, liabilities and losses that the Sponsor may incur as a result of taking any such steps as the Guarantor may require pursuant to Clauses 11.1.1; and
 
(3)                     the Sponsor shall not be required to take any action or step pursuant to this Clause 11 if doing so shall (or is reasonably likely to) (i) cause the Sponsor to be in breach of any of its obligations under any of the Transaction Documents; or (ii) be unlawful.
 
12.                            INCORPORATION OF TERMS
 
The provisions of Clause 11 ( Assignment ), Clause 12 ( Notices ), Clause 13 ( Counterparts ) and Clause 14 ( Law and Jurisdiction ) of the Secondary Put Agreement shall be incorporated into this Agreement as if set out in full herein and as if references therein to “ this Agreement ” are references to this Agreement.
 
13.                            CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999
 
A person who is not a party to this Agreement has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this Agreement.
 
14.                            PROCESS AGENT
 
The Guarantor agrees that the process by which any proceedings are begun under this Agreement may be served on it by being delivered in connection with any proceedings in England, to SH Process Agents Limited, of One, St Paul’s Churchyard, London, EC4M 8SH ref 41-26417. If this appointment ceases to be effective the Guarantor shall immediately appoint a further person in England to accept service of process on its behalf in England. Nothing contained herein shall affect the right to serve process in any other manner permitted by law.
 
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IN WITNESS of which this Agreement has been duly executed on the day and year first before written.

Guarantor:	
 	
DANAOS HOLDINGS LIMITED	
 	
By: /s/ Arlene Payne, Attorney-in-fact	

 	
Sponsor:	
 	
ALLCO FINANCE (UK) LIMITED	
 	
By: [Illegible]	
 
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SCHEDULE 1                      
FORM OF PUT OPTION NOTICE
 
Danaos Holdings Limited
Akti Miaouli 57
185 36 Piraeus
Greece
Attention:      Legal Department
 
Dear Sirs
 
The Ocean Container (No.2) Limited Partnership (the “Partnership”)
 
We refer to the secondary put and call agreement relating to the Residual Partnership Interest between ourselves and yourself on [                      ] (the “ Secondary Put and Call Agreement ”). Terms defined in the Secondary Put and Call Agreement (except where defined herein) shall have the same respective meanings herein.
 
This Notice is the Put Option Notice for the purposes of the Secondary Put and Call Agreement. We hereby exercise our option contained in Clause 2.1 of the Secondary Put and Call Agreement, being the Put Option in respect of [ ]% of the Residual Partnership Interest and hereby notify you that the Put Option Date shall be [ ] and the Residual Interest Put Option Price shall be [ ].
 
This Notice shall be governed by and construed in accordance with English law. Please acknowledge safe receipt of this Notice.

Yours faithfully	

For and on behalf of	
ALLCO FINANCE (UK) LIMITED	
 
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We acknowledge safe receipt of this Notice of which this is a copy.

 	
 	 	
For and on behalf of	
DANAOS HOLDINGS LIMITED	
 
15

 
SCHEDULE 2                      
FORM OF FIRST CALL OPTION NOTICE
 
Allco Finance (UK) Limited
c/o Allco (Leasing) Europe Ltd.
Lord Coutanche House
66-68 Esplanade
St. Helier
Jersey JE4 8SZ

Attention: The Directors
 
Dear Sirs
 
The Ocean Container (No.2) Limited Partnership (the “Partnership”)
 
We refer to the secondary put and call agreement relating to the Residual Partnership Interest between ourselves and yourself on [                     ] (the “ Secondary Put and Call Agreement ”). Terms defined in the Secondary Put and Call Agreement (except where defined herein) shall have the same respective meanings herein.
 
This Notice is the First Call Option Notice for the purposes of the Secondary Put and Call Agreement. We hereby exercise our option contained in Clause 3.1 of the Secondary Put and Call Agreement, being the First Call Option in respect of [ ]% of the Residual Partnership Interest and hereby notify you that the First Call Option Date shall be [ ] and the First Call Option Price shall be [ ].
 
This Notice shall be governed by and construed in accordance with English law. Please acknowledge safe receipt of this Notice.

Yours faithfully	

For and on behalf of	
DANAOS HOLDINGS LIMITED	
 
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We acknowledge safe receipt of this Notice of which this is a copy.

 	
 	 	
For and on behalf of	
ALLCO FINANCE (UK) LIMITED	
 
17

 
SCHEDULE 3                      
FORM OF SECOND CALL OPTION NOTICE
 
Allco Finance (UK) Limited
c/o Allco (Leasing) Europe Ltd.
Lord Coutanche House
66-68 Esplanade
St. Helier
Jersey JE4 8SZ
 
Attention: The Directors
 
Dear Sirs
 
The Ocean Container (No.2) Limited Partnership (the “Partnership”)
 
We refer to the secondary put and call agreement relating to our interest in the Partnership entered into between ourselves and yourself on [            ] (the “ Secondary Put and Call Agreement ”). Terms defined in the Secondary Put and Call Agreement (except where defined herein) shall have the same respective meanings herein.
 
This Notice is the Second Call Option Notice for the purposes of the Secondary Put and Call Option Agreement. We hereby exercise our option contained in Clause 4.1 of the Secondary Put and Call Agreement, being the Second Call Option and hereby notify you that:
 
1.                                        the Second Call Option Date shall be [ ]; and
 
2.                                        the Second Call Option Price is [ ] pounds (£[ ]).
 
This Notice shall be governed by and construed in accordance with English law. Please acknowledge safe receipt of this Notice.

Yours faithfully	

 	 	
For and on behalf of	
DANAOS HOLDINGS LIMITED	
 
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We acknowledge safe receipt of this Notice of which this is a copy.

 	
 	 	
For and on behalf of	
ALLCO FINANCE (UK) LIMITED	
 
19

 
Exhibit 10.15

	 	LIMITED LIABILITY PARTNERSHIP	

 
ALLCO FINANCE (UK) LIMITED
 
and
 
DANAOS HOLDINGS LIMITED

 
SECONDARY PUT AND CALL AGREEMENT

 

 
CONTENTS

Clause	 	Page	
 	 	 	
1.	Definitions	1	
 	 	 	
2.	The Put Option	4	
 	 	 	
3.	The First Call Option	5	
 	 	 	
4.	The Second Call Option	5	
 	 	 	
5.	Exercise Of Option	6	
 	 	 	
6.	Power Of Attorney	7	
 	 	 	
7.	Representations And Warranties	7	
 	 	 	
8.	INDEMNITY	7	
 	 	 	
9.	Payment And Taxes	8	
 	 	 	
10.	Tax Notification	11	
 	 	 	
11.	Sponsor’s Covenants	11	
 	 	 	
12.	Incorporation Of Terms	12	
 	 	 	
13.	Contracts (Rights Of Third Parties) Act 1999	12	
 	 	 	
14.	Process Agent	12	
 	 	 	
SCHEDULE 1	FORM OF PUT OPTION NOTICE	14	
 	 	￠	
SCHEDULE 2	FORM OF FIRST CALL OPTION NOTICE	16	
 	 	￠	
SCHEDULE 3	FORM OF SECOND CALL OPTION NOTICE	18	

 
THIS AGREEMENT is made the 11 th day of March 2004
 
BETWEEN :
 
(1)                             ALLCO FINANCE (UK) LIMITED , a limited company registered in England, whose registered office is at 5th Floor, 40 Queen Street, London EC4R 1DD (the “ Sponsor ”); and
 
(2)                             DANAOS HOLDINGS LIMITED , a company incorporated under the laws of The Republic of Liberia, whose registered office is at 80 Broad Street, Monrovia, The Republic of Liberia and whose principal place of business is at Akti Miaouli 57, 185 36 Piraeus, Greece (the “ Guarantor ”).
 
WHEREAS :
 
(A)                         The Partners have formed the Partnership as a limited partnership by a partnership agreement of even date herewith (the “ Partnership Agreement ”) between Allco Finance Limited as general partner (the “ General Partner ”) and Lloyds TSB Equipment Leasing (No.6) Limited (the “ Investor ”) and the Sponsor as limited partners to make Capital Contributions thereto so that the Partnership may (a) provide the Owner with the funds to purchase the Vessel and (b) conduct Partnership Business.
 
(B)                           The Sponsor has granted to the Investor various put options in respect of the Investor’s interest in the Partnership under the Put Option Agreement.
 
(C)                           The Guarantor has agreed to grant to the Sponsor certain put options in respect of the Sponsor’s Partnership Interest, and in return for which the Sponsor has agreed to consult with the Guarantor prior to exercising any of its rights as a limited partner with a view to protecting the interests of the Guarantor as a potential future partner in the Partnership.
 
(D)                          The Sponsor in return has agreed to grant the Guarantor certain call options in respect of the Sponsor’s Partnership Interest.
 
IT IS NOW AGREED as follows:
 
1.                                  DEFINITIONS
 
1.1                            Except as otherwise defined in this Agreement, all terms defined in the Secondary Put Agreement shall have the same respective meanings when used in this Agreement.
 
1.2                            In this Agreement, unless the context otherwise requires, the following expressions shall have the following meanings:
 
“ Act ” means the Limited Partnerships Act 1907.
 
“ Business Day ” means a day other than a Saturday or Sunday or a public holiday, on which the major retail banks in London, and Athens are open for non-automated customer services.
 
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“ Capital Contribution ” means, in relation to a Partner, any contribution that such Partner makes to the capital of the Partnership pursuant to Clause 4 of the Partnership Agreement.
 
“ Early Put Option ” has the meaning ascribed to that expression in the Put Option Agreement.
 
“ Encumbrance ” means any right, title or interest of any person and shall, without limiting the generality of the foregoing, include any retention of title (for security purposes), right of possession or detention, mortgage, charge, lien, pledge, encumbrance, lease or other bailment, demise charter of the Vessel, statutory right in rem, hypothecation, attachment, levy, claim or set-off (other than any right of set-off arising in favour of a banker by operation of law which has not been exercised) or any other security interest whatsoever, howsoever and wheresoever created or arising.
 
“ First Call Option ” has the meaning ascribed to that expression in Clause 3.1.
 
“ First Call Option Date ” means any Business Day specified in the First Call Option Notice.
 
“ First Call Option Notice ” means a notice substantially in the form set out in Schedule 2.
 
“ First Call Option Price ” means an amount of fifty thousand pounds (£50,000) together with the amount of any Capital Contribution actually paid by the Sponsor and representing its Residual Partnership Interest except in the case of a Sponsor Insolvency Event, in which case the First Call Option Price will be such amount as was paid by the Sponsor for its Residual Partnership Interest.
 
“ Option Date ” means any or all of the First Call Option Date, the Second Call Option Date or the Put Option Date as the context may require.
 
“ Option Interest ” has the meaning ascribed to that expression in the Secondary Put Agreement.
 
“ Option Price ” means any or all of the First Call Option Price, the Second Call Option Price or the Residual Interest Put Option Price as the context may require.
 
“ Owner ” means Ocean Container (No.1) Limited whose registered office is at Diagoras House, 16P. Catelaris Street, 7 th Floor, 1097 Nicosia, Republic of Cyprus and whose principal place of business is at 5 th Floor, 40 Queen Street, London EC4R 1DD.
 
“ Partners ” means each of the General Partner, the Sponsor and the Investor and their respective and any subsequent successors, transferees and assigns and the expression “ Partner ” shall be construed accordingly.
 
“ Put Option ” has the meaning ascribed to that expression in Clause 2.1.
 
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“ Put Option Agreement ” means the put option agreement entered or to be entered into between the Investor and the Sponsor under which the Investor may, in certain circumstances, require the Sponsor to purchase (on a limited recourse basis) its interest in the Partnership.
 
“ Put Option Date ” means any Business Day specified in the Put Option Notice.
 
“ Put Option Notice ” means a notice substantially in the form set out in Schedule 1.
 
“ Residual Interest Put Option Price ” means an amount of one thousand pounds (£1000) together with the amount of any Capital Contribution actually paid by the Sponsor and representing its Residual Partnership Interest.
 
“ Residual Partnership Interest ” means the Sponsor’s interest in the Partnership other than the Option Interest.
 
“ Secondary Put Agreement ” means the secondary put agreement entered or to be entered into between the Sponsor and the Guarantor under which the Guarantor has granted certain put option rights to the Sponsor in respect of the whole of the Sponsor’s interest in the Partnership.
 
“ Second Call Option ” has the meaning ascribed to that expression in Clause 4.1.
 
“ Second Call Option Date : means:
 
(a)                                       any Business Day on or after 14 April 2011;
 
(b)                                      any Business Day on or after the date on which a default by the Sponsor under this Agreement or a Sponsor Insolvency Event has occurred and is continuing; or
 
(c)                                       any Business Day following the exercise of the Early Put Option by the Investor.
 
“ Second Call Option Notice ” means a notice substantially in the form set out in Schedule 3.
 
“ Second Call Option Price ” means an amount equal to the Put Option Price as defined in the Secondary Put Agreement plus ten thousand pounds (£10,000).
 
“ Sponsor Insolvency Event ” means any of the following:
 
(a)                                       the Sponsor is unable or admits inability to pay its debts as they fall due or the Sponsor becomes insolvent or stops or suspends making payments (whether of principal or interest) with respect or all or any class of its debts or announces an intention to do so; or
 
(b)                                      any corporate action, legal proceedings or other procedure is presented or other step is taken for the purpose of winding up the Sponsor (and which petition or other step is not withdrawn within 14 days of such presentation or, as the case may be, such step being taken) or an order is made or resolution
 
3

 
passed for the winding up of the Sponsor or a notice is issued convening a meeting for the purpose of passing any such resolution other than in the context of a solvent reorganisation which has the prior written approval of the Guarantor; or
 
(c)                                       any petition is presented, notice given or other step is taken for the purpose of the appointment of an administrator of the Sponsor or the Guarantor reasonably believes that any such petition or other step is imminent or an administration order is made in relation to the Sponsor; or
 
(d)                                      any administrative or other receiver is appointed of the Sponsor or any part of its assets and/or undertaking or any other steps are taken to enforce any Encumbrance over all or any part of the assets of the Sponsor; or
 
(e)                                       there occurs, in relation to the Sponsor, in any country or territory in which it carries on business or to the jurisdiction of whose courts any part of its assets are subject, any event which, in the reasonable opinion of the Guarantor, appears in that country or territory to correspond with, or have an effect equivalent or similar to, any of those mentioned in (a) to (d) above or the Sponsor otherwise becomes subject, in any such country or territory, to the operation of any law relating to insolvency, bankruptcy or liquidation (unless, in relation to any litigation involving the Sponsor can demonstrate to the satisfaction of the Guarantor that any proceedings in respect of such litigation are frivolous, vexatious or an abuse of the process of the court or relate to a claim to which the Sponsor has a good defence and which is being contested in good faith by the Sponsor).
 
“ Tax ” means all present and future taxes, charges, imposts, duties, levies of any kind whatsoever (whether levied by deduction, withholding or otherwise), or any amount payable on account of or as security for any of the foregoing, payable at the instance of or imposed by any statutory, governmental, international, state, federal, provincial, local or municipal authority, agency, body or department whatsoever or any central bank, monetary agency or European Union institution, in each case whether in the United Kingdom or elsewhere, together with any penalties, additions, fines, surcharges or interest relating thereto and “ Taxes ”, “ Taxation ” and cognate expressions shall be construed accordingly.
 
2.                                  THE PUT OPTION
 
2.1                            In consideration of the payment of ten pounds (£10) by the Sponsor to the Guarantor and for other good and valuable consideration (the receipt and adequacy of which the Guarantor hereby acknowledges), the Guarantor hereby grants to the Sponsor the option (i) at any time to require the Guarantor to purchase from the Sponsor up to fifty per cent. (50%) of the Residual Partnership Interest and (ii) at any time after the Put Option Date (as defined in the Secondary Put Agreement) to require the Guarantor to purchase from the Sponsor the Residual Partnership Interest in accordance with the provisions of this Agreement (the “ Put Option ”).
 
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2.2                            The Sponsor shall be entitled, but not obliged, at any time to exercise the Put Option at the Residual Interest Put Option Price by serving a Put Option Notice on the Guarantor specifying the Put Option Date and upon the service of such Put Option Notice, the Guarantor shall be obliged to purchase and the Sponsor shall be obliged to sell the Residual Partnership Interest on the Put Option Date for the Residual Partnership Interest Put Option Price and otherwise in accordance with the provisions of Clause 5 provided however that the Guarantor may nominate a third party to take the transfer in its place.
 
3.                                  THE FIRST CALL OPTION
 
3.1                            In consideration of the payment of ten pounds (£10) by the Guarantor to the Sponsor and for other good and valuable consideration (the receipt and adequacy of which the Sponsor hereby acknowledges), the Sponsor hereby grants the Guarantor the option (i) at any time to require the Sponsor to sell and transfer to the Guarantor up to fifty per cent. (50%) of the Residual Partnership Interest and (ii) at any time after the Put Option Date (as defined in the Secondary Put Agreement) to require the Sponsor to sell and transfer to the Guarantor the Residual Partnership Interest in accordance with the provisions of this Agreement  (the “ First Call Option ”).
 
3.2                            The Guarantor shall be entitled, but not obliged, at any time to exercise the First Call Option by serving a First Call Option Notice on the Sponsor specifying the relevant First Call Option Date and upon service of such First Call Option Notice, the Sponsor shall be obliged to sell to the Guarantor the Residual Partnership Interest on the First Call Option Date for the First Call Option Price and otherwise in accordance with the provisions of Clause 5 provided however that the Guarantor may nominate a third party to take the transfer in its place.
 
4.                                  THE SECOND CALL OPTION
 
4.1                            In consideration of the payment of ten pounds (£10) by the Guarantor to the Sponsor and for other good and valuable consideration (the receipt and adequacy of which the Sponsor hereby acknowledges), the Sponsor hereby grants the Guarantor the option to require the Sponsor to sell and transfer to the Guarantor the Option Interest in accordance with the provisions of this Agreement on any Second Call Option Date (the “ Second Call Option ”).
 
4.2                            The Guarantor shall be entitled, but not obliged, to exercise the Second Call Option immediately after service of notice by the Investor pursuant to the Put Option Agreement by serving a Second Call Option Notice on the Sponsor specifying the relevant Second Call Option Date and the Second Call Option Price and upon service of such Second Call Option Notice, the Sponsor shall be obliged to sell the Option Interest to the Guarantor on the Second Call Option Date for the Second Call Option Price and otherwise in accordance with the provisions of Clause 5 provided however that the Guarantor may nominate a third party to take the transfer in its place.
 
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5.                                  EXERCISE OF OPTION
 
5.1                            Each of the Put Option and the First Call Option may be exercised in respect of any portion of the Residual Partnership Interest at the relevant Option Price which shall be proportionally reduced. If a Put Option or a First Call Option is exercised in respect of a portion of the Residual Partnership Interest, the Residual Partnership Interest shall be reduced by the portion in respect of which a Put Option or a First Call Option, as the case may be, has been exercised, and each of the Put Option and the First Call Option shall continue to be available in respect of the Residual Partnership Interest so reduced.
 
5.2                            If the Sponsor exercises a Put Option, or if the Guarantor exercises a First Call Option or the Second Call Option, then upon the Guarantor paying the relevant Option Price on the relevant Option Date in accordance with the terms of Clause 2.2 or Clause 3.2 and Clause 5.1 or Clause 4.2, as the case may be, the sale and purchase of the relevant portion of the Residual Partnership Interest or the Option Interest, as the case may be, shall be concluded by the Guarantor procuring:
 
5.2.1                             the filing by the General Partner of a duly completed LP6 detailing the transfer of the relevant portion of the Sponsor’s interest in the Partnership to the Guarantor in accordance with Section 9(1)(d) of the Act;
 
5.2.2                             the submission of a notice of the transfer by the General Partner for publication in the London Gazette pursuant to Section 10 of the Act or such other publication referred to in Clause 15.3 of the Partnership Agreement; and
 
5.2.3                             the execution by the Sponsor, the General Partner, the Guarantor and any other members of the Partnership at the relevant time of the deed of accession in the form of the schedule to the Partnership Agreement.
 
5.3                            If after the service of the Second Call Option Notice but before the Second Call Option Date the Sponsor serves a put option notice pursuant to Clause 2.2 of the Secondary Put Agreement, then such put option notice shall supersede the Second Call Option Notice.
 
5.4                            The Sponsor covenants with the Guarantor that if it receives a First Call Option Notice or a Second Call Option Notice, as the case may be, from the Guarantor it shall take all reasonable steps to ensure that such First Call Option Notice or Second Call Option Notice, as the case may be, is securely stored outside the United Kingdom and provide information on request of the Guarantor as to its whereabouts and safekeeping.
 
5.5                            The Guarantor covenants with the Sponsor that if it receives a Put Option Notice from the Sponsor it shall take all reasonable steps to ensure that such Put Option Notice is securely stored outside the United Kingdom and provide information on request of the Sponsor as to its whereabouts and safekeeping.
 
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6.                                  POWER OF ATTORNEY
 
6.1                            The Guarantor hereby by way of security irrevocably appoints the Sponsor to be its true and lawful attorney (with full power to appoint substitute attorneys and to revoke the appointment thereof at any time) and in its name, on its behalf and as its act and deed to execute, deliver and perfect all documents (including, without limitation, the documents referred to in Clause 5.2) and do all things that the Sponsor may consider to be requisite for (a) carrying out any obligation imposed on the Guarantor under this Agreement in connection with the purchase of the Residual Partnership Interest contemplated herein or (b) exercising any of the rights conferred on the Sponsor by this Agreement or by law. The Guarantor hereby ratifies and confirms and agrees to ratify and confirm all things done and all documents executed by the Sponsor in the exercise of this power of attorney provided always that this power of attorney shall only be exercisable by the Sponsor if the Guarantor shall have failed to perform its obligations hereunder in a timely manner.
 
6.2                            The Sponsor hereby by way of security irrevocably appoints the Guarantor to be its true and lawful attorney (with full power to appoint substitute attorneys and to revoke the appointment thereof at any time) and in its name, on its behalf and as its act and deed to execute, deliver and perfect all documents and do all things that the Guarantor may consider to be requisite for (a) carrying out any obligation imposed on the Sponsor under this Agreement in connection with the purchase of the Residual Partnership Interest and/or the Option Interest contemplated herein or (b) exercising any of the rights conferred on the Guarantor by this Agreement or by law. The Sponsor hereby ratifies and confirms and agrees to ratify and confirm all things done and all documents executed by the Guarantor in the exercise of this power of attorney provided always that this power of attorney shall only be exercisable by the Guarantor if the Sponsor shall have failed to perform its obligations hereunder in a timely manner.
 
7.                                  REPRESENTATIONS AND WARRANTIES
 
The representations and warranties of each party hereto set out in Clause 5 of the Secondary Put Agreement shall apply ( mutatis mutandis ) to this Agreement as though the same were set out herein. Each party hereto acknowledges that the other party hereto has entered into this Agreement in full reliance on such representations and warranties being true and accurate as at the date hereof.
 
8.                                  INDEMNITY
 
8.1                            In consideration of the payment of ten pounds (£10) by the Sponsor to the Guarantor (receipt of which the Guarantor hereby acknowledges) and for other good and valuable consideration the Guarantor irrevocably and unconditionally agrees to indemnify the Sponsor on demand against any loss suffered by it if any obligation of the Guarantor hereunder is or becomes unenforceable, invalid or illegal.
 
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8.2                            The obligations of the Guarantor under this Clause 8 will not be affected by any matter which, without this provision, would affect any of its obligations under this Clause 8 including, but without limitation, the following:
 
8.2.1                             any change in or amendment, compromise or release of, this Agreement or any other document or security; and
 
8.2.2                             any adjustment, discharge, inability to prove or other similar circumstance affecting any obligation of the Guarantor under this Agreement because of any insolvency proceedings or any applicable law, treaty, court order or other regulation binding upon the Guarantor. Each of the Guarantor’s obligations will for the purposes of this Clause 8 be read as if any such circumstance had not arisen.
 
9.                                  PAYMENT AND TAXES
 
9.1                            All payments to be made by the Guarantor under this Agreement shall be made in full, without any set-off or counterclaim whatsoever and free and clear of all deductions or withholdings whatsoever save only as may be required by law for value on the day on which payment is due.
 
9.2                            If at any time the Guarantor is required to make any deduction or withholding in respect of Taxes from any payment due under this Agreement, it shall pay the full amount required to be deducted or withheld to the relevant taxation or other authority within the time allowed for such payment under applicable law and the sum due from the Guarantor in respect of such payment shall be increased to the extent necessary to ensure that, after the making of such deduction or withholding, the Sponsor receives on the due date for such payment (and retains, free from any liability in respect of such deduction or withholding), a net sum equal to the sum which it would have received had no such deduction or withholding been required to be made and the Guarantor and shall indemnify the Sponsor against any losses or costs incurred by it by reason of any failure of the Guarantor to make any such deduction or withholding or by reason of any increased payment not being made on the due date for such payment. The Guarantor shall promptly deliver to the Sponsor any receipts, certificates or other proof evidencing the amounts (if any) paid or payable in respect of any deduction or withholding as aforesaid.
 
9.3                            If, following any such deduction or withholding as is referred to in Clause 8.2 from any payment by the Guarantor, the Sponsor shall receive or be granted a credit against or remission for any Taxes payable by it, the Sponsor shall, subject to the Guarantor having made any increased payment in accordance with Clause 8.2 and to the extent that the Sponsor can do so without prejudicing the retention of the amount of such credit or remission and without prejudice to the right of the Sponsor to obtain any other relief or allowance which may be available to it, reimburse the Guarantor with such amount as the Sponsor shall acting in its absolute discretion certify to be the proportion of such credit or remission as will leave the Sponsor (after such reimbursement) in no worse position than it would have been in had there been no such deduction or withholding from the payment by the Guarantor as aforesaid. Such
 
8

 
reimbursement shall be made forthwith upon the Sponsor certifying that the amount of such credit or remission has been received by it. Nothing contained in this Agreement shall oblige the Sponsor to rearrange its tax affairs or to disclose any information regarding its tax affairs and computations. Without prejudice to the generality of the foregoing, the Guarantor shall not, by virtue of this Clause 8.3 be entitled to enquire about the Sponsor’s tax affairs.
 
9.4                            Without prejudice to the foregoing provisions of this Clause 8, if the Sponsor is required to make any payment on account of Tax (not being a Tax imposed on and calculated by reference to the net income or a capital gain of the Sponsor by the jurisdiction in which it is incorporated other than any such Tax (including in respect of any balancing charge) imposed as a consequence of the exercise of the Put Option, the First Call Option or the Second Call Option (after taking into account the acquisition by the Sponsor of the Option Interest or the Residual Partnership Interest as the case may be) or otherwise on or in relation to any sum received or receivable or deemed to be received or receivable hereunder by the Sponsor (including any sum received or receivable or deemed to be received or receivable under this Clause 8) or any liability in respect of any such payment is asserted, imposed, levied or assessed against the Sponsor, the Guarantor shall, upon demand of the Sponsor, promptly indemnify the Sponsor against such payment or liability, together with any interest, penalties, costs and expenses payable or incurred in connection therewith (except to the extent that such interest penalties, costs or expenses have been incurred by the Sponsor’s gross negligence or wilful misconduct) by making to the Sponsor such payment as is necessary to ensure that the Sponsor receives a sum net of such Tax equal to the sum which it would have received had no such Tax been imposed.
 
9.5                            If the Guarantor is required to indemnify the Sponsor pursuant to Clause 8.5 or a Tax arises in respect of which the Guarantor has an obligation under this Clause 8, then, without in any way limiting, reducing or otherwise qualifying any rights or obligations of the Sponsor, the Sponsor shall promptly upon becoming aware of the same notify the Guarantor thereof and, in consultation in good faith with the Guarantor, for a period of up to sixty (60) days from the date of such notification, the Sponsor shall take such steps at the request and expense of the Guarantor as may be open to it to mitigate the effects of such circumstances on the Guarantor including, without limiting the generality of the foregoing by using all reasonable endeavours to transfer its rights and obligations under this Agreement to another office or to a subsidiary or an affiliate of the Sponsor or to another institution, in each case not affected by the relevant circumstances  provided that the Sponsor shall not be under any obligation to take or continue to take any such action or other steps if the Guarantor is in breach of this Agreement or if in its reasonable opinion, acting in good faith, to do so would have a material adverse effect on its business, operations or financial condition or the financial basis under which, inter alia , this Agreement has been entered into or would entail any cost or expense to the Sponsor (unless, in the case of any adverse effect on such financial basis, or cost or expense, the Sponsor shall have been indemnified or otherwise secured to its satisfaction).
 
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9.6
 
9.6.1                             If a claim shall be made by the Sponsor for any Tax for which the Guarantor may be required to indemnify the Sponsor pursuant to Clause 8.2 or Clause 8.5, and under applicable law of the taxing jurisdiction the Guarantor is allowed to contest directly such Tax in its own name, then without prejudice to the obligation of the Guarantor to pay any sum due to the Sponsor pursuant to this Clause 8 on its due date, the Guarantor shall be permitted, at is expense and in its own name, and with the prior written consent of the Sponsor, to contest the imposition of such claim.
 
9.6.2                             If the Guarantor is prevented by applicable law from validly contesting such claim in its own name or if it is necessary for the Sponsor to join in or assist in the contesting by the Guarantor of any claim, upon request of the Guarantor supported by an opinion of counsel selected by the Guarantor reasonably acceptable to the Sponsor confirming that there is a reasonable basis for contesting the validity, applicability or amount of such Taxes, the Sponsor shall, subject to sub-clause 8.7.3, in good faith, at the Guarantor’s expense, contest or assist in contesting the imposition of such Tax. After considering any views offered by the Sponsor and the Sponsor’s counsel concerning the forum in which a claim is most likely to be favourably resolved, the Guarantor may in its sole discretion select the forum for such consent and determine whether any such contest shall be by (a) resisting payment of such Tax, (b) paying such Tax under protest, (c) paying such Tax and seeking a refund or other repayment thereof or (d) seeking a reduction in the amount of such Tax.
 
9.6.3                             In no event shall the Sponsor be required to contest nor shall the Sponsor be required to join in or assist in contesting the imposition of any such Tax:
 
(a)                      if the Sponsor reasonably believes that to do so would be prejudicial to its interest;
 
(b)                     unless the Guarantor shall have agreed to pay the Sponsor on demand, and indemnify the Sponsor from, all reasonable costs and expenses that the Sponsor incurs in contesting or assisting in contesting such claim or arising out of or relating to such contest or assistance (including, but not limited to, all reasonable out-of-pocket costs, expenses, losses, reasonable legal and accounting fees, disbursements, penalties and interest); and
 
(c)                      if such contest shall be conducted in a manner requiring the prior payment of the claim by the Sponsor or, if the Guarantor shall request the Sponsor to make payment thereof pursuant to sub-clauses (b) or (c) of Clause 8.7.2 unless the Guarantor shall have advanced to the Sponsor sufficient funds (on an interest free basis) (and if such payment results in Taxable income to the Sponsor in respect of which the Sponsor does not
 
10

 
receive a corresponding deduction, on an after tax basis) to make such payment.
 
10.                            TAX NOTIFICATION
 
If, at any time, the Guarantor is required by law to make any deduction or withholding from any sum payable by it hereunder (or if thereafter there is any change in the rates at which or the manner in which such deductions or withholdings are calculated), the Guarantor (as the case may be) shall promptly notify the Sponsor.
 
11.                            SPONSOR’S COVENANTS
 
Subject to the proviso below, the Sponsor hereby covenants:
 
11.1.1                       to take all steps reasonably required by the Guarantor in writing, at no cost to the Guarantor, to preserve or protect its interest in the Residual Partnership Interest and the Option Interest;
 
11.1.2                       to perform its obligations under the Put Option Agreement and the Limited Partnership Agreement;
 
11.1.3                       to enforce and exercise its rights and remedies under the Put Option Agreement and the Limited Partnership as reasonably required by the Guarantor;
 
11.1.4                       to notify the Guarantor of any notices, demands, requests or communications received by the Sponsor under or pursuant to the Put Option Agreement;
 
11.1.5                       to involve the Guarantor (to the extent it is entitled to do so in accordance with the terms of the Put Option Agreement) in all consultations and discussions between the Sponsor and Investor that are undertaken by way of exercise of the Sponsor’s consultation rights under the terms of the Put Option Agreement;
 
11.1.6                       not to give any consent, waiver or approval under the Put Option Agreement or take any other action in writing in connection with the Residual Partnership Interest or the Option Interest which in each case would (to the Sponsor’s actual knowledge) materially adversely affect their value
 
PROVIDED that:
 
(1)                     the above covenants, obligations and restrictions shall only apply if and to the extent that such covenants, obligations and restrictions are necessary or reasonably required to the Guarantor’s enjoyment and exercise of its rights, powers, remedies and benefits hereunder and under the Secondary Put Agreement or relevant to the amount or timing of any payment or other obligation or liability of the Guarantor hereunder or under the Secondary Put Agreement to protect and preserve the enjoyment of the interest of the Guarantor
 
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in the Residual Partnership Interest and Option Interest and the rights and benefits intended to be conferred thereby;
 
(2)                     the Sponsor is indemnified and secured (in manner and form reasonably acceptable to the Sponsor) for all costs, liabilities and losses that the Sponsor may incur as a result of taking any such steps as the Guarantor may require pursuant to Clauses 11.1.1; and
 
(3)                     the Sponsor shall not be required to take any action or step pursuant to this Clause 11 if doing so shall (or is reasonably likely to) (i) cause the Sponsor to be in breach of any of its obligations under any of the Transaction Documents; or (ii) be unlawful.
 
12.                            INCORPORATION OF TERMS
 
The provisions of Clause 11 ( Assignment ), Clause 12 ( Notices ), Clause 13 ( Counterparts ) and Clause 14 ( Law and Jurisdiction ) of the Secondary Put Agreement shall be incorporated into this Agreement as if set out in full herein and as if references therein to “ this Agreement ” are references to this Agreement.
 
13.                            CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999
 
A person who is not a party to this Agreement has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this Agreement.
 
14.                            PROCESS AGENT
 
The Guarantor agrees that the process by which any proceedings are begun under this Agreement may be served on it by being delivered in connection with any proceedings in England, to SH Process Agents Limited, of One, St Paul’s Churchyard, London, EC4M 8SH ref 41-26417. If this appointment ceases to be effective the Guarantor shall immediately appoint a further person in England to accept service of process on its behalf in England. Nothing contained herein shall affect the right to serve process in any other manner permitted by law.
 
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IN WITNESS of which this Agreement has been duly executed on the day and year first before written.

Guarantor:	 	
 	 	
DANAOS HOLDINGS LIMITED	 	
 	 	
By: /s/ Arlene Payne, Attorney-in-fact	 	

Sponsor:	 	
 	 	
ALLCO FINANCE (UK) LIMITED	 	
 	 	
By: [Illegible]	 	
 
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SCHEDULE 1
FORM OF PUT OPTION NOTICE
 
Danaos Holdings Limited
Akti Miaouli 57
185 36 Piraeus
Greece
 
Attention:                                          Legal Department

Dear Sirs
 
The Ocean Container (No.1) Limited Partnership (the “Partnership”)
 
We refer to the secondary put and call agreement relating to the Residual Partnership Interest between ourselves and yourself on [      ] (the “ Secondary Put and Call Agreement ”). Terms defined in the Secondary Put and Call Agreement (except where defined herein) shall have the same respective meanings herein.
 
This Notice is the Put Option Notice for the purposes of the Secondary Put and Call Agreement. We hereby exercise our option contained in Clause 2.1 of the Secondary Put and Call Agreement, being the Put Option in respect of [ ]% of the Residual Partnership Interest and hereby notify you that the Put Option Date shall be [ ] and the Residual Interest Put Option Price shall be [ ].
 
This Notice shall be governed by and construed in accordance with English law. Please acknowledge safe receipt of this Notice.
 
Yours faithfully

 	 	 	
For and on behalf of	
ALLCO FINANCE (UK) LIMITED	
 
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We acknowledge safe receipt of this Notice of which this is a copy.

 	 	 	
For and on behalf of	
DANAOS HOLDINGS LIMITED	
 
15

 
SCHEDULE 2
FORM OF FIRST CALL OPTION NOTICE
 
Allco Finance (UK) Limited
c/o Allco (Leasing) Europe Ltd.
Lord Coutanche House
66-68 Esplanade
St. Helier
Jersey JE4 8SZ

Attention: The Directors
 
Dear Sirs
 
The Ocean Container (No.1) Limited Partnership (the “Partnership”)
 
We refer to the secondary put and call agreement relating to the Residual Partnership Interest between ourselves and yourself on [      ] (the “ Secondary Put and Call Agreement ”). Terms defined in the Secondary Put and Call Agreement (except where defined herein) shall have the same respective meanings herein.
 
This Notice is the First Call Option Notice for the purposes of the Secondary Put and Call Agreement. We hereby exercise our option contained in Clause 3.1 of the Secondary Put and Call Agreement, being the First Call Option in respect of [ ]% of the Residual Partnership Interest and hereby notify you that the First Call Option Date shall be [ ] and the First Call Option Price shall be [ ].
 
This Notice shall be governed by and construed in accordance with English law. Please acknowledge safe receipt of this Notice.
 
Yours faithfully

 	 	 	
For and on behalf of	
DANAOS HOLDINGS LIMITED	
 
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We acknowledge safe receipt of this Notice of which this is a copy.

 	 	 	
For and on behalf of	
ALLCO FINANCE (UK) LIMITED	
 
17

 
SCHEDULE 3
FORM OF SECOND CALL OPTION NOTICE
 
Allco Finance (UK) Limited
c/o Allco (Leasing) Europe Ltd.
Lord Coutanche House
66-68 Esplanade
St. Helier
Jersey JE4 8SZ
 
Attention: The Directors
 
Dear Sirs
 
The Ocean Container (No.1) Limited Partnership (the “Partnership”)
 
We refer to the secondary put and call agreement relating to our interest in the Partnership entered into between ourselves and yourself on [      ] (the “ Secondary Put and Call Agreement ”). Terms defined in the Secondary Put and Call Agreement (except where defined herein) shall have the same respective meanings herein.
 
This Notice is the Second Call Option Notice for the purposes of the Secondary Put and Call Option Agreement. We hereby exercise our option contained in Clause 4.1 of the Secondary Put and Call Agreement, being the Second Call Option and hereby notify you that:
 
1.                                        the Second Call Option Date shall be [ ]; and
 
2.                                        the Second Call Option Price is [ ] pounds (£[ ]).
 
This Notice shall be governed by and construed in accordance with English law. Please acknowledge safe receipt of this Notice.
 
Yours faithfully

 	 	 	
For and on behalf of	
DANAOS HOLDINGS LIMITED	
 
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We acknowledge safe receipt of this Notice of which this is a copy.

 	 	 	
For and on behalf of	
ALLCO FINANCE (UK) LIMITED	
 
19

 
Exhibit 10.16

	 	LIMITED LIABILITY PARTNERSHIP	
 
EXECUTION TEXT

 
ALLCO FINANCE (UK) LIMITED
 
and
 
DANAOS HOLDINGS LIMITED

 
SECONDARY PUT AND CALL AGREEMENT

 

 
CONTENTS

Clause	 	Page	
 	 	
1.	Definitions	1	
 	 	 	
2.	The Put Option	4	
 	 	 	
3.	The First Call Option	5	
 	 	 	
4.	The Second Call Option	5	
 	 	 	
5.	Exercise Of Option	6	
 	 	 	
6.	Power Of Attorney	7	
 	 	 	
7.	Representations And Warranties	7	
 	 	 	
8.	Indemnity	7	
 	 	 	
9.	Payment And Taxes	8	
 	 	 	
10.	Tax Notification	11	
 	 	 	
11.	Sponsor’s Covenants	11	
 	 	 	
12.	Application Of Moneys	12	
 	 	 	
13.	Incorporation Of Terms	12	
 	 	 	
14.	Contracts (Rights Of Third Parties) Act 1999	12	
 	 	 	
15.	Process Agent	12	
 	 	 	
SCHEDULE 1	FORM OF PUT OPTION NOTICE	14	
 	 	￠	
SCHEDULE 2	FORM OF FIRST CALL OPTION NOTICE	16	
 	 	￠	
SCHEDULE 3	FORM OF SECOND CALL OPTION NOTICE	18	

 
THIS AGREEMENT is made the 30 th day of November 2004
 
BETWEEN :
 
(1)                             ALLCO FINANCE (UK) LIMITED , a limited company registered in England, whose registered office is at 5th Floor, 40 Queen Street, London EC4R 1DD (the “ Sponsor ”); and
 
(2)                             DANAOS HOLDINGS LIMITED , a company incorporated under the laws of The Republic of Liberia, whose registered office is at 80 Broad Street, Monrovia, The Republic of Liberia and whose principal place of business is at Akti Kondyli 14, 185 45 Piraeus, Greece (the “ Guarantor ”).
 
WHEREAS :
 
(A)                         The Partners have formed the Partnership as a limited partnership by a partnership agreement of even date herewith (the “ Partnership Agreement ”) between Allco Finance Limited as general partner (the “ General Partner ”) and Lloyds TSB Equipment Leasing (No.6) Limited (the “ Investor ”) and the Sponsor as limited partners to make Capital Contributions thereto so that the Partnership may (a) provide the Owner with the funds to purchase the Vessel and (b) conduct Partnership Business.
 
(B)                           The Sponsor has granted to the Investor various put options in respect of the Investor’s interest in the Partnership under the Put Option Agreement.
 
(C)                           The Guarantor has agreed to grant to the Sponsor certain put options in respect of the Sponsor’s Partnership Interest, and in return for which the Sponsor has agreed to consult with the Guarantor prior to exercising any of its rights as a limited partner with a view to protecting the interests of the Guarantor as a potential future partner in the Partnership.
 
(D)                          The Sponsor in return has agreed to grant the Guarantor certain call options in respect of the Sponsor’s Partnership Interest.
 
IT IS NOW AGREED as follows:
 
1.                                  DEFINITIONS
 
1.1                            Except as otherwise defined in this Agreement, all terms defined in the Secondary Put Agreement shall have the same respective meanings when used in this Agreement.
 
1.2                            In this Agreement, unless the context otherwise requires, the following expressions shall have the following meanings:
 
“ Act ” means the Limited Partnerships Act 1907.
 
“ Business Day ” means a day other than a Saturday or Sunday or a public holiday, on which the major retail banks in London, and Athens are open for non-automated customer services.
 
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“ Capital Contribution ” means, in relation to a Partner, any contribution that such Partner makes to the capital of the Partnership pursuant to Clause 4 of the Partnership Agreement.
 
“ Early Put Option ” has the meaning ascribed to that expression in the Put Option Agreement.
 
“ Encumbrance ” means any right, title or interest of any person and shall, without limiting the generality of the foregoing, include any retention of title (for security purposes), right of possession or detention, mortgage, charge, lien, pledge, encumbrance, lease or other bailment, demise charter of the Vessel, statutory right in rem, hypothecation, attachment, levy, claim or set-off (other than any right of set-off arising in favour of a banker by operation of law which has not been exercised) or any other security interest whatsoever, howsoever and wheresoever created or arising.
 
“ First Call Option ” has the meaning ascribed to that expression in Clause 3.1.
 
“ First Call Option Date ” means any Business Day specified in the First Call Option Notice.
 
“ First Call Option Notice ” means a notice substantially in the form set out in Schedule 2.
 
“ First Call Option Price ” means an amount of fifty thousand pounds (£50,000) together with the amount of any Capital Contribution actually paid by the Sponsor and representing its Residual Partnership Interest except in the case of a Sponsor Insolvency Event, in which case the First Call Option Price will be such amount as was paid by the Sponsor for its Residual Partnership Interest.
 
“ Option Date ” means any or all of the First Call Option Date, the Second Call Option Date or the Put Option Date as the context may require.
 
“ Option Interest ” has the meaning ascribed to that expression in the Secondary Put Agreement.
 
“ Option Price ” means any or all of the First Call Option Price, the Second Call Option Price or the Residual Interest Put Option Price as the context may require.
 
“ Owner ” means Carpasso Shipping Company Limited, subsequently to be renamed Ocean Container (No.3) Limited, whose registered office is at Diagoras House, 16 P. Catelaris Street, 7 th Floor, 1097 Nicosia, Republic of Cyprus and whose principal place of business is at 5 th Floor, 40 Queen Street, London EC4R 1DD.
 
“ Partners ” means each of the General Partner, the Sponsor and the Investor and their respective and any subsequent successors, transferees and assigns and the expression “ Partner ” shall be construed accordingly.
 
“ Put Option ” has the meaning ascribed to that expression in Clause 2.1.
 
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“ Put Option Agreement ” means the put option agreement entered or to be entered into between the Investor and the Sponsor under which the Investor may, in certain circumstances, require the Sponsor to purchase (on a limited recourse basis) its interest in the Partnership.
 
“ Put Option Date ” means any Business Day specified in the Put Option Notice.
 
“ Put Option Notice ” means a notice substantially in the form set out in Schedule 1.
 
“ Residual Interest Put Option Price ” means an amount of one thousand pounds (£1000) together with the amount of any Capital Contribution actually paid by the Sponsor and representing its Residual Partnership Interest.
 
“ Residual Partnership Interest ” means the Sponsor’s interest in the Partnership other than the Option Interest.
 
“ Secondary Put Agreement ” means the secondary put agreement entered or to be entered into between the Sponsor and the Guarantor under which the Guarantor has granted certain put option rights to the Sponsor in respect of the whole of the Sponsor’s interest in the Partnership.
 
“ Second Call Option ” has the meaning ascribed to that expression in Clause 4.1.
 
“ Second Call Option Date : means:
 
(a)                                       any Business Day on or after 14 April 2013;
 
(b)                                      any Business Day on or after the date on which a default by the Sponsor under this Agreement or a Sponsor Insolvency Event has occurred and is continuing; or
 
(c)                                       any Business Day following the exercise of the Early Put Option by the Investor.
 
“ Second Call Option Notice ” means a notice substantially in the form set out in Schedule 3.
 
“ Second Call Option Price ” means an amount equal to the Put Option Price as defined in the Secondary Put Agreement plus ten thousand pounds (£10,000).
 
“ Sponsor Insolvency Event ” means any of the following:
 
(a)                                       the Sponsor is unable or admits inability to pay its debts as they fall due or the Sponsor becomes insolvent or stops or suspends making payments (whether of principal or interest) with respect or all or any class of its debts or announces an intention to do so; or
 
(b)                                      any corporate action, legal proceedings or other procedure is presented or other step is taken for the purpose of winding up the Sponsor (and which petition or other step is not withdrawn within 14 days of such presentation or, as the case may be, such step being taken) or an order is made or resolution
 
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passed for the winding up of the Sponsor or a notice is issued convening a meeting for the purpose of passing any such resolution other than in the context of a solvent reorganisation which has the prior written approval of the Guarantor; or
 
(c)                                       any petition is presented, notice given or other step is taken for the purpose of the appointment of an administrator of the Sponsor or the Guarantor reasonably believes that any such petition or other step is imminent or an administration order is made in relation to the Sponsor; or
 
(d)                                      any administrative or other receiver is appointed of the Sponsor or any part of its assets and/or undertaking or any other steps are taken to enforce any Encumbrance over all or any part of the assets of the Sponsor; or
 
(e)                                       there occurs, in relation to the Sponsor, in any country or territory in which it carries on business or to the jurisdiction of whose courts any part of its assets are subject, any event which, in the reasonable opinion of the Guarantor, appears in that country or territory to correspond with, or have an effect equivalent or similar to, any of those mentioned in (a) to (d) above or the Sponsor otherwise becomes subject, in any such country or territory, to the operation of any law relating to insolvency, bankruptcy or liquidation (unless, in relation to any litigation involving the Sponsor can demonstrate to the satisfaction of the Guarantor that any proceedings in respect of such litigation are frivolous, vexatious or an abuse of the process of the court or relate to a claim to which the Sponsor has a good defence and which is being contested in good faith by the Sponsor).
 
“ Tax ” means all present and future taxes, charges, imposts, duties, levies of any kind whatsoever (whether levied by deduction, withholding or otherwise), or any amount payable on account of or as security for any of the foregoing, payable at the instance of or imposed by any statutory, governmental, international, state, federal, provincial, local or municipal authority, agency, body or department whatsoever or any central bank, monetary agency or European Union institution, in each case whether in the United Kingdom or elsewhere, together with any penalties, additions, fines, surcharges or interest relating thereto and “ Taxes ”, “ Taxation ” and cognate expressions shall be construed accordingly.
 
2.                                  THE PUT OPTION
 
2.1                            In consideration of the payment of ten pounds (£10) by the Sponsor to the Guarantor and for other good and valuable consideration (the receipt and adequacy of which the Guarantor hereby acknowledges), the Guarantor hereby grants to the Sponsor the option (i) at any time to require the Guarantor to purchase from the Sponsor up to fifty per cent. (50%) of the Residual Partnership Interest and (ii) at any time after the Put Option Date (as defined in the Secondary Put Agreement) to require the Guarantor to purchase from the Sponsor the Residual Partnership Interest in accordance with the provisions of this Agreement (the “ Put Option ”).
 
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2.2                            The Sponsor shall be entitled, but not obliged, at any time to exercise the Put Option at the Residual Interest Put Option Price by serving a Put Option Notice on the Guarantor specifying the Put Option Date and upon the service of such Put Option Notice, the Guarantor shall be obliged to purchase and the Sponsor shall be obliged to sell the Residual Partnership Interest on the Put Option Date for the Residual Partnership Interest Put Option Price and otherwise in accordance with the provisions of Clause 5 provided however that the Guarantor may nominate a third party to take the transfer in its place.
 
3.                                  THE FIRST CALL OPTION
 
3.1                            In consideration of the payment of ten pounds (£10) by the Guarantor to the Sponsor and for other good and valuable consideration (the receipt and adequacy of which the Sponsor hereby acknowledges), the Sponsor hereby grants the Guarantor the option (i) at any time to require the Sponsor to sell and transfer to the Guarantor up to fifty per cent. (50%) of the Residual Partnership Interest and (ii) at any time after the Put Option Date (as defined in the Secondary Put Agreement) to require the Sponsor to sell and transfer to the Guarantor the Residual Partnership Interest in accordance with the provisions of this Agreement (the “ First Call Option ”).
 
3.2                            The Guarantor shall be entitled, but not obliged, at any time to exercise the First Call Option by serving a First Call Option Notice on the Sponsor specifying the relevant First Call Option Date and upon service of such First Call Option Notice, the Sponsor shall be obliged to sell to the Guarantor the Residual Partnership Interest on the First Call Option Date for the First Call Option Price and otherwise in accordance with the provisions of Clause 5 provided however that the Guarantor may nominate a third party to take the transfer in its place.
 
4.                                  THE SECOND CALL OPTION
 
4.1                            In consideration of the payment of ten pounds (£10) by the Guarantor to the Sponsor and for other good and valuable consideration (the receipt and adequacy of which the Sponsor hereby acknowledges), the Sponsor hereby grants the Guarantor the option to require the Sponsor to sell and transfer to the Guarantor the Option Interest in accordance with the provisions of this Agreement on any Second Call Option Date (the “ Second Call Option ”).
 
4.2                            The Guarantor shall be entitled, but not obliged, to exercise the Second Call Option immediately after service of notice by the Investor pursuant to the Put Option Agreement by serving a Second Call Option Notice on the Sponsor specifying the relevant Second Call Option Date and the Second Call Option Price and upon service of such Second Call Option Notice, the Sponsor shall be obliged to sell the Option Interest to the Guarantor on the Second Call Option Date for the Second Call Option Price and otherwise in accordance with the provisions of Clause 5 provided however that the Guarantor may nominate a third party to take the transfer in its place.
 
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5.                                  EXERCISE OF OPTION
 
5.1                            Each of the Put Option and the First Call Option may be exercised in respect of any portion of the Residual Partnership Interest at the relevant Option Price which shall be proportionally reduced. If a Put Option or a First Call Option is exercised in respect of a portion of the Residual Partnership Interest, the Residual Partnership Interest shall be reduced by the portion in respect of which a Put Option or a First Call Option, as the case may be, has been exercised, and each of the Put Option and the First Call Option shall continue to be available in respect of the Residual Partnership Interest so reduced.
 
5.2                            If the Sponsor exercises a Put Option, or if the Guarantor exercises a First Call Option or the Second Call Option, then upon the Guarantor paying the relevant Option Price on the relevant Option Date in accordance with the terms of Clause 2.2 or Clause 3.2 and Clause 5.1 or Clause 4.2, as the case may be, the sale and purchase of the relevant portion of the Residual Partnership Interest or the Option Interest, as the case may be, shall be concluded by the Guarantor procuring:
 
5.2.1                             the filing by the General Partner of a duly completed LP6 detailing the transfer of the relevant portion of the Sponsor’s interest in the Partnership to the Guarantor in accordance with Section 9(1)(d) of the Act;
 
5.2.2                             the submission of a notice of the transfer by the General Partner for publication in the London Gazette pursuant to Section 10 of the Act or such other publication referred to in Clause 15.3 of the Partnership Agreement; and
 
5.2.3                             the execution by the Sponsor, the General Partner, the Guarantor and any other members of the Partnership at the relevant time of the deed of accession in the form of the schedule to the Partnership Agreement.
 
5.3                            If after the service of the Second Call Option Notice but before the Second Call Option Date the Sponsor serves a put option notice pursuant to Clause 2.2 of the Secondary Put Agreement, then such put option notice shall supersede the Second Call Option Notice.
 
5.4                            The Sponsor covenants with the Guarantor that if it receives a First Call Option Notice or a Second Call Option Notice, as the case may be, from the Guarantor it shall take all reasonable steps to ensure that such First Call Option Notice or Second Call Option Notice, as the case may be, is securely stored outside the United Kingdom and provide information on request of the Guarantor as to its whereabouts and safekeeping.
 
5.5                            The Guarantor covenants with the Sponsor that if it receives a Put Option Notice from the Sponsor it shall take all reasonable steps to ensure that such Put Option Notice is securely stored outside the United Kingdom and provide information on request of the Sponsor as to its whereabouts and safekeeping.
 
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6.                                  POWER OF ATTORNEY
 
6.1                            The Guarantor hereby by way of security irrevocably appoints the Sponsor to be its true and lawful attorney (with full power to appoint substitute attorneys and to revoke the appointment thereof at any time) and in its name, on its behalf and as its act and deed to execute, deliver and perfect all documents (including, without limitation, the documents referred to in Clause 5.2) and do all things that the Sponsor may consider to be requisite for (a) carrying out any obligation imposed on the Guarantor under this Agreement in connection with the purchase of the Residual Partnership Interest contemplated herein or (b) exercising any of the rights conferred on the Sponsor by this Agreement or by law. The Guarantor hereby ratifies and confirms and agrees to ratify and confirm all things done and all documents executed by the Sponsor in the exercise of this power of attorney provided always that this power of attorney shall only be exercisable by the Sponsor if the Guarantor shall have failed to perform its obligations hereunder in a timely manner.
 
6.2                            The Sponsor hereby by way of security irrevocably appoints the Guarantor to be its true and lawful attorney (with full power to appoint substitute attorneys and to revoke the appointment thereof at any time) and in its name, on its behalf and as its act and deed to execute, deliver and perfect all documents and do all things that the Guarantor may consider to be requisite for (a) carrying out any obligation imposed on the Sponsor under this Agreement in connection with the purchase of the Residual Partnership Interest and/or the Option Interest contemplated herein or (b) exercising any of the rights conferred on the Guarantor by this Agreement or by law. The Sponsor hereby ratifies and confirms and agrees to ratify and confirm all things done and all documents executed by the Guarantor in the exercise of this power of attorney provided always that this power of attorney shall only be exercisable by the Guarantor if the Sponsor shall have failed to perform its obligations hereunder in a timely manner.
 
7.                                  REPRESENTATIONS AND WARRANTIES
 
The representations and warranties of each party hereto set out in Clause 5 of the Secondary Put Agreement shall apply ( mutatis mutandis ) to this Agreement as though the same were set out herein. Each party hereto acknowledges that the other party hereto has entered into this Agreement in full reliance on such representations and warranties being true and accurate as at the date hereof.
 
8.                                  INDEMNITY
 
8.1                            In consideration of the payment of ten pounds (£10) by the Sponsor to the Guarantor (receipt of which the Guarantor hereby acknowledges) and for other good and valuable consideration the Guarantor irrevocably and unconditionally agrees to indemnify the Sponsor on demand against any loss suffered by it if any obligation of the Guarantor hereunder is or becomes unenforceable, invalid or illegal.
 
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8.2                            The obligations of the Guarantor under this Clause 8 will not be affected by any matter which, without this provision, would affect any of its obligations under this Clause 8 including, but without limitation, the following:
 
8.2.1                             any change in or amendment, compromise or release of, this Agreement or any other document or security; and
 
8.2.2                             any adjustment, discharge, inability to prove or other similar circumstance affecting any obligation of the Guarantor under this Agreement because of any insolvency proceedings or any applicable law, treaty, court order or other regulation binding upon the Guarantor. Each of the Guarantor’s obligations will for the purposes of this Clause 8 be read as if any such circumstance had not arisen.
 
9.                                  PAYMENT AND TAXES
 
9.1                            All payments to be made by the Guarantor under this Agreement shall be made in full, without any set-off or counterclaim whatsoever and free and clear of all deductions or withholdings whatsoever save only as may be required by law for value on the day on which payment is due.
 
9.2                            If at any time the Guarantor is required to make any deduction or withholding in respect of Taxes from any payment due under this Agreement, it shall pay the full amount required to be deducted or withheld to the relevant taxation or other authority within the time allowed for such payment under applicable law and the sum due from the Guarantor in respect of such payment shall be increased to the extent necessary to ensure that, after the making of such deduction or withholding, the Sponsor receives on the due date for such payment (and retains, free from any liability in respect of such deduction or withholding), a net sum equal to the sum which it would have received had no such deduction or withholding been required to be made and the Guarantor and shall indemnify the Sponsor against any losses or costs incurred by it by reason of any failure of the Guarantor to make any such deduction or withholding or by reason of any increased payment not being made on the due date for such payment. The Guarantor shall promptly deliver to the Sponsor any receipts, certificates or other proof evidencing the amounts (if any) paid or payable in respect of any deduction or withholding as aforesaid.
 
9.3                            If, following any such deduction or withholding as is referred to in Clause 8.2 from any payment by the Guarantor, the Sponsor shall receive or be granted a credit against or remission for any Taxes payable by it, the Sponsor shall, subject to the Guarantor having made any increased payment in accordance with Clause 8.2 and to the extent that the Sponsor can do so without prejudicing the retention of the amount of such credit or remission and without prejudice to the right of the Sponsor to obtain any other relief or allowance which may be available to it, reimburse the Guarantor with such amount as the Sponsor shall acting in its absolute discretion certify to be the proportion of such credit or remission as will leave the Sponsor (after such reimbursement) in no worse position than it would have been in had there been no such deduction or withholding from the payment by the Guarantor as aforesaid. Such
 
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reimbursement shall be made forthwith upon the Sponsor certifying that the amount of such credit or remission has been received by it. Nothing contained in this Agreement shall oblige the Sponsor to rearrange its tax affairs or to disclose any information regarding its tax affairs and computations. Without prejudice to the generality of the foregoing, the Guarantor shall not, by virtue of this Clause 8.3 be entitled to enquire about the Sponsor’s tax affairs.
 
9.4                            Without prejudice to the foregoing provisions of this Clause 8, if the Sponsor is required to make any payment on account of Tax (not being a Tax imposed on and calculated by reference to the net income or a capital gain of the Sponsor by the jurisdiction in which it is incorporated other than any such Tax (including in respect of any balancing charge) imposed as a consequence of the exercise of the Put Option, the First Call Option or the Second Call Option (after taking into account the acquisition by the Sponsor of the Option Interest or the Residual Partnership Interest as the case may be) or otherwise on or in relation to any sum received or receivable or deemed to be received or receivable hereunder by the Sponsor (including any sum received or receivable or deemed to be received or receivable under this Clause 8) or any liability in respect of any such payment is asserted, imposed, levied or assessed against the Sponsor, the Guarantor shall, upon demand of the Sponsor, promptly indemnify the Sponsor against such payment or liability, together with any interest, penalties, costs and expenses payable or incurred in connection therewith (except to the extent that such interest penalties, costs or expenses have been incurred by the Sponsor’s gross negligence or wilful misconduct) by making to the Sponsor such payment as is necessary to ensure that the Sponsor receives a sum net of such Tax equal to the sum which it would have received had no such Tax been imposed.
 
9.5                            If the Guarantor is required to indemnify the Sponsor pursuant to Clause 8.5 or a Tax arises in respect of which the Guarantor has an obligation under this Clause 8, then, without in any way limiting, reducing or otherwise qualifying any rights or obligations of the Sponsor, the Sponsor shall promptly upon becoming aware of the same notify the Guarantor thereof and, in consultation in good faith with the Guarantor, for a period of up to sixty (60) days from the date of such notification, the Sponsor shall take such steps at the request and expense of the Guarantor as may be open to it to mitigate the effects of such circumstances on the Guarantor including, without limiting the generality of the foregoing by using all reasonable endeavours to transfer its rights and obligations under this Agreement to another office or to a subsidiary or an affiliate of the Sponsor or to another institution, in each case not affected by the relevant circumstances provided that the Sponsor shall not be under any obligation to take or continue to take any such action or other steps if the Guarantor is in breach of this Agreement or if in its reasonable opinion, acting in good faith, to do so would have a material adverse effect on its business, operations or financial condition or the financial basis under which, inter alia , this Agreement has been entered into or would entail any cost or expense to the Sponsor (unless, in the case of any adverse effect on such financial basis, or cost or expense, the Sponsor shall have been indemnified or otherwise secured to its satisfaction).
 
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9.6
 
9.6.1                             If a claim shall be made by the Sponsor for any Tax for which the Guarantor may be required to indemnify the Sponsor pursuant to Clause 8.2 or Clause 8.5, and under applicable law of the taxing jurisdiction the Guarantor is allowed to contest directly such Tax in its own name, then without prejudice to the obligation of the Guarantor to pay any sum due to the Sponsor pursuant to this Clause 8 on its due date, the Guarantor shall be permitted, at is expense and in its own name, and with the prior written consent of the Sponsor, to contest the imposition of such claim.
 
9.6.2                             If the Guarantor is prevented by applicable law from validly contesting such claim in its own name or if it is necessary for the Sponsor to join in or assist in the contesting by the Guarantor of any claim, upon request of the Guarantor supported by an opinion of counsel selected by the Guarantor reasonably acceptable to the Sponsor confirming that there is a reasonable basis for contesting the validity, applicability or amount of such Taxes, the Sponsor shall, subject to sub-clause 8.7.3, in good faith, at the Guarantor’s expense, contest or assist in contesting the imposition of such Tax. After considering any views offered by the Sponsor and the Sponsor’s counsel concerning the forum in which a claim is most likely to be favourably resolved, the Guarantor may in its sole discretion select the forum for such consent and determine whether any such contest shall be by (a) resisting payment of such Tax, (b) paying such Tax under protest, (c) paying such Tax and seeking a refund or other repayment thereof or (d) seeking a reduction in the amount of such Tax.
 
9.6.3                             In no event shall the Sponsor be required to contest nor shall the Sponsor be required to join in or assist in contesting the imposition of any such Tax:
 
(a)                      if the Sponsor reasonably believes that to do so would be prejudicial to its interest;
 
(b)                     unless the Guarantor shall have agreed to pay the Sponsor on demand, and indemnify the Sponsor from, all reasonable costs and expenses that the Sponsor incurs in contesting or assisting in contesting such claim or arising out of or relating to such contest or assistance (including, but not limited to, all reasonable out-of-pocket costs, expenses, losses, reasonable legal and accounting fees, disbursements, penalties and interest); and
 
(c)                      if such contest shall be conducted in a manner requiring the prior payment of the claim by the Sponsor or, if the Guarantor shall request the Sponsor to make payment thereof pursuant to sub-clauses (b) or (c) of Clause 8.7.2 unless the Guarantor shall have advanced to the Sponsor sufficient funds (on an interest free basis) (and if such payment results in Taxable income to the Sponsor in respect of which the Sponsor does not
 
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receive a corresponding deduction, on an after tax basis) to make such payment.
 
10.                            TAX NOTIFICATION
 
If, at any time, the Guarantor is required by law to make any deduction or withholding from any sum payable by it hereunder (or if thereafter there is any change in the rates at which or the manner in which such deductions or withholdings are calculated), the Guarantor (as the case may be) shall promptly notify the Sponsor.
 
11.                            SPONSOR’S COVENANTS
 
Subject to the proviso below, the Sponsor hereby covenants:
 
11.1.1                       to take all steps reasonably required by the Guarantor in writing, at no cost to the Guarantor, to preserve or protect its interest in the Residual Partnership Interest and the Option Interest;
 
11.1.2                       to perform its obligations under the Put Option Agreement and the Limited Partnership Agreement;
 
11.1.3                       to enforce and exercise its rights and remedies under the Put Option Agreement and the Limited Partnership as reasonably required by the Guarantor;
 
11.1.4                       to notify the Guarantor of any notices, demands, requests or communications received by the Sponsor under or pursuant to the Put Option Agreement;
 
11.1.5                       to involve the Guarantor (to the extent it is entitled to do so in accordance with the terms of the Put Option Agreement) in all consultations and discussions between the Sponsor and Investor that are undertaken by way of exercise of the Sponsor’s consultation rights under the terms of the Put Option Agreement;
 
11.1.6                       not to give any consent, waiver or approval under the Put Option Agreement or take any other action in writing in connection with the Residual Partnership Interest or the Option Interest which in each case would (to the Sponsor’s actual knowledge) materially adversely affect their value
 
PROVIDED that:
 
(1)                     the above covenants, obligations and restrictions shall only apply if and to the extent that such covenants, obligations and restrictions are necessary or reasonably required to the Guarantor’s enjoyment and exercise of its rights, powers, remedies and benefits hereunder and under the Secondary Put Agreement or relevant to the amount or timing of any payment or other obligation or liability of the Guarantor hereunder or under the Secondary Put Agreement to protect and preserve the enjoyment of the interest of the Guarantor
 
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in the Residual Partnership Interest and Option Interest and the rights and benefits intended to be conferred thereby;
 
(2)                     the Sponsor is indemnified and secured (in manner and form reasonably acceptable to the Sponsor) for all costs, liabilities and losses that the Sponsor may incur as a result of taking any such steps as the Guarantor may require pursuant to Clauses 11.1.1;
 
(3)                     the Sponsor shall not be required to take any action or step pursuant to this Clause 11 if doing so shall (or is reasonably likely to) (i) cause the Sponsor to be in breach of any of its obligations under any of the Transaction Documents; or (ii) be unlawful; and
 
(4)                     the obligations of the Sponsor under any document to which it is a party shall be construed as being limited by any non-recourse language contained in such document.
 
12.                            APPLICATION OF MONEYS
 
The Sponsor agrees that all moneys received by it pursuant to Clause 2.5 of the Put Option Agreement and Clause 13 of the Second Assignment shall be paid to the Guarantor, to such account as the Guarantor may direct in writing after, in the case of moneys received under Clause 13 of the Second Assignment, payment to the Sponsor, the General Partner and the Owner of any and all amounts owing to them under any Transaction Document.
 
13.                            INCORPORATION OF TERMS
 
The provisions of Clause 11 ( Assignment ), Clause 12 ( Notices ), Clause 13 ( Counterparts ) and Clause 14 ( Law and Jurisdiction ) of the Secondary Put Agreement shall be incorporated into this Agreement as if set out in full herein and as if references therein to “ this Agreement ” are references to this Agreement.
 
14.                            CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999
 
A person who is not a party to this Agreement has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this Agreement.
 
15.                            PROCESS AGENT
 
The Guarantor agrees that the process by which any proceedings are begun under this Agreement may be served on it by being delivered in connection with any proceedings in England, to SH Process Agents Limited, of One, St Paul’s Churchyard, London, EC4M 8SH ref 43-01770. If this appointment ceases to be effective the Guarantor shall immediately appoint a further person in England to accept service of process on its behalf in England. Nothing contained herein shall affect the right to serve process in any other manner permitted by law.
 
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IN WITNESS of which this Agreement has been duly executed on the day and year first before written.

Guarantor:
 
DANAOS HOLDINGS LIMITED
 
By: /s/ Arlene Payne, Attorney-in-fact

Sponsor:
 
ALLCO FINANCE (UK) LIMITED
 
By: [Illegible]
 
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SCHEDULE 1                      
FORM OF PUT OPTION NOTICE
 
Danaos Holdings Limited
Akti Miaouli 57
185 36 Piraeus
Greece
 
Attention:                                          Legal Department

Dear Sirs
 
The Ocean Container (No.3) Limited Partnership (the “Partnership”)
 
We refer to the secondary put and call agreement relating to the Residual Partnership Interest between ourselves and yourself on [                    ] (the “ Secondary Put and Call Agreement ”). Terms defined in the Secondary Put and Call Agreement (except where defined herein) shall have the same respective meanings herein.
 
This Notice is the Put Option Notice for the purposes of the Secondary Put and Call Agreement. We hereby exercise our option contained in Clause 2.1 of the Secondary Put and Call Agreement, being the Put Option in respect of [ ]% of the Residual Partnership Interest and hereby notify you that the Put Option Date shall be [ ] and the Residual Interest Put Option Price shall be [ ].
 
This Notice shall be governed by and construed in accordance with English law. Please acknowledge safe receipt of this Notice.
 
Yours faithfully

 	 	
For and on behalf of	
ALLCO FINANCE (UK) LIMITED	
 
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We acknowledge safe receipt of this Notice of which this is a copy.

 	 	
For and on behalf of	
DANAOS HOLDINGS LIMITED	
 
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SCHEDULE 2                      
FORM OF FIRST CALL OPTION NOTICE
 
Allco Finance (UK) Limited
c/o Allco (Leasing) Europe Ltd.
Lord Coutanche House
66-68 Esplanade
St. Helier
Jersey JE4 8SZ

Attention: The Directors
 
Dear Sirs
 
The Ocean Container (No.3) Limited Partnership (the “Partnership”)
 
We refer to the secondary put and call agreement relating to the Residual Partnership Interest between ourselves and yourself on [                    ] (the “ Secondary Put and Call Agreement ”). Terms defined in the Secondary Put and Call Agreement (except where defined herein) shall have the same respective meanings herein.
 
This Notice is the First Call Option Notice for the purposes of the Secondary Put and Call Agreement. We hereby exercise our option contained in Clause 3.1 of the Secondary Put and Call Agreement, being the First Call Option in respect of [ ]% of the Residual Partnership Interest and hereby notify you that the First Call Option Date shall be [ ] and the First Call Option Price shall be [ ].
 
This Notice shall be governed by and construed in accordance with English law. Please acknowledge safe receipt of this Notice.
 
Yours faithfully

 	 	
For and on behalf of	
DANAOS HOLDINGS LIMITED	
 
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We acknowledge safe receipt of this Notice of which this is a copy.

 	 	
For and on behalf of	
ALLCO FINANCE (UK) LIMITED	
 
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SCHEDULE 3                      
FORM OF SECOND CALL OPTION NOTICE
 
Allco Finance (UK) Limited
c/o Allco (Leasing) Europe Ltd.
Lord Coutanche House
66-68 Esplanade
St. Helier
Jersey JE4 8SZ
 
Attention: The Directors
 
Dear Sirs
 
The Ocean Container (No.3) Limited Partnership (the “Partnership”)
 
We refer to the secondary put and call agreement relating to our interest in the Partnership entered into between ourselves and yourself on [           ] (the “ Secondary Put and Call Agreement ”). Terms defined in the Secondary Put and Call Agreement (except where defined herein) shall have the same respective meanings herein.
 
This Notice is the Second Call Option Notice for the purposes of the Secondary Put and Call Option Agreement. We hereby exercise our option contained in Clause 4.1 of the Secondary Put and Call Agreement, being the Second Call Option and hereby notify you that:
 
1.                                        the Second Call Option Date shall be [ ]; and
 
2.                                        the Second Call Option Price is [ ] pounds (£[ ]).
 
This Notice shall be governed by and construed in accordance with English law. Please acknowledge safe receipt of this Notice.
 
Yours faithfully

 	 	
For and on behalf of	
DANAOS HOLDINGS LIMITED	
 
18

 
We acknowledge safe receipt of this Notice of which this is a copy.

 	 	
For and on behalf of	
ALLCO FINANCE (UK) LIMITED	
 
19

 
Exhibit 10.17

	 	LIMITED LIABILITY PARTNERSHIP	
 
EXECUTION TEXT

 
 
ALLCO FINANCE (UK) LIMITED
 
and
 
DANAOS HOLDINGS LIMITED

 
SECONDARY PUT AND CALL AGREEMENT

 

 
CONTENTS

Clause	 	Page	
 	 	
1.	Definitions	1	
 	 	 	
2.	The Put Option	4	
 	 	 	
3.	The First Call Option	5	
 	 	 	
4.	The Second Call Option	5	
 	 	 	
5.	Exercise Of Option	6	
 	 	 	
6.	Power Of Attorney	7	
 	 	 	
7.	Representations And Warranties	7	
 	 	 	
8.	INDEMNITY	7	
 	 	 	
9.	Payment And Taxes	8	
 	 	 	
10.	Tax Notification	11	
 	 	 	
11.	Sponsor’s Covenants	11	
 	 	 	
12.	APPLICATION OF MONEYS	12	
 	 	 	
13.	Incorporation Of Terms	12	
 	 	 	
14.	Contracts (Rights Of Third Parties) Act 1999	12	
 	 	 	
15.	Process Agent	12	
 	 	
SCHEDULE 1	FORM OF PUT OPTION NOTICE	14	
 	 	￠	
SCHEDULE 2	FORM OF FIRST CALL OPTION NOTICE	16	
 	 	￠	
SCHEDULE 3	FORM OF SECOND CALL OPTION NOTICE	18	

 
THIS AGREEMENT is made the 30 th day of November 2004
 
BETWEEN :
 
(1)                             ALLCO FINANCE (UK) LIMITED , a limited company registered in England, whose registered office is at 5th Floor, 40 Queen Street, London EC4R 1DD (the “ Sponsor ”); and
 
(2)                             DANAOS HOLDINGS LIMITED , a company incorporated under the laws of The Republic of Liberia, whose registered office is at 80 Broad Street, Monrovia, The Republic of Liberia and whose principal place of business is at Akti Kondyli 14, 185 45 Piraeus, Greece (the “ Guarantor ”).
 
WHEREAS :
 
(A)                         The Partners have formed the Partnership as a limited partnership by a partnership agreement of even date herewith (the “ Partnership Agreement ”) between Allco Finance Limited as general partner (the “ General Partner ”) and Lloyds TSB Equipment Leasing (No.6) Limited (the “ Investor ”) and the Sponsor as limited partners to make Capital Contributions thereto so that the Partnership may (a) provide the Owner with the funds to purchase the Vessel and (b) conduct Partnership Business.
 
(B)                           The Sponsor has granted to the Investor various put options in respect of the Investor’s interest in the Partnership under the Put Option Agreement.
 
(C)                           The Guarantor has agreed to grant to the Sponsor certain put options in respect of the Sponsor’s Partnership Interest, and in return for which the Sponsor has agreed to consult with the Guarantor prior to exercising any of its rights as a limited partner with a view to protecting the interests of the Guarantor as a potential future partner in the Partnership.
 
(D)                          The Sponsor in return has agreed to grant the Guarantor certain call options in respect of the Sponsor’s Partnership Interest.
 
IT IS NOW AGREED as follows:
 
1.                                  DEFINITIONS
 
1.1                            Except as otherwise defined in this Agreement, all terms defined in the Secondary Put Agreement shall have the same respective meanings when used in this Agreement.
 
1.2                            In this Agreement, unless the context otherwise requires, the following expressions shall have the following meanings:
 
“ Act ” means the Limited Partnerships Act 1907.
 
“ Business Day ” means a day other than a Saturday or Sunday or a public holiday, on which the major retail banks in London, and Athens are open for non-automated customer services.
 
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“ Capital Contribution ” means, in relation to a Partner, any contribution that such Partner makes to the capital of the Partnership pursuant to Clause 4 of the Partnership Agreement.
 
“ Early Put Option ” has the meaning ascribed to that expression in the Put Option Agreement.
 
“ Encumbrance ” means any right, title or interest of any person and shall, without limiting the generality of the foregoing, include any retention of title (for security purposes), right of possession or detention, mortgage, charge, lien, pledge, encumbrance, lease or other bailment, demise charter of the Vessel, statutory right in rem, hypothecation, attachment, levy, claim or set-off (other than any right of set-off arising in favour of a banker by operation of law which has not been exercised) or any other security interest whatsoever, howsoever and wheresoever created or arising.
 
“ First Call Option ” has the meaning ascribed to that expression in Clause 3.1.
 
“ First Call Option Date ” means any Business Day specified in the First Call Option Notice.
 
“ First Call Option Notice ” means a notice substantially in the form set out in Schedule 2.
 
“ First Call Option Price ” means an amount of fifty thousand pounds (£50,000) together with the amount of any Capital Contribution actually paid by the Sponsor and representing its Residual Partnership Interest except in the case of a Sponsor Insolvency Event, in which case the First Call Option Price will be such amount as was paid by the Sponsor for its Residual Partnership Interest.
 
“ Option Date ” means any or all of the First Call Option Date, the Second Call Option Date or the Put Option Date as the context may require.
 
“ Option Interest ” has the meaning ascribed to that expression in the Secondary Put Agreement.
 
“ Option Price ” means any or all of the First Call Option Price, the Second Call Option Price or the Residual Interest Put Option Price as the context may require.
 
“ Owner ” means Lucota Marine Company Limited, subsequently to be renamed Ocean Container (No.4) Limited, whose registered office is at Diagoras House, 16 P. Catelaris Street, 7 th Floor, 1097 Nicosia, Republic of Cyprus and whose principal place of business is at 5 th Floor, 40 Queen Street, London EC4R 1DD.
 
“ Partners ” means each of the General Partner, the Sponsor and the Investor and their respective and any subsequent successors, transferees and assigns and the expression “ Partner ” shall be construed accordingly.
 
“ Put Option ” has the meaning ascribed to that expression in Clause 2.1.
 
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“ Put Option Agreement ” means the put option agreement entered or to be entered into between the Investor and the Sponsor under which the Investor may, in certain circumstances, require the Sponsor to purchase (on a limited recourse basis) its interest in the Partnership.
 
“ Put Option Date ” means any Business Day specified in the Put Option Notice.
 
“ Put Option Notice ” means a notice substantially in the form set out in Schedule 1.
 
“ Residual Interest Put Option Price ” means an amount of one thousand pounds (£1000) together with the amount of any Capital Contribution actually paid by the Sponsor and representing its Residual Partnership Interest.
 
“ Residual Partnership Interest ” means the Sponsor’s interest in the Partnership other than the Option Interest.
 
“ Secondary Put Agreement ” means the secondary put agreement entered or to be entered into between the Sponsor and the Guarantor under which the Guarantor has granted certain put option rights to the Sponsor in respect of the whole of the Sponsor’s interest in the Partnership.
 
“ Second Call Option ” has the meaning ascribed to that expression in Clause 4.1.
 
“ Second Call Option Date : means:
 
(a)                                       any Business Day on or after 14 April 2013;
 
(b)                                      any Business Day on or after the date on which a default by the Sponsor under this Agreement or a Sponsor Insolvency Event has occurred and is continuing; or
 
(c)                                       any Business Day following the exercise of the Early Put Option by the Investor.
 
“ Second Call Option Notice ” means a notice substantially in the form set out in Schedule 3.
 
“ Second Call Option Price ” means an amount equal to the Put Option Price as defined in the Secondary Put Agreement plus ten thousand pounds (£10,000).
 
“ Sponsor Insolvency Event ” means any of the following:
 
(a)                                       the Sponsor is unable or admits inability to pay its debts as they fall due or the Sponsor becomes insolvent or stops or suspends making payments (whether of principal or interest) with respect or all or any class of its debts or announces an intention to do so; or
 
(b)                                      any corporate action, legal proceedings or other procedure is presented or other step is taken for the purpose of winding up the Sponsor (and which petition or other step is not withdrawn within 14 days of such presentation or, as the case may be, such step being taken) or an order is made or resolution
 
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passed for the winding up of the Sponsor or a notice is issued convening a meeting for the purpose of passing any such resolution other than in the context of a solvent reorganisation which has the prior written approval of the Guarantor; or
 
(c)                                       any petition is presented, notice given or other step is taken for the purpose of the appointment of an administrator of the Sponsor or the Guarantor reasonably believes that any such petition or other step is imminent or an administration order is made in relation to the Sponsor; or
 
(d)                                      any administrative or other receiver is appointed of the Sponsor or any part of its assets and/or undertaking or any other steps are taken to enforce any Encumbrance over all or any part of the assets of the Sponsor; or
 
(e)                                       there occurs, in relation to the Sponsor, in any country or territory in which it carries on business or to the jurisdiction of whose courts any part of its assets are subject, any event which, in the reasonable opinion of the Guarantor, appears in that country or territory to correspond with, or have an effect equivalent or similar to, any of those mentioned in (a) to (d) above or the Sponsor otherwise becomes subject, in any such country or territory, to the operation of any law relating to insolvency, bankruptcy or liquidation (unless, in relation to any litigation involving the Sponsor can demonstrate to the satisfaction of the Guarantor that any proceedings in respect of such litigation are frivolous, vexatious or an abuse of the process of the court or relate to a claim to which the Sponsor has a good defence and which is being contested in good faith by the Sponsor).
 
“ Tax ” means all present and future taxes, charges, imposts, duties, levies of any kind whatsoever (whether levied by deduction, withholding or otherwise), or any amount payable on account of or as security for any of the foregoing, payable at the instance of or imposed by any statutory, governmental, international, state, federal, provincial, local or municipal authority, agency, body or department whatsoever or any central bank, monetary agency or European Union institution, in each case whether in the United Kingdom or elsewhere, together with any penalties, additions, fines, surcharges or interest relating thereto and “ Taxes ”, “ Taxation ” and cognate expressions shall be construed accordingly.
 
2.                                  THE PUT OPTION
 
2.1                            In consideration of the payment of ten pounds (£10) by the Sponsor to the Guarantor and for other good and valuable consideration (the receipt and adequacy of which the Guarantor hereby acknowledges), the Guarantor hereby grants to the Sponsor the option (i) at any time to require the Guarantor to purchase from the Sponsor up to fifty per cent. (50%) of the Residual Partnership Interest and (ii) at any time after the Put Option Date (as defined in the Secondary Put Agreement) to require the Guarantor to purchase from the Sponsor the Residual Partnership Interest in accordance with the provisions of this Agreement (the “ Put Option ”).
 
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2.2                            The Sponsor shall be entitled, but not obliged, at any time to exercise the Put Option at the Residual Interest Put Option Price by serving a Put Option Notice on the Guarantor specifying the Put Option Date and upon the service of such Put Option Notice, the Guarantor shall be obliged to purchase and the Sponsor shall be obliged to sell the Residual Partnership Interest on the Put Option Date for the Residual Partnership Interest Put Option Price and otherwise in accordance with the provisions of Clause 5 provided however that the Guarantor may nominate a third party to take the transfer in its place.
 
3.                                  THE FIRST CALL OPTION
 
3.1                            In consideration of the payment of ten pounds (£10) by the Guarantor to the Sponsor and for other good and valuable consideration (the receipt and adequacy of which the Sponsor hereby acknowledges), the Sponsor hereby grants the Guarantor the option (i) at any time to require the Sponsor to sell and transfer to the Guarantor up to fifty per cent. (50%) of the Residual Partnership Interest and (ii) at any time after the Put Option Date (as defined in the Secondary Put Agreement) to require the Sponsor to sell and transfer to the Guarantor the Residual Partnership Interest in accordance with the provisions of this Agreement (the “ First Call Option ”).
 
3.2                            The Guarantor shall be entitled, but not obliged, at any time to exercise the First Call Option by serving a First Call Option Notice on the Sponsor specifying the relevant First Call Option Date and upon service of such First Call Option Notice, the Sponsor shall be obliged to sell to the Guarantor the Residual Partnership Interest on the First Call Option Date for the First Call Option Price and otherwise in accordance with the provisions of Clause 5 provided however that the Guarantor may nominate a third party to take the transfer in its place.
 
4.                                  THE SECOND CALL OPTION
 
4.1                            In consideration of the payment of ten pounds (£10) by the Guarantor to the Sponsor and for other good and valuable consideration (the receipt and adequacy of which the Sponsor hereby acknowledges), the Sponsor hereby grants the Guarantor the option to require the Sponsor to sell and transfer to the Guarantor the Option Interest in accordance with the provisions of this Agreement on any Second Call Option Date (the “ Second Call Option ”).
 
4.2                            The Guarantor shall be entitled, but not obliged, to exercise the Second Call Option immediately after service of notice by the Investor pursuant to the Put Option Agreement by serving a Second Call Option Notice on the Sponsor specifying the relevant Second Call Option Date and the Second Call Option Price and upon service of such Second Call Option Notice, the Sponsor shall be obliged to sell the Option Interest to the Guarantor on the Second Call Option Date for the Second Call Option Price and otherwise in accordance with the provisions of Clause 5 provided however that the Guarantor may nominate a third party to take the transfer in its place.
 
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5.                                  EXERCISE OF OPTION
 
5.1                            Each of the Put Option and the First Call Option may be exercised in respect of any portion of the Residual Partnership Interest at the relevant Option Price which shall be proportionally reduced. If a Put Option or a First Call Option is exercised in respect of a portion of the Residual Partnership Interest, the Residual Partnership Interest shall be reduced by the portion in respect of which a Put Option or a First Call Option, as the case may be, has been exercised, and each of the Put Option and the First Call Option shall continue to be available in respect of the Residual Partnership Interest so reduced.
 
5.2                            If the Sponsor exercises a Put Option, or if the Guarantor exercises a First Call Option or the Second Call Option, then upon the Guarantor paying the relevant Option Price on the relevant Option Date in accordance with the terms of Clause 2.2 or Clause 3.2 and Clause 5.1 or Clause 4.2, as the case may be, the sale and purchase of the relevant portion of the Residual Partnership Interest or the Option Interest, as the case may be, shall be concluded by the Guarantor procuring:
 
5.2.1                             the filing by the General Partner of a duly completed LP6 detailing the transfer of the relevant portion of the Sponsor’s interest in the Partnership to the Guarantor in accordance with Section 9(1)(d) of the Act;
 
5.2.2                             the submission of a notice of the transfer by the General Partner for publication in the London Gazette pursuant to Section 10 of the Act or such other publication referred to in Clause 15.3 of the Partnership Agreement; and
 
5.2.3                             the execution by the Sponsor, the General Partner, the Guarantor and any other members of the Partnership at the relevant time of the deed of accession in the form of the schedule to the Partnership Agreement.
 
5.3                            If after the service of the Second Call Option Notice but before the Second Call Option Date the Sponsor serves a put option notice pursuant to Clause 2.2 of the Secondary Put Agreement, then such put option notice shall supersede the Second Call Option Notice.
 
5.4                            The Sponsor covenants with the Guarantor that if it receives a First Call Option Notice or a Second Call Option Notice, as the case may be, from the Guarantor it shall take all reasonable steps to ensure that such First Call Option Notice or Second Call Option Notice, as the case may be, is securely stored outside the United Kingdom and provide information on request of the Guarantor as to its whereabouts and safekeeping.
 
5.5                            The Guarantor covenants with the Sponsor that if it receives a Put Option Notice from the Sponsor it shall take all reasonable steps to ensure that such Put Option Notice is securely stored outside the United Kingdom and provide information on request of the Sponsor as to its whereabouts and safekeeping.
 
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6.                                  POWER OF ATTORNEY
 
6.1                            The Guarantor hereby by way of security irrevocably appoints the Sponsor to be its true and lawful attorney (with full power to appoint substitute attorneys and to revoke the appointment thereof at any time) and in its name, on its behalf and as its act and deed to execute, deliver and perfect all documents (including, without limitation, the documents referred to in Clause 5.2) and do all things that the Sponsor may consider to be requisite for (a) carrying out any obligation imposed on the Guarantor under this Agreement in connection with the purchase of the Residual Partnership Interest contemplated herein or (b) exercising any of the rights conferred on the Sponsor by this Agreement or by law. The Guarantor hereby ratifies and confirms and agrees to ratify and confirm all things done and all documents executed by the Sponsor in the exercise of this power of attorney provided always that this power of attorney shall only be exercisable by the Sponsor if the Guarantor shall have failed to perform its obligations hereunder in a timely manner.
 
6.2                            The Sponsor hereby by way of security irrevocably appoints the Guarantor to be its true and lawful attorney (with full power to appoint substitute attorneys and to revoke the appointment thereof at any time) and in its name, on its behalf and as its act and deed to execute, deliver and perfect all documents and do all things that the Guarantor may consider to be requisite for (a) carrying out any obligation imposed on the Sponsor under this Agreement in connection with the purchase of the Residual Partnership Interest and/or the Option Interest contemplated herein or (b) exercising any of the rights conferred on the Guarantor by this Agreement or by law. The Sponsor hereby ratifies and confirms and agrees to ratify and confirm all things done and all documents executed by the Guarantor in the exercise of this power of attorney provided always that this power of attorney shall only be exercisable by the Guarantor if the Sponsor shall have failed to perform its obligations hereunder in a timely manner.
 
7.                                  REPRESENTATIONS AND WARRANTIES
 
The representations and warranties of each party hereto set out in Clause 5 of the Secondary Put Agreement shall apply ( mutatis mutandis ) to this Agreement as though the same were set out herein. Each party hereto acknowledges that the other party hereto has entered into this Agreement in full reliance on such representations and warranties being true and accurate as at the date hereof.
 
8.                                  INDEMNITY
 
8.1                            In consideration of the payment of ten pounds (£10) by the Sponsor to the Guarantor (receipt of which the Guarantor hereby acknowledges) and for other good and valuable consideration the Guarantor irrevocably and unconditionally agrees to indemnify the Sponsor on demand against any loss suffered by it if any obligation of the Guarantor hereunder is or becomes unenforceable, invalid or illegal.
 
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8.2                            The obligations of the Guarantor under this Clause 8 will not be affected by any matter which, without this provision, would affect any of its obligations under this Clause 8 including, but without limitation, the following:
 
8.2.1                             any change in or amendment, compromise or release of, this Agreement or any other document or security; and
 
8.2.2                             any adjustment, discharge, inability to prove or other similar circumstance affecting any obligation of the Guarantor under this Agreement because of any insolvency proceedings or any applicable law, treaty, court order or other regulation binding upon the Guarantor. Each of the Guarantor’s obligations will for the purposes of this Clause 8 be read as if any such circumstance had not arisen.
 
9.                                  PAYMENT AND TAXES
 
9.1                            All payments to be made by the Guarantor under this Agreement shall be made in full, without any set-off or counterclaim whatsoever and free and clear of all deductions or withholdings whatsoever save only as may be required by law for value on the day on which payment is due.
 
9.2                            If at any time the Guarantor is required to make any deduction or withholding in respect of Taxes from any payment due under this Agreement, it shall pay the full amount required to be deducted or withheld to the relevant taxation or other authority within the time allowed for such payment under applicable law and the sum due from the Guarantor in respect of such payment shall be increased to the extent necessary to ensure that, after the making of such deduction or withholding, the Sponsor receives on the due date for such payment (and retains, free from any liability in respect of such deduction or withholding), a net sum equal to the sum which it would have received had no such deduction or withholding been required to be made and the Guarantor and shall indemnify the Sponsor against any losses or costs incurred by it by reason of any failure of the Guarantor to make any such deduction or withholding or by reason of any increased payment not being made on the due date for such payment. The Guarantor shall promptly deliver to the Sponsor any receipts, certificates or other proof evidencing the amounts (if any) paid or payable in respect of any deduction or withholding as aforesaid.
 
9.3                            If, following any such deduction or withholding as is referred to in Clause 8.2 from any payment by the Guarantor, the Sponsor shall receive or be granted a credit against or remission for any Taxes payable by it, the Sponsor shall, subject to the Guarantor having made any increased payment in accordance with Clause 8.2 and to the extent that the Sponsor can do so without prejudicing the retention of the amount of such credit or remission and without prejudice to the right of the Sponsor to obtain any other relief or allowance which may be available to it, reimburse the Guarantor with such amount as the Sponsor shall acting in its absolute discretion certify to be the proportion of such credit or remission as will leave the Sponsor (after such reimbursement) in no worse position than it would have been in had there been no such deduction or withholding from the payment by the Guarantor as aforesaid. Such
 
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reimbursement shall be made forthwith upon the Sponsor certifying that the amount of such credit or remission has been received by it. Nothing contained in this Agreement shall oblige the Sponsor to rearrange its tax affairs or to disclose any information regarding its tax affairs and computations. Without prejudice to the generality of the foregoing, the Guarantor shall not, by virtue of this Clause 8.3 be entitled to enquire about the Sponsor’s tax affairs.
 
9.4                            Without prejudice to the foregoing provisions of this Clause 8, if the Sponsor is required to make any payment on account of Tax (not being a Tax imposed on and calculated by reference to the net income or a capital gain of the Sponsor by the jurisdiction in which it is incorporated other than any such Tax (including in respect of any balancing charge) imposed as a consequence of the exercise of the Put Option, the First Call Option or the Second Call Option (after taking into account the acquisition by the Sponsor of the Option Interest or the Residual Partnership Interest as the case may be) or otherwise on or in relation to any sum received or receivable or deemed to be received or receivable hereunder by the Sponsor (including any sum received or receivable or deemed to be received or receivable under this Clause 8) or any liability in respect of any such payment is asserted, imposed, levied or assessed against the Sponsor, the Guarantor shall, upon demand of the Sponsor, promptly indemnify the Sponsor against such payment or liability, together with any interest, penalties, costs and expenses payable or incurred in connection therewith (except to the extent that such interest penalties, costs or expenses have been incurred by the Sponsor’s gross negligence or wilful misconduct) by making to the Sponsor such payment as is necessary to ensure that the Sponsor receives a sum net of such Tax equal to the sum which it would have received had no such Tax been imposed.
 
9.5                            If the Guarantor is required to indemnify the Sponsor pursuant to Clause 8.5 or a Tax arises in respect of which the Guarantor has an obligation under this Clause 8, then, without in any way limiting, reducing or otherwise qualifying any rights or obligations of the Sponsor, the Sponsor shall promptly upon becoming aware of the same notify the Guarantor thereof and, in consultation in good faith with the Guarantor, for a period of up to sixty (60) days from the date of such notification, the Sponsor shall take such steps at the request and expense of the Guarantor as may be open to it to mitigate the effects of such circumstances on the Guarantor including, without limiting the generality of the foregoing by using all reasonable endeavours to transfer its rights and obligations under this Agreement to another office or to a subsidiary or an affiliate of the Sponsor or to another institution, in each case not affected by the relevant circumstances provided that the Sponsor shall not be under any obligation to take or continue to take any such action or other steps if the Guarantor is in breach of this Agreement or if in its reasonable opinion, acting in good faith, to do so would have a material adverse effect on its business, operations or financial condition or the financial basis under which, inter alia , this Agreement has been entered into or would entail any cost or expense to the Sponsor (unless, in the case of any adverse effect on such financial basis, or cost or expense, the Sponsor shall have been indemnified or otherwise secured to its satisfaction).
 
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9.6
 
9.6.1                             If a claim shall be made by the Sponsor for any Tax for which the Guarantor may be required to indemnify the Sponsor pursuant to Clause 8.2 or Clause 8.5, and under applicable law of the taxing jurisdiction the Guarantor is allowed to contest directly such Tax in its own name, then without prejudice to the obligation of the Guarantor to pay any sum due to the Sponsor pursuant to this Clause 8 on its due date, the Guarantor shall be permitted, at is expense and in its own name, and with the prior written consent of the Sponsor, to contest the imposition of such claim.
 
9.6.2                             If the Guarantor is prevented by applicable law from validly contesting such claim in its own name or if it is necessary for the Sponsor to join in or assist in the contesting by the Guarantor of any claim, upon request of the Guarantor supported by an opinion of counsel selected by the Guarantor reasonably acceptable to the Sponsor confirming that there is a reasonable basis for contesting the validity, applicability or amount of such Taxes, the Sponsor shall, subject to sub-clause 8.7.3, in good faith, at the Guarantor’s expense, contest or assist in contesting the imposition of such Tax. After considering any views offered by the Sponsor and the Sponsor’s counsel concerning the forum in which a claim is most likely to be favourably resolved, the Guarantor may in its sole discretion select the forum for such consent and determine whether any such contest shall be by (a) resisting payment of such Tax, (b) paying such Tax under protest, (c) paying such Tax and seeking a refund or other repayment thereof or (d) seeking a reduction in the amount of such Tax.
 
9.6.3                             In no event shall the Sponsor be required to contest nor shall the Sponsor be required to join in or assist in contesting the imposition of any such Tax:
 
(a)                      if the Sponsor reasonably believes that to do so would be prejudicial to its interest;
 
(b)                     unless the Guarantor shall have agreed to pay the Sponsor on demand, and indemnify the Sponsor from, all reasonable costs and expenses that the Sponsor incurs in contesting or assisting in contesting such claim or arising out of or relating to such contest or assistance (including, but not limited to, all reasonable out-of-pocket costs, expenses, losses, reasonable legal and accounting fees, disbursements, penalties and interest); and
 
(c)                      if such contest shall be conducted in a manner requiring the prior payment of the claim by the Sponsor or, if the Guarantor shall request the Sponsor to make payment thereof pursuant to sub-clauses (b) or (c) of Clause 8.7.2 unless the Guarantor shall have advanced to the Sponsor sufficient funds (on an interest free basis) (and if such payment results in Taxable income to the Sponsor in respect of which the Sponsor does not
 
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receive a corresponding deduction, on an after tax basis) to make such payment.
 
10.                            TAX NOTIFICATION
 
If, at any time, the Guarantor is required by law to make any deduction or withholding from any sum payable by it hereunder (or if thereafter there is any change in the rates at which or the manner in which such deductions or withholdings are calculated), the Guarantor (as the case may be) shall promptly notify the Sponsor.
 
11.                            SPONSOR’S COVENANTS
 
Subject to the proviso below, the Sponsor hereby covenants:
 
11.1.1                       to take all steps reasonably required by the Guarantor in writing, at no cost to the Guarantor, to preserve or protect its interest in the Residual Partnership Interest and the Option Interest;
 
11.1.2                       to perform its obligations under the Put Option Agreement and the Limited Partnership Agreement;
 
11.1.3                       to enforce and exercise its rights and remedies under the Put Option Agreement and the Limited Partnership as reasonably required by the Guarantor;
 
11.1.4                       to notify the Guarantor of any notices, demands, requests or communications received by the Sponsor under or pursuant to the Put Option Agreement;
 
11.1.5                       to involve the Guarantor (to the extent it is entitled to do so in accordance with the terms of the Put Option Agreement) in all consultations and discussions between the Sponsor and Investor that are undertaken by way of exercise of the Sponsor’s consultation rights under the terms of the Put Option Agreement;
 
11.1.6                       not to give any consent, waiver or approval under the Put Option Agreement or take any other action in writing in connection with the Residual Partnership Interest or the Option Interest which in each case would (to the Sponsor’s actual knowledge) materially adversely affect their value
 
PROVIDED that:
 
(1)                     the above covenants, obligations and restrictions shall only apply if and to the extent that such covenants, obligations and restrictions are necessary or reasonably required to the Guarantor’s enjoyment and exercise of its rights, powers, remedies and benefits hereunder and under the Secondary Put Agreement or relevant to the amount or timing of any payment or other obligation or liability of the Guarantor hereunder or under the Secondary Put Agreement to protect and preserve the enjoyment of the interest of the Guarantor
 
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in the Residual Partnership Interest and Option Interest and the rights and benefits intended to be conferred thereby;
 
(2)                     the Sponsor is indemnified and secured (in manner and form reasonably acceptable to the Sponsor) for all costs, liabilities and losses that the Sponsor may incur as a result of taking any such steps as the Guarantor may require pursuant to Clauses 11.1.1;
 
(3)                     the Sponsor shall not be required to take any action or step pursuant to this Clause 11 if doing so shall (or is reasonably likely to) (i) cause the Sponsor to be in breach of any of its obligations under any of the Transaction Documents; or (ii) be unlawful; and
 
(4)                     the obligations of the Sponsor under any document to which it is a party shall be construed as being limited by any non-recourse language contained in such document.
 
12.                            APPLICATION OF MONEYS
 
The Sponsor agrees that all moneys received by it pursuant to Clause 2.5 of the Put Option Agreement and Clause 13 of the Second Assignment shall be paid to the Guarantor, to such account as the Guarantor may direct in writing after, in the case of moneys received under Clause 13 of the Second Assignment, payment to the Sponsor, the General Partner and the Owner of any and all amounts owing to them under any Transaction Document.
 
13.                            INCORPORATION OF TERMS
 
The provisions of Clause 11 ( Assignment ), Clause 12 ( Notices ), Clause 13 ( Counterparts ) and Clause 14 ( Law and Jurisdiction ) of the Secondary Put Agreement shall be incorporated into this Agreement as if set out in full herein and as if references therein to “ this Agreement ” are references to this Agreement.
 
14.                            CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999
 
A person who is not a party to this Agreement has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this Agreement.
 
15.                            PROCESS AGENT
 
The Guarantor agrees that the process by which any proceedings are begun under this Agreement may be served on it by being delivered in connection with any proceedings in England, to SH Process Agents Limited, of One, St Paul’s Churchyard, London, EC4M 8SH ref 43-01770. If this appointment ceases to be effective the Guarantor shall immediately appoint a further person in England to accept service of process on its behalf in England. Nothing contained herein shall affect the right to serve process in any other manner permitted by law.
 
12

 
IN WITNESS of which this Agreement has been duly executed on the day and year first before written.

Guarantor:
 
DANAOS HOLDINGS LIMITED
 
By: /s/ Arlene Payne, Attorney-in-fact

Sponsor:
 
ALLCO FINANCE (UK) LIMITED
 
By: [Illegible]
 
13

 
SCHEDULE 1                      
FORM OF PUT OPTION NOTICE
 
Danaos Holdings Limited
Akti Miaouli 57
185 36 Piraeus
Greece
 
Attention:                                          Legal Department

Dear Sirs
 
The Ocean Container (No.4) Limited Partnership (the “Partnership”)
 
We refer to the secondary put and call agreement relating to the Residual Partnership Interest between ourselves and yourself on [               ] (the “ Secondary Put and Call Agreement ”). Terms defined in the Secondary Put and Call Agreement (except where defined herein) shall have the same respective meanings herein.
 
This Notice is the Put Option Notice for the purposes of the Secondary Put and Call Agreement. We hereby exercise our option contained in Clause 2.1 of the Secondary Put and Call Agreement, being the Put Option in respect of [ ]% of the Residual Partnership Interest and hereby notify you that the Put Option Date shall be [ ] and the Residual Interest Put Option Price shall be [ ].
 
This Notice shall be governed by and construed in accordance with English law. Please acknowledge safe receipt of this Notice.
 
Yours faithfully

 	 	
For and on behalf of	
ALLCO FINANCE (UK) LIMITED	
 
14

 
We acknowledge safe receipt of this Notice of which this is a copy.

 	 	
For and on behalf of	
DANAOS HOLDINGS LIMITED	
 
15

 
SCHEDULE 2                      
FORM OF FIRST CALL OPTION NOTICE
 
Allco Finance (UK) Limited
c/o Allco (Leasing) Europe Ltd.
Lord Coutanche House
66-68 Esplanade
St. Helier
Jersey JE4 8SZ

Attention: The Directors
 
Dear Sirs
 
The Ocean Container (No.4) Limited Partnership (the “Partnership”)
 
We refer to the secondary put and call agreement relating to the Residual Partnership Interest between ourselves and yourself on [              ] (the “ Secondary Put and Call Agreement ”). Terms defined in the Secondary Put and Call Agreement (except where defined herein) shall have the same respective meanings herein.
 
This Notice is the First Call Option Notice for the purposes of the Secondary Put and Call Agreement. We hereby exercise our option contained in Clause 3.1 of the Secondary Put and Call Agreement, being the First Call Option in respect of [ ]% of the Residual Partnership Interest and hereby notify you that the First Call Option Date shall be [ ] and the First Call Option Price shall be [ ].
 
This Notice shall be governed by and construed in accordance with English law. Please acknowledge safe receipt of this Notice.
 
Yours faithfully

 	 	
For and on behalf of	
DANAOS HOLDINGS LIMITED	
 
16

 
We acknowledge safe receipt of this Notice of which this is a copy.

 	 	
For and on behalf of	
ALLCO FINANCE (UK) LIMITED	
 
17

 
SCHEDULE 3                      
FORM OF SECOND CALL OPTION NOTICE
 
Allco Finance (UK) Limited
c/o Allco (Leasing) Europe Ltd.
Lord Coutanche House
66-68 Esplanade
St. Helier
Jersey JE4 8SZ
 
Attention: The Directors
 
Dear Sirs
 
The Ocean Container (No.4) Limited Partnership (the “Partnership”)
 
We refer to the secondary put and call agreement relating to our interest in the Partnership entered into between ourselves and yourself on [         ] (the “ Secondary Put and Call Agreement ”). Terms defined in the Secondary Put and Call Agreement (except where defined herein) shall have the same respective meanings herein.
 
This Notice is the Second Call Option Notice for the purposes of the Secondary Put and Call Option Agreement. We hereby exercise our option contained in Clause 4.1 of the Secondary Put and Call Agreement, being the Second Call Option and hereby notify you that:
 
1.                                        the Second Call Option Date shall be [ ]; and
 
2.                                        the Second Call Option Price is [ ] pounds (£[ ]).
 
This Notice shall be governed by and construed in accordance with English law. Please acknowledge safe receipt of this Notice.
 
Yours faithfully

 	 	
For and on behalf of	
DANAOS HOLDINGS LIMITED	
 
18

 
We acknowledge safe receipt of this Notice of which this is a copy.

 	 	
For and on behalf of	
ALLCO FINANCE (UK) LIMITED	
 
19

 
Exhibit 10.18
 
SHIP BUILDING CONTRACT
 
between
RAMONA MARINE COMPANY LIMITED
and
SAMSUNG HEAVY INDUSTRIES CO. , LTD.

(HULL NO. 1561 )
 
i

 
TABLE OF CONTENTS

ARTICLE I - DESCRIPTION AND CLASS	 	2	
1.	 	Description:	 	2	
2.	 	Principal Dimensions and Characteristics:	 	3	
3.	 	Classification, Rules and Regulations:	 	4	
4.	 	Registration:	 	4	
5.	 	Contract Specifications and Approved Drawings:	 	5	
6.	 	Subcontracting:	 	5	
ARTICLE II - CONTRACT PRICE AND TERMS OF PAYMENT	 	6	
1.	 	Contract Price:	 	6	
2.	 	Adjustment of Contract Price:	 	6	
3.	 	Currency:	 	6	
4.	 	Terms of Payment:	 	6	
5.	 	Method of Payment:	 	7	
6.	 	Notice of Payment on or before Delivery:	 	9	
7.	 	Expenses:	 	9	
8.	 	Advance Payment:	 	9	
9.	 	Refundment Guarantee:	 	9	
ARTICLE III - ADJUSTMENT OF CONTRACT PRICE	 	10	
1.	 	Delivery:	 	10	
2.	 	Speed:	 	11	
3.	 	Fuel Consumption:	 	11	
4.	 	Deadweight:	 	12	
5.	 	Container capacity:	 	12	
6.	 	Reductions to be Independent of Each Other:	 	13	
7.	 	Effect of Rescission:	 	13	
ARTICLE IV - APPROVAL OF PLANS AND DRAWINGS AND INSPECTION DURING CONSTRUCTION	 	14	
1.	 	Approval of Plans and Drawings:	 	14	
2.	 	Appointment of BUYER’s Representatives:	 	15	
3.	 	Inspection by BUYER’s Representatives:	 	15	
4.	 	Rights of the Representatives:	 	15	
5.	 	Facilities:	 	18	
6.	 	Liability of BUILDER:	 	18	
7.	 	Responsibility of BUYER:	 	19	
8.	 	Information to Representatives:	 	19	
ARTICLE V - MODIFICATIONS, CHANGES AND EXTRAS	 	20	
1.	 	How Effected:	 	20	
2.	 	Changes in Rules of Classification Society, Regulations, etc.:	 	20	
3.	 	Substitution of Materials:	 	21	
ARTICLE VI - TRIALS AND ACCEPTANCE	 	22	
1.	 	Notice:	 	22	
2.	 	Weather Condition:	 	22	
3.	 	How Conducted:	 	23	
4.	 	Method of Acceptance or Rejection:	 	23	
5.	 	Effect of Acceptance:	 	24	
6.	 	Disposition of Surplus Consumable Stores:	 	24	
ARTICLE VII - DELIVERY	 	26	
1.	 	Time and Place:	 	26	
2.	 	When and How Effected:	 	26	
3.	 	Documents to be delivered to BUYER:	 	26	
4.	 	Tender of VESSEL:	 	28	
5.	 	Title and Risk:	 	28	
 
i

 

6.	 	Removal of VESSEL:	 	28	
7.	 	Notices:	 	28	
ARTICLE VIII - DELAYS AND EXTENSION OF TIME FOR DELIVERY (FORCE MAJEURE)	 	30	
1.	 	Causes of Delay (Force Majeure):	 	30	
2.	 	Notice of Delay:	 	31	
3.	 	Definition of Permissible Delay:	 	31	
4.	 	Right to Rescind for Excessive Delay:	 	32	
ARTICLE IX - WARRANTY OF QUALITY	 	33	
ARTICLE X - BUILDER’s DEFAULT - RESCISSION BY BUYER	 	38	
1.	 	BUILDER’s Default:	 	38	
2.	 	Effect of BUILDER’s Default:	 	38	
3.	 	Notice:	 	38	
4.	 	Refundment by BUILDER:	 	39	
5.	 	Discharge of Obligations:	 	39	
ARTICLE XI - DEFAULT BY THE BUYER	 	40	
1.	 	Definition of BUYER’s Default:	 	40	
2.	 	Effect of BUYER’s Default on or before Delivery of VESSEL:	 	40	
3.	 	Disposal of VESSEL:	 	41	
ARTICLE XII - ARBITRATION	 	43	
1.	 	Decisions by the Classification Society:	 	43	
2.	 	Proceedings of Arbitration:	 	43	
3.	 	Notice of Award:	 	44	
4.	 	Expenses:	 	44	
5.	 	Entry in Court:	 	44	
6.	 	Alteration of Delivery Date:	 	44	
ARTICLE XIII - ASSIGNMENT - SUCCESSOR AND ASSIGNS	 	45	
ARTICLE XIV - TAXES AND DUTIES	 	46	
1.	 	Taxes and Duties Incurred in Korea:	 	46	
2.	 	Taxes and Duties Incurred outside Korea:	 	46	
ARTICLE XV - PATENTS, TRADEMARKS, COPYRIGHTS, ETC.	 	47	
1.	 	Patents, Trademarks and Copyrights:	 	47	
2.	 	General Plans, Specifications and Working Drawings:	 	47	
ARTICLE XVI - BUYER’s SUPPLIES	 	48	
1.	 	Responsibility of BUYER:	 	48	
2.	 	Responsibility of BUILDER:	 	49	
ARTICLE XVII - INSURANCE	 	50	
1.	 	Extent of Insurance Coverage:	 	50	
2.	 	Application of the Recovered Amounts:	 	50	
3.	 	Termination of BUILDER’s Obligation to Insure:	 	51	
ARTICLE XVIII - NOTICES	 	52	
1.	 	Address:	 	52	
2.	 	Language:	 	52	
3.	 	Effective Date of Notice:	 	53	
4.	 	Change of Address:	 	53	
ARTICLE XIX - EFFECTIVE DATE OF CONTRACT	 	54	
ARTICLE XX - INTERPRETATION	 	55	
1.	 	Laws Applicable:	 	55	
2.	 	Entire Agreement:	 	55	
3.	 	Amendments and Supplements:	 	55	
4.	 	Banking Day:	 	55	
5.	 	No Set Off, Deduction or Counter-claim:	 	55	
6.	 	Deemed Benefit for Servants, etc.:	 	56	
 
ii

 

7	 	Responsibility:	 	56	
8.	 	Time of the Essence:	 	56	
9.	 	Headings:	 	57	
 	 	Annex A. LETTER OF REFUNDMENT GUARANTEE NO.	 	 	
 	 	Annex B. PERFORMANCE GUARANTEE	 	 	
 
iii

 
THIS CONTRACT, made and entered into on this 18 th day of November, 2003, by and between Ramona Marine Company Limited a corporation incorporated and existing under the laws of Cyprus, having its registered office at Diagoras House, 16 P. Catelaris Street, P.O. Box 25001, 1306 Nicosia, Cyprus (hereinafter referred to as the “BUYER”), of the one part and SAMSUNG HEAVY INDUSTRIES CO. LTD., a corporation incorporated and existing under the laws of the Republic of Korea, having its registered office at 647-9, Yoksam-Dong, Kangnam-Ku, Seoul, Korea 135-080 (hereinafter referred to as the “BUILDER”), of the other part.
 
W I T N E S S E T H:
 
In consideration of the mutual covenants herein contained, the BUILDER agrees and undertakes to design, build, launch, equip and complete in accordance with highest shipbuilding practice in Korea, this Contract, the Specifications, the Approved Drawings and the Classification Society Rules (and wherever the term “Classification Society Rules” is used in this Contract, it means the rules of the Classification Society as stipulated in the Contract and the Specifications), in all respects, one (1) Ocean Going Single Screw diesel engine driven fully Cellular Container Vessel as described herein and in the Specifications referred to herein (hereinafter called the “VESSEL” which term shall, where it appears, include its design, drawings, plans, machinery, engines, equipment, fittings, outfittings, appurtenances, furniture, materials, parts, spares, articles and things whatsoever specified or required by the Specifications and/or otherwise under this Contract), at the BUILDER’s shipyard located in Koje Island, Korea (hereinafter called the “Shipyard”) and to deliver and sell the same to the BUYER free and clear of all liens, charges, mortgages and encumbrances, and the BUYER hereby agrees to purchase and accept delivery of the VESSEL from the BUILDER and to pay for the same upon the terms and conditions hereinafter set forth.
 
1

 
ARTICLE I - DESCRIPTION AND CLASS
 
1.              Description:
 
The VESSEL shall be a Single Screw Cellular Container VESSEL having the BUILDER’s Hull No. 1561 and shall be designed, constructed, equipped, inspected, tested and ready for sea and suitable in all respects for its intended use for carrying dry cargo containers in accordance with the provisions of this Contract, and the full specifications reference No. CN03086.FS01 October 22, 2003, General Arrangement Drawing reference DWG. No. CN03086.GA01, Maker’s List reference No. CN03086.ML01 and Midship Section Plan reference DWG. No. CN03086.MS01 (hereinafter collectively called the “Specifications”) signed by each of the parties for identification and constituting an integral part hereof. The Approved Drawings, and the Classification Society Rules shall constitute an integral part hereof. A reference hereafter in this Contract to Specifications shall be deemed to include the Approved Drawings and the Classification Society Rules. The BUILDER undertakes that the quality of the design, construction, testing and trials of the VESSEL and the quality of the VESSEL and of her workmanship shall be in accordance with the highest shipbuilding practice in Korea and the warranty provided in Article IX 1. (a) shall be effective to this standard.
 
 BUYER and the BUILDER hereby undertake the VESSEL shall be the just repeat and series vessel of the BUILDER’s Hull No. 1558 (as a series project). Thus all construction procedure including model test and sea trial etc. shall be done on the basis of the just repeat and series vessel of Hull No. 1558.
 
The BUYER and BUILDER hereby further undertake that the Specifications, all plans, Manufacturer List and all drawings, made, used and approved in accordance with the Shipbuilding Contracts for BUILDER’s Hull No. 1558, shall be used for the VESSEL without any further approval and modification from the BUYER unless otherwise mutually agreed by both parties.
 
The BUYER further acknowledge that any change or modification or request therefor to be made by the BUYER during the construction phase of the VESSEL will reduce the series/repeat effects of the relevant vessel as originally contemplated by the parties hereto upon execution of the Shipbuilding Contract and thus, may be acceptable and incorporated at the BUILDER’s sole discretion only upon payment of the costs incurred by the BUILDER due to such change or modification.
 
2

 
2.              Principal Dimensions and Characteristics:
 
(a)            The BUILDER guarantees that the VESSEL will have the following:

Length, overall	 	app.	336.7 m	
Length, between perpendiculars	 	 	321.0 m	
Breath, moulded	 	 	45.60 m	
Depth, moulded	 	 	27.2 m	
Designed draught, moulded	 	 	13.0 m	
Scantling draught, moulded	 	 	15.0 m	
Main Engine	 	MAN B &W 12K98MC-C	
MCR x RPM	 	93,120 BHP x 104 RPM	
NCR (90% MCR)	 	83,810 BHP	
 
(b)         The BUILDER guarantees that the VESSEL shall have the following Capacity of ISO standard 20’ x 8’ x 8’ 6” Containers (the “Guaranteed Container Capacity”), namely:

Under deck -	4,678 TEU	
On deck -	4,902 TEU (in eight tiers + castle stow)	
Total	9,580 TEU	
 
(c)            The BUILDER guarantees that the VESSEL shall have a deadweight of not less than 108,330 metric tons on scantling draught as calculated in accordance with the provisions of the Specifications (hereinafter called the “Guaranteed Deadweight”). The actual deadweight of the VESSEL expressed in tonnes of 1,000 kilograms shall be determined in the presence of the Representatives of the BUYER, the Classification Society and the BUILDER on the basis of the actual measurement of the lightweight of the completed VESSEL, and thereafter a certificate of deadweight shall be issued by the BUILDER. The cost, if any, shall be for the account of the BUILDER.
 
(d)             The BUILDER guarantees that the speed of the VESSEL on sea trial as stipulated and on the conditions prescribed in the Specifications shall be 25.2 knots at 14.5 metres draught at main engine output of 72,880 HP (hereinafter called the “Guaranteed Speed”).
 
(e)             The BUILDER guarantees that fuel consumption for the main engine, the figure of which shall be calculated by applying I.S.O. reference condition to the result obtained at the shop trial, shall not exceed 126.0 grams/bhp/hour at MCR as stipulated and on the conditions prescribed in the Specifications (hereinafter called the “Guaranteed Fuel Consumption”).
 
The details of the aforementioned particulars as well as the definitions and method of measurements and calculations are as indicated in the Specifications.
 
3

 
3.              Classification, Rules and Regulations:
 
The VESSEL shall be designed, constructed, equipped, inspected, tested and completed in accordance with the rules and regulations (the edition and amendments thereto being in force and effect as of the date of this Contract) of and under special survey of Lloyds Register of Shipping (hereinafter called the “Classification Society”) and shall be distinguished in the register by the symbol of X 100A1 Containership, Shipright (SDA, FDA, CM) *IWS, X LMC, UMS, SCM, EP, CAC, NAV1 Details of Class notation shall be in accordance with the Specifications.
 
Decisions of the Classification Society as to compliance or non-compliance with the classification rules and regulations shall be final and binding upon both parties hereto, except where this Contract provides for Arbitration.
 
The VESSEL shall comply with rules, regulations, recommendations and requirements of the Authorities in force as of the date of the Contract signing as described and listed in the Specifications, together with all mandatory rules and regulations with amendment, which have already been ratified up to the contract signing date and to come into effect prior to the scheduled delivery date of the VESSEL.
 
The BUILDER shall arrange with the Classification Society for the assignment by the Classification Society of a representative (hereinafter referred to as the “Classification Surveyor”) to the VESSEL during all stages of construction. All materials, workmanship and major plans used in the construction of the VESSEL shall be subject to inspection and test by the Classification Society in accordance with the rules and regulations of the Classification Society. All fees and charges in connection with or incidental to the classification of the VESSEL, to all certificates required under this Contract and the Specifications, and to compliance with the above specified rules, regulations and requirements, shall be for the account of the BUILDER.
 
No act or omission of the Classification Society and/or Classification Surveyor shall, in any way, diminish or impair the obligations and liabilities of the BUILDER under the terms of this Contract.
 
4.              Registration:
 
The VESSEL, at the time of her delivery and acceptance, shall be registered at the port of registry by the BUYER under the Cypriot or Hong Kong flag at the BUYER’s expense. The BUILDER shall obtain and deliver to the BUYER at delivery and acceptance the Certificates required pursuant to the Specifications.
 
4

 
5.              Contract Specifications and Approved Drawings:
 
(a)            Subject to provisions of sub-clause (b) hereunder, the Specifications and the Approved Drawings are intended to complement this Contract as well as one another and everything contained in the Specifications and/or the Approved Drawings shall have full force and effect as if incorporated within the body of this Contract.
 
(b)            (i)             Should there be any inconsistency or discrepancy between this Contract and the Specifications or between this Contract and the Approved Drawings, this Contract shall prevail.
 
(ii)            Should there be any inconsistency or discrepancy between the Specifications and the Approved Drawings, the Specifications shall prevail.
 
6.              Subcontracting:
 
The BUILDER may, at its sole discretion and responsibility, and upon written notice to BUYER subcontract any portion but not the whole, of the construction work of the VESSEL outside the Shipyard but in any event major hull structure parts will be built by the BUILDER provided, however, that the BUILDER shall remain responsible for the performance of this Contract with regard to the work done or materials supplied or used by such subcontractors in accordance with this Contract. Subcontractors shall apply same standard as the BUILDER.
 
(end of Article)
 
5

 
ARTICLE II - CONTRACT PRICE AND TERMS OF PAYMENT
 
1.              Contract Price:
 
The purchase price of the VESSEL is Eighty Three Million Nine Hundred Thousand Million United States Dollars (US$ 83,900,000.) including extra costs of US$ 266,600 agreed on October 21, 2003 (hereinafter called the “Contract Price”).
 
The Contract Price is fixed and not subject to any escalation under any circumstances whatsoever unless otherwise provided in this Contract and includes payment for services in the design, inspection, tests, trials, survey and classification of the VESSEL which shall be rendered by the Classification Society but shall not include the cost of items to be supplied by the BUYER as stipulated in Clause 1 of Article XVI of this Contract.
 
The Contract Price also includes all costs and expenses for supplying all drawings and plans (except those to be furnished by the BUYER in respect of the BUYER’s Supplies) and designs, machinery, engines, equipment, fittings, outfittings, appurtenances, furniture, materials, parts, spares, articles and things whatsoever and specified or required by the Specifications and/or otherwise under this Contract for the VESSEL, and all other items and acts necessary for the due and punctual performance of BUILDER’s obligations under or pursuant to this Contract.
 
2.              Adjustment of Contract Price:
 
Increase or decrease of the Contract Price, if any, due to adjustments thereof made in accordance with the provisions of this Contract shall be adjusted by way of addition to or subtraction from the Contract Price upon delivery of the VESSEL in the manner as hereinafter provided.
 
3.              Currency:
 
Any and all payments which are due under this Contract or to be refunded under the terms thereof shall be made in United States Dollars.
 
4.              Terms of Payment:
 
The Contract Price shall be due and payable by the BUYER to the BUILDER in four installments as follows:
 
6

 
(a)            First Installment:
 
The first installment amounting to US$ 4,195,000 shall be payable as set out in clause 5(a) of this Article.
 
(b)            Second Installment:
 
The second installment amounting to US$ 4,195,000 shall be due and payable as set out in Clause 5 (b) of this Article.
 
( c)            Third Installment:
 
The third installment amounting to US$ 67,120,000 shall be due and payable as set out in Clause 5 (c) of this Article.
 
( d)            Delivery Installment:
 
The Delivery Installment amounting to US$ 8,390,000 plus any increase or minus any decrease due to adjustment of the Contract Price under the provisions of this Contract shall be due and payable simultaneously with the delivery to and acceptance of the VESSEL by the BUYER as set out in Clause 5 (d) of this Article.
 
5.              Method of Payment:
 
(a)            First Installment:
 
By November 25, 2003, the BUYER shall remit by telegraphic transfer the first installment after the BUYER’S receipt from the BUILDER of the signed copy of Letter of Refundment Guarantee by fax as set forth in clause 9 of this Article to the Export-Import Bank of Korea, Head office Seoul (account No. 04-029-695) with Deutsche Bank Trust Company Americas, 60 Wall Street, Mail Stop NYC 60-1310, New York, NY10005, U.S.A. in favor of Samsung Heavy Industries Co., Ltd., or to the account of such other bank in New York which the BUILDER may designate in writing (herein referred to as the “BUILDER’s Bank”) in favor of Samsung Heavy Industries Co., Ltd.
 
(b)            Second Installment:
 
By December 1, 2003, the BUYER shall remit by telegraphic transfer the second installment to the account mentioned in clause 5 (a) above.
 
( c)            Third Installment:
 
By January 31, 2004, the BUYER shall remit by telegraphic transfer the third installment to the account mentioned in clause 5 (a) above.
 
In the event the BUYER does not expect to obtain the financing by December 31, 2003, the BUYER may request a month extension of the Due Date so as to defer the BUYER’s payment of the Third
 
7

 
Instalment up until February 28, 2004. The BUYER must request the extension in writing and with reasons. The BUILDER shall have a right to grant, in its sole discretion, a month extension provided, which not to be unreasonably withhold. In such event of extension and deferment, the interest rate applying to interest which shall accrue on the Third Instalment at the rate of 5% per annum and be computed starting from January 31, 2004 through (including) to the earlier of the actual date of payment and February 28, 2004. The accrued default interest (the “Default Interest”) shall be paid to the BUILDER, together with the Third Instalment.
 
( d)            Delivery Installment:
 
The BUYER shall pay the installment due on delivery of the VESSEL (the “Delivery Installment”) in the following way: At least one (1) Banking Day prior to the scheduled Delivery Date of the VESSEL, the BUYER shall procure that a first class bank (the “Remitting Bank”) issue a tested key telex to the BUILDER’s Bank containing an irrevocable undertaking by the Remitting Bank that funds shall be transferred to the BUILDER’s Bank for value on the scheduled delivery date and held to the order of the Remitting Bank for release to Samsung Heavy Industries Co., Ltd. against presentation by the BUILDER to the BUILDER’s Bank of a duplicate original copy of the Protocol of Delivery and Acceptance of the VESSEL duly executed by the BUYER and the BUILDER, evidencing the delivery of the VESSEL to and her acceptance by the BUYER.
 
No later than five (5) Banking Days prior to the scheduled date for the acceptance of delivery of the VESSEL, the parties hereto shall execute an agreement on all adjustments of the Contract Price, if any. Notwithstanding the foregoing, adjustment in connection with the delay in delivery of the VESSEL shall be made on delivery. If the parties cannot agree on the said adjustments, delivery of the VESSEL shall take place as provided herein and the adjustments shall be determined by arbitration pursuant to Article XII herein.
 
If any of the above payment dates is not a Banking Day then the payment(s) so due on such non-Banking Day shall be understood to be payable on the next Banking Day after the date on which payment should have been made in accordance with this Clause.
 
( e)            Default Interest and Others
 
In the event of default in the payment of any installment in sub-clause (a) through ( d) of this Clause 5, the BUYER shall pay default interest, charges and expenses in accordance with Clause 2 (a) of Article XI hereof.
 
8

 
6.              Notice of Payment on or before Delivery:
 
With the exception of the first installment, the BUILDER shall give the BUYER at least fourteen (14) Banking Days prior notice in writing by telex or facsimile confirmed in writing by registered air mail confirming the due date and amount of each installment payable on or before delivery of the VESSEL.
 
7.              Expenses:
 
All charges, expenses and bank charges outside of Korea for remitting payments and any taxes, duties, expenses and fees outside of Korea connected with such payment shall be for the account of the BUYER except for the BUILDER’s receiving bank. All charges, expenses and bank charges and any taxes, duties, expenses and fees arising inside Korea for remitting payment shall be for the account of BUILDER.
 
8.              Advance Payment:
 
The payment of the Contract Price by way of the installments set out in Clause 4 of this Article shall be in the nature of advance(s) and shall be subject to refund to the BUYER in accordance with the provisions of this Contract.
 
9.              Refundment Guarantee:
 
As security for refund of installments including interest prior to delivery of the VESSEL, the BUILDER shall, as provided in Clause 5( a) of this Article, furnish the BUYER with an Irrevocable Letter of Refundment Guarantee in favour of the BUYER issued by Export-Import Bank of Korea, acceptable to the Buyer (hereinafter called the “Refundment Guarantee”) covering the amount of all of the first, second and third installments from the BUYER. The receipt of such Refundment Guarantee is a pre-condition to payment of the first, second and third installments. The Refundment Guarantee shall be in the form of Exhibit “A” attached hereto.
 
(end of Article)
 
9

 
ARTICLE III - ADJUSTMENT OF CONTRACT PRICE
 
The Contract Price shall be subject to adjustment, as hereinafter set forth, in the event of any of the following contingencies (it being agreed and understood by both parties that any reduction of the Contract Price under this Article is by way of liquidated damages and not by way of penalty), namely:
 
1.              Delivery:
 
(a)            No adjustment shall be made and the Contract Price shall remain unchanged for the first thirty (30) days of delay in delivery of the VESSEL beyond the Delivery Date as defined in Article VII hereof (ending as of twelve o’clock midnight in Korea of the thirtieth (30th) day of delay).
 
(b)            If the delivery of the VESSEL is delayed by more than thirty (30) days after the Delivery Date, then, in such event, beginning at twelve o’clock midnight in Korea of the thirtieth (30th) day after the Delivery Date, the Contract Price shall be reduced by deduction therefrom as follows: from the 31st day to 90th day - US$ 40,000.- per day and pro rata for part of a day; from the 91st day to the 150th day - US$ 45,000.- per day and pro rata for part of a day. However, the total reduction in the Contract Price shall not exceed the amount due to cover the delay of 120 days after the first 30 days hereinabove referred to for the delay in delivery of the VESSEL at the rate of reduction as specified above.
 
(c)            However, if the delay in delivery of the VESSEL should continue for a period of one hundred and fifty (150) days from the Delivery Date, then in such event, and after such period has expired, the BUYER may, at its option, rescind this Contract in accordance with the provisions of Article X hereof and reject the VESSEL.
 
The BUILDER may, at any time after the expiration of the aforementioned one hundred and fifty (150) days of delay in delivery, if the BUYER has not served notice of rescission as provided in Article X hereof, demand in writing that the BUYER shall make an election, in which case the BUYER shall within twenty (20) days after such demand is received by it notify the BUILDER of its intention either to rescind this Contract or to consent to the acceptance of the VESSEL at an agreed future date. If the BUYER shall not make an election within twenty (20) days as provided herein above, the BUYER shall be deemed to have accepted such extension of the delivery date to the future delivery date indicated by the BUILDER and it being understood by the
 
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parties hereto that if the VESSEL is not delivered by such future date, the BUYER shall have the same right of rescission upon the same terms and conditions as herein above provided. The reduction in the Contract Price shall apply in case of agreed future date of delivery.
 
(d)            For the purpose of this Article, the delivery of the VESSEL shall be deemed to be delayed when and if the VESSEL, after taking into account all postponements of the Delivery Date by reason of Permissible Delay as defined in Article VIII, is not delivered by the date upon which delivery is required under the terms of this Contract.
 
2.              Speed:
 
(a)            The Contract Price shall not be affected or changed by reason of the actual trial speed (as determined according to the Specifications) being less than the Guaranteed Speed, if such deficiency is not more than four-tenths (4/10) of one (1) knot below the Guaranteed Speed.
 
(b)            However, if such deficiency is more than four-tenths (4/10) of one (1) knot, then the Contract Price shall be reduced by EightyFour Thousand United States Dollars (US$ 84,000) for each successive whole one-tenth (1/10) of a knot and pro rata for any fraction thereof in excess of a deficiency of four-tenths (4/10) of a knot.
 
(c)            If the deficiency in the actual trial speed upon final sea trial is seven-tenths (7/10) of a knot or more below the Guaranteed Speed of the VESSEL, then the BUYER may, at its option, reject the VESSEL and rescind this Contract in accordance with the provisions of Article X hereof, or may accept the VESSEL at a reduction in the Contract Price as above provided that the total reduction does not exceed Two Hundred and Fifty Two Thousand United States Dollars (US$ 252,000.).
 
3.              Fuel Consumption:
 
(a)            The Contract Price shall not be affected or changed in case the actual fuel consumption, as determined by the engine manufacturer’s shop trial as specified in the Specifications, is not more than tolerance margin of five percent (5%) in excess of the Guaranteed Fuel Consumption.
 
(b)            However, in the event that the actual fuel consumption at the shop
 
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trial is in excess of five percent (5%) of the Guaranteed Fuel Consumption, the Contract Price shall be reduced by the sum of Sixty Thousand United States Dollars (US$60,000) for each full one percent (1%) increase in fuel consumption and pro rata for any fraction of one percent (1%) of the Guaranteed Fuel Consumption in excess of the said five percent (5%) up to maximum of eight percent (8%) over the Guaranteed Fuel Consumption.
 
(c)            If the fuel consumption of the main engine exceeds the Guaranteed Fuel Consumption by more than eight percent (8%), then the BUYER may, at its option, reject the VESSEL and rescind this Contract in accordance with the provisions of Article X hereof, or may accept the VESSEL at a reduction in the Contract Price as above provided for eight percent (8%) only, that is, at a total reduction of One Hundred and Eighty Thousand United Stated Dollars (US$180,000).
 
4.              Deadweight:
 
(a)            In the event that the actual deadweight of the VESSEL as determined in accordance with the Specifications is less than the Guaranteed Deadweight, the Contract Price shall be reduced by the sum of Six Hundred United States Dollars (US$600) for each full metric ton of such deficiency being more than One Thousand Five Hundred (1,500) metric tons.
 
(b)            In the event of such deficiency in the actual deadweight of the VESSEL being Three Thousand Nine Hundred (3,900) metric tons or more, then the BUYER may, at its option, reject the VESSEL and rescind this Contract in accordance with the provisions of Article X hereof or accept the VESSEL at a reduction in the Contract Price as above provided for Three Thousand Nine Hundred (3,900) metric tons only, that is, at a total reduction of One Million Four Hundred Forty Thousand United States Dollars (US$ 1,440,000).
 
5.              Container capacity:
 
(a)            In the event that the actual container capacity of the VESSEL as determined in accordance with the Specifications is less than the Guaranteed Container Capacity by more than 35 TEUs, the Contract Price shall be reduced by the sum of Thirty Five Thousand United States Dollars (US$35,000) for each container TEU of deficiency in excess of 35 TEUs.
 
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(b)            In the event of such deficiency being 90 TEU containers or more the BUYER may, at its option reject the VESSEL and rescind this Contract in accordance with the provisions of Article X hereof or may accept the VESSEL at a total reduction in the Contract Price as above provided of One Million Nine Hundred Twenty Five Thousand United States Dollars (US$1,925,000).
 
6.              Reductions to be Independent of Each Other:
 
Reductions permitted herein are independent of each other and in the event of there being contingencies which necessitate the application of two or more paragraphs, there shall be separate reductions in the Contract Price in respect of each contingency.
 
7.              Effect of Rescission:
 
It is expressly understood and agreed by the parties that in any case, if the BUYER rescinds this Contract under this Article, the BUYER shall not be entitled to any liquidated damages or any other recourse unless by means of the provisions of Article X hereof.
 
(end of Article)
 
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ARTICLE IV - APPROVAL OF PLANS AND DRAWINGS AND INSPECTION DURING CONSTRUCTION
 
1.              Approval of Plans and Drawings:
 
(a)            The BUILDER shall submit to the BUYER three (3) copies of the plans and drawings to be submitted thereto for its approval at its address as set forth in Article XVIII hereof. The BUYER shall, within twenty four (24) days after receipt thereof, return to the BUILDER one (1) copy of such plans and drawings with the BUYER’s approval or comments written thereon, if any. A list of the plans and drawings to be so submitted to the BUYER shall be mutually agreed upon between the parties hereto.
 
(b)            When and if the Representatives shall have been sent by the BUYER to the Shipyard in accordance with Clause 2 of this Article, the BUILDER may submit the remainder, if any, of the plans and drawings in the agreed list, to the Representatives for his approval, unless otherwise advised by the BUYER.
 
The Representatives shall, within eighteen (18) days after receipt thereof, return to the BUILDER one (1) copy of such plans and drawings with his approval or comments written thereon, if any.
 
Approval by the Representatives of the plans and drawings duly submitted to him shall be deemed to be the approval by the BUYER for all purposes of this Contract (the “Approved Drawings”).
 
(c)            In the event that the BUYER or Representatives shall fail to return the plans and drawings to the BUILDER by fax or otherwise within the time limit as hereinabove provided, such plans and drawings shall be deemed to have been automatically approved without any comment.
 
Notwithstanding this Article IV. 1. (Approval of Plans and Drawings) above, the BUYER and the BUILDER hereby agree and undertake that the Specifications, all plans, Manufacture List and all drawings, made, used and approved in accordance with the Shipbuilding Contracts for BUILDER’s Hull No. 1558, shall be used for the VESSEL without any further approval and modification from the BUYER unless otherwise mutually agreed by both parties.
 
The BUYER further acknowledge that any change or modification or request therefor to be made by the BUYER during the construction
 
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phase of the V ESSEL will reduce the series/repeat effects of the relevant vessel as originally contemplated by the parties hereto upon execution of the Shipbuilding Contract and thus, may be acceptable and incorporated at the BUILDER’s sole discretion only upon payment of the costs incurred by the BUILDER due to such change or modification.
 
2.              Appointment of BUYER’s Representatives:
 
The Buyer may send to and maintain at the Shipyard, at the BUYER’s own cost and expense, one or more Representatives who shall be duly authorized in writing by the BUYER (herein called the “Representatives”) to supervise the construction by the BUILDER of the VESSEL and to act on behalf of the BUYER in connection with the modifications of the Specifications, approval of the plans and drawings, attendance to the tests, inspections and trials relating to the VESSEL, and any other matters for which he is specifically authorized by the BUYER. The Representatives may appoint assistant(s) to attend at the Shipyard for the purposes as aforesaid.
 
Upon appointment of the Representatives, the BUYER shall notify the BUILDER in writing of the name and the scope of authority of the Representatives to be dispatched as a single unified team to the BUILDER’s yard for supervision of the construction of the VESSEL. Further, the BUYER understands and agrees that regardless of any Technical Agreement, any and all communications and correspondences relating to the construction of the VESSEL shall be made through the BUYER only. Before the commencement of any item of work under this Contract, the BUILDER shall, whenever reasonably required previously exhibit, furnish to, and within the limits of the Representative’s authority, secure the approval from the Representatives of any plans and drawings prepared in connection therewith.
 
3.              Inspection by BUYER’s Representatives:
 
The necessary inspections and testing of the VESSEL shall be carried out by the Classification Society, other regulatory bodies and an inspection team of the BUYER, including the Representatives, throughout the entire period of construction, in order to ensure that the construction of the VESSEL is duly performed in accordance with this Contract and the Specifications.
 
4.              Rights of the Representatives:
 
(a)            The Representatives shall, at all times during the construction until
 
15

 
delivery and acceptance of the VESSEL, have the reasonable right to inspect the VESSEL and all work in progress, materials utilized and quality of work in connection with the construction thereof wherever such work is being done within the Shipyard’s premises or wherever such materials and equipment are stored, for the purpose of determining that the VESSEL is being constructed in accordance with the terms of this Contract and the Specifications.
 
(b)            The Representatives shall have the unrestricted right to visit the VESSEL and all work in progress. The Representatives shall also have the reasonable right to visit, with the BUILDER’s attendance or introduction as necessary, all property and premises utilized in connection with the construction of the VESSEL, wherever and whenever such premises is being utilized or such property is stored.
 
(c)            The construction of the VESSEL shall be subjected, throughout the entire period of construction, to quality control by a quality control department of the BUILDER. The necessary tests and inspection by the Classification Society and other regulatory bodies concerned shall also be carried out and recorded and all results of quality control and tests and inspections shall be communicated in the form documented, or in the absence of documentation, orally, to the Representatives.
 
(d)            The Representatives may attend during construction of the VESSEL, tests and inspection of the VESSEL, its machinery and equipment. The BUILDER shall give the Representatives at least one (1) week advance notice for tests and inspections within the Shipyard stating particulars of any tests or inspections which may be attended by the Representatives provided that in exceptional circumstances the manner in which such notice is given may be modified by mutual agreement. Notice of tests and inspections to be conducted shall also be given to the Representatives latest up to 5:00 p.m. of the day prior to the day on which any tests or inspections shall occur.
 
For test or inspections outside the Shipyard, including manufacturer’s shop tests, sufficient advance notice to allow for the Representatives to arrange transportation shall be given. This advance notice should not be less than seven (7) days for tests or inspections that require air travel for attendance.
 
Inspection schedule must be reasonable at all times in order to allow the BUYER’s Representatives to carry out their duties properly and inspections must be spread over a reasonable time, but to follow building schedule at the same rate. In principle, inspections will not take place on Saturdays, Sundays and Holidays, unless mutually agreed upon and necessary in order to meet the BUILDER’s schedule.
 
Failure of the Representatives to be present at the tests and inspections
 
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after due notice shall be deemed to be a waiver of the BUYER’s right to be present. In such case the BUYER shall be obliged to accept the result of such test on the basis of the BUILDER’s certificate, signed by the Classification Society, that the said result is conforming to the provisions of this Contract and the Specifications.
 
(e)            The Representatives shall notify the BUILDER promptly, in writing, if, in his opinion, the VESSEL is not being constructed in accordance with this Contract or the Specifications. The BUYER may at its election send a copy of such notification to the Classification Society.
 
(f)             No act or omission of the Representatives or his assistants shall, in any way, diminish or impair the liability of the BUILDER under this Contract and/or the Specifications.
 
(g)            The Representatives shall advise and consult the BUILDER on all matters pertaining to the construction of the VESSEL, as may be required by the BUILDER, or as he may deem necessary.
 
(h)            The inspection thus exercised on behalf of the BUYER shall not alter or diminish the responsibility of the BUILDER to construct the VESSEL in accordance with the Contract and the Specifications.
 
(i)             In the events that the Representatives shall advise the BUILDER that he has discovered and believes the VESSEL is not being constructed in accordance with this Contract or the Specifications, and the BUILDER shall not agree with the views of the Representatives in such respect, as provided in Clause (e) of this Article, either the BUYER or the BUILDER shall seek a decision of the Classification Society in accordance with clause 1 of Article XII of this Contract.
 
The Classification Society shall determine whether or not a non-conformity with the provisions of this Contract or the Specifications exists. If the Classification Society enters a determination in favour of the BUYER, then in such case the BUILDER shall make the necessary alterations or changes, or if such alterations or changes cannot be made in time to meet the construction schedule for the VESSEL and the BUYER so agrees, which shall not be unreasonably withheld, but without prejudice to BUYER’s other rights under this Contract, the Contract Price shall be fairly and reasonably reduced (as agreed between the Parties hereto and failing which by Arbitration as hereinafter provided) in lieu of such alterations and changes.
 
If the Classification Society enters a determination in favour of the BUILDER, then the time for delivery of the VESSEL shall be extended for the period of delay in construction, if any, occasioned by such proceedings, and the BUYER shall compensate the BUILDER for the
 
17

 
proven loss and damages incurred by the BUILDER as a result of the dispute herein referred to.
 
The BUILDER undertakes to inform the Classification Society in writing within thirty (30) days of the date of this Contract that the BUILDER has no objection to the BUYER making an arrangement with the Classification Society for receiving copies of any technical correspondence exchanged between the BUILDER and the Classification Society in the course of design, testing, approval, inspection, survey, supervision, certification and construction of the VESSEL.
 
5.              Facilities:
 
The BUILDER shall, at no cost to the BUYER, furnish suitably lighted, and air conditioned office space, for a team of not less than six (6) Representatives all along, including changing room, toilet and shower space, office furniture, drawing table and filing cabinets. Separate telephone lines and facsimile receiver to be provided in Representatives office and international communication service shall be paid by the BUYER at normal rate of charges of Korean telecommunication company. However, the changing room, toilet and shower space shall be supplied as public facilities.
 
During the last forty five (45) days of the period of construction of the VESSEL, office space shall be provided to accommodate the VESSEL’s senior officers as far as practicable in the Representatives’ office space.
 
With an ample prior notice by the BUYER, the BUILDER shall arrange for the Representatives suitable and convenient living quarters nearest possible to the Shipyard and are to provide for the purpose thereof apartments/houses fully furnished and equipped in Western style with minimum two (2) bedrooms and one (1) living room for each Representatives, all at the BUYER’s expenses.
 
If accommodation is not arranged before arrival of Representatives the BUILDER shall provide hotel accommodation (of minimum four (4) star class) until accommodation is arranged in all respects. Transportation to and from the Shipyard for Representatives and transportation for Representatives to and from the BUILDER’s sub-contractors for inspections shall be arranged by the BUILDER during the whole building period in accordance with BUILDER’s practice.
 
6.              Liability of BUILDER:
 
The Representatives and his assistant(s) shall at all times be deemed to be the employees of the BUYER and not of the BUILDER.
 
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The BUILDER shall be under no liability whatsoever to the BUYER, the Representatives or his assistant(s) for personal injuries, including death, suffered during the time when he or they are on the VESSEL, or within the premises of either the BUILDER or its subcontractors, or are otherwise engaged in and about the construction of the VESSEL, unless, however, such personal injuries, including death, was caused by negligence or willful misconduct of the BUILDER, or of any of its employees or agents or subcontractors.
 
Nor shall the BUILDER be under any liability whatsoever to the BUYER, the Representatives or his assistant(s) for damage to, or loss or destruction of property of the BUYER or of the BUYER’s Representatives or his assistant(s), unless such damage, loss or destruction was caused by negligence or willful misconduct of the BUILDER or of any of its employees or agents or subcontractors.
 
7.              Responsibility of BUYER:
 
The BUYER shall undertake and assure that the Representatives and his assistant(s) shall carry out their duties hereunder in accordance with the normal shipbuilding practice and in such a way so as to avoid any unreasonable disturbance in the construction schedule of the BUILDER in respect of the VESSEL.
 
The Representatives and his assistant(s) shall observe the work rules and regulations prevailing at the BUILDER’s and its subcontractors’ and suppliers’ premises.
 
8.              Information to Representatives:
 
The BUILDER shall promptly provide all required information to the Representatives and his assistant(s) and shall secure that its subcontractors and suppliers shall promptly provide all such information as he or they may reasonably request in connection with the construction of the VESSEL.
 
(end of Article)
 
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ARTICLE V - MODIFICATIONS, CHANGES AND EXTRAS
 
1.              How Effected:
 
Any modifications and/or changes in the Specifications under which the VESSEL is to be constructed shall be made by written agreement of the parties hereto provided, however, that any modifications and/or changes will not adversely affect the BUILDER’s planning or programme in relation to the BUILDER’s other commitments and if the BUYER and BUILDER shall agree to adjustment of the Contract Price, time for delivery of the VESSEL and other terms and conditions of this Contract as hereinafter provided. The BUILDER hereby agrees to exert its best efforts to accommodate such reasonable request by the BUYER so that the said changes and/or modifications may be made at a reasonable cost and within the shortest period of time which is reasonably possible. Any such agreement for modifications and/or changes shall include an agreement as to the increase or decrease, if any, in the Contract Price of the VESSEL together with an agreement as to any extension or reduction in the time of delivery, or any other alterations in this Contract, or the Specifications or the Approved Drawings occasioned by such modifications and/or changes.
 
The aforementioned agreement to modify and/or change the Specifications and/or Approved Drawings may be effected by an exchange of letters signed by the authorized Representatives of the parties hereto, or telex or facsimile confirmed in writing, manifesting such agreement. Such letters and confirmed telex and facsimile exchanged by the parties hereto pursuant to the foregoing shall constitute an amendment of the Specifications, and such letters and telex and facsimile shall be incorporated into this Contract and made a part hereof.
 
The BUILDER may make minor changes to the Specifications, if found necessary for introduction of improved production methods or otherwise, provided that the BUILDER shall first obtain the BUYER’s written approval which shall not be unreasonably withheld.
 
2.              Changes in Rules of Classification Society, Regulations, etc.:
 
In the event that, after the date of this Contract, any requirements as to class, or as to rules and regulations to which the construction of the VESSEL is required to conform are altered or changed by the Classification Society or the other regulatory bodies authorized to make such alterations or changes, the following provisions shall apply:
 
(a)            If such alterations or changes are compulsory for the VESSEL,
 
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either of the parties hereto, upon receipt of such information from the Classification Society or such other regulatory bodies, shall promptly transmit the same to the other in writing, and the BUILDER shall thereupon incorporate such alterations or changes into the construction of the VESSEL, provided that the BUYER shall first agree to reasonable adjustments required by the BUILDER in the Contract Price, the Delivery Date and other terms and conditions of this Contract and the Specifications occasioned by or resulting from such alternations or changes.
 
(b)            If such alterations or changes are not compulsory for the VESSEL, but the BUYER desires to incorporate such alterations or changes into the construction of the VESSEL, then the BUYER shall notify the BUILDER of such intention. The BUILDER shall accept such alterations or changes, provided that such alterations or changes will not, in the judgment of the BUILDER, adversely affect the BUILDER’s planning or program in relation to the BUILDER’s other commitments, and provided, further, that the BUYER shall first agree to reasonable adjustments required by the BUILDER in the Contract Price, the Delivery Date and other terms and conditions of this Contract and the Specifications occasioned by or resulting from such alternations or changes. Agreements as to such alterations or changes under this Paragraph 2 shall be made in the same manner as provided in Paragraph 1 of this Article for modifications or changes to the Specifications.
 
3.              Substitution of Materials:
 
In the event that any of the materials and equipment more specifically described in the definition of VESSEL and required by the Specifications or otherwise under this Contract for the construction of the VESSEL can not be procured in time to effect delivery of the VESSEL, or are in short supply to maintain the delivery date of the VESSEL, the BUILDER may, provided the BUYER so agrees in writing, supply other materials and equipment of the best available and like quality, meeting the requirements of the Classification Society and of the rules, regulations, requirements and recommendations with which the construction of the VESSEL must comply. Any agreement as to such substitution of materials and equipment shall be effected in the manner as provided in Clause 1 of this Article, and shall, likewise, be in accordance with the terms and conditions of this Contract affected by such substitution.
 
(end of Article)
 
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ARTICLE VI - TRIALS AND ACCEPTANCE
 
The sea trial shall be done on the basis that the VESSEL is the repeat and series vessel of BUILDER’s Hull No. 1558.
 
1.              Notice:
 
The sea trial shall start when the VESSEL is ready for the sea trial according to the Specifications.
 
The BUILDER shall give the BUYER at least Thirty (30) days estimated prior notice and Seven (7) days confirming prior notice by telefax or facsimile confirmed in writing of the time and place of any trial run of the VESSEL, and the BUYER shall promptly acknowledge receipt of such notice. The BUYER shall have its Representatives on board the VESSEL to witness such trial run.
 
Should such Representatives fail to be present after the BUILDER’s due notice to the BUYER as provided above, the BUILDER shall be entitled to conduct such trial run with the presence of the Classification Surveyor only without the Representatives of the BUYER being present and in such case the BUYER shall be obligated to accept the VESSEL on the basis of a certificate of the Classification Society and certificate of the BUILDER stating that the VESSEL, upon trial run, is found to conform to this Contract and Specifications.
 
2.              Weather Condition:
 
The trial run shall be carried out under the weather condition which is deemed favorable enough by the judgment of the BUILDER. In the event of unfavourable weather on the date specified for the trial run, the same shall take place on the first available day thereafter that the weather condition permits. It is agreed that, if during the trial run of the VESSEL, the weather should suddenly become so unfavourable (i.e. at least sea and wind state of Beaufort 3) that orderly conduct of the trial run can no longer be continued, the trial run shall be discontinued and postponed until the first favorable day next following, unless the BUYER shall assent in writing to acceptance of the VESSEL on the basis of the trial run already made before such discontinuance has occurred.
 
Any delay of trial run caused by such unfavourable weather condition shall operate to postpone the Delivery Date by the period of the delay involved and such delay shall be deemed as Permissible Delay in the delivery of the VESSEL.
 
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3.              How Conducted:
 
(a)            The VESSEL shall run the official sea trial in the manner as specified in the Specifications and shall prove fulfillment of the performance requirements for the trial run as set forth in the Specification.
 
(b)            All expenses in connection with the trial run (including bunkers, diesel oil, lubricating oil and greases) including proper insurance are to be for account of the BUILDER and the BUILDER shall provide, at its own expense, the necessary crew to comply with conditions of safe navigation.
 
4.              Method of Acceptance or Rejection:
 
(a)            Upon completion of the trial run, the BUILDER shall give the BUYER a notice by telex or facsimile confirmed in writing of completion of the trial run and promptly provide the BUYER with all protocols and records of tests and trials, as and if the BUILDER considers that the results of the trial run prove conformity of the VESSEL to this Contract and Specifications.
 
The BUYER shall, within Six (6) working days after receipt of the aforementioned records of tests and trials from the BUILDER, notify the BUILDER by telex or facsimile confirmed in writing of its acceptance or rejection of the VESSEL’s conformity to this Contract and the Specifications.
 
(b)            Should the records of tests and trials indicate that the VESSEL does not conform to the requirements of this Contract or the Specifications and if the BUILDER agrees with the BUYER’s notice of non-conformity, then the BUILDER shall promptly take the necessary steps to correct such non-conformity and notify the BUYER promptly in writing or by telex or facsimile confirmed in writing advising the BUYER of the estimated additional time required for the necessary alterations to correct such non-conformity.
 
Upon completion of correction of such non-conformity, new trial run or runs as necessary will be made to prove conformity of the VESSEL to this Contract and Specifications if so found necessary by the BUILDER, the Classification Society and the Representatives. The BUILDER shall notify the BUYER of the time and place of any new trial run no less than five (5) working days beforehand, unless otherwise mutually agreed to. All provisions of the trial run shall apply to such new trial run.
 
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Notwithstanding the aforesaid, the BUYER may accept the VESSEL qualifying its acceptance by reservations regarding works or parts which have not been completed or properly installed prior to such acceptance. In the event that BUYER makes such qualified acceptance the parties will reach an agreement in writing, prior to the delivery of the VESSEL, as to how and when to remedy the items being the subject of the qualified acceptance, at the BUILDER’s cost and expense, either before or after the delivery, as quickly as possible, without delaying the date of delivery and without causing the BUYER inconvenience in the operation of the VESSEL.
 
(c)            In the event that the BUILDER fails to correct any non-conformity of which it has been given notice by the BUYER, which non-conformity has been confirmed by the Classification Society, the BUYER shall indicate what aspect of the VESSEL does not conform to this Contract and/or the Specifications and the BUILDER shall promptly correct those non-conformities.
 
(d)            In the event that the BUYER fails to give notice to the BUILDER by fax and/or telex confirmed in writing of the VESSEL within the period as provided in the above sub-paragraph (a) or (b), the BUYER shall be deemed to have accepted the VESSEL.
 
(e)            Any dispute between the BUILDER and the BUYER as to the conformity or non-conformity of the VESSEL to the requirements of this Contract and/or the Specifications shall be submitted for final decision in accordance with Article XII hereof.
 
5.              Effect of Acceptance:
 
Acceptance of the VESSEL as above provided shall be final and binding in so far as conformity of the VESSEL to this Contract and Specifications is concerned and shall preclude the BUYER from refusing formal delivery of the VESSEL as hereinafter provided, if the BUILDER complies with all other requirements for delivery as provided in Article VII hereof. However, the BUYER’s acceptance of the VESSEL shall not affect the BUYER’s right under Article IX hereof and/or under law.
 
6.       Disposition of Surplus Consumable Stores:
 
(a)      Any fuel oil, lubricating oil and greases furnished and paid for by the BUILDER for trial runs remaining on the VESSEL, at the time of acceptance of the VESSEL by the BUYER, shall be bought by the
 
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BUYER from the BUILDER at the BUILDER’s net purchase price for such supply in Korea and the payment by the BUYER thereof shall be made at the time of delivery of the VESSEL.
 
(b)     If any of the consumables under (a) above are furnished by the BUYER, BUILDER shall pay at time of delivery for quantities consumed until delivery at BUYERS net purchase price.
 
(end of Article)
 
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ARTICLE VII - DELIVERY
 
1.              Time and Place:
 
The VESSEL, duly completed in accordance with this Contract and the Specifications, shall be delivered by the BUILDER to the BUYER at the BUILDER’s wharf at the Shipyard safely afloat on or before January 31, 2007 (hereinafter called the “Delivery Date”) after completion of satisfactory tests and trials and acceptance in accordance with Article VI hereof, except that, in the event of delays in the construction of the VESSEL or any performance required under this Contract due to causes which under the terms of this Contract permit postponement of the date for delivery, the aforementioned Delivery Date of the VESSEL shall be postponed accordingly.
 
Earlier Delivery Date is subject to BUYER’s prior written consent, such consent not to be unreasonably withheld.
 
2.              When and How Effected:
 
Provided that the BUILDER and the BUYER shall have fulfilled all of their obligations stipulated under this Contract, the delivery of the VESSEL shall be effected forthwith upon acceptance thereof by the BUYER, by concurrent delivery by each of the parties hereto to the other of the PROTOCOL OF DELIVERY AND ACCEPTANCE, acknowledging delivery of the VESSEL by the BUILDER and acceptance thereof by the BUYER, which Protocol of Delivery and Acceptance shall be prepared in duplicate and signed by each of the parties hereto with additional copies as required by the BUYER or the BUILDER.
 
3.              Documents to be delivered to BUYER:
 
Acceptance of the VESSEL by the BUYER shall be conditional upon receipt by the BUYER from the BUILDER of the following duly authenticated documents (all in the English language), which shall accompany the aforementioned PROTOCOL OF DELIVERY AND ACCEPTANCE:
 
(a)            PROTOCOL OF TRIALS of the VESSEL made pursuant to the Specifications.
 
(b)            PROTOCOL OF INVENTORY of the equipment of the VESSEL, including spare parts and the like, as specified in the
 
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Specifications.
 
(c)            PROTOCOL OF STORES OF CONSUMABLE NATURE covering items referred to under Clause 6 of Article VI hereof.
 
(d)            ALL CERTIFICATES required to be furnished upon delivery of the VESSEL pursuant to this Contract and the Specifications and for the customary shipbuilding practice.
 
It is agreed that if, through no fault on the part of the BUILDER, the Classifications certificates and/or other certificates are not available at the time of delivery of the VESSEL, provisional certificates valid for at least five (5) months shall be accepted by the BUYER, provided that the BUILDER shall furnish the BUYER with the formal certificates as promptly as possible after such certificates have been issued, but in any event timely before the expiry of the provisional certificates.
 
All certificates to be delivered to the BUYER hereunder pursuant hereto shall be clean and valid in every respect and without any recommendation or notation.
 
(e)            DECLARATION OF WARRANTY of the BUILDER that the VESSEL is delivered to the BUYER free and clear of any liens, charges, claims, mortgages, or other encumbrances upon the BUYER’s title thereto, and in particular that the VESSEL is absolutely free of all burdens in the nature of imposts, taxes or charges imposed by the Korean governmental authorities whether national or local as well as of all liabilities of the BUILDER to its subcontractors, suppliers, employees and crew(s), and of all the liabilities arising from the operation of the VESSEL in trial runs, or otherwise, prior to delivery.
 
(f)             DRAWINGS AND PLANS in quadruplicate pertaining to the VESSEL, including List of Finished Plans and As Built Specs and the trim and stability booklet, technical descriptions, test results and other data, information and documents in the possession of the BUILDER concerning the design and construction of the VESSEL which shall be forwarded to the BUYER at no additional cost as stipulated in the Specifications.
 
(g)            COMMERCIAL INVOICE
 
(h)            BILL OF SALE
 
(i)             BUILDER’s CERTIFICATE
 
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If required by the BUYER, the BUILDER shall arrange for the notarization and legalization in Korea by a consulate of the VESSEL’s country of registration of any of the listed documents/certificates which may be required to be notarized/legalized for the purposes of the BUYER’s registration.
 
4.              Tender of VESSEL:
 
If the BUYER fails to take delivery of the VESSEL after completion thereof according to this Contract and Specifications without any justifiable reason, the BUILDER shall have the right to tender delivery of the VESSEL after fulfillment of all BUILDER’s obligations as provided herein.
 
5.              Title and Risk:
 
Title to and risk of loss of or damage to the VESSEL shall pass to the BUYER only upon the delivery and acceptance thereof having been completed as stated above; it being expressly understood that, until such delivery is effected, title to and risk of loss of or damage to the VESSEL and her equipment and risk of items and materials supplied by the BUYER or its suppliers shall be with the BUILDER.
 
Notwithstanding the provisions of this Article, the title to the material and equipment supplied by the BUYER shall remain with the BUYER.
 
6.              Removal of VESSEL:
 
The BUYER shall take possession of the VESSEL immediately upon delivery and acceptance thereof and, if so requested by the BUILDER shall remove the VESSEL from the premises of the Shipyard within five (5) days after delivery and acceptance thereof is effected.
 
If the BUYER shall not remove the VESSEL from the premises of the Shipyard within the aforesaid five (5) days, in such event, the BUYER shall pay to the BUILDER the reasonable mooring charges of the VESSEL.
 
7.              Notices:
 
Prior to the delivery of the VESSEL, the BUILDER shall give notice to the BUYER with the following schedule:
 
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90 DAYS PRIOR TO DELIVERY - 30 DAYS ESTIMATED DELIVERY DATE;
 
60 DAYS PRIOR TO DELIVERY - 10 DAYS ESTIMATED DELIVERY DATE;
 
30 DAYS PRIOR TO DELIVERY - 7 DAYS ESTIMATED DELIVERY DATE;
 
15 DAYS PRIOR TO DELIVERY - 1 DAY DEFINITE DELIVERY DATE
 
(end of Article)
 
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ARTICLE VIII - DELAYS AND EXTENSION OF TIME FOR DELIVERY (FORCE MAJEURE)
 
1.              Causes of Delay (Force Majeure):
 
If, at any time before the actual delivery, either the construction of the VESSEL or any performance required as a prerequisite of delivery of the VESSEL is delayed due to Acts of God; acts of princes or rulers; compulsory requirements of government authorities; war, blockade, revolution, insurrections, mobilization, civil war; vandalism; sabotages, strikes in the shipbuilding industry in Korea, lockouts or other labor disturbances; plague or other epidemic quarantines; flood, typhoon, hurricanes, or other unusual severe weather conditions not included in normal planning; earthquakes; tidal waves; landslides; fires, explosions; embargoes; import restrictions; inability to obtain delivery or delays in delivery of machinery or equipment, provided that at the time of timely ordering the same could reasonably be expected by the BUILDER to be delivered in time; prolonged failure of electric current, oil or gas; defects in materials, machinery or equipment which could not have been detected by the BUILDER using reasonable care; casting or forging rejects or the like; delays caused by the Classification Society or other bodies whose documents are required; destruction of or severe damage to the Shipyard or works of the BUILDER, its relevant subcontractors or suppliers, or of or to the VESSEL or any part thereof, by any causes herein described; other causes or accidents beyond the reasonable control of the BUILDER, its relevant subcontractors or suppliers of a parallel nature whether or not indicated by the foregoing words; provided all the foregoing events where not existing and known to the BUILDER at the date of this Contract or the effect of which could not have been avoided or reduced by the exercise of due diligence by the BUILDER or his relevant subcontractors, as the case may be, and provided further that the events and/or delays were not caused or contributed by the negligence or misconduct of the BUILDER or his relevant sub-contractors, as the case may be; and provided further that any of the above events directly affect the construction schedule of the VESSEL; then and in any such case, the date of delivery shall be postponed for a period of one day for every one working day actually lost by any of the aforesaid events.
 
The BUILDER shall take immediate steps to overcome and mitigate the delay and to recover time lost, if any. Delays resulting from contingencies occurring simultaneously shall count as one delay only.
 
Any cause of delay for which the BUILDER claims that it is entitled to a postponement of the Delivery Date under this Contract resulting from the BUILDER’s subcontractors shall be subject to any of the aforementioned
 
30

 
contingencies being applicable to the subcontractors.
 
2.              Notice of Delay:
 
As soon as possible after and in any event within seven (7) days after the date of the commencement of any cause of delay, on account of which the BUILDER claims that it is entitled under this Contract to a postponement of the Delivery Date excluding days due to arbitration, the BUILDER shall notify the BUYER in writing or by telex or facsimile confirmed in writing of the date when such cause of delay commenced and the reasons thereof, and the estimated duration of the probable delay in delivery of the VESSEL, and shall provide the BUYER, if available, evidence to justify the delay claimed. Likewise, within seven (7) days after the date of ending of such cause of delay, the BUILDER shall notify the BUYER in writing or by telex or facsimile confirmed in writing of the date when such cause of delay ended.
 
In any event the BUILDER shall also notify the BUYER of the period of time by which the BUILDER claims the Delivery Date should be postponed by reason of such cause of delay within the same seven (7) days period as aforesaid. Failure of the BUILDER to notify the BUYER of its claim for postponement of the Delivery Date within a period of seven (7) days from the date of cessation of the event causing the delay shall be deemed a waiver of its claim.
 
Failure of the BUYER to object to the BUILDER’s claim for postponement of the Delivery Date within Fourteen (14) days after receipt by the BUYER of such notice of claim shall be deemed to be a waiver by the BUYER of its right to object to such postponement of the Delivery Date.
 
The burden of proof shall always be on the BUILDER to establish the facts entitling it to rely on this clause and that due notices were given and that it has taken all reasonable steps to avoid or mitigate the delay.
 
3.              Definition of Permissible Delay:
 
Delays on account of such causes as specified in Clause 1 of this Article and any other delay of a nature which under the terms of this Contract permits postponement of the Delivery Date shall be understood to be Permissible Delays and are to be distinguished from unauthorized delays on account of which the Contract Price is subject to adjustment and/or the Contract is subject to rescission as provided for respectively in Article III and Article X hereof.
 
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4.              Right to Rescind for Excessive Delay:
 
If the total accumulated time of all delays claimed by the BUILDER on account of the causes specified in Clause 1 of this Article, excluding other delays of the nature which under the terms of this Contract permit postponement of the Delivery Date, amounts to one hundred and fifty (150) days or more, then, in such event, the BUYER may rescind this Contract in accordance with the provisions of Article X hereof.
 
The BUILDER may, at any time after the accumulated time of the aforementioned delays justifying the rescission by the BUYER, demand in writing that the BUYER shall make an election, in which case the BUYER shall, within twenty one (21) days after such demand is received by the BUYER, either notify the BUILDER of its intention to rescind this Contract, or consent to a postponement of the Delivery Date to an agreed specific future date. If the BUYER elects to consent to the postponement of the Delivery Date at such agreed specific future date, then such date shall become the contractual delivery date, for the purpose of this Contract and if the VESSEL is not delivered by such revised delivery date, the BUYER shall have the same right of rescission upon the same terms as herein provided.
 
(end of Article)
 
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ARTICLE IX - WARRANTY OF QUALITY
 
1.              Guarantee:
 
(a)            The BUILDER guarantees the VESSEL in her entirety and each and every part thereof and in particular but without prejudice to the generality of the foregoing, her design, drawing, plans, the hull and all machinery, engines, engine room auxiliaries, equipment, fittings, outfittings, appurtenances, furniture, parts, spares, and materials manufactured, furnished, installed or incorporated in the VESSEL by the BUILDER and/or its subcontractors under this Contract against all defects, omissions, shortages and non-conformity, defective or unsuitable materials or equipment, faulty design and/or performance or poor workmanship, (hereinafter collectively referred to as “Defect(s)”), whether or not such Defect(s) affect seaworthiness or class, provided such Defect(s) have arisen within a period of twelve (12) calendar months as from the date when the VESSEL was delivered to and accepted by the BUYER, (hereinafter referred to as the “Guarantee Period”), provided that such Defect(s) are not the result of an accident, ordinary wear and tear, misuse, negligence or willful neglect or omissions on the part of the BUYER, its employees or agents.
 
The BUILDER shall pass to the BUYER information about any claims that the BUILDER may have against subcontractors for Defect(s) in deliveries to the VESSEL, without in any way, diminishing the BUILDER’s guarantee as aforesaid.
 
(b)            In the event that the normal guarantee period stipulated by manufacturers or suppliers or various components of machinery, materials of equipment, appurtenances and outfit furnished to the BUILDER and embodied in the VESSEL exceeds the aforesaid twelve (12) calendar months Guarantee Period, the benefits of such extended guarantee rights shall be made available to the BUYER by the BUILDER without any additional cost to the BUYER.
 
(c)            Notwithstanding the foregoing, the BUILDER shall be responsible to arrange that the paint manufacturer shall guarantee defects in paint and/or application on under water parts of the VESSEL for additional 12 calendar months commencing from the end of the Guarantee Period.
 
2.              Notice of Defects:
 
The BUYER or its duly authorized Representatives shall notify the BUILDER in writing, or by telex or facsimile confirmed in writing of any
 
33

 
Defect for which claim is made under this guarantee, as promptly as possible after discovery thereof. The BUYER’s written notice shall describe in reasonable detail the nature and extent of the Defect(s).
 
The BUILDER shall have no obligation for any Defect discovered prior to the expiry date of the Guarantee Period unless notice of such Defect is received by the BUILDER not later than thirty (30) days after such expiry date. Telex or facsimile advice within twenty (20) days that a claim is forthcoming will be sufficient compliance with the requirement as to time, provided that full description of such Defect(s) in written form shall be received by the BUILDER not later than thirty (30) days after such expiry date.
 
3.              Remedy of Defects:
 
(a)            The BUILDER shall remedy, at its cost and expense, any Defect(s) against which the VESSEL is guaranteed under this Article, by making all necessary repairs or replacements as well as dismantling, removal, reassembling and incidental works at the Shipyard or elsewhere as provided in Sub-clause (b) of this Clause, at the BUYER’s convenience.
 
If the cause of the Defect(s) is not known or if the Defect(s) is of a recurring nature the BUILDER shall, at its expense, explore the reason for such Defect(s) and take all necessary steps and measures to remedy same in such a way as to eliminate the reoccurrence thereof.
 
(b)            However, if, in the BUYER’s sole discretion, it is impracticable to bring the VESSEL to the Shipyard, the BUYER may cause the necessary repairs or replacements to be made elsewhere which is deemed suitable by the BUYER for the purpose (including by the VESSEL’s crew), provided that, in such event, the BUILDER may forward or supply replacement parts or materials to the VESSEL, unless forwarding or supplying to the VESSEL would impair or delay the operation or working schedule of the VESSEL. In the event that the BUYER proposes to cause the necessary repairs or replacements for the VESSEL to be made at any other shipyard or works than the Shipyard, the BUYER shall first, but in all events as soon as possible, give the BUILDER notice in writing by telex or facsimile confirmed in writing of the time and place when and where such repairs will be made, and if the VESSEL is not thereby delayed, or her operation or working schedule is not thereby impaired, the BUILDER shall have the right at its own cost and expense to verify by its own representatives the nature, cause and extent of the Defect(s) complained of. It is understood that defects to underwater parts of the VESSEL, which were found and
 
34

 
detected during the Guarantee Period, may be made good at the time of the first dry-docking of the VESSEL following the expiration of the Guarantee Period.
 
The BUILDER shall, in such case, promptly advise the BUYER by telex or facsimile confirmed in writing, after such examination has been completed, of its acceptance or rejection of the Defect(s) as ones that are covered by the guarantee herein provided. Upon the BUILDER’s acceptance of the Defect(s) as justifying remedy under this Article, or upon award of the arbitration so determining, the BUILDER shall pay to the BUYER for such repairs or replacements a sum equal to the reasonable cost of making the same repairs or replacements in a first class Korean shipyard, at the prices prevailing at the time of such repairs or replacements are made. Payment for the work done to remedy the Defect(s) shall be settled regularly during the Guarantee Period and the actual reimbursement for the guarantee shall be made in a lump sum at the expiry of the Guarantee Period for minor items (up to US$50,000) and promptly by the BUILDER after settlement of the same for major items.
 
(c)            In any case, the VESSEL shall be taken, at the BUYER’s cost and responsibility, to the place elected, ready in all respects for such repairs or replacement. In case of breakdown at sea due to Defects the cost of bringing the VESSEL to a repair yard shall be for BUILDER’s account.
 
(d)            Notwithstanding anything contained in Clause 3 of this Article, the BUYER shall be entitled to require the BUILDER to forward to the VESSEL, wherever it may be, replacement(s) for defective part(s) to which the BUILDER’s guarantee under this Article applies, and in such case the BUILDER shall forward the same by such means as to reach the VESSEL as expeditiously as possible.
 
In emergency cases when the VESSEL will be prevented from sailing or from completing its voyage, forwarding of replacement(s) as aforesaid will be effected by the BUILDER by air cargo. The BUILDER shall bear and pay all C.I.F. costs of the replacement(s) until they arrive on board the VESSEL.
 
(e)            Any dispute under this Article shall be referred to arbitration in accordance with the provisions of Article XII hereof.
 
4.              Extent of BUILDER’s Responsibility:
 
(a)            The BUILDER shall have no responsibility or liability for any other defect(s) whatsoever in the VESSEL than the Defect(s) specified in Clause 1 of this Article.
 
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The BUILDER shall not in any circumstances be responsible or liable for any consequential loss, damage or expense including but not limited to loss of time, loss of profit of earning or demurrage directly or indirectly occasioned to the BUYER by reason of the Defect(s) in Clause 1 of this Article.
 
(b)            The BUILDER shall not be responsible for any defect in any part of the VESSEL which may, subsequently to delivery of the VESSEL, have been replaced or repaired in any way by any other contractor, unless approved by the BUILDER, or for any defect which has been caused or aggravated by omission or negligent use and maintenance of the VESSEL on the part of the BUYER, its servants or agents or by ordinary wear and tear or by any other occurrence beyond control of the BUILDER as specified in this Contract.
 
5.              The Guarantee Period shall be extended in, inter alia, the following cases and to the following extent:
 
(a)            If, during the Guarantee Period, the VESSEL shall not be capable of performing services for periods consisting of at least twenty four (24) hours each and aggregating to eight (8) days or more and such non-capability shall be as a result of any Defect(s) covered by the BUILDER’s guarantee under Clause 1 of this Article, the Guarantee Period shall be extended by such period(s) of time lost in remedying of the defect(s) for which the BUILDER is responsible according to this Contract or in awaiting part(s) required for the purpose to remedying such defect(s).
 
(b)            The Guarantee Period shall further, in relation to reservations made by the BUYER pursuant to Clause 4(b) of Article VI hereof, be extended up to the expiration of twelve (12) calendar months following the time when such reservations are respectively made good by the BUILDER after the delivery of the VESSEL to the BUYER as herein provided.
 
6.              Wherever any Defect(s) covered by the BUILDER’s Guarantee under this Article has been remedied, in whole or in part, the BUILDER’s Guarantee under this Article and the provisions of this Article shall apply anew in respect of the part(s) to which such remedying relates and the aforesaid Guarantee Period shall apply in respect thereof, save that the said Guarantee Period shall commence as from the time of such remedying in lieu of as from the time of the delivery of the VESSEL to the BUYER.
 
7.              If attempts at remedying any Defect(s) covered by the BUILDER’s Guarantee under this Article, carried out by or on behalf of the BUILDER
 
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as aforesaid, are unsuccessful, the BUILDER shall remain liable to remedy such Defect(s) until same be satisfactorily remedied.
 
8.              The BUILDER shall be liable under its Guarantee under this Article also for damage to any part of the VESSEL occasioned directly by any Defect(s) to which the BUILDER’s Guarantee under this Article extends in any other part of the VESSEL.
 
9.              Guarantee Engineer:
 
The BUILDER shall at the request of the BUYER appoint an English speaking Guarantee Engineer to serve on the VESSEL as its Representatives for a period of three (3) months from the date the VESSEL is delivered. However, if the BUYER and the BUILDER shall deem it necessary to keep the Guarantee Engineer on the VESSEL for a longer period, then he shall remain on board the VESSEL after the said three (3) months but not longer than nine (9) months from the delivery of the VESSEL.
 
The BUYER, and its employees shall give such Guarantee Engineer full cooperation in carrying out his duties as the representatives of the BUILDER on board the VESSEL.
 
The BUYER shall accord the Guarantee Engineer treatment comparable to the VESSEL’s Chief Engineer as far as possible, and shall provide board and lodging at no cost to the BUILDER and/or the Guarantee Engineer. The BUILDER and the BUYER shall, prior to delivery of the VESSEL, execute a separate agreement regarding the Guarantee Engineer.
 
While the Guarantee Engineer is on board the VESSEL, the BUYER shall pay to the BUILDER the sum of US$ 6,000.- per month and the expenses of his repatriation to Seoul, Korea by air (economy class) upon termination of his service. The expenses of his communication with the BUILDER incurred in performing his duties shall be for BUILDER’s account and expenses, if any, of his medical and hospital care in the VESSEL’s hospital shall be for BUYER’s account. Notwithstanding the above, the Guarantee Engineer shall remain at all times an employee of the BUILDER.
 
(end of Article)
 
37

 
ARTICLE X - BUILDER’s DEFAULT - RESCISSION BY BUYER
 
1.              BUILDER’s Default:
 
The BUYER shall be entitled, but not bound, to declare the BUILDER in default and to rescind this Contract, all as stipulated in this Contract and Specifications, in any of the following cases:
 
(i)             any breach of or default by the BUILDER in any Fundamental Term. “Fundamental Term” means any of the following:
 
(a)            an event described in a provision of this Contract specifically permitting the BUYER to rescind this Contract including and without restricting the generality of the foregoing, those contained in Article III and Articles XVII 2(b);
 
(b)            failure to deliver the VESSEL on or before the Delivery Date as may be extended by a Permissible Delay;
 
(c)            failure to deliver the VESSEL free and clear of all liens, charges, mortgages and encumbrances on the Delivery Date;
 
(d)            any other failure, not specifically referred to above, to build in accordance with this Contract or the Specifications;
 
(ii)            the court declares bankruptcy proceedings against the BUILDER under the Bankruptcy Act of Korea; or
 
(iii)           insolvency proceedings which prevents the BUILDER from building and completing the VESSEL.
 
2.              Effect of BUILDER’s Default:
 
If the BUILDER shall be in any default as provided for in Clause 1 of this Article hereinabove, the BUYER may, at its option, rescind this Contract in accordance with provisions of this Article X.
 
3.              Notice:
 
In the event that the BUYER shall exercise its right of rescission of this Contract under and pursuant to any of the provisions of this Contract specifically permitting the BUYER to do so, then the BUYER shall notify the BUILDER in writing or by fax and/or telex confirmed in writing, and such rescission shall be effective as of the date notice thereof is received
 
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by the BUILDER.
 
4.              Refundment by BUILDER:
 
In case the BUILDER receives the notice stipulated in Clause 3 of this Article, the BUILDER shall promptly refund to the BUYER the full amount of all sums paid by the BUYER to the BUILDER on account of the VESSEL together with the interest thereon, and reimburse the BUYER for all expenses incurred by the BUYER as a result of the BUILDER’s default.
 
In case of refundment, the BUILDER shall pay the BUYER interest at the rate of five percent (5%) per annum on the amount required herein to be refunded to the BUYER, computed from the respective dates on which such sums were paid by the BUYER to the BUILDER to the date of receipt (remittance by wire transfer) of such refund by the BUYER from the BUILDER.
 
If pursuant to the provisions of this Contract the BUILDER is required to refund to the BUYER the installments paid by the BUYER to the BUILDER, the BUILDER shall return to the BUYER all of the BUYER’s supplies not incorporated into the VESSEL and pay to the BUYER an amount equal to the purchased price by the BUYER of those supplies incorporated into the VESSEL, together with interest as aforesaid, in which case title to such supplies incorporated into the VESSEL shall transfer to the BUILDER.
 
Any and all refunds or payments due to the BUYER under this Contract shall be effected by telegraphic transfer to the account and bank specified by the BUYER free of bank charges, remittance fees, taxes and other applicable withholdings.
 
5.              Discharge of Obligations:
 
Upon such refund by the BUILDER to the BUYER, and upon compliance with the provisions of Clause 4 of this Article, all obligations, duties and liabilities of each of the parties hereto to the other under this Contract shall be forthwith completely discharged.
 
(end of Article)
 
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ARTICLE XI - DEFAULT BY THE BUYER
 
1.              Definition of BUYER’s Default:
 
The BUYER shall be deemed to be in default of its performance of obligations under this Contract in the following cases (hereinafter called “BUYER’s Default”):
 
(a)            If the first, second, third and Delivery installments are not paid by the BUYER to the BUILDER’s Bank as provided in Article II hereof;  or
 
(b)            If the delivery installment is not deposited to the BUILDER’s Bank by the BUYER to the BUILDER for the delivery of the VESSEL as provided in Article II hereof;  or
 
(c)            If the increased amount, if any, in the Contract Price as adjusted pursuant to Article V due and payable upon delivery of the VESSEL is not paid by the BUYER concurrently with the delivery of the VESSEL as provided in Article II hereof;  or
 
(d)            If the BUYER, when the VESSEL is duly completed and in full conformity with the terms of this Contract and the Specifications and is tendered for delivery by the BUILDER in accordance with the provisions of this Contract, fails to take delivery of the VESSEL within Five (5) days from the tendered date without any specific and valid ground therefor under this Contract.
 
2.              Effect of BUYER’s Default on or before Delivery of VESSEL:
 
(a)            Should the BUYER make default in payment of any installment of the Contract Price on or before delivery of the VESSEL, the BUYER shall pay the installment(s) in default plus accrued interest thereon at the rate of five percent (5%) per annum computed from the due date for payment of such installment to the date when the BUILDER receives the payment, and, for the purpose of Clause 1 of Article VII hereof the Delivery Date of the VESSEL shall be automatically extended by the period of continuance of such default by the BUYER.
 
(b)            If any BUYER’s Default continues for a period of Twenty One (21) days, the BUILDER may, at its option, rescind this Contract by giving notice to such effect to the BUYER by telex or facsimile confirmed in writing.
 
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Upon receipt by the BUYER of such notice of rescission, this Contract shall be forthwith rescinded and terminated. In the event of such rescission of this Contract, the BUILDER shall, subject to Clause 3 below, be entitled to retain any installment or installments already paid by the BUYER to the BUILDER on account of this Contract and the BUYER’s Supplies, if any.
 
3.              Disposal of VESSEL:
 
(a)            In the event that this Contract is rescinded by the BUILDER under the provisions of Clause 2(b) of this Article, the BUILDER may, at its sole discretion, either complete the VESSEL and sell the same, or sell the VESSEL in its incomplete state, free of any right or claim of the BUYER. Such sale of the VESSEL by the BUILDER shall be either by public auction or private contract at the BUILDER’s sole discretion and on such terms and conditions as the BUILDER shall deem fit, provided that the BUILDER shall use reasonable endeavors to obtain the best price obtainable. The BUILDER shall send to BUYER invitation to participate in any tender for the sale of the VESSEL. Such invitation shall be sent by telex or facsimile at least fifteen (15) days in advance before the closing date of the tender.
 
(b)            In the event of such sale of the VESSEL in its completed state, the proceeds of the sale received by the BUILDER shall be applied firstly to payment of all expenses attending such sale and otherwise incurred by the BUILDER as a result of the BUYER’s default, and then to payment of all unpaid Installments of the Contract Price and interest on such Installments at the rate of five percent (5%) per annum from the respective due dated thereof to the date of application.
 
(c)            In the event of sale of the VESSEL in its incompleted state, the proceeds of sale received by the BUILDER shall be applied firstly to all expenses attending such sale and otherwise incurred by the BUILDER as a result of the BUYER’s default as provided hereinbefore, and then to payment of all costs of construction of the VESSEL less BUYER’s Supplies as defined in Article XVI hereof and less the Installments so retained by the BUILDER and compensation to the BUILDER for a reasonable loss of profit - if any - due to the rescission of this Contract.
 
(d)            In either of the above events of sale, if the proceeds of sale exceeds the total amounts to which such proceeds are to be applied as aforesaid, the BUILDER shall promptly pay the excess to the
 
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BUYER.
 
(e)            If the proceeds of sale are insufficient to pay such total amounts payable as aforesaid, the BUYER shall promptly pay the deficiency to the BUILDER upon request.
 
(end of Article)
 
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ARTICLE XII - ARBITRATION
 
1.              Decisions by the Classification Society:
 
If any dispute arises between the parties hereto in regard to the design and/or construction of the VESSEL, its machinery and equipment, and/or in respect of the materials and/or workmanship thereof and/or thereon, and/or in respect of interpretation of this Contract or the Specifications, the parties may by mutual agreement refer the dispute to the Classification Society headquarters or to such other expert as may be mutually agreed between the parties hereto, and in such case the decision of the principal surveyor or such expert, as the case may be, shall be final, conclusive and binding upon the parties hereto.
 
2.              Proceedings of Arbitration:
 
In the event that the parties hereto do not agree to settle a dispute according to Clause 1 of this Article and/or in the event of any other dispute of any kind whatsoever between the parties and relating to this Contract or its rescission or any stipulation herein, such dispute shall be submitted to and settled by arbitration in London, England in accordance with the London Maritime Arbitrators Association (LMAA) Terms current at the time when the arbitration proceedings are commenced. Each party shall appoint an arbitrator and in the event that they cannot agree, the two arbitrators so appointed shall appoint a third arbitrator.
 
If the two arbitrators are unable to agree upon a third arbitrator within Twenty (20) days, either of the said two arbitrators may apply to the President for the time being of the London Maritime Arbitrators Association to appoint the third arbitrator, and the three arbitrators shall constitute the board of arbitration.
 
Such arbitration shall be in accordance with and subject to the provisions of the relevant English Arbitration Act for the time being in force at the time of the action. Either party may demand arbitration of any such dispute by giving notice to the other party.
 
Any demand for arbitration by either of the parties hereto shall state the name of the arbitrator appointed by such party and shall also state specifically the question or questions as to which such party is demanding arbitration. Within Fourteen (14) days after receipt of notice of such demand for arbitration, the other party shall in turn appoint a second arbitrator and give notice in writing of such appointment to the party demanding arbitration. If a party fails to appoint an arbitrator as
 
43

 
aforementioned within Fourteen (14) days following receipt of notice of demand for arbitration by the other party, the party failing to appoint an arbitrator shall be deemed to have accepted and appointed, as its own arbitrator, the arbitrator appointed by the party demanding arbitration and the arbitration shall proceed before this sole arbitrator who alone in all such events shall constitute the Arbitration Board.
 
The award of the sole arbitrator and/or of the majority of the three arbitrators, as the case may be, shall be final and binding on both parties. If the majority of the three arbitrators is not obtained, then the decision of the third arbitrator shall be final and binding upon the parties hereto.
 
3.              Notice of Award:
 
The award shall immediately be given to the BUYER and the BUILDER by telex or facsimile confirmed in writing.
 
4.              Expenses:
 
The Arbitration Board shall determine which party shall bear the expenses of the arbitration or the portion of such expenses which each party shall bear.
 
5.              Entry in Court:
 
In case of failure by either party to respect the award of the arbitration, judgment upon the award may be entered in any court having jurisdiction thereof.
 
6.              Alteration of Delivery Date:
 
In the event of reference to arbitration of any dispute arising out of matters occurring prior to delivery of the VESSEL, the award may include any postponement of the Delivery Date which the Arbitration Board may deem appropriate.
 
(end of Article)
 
44

 
ARTICLE XIII - ASSIGNMENT - SUCCESSOR AND ASSIGNS
 
(a)            The BUILDER agrees that prior to delivery of the VESSEL, this Contract may, with the prior approval of the BUILDER, which the BUILDER shall not unreasonably withhold, be transferred by the BUYER to and title be taken by another company. In the event of any assignment pursuant to the terms of this Contract, the assignee, its successors and assigns shall succeed to all of the rights and obligations of the BUYER hereunder. However, the BUYER shall remain responsible for performance by the assignee, its successors, and assigns of all the BUYER’s obligations, liabilities and responsibilities under this Contract. It is understood that any expenses or charges incurred by the transfer of this Contract shall be for the account of the BUYER.
 
Notwithstanding the above, the BUYER has the right to assign this Contract to a bank or syndicate of banks or financial institution or any commercial corporation assisting in the finance of the VESSEL prior to delivery of the VESSEL provided that the BUYER has given the BUILDER a notice of assignment in form and content acceptable to the BUILDER AND BUYER, acting reasonably. The BUILDER shall, at the BUYER’s request, acknowledge and consent to such assignment by signing an acknowledgement and consent acceptable to the BUILDER and BUYER, acting reasonably.
 
(b)             Subject to Article I 6, the BUILDER shall have the right to assign this Contract at any time after the Effective Date hereof, provided that prior written agreement is obtained from the BUYER, provided always that BUILDER shall remain responsible for the due and punctual performance if this Contract by the Assignee.
 
(c)             The BUYER and the BUILDER understand and acknowledge that the VESSEL shall be built and constructed as a repeat and series vessel of the BUILDER’s Hull No. 1558 as stipulated in this Contract. Thus, in the event that the BUYER assigns or novates this Contract to any third party after execution of this Contract and the supervision of the construction of the VESSEL will be conducted by other than the BUYER (who signed this Contract), the BUILDER shall be entitled to readjust the Contract Price of this Contract to compensate the BUILDER’s additional cost resulting from and due to any loss of the repeat and series effect. In such case, the original BUYER shall be responsible to pay such additional cost to the BUILDER. This, however, shall not preclude nor limit the right of the BUYER to hire or appoint third party subcontractors to assist him in the supervision work.
 
(end of Article)
 
45

 
ARTICLE XIV - TAXES AND DUTIES
 
1.              Taxes and Duties Incurred in Korea:
 
The BUILDER shall bear and pay all taxes, duties, stamps and fees incurred in Korea in connection with execution and/or performance of its obligations under this Contract, except for any taxes and duties imposed in Korea upon the BUYER’s Supplies.
 
2.              Taxes and Duties Incurred outside Korea:
 
The BUYER shall bear and pay all taxes, duties, stamps and fees incurred outside Korea in connection with execution and/or performance of its obligations under this Contract, except for taxes and duties imposed upon those items to be procured by the BUILDER for the construction of the VESSEL.
 
(end of Article)
 
46

 
ARTICLE XV - PATENTS, TRADEMARKS, COPYRIGHTS, ETC.
 
1.              Patents, Trademarks and Copyrights:
 
Machinery and equipment of the VESSEL may bear the patent number, trademarks or trade names of the manufacturers. The BUILDER shall defend and hold harmless the BUYER from patent liability or claims for or on account of any patents, copyrights or design or for infringement thereof of any nature and kind, including costs and expenses for, or on account of any patented or patentable invention made or used in the performance of this Contract and also including costs and expenses of litigation, if any, in connection therewith.
 
Nothing contained herein shall be construed as transferring any patent or trademark rights or copyrights in equipment covered by this Contract, and all such rights are hereby expressly reserved to the true and lawful owners thereof.
 
The BUILDER’s warranty hereunder does not extend to the BUYER’s Supplies.
 
The BUILDER’s obligation shall not be terminated by the passage of any period of time.
 
2.              General Plans, Specifications and Working Drawings:
 
The BUILDER retains copyright with respect to the Specifications, and plans and working drawings, technical descriptions, calculations, test results and other dat a, information and documents concerning the design and construction of the VESSEL and the BUYER undertakes therefore not to disclose the same or divulge any information contained therein to any third parties, without the prior written consent of the BUILDER, except where it is necessary for usual operation, repair and maintenance of the VESSEL and its financing.
 
(end of Article)
 
47

 
ARTICLE XVI - BUYER’s SUPPLIES
 
1.              Responsibility of BUYER:
 
(a)            The BUYER shall, at its own risk, cost and expense, supply and deliver to the BUILDER all of the items to be furnished by the BUYER as specified in the Specifications (herein called the “BUYER’s Supplies”) at a warehouse or other storage facility of the Shipyard in the proper condition ready for installation in or on the VESSEL, in accordance with the time schedule designated and advised to the BUYER by the BUILDER.
 
(b)            In order to facilitate installation by the BUILDER of the BUYER’s Supplies in or on the VESSEL, the BUYER shall furnish the BUILDER with necessary specifications, plans, drawings, instruction books, manuals, test reports and certificates required by the rules and regulations of the Specifications. If so requested by the BUILDER, the BUYER shall, without any charge to the BUILDER, cause the representatives of the manufacturers of the BUYER’s Supplies to assist the BUILDER in installation thereof in or on the VESSEL and/or to carry out installation thereof by themselves or to make necessary adjustments at the Shipyard.
 
(c)            Any and all of the BUYER’s Supplies shall be subject to the BUILDER’s reasonable right of rejection, as and if they are found to be unsuitable or in improper condition for installation.
 
However, if so requested by the BUYER, the BUILDER may repair or adjust the BUYER’s Supplies without prejudice to the BUILDER’s other rights hereunder and without being responsible for any consequences arising therefrom.
 
(d)            Should the BUYER fail to deliver any of the BUYER’s Supplies within the time designated by three (3) months prior notice to the BUYER, the Delivery Date shall be extended for a period which actually caused the delay in the delivery of the VESSEL.
 
(e)            If delay in delivery of any of the BUYER’s Supplies exceeds thirty (30) days, then the BUILDER shall be entitled to proceed with construction of the VESSEL without installation thereof in or on the VESSEL as hereinabove provided, and the BUYER shall accept and take delivery of the VESSEL so constructed, unless such delay is caused by Force Majeure in which case the provision of Clause 1(d) of this Article shall apply.
 
(f)             The BUILDER shall not be liable under Article IX for any defects
 
48

 
in the BUYER’s Supplies  (if any) but the BUILDER shall be liable under Article IX for any Defect(s) in respect of installation of the BUYER’s Supplies and their adaptation to the VESSEL.
 
2.              Responsibility of BUILDER:
 
The BUILDER shall be responsible for storing, safekeeping and handling with reasonable care of the BUYER’s Supplies after delivery thereof at the Shipyard, and shall, at its own cost and expense, install them in or on the VESSEL, unless otherwise provided herein or agreed by the parties hereto, provided, always, that the BUILDER shall not be responsible for quality, efficiency and/or performance of any of the BUYER’s Supplies.
 
However, if any BUYER’s Supplies are lost or damaged after acceptance by the BUILDER without rejection while in the custody of the BUILDER, the BUILDER shall be responsible for such loss or damage and shall either replace the items or reimburse the BUYER accordingly. The BUILDER shall further be responsible for wrongful or negligent installation of the BUYER’s Supplies in the course of their installation by the BUILDER.
 
(end of Article)
 
49

 
ARTICLE XVII - INSURANCE
 
1.              Extent of Insurance Coverage:
 
From the time of launching until delivery of the VESSEL, the BUILDER shall, at its own cost and expense, insure the VESSEL and all machinery and equipment, appurtenances and outfits delivered to the Shipyard or other building facility utilized by the BUILDER, including the BUYER’s Supplies when at a warehouse or other storage facility of the BUILDER or built into or installed in or upon the VESSEL, against all risks under the Builder’s Risks Insurance Clause on terms and conditions not less than the current British Institute Time Clauses and British War Clauses Builders Risks, with first class insurance company or underwriters in Korea recognized in the international insurance market. The amount of such insurance coverage shall not be less than the aggregate amount of all installments paid by the BUYER to the BUILDER.
 
2.              Application of the Recovered Amounts:
 
In the event that the VESSEL shall be damaged from any cause at any time before delivery of the VESSEL, and in the further event that such damage shall not constitute an actual or constructive total loss of the VESSEL, the amount received in respect of the insurance plus amounts received from the general insurance of the BUILDER shall be applied by the BUILDER in repair of such damage, satisfactory to the Classification Society requirements and in conformity with the terms of this Contract and the Specifications, and the BUYER shall accept the VESSEL under this Contract if completed in accordance with this Contract and the Specifications and so certified by the Classification Surveyor.
 
Should the VESSEL from any cause become an actual or constructive total loss:
 
(a)            the BUILDER and the BUYER may mutually agree to build another VESSEL in place of the VESSEL so lost or reconstruct the VESSEL’s damage and proceed in accordance with the terms of this Contract, in which case the amount received in respect of the insurance plus amounts received from the BUILDER’s general insurance shall be applied to the construction of a new VESSEL or reconstruction of the VESSEL, provided the parties hereto shall have first agreed thereto in writing and to such reasonable extension of delivery time as may be necessary for the completion of such construction or reconstruction.
 
50

 
If the parties fail to reach agreement pursuant to sub-paragraph 2(a) above within 45 days after the VESSEL is determined to be an actual or constructive total loss, the provisions of sub-paragraph 2(b) shall apply.
 
(b)            The BUILDER shall refund promptly to the BUYER the full amount of all sums paid by the BUYER to the BUILDER as installments in advance of delivery of the VESSEL together with interest thereon at the rate of five percent (5%) per annum, and promptly deliver to the BUYER all BUYER’s Supplies (or the insurance proceeds paid with respect thereto), in which case this Contract shall be deemed to be automatically rescinded and all rights, duties, liabilities and obligations of each of the parties to the other shall forthwith cease and terminate.
 
If the BUILDER fails to refund within 15 Banking Days, the full amount of all sums paid by the BUYER to the BUILDER as installments in advance of delivery of the VESSEL together with interest thereon as the rate of five (5%) per annum, and promptly deliver to the BUYER all BUYER’s Supplies (or the insurance proceeds paid with respect thereto), the BUYER shall be entitled to rescind this Contract.
 
Payment of refunds pursuant to this clause shall be effected by telegraphic transfer to the account and bank specified by the BUYER free of bank charges, remittance fees, taxes and other applicable withholdings.
 
3.              Termination of BUILDER’s Obligation to Insure:
 
The BUILDER shall be under no obligation to insure the VESSEL hereunder after her delivery to, and her acceptance by, the BUYER.
 
(end of Article)
 
51

 
ARTICLE XVIII - NOTICES
 
1.              Address:
 
Any and all notices, invoices, requests, demands, instructions, advices, and communications (collectively “Notices”) in connection with this Contract shall be addressed as follows:
 
To the BUYER:

For the commercial:	
Seaspan Container Lines Limited	
c/o 2 600 - 200 Granville Street	
Vancouver, B.C. CANADA	
V6C 1S4	
Facsimile No:	(604) 331-0925 (Mr. Gerry Wang)	
 	(604) 682-5644 (Mr. Graham Porter)	
 	
For the technical:	
Seaspan Ship Management	
50 Pemberton Avenue	
North Vancouver, B.C. CANADA	
V7P 2R2	
Facsimile No:	(604) 990-3203	
 
To the BUILDER:

Samsung Heavy Industries Co., Ltd.	
KIPS Building , 647-9	
Yoksam-Dong, Kangnam-Ku,	
Seoul, Korea, 135-080	
Telefax No.:	(82- 2) 3458-7349 (Ship Sales Department)	
 
or to its Koje Yard:

P.O. Box Gohyun 9	
530 Jangpyung-ri, Sinhyun-up,	
Koje-City, Kyungnam, Korea	
Telex No.:	SSCYARD K52213	
Telefax No.:	(82-558) 630-4947/8 (Design Department)	
 	(82-558) 636-2560 (C /S Department)	
 
52

 
2.              Language:
 
All Notices shall be written in the English language.
 
3.              Effective Date of Notice:
 
Any Notice shall become effective from the date when such Notice is received by the BUYER or by the BUILDER except as otherwise described in the Contract.
 
Notices shall be deemed to be received by the addressee when delivered (in case of personal delivery), within 7 (seven) days of dispatch (if sent by registered airmail postage prepaid) and when dispatched (in case of telex or telefax) as proven by answer back call sign or transmission report. Any such Notice received on a non-working day or after business hours in the place of receipt shall be deemed to be received on the next following working day in such place.
 
4.              Change of Address:
 
Each of the parties hereto shall be entitled to give the other party notice, in writing, of any change in any of the addresses relating to the party giving such notice and Clause 1 of this Article shall be deemed modified by and in accordance with every such notice of change.
 
(end of Article)
 
53

 
ARTICLE XIX - EFFECTIVE DATE OF CONTRACT
 
This Contract shall become effective on November 18, 2003.
 
The obligations of the BUYER under this Contract are subject in all respects to the following conditions which are for the exclusive benefit of the BUYER.
 
Th e BUYER arranges financing satisfactory to it for payment of the Contract Price or any installment hereof. If the BUYER has not satisfied or waived this condition by notice in accordance with Article XVIII to the BUILDER on or before January 31, 2004 then the BUYER will forfeit the first installment and the second installment to the BUILDER and this Contract will be of no further force and effect.
 
(end of Article)
 
54

 
ARTICLE XX - INTERPRETATION
 
1.              Laws Applicable:
 
The parties hereto agree that the validity and interpretation of this Contract and of each Article and part thereof shall be governed by and be construed and interpreted in accordance with the laws of England.
 
2.              Entire Agreement:
 
This Contract contains the entire agreement and understanding between the parties hereto and supercedes all prior negotiations, representations, undertakings and agreement on any subject matter of this Contract.
 
This Contract and the subject matter thereof shall not be subject to any general Terms and Conditions of the BUILDER or any other terms and conditions normally or at any time put forward by the BUILDER with reference to any order from or work undertaken by the BUILDER and all such General Terms and Conditions and other terms and conditions are hereby explicitly and expressly excluded from this Contract, shall form no part thereof and shall have no force and effect.
 
3.              Amendments and Supplements:
 
Any supplement, memorandum of understanding or amendment, whatsoever form it may be relating to this Contract, to be made and signed among parties hereof after signing this Contract, shall be predominant over the respective corresponding Article and/or Clause of this Contract, unless otherwise expressly stipulated.
 
4.              Banking Day:
 
A Banking Day under this Contract is defined as a day on which the banks are open in Cyprus, Korea and New York.
 
5.              No Set Off, Deduction or Counter-claim:
 
All moneys refundable or payable to the BUYER under or pursuant to this Contract shall be paid to the BUYER without set-off or deduction or counter-claim and all moneys payable to the BUILDER pursuant to this Contract shall be paid to the BUILDER without set off or deduction or
 
55

 
counter-claim.
 
6.              Deemed Benefit for Servants, etc.:
 
Any exemptions from liability and any undertaking to hold harmless which have been stipulated in this Contract to the benefit of either of the parties hereto shall be deemed to have been stipulated also to the benefit of the servants, sub-contractors, vendors and suppliers of such party and of the servants of the said sub-contractors, vendors and suppliers.
 
7               Responsibility:
 
Notwithstanding any other term of this Contract or the Specifications, the BUILDER shall be fully responsible for the due, proper, accurate, diligent and punctual designing, building, equipping, launching, outfitting and completing of the VESSEL and for the quality of the materials employed and work done and for the delivery in due time of the VESSEL to the BUYER as herein provided, and the BUYER shall have and bear no responsibility whatsoever in respect thereof or in connection therewith as stipulated in the Contract and the Specifications.
 
8.              Time of the Essence:
 
Time shall be of the essence hereof.
 
56

 
9.              Headings:
 
The descriptive headings of Articles and Clauses herein are for the convenience of reference only and are not to be used in construing or interpreting this Contract.
 
IN WITNESS WHEREOF, the parties hereto have caused this Contract to be duly executed on the day and year first above written.

BUYER	BUILDER	
 	 	
RAMONA MARINE COMPANY
LIMITED	SAMSUNG HEAVY INDUSTRIES
CO., LTD.	
 	 	
Signature:	Signature:	

/s/ Gerry Wang	 	/s/ J. W. Kim	 	
Name:	Gerry Wang	Name:	J. W. Kim	
 	 	
Title:	Director	Title:	President	

57

 
Annex A
 
LETTER OF REFUNDMENT GUARANTEE NO.
 
Date :
 
Gentlemen:
 
We, the                                                     (hereinafter called the “Bank”), hereby issue our irrevocable letter of guarantee No.                                           in favor of                       a company organized and existing under the laws of       , having its office at (hereinafter called the “BUYER”) for account of Samsung Heavy Industry Co., Ltd. Of Korea (hereinafter called the “BUILDER”) in consideration of the BUYER making advance payments to the Builder under the Shipbuilding Contract dated             2003 (hereinafter called the “Contract”) made by and between the BUYER and the BUILDER for the design, construction and sale of one (1) single screw cellular container vessel having the BUILDER’S Hull No. (hereinafter called the “VESSEL”).
 
Whereas in Article II of the Contract, the BUYER is required to make three (3) advance payments of the Contract price, in the following amounts : First Installment amounting to      United States Dollars, Second Installment amounting to            United States Dollars and Third Installment amounting to             United States Dollars.
 
If in connection with or under the terms and conditions of the Contract, the BUYER shall become entitled to refund of the advance payment(s) made to the BUILDER prior to the delivery of the VESSEL, we hereby irrevocably and unconditionally guarantee as a primary obliger and not as a surety that we will pay to the BUYER on demand the sum of            United States Dollars together with interest thereon at the rate of 5 % (five percent) per annum from the date respective dates of receipt by the BUILDER of any advance payment to the date of our payment to the BUYER hereunder.
 
The amount of this letter of guarantee will be automatically increased, not more than two (2) times upon the BUILDER’s receipt of the Second and Third Installments as set forth above payable under the Contract by the respective amount of the Second and Third Installments plus interest thereon as provided by the Contract, but in any eventually the amount of this guarantee shall not exceed the total principal sum of            United States Dollars plus interest thereon at the rate of 5% (five percent) per annum from the respective dates of the BUILDER’s receipt of each installment to the date of receipt by the BUYER of the guaranteed amount plus interest as aforesaid.
 
In case any refund is made to the BUYER by the BUILDER or by us, under this guarantee, our liability hereunder shall be automatically reduced by the amount of such refund.
 
58

 
This letter of guarantee is available against the BUYER’s simple signed statement certifying that the BUYER’s demand for refund has been made in conformity with Article X of the Contract and the BUILDER has failed to make the refund within twenty (20) days after the BUYER’s demand to the BUILDER. Refund shall be made to the BUYER by telegraphic transfer in freely transferable United States Dollars free of bank charges, remittance fees, taxes, and other applicable withholdings.
 
This letter of guarantee shall expire and become null and void upon receipt by the BUYER of the full sum guaranteed hereby or upon acceptance by the BUYER of the delivery of the VESSEL in accordance with the terms of the Contract as evidenced by the Protocol of Delivery and Acceptance duly signed by the BUILDER and the BUYER and, in either case, this letter of guarantee shall be returned to us. This guarantee is valid from the date of this letter of guarantee until the VESSEL is delivered by the BUILDER to and accepted by the BUYER in accordance with the terms of the Contract.
 
Notwithstanding the provisions hereinabove, in case where we receive notification from the BUYER or the BUILDER, confirmed by the Arbitrators appointed for this purpose stating that the BUYER’s claim to rescind the Contract or the BUYER’s claim for refundment thereunder has been disputed and referred to Arbitration in accordance with the provisions of the Contract, the period of validity of this guarantee shall be extended until Forty-five (45) days after the award shall be rendered in the Arbitration and we shall pay to the BUYER the sum of adjudged to the due to the BUYER by the BUILDER pursuant to the award made under such Arbitration, immediately upon receipt from the BUYER of a simple demand accompanied by a copy of the award certified by an English Solicitor or by the Arbitrator or Arbitrators, as the case may be.
 
We hereby agree that this letter of guarantee shall be construed as a continuing and unconditional guarantee of payment and without regard to the validity or unenforceability of any other agreement or instrument and without regard to defence, set-off or counterclaim or any other circumstance whatsoever which might constitute an equitable or legal discharge of our obligation hereunder. No action or failure to act on the BUYER’s part shall relieve us of any our obligations hereunder.
 
This letter of guarantee shall continue to be effective or reinstated, as the case may be, if at any time, payment of any of payments guaranteed hereunder is rescinded or must otherwise be returned by the BUYER upon the insolvency, bankruptcy or reorganization of the BUILDER or otherwise, all as though any such payment had not been made.
 
This letter of guarantee shall be assignable to the BUYER’s financier, whether it is a bank, financial institution or a commercial corporation, by giving written notice to us.
 
59

 
All demands and notices in connection with this letter of guarantee shall be validly given if sent to us by post fax or telex to our office as follows ;
 
This guarantee shall be governed by and be construed and interpreted in accordance with the law of England and we hereby submit to the exclusive jurisdiction of the English Courts.
 
Very truly yours,

For and on behalf of the                                                          .

By	:	By	:	
Name	:	Name	:	
Title	 :	 Title	 :	
 
60

 
Annex B
 
PERFORMANCE GUARANTEE
 
In consideration of the assignment of a certain shipbuilding contract dated                           2003 (hereinafter called the “Contract”) by us to (hereinafter called the “BUYER”), for the construction of one(1) single screw diesel engine driven fully Cellular Container Vessel having your Hull No. (hereinafter called the “VESSEL”) providing among other things for payment of the Contract Price amounting to United States               Dollars (US$                    );
 
We, the undersigned, hereby irrevocably and unconditionally guarantee to you, your successors, and assigns the due and faithful performance by the BUYER of its all liabilities and responsibilities under the Contract and any supplement, amendment, change or modification hereafter made thereto, including but not limited to, due and prompt payment of the Contract Price by the BUYER to you, your successors, and assigns under the Contract and any supplement, amendment, change or modification as aforesaid (hereby expressly waiving notice of any such supplement, amendment, change or modification as may be agreed to by the BUYER and confirming that this guarantee shall be fully applicable to the Contract as so supplemented, amended, changed or modified).
 
This Performance Guarantee shall be governed by the laws of England.

GUARANTOR :	 	
BY :	 	
TITLE :	 	
WITNESS :	 	
 
61

 
Exhibit 10.19

 
FOR
 
CONSTRUCTION AND SALE
 
OF
 
A 4 ,250 TEU CONTAINER VESSEL
(HULL NO. 1639)

 
BETWEEN

Seacarriers Services Inc.
As BUYER
 
AND

Samsung Heavy Industries Co., Ltd.
As BUILDER

 
I N D E X

 	PAGE	
 	 	
PREAMBLE	7	
 	 	
ARTICLE I - DESCRIPTION AND CLASS	 	
 	 	
1. Description	8	
2. Dimensions and Characteristics	8	
3. Classification, Rules and Regulations	10	
4. Subcontracting	11	
5. Registration.	11	
 	 	
ARTICLE II - CONTRACT PRICE AND TERMS OF PAYMENT	 	
 	 	
1. Contract Price	12	
2. Adjustment of Contract price	12	
3. Currency	12	
4. Terms of Payment	12	
5. Method of Payment	13	
6. Notice of Payment on or before Delivery	15	
7. Expenses	15	
8. Prepayment	15	
9. Performance Guarantee	15	
 	 	
ARTICLE III - ADJUSTMENT OF CONTRACT PRICE	 	
 	 	
1. Delivery	16	
2. Speed	17	
3. Fuel Consumption	18	
4. Deadweight	18	
5. Early Delivery	19	
6. Effect of Rescission	19	
 
2

 

ARTICLE IV - APPROVAL OF PLANS AND DRAWINGS AND INSPECTION DURING CONSTRUCTION	 	
 	 	
1. Approval of Plans and Drawings	20	
2. Appointment of BUYER’s Supervisor	20	
3. Inspection by the Supervisor	21	
4. Facilities	22	
5. Liability of BUILDER	22	
6. Responsibility of BUYER	23	
 	 	
ARTICLE V - MODIFICATIONS, CHANGES AND EXTRAS	 	
 	 	
1. How Effected	24	
2. Change in Rules of Classification Society, Regulations etc.	25	
3. Substitution of Materials	26	
 	 	
ARTICLE VI - TRIALS AND ACCEPTANCE	 	
 	 	
1. Notice	27	
2. Weather Condition	27	
3. How Conducted	28	
4. Method of Acceptance of Rejection	28	
5. Effect of Acceptance	29	
6. Disposition of Surplus Consumable Stores	30	
 	 	
ARTICLE VII - DELIVERY	 	
 	 	
1. Time and Place	31	
2. When and How Effected	31	
3. Documents to be delivered to BUYER	31	
4. Tender of VESSEL	32	
5. Title and Risk	33	
6. Removal of VESSEL	33	
 
3

 

ARTICLE VIII - DELAYS AND EXTENSION OF TIME FOR DELIVERY (FORCE MAJEURE)	 	
 	 	
1. Causes of Delay	34	
2. Notice of Delay	35	
3. Definition of Permissible Delay	35	
4. Right to Rescind for Excessive Delay	35	
 	 	
ARTICLE IX - WARRANTY OF QUALITY	 	
 	 	
1. Guarantee	37	
2. Notice of Defects	37	
3. Remedy of Defects	37	
4. Extent of the BUILDER’s Responsibility	39	
5. Guarantee Engineer	39	
 	 	
ARTICLE X - RESCISSION BY BUYER	 	
 	 	
1. Notice	41	
2. Refundment by BUILDER	41	
3. Discharge of Obligations	42	
 	 	
ARTICLE XI - BUYER’S DEFAULT	 	
 	 	
1. Definition of Default	43	
2. Effect of Default on or before Delivery of VESSEL	43	
3. Disposal of VESSEL	44	
 	 	
ARTICLE XII - ARBITRATION	 	
 	 	
1. Decision by Classification Society	45	
2. Proceedings of Arbitration	45	
3. Notice of Award	46	
4. Expenses	46	
5. Entry in Court.	46	
6. Alteration of Delivery Date	46	
 	 	
ARTICLE XIII - SUCCESSOR AND ASSIGNS	47	
 
4

 

ARTICLE XIV - TAXES AND DUTIES	 	
 	 	
1. Taxes and duties Incurred in Korea	48	
2. Taxes and Duties Incurred outside Korea	48	
 	 	
ARTICLE XV - PATENTS, TRADEMARKS, COPYRIGHTS, ETC.	 	
 	 	
1. Patents, Trademarks and Copyrights	49	
2. General Plans, Specifications and Working Drawings	49	
 	 	
ARTICLE XVI - BUYER’S SUPPLIES	 	
 	 	
1. Responsibility of BUYER	50	
2. Responsibility of BUILDER	51	
 	 	
ARTICLE XVII - INSURANCE	 	
 	 	
1. Extent of Insurance Coverage	52	
2. Application of the Recovered Amounts	52	
3. Termination of BUILDER’s Obligation to Insure	53	
 	 	
ARTICLE XVIII - NOTICE	 	
 	 	
1. Address	54	
2. Language	54	
3. Effective Date of Notice	55	
 	 	
ARTICLE XIX - EFFECTIVE DATE OF CONTRACT	56	
 	 	
ARTICLE XX - INTERPRETATION	 	
 	 	
1. Laws Applicable	57	
2. Discrepancies	57	
3. Entire Agreement	57	
4. Amendments and supplements	57	
 
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END OF CONTRACT .	57	
 	 	
EXHIBIT “A” LETTER OF REFUNDMENT GUARANTEE	59	
 	 	
EXHIBIT “B” PERFORMANCE GUARANTEE	63	
 	 	
EXHIBIT “C” PERFORMANCE GUARANTEE	64	
 
6

 
THIS CONTRACT, made and entered into on this 30th day of June, 2005 by and between Seacarriers Services Inc. a corporation incorporated and existing under the laws of Liberian, having its registered office at 80 Broad Street, Monrovia, Liberia (hereinafter called the “BUYER”), on the one part and Samsung Heavy Industries Co.,Ltd., a corporation incorporated and existing under the laws of the Republic of Korea of having its registered office at 647-9, Yoksam-Dong, Kangnam-ku, Seoul, Korea (hereinafter called the “BUILDER”), on the other part,

WITNESSETH:
 
In consideration of the mutual covenants herein contained, the BUILDER agrees to design, build, launch and complete in accordance with first class modern Korean shipbuilding practice and standards one (1) Single Screw Diesel Engine driven Container VESSEL as described in the Specifications attached herewith and any addendum thereto (hereinafter called the “VESSEL”) at the BUILDER’s shipyard located in Koje Island, Korea (hereinafter called the “Shipyard”) and to deliver and sell the same to the BUYER, and the BUYER hereby agrees to purchase and accept delivery of the VESSEL from the BUILDER and to pay for the same upon the terms and conditions hereinafter set forth.
 
7

 
ARTICLE I - DESCRIPTION AND CLASS
 
1.                           Description :
 
The VESSEL shall be an ocean going single screw diesel engine driven fully cellular container VESSEL suitable for carrying dry cargo containers having the BUILDER’s Hull No.1639 and shall be constructed, equipped and completed in accordance with the specifications, all plans and drawings, and manufacturer list made, used, and duly approved for the construction of the BUILDER’s Hull No. 1455~1456 (hereinafter collectively called the “As-Built-Specifications”).
 
The BUYER and the BUILDER hereby undertake that the VESSEL shall be the just repeat and series VESSEL of the BUILDER’s Hull Nos. 1455 & 1456 (as a series project). Thus all construction procedure including model test and sea trial etc. shall be done on the basis of the just repeat and series VESSEL of Hull Nos. 1455 & 1456.
 
The BUYER and the BUILDER hereby further undertake that As-Built-Specifications shall be used for the VESSEL without any further approval and modification from the BUYER unless otherwise mutually agreed by both parties.
 
2.                           Dimensions and Characteristics :

Length, overall	 	appx.	 	259.8	 	m	
Length, between perpendiculars	 	appx.	 	244.8	 	m	
Breadth, moulded	 	appx.	 	32.25	 	m	
Depth, moulded	 	appx.	 	19.3	 	m	
Designed loaded draught, moulded	 	appx.	 	11.0	 	m	
Scantling draught, moulded	 	appx.	 	12.6	 	m	
Main Engine	:	MAN B&W 8K 90MC-C	 	 	 	type License	
 	 	 	 	 	 	 	
Made MCR 49,680 bhp at 104 r.p.m.	 	 	 	 	
 
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Deadweight, guaranteed	 	:	 	50,500 metric tons at the moulded	
 	 	 	 	scantling draught of 12.6 meters.	
 	 	 	 	 	
Speed, guaranteed	 	:	 	24.5 knots at a draught of 11.0 meters	
 	 	 	 	and main engine developing power	
 	 	 	 	of 38,880 bhp (metric).	
 	 	 	 	 	
Fuel Consumption, guaranteed	 	:	 	124.3 grams/bhp(metric)-hour using marine	
 	 	 	 	diesel oil having lower calorific value of	
 	 	 	 	10,200 kcal/kg at normal continuous	
 	 	 	 	rating of 44,710 bhp(metric) measured	
 	 	 	 	at the shop trial.	
 
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The details of the aforementioned particulars as well as the definitions and method of measurements and calculations are as defined in the As-Built-Specifications.
 
3.                           Classification, Rules and Regulations :
 
The VESSEL, including its machinery, equipment and outfittings shall be constructed in accordance with the rules and regulations in year 2004 July edition of the Classification Society in accordance with the interpretation of Classification Society (dated on 2005-06-29 Ref No. MKOKR120/MSSH/Gen-precontract/PUS-J-668) and under special survey of Det Norske Veritas (hereinafter called the “Classification Society”) and shall be distinguished in the register by the symbol of X 1A1 “ Container Carrier”, NAUTICUS, EO , and In water survey and TMON shall be applied according to the requirement of the class rule.
 
Decisions of the Classification Society as to compliance or non-compliance with the classification shall be final and binding upon both parties hereto. Details of its notation shall be in accordance with the As-Built-Specifications.
 
The VESSEL shall also comply with the compulsory rules, regulations and requirements of the regulatory bodies as described in the As-Built-Specifications rectified and in effect as of the signing date of this Contract. Non-compulsory rules, regulations and requirements of the regulatory bodies shall be dealt with in accordance with Article V (2) of this Contract.
 
All the fees and charges incidental to the classification and with respect to compliance with the above referred rules, regulations and requirements shall be for account of the BUILDER except otherwise agreed.
 
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4.                           Subcontracting :
 
The BUILDER may, at its sole discretion and responsibility, subcontract any portion of the construction work of the VESSEL, provided that the construction and assembly of the VESSEL shall be carried out as is normally done according to the BUILDER’s building practice and provided further that the BUILDER shall be responsible to the BUYER in respect of any construction work carried out by such subcontractors.
 
5.                           Registration :
 
The VESSEL, at the time of its delivery and acceptance, shall be registered at the port of registry by the BUYER under Greek, Liberian, Cyprus or Panama flag at the BUYER’s expenses. The BUYER shall decide the flag within one(1) month after the date of signing of this Contract.
 
(End of Article)
 
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ARTICLE II - CONTRACT PRICE AND TERMS OF PAYMENT
 
1.                           Contract Price :
 
The Contract price of the VESSEL and exclusive of the BUYER’s Supplies as provided in Paragraph 1 of Article XVI hereof is Seventy Million United States Dollars (US$ 70,000,000.-) (hereinafter called the “Contract Price”), which shall be subject to upward or downward adjustment, if any, as hereinafter set forth in this Contract.
 
2.                           Adjustment of Contract Price:
 
Increase or decrease of the Contract Price, if any, due to adjustments thereof made in accordance with the provisions of this Contract, shall be adjusted by way of addition to or subtraction from the Contract Price upon delivery and acceptance of the VESSEL in the manner as hereinafter provided.
 
3.                           Currency :
 
Any and all payments by the BUYER to the BUILDER which are due under this Contract shall be made in United States Dollars.
 
4.                           Terms of Payment :
 
The Contract Price shall be due and payable by the BUYER to the BUILDER in the instalments as follows :
 
(a)  First Instalment :
 
The First Instalment amounting to Seven Million United States Dollars (US$ 7,000,000.-) shall be due and payable upon issuance and delivery to the BUYER of the original of Refund Guarantee.
 
(b)                      Second Instalment :
 
The Second Instalment amounting to Seven Million United States Dollars (US$ 7,000,000.-) shall be due and payable upon six(6) calendar months after the date of singing of this Contract.
 
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(c)                       Third Instalment :
 
The Third Instalment amounting to Seven Million United States Dollars (US$ 7,000,000.-) shall be due and payable upon steel cutting of the VESSEL.
 
(d)                      Fourth Instalment :
 
The Foruth Instalment amounting to Seven Million United States Dollars (US$ 7,000,000.-) shall be due and payable upon keel laying of the VESSEL.
 
(e)                       Fifth Instalment :
 
The Delivery Instalment amounting to Forty Two Million United States Dollars (US$ 42,000,000.-) plus any increase or minus any decrease due to adjustments of the Contract Price under and pursuant to the provisions of this Contract, shall be due and payable upon delivery and acceptance of the VESSEL or upon tender for delivery of the VESSEL referred to in Paragraph 4 of Article VII of this Contract.
 
It is agreed that no payment shall be effected until the original Refund Guarantee is delivered to the BUYER.
 
5.                           Method of Payment :
 
(a)                       First Instalment :
 
Within Seven(7) banking days after 30 th day of June, 2005, the BUYER shall remit by telegraphic transfer the first instalment to the account of The Export-Import Bank of Korea, Head Office, Seoul, Korea with Deutsche Bank Trust Company Americas(BIC : BKTRUS33), 60 Wall Street, Mail Stop NYC 60 1310, New York, NY 10005, USA, Account No.04 029 695, in favour of Samsung Heavy Industries., Ltd, SWIFT code : EXIKKRSE or other bank as designated by the Builder, in favor of Samsung Heavy Industrise Co, Ltd.(hereinafter called the “BUILDER’s Bank”)
 
(b)                      Second, Third and Fourth Instalment :
 
Upon receipt of telefax notice from the BUILDER confirming that the second, third, and fourth instalment on each event is due and payable, the BUYER shall remit by telegraphic transfer the second, third, and fourth instalment to the aforesaid account of the BUILDER’s Bank in favour of Samsung Heavy Industries Co., Ltd.
 
13

 
(c)                       Fifth Instalment :
 
At least One (1) banking days prior to delivery and acceptance of the VESSEL, the BUYER shall remit by telegraphic transfer the fifth instalment to the name of the BUYER at BUILDER’s BANK, with an irrevocable instruction that the amount so remitted shall be payable to the BUILDER against a facsimile copy of PROTOCOL OF DELIVERY and ACCEPTANCE OF THE VESSEL signed by the BUYER and the BUILDER or returned to the BUYER if such PROTOCOL OF DELIVERY and ACCEPTANCE has not been presented within 15 days.
 
Simultaneously with each of all such payments, the BUYER shall cause the BUYER’s BANK to advise the BUILDER’s BANK of the details of such payments by authenticated bank cable.
 
Any claim which the BUYER may have against the BUILDER hereunder shall be settled and liquidated separately from any payment by the BUYER to the BUILDER hereunder.
 
14

 
6.                           Notice of Payment on or before Delivery :
 
With the exception of the first instalment, the BUILDER shall give the BUYER Five(5) banking days prior notice by telefax of the anticipated due date and amount of each instalment payable on or before delivery of the VESSEL.
 
7.                           Expenses.
 
Expenses and bank charges for remitting payments and any taxes, duties, expenses and fees connected with such payment shall be for account of the BUYER referred to in paragraph 2 of Article XIV of this Contract, except expenses and bank charges of the BUILDER’s BANK.
 
8.                           Prepayment :
 
Prepayment of any instalment due on or before delivery of the VESSEL shall be subject to mutual agreement between the parties hereto.
 
9.                           Performance Guarantee
 
Upon signing this Contract, the BUYER shall provide the BUILDER with a Performance Guarantee in order to secure the due and faithful performance of this Contract by the BUYER having same form and contents as Exhibit “B” annexed hereto.
 
(End of Article)
 
15

 
ARTICLE III - ADJUSTMENT OF CONTRACT PRICE
 
The Contract Price shall be subject to adjustment, as hereinafter set forth, in the event of the following contingencies (it being understood by both parties that any reduction of the Contract Price is by way of liquidated damages and not by way of penalty) :
 
1.                           Delivery :
 
(a)                       No adjustment shall be made and the Contract Price shall remain unchanged for the first Thirty (30) days of delay in delivery of the VESSEL beyond the Delivery Date as defined in Article VII hereof (ending as of twelve o’clock midnight of the Thirty (30) day of delay).
 
(b)                      If the delivery of the VESSEL is delayed more than Thirty (30) days after the Delivery Date, the Contract Price shall be reduced by the sum of Twenty Seven Thousand Five Hundred United States Dollars (US$27,500.-) for each full day for which thereafter delivery is delayed.
 
However, the total reduction in the Contract Price shall not be more than as would be the case for a delay of One Hundred Eighty (180) days counting from the midnight of the Thirty (30) day after the Delivery Date at the above specified rate of reduction.
 
(c)                       However, if the delay in delivery of the VESSEL should continue for a period of Two Hundred Ten (210) days from the Delivery Date in Paragraph 1 of Article VII, then in such event, and after such period has expired, the BUYER may, at its option, rescind this Contract in accordance with the provisions of Article X hereof.
 
The BUILDER may, at any time after the expiration of the aforementioned Two Hundred Ten (210) days of delay in delivery, if the BUYER has not served notice of rescission as provided in Article X hereof, demand in writing that the BUYER shall make an election, in which case the BUYER shall, within Twenty (20) days after such demand is received by the BUYER, notify the BUILDER of its intention either to rescind this Contract or to consent to the acceptance of the VESSEL at the BUILDER’s specified future date. If the BUYER shall not make an election within Twenty (20) days as provided hereinabove, the BUYER shall be deemed to have accepted such extension of the delivery date to the future delivery date indicated by the BUILDER and it being understood by the parties hereto that if the VESSEL is not delivered by such future date, the BUYER shall
 
16

 
have the same right of rescission upon the same terms and conditions as hereinabove provided.
 
It is understood that accrued liquidated damages are preserved. Further delay shall incur additional liquidated damages in accordance with existing terms and conditions.
 
(d)                      For the purpose of this Article, the delivery of the VESSEL shall be deemed to be delayed when and if the VESSEL, after taking into account all postponements of the Delivery Date by reason of permissible delay as defined in Article VIII and/or any other reason under this Contract, is not delivered by the date upon which delivery is required under the terms of this Contract.
 
2.                           Speed :
 
(a)                       The Contract Price shall not be affected or changed by reason of the trial speed (as determined according to the As-Built-Specifications) being less than the guaranteed speed, if such variation is not more than Two-Tenths (2/10) of One (1) knot.
 
(b)                      However, if such variation is more than Two-Tenths (2/10) of One (1) knot, then, the Contract Price shall be decreased by One Hundred and Seventy Five Thousand Five Hundred United States Dollars (US$ 175,000.-) for each successive whole One-Tenth(1/10) of a knot in excess of a deficiency of Two-Tenths (2/10) of a knot (in both cases smaller fractions being disregarded).
 
(c)                       If the deficiency in the speed upon final sea trial is more than Half(1/2) a knot below the guaranteed speed of the VESSEL, then the BUYER may, at its option, reject the VESSEL and rescind this Contract in accordance with the provisions of Article X hereof, or may accept the VESSEL at a reduction in the Contract Price as above provided for Half(1/2) a knot only, that is, at a total reduction of Five Hundred and Twenty Five Thousand Five Hundred United States Dollars (US$ 525,000.-).
 
17

 
3.                           Fuel Consumption :
 
(a)                       The Contract Price shall not be affected or changed in case the fuel consumption, as determined by the shop trial as specified in the As-Built-Specifications, is not more than Five percent (5%) in excess of the guaranteed fuel consumption specified in Paragraph 2 of Article I.
 
(b)                      However, in the event that the actual fuel consumption at the shop trial is in excess of Five percent (5%) of the guaranteed fuel consumption, the Contract Price shall be reduced by the sum of One Hundred and Ten Thousand United States Dollars (US$ 110,000.-) for each full one percent(1%) increase in fuel consumption and pro rata for any fraction of one percent(1%) of the Guaranteed Fuel Consumption in excess of the said five percent(5%) up to maximum of eight percent(8%) over the Guaranteed Fuel Consumption.
 
(c)                       If the deficiency in fuel consumption is more than Eight percent (8%) then the BUYER may at its option rescind this Contract in accordance with the provision of Article X hereof.
 
4.                           Deadweight :
 
(a)                       In the event that the deadweight of the VESSEL as determined in accordance with the As-Built-Specifications is less than the guaranteed deadweight as specified in Paragraph 2 of Article I, the Contract Price shall be reduced by the sum of One Thousand One Hundred United States Dollars (US$ 1,100.-) for each full metric ton of such deficiency being more than Seven Hundred (700) metric tons, up to a maximum reduction of One Million Two Hundred and Ten Thousand United States Dollars (US$ 1,210,000.-).
 
(b)                      In the event of such deficiency in the deadweight of the VESSEL being One thousand eight hundred (1,800) metric tons or more, then, the BUYER may, at its option, reject the VESSEL and rescind this Contract in accordance with the provisions of Article X hereof or accept the VESSEL at a reduction in the Contract Price as above provided for One thousand eight hundred (1,800) metric tons only, that is, at a total reduction of One Million Two Hundred and Ten Thousand United States Dollars (US$1,210,000.-).
 
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5.                  Early Delivery
 
In the event that the BUILDER believes that the VESSEL can be completed and ready for Delivery on a date earlier than the Contractual Delivery Date, then the BUILDER may give a written notice to the BUYER, no later than six (6) months before the revised date (the “Early Delivery Date”) informing the approximate date on which the VESSEL can be ready for the Delivery. The BUYER shall have the option, but not the obligation, to accept Delivery of the VESSEL on the Early Delivery Date and upon the BUYER’s acceptance thereof, the parties shall discuss the specific amount of the additional payment due to the BUILDER for the accelerated Delivery of the VESSEL on the Early Delivery Date at the delivery stage of the VESSEL and t he compensation payment of the acceleration bonus shall be settled and paid in full with the final delivery instalment concurrently uponwith the actual Delivery and acceptance of the VESSEL by the BUYER. If the Parties fail to reach a mutual agreement on the amount of the Early Delivery bonus, the BUILDER shall be free to deliver the VESSEL on the original Contractual Delivery Date or earlier at its option. The Parties hereto acknowledge that there will be no liquidated damages or other penalty to be imposed on the BUILDER in the event the VESSEL happens to be delivered on any date later than the Early Delivery Date but earlier than the original Contractual Delivery Date.
 
6                              Effect of Rescission :
 
It is expressly understood and agreed by the parties that in any case, if the BUYER rescinds this Contract under this article, the BUYER shall not be entitled to any liquidated damages or any other recourse unless by means of the provisions of Article X hereof.
 
(End of Article)
 
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ARTICLE IV - APPROVAL OF PLANS AND DRAWINGS AND INSPECTION DURING CONSTRUCTION
 
1.                           Approval of Plans and Drawings :
 
As-Built-Specifications for the BUILDER’s Hull No. 1455 & 1456 shall be used for the VESSEL without any further approval and modification from the BUYER unless otherwise mutually agreed by both parties. Should any changes are required by the BUYER’s request or the application of new rules and regulations (of a mandatory nature) coming into effect after the date of this Contract signing, the BUILDER shall submit such changes to the BUYER for its approval. If approved by the BUYER, such changes shall be applied to the VESSEL with cost adjustment in accordance with Article V of this Contract.
 
2.                           Appointment of BUYER’s Supervisor :
 
The BUYER may send to and maintain at the Shipyard, at the BUYER’s own cost and expense, one supervisor who shall be duly authorized in writing by the BUYER (herein called the “Supervisor”) to act on behalf of the BUYER in connection with the modifications of the As-Built-Specifications, adjustments of the Contract Price and Delivery Date, approval of the plans and drawings, attendance to the tests and inspections relating to the VESSEL, its machinery, equipment and outfittings, and any other matters for which he is specifically authorized by the BUYER. The Supervisor may appoint his assistant(s) to attend at the Shipyard for the purposes as aforesaid.
 
In the event that assignment, novation or resale occurs under the Article XIII and as a result, BUYER’s Supervisor is changed during the construction of the VESSEL, any and all matters determined by mutual agreement between the BUYER’s Supervisor and the BUILDER prior to the dispatch of a new Supervisor shall be accepted and complied by the new Supervisor. In case two or more Supervisors are dispatched to the Shipyard and authorized, under the BUILDER’s prior consent, to perform the supervision, each of them will form uniform opinions between them to keep the design and As-Built-Specifications so as not to adversely affect the CONTRACT PRICE and Delivery of the VESSEL, provided that such change in the Contract Price will be reasonable and proven under the BUILDER’s normal practice.
 
20

 
3.                           Inspection by the Supervisor :
 
The necessary inspections of the VESSEL, its machinery, equipment and outfittings shall be carried out by the Classification Society, other regulatory bodies and/or an inspection team of the BUILDER throughout the entire period of construction in order to ensure that the construction of the VESSEL is duly performed in accordance with this Contract and the As-Built-Specifications. The Supervisor shall have, during construction of the VESSEL, the right to attend such tests and inspections of the VESSEL, its machinery and equipment within the premises of either the BUILDER or its subcontractors. The BUILDER shall give notice to the Supervisor, in advance of the date and place of such tests and inspections for the convenience of their attendance. Detailed procedures of the inspection and the tests thereof shall be in accordance with the As-Built-Specifications.
 
The BUILDER may request BUYER’s supervisor to attend the inspection and tests during public holidays and weekends and/or Company holidays in order to keep BUILDER’s construction schedule. BUYER’s supervisor shall fully cooperate with BUILDER and promptly attend such inspection/tests including those for surface preparation and painting work, which are especially vulnerable to weather condition and time interval. However, BUILDER shall keep such inspection and tests to a minimum and only when the inspection and tests affect BUILDER’s construction schedule. The BUILDER’s prior notice of such inspection/test schedule shall be informed to the BUYER’s supervisor three(3) working days in advance as a minimum
 
The Supervisor shall be entitled to request copies of all test results and trials as soon as required for the performance of his duties.
 
The Supervisor shall notify the BUILDER of deficiencies in the construction of the VESSEL or materials. The BUILDER should examine the deficiency and rectify.
 
If any of the BUYER’s supervisors discover any construction, material or workmanship which is not deemed to conform to the requirements of this Contract and/or the As-Built-Specifications, the BUYER’s supervisors shall promptly give the BUILDER a notice in writing that such alleged non-conformity exists. Upon
 
21

 
receipt of such notice from the BUYER’s supervisor, the BUILDER shall correct such non-conformity, if the BUILDER agrees to his view. Any disagreement shall be resolved in accordance with Paragraph 1 of Article XII.
 
4.                           Facilities :
 
The BUILDER shall furnish the Supervisor and his assistant(s) with adequate office space and such other reasonable facilities according to the BUILDER’s practice at or in the immediate vicinity of the Shipyard as may be necessary to enable them to effectively carry out their duties. The BUYER shall pay for all such facilities other than office space at the BUILDER’s normal rate of charge.
 
5.                           Liability of BUILDER :
 
The Supervisor and his assistant(s) shall at all times be deemed to be the employees of the BUYER and not of the BUILDER. The BUILDER shall be under no liability whatsoever to the BUYER, the Supervisor or his assistant(s) for personal injuries, including death, suffered during the time when he or they are on the VESSEL, or within the premises of either the BUILDER or its subcontractors, or are otherwise engaged in and about the construction of the VESSEL, unless, however, such personal injuries, including death, were caused by a gross negligence of the BUILDER, or of any of its employees or agents or subcontractors.
 
Nor shall the BUILDER be under any liability whatsoever to the BUYER, the Supervisor or his assistant(s) for damage to, or loss or destruction of property in Korea of the BUYER or of the Supervisor or his assistant(s), unless such damage, loss or destruction were caused by a gross negligence of the BUILDER or of any of its employees or agents or subcontractors.
 
22

 
6.                           Responsibility of BUYER :
 
The BUYER shall undertake and assure that the Supervisor shall carry out his duties hereunder in accordance with the normal shipbuilding practice of the BUILDER and in such a way so as to avoid any unnecessary increase in building cost, delay in the construction of the VESSEL, and/or any disturbance in the construction schedule of the BUILDER.
 
The BUILDER has the right to request the BUYER to replace the Supervisor who is deemed unsuitable and unsatisfactory for the proper progress of the VESSEL’s construction. The BUYER shall investigate the situation by sending its representative(s) to the Shipyard if necessary, and if the BUYER considers that such BUILDER’s request is justified, the BUYER shall effect such replacement as soon as conveniently arrangeable.
 
(End of Article)
 
23

 
ARTICLE V - MODIFICATIONS, CHANGES AND EXTRAS
 
1.                           How Effected :
 
Any modifications and/or changes in the As-Built-Specifications shall be made by written agreement of the parties hereto provided, however, that any modifications and/or changes requested by the BUYER or an accumulation of such modifications and/or changes will not adversely affect the BUILDER’s planning or programme in relation to the BUILDER’s other commitments and if the BUYER shall assent to adjustment of the Contract Price, time for delivery of the VESSEL and other terms and conditions of this Contract as hereinafter provided. The BUILDER hereby agrees to exert its best efforts to accommodate such reasonable request by the BUYER so that the said changes and/or modifications may be made at a reasonable cost and within the shortest period of time which is reasonably possible.
 
Any such agreement for modifications and/or changes shall include an agreement as to the increase or decrease, if any, in the Contract Price of the VESSEL together with an agreement as to any extension or reduction in the time of delivery, or any other alterations in this Contract or the As-Built-Specifications occasioned by such modifications and/or changes.
 
The aforementioned agreement to modify and/or change the As-Built-Specifications may be effected by an exchange of letters signed by the authorized representatives of the parties hereto, or telefax confirmed in writing, manifesting such agreement. Such letters and confirmed message exchanged by the parties hereto pursuant to the foregoing shall constitute an amendment of the As-Built-Specifications, and such letters and message shall be incorporated into this Contract and made a part hereof.
 
The BUILDER may make minor changes to the As-Built-Specifications, if found necessary for introduction of improved production methods or otherwise, provided that the BUILDER shall first obtain the BUYER’s approval which shall not be unreasonably withheld.
 
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2.                           Changes in Rules of Classification Society, Regulations, etc.:
 
If, after the date of signing this Contract, any requirements as to classification, or as to the rules and regulations to which the construction of the VESSEL is required to conform, are altered or changed by the Classification Society or regulatory bodies authorized to make such alterations or changes, either of the parties hereto upon receipt of information thereof, shall transmit such information in full to the other party in writing, thereupon within Twenty-one(21) days after receipt of the said notice from the other party, the BUYER shall instruct the BUILDER in writing if such alterations or changes shall be made in the VESSEL or not, in the BUYER’s sole discretion.
 
(a)           If such alterations or changes are compulsory for the construction of VESSEL, either of the parties hereto, upon receipt of such information from Classification Society or such other regulatory bodies, shall promptly transmit the same to the other in writing, and the BUILDER shall thereupon incorporate such alterations or changes into the construction of the VESSEL, provided that the BUYER shall first agree to reasonable and proven adjustments required by the BUILDER in the Contract Price, the Delivery Date and other terms and conditions of this Contract and the As-Built-Specifications occasioned by or resulting from such alterations or changes.
 
(b)      If such alterations or changes are not compulsory for the construction of the VESSEL, and the BUYER desires to incorporate such alterations or changes into the construction of the VESSEL, then, the BUYER shall notify the BUILDER of such intention. The BUILDER may accept such alterations or changes, provided that such alterations or changes will not, in the judgement of the BUILDER, adversely affect the BUILDER’s planning or program in relation to the BUILDER’s other commitments, and provided, further, that the BUYER shall first agree to reasonable and proven adjustments required by the BUILDER in the Contract Price, the Delivery Date and other terms and conditions of this Contract and the As-Built-Specifications occasioned by or resulting from such alterations or changes.
 
In the event of a disagreement on price and delivery, and in the event that such alterations or changes are compulsory for the construction of VESSEL, then the BUILDER shall proceed with the required alterations and the dispute related to the above shall be resolved in accordance with the provisions of Article XII.
 
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Such agreement by the BUYER shall be effected in the same manner as provided in Paragraph 1 of this Article for modifications and/or changes of the As-Built-Specifications.
 
3.                           Substitution of Materials :
 
In the event that any of the materials required by the As-Built-Specifications or otherwise under this Contract for the construction of the VESSEL can not be procured in time to effect delivery of the VESSEL, or are in short supply, the BUILDER may, provided the BUYER so agrees in writing, supply other materials and equipment of the best available and like quality, capable of meeting the requirements of the Classification Society and of the rules, regulations, requirements and recommendations with which the construction of the VESSEL must comply. Any agreement as to such substitution of materials shall be effected in the manner as provided in Paragraph 1 of this Article, and shall, likewise, include possible decrease in the Contract Price and other terms and conditions of this Contract affected by such substitution.
 
(End of Article)
 
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ARTICLE VI - TRIALS AND ACCEPTANCE
 
Since the VESSEL is the repeat of BUILDER’s Hull Nos. 1455 & 1456, some sea trial items may be deleted subject to mutual agreement between the BUYER and the BUILDER
 
1.                           Notice :
 
The sea trial shall start when the VESSEL is reasonably completed according to the As-Built-Specifications.
 
The BUILDER shall give the BUYER at least Twenty (20) days estimated prior notice and Seven(7) days confirming prior notice by telefax of the time and place of the trial run of the VESSEL, and the BUYER shall promptly acknowledge receipt of such notice. The BUYER shall have its representatives on board the VESSEL to witness such trial run. Failure in attendance of the BUYER’s representative at the trial run of the VESSEL for any reason whatsoever after due notice to the BUYER as above provided shall be deemed to be a waiver by the BUYER of its right to have its representative on board the VESSEL at the trial run, and the BUILDER may conduct the trial run without attendance of the BUYER’s representative, and in such case the BUYER shall be obligated to accept the VESSEL on the basis of a certificate of the BUILDER that the VESSEL, upon trial run, is found to conform to this Contract and the As-Built-Specifications.
 
2.                           Weather Condition :
 
The trial run shall be carried out under the weather condition which is deemed favourable enough by the judgement of the BUILDER. In the event of unfavourable weather on the date specified for the trial run, the same shall take place on the first available day thereafter that the weather condition permits. It is agreed that, if during the trial run of the VESSEL, the weather should suddenly become so unfavourable that orderly conduct of the trial run can no longer be continued, the trial run shall be discontinued and postponed until the first favourable day next following, unless the BUYER shall assent in writing to acceptance of the VESSEL on the basis of the trial run already made before such discontinuance has occurred.
 
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Any delay of trial run caused by such unfavourable weather condition shall operate to postpone the Delivery Date by the period of the delay involved and such delay shall be deemed as permissible delay in the delivery of the VESSEL.
 
3.                           How Conducted :
 
(a)                       The VESSEL shall run the official trial trip in the manner as specified in the As-Built-Specifications.
 
(b)                      All expenses in connection with the trial run are to be for account of the BUILDER and the BUILDER shall provide, at its own expense, the necessary crew to comply with conditions of safe navigation, fuel oil, fresh water and other consumable stores necessary, the BUYER shall supply at its own expense lubricating oils and greases.
 
4.                           Method of Acceptance or Rejection :
 
(a)                       Upon completion of the trial run, the BUILDER shall give the BUYER a notice by telefax of completion of the trial run, as and if the BUILDER considers that the results of trial run indicate conformity of the VESSEL to this Contract and the As-Built-Specifications. The BUYER shall, within Five (5)days after receipt of such notice from the BUILDER, notify the BUILDER by telefax of its acceptance or rejection of the VESSEL’s conformity to this Contract and the As-Built-Specifications.
 
(b)                      However, should the result of the trial run show that the VESSEL, or any part or equipment thereof, does not conform to the requirements of this Contract and/or the As-Built-Specifications, or if the BUILDER is in agreement to non-conformity as specified in the BUYER’s notice of rejection, then, the BUILDER shall take necessary steps to correct such non-conformity.
 
Upon completion of correction of such non-conformity, and re-test or trial if necessary, the BUILDER shall give the BUYER a notice thereof by telefax.
 
The BUYER shall, within Three (3) days after receipt of such notice from the BUILDER, notify the BUILDER of its acceptance or rejection of the VESSEL.
 
(c)                       In any event that the BUYER rejects the VESSEL, the BUYER shall indicate in detail in its notice of rejection in what respect the VESSEL, or any part or
 
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equipment thereof does not conform to this Contract and/or the As-Built-Specifications.
 
(d)                      In the event that the BUYER fails to notify the BUILDER by telefax of the acceptance of or the rejection together with the reason therefor of the VESSEL within the period as provided in the above Sub-paragraph (a) or (b), the BUYER shall be deemed to have accepted the VESSEL.
 
(e)                       Any dispute between the BUILDER and the BUYER as to the conformity or non-conformity of the VESSEL to the requirements of this Contract and/or the As-Built-Specifications shall be submitted for final decision in accordance with Article XII hereof.
 
5.                           Effect of Acceptance :
 
Acceptance of the VESSEL as above provided shall be final and binding so far as conformity of the VESSEL to this Contract and the As-Built-Specifications is concerned and shall preclude the BUYER from refusing formal delivery of the VESSEL as hereinafter provided, if the BUILDER complies with all other procedural requirements for delivery as provided in Article VII hereof. However, the BUYER’s acceptance of the VESSEL shall not affect the BUYER’s right under Article IX hereof.
 
The BUYER may accept the VESSEL under protest with outstanding defects to be dealt under the guarantee provisions or made subject of a claim for damages.
 
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6.                           Disposition of Surplus Consumable Stores
 
Any fuel oil or other furnished and paid for by the BUILDER for trial runs remaining on board the VESSEL, at the time of acceptance of the VESSEL by the BUYER, shall be bought by the BUYER from the BUILDER at the BUILDER’s purchase price for such supply in Korea and the payment by the BUYER thereof shall be made at the time of delivery of the VESSEL.
 
The BUILDER shall pay the BUYER at the time of delivery of the VESSEL an amount for the consumed quantity until delivery of any lubricating oil and greases which were furnished and paid for by the BUYER at the BUYER’s purchase price thereof. For avoidance of doubt, the practice of this Article VI. 6 shall follow the practice in construction of the BUILDER’s Hull Nos. 1455 & 1456.
 
(End of Article)
 
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ARTICLE VII - DELIVERY
 
1.                           Time and Place :
 
The VESSEL shall be delivered by the BUILDER to the BUYER at the Shipyard on or before September 30, 2007, except that, in the event of delays in the construction of the VESSEL or any performance required under this Contract due to causes which under the terms of this Contract permit postponement of the date for delivery, the aforementioned date for delivery of the VESSEL shall be postponed accordingly.
 
The aforementioned date, or such later date to which the requirement of delivery is postponed pursuant to such terms, is herein called the “Delivery Date”.
 
2.                           When and How Effected :
 
Provided that the BUILDER and the BUYER shall have fulfilled all of their obligations stipulated under this Contract, the delivery of the VESSEL shall be effected forthwith by the concurrent delivery by each of the parties hereto to the other of the PROTOCOL OF DELIVERY AND ACCEPTANCE, acknowledging delivery of the VESSEL by the BUILDER and acceptance thereof by the BUYER.
 
3.                           Documents to be delivered to BUYER :
 
Upon delivery and acceptance of the VESSEL, the BUILDER shall deliver to the BUYER the following documents, which shall accompany the PROTOCOL OF DELIVERY AND ACCEPTANCE :
 
(a)                       PROTOCOL OF TRIALS of the VESSEL made pursuant to the As-Built-Specifications.
 
(c)                       PROTOCOL OF INVENTORY of the equipment of the VESSEL, including spare parts and the like, as specified in the As-Built-Specifications.
 
(d)                      PROTOCOL OF STORES OF CONSUMABLE NATURE referred to under Paragraph 6 of Article VI hereof.
 
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(d)                      ALL CERTIFICATES including the BUILDERS’s CERTIFICATE required to be furnished upon delivery of the VESSEL pursuant to this Contract and the As-Built-Specifications, necessary for the registration of the VESSEL and BUYER’s trading requirements.
 
It is agreed that if, through no fault on the part of the BUILDER, the Classifications certificates and/or other certificates are not available at the time of delivery of the VESSEL, provisional certificates shall be accepted by the BUYER, provided that the BUILDER shall furnish the BUYER with the formal certificates as promptly as possible after such certificates have been issued.
 
Application and certificate for statutory inspections for the registry of the VESSEL shall be arranged by the BUYER at its expense.
 
(e)                       DECLARATION OF WARRANTY of the BUILDER that the VESSEL is delivered to the BUYER free and clear of any liens, charges, claims, mortgages, or other encumbrances upon the BUYER’s title thereto, and in particular that the VESSEL is absolutely free of all burdens in the nature of imposts, taxes or charges imposed by Korean Governmental Authorities, as well as of all liabilities of the BUILDER to its subcontractors, employees and crew, and of the liabilities arising from the operation of the VESSEL in trial runs, or otherwise, prior to delivery.
 
(f)                         DRAWING AND PLANS pertaining to the VESSEL as stipulated in the As-Built-Specifications.
 
(g)                      COMMERCIAL INVOICE.
 
4.                           Tender of VESSEL :
 
If the BUYER fails to take delivery of the VESSEL after completion thereof according to this Contract and the As-Built-Specifications without any justifiable reason, the BUILDER shall have the right to tender delivery of the VESSEL after compliance with all procedural requirements as above provided.
 
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5.                           Title and Risk :
 
Title to and risk of loss of the VESSEL shall pass to the BUYER only upon the delivery and acceptance thereof having been completed as stated above; it being expressly understood that, until such delivery is effected, title to and risk of loss of the VESSEL and her equipment shall be in the BUILDER.
 
6.                           Removal of VESSEL :
 
The BUYER shall take possession of the VESSEL immediately upon delivery and acceptance thereof and shall remove the VESSEL from the premises of the Shipyard within Three (3) days after delivery and acceptance thereof is effected.
 
If the BUYER shall not remove the VESSEL from the premises of the Shipyard within the aforesaid Three (3) days, in such event, the BUYER shall pay to the BUILDER the reasonable mooring charges of the VESSEL.
 
(End of Article)
 
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ARTICLE VIII - DELAYS AND EXTENSION OF TIME FOR DELIVERY  (FORCE MAJEURE)
 
1.                           Causes of Delay (Force Majeure) :
 
If, at any time either the construction or delivery of the VESSEL or any performance required hereunder as a prerequisite to the delivery thereof is delayed by any of the following events; namely war, acts of state or government, blockade, revolution, insurrections, mobilization, civil commotion, riots, national strikes, sabotage, Acts of God or the public enemy, plague or other epidemics, quarantines, prolonged failure of electric current, freight embargoes, or defects in major forgings or castings or delay in BUYER’s supplied articles, if any, or defects in materials, machinery or equipment which could not have been detected by the BUILDER using reasonable care, or earthquakes, tidal waves, typhoons, hurricanes, prolonged or unusually severe weather conditions or by destruction of the premises or works of the BUILDER or its sub-contractors, or of the VESSEL, or any part thereof, by fire, landslides, flood, lightning, explosion, or other causes beyond the control of the BUILDER, or its sub-contractors, as the case may be, or for any other causes which, under the terms of this Contract, authorize and permit extension of the time for delivery of the VESSEL, then, in the event of delays due to the happening of any of the aforementioned contingencies, the Delivery Date of the VESSEL under this Contract shall be extended for a period of time which shall not exceed the total accumulated time of all such delays.
 
The enumerated contingencies shall not give rise to an extension of the delivery date unless :
 
i)                            The occurrence could not reasonably have been foreseen by the BUILDER at the date of signing of the Contract.
 
ii)                         The BUILDER shall have exercised reasonable due diligence to avoid or minimize the occurrence of such event.
 
iii)                      The BUILDER shall have used reasonable efforts to mitigate the duration and effects of such events of the construction schedule.
 
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2.                           Notice of Delay :
 
Within Fourteen (14) days after the date of occurrence of any cause of delay, on account of which the BUILDER claims that it is entitled under this Contract to a postponement of the Delivery Date, the BUILDER shall notify the BUYER in writing or by telefax confirmed in writing of the date when such cause of delay occurred. Likewise, within Fourteen (14) days after the date of ending of such cause of delay, the BUILDER shall notify the BUYER in writing or by telefax confirmed in writing of the date when such cause of delay ended.
 
The BUILDER shall also notify the BUYER of the period, by which the Delivery Date is postponed by reason of such cause of delay, with all reasonable dispatch after it has been determined. If the BUILDER does not give the timely advice as above, the BUILDER shall lose the right to claim such delays as permissible delay.
 
Failure of the BUYER to acknowledge to the BUILDER’s claim for postponement of the Delivery Date within Fourteen (14) days after receipt by the BUYER of such notice of claim shall be deemed to be a waiver by the BUYER of its right to object to such postponement of the Delivery Date.
 
3.                           Definition of Permissible Delay :
 
Delays on account of such causes as specified in Paragraph 1 of this Article and any other delay of a nature which under the terms of this Contract permits postponement of the Delivery Date shall be understood to be permissible delays and are to be distinguished from unauthorized delays on account of which the Contract Price is subject to adjustment as provided for in Article III hereof.
 
4.                           Right to Rescind for Excessive Delay :
 
If the total accumulated time of all delays whether permissible or not exceeds One Hundred and Eighty (180) days, then, in such event, the BUYER may rescind this Contract in accordance with the provisions of Article X hereof.
 
The accumulated time as above shall be excluded by the time lost due to BUYER’s Default or delays in the BUYER’s supplies. The BUILDER may, at any time after the accumulated time of the aforementioned delays justifying rescission by the BUYER, demand in writing that the BUYER shall make an election
 
35

 
proposing a new delivery date, in which case the BUYER shall, within Fourteen (14) days after such demand is received by the BUYER, either notify the BUILDER of its intention to rescind this Contract, or consent to a postponement of the Delivery Date to an agreed specific future date; it being understood and agreed by the parties hereto that, if any further delay occurs on account of causes justifying rescission as specified in this Article, the BUYER shall have the same right of rescission upon the same terms as herein above provided.
 
(End of Article)
 
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ARTICLE IX - WARRANTY OF QUALITY
 
1.                           Guarantee :
 
The BUILDER, for the period of Twelve (12) months after delivery of the VESSEL (hereinafter called “Guarantee Period”), guarantees the VESSEL and her engine, including all parts and equipment manufactured, furnished or installed by the BUILDER under this Contract, and including the machinery, equipment and appurtenances thereof, under the Contract but excluding any item which is supplied or designated by the BUYER or by any other bodies on behalf of the BUYER, against all defects discovered within the Guarantee Period which are due to improper design, defective material, and/or poor workmanship or negligent or other improper acts or omissions on the part of the BUILDER or its subcontractors (hereinafter called the “Defect” or “Defects”) and are not a result of accident, ordinary wear and tear, misuse, mismanagement, negligent or other improper acts or omissions or neglect on the part of the BUYER, its employee or agents.
 
Upon rectification of an item claimed under this guarantee, this item shall be covered for further Twelve (12) months under the same terms and conditions. However, this is limited to a maximum of Twenty Four (24) months from delivery date.
 
2.                           Notice of Defects :
 
The BUYER shall notify the BUILDER in writing, or by telefax of any defect for which claim is made under this guarantee, as promptly as possible after discovery thereof. The BUYER’s notice shall describe in detail the nature, cause if known and extent of the Defects.
 
The BUILDER shall have no obligation for any Defect discovered prior to the expiry date of the Guarantee Period, unless notice of such Defect is received by the BUILDER not later than Twenty (20) days after such expiry date.
 
3.                           Remedy of Defects :
 
(a)                       The BUILDER shall remedy, at its expense, any Defect against which the VESSEL is guaranteed under this Article, by making all necessary repairs or
 
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replacements at the Shipyard.
 
(b)                      However, if the BUYER should determine that it is commercially or operationally impracticable to bring the VESSEL to the Shipyard, the BUYER may cause the necessary repairs or replacements to be made elsewhere which is deemed suitable for the purpose, provided that, in such event, the BUILDER may forward or supply replacement parts or materials to the BUYER’s agent to be designated by the BYUER in writting , unless forwarding or supplying thereof the VESSEL would impair or delay the operation of working schedule of the VESSEL. In the event that the BUYER proposes to cause the necessary repairs or replacements for the VESSEL to be made at any other shipyard or works than the Shipyard, the BUYER shall first, but in all events as soon as possible, give the BUILDER a notice in writing or by telefax confirmed in writing of the time and place when and where such repairs will be made, and if the VESSEL is not thereby delayed, or her operation or working schedule is not thereby impaired, the BUILDER shall have the right to verify by its own representative(s) the nature, cause and extent of the Defects complained of. The BUILDER shall, in such case, promptly advise the BUYER by telefax, after such examination has been completed, of its acceptance or rejection of the Defects as ones that are covered by the guarantee herein provided. Upon the BUILDER’s acceptance of the Defects as justifying remedy under this Article, or upon award of the arbitration so determining, the BUILDER shall pay to the BUYER for such repairs or replacements justified reasonable and proven actual cost of repairs or replacements.
 
(c)                 The reimbursement of the costs incurred in relation to guarantee works shall be paid in a lumpsum after expiration of the guarantee period.
 
(d)                In any case, the VESSEL shall be taken, at the BUYER’s cost and responsibility, to the place elected, ready in all respects for such repairs or replacement.
 
(e)                       Any dispute under this Article shall be referred to arbitration in accordance with the provisions of Article XII hereof.
 
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4.                           Extent of BUILDER’s Responsibility :
 
(a)                       The BUILDER shall have no responsibility or liability for any other defect whatsoever in the VESSEL than the Defects specified in Paragraph 1 of this Article. Nor the BUILDER shall in any circumstance be responsible or liable for any consequential or special loss, damage or expense including but not limited to loss of time, loss of profit of earning or demurrage directly or indirectly occasioned to the BUYER by reason of the Defects specified in Paragraph 1 of this Article or due to repairs or other works done to the VESSEL to remedy such Defects.
 
(b)                      The BUILDER shall not be responsible for any defect in any part of the VESSEL which may, subsequently to delivery of the VESSEL, have been replaced or repaired in any way by any other contractor unless the BUILDER has not object the contractor to perform guarantee repairs, or for any defect which have been caused or aggravated by omission or improper use and maintenance of the VESSEL on the part of the BUYER, its servants or agents or by ordinary wear and tear or by any other cause beyond the control of the BUILDER.
 
(c)                       The guarantee contained as hereinabove in this Article replaces and excludes any other liability, guarantee, warranty and/or condition imposed or implied by the law, customary, statutory or otherwise, by reason of the construction and sale of the VESSEL by the BUILDER for and to the BUYER.
 
5.                           Guarantee Engineer :
 
The BUILDER shall have the right to appoint a Guarantee Engineer to serve on the VESSEL as its representative for a period of Three (3) months from the date the VESSEL is delivered. However, if the BUYER and the BUILDER shall deem it necessary to keep the Guarantee Engineer on the VESSEL for a longer period, then he shall remain on board the VESSEL after the said Three (3) months, but not longer than Six (6) months from the delivery of the VESSEL.
 
The BUYER, and its employees, shall give such Guarantee Engineer full cooperation in carrying out his duties as the representative of the BUILDER on board the VESSEL.
 
The Guarantee Engineer shall sign BUYER’s Indemnity Forms and shall at all times deemed to be an employee of the BUILDER.
 
The BUYER shall accord the Guarantee Engineer treatment comparable to the
 
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VESSEL’s Chief Engineer, and shall provide board and lodging at no cost to the BUILDER and/or the Guarantee Engineer.
 
While the Guarantee Engineer is on board the VESSEL, the BUYER shall pay to the BUILDER the sum of US$ 7,000.- per month as a compensation for a part of cost and charges to be borne by the BUILDER in connection with Guarantee Engineer and also shall pay the expenses of his repatriation to Seoul, Korea by air upon termination of his service, the expenses of his communication with the BUILDER incurred in performing his duties and expenses, if any, of his medical and hospital care in the VESSEL’s hospital.
 
Pertaining to the detailed particulars of this Paragraph, an agreement will be made according to this effect between the parties hereto upon delivery of the VESSEL.
 
(End of Article)
 
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ARTICLE X - RESCISSION BY BUYER
 
1.                           Notice :
 
The payments made by the BUYER prior to delivery of the VESSEL shall be in the nature of advances to the BUILDER, and in the event that the VESSEL after sea trial is rejected by the BUYER or the VESSEL is cancelled by the BUYER in accordance with the terms of this Contract under and pursuant to any of the provisions of this Contract specifically permitting the BUYER to do so and in the event that the Contract is rescinded by the BUYER under and pursuant to any of the provisions of this Contract specially permitting the BUYER, then the BUYER shall notify the BUILDER in writing or by telefax confirmed in writing, and such rescission shall be effective as of the date when notice thereof is received by the BUILDER.
 
2.                           Refundment by BUILDER :
 
In case the BUILDER receives the notice stipulated in Paragraph 1 of this Article, the BUILDER shall promptly refund to the BUYER the full amount of all sums paid by the BUYER to the BUILDER on account of the VESSEL together with the interest thereon, unless the BUILDER proceeds to the arbitration under the provisions of Article XII hereof.
 
In such event, the BUILDER shall pay the BUYER interest at the rate of Six percent (6.0%)per annum on the amount required herein to be refunded to the BUYER, computed from the dates following on which such sums were paid by the BUYER to the BUILDER to the date of remittance by transfer of such refund to the BUYER by the BUILDER.
 
As security for refund of instalments prior to delivery of the VESSEL, the BUILDER shall furnish the BUYER within Fourteen (14) calendar days after the Contract signing with a letter of guarantee covering the amount of such pre-delivery instalments in favour of the BUYER. Such letter of guarantee shall have substantially the same form and substance as Exhibit “A” annexed hereto.
 
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3.                           Discharge of Obligations :
 
Upon such refund by the BUILDER to the BUYER, all obligations, duties and liabilities of each of the parties hereto to the other under this Contract shall be forthwith completely discharged.
 
(End of Article)
 
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ARTICLE XI - BUYER’S DEFAULT
 
1.                           Definition of Default :
 
The BUYER shall be deemed to be in default of its performance of obligations under this Contract in the following cases :
 
(a)                       If the first, second, third, fourth or fifth instalment are not paid by the BUYER to the BUILDER within Five (5) banking days after such instalment becomes due and payable as provided in Article II hereof;
 
or
 
(b)                      If the Delivery instalment is not paid by the BUYER to the BUILDER concurrently with the delivery of the VESSEL as provided in Article II hereof;
 
or
 
(c)                       If the BUYER, when the VESSEL is duly tendered for delivery by the BUILDER:
 
i)                            fails to take delivery of the VESSEL within Five (5) banking days from tendered date
 
ii)                         having initiated the arbitration procedure the BUYER does not accept delivery within Seven (7) days of an arbitration award which is not appealed.
 
2.                           Effect of Default on or before Delivery of VESSEL :
 
(a)                       Should the BUYER make default in payment of any instalment of the Contract Price on or before delivery of the VESSEL, the BUYER shall pay the instalment(s) in default plus accrued interest thereon at the rate of Six percent (6.0%) per annum computed from the due date of such instalment to the date when the BUILDER receives the payment, and, for the purpose of Paragraph 1 of Article VII hereof the Delivery Date of the VESSEL shall be automatically extended by the period of continuance of such default by the BUYER. In any event of default by the BUYER, the BUYER shall also pay direct charges and expenses incurred by the BUILDER in consequence of such default after mutual agreement.
 
(b)                      If any default by the BUYER continues for a period of Ten (10) days after the BUILDER’s notification, the BUILDER may, at its option, rescind this Contract by giving notice of such effect to the BUYER by telefax confirmed in writing.
 
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Upon dispatch by the BUILDER of such notice of rescission, this Contract shall be forthwith rescinded and terminated. In the event of such rescission of this Contract, the BUILDER shall be entitled to retain any instalment or instalments already paid by the BUYER to the BUILDER on account of this Contract and the BUYER’s Supplies, if any.
 
3.                           Disposal of VESSEL :
 
(a)                       In the event that this Contract is rescinded by the BUILDER under the provisions of Paragraph 2(b) of this Article, the BUILDER may, at its sole discretion, either complete the VESSEL and sell the same, or sell the VESSEL in its incomplete state, free of any right or claim of the BUYER. Such sale of the VESSEL by the BUILDER shall be either by public auction or private contract at the BUILDER’s sole discretion and on such terms and conditions as the BUILDER shall deem fit.
 
(b)                      In the event of such sale of the VESSEL, the amount of the sale received by the BUILDER shall be applied firstly to all expenses attending such sale or otherwise incurred by the BUILDER as a result of the BUYER’s default, secondly to the payment of all costs and expenses of construction of the VESSEL incurred by the BUILDER less BUYER’s Supplies and the instalments already paid by the BUYER and the compensation to the BUILDER for a reasonable loss of profit due to rescission of this Contract, and finally to the repayment to the BUYER without interest, if any balance is obtained.
 
(c)              If the proceeds of sale are insufficient to pay such total costs and loss of profit as aforesaid, the BUYER shall promptly pay the deficiency to the BUILDER upon request.
 
(End of Article)
 
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ARTICLE XII - ARBITRATION
 
1.                           Decision by the Classification Society :
 
If any dispute arises between the parties hereto in regard to the design and/or construction of the VESSEL, its machinery and equipment, and/or in respect of the materials and/or workmanship thereof and/or thereon, and/or in respect of interpretations of this Contract or the As-Built-Specifications, the parties may by mutual agreement refer the dispute to the Classification Society or to such other expert as may be mutually agreed between the parties hereto, and whose decision shall be final, conclusive and binding upon the parties hereto.
 
2.                           Proceedings of Arbitration :
 
In the event that the parties hereto do not agree to settle a dispute according to Paragraph 1 of this Article and/or in the event of any other dispute of any kind whatsoever between the parties and relating to this Contract or its rescission or any stipulation herein, such dispute shall be submitted to arbitration in London. Each party shall appoint an arbitrator and in the event that they cannot agree, the two arbitrators so appointed shall appoint an Umpire.
 
If the two arbitrators are unable to agree upon an Umpire within Twenty(20) days after appointment of the second arbitrator, either of the said two arbitrators may apply to the President for the time being of the London Maritime Arbitrators Association to appoint the third arbitrator, and the three arbitrators shall constitute the board of arbitration.
 
Such arbitration shall be in accordance with and subject to the provisions of the English Arbitration Act 1996 or any statutory modification or re-enactment thereof for the time being in force.
 
The Arbitration shall be conducted in accordance with the rules in force of the London Maritime Arbitrators Association.
 
Either party may demand arbitration of any such dispute by giving notice to the other party. Any demand for arbitration by either of the parties hereto shall state the name of the arbitrator appointed by such party and shall also state specifically the question or questions as to which such party is demanding arbitration.
 
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Within Fourteen(14) days after receipt of notice of such demand for arbitration, the other party shall in turn appoint a second arbitrator and give notice in writing of such appointment to the party demanding arbitration. If a party fails to appoint an arbitrator as aforementioned within Fourteen(14) days following receipt of notice of demand for arbitration by the other party, the party failing to appoint an arbitrator shall be deemed to have accepted and appointed, as its own arbitrator, the arbitrator appointed by the party demanding arbitration and the arbitration shall proceed before this sole arbitrator who alone in such event shall constitute the Arbitration Board.
 
The award of the arbitrators and/or Umpire shall be final and binding on both parties.
 
3.                           Notice of Award :
 
The award shall immediately be given to the BUYER and the BUILDER by telefax.
 
4.                           Expenses :
 
The Arbitration Board shall determine which party shall bear the expenses of the arbitration or the portion of such expenses which each party shall bear.
 
5.                           Entry in Court :
 
In case of failure by either party to respect the award of the arbitration, the judgement may be entered in any proper court having jurisdiction thereof.
 
6.                           Alteration of Delivery Date :
 
In the event of reference to arbitration of any dispute arising out of matters occurring prior to delivery of the VESSEL, the award may include any postponement of the Delivery Date which the Arbitration Board may deem appropriate.
 
 (End of Article)
 
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ARTICLE XIII - SUCCESSOR AND ASSIGNS
 
Neither of the parties hereto shall assign this Contract to any other individual or company save as provided hereto. unless prior consent of the other party is given in writing. Should circumstances permit with or without alteration of the terms and conditions of this Contract, such consent shall not be unreasonably withheld by either party.
 
The BUYER is hereby allowed to assign the Contract for the purposes of financing.
 
The BUYER is further allowed to nominate a company controlled by the BUYER to take over the Contract.
 
The BUILDER shall fully cooperate in case the BUYER requests UK Tax lease financing arrangements.
 
In the event of any assignment pursuant to the terms of this Contract, the assignee shall succeed to all of the rights and obligations of the assignor under this Contract and the assignor shall remain responsible for the fulfillment of this Contract.
 
In the event of the assignment from the BUYER to any other individual or company the BUILDER shall be entitled to request a Performance Guarantee from the BUYER having same form and contents as Exhibit “C” annexed hereto.
 
The BUYER and the BUILDER understand and acknowledge that the VESSEL shall be built and constructed as a repeat and series VESSEL of the BUILDER’s Hull Nos. 1455 & 1456 as stipulated in this Contract. Thus, i n the event of a resale of the VESSEL, any and all matters determined by mutual agreement between the BUYER and the BUILDER prior to the resale of the VESSEL shall be accepted and complied by the New BUYER (i.e., assignee). If the New BUYER or its supervisor makes unreasonable requests that may have a significant impact on the delivery schedule of the VESSEL and/or costs of construction (including, without limitation to, request for fundamental change of ship type or excessive revision of design specifications, etc.), the BUILDER shall be entitled to refuse these requests. The BUYER shall notify the above to the New BUYER before assignment or novation and the New BUYER will have to accept any additional cost related to the new supervision.
 
 (End of Article)
 
47

 
ARTICLE XIV - TAXES AND DUTIES
 
1.                           Taxes and Duties Incurred in Korea :
 
The BUILDER shall bear and pay all taxes, duties, stamps and fees incurred in Korea in connection with execution and/or performance of this Contract as the BUILDER, except for any taxes and duties imposed in Korea upon the BUYER’s Supplies.
 
2.                           Taxes and Duties Incurred outside Korea :
 
The BUILDER shall bear and pay all taxes, duties, stamps and fees incurred outside Korea in connection with execution and/or performance of this Contract including guarantee matter, except for taxes and duties imposed upon the BUYER or the BUYER supplies.
 
(End of Article)
 
48

 
ARTICLE XV - PATENTS, TRADEMARKS, COPYRIGHTS, ETC.
 
1.                           Patents, Trademarks and Copyrights :
 
Machinery and equipment of the VESSEL may bear the patent number trademarks or trade names of the manufacturers. The BUILDER shall defend and hold harmless the BUYER from patent liability or claims of patent infringement of any nature or kind, including costs and expenses for, or on account of any patented or patentable invention made or used in the performance of this Contract and also including costs and expenses of litigation, if any.
 
Nothing contained herein shall be construed as transferring any patent or trademark rights or copyrights in equipment covered by this Contract, and all such rights are hereby expressly reserved to the true and lawful owners thereof.
 
The BUILDER’s warranty hereunder does not extend to the BUYER’s Supplies.
 
2.                           General Plans, Specifications and Working Drawings :
 
The BUILDER retains all rights with respect to the As-Built-Specifications, and plans and working drawings, technical descriptions, calculations, test results and other data, information and documents concerning the design and construction of the VESSEL and the BUYER undertakes therefore not to disclose the same or divulge any information contained therein to any third parties, without the prior written consent of the BUILDER, except where it is necessary for usual operation, repair , registration, classification, chartering, sale and maintenance of the VESSEL.
 
(End of Article)
 
49

 
ARTICLE XVI - BUYER’S SUPPLIES
 
1.                           Responsibility of BUYER :
 
(a)                       The BUYER shall, at its own risk, cost and expense, supply and deliver to the BUILDER all of the items to be furnished by the BUYER as specified in the As-Built-Specifications (herein called the BUYER’s Supplies) at warehouse or other storage of the Shipyard in the proper condition ready for installation in or on the VESSEL, in accordance with the time schedule designated and advised by the BUILDER to the BUYER within 60 days from signing this Contract.
 
(b)                      In order to facilitate installation by the BUILDER of the BUYER’s Supplies in or on the VESSEL, the BUYER shall furnish the BUILDER with necessary specifications, plans, drawings, instruction books, manuals, test reports and certificates required by the rules and regulations of the As-Built-Specifications.
 
If so requested by the BUILDER, the BUYER shall, without any charge to the BUILDER, cause the representatives of the manufacturers of the BUYER’s Supplies to assist the BUILDER in installation thereof in or on the VESSEL and/or to carry out installation thereof by themselves or to make necessary adjustments at the Shipyard.
 
(c)                       Any and all of the BUYER’s Supplies shall be subject to the BUILDER’s reasonable right of rejection, as and if they are found to be unsuitable or in improper condition for installation.
 
(d)                      Should the BUYER fail to deliver any of the BUYER’s Supplies within the time designated, the Delivery Date shall be automatically extended for a period which actually caused the delay in the delivery of the VESSEL.
 
(e)                       If delay in delivery of any of the BUYER’s Supplies exceeds thirty (30) days, then, the BUILDER shall be entitled to proceed with construction of the VESSEL without installation thereof in or on the VESSEL as hereinabove provided, and the BUYER shall accept and take delivery of the VESSEL so constructed, unless such delay is caused by Force Majeure in which case the provision Paragraph 1(d) of this Article shall apply.
 
50

 
2.                           Responsibility of BUILDER :
 
The BUILDER shall be responsible for storing and handling with reasonable care of the BUYER’s Supplies after delivery thereof at the Shipyard, and shall, at its own cost and expense, install them in or on the VESSEL, unless otherwise provided herein or agreed by the parties hereto, provided, always, that the BUILDER shall not be responsible for quality, efficiency and/or performance of any of the BUYER’s Supplies.
 
(End of Article)
 
51

 
ARTICLE XVII - INSURANCE
 
1.                           Extent of Insurance Coverage
 
From the time of launching until delivery of the VESSEL, the BUILDER shall, at its own cost and expense, insure the VESSEL and all machinery and equipment, appurtenances and outfits, including the BUYER’s Supplies, built into or installed in or upon the VESSEL, against all risks under the “Institute Causes for BUILDER’s Risk”, with first class insurance company or underwriters in Korea.  The amount of such insurance coverage shall, up to the date of delivery of the VESSEL, not be less than the aggregate amount of all instalments paid by the BUYER to the BUILDER, plus the value of the BUYER’s Supplies in the custody of the Shipyard.
 
2.                           Application of the Recovered Amounts
 
In the event that the VESSEL shall be damaged from any insured cause at any time before delivery of the VESSEL, and in the further event that such damage shall not constitute an actual or constructive total loss of the VESSEL, the amount received in respect of the insurance shall be applied by the BUILDER in repair of such damage, satisfactory to the Classification Society, and the BUYER shall accept the VESSEL under this Contract if completed in accordance with this Contract and the As-Built-Specifications, however, subject to the extension of delivery time under Article VIII hereof (except in case of negligence of the BUILDER).
 
Should the VESSEL from any cause become an actual or constructive total loss, the BUILDER shall either :
 
(a)                       proceed in accordance with the terms of this Contract, in which case the amount received in respect of the insurance shall be applied to the construction and repair of damage of the VESSEL, provided the parties hereto shall have first agreed thereto in writing and to such reasonable extension of delivery time as may be necessary for the completion of such reconstruction and repair ; or
 
52

 
(b)                      refund promptly to the BUYER the full amount of all sums paid by the BUYER to the BUILDER as instalments in advance of delivery of the VESSEL with Six percent (6.0%) interest, and deliver to the BUYER all BUYER’s Supplies (or the insurance proceeds paid with respect thereto), in which case this Contract shall be deemed to be automatically terminated and all right, duties, liabilities and obligations of each of the parties to the other shall forthwith cease and terminate.
 
3.                           Termination of BUILDER’s Obligation to Insure
 
The BUILDER shall be under no obligation to insure the VESSEL hereunder after delivery and acceptance of the VESSEL.
 
(End of Article)
 
53

 
ARTICLE XVIII – NOTICE
 
1.                           Address :
 
Any and all notices and communications in connection with this Contract shall be addressed as follows :

To the BUYER :	Seacarriers Services Inc. c/o DANAOS SHIPPING	
 	CO. LTD. Akti Kondyli 14, 185 45 Piraeus, Greece	
 	Cable address : DECUSHIP PIRAEUS	
 	Telefax No. : +30 210 422 0855	

To the BUILDER:	
 	
 	Samsung Heavy Industries Co., Ltd.	
 	647-9, 11 th Floor, KIPS Building, Kangnam-Ku,	
 	Seoul, Korea	
 	Calbe address : SSYARD SEOUL	
 	Telefax No. : (+82 2) 3458-7349, (+82 2) 3458-7319	
 	 	
or preferably to its Koje Yard :	
 	
 	Samsung Heavy Industries Co., Ltd.	
 	P.O.BOX Gohyun 9	
 	530, Jangpyung-Ri, Shinhyun-Up, Kyungnam,	
 	Korea	
 	Telefax No. :    (+82 55) 630-4947 (Design Department)	
 	(+82 55) 630-4978 (Customer Satisfaction Team.)	

2.                           Language :
 
Any and all notices and communications in connection with this Contract shall be written in the English language.
 
54

 
3.                           Effective Date of Notice :
 
The notice in connection with this Contract shall become effective from the date when such notice is received by the BUYER or by the BUILDER except otherwise described in the Contract.
 
(End of Article)
 
55

 
ARTICLE XIX - EFFECTIVE DATE OF CONTRACT
 
This Contract shall become effective upon signing by the parties hereto.
 
(End of Article)
 
56

 
ARTICLE XX - INTERPRETATION
 
1.                           Laws Applicable :
 
The parties hereto agree that the validity and interpretation of this Contract and of each Article and part thereof shall be governed by the laws of England.
 
2.                           Discrepancies :
 
All general language or requirements embodied in the As-Built-Specifications are intended to amplify, explain and implement the requirements of this Contract. However, in the event that any language or requirements so embodied permit of an interpretation inconsistent with any provisions of this Contract, then, in each and every such event, the applicable provisions of this Contract shall prevail and govern. In the event of conflict between the As-Built-Specifications and Plans, the As-Built-Specifications shall prevail and govern.
 
3.                           Entire Agreement :
 
This Contract contains the entire agreement and understanding between the parties hereto and supersedes all prior negotiations, representations, undertaking and agreements on any subject matter of this Contract.
 
4.                           Amendments and Supplements :
 
Any supplement, memorandum of understanding or amendment, whatsoever form it may be relating to this Contract, to be made and signed among parties hereof after signing this Contract, shall be the integral part of this Contract and shall be predominant over the respective corresponding Article and/or Paragraph of this Contract.
 
The Contract can only be amended in writing.
 
(End of Article)
 
57

 
IN WITNESS WHEREOF, the parties hereto have caused this Contract to be duly executed on the day and year first above written.

BUYER :	BUILDER :	
SEACARRIERS SERVICES INC.	SAMSUNG HEAVY IND., CO., LTD.	

/s/ John Coustas	 	/s/ C.H. Park	 	
By : John Coustas	By : C.H. Park	
Title : Director	Title : Attorney-in-fact	

 	/s/ Yeon Taek Chae	 	
 	Initialed by : Yeon Taek Chae	
 	Title : Attorney-in-fact	

WITNESS :	
 	
/s/ I. Prokopakis	 	
By : I. Prokopakis	
Title : Deputy Managing Director	
 
58

 
EXHIBIT “A”
 
LETTER OF REFUNDMENT GUARANTEE
 
Gentlemen :
 
We hereby issue our letter of guarantee no.      in favour of Seacarriers Services Inc., (hereinafter called the “BUYER”) for account of Samsung Heavy Industries Co., Ltd.(hereinafter called the “BUILDER”) as follows in consideration of the shipbuilding contract dated June 30, 2005 (hereinafter called the “Contract”) made by and among the BUYER and the BUILDER for the construction of one(1) single screw diesel engine driven Container VESSEL having BUILDER’s Hull No. 1639 (hereinafter called the “VESSEL”).
 
If in connection with the terms of the Contract the BUYER shall become entitled to a refund of the advance payment(s) made to the BUILDER prior to the delivery of the VESSEL, we hereby irrevocably guarantee the repayment of the same to the BUYER immediately on demand being initially US$ 7,000,000.- (Say U.S. Dollars Seven Million only) together with interest thereon at the rate of Six (6) percent per annum from the respective dates on which such sums were paid by the BUILDER to the date of remittance by telegraphic transfer of such refund.
 
The amount of this guarantee will be automatically increased, not more than three times, upon BUILDER’s receipt of the respective instalment: each time by the amount of instalment of US$ 7,000,000.- (Say U.S. Dollars Seven Million only), US$ 7,000,000.- (Say U.S. Dollars Seven Million only) and US$ 7,000,000.- (Say U.S. Dollars Seven Million only)  respectively plus interest thereon as provided in the Contract, but in any eventuality the amount of this guarantee shall not exceed the total sum of US$ 28,000,000.- (Say U.S. Dollars Twenty Eight Million only) plus interest thereon at the rate of Six (6) percent per annum from the respective dates on which such sums were paid by the BUYER to the BUILDER to the date of remittance by telegraphic transfer of the refund.
 
Our liability under this letter of guarantee shall not be affected by any alteration to or variation of the terms of the Contract you may hereafter agree with the BUILDER and by any other matter of circumstances, including bankruptcy or insolvency of the BUILDER, which might otherwise discharge our liability hereunder as guarantor of the BUILDER’s obligations as aforesaid.
 
59

 
In case any refund is made to you by the BUILDER or by us under this guarantee, our liability hereunder shall be automatically reduced by the amount of such refund.
 
This letter of guarantee is available against BUYER’s simple receipt and signed statement certifying that BUYER’s demand for refund has been made in conformity with Article X of the Contract and the BUILDER has failed to make the refund within Thirty One (31) days after BUYER’s demand to the BUILDER.
 
Refund shall be made to BUYER by telegraphic transfer in United States Dollars to an account designated by you without deduction, withholding or set-off.
 
This letter of guarantee shall expire and become null and void upon receipt by the BUYER of the sum guaranteed hereby or upon acceptance by the BUYER of the delivery of the VESSEL in accordance with the terms of the Contract and, in either case, this letter of guarantee shall be returned to us. This guarantee is valid from the date of this letter of guarantee until or in the event of delayed delivery until such time as the VESSEL is delivered by the BUILDER to the BUYER in accordance with the terms of the Contract.
 
Notwithstanding the provisions hereinabove, in case we receive notification from you or the BUILDER confirmed by an Arbitrator stating that your claim to cancel the Contract or your claim for refundment thereunder has been disputed and referred to Arbitration in accordance with the provisions of the Contract, the period of validity of this guarantee shall be extended until Thirty (30) days after the final and non-appealable award shall be rendered in the Arbitration and a copy thereof acknowledged by the Arbitrators. In such case, this guarantee shall not be available unless and until such acknowledged copy of the final award in the Arbitration justifying your claim is presented to us.
 
Your rights in respect of this letter of guarantee are assignable from the date of this letter of guarantee until such time as the VESSEL is delivered by the BUILDER to the BUYER in accordance with the provisions of the Contract, on the understanding that you will notify us of the identity of any assignee of your rights under this letter of guarantee.
 
Any notice or demand under this letter of guarantee shall be given by facsimile and sent to:
 
60

 

 
or to such other address as we might notify to you in writing. A notice shall be deemed to be served and shall take effect 2 hours after its transmission is completed, provided that if a notice would be deemed to be served on a day which is not a business day, or which is a business day but after 5:00 p.m. local time, in the place of receipt, the notice shall be deemed to be served and shall take effect at 9:00 a.m. on the next day which is a business day.
 
This guarantee shall be governed by and construed in accordance with the Laws of England. Any disputes arising under this guarantee (but not any disputes arising under the Contract which shall be determined by arbitration in accordance with the terms of the Contract and as referenced in this letter of guarantee) shall be determined by the High Court of Justice in London to whose exclusive jurisdiction we hereby submit. We appoint                                                                                                                                                                                                                                                                                                                                                                                                                                                                          as our agents for service of process in connection with any proceedings in such courts.
 
We each jointly and severally hereby represent and guarantee that we have the corporate power and authority to execute, deliver and perform the obligations under this letter of guarantee, and that such execution and performance will not violate or conflict with any provision of law, statute, rule, permit or regulation of any government, regulatory body, agency or other authority in the jurisdictions where we are subject to such laws and regulations.
 
61

 
IN WITNESS WHEREOF, we have hereunder set our hands and seal by our duly authorized representatives this             day of                  , 2005.

 	Very truly yours,	

 	For and on behalf of	

 	By	 	 	
 	Name :	
 	Title : Attorney-in-Fact	

 	For and on behalf of	
 	 	 	
 	By	 	 	
 	Name :	
 	Title : Attorney-in-Fact	

62

 
EXHIBIT “B”
 
Samsung Heavy Industries Co., Ltd.
11 th Floor, KIPS Building
647-9, Yoksam-Dong, Kangnam-Ku,
Seoul, Korea 135-080
 
Date :                   , 2005
 
PERFORMANCE GUARANTEE
 
In consideration of the performance of a certain shipbuilding contract dated        (hereinafter called the “Contract”) by SEACARRIERS SERVICE INC. of 80 Broad street, Monrovia, Liberia having your Hull No.1639(hereinafter called the “VESSEL”) providing among other things for payment of the Contract Price amounting to United States Dollars                (US$         );
 
We, the undersigned, hereby irrevocably and unconditionally guarantee to you, your successors, and assigns the due and faithful performance by the BUYER of its all liabilities and responsibilities under the Contract and any supplement, amendment, change or modification hereafter made thereto, including but not limited to, due and prompt payment of the Contract Price by the BUYER to you, your successors, and assigns under the Contract and any supplement, amendment, change or modification as aforesaid (hereby expressly waiving notice of any such supplement, amendment, change or modification as may be agreed to by the BUYER and confirming that this guarantee shall be fully applicable to the Contract as so supplemented, amended, changed or modified).
 
This Performance Guarantee shall be governed by the laws of England.
 
GUARANTOR :
BY :
TITLE :
WITNESS :
 
63

 
EXHIBIT “C”
 
Samsung Heavy Industries Co., Ltd.
11 th Floor, KIPS Building
647-9, Yoksam-Dong, Kangnam-Ku,
Seoul, Korea 135-080
 
Date :                    , 2005
 
PERFORMANCE GUARANTEE
 
In consideration of the assignment of a certain shipbuilding contract dated        (hereinafter called the “Contract”) by us to                  having your Hull No.1639(hereinafter called the “VESSEL”) providing among other things for payment of the Contract Price amounting to United States Dollars               (US$            );
 
We, the undersigned, hereby irrevocably and unconditionally guarantee to you, your successors, and assigns the due and faithful performance by the BUYER of its all liabilities and responsibilities under the Contract and any supplement, amendment, change or modification hereafter made thereto, including but not limited to, due and prompt payment of the Contract Price by the BUYER to you, your successors, and assigns under the Contract and any supplement, amendment, change or modification as aforesaid (hereby expressly waiving notice of any such supplement, amendment, change or modification as may be agreed to by the BUYER and confirming that this guarantee shall be fully applicable to the Contract as so supplemented, amended, changed or modified).
 
This Performance Guarantee shall be governed by the laws of England.

GUARANTOR :
BY :
TITLE :
WITNESS :
 
64

 
Exhibit 10.20
 
FOR
 
CONSTRUCTION AND SALE
 
OF
 
A 4 ,250 TEU CONTAINER VESSEL
(HULL NO. 1640)

BETWEEN
 
Seacarriers Lines Inc.
As BUYER
 
AND

Samsung Heavy Industries Co., Ltd.
As BUILDER

 
INDEX

 	 	PAGE	
 	 	 	
PREAMBLE	 	7	
 	 	 	
ARTICLE I - DESCRIPTION AND CLASS	 	 	
 	 	 	
1. Description	 	8	
2. Dimensions and Characteristics	 	8	
3. Classification, Rules and Regulations	 	10	
4. Subcontracting	 	11	
5. Registration	 	11	
 	 	 	
ARTICLE II - CONTRACT PRICE AND TERMS OF PAYMENT	 	 	
 	 	 	
1. Contract Price	 	12	
2. Adjustment of Contract price	 	12	
3. Currency	 	12	
4. Terms of Payment	 	12	
5. Method of Payment	 	13	
6. Notice of Payment on or before Delivery	 	15	
7. Expenses	 	15	
8. Prepayment	 	15	
9. Performance Guarantee	 	15	
 	 	 	
ARTICLE III - ADJUSTMENT OF CONTRACT PRICE	 	 	
 	 	 	
1. Delivery	 	16	
2. Speed	 	17	
3. Fuel Consumption	 	18	
4. Deadweight	 	18	
5. Early Delivery	 	19	
6. Effect of Rescission	 	19	
 
2

 

ARTICLE IV - APPROVAL OF PLANS AND DRAWINGS AND INSPECTION DURING CONSTRUCTION	
 	 	 	
1. Approval of Plans and Drawings	 	20	
2. Appointment of BUYER’s Supervisor	 	20	
3. Inspection by the Supervisor	 	21	
4. Facilities	 	22	
5. Liability of BUILDER	 	22	
6. Responsibility of BUYER	 	23	
 	 	 	
ARTICLE V - MODIFICATIONS, CHANGES AND EXTRAS	 	 	
 	 	 	
1. How Effected	 	24	
2. Change in Rules of Classification Society, Regulations etc	 	25	
3. Substitution of Materials	 	26	
 	 	 	
ARTICLE VI - TRIALS AND ACCEPTANCE	 	 	
 	 	 	
1. Notice	 	27	
2. Weather Condition	 	27	
3. How Conducted	 	28	
4. Method of Acceptance of Rejection	 	28	
5. Effect of Acceptance	 	29	
6. Disposition of Surplus Consumable Stores	 	30	
 	 	 	
ARTICLE VII - DELIVERY	 	 	
 	 	 	
1. Time and Place	 	31	
2. When and How Effected	 	31	
3. Documents to be delivered to BUYER	 	31	
4. Tender of VESSEL	 	32	
5. Title and Risk	 	33	
6. Removal of VESSEL	 	33	
 
3

 

ARTICLE VIII - DELAYS AND EXTENSION OF TIME FOR DELIVERY (FORCE MAJEURE)	 	 	
 	 	 	
1. Causes of Delay	 	34	
2. Notice of Delay	 	35	
3. Definition of Permissible Delay	 	35	
4. Right to Rescind for Excessive Delay	 	35	
 	 	 	
ARTICLE IX - WARRANTY OF QUALITY	 	 	
 	 	 	
1. Guarantee	 	37	
2. Notice of Defects	 	37	
3. Remedy of Defects	 	37	
4. Extent of the BUILDER’s Responsibility	 	39	
5. Guarantee Engineer	 	39	
 	 	 	
ARTICLE X - RESCISSION BY BUYER	 	 	
 	 	 	
1. Notice	 	41	
2. Refundment by BUILDER	 	41	
3. Discharge of Obligations	 	42	
 	 	 	
ARTICLE XI - BUYER’S DEFAULT	 	 	
 	 	 	
1. Definition of Default	 	43	
2. Effect of Default on or before Delivery of VESSEL	 	43	
3. Disposal of VESSEL	 	44	
 	 	 	
ARTICLE XII - ARBITRATION	 	 	
 	 	 	
1. Decision by Classification Society	 	45	
2. Proceedings of Arbitration	 	45	
3. Notice of Award	 	46	
4. Expenses	 	46	
5. Entry in Court	 	46	
6. Alteration of Delivery Date	 	46	
 	 	 	
ARTICLE XIII - SUCCESSOR AND ASSIGNS	 	47	

4

 

ARTICLE XIV - TAXES AND DUTIES	 	 	
 	 	 	
1. Taxes and duties Incurred in Korea	 	48	
2. Taxes and Duties Incurred outside Korea	 	48	
 	 	 	
ARTICLE XV - PATENTS, TRADEMARKS, COPYRIGHTS, ETC	 	 	
 	 	 	
1. Patents, Trademarks and Copyrights	 	49	
2. General Plans, Specifications and Working Drawings	 	49	
 	 	 	
ARTICLE XVI - BUYER’S SUPPLIES	 	 	
 	 	 	
1. Responsibility of BUYER	 	50	
2. Responsibility of BUILDER	 	51	
 	 	 	
ARTICLE XVII - INSURANCE	 	 	
 	 	 	
1. Extent of Insurance Coverage	 	52	
2. Application of the Recovered Amounts	 	52	
3. Termination of BUILDER’s Obligation to Insure	 	52	
 	 	 	
ARTICLE XVIII - NOTICE	 	 	
 	 	 	
1. Address	 	54	
2. Language	 	54	
3. Effective Date of Notice	 	55	
 	 	 	
ARTICLE XIX - EFFECTIVE DATE OF CONTRACT	 	56	
 	 	 	
ARTICLE XX - INTERPRETATION	 	 	
 	 	 	
1. Laws Applicable	 	57	
2. Discrepancies	 	57	
3. Entire Agreement	 	57	
4. Amendments and supplements	 	57	
 
5

 

END OF CONTRACT	 	58	
 	 	 	
EXHIBIT “A” LETTER OF REFUNDMENT GUARANTEE	 	59	
 	 	 	
EXHIBIT “B” PERFORMANCE GUARANTEE	 	63	
 	 	 	
EXHIBIT “C” PERFORMANCE GUARANTEE	 	64	
 
6

 
THIS CONTRACT, made and entered into on this 30 th day of June, 2005 by and between Seacarriers Lines Inc. a corporation incorporated and existing under the laws of Liberian, having its registered office at 80 Broad Street, Monrovia, Liberia (hereinafter called the “BUYER”), on the one part and Samsung Heavy Industries Co.,Ltd., a corporation incorporated and existing under the laws of the Republic of Korea of having its registered office at 647-9, Yoksam-Dong, Kangnam-ku, Seoul, Korea (hereinafter called the “BUILDER”), on the other part,
 
WITNESSETH:
 
In consideration of the mutual covenants herein contained, the BUILDER agrees to design, build, launch and complete in accordance with first class modern Korean shipbuilding practice and standards one (1) Single Screw Diesel Engine driven Container VESSEL as described in the Specifications attached herewith and any addendum thereto (hereinafter called the “VESSEL”) at the BUILDER’s shipyard located in Koje Island, Korea (hereinafter called the “Shipyard”) and to deliver and sell the same to the BUYER, and the BUYER hereby agrees to purchase and accept delivery of the VESSEL from the BUILDER and to pay for the same upon the terms and conditions hereinafter set forth.
 
7

 
ARTICLE I - DESCRIPTION AND CLASS
 
1.          Description :
 
The VESSEL shall be an ocean going single screw diesel engine driven fully cellular container VESSEL suitable for carrying dry cargo containers having the BUILDER’s Hull No.1640 and shall be constructed, equipped and completed in accordance with the specifications, all plans and drawings, and manufacturer list made, used, and duly approved for the construction of the BUILDER’s Hull No. 1455~1456 (hereinafter collectively called the “As-Built-Specifications”).
 
The BUYER and the BUILDER hereby undertake that the VESSEL shall be the just repeat and series VESSEL of the BUILDER’s Hull Nos. 1455 & 1456 (as a series project). Thus all construction procedure including model test and sea trial etc. shall be done on the basis of the just repeat and series VESSEL of Hull Nos. 1455 & 1456.
 
The BUYER and the BUILDER hereby further undertake that As-Built-Specifications shall be used for the VESSEL without any further approval and modification from the BUYER unless otherwise mutually agreed by both parties.
 
2.          Dimensions and Characteristics :

Length, overall	 	 	 	appx.	 	259.8	m	
Length, between perpendiculars	 	 	 	appx.	 	244.8	m	
Breadth, moulded	 	 	 	appx.	 	32.25	m	
Depth, moulded	 	 	 	appx.	 	19.3	m	
Designed loaded draught, moulded	 	 	 	appx.	 	11.0	m	
Scantling draught, moulded	 	 	 	appx.	 	12.6	m	

Main Engine	:	 	MAN B&W 8K 90MC-C type License Made MCR 49,680 bhp at 104 r.p.m.	
 
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Deadweight, guaranteed	:	 	50,500 metric tons at the moulded scantling draught of 12.6 meters.	
 	 	 	 	
Speed, guaranteed	:	 	24.5 knots at a draught of 11.0 meters and main engine developing power of 38,880 bhp (metric).	
 	 	 	 	
Fuel Consumption, guaranteed	:	 	124.3 grams/bhp(metric)-hour using marine diesel oil having lower calorific value of 1 0,200 kcal/kg at normal continuous rating of 44,710 bhp(metric) measured at the shop trial.	
 
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The details of the aforementioned particulars as well as the definitions and method of measurements and calculations are as defined in the As-Built-Specifications.
 
3.          Classification, Rules and Regulations :
 
The VESSEL, including its machinery, equipment and outfittings shall be constructed in accordance with the rules and regulations in year 2004 July edition of the Classification Society in accordance with the interpretation of Classification Society (dated on 2005-06-29 Ref No. MKOKR120/MSSH/Gen-precontract/PUS-J-668) and under special survey of Det Norske Veritas (hereinafter called the “Classification Society”) and shall be distinguished in the register by the symbol of X 1A1 “ Container Carrier”, NAUTICUS, EO , and In water survey and TMON shall be applied according to the requirement of the class rule.
 
Decisions of the Classification Society as to compliance or non-compliance with the classification shall be final and binding upon both parties hereto. Details of its notation shall be in accordance with the As-Built-Specifications.
 
The VESSEL shall also comply with the compulsory rules, regulations and requirements of the regulatory bodies as described in the As-Built-Specifications rectified and in effect as of the signing date of this Contract. Non-compulsory rules, regulations and requirements of the regulatory bodies shall be dealt with in accordance with Article V (2) of this Contract.
 
All the fees and charges incidental to the classification and with respect to compliance with the above referred rules, regulations and requirements shall be for account of the BUILDER except otherwise agreed.
 
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4.          Subcontracting :
 
The BUILDER may, at its sole discretion and responsibility, subcontract any portion of the construction work of the VESSEL, provided that the construction and assembly of the VESSEL shall be carried out as is normally done according to the BUILDER’s building practice and provided further that the BUILDER shall be responsible to the BUYER in respect of any construction work carried out by such subcontractors.
 
5.          Registration :
 
The VESSEL, at the time of its delivery and acceptance, shall be registered at the port of registry by the BUYER under Greek, Liberian, Cyprus or Panama flag at the BUYER’s expenses. The BUYER shall decide the flag within one(1) month after the date of signing of this Contract.
 
(End of Article)
 
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ARTICLE II - CONTRACT PRICE AND TERMS OF PAYMENT
 
1.          Contract Price :
 
The Contract price of the VESSEL and exclusive of the BUYER’s Supplies as provided in Paragraph 1 of Article XVI hereof is Seventy Million United States Dollars (US$ 70,000,000.-) (hereinafter called the “Contract Price”), which shall be subject to upward or downward adjustment, if any, as hereinafter set forth in this Contract.
 
2.          Adjustment of Contract Price:
 
Increase or decrease of the Contract Price, if any, due to adjustments thereof made in accordance with the provisions of this Contract, shall be adjusted by way of addition to or subtraction from the Contract Price upon delivery and acceptance of the VESSEL in the manner as hereinafter provided.
 
3.          Currency :
 
Any and all payments by the BUYER to the BUILDER which are due under this Contract shall be made in United States Dollars.
 
4.          Terms of Payment :
 
The Contract Price shall be due and payable by the BUYER to the BUILDER in the instalments as follows :
 
(a)        First Instalment :
 
The First Instalment amounting to Seven Million United States Dollars (US$ 7,000,000.-) shall be due and payable upon issuance and delivery to the BUYER of the original of Refund Guarantee.
 
(b)        Second Instalment :
 
The Second Instalment amounting to Seven Million United States Dollars (US$ 7,000,000.-) shall be due and payable upon six(6) calendar months after the date of singing of this Contract.
 
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(c)        Third Instalment :
 
The Third Instalment amounting to Seven Million United States Dollars (US$ 7,000,000.-) shall be due and payable upon steel cutting of the VESSEL.
 
(d)        Fourth Instalment :
 
The Foruth Instalment amounting to Seven Million United States Dollars (US$ 7,000,000.-) shall be due and payable upon keel laying of the VESSEL.
 
(e)        Fifth Instalment :
 
The Delivery Instalment amounting to Forty Two Million United States Dollars (US$ 42,000,000.-) plus any increase or minus any decrease due to adjustments of the Contract Price under and pursuant to the provisions of this Contract, shall be due and payable upon delivery and acceptance of the VESSEL or upon tender for delivery of the VESSEL referred to in Paragraph 4 of Article VII of this Contract.
 
It is agreed that no payment shall be effected until the original Refund Guarantee is delivered to the BUYER.
 
5.          Method of Payment :
 
(a)        First Instalment :
 
Within Seven(7) banking days after 30 th day of June, 2005, the BUYER shall remit by telegraphic transfer the first instalment to the account of The Export-Import Bank of Korea, Head Office, Seoul, Korea with Deutsche Bank Trust Company Americas(BIC : BKTRUS33), 60 Wall Street, Mail Stop NYC 60 1310, New York, NY 10005, USA, Account No.04 029 695, in favour of Samsung Heavy Industries., Ltd, SWIFT code : EXIKKRSE or other bank as designated by the Builder, in favor of Samsung Heavy Industrise Co, Ltd.(hereinafter called the “BUILDER’s Bank”)
 
(b)        Second, Third and Fourth Instalment :
 
Upon receipt of telefax notice from the BUILDER confirming that the second, third, and fourth instalment on each event is due and payable, the BUYER shall remit by telegraphic transfer the second, third, and fourth instalment to the aforesaid account of the BUILDER’s Bank in favour of Samsung Heavy Industries Co., Ltd.
 
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(c)        Fifth Instalment :
 
At least One (1) banking days prior to delivery and acceptance of the VESSEL, the BUYER shall remit by telegraphic transfer the fifth instalment to the name of the BUYER at BUILDER’s BANK, with an irrevocable instruction that the amount so remitted shall be payable to the BUILDER against a facsimile copy of PROTOCOL OF DELIVERY and ACCEPTANCE OF THE VESSEL signed by the BUYER and the BUILDER or returned to the BUYER if such PROTOCOL OF DELIVERY and ACCEPTANCE has not been presented within 15 days.
 
Simultaneously with each of all such payments, the BUYER shall cause the BUYER’s BANK to advise the BUILDER’s BANK of the details of such payments by authenticated bank cable.
 
Any claim which the BUYER may have against the BUILDER hereunder shall be settled and liquidated separately from any payment by the BUYER to the BUILDER hereunder.
 
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6.          Notice of Payment on or before Delivery :
 
With the exception of the first instalment, the BUILDER shall give the BUYER Five(5) banking days prior notice by telefax of the anticipated due date and amount of each instalment payable on or before delivery of the VESSEL.
 
7.          Expenses.
 
Expenses and bank charges for remitting payments and any taxes, duties, expenses and fees connected with such payment shall be for account of the BUYER referred to in paragraph 2 of Article XIV of this Contract, except expenses and bank charges of the BUILDER’s BANK.
 
8.          Prepayment :
 
Prepayment of any instalment due on or before delivery of the VESSEL shall be subject to mutual agreement between the parties hereto.
 
9.          Performance Guarantee
 
Upon signing this Contract, the BUYER shall provide the BUILDER with a Performance Guarantee in order to secure the due and faithful performance of this Contract by the BUYER having same form and contents as Exhibit  “B” annexed hereto.
 
(End of Article)
 
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ARTICLE III - ADJUSTMENT OF CONTRACT PRICE
 
The Contract Price shall be subject to adjustment, as hereinafter set forth, in the event of the following contingencies (it being understood by both parties that any reduction of the Contract Price is by way of liquidated damages and not by way of penalty) :
 
1.          Delivery :
 
(a)        No adjustment shall be made and the Contract Price shall remain unchanged for the first Thirty (30) days of delay in delivery of the VESSEL beyond the Delivery Date as defined in Article VII hereof (ending as of twelve o’clock midnight of the Thirty (30) day of delay).
 
(b)        If the delivery of the VESSEL is delayed more than Thirty (30) days after the Delivery Date, the Contract Price shall be reduced by the sum of Twenty Seven Thousand Five Hundred United States Dollars (US$27,500.-) for each full day for which thereafter delivery is delayed.
 
However, the total reduction in the Contract Price shall not be more than as would be the case for a delay of One Hundred Eighty (180) days counting from the midnight of the Thirty (30) day after the Delivery Date at the above specified rate of reduction.
 
(c)        However, if the delay in delivery of the VESSEL should continue for a period of Two Hundred Ten (210) days from the Delivery Date in Paragraph 1 of Article VII, then in such event, and after such period has expired, the BUYER may, at its option, rescind this Contract in accordance with the provisions of Article X hereof.
 
The BUILDER may, at any time after the expiration of the aforementioned Two Hundred Ten (210) days of delay in delivery, if the BUYER has not served notice of rescission as provided in Article X hereof, demand in writing that the BUYER shall make an election, in which case the BUYER shall, within Twenty (20) days after such demand is received by the BUYER, notify the BUILDER of its intention either to rescind this Contract or to consent to the acceptance of the VESSEL at the BUILDER’s specified future date. If the BUYER shall not make an election within Twenty (20) days as provided hereinabove, the BUYER shall be deemed to have accepted such extension of the delivery date to the future delivery date indicated by the BUILDER and it being understood by the parties hereto that if the VESSEL is not delivered by such future date, the BUYER shall
 
16

 
have the same right of rescission upon the same terms and conditions as hereinabove provided.
 
It is understood that accrued liquidated damages are preserved. Further delay shall incur additional liquidated damages in accordance with existing terms and conditions.
 
 (d)       For the purpose of this Article, the delivery of the VESSEL shall be deemed to be delayed when and if the VESSEL, after taking into account all postponements of the Delivery Date by reason of permissible delay as defined in Article VIII and/or any other reason under this Contract, is not delivered by the date upon which delivery is required under the terms of this Contract.
 
2.          Speed :
 
(a)        The Contract Price shall not be affected or changed by reason of the trial speed (as determined according to the As-Built-Specifications) being less than the guaranteed speed, if such variation is not more than Two-Tenths (2/10) of One (1) knot.
 
(b)        However, if such variation is more than Two-Tenths (2/10) of One (1) knot, then, the Contract Price shall be decreased by One Hundred and Seventy Five Thousand Five Hundred United States Dollars (US$ 175,000.-) for each successive whole One-Tenth(1/10) of a knot in excess of a deficiency of Two-Tenths (2/10) of a knot (in both cases smaller fractions being disregarded).
 
(c)        If the deficiency in the speed upon final sea trial is more than Half(1/2) a knot below the guaranteed speed of the VESSEL, then the BUYER may, at its option, reject the VESSEL and rescind this Contract in accordance with the provisions of Article X hereof, or may accept the VESSEL at a reduction in the Contract Price as above provided for Half(1/2) a knot only, that is, at a total reduction of Five Hundred and Twenty Five Thousand Five Hundred United States Dollars (US$ 525,000.-).
 
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3.          Fuel Consumption :
 
(a)        The Contract Price shall not be affected or changed in case the fuel consumption, as determined by the shop trial as specified in the As-Built-Specifications, is not more than Five percent (5%) in excess of the guaranteed fuel consumption specified in Paragraph 2 of Article I.
 
(b)        However, in the event that the actual fuel consumption at the shop trial is in excess of Five percent (5%) of the guaranteed fuel consumption, the Contract Price shall be reduced by the sum of One Hundred and Ten Thousand United States Dollars (US$ 110,000.-) for each full one percent(1%) increase in fuel consumption and pro rata for any fraction of one percent(1%) of the Guaranteed Fuel Consumption in excess of the said five percent(5%) up to maximum of eight percent(8%) over the Guaranteed Fuel Consumption.
 
(c)        If the deficiency in fuel consumption is more than Eight percent (8%) then the BUYER may at its option rescind this Contract in accordance with the provision of Article X hereof.
 
4.          Deadweight :
 
(a)        In the event that the deadweight of the VESSEL as determined in accordance with the As-Built-Specifications is less than the guaranteed deadweight as specified in Paragraph 2 of Article I, the Contract Price shall be reduced by the sum of One Thousand One Hundred United States Dollars (US$ 1,100.-) for each full metric ton of such deficiency being more than Seven Hundred (700) metric tons, up to a maximum reduction of One Million Two Hundred and Ten Thousand United States Dollars (US$ 1,210,000.-).
 
(b)        In the event of such deficiency in the deadweight of the VESSEL being One thousand eight hundred (1,800) metric tons or more, then, the BUYER may, at its option, reject the VESSEL and rescind this Contract in accordance with the provisions of Article X hereof or accept the VESSEL at a reduction in the Contract Price as above provided for One thousand eight hundred (1,800) metric tons only, that is, at a total reduction of One Million Two Hundred and Ten Thousand United States Dollars (US$1,210,000.-).
 
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5.          Early Delivery
 
In the event that the BUILDER believes that the VESSEL can be completed and ready for Delivery on a date earlier than the Contractual Delivery Date, then the BUILDER may give a written notice to the BUYER, no later than six (6) months before the revised date (the “Early Delivery Date”) informing the approximate date on which the VESSEL can be ready for the Delivery. The BUYER shall have the option, but not the obligation, to accept Delivery of the VESSEL on the Early Delivery Date and upon the BUYER’s acceptance thereof, the parties shall discuss the specific amount of the additional payment due to the BUILDER for the accelerated Delivery of the VESSEL on the Early Delivery Date at the delivery stage of the VESSEL and t he compensation payment of the acceleration bonus shall be settled and paid in full with the final delivery instalment concurrently uponwith the actual Delivery and acceptance of the VESSEL by the BUYER. If the Parties fail to reach a mutual agreement on the amount of the Early Delivery bonus, the BUILDER shall be free to deliver the VESSEL on the original Contractual Delivery Date or earlier at its option. The Parties hereto acknowledge that there will be no liquidated damages or other penalty to be imposed on the BUILDER in the event the VESSEL happens to be delivered on any date later than the Early Delivery Date but earlier than the original Contractual Delivery Date.
 
6         Effect of Rescission :
 
It is expressly understood and agreed by the parties that in any case, if the BUYER rescinds this Contract under this article, the BUYER shall not be entitled to any liquidated damages or any other recourse unless by means of the provisions of Article X hereof.
 
(End of Article)
 
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ARTICLE IV - APPROVAL OF PLANS AND DRAWINGS AND INSPECTION DURING CONSTRUCTION
 
1.          Approval of Plans and Drawings :
 
As-Built-Specifications for the BUILDER’s Hull No. 1455 & 1456 shall be used for the VESSEL without any further approval and modification from the BUYER unless otherwise mutually agreed by both parties. Should any changes are required by the BUYER’s request or the application of new rules and regulations (of a mandatory nature) coming into effect after the date of this Contract signing, the BUILDER shall submit such changes to the BUYER for its approval. If approved by the BUYER, such changes shall be applied to the VESSEL with cost adjustment in accordance with Article V of this Contract.
 
2.          Appointment of BUYER’s Supervisor :
 
The BUYER may send to and maintain at the Shipyard, at the BUYER’s own cost and expense, one supervisor who shall be duly authorized in writing by the BUYER (herein called the “Supervisor”) to act on behalf of the BUYER in connection with the modifications of the As-Built-Specifications, adjustments of the Contract Price and Delivery Date, approval of the plans and drawings, attendance to the tests and inspections relating to the VESSEL, its machinery, equipment and outfittings, and any other matters for which he is specifically authorized by the BUYER. The Supervisor may appoint his assistant(s) to attend at the Shipyard for the purposes as aforesaid.
 
In the event that assignment, novation or resale occurs under the Article XIII and as a result, BUYER’s Supervisor is changed during the construction of the VESSEL, any and all matters determined by mutual agreement between the BUYER’s Supervisor and the BUILDER prior to the dispatch of a new Supervisor shall be accepted and complied by the new Supervisor. In case two or more Supervisors are dispatched to the Shipyard and authorized, under the BUILDER’s prior consent, to perform the supervision, each of them will form uniform opinions between them to keep the design and As-Built-Specifications so as not to adversely affect the CONTRACT PRICE and Delivery of the VESSEL, provided that such change in the Contract Price will be reasonable and proven under the BUILDER’s normal practice.
 
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3.          Inspection by the Supervisor :
 
The necessary inspections of the VESSEL, its machinery, equipment and outfittings shall be carried out by the Classification Society, other regulatory bodies and/or an inspection team of the BUILDER throughout the entire period of construction in order to ensure that the construction of the VESSEL is duly performed in accordance with this Contract and the As-Built-Specifications. The Supervisor shall have, during construction of the VESSEL, the right to attend such tests and inspections of the VESSEL, its machinery and equipment within the premises of either the BUILDER or its subcontractors. The BUILDER shall give notice to the Supervisor, in advance of the date and place of such tests and inspections for the convenience of their attendance. Detailed procedures of the inspection and the tests thereof shall be in accordance with the As-Built-Specifications.
 
The BUILDER may request BUYER’s supervisor to attend the inspection and tests during public holidays and weekends and/or Company holidays in order to keep BUILDER’s construction schedule. BUYER’s supervisor shall fully cooperate with BUILDER and promptly attend such inspection/tests including those for surface preparation and painting work, which are especially vulnerable to weather condition and time interval. However, BUILDER shall keep such inspection and tests to a minimum and only when the inspection and tests affect BUILDER’s construction schedule. The BUILDER’s prior notice of such inspection/test schedule shall be informed to the BUYER’s supervisor three(3) working days in advance as a minimum
 
The Supervisor shall be entitled to request copies of all test results and trials as soon as required for the performance of his duties.
 
The Supervisor shall notify the BUILDER of deficiencies in the construction of the VESSEL or materials. The BUILDER should examine the deficiency and rectify.
 
If any of the BUYER’s supervisors discover any construction, material or workmanship which is not deemed to conform to the requirements of this Contract and/or the As-Built-Specifications, the BUYER’s supervisors shall promptly give the BUILDER a notice in writing that such alleged non-conformity exists. Upon
 
21

 
receipt of such notice from the BUYER’s supervisor, the BUILDER shall correct such non-conformity, if the BUILDER agrees to his view. Any disagreement shall be resolved in accordance with Paragraph 1 of Article XII.
 
4.          Facilities :
 
The BUILDER shall furnish the Supervisor and his assistant(s) with adequate office space and such other reasonable facilities according to the BUILDER’s practice at or in the immediate vicinity of the Shipyard as may be necessary to enable them to effectively carry out their duties. The BUYER shall pay for all such facilities other than office space at the BUILDER’s normal rate of charge.
 
5.          Liability of BUILDER :
 
The Supervisor and his assistant(s) shall at all times be deemed to be the employees of the BUYER and not of the BUILDER. The BUILDER shall be under no liability whatsoever to the BUYER, the Supervisor or his assistant(s) for personal injuries, including death, suffered during the time when he or they are on the VESSEL, or within the premises of either the BUILDER or its subcontractors, or are otherwise engaged in and about the construction of the VESSEL, unless, however, such personal injuries, including death, were caused by a gross negligence of the BUILDER, or of any of its employees or agents or subcontractors.
 
Nor shall the BUILDER be under any liability whatsoever to the BUYER, the Supervisor or his assistant(s) for damage to, or loss or destruction of property in Korea of the BUYER or of the Supervisor or his assistant(s), unless such damage, loss or destruction were caused by a gross negligence of the BUILDER or of any of its employees or agents or subcontractors.
 
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6.          Responsibility of BUYER :
 
The BUYER shall undertake and assure that the Supervisor shall carry out his duties hereunder in accordance with the normal shipbuilding practice of the BUILDER and in such a way so as to avoid any unnecessary increase in building cost, delay in the construction of the VESSEL, and/or any disturbance in the construction schedule of the BUILDER.
 
The BUILDER has the right to request the BUYER to replace the Supervisor who is deemed unsuitable and unsatisfactory for the proper progress of the VESSEL’s construction. The BUYER shall investigate the situation by sending its representative(s) to the Shipyard if necessary, and if the BUYER considers that such BUILDER’s request is justified, the BUYER shall effect such replacement as soon as conveniently arrangeable.
 
(End of Article)
 
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ARTICLE V - MODIFICATIONS, CHANGES AND EXTRAS
 
1.          How Effected :
 
Any modifications and/or changes in the As-Built-Specifications shall be made by written agreement of the parties hereto provided, however, that any modifications and/or changes requested by the BUYER or an accumulation of such modifications and/or changes will not adversely affect the BUILDER’s planning or programme in relation to the BUILDER’s other commitments and if the BUYER shall assent to adjustment of the Contract Price, time for delivery of the VESSEL and other terms and conditions of this Contract as hereinafter provided. The BUILDER hereby agrees to exert its best efforts to accommodate such reasonable request by the BUYER so that the said changes and/or modifications may be made at a reasonable cost and within the shortest period of time which is reasonably possible.
 
Any such agreement for modifications and/or changes shall include an agreement as to the increase or decrease, if any, in the Contract Price of the VESSEL together with an agreement as to any extension or reduction in the time of delivery, or any other alterations in this Contract or the As-Built-Specifications occasioned by such modifications and/or changes.
 
The aforementioned agreement to modify and/or change the As-Built-Specifications may be effected by an exchange of letters signed by the authorized representatives of the parties hereto, or telefax confirmed in writing, manifesting such agreement. Such letters and confirmed message exchanged by the parties hereto pursuant to the foregoing shall constitute an amendment of the As-Built-Specifications, and such letters and message shall be incorporated into this Contract and made a part hereof.
 
The BUILDER may make minor changes to the As-Built-Specifications, if found necessary for introduction of improved production methods or otherwise, provided that the BUILDER shall first obtain the BUYER’s approval which shall not be unreasonably withheld.
 
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2.      Changes in Rules of Classification Society, Regulations, etc.:
 
If, after the date of signing this Contract, any requirements as to classification, or as to the rules and regulations to which the construction of the VESSEL is required to conform, are altered or changed by the Classification Society or regulatory bodies authorized to make such alterations or changes, either of the parties hereto upon receipt of information thereof, shall transmit such information in full to the other party in writing, thereupon within Twenty-one(21) days after receipt of the said notice from the other party, the BUYER shall instruct the BUILDER in writing if such alterations or changes shall be made in the VESSEL or not, in the BUYER’s sole discretion.
 
(a)   If such alterations or changes are compulsory for the construction of VESSEL, either of the parties hereto, upon receipt of such information from Classification Society or such other regulatory bodies, shall promptly transmit the same to the other in writing, and the BUILDER shall thereupon incorporate such alterations or changes into the construction of the VESSEL, provided that the BUYER shall first agree to reasonable and proven adjustments required by the BUILDER in the Contract Price, the Delivery Date and other terms and conditions of this Contract and the As-Built-Specifications occasioned by or resulting from such alterations or changes.
 
(b)   If such alterations or changes are not compulsory for the construction of the VESSEL, and the BUYER desires to incorporate such alterations or changes into the construction of the VESSEL, then, the BUYER shall notify the BUILDER of such intention. The BUILDER may accept such alterations or changes, provided that such alterations or changes will not, in the judgement of the BUILDER, adversely affect the BUILDER’s planning or program in relation to the BUILDER’s other commitments, and provided, further, that the BUYER shall first agree to reasonable and proven adjustments required by the BUILDER in the Contract Price, the Delivery Date and other terms and conditions of this Contract and the As-Built-Specifications occasioned by or resulting from such alterations or changes.
 
In the event of a disagreement on price and delivery, and in the event that such alterations or changes are compulsory for the construction of VESSEL, then the BUILDER shall proceed with the required alterations and the dispute related to the above shall be resolved in accordance with the provisions of Article XII.

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Such agreement by the BUYER shall be effected in the same manner as provided in Paragraph 1 of this Article for modifications and/or changes of the As-Built-Specifications.
 
3.          Substitution of Materials :
 
In the event that any of the materials required by the As-Built-Specifications or otherwise under this Contract for the construction of the VESSEL can not be procured in time to effect delivery of the VESSEL, or are in short supply, the BUILDER may, provided the BUYER so agrees in writing, supply other materials and equipment of the best available and like quality, capable of meeting the requirements of the Classification Society and of the rules, regulations, requirements and recommendations with which the construction of the VESSEL must comply. Any agreement as to such substitution of materials shall be effected in the manner as provided in Paragraph 1 of this Article, and shall, likewise, include possible decrease in the Contract Price and other terms and conditions of this Contract affected by such substitution.
 
(End of Article)
 
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ARTICLE VI - TRIALS AND ACCEPTANCE
 
Since the VESSEL is the repeat of BUILDER’s Hull Nos. 1455 & 1456, some sea trial items may be deleted subject to mutual agreement between the BUYER and the BUILDER
 
1.          Notice :
 
The sea trial shall start when the VESSEL is reasonably completed according to the As-Built-Specifications.
 
The BUILDER shall give the BUYER at least Twenty (20) days estimated prior notice and Seven(7) days confirming prior notice by telefax of the time and place of the trial run of the VESSEL, and the BUYER shall promptly acknowledge receipt of such notice. The BUYER shall have its representatives on board the VESSEL to witness such trial run. Failure in attendance of the BUYER’s representative at the trial run of the VESSEL for any reason whatsoever after due notice to the BUYER as above provided shall be deemed to be a waiver by the BUYER of its right to have its representative on board the VESSEL at the trial run, and the BUILDER may conduct the trial run without attendance of the BUYER’s representative, and in such case the BUYER shall be obligated to accept the VESSEL on the basis of a certificate of the BUILDER that the VESSEL, upon trial run, is found to conform to this Contract and the As-Built-Specifications.
 
2.          Weather Condition :
 
The trial run shall be carried out under the weather condition which is deemed favourable enough by the judgement of the BUILDER. In the event of unfavourable weather on the date specified for the trial run, the same shall take place on the first available day thereafter that the weather condition permits. It is agreed that, if during the trial run of the VESSEL, the weather should suddenly become so unfavourable that orderly conduct of the trial run can no longer be continued, the trial run shall be discontinued and postponed until the first favourable day next following, unless the BUYER shall assent in writing to acceptance of the VESSEL on the basis of the trial run already made before such discontinuance has occurred.
 
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Any delay of trial run caused by such unfavourable weather condition shall operate to postpone the Delivery Date by the period of the delay involved and such delay shall be deemed as permissible delay in the delivery of the VESSEL.
 
3.          How Conducted :
 
(a)        The VESSEL shall run the official trial trip in the manner as specified in the As-Built-Specifications.
 
(b)        All expenses in connection with the trial run are to be for account of the BUILDER and the BUILDER shall provide, at its own expense, the necessary crew to comply with conditions of safe navigation, fuel oil, fresh water and other consumable stores necessary, the BUYER shall supply at its own expense lubricating oils and greases.
 
4.          Method of Acceptance or Rejection :
 
(a)        Upon completion of the trial run, the BUILDER shall give the BUYER a notice by telefax of completion of the trial run, as and if the BUILDER considers that the results of trial run indicate conformity of the VESSEL to this Contract and the As-Built-Specifications. The BUYER shall, within Five (5)days after receipt of such notice from the BUILDER, notify the BUILDER by telefax of its acceptance or rejection of the VESSEL’s conformity to this Contract and the As-Built-Specifications.
 
(b)        However, should the result of the trial run show that the VESSEL, or any part or equipment thereof, does not conform to the requirements of this Contract and/or the As-Built-Specifications, or if the BUILDER is in agreement to non-conformity as specified in the BUYER’s notice of rejection, then, the BUILDER shall take necessary steps to correct such non-conformity.
 
Upon completion of correction of such non-conformity, and re-test or trial if necessary, the BUILDER shall give the BUYER a notice thereof by telefax.
 
The BUYER shall, within Three (3) days after receipt of such notice from the BUILDER, notify the BUILDER of its acceptance or rejection of the VESSEL.
 
(c)      In any event that the BUYER rejects the VESSEL, the BUYER shall indicate in detail in its notice of rejection in what respect the VESSEL, or any part or
 
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equipment thereof does not conform to this Contract and/or the As-Built-Specifications.
 
(d)        In the event that the BUYER fails to notify the BUILDER by telefax of the acceptance of or the rejection together with the reason therefor of the VESSEL within the period as provided in the above Sub-paragraph (a) or (b), the BUYER shall be deemed to have accepted the VESSEL.
 
(e)        Any dispute between the BUILDER and the BUYER as to the conformity or non-conformity of the VESSEL to the requirements of this Contract and/or the As-Built-Specifications shall be submitted for final decision in accordance with Article XII hereof.
 
5.          Effect of Acceptance :
 
Acceptance of the VESSEL as above provided shall be final and binding so far as conformity of the VESSEL to this Contract and the As-Built-Specifications is concerned and shall preclude the BUYER from refusing formal delivery of the VESSEL as hereinafter provided, if the BUILDER complies with all other procedural requirements for delivery as provided in Article VII hereof. However, the BUYER’s acceptance of the VESSEL shall not affect the BUYER’s right under Article IX hereof.
 
The BUYER may accept the VESSEL under protest with outstanding defects to be dealt under the guarantee provisions or made subject of a claim for damages.
 
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6.          Disposition of Surplus Consumable Stores
 
Any fuel oil or other furnished and paid for by the BUILDER for trial runs remaining on board the VESSEL, at the time of acceptance of the VESSEL by the BUYER, shall be bought by the BUYER from the BUILDER at the BUILDER’s purchase price for such supply in Korea and the payment by the BUYER thereof shall be made at the time of delivery of the VESSEL.
 
The BUILDER shall pay the BUYER at the time of delivery of the VESSEL an amount for the consumed quantity until delivery of any lubricating oil and greases which were furnished and paid for by the BUYER at the BUYER’s purchase price thereof. For avoidance of doubt, the practice of this Article VI. 6 shall follow the practice in construction of the BUILDER’s Hull Nos. 1455 & 1456.
 
(End of Article)
 
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ARTICLE VII - DELIVERY
 
1.          Time and Place :
 
The VESSEL shall be delivered by the BUILDER to the BUYER at the Shipyard on or before November 30, 2007, except that, in the event of delays in the construction of the VESSEL or any performance required under this Contract due to causes which under the terms of this Contract permit postponement of the date for delivery, the aforementioned date for delivery of the VESSEL shall be postponed accordingly.
 
The aforementioned date, or such later date to which the requirement of delivery is postponed pursuant to such terms, is herein called the “Delivery Date”.
 
2.          When and How Effected :
 
Provided that the BUILDER and the BUYER shall have fulfilled all of their obligations stipulated under this Contract, the delivery of the VESSEL shall be effected forthwith by the concurrent delivery by each of the parties hereto to the other of the PROTOCOL OF DELIVERY AND ACCEPTANCE, acknowledging delivery of the VESSEL by the BUILDER and acceptance thereof by the BUYER.
 
3.          Documents to be delivered to BUYER :
 
Upon delivery and acceptance of the VESSEL, the BUILDER shall deliver to the BUYER the following documents, which shall accompany the PROTOCOL OF DELIVERY AND ACCEPTANCE :
 
(a)        PROTOCOL OF TRIALS of the VESSEL made pursuant to the As-Built-Specifications.
 
(c)        PROTOCOL OF INVENTORY of the equipment of the VESSEL, including spare parts and the like, as specified in the As-Built-Specifications.
 
(d)        PROTOCOL OF STORES OF CONSUMABLE NATURE referred to under Paragraph 6 of Article VI hereof.
 
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(d)        ALL CERTIFICATES including the BUILDERS’s CERTIFICATE required to be furnished upon delivery of the VESSEL pursuant to this Contract and the As-Built-Specifications, necessary for the registration of the VESSEL and BUYER’s trading requirements.
 
It is agreed that if, through no fault on the part of the BUILDER, the Classifications certificates and/or other certificates are not available at the time of delivery of the VESSEL, provisional certificates shall be accepted by the BUYER, provided that the BUILDER shall furnish the BUYER with the formal certificates as promptly as possible after such certificates have been issued.
 
Application and certificate for statutory inspections for the registry of the VESSEL shall be arranged by the BUYER at its expense.
 
(e)        DECLARATION OF WARRANTY of the BUILDER that the VESSEL is delivered to the BUYER free and clear of any liens, charges, claims, mortgages, or other encumbrances upon the BUYER’s title thereto, and in particular that the VESSEL is absolutely free of all burdens in the nature of imposts, taxes or charges imposed by Korean Governmental Authorities, as well as of all liabilities of the BUILDER to its subcontractors, employees and crew, and of the liabilities arising from the operation of the VESSEL in trial runs, or otherwise, prior to delivery.
 
(f)         DRAWING AND PLANS pertaining to the VESSEL as stipulated in the As-Built-Specifications.
 
(g)        COMMERCIAL INVOICE.
 
4.          Tender of VESSEL :
 
If the BUYER fails to take delivery of the VESSEL after completion thereof according to this Contract and the As-Built-Specifications without any justifiable reason, the BUILDER shall have the right to tender delivery of the VESSEL after compliance with all procedural requirements as above provided.
 
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5.          Title and Risk :
 
Title to and risk of loss of the VESSEL shall pass to the BUYER only upon the delivery and acceptance thereof having been completed as stated above; it being expressly understood that, until such delivery is effected, title to and risk of loss of the VESSEL and her equipment shall be in the BUILDER.
 
6.          Removal of VESSEL :
 
The BUYER shall take possession of the VESSEL immediately upon delivery and acceptance thereof and shall remove the VESSEL from the premises of the Shipyard within Three (3) days after delivery and acceptance thereof is effected. If the BUYER shall not remove the VESSEL from the premises of the Shipyard within the aforesaid Three (3) days, in such event, the BUYER shall pay to the BUILDER the reasonable mooring charges of the VESSEL.
 
(End of Article)
 
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ARTICLE VIII - DELAYS AND EXTENSION OF TIME FOR DELIVERY
(FORCE MAJEURE)
 
1.          Causes of Delay (Force Majeure) :
 
If, at any time either the construction or delivery of the VESSEL or any performance required hereunder as a prerequisite to the delivery thereof is delayed by any of the following events; namely war, acts of state or government, blockade, revolution, insurrections, mobilization, civil commotion, riots, national strikes, sabotage, Acts of God or the public enemy, plague or other epidemics, quarantines, prolonged failure of electric current, freight embargoes, or defects in major forgings or castings or delay in BUYER’s supplied articles, if any, or defects in materials, machinery or equipment which could not have been detected by the BUILDER using reasonable care, or earthquakes, tidal waves, typhoons, hurricanes, prolonged or unusually severe weather conditions or by destruction of the premises or works of the BUILDER or its sub-contractors, or of the VESSEL, or any part thereof, by fire, landslides, flood, lightning, explosion, or other causes beyond the control of the BUILDER, or its sub-contractors, as the case may be, or for any other causes which, under the terms of this Contract, authorize and permit extension of the time for delivery of the VESSEL, then, in the event of delays due to the happening of any of the aforementioned contingencies, the Delivery Date of the VESSEL under this Contract shall be extended for a period of time which shall not exceed the total accumulated time of all such delays.
 
The enumerated contingencies shall not give rise to an extension of the delivery date unless :
 
i)          The occurrence could not reasonably have been foreseen by the BUILDER at the date of signing of the Contract.
 
ii)         The BUILDER shall have exercised reasonable due diligence to avoid or minimize the occurrence of such event.
 
iii)        The BUILDER shall have used reasonable efforts to mitigate the duration and effects of such events of the construction schedule.
 
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2.          Notice of Delay :
 
Within Fourteen (14) days after the date of occurrence of any cause of delay, on account of which the BUILDER claims that it is entitled under this Contract to a postponement of the Delivery Date, the BUILDER shall notify the BUYER in writing or by telefax confirmed in writing of the date when such cause of delay occurred. Likewise, within Fourteen (14) days after the date of ending of such cause of delay, the BUILDER shall notify the BUYER in writing or by telefax confirmed in writing of the date when such cause of delay ended.
 
The BUILDER shall also notify the BUYER of the period, by which the Delivery Date is postponed by reason of such cause of delay, with all reasonable dispatch after it has been determined. If the BUILDER does not give the timely advice as above, the BUILDER shall lose the right to claim such delays as permissible delay.
 
Failure of the BUYER to acknowledge to the BUILDER’s claim for postponement of the Delivery Date within Fourteen (14) days after receipt by the BUYER of such notice of claim shall be deemed to be a waiver by the BUYER of its right to object to such postponement of the Delivery Date.
 
3.          Definition of Permissible Delay :
 
Delays on account of such causes as specified in Paragraph 1 of this Article and any other delay of a nature which under the terms of this Contract permits postponement of the Delivery Date shall be understood to be permissible delays and are to be distinguished from unauthorized delays on account of which the Contract Price is subject to adjustment as provided for in Article III hereof.
 
4.          Right to Rescind for Excessive Delay :
 
If the total accumulated time of all delays whether permissible or not exceeds One Hundred and Eighty (180) days, then, in such event, the BUYER may rescind this Contract in accordance with the provisions of Article X hereof.
 
The accumulated time as above shall be excluded by the time lost due to BUYER’s Default or delays in the BUYER’s supplies. The BUILDER may, at any time after the accumulated time of the aforementioned delays justifying rescission by the BUYER, demand in writing that the BUYER shall make an election
 
35

 
proposing a new delivery date, in which case the BUYER shall, within Fourteen (14) days after such demand is received by the BUYER, either notify the BUILDER of its intention to rescind this Contract, or consent to a postponement of the Delivery Date to an agreed specific future date; it being understood and agreed by the parties hereto that, if any further delay occurs on account of causes justifying rescission as specified in this Article, the BUYER shall have the same right of rescission upon the same terms as herein above provided.
 
(End of Article)
 
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ARTICLE IX - WARRANTY OF QUALITY
 
1.          Guarantee :
 
The BUILDER, for the period of Twelve (12) months after delivery of the VESSEL (hereinafter called “Guarantee Period”), guarantees the VESSEL and her engine, including all parts and equipment manufactured, furnished or installed by the BUILDER under this Contract, and including the machinery, equipment and appurtenances thereof, under the Contract but excluding any item which is supplied or designated by the BUYER or by any other bodies on behalf of the BUYER, against all defects discovered within the Guarantee Period which are due to improper design, defective material, and/or poor workmanship or negligent or other improper acts or omissions on the part of the BUILDER or its subcontractors (hereinafter called the “Defect” or “Defects”) and are not a result of accident, ordinary wear and tear, misuse, mismanagement, negligent or other improper acts or omissions or neglect on the part of the BUYER, its employee or agents.
 
Upon rectification of an item claimed under this guarantee, this item shall be covered for further Twelve (12) months under the same terms and conditions. However, this is limited to a maximum of Twenty Four (24) months from delivery date.
 
2.          Notice of Defects :
 
The BUYER shall notify the BUILDER in writing, or by telefax of any defect for which claim is made under this guarantee, as promptly as possible after discovery thereof. The BUYER’s notice shall describe in detail the nature, cause if known and extent of the Defects.
 
The BUILDER shall have no obligation for any Defect discovered prior to the expiry date of the Guarantee Period, unless notice of such Defect is received by the BUILDER not later than Twenty (20) days after such expiry date.
 
3.          Remedy of Defects :
 
(a)        The BUILDER shall remedy, at its expense, any Defect against which the VESSEL is guaranteed under this Article, by making all necessary repairs or
 
37

 
replacements at the Shipyard.
 
(b)        However, if the BUYER should determine that it is commercially or operationally impracticable to bring the VESSEL to the Shipyard, the BUYER may cause the necessary repairs or replacements to be made elsewhere which is deemed suitable for the purpose, provided that, in such event, the BUILDER may forward or supply replacement parts or materials to the BUYER’s agent to be designated by the BYUER in writting , unless forwarding or supplying thereof the VESSEL would impair or delay the operation of working schedule of the VESSEL. In the event that the BUYER proposes to cause the necessary repairs or replacements for the VESSEL to be made at any other shipyard or works than the Shipyard, the BUYER shall first, but in all events as soon as possible, give the BUILDER a notice in writing or by telefax confirmed in writing of the time and place when and where such repairs will be made, and if the VESSEL is not thereby delayed, or her operation or working schedule is not thereby impaired, the BUILDER shall have the right to verify by its own representative(s) the nature, cause and extent of the Defects complained of. The BUILDER shall, in such case, promptly advise the BUYER by telefax, after such examination has been completed, of its acceptance or rejection of the Defects as ones that are covered by the guarantee herein provided. Upon the BUILDER’s acceptance of the Defects as justifying remedy under this Article, or upon award of the arbitration so determining, the BUILDER shall pay to the BUYER for such repairs or replacements justified reasonable and proven actual cost of repairs or replacements.
 
(c)        The reimbursement of the costs incurred in relation to guarantee works shall be paid in a lumpsum after expiration of the guarantee period.
 
(d)        In any case, the VESSEL shall be taken, at the BUYER’s cost and responsibility, to the place elected, ready in all respects for such repairs or replacement.
 
(e)        Any dispute under this Article shall be referred to arbitration in accordance with the provisions of Article XII hereof.
 
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4.          Extent of BUILDER’s Responsibility :
 
 (a)       The BUILDER shall have no responsibility or liability for any other defect whatsoever in the VESSEL than the Defects specified in Paragraph 1 of this Article. Nor the BUILDER shall in any circumstance be responsible or liable for any consequential or special loss, damage or expense including but not limited to loss of time, loss of profit of earning or demurrage directly or indirectly occasioned to the BUYER by reason of the Defects specified in Paragraph 1 of this Article or due to repairs or other works done to the VESSEL to remedy such Defects.
 
 (b)       The BUILDER shall not be responsible for any defect in any part of the VESSEL which may, subsequently to delivery of the VESSEL, have been replaced or repaired in any way by any other contractor unless the BUILDER has not object the contractor to perform guarantee repairs, or for any defect which have been caused or aggravated by omission or improper use and maintenance of the VESSEL on the part of the BUYER, its servants or agents or by ordinary wear and tear or by any other cause beyond the control of the BUILDER.
 
 (c)       The guarantee contained as hereinabove in this Article replaces and excludes any other liability, guarantee, warranty and/or condition imposed or implied by the law, customary, statutory or otherwise, by reason of the construction and sale of the VESSEL by the BUILDER for and to the BUYER.
 
5.          Guarantee Engineer :
 
The BUILDER shall have the right to appoint a Guarantee Engineer to serve on the VESSEL as its representative for a period of Three (3) months from the date the VESSEL is delivered. However, if the BUYER and the BUILDER shall deem it necessary to keep the Guarantee Engineer on the VESSEL for a longer period, then he shall remain on board the VESSEL after the said Three (3) months, but not longer than Six (6) months from the delivery of the VESSEL.
 
The BUYER, and its employees, shall give such Guarantee Engineer full cooperation in carrying out his duties as the represe ntative of the BUILDER on board the VESSEL.
 
The Guarantee Engineer shall sign BUYER’s Indemnity Forms and shall at all times deemed to be an employee of the BUILDER.
 
The BUYER shall accord the Guarantee Engineer treatment comparable to the
 
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VESSEL’s Chief Engineer, and shall provide board and lodging at no cost to the BUILDER and/or the Guarantee Engineer.
 
While the Guarantee Engineer is on board the VESSEL, the BUYER shall pay to the BUILDER the sum of US$ 7,000.- per month as a compensation for a part of cost and charges to be borne by the BUILDER in connection with Guarantee Engineer and also shall pay the expenses of his repatriation to Seoul, Korea by air upon termination of his service, the expenses of his communication with the BUILDER incurred in performing his duties and expenses, if any, of his medical and hospital care in the VESSEL’s hospital.
 
Pertaining to the detailed particulars of this Paragraph, an agreement will be made according to this effect between the parties hereto upon delivery of the VESSEL.
 
(End of Article)
 
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ARTICLE X - RESCISSION BY BUYER
 
1.          Notice :
 
The payments made by the BUYER prior to delivery of the VESSEL shall be in the nature of advances to the BUILDER, and in the event that the VESSEL after sea trial is rejected by the BUYER or the VESSEL is cancelled by the BUYER in accordance with the terms of this Contract under and pursuant to any of the provisions of this Contract specifically permitting the BUYER to do so and in the event that the Contract is rescinded by the BUYER under and pursuant to any of the provisions of this Contract specially permitting the BUYER, then the BUYER shall notify the BUILDER in writing or by telefax confirmed in writing, and such rescission shall be effective as of the date when notice thereof is received by the BUILDER.
 
2.          Refundment by BUILDER :
 
In case the BUILDER receives the notice stipulated in Paragraph 1 of this Article, the BUILDER shall promptly refund to the BUYER the full amount of all sums paid by the BUYER to the BUILDER on account of the VESSEL together with the interest thereon, unless the BUILDER proceeds to the arbitration under the provisions of Article XII hereof.
 
In such event, the BUILDER shall pay the BUYER interest at the rate of Six percent (6.0%)per annum on the amount required herein to be refunded to the BUYER, computed from the dates following on which such sums were paid by the BUYER to the BUILDER to the date of remittance by transfer of such refund to the BUYER by the BUILDER.
 
As security for refund of instalments prior to delivery of the VESSEL, the BUILDER shall furnish the BUYER within Fourteen (14) calendar days after the Contract signing with a letter of guarantee covering the amount of such pre-delivery instalments in favour of the BUYER. Such letter of guarantee shall have substantially the same form and substance as Exhibit “A” annexed hereto.
 
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3.          Discharge of Obligations :
 
Upon such refund by the BUILDER to the BUYER, all obligations, duties and liabilities of each of the parties hereto to the other under this Contract shall be forthwith completely discharged.
 
(End of Article)
 
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ARTICLE XI - BUYER’S DEFAULT
 
1.          Definition of Default :
 
The BUYER shall be deemed to be in default of its performance of obligations under this Contract in the following cases :
 
(a)        If the first, second, third, fourth or fifth instalment are not paid by the BUYER to the BUILDER within Five (5) banking days after such instalment becomes due and payable as provided in Article II hereof;
or
 
(b)        If the Delivery instalment is not paid by the BUYER to the BUILDER concurrently with the delivery of the VESSEL as provided in Article II hereof;
or
 
(c)        If the BUYER, when the VESSEL is duly tendered for delivery by the BUILDER:
i)          fails to take delivery of the VESSEL within Five (5) banking days from tendered date
ii)          having initiated the arbitration procedure the BUYER does not accept delivery within Seven (7) days of an arbitration award which is not appealed.
 
2.          Effect of Default on or before Delivery of VESSEL :
 
(a)        Should the BUYER make default in payment of any instalment of the Contract Price on or before delivery of the VESSEL, the BUYER shall pay the instalment(s) in default plus accrued interest thereon at the rate of Six percent (6.0%) per annum computed from the due date of such instalment to the date when the BUILDER receives the payment, and, for the purpose of Paragraph 1 of Article VII hereof the Delivery Date of the VESSEL shall be automatically extended by the period of continuance of such default by the BUYER. In any event of default by the BUYER, the BUYER shall also pay direct charges and expenses incurred by the BUILDER in consequence of such default after mutual agreement.
 
(b)        If any default by the BUYER continues for a period of Ten (10) days after the BUILDER’s notification, the BUILDER may, at its option, rescind this Contract by giving notice of such effect to the BUYER by telefax confirmed in writing.
 
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Upon dispatch by the BUILDER of such notice of rescission, this Contract shall be forthwith rescinded and terminated. In the event of such rescission of this Contract, the BUILDER shall be entitled to retain any instalment or instalments already paid by the BUYER to the BUILDER on account of this Contract and the BUYER’s Supplies, if any.
 
3.          Disposal of VESSEL :
 
(a)        In the event that this Contract is rescinded by the BUILDER under the provisions of Paragraph 2(b) of this Article, the BUILDER may, at its sole discretion, either complete the VESSEL and sell the same, or sell the VESSEL in its incomplete state, free of any right or claim of the BUYER. Such sale of the VESSEL by the BUILDER shall be either by public auction or private contract at the BUILDER’s sole discretion and on such terms and conditions as the BUILDER shall deem fit.
 
(b)        In the event of such sale of the VESSEL, the amount of the sale received by the BUILDER shall be applied firstly to all expenses attending such sale or otherwise incurred by the BUILDER as a result of the BUYER’s default, secondly to the payment of all costs and expenses of construction of the VESSEL incurred by the BUILDER less BUYER’s Supplies and the instalments already paid by the BUYER and the compensation to the BUILDER for a reasonable loss of profit due to rescission of this Contract, and finally to the repayment to the BUYER without interest, if any balance is obtained.
 
(c)        If the proceeds of sale are insufficient to pay such total costs and loss of profit as aforesaid, the BUYER shall promptly pay the deficiency to the BUILDER upon request.
 
(End of Article)
 
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ARTICLE XII - ARBITRATION
 
1.          Decision by the Classification Society :
 
If any dispute arises between the parties hereto in regard to the design and/or construction of the VESSEL, its machinery and equipment, and/or in respect of the materials and/or workmanship thereof and/or thereon, and/or in respect of interpretations of this Contract or the As-Built-Specifications, the parties may by mutual agreement refer the dispute to the Classification Society or to such other expert as may be mutually agreed between the parties hereto, and whose decision shall be final, conclusive and binding upon the parties hereto.
 
2.          Proceedings of Arbitration :
 
In the event that the parties hereto do not agree to settle a dispute according to Paragraph 1 of this Article and/or in the event of any other dispute of any kind whatsoever between the parties and relating to this Contract or its rescission or any stipulation herein, such dispute shall be submitted to arbitration in London. Each party shall appoint an arbitrator and in the event that they cannot agree, the two arbitrators so appointed shall appoint an Umpire.
 
If the two arbitrators are unable to agree upon an Umpire within Twenty(20) days after appointment of the second arbitrator, either of the said two arbitrators may apply to the President for the time being of the London Maritime Arbitrators Association to appoint the third arbitrator, and the three arbitrators shall constitute the board of arbitration.
 
Such arbitration shall be in accordance with and subject to the provisions of the English Arbitration Act 1996 or any statutory modification or re-enactment thereof for the time being in force.
 
The Arbitration shall be conducted in accordance with the rules in force of the London Maritime Arbitrators Association.
 
Either party may demand arbitration of any such dispute by giving notice to the other party. Any demand for arbitration by either of the parties hereto shall state the name of the arbitrator appointed by such party and shall also state specifically the question or questions as to which such party is demanding arbitration.
 
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Within Fourteen(14) days after receipt of notice of such demand for arbitration, the other party shall in turn appoint a second arbitrator and give notice in writing of such appointment to the party demanding arbitration. If a party fails to appoint an arbitrator as aforementioned within Fourteen(14) days following receipt of notice of demand for arbitration by the other party, the party failing to appoint an arbitrator shall be deemed to have accepted and appointed, as its own arbitrator, the arbitrator appointed by the party demanding arbitration and the arbitration shall proceed before this sole arbitrator who alone in such event shall constitute the Arbitration Board.
 
The award of the arbitrators and/or Umpire shall be final and binding on both  parties.
 
3.          Notice of Award :
 
The award shall immediately be given to the BUYER and the BUILDER by telefax.
 
4.          Expenses :
 
The Arbitration Board shall determine which party shall bear the expenses of the arbitration or the portion of such expenses which each party shall bear.
 
5.          Entry in Court :
 
In case of failure by either party to respect the award of the arbitration, the judgement may be entered in any proper court having jurisdiction thereof.
 
6.          Alteration of Delivery Date :
 
In the event of reference to arbitration of any dispute arising out of matters occurring prior to delivery of the VESSEL, the award may include any postponement of the Delivery Date which the Arbitration Board may deem appropriate.
 
 (End of Article)
 
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ARTICLE XIII - SUCCESSOR AND ASSIGNS
 
Neither of the parties hereto shall assign this Contract to any other individual or company save as provided hereto. unless prior consent of the other party is given in writing. Should circumstances permit with or without alteration of the terms and conditions of this Contract, such consent shall not be unreasonably withheld by either party.
 
The BUYER is hereby allowed to assign the Contract for the purposes of financing.
 
The BUYER is further allowed to nominate a company controlled by the BUYER to take over the Contract.
 
The BUILDER shall fully cooperate in case the BUYER requests UK Tax lease financing arrangements.
 
In the event of any assignment pursuant to the terms of this Contract, the assignee shall succeed to all of the rights and obligations of the assignor under this Contract and the assignor shall remain responsible for the fulfillment of this Contract.
 
In the event of the assignment from the BUYER to any other individual or company the BUILDER shall be entitled to request a Performance Guarantee from the BUYER having same form and contents as Exhibit “C” annexed hereto.
 
The BUYER and the BUILDER understand and acknowledge that the VESSEL shall be built and constructed as a repeat and series VESSEL of the BUILDER’s Hull Nos. 1455 & 1456 as stipulated in this Contract. Thus, i n the event of a resale of the VESSEL, any and all matters determined by mutual agreement between the BUYER and the BUILDER prior to the resale of the VESSEL shall be accepted and complied by the New BUYER (i.e., assignee). If the New BUYER or its supervisor makes unreasonable requests that may have a significant impact on the delivery schedule of the VESSEL and/or costs of construction (including, without limitation to, request for fundamental change of ship type or excessive revision of design specifications, etc.), the BUILDER shall be entitled to refuse these requests. The BUYER shall notify the above to the New BUYER before assignment or novation and the New BUYER will have to accept any additional cost related to the new supervision.
 
(End of Article)
 
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ARTICLE XIV - TAXES AND DUTIES
 
1.          Taxes and Duties Incurred in Korea :
 
The BUILDER shall bear and pay all taxes, duties, stamps and fees incurred in Korea in connection with execution and/or performance of this Contract as the BUILDER, except for any taxes and duties imposed in Korea upon the BUYER’s Supplies.
 
2.          Taxes and Duties Incurred outside Korea :
 
The BUILDER shall bear and pay all taxes, duties, stamps and fees incurred outside Korea in connection with execution and/or performance of this Contract including guarantee matter, except for taxes and duties imposed upon the BUYER or the BUYER supplies.
 
(End of Article)
 
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ARTICLE XV - PATENTS, TRADEMARKS, COPYRIGHTS, ETC.
 
1.          Patents, Trademarks and Copyrights :
 
Machinery and equipment of the VESSEL may bear the patent number trademarks or trade names of the manufacturers. The BUILDER shall defend and hold harmless the BUYER from patent liability or claims of patent infringement of any nature or kind, including costs and expenses for, or on account of any patented or patentable invention made or used in the performance of this Contract and also including costs and expenses of litigation, if any.
 
Nothing contained herein shall be construed as transferring any patent or trademark rights or copyrights in equipment covered by this Contract, and all such rights are hereby expressly reserved to the true and lawful owners thereof.
 
The BUILDER’s warranty hereunder does not extend to the BUYER’s Supplies.
 
2.          General Plans, Specifications and Working Drawings :
 
The BUILDER retains all rights with respect to the As-Built-Specifications, and plans and working drawings, technical descriptions, calculations, test results and other data, information and documents concerning the design and construction of the VESSEL and the BUYER undertakes therefore not to disclose the same or divulge any information contained therein to any third parties, without the prior written consent of the BUILDER, except where it is necessary for usual operation, repair , registration, classification, chartering, sale and maintenance of the VESSEL.
 
(End of Article)
 
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ARTICLE XVI - BUYER’S SUPPLIES
 
1.          Responsibility of BUYER :
 
(a)      The BUYER shall, at its own risk, cost and expense, supply and deliver to the BUILDER all of the items to be furnished by the BUYER as specified in the As-Built-Specifications (herein called the BUYER’s Supplies) at warehouse or other storage of the Shipyard in the proper condition ready for installation in or on the VESSEL, in accordance with the time schedule designated and advised by the BUILDER to the BUYER within 60 days from signing this Contract.
 
 (b)       In order to facilitate installation by the BUILDER of the BUYER’s Supplies in or on the VESSEL, the BUYER shall furnish the BUILDER with necessary specifications, plans, drawings, instruction books, manuals, test reports and certificates required by the rules and regulations of the As-Built-Specifications.
 
If so requested by the BUILDER, the BUYER shall, without any charge to the BUILDER, cause the representatives of the manufacturers of the BUYER’s Supplies to assist the BUILDER in installation thereof in or on the VESSEL and/or to carry out installation thereof by themselves or to make necessary adjustments at the Shipyard.
 
 (c)       Any and all of the BUYER’s Supplies shall be subject to the BUILDER’s reasonable right of rejection, as and if they are found to be unsuitable or in improper condition for installation.
 
 (d)       Should the BUYER fail to deliver any of the BUYER’s Supplies within the time designated, the Delivery Date shall be automatically extended for a period which actually caused the delay in the delivery of the VESSEL.
 
 (e)       If delay in delivery of any of the BUYER’s Supplies exceeds thirty (30) days, then, the BUILDER shall be entitled to proceed with construction of the VESSEL without installation thereof in or on the VESSEL as hereinabove provided, and the BUYER shall accept and take delivery of the VESSEL so constructed, unless such delay is caused by Force Majeure in which case the provision Paragraph 1(d) of this Article shall apply.
 
50

 
2.          Responsibility of BUILDER :
 
The BUILDER shall be responsible for storing and handling with reasonable care of the BUYER’s Supplies after delivery thereof at the Shipyard, and shall, at its own cost and expense, install them in or on the VESSEL, unless otherwise provided herein or agreed by the parties hereto, provided, always, that the BUILDER shall not be responsible for quality, efficiency and/or performance of any of the BUYER’s Supplies.
 
(End of Article)
 
51

 
ARTICLE XVII - INSURANCE
 
1.          Extent of Insurance Coverage
 
From the time of launching until delivery of the VESSEL, the BUILDER shall, at its own cost and expense, insure the VESSEL and all machinery and equipment, appurtenances and outfits, including the BUYER’s Supplies, built into or installed in or upon the VESSEL, against all risks under the “Institute Causes for BUILDER’s Risk”, with first class insurance company or underwriters in Korea. The amount of such insurance coverage shall, up to the date of delivery of the VESSEL, not be less than the aggregate amount of all instalments paid by the BUYER to the BUILDER, plus the value of the BUYER’s Supplies in the custody of the Shipyard.
 
2.          Application of the Recovered Amounts
 
In the event that the VESSEL shall be damaged from any insured cause at any time before delivery of the VESSEL, and in the further event that such damage shall not constitute an actual or constructive total loss of the VESSEL, the amount received in respect of the insurance shall be applied by the BUILDER in repair of such damage, satisfactory to the Classification Society, and the BUYER shall accept the VESSEL under this Contract if completed in accordance with this Contract and the As-Built-Specifications, however, subject to the extension of delivery time under Article VIII hereof (except in case of negligence of the BUILDER).
 
Should the VESSEL from any cause become an actual or constructive total loss, the BUILDER shall either :
 
 (a)       proceed in accordance with the terms of this Contract, in which case the amount received in respect of the insurance shall be applied to the construction and repair of damage of the VESSEL, provided the parties hereto shall have first agreed thereto in writing and to such reasonable extension of delivery time as may be necessary for the completion of such reconstruction and repair ; or
 
52

 
 (b)       refund promptly to the BUYER the full amount of all sums paid by the BUYER to the BUILDER as instalments in advance of delivery of the VESSEL with Six percent (6.0%) interest, and deliver to the BUYER all BUYER’s Supplies (or the insurance proceeds paid with respect thereto), in which case this Contract shall be deemed to be automatically terminated and all right, duties, liabilities and obligations of each of the parties to the other shall forthwith cease and terminate.
 
3.          Termination of BUILDER’s Obligation to Insure
 
The BUILDER shall be under no obligation to insure the VESSEL hereunder after delivery and acceptance of the VESSEL.
 
(End of Article)
 
53

 
ARTICLE XVIII – NOTICE
 
1.          Address :
 
Any and all notices and communications in connection with this Contract shall be addressed as follows :

To the BUYER :	Seacarriers Lines Inc. c/o DANAOS SHIPPING	
 	CO. LTD. Akti Kondyli 14, 185 45 Piraeus, Greece	
Cable address :	DECUSHIP PIRAEUS	
Telefax No. :+30 210 422 0855	
 	
To the BUILDER:	
 	
Samsung Heavy Industries Co., Ltd.	
647-9, 11 th Floor, KIPS Building, Kangnam-Ku,	
Seoul, Korea	
Calbe address : SSYARD SEOUL	
Telefax No. : (+82 2) 3458-7349, (+82 2) 3458-7319	
 	
or preferably to its Koje Yard :	
 	
Samsung Heavy Industries Co., Ltd.	
P.O.BOX Gohyun 9	
530, Jangpyung-Ri, Shinhyun-Up, Kyungnam,	
Korea	
Telefax No. :         (+82 55) 630-4947 (Design Department)	
(+82 55) 630-4978 (Customer Satisfaction Team.)	
 
2.          Language :
 
Any and all notices and communications in connection with this Contract shall be written in the English language.
 
54

 
3.          Effective Date of Notice :
 
The notice in connection with this Contract shall become effective from the date when such notice is received by the BUYER or by the BUILDER except otherwise described in the Contract.
 
(End of Article)
 
55

 
ARTICLE XIX - EFFECTIVE DATE OF CONTRACT
 
This Contract shall become effective upon signing by the parties hereto.
 
(End of Article)
 
56

 
ARTICLE XX - INTERPRETATION
 
1.          Laws Applicable :
 
The parties hereto agree that the validity and interpretation of this Contract and of each Article and part thereof shall be governed by the laws of England.
 
2.          Discrepancies :
 
All general language or requirements embodied in the As-Built-Specifications are intended to amplify, explain and implement the requirements of this Contract. However, in the event that any language or requirements so embodied permit of an interpretation inconsistent with any provisions of this Contract, then, in each and every such event, the applicable provisions of this Contract shall prevail and govern. In the event of conflict between the As-Built-Specifications and Plans, the As-Built-Specifications shall prevail and govern.
 
3.          Entire Agreement :
 
This Contract contains the entire agreement and understanding between the parties hereto and supersedes all prior negotiations, representations, undertaking and agreements on any subject matter of this Contract.
 
4.          Amendments and Supplements :
 
Any supplement, memorandum of understanding or amendment, whatsoever form it may be relating to this Contract, to be made and signed among parties hereof after signing this Contract, shall be the integral part of this Contract and shall be predominant over the respective corresponding Article and/or Paragraph of this Contract.
 
The Contract can only be amended in writing.
 
(End of Article)
 
57

 
IN WITNESS WHEREOF, the parties hereto have caused this Contract to be duly executed on the day and year first above written.

BUYER :	BUILDER :	
SEACARRIERS LINES INC.	SAMSUNG HEAVY IND., CO., LTD.	

/s/ John Coustas	 	 	/s/ C.H. Park	 	
By : John Coustas	 	By : C.H. Park	
Title : Director	 	Title : Attorney-in fact	

 	 	/s/ Yeon Taek Chae	 	
 	 	Initialed by : Yeon Taek Chae	
 	 	Title : Attorney-in-fact	

WITNESS :	 	 	

/s/ I. Prokopakis	 	 	 	
By : I. Prokopakis	 	 	
Title : M. Director Deputy	 	 	

58

 
EXHIBIT “A”
 
LETTER OF REFUNDMENT GUARANTEE
 
Gentlemen :
 
We hereby issue our letter of guarantee no.           in favour of Seacarriers Lines Inc., (hereinafter called the “BUYER”) for account of Samsung Heavy Industries Co., Ltd.(hereinafter called the “BUILDER”) as follows in consideration of the shipbuilding contract dated June 30, 2005 (hereinafter called the “Contract”) made by and among the BUYER and the BUILDER for the construction of one(1) single screw diesel engine driven Container VESSEL having BUILDER’s Hull No. 1640 (hereinafter called the “VESSEL”).
 
If in connection with the terms of the Contract the BUYER shall become entitled to a refund of the advance payment(s) made to the BUILDER prior to the delivery of the VESSEL, we hereby irrevocably guarantee the repayment of the same to the BUYER immediately on demand being initially US$ 7,000,000.- (Say U.S. Dollars Seven Million only) together with interest thereon at the rate of Six (6) percent per annum from the respective dates on which such sums were paid by the BUILDER to the date of remittance by telegraphic transfer of such refund.
 
The amount of this guarantee will be automatically increased, not more than three times, upon BUILDER’s receipt of the respective instalment: each time by the amount of instalment of US$ 7,000,000.- (Say U.S. Dollars Seven Million only), US$ 7,000,000.- (Say U.S. Dollars Seven Million only) and US$ 7,000,000.- (Say U.S. Dollars Seven Million only)  respectively plus interest thereon as provided in the Contract, but in any eventuality the amount of this guarantee shall not exceed the total sum of US$ 28,000,000.- (Say U.S. Dollars Twenty Eight Million only) plus interest thereon at the rate of Six (6) percent per annum from the respective dates on which such sums were paid by the BUYER to the BUILDER to the date of remittance by telegraphic transfer of the refund.
 
Our liability under this letter of guarantee shall not be affected by any alteration to or variation of the terms of the Contract you may hereafter agree with the BUILDER and by any other matter of circumstances, including bankruptcy or insolvency of the BUILDER, which might otherwise discharge our liability hereunder as guarantor of the BUILDER’s obligations as aforesaid.
 
59

 
In case any refund is made to you by the BUILDER or by us under this guarantee, our liability hereunder shall be automatically reduced by the amount of such refund.
 
This letter of guarantee is available against BUYER’s simple receipt and signed statement certifying that BUYER’s demand for refund has been made in conformity with Article X of the Contract and the BUILDER has failed to make the refund within Thirty One (31) days after BUYER’s demand to the BUILDER.
 
Refund shall be made to BUYER by telegraphic transfer in United States Dollars to an account designated by you without deduction, withholding or set-off.
 
This letter of guarantee shall expire and become null and void upon receipt by the BUYER of the sum guaranteed hereby or upon acceptance by the BUYER of the delivery of the VESSEL in accordance with the terms of the Contract and, in either case, this letter of guarantee shall be returned to us. This guarantee is valid from the date of this letter of guarantee until or in the event of delayed delivery until such time as the VESSEL is delivered by the BUILDER to the BUYER in accordance with the terms of the Contract.
 
Notwithstanding the provisions hereinabove, in case we receive notification from you or the BUILDER confirmed by an Arbitrator stating that your claim to cancel the Contract or your claim for refundment thereunder has been disputed and referred to Arbitration in accordance with the provisions of the Contract, the period of validity of this guarantee shall be extended until Thirty (30) days after the final and non-appealable award shall be rendered in the Arbitration and a copy thereof acknowledged by the Arbitrators. In such case, this guarantee shall not be available unless and until such acknowledged copy of the final award in the Arbitration justifying your claim is presented to us.
 
Your rights in respect of this letter of guarantee are assignable from the date of this letter of guarantee until such time as the VESSEL is delivered by the BUILDER to the BUYER in accordance with the provisions of the Contract, on the understanding that you will notify us of the identity of any assignee of your rights under this letter of guarantee.
 
Any notice or demand under this letter of guarantee shall be given by facsimile and sent to:
 
60

 

or to such other address as we might notify to you in writing. A notice shall be deemed to be served and shall take effect 2 hours after its transmission is completed, provided that if a notice would be deemed to be served on a day which is not a business day, or which is a business day but after 5:00 p.m. local time, in the place of receipt, the notice shall be deemed to be served and shall take effect at 9:00 a.m. on the next day which is a business day.
 
This guarantee shall be governed by and construed in accordance with the Laws of England. Any disputes arising under this guarantee (but not any disputes arising under the Contract which shall be determined by arbitration in accordance with the terms of the Contract and as referenced in this letter of guarantee) shall be determined by the High Court of Justice in London to whose exclusive jurisdiction we hereby submit. We appoint                          
 
                                                                                                                          as our agents for service of process in connection with any proceedings in such courts.
 
We each jointly and severally hereby represent and guarantee that we have the corporate power and authority to execute, deliver and perform the obligations under this letter of guarantee, and that such execution and performance will not violate or conflict with any provision of law, statute, rule, permit or regulation of any government, regulatory body, agency or other authority in the jurisdictions where we are subject to such laws and regulations.
 
61

 
IN WITNESS WHEREOF, we have hereunder set our hands and seal by our duly authorized representatives this      day of         , 2005.

 	Very truly yours,	

 	For and on behalf of	

 	 	
 	By	 	 	
 	Name :	
 	Title : Attorney-in-Fact	

 	For and on behalf of	
 	 	 	
 	By	 	 	
 	Name :	
 	Title : Attorney-in-Fact	
 
62

 
EXHIBIT “B”
 
Samsung Heavy Industries Co., Ltd.
11 th Floor, KIPS Building
647-9, Yoksam-Dong, Kangnam-Ku,
Seoul, Korea 135-080
 
Date :                        , 2005
 
PERFORMANCE GUARANTEE
 
In consideration of the performance of a certain shipbuilding contract dated                   (hereinafter called the “Contract”) by SEACARRIERS LINES INC. of 80 Broad street, Monrovia, Liberia having your Hull No.1640 (hereinafter called the “VESSEL”) providing among other things for payment of the Contract Price amounting to United States Dollars             (US$              );
 
We, the undersigned, hereby irrevocably and unconditionally guarantee to you, your successors, and assigns the due and faithful performance by the BUYER of its all liabilities and responsibilities under the Contract and any supplement, amendment, change or modification hereafter made thereto, including but not limited to, due and prompt payment of the Contract Price by the BUYER to you, your successors, and assigns under the Contract and any supplement, amendment, change or modification as aforesaid (hereby expressly waiving notice of any such supplement, amendment, change or modification as may be agreed to by the BUYER and confirming that this guarantee shall be fully applicable to the Contract as so supplemented, amended, changed or modified).
 
This Performance Guarantee shall be governed by the laws of England.

GUARANTOR :
BY :
TITLE :
WITNESS :
 
63

 
EXHIBIT “C”
 
Samsung Heavy Industries Co., Ltd.
11 th Floor, KIPS Building
647-9, Yoksam-Dong, Kangnam-Ku,
Seoul, Korea 135-080
 
Date :                        , 2005
 
PERFORMANCE GUARANTEE
 
In consideration of the assignment of a certain shipbuilding contract dated                   (hereinafter called the “Contract”) by us to              having your Hull No.1640(hereinafter called the “VESSEL”) providing among other things for payment of the Contract Price amounting to United States Dollars            (US$              );
 
We, the undersigned, hereby irrevocably and unconditionally guarantee to you, your successors, and assigns the due and faithful performance by the BUYER of its all liabilities and responsibilities under the Contract and any supplement, amendment, change or modification hereafter made thereto, including but not limited to, due and prompt payment of the Contract Price by the BUYER to you, your successors, and assigns under the Contract and any supplement, amendment, change or modification as aforesaid (hereby expressly waiving notice of any such supplement, amendment, change or modification as may be agreed to by the BUYER and confirming that this guarantee shall be fully applicable to the Contract as so supplemented, amended, changed or modified).
 
This Performance Guarantee shall be governed by the laws of England.

GUARANTOR :
BY :
TITLE :
WITNESS :
 
64

 
Exhibit 10.21
 
FOR
 
CONSTRUCTION AND SALE
 
OF
 
A 4,250 TEU CONTAINER VESSEL
(HULL NO. 1670)

BETWEEN
 
Bayview Shipping Inc.
As BUYER
 
AND

Samsung Heavy Industries Co., Ltd.
As BUILDER

 
I N D E X

 	 	PAGE	
 	 	 	
PREAMBLE	 	7	
 	 	 	
ARTICLE I - DESCRIPTION AND CLASS	 	 	
 	 	 	
1. Description	 	8	
2. Dimensions and Characteristics	 	8	
3. Classification, Rules and Regulations	 	9	
4. Subcontracting	 	10	
5. Registration	 	10	
 	 	 	
ARTICLE II - CONTRACT PRICE AND TERMS OF PAYMENT	 	 	
 	 	 	
1. Contract Price	 	11	
2. Adjustment of Contract price	 	11	
3. Currency	 	11	
4. Terms of Payment	 	11	
5. Method of Payment	 	12	
6. Notice of Payment on or before Delivery	 	13	
7. Expenses	 	13	
8. Prepayment	 	13	
9. Performance Guarantee	 	14	
 	 	 	
ARTICLE III - ADJUSTMENT OF CONTRACT PRICE	 	 	
 	 	 	
1. Delivery	 	15	
2. Speed	 	16	
3. Fuel Consumption	 	17	
4. Deadweight	 	17	
5. Early Delivery	 	18	
6. Effect of Rescission	 	18	
 
2

 

ARTICLE IV - APPROVAL OF PLANS AND DRAWINGS AND INSPECTION DURING CONSTRUCTION	 	 	
 	 	 	
1. Approval of Plans and Drawings	 	19	
2. Appointment of BUYER’s Supervisor	 	19	
3. Inspection by the Supervisor	 	20	
4. Facilities	 	21	
5. Liability of BUILDER	 	21	
6. Responsibility of BUYER	 	22	
 	 	 	
ARTICLE V - MODIFICATIONS, CHANGES AND EXTRAS	 	 	
 	 	 	
1. How Effected	 	23	
2. Change in Rules of Classification Society, Regulations etc	 	24	
3. Substitution of Materials	 	25	
 	 	 	
ARTICLE VI - TRIALS AND ACCEPTANCE	 	 	
 	 	 	
1. Notice	 	26	
2. Weather Condition	 	26	
3. How Conducted	 	27	
4. Method of Acceptance of Rejection	 	27	
5. Effect of Acceptance	 	28	
6. Disposition of Surplus Consumable Stores	 	28	
 	 	 	
ARTICLE VII - DELIVERY	 	 	
 	 	 	
1. Time and Place	 	29	
2. When and How Effected	 	29	
3. Documents to be delivered to BUYER	 	29	
4. Tender of VESSEL	 	30	
5. Title and Risk	 	31	
6. Removal of VESSEL	 	31	
 
3

 

ARTICLE VIII - DELAYS AND EXTENSION OF TIME FOR DELIVERY (FORCE MAJEURE)	 	 	
 	 	 	
1. Causes of Delay	 	32	
2. Notice of Delay	 	33	
3. Definition of Permissible Delay	 	33	
4. Right to Rescind for Excessive Delay	 	33	
 	 	 	
ARTICLE IX - WARRANTY OF QUALITY	 	 	
 	 	 	
1. Guarantee	 	35	
2. Notice of Defects	 	35	
3. Remedy of Defects	 	35	
4. Extent of the BUILDER’s Responsibility	 	37	
5. Guarantee Engineer	 	37	
 	 	 	
ARTICLE X - RESCISSION BY BUYER	 	 	
 	 	 	
1. Notice	 	39	
2. Refundment by BUILDER	 	39	
3. Discharge of Obligations	 	40	
 	 	 	
ARTICLE XI - BUYER’S DEFAULT	 	 	
 	 	 	
1. Definition of Default	 	41	
2. Effect of Default on or before Delivery of VESSEL	 	41	
3. Disposal of VESSEL	 	42	
 	 	 	
ARTICLE XII - ARBITRATION	 	 	
 	 	 	
1. Decision by Classification Society	 	43	
2. Proceedings of Arbitration	 	43	
3. Notice of Award	 	44	
4. Expenses	 	44	
5. Entry in Court	 	44	
6. Alteration of Delivery Date	 	44	
 	 	 	
ARTICLE XIII - SUCCESSOR AND ASSIGNS	 	45	
 
4

 

ARTICLE XIV - TAXES AND DUTIES	 	 	
 	 	 	
1. Taxes and duties Incurred in Korea	 	46	
2. Taxes and Duties Incurred outside Korea	 	46	
 	 	 	
ARTICLE XV - PATENTS, TRADEMARKS, COPYRIGHTS, ETC	 	 	
 	 	 	
1. Patents, Trademarks and Copyrights	 	47	
2. General Plans, Specifications and Working Drawings	 	47	
 	 	 	
ARTICLE XVI - BUYER’S SUPPLIES	 	 	
 	 	 	
1. Responsibility of BUYER	 	48	
2. Responsibility of BUILDER	 	49	
 	 	 	
ARTICLE XVII - INSURANCE	 	 	
 	 	 	
1. Extent of Insurance Coverage	 	50	
2. Application of the Recovered Amounts	 	50	
3. Termination of BUILDER’s Obligation to Insure	 	51	
 	 	 	
ARTICLE XVIII - NOTICE	 	 	
 	 	 	
1. Address	 	52	
2. Language	 	52	
3. Effective Date of Notice	 	53	
 	 	 	
ARTICLE XIX - EFFECTIVE DATE OF CONTRACT	 	54	
 	 	 	
ARTICLE XX - INTERPRETATION	 	 	
 	 	 	
1. Laws Applicable	 	55	
2. Discrepancies	 	55	
3. Entire Agreement	 	55	
4. Amendments and supplements	 	55	
 
5

 

END OF CONTRACT	 	56	
 	 	 	
EXHIBIT “A” LETTER OF REFUNDMENT GUARANTEE	 	57	
 	 	 	
EXHIBIT “B” PERFORMANCE GUARANTEE	 	61	
 	 	 	
EXHIBIT “C” PERFORMANCE GUARANTEE	 	62	
 
6

 
THIS CONTRACT, made and entered into on this 28 th day of March, 2006 by and between Bayview Shipping Inc. a corporation incorporated and existing under the laws of Liberian, having its registered office at 80 Broad Street, Monrovia, Liberia (hereinafter called the “BUYER”), on the one part and Samsung Heavy Industries Co., Ltd., a corporation incorporated and existing under the laws of the Republic of Korea of having its registered office at 647-9, Yeoksam-Dong, Kangnam-ku, Seoul, Korea (hereinafter called the “BUILDER”), on the other part,
 
WITNESSETH:
 
In consideration of the mutual covenants herein contained, the BUILDER agrees to design, build, launch and complete in accordance with first class modern Korean shipbuilding practice and standards one (1) Single Screw Diesel Engine driven Container VESSEL as described in the Specifications attached herewith and any addendum thereto (hereinafter called the “VESSEL”) at the BUILDER’s shipyard located in Geoje Island, Korea (hereinafter called the “Shipyard”) and to deliver and sell the same to the BUYER, and the BUYER hereby agrees to purchase and accept delivery of the VESSEL from the BUILDER and to pay for the same upon the terms and conditions hereinafter set forth.
 
7

 
ARTICLE I - DESCRIPTION AND CLASS
 
1.                           Description :
 
The VESSEL shall be an ocean going single screw diesel engine driven fully cellular container VESSEL suitable for carrying dry cargo containers having the BUILDER’s Hull No.1670 and shall be built, constructed, equipped and completed in accordance with the ‘As-Built-Specifications’ as specified in the shipbuilding contracts of the BUILDER’s Hull No. 1639 and 1640 (hereinafter called as the “HN1639 Series Contract”) to build just identical vessels to the BUILDER’s Hull No. 1639 and 1640 (hereinafter called as the “HN1639 Series”) as a repeat and series, and the ‘Maker List’ as specified in the Supplement Agreement No.1 (dated June 30, 2005) to the HN 1639 Series Contract (hereinafter collectively called as the “SPECIFICATIONS”).
 
Thus, all drawings and plans made by the BUILDER and duly approved by the BUYER during the construction of the HN1639 Series in accordance with HN 1639 Series Contract shall be used without any further change, modification and approval by the BUYER, and a ll extra/credit costs agreed as of February 27, 2006 for the HN 1639 Series are included into the ship price described in this CONTRACT, and all construction procedure including model test and sea trial etc. shall be done on the basis of the just repeat and series VESSEL of the HN 1639s Series.
 
2.                           Dimensions and Characteristics :

Length, overall	 	 	 	appx.	 	259.8	m	
Length, between perpendiculars	 	 	 	appx.	 	244.8	m	
Breadth, moulded	 	 	 	appx.	 	32.25	m	
Depth, moulded	 	 	 	appx.	 	19.3	m	
Designed loaded draught, moulded	 	 	 	appx.	 	11.0	m	
Scantling draught, moulded	 	 	 	appx.	 	12.6	m	
 
Main Engine                                                                    :                                                       MAN B&W 8K 90MC-C type License Made MCR 49,680 bhp at 104 r.p.m.

Deadweight, guaranteed	:	 	50,500 metric tons at the moulded	
 
8

 

 	 	 	scantling draught of 12.6 meters.	
 	 	 	 	
Speed, guaranteed	:	 	24.5 knots at a draught of 11.0 meters and main engine developing power of 38,880 bhp (metric).	
 	 	 	
Fuel Consumption, guaranteed :	 	124.3 grams/bhp(metric)-hour using marine diesel oil having lower calorific value of 10,200 kcal/kg at normal continuous rating of 44,710 bhp(metric) measured at the shop trial.	
 
The details of the aforementioned particulars as well as the definitions and method of measurements and calculations are as defined in the SPECIFICATIONS .
 
3.                           Classification, Rules and Regulations :
 
The VESSEL, including its machinery, equipment and outfittings shall be constructed in accordance with the rules and regulations in year 2004 July edition of the Classification Society in accordance with both the interpretation of Classification Society (dated on 2005-06-29 Ref No. MKOKR120/MSSH/Gen-precontract/PUS-J-668) and the interpretation of the Classification Society (dated 28 th February 2006 Ref. No. MKOKR120/MSSH/Gen-Precontract/PUS-J-698 in respect of new updates in effect as of March 28, 2006 from rule and regulations applied to the HN1639 Series) and under special survey of Det Norske Veritas (hereinafter called the “Classification Society”) and shall be distinguished in the register by the symbol of X 1A1 “ Container Carrier”, NAUTICUS, EO, and In water survey and TMON shall be applied according to the requirement of the class rule.
 
Decisions of the Classification Society as to compliance or non-compliance with the classification shall be final and binding upon both parties hereto. Details of its notation shall be in accordance with the SPECIFICATIONS .
 
The VESSEL shall also comply with the compulsory rules, regulations and requirements of the regulatory bodies as described in the SPECIFICATIONS rectified and in effect as of the signing date of this Contract. Non-compulsory rules, regulations and requirements of the regulatory bodies shall be dealt with in
 
9

 
accordance with Article V (2) of this Contract.
 
All the fees and charges incidental to the classification and with respect to compliance with the above referred rules, regulations and requirements shall be for account of the BUILDER except otherwise agreed.
 
4.                           Subcontracting :
 
The BUILDER may, at its sole discretion and responsibility, subcontract any portion of the construction work of the VESSEL, provided that the construction and assembly of the VESSEL shall be carried out as is normally done according to the BUILDER’s building practice and provided further that the BUILDER shall be responsible to the BUYER in respect of any construction work carried out by such subcontractors.
 
5.                           Registration :
 
The VESSEL, at the time of its delivery and acceptance, shall be registered at the port of registry by the BUYER under Greek, Liberian, Cyprus or Panama flag at the BUYER’s expenses. The BUYER shall decide the flag within one(1) month after the date of signing of this Contract.
 
(End of Article)
 
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ARTICLE II - CONTRACT PRICE AND TERMS OF PAYMENT
 
1.                           Contract Price :
 
The Contract price of the VESSEL and exclusive of the BUYER’s Supplies as provided in Paragraph 1 of Article XVI hereof is Sixty Three Million Eight Hundred Thousand United States Dollars (US$ 63,800,000.-) (hereinafter called the “Contract Price”), which shall be subject to upward or downward adjustment, if any, as hereinafter set forth in this Contract.
 
2.                           Adjustment of Contract Price:
 
Increase or decrease of the Contract Price, if any, due to adjustments thereof made in accordance with the provisions of this Contract, shall be adjusted by way of addition to or subtraction from the Contract Price upon delivery and acceptance of the VESSEL in the manner as hereinafter provided.
 
3.                           Currency :
 
Any and all payments by the BUYER to the BUILDER which are due under this Contract shall be made in United States Dollars.
 
4.                           Terms of Payment :
 
The Contract Price shall be due and payable by the BUYER to the BUILDER in the instalments as follows :
 
(a)                       First Instalment :
 
The First Instalment amounting to Six Million Three Hundred and Eighty Thousand United States Dollars (US$ 6,380,000.-) shall be due and payable upon issuance and delivery to the BUYER of the original of Refund Guarantee.
 
(b)                      Second Instalment :
 
The Second Instalment amounting to Six Million Three Hundred and Eighty Thousand Million United States Dollars (US$ 6,380,000.-) shall be due and payable upon six(6) calendar months after the date of singing of this Contract.
 
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(c)                       Third Instalment :
 
The Third Instalment amounting to Six Million Three Hundred and Eighty Thousand Million United States Dollars (US$ 6,380,000.-) shall be due and payable upon steel cutting of the VESSEL.
 
(d)                      Fourth Instalment :
 
The Foruth Instalment amounting to Six Million Three Hundred and Eighty Thousand Million United States Dollars (US$ 6,380,000.-) shall be due and payable upon keel laying of the VESSEL.
 
 (e)                    Fifth Instalment :
 
The Delivery Instalment amounting to Thirty Eight Million Two Hundred and Eighty Thousand United States Dollars (US$ 38,280,000.-) plus any increase or minus any decrease due to adjustments of the Contract Price under and pursuant to the provisions of this Contract, shall be due and payable upon delivery and acceptance of the VESSEL or upon tender for delivery of the VESSEL referred to in Paragraph 4 of Article VII of this Contract.
 
It is agreed that no payment shall be effected until the original Refund Guarantee is delivered to the BUYER.
 
5.                           Method of Payment :
 
 (a)                    First Instalment :
 
Within Seven(7) banking days after 28 th day of March 2006, the BUYER shall remit by telegraphic transfer the first instalment to the account of The Export-Import Bank of Korea, Head Office, Seoul, Korea with Deutsche Bank Trust Company Americas(BIC : BKTRUS33), 60 Wall Street, Mail Stop NYC 60 1310, New York, NY 10005, USA, Account No.04 029 695, in favour of Samsung Heavy Industries., Ltd, SWIFT code : EXIKKRSE or other bank as designated by the Builder, in favor of Samsung Heavy Industrise Co, Ltd.(hereinafter called the “BUILDER’s Bank”)
 
 (b)                   Second, Third and Fourth Instalment :
 
Upon receipt of telefax notice from the BUILDER confirming that the second, third, and fourth instalment on each event is due and payable, the BUYER shall
 
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remit by telegraphic transfer the second, third, and fourth instalment to the aforesaid account of the BUILDER’s Bank in favour of Samsung Heavy Industries Co., Ltd.
 
 (c)                    Fifth Instalment :
 
At least One (1) banking days prior to delivery and acceptance of the VESSEL, the BUYER shall remit by telegraphic transfer the fifth instalment to the name of the BUYER at BUILDER’s BANK, with an irrevocable instruction that the amount so remitted shall be payable to the BUILDER against a facsimile copy of PROTOCOL OF DELIVERY and ACCEPTANCE OF THE VESSEL signed by the BUYER and the BUILDER or returned to the BUYER if such PROTOCOL OF DELIVERY and ACCEPTANCE has not been presented within 15 days.
 
Simultaneously with each of all such payments, the BUYER shall cause the BUYER’s BANK to advise the BUILDER’s BANK of the details of such payments by authenticated bank cable.
 
Any claim which the BUYER may have against the BUILDER hereunder shall be settled and liquidated separately from any payment by the BUYER to the BUILDER hereunder.
 
6.                           Notice of Payment on or before Delivery :
 
With the exception of the first instalment, the BUILDER shall give the BUYER Five(5) banking days prior notice by telefax of the anticipated due date and amount of each instalment payable on or before delivery of the VESSEL.
 
7.                           Expenses.
 
Expenses and bank charges for remitting payments and any taxes, duties, expenses and fees connected with such payment shall be for account of the BUYER referred to in paragraph 2 of Article XIV of this Contract, except expenses and bank charges of the BUILDER’s BANK.
 
8.                           Prepayment :
 
Prepayment of any instalment due on or before delivery of the VESSEL shall be subject to mutual agreement between the parties hereto.
 
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9.                           Performance Guarantee
 
Upon signing this Contract, the BUYER shall provide the BUILDER with a Performance Guarantee in order to secure the due and faithful performance of this Contract by the BUYER having same form and contents as Exhibit ”B” annexed hereto.
 
(End of Article)
 
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ARTICLE III - ADJUSTMENT OF CONTRACT PRICE
 
The Contract Price shall be subject to adjustment, as hereinafter set forth, in the event of the following contingencies (it being understood by both parties that any reduction of the Contract Price is by way of liquidated damages and not by way of penalty) :
 
1.                           Delivery :
 
  (a)                    No adjustment shall be made and the Contract Price shall remain unchanged for the first Thirty (30) days of delay in delivery of the VESSEL beyond the Delivery Date as defined in Article VII hereof (ending as of twelve o’clock midnight of the Thirty (30) day of delay).
 
 (b)                   If the delivery of the VESSEL is delayed more than Thirty (30) days after the Delivery Date, the Contract Price shall be reduced by the sum of Twenty Seven Thousand Five Hundred United States Dollars (US$27,500.-) for each full day for which thereafter delivery is delayed.
 
However, the total reduction in the Contract Price shall not be more than as would be the case for a delay of One Hundred Eighty (180) days counting from the midnight of the Thirty (30) day after the Delivery Date at the above specified rate of reduction.
 
  (c)                    However, if the delay in delivery of the VESSEL should continue for a period of Two Hundred Ten (210) days from the Delivery Date in Paragraph 1 of Article VII, then in such event, and after such period has expired, the BUYER may, at its option, rescind this Contract in accordance with the provisions of Article X hereof.
 
The BUILDER may, at any time after the expiration of the aforementioned Two Hundred Ten (210) days of delay in delivery, if the BUYER has not served notice of rescission as provided in Article X hereof, demand in writing that the BUYER shall make an election, in which case the BUYER shall, within Twenty (20) days after such demand is received by the BUYER, notify the BUILDER of its intention either to rescind this Contract or to consent to the acceptance of the VESSEL at the BUILDER’s specified future date. If the BUYER shall not make an election within Twenty (20) days as provided hereinabove, the BUYER shall be deemed to have accepted such extension of the delivery date to the future delivery date indicated by the BUILDER and it being understood by the parties hereto that if the VESSEL is not delivered by such future date, the BUYER shall
 
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have the same right of rescission upon the same terms and conditions as hereinabove provided.
 
It is understood that accrued liquidated damages are preserved. Further delay shall incur additional liquidated damages in accordance with existing terms and conditions.
 
 (d)                   For the purpose of this Article, the delivery of the VESSEL shall be deemed to be delayed when and if the VESSEL, after taking into account all postponements of the Delivery Date by reason of permissible delay as defined in Article VIII and/or any other reason under this Contract, is not delivered by the date upon which delivery is required under the terms of this Contract.
 
2.                           Speed :
 
 (a)                    The Contract Price shall not be affected or changed by reason of the trial speed (as determined according to the SPECIFICATIONS being less than the guaranteed speed, if such variation is not more than Two-Tenths (2/10) of One (1) knot.
 
 (b)                   However, if such variation is more than Two-Tenths (2/10) of One (1) knot, then, the Contract Price shall be decreased by One Hundred and Seventy Five Thousand United States Dollars (US$ 175,000.-) for each successive whole One-Tenth(1/10) of a knot in excess of a deficiency of Two-Tenths (2/10) of a knot (in both cases smaller fractions being disregarded).
 
 (c)                    If the deficiency in the speed upon final sea trial is more than Half(1/2) a knot below the guaranteed speed of the VESSEL, then the BUYER may, at its option, reject the VESSEL and rescind this Contract in accordance with the provisions of Article X hereof, or may accept the VESSEL at a reduction in the Contract Price as above provided for Half(1/2) a knot only, that is, at a total reduction of Five Hundred and Twenty Five Thousand United States Dollars (US$ 525,000.-).
 
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3.                           Fuel Consumption :
 
 (a)                    The Contract Price shall not be affected or changed in case the fuel consumption, as determined by the shop trial as specified in the  SPECIFICATIONS , is not more than Five percent (5%) in excess of the guaranteed fuel consumption specified in Paragraph 2 of Article I.
 
 (b)                   However, in the event that the actual fuel consumption at the shop trial is in excess of Five percent (5%) of the guaranteed fuel consumption, the Contract Price shall be reduced by the sum of One Hundred and Ten Thousand United States Dollars (US$ 110,000.-) for each full one percent(1%) increase in fuel consumption and pro rata for any fraction of one percent(1%) of the Guaranteed Fuel Consumption in excess of the said five percent(5%) up to maximum of eight percent(8%) over the Guaranteed Fuel Consumption.
 
 (c)                    If the deficiency in fuel consumption is more than Eight percent (8%) then the BUYER may at its option rescind this Contract in accordance with the provision of Article X hereof.
 
4.                           Deadweight :
 
(a)                       In the event that the deadweight of the VESSEL as determined in accordance with the SPECIFICATIONS is less than the guaranteed deadweight as specified in Paragraph 2 of Article I, the Contract Price shall be reduced by the sum of One Thousand One Hundred United States Dollars (US$ 1,100.-) for each full metric ton of such deficiency being more than Seven Hundred (700) metric tons, up to a maximum reduction of One Million Two Hundred and Ten Thousand United States Dollars (US$ 1,210,000.-).
 
(b)                      In the event of such deficiency in the deadweight of the VESSEL being One thousand eight hundred (1,800) metric tons or more, then, the BUYER may, at its option, reject the VESSEL and rescind this Contract in accordance with the provisions of Article X hereof or accept the VESSEL at a reduction in the Contract Price as above provided for One Thousand Eight Hundred (1,800) metric tons only, that is, at a total reduction of One Million Two Hundred and Ten Thousand United States Dollars (US$1,210,000.-).
 
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5.                           Early Delivery
 
In the event that the BUILDER believes that the VESSEL can be completed and ready for Delivery on a date earlier than the Contractual Delivery Date, then the BUILDER may give a written notice to the BUYER, no later than six (6) months before the revised date (the “Early Delivery Date”) informing the approximate date on which the VESSEL can be ready for the Delivery. The BUYER shall have the option, but not the obligation, to accept Delivery of the VESSEL on the Early Delivery Date and upon the BUYER’s acceptance thereof, the parties shall discuss the specific amount of the additional payment due to the BUILDER for the accelerated Delivery of the VESSEL on the Early Delivery Date at the delivery stage of the VESSEL and t he compensation payment of the acceleration bonus shall be settled and paid in full with the final delivery instalment concurrently uponwith the actual Delivery and acceptance of the VESSEL by the BUYER. If the Parties fail to reach a mutual agreement on the amount of the Early Delivery bonus, the BUILDER shall be free to deliver the VESSEL on the original Contractual Delivery Date or earlier at its option. The Parties hereto acknowledge that there will be no liquidated damages or other penalty to be imposed on the BUILDER in the event the VESSEL happens to be delivered on any date later than the Early Delivery Date but earlier than the original Contractual Delivery Date.
 
6                              Effect of Rescission :
 
It is expressly understood and agreed by the parties that in any case, if the BUYER rescinds this Contract under this article, the BUYER shall not be entitled to any liquidated damages or any other recourse unless by means of the provisions of Article X hereof.
 
(End of Article)
 
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ARTICLE IV - APPROVAL OF PLANS AND DRAWINGS AND INSPECTION DURING CONSTRUCTION
 
1.                           Approval of Plans and Drawings :
 
The SPECIFICATIONS   shall be used for the VESSEL without any further approval and modification from the BUYER unless otherwise mutually agreed by both parties. Should any changes are required by the BUYER’s request or the application of new rules and regulations (of a mandatory nature) coming into effect after the date of this Contract signing, the BUILDER shall submit such changes to the BUYER for its approval. If approved by the BUYER, such changes shall be applied to the VESSEL with cost adjustment in accordance with Article V of this Contract.
 
2.                           Appointment of BUYER’s Supervisor :
 
The BUYER may send to and maintain at the Shipyard, at the BUYER’s own cost and expense, one supervisor who shall be duly authorized in writing by the BUYER (herein called the “Supervisor”) to act on behalf of the BUYER in connection with the modifications of the SPECIFICATIONS, adjustments of the Contract Price and Delivery Date, approval of the plans and drawings, attendance to the tests and inspections relating to the VESSEL, its machinery, equipment and outfittings, and any other matters for which he is specifically authorized by the BUYER. The Supervisor may appoint his assistant(s) to attend at the Shipyard for the purposes as aforesaid.
 
In the event that assignment, novation or resale occurs under the Article XIII and as a result, BUYER’s Supervisor is changed during the construction of the VESSEL, any and all matters determined by mutual agreement between the BUYER’s Supervisor and the BUILDER prior to the dispatch of a new Supervisor shall be accepted and complied by the new Supervisor. In case two or more Supervisors are dispatched to the Shipyard and authorized, under the BUILDER’s prior consent, to perform the supervision, each of them will form uniform opinions between them to keep the design and the SPECIFICATIONS so as not to adversely affect the CONTRACT PRICE and Delivery of the VESSEL, provided that such change in the Contract Price will be reasonable and proven under the BUILDER’s normal practice. In the event of any additional costs attributable to such dispatch of two or more supervisors due to the reasons including but not
 
19

 
limited to resale, novation, charter or any other occurrence otherwise resulting from the BUYER, such costs shall be borne by the BUYER and the BUYER shall reimburse and hold harmless the BUILDER from any such costs and expenses.
 
3.                           Inspection by the Supervisor :
 
The necessary inspections of the VESSEL, its machinery, equipment and outfittings shall be carried out by the Classification Society, other regulatory bodies and/or an inspection team of the BUILDER throughout the entire period of construction in order to ensure that the construction of the VESSEL is duly performed in accordance with this Contract and the SPECIFICATIONS The Supervisor shall have, during construction of the VESSEL, the right to attend such tests and inspections of the VESSEL, its machinery and equipment within the premises of either the BUILDER or its subcontractors. The BUILDER shall give notice to the Supervisor, in advance of the date and place of such tests and inspections for the convenience of their attendance. Detailed procedures of the inspection and the tests thereof shall be in accordance with the SPECIFICATIONS .
 
The BUILDER may request BUYER’s supervisor to attend the inspection and tests during public holidays and weekends and/or Company holidays in order to keep BUILDER’s construction schedule. BUYER’s supervisor shall fully cooperate with BUILDER and promptly attend such inspection/tests including those for surface preparation and painting work, which are especially vulnerable to weather condition and time interval. However, BUILDER shall keep such inspection and tests to a minimum and only when the inspection and tests affect BUILDER’s construction schedule. The BUILDER’s prior notice of such inspection/test schedule shall be informed to the BUYER’s supervisor three(3) working days in advance as a minimum
 
The Supervisor shall be entitled to request copies of all test results and trials as soon as required for the performance of his duties.
 
The Supervisor shall notify the BUILDER of deficiencies in the construction of the VESSEL or materials. The BUILDER should examine the deficiency and rectify.
 
If any of the BUYER’s supervisors discover any construction, material or
 
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workmanship which is not deemed to conform to the requirements of this Contract and/or the SPECIFICATIONS , the BUYER’s supervisors shall promptly give the BUILDER a notice in writing that such alleged non-conformity exists. Upon receipt of such notice from the BUYER’s supervisor, the BUILDER shall correct such non-conformity, if the BUILDER agrees to his view. Any disagreement shall be resolved in accordance with Paragraph 1 of Article XII.
 
4.                           Facilities :
 
The BUILDER shall furnish the Supervisor and his assistant(s) with adequate office space and such other reasonable facilities according to the BUILDER’s practice at or in the immediate vicinity of the Shipyard as may be necessary to enable them to effectively carry out their duties. The BUYER shall pay for all such facilities other than office space at the BUILDER’s normal rate of charge.
 
5.                           Liability of BUILDER :
 
The Supervisor and his assistant(s) shall at all times be deemed to be the employees of the BUYER and not of the BUILDER. The BUILDER shall be under no liability whatsoever to the BUYER, the Supervisor or his assistant(s) for personal injuries, including death, suffered during the time when he or they are on the VESSEL, or within the premises of either the BUILDER or its subcontractors, or are otherwise engaged in and about the construction of the VESSEL, unless, however, such personal injuries, including death, were caused by a gross negligence of the BUILDER, or of any of its employees or agents or subcontractors.
 
Nor shall the BUILDER be under any liability whatsoever to the BUYER, the Supervisor or his assistant(s) for damage to, or loss or destruction of property in Korea of the BUYER or of the Supervisor or his assistant(s), unless such damage, loss or destruction were caused by a gross negligence of the BUILDER or of any of its employees or agents or subcontractors.
 
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6.                           Responsibility of BUYER :
 
The BUYER shall undertake and assure that the Supervisor shall carry out his duties hereunder in accordance with the normal shipbuilding practice of the BUILDER and in such a way so as to avoid any unnecessary increase in building cost, delay in the construction of the VESSEL, and/or any disturbance in the construction schedule of the BUILDER.
 
The BUILDER has the right to request the BUYER to replace the Supervisor who is deemed unsuitable and unsatisfactory for the proper progress of the VESSEL’s construction. The BUYER shall investigate the situation by sending its representative(s) to the Shipyard if necessary, and if the BUYER considers that such BUILDER’s request is justified, the BUYER shall effect such replacement as soon as conveniently arrangeable.
 
(End of Article)
 
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ARTICLE V - MODIFICATIONS, CHANGES AND EXTRAS
 
1.                           How Effected :
 
Any modifications and/or changes in the SPECIFICATIONS shall be made by written agreement of the parties hereto provided, however, that any modifications and/or changes requested by the BUYER or an accumulation of such modifications and/or changes will not adversely affect the BUILDER’s planning or programme in relation to the BUILDER’s other commitments and if the BUYER shall assent to adjustment of the Contract Price, time for delivery of the VESSEL and other terms and conditions of this Contract as hereinafter provided. The BUILDER hereby agrees to exert its best efforts to accommodate such reasonable request by the BUYER so that the said changes and/or modifications may be made at a reasonable cost and within the shortest period of time which is reasonably possible.
 
Any such agreement for modifications and/or changes shall include an agreement as to the increase or decrease, if any, in the Contract Price of the VESSEL together with an agreement as to any extension or reduction in the time of delivery, or any other alterations in this Contract or the SPECIFICATIONS occasioned by such modifications and/or changes.
 
The aforementioned agreement to modify and/or change the SPECIFICATIONS may be effected by an exchange of letters signed by the authorized representatives of the parties hereto, or telefax confirmed in writing, manifesting such agreement. Such letters and confirmed message exchanged by the parties hereto pursuant to the foregoing shall constitute an amendment of the SPECIFICATIONS , and such letters and message shall be incorporated into this Contract and made a part hereof.
 
The BUILDER may make minor changes to the SPECIFICATIONS , if found necessary for introduction of improved production methods or otherwise, provided that the BUILDER shall first obtain the BUYER’s approval which shall not be unreasonably withheld.
 
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2.               Changes in Rules of Classification Society, Regulations, etc.:
 
If, after the date of signing this Contract, any requirements as to classification, or as to the rules and regulations to which the construction of the VESSEL is required to conform in accordance with the provisions of Article I. (3), are altered or changed by the Classification Society or regulatory bodies authorized to make such alterations or changes, either of the parties hereto upon receipt of information thereof, shall transmit such information in full to the other party in writing, thereupon within Twenty-one(21) days after receipt of the said notice from the other party, the BUYER shall instruct the BUILDER in writing if such alterations or changes shall be made in the VESSEL or not, in the BUYER’s sole discretion.
 
(a)           If such alterations or changes are compulsory for the construction of VESSEL, either of the parties hereto, upon receipt of such information from Classification Society or such other regulatory bodies, shall promptly transmit the same to the other in writing, and the BUILDER shall thereupon incorporate such alterations or changes into the construction of the VESSEL, provided that the BUYER shall first agree to reasonable and proven adjustments required by the BUILDER in the Contract Price, the Delivery Date and other terms and conditions of this Contract and the SPECIFICATIONS occasioned by or resulting from such alterations or changes.
 
(b)   If such alterations or changes are not compulsory for the construction of the VESSEL, and the BUYER desires to incorporate such alterations or changes into the construction of the VESSEL, then, the BUYER shall notify the BUILDER of such intention. The BUILDER may accept such alterations or changes, provided that such alterations or changes will not, in the judgement of the BUILDER, adversely affect the BUILDER’s planning or program in relation to the BUILDER’s other commitments, and provided, further, that the BUYER shall first agree to reasonable and proven adjustments required by the BUILDER in the Contract Price, the Delivery Date and other terms and conditions of this Contract and the SPECIFICATIONS occasioned by or resulting from such alterations or changes.
 
In the event of a disagreement on price and delivery, and in the event that such alterations or changes are compulsory for the construction of VESSEL, then the BUILDER shall proceed with the required alterations and the dispute related to the above shall be resolved in accordance with the provisions of Article XII.
 
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Such agreement by the BUYER shall be effected in the same manner as provided in Paragraph 1 of this Article for modifications and/or changes of the SPECIFICATIONS .
 
3.                           Substitution of Materials :
 
In the event that any of the materials required by the SPECIFICATIONS or otherwise under this Contract for the construction of the VESSEL can not be procured in time to effect delivery of the VESSEL, or are in short supply, the BUILDER may, provided the BUYER so agrees in writing, supply other materials and equipment of the best available and like quality, capable of meeting the requirements of the Classification Society and of the rules, regulations, requirements and recommendations with which the construction of the VESSEL must comply. Any agreement as to such substitution of materials shall be effected in the manner as provided in Paragraph 1 of this Article, and shall, likewise, include possible decrease or increase in the Contract Price and other terms and conditions of this Contract affected by such substitution.
 
(End of Article)
 
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ARTICLE VI - TRIALS AND ACCEPTANCE
 
Since the VESSEL is the repeat and series of BUILDER’s Hull Nos. 1639 and 1640, some sea trial items may be deleted subject to mutual agreement between the BUYER and the BUILDER
 
1.                           Notice :
 
The sea trial shall start when the VESSEL is reasonably completed according to the SPECIFICATIONS .
 
The BUILDER shall give the BUYER at least Twenty (20) days estimated prior notice and Seven(7) days confirming prior notice by telefax of the time and place of the trial run of the VESSEL, and the BUYER shall promptly acknowledge receipt of such notice. The BUYER shall have its representatives on board the VESSEL to witness such trial run. Failure in attendance of the BUYER’s representative at the trial run of the VESSEL for any reason whatsoever after due notice to the BUYER as above provided shall be deemed to be a waiver by the BUYER of its right to have its representative on board the VESSEL at the trial run, and the BUILDER may conduct the trial run without attendance of the BUYER’s representative, and in such case the BUYER shall be obligated to accept the VESSEL on the basis of a certificate of the BUILDER that the VESSEL, upon trial run, is found to conform to this Contract and the SPECIFICATIONS s.
 
2.                           Weather Condition :
 
The trial run shall be carried out under the weather condition which is deemed favourable enough by the judgement of the BUILDER. In the event of unfavourable weather on the date specified for the trial run, the same shall take place on the first available day thereafter that the weather condition permits. It is agreed that, if during the trial run of the VESSEL, the weather should suddenly become so unfavourable that orderly conduct of the trial run can no longer be continued, the trial run shall be discontinued and postponed until the first favourable day next following, unless the BUYER shall assent in writing to acceptance of the VESSEL on the basis of the trial run already made before such discontinuance has occurred. Any delay of trial run caused by such unfavourable weather condition shall operate to postpone the Delivery Date by the period of the delay involved and such delay shall be deemed as permissible delay in the delivery of the VESSEL.
 
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3.                     How Conducted :
 
 (a)                    The VESSEL shall run the official trial trip in the manner as specified in the SPECIFICATIONS .
 
  (b)                All expenses in connection with the trial run are to be for account of the BUILDER and the BUILDER shall provide, at its own expense, the necessary crew to comply with conditions of safe navigation, fuel oil, fresh water and other consumable stores necessary, the BUYER shall supply at its own expense lubricating oils and greases.
 
4.                           Method of Acceptance or Rejection :
 
 (a)                    Upon completion of the trial run, the BUILDER shall give the BUYER a notice by telefax of completion of the trial run, as and if the BUILDER considers that the results of trial run indicate conformity of the VESSEL to this Contract and the SPECIFICATIONS . The BUYER shall, within Five (5)days after receipt of such notice from the BUILDER, notify the BUILDER by telefax of its acceptance or rejection of the VESSEL’s conformity to this Contract and the SPECIFICATIONS .
 
 (b)                   However, should the result of the trial run show that the VESSEL, or any part or equipment thereof, does not conform to the requirements of this Contract and/or the SPECIFICATIONS , or if the BUILDER is in agreement to non-conformity as specified in the BUYER’s notice of rejection, then, the BUILDER shall take necessary steps to correct such non-conformity.
 
Upon completion of correction of such non-conformity, and re-test or trial if necessary, the BUILDER shall give the BUYER a notice thereof by telefax.
 
The BUYER shall, within Three (3) days after receipt of such notice from the BUILDER, notify the BUILDER of its acceptance or rejection of the VESSEL.
 
(c)               In any event that the BUYER rejects the VESSEL, the BUYER shall indicate in detail in its notice of rejection in what respect the VESSEL, or any part or equipment thereof does not conform to this Contract and/or the SPECIFICATIONS .
 
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 (d)                   In the event that the BUYER fails to notify the BUILDER by telefax of the acceptance of or the rejection together with the reason therefor of the VESSEL within the period as provided in the above Sub-paragraph (a) or (b), the BUYER shall be deemed to have accepted the VESSEL.
 
 (e)                    Any dispute between the BUILDER and the BUYER as to the conformity or non-conformity of the VESSEL to the requirements of this Contract and/or the SPECIFICATIONS shall be submitted for final decision in accordance with Article XII hereof.
 
5.                           Effect of Acceptance :
 
Acceptance of the VESSEL as above provided shall be final and binding so far as conformity of the VESSEL to this Contract and the SPECIFICATIONS is concerned and shall preclude the BUYER from refusing formal delivery of the VESSEL as hereinafter provided, if the BUILDER complies with all other procedural requirements for delivery as provided in Article VII hereof. However, the BUYER’s acceptance of the VESSEL shall not affect the BUYER’s right under Article IX hereof.
 
The BUYER may accept the VESSEL under protest with outstanding defects to be dealt under the guarantee provisions or made subject of a claim for damages.
 
6.                           Disposition of Surplus Consumable Stores
 
Any fuel oil or other furnished and paid for by the BUILDER for trial runs remaining on board the VESSEL, at the time of acceptance of the VESSEL by the BUYER, shall be bought by the BUYER from the BUILDER at the BUILDER’s purchase price for such supply in Korea and the payment by the BUYER thereof shall be made at the time of delivery of the VESSEL.
 
The BUILDER shall pay the BUYER at the time of delivery of the VESSEL an amount for the consumed quantity until delivery of any lubricating oil and greases which were furnished and paid for by the BUYER at the BUYER’s purchase price thereof. For avoidance of doubt, the practice of this Article VI. 6 shall follow the practice in construction of the BUILDER’s Hull Nos. 1639 and 1640.
 
(End of Article)
 
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ARTICLE VII - DELIVERY
 
1.                           Time and Place :
 
The VESSEL shall be delivered by the BUILDER to the BUYER at the Shipyard on or before July 31, 2008, except that, in the event of delays in the construction of the VESSEL or any performance required under this Contract due to causes which under the terms of this Contract permit postponement of the date for delivery, the aforementioned date for delivery of the VESSEL shall be postponed accordingly.
 
The aforementioned date, or such later date to which the requirement of delivery is postponed pursuant to such terms, is herein called the “Delivery Date”.
 
2.                           When and How Effected :
 
Provided that the BUILDER and the BUYER shall have fulfilled all of their obligations stipulated under this Contract, the delivery of the VESSEL shall be effected forthwith by the concurrent delivery by each of the parties hereto to the other of the PROTOCOL OF DELIVERY AND ACCEPTANCE, acknowledging delivery of the VESSEL by the BUILDER and acceptance thereof by the BUYER.
 
3.                           Documents to be delivered to BUYER :
 
Upon delivery and acceptance of the VESSEL, the BUILDER shall deliver to the BUYER the following documents, which shall accompany the PROTOCOL OF DELIVERY AND ACCEPTANCE :
 
 (a)                    PROTOCOL OF TRIALS of the VESSEL made pursuant to the SPECIFICATIONS .
 
 (b)                   PROTOCOL OF INVENTORY of the equipment of the VESSEL, including spare parts and the like, as specified in the SPECIFICATIONS .
 
 (c)                    PROTOCOL OF STORES OF CONSUMABLE NATURE referred to under Paragraph 6 of Article VI hereof.
 
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 (d)                   ALL CERTIFICATES including the BUILDERS’s CERTIFICATE required to be furnished upon delivery of the VESSEL pursuant to this Contract and the SPECIFICATIONS , necessary for the registration of the VESSEL and BUYER’s trading requirements.
 
It is agreed that if, through no fault on the part of the BUILDER, the Classifications certificates and/or other certificates are not available at the time of delivery of the VESSEL, provisional certificates shall be accepted by the BUYER, provided that the BUILDER shall furnish the BUYER with the formal certificates as promptly as possible after such certificates have been issued.
 
Application and certificate for statutory inspections for the registry of the VESSEL shall be arranged by the BUYER at its expense.
 
 (e)                    DECLARATION OF WARRANTY of the BUILDER that the VESSEL is delivered to the BUYER free and clear of any liens, charges, claims, mortgages, or other encumbrances upon the BUYER’s title thereto, and in particular that the VESSEL is absolutely free of all burdens in the nature of imposts, taxes or charges imposed by Korean Governmental Authorities, as well as of all liabilities of the BUILDER to its subcontractors, employees and crew, and of the liabilities arising from the operation of the VESSEL in trial runs, or otherwise, prior to delivery.
 
 (f)                      DRAWING AND PLANS pertaining to the VESSEL as stipulated in the      SPECIFICATIONS .
 
 (g)                   COMMERCIAL INVOICE.
 
4.                           Tender of VESSEL :
 
If the BUYER fails to take delivery of the VESSEL after completion thereof according to this Contract and the SPECIFICATIONS without any justifiable reason, the BUILDER shall have the right to tender delivery of the VESSEL after compliance with all procedural requirements as above provided.
 
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5.                           Title and Risk :
 
Title to and risk of loss of the VESSEL shall pass to the BUYER only upon the delivery and acceptance thereof having been completed as stated above; it being expressly understood that, until such delivery is effected, title to and risk of loss of the VESSEL and her equipment shall be in the BUILDER.
 
6.                           Removal of VESSEL :
 
The BUYER shall take possession of the VESSEL immediately upon delivery and acceptance thereof and shall remove the VESSEL from the premises of the Shipyard within Three (3) days after delivery and acceptance thereof is effected.
 
If the BUYER shall not remove the VESSEL from the premises of the Shipyard within the aforesaid Three (3) days, in such event, the BUYER shall pay to the BUILDER the reasonable mooring charges of the VESSEL.
 
(End of Article)
 
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ARTICLE VIII - DELAYS AND EXTENSION OF TIME FOR DELIVERY
(FORCE MAJEURE)
 
1.                           Causes of Delay (Force Majeure) :
 
If, at any time either the construction or delivery of the VESSEL or any performance required hereunder as a prerequisite to the delivery thereof is delayed by any of the following events; namely war, acts of state or government, blockade, revolution, insurrections, mobilization, civil commotion, riots, national strikes, sabotage, Acts of God or the public enemy, plague or other epidemics, quarantines, prolonged failure of electric current, freight embargoes, or defects in major forgings or castings or delay in BUYER’s supplied articles, if any, or defects in materials, machinery or equipment which could not have been detected by the BUILDER using reasonable care, or earthquakes, tidal waves, typhoons, hurricanes, prolonged or unusually severe weather conditions or by destruction of the premises or works of the BUILDER or its sub-contractors, or of the VESSEL, or any part thereof, by fire, landslides, flood, lightning, explosion, or other causes beyond the control of the BUILDER, or its sub-contractors, as the case may be, or for any other causes which, under the terms of this Contract, authorize and permit extension of the time for delivery of the VESSEL, then, in the event of delays due to the happening of any of the aforementioned contingencies, the Delivery Date of the VESSEL under this Contract shall be extended for a period of time which shall not exceed the total accumulated time of all such delays.
 
The enumerated contingencies shall not give rise to an extension of the delivery date unless :
 
i)                              The occurrence could not reasonably have been foreseen by the BUILDER at the date of signing of the Contract.
 
ii)                           The BUILDER shall have exercised reasonable due diligence to avoid or minimize the occurrence of such event.
 
iii)                        The BUILDER shall have used reasonable efforts to mitigate the duration and effects of such events of the construction schedule.
 
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2.                           Notice of Delay :
 
Within Fourteen (14) days after the date of occurrence of any cause of delay, on account of which the BUILDER claims that it is entitled under this Contract to a postponement of the Delivery Date, the BUILDER shall notify the BUYER in writing or by telefax confirmed in writing of the date when such cause of delay occurred. Likewise, within Fourteen (14) days after the date of ending of such cause of delay, the BUILDER shall notify the BUYER in writing or by telefax confirmed in writing of the date when such cause of delay ended.
 
The BUILDER shall also notify the BUYER of the period, by which the Delivery Date is postponed by reason of such cause of delay, with all reasonable dispatch after it has been determined. If the BUILDER does not give the timely advice as above, the BUILDER shall lose the right to claim such delays as permissible delay.
 
Failure of the BUYER to acknowledge to the BUILDER’s claim for postponement of the Delivery Date within Fourteen (14) days after receipt by the BUYER of such notice of claim shall be deemed to be a waiver by the BUYER of its right to object to such postponement of the Delivery Date.
 
3.                           Definition of Permissible Delay :
 
Delays on account of such causes as specified in Paragraph 1 of this Article and any other delay of a nature which under the terms of this Contract permits postponement of the Delivery Date shall be understood to be permissible delays and are to be distinguished from unauthorized delays on account of which the Contract Price is subject to adjustment as provided for in Article III hereof.
 
4.                           Right to Rescind for Excessive Delay :
 
If the total accumulated time of all delays whether permissible or not exceeds One Hundred and Eighty (180) days, then, in such event, the BUYER may rescind this Contract in accordance with the provisions of Article X hereof.
 
The accumulated time as above shall exclude the time lost due to BUYER’s Default or delays in the BUYER’s supplies. The BUILDER may, at any time after the accumulated time of the aforementioned delays justifying rescission by the BUYER, demand in writing that the BUYER shall make an election proposing a new delivery date, in which case the BUYER shall, within Fourteen (14) days
 
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after such demand is received by the BUYER, either notify the BUILDER of its intention to rescind this Contract, or consent to a postponement of the Delivery Date to an agreed specific future date; it being understood and agreed by the parties hereto that, if any further delay occurs on account of causes justifying rescission as specified in this Article, the BUYER shall have the same right of rescission upon the same terms as herein above provided.
 
(End of Article)
 
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ARTICLE IX - WARRANTY OF QUALITY
 
1.                           Guarantee :
 
The BUILDER, for the period of Twelve (12) months after delivery of the VESSEL (hereinafter called “Guarantee Period”), guarantees the VESSEL and her engine, including all parts and equipment manufactured, furnished or installed by the BUILDER under this Contract, and including the machinery, equipment and appurtenances thereof, under the Contract but excluding any item which is supplied or designated by the BUYER or by any other bodies on behalf of the BUYER, against all defects discovered within the Guarantee Period which are due to improper design, defective material, and/or poor workmanship or negligent or other improper acts or omissions on the part of the BUILDER or its subcontractors (hereinafter called the “Defect” or “Defects”) and are not a result of accident, ordinary wear and tear, misuse, mismanagement, negligent or other improper acts or omissions or neglect on the part of the BUYER, its employee or agents.
 
Upon rectification of an item claimed under this guarantee, this item shall be covered for further Twelve (12) months under the same terms and conditions. However, this is limited to a maximum of Twenty Four (24) months from delivery date.
 
2.                           Notice of Defects :
 
The BUYER shall notify the BUILDER in writing, or by telefax of any defect for which claim is made under this guarantee, as promptly as possible after discovery thereof. The BUYER’s notice shall describe in detail the nature, cause if known and extent of the Defects.
 
The BUILDER shall have no obligation for any Defect discovered prior to the expiry date of the Guarantee Period, unless notice of such Defect is received by the BUILDER not later than Twenty (20) days after such expiry date.
 
3.                           Remedy of Defects :
 
(a)                       The BUILDER shall remedy, at its expense, any Defect against which the VESSEL is guaranteed under this Article, by making all necessary repairs or replacements at the Shipyard.
 
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(b)                      However, if the BUYER should determine that it is commercially or operationally impracticable to bring the VESSEL to the Shipyard, the BUYER may cause the necessary repairs or replacements to be made elsewhere which is deemed suitable for the purpose, provided that, in such event, the BUILDER may forward or supply replacement parts or materials to the BUYER’s agent to be designated by the BUYER in writing , unless forwarding or supplying thereof the VESSEL would impair or delay the operation of working schedule of the VESSEL. In the event that the BUYER proposes to cause the necessary repairs or replacements for the VESSEL to be made at any other shipyard or works than the Shipyard, the BUYER shall first, but in all events as soon as possible, give the BUILDER a notice in writing or by telefax confirmed in writing of the time and place when and where such repairs will be made, and if the VESSEL is not thereby delayed, or her operation or working schedule is not thereby impaired, the BUILDER shall have the right to verify by its own representative(s) the nature, cause and extent of the Defects complained of. The BUILDER shall, in such case, promptly advise the BUYER by telefax, after such examination has been completed, of its acceptance or rejection of the Defects as ones that are covered by the guarantee herein provided. Upon the BUILDER’s acceptance of the Defects as justifying remedy under this Article, or upon award of the arbitration so determining, the BUILDER shall pay to the BUYER for such repairs or replacements justified reasonable and proven actual cost of repairs or replacements.
 
(c)                       The reimbursement of the costs incurred in relation to guarantee works shall be paid in a lumpsum after expiration of the guarantee period.
 
(d)                      In any case, the VESSEL shall be taken, at the BUYER’s cost and responsibility, to the place elected, ready in all respects for such repairs or replacement.
 
(e)                       Any dispute under this Article shall be referred to arbitration in accordance with the provisions of Article XII hereof.
 
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4.                           Extent of BUILDER’s Responsibility :
 
 (a)                    The BUILDER shall have no responsibility or liability for any other defect whatsoever in the VESSEL than the Defects specified in Paragraph 1 of this Article. Nor the BUILDER shall in any circumstance be responsible or liable for any consequential or special loss, damage or expense including but not limited to loss of time, loss of profit of earning or demurrage directly or indirectly occasioned to the BUYER by reason of the Defects specified in Paragraph 1 of this Article or due to repairs or other works done to the VESSEL to remedy such Defects.
 
 (b)                   The BUILDER shall not be responsible for any defect in any part of the VESSEL which may, subsequently to delivery of the VESSEL, have been replaced or repaired in any way by any other contractor unless the BUILDER has not objected the contractor to perform guarantee repairs, or for any defect which have been caused or aggravated by omission or improper use and maintenance of the VESSEL on the part of the BUYER, its servants or agents or by ordinary wear and tear or by any other cause beyond the control of the BUILDER.
 
 (c)                    The guarantee contained as hereinabove in this Article replaces and excludes any other liability, guarantee, warranty and/or condition imposed or implied by the law, customary, statutory or otherwise, by reason of the construction and sale of the VESSEL by the BUILDER for and to the BUYER.
 
5.                           Guarantee Engineer :
 
The BUILDER shall have the right to appoint a Guarantee Engineer to serve on the VESSEL as its representative for a period of Three (3) months from the date the VESSEL is delivered. However, if the BUYER and the BUILDER shall deem it necessary to keep the Guarantee Engineer on the VESSEL for a longer period, then he shall remain on board the VESSEL after the said Three (3) months, but not longer than Six (6) months from the delivery of the VESSEL.
 
The BUYER, and its employees, shall give such Guarantee Engineer full cooperation in carrying out his duties as the representative of the BUILDER on board the VESSEL.
 
The Guarantee Engineer shall sign BUYER’s Indemnity Forms and shall at all times deemed to be an employee of the BUILDER.
 
The BUYER shall accord the Guarantee Engineer treatment comparable to the
 
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VESSEL’s Chief Engineer, and shall provide board and lodging at no cost to the BUILDER and/or the Guarantee Engineer.
 
While the Guarantee Engineer is on board the VESSEL, the BUYER shall pay to the BUILDER the sum of Seven Thousand United States Dollars (US$ 7,000.-) per month as a compensation for a part of cost and charges to be borne by the BUILDER in connection with Guarantee Engineer and also shall pay the expenses of his repatriation to Seoul, Korea by air upon termination of his service, the expenses of his communication with the BUILDER incurred in performing his duties and expenses, if any, of his medical and hospital care in the VESSEL’s hospital.
 
Pertaining to the detailed particulars of this Paragraph, an agreement will be made according to this effect between the parties hereto upon delivery of the VESSEL.
 
(End of Article)
 
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ARTICLE X - RESCISSION BY BUYER
 
1.                           Notice :
 
The payments made by the BUYER prior to delivery of the VESSEL shall be in the nature of advances to the BUILDER, and in the event that the VESSEL after sea trial is rejected by the BUYER or the VESSEL is cancelled by the BUYER in accordance with the terms of this Contract under and pursuant to any of the provisions of this Contract specifically permitting the BUYER to do so and in the event that the Contract is rescinded by the BUYER under and pursuant to any of the provisions of this Contract specially permitting the BUYER, then the BUYER shall notify the BUILDER in writing or by telefax confirmed in writing, and such rescission shall be effective as of the date when notice thereof is received by the BUILDER.
 
2.                           Refundment by BUILDER :
 
In case the BUILDER receives the notice stipulated in Paragraph 1 of this Article, the BUILDER shall promptly refund to the BUYER the full amount of all sums paid by the BUYER to the BUILDER on account of the VESSEL together with the interest thereon, unless the BUILDER proceeds to the arbitration under the provisions of Article XII hereof.
 
In such event, the BUILDER shall pay the BUYER interest at the rate of Six percent (6.0%)per annum on the amount required herein to be refunded to the BUYER, computed from the dates following on which such sums were paid by the BUYER to the BUILDER to the date of remittance by transfer of such refund to the BUYER by the BUILDER.
 
As security for refund of instalments prior to delivery of the VESSEL, the BUILDER shall furnish the BUYER within Fourteen (14) calendar days after the Contract signing with a letter of guarantee covering the amount of such pre-delivery instalments in favour of the BUYER. Such letter of guarantee shall have substantially the same form and substance as Exhibit ”A” annexed hereto.
 
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3.                           Discharge of Obligations :
 
Upon such refund by the BUILDER to the BUYER, all obligations, duties and liabilities of each of the parties hereto to the other under this Contract shall be forthwith completely discharged .
 
(End of Article)
 
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ARTICLE XI - BUYER’S DEFAULT
 
1.                           Definition of Default :
 
The BUYER shall be deemed to be in default of its performance of obligations under this Contract in the following cases :
 
(a)                       If the first, second, third, fourth or fifth instalment are not paid by the BUYER to the BUILDER within Five (5) banking days after such instalment becomes due and payable as provided in Article II hereof;
 
or
 
(b)                      If the Delivery instalment is not paid by the BUYER to the BUILDER concurrently with the delivery of the VESSEL as provided in Article II hereof;
 
or
 
(c)                       If the BUYER, when the VESSEL is duly tendered for delivery by the BUILDER:
 
i)                            fails to take delivery of the VESSEL within Five (5) banking days from tendered date
 
ii)                           having initiated the arbitration procedure the BUYER does not accept delivery within Seven (7) days of an arbitration award which is not appealed.
 
2.                           Effect of Default on or before Delivery of VESSEL :
 
 (a)                    Should the BUYER make default in payment of any instalment of the Contract Price on or before delivery of the VESSEL, the BUYER shall pay the instalment(s) in default plus accrued interest thereon at the rate of Six percent (6.0%) per annum computed from the due date of such instalment to the date when the BUILDER receives the payment, and, for the purpose of Paragraph 1 of Article VII hereof the Delivery Date of the VESSEL shall be automatically extended by the period of continuance of such default by the BUYER. In any event of default by the BUYER, the BUYER shall also pay direct charges and expenses incurred by the BUILDER in consequence of such default after mutual agreement.
 
 (b)                If any default by the BUYER continues for a period of Ten (10) days after the BUILDER’s notification, the BUILDER may, at its option, rescind this Contract by giving notice of such effect to the BUYER by telefax confirmed in writing.
 
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Upon dispatch by the BUILDER of such notice of rescission, this Contract shall be forthwith rescinded and terminated. In the event of such rescission of this Contract, the BUILDER shall be entitled to retain any instalment or instalments already paid by the BUYER to the BUILDER on account of this Contract and the BUYER’s Supplies, if any.
 
3.                           Disposal of VESSEL :
 
 (a)                    In the event that this Contract is rescinded by the BUILDER under the provisions of Paragraph 2(b) of this Article, the BUILDER may, at its sole discretion, either complete the VESSEL and sell the same, or sell the VESSEL in its incomplete state, free of any right or claim of the BUYER. Such sale of the VESSEL by the BUILDER shall be either by public auction or private contract at the BUILDER’s sole discretion and on such terms and conditions as the BUILDER shall deem fit.
 
 (b)                   In the event of such sale of the VESSEL, the amount of the sale received by the BUILDER shall be applied firstly to all expenses attending such sale or otherwise incurred by the BUILDER as a result of the BUYER’s default, secondly to the payment of all costs and expenses of construction of the VESSEL incurred by the BUILDER less BUYER’s Supplies and the instalments already paid by the BUYER and the compensation to the BUILDER for a reasonable loss of profit due to rescission of this Contract, and finally to the repayment to the BUYER without interest, if any balance is obtained.
 
 (c)                    If the proceeds of sale are insufficient to pay such total costs and loss of profit as aforesaid, the BUYER shall promptly pay the deficiency to the BUILDER upon request.
 
(End of Article)
 
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ARTICLE XII - ARBITRATION
 
1.                           Decision by the Classification Society :
 
If any dispute arises between the parties hereto in regard to the design and/or construction of the VESSEL, its machinery and equipment, and/or in respect of the materials and/or workmanship thereof and/or thereon, and/or in respect of interpretations of this Contract or the SPECIFICATIONS , the parties may by mutual agreement refer the dispute to the Classification Society or to such other expert as may be mutually agreed between the parties hereto, and whose decision shall be final, conclusive and binding upon the parties hereto.
 
2.                           Proceedings of Arbitration :
 
In the event that the parties hereto do not agree to settle a dispute according to Paragraph 1 of this Article and/or in the event of any other dispute of any kind whatsoever between the parties and relating to this Contract or its rescission or any stipulation herein, such dispute shall be submitted to arbitration in London. Each party shall appoint an arbitrator and in the event that they cannot agree, the two arbitrators so appointed shall appoint an Umpire.
 
If the two arbitrators are unable to agree upon an Umpire within Twenty(20) days after appointment of the second arbitrator, either of the said two arbitrators may apply to the President for the time being of the London Maritime Arbitrators Association to appoint the third arbitrator, and the three arbitrators shall constitute the board of arbitration.
 
Such arbitration shall be in accordance with and subject to the provisions of the English Arbitration Act 1996 or any statutory modification or re-enactment thereof for the time being in force.
 
The Arbitration shall be conducted in accordance with the rules in force of the London Maritime Arbitrators Association.
 
Either party may demand arbitration of any such dispute by giving notice to the other party. Any demand for arbitration by either of the parties hereto shall state the name of the arbitrator appointed by such party and shall also state specifically the question or questions as to which such party is demanding arbitration.
 
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Within Fourteen(14) days after receipt of notice of such demand for arbitration, the other party shall in turn appoint a second arbitrator and give notice in writing of such appointment to the party demanding arbitration. If a party fails to appoint an arbitrator as aforementioned within Fourteen(14) days following receipt of notice of demand for arbitration by the other party, the party failing to appoint an arbitrator shall be deemed to have accepted and appointed, as its own arbitrator, the arbitrator appointed by the party demanding arbitration and the arbitration shall proceed before this sole arbitrator who alone in such event shall constitute the Arbitration Board.
 
The award of the arbitrators and/or Umpire shall be final and binding on both   parties.
 
3.                           Notice of Award :
 
The award shall immediately be given to the BUYER and the BUILDER by telefax.
 
4.                           Expenses :
 
The Arbitration Board shall determine which party shall bear the expenses of the arbitration or the portion of such expenses which each party shall bear.
 
5.                           Entry in Court :
 
In case of failure by either party to respect the award of the arbitration, the judgement may be entered in any proper court having jurisdiction thereof.
 
6.                           Alteration of Delivery Date :
 
In the event of reference to arbitration of any dispute arising out of matters occurring prior to delivery of the VESSEL, the award may include any postponement of the Delivery Date which the Arbitration Board may deem appropriate.
 
(End of Article)
 
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ARTICLE XIII - SUCCESSOR AND ASSIGNS
 
Neither of the parties hereto shall assign this Contract to any other individual or company save as provided hereto. unless prior consent of the other party is given in writing. Should circumstances permit with or without alteration of the terms and conditions of this Contract, such consent shall not be unreasonably withheld by either party.
 
The BUYER is hereby allowed to assign the Contract for the purposes of financing.
 
The BUYER is further allowed to nominate a company controlled by the BUYER to take over the Contract.
 
The BUILDER shall fully cooperate in case the BUYER requests UK Tax lease financing arrangements.
 
In the event of any assignment pursuant to the terms of this Contract, the assignee shall succeed to all of the rights and obligations of the assignor under this Contract and the assignor shall remain responsible for the fulfillment of this Contract.
 
In the event of the assignment from the BUYER to any other individual or company the BUILDER shall be entitled to request a Performance Guarantee from the BUYER having same form and contents as Exhibit ”C” annexed hereto.
 
The BUYER and the BUILDER understand and acknowledge that the VESSEL shall be built and constructed as a repeat and series vessel of the BUILDER’s Hull Nos. 1639 and 1640 as stipulated in this Contract. Thus, i n the event of a resale, assignment and novation of the VESSEL, any and all matters determined by mutual agreement between the BUYER and the BUILDER prior to the resale, assignment and novation of the VESSEL shall be accepted and complied by the New BUYER (i.e., assignee). If the New BUYER or its supervisor makes unreasonable requests that may have a significant impact on the delivery schedule of the VESSEL and/or costs of construction (including, without limitation to, request for fundamental change of ship type or excessive revision of design specifications, etc.), the BUILDER shall be entitled to refuse these requests. The BUYER shall notify the above to the New BUYER before assignment or novation and the New BUYER will have to accept any additional cost related to the new supervision.
 
(End of Article)
 
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ARTICLE XIV - TAXES AND DUTIES
 
1.                           Taxes and Duties Incurred in Korea :
 
The BUILDER shall bear and pay all taxes, duties, stamps and fees incurred in Korea in connection with execution and/or performance of this Contract as the BUILDER, except for any taxes and duties imposed in Korea upon the BUYER’s Supplies.
 
2.                           Taxes and Duties Incurred outside Korea :
 
The BUILDER shall bear and pay all taxes, duties, stamps and fees incurred outside Korea in connection with execution and/or performance of this Contract including guarantee matter as the BUILDER.
 
The BUYER shall bear and pay all taxes, duties, stamps and fees incurred outside Korea in connection with execution and/or performance of this Contract as the BUYER.
 
(End of Article)
 
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ARTICLE XV - PATENTS, TRADEMARKS, COPYRIGHTS, ETC.
 
1.                           Patents, Trademarks and Copyrights :
 
Machinery and equipment of the VESSEL may bear the patent number trademarks or trade names of the manufacturers. The BUILDER shall defend and hold harmless the BUYER from patent liability or claims of patent infringement of any nature or kind, including costs and expenses for, or on account of any patented or patentable invention made or used in the performance of this Contract and also including costs and expenses of litigation, if any.
 
Nothing contained herein shall be construed as transferring any patent or trademark rights or copyrights in equipment covered by this Contract, and all such rights are hereby expressly reserved to the true and lawful owners thereof.
 
The BUILDER’s warranty hereunder does not extend to the BUYER’s Supplies.
 
2.                           General Plans, Specifications and Working Drawings :
 
The BUILDER retains all rights with respect to the SPECIFICATIONS , and plans and working drawings, technical descriptions, calculations, test results and other data, information and documents concerning the design and construction of the VESSEL and the BUYER undertakes therefore not to disclose the same or divulge any information contained therein to any third parties, without the prior written consent of the BUILDER, except where it is necessary for usual operation, repair , registration, classification, chartering, sale and maintenance of the VESSEL.
 
(End of Article)
 
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ARTICLE XVI - BUYER’S SUPPLIES
 
1.                           Responsibility of BUYER :
 
 (a)                    The BUYER shall, at its own risk, cost and expense, supply and deliver to the BUILDER all of the items to be furnished by the BUYER as specified in the SPECIFICATINS (herein called the BUYER’s Supplies) at warehouse or other storage of the Shipyard in the proper condition ready for installation in or on the VESSEL, in accordance with the time schedule designated and advised by the BUILDER to the BUYER within 60 days from signing this Contract.
 
 (b)                   In order to facilitate installation by the BUILDER of the BUYER’s Supplies in or on the VESSEL, the BUYER shall furnish the BUILDER with necessary specifications, plans, drawings, instruction books, manuals, test reports and certificates required by the rules and regulations of the SPECIFICATIONS .
 
If so requested by the BUILDER, the BUYER shall, without any charge to the BUILDER, cause the representatives of the manufacturers of the BUYER’s Supplies to assist the BUILDER in installation thereof in or on the VESSEL and/or to carry out installation thereof by themselves or to make necessary adjustments at the Shipyard.
 
 (c)                    Any and all of the BUYER’s Supplies shall be subject to the BUILDER’s reasonable right of rejection, as and if they are found to be unsuitable or in improper condition for installation.
 
 (d)                   Should the BUYER fail to deliver any of the BUYER’s Supplies within the time designated, the Delivery Date shall be automatically extended for a period which actually caused the delay in the delivery of the VESSEL.
 
 (e)                    If delay in delivery of any of the BUYER’s Supplies exceeds thirty (30) days, then, the BUILDER shall be entitled to proceed with construction of the VESSEL without installation thereof in or on the VESSEL as hereinabove provided, and the BUYER shall accept and take delivery of the VESSEL so constructed, unless such delay is caused by Force Majeure in which case the provision Paragraph 1(d) of this Article shall apply.
 
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2.                           Responsibility of BUILDER :
 
The BUILDER shall be responsible for storing and handling with reasonable care of the BUYER’s Supplies after delivery thereof at the Shipyard, and shall, at its own cost and expense, install them in or on the VESSEL, unless otherwise provided herein or agreed by the parties hereto, provided, always, that the BUILDER shall not be responsible for quality, efficiency and/or performance of any of the BUYER’s Supplies.
 
(End of Article)
 
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ARTICLE XVII - INSURANCE
 
1.                           Extent of Insurance Coverage
 
From the time of launching until delivery of the VESSEL, the BUILDER shall, at its own cost and expense, insure the VESSEL and all machinery and equipment, appurtenances and outfits, including the BUYER’s Supplies, built into or installed in or upon the VESSEL, against all risks under the “Institute Causes for BUILDER’s Risk”, with first class insurance company or underwriters in Korea.
 
The amount of such insurance coverage shall, up to the date of delivery of the VESSEL, not be less than the aggregate amount of all instalments paid by the BUYER to the BUILDER, plus the value of the BUYER’s Supplies in the custody of the Shipyard.
 
2.                           Application of the Recovered Amounts
 
In the event that the VESSEL shall be damaged from any insured cause at any time before delivery of the VESSEL, and in the further event that such damage shall not constitute an actual or constructive total loss of the VESSEL, the amount received in respect of the insurance shall be applied by the BUILDER in repair of such damage, satisfactory to the Classification Society, and the BUYER shall accept the VESSEL under this Contract if completed in accordance with this Contract and the SPECIFICATIONS , however, subject to the extension of delivery time under Article VIII hereof (except in case of negligence of the BUILDER).
 
Should the VESSEL from any cause become an actual or constructive total loss, the BUILDER shall either :
 
 (a)                    proceed in accordance with the terms of this Contract, in which case the amount received in respect of the insurance shall be applied to the construction and repair of damage of the VESSEL, provided the parties hereto shall have first agreed thereto in writing and to such reasonable extension of delivery time as may be necessary for the completion of such reconstruction and repair ; or
 
50

 
 (b)                   refund promptly to the BUYER the full amount of all sums paid by the BUYER to the BUILDER as instalments in advance of delivery of the VESSEL with Six percent (6.0%) interest, and deliver to the BUYER all BUYER’s Supplies (or the insurance proceeds paid with respect thereto), in which case this Contract shall be deemed to be automatically terminated and all right, duties, liabilities and obligations of each of the parties to the other shall forthwith cease and terminate.
 
3.                           Termination of BUILDER’s Obligation to Insure
 
The BUILDER shall be under no obligation to insure the VESSEL hereunder after delivery and acceptance of the VESSEL.
 
(End of Article)
 
51

 
ARTICLE XVIII – NOTICE
 
1.                           Address :
 
Any and all notices and communications in connection with this Contract shall be addressed as follows :
 
To the BUYER :
Bayview Shipping Inc.
80 Broad Street, Monrovia, Liberia
Cable address :    BALMAR
Telefax No.  :        231-7-7000-422
 
To the BUILDER:
 
Samsung Heavy Industries Co., Ltd.
647-9, 11 th Floor, KIPS Building, Yeoksam-Dong, Kangnam-Ku,
Seoul, Korea
Cable address : SSYARD SEOUL
Telefax No. : (+82 2) 3458-7349, (+82 2) 3458-7319
 
or preferably to its Geoje Yard :
 
Samsung Heavy Industries Co., Ltd.
P.O.BOX Gohyun 9
530, Jangpyung-Ri, Shinhyun-Up, Geoje-Si, Kyungnam, Korea

Telefax No. :	(+82 55) 630-4947 (Design Department)	
 	(+82 55) 630-4978 (Customer Satisfaction Team.)	
 
2.                           Language :
 
Any and all notices and communications in connection with this Contract shall be written in the English language.
 
52

 
3.                           Effective Date of Notice :
 
The notice in connection with this Contract shall become effective from the date when such notice is received by the BUYER or by the BUILDER except otherwise described in the Contract.
 
(End of Article)
 
53

 
ARTICLE XIX - EFFECTIVE DATE OF CONTRACT
 
This Contract shall become effective upon signing by the parties hereto.
 
(End of Article)
 
54

 
ARTICLE XX - INTERPRETATION
 
1.                           Laws Applicable :
 
The parties hereto agree that the validity and interpretation of this Contract and of each Article and part thereof shall be governed by the laws of England.
 
2.                           Discrepancies :
 
All general language or requirements embodied in the SPECIFICATIONS are intended to amplify, explain and implement the requirements of this Contract. However, in the event that any language or requirements so embodied permit of an interpretation inconsistent with any provisions of this Contract, then, in each and every such event, the applicable provisions of this Contract shall prevail and govern. In the event of conflict between the SPECIFICATIONS and Plans, the SPECIFICATIONS shall prevail and govern.
 
3.                           Entire Agreement :
 
This Contract contains the entire agreement and understanding between the parties hereto and supersedes all prior negotiations, representations, undertaking and agreements on any subject matter of this Contract.
 
4.                           Amendments and Supplements :
 
Any supplement, memorandum of understanding or amendment, whatsoever form it may be relating to this Contract, to be made and signed among parties hereof after signing this Contract, shall be the integral part of this Contract and shall be predominant over the respective corresponding Article and/or Paragraph of this Contract.
 
The Contract can only be amended in writing.
 
(End of Article)
 
55

 
IN WITNESS WHEREOF, the parties hereto have caused this Contract to be duly executed on the day and year first above written.

BUYER :	BUILDER :	
BAYVIEW SHIPPING INC.	SAMSUNG HEAVY IND., CO., LTD.	

/s/ John Coustas	 	 	/s/ J. W. Kim	 	
By    :	John Coustas	 	By   :   J. W. Kim	
Title :	Attorney-In-Fact	Title :	President & CEO	

56

 
EXHIBIT “A”
 
LETTER OF REFUNDMENT GUARANTEE
 
Gentlemen :
 
We hereby issue our letter of guarantee no.              in favour of Bayview Shipping Inc.,(hereinafter called the “BUYER”) for account of Samsung Heavy Industries Co., Ltd.(hereinafter called the “BUILDER”) as follows in consideration of the shipbuilding contract dated March 28, 2006 (hereinafter called the “Contract”) made by and among the BUYER and the BUILDER for the construction of one(1) single screw diesel engine driven Container VESSEL having BUILDER’s Hull No. 1670 (hereinafter called the “VESSEL”).
 
If in connection with the terms of the Contract the BUYER shall become entitled to a refund of the advance payment(s) made to the BUILDER prior to the delivery of the VESSEL, we hereby irrevocably guarantee the repayment of the same to the BUYER immediately on demand being initially US$ 6,380,000.- (Say U.S. Dollars Six Million Three Hundred and Eighty Thousand only) together with interest thereon at the rate of Six (6) percent per annum from the respective dates on which such sums were paid by the BUILDER to the date of remittance by telegraphic transfer of such refund.
 
The amount of this guarantee will be automatically increased, not more than three times, upon BUILDER’s receipt of the respective instalment: each time by the amount of instalment of US$ 6,380,000.- (Say U.S. Dollars Six Million Three Hundred and Eighty Thousand only), US$ 6,380,000.- (Say U.S. Dollars Six Million Three Hundred and Eighty Thousand only) and US$ 6,380,000.- (Say U.S. Dollars Six Million Three Hundred and Eighty Thousand only) respectively plus interest thereon as provided in the Contract, but in any eventuality the amount of this guarantee shall not exceed the total sum of US$ 25,520,000.- (Say U.S. Dollars Twenty Five Million Five Hundred and Twenty Thousand only) plus interest thereon at the rate of Six (6) percent per annum from the respective dates on which such sums were paid by the BUYER to the BUILDER to the date of remittance by telegraphic transfer of the refund.
 
Our liability under this letter of guarantee shall not be affected by any alteration to or variation of the terms of the Contract you may hereafter agree with the BUILDER and by any other matter of circumstances, including bankruptcy or insolvency of the BUILDER, which might otherwise discharge our liability hereunder as guarantor of the BUILDER’s obligations as aforesaid.
 
57

 
In case any refund is made to you by the BUILDER or by us under this guarantee, our liability hereunder shall be automatically reduced by the amount of such refund.
 
This letter of guarantee is available against BUYER’s simple receipt and signed statement certifying that BUYER’s demand for refund has been made in conformity with Article X of the Contract and the BUILDER has failed to make the refund within Thirty One (31) days after BUYER’s demand to the BUILDER.
 
Refund shall be made to BUYER by telegraphic transfer in United States Dollars to an account designated by you without deduction, withholding or set-off.
 
This letter of guarantee shall expire and become null and void upon receipt by the BUYER of the sum guaranteed hereby or upon acceptance by the BUYER of the delivery of the VESSEL in accordance with the terms of the Contract and, in either case, this letter of guarantee shall be returned to us. This guarantee is valid from the date of this letter of guarantee until or in the event of delayed delivery until such time as the VESSEL is delivered by the BUILDER to the BUYER in accordance with the terms of the Contract.
 
Notwithstanding the provisions hereinabove, in case we receive notification from you or the BUILDER confirmed by an Arbitrator stating that your claim to cancel the Contract or your claim for refundment thereunder has been disputed and referred to Arbitration in accordance with the provisions of the Contract, the period of validity of this guarantee shall be extended until Thirty (30) days after the final and non-appealable award shall be rendered in the Arbitration and a copy thereof acknowledged by the Arbitrators. In such case, this guarantee shall not be available unless and until such acknowledged copy of the final award in the Arbitration justifying your claim is presented to us.
 
Your rights in respect of this letter of guarantee are assignable from the date of this letter of guarantee until such time as the VESSEL is delivered by the BUILDER to the BUYER in accordance with the provisions of the Contract, on the understanding that you will notify us of the identity of any assignee of your rights under this letter of guarantee.
 
Any notice or demand under this letter of guarantee shall be given by facsimile and sent to:
 
58

 

 
 
or to such other address as we might notify to you in writing. A notice shall be deemed to be served and shall take effect 2 hours after its transmission is completed, provided that if a notice would be deemed to be served on a day which is not a business day, or which is a business day but after 5:00 p.m. local time, in the place of receipt, the notice shall be deemed to be served and shall take effect at 9:00 a.m. on the next day which is a business day.
 
This guarantee shall be governed by and construed in accordance with the Laws of England. Any disputes arising under this guarantee (but not any disputes arising under the Contract which shall be determined by arbitration in accordance with the terms of the Contract and as referenced in this letter of guarantee) shall be determined by the High Court of Justice in London to whose exclusive jurisdiction we hereby submit. We appoint
 
                                                                                                              as our agents for service of process in connection with any proceedings in such courts.
 
We each jointly and severally hereby represent and guarantee that we have the corporate power and authority to execute, deliver and perform the obligations under this letter of guarantee, and that such execution and performance will not violate or conflict with any provision of law, statute, rule, permit or regulation of any government, regulatory body, agency or other authority in the jurisdictions where we are subject to such laws and regulations.
 
59

 
IN WITNESS WHEREOF, we have hereunder set our hands and seal by our duly authorized representatives this          day of                 , 2006.

 	Very truly yours,	

 	For and on behalf of	

 	By	 	 	
 	Name :	
 	Title : Attorney-in-Fact	

 	For and on behalf of	
 	 	 	
 	By	 	 	
 	Name :	
 	Title : Attorney-in-Fact	
 
60

 
EXHIBIT “B”
 
Samsung Heavy Industries Co., Ltd.
11 th Floor, KIPS Building
647-9, Yoksam-Dong, Kangnam-Ku,
Seoul, Korea 135-080
 
Date :                                   , 2006
 
PERFORMANCE GUARANTEE
 
In consideration of the performance of a certain shipbuilding contract dated                       (hereinafter called the “Contract”) by BAYVIEW SHIPPING INC. of 80 Broad street, Monrovia, Liberia having your Hull No.1670 (hereinafter called the “VESSEL”) providing among other things for payment of the Contract Price amounting to United States Dollars             (US$              );
 
We, the undersigned, hereby irrevocably and unconditionally guarantee to you, your successors, and assigns the due and faithful performance by the BUYER of its all liabilities and responsibilities under the Contract and any supplement, amendment, change or modification hereafter made thereto, including but not limited to, due and prompt payment of the Contract Price by the BUYER to you, your successors, and assigns under the Contract and any supplement, amendment, change or modification as aforesaid (hereby expressly waiving notice of any such supplement, amendment, change or modification as may be agreed to by the BUYER and confirming that this guarantee shall be fully applicable to the Contract as so supplemented, amended, changed or modified).
 
This Performance Guarantee shall be governed by the laws of England.

GUARANTOR :	
BY :	 	 	
TITLE :	
WITNESS :	
 
61

 
EXHIBIT “C”
 
Samsung Heavy Industries Co., Ltd.
11 th Floor, KIPS Building
647-9, Yoksam-Dong, Kangnam-Ku,
Seoul, Korea 135-080
 
Date :                                             , 2006
 
PERFORMANCE GUARANTEE
 
In consideration of the assignment of a certain shipbuilding contract dated                    (hereinafter called the “Contract”) by us to        having your Hull No.1670 (hereinafter called the “VESSEL”) providing among other things for payment of the Contract Price amounting to United States Dollars            (US$              );
 
We, the undersigned, hereby irrevocably and unconditionally guarantee to you, your successors, and assigns the due and faithful performance by the BUYER of its all liabilities and responsibilities under the Contract and any supplement, amendment, change or modification hereafter made thereto, including but not limited to, due and prompt payment of the Contract Price by the BUYER to you, your successors, and assigns under the Contract and any supplement, amendment, change or modification as aforesaid (hereby expressly waiving notice of any such supplement, amendment, change or modification as may be agreed to by the BUYER and confirming that this guarantee shall be fully applicable to the Contract as so supplemented, amended, changed or modified).
 
This Performance Guarantee shall be governed by the laws of England.

GUARANTOR :	
BY :	 	 	
TITLE :	
WITNESS :	
 
62

 
Exhibit 10.22
 
FOR
 
CONSTRUCTION AND SALE
 
OF
 
A 4,250 TEU CONTAINER VESSEL
(HULL NO. 1671)

BETWEEN
 
Channelview Marine Inc.
As BUYER
 
AND

Samsung Heavy Industries Co., Ltd.
As BUILDER

 
I N D E X

 	 	PAGE	
 	 	 	
PREAMBLE	 	7	
 	 	 	
ARTICLE I - DESCRIPTION AND CLASS	 	 	
 	 	 	
1. Description	 	8	
2. Dimensions and Characteristics	 	8	
3. Classification, Rules and Regulations	 	9	
4. Subcontracting	 	10	
5. Registration	 	10	
 	 	 	
ARTICLE II - CONTRACT PRICE AND TERMS OF PAYMENT	 	 	
 	 	 	
1. Contract Price	 	11	
2. Adjustment of Contract price	 	11	
3. Currency	 	11	
4. Terms of Payment	 	11	
5. Method of Payment	 	12	
6. Notice of Payment on or before Delivery	 	13	
7. Expenses	 	13	
8. Prepayment	 	13	
9. Performance Guarantee	 	14	
 	 	 	
ARTICLE III - ADJUSTMENT OF CONTRACT PRICE	 	 	
 	 	 	
1. Delivery	 	15	
2. Speed	 	16	
3. Fuel Consumption	 	17	
4. Deadweight	 	17	
5. Early Delivery	 	18	
6. Effect of Rescission	 	18	
 
2

 

ARTICLE IV - APPROVAL OF PLANS AND DRAWINGS AND INSPECTION DURING CONSTRUCTION	
 	 	 	
1. Approval of Plans and Drawings	 	19	
2. Appointment of BUYER’s Supervisor	 	19	
3. Inspection by the Supervisor	 	20	
4. Facilities	 	21	
5. Liability of BUILDER	 	21	
6. Responsibility of BUYER	 	22	
 	 	 	
ARTICLE V - MODIFICATIONS, CHANGES AND EXTRAS	 	 	
 	 	 	
1. How Effected	 	23	
2. Change in Rules of Classification Society, Regulations etc	 	24	
3. Substitution of Materials	 	25	
 	 	 	
ARTICLE VI - TRIALS AND ACCEPTANCE	 	 	
 	 	 	
1. Notice	 	26	
2. Weather Condition	 	26	
3. How Conducted	 	27	
4. Method of Acceptance of Rejection	 	27	
5. Effect of Acceptance	 	28	
6. Disposition of Surplus Consumable Stores	 	28	
 	 	 	
ARTICLE VII - DELIVERY	 	 	
 	 	 	
1. Time and Place	 	29	
2. When and How Effected	 	29	
3. Documents to be delivered to BUYER	 	29	
4. Tender of VESSEL	 	30	
5. Title and Risk	 	31	
6. Removal of VESSEL	 	31	
 
3

 

ARTICLE VIII - DELAYS AND EXTENSION OF TIME FOR DELIVERY (FORCE MAJEURE)	 	 	
 	 	 	
1. Causes of Delay	 	32	
2. Notice of Delay	 	33	
3. Definition of Permissible Delay	 	33	
4. Right to Rescind for Excessive Delay	 	33	
 	 	 	
ARTICLE IX - WARRANTY OF QUALITY	 	 	
 	 	 	
1. Guarantee	 	35	
2. Notice of Defects	 	35	
3. Remedy of Defects	 	35	
4. Extent of the BUILDER’s Responsibility	 	37	
5. Guarantee Engineer	 	37	
 	 	 	
ARTICLE X - RESCISSION BY BUYER	 	 	
 	 	 	
1. Notice	 	39	
2. Refundment by BUILDER	 	39	
3. Discharge of Obligations	 	40	
 	 	 	
ARTICLE XI - BUYER’S DEFAULT	 	 	
 	 	 	
1. Definition of Default	 	41	
2. Effect of Default on or before Delivery of VESSEL	 	41	
3. Disposal of VESSEL	 	42	
 	 	 	
ARTICLE XII - ARBITRATION	 	 	
 	 	 	
1. Decision by Classification Society	 	43	
2. Proceedings of Arbitration	 	43	
3. Notice of Award	 	44	
4. Expenses	 	44	
5. Entry in Court	 	44	
6. Alteration of Delivery Date	 	44	
 	 	 	
ARTICLE XIII - SUCCESSOR AND ASSIGNS	 	45	
 
4

 

ARTICLE XIV - TAXES AND DUTIES	 	 	
 	 	 	
1. Taxes and duties Incurred in Korea	 	46	
2. Taxes and Duties Incurred outside Korea	 	46	
 	 	 	
ARTICLE XV - PATENTS, TRADEMARKS, COPYRIGHTS, ETC	 	 	
 	 	 	
1. Patents, Trademarks and Copyrights	 	47	
2. General Plans, Specifications and Working Drawings	 	47	
 	 	 	
ARTICLE XVI - BUYER’S SUPPLIES	 	 	
 	 	 	
1. Responsibility of BUYER	 	48	
2. Responsibility of BUILDER	 	49	
 	 	 	
ARTICLE XVII - INSURANCE	 	 	
 	 	 	
1. Extent of Insurance Coverage	 	50	
2. Application of the Recovered Amounts	 	50	
3. Termination of BUILDER’s Obligation to Insure	 	51	
 	 	 	
ARTICLE XVIII - NOTICE	 	 	
 	 	 	
1. Address	 	52	
2. Language	 	52	
3. Effective Date of Notice	 	53	
 	 	 	
ARTICLE XIX - EFFECTIVE DATE OF CONTRACT	 	54	
 	 	 	
ARTICLE XX - INTERPRETATION	 	 	
 	 	 	
1. Laws Applicable	 	55	
2. Discrepancies	 	55	
3. Entire Agreement	 	55	
4. Amendments and supplements	 	55	
 
5

 

END OF CONTRACT	 	56	
 	 	 	
EXHIBIT “A” LETTER OF REFUNDMENT GUARANTEE	 	57	
 	 	 	
EXHIBIT “B” PERFORMANCE GUARANTEE	 	61	
 	 	 	
EXHIBIT “C” PERFORMANCE GUARANTEE	 	62	
 
6

 
THIS CONTRACT, made and entered into on this 28 th day of March, 2006 by and between Channelview Marine Inc. a corporation incorporated and existing under the laws of Liberian, having its registered office at 80 Broad Street, Monrovia, Liberia (hereinafter called the “BUYER”), on the one part and Samsung Heavy Industries Co., Ltd., a corporation incorporated and existing under the laws of the Republic of Korea of having its registered office at 647-9, Yeoksam-Dong, Kangnam-ku, Seoul, Korea (hereinafter called the “BUILDER”), on the other part,
 
WITNESSETH:
 
In consideration of the mutual covenants herein contained, the BUILDER agrees to design, build, launch and complete in accordance with first class modern Korean shipbuilding practice and standards one (1) Single Screw Diesel Engine driven Container VESSEL as described in the Specifications attached herewith and any addendum thereto (hereinafter called the “VESSEL”) at the BUILDER’s shipyard located in Geoje Island, Korea (hereinafter called the “Shipyard”) and to deliver and sell the same to the BUYER, and the BUYER hereby agrees to purchase and accept delivery of the VESSEL from the BUILDER and to pay for the same upon the terms and conditions hereinafter set forth.
 
7

 
ARTICLE I - DESCRIPTION AND CLASS
 
1.                           Description :
 
The VESSEL shall be an ocean going single screw diesel engine driven fully cellular container VESSEL suitable for carrying dry cargo containers having the BUILDER’s Hull No.1671 and shall be built, constructed, equipped and completed in accordance with the ‘As-Built-Specifications’ as specified in the shipbuilding contracts of the BUILDER’s Hull No. 1639 and 1640 (hereinafter called as the “HN1639 Series Contract”) to build just identical vessels to the BUILDER’s Hull No. 1639 and 1640 (hereinafter called as the “HN1639 Series”) as a repeat and series, and the ‘Maker List’ as specified in the Supplement Agreement No.1 (dated June 30, 2005) to the HN 1639 Series Contract (hereinafter collectively called as the “SPECIFICATIONS”).
 
Thus, all drawings and plans made by the BUILDER and duly approved by the BUYER during the construction of the HN1639 Series in accordance with HN 1639 Series Contract shall be used without any further change, modification and approval by the BUYER, and a ll extra/credit costs agreed as of February 27, 2006 for the HN 1639 Series are included into the ship price described in this CONTRACT, and all construction procedure including model test and sea trial etc. shall be done on the basis of the just repeat and series VESSEL of the HN 1639s Series.
 
2.                           Dimensions and Characteristics :

Length, overall	 	 	 	appx.	 	259.8	m	
Length, between perpendiculars	 	 	 	appx.	 	244.8	m	
Breadth, moulded	 	 	 	appx.	 	32.25	m	
Depth, moulded	 	 	 	appx.	 	19.3	m	
Designed loaded draught, moulded	 	 	 	appx.	 	11.0	m	
Scantling draught, moulded	 	 	 	appx.	 	12.6	m	
 
Main Engine                                                                    :                                                       MAN B&W 8K 90MC-C type License Made MCR 49,680 bhp at 104 r.p.m.

Deadweight, guaranteed	:	 	50,500 metric tons at the moulded	
 
8

 

 	 	 	scantling draught of 12.6 meters.	
 	 	 	 	
Speed, guaranteed	:	 	24.5 knots at a draught of 11.0 meters and main engine developing power of 38,880 bhp (metric).	
 	 	 	
Fuel Consumption, guaranteed :	 	124.3 grams/bhp(metric)-hour using marine diesel oil having lower calorific value of 10,200 kcal/kg at normal continuous rating of 44,710 bhp(metric) measured at the shop trial.	
 
The details of the aforementioned particulars as well as the definitions and method of measurements and calculations are as defined in the SPECIFICATIONS .
 
3.                           Classification, Rules and Regulations :
 
The VESSEL, including its machinery, equipment and outfittings shall be constructed in accordance with the rules and regulations in year 2004 July edition of the Classification Society in accordance with both the interpretation of Classification Society (dated on 2005-06-29 Ref No. MKOKR120/MSSH/Gen-precontract/PUS-J-668) and the interpretation of the Classification Society (dated 28 th February 2006 Ref. No. MKOKR120/MSSH/Gen-Precontract/PUS-J-698 in respect of new updates in effect as of March 28, 2006 from rule and regulations applied to the HN1639 Series) and under special survey of Det Norske Veritas (hereinafter called the “Classification Society”) and shall be distinguished in the register by the symbol of X 1A1 “ Container Carrier”, NAUTICUS, EO, and In water survey and TMON shall be applied according to the requirement of the class rule.
 
Decisions of the Classification Society as to compliance or non-compliance with the classification shall be final and binding upon both parties hereto. Details of its notation shall be in accordance with the SPECIFICATIONS .
 
The VESSEL shall also comply with the compulsory rules, regulations and requirements of the regulatory bodies as described in the SPECIFICATIONS rectified and in effect as of the signing date of this Contract. Non-compulsory rules, regulations and requirements of the regulatory bodies shall be dealt with in
 
9

 
accordance with Article V (2) of this Contract.
 
All the fees and charges incidental to the classification and with respect to compliance with the above referred rules, regulations and requirements shall be for account of the BUILDER except otherwise agreed.
 
4.                           Subcontracting :
 
The BUILDER may, at its sole discretion and responsibility, subcontract any portion of the construction work of the VESSEL, provided that the construction and assembly of the VESSEL shall be carried out as is normally done according to the BUILDER’s building practice and provided further that the BUILDER shall be responsible to the BUYER in respect of any construction work carried out by such subcontractors.
 
5.                           Registration :
 
The VESSEL, at the time of its delivery and acceptance, shall be registered at the port of registry by the BUYER under Greek, Liberian, Cyprus or Panama flag at the BUYER’s expenses. The BUYER shall decide the flag within one(1) month after the date of signing of this Contract.
 
(End of Article)
 
10

 
ARTICLE II - CONTRACT PRICE AND TERMS OF PAYMENT
 
1.                           Contract Price :
 
The Contract price of the VESSEL and exclusive of the BUYER’s Supplies as provided in Paragraph 1 of Article XVI hereof is Sixty Three Million Eight Hundred Thousand United States Dollars (US$ 63,800,000.-) (hereinafter called the “Contract Price”), which shall be subject to upward or downward adjustment, if any, as hereinafter set forth in this Contract.
 
2.                           Adjustment of Contract Price:
 
Increase or decrease of the Contract Price, if any, due to adjustments thereof made in accordance with the provisions of this Contract, shall be adjusted by way of addition to or subtraction from the Contract Price upon delivery and acceptance of the VESSEL in the manner as hereinafter provided.
 
3.                           Currency :
 
Any and all payments by the BUYER to the BUILDER which are due under this Contract shall be made in United States Dollars.
 
4.                           Terms of Payment :
 
The Contract Price shall be due and payable by the BUYER to the BUILDER in the instalments as follows :
 
(a)                       First Instalment :
 
The First Instalment amounting to Six Million Three Hundred and Eighty Thousand United States Dollars (US$ 6,380,000.-) shall be due and payable upon issuance and delivery to the BUYER of the original of Refund Guarantee.
 
(b)                      Second Instalment :
 
The Second Instalment amounting to Six Million Three Hundred and Eighty Thousand Million United States Dollars (US$ 6,380,000.-) shall be due and payable upon six(6) calendar months after the date of singing of this Contract.
 
11

 
(c)                       Third Instalment :
 
The Third Instalment amounting to Six Million Three Hundred and Eighty Thousand Million United States Dollars (US$ 6,380,000.-) shall be due and payable upon steel cutting of the VESSEL.
 
(d)                      Fourth Instalment :
 
The Foruth Instalment amounting to Six Million Three Hundred and Eighty Thousand Million United States Dollars (US$ 6,380,000.-) shall be due and payable upon keel laying of the VESSEL.
 
 (e)                    Fifth Instalment :
 
The Delivery Instalment amounting to Thirty Eight Million Two Hundred and Eighty Thousand United States Dollars (US$ 38,280,000.-) plus any increase or minus any decrease due to adjustments of the Contract Price under and pursuant to the provisions of this Contract, shall be due and payable upon delivery and acceptance of the VESSEL or upon tender for delivery of the VESSEL referred to in Paragraph 4 of Article VII of this Contract.
 
It is agreed that no payment shall be effected until the original Refund Guarantee is delivered to the BUYER.
 
5.                           Method of Payment :
 
 (a)                    First Instalment :
 
Within Seven(7) banking days after 28 th day of March 2006, the BUYER shall remit by telegraphic transfer the first instalment to the account of The Export-Import Bank of Korea, Head Office, Seoul, Korea with Deutsche Bank Trust Company Americas(BIC : BKTRUS33), 60 Wall Street, Mail Stop NYC 60 1310, New York, NY 10005, USA, Account No.04 029 695, in favour of Samsung Heavy Industries., Ltd, SWIFT code : EXIKKRSE or other bank as designated by the Builder, in favor of Samsung Heavy Industrise Co, Ltd.(hereinafter called the “BUILDER’s Bank”)
 
(b)                      Second, Third and Fourth Instalment :
 
Upon receipt of telefax notice from the BUILDER confirming that the second, third, and fourth instalment on each event is due and payable, the BUYER shall
 
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remit by telegraphic transfer the second, third, and fourth instalment to the aforesaid account of the BUILDER’s Bank in favour of Samsung Heavy Industries Co., Ltd.
 
 (c)                    Fifth Instalment :
 
At least One (1) banking days prior to delivery and acceptance of the VESSEL, the BUYER shall remit by telegraphic transfer the fifth instalment to the name of the BUYER at BUILDER’s BANK, with an irrevocable instruction that the amount so remitted shall be payable to the BUILDER against a facsimile copy of PROTOCOL OF DELIVERY and ACCEPTANCE OF THE VESSEL signed by the BUYER and the BUILDER or returned to the BUYER if such PROTOCOL OF DELIVERY and ACCEPTANCE has not been presented within 15 days.
 
Simultaneously with each of all such payments, the BUYER shall cause the BUYER’s BANK to advise the BUILDER’s BANK of the details of such payments by authenticated bank cable.
 
Any claim which the BUYER may have against the BUILDER hereunder shall be settled and liquidated separately from any payment by the BUYER to the BUILDER hereunder.
 
6.                           Notice of Payment on or before Delivery :
 
With the exception of the first instalment, the BUILDER shall give the BUYER Five(5) banking days prior notice by telefax of the anticipated due date and amount of each instalment payable on or before delivery of the VESSEL.
 
7.                           Expenses.
 
Expenses and bank charges for remitting payments and any taxes, duties, expenses and fees connected with such payment shall be for account of the BUYER referred to in paragraph 2 of Article XIV of this Contract, except expenses and bank charges of the BUILDER’s BANK.
 
8.                           Prepayment :
 
Prepayment of any instalment due on or before delivery of the VESSEL shall be subject to mutual agreement between the parties hereto.
 
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9.                           Performance Guarantee
 
Upon signing this Contract, the BUYER shall provide the BUILDER with a Performance Guarantee in order to secure the due and faithful performance of this Contract by the BUYER having same form and contents as Exhibit ”B” annexed hereto.
 
(End of Article)
 
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ARTICLE III - ADJUSTMENT OF CONTRACT PRICE
 
The Contract Price shall be subject to adjustment, as hereinafter set forth, in the event of the following contingencies (it being understood by both parties that any reduction of the Contract Price is by way of liquidated damages and not by way of penalty) :
 
1.                           Delivery :
 
  (a)                    No adjustment shall be made and the Contract Price shall remain unchanged for the first Thirty (30) days of delay in delivery of the VESSEL beyond the Delivery Date as defined in Article VII hereof (ending as of twelve o’clock midnight of the Thirty (30) day of delay).
 
 (b)                   If the delivery of the VESSEL is delayed more than Thirty (30) days after the Delivery Date, the Contract Price shall be reduced by the sum of Twenty Seven Thousand Five Hundred United States Dollars (US$27,500.-) for each full day for which thereafter delivery is delayed.
 
However, the total reduction in the Contract Price shall not be more than as would be the case for a delay of One Hundred Eighty (180) days counting from the midnight of the Thirty (30) day after the Delivery Date at the above specified rate of reduction.
 
  (c)                    However, if the delay in delivery of the VESSEL should continue for a period of Two Hundred Ten (210) days from the Delivery Date in Paragraph 1 of Article VII, then in such event, and after such period has expired, the BUYER may, at its option, rescind this Contract in accordance with the provisions of Article X hereof.
 
The BUILDER may, at any time after the expiration of the aforementioned Two Hundred Ten (210) days of delay in delivery, if the BUYER has not served notice of rescission as provided in Article X hereof, demand in writing that the BUYER shall make an election, in which case the BUYER shall, within Twenty (20) days after such demand is received by the BUYER, notify the BUILDER of its intention either to rescind this Contract or to consent to the acceptance of the VESSEL at the BUILDER’s specified future date. If the BUYER shall not make an election within Twenty (20) days as provided hereinabove, the BUYER shall be deemed to have accepted such extension of the delivery date to the future delivery date indicated by the BUILDER and it being understood by the parties hereto that if the VESSEL is not delivered by such future date, the BUYER shall
 
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have the same right of rescission upon the same terms and conditions as hereinabove provided.
 
It is understood that accrued liquidated damages are preserved. Further delay shall incur additional liquidated damages in accordance with existing terms and conditions.
 
 (d)                   For the purpose of this Article, the delivery of the VESSEL shall be deemed to be delayed when and if the VESSEL, after taking into account all postponements of the Delivery Date by reason of permissible delay as defined in Article VIII and/or any other reason under this Contract, is not delivered by the date upon which delivery is required under the terms of this Contract.
 
2.                           Speed :
 
 (a)                    The Contract Price shall not be affected or changed by reason of the trial speed (as determined according to the SPECIFICATIONS being less than the guaranteed speed, if such variation is not more than Two-Tenths (2/10) of One (1) knot.
 
 (b)                   However, if such variation is more than Two-Tenths (2/10) of One (1) knot, then, the Contract Price shall be decreased by One Hundred and Seventy Five Thousand United States Dollars (US$ 175,000.-) for each successive whole One-Tenth(1/10) of a knot in excess of a deficiency of Two-Tenths (2/10) of a knot (in both cases smaller fractions being disregarded).
 
 (c)                    If the deficiency in the speed upon final sea trial is more than Half(1/2) a knot below the guaranteed speed of the VESSEL, then the BUYER may, at its option, reject the VESSEL and rescind this Contract in accordance with the provisions of Article X hereof, or may accept the VESSEL at a reduction in the Contract Price as above provided for Half(1/2) a knot only, that is, at a total reduction of Five Hundred and Twenty Five Thousand United States Dollars (US$ 525,000.-).
 
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3.                           Fuel Consumption :
 
 (a)                    The Contract Price shall not be affected or changed in case the fuel consumption, as determined by the shop trial as specified in the SPECIFICATIONS , is not more than Five percent (5%) in excess of the guaranteed fuel consumption specified in Paragraph 2 of Article I.
 
 (b)                   However, in the event that the actual fuel consumption at the shop trial is in excess of Five percent (5%) of the guaranteed fuel consumption, the Contract Price shall be reduced by the sum of One Hundred and Ten Thousand United States Dollars (US$ 110,000.-) for each full one percent(1%) increase in fuel consumption and pro rata for any fraction of one percent(1%) of the Guaranteed Fuel Consumption in excess of the said five percent(5%) up to maximum of eight percent(8%) over the Guaranteed Fuel Consumption.
 
 (c)                    If the deficiency in fuel consumption is more than Eight percent (8%) then the BUYER may at its option rescind this Contract in accordance with the provision of Article X hereof.
 
4.                           Deadweight :
 
(a)                       In the event that the deadweight of the VESSEL as determined in accordance with the SPECIFICATIONS is less than the guaranteed deadweight as specified in Paragraph 2 of Article I, the Contract Price shall be reduced by the sum of One Thousand One Hundred United States Dollars (US$ 1,100.-) for each full metric ton of such deficiency being more than Seven Hundred (700) metric tons, up to a maximum reduction of One Million Two Hundred and Ten Thousand United States Dollars (US$ 1,210,000.-).
 
(b)                      In the event of such deficiency in the deadweight of the VESSEL being One thousand eight hundred (1,800) metric tons or more, then, the BUYER may, at its option, reject the VESSEL and rescind this Contract in accordance with the provisions of Article X hereof or accept the VESSEL at a reduction in the Contract Price as above provided for One Thousand Eight Hundred (1,800) metric tons only, that is, at a total reduction of One Million Two Hundred and Ten Thousand United States Dollars (US$1,210,000.-).
 
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5.                           Early Delivery
 
In the event that the BUILDER believes that the VESSEL can be completed and ready for Delivery on a date earlier than the Contractual Delivery Date, then the BUILDER may give a written notice to the BUYER, no later than six (6) months before the revised date (the “Early Delivery Date”) informing the approximate date on which the VESSEL can be ready for the Delivery. The BUYER shall have the option, but not the obligation, to accept Delivery of the VESSEL on the Early Delivery Date and upon the BUYER’s acceptance thereof, the parties shall discuss the specific amount of the additional payment due to the BUILDER for the accelerated Delivery of the VESSEL on the Early Delivery Date at the delivery stage of the VESSEL and t he compensation payment of the acceleration bonus shall be settled and paid in full with the final delivery instalment concurrently uponwith the actual Delivery and acceptance of the VESSEL by the BUYER. If the Parties fail to reach a mutual agreement on the amount of the Early Delivery bonus, the BUILDER shall be free to deliver the VESSEL on the original Contractual Delivery Date or earlier at its option. The Parties hereto acknowledge that there will be no liquidated damages or other penalty to be imposed on the BUILDER in the event the VESSEL happens to be delivered on any date later than the Early Delivery Date but earlier than the original Contractual Delivery Date.
 
6                              Effect of Rescission :
 
It is expressly understood and agreed by the parties that in any case, if the BUYER rescinds this Contract under this article, the BUYER shall not be entitled to any liquidated damages or any other recourse unless by means of the provisions of Article X hereof.
 
(End of Article)
 
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ARTICLE IV - APPROVAL OF PLANS AND DRAWINGS AND INSPECTION DURING CONSTRUCTION
 
1.                           Approval of Plans and Drawings :
 
The SPECIFICATIONS   shall be used for the VESSEL without any further approval and modification from the BUYER unless otherwise mutually agreed by both parties. Should any changes are required by the BUYER’s request or the application of new rules and regulations (of a mandatory nature) coming into effect after the date of this Contract signing, the BUILDER shall submit such changes to the BUYER for its approval. If approved by the BUYER, such changes shall be applied to the VESSEL with cost adjustment in accordance with Article V of this Contract.
 
2.                           Appointment of BUYER’s Supervisor :
 
The BUYER may send to and maintain at the Shipyard, at the BUYER’s own cost and expense, one supervisor who shall be duly authorized in writing by the BUYER (herein called the “Supervisor”) to act on behalf of the BUYER in connection with the modifications of the SPECIFICATIONS, adjustments of the Contract Price and Delivery Date, approval of the plans and drawings, attendance to the tests and inspections relating to the VESSEL, its machinery, equipment and outfittings, and any other matters for which he is specifically authorized by the BUYER. The Supervisor may appoint his assistant(s) to attend at the Shipyard for the purposes as aforesaid.
 
In the event that assignment, novation or resale occurs under the Article XIII and as a result, BUYER’s Supervisor is changed during the construction of the VESSEL, any and all matters determined by mutual agreement between the BUYER’s Supervisor and the BUILDER prior to the dispatch of a new Supervisor shall be accepted and complied by the new Supervisor. In case two or more Supervisors are dispatched to the Shipyard and authorized, under the BUILDER’s prior consent, to perform the supervision, each of them will form uniform opinions between them to keep the design and the SPECIFICATIONS so as not to adversely affect the CONTRACT PRICE and Delivery of the VESSEL, provided that such change in the Contract Price will be reasonable and proven under the BUILDER’s normal practice. In the event of any additional costs attributable to such dispatch of two or more supervisors due to the reasons including but not
 
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limited to resale, novation, charter or any other occurrence otherwise resulting from the BUYER, such costs shall be borne by the BUYER and the BUYER shall reimburse and hold harmless the BUILDER from any such costs and expenses.
 
3.                           Inspection by the Supervisor :
 
The necessary inspections of the VESSEL, its machinery, equipment and outfittings shall be carried out by the Classification Society, other regulatory bodies and/or an inspection team of the BUILDER throughout the entire period of construction in order to ensure that the construction of the VESSEL is duly performed in accordance with this Contract and the SPECIFICATIONS The Supervisor shall have, during construction of the VESSEL, the right to attend such tests and inspections of the VESSEL, its machinery and equipment within the premises of either the BUILDER or its subcontractors. The BUILDER shall give notice to the Supervisor, in advance of the date and place of such tests and inspections for the convenience of their attendance. Detailed procedures of the inspection and the tests thereof shall be in accordance with the SPECIFICATIONS .
 
The BUILDER may request BUYER’s supervisor to attend the inspection and tests during public holidays and weekends and/or Company holidays in order to keep BUILDER’s construction schedule. BUYER’s supervisor shall fully cooperate with BUILDER and promptly attend such inspection/tests including those for surface preparation and painting work, which are especially vulnerable to weather condition and time interval. However, BUILDER shall keep such inspection and tests to a minimum and only when the inspection and tests affect BUILDER’s construction schedule. The BUILDER’s prior notice of such inspection/test schedule shall be informed to the BUYER’s supervisor three(3) working days in advance as a minimum
 
The Supervisor shall be entitled to request copies of all test results and trials as soon as required for the performance of his duties.
 
The Supervisor shall notify the BUILDER of deficiencies in the construction of the VESSEL or materials. The BUILDER should examine the deficiency and rectify.
 
If any of the BUYER’s supervisors discover any construction, material or
 
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workmanship which is not deemed to conform to the requirements of this Contract and/or the SPECIFICATIONS , the BUYER’s supervisors shall promptly give the BUILDER a notice in writing that such alleged non-conformity exists. Upon receipt of such notice from the BUYER’s supervisor, the BUILDER shall correct such non-conformity, if the BUILDER agrees to his view. Any disagreement shall be resolved in accordance with Paragraph 1 of Article XII.
 
4.                           Facilities :
 
The BUILDER shall furnish the Supervisor and his assistant(s) with adequate office space and such other reasonable facilities according to the BUILDER’s practice at or in the immediate vicinity of the Shipyard as may be necessary to enable them to effectively carry out their duties. The BUYER shall pay for all such facilities other than office space at the BUILDER’s normal rate of charge.
 
5.                           Liability of BUILDER :
 
The Supervisor and his assistant(s) shall at all times be deemed to be the employees of the BUYER and not of the BUILDER. The BUILDER shall be under no liability whatsoever to the BUYER, the Supervisor or his assistant(s) for personal injuries, including death, suffered during the time when he or they are on the VESSEL, or within the premises of either the BUILDER or its subcontractors, or are otherwise engaged in and about the construction of the VESSEL, unless, however, such personal injuries, including death, were caused by a gross negligence of the BUILDER, or of any of its employees or agents or subcontractors.
 
Nor shall the BUILDER be under any liability whatsoever to the BUYER, the Supervisor or his assistant(s) for damage to, or loss or destruction of property in Korea of the BUYER or of the Supervisor or his assistant(s), unless such damage, loss or destruction were caused by a gross negligence of the BUILDER or of any of its employees or agents or subcontractors.
 
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6.                           Responsibility of BUYER :
 
The BUYER shall undertake and assure that the Supervisor shall carry out his duties hereunder in accordance with the normal shipbuilding practice of the BUILDER and in such a way so as to avoid any unnecessary increase in building cost, delay in the construction of the VESSEL, and/or any disturbance in the construction schedule of the BUILDER.
 
The BUILDER has the right to request the BUYER to replace the Supervisor who is deemed unsuitable and unsatisfactory for the proper progress of the VESSEL’s construction. The BUYER shall investigate the situation by sending its representative(s) to the Shipyard if necessary, and if the BUYER considers that such BUILDER’s request is justified, the BUYER shall effect such replacement as soon as conveniently arrangeable.
 
(End of Article)
 
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ARTICLE V - MODIFICATIONS, CHANGES AND EXTRAS
 
1.                           How Effected :
 
Any modifications and/or changes in the SPECIFICATIONS shall be made by written agreement of the parties hereto provided, however, that any modifications and/or changes requested by the BUYER or an accumulation of such modifications and/or changes will not adversely affect the BUILDER’s planning or programme in relation to the BUILDER’s other commitments and if the BUYER shall assent to adjustment of the Contract Price, time for delivery of the VESSEL and other terms and conditions of this Contract as hereinafter provided. The BUILDER hereby agrees to exert its best efforts to accommodate such reasonable request by the BUYER so that the said changes and/or modifications may be made at a reasonable cost and within the shortest period of time which is reasonably possible.
 
Any such agreement for modifications and/or changes shall include an agreement as to the increase or decrease, if any, in the Contract Price of the VESSEL together with an agreement as to any extension or reduction in the time of delivery, or any other alterations in this Contract or the SPECIFICATIONS occasioned by such modifications and/or changes.
 
The aforementioned agreement to modify and/or change the SPECIFICATIONS may be effected by an exchange of letters signed by the authorized representatives of the parties hereto, or telefax confirmed in writing, manifesting such agreement. Such letters and confirmed message exchanged by the parties hereto pursuant to the foregoing shall constitute an amendment of the SPECIFICATIONS , and such letters and message shall be incorporated into this Contract and made a part hereof.
 
The BUILDER may make minor changes to the SPECIFICATIONS , if found necessary for introduction of improved production methods or otherwise, provided that the BUILDER shall first obtain the BUYER’s approval which shall not be unreasonably withheld.
 
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2.               Changes in Rules of Classification Society, Regulations, etc.:
 
If, after the date of signing this Contract, any requirements as to classification, or as to the rules and regulations to which the construction of the VESSEL is required to conform in accordance with the provisions of Article I. (3), are altered or changed by the Classification Society or regulatory bodies authorized to make such alterations or changes, either of the parties hereto upon receipt of information thereof, shall transmit such information in full to the other party in writing, thereupon within Twenty-one(21) days after receipt of the said notice from the other party, the BUYER shall instruct the BUILDER in writing if such alterations or changes shall be made in the VESSEL or not, in the BUYER’s sole discretion.
 
(a)           If such alterations or changes are compulsory for the construction of VESSEL, either of the parties hereto, upon receipt of such information from Classification Society or such other regulatory bodies, shall promptly transmit the same to the other in writing, and the BUILDER shall thereupon incorporate such alterations or changes into the construction of the VESSEL, provided that the BUYER shall first agree to reasonable and proven adjustments required by the BUILDER in the Contract Price, the Delivery Date and other terms and conditions of this Contract and the SPECIFICATIONS occasioned by or resulting from such alterations or changes.
 
(b)   If such alterations or changes are not compulsory for the construction of the VESSEL, and the BUYER desires to incorporate such alterations or changes into the construction of the VESSEL, then, the BUYER shall notify the BUILDER of such intention. The BUILDER may accept such alterations or changes, provided that such alterations or changes will not, in the judgement of the BUILDER, adversely affect the BUILDER’s planning or program in relation to the BUILDER’s other commitments, and provided, further, that the BUYER shall first agree to reasonable and proven adjustments required by the BUILDER in the Contract Price, the Delivery Date and other terms and conditions of this Contract and the SPECIFICATIONS occasioned by or resulting from such alterations or changes.
 
In the event of a disagreement on price and delivery, and in the event that such alterations or changes are compulsory for the construction of VESSEL, then the BUILDER shall proceed with the required alterations and the dispute related to the above shall be resolved in accordance with the provisions of Article XII.
 
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Such agreement by the BUYER shall be effected in the same manner as provided in Paragraph 1 of this Article for modifications and/or changes of the SPECIFICATIONS .
 
3.                           Substitution of Materials :
 
In the event that any of the materials required by the SPECIFICATIONS or otherwise under this Contract for the construction of the VESSEL can not be procured in time to effect delivery of the VESSEL, or are in short supply, the BUILDER may, provided the BUYER so agrees in writing, supply other materials and equipment of the best available and like quality, capable of meeting the requirements of the Classification Society and of the rules, regulations, requirements and recommendations with which the construction of the VESSEL must comply. Any agreement as to such substitution of materials shall be effected in the manner as provided in Paragraph 1 of this Article, and shall, likewise, include possible decrease or increase in the Contract Price and other terms and conditions of this Contract affected by such substitution.
 
(End of Article)
 
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ARTICLE VI - TRIALS AND ACCEPTANCE
 
Since the VESSEL is the repeat and series of BUILDER’s Hull Nos. 1639 and 1640, some sea trial items may be deleted subject to mutual agreement between the BUYER and the BUILDER
 
1.                           Notice :
 
The sea trial shall start when the VESSEL is reasonably completed according to the SPECIFICATIONS .
 
The BUILDER shall give the BUYER at least Twenty (20) days estimated prior notice and Seven(7) days confirming prior notice by telefax of the time and place of the trial run of the VESSEL, and the BUYER shall promptly acknowledge receipt of such notice. The BUYER shall have its representatives on board the VESSEL to witness such trial run. Failure in attendance of the BUYER’s representative at the trial run of the VESSEL for any reason whatsoever after due notice to the BUYER as above provided shall be deemed to be a waiver by the BUYER of its right to have its representative on board the VESSEL at the trial run, and the BUILDER may conduct the trial run without attendance of the BUYER’s representative, and in such case the BUYER shall be obligated to accept the VESSEL on the basis of a certificate of the BUILDER that the VESSEL, upon trial run, is found to conform to this Contract and the SPECIFICATIONS s.
 
2.                           Weather Condition :
 
The trial run shall be carried out under the weather condition which is deemed favourable enough by the judgement of the BUILDER. In the event of unfavourable weather on the date specified for the trial run, the same shall take place on the first available day thereafter that the weather condition permits. It is agreed that, if during the trial run of the VESSEL, the weather should suddenly become so unfavourable that orderly conduct of the trial run can no longer be continued, the trial run shall be discontinued and postponed until the first favourable day next following, unless the BUYER shall assent in writing to acceptance of the VESSEL on the basis of the trial run already made before such discontinuance has occurred. Any delay of trial run caused by such unfavourable weather condition shall operate to postpone the Delivery Date by the period of the delay involved and such delay shall be deemed as permissible delay in the delivery of the VESSEL.
 
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3.                     How Conducted :
 
 (a)                    The VESSEL shall run the official trial trip in the manner as specified in the SPECIFICATIONS .
 
  (b)                All expenses in connection with the trial run are to be for account of the BUILDER and the BUILDER shall provide, at its own expense, the necessary crew to comply with conditions of safe navigation, fuel oil, fresh water and other consumable stores necessary, the BUYER shall supply at its own expense lubricating oils and greases.
 
4.                           Method of Acceptance or Rejection :
 
 (a)                    Upon completion of the trial run, the BUILDER shall give the BUYER a notice by telefax of completion of the trial run, as and if the BUILDER considers that the results of trial run indicate conformity of the VESSEL to this Contract and the SPECIFICATIONS . The BUYER shall, within Five (5)days after receipt of such notice from the BUILDER, notify the BUILDER by telefax of its acceptance or rejection of the VESSEL’s conformity to this Contract and the SPECIFICATIONS .
 
 (b)                   However, should the result of the trial run show that the VESSEL, or any part or equipment thereof, does not conform to the requirements of this Contract and/or the SPECIFICATIONS , or if the BUILDER is in agreement to non-conformity as specified in the BUYER’s notice of rejection, then, the BUILDER shall take necessary steps to correct such non-conformity.
 
Upon completion of correction of such non-conformity, and re-test or trial if necessary, the BUILDER shall give the BUYER a notice thereof by telefax.
 
The BUYER shall, within Three (3) days after receipt of such notice from the BUILDER, notify the BUILDER of its acceptance or rejection of the VESSEL.
 
(c)               In any event that the BUYER rejects the VESSEL, the BUYER shall indicate in detail in its notice of rejection in what respect the VESSEL, or any part or equipment thereof does not conform to this Contract and/or the SPECIFICATIONS .
 
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 (d)                   In the event that the BUYER fails to notify the BUILDER by telefax of the acceptance of or the rejection together with the reason therefor of the VESSEL within the period as provided in the above Sub-paragraph (a) or (b), the BUYER shall be deemed to have accepted the VESSEL.
 
 (e)                    Any dispute between the BUILDER and the BUYER as to the conformity or non-conformity of the VESSEL to the requirements of this Contract and/or the SPECIFICATIONS shall be submitted for final decision in accordance with Article XII hereof.
 
5.                           Effect of Acceptance :
 
Acceptance of the VESSEL as above provided shall be final and binding so far as conformity of the VESSEL to this Contract and the SPECIFICATIONS is concerned and shall preclude the BUYER from refusing formal delivery of the VESSEL as hereinafter provided, if the BUILDER complies with all other procedural requirements for delivery as provided in Article VII hereof. However, the BUYER’s acceptance of the VESSEL shall not affect the BUYER’s right under Article IX hereof.
 
The BUYER may accept the VESSEL under protest with outstanding defects to be dealt under the guarantee provisions or made subject of a claim for damages.
 
6.                           Disposition of Surplus Consumable Stores
 
Any fuel oil or other furnished and paid for by the BUILDER for trial runs remaining on board the VESSEL, at the time of acceptance of the VESSEL by the BUYER, shall be bought by the BUYER from the BUILDER at the BUILDER’s purchase price for such supply in Korea and the payment by the BUYER thereof shall be made at the time of delivery of the VESSEL.
 
The BUILDER shall pay the BUYER at the time of delivery of the VESSEL an amount for the consumed quantity until delivery of any lubricating oil and greases which were furnished and paid for by the BUYER at the BUYER’s purchase price thereof. For avoidance of doubt, the practice of this Article VI. 6 shall follow the practice in construction of the BUILDER’s Hull Nos. 1639 and 1640.
 
(End of Article)
 
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  ARTICLE VII - DELIVERY
 
1.                           Time and Place :
 
The VESSEL shall be delivered by the BUILDER to the BUYER at the Shipyard on or before September 30, 2008, except that, in the event of delays in the construction of the VESSEL or any performance required under this Contract due to causes which under the terms of this Contract permit postponement of the date for delivery, the aforementioned date for delivery of the VESSEL shall be postponed accordingly.
 
The aforementioned date, or such later date to which the requirement of delivery is postponed pursuant to such terms, is herein called the “Delivery Date”.
 
2.                           When and How Effected :
 
Provided that the BUILDER and the BUYER shall have fulfilled all of their obligations stipulated under this Contract, the delivery of the VESSEL shall be effected forthwith by the concurrent delivery by each of the parties hereto to the other of the PROTOCOL OF DELIVERY AND ACCEPTANCE, acknowledging delivery of the VESSEL by the BUILDER and acceptance thereof by the BUYER.
 
3.                           Documents to be delivered to BUYER :
 
Upon delivery and acceptance of the VESSEL, the BUILDER shall deliver to the BUYER the following documents, which shall accompany the PROTOCOL OF DELIVERY AND ACCEPTANCE :
 
(a)                       PROTOCOL OF TRIALS of the VESSEL made pursuant to the SPECIFICATIONS .
 
(b)                      PROTOCOL OF INVENTORY of the equipment of the VESSEL, including spare parts and the like, as specified in the SPECIFICATIONS .
 
(c)                       PROTOCOL OF STORES OF CONSUMABLE NATURE referred to under Paragraph 6 of Article VI hereof.
 
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 (d)                   ALL CERTIFICATES including the BUILDERS’s CERTIFICATE required to be furnished upon delivery of the VESSEL pursuant to this Contract and the SPECIFICATIONS , necessary for the registration of the VESSEL and BUYER’s trading requirements.
 
It is agreed that if, through no fault on the part of the BUILDER, the Classifications certificates and/or other certificates are not available at the time of delivery of the VESSEL, provisional certificates shall be accepted by the BUYER, provided that the BUILDER shall furnish the BUYER with the formal certificates as promptly as possible after such certificates have been issued.
 
Application and certificate for statutory inspections for the registry of the VESSEL shall be arranged by the BUYER at its expense.
 
 (e)                    DECLARATION OF WARRANTY of the BUILDER that the VESSEL is delivered to the BUYER free and clear of any liens, charges, claims, mortgages, or other encumbrances upon the BUYER’s title thereto, and in particular that the VESSEL is absolutely free of all burdens in the nature of imposts, taxes or charges imposed by Korean Governmental Authorities, as well as of all liabilities of the BUILDER to its subcontractors, employees and crew, and of the liabilities arising from the operation of the VESSEL in trial runs, or otherwise, prior to delivery.
 
 (f)                      DRAWING AND PLANS pertaining to the VESSEL as stipulated in the      SPECIFICATIONS .
 
 (g)                   COMMERCIAL INVOICE.
 
4.                           Tender of VESSEL :
 
If the BUYER fails to take delivery of the VESSEL after completion thereof according to this Contract and the SPECIFICATIONS without any justifiable reason, the BUILDER shall have the right to tender delivery of the VESSEL after compliance with all procedural requirements as above provided.
 
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5.                           Title and Risk :
 
Title to and risk of loss of the VESSEL shall pass to the BUYER only upon the delivery and acceptance thereof having been completed as stated above; it being expressly understood that, until such delivery is effected, title to and risk of loss of the VESSEL and her equipment shall be in the BUILDER.
 
6.                           Removal of VESSEL :
 
The BUYER shall take possession of the VESSEL immediately upon delivery and acceptance thereof and shall remove the VESSEL from the premises of the Shipyard within Three (3) days after delivery and acceptance thereof is effected.
 
If the BUYER shall not remove the VESSEL from the premises of the Shipyard within the aforesaid Three (3) days, in such event, the BUYER shall pay to the BUILDER the reasonable mooring charges of the VESSEL.
 
(End of Article)
 
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ARTICLE VIII - DELAYS AND EXTENSION OF TIME FOR DELIVERY
(FORCE MAJEURE)
 
1.                           Causes of Delay (Force Majeure) :
 
If, at any time either the construction or delivery of the VESSEL or any performance required hereunder as a prerequisite to the delivery thereof is delayed by any of the following events; namely war, acts of state or government, blockade, revolution, insurrections, mobilization, civil commotion, riots, national strikes, sabotage, Acts of God or the public enemy, plague or other epidemics, quarantines, prolonged failure of electric current, freight embargoes, or defects in major forgings or castings or delay in BUYER’s supplied articles, if any, or defects in materials, machinery or equipment which could not have been detected by the BUILDER using reasonable care, or earthquakes, tidal waves, typhoons, hurricanes, prolonged or unusually severe weather conditions or by destruction of the premises or works of the BUILDER or its sub-contractors, or of the VESSEL, or any part thereof, by fire, landslides, flood, lightning, explosion, or other causes beyond the control of the BUILDER, or its sub-contractors, as the case may be, or for any other causes which, under the terms of this Contract, authorize and permit extension of the time for delivery of the VESSEL, then, in the event of delays due to the happening of any of the aforementioned contingencies, the Delivery Date of the VESSEL under this Contract shall be extended for a period of time which shall not exceed the total accumulated time of all such delays.
 
The enumerated contingencies shall not give rise to an extension of the delivery date unless :
 
i)                              The occurrence could not reasonably have been foreseen by the BUILDER at the date of signing of the Contract.
 
ii)                           The BUILDER shall have exercised reasonable due diligence to avoid or minimize the occurrence of such event.
 
iii)                        The BUILDER shall have used reasonable efforts to mitigate the duration and effects of such events of the construction schedule.
 
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2.                           Notice of Delay :
 
Within Fourteen (14) days after the date of occurrence of any cause of delay, on account of which the BUILDER claims that it is entitled under this Contract to a postponement of the Delivery Date, the BUILDER shall notify the BUYER in writing or by telefax confirmed in writing of the date when such cause of delay occurred. Likewise, within Fourteen (14) days after the date of ending of such cause of delay, the BUILDER shall notify the BUYER in writing or by telefax confirmed in writing of the date when such cause of delay ended.
 
The BUILDER shall also notify the BUYER of the period, by which the Delivery Date is postponed by reason of such cause of delay, with all reasonable dispatch after it has been determined. If the BUILDER does not give the timely advice as above, the BUILDER shall lose the right to claim such delays as permissible delay.
 
Failure of the BUYER to acknowledge to the BUILDER’s claim for postponement of the Delivery Date within Fourteen (14) days after receipt by the BUYER of such notice of claim shall be deemed to be a waiver by the BUYER of its right to object to such postponement of the Delivery Date.
 
3.                           Definition of Permissible Delay :
 
Delays on account of such causes as specified in Paragraph 1 of this Article and any other delay of a nature which under the terms of this Contract permits postponement of the Delivery Date shall be understood to be permissible delays and are to be distinguished from unauthorized delays on account of which the Contract Price is subject to adjustment as provided for in Article III hereof.
 
4.                           Right to Rescind for Excessive Delay :
 
If the total accumulated time of all delays whether permissible or not exceeds One Hundred and Eighty (180) days, then, in such event, the BUYER may rescind this Contract in accordance with the provisions of Article X hereof.
 
The accumulated time as above shall exclude the time lost due to BUYER’s Default or delays in the BUYER’s supplies. The BUILDER may, at any time after the accumulated time of the aforementioned delays justifying rescission by the BUYER, demand in writing that the BUYER shall make an election proposing a new delivery date, in which case the BUYER shall, within Fourteen (14) days
 
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after such demand is received by the BUYER, either notify the BUILDER of its intention to rescind this Contract, or consent to a postponement of the Delivery Date to an agreed specific future date; it being understood and agreed by the parties hereto that, if any further delay occurs on account of causes justifying rescission as specified in this Article, the BUYER shall have the same right of rescission upon the same terms as herein above provided.
 
(End of Article)
 
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ARTICLE IX - WARRANTY OF QUALITY
 
1.                           Guarantee :
 
The BUILDER, for the period of Twelve (12) months after delivery of the VESSEL (hereinafter called “Guarantee Period”), guarantees the VESSEL and her engine, including all parts and equipment manufactured, furnished or installed by the BUILDER under this Contract, and including the machinery, equipment and appurtenances thereof, under the Contract but excluding any item which is supplied or designated by the BUYER or by any other bodies on behalf of the BUYER, against all defects discovered within the Guarantee Period which are due to improper design, defective material, and/or poor workmanship or negligent or other improper acts or omissions on the part of the BUILDER or its subcontractors (hereinafter called the “Defect” or “Defects”) and are not a result of accident, ordinary wear and tear, misuse, mismanagement, negligent or other improper acts or omissions or neglect on the part of the BUYER, its employee or agents.
 
Upon rectification of an item claimed under this guarantee, this item shall be covered for further Twelve (12) months under the same terms and conditions. However, this is limited to a maximum of Twenty Four (24) months from delivery date.
 
2.                           Notice of Defects :
 
The BUYER shall notify the BUILDER in writing, or by telefax of any defect for which claim is made under this guarantee, as promptly as possible after discovery thereof. The BUYER’s notice shall describe in detail the nature, cause if known and extent of the Defects.
 
The BUILDER shall have no obligation for any Defect discovered prior to the expiry date of the Guarantee Period, unless notice of such Defect is received by the BUILDER not later than Twenty (20) days after such expiry date.
 
3.                           Remedy of Defects :
 
(a)                       The BUILDER shall remedy, at its expense, any Defect against which the VESSEL is guaranteed under this Article, by making all necessary repairs or replacements at the Shipyard.
 
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(b)                      However, if the BUYER should determine that it is commercially or operationally impracticable to bring the VESSEL to the Shipyard, the BUYER may cause the necessary repairs or replacements to be made elsewhere which is deemed suitable for the purpose, provided that, in such event, the BUILDER may forward or supply replacement parts or materials to the BUYER’s agent to be designated by the BUYER in writing , unless forwarding or supplying thereof the VESSEL would impair or delay the operation of working schedule of the VESSEL. In the event that the BUYER proposes to cause the necessary repairs or replacements for the VESSEL to be made at any other shipyard or works than the Shipyard, the BUYER shall first, but in all events as soon as possible, give the BUILDER a notice in writing or by telefax confirmed in writing of the time and place when and where such repairs will be made, and if the VESSEL is not thereby delayed, or her operation or working schedule is not thereby impaired, the BUILDER shall have the right to verify by its own representative(s) the nature, cause and extent of the Defects complained of. The BUILDER shall, in such case, promptly advise the BUYER by telefax, after such examination has been completed, of its acceptance or rejection of the Defects as ones that are covered by the guarantee herein provided. Upon the BUILDER’s acceptance of the Defects as justifying remedy under this Article, or upon award of the arbitration so determining, the BUILDER shall pay to the BUYER for such repairs or replacements justified reasonable and proven actual cost of repairs or replacements.
 
(c)                       The reimbursement of the costs incurred in relation to guarantee works shall be paid in a lumpsum after expiration of the guarantee period.
 
(d)                      In any case, the VESSEL shall be taken, at the BUYER’s cost and responsibility, to the place elected, ready in all respects for such repairs or replacement.
 
(e)                       Any dispute under this Article shall be referred to arbitration in accordance with the provisions of Article XII hereof.
 
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4.                           Extent of BUILDER’s Responsibility :
 
 (a)                    The BUILDER shall have no responsibility or liability for any other defect whatsoever in the VESSEL than the Defects specified in Paragraph 1 of this Article. Nor the BUILDER shall in any circumstance be responsible or liable for any consequential or special loss, damage or expense including but not limited to loss of time, loss of profit of earning or demurrage directly or indirectly occasioned to the BUYER by reason of the Defects specified in Paragraph 1 of this Article or due to repairs or other works done to the VESSEL to remedy such Defects.
 
 (b)                   The BUILDER shall not be responsible for any defect in any part of the VESSEL which may, subsequently to delivery of the VESSEL, have been replaced or repaired in any way by any other contractor unless the BUILDER has not objected the contractor to perform guarantee repairs, or for any defect which have been caused or aggravated by omission or improper use and maintenance of the VESSEL on the part of the BUYER, its servants or agents or by ordinary wear and tear or by any other cause beyond the control of the BUILDER.
 
 (c)                    The guarantee contained as hereinabove in this Article replaces and excludes any other liability, guarantee, warranty and/or condition imposed or implied by the law, customary, statutory or otherwise, by reason of the construction and sale of the VESSEL by the BUILDER for and to the BUYER.
 
5.                           Guarantee Engineer :
 
The BUILDER shall have the right to appoint a Guarantee Engineer to serve on the VESSEL as its representative for a period of Three (3) months from the date the VESSEL is delivered. However, if the BUYER and the BUILDER shall deem it necessary to keep the Guarantee Engineer on the VESSEL for a longer period, then he shall remain on board the VESSEL after the said Three (3) months, but not longer than Six (6) months from the delivery of the VESSEL.
 
The BUYER, and its employees, shall give such Guarantee Engineer full cooperation in carrying out his duties as the representative of the BUILDER on board the VESSEL.
 
The Guarantee Engineer shall sign BUYER’s Indemnity Forms and shall at all times deemed to be an employee of the BUILDER.
 
The BUYER shall accord the Guarantee Engineer treatment comparable to the
 
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VESSEL’s Chief Engineer, and shall provide board and lodging at no cost to the BUILDER and/or the Guarantee Engineer.
 
While the Guarantee Engineer is on board the VESSEL, the BUYER shall pay to the BUILDER the sum of Seven Thousand United States Dollars (US$ 7,000.-) per month as a compensation for a part of cost and charges to be borne by the BUILDER in connection with Guarantee Engineer and also shall pay the expenses of his repatriation to Seoul, Korea by air upon termination of his service, the expenses of his communication with the BUILDER incurred in performing his duties and expenses, if any, of his medical and hospital care in the VESSEL’s hospital.
 
Pertaining to the detailed particulars of this Paragraph, an agreement will be made according to this effect between the parties hereto upon delivery of the VESSEL.
 
(End of Article)
 
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ARTICLE X - RESCISSION BY BUYER
 
1.                           Notice :
 
The payments made by the BUYER prior to delivery of the VESSEL shall be in the nature of advances to the BUILDER, and in the event that the VESSEL after sea trial is rejected by the BUYER or the VESSEL is cancelled by the BUYER in accordance with the terms of this Contract under and pursuant to any of the provisions of this Contract specifically permitting the BUYER to do so and in the event that the Contract is rescinded by the BUYER under and pursuant to any of the provisions of this Contract specially permitting the BUYER, then the BUYER shall notify the BUILDER in writing or by telefax confirmed in writing, and such rescission shall be effective as of the date when notice thereof is received by the BUILDER.
 
2.                           Refundment by BUILDER :
 
In case the BUILDER receives the notice stipulated in Paragraph 1 of this Article, the BUILDER shall promptly refund to the BUYER the full amount of all sums paid by the BUYER to the BUILDER on account of the VESSEL together with the interest thereon, unless the BUILDER proceeds to the arbitration under the provisions of Article XII hereof.
 
In such event, the BUILDER shall pay the BUYER interest at the rate of Six percent (6.0%)per annum on the amount required herein to be refunded to the BUYER, computed from the dates following on which such sums were paid by the BUYER to the BUILDER to the date of remittance by transfer of such refund to the BUYER by the BUILDER.
 
As security for refund of instalments prior to delivery of the VESSEL, the BUILDER shall furnish the BUYER within Fourteen (14) calendar days after the Contract signing with a letter of guarantee covering the amount of such pre-delivery instalments in favour of the BUYER. Such letter of guarantee shall have substantially the same form and substance as Exhibit ”A” annexed hereto.
 
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3.                           Discharge of Obligations :
 
Upon such refund by the BUILDER to the BUYER, all obligations, duties and liabilities of each of the parties hereto to the other under this Contract shall be forthwith completely discharged .
 
(End of Article)
 
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ARTICLE XI - BUYER’S DEFAULT
 
1.                           Definition of Default :
 
The BUYER shall be deemed to be in default of its performance of obligations under this Contract in the following cases :
 
(a)                       If the first, second, third, fourth or fifth instalment are not paid by the BUYER to the BUILDER within Five (5) banking days after such instalment becomes due and payable as provided in Article II hereof;
 
or
 
(b)                      If the Delivery instalment is not paid by the BUYER to the BUILDER concurrently with the delivery of the VESSEL as provided in Article II hereof;
 
or
 
(c)                       If the BUYER, when the VESSEL is duly tendered for delivery by the BUILDER:
 
i)                            fails to take delivery of the VESSEL within Five (5) banking days from tendered date
 
ii)                           having initiated the arbitration procedure the BUYER does not accept delivery within Seven (7) days of an arbitration award which is not appealed.
 
2.                           Effect of Default on or before Delivery of VESSEL :
 
 (a)                    Should the BUYER make default in payment of any instalment of the Contract Price on or before delivery of the VESSEL, the BUYER shall pay the instalment(s) in default plus accrued interest thereon at the rate of Six percent (6.0%) per annum computed from the due date of such instalment to the date when the BUILDER receives the payment, and, for the purpose of Paragraph 1 of Article VII hereof the Delivery Date of the VESSEL shall be automatically extended by the period of continuance of such default by the BUYER. In any event of default by the BUYER, the BUYER shall also pay direct charges and expenses incurred by the BUILDER in consequence of such default after mutual agreement.
 
(b)                    If any default by the BUYER continues for a period of Ten (10) days after the BUILDER’s notification, the BUILDER may, at its option, rescind this Contract by giving notice of such effect to the BUYER by telefax confirmed in writing.
 
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Upon dispatch by the BUILDER of such notice of rescission, this Contract shall be forthwith rescinded and terminated. In the event of such rescission of this Contract, the BUILDER shall be entitled to retain any instalment or instalments already paid by the BUYER to the BUILDER on account of this Contract and the BUYER’s Supplies, if any.
 
3.                           Disposal of VESSEL :
 
 (a)                    In the event that this Contract is rescinded by the BUILDER under the provisions of Paragraph 2(b) of this Article, the BUILDER may, at its sole discretion, either complete the VESSEL and sell the same, or sell the VESSEL in its incomplete state, free of any right or claim of the BUYER. Such sale of the VESSEL by the BUILDER shall be either by public auction or private contract at the BUILDER’s sole discretion and on such terms and conditions as the BUILDER shall deem fit.
 
 (b)                   In the event of such sale of the VESSEL, the amount of the sale received by the BUILDER shall be applied firstly to all expenses attending such sale or otherwise incurred by the BUILDER as a result of the BUYER’s default, secondly to the payment of all costs and expenses of construction of the VESSEL incurred by the BUILDER less BUYER’s Supplies and the instalments already paid by the BUYER and the compensation to the BUILDER for a reasonable loss of profit due to rescission of this Contract, and finally to the repayment to the BUYER without interest, if any balance is obtained.
 
(c)                       If the proceeds of sale are insufficient to pay such total costs and loss of profit as aforesaid, the BUYER shall promptly pay the deficiency to the BUILDER upon request.
 
(End of Article)
 
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ARTICLE XII - ARBITRATION
 
1.                           Decision by the Classification Society :
 
If any dispute arises between the parties hereto in regard to the design and/or construction of the VESSEL, its machinery and equipment, and/or in respect of the materials and/or workmanship thereof and/or thereon, and/or in respect of interpretations of this Contract or the SPECIFICATIONS , the parties may by mutual agreement refer the dispute to the Classification Society or to such other expert as may be mutually agreed between the parties hereto, and whose decision shall be final, conclusive and binding upon the parties hereto.
 
2.                           Proceedings of Arbitration :
 
In the event that the parties hereto do not agree to settle a dispute according to Paragraph 1 of this Article and/or in the event of any other dispute of any kind whatsoever between the parties and relating to this Contract or its rescission or any stipulation herein, such dispute shall be submitted to arbitration in London. Each party shall appoint an arbitrator and in the event that they cannot agree, the two arbitrators so appointed shall appoint an Umpire.
 
If the two arbitrators are unable to agree upon an Umpire within Twenty(20) days after appointment of the second arbitrator, either of the said two arbitrators may apply to the President for the time being of the London Maritime Arbitrators Association to appoint the third arbitrator, and the three arbitrators shall constitute the board of arbitration.
 
Such arbitration shall be in accordance with and subject to the provisions of the English Arbitration Act 1996 or any statutory modification or re-enactment thereof for the time being in force.
 
The Arbitration shall be conducted in accordance with the rules in force of the London Maritime Arbitrators Association.
 
Either party may demand arbitration of any such dispute by giving notice to the other party. Any demand for arbitration by either of the parties hereto shall state the name of the arbitrator appointed by such party and shall also state specifically the question or questions as to which such party is demanding arbitration.
 
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Within Fourteen(14) days after receipt of notice of such demand for arbitration, the other party shall in turn appoint a second arbitrator and give notice in writing of such appointment to the party demanding arbitration. If a party fails to appoint an arbitrator as aforementioned within Fourteen(14) days following receipt of notice of demand for arbitration by the other party, the party failing to appoint an arbitrator shall be deemed to have accepted and appointed, as its own arbitrator, the arbitrator appointed by the party demanding arbitration and the arbitration shall proceed before this sole arbitrator who alone in such event shall constitute the Arbitration Board.
 
The award of the arbitrators and/or Umpire shall be final and binding on both parties.
 
3.                           Notice of Award :
 
The award shall immediately be given to the BUYER and the BUILDER by telefax.
 
4.                           Expenses :
 
The Arbitration Board shall determine which party shall bear the expenses of the arbitration or the portion of such expenses which each party shall bear.
 
5.                           Entry in Court :
 
In case of failure by either party to respect the award of the arbitration, the judgement may be entered in any proper court having jurisdiction thereof.
 
6.                           Alteration of Delivery Date :
 
In the event of reference to arbitration of any dispute arising out of matters occurring prior to delivery of the VESSEL, the award may include any postponement of the Delivery Date which the Arbitration Board may deem appropriate.
 
(End of Article)
 
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ARTICLE XIII - SUCCESSOR AND ASSIGNS
 
Neither of the parties hereto shall assign this Contract to any other individual or company save as provided hereto. unless prior consent of the other party is given in writing. Should circumstances permit with or without alteration of the terms and conditions of this Contract, such consent shall not be unreasonably withheld by either party.
 
The BUYER is hereby allowed to assign the Contract for the purposes of financing.
 
The BUYER is further allowed to nominate a company controlled by the BUYER to take over the Contract.
 
The BUILDER shall fully cooperate in case the BUYER requests UK Tax lease financing arrangements.
 
In the event of any assignment pursuant to the terms of this Contract, the assignee shall succeed to all of the rights and obligations of the assignor under this Contract and the assignor shall remain responsible for the fulfillment of this Contract.
 
In the event of the assignment from the BUYER to any other individual or company the BUILDER shall be entitled to request a Performance Guarantee from the BUYER having same form and contents as Exhibit ”C” annexed hereto.
 
The BUYER and the BUILDER understand and acknowledge that the VESSEL shall be built and constructed as a repeat and series vessel of the BUILDER’s Hull Nos. 1639 and 1640 as stipulated in this Contract. Thus, i n the event of a resale, assignment and novation of the VESSEL, any and all matters determined by mutual agreement between the BUYER and the BUILDER prior to the resale, assignment and novation of the VESSEL shall be accepted and complied by the New BUYER (i.e., assignee). If the New BUYER or its supervisor makes unreasonable requests that may have a significant impact on the delivery schedule of the VESSEL and/or costs of construction (including, without limitation to, request for fundamental change of ship type or excessive revision of design specifications, etc.), the BUILDER shall be entitled to refuse these requests. The BUYER shall notify the above to the New BUYER before assignment or novation and the New BUYER will have to accept any additional cost related to the new supervision.
 
(End of Article)
 
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ARTICLE XIV - TAXES AND DUTIES
 
1.                           Taxes and Duties Incurred in Korea :
 
The BUILDER shall bear and pay all taxes, duties, stamps and fees incurred in Korea in connection with execution and/or performance of this Contract as the BUILDER, except for any taxes and duties imposed in Korea upon the BUYER’s Supplies.
 
2.                           Taxes and Duties Incurred outside Korea :
 
The BUILDER shall bear and pay all taxes, duties, stamps and fees incurred outside Korea in connection with execution and/or performance of this Contract including guarantee matter as the BUILDER.
 
The BUYER shall bear and pay all taxes, duties, stamps and fees incurred outside Korea in connection with execution and/or performance of this Contract as the BUYER.
 
(End of Article)
 
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ARTICLE XV - PATENTS, TRADEMARKS, COPYRIGHTS, ETC.
 
1.                           Patents, Trademarks and Copyrights :
 
Machinery and equipment of the VESSEL may bear the patent number trademarks or trade names of the manufacturers. The BUILDER shall defend and hold harmless the BUYER from patent liability or claims of patent infringement of any nature or kind, including costs and expenses for, or on account of any patented or patentable invention made or used in the performance of this Contract and also including costs and expenses of litigation, if any.
 
Nothing contained herein shall be construed as transferring any patent or trademark rights or copyrights in equipment covered by this Contract, and all such rights are hereby expressly reserved to the true and lawful owners thereof.
 
The BUILDER’s warranty hereunder does not extend to the BUYER’s Supplies.
 
2.                           General Plans, Specifications and Working Drawings :
 
The BUILDER retains all rights with respect to the SPECIFICATIONS , and plans and working drawings, technical descriptions, calculations, test results and other data, information and documents concerning the design and construction of the VESSEL and the BUYER undertakes therefore not to disclose the same or divulge any information contained therein to any third parties, without the prior written consent of the BUILDER, except where it is necessary for usual operation, repair , registration, classification, chartering, sale and maintenance of the VESSEL.
 
(End of Article)
 
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ARTICLE XVI - BUYER’S SUPPLIES
 
1.                           Responsibility of BUYER :
 
(a)               The BUYER shall, at its own risk, cost and expense, supply and deliver to the BUILDER all of the items to be furnished by the BUYER as specified in the SPECIFICATINS (herein called the BUYER’s Supplies) at warehouse or other storage of the Shipyard in the proper condition ready for installation in or on the VESSEL, in accordance with the time schedule designated and advised by the BUILDER to the BUYER within 60 days from signing this Contract.
 
 (b)                   In order to facilitate installation by the BUILDER of the BUYER’s Supplies in or on the VESSEL, the BUYER shall furnish the BUILDER with necessary specifications, plans, drawings, instruction books, manuals, test reports and certificates required by the rules and regulations of the SPECIFICATIONS .
 
If so requested by the BUILDER, the BUYER shall, without any charge to the BUILDER, cause the representatives of the manufacturers of the BUYER’s Supplies to assist the BUILDER in installation thereof in or on the VESSEL and/or to carry out installation thereof by themselves or to make necessary adjustments at the Shipyard.
 
 (c)                    Any and all of the BUYER’s Supplies shall be subject to the BUILDER’s reasonable right of rejection, as and if they are found to be unsuitable or in improper condition for installation.
 
 (d)                   Should the BUYER fail to deliver any of the BUYER’s Supplies within the time designated, the Delivery Date shall be automatically extended for a period which actually caused the delay in the delivery of the VESSEL.
 
 (e)                    If delay in delivery of any of the BUYER’s Supplies exceeds thirty (30) days, then, the BUILDER shall be entitled to proceed with construction of the VESSEL without installation thereof in or on the VESSEL as hereinabove provided, and the BUYER shall accept and take delivery of the VESSEL so constructed, unless such delay is caused by Force Majeure in which case the provision Paragraph 1(d) of this Article shall apply.
 
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2.                           Responsibility of BUILDER :
 
The BUILDER shall be responsible for storing and handling with reasonable care of the BUYER’s Supplies after delivery thereof at the Shipyard, and shall, at its own cost and expense, install them in or on the VESSEL, unless otherwise provided herein or agreed by the parties hereto, provided, always, that the BUILDER shall not be responsible for quality, efficiency and/or performance of any of the BUYER’s Supplies.
 
(End of Article)
 
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ARTICLE XVII - INSURANCE
 
1.                           Extent of Insurance Coverage
 
From the time of launching until delivery of the VESSEL, the BUILDER shall, at its own cost and expense, insure the VESSEL and all machinery and equipment, appurtenances and outfits, including the BUYER’s Supplies, built into or installed in or upon the VESSEL, against all risks under the “Institute Causes for BUILDER’s Risk”, with first class insurance company or underwriters in Korea.
 
The amount of such insurance coverage shall, up to the date of delivery of the VESSEL, not be less than the aggregate amount of all instalments paid by the BUYER to the BUILDER, plus the value of the BUYER’s Supplies in the custody of the Shipyard.
 
2.                           Application of the Recovered Amounts
 
In the event that the VESSEL shall be damaged from any insured cause at any time before delivery of the VESSEL, and in the further event that such damage shall not constitute an actual or constructive total loss of the VESSEL, the amount received in respect of the insurance shall be applied by the BUILDER in repair of such damage, satisfactory to the Classification Society, and the BUYER shall accept the VESSEL under this Contract if completed in accordance with this Contract and the SPECIFICATIONS , however, subject to the extension of delivery time under Article VIII hereof (except in case of negligence of the BUILDER).
 
Should the VESSEL from any cause become an actual or constructive total loss, the BUILDER shall either :
 
 (a)                    proceed in accordance with the terms of this Contract, in which case the amount received in respect of the insurance shall be applied to the construction and repair of damage of the VESSEL, provided the parties hereto shall have first agreed thereto in writing and to such reasonable extension of delivery time as may be necessary for the completion of such reconstruction and repair ; or
 
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 (b)                   refund promptly to the BUYER the full amount of all sums paid by the BUYER to the BUILDER as instalments in advance of delivery of the VESSEL with Six percent (6.0%) interest, and deliver to the BUYER all BUYER’s Supplies (or the insurance proceeds paid with respect thereto), in which case this Contract shall be deemed to be automatically terminated and all right, duties, liabilities and obligations of each of the parties to the other shall forthwith cease and terminate.
 
3.                           Termination of BUILDER’s Obligation to Insure
 
The BUILDER shall be under no obligation to insure the VESSEL hereunder after delivery and acceptance of the VESSEL.
 
(End of Article)
 
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ARTICLE XVIII – NOTICE
 
1.                           Address :
 
Any and all notices and communications in connection with this Contract shall be addressed as follows :
 
To the BUYER :
Channelview Marine Inc.
80 Broad Street, Monrovia, Liberia
Cable address :    CHAMAR
Telefax No.  :        231-7-7000-422
 
To the BUILDER:
 
Samsung Heavy Industries Co., Ltd.
647-9, 11 th Floor, KIPS Building, Yeoksam-Dong, Kangnam-Ku,
Seoul, Korea
Cable address : SSYARD SEOUL
Telefax No. : (+82 2) 3458-7349, (+82 2) 3458-7319
 
or preferably to its Geoje Yard :
 
Samsung Heavy Industries Co., Ltd.
P.O.BOX Gohyun 9
530, Jangpyung-Ri, Shinhyun-Up, Geoje-Si, Kyungnam, Korea

Telefax No. :	(+82 55) 630-4947 (Design Department)	
 	(+82 55) 630-4978 (Customer Satisfaction Team.)	
 
2.                           Language :
 
Any and all notices and communications in connection with this Contract shall be written in the English language.
 
52

 
3.                           Effective Date of Notice :
 
The notice in connection with this Contract shall become effective from the date when such notice is received by the BUYER or by the BUILDER except otherwise described in the Contract.
 
(End of Article)
 
53

 
ARTICLE XIX - EFFECTIVE DATE OF CONTRACT
 
This Contract shall become effective upon signing by the parties hereto.
 
(End of Article)
 
54

 
ARTICLE XX - INTERPRETATION
 
1.                           Laws Applicable :
 
The parties hereto agree that the validity and interpretation of this Contract and of each Article and part thereof shall be governed by the laws of England.
 
2.                           Discrepancies :
 
All general language or requirements embodied in the SPECIFICATIONS are intended to amplify, explain and implement the requirements of this Contract. However, in the event that any language or requirements so embodied permit of an interpretation inconsistent with any provisions of this Contract, then, in each and every such event, the applicable provisions of this Contract shall prevail and govern. In the event of conflict between the SPECIFICATIONS and Plans, the SPECIFICATIONS shall prevail and govern.
 
3.                           Entire Agreement :
 
This Contract contains the entire agreement and understanding between the parties hereto and supersedes all prior negotiations, representations, undertaking and agreements on any subject matter of this Contract.
 
4.                           Amendments and Supplements :
 
Any supplement, memorandum of understanding or amendment, whatsoever form it may be relating to this Contract, to be made and signed among parties hereof after signing this Contract, shall be the integral part of this Contract and shall be predominant over the respective corresponding Article and/or Paragraph of this Contract.
 
The Contract can only be amended in writing.
 
(End of Article)
 
55

 
IN WITNESS WHEREOF, the parties hereto have caused this Contract to be duly executed on the day and year first above written.

BUYER :	BUILDER :	
CHANNELVIEW MARINE INC.	SAMSUNG HEAVY IND., CO., LTD.	

/s/ John Coustas	 	 	/s/ J. W. Kim	 	
By    :	John Coustas	 	By   :   J. W. Kim	
Title :	Attorney-In-Fact	Title :	President & CEO	

56

 
EXHIBIT  “ A”
 
LETTER OF REFUNDMENT GUARANTEE
 
Gentlemen :
 
We hereby issue our letter of guarantee no.              in favour of Channelview Marine Inc.,(hereinafter called the “BUYER”) for account of Samsung Heavy Industries Co., Ltd.(hereinafter called the “BUILDER”) as follows in consideration of the shipbuilding contract dated March 28, 2006 (hereinafter called the “Contract”) made by and among the BUYER and the BUILDER for the construction of one(1) single screw diesel engine driven Container VESSEL having BUILDER’s Hull No. 1671 (hereinafter called the “VESSEL”).
 
If in connection with the terms of the Contract the BUYER shall become entitled to a refund of the advance payment(s) made to the BUILDER prior to the delivery of the VESSEL, we hereby irrevocably guarantee the repayment of the same to the BUYER immediately on demand being initially US$ 6,380,000.- (Say U.S. Dollars Six Million Three Hundred and Eighty Thousand only) together with interest thereon at the rate of Six (6) percent per annum from the respective dates on which such sums were paid by the BUILDER to the date of remittance by telegraphic transfer of such refund.
 
The amount of this guarantee will be automatically increased, not more than three times, upon BUILDER’s receipt of the respective instalment: each time by the amount of instalment of US$ 6,380,000.- (Say U.S. Dollars Six Million Three Hundred and Eighty Thousand only), US$ 6,380,000.- (Say U.S. Dollars Six Million Three Hundred and Eighty Thousand only) and US$ 6,380,000.- (Say U.S. Dollars Six Million Three Hundred and Eighty Thousand only) respectively plus interest thereon as provided in the Contract, but in any eventuality the amount of this guarantee shall not exceed the total sum of US$ 25,520,000.- (Say U.S. Dollars Twenty Five Million Five Hundred and Twenty Thousand only) plus interest thereon at the rate of Six (6) percent per annum from the respective dates on which such sums were paid by the BUYER to the BUILDER to the date of remittance by telegraphic transfer of the refund.
 
Our liability under this letter of guarantee shall not be affected by any alteration to or variation of the terms of the Contract you may hereafter agree with the BUILDER and by any other matter of circumstances, including bankruptcy or insolvency of the BUILDER, which might otherwise discharge our liability hereunder as guarantor of the BUILDER’s obligations as aforesaid.
 
57

 
In case any refund is made to you by the BUILDER or by us under this guarantee, our liability hereunder shall be automatically reduced by the amount of such refund.
 
This letter of guarantee is available against BUYER’s simple receipt and signed statement certifying that BUYER’s demand for refund has been made in conformity with Article X of the Contract and the BUILDER has failed to make the refund within Thirty One (31) days after BUYER’s demand to the BUILDER.
 
Refund shall be made to BUYER by telegraphic transfer in United States Dollars to an account designated by you without deduction, withholding or set-off.
 
This letter of guarantee shall expire and become null and void upon receipt by the BUYER of the sum guaranteed hereby or upon acceptance by the BUYER of the delivery of the VESSEL in accordance with the terms of the Contract and, in either case, this letter of guarantee shall be returned to us. This guarantee is valid from the date of this letter of guarantee until or in the event of delayed delivery until such time as the VESSEL is delivered by the BUILDER to the BUYER in accordance with the terms of the Contract.
 
Notwithstanding the provisions hereinabove, in case we receive notification from you or the BUILDER confirmed by an Arbitrator stating that your claim to cancel the Contract or your claim for refundment thereunder has been disputed and referred to Arbitration in accordance with the provisions of the Contract, the period of validity of this guarantee shall be extended until Thirty (30) days after the final and non-appealable award shall be rendered in the Arbitration and a copy thereof acknowledged by the Arbitrators. In such case, this guarantee shall not be available unless and until such acknowledged copy of the final award in the Arbitration justifying your claim is presented to us.
 
Your rights in respect of this letter of guarantee are assignable from the date of this letter of guarantee until such time as the VESSEL is delivered by the BUILDER to the BUYER in accordance with the provisions of the Contract, on the understanding that you will notify us of the identity of any assignee of your rights under this letter of guarantee.
 
Any notice or demand under this letter of guarantee shall be given by facsimile and sent to:
 
58

 

 
 
or to such other address as we might notify to you in writing. A notice shall be deemed to be served and shall take effect 2 hours after its transmission is completed, provided that if a notice would be deemed to be served on a day which is not a business day, or which is a business day but after 5:00 p.m. local time, in the place of receipt, the notice shall be deemed to be served and shall take effect at 9:00 a.m. on the next day which is a business day.
 
This guarantee shall be governed by and construed in accordance with the Laws of England. Any disputes arising under this guarantee (but not any disputes arising under the Contract which shall be determined by arbitration in accordance with the terms of the Contract and as referenced in this letter of guarantee) shall be determined by the High Court of Justice in London to whose exclusive jurisdiction we hereby submit. We appoint
 
                                                                                                              as our agents for service of process in connection with any proceedings in such courts.
 
We each jointly and severally hereby represent and guarantee that we have the corporate power and authority to execute, deliver and perform the obligations under this letter of guarantee, and that such execution and performance will not violate or conflict with any provision of law, statute, rule, permit or regulation of any government, regulatory body, agency or other authority in the jurisdictions where we are subject to such laws and regulations.
 
59

 
IN WITNESS WHEREOF, we have hereunder set our hands and seal by our duly authorized representatives this          day of                 , 2006.

 	Very truly yours,	

 	For and on behalf of	

 	By	 	 	
 	Name :	
 	Title : Attorney-in-Fact	

 	For and on behalf of	
 	 	 	
 	By	 	 	
 	Name :	
 	Title : Attorney-in-Fact	
 
60

 
EXHIBIT  “ B”
 
Samsung Heavy Industries Co., Ltd.
11 th Floor, KIPS Building
647-9, Yoksam-Dong, Kangnam-Ku,
Seoul, Korea 135-080
 
Date :                                   , 2006
 
PERFORMANCE GUARANTEE
 
In consideration of the performance of a certain shipbuilding contract dated                       (hereinafter called the “Contract”) by CHANNELVIEW MARINE INC. of 80 Broad street, Monrovia, Liberia having your Hull No.1671 (hereinafter called the “VESSEL”) providing among other things for payment of the Contract Price amounting to United States Dollars             (US$              );
 
We, the undersigned, hereby irrevocably and unconditionally guarantee to you, your successors, and assigns the due and faithful performance by the BUYER of its all liabilities and responsibilities under the Contract and any supplement, amendment, change or modification hereafter made thereto, including but not limited to, due and prompt payment of the Contract Price by the BUYER to you, your successors, and assigns under the Contract and any supplement, amendment, change or modification as aforesaid (hereby expressly waiving notice of any such supplement, amendment, change or modification as may be agreed to by the BUYER and confirming that this guarantee shall be fully applicable to the Contract as so supplemented, amended, changed or modified).
 
This Performance Guarantee shall be governed by the laws of England.

GUARANTOR :	
BY :	 	 	
TITLE :	
WITNESS :	
 
61

 
EXHIBIT  “ C”
 
Samsung Heavy Industries Co., Ltd.
11 th Floor, KIPS Building
647-9, Yoksam-Dong, Kangnam-Ku,
Seoul, Korea 135-080
 
Date :                                             , 2006
 
PERFORMANCE GUARANTEE
 
In consideration of the assignment of a certain shipbuilding contract dated                    (hereinafter called the “Contract”) by us to        having your Hull No.1671 (hereinafter called the “VESSEL”) providing among other things for payment of the Contract Price amounting to United States Dollars            (US$              );
 
We, the undersigned, hereby irrevocably and unconditionally guarantee to you, your successors, and assigns the due and faithful performance by the BUYER of its all liabilities and responsibilities under the Contract and any supplement, amendment, change or modification hereafter made thereto, including but not limited to, due and prompt payment of the Contract Price by the BUYER to you, your successors, and assigns under the Contract and any supplement, amendment, change or modification as aforesaid (hereby expressly waiving notice of any such supplement, amendment, change or modification as may be agreed to by the BUYER and confirming that this guarantee shall be fully applicable to the Contract as so supplemented, amended, changed or modified).
 
This Performance Guarantee shall be governed by the laws of England.

GUARANTOR :	
BY :	 	 	
TITLE :	
WITNESS :	
 
62

 
Exhibit 10.23
 
FOR
 
CONSTRUCTION AND SALE
 
OF
 
A 4,250 TEU CONTAINER VESSEL
(HULL NO. 1672)

BETWEEN
 
Balticsea Marine Inc.
As BUYER
 
AND

Samsung Heavy Industries Co., Ltd.
As BUILDER

 
I N D E X

 	 	PAGE	
 	 	 	
PREAMBLE	 	7	
 	 	 	
ARTICLE I - DESCRIPTION AND CLASS	 	 	
 	 	 	
1. Description	 	8	
2. Dimensions and Characteristics	 	8	
3. Classification, Rules and Regulations	 	9	
4. Subcontracting	 	10	
5. Registration	 	10	
 	 	 	
ARTICLE II - CONTRACT PRICE AND TERMS OF PAYMENT	 	 	
 	 	 	
1. Contract Price	 	11	
2. Adjustment of Contract price	 	11	
3. Currency	 	11	
4. Terms of Payment	 	11	
5. Method of Payment	 	12	
6. Notice of Payment on or before Delivery	 	13	
7. Expenses	 	13	
8. Prepayment	 	13	
9. Performance Guarantee	 	14	
 	 	 	
ARTICLE III - ADJUSTMENT OF CONTRACT PRICE	 	 	
 	 	 	
1. Delivery	 	15	
2. Speed	 	16	
3. Fuel Consumption	 	17	
4. Deadweight	 	17	
5. Early Delivery	 	18	
6. Effect of Rescission	 	18	
 
2

 

ARTICLE IV - APPROVAL OF PLANS AND DRAWINGS AND INSPECTION DURING CONSTRUCTION	 	 	
 	 	 	
1. Approval of Plans and Drawings	 	19	
2. Appointment of BUYER’s Supervisor	 	19	
3. Inspection by the Supervisor	 	20	
4. Facilities	 	21	
5. Liability of BUILDER	 	21	
6. Responsibility of BUYER	 	22	
 	 	 	
ARTICLE V - MODIFICATIONS, CHANGES AND EXTRAS	 	 	
 	 	 	
1. How Effected	 	23	
2. Change in Rules of Classification Society, Regulations etc	 	24	
3. Substitution of Materials	 	25	
 	 	 	
ARTICLE VI - TRIALS AND ACCEPTANCE	 	 	
 	 	 	
1. Notice	 	26	
2. Weather Condition	 	26	
3. How Conducted	 	27	
4. Method of Acceptance of Rejection	 	27	
5. Effect of Acceptance	 	28	
6. Disposition of Surplus Consumable Stores	 	28	
 	 	 	
ARTICLE VII - DELIVERY	 	 	
 	 	 	
1. Time and Place	 	29	
2. When and How Effected	 	29	
3. Documents to be delivered to BUYER	 	29	
4. Tender of VESSEL	 	30	
5. Title and Risk	 	31	
6. Removal of VESSEL	 	31	
 
3

 

ARTICLE VIII - DELAYS AND EXTENSION OF TIME FOR DELIVERY (FORCE MAJEURE)	 	 	
 	 	 	
1. Causes of Delay	 	32	
2. Notice of Delay	 	33	
3. Definition of Permissible Delay	 	33	
4. Right to Rescind for Excessive Delay	 	33	
 	 	 	
ARTICLE IX - WARRANTY OF QUALITY	 	 	
 	 	 	
1. Guarantee	 	35	
2. Notice of Defects	 	35	
3. Remedy of Defects	 	35	
4. Extent of the BUILDER’s Responsibility	 	37	
5. Guarantee Engineer	 	37	
 	 	 	
ARTICLE X - RESCISSION BY BUYER	 	 	
 	 	 	
1. Notice	 	39	
2. Refundment by BUILDER	 	39	
3. Discharge of Obligations	 	40	
 	 	 	
ARTICLE XI - BUYER’S DEFAULT	 	 	
 	 	 	
1. Definition of Default	 	41	
2. Effect of Default on or before Delivery of VESSEL	 	41	
3. Disposal of VESSEL	 	42	
 	 	 	
ARTICLE XII - ARBITRATION	 	 	
 	 	 	
1. Decision by Classification Society	 	43	
2. Proceedings of Arbitration	 	43	
3. Notice of Award	 	44	
4. Expenses	 	44	
5. Entry in Court	 	44	
6. Alteration of Delivery Date	 	44	
 	 	 	
ARTICLE XIII - SUCCESSOR AND ASSIGNS	 	45	
 
4

 

ARTICLE XIV - TAXES AND DUTIES	 	 	
 	 	 	
1. Taxes and duties Incurred in Korea	 	46	
2. Taxes and Duties Incurred outside Korea	 	46	
 	 	 	
ARTICLE XV - PATENTS, TRADEMARKS, COPYRIGHTS, ETC	 	 	
 	 	 	
1. Patents, Trademarks and Copyrights	 	47	
2. General Plans, Specifications and Working Drawings	 	47	
 	 	 	
ARTICLE XVI - BUYER’S SUPPLIES	 	 	
 	 	 	
1. Responsibility of BUYER	 	48	
2. Responsibility of BUILDER	 	49	
 	 	 	
ARTICLE XVII - INSURANCE	 	 	
 	 	 	
1. Extent of Insurance Coverage	 	50	
2. Application of the Recovered Amounts	 	50	
3. Termination of BUILDER’s Obligation to Insure	 	51	
 	 	 	
ARTICLE XVIII - NOTICE	 	 	
 	 	 	
1. Address	 	52	
2. Language	 	52	
3. Effective Date of Notice	 	53	
 	 	 	
ARTICLE XIX - EFFECTIVE DATE OF CONTRACT	 	54	
 	 	 	
ARTICLE XX - INTERPRETATION	 	 	
 	 	 	
1. Laws Applicable	 	55	
2. Discrepancies	 	55	
3. Entire Agreement	 	55	
4. Amendments and supplements	 	55	
 
5

 

END OF CONTRACT	 	56	
 	 	 	
EXHIBIT “A” LETTER OF REFUNDMENT GUARANTEE	 	57	
 	 	 	
EXHIBIT “B” PERFORMANCE GUARANTEE	 	61	
 	 	 	
EXHIBIT “C” PERFORMANCE GUARANTEE	 	62	
 
6

 
THIS CONTRACT, made and entered into on this 28 th day of March, 2006 by and between Balticsea Marine Inc. a corporation incorporated and existing under the laws of Liberian, having its registered office at 80 Broad Street, Monrovia, Liberia (hereinafter called the “BUYER”), on the one part and Samsung Heavy Industries Co., Ltd., a corporation incorporated and existing under the laws of the Republic of Korea of having its registered office at 647-9, Yeoksam-Dong, Kangnam-ku, Seoul, Korea (hereinafter called the “BUILDER”), on the other part,
 
WITNESSETH:
 
In consideration of the mutual covenants herein contained, the BUILDER agrees to design, build, launch and complete in accordance with first class modern Korean shipbuilding practice and standards one (1) Single Screw Diesel Engine driven Container VESSEL as described in the Specifications attached herewith and any addendum thereto (hereinafter called the “VESSEL”) at the BUILDER’s shipyard located in Geoje Island, Korea (hereinafter called the “Shipyard”) and to deliver and sell the same to the BUYER, and the BUYER hereby agrees to purchase and accept delivery of the VESSEL from the BUILDER and to pay for the same upon the terms and conditions hereinafter set forth.
 
7

 
ARTICLE I - DESCRIPTION AND CLASS
 
1.                           Description :
 
The VESSEL shall be an ocean going single screw diesel engine driven fully cellular container VESSEL suitable for carrying dry cargo containers having the BUILDER’s Hull No.1672 and shall be built, constructed, equipped and completed in accordance with the ‘As-Built-Specifications’ as specified in the shipbuilding contracts of the BUILDER’s Hull No. 1639 and 1640 (hereinafter called as the “HN1639 Series Contract”) to build just identical vessels to the BUILDER’s Hull No. 1639 and 1640 (hereinafter called as the “HN1639 Series”) as a repeat and series, and the ‘Maker List’ as specified in the Supplement Agreement No.1 (dated June 30, 2005) to the HN 1639 Series Contract (hereinafter collectively called as the “SPECIFICATIONS”).
 
Thus, all drawings and plans made by the BUILDER and duly approved by the BUYER during the construction of the HN1639 Series in accordance with HN 1639 Series Contract shall be used without any further change, modification and approval by the BUYER, and a ll extra/credit costs agreed as of February 27, 2006 for the HN 1639 Series are included into the ship price described in this CONTRACT, and all construction procedure including model test and sea trial etc. shall be done on the basis of the just repeat and series VESSEL of the HN 1639s Series.
 
2.                           Dimensions and Characteristics :

Length, overall	 	 	 	appx.	 	259.8	m	
Length, between perpendiculars	 	 	 	appx.	 	244.8	m	
Breadth, moulded	 	 	 	appx.	 	32.25	m	
Depth, moulded	 	 	 	appx.	 	19.3	m	
Designed loaded draught, moulded	 	 	 	appx.	 	11.0	m	
Scantling draught, moulded	 	 	 	appx.	 	12.6	m	
 
Main Engine                                                                    :                                                       MAN B&W 8K 90MC-C type License Made MCR 49,680 bhp at 104 r.p.m.

Deadweight, guaranteed	:	 	50,500 metric tons at the moulded	
 
8

 

 	 	 	scantling draught of 12.6 meters.	
 	 	 	 	
Speed, guaranteed	:	 	24.5 knots at a draught of 11.0 meters and main engine developing power of 38,880 bhp (metric).	
 	 	 	
Fuel Consumption, guaranteed :	 	124.3 grams/bhp(metric)-hour using marine diesel oil having lower calorific value of 10,200 kcal/kg at normal continuous rating of 44,710 bhp(metric) measured at the shop trial.	
 
The details of the aforementioned particulars as well as the definitions and method of measurements and calculations are as defined in the SPECIFICATIONS .
 
3.                           Classification, Rules and Regulations :
 
The VESSEL, including its machinery, equipment and outfittings shall be constructed in accordance with the rules and regulations in year 2004 July edition of the Classification Society in accordance with both the interpretation of Classification Society (dated on 2005-06-29 Ref No. MKOKR120/MSSH/Gen-precontract/PUS-J-668) and the interpretation of the Classification Society (dated 28 th February 2006 Ref. No. MKOKR120/MSSH/Gen-Precontract/PUS-J-698 in respect of new updates in effect as of March 28, 2006 from rule and regulations applied to the HN1639 Series) and under special survey of Det Norske Veritas (hereinafter called the “Classification Society”) and shall be distinguished in the register by the symbol of X 1A1 “ Container Carrier”, NAUTICUS, EO, and In water survey and TMON shall be applied according to the requirement of the class rule.
 
Decisions of the Classification Society as to compliance or non-compliance with the classification shall be final and binding upon both parties hereto. Details of its notation shall be in accordance with the SPECIFICATIONS .
 
The VESSEL shall also comply with the compulsory rules, regulations and requirements of the regulatory bodies as described in the SPECIFICATIONS rectified and in effect as of the signing date of this Contract. Non-compulsory rules, regulations and requirements of the regulatory bodies shall be dealt with in
 
9

 
accordance with Article V (2) of this Contract.
 
All the fees and charges incidental to the classification and with respect to compliance with the above referred rules, regulations and requirements shall be for account of the BUILDER except otherwise agreed.
 
4.                           Subcontracting :
 
The BUILDER may, at its sole discretion and responsibility, subcontract any portion of the construction work of the VESSEL, provided that the construction and assembly of the VESSEL shall be carried out as is normally done according to the BUILDER’s building practice and provided further that the BUILDER shall be responsible to the BUYER in respect of any construction work carried out by such subcontractors.
 
5.                           Registration :
 
The VESSEL, at the time of its delivery and acceptance, shall be registered at the port of registry by the BUYER under Greek, Liberian, Cyprus or Panama flag at the BUYER’s expenses. The BUYER shall decide the flag within one(1) month after the date of signing of this Contract.
 
(End of Article)
 
10

 
ARTICLE II - CONTRACT PRICE AND TERMS OF PAYMENT
 
1.                           Contract Price :
 
The Contract price of the VESSEL and exclusive of the BUYER’s Supplies as provided in Paragraph 1 of Article XVI hereof is Sixty Three Million Eight Hundred Thousand United States Dollars (US$ 63,800,000.-) (hereinafter called the “Contract Price”), which shall be subject to upward or downward adjustment, if any, as hereinafter set forth in this Contract.
 
2.                           Adjustment of Contract Price:
 
Increase or decrease of the Contract Price, if any, due to adjustments thereof made in accordance with the provisions of this Contract, shall be adjusted by way of addition to or subtraction from the Contract Price upon delivery and acceptance of the VESSEL in the manner as hereinafter provided.
 
3.                           Currency :
 
Any and all payments by the BUYER to the BUILDER which are due under this Contract shall be made in United States Dollars.
 
4.                           Terms of Payment :
 
The Contract Price shall be due and payable by the BUYER to the BUILDER in the instalments as follows :
 
(a)                       First Instalment :
 
The First Instalment amounting to Six Million Three Hundred and Eighty Thousand United States Dollars (US$ 6,380,000.-) shall be due and payable upon issuance and delivery to the BUYER of the original of Refund Guarantee.
 
(b)                      Second Instalment :
 
The Second Instalment amounting to Six Million Three Hundred and Eighty Thousand Million United States Dollars (US$ 6,380,000.-) shall be due and payable upon six(6) calendar months after the date of singing of this Contract.
 
11

 
(c)                       Third Instalment :
 
The Third Instalment amounting to Six Million Three Hundred and Eighty Thousand Million United States Dollars (US$ 6,380,000.-) shall be due and payable upon steel cutting of the VESSEL.
 
(d)                      Fourth Instalment :
 
The Foruth Instalment amounting to Six Million Three Hundred and Eighty Thousand Million United States Dollars (US$ 6,380,000.-) shall be due and payable upon keel laying of the VESSEL.
 
 (e)                    Fifth Instalment :
 
The Delivery Instalment amounting to Thirty Eight Million Two Hundred and Eighty Thousand United States Dollars (US$ 38,280,000.-) plus any increase or minus any decrease due to adjustments of the Contract Price under and pursuant to the provisions of this Contract, shall be due and payable upon delivery and acceptance of the VESSEL or upon tender for delivery of the VESSEL referred to in Paragraph 4 of Article VII of this Contract.
 
It is agreed that no payment shall be effected until the original Refund Guarantee is delivered to the BUYER.
 
5.                           Method of Payment :
 
 (a)                    First Instalment :
 
Within Seven(7) banking days after 28 th day of March 2006, the BUYER shall remit by telegraphic transfer the first instalment to the account of The Export-Import Bank of Korea, Head Office, Seoul, Korea with Deutsche Bank Trust Company Americas(BIC : BKTRUS33), 60 Wall Street, Mail Stop NYC 60 1310, New York, NY 10005, USA, Account No.04 029 695, in favour of Samsung Heavy Industries., Ltd, SWIFT code : EXIKKRSE or other bank as designated by the Builder, in favor of Samsung Heavy Industrise Co, Ltd.(hereinafter called the “BUILDER’s Bank”)
 
(b)                      Second, Third and Fourth Instalment :
 
Upon receipt of telefax notice from the BUILDER confirming that the second, third, and fourth instalment on each event is due and payable, the BUYER shall
 
12

 
remit by telegraphic transfer the second, third, and fourth instalment to the aforesaid account of the BUILDER’s Bank in favour of Samsung Heavy Industries Co., Ltd.
 
 (c)                    Fifth Instalment :
 
At least One (1) banking days prior to delivery and acceptance of the VESSEL, the BUYER shall remit by telegraphic transfer the fifth instalment to the name of the BUYER at BUILDER’s BANK, with an irrevocable instruction that the amount so remitted shall be payable to the BUILDER against a facsimile copy of PROTOCOL OF DELIVERY and ACCEPTANCE OF THE VESSEL signed by the BUYER and the BUILDER or returned to the BUYER if such PROTOCOL OF DELIVERY and ACCEPTANCE has not been presented within 15 days.
 
Simultaneously with each of all such payments, the BUYER shall cause the BUYER’s BANK to advise the BUILDER’s BANK of the details of such payments by authenticated bank cable.
 
Any claim which the BUYER may have against the BUILDER hereunder shall be settled and liquidated separately from any payment by the BUYER to the BUILDER hereunder.
 
6.                           Notice of Payment on or before Delivery :
 
With the exception of the first instalment, the BUILDER shall give the BUYER Five(5) banking days prior notice by telefax of the anticipated due date and amount of each instalment payable on or before delivery of the VESSEL.
 
7.                           Expenses.
 
Expenses and bank charges for remitting payments and any taxes, duties, expenses and fees connected with such payment shall be for account of the BUYER referred to in paragraph 2 of Article XIV of this Contract, except expenses and bank charges of the BUILDER’s BANK.
 
8.                           Prepayment :
 
Prepayment of any instalment due on or before delivery of the VESSEL shall be subject to mutual agreement between the parties hereto.
 
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9.                           Performance Guarantee
 
Upon signing this Contract, the BUYER shall provide the BUILDER with a Performance Guarantee in order to secure the due and faithful performance of this Contract by the BUYER having same form and contents as Exhibit ”B” annexed hereto.
 
(End of Article)
 
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ARTICLE III - ADJUSTMENT OF CONTRACT PRICE
 
The Contract Price shall be subject to adjustment, as hereinafter set forth, in the event of the following contingencies (it being understood by both parties that any reduction of the Contract Price is by way of liquidated damages and not by way of penalty) :
 
1.                           Delivery :
 
  (a)                    No adjustment shall be made and the Contract Price shall remain unchanged for the first Thirty (30) days of delay in delivery of the VESSEL beyond the Delivery Date as defined in Article VII hereof (ending as of twelve o’clock midnight of the Thirty (30) day of delay).
 
 (b)                   If the delivery of the VESSEL is delayed more than Thirty (30) days after the Delivery Date, the Contract Price shall be reduced by the sum of Twenty Seven Thousand Five Hundred United States Dollars (US$27,500.-) for each full day for which thereafter delivery is delayed.
 
However, the total reduction in the Contract Price shall not be more than as would be the case for a delay of One Hundred Eighty (180) days counting from the midnight of the Thirty (30) day after the Delivery Date at the above specified rate of reduction.
 
  (c)                    However, if the delay in delivery of the VESSEL should continue for a period of Two Hundred Ten (210) days from the Delivery Date in Paragraph 1 of Article VII, then in such event, and after such period has expired, the BUYER may, at its option, rescind this Contract in accordance with the provisions of Article X hereof.
 
The BUILDER may, at any time after the expiration of the aforementioned Two Hundred Ten (210) days of delay in delivery, if the BUYER has not served notice of rescission as provided in Article X hereof, demand in writing that the BUYER shall make an election, in which case the BUYER shall, within Twenty (20) days after such demand is received by the BUYER, notify the BUILDER of its intention either to rescind this Contract or to consent to the acceptance of the VESSEL at the BUILDER’s specified future date. If the BUYER shall not make an election within Twenty (20) days as provided hereinabove, the BUYER shall be deemed to have accepted such extension of the delivery date to the future delivery date indicated by the BUILDER and it being understood by the parties hereto that if the VESSEL is not delivered by such future date, the BUYER shall
 
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have the same right of rescission upon the same terms and conditions as hereinabove provided.
 
It is understood that accrued liquidated damages are preserved. Further delay shall incur additional liquidated damages in accordance with existing terms and conditions.
 
 (d)                   For the purpose of this Article, the delivery of the VESSEL shall be deemed to be delayed when and if the VESSEL, after taking into account all postponements of the Delivery Date by reason of permissible delay as defined in Article VIII and/or any other reason under this Contract, is not delivered by the date upon which delivery is required under the terms of this Contract.
 
2.                           Speed :
 
 (a)                    The Contract Price shall not be affected or changed by reason of the trial speed (as determined according to the SPECIFICATIONS being less than the guaranteed speed, if such variation is not more than Two-Tenths (2/10) of One (1) knot.
 
 (b)                   However, if such variation is more than Two-Tenths (2/10) of One (1) knot, then, the Contract Price shall be decreased by One Hundred and Seventy Five Thousand United States Dollars (US$ 175,000.-) for each successive whole One-Tenth(1/10) of a knot in excess of a deficiency of Two-Tenths (2/10) of a knot (in both cases smaller fractions being disregarded).
 
 (c)                    If the deficiency in the speed upon final sea trial is more than Half(1/2) a knot below the guaranteed speed of the VESSEL, then the BUYER may, at its option, reject the VESSEL and rescind this Contract in accordance with the provisions of Article X hereof, or may accept the VESSEL at a reduction in the Contract Price as above provided for Half(1/2) a knot only, that is, at a total reduction of Five Hundred and Twenty Five Thousand United States Dollars (US$ 525,000.-).
 
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3.                           Fuel Consumption :
 
 (a)                    The Contract Price shall not be affected or changed in case the fuel consumption, as determined by the shop trial as specified in the SPECIFICATIONS , is not more than Five percent (5%) in excess of the guaranteed fuel consumption specified in Paragraph 2 of Article I.
 
 (b)                   However, in the event that the actual fuel consumption at the shop trial is in excess of Five percent (5%) of the guaranteed fuel consumption, the Contract Price shall be reduced by the sum of One Hundred and Ten Thousand United States Dollars (US$ 110,000.-) for each full one percent(1%) increase in fuel consumption and pro rata for any fraction of one percent(1%) of the Guaranteed Fuel Consumption in excess of the said five percent(5%) up to maximum of eight percent(8%) over the Guaranteed Fuel Consumption.
 
 (c)                    If the deficiency in fuel consumption is more than Eight percent (8%) then the BUYER may at its option rescind this Contract in accordance with the provision of Article X hereof.
 
4.                           Deadweight :
 
(a)                       In the event that the deadweight of the VESSEL as determined in accordance with the SPECIFICATIONS is less than the guaranteed deadweight as specified in Paragraph 2 of Article I, the Contract Price shall be reduced by the sum of One Thousand One Hundred United States Dollars (US$ 1,100.-) for each full metric ton of such deficiency being more than Seven Hundred (700) metric tons, up to a maximum reduction of One Million Two Hundred and Ten Thousand United States Dollars (US$ 1,210,000.-).
 
(b)                      In the event of such deficiency in the deadweight of the VESSEL being One thousand eight hundred (1,800) metric tons or more, then, the BUYER may, at its option, reject the VESSEL and rescind this Contract in accordance with the provisions of Article X hereof or accept the VESSEL at a reduction in the Contract Price as above provided for One Thousand Eight Hundred (1,800) metric tons only, that is, at a total reduction of One Million Two Hundred and Ten Thousand United States Dollars (US$1,210,000.-).
 
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5.                           Early Delivery
 
In the event that the BUILDER believes that the VESSEL can be completed and ready for Delivery on a date earlier than the Contractual Delivery Date, then the BUILDER may give a written notice to the BUYER, no later than six (6) months before the revised date (the “Early Delivery Date”) informing the approximate date on which the VESSEL can be ready for the Delivery. The BUYER shall have the option, but not the obligation, to accept Delivery of the VESSEL on the Early Delivery Date and upon the BUYER’s acceptance thereof, the parties shall discuss the specific amount of the additional payment due to the BUILDER for the accelerated Delivery of the VESSEL on the Early Delivery Date at the delivery stage of the VESSEL and t he compensation payment of the acceleration bonus shall be settled and paid in full with the final delivery instalment concurrently uponwith the actual Delivery and acceptance of the VESSEL by the BUYER. If the Parties fail to reach a mutual agreement on the amount of the Early Delivery bonus, the BUILDER shall be free to deliver the VESSEL on the original Contractual Delivery Date or earlier at its option. The Parties hereto acknowledge that there will be no liquidated damages or other penalty to be imposed on the BUILDER in the event the VESSEL happens to be delivered on any date later than the Early Delivery Date but earlier than the original Contractual Delivery Date.
 
6                              Effect of Rescission :
 
It is expressly understood and agreed by the parties that in any case, if the BUYER rescinds this Contract under this article, the BUYER shall not be entitled to any liquidated damages or any other recourse unless by means of the provisions of Article X hereof.
 
(End of Article)
 
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ARTICLE IV - APPROVAL OF PLANS AND DRAWINGS AND INSPECTION DURING CONSTRUCTION
 
1.                           Approval of Plans and Drawings :
 
The SPECIFICATIONS   shall be used for the VESSEL without any further approval and modification from the BUYER unless otherwise mutually agreed by both parties. Should any changes are required by the BUYER’s request or the application of new rules and regulations (of a mandatory nature) coming into effect after the date of this Contract signing, the BUILDER shall submit such changes to the BUYER for its approval. If approved by the BUYER, such changes shall be applied to the VESSEL with cost adjustment in accordance with Article V of this Contract.
 
2.                           Appointment of BUYER’s Supervisor :
 
The BUYER may send to and maintain at the Shipyard, at the BUYER’s own cost and expense, one supervisor who shall be duly authorized in writing by the BUYER (herein called the “Supervisor”) to act on behalf of the BUYER in connection with the modifications of the SPECIFICATIONS, adjustments of the Contract Price and Delivery Date, approval of the plans and drawings, attendance to the tests and inspections relating to the VESSEL, its machinery, equipment and outfittings, and any other matters for which he is specifically authorized by the BUYER. The Supervisor may appoint his assistant(s) to attend at the Shipyard for the purposes as aforesaid.
 
In the event that assignment, novation or resale occurs under the Article XIII and as a result, BUYER’s Supervisor is changed during the construction of the VESSEL, any and all matters determined by mutual agreement between the BUYER’s Supervisor and the BUILDER prior to the dispatch of a new Supervisor shall be accepted and complied by the new Supervisor. In case two or more Supervisors are dispatched to the Shipyard and authorized, under the BUILDER’s prior consent, to perform the supervision, each of them will form uniform opinions between them to keep the design and the SPECIFICATIONS so as not to adversely affect the CONTRACT PRICE and Delivery of the VESSEL, provided that such change in the Contract Price will be reasonable and proven under the BUILDER’s normal practice. In the event of any additional costs attributable to such dispatch of two or more supervisors due to the reasons including but not
 
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limited to resale, novation, charter or any other occurrence otherwise resulting from the BUYER, such costs shall be borne by the BUYER and the BUYER shall reimburse and hold harmless the BUILDER from any such costs and expenses.
 
3.                           Inspection by the Supervisor :
 
The necessary inspections of the VESSEL, its machinery, equipment and outfittings shall be carried out by the Classification Society, other regulatory bodies and/or an inspection team of the BUILDER throughout the entire period of construction in order to ensure that the construction of the VESSEL is duly performed in accordance with this Contract and the SPECIFICATIONS The Supervisor shall have, during construction of the VESSEL, the right to attend such tests and inspections of the VESSEL, its machinery and equipment within the premises of either the BUILDER or its subcontractors. The BUILDER shall give notice to the Supervisor, in advance of the date and place of such tests and inspections for the convenience of their attendance. Detailed procedures of the inspection and the tests thereof shall be in accordance with the SPECIFICATIONS .
 
The BUILDER may request BUYER’s supervisor to attend the inspection and tests during public holidays and weekends and/or Company holidays in order to keep BUILDER’s construction schedule. BUYER’s supervisor shall fully cooperate with BUILDER and promptly attend such inspection/tests including those for surface preparation and painting work, which are especially vulnerable to weather condition and time interval. However, BUILDER shall keep such inspection and tests to a minimum and only when the inspection and tests affect BUILDER’s construction schedule. The BUILDER’s prior notice of such inspection/test schedule shall be informed to the BUYER’s supervisor three(3) working days in advance as a minimum
 
The Supervisor shall be entitled to request copies of all test results and trials as soon as required for the performance of his duties.
 
The Supervisor shall notify the BUILDER of deficiencies in the construction of the VESSEL or materials. The BUILDER should examine the deficiency and rectify.
 
If any of the BUYER’s supervisors discover any construction, material or
 
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workmanship which is not deemed to conform to the requirements of this Contract and/or the SPECIFICATIONS , the BUYER’s supervisors shall promptly give the BUILDER a notice in writing that such alleged non-conformity exists. Upon receipt of such notice from the BUYER’s supervisor, the BUILDER shall correct such non-conformity, if the BUILDER agrees to his view. Any disagreement shall be resolved in accordance with Paragraph 1 of Article XII.
 
4.                           Facilities :
 
The BUILDER shall furnish the Supervisor and his assistant(s) with adequate office space and such other reasonable facilities according to the BUILDER’s practice at or in the immediate vicinity of the Shipyard as may be necessary to enable them to effectively carry out their duties. The BUYER shall pay for all such facilities other than office space at the BUILDER’s normal rate of charge.
 
5.                           Liability of BUILDER :
 
The Supervisor and his assistant(s) shall at all times be deemed to be the employees of the BUYER and not of the BUILDER. The BUILDER shall be under no liability whatsoever to the BUYER, the Supervisor or his assistant(s) for personal injuries, including death, suffered during the time when he or they are on the VESSEL, or within the premises of either the BUILDER or its subcontractors, or are otherwise engaged in and about the construction of the VESSEL, unless, however, such personal injuries, including death, were caused by a gross negligence of the BUILDER, or of any of its employees or agents or subcontractors.
 
Nor shall the BUILDER be under any liability whatsoever to the BUYER, the Supervisor or his assistant(s) for damage to, or loss or destruction of property in Korea of the BUYER or of the Supervisor or his assistant(s), unless such damage, loss or destruction were caused by a gross negligence of the BUILDER or of any of its employees or agents or subcontractors.
 
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6.                           Responsibility of BUYER :
 
The BUYER shall undertake and assure that the Supervisor shall carry out his duties hereunder in accordance with the normal shipbuilding practice of the BUILDER and in such a way so as to avoid any unnecessary increase in building cost, delay in the construction of the VESSEL, and/or any disturbance in the construction schedule of the BUILDER.
 
The BUILDER has the right to request the BUYER to replace the Supervisor who is deemed unsuitable and unsatisfactory for the proper progress of the VESSEL’s construction. The BUYER shall investigate the situation by sending its representative(s) to the Shipyard if necessary, and if the BUYER considers that such BUILDER’s request is justified, the BUYER shall effect such replacement as soon as conveniently arrangeable.
 
(End of Article)
 
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ARTICLE V - MODIFICATIONS, CHANGES AND EXTRAS
 
1.                           How Effected :
 
Any modifications and/or changes in the SPECIFICATIONS shall be made by written agreement of the parties hereto provided, however, that any modifications and/or changes requested by the BUYER or an accumulation of such modifications and/or changes will not adversely affect the BUILDER’s planning or programme in relation to the BUILDER’s other commitments and if the BUYER shall assent to adjustment of the Contract Price, time for delivery of the VESSEL and other terms and conditions of this Contract as hereinafter provided. The BUILDER hereby agrees to exert its best efforts to accommodate such reasonable request by the BUYER so that the said changes and/or modifications may be made at a reasonable cost and within the shortest period of time which is reasonably possible.
 
Any such agreement for modifications and/or changes shall include an agreement as to the increase or decrease, if any, in the Contract Price of the VESSEL together with an agreement as to any extension or reduction in the time of delivery, or any other alterations in this Contract or the SPECIFICATIONS occasioned by such modifications and/or changes.
 
The aforementioned agreement to modify and/or change the SPECIFICATIONS may be effected by an exchange of letters signed by the authorized representatives of the parties hereto, or telefax confirmed in writing, manifesting such agreement. Such letters and confirmed message exchanged by the parties hereto pursuant to the foregoing shall constitute an amendment of the SPECIFICATIONS , and such letters and message shall be incorporated into this Contract and made a part hereof.
 
The BUILDER may make minor changes to the SPECIFICATIONS , if found necessary for introduction of improved production methods or otherwise, provided that the BUILDER shall first obtain the BUYER’s approval which shall not be unreasonably withheld.
 
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2.               Changes in Rules of Classification Society, Regulations, etc.:
 
If, after the date of signing this Contract, any requirements as to classification, or as to the rules and regulations to which the construction of the VESSEL is required to conform in accordance with the provisions of Article I. (3), are altered or changed by the Classification Society or regulatory bodies authorized to make such alterations or changes, either of the parties hereto upon receipt of information thereof, shall transmit such information in full to the other party in writing, thereupon within Twenty-one(21) days after receipt of the said notice from the other party, the BUYER shall instruct the BUILDER in writing if such alterations or changes shall be made in the VESSEL or not, in the BUYER’s sole discretion.
 
(a)           If such alterations or changes are compulsory for the construction of VESSEL, either of the parties hereto, upon receipt of such information from Classification Society or such other regulatory bodies, shall promptly transmit the same to the other in writing, and the BUILDER shall thereupon incorporate such alterations or changes into the construction of the VESSEL, provided that the BUYER shall first agree to reasonable and proven adjustments required by the BUILDER in the Contract Price, the Delivery Date and other terms and conditions of this Contract and the SPECIFICATIONS occasioned by or resulting from such alterations or changes.
 
(b)   If such alterations or changes are not compulsory for the construction of the VESSEL, and the BUYER desires to incorporate such alterations or changes into the construction of the VESSEL, then, the BUYER shall notify the BUILDER of such intention. The BUILDER may accept such alterations or changes, provided that such alterations or changes will not, in the judgement of the BUILDER, adversely affect the BUILDER’s planning or program in relation to the BUILDER’s other commitments, and provided, further, that the BUYER shall first agree to reasonable and proven adjustments required by the BUILDER in the Contract Price, the Delivery Date and other terms and conditions of this Contract and the SPECIFICATIONS occasioned by or resulting from such alterations or changes.
 
In the event of a disagreement on price and delivery, and in the event that such alterations or changes are compulsory for the construction of VESSEL, then the BUILDER shall proceed with the required alterations and the dispute related to the above shall be resolved in accordance with the provisions of Article XII.
 
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Such agreement by the BUYER shall be effected in the same manner as provided in Paragraph 1 of this Article for modifications and/or changes of the SPECIFICATIONS .
 
3.                           Substitution of Materials :
 
In the event that any of the materials required by the SPECIFICATIONS or otherwise under this Contract for the construction of the VESSEL can not be procured in time to effect delivery of the VESSEL, or are in short supply, the BUILDER may, provided the BUYER so agrees in writing, supply other materials and equipment of the best available and like quality, capable of meeting the requirements of the Classification Society and of the rules, regulations, requirements and recommendations with which the construction of the VESSEL must comply. Any agreement as to such substitution of materials shall be effected in the manner as provided in Paragraph 1 of this Article, and shall, likewise, include possible decrease or increase in the Contract Price and other terms and conditions of this Contract affected by such substitution.
 
(End of Article)
 
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ARTICLE VI - TRIALS AND ACCEPTANCE
 
Since the VESSEL is the repeat and series of BUILDER’s Hull Nos. 1639 and 1640, some sea trial items may be deleted subject to mutual agreement between the BUYER and the BUILDER
 
1.                           Notice :
 
The sea trial shall start when the VESSEL is reasonably completed according to the SPECIFICATIONS .
 
The BUILDER shall give the BUYER at least Twenty (20) days estimated prior notice and Seven(7) days confirming prior notice by telefax of the time and place of the trial run of the VESSEL, and the BUYER shall promptly acknowledge receipt of such notice. The BUYER shall have its representatives on board the VESSEL to witness such trial run. Failure in attendance of the BUYER’s representative at the trial run of the VESSEL for any reason whatsoever after due notice to the BUYER as above provided shall be deemed to be a waiver by the BUYER of its right to have its representative on board the VESSEL at the trial run, and the BUILDER may conduct the trial run without attendance of the BUYER’s representative, and in such case the BUYER shall be obligated to accept the VESSEL on the basis of a certificate of the BUILDER that the VESSEL, upon trial run, is found to conform to this Contract and the SPECIFICATIONS s.
 
2.                           Weather Condition :
 
The trial run shall be carried out under the weather condition which is deemed favourable enough by the judgement of the BUILDER. In the event of unfavourable weather on the date specified for the trial run, the same shall take place on the first available day thereafter that the weather condition permits. It is agreed that, if during the trial run of the VESSEL, the weather should suddenly become so unfavourable that orderly conduct of the trial run can no longer be continued, the trial run shall be discontinued and postponed until the first favourable day next following, unless the BUYER shall assent in writing to acceptance of the VESSEL on the basis of the trial run already made before such discontinuance has occurred. Any delay of trial run caused by such unfavourable weather condition shall operate to postpone the Delivery Date by the period of the delay involved and such delay shall be deemed as permissible delay in the delivery of the VESSEL.
 
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3.                     How Conducted :
 
 (a)                    The VESSEL shall run the official trial trip in the manner as specified in the SPECIFICATIONS .
 
  (b)                All expenses in connection with the trial run are to be for account of the BUILDER and the BUILDER shall provide, at its own expense, the necessary crew to comply with conditions of safe navigation, fuel oil, fresh water and other consumable stores necessary, the BUYER shall supply at its own expense lubricating oils and greases.
 
4.                           Method of Acceptance or Rejection :
 
 (a)                    Upon completion of the trial run, the BUILDER shall give the BUYER a notice by telefax of completion of the trial run, as and if the BUILDER considers that the results of trial run indicate conformity of the VESSEL to this Contract and the SPECIFICATIONS . The BUYER shall, within Five (5)days after receipt of such notice from the BUILDER, notify the BUILDER by telefax of its acceptance or rejection of the VESSEL’s conformity to this Contract and the SPECIFICATIONS .
 
 (b)                   However, should the result of the trial run show that the VESSEL, or any part or equipment thereof, does not conform to the requirements of this Contract and/or the SPECIFICATIONS , or if the BUILDER is in agreement to non-conformity as specified in the BUYER’s notice of rejection, then, the BUILDER shall take necessary steps to correct such non-conformity.
 
Upon completion of correction of such non-conformity, and re-test or trial if necessary, the BUILDER shall give the BUYER a notice thereof by telefax.
 
The BUYER shall, within Three (3) days after receipt of such notice from the BUILDER, notify the BUILDER of its acceptance or rejection of the VESSEL.
 
(c)               In any event that the BUYER rejects the VESSEL, the BUYER shall indicate in detail in its notice of rejection in what respect the VESSEL, or any part or equipment thereof does not conform to this Contract and/or the SPECIFICATIONS .
 
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 (d)                   In the event that the BUYER fails to notify the BUILDER by telefax of the acceptance of or the rejection together with the reason therefor of the VESSEL within the period as provided in the above Sub-paragraph (a) or (b), the BUYER shall be deemed to have accepted the VESSEL.
 
 (e)                    Any dispute between the BUILDER and the BUYER as to the conformity or non-conformity of the VESSEL to the requirements of this Contract and/or the SPECIFICATIONS shall be submitted for final decision in accordance with Article XII hereof.
 
5.                           Effect of Acceptance :
 
Acceptance of the VESSEL as above provided shall be final and binding so far as conformity of the VESSEL to this Contract and the SPECIFICATIONS is concerned and shall preclude the BUYER from refusing formal delivery of the VESSEL as hereinafter provided, if the BUILDER complies with all other procedural requirements for delivery as provided in Article VII hereof. However, the BUYER’s acceptance of the VESSEL shall not affect the BUYER’s right under Article IX hereof.
 
The BUYER may accept the VESSEL under protest with outstanding defects to be dealt under the guarantee provisions or made subject of a claim for damages.
 
6.                           Disposition of Surplus Consumable Stores
 
Any fuel oil or other furnished and paid for by the BUILDER for trial runs remaining on board the VESSEL, at the time of acceptance of the VESSEL by the BUYER, shall be bought by the BUYER from the BUILDER at the BUILDER’s purchase price for such supply in Korea and the payment by the BUYER thereof shall be made at the time of delivery of the VESSEL.
 
The BUILDER shall pay the BUYER at the time of delivery of the VESSEL an amount for the consumed quantity until delivery of any lubricating oil and greases which were furnished and paid for by the BUYER at the BUYER’s purchase price thereof. For avoidance of doubt, the practice of this Article VI. 6 shall follow the practice in construction of the BUILDER’s Hull Nos. 1639 and 1640.
 
(End of Article)
 
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  ARTICLE VII - DELIVERY
 
1.                           Time and Place :
 
The VESSEL shall be delivered by the BUILDER to the BUYER at the Shipyard on or before November 30, 2008, except that, in the event of delays in the construction of the VESSEL or any performance required under this Contract due to causes which under the terms of this Contract permit postponement of the date for delivery, the aforementioned date for delivery of the VESSEL shall be postponed accordingly.
 
The aforementioned date, or such later date to which the requirement of delivery is postponed pursuant to such terms, is herein called the “Delivery Date”.
 
2.                           When and How Effected :
 
Provided that the BUILDER and the BUYER shall have fulfilled all of their obligations stipulated under this Contract, the delivery of the VESSEL shall be effected forthwith by the concurrent delivery by each of the parties hereto to the other of the PROTOCOL OF DELIVERY AND ACCEPTANCE, acknowledging delivery of the VESSEL by the BUILDER and acceptance thereof by the BUYER.
 
3.                           Documents to be delivered to BUYER :
 
Upon delivery and acceptance of the VESSEL, the BUILDER shall deliver to the BUYER the following documents, which shall accompany the PROTOCOL OF DELIVERY AND ACCEPTANCE :
 
(a)                       PROTOCOL OF TRIALS of the VESSEL made pursuant to the SPECIFICATIONS .
 
(b)                      PROTOCOL OF INVENTORY of the equipment of the VESSEL, including spare parts and the like, as specified in the SPECIFICATIONS .
 
(c)                       PROTOCOL OF STORES OF CONSUMABLE NATURE referred to under Paragraph 6 of Article VI hereof.
 
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 (d)                   ALL CERTIFICATES including the BUILDERS’s CERTIFICATE required to be furnished upon delivery of the VESSEL pursuant to this Contract and the SPECIFICATIONS , necessary for the registration of the VESSEL and BUYER’s trading requirements.
 
It is agreed that if, through no fault on the part of the BUILDER, the Classifications certificates and/or other certificates are not available at the time of delivery of the VESSEL, provisional certificates shall be accepted by the BUYER, provided that the BUILDER shall furnish the BUYER with the formal certificates as promptly as possible after such certificates have been issued.
 
Application and certificate for statutory inspections for the registry of the VESSEL shall be arranged by the BUYER at its expense.
 
 (e)                    DECLARATION OF WARRANTY of the BUILDER that the VESSEL is delivered to the BUYER free and clear of any liens, charges, claims, mortgages, or other encumbrances upon the BUYER’s title thereto, and in particular that the VESSEL is absolutely free of all burdens in the nature of imposts, taxes or charges imposed by Korean Governmental Authorities, as well as of all liabilities of the BUILDER to its subcontractors, employees and crew, and of the liabilities arising from the operation of the VESSEL in trial runs, or otherwise, prior to delivery.
 
 (f)                      DRAWING AND PLANS pertaining to the VESSEL as stipulated in the      SPECIFICATIONS .
 
 (g)                   COMMERCIAL INVOICE.
 
4.                           Tender of VESSEL :
 
If the BUYER fails to take delivery of the VESSEL after completion thereof according to this Contract and the SPECIFICATIONS without any justifiable reason, the BUILDER shall have the right to tender delivery of the VESSEL after compliance with all procedural requirements as above provided.
 
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5.                           Title and Risk :
 
Title to and risk of loss of the VESSEL shall pass to the BUYER only upon the delivery and acceptance thereof having been completed as stated above; it being expressly understood that, until such delivery is effected, title to and risk of loss of the VESSEL and her equipment shall be in the BUILDER.
 
6.                           Removal of VESSEL :
 
The BUYER shall take possession of the VESSEL immediately upon delivery and acceptance thereof and shall remove the VESSEL from the premises of the Shipyard within Three (3) days after delivery and acceptance thereof is effected.
 
If the BUYER shall not remove the VESSEL from the premises of the Shipyard within the aforesaid Three (3) days, in such event, the BUYER shall pay to the BUILDER the reasonable mooring charges of the VESSEL.
 
(End of Article)
 
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ARTICLE VIII - DELAYS AND EXTENSION OF TIME FOR DELIVERY
(FORCE MAJEURE)
 
1.                           Causes of Delay (Force Majeure) :
 
If, at any time either the construction or delivery of the VESSEL or any performance required hereunder as a prerequisite to the delivery thereof is delayed by any of the following events; namely war, acts of state or government, blockade, revolution, insurrections, mobilization, civil commotion, riots, national strikes, sabotage, Acts of God or the public enemy, plague or other epidemics, quarantines, prolonged failure of electric current, freight embargoes, or defects in major forgings or castings or delay in BUYER’s supplied articles, if any, or defects in materials, machinery or equipment which could not have been detected by the BUILDER using reasonable care, or earthquakes, tidal waves, typhoons, hurricanes, prolonged or unusually severe weather conditions or by destruction of the premises or works of the BUILDER or its sub-contractors, or of the VESSEL, or any part thereof, by fire, landslides, flood, lightning, explosion, or other causes beyond the control of the BUILDER, or its sub-contractors, as the case may be, or for any other causes which, under the terms of this Contract, authorize and permit extension of the time for delivery of the VESSEL, then, in the event of delays due to the happening of any of the aforementioned contingencies, the Delivery Date of the VESSEL under this Contract shall be extended for a period of time which shall not exceed the total accumulated time of all such delays.
 
The enumerated contingencies shall not give rise to an extension of the delivery date unless :
 
i)                              The occurrence could not reasonably have been foreseen by the BUILDER at the date of signing of the Contract.
 
ii)                           The BUILDER shall have exercised reasonable due diligence to avoid or minimize the occurrence of such event.
 
iii)                        The BUILDER shall have used reasonable efforts to mitigate the duration and effects of such events of the construction schedule.
 
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2.                           Notice of Delay :
 
Within Fourteen (14) days after the date of occurrence of any cause of delay, on account of which the BUILDER claims that it is entitled under this Contract to a postponement of the Delivery Date, the BUILDER shall notify the BUYER in writing or by telefax confirmed in writing of the date when such cause of delay occurred. Likewise, within Fourteen (14) days after the date of ending of such cause of delay, the BUILDER shall notify the BUYER in writing or by telefax confirmed in writing of the date when such cause of delay ended.
 
The BUILDER shall also notify the BUYER of the period, by which the Delivery Date is postponed by reason of such cause of delay, with all reasonable dispatch after it has been determined. If the BUILDER does not give the timely advice as above, the BUILDER shall lose the right to claim such delays as permissible delay.
 
Failure of the BUYER to acknowledge to the BUILDER’s claim for postponement of the Delivery Date within Fourteen (14) days after receipt by the BUYER of such notice of claim shall be deemed to be a waiver by the BUYER of its right to object to such postponement of the Delivery Date.
 
3.                           Definition of Permissible Delay :
 
Delays on account of such causes as specified in Paragraph 1 of this Article and any other delay of a nature which under the terms of this Contract permits postponement of the Delivery Date shall be understood to be permissible delays and are to be distinguished from unauthorized delays on account of which the Contract Price is subject to adjustment as provided for in Article III hereof.
 
4.                           Right to Rescind for Excessive Delay :
 
If the total accumulated time of all delays whether permissible or not exceeds One Hundred and Eighty (180) days, then, in such event, the BUYER may rescind this Contract in accordance with the provisions of Article X hereof.
 
The accumulated time as above shall exclude the time lost due to BUYER’s Default or delays in the BUYER’s supplies. The BUILDER may, at any time after the accumulated time of the aforementioned delays justifying rescission by the BUYER, demand in writing that the BUYER shall make an election proposing a new delivery date, in which case the BUYER shall, within Fourteen (14) days
 
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after such demand is received by the BUYER, either notify the BUILDER of its intention to rescind this Contract, or consent to a postponement of the Delivery Date to an agreed specific future date; it being understood and agreed by the parties hereto that, if any further delay occurs on account of causes justifying rescission as specified in this Article, the BUYER shall have the same right of rescission upon the same terms as herein above provided.
 
(End of Article)
 
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ARTICLE IX - WARRANTY OF QUALITY
 
1.                           Guarantee :
 
The BUILDER, for the period of Twelve (12) months after delivery of the VESSEL (hereinafter called “Guarantee Period”), guarantees the VESSEL and her engine, including all parts and equipment manufactured, furnished or installed by the BUILDER under this Contract, and including the machinery, equipment and appurtenances thereof, under the Contract but excluding any item which is supplied or designated by the BUYER or by any other bodies on behalf of the BUYER, against all defects discovered within the Guarantee Period which are due to improper design, defective material, and/or poor workmanship or negligent or other improper acts or omissions on the part of the BUILDER or its subcontractors (hereinafter called the “Defect” or “Defects”) and are not a result of accident, ordinary wear and tear, misuse, mismanagement, negligent or other improper acts or omissions or neglect on the part of the BUYER, its employee or agents.
 
Upon rectification of an item claimed under this guarantee, this item shall be covered for further Twelve (12) months under the same terms and conditions. However, this is limited to a maximum of Twenty Four (24) months from delivery date.
 
2.                           Notice of Defects :
 
The BUYER shall notify the BUILDER in writing, or by telefax of any defect for which claim is made under this guarantee, as promptly as possible after discovery thereof. The BUYER’s notice shall describe in detail the nature, cause if known and extent of the Defects.
 
The BUILDER shall have no obligation for any Defect discovered prior to the expiry date of the Guarantee Period, unless notice of such Defect is received by the BUILDER not later than Twenty (20) days after such expiry date.
 
3.                           Remedy of Defects :
 
(a)                       The BUILDER shall remedy, at its expense, any Defect against which the VESSEL is guaranteed under this Article, by making all necessary repairs or replacements at the Shipyard.
 
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(b)                      However, if the BUYER should determine that it is commercially or operationally impracticable to bring the VESSEL to the Shipyard, the BUYER may cause the necessary repairs or replacements to be made elsewhere which is deemed suitable for the purpose, provided that, in such event, the BUILDER may forward or supply replacement parts or materials to the BUYER’s agent to be designated by the BUYER in writing , unless forwarding or supplying thereof the VESSEL would impair or delay the operation of working schedule of the VESSEL. In the event that the BUYER proposes to cause the necessary repairs or replacements for the VESSEL to be made at any other shipyard or works than the Shipyard, the BUYER shall first, but in all events as soon as possible, give the BUILDER a notice in writing or by telefax confirmed in writing of the time and place when and where such repairs will be made, and if the VESSEL is not thereby delayed, or her operation or working schedule is not thereby impaired, the BUILDER shall have the right to verify by its own representative(s) the nature, cause and extent of the Defects complained of. The BUILDER shall, in such case, promptly advise the BUYER by telefax, after such examination has been completed, of its acceptance or rejection of the Defects as ones that are covered by the guarantee herein provided. Upon the BUILDER’s acceptance of the Defects as justifying remedy under this Article, or upon award of the arbitration so determining, the BUILDER shall pay to the BUYER for such repairs or replacements justified reasonable and proven actual cost of repairs or replacements.
 
(c)                       The reimbursement of the costs incurred in relation to guarantee works shall be paid in a lumpsum after expiration of the guarantee period.
 
(d)                      In any case, the VESSEL shall be taken, at the BUYER’s cost and responsibility, to the place elected, ready in all respects for such repairs or replacement.
 
(e)                       Any dispute under this Article shall be referred to arbitration in accordance with the provisions of Article XII hereof.
 
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4.                           Extent of BUILDER’s Responsibility :
 
 (a)                    The BUILDER shall have no responsibility or liability for any other defect whatsoever in the VESSEL than the Defects specified in Paragraph 1 of this Article. Nor the BUILDER shall in any circumstance be responsible or liable for any consequential or special loss, damage or expense including but not limited to loss of time, loss of profit of earning or demurrage directly or indirectly occasioned to the BUYER by reason of the Defects specified in Paragraph 1 of this Article or due to repairs or other works done to the VESSEL to remedy such Defects.
 
 (b)                   The BUILDER shall not be responsible for any defect in any part of the VESSEL which may, subsequently to delivery of the VESSEL, have been replaced or repaired in any way by any other contractor unless the BUILDER has not objected the contractor to perform guarantee repairs, or for any defect which have been caused or aggravated by omission or improper use and maintenance of the VESSEL on the part of the BUYER, its servants or agents or by ordinary wear and tear or by any other cause beyond the control of the BUILDER.
 
 (c)                    The guarantee contained as hereinabove in this Article replaces and excludes any other liability, guarantee, warranty and/or condition imposed or implied by the law, customary, statutory or otherwise, by reason of the construction and sale of the VESSEL by the BUILDER for and to the BUYER.
 
5.                           Guarantee Engineer :
 
The BUILDER shall have the right to appoint a Guarantee Engineer to serve on the VESSEL as its representative for a period of Three (3) months from the date the VESSEL is delivered. However, if the BUYER and the BUILDER shall deem it necessary to keep the Guarantee Engineer on the VESSEL for a longer period, then he shall remain on board the VESSEL after the said Three (3) months, but not longer than Six (6) months from the delivery of the VESSEL.
 
The BUYER, and its employees, shall give such Guarantee Engineer full cooperation in carrying out his duties as the representative of the BUILDER on board the VESSEL.
 
The Guarantee Engineer shall sign BUYER’s Indemnity Forms and shall at all times deemed to be an employee of the BUILDER.
 
The BUYER shall accord the Guarantee Engineer treatment comparable to the
 
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VESSEL’s Chief Engineer, and shall provide board and lodging at no cost to the BUILDER and/or the Guarantee Engineer.
 
While the Guarantee Engineer is on board the VESSEL, the BUYER shall pay to the BUILDER the sum of Seven Thousand United States Dollars (US$ 7,000.-) per month as a compensation for a part of cost and charges to be borne by the BUILDER in connection with Guarantee Engineer and also shall pay the expenses of his repatriation to Seoul, Korea by air upon termination of his service, the expenses of his communication with the BUILDER incurred in performing his duties and expenses, if any, of his medical and hospital care in the VESSEL’s hospital.
 
Pertaining to the detailed particulars of this Paragraph, an agreement will be made according to this effect between the parties hereto upon delivery of the VESSEL.
 
(End of Article)
 
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ARTICLE X - RESCISSION BY BUYER
 
1.                           Notice :
 
The payments made by the BUYER prior to delivery of the VESSEL shall be in the nature of advances to the BUILDER, and in the event that the VESSEL after sea trial is rejected by the BUYER or the VESSEL is cancelled by the BUYER in accordance with the terms of this Contract under and pursuant to any of the provisions of this Contract specifically permitting the BUYER to do so and in the event that the Contract is rescinded by the BUYER under and pursuant to any of the provisions of this Contract specially permitting the BUYER, then the BUYER shall notify the BUILDER in writing or by telefax confirmed in writing, and such rescission shall be effective as of the date when notice thereof is received by the BUILDER.
 
2.                           Refundment by BUILDER :
 
In case the BUILDER receives the notice stipulated in Paragraph 1 of this Article, the BUILDER shall promptly refund to the BUYER the full amount of all sums paid by the BUYER to the BUILDER on account of the VESSEL together with the interest thereon, unless the BUILDER proceeds to the arbitration under the provisions of Article XII hereof.
 
In such event, the BUILDER shall pay the BUYER interest at the rate of Six percent (6.0%)per annum on the amount required herein to be refunded to the BUYER, computed from the dates following on which such sums were paid by the BUYER to the BUILDER to the date of remittance by transfer of such refund to the BUYER by the BUILDER.
 
As security for refund of instalments prior to delivery of the VESSEL, the BUILDER shall furnish the BUYER within Fourteen (14) calendar days after the Contract signing with a letter of guarantee covering the amount of such pre-delivery instalments in favour of the BUYER. Such letter of guarantee shall have substantially the same form and substance as Exhibit “A” annexed hereto.
 
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3.                           Discharge of Obligations :
 
Upon such refund by the BUILDER to the BUYER, all obligations, duties and liabilities of each of the parties hereto to the other under this Contract shall be forthwith completely discharged .
 
(End of Article)
 
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ARTICLE XI - BUYER’S DEFAULT
 
1.                           Definition of Default :
 
The BUYER shall be deemed to be in default of its performance of obligations under this Contract in the following cases :
 
(a)                       If the first, second, third, fourth or fifth instalment are not paid by the BUYER to the BUILDER within Five (5) banking days after such instalment becomes due and payable as provided in Article II hereof;
 
or
 
(b)                      If the Delivery instalment is not paid by the BUYER to the BUILDER concurrently with the delivery of the VESSEL as provided in Article II hereof;
 
or
 
(c)                       If the BUYER, when the VESSEL is duly tendered for delivery by the BUILDER:
 
i)                            fails to take delivery of the VESSEL within Five (5) banking days from tendered date
 
ii)                           having initiated the arbitration procedure the BUYER does not accept delivery within Seven (7) days of an arbitration award which is not appealed.
 
2.                           Effect of Default on or before Delivery of VESSEL :
 
 (a)                    Should the BUYER make default in payment of any instalment of the Contract Price on or before delivery of the VESSEL, the BUYER shall pay the instalment(s) in default plus accrued interest thereon at the rate of Six percent (6.0%) per annum computed from the due date of such instalment to the date when the BUILDER receives the payment, and, for the purpose of Paragraph 1 of Article VII hereof the Delivery Date of the VESSEL shall be automatically extended by the period of continuance of such default by the BUYER. In any event of default by the BUYER, the BUYER shall also pay direct charges and expenses incurred by the BUILDER in consequence of such default after mutual agreement.
 
(b)                   If any default by the BUYER continues for a period of Ten (10) days after the BUILDER’s notification, the BUILDER may, at its option, rescind this Contract by giving notice of such effect to the BUYER by telefax confirmed in writing.
 
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Upon dispatch by the BUILDER of such notice of rescission, this Contract shall be forthwith rescinded and terminated. In the event of such rescission of this Contract, the BUILDER shall be entitled to retain any instalment or instalments already paid by the BUYER to the BUILDER on account of this Contract and the BUYER’s Supplies, if any.
 
3.                           Disposal of VESSEL :
 
 (a)                    In the event that this Contract is rescinded by the BUILDER under the provisions of Paragraph 2(b) of this Article, the BUILDER may, at its sole discretion, either complete the VESSEL and sell the same, or sell the VESSEL in its incomplete state, free of any right or claim of the BUYER. Such sale of the VESSEL by the BUILDER shall be either by public auction or private contract at the BUILDER’s sole discretion and on such terms and conditions as the BUILDER shall deem fit.
 
 (b)                   In the event of such sale of the VESSEL, the amount of the sale received by the BUILDER shall be applied firstly to all expenses attending such sale or otherwise incurred by the BUILDER as a result of the BUYER’s default, secondly to the payment of all costs and expenses of construction of the VESSEL incurred by the BUILDER less BUYER’s Supplies and the instalments already paid by the BUYER and the compensation to the BUILDER for a reasonable loss of profit due to rescission of this Contract, and finally to the repayment to the BUYER without interest, if any balance is obtained.
 
(c)                       If the proceeds of sale are insufficient to pay such total costs and loss of profit as aforesaid, the BUYER shall promptly pay the deficiency to the BUILDER upon request.
 
(End of Article)
 
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ARTICLE XII - ARBITRATION
 
1.                           Decision by the Classification Society :
 
If any dispute arises between the parties hereto in regard to the design and/or construction of the VESSEL, its machinery and equipment, and/or in respect of the materials and/or workmanship thereof and/or thereon, and/or in respect of interpretations of this Contract or the SPECIFICATIONS , the parties may by mutual agreement refer the dispute to the Classification Society or to such other expert as may be mutually agreed between the parties hereto, and whose decision shall be final, conclusive and binding upon the parties hereto.
 
2.                           Proceedings of Arbitration :
 
In the event that the parties hereto do not agree to settle a dispute according to Paragraph 1 of this Article and/or in the event of any other dispute of any kind whatsoever between the parties and relating to this Contract or its rescission or any stipulation herein, such dispute shall be submitted to arbitration in London. Each party shall appoint an arbitrator and in the event that they cannot agree, the two arbitrators so appointed shall appoint an Umpire.
 
If the two arbitrators are unable to agree upon an Umpire within Twenty(20) days after appointment of the second arbitrator, either of the said two arbitrators may apply to the President for the time being of the London Maritime Arbitrators Association to appoint the third arbitrator, and the three arbitrators shall constitute the board of arbitration.
 
Such arbitration shall be in accordance with and subject to the provisions of the English Arbitration Act 1996 or any statutory modification or re-enactment thereof for the time being in force.
 
The Arbitration shall be conducted in accordance with the rules in force of the London Maritime Arbitrators Association.
 
Either party may demand arbitration of any such dispute by giving notice to the other party. Any demand for arbitration by either of the parties hereto shall state the name of the arbitrator appointed by such party and shall also state specifically the question or questions as to which such party is demanding arbitration.
 
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Within Fourteen(14) days after receipt of notice of such demand for arbitration, the other party shall in turn appoint a second arbitrator and give notice in writing of such appointment to the party demanding arbitration. If a party fails to appoint an arbitrator as aforementioned within Fourteen(14) days following receipt of notice of demand for arbitration by the other party, the party failing to appoint an arbitrator shall be deemed to have accepted and appointed, as its own arbitrator, the arbitrator appointed by the party demanding arbitration and the arbitration shall proceed before this sole arbitrator who alone in such event shall constitute the Arbitration Board.
 
The award of the arbitrators and/or Umpire shall be final and binding on both parties.
 
3.                           Notice of Award :
 
The award shall immediately be given to the BUYER and the BUILDER by telefax.
 
4.                           Expenses :
 
The Arbitration Board shall determine which party shall bear the expenses of the arbitration or the portion of such expenses which each party shall bear.
 
5.                           Entry in Court :
 
In case of failure by either party to respect the award of the arbitration, the judgement may be entered in any proper court having jurisdiction thereof.
 
6.                           Alteration of Delivery Date :
 
In the event of reference to arbitration of any dispute arising out of matters occurring prior to delivery of the VESSEL, the award may include any postponement of the Delivery Date which the Arbitration Board may deem appropriate.
 
(End of Article)
 
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ARTICLE XIII - SUCCESSOR AND ASSIGNS
 
Neither of the parties hereto shall assign this Contract to any other individual or company save as provided hereto. unless prior consent of the other party is given in writing. Should circumstances permit with or without alteration of the terms and conditions of this Contract, such consent shall not be unreasonably withheld by either party.
 
The BUYER is hereby allowed to assign the Contract for the purposes of financing.
 
The BUYER is further allowed to nominate a company controlled by the BUYER to take over the Contract.
 
The BUILDER shall fully cooperate in case the BUYER requests UK Tax lease financing arrangements.
 
In the event of any assignment pursuant to the terms of this Contract, the assignee shall succeed to all of the rights and obligations of the assignor under this Contract and the assignor shall remain responsible for the fulfillment of this Contract.
 
In the event of the assignment from the BUYER to any other individual or company the BUILDER shall be entitled to request a Performance Guarantee from the BUYER having same form and contents as Exhibit  “ C” annexed hereto.
 
The BUYER and the BUILDER understand and acknowledge that the VESSEL shall be built and constructed as a repeat and series vessel of the BUILDER’s Hull Nos. 1639 and 1640 as stipulated in this Contract. Thus, i n the event of a resale, assignment and novation of the VESSEL, any and all matters determined by mutual agreement between the BUYER and the BUILDER prior to the resale, assignment and novation of the VESSEL shall be accepted and complied by the New BUYER (i.e., assignee). If the New BUYER or its supervisor makes unreasonable requests that may have a significant impact on the delivery schedule of the VESSEL and/or costs of construction (including, without limitation to, request for fundamental change of ship type or excessive revision of design specifications, etc.), the BUILDER shall be entitled to refuse these requests. The BUYER shall notify the above to the New BUYER before assignment or novation and the New BUYER will have to accept any additional cost related to the new supervision.
 
(End of Article)
 
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ARTICLE XIV - TAXES AND DUTIES
 
1.                           Taxes and Duties Incurred in Korea :
 
The BUILDER shall bear and pay all taxes, duties, stamps and fees incurred in Korea in connection with execution and/or performance of this Contract as the BUILDER, except for any taxes and duties imposed in Korea upon the BUYER’s Supplies.
 
2.                           Taxes and Duties Incurred outside Korea :
 
The BUILDER shall bear and pay all taxes, duties, stamps and fees incurred outside Korea in connection with execution and/or performance of this Contract including guarantee matter as the BUILDER.
 
The BUYER shall bear and pay all taxes, duties, stamps and fees incurred outside Korea in connection with execution and/or performance of this Contract as the BUYER.
 
(End of Article)
 
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ARTICLE XV - PATENTS, TRADEMARKS, COPYRIGHTS, ETC.
 
1.                           Patents, Trademarks and Copyrights :
 
Machinery and equipment of the VESSEL may bear the patent number trademarks or trade names of the manufacturers. The BUILDER shall defend and hold harmless the BUYER from patent liability or claims of patent infringement of any nature or kind, including costs and expenses for, or on account of any patented or patentable invention made or used in the performance of this Contract and also including costs and expenses of litigation, if any.
 
Nothing contained herein shall be construed as transferring any patent or trademark rights or copyrights in equipment covered by this Contract, and all such rights are hereby expressly reserved to the true and lawful owners thereof.
 
The BUILDER’s warranty hereunder does not extend to the BUYER’s Supplies.
 
2.                           General Plans, Specifications and Working Drawings :
 
The BUILDER retains all rights with respect to the SPECIFICATIONS , and plans and working drawings, technical descriptions, calculations, test results and other data, information and documents concerning the design and construction of the VESSEL and the BUYER undertakes therefore not to disclose the same or divulge any information contained therein to any third parties, without the prior written consent of the BUILDER, except where it is necessary for usual operation, repair , registration, classification, chartering, sale and maintenance of the VESSEL.
 
(End of Article)
 
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ARTICLE XVI - BUYER’S SUPPLIES
 
1.                           Responsibility of BUYER :
 
(a)               The BUYER shall, at its own risk, cost and expense, supply and deliver to the BUILDER all of the items to be furnished by the BUYER as specified in the SPECIFICATINS (herein called the BUYER’s Supplies) at warehouse or other storage of the Shipyard in the proper condition ready for installation in or on the VESSEL, in accordance with the time schedule designated and advised by the BUILDER to the BUYER within 60 days from signing this Contract.
 
 (b)                   In order to facilitate installation by the BUILDER of the BUYER’s Supplies in or on the VESSEL, the BUYER shall furnish the BUILDER with necessary specifications, plans, drawings, instruction books, manuals, test reports and certificates required by the rules and regulations of the SPECIFICATIONS .
 
If so requested by the BUILDER, the BUYER shall, without any charge to the BUILDER, cause the representatives of the manufacturers of the BUYER’s Supplies to assist the BUILDER in installation thereof in or on the VESSEL and/or to carry out installation thereof by themselves or to make necessary adjustments at the Shipyard.
 
 (c)                    Any and all of the BUYER’s Supplies shall be subject to the BUILDER’s reasonable right of rejection, as and if they are found to be unsuitable or in improper condition for installation.
 
 (d)                   Should the BUYER fail to deliver any of the BUYER’s Supplies within the time designated, the Delivery Date shall be automatically extended for a period which actually caused the delay in the delivery of the VESSEL.
 
 (e)                    If delay in delivery of any of the BUYER’s Supplies exceeds thirty (30) days, then, the BUILDER shall be entitled to proceed with construction of the VESSEL without installation thereof in or on the VESSEL as hereinabove provided, and the BUYER shall accept and take delivery of the VESSEL so constructed, unless such delay is caused by Force Majeure in which case the provision Paragraph 1(d) of this Article shall apply.
 
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2.                           Responsibility of BUILDER :
 
The BUILDER shall be responsible for storing and handling with reasonable care of the BUYER’s Supplies after delivery thereof at the Shipyard, and shall, at its own cost and expense, install them in or on the VESSEL, unless otherwise provided herein or agreed by the parties hereto, provided, always, that the BUILDER shall not be responsible for quality, efficiency and/or performance of any of the BUYER’s Supplies.
 
(End of Article)
 
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ARTICLE XVII - INSURANCE
 
1.                           Extent of Insurance Coverage
 
From the time of launching until delivery of the VESSEL, the BUILDER shall, at its own cost and expense, insure the VESSEL and all machinery and equipment, appurtenances and outfits, including the BUYER’s Supplies, built into or installed in or upon the VESSEL, against all risks under the “Institute Causes for BUILDER’s Risk”, with first class insurance company or underwriters in Korea.
 
The amount of such insurance coverage shall, up to the date of delivery of the VESSEL, not be less than the aggregate amount of all instalments paid by the BUYER to the BUILDER, plus the value of the BUYER’s Supplies in the custody of the Shipyard.
 
2.                           Application of the Recovered Amounts
 
In the event that the VESSEL shall be damaged from any insured cause at any time before delivery of the VESSEL, and in the further event that such damage shall not constitute an actual or constructive total loss of the VESSEL, the amount received in respect of the insurance shall be applied by the BUILDER in repair of such damage, satisfactory to the Classification Society, and the BUYER shall accept the VESSEL under this Contract if completed in accordance with this Contract and the SPECIFICATIONS , however, subject to the extension of delivery time under Article VIII hereof (except in case of negligence of the BUILDER).
 
Should the VESSEL from any cause become an actual or constructive total loss, the BUILDER shall either :
 
 (a)                    proceed in accordance with the terms of this Contract, in which case the amount received in respect of the insurance shall be applied to the construction and repair of damage of the VESSEL, provided the parties hereto shall have first agreed thereto in writing and to such reasonable extension of delivery time as may be necessary for the completion of such reconstruction and repair ; or
 
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 (b)                   refund promptly to the BUYER the full amount of all sums paid by the BUYER to the BUILDER as instalments in advance of delivery of the VESSEL with Six percent (6.0%) interest, and deliver to the BUYER all BUYER’s Supplies (or the insurance proceeds paid with respect thereto), in which case this Contract shall be deemed to be automatically terminated and all right, duties, liabilities and obligations of each of the parties to the other shall forthwith cease and terminate.
 
3.                           Termination of BUILDER’s Obligation to Insure
 
The BUILDER shall be under no obligation to insure the VESSEL hereunder after delivery and acceptance of the VESSEL.
 
(End of Article)
 
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ARTICLE XVIII – NOTICE
 
1.                           Address :
 
Any and all notices and communications in connection with this Contract shall be addressed as follows :
 
To the BUYER :
Balticsea Marine Inc.
80 Broad Street, Monrovia, Liberia
Cable address :    BALMAR
Telefax No.  :        231-7-7000-422
 
To the BUILDER:
 
Samsung Heavy Industries Co., Ltd.
647-9, 11 th Floor, KIPS Building, Yeoksam-Dong, Kangnam-Ku,
Seoul, Korea
Cable address : SSYARD SEOUL
Telefax No. : (+82 2) 3458-7349, (+82 2) 3458-7319
 
or preferably to its Geoje Yard :
 
Samsung Heavy Industries Co., Ltd.
P.O.BOX Gohyun 9
530, Jangpyung-Ri, Shinhyun-Up, Geoje-Si, Kyungnam, Korea

Telefax No. :	(+82 55) 630-4947 (Design Department)	
 	(+82 55) 630-4978 (Customer Satisfaction Team.)	
 
2.                           Language :
 
Any and all notices and communications in connection with this Contract shall be written in the English language.
 
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3.                           Effective Date of Notice :
 
The notice in connection with this Contract shall become effective from the date when such notice is received by the BUYER or by the BUILDER except otherwise described in the Contract.
 
(End of Article)
 
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ARTICLE XIX - EFFECTIVE DATE OF CONTRACT
 
This Contract shall become effective upon signing by the parties hereto.
 
(End of Article)
 
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ARTICLE XX - INTERPRETATION
 
1.                           Laws Applicable :
 
The parties hereto agree that the validity and interpretation of this Contract and of each Article and part thereof shall be governed by the laws of England.
 
2.                           Discrepancies :
 
All general language or requirements embodied in the SPECIFICATIONS are intended to amplify, explain and implement the requirements of this Contract. However, in the event that any language or requirements so embodied permit of an interpretation inconsistent with any provisions of this Contract, then, in each and every such event, the applicable provisions of this Contract shall prevail and govern. In the event of conflict between the SPECIFICATIONS and Plans, the SPECIFICATIONS shall prevail and govern.
 
3.                           Entire Agreement :
 
This Contract contains the entire agreement and understanding between the parties hereto and supersedes all prior negotiations, representations, undertaking and agreements on any subject matter of this Contract.
 
4.                           Amendments and Supplements :
 
Any supplement, memorandum of understanding or amendment, whatsoever form it may be relating to this Contract, to be made and signed among parties hereof after signing this Contract, shall be the integral part of this Contract and shall be predominant over the respective corresponding Article and/or Paragraph of this Contract.
 
The Contract can only be amended in writing.
 
(End of Article)
 
55

 
IN WITNESS WHEREOF, the parties hereto have caused this Contract to be duly executed on the day and year first above written.

BUYER :	BUILDER :	
BALTICSEA MARINE INC.	SAMSUNG HEAVY IND., CO., LTD.	

/s/ John Coustas	 	 	 	/s/ J. W. Kim	 	
By    :	John Coustas	 	By	:	J. W. Kim	
Title :	Attorney-In-Fact	Title :	President & CEO	

56

 
EXHIBIT “ A”
 
LETTER OF REFUNDMENT GUARANTEE
 
Gentlemen :
 
We hereby issue our letter of guarantee no.              in favour of Balticsea Marine Inc.,(hereinafter called the “BUYER”) for account of Samsung Heavy Industries Co., Ltd.(hereinafter called the “BUILDER”) as follows in consideration of the shipbuilding contract dated March 28, 2006 (hereinafter called the “Contract”) made by and among the BUYER and the BUILDER for the construction of one(1) single screw diesel engine driven Container VESSEL having BUILDER’s Hull No. 1672 (hereinafter called the “VESSEL”).
 
If in connection with the terms of the Contract the BUYER shall become entitled to a refund of the advance payment(s) made to the BUILDER prior to the delivery of the VESSEL, we hereby irrevocably guarantee the repayment of the same to the BUYER immediately on demand being initially US$ 6,380,000.- (Say U.S. Dollars Six Million Three Hundred and Eighty Thousand only) together with interest thereon at the rate of Six (6) percent per annum from the respective dates on which such sums were paid by the BUILDER to the date of remittance by telegraphic transfer of such refund.
 
The amount of this guarantee will be automatically increased, not more than three times, upon BUILDER’s receipt of the respective instalment: each time by the amount of instalment of US$ 6,380,000.- (Say U.S. Dollars Six Million Three Hundred and Eighty Thousand only), US$ 6,380,000.- (Say U.S. Dollars Six Million Three Hundred and Eighty Thousand only) and US$ 6,380,000.- (Say U.S. Dollars Six Million Three Hundred and Eighty Thousand only) respectively plus interest thereon as provided in the Contract, but in any eventuality the amount of this guarantee shall not exceed the total sum of US$ 25,520,000.- (Say U.S. Dollars Twenty Five Million Five Hundred and Twenty Thousand only) plus interest thereon at the rate of Six (6) percent per annum from the respective dates on which such sums were paid by the BUYER to the BUILDER to the date of remittance by telegraphic transfer of the refund.
 
Our liability under this letter of guarantee shall not be affected by any alteration to or variation of the terms of the Contract you may hereafter agree with the BUILDER and by any other matter of circumstances, including bankruptcy or insolvency of the BUILDER, which might otherwise discharge our liability hereunder as guarantor of the BUILDER’s obligations as aforesaid.
 
57

 
In case any refund is made to you by the BUILDER or by us under this guarantee, our liability hereunder shall be automatically reduced by the amount of such refund.
 
This letter of guarantee is available against BUYER’s simple receipt and signed statement certifying that BUYER’s demand for refund has been made in conformity with Article X of the Contract and the BUILDER has failed to make the refund within Thirty One (31) days after BUYER’s demand to the BUILDER.
 
Refund shall be made to BUYER by telegraphic transfer in United States Dollars to an account designated by you without deduction, withholding or set-off.
 
This letter of guarantee shall expire and become null and void upon receipt by the BUYER of the sum guaranteed hereby or upon acceptance by the BUYER of the delivery of the VESSEL in accordance with the terms of the Contract and, in either case, this letter of guarantee shall be returned to us. This guarantee is valid from the date of this letter of guarantee until or in the event of delayed delivery until such time as the VESSEL is delivered by the BUILDER to the BUYER in accordance with the terms of the Contract.
 
Notwithstanding the provisions hereinabove, in case we receive notification from you or the BUILDER confirmed by an Arbitrator stating that your claim to cancel the Contract or your claim for refundment thereunder has been disputed and referred to Arbitration in accordance with the provisions of the Contract, the period of validity of this guarantee shall be extended until Thirty (30) days after the final and non-appealable award shall be rendered in the Arbitration and a copy thereof acknowledged by the Arbitrators. In such case, this guarantee shall not be available unless and until such acknowledged copy of the final award in the Arbitration justifying your claim is presented to us.
 
Your rights in respect of this letter of guarantee are assignable from the date of this letter of guarantee until such time as the VESSEL is delivered by the BUILDER to the BUYER in accordance with the provisions of the Contract, on the understanding that you will notify us of the identity of any assignee of your rights under this letter of guarantee.
 
Any notice or demand under this letter of guarantee shall be given by facsimile and sent to:
 
58

 
or to such other address as we might notify to you in writing. A notice shall be deemed to be served and shall take effect 2 hours after its transmission is completed, provided that if a notice would be deemed to be served on a day which is not a business day, or which is a business day but after 5:00 p.m. local time, in the place of receipt, the notice shall be deemed to be served and shall take effect at 9:00 a.m. on the next day which is a business day.
 
This guarantee shall be governed by and construed in accordance with the Laws of England. Any disputes arising under this guarantee (but not any disputes arising under the Contract which shall be determined by arbitration in accordance with the terms of the Contract and as referenced in this letter of guarantee) shall be determined by the High Court of Justice in London to whose exclusive jurisdiction we hereby submit. We appoint
 
                                                                                                              as our agents for service of process in connection with any proceedings in such courts.
 
We each jointly and severally hereby represent and guarantee that we have the corporate power and authority to execute, deliver and perform the obligations under this letter of guarantee, and that such execution and performance will not violate or conflict with any provision of law, statute, rule, permit or regulation of any government, regulatory body, agency or other authority in the jurisdictions where we are subject to such laws and regulations.
 
59

 
IN WITNESS WHEREOF, we have hereunder set our hands and seal by our duly authorized representatives this          day of                 , 2006.

 	Very truly yours,	

 	For and on behalf of	

 	By	 	 	
 	Name :	
 	Title : Attorney-in-Fact	

 	For and on behalf of	
 	 	 	
 	By	 	 	
 	Name :	
 	Title : Attorney-in-Fact	
 
60

 
EXHIBIT  “ B”
 
Samsung Heavy Industries Co., Ltd.
11 th Floor, KIPS Building
647-9, Yoksam-Dong, Kangnam-Ku,
Seoul, Korea 135-080
 
Date :                                   , 2006
 
PERFORMANCE GUARANTEE
 
In consideration of the performance of a certain shipbuilding contract dated                       (hereinafter called the “Contract”) by BALTICSEA MARINE INC. of 80 Broad street, Monrovia, Liberia having your Hull No.1672 (hereinafter called the “VESSEL”) providing among other things for payment of the Contract Price amounting to United States Dollars             (US$              );
 
We, the undersigned, hereby irrevocably and unconditionally guarantee to you, your successors, and assigns the due and faithful performance by the BUYER of its all liabilities and responsibilities under the Contract and any supplement, amendment, change or modification hereafter made thereto, including but not limited to, due and prompt payment of the Contract Price by the BUYER to you, your successors, and assigns under the Contract and any supplement, amendment, change or modification as aforesaid (hereby expressly waiving notice of any such supplement, amendment, change or modification as may be agreed to by the BUYER and confirming that this guarantee shall be fully applicable to the Contract as so supplemented, amended, changed or modified).
 
This Performance Guarantee shall be governed by the laws of England.

GUARANTOR :	
BY :	 	 	
TITLE :	
WITNESS :	
 
61

 
EXHIBIT  “ C”
 
Samsung Heavy Industries Co., Ltd.
11 th Floor, KIPS Building
647-9, Yoksam-Dong, Kangnam-Ku,
Seoul, Korea 135-080
 
Date :                                             , 2006
 
PERFORMANCE GUARANTEE
 
In consideration of the assignment of a certain shipbuilding contract dated                    (hereinafter called the “Contract”) by us to        having your Hull No.1672 (hereinafter called the “VESSEL”) providing among other things for payment of the Contract Price amounting to United States Dollars            (US$              );
 
We, the undersigned, hereby irrevocably and unconditionally guarantee to you, your successors, and assigns the due and faithful performance by the BUYER of its all liabilities and responsibilities under the Contract and any supplement, amendment, change or modification hereafter made thereto, including but not limited to, due and prompt payment of the Contract Price by the BUYER to you, your successors, and assigns under the Contract and any supplement, amendment, change or modification as aforesaid (hereby expressly waiving notice of any such supplement, amendment, change or modification as may be agreed to by the BUYER and confirming that this guarantee shall be fully applicable to the Contract as so supplemented, amended, changed or modified).
 
This Performance Guarantee shall be governed by the laws of England.

GUARANTOR :	
BY :	 	 	
TITLE :	
WITNESS :	
 
62

 
Exhibit 10.24
 
FOR
 
CONSTRUCTION AND SALE
 
OF
 
A 4,250 TEU CONTAINER VESSEL
(HULL NO. 1673)

BETWEEN
 
Continent Marine Inc.
As BUYER
 
AND

Samsung Heavy Industries Co., Ltd.
As BUILDER

 
I N D E X

 	 	PAGE	
 	 	 	
PREAMBLE	 	7	
 	 	 	
ARTICLE I - DESCRIPTION AND CLASS	 	 	
 	 	 	
1. Description	 	8	
2. Dimensions and Characteristics	 	8	
3. Classification, Rules and Regulations	 	9	
4. Subcontracting	 	10	
5. Registration	 	10	
 	 	 	
ARTICLE II - CONTRACT PRICE AND TERMS OF PAYMENT	 	 	
 	 	 	
1. Contract Price	 	11	
2. Adjustment of Contract price	 	11	
3. Currency	 	11	
4. Terms of Payment	 	11	
5. Method of Payment	 	12	
6. Notice of Payment on or before Delivery	 	13	
7. Expenses	 	13	
8. Prepayment	 	13	
9. Performance Guarantee	 	14	
 	 	 	
ARTICLE III - ADJUSTMENT OF CONTRACT PRICE	 	 	
 	 	 	
1. Delivery	 	15	
2. Speed	 	16	
3. Fuel Consumption	 	17	
4. Deadweight	 	17	
5. Early Delivery	 	18	
6. Effect of Rescission	 	18	
 
2

 

ARTICLE IV - APPROVAL OF PLANS AND DRAWINGS AND INSPECTION DURING CONSTRUCTION	 	 	
 	 	 	
1. Approval of Plans and Drawings	 	19	
2. Appointment of BUYER’s Supervisor	 	19	
3. Inspection by the Supervisor	 	20	
4. Facilities	 	21	
5. Liability of BUILDER	 	21	
6. Responsibility of BUYER	 	22	
 	 	 	
ARTICLE V - MODIFICATIONS, CHANGES AND EXTRAS	 	 	
 	 	 	
1. How Effected	 	23	
2. Change in Rules of Classification Society, Regulations etc	 	24	
3. Substitution of Materials	 	25	
 	 	 	
ARTICLE VI - TRIALS AND ACCEPTANCE	 	 	
 	 	 	
1. Notice	 	26	
2. Weather Condition	 	26	
3. How Conducted	 	27	
4. Method of Acceptance of Rejection	 	27	
5. Effect of Acceptance	 	28	
6. Disposition of Surplus Consumable Stores	 	28	
 	 	 	
ARTICLE VII - DELIVERY	 	 	
 	 	 	
1. Time and Place	 	29	
2. When and How Effected	 	29	
3. Documents to be delivered to BUYER	 	29	
4. Tender of VESSEL	 	30	
5. Title and Risk	 	31	
6. Removal of VESSEL	 	31	
 
3

 

ARTICLE VIII - DELAYS AND EXTENSION OF TIME FOR DELIVERY (FORCE MAJEURE)	 	 	
 	 	 	
1. Causes of Delay	 	32	
2. Notice of Delay	 	33	
3. Definition of Permissible Delay	 	33	
4. Right to Rescind for Excessive Delay	 	33	
 	 	 	
ARTICLE IX - WARRANTY OF QUALITY	 	 	
 	 	 	
1. Guarantee	 	35	
2. Notice of Defects	 	35	
3. Remedy of Defects	 	35	
4. Extent of the BUILDER’s Responsibility	 	37	
5. Guarantee Engineer	 	37	
 	 	 	
ARTICLE X - RESCISSION BY BUYER	 	 	
 	 	 	
1. Notice	 	39	
2. Refundment by BUILDER	 	39	
3. Discharge of Obligations	 	40	
 	 	 	
ARTICLE XI - BUYER’S DEFAULT	 	 	
 	 	 	
1. Definition of Default	 	41	
2. Effect of Default on or before Delivery of VESSEL	 	41	
3. Disposal of VESSEL	 	42	
 	 	 	
ARTICLE XII - ARBITRATION	 	 	
 	 	 	
1. Decision by Classification Society	 	43	
2. Proceedings of Arbitration	 	43	
3. Notice of Award	 	44	
4. Expenses	 	44	
5. Entry in Court	 	44	
6. Alteration of Delivery Date	 	44	
 	 	 	
ARTICLE XIII - SUCCESSOR AND ASSIGNS	 	45	
 
4

 

ARTICLE XIV - TAXES AND DUTIES	 	 	
 	 	 	
1. Taxes and duties Incurred in Korea	 	46	
2. Taxes and Duties Incurred outside Korea	 	46	
 	 	 	
ARTICLE XV - PATENTS, TRADEMARKS, COPYRIGHTS, ETC	 	 	
 	 	 	
1. Patents, Trademarks and Copyrights	 	47	
2. General Plans, Specifications and Working Drawings	 	47	
 	 	 	
ARTICLE XVI - BUYER’S SUPPLIES	 	 	
 	 	 	
1. Responsibility of BUYER	 	48	
2. Responsibility of BUILDER	 	49	
 	 	 	
ARTICLE XVII - INSURANCE	 	 	
 	 	 	
1. Extent of Insurance Coverage	 	50	
2. Application of the Recovered Amounts	 	50	
3. Termination of BUILDER’s Obligation to Insure	 	51	
 	 	 	
ARTICLE XVIII - NOTICE	 	 	
 	 	 	
1. Address	 	52	
2. Language	 	52	
3. Effective Date of Notice	 	53	
 	 	 	
ARTICLE XIX - EFFECTIVE DATE OF CONTRACT	 	54	
 	 	 	
ARTICLE XX - INTERPRETATION	 	 	
 	 	 	
1. Laws Applicable	 	55	
2. Discrepancies	 	55	
3. Entire Agreement	 	55	
4. Amendments and supplements	 	55	
 
5

 

END OF CONTRACT	 	56	
 	 	 	
EXHIBIT “A” LETTER OF REFUNDMENT GUARANTEE	 	57	
 	 	 	
EXHIBIT “B” PERFORMANCE GUARANTEE	 	61	
 	 	 	
EXHIBIT “C” PERFORMANCE GUARANTEE	 	62	
 
6

 
THIS CONTRACT, made and entered into on this 28 th day of March, 2006 by and between Continent Marine Inc. a corporation incorporated and existing under the laws of Liberian, having its registered office at 80 Broad Street, Monrovia, Liberia (hereinafter called the “BUYER”), on the one part and Samsung Heavy Industries Co., Ltd., a corporation incorporated and existing under the laws of the Republic of Korea of having its registered office at 647-9, Yeoksam-Dong, Kangnam-ku, Seoul, Korea (hereinafter called the “BUILDER”), on the other part,
 
WITNESSETH:
 
In consideration of the mutual covenants herein contained, the BUILDER agrees to design, build, launch and complete in accordance with first class modern Korean shipbuilding practice and standards one (1) Single Screw Diesel Engine driven Container VESSEL as described in the Specifications attached herewith and any addendum thereto (hereinafter called the “VESSEL”) at the BUILDER’s shipyard located in Geoje Island, Korea (hereinafter called the “Shipyard”) and to deliver and sell the same to the BUYER, and the BUYER hereby agrees to purchase and accept delivery of the VESSEL from the BUILDER and to pay for the same upon the terms and conditions hereinafter set forth.
 
7

 
ARTICLE I - DESCRIPTION AND CLASS
 
1.                           Description :
 
The VESSEL shall be an ocean going single screw diesel engine driven fully cellular container VESSEL suitable for carrying dry cargo containers having the BUILDER’s Hull No.1673 and shall be built, constructed, equipped and completed in accordance with the ‘As-Built-Specifications’ as specified in the shipbuilding contracts of the BUILDER’s Hull No. 1639 and 1640 (hereinafter called as the “HN1639 Series Contract”) to build just identical vessels to the BUILDER’s Hull No. 1639 and 1640 (hereinafter called as the “HN1639 Series”) as a repeat and series, and the ‘Maker List’ as specified in the Supplement Agreement No.1 (dated June 30, 2005) to the HN 1639 Series Contract (hereinafter collectively called as the “SPECIFICATIONS”).
 
Thus, all drawings and plans made by the BUILDER and duly approved by the BUYER during the construction of the HN1639 Series in accordance with HN 1639 Series Contract shall be used without any further change, modification and approval by the BUYER, and a ll extra/credit costs agreed as of February 27, 2006 for the HN 1639 Series are included into the ship price described in this CONTRACT, and all construction procedure including model test and sea trial etc. shall be done on the basis of the just repeat and series VESSEL of the HN 1639s Series.
 
2.                           Dimensions and Characteristics :

Length, overall	 	 	 	appx.	 	259.8	m	
Length, between perpendiculars	 	 	 	appx.	 	244.8	m	
Breadth, moulded	 	 	 	appx.	 	32.25	m	
Depth, moulded	 	 	 	appx.	 	19.3	m	
Designed loaded draught, moulded	 	 	 	appx.	 	11.0	m	
Scantling draught, moulded	 	 	 	appx.	 	12.6	m	
 
Main Engine                                                                    :                                                       MAN B&W 8K 90MC-C type License Made MCR 49,680 bhp at 104 r.p.m.

Deadweight, guaranteed	:	 	50,500 metric tons at the moulded	
 
8

 

 	 	 	scantling draught of 12.6 meters.	
 	 	 	 	
Speed, guaranteed	:	 	24.5 knots at a draught of 11.0 meters and main engine developing power of 38,880 bhp (metric).	
 	 	 	
Fuel Consumption, guaranteed :	 	124.3 grams/bhp(metric)-hour using marine diesel oil having lower calorific value of 10,200 kcal/kg at normal continuous rating of 44,710 bhp(metric) measured at the shop trial.	
 
The details of the aforementioned particulars as well as the definitions and method of measurements and calculations are as defined in the SPECIFICATIONS .
 
3.                           Classification, Rules and Regulations :
 
The VESSEL, including its machinery, equipment and outfittings shall be constructed in accordance with the rules and regulations in year 2004 July edition of the Classification Society in accordance with both the interpretation of Classification Society (dated on 2005-06-29 Ref No. MKOKR120/MSSH/Gen-precontract/PUS-J-668) and the interpretation of the Classification Society (dated 28 th February 2006 Ref. No. MKOKR120/MSSH/Gen-Precontract/PUS-J-698 in respect of new updates in effect as of March 28, 2006 from rule and regulations applied to the HN1639 Series) and under special survey of Det Norske Veritas (hereinafter called the “Classification Society”) and shall be distinguished in the register by the symbol of X 1A1 “ Container Carrier”, NAUTICUS, EO, and In water survey and TMON shall be applied according to the requirement of the class rule.
 
Decisions of the Classification Society as to compliance or non-compliance with the classification shall be final and binding upon both parties hereto. Details of its notation shall be in accordance with the SPECIFICATIONS .
 
The VESSEL shall also comply with the compulsory rules, regulations and requirements of the regulatory bodies as described in the SPECIFICATIONS rectified and in effect as of the signing date of this Contract. Non-compulsory rules, regulations and requirements of the regulatory bodies shall be dealt with in
 
9

 
accordance with Article V (2) of this Contract.
 
All the fees and charges incidental to the classification and with respect to compliance with the above referred rules, regulations and requirements shall be for account of the BUILDER except otherwise agreed.
 
4.                           Subcontracting :
 
The BUILDER may, at its sole discretion and responsibility, subcontract any portion of the construction work of the VESSEL, provided that the construction and assembly of the VESSEL shall be carried out as is normally done according to the BUILDER’s building practice and provided further that the BUILDER shall be responsible to the BUYER in respect of any construction work carried out by such subcontractors.
 
5.                           Registration :
 
The VESSEL, at the time of its delivery and acceptance, shall be registered at the port of registry by the BUYER under Greek, Liberian, Cyprus or Panama flag at the BUYER’s expenses. The BUYER shall decide the flag within one(1) month after the date of signing of this Contract.
 
(End of Article)
 
10

 
ARTICLE II - CONTRACT PRICE AND TERMS OF PAYMENT
 
1.                           Contract Price :
 
The Contract price of the VESSEL and exclusive of the BUYER’s Supplies as provided in Paragraph 1 of Article XVI hereof is Sixty Three Million Eight Hundred Thousand United States Dollars (US$ 63,800,000.-) (hereinafter called the “Contract Price”), which shall be subject to upward or downward adjustment, if any, as hereinafter set forth in this Contract.
 
2.                           Adjustment of Contract Price:
 
Increase or decrease of the Contract Price, if any, due to adjustments thereof made in accordance with the provisions of this Contract, shall be adjusted by way of addition to or subtraction from the Contract Price upon delivery and acceptance of the VESSEL in the manner as hereinafter provided.
 
3.                           Currency :
 
Any and all payments by the BUYER to the BUILDER which are due under this Contract shall be made in United States Dollars.
 
4.                           Terms of Payment :
 
The Contract Price shall be due and payable by the BUYER to the BUILDER in the instalments as follows :
 
(a)                       First Instalment :
 
The First Instalment amounting to Six Million Three Hundred and Eighty Thousand United States Dollars (US$ 6,380,000.-) shall be due and payable upon issuance and delivery to the BUYER of the original of Refund Guarantee.
 
(b)                      Second Instalment :
 
The Second Instalment amounting to Six Million Three Hundred and Eighty Thousand Million United States Dollars (US$ 6,380,000.-) shall be due and payable upon six(6) calendar months after the date of singing of this Contract.
 
11

 
(c)                       Third Instalment :
 
The Third Instalment amounting to Six Million Three Hundred and Eighty Thousand Million United States Dollars (US$ 6,380,000.-) shall be due and payable upon steel cutting of the VESSEL.
 
(d)                      Fourth Instalment :
 
The Forth Instalment amounting to Six Million Three Hundred and Eighty Thousand Million United States Dollars (US$ 6,380,000.-) shall be due and payable upon keel laying of the VESSEL.
 
 (e)                    Fifth Instalment :
 
The Delivery Instalment amounting to Thirty Eight Million Two Hundred and Eighty Thousand United States Dollars (US$ 38,280,000.-) plus any increase or minus any decrease due to adjustments of the Contract Price under and pursuant to the provisions of this Contract, shall be due and payable upon delivery and acceptance of the VESSEL or upon tender for delivery of the VESSEL referred to in Paragraph 4 of Article VII of this Contract.
 
It is agreed that no payment shall be effected until the original Refund Guarantee is delivered to the BUYER.
 
5.                           Method of Payment :
 
 (a)                    First Instalment :
 
Within Seven(7) banking days after 28 th day of March 2006, the BUYER shall remit by telegraphic transfer the first instalment to the account of The Export-Import Bank of Korea, Head Office, Seoul, Korea with Deutsche Bank Trust Company Americas(BIC : BKTRUS33), 60 Wall Street, Mail Stop NYC 60 1310, New York, NY 10005, USA, Account No.04 029 695, in favour of Samsung Heavy Industries., Ltd, SWIFT code : EXIKKRSE or other bank as designated by the Builder, in favor of Samsung Heavy Industrise Co, Ltd.(hereinafter called the “BUILDER’s Bank”)
 
(b)                      Second, Third and Fourth Instalment :
 
Upon receipt of telefax notice from the BUILDER confirming that the second, third, and fourth instalment on each event is due and payable, the BUYER shall
 
12

 
remit by telegraphic transfer the second, third, and fourth instalment to the aforesaid account of the BUILDER’s Bank in favour of Samsung Heavy Industries Co., Ltd.
 
 (c)                    Fifth Instalment :
 
At least One (1) banking days prior to delivery and acceptance of the VESSEL, the BUYER shall remit by telegraphic transfer the fifth instalment to the name of the BUYER at BUILDER’s BANK, with an irrevocable instruction that the amount so remitted shall be payable to the BUILDER against a facsimile copy of PROTOCOL OF DELIVERY and ACCEPTANCE OF THE VESSEL signed by the BUYER and the BUILDER or returned to the BUYER if such PROTOCOL OF DELIVERY and ACCEPTANCE has not been presented within 15 days.
 
Simultaneously with each of all such payments, the BUYER shall cause the BUYER’s BANK to advise the BUILDER’s BANK of the details of such payments by authenticated bank cable.
 
Any claim which the BUYER may have against the BUILDER hereunder shall be settled and liquidated separately from any payment by the BUYER to the BUILDER hereunder.
 
6.                           Notice of Payment on or before Delivery :
 
With the exception of the first instalment, the BUILDER shall give the BUYER Five(5) banking days prior notice by telefax of the anticipated due date and amount of each instalment payable on or before delivery of the VESSEL.
 
7.                           Expenses.
 
Expenses and bank charges for remitting payments and any taxes, duties, expenses and fees connected with such payment shall be for account of the BUYER referred to in paragraph 2 of Article XIV of this Contract, except expenses and bank charges of the BUILDER’s BANK.
 
8.                           Prepayment :
 
Prepayment of any instalment due on or before delivery of the VESSEL shall be subject to mutual agreement between the parties hereto.
 
13

 
9.                           Performance Guarantee
 
Upon signing this Contract, the BUYER shall provide the BUILDER with a Performance Guarantee in order to secure the due and faithful performance of this Contract by the BUYER having same form and contents as Exhibit ”B” annexed hereto.
 
(End of Article)
 
14

 
ARTICLE III - ADJUSTMENT OF CONTRACT PRICE
 
The Contract Price shall be subject to adjustment, as hereinafter set forth, in the event of the following contingencies (it being understood by both parties that any reduction of the Contract Price is by way of liquidated damages and not by way of penalty) :
 
1.                           Delivery :
 
  (a)                    No adjustment shall be made and the Contract Price shall remain unchanged for the first Thirty (30) days of delay in delivery of the VESSEL beyond the Delivery Date as defined in Article VII hereof (ending as of twelve o’clock midnight of the Thirty (30) day of delay).
 
 (b)                   If the delivery of the VESSEL is delayed more than Thirty (30) days after the Delivery Date, the Contract Price shall be reduced by the sum of Twenty Seven Thousand Five Hundred United States Dollars (US$27,500.-) for each full day for which thereafter delivery is delayed.
 
However, the total reduction in the Contract Price shall not be more than as would be the case for a delay of One Hundred Eighty (180) days counting from the midnight of the Thirty (30) day after the Delivery Date at the above specified rate of reduction.
 
  (c)                    However, if the delay in delivery of the VESSEL should continue for a period of Two Hundred Ten (210) days from the Delivery Date in Paragraph 1 of Article VII, then in such event, and after such period has expired, the BUYER may, at its option, rescind this Contract in accordance with the provisions of Article X hereof.
 
The BUILDER may, at any time after the expiration of the aforementioned Two Hundred Ten (210) days of delay in delivery, if the BUYER has not served notice of rescission as provided in Article X hereof, demand in writing that the BUYER shall make an election, in which case the BUYER shall, within Twenty (20) days after such demand is received by the BUYER, notify the BUILDER of its intention either to rescind this Contract or to consent to the acceptance of the VESSEL at the BUILDER’s specified future date. If the BUYER shall not make an election within Twenty (20) days as provided hereinabove, the BUYER shall be deemed to have accepted such extension of the delivery date to the future delivery date indicated by the BUILDER and it being understood by the parties hereto that if the VESSEL is not delivered by such future date, the BUYER shall
 
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have the same right of rescission upon the same terms and conditions as hereinabove provided.
 
It is understood that accrued liquidated damages are preserved. Further delay shall incur additional liquidated damages in accordance with existing terms and conditions.
 
 (d)                   For the purpose of this Article, the delivery of the VESSEL shall be deemed to be delayed when and if the VESSEL, after taking into account all postponements of the Delivery Date by reason of permissible delay as defined in Article VIII and/or any other reason under this Contract, is not delivered by the date upon which delivery is required under the terms of this Contract.
 
2.                           Speed :
 
 (a)                    The Contract Price shall not be affected or changed by reason of the trial speed (as determined according to the SPECIFICATIONS being less than the guaranteed speed, if such variation is not more than Two-Tenths (2/10) of One (1) knot.
 
 (b)                   However, if such variation is more than Two-Tenths (2/10) of One (1) knot, then, the Contract Price shall be decreased by One Hundred and Seventy Five Thousand United States Dollars (US$ 175,000.-) for each successive whole One-Tenth(1/10) of a knot in excess of a deficiency of Two-Tenths (2/10) of a knot (in both cases smaller fractions being disregarded).
 
 (c)                    If the deficiency in the speed upon final sea trial is more than Half(1/2) a knot below the guaranteed speed of the VESSEL, then the BUYER may, at its option, reject the VESSEL and rescind this Contract in accordance with the provisions of Article X hereof, or may accept the VESSEL at a reduction in the Contract Price as above provided for Half(1/2) a knot only, that is, at a total reduction of Five Hundred and Twenty Five Thousand United States Dollars (US$ 525,000.-).
 
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3.                           Fuel Consumption :
 
 (a)                    The Contract Price shall not be affected or changed in case the fuel consumption, as determined by the shop trial as specified in the SPECIFICATIONS , is not more than Five percent (5%) in excess of the guaranteed fuel consumption specified in Paragraph 2 of Article I.
 
 (b)                   However, in the event that the actual fuel consumption at the shop trial is in excess of Five percent (5%) of the guaranteed fuel consumption, the Contract Price shall be reduced by the sum of One Hundred and Ten Thousand United States Dollars (US$ 110,000.-) for each full one percent(1%) increase in fuel consumption and pro rata for any fraction of one percent(1%) of the Guaranteed Fuel Consumption in excess of the said five percent(5%) up to maximum of eight percent(8%) over the Guaranteed Fuel Consumption.
 
 (c)                    If the deficiency in fuel consumption is more than Eight percent (8%) then the BUYER may at its option rescind this Contract in accordance with the provision of Article X hereof.
 
4.                           Deadweight :
 
(a)                       In the event that the deadweight of the VESSEL as determined in accordance with the SPECIFICATIONS is less than the guaranteed deadweight as specified in Paragraph 2 of Article I, the Contract Price shall be reduced by the sum of One Thousand One Hundred United States Dollars (US$ 1,100.-) for each full metric ton of such deficiency being more than Seven Hundred (700) metric tons, up to a maximum reduction of One Million Two Hundred and Ten Thousand United States Dollars (US$ 1,210,000.-).
 
(b)                      In the event of such deficiency in the deadweight of the VESSEL being One thousand eight hundred (1,800) metric tons or more, then, the BUYER may, at its option, reject the VESSEL and rescind this Contract in accordance with the provisions of Article X hereof or accept the VESSEL at a reduction in the Contract Price as above provided for One Thousand Eight Hundred (1,800) metric tons only, that is, at a total reduction of One Million Two Hundred and Ten Thousand United States Dollars (US$1,210,000.-).
 
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5.                           Early Delivery
 
In the event that the BUILDER believes that the VESSEL can be completed and ready for Delivery on a date earlier than the Contractual Delivery Date, then the BUILDER may give a written notice to the BUYER, no later than six (6) months before the revised date (the “Early Delivery Date”) informing the approximate date on which the VESSEL can be ready for the Delivery. The BUYER shall have the option, but not the obligation, to accept Delivery of the VESSEL on the Early Delivery Date and upon the BUYER’s acceptance thereof, the parties shall discuss the specific amount of the additional payment due to the BUILDER for the accelerated Delivery of the VESSEL on the Early Delivery Date at the delivery stage of the VESSEL and t he compensation payment of the acceleration bonus shall be settled and paid in full with the final delivery instalment concurrently uponwith the actual Delivery and acceptance of the VESSEL by the BUYER. If the Parties fail to reach a mutual agreement on the amount of the Early Delivery bonus, the BUILDER shall be free to deliver the VESSEL on the original Contractual Delivery Date or earlier at its option. The Parties hereto acknowledge that there will be no liquidated damages or other penalty to be imposed on the BUILDER in the event the VESSEL happens to be delivered on any date later than the Early Delivery Date but earlier than the original Contractual Delivery Date.
 
6                              Effect of Rescission :
 
It is expressly understood and agreed by the parties that in any case, if the BUYER rescinds this Contract under this article, the BUYER shall not be entitled to any liquidated damages or any other recourse unless by means of the provisions of Article X hereof.
 
(End of Article)
 
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ARTICLE IV - APPROVAL OF PLANS AND DRAWINGS AND INSPECTION DURING CONSTRUCTION
 
1.                           Approval of Plans and Drawings :
 
The SPECIFICATIONS   shall be used for the VESSEL without any further approval and modification from the BUYER unless otherwise mutually agreed by both parties. Should any changes are required by the BUYER’s request or the application of new rules and regulations (of a mandatory nature) coming into effect after the date of this Contract signing, the BUILDER shall submit such changes to the BUYER for its approval. If approved by the BUYER, such changes shall be applied to the VESSEL with cost adjustment in accordance with Article V of this Contract.
 
2.                           Appointment of BUYER’s Supervisor :
 
The BUYER may send to and maintain at the Shipyard, at the BUYER’s own cost and expense, one supervisor who shall be duly authorized in writing by the BUYER (herein called the “Supervisor”) to act on behalf of the BUYER in connection with the modifications of the SPECIFICATIONS, adjustments of the Contract Price and Delivery Date, approval of the plans and drawings, attendance to the tests and inspections relating to the VESSEL, its machinery, equipment and outfittings, and any other matters for which he is specifically authorized by the BUYER. The Supervisor may appoint his assistant(s) to attend at the Shipyard for the purposes as aforesaid.
 
In the event that assignment, novation or resale occurs under the Article XIII and as a result, BUYER’s Supervisor is changed during the construction of the VESSEL, any and all matters determined by mutual agreement between the BUYER’s Supervisor and the BUILDER prior to the dispatch of a new Supervisor shall be accepted and complied by the new Supervisor. In case two or more Supervisors are dispatched to the Shipyard and authorized, under the BUILDER’s prior consent, to perform the supervision, each of them will form uniform opinions between them to keep the design and the SPECIFICATIONS so as not to adversely affect the CONTRACT PRICE and Delivery of the VESSEL, provided that such change in the Contract Price will be reasonable and proven under the BUILDER’s normal practice. In the event of any additional costs attributable to such dispatch of two or more supervisors due to the reasons including but not
 
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limited to resale, novation, charter or any other occurrence otherwise resulting from the BUYER, such costs shall be borne by the BUYER and the BUYER shall reimburse and hold harmless the BUILDER from any such costs and expenses.
 
3.                           Inspection by the Supervisor :
 
The necessary inspections of the VESSEL, its machinery, equipment and outfittings shall be carried out by the Classification Society, other regulatory bodies and/or an inspection team of the BUILDER throughout the entire period of construction in order to ensure that the construction of the VESSEL is duly performed in accordance with this Contract and the SPECIFICATIONS The Supervisor shall have, during construction of the VESSEL, the right to attend such tests and inspections of the VESSEL, its machinery and equipment within the premises of either the BUILDER or its subcontractors. The BUILDER shall give notice to the Supervisor, in advance of the date and place of such tests and inspections for the convenience of their attendance. Detailed procedures of the inspection and the tests thereof shall be in accordance with the SPECIFICATIONS .
 
The BUILDER may request BUYER’s supervisor to attend the inspection and tests during public holidays and weekends and/or Company holidays in order to keep BUILDER’s construction schedule. BUYER’s supervisor shall fully cooperate with BUILDER and promptly attend such inspection/tests including those for surface preparation and painting work, which are especially vulnerable to weather condition and time interval. However, BUILDER shall keep such inspection and tests to a minimum and only when the inspection and tests affect BUILDER’s construction schedule. The BUILDER’s prior notice of such inspection/test schedule shall be informed to the BUYER’s supervisor three(3) working days in advance as a minimum
 
The Supervisor shall be entitled to request copies of all test results and trials as soon as required for the performance of his duties.
 
The Supervisor shall notify the BUILDER of deficiencies in the construction of the VESSEL or materials. The BUILDER should examine the deficiency and rectify.
 
If any of the BUYER’s supervisors discover any construction, material or
 
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workmanship which is not deemed to conform to the requirements of this Contract and/or the SPECIFICATIONS , the BUYER’s supervisors shall promptly give the BUILDER a notice in writing that such alleged non-conformity exists. Upon receipt of such notice from the BUYER’s supervisor, the BUILDER shall correct such non-conformity, if the BUILDER agrees to his view. Any disagreement shall be resolved in accordance with Paragraph 1 of Article XII.
 
4.                           Facilities :
 
The BUILDER shall furnish the Supervisor and his assistant(s) with adequate office space and such other reasonable facilities according to the BUILDER’s practice at or in the immediate vicinity of the Shipyard as may be necessary to enable them to effectively carry out their duties. The BUYER shall pay for all such facilities other than office space at the BUILDER’s normal rate of charge.
 
5.                           Liability of BUILDER :
 
The Supervisor and his assistant(s) shall at all times be deemed to be the employees of the BUYER and not of the BUILDER. The BUILDER shall be under no liability whatsoever to the BUYER, the Supervisor or his assistant(s) for personal injuries, including death, suffered during the time when he or they are on the VESSEL, or within the premises of either the BUILDER or its subcontractors, or are otherwise engaged in and about the construction of the VESSEL, unless, however, such personal injuries, including death, were caused by a gross negligence of the BUILDER, or of any of its employees or agents or subcontractors.
 
Nor shall the BUILDER be under any liability whatsoever to the BUYER, the Supervisor or his assistant(s) for damage to, or loss or destruction of property in Korea of the BUYER or of the Supervisor or his assistant(s), unless such damage, loss or destruction were caused by a gross negligence of the BUILDER or of any of its employees or agents or subcontractors.
 
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6.                           Responsibility of BUYER :
 
The BUYER shall undertake and assure that the Supervisor shall carry out his duties hereunder in accordance with the normal shipbuilding practice of the BUILDER and in such a way so as to avoid any unnecessary increase in building cost, delay in the construction of the VESSEL, and/or any disturbance in the construction schedule of the BUILDER.
 
The BUILDER has the right to request the BUYER to replace the Supervisor who is deemed unsuitable and unsatisfactory for the proper progress of the VESSEL’s construction. The BUYER shall investigate the situation by sending its representative(s) to the Shipyard if necessary, and if the BUYER considers that such BUILDER’s request is justified, the BUYER shall effect such replacement as soon as conveniently arrangeable.
 
(End of Article)
 
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ARTICLE V - MODIFICATIONS, CHANGES AND EXTRAS
 
1.                           How Effected :
 
Any modifications and/or changes in the SPECIFICATIONS shall be made by written agreement of the parties hereto provided, however, that any modifications and/or changes requested by the BUYER or an accumulation of such modifications and/or changes will not adversely affect the BUILDER’s planning or programme in relation to the BUILDER’s other commitments and if the BUYER shall assent to adjustment of the Contract Price, time for delivery of the VESSEL and other terms and conditions of this Contract as hereinafter provided. The BUILDER hereby agrees to exert its best efforts to accommodate such reasonable request by the BUYER so that the said changes and/or modifications may be made at a reasonable cost and within the shortest period of time which is reasonably possible.
 
Any such agreement for modifications and/or changes shall include an agreement as to the increase or decrease, if any, in the Contract Price of the VESSEL together with an agreement as to any extension or reduction in the time of delivery, or any other alterations in this Contract or the SPECIFICATIONS occasioned by such modifications and/or changes.
 
The aforementioned agreement to modify and/or change the SPECIFICATIONS may be effected by an exchange of letters signed by the authorized representatives of the parties hereto, or telefax confirmed in writing, manifesting such agreement. Such letters and confirmed message exchanged by the parties hereto pursuant to the foregoing shall constitute an amendment of the SPECIFICATIONS , and such letters and message shall be incorporated into this Contract and made a part hereof.
 
The BUILDER may make minor changes to the SPECIFICATIONS , if found necessary for introduction of improved production methods or otherwise, provided that the BUILDER shall first obtain the BUYER’s approval which shall not be unreasonably withheld.
 
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2.               Changes in Rules of Classification Society, Regulations, etc.:
 
If, after the date of signing this Contract, any requirements as to classification, or as to the rules and regulations to which the construction of the VESSEL is required to conform in accordance with the provisions of Article I. (3), are altered or changed by the Classification Society or regulatory bodies authorized to make such alterations or changes, either of the parties hereto upon receipt of information thereof, shall transmit such information in full to the other party in writing, thereupon within Twenty-one(21) days after receipt of the said notice from the other party, the BUYER shall instruct the BUILDER in writing if such alterations or changes shall be made in the VESSEL or not, in the BUYER’s sole discretion.
 
(a)           If such alterations or changes are compulsory for the construction of VESSEL, either of the parties hereto, upon receipt of such information from Classification Society or such other regulatory bodies, shall promptly transmit the same to the other in writing, and the BUILDER shall thereupon incorporate such alterations or changes into the construction of the VESSEL, provided that the BUYER shall first agree to reasonable and proven adjustments required by the BUILDER in the Contract Price, the Delivery Date and other terms and conditions of this Contract and the SPECIFICATIONS occasioned by or resulting from such alterations or changes.
 
(b)   If such alterations or changes are not compulsory for the construction of the VESSEL, and the BUYER desires to incorporate such alterations or changes into the construction of the VESSEL, then, the BUYER shall notify the BUILDER of such intention. The BUILDER may accept such alterations or changes, provided that such alterations or changes will not, in the judgement of the BUILDER, adversely affect the BUILDER’s planning or program in relation to the BUILDER’s other commitments, and provided, further, that the BUYER shall first agree to reasonable and proven adjustments required by the BUILDER in the Contract Price, the Delivery Date and other terms and conditions of this Contract and the SPECIFICATIONS occasioned by or resulting from such alterations or changes.
 
In the event of a disagreement on price and delivery, and in the event that such alterations or changes are compulsory for the construction of VESSEL, then the BUILDER shall proceed with the required alterations and the dispute related to the above shall be resolved in accordance with the provisions of Article XII.
 
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Such agreement by the BUYER shall be effected in the same manner as provided in Paragraph 1 of this Article for modifications and/or changes of the SPECIFICATIONS .
 
3.                           Substitution of Materials :
 
In the event that any of the materials required by the SPECIFICATIONS or otherwise under this Contract for the construction of the VESSEL can not be procured in time to effect delivery of the VESSEL, or are in short supply, the BUILDER may, provided the BUYER so agrees in writing, supply other materials and equipment of the best available and like quality, capable of meeting the requirements of the Classification Society and of the rules, regulations, requirements and recommendations with which the construction of the VESSEL must comply. Any agreement as to such substitution of materials shall be effected in the manner as provided in Paragraph 1 of this Article, and shall, likewise, include possible decrease or increase in the Contract Price and other terms and conditions of this Contract affected by such substitution.
 
(End of Article)
 
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ARTICLE VI - TRIALS AND ACCEPTANCE
 
Since the VESSEL is the repeat and series of BUILDER’s Hull Nos. 1639 and 1640, some sea trial items may be deleted subject to mutual agreement between the BUYER and the BUILDER
 
1.                           Notice :
 
The sea trial shall start when the VESSEL is reasonably completed according to the SPECIFICATIONS .
 
The BUILDER shall give the BUYER at least Twenty (20) days estimated prior notice and Seven(7) days confirming prior notice by telefax of the time and place of the trial run of the VESSEL, and the BUYER shall promptly acknowledge receipt of such notice. The BUYER shall have its representatives on board the VESSEL to witness such trial run. Failure in attendance of the BUYER’s representative at the trial run of the VESSEL for any reason whatsoever after due notice to the BUYER as above provided shall be deemed to be a waiver by the BUYER of its right to have its representative on board the VESSEL at the trial run, and the BUILDER may conduct the trial run without attendance of the BUYER’s representative, and in such case the BUYER shall be obligated to accept the VESSEL on the basis of a certificate of the BUILDER that the VESSEL, upon trial run, is found to conform to this Contract and the SPECIFICATIONS s.
 
2.                           Weather Condition :
 
The trial run shall be carried out under the weather condition which is deemed favourable enough by the judgement of the BUILDER. In the event of unfavourable weather on the date specified for the trial run, the same shall take place on the first available day thereafter that the weather condition permits. It is agreed that, if during the trial run of the VESSEL, the weather should suddenly become so unfavourable that orderly conduct of the trial run can no longer be continued, the trial run shall be discontinued and postponed until the first favourable day next following, unless the BUYER shall assent in writing to acceptance of the VESSEL on the basis of the trial run already made before such discontinuance has occurred. Any delay of trial run caused by such unfavourable weather condition shall operate to postpone the Delivery Date by the period of the delay involved and such delay shall be deemed as permissible delay in the delivery of the VESSEL.
 
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3.                     How Conducted :
 
 (a)                    The VESSEL shall run the official trial trip in the manner as specified in the SPECIFICATIONS .
 
  (b)                All expenses in connection with the trial run are to be for account of the BUILDER and the BUILDER shall provide, at its own expense, the necessary crew to comply with conditions of safe navigation, fuel oil, fresh water and other consumable stores necessary, the BUYER shall supply at its own expense lubricating oils and greases.
 
4.                           Method of Acceptance or Rejection :
 
 (a)                    Upon completion of the trial run, the BUILDER shall give the BUYER a notice by telefax of completion of the trial run, as and if the BUILDER considers that the results of trial run indicate conformity of the VESSEL to this Contract and the SPECIFICATIONS . The BUYER shall, within Five (5)days after receipt of such notice from the BUILDER, notify the BUILDER by telefax of its acceptance or rejection of the VESSEL’s conformity to this Contract and the SPECIFICATIONS .
 
 (b)                   However, should the result of the trial run show that the VESSEL, or any part or equipment thereof, does not conform to the requirements of this Contract and/or the SPECIFICATIONS , or if the BUILDER is in agreement to non-conformity as specified in the BUYER’s notice of rejection, then, the BUILDER shall take necessary steps to correct such non-conformity.
 
Upon completion of correction of such non-conformity, and re-test or trial if necessary, the BUILDER shall give the BUYER a notice thereof by telefax.
 
The BUYER shall, within Three (3) days after receipt of such notice from the BUILDER, notify the BUILDER of its acceptance or rejection of the VESSEL.
 
(c)               In any event that the BUYER rejects the VESSEL, the BUYER shall indicate in detail in its notice of rejection in what respect the VESSEL, or any part or equipment thereof does not conform to this Contract and/or the SPECIFICATIONS .
 
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 (d)                   In the event that the BUYER fails to notify the BUILDER by telefax of the acceptance of or the rejection together with the reason therefor of the VESSEL within the period as provided in the above Sub-paragraph (a) or (b), the BUYER shall be deemed to have accepted the VESSEL.
 
 (e)                    Any dispute between the BUILDER and the BUYER as to the conformity or non-conformity of the VESSEL to the requirements of this Contract and/or the SPECIFICATIONS shall be submitted for final decision in accordance with Article XII hereof.
 
5.                           Effect of Acceptance :
 
Acceptance of the VESSEL as above provided shall be final and binding so far as conformity of the VESSEL to this Contract and the SPECIFICATIONS is concerned and shall preclude the BUYER from refusing formal delivery of the VESSEL as hereinafter provided, if the BUILDER complies with all other procedural requirements for delivery as provided in Article VII hereof. However, the BUYER’s acceptance of the VESSEL shall not affect the BUYER’s right under Article IX hereof.
 
The BUYER may accept the VESSEL under protest with outstanding defects to be dealt under the guarantee provisions or made subject of a claim for damages.
 
6.                           Disposition of Surplus Consumable Stores
 
Any fuel oil or other furnished and paid for by the BUILDER for trial runs remaining on board the VESSEL, at the time of acceptance of the VESSEL by the BUYER, shall be bought by the BUYER from the BUILDER at the BUILDER’s purchase price for such supply in Korea and the payment by the BUYER thereof shall be made at the time of delivery of the VESSEL.
 
The BUILDER shall pay the BUYER at the time of delivery of the VESSEL an amount for the consumed quantity until delivery of any lubricating oil and greases which were furnished and paid for by the BUYER at the BUYER’s purchase price thereof. For avoidance of doubt, the practice of this Article VI. 6 shall follow the practice in construction of the BUILDER’s Hull Nos. 1639 and 1640.
 
(End of Article)
 
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  ARTICLE VII - DELIVERY
 
1.                           Time and Place :
 
The VESSEL shall be delivered by the BUILDER to the BUYER at the Shipyard on or before December 31, 2008, except that, in the event of delays in the construction of the VESSEL or any performance required under this Contract due to causes which under the terms of this Contract permit postponement of the date for delivery, the aforementioned date for delivery of the VESSEL shall be postponed accordingly.
 
The aforementioned date, or such later date to which the requirement of delivery is postponed pursuant to such terms, is herein called the “Delivery Date”.
 
2.                           When and How Effected :
 
Provided that the BUILDER and the BUYER shall have fulfilled all of their obligations stipulated under this Contract, the delivery of the VESSEL shall be effected forthwith by the concurrent delivery by each of the parties hereto to the other of the PROTOCOL OF DELIVERY AND ACCEPTANCE, acknowledging delivery of the VESSEL by the BUILDER and acceptance thereof by the BUYER.
 
3.                           Documents to be delivered to BUYER :
 
Upon delivery and acceptance of the VESSEL, the BUILDER shall deliver to the BUYER the following documents, which shall accompany the PROTOCOL OF DELIVERY AND ACCEPTANCE :
 
(a)                       PROTOCOL OF TRIALS of the VESSEL made pursuant to the SPECIFICATIONS .
 
(b)                      PROTOCOL OF INVENTORY of the equipment of the VESSEL, including spare parts and the like, as specified in the SPECIFICATIONS .
 
(c)                       PROTOCOL OF STORES OF CONSUMABLE NATURE referred to under Paragraph 6 of Article VI hereof.
 
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 (d)                   ALL CERTIFICATES including the BUILDERS’s CERTIFICATE required to be furnished upon delivery of the VESSEL pursuant to this Contract and the SPECIFICATIONS , necessary for the registration of the VESSEL and BUYER’s trading requirements.
 
It is agreed that if, through no fault on the part of the BUILDER, the Classifications certificates and/or other certificates are not available at the time of delivery of the VESSEL, provisional certificates shall be accepted by the BUYER, provided that the BUILDER shall furnish the BUYER with the formal certificates as promptly as possible after such certificates have been issued.
 
Application and certificate for statutory inspections for the registry of the VESSEL shall be arranged by the BUYER at its expense.
 
 (e)                    DECLARATION OF WARRANTY of the BUILDER that the VESSEL is delivered to the BUYER free and clear of any liens, charges, claims, mortgages, or other encumbrances upon the BUYER’s title thereto, and in particular that the VESSEL is absolutely free of all burdens in the nature of imposts, taxes or charges imposed by Korean Governmental Authorities, as well as of all liabilities of the BUILDER to its subcontractors, employees and crew, and of the liabilities arising from the operation of the VESSEL in trial runs, or otherwise, prior to delivery.
 
 (f)                      DRAWING AND PLANS pertaining to the VESSEL as stipulated in the      SPECIFICATIONS .
 
 (g)                   COMMERCIAL INVOICE.
 
4.                           Tender of VESSEL :
 
If the BUYER fails to take delivery of the VESSEL after completion thereof according to this Contract and the SPECIFICATIONS without any justifiable reason, the BUILDER shall have the right to tender delivery of the VESSEL after compliance with all procedural requirements as above provided.
 
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5.                           Title and Risk :
 
Title to and risk of loss of the VESSEL shall pass to the BUYER only upon the delivery and acceptance thereof having been completed as stated above; it being expressly understood that, until such delivery is effected, title to and risk of loss of the VESSEL and her equipment shall be in the BUILDER.
 
6.                           Removal of VESSEL :
 
The BUYER shall take possession of the VESSEL immediately upon delivery and acceptance thereof and shall remove the VESSEL from the premises of the Shipyard within Three (3) days after delivery and acceptance thereof is effected.
 
If the BUYER shall not remove the VESSEL from the premises of the Shipyard within the aforesaid Three (3) days, in such event, the BUYER shall pay to the BUILDER the reasonable mooring charges of the VESSEL.
 
(End of Article)
 
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ARTICLE VIII - DELAYS AND EXTENSION OF TIME FOR DELIVERY
(FORCE MAJEURE)
 
1.                           Causes of Delay (Force Majeure) :
 
If, at any time either the construction or delivery of the VESSEL or any performance required hereunder as a prerequisite to the delivery thereof is delayed by any of the following events; namely war, acts of state or government, blockade, revolution, insurrections, mobilization, civil commotion, riots, national strikes, sabotage, Acts of God or the public enemy, plague or other epidemics, quarantines, prolonged failure of electric current, freight embargoes, or defects in major forgings or castings or delay in BUYER’s supplied articles, if any, or defects in materials, machinery or equipment which could not have been detected by the BUILDER using reasonable care, or earthquakes, tidal waves, typhoons, hurricanes, prolonged or unusually severe weather conditions or by destruction of the premises or works of the BUILDER or its sub-contractors, or of the VESSEL, or any part thereof, by fire, landslides, flood, lightning, explosion, or other causes beyond the control of the BUILDER, or its sub-contractors, as the case may be, or for any other causes which, under the terms of this Contract, authorize and permit extension of the time for delivery of the VESSEL, then, in the event of delays due to the happening of any of the aforementioned contingencies, the Delivery Date of the VESSEL under this Contract shall be extended for a period of time which shall not exceed the total accumulated time of all such delays.
 
The enumerated contingencies shall not give rise to an extension of the delivery date unless :
 
i)                              The occurrence could not reasonably have been foreseen by the BUILDER at the date of signing of the Contract.
 
ii)                           The BUILDER shall have exercised reasonable due diligence to avoid or minimize the occurrence of such event.
 
iii)                        The BUILDER shall have used reasonable efforts to mitigate the duration and effects of such events of the construction schedule.
 
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2.                           Notice of Delay :
 
Within Fourteen (14) days after the date of occurrence of any cause of delay, on account of which the BUILDER claims that it is entitled under this Contract to a postponement of the Delivery Date, the BUILDER shall notify the BUYER in writing or by telefax confirmed in writing of the date when such cause of delay occurred. Likewise, within Fourteen (14) days after the date of ending of such cause of delay, the BUILDER shall notify the BUYER in writing or by telefax confirmed in writing of the date when such cause of delay ended.
 
The BUILDER shall also notify the BUYER of the period, by which the Delivery Date is postponed by reason of such cause of delay, with all reasonable dispatch after it has been determined. If the BUILDER does not give the timely advice as above, the BUILDER shall lose the right to claim such delays as permissible delay.
 
Failure of the BUYER to acknowledge to the BUILDER’s claim for postponement of the Delivery Date within Fourteen (14) days after receipt by the BUYER of such notice of claim shall be deemed to be a waiver by the BUYER of its right to object to such postponement of the Delivery Date.
 
3.                           Definition of Permissible Delay :
 
Delays on account of such causes as specified in Paragraph 1 of this Article and any other delay of a nature which under the terms of this Contract permits postponement of the Delivery Date shall be understood to be permissible delays and are to be distinguished from unauthorized delays on account of which the Contract Price is subject to adjustment as provided for in Article III hereof.
 
4.                           Right to Rescind for Excessive Delay :
 
If the total accumulated time of all delays whether permissible or not exceeds One Hundred and Eighty (180) days, then, in such event, the BUYER may rescind this Contract in accordance with the provisions of Article X hereof.
 
The accumulated time as above shall exclude the time lost due to BUYER’s Default or delays in the BUYER’s supplies. The BUILDER may, at any time after the accumulated time of the aforementioned delays justifying rescission by the BUYER, demand in writing that the BUYER shall make an election proposing a new delivery date, in which case the BUYER shall, within Fourteen (14) days
 
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after such demand is received by the BUYER, either notify the BUILDER of its intention to rescind this Contract, or consent to a postponement of the Delivery Date to an agreed specific future date; it being understood and agreed by the parties hereto that, if any further delay occurs on account of causes justifying rescission as specified in this Article, the BUYER shall have the same right of rescission upon the same terms as herein above provided.
 
(End of Article)
 
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ARTICLE IX - WARRANTY OF QUALITY
 
1.                           Guarantee :
 
The BUILDER, for the period of Twelve (12) months after delivery of the VESSEL (hereinafter called “Guarantee Period”), guarantees the VESSEL and her engine, including all parts and equipment manufactured, furnished or installed by the BUILDER under this Contract, and including the machinery, equipment and appurtenances thereof, under the Contract but excluding any item which is supplied or designated by the BUYER or by any other bodies on behalf of the BUYER, against all defects discovered within the Guarantee Period which are due to improper design, defective material, and/or poor workmanship or negligent or other improper acts or omissions on the part of the BUILDER or its subcontractors (hereinafter called the “Defect” or “Defects”) and are not a result of accident, ordinary wear and tear, misuse, mismanagement, negligent or other improper acts or omissions or neglect on the part of the BUYER, its employee or agents.
 
Upon rectification of an item claimed under this guarantee, this item shall be covered for further Twelve (12) months under the same terms and conditions. However, this is limited to a maximum of Twenty Four (24) months from delivery date.
 
2.                           Notice of Defects :
 
The BUYER shall notify the BUILDER in writing, or by telefax of any defect for which claim is made under this guarantee, as promptly as possible after discovery thereof. The BUYER’s notice shall describe in detail the nature, cause if known and extent of the Defects.
 
The BUILDER shall have no obligation for any Defect discovered prior to the expiry date of the Guarantee Period, unless notice of such Defect is received by the BUILDER not later than Twenty (20) days after such expiry date.
 
3.                           Remedy of Defects :
 
(a)                       The BUILDER shall remedy, at its expense, any Defect against which the VESSEL is guaranteed under this Article, by making all necessary repairs or replacements at the Shipyard.
 
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(b)                      However, if the BUYER should determine that it is commercially or operationally impracticable to bring the VESSEL to the Shipyard, the BUYER may cause the necessary repairs or replacements to be made elsewhere which is deemed suitable for the purpose, provided that, in such event, the BUILDER may forward or supply replacement parts or materials to the BUYER’s agent to be designated by the BUYER in writing , unless forwarding or supplying thereof the VESSEL would impair or delay the operation of working schedule of the VESSEL. In the event that the BUYER proposes to cause the necessary repairs or replacements for the VESSEL to be made at any other shipyard or works than the Shipyard, the BUYER shall first, but in all events as soon as possible, give the BUILDER a notice in writing or by telefax confirmed in writing of the time and place when and where such repairs will be made, and if the VESSEL is not thereby delayed, or her operation or working schedule is not thereby impaired, the BUILDER shall have the right to verify by its own representative(s) the nature, cause and extent of the Defects complained of. The BUILDER shall, in such case, promptly advise the BUYER by telefax, after such examination has been completed, of its acceptance or rejection of the Defects as ones that are covered by the guarantee herein provided. Upon the BUILDER’s acceptance of the Defects as justifying remedy under this Article, or upon award of the arbitration so determining, the BUILDER shall pay to the BUYER for such repairs or replacements justified reasonable and proven actual cost of repairs or replacements.
 
(c)                       The reimbursement of the costs incurred in relation to guarantee works shall be paid in a lumpsum after expiration of the guarantee period.
 
(d)                      In any case, the VESSEL shall be taken, at the BUYER’s cost and responsibility, to the place elected, ready in all respects for such repairs or replacement.
 
(e)                       Any dispute under this Article shall be referred to arbitration in accordance with the provisions of Article XII hereof.
 
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4.                           Extent of BUILDER’s Responsibility :
 
 (a)                    The BUILDER shall have no responsibility or liability for any other defect whatsoever in the VESSEL than the Defects specified in Paragraph 1 of this Article. Nor the BUILDER shall in any circumstance be responsible or liable for any consequential or special loss, damage or expense including but not limited to loss of time, loss of profit of earning or demurrage directly or indirectly occasioned to the BUYER by reason of the Defects specified in Paragraph 1 of this Article or due to repairs or other works done to the VESSEL to remedy such Defects.
 
 (b)                   The BUILDER shall not be responsible for any defect in any part of the VESSEL which may, subsequently to delivery of the VESSEL, have been replaced or repaired in any way by any other contractor unless the BUILDER has not objected the contractor to perform guarantee repairs, or for any defect which have been caused or aggravated by omission or improper use and maintenance of the VESSEL on the part of the BUYER, its servants or agents or by ordinary wear and tear or by any other cause beyond the control of the BUILDER.
 
 (c)                    The guarantee contained as hereinabove in this Article replaces and excludes any other liability, guarantee, warranty and/or condition imposed or implied by the law, customary, statutory or otherwise, by reason of the construction and sale of the VESSEL by the BUILDER for and to the BUYER.
 
5.                           Guarantee Engineer :
 
The BUILDER shall have the right to appoint a Guarantee Engineer to serve on the VESSEL as its representative for a period of Three (3) months from the date the VESSEL is delivered. However, if the BUYER and the BUILDER shall deem it necessary to keep the Guarantee Engineer on the VESSEL for a longer period, then he shall remain on board the VESSEL after the said Three (3) months, but not longer than Six (6) months from the delivery of the VESSEL.
 
The BUYER, and its employees, shall give such Guarantee Engineer full cooperation in carrying out his duties as the representative of the BUILDER on board the VESSEL.
 
The Guarantee Engineer shall sign BUYER’s Indemnity Forms and shall at all times deemed to be an employee of the BUILDER.
 
The BUYER shall accord the Guarantee Engineer treatment comparable to the
 
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VESSEL’s Chief Engineer, and shall provide board and lodging at no cost to the BUILDER and/or the Guarantee Engineer.
 
While the Guarantee Engineer is on board the VESSEL, the BUYER shall pay to the BUILDER the sum of Seven Thousand United States Dollars (US$ 7,000.-) per month as a compensation for a part of cost and charges to be borne by the BUILDER in connection with Guarantee Engineer and also shall pay the expenses of his repatriation to Seoul, Korea by air upon termination of his service, the expenses of his communication with the BUILDER incurred in performing his duties and expenses, if any, of his medical and hospital care in the VESSEL’s hospital.
 
Pertaining to the detailed particulars of this Paragraph, an agreement will be made according to this effect between the parties hereto upon delivery of the VESSEL.
 
(End of Article)
 
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ARTICLE X - RESCISSION BY BUYER
 
1.                           Notice :
 
The payments made by the BUYER prior to delivery of the VESSEL shall be in the nature of advances to the BUILDER, and in the event that the VESSEL after sea trial is rejected by the BUYER or the VESSEL is cancelled by the BUYER in accordance with the terms of this Contract under and pursuant to any of the provisions of this Contract specifically permitting the BUYER to do so and in the event that the Contract is rescinded by the BUYER under and pursuant to any of the provisions of this Contract specially permitting the BUYER, then the BUYER shall notify the BUILDER in writing or by telefax confirmed in writing, and such rescission shall be effective as of the date when notice thereof is received by the BUILDER.
 
2.                           Refundment by BUILDER :
 
In case the BUILDER receives the notice stipulated in Paragraph 1 of this Article, the BUILDER shall promptly refund to the BUYER the full amount of all sums paid by the BUYER to the BUILDER on account of the VESSEL together with the interest thereon, unless the BUILDER proceeds to the arbitration under the provisions of Article XII hereof.
 
In such event, the BUILDER shall pay the BUYER interest at the rate of Six percent (6.0%)per annum on the amount required herein to be refunded to the BUYER, computed from the dates following on which such sums were paid by the BUYER to the BUILDER to the date of remittance by transfer of such refund to the BUYER by the BUILDER.
 
As security for refund of instalments prior to delivery of the VESSEL, the BUILDER shall furnish the BUYER within Fourteen (14) calendar days after the Contract signing with a letter of guarantee covering the amount of such pre-delivery instalments in favour of the BUYER. Such letter of guarantee shall have substantially the same form and substance as Exhibit ”A” annexed hereto.
 
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3.                           Discharge of Obligations :
 
Upon such refund by the BUILDER to the BUYER, all obligations, duties and liabilities of each of the parties hereto to the other under this Contract shall be forthwith completely discharged .
 
(End of Article)
 
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ARTICLE XI - BUYER’S DEFAULT
 
1.                           Definition of Default :
 
The BUYER shall be deemed to be in default of its performance of obligations under this Contract in the following cases :
 
 (a)                    If the first, second, third, fourth or fifth instalment are not paid by the BUYER to the BUILDER within Five (5) banking days after such instalment becomes due and payable as provided in Article II hereof;
 
or
 
 (b)                   If the Delivery instalment is not paid by the BUYER to the BUILDER concurrently with the delivery of the VESSEL as provided in Article II hereof;
 
or
 
 (c)                    If the BUYER, when the VESSEL is duly tendered for delivery by the BUILDER:
 
i)                            fails to take delivery of the VESSEL within Five (5) banking days from tendered date
 
ii)                           having initiated the arbitration procedure the BUYER does not accept delivery within Seven (7) days of an arbitration award which is not appealed.
 
2.                           Effect of Default on or before Delivery of VESSEL :
 
 (a)                    Should the BUYER make default in payment of any instalment of the Contract Price on or before delivery of the VESSEL, the BUYER shall pay the instalment(s) in default plus accrued interest thereon at the rate of Six percent (6.0%) per annum computed from the due date of such instalment to the date when the BUILDER receives the payment, and, for the purpose of Paragraph 1 of Article VII hereof the Delivery Date of the VESSEL shall be automatically extended by the period of continuance of such default by the BUYER. In any event of default by the BUYER, the BUYER shall also pay direct charges and expenses incurred by the BUILDER in consequence of such default after mutual agreement.
 
 (b)                If any default by the BUYER continues for a period of Ten (10) days after the BUILDER’s notification, the BUILDER may, at its option, rescind this Contract by giving notice of such effect to the BUYER by telefax confirmed in writing.
 
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Upon dispatch by the BUILDER of such notice of rescission, this Contract shall be forthwith rescinded and terminated. In the event of such rescission of this Contract, the BUILDER shall be entitled to retain any instalment or instalments already paid by the BUYER to the BUILDER on account of this Contract and the BUYER’s Supplies, if any.
 
3.                           Disposal of VESSEL :
 
 (a)                    In the event that this Contract is rescinded by the BUILDER under the provisions of Paragraph 2(b) of this Article, the BUILDER may, at its sole discretion, either complete the VESSEL and sell the same, or sell the VESSEL in its incomplete state, free of any right or claim of the BUYER. Such sale of the VESSEL by the BUILDER shall be either by public auction or private contract at the BUILDER’s sole discretion and on such terms and conditions as the BUILDER shall deem fit.
 
 (b)                   In the event of such sale of the VESSEL, the amount of the sale received by the BUILDER shall be applied firstly to all expenses attending such sale or otherwise incurred by the BUILDER as a result of the BUYER’s default, secondly to the payment of all costs and expenses of construction of the VESSEL incurred by the BUILDER less BUYER’s Supplies and the instalments already paid by the BUYER and the compensation to the BUILDER for a reasonable loss of profit due to rescission of this Contract, and finally to the repayment to the BUYER without interest, if any balance is obtained.
 
 (c)                    If the proceeds of sale are insufficient to pay such total costs and loss of profit as aforesaid, the BUYER shall promptly pay the deficiency to the BUILDER upon request.
 
(End of Article)
 
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ARTICLE XII - ARBITRATION
 
1.                           Decision by the Classification Society :
 
If any dispute arises between the parties hereto in regard to the design and/or construction of the VESSEL, its machinery and equipment, and/or in respect of the materials and/or workmanship thereof and/or thereon, and/or in respect of interpretations of this Contract or the SPECIFICATIONS , the parties may by mutual agreement refer the dispute to the Classification Society or to such other expert as may be mutually agreed between the parties hereto, and whose decision shall be final, conclusive and binding upon the parties hereto.
 
2.                           Proceedings of Arbitration :
 
In the event that the parties hereto do not agree to settle a dispute according to Paragraph 1 of this Article and/or in the event of any other dispute of any kind whatsoever between the parties and relating to this Contract or its rescission or any stipulation herein, such dispute shall be submitted to arbitration in London. Each party shall appoint an arbitrator and in the event that they cannot agree, the two arbitrators so appointed shall appoint an Umpire.
 
If the two arbitrators are unable to agree upon an Umpire within Twenty(20) days after appointment of the second arbitrator, either of the said two arbitrators may apply to the President for the time being of the London Maritime Arbitrators Association to appoint the third arbitrator, and the three arbitrators shall constitute the board of arbitration.
 
Such arbitration shall be in accordance with and subject to the provisions of the English Arbitration Act 1996 or any statutory modification or re-enactment thereof for the time being in force.
 
The Arbitration shall be conducted in accordance with the rules in force of the London Maritime Arbitrators Association.
 
Either party may demand arbitration of any such dispute by giving notice to the other party. Any demand for arbitration by either of the parties hereto shall state the name of the arbitrator appointed by such party and shall also state specifically the question or questions as to which such party is demanding arbitration.
 
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Within Fourteen(14) days after receipt of notice of such demand for arbitration, the other party shall in turn appoint a second arbitrator and give notice in writing of such appointment to the party demanding arbitration. If a party fails to appoint an arbitrator as aforementioned within Fourteen(14) days following receipt of notice of demand for arbitration by the other party, the party failing to appoint an arbitrator shall be deemed to have accepted and appointed, as its own arbitrator, the arbitrator appointed by the party demanding arbitration and the arbitration shall proceed before this sole arbitrator who alone in such event shall constitute the Arbitration Board.
 
The award of the arbitrators and/or Umpire shall be final and binding on both   parties.
 
3.                           Notice of Award :
 
The award shall immediately be given to the BUYER and the BUILDER by telefax.
 
4.                           Expenses :
 
The Arbitration Board shall determine which party shall bear the expenses of the arbitration or the portion of such expenses which each party shall bear.
 
5.                           Entry in Court :
 
In case of failure by either party to respect the award of the arbitration, the judgement may be entered in any proper court having jurisdiction thereof.
 
6.                           Alteration of Delivery Date :
 
In the event of reference to arbitration of any dispute arising out of matters occurring prior to delivery of the VESSEL, the award may include any postponement of the Delivery Date which the Arbitration Board may deem appropriate.
 
(End of Article)
 
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ARTICLE XIII - SUCCESSOR AND ASSIGNS
 
Neither of the parties hereto shall assign this Contract to any other individual or company save as provided hereto. unless prior consent of the other party is given in writing. Should circumstances permit with or without alteration of the terms and conditions of this Contract, such consent shall not be unreasonably withheld by either party.
 
The BUYER is hereby allowed to assign the Contract for the purposes of financing.
 
The BUYER is further allowed to nominate a company controlled by the BUYER to take over the Contract.
 
The BUILDER shall fully cooperate in case the BUYER requests UK Tax lease financing arrangements.
 
In the event of any assignment pursuant to the terms of this Contract, the assignee shall succeed to all of the rights and obligations of the assignor under this Contract and the assignor shall remain responsible for the fulfillment of this Contract.
 
In the event of the assignment from the BUYER to any other individual or company the BUILDER shall be entitled to request a Performance Guarantee from the BUYER having same form and contents as Exhibit ”C” annexed hereto.
 
The BUYER and the BUILDER understand and acknowledge that the VESSEL shall be built and constructed as a repeat and series vessel of the BUILDER’s Hull Nos. 1639 and 1640 as stipulated in this Contract. Thus, i n the event of a resale, assignment and novation of the VESSEL, any and all matters determined by mutual agreement between the BUYER and the BUILDER prior to the resale, assignment and novation of the VESSEL shall be accepted and complied by the New BUYER (i.e., assignee). If the New BUYER or its supervisor makes unreasonable requests that may have a significant impact on the delivery schedule of the VESSEL and/or costs of construction (including, without limitation to, request for fundamental change of ship type or excessive revision of design specifications, etc.), the BUILDER shall be entitled to refuse these requests. The BUYER shall notify the above to the New BUYER before assignment or novation and the New BUYER will have to accept any additional cost related to the new supervision.
 
(End of Article)
 
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ARTICLE XIV - TAXES AND DUTIES
 
1.                           Taxes and Duties Incurred in Korea :
 
The BUILDER shall bear and pay all taxes, duties, stamps and fees incurred in Korea in connection with execution and/or performance of this Contract as the BUILDER, except for any taxes and duties imposed in Korea upon the BUYER’s Supplies.
 
2.                           Taxes and Duties Incurred outside Korea :
 
The BUILDER shall bear and pay all taxes, duties, stamps and fees incurred outside Korea in connection with execution and/or performance of this Contract including guarantee matter as the BUILDER.
 
The BUYER shall bear and pay all taxes, duties, stamps and fees incurred outside Korea in connection with execution and/or performance of this Contract as the BUYER.
 
(End of Article)
 
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ARTICLE XV - PATENTS, TRADEMARKS, COPYRIGHTS, ETC.
 
1.                           Patents, Trademarks and Copyrights :
 
Machinery and equipment of the VESSEL may bear the patent number trademarks or trade names of the manufacturers. The BUILDER shall defend and hold harmless the BUYER from patent liability or claims of patent infringement of any nature or kind, including costs and expenses for, or on account of any patented or patentable invention made or used in the performance of this Contract and also including costs and expenses of litigation, if any.
 
Nothing contained herein shall be construed as transferring any patent or trademark rights or copyrights in equipment covered by this Contract, and all such rights are hereby expressly reserved to the true and lawful owners thereof.
 
The BUILDER’s warranty hereunder does not extend to the BUYER’s Supplies.
 
2.                           General Plans, Specifications and Working Drawings :
 
The BUILDER retains all rights with respect to the SPECIFICATIONS , and plans and working drawings, technical descriptions, calculations, test results and other data, information and documents concerning the design and construction of the VESSEL and the BUYER undertakes therefore not to disclose the same or divulge any information contained therein to any third parties, without the prior written consent of the BUILDER, except where it is necessary for usual operation, repair , registration, classification, chartering, sale and maintenance of the VESSEL.
 
(End of Article)
 
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ARTICLE XVI - BUYER’S SUPPLIES
 
1.                           Responsibility of BUYER :
 
(a)               The BUYER shall, at its own risk, cost and expense, supply and deliver to the BUILDER all of the items to be furnished by the BUYER as specified in the SPECIFICATIONS (herein called the BUYER’s Supplies) at warehouse or other storage of the Shipyard in the proper condition ready for installation in or on the VESSEL, in accordance with the time schedule designated and advised by the BUILDER to the BUYER within 60 days from signing this Contract.
 
 (b)                   In order to facilitate installation by the BUILDER of the BUYER’s Supplies in or on the VESSEL, the BUYER shall furnish the BUILDER with necessary specifications, plans, drawings, instruction books, manuals, test reports and certificates required by the rules and regulations of the SPECIFICATIONS .
 
If so requested by the BUILDER, the BUYER shall, without any charge to the BUILDER, cause the representatives of the manufacturers of the BUYER’s Supplies to assist the BUILDER in installation thereof in or on the VESSEL and/or to carry out installation thereof by themselves or to make necessary adjustments at the Shipyard.
 
 (c)                    Any and all of the BUYER’s Supplies shall be subject to the BUILDER’s reasonable right of rejection, as and if they are found to be unsuitable or in improper condition for installation.
 
 (d)                   Should the BUYER fail to deliver any of the BUYER’s Supplies within the time designated, the Delivery Date shall be automatically extended for a period which actually caused the delay in the delivery of the VESSEL.
 
 (e)                    If delay in delivery of any of the BUYER’s Supplies exceeds thirty (30) days, then, the BUILDER shall be entitled to proceed with construction of the VESSEL without installation thereof in or on the VESSEL as hereinabove provided, and the BUYER shall accept and take delivery of the VESSEL so constructed, unless such delay is caused by Force Majeure in which case the provision Paragraph 1(d) of this Article shall apply.
 
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2.                           Responsibility of BUILDER :
 
The BUILDER shall be responsible for storing and handling with reasonable care of the BUYER’s Supplies after delivery thereof at the Shipyard, and shall, at its own cost and expense, install them in or on the VESSEL, unless otherwise provided herein or agreed by the parties hereto, provided, always, that the BUILDER shall not be responsible for quality, efficiency and/or performance of any of the BUYER’s Supplies.
 
(End of Article)
 
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ARTICLE XVII - INSURANCE
 
1.                           Extent of Insurance Coverage
 
From the time of launching until delivery of the VESSEL, the BUILDER shall, at its own cost and expense, insure the VESSEL and all machinery and equipment, appurtenances and outfits, including the BUYER’s Supplies, built into or installed in or upon the VESSEL, against all risks under the “Institute Causes for BUILDER’s Risk”, with first class insurance company or underwriters in Korea.
 
The amount of such insurance coverage shall, up to the date of delivery of the VESSEL, not be less than the aggregate amount of all instalments paid by the BUYER to the BUILDER, plus the value of the BUYER’s Supplies in the custody of the Shipyard.
 
2.                           Application of the Recovered Amounts
 
In the event that the VESSEL shall be damaged from any insured cause at any time before delivery of the VESSEL, and in the further event that such damage shall not constitute an actual or constructive total loss of the VESSEL, the amount received in respect of the insurance shall be applied by the BUILDER in repair of such damage, satisfactory to the Classification Society, and the BUYER shall accept the VESSEL under this Contract if completed in accordance with this Contract and the SPECIFICATIONS , however, subject to the extension of delivery time under Article VIII hereof (except in case of negligence of the BUILDER).
 
Should the VESSEL from any cause become an actual or constructive total loss, the BUILDER shall either :
 
 (a)                    proceed in accordance with the terms of this Contract, in which case the amount received in respect of the insurance shall be applied to the construction and repair of damage of the VESSEL, provided the parties hereto shall have first agreed thereto in writing and to such reasonable extension of delivery time as may be necessary for the completion of such reconstruction and repair ; or
 
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 (b)                   refund promptly to the BUYER the full amount of all sums paid by the BUYER to the BUILDER as instalments in advance of delivery of the VESSEL with Six percent (6.0%) interest, and deliver to the BUYER all BUYER’s Supplies (or the insurance proceeds paid with respect thereto), in which case this Contract shall be deemed to be automatically terminated and all right, duties, liabilities and obligations of each of the parties to the other shall forthwith cease and terminate.
 
3.                           Termination of BUILDER’s Obligation to Insure
 
The BUILDER shall be under no obligation to insure the VESSEL hereunder after delivery and acceptance of the VESSEL.
 
(End of Article)
 
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ARTICLE XVIII – NOTICE
 
1.                           Address :
 
Any and all notices and communications in connection with this Contract shall be addressed as follows :
 
To the BUYER :
Continent Marine Inc.
80 Broad Street, Monrovia, Liberia
Cable address :    CONMAR
Telefax No.  :        231-7-7000-422
 
To the BUILDER:
 
Samsung Heavy Industries Co., Ltd.
647-9, 11 th Floor, KIPS Building, Yeoksam-Dong, Kangnam-Ku,
Seoul, Korea
Cable address : SSYARD SEOUL
Telefax No. : (+82 2) 3458-7349, (+82 2) 3458-7319
 
or preferably to its Geoje Yard :
 
Samsung Heavy Industries Co., Ltd.
P.O.BOX Gohyun 9
530, Jangpyung-Ri, Shinhyun-Up, Geoje-Si, Kyungnam, Korea

Telefax No. :	(+82 55) 630-4947 (Design Department)	
 	(+82 55) 630-4978 (Customer Satisfaction Team.)	
 
2.                           Language :
 
Any and all notices and communications in connection with this Contract shall be written in the English language.
 
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3.                           Effective Date of Notice :
 
The notice in connection with this Contract shall become effective from the date when such notice is received by the BUYER or by the BUILDER except otherwise described in the Contract.
 
(End of Article)
 
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ARTICLE XIX - EFFECTIVE DATE OF CONTRACT
 
This Contract shall become effective upon signing by the parties hereto.
 
(End of Article)
 
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ARTICLE XX - INTERPRETATION
 
1.                           Laws Applicable :
 
The parties hereto agree that the validity and interpretation of this Contract and of each Article and part thereof shall be governed by the laws of England.
 
2.                           Discrepancies :
 
All general language or requirements embodied in the SPECIFICATIONS are intended to amplify, explain and implement the requirements of this Contract. However, in the event that any language or requirements so embodied permit of an interpretation inconsistent with any provisions of this Contract, then, in each and every such event, the applicable provisions of this Contract shall prevail and govern. In the event of conflict between the SPECIFICATIONS and Plans, the SPECIFICATIONS shall prevail and govern.
 
3.                           Entire Agreement :
 
This Contract contains the entire agreement and understanding between the parties hereto and supersedes all prior negotiations, representations, undertaking and agreements on any subject matter of this Contract.
 
4.                           Amendments and Supplements :
 
Any supplement, memorandum of understanding or amendment, whatsoever form it may be relating to this Contract, to be made and signed among parties hereof after signing this Contract, shall be the integral part of this Contract and shall be predominant over the respective corresponding Article and/or Paragraph of this Contract.
 
The Contract can only be amended in writing.
 
(End of Article)
 
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IN WITNESS WHEREOF, the parties hereto have caused this Contract to be duly executed on the day and year first above written.

BUYER :	BUILDER :	
CONTINENT MARINE INC.	SAMSUNG HEAVY IND., CO., LTD.	

/s/ John Coustas	 	 	/s/ J. W. Kim	 	
By    :	John Coustas	 	By   :   J. W. Kim	
Title :	Attorney-In-Fact	Title :	President & CEO	

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EXHIBIT “A”
 
LETTER OF REFUNDMENT GUARANTEE
 
Gentlemen :
 
We hereby issue our letter of guarantee no.              in favour of Continent Marine Inc.,(hereinafter called the “BUYER”) for account of Samsung Heavy Industries Co., Ltd.(hereinafter called the “BUILDER”) as follows in consideration of the shipbuilding contract dated March 28, 2006 (hereinafter called the “Contract”) made by and among the BUYER and the BUILDER for the construction of one(1) single screw diesel engine driven Container VESSEL having BUILDER’s Hull No. 1673 (hereinafter called the “VESSEL”).
 
If in connection with the terms of the Contract the BUYER shall become entitled to a refund of the advance payment(s) made to the BUILDER prior to the delivery of the VESSEL, we hereby irrevocably guarantee the repayment of the same to the BUYER immediately on demand being initially US$ 6,380,000.- (Say U.S. Dollars Six Million Three Hundred and Eighty Thousand only) together with interest thereon at the rate of Six (6) percent per annum from the respective dates on which such sums were paid by the BUILDER to the date of remittance by telegraphic transfer of such refund.
 
The amount of this guarantee will be automatically increased, not more than three times, upon BUILDER’s receipt of the respective instalment: each time by the amount of instalment of US$ 6,380,000.- (Say U.S. Dollars Six Million Three Hundred and Eighty Thousand only), US$ 6,380,000.- (Say U.S. Dollars Six Million Three Hundred and Eighty Thousand only) and US$ 6,380,000.- (Say U.S. Dollars Six Million Three Hundred and Eighty Thousand only) respectively plus interest thereon as provided in the Contract, but in any eventuality the amount of this guarantee shall not exceed the total sum of US$ 25,520,000.- (Say U.S. Dollars Twenty Five Million Five Hundred and Twenty Thousand only) plus interest thereon at the rate of Six (6) percent per annum from the respective dates on which such sums were paid by the BUYER to the BUILDER to the date of remittance by telegraphic transfer of the refund.
 
Our liability under this letter of guarantee shall not be affected by any alteration to or variation of the terms of the Contract you may hereafter agree with the BUILDER and by any other matter of circumstances, including bankruptcy or insolvency of the BUILDER, which might otherwise discharge our liability hereunder as guarantor of the BUILDER’s obligations as aforesaid.
 
57

 
In case any refund is made to you by the BUILDER or by us under this guarantee, our liability hereunder shall be automatically reduced by the amount of such refund.
 
This letter of guarantee is available against BUYER’s simple receipt and signed statement certifying that BUYER’s demand for refund has been made in conformity with Article X of the Contract and the BUILDER has failed to make the refund within Thirty One (31) days after BUYER’s demand to the BUILDER.
 
Refund shall be made to BUYER by telegraphic transfer in United States Dollars to an account designated by you without deduction, withholding or set-off.
 
This letter of guarantee shall expire and become null and void upon receipt by the BUYER of the sum guaranteed hereby or upon acceptance by the BUYER of the delivery of the VESSEL in accordance with the terms of the Contract and, in either case, this letter of guarantee shall be returned to us. This guarantee is valid from the date of this letter of guarantee until or in the event of delayed delivery until such time as the VESSEL is delivered by the BUILDER to the BUYER in accordance with the terms of the Contract.
 
Notwithstanding the provisions hereinabove, in case we receive notification from you or the BUILDER confirmed by an Arbitrator stating that your claim to cancel the Contract or your claim for refundment thereunder has been disputed and referred to Arbitration in accordance with the provisions of the Contract, the period of validity of this guarantee shall be extended until Thirty (30) days after the final and non-appealable award shall be rendered in the Arbitration and a copy thereof acknowledged by the Arbitrators. In such case, this guarantee shall not be available unless and until such acknowledged copy of the final award in the Arbitration justifying your claim is presented to us.
 
Your rights in respect of this letter of guarantee are assignable from the date of this letter of guarantee until such time as the VESSEL is delivered by the BUILDER to the BUYER in accordance with the provisions of the Contract, on the understanding that you will notify us of the identity of any assignee of your rights under this letter of guarantee.
 
Any notice or demand under this letter of guarantee shall be given by facsimile and sent to:
 
58

 

 
 
or to such other address as we might notify to you in writing. A notice shall be deemed to be served and shall take effect 2 hours after its transmission is completed, provided that if a notice would be deemed to be served on a day which is not a business day, or which is a business day but after 5:00 p.m. local time, in the place of receipt, the notice shall be deemed to be served and shall take effect at 9:00 a.m. on the next day which is a business day.
 
This guarantee shall be governed by and construed in accordance with the Laws of England. Any disputes arising under this guarantee (but not any disputes arising under the Contract which shall be determined by arbitration in accordance with the terms of the Contract and as referenced in this letter of guarantee) shall be determined by the High Court of Justice in London to whose exclusive jurisdiction we hereby submit. We appoint
 
                                                                                                              as our agents for service of process in connection with any proceedings in such courts.
 
We each jointly and severally hereby represent and guarantee that we have the corporate power and authority to execute, deliver and perform the obligations under this letter of guarantee, and that such execution and performance will not violate or conflict with any provision of law, statute, rule, permit or regulation of any government, regulatory body, agency or other authority in the jurisdictions where we are subject to such laws and regulations.
 
59

 
IN WITNESS WHEREOF, we have hereunder set our hands and seal by our duly authorized representatives this          day of                 , 2006.

 	Very truly yours,	

 	For and on behalf of	

 	By	 	 	
 	Name :	
 	Title : Attorney-in-Fact	

 	For and on behalf of	
 	 	 	
 	By	 	 	
 	Name :	
 	Title : Attorney-in-Fact	
 
60

 
EXHIBIT “B”
 
Samsung Heavy Industries Co., Ltd.
11 th Floor, KIPS Building
647-9, Yoksam-Dong, Kangnam-Ku,
Seoul, Korea 135-080
 
Date :                                   , 2006
 
PERFORMANCE GUARANTEE
 
In consideration of the performance of a certain shipbuilding contract dated                       (hereinafter called the “Contract”) by CONTINENT MARINE INC. of 80 Broad street, Monrovia, Liberia having your Hull No.1673 (hereinafter called the “VESSEL”) providing among other things for payment of the Contract Price amounting to United States Dollars             (US$              );
 
We, the undersigned, hereby irrevocably and unconditionally guarantee to you, your successors, and assigns the due and faithful performance by the BUYER of its all liabilities and responsibilities under the Contract and any supplement, amendment, change or modification hereafter made thereto, including but not limited to, due and prompt payment of the Contract Price by the BUYER to you, your successors, and assigns under the Contract and any supplement, amendment, change or modification as aforesaid (hereby expressly waiving notice of any such supplement, amendment, change or modification as may be agreed to by the BUYER and confirming that this guarantee shall be fully applicable to the Contract as so supplemented, amended, changed or modified).
 
This Performance Guarantee shall be governed by the laws of England.

GUARANTOR :	
BY :	 	 	
TITLE :	
WITNESS :	
 
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EXHIBIT “C”
 
Samsung Heavy Industries Co., Ltd.
11 th Floor, KIPS Building
647-9, Yoksam-Dong, Kangnam-Ku,
Seoul, Korea 135-080
 
Date :                                             , 2006
 
PERFORMANCE GUARANTEE
 
In consideration of the assignment of a certain shipbuilding contract dated                    (hereinafter called the “Contract”) by us to        having your Hull No.1673 (hereinafter called the “VESSEL”) providing among other things for payment of the Contract Price amounting to United States Dollars            (US$              );
 
We, the undersigned, hereby irrevocably and unconditionally guarantee to you, your successors, and assigns the due and faithful performance by the BUYER of its all liabilities and responsibilities under the Contract and any supplement, amendment, change or modification hereafter made thereto, including but not limited to, due and prompt payment of the Contract Price by the BUYER to you, your successors, and assigns under the Contract and any supplement, amendment, change or modification as aforesaid (hereby expressly waiving notice of any such supplement, amendment, change or modification as may be agreed to by the BUYER and confirming that this guarantee shall be fully applicable to the Contract as so supplemented, amended, changed or modified).
 
This Performance Guarantee shall be governed by the laws of England.

GUARANTOR :	
BY :	 	 	
TITLE :	
WITNESS :	
 
62

 
Exhibit 10.25
FOR
 
CONSTRUCTION AND SALE
 
OF
 
A 4,250 TEU CONTAINER VESSEL
(HULL NO. 1698)

BETWEEN
 
Medsea Marine Inc.
As BUYER
 
AND

Samsung Heavy Industries Co., Ltd.
As BUILDER

 
I N D E X

 	 	PAGE	
 	 	 	
PREAMBLE	 	7	
 	 	 	
ARTICLE I - DESCRIPTION AND CLASS	 	 	
 	 	 	
1. Description	 	8	
2. Dimensions and Characteristics	 	8	
3. Classification, Rules and Regulations	 	9	
4. Subcontracting	 	10	
5. Registration	 	10	
 	 	 	
ARTICLE II - CONTRACT PRICE AND TERMS OF PAYMENT	 	 	
 	 	 	
1. Contract Price	 	11	
2. Adjustment of Contract price	 	11	
3. Currency	 	11	
4. Terms of Payment	 	11	
5. Method of Payment	 	12	
6. Notice of Payment on or before Delivery	 	13	
7. Expenses	 	13	
8. Prepayment	 	13	
9. Performance Guarantee	 	14	
 	 	 	
ARTICLE III - ADJUSTMENT OF CONTRACT PRICE	 	 	
 	 	 	
1. Delivery	 	15	
2. Speed	 	16	
3. Fuel Consumption	 	17	
4. Deadweight	 	17	
5. Early Delivery	 	18	
6. Effect of Rescission	 	18	
 
2

 

ARTICLE IV - APPROVAL OF PLANS AND DRAWINGS AND INSPECTION DURING CONSTRUCTION	 	 	
 	 	 	
1. Approval of Plans and Drawings	 	19	
2. Appointment of BUYER’s Supervisor	 	19	
3. Inspection by the Supervisor	 	20	
4. Facilities	 	21	
5. Liability of BUILDER	 	21	
6. Responsibility of BUYER	 	22	
 	 	 	
ARTICLE V - MODIFICATIONS, CHANGES AND EXTRAS	 	 	
 	 	 	
1. How Effected	 	23	
2. Change in Rules of Classification Society, Regulations etc	 	24	
3. Substitution of Materials	 	25	
 	 	 	
ARTICLE VI - TRIALS AND ACCEPTANCE	 	 	
 	 	 	
1. Notice	 	26	
2. Weather Condition	 	26	
3. How Conducted	 	27	
4. Method of Acceptance of Rejection	 	27	
5. Effect of Acceptance	 	28	
6. Disposition of Surplus Consumable Stores	 	28	
 	 	 	
ARTICLE VII - DELIVERY	 	 	
 	 	 	
1. Time and Place	 	29	
2. When and How Effected	 	29	
3. Documents to be delivered to BUYER	 	29	
4. Tender of VESSEL	 	30	
5. Title and Risk	 	31	
6. Removal of VESSEL	 	31	
 
3

 

ARTICLE VIII - DELAYS AND EXTENSION OF TIME FOR DELIVERY (FORCE MAJEURE)	 	 	
 	 	 	
1. Causes of Delay	 	32	
2. Notice of Delay	 	33	
3. Definition of Permissible Delay	 	33	
4. Right to Rescind for Excessive Delay	 	33	
 	 	 	
ARTICLE IX - WARRANTY OF QUALITY	 	 	
 	 	 	
1. Guarantee	 	35	
2. Notice of Defects	 	35	
3. Remedy of Defects	 	35	
4. Extent of the BUILDER’s Responsibility	 	37	
5. Guarantee Engineer	 	37	
 	 	 	
ARTICLE X - RESCISSION BY BUYER	 	 	
 	 	 	
1. Notice	 	39	
2. Refundment by BUILDER	 	39	
3. Discharge of Obligations	 	40	
 	 	 	
ARTICLE XI - BUYER’S DEFAULT	 	 	
 	 	 	
1. Definition of Default	 	41	
2. Effect of Default on or before Delivery of VESSEL	 	41	
3. Disposal of VESSEL	 	42	
 	 	 	
ARTICLE XII - ARBITRATION	 	 	
 	 	 	
1. Decision by Classification Society	 	43	
2. Proceedings of Arbitration	 	43	
3. Notice of Award	 	44	
4. Expenses	 	44	
5. Entry in Court	 	44	
6. Alteration of Delivery Date	 	44	
 	 	 	
ARTICLE XIII - SUCCESSOR AND ASSIGNS	 	45	
 
4

 

ARTICLE XIV - TAXES AND DUTIES	 	 	
 	 	 	
1. Taxes and duties Incurred in Korea	 	46	
2. Taxes and Duties Incurred outside Korea	 	46	
 	 	 	
ARTICLE XV - PATENTS, TRADEMARKS, COPYRIGHTS, ETC	 	 	
 	 	 	
1. Patents, Trademarks and Copyrights	 	47	
2. General Plans, Specifications and Working Drawings	 	47	
 	 	 	
ARTICLE XVI - BUYER’S SUPPLIES	 	 	
 	 	 	
1. Responsibility of BUYER	 	48	
2. Responsibility of BUILDER	 	49	
 	 	 	
ARTICLE XVII - INSURANCE	 	 	
 	 	 	
1. Extent of Insurance Coverage	 	50	
2. Application of the Recovered Amounts	 	50	
3. Termination of BUILDER’s Obligation to Insure	 	51	
 	 	 	
ARTICLE XVIII - NOTICE	 	 	
 	 	 	
1. Address	 	52	
2. Language	 	52	
3. Effective Date of Notice	 	53	
 	 	 	
ARTICLE XIX - EFFECTIVE DATE OF CONTRACT	 	54	
 	 	 	
ARTICLE XX - INTERPRETATION	 	 	
 	 	 	
1. Laws Applicable	 	55	
2. Discrepancies	 	55	
3. Entire Agreement	 	55	
4. Amendments and supplements	 	55	
 
5

 

END OF CONTRACT	 	56	
 	 	 	
EXHIBIT “A” LETTER OF REFUNDMENT GUARANTEE	 	57	
 	 	 	
EXHIBIT “B” PERFORMANCE GUARANTEE	 	61	
 	 	 	
EXHIBIT “C” PERFORMANCE GUARANTEE	 	62	
 
6

 
THIS CONTRACT, made and entered into on this 12 th day of May, 2006 by and between Medsea Marine Inc. a corporation incorporated and existing under the laws of Liberian, having its registered office at 80 Broad Street, Monrovia, Liberia (hereinafter called the “BUYER”), on the one part and Samsung Heavy Industries Co., Ltd., a corporation incorporated and existing under the laws of the Republic of Korea of having its registered office at 647-9, Yeoksam-Dong, Kangnam-ku, Seoul, Korea (hereinafter called the “BUILDER”), on the other part,
 
WITNESSETH:
 
In consideration of the mutual covenants herein contained, the BUILDER agrees to design, build, launch and complete in accordance with first class modern Korean shipbuilding practice and standards one (1) Single Screw Diesel Engine driven Container VESSEL as described in the Specifications attached herewith and any addendum thereto (hereinafter called the “VESSEL”) at the BUILDER’s shipyard located in Geoje Island, Korea (hereinafter called the “Shipyard”) and to deliver and sell the same to the BUYER, and the BUYER hereby agrees to purchase and accept delivery of the VESSEL from the BUILDER and to pay for the same upon the terms and conditions hereinafter set forth.
 
7

 
ARTICLE I - DESCRIPTION AND CLASS
 
1.                           Description :
 
The VESSEL shall be an ocean going single screw diesel engine driven fully cellular container VESSEL suitable for carrying dry cargo containers having the BUILDER’s Hull No.1698 and shall be built, constructed, equipped and completed in accordance with the ‘As-Built-Specifications’ as specified in the shipbuilding contracts of the BUILDER’s Hull No. 1639 and 1640 (hereinafter called as the “HN1639 Series Contract”) to build just identical vessels to the BUILDER’s Hull No. 1639 and 1640 (hereinafter called as the “HN1639 Series”) as a repeat and series, and the ‘Maker List’ as specified in the Supplement Agreement No.1 (dated June 30, 2005) to the HN 1639 Series Contract (hereinafter collectively called as the “SPECIFICATIONS”).
 
Thus, all drawings and plans made by the BUILDER and duly approved by the BUYER during the construction of the HN1639 Series in accordance with HN 1639 Series Contract shall be used without any further change, modification and approval by the BUYER, and a ll extra/credit costs agreed as of April 28, 2006 for the HN 1639 Series are included into the ship price described in this CONTRACT, and all construction procedure including model test and sea trial etc. shall be done on the basis of the just repeat and series VESSEL of the HN 1639s Series.
 
2.                           Dimensions and Characteristics :

Length, overall	 	 	 	appx.	 	259.8	m	
Length, between perpendiculars	 	 	 	appx.	 	244.8	m	
Breadth, moulded	 	 	 	appx.	 	32.25	m	
Depth, moulded	 	 	 	appx.	 	19.3	m	
Designed loaded draught, moulded	 	 	 	appx.	 	11.0	m	
Scantling draught, moulded	 	 	 	appx.	 	12.6	m	
 
Main Engine                                                                    :                                                       MAN B&W 8K 90MC-C type License Made MCR 49,680 bhp at 104 r.p.m.

Deadweight, guaranteed	:	 	50,500 metric tons at the moulded scantling draught of 12.6 meters.	
 
8

 

Speed, guaranteed	:	 	24.5 knots at a draught of 11.0 meters and main engine developing power of 38,880 bhp (metric).	
 	 	 	
Fuel Consumption, guaranteed :	 	124.3 grams/bhp(metric)-hour using marine diesel oil having lower calorific value of 10,200 kcal/kg at normal continuous rating of 44,710 bhp(metric) measured at the shop trial.	
 
The details of the aforementioned particulars as well as the definitions and method of measurements and calculations are as defined in the SPECIFICATIONS .
 
3.                           Classification, Rules and Regulations :
 
The VESSEL, including its machinery, equipment and outfittings shall be constructed in accordance with the rules and regulations in year 2004 July edition of the Classification Society in accordance with both the interpretation of Classification Society (dated on 2005-06-29 Ref No. MKOKR120/MSSH/Gen-precontract/PUS-J-668) and the interpretation of the Classification Society (dated 28 th February 2006 Ref. No. MKOKR120/MSSH/Gen-Precontract/PUS-J-698 in respect of new updates in effect as of April 28, 2006 from rule and regulations applied to the HN1639 Series) and under special survey of Det Norske Veritas (hereinafter called the “Classification Society”) and shall be distinguished in the register by the symbol of X 1A1 “ Container Carrier”, NAUTICUS, EO, and In water survey and TMON shall be applied according to the requirement of the class rule.
 
Decisions of the Classification Society as to compliance or non-compliance with the classification shall be final and binding upon both parties hereto. Details of its notation shall be in accordance with the SPECIFICATIONS .
 
The VESSEL shall also comply with the compulsory rules, regulations and requirements of the regulatory bodies as described in the SPECIFICATIONS rectified and in effect as of the signing date of this Contract. Non-compulsory rules, regulations and requirements of the regulatory bodies shall be dealt with in accordance with Article V (2) of this Contract.
 
9

 
All the fees and charges incidental to the classification and with respect to compliance with the above referred rules, regulations and requirements shall be for account of the BUILDER except otherwise agreed.
 
4.                           Subcontracting :
 
The BUILDER may, at its sole discretion and responsibility, subcontract any portion of the construction work of the VESSEL, provided that the construction and assembly of the VESSEL shall be carried out as is normally done according to the BUILDER’s building practice and provided further that the BUILDER shall be responsible to the BUYER in respect of any construction work carried out by such subcontractors.
 
5.                           Registration :
 
The VESSEL, at the time of its delivery and acceptance, shall be registered at the port of registry by the BUYER under Cyprus flag at the BUYER’s expenses.
 
(End of Article)
 
10

 
ARTICLE II - CONTRACT PRICE AND TERMS OF PAYMENT
 
1.                           Contract Price :
 
The Contract price of the VESSEL and exclusive of the BUYER’s Supplies as provided in Paragraph 1 of Article XVI hereof is Sixty Three Million Eight Hundred Thousand United States Dollars (US$ 63,800,000.-) (hereinafter called the “Contract Price”), which shall be subject to upward or downward adjustment, if any, as hereinafter set forth in this Contract.
 
2.                           Adjustment of Contract Price:
 
Increase or decrease of the Contract Price, if any, due to adjustments thereof made in accordance with the provisions of this Contract, shall be adjusted by way of addition to or subtraction from the Contract Price upon delivery and acceptance of the VESSEL in the manner as hereinafter provided.
 
3.                           Currency :
 
Any and all payments by the BUYER to the BUILDER which are due under this Contract shall be made in United States Dollars.
 
4.                           Terms of Payment :
 
The Contract Price shall be due and payable by the BUYER to the BUILDER in the instalments as follows :
 
(a)                       First Instalment :
 
The First Instalment amounting to Six Million Three Hundred and Eighty Thousand United States Dollars (US$ 6,380,000.-) shall be due and payable upon issuance and delivery to the BUYER of the original of Refund Guarantee.
 
(b)                      Second Instalment :
 
The Second Instalment amounting to Six Million Three Hundred and Eighty Thousand United States Dollars (US$ 6,380,000.-) shall be due and payable upon eighteen(18) calendar months after the date of singing of this Contract.
 
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(c)                       Third Instalment :
 
The Third Instalment amounting to Six Million Three Hundred and Eighty Thousand United States Dollars (US$ 6,380,000.-) shall be due and payable upon steel cutting of the VESSEL.
 
(d)                      Fourth Instalment :
 
The Fourth Instalment amounting to Six Million Three Hundred and Eighty Thousand United States Dollars (US$ 6,380,000.-) shall be due and payable upon keel laying of the VESSEL.
 
 (e)                    Fifth Instalment :
 
The Delivery Instalment amounting to Thirty Eight Million Two Hundred and Eighty Thousand United States Dollars (US$ 38,280,000.-) plus any increase or minus any decrease due to adjustments of the Contract Price under and pursuant to the provisions of this Contract, shall be due and payable upon delivery and acceptance of the VESSEL or upon tender for delivery of the VESSEL referred to in Paragraph 4 of Article VII of this Contract.
 
It is agreed that no payment shall be effected until the original Refund Guarantee is delivered to the BUYER.
 
5.                           Method of Payment :
 
 (a)                    First Instalment :
 
Within Seven(7) banking days after 12th day of May 2006, the BUYER shall remit by telegraphic transfer the first instalment to the account of The Export-Import Bank of Korea, Head Office, Seoul, Korea with Deutsche Bank Trust Company Americas(BIC : BKTRUS33), 60 Wall Street, Mail Stop NYC 60 1310, New York, NY 10005, USA, Account No.04 029 695, in favour of Samsung Heavy Industries., Ltd, SWIFT code : EXIKKRSE or other bank as designated by the Builder, in favor of Samsung Heavy Industries Co, Ltd.(hereinafter called the “BUILDER’s Bank”)
 
(b)                      Second, Third and Fourth Instalment :
 
Upon receipt of telefax notice from the BUILDER confirming that the second, third, and fourth instalment on each event is due and payable, the BUYER shall
 
12

 
remit by telegraphic transfer the second, third, and fourth instalment to the aforesaid account of the BUILDER’s Bank in favour of Samsung Heavy Industries Co., Ltd.
 
 (c)                    Fifth Instalment :
 
At least One (1) banking days prior to delivery and acceptance of the VESSEL, the BUYER shall remit by telegraphic transfer the fifth instalment to the name of the BUYER at BUILDER’s BANK, with an irrevocable instruction that the amount so remitted shall be payable to the BUILDER against a facsimile copy of PROTOCOL OF DELIVERY and ACCEPTANCE OF THE VESSEL signed by the BUYER and the BUILDER or returned to the BUYER if such PROTOCOL OF DELIVERY and ACCEPTANCE has not been presented within fifteen (15) days.
 
Simultaneously with each of all such payments, the BUYER shall cause the BUYER’s BANK to advise the BUILDER’s BANK of the details of such payments by authenticated bank cable.
 
Any claim which the BUYER may have against the BUILDER hereunder shall be settled and liquidated separately from any payment by the BUYER to the BUILDER hereunder.
 
6.                           Notice of Payment on or before Delivery :
 
With the exception of the first instalment, the BUILDER shall give the BUYER Five(5) banking days prior notice by telefax of the anticipated due date and amount of each instalment payable on or before delivery of the VESSEL.
 
7.                           Expenses
 
Expenses and bank charges for remitting payments and any taxes, duties, expenses and fees connected with such payment shall be for account of the BUYER referred to in paragraph 2 of Article XIV of this Contract, except expenses and bank charges of the BUILDER’s BANK.
 
8.                           Prepayment :
 
Prepayment of any instalment due on or before delivery of the VESSEL shall be subject to mutual agreement between the parties hereto.
 
13

 
9.                           Performance Guarantee
 
Upon signing this Contract, the BUYER shall provide the BUILDER with a Performance Guarantee in order to secure the due and faithful performance of this Contract by the BUYER having same form and contents as Exhibit ”B” annexed hereto.
 
(End of Article)
 
14

 
ARTICLE III - ADJUSTMENT OF CONTRACT PRICE
 
The Contract Price shall be subject to adjustment, as hereinafter set forth, in the event of the following contingencies (it being understood by both parties that any reduction of the Contract Price is by way of liquidated damages and not by way of penalty) :
 
1.                           Delivery :
 
  (a)                    No adjustment shall be made and the Contract Price shall remain unchanged for the first Thirty (30) days of delay in delivery of the VESSEL beyond the Delivery Date as defined in Article VII hereof (ending as of twelve o’clock midnight of the Thirty (30) day of delay).
 
 (b)                   If the delivery of the VESSEL is delayed more than Thirty (30) days after the Delivery Date, the Contract Price shall be reduced by the sum of Twenty Seven Thousand Five Hundred United States Dollars (US$27,500.-) for each full day for which thereafter delivery is delayed.
 
However, the total reduction in the Contract Price shall not be more than as would be the case for a delay of One Hundred Eighty (180) days counting from the midnight of the Thirty (30) day after the Delivery Date at the above specified rate of reduction.
 
  (c)                    However, if the delay in delivery of the VESSEL should continue for a period of Two Hundred Ten (210) days from the Delivery Date in Paragraph 1 of Article VII, then in such event, and after such period has expired, the BUYER may, at its option, rescind this Contract in accordance with the provisions of Article X hereof.
 
The BUILDER may, at any time after the expiration of the aforementioned Two Hundred Ten (210) days of delay in delivery, if the BUYER has not served notice of rescission as provided in Article X hereof, demand in writing that the BUYER shall make an election, in which case the BUYER shall, within Twenty (20) days after such demand is received by the BUYER, notify the BUILDER of its intention either to rescind this Contract or to consent to the acceptance of the VESSEL at the BUILDER’s specified future date. If the BUYER shall not make an election within Twenty (20) days as provided hereinabove, the BUYER shall be deemed to have accepted such extension of the delivery date to the future delivery date indicated by the BUILDER and it being understood by the parties hereto that if the VESSEL is not delivered by such future date, the BUYER shall
 
15

 
have the same right of rescission upon the same terms and conditions as hereinabove provided.
 
It is understood that accrued liquidated damages are preserved. Further delay shall incur additional liquidated damages in accordance with existing terms and conditions.
 
 (d)                   For the purpose of this Article, the delivery of the VESSEL shall be deemed to be delayed when and if the VESSEL, after taking into account all postponements of the Delivery Date by reason of permissible delay as defined in Article VIII and/or any other reason under this Contract, is not delivered by the date upon which delivery is required under the terms of this Contract.
 
2.                           Speed :
 
 (a)                    The Contract Price shall not be affected or changed by reason of the trial speed (as determined according to the SPECIFICATIONS being less than the guaranteed speed, if such variation is not more than Two-Tenths (2/10) of One (1) knot.
 
(b)              However, if such variation is more than Two-Tenths (2/10) of One (1) knot, then, the Contract Price shall be decreased by One Hundred and Seventy Five Thousand United States Dollars (US$ 175,000.-) for each successive whole One-Tenth(1/10) of a knot in excess of a deficiency of Two-Tenths (2/10) of a knot (in both cases smaller fractions being disregarded).
 
(c)           If the deficiency in the speed upon final sea trial is more than Half(1/2) a knot below the guaranteed speed of the VESSEL, then the BUYER may, at its option, reject the VESSEL and rescind this Contract in accordance with the provisions of Article X hereof, or may accept the VESSEL at a reduction in the Contract Price as above provided for Half(1/2) a knot only, that is, at a total reduction of Five Hundred and Twenty Five Thousand United States Dollars (US$ 525,000.-).
 
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3.                           Fuel Consumption :
 
 (a)                    The Contract Price shall not be affected or changed in case the fuel consumption, as determined by the shop trial as specified in the SPECIFICATIONS , is not more than Five percent (5%) in excess of the guaranteed fuel consumption specified in Paragraph 2 of Article I.
 
 (b)                   However, in the event that the actual fuel consumption at the shop trial is in excess of Five percent (5%) of the guaranteed fuel consumption, the Contract Price shall be reduced by the sum of One Hundred and Ten Thousand United States Dollars (US$ 110,000.-) for each full one percent(1%) increase in fuel consumption and pro rata for any fraction of one percent(1%) of the Guaranteed Fuel Consumption in excess of the said five percent(5%) up to maximum of eight percent(8%) over the Guaranteed Fuel Consumption.
 
 (c)                    If the deficiency in fuel consumption is more than Eight percent (8%) then the BUYER may at its option rescind this Contract in accordance with the provision of Article X hereof.
 
4.                           Deadweight :
 
(a)                       In the event that the deadweight of the VESSEL as determined in accordance with the SPECIFICATIONS is less than the guaranteed deadweight as specified in Paragraph 2 of Article I, the Contract Price shall be reduced by the sum of One Thousand One Hundred United States Dollars (US$ 1,100.-) for each full metric ton of such deficiency being more than Seven Hundred (700) metric tons, up to a maximum reduction of One Million Two Hundred and Ten Thousand United States Dollars (US$ 1,210,000.-).
 
(b)                      In the event of such deficiency in the deadweight of the VESSEL being One thousand eight hundred (1,800) metric tons or more, then, the BUYER may, at its option, reject the VESSEL and rescind this Contract in accordance with the provisions of Article X hereof or accept the VESSEL at a reduction in the Contract Price as above provided for One Thousand Eight Hundred (1,800) metric tons only, that is, at a total reduction of One Million Two Hundred and Ten Thousand United States Dollars (US$1,210,000.-).
 
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5.                           Early Delivery
 
In the event that the BUILDER believes that the VESSEL can be completed and ready for Delivery on a date earlier than the Contractual Delivery Date, then the BUILDER may give a written notice to the BUYER, no later than six (6) months before the revised date (the “Early Delivery Date”) informing the approximate date on which the VESSEL can be ready for the Delivery. The BUYER shall have the option, but not the obligation, to accept Delivery of the VESSEL on the Early Delivery Date and upon the BUYER’s acceptance thereof, the parties shall discuss the specific amount of the additional payment due to the BUILDER for the accelerated Delivery of the VESSEL on the Early Delivery Date at the delivery stage of the VESSEL and t he compensation payment of the acceleration bonus shall be settled and paid in full with the final delivery instalment concurrently uponwith the actual Delivery and acceptance of the VESSEL by the BUYER. If the Parties fail to reach a mutual agreement on the amount of the Early Delivery bonus, the BUILDER shall be free to deliver the VESSEL on the original Contractual Delivery Date or earlier at its option. The Parties hereto acknowledge that there will be no liquidated damages or other penalty to be imposed on the BUILDER in the event the VESSEL happens to be delivered on any date later than the Early Delivery Date but earlier than the original Contractual Delivery Date.
 
6                              Effect of Rescission :
 
It is expressly understood and agreed by the parties that in any case, if the BUYER rescinds this Contract under this article, the BUYER shall not be entitled to any liquidated damages or any other recourse unless by means of the provisions of Article X hereof.
 
(End of Article)
 
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ARTICLE IV - APPROVAL OF PLANS AND DRAWINGS AND INSPECTION DURING CONSTRUCTION
 
1.                           Approval of Plans and Drawings :
 
The SPECIFICATIONS shall be used for the VESSEL without any further approval and modification from the BUYER unless otherwise mutually agreed by both parties. Should any changes are required by the BUYER’s request or the application of new rules and regulations (of a mandatory nature) coming into effect after the date of this Contract signing, the BUILDER shall submit such changes to the BUYER for its approval. If approved by the BUYER, such changes shall be applied to the VESSEL with cost adjustment in accordance with Article V of this Contract.
 
2.                           Appointment of BUYER’s Supervisor :
 
The BUYER may send to and maintain at the Shipyard, at the BUYER’s own cost and expense, one supervisor who shall be duly authorized in writing by the BUYER (herein called the “Supervisor”) to act on behalf of the BUYER in connection with the modifications of the SPECIFICATIONS, adjustments of the Contract Price and Delivery Date, approval of the plans and drawings, attendance to the tests and inspections relating to the VESSEL, its machinery, equipment and outfittings, and any other matters for which he is specifically authorized by the BUYER. The Supervisor may appoint his assistant(s) to attend at the Shipyard for the purposes as aforesaid.
 
In the event that assignment, novation or resale occurs under the Article XIII and as a result, BUYER’s Supervisor is changed during the construction of the VESSEL, any and all matters determined by mutual agreement between the BUYER’s Supervisor and the BUILDER prior to the dispatch of a new Supervisor shall be accepted and complied by the new Supervisor. In case two or more Supervisors are dispatched to the Shipyard and authorized, under the BUILDER’s prior consent, to perform the supervision, each of them will form uniform opinions between them to keep the design and the SPECIFICATIONS so as not to adversely affect the CONTRACT PRICE and Delivery of the VESSEL, provided that such change in the Contract Price will be reasonable and proven under the BUILDER’s normal practice. In the event of any additional costs attributable to such dispatch of two or more supervisors due to the reasons including but not
 
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limited to resale, novation, charter or any other occurrence otherwise resulting from the BUYER, such costs shall be borne by the BUYER and the BUYER shall reimburse and hold harmless the BUILDER from any such costs and expenses.
 
3.                           Inspection by the Supervisor :
 
The necessary inspections of the VESSEL, its machinery, equipment and outfittings shall be carried out by the Classification Society, other regulatory bodies and/or an inspection team of the BUILDER throughout the entire period of construction in order to ensure that the construction of the VESSEL is duly performed in accordance with this Contract and the SPECIFICATIONS. The Supervisor shall have, during construction of the VESSEL, the right to attend such tests and inspections of the VESSEL, its machinery and equipment within the premises of either the BUILDER or its subcontractors. The BUILDER shall give notice to the Supervisor, in advance of the date and place of such tests and inspections for the convenience of their attendance. Detailed procedures of the inspection and the tests thereof shall be in accordance with the SPECIFICATIONS .
 
The BUILDER may request BUYER’s supervisor to attend the inspection and tests during public holidays and weekends and/or Company holidays in order to keep BUILDER’s construction schedule. BUYER’s supervisor shall fully cooperate with BUILDER and promptly attend such inspection/tests including those for surface preparation and painting work, which are especially vulnerable to weather condition and time interval. However, BUILDER shall keep such inspection and tests to a minimum and only when the inspection and tests affect BUILDER’s construction schedule. The BUILDER’s prior notice of such inspection/test schedule shall be informed to the BUYER’s supervisor three(3) working days in advance as a minimum
 
The Supervisor shall be entitled to request copies of all test results and trials as soon as required for the performance of his duties.
 
The Supervisor shall notify the BUILDER of deficiencies in the construction of the VESSEL or materials. The BUILDER should examine the deficiency and rectify.
 
If any of the BUYER’s supervisors discover any construction, material or
 
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workmanship which is not deemed to conform to the requirements of this Contract and/or the SPECIFICATIONS , the BUYER’s supervisors shall promptly give the BUILDER a notice in writing that such alleged non-conformity exists. Upon receipt of such notice from the BUYER’s supervisor, the BUILDER shall correct such non-conformity, if the BUILDER agrees to his view. Any disagreement shall be resolved in accordance with Paragraph 1 of Article XII.
 
4.                           Facilities :
 
The BUILDER shall furnish the Supervisor and his assistant(s) with adequate office space and such other reasonable facilities according to the BUILDER’s practice at or in the immediate vicinity of the Shipyard as may be necessary to enable them to effectively carry out their duties. The BUYER shall pay for all such facilities other than office space at the BUILDER’s normal rate of charge.
 
5.                           Liability of BUILDER :
 
The Supervisor and his assistant(s) shall at all times be deemed to be the employees of the BUYER and not of the BUILDER. The BUILDER shall be under no liability whatsoever to the BUYER, the Supervisor or his assistant(s) for personal injuries, including death, suffered during the time when he or they are on the VESSEL, or within the premises of either the BUILDER or its subcontractors, or are otherwise engaged in and about the construction of the VESSEL, unless, however, such personal injuries, including death, were caused by a gross negligence of the BUILDER, or of any of its employees or agents or subcontractors.
 
Nor shall the BUILDER be under any liability whatsoever to the BUYER, the Supervisor or his assistant(s) for damage to, or loss or destruction of property in Korea of the BUYER or of the Supervisor or his assistant(s), unless such damage, loss or destruction were caused by a gross negligence of the BUILDER or of any of its employees or agents or subcontractors.
 
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6.                           Responsibility of BUYER :
 
The BUYER shall undertake and assure that the Supervisor shall carry out his duties hereunder in accordance with the normal shipbuilding practice of the BUILDER and in such a way so as to avoid any unnecessary increase in building cost, delay in the construction of the VESSEL, and/or any disturbance in the construction schedule of the BUILDER.
 
The BUILDER has the right to request the BUYER to replace the Supervisor who is deemed unsuitable and unsatisfactory for the proper progress of the VESSEL’s construction. The BUYER shall investigate the situation by sending its representative(s) to the Shipyard if necessary, and if the BUYER considers that such BUILDER’s request is justified, the BUYER shall effect such replacement as soon as conveniently arrangeable.
 
(End of Article)
 
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ARTICLE V - MODIFICATIONS, CHANGES AND EXTRAS
 
1.                           How Effected :
 
Any modifications and/or changes in the SPECIFICATIONS shall be made by written agreement of the parties hereto provided, however, that any modifications and/or changes requested by the BUYER or an accumulation of such modifications and/or changes will not adversely affect the BUILDER’s planning or programme in relation to the BUILDER’s other commitments and if the BUYER shall assent to adjustment of the Contract Price, time for delivery of the VESSEL and other terms and conditions of this Contract as hereinafter provided. The BUILDER hereby agrees to exert its best efforts to accommodate such reasonable request by the BUYER so that the said changes and/or modifications may be made at a reasonable cost and within the shortest period of time which is reasonably possible.
 
Any such agreement for modifications and/or changes shall include an agreement as to the increase or decrease, if any, in the Contract Price of the VESSEL together with an agreement as to any extension or reduction in the time of delivery, or any other alterations in this Contract or the SPECIFICATIONS occasioned by such modifications and/or changes.
 
The aforementioned agreement to modify and/or change the SPECIFICATIONS may be effected by an exchange of letters signed by the authorized representatives of the parties hereto, or telefax confirmed in writing, manifesting such agreement. Such letters and confirmed message exchanged by the parties hereto pursuant to the foregoing shall constitute an amendment of the SPECIFICATIONS , and such letters and message shall be incorporated into this Contract and made a part hereof.
 
The BUILDER may make minor changes to the SPECIFICATIONS , if found necessary for introduction of improved production methods or otherwise, provided that the BUILDER shall first obtain the BUYER’s approval which shall not be unreasonably withheld.
 
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2.               Changes in Rules of Classification Society, Regulations, etc.:
 
If, after the date of signing this Contract, any requirements as to classification, or as to the rules and regulations to which the construction of the VESSEL is required to conform in accordance with the provisions of Article I. (3), are altered or changed by the Classification Society or regulatory bodies authorized to make such alterations or changes, either of the parties hereto upon receipt of information thereof, shall transmit such information in full to the other party in writing, thereupon within Twenty-one(21) days after receipt of the said notice from the other party, the BUYER shall instruct the BUILDER in writing if such alterations or changes shall be made in the VESSEL or not, in the BUYER’s sole discretion.
 
(a)           If such alterations or changes are compulsory for the construction of VESSEL, either of the parties hereto, upon receipt of such information from Classification Society or such other regulatory bodies, shall promptly transmit the same to the other in writing, and the BUILDER shall thereupon incorporate such alterations or changes into the construction of the VESSEL, provided that the BUYER shall first agree to reasonable and proven adjustments required by the BUILDER in the Contract Price, the Delivery Date and other terms and conditions of this Contract and the SPECIFICATIONS occasioned by or resulting from such alterations or changes.
 
(b)   If such alterations or changes are not compulsory for the construction of the VESSEL, and the BUYER desires to incorporate such alterations or changes into the construction of the VESSEL, then, the BUYER shall notify the BUILDER of such intention. The BUILDER may accept such alterations or changes, provided that such alterations or changes will not, in the judgement of the BUILDER, adversely affect the BUILDER’s planning or program in relation to the BUILDER’s other commitments, and provided, further, that the BUYER shall first agree to reasonable and proven adjustments required by the BUILDER in the Contract Price, the Delivery Date and other terms and conditions of this Contract and the SPECIFICATIONS occasioned by or resulting from such alterations or changes.
 
In the event of a disagreement on price and delivery, and in the event that such alterations or changes are compulsory for the construction of VESSEL, then the BUILDER shall proceed with the required alterations and the dispute related to the above shall be resolved in accordance with the provisions of Article XII.
 
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Such agreement by the BUYER shall be effected in the same manner as provided in Paragraph 1 of this Article for modifications and/or changes of the SPECIFICATIONS .
 
3.                           Substitution of Materials :
 
In the event that any of the materials required by the SPECIFICATIONS or otherwise under this Contract for the construction of the VESSEL can not be procured in time to effect delivery of the VESSEL, or are in short supply, the BUILDER may, provided the BUYER so agrees in writing, supply other materials and equipment of the best available and like quality, capable of meeting the requirements of the Classification Society and of the rules, regulations, requirements and recommendations with which the construction of the VESSEL must comply. Any agreement as to such substitution of materials shall be effected in the manner as provided in Paragraph 1 of this Article, and shall, likewise, include possible decrease or increase in the Contract Price and other terms and conditions of this Contract affected by such substitution.
 
(End of Article)
 
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ARTICLE VI - TRIALS AND ACCEPTANCE
 
Since the VESSEL is the repeat and series of BUILDER’s Hull Nos. 1639 and 1640, some sea trial items may be deleted subject to mutual agreement between the BUYER and the BUILDER
 
1.                           Notice :
 
The sea trial shall start when the VESSEL is reasonably completed according to the SPECIFICATIONS .
 
The BUILDER shall give the BUYER at least Twenty (20) days estimated prior notice and Seven(7) days confirming prior notice by telefax of the time and place of the trial run of the VESSEL, and the BUYER shall promptly acknowledge receipt of such notice. The BUYER shall have its representatives on board the VESSEL to witness such trial run. Failure in attendance of the BUYER’s representative at the trial run of the VESSEL for any reason whatsoever after due notice to the BUYER as above provided shall be deemed to be a waiver by the BUYER of its right to have its representative on board the VESSEL at the trial run, and the BUILDER may conduct the trial run without attendance of the BUYER’s representative, and in such case the BUYER shall be obligated to accept the VESSEL on the basis of a certificate of the BUILDER that the VESSEL, upon trial run, is found to conform to this Contract and the SPECIFICATIONS.
 
2.                           Weather Condition :
 
The trial run shall be carried out under the weather condition which is deemed favourable enough by the judgement of the BUILDER. In the event of unfavourable weather on the date specified for the trial run, the same shall take place on the first available day thereafter that the weather condition permits. It is agreed that, if during the trial run of the VESSEL, the weather should suddenly become so unfavourable that orderly conduct of the trial run can no longer be continued, the trial run shall be discontinued and postponed until the first favourable day next following, unless the BUYER shall assent in writing to acceptance of the VESSEL on the basis of the trial run already made before such discontinuance has occurred. Any delay of trial run caused by such unfavourable weather condition shall operate to postpone the Delivery Date by the period of the delay involved and such delay shall be deemed as permissible delay in the delivery of the VESSEL.
 
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3.                     How Conducted :
 
 (a)                    The VESSEL shall run the official trial trip in the manner as specified in the SPECIFICATIONS .
 
  (b)                All expenses in connection with the trial run are to be for account of the BUILDER and the BUILDER shall provide, at its own expense, the necessary crew to comply with conditions of safe navigation, fuel oil, fresh water and other consumable stores necessary, the BUYER shall supply at its own expense lubricating oils and greases.
 
4.                           Method of Acceptance or Rejection :
 
 (a)                    Upon completion of the trial run, the BUILDER shall give the BUYER a notice by telefax of completion of the trial run, as and if the BUILDER considers that the results of trial run indicate conformity of the VESSEL to this Contract and the SPECIFICATIONS . The BUYER shall, within Five (5)days after receipt of such notice from the BUILDER, notify the BUILDER by telefax of its acceptance or rejection of the VESSEL’s conformity to this Contract and the SPECIFICATIONS .
 
 (b)                   However, should the result of the trial run show that the VESSEL, or any part or equipment thereof, does not conform to the requirements of this Contract and/or the SPECIFICATIONS , or if the BUILDER is in agreement to non-conformity as specified in the BUYER’s notice of rejection, then, the BUILDER shall take necessary steps to correct such non-conformity.
 
Upon completion of correction of such non-conformity, and re-test or trial if necessary, the BUILDER shall give the BUYER a notice thereof by telefax.
 
The BUYER shall, within Three (3) days after receipt of such notice from the BUILDER, notify the BUILDER of its acceptance or rejection of the VESSEL.
 
(c)               In any event that the BUYER rejects the VESSEL, the BUYER shall indicate in detail in its notice of rejection in what respect the VESSEL, or any part or equipment thereof does not conform to this Contract and/or the SPECIFICATIONS .
 
 (d)                   In the event that the BUYER fails to notify the BUILDER by telefax of the
 
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acceptance of or the rejection together with the reason therefor of the VESSEL within the period as provided in the above Sub-paragraph (a) or (b), the BUYER shall be deemed to have accepted the VESSEL.
 
 (e)                    Any dispute between the BUILDER and the BUYER as to the conformity or non-conformity of the VESSEL to the requirements of this Contract and/or the SPECIFICATIONS shall be submitted for final decision in accordance with Article XII hereof.
 
5.                           Effect of Acceptance :
 
Acceptance of the VESSEL as above provided shall be final and binding so far as conformity of the VESSEL to this Contract and the SPECIFICATIONS is concerned and shall preclude the BUYER from refusing formal delivery of the VESSEL as hereinafter provided, if the BUILDER complies with all other procedural requirements for delivery as provided in Article VII hereof. However, the BUYER’s acceptance of the VESSEL shall not affect the BUYER’s right under Article IX hereof.
 
The BUYER may accept the VESSEL under protest with outstanding defects to be dealt under the guarantee provisions or made subject of a claim for damages.
 
6.                           Disposition of Surplus Consumable Stores
 
Any fuel oil or other furnished and paid for by the BUILDER for trial runs remaining on board the VESSEL, at the time of acceptance of the VESSEL by the BUYER, shall be bought by the BUYER from the BUILDER at the BUILDER’s purchase price for such supply in Korea and the payment by the BUYER thereof shall be made at the time of delivery of the VESSEL.
 
The BUILDER shall pay the BUYER at the time of delivery of the VESSEL an amount for the consumed quantity until delivery of any lubricating oil and greases which were furnished and paid for by the BUYER at the BUYER’s purchase price thereof. For avoidance of doubt, the practice of this Article VI. 6 shall follow the practice in construction of the BUILDER’s Hull Nos. 1639 and 1640.
 
(End of Article)
 
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  ARTICLE VII - DELIVERY
 
1.                           Time and Place :
 
The VESSEL shall be delivered by the BUILDER to the BUYER at the Shipyard on or before March 31, 2009, except that, in the event of delays in the construction of the VESSEL or any performance required under this Contract due to causes which under the terms of this Contract permit postponement of the date for delivery, the aforementioned date for delivery of the VESSEL shall be postponed accordingly.
 
The aforementioned date, or such later date to which the requirement of delivery is postponed pursuant to such terms, is herein called the “Delivery Date”.
 
2.                           When and How Effected :
 
Provided that the BUILDER and the BUYER shall have fulfilled all of their obligations stipulated under this Contract, the delivery of the VESSEL shall be effected forthwith by the concurrent delivery by each of the parties hereto to the other of the PROTOCOL OF DELIVERY AND ACCEPTANCE, acknowledging delivery of the VESSEL by the BUILDER and acceptance thereof by the BUYER.
 
3.                           Documents to be delivered to BUYER :
 
Upon delivery and acceptance of the VESSEL, the BUILDER shall deliver to the BUYER the following documents, which shall accompany the PROTOCOL OF DELIVERY AND ACCEPTANCE :
 
(a)                       PROTOCOL OF TRIALS of the VESSEL made pursuant to the SPECIFICATIONS .
 
(b)                      PROTOCOL OF INVENTORY of the equipment of the VESSEL, including spare parts and the like, as specified in the SPECIFICATIONS .
 
(c)                       PROTOCOL OF STORES OF CONSUMABLE NATURE referred to under Paragraph 6 of Article VI hereof.
 
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 (d)                   ALL CERTIFICATES including the BUILDERS’s CERTIFICATE required to be furnished upon delivery of the VESSEL pursuant to this Contract and the SPECIFICATIONS , necessary for the registration of the VESSEL and BUYER’s trading requirements.
 
It is agreed that if, through no fault on the part of the BUILDER, the Classifications certificates and/or other certificates are not available at the time of delivery of the VESSEL, provisional certificates shall be accepted by the BUYER, provided that the BUILDER shall furnish the BUYER with the formal certificates as promptly as possible after such certificates have been issued.
 
Application and certificate for statutory inspections for the registry of the VESSEL shall be arranged by the BUYER at its expense.
 
 (e)                    DECLARATION OF WARRANTY of the BUILDER that the VESSEL is delivered to the BUYER free and clear of any liens, charges, claims, mortgages, or other encumbrances upon the BUYER’s title thereto, and in particular that the VESSEL is absolutely free of all burdens in the nature of imposts, taxes or charges imposed by Korean Governmental Authorities, as well as of all liabilities of the BUILDER to its subcontractors, employees and crew, and of the liabilities arising from the operation of the VESSEL in trial runs, or otherwise, prior to delivery.
 
 (f)                      DRAWING AND PLANS pertaining to the VESSEL as stipulated in the SPECIFICATIONS .
 
 (g)                   COMMERCIAL INVOICE.
 
4.                           Tender of VESSEL :
 
If the BUYER fails to take delivery of the VESSEL after completion thereof according to this Contract and the SPECIFICATIONS without any justifiable reason, the BUILDER shall have the right to tender delivery of the VESSEL after compliance with all procedural requirements as above provided.
 
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5.                           Title and Risk :
 
Title to and risk of loss of the VESSEL shall pass to the BUYER only upon the delivery and acceptance thereof having been completed as stated above; it being expressly understood that, until such delivery is effected, title to and risk of loss of the VESSEL and her equipment shall be in the BUILDER.
 
6.                           Removal of VESSEL :
 
The BUYER shall take possession of the VESSEL immediately upon delivery and acceptance thereof and shall remove the VESSEL from the premises of the Shipyard within Three (3) days after delivery and acceptance thereof is effected.
 
If the BUYER shall not remove the VESSEL from the premises of the Shipyard within the aforesaid Three (3) days, in such event, the BUYER shall pay to the BUILDER the reasonable mooring charges of the VESSEL.
 
(End of Article)
 
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ARTICLE VIII - DELAYS AND EXTENSION OF TIME FOR DELIVERY
(FORCE MAJEURE)
 
1.                           Causes of Delay (Force Majeure) :
 
If, at any time either the construction or delivery of the VESSEL or any performance required hereunder as a prerequisite to the delivery thereof is delayed by any of the following events; namely war, acts of state or government, blockade, revolution, insurrections, mobilization, civil commotion, riots, national strikes, sabotage, Acts of God or the public enemy, plague or other epidemics, quarantines, prolonged failure of electric current, freight embargoes, or defects in major forgings or castings or delay in BUYER’s supplied articles, if any, or defects in materials, machinery or equipment which could not have been detected by the BUILDER using reasonable care, or earthquakes, tidal waves, typhoons, hurricanes, prolonged or unusually severe weather conditions or by destruction of the premises or works of the BUILDER or its sub-contractors, or of the VESSEL, or any part thereof, by fire, landslides, flood, lightning, explosion, or other causes beyond the control of the BUILDER, or its sub-contractors, as the case may be, or for any other causes which, under the terms of this Contract, authorize and permit extension of the time for delivery of the VESSEL, then, in the event of delays due to the happening of any of the aforementioned contingencies, the Delivery Date of the VESSEL under this Contract shall be extended for a period of time which shall not exceed the total accumulated time of all such delays.
 
The enumerated contingencies shall not give rise to an extension of the delivery date unless :
 
i)                              The occurrence could not reasonably have been foreseen by the BUILDER at the date of signing of the Contract.
 
ii)                           The BUILDER shall have exercised reasonable due diligence to avoid or minimize the occurrence of such event.
 
iii)                        The BUILDER shall have used reasonable efforts to mitigate the duration and effects of such events of the construction schedule.
 
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2.                           Notice of Delay :
 
Within Fourteen (14) days after the date of occurrence of any cause of delay, on account of which the BUILDER claims that it is entitled under this Contract to a postponement of the Delivery Date, the BUILDER shall notify the BUYER in writing or by telefax confirmed in writing of the date when such cause of delay occurred. Likewise, within Fourteen (14) days after the date of ending of such cause of delay, the BUILDER shall notify the BUYER in writing or by telefax confirmed in writing of the date when such cause of delay ended.
 
The BUILDER shall also notify the BUYER of the period, by which the Delivery Date is postponed by reason of such cause of delay, with all reasonable dispatch after it has been determined. If the BUILDER does not give the timely advice as above, the BUILDER shall lose the right to claim such delays as permissible delay.
 
Failure of the BUYER to acknowledge to the BUILDER’s claim for postponement of the Delivery Date within Fourteen (14) days after receipt by the BUYER of such notice of claim shall be deemed to be a waiver by the BUYER of its right to object to such postponement of the Delivery Date.
 
3.                           Definition of Permissible Delay :
 
Delays on account of such causes as specified in Paragraph 1 of this Article and any other delay of a nature which under the terms of this Contract permits postponement of the Delivery Date shall be understood to be permissible delays and are to be distinguished from unauthorized delays on account of which the Contract Price is subject to adjustment as provided for in Article III hereof.
 
4.                           Right to Rescind for Excessive Delay :
 
If the total accumulated time of all delays whether permissible or not exceeds One Hundred and Eighty (180) days, then, in such event, the BUYER may rescind this Contract in accordance with the provisions of Article X hereof.
 
The accumulated time as above shall exclude the time lost due to BUYER’s Default or delays in the BUYER’s supplies. The BUILDER may, at any time after the accumulated time of the aforementioned delays justifying rescission by the BUYER, demand in writing that the BUYER shall make an election proposing a new delivery date, in which case the BUYER shall, within Fourteen (14) days
 
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after such demand is received by the BUYER, either notify the BUILDER of its intention to rescind this Contract, or consent to a postponement of the Delivery Date to an agreed specific future date; it being understood and agreed by the parties hereto that, if any further delay occurs on account of causes justifying rescission as specified in this Article, the BUYER shall have the same right of rescission upon the same terms as herein above provided.
 
(End of Article)
 
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ARTICLE IX - WARRANTY OF QUALITY
 
1.                           Guarantee :
 
The BUILDER, for the period of Twelve (12) months after delivery of the VESSEL (hereinafter called “Guarantee Period”), guarantees the VESSEL and her engine, including all parts and equipment manufactured, furnished or installed by the BUILDER under this Contract, and including the machinery, equipment and appurtenances thereof, under the Contract but excluding any item which is supplied or designated by the BUYER or by any other bodies on behalf of the BUYER, against all defects discovered within the Guarantee Period which are due to improper design, defective material, and/or poor workmanship or negligent or other improper acts or omissions on the part of the BUILDER or its subcontractors (hereinafter called the “Defect” or “Defects”) and are not a result of accident, ordinary wear and tear, misuse, mismanagement, negligent or other improper acts or omissions or neglect on the part of the BUYER, its employee or agents.
 
Upon rectification of an item claimed under this guarantee, this item shall be covered for further Twelve (12) months under the same terms and conditions. However, this is limited to a maximum of Twenty Four (24) months from delivery date.
 
2.                           Notice of Defects :
 
The BUYER shall notify the BUILDER in writing, or by telefax of any defect for which claim is made under this guarantee, as promptly as possible after discovery thereof. The BUYER’s notice shall describe in detail the nature, cause if known and extent of the Defects.
 
The BUILDER shall have no obligation for any Defect discovered prior to the expiry date of the Guarantee Period, unless notice of such Defect is received by the BUILDER not later than Twenty (20) days after such expiry date.
 
3.                           Remedy of Defects :
 
(a)                       The BUILDER shall remedy, at its expense, any Defect against which the VESSEL is guaranteed under this Article, by making all necessary repairs or replacements at the Shipyard.
 
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(b)                      However, if the BUYER should determine that it is commercially or operationally impracticable to bring the VESSEL to the Shipyard, the BUYER may cause the necessary repairs or replacements to be made elsewhere which is deemed suitable for the purpose, provided that, in such event, the BUILDER may forward or supply replacement parts or materials to the BUYER’s agent to be designated by the BUYER in writing , unless forwarding or supplying thereof the VESSEL would impair or delay the operation of working schedule of the VESSEL. In the event that the BUYER proposes to cause the necessary repairs or replacements for the VESSEL to be made at any other shipyard or works than the Shipyard, the BUYER shall first, but in all events as soon as possible, give the BUILDER a notice in writing or by telefax confirmed in writing of the time and place when and where such repairs will be made, and if the VESSEL is not thereby delayed, or her operation or working schedule is not thereby impaired, the BUILDER shall have the right to verify by its own representative(s) the nature, cause and extent of the Defects complained of. The BUILDER shall, in such case, promptly advise the BUYER by telefax, after such examination has been completed, of its acceptance or rejection of the Defects as ones that are covered by the guarantee herein provided. Upon the BUILDER’s acceptance of the Defects as justifying remedy under this Article, or upon award of the arbitration so determining, the BUILDER shall pay to the BUYER for such repairs or replacements justified reasonable and proven actual cost of repairs or replacements.
 
(c)                       The reimbursement of the costs incurred in relation to guarantee works shall be paid in a lumpsum after expiration of the guarantee period.
 
(d)                      In any case, the VESSEL shall be taken, at the BUYER’s cost and responsibility, to the place elected, ready in all respects for such repairs or replacement.
 
(e)                       Any dispute under this Article shall be referred to arbitration in accordance with the provisions of Article XII hereof.
 
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4.                           Extent of BUILDER’s Responsibility :
 
 (a)                    The BUILDER shall have no responsibility or liability for any other defect whatsoever in the VESSEL than the Defects specified in Paragraph 1 of this Article. Nor the BUILDER shall in any circumstance be responsible or liable for any consequential or special loss, damage or expense including but not limited to loss of time, loss of profit of earning or demurrage directly or indirectly occasioned to the BUYER by reason of the Defects specified in Paragraph 1 of this Article or due to repairs or other works done to the VESSEL to remedy such Defects.
 
 (b)                   The BUILDER shall not be responsible for any defect in any part of the VESSEL which may, subsequently to delivery of the VESSEL, have been replaced or repaired in any way by any other contractor unless the BUILDER has not objected the contractor to perform guarantee repairs, or for any defect which have been caused or aggravated by omission or improper use and maintenance of the VESSEL on the part of the BUYER, its servants or agents or by ordinary wear and tear or by any other cause beyond the control of the BUILDER.
 
 (c)                    The guarantee contained as hereinabove in this Article replaces and excludes any other liability, guarantee, warranty and/or condition imposed or implied by the law, customary, statutory or otherwise, by reason of the construction and sale of the VESSEL by the BUILDER for and to the BUYER.
 
5.                           Guarantee Engineer :
 
The BUILDER shall have the right to appoint a Guarantee Engineer to serve on the VESSEL as its representative for a period of Three (3) months from the date the VESSEL is delivered. However, if the BUYER and the BUILDER shall deem it necessary to keep the Guarantee Engineer on the VESSEL for a longer period, then he shall remain on board the VESSEL after the said Three (3) months, but not longer than Six (6) months from the delivery of the VESSEL.
 
The BUYER, and its employees, shall give such Guarantee Engineer full cooperation in carrying out his duties as the representative of the BUILDER on board the VESSEL.
 
The Guarantee Engineer shall sign BUYER’s Indemnity Forms and shall at all times deemed to be an employee of the BUILDER.
 
The BUYER shall accord the Guarantee Engineer treatment comparable to the
 
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VESSEL’s Chief Engineer, and shall provide board and lodging at no cost to the BUILDER and/or the Guarantee Engineer.
 
While the Guarantee Engineer is on board the VESSEL, the BUYER shall pay to the BUILDER the sum of Seven Thousand United States Dollars (US$ 7,000.-) per month as a compensation for a part of cost and charges to be borne by the BUILDER in connection with Guarantee Engineer and also shall pay the expenses of his repatriation to Seoul, Korea by air upon termination of his service, the expenses of his communication with the BUILDER incurred in performing his duties and expenses, if any, of his medical and hospital care in the VESSEL’s hospital.
 
Pertaining to the detailed particulars of this Paragraph, an agreement will be made according to this effect between the parties hereto upon delivery of the VESSEL.
 
(End of Article)
 
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ARTICLE X - RESCISSION BY BUYER
 
1.                           Notice :
 
The payments made by the BUYER prior to delivery of the VESSEL shall be in the nature of advances to the BUILDER, and in the event that the VESSEL after sea trial is rejected by the BUYER or the VESSEL is cancelled by the BUYER in accordance with the terms of this Contract under and pursuant to any of the provisions of this Contract specifically permitting the BUYER to do so and in the event that the Contract is rescinded by the BUYER under and pursuant to any of the provisions of this Contract specially permitting the BUYER, then the BUYER shall notify the BUILDER in writing or by telefax confirmed in writing, and such rescission shall be effective as of the date when notice thereof is received by the BUILDER.
 
2.                           Refundment by BUILDER :
 
In case the BUILDER receives the notice stipulated in Paragraph 1 of this Article, the BUILDER shall promptly refund to the BUYER the full amount of all sums paid by the BUYER to the BUILDER on account of the VESSEL together with the interest thereon, unless the BUILDER proceeds to the arbitration under the provisions of Article XII hereof.
 
In such event, the BUILDER shall pay the BUYER interest at the rate of Six percent (6.0%)per annum on the amount required herein to be refunded to the BUYER, computed from the dates following on which such sums were paid by the BUYER to the BUILDER to the date of remittance by transfer of such refund to the BUYER by the BUILDER.
 
As security for refund of instalments prior to delivery of the VESSEL, the BUILDER shall furnish the BUYER within Fourteen (14) calendar days after the Contract signing with a letter of guarantee covering the amount of such pre-delivery instalments in favour of the BUYER. Such letter of guarantee shall have substantially the same form and substance as Exhibit “A” annexed hereto.
 
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3.                           Discharge of Obligations :
 
Upon such refund by the BUILDER to the BUYER, all obligations, duties and liabilities of each of the parties hereto to the other under this Contract shall be forthwith completely discharged .
 
(End of Article)
 
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ARTICLE XI - BUYER’S DEFAULT
 
1.                           Definition of Default :
 
The BUYER shall be deemed to be in default of its performance of obligations under this Contract in the following cases :
 
(a)                       If the first, second, third, fourth or fifth instalment are not paid by the BUYER to the BUILDER within Five (5) banking days after such instalment becomes due and payable as provided in Article II hereof;
 
or
 
(b)                      If the Delivery instalment is not paid by the BUYER to the BUILDER concurrently with the delivery of the VESSEL as provided in Article II hereof;
 
or
 
(c)                       If the BUYER, when the VESSEL is duly tendered for delivery by the BUILDER:
 
i)                            fails to take delivery of the VESSEL within Five (5) banking days from tendered date
 
ii)                           having initiated the arbitration procedure the BUYER does not accept delivery within Seven (7) days of an arbitration award which is not appealed.
 
2.                           Effect of Default on or before Delivery of VESSEL :
 
 (a)                    Should the BUYER make default in payment of any instalment of the Contract Price on or before delivery of the VESSEL, the BUYER shall pay the instalment(s) in default plus accrued interest thereon at the rate of Six percent (6.0%) per annum computed from the due date of such instalment to the date when the BUILDER receives the payment, and, for the purpose of Paragraph 1 of Article VII hereof the Delivery Date of the VESSEL shall be automatically extended by the period of continuance of such default by the BUYER. In any event of default by the BUYER, the BUYER shall also pay direct charges and expenses incurred by the BUILDER in consequence of such default after mutual agreement.
 
(b)                   If any default by the BUYER continues for a period of Ten (10) days after the BUILDER’s notification, the BUILDER may, at its option, rescind this Contract by giving notice of such effect to the BUYER by telefax confirmed in writing.
 
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Upon dispatch by the BUILDER of such notice of rescission, this Contract shall be forthwith rescinded and terminated. In the event of such rescission of this Contract, the BUILDER shall be entitled to retain any instalment or instalments already paid by the BUYER to the BUILDER on account of this Contract and the BUYER’s Supplies, if any.
 
3.                           Disposal of VESSEL :
 
 (a)                    In the event that this Contract is rescinded by the BUILDER under the provisions of Paragraph 2(b) of this Article, the BUILDER may, at its sole discretion, either complete the VESSEL and sell the same, or sell the VESSEL in its incomplete state, free of any right or claim of the BUYER. Such sale of the VESSEL by the BUILDER shall be either by public auction or private contract at the BUILDER’s sole discretion and on such terms and conditions as the BUILDER shall deem fit.
 
 (b)                   In the event of such sale of the VESSEL, the amount of the sale received by the BUILDER shall be applied firstly to all expenses attending such sale or otherwise incurred by the BUILDER as a result of the BUYER’s default, secondly to the payment of all costs and expenses of construction of the VESSEL incurred by the BUILDER less BUYER’s Supplies and the instalments already paid by the BUYER and the compensation to the BUILDER for a reasonable loss of profit due to rescission of this Contract, and finally to the repayment to the BUYER without interest, if any balance is obtained.
 
(c)                       If the proceeds of sale are insufficient to pay such total costs and loss of profit as aforesaid, the BUYER shall promptly pay the deficiency to the BUILDER upon request.
 
(End of Article)
 
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ARTICLE XII - ARBITRATION
 
1.                           Decision by the Classification Society :
 
If any dispute arises between the parties hereto in regard to the design and/or construction of the VESSEL, its machinery and equipment, and/or in respect of the materials and/or workmanship thereof and/or thereon, and/or in respect of interpretations of this Contract or the SPECIFICATIONS, the parties may by mutual agreement refer the dispute to the Classification Society or to such other expert as may be mutually agreed between the parties hereto, and whose decision shall be final, conclusive and binding upon the parties hereto.
 
2.                           Proceedings of Arbitration :
 
In the event that the parties hereto do not agree to settle a dispute according to Paragraph 1 of this Article and/or in the event of any other dispute of any kind whatsoever between the parties and relating to this Contract or its rescission or any stipulation herein, such dispute shall be submitted to arbitration in London. Each party shall appoint an arbitrator and in the event that they cannot agree, the two arbitrators so appointed shall appoint an Umpire.
 
If the two arbitrators are unable to agree upon an Umpire within Twenty(20) days after appointment of the second arbitrator, either of the said two arbitrators may apply to the President for the time being of the London Maritime Arbitrators Association to appoint the third arbitrator, and the three arbitrators shall constitute the board of arbitration.
 
Such arbitration shall be in accordance with and subject to the provisions of the English Arbitration Act 1996 or any statutory modification or re-enactment thereof for the time being in force.
 
The Arbitration shall be conducted in accordance with the rules in force of the London Maritime Arbitrators Association.
 
Either party may demand arbitration of any such dispute by giving notice to the other party. Any demand for arbitration by either of the parties hereto shall state the name of the arbitrator appointed by such party and shall also state specifically the question or questions as to which such party is demanding arbitration.
 
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Within Fourteen(14) days after receipt of notice of such demand for arbitration, the other party shall in turn appoint a second arbitrator and give notice in writing of such appointment to the party demanding arbitration. If a party fails to appoint an arbitrator as aforementioned within Fourteen(14) days following receipt of notice of demand for arbitration by the other party, the party failing to appoint an arbitrator shall be deemed to have accepted and appointed, as its own arbitrator, the arbitrator appointed by the party demanding arbitration and the arbitration shall proceed before this sole arbitrator who alone in such event shall constitute the Arbitration Board.
 
The award of the arbitrators and/or Umpire shall be final and binding on both parties.
 
3.                           Notice of Award :
 
The award shall immediately be given to the BUYER and the BUILDER by telefax.
 
4.                           Expenses :
 
The Arbitration Board shall determine which party shall bear the expenses of the arbitration or the portion of such expenses which each party shall bear.
 
5.                           Entry in Court :
 
In case of failure by either party to respect the award of the arbitration, the judgement may be entered in any proper court having jurisdiction thereof.
 
6.                           Alteration of Delivery Date :
 
In the event of reference to arbitration of any dispute arising out of matters occurring prior to delivery of the VESSEL, the award may include any postponement of the Delivery Date which the Arbitration Board may deem appropriate.
 
(End of Article)
 
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ARTICLE XIII - SUCCESSOR AND ASSIGNS
 
Neither of the parties hereto shall assign this Contract to any other individual or company save as provided hereto. unless prior consent of the other party is given in writing. Should circumstances permit with or without alteration of the terms and conditions of this Contract, such consent shall not be unreasonably withheld by either party.
 
The BUYER is hereby allowed to assign the Contract for the purposes of financing.
 
The BUYER is further allowed to nominate a company controlled by the BUYER to take over the Contract.
 
The BUILDER shall fully cooperate in case the BUYER requests UK Tax lease financing arrangements.
 
In the event of any assignment pursuant to the terms of this Contract, the assignee shall succeed to all of the rights and obligations of the assignor under this Contract and the assignor shall remain responsible for the fulfillment of this Contract.
 
In the event of the assignment from the BUYER to any other individual or company the BUILDER shall be entitled to request a Performance Guarantee from the BUYER having same form and contents as Exhibit “C” annexed hereto.
 
The BUYER and the BUILDER understand and acknowledge that the VESSEL shall be built and constructed as a repeat and series vessel of the BUILDER’s Hull Nos. 1639 and 1640 as stipulated in this Contract. Thus, i n the event of a resale, assignment and novation of the VESSEL, any and all matters determined by mutual agreement between the BUYER and the BUILDER prior to the resale, assignment and novation of the VESSEL shall be accepted and complied by the New BUYER (i.e., assignee). If the New BUYER or its supervisor makes unreasonable requests that may have a significant impact on the delivery schedule of the VESSEL and/or costs of construction (including, without limitation to, request for fundamental change of ship type or excessive revision of design specifications, etc.), the BUILDER shall be entitled to refuse these requests. The BUYER shall notify the above to the New BUYER before assignment or novation and the New BUYER will have to accept any additional cost related to the new supervision.
 
(End of Article)
 
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ARTICLE XIV - TAXES AND DUTIES
 
1.                           Taxes and Duties Incurred in Korea :
 
The BUILDER shall bear and pay all taxes, duties, stamps and fees incurred in Korea in connection with execution and/or performance of this Contract as the BUILDER, except for any taxes and duties imposed in Korea upon the BUYER’s Supplies.
 
2.                           Taxes and Duties Incurred outside Korea :
 
The BUILDER shall bear and pay all taxes, duties, stamps and fees incurred outside Korea in connection with execution and/or performance of this Contract including guarantee matter as the BUILDER.
 
The BUYER shall bear and pay all taxes, duties, stamps and fees incurred outside Korea in connection with execution and/or performance of this Contract as the BUYER.
 
(End of Article)
 
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ARTICLE XV - PATENTS, TRADEMARKS, COPYRIGHTS, ETC.
 
1.                           Patents, Trademarks and Copyrights :
 
Machinery and equipment of the VESSEL may bear the patent number trademarks or trade names of the manufacturers. The BUILDER shall defend and hold harmless the BUYER from patent liability or claims of patent infringement of any nature or kind, including costs and expenses for, or on account of any patented or patentable invention made or used in the performance of this Contract and also including costs and expenses of litigation, if any.
 
Nothing contained herein shall be construed as transferring any patent or trademark rights or copyrights in equipment covered by this Contract, and all such rights are hereby expressly reserved to the true and lawful owners thereof.
 
The BUILDER’s warranty hereunder does not extend to the BUYER’s Supplies.
 
2.                           General Plans, Specifications and Working Drawings :
 
The BUILDER retains all rights with respect to the SPECIFICATIONS, and plans and working drawings, technical descriptions, calculations, test results and other data, information and documents concerning the design and construction of the VESSEL and the BUYER undertakes therefore not to disclose the same or divulge any information contained therein to any third parties, without the prior written consent of the BUILDER, except where it is necessary for usual operation, repair , registration, classification, chartering, sale and maintenance of the VESSEL.
 
(End of Article)
 
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ARTICLE XVI - BUYER’S SUPPLIES
 
1.                           Responsibility of BUYER :
 
(a)               The BUYER shall, at its own risk, cost and expense, supply and deliver to the BUILDER all of the items to be furnished by the BUYER as specified in the SPECIFICATIONS (herein called the BUYER’s Supplies) at warehouse or other storage of the Shipyard in the proper condition ready for installation in or on the VESSEL, in accordance with the time schedule designated and advised by the BUILDER to the BUYER within sixty (60) days from signing this Contract.
 
 (b)                   In order to facilitate installation by the BUILDER of the BUYER’s Supplies in or on the VESSEL, the BUYER shall furnish the BUILDER with necessary specifications, plans, drawings, instruction books, manuals, test reports and certificates required by the rules and regulations of the SPECIFICATIONS.
 
If so requested by the BUILDER, the BUYER shall, without any charge to the BUILDER, cause the representatives of the manufacturers of the BUYER’s Supplies to assist the BUILDER in installation thereof in or on the VESSEL and/or to carry out installation thereof by themselves or to make necessary adjustments at the Shipyard.
 
 (c)                    Any and all of the BUYER’s Supplies shall be subject to the BUILDER’s reasonable right of rejection, as and if they are found to be unsuitable or in improper condition for installation.
 
 (d)                   Should the BUYER fail to deliver any of the BUYER’s Supplies within the time designated, the Delivery Date shall be automatically extended for a period which actually caused the delay in the delivery of the VESSEL.
 
 (e)                    If delay in delivery of any of the BUYER’s Supplies exceeds thirty (30) days, then, the BUILDER shall be entitled to proceed with construction of the VESSEL without installation thereof in or on the VESSEL as hereinabove provided, and the BUYER shall accept and take delivery of the VESSEL so constructed, unless such delay is caused by Force Majeure in which case the provision Paragraph 1(d) of this Article shall apply.
 
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2.                           Responsibility of BUILDER :
 
The BUILDER shall be responsible for storing and handling with reasonable care of the BUYER’s Supplies after delivery thereof at the Shipyard, and shall, at its own cost and expense, install them in or on the VESSEL, unless otherwise provided herein or agreed by the parties hereto, provided, always, that the BUILDER shall not be responsible for quality, efficiency and/or performance of any of the BUYER’s Supplies.
 
(End of Article)
 
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ARTICLE XVII - INSURANCE
 
1.                           Extent of Insurance Coverage
 
From the time of launching until delivery of the VESSEL, the BUILDER shall, at its own cost and expense, insure the VESSEL and all machinery and equipment, appurtenances and outfits, including the BUYER’s Supplies, built into or installed in or upon the VESSEL, against all risks under the “Institute Causes for BUILDER’s Risk”, with first class insurance company or underwriters in Korea.
 
The amount of such insurance coverage shall, up to the date of delivery of the VESSEL, not be less than the aggregate amount of all instalments paid by the BUYER to the BUILDER, plus the value of the BUYER’s Supplies in the custody of the Shipyard.
 
2.                           Application of the Recovered Amounts
 
In the event that the VESSEL shall be damaged from any insured cause at any time before delivery of the VESSEL, and in the further event that such damage shall not constitute an actual or constructive total loss of the VESSEL, the amount received in respect of the insurance shall be applied by the BUILDER in repair of such damage, satisfactory to the Classification Society, and the BUYER shall accept the VESSEL under this Contract if completed in accordance with this Contract and the SPECIFICATIONS, however, subject to the extension of delivery time under Article VIII hereof (except in case of negligence of the BUILDER).
 
Should the VESSEL from any cause become an actual or constructive total loss, the BUILDER shall either :
 
 (a)                    proceed in accordance with the terms of this Contract, in which case the amount received in respect of the insurance shall be applied to the construction and repair of damage of the VESSEL, provided the parties hereto shall have first agreed thereto in writing and to such reasonable extension of delivery time as may be necessary for the completion of such reconstruction and repair ; or
 
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 (b)                   refund promptly to the BUYER the full amount of all sums paid by the BUYER to the BUILDER as instalments in advance of delivery of the VESSEL with Six percent (6.0%) interest, and deliver to the BUYER all BUYER’s Supplies (or the insurance proceeds paid with respect thereto), in which case this Contract shall be deemed to be automatically terminated and all right, duties, liabilities and obligations of each of the parties to the other shall forthwith cease and terminate.
 
3.                           Termination of BUILDER’s Obligation to Insure
 
The BUILDER shall be under no obligation to insure the VESSEL hereunder after delivery and acceptance of the VESSEL.
 
(End of Article)
 
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ARTICLE XVIII – NOTICE
 
1.                           Address :
 
Any and all notices and communications in connection with this Contract shall be addressed as follows :
 
To the BUYER :
MedSea Marine Inc.
80 Broad Street, Monrovia, Liberia
Cable address :    MEDMAR
Telefax No. :         231-7-7000-422
 
To the BUILDER:
 
Samsung Heavy Industries Co., Ltd.
647-9, 11 th Floor, KIPS Building, Yeoksam-Dong, Kangnam-Ku,
Seoul, Korea
Cable address : SSYARD SEOUL
Telefax No. : (+82 2) 3458-7349, (+82 2) 3458-7319
 
or preferably to its Geoje Yard :
 
Samsung Heavy Industries Co., Ltd.
P.O.BOX Gohyun 9
530, Jangpyung-Ri, Shinhyun-Up, Geoje-Si, Kyungnam, Korea

Telefax No. :	(+82 55) 630-4947 (Design Department)	
 	(+82 55) 630-4978 (Customer Satisfaction Team.)	
 
2.                           Language :
 
Any and all notices and communications in connection with this Contract shall be written in the English language.
 
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3.                           Effective Date of Notice :
 
The notice in connection with this Contract shall become effective from the date when such notice is received by the BUYER or by the BUILDER except otherwise described in the Contract.
 
(End of Article)
 
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ARTICLE XIX - EFFECTIVE DATE OF CONTRACT
 
This Contract shall become effective upon signing by the parties hereto.
 
(End of Article)
 
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ARTICLE XX - INTERPRETATION
 
1.                           Laws Applicable :
 
The parties hereto agree that the validity and interpretation of this Contract and of each Article and part thereof shall be governed by the laws of England.
 
2.                           Discrepancies :
 
All general language or requirements embodied in the SPECIFICATIONS are intended to amplify, explain and implement the requirements of this Contract. However, in the event that any language or requirements so embodied permit of an interpretation inconsistent with any provisions of this Contract, then, in each and every such event, the applicable provisions of this Contract shall prevail and govern. In the event of conflict between the SPECIFICATIONS and Plans, the SPECIFICATIONS shall prevail and govern.
 
3.                           Entire Agreement :
 
This Contract contains the entire agreement and understanding between the parties hereto and supersedes all prior negotiations, representations, undertaking and agreements on any subject matter of this Contract.
 
4.                           Amendments and Supplements :
 
Any supplement, memorandum of understanding or amendment, whatsoever form it may be relating to this Contract, to be made and signed among parties hereof after signing this Contract, shall be the integral part of this Contract and shall be predominant over the respective corresponding Article and/or Paragraph of this Contract.
 
The Contract can only be amended in writing.
 
(End of Article)
 
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IN WITNESS WHEREOF, the parties hereto have caused this Contract to be duly executed on the day and year first above written.

BUYER :	BUILDER :	
MEDSEA MARINE INC.	SAMSUNG HEAVY IND. CO., LTD.	

/s/ Iraklis Prokopakis	 	 	/s/ K. J. Song	 	
By  :	Iraklis Prokopakis	 	By   :   K. J. Song	
Title :	Attorney-In-Fact	Title :	Attorney-In-Fact	

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EXHIBIT “A”
 
LETTER OF REFUNDMENT GUARANTEE
 
Gentlemen :
 
We hereby issue our letter of guarantee no.       in favour of Medsea Marine Inc.,(hereinafter called the “BUYER”) for account of Samsung Heavy Industries Co., Ltd.(hereinafter called the “BUILDER”) as follows in consideration of the shipbuilding contract dated May 12, 2006 (hereinafter called the “Contract”) made by and among the BUYER and the BUILDER for the construction of one(1) single screw diesel engine driven Container VESSEL having BUILDER’s Hull No. 1698 (hereinafter called the “VESSEL”).
 
If in connection with the terms of the Contract the BUYER shall become entitled to a refund of the advance payment(s) made to the BUILDER prior to the delivery of the VESSEL, we hereby irrevocably guarantee the repayment of the same to the BUYER immediately on demand being initially US$ 6,380,000.- (Say U.S. Dollars Six Million Three Hundred and Eighty Thousand only) together with interest thereon at the rate of Six (6) percent per annum from the respective dates on which such sums were paid by the BUILDER to the date of remittance by telegraphic transfer of such refund.
 
The amount of this guarantee will be automatically increased, not more than three times, upon BUILDER’s receipt of the respective instalment: each time by the amount of instalment of US$ 6,380,000.- (Say U.S. Dollars Six Million Three Hundred and Eighty Thousand only), US$ 6,380,000.- (Say U.S. Dollars Six Million Three Hundred and Eighty Thousand only) and US$ 6,380,000.- (Say U.S. Dollars Six Million Three Hundred and Eighty Thousand only) respectively plus interest thereon as provided in the Contract, but in any eventuality the amount of this guarantee shall not exceed the total sum of US$ 25,520,000.- (Say U.S. Dollars Twenty Five Million Five Hundred and Twenty Thousand only) plus interest thereon at the rate of Six (6) percent per annum from the respective dates on which such sums were paid by the BUYER to the BUILDER to the date of remittance by telegraphic transfer of the refund.
 
Our liability under this letter of guarantee shall not be affected by any alteration to or variation of the terms of the Contract you may hereafter agree with the BUILDER and by any other matter of circumstances, including bankruptcy or insolvency of the BUILDER, which might otherwise discharge our liability hereunder as guarantor of the BUILDER’s obligations as aforesaid.
 
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In case any refund is made to you by the BUILDER or by us under this guarantee, our liability hereunder shall be automatically reduced by the amount of such refund.
 
This letter of guarantee is available against BUYER’s simple receipt and signed statement certifying that BUYER’s demand for refund has been made in conformity with Article X of the Contract and the BUILDER has failed to make the refund within Thirty One (31) days after BUYER’s demand to the BUILDER.
 
Refund shall be made to BUYER by telegraphic transfer in United States Dollars to an account designated by you without deduction, withholding or set-off.
 
This letter of guarantee shall expire and become null and void upon receipt by the BUYER of the sum guaranteed hereby or upon acceptance by the BUYER of the delivery of the VESSEL in accordance with the terms of the Contract and, in either case, this letter of guarantee shall be returned to us. This guarantee is valid from the date of this letter of guarantee until or in the event of delayed delivery until such time as the VESSEL is delivered by the BUILDER to the BUYER in accordance with the terms of the Contract.
 
Notwithstanding the provisions hereinabove, in case we receive notification from you or the BUILDER confirmed by an Arbitrator stating that your claim to cancel the Contract or your claim for refundment thereunder has been disputed and referred to Arbitration in accordance with the provisions of the Contract, the period of validity of this guarantee shall be extended until Thirty (30) days after the final and non-appealable award shall be rendered in the Arbitration and a copy thereof acknowledged by the Arbitrators. In such case, this guarantee shall not be available unless and until such acknowledged copy of the final award in the Arbitration justifying your claim is presented to us.
 
Your rights in respect of this letter of guarantee are assignable from the date of this letter of guarantee until such time as the VESSEL is delivered by the BUILDER to the BUYER in accordance with the provisions of the Contract, on the understanding that you will notify us of the identity of any assignee of your rights under this letter of guarantee.
 
Any notice or demand under this letter of guarantee shall be given by facsimile and sent to:
 
58

 

 
 
or to such other address as we might notify to you in writing. A notice shall be deemed to be served and shall take effect 2 hours after its transmission is completed, provided that if a notice would be deemed to be served on a day which is not a business day, or which is a business day but after 5:00 p.m. local time, in the place of receipt, the notice shall be deemed to be served and shall take effect at 9:00 a.m. on the next day which is a business day.
 
This guarantee shall be governed by and construed in accordance with the Laws of England. Any disputes arising under this guarantee (but not any disputes arising under the Contract which shall be determined by arbitration in accordance with the terms of the Contract and as referenced in this letter of guarantee) shall be determined by the High Court of Justice in London to whose exclusive jurisdiction we hereby submit. We appoint
 
                                                       as our agents for service of process in connection with any proceedings in such courts.
 
We each jointly and severally hereby represent and guarantee that we have the corporate power and authority to execute, deliver and perform the obligations under this letter of guarantee, and that such execution and performance will not violate or conflict with any provision of law, statute, rule, permit or regulation of any government, regulatory body, agency or other authority in the jurisdictions where we are subject to such laws and regulations.
 
59

 
IN WITNESS WHEREOF, we have hereunder set our hands and seal by our duly authorized representatives this     day of         , 2006.

 	Very truly yours,	

 	For and on behalf of	

 	By	 	 	
 	Name :	
 	Title : Attorney-in-Fact	

 	For and on behalf of	
 	 	 	
 	By	 	 	
 	Name :	
 	Title : Attorney-in-Fact	
 
60

 
EXHIBIT “B”
 
Samsung Heavy Industries Co., Ltd.
11 th Floor, KIPS Building
647-9, Yoksam-Dong, Kangnam-Ku,
Seoul, Korea 135-080
 
Date :                  , 2006
 
PERFORMANCE GUARANTEE
 
In consideration of the performance of a certain shipbuilding contract dated            (hereinafter called the “Contract”) by MEDSEA MARINE INC. of 80 Broad street, Monrovia, Liberia having your Hull No.1698 (hereinafter called the “VESSEL”) providing among other things for payment of the Contract Price amounting to United States Dollars       (US$       );
 
We, the undersigned, hereby irrevocably and unconditionally guarantee to you, your successors, and assigns the due and faithful performance by the BUYER of its all liabilities and responsibilities under the Contract and any supplement, amendment, change or modification hereafter made thereto, including but not limited to, due and prompt payment of the Contract Price by the BUYER to you, your successors, and assigns under the Contract and any supplement, amendment, change or modification as aforesaid (hereby expressly waiving notice of any such supplement, amendment, change or modification as may be agreed to by the BUYER and confirming that this guarantee shall be fully applicable to the Contract as so supplemented, amended, changed or modified).
 
This Performance Guarantee shall be governed by the laws of England.

GUARANTOR :	
BY :	 	 	
TITLE :	
WITNESS :	
 
61

 
EXHIBIT “C”
 
Samsung Heavy Industries Co., Ltd.
11 th Floor, KIPS Building
647-9, Yoksam-Dong, Kangnam-Ku,
Seoul, Korea 135-080
 
Date :                       , 2006
 
PERFORMANCE GUARANTEE
 
In consideration of the assignment of a certain shipbuilding contract dated          (hereinafter called the “Contract”) by us to    having your Hull No.1698 (hereinafter called the “VESSEL”) providing among other things for payment of the Contract Price amounting to United States Dollars      (US$       );
 
We, the undersigned, hereby irrevocably and unconditionally guarantee to you, your successors, and assigns the due and faithful performance by the BUYER of its all liabilities and responsibilities under the Contract and any supplement, amendment, change or modification hereafter made thereto, including but not limited to, due and prompt payment of the Contract Price by the BUYER to you, your successors, and assigns under the Contract and any supplement, amendment, change or modification as aforesaid (hereby expressly waiving notice of any such supplement, amendment, change or modification as may be agreed to by the BUYER and confirming that this guarantee shall be fully applicable to the Contract as so supplemented, amended, changed or modified).
 
This Performance Guarantee shall be governed by the laws of England.

GUARANTOR :	
BY :	 	 	
TITLE :	
WITNESS :	
 
62

 
Exhibit 10.26
 
FOR
 
CONSTRUCTION AND SALE
 
OF
 
A 4,250 TEU CONTAINER VESSEL
(HULL NO. 1699)

BETWEEN
 
Blacksea Marine Inc.
As BUYER
 
AND

Samsung Heavy Industries Co., Ltd.
As BUILDER

 
I N D E X

 	 	PAGE	
 	 	 	
PREAMBLE	 	7	
 	 	 	
ARTICLE I - DESCRIPTION AND CLASS	 	 	
 	 	 	
1. Description	 	8	
2. Dimensions and Characteristics	 	8	
3. Classification, Rules and Regulations	 	9	
4. Subcontracting	 	10	
5. Registration	 	10	
 	 	 	
ARTICLE II - CONTRACT PRICE AND TERMS OF PAYMENT	 	 	
 	 	 	
1. Contract Price	 	11	
2. Adjustment of Contract price	 	11	
3. Currency	 	11	
4. Terms of Payment	 	11	
5. Method of Payment	 	12	
6. Notice of Payment on or before Delivery	 	13	
7. Expenses	 	13	
8. Prepayment	 	13	
9. Performance Guarantee	 	14	
 	 	 	
ARTICLE III - ADJUSTMENT OF CONTRACT PRICE	 	 	
 	 	 	
1. Delivery	 	15	
2. Speed	 	16	
3. Fuel Consumption	 	17	
4. Deadweight	 	17	
5. Early Delivery	 	18	
6. Effect of Rescission	 	18	
 
2

 

ARTICLE IV - APPROVAL OF PLANS AND DRAWINGS AND INSPECTION DURING CONSTRUCTION	
 	 	 	
1. Approval of Plans and Drawings	 	19	
2. Appointment of BUYER’s Supervisor	 	19	
3. Inspection by the Supervisor	 	20	
4. Facilities	 	21	
5. Liability of BUILDER	 	21	
6. Responsibility of BUYER	 	22	
 	 	 	
ARTICLE V - MODIFICATIONS, CHANGES AND EXTRAS	 	 	
 	 	 	
1. How Effected	 	23	
2. Change in Rules of Classification Society, Regulations etc	 	24	
3. Substitution of Materials	 	25	
 	 	 	
ARTICLE VI - TRIALS AND ACCEPTANCE	 	 	
 	 	 	
1. Notice	 	26	
2. Weather Condition	 	26	
3. How Conducted	 	27	
4. Method of Acceptance of Rejection	 	27	
5. Effect of Acceptance	 	28	
6. Disposition of Surplus Consumable Stores	 	28	
 	 	 	
ARTICLE VII - DELIVERY	 	 	
 	 	 	
1. Time and Place	 	29	
2. When and How Effected	 	29	
3. Documents to be delivered to BUYER	 	29	
4. Tender of VESSEL	 	30	
5. Title and Risk	 	31	
6. Removal of VESSEL	 	31	
 
3

 

ARTICLE VIII - DELAYS AND EXTENSION OF TIME FOR DELIVERY (FORCE MAJEURE)	 	 	
 	 	 	
1. Causes of Delay	 	32	
2. Notice of Delay	 	33	
3. Definition of Permissible Delay	 	33	
4. Right to Rescind for Excessive Delay	 	33	
 	 	 	
ARTICLE IX - WARRANTY OF QUALITY	 	 	
 	 	 	
1. Guarantee	 	35	
2. Notice of Defects	 	35	
3. Remedy of Defects	 	35	
4. Extent of the BUILDER’s Responsibility	 	37	
5. Guarantee Engineer	 	37	
 	 	 	
ARTICLE X - RESCISSION BY BUYER	 	 	
 	 	 	
1. Notice	 	39	
2. Refundment by BUILDER	 	39	
3. Discharge of Obligations	 	40	
 	 	 	
ARTICLE XI - BUYER’S DEFAULT	 	 	
 	 	 	
1. Definition of Default	 	41	
2. Effect of Default on or before Delivery of VESSEL	 	41	
3. Disposal of VESSEL	 	42	
 	 	 	
ARTICLE XII - ARBITRATION	 	 	
 	 	 	
1. Decision by Classification Society	 	43	
2. Proceedings of Arbitration	 	43	
3. Notice of Award	 	44	
4. Expenses	 	44	
5. Entry in Court	 	44	
6. Alteration of Delivery Date	 	44	
 	 	 	
ARTICLE XIII - SUCCESSOR AND ASSIGNS	 	45	
 
4

 

ARTICLE XIV - TAXES AND DUTIES	 	 	
 	 	 	
1. Taxes and duties Incurred in Korea	 	46	
2. Taxes and Duties Incurred outside Korea	 	46	
 	 	 	
ARTICLE XV - PATENTS, TRADEMARKS, COPYRIGHTS, ETC	 	 	
 	 	 	
1. Patents, Trademarks and Copyrights	 	47	
2. General Plans, Specifications and Working Drawings	 	47	
 	 	 	
ARTICLE XVI - BUYER’S SUPPLIES	 	 	
 	 	 	
1. Responsibility of BUYER	 	48	
2. Responsibility of BUILDER	 	49	
 	 	 	
ARTICLE XVII - INSURANCE	 	 	
 	 	 	
1. Extent of Insurance Coverage	 	50	
2. Application of the Recovered Amounts	 	50	
3. Termination of BUILDER’s Obligation to Insure	 	51	
 	 	 	
ARTICLE XVIII - NOTICE	 	 	
 	 	 	
1. Address	 	52	
2. Language	 	52	
3. Effective Date of Notice	 	53	
 	 	 	
ARTICLE XIX - EFFECTIVE DATE OF CONTRACT	 	54	
 	 	 	
ARTICLE XX - INTERPRETATION	 	 	
 	 	 	
1. Laws Applicable	 	55	
2. Discrepancies	 	55	
3. Entire Agreement	 	55	
4. Amendments and supplements	 	55	
 
5

 

END OF CONTRACT	 	56	
 	 	 	
EXHIBIT ”A” LETTER OF REFUNDMENT GUARANTEE	 	57	
 	 	 	
EXHIBIT ”B” PERFORMANCE GUARANTEE	 	61	
 	 	 	
EXHIBIT ”C” PERFORMANCE GUARANTEE	 	62	
 
6

 
THIS CONTRACT, made and entered into on this 12 th day of May, 2006 by and between Blacksea Marine Inc. a corporation incorporated and existing under the laws of Liberia, having its registered office at 80 Broad Street, Monrovia, Liberia (hereinafter called the “BUYER”), on the one part and Samsung Heavy Industries Co., Ltd., a corporation incorporated and existing under the laws of the Republic of Korea of having its registered office at 647-9, Yeoksam-Dong, Kangnam-ku, Seoul, Korea (hereinafter called the “BUILDER”), on the other part,
 
WITNESSETH:
 
In consideration of the mutual covenants herein contained, the BUILDER agrees to design, build, launch and complete in accordance with first class modern Korean shipbuilding practice and standards one (1) Single Screw Diesel Engine driven Container VESSEL as described in the Specifications attached herewith and any addendum thereto (hereinafter called the “VESSEL”) at the BUILDER’s shipyard located in Geoje Island, Korea (hereinafter called the “Shipyard”) and to deliver and sell the same to the BUYER, and the BUYER hereby agrees to purchase and accept delivery of the VESSEL from the BUILDER and to pay for the same upon the terms and conditions hereinafter set forth.
 
7

 
ARTICLE I - DESCRIPTION AND CLASS
 
1.                           Description :
 
The VESSEL shall be an ocean going single screw diesel engine driven fully cellular container VESSEL suitable for carrying dry cargo containers having the BUILDER’s Hull No.1699 and shall be built, constructed, equipped and completed in accordance with the ‘As-Built-Specifications’ as specified in the shipbuilding contracts of the BUILDER’s Hull No. 1639 and 1640 (hereinafter called as the “HN1639 Series Contract”) to build just identical vessels to the BUILDER’s Hull No. 1639 and 1640 (hereinafter called as the “HN1639 Series”) as a repeat and series, and the ‘Maker List’ as specified in the Supplement Agreement No.1 (dated June 30, 2005) to the HN 1639 Series Contract (hereinafter collectively called as the “SPECIFICATIONS”).
 
Thus, all drawings and plans made by the BUILDER and duly approved by the BUYER during the construction of the HN1639 Series in accordance with HN 1639 Series Contract shall be used without any further change, modification and approval by the BUYER, and a ll extra/credit costs agreed as of April 28, 2006 for the HN 1639 Series are included into the ship price described in this CONTRACT, and all construction procedure including model test and sea trial etc. shall be done on the basis of the just repeat and series VESSEL of the HN 1639s Series.
 
2.                           Dimensions and Characteristics :

Length, overall	 	 	 	appx.	 	259.8	m	
Length, between perpendiculars	 	 	 	appx.	 	244.8	m	
Breadth, moulded	 	 	 	appx.	 	32.25	m	
Depth, moulded	 	 	 	appx.	 	19.3	m	
Designed loaded draught, moulded	 	 	 	appx.	 	11.0	m	
Scantling draught, moulded	 	 	 	appx.	 	12.6	m	
 
Main Engine                                                                    :                                                       MAN B&W 8K 90MC-C type License Made MCR 49,680 bhp at 104 r.p.m.

Deadweight, guaranteed	:	 	50,500 metric tons at the moulded scantling draught of 12.6 meters.	
 
8

 

Speed, guaranteed	:	 	24.5 knots at a draught of 11.0 meters and main engine developing power of 38,880 bhp (metric).	
 	 	 	
Fuel Consumption, guaranteed :	 	124.3 grams/bhp(metric)-hour using marine diesel oil having lower calorific value of 10,200 kcal/kg at normal continuous rating of 44,710 bhp(metric) measured at the shop trial.	
 
The details of the aforementioned particulars as well as the definitions and method of measurements and calculations are as defined in the SPECIFICATIONS .
 
3.                           Classification, Rules and Regulations :
 
The VESSEL, including its machinery, equipment and outfittings shall be constructed in accordance with the rules and regulations in year 2004 July edition of the Classification Society in accordance with both the interpretation of Classification Society (dated on 2005-06-29 Ref No. MKOKR120/MSSH/Gen-precontract/PUS-J-668) and the interpretation of the Classification Society (dated 28 th February 2006 Ref. No. MKOKR120/MSSH/Gen-Precontract/PUS-J-698 in respect of new updates in effect as of April 28, 2006 from rule and regulations applied to the HN1639 Series) and under special survey of Det Norske Veritas (hereinafter called the “Classification Society”) and shall be distinguished in the register by the symbol of X 1A1 “ Container Carrier”, NAUTICUS, EO, and In water survey and TMON shall be applied according to the requirement of the class rule.
 
Decisions of the Classification Society as to compliance or non-compliance with the classification shall be final and binding upon both parties hereto. Details of its notation shall be in accordance with the SPECIFICATIONS .
 
The VESSEL shall also comply with the compulsory rules, regulations and requirements of the regulatory bodies as described in the SPECIFICATIONS  rectified and in effect as of the signing date of this Contract. Non-compulsory rules, regulations and requirements of the regulatory bodies shall be dealt with in accordance with Article V (2) of this Contract.
 
9

 
All the fees and charges incidental to the classification and with respect to compliance with the above referred rules, regulations and requirements shall be for account of the BUILDER except otherwise agreed.
 
4.                           Subcontracting :
 
The BUILDER may, at its sole discretion and responsibility, subcontract any portion of the construction work of the VESSEL, provided that the construction and assembly of the VESSEL shall be carried out as is normally done according to the BUILDER’s building practice and provided further that the BUILDER shall be responsible to the BUYER in respect of any construction work carried out by such subcontractors.
 
5.                           Registration :
 
The VESSEL, at the time of its delivery and acceptance, shall be registered at the port of registry by the BUYER under Cyprus flag at the BUYER’s expenses.
 
(End of Article)
 
10

 
ARTICLE II - CONTRACT PRICE AND TERMS OF PAYMENT
 
1.                           Contract Price :
 
The Contract price of the VESSEL and exclusive of the BUYER’s Supplies as provided in Paragraph 1 of Article XVI hereof is Sixty Three Million Eight Hundred Thousand United States Dollars (US$ 63,800,000.-) (hereinafter called the “Contract Price”), which shall be subject to upward or downward adjustment, if any, as hereinafter set forth in this Contract.
 
2.                           Adjustment of Contract Price:
 
Increase or decrease of the Contract Price, if any, due to adjustments thereof made in accordance with the provisions of this Contract, shall be adjusted by way of addition to or subtraction from the Contract Price upon delivery and acceptance of the VESSEL in the manner as hereinafter provided.
 
3.                           Currency :
 
Any and all payments by the BUYER to the BUILDER which are due under this Contract shall be made in United States Dollars.
 
4.                           Terms of Payment :
 
The Contract Price shall be due and payable by the BUYER to the BUILDER in the instalments as follows :
 
(a)                       First Instalment :
 
The First Instalment amounting to Six Million Three Hundred and Eighty Thousand United States Dollars (US$ 6,380,000.-) shall be due and payable upon issuance and delivery to the BUYER of the original of Refund Guarantee.
 
(b)                      Second Instalment :
 
The Second Instalment amounting to Six Million Three Hundred and Eighty Thousand United States Dollars (US$ 6,380,000.-) shall be due and payable upon eighteen(18) calendar months after the date of singing of this Contract.
 
11

 
(c)                       Third Instalment :
 
The Third Instalment amounting to Six Million Three Hundred and Eighty Thousand United States Dollars (US$ 6,380,000.-) shall be due and payable upon steel cutting of the VESSEL.
 
(d)                      Fourth Instalment :
 
The Fourth Instalment amounting to Six Million Three Hundred and Eighty Thousand United States Dollars (US$ 6,380,000.-) shall be due and payable upon keel laying of the VESSEL.
 
 (e)                    Fifth Instalment :
 
The Delivery Instalment amounting to Thirty Eight Million Two Hundred and Eighty Thousand United States Dollars (US$ 38,280,000.-) plus any increase or minus any decrease due to adjustments of the Contract Price under and pursuant to the provisions of this Contract, shall be due and payable upon delivery and acceptance of the VESSEL or upon tender for delivery of the VESSEL referred to in Paragraph 4 of Article VII of this Contract.
 
It is agreed that no payment shall be effected until the original Refund Guarantee is delivered to the BUYER.
 
5.                           Method of Payment :
 
 (a)                    First Instalment :
 
Within Seven(7) banking days after 12th day of May 2006, the BUYER shall remit by telegraphic transfer the first instalment to the account of The Export-Import Bank of Korea, Head Office, Seoul, Korea with Deutsche Bank Trust Company Americas(BIC : BKTRUS33), 60 Wall Street, Mail Stop NYC 60 1310, New York, NY 10005, USA, Account No.04 029 695, in favour of Samsung Heavy Industries., Ltd, SWIFT code : EXIKKRSE or other bank as designated by the Builder, in favor of Samsung Heavy Industrise Co, Ltd.(hereinafter called the “BUILDER’s Bank”)
 
 (b)                   Second, Third and Fourth Instalment :
 
Upon receipt of telefax notice from the BUILDER confirming that the second, third, and fourth instalment on each event is due and payable, the BUYER shall
 
12

 
remit by telegraphic transfer the second, third, and fourth instalment to the aforesaid account of the BUILDER’s Bank in favour of Samsung Heavy Industries Co., Ltd.
 
 (c)                    Fifth Instalment :
 
At least One (1) banking days prior to delivery and acceptance of the VESSEL, the BUYER shall remit by telegraphic transfer the fifth instalment to the name of the BUYER at BUILDER’s BANK, with an irrevocable instruction that the amount so remitted shall be payable to the BUILDER against a facsimile copy of PROTOCOL OF DELIVERY and ACCEPTANCE OF THE VESSEL signed by the BUYER and the BUILDER or returned to the BUYER if such PROTOCOL OF DELIVERY and ACCEPTANCE has not been presented within fifteen (15) days.
 
Simultaneously with each of all such payments, the BUYER shall cause the BUYER’s BANK to advise the BUILDER’s BANK of the details of such payments by authenticated bank cable.
 
Any claim which the BUYER may have against the BUILDER hereunder shall be settled and liquidated separately from any payment by the BUYER to the BUILDER hereunder.
 
6.                           Notice of Payment on or before Delivery :
 
With the exception of the first instalment, the BUILDER shall give the BUYER Five(5) banking days prior notice by telefax of the anticipated due date and amount of each instalment payable on or before delivery of the VESSEL.
 
7.                           Expenses
 
Expenses and bank charges for remitting payments and any taxes, duties, expenses and fees connected with such payment shall be for account of the BUYER referred to in paragraph 2 of Article XIV of this Contract, except expenses and bank charges of the BUILDER’s BANK.
 
8.                           Prepayment :
 
Prepayment of any instalment due on or before delivery of the VESSEL shall be subject to mutual agreement between the parties hereto.
 
13

 
9.                           Performance Guarantee
 
Upon signing this Contract, the BUYER shall provide the BUILDER with a Performance Guarantee in order to secure the due and faithful performance of this Contract by the BUYER having same form and contents as Exhibit ”B” annexed hereto.
 
(End of Article)
 
14

 
ARTICLE III - ADJUSTMENT OF CONTRACT PRICE
 
The Contract Price shall be subject to adjustment, as hereinafter set forth, in the event of the following contingencies (it being understood by both parties that any reduction of the Contract Price is by way of liquidated damages and not by way of penalty) :
 
1.                           Delivery :
 
  (a)                    No adjustment shall be made and the Contract Price shall remain unchanged for the first Thirty (30) days of delay in delivery of the VESSEL beyond the Delivery Date as defined in Article VII hereof (ending as of twelve o’clock midnight of the Thirty (30) day of delay).
 
 (b)                   If the delivery of the VESSEL is delayed more than Thirty (30) days after the Delivery Date, the Contract Price shall be reduced by the sum of  Twenty Seven Thousand Five Hundred United States Dollars (US$27,500.-) for each full day for which thereafter delivery is delayed.
 
However, the total reduction in the Contract Price shall not be more than as would be the case for a delay of One Hundred Eighty (180) days counting from the midnight of the Thirty (30) day after the Delivery Date at the above specified rate of reduction.
 
  (c)                    However, if the delay in delivery of the VESSEL should continue for a period of Two Hundred Ten (210) days from the Delivery Date in Paragraph 1 of Article VII, then in such event, and after such period has expired, the BUYER may, at its option, rescind this Contract in accordance with the provisions of Article X hereof.
 
The BUILDER may, at any time after the expiration of the aforementioned Two Hundred Ten (210) days of delay in delivery, if the BUYER has not served notice of rescission as provided in Article X hereof, demand in writing that the BUYER shall make an election, in which case the BUYER shall, within Twenty (20) days after such demand is received by the BUYER, notify the BUILDER of its intention either to rescind this Contract or to consent to the acceptance of the VESSEL at the BUILDER’s specified future date. If the BUYER shall not make an election within Twenty (20) days as provided hereinabove, the BUYER shall be deemed to have accepted such extension of the delivery date to the future delivery date indicated by the BUILDER and it being understood by the parties hereto that if the VESSEL is not delivered by such future date, the BUYER shall
 
15

 
have the same right of rescission upon the same terms and conditions as hereinabove provided.
 
It is understood that accrued liquidated damages are preserved. Further delay shall incur additional liquidated damages in accordance with existing terms and conditions.
 
 (d)                   For the purpose of this Article, the delivery of the VESSEL shall be deemed to be delayed when and if the VESSEL, after taking into account all postponements of the Delivery Date by reason of permissible delay as defined in Article VIII and/or any other reason under this Contract, is not delivered by the date upon which delivery is required under the terms of this Contract.
 
2.                           Speed :
 
 (a)                    The Contract Price shall not be affected or changed by reason of the trial speed (as determined according to the SPECIFICATIONS  being less than the guaranteed speed, if such variation is not more than Two-Tenths (2/10) of One (1) knot.
 
 (b)                   However, if such variation is more than Two-Tenths (2/10) of One (1) knot, then, the Contract Price shall be decreased by One Hundred and Seventy Five Thousand United States Dollars (US$ 175,000.-) for each successive whole One-Tenth(1/10) of a knot in excess of a deficiency of Two-Tenths (2/10) of a knot (in both cases smaller fractions being disregarded).
 
 (c)                    If the deficiency in the speed upon final sea trial is more than Half(1/2) a knot below the guaranteed speed of the VESSEL, then the BUYER may, at its option, reject the VESSEL and rescind this Contract in accordance with the provisions of Article X hereof, or may accept the VESSEL at a reduction in the Contract Price as above provided for Half(1/2) a knot only, that is, at a total reduction of Five Hundred and Twenty Five Thousand United States Dollars (US$ 525,000.-).
 
16

 
3.                           Fuel Consumption :
 
 (a)                    The Contract Price shall not be affected or changed in case the fuel consumption, as determined by the shop trial as specified in the SPECIFICATIONS , is not more than Five percent (5%) in excess of the guaranteed fuel consumption specified in Paragraph 2 of Article I.
 
 (b)                   However, in the event that the actual fuel consumption at the shop trial is in excess of Five percent (5%) of the guaranteed fuel consumption, the Contract Price shall be reduced by the sum of One Hundred and Ten Thousand United States Dollars (US$ 110,000.-) for each full one percent(1%) increase in fuel consumption and pro rata for any fraction of one percent(1%) of the Guaranteed Fuel Consumption in excess of the said five percent(5%) up to maximum of eight percent(8%) over the Guaranteed Fuel Consumption.
 
 (c)                    If the deficiency in fuel consumption is more than Eight percent (8%) then the BUYER may at its option rescind this Contract in accordance with the provision of Article X hereof.
 
4.                           Deadweight :
 
(a)                       In the event that the deadweight of the VESSEL as determined in accordance with the SPECIFICATIONS  is less than the guaranteed deadweight as specified in Paragraph 2 of Article I, the Contract Price shall be reduced by the sum of One Thousand One Hundred United States Dollars (US$ 1,100.-) for each full metric ton of such deficiency being more than Seven Hundred (700) metric tons, up to a maximum reduction of  One Million Two Hundred and Ten Thousand United States Dollars (US$ 1,210,000.-).
 
(b)                      In the event of such deficiency in the deadweight of the VESSEL being One thousand eight hundred (1,800) metric tons or more, then, the BUYER may, at its option, reject the VESSEL and rescind this Contract in accordance with the provisions of Article X hereof or accept the VESSEL at a reduction in the Contract Price as above provided for One Thousand Eight Hundred (1,800) metric tons only, that is, at a total reduction of One Million Two Hundred and Ten Thousand United States Dollars (US$1,210,000.-).
 
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5.                           Early Delivery
 
In the event that the BUILDER believes that the VESSEL can be completed and ready for Delivery on a date earlier than the Contractual Delivery Date, then the BUILDER may give a written notice to the BUYER, no later than six (6) months before the revised date (the “Early Delivery Date”) informing the approximate date on which the VESSEL can be ready for the Delivery. The BUYER shall have the option, but not the obligation, to accept Delivery of the VESSEL on the Early Delivery Date and upon the BUYER’s acceptance thereof, the parties shall discuss the specific amount of the additional payment due to the BUILDER for the accelerated Delivery of the VESSEL on the Early Delivery Date at the delivery stage of the VESSEL and t he compensation payment of the acceleration bonus shall be settled and paid in full with the final delivery instalment concurrently uponwith the actual Delivery and acceptance of the VESSEL by the BUYER. If the Parties fail to reach a mutual agreement on the amount of the Early Delivery bonus, the BUILDER shall be free to deliver the VESSEL on the original Contractual Delivery Date or earlier at its option. The Parties hereto acknowledge that there will be no liquidated damages or other penalty to be imposed on the BUILDER in the event the VESSEL happens to be delivered on any date later than the Early Delivery Date but earlier than the original Contractual Delivery Date.
 
6                              Effect of Rescission :
 
It is expressly understood and agreed by the parties that in any case, if the BUYER rescinds this Contract under this article, the BUYER shall not be entitled to any liquidated damages or any other recourse unless by means of the provisions of Article X hereof.
 
(End of Article)
 
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ARTICLE IV - APPROVAL OF PLANS AND DRAWINGS AND INSPECTION DURING CONSTRUCTION
 
1.                           Approval of Plans and Drawings :
 
The SPECIFICATIONS   shall be used for the VESSEL without any further approval and modification from the BUYER unless otherwise mutually agreed by both parties. Should any changes are required by the BUYER’s request or the application of new rules and regulations (of a mandatory nature) coming into effect after the date of this Contract signing, the BUILDER shall submit such changes to the BUYER for its approval. If approved by the BUYER, such changes shall be applied to the VESSEL with cost adjustment in accordance with Article V of this Contract.
 
2.                           Appointment of BUYER’s Supervisor :
 
The BUYER may send to and maintain at the Shipyard, at the BUYER’s own cost and expense, one supervisor who shall be duly authorized in writing by the BUYER (herein called the “Supervisor”) to act on behalf of the BUYER in connection with the modifications of the SPECIFICATIONS, adjustments of the Contract Price and Delivery Date, approval of the plans and drawings, attendance to the tests and inspections relating to the VESSEL, its machinery, equipment and outfittings, and any other matters for which he is specifically authorized by the BUYER. The Supervisor may appoint his assistant(s) to attend at the Shipyard for the purposes as aforesaid.
 
In the event that assignment, novation or resale occurs under the Article XIII and  as a result, BUYER’s Supervisor is changed during the construction of the VESSEL, any and all matters determined by mutual agreement between the BUYER’s Supervisor and the BUILDER prior to the dispatch of a new Supervisor shall be accepted and complied by the new Supervisor. In case two or more Supervisors are dispatched to the Shipyard and authorized, under the BUILDER’s prior consent, to perform the supervision, each of them will form uniform opinions between them to keep the design and the SPECIFICATIONS so as not to adversely affect the CONTRACT PRICE and Delivery of the VESSEL, provided that such change in the Contract Price will be reasonable and proven under the BUILDER’s normal practice. In the event of any additional costs attributable to such dispatch of two or more supervisors due to the reasons including but not
 
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limited to resale, novation, charter or any other occurrence otherwise resulting from the BUYER, such costs shall be borne by the BUYER and the BUYER shall reimburse and hold harmless the BUILDER from any such costs and expenses.
 
3.                           Inspection by the Supervisor :
 
The necessary inspections of the VESSEL, its machinery, equipment and outfittings shall be carried out by the Classification Society, other regulatory bodies and/or an inspection team of the BUILDER throughout the entire period of construction in order to ensure that the construction of the VESSEL is duly performed in accordance with this Contract and the SPECIFICATIONS. The Supervisor shall have, during construction of the VESSEL, the right to attend such tests and inspections of the VESSEL, its machinery and equipment within the premises of either the BUILDER or its subcontractors. The BUILDER shall give notice to the Supervisor, in advance of the date and place of such tests and inspections for the convenience of their attendance. Detailed procedures of the inspection and the tests thereof shall be in accordance with the SPECIFICATIONS .
 
The BUILDER may request BUYER’s supervisor to attend the inspection and tests during public holidays and weekends and/or Company holidays in order to keep BUILDER’s construction schedule. BUYER’s supervisor shall fully cooperate with BUILDER and promptly attend such inspection/tests including those for surface preparation and painting work, which are especially vulnerable to weather condition and time interval. However, BUILDER shall keep such inspection and tests to a minimum and only when the inspection and tests affect BUILDER’s construction schedule. The BUILDER’s prior notice of such inspection/test schedule shall be informed to the BUYER’s supervisor three(3) working  days in advance as a minimum
 
The Supervisor shall be entitled to request copies of all test results and trials as soon as required for the performance of his duties.
 
The Supervisor shall notify the BUILDER of deficiencies in the construction of the VESSEL or materials. The BUILDER should examine the deficiency and rectify.
 
If any of the BUYER’s supervisors discover any construction, material or
 
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workmanship which is not deemed to conform to the requirements of this Contract and/or the SPECIFICATIONS , the BUYER’s supervisors shall promptly give the BUILDER a notice in writing that such alleged non-conformity exists. Upon receipt of such notice from the BUYER’s supervisor, the BUILDER shall correct such non-conformity, if the BUILDER agrees to his view. Any disagreement shall be resolved in accordance with Paragraph 1 of Article XII.
 
4.                           Facilities :
 
The BUILDER shall furnish the Supervisor and his assistant(s) with adequate office space and such other reasonable facilities according to the BUILDER’s practice at or in the immediate vicinity of the Shipyard as may be necessary to enable them to effectively carry out their duties. The BUYER shall pay for all such facilities other than office space at the BUILDER’s normal rate of charge.
 
5.                           Liability of BUILDER :
 
The Supervisor and his assistant(s) shall at all times be deemed to be the employees of the BUYER and not of the BUILDER. The BUILDER shall be under no liability whatsoever to the BUYER, the Supervisor or his assistant(s) for personal injuries, including death, suffered during the time when he or they are on the VESSEL, or within the premises of either the BUILDER or its subcontractors, or are otherwise engaged in and about the construction of the VESSEL, unless, however, such personal injuries, including death, were caused by a gross negligence of the BUILDER, or of any of its employees or agents or subcontractors.
 
Nor shall the BUILDER be under any liability whatsoever to the BUYER, the Supervisor or his assistant(s) for damage to, or loss or destruction of property in Korea of the BUYER or of the Supervisor or his assistant(s), unless such damage, loss or destruction were caused by a gross negligence of the BUILDER or of any of its employees or agents or subcontractors.
 
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6.                           Responsibility of BUYER :
 
The BUYER shall undertake and assure that the Supervisor shall carry out his duties hereunder in accordance with the normal shipbuilding practice of the BUILDER and in such a way so as to avoid any unnecessary increase in building cost, delay in the construction of the VESSEL, and/or any disturbance in the construction schedule of the BUILDER.
 
The BUILDER has the right to request the BUYER to replace the Supervisor who is deemed unsuitable and unsatisfactory for the proper progress of the VESSEL’s construction. The BUYER shall investigate the situation by sending its representative(s) to the Shipyard if necessary, and if the BUYER considers that such BUILDER’s request is justified, the BUYER shall effect such replacement as soon as conveniently arrangeable.
 
(End of Article)
 
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ARTICLE V - MODIFICATIONS, CHANGES AND EXTRAS
 
1.                           How Effected :
 
Any modifications and/or changes in the SPECIFICATIONS  shall be made by written agreement of the parties hereto provided, however, that any modifications and/or changes requested by the BUYER or an accumulation of such modifications and/or changes will not adversely affect the BUILDER’s planning or programme in relation to the BUILDER’s other commitments and if the BUYER shall assent to adjustment of the Contract Price, time for delivery of the VESSEL and other terms and conditions of this Contract as hereinafter provided. The BUILDER hereby agrees to exert its best efforts to accommodate such reasonable request by the BUYER so that the said changes and/or modifications may be made at a reasonable cost and within the shortest period of time which is reasonably possible.
 
Any such agreement for modifications and/or changes shall include an agreement as to the increase or decrease, if any, in the Contract Price of the VESSEL together with an agreement as to any extension or reduction in the time of delivery, or any other alterations in this Contract or the SPECIFICATIONS  occasioned by such modifications and/or changes.
 
The aforementioned agreement to modify and/or change the SPECIFICATIONS  may be effected by an exchange of letters signed by the authorized representatives of the parties hereto, or telefax confirmed in writing, manifesting such agreement. Such letters and confirmed message exchanged by the parties hereto pursuant to the foregoing shall constitute an amendment of the SPECIFICATIONS , and such letters and message shall be incorporated into this Contract and made a part hereof.
 
The BUILDER may make minor changes to the SPECIFICATIONS , if found necessary for introduction of improved production methods or otherwise, provided that the BUILDER shall first obtain the BUYER’s approval which shall not be unreasonably withheld.
 
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2.               Changes in Rules of Classification Society, Regulations, etc.:
 
If, after the date of signing this Contract, any requirements as to classification, or as to the rules and regulations to which the construction of the VESSEL is required to conform in accordance with the provisions of Article I. (3), are altered or changed by the Classification Society or regulatory bodies authorized to make such alterations or changes, either of the parties hereto upon receipt of information thereof, shall transmit such information in full to the other party in writing, thereupon within Twenty-one(21) days after receipt of the said notice from the other party, the BUYER shall instruct the BUILDER in writing if such alterations or changes shall be made in the VESSEL or not, in the BUYER’s sole discretion.
 
(a)           If such alterations or changes are compulsory for the construction of VESSEL, either of the parties hereto, upon receipt of such information from Classification Society or such other regulatory bodies, shall promptly transmit the same to the other in writing, and the BUILDER shall thereupon incorporate such alterations or changes into the construction of the VESSEL, provided that the BUYER shall first agree to reasonable and proven adjustments required by the BUILDER in the Contract Price, the Delivery Date and other terms and conditions of this Contract and the SPECIFICATIONS  occasioned by or resulting from such alterations or changes.
 
(b)   If such alterations or changes are not compulsory for the construction of the VESSEL, and the BUYER desires to incorporate such alterations or changes into the construction of the VESSEL, then, the BUYER shall notify the BUILDER of such intention. The BUILDER may accept such alterations or changes, provided that such alterations or changes will not, in the judgement of the BUILDER, adversely affect the BUILDER’s planning or program in relation to the BUILDER’s other commitments, and provided, further, that the BUYER shall first agree to reasonable and proven adjustments required by the BUILDER in the Contract Price, the Delivery Date and other terms and conditions of this Contract and the SPECIFICATIONS  occasioned by or resulting from such alterations or changes.
 
In the event of a disagreement on price and delivery, and in the event that such alterations or changes are compulsory for the construction of VESSEL, then the BUILDER shall proceed with the required alterations and the dispute related to the above shall be resolved in accordance with the provisions of Article XII.
 
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Such agreement by the BUYER shall be effected in the same manner as provided in Paragraph 1 of this Article for modifications and/or changes of the SPECIFICATIONS .
 
3.                           Substitution of Materials :
 
In the event that any of the materials required by the SPECIFICATIONS  or otherwise under this Contract for the construction of the VESSEL can not be procured in time to effect delivery of the VESSEL, or are in short supply, the BUILDER may, provided the BUYER so agrees in writing, supply other materials and equipment of the best available and like quality, capable of meeting the requirements of the Classification Society and of the rules, regulations, requirements and recommendations with which the construction of the VESSEL must comply. Any agreement as to such substitution of materials shall be effected in the manner as provided in Paragraph 1 of this Article, and shall, likewise, include possible decrease or increase in the Contract Price and other terms and conditions of this Contract affected by such substitution.
 
(End of Article)
 
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ARTICLE VI - TRIALS AND ACCEPTANCE
 
Since the VESSEL is the repeat and series of BUILDER’s Hull Nos. 1639 and 1640, some sea trial items may be deleted subject to mutual agreement between the BUYER and the BUILDER
 
1.                           Notice :
 
The sea trial shall start when the VESSEL is reasonably completed according to the SPECIFICATIONS .
 
The BUILDER shall give the BUYER at least Twenty (20) days estimated prior notice and Seven(7) days confirming prior notice by telefax of the time and place of the trial run of the VESSEL, and the BUYER shall promptly acknowledge receipt of such notice. The BUYER shall have its representatives on board the VESSEL to witness such trial run. Failure in attendance of the BUYER’s representative at the trial run of the VESSEL for any reason whatsoever after due notice to the BUYER as above provided shall be deemed to be a waiver by the BUYER of its right to have its representative on board the VESSEL at the trial run, and the BUILDER may conduct the trial run without attendance of the BUYER’s representative, and in such case the BUYER shall be obligated to accept the VESSEL on the basis of a certificate of the BUILDER that the VESSEL, upon trial run, is found to conform to this Contract and the SPECIFICATIONS.
 
2.                           Weather Condition :
 
The trial run shall be carried out under the weather condition which is deemed favourable enough by the judgement of the BUILDER. In the event of unfavourable weather on the date specified for the trial run, the same shall take place on the first available day thereafter that the weather condition permits. It is agreed that, if during the trial run of the VESSEL, the weather should suddenly become so unfavourable that orderly conduct of the trial run can no longer be continued, the trial run shall be discontinued and postponed until the first favourable day next following, unless the BUYER shall assent in writing to acceptance of the VESSEL on the basis of the trial run already made before such discontinuance has occurred. Any delay of trial run caused by such unfavourable weather condition shall operate to postpone the Delivery Date by the period of the delay involved and such delay shall be deemed as permissible delay in the delivery of the VESSEL.
 
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3.                     How Conducted :
 
 (a)                    The VESSEL shall run the official trial trip in the manner as specified in the SPECIFICATIONS .
 
  (b)                All expenses in connection with the trial run are to be for account of the BUILDER and the BUILDER shall provide, at its own expense, the necessary crew to comply with conditions of safe navigation, fuel oil, fresh water and other consumable stores necessary, the BUYER shall supply at its own expense lubricating oils and greases.
 
4.                           Method of Acceptance or Rejection :
 
 (a)                    Upon completion of the trial run, the BUILDER shall give the BUYER a notice by telefax of completion of the trial run, as and if the BUILDER considers that the results of trial run indicate conformity of the VESSEL to this Contract and the SPECIFICATIONS . The BUYER shall, within Five (5)days after receipt of such notice from the BUILDER, notify the BUILDER by telefax of its acceptance or rejection of the VESSEL’s conformity to this Contract and the SPECIFICATIONS .
 
 (b)                   However, should the result of the trial run show that the VESSEL, or any part or equipment thereof, does not conform to the requirements of this Contract and/or the SPECIFICATIONS , or if the BUILDER is in agreement to non-conformity as specified in the BUYER’s notice of rejection, then, the BUILDER shall take necessary steps to correct such non-conformity.
 
Upon completion of correction of such non-conformity, and re-test or trial if necessary, the BUILDER shall give the BUYER a notice thereof by telefax.
 
The BUYER shall, within Three (3) days after receipt of such notice from the BUILDER, notify the BUILDER of its acceptance or rejection of the VESSEL.
 
 (c)            In any event that the BUYER rejects the VESSEL, the BUYER shall indicate in detail in its notice of rejection in what respect the VESSEL, or any part or equipment thereof does not conform to this Contract and/or the SPECIFICATIONS .
 
 (d)           In the event that the BUYER fails to notify the BUILDER by telefax of the
 
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acceptance of or the rejection together with the reason therefor of the VESSEL within the period as provided in the above Sub-paragraph (a) or (b), the BUYER shall be deemed to have accepted the VESSEL.
 
 (e)                    Any dispute between the BUILDER and the BUYER as to the conformity or non-conformity of the VESSEL to the requirements of this Contract and/or the SPECIFICATIONS  shall be submitted for final decision in accordance with Article XII hereof.
 
5.                           Effect of Acceptance :
 
Acceptance of the VESSEL as above provided shall be final and binding so far as conformity of the VESSEL to this Contract and the SPECIFICATIONS  is concerned and shall preclude the BUYER from refusing formal delivery of the VESSEL as hereinafter provided, if the BUILDER complies with all other procedural requirements for delivery as provided in Article VII hereof. However, the BUYER’s acceptance of the VESSEL shall not affect the BUYER’s right under Article IX hereof.
 
The BUYER may accept the VESSEL under protest with outstanding defects to be dealt under the guarantee provisions or made subject of a claim for damages.
 
6.                           Disposition of Surplus Consumable Stores
 
Any fuel oil or other furnished and paid for by the BUILDER for trial runs remaining on board the VESSEL, at the time of acceptance of the VESSEL by the BUYER, shall be bought by the BUYER from the BUILDER at the BUILDER’s purchase price for such supply in Korea and the payment by the BUYER thereof shall be made at the time of delivery of the VESSEL.
 
The BUILDER shall pay the BUYER at the time of delivery of the VESSEL an amount for the consumed quantity until delivery of any lubricating oil and greases which were furnished and paid for by the BUYER at the BUYER’s purchase price thereof. For avoidance of doubt, the practice of this Article VI. 6 shall follow the practice in construction of the BUILDER’s Hull Nos. 1639 and 1640.
 
(End of Article)
 
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  ARTICLE VII - DELIVERY
 
1.                           Time and Place :
 
The VESSEL shall be delivered by the BUILDER to the BUYER at the Shipyard on or before June 30, 2009, except that, in the event of delays in the construction of the VESSEL or any performance required under this Contract due to causes which under the terms of this Contract permit postponement of the date for delivery, the aforementioned date for delivery of the VESSEL shall be postponed accordingly.
 
The aforementioned date, or such later date to which the requirement of delivery is postponed pursuant to such terms, is herein called the “Delivery Date”.
 
2.                           When and How Effected :
 
Provided that the BUILDER and the BUYER shall have fulfilled all of their obligations stipulated under this Contract, the delivery of the VESSEL shall be effected forthwith by the concurrent delivery by each of the parties hereto to the other of the PROTOCOL OF DELIVERY AND ACCEPTANCE, acknowledging delivery of the VESSEL by the BUILDER and acceptance thereof by the BUYER.
 
3.                           Documents to be delivered to BUYER :
 
Upon delivery and acceptance of the VESSEL, the BUILDER shall deliver to the BUYER the following documents, which shall accompany the PROTOCOL OF DELIVERY AND ACCEPTANCE :
 
(a)                       PROTOCOL OF TRIALS of the VESSEL made pursuant to the SPECIFICATIONS .
 
(b)                      PROTOCOL OF INVENTORY of the equipment of the VESSEL, including spare parts and the like, as specified in the SPECIFICATIONS .
 
(c)                       PROTOCOL OF STORES OF CONSUMABLE NATURE referred to under Paragraph 6 of Article VI hereof.
 
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 (d)                   ALL CERTIFICATES including the BUILDERS’s CERTIFICATE required to be furnished upon delivery of the VESSEL pursuant to this Contract and the SPECIFICATIONS , necessary for the registration of the VESSEL and BUYER’s trading requirements.
 
It is agreed that if, through no fault on the part of the BUILDER, the Classifications certificates and/or other certificates are not available at the time of delivery of the VESSEL, provisional certificates shall be accepted by the BUYER, provided that the BUILDER shall furnish the BUYER with the formal certificates as promptly as possible after such certificates have been issued.
 
Application and certificate for statutory inspections for the registry of the VESSEL shall be arranged by the BUYER at its expense.
 
 (e)                    DECLARATION OF WARRANTY of the BUILDER that the VESSEL is delivered to the BUYER free and clear of any liens, charges, claims, mortgages, or other encumbrances upon the BUYER’s title thereto, and in particular that the VESSEL is absolutely free of all burdens in the nature of imposts, taxes or charges imposed by Korean Governmental Authorities, as well as of all liabilities of the BUILDER to its subcontractors, employees and crew, and of the liabilities arising from the operation of the VESSEL in trial runs, or otherwise, prior to delivery.
 
 (f)                      DRAWING AND PLANS pertaining to the VESSEL as stipulated in the      SPECIFICATIONS .
 
 (g)                   COMMERCIAL INVOICE.
 
4.                           Tender of VESSEL :
 
If the BUYER fails to take delivery of the VESSEL after completion thereof according to this Contract and the SPECIFICATIONS  without any justifiable reason, the BUILDER shall have the right to tender delivery of the VESSEL after compliance with all procedural requirements as above provided.
 
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5.                           Title and Risk :
 
Title to and risk of loss of the VESSEL shall pass to the BUYER only upon the delivery and acceptance thereof having been completed as stated above; it being expressly understood that, until such delivery is effected, title to and risk of loss of the VESSEL and her equipment shall be in the BUILDER.
 
6.                           Removal of VESSEL :
 
The BUYER shall take possession of the VESSEL immediately upon delivery and acceptance thereof and shall remove the VESSEL from the premises of the Shipyard within Three (3) days after delivery and acceptance thereof is effected.
 
If the BUYER shall not remove the VESSEL from the premises of the Shipyard within the aforesaid Three (3) days, in such event, the BUYER shall pay to the BUILDER the reasonable mooring charges of the VESSEL.
 
(End of Article)
 
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ARTICLE VIII - DELAYS AND EXTENSION OF TIME FOR DELIVERY
(FORCE MAJEURE)
 
1.                           Causes of Delay (Force Majeure) :
 
If, at any time either the construction or delivery of the VESSEL or any performance required hereunder as a prerequisite to the delivery thereof is delayed by any of the following events; namely war, acts of state or government, blockade, revolution, insurrections, mobilization, civil commotion, riots, national strikes, sabotage, Acts of God or the public enemy, plague or other epidemics, quarantines, prolonged failure of electric current, freight embargoes, or defects in major forgings or castings or delay in BUYER’s supplied articles, if any, or defects in materials, machinery or equipment which could not have been detected by the BUILDER using reasonable care, or earthquakes, tidal waves, typhoons, hurricanes, prolonged or unusually severe weather conditions or by destruction of the premises or works of the BUILDER or its sub-contractors, or of the VESSEL, or any part thereof, by fire, landslides, flood, lightning, explosion, or other causes beyond the control of the BUILDER, or its sub-contractors, as the case may be, or for any other causes which, under the terms of this Contract, authorize and permit extension of the time for delivery of the VESSEL, then, in the event of delays due to the happening of any of the aforementioned contingencies, the Delivery Date of the VESSEL under this Contract shall be extended for a period of time which shall not exceed the total accumulated time of all such delays.
 
The enumerated contingencies shall not give rise to an extension of the delivery date unless :
 
i)                              The occurrence could not reasonably have been foreseen by the BUILDER at the date of signing of the Contract.
 
ii)                           The BUILDER shall have exercised reasonable due diligence to avoid or minimize the occurrence of such event.
 
iii)                        The BUILDER shall have used reasonable efforts to mitigate the duration and effects of such events of the construction schedule.
 
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2.                           Notice of Delay :
 
Within Fourteen (14) days after the date of occurrence of any cause of delay, on account of which the BUILDER claims that it is entitled under this Contract to a postponement of the Delivery Date, the BUILDER shall notify the BUYER in writing or by telefax confirmed in writing of the date when such cause of delay occurred. Likewise, within Fourteen (14) days after the date of ending of such cause of delay, the BUILDER shall notify the BUYER in writing or by telefax confirmed in writing of the date when such cause of delay ended.
 
The BUILDER shall also notify the BUYER of the period, by which the Delivery Date is postponed by reason of such cause of delay, with all reasonable dispatch after it has been determined. If the BUILDER does not give the timely advice as above, the BUILDER shall lose the right to claim such delays as permissible delay.
 
Failure of the BUYER to acknowledge to the BUILDER’s claim for postponement of the Delivery Date within Fourteen (14) days after receipt by the BUYER of such notice of claim shall be deemed to be a waiver by the BUYER of its right to object to such postponement of the Delivery Date.
 
3.                           Definition of Permissible Delay :
 
Delays on account of such causes as specified in Paragraph 1 of this Article and any other delay of a nature which under the terms of this Contract permits postponement of the Delivery Date shall be understood to be permissible delays and are to be distinguished from unauthorized delays on account of which the Contract Price is subject to adjustment as provided for in Article III hereof.
 
4.                           Right to Rescind for Excessive Delay :
 
If the total accumulated time of all delays whether permissible or not exceeds One Hundred and Eighty (180) days, then, in such event, the BUYER may rescind this Contract in accordance with the provisions of Article X hereof.
 
The accumulated time as above shall exclude the time lost due to BUYER’s Default or delays in the BUYER’s supplies. The BUILDER may, at any time after the accumulated time of the aforementioned delays justifying rescission by the BUYER, demand in writing that the BUYER shall make an election proposing a new delivery date, in which case the BUYER shall, within Fourteen (14) days
 
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after such demand is received by the BUYER, either notify the BUILDER of its intention to rescind this Contract, or consent to a postponement of the Delivery Date to an agreed specific future date; it being understood and agreed by the parties hereto that, if any further delay occurs on account of causes justifying rescission as specified in this Article, the BUYER shall have the same right of rescission upon the same terms as herein above provided.
 
(End of Article)
 
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ARTICLE IX - WARRANTY OF QUALITY
 
1.                           Guarantee :
 
The BUILDER, for the period of Twelve (12) months after delivery of the VESSEL (hereinafter called “Guarantee Period”), guarantees the VESSEL and her engine, including all parts and equipment manufactured, furnished or installed by the BUILDER under this Contract, and including the machinery, equipment and appurtenances thereof, under the Contract but excluding any item which is supplied or designated by the BUYER or by any other bodies on behalf of the BUYER, against all defects discovered within the Guarantee Period which are due to improper design, defective material, and/or poor workmanship or negligent or other improper acts or omissions on the part of the BUILDER or its subcontractors (hereinafter called the “Defect” or “Defects”) and are not a result of accident, ordinary wear and tear, misuse, mismanagement, negligent or other improper acts or omissions or neglect on the part of the BUYER, its employee or agents.
 
Upon rectification of an item claimed under this guarantee, this item shall be covered for further Twelve (12) months under the same terms and conditions. However, this is limited to a maximum of Twenty Four (24) months from delivery date.
 
2.                           Notice of Defects :
 
The BUYER shall notify the BUILDER in writing, or by telefax of any defect for which claim is made under this guarantee, as promptly as possible after discovery thereof. The BUYER’s notice shall describe in detail the nature, cause if known and extent of the Defects.
 
The BUILDER shall have no obligation for any Defect discovered prior to the expiry date of the Guarantee Period, unless notice of such Defect is received by the BUILDER not later than Twenty (20) days after such expiry date.
 
3.                           Remedy of Defects :
 
(a)                       The BUILDER shall remedy, at its expense, any Defect against which the VESSEL is guaranteed under this Article, by making all necessary repairs or replacements at the Shipyard.
 
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(b)                      However, if the BUYER should determine that it is commercially or operationally impracticable to bring the VESSEL to the Shipyard, the BUYER may cause the necessary repairs or replacements to be made elsewhere which is deemed suitable for the purpose, provided that, in such event, the BUILDER may forward or supply replacement parts or materials to the BUYER’s agent to be designated by the BUYER in writing , unless forwarding or supplying thereof the VESSEL would impair or delay the operation of working schedule of the VESSEL. In the event that the BUYER proposes to cause the necessary repairs or replacements for the VESSEL to be made at any other shipyard or works than the Shipyard, the BUYER shall first, but in all events as soon as possible, give the BUILDER a notice in writing or by telefax confirmed in writing of the time and place when and where such repairs will be made, and if the VESSEL is not thereby delayed, or her operation or working schedule is not thereby impaired, the BUILDER shall have the right to verify by its own representative(s) the nature, cause and extent of the Defects complained of. The BUILDER shall, in such case, promptly advise the BUYER by telefax, after such examination has been completed, of its acceptance or rejection of the Defects as ones that are covered by the guarantee herein provided. Upon the BUILDER’s acceptance of the Defects as justifying remedy under this Article, or upon award of the arbitration so determining, the BUILDER shall pay to the BUYER for such repairs or replacements justified reasonable and proven actual cost of repairs or replacements.
 
(c)                       The reimbursement of the costs incurred in relation to guarantee works shall be paid in a lumpsum after expiration of the guarantee period.
 
(d)                      In any case, the VESSEL shall be taken, at the BUYER’s cost and responsibility, to the place elected, ready in all respects for such repairs or replacement.
 
(e)                       Any dispute under this Article shall be referred to arbitration in accordance with the provisions of Article XII hereof.
 
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4.                           Extent of BUILDER’s Responsibility :
 
 (a)                    The BUILDER shall have no responsibility or liability for any other defect whatsoever in the VESSEL than the Defects specified in Paragraph 1 of this Article. Nor the BUILDER shall in any circumstance be responsible or liable for any consequential or special loss, damage or expense including but not limited to loss of time, loss of profit of earning or demurrage directly or indirectly occasioned to the BUYER by reason of the Defects specified in Paragraph 1 of this Article or due to repairs or other works done to the VESSEL to remedy such Defects.
 
 (b)                   The BUILDER shall not be responsible for any defect in any part of the VESSEL which may, subsequently to delivery of the VESSEL, have been replaced or repaired in any way by any other contractor unless the BUILDER has not objected the contractor to perform guarantee repairs, or for any defect which have been caused or aggravated by omission or improper use and maintenance of the VESSEL on the part of the BUYER, its servants or agents or by ordinary wear and tear or by any other cause beyond the control of the BUILDER.
 
 (c)                    The guarantee contained as hereinabove in this Article replaces and excludes any other liability, guarantee, warranty and/or condition imposed or implied by the law, customary, statutory or otherwise, by reason of the construction and sale of the VESSEL by the BUILDER for and to the BUYER.
 
5.                           Guarantee Engineer :
 
The BUILDER shall have the right to appoint a Guarantee Engineer to serve on the VESSEL as its representative for a period of Three (3) months from the date the VESSEL is delivered. However, if the BUYER and the BUILDER shall deem it necessary to keep the Guarantee Engineer on the VESSEL for a longer period, then he shall remain on board the VESSEL after the said Three (3) months, but not longer than Six (6) months from the delivery of the VESSEL.
 
The BUYER, and its employees, shall give such Guarantee Engineer full cooperation in carrying out his duties as the representative of the BUILDER on board the VESSEL.
 
The Guarantee Engineer shall sign BUYER’s Indemnity Forms and shall at all times deemed to be an employee of the BUILDER.
 
The BUYER shall accord the Guarantee Engineer treatment comparable to the
 
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VESSEL’s Chief Engineer, and shall provide board and lodging at no cost to the BUILDER and/or the Guarantee Engineer.
 
While the Guarantee Engineer is on board the VESSEL, the BUYER shall pay to the BUILDER the sum of Seven Thousand United States Dollars (US$ 7,000.-) per month as a compensation for a part of cost and charges to be borne by the BUILDER in connection with Guarantee Engineer and also shall pay the expenses of his repatriation to Seoul, Korea by air upon termination of his service, the expenses of his communication with the BUILDER incurred in performing his duties and expenses, if any, of his medical and hospital care in the VESSEL’s hospital.
 
Pertaining to the detailed particulars of this Paragraph, an agreement will be made according to this effect between the parties hereto upon delivery of the VESSEL.
 
(End of Article)
 
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ARTICLE X - RESCISSION BY BUYER
 
1.                           Notice :
 
The payments made by the BUYER prior to delivery of the VESSEL shall be in the nature of advances to the BUILDER, and in the event that the VESSEL after sea trial is rejected by the BUYER or the VESSEL is cancelled by the BUYER in accordance with the terms of this Contract under and pursuant to any of the provisions of this Contract specifically permitting the BUYER to do so and in the event that the Contract is rescinded by the BUYER under and pursuant to any of the provisions of this Contract specially permitting the BUYER, then the BUYER shall notify the BUILDER in writing or by telefax confirmed in writing, and such rescission shall be effective as of the date when notice thereof is received by the BUILDER.
 
2.                           Refundment by BUILDER :
 
In case the BUILDER receives the notice stipulated in Paragraph 1 of this Article, the BUILDER shall promptly refund to the BUYER the full amount of all sums paid by the BUYER to the BUILDER on account of the VESSEL together with the interest thereon, unless the BUILDER proceeds to the arbitration under the provisions of Article XII hereof.
 
In such event, the BUILDER shall pay the BUYER interest at the rate of Six percent (6.0%)per annum on the amount required herein to be refunded to the BUYER, computed from the dates following on which such sums were paid by the BUYER to the BUILDER to the date of remittance by transfer of such refund to the BUYER by the BUILDER.
 
As security for refund of instalments prior to delivery of the VESSEL, the BUILDER shall furnish the BUYER within Fourteen (14) calendar days after the Contract signing with a letter of guarantee covering the amount of such pre-delivery instalments in favour of the BUYER. Such letter of guarantee shall have substantially the same form and substance as Exhibit ”A” annexed hereto.
 
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3.                           Discharge of Obligations :
 
Upon such refund by the BUILDER to the BUYER, all obligations, duties and liabilities of each of the parties hereto to the other under this Contract shall be forthwith completely discharged .
 
(End of Article)
 
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ARTICLE XI - BUYER’S DEFAULT
 
1.                           Definition of Default :
 
The BUYER shall be deemed to be in default of its performance of obligations under this Contract in the following cases :
 
(a)                       If the first, second, third, fourth or fifth instalment are not paid by the BUYER to the BUILDER within Five (5) banking days after such instalment becomes due and payable as provided in Article II hereof;
 
or
 
(b)                      If the Delivery instalment is not paid by the BUYER to the BUILDER concurrently with the delivery of the VESSEL as provided in Article II hereof;
 
or
 
(c)                       If the BUYER, when the VESSEL is duly tendered for delivery by the BUILDER:
 
i)                            fails to take delivery of the VESSEL within Five (5) banking days from tendered date
 
ii)                           having initiated the arbitration procedure the BUYER does not accept delivery within Seven (7) days of an arbitration award which is not appealed.
 
2.                           Effect of Default on or before Delivery of VESSEL :
 
 (a)                    Should the BUYER make default in payment of any instalment of the Contract Price on or before delivery of the VESSEL, the BUYER shall pay the instalment(s) in default plus accrued interest thereon at the rate of Six percent (6.0%) per annum computed from the due date of such instalment to the date when the BUILDER receives the payment, and, for the purpose of Paragraph 1 of Article VII hereof the Delivery Date of the VESSEL shall be automatically extended by the period of continuance of such default by the BUYER. In any event of default by the BUYER, the BUYER shall also pay direct charges and expenses incurred by the BUILDER in consequence of such default after mutual agreement.
 
(b)                   If any default by the BUYER continues for a period of Ten (10) days after the BUILDER’s notification, the BUILDER may, at its option, rescind this Contract by giving notice of such effect to the BUYER by telefax confirmed in writing.
 
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Upon dispatch by the BUILDER of such notice of rescission, this Contract shall be forthwith rescinded and terminated. In the event of such rescission of this Contract, the BUILDER shall be entitled to retain any instalment or instalments already paid by the BUYER to the BUILDER on account of this Contract and the BUYER’s Supplies, if any.
 
3.                           Disposal of VESSEL :
 
 (a)                    In the event that this Contract is rescinded by the BUILDER under the provisions of Paragraph 2(b) of this Article, the BUILDER may, at its sole discretion, either complete the VESSEL and sell the same, or sell the VESSEL in its incomplete state, free of any right or claim of the BUYER. Such sale of the VESSEL by the BUILDER shall be either by public auction or private contract at the BUILDER’s sole discretion and on such terms and conditions as the BUILDER shall deem fit.
 
 (b)                   In the event of such sale of the VESSEL, the amount of the sale received by the BUILDER shall be applied firstly to all expenses attending such sale or otherwise incurred by the BUILDER as a result of the BUYER’s default, secondly to the payment of all costs and expenses of construction of the VESSEL incurred by the BUILDER less BUYER’s Supplies and the instalments already paid by the BUYER and the compensation to the BUILDER for a reasonable loss of profit due to rescission of this Contract, and finally to the repayment to the BUYER without interest, if any balance is obtained.
 
(c)                       If the proceeds of sale are insufficient to pay such total costs and loss of profit as aforesaid, the BUYER shall promptly pay the deficiency to the BUILDER upon request.
 
(End of Article)
 
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ARTICLE XII - ARBITRATION
 
1.                           Decision by the Classification Society :
 
If any dispute arises between the parties hereto in regard to the design and/or construction of the VESSEL, its machinery and equipment, and/or in respect of the materials and/or workmanship thereof and/or thereon, and/or in respect of interpretations of this Contract or the SPECIFICATIONS , the parties may by mutual agreement refer the dispute to the Classification Society or to such other expert as may be mutually agreed between the parties hereto, and whose decision shall be final, conclusive and binding upon the parties hereto.
 
2.                           Proceedings of Arbitration :
 
In the event that the parties hereto do not agree to settle a dispute according to Paragraph 1 of this Article and/or in the event of any other dispute of any kind whatsoever between the parties and relating to this Contract or its rescission or any stipulation herein, such dispute shall be submitted to arbitration in London. Each party shall appoint an arbitrator and in the event that they cannot agree, the two arbitrators so appointed shall appoint an Umpire.
 
If the two arbitrators are unable to agree upon an Umpire within Twenty(20) days after appointment of the second arbitrator, either of the said two arbitrators may apply to the President for the time being of the London Maritime Arbitrators Association to appoint the third arbitrator, and the three arbitrators shall constitute the board of arbitration.
 
Such arbitration shall be in accordance with and subject to the provisions of the English Arbitration Act 1996 or any statutory modification or re-enactment thereof for the time being in force.
 
The Arbitration shall be conducted in accordance with the rules in force of the London Maritime Arbitrators Association.
 
Either party may demand arbitration of any such dispute by giving notice to the other party. Any demand for arbitration by either of the parties hereto shall state the name of the arbitrator appointed by such party and shall also state specifically the question or questions as to which such party is demanding arbitration.
 
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Within Fourteen(14) days after receipt of notice of such demand for arbitration, the other party shall in turn appoint a second arbitrator and give notice in writing of such appointment to the party demanding arbitration. If a party fails to appoint an arbitrator as aforementioned within Fourteen(14) days following receipt of notice of demand for arbitration by the other party, the party failing to appoint an arbitrator shall be deemed to have accepted and appointed, as its own arbitrator, the arbitrator appointed by the party demanding arbitration and the arbitration shall proceed before this sole arbitrator who alone in such event shall constitute the Arbitration Board.
 
The award of the arbitrators and/or Umpire shall be final and binding on both   parties.
 
3.                           Notice of Award :
 
The award shall immediately be given to the BUYER and the BUILDER by telefax.
 
4.                           Expenses :
 
The Arbitration Board shall determine which party shall bear the expenses of the arbitration or the portion of such expenses which each party shall bear.
 
5.                           Entry in Court :
 
In case of failure by either party to respect the award of the arbitration, the judgement may be entered in any proper court having jurisdiction thereof.
 
6.                           Alteration of Delivery Date :
 
In the event of reference to arbitration of any dispute arising out of matters occurring prior to delivery of the VESSEL, the award may include any postponement of the Delivery Date which the Arbitration Board may deem appropriate.
 
(End of Article)
 
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ARTICLE XIII - SUCCESSOR AND ASSIGNS
 
Neither of the parties hereto shall assign this Contract to any other individual or company save as provided hereto. unless prior consent of the other party is given in writing. Should circumstances permit with or without alteration of the terms and conditions of this Contract, such consent shall not be unreasonably withheld by either party.
 
The BUYER is hereby allowed to assign the Contract for the purposes of financing.
 
The BUYER is further allowed to nominate a company controlled by the BUYER to take over the Contract.
 
The BUILDER shall fully cooperate in case the BUYER requests UK Tax lease financing arrangements.
 
In the event of any assignment pursuant to the terms of this Contract, the assignee shall succeed to all of the rights and obligations of the assignor under this Contract and the assignor shall remain responsible for the fulfillment of this Contract.
 
In the event of the assignment from the BUYER to any other individual or company the BUILDER shall be entitled to request a Performance Guarantee from the BUYER having same form and contents as Exhibit ”C” annexed hereto.
 
The BUYER and the BUILDER understand and acknowledge that the VESSEL shall be built and constructed as a repeat and series vessel of the BUILDER’s Hull Nos. 1639 and 1640 as stipulated in this Contract. Thus, i n the event of a resale, assignment and novation of the VESSEL, any and all matters determined by mutual agreement between the BUYER and the BUILDER prior to the resale, assignment and novation of the VESSEL shall be accepted and complied by the New BUYER (i.e., assignee). If the New BUYER or its supervisor makes unreasonable requests that may have a significant impact on the delivery schedule of the VESSEL and/or costs of construction (including, without limitation to, request for fundamental change of ship type or excessive revision of design specifications, etc.), the BUILDER shall be entitled to refuse these requests. The BUYER shall notify the above to the New BUYER before assignment or novation and the New BUYER will have to accept any additional cost related to the new supervision.
 
(End of Article)
 
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ARTICLE XIV - TAXES AND DUTIES
 
1.                           Taxes and Duties Incurred in Korea :
 
The BUILDER shall bear and pay all taxes, duties, stamps and fees incurred in Korea in connection with execution and/or performance of this Contract as the BUILDER, except for any taxes and duties imposed in Korea upon the BUYER’s Supplies.
 
2.                           Taxes and Duties Incurred outside Korea :
 
The BUILDER shall bear and pay all taxes, duties, stamps and fees incurred outside Korea in connection with execution and/or performance of this Contract including guarantee matter as the BUILDER.
 
The BUYER shall bear and pay all taxes, duties, stamps and fees incurred outside Korea in connection with execution and/or performance of this Contract as the BUYER.
 
(End of Article)
 
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ARTICLE XV - PATENTS, TRADEMARKS, COPYRIGHTS, ETC.
 
1.                           Patents, Trademarks and Copyrights :
 
Machinery and equipment of the VESSEL may bear the patent number trademarks or trade names of the manufacturers. The BUILDER shall defend and hold harmless the BUYER from patent liability or claims of patent infringement of any nature or kind, including costs and expenses for, or on account of any patented or patentable invention made or used in the performance of this Contract and also including costs and expenses of litigation, if any.
 
Nothing contained herein shall be construed as transferring any patent or trademark rights or copyrights in equipment covered by this Contract, and all such rights are hereby expressly reserved to the true and lawful owners thereof.
 
The BUILDER’s warranty hereunder does not extend to the BUYER’s Supplies.
 
2.                           General Plans, Specifications and Working Drawings :
 
The BUILDER retains all rights with respect to the SPECIFICATIONS , and plans and working drawings, technical descriptions, calculations, test results and other data, information and documents concerning the design and construction of the VESSEL and the BUYER undertakes therefore not to disclose the same or divulge any information contained therein to any third parties, without the prior written consent of the BUILDER, except where it is necessary for usual operation, repair , registration, classification, chartering, sale and maintenance of the VESSEL.
 
(End of Article)
 
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ARTICLE XVI - BUYER’S SUPPLIES
 
1.                           Responsibility of BUYER :
 
(a)               The BUYER shall, at its own risk, cost and expense, supply and deliver to the BUILDER all of the items to be furnished by the BUYER as specified in the SPECIFICATINS (herein called the BUYER’s Supplies) at warehouse or other storage of the Shipyard in the proper condition ready for installation in or on the VESSEL, in accordance with the time schedule designated and advised by the BUILDER to the BUYER within sixty (60) days from signing this Contract.
 
 (b)                   In order to facilitate installation by the BUILDER of the BUYER’s Supplies in or on the VESSEL, the BUYER shall furnish the BUILDER with necessary specifications, plans, drawings, instruction books, manuals, test reports and certificates required by the rules and regulations of the SPECIFICATIONS .
 
If so requested by the BUILDER, the BUYER shall, without any charge to the BUILDER, cause the representatives of the manufacturers of the BUYER’s Supplies to assist the BUILDER in installation thereof in or on the VESSEL and/or to carry out installation thereof by themselves or to make necessary adjustments at the Shipyard.
 
 (c)                    Any and all of the BUYER’s Supplies shall be subject to the BUILDER’s reasonable right of rejection, as and if they are found to be unsuitable or in improper condition for installation.
 
 (d)                   Should the BUYER fail to deliver any of the BUYER’s Supplies within the time designated, the Delivery Date shall be automatically extended for a period which actually caused the delay in the delivery of the VESSEL.
 
 (e)                    If delay in delivery of any of the BUYER’s Supplies exceeds thirty (30) days, then, the BUILDER shall be entitled to proceed with construction of the VESSEL without installation thereof in or on the VESSEL as hereinabove provided, and the BUYER shall accept and take delivery of the VESSEL so constructed, unless such delay is caused by Force Majeure in which case the provision Paragraph 1(d) of this Article shall apply.
 
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2.                           Responsibility of BUILDER :
 
The BUILDER shall be responsible for storing and handling with reasonable care of the BUYER’s Supplies after delivery thereof at the Shipyard, and shall, at its own cost and expense, install them in or on the VESSEL, unless otherwise provided herein or agreed by the parties hereto, provided, always, that the BUILDER shall not be responsible for quality, efficiency and/or performance of any of the BUYER’s Supplies.
 
(End of Article)
 
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ARTICLE XVII - INSURANCE
 
1.                           Extent of Insurance Coverage
 
From the time of launching until delivery of the VESSEL, the BUILDER shall, at its own cost and expense, insure the VESSEL and all machinery and equipment, appurtenances and outfits, including the BUYER’s Supplies, built into or installed in or upon the VESSEL, against all risks under the “Institute Causes for BUILDER’s Risk”, with first class insurance company or underwriters in Korea.
 
The amount of such insurance coverage shall, up to the date of delivery of the VESSEL, not be less than the aggregate amount of all instalments paid by the BUYER to the BUILDER, plus the value of the BUYER’s Supplies in the custody of the Shipyard.
 
2.                           Application of the Recovered Amounts
 
In the event that the VESSEL shall be damaged from any insured cause at any time before delivery of the VESSEL, and in the further event that such damage shall not constitute an actual or constructive total loss of the VESSEL, the amount received in respect of the insurance shall be applied by the BUILDER in repair of such damage, satisfactory to the Classification Society, and the BUYER shall accept the VESSEL under this Contract if completed in accordance with this Contract and the SPECIFICATIONS , however, subject to the extension of delivery time under Article VIII hereof (except in case of negligence of the BUILDER).
 
Should the VESSEL from any cause become an actual or constructive total loss, the BUILDER shall either :
 
 (a)                    proceed in accordance with the terms of this Contract, in which case the amount received in respect of the insurance shall be applied to the construction and repair of damage of the VESSEL, provided the parties hereto shall have first agreed thereto in writing and to such reasonable extension of delivery time as may be necessary for the completion of such reconstruction and repair ; or
 
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 (b)                   refund promptly to the BUYER the full amount of all sums paid by the BUYER to the BUILDER as instalments in advance of delivery of the VESSEL with Six percent (6.0%) interest, and deliver to the BUYER all BUYER’s Supplies (or the insurance proceeds paid with respect thereto), in which case this Contract shall be deemed to be automatically terminated and all right, duties, liabilities and obligations of each of the parties to the other shall forthwith cease and terminate.
 
3.                           Termination of BUILDER’s Obligation to Insure
 
The BUILDER shall be under no obligation to insure the VESSEL hereunder after delivery and acceptance of the VESSEL.
 
(End of Article)
 
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ARTICLE XVIII – NOTICE
 
1.                           Address :
 
Any and all notices and communications in connection with this Contract shall be addressed as follows :
 
To the BUYER :
Blacksea Marine Inc.
80 Broad Street, Monrovia, Liberia
Cable address :    BLAMAR
Telefax No.  :        231-7-7000-422
 
To the BUILDER:
 
Samsung Heavy Industries Co., Ltd.
647-9, 11 th Floor, KIPS Building, Yeoksam-Dong, Kangnam-Ku,
Seoul, Korea
Cable address : SSYARD SEOUL
Telefax No. : (+82 2) 3458-7349, (+82 2) 3458-7319
 
or preferably to its Geoje Yard :
 
Samsung Heavy Industries Co., Ltd.
P.O.BOX Gohyun 9
530, Jangpyung-Ri, Shinhyun-Up, Geoje-Si, Kyungnam, Korea

Telefax No. :	(+82 55) 630-4947 (Design Department)	
 	(+82 55) 630-4978 (Customer Satisfaction Team.)	
 
2.                           Language :
 
Any and all notices and communications in connection with this Contract shall be written in the English language.
 
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3.                           Effective Date of Notice :
 
The notice in connection with this Contract shall become effective from the date when such notice is received by the BUYER or by the BUILDER except otherwise described in the Contract.
 
(End of Article)
 
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ARTICLE XIX - EFFECTIVE DATE OF CONTRACT
 
This Contract shall become effective upon signing by the parties hereto.
 
(End of Article)
 
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ARTICLE XX - INTERPRETATION
 
1.                           Laws Applicable :
 
The parties hereto agree that the validity and interpretation of this Contract and of each Article and part thereof shall be governed by the laws of England.
 
2.                           Discrepancies :
 
All general language or requirements embodied in the SPECIFICATIONS  are intended to amplify, explain and implement the requirements of this Contract. However, in the event that any language or requirements so embodied permit of an interpretation inconsistent with any provisions of this Contract, then, in each and every such event, the applicable provisions of this Contract shall prevail and govern. In the event of conflict between the SPECIFICATIONS  and Plans, the SPECIFICATIONS  shall prevail and govern.
 
3.                           Entire Agreement :
 
This Contract contains the entire agreement and understanding between the parties hereto and supersedes all prior negotiations, representations, undertaking and agreements on any subject matter of this Contract.
 
4.                           Amendments and Supplements :
 
Any supplement, memorandum of understanding or amendment, whatsoever form it may be relating to this Contract, to be made and signed among parties hereof after signing this Contract, shall be the integral part of this Contract and shall be predominant over the respective corresponding Article and/or Paragraph of this Contract.
 
The Contract can only be amended in writing.
 
(End of Article)
 
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IN WITNESS WHEREOF, the parties hereto have caused this Contract to be duly executed on the day and year first above written.

BUYER :	BUILDER :	
BLACKSEA MARINE INC.	SAMSUNG HEAVY IND. CO., LTD.	

/s/ Iraklis Prokopakis	 	 	/s/ K.J. Song	 	
By    :	Iraklis Prokopakis	 	By   :   K. J. Song	
Title :	Attorney-In-Fact	Title :	Attorney-In-Fact	

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EXHIBIT “A”
 
LETTER OF REFUNDMENT GUARANTEE
 
Gentlemen :
 
We hereby issue our letter of guarantee no.              in favour of Blacksea Marine Inc.,(hereinafter called the “BUYER”) for account of Samsung Heavy Industries Co., Ltd.(hereinafter called the “BUILDER”) as follows in consideration of the shipbuilding contract dated May 12, 2006 (hereinafter called the “Contract”) made by and among the BUYER and the BUILDER for the construction of one(1) single screw diesel engine driven Container VESSEL having BUILDER’s Hull No. 1699 (hereinafter called the “VESSEL”).
 
If in connection with the terms of the Contract the BUYER shall become entitled to a refund of the advance payment(s) made to the BUILDER prior to the delivery of the VESSEL, we hereby irrevocably guarantee the repayment of the same to the BUYER immediately on demand being initially US$ 6,380,000.- (Say U.S. Dollars Six Million Three Hundred and Eighty Thousand only) together with interest thereon at the rate of Six (6) percent per annum from the respective dates on which such sums were paid by the BUILDER to the date of remittance by telegraphic transfer of such refund.
 
The amount of this guarantee will be automatically increased, not more than three  times, upon BUILDER’s receipt of the respective instalment: each time by the amount of instalment of US$ 6,380,000.- (Say U.S. Dollars Six Million Three Hundred and Eighty Thousand only), US$ 6,380,000.- (Say U.S. Dollars Six Million Three Hundred and Eighty Thousand only) and US$ 6,380,000.- (Say U.S. Dollars Six Million Three Hundred and Eighty Thousand only) respectively plus interest thereon as provided in the Contract, but in any eventuality the amount of this guarantee shall not exceed the total sum of US$ 25,520,000.- (Say U.S. Dollars Twenty Five Million Five Hundred and Twenty Thousand only) plus interest thereon at the rate of Six (6) percent per annum from the respective dates on which such sums were paid by the BUYER to the BUILDER to the date of remittance by telegraphic transfer of the refund.
 
Our liability under this letter of guarantee shall not be affected by any alteration to or variation of the terms of the Contract you may hereafter agree with the BUILDER and by any other matter of circumstances, including bankruptcy or insolvency of the BUILDER, which might otherwise discharge our liability hereunder as guarantor of the BUILDER’s obligations as aforesaid.
 
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In case any refund is made to you by the BUILDER or by us under this guarantee, our liability hereunder shall be automatically reduced by the amount of such refund.
 
This letter of guarantee is available against BUYER’s simple receipt and signed statement certifying that BUYER’s demand for refund has been made in conformity with Article X of the Contract and the BUILDER has failed to make the refund within Thirty One (31) days after BUYER’s demand to the BUILDER.
 
Refund shall be made to BUYER by telegraphic transfer in United States Dollars to an account designated by you without deduction, withholding or set-off.
 
This letter of guarantee shall expire and become null and void upon receipt by the BUYER of the sum guaranteed hereby or upon acceptance by the BUYER of the delivery of the VESSEL in accordance with the terms of the Contract and, in either case, this letter of guarantee shall be returned to us. This guarantee is valid from the date of this letter of guarantee until or in the event of delayed delivery until such time as the VESSEL is delivered by the BUILDER to the BUYER in accordance with the terms of the Contract.
 
Notwithstanding the provisions hereinabove, in case we receive notification from you or the BUILDER confirmed by an Arbitrator stating that your claim to cancel the Contract or your claim for refundment thereunder has been disputed and referred to Arbitration in accordance with the provisions of the Contract, the period of validity of this guarantee shall be extended until Thirty (30) days after the final and non-appealable award shall be rendered in the Arbitration and a copy thereof acknowledged by the Arbitrators. In such case, this guarantee shall not be available unless and until such acknowledged copy of the final award in the Arbitration justifying your claim is presented to us.
 
Your rights in respect of this letter of guarantee are assignable from the date of this letter of guarantee until such time as the VESSEL is delivered by the BUILDER to the BUYER in accordance with the provisions of the Contract, on the understanding that you will notify us of the identity of any assignee of your rights under this letter of guarantee.
 
Any notice or demand under this letter of guarantee shall be given by facsimile and sent to:
 
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or to such other address as we might notify to you in writing. A notice shall be deemed to be served and shall take effect 2 hours after its transmission is completed, provided that if a notice would be deemed to be served on a day which is not a business day, or which is a business day but after 5:00 p.m. local time, in the place of receipt, the notice shall be deemed to be served and shall take effect at 9:00 a.m. on the next day which is a business day.
 
This guarantee shall be governed by and construed in accordance with the Laws of England. Any disputes arising under this guarantee (but not any disputes arising under the Contract which shall be determined by arbitration in accordance with the terms of the Contract and as referenced in this letter of guarantee) shall be determined by the High Court of Justice in London to whose exclusive jurisdiction we hereby submit. We appoint
 
                                                                                                              as our agents for service of process in connection with any proceedings in such courts.
 
We each jointly and severally hereby represent and guarantee that we have the corporate power and authority to execute, deliver and perform the obligations under this letter of guarantee, and that such execution and performance will not violate or conflict with any provision of law, statute, rule, permit or regulation of any government, regulatory body, agency or other authority in the jurisdictions where we are subject to such laws and regulations.
 
59

 
IN WITNESS WHEREOF, we have hereunder set our hands and seal by our duly authorized representatives this          day of                 , 2006.

 	Very truly yours,	

 	For and on behalf of	

 	By	 	 	
 	Name :	
 	Title : Attorney-in-Fact	

 	For and on behalf of	
 	 	 	
 	By	 	 	
 	Name :	
 	Title : Attorney-in-Fact	
 
60

 
EXHIBIT “B”
 
Samsung Heavy Industries Co., Ltd.
11 th Floor, KIPS Building
647-9, Yoksam-Dong, Kangnam-Ku,
Seoul, Korea 135-080
 
Date :                                   , 2006
 
PERFORMANCE GUARANTEE
 
In consideration of the performance of a certain shipbuilding contract dated                       (hereinafter called the “Contract”) by BLACKSEA MARINE INC. of 80 Broad street, Monrovia, Liberia having your Hull No.1699 (hereinafter called the “VESSEL”) providing among other things for payment of the Contract Price amounting to United States Dollars             (US$              );
 
We, the undersigned, hereby irrevocably and unconditionally guarantee to you, your successors, and assigns the due and faithful performance by the BUYER of its all liabilities and responsibilities under the Contract and any supplement, amendment, change or modification hereafter made thereto, including but not limited to, due and prompt payment of the Contract Price by the BUYER to you, your successors, and assigns under the Contract and any supplement, amendment, change or modification as aforesaid (hereby expressly waiving notice of any such supplement, amendment, change or modification as may be agreed to by the BUYER and confirming that this guarantee shall be fully applicable to the Contract as so supplemented, amended, changed or modified).
 
This Performance Guarantee shall be governed by the laws of England.

GUARANTOR :	
BY :	 	 	
TITLE :	
WITNESS :	
 
61

 
EXHIBIT “C”
 
Samsung Heavy Industries Co., Ltd.
11 th Floor, KIPS Building
647-9, Yoksam-Dong, Kangnam-Ku,
Seoul, Korea 135-080
 
Date :                                             , 2006
 
PERFORMANCE GUARANTEE
 
In consideration of the assignment of a certain shipbuilding contract dated                    (hereinafter called the “Contract”) by us to        having your Hull No.1699 (hereinafter called the “VESSEL”) providing among other things for payment of the Contract Price amounting to United States Dollars            (US$              );
 
We, the undersigned, hereby irrevocably and unconditionally guarantee to you, your successors, and assigns the due and faithful performance by the BUYER of its all liabilities and responsibilities under the Contract and any supplement, amendment, change or modification hereafter made thereto, including but not limited to, due and prompt payment of the Contract Price by the BUYER to you, your successors, and assigns under the Contract and any supplement, amendment, change or modification as aforesaid (hereby expressly waiving notice of any such supplement, amendment, change or modification as may be agreed to by the BUYER and confirming that this guarantee shall be fully applicable to the Contract as so supplemented, amended, changed or modified).
 
This Performance Guarantee shall be governed by the laws of England.

GUARANTOR :	
BY :	 	 	
TITLE :	
WITNESS :	
 
62

 
Exhibit 10.27
 
SHIPBUILDING CONTRACT

FOR

THE CONSTRUCTION AND SALE OF
 
ONE (1) 6,500 TEU CLASS CONTAINER CARRIER

HULL NO. S4001

BETWEEN

BOXCARRIER (NO.1) CORP.

(AS BUYER)

AND

SUNGDONG SHIPBUILDING & MARINE ENGINEERING CO., LTD.
 
(AS BUILDER)

 
 
I N D E X

 	 	PAGE	
PREAMBLE	 	1	
 	 	 	
ARTICLE      I	: DESCRIPTION AND CLASS	2	
 	 	 	
 	II	: CONTRACT PRICE	5	
 	 	 	 	
 	III	: ADJUSTMENT OF THE CONTRACT PRICE	6	
 	 	 	 	
 	IV	: INSPECTION AND APPROVAL	10	
 	 	 	 	
 	V	: MODIFICATIONS, CHANGES AND EXTRAS	15	
 	 	 	 	
 	VI	: TRIALS AND COMPLETION	18	
 	 	 	 	
 	VII	: DELIVERY	22	
 	 	 	 	
 	VIII	: DELAYS AND EXTENSIONS OF TIME (FORCE MAJEURE)	25	
 	 	 	 	
 	IX	: WARRANTY OF QUALITY	28	
 	 	 	 	
 	X	: PAYMENT	33	
 	 	 	 	
 	XI	: BUYER’S DEFAULT	38	
 	 	 	 	
 	XII	: BUYER’S SUPPLIES	41	
 	 	 	 	
 	XIII	: INSURANCE	43	
 	 	 	 	
 	XIV	: ARBITRATION	44	
 	 	 	 	
 	XV	: SUCCESSORS AND ASSIGNS	46	
 	 	 	 	
 	XVI	: TAXES AND DUTIES	47	
 	 	 	 	
 	XVII	: PATENTS, TRADEMARKS AND COPYRIGHTS	48	
 	 	 	 	
 	XVIII	: INTERPRETATION AND GOVERNING LAW	49	
 	 	 	 	
 	XIX	: NOTICE	50	
 	 	 	 	
 	XX	:EFFECTIVENESS OF THIS CONTRACT	51	
 	 	 	 	
 	XXI	: INTERPRETATION	52	
 	 	 	 	
 	XXII	:EXCLUSIVENESS	53	
 
SCHEDULES
 
EXHIBIT “A”  REFUND GUARANTEE LETTER OF REFUNDMENT GUARANTEE
 
EXHIBIT “B”  PERFORMANCE GUARANTEE

 
SHIPBUILDING CONTRACT
 
THIS CONTRACT, made on this 26 day of July, 2006 by and between BOXCARRIER (NO.1) CORP. , a corporation incorporated and existing under the laws of Republic of Liberia with its registered office at 80 Broad Street, Monrovia, Liberia (hereinafter called the “BUYER”), the party of the first part and Sungdong Shipbuilding & Marine Engineering Co., Ltd., a company organized and existing under the laws of the Republic of Korea, having its registered office at 1609-2, Hwang-li, Gwangdo-myeon, Tongyoung-si, Gyeongnam, 650-827, Korea (hereinafter called the “BUILDER”), the party of the second part,
 
W I T N E S S E T H :
 
In consideration of the mutual covenants contained herein, the BUILDER agrees to design, build, launch, equip and complete in accordance with the Sung Dong Shipbuilding & Marine Engineering Quality Standard one (1) Single Screw Diesel Engine driven Container VESSEL as described in the Specifications as described in Article I hereof (hereinafter called the “VESSEL”) at the BUILDER’s yards in Korea (hereinafter called the “SHIPYARD”) and to deliver and sell the VESSEL to the BUYER, and the BUYER agrees to accept delivery of and purchase from the BUILDER the VESSEL, according to the terms and conditions hereinafter set forth :
 
(End of Preamble)
 
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ARTICLE I : DESCRIPTION AND CLASS
 
1.                         DESCRIPTION
 
The VESSEL shall have the BUILDER’s Hull No. S4001 and shall be built, constructed, equipped and completed in accordance with the specifications No. SD-DN-6500T.CN.FS-01 dated July 26, 2006 and the general arrangement plan No. SD-DN-6500T.CN.GA-01 dated July 26, 2006 attached thereto and the ‘Maker List’ No. SD-DN-6500T.CN.ML-01 dated July 26, 2006 (hereinafter called respectively the “SPECIFICATIONS” and the “PLAN”) signed by both parties, which shall constitute an integral part of this CONTRACT although not attached hereto.
 
The SPECIFICATIONS and the PLAN are intended to explain each other and anything shown on the PLAN and not stipulated in the SPECIFICATIONS or anything stipulated in the SPECIFICATIONS and not shown on the PLAN shall be deemed and considered as if included in both. Should there be any inconsistencies or contradictions between the SPECIFICATIONS and the PLAN, the SPECIFICATIONS shall prevail. Should there be any inconsistencies or contradictions between this CONTRACT and the SPECIFICATIONS, this CONTRACT shall prevail.
 
2.                         BASIC DIMENSIONS AND PRINCIPAL PARTICULARS OF THE VESSEL
 
(a)                    The basic dimensions and principal particulars of the VESSEL shall be :

Length, overall	about	300.0	 	M	
Length, between perpendiculars	286.6	 	M	
Breadth, moulded	40.0	 	M	
Depth to Upper Deck, moulded	24.2	 	M	
 	 	 	 	
Design draft, moulded, in seawater of specific gravity of 1.025	12.0	 	M	
Scantling draft, moulded, in seawater of specific gravity of 1.025	14.5	 	M	
 	 	 	 	
Deadweight guaranteed on the above moulded design draft of 12.0 M	59,000	 	M/T	
 
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Deadweight on the above moulded scantling draft of 14.5 M	83,300 	 	M/T	
 	 	 	 	
Main propulsion engine	MAN B&W 10K98MC-C	
 	MCR :	77,600 PS x 104 RPM	
 	NCR :	69,840 PS x 100.4 RPM	
 	
Speed guaranteed at 12.0meters design draft at the condition of clean bottom and in calm and deep sea with main engine developing a NCR of 69,840 PS with fifteen per cent (15%) sea margin	 	25.6 KNOTS	
 	 	 	
Specific Fuel consumption guaranteed of the main engine applying I.S.O. reference conditions to the result of official shop test at a MCR of 77,600 PS using marine fuel oil having lower calorific value of 10,200 Kcal per Kg.	 	126.0 gr/BHP.HR	

The details of the above particulars as well as the definitions and method of measurements and calculations are as indicated in the SPECIFICATIONS.
 
(b)                   All other vessels Hull Number S4002, S4003, S4004 and S4005 shall be built as identical sister ships unless a modification to a design is agreed upon.
 
3.                  CLASSIFICATION, RULES AND REGULATIONS
 
(a)             The VESSEL including its machinery, equipment and outfittings shall be built in compliance with the rules and regulations of Det Norske Veritas (hereinafter called the “CLASSIFICATION SOCIETY”), in force as of the date of this CONTRACT, to be classed and registered as +1A, CONTAINER CARRIER, EO, BIS, TMON, NAUTICUS (NEWBUILDING) and also to comply with the rules and regulations, in force as of the date of this CONTRACT, as described in the SPECIFICATIONS. Provided that the BUILDER shall have an option to declare the CLASSIIFICATION SOCIETY as either equivalent Lloyd Register of Shipping or Det Norske Veritas within three (3) month after signing of this CONTRACT.
 
(b)            The BUILDER shall arrange with the CLASSIFICATION SOCIETY for the assignment by the CLASSIFICATION SOCIETY of representative(s) to the VESSEL during
 
3

 
construction. All fees and charges incidental to classification of the VESSEL in compliance with the above specified rules, regulations and requirements of this CONTRACT shall be for the account of the BUILDER.
 
(c)             The decision of the CLASSIFICATION SOCIETY as to whether the VESSEL complies with the regulations of the CLASSIFICATION SOCIETY shall be final and binding upon the BUILDER and the BUYER.
 
Details of its notation shall be in accordance with the SPECIFICATIONS.
 
The VESSEL shall also comply with the compulsory rules, regulations and requirements of the regulatory bodies as described in the SPECIFICATIONS rectified and in effect as of the signing date of this Contract. Non-compulsory rules, regulations and requirements of the regulatory bodies shall be dealt with in accordance with Article V (2) of this Contract.
 
All the fees and charges incidental to the classification and with respect to compliance with the above referred rules, regulations and requirements shall be for account of the BUILDER except otherwise agreed.
 
4.                  SUBCONTRACTING
 
The BUILDER may, at its sole discretion and responsibility, subcontract any portion of the construction work of the VESSEL, provided that the construction and assembly of the VESSEL shall be carried out as is normally done according to the BUILDER’s building practice and provided further that the BUILDER shall be responsible to the BUYER in respect of any construction work carried out by such subcontractors.
 
5.                  NATIONALITY OF THE VESSEL
 
The VESSEL shall be registered by the BUYER at its own cost and expense under the laws of either Greece or Cyprus or Bahamas or Marshall Islands or Panama or Liberia with its home port of either Piraeus or Limassol or Nassau or Majuro or Panama or Monrovia at the time of its delivery and acceptance hereunder provided that the BUYER may in its sole discretion declare the VESSEL’S flag and registration within four (4) months after the signing of the CONTRACT. In the case that the BUYER declares the VESSEL’S flag and registration to the Greece, the BUYER should pay the extra cost.
 
(End of Article)
 
4

 
ARTICLE II : CONTRACT PRICE
 
The contract price of the VESSEL delivered to the BUYER at the SHIPYARD shall be United States Dollars Ninety One Million Five Hundred Thousand (US$ 91,500,000) (hereinafter called the “CONTRACT PRICE”) which shall be paid plus any increases or less any decreases due to adjustment or modifications, if any, as set forth in this CONTRACT. The above CONTRACT PRICE shall include payment for services in the inspection, tests, survey and classification of the VESSEL which will be rendered by the CLASSIFICATION SOCIETY and shall not include the cost of the BUYER’s supplies as stipulated in Article XII.
 
The CONTRACT PRICE also includes all costs and expenses for supplying all necessary drawings as stipulated in the SPECIFICATIONS except those to be furnished by the BUYER for the VESSEL in accordance with the SPECIFICATIONS.
 
(End of Article)
 
5

 
ARTICLE III : ADJUSTMENT OF THE CONTRACT PRICE
 
The CONTRACT PRICE of the VESSEL shall be adjusted as hereinafter set forth in the event of the following contingencies. It is hereby understood by both parties that any adjustment of the CONTRACT PRICE as provided for in this Article is by way of liquidated damages and not by way of penalty.
 
1.                  DELAYED DELIVERY
 
(a)             No adjustment shall be made and the CONTRACT PRICE shall remain unchanged for the first thirty (30) days of the delay in delivery of the VESSEL [ending as of 12 o’clock midnight Korean Standard Time on the thirtieth (30th) day of delay] beyond the Delivery Date calculated as provided in Article VII.1. hereof.
 
(b)            If delivery of the VESSEL is delayed more than thirty (30) days beyond the date upon which the delivery is due from the BUILDER under the terms of this CONTRACT, then, beginning at midnight of the thirtieth (30th) day after such due date, the CONTRACT PRICE of the VESSEL shall be reduced by U.S. Dollars Twenty Two Thousand only (US$ 22,000.-) for each full day of delay.
 
However, unless the parties agree otherwise, the total amount of deduction from the CONTRACT PRICE shall not exceed the amount due to cover the delay of one hundred and eighty (180) days after thirty (30) days of the delay in delivery of the VESSEL at the rate of deduction as specified hereinabove.
 
(c)             But, if the delay in delivery of the VESSEL continues for a period of more than two hundred and ten (210) days beyond the date upon which the delivery is due from the BUILDER under the terms of this CONTRACT then, in such event, and after such period has expired, the BUYER may, at its option, rescind this CONTRACT by serving upon the BUILDER a notice of rescission by facsimile to be confirmed by a registered letter via airmail directed to the BUILDER at the address given in this CONTRACT. Such rescission shall be effective as of the date the notice thereof is received by the BUILDER. If the BUYER has not served the notice of rescission after the aforementioned two hundred and ten (210) days delay in delivery, the BUILDER may demand the BUYER to make an election in accordance with Article VIII.3. hereof.
 
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(d)            For the purpose of this Article, the delivery of the VESSEL shall be deemed to be delayed when and if the VESSEL, after taking into full account extension of the Delivery Date or permissible delays as provided in Article V, VI, VIII, XI or elsewhere in this CONTRACT, is delivered beyond the date upon which delivery would then be due under the terms of this CONTRACT.
 
2.                  INSUFFICIENT SPEED
 
(a)              The CONTRACT PRICE of the VESSEL shall not be affected or changed, if the actual speed, as determined by trial runs more fully described in Article VI hereof, is less than the speed required under the terms of this CONTRACT and the SPECIFICATIONS provided such deficiency in actual speed is not more than two-tenths (2/10) of a knot below the guaranteed speed.
 
(b)             However, as for the deficiency of more than two-tenths (2/10) of a knot in actual speed below the speed guaranteed under this CONTRACT, the CONTRACT PRICE shall be reduced by U.S. Dollars Two Hundred Thousand only (U.S.$ 200,000.-) for each full one-tenth (1/10) of a knot in excess of the said two-tenths (2/10) of a knot of deficiency in speed [fractions of less than one-tenth (1/10) of a knot shall be regarded as a full one-tenth (1/10) of a knot]. However, unless the parties agree otherwise, the total amount of reduction from the CONTRACT PRICE shall not exceed the amount due to cover the deficiency of one (1) full knot below the guaranteed speed at the rate of reduction as specified above.
 
(c)             If the deficiency in actual speed of the VESSEL is more than seven point five-tenths (7.5/10) knot below the speed guaranteed under this CONTRACT, then the BUYER, at its option, may, subject to the BUILDER’s right to effect alterations or corrections as provided in Article VI.5. hereof, rescind this CONTRACT or may accept the VESSEL at a reduction in the CONTRACT PRICE as above provided for seven point five-tenths (7.5/10) knot of deficiency only.
 
3.                  EXCESSIVE FUEL CONSUMPTION
 
(a)             The CONTRACT PRICE shall not be affected or changed by reason of the fuel consumption of the VESSEL’s main engine, as determined by the engine manufacturer’s shop trial as per the SPECIFICATIONS being more than the guaranteed fuel consumption of the VESSEL’s main engine, if such excess is not more than five per cent (5%) over the guaranteed fuel consumption.
 
7

 
(b)            However, as for the excess of more than five per cent (5%) in the actual fuel consumption over the guaranteed fuel consumption of the VESSEL’s main engine, the CONTRACT PRICE shall be reduced by U.S. Dollars Two Hundred Thousand only (US$ 200,000.-) for each full one per cent (1%) increase in fuel consumption in excess of the said five per cent (5%) increase in fuel consumption [fractions of less than one per cent (1%) shall be regarded as a full one per cent (1%)]. However, unless the parties agree otherwise, the total amount of reduction from the CONTRACT PRICE shall not exceed the amount due to cover the excess of nine per cent (9%) over the guaranteed fuel consumption of the VESSEL’s main engine at the rate of reduction as specified above.
 
(c)             If such actual fuel consumption exceeds the guaranteed fuel consumption of the VESSEL’s main engine by more than ten per cent (10%), the BUYER, at its option, may, subject to the BUILDER’s right to effect alterations or corrections as specified in Article VI.5. hereof, rescind this CONTRACT or may accept the VESSEL at a reduction in the CONTRACT PRICE as above provided for the nine per cent (9%) increase only.
 
4.                  DEADWEIGHT BELOW CONTRACT REQUIREMENTS
 
(a)             The CONTRACT PRICE of the VESSEL shall not be affected or changed, if actual deadweight, determined as provided in this CONTRACT and the SPECIFICATIONS, is below the deadweight of 83,300 metric tons on the moulded design draft of 12.0 metres required by this CONTRACT and the SPECIFICATIONS by an amount of 83,300 metric tons or less. However, should the deficiency in the actual deadweight of the VESSEL be more than 830 metric tons below the said required deadweight, then the CONTRACT PRICE of the VESSEL shall be reduced for each full one (1) metric ton [fractions of less than one (1) metric ton shall be disregarded] of decreased deadweight in excess of 830 metric tons by the sum of U.S. Dollars One Thousand One Hundred only (US$ 1,100.-) per metric ton.
 
However, unless the parties agree otherwise, the total amount of deduction from the CONTRACT PRICE shall not exceed the amount due to cover the deficiency of 2,000 metric tons below the said required deadweight hereinabove.
 
(b)            If the deficiency in the deadweight of the VESSEL is more than 2,000 metric tons below the said required deadweight, then the BUYER, at its option, may, subject to the BUILDER’s right to effect alterations or corrections without the BUYER’s prior
 
8

 
consent as specified in Article VI.5. hereof, rescind this CONTRACT or may accept the VESSEL at a reduction in the CONTRACT PRICE as above provided for metric tons of deficiency only.
 
5.                  EFFECT OF RESCISSION
 
It is expressly understood and agreed by the parties hereto that in any case, if the BUYER rescinds this CONTRACT under this Article, the BUYER shall not be entitled to any liquidated damages, unless by means of the provision of Article X hereof.
 
(End of Article)
 
9

 
ARTICLE IV : INSPECTION AND APPROVAL
 
1.                  APPOINTMENT OF BUYER’S REPRESENTATIVE
 
The BUYER shall timely despatch to and maintain at the SHIPYARD, at its own cost, expense and risk, one or more representatives (hereinafter called the “BUYER’S REPRESENTATIVE”), who shall be duly accredited in writing by the BUYER to supervise adequately the construction by the BUILDER of the VESSEL, her equipment and all accessories. Before the commencement of any item of work under this CONTRACT, the BUILDER shall, whenever reasonably required, previously exhibit, furnish to, and within the limits of the BUYER’S REPRESENTATIVE’s authority, secure the approval from the BUYER’S REPRESENTATIVE of any and all plans and drawings prepared in connection therewith. Upon appointment of the BUYER’S REPRESENTATIVE, the BUYER shall notify the BUILDER in writing of the name and the scope of the authority of the BUYER’S REPRESENTATIVE.
 
2.                  AUTHORITY OF THE BUYER’S REPRESENTATIVE
 
Such BUYER’S REPRESENTATIVE shall, at all times during working hours of the construction until delivery of the VESSEL, have the right to inspect the VESSEL, her equipment and all accessories, and work in progress, or materials utilized in connection with the construction of the VESSEL, wherever such work is being done or such materials are stored, for the purpose of determining that the VESSEL, her equipment and accessories are being constructed in accordance with the terms of this CONTRACT and/or the SPECIFICATIONS and the PLAN.
 
The BUILDER will endeavor to arrange for the inspection by the BUYER’S REPRESENTATIVE during working hours of the BUILDER. However, such inspection may be arranged beyond the BUILDER’s normal working hours, including weekend and/or holiday if this is considered necessary by the BUILDER in order to meet the BUILDER’s construction schedule, on the condition that the BUILDER will inform the BUYER’S REPRESENTATIVE at least two (2) days in advance of such inspection.
 
The BUYER’S REPRESENTATIVE shall, within the limits of the authority conferred upon him by the BUYER, make decisions or give advice to the BUILDER on behalf of the BUYER promptly on all problems arising out of, or in connection with, the construction of
 
10

 
the VESSEL and generally act in a reasonable manner with a view to cooperating to the utmost with the BUILDER in the construction process of the VESSEL.
 
The decision, approval or advice of the BUYER’S REPRESENTATIVE shall be deemed to have been given by the BUYER and once given shall not be withdrawn, revoked or modified except with consent of the BUILDER. Provided that the BUYER’S REPRESENTATIVE or his assistants shall comply with the foregoing obligations, no act or omission of the BUYER’S REPRESENTATIVE or his assistants shall, in any way, diminish the liability of the BUILDER under Article IX (WARRANTY OF QUALITY). The BUYER’S REPRESENTATIVE shall notify the BUILDER promptly in writing of his discovery of any construction or materials, which he believes do not or will not conform to the requirements of the CONTRACT and the SPECIFICATIONS or the PLAN and likewise advise and consult with the BUILDER on all matters pertaining to the construction of the VESSEL, as may be required by the BUILDER, or as he may deem necessary.
 
However, if the BUYER’S REPRESENTATIVE fails to submit to the BUILDER without delay any such demand concerning alterations or changes with respect to the construction, arrangement or outfit of the VESSEL, which the BUYER’S REPRESENTATIVE has examined, inspected or attended at the test thereof under this CONTRACT or the SPECIFICATIONS, the BUYER’S REPRESENTATIVE shall be deemed to have approved the same and shall be precluded from making any demand for alterations, changes, or complaints with respect thereto at a later date.
 
The BUILDER shall comply with any such demand which is not contradictory to this CONTRACT and the SPECIFICATIONS or the PLAN, provided that any and all such demands by the BUYER’S REPRESENTATIVE with regard to construction, arrangement and outfit of the VESSEL shall be submitted in writing to the authorised representative of the BUILDER. The BUILDER shall notify the BUYER’S REPRESENTATIVE of the names of the persons who are from time to time authorised by the BUILDER for this purpose.
 
It is agreed upon between the BUYER and the BUILDER that the modifications, alterations or changes and other measures necessary to comply with such demand may be effected at a convenient time and place at the BUILDER’s reasonable discretion in view of the construction schedule of the VESSEL.
 
In the event that the BUYER’S REPRESENTATIVE shall advise the BUILDER that he has discovered or believes the construction or materials do not or will not conform to the
 
11

 
requirements of this CONTRACT and the SPECIFICATIONS or the PLAN, and the BUILDER shall not agree with the views of the BUYER’S REPRESENTATIVE in such respect, either the BUYER or the BUILDER may, with the agreement of the other party, seek an opinion of the CLASSIFICATION SOCIETY.
 
3.                  APPROVAL OF DRAWINGS
 
(a)             The BUILDER shall submit to the BUYER three (3) copies of each of the plans and drawings to be submitted to the BUYER for its approval at its address as set forth in Article XIV hereof. The BUYER shall, within fourteen (14) days after receipt thereof return to the BUILDER one (1) copy of such plans and drawings with the approval or comments, if any, of the BUYER. A list of the plans and drawings to be so submitted to the BUYER shall be mutually agreed upon between the parties hereto.
 
(b)            When and if the BUYER’S REPRESENTATIVE shall have been sent by the BUYER to the SHIPYARD in accordance with Paragraph 1 of this Article, the BUILDER may submit the remainder, if any, of the plans and drawings in the agreed list, to the BUYER’S REPRESENTATIVE for his approval, unless otherwise agreed upon between the parties hereto.
 
The BUYER’S REPRESENTATIVE shall, within ten (10) days after receipt thereof, return to the BUILDER one (1) copy of such plans and drawings with his approval or comments written thereon, if any. Approval by the BUYER’S REPRESENTATIVE of the plans and drawings duly submitted to him shall be deemed to be the approval by the BUYER for all purposes of this CONTRACT.
 
(c)             In the event that the BUYER or the BUYER’S REPRESENTATIVE shall fail to return the plans and drawings to the BUILDER within the time limit as hereinabove provided, such plans and drawings shall be deemed to have been automatically approved without any comment. In the event the plans and drawings submitted by the BUILDER to the BUYER or the BUYER’S REPRESENTATIVE in accordance with this Article do not meet with the BUYER’s or the BUYER’S REPRESENTATIVE’s approval, the matter may be submitted by either party hereto for determination pursuant to Article XIV hereof. If the BUYER’s comments on the plans and drawings that are returned to the BUILDER by the BUYER within the said time limit are not clearly specified or detailed, the BUILDER shall be entitled to place its own interpretation on such comments in implementing them.
 
12

 
(d)            Approval of drawings by Buyers shall not constitute a waiver of Builder’s responsibility to deliver the vessel in accordance with the Contract and Specifications.
 
4.                  SALARIES AND EXPENSES
 
All salaries and expenses of the BUYER’S REPRESENTATIVE or any other person or persons employed by the BUYER hereunder shall be for the BUYER’s account.
 
5.                  RESPONSIBILITY OF THE BUILDER
 
(a)             The BUILDER shall provide the BUYER’S REPRESENTATIVE and his assistants free of charge with suitably furnished office space at, or in the immediate vicinity of, the SHIPYARD together with access to telephone and facsimile facilities as may be necessary to enable the BUYER’S REPRESENTATIVE and his assistants to carry out their work under this CONTRACT. However, the BUYER shall pay for the telephone or facsimile facilities used by the BUYER’S REPRESENTATIVE or his assistants.
 
The BUILDER, its employees, agents and subcontractors, during its working hours until delivery of the VESSEL, shall arrange for them to have free and ready access to the VESSEL, her equipment and accessories, and to any other place (except the areas controlled for the purpose of national security) where work is being done, or materials are being processed or stored in connection with the construction of the VESSEL including the premises of sub-contractors.
 
The BUYER’S REPRESENTATIVE or his assistants or employees shall observe the work’s rules, regulations and the guidances prevailing at the BUILDER’s and its sub-contractor’s premises. The BUILDER shall promptly provide to the BUYER’S REPRESENTATIVE and/or his assistants and shall ensure that its sub-contractors shall promptly provide all such information as he or they may reasonably request in connection with the construction of the VESSEL and her engines, equipment and machinery.
 
(b)            The BUYER’S REPRESENTATIVE and his assistants shall at all times remain the employees of the BUYER. The BUILDER shall not be liable to the BUYER or the BUYER’S REPRESENTATIVE or to his assistants or to the BUYER’s employees or
 
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agents for personal injuries, including death, during the time they, or any of them, are on the VESSEL, or within the premises of either the BUILDER or its sub-contractors, or are otherwise engaged in and about the construction of the VESSEL, unless, however, such personal injuries, including death, are caused by the gross negligence of the BUILDER, its sub-contractors, or its or their employees or agents. The BUILDER shall not be liable to the BUYER for damages to, or destruction of property of the BUYER or of the BUYER’S REPRESENTATIVE or his assistants or the BUYER’s employees or agents, unless such damages, loss or destruction is caused by the gross negligence of the BUILDER, its sub-contractors, or its or their employees or agents.
 
6.                  RESPONSIBILITY OF THE BUYER
 
The BUYER shall undertake and assure that the BUYER’S REPRESENTATIVE and his assistants shall carry out their duties hereunder in accordance with the normal shipbuilding practice and in such a way as to avoid any unnecessary increase in building cost, delay in the construction of the VESSEL, and/or any disturbance in the construction schedule of the BUILDER.
 
The BUILDER has the right to request the BUYER to replace any of the BUYER’S REPRESENTATIVE and/or his assistants who are deemed unsuitable and unsatisfactory for the proper progress of the VESSEL’s construction. The BUYER shall investigate the situation by sending its representative(s) to the SHIPYARD and if the BUYER considers that such BUILDER’s request is justified, the BUYER shall effect the replacement as soon as conveniently arrangeable.
 
(End of Article)
 
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ARTICLE V : MODIFICATIONS, CHANGES AND EXTRAS
 
1.                  HOW EFFECTED
 
Any modifications or changes to the SPECIFICATIONS and the PLAN under which the VESSEL is to be constructed may be made at any time hereafter by written agreement of the parties hereto. Any modification or change requested by the BUYER which does not affect the frame-work of the SPECIFICATIONS shall be agreed to by the BUILDER if the BUYER agrees to adjustment of the CONTRACT PRICE, deadweight and/or cubic capacity, speed requirements, the Delivery Date and other terms and conditions of this CONTRACT reasonably required as a result of such modification or change. The BUILDER has the right to continue construction of the VESSEL on the basis of the SPECIFICATIONS and the PLAN until the BUYER has agreed to such adjustments. The BUILDER shall be entitled to refuse to make any alteration, change or modification of the SPECIFICATIONS and/or the PLAN requested by the BUYER, if the BUYER does not agree to the aforesaid adjustments within seven (7) days of the BUILDER’s notification of the same to the BUYER, or, if, in the BUILDER’s judgement, the compliance with such request of the BUYER would cause an unreasonable disruption of the normal working schedule of the SHIPYARD.
 
The BUILDER, however, agrees to exert its efforts to accommodate such reasonable request by the BUYER so that the said change and modification shall be made at a reasonable cost and within the shortest period of time reasonably possible. The aforementioned agreement to modify and change the SPECIFICATIONS and the PLAN may be effected by exchange of letters or facsimiles manifesting the agreement.
 
The letters and facsimiles exchanged by the parties pursuant to the foregoing shall constitute an amendment to this CONTRACT and the SPECIFICATIONS or the PLAN under which the VESSEL shall be built. Upon consummation of such an agreement to modify and change the SPECIFICATIONS or the PLAN, the BUILDER shall alter the construction of the VESSEL in accordance therewith including any addition to, or deduction from, the work to be performed in connection with such construction.
 
2.                  SUBSTITUTION OF MATERIAL
 
If any materials, machinery or equipment required for the construction of the VESSEL by
 
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the SPECIFICATIONS and the PLAN or otherwise under this CONTRACT cannot be procured in time to meet the BUILDER’s construction schedule for the VESSEL, or are in short supply, or are unreasonably high in price compared with the prevailing international market price, the BUILDER may supply, subject to the BUYER’s prior approval, other materials, machinery or equipment of equal quality and effect capable of meeting the requirements of the CLASSIFICATION SOCIETY and the rules, regulations and requirements with which the construction of the VESSEL must comply.
 
3.                  CHANGES IN RULES AND REGULATIONS
 
If the specified rules and regulations with which the construction of the VESSEL is required to comply are altered or changed by the CLASSIFICATION SOCIETY or bodies authorised to make such alterations or changes, either the BUYER or the BUILDER, upon receipt of due notice thereof, shall forthwith give notice thereof to the other party in writing. Thereupon, within fifteen (15) days after giving the notice to the BUILDER or receiving the notice from the BUILDER, the BUYER shall advise the BUILDER as to the alterations and changes, if any, to be made on the VESSEL which the BUYER, in its sole discretion, shall decide. The BUILDER shall not be obliged to comply with such alterations and/or changes if the BUYER fails to notify the BUILDER of its decision within the time limit stated above.
 
The BUILDER shall comply promptly with the said request of the BUYER, provided that the BUILDER and the BUYER shall first agree to :
 
(a)             any increase or decrease in the CONTRACT PRICE of the VESSEL that is occasioned by such compliance ;
 
(b)            any extension or advancement in the Delivery Date of the VESSEL that is occasioned by such compliance ;
 
(c)             any increase or decrease in the deadweight and/or cubic capacity of the VESSEL, if such compliance results in any increase or reduction in the deadweight and/or cubic capacity ;
 
(d)            adjustment of the speed requirements if such compliance results in any increase or reduction in the speed ; and
 
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(e)             any other alterations in the terms of this CONTRACT or of the SPECIFICATIONS or the PLAN or both, if such compliance makes such alterations of the terms necessary.
 
Any delay in the construction of the VESSEL caused by the BUYER’s delay in making a decision or agreement as above shall constitute a permissible delay under this CONTRACT. Such agreement by the BUYER shall be effected in the same manner as provided above for modification and change of the SPECIFICATIONS and the PLAN.
 
(End of Article)
 
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ARTICLE VI : TRIALS AND COMPLETION
 
1.                  NOTICE
 
The BUILDER shall notify the BUYER in writing or by facsimile at least twenty (20) days in advance of the time and place of the trial run of the VESSEL. Such notice shall specify the place from which the VESSEL will commence her trial run and approximate date upon which the trial run is expected to take place. Such date shall be further confirmed by the BUILDER five (5) days in advance of the trial run in writing or by facsimile.
 
The BUYER’S REPRESENTATIVE, who is to witness the performance of the VESSEL during such trial run, shall be present at such place on the date specified in such notice. Should the BUYER’S REPRESENTATIVE fail to be present after the BUILDER’s due notice to the BUYER as provided above, the BUILDER shall be entitled to conduct such trial run with the presence of the representative(s) of the CLASSIFICATION SOCIETY only without the BUYER’S REPRESENTATIVE being present. In such case, the BUYER shall be obliged to accept the VESSEL on the basis of a certificate issued by the BUILDER that the VESSEL, after the trial run, subject to alterations and corrections, if necessary, has been found to conform with the SPECIFICATIONS and this CONTRACT and is satisfactory in all respects, provided the BUILDER first makes such corrections and alterations promptly.
 
2.                  WEATHER CONDITION
 
In the event of unfavourable weather on the date specified for the trial run, the trial run shall take place on the first available day that weather conditions permit. The parties hereto recognise that the weather conditions in Korean waters, in which the trial run is to take place, are such that great changes in weather may arise momentarily and without warning and therefore, it is agreed that if, during the trial run, the weather should become so unfavourable that the trial run cannot be continued, then the trial run shall be discontinued and postponed until the first favourable day next following, unless the BUYER shall assent to the acceptance of the VESSEL by notification in writing on the basis of such trial run so far made prior to such change in weather conditions. Any delay of the trial run caused by such unfavourable weather conditions shall also operate to extend the Delivery Date of the VESSEL for the period of delay occasioned by such unfavourable weather conditions.
 
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3.               HOW CONDUCTED
 
All expenses in connection with the trials of the VESSEL are to be for the account of the BUILDER, which, during the trials, is to provide at its own expense the necessary crew to comply with conditions of safe navigation. The trials shall be conducted in the manner prescribed in this CONTRACT and the SPECIFICATIONS, and shall prove fulfilment of the performance requirements for the trials as set forth in the SPECIFICATIONS.
 
The BUILDER shall be entitled to conduct preliminary sea trials, during which the propulsion plant and/or its appurtenance shall be adjusted according to the BUILDER’s judgement. The BUILDER shall have the right to repeat any trial whatsoever as it deems necessary.
 
4.                  CONSUMABLE STORES
 
The BUILDER shall load the VESSEL with the required quantity of fuel oil, lubricating oil and greases, fresh water, and other stores necessary to conduct the trials as set forth in the SPECIFICATIONS. The necessary ballast (fuel oil, fresh water and such other ballast as may be required) to bring the VESSEL to the trial load draft, as specified in the SPECIFICATIONS, shall be supplied and paid for by the BUILDER whilst lubricating oil and greases shall be supplied and paid for by the BUYER within the time advised by the BUILDER for the conduct of sea trials as well as for use before the delivery of the VESSEL to the BUYER. The fuel oil as well as lubricating oil and greases shall be in accordance with the specifications of the main engine and other machinery and the BUYER shall decide and advise the BUILDER of the supplier’s name for lubricating oil and greases before the work-commencement of the VESSEL, provided that the supplier shall be acceptable to the BUILDER and/or the makers of all the machinery.
 
Any fuel oil, fresh water or other consumable stores furnished and paid for by the BUILDER for trial runs remaining on board the VESSEL, at the time of acceptance of the VESSEL by the BUYER, shall be bought by the BUYER from the BUILDER at the BUILDER’s purchase price for such supply in Korea and payment by the BUYER thereof shall be made at the time of delivery of the VESSEL. The BUILDER shall pay the BUYER at the time of delivery of the VESSEL for the consumed quantity of any lubricating oil and greases which were furnished and paid for by the BUYER at the BUYER’s purchase price thereof. The consumed quantity of lubricating oils and greases shall be calculated on the basis of the difference between the remaining amount, including the same remaining in the
 
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main engine, other machinery and their pipes, stern tube and the like, and the supplied amount.
 
5.                  ACCEPTANCE OR REJECTION
 
(a)                If, during any sea trial, any breakdown occurs entailing interruption or irregular performance which can be repaired on board, the trial shall be continued after such repairs and be valid in all respects.
 
(b)            However, if, during or after the trial run, it becomes apparent that the VESSEL or any part of her equipment requires alterations or corrections which but for this provision would or might entitle the BUYER to rescind this CONTRACT, the BUILDER shall notify the BUYER promptly in writing or by facsimile to such effect and shall simultaneously advise the BUYER of the estimated additional time required for the necessary alterations or corrections to be made.
 
The BUYER shall, within five(5) days of receipt from the BUILDER of notice of completion of such alterations or corrections and after such further trials or tests as necessary, notify the BUILDER in writing or by facsimile confirmed in writing of its acceptance, qualified acceptance or rejection of the VESSEL, all in accordance with the SPECIFICATIONS, the PLAN and this CONTRACT, and shall not be entitled to reject the VESSEL on such grounds until such time.
 
(c)                Save as above provided, the BUYER shall, within three(3) days after completion of the trial run, notify the BUILDER in writing or by facsimile confirmed in writing of its acceptance of the VESSEL or of the details in respect of which the VESSEL does not conform to the SPECIFICATIONS or this CONTRACT.
 
If the BUILDER is in agreement with the BUYER’s determinations as to non-conformity, the BUILDER shall make such alterations or changes as may be necessary to correct such non-conformity and shall prove the fulfilment of this CONTRACT and the SPECIFICATIONS by such tests or trials as may be necessary.
 
The BUYER shall, within three (3) days after completion of such tests and/or trials, notify the BUILDER in writing or by facsimile confirmed in writing of its acceptance or rejection of the VESSEL.
 
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(d)            However, the BUYER shall not be entitled to reject the VESSEL by reason of any minor or insubstantial items judged from the point of view of standard shipbuilding and shipping practice as not being in conformity with the SPECIFICATIONS, but, in that case, the BUILDER shall not be released from the obligation to correct and/or remedy such minor or insubstantial items as soon as practicable after the delivery of the VESSEL.
 
6.                  EFFECT OF ACCEPTANCE
 
The BUYER’s written or facsimiled notification of acceptance delivered to the BUILDER as above provided, shall be final and binding insofar as conformity of the VESSEL with the SPECIFICATIONS is concerned and shall preclude the BUYER from refusing formal delivery of the VESSEL as hereinafter provided, if the BUILDER complies with all conditions of delivery, as herein set forth and provided that, in the case of qualified acceptance, any matters which were mentioned in the notice of the qualified acceptance by the BUYER as requiring correction have been corrected satisfactorily.
 
If the BUYER fails to notify the BUILDER of its acceptance or rejection of the VESSEL as hereinabove provided, the BUYER shall be deemed to have accepted the VESSEL. Nothing contained in this Article shall preclude the BUILDER from exercising any and all rights which the BUILDER has under this CONTRACT if the BUILDER disagrees with the BUYER’s rejection of the VESSEL or any reasons given for such rejection, including arbitration provided in Article XIV hereof.
 
(End of Article)
 
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ARTICLE VII : DELIVERY
 
1.                  TIME AND PLACE
 
The VESSEL shall be delivered by the BUILDER to the BUYER at the SHIPYARD, safely afloat on or before 30 th April, 2009 (hereinafter called the “DELIVERY DATE”) after completion of satisfactory trials and acceptance by the BUYER in accordance with the terms of Article VI, except that, in the event of delays in delivery of the VESSEL by the BUILDER due to causes which under the terms of this CONTRACT permit extensions of the time for delivery of the VESSEL, the aforementioned DELIVERY DATE shall be extended accordingly.
 
It is hereby agreed that the BUILDER shall have the right to advance the DELIVERY DATE provided that the BUILDER shall have given to the BUYER written notice of the new proposed earlier delivery date at least six (6) months before such new proposed advanced delivery date; and
 
Any such new proposed earlier delivery date shall be considered as the DELIVERY DATE for the purpose of this CONTRACT.
 
2.                  WHEN AND HOW EFFECTED 
 
Provided that the BUYER shall concurrently with delivery of the VESSEL release to the BUILDER the fifth instalment as set forth in Article X.2. hereof and shall have fulfilled all of its obligations provided for in this CONTRACT, delivery of the VESSEL shall be forthwith effected upon acceptance thereof by the BUYER, as hereinabove provided, by the concurrent delivery by each of the parties hereto to the other of a PROTOCOL OF DELIVERY AND ACCEPTANCE acknowledging delivery of the VESSEL by the BUILDER and acceptance thereof by the BUYER, which PROTOCOL shall be prepared in duplicate and signed by each of the parties hereto.
 
3.                  DOCUMENTS TO BE DELIVERED TO THE BUYER
 
Upon delivery and acceptance of the VESSEL, the BUILDER shall deliver to the BUYER the following documents, which shall accompany the aforementioned PROTOCOL OF DELIVERY AND ACCEPTANCE :
 
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(a)             PROTOCOL OF TRIALS of the VESSEL made pursuant to this CONTRACT and the SPECIFICATIONS,
 
(b)            PROTOCOL OF INVENTORY of the equipment of the VESSEL, including spare parts, all as specified in the SPECIFICATIONS,
 
(c)             PROTOCOL OF STORES OF CONSUMABLE NATURE, such as all fuel oil and fresh water remaining in tanks if its cost is charged to the BUYER under Article VI.4. hereof,
 
(d)            DRAWINGS AND PLANS pertaining to the VESSEL as stipulated in the SPECIFICATIONS, which shall be furnished to the BUYER at no additional cost,
 
(e)             ALL CERTIFICATES required to be furnished upon delivery of the VESSEL pursuant to this CONTRACT, the SPECIFICATIONS and the customary shipbuilding practice, including
 
(i)                                  Classification Certificate
(ii)                               Safety Construction Certificate
(iii)                            Safety Equipment Certificate
(iv)                           Safety Radio Certificate
(v)                              International Loadline Certificate
(vi)                           International Tonnage Certificate
(vii)                        BUILDER’s Certificate
(viii)                     De-ratting Exemption Certificate
 
However, it is agreed by the parties that if the Classification Certificate and/or other certificates are not available at the time of delivery of the VESSEL, provisional certificates shall be accepted by the BUYER, provided that the BUILDER shall furnish the BUYER with formal certificates as promptly as possible after such formal certificates have been issued.
 
(f)               DECLARATION OF WARRANTY of the BUILDER that the VESSEL is delivered to the BUYER free and clear of any liens, claims, mortgages, or other encumbrances upon the BUYER’s title thereto, and in particular, that the VESSEL is absolutely free of all burdens in the nature of imposts, taxes, or charges imposed by the prefecture or country
 
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of the port of delivery, as well as of all liabilities of the BUILDER to its sub-contractors and employees and of all liabilities arising from the operation of the VESSEL in trial runs, or otherwise, prior to delivery except as otherwise provided under this CONTRACT.
 
(g)                      COMMERCIAL INVOICE.
 
4.                  TENDER OF THE VESSEL
 
If the BUYER fails to take delivery of the VESSEL after completion thereof according to this CONTRACT and the SPECIFICATIONS, the BUILDER shall have the right to tender delivery of the VESSEL after compliance with all procedural requirements as provided above.
 
5.                  TITLE AND RISK
 
Title and risk shall pass to the BUYER upon delivery and acceptance of the VESSEL being effected as stated above and the BUILDER shall be free of all responsibility or liability whatsoever related with this CONTRACT except for the warranty of quality contained in Article IX and the obligation to correct and/or remedy, as provided in Article VI.5.(d), if any, it being expressly understood that, until such delivery is effected, the VESSEL and equipment thereof are at the entire risk of the BUILDER including but not confined to, risks of war, insurrection and seizure by Governments or Authorities, whether Korean or foreign, and whether at war or at peace. The title to the BUYER’s supplies as provided in Article XII shall remain with the BUYER and the BUILDER’s responsibility for such BUYER’s supplies shall be as described in Article XII.2.
 
6.                  REMOVAL OF THE VESSEL
 
The BUYER shall take possession of the VESSEL immediately upon delivery thereof and shall remove the VESSEL from the SHIPYARD within three (3) days after delivery thereof is effected. Port dues and other charges levied by the Korean Government Authorities after delivery of the VESSEL and any other costs related to the removal of the VESSEL shall be borne by the BUYER.
 
(End of Article)
 
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ARTICLE VIII : DELAYS AND EXTENSIONS OF TIME (FORCE MAJEURE)
 
1.                  CAUSES OF DELAY
 
If, at any time after signing this CONTRACT, either the construction or delivery of the VESSEL or any performance required hereunder as a prerequisite to the delivery thereof is delayed by any of the following events; namely war, acts of state or government, blockade, revolution, insurrections, mobilization, civil commotion, riots, general workers strikes, sabotage,  Acts of God or the public enemy, plague or other epidemics, quarantines, prolonged failure of electric current, freight embargoes, or defects in major forgings or castings, or delays in the BUYER’s supplies as stipulated in Article XII, if any, or or defects in materials, machinery or equipment which could not have been detected by the BUILDER using reasonable care or earthquakes, tidal waves, typhoons, hurricanes, prolonged or unusually severe weather conditions or by destruction of the premises or works of the BUILDER or its sub-contractors, or of the VESSEL, or any part thereof, by fire, landslides, flood, lightning, explosion or the BUILDER’s performance under the CONTRACT, or delays caused by the CLASSIFICATION SOCIETY or the BUYER’s faulty action or omission, or other causes beyond the control of the BUILDER, or its sub-contractors, as the case may be, or for any other causes which, under the terms of this CONTRACT, authorise and permit extension of the time for delivery of the VESSEL, then, in the event of delays due to the happening of any of the aforementioned contingencies, the DELIVERY DATE of the VESSEL under this CONTRACT shall be extended for a period of time which shall not exceed the total accumulated time of all such delays.
 
The BUILDER shall have used reasonable efforts to mitigate the duration and effects of such events of the construction schedule.
 
2.                  NOTICE OF DELAYS
 
As soon as practicably possible after commencement of any delay but not later than fourteen (14) days on account of which the BUILDER claims that it is entitled under this CONTRACT to an extension of the DELIVERY DATE of the VESSEL, excluding delays due to arbitration, the BUILDER shall advise the BUYER in writing or by facsimile of the date such delay commenced, the reasons thereof and, if possible, its estimated duration of the probable delay in the delivery of the VESSEL, and shall supply the BUYER if reasonably available with evidence to justify the delay claimed. Within fourteen (14) days after such delay ends, the BUILDER shall likewise advise the BUYER in writing or by
 
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facsimile of the date that such delay ended, and also, shall specify the period of time by which the BUILDER claims the DELIVERY DATE should be extended by reason of such delay. Failure of the BUYER to object to the BUILDER’s notification of any claim for extension of the date for delivery of the VESSEL within fourteen (14) days after receipt by the BUYER of such notification shall be deemed to be a waiver by the BUYER of its right to object to such extension.
 
3.                  RIGHT TO RESCIND FOR EXCESSIVE DELAY
 
If the total accumulated time of all permissible and non-permissible delays, excluding delays due to (i) arbitration under Article XIV, (ii) the BUYER’s defaults under Article XI, (iii) modifications and changes under Article V or (iv) delays or defects in the BUYER’s supplies as stipulated in Article XII, aggregates two hundred and forty (240) days or more, then, the BUYER may, at any time thereafter, rescind this CONTRACT by giving a written notice of rescission to the BUILDER. Such rescission shall be effective as of the date the notice thereof is received by the BUILDER.
 
If the BUYER has not served the notice of rescission as provided in the above or Article III.1. hereof, the BUILDER may, at any time after expiration of the accumulated time of the delay in delivery, either two hundred and forty (240) days in case of the delay in this Paragraph or two hundred and ten (210) days in case of the delay in Article III.1, notify the BUYER of the future date upon which the BUILDER estimates the VESSEL will be ready for delivery and demand in writing or by facsimile that the BUYER make an election either to rescind this CONTRACT or to consent to the delivery of the VESSEL at such future date, in which case the BUYER shall, within fourteen(14) days after receipt of such demand, make and notify the BUILDER of such election. If the BUYER elects to consent to the delivery of the VESSEL at such future date (or other future date as the parties may agree):
 
(a)             Such future date shall become the contractual delivery date for the purposes of this CONTRACT and shall be subject to extension by reason of permissible delays as herein provided, and
 
(b)            If the VESSEL is not delivered by such revised contractual delivery date (as extended by reason of permissible delays), the BUYER shall have the same right of rescission upon the same terms as provided in the above and Article III. 1.
 
If the BUYER shall not make an election within fourteen(14) days as provided hereinabove, the BUYER shall be deemed to have accepted such extension of the DELIVERY DATE to
 
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the future delivery date indicated by the BUILDER.
 
4.               DEFINITION OF PERMISSIBLE DELAYS
 
Delays on account of the foregoing causes shall be understood to be permissible delays, and are to be distinguished from non-permissible unauthorised delays on account of which the CONTRACT PRICE of the VESSEL is subject to adjustment as provided in Article III hereof.
 
(End of Article)
 
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ARTICLE IX : WARRANTY OF QUALITY
 
1.                  GUARANTEE OF MATERIAL AND WORKMANSHIP
 
The BUILDER, for the period of twelve (12) months from the date of delivery of the VESSEL to the BUYER, guarantees the VESSEL and her engine and all parts and equipment thereof that are manufactured or furnished by the BUILDER under this CONTRACT against all defects which are directly due to faulty design, defective materials, construction miscalculation and/or poor workmanship, or negligent or other improper acts or omissions on the part of the BUILDER or its subcontractors provided such defects have not been caused by perils of the sea, rivers or navigations, or by normal wear and tear, overloading, improper loading or stowage, corrosion of the materials other than related to lack of maintenance, fire, accidents at sea or elsewhere, or by incompetence, mismanagement, negligence or wilful neglect or any alteration or addition to the VESSEL which has not previously been approved by the BUILDER.
 
The BUILDER will be responsible for all machinery or parts of machinery and all constructions which are supplied by sub-contractors and will guarantee the above mentioned for a period of twelve (12) months on the basis as laid down in this Paragraph. Upon rectification of an item claimed under this guarantee, this item shall be covered for further twelve (12) months under the same terms and conditions. However, this is limited to a maximum of Eighteen (18) months from Delivery Date.
 
2.                  NOTICE OF DEFECTS
 
The BUYER or its duly authorised representative will notify the BUILDER in writing or by facsimile promptly after discovery of any defect for which a claim is to be made under this guarantee.
 
The BUYER’s written notice shall include full particulars as to the nature of the defect and the extent of the damage caused thereby, but excluding consequential damage as hereinafter provided. The BUILDER will be under no obligation with respect to this guarantee in respect of any claim for defects discovered prior to the expiry date of the guarantee, unless notice of such defects is received by the BUILDER before the expiry date. However, facsimiled advice received by the BUILDER within seven (7) days after such expiry date that a claim is forthcoming will be sufficient compliance with the requirement as to time,
 
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provided that such facsimiled advice shall include at least a brief description of the defect including the identity of the equipment, extent of damage, name and number of any replacement part and description of any remedial work required, and that full particulars are given to the BUILDER not later than fourteen (14) days after the expiry date.
 
3.                  REMEDY OF DEFECTS
 
(a)              The BUILDER shall remedy, at its expense, any defects, against which the VESSEL is guaranteed under this Article, by making all necessary and reasonably practicable repairs or replacements at the SHIPYARD or elsewhere as provided for in (b) hereinbelow.
 
In such case, the VESSEL shall be taken at the BUYER’s cost and responsibility to the place selected, ready in all respects for such repairs or replacements and in any event, the BUILDER shall not be responsible for towage
 
(b)            However, BUYER should determine and prove if it is commercially and/or operationally impractical (which shall include, but not be limited to, an emergency) to bring the VESSEL to the SHIPYARD, the BUYER may cause the necessary repairs or replacements to be made elsewhere which is deemed by the BUYER with the consent of the BUILDER which shall not be unreasonably withheld, to be suitable for the purpose, provided that, in such event, the BUILDER may forward or supply replacement parts or materials under the terms described in (c) hereinbelow, unless forwarding or supplying thereof under the terms described in (c) hereinbelow would impair or delay the operation or working schedule of the VESSEL. In the event that the BUYER proposes to cause the necessary repairs or replacements to be made to the VESSEL at any shipyard or works other than the SHIPYARD, the BUYER shall first (but in all events as soon as reasonably possible) give the BUILDER notice in writing or by facsimile of the time and place such repairs will be made, and if the VESSEL is not thereby delayed, or her operation or working schedule is not thereby impaired, the BUILDER shall have the right to verify by its own representative(s) the nature and extent of the defects complained of. The BUILDER shall, in such case, promptly advise the BUYER by facsimile, after such examination has been completed, of its acceptance or rejection of the defects as ones that are covered by the guarantee herein provided. Upon the BUILDER’s acceptance of the defects as justifying remedy under this Article, or upon award of the arbitration so determining, the BUILDER shall compensate the BUYER an amount equal to the actual proven cost of making the same repairs or replacements.
 
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(c)             In the event that it is necessary for the BUILDER to forward a replacement for a defective part under this guarantee, replacement parts shall be shipped to the BUYER under the terms of CIF port of the country where vessel will be repaired.
 
(d)            The BUILDER reserves the option to retrieve, at the BUILDER’s cost, any of the replaced equipment/parts in case defects are remedied in accordance with the provisions in this Article.
 
(e)            Any dispute under this Article shall be referred to arbitration in accordance with the provisions of Article XIV hereof.
 
4.                  EXTENT OF THE BUILDER’S LIABILITY
 
(a)             After delivery of the VESSEL the responsibility of the BUILDER in respect of and/or in connection with the VESSEL and/or this CONTRACT shall be limited to the extent expressly provided in the Paragraphs of this Article. Except as expressly provided in the Paragraphs of this Article, in no circumstances and on no ground whatsoever shall the BUILDER have any responsibility or liability whatsoever or howsoever arising in respect of or in connection with the VESSEL or this CONTRACT after the delivery of the VESSEL. Further, but without in any way limiting the generality of the foregoing, the BUILDER shall have no liability or responsibility whatsoever or howsoever arising for or in connection with any consequential or special losses, damages or expenses (including but not limited to loss of time, loss of profit or earnings or demurrage directly or indirectly caused), any pecuniary loss or expense, any liability to any third party or any fine, compensation, penalty or other payment or sanction incurred by or imposed upon the BUYER or any other party whatsoever in relation to or in connection with this CONTRACT or the VESSEL.
 
(b)            The BUILDER shall be under no obligation with respect to defects in respect of which the BUILDER has not received notice in accordance with Paragraph 2 of this Article by the expiry date of the guarantee specified in Paragraph 1, nor in any event shall the BUILDER be liable for any worsening of the defects after the expiry date of the guarantee.
 
(c)             The BUILDER shall under no circumstances be liable for defects in the VESSEL or any part of equipment thereof caused by perils of the sea, rivers or navigations, or by normal wear and tear, overloading, improper loading or stowage, corrosion of the
 
30

 
materials other than related to lack of maintenance, fire, accidents at sea or elsewhere, or by incompetence, mismanagement, negligence or wilful neglect or any alteration or addition on the part of the BUYER, its employees or agents or any other person on or doing work on the VESSEL, including the VESSEL’s officers, crew and passengers. Likewise, the BUILDER shall not be liable for defects in the VESSEL or any part of equipment thereof that are due to repairs carried out by any other than the BUILDER or which have not been carried out in accordance with the procedure set out in Paragraph 3 (b) of this Article.
 
(d)            The BUILDER shall not be obliged to repair, not be liable for, damage to the VESSEL or any part of the equipment thereof, which after delivery of the VESSEL, is caused other than by the defects of the nature specified in this Article. The guarantees contained as hereinabove in this Article replace and exclude any other liability, guarantee, warranty and/or condition imposed or implied by statute, common law, custom, contract (including this CONTRACT) or otherwise on the part of the BUILDER by reason of the construction and sale of the VESSEL for and to the BUYER or for any other reason whatsoever.
 
5.                        GUARANTEE ENGINEER
 
The BUILDER shall have the right to appoint a Guarantee Engineer to serve on the VESSEL as its representative for a period of Three (3) months from the date the VESSEL is delivered. However, if the BUYER and the BUILDER shall deem it necessary to keep the Guarantee Engineer on the VESSEL for a longer period, then he shall remain on board the VESSEL after the said Three (3) months, but not longer than Six (6) months from the delivery of the VESSEL.
 
The BUYER, and its employees, shall give such Guarantee Engineer full cooperation in carrying out his duties as the representative of the BUILDER on board the VESSEL.
 
The Guarantee Engineer shall sign BUYER’s Indemnity Forms and shall at all times deemed to be an employee of the BUILDER.
 
The BUYER shall accord the Guarantee Engineer treatment comparable to the VESSEL’s Chief Engineer, and shall provide board and lodging at no cost to the BUILDER and/or the Guarantee Engineer.
 
While the Guarantee Engineer is on board the VESSEL, the BUYER shall pay to the BUILDER the sum of United States Dollars Six Thousand and Five Hundred (US$ 6,500.-) per month as a compensation for a part of cost and charges to be borne by the BUILDER in connection with Guarantee Engineer and also shall pay the expenses of his repatriation to
 
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Korea by air upon termination of his service, the expenses of his communication with the BUILDER incurred in performing his duties and expenses, if any, of his medical and hospital care in the VESSEL’s hospital.
 
Pertaining to the detailed particulars of this Paragraph, an agreement will be made according to this effect between the parties hereto upon delivery of the VESSEL.
 
(End of Article)
 
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ARTICLE X : PAYMENT
 
1.                  CURRENCY
 
All payments under this CONTRACT shall be made in United States Dollars.
 
2.                  TERMS OF PAYMENT
 
The payments of the CONTRACT PRICE shall be made as follows :
 
(a)             First Instalment
 
Twenty per cent (20 %) of the CONTRACT PRICE amounting to U.S.Dollars Eighteen Million Three Hundred Thousand only (US$ 18,300,000.-) shall be paid within three (3) business days after receipt by the BUYER of the original of the Refund Guarantee specified in Paragraph 8 of this Article.
 
Under this CONTRACT, in counting the business days, only Saturdays and Sundays are excepted. When a due date falls on a day when banks are not open for business in New York, N.Y., U.S.A., such due date shall fall due upon the first business day next following.
 
(b)            Second Instalment
 
Twenty per cent (20%) of the CONTRACT PRICE amounting to U.S.Dollars Eighteen Million Three Hundred Thousand only (US$ 18,300,000.-) shall be paid within three (3) business days of receipt by the Buyer of a facsimiled advice from the BUILDER that steel cutting has been commenced.
 
(c)             Third Instalment
 
Ten per cent (10%) of the CONTRACT PRICE amounting to U.S.Dollars Nine Million One Hundered Fifty Thousand only (US$ 9,150,000.-) shall be paid within three (3) business days of receipt by the BUYER of a facsimiled advice from the BUILDER that the first block of the keel has been laid.
 
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(d)            Fourth Instalment
 
Ten per cent (10%) of the CONTRACT PRICE amounting to U.S.Dollars Nine Million One Hundred Fifty Thousand only (US$ 9,150,000-) shall be paid within three (3) business days of receipt by the BUYER of a facsimiled advice from the BUILDER that the launching of the VESSEL has been completed.
 
(f)               Fifth Instalment
 
Forty per cent (40%) of the CONTRACT PRICE amounting to U.S.Dollars Thirty Six Million Six Hundred Thousand only (US$ 36,600,000.-) plus or minus any increase or decrease due to modifications and/or adjustment, if any, arising prior to delivery of the VESSEL of the CONTRACT PRICE under Articles III and V of this CONTRACT shall be paid to the BUILDER concurrently with the delivery of the VESSEL. (The date stipulated for payment of each of the five instalments mentioned above is hereinafter in this Article and in Article XI referred to as the “DUE DATE” of that instalment).
 
It is understood and agreed upon by the BUILDER and the BUYER that all payments under the provisions of this Article shall not be delayed or withheld by the BUYER due to any dispute or disagreement of whatsoever nature arising between the BUILDER and the BUYER. Should there be any dispute in this connection, the matter shall be dealt with in accordance with the provisions of arbitration in Article XIV hereof. Expenses for remitting payments and any other expenses connected with such payments shall be for the account of the BUYER.
 
3.                  DEMAND FOR PAYMENT
 
At least fourteen (14) days prior to the date of each event provided in Paragraph 2 of this Article on which any payment shall fall due hereunder, with the exception of the payment of the first and second instalments, the BUILDER shall notify the BUYER by facsimile of the date such payment shall become due.
 
The BUYER shall immediately acknowledge receipt of such notification by facsimile to the BUILDER, and make payment as set forth in this Article. If the BUILDER fails to receive the BUYER’s said acknowledgement within three (3) days after sending the aforementioned notification, the BUILDER shall promptly facsimile to the BUYER a second notification of similar import. The BUYER shall immediately acknowledge by facsimile receipt of the
 
34

 
foregoing second notification regardless of whether or not the first notification was acknowledged as aforesaid.
 
4.                  METHOD OF PAYMENT
 
(a)            All the pre-delivery payments and the payment due on delivery in settlement of the CONTRACT PRICE as provided for in Paragraph 2 of this Article shall be made in U.S. Dollars on or before the DUE DATE thereof by telegraphic transfer as follows ;
 
(i)                                     The payment of the first, second, third and fourth instalments shall be made to the account of the BUILDER with a bank to be duly designated by the BUILDER, in Korea (the “BUILDER’S BANK”) or any other bank by telegraphic transfer remittance at least two(2) business days prior to the DUE DATE notified by the BUILDER.
 
(ii)                                  The fifth instalment as provided for in Paragraph 2.(f) of this Article shall be deposited at the BUILDER’S BANK in the name of the Buyer or, if the BUILDER requires, with any other bank in the name of the Byuer by telegraphic transfer remittance at least two (2) business days prior to the scheduled delivery date of the VESSEL notified by the BUILDER, with instructions that the said instalment is payable to the BUILDER against presentation by the BUILDER to the BUILDER’S BANK or any other bank, as the case may be, of a duplicate original copy of the PROTOCOL OF DELIVERY AND ACCEPTANCE of the VESSEL signed by the BUILDER and the BUYER.
 
(b)            Simultaneously with each of such payments, the BUYER shall advise the BUILDER of the details of the payments by facsimile and at the same time, the BUYER shall cause the BUYER’s remitting Bank to advise the BUILDER’S BANK or any other bank of the details of such payments by authenticated bank cable or telex.
 
5.                  REFUND BY THE BUILDER
 
The payments made by the BUYER to the BUILDER prior to delivery of the VESSEL shall constitute advances to the BUILDER. If the VESSEL is rejected by the BUYER in accordance with the terms of this CONTRACT, or except in the case of rescission or rescission of this CONTRACT by the BUILDER under the provisions of Article XI hereof, if the BUYER terminates or rescinds this CONTRACT pursuant to any of the provisions of
 
35

 
this CONTRACT specifically permitting the BUYER to do so, the BUILDER shall forthwith refund to the BUYER, in U.S. Dollars, the full amount of total sums paid by the BUYER to the BUILDER in advance of delivery together with interest thereon as herein provided.
 
The transfer and other bank charges of such refund shall be for the BUILDER’s account. The interest rate of the refund, as above provided, shall be seven per cent (7%) per annum from the date following the date of receipt by the BUILDER of the pre-delivery instalment(s) to the date of remittance by telegraphic transfer of such refund, provided, however, that if the cancellation of this CONTRACT by the BUYER is based upon delays due to force majeure or other causes beyond the control of the BUILDER as provided for in Article VIII hereof, then in such event, the interest rate of refund shall be reduced to six point five per cent (6.5%) per annum.
 
It is hereby understood by both parties that payment of any interest provided herein is by way of liquidated damages due to rescission of this CONTRACT and not by way of compensation for use of money.
 
If, the BUILDER is required to refund to the BUYER the instalments paid by the BUYER to the BUILDER as provided in this Paragraph, the BUILDER shall return to the BUYER all of the BUYER’s supplies as stipulated in Article XII which were not incorporated into the VESSEL and pay to the BUYER an amount equal to the cost to the BUYER of those supplies incorporated into the VESSEL.
 
6.                  TOTAL LOSS
 
If there is a total loss or a constructive total loss of the VESSEL prior to delivery thereof, the BUILDER shall proceed according to the option of the Buyer hereto either:
 
(a)             to build another vessel in place of the VESSEL so lost and deliver it under this CONTRACT to the BUYER, provided that the parties hereto shall have agreed in writing to a reasonable cost and time for the construction of such vessel in place of the lost VESSEL; or
 
(b)            to refund to the BUYER the full amount of the total sums paid by the BUYER to the BUILDER under the provisions of Paragraph 2 of this Article together with interest thereon at the rate of six point five per cent (6.5%) per annum from the date following the date of receipt by the BUILDER of such pre-delivery instalment(s) to the date of
 
36

 
payment by the BUILDER to the BUYER of the refund.
 
If the parties hereto fail to reach such agreement within two (2) months after the VESSEL is determined to be a total loss or constructive total loss, the provisions of (b) hereinabove shall be applied.
 
7.                  DISCHARGE OF OBLIGATIONS
 
Such refund as provided in the foregoing Paragraphs 5 and 6 by the BUILDER to the BUYER shall forthwith discharge all the obligations, duties and liabilities of each of the parties hereto to the other except the claims of the BUILDER against the BUYER, if any, under this CONTRACT. Any and all refunds or payments due to the BUYER under this CONTRACT shall be effected by telegraphic transfer to the account specified by the BUYER.
 
8.                  REFUND GUARANTEE
 
The BUILDER shall deliver to the BUYER by hard copy or by SWIFT through the BUYER’s bank, acceptable to the BUILDER, an assignable letter of guarantee issued by a Bank acceptable to the Buyer as soon as possible but in any case no later than Ninety (90) days from the date of this CONTRACT for the refund of the pre-delivery instalments plus interest as aforesaid to the BUYER under or pursuant to Paragraph 5 above in the form annexed hereto as Exhibit “A”. All expenses in issuing and maintaining the letter of guarantee described in this Paragraph shall be borne by the BUILDER. In case of SWIFT, the BUYER shall advise the BUILDER of the details of the BUYER’s bank including the SWIFT address upon execution of this CONTRACT.
 
9.                  PERFORMANCE GUARANTEE
 
Upon signing this CONTRACT, the BUYER shall provide the BUILDER with an irrevocable and Corporate Guarantee pursuant to the Terms and Provisions of this Contract issued by a Corporate Guarantor acceptable to the BUILDER for the due and faithful performance by the BUYER of all its liabilities and responsibilities under the CONTRACT including, but not limited to, the payment of the CONTRACT PRICE and taking delivery of the VESSEL, in the form annexed hereto as Exhibit “B”.
 
(End of Article)
 
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ARTICLE XI : BUYER’S DEFAULT
 
1.                  DEFINITION OF DEFAULT
 
The BUYER shall be deemed to be in default under this CONTRACT in the following cases :
 
(a)             If the first, second, third and fourth is not paid to the BUILDER within respective Three (3) banking days of such instalments; or
 
(b)            If the fifth instalment is not deposited at the BUILDER’S BANK or at the account of the BUILDER with any other bank in accordance with Article X.4.(a)(ii) hereof or if the said fifth instalment deposit is not released to the BUILDER against presentation by the BUILDER of a duplicate original copy of the PROTOCOL OF DELIVERY AND ACCEPTANCE; or
 
(c)             If the BUYER fails to take delivery of the VESSEL when the VESSEL is duly tendered for delivery by the BUILDER within Three (3) banking days under the provisions of Article VII hereof; or
 
(d)            If and order or an effective resolution shall be passed for winding up of the BUYER (except for the purpose of reorganization, merger or amalgamation); or
 
(e)             If the BUYER fails to be in punctual, due and full compliance with any of its obligations under this CONTRACT.
 
In case the BUYER is in default of any of its obligations under this CONTRACT, the BUILDER is entitled to and shall have the following rights, powers and remedies in addition to such other rights, powers and remedies as the BUILDER may have elsewhere in this CONTRACT and/or at law, at equity or otherwise.
 
2.                  EFFECT OF THE BUYER’S DEFAULT ON OR BEFORE THE DELIVERY OF THE VESSEL
 
If the BUYER shall be in default as provided in Paragraph 1 above of its obligations under this CONTRACT, then;
 
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(a)             The DELIVERY DATE of the VESSEL shall be extended automatically for the actual period of such default and the BUILDER shall not be obliged to pay any liquidated damages for the delay in delivery of the VESSEL caused thereby.
 
(b)            The BUYER shall pay to the BUILDER interest at the rate of seven per cent (7%) per annum in respect of the instalment(s) in default from the respective DUE DATE to the date of actual receipt by the BUILDER of the full amount of such instalment(s).
 
(c)             If the BUYER is in default in payment of any of the instalment(s) due and payable prior to or simultaneously with the delivery of the VESSEL, the BUILDER shall, in writing or by facsimile, notify the BUYER to that effect, and the BUYER shall, upon receipt of such notification, forthwith acknowledge in writing or by facsimile to the BUILDER that such notification has been received.
 
(d)            If any of the BUYER’s default continues for a period of ten(10) days after the BUILDER’s notification to the BUYER of such default, the BUILDER may, at its option, rescind this CONTRACT by serving upon the BUYER a written notice or a facsimile notice of rescission confirmed in writing.
 
(e)            In the event of such rescission by the BUILDER of this CONTRACT due to the BUYER’s default as provided for in paragraph 1 above, the BUILDER shall be entitled to retain and apply the instalments already paid by the BUYER to the recovery of the BUILDER’s loss and damage including, but not being limited to, reasonable estimated profit due to the BUYER’s default and the rescission of this CONTRACT and at the same time the BUILDER shall have the full right and power either to complete or not to complete the VESSEL which is the sole property of the BUILDER as it deems fit, and to sell the VESSEL at a public or private sale on such terms and conditions as the BUILDER thinks fit without being answerable for any loss or damage.
 
The proceeds received by the BUILDER from the sale shall be applied in addition to the instalment(s) retained by the BUILDER as mentioned hereinabove as follows : -
 
First,                            in payment of all reasonable costs and expenses of the sale of the VESSEL, including interest thereon at seven per cent (7%) per annum from the respective date of payment of such costs and expenses aforesaid to the date of sale on account of the BUYER’s default.
 
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Second,            if the VESSEL has been completed, in or towards satisfaction of the unpaid balance of the CONTRACT PRICE, to which shall be added the cost of all additional work and extras agreed by the BUYER including interest thereon at seven per cent (7%) per annum from the respective DUE DATE of the instalment in default to the date of sale, or if the VESSEL has not been completed, in or towards satisfaction of the unpaid amount of the cost incurred by the BUILDER prior to the date of sale on account of construction of the VESSEL, including work, labour, materials and reasonably estimated profit which the BUILDER would have been entitled to receive if the VESSEL had been completed and delivered plus interest thereon at seven per cent (7%) per annum from the respective DUE DATE of the instalment in default to the date of sale.
 
Third,                       the balance of the proceeds, if any, shall belong to the BUYER, and shall forthwith be paid over to the BUYER by the BUILDER.
 
In the event of the proceeds from the sale together with instalment(s) retained by the BUILDER being insufficient to pay the BUILDER, the BUYER shall be liable for the deficiency and shall pay the same to the BUILDER upon its demand.
 
(End of Article)
 
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ARTICLE XII : BUYER’S SUPPLIES
 
1.                  RESPONSIBILITY OF THE BUYER
 
The BUYER shall, at its own risk, cost and expense, supply all the BUYER’s supplies as specified in Paragraph 0.16.1 of the SPECIFICATIONS (hereinafter called the “BUYER’S SUPPLIES”), to the BUILDER at the SHIPYARD in proper condition ready for installation and in accordance with the time schedule to be furnished by the BUILDER sixty (60) days from signing this Contract.
 
In order to facilitate the installation of the BUYER’S SUPPLIES by the BUILDER, the BUYER shall furnish the BUILDER with the necessary plans, instruction books, test report and all test certificates required by the BUILDER and shall cause the representative(s) of the makers of the BUYER’S SUPPLIES to give the BUILDER any advice, instructions or assistance which the BUILDER may reasonably require in the installation or adjustment thereof at the SHIPYARD, all without cost or expense to the BUILDER.
 
The BUYER shall be liable for any expense incurred by the BUILDER for repair of the BUYER’S SUPPLIES due to defective design or materials, poor workmanship or performance or due to damage in transit and the DELIVERY DATE of the VESSEL shall be extended for the period of such repair if such repair shall affect the delivery of the VESSEL.
 
Commissioning into good order of the BUYER’S SUPPLIES during and after installation on board shall be made at the BUYER’s expense by the representative of respective maker or the person designated by the BUYER in accordance with the BUILDER’s building schedule.
 
Should the BUYER fail to deliver to the BUILDER the BUYER’S SUPPLIES and the necessary document or advice for such supplies within the time specified by the BUILDER, the DELIVERY DATE of the VESSEL shall automatically be extended for the period of such delay if such delay in delivery shall affect the delivery of the VESSEL. In such event, the BUYER shall pay to the BUILDER all losses and damages sustained by the BUILDER due to such delay in the delivery of the BUYER’S SUPPLIES and such payment shall be made upon delivery of the VESSEL, provided, however, that the BUILDER shall have :
 
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(a)             furnished the BUYER with the time schedule referred to above, two (2) months prior to installation of the BUYER’S SUPPLIES and
 
(b)            given the BUYER written notice of any delay in delivery of the BUYER’S SUPPLIES and the necessary document or advice for such supplies as soon as the delay occurs which might give rise to a claim by the BUILDER under this Paragraph.
 
Furthermore, if the delay in delivery of the BUYER’S SUPPLIES and the necessary document or advice for such supplies should exceed twenty (20) days from the date specified by the BUILDER, the BUILDER shall be entitled to proceed with construction of the VESSEL without installation of such items (regardless of their nature or importance to the BUYER or the VESSEL) in or on the VESSEL without prejudice to the BUILDER’s right hereinabove provided, and the BUYER shall accept the VESSEL so completed.
 
2.                  RESPONSIBILITY OF THE BUILDER
 
The BUILDER shall be responsible for storing, safekeeping and handling with reasonable care of the BUYER’S SUPPLIES which the BUILDER is required to install on board the VESSEL under Paragraph 0.16.1 of the SPECIFICATIONS after delivery of such supplies to the SHIPYARD, and shall install such supplies on board the VESSEL at the BUILDER’s expense unless otherwise specified in the SPECIFICATIONS.
 
However, the BUILDER shall not be responsible for the quality, performance or efficiency of any equipment included in the BUYER’S SUPPLIES and is under no obligation with respect to the guarantee of such equipment against any defects caused by poor quality, performance or efficiency of the BUYER’S SUPPLIES. If any of the BUYER’S SUPPLIES is lost or damaged while in the custody of the BUILDER, the BUILDER shall, if the loss or damage is due to wilful default or negligence on its part, be responsible for such loss or damage.
 
(End of Article)
 
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ARTICLE XIII - INSURANCE
 
1.                           EXTENT OF INSURANCE COVERAGE
 
From the time of launching until delivery of the VESSEL, the BUILDER shall, at its own cost and expense, insure the VESSEL and all machinery and equipment, appurtenances and outfits, including the BUYER’s Supplies, built into or installed in or upon the VESSEL, against all risks under the “Institute Causes for BUILDER’s Risk”, with first class insurance company or underwriters in.
 
The amount of such insurance coverage shall, up to the date of delivery of the VESSEL, not be less than the aggregate amount of all instalments paid by the BUYER to the BUILDER, plus the value of the BUYER’s Supplies in the custody of the Shipyard.
 
The BUILDER shall provide the copy of corresponding insurance coverage of the VESSEL to the BUYER.
 
2.                           TERMINATION OF BUILDER’S OBLIGATION TO INSURE
 
The BUILDER shall be under no obligation to insure the VESSEL hereunder after delivery and acceptance of the VESSEL.

(End of Article)
 
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ARTICLE XIV: ARBITRATION
 
1.                  APPOINTMENT OF THE ARBITRATOR
 
If any dispute or difference shall arise between the parties hereto concerning any matter or thing herein contained, or the operation or the design and / or construction of the VESSEL, its machinery and equipment thereof, or any matter or thing in any way connected with this CONTRACT or the rights, duties or liabilities of either party under or in connection with this CONTRACT, then, in every such case, the dispute or difference shall be referred to arbitration in London by a sole arbitrator. The arbitrator shall be appointed by agreement within fourteen (14) days of first written notification of either party to the other of intention to arbitrate such dispute or difference, or in default of such agreement, upon the application of either of the parties, by the President for the time being of the London Maritime Arbitrators Association who shall in making any such appointment have due regard to the requirement for an expeditious resolution of the dispute and in particular the availability of any arbitrator so appointed for an early hearing date.
 
2.                  LAWS APPLICABLE
 
Any arbitration arising hereunder shall be governed by and construed in accordance with the Arbitration Act 1996 of England or any statutory modification or re-enactments thereof for the time being in force. The award of the arbitrator shall be final and binding upon parties hereto.
 
3.                  PROCEEDINGS
 
In the event of any dispute or difference arising or occurring prior to delivery to, or acceptance by, the BUYER of the VESSEL being referred to arbitration, the parties hereby acknowledge that time is of the essence in obtaining an award from the arbitrator on such dispute or difference and the parties hereby agree that the arbitration shall be conducted according to the following timetable:
 
(a)            The claimant in the arbitration to serve points of claim within fourteen (14) days of the appointment of the arbitrator.
 
(b)           The respondent in the arbitration to serve points of defence and points of counterclaim,
 
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if any, within fourteen (14) days thereafter.
 
(c)         The claimant to serve points of reply and defence to counterclaim, if any, within seven (7) days thereafter and the hearing of the arbitration to commence within twelve (12) weeks of the appointment of the arbitrator.
 
4.                  ALTERATION OF DELIVERY OF THE VESSEL
 
In the event of the arbitration of any dispute or difference arising or occurring prior to delivery to, or acceptance by the BUYER of the VESSEL, the award by the arbitrator shall include a finding as to whether or not the contractual delivery date of the VESSEL should, as a result of such dispute, be in any way altered thereby.
 
5.                  NOTICE OF AWARD
 
The award shall immediately be given to the BUYER and the BUILDER by telefax.
 
6.                  EXPENSES
 
The Arbitration Board shall determine which party shall bear the expenses of the arbitration or the portion of such expenses which each party shall bear.
 
7.                  ENTRY IN COURT
 
In case of failure by either party to respect the award of the arbitration, the judgement may be entered in any proper court having jurisdiction thereof.
 
(End of Article)
 
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ARTICLE XV: SUCCESSORS AND ASSIGNS
 
The BUILDER agrees that, prior to delivery of the VESSEL, this CONTRACT may, with the prior written approval of the BUILDER, which the BUILDER shall not unreasonably withhold, be transferred to and the title thereof may be taken by another company. In the event of any assignment pursuant to the terms of this CONTRACT, the assignee, its successors and assigns shall succeed to all the rights and obligations of the BUYER under this CONTRACT. However, the BUYER shall remain responsible for performance by the assignee, its successors and assigns of all the BUYER’s obligations, liabilities and responsibilities under this CONTRACT. It is understood that any expenses or charges incurred due to the transfer of this CONTRACT shall be for the account of the BUYER.
 
The BUYER is hereby allowed to assign the Contract for the purposes of financing without BUILDER’S approval. However, the BUYER shall remain responsible for performance by the assignee, its successors and assigns of all the BUYER’s obligations, liabilities and responsibilities under this CONTRACT. It is understood that any expenses or charges incurred due to the transfer of this CONTRACT shall be for the account of the BUYER. The BUYER is further allowed to nominate a company controlled by the BUYER to take over the Contract.
 
The BUILDER shall fully cooperate in case the BUYER requests UK Tax lease financing arrangements. However, the BUYER shall remain responsible for performance by the assignee, its successors and assigns of all the BUYER’s obligations, liabilities and responsibilities under this CONTRACT. It is understood that any expenses or charges incurred due to the transfer of this CONTRACT shall be for the account of the BUYER.
 
The BUILDER shall have the right to assign this CONTRACT at any time after the effective date hereof, provided that prior written agreement is obtained from the BUYER.
 
(End of Article)
 
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ARTICLE XVI: TAXES AND DUTIES
 
1.                  TAXES
 
Unless otherwise expressly provided for in this CONTRACT, all costs and taxes including stamp duties, if any, incurred in or levied by any country except Korea in connection with this CONTRACT shall be borne by the BUYER and corresponding costs and taxes in Korea, before delivery of the VESSEL, if any, shall be borne by the BUILDER.
 
2.                  DUTIES
 
The BUILDER shall hold the BUYER harmless from any payment of duty imposed in Korea upon materials or supplies which, under the terms of this CONTRACT, or amendments thereto, may be supplied by the BUYER from abroad for the construction of the VESSEL.
 
The BUILDER shall likewise hold the BUYER harmless from any payment of duty imposed in Korea in connection with materials or supplies for operation of the VESSEL, including running stores, provisions and supplies necessary to stock the VESSEL for its operation. This indemnity does not, however, extend to any items purchased by the BUYER for use in connection with the VESSEL which are not absolutely required for the construction or operation of the VESSEL.
 
(End of Article)
 
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ARTICLE XVII: PATENTS, TRADEMARKS AND COPYRIGHTS
 
1.                  PATENTS, TRADEMARKS AND COPYRIGHTS
 
Machinery and equipment of the VESSEL, whether made or furnished by the BUILDER under this CONTRACT, may bear the patent numbers, trademarks, or trade names of the manufacturers. The BUILDER shall defend and save harmless the BUYER from all liabilities or claims for or on account of the use of any patents, copyrights or design of any nature or kind, or for the infringement thereof including any unpatented invention made or used in the performance of this CONTRACT and also for any costs and expenses of litigation, if any in connection therewith. No such liability or responsibility shall be with the BUILDER with regard to components and/or equipment and/or design supplied by the BUYER.
 
Nothing contained herein shall be construed as transferring any patent or trademark rights or copyrights in equipment covered by this CONTRACT, and all such rights are hereby expressly reserved to the true and lawful owners thereof.
 
2.                  RIGHTS TO THE SPECIFICATIONS, PLANS, ETC.
 
The BUILDER retains all rights with respect to the SPECIFICATIONS, plans and working drawings, technical descriptions, calculations, test results and other data, information and documents concerning the design and construction of the VESSEL and the BUYER shall not disclose the same or divulge any information contained therein to any third parties, including but not limited to any other shipbuilders, without the prior written consent of the BUILDER, excepting where it is necessary for usual operation, repair and maintenance of the VESSEL.
 
(End of Article)
 
48

 
ARTICLE XVIII: INTERPRETATION AND GOVERNING LAW
 
This CONTRACT has been prepared in English and shall be executed in duplicate and in such number of additional copies as may be required by either party respectively. The parties hereto agree that the validity and interpretation of this CONTRACT and of each Article and part thereof shall be governed by the laws of England.
 
(End of Article)
 
49

 
ARTICLE XIX : NOTICE
 
Any and all notices, requests, demands, instructions, advices and communications in connection with this CONTRACT shall be written in English, sent by registered air mail or facsimile and shall be deemed to be given when first received whether by registered mail or facsimile. They shall be addressed as follows, unless and until otherwise advised : -

To the BUILDER :	Sungdong Shipbuilding & Marine Engineering Co., Ltd.	
 	1609-2, Hwang-li, Gwangdo-myeon, Tongyoung-si,	
 	Gyeongnam, Korea	
 	 	
 	Contract Administration Department	
 	Attn : Mr. S. K. Ahn	
 	Facsimile: (82) 55 650 9294	
 	Telephone: (82) 55 650 9311	
 	 	
To the BUYER :	Danaos Shipping Co., Ltd.	
 	Akti Kondyli 14, 185 45 Piraeus, Greece	
 	Attn : Mr. Dimitrios Vastarouchas	
 	Facsimile : (30) 210 422 0855	
 	Telephone: (30) 210 419 6529	
 
The said notices shall become effective upon receipt of the letter or facsimile communication by the receiver thereof. Where a notice by facsimile is concerned which is required to be confirmed by letter, then, unless the CONTRACT or the relevant Article thereof otherwise requires, the notice shall become effective upon receipt of the facsimile.
 
(End of Article)
 
50

 
ARTICLE XX : EFFECTIVENESS OF THIS CONTRACT
 
This CONTRACT shall become effective upon signing by the parties hereto.
 
(End of Article)
 
51

 
ARTICLE XXI - INTERPRETATION
 
1.                           LAWS APPLICABLE
 
The parties hereto agree that the validity and interpretation of this Contract and of each Article and part thereof shall be governed by the laws of England.
 
2.                           DISCREPANCIES
 
All general language or requirements embodied in the SPECIFICATIONS are intended to amplify, explain and implement the requirements of this CONTRACT. However, in the event that any language or requirements so embodied permit of an interpretation inconsistent with any provisions of this Contract, then, in each and every such event, the applicable provisions of this Contract shall prevail and govern. In the event of conflict between the SPECIFICATIONS and Plans, the SPECIFICATIONS shall prevail and govern.
 
3.                           ENTIRE AGREEMENT
 
This Contract contains the entire agreement and understanding between the parties hereto and supersedes all prior negotiations, representations, undertaking and agreements on any subject matter of this Contract.
 
4.                           AMENDMENTS AND SUPPLEMENTS
 
Any supplement, memorandum of understanding or amendment, whatsoever form it may be relating to this CONTRACT, to be made and signed among parties hereof after signing this CONTRACT, shall be the integral part of this CONTRACT and shall be predominant over the respective corresponding Article and/or Paragraph of this CONTRACT.
 
The Contract can only be amended in writing.
 
(End of Article)
 
52

 
ARTICLE XXII : EXCLUSIVENESS
 
This CONTRACT shall constitute the only and entire agreement between the parties hereto, and unless otherwise expressly provided for in this CONTRACT, all other agreements, oral or written, made and entered into between the parties prior to the execution of this CONTRACT shall be null and void.
 
(End of Article)
 
53

 
IN WITNESS WHEREOF , the parties hereto have caused this CONTRACT to be duly executed on the date and year first above written.

BUYER	BUILDER	

For and on behalf of	For and on behalf of	
BOXCARRIER (NO.1) CORP.	SUNGDONG SHIPBUILDING &	
 	MARINE ENGINEERING CO.,LTD.	

By	/s/ John Coustas	 	By	/s/ Kwan Hong Yu	 	
Name: John Coustas	Name: Kwan Hong Yu	
Title:	Title:	
President & Chief Executive Officer	Chairman & Chief Executive Officer	

WITNESS : /s/ Heung Chul Jung, Attorney-in-fact	WITNESS: [Illegible]	

54

 
EXHIBIT “A”
 
LETTER OF REFUNDMENT GUARANTEE
 
Gentlemen :
 
We hereby issue our letter of guarantee no.             in favour of                    (hereinafter called the “BUYER”) for account of                    (hereinafter called the “BUILDER”) as follows in consideration of the shipbuilding contract dated (hereinafter called the “Contract”) made by and among the BUYER and the BUILDER for the construction of one(1) single screw diesel engine driven Container VESSEL having BUILDER’s Hull No. (hereinafter called the “VESSEL”).
 
If in connection with the terms of the Contract the BUYER shall become entitled to a refund of the advance payment(s) made to the BUILDER prior to the delivery of the VESSEL, we hereby irrevocably guarantee the repayment of the same to the BUYER immediately on demand being initially US$ (Say U.S. Dollars) together with interest thereon at the rate of Seven (7) percent per annum from the respective dates on which such sums were paid by the BUILDER to the date of remittance by telegraphic transfer of such refund.
 
The amount of this guarantee will be automatically increased, not more than three times, upon BUILDER’s receipt of the respective instalment: each time by the amount of instalment of US$ (Say U.S. Dollars), US$.- (Say U.S. Dollars) and US$.- (Say U.S. Dollars) respectively plus interest thereon as provided in the Contract, but in any eventuality the amount of this guarantee shall not exceed the total sum of US$.- (Say U.S. Dollars plus interest thereon at the rate of Seven (7) percent per annum from the respective dates on which such sums were paid by the BUYER to the BUILDER to the date of remittance by telegraphic transfer of the refund. However, in the event of cancellation of the CONTRACT being based on delays due to force majeure or other causes beyond the control of the BUILDER, the interest rate of refund shall be reduced to six point five per cent (6.5%) per annum as provided in Article X of the CONTRACT.
 
Our liability under this letter of guarantee shall not be affected by any alteration to or variation of the terms of the Contract you may hereafter agree with the BUILDER and by any other matter of circumstances, including bankruptcy or insolvency of the BUILDER, which might otherwise discharge our liability hereunder as guarantor of the BUILDER’s obligations as aforesaid.
 
In case any refund is made to you by the BUILDER or by us under this guarantee, our liability hereunder shall be automatically reduced by the amount of such refund.
 
This letter of guarantee is available against BUYER’s simple receipt and signed statement certifying that BUYER’s demand for refund has been made in conformity with Article X of the Contract and the BUILDER has failed to make the refund within Thirty One (31) days after BUYER’s demand to the BUILDER.
 
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Refund shall be made to BUYER by telegraphic transfer in United States Dollars to an account designated by you without deduction, withholding or set-off.
 
This letter of guarantee shall expire and become null and void upon receipt by the BUYER of the sum guaranteed hereby or upon acceptance by the BUYER of the delivery of the VESSEL in accordance with the terms of the Contract and, in either case, this letter of guarantee shall be returned to us. This guarantee is valid from the date of this letter of guarantee until or in the event of delayed delivery until such time as the VESSEL is delivered by the BUILDER to the BUYER in accordance with the terms of the Contract.
 
Notwithstanding the provisions hereinabove, in case we receive notification from you or the BUILDER confirmed by an Arbitrator stating that your claim to cancel the Contract or your claim for refundment thereunder has been disputed and referred to Arbitration in accordance with the provisions of the Contract, the period of validity of this guarantee shall be extended until Thirty (30) days after the final and non-appealable award shall be rendered in the Arbitration and a copy thereof acknowledged by the Arbitrators. In such case, this guarantee shall not be available unless and until such acknowledged copy of the final award in the Arbitration justifying your claim is presented to us.
 
Your rights in respect of this letter of guarantee are assignable from the date of this letter of guarantee until such time as the VESSEL is delivered by the BUILDER to the BUYER in accordance with the provisions of the Contract, on the understanding that you will notify us of the identity of any assignee of your rights under this letter of guarantee.
 
Any notice or demand under this letter of guarantee shall be given by facsimile and sent to:

 

 
or to such other address as we might notify to you in writing. A notice shall be deemed to be served and shall take effect 2 hours after its transmission is completed, provided that if a notice would be deemed to be served on a day which is not a business day, or which is a business day but after 5:00 p.m. local time, in the place of receipt, the notice shall be deemed to be served and shall take effect at 9:00 a.m. on the next day which is a business day.
 
This guarantee shall be governed by and construed in accordance with the Laws of England. Any disputes arising under this guarantee (but not any disputes arising under the Contract which shall be determined by arbitration in accordance with the terms of the Contract and as referenced in this letter of guarantee) shall be determined by the High Court of Justice in London to whose exclusive jurisdiction we hereby submit. We appoint
 
2

 
                                                             as our agents for service of process in connection with any proceedings in such courts.
 
We each jointly and severally hereby represent and guarantee that we have the corporate power and authority to execute, deliver and perform the obligations under this letter of guarantee, and that such execution and performance will not violate or conflict with any provision of law, statute, rule, permit or regulation of any government, regulatory body, agency or other authority in the jurisdictions where we are subject to such laws and regulations.
 
IN WITNESS WHEREOF, we have hereunder set our hands and seal by our duly authorized representatives this           day of                , 2006.

 	Very truly yours,	

 	For and on behalf of	

 	 	
 	By	 	 	
 	Name :	
 	Title : Attorney-in-Fact	

 	For and on behalf of	

 	 	 	
 	By	 	 	
 	Name :	
 	Title : Attorney-in-Fact	
 
3

 
EXHIBIT “B”

Date :             , 2006
 
PERFORMANCE GUARANTEE
 
In consideration of the performance of a certain shipbuilding contract dated                                        (hereinafter called the “Contract”) by having your Hull No. (hereinafter called the “VESSEL”) providing among other things for payment of the Contract Price amounting to United States Dollars                                    (US$                                  );
 
We, the undersigned, hereby irrevocably and unconditionally guarantee to you, your successors, and assigns the due and faithful performance by the BUYER of its all liabilities and responsibilities under the Contract and any supplement, amendment, change or modification hereafter made thereto, including but not limited to, due and prompt payment of the Contract Price by the BUYER to you, your successors, and assigns under the Contract and any supplement, amendment, change or modification as aforesaid (hereby expressly waiving notice of any such supplement, amendment, change or modification as may be agreed to by the BUYER and confirming that this guarantee shall be fully applicable to the Contract as so supplemented, amended, changed or modified).
 
This Performance Guarantee shall be governed by the laws of England.

GUARANTOR :	
BY :	 	 	
TITLE :	
WITNESS :	
 
4

 
Exhibit 10.28
 
SHIPBUILDING CONTRACT

FOR

THE CONSTRUCTION AND SALE OF
 
ONE (1) 6,500 TEU CLASS CONTAINER CARRIER

HULL NO. S4002

BETWEEN

BOXCARRIER (NO.2) CORP.

(AS BUYER)

AND

SUNGDONG SHIPBUILDING & MARINE ENGINEERING CO., LTD.
 
(AS BUILDER)

 
 
I N D E X

 	 	PAGE	
PREAMBLE	 	1	
 	 	 	
ARTICLE      I	: DESCRIPTION AND CLASS	2	
 	 	 	
 	II	: CONTRACT PRICE	5	
 	 	 	 	
 	III	: ADJUSTMENT OF THE CONTRACT PRICE	6	
 	 	 	 	
 	IV	: INSPECTION AND APPROVAL	10	
 	 	 	 	
 	V	: MODIFICATIONS, CHANGES AND EXTRAS	15	
 	 	 	 	
 	VI	: TRIALS AND COMPLETION	18	
 	 	 	 	
 	VII	: DELIVERY	22	
 	 	 	 	
 	VIII	: DELAYS AND EXTENSIONS OF TIME (FORCE MAJEURE)	25	
 	 	 	 	
 	IX	: WARRANTY OF QUALITY	28	
 	 	 	 	
 	X	: PAYMENT	33	
 	 	 	 	
 	XI	: BUYER’S DEFAULT	38	
 	 	 	 	
 	XII	: BUYER’S SUPPLIES	41	
 	 	 	 	
 	XIII	: INSURANCE	43	
 	 	 	 	
 	XIV	: ARBITRATION	44	
 	 	 	 	
 	XV	: SUCCESSORS AND ASSIGNS	46	
 	 	 	 	
 	XVI	: TAXES AND DUTIES	47	
 	 	 	 	
 	XVII	: PATENTS, TRADEMARKS AND COPYRIGHTS	48	
 	 	 	 	
 	XVIII	: INTERPRETATION AND GOVERNING LAW	49	
 	 	 	 	
 	XIX	: NOTICE	50	
 	 	 	 	
 	XX	:EFFECTIVENESS OF THIS CONTRACT	51	
 	 	 	 	
 	XXI	: INTERPRETATION	52	
 	 	 	 	
 	XXII	:EXCLUSIVENESS	53	
 
SCHEDULES
 
EXHIBIT “A”  REFUND GUARANTEE LETTER OF REFUNDMENT GUARANTEE
 
EXHIBIT “B”  PERFORMANCE GUARANTEE

 
SHIPBUILDING CONTRACT
 
THIS CONTRACT, made on this 26 day of July, 2006 by and between BOXCARRIER (NO.2) CORP. , a corporation incorporated and existing under the laws of Republic of Liberia with its registered office at 80 Broad Street, Monrovia, Liberia (hereinafter called the “BUYER”), the party of the first part and Sungdong Shipbuilding & Marine Engineering Co., Ltd., a company organized and existing under the laws of the Republic of Korea, having its registered office at 1609-2, Hwang-li, Gwangdo-myeon, Tongyoung-si, Gyeongnam, 650-827, Korea (hereinafter called the “BUILDER”), the party of the second part,
 
W I T N E S S E T H :
 
In consideration of the mutual covenants contained herein, the BUILDER agrees to design, build, launch, equip and complete in accordance with the Sung Dong Shipbuilding & Marine Engineering Quality Standard one (1) Single Screw Diesel Engine driven Container VESSEL as described in the Specifications as described in Article I hereof (hereinafter called the “VESSEL”) at the BUILDER’s yards in Korea (hereinafter called the “SHIPYARD”) and to deliver and sell the VESSEL to the BUYER, and the BUYER agrees to accept delivery of and purchase from the BUILDER the VESSEL, according to the terms and conditions hereinafter set forth :
 
(End of Preamble)
 
1

 
ARTICLE I : DESCRIPTION AND CLASS
 
1.                         DESCRIPTION
 
The VESSEL shall have the BUILDER’s Hull No. S4002 and shall be built, constructed, equipped and completed in accordance with the specifications No. SD-DN-6500T.CN.FS-01 dated July 26, 2006 and the general arrangement plan No. SD-DN-6500T.CN.GA-01 dated July 26, 2006 attached thereto and the ‘Maker List’ No. SD-DN-6500T.CN.ML-01 dated July 26, 2006 (hereinafter called respectively the “SPECIFICATIONS” and the “PLAN”) signed by both parties, which shall constitute an integral part of this CONTRACT although not attached hereto.
 
The SPECIFICATIONS and the PLAN are intended to explain each other and anything shown on the PLAN and not stipulated in the SPECIFICATIONS or anything stipulated in the SPECIFICATIONS and not shown on the PLAN shall be deemed and considered as if included in both. Should there be any inconsistencies or contradictions between the SPECIFICATIONS and the PLAN, the SPECIFICATIONS shall prevail. Should there be any inconsistencies or contradictions between this CONTRACT and the SPECIFICATIONS, this CONTRACT shall prevail.
 
2.                         BASIC DIMENSIONS AND PRINCIPAL PARTICULARS OF THE VESSEL
 
(a)                    The basic dimensions and principal particulars of the VESSEL shall be :

Length, overall	about	300.0	 	M	
Length, between perpendiculars	286.6	 	M	
Breadth, moulded	40.0	 	M	
Depth to Upper Deck, moulded	24.2	 	M	
 	 	 	 	
Design draft, moulded, in seawater of specific gravity of 1.025	12.0	 	M	
Scantling draft, moulded, in seawater of specific gravity of 1.025	14.5	 	M	
 	 	 	 	
Deadweight guaranteed on the above moulded design draft of 12.0 M	59,000	 	M/T	
 
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Deadweight on the above moulded scantling draft of 14.5 M	83,300 	 	M/T	
 	 	 	 	
Main propulsion engine	MAN B&W 10K98MC-C	
 	MCR :	77,600 PS x 104 RPM	
 	NCR :	69,840 PS x 100.4 RPM	
 	
Speed guaranteed at 12.0meters design draft at the condition of clean bottom and in calm and deep sea with main engine developing a NCR of 69,840 PS with fifteen per cent (15%) sea margin	 	25.6 KNOTS	
 	 	 	
Specific Fuel consumption guaranteed of the main engine applying I.S.O. reference conditions to the result of official shop test at a MCR of 77,600 PS using marine fuel oil having lower calorific value of 10,200 Kcal per Kg.	 	126.0 gr/BHP.HR	

The details of the above particulars as well as the definitions and method of measurements and calculations are as indicated in the SPECIFICATIONS.
 
(b)                   All other vessels Hull Number S4002, S4003, S4004 and S4005 shall be built as identical sister ships unless a modification to a design is agreed upon.
 
3.                  CLASSIFICATION, RULES AND REGULATIONS
 
(a)             The VESSEL including its machinery, equipment and outfittings shall be built in compliance with the rules and regulations of Det Norske Veritas (hereinafter called the “CLASSIFICATION SOCIETY”), in force as of the date of this CONTRACT, to be classed and registered as +1A, CONTAINER CARRIER, EO, BIS, TMON, NAUTICUS (NEWBUILDING) and also to comply with the rules and regulations, in force as of the date of this CONTRACT, as described in the SPECIFICATIONS. Provided that the BUILDER shall have an option to declare the CLASSIIFICATION SOCIETY as either equivalent Lloyd Register of Shipping or Det Norske Veritas within three (3) month after signing of this CONTRACT.
 
(b)            The BUILDER shall arrange with the CLASSIFICATION SOCIETY for the assignment by the CLASSIFICATION SOCIETY of representative(s) to the VESSEL during
 
3

 
construction. All fees and charges incidental to classification of the VESSEL in compliance with the above specified rules, regulations and requirements of this CONTRACT shall be for the account of the BUILDER.
 
(c)             The decision of the CLASSIFICATION SOCIETY as to whether the VESSEL complies with the regulations of the CLASSIFICATION SOCIETY shall be final and binding upon the BUILDER and the BUYER.
 
Details of its notation shall be in accordance with the SPECIFICATIONS.
 
The VESSEL shall also comply with the compulsory rules, regulations and requirements of the regulatory bodies as described in the SPECIFICATIONS rectified and in effect as of the signing date of this Contract. Non-compulsory rules, regulations and requirements of the regulatory bodies shall be dealt with in accordance with Article V (2) of this Contract.
 
All the fees and charges incidental to the classification and with respect to compliance with the above referred rules, regulations and requirements shall be for account of the BUILDER except otherwise agreed.
 
4.                  SUBCONTRACTING
 
The BUILDER may, at its sole discretion and responsibility, subcontract any portion of the construction work of the VESSEL, provided that the construction and assembly of the VESSEL shall be carried out as is normally done according to the BUILDER’s building practice and provided further that the BUILDER shall be responsible to the BUYER in respect of any construction work carried out by such subcontractors.
 
5.                  NATIONALITY OF THE VESSEL
 
The VESSEL shall be registered by the BUYER at its own cost and expense under the laws of either Greece or Cyprus or Bahamas or Marshall Islands or Panama or Liberia with its home port of either Piraeus or Limassol or Nassau or Majuro or Panama or Monrovia at the time of its delivery and acceptance hereunder provided that the BUYER may in its sole discretion declare the VESSEL’S flag and registration within four (4) months after the signing of the CONTRACT. In the case that the BUYER declares the VESSEL’S flag and registration to the Greece, the BUYER should pay the extra cost.
 
(End of Article)
 
4

 
ARTICLE II : CONTRACT PRICE
 
The contract price of the VESSEL delivered to the BUYER at the SHIPYARD shall be United States Dollars Ninety One Million Five Hundred Thousand (US$ 91,500,000) (hereinafter called the “CONTRACT PRICE”) which shall be paid plus any increases or less any decreases due to adjustment or modifications, if any, as set forth in this CONTRACT. The above CONTRACT PRICE shall include payment for services in the inspection, tests, survey and classification of the VESSEL which will be rendered by the CLASSIFICATION SOCIETY and shall not include the cost of the BUYER’s supplies as stipulated in Article XII.
 
The CONTRACT PRICE also includes all costs and expenses for supplying all necessary drawings as stipulated in the SPECIFICATIONS except those to be furnished by the BUYER for the VESSEL in accordance with the SPECIFICATIONS.
 
(End of Article)
 
5

 
ARTICLE III : ADJUSTMENT OF THE CONTRACT PRICE
 
The CONTRACT PRICE of the VESSEL shall be adjusted as hereinafter set forth in the event of the following contingencies. It is hereby understood by both parties that any adjustment of the CONTRACT PRICE as provided for in this Article is by way of liquidated damages and not by way of penalty.
 
1.                  DELAYED DELIVERY
 
(a)             No adjustment shall be made and the CONTRACT PRICE shall remain unchanged for the first thirty (30) days of the delay in delivery of the VESSEL [ending as of 12 o’clock midnight Korean Standard Time on the thirtieth (30th) day of delay] beyond the Delivery Date calculated as provided in Article VII.1. hereof.
 
(b)            If delivery of the VESSEL is delayed more than thirty (30) days beyond the date upon which the delivery is due from the BUILDER under the terms of this CONTRACT, then, beginning at midnight of the thirtieth (30th) day after such due date, the CONTRACT PRICE of the VESSEL shall be reduced by U.S. Dollars Twenty Two Thousand only (US$ 22,000.-) for each full day of delay.
 
However, unless the parties agree otherwise, the total amount of deduction from the CONTRACT PRICE shall not exceed the amount due to cover the delay of one hundred and eighty (180) days after thirty (30) days of the delay in delivery of the VESSEL at the rate of deduction as specified hereinabove.
 
(c)             But, if the delay in delivery of the VESSEL continues for a period of more than two hundred and ten (210) days beyond the date upon which the delivery is due from the BUILDER under the terms of this CONTRACT then, in such event, and after such period has expired, the BUYER may, at its option, rescind this CONTRACT by serving upon the BUILDER a notice of rescission by facsimile to be confirmed by a registered letter via airmail directed to the BUILDER at the address given in this CONTRACT. Such rescission shall be effective as of the date the notice thereof is received by the BUILDER. If the BUYER has not served the notice of rescission after the aforementioned two hundred and ten (210) days delay in delivery, the BUILDER may demand the BUYER to make an election in accordance with Article VIII.3. hereof.
 
6

 
(d)            For the purpose of this Article, the delivery of the VESSEL shall be deemed to be delayed when and if the VESSEL, after taking into full account extension of the Delivery Date or permissible delays as provided in Article V, VI, VIII, XI or elsewhere in this CONTRACT, is delivered beyond the date upon which delivery would then be due under the terms of this CONTRACT.
 
2.                  INSUFFICIENT SPEED
 
(a)              The CONTRACT PRICE of the VESSEL shall not be affected or changed, if the actual speed, as determined by trial runs more fully described in Article VI hereof, is less than the speed required under the terms of this CONTRACT and the SPECIFICATIONS provided such deficiency in actual speed is not more than two-tenths (2/10) of a knot below the guaranteed speed.
 
(b)             However, as for the deficiency of more than two-tenths (2/10) of a knot in actual speed below the speed guaranteed under this CONTRACT, the CONTRACT PRICE shall be reduced by U.S. Dollars Two Hundred Thousand only (U.S.$ 200,000.-) for each full one-tenth (1/10) of a knot in excess of the said two-tenths (2/10) of a knot of deficiency in speed [fractions of less than one-tenth (1/10) of a knot shall be regarded as a full one-tenth (1/10) of a knot]. However, unless the parties agree otherwise, the total amount of reduction from the CONTRACT PRICE shall not exceed the amount due to cover the deficiency of one (1) full knot below the guaranteed speed at the rate of reduction as specified above.
 
(c)             If the deficiency in actual speed of the VESSEL is more than seven point five-tenths (7.5/10) knot below the speed guaranteed under this CONTRACT, then the BUYER, at its option, may, subject to the BUILDER’s right to effect alterations or corrections as provided in Article VI.5. hereof, rescind this CONTRACT or may accept the VESSEL at a reduction in the CONTRACT PRICE as above provided for seven point five-tenths (7.5/10) knot of deficiency only.
 
3.                  EXCESSIVE FUEL CONSUMPTION
 
(a)             The CONTRACT PRICE shall not be affected or changed by reason of the fuel consumption of the VESSEL’s main engine, as determined by the engine manufacturer’s shop trial as per the SPECIFICATIONS being more than the guaranteed fuel consumption of the VESSEL’s main engine, if such excess is not more than five per cent (5%) over the guaranteed fuel consumption.
 
7

 
(b)            However, as for the excess of more than five per cent (5%) in the actual fuel consumption over the guaranteed fuel consumption of the VESSEL’s main engine, the CONTRACT PRICE shall be reduced by U.S. Dollars Two Hundred Thousand only (US$ 200,000.-) for each full one per cent (1%) increase in fuel consumption in excess of the said five per cent (5%) increase in fuel consumption [fractions of less than one per cent (1%) shall be regarded as a full one per cent (1%)]. However, unless the parties agree otherwise, the total amount of reduction from the CONTRACT PRICE shall not exceed the amount due to cover the excess of nine per cent (9%) over the guaranteed fuel consumption of the VESSEL’s main engine at the rate of reduction as specified above.
 
(c)             If such actual fuel consumption exceeds the guaranteed fuel consumption of the VESSEL’s main engine by more than ten per cent (10%), the BUYER, at its option, may, subject to the BUILDER’s right to effect alterations or corrections as specified in Article VI.5. hereof, rescind this CONTRACT or may accept the VESSEL at a reduction in the CONTRACT PRICE as above provided for the nine per cent (9%) increase only.
 
4.                  DEADWEIGHT BELOW CONTRACT REQUIREMENTS
 
(a)             The CONTRACT PRICE of the VESSEL shall not be affected or changed, if actual deadweight, determined as provided in this CONTRACT and the SPECIFICATIONS, is below the deadweight of 83,300 metric tons on the moulded design draft of 12.0 metres required by this CONTRACT and the SPECIFICATIONS by an amount of 83,300 metric tons or less. However, should the deficiency in the actual deadweight of the VESSEL be more than 830 metric tons below the said required deadweight, then the CONTRACT PRICE of the VESSEL shall be reduced for each full one (1) metric ton [fractions of less than one (1) metric ton shall be disregarded] of decreased deadweight in excess of 830 metric tons by the sum of U.S. Dollars One Thousand One Hundred only (US$ 1,100.-) per metric ton.
 
However, unless the parties agree otherwise, the total amount of deduction from the CONTRACT PRICE shall not exceed the amount due to cover the deficiency of 2,000 metric tons below the said required deadweight hereinabove.
 
(b)            If the deficiency in the deadweight of the VESSEL is more than 2,000 metric tons below the said required deadweight, then the BUYER, at its option, may, subject to the BUILDER’s right to effect alterations or corrections without the BUYER’s prior
 
8

 
consent as specified in Article VI.5. hereof, rescind this CONTRACT or may accept the VESSEL at a reduction in the CONTRACT PRICE as above provided for metric tons of deficiency only.
 
5.                  EFFECT OF RESCISSION
 
It is expressly understood and agreed by the parties hereto that in any case, if the BUYER rescinds this CONTRACT under this Article, the BUYER shall not be entitled to any liquidated damages, unless by means of the provision of Article X hereof.
 
(End of Article)
 
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ARTICLE IV : INSPECTION AND APPROVAL
 
1.                  APPOINTMENT OF BUYER’S REPRESENTATIVE
 
The BUYER shall timely despatch to and maintain at the SHIPYARD, at its own cost, expense and risk, one or more representatives (hereinafter called the “BUYER’S REPRESENTATIVE”), who shall be duly accredited in writing by the BUYER to supervise adequately the construction by the BUILDER of the VESSEL, her equipment and all accessories. Before the commencement of any item of work under this CONTRACT, the BUILDER shall, whenever reasonably required, previously exhibit, furnish to, and within the limits of the BUYER’S REPRESENTATIVE’s authority, secure the approval from the BUYER’S REPRESENTATIVE of any and all plans and drawings prepared in connection therewith. Upon appointment of the BUYER’S REPRESENTATIVE, the BUYER shall notify the BUILDER in writing of the name and the scope of the authority of the BUYER’S REPRESENTATIVE.
 
2.                  AUTHORITY OF THE BUYER’S REPRESENTATIVE
 
Such BUYER’S REPRESENTATIVE shall, at all times during working hours of the construction until delivery of the VESSEL, have the right to inspect the VESSEL, her equipment and all accessories, and work in progress, or materials utilized in connection with the construction of the VESSEL, wherever such work is being done or such materials are stored, for the purpose of determining that the VESSEL, her equipment and accessories are being constructed in accordance with the terms of this CONTRACT and/or the SPECIFICATIONS and the PLAN.
 
The BUILDER will endeavor to arrange for the inspection by the BUYER’S REPRESENTATIVE during working hours of the BUILDER. However, such inspection may be arranged beyond the BUILDER’s normal working hours, including weekend and/or holiday if this is considered necessary by the BUILDER in order to meet the BUILDER’s construction schedule, on the condition that the BUILDER will inform the BUYER’S REPRESENTATIVE at least two (2) days in advance of such inspection.
 
The BUYER’S REPRESENTATIVE shall, within the limits of the authority conferred upon him by the BUYER, make decisions or give advice to the BUILDER on behalf of the BUYER promptly on all problems arising out of, or in connection with, the construction of
 
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the VESSEL and generally act in a reasonable manner with a view to cooperating to the utmost with the BUILDER in the construction process of the VESSEL.
 
The decision, approval or advice of the BUYER’S REPRESENTATIVE shall be deemed to have been given by the BUYER and once given shall not be withdrawn, revoked or modified except with consent of the BUILDER. Provided that the BUYER’S REPRESENTATIVE or his assistants shall comply with the foregoing obligations, no act or omission of the BUYER’S REPRESENTATIVE or his assistants shall, in any way, diminish the liability of the BUILDER under Article IX (WARRANTY OF QUALITY). The BUYER’S REPRESENTATIVE shall notify the BUILDER promptly in writing of his discovery of any construction or materials, which he believes do not or will not conform to the requirements of the CONTRACT and the SPECIFICATIONS or the PLAN and likewise advise and consult with the BUILDER on all matters pertaining to the construction of the VESSEL, as may be required by the BUILDER, or as he may deem necessary.
 
However, if the BUYER’S REPRESENTATIVE fails to submit to the BUILDER without delay any such demand concerning alterations or changes with respect to the construction, arrangement or outfit of the VESSEL, which the BUYER’S REPRESENTATIVE has examined, inspected or attended at the test thereof under this CONTRACT or the SPECIFICATIONS, the BUYER’S REPRESENTATIVE shall be deemed to have approved the same and shall be precluded from making any demand for alterations, changes, or complaints with respect thereto at a later date.
 
The BUILDER shall comply with any such demand which is not contradictory to this CONTRACT and the SPECIFICATIONS or the PLAN, provided that any and all such demands by the BUYER’S REPRESENTATIVE with regard to construction, arrangement and outfit of the VESSEL shall be submitted in writing to the authorised representative of the BUILDER. The BUILDER shall notify the BUYER’S REPRESENTATIVE of the names of the persons who are from time to time authorised by the BUILDER for this purpose.
 
It is agreed upon between the BUYER and the BUILDER that the modifications, alterations or changes and other measures necessary to comply with such demand may be effected at a convenient time and place at the BUILDER’s reasonable discretion in view of the construction schedule of the VESSEL.
 
In the event that the BUYER’S REPRESENTATIVE shall advise the BUILDER that he has discovered or believes the construction or materials do not or will not conform to the
 
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requirements of this CONTRACT and the SPECIFICATIONS or the PLAN, and the BUILDER shall not agree with the views of the BUYER’S REPRESENTATIVE in such respect, either the BUYER or the BUILDER may, with the agreement of the other party, seek an opinion of the CLASSIFICATION SOCIETY.
 
3.                  APPROVAL OF DRAWINGS
 
(a)             The BUILDER shall submit to the BUYER three (3) copies of each of the plans and drawings to be submitted to the BUYER for its approval at its address as set forth in Article XIV hereof. The BUYER shall, within fourteen (14) days after receipt thereof return to the BUILDER one (1) copy of such plans and drawings with the approval or comments, if any, of the BUYER. A list of the plans and drawings to be so submitted to the BUYER shall be mutually agreed upon between the parties hereto.
 
(b)            When and if the BUYER’S REPRESENTATIVE shall have been sent by the BUYER to the SHIPYARD in accordance with Paragraph 1 of this Article, the BUILDER may submit the remainder, if any, of the plans and drawings in the agreed list, to the BUYER’S REPRESENTATIVE for his approval, unless otherwise agreed upon between the parties hereto.
 
The BUYER’S REPRESENTATIVE shall, within ten (10) days after receipt thereof, return to the BUILDER one (1) copy of such plans and drawings with his approval or comments written thereon, if any. Approval by the BUYER’S REPRESENTATIVE of the plans and drawings duly submitted to him shall be deemed to be the approval by the BUYER for all purposes of this CONTRACT.
 
(c)             In the event that the BUYER or the BUYER’S REPRESENTATIVE shall fail to return the plans and drawings to the BUILDER within the time limit as hereinabove provided, such plans and drawings shall be deemed to have been automatically approved without any comment. In the event the plans and drawings submitted by the BUILDER to the BUYER or the BUYER’S REPRESENTATIVE in accordance with this Article do not meet with the BUYER’s or the BUYER’S REPRESENTATIVE’s approval, the matter may be submitted by either party hereto for determination pursuant to Article XIV hereof. If the BUYER’s comments on the plans and drawings that are returned to the BUILDER by the BUYER within the said time limit are not clearly specified or detailed, the BUILDER shall be entitled to place its own interpretation on such comments in implementing them.
 
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(d)            Approval of drawings by Buyers shall not constitute a waiver of Builder’s responsibility to deliver the vessel in accordance with the Contract and Specifications.
 
4.                  SALARIES AND EXPENSES
 
All salaries and expenses of the BUYER’S REPRESENTATIVE or any other person or persons employed by the BUYER hereunder shall be for the BUYER’s account.
 
5.                  RESPONSIBILITY OF THE BUILDER
 
(a)             The BUILDER shall provide the BUYER’S REPRESENTATIVE and his assistants free of charge with suitably furnished office space at, or in the immediate vicinity of, the SHIPYARD together with access to telephone and facsimile facilities as may be necessary to enable the BUYER’S REPRESENTATIVE and his assistants to carry out their work under this CONTRACT. However, the BUYER shall pay for the telephone or facsimile facilities used by the BUYER’S REPRESENTATIVE or his assistants.
 
The BUILDER, its employees, agents and subcontractors, during its working hours until delivery of the VESSEL, shall arrange for them to have free and ready access to the VESSEL, her equipment and accessories, and to any other place (except the areas controlled for the purpose of national security) where work is being done, or materials are being processed or stored in connection with the construction of the VESSEL including the premises of sub-contractors.
 
The BUYER’S REPRESENTATIVE or his assistants or employees shall observe the work’s rules, regulations and the guidances prevailing at the BUILDER’s and its sub-contractor’s premises. The BUILDER shall promptly provide to the BUYER’S REPRESENTATIVE and/or his assistants and shall ensure that its sub-contractors shall promptly provide all such information as he or they may reasonably request in connection with the construction of the VESSEL and her engines, equipment and machinery.
 
(b)            The BUYER’S REPRESENTATIVE and his assistants shall at all times remain the employees of the BUYER. The BUILDER shall not be liable to the BUYER or the BUYER’S REPRESENTATIVE or to his assistants or to the BUYER’s employees or
 
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agents for personal injuries, including death, during the time they, or any of them, are on the VESSEL, or within the premises of either the BUILDER or its sub-contractors, or are otherwise engaged in and about the construction of the VESSEL, unless, however, such personal injuries, including death, are caused by the gross negligence of the BUILDER, its sub-contractors, or its or their employees or agents. The BUILDER shall not be liable to the BUYER for damages to, or destruction of property of the BUYER or of the BUYER’S REPRESENTATIVE or his assistants or the BUYER’s employees or agents, unless such damages, loss or destruction is caused by the gross negligence of the BUILDER, its sub-contractors, or its or their employees or agents.
 
6.                  RESPONSIBILITY OF THE BUYER
 
The BUYER shall undertake and assure that the BUYER’S REPRESENTATIVE and his assistants shall carry out their duties hereunder in accordance with the normal shipbuilding practice and in such a way as to avoid any unnecessary increase in building cost, delay in the construction of the VESSEL, and/or any disturbance in the construction schedule of the BUILDER.
 
The BUILDER has the right to request the BUYER to replace any of the BUYER’S REPRESENTATIVE and/or his assistants who are deemed unsuitable and unsatisfactory for the proper progress of the VESSEL’s construction. The BUYER shall investigate the situation by sending its representative(s) to the SHIPYARD and if the BUYER considers that such BUILDER’s request is justified, the BUYER shall effect the replacement as soon as conveniently arrangeable.
 
(End of Article)
 
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ARTICLE V : MODIFICATIONS, CHANGES AND EXTRAS
 
1.                  HOW EFFECTED
 
Any modifications or changes to the SPECIFICATIONS and the PLAN under which the VESSEL is to be constructed may be made at any time hereafter by written agreement of the parties hereto. Any modification or change requested by the BUYER which does not affect the frame-work of the SPECIFICATIONS shall be agreed to by the BUILDER if the BUYER agrees to adjustment of the CONTRACT PRICE, deadweight and/or cubic capacity, speed requirements, the Delivery Date and other terms and conditions of this CONTRACT reasonably required as a result of such modification or change. The BUILDER has the right to continue construction of the VESSEL on the basis of the SPECIFICATIONS and the PLAN until the BUYER has agreed to such adjustments. The BUILDER shall be entitled to refuse to make any alteration, change or modification of the SPECIFICATIONS and/or the PLAN requested by the BUYER, if the BUYER does not agree to the aforesaid adjustments within seven (7) days of the BUILDER’s notification of the same to the BUYER, or, if, in the BUILDER’s judgement, the compliance with such request of the BUYER would cause an unreasonable disruption of the normal working schedule of the SHIPYARD.
 
The BUILDER, however, agrees to exert its efforts to accommodate such reasonable request by the BUYER so that the said change and modification shall be made at a reasonable cost and within the shortest period of time reasonably possible. The aforementioned agreement to modify and change the SPECIFICATIONS and the PLAN may be effected by exchange of letters or facsimiles manifesting the agreement.
 
The letters and facsimiles exchanged by the parties pursuant to the foregoing shall constitute an amendment to this CONTRACT and the SPECIFICATIONS or the PLAN under which the VESSEL shall be built. Upon consummation of such an agreement to modify and change the SPECIFICATIONS or the PLAN, the BUILDER shall alter the construction of the VESSEL in accordance therewith including any addition to, or deduction from, the work to be performed in connection with such construction.
 
2.                  SUBSTITUTION OF MATERIAL
 
If any materials, machinery or equipment required for the construction of the VESSEL by
 
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the SPECIFICATIONS and the PLAN or otherwise under this CONTRACT cannot be procured in time to meet the BUILDER’s construction schedule for the VESSEL, or are in short supply, or are unreasonably high in price compared with the prevailing international market price, the BUILDER may supply, subject to the BUYER’s prior approval, other materials, machinery or equipment of equal quality and effect capable of meeting the requirements of the CLASSIFICATION SOCIETY and the rules, regulations and requirements with which the construction of the VESSEL must comply.
 
3.                  CHANGES IN RULES AND REGULATIONS
 
If the specified rules and regulations with which the construction of the VESSEL is required to comply are altered or changed by the CLASSIFICATION SOCIETY or bodies authorised to make such alterations or changes, either the BUYER or the BUILDER, upon receipt of due notice thereof, shall forthwith give notice thereof to the other party in writing. Thereupon, within fifteen (15) days after giving the notice to the BUILDER or receiving the notice from the BUILDER, the BUYER shall advise the BUILDER as to the alterations and changes, if any, to be made on the VESSEL which the BUYER, in its sole discretion, shall decide. The BUILDER shall not be obliged to comply with such alterations and/or changes if the BUYER fails to notify the BUILDER of its decision within the time limit stated above.
 
The BUILDER shall comply promptly with the said request of the BUYER, provided that the BUILDER and the BUYER shall first agree to :
 
(a)             any increase or decrease in the CONTRACT PRICE of the VESSEL that is occasioned by such compliance ;
 
(b)            any extension or advancement in the Delivery Date of the VESSEL that is occasioned by such compliance ;
 
(c)             any increase or decrease in the deadweight and/or cubic capacity of the VESSEL, if such compliance results in any increase or reduction in the deadweight and/or cubic capacity ;
 
(d)            adjustment of the speed requirements if such compliance results in any increase or reduction in the speed ; and
 
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(e)             any other alterations in the terms of this CONTRACT or of the SPECIFICATIONS or the PLAN or both, if such compliance makes such alterations of the terms necessary.
 
Any delay in the construction of the VESSEL caused by the BUYER’s delay in making a decision or agreement as above shall constitute a permissible delay under this CONTRACT. Such agreement by the BUYER shall be effected in the same manner as provided above for modification and change of the SPECIFICATIONS and the PLAN.
 
(End of Article)
 
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ARTICLE VI : TRIALS AND COMPLETION
 
1.                  NOTICE
 
The BUILDER shall notify the BUYER in writing or by facsimile at least twenty (20) days in advance of the time and place of the trial run of the VESSEL. Such notice shall specify the place from which the VESSEL will commence her trial run and approximate date upon which the trial run is expected to take place. Such date shall be further confirmed by the BUILDER five (5) days in advance of the trial run in writing or by facsimile.
 
The BUYER’S REPRESENTATIVE, who is to witness the performance of the VESSEL during such trial run, shall be present at such place on the date specified in such notice. Should the BUYER’S REPRESENTATIVE fail to be present after the BUILDER’s due notice to the BUYER as provided above, the BUILDER shall be entitled to conduct such trial run with the presence of the representative(s) of the CLASSIFICATION SOCIETY only without the BUYER’S REPRESENTATIVE being present. In such case, the BUYER shall be obliged to accept the VESSEL on the basis of a certificate issued by the BUILDER that the VESSEL, after the trial run, subject to alterations and corrections, if necessary, has been found to conform with the SPECIFICATIONS and this CONTRACT and is satisfactory in all respects, provided the BUILDER first makes such corrections and alterations promptly.
 
2.                  WEATHER CONDITION
 
In the event of unfavourable weather on the date specified for the trial run, the trial run shall take place on the first available day that weather conditions permit. The parties hereto recognise that the weather conditions in Korean waters, in which the trial run is to take place, are such that great changes in weather may arise momentarily and without warning and therefore, it is agreed that if, during the trial run, the weather should become so unfavourable that the trial run cannot be continued, then the trial run shall be discontinued and postponed until the first favourable day next following, unless the BUYER shall assent to the acceptance of the VESSEL by notification in writing on the basis of such trial run so far made prior to such change in weather conditions. Any delay of the trial run caused by such unfavourable weather conditions shall also operate to extend the Delivery Date of the VESSEL for the period of delay occasioned by such unfavourable weather conditions.
 
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3.               HOW CONDUCTED
 
All expenses in connection with the trials of the VESSEL are to be for the account of the BUILDER, which, during the trials, is to provide at its own expense the necessary crew to comply with conditions of safe navigation. The trials shall be conducted in the manner prescribed in this CONTRACT and the SPECIFICATIONS, and shall prove fulfilment of the performance requirements for the trials as set forth in the SPECIFICATIONS.
 
The BUILDER shall be entitled to conduct preliminary sea trials, during which the propulsion plant and/or its appurtenance shall be adjusted according to the BUILDER’s judgement. The BUILDER shall have the right to repeat any trial whatsoever as it deems necessary.
 
4.                  CONSUMABLE STORES
 
The BUILDER shall load the VESSEL with the required quantity of fuel oil, lubricating oil and greases, fresh water, and other stores necessary to conduct the trials as set forth in the SPECIFICATIONS. The necessary ballast (fuel oil, fresh water and such other ballast as may be required) to bring the VESSEL to the trial load draft, as specified in the SPECIFICATIONS, shall be supplied and paid for by the BUILDER whilst lubricating oil and greases shall be supplied and paid for by the BUYER within the time advised by the BUILDER for the conduct of sea trials as well as for use before the delivery of the VESSEL to the BUYER. The fuel oil as well as lubricating oil and greases shall be in accordance with the specifications of the main engine and other machinery and the BUYER shall decide and advise the BUILDER of the supplier’s name for lubricating oil and greases before the work-commencement of the VESSEL, provided that the supplier shall be acceptable to the BUILDER and/or the makers of all the machinery.
 
Any fuel oil, fresh water or other consumable stores furnished and paid for by the BUILDER for trial runs remaining on board the VESSEL, at the time of acceptance of the VESSEL by the BUYER, shall be bought by the BUYER from the BUILDER at the BUILDER’s purchase price for such supply in Korea and payment by the BUYER thereof shall be made at the time of delivery of the VESSEL. The BUILDER shall pay the BUYER at the time of delivery of the VESSEL for the consumed quantity of any lubricating oil and greases which were furnished and paid for by the BUYER at the BUYER’s purchase price thereof. The consumed quantity of lubricating oils and greases shall be calculated on the basis of the difference between the remaining amount, including the same remaining in the
 
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main engine, other machinery and their pipes, stern tube and the like, and the supplied amount.
 
5.                  ACCEPTANCE OR REJECTION
 
(a)                If, during any sea trial, any breakdown occurs entailing interruption or irregular performance which can be repaired on board, the trial shall be continued after such repairs and be valid in all respects.
 
(b)            However, if, during or after the trial run, it becomes apparent that the VESSEL or any part of her equipment requires alterations or corrections which but for this provision would or might entitle the BUYER to rescind this CONTRACT, the BUILDER shall notify the BUYER promptly in writing or by facsimile to such effect and shall simultaneously advise the BUYER of the estimated additional time required for the necessary alterations or corrections to be made.
 
The BUYER shall, within five(5) days of receipt from the BUILDER of notice of completion of such alterations or corrections and after such further trials or tests as necessary, notify the BUILDER in writing or by facsimile confirmed in writing of its acceptance, qualified acceptance or rejection of the VESSEL, all in accordance with the SPECIFICATIONS, the PLAN and this CONTRACT, and shall not be entitled to reject the VESSEL on such grounds until such time.
 
(c)                Save as above provided, the BUYER shall, within three(3) days after completion of the trial run, notify the BUILDER in writing or by facsimile confirmed in writing of its acceptance of the VESSEL or of the details in respect of which the VESSEL does not conform to the SPECIFICATIONS or this CONTRACT.
 
If the BUILDER is in agreement with the BUYER’s determinations as to non-conformity, the BUILDER shall make such alterations or changes as may be necessary to correct such non-conformity and shall prove the fulfilment of this CONTRACT and the SPECIFICATIONS by such tests or trials as may be necessary.
 
The BUYER shall, within three (3) days after completion of such tests and/or trials, notify the BUILDER in writing or by facsimile confirmed in writing of its acceptance or rejection of the VESSEL.
 
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(d)            However, the BUYER shall not be entitled to reject the VESSEL by reason of any minor or insubstantial items judged from the point of view of standard shipbuilding and shipping practice as not being in conformity with the SPECIFICATIONS, but, in that case, the BUILDER shall not be released from the obligation to correct and/or remedy such minor or insubstantial items as soon as practicable after the delivery of the VESSEL.
 
6.                  EFFECT OF ACCEPTANCE
 
The BUYER’s written or facsimiled notification of acceptance delivered to the BUILDER as above provided, shall be final and binding insofar as conformity of the VESSEL with the SPECIFICATIONS is concerned and shall preclude the BUYER from refusing formal delivery of the VESSEL as hereinafter provided, if the BUILDER complies with all conditions of delivery, as herein set forth and provided that, in the case of qualified acceptance, any matters which were mentioned in the notice of the qualified acceptance by the BUYER as requiring correction have been corrected satisfactorily.
 
If the BUYER fails to notify the BUILDER of its acceptance or rejection of the VESSEL as hereinabove provided, the BUYER shall be deemed to have accepted the VESSEL. Nothing contained in this Article shall preclude the BUILDER from exercising any and all rights which the BUILDER has under this CONTRACT if the BUILDER disagrees with the BUYER’s rejection of the VESSEL or any reasons given for such rejection, including arbitration provided in Article XIV hereof.
 
(End of Article)
 
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ARTICLE VII : DELIVERY
 
1.                  TIME AND PLACE
 
The VESSEL shall be delivered by the BUILDER to the BUYER at the SHIPYARD, safely afloat on or before 30 th June, 2009 (hereinafter called the “DELIVERY DATE”) after completion of satisfactory trials and acceptance by the BUYER in accordance with the terms of Article VI, except that, in the event of delays in delivery of the VESSEL by the BUILDER due to causes which under the terms of this CONTRACT permit extensions of the time for delivery of the VESSEL, the aforementioned DELIVERY DATE shall be extended accordingly.
 
It is hereby agreed that the BUILDER shall have the right to advance the DELIVERY DATE provided that the BUILDER shall have given to the BUYER written notice of the new proposed earlier delivery date at least six (6) months before such new proposed advanced delivery date; and
 
Any such new proposed earlier delivery date shall be considered as the DELIVERY DATE for the purpose of this CONTRACT.
 
2.                  WHEN AND HOW EFFECTED 
 
Provided that the BUYER shall concurrently with delivery of the VESSEL release to the BUILDER the fifth instalment as set forth in Article X.2. hereof and shall have fulfilled all of its obligations provided for in this CONTRACT, delivery of the VESSEL shall be forthwith effected upon acceptance thereof by the BUYER, as hereinabove provided, by the concurrent delivery by each of the parties hereto to the other of a PROTOCOL OF DELIVERY AND ACCEPTANCE acknowledging delivery of the VESSEL by the BUILDER and acceptance thereof by the BUYER, which PROTOCOL shall be prepared in duplicate and signed by each of the parties hereto.
 
3.                  DOCUMENTS TO BE DELIVERED TO THE BUYER
 
Upon delivery and acceptance of the VESSEL, the BUILDER shall deliver to the BUYER the following documents, which shall accompany the aforementioned PROTOCOL OF DELIVERY AND ACCEPTANCE :
 
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(a)             PROTOCOL OF TRIALS of the VESSEL made pursuant to this CONTRACT and the SPECIFICATIONS,
 
(b)            PROTOCOL OF INVENTORY of the equipment of the VESSEL, including spare parts, all as specified in the SPECIFICATIONS,
 
(c)             PROTOCOL OF STORES OF CONSUMABLE NATURE, such as all fuel oil and fresh water remaining in tanks if its cost is charged to the BUYER under Article VI.4. hereof,
 
(d)            DRAWINGS AND PLANS pertaining to the VESSEL as stipulated in the SPECIFICATIONS, which shall be furnished to the BUYER at no additional cost,
 
(e)             ALL CERTIFICATES required to be furnished upon delivery of the VESSEL pursuant to this CONTRACT, the SPECIFICATIONS and the customary shipbuilding practice, including
 
(i)                                  Classification Certificate
(ii)                               Safety Construction Certificate
(iii)                            Safety Equipment Certificate
(iv)                           Safety Radio Certificate
(v)                              International Loadline Certificate
(vi)                           International Tonnage Certificate
(vii)                        BUILDER’s Certificate
(viii)                     De-ratting Exemption Certificate
 
However, it is agreed by the parties that if the Classification Certificate and/or other certificates are not available at the time of delivery of the VESSEL, provisional certificates shall be accepted by the BUYER, provided that the BUILDER shall furnish the BUYER with formal certificates as promptly as possible after such formal certificates have been issued.
 
(f)               DECLARATION OF WARRANTY of the BUILDER that the VESSEL is delivered to the BUYER free and clear of any liens, claims, mortgages, or other encumbrances upon the BUYER’s title thereto, and in particular, that the VESSEL is absolutely free of all burdens in the nature of imposts, taxes, or charges imposed by the prefecture or country
 
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of the port of delivery, as well as of all liabilities of the BUILDER to its sub-contractors and employees and of all liabilities arising from the operation of the VESSEL in trial runs, or otherwise, prior to delivery except as otherwise provided under this CONTRACT.
 
(g)                      COMMERCIAL INVOICE.
 
4.                  TENDER OF THE VESSEL
 
If the BUYER fails to take delivery of the VESSEL after completion thereof according to this CONTRACT and the SPECIFICATIONS, the BUILDER shall have the right to tender delivery of the VESSEL after compliance with all procedural requirements as provided above.
 
5.                  TITLE AND RISK
 
Title and risk shall pass to the BUYER upon delivery and acceptance of the VESSEL being effected as stated above and the BUILDER shall be free of all responsibility or liability whatsoever related with this CONTRACT except for the warranty of quality contained in Article IX and the obligation to correct and/or remedy, as provided in Article VI.5.(d), if any, it being expressly understood that, until such delivery is effected, the VESSEL and equipment thereof are at the entire risk of the BUILDER including but not confined to, risks of war, insurrection and seizure by Governments or Authorities, whether Korean or foreign, and whether at war or at peace. The title to the BUYER’s supplies as provided in Article XII shall remain with the BUYER and the BUILDER’s responsibility for such BUYER’s supplies shall be as described in Article XII.2.
 
6.                  REMOVAL OF THE VESSEL
 
The BUYER shall take possession of the VESSEL immediately upon delivery thereof and shall remove the VESSEL from the SHIPYARD within three (3) days after delivery thereof is effected. Port dues and other charges levied by the Korean Government Authorities after delivery of the VESSEL and any other costs related to the removal of the VESSEL shall be borne by the BUYER.
 
(End of Article)
 
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ARTICLE VIII : DELAYS AND EXTENSIONS OF TIME (FORCE MAJEURE)
 
1.                  CAUSES OF DELAY
 
If, at any time after signing this CONTRACT, either the construction or delivery of the VESSEL or any performance required hereunder as a prerequisite to the delivery thereof is delayed by any of the following events; namely war, acts of state or government, blockade, revolution, insurrections, mobilization, civil commotion, riots, general workers strikes, sabotage,  Acts of God or the public enemy, plague or other epidemics, quarantines, prolonged failure of electric current, freight embargoes, or defects in major forgings or castings, or delays in the BUYER’s supplies as stipulated in Article XII, if any, or or defects in materials, machinery or equipment which could not have been detected by the BUILDER using reasonable care or earthquakes, tidal waves, typhoons, hurricanes, prolonged or unusually severe weather conditions or by destruction of the premises or works of the BUILDER or its sub-contractors, or of the VESSEL, or any part thereof, by fire, landslides, flood, lightning, explosion or the BUILDER’s performance under the CONTRACT, or delays caused by the CLASSIFICATION SOCIETY or the BUYER’s faulty action or omission, or other causes beyond the control of the BUILDER, or its sub-contractors, as the case may be, or for any other causes which, under the terms of this CONTRACT, authorise and permit extension of the time for delivery of the VESSEL, then, in the event of delays due to the happening of any of the aforementioned contingencies, the DELIVERY DATE of the VESSEL under this CONTRACT shall be extended for a period of time which shall not exceed the total accumulated time of all such delays.
 
The BUILDER shall have used reasonable efforts to mitigate the duration and effects of such events of the construction schedule.
 
2.                  NOTICE OF DELAYS
 
As soon as practicably possible after commencement of any delay but not later than fourteen (14) days on account of which the BUILDER claims that it is entitled under this CONTRACT to an extension of the DELIVERY DATE of the VESSEL, excluding delays due to arbitration, the BUILDER shall advise the BUYER in writing or by facsimile of the date such delay commenced, the reasons thereof and, if possible, its estimated duration of the probable delay in the delivery of the VESSEL, and shall supply the BUYER if reasonably available with evidence to justify the delay claimed. Within fourteen (14) days after such delay ends, the BUILDER shall likewise advise the BUYER in writing or by
 
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facsimile of the date that such delay ended, and also, shall specify the period of time by which the BUILDER claims the DELIVERY DATE should be extended by reason of such delay. Failure of the BUYER to object to the BUILDER’s notification of any claim for extension of the date for delivery of the VESSEL within fourteen (14) days after receipt by the BUYER of such notification shall be deemed to be a waiver by the BUYER of its right to object to such extension.
 
3.                  RIGHT TO RESCIND FOR EXCESSIVE DELAY
 
If the total accumulated time of all permissible and non-permissible delays, excluding delays due to (i) arbitration under Article XIV, (ii) the BUYER’s defaults under Article XI, (iii) modifications and changes under Article V or (iv) delays or defects in the BUYER’s supplies as stipulated in Article XII, aggregates two hundred and forty (240) days or more, then, the BUYER may, at any time thereafter, rescind this CONTRACT by giving a written notice of rescission to the BUILDER. Such rescission shall be effective as of the date the notice thereof is received by the BUILDER.
 
If the BUYER has not served the notice of rescission as provided in the above or Article III.1. hereof, the BUILDER may, at any time after expiration of the accumulated time of the delay in delivery, either two hundred and forty (240) days in case of the delay in this Paragraph or two hundred and ten (210) days in case of the delay in Article III.1, notify the BUYER of the future date upon which the BUILDER estimates the VESSEL will be ready for delivery and demand in writing or by facsimile that the BUYER make an election either to rescind this CONTRACT or to consent to the delivery of the VESSEL at such future date, in which case the BUYER shall, within fourteen(14) days after receipt of such demand, make and notify the BUILDER of such election. If the BUYER elects to consent to the delivery of the VESSEL at such future date (or other future date as the parties may agree):
 
(a)             Such future date shall become the contractual delivery date for the purposes of this CONTRACT and shall be subject to extension by reason of permissible delays as herein provided, and
 
(b)            If the VESSEL is not delivered by such revised contractual delivery date (as extended by reason of permissible delays), the BUYER shall have the same right of rescission upon the same terms as provided in the above and Article III. 1.
 
If the BUYER shall not make an election within fourteen(14) days as provided hereinabove, the BUYER shall be deemed to have accepted such extension of the DELIVERY DATE to
 
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the future delivery date indicated by the BUILDER.
 
4.               DEFINITION OF PERMISSIBLE DELAYS
 
Delays on account of the foregoing causes shall be understood to be permissible delays, and are to be distinguished from non-permissible unauthorised delays on account of which the CONTRACT PRICE of the VESSEL is subject to adjustment as provided in Article III hereof.
 
(End of Article)
 
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ARTICLE IX : WARRANTY OF QUALITY
 
1.                  GUARANTEE OF MATERIAL AND WORKMANSHIP
 
The BUILDER, for the period of twelve (12) months from the date of delivery of the VESSEL to the BUYER, guarantees the VESSEL and her engine and all parts and equipment thereof that are manufactured or furnished by the BUILDER under this CONTRACT against all defects which are directly due to faulty design, defective materials, construction miscalculation and/or poor workmanship, or negligent or other improper acts or omissions on the part of the BUILDER or its subcontractors provided such defects have not been caused by perils of the sea, rivers or navigations, or by normal wear and tear, overloading, improper loading or stowage, corrosion of the materials other than related to lack of maintenance, fire, accidents at sea or elsewhere, or by incompetence, mismanagement, negligence or wilful neglect or any alteration or addition to the VESSEL which has not previously been approved by the BUILDER.
 
The BUILDER will be responsible for all machinery or parts of machinery and all constructions which are supplied by sub-contractors and will guarantee the above mentioned for a period of twelve (12) months on the basis as laid down in this Paragraph. Upon rectification of an item claimed under this guarantee, this item shall be covered for further twelve (12) months under the same terms and conditions. However, this is limited to a maximum of Eighteen (18) months from Delivery Date.
 
2.                  NOTICE OF DEFECTS
 
The BUYER or its duly authorised representative will notify the BUILDER in writing or by facsimile promptly after discovery of any defect for which a claim is to be made under this guarantee.
 
The BUYER’s written notice shall include full particulars as to the nature of the defect and the extent of the damage caused thereby, but excluding consequential damage as hereinafter provided. The BUILDER will be under no obligation with respect to this guarantee in respect of any claim for defects discovered prior to the expiry date of the guarantee, unless notice of such defects is received by the BUILDER before the expiry date. However, facsimiled advice received by the BUILDER within seven (7) days after such expiry date that a claim is forthcoming will be sufficient compliance with the requirement as to time,
 
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provided that such facsimiled advice shall include at least a brief description of the defect including the identity of the equipment, extent of damage, name and number of any replacement part and description of any remedial work required, and that full particulars are given to the BUILDER not later than fourteen (14) days after the expiry date.
 
3.                  REMEDY OF DEFECTS
 
(a)              The BUILDER shall remedy, at its expense, any defects, against which the VESSEL is guaranteed under this Article, by making all necessary and reasonably practicable repairs or replacements at the SHIPYARD or elsewhere as provided for in (b) hereinbelow.
 
In such case, the VESSEL shall be taken at the BUYER’s cost and responsibility to the place selected, ready in all respects for such repairs or replacements and in any event, the BUILDER shall not be responsible for towage
 
(b)            However, BUYER should determine and prove if it is commercially and/or operationally impractical (which shall include, but not be limited to, an emergency) to bring the VESSEL to the SHIPYARD, the BUYER may cause the necessary repairs or replacements to be made elsewhere which is deemed by the BUYER with the consent of the BUILDER which shall not be unreasonably withheld, to be suitable for the purpose, provided that, in such event, the BUILDER may forward or supply replacement parts or materials under the terms described in (c) hereinbelow, unless forwarding or supplying thereof under the terms described in (c) hereinbelow would impair or delay the operation or working schedule of the VESSEL. In the event that the BUYER proposes to cause the necessary repairs or replacements to be made to the VESSEL at any shipyard or works other than the SHIPYARD, the BUYER shall first (but in all events as soon as reasonably possible) give the BUILDER notice in writing or by facsimile of the time and place such repairs will be made, and if the VESSEL is not thereby delayed, or her operation or working schedule is not thereby impaired, the BUILDER shall have the right to verify by its own representative(s) the nature and extent of the defects complained of. The BUILDER shall, in such case, promptly advise the BUYER by facsimile, after such examination has been completed, of its acceptance or rejection of the defects as ones that are covered by the guarantee herein provided. Upon the BUILDER’s acceptance of the defects as justifying remedy under this Article, or upon award of the arbitration so determining, the BUILDER shall compensate the BUYER an amount equal to the actual proven cost of making the same repairs or replacements.
 
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(c)              In the event that it is necessary for the BUILDER to forward a replacement for a defective part under this guarantee, replacement parts shall be shipped to the BUYER under the terms of CIF port of the country where vessel will be repaired.
 
(d)            The BUILDER reserves the option to retrieve, at the BUILDER’s cost, any of the replaced equipment/parts in case defects are remedied in accordance with the provisions in this Article.
 
(e)            Any dispute under this Article shall be referred to arbitration in accordance with the provisions of Article XIV hereof.
 
4.                  EXTENT OF THE BUILDER’S LIABILITY
 
(a)             After delivery of the VESSEL the responsibility of the BUILDER in respect of and/or in connection with the VESSEL and/or this CONTRACT shall be limited to the extent expressly provided in the Paragraphs of this Article. Except as expressly provided in the Paragraphs of this Article, in no circumstances and on no ground whatsoever shall the BUILDER have any responsibility or liability whatsoever or howsoever arising in respect of or in connection with the VESSEL or this CONTRACT after the delivery of the VESSEL. Further, but without in any way limiting the generality of the foregoing, the BUILDER shall have no liability or responsibility whatsoever or howsoever arising for or in connection with any consequential or special losses, damages or expenses (including but not limited to loss of time, loss of profit or earnings or demurrage directly or indirectly caused), any pecuniary loss or expense, any liability to any third party or any fine, compensation, penalty or other payment or sanction incurred by or imposed upon the BUYER or any other party whatsoever in relation to or in connection with this CONTRACT or the VESSEL.
 
(b)            The BUILDER shall be under no obligation with respect to defects in respect of which the BUILDER has not received notice in accordance with Paragraph 2 of this Article by the expiry date of the guarantee specified in Paragraph 1, nor in any event shall the BUILDER be liable for any worsening of the defects after the expiry date of the guarantee.
 
(c)              The BUILDER shall under no circumstances be liable for defects in the VESSEL or any part of equipment thereof caused by perils of the sea, rivers or navigations, or by normal wear and tear, overloading, improper loading or stowage, corrosion of the
 
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materials other than related to lack of maintenance, fire, accidents at sea or elsewhere, or by incompetence, mismanagement, negligence or wilful neglect or any alteration or addition on the part of the BUYER, its employees or agents or any other person on or doing work on the VESSEL, including the VESSEL’s officers, crew and passengers. Likewise, the BUILDER shall not be liable for defects in the VESSEL or any part of equipment thereof that are due to repairs carried out by any other than the BUILDER or which have not been carried out in accordance with the procedure set out in Paragraph 3 (b) of this Article.
 
(d)            The BUILDER shall not be obliged to repair, not be liable for, damage to the VESSEL or any part of the equipment thereof, which after delivery of the VESSEL, is caused other than by the defects of the nature specified in this Article. The guarantees contained as hereinabove in this Article replace and exclude any other liability, guarantee, warranty and/or condition imposed or implied by statute, common law, custom, contract (including this CONTRACT) or otherwise on the part of the BUILDER by reason of the construction and sale of the VESSEL for and to the BUYER or for any other reason whatsoever.
 
5.                        GUARANTEE ENGINEER
 
The BUILDER shall have the right to appoint a Guarantee Engineer to serve on the VESSEL as its representative for a period of Three (3) months from the date the VESSEL is delivered. However, if the BUYER and the BUILDER shall deem it necessary to keep the Guarantee Engineer on the VESSEL for a longer period, then he shall remain on board the VESSEL after the said Three (3) months, but not longer than Six (6) months from the delivery of the VESSEL.
 
The BUYER, and its employees, shall give such Guarantee Engineer full cooperation in carrying out his duties as the representative of the BUILDER on board the VESSEL.
 
The Guarantee Engineer shall sign BUYER’s Indemnity Forms and shall at all times deemed to be an employee of the BUILDER.
 
The BUYER shall accord the Guarantee Engineer treatment comparable to the VESSEL’s Chief Engineer, and shall provide board and lodging at no cost to the BUILDER and/or the Guarantee Engineer.
 
While the Guarantee Engineer is on board the VESSEL, the BUYER shall pay to the BUILDER the sum of United States Dollars Six Thousand and Five Hundred (US$ 6,500.-) per month as a compensation for a part of cost and charges to be borne by the BUILDER in connection with Guarantee Engineer and also shall pay the expenses of his repatriation to
 
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Korea by air upon termination of his service, the expenses of his communication with the BUILDER incurred in performing his duties and expenses, if any, of his medical and hospital care in the VESSEL’s hospital.
 
Pertaining to the detailed particulars of this Paragraph, an agreement will be made according to this effect between the parties hereto upon delivery of the VESSEL.
 
(End of Article)
 
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ARTICLE X : PAYMENT
 
1.                  CURRENCY
 
All payments under this CONTRACT shall be made in United States Dollars.
 
2.                  TERMS OF PAYMENT
 
The payments of the CONTRACT PRICE shall be made as follows :
 
(a)             First Instalment
 
Twenty per cent (20 %) of the CONTRACT PRICE amounting to U.S.Dollars Eighteen Million Three Hundred Thousand only (US$ 18,300,000.-) shall be paid within three (3) business days after receipt by the BUYER of the original of the Refund Guarantee specified in Paragraph 8 of this Article.
 
Under this CONTRACT, in counting the business days, only Saturdays and Sundays are excepted. When a due date falls on a day when banks are not open for business in New York, N.Y., U.S.A., such due date shall fall due upon the first business day next following.
 
(b)            Second Instalment
 
Twenty per cent (20%) of the CONTRACT PRICE amounting to U.S.Dollars Eighteen Million Three Hundred Thousand only (US$ 18,300,000.-) shall be paid within three (3) business days of receipt by the Buyer of a facsimiled advice from the BUILDER that steel cutting has been commenced.
 
(c)             Third Instalment
 
Ten per cent (10%) of the CONTRACT PRICE amounting to U.S.Dollars Nine Million One Hundered Fifty Thousand only (US$ 9,150,000.-) shall be paid within three (3) business days of receipt by the BUYER of a facsimiled advice from the BUILDER that the first block of the keel has been laid.
 
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(d)            Fourth Instalment
 
Ten per cent (10%) of the CONTRACT PRICE amounting to U.S.Dollars Nine Million One Hundred Fifty Thousand only (US$ 9,150,000-) shall be paid within three (3) business days of receipt by the BUYER of a facsimiled advice from the BUILDER that the launching of the VESSEL has been completed.
 
(f)               Fifth Instalment
 
Forty per cent (40%) of the CONTRACT PRICE amounting to U.S.Dollars Thirty Six Million Six Hundred Thousand only (US$ 36,600,000.-) plus or minus any increase or decrease due to modifications and/or adjustment, if any, arising prior to delivery of the VESSEL of the CONTRACT PRICE under Articles III and V of this CONTRACT shall be paid to the BUILDER concurrently with the delivery of the VESSEL. (The date stipulated for payment of each of the five instalments mentioned above is hereinafter in this Article and in Article XI referred to as the “DUE DATE” of that instalment).
 
It is understood and agreed upon by the BUILDER and the BUYER that all payments under the provisions of this Article shall not be delayed or withheld by the BUYER due to any dispute or disagreement of whatsoever nature arising between the BUILDER and the BUYER. Should there be any dispute in this connection, the matter shall be dealt with in accordance with the provisions of arbitration in Article XIV hereof. Expenses for remitting payments and any other expenses connected with such payments shall be for the account of the BUYER.
 
3.                  DEMAND FOR PAYMENT
 
At least fourteen (14) days prior to the date of each event provided in Paragraph 2 of this Article on which any payment shall fall due hereunder, with the exception of the payment of the first and second instalments, the BUILDER shall notify the BUYER by facsimile of the date such payment shall become due.
 
The BUYER shall immediately acknowledge receipt of such notification by facsimile to the BUILDER, and make payment as set forth in this Article. If the BUILDER fails to receive the BUYER’s said acknowledgement within three (3) days after sending the aforementioned notification, the BUILDER shall promptly facsimile to the BUYER a second notification of similar import. The BUYER shall immediately acknowledge by facsimile receipt of the
 
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foregoing second notification regardless of whether or not the first notification was acknowledged as aforesaid.
 
4.                  METHOD OF PAYMENT
 
(a)            All the pre-delivery payments and the payment due on delivery in settlement of the CONTRACT PRICE as provided for in Paragraph 2 of this Article shall be made in U.S. Dollars on or before the DUE DATE thereof by telegraphic transfer as follows ;
 
(i)                                     The payment of the first, second, third and fourth instalments shall be made to the account of the BUILDER with a bank to be duly designated by the BUILDER, in Korea (the “BUILDER’S BANK”) or any other bank by telegraphic transfer remittance at least two(2) business days prior to the DUE DATE notified by the BUILDER.
 
(ii)                                  The fifth instalment as provided for in Paragraph 2.(f) of this Article shall be deposited at the BUILDER’S BANK in the name of the Buyer or, if the BUILDER requires, with any other bank in the name of the Byuer by telegraphic transfer remittance at least two (2) business days prior to the scheduled delivery date of the VESSEL notified by the BUILDER, with instructions that the said instalment is payable to the BUILDER against presentation by the BUILDER to the BUILDER’S BANK or any other bank, as the case may be, of a duplicate original copy of the PROTOCOL OF DELIVERY AND ACCEPTANCE of the VESSEL signed by the BUILDER and the BUYER.
 
(b)            Simultaneously with each of such payments, the BUYER shall advise the BUILDER of the details of the payments by facsimile and at the same time, the BUYER shall cause the BUYER’s remitting Bank to advise the BUILDER’S BANK or any other bank of the details of such payments by authenticated bank cable or telex.
 
5.                  REFUND BY THE BUILDER
 
The payments made by the BUYER to the BUILDER prior to delivery of the VESSEL shall constitute advances to the BUILDER. If the VESSEL is rejected by the BUYER in accordance with the terms of this CONTRACT, or except in the case of rescission or rescission of this CONTRACT by the BUILDER under the provisions of Article XI hereof,
 
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if the BUYER terminates or rescinds this CONTRACT pursuant to any of the provisions of this CONTRACT specifically permitting the BUYER to do so, the BUILDER shall forthwith refund to the BUYER, in U.S. Dollars, the full amount of total sums paid by the BUYER to the BUILDER in advance of delivery together with interest thereon as herein provided.
 
The transfer and other bank charges of such refund shall be for the BUILDER’s account. The interest rate of the refund, as above provided, shall be seven per cent (7%) per annum from the date following the date of receipt by the BUILDER of the pre-delivery instalment(s) to the date of remittance by telegraphic transfer of such refund, provided, however, that if the cancellation of this CONTRACT by the BUYER is based upon delays due to force majeure or other causes beyond the control of the BUILDER as provided for in Article VIII hereof, then in such event, the interest rate of refund shall be reduced to six point five per cent (6.5%) per annum.
 
It is hereby understood by both parties that payment of any interest provided herein is by way of liquidated damages due to rescission of this CONTRACT and not by way of compensation for use of money.
 
If, the BUILDER is required to refund to the BUYER the instalments paid by the BUYER to the BUILDER as provided in this Paragraph, the BUILDER shall return to the BUYER all of the BUYER’s supplies as stipulated in Article XII which were not incorporated into the VESSEL and pay to the BUYER an amount equal to the cost to the BUYER of those supplies incorporated into the VESSEL.
 
6.                  TOTAL LOSS
 
If there is a total loss or a constructive total loss of the VESSEL prior to delivery thereof, the BUILDER shall proceed according to the option of the Buyer hereto either:
 
(a)             to build another vessel in place of the VESSEL so lost and deliver it under this CONTRACT to the BUYER, provided that the parties hereto shall have agreed in writing to a reasonable cost and time for the construction of such vessel in place of the lost VESSEL; or
 
(b)            to refund to the BUYER the full amount of the total sums paid by the BUYER to the BUILDER under the provisions of Paragraph 2 of this Article together with interest thereon at the rate of six point five per cent (6.5%) per annum from the date following
 
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the date of receipt by the BUILDER of such pre-delivery instalment(s) to the date of payment by the BUILDER to the BUYER of the refund.
 
If the parties hereto fail to reach such agreement within two (2) months after the VESSEL is determined to be a total loss or constructive total loss, the provisions of (b) hereinabove shall be applied.
 
7.                  DISCHARGE OF OBLIGATIONS
 
Such refund as provided in the foregoing Paragraphs 5 and 6 by the BUILDER to the BUYER shall forthwith discharge all the obligations, duties and liabilities of each of the parties hereto to the other except the claims of the BUILDER against the BUYER, if any, under this CONTRACT. Any and all refunds or payments due to the BUYER under this CONTRACT shall be effected by telegraphic transfer to the account specified by the BUYER.
 
8.                  REFUND GUARANTEE
 
The BUILDER shall deliver to the BUYER by hard copy or by SWIFT through the BUYER’s bank, acceptable to the BUILDER, an assignable letter of guarantee issued by a Bank acceptable to the Buyer as soon as possible but in any case no later than Ninety (90) days from the date of this CONTRACT for the refund of the pre-delivery instalments plus interest as aforesaid to the BUYER under or pursuant to Paragraph 5 above in the form annexed hereto as Exhibit “A”. All expenses in issuing and maintaining the letter of guarantee described in this Paragraph shall be borne by the BUILDER. In case of SWIFT, the BUYER shall advise the BUILDER of the details of the BUYER’s bank including the SWIFT address upon execution of this CONTRACT.
 
9.                  PERFORMANCE GUARANTEE
 
Upon signing this CONTRACT, the BUYER shall provide the BUILDER with an irrevocable and Corporate Guarantee pursuant to the Terms and Provisions of this Contract issued by a Corporate Guarantor acceptable to the BUILDER for the due and faithful performance by the BUYER of all its liabilities and responsibilities under the CONTRACT including, but not limited to, the payment of the CONTRACT PRICE and taking delivery of the VESSEL, in the form annexed hereto as Exhibit “B”.
 
(End of Article)
 
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ARTICLE XI : BUYER’S DEFAULT
 
1.                  DEFINITION OF DEFAULT
 
The BUYER shall be deemed to be in default under this CONTRACT in the following cases :
 
(a)             If the first, second, third and fourth instalment is not paid to the BUILDER within respective Three (3) banking days of such instalments; or
 
(b)            If the fifth instalment is not deposited at the BUILDER’S BANK or at the account of the BUILDER with any other bank in accordance with Article X.4.(a)(ii) hereof or if the said fifth instalment deposit is not released to the BUILDER against presentation by the BUILDER of a duplicate original copy of the PROTOCOL OF DELIVERY AND ACCEPTANCE; or
 
(c)             If the BUYER fails to take delivery of the VESSEL when the VESSEL is duly tendered for delivery by the BUILDER within Three (3) banking days under the provisions of Article VII hereof; or
 
(d)            If and order or an effective resolution shall be passed for winding up of the BUYER (except for the purpose of reorganization, merger or amalgamation); or
 
(e)             If the BUYER fails to be in punctual, due and full compliance with any of its obligations under this CONTRACT.
 
In case the BUYER is in default of any of its obligations under this CONTRACT, the BUILDER is entitled to and shall have the following rights, powers and remedies in addition to such other rights, powers and remedies as the BUILDER may have elsewhere in this CONTRACT and/or at law, at equity or otherwise.
 
2.                  EFFECT OF THE BUYER’S DEFAULT ON OR BEFORE THE DELIVERY OF THE VESSEL
 
If the BUYER shall be in default as provided in Paragraph 1 above of its obligations under this CONTRACT, then;
 
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(a)             The DELIVERY DATE of the VESSEL shall be extended automatically for the actual period of such default and the BUILDER shall not be obliged to pay any liquidated damages for the delay in delivery of the VESSEL caused thereby.
 
(b)            The BUYER shall pay to the BUILDER interest at the rate of seven per cent (7%) per annum in respect of the instalment(s) in default from the respective DUE DATE to the date of actual receipt by the BUILDER of the full amount of such instalment(s).
 
(c)             If the BUYER is in default in payment of any of the instalment(s) due and payable prior to or simultaneously with the delivery of the VESSEL, the BUILDER shall, in writing or by facsimile, notify the BUYER to that effect, and the BUYER shall, upon receipt of such notification, forthwith acknowledge in writing or by facsimile to the BUILDER that such notification has been received.
 
(d)            If any of the BUYER’s default continues for a period of ten(10) days after the BUILDER’s notification to the BUYER of such default, the BUILDER may, at its option, rescind this CONTRACT by serving upon the BUYER a written notice or a facsimile notice of rescission confirmed in writing.
 
(e)            In the event of such rescission by the BUILDER of this CONTRACT due to the BUYER’s default as provided for in paragraph 1 above, the BUILDER shall be entitled to retain and apply the instalments already paid by the BUYER to the recovery of the BUILDER’s loss and damage including, but not being limited to, reasonable estimated profit due to the BUYER’s default and the rescission of this CONTRACT and at the same time the BUILDER shall have the full right and power either to complete or not to complete the VESSEL which is the sole property of the BUILDER as it deems fit, and to sell the VESSEL at a public or private sale on such terms and conditions as the BUILDER thinks fit without being answerable for any loss or damage.
 
The proceeds received by the BUILDER from the sale shall be applied in addition to the instalment(s) retained by the BUILDER as mentioned hereinabove as follows : -
 
First,                            in payment of all reasonable costs and expenses of the sale of the VESSEL, including interest thereon at seven per cent (7%) per annum from the respective date of payment of such costs and expenses aforesaid to the date of sale on account of the BUYER’s default.
 
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Second,            if the VESSEL has been completed, in or towards satisfaction of the unpaid balance of the CONTRACT PRICE, to which shall be added the cost of all additional work and extras agreed by the BUYER including interest thereon at seven per cent (7%) per annum from the respective DUE DATE of the instalment in default to the date of sale, or if the VESSEL has not been completed, in or towards satisfaction of the unpaid amount of the cost incurred by the BUILDER prior to the date of sale on account of construction of the VESSEL, including work, labour, materials and reasonably estimated profit which the BUILDER would have been entitled to receive if the VESSEL had been completed and delivered plus interest thereon at seven per cent (7%) per annum from the respective DUE DATE of the instalment in default to the date of sale.
 
Third,                       the balance of the proceeds, if any, shall belong to the BUYER, and shall forthwith be paid over to the BUYER by the BUILDER.
 
In the event of the proceeds from the sale together with instalment(s) retained by the BUILDER being insufficient to pay the BUILDER, the BUYER shall be liable for the deficiency and shall pay the same to the BUILDER upon its demand.
 
(End of Article)
 
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ARTICLE XII : BUYER’S SUPPLIES
 
1.                  RESPONSIBILITY OF THE BUYER
 
The BUYER shall, at its own risk, cost and expense, supply all the BUYER’s supplies as specified in Paragraph 0.16.1 of the SPECIFICATIONS (hereinafter called the “BUYER’S SUPPLIES”), to the BUILDER at the SHIPYARD in proper condition ready for installation and in accordance with the time schedule to be furnished by the BUILDER sixty (60) days from signing this Contract.
 
In order to facilitate the installation of the BUYER’S SUPPLIES by the BUILDER, the BUYER shall furnish the BUILDER with the necessary plans, instruction books, test report and all test certificates required by the BUILDER and shall cause the representative(s) of the makers of the BUYER’S SUPPLIES to give the BUILDER any advice, instructions or assistance which the BUILDER may reasonably require in the installation or adjustment thereof at the SHIPYARD, all without cost or expense to the BUILDER.
 
The BUYER shall be liable for any expense incurred by the BUILDER for repair of the BUYER’S SUPPLIES due to defective design or materials, poor workmanship or performance or due to damage in transit and the DELIVERY DATE of the VESSEL shall be extended for the period of such repair if such repair shall affect the delivery of the VESSEL.
 
Commissioning into good order of the BUYER’S SUPPLIES during and after installation on board shall be made at the BUYER’s expense by the representative of respective maker or the person designated by the BUYER in accordance with the BUILDER’s building schedule.
 
Should the BUYER fail to deliver to the BUILDER the BUYER’S SUPPLIES and the necessary document or advice for such supplies within the time specified by the BUILDER, the DELIVERY DATE of the VESSEL shall automatically be extended for the period of such delay if such delay in delivery shall affect the delivery of the VESSEL. In such event, the BUYER shall pay to the BUILDER all losses and damages sustained by the BUILDER due to such delay in the delivery of the BUYER’S SUPPLIES and such payment shall be made upon delivery of the VESSEL, provided, however, that the BUILDER shall have :
 
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(a)             furnished the BUYER with the time schedule referred to above, two (2) months prior to installation of the BUYER’S SUPPLIES and
 
(b)            given the BUYER written notice of any delay in delivery of the BUYER’S SUPPLIES and the necessary document or advice for such supplies as soon as the delay occurs which might give rise to a claim by the BUILDER under this Paragraph.
 
Furthermore, if the delay in delivery of the BUYER’S SUPPLIES and the necessary document or advice for such supplies should exceed twenty (20) days from the date specified by the BUILDER, the BUILDER shall be entitled to proceed with construction of the VESSEL without installation of such items (regardless of their nature or importance to the BUYER or the VESSEL) in or on the VESSEL without prejudice to the BUILDER’s right hereinabove provided, and the BUYER shall accept the VESSEL so completed.
 
2.                  RESPONSIBILITY OF THE BUILDER
 
The BUILDER shall be responsible for storing, safekeeping and handling with reasonable care of the BUYER’S SUPPLIES which the BUILDER is required to install on board the VESSEL under Paragraph 0.16.1 of the SPECIFICATIONS after delivery of such supplies to the SHIPYARD, and shall install such supplies on board the VESSEL at the BUILDER’s expense unless otherwise specified in the SPECIFICATIONS.
 
However, the BUILDER shall not be responsible for the quality, performance or efficiency of any equipment included in the BUYER’S SUPPLIES and is under no obligation with respect to the guarantee of such equipment against any defects caused by poor quality, performance or efficiency of the BUYER’S SUPPLIES. If any of the BUYER’S SUPPLIES is lost or damaged while in the custody of the BUILDER, the BUILDER shall, if the loss or damage is due to wilful default or negligence on its part, be responsible for such loss or damage.
 
(End of Article)
 
42

 
ARTICLE XIII - INSURANCE
 
1.                           EXTENT OF INSURANCE COVERAGE
 
From the time of launching until delivery of the VESSEL, the BUILDER shall, at its own cost and expense, insure the VESSEL and all machinery and equipment, appurtenances and outfits, including the BUYER’s Supplies, built into or installed in or upon the VESSEL, against all risks under the “Institute Causes for BUILDER’s Risk”, with first class insurance company or underwriters in.
 
The amount of such insurance coverage shall, up to the date of delivery of the VESSEL, not be less than the aggregate amount of all instalments paid by the BUYER to the BUILDER, plus the value of the BUYER’s Supplies in the custody of the Shipyard.
 
The BUILDER shall provide the copy of corresponding insurance coverage of the VESSEL to the BUYER.
 
2.                           TERMINATION OF BUILDER’S OBLIGATION TO INSURE
 
The BUILDER shall be under no obligation to insure the VESSEL hereunder after delivery and acceptance of the VESSEL.

(End of Article)
 
43

 
ARTICLE XIV: ARBITRATION
 
1.                  APPOINTMENT OF THE ARBITRATOR
 
If any dispute or difference shall arise between the parties hereto concerning any matter or thing herein contained, or the operation or the design and / or construction of the VESSEL, its machinery and equipment thereof, or any matter or thing in any way connected with this CONTRACT or the rights, duties or liabilities of either party under or in connection with this CONTRACT, then, in every such case, the dispute or difference shall be referred to arbitration in London by a sole arbitrator. The arbitrator shall be appointed by agreement within fourteen (14) days of first written notification of either party to the other of intention to arbitrate such dispute or difference, or in default of such agreement, upon the application of either of the parties, by the President for the time being of the London Maritime Arbitrators Association who shall in making any such appointment have due regard to the requirement for an expeditious resolution of the dispute and in particular the availability of any arbitrator so appointed for an early hearing date.
 
2.                  LAWS APPLICABLE
 
Any arbitration arising hereunder shall be governed by and construed in accordance with the Arbitration Act 1996 of England or any statutory modification or re-enactments thereof for the time being in force. The award of the arbitrator shall be final and binding upon parties hereto.
 
3.                  PROCEEDINGS
 
In the event of any dispute or difference arising or occurring prior to delivery to, or acceptance by, the BUYER of the VESSEL being referred to arbitration, the parties hereby acknowledge that time is of the essence in obtaining an award from the arbitrator on such dispute or difference and the parties hereby agree that the arbitration shall be conducted according to the following timetable:
 
(a)            The claimant in the arbitration to serve points of claim within fourteen (14) days of the appointment of the arbitrator.
 
(b)           The respondent in the arbitration to serve points of defence and points of counterclaim,
 
44

 
if any, within fourteen (14) days thereafter.
 
(c)         The claimant to serve points of reply and defence to counterclaim, if any, within seven (7) days thereafter and the hearing of the arbitration to commence within twelve (12) weeks of the appointment of the arbitrator.
 
4.                  ALTERATION OF DELIVERY OF THE VESSEL
 
In the event of the arbitration of any dispute or difference arising or occurring prior to delivery to, or acceptance by the BUYER of the VESSEL, the award by the arbitrator shall include a finding as to whether or not the contractual delivery date of the VESSEL should, as a result of such dispute, be in any way altered thereby.
 
5.                  NOTICE OF AWARD
 
The award shall immediately be given to the BUYER and the BUILDER by telefax.
 
6.                  EXPENSES
 
The Arbitration Board shall determine which party shall bear the expenses of the arbitration or the portion of such expenses which each party shall bear.
 
7.                  ENTRY IN COURT
 
In case of failure by either party to respect the award of the arbitration, the judgement may be entered in any proper court having jurisdiction thereof.
 
(End of Article)
 
45

 
ARTICLE XV: SUCCESSORS AND ASSIGNS
 
The BUILDER agrees that, prior to delivery of the VESSEL, this CONTRACT may, with the prior written approval of the BUILDER, which the BUILDER shall not unreasonably withhold, be transferred to and the title thereof may be taken by another company. In the event of any assignment pursuant to the terms of this CONTRACT, the assignee, its successors and assigns shall succeed to all the rights and obligations of the BUYER under this CONTRACT. However, the BUYER shall remain responsible for performance by the assignee, its successors and assigns of all the BUYER’s obligations, liabilities and responsibilities under this CONTRACT. It is understood that any expenses or charges incurred due to the transfer of this CONTRACT shall be for the account of the BUYER.
 
The BUYER is hereby allowed to assign the Contract for the purposes of financing without BUILDER’S approval. However, the BUYER shall remain responsible for performance by the assignee, its successors and assigns of all the BUYER’s obligations, liabilities and responsibilities under this CONTRACT. It is understood that any expenses or charges incurred due to the transfer of this CONTRACT shall be for the account of the BUYER. The BUYER is further allowed to nominate a company controlled by the BUYER to take over the Contract.
 
The BUILDER shall fully cooperate in case the BUYER requests UK Tax lease financing arrangements. However, the BUYER shall remain responsible for performance by the assignee, its successors and assigns of all the BUYER’s obligations, liabilities and responsibilities under this CONTRACT. It is understood that any expenses or charges incurred due to the transfer of this CONTRACT shall be for the account of the BUYER.
 
The BUILDER shall have the right to assign this CONTRACT at any time after the effective date hereof, provided that prior written agreement is obtained from the BUYER.
 
(End of Article)
 
46

 
ARTICLE XVI: TAXES AND DUTIES
 
1.                  TAXES
 
Unless otherwise expressly provided for in this CONTRACT, all costs and taxes including stamp duties, if any, incurred in or levied by any country except Korea in connection with this CONTRACT shall be borne by the BUYER and corresponding costs and taxes in Korea, before delivery of the VESSEL, if any, shall be borne by the BUILDER.
 
2.                  DUTIES
 
The BUILDER shall hold the BUYER harmless from any payment of duty imposed in Korea upon materials or supplies which, under the terms of this CONTRACT, or amendments thereto, may be supplied by the BUYER from abroad for the construction of the VESSEL.
 
The BUILDER shall likewise hold the BUYER harmless from any payment of duty imposed in Korea in connection with materials or supplies for operation of the VESSEL, including running stores, provisions and supplies necessary to stock the VESSEL for its operation. This indemnity does not, however, extend to any items purchased by the BUYER for use in connection with the VESSEL which are not absolutely required for the construction or operation of the VESSEL.
 
(End of Article)
 
47

 
ARTICLE XVII: PATENTS, TRADEMARKS AND COPYRIGHTS
 
1.                  PATENTS, TRADEMARKS AND COPYRIGHTS
 
Machinery and equipment of the VESSEL, whether made or furnished by the BUILDER under this CONTRACT, may bear the patent numbers, trademarks, or trade names of the manufacturers. The BUILDER shall defend and save harmless the BUYER from all liabilities or claims for or on account of the use of any patents, copyrights or design of any nature or kind, or for the infringement thereof including any unpatented invention made or used in the performance of this CONTRACT and also for any costs and expenses of litigation, if any in connection therewith. No such liability or responsibility shall be with the BUILDER with regard to components and/or equipment and/or design supplied by the BUYER.
 
Nothing contained herein shall be construed as transferring any patent or trademark rights or copyrights in equipment covered by this CONTRACT, and all such rights are hereby expressly reserved to the true and lawful owners thereof.
 
2.                  RIGHTS TO THE SPECIFICATIONS, PLANS, ETC.
 
The BUILDER retains all rights with respect to the SPECIFICATIONS, plans and working drawings, technical descriptions, calculations, test results and other data, information and documents concerning the design and construction of the VESSEL and the BUYER shall not disclose the same or divulge any information contained therein to any third parties, including but not limited to any other shipbuilders, without the prior written consent of the BUILDER, excepting where it is necessary for usual operation, repair and maintenance of the VESSEL.
 
(End of Article)
 
48

 
ARTICLE XVIII: INTERPRETATION AND GOVERNING LAW
 
This CONTRACT has been prepared in English and shall be executed in duplicate and in such number of additional copies as may be required by either party respectively. The parties hereto agree that the validity and interpretation of this CONTRACT and of each Article and part thereof shall be governed by the laws of England.
 
(End of Article)
 
49

 
ARTICLE XIX : NOTICE
 
Any and all notices, requests, demands, instructions, advices and communications in connection with this CONTRACT shall be written in English, sent by registered air mail or facsimile and shall be deemed to be given when first received whether by registered mail or facsimile. They shall be addressed as follows, unless and until otherwise advised : -

To the BUILDER :	Sungdong Shipbuilding & Marine Engineering Co., Ltd.	
 	1609-2, Hwang-li, Gwangdo-myeon, Tongyoung-si,	
 	Gyeongnam, Korea	
 	 	
 	Contract Administration Department	
 	Attn : Mr. S. K. Ahn	
 	Facsimile: (82) 55 650 9294	
 	Telephone: (82) 55 650 9311	
 	 	
To the BUYER :	Danaos Shipping Co., Ltd.	
 	Akti Kondyli 14, 185 45 Piraeus, Greece	
 	Attn : Mr. Dimitrios Vastarouchas	
 	Facsimile : (30) 210 422 0855	
 	Telephone: (30) 210 419 6529	
 
The said notices shall become effective upon receipt of the letter or facsimile communication by the receiver thereof. Where a notice by facsimile is concerned which is required to be confirmed by letter, then, unless the CONTRACT or the relevant Article thereof otherwise requires, the notice shall become effective upon receipt of the facsimile.
 
(End of Article)
 
50

 
ARTICLE XX : EFFECTIVENESS OF THIS CONTRACT
 
This CONTRACT shall become effective upon signing by the parties hereto.
 
(End of Article)
 
51

 
ARTICLE XXI - INTERPRETATION
 
1.                           LAWS APPLICABLE
 
The parties hereto agree that the validity and interpretation of this Contract and of each Article and part thereof shall be governed by the laws of England.
 
2.                           DISCREPANCIES
 
All general language or requirements embodied in the SPECIFICATIONS are intended to amplify, explain and implement the requirements of this CONTRACT. However, in the event that any language or requirements so embodied permit of an interpretation inconsistent with any provisions of this Contract, then, in each and every such event, the applicable provisions of this Contract shall prevail and govern. In the event of conflict between the SPECIFICATIONS and Plans, the SPECIFICATIONS shall prevail and govern.
 
3.                           ENTIRE AGREEMENT
 
This Contract contains the entire agreement and understanding between the parties hereto and supersedes all prior negotiations, representations, undertaking and agreements on any subject matter of this Contract.
 
4.                           AMENDMENTS AND SUPPLEMENTS
 
Any supplement, memorandum of understanding or amendment, whatsoever form it may be relating to this CONTRACT, to be made and signed among parties hereof after signing this CONTRACT, shall be the integral part of this CONTRACT and shall be predominant over the respective corresponding Article and/or Paragraph of this CONTRACT.
 
The Contract can only be amended in writing.
 
(End of Article)
 
52

 
ARTICLE XXII : EXCLUSIVENESS
 
This CONTRACT shall constitute the only and entire agreement between the parties hereto, and unless otherwise expressly provided for in this CONTRACT, all other agreements, oral or written, made and entered into between the parties prior to the execution of this CONTRACT shall be null and void.
 
(End of Article)
 
53

 
IN WITNESS WHEREOF , the parties hereto have caused this CONTRACT to be duly executed on the date and year first above written.

BUYER	BUILDER	

For and on behalf of	For and on behalf of	
BOXCARRIER (NO.2) CORP.	SUNGDONG SHIPBUILDING &	
 	MARINE ENGINEERING CO.,LTD.	

By	/s/ John Coustas	 	By	/s/ Kwan Hong Yu	 	
Name: John Coustas	Name: Kwan Hong Yu	
Title:	Title:	
President & Chief Executive Officer	Chairman & Chief Executive Officer	

WITNESS : /s/ Heung Chul Jung, Attorney-in-fact	WITNESS: [Illegible]	

54

 
EXHIBIT “A”
 
LETTER OF REFUNDMENT GUARANTEE
 
Gentlemen :
 
We hereby issue our letter of guarantee no.             in favour of                    (hereinafter called the “BUYER”) for account of                    (hereinafter called the “BUILDER”) as follows in consideration of the shipbuilding contract dated (hereinafter called the “Contract”) made by and among the BUYER and the BUILDER for the construction of one(1) single screw diesel engine driven Container VESSEL having BUILDER’s Hull No. (hereinafter called the “VESSEL”).
 
If in connection with the terms of the Contract the BUYER shall become entitled to a refund of the advance payment(s) made to the BUILDER prior to the delivery of the VESSEL, we hereby irrevocably guarantee the repayment of the same to the BUYER immediately on demand being initially US$ (Say U.S. Dollars) together with interest thereon at the rate of Seven (7) percent per annum from the respective dates on which such sums were paid by the BUILDER to the date of remittance by telegraphic transfer of such refund.
 
The amount of this guarantee will be automatically increased, not more than three times, upon BUILDER’s receipt of the respective instalment: each time by the amount of instalment of US$ (Say U.S. Dollars), US$.- (Say U.S. Dollars) and US$.- (Say U.S. Dollars) respectively plus interest thereon as provided in the Contract, but in any eventuality the amount of this guarantee shall not exceed the total sum of US$.- (Say U.S. Dollars plus interest thereon at the rate of Seven (7) percent per annum from the respective dates on which such sums were paid by the BUYER to the BUILDER to the date of remittance by telegraphic transfer of the refund. However, in the event of cancellation of the CONTRACT being based on delays due to force majeure or other causes beyond the control of the BUILDER, the interest rate of refund shall be reduced to six point five per cent (6.5%) per annum as provided in Article X of the CONTRACT.
 
Our liability under this letter of guarantee shall not be affected by any alteration to or variation of the terms of the Contract you may hereafter agree with the BUILDER and by any other matter of circumstances, including bankruptcy or insolvency of the BUILDER, which might otherwise discharge our liability hereunder as guarantor of the BUILDER’s obligations as aforesaid.
 
In case any refund is made to you by the BUILDER or by us under this guarantee, our liability hereunder shall be automatically reduced by the amount of such refund.
 
This letter of guarantee is available against BUYER’s simple receipt and signed statement certifying that BUYER’s demand for refund has been made in conformity with Article X of the Contract and the BUILDER has failed to make the refund within Thirty One (31) days after BUYER’s demand to the BUILDER.
 
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Refund shall be made to BUYER by telegraphic transfer in United States Dollars to an account designated by you without deduction, withholding or set-off.
 
This letter of guarantee shall expire and become null and void upon receipt by the BUYER of the sum guaranteed hereby or upon acceptance by the BUYER of the delivery of the VESSEL in accordance with the terms of the Contract and, in either case, this letter of guarantee shall be returned to us. This guarantee is valid from the date of this letter of guarantee until or in the event of delayed delivery until such time as the VESSEL is delivered by the BUILDER to the BUYER in accordance with the terms of the Contract.
 
Notwithstanding the provisions hereinabove, in case we receive notification from you or the BUILDER confirmed by an Arbitrator stating that your claim to cancel the Contract or your claim for refundment thereunder has been disputed and referred to Arbitration in accordance with the provisions of the Contract, the period of validity of this guarantee shall be extended until Thirty (30) days after the final and non-appealable award shall be rendered in the Arbitration and a copy thereof acknowledged by the Arbitrators. In such case, this guarantee shall not be available unless and until such acknowledged copy of the final award in the Arbitration justifying your claim is presented to us.
 
Your rights in respect of this letter of guarantee are assignable from the date of this letter of guarantee until such time as the VESSEL is delivered by the BUILDER to the BUYER in accordance with the provisions of the Contract, on the understanding that you will notify us of the identity of any assignee of your rights under this letter of guarantee.
 
Any notice or demand under this letter of guarantee shall be given by facsimile and sent to:

 

 
or to such other address as we might notify to you in writing. A notice shall be deemed to be served and shall take effect 2 hours after its transmission is completed, provided that if a notice would be deemed to be served on a day which is not a business day, or which is a business day but after 5:00 p.m. local time, in the place of receipt, the notice shall be deemed to be served and shall take effect at 9:00 a.m. on the next day which is a business day.
 
This guarantee shall be governed by and construed in accordance with the Laws of England. Any disputes arising under this guarantee (but not any disputes arising under the Contract which shall be determined by arbitration in accordance with the terms of the Contract and as referenced in this letter of guarantee) shall be determined by the High Court of Justice in London to whose exclusive jurisdiction we hereby submit. We appoint
 
2

 
                                                             as our agents for service of process in connection with any proceedings in such courts.
 
We each jointly and severally hereby represent and guarantee that we have the corporate power and authority to execute, deliver and perform the obligations under this letter of guarantee, and that such execution and performance will not violate or conflict with any provision of law, statute, rule, permit or regulation of any government, regulatory body, agency or other authority in the jurisdictions where we are subject to such laws and regulations.
 
IN WITNESS WHEREOF, we have hereunder set our hands and seal by our duly authorized representatives this           day of                , 2006.

 	Very truly yours,	

 	For and on behalf of	

 	 	
 	By	 	 	
 	Name :	
 	Title : Attorney-in-Fact	

 	For and on behalf of	

 	 	 	
 	By	 	 	
 	Name :	
 	Title : Attorney-in-Fact	
 
3

 
EXHIBIT “B”

Date :             , 2006
 
PERFORMANCE GUARANTEE
 
In consideration of the performance of a certain shipbuilding contract dated                                        (hereinafter called the “Contract”) by having your Hull No. (hereinafter called the “VESSEL”) providing among other things for payment of the Contract Price amounting to United States Dollars                                    (US$                                  );
 
We, the undersigned, hereby irrevocably and unconditionally guarantee to you, your successors, and assigns the due and faithful performance by the BUYER of its all liabilities and responsibilities under the Contract and any supplement, amendment, change or modification hereafter made thereto, including but not limited to, due and prompt payment of the Contract Price by the BUYER to you, your successors, and assigns under the Contract and any supplement, amendment, change or modification as aforesaid (hereby expressly waiving notice of any such supplement, amendment, change or modification as may be agreed to by the BUYER and confirming that this guarantee shall be fully applicable to the Contract as so supplemented, amended, changed or modified).
 
This Performance Guarantee shall be governed by the laws of England.

GUARANTOR :	
BY :	 	 	
TITLE :	
WITNESS :	
 
4

 
Exhibit 10.29
 
SHIPBUILDING CONTRACT

FOR

THE CONSTRUCTION AND SALE OF
 
ONE (1) 6,500 TEU CLASS CONTAINER CARRIER

HULL NO. S4003

BETWEEN

BOXCARRIER (NO.3) CORP.

(AS BUYER)

AND

SUNGDONG SHIPBUILDING & MARINE ENGINEERING CO., LTD.
 
(AS BUILDER)

 
 
I N D E X

 	 	PAGE	
PREAMBLE	 	1	
 	 	 	
ARTICLE      I	: DESCRIPTION AND CLASS	2	
 	 	 	
 	II	: CONTRACT PRICE	5	
 	 	 	 	
 	III	: ADJUSTMENT OF THE CONTRACT PRICE	6	
 	 	 	 	
 	IV	: INSPECTION AND APPROVAL	10	
 	 	 	 	
 	V	: MODIFICATIONS, CHANGES AND EXTRAS	15	
 	 	 	 	
 	VI	: TRIALS AND COMPLETION	18	
 	 	 	 	
 	VII	: DELIVERY	22	
 	 	 	 	
 	VIII	: DELAYS AND EXTENSIONS OF TIME (FORCE MAJEURE)	25	
 	 	 	 	
 	IX	: WARRANTY OF QUALITY	28	
 	 	 	 	
 	X	: PAYMENT	33	
 	 	 	 	
 	XI	: BUYER’S DEFAULT	38	
 	 	 	 	
 	XII	: BUYER’S SUPPLIES	41	
 	 	 	 	
 	XIII	: INSURANCE	43	
 	 	 	 	
 	XIV	: ARBITRATION	44	
 	 	 	 	
 	XV	: SUCCESSORS AND ASSIGNS	46	
 	 	 	 	
 	XVI	: TAXES AND DUTIES	47	
 	 	 	 	
 	XVII	: PATENTS, TRADEMARKS AND COPYRIGHTS	48	
 	 	 	 	
 	XVIII	: INTERPRETATION AND GOVERNING LAW	49	
 	 	 	 	
 	XIX	: NOTICE	50	
 	 	 	 	
 	XX	:EFFECTIVENESS OF THIS CONTRACT	51	
 	 	 	 	
 	XXI	: INTERPRETATION	52	
 	 	 	 	
 	XXII	:EXCLUSIVENESS	53	
 
SCHEDULES
 
EXHIBIT “A”  REFUND GUARANTEE LETTER OF REFUNDMENT GUARANTEE
 
EXHIBIT “B”  PERFORMANCE GUARANTEE

 
SHIPBUILDING CONTRACT
 
THIS CONTRACT, made on this 26 day of July, 2006 by and between BOXCARRIER (NO.3) CORP. , a corporation incorporated and existing under the laws of Republic of Liberia with its registered office at 80 Broad Street, Monrovia, Liberia (hereinafter called the “BUYER”), the party of the first part and Sungdong Shipbuilding & Marine Engineering Co., Ltd., a company organized and existing under the laws of the Republic of Korea, having its registered office at 1609-2, Hwang-li, Gwangdo-myeon, Tongyoung-si, Gyeongnam, 650-827, Korea (hereinafter called the “BUILDER”), the party of the second part,
 
W I T N E S S E T H :
 
In consideration of the mutual covenants contained herein, the BUILDER agrees to design, build, launch, equip and complete in accordance with the Sung Dong Shipbuilding & Marine Engineering Quality Standard one (1) Single Screw Diesel Engine driven Container VESSEL as described in the Specifications as described in Article I hereof (hereinafter called the “VESSEL”) at the BUILDER’s yards in Korea (hereinafter called the “SHIPYARD”) and to deliver and sell the VESSEL to the BUYER, and the BUYER agrees to accept delivery of and purchase from the BUILDER the VESSEL, according to the terms and conditions hereinafter set forth :
 
(End of Preamble)
 
1

 
ARTICLE I : DESCRIPTION AND CLASS
 
1.                         DESCRIPTION
 
The VESSEL shall have the BUILDER’s Hull No. S4003 and shall be built, constructed, equipped and completed in accordance with the specifications No. SD-DN-6500T.CN.FS-01 dated July 26, 2006 and the general arrangement plan No. SD-DN-6500T.CN.GA-01 dated July 26, 2006 attached thereto and the ‘Maker List’ No. SD-DN-6500T.CN.ML-01 dated July 26, 2006 (hereinafter called respectively the “SPECIFICATIONS” and the “PLAN”) signed by both parties, which shall constitute an integral part of this CONTRACT although not attached hereto.
 
The SPECIFICATIONS and the PLAN are intended to explain each other and anything shown on the PLAN and not stipulated in the SPECIFICATIONS or anything stipulated in the SPECIFICATIONS and not shown on the PLAN shall be deemed and considered as if included in both. Should there be any inconsistencies or contradictions between the SPECIFICATIONS and the PLAN, the SPECIFICATIONS shall prevail. Should there be any inconsistencies or contradictions between this CONTRACT and the SPECIFICATIONS, this CONTRACT shall prevail.
 
2.                         BASIC DIMENSIONS AND PRINCIPAL PARTICULARS OF THE VESSEL
 
(a)                    The basic dimensions and principal particulars of the VESSEL shall be :

Length, overall	about	300.0	 	M	
Length, between perpendiculars	286.6	 	M	
Breadth, moulded	40.0	 	M	
Depth to Upper Deck, moulded	24.2	 	M	
 	 	 	 	
Design draft, moulded, in seawater of specific gravity of 1.025	12.0	 	M	
Scantling draft, moulded, in seawater of specific gravity of 1.025	14.5	 	M	
 	 	 	 	
Deadweight guaranteed on the above moulded design draft of 12.0 M	59,000	 	M/T	
 
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Deadweight on the above moulded scantling draft of 14.5 M	83,300 	 	M/T	
 	 	 	 	
Main propulsion engine	MAN B&W 10K98MC-C	
 	MCR :	77,600 PS x 104 RPM	
 	NCR :	69,840 PS x 100.4 RPM	
 	
Speed guaranteed at 12.0meters design draft at the condition of clean bottom and in calm and deep sea with main engine developing a NCR of 69,840 PS with fifteen per cent (15%) sea margin	 	25.6 KNOTS	
 	 	 	
Specific Fuel consumption guaranteed of the main engine applying I.S.O. reference conditions to the result of official shop test at a MCR of 77,600 PS using marine fuel oil having lower calorific value of 10,200 Kcal per Kg.	 	126.0 gr/BHP.HR	

The details of the above particulars as well as the definitions and method of measurements and calculations are as indicated in the SPECIFICATIONS.
 
(b)                   All other vessels Hull Number S4002, S4003, S4004 and S4005 shall be built as identical sister ships unless a modification to a design is agreed upon.
 
3.                  CLASSIFICATION, RULES AND REGULATIONS
 
(a)             The VESSEL including its machinery, equipment and outfittings shall be built in compliance with the rules and regulations of Det Norske Veritas (hereinafter called the “CLASSIFICATION SOCIETY”), in force as of the date of this CONTRACT, to be classed and registered as +1A, CONTAINER CARRIER, EO, BIS, TMON, NAUTICUS (NEWBUILDING) and also to comply with the rules and regulations, in force as of the date of this CONTRACT, as described in the SPECIFICATIONS. Provided that the BUILDER shall have an option to declare the CLASSIIFICATION SOCIETY as either equivalent Lloyd Register of Shipping or Det Norske Veritas within three (3) month after signing of this CONTRACT.
 
(b)            The BUILDER shall arrange with the CLASSIFICATION SOCIETY for the assignment by the CLASSIFICATION SOCIETY of representative(s) to the VESSEL during
 
3

 
construction. All fees and charges incidental to classification of the VESSEL in compliance with the above specified rules, regulations and requirements of this CONTRACT shall be for the account of the BUILDER.
 
(c)             The decision of the CLASSIFICATION SOCIETY as to whether the VESSEL complies with the regulations of the CLASSIFICATION SOCIETY shall be final and binding upon the BUILDER and the BUYER.
 
Details of its notation shall be in accordance with the SPECIFICATIONS.
 
The VESSEL shall also comply with the compulsory rules, regulations and requirements of the regulatory bodies as described in the SPECIFICATIONS rectified and in effect as of the signing date of this Contract. Non-compulsory rules, regulations and requirements of the regulatory bodies shall be dealt with in accordance with Article V (2) of this Contract.
 
All the fees and charges incidental to the classification and with respect to compliance with the above referred rules, regulations and requirements shall be for account of the BUILDER except otherwise agreed.
 
4.                  SUBCONTRACTING
 
The BUILDER may, at its sole discretion and responsibility, subcontract any portion of the construction work of the VESSEL, provided that the construction and assembly of the VESSEL shall be carried out as is normally done according to the BUILDER’s building practice and provided further that the BUILDER shall be responsible to the BUYER in respect of any construction work carried out by such subcontractors.
 
5.                  NATIONALITY OF THE VESSEL
 
The VESSEL shall be registered by the BUYER at its own cost and expense under the laws of either Greece or Cyprus or Bahamas or Marshall Islands or Panama or Liberia with its home port of either Piraeus or Limassol or Nassau or Majuro or Panama or Monrovia at the time of its delivery and acceptance hereunder provided that the BUYER may in its sole discretion declare the VESSEL’S flag and registration within four (4) months after the signing of the CONTRACT. In the case that the BUYER declares the VESSEL’S flag and registration to the Greece, the BUYER should pay the extra cost.
 
(End of Article)
 
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ARTICLE II : CONTRACT PRICE
 
The contract price of the VESSEL delivered to the BUYER at the SHIPYARD shall be United States Dollars Ninety One Million Five Hundred Thousand (US$ 91,500,000) (hereinafter called the “CONTRACT PRICE”) which shall be paid plus any increases or less any decreases due to adjustment or modifications, if any, as set forth in this CONTRACT. The above CONTRACT PRICE shall include payment for services in the inspection, tests, survey and classification of the VESSEL which will be rendered by the CLASSIFICATION SOCIETY and shall not include the cost of the BUYER’s supplies as stipulated in Article XII.
 
The CONTRACT PRICE also includes all costs and expenses for supplying all necessary drawings as stipulated in the SPECIFICATIONS except those to be furnished by the BUYER for the VESSEL in accordance with the SPECIFICATIONS.
 
(End of Article)
 
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ARTICLE III : ADJUSTMENT OF THE CONTRACT PRICE
 
The CONTRACT PRICE of the VESSEL shall be adjusted as hereinafter set forth in the event of the following contingencies. It is hereby understood by both parties that any adjustment of the CONTRACT PRICE as provided for in this Article is by way of liquidated damages and not by way of penalty.
 
1.                  DELAYED DELIVERY
 
(a)             No adjustment shall be made and the CONTRACT PRICE shall remain unchanged for the first thirty (30) days of the delay in delivery of the VESSEL [ending as of 12 o’clock midnight Korean Standard Time on the thirtieth (30th) day of delay] beyond the Delivery Date calculated as provided in Article VII.1. hereof.
 
(b)            If delivery of the VESSEL is delayed more than thirty (30) days beyond the date upon which the delivery is due from the BUILDER under the terms of this CONTRACT, then, beginning at midnight of the thirtieth (30th) day after such due date, the CONTRACT PRICE of the VESSEL shall be reduced by U.S. Dollars Twenty Two Thousand only (US$ 22,000.-) for each full day of delay.
 
However, unless the parties agree otherwise, the total amount of deduction from the CONTRACT PRICE shall not exceed the amount due to cover the delay of one hundred and eighty (180) days after thirty (30) days of the delay in delivery of the VESSEL at the rate of deduction as specified hereinabove.
 
(c)             But, if the delay in delivery of the VESSEL continues for a period of more than two hundred and ten (210) days beyond the date upon which the delivery is due from the BUILDER under the terms of this CONTRACT then, in such event, and after such period has expired, the BUYER may, at its option, rescind this CONTRACT by serving upon the BUILDER a notice of rescission by facsimile to be confirmed by a registered letter via airmail directed to the BUILDER at the address given in this CONTRACT. Such rescission shall be effective as of the date the notice thereof is received by the BUILDER. If the BUYER has not served the notice of rescission after the aforementioned two hundred and ten (210) days delay in delivery, the BUILDER may demand the BUYER to make an election in accordance with Article VIII.3. hereof.
 
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(d)            For the purpose of this Article, the delivery of the VESSEL shall be deemed to be delayed when and if the VESSEL, after taking into full account extension of the Delivery Date or permissible delays as provided in Article V, VI, VIII, XI or elsewhere in this CONTRACT, is delivered beyond the date upon which delivery would then be due under the terms of this CONTRACT.
 
2.                  INSUFFICIENT SPEED
 
(a)              The CONTRACT PRICE of the VESSEL shall not be affected or changed, if the actual speed, as determined by trial runs more fully described in Article VI hereof, is less than the speed required under the terms of this CONTRACT and the SPECIFICATIONS provided such deficiency in actual speed is not more than two-tenths (2/10) of a knot below the guaranteed speed.
 
(b)             However, as for the deficiency of more than two-tenths (2/10) of a knot in actual speed below the speed guaranteed under this CONTRACT, the CONTRACT PRICE shall be reduced by U.S. Dollars Two Hundred Thousand only (U.S.$ 200,000.-) for each full one-tenth (1/10) of a knot in excess of the said two-tenths (2/10) of a knot of deficiency in speed [fractions of less than one-tenth (1/10) of a knot shall be regarded as a full one-tenth (1/10) of a knot]. However, unless the parties agree otherwise, the total amount of reduction from the CONTRACT PRICE shall not exceed the amount due to cover the deficiency of one (1) full knot below the guaranteed speed at the rate of reduction as specified above.
 
(c)             If the deficiency in actual speed of the VESSEL is more than seven point five-tenths (7.5/10) knot below the speed guaranteed under this CONTRACT, then the BUYER, at its option, may, subject to the BUILDER’s right to effect alterations or corrections as provided in Article VI.5. hereof, rescind this CONTRACT or may accept the VESSEL at a reduction in the CONTRACT PRICE as above provided for seven point five-tenths (7.5/10) knot of deficiency only.
 
3.                  EXCESSIVE FUEL CONSUMPTION
 
(a)             The CONTRACT PRICE shall not be affected or changed by reason of the fuel consumption of the VESSEL’s main engine, as determined by the engine manufacturer’s shop trial as per the SPECIFICATIONS being more than the guaranteed fuel consumption of the VESSEL’s main engine, if such excess is not more than five per cent (5%) over the guaranteed fuel consumption.
 
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(b)            However, as for the excess of more than five per cent (5%) in the actual fuel consumption over the guaranteed fuel consumption of the VESSEL’s main engine, the CONTRACT PRICE shall be reduced by U.S. Dollars Two Hundred Thousand only (US$ 200,000.-) for each full one per cent (1%) increase in fuel consumption in excess of the said five per cent (5%) increase in fuel consumption [fractions of less than one per cent (1%) shall be regarded as a full one per cent (1%)]. However, unless the parties agree otherwise, the total amount of reduction from the CONTRACT PRICE shall not exceed the amount due to cover the excess of nine per cent (9%) over the guaranteed fuel consumption of the VESSEL’s main engine at the rate of reduction as specified above.
 
(c)             If such actual fuel consumption exceeds the guaranteed fuel consumption of the VESSEL’s main engine by more than ten per cent (10%), the BUYER, at its option, may, subject to the BUILDER’s right to effect alterations or corrections as specified in Article VI.5. hereof, rescind this CONTRACT or may accept the VESSEL at a reduction in the CONTRACT PRICE as above provided for the nine per cent (9%) increase only.
 
4.                  DEADWEIGHT BELOW CONTRACT REQUIREMENTS
 
(a)             The CONTRACT PRICE of the VESSEL shall not be affected or changed, if actual deadweight, determined as provided in this CONTRACT and the SPECIFICATIONS, is below the deadweight of 83,300 metric tons on the moulded design draft of 12.0 metres required by this CONTRACT and the SPECIFICATIONS by an amount of 83,300 metric tons or less. However, should the deficiency in the actual deadweight of the VESSEL be more than 830 metric tons below the said required deadweight, then the CONTRACT PRICE of the VESSEL shall be reduced for each full one (1) metric ton [fractions of less than one (1) metric ton shall be disregarded] of decreased deadweight in excess of 830 metric tons by the sum of U.S. Dollars One Thousand One Hundred only (US$ 1,100.-) per metric ton.
 
However, unless the parties agree otherwise, the total amount of deduction from the CONTRACT PRICE shall not exceed the amount due to cover the deficiency of 2,000 metric tons below the said required deadweight hereinabove.
 
(b)            If the deficiency in the deadweight of the VESSEL is more than 2,000 metric tons below the said required deadweight, then the BUYER, at its option, may, subject to the BUILDER’s right to effect alterations or corrections without the BUYER’s prior
 
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consent as specified in Article VI.5. hereof, rescind this CONTRACT or may accept the VESSEL at a reduction in the CONTRACT PRICE as above provided for metric tons of deficiency only.
 
5.                  EFFECT OF RESCISSION
 
It is expressly understood and agreed by the parties hereto that in any case, if the BUYER rescinds this CONTRACT under this Article, the BUYER shall not be entitled to any liquidated damages, unless by means of the provision of Article X hereof.
 
(End of Article)
 
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ARTICLE IV : INSPECTION AND APPROVAL
 
1.                  APPOINTMENT OF BUYER’S REPRESENTATIVE
 
The BUYER shall timely despatch to and maintain at the SHIPYARD, at its own cost, expense and risk, one or more representatives (hereinafter called the “BUYER’S REPRESENTATIVE”), who shall be duly accredited in writing by the BUYER to supervise adequately the construction by the BUILDER of the VESSEL, her equipment and all accessories. Before the commencement of any item of work under this CONTRACT, the BUILDER shall, whenever reasonably required, previously exhibit, furnish to, and within the limits of the BUYER’S REPRESENTATIVE’s authority, secure the approval from the BUYER’S REPRESENTATIVE of any and all plans and drawings prepared in connection therewith. Upon appointment of the BUYER’S REPRESENTATIVE, the BUYER shall notify the BUILDER in writing of the name and the scope of the authority of the BUYER’S REPRESENTATIVE.
 
2.                  AUTHORITY OF THE BUYER’S REPRESENTATIVE
 
Such BUYER’S REPRESENTATIVE shall, at all times during working hours of the construction until delivery of the VESSEL, have the right to inspect the VESSEL, her equipment and all accessories, and work in progress, or materials utilized in connection with the construction of the VESSEL, wherever such work is being done or such materials are stored, for the purpose of determining that the VESSEL, her equipment and accessories are being constructed in accordance with the terms of this CONTRACT and/or the SPECIFICATIONS and the PLAN.
 
The BUILDER will endeavor to arrange for the inspection by the BUYER’S REPRESENTATIVE during working hours of the BUILDER. However, such inspection may be arranged beyond the BUILDER’s normal working hours, including weekend and/or holiday if this is considered necessary by the BUILDER in order to meet the BUILDER’s construction schedule, on the condition that the BUILDER will inform the BUYER’S REPRESENTATIVE at least two (2) days in advance of such inspection.
 
The BUYER’S REPRESENTATIVE shall, within the limits of the authority conferred upon him by the BUYER, make decisions or give advice to the BUILDER on behalf of the BUYER promptly on all problems arising out of, or in connection with, the construction of
 
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the VESSEL and generally act in a reasonable manner with a view to cooperating to the utmost with the BUILDER in the construction process of the VESSEL.
 
The decision, approval or advice of the BUYER’S REPRESENTATIVE shall be deemed to have been given by the BUYER and once given shall not be withdrawn, revoked or modified except with consent of the BUILDER. Provided that the BUYER’S REPRESENTATIVE or his assistants shall comply with the foregoing obligations, no act or omission of the BUYER’S REPRESENTATIVE or his assistants shall, in any way, diminish the liability of the BUILDER under Article IX (WARRANTY OF QUALITY). The BUYER’S REPRESENTATIVE shall notify the BUILDER promptly in writing of his discovery of any construction or materials, which he believes do not or will not conform to the requirements of the CONTRACT and the SPECIFICATIONS or the PLAN and likewise advise and consult with the BUILDER on all matters pertaining to the construction of the VESSEL, as may be required by the BUILDER, or as he may deem necessary.
 
However, if the BUYER’S REPRESENTATIVE fails to submit to the BUILDER without delay any such demand concerning alterations or changes with respect to the construction, arrangement or outfit of the VESSEL, which the BUYER’S REPRESENTATIVE has examined, inspected or attended at the test thereof under this CONTRACT or the SPECIFICATIONS, the BUYER’S REPRESENTATIVE shall be deemed to have approved the same and shall be precluded from making any demand for alterations, changes, or complaints with respect thereto at a later date.
 
The BUILDER shall comply with any such demand which is not contradictory to this CONTRACT and the SPECIFICATIONS or the PLAN, provided that any and all such demands by the BUYER’S REPRESENTATIVE with regard to construction, arrangement and outfit of the VESSEL shall be submitted in writing to the authorised representative of the BUILDER. The BUILDER shall notify the BUYER’S REPRESENTATIVE of the names of the persons who are from time to time authorised by the BUILDER for this purpose.
 
It is agreed upon between the BUYER and the BUILDER that the modifications, alterations or changes and other measures necessary to comply with such demand may be effected at a convenient time and place at the BUILDER’s reasonable discretion in view of the construction schedule of the VESSEL.
 
In the event that the BUYER’S REPRESENTATIVE shall advise the BUILDER that he has discovered or believes the construction or materials do not or will not conform to the
 
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requirements of this CONTRACT and the SPECIFICATIONS or the PLAN, and the BUILDER shall not agree with the views of the BUYER’S REPRESENTATIVE in such respect, either the BUYER or the BUILDER may, with the agreement of the other party, seek an opinion of the CLASSIFICATION SOCIETY.
 
3.                  APPROVAL OF DRAWINGS
 
(a)             The BUILDER shall submit to the BUYER three (3) copies of each of the plans and drawings to be submitted to the BUYER for its approval at its address as set forth in Article XIV hereof. The BUYER shall, within fourteen (14) days after receipt thereof return to the BUILDER one (1) copy of such plans and drawings with the approval or comments, if any, of the BUYER. A list of the plans and drawings to be so submitted to the BUYER shall be mutually agreed upon between the parties hereto.
 
(b)            When and if the BUYER’S REPRESENTATIVE shall have been sent by the BUYER to the SHIPYARD in accordance with Paragraph 1 of this Article, the BUILDER may submit the remainder, if any, of the plans and drawings in the agreed list, to the BUYER’S REPRESENTATIVE for his approval, unless otherwise agreed upon between the parties hereto.
 
The BUYER’S REPRESENTATIVE shall, within ten (10) days after receipt thereof, return to the BUILDER one (1) copy of such plans and drawings with his approval or comments written thereon, if any. Approval by the BUYER’S REPRESENTATIVE of the plans and drawings duly submitted to him shall be deemed to be the approval by the BUYER for all purposes of this CONTRACT.
 
(c)             In the event that the BUYER or the BUYER’S REPRESENTATIVE shall fail to return the plans and drawings to the BUILDER within the time limit as hereinabove provided, such plans and drawings shall be deemed to have been automatically approved without any comment. In the event the plans and drawings submitted by the BUILDER to the BUYER or the BUYER’S REPRESENTATIVE in accordance with this Article do not meet with the BUYER’s or the BUYER’S REPRESENTATIVE’s approval, the matter may be submitted by either party hereto for determination pursuant to Article XIV hereof. If the BUYER’s comments on the plans and drawings that are returned to the BUILDER by the BUYER within the said time limit are not clearly specified or detailed, the BUILDER shall be entitled to place its own interpretation on such comments in implementing them.
 
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(d)            Approval of drawings by Buyers shall not constitute a waiver of Builder’s responsibility to deliver the vessel in accordance with the Contract and Specifications.
 
4.                  SALARIES AND EXPENSES
 
All salaries and expenses of the BUYER’S REPRESENTATIVE or any other person or persons employed by the BUYER hereunder shall be for the BUYER’s account.
 
5.                  RESPONSIBILITY OF THE BUILDER
 
(a)             The BUILDER shall provide the BUYER’S REPRESENTATIVE and his assistants free of charge with suitably furnished office space at, or in the immediate vicinity of, the SHIPYARD together with access to telephone and facsimile facilities as may be necessary to enable the BUYER’S REPRESENTATIVE and his assistants to carry out their work under this CONTRACT. However, the BUYER shall pay for the telephone or facsimile facilities used by the BUYER’S REPRESENTATIVE or his assistants.
 
The BUILDER, its employees, agents and subcontractors, during its working hours until delivery of the VESSEL, shall arrange for them to have free and ready access to the VESSEL, her equipment and accessories, and to any other place (except the areas controlled for the purpose of national security) where work is being done, or materials are being processed or stored in connection with the construction of the VESSEL including the premises of sub-contractors.
 
The BUYER’S REPRESENTATIVE or his assistants or employees shall observe the work’s rules, regulations and the guidances prevailing at the BUILDER’s and its sub-contractor’s premises. The BUILDER shall promptly provide to the BUYER’S REPRESENTATIVE and/or his assistants and shall ensure that its sub-contractors shall promptly provide all such information as he or they may reasonably request in connection with the construction of the VESSEL and her engines, equipment and machinery.
 
(b)            The BUYER’S REPRESENTATIVE and his assistants shall at all times remain the employees of the BUYER. The BUILDER shall not be liable to the BUYER or the BUYER’S REPRESENTATIVE or to his assistants or to the BUYER’s employees or
 
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agents for personal injuries, including death, during the time they, or any of them, are on the VESSEL, or within the premises of either the BUILDER or its sub-contractors, or are otherwise engaged in and about the construction of the VESSEL, unless, however, such personal injuries, including death, are caused by the gross negligence of the BUILDER, its sub-contractors, or its or their employees or agents. The BUILDER shall not be liable to the BUYER for damages to, or destruction of property of the BUYER or of the BUYER’S REPRESENTATIVE or his assistants or the BUYER’s employees or agents, unless such damages, loss or destruction is caused by the gross negligence of the BUILDER, its sub-contractors, or its or their employees or agents.
 
6.                  RESPONSIBILITY OF THE BUYER
 
The BUYER shall undertake and assure that the BUYER’S REPRESENTATIVE and his assistants shall carry out their duties hereunder in accordance with the normal shipbuilding practice and in such a way as to avoid any unnecessary increase in building cost, delay in the construction of the VESSEL, and/or any disturbance in the construction schedule of the BUILDER.
 
The BUILDER has the right to request the BUYER to replace any of the BUYER’S REPRESENTATIVE and/or his assistants who are deemed unsuitable and unsatisfactory for the proper progress of the VESSEL’s construction. The BUYER shall investigate the situation by sending its representative(s) to the SHIPYARD and if the BUYER considers that such BUILDER’s request is justified, the BUYER shall effect the replacement as soon as conveniently arrangeable.
 
(End of Article)
 
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ARTICLE V : MODIFICATIONS, CHANGES AND EXTRAS
 
1.                  HOW EFFECTED
 
Any modifications or changes to the SPECIFICATIONS and the PLAN under which the VESSEL is to be constructed may be made at any time hereafter by written agreement of the parties hereto. Any modification or change requested by the BUYER which does not affect the frame-work of the SPECIFICATIONS shall be agreed to by the BUILDER if the BUYER agrees to adjustment of the CONTRACT PRICE, deadweight and/or cubic capacity, speed requirements, the Delivery Date and other terms and conditions of this CONTRACT reasonably required as a result of such modification or change. The BUILDER has the right to continue construction of the VESSEL on the basis of the SPECIFICATIONS and the PLAN until the BUYER has agreed to such adjustments. The BUILDER shall be entitled to refuse to make any alteration, change or modification of the SPECIFICATIONS and/or the PLAN requested by the BUYER, if the BUYER does not agree to the aforesaid adjustments within seven (7) days of the BUILDER’s notification of the same to the BUYER, or, if, in the BUILDER’s judgement, the compliance with such request of the BUYER would cause an unreasonable disruption of the normal working schedule of the SHIPYARD.
 
The BUILDER, however, agrees to exert its efforts to accommodate such reasonable request by the BUYER so that the said change and modification shall be made at a reasonable cost and within the shortest period of time reasonably possible. The aforementioned agreement to modify and change the SPECIFICATIONS and the PLAN may be effected by exchange of letters or facsimiles manifesting the agreement.
 
The letters and facsimiles exchanged by the parties pursuant to the foregoing shall constitute an amendment to this CONTRACT and the SPECIFICATIONS or the PLAN under which the VESSEL shall be built. Upon consummation of such an agreement to modify and change the SPECIFICATIONS or the PLAN, the BUILDER shall alter the construction of the VESSEL in accordance therewith including any addition to, or deduction from, the work to be performed in connection with such construction.
 
2.                  SUBSTITUTION OF MATERIAL
 
If any materials, machinery or equipment required for the construction of the VESSEL by
 
15

 
the SPECIFICATIONS and the PLAN or otherwise under this CONTRACT cannot be procured in time to meet the BUILDER’s construction schedule for the VESSEL, or are in short supply, or are unreasonably high in price compared with the prevailing international market price, the BUILDER may supply, subject to the BUYER’s prior approval, other materials, machinery or equipment of equal quality and effect capable of meeting the requirements of the CLASSIFICATION SOCIETY and the rules, regulations and requirements with which the construction of the VESSEL must comply.
 
3.                  CHANGES IN RULES AND REGULATIONS
 
If the specified rules and regulations with which the construction of the VESSEL is required to comply are altered or changed by the CLASSIFICATION SOCIETY or bodies authorised to make such alterations or changes, either the BUYER or the BUILDER, upon receipt of due notice thereof, shall forthwith give notice thereof to the other party in writing. Thereupon, within fifteen (15) days after giving the notice to the BUILDER or receiving the notice from the BUILDER, the BUYER shall advise the BUILDER as to the alterations and changes, if any, to be made on the VESSEL which the BUYER, in its sole discretion, shall decide. The BUILDER shall not be obliged to comply with such alterations and/or changes if the BUYER fails to notify the BUILDER of its decision within the time limit stated above.
 
The BUILDER shall comply promptly with the said request of the BUYER, provided that the BUILDER and the BUYER shall first agree to :
 
(a)             any increase or decrease in the CONTRACT PRICE of the VESSEL that is occasioned by such compliance ;
 
(b)            any extension or advancement in the Delivery Date of the VESSEL that is occasioned by such compliance ;
 
(c)             any increase or decrease in the deadweight and/or cubic capacity of the VESSEL, if such compliance results in any increase or reduction in the deadweight and/or cubic capacity ;
 
(d)            adjustment of the speed requirements if such compliance results in any increase or reduction in the speed ; and
 
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(e)             any other alterations in the terms of this CONTRACT or of the SPECIFICATIONS or the PLAN or both, if such compliance makes such alterations of the terms necessary.
 
Any delay in the construction of the VESSEL caused by the BUYER’s delay in making a decision or agreement as above shall constitute a permissible delay under this CONTRACT. Such agreement by the BUYER shall be effected in the same manner as provided above for modification and change of the SPECIFICATIONS and the PLAN.
 
(End of Article)
 
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ARTICLE VI : TRIALS AND COMPLETION
 
1.                  NOTICE
 
The BUILDER shall notify the BUYER in writing or by facsimile at least twenty (20) days in advance of the time and place of the trial run of the VESSEL. Such notice shall specify the place from which the VESSEL will commence her trial run and approximate date upon which the trial run is expected to take place. Such date shall be further confirmed by the BUILDER five (5) days in advance of the trial run in writing or by facsimile.
 
The BUYER’S REPRESENTATIVE, who is to witness the performance of the VESSEL during such trial run, shall be present at such place on the date specified in such notice. Should the BUYER’S REPRESENTATIVE fail to be present after the BUILDER’s due notice to the BUYER as provided above, the BUILDER shall be entitled to conduct such trial run with the presence of the representative(s) of the CLASSIFICATION SOCIETY only without the BUYER’S REPRESENTATIVE being present. In such case, the BUYER shall be obliged to accept the VESSEL on the basis of a certificate issued by the BUILDER that the VESSEL, after the trial run, subject to alterations and corrections, if necessary, has been found to conform with the SPECIFICATIONS and this CONTRACT and is satisfactory in all respects, provided the BUILDER first makes such corrections and alterations promptly.
 
2.                  WEATHER CONDITION
 
In the event of unfavourable weather on the date specified for the trial run, the trial run shall take place on the first available day that weather conditions permit. The parties hereto recognise that the weather conditions in Korean waters, in which the trial run is to take place, are such that great changes in weather may arise momentarily and without warning and therefore, it is agreed that if, during the trial run, the weather should become so unfavourable that the trial run cannot be continued, then the trial run shall be discontinued and postponed until the first favourable day next following, unless the BUYER shall assent to the acceptance of the VESSEL by notification in writing on the basis of such trial run so far made prior to such change in weather conditions. Any delay of the trial run caused by such unfavourable weather conditions shall also operate to extend the Delivery Date of the VESSEL for the period of delay occasioned by such unfavourable weather conditions.
 
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3.               HOW CONDUCTED
 
All expenses in connection with the trials of the VESSEL are to be for the account of the BUILDER, which, during the trials, is to provide at its own expense the necessary crew to comply with conditions of safe navigation. The trials shall be conducted in the manner prescribed in this CONTRACT and the SPECIFICATIONS, and shall prove fulfilment of the performance requirements for the trials as set forth in the SPECIFICATIONS.
 
The BUILDER shall be entitled to conduct preliminary sea trials, during which the propulsion plant and/or its appurtenance shall be adjusted according to the BUILDER’s judgement. The BUILDER shall have the right to repeat any trial whatsoever as it deems necessary.
 
4.                  CONSUMABLE STORES
 
The BUILDER shall load the VESSEL with the required quantity of fuel oil, lubricating oil and greases, fresh water, and other stores necessary to conduct the trials as set forth in the SPECIFICATIONS. The necessary ballast (fuel oil, fresh water and such other ballast as may be required) to bring the VESSEL to the trial load draft, as specified in the SPECIFICATIONS, shall be supplied and paid for by the BUILDER whilst lubricating oil and greases shall be supplied and paid for by the BUYER within the time advised by the BUILDER for the conduct of sea trials as well as for use before the delivery of the VESSEL to the BUYER. The fuel oil as well as lubricating oil and greases shall be in accordance with the specifications of the main engine and other machinery and the BUYER shall decide and advise the BUILDER of the supplier’s name for lubricating oil and greases before the work-commencement of the VESSEL, provided that the supplier shall be acceptable to the BUILDER and/or the makers of all the machinery.
 
Any fuel oil, fresh water or other consumable stores furnished and paid for by the BUILDER for trial runs remaining on board the VESSEL, at the time of acceptance of the VESSEL by the BUYER, shall be bought by the BUYER from the BUILDER at the BUILDER’s purchase price for such supply in Korea and payment by the BUYER thereof shall be made at the time of delivery of the VESSEL. The BUILDER shall pay the BUYER at the time of delivery of the VESSEL for the consumed quantity of any lubricating oil and greases which were furnished and paid for by the BUYER at the BUYER’s purchase price thereof. The consumed quantity of lubricating oils and greases shall be calculated on the basis of the difference between the remaining amount, including the same remaining in the
 
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main engine, other machinery and their pipes, stern tube and the like, and the supplied amount.
 
5.                  ACCEPTANCE OR REJECTION
 
(a)                If, during any sea trial, any breakdown occurs entailing interruption or irregular performance which can be repaired on board, the trial shall be continued after such repairs and be valid in all respects.
 
(b)            However, if, during or after the trial run, it becomes apparent that the VESSEL or any part of her equipment requires alterations or corrections which but for this provision would or might entitle the BUYER to rescind this CONTRACT, the BUILDER shall notify the BUYER promptly in writing or by facsimile to such effect and shall simultaneously advise the BUYER of the estimated additional time required for the necessary alterations or corrections to be made.
 
The BUYER shall, within five(5) days of receipt from the BUILDER of notice of completion of such alterations or corrections and after such further trials or tests as necessary, notify the BUILDER in writing or by facsimile confirmed in writing of its acceptance, qualified acceptance or rejection of the VESSEL, all in accordance with the SPECIFICATIONS, the PLAN and this CONTRACT, and shall not be entitled to reject the VESSEL on such grounds until such time.
 
(c)                Save as above provided, the BUYER shall, within three(3) days after completion of the trial run, notify the BUILDER in writing or by facsimile confirmed in writing of its acceptance of the VESSEL or of the details in respect of which the VESSEL does not conform to the SPECIFICATIONS or this CONTRACT.
 
If the BUILDER is in agreement with the BUYER’s determinations as to non-conformity, the BUILDER shall make such alterations or changes as may be necessary to correct such non-conformity and shall prove the fulfilment of this CONTRACT and the SPECIFICATIONS by such tests or trials as may be necessary.
 
The BUYER shall, within three (3) days after completion of such tests and/or trials, notify the BUILDER in writing or by facsimile confirmed in writing of its acceptance or rejection of the VESSEL.
 
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(d)            However, the BUYER shall not be entitled to reject the VESSEL by reason of any minor or insubstantial items judged from the point of view of standard shipbuilding and shipping practice as not being in conformity with the SPECIFICATIONS, but, in that case, the BUILDER shall not be released from the obligation to correct and/or remedy such minor or insubstantial items as soon as practicable after the delivery of the VESSEL.
 
6.                  EFFECT OF ACCEPTANCE
 
The BUYER’s written or facsimiled notification of acceptance delivered to the BUILDER as above provided, shall be final and binding insofar as conformity of the VESSEL with the SPECIFICATIONS is concerned and shall preclude the BUYER from refusing formal delivery of the VESSEL as hereinafter provided, if the BUILDER complies with all conditions of delivery, as herein set forth and provided that, in the case of qualified acceptance, any matters which were mentioned in the notice of the qualified acceptance by the BUYER as requiring correction have been corrected satisfactorily.
 
If the BUYER fails to notify the BUILDER of its acceptance or rejection of the VESSEL as hereinabove provided, the BUYER shall be deemed to have accepted the VESSEL. Nothing contained in this Article shall preclude the BUILDER from exercising any and all rights which the BUILDER has under this CONTRACT if the BUILDER disagrees with the BUYER’s rejection of the VESSEL or any reasons given for such rejection, including arbitration provided in Article XIV hereof.
 
(End of Article)
 
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ARTICLE VII : DELIVERY
 
1.                  TIME AND PLACE
 
The VESSEL shall be delivered by the BUILDER to the BUYER at the SHIPYARD, safely afloat on or before 31 st August, 2009 (hereinafter called the “DELIVERY DATE”) after completion of satisfactory trials and acceptance by the BUYER in accordance with the terms of Article VI, except that, in the event of delays in delivery of the VESSEL by the BUILDER due to causes which under the terms of this CONTRACT permit extensions of the time for delivery of the VESSEL, the aforementioned DELIVERY DATE shall be extended accordingly.
 
It is hereby agreed that the BUILDER shall have the right to advance the DELIVERY DATE provided that the BUILDER shall have given to the BUYER written notice of the new proposed earlier delivery date at least six (6) months before such new proposed advanced delivery date; and
 
Any such new proposed earlier delivery date shall be considered as the DELIVERY DATE for the purpose of this CONTRACT.
 
2.                  WHEN AND HOW EFFECTED 
 
Provided that the BUYER shall concurrently with delivery of the VESSEL release to the BUILDER the fifth instalment as set forth in Article X.2. hereof and shall have fulfilled all of its obligations provided for in this CONTRACT, delivery of the VESSEL shall be forthwith effected upon acceptance thereof by the BUYER, as hereinabove provided, by the concurrent delivery by each of the parties hereto to the other of a PROTOCOL OF DELIVERY AND ACCEPTANCE acknowledging delivery of the VESSEL by the BUILDER and acceptance thereof by the BUYER, which PROTOCOL shall be prepared in duplicate and signed by each of the parties hereto.
 
3.                  DOCUMENTS TO BE DELIVERED TO THE BUYER
 
Upon delivery and acceptance of the VESSEL, the BUILDER shall deliver to the BUYER the following documents, which shall accompany the aforementioned PROTOCOL OF DELIVERY AND ACCEPTANCE :
 
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(a)             PROTOCOL OF TRIALS of the VESSEL made pursuant to this CONTRACT and the SPECIFICATIONS,
 
(b)            PROTOCOL OF INVENTORY of the equipment of the VESSEL, including spare parts, all as specified in the SPECIFICATIONS,
 
(c)             PROTOCOL OF STORES OF CONSUMABLE NATURE, such as all fuel oil and fresh water remaining in tanks if its cost is charged to the BUYER under Article VI.4. hereof,
 
(d)            DRAWINGS AND PLANS pertaining to the VESSEL as stipulated in the SPECIFICATIONS, which shall be furnished to the BUYER at no additional cost,
 
(e)             ALL CERTIFICATES required to be furnished upon delivery of the VESSEL pursuant to this CONTRACT, the SPECIFICATIONS and the customary shipbuilding practice, including
 
(i)                                  Classification Certificate
(ii)                               Safety Construction Certificate
(iii)                            Safety Equipment Certificate
(iv)                           Safety Radio Certificate
(v)                              International Loadline Certificate
(vi)                           International Tonnage Certificate
(vii)                        BUILDER’s Certificate
(viii)                     De-ratting Exemption Certificate
 
However, it is agreed by the parties that if the Classification Certificate and/or other certificates are not available at the time of delivery of the VESSEL, provisional certificates shall be accepted by the BUYER, provided that the BUILDER shall furnish the BUYER with formal certificates as promptly as possible after such formal certificates have been issued.
 
(f)               DECLARATION OF WARRANTY of the BUILDER that the VESSEL is delivered to the BUYER free and clear of any liens, claims, mortgages, or other encumbrances upon the BUYER’s title thereto, and in particular, that the VESSEL is absolutely free of all burdens in the nature of imposts, taxes, or charges imposed by the prefecture or country
 
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of the port of delivery, as well as of all liabilities of the BUILDER to its sub-contractors and employees and of all liabilities arising from the operation of the VESSEL in trial runs, or otherwise, prior to delivery except as otherwise provided under this CONTRACT.
 
(g)                      COMMERCIAL INVOICE.
 
4.                  TENDER OF THE VESSEL
 
If the BUYER fails to take delivery of the VESSEL after completion thereof according to this CONTRACT and the SPECIFICATIONS, the BUILDER shall have the right to tender delivery of the VESSEL after compliance with all procedural requirements as provided above.
 
5.                  TITLE AND RISK
 
Title and risk shall pass to the BUYER upon delivery and acceptance of the VESSEL being effected as stated above and the BUILDER shall be free of all responsibility or liability whatsoever related with this CONTRACT except for the warranty of quality contained in Article IX and the obligation to correct and/or remedy, as provided in Article VI.5.(d), if any, it being expressly understood that, until such delivery is effected, the VESSEL and equipment thereof are at the entire risk of the BUILDER including but not confined to, risks of war, insurrection and seizure by Governments or Authorities, whether Korean or foreign, and whether at war or at peace. The title to the BUYER’s supplies as provided in Article XII shall remain with the BUYER and the BUILDER’s responsibility for such BUYER’s supplies shall be as described in Article XII.2.
 
6.                  REMOVAL OF THE VESSEL
 
The BUYER shall take possession of the VESSEL immediately upon delivery thereof and shall remove the VESSEL from the SHIPYARD within three (3) days after delivery thereof is effected. Port dues and other charges levied by the Korean Government Authorities after delivery of the VESSEL and any other costs related to the removal of the VESSEL shall be borne by the BUYER.
 
(End of Article)
 
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ARTICLE VIII : DELAYS AND EXTENSIONS OF TIME (FORCE MAJEURE)
 
1.                  CAUSES OF DELAY
 
If, at any time after signing this CONTRACT, either the construction or delivery of the VESSEL or any performance required hereunder as a prerequisite to the delivery thereof is delayed by any of the following events; namely war, acts of state or government, blockade, revolution, insurrections, mobilization, civil commotion, riots, general workers strikes, sabotage,  Acts of God or the public enemy, plague or other epidemics, quarantines, prolonged failure of electric current, freight embargoes, or defects in major forgings or castings, or delays in the BUYER’s supplies as stipulated in Article XII, if any, or or defects in materials, machinery or equipment which could not have been detected by the BUILDER using reasonable care or earthquakes, tidal waves, typhoons, hurricanes, prolonged or unusually severe weather conditions or by destruction of the premises or works of the BUILDER or its sub-contractors, or of the VESSEL, or any part thereof, by fire, landslides, flood, lightning, explosion or the BUILDER’s performance under the CONTRACT, or delays caused by the CLASSIFICATION SOCIETY or the BUYER’s faulty action or omission, or other causes beyond the control of the BUILDER, or its sub-contractors, as the case may be, or for any other causes which, under the terms of this CONTRACT, authorise and permit extension of the time for delivery of the VESSEL, then, in the event of delays due to the happening of any of the aforementioned contingencies, the DELIVERY DATE of the VESSEL under this CONTRACT shall be extended for a period of time which shall not exceed the total accumulated time of all such delays.
 
The BUILDER shall have used reasonable efforts to mitigate the duration and effects of suchevents of the construction schedule.
 
2.                  NOTICE OF DELAYS
 
As soon as practicably possible after commencement of any delay but not later than fourteen (14) days on account of which the BUILDER claims that it is entitled under this CONTRACT to an extension of the DELIVERY DATE of the VESSEL, excluding delays due to arbitration, the BUILDER shall advise the BUYER in writing or by facsimile of the date such delay commenced, the reasons thereof and, if possible, its estimated duration of the probable delay in the delivery of the VESSEL, and shall supply the BUYER if reasonably available with evidence to justify the delay claimed. Within fourteen (14) days after such delay ends, the BUILDER shall likewise advise the BUYER in writing or by
 
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facsimile of the date that such delay ended, and also, shall specify the period of time by which the BUILDER claims the DELIVERY DATE should be extended by reason of such delay. Failure of the BUYER to object to the BUILDER’s notification of any claim for extension of the date for delivery of the VESSEL within fourteen (14) days after receipt by the BUYER of such notification shall be deemed to be a waiver by the BUYER of its right to object to such extension.
 
3.                  RIGHT TO RESCIND FOR EXCESSIVE DELAY
 
If the total accumulated time of all permissible and non-permissible delays, excluding delays due to (i) arbitration under Article XIV, (ii) the BUYER’s defaults under Article XI, (iii) modifications and changes under Article V or (iv) delays or defects in the BUYER’s supplies as stipulated in Article XII, aggregates two hundred and forty (240) days or more, then, the BUYER may, at any time thereafter, rescind this CONTRACT by giving a written notice of rescission to the BUILDER. Such rescission shall be effective as of the date the notice thereof is received by the BUILDER.
 
If the BUYER has not served the notice of rescission as provided in the above or Article III.1. hereof, the BUILDER may, at any time after expiration of the accumulated time of the delay in delivery, either two hundred and forty (240) days in case of the delay in this Paragraph or two hundred and ten (210) days in case of the delay in Article III.1, notify the BUYER of the future date upon which the BUILDER estimates the VESSEL will be ready for delivery and demand in writing or by facsimile that the BUYER make an election either to rescind this CONTRACT or to consent to the delivery of the VESSEL at such future date, in which case the BUYER shall, within fourteen(14) days after receipt of such demand, make and notify the BUILDER of such election. If the BUYER elects to consent to the delivery of the VESSEL at such future date (or other future date as the parties may agree):
 
(a)             Such future date shall become the contractual delivery date for the purposes of this CONTRACT and shall be subject to extension by reason of permissible delays as herein provided, and
 
(b)            If the VESSEL is not delivered by such revised contractual delivery date (as extended by reason of permissible delays), the BUYER shall have the same right of rescission upon the same terms as provided in the above and Article III. 1.
 
If the BUYER shall not make an election within fourteen(14) days as provided hereinabove, the BUYER shall be deemed to have accepted such extension of the DELIVERY DATE to
 
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the future delivery date indicated by the BUILDER.
 
4.               DEFINITION OF PERMISSIBLE DELAYS
 
Delays on account of the foregoing causes shall be understood to be permissible delays, and are to be distinguished from non-permissible unauthorised delays on account of which the CONTRACT PRICE of the VESSEL is subject to adjustment as provided in Article III hereof.
 
(End of Article)
 
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ARTICLE IX : WARRANTY OF QUALITY
 
1.                  GUARANTEE OF MATERIAL AND WORKMANSHIP
 
The BUILDER, for the period of twelve (12) months from the date of delivery of the VESSEL to the BUYER, guarantees the VESSEL and her engine and all parts and equipment thereof that are manufactured or furnished by the BUILDER under this CONTRACT against all defects which are directly due to faulty design, defective materials, construction miscalculation and/or poor workmanship, or negligent or other improper acts or omissions on the part of the BUILDER or its subcontractors provided such defects have not been caused by perils of the sea, rivers or navigations, or by normal wear and tear, overloading, improper loading or stowage, corrosion of the materials other than related to lack of maintenance, fire, accidents at sea or elsewhere, or by incompetence, mismanagement, negligence or wilful neglect or any alteration or addition to the VESSEL which has not previously been approved by the BUILDER.
 
The BUILDER will be responsible for all machinery or parts of machinery and all constructions which are supplied by sub-contractors and will guarantee the above mentioned for a period of twelve (12) months on the basis as laid down in this Paragraph. Upon rectification of an item claimed under this guarantee, this item shall be covered for further twelve (12) months under the same terms and conditions. However, this is limited to a maximum of Eighteen (18) months from Delivery Date.
 
2.                  NOTICE OF DEFECTS
 
The BUYER or its duly authorised representative will notify the BUILDER in writing or by facsimile promptly after discovery of any defect for which a claim is to be made under this guarantee.
 
The BUYER’s written notice shall include full particulars as to the nature of the defect and the extent of the damage caused thereby, but excluding consequential damage as hereinafter provided. The BUILDER will be under no obligation with respect to this guarantee in respect of any claim for defects discovered prior to the expiry date of the guarantee, unless notice of such defects is received by the BUILDER before the expiry date. However, facsimiled advice received by the BUILDER within seven (7) days after such expiry date that a claim is forthcoming will be sufficient compliance with the requirement as to time,
 
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provided that such facsimiled advice shall include at least a brief description of the defect including the identity of the equipment, extent of damage, name and number of any replacement part and description of any remedial work required, and that full particulars are given to the BUILDER not later than fourteen (14) days after the expiry date.
 
3.                  REMEDY OF DEFECTS
 
(a)              The BUILDER shall remedy, at its expense, any defects, against which the VESSEL is guaranteed under this Article, by making all necessary and reasonably practicable repairs or replacements at the SHIPYARD or elsewhere as provided for in (b) hereinbelow.
 
In such case, the VESSEL shall be taken at the BUYER’s cost and responsibility to the place selected, ready in all respects for such repairs or replacements and in any event, the BUILDER shall not be responsible for towage
 
(b)            However, BUYER should determine and prove if it is commercially and/or operationally impractical (which shall include, but not be limited to, an emergency) to bring the VESSEL to the SHIPYARD, the BUYER may cause the necessary repairs or replacements to be made elsewhere which is deemed by the BUYER with the consent of the BUILDER which shall not be unreasonably withheld, to be suitable for the purpose, provided that, in such event, the BUILDER may forward or supply replacement parts or materials under the terms described in (c) hereinbelow, unless forwarding or supplying thereof under the terms described in (c) hereinbelow would impair or delay the operation or working schedule of the VESSEL. In the event that the BUYER proposes to cause the necessary repairs or replacements to be made to the VESSEL at any shipyard or works other than the SHIPYARD, the BUYER shall first (but in all events as soon as reasonably possible) give the BUILDER notice in writing or by facsimile of the time and place such repairs will be made, and if the VESSEL is not thereby delayed, or her operation or working schedule is not thereby impaired, the BUILDER shall have the right to verify by its own representative(s) the nature and extent of the defects complained of. The BUILDER shall, in such case, promptly advise the BUYER by facsimile, after such examination has been completed, of its acceptance or rejection of the defects as ones that are covered by the guarantee herein provided. Upon the BUILDER’s acceptance of the defects as justifying remedy under this Article, or upon award of the arbitration so determining, the BUILDER shall compensate the BUYER an amount equal to the actual proven cost of making the same repairs or replacements.
 
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(c)             In the event that it is necessary for the BUILDER to forward a replacement for a defective part under this guarantee, replacement parts shall be shipped to the BUYER under the terms of CIF port of the country where vessel will be repaired.
 
(d)            The BUILDER reserves the option to retrieve, at the BUILDER’s cost, any of the replaced equipment/parts in case defects are remedied in accordance with the provisions in this Article.
 
(e)            Any dispute under this Article shall be referred to arbitration in accordance with the provisions of Article XIV hereof.
 
4.                  EXTENT OF THE BUILDER’S LIABILITY
 
(a)             After delivery of the VESSEL the responsibility of the BUILDER in respect of and/or in connection with the VESSEL and/or this CONTRACT shall be limited to the extent expressly provided in the Paragraphs of this Article. Except as expressly provided in the Paragraphs of this Article, in no circumstances and on no ground whatsoever shall the BUILDER have any responsibility or liability whatsoever or howsoever arising in respect of or in connection with the VESSEL or this CONTRACT after the delivery of the VESSEL. Further, but without in any way limiting the generality of the foregoing, the BUILDER shall have no liability or responsibility whatsoever or howsoever arising for or in connection with any consequential or special losses, damages or expenses (including but not limited to loss of time, loss of profit or earnings or demurrage directly or indirectly caused), any pecuniary loss or expense, any liability to any third party or any fine, compensation, penalty or other payment or sanction incurred by or imposed upon the BUYER or any other party whatsoever in relation to or in connection with this CONTRACT or the VESSEL.
 
(b)            The BUILDER shall be under no obligation with respect to defects in respect of which the BUILDER has not received notice in accordance with Paragraph 2 of this Article by the expiry date of the guarantee specified in Paragraph 1, nor in any event shall the BUILDER be liable for any worsening of the defects after the expiry date of the guarantee.
 
(c)              The BUILDER shall under no circumstances be liable for defects in the VESSEL or any part of equipment thereof caused by perils of the sea, rivers or navigations, or by normal wear and tear, overloading, improper loading or stowage, corrosion of the
 
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materials other than related to lack of maintenance, fire, accidents at sea or elsewhere, or by incompetence, mismanagement, negligence or wilful neglect or any alteration or addition on the part of the BUYER, its employees or agents or any other person on or doing work on the VESSEL, including the VESSEL’s officers, crew and passengers. Likewise, the BUILDER shall not be liable for defects in the VESSEL or any part of equipment thereof that are due to repairs carried out by any other than the BUILDER or which have not been carried out in accordance with the procedure set out in Paragraph 3 (b) of this Article.
 
(d)            The BUILDER shall not be obliged to repair, not be liable for, damage to the VESSEL or any part of the equipment thereof, which after delivery of the VESSEL, is caused other than by the defects of the nature specified in this Article. The guarantees contained as hereinabove in this Article replace and exclude any other liability, guarantee, warranty and/or condition imposed or implied by statute, common law, custom, contract (including this CONTRACT) or otherwise on the part of the BUILDER by reason of the construction and sale of the VESSEL for and to the BUYER or for any other reason whatsoever.
 
5.                        GUARANTEE ENGINEER
 
The BUILDER shall have the right to appoint a Guarantee Engineer to serve on the VESSEL as its representative for a period of Three (3) months from the date the VESSEL is delivered. However, if the BUYER and the BUILDER shall deem it necessary to keep the Guarantee Engineer on the VESSEL for a longer period, then he shall remain on board the VESSEL after the said Three (3) months, but not longer than Six (6) months from the delivery of the VESSEL.
 
The BUYER, and its employees, shall give such Guarantee Engineer full cooperation in carrying out his duties as the representative of the BUILDER on board the VESSEL.
 
The Guarantee Engineer shall sign BUYER’s Indemnity Forms and shall at all times deemed to be an employee of the BUILDER.
 
The BUYER shall accord the Guarantee Engineer treatment comparable to the VESSEL’s Chief Engineer, and shall provide board and lodging at no cost to the BUILDER and/or the Guarantee Engineer.
 
While the Guarantee Engineer is on board the VESSEL, the BUYER shall pay to the BUILDER the sum of United States Dollars Six Thousand and Five Hundred (US$ 6,500.-) per month as a compensation for a part of cost and charges to be borne by the BUILDER in connection with Guarantee Engineer and also shall pay the expenses of his repatriation to
 
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Korea by air upon termination of his service, the expenses of his communication with the BUILDER incurred in performing his duties and expenses, if any, of his medical and hospital care in the VESSEL’s hospital.
 
Pertaining to the detailed particulars of this Paragraph, an agreement will be made according to this effect between the parties hereto upon delivery of the VESSEL.
 
(End of Article)
 
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ARTICLE X : PAYMENT
 
1.                  CURRENCY
 
All payments under this CONTRACT shall be made in United States Dollars.
 
2.                  TERMS OF PAYMENT
 
The payments of the CONTRACT PRICE shall be made as follows :
 
(a)             First Instalment
 
Twenty per cent (20 %) of the CONTRACT PRICE amounting to U.S.Dollars Eighteen Million Three Hundred Thousand only (US$ 18,300,000.-) shall be paid within three (3) business days after receipt by the BUYER of the original of the Refund Guarantee specified in Paragraph 8 of this Article.
 
Under this CONTRACT, in counting the business days, only Saturdays and Sundays are excepted. When a due date falls on a day when banks are not open for business in New York, N.Y., U.S.A., such due date shall fall due upon the first business day next following.
 
(b)            Second Instalment
 
Twenty per cent (20%) of the CONTRACT PRICE amounting to U.S.Dollars Eighteen Million Three Hundred Thousand only (US$ 18,300,000.-) shall be paid within three (3) business days of receipt by the Buyer of a facsimiled advice from the BUILDER that steel cutting has been commenced.
 
(c)             Third Instalment
 
Ten per cent (10%) of the CONTRACT PRICE amounting to U.S.Dollars Nine Million One Hundered Fifty Thousand only (US$ 9,150,000,-) shall be paid within three (3) business days of receipt by the BUYER of a facsimiled advice from the BUILDER that the first block of the keel has been laid.
 
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(d)            Fourth Instalment
 
Ten per cent (10%) of the CONTRACT PRICE amounting to U.S.Dollars Nine Million One Hundred Fifty Thousand only (US$ 9,150,000-) shall be paid within three (3) business days of receipt by the BUYER of a facsimiled advice from the BUILDER that the launching of the VESSEL has been completed.
 
(f)               Fifth Instalment
 
Forty per cent (40%) of the CONTRACT PRICE amounting to U.S.Dollars Thirty Six Million Six Hundred Thousand only (US$ 36,600,000.-) plus or minus any increase or decrease due to modifications and/or adjustment, if any, arising prior to delivery of the VESSEL of the CONTRACT PRICE under Articles III and V of this CONTRACT shall be paid to the BUILDER concurrently with the delivery of the VESSEL. (The date stipulated for payment of each of the five instalments mentioned above is hereinafter in this Article and in Article XI referred to as the “DUE DATE” of that instalment).
 
It is understood and agreed upon by the BUILDER and the BUYER that all payments under the provisions of this Article shall not be delayed or withheld by the BUYER due to any dispute or disagreement of whatsoever nature arising between the BUILDER and the BUYER. Should there be any dispute in this connection, the matter shall be dealt with in accordance with the provisions of arbitration in Article XIV hereof. Expenses for remitting payments and any other expenses connected with such payments shall be for the account of the BUYER.
 
3.                  DEMAND FOR PAYMENT
 
At least fourteen (14) days prior to the date of each event provided in Paragraph 2 of this Article on which any payment shall fall due hereunder, with the exception of the payment of the first and second instalments, the BUILDER shall notify the BUYER by facsimile of the date such payment shall become due.
 
The BUYER shall immediately acknowledge receipt of such notification by facsimile to the BUILDER, and make payment as set forth in this Article. If the BUILDER fails to receive the BUYER’s said acknowledgement within three (3) days after sending the aforementioned notification, the BUILDER shall promptly facsimile to the BUYER a second notification of similar import. The BUYER shall immediately acknowledge by facsimile receipt of the
 
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foregoing second notification regardless of whether or not the first notification was acknowledged as aforesaid.
 
4.                  METHOD OF PAYMENT
 
(a)            All the pre-delivery payments and the payment due on delivery in settlement of the CONTRACT PRICE as provided for in Paragraph 2 of this Article shall be made in U.S. Dollars on or before the DUE DATE thereof by telegraphic transfer as follows ;
 
(i)                                     The payment of the first, second, third and fourth instalments shall be made to the account of the BUILDER with a bank to be duly designated by the BUILDER, in Korea (the “BUILDER’S BANK”) or any other bank by telegraphic transfer remittance at least two(2) business days prior to the DUE DATE notified by the BUILDER.
 
(ii)                                  The fifth instalment as provided for in Paragraph 2.(f) of this Article shall be deposited at the BUILDER’S BANK in the name of the Buyer or, if the BUILDER requires, with any other bank in the name of the Byuer by telegraphic transfer remittance at least two (2) business days prior to the scheduled delivery date of the VESSEL notified by the BUILDER, with instructions that the said instalment is payable to the BUILDER against presentation by the BUILDER to the BUILDER’S BANK or any other bank, as the case may be, of a duplicate original copy of the PROTOCOL OF DELIVERY AND ACCEPTANCE of the VESSEL signed by the BUILDER and the BUYER.
 
(b)            Simultaneously with each of such payments, the BUYER shall advise the BUILDER of the details of the payments by facsimile and at the same time, the BUYER shall cause the BUYER’s remitting Bank to advise the BUILDER’S BANK or any other bank of the details of such payments by authenticated bank cable or telex.
 
5.                  REFUND BY THE BUILDER
 
The payments made by the BUYER to the BUILDER prior to delivery of the VESSEL shall constitute advances to the BUILDER. If the VESSEL is rejected by the BUYER in accordance with the terms of this CONTRACT, or except in the case of rescission or rescission of this CONTRACT by the BUILDER under the provisions of Article XI hereof,
 
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if the BUYER terminates or rescinds this CONTRACT pursuant to any of the provisions of this CONTRACT specifically permitting the BUYER to do so, the BUILDER shall forthwith refund to the BUYER, in U.S. Dollars, the full amount of total sums paid by the BUYER to the BUILDER in advance of delivery together with interest thereon as herein provided.
 
The transfer and other bank charges of such refund shall be for the BUILDER’s account. The interest rate of the refund, as above provided, shall be seven per cent (7%) per annum from the date following the date of receipt by the BUILDER of the pre-delivery instalment(s) to the date of remittance by telegraphic transfer of such refund, provided, however, that if the cancellation of this CONTRACT by the BUYER is based upon delays due to force majeure or other causes beyond the control of the BUILDER as provided for in Article VIII hereof, then in such event, the interest rate of refund shall be reduced to six point five per cent (6.5%) per annum.
 
It is hereby understood by both parties that payment of any interest provided herein is by way of liquidated damages due to rescission of this CONTRACT and not by way of compensation for use of money.
 
If, the BUILDER is required to refund to the BUYER the instalments paid by the BUYER to the BUILDER as provided in this Paragraph, the BUILDER shall return to the BUYER all of the BUYER’s supplies as stipulated in Article XII which were not incorporated into the VESSEL and pay to the BUYER an amount equal to the cost to the BUYER of those supplies incorporated into the VESSEL.
 
6.                  TOTAL LOSS
 
If there is a total loss or a constructive total loss of the VESSEL prior to delivery thereof, the BUILDER shall proceed according to the option of the Buyer hereto either:
 
(a)             to build another vessel in place of the VESSEL so lost and deliver it under this CONTRACT to the BUYER, provided that the parties hereto shall have agreed in writing to a reasonable cost and time for the construction of such vessel in place of the lost VESSEL; or
 
(b)            to refund to the BUYER the full amount of the total sums paid by the BUYER to the BUILDER under the provisions of Paragraph 2 of this Article together with interest thereon at the rate of six point five per cent (6.5%) per annum from the date following
 
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the date of receipt by the BUILDER of such pre-delivery instalment(s) to the date of payment by the BUILDER to the BUYER of the refund.
 
If the parties hereto fail to reach such agreement within two (2) months after the VESSEL is determined to be a total loss or constructive total loss, the provisions of (b) hereinabove shall be applied.
 
7.                  DISCHARGE OF OBLIGATIONS
 
Such refund as provided in the foregoing Paragraphs 5 and 6 by the BUILDER to the BUYER shall forthwith discharge all the obligations, duties and liabilities of each of the parties hereto to the other except the claims of the BUILDER against the BUYER, if any, under this CONTRACT. Any and all refunds or payments due to the BUYER under this CONTRACT shall be effected by telegraphic transfer to the account specified by the BUYER.
 
8.                  REFUND GUARANTEE
 
The BUILDER shall deliver to the BUYER by hard copy or by SWIFT through the BUYER’s bank, acceptable to the BUILDER, an assignable letter of guarantee issued by a Bank acceptable to the Buyer as soon as possible but in any case no later than Ninety (90) days from the date of this CONTRACT for the refund of the pre-delivery instalments plus interest as aforesaid to the BUYER under or pursuant to Paragraph 5 above in the form annexed hereto as Exhibit “A”. All expenses in issuing and maintaining the letter of guarantee described in this Paragraph shall be borne by the BUILDER. In case of SWIFT, the BUYER shall advise the BUILDER of the details of the BUYER’s bank including the SWIFT address upon execution of this CONTRACT.
 
9.                  PERFORMANCE GUARANTEE
 
Upon signing this CONTRACT, the BUYER shall provide the BUILDER with an irrevocable and Corporate Guarantee pursuant to the Terms and Provisions of this Contract issued by a Corporate Guarantor acceptable to the BUILDER for the due and faithful performance by the BUYER of all its liabilities and responsibilities under the CONTRACT including, but not limited to, the payment of the CONTRACT PRICE and taking delivery of the VESSEL, in the form annexed hereto as Exhibit “B”.
 
(End of Article)
 
37

 
ARTICLE XI : BUYER’S DEFAULT
 
1.                  DEFINITION OF DEFAULT
 
The BUYER shall be deemed to be in default under this CONTRACT in the following cases :
 
(a)             If the first, second, third and fourth instalment is not paid to the BUILDER within respective Three (3) banking days of such instalments; or
 
(b)            If the fifth instalment is not deposited at the BUILDER’S BANK or at the account of the BUILDER with any other bank in accordance with Article X.4.(a)(ii) hereof or if the said fifth instalment deposit is not released to the BUILDER against presentation by the BUILDER of a duplicate original copy of the PROTOCOL OF DELIVERY AND ACCEPTANCE; or
 
(c)             If the BUYER fails to take delivery of the VESSEL when the VESSEL is duly tendered for delivery by the BUILDER within Three (3) banking days under the provisions of Article VII hereof; or
 
(d)            If and order or an effective resolution shall be passed for winding up of the BUYER (except for the purpose of reorganization, merger or amalgamation); or
 
(e)             If the BUYER fails to be in punctual, due and full compliance with any of its obligations under this CONTRACT.
 
In case the BUYER is in default of any of its obligations under this CONTRACT, the BUILDER is entitled to and shall have the following rights, powers and remedies in addition to such other rights, powers and remedies as the BUILDER may have elsewhere in this CONTRACT and/or at law, at equity or otherwise.
 
2.                  EFFECT OF THE BUYER’S DEFAULT ON OR BEFORE THE DELIVERY OF THE VESSEL
 
If the BUYER shall be in default as provided in Paragraph 1 above of its obligations under this CONTRACT, then;
 
38

 
(a)             The DELIVERY DATE of the VESSEL shall be extended automatically for the actual period of such default and the BUILDER shall not be obliged to pay any liquidated damages for the delay in delivery of the VESSEL caused thereby.
 
(b)            The BUYER shall pay to the BUILDER interest at the rate of seven per cent (7%) per annum in respect of the instalment(s) in default from the respective DUE DATE to the date of actual receipt by the BUILDER of the full amount of such instalment(s).
 
(c)             If the BUYER is in default in payment of any of the instalment(s) due and payable prior to or simultaneously with the delivery of the VESSEL, the BUILDER shall, in writing or by facsimile, notify the BUYER to that effect, and the BUYER shall, upon receipt of such notification, forthwith acknowledge in writing or by facsimile to the BUILDER that such notification has been received.
 
(d)            If any of the BUYER’s default continues for a period of ten(10) days after the BUILDER’s notification to the BUYER of such default, the BUILDER may, at its option, rescind this CONTRACT by serving upon the BUYER a written notice or a facsimile notice of rescission confirmed in writing.
 
(e)            In the event of such rescission by the BUILDER of this CONTRACT due to the BUYER’s default as provided for in paragraph 1 above, the BUILDER shall be entitled to retain and apply the instalments already paid by the BUYER to the recovery of the BUILDER’s loss and damage including, but not being limited to, reasonable estimated profit due to the BUYER’s default and the rescission of this CONTRACT and at the same time the BUILDER shall have the full right and power either to complete or not to complete the VESSEL which is the sole property of the BUILDER as it deems fit, and to sell the VESSEL at a public or private sale on such terms and conditions as the BUILDER thinks fit without being answerable for any loss or damage.
 
The proceeds received by the BUILDER from the sale shall be applied in addition to the instalment(s) retained by the BUILDER as mentioned hereinabove as follows : -
 
First,                            in payment of all reasonable costs and expenses of the sale of the VESSEL, including interest thereon at seven per cent (7%) per annum from the respective date of payment of such costs and expenses aforesaid to the date of sale on account of the BUYER’s default.
 
39

 
Second,            if the VESSEL has been completed, in or towards satisfaction of the unpaid balance of the CONTRACT PRICE, to which shall be added the cost of all additional work and extras agreed by the BUYER including interest thereon at seven per cent (7%) per annum from the respective DUE DATE of the instalment in default to the date of sale, or if the VESSEL has not been completed, in or towards satisfaction of the unpaid amount of the cost incurred by the BUILDER prior to the date of sale on account of construction of the VESSEL, including work, labour, materials and reasonably estimated profit which the BUILDER would have been entitled to receive if the VESSEL had been completed and delivered plus interest thereon at seven per cent (7%) per annum from the respective DUE DATE of the instalment in default to the date of sale.
 
Third,                       the balance of the proceeds, if any, shall belong to the BUYER, and shall forthwith be paid over to the BUYER by the BUILDER.
 
In the event of the proceeds from the sale together with instalment(s) retained by the BUILDER being insufficient to pay the BUILDER, the BUYER shall be liable for the deficiency and shall pay the same to the BUILDER upon its demand.
 
(End of Article)
 
40

 
ARTICLE XII : BUYER’S SUPPLIES
 
1.                  RESPONSIBILITY OF THE BUYER
 
The BUYER shall, at its own risk, cost and expense, supply all the BUYER’s supplies as specified in Paragraph 0.16.1 of the SPECIFICATIONS (hereinafter called the “BUYER’S SUPPLIES”), to the BUILDER at the SHIPYARD in proper condition ready for installation and in accordance with the time schedule to be furnished by the BUILDER sixty (60) days from signing this Contract.
 
In order to facilitate the installation of the BUYER’S SUPPLIES by the BUILDER, the BUYER shall furnish the BUILDER with the necessary plans, instruction books, test report and all test certificates required by the BUILDER and shall cause the representative(s) of the makers of the BUYER’S SUPPLIES to give the BUILDER any advice, instructions or assistance which the BUILDER may reasonably require in the installation or adjustment thereof at the SHIPYARD, all without cost or expense to the BUILDER.
 
The BUYER shall be liable for any expense incurred by the BUILDER for repair of the BUYER’S SUPPLIES due to defective design or materials, poor workmanship or performance or due to damage in transit and the DELIVERY DATE of the VESSEL shall be extended for the period of such repair if such repair shall affect the delivery of the VESSEL.
 
Commissioning into good order of the BUYER’S SUPPLIES during and after installation on board shall be made at the BUYER’s expense by the representative of respective maker or the person designated by the BUYER in accordance with the BUILDER’s building schedule.
 
Should the BUYER fail to deliver to the BUILDER the BUYER’S SUPPLIES and the necessary document or advice for such supplies within the time specified by the BUILDER, the DELIVERY DATE of the VESSEL shall automatically be extended for the period of such delay if such delay in delivery shall affect the delivery of the VESSEL. In such event, the BUYER shall pay to the BUILDER all losses and damages sustained by the BUILDER due to such delay in the delivery of the BUYER’S SUPPLIES and such payment shall be made upon delivery of the VESSEL, provided, however, that the BUILDER shall have :
 
41

 
(a)             furnished the BUYER with the time schedule referred to above, two (2) months prior to installation of the BUYER’S SUPPLIES and
 
(b)            given the BUYER written notice of any delay in delivery of the BUYER’S SUPPLIES and the necessary document or advice for such supplies as soon as the delay occurs which might give rise to a claim by the BUILDER under this Paragraph.
 
Furthermore, if the delay in delivery of the BUYER’S SUPPLIES and the necessary document or advice for such supplies should exceed twenty (20) days from the date specified by the BUILDER, the BUILDER shall be entitled to proceed with construction of the VESSEL without installation of such items (regardless of their nature or importance to the BUYER or the VESSEL) in or on the VESSEL without prejudice to the BUILDER’s right hereinabove provided, and the BUYER shall accept the VESSEL so completed.
 
2.                  RESPONSIBILITY OF THE BUILDER
 
The BUILDER shall be responsible for storing, safekeeping and handling with reasonable care of the BUYER’S SUPPLIES which the BUILDER is required to install on board the VESSEL under Paragraph 0.16.1 of the SPECIFICATIONS after delivery of such supplies to the SHIPYARD, and shall install such supplies on board the VESSEL at the BUILDER’s expense unless otherwise specified in the SPECIFICATIONS.
 
However, the BUILDER shall not be responsible for the quality, performance or efficiency of any equipment included in the BUYER’S SUPPLIES and is under no obligation with respect to the guarantee of such equipment against any defects caused by poor quality, performance or efficiency of the BUYER’S SUPPLIES. If any of the BUYER’S SUPPLIES is lost or damaged while in the custody of the BUILDER, the BUILDER shall, if the loss or damage is due to wilful default or negligence on its part, be responsible for such loss or damage.
 
(End of Article)
 
42

 
ARTICLE XIII - INSURANCE
 
1.                           EXTENT OF INSURANCE COVERAGE
 
From the time of launching until delivery of the VESSEL, the BUILDER shall, at its own cost and expense, insure the VESSEL and all machinery and equipment, appurtenances and outfits, including the BUYER’s Supplies, built into or installed in or upon the VESSEL, against all risks under the “Institute Causes for BUILDER’s Risk”, with first class insurance company or underwriters in.
 
The amount of such insurance coverage shall, up to the date of delivery of the VESSEL, not be less than the aggregate amount of all instalments paid by the BUYER to the BUILDER, plus the value of the BUYER’s Supplies in the custody of the Shipyard.
 
The BUILDER shall provide the copy of corresponding insurance coverage of the VESSEL to the BUYER.
 
2.                           TERMINATION OF BUILDER’S OBLIGATION TO INSURE
 
The BUILDER shall be under no obligation to insure the VESSEL hereunder after delivery and acceptance of the VESSEL.

(End of Article)
 
43

 
ARTICLE XIV: ARBITRATION
 
1.                  APPOINTMENT OF THE ARBITRATOR
 
If any dispute or difference shall arise between the parties hereto concerning any matter or thing herein contained, or the operation or the design and / or construction of the VESSEL, its machinery and equipment thereof, or any matter or thing in any way connected with this CONTRACT or the rights, duties or liabilities of either party under or in connection with this CONTRACT, then, in every such case, the dispute or difference shall be referred to arbitration in London by a sole arbitrator. The arbitrator shall be appointed by agreement within fourteen (14) days of first written notification of either party to the other of intention to arbitrate such dispute or difference, or in default of such agreement, upon the application of either of the parties, by the President for the time being of the London Maritime Arbitrators Association who shall in making any such appointment have due regard to the requirement for an expeditious resolution of the dispute and in particular the availability of any arbitrator so appointed for an early hearing date.
 
2.                  LAWS APPLICABLE
 
Any arbitration arising hereunder shall be governed by and construed in accordance with the Arbitration Act 1996 of England or any statutory modification or re-enactments thereof for the time being in force. The award of the arbitrator shall be final and binding upon parties hereto.
 
3.                  PROCEEDINGS
 
In the event of any dispute or difference arising or occurring prior to delivery to, or acceptance by, the BUYER of the VESSEL being referred to arbitration, the parties hereby acknowledge that time is of the essence in obtaining an award from the arbitrator on such dispute or difference and the parties hereby agree that the arbitration shall be conducted according to the following timetable:
 
(a)            The claimant in the arbitration to serve points of claim within fourteen (14) days of the appointment of the arbitrator.
 
(b)           The respondent in the arbitration to serve points of defence and points of counterclaim,
 
44

 
if any, within fourteen (14) days thereafter.
 
(c)         The claimant to serve points of reply and defence to counterclaim, if any, within seven (7) days thereafter and the hearing of the arbitration to commence within twelve (12) weeks of the appointment of the arbitrator.
 
4.                  ALTERATION OF DELIVERY OF THE VESSEL
 
In the event of the arbitration of any dispute or difference arising or occurring prior to delivery to, or acceptance by the BUYER of the VESSEL, the award by the arbitrator shall include a finding as to whether or not the contractual delivery date of the VESSEL should, as a result of such dispute, be in any way altered thereby.
 
5.                  NOTICE OF AWARD
 
The award shall immediately be given to the BUYER and the BUILDER by telefax.
 
6.                  EXPENSES
 
The Arbitration Board shall determine which party shall bear the expenses of the arbitration or the portion of such expenses which each party shall bear.
 
7.                  ENTRY IN COURT
 
In case of failure by either party to respect the award of the arbitration, the judgement may be entered in any proper court having jurisdiction thereof.
 
(End of Article)
 
45

 
ARTICLE XV: SUCCESSORS AND ASSIGNS
 
The BUILDER agrees that, prior to delivery of the VESSEL, this CONTRACT may, with the prior written approval of the BUILDER, which the BUILDER shall not unreasonably withhold, be transferred to and the title thereof may be taken by another company. In the event of any assignment pursuant to the terms of this CONTRACT, the assignee, its successors and assigns shall succeed to all the rights and obligations of the BUYER under this CONTRACT. However, the BUYER shall remain responsible for performance by the assignee, its successors and assigns of all the BUYER’s obligations, liabilities and responsibilities under this CONTRACT. It is understood that any expenses or charges incurred due to the transfer of this CONTRACT shall be for the account of the BUYER.
 
The BUYER is hereby allowed to assign the Contract for the purposes of financing without BUILDER’S approval. However, the BUYER shall remain responsible for performance by the assignee, its successors and assigns of all the BUYER’s obligations, liabilities and responsibilities under this CONTRACT. It is understood that any expenses or charges incurred due to the transfer of this CONTRACT shall be for the account of the BUYER. The BUYER is further allowed to nominate a company controlled by the BUYER to take over the Contract.
 
The BUILDER shall fully cooperate in case the BUYER requests UK Tax lease financing arrangements. However, the BUYER shall remain responsible for performance by the assignee, its successors and assigns of all the BUYER’s obligations, liabilities and responsibilities under this CONTRACT. It is understood that any expenses or charges incurred due to the transfer of this CONTRACT shall be for the account of the BUYER.
 
The BUILDER shall have the right to assign this CONTRACT at any time after the effective date hereof, provided that prior written agreement is obtained from the BUYER.
 
(End of Article)
 
46

 
ARTICLE XVI: TAXES AND DUTIES
 
1.                  TAXES
 
Unless otherwise expressly provided for in this CONTRACT, all costs and taxes including stamp duties, if any, incurred in or levied by any country except Korea in connection with this CONTRACT shall be borne by the BUYER and corresponding costs and taxes in Korea, before delivery of the VESSEL, if any, shall be borne by the BUILDER.
 
2.                  DUTIES
 
The BUILDER shall hold the BUYER harmless from any payment of duty imposed in Korea upon materials or supplies which, under the terms of this CONTRACT, or amendments thereto, may be supplied by the BUYER from abroad for the construction of the VESSEL.
 
The BUILDER shall likewise hold the BUYER harmless from any payment of duty imposed in Korea in connection with materials or supplies for operation of the VESSEL, including running stores, provisions and supplies necessary to stock the VESSEL for its operation. This indemnity does not, however, extend to any items purchased by the BUYER for use in connection with the VESSEL which are not absolutely required for the construction or operation of the VESSEL.
 
(End of Article)
 
47

 
ARTICLE XVII: PATENTS, TRADEMARKS AND COPYRIGHTS
 
1.                  PATENTS, TRADEMARKS AND COPYRIGHTS
 
Machinery and equipment of the VESSEL, whether made or furnished by the BUILDER under this CONTRACT, may bear the patent numbers, trademarks, or trade names of the manufacturers. The BUILDER shall defend and save harmless the BUYER from all liabilities or claims for or on account of the use of any patents, copyrights or design of any nature or kind, or for the infringement thereof including any unpatented invention made or used in the performance of this CONTRACT and also for any costs and expenses of litigation, if any in connection therewith. No such liability or responsibility shall be with the BUILDER with regard to components and/or equipment and/or design supplied by the BUYER.
 
Nothing contained herein shall be construed as transferring any patent or trademark rights or copyrights in equipment covered by this CONTRACT, and all such rights are hereby expressly reserved to the true and lawful owners thereof.
 
2.                  RIGHTS TO THE SPECIFICATIONS, PLANS, ETC.
 
The BUILDER retains all rights with respect to the SPECIFICATIONS, plans and working drawings, technical descriptions, calculations, test results and other data, information and documents concerning the design and construction of the VESSEL and the BUYER shall not disclose the same or divulge any information contained therein to any third parties, including but not limited to any other shipbuilders, without the prior written consent of the BUILDER, excepting where it is necessary for usual operation, repair and maintenance of the VESSEL.
 
(End of Article)
 
48

 
ARTICLE XVIII: INTERPRETATION AND GOVERNING LAW
 
This CONTRACT has been prepared in English and shall be executed in duplicate and in such number of additional copies as may be required by either party respectively. The parties hereto agree that the validity and interpretation of this CONTRACT and of each Article and part thereof shall be governed by the laws of England.
 
(End of Article)
 
49

 
ARTICLE XIX : NOTICE
 
Any and all notices, requests, demands, instructions, advices and communications in connection with this CONTRACT shall be written in English, sent by registered air mail or facsimile and shall be deemed to be given when first received whether by registered mail or facsimile. They shall be addressed as follows, unless and until otherwise advised : -

To the BUILDER :	Sungdong Shipbuilding & Marine Engineering Co., Ltd.	
 	1609-2, Hwang-li, Gwangdo-myeon, Tongyoung-si,	
 	Gyeongnam, Korea	
 	 	
 	Contract Administration Department	
 	Attn : Mr. S. K. Ahn	
 	Facsimile: (82) 55 650 9294	
 	Telephone: (82) 55 650 9311	
 	 	
To the BUYER :	Danaos Shipping Co., Ltd.	
 	Akti Kondyli 14, 185 45 Piraeus, Greece	
 	Attn : Mr. Dimitrios Vastarouchas	
 	Facsimile : (30) 210 422 0855	
 	Telephone: (30) 210 419 6529	
 
The said notices shall become effective upon receipt of the letter or facsimile communication by the receiver thereof. Where a notice by facsimile is concerned which is required to be confirmed by letter, then, unless the CONTRACT or the relevant Article thereof otherwise requires, the notice shall become effective upon receipt of the facsimile.
 
(End of Article)
 
50

 
ARTICLE XX : EFFECTIVENESS OF THIS CONTRACT
 
This CONTRACT shall become effective upon signing by the parties hereto.
 
(End of Article)
 
51

 
ARTICLE XXI - INTERPRETATION
 
1.                           LAWS APPLICABLE
 
The parties hereto agree that the validity and interpretation of this Contract and of each Article and part thereof shall be governed by the laws of England.
 
2.                           DISCREPANCIES
 
All general language or requirements embodied in the SPECIFICATIONS are intended to amplify, explain and implement the requirements of this CONTRACT. However, in the event that any language or requirements so embodied permit of an interpretation inconsistent with any provisions of this Contract, then, in each and every such event, the applicable provisions of this Contract shall prevail and govern. In the event of conflict between the SPECIFICATIONS and Plans, the SPECIFICATIONS shall prevail and govern.
 
3.                           ENTIRE AGREEMENT
 
This Contract contains the entire agreement and understanding between the parties hereto and supersedes all prior negotiations, representations, undertaking and agreements on any subject matter of this Contract.
 
4.                           AMENDMENTS AND SUPPLEMENTS
 
Any supplement, memorandum of understanding or amendment, whatsoever form it may be relating to this CONTRACT, to be made and signed among parties hereof after signing this CONTRACT, shall be the integral part of this CONTRACT and shall be predominant over the respective corresponding Article and/or Paragraph of this CONTRACT.
 
The Contract can only be amended in writing.
 
(End of Article)
 
52

 
ARTICLE XXII : EXCLUSIVENESS
 
This CONTRACT shall constitute the only and entire agreement between the parties hereto, and unless otherwise expressly provided for in this CONTRACT, all other agreements, oral or written, made and entered into between the parties prior to the execution of this CONTRACT shall be null and void.
 
(End of Article)
 
53

 
IN WITNESS WHEREOF , the parties hereto have caused this CONTRACT to be duly executed on the date and year first above written.

BUYER	BUILDER	

For and on behalf of	For and on behalf of	
BOXCARRIER (NO.3) CORP.	SUNGDONG SHIPBUILDING &	
 	MARINE ENGINEERING CO.,LTD.	

By	/s/ John Coustas	 	By	/s/ Kwan Hong Yu	 	
Name: John Coustas	Name: Kwan Hong Yu	
Title:	Title:	
President & Chief Executive Officer	Chairman & Chief Executive Officer	

WITNESS : /s/ Heung Chul Jung, Attorney-in-fact	WITNESS: [Illegible]	

54

 
EXHIBIT “A”
 
LETTER OF REFUNDMENT GUARANTEE
 
Gentlemen :
 
We hereby issue our letter of guarantee no.             in favour of                    (hereinafter called the “BUYER”) for account of                    (hereinafter called the “BUILDER”) as follows in consideration of the shipbuilding contract dated (hereinafter called the “Contract”) made by and among the BUYER and the BUILDER for the construction of one(1) single screw diesel engine driven Container VESSEL having BUILDER’s Hull No. (hereinafter called the “VESSEL”).
 
If in connection with the terms of the Contract the BUYER shall become entitled to a refund of the advance payment(s) made to the BUILDER prior to the delivery of the VESSEL, we hereby irrevocably guarantee the repayment of the same to the BUYER immediately on demand being initially US$ (Say U.S. Dollars) together with interest thereon at the rate of Seven (7) percent per annum from the respective dates on which such sums were paid by the BUILDER to the date of remittance by telegraphic transfer of such refund.
 
The amount of this guarantee will be automatically increased, not more than three times, upon BUILDER’s receipt of the respective instalment: each time by the amount of instalment of US$ (Say U.S. Dollars), US$.- (Say U.S. Dollars) and US$.- (Say U.S. Dollars) respectively plus interest thereon as provided in the Contract, but in any eventuality the amount of this guarantee shall not exceed the total sum of US$.- (Say U.S. Dollars plus interest thereon at the rate of Seven (7) percent per annum from the respective dates on which such sums were paid by the BUYER to the BUILDER to the date of remittance by telegraphic transfer of the refund. However, in the event of cancellation of the CONTRACT being based on delays due to force majeure or other causes beyond the control of the BUILDER, the interest rate of refund shall be reduced to six point five per cent (6.5%) per annum as provided in Article X of the CONTRACT.
 
Our liability under this letter of guarantee shall not be affected by any alteration to or variation of the terms of the Contract you may hereafter agree with the BUILDER and by any other matter of circumstances, including bankruptcy or insolvency of the BUILDER, which might otherwise discharge our liability hereunder as guarantor of the BUILDER’s obligations as aforesaid.
 
In case any refund is made to you by the BUILDER or by us under this guarantee, our liability hereunder shall be automatically reduced by the amount of such refund.
 
This letter of guarantee is available against BUYER’s simple receipt and signed statement certifying that BUYER’s demand for refund has been made in conformity with Article X of the Contract and the BUILDER has failed to make the refund within Thirty One (31) days after BUYER’s demand to the BUILDER.
 
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Refund shall be made to BUYER by telegraphic transfer in United States Dollars to an account designated by you without deduction, withholding or set-off.
 
This letter of guarantee shall expire and become null and void upon receipt by the BUYER of the sum guaranteed hereby or upon acceptance by the BUYER of the delivery of the VESSEL in accordance with the terms of the Contract and, in either case, this letter of guarantee shall be returned to us. This guarantee is valid from the date of this letter of guarantee until or in the event of delayed delivery until such time as the VESSEL is delivered by the BUILDER to the BUYER in accordance with the terms of the Contract.
 
Notwithstanding the provisions hereinabove, in case we receive notification from you or the BUILDER confirmed by an Arbitrator stating that your claim to cancel the Contract or your claim for refundment thereunder has been disputed and referred to Arbitration in accordance with the provisions of the Contract, the period of validity of this guarantee shall be extended until Thirty (30) days after the final and non-appealable award shall be rendered in the Arbitration and a copy thereof acknowledged by the Arbitrators. In such case, this guarantee shall not be available unless and until such acknowledged copy of the final award in the Arbitration justifying your claim is presented to us.
 
Your rights in respect of this letter of guarantee are assignable from the date of this letter of guarantee until such time as the VESSEL is delivered by the BUILDER to the BUYER in accordance with the provisions of the Contract, on the understanding that you will notify us of the identity of any assignee of your rights under this letter of guarantee.
 
Any notice or demand under this letter of guarantee shall be given by facsimile and sent to:

 

 
or to such other address as we might notify to you in writing. A notice shall be deemed to be served and shall take effect 2 hours after its transmission is completed, provided that if a notice would be deemed to be served on a day which is not a business day, or which is a business day but after 5:00 p.m. local time, in the place of receipt, the notice shall be deemed to be served and shall take effect at 9:00 a.m. on the next day which is a business day.
 
This guarantee shall be governed by and construed in accordance with the Laws of England. Any disputes arising under this guarantee (but not any disputes arising under the Contract which shall be determined by arbitration in accordance with the terms of the Contract and as referenced in this letter of guarantee) shall be determined by the High Court of Justice in London to whose exclusive jurisdiction we hereby submit. We appoint
 
2

 
                                                             as our agents for service of process in connection with any proceedings in such courts.
 
We each jointly and severally hereby represent and guarantee that we have the corporate power and authority to execute, deliver and perform the obligations under this letter of guarantee, and that such execution and performance will not violate or conflict with any provision of law, statute, rule, permit or regulation of any government, regulatory body, agency or other authority in the jurisdictions where we are subject to such laws and regulations.
 
IN WITNESS WHEREOF, we have hereunder set our hands and seal by our duly authorized representatives this           day of                , 2006.

 	Very truly yours,	

 	For and on behalf of	

 	 	
 	By	 	 	
 	Name :	
 	Title : Attorney-in-Fact	

 	For and on behalf of	

 	 	 	
 	By	 	 	
 	Name :	
 	Title : Attorney-in-Fact	
 
3

 
EXHIBIT “B”

Date :             , 2006
 
PERFORMANCE GUARANTEE
 
In consideration of the performance of a certain shipbuilding contract dated                                        (hereinafter called the “Contract”) by having your Hull No. (hereinafter called the “VESSEL”) providing among other things for payment of the Contract Price amounting to United States Dollars                                    (US$                                  );
 
We, the undersigned, hereby irrevocably and unconditionally guarantee to you, your successors, and assigns the due and faithful performance by the BUYER of its all liabilities and responsibilities under the Contract and any supplement, amendment, change or modification hereafter made thereto, including but not limited to, due and prompt payment of the Contract Price by the BUYER to you, your successors, and assigns under the Contract and any supplement, amendment, change or modification as aforesaid (hereby expressly waiving notice of any such supplement, amendment, change or modification as may be agreed to by the BUYER and confirming that this guarantee shall be fully applicable to the Contract as so supplemented, amended, changed or modified).
 
This Performance Guarantee shall be governed by the laws of England.

GUARANTOR :	
BY :	 	 	
TITLE :	
WITNESS :	
 
4

 
Exhibit 10.30
 
SHIPBUILDING CONTRACT

FOR

THE CONSTRUCTION AND SALE OF
 
ONE (1) 6,500 TEU CLASS CONTAINER CARRIER

HULL NO. S4004

BETWEEN

BOXCARRIER (NO.4) CORP.

(AS BUYER)

AND

SUNGDONG SHIPBUILDING & MARINE ENGINEERING CO., LTD.
 
(AS BUILDER)

 
 
I N D E X

 	 	PAGE	
PREAMBLE	 	1	
 	 	 	
ARTICLE      I	: DESCRIPTION AND CLASS	2	
 	 	 	
 	II	: CONTRACT PRICE	5	
 	 	 	 	
 	III	: ADJUSTMENT OF THE CONTRACT PRICE	6	
 	 	 	 	
 	IV	: INSPECTION AND APPROVAL	10	
 	 	 	 	
 	V	: MODIFICATIONS, CHANGES AND EXTRAS	15	
 	 	 	 	
 	VI	: TRIALS AND COMPLETION	18	
 	 	 	 	
 	VII	: DELIVERY	22	
 	 	 	 	
 	VIII	: DELAYS AND EXTENSIONS OF TIME (FORCE MAJEURE)	25	
 	 	 	 	
 	IX	: WARRANTY OF QUALITY	28	
 	 	 	 	
 	X	: PAYMENT	33	
 	 	 	 	
 	XI	: BUYER’S DEFAULT	38	
 	 	 	 	
 	XII	: BUYER’S SUPPLIES	41	
 	 	 	 	
 	XIII	: INSURANCE	43	
 	 	 	 	
 	XIV	: ARBITRATION	44	
 	 	 	 	
 	XV	: SUCCESSORS AND ASSIGNS	46	
 	 	 	 	
 	XVI	: TAXES AND DUTIES	47	
 	 	 	 	
 	XVII	: PATENTS, TRADEMARKS AND COPYRIGHTS	48	
 	 	 	 	
 	XVIII	: INTERPRETATION AND GOVERNING LAW	49	
 	 	 	 	
 	XIX	: NOTICE	50	
 	 	 	 	
 	XX	:EFFECTIVENESS OF THIS CONTRACT	51	
 	 	 	 	
 	XXI	: INTERPRETATION	52	
 	 	 	 	
 	XXII	:EXCLUSIVENESS	53	
 
SCHEDULES
 
EXHIBIT “A”  REFUND GUARANTEE LETTER OF REFUNDMENT GUARANTEE
 
EXHIBIT “B”  PERFORMANCE GUARANTEE

 
SHIPBUILDING CONTRACT
 
THIS CONTRACT, made on this 26 day of July, 2006 by and between BOXCARRIER (NO.4) CORP. , a corporation incorporated and existing under the laws of Republic of Liberia with its registered office at 80 Broad Street, Monrovia, Liberia (hereinafter called the “BUYER”), the party of the first part and Sungdong Shipbuilding & Marine Engineering Co., Ltd., a company organized and existing under the laws of the Republic of Korea, having its registered office at 1609-2, Hwang-li, Gwangdo-myeon, Tongyoung-si, Gyeongnam, 650-827, Korea (hereinafter called the “BUILDER”), the party of the second part,
 
W I T N E S S E T H :
 
In consideration of the mutual covenants contained herein, the BUILDER agrees to design, build, launch, equip and complete in accordance with the Sung Dong Shipbuilding & Marine Engineering Quality Standard one (1) Single Screw Diesel Engine driven Container VESSEL as described in the Specifications as described in Article I hereof (hereinafter called the “VESSEL”) at the BUILDER’s yards in Korea (hereinafter called the “SHIPYARD”) and to deliver and sell the VESSEL to the BUYER, and the BUYER agrees to accept delivery of and purchase from the BUILDER the VESSEL, according to the terms and conditions hereinafter set forth :
 
(End of Preamble)
 
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ARTICLE I : DESCRIPTION AND CLASS
 
1.                         DESCRIPTION
 
The VESSEL shall have the BUILDER’s Hull No. S4004 and shall be built, constructed, equipped and completed in accordance with the specifications No. SD-DN-6500T.CN.FS-01 dated July 26, 2006 and the general arrangement plan No. SD-DN-6500T.CN.GA-01 dated July 26, 2006 attached thereto and the ‘Maker List’ No. SD-DN-6500T.CN.ML-01 dated July 26, 2006 (hereinafter called respectively the “SPECIFICATIONS” and the “PLAN”) signed by both parties, which shall constitute an integral part of this CONTRACT although not attached hereto.
 
The SPECIFICATIONS and the PLAN are intended to explain each other and anything shown on the PLAN and not stipulated in the SPECIFICATIONS or anything stipulated in the SPECIFICATIONS and not shown on the PLAN shall be deemed and considered as if included in both. Should there be any inconsistencies or contradictions between the SPECIFICATIONS and the PLAN, the SPECIFICATIONS shall prevail. Should there be any inconsistencies or contradictions between this CONTRACT and the SPECIFICATIONS, this CONTRACT shall prevail.
 
2.                         BASIC DIMENSIONS AND PRINCIPAL PARTICULARS OF THE VESSEL
 
(a)                    The basic dimensions and principal particulars of the VESSEL shall be :

Length, overall	about	300.0	 	M	
Length, between perpendiculars	286.6	 	M	
Breadth, moulded	40.0	 	M	
Depth to Upper Deck, moulded	24.2	 	M	
 	 	 	 	
Design draft, moulded, in seawater of specific gravity of 1.025	12.0	 	M	
Scantling draft, moulded, in seawater of specific gravity of 1.025	14.5	 	M	
 	 	 	 	
Deadweight guaranteed on the above moulded design draft of 12.0 M	59,000	 	M/T	
 
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Deadweight on the above moulded scantling draft of 14.5 M	83,300 	 	M/T	
 	 	 	 	
Main propulsion engine	MAN B&W 10K98MC-C	
 	MCR :	77,600 PS x 104 RPM	
 	NCR :	69,840 PS x 100.4 RPM	
 	
Speed guaranteed at 12.0meters design draft at the condition of clean bottom and in calm and deep sea with main engine developing a NCR of 69,840 PS with fifteen per cent (15%) sea margin	 	25.6 KNOTS	
 	 	 	
Specific Fuel consumption guaranteed of the main engine applying I.S.O. reference conditions to the result of official shop test at a MCR of 77,600 PS using marine fuel oil having lower calorific value of 10,200 Kcal per Kg.	 	126.0 gr/BHP.HR	

The details of the above particulars as well as the definitions and method of measurements and calculations are as indicated in the SPECIFICATIONS.
 
(b)                   All other vessels Hull Number S4002, S4003, S4004 and S4005 shall be built as identical sister ships unless a modification to a design is agreed upon.
 
3.                  CLASSIFICATION, RULES AND REGULATIONS
 
(a)             The VESSEL including its machinery, equipment and outfittings shall be built in compliance with the rules and regulations of Det Norske Veritas (hereinafter called the “CLASSIFICATION SOCIETY”), in force as of the date of this CONTRACT, to be classed and registered as +1A, CONTAINER CARRIER, EO, BIS, TMON, NAUTICUS (NEWBUILDING) and also to comply with the rules and regulations, in force as of the date of this CONTRACT, as described in the SPECIFICATIONS. Provided that the BUILDER shall have an option to declare the CLASSIIFICATION SOCIETY as either equivalent Lloyd Register of Shipping or Det Norske Veritas within three (3) month after signing of this CONTRACT.
 
(b)            The BUILDER shall arrange with the CLASSIFICATION SOCIETY for the assignment by the CLASSIFICATION SOCIETY of representative(s) to the VESSEL during
 
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construction. All fees and charges incidental to classification of the VESSEL in compliance with the above specified rules, regulations and requirements of this CONTRACT shall be for the account of the BUILDER.
 
(c)             The decision of the CLASSIFICATION SOCIETY as to whether the VESSEL complies with the regulations of the CLASSIFICATION SOCIETY shall be final and binding upon the BUILDER and the BUYER.
 
Details of its notation shall be in accordance with the SPECIFICATIONS.
 
The VESSEL shall also comply with the compulsory rules, regulations and requirements of the regulatory bodies as described in the SPECIFICATIONS rectified and in effect as of the signing date of this Contract. Non-compulsory rules, regulations and requirements of the regulatory bodies shall be dealt with in accordance with Article V (2) of this Contract.
 
All the fees and charges incidental to the classification and with respect to compliance with the above referred rules, regulations and requirements shall be for account of the BUILDER except otherwise agreed.
 
4.                  SUBCONTRACTING
 
The BUILDER may, at its sole discretion and responsibility, subcontract any portion of the construction work of the VESSEL, provided that the construction and assembly of the VESSEL shall be carried out as is normally done according to the BUILDER’s building practice and provided further that the BUILDER shall be responsible to the BUYER in respect of any construction work carried out by such subcontractors.
 
5.                  NATIONALITY OF THE VESSEL
 
The VESSEL shall be registered by the BUYER at its own cost and expense under the laws of either Greece or Cyprus or Bahamas or Marshall Islands or Panama or Liberia with its home port of either Piraeus or Limassol or Nassau or Majuro or Panama or Monrovia at the time of its delivery and acceptance hereunder provided that the BUYER may in its sole discretion declare the VESSEL’S flag and registration within four (4) months after the signing of the CONTRACT. In the case that the BUYER declares the VESSEL’S flag and registration to the Greece, the BUYER should pay the extra cost.
 
(End of Article)
 
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ARTICLE II : CONTRACT PRICE
 
The contract price of the VESSEL delivered to the BUYER at the SHIPYARD shall be United States Dollars Ninety One Million Five Hundred Thousand (US$ 91,500,000) (hereinafter called the “CONTRACT PRICE”) which shall be paid plus any increases or less any decreases due to adjustment or modifications, if any, as set forth in this CONTRACT. The above CONTRACT PRICE shall include payment for services in the inspection, tests, survey and classification of the VESSEL which will be rendered by the CLASSIFICATION SOCIETY and shall not include the cost of the BUYER’s supplies as stipulated in Article XII.
 
The CONTRACT PRICE also includes all costs and expenses for supplying all necessary drawings as stipulated in the SPECIFICATIONS except those to be furnished by the BUYER for the VESSEL in accordance with the SPECIFICATIONS.
 
(End of Article)
 
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ARTICLE III : ADJUSTMENT OF THE CONTRACT PRICE
 
The CONTRACT PRICE of the VESSEL shall be adjusted as hereinafter set forth in the event of the following contingencies. It is hereby understood by both parties that any adjustment of the CONTRACT PRICE as provided for in this Article is by way of liquidated damages and not by way of penalty.
 
1.                  DELAYED DELIVERY
 
(a)             No adjustment shall be made and the CONTRACT PRICE shall remain unchanged for the first thirty (30) days of the delay in delivery of the VESSEL [ending as of 12 o’clock midnight Korean Standard Time on the thirtieth (30th) day of delay] beyond the Delivery Date calculated as provided in Article VII.1. hereof.
 
(b)            If delivery of the VESSEL is delayed more than thirty (30) days beyond the date upon which the delivery is due from the BUILDER under the terms of this CONTRACT, then, beginning at midnight of the thirtieth (30th) day after such due date, the CONTRACT PRICE of the VESSEL shall be reduced by U.S. Dollars Twenty Two Thousand only (US$ 22,000.-) for each full day of delay.
 
However, unless the parties agree otherwise, the total amount of deduction from the CONTRACT PRICE shall not exceed the amount due to cover the delay of one hundred and eighty (180) days after thirty (30) days of the delay in delivery of the VESSEL at the rate of deduction as specified hereinabove.
 
(c)             But, if the delay in delivery of the VESSEL continues for a period of more than two hundred and ten (210) days beyond the date upon which the delivery is due from the BUILDER under the terms of this CONTRACT then, in such event, and after such period has expired, the BUYER may, at its option, rescind this CONTRACT by serving upon the BUILDER a notice of rescission by facsimile to be confirmed by a registered letter via airmail directed to the BUILDER at the address given in this CONTRACT. Such rescission shall be effective as of the date the notice thereof is received by the BUILDER. If the BUYER has not served the notice of rescission after the aforementioned two hundred and ten (210) days delay in delivery, the BUILDER may demand the BUYER to make an election in accordance with Article VIII.3. hereof.
 
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(d)            For the purpose of this Article, the delivery of the VESSEL shall be deemed to be delayed when and if the VESSEL, after taking into full account extension of the Delivery Date or permissible delays as provided in Article V, VI, VIII, XI or elsewhere in this CONTRACT, is delivered beyond the date upon which delivery would then be due under the terms of this CONTRACT.
 
2.                  INSUFFICIENT SPEED
 
(a)              The CONTRACT PRICE of the VESSEL shall not be affected or changed, if the actual speed, as determined by trial runs more fully described in Article VI hereof, is less than the speed required under the terms of this CONTRACT and the SPECIFICATIONS provided such deficiency in actual speed is not more than two-tenths (2/10) of a knot below the guaranteed speed.
 
(b)             However, as for the deficiency of more than two-tenths (2/10) of a knot in actual speed below the speed guaranteed under this CONTRACT, the CONTRACT PRICE shall be reduced by U.S. Dollars Two Hundred Thousand only (U.S.$ 200,000.-) for each full one-tenth (1/10) of a knot in excess of the said two-tenths (2/10) of a knot of deficiency in speed [fractions of less than one-tenth (1/10) of a knot shall be regarded as a full one-tenth (1/10) of a knot]. However, unless the parties agree otherwise, the total amount of reduction from the CONTRACT PRICE shall not exceed the amount due to cover the deficiency of one (1) full knot below the guaranteed speed at the rate of reduction as specified above.
 
(c)             If the deficiency in actual speed of the VESSEL is more than seven point five-tenths (7.5/10) knot below the speed guaranteed under this CONTRACT, then the BUYER, at its option, may, subject to the BUILDER’s right to effect alterations or corrections as provided in Article VI.5. hereof, rescind this CONTRACT or may accept the VESSEL at a reduction in the CONTRACT PRICE as above provided for seven point five-tenths (7.5/10) knot of deficiency only.
 
3.                  EXCESSIVE FUEL CONSUMPTION
 
(a)             The CONTRACT PRICE shall not be affected or changed by reason of the fuel consumption of the VESSEL’s main engine, as determined by the engine manufacturer’s shop trial as per the SPECIFICATIONS being more than the guaranteed fuel consumption of the VESSEL’s main engine, if such excess is not more than five per cent (5%) over the guaranteed fuel consumption.
 
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(b)            However, as for the excess of more than five per cent (5%) in the actual fuel consumption over the guaranteed fuel consumption of the VESSEL’s main engine, the CONTRACT PRICE shall be reduced by U.S. Dollars Two Hundred Thousand only (US$ 200,000.-) for each full one per cent (1%) increase in fuel consumption in excess of the said five per cent (5%) increase in fuel consumption [fractions of less than one per cent (1%) shall be regarded as a full one per cent (1%)]. However, unless the parties agree otherwise, the total amount of reduction from the CONTRACT PRICE shall not exceed the amount due to cover the excess of nine per cent (9%) over the guaranteed fuel consumption of the VESSEL’s main engine at the rate of reduction as specified above.
 
(c)             If such actual fuel consumption exceeds the guaranteed fuel consumption of the VESSEL’s main engine by more than ten per cent (10%), the BUYER, at its option, may, subject to the BUILDER’s right to effect alterations or corrections as specified in Article VI.5. hereof, rescind this CONTRACT or may accept the VESSEL at a reduction in the CONTRACT PRICE as above provided for the nine per cent (9%) increase only.
 
4.                  DEADWEIGHT BELOW CONTRACT REQUIREMENTS
 
(a)             The CONTRACT PRICE of the VESSEL shall not be affected or changed, if actual deadweight, determined as provided in this CONTRACT and the SPECIFICATIONS, is below the deadweight of 83,300 metric tons on the moulded design draft of 12.0 metres required by this CONTRACT and the SPECIFICATIONS by an amount of 83,300 metric tons or less. However, should the deficiency in the actual deadweight of the VESSEL be more than 830 metric tons below the said required deadweight, then the CONTRACT PRICE of the VESSEL shall be reduced for each full one (1) metric ton [fractions of less than one (1) metric ton shall be disregarded] of decreased deadweight in excess of 830 metric tons by the sum of U.S. Dollars One Thousand One Hundred only (US$ 1,100.-) per metric ton.
 
However, unless the parties agree otherwise, the total amount of deduction from the CONTRACT PRICE shall not exceed the amount due to cover the deficiency of 2,000 metric tons below the said required deadweight hereinabove.
 
(b)            If the deficiency in the deadweight of the VESSEL is more than 2,000 metric tons below the said required deadweight, then the BUYER, at its option, may, subject to the BUILDER’s right to effect alterations or corrections without the BUYER’s prior
 
8

 
consent as specified in Article VI.5. hereof, rescind this CONTRACT or may accept the VESSEL at a reduction in the CONTRACT PRICE as above provided for metric tons of deficiency only.
 
5.                  EFFECT OF RESCISSION
 
It is expressly understood and agreed by the parties hereto that in any case, if the BUYER rescinds this CONTRACT under this Article, the BUYER shall not be entitled to any liquidated damages, unless by means of the provision of Article X hereof.
 
(End of Article)
 
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ARTICLE IV : INSPECTION AND APPROVAL
 
1.                  APPOINTMENT OF BUYER’S REPRESENTATIVE
 
The BUYER shall timely despatch to and maintain at the SHIPYARD, at its own cost, expense and risk, one or more representatives (hereinafter called the “BUYER’S REPRESENTATIVE”), who shall be duly accredited in writing by the BUYER to supervise adequately the construction by the BUILDER of the VESSEL, her equipment and all accessories. Before the commencement of any item of work under this CONTRACT, the BUILDER shall, whenever reasonably required, previously exhibit, furnish to, and within the limits of the BUYER’S REPRESENTATIVE’s authority, secure the approval from the BUYER’S REPRESENTATIVE of any and all plans and drawings prepared in connection therewith. Upon appointment of the BUYER’S REPRESENTATIVE, the BUYER shall notify the BUILDER in writing of the name and the scope of the authority of the BUYER’S REPRESENTATIVE.
 
2.                  AUTHORITY OF THE BUYER’S REPRESENTATIVE
 
Such BUYER’S REPRESENTATIVE shall, at all times during working hours of the construction until delivery of the VESSEL, have the right to inspect the VESSEL, her equipment and all accessories, and work in progress, or materials utilized in connection with the construction of the VESSEL, wherever such work is being done or such materials are stored, for the purpose of determining that the VESSEL, her equipment and accessories are being constructed in accordance with the terms of this CONTRACT and/or the SPECIFICATIONS and the PLAN.
 
The BUILDER will endeavor to arrange for the inspection by the BUYER’S REPRESENTATIVE during working hours of the BUILDER. However, such inspection may be arranged beyond the BUILDER’s normal working hours, including weekend and/or holiday if this is considered necessary by the BUILDER in order to meet the BUILDER’s construction schedule, on the condition that the BUILDER will inform the BUYER’S REPRESENTATIVE at least two (2) days in advance of such inspection.
 
The BUYER’S REPRESENTATIVE shall, within the limits of the authority conferred upon him by the BUYER, make decisions or give advice to the BUILDER on behalf of the BUYER promptly on all problems arising out of, or in connection with, the construction of
 
10

 
the VESSEL and generally act in a reasonable manner with a view to cooperating to the utmost with the BUILDER in the construction process of the VESSEL.
 
The decision, approval or advice of the BUYER’S REPRESENTATIVE shall be deemed to have been given by the BUYER and once given shall not be withdrawn, revoked or modified except with consent of the BUILDER. Provided that the BUYER’S REPRESENTATIVE or his assistants shall comply with the foregoing obligations, no act or omission of the BUYER’S REPRESENTATIVE or his assistants shall, in any way, diminish the liability of the BUILDER under Article IX (WARRANTY OF QUALITY). The BUYER’S REPRESENTATIVE shall notify the BUILDER promptly in writing of his discovery of any construction or materials, which he believes do not or will not conform to the requirements of the CONTRACT and the SPECIFICATIONS or the PLAN and likewise advise and consult with the BUILDER on all matters pertaining to the construction of the VESSEL, as may be required by the BUILDER, or as he may deem necessary.
 
However, if the BUYER’S REPRESENTATIVE fails to submit to the BUILDER without delay any such demand concerning alterations or changes with respect to the construction, arrangement or outfit of the VESSEL, which the BUYER’S REPRESENTATIVE has examined, inspected or attended at the test thereof under this CONTRACT or the SPECIFICATIONS, the BUYER’S REPRESENTATIVE shall be deemed to have approved the same and shall be precluded from making any demand for alterations, changes, or complaints with respect thereto at a later date.
 
The BUILDER shall comply with any such demand which is not contradictory to this CONTRACT and the SPECIFICATIONS or the PLAN, provided that any and all such demands by the BUYER’S REPRESENTATIVE with regard to construction, arrangement and outfit of the VESSEL shall be submitted in writing to the authorised representative of the BUILDER. The BUILDER shall notify the BUYER’S REPRESENTATIVE of the names of the persons who are from time to time authorised by the BUILDER for this purpose.
 
It is agreed upon between the BUYER and the BUILDER that the modifications, alterations or changes and other measures necessary to comply with such demand may be effected at a convenient time and place at the BUILDER’s reasonable discretion in view of the construction schedule of the VESSEL.
 
In the event that the BUYER’S REPRESENTATIVE shall advise the BUILDER that he has discovered or believes the construction or materials do not or will not conform to the
 
11

 
requirements of this CONTRACT and the SPECIFICATIONS or the PLAN, and the BUILDER shall not agree with the views of the BUYER’S REPRESENTATIVE in such respect, either the BUYER or the BUILDER may, with the agreement of the other party, seek an opinion of the CLASSIFICATION SOCIETY.
 
3.                  APPROVAL OF DRAWINGS
 
(a)             The BUILDER shall submit to the BUYER three (3) copies of each of the plans and drawings to be submitted to the BUYER for its approval at its address as set forth in Article XIV hereof. The BUYER shall, within fourteen (14) days after receipt thereof return to the BUILDER one (1) copy of such plans and drawings with the approval or comments, if any, of the BUYER. A list of the plans and drawings to be so submitted to the BUYER shall be mutually agreed upon between the parties hereto.
 
(b)            When and if the BUYER’S REPRESENTATIVE shall have been sent by the BUYER to the SHIPYARD in accordance with Paragraph 1 of this Article, the BUILDER may submit the remainder, if any, of the plans and drawings in the agreed list, to the BUYER’S REPRESENTATIVE for his approval, unless otherwise agreed upon between the parties hereto.
 
The BUYER’S REPRESENTATIVE shall, within ten (10) days after receipt thereof, return to the BUILDER one (1) copy of such plans and drawings with his approval or comments written thereon, if any. Approval by the BUYER’S REPRESENTATIVE of the plans and drawings duly submitted to him shall be deemed to be the approval by the BUYER for all purposes of this CONTRACT.
 
(c)             In the event that the BUYER or the BUYER’S REPRESENTATIVE shall fail to return the plans and drawings to the BUILDER within the time limit as hereinabove provided, such plans and drawings shall be deemed to have been automatically approved without any comment. In the event the plans and drawings submitted by the BUILDER to the BUYER or the BUYER’S REPRESENTATIVE in accordance with this Article do not meet with the BUYER’s or the BUYER’S REPRESENTATIVE’s approval, the matter may be submitted by either party hereto for determination pursuant to Article XIV hereof. If the BUYER’s comments on the plans and drawings that are returned to the BUILDER by the BUYER within the said time limit are not clearly specified or detailed, the BUILDER shall be entitled to place its own interpretation on such comments in implementing them.
 
12

 
(d)            Approval of drawings by Buyers shall not constitute a waiver of Builder’s responsibility to deliver the vessel in accordance with the Contract and Specifications.
 
4.                  SALARIES AND EXPENSES
 
All salaries and expenses of the BUYER’S REPRESENTATIVE or any other person or persons employed by the BUYER hereunder shall be for the BUYER’s account.
 
5.                  RESPONSIBILITY OF THE BUILDER
 
(a)             The BUILDER shall provide the BUYER’S REPRESENTATIVE and his assistants free of charge with suitably furnished office space at, or in the immediate vicinity of, the SHIPYARD together with access to telephone and facsimile facilities as may be necessary to enable the BUYER’S REPRESENTATIVE and his assistants to carry out their work under this CONTRACT. However, the BUYER shall pay for the telephone or facsimile facilities used by the BUYER’S REPRESENTATIVE or his assistants.
 
The BUILDER, its employees, agents and subcontractors, during its working hours until delivery of the VESSEL, shall arrange for them to have free and ready access to the VESSEL, her equipment and accessories, and to any other place (except the areas controlled for the purpose of national security) where work is being done, or materials are being processed or stored in connection with the construction of the VESSEL including the premises of sub-contractors.
 
The BUYER’S REPRESENTATIVE or his assistants or employees shall observe the work’s rules, regulations and the guidances prevailing at the BUILDER’s and its sub-contractor’s premises. The BUILDER shall promptly provide to the BUYER’S REPRESENTATIVE and/or his assistants and shall ensure that its sub-contractors shall promptly provide all such information as he or they may reasonably request in connection with the construction of the VESSEL and her engines, equipment and machinery.
 
(b)            The BUYER’S REPRESENTATIVE and his assistants shall at all times remain the employees of the BUYER. The BUILDER shall not be liable to the BUYER or the BUYER’S REPRESENTATIVE or to his assistants or to the BUYER’s employees or
 
13

 
agents for personal injuries, including death, during the time they, or any of them, are on the VESSEL, or within the premises of either the BUILDER or its sub-contractors, or are otherwise engaged in and about the construction of the VESSEL, unless, however, such personal injuries, including death, are caused by the gross negligence of the BUILDER, its sub-contractors, or its or their employees or agents. The BUILDER shall not be liable to the BUYER for damages to, or destruction of property of the BUYER or of the BUYER’S REPRESENTATIVE or his assistants or the BUYER’s employees or agents, unless such damages, loss or destruction is caused by the gross negligence of the BUILDER, its sub-contractors, or its or their employees or agents.
 
6.                  RESPONSIBILITY OF THE BUYER
 
The BUYER shall undertake and assure that the BUYER’S REPRESENTATIVE and his assistants shall carry out their duties hereunder in accordance with the normal shipbuilding practice and in such a way as to avoid any unnecessary increase in building cost, delay in the construction of the VESSEL, and/or any disturbance in the construction schedule of the BUILDER.
 
The BUILDER has the right to request the BUYER to replace any of the BUYER’S REPRESENTATIVE and/or his assistants who are deemed unsuitable and unsatisfactory for the proper progress of the VESSEL’s construction. The BUYER shall investigate the situation by sending its representative(s) to the SHIPYARD and if the BUYER considers that such BUILDER’s request is justified, the BUYER shall effect the replacement as soon as conveniently arrangeable.
 
(End of Article)
 
14

 
ARTICLE V : MODIFICATIONS, CHANGES AND EXTRAS
 
1.                  HOW EFFECTED
 
Any modifications or changes to the SPECIFICATIONS and the PLAN under which the VESSEL is to be constructed may be made at any time hereafter by written agreement of the parties hereto. Any modification or change requested by the BUYER which does not affect the frame-work of the SPECIFICATIONS shall be agreed to by the BUILDER if the BUYER agrees to adjustment of the CONTRACT PRICE, deadweight and/or cubic capacity, speed requirements, the Delivery Date and other terms and conditions of this CONTRACT reasonably required as a result of such modification or change. The BUILDER has the right to continue construction of the VESSEL on the basis of the SPECIFICATIONS and the PLAN until the BUYER has agreed to such adjustments. The BUILDER shall be entitled to refuse to make any alteration, change or modification of the SPECIFICATIONS and/or the PLAN requested by the BUYER, if the BUYER does not agree to the aforesaid adjustments within seven (7) days of the BUILDER’s notification of the same to the BUYER, or, if, in the BUILDER’s judgement, the compliance with such request of the BUYER would cause an unreasonable disruption of the normal working schedule of the SHIPYARD.
 
The BUILDER, however, agrees to exert its efforts to accommodate such reasonable request by the BUYER so that the said change and modification shall be made at a reasonable cost and within the shortest period of time reasonably possible. The aforementioned agreement to modify and change the SPECIFICATIONS and the PLAN may be effected by exchange of letters or facsimiles manifesting the agreement.
 
The letters and facsimiles exchanged by the parties pursuant to the foregoing shall constitute an amendment to this CONTRACT and the SPECIFICATIONS or the PLAN under which the VESSEL shall be built. Upon consummation of such an agreement to modify and change the SPECIFICATIONS or the PLAN, the BUILDER shall alter the construction of the VESSEL in accordance therewith including any addition to, or deduction from, the work to be performed in connection with such construction.
 
2.                  SUBSTITUTION OF MATERIAL
 
If any materials, machinery or equipment required for the construction of the VESSEL by
 
15

 
the SPECIFICATIONS and the PLAN or otherwise under this CONTRACT cannot be procured in time to meet the BUILDER’s construction schedule for the VESSEL, or are in short supply, or are unreasonably high in price compared with the prevailing international market price, the BUILDER may supply, subject to the BUYER’s prior approval, other materials, machinery or equipment of equal quality and effect capable of meeting the requirements of the CLASSIFICATION SOCIETY and the rules, regulations and requirements with which the construction of the VESSEL must comply.
 
3.                  CHANGES IN RULES AND REGULATIONS
 
If the specified rules and regulations with which the construction of the VESSEL is required to comply are altered or changed by the CLASSIFICATION SOCIETY or bodies authorised to make such alterations or changes, either the BUYER or the BUILDER, upon receipt of due notice thereof, shall forthwith give notice thereof to the other party in writing. Thereupon, within fifteen (15) days after giving the notice to the BUILDER or receiving the notice from the BUILDER, the BUYER shall advise the BUILDER as to the alterations and changes, if any, to be made on the VESSEL which the BUYER, in its sole discretion, shall decide. The BUILDER shall not be obliged to comply with such alterations and/or changes if the BUYER fails to notify the BUILDER of its decision within the time limit stated above.
 
The BUILDER shall comply promptly with the said request of the BUYER, provided that the BUILDER and the BUYER shall first agree to :
 
(a)             any increase or decrease in the CONTRACT PRICE of the VESSEL that is occasioned by such compliance ;
 
(b)            any extension or advancement in the Delivery Date of the VESSEL that is occasioned by such compliance ;
 
(c)             any increase or decrease in the deadweight and/or cubic capacity of the VESSEL, if such compliance results in any increase or reduction in the deadweight and/or cubic capacity ;
 
(d)            adjustment of the speed requirements if such compliance results in any increase or reduction in the speed ; and
 
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(e)             any other alterations in the terms of this CONTRACT or of the SPECIFICATIONS or the PLAN or both, if such compliance makes such alterations of the terms necessary.
 
Any delay in the construction of the VESSEL caused by the BUYER’s delay in making a decision or agreement as above shall constitute a permissible delay under this CONTRACT. Such agreement by the BUYER shall be effected in the same manner as provided above for modification and change of the SPECIFICATIONS and the PLAN.
 
(End of Article)
 
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ARTICLE VI : TRIALS AND COMPLETION
 
1.                  NOTICE
 
The BUILDER shall notify the BUYER in writing or by facsimile at least twenty (20) days in advance of the time and place of the trial run of the VESSEL. Such notice shall specify the place from which the VESSEL will commence her trial run and approximate date upon which the trial run is expected to take place. Such date shall be further confirmed by the BUILDER five (5) days in advance of the trial run in writing or by facsimile.
 
The BUYER’S REPRESENTATIVE, who is to witness the performance of the VESSEL during such trial run, shall be present at such place on the date specified in such notice. Should the BUYER’S REPRESENTATIVE fail to be present after the BUILDER’s due notice to the BUYER as provided above, the BUILDER shall be entitled to conduct such trial run with the presence of the representative(s) of the CLASSIFICATION SOCIETY only without the BUYER’S REPRESENTATIVE being present. In such case, the BUYER shall be obliged to accept the VESSEL on the basis of a certificate issued by the BUILDER that the VESSEL, after the trial run, subject to alterations and corrections, if necessary, has been found to conform with the SPECIFICATIONS and this CONTRACT and is satisfactory in all respects, provided the BUILDER first makes such corrections and alterations promptly.
 
2.                  WEATHER CONDITION
 
In the event of unfavourable weather on the date specified for the trial run, the trial run shall take place on the first available day that weather conditions permit. The parties hereto recognise that the weather conditions in Korean waters, in which the trial run is to take place, are such that great changes in weather may arise momentarily and without warning and therefore, it is agreed that if, during the trial run, the weather should become so unfavourable that the trial run cannot be continued, then the trial run shall be discontinued and postponed until the first favourable day next following, unless the BUYER shall assent to the acceptance of the VESSEL by notification in writing on the basis of such trial run so far made prior to such change in weather conditions. Any delay of the trial run caused by such unfavourable weather conditions shall also operate to extend the Delivery Date of the VESSEL for the period of delay occasioned by such unfavourable weather conditions.
 
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3.               HOW CONDUCTED
 
All expenses in connection with the trials of the VESSEL are to be for the account of the BUILDER, which, during the trials, is to provide at its own expense the necessary crew to comply with conditions of safe navigation. The trials shall be conducted in the manner prescribed in this CONTRACT and the SPECIFICATIONS, and shall prove fulfilment of the performance requirements for the trials as set forth in the SPECIFICATIONS.
 
The BUILDER shall be entitled to conduct preliminary sea trials, during which the propulsion plant and/or its appurtenance shall be adjusted according to the BUILDER’s judgement. The BUILDER shall have the right to repeat any trial whatsoever as it deems necessary.
 
4.                  CONSUMABLE STORES
 
The BUILDER shall load the VESSEL with the required quantity of fuel oil, lubricating oil and greases, fresh water, and other stores necessary to conduct the trials as set forth in the SPECIFICATIONS. The necessary ballast (fuel oil, fresh water and such other ballast as may be required) to bring the VESSEL to the trial load draft, as specified in the SPECIFICATIONS, shall be supplied and paid for by the BUILDER whilst lubricating oil and greases shall be supplied and paid for by the BUYER within the time advised by the BUILDER for the conduct of sea trials as well as for use before the delivery of the VESSEL to the BUYER. The fuel oil as well as lubricating oil and greases shall be in accordance with the specifications of the main engine and other machinery and the BUYER shall decide and advise the BUILDER of the supplier’s name for lubricating oil and greases before the work-commencement of the VESSEL, provided that the supplier shall be acceptable to the BUILDER and/or the makers of all the machinery.
 
Any fuel oil, fresh water or other consumable stores furnished and paid for by the BUILDER for trial runs remaining on board the VESSEL, at the time of acceptance of the VESSEL by the BUYER, shall be bought by the BUYER from the BUILDER at the BUILDER’s purchase price for such supply in Korea and payment by the BUYER thereof shall be made at the time of delivery of the VESSEL. The BUILDER shall pay the BUYER at the time of delivery of the VESSEL for the consumed quantity of any lubricating oil and greases which were furnished and paid for by the BUYER at the BUYER’s purchase price thereof. The consumed quantity of lubricating oils and greases shall be calculated on the basis of the difference between the remaining amount, including the same remaining in the
 
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main engine, other machinery and their pipes, stern tube and the like, and the supplied amount.
 
5.                  ACCEPTANCE OR REJECTION
 
(a)                If, during any sea trial, any breakdown occurs entailing interruption or irregular performance which can be repaired on board, the trial shall be continued after such repairs and be valid in all respects.
 
(b)            However, if, during or after the trial run, it becomes apparent that the VESSEL or any part of her equipment requires alterations or corrections which but for this provision would or might entitle the BUYER to rescind this CONTRACT, the BUILDER shall notify the BUYER promptly in writing or by facsimile to such effect and shall simultaneously advise the BUYER of the estimated additional time required for the necessary alterations or corrections to be made.
 
The BUYER shall, within five(5) days of receipt from the BUILDER of notice of completion of such alterations or corrections and after such further trials or tests as necessary, notify the BUILDER in writing or by facsimile confirmed in writing of its acceptance, qualified acceptance or rejection of the VESSEL, all in accordance with the SPECIFICATIONS, the PLAN and this CONTRACT, and shall not be entitled to reject the VESSEL on such grounds until such time.
 
(c)                Save as above provided, the BUYER shall, within three(3) days after completion of the trial run, notify the BUILDER in writing or by facsimile confirmed in writing of its acceptance of the VESSEL or of the details in respect of which the VESSEL does not conform to the SPECIFICATIONS or this CONTRACT.
 
If the BUILDER is in agreement with the BUYER’s determinations as to non-conformity, the BUILDER shall make such alterations or changes as may be necessary to correct such non-conformity and shall prove the fulfilment of this CONTRACT and the SPECIFICATIONS by such tests or trials as may be necessary.
 
The BUYER shall, within three (3) days after completion of such tests and/or trials, notify the BUILDER in writing or by facsimile confirmed in writing of its acceptance or rejection of the VESSEL.
 
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(d)            However, the BUYER shall not be entitled to reject the VESSEL by reason of any minor or insubstantial items judged from the point of view of standard shipbuilding and shipping practice as not being in conformity with the SPECIFICATIONS, but, in that case, the BUILDER shall not be released from the obligation to correct and/or remedy such minor or insubstantial items as soon as practicable after the delivery of the VESSEL.
 
6.                  EFFECT OF ACCEPTANCE
 
The BUYER’s written or facsimiled notification of acceptance delivered to the BUILDER as above provided, shall be final and binding insofar as conformity of the VESSEL with the SPECIFICATIONS is concerned and shall preclude the BUYER from refusing formal delivery of the VESSEL as hereinafter provided, if the BUILDER complies with all conditions of delivery, as herein set forth and provided that, in the case of qualified acceptance, any matters which were mentioned in the notice of the qualified acceptance by the BUYER as requiring correction have been corrected satisfactorily.
 
If the BUYER fails to notify the BUILDER of its acceptance or rejection of the VESSEL as hereinabove provided, the BUYER shall be deemed to have accepted the VESSEL. Nothing contained in this Article shall preclude the BUILDER from exercising any and all rights which the BUILDER has under this CONTRACT if the BUILDER disagrees with the BUYER’s rejection of the VESSEL or any reasons given for such rejection, including arbitration provided in Article XIV hereof.
 
(End of Article)
 
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ARTICLE VII : DELIVERY
 
1.                  TIME AND PLACE
 
The VESSEL shall be delivered by the BUILDER to the BUYER at the SHIPYARD, safely afloat on or before 31 st October, 2009 (hereinafter called the “DELIVERY DATE”) after completion of satisfactory trials and acceptance by the BUYER in accordance with the terms of Article VI, except that, in the event of delays in delivery of the VESSEL by the BUILDER due to causes which under the terms of this CONTRACT permit extensions of the time for delivery of the VESSEL, the aforementioned DELIVERY DATE shall be extended accordingly.
 
It is hereby agreed that the BUILDER shall have the right to advance the DELIVERY DATE provided that the BUILDER shall have given to the BUYER written notice of the new proposed earlier delivery date at least six (6) months before such new proposed advanced delivery date; and
 
Any such new proposed earlier delivery date shall be considered as the DELIVERY DATE for the purpose of this CONTRACT.
 
2.                  WHEN AND HOW EFFECTED 
 
Provided that the BUYER shall concurrently with delivery of the VESSEL release to the BUILDER the fifth instalment as set forth in Article X.2. hereof and shall have fulfilled all of its obligations provided for in this CONTRACT, delivery of the VESSEL shall be forthwith effected upon acceptance thereof by the BUYER, as hereinabove provided, by the concurrent delivery by each of the parties hereto to the other of a PROTOCOL OF DELIVERY AND ACCEPTANCE acknowledging delivery of the VESSEL by the BUILDER and acceptance thereof by the BUYER, which PROTOCOL shall be prepared in duplicate and signed by each of the parties hereto.
 
3.                  DOCUMENTS TO BE DELIVERED TO THE BUYER
 
Upon delivery and acceptance of the VESSEL, the BUILDER shall deliver to the BUYER the following documents, which shall accompany the aforementioned PROTOCOL OF DELIVERY AND ACCEPTANCE :
 
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(a)             PROTOCOL OF TRIALS of the VESSEL made pursuant to this CONTRACT and the SPECIFICATIONS,
 
(b)            PROTOCOL OF INVENTORY of the equipment of the VESSEL, including spare parts, all as specified in the SPECIFICATIONS,
 
(c)             PROTOCOL OF STORES OF CONSUMABLE NATURE, such as all fuel oil and fresh water remaining in tanks if its cost is charged to the BUYER under Article VI.4. hereof,
 
(d)            DRAWINGS AND PLANS pertaining to the VESSEL as stipulated in the SPECIFICATIONS, which shall be furnished to the BUYER at no additional cost,
 
(e)             ALL CERTIFICATES required to be furnished upon delivery of the VESSEL pursuant to this CONTRACT, the SPECIFICATIONS and the customary shipbuilding practice, including
 
(i)                                  Classification Certificate
(ii)                               Safety Construction Certificate
(iii)                            Safety Equipment Certificate
(iv)                           Safety Radio Certificate
(v)                              International Loadline Certificate
(vi)                           International Tonnage Certificate
(vii)                        BUILDER’s Certificate
(viii)                     De-ratting Exemption Certificate
 
However, it is agreed by the parties that if the Classification Certificate and/or other certificates are not available at the time of delivery of the VESSEL, provisional certificates shall be accepted by the BUYER, provided that the BUILDER shall furnish the BUYER with formal certificates as promptly as possible after such formal certificates have been issued.
 
(f)               DECLARATION OF WARRANTY of the BUILDER that the VESSEL is delivered to the BUYER free and clear of any liens, claims, mortgages, or other encumbrances upon the BUYER’s title thereto, and in particular, that the VESSEL is absolutely free of all burdens in the nature of imposts, taxes, or charges imposed by the prefecture or country
 
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of the port of delivery, as well as of all liabilities of the BUILDER to its sub-contractors and employees and of all liabilities arising from the operation of the VESSEL in trial runs, or otherwise, prior to delivery except as otherwise provided under this CONTRACT.
 
(g)                      COMMERCIAL INVOICE.
 
4.                  TENDER OF THE VESSEL
 
If the BUYER fails to take delivery of the VESSEL after completion thereof according to this CONTRACT and the SPECIFICATIONS, the BUILDER shall have the right to tender delivery of the VESSEL after compliance with all procedural requirements as provided above.
 
5.                  TITLE AND RISK
 
Title and risk shall pass to the BUYER upon delivery and acceptance of the VESSEL being effected as stated above and the BUILDER shall be free of all responsibility or liability whatsoever related with this CONTRACT except for the warranty of quality contained in Article IX and the obligation to correct and/or remedy, as provided in Article VI.5.(d), if any, it being expressly understood that, until such delivery is effected, the VESSEL and equipment thereof are at the entire risk of the BUILDER including but not confined to, risks of war, insurrection and seizure by Governments or Authorities, whether Korean or foreign, and whether at war or at peace. The title to the BUYER’s supplies as provided in Article XII shall remain with the BUYER and the BUILDER’s responsibility for such BUYER’s supplies shall be as described in Article XII.2.
 
6.                  REMOVAL OF THE VESSEL
 
The BUYER shall take possession of the VESSEL immediately upon delivery thereof and shall remove the VESSEL from the SHIPYARD within three (3) days after delivery thereof is effected. Port dues and other charges levied by the Korean Government Authorities after delivery of the VESSEL and any other costs related to the removal of the VESSEL shall be borne by the BUYER.
 
(End of Article)
 
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ARTICLE VIII : DELAYS AND EXTENSIONS OF TIME (FORCE MAJEURE)
 
1.                  CAUSES OF DELAY
 
If, at any time after signing this CONTRACT, either the construction or delivery of the VESSEL or any performance required hereunder as a prerequisite to the delivery thereof is delayed by any of the following events; namely war, acts of state or government, blockade, revolution, insurrections, mobilization, civil commotion, riots, general workers strikes, sabotage,  Acts of God or the public enemy, plague or other epidemics, quarantines, prolonged failure of electric current, freight embargoes, or defects in major forgings or castings, or delays in the BUYER’s supplies as stipulated in Article XII, if any, or or defects in materials, machinery or equipment which could not have been detected by the BUILDER using reasonable care or earthquakes, tidal waves, typhoons, hurricanes, prolonged or unusually severe weather conditions or by destruction of the premises or works of the BUILDER or its sub-contractors, or of the VESSEL, or any part thereof, by fire, landslides, flood, lightning, explosion or the BUILDER’s performance under the CONTRACT, or delays caused by the CLASSIFICATION SOCIETY or the BUYER’s faulty action or omission, or other causes beyond the control of the BUILDER, or its sub-contractors, as the case may be, or for any other causes which, under the terms of this CONTRACT, authorise and permit extension of the time for delivery of the VESSEL, then, in the event of delays due to the happening of any of the aforementioned contingencies, the DELIVERY DATE of the VESSEL under this CONTRACT shall be extended for a period of time which shall not exceed the total accumulated time of all such delays.
 
The BUILDER shall have used reasonable efforts to mitigate the duration and effects of such events of the construction schedule.
 
2.                  NOTICE OF DELAYS
 
As soon as practicably possible after commencement of any delay but not later than fourteen (14) days on account of which the BUILDER claims that it is entitled under this CONTRACT to an extension of the DELIVERY DATE of the VESSEL, excluding delays due to arbitration, the BUILDER shall advise the BUYER in writing or by facsimile of the date such delay commenced, the reasons thereof and, if possible, its estimated duration of the probable delay in the delivery of the VESSEL, and shall supply the BUYER if reasonably available with evidence to justify the delay claimed. Within fourteen (14) days after such delay ends, the BUILDER shall likewise advise the BUYER in writing or by
 
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facsimile of the date that such delay ended, and also, shall specify the period of time by which the BUILDER claims the DELIVERY DATE should be extended by reason of such delay. Failure of the BUYER to object to the BUILDER’s notification of any claim for extension of the date for delivery of the VESSEL within fourteen (14) days after receipt by the BUYER of such notification shall be deemed to be a waiver by the BUYER of its right to object to such extension.
 
3.                  RIGHT TO RESCIND FOR EXCESSIVE DELAY
 
If the total accumulated time of all permissible and non-permissible delays, excluding delays due to (i) arbitration under Article XIV, (ii) the BUYER’s defaults under Article XI, (iii) modifications and changes under Article V or (iv) delays or defects in the BUYER’s supplies as stipulated in Article XII, aggregates two hundred and forty (240) days or more, then, the BUYER may, at any time thereafter, rescind this CONTRACT by giving a written notice of rescission to the BUILDER. Such rescission shall be effective as of the date the notice thereof is received by the BUILDER.
 
If the BUYER has not served the notice of rescission as provided in the above or Article III.1. hereof, the BUILDER may, at any time after expiration of the accumulated time of the delay in delivery, either two hundred and forty (240) days in case of the delay in this Paragraph or two hundred and ten (210) days in case of the delay in Article III.1, notify the BUYER of the future date upon which the BUILDER estimates the VESSEL will be ready for delivery and demand in writing or by facsimile that the BUYER make an election either to rescind this CONTRACT or to consent to the delivery of the VESSEL at such future date, in which case the BUYER shall, within fourteen(14) days after receipt of such demand, make and notify the BUILDER of such election. If the BUYER elects to consent to the delivery of the VESSEL at such future date (or other future date as the parties may agree):
 
(a)             Such future date shall become the contractual delivery date for the purposes of this CONTRACT and shall be subject to extension by reason of permissible delays as herein provided, and
 
(b)            If the VESSEL is not delivered by such revised contractual delivery date (as extended by reason of permissible delays), the BUYER shall have the same right of rescission upon the same terms as provided in the above and Article III. 1.
 
If the BUYER shall not make an election within fourteen(14) days as provided hereinabove, the BUYER shall be deemed to have accepted such extension of the DELIVERY DATE to
 
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the future delivery date indicated by the BUILDER.
 
4.               DEFINITION OF PERMISSIBLE DELAYS
 
Delays on account of the foregoing causes shall be understood to be permissible delays, and are to be distinguished from non-permissible unauthorised delays on account of which the CONTRACT PRICE of the VESSEL is subject to adjustment as provided in Article III hereof.
 
(End of Article)
 
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ARTICLE IX : WARRANTY OF QUALITY
 
1.                  GUARANTEE OF MATERIAL AND WORKMANSHIP
 
The BUILDER, for the period of twelve (12) months from the date of delivery of the VESSEL to the BUYER, guarantees the VESSEL and her engine and all parts and equipment thereof that are manufactured or furnished by the BUILDER under this CONTRACT against all defects which are directly due to faulty design, defective materials, construction miscalculation and/or poor workmanship, or negligent or other improper acts or omissions on the part of the BUILDER or its subcontractors provided such defects have not been caused by perils of the sea, rivers or navigations, or by normal wear and tear, overloading, improper loading or stowage, corrosion of the materials other than related to lack of maintenance, fire, accidents at sea or elsewhere, or by incompetence, mismanagement, negligence or wilful neglect or any alteration or addition to the VESSEL which has not previously been approved by the BUILDER.
 
The BUILDER will be responsible for all machinery or parts of machinery and all constructions which are supplied by sub-contractors and will guarantee the above mentioned for a period of twelve (12) months on the basis as laid down in this Paragraph. Upon rectification of an item claimed under this guarantee, this item shall be covered for further twelve (12) months under the same terms and conditions. However, this is limited to a maximum of Eighteen (18) months from Delivery Date.
 
2.                  NOTICE OF DEFECTS
 
The BUYER or its duly authorised representative will notify the BUILDER in writing or by facsimile promptly after discovery of any defect for which a claim is to be made under this guarantee.
 
The BUYER’s written notice shall include full particulars as to the nature of the defect and the extent of the damage caused thereby, but excluding consequential damage as hereinafter provided. The BUILDER will be under no obligation with respect to this guarantee in respect of any claim for defects discovered prior to the expiry date of the guarantee, unless notice of such defects is received by the BUILDER before the expiry date. However, facsimiled advice received by the BUILDER within seven (7) days after such expiry date that a claim is forthcoming will be sufficient compliance with the requirement as to time,
 
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provided that such facsimiled advice shall include at least a brief description of the defect including the identity of the equipment, extent of damage, name and number of any replacement part and description of any remedial work required, and that full particulars are given to the BUILDER not later than fourteen (14) days after the expiry date.
 
3.                  REMEDY OF DEFECTS
 
(a)              The BUILDER shall remedy, at its expense, any defects, against which the VESSEL is guaranteed under this Article, by making all necessary and reasonably practicable repairs or replacements at the SHIPYARD or elsewhere as provided for in (b) hereinbelow.
 
In such case, the VESSEL shall be taken at the BUYER’s cost and responsibility to the place selected, ready in all respects for such repairs or replacements and in any event, the BUILDER shall not be responsible for towage
 
(b)            However, BUYER should determine and prove if it is commercially and/or operationally impractical (which shall include, but not be limited to, an emergency) to bring the VESSEL to the SHIPYARD, the BUYER may cause the necessary repairs or replacements to be made elsewhere which is deemed by the BUYER with the consent of the BUILDER which shall not be unreasonably withheld, to be suitable for the purpose, provided that, in such event, the BUILDER may forward or supply replacement parts or materials under the terms described in (c) hereinbelow, unless forwarding or supplying thereof under the terms described in (c) hereinbelow would impair or delay the operation or working schedule of the VESSEL. In the event that the BUYER proposes to cause the necessary repairs or replacements to be made to the VESSEL at any shipyard or works other than the SHIPYARD, the BUYER shall first (but in all events as soon as reasonably possible) give the BUILDER notice in writing or by facsimile of the time and place such repairs will be made, and if the VESSEL is not thereby delayed, or her operation or working schedule is not thereby impaired, the BUILDER shall have the right to verify by its own representative(s) the nature and extent of the defects complained of. The BUILDER shall, in such case, promptly advise the BUYER by facsimile, after such examination has been completed, of its acceptance or rejection of the defects as ones that are covered by the guarantee herein provided. Upon the BUILDER’s acceptance of the defects as justifying remedy under this Article, or upon award of the arbitration so determining, the BUILDER shall compensate the BUYER an amount equal to the actual proven cost of making the same repairs or replacements.
 
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(c)             In the event that it is necessary for the BUILDER to forward a replacement for a defective part under this guarantee, replacement parts shall be shipped to the BUYER under the terms of CIF port of the country where vessel will be repaired.
 
(d)            The BUILDER reserves the option to retrieve, at the BUILDER’s cost, any of the replaced equipment/parts in case defects are remedied in accordance with the provisions in this Article.
 
(e)            Any dispute under this Article shall be referred to arbitration in accordance with the provisions of Article XIV hereof.
 
4.                  EXTENT OF THE BUILDER’S LIABILITY
 
(a)             After delivery of the VESSEL the responsibility of the BUILDER in respect of and/or in connection with the VESSEL and/or this CONTRACT shall be limited to the extent expressly provided in the Paragraphs of this Article. Except as expressly provided in the Paragraphs of this Article, in no circumstances and on no ground whatsoever shall the BUILDER have any responsibility or liability whatsoever or howsoever arising in respect of or in connection with the VESSEL or this CONTRACT after the delivery of the VESSEL. Further, but without in any way limiting the generality of the foregoing, the BUILDER shall have no liability or responsibility whatsoever or howsoever arising for or in connection with any consequential or special losses, damages or expenses (including but not limited to loss of time, loss of profit or earnings or demurrage directly or indirectly caused), any pecuniary loss or expense, any liability to any third party or any fine, compensation, penalty or other payment or sanction incurred by or imposed upon the BUYER or any other party whatsoever in relation to or in connection with this CONTRACT or the VESSEL.
 
(b)            The BUILDER shall be under no obligation with respect to defects in respect of which the BUILDER has not received notice in accordance with Paragraph 2 of this Article by the expiry date of the guarantee specified in Paragraph 1, nor in any event shall the BUILDER be liable for any worsening of the defects after the expiry date of the guarantee.
 
(c)             The BUILDER shall under no circumstances be liable for defects in the VESSEL or any part of equipment thereof caused by perils of the sea, rivers or navigations, or by normal wear and tear, overloading, improper loading or stowage, corrosion of the
 
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materials other than related to lack of maintenance, fire, accidents at sea or elsewhere, or by incompetence, mismanagement, negligence or wilful neglect or any alteration or addition on the part of the BUYER, its employees or agents or any other person on or doing work on the VESSEL, including the VESSEL’s officers, crew and passengers. Likewise, the BUILDER shall not be liable for defects in the VESSEL or any part of equipment thereof that are due to repairs carried out by any other than the BUILDER or which have not been carried out in accordance with the procedure set out in Paragraph 3 (b) of this Article.
 
(d)            The BUILDER shall not be obliged to repair, not be liable for, damage to the VESSEL or any part of the equipment thereof, which after delivery of the VESSEL, is caused other than by the defects of the nature specified in this Article. The guarantees contained as hereinabove in this Article replace and exclude any other liability, guarantee, warranty and/or condition imposed or implied by statute, common law, custom, contract (including this CONTRACT) or otherwise on the part of the BUILDER by reason of the construction and sale of the VESSEL for and to the BUYER or for any other reason whatsoever.
 
5.                        GUARANTEE ENGINEER
 
The BUILDER shall have the right to appoint a Guarantee Engineer to serve on the VESSEL as its representative for a period of Three (3) months from the date the VESSEL is delivered. However, if the BUYER and the BUILDER shall deem it necessary to keep the Guarantee Engineer on the VESSEL for a longer period, then he shall remain on board the VESSEL after the said Three (3) months, but not longer than Six (6) months from the delivery of the VESSEL.
 
The BUYER, and its employees, shall give such Guarantee Engineer full cooperation in carrying out his duties as the representative of the BUILDER on board the VESSEL.
 
The Guarantee Engineer shall sign BUYER’s Indemnity Forms and shall at all times deemed to be an employee of the BUILDER.
 
The BUYER shall accord the Guarantee Engineer treatment comparable to the VESSEL’s Chief Engineer, and shall provide board and lodging at no cost to the BUILDER and/or the Guarantee Engineer.
 
While the Guarantee Engineer is on board the VESSEL, the BUYER shall pay to the BUILDER the sum of United States Dollars Six Thousand and Five Hundred (US$ 6,500.-) per month as a compensation for a part of cost and charges to be borne by the BUILDER in connection with Guarantee Engineer and also shall pay the expenses of his repatriation to
 
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Korea by air upon termination of his service, the expenses of his communication with the BUILDER incurred in performing his duties and expenses, if any, of his medical and hospital care in the VESSEL’s hospital.
 
Pertaining to the detailed particulars of this Paragraph, an agreement will be made according to this effect between the parties hereto upon delivery of the VESSEL.
 
(End of Article)
 
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ARTICLE X : PAYMENT
 
1.                  CURRENCY
 
All payments under this CONTRACT shall be made in United States Dollars.
 
2.                  TERMS OF PAYMENT
 
The payments of the CONTRACT PRICE shall be made as follows :
 
(a)             First Instalment
 
Twenty per cent (20 %) of the CONTRACT PRICE amounting to U.S.Dollars Eighteen Million Three Hundred Thousand only (US$ 18,300,000.-) shall be paid within three (3) business days after receipt by the BUYER of the original of the Refund Guarantee specified in Paragraph 8 of this Article.
 
Under this CONTRACT, in counting the business days, only Saturdays and Sundays are excepted. When a due date falls on a day when banks are not open for business in New York, N.Y., U.S.A., such due date shall fall due upon the first business day next following.
 
(b)            Second Instalment
 
Twenty per cent (20%) of the CONTRACT PRICE amounting to U.S.Dollars Eighteen Million Three Hundred Thousand only (US$ 18,300,000.-) shall be paid within three (3) business days of receipt by the Buyer of a facsimiled advice from the BUILDER that steel cutting has been commenced.
 
(c)             Third Instalment
 
Ten per cent (10%) of the CONTRACT PRICE amounting to U.S.Dollars Nine Million One Hundered Fifty Thousand only (US$ 9,150,000.-) shall be paid within three (3) business days of receipt by the BUYER of a facsimiled advice from the BUILDER that the first block of the keel has been laid.
 
33

 
(d)            Fourth Instalment
 
Ten per cent (10%) of the CONTRACT PRICE amounting to U.S.Dollars Nine Million One Hundred Fifty Thousand only (US$ 9,150,000-) shall be paid within three (3) business days of receipt by the BUYER of a facsimiled advice from the BUILDER that the launching of the VESSEL has been completed.
 
(f)               Fifth Instalment
 
Forty per cent (40%) of the CONTRACT PRICE amounting to U.S.Dollars Thirty Six Million Six Hundred Thousand only (US$ 36,600,000.-) plus or minus any increase or decrease due to modifications and/or adjustment, if any, arising prior to delivery of the VESSEL of the CONTRACT PRICE under Articles III and V of this CONTRACT shall be paid to the BUILDER concurrently with the delivery of the VESSEL. (The date stipulated for payment of each of the five instalments mentioned above is hereinafter in this Article and in Article XI referred to as the “DUE DATE” of that instalment).
 
It is understood and agreed upon by the BUILDER and the BUYER that all payments under the provisions of this Article shall not be delayed or withheld by the BUYER due to any dispute or disagreement of whatsoever nature arising between the BUILDER and the BUYER. Should there be any dispute in this connection, the matter shall be dealt with in accordance with the provisions of arbitration in Article XIV hereof. Expenses for remitting payments and any other expenses connected with such payments shall be for the account of the BUYER.
 
3.                  DEMAND FOR PAYMENT
 
At least fourteen (14) days prior to the date of each event provided in Paragraph 2 of this Article on which any payment shall fall due hereunder, with the exception of the payment of the first and second instalments, the BUILDER shall notify the BUYER by facsimile of the date such payment shall become due.
 
The BUYER shall immediately acknowledge receipt of such notification by facsimile to the BUILDER, and make payment as set forth in this Article. If the BUILDER fails to receive the BUYER’s said acknowledgement within three (3) days after sending the aforementioned notification, the BUILDER shall promptly facsimile to the BUYER a second notification of similar import. The BUYER shall immediately acknowledge by facsimile receipt of the
 
34

 
foregoing second notification regardless of whether or not the first notification was acknowledged as aforesaid.
 
4.                  METHOD OF PAYMENT
 
(a)            All the pre-delivery payments and the payment due on delivery in settlement of the CONTRACT PRICE as provided for in Paragraph 2 of this Article shall be made in U.S. Dollars on or before the DUE DATE thereof by telegraphic transfer as follows ;
 
(i)                                     The payment of the first, second, third and fourth instalments shall be made to the account of the BUILDER with a bank to be duly designated by the BUILDER, in Korea (the “BUILDER’S BANK”) or any other bank by telegraphic transfer remittance at least two(2) business days prior to the DUE DATE notified by the BUILDER.
 
(ii)                                  The fifth instalment as provided for in Paragraph 2.(f) of this Article shall be deposited at the BUILDER’S BANK in the name of the Buyer or, if the BUILDER requires, with any other bank in the name of the Byuer by telegraphic transfer remittance at least two (2) business days prior to the scheduled delivery date of the VESSEL notified by the BUILDER, with instructions that the said instalment is payable to the BUILDER against presentation by the BUILDER to the BUILDER’S BANK or any other bank, as the case may be, of a duplicate original copy of the PROTOCOL OF DELIVERY AND ACCEPTANCE of the VESSEL signed by the BUILDER and the BUYER.
 
(b)            Simultaneously with each of such payments, the BUYER shall advise the BUILDER of the details of the payments by facsimile and at the same time, the BUYER shall cause the BUYER’s remitting Bank to advise the BUILDER’S BANK or any other bank of the details of such payments by authenticated bank cable or telex.
 
5.                  REFUND BY THE BUILDER
 
The payments made by the BUYER to the BUILDER prior to delivery of the VESSEL shall constitute advances to the BUILDER. If the VESSEL is rejected by the BUYER in accordance with the terms of this CONTRACT, or except in the case of rescission or rescission of this CONTRACT by the BUILDER under the provisions of Article XI hereof,
 
35

 
if the BUYER terminates or rescinds this CONTRACT pursuant to any of the provisions of this CONTRACT specifically permitting the BUYER to do so, the BUILDER shall forthwith refund to the BUYER, in U.S. Dollars, the full amount of total sums paid by the BUYER to the BUILDER in advance of delivery together with interest thereon as herein provided.
 
The transfer and other bank charges of such refund shall be for the BUILDER’s account. The interest rate of the refund, as above provided, shall be seven per cent (7%) per annum from the date following the date of receipt by the BUILDER of the pre-delivery instalment(s) to the date of remittance by telegraphic transfer of such refund, provided, however, that if the cancellation of this CONTRACT by the BUYER is based upon delays due to force majeure or other causes beyond the control of the BUILDER as provided for in Article VIII hereof, then in such event, the interest rate of refund shall be reduced to six point five per cent (6.5%) per annum.
 
It is hereby understood by both parties that payment of any interest provided herein is by way of liquidated damages due to rescission of this CONTRACT and not by way of compensation for use of money.
 
If, the BUILDER is required to refund to the BUYER the instalments paid by the BUYER to the BUILDER as provided in this Paragraph, the BUILDER shall return to the BUYER all of the BUYER’s supplies as stipulated in Article XII which were not incorporated into the VESSEL and pay to the BUYER an amount equal to the cost to the BUYER of those supplies incorporated into the VESSEL.
 
6.                  TOTAL LOSS
 
If there is a total loss or a constructive total loss of the VESSEL prior to delivery thereof, the BUILDER shall proceed according to the option of the Buyer hereto either:
 
(a)             to build another vessel in place of the VESSEL so lost and deliver it under this CONTRACT to the BUYER, provided that the parties hereto shall have agreed in writing to a reasonable cost and time for the construction of such vessel in place of the lost VESSEL; or
 
(b)            to refund to the BUYER the full amount of the total sums paid by the BUYER to the BUILDER under the provisions of Paragraph 2 of this Article together with interest thereon at the rate of six point five per cent (6.5%) per annum from the date following
 
36

 
the date of receipt by the BUILDER of such pre-delivery instalment(s) to the date of payment by the BUILDER to the BUYER of the refund.
 
If the parties hereto fail to reach such agreement within two (2) months after the VESSEL is determined to be a total loss or constructive total loss, the provisions of (b) hereinabove shall be applied.
 
7.                  DISCHARGE OF OBLIGATIONS
 
Such refund as provided in the foregoing Paragraphs 5 and 6 by the BUILDER to the BUYER shall forthwith discharge all the obligations, duties and liabilities of each of the parties hereto to the other except the claims of the BUILDER against the BUYER, if any, under this CONTRACT. Any and all refunds or payments due to the BUYER under this CONTRACT shall be effected by telegraphic transfer to the account specified by the BUYER.
 
8.                  REFUND GUARANTEE
 
The BUILDER shall deliver to the BUYER by hard copy or by SWIFT through the BUYER’s bank, acceptable to the BUILDER, an assignable letter of guarantee issued by a Bank acceptable to the Buyer as soon as possible but in any case no later than Ninety (90) days from the date of this CONTRACT for the refund of the pre-delivery instalments plus interest as aforesaid to the BUYER under or pursuant to Paragraph 5 above in the form annexed hereto as Exhibit “A”. All expenses in issuing and maintaining the letter of guarantee described in this Paragraph shall be borne by the BUILDER. In case of SWIFT, the BUYER shall advise the BUILDER of the details of the BUYER’s bank including the SWIFT address upon execution of this CONTRACT.
 
9.                  PERFORMANCE GUARANTEE
 
Upon signing this CONTRACT, the BUYER shall provide the BUILDER with an irrevocable and Corporate Guarantee pursuant to the Terms and Provisions of this Contract issued by a Corporate Guarantor acceptable to the BUILDER for the due and faithful performance by the BUYER of all its liabilities and responsibilities under the CONTRACT including, but not limited to, the payment of the CONTRACT PRICE and taking delivery of the VESSEL, in the form annexed hereto as Exhibit “B”.
 
(End of Article)
 
37

 
ARTICLE XI : BUYER’S DEFAULT
 
1.                  DEFINITION OF DEFAULT
 
The BUYER shall be deemed to be in default under this CONTRACT in the following cases :
 
(a)             If the first, second, third and fourth instalment is not paid to the BUILDER within respective Three (3) banking days of such instalments; or
 
(b)            If the fifth instalment is not deposited at the BUILDER’S BANK or at the account of the BUILDER with any other bank in accordance with Article X.4.(a)(ii) hereof or if the said fifth instalment deposit is not released to the BUILDER against presentation by the BUILDER of a duplicate original copy of the PROTOCOL OF DELIVERY AND ACCEPTANCE; or
 
(c)             If the BUYER fails to take delivery of the VESSEL when the VESSEL is duly tendered for delivery by the BUILDER within Three (3) banking days under the provisions of Article VII hereof; or
 
(d)            If and order or an effective resolution shall be passed for winding up of the BUYER (except for the purpose of reorganization, merger or amalgamation); or
 
(e)             If the BUYER fails to be in punctual, due and full compliance with any of its obligations under this CONTRACT.
 
In case the BUYER is in default of any of its obligations under this CONTRACT, the BUILDER is entitled to and shall have the following rights, powers and remedies in addition to such other rights, powers and remedies as the BUILDER may have elsewhere in this CONTRACT and/or at law, at equity or otherwise.
 
2.                  EFFECT OF THE BUYER’S DEFAULT ON OR BEFORE THE DELIVERY OF THE VESSEL
 
If the BUYER shall be in default as provided in Paragraph 1 above of its obligations under this CONTRACT, then;
 
38

 
(a)             The DELIVERY DATE of the VESSEL shall be extended automatically for the actual period of such default and the BUILDER shall not be obliged to pay any liquidated damages for the delay in delivery of the VESSEL caused thereby.
 
(b)            The BUYER shall pay to the BUILDER interest at the rate of seven per cent (7%) per annum in respect of the instalment(s) in default from the respective DUE DATE to the date of actual receipt by the BUILDER of the full amount of such instalment(s).
 
(c)             If the BUYER is in default in payment of any of the instalment(s) due and payable prior to or simultaneously with the delivery of the VESSEL, the BUILDER shall, in writing or by facsimile, notify the BUYER to that effect, and the BUYER shall, upon receipt of such notification, forthwith acknowledge in writing or by facsimile to the BUILDER that such notification has been received.
 
(d)            If any of the BUYER’s default continues for a period of ten(10) days after the BUILDER’s notification to the BUYER of such default, the BUILDER may, at its option, rescind this CONTRACT by serving upon the BUYER a written notice or a facsimile notice of rescission confirmed in writing.
 
(e)            In the event of such rescission by the BUILDER of this CONTRACT due to the BUYER’s default as provided for in paragraph 1 above, the BUILDER shall be entitled to retain and apply the instalments already paid by the BUYER to the recovery of the BUILDER’s loss and damage including, but not being limited to, reasonable estimated profit due to the BUYER’s default and the rescission of this CONTRACT and at the same time the BUILDER shall have the full right and power either to complete or not to complete the VESSEL which is the sole property of the BUILDER as it deems fit, and to sell the VESSEL at a public or private sale on such terms and conditions as the BUILDER thinks fit without being answerable for any loss or damage.
 
The proceeds received by the BUILDER from the sale shall be applied in addition to the instalment(s) retained by the BUILDER as mentioned hereinabove as follows : -
 
First,                            in payment of all reasonable costs and expenses of the sale of the VESSEL, including interest thereon at seven per cent (7%) per annum from the respective date of payment of such costs and expenses aforesaid to the date of sale on account of the BUYER’s default.
 
39

 
Second,            if the VESSEL has been completed, in or towards satisfaction of the unpaid balance of the CONTRACT PRICE, to which shall be added the cost of all additional work and extras agreed by the BUYER including interest thereon at seven per cent (7%) per annum from the respective DUE DATE of the instalment in default to the date of sale, or if the VESSEL has not been completed, in or towards satisfaction of the unpaid amount of the cost incurred by the BUILDER prior to the date of sale on account of construction of the VESSEL, including work, labour, materials and reasonably estimated profit which the BUILDER would have been entitled to receive if the VESSEL had been completed and delivered plus interest thereon at seven per cent (7%) per annum from the respective DUE DATE of the instalment in default to the date of sale.
 
Third,                       the balance of the proceeds, if any, shall belong to the BUYER, and shall forthwith be paid over to the BUYER by the BUILDER.
 
In the event of the proceeds from the sale together with instalment(s) retained by the BUILDER being insufficient to pay the BUILDER, the BUYER shall be liable for the deficiency and shall pay the same to the BUILDER upon its demand.
 
(End of Article)
 
40

 
ARTICLE XII : BUYER’S SUPPLIES
 
1.                  RESPONSIBILITY OF THE BUYER
 
The BUYER shall, at its own risk, cost and expense, supply all the BUYER’s supplies as specified in Paragraph 0.16.1 of the SPECIFICATIONS (hereinafter called the “BUYER’S SUPPLIES”), to the BUILDER at the SHIPYARD in proper condition ready for installation and in accordance with the time schedule to be furnished by the BUILDER sixty (60) days from signing this Contract.
 
In order to facilitate the installation of the BUYER’S SUPPLIES by the BUILDER, the BUYER shall furnish the BUILDER with the necessary plans, instruction books, test report and all test certificates required by the BUILDER and shall cause the representative(s) of the makers of the BUYER’S SUPPLIES to give the BUILDER any advice, instructions or assistance which the BUILDER may reasonably require in the installation or adjustment thereof at the SHIPYARD, all without cost or expense to the BUILDER.
 
The BUYER shall be liable for any expense incurred by the BUILDER for repair of the BUYER’S SUPPLIES due to defective design or materials, poor workmanship or performance or due to damage in transit and the DELIVERY DATE of the VESSEL shall be extended for the period of such repair if such repair shall affect the delivery of the VESSEL.
 
Commissioning into good order of the BUYER’S SUPPLIES during and after installation on board shall be made at the BUYER’s expense by the representative of respective maker or the person designated by the BUYER in accordance with the BUILDER’s building schedule.
 
Should the BUYER fail to deliver to the BUILDER the BUYER’S SUPPLIES and the necessary document or advice for such supplies within the time specified by the BUILDER, the DELIVERY DATE of the VESSEL shall automatically be extended for the period of such delay if such delay in delivery shall affect the delivery of the VESSEL. In such event, the BUYER shall pay to the BUILDER all losses and damages sustained by the BUILDER due to such delay in the delivery of the BUYER’S SUPPLIES and such payment shall be made upon delivery of the VESSEL, provided, however, that the BUILDER shall have :
 
41

 
(a)             furnished the BUYER with the time schedule referred to above, two (2) months prior to installation of the BUYER’S SUPPLIES and
 
(b)            given the BUYER written notice of any delay in delivery of the BUYER’S SUPPLIES and the necessary document or advice for such supplies as soon as the delay occurs which might give rise to a claim by the BUILDER under this Paragraph.
 
Furthermore, if the delay in delivery of the BUYER’S SUPPLIES and the necessary document or advice for such supplies should exceed twenty (20) days from the date specified by the BUILDER, the BUILDER shall be entitled to proceed with construction of the VESSEL without installation of such items (regardless of their nature or importance to the BUYER or the VESSEL) in or on the VESSEL without prejudice to the BUILDER’s right hereinabove provided, and the BUYER shall accept the VESSEL so completed.
 
2.                  RESPONSIBILITY OF THE BUILDER
 
The BUILDER shall be responsible for storing, safekeeping and handling with reasonable care of the BUYER’S SUPPLIES which the BUILDER is required to install on board the VESSEL under Paragraph 0.16.1 of the SPECIFICATIONS after delivery of such supplies to the SHIPYARD, and shall install such supplies on board the VESSEL at the BUILDER’s expense unless otherwise specified in the SPECIFICATIONS.
 
However, the BUILDER shall not be responsible for the quality, performance or efficiency of any equipment included in the BUYER’S SUPPLIES and is under no obligation with respect to the guarantee of such equipment against any defects caused by poor quality, performance or efficiency of the BUYER’S SUPPLIES. If any of the BUYER’S SUPPLIES is lost or damaged while in the custody of the BUILDER, the BUILDER shall, if the loss or damage is due to wilful default or negligence on its part, be responsible for such loss or damage.
 
(End of Article)
 
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ARTICLE XIII - INSURANCE
 
1.                           EXTENT OF INSURANCE COVERAGE
 
From the time of launching until delivery of the VESSEL, the BUILDER shall, at its own cost and expense, insure the VESSEL and all machinery and equipment, appurtenances and outfits, including the BUYER’s Supplies, built into or installed in or upon the VESSEL, against all risks under the “Institute Causes for BUILDER’s Risk”, with first class insurance company or underwriters in.
 
The amount of such insurance coverage shall, up to the date of delivery of the VESSEL, not be less than the aggregate amount of all instalments paid by the BUYER to the BUILDER, plus the value of the BUYER’s Supplies in the custody of the Shipyard.
 
The BUILDER shall provide the copy of corresponding insurance coverage of the VESSEL to the BUYER.
 
2.                           TERMINATION OF BUILDER’S OBLIGATION TO INSURE
 
The BUILDER shall be under no obligation to insure the VESSEL hereunder after delivery and acceptance of the VESSEL.

(End of Article)
 
43

 
ARTICLE XIV: ARBITRATION
 
1.                  APPOINTMENT OF THE ARBITRATOR
 
If any dispute or difference shall arise between the parties hereto concerning any matter or thing herein contained, or the operation or the design and / or construction of the VESSEL, its machinery and equipment thereof, or any matter or thing in any way connected with this CONTRACT or the rights, duties or liabilities of either party under or in connection with this CONTRACT, then, in every such case, the dispute or difference shall be referred to arbitration in London by a sole arbitrator. The arbitrator shall be appointed by agreement within fourteen (14) days of first written notification of either party to the other of intention to arbitrate such dispute or difference, or in default of such agreement, upon the application of either of the parties, by the President for the time being of the London Maritime Arbitrators Association who shall in making any such appointment have due regard to the requirement for an expeditious resolution of the dispute and in particular the availability of any arbitrator so appointed for an early hearing date.
 
2.                  LAWS APPLICABLE
 
Any arbitration arising hereunder shall be governed by and construed in accordance with the Arbitration Act 1996 of England or any statutory modification or re-enactments thereof for the time being in force. The award of the arbitrator shall be final and binding upon parties hereto.
 
3.                  PROCEEDINGS
 
In the event of any dispute or difference arising or occurring prior to delivery to, or acceptance by, the BUYER of the VESSEL being referred to arbitration, the parties hereby acknowledge that time is of the essence in obtaining an award from the arbitrator on such dispute or difference and the parties hereby agree that the arbitration shall be conducted according to the following timetable:
 
(a)            The claimant in the arbitration to serve points of claim within fourteen (14) days of the appointment of the arbitrator.
 
(b)           The respondent in the arbitration to serve points of defence and points of counterclaim,
 
44

 
if any, within fourteen (14) days thereafter.
 
(c)         The claimant to serve points of reply and defence to counterclaim, if any, within seven (7) days thereafter and the hearing of the arbitration to commence within twelve (12) weeks of the appointment of the arbitrator.
 
4.                  ALTERATION OF DELIVERY OF THE VESSEL
 
In the event of the arbitration of any dispute or difference arising or occurring prior to delivery to, or acceptance by the BUYER of the VESSEL, the award by the arbitrator shall include a finding as to whether or not the contractual delivery date of the VESSEL should, as a result of such dispute, be in any way altered thereby.
 
5.                  NOTICE OF AWARD
 
The award shall immediately be given to the BUYER and the BUILDER by telefax.
 
6.                  EXPENSES
 
The Arbitration Board shall determine which party shall bear the expenses of the arbitration or the portion of such expenses which each party shall bear.
 
7.                  ENTRY IN COURT
 
In case of failure by either party to respect the award of the arbitration, the judgement may be entered in any proper court having jurisdiction thereof.
 
(End of Article)
 
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ARTICLE XV: SUCCESSORS AND ASSIGNS
 
The BUILDER agrees that, prior to delivery of the VESSEL, this CONTRACT may, with the prior written approval of the BUILDER, which the BUILDER shall not unreasonably withhold, be transferred to and the title thereof may be taken by another company. In the event of any assignment pursuant to the terms of this CONTRACT, the assignee, its successors and assigns shall succeed to all the rights and obligations of the BUYER under this CONTRACT. However, the BUYER shall remain responsible for performance by the assignee, its successors and assigns of all the BUYER’s obligations, liabilities and responsibilities under this CONTRACT. It is understood that any expenses or charges incurred due to the transfer of this CONTRACT shall be for the account of the BUYER.
 
The BUYER is hereby allowed to assign the Contract for the purposes of financing without BUILDER’S approval. However, the BUYER shall remain responsible for performance by the assignee, its successors and assigns of all the BUYER’s obligations, liabilities and responsibilities under this CONTRACT. It is understood that any expenses or charges incurred due to the transfer of this CONTRACT shall be for the account of the BUYER. The BUYER is further allowed to nominate a company controlled by the BUYER to take over the Contract.
 
The BUILDER shall fully cooperate in case the BUYER requests UK Tax lease financing arrangements. However, the BUYER shall remain responsible for performance by the assignee, its successors and assigns of all the BUYER’s obligations, liabilities and responsibilities under this CONTRACT. It is understood that any expenses or charges incurred due to the transfer of this CONTRACT shall be for the account of the BUYER.
 
The BUILDER shall have the right to assign this CONTRACT at any time after the effective date hereof, provided that prior written agreement is obtained from the BUYER.
 
(End of Article)
 
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ARTICLE XVI: TAXES AND DUTIES
 
1.                  TAXES
 
Unless otherwise expressly provided for in this CONTRACT, all costs and taxes including stamp duties, if any, incurred in or levied by any country except Korea in connection with this CONTRACT shall be borne by the BUYER and corresponding costs and taxes in Korea, before delivery of the VESSEL, if any, shall be borne by the BUILDER.
 
2.                  DUTIES
 
The BUILDER shall hold the BUYER harmless from any payment of duty imposed in Korea upon materials or supplies which, under the terms of this CONTRACT, or amendments thereto, may be supplied by the BUYER from abroad for the construction of the VESSEL.
 
The BUILDER shall likewise hold the BUYER harmless from any payment of duty imposed in Korea in connection with materials or supplies for operation of the VESSEL, including running stores, provisions and supplies necessary to stock the VESSEL for its operation. This indemnity does not, however, extend to any items purchased by the BUYER for use in connection with the VESSEL which are not absolutely required for the construction or operation of the VESSEL.
 
(End of Article)
 
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ARTICLE XVII: PATENTS, TRADEMARKS AND COPYRIGHTS
 
1.                  PATENTS, TRADEMARKS AND COPYRIGHTS
 
Machinery and equipment of the VESSEL, whether made or furnished by the BUILDER under this CONTRACT, may bear the patent numbers, trademarks, or trade names of the manufacturers. The BUILDER shall defend and save harmless the BUYER from all liabilities or claims for or on account of the use of any patents, copyrights or design of any nature or kind, or for the infringement thereof including any unpatented invention made or used in the performance of this CONTRACT and also for any costs and expenses of litigation, if any in connection therewith. No such liability or responsibility shall be with the BUILDER with regard to components and/or equipment and/or design supplied by the BUYER.
 
Nothing contained herein shall be construed as transferring any patent or trademark rights or copyrights in equipment covered by this CONTRACT, and all such rights are hereby expressly reserved to the true and lawful owners thereof.
 
2.                  RIGHTS TO THE SPECIFICATIONS, PLANS, ETC.
 
The BUILDER retains all rights with respect to the SPECIFICATIONS, plans and working drawings, technical descriptions, calculations, test results and other data, information and documents concerning the design and construction of the VESSEL and the BUYER shall not disclose the same or divulge any information contained therein to any third parties, including but not limited to any other shipbuilders, without the prior written consent of the BUILDER, excepting where it is necessary for usual operation, repair and maintenance of the VESSEL.
 
(End of Article)
 
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ARTICLE XVIII: INTERPRETATION AND GOVERNING LAW
 
This CONTRACT has been prepared in English and shall be executed in duplicate and in such number of additional copies as may be required by either party respectively. The parties hereto agree that the validity and interpretation of this CONTRACT and of each Article and part thereof shall be governed by the laws of England.
 
(End of Article)
 
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ARTICLE XIX : NOTICE
 
Any and all notices, requests, demands, instructions, advices and communications in connection with this CONTRACT shall be written in English, sent by registered air mail or facsimile and shall be deemed to be given when first received whether by registered mail or facsimile. They shall be addressed as follows, unless and until otherwise advised : -

To the BUILDER :	Sungdong Shipbuilding & Marine Engineering Co., Ltd.	
 	1609-2, Hwang-li, Gwangdo-myeon, Tongyoung-si,	
 	Gyeongnam, Korea	
 	 	
 	Contract Administration Department	
 	Attn : Mr. S. K. Ahn	
 	Facsimile: (82) 55 650 9294	
 	Telephone: (82) 55 650 9311	
 	 	
To the BUYER :	Danaos Shipping Co., Ltd.	
 	Akti Kondyli 14, 185 45 Piraeus, Greece	
 	Attn : Mr. Dimitrios Vastarouchas	
 	Facsimile : (30) 210 422 0855	
 	Telephone: (30) 210 419 6529	
 
The said notices shall become effective upon receipt of the letter or facsimile communication by the receiver thereof. Where a notice by facsimile is concerned which is required to be confirmed by letter, then, unless the CONTRACT or the relevant Article thereof otherwise requires, the notice shall become effective upon receipt of the facsimile.
 
(End of Article)
 
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ARTICLE XX : EFFECTIVENESS OF THIS CONTRACT
 
This CONTRACT shall become effective upon signing by the parties hereto.
 
(End of Article)
 
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ARTICLE XXI - INTERPRETATION
 
1.                           LAWS APPLICABLE
 
The parties hereto agree that the validity and interpretation of this Contract and of each Article and part thereof shall be governed by the laws of England.
 
2.                           DISCREPANCIES
 
All general language or requirements embodied in the SPECIFICATIONS are intended to amplify, explain and implement the requirements of this CONTRACT. However, in the event that any language or requirements so embodied permit of an interpretation inconsistent with any provisions of this Contract, then, in each and every such event, the applicable provisions of this Contract shall prevail and govern. In the event of conflict between the SPECIFICATIONS and Plans, the SPECIFICATIONS shall prevail and govern.
 
3.                           ENTIRE AGREEMENT
 
This Contract contains the entire agreement and understanding between the parties hereto and supersedes all prior negotiations, representations, undertaking and agreements on any subject matter of this Contract.
 
4.                           AMENDMENTS AND SUPPLEMENTS
 
Any supplement, memorandum of understanding or amendment, whatsoever form it may be relating to this CONTRACT, to be made and signed among parties hereof after signing this CONTRACT, shall be the integral part of this CONTRACT and shall be predominant over the respective corresponding Article and/or Paragraph of this CONTRACT.
 
The Contract can only be amended in writing.
 
(End of Article)
 
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ARTICLE XXII : EXCLUSIVENESS
 
This CONTRACT shall constitute the only and entire agreement between the parties hereto, and unless otherwise expressly provided for in this CONTRACT, all other agreements, oral or written, made and entered into between the parties prior to the execution of this CONTRACT shall be null and void.
 
(End of Article)
 
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IN WITNESS WHEREOF , the parties hereto have caused this CONTRACT to be duly executed on the date and year first above written.

BUYER	BUILDER	

For and on behalf of	For and on behalf of	
BOXCARRIER (NO.4) CORP.	SUNGDONG SHIPBUILDING &	
 	MARINE ENGINEERING CO.,LTD.	

By	/s/ John Coustas	 	By	/s/ Kwan Hong Yu	 	
Name: John Coustas	Name: Kwan Hong Yu	
Title:	Title:	
President & Chief Executive Officer	Chairman & Chief Executive Officer	

WITNESS : /s/ Heung Chul Jung, Attorney-in-fact	WITNESS: [Illegible]	

 
54

 
EXHIBIT “A”
 
LETTER OF REFUNDMENT GUARANTEE
 
Gentlemen :
 
We hereby issue our letter of guarantee no.             in favour of                    (hereinafter called the “BUYER”) for account of                    (hereinafter called the “BUILDER”) as follows in consideration of the shipbuilding contract dated (hereinafter called the “Contract”) made by and among the BUYER and the BUILDER for the construction of one(1) single screw diesel engine driven Container VESSEL having BUILDER’s Hull No. (hereinafter called the “VESSEL”).
 
If in connection with the terms of the Contract the BUYER shall become entitled to a refund of the advance payment(s) made to the BUILDER prior to the delivery of the VESSEL, we hereby irrevocably guarantee the repayment of the same to the BUYER immediately on demand being initially US$ (Say U.S. Dollars) together with interest thereon at the rate of Seven (7) percent per annum from the respective dates on which such sums were paid by the BUILDER to the date of remittance by telegraphic transfer of such refund.
 
The amount of this guarantee will be automatically increased, not more than three times, upon BUILDER’s receipt of the respective instalment: each time by the amount of instalment of US$ (Say U.S. Dollars), US$.- (Say U.S. Dollars) and US$.- (Say U.S. Dollars) respectively plus interest thereon as provided in the Contract, but in any eventuality the amount of this guarantee shall not exceed the total sum of US$.- (Say U.S. Dollars plus interest thereon at the rate of Seven (7) percent per annum from the respective dates on which such sums were paid by the BUYER to the BUILDER to the date of remittance by telegraphic transfer of the refund. However, in the event of cancellation of the CONTRACT being based on delays due to force majeure or other causes beyond the control of the BUILDER, the interest rate of refund shall be reduced to six point five per cent (6.5%) per annum as provided in Article X of the CONTRACT.
 
Our liability under this letter of guarantee shall not be affected by any alteration to or variation of the terms of the Contract you may hereafter agree with the BUILDER and by any other matter of circumstances, including bankruptcy or insolvency of the BUILDER, which might otherwise discharge our liability hereunder as guarantor of the BUILDER’s obligations as aforesaid.
 
In case any refund is made to you by the BUILDER or by us under this guarantee, our liability hereunder shall be automatically reduced by the amount of such refund.
 
This letter of guarantee is available against BUYER’s simple receipt and signed statement certifying that BUYER’s demand for refund has been made in conformity with Article X of the Contract and the BUILDER has failed to make the refund within Thirty One (31) days after BUYER’s demand to the BUILDER.
 
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Refund shall be made to BUYER by telegraphic transfer in United States Dollars to an account designated by you without deduction, withholding or set-off.
 
This letter of guarantee shall expire and become null and void upon receipt by the BUYER of the sum guaranteed hereby or upon acceptance by the BUYER of the delivery of the VESSEL in accordance with the terms of the Contract and, in either case, this letter of guarantee shall be returned to us. This guarantee is valid from the date of this letter of guarantee until or in the event of delayed delivery until such time as the VESSEL is delivered by the BUILDER to the BUYER in accordance with the terms of the Contract.
 
Notwithstanding the provisions hereinabove, in case we receive notification from you or the BUILDER confirmed by an Arbitrator stating that your claim to cancel the Contract or your claim for refundment thereunder has been disputed and referred to Arbitration in accordance with the provisions of the Contract, the period of validity of this guarantee shall be extended until Thirty (30) days after the final and non-appealable award shall be rendered in the Arbitration and a copy thereof acknowledged by the Arbitrators. In such case, this guarantee shall not be available unless and until such acknowledged copy of the final award in the Arbitration justifying your claim is presented to us.
 
Your rights in respect of this letter of guarantee are assignable from the date of this letter of guarantee until such time as the VESSEL is delivered by the BUILDER to the BUYER in accordance with the provisions of the Contract, on the understanding that you will notify us of the identity of any assignee of your rights under this letter of guarantee.
 
Any notice or demand under this letter of guarantee shall be given by facsimile and sent to:

 

 
or to such other address as we might notify to you in writing. A notice shall be deemed to be served and shall take effect 2 hours after its transmission is completed, provided that if a notice would be deemed to be served on a day which is not a business day, or which is a business day but after 5:00 p.m. local time, in the place of receipt, the notice shall be deemed to be served and shall take effect at 9:00 a.m. on the next day which is a business day.
 
This guarantee shall be governed by and construed in accordance with the Laws of England. Any disputes arising under this guarantee (but not any disputes arising under the Contract which shall be determined by arbitration in accordance with the terms of the Contract and as referenced in this letter of guarantee) shall be determined by the High Court of Justice in London to whose exclusive jurisdiction we hereby submit. We appoint
 
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                                                             as our agents for service of process in connection with any proceedings in such courts.
 
We each jointly and severally hereby represent and guarantee that we have the corporate power and authority to execute, deliver and perform the obligations under this letter of guarantee, and that such execution and performance will not violate or conflict with any provision of law, statute, rule, permit or regulation of any government, regulatory body, agency or other authority in the jurisdictions where we are subject to such laws and regulations.
 
IN WITNESS WHEREOF, we have hereunder set our hands and seal by our duly authorized representatives this           day of                , 2006.

 	Very truly yours,	

 	For and on behalf of	

 	 	
 	By	 	 	
 	Name :	
 	Title : Attorney-in-Fact	

 	For and on behalf of	

 	 	 	
 	By	 	 	
 	Name :	
 	Title : Attorney-in-Fact	
 
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EXHIBIT “B”

Date :             , 2006
 
PERFORMANCE GUARANTEE
 
In consideration of the performance of a certain shipbuilding contract dated                                        (hereinafter called the “Contract”) by having your Hull No. (hereinafter called the “VESSEL”) providing among other things for payment of the Contract Price amounting to United States Dollars                                    (US$                                  );
 
We, the undersigned, hereby irrevocably and unconditionally guarantee to you, your successors, and assigns the due and faithful performance by the BUYER of its all liabilities and responsibilities under the Contract and any supplement, amendment, change or modification hereafter made thereto, including but not limited to, due and prompt payment of the Contract Price by the BUYER to you, your successors, and assigns under the Contract and any supplement, amendment, change or modification as aforesaid (hereby expressly waiving notice of any such supplement, amendment, change or modification as may be agreed to by the BUYER and confirming that this guarantee shall be fully applicable to the Contract as so supplemented, amended, changed or modified).
 
This Performance Guarantee shall be governed by the laws of England.

GUARANTOR :	
BY :	 	 	
TITLE :	
WITNESS :	
 
4

 
Exhibit 10.31
 
SHIPBUILDING CONTRACT

FOR

THE CONSTRUCTION AND SALE OF
 
ONE (1) 6,500 TEU CLASS CONTAINER CARRIER

HULL NO. S4005

BETWEEN

BOXCARRIER (NO.5) CORP.

(AS BUYER)

AND

SUNGDONG SHIPBUILDING & MARINE ENGINEERING CO., LTD.
 
(AS BUILDER)

 
 
I N D E X

 	 	PAGE	
PREAMBLE	 	1	
 	 	 	
ARTICLE      I	: DESCRIPTION AND CLASS	2	
 	 	 	
 	II	: CONTRACT PRICE	5	
 	 	 	 	
 	III	: ADJUSTMENT OF THE CONTRACT PRICE	6	
 	 	 	 	
 	IV	: INSPECTION AND APPROVAL	10	
 	 	 	 	
 	V	: MODIFICATIONS, CHANGES AND EXTRAS	15	
 	 	 	 	
 	VI	: TRIALS AND COMPLETION	18	
 	 	 	 	
 	VII	: DELIVERY	22	
 	 	 	 	
 	VIII	: DELAYS AND EXTENSIONS OF TIME (FORCE MAJEURE)	25	
 	 	 	 	
 	IX	: WARRANTY OF QUALITY	28	
 	 	 	 	
 	X	: PAYMENT	33	
 	 	 	 	
 	XI	: BUYER’S DEFAULT	38	
 	 	 	 	
 	XII	: BUYER’S SUPPLIES	41	
 	 	 	 	
 	XIII	: INSURANCE	43	
 	 	 	 	
 	XIV	: ARBITRATION	44	
 	 	 	 	
 	XV	: SUCCESSORS AND ASSIGNS	46	
 	 	 	 	
 	XVI	: TAXES AND DUTIES	47	
 	 	 	 	
 	XVII	: PATENTS, TRADEMARKS AND COPYRIGHTS	48	
 	 	 	 	
 	XVIII	: INTERPRETATION AND GOVERNING LAW	49	
 	 	 	 	
 	XIX	: NOTICE	50	
 	 	 	 	
 	XX	:EFFECTIVENESS OF THIS CONTRACT	51	
 	 	 	 	
 	XXI	: INTERPRETATION	52	
 	 	 	 	
 	XXII	:EXCLUSIVENESS	53	
 
SCHEDULES
 
EXHIBIT “A”  REFUND GUARANTEE LETTER OF REFUNDMENT GUARANTEE
 
EXHIBIT “B”  PERFORMANCE GUARANTEE

 
SHIPBUILDING CONTRACT
 
THIS CONTRACT, made on this 26 day of July, 2006 by and between BOXCARRIER (NO.5) CORP. , a corporation incorporated and existing under the laws of Republic of Liberia with its registered office at 80 Broad Street, Monrovia, Liberia (hereinafter called the “BUYER”), the party of the first part and Sungdong Shipbuilding & Marine Engineering Co., Ltd., a company organized and existing under the laws of the Republic of Korea, having its registered office at 1609-2, Hwang-li, Gwangdo-myeon, Tongyoung-si, Gyeongnam, 650-827, Korea (hereinafter called the “BUILDER”), the party of the second part,
 
W I T N E S S E T H :
 
In consideration of the mutual covenants contained herein, the BUILDER agrees to design, build, launch, equip and complete in accordance with the Sung Dong Shipbuilding & Marine Engineering Quality Standard one (1) Single Screw Diesel Engine driven Container VESSEL as described in the Specifications as described in Article I hereof (hereinafter called the “VESSEL”) at the BUILDER’s yards in Korea (hereinafter called the “SHIPYARD”) and to deliver and sell the VESSEL to the BUYER, and the BUYER agrees to accept delivery of and purchase from the BUILDER the VESSEL, according to the terms and conditions hereinafter set forth :
 
(End of Preamble)
 
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ARTICLE I : DESCRIPTION AND CLASS
 
1.                         DESCRIPTION
 
The VESSEL shall have the BUILDER’s Hull No. S4005 and shall be built, constructed, equipped and completed in accordance with the specifications No. SD-DN-6500T.CN.FS-01 dated July 26, 2006 and the general arrangement plan No. SD-DN-6500T.CN.GA-01 dated July 26, 2006 attached thereto and the ‘Maker List’ No. SD-DN-6500T.CN.ML-01 dated July 26, 2006 (hereinafter called respectively the “SPECIFICATIONS” and the “PLAN”) signed by both parties, which shall constitute an integral part of this CONTRACT although not attached hereto.
 
The SPECIFICATIONS and the PLAN are intended to explain each other and anything shown on the PLAN and not stipulated in the SPECIFICATIONS or anything stipulated in the SPECIFICATIONS and not shown on the PLAN shall be deemed and considered as if included in both. Should there be any inconsistencies or contradictions between the SPECIFICATIONS and the PLAN, the SPECIFICATIONS shall prevail. Should there be any inconsistencies or contradictions between this CONTRACT and the SPECIFICATIONS, this CONTRACT shall prevail.
 
2.                         BASIC DIMENSIONS AND PRINCIPAL PARTICULARS OF THE VESSEL
 
(a)                    The basic dimensions and principal particulars of the VESSEL shall be :

Length, overall	about	300.0	 	M	
Length, between perpendiculars	286.6	 	M	
Breadth, moulded	40.0	 	M	
Depth to Upper Deck, moulded	24.2	 	M	
 	 	 	 	
Design draft, moulded, in seawater of specific gravity of 1.025	12.0	 	M	
Scantling draft, moulded, in seawater of specific gravity of 1.025	14.5	 	M	
 	 	 	 	
Deadweight guaranteed on the above moulded design draft of 12.0 M	59,000	 	M/T	
 
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Deadweight on the above moulded scantling draft of 14.5 M	83,300 	 	M/T	
 	 	 	 	
Main propulsion engine	MAN B&W 10K98MC-C	
 	MCR :	77,600 PS x 104 RPM	
 	NCR :	69,840 PS x 100.4 RPM	
 	
Speed guaranteed at 12.0meters design draft at the condition of clean bottom and in calm and deep sea with main engine developing a NCR of 69,840 PS with fifteen per cent (15%) sea margin	 	25.6 KNOTS	
 	 	 	
Specific Fuel consumption guaranteed of the main engine applying I.S.O. reference conditions to the result of official shop test at a MCR of 77,600 PS using marine fuel oil having lower calorific value of 10,200 Kcal per Kg.	 	126.0 gr/BHP.HR	

The details of the above particulars as well as the definitions and method of measurements and calculations are as indicated in the SPECIFICATIONS.
 
(b)                   All other vessels Hull Number S4002, S4003, S4004 and S4005 shall be built as identical sister ships unless a modification to a design is agreed upon.
 
3.                  CLASSIFICATION, RULES AND REGULATIONS
 
(a)             The VESSEL including its machinery, equipment and outfittings shall be built in compliance with the rules and regulations of Det Norske Veritas (hereinafter called the “CLASSIFICATION SOCIETY”), in force as of the date of this CONTRACT, to be classed and registered as +1A, CONTAINER CARRIER, EO, BIS, TMON, NAUTICUS (NEWBUILDING) and also to comply with the rules and regulations, in force as of the date of this CONTRACT, as described in the SPECIFICATIONS. Provided that the BUILDER shall have an option to declare the CLASSIIFICATION SOCIETY as either equivalent Lloyd Register of Shipping or Det Norske Veritas within three (3) month after signing of this CONTRACT.
 
(b)            The BUILDER shall arrange with the CLASSIFICATION SOCIETY for the assignment by the CLASSIFICATION SOCIETY of representative(s) to the VESSEL during
 
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construction. All fees and charges incidental to classification of the VESSEL in compliance with the above specified rules, regulations and requirements of this CONTRACT shall be for the account of the BUILDER.
 
(c)             The decision of the CLASSIFICATION SOCIETY as to whether the VESSEL complies with the regulations of the CLASSIFICATION SOCIETY shall be final and binding upon the BUILDER and the BUYER.
 
Details of its notation shall be in accordance with the SPECIFICATIONS.
 
The VESSEL shall also comply with the compulsory rules, regulations and requirements of the regulatory bodies as described in the SPECIFICATIONS rectified and in effect as of the signing date of this Contract. Non-compulsory rules, regulations and requirements of the regulatory bodies shall be dealt with in accordance with Article V (2) of this Contract.
 
All the fees and charges incidental to the classification and with respect to compliance with the above referred rules, regulations and requirements shall be for account of the BUILDER except otherwise agreed.
 
4.                  SUBCONTRACTING
 
The BUILDER may, at its sole discretion and responsibility, subcontract any portion of the construction work of the VESSEL, provided that the construction and assembly of the VESSEL shall be carried out as is normally done according to the BUILDER’s building practice and provided further that the BUILDER shall be responsible to the BUYER in respect of any construction work carried out by such subcontractors.
 
5.                  NATIONALITY OF THE VESSEL
 
The VESSEL shall be registered by the BUYER at its own cost and expense under the laws of either Greece or Cyprus or Bahamas or Marshall Islands or Panama or Liberia with its home port of either Piraeus or Limassol or Nassau or Majuro or Panama or Monrovia at the time of its delivery and acceptance hereunder provided that the BUYER may in its sole discretion declare the VESSEL’S flag and registration within four (4) months after the signing of the CONTRACT. In the case that the BUYER declares the VESSEL’S flag and registration to the Greece, the BUYER should pay the extra cost.
 
(End of Article)
 
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ARTICLE II : CONTRACT PRICE
 
The contract price of the VESSEL delivered to the BUYER at the SHIPYARD shall be United States Dollars Ninety One Million Five Hundred Thousand (US$ 91,500,000) (hereinafter called the “CONTRACT PRICE”) which shall be paid plus any increases or less any decreases due to adjustment or modifications, if any, as set forth in this CONTRACT. The above CONTRACT PRICE shall include payment for services in the inspection, tests, survey and classification of the VESSEL which will be rendered by the CLASSIFICATION SOCIETY and shall not include the cost of the BUYER’s supplies as stipulated in Article XII.
 
The CONTRACT PRICE also includes all costs and expenses for supplying all necessary drawings as stipulated in the SPECIFICATIONS except those to be furnished by the BUYER for the VESSEL in accordance with the SPECIFICATIONS.
 
(End of Article)
 
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ARTICLE III : ADJUSTMENT OF THE CONTRACT PRICE
 
The CONTRACT PRICE of the VESSEL shall be adjusted as hereinafter set forth in the event of the following contingencies. It is hereby understood by both parties that any adjustment of the CONTRACT PRICE as provided for in this Article is by way of liquidated damages and not by way of penalty.
 
1.                  DELAYED DELIVERY
 
(a)             No adjustment shall be made and the CONTRACT PRICE shall remain unchanged for the first thirty (30) days of the delay in delivery of the VESSEL [ending as of 12 o’clock midnight Korean Standard Time on the thirtieth (30th) day of delay] beyond the Delivery Date calculated as provided in Article VII.1. hereof.
 
(b)            If delivery of the VESSEL is delayed more than thirty (30) days beyond the date upon which the delivery is due from the BUILDER under the terms of this CONTRACT, then, beginning at midnight of the thirtieth (30th) day after such due date, the CONTRACT PRICE of the VESSEL shall be reduced by U.S. Dollars Twenty Two Thousand only (US$ 22,000.-) for each full day of delay.
 
However, unless the parties agree otherwise, the total amount of deduction from the CONTRACT PRICE shall not exceed the amount due to cover the delay of one hundred and eighty (180) days after thirty (30) days of the delay in delivery of the VESSEL at the rate of deduction as specified hereinabove.
 
(c)             But, if the delay in delivery of the VESSEL continues for a period of more than two hundred and ten (210) days beyond the date upon which the delivery is due from the BUILDER under the terms of this CONTRACT then, in such event, and after such period has expired, the BUYER may, at its option, rescind this CONTRACT by serving upon the BUILDER a notice of rescission by facsimile to be confirmed by a registered letter via airmail directed to the BUILDER at the address given in this CONTRACT. Such rescission shall be effective as of the date the notice thereof is received by the BUILDER. If the BUYER has not served the notice of rescission after the aforementioned two hundred and ten (210) days delay in delivery, the BUILDER may demand the BUYER to make an election in accordance with Article VIII.3. hereof.
 
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(d)            For the purpose of this Article, the delivery of the VESSEL shall be deemed to be delayed when and if the VESSEL, after taking into full account extension of the Delivery Date or permissible delays as provided in Article V, VI, VIII, XI or elsewhere in this CONTRACT, is delivered beyond the date upon which delivery would then be due under the terms of this CONTRACT.
 
2.                  INSUFFICIENT SPEED
 
(a)              The CONTRACT PRICE of the VESSEL shall not be affected or changed, if the actual speed, as determined by trial runs more fully described in Article VI hereof, is less than the speed required under the terms of this CONTRACT and the SPECIFICATIONS provided such deficiency in actual speed is not more than two-tenths (2/10) of a knot below the guaranteed speed.
 
(b)             However, as for the deficiency of more than two-tenths (2/10) of a knot in actual speed below the speed guaranteed under this CONTRACT, the CONTRACT PRICE shall be reduced by U.S. Dollars Two Hundred Thousand only (U.S.$ 200,000.-) for each full one-tenth (1/10) of a knot in excess of the said two-tenths (2/10) of a knot of deficiency in speed [fractions of less than one-tenth (1/10) of a knot shall be regarded as a full one-tenth (1/10) of a knot]. However, unless the parties agree otherwise, the total amount of reduction from the CONTRACT PRICE shall not exceed the amount due to cover the deficiency of one (1) full knot below the guaranteed speed at the rate of reduction as specified above.
 
(c)             If the deficiency in actual speed of the VESSEL is more than seven point five-tenths (7.5/10) knot below the speed guaranteed under this CONTRACT, then the BUYER, at its option, may, subject to the BUILDER’s right to effect alterations or corrections as provided in Article VI.5. hereof, rescind this CONTRACT or may accept the VESSEL at a reduction in the CONTRACT PRICE as above provided for seven point five-tenths (7.5/10) knot of deficiency only.
 
3.                  EXCESSIVE FUEL CONSUMPTION
 
(a)             The CONTRACT PRICE shall not be affected or changed by reason of the fuel consumption of the VESSEL’s main engine, as determined by the engine manufacturer’s shop trial as per the SPECIFICATIONS being more than the guaranteed fuel consumption of the VESSEL’s main engine, if such excess is not more than five per cent (5%) over the guaranteed fuel consumption.
 
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(b)            However, as for the excess of more than five per cent (5%) in the actual fuel consumption over the guaranteed fuel consumption of the VESSEL’s main engine, the CONTRACT PRICE shall be reduced by U.S. Dollars Two Hundred Thousand only (US$ 200,000.-) for each full one per cent (1%) increase in fuel consumption in excess of the said five per cent (5%) increase in fuel consumption [fractions of less than one per cent (1%) shall be regarded as a full one per cent (1%)]. However, unless the parties agree otherwise, the total amount of reduction from the CONTRACT PRICE shall not exceed the amount due to cover the excess of nine per cent (9%) over the guaranteed fuel consumption of the VESSEL’s main engine at the rate of reduction as specified above.
 
(c)             If such actual fuel consumption exceeds the guaranteed fuel consumption of the VESSEL’s main engine by more than ten per cent (10%), the BUYER, at its option, may, subject to the BUILDER’s right to effect alterations or corrections as specified in Article VI.5. hereof, rescind this CONTRACT or may accept the VESSEL at a reduction in the CONTRACT PRICE as above provided for the nine per cent (9%) increase only.
 
4.                  DEADWEIGHT BELOW CONTRACT REQUIREMENTS
 
(a)             The CONTRACT PRICE of the VESSEL shall not be affected or changed, if actual deadweight, determined as provided in this CONTRACT and the SPECIFICATIONS, is below the deadweight of 83,300 metric tons on the moulded design draft of 12.0 metres required by this CONTRACT and the SPECIFICATIONS by an amount of 83,300 metric tons or less. However, should the deficiency in the actual deadweight of the VESSEL be more than 830 metric tons below the said required deadweight, then the CONTRACT PRICE of the VESSEL shall be reduced for each full one (1) metric ton [fractions of less than one (1) metric ton shall be disregarded] of decreased deadweight in excess of 830 metric tons by the sum of U.S. Dollars One Thousand One Hundred only (US$ 1,100.-) per metric ton.
 
However, unless the parties agree otherwise, the total amount of deduction from the CONTRACT PRICE shall not exceed the amount due to cover the deficiency of 2,000 metric tons below the said required deadweight hereinabove.
 
(b)            If the deficiency in the deadweight of the VESSEL is more than 2,000 metric tons below the said required deadweight, then the BUYER, at its option, may, subject to the BUILDER’s right to effect alterations or corrections without the BUYER’s prior
 
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consent as specified in Article VI.5. hereof, rescind this CONTRACT or may accept the VESSEL at a reduction in the CONTRACT PRICE as above provided for metric tons of deficiency only.
 
5.                  EFFECT OF RESCISSION
 
It is expressly understood and agreed by the parties hereto that in any case, if the BUYER rescinds this CONTRACT under this Article, the BUYER shall not be entitled to any liquidated damages, unless by means of the provision of Article X hereof.
 
(End of Article)
 
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ARTICLE IV : INSPECTION AND APPROVAL
 
1.                  APPOINTMENT OF BUYER’S REPRESENTATIVE
 
The BUYER shall timely despatch to and maintain at the SHIPYARD, at its own cost, expense and risk, one or more representatives (hereinafter called the “BUYER’S REPRESENTATIVE”), who shall be duly accredited in writing by the BUYER to supervise adequately the construction by the BUILDER of the VESSEL, her equipment and all accessories. Before the commencement of any item of work under this CONTRACT, the BUILDER shall, whenever reasonably required, previously exhibit, furnish to, and within the limits of the BUYER’S REPRESENTATIVE’s authority, secure the approval from the BUYER’S REPRESENTATIVE of any and all plans and drawings prepared in connection therewith. Upon appointment of the BUYER’S REPRESENTATIVE, the BUYER shall notify the BUILDER in writing of the name and the scope of the authority of the BUYER’S REPRESENTATIVE.
 
2.                  AUTHORITY OF THE BUYER’S REPRESENTATIVE
 
Such BUYER’S REPRESENTATIVE shall, at all times during working hours of the construction until delivery of the VESSEL, have the right to inspect the VESSEL, her equipment and all accessories, and work in progress, or materials utilized in connection with the construction of the VESSEL, wherever such work is being done or such materials are stored, for the purpose of determining that the VESSEL, her equipment and accessories are being constructed in accordance with the terms of this CONTRACT and/or the SPECIFICATIONS and the PLAN.
 
The BUILDER will endeavor to arrange for the inspection by the BUYER’S REPRESENTATIVE during working hours of the BUILDER. However, such inspection may be arranged beyond the BUILDER’s normal working hours, including weekend and/or holiday if this is considered necessary by the BUILDER in order to meet the BUILDER’s construction schedule, on the condition that the BUILDER will inform the BUYER’S REPRESENTATIVE at least two (2) days in advance of such inspection.
 
The BUYER’S REPRESENTATIVE shall, within the limits of the authority conferred upon him by the BUYER, make decisions or give advice to the BUILDER on behalf of the BUYER promptly on all problems arising out of, or in connection with, the construction of
 
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the VESSEL and generally act in a reasonable manner with a view to cooperating to the utmost with the BUILDER in the construction process of the VESSEL.
 
The decision, approval or advice of the BUYER’S REPRESENTATIVE shall be deemed to have been given by the BUYER and once given shall not be withdrawn, revoked or modified except with consent of the BUILDER. Provided that the BUYER’S REPRESENTATIVE or his assistants shall comply with the foregoing obligations, no act or omission of the BUYER’S REPRESENTATIVE or his assistants shall, in any way, diminish the liability of the BUILDER under Article IX (WARRANTY OF QUALITY). The BUYER’S REPRESENTATIVE shall notify the BUILDER promptly in writing of his discovery of any construction or materials, which he believes do not or will not conform to the requirements of the CONTRACT and the SPECIFICATIONS or the PLAN and likewise advise and consult with the BUILDER on all matters pertaining to the construction of the VESSEL, as may be required by the BUILDER, or as he may deem necessary.
 
However, if the BUYER’S REPRESENTATIVE fails to submit to the BUILDER without delay any such demand concerning alterations or changes with respect to the construction, arrangement or outfit of the VESSEL, which the BUYER’S REPRESENTATIVE has examined, inspected or attended at the test thereof under this CONTRACT or the SPECIFICATIONS, the BUYER’S REPRESENTATIVE shall be deemed to have approved the same and shall be precluded from making any demand for alterations, changes, or complaints with respect thereto at a later date.
 
The BUILDER shall comply with any such demand which is not contradictory to this CONTRACT and the SPECIFICATIONS or the PLAN, provided that any and all such demands by the BUYER’S REPRESENTATIVE with regard to construction, arrangement and outfit of the VESSEL shall be submitted in writing to the authorised representative of the BUILDER. The BUILDER shall notify the BUYER’S REPRESENTATIVE of the names of the persons who are from time to time authorised by the BUILDER for this purpose.
 
It is agreed upon between the BUYER and the BUILDER that the modifications, alterations or changes and other measures necessary to comply with such demand may be effected at a convenient time and place at the BUILDER’s reasonable discretion in view of the construction schedule of the VESSEL.
 
In the event that the BUYER’S REPRESENTATIVE shall advise the BUILDER that he has discovered or believes the construction or materials do not or will not conform to the
 
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requirements of this CONTRACT and the SPECIFICATIONS or the PLAN, and the BUILDER shall not agree with the views of the BUYER’S REPRESENTATIVE in such respect, either the BUYER or the BUILDER may, with the agreement of the other party, seek an opinion of the CLASSIFICATION SOCIETY.
 
3.                  APPROVAL OF DRAWINGS
 
(a)             The BUILDER shall submit to the BUYER three (3) copies of each of the plans and drawings to be submitted to the BUYER for its approval at its address as set forth in Article XIV hereof. The BUYER shall, within fourteen (14) days after receipt thereof return to the BUILDER one (1) copy of such plans and drawings with the approval or comments, if any, of the BUYER. A list of the plans and drawings to be so submitted to the BUYER shall be mutually agreed upon between the parties hereto.
 
(b)            When and if the BUYER’S REPRESENTATIVE shall have been sent by the BUYER to the SHIPYARD in accordance with Paragraph 1 of this Article, the BUILDER may submit the remainder, if any, of the plans and drawings in the agreed list, to the BUYER’S REPRESENTATIVE for his approval, unless otherwise agreed upon between the parties hereto.
 
The BUYER’S REPRESENTATIVE shall, within ten (10) days after receipt thereof, return to the BUILDER one (1) copy of such plans and drawings with his approval or comments written thereon, if any. Approval by the BUYER’S REPRESENTATIVE of the plans and drawings duly submitted to him shall be deemed to be the approval by the BUYER for all purposes of this CONTRACT.
 
(c)             In the event that the BUYER or the BUYER’S REPRESENTATIVE shall fail to return the plans and drawings to the BUILDER within the time limit as hereinabove provided, such plans and drawings shall be deemed to have been automatically approved without any comment. In the event the plans and drawings submitted by the BUILDER to the BUYER or the BUYER’S REPRESENTATIVE in accordance with this Article do not meet with the BUYER’s or the BUYER’S REPRESENTATIVE’s approval, the matter may be submitted by either party hereto for determination pursuant to Article XIV hereof. If the BUYER’s comments on the plans and drawings that are returned to the BUILDER by the BUYER within the said time limit are not clearly specified or detailed, the BUILDER shall be entitled to place its own interpretation on such comments in implementing them.
 
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(d)            Approval of drawings by Buyers shall not constitute a waiver of Builder’s responsibility to deliver the vessel in accordance with the Contract and Specifications.
 
4.                  SALARIES AND EXPENSES
 
All salaries and expenses of the BUYER’S REPRESENTATIVE or any other person or persons employed by the BUYER hereunder shall be for the BUYER’s account.
 
5.                  RESPONSIBILITY OF THE BUILDER
 
(a)             The BUILDER shall provide the BUYER’S REPRESENTATIVE and his assistants free of charge with suitably furnished office space at, or in the immediate vicinity of, the SHIPYARD together with access to telephone and facsimile facilities as may be necessary to enable the BUYER’S REPRESENTATIVE and his assistants to carry out their work under this CONTRACT. However, the BUYER shall pay for the telephone or facsimile facilities used by the BUYER’S REPRESENTATIVE or his assistants.
 
The BUILDER, its employees, agents and subcontractors, during its working hours until delivery of the VESSEL, shall arrange for them to have free and ready access to the VESSEL, her equipment and accessories, and to any other place (except the areas controlled for the purpose of national security) where work is being done, or materials are being processed or stored in connection with the construction of the VESSEL including the premises of sub-contractors.
 
The BUYER’S REPRESENTATIVE or his assistants or employees shall observe the work’s rules, regulations and the guidances prevailing at the BUILDER’s and its sub-contractor’s premises. The BUILDER shall promptly provide to the BUYER’S REPRESENTATIVE and/or his assistants and shall ensure that its sub-contractors shall promptly provide all such information as he or they may reasonably request in connection with the construction of the VESSEL and her engines, equipment and machinery.
 
(b)            The BUYER’S REPRESENTATIVE and his assistants shall at all times remain the employees of the BUYER. The BUILDER shall not be liable to the BUYER or the BUYER’S REPRESENTATIVE or to his assistants or to the BUYER’s employees or
 
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agents for personal injuries, including death, during the time they, or any of them, are on the VESSEL, or within the premises of either the BUILDER or its sub-contractors, or are otherwise engaged in and about the construction of the VESSEL, unless, however, such personal injuries, including death, are caused by the gross negligence of the BUILDER, its sub-contractors, or its or their employees or agents. The BUILDER shall not be liable to the BUYER for damages to, or destruction of property of the BUYER or of the BUYER’S REPRESENTATIVE or his assistants or the BUYER’s employees or agents, unless such damages, loss or destruction is caused by the gross negligence of the BUILDER, its sub-contractors, or its or their employees or agents.
 
6.                  RESPONSIBILITY OF THE BUYER
 
The BUYER shall undertake and assure that the BUYER’S REPRESENTATIVE and his assistants shall carry out their duties hereunder in accordance with the normal shipbuilding practice and in such a way as to avoid any unnecessary increase in building cost, delay in the construction of the VESSEL, and/or any disturbance in the construction schedule of the BUILDER.
 
The BUILDER has the right to request the BUYER to replace any of the BUYER’S REPRESENTATIVE and/or his assistants who are deemed unsuitable and unsatisfactory for the proper progress of the VESSEL’s construction. The BUYER shall investigate the situation by sending its representative(s) to the SHIPYARD and if the BUYER considers that such BUILDER’s request is justified, the BUYER shall effect the replacement as soon as conveniently arrangeable.
 
(End of Article)
 
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ARTICLE V : MODIFICATIONS, CHANGES AND EXTRAS
 
1.                  HOW EFFECTED
 
Any modifications or changes to the SPECIFICATIONS and the PLAN under which the VESSEL is to be constructed may be made at any time hereafter by written agreement of the parties hereto. Any modification or change requested by the BUYER which does not affect the frame-work of the SPECIFICATIONS shall be agreed to by the BUILDER if the BUYER agrees to adjustment of the CONTRACT PRICE, deadweight and/or cubic capacity, speed requirements, the Delivery Date and other terms and conditions of this CONTRACT reasonably required as a result of such modification or change. The BUILDER has the right to continue construction of the VESSEL on the basis of the SPECIFICATIONS and the PLAN until the BUYER has agreed to such adjustments. The BUILDER shall be entitled to refuse to make any alteration, change or modification of the SPECIFICATIONS and/or the PLAN requested by the BUYER, if the BUYER does not agree to the aforesaid adjustments within seven (7) days of the BUILDER’s notification of the same to the BUYER, or, if, in the BUILDER’s judgement, the compliance with such request of the BUYER would cause an unreasonable disruption of the normal working schedule of the SHIPYARD.
 
The BUILDER, however, agrees to exert its efforts to accommodate such reasonable request by the BUYER so that the said change and modification shall be made at a reasonable cost and within the shortest period of time reasonably possible. The aforementioned agreement to modify and change the SPECIFICATIONS and the PLAN may be effected by exchange of letters or facsimiles manifesting the agreement.
 
The letters and facsimiles exchanged by the parties pursuant to the foregoing shall constitute an amendment to this CONTRACT and the SPECIFICATIONS or the PLAN under which the VESSEL shall be built. Upon consummation of such an agreement to modify and change the SPECIFICATIONS or the PLAN, the BUILDER shall alter the construction of the VESSEL in accordance therewith including any addition to, or deduction from, the work to be performed in connection with such construction.
 
2.                  SUBSTITUTION OF MATERIAL
 
If any materials, machinery or equipment required for the construction of the VESSEL by
 
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the SPECIFICATIONS and the PLAN or otherwise under this CONTRACT cannot be procured in time to meet the BUILDER’s construction schedule for the VESSEL, or are in short supply, or are unreasonably high in price compared with the prevailing international market price, the BUILDER may supply, subject to the BUYER’s prior approval, other materials, machinery or equipment of equal quality and effect capable of meeting the requirements of the CLASSIFICATION SOCIETY and the rules, regulations and requirements with which the construction of the VESSEL must comply.
 
3.                  CHANGES IN RULES AND REGULATIONS
 
If the specified rules and regulations with which the construction of the VESSEL is required to comply are altered or changed by the CLASSIFICATION SOCIETY or bodies authorised to make such alterations or changes, either the BUYER or the BUILDER, upon receipt of due notice thereof, shall forthwith give notice thereof to the other party in writing. Thereupon, within fifteen (15) days after giving the notice to the BUILDER or receiving the notice from the BUILDER, the BUYER shall advise the BUILDER as to the alterations and changes, if any, to be made on the VESSEL which the BUYER, in its sole discretion, shall decide. The BUILDER shall not be obliged to comply with such alterations and/or changes if the BUYER fails to notify the BUILDER of its decision within the time limit stated above.
 
The BUILDER shall comply promptly with the said request of the BUYER, provided that the BUILDER and the BUYER shall first agree to :
 
(a)             any increase or decrease in the CONTRACT PRICE of the VESSEL that is occasioned by such compliance ;
 
(b)            any extension or advancement in the Delivery Date of the VESSEL that is occasioned by such compliance ;
 
(c)             any increase or decrease in the deadweight and/or cubic capacity of the VESSEL, if such compliance results in any increase or reduction in the deadweight and/or cubic capacity ;
 
(d)            adjustment of the speed requirements if such compliance results in any increase or reduction in the speed ; and
 
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(e)             any other alterations in the terms of this CONTRACT or of the SPECIFICATIONS or the PLAN or both, if such compliance makes such alterations of the terms necessary.
 
Any delay in the construction of the VESSEL caused by the BUYER’s delay in making a decision or agreement as above shall constitute a permissible delay under this CONTRACT. Such agreement by the BUYER shall be effected in the same manner as provided above for modification and change of the SPECIFICATIONS and the PLAN.
 
(End of Article)
 
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ARTICLE VI : TRIALS AND COMPLETION
 
1.                  NOTICE
 
The BUILDER shall notify the BUYER in writing or by facsimile at least twenty (20) days in advance of the time and place of the trial run of the VESSEL. Such notice shall specify the place from which the VESSEL will commence her trial run and approximate date upon which the trial run is expected to take place. Such date shall be further confirmed by the BUILDER five (5) days in advance of the trial run in writing or by facsimile.
 
The BUYER’S REPRESENTATIVE, who is to witness the performance of the VESSEL during such trial run, shall be present at such place on the date specified in such notice. Should the BUYER’S REPRESENTATIVE fail to be present after the BUILDER’s due notice to the BUYER as provided above, the BUILDER shall be entitled to conduct such trial run with the presence of the representative(s) of the CLASSIFICATION SOCIETY only without the BUYER’S REPRESENTATIVE being present. In such case, the BUYER shall be obliged to accept the VESSEL on the basis of a certificate issued by the BUILDER that the VESSEL, after the trial run, subject to alterations and corrections, if necessary, has been found to conform with the SPECIFICATIONS and this CONTRACT and is satisfactory in all respects, provided the BUILDER first makes such corrections and alterations promptly.
 
2.                  WEATHER CONDITION
 
In the event of unfavourable weather on the date specified for the trial run, the trial run shall take place on the first available day that weather conditions permit. The parties hereto recognise that the weather conditions in Korean waters, in which the trial run is to take place, are such that great changes in weather may arise momentarily and without warning and therefore, it is agreed that if, during the trial run, the weather should become so unfavourable that the trial run cannot be continued, then the trial run shall be discontinued and postponed until the first favourable day next following, unless the BUYER shall assent to the acceptance of the VESSEL by notification in writing on the basis of such trial run so far made prior to such change in weather conditions. Any delay of the trial run caused by such unfavourable weather conditions shall also operate to extend the Delivery Date of the VESSEL for the period of delay occasioned by such unfavourable weather conditions.
 
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3.               HOW CONDUCTED
 
All expenses in connection with the trials of the VESSEL are to be for the account of the BUILDER, which, during the trials, is to provide at its own expense the necessary crew to comply with conditions of safe navigation. The trials shall be conducted in the manner prescribed in this CONTRACT and the SPECIFICATIONS, and shall prove fulfilment of the performance requirements for the trials as set forth in the SPECIFICATIONS.
 
The BUILDER shall be entitled to conduct preliminary sea trials, during which the propulsion plant and/or its appurtenance shall be adjusted according to the BUILDER’s judgement. The BUILDER shall have the right to repeat any trial whatsoever as it deems necessary.
 
4.                  CONSUMABLE STORES
 
The BUILDER shall load the VESSEL with the required quantity of fuel oil, lubricating oil and greases, fresh water, and other stores necessary to conduct the trials as set forth in the SPECIFICATIONS. The necessary ballast (fuel oil, fresh water and such other ballast as may be required) to bring the VESSEL to the trial load draft, as specified in the SPECIFICATIONS, shall be supplied and paid for by the BUILDER whilst lubricating oil and greases shall be supplied and paid for by the BUYER within the time advised by the BUILDER for the conduct of sea trials as well as for use before the delivery of the VESSEL to the BUYER. The fuel oil as well as lubricating oil and greases shall be in accordance with the specifications of the main engine and other machinery and the BUYER shall decide and advise the BUILDER of the supplier’s name for lubricating oil and greases before the work-commencement of the VESSEL, provided that the supplier shall be acceptable to the BUILDER and/or the makers of all the machinery.
 
Any fuel oil, fresh water or other consumable stores furnished and paid for by the BUILDER for trial runs remaining on board the VESSEL, at the time of acceptance of the VESSEL by the BUYER, shall be bought by the BUYER from the BUILDER at the BUILDER’s purchase price for such supply in Korea and payment by the BUYER thereof shall be made at the time of delivery of the VESSEL. The BUILDER shall pay the BUYER at the time of delivery of the VESSEL for the consumed quantity of any lubricating oil and greases which were furnished and paid for by the BUYER at the BUYER’s purchase price thereof. The consumed quantity of lubricating oils and greases shall be calculated on the basis of the difference between the remaining amount, including the same remaining in the
 
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main engine, other machinery and their pipes, stern tube and the like, and the supplied amount.
 
5.                  ACCEPTANCE OR REJECTION
 
(a)                If, during any sea trial, any breakdown occurs entailing interruption or irregular performance which can be repaired on board, the trial shall be continued after such repairs and be valid in all respects.
 
(b)            However, if, during or after the trial run, it becomes apparent that the VESSEL or any part of her equipment requires alterations or corrections which but for this provision would or might entitle the BUYER to rescind this CONTRACT, the BUILDER shall notify the BUYER promptly in writing or by facsimile to such effect and shall simultaneously advise the BUYER of the estimated additional time required for the necessary alterations or corrections to be made.
 
The BUYER shall, within five(5) days of receipt from the BUILDER of notice of completion of such alterations or corrections and after such further trials or tests as necessary, notify the BUILDER in writing or by facsimile confirmed in writing of its acceptance, qualified acceptance or rejection of the VESSEL, all in accordance with the SPECIFICATIONS, the PLAN and this CONTRACT, and shall not be entitled to reject the VESSEL on such grounds until such time.
 
(c)                Save as above provided, the BUYER shall, within three(3) days after completion of the trial run, notify the BUILDER in writing or by facsimile confirmed in writing of its acceptance of the VESSEL or of the details in respect of which the VESSEL does not conform to the SPECIFICATIONS or this CONTRACT.
 
If the BUILDER is in agreement with the BUYER’s determinations as to non-conformity, the BUILDER shall make such alterations or changes as may be necessary to correct such non-conformity and shall prove the fulfilment of this CONTRACT and the SPECIFICATIONS by such tests or trials as may be necessary.
 
The BUYER shall, within three (3) days after completion of such tests and/or trials, notify the BUILDER in writing or by facsimile confirmed in writing of its acceptance or rejection of the VESSEL.
 
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(d)            However, the BUYER shall not be entitled to reject the VESSEL by reason of any minor or insubstantial items judged from the point of view of standard shipbuilding and shipping practice as not being in conformity with the SPECIFICATIONS, but, in that case, the BUILDER shall not be released from the obligation to correct and/or remedy such minor or insubstantial items as soon as practicable after the delivery of the VESSEL.
 
6.                  EFFECT OF ACCEPTANCE
 
The BUYER’s written or facsimiled notification of acceptance delivered to the BUILDER as above provided, shall be final and binding insofar as conformity of the VESSEL with the SPECIFICATIONS is concerned and shall preclude the BUYER from refusing formal delivery of the VESSEL as hereinafter provided, if the BUILDER complies with all conditions of delivery, as herein set forth and provided that, in the case of qualified acceptance, any matters which were mentioned in the notice of the qualified acceptance by the BUYER as requiring correction have been corrected satisfactorily.
 
If the BUYER fails to notify the BUILDER of its acceptance or rejection of the VESSEL as hereinabove provided, the BUYER shall be deemed to have accepted the VESSEL. Nothing contained in this Article shall preclude the BUILDER from exercising any and all rights which the BUILDER has under this CONTRACT if the BUILDER disagrees with the BUYER’s rejection of the VESSEL or any reasons given for such rejection, including arbitration provided in Article XIV hereof.
 
(End of Article)
 
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ARTICLE VII : DELIVERY
 
1.                  TIME AND PLACE
 
The VESSEL shall be delivered by the BUILDER to the BUYER at the SHIPYARD, safely afloat on or before 31 st December, 2009 (hereinafter called the “DELIVERY DATE”) after completion of satisfactory trials and acceptance by the BUYER in accordance with the terms of Article VI, except that, in the event of delays in delivery of the VESSEL by the BUILDER due to causes which under the terms of this CONTRACT permit extensions of the time for delivery of the VESSEL, the aforementioned DELIVERY DATE shall be extended accordingly.
 
It is hereby agreed that the BUILDER shall have the right to advance the DELIVERY DATE provided that the BUILDER shall have given to the BUYER written notice of the new proposed earlier delivery date at least six (6) months before such new proposed advanced delivery date; and
 
Any such new proposed earlier delivery date shall be considered as the DELIVERY DATE for the purpose of this CONTRACT.
 
2.                  WHEN AND HOW EFFECTED 
 
Provided that the BUYER shall concurrently with delivery of the VESSEL release to the BUILDER the fifth instalment as set forth in Article X.2. hereof and shall have fulfilled all of its obligations provided for in this CONTRACT, delivery of the VESSEL shall be forthwith effected upon acceptance thereof by the BUYER, as hereinabove provided, by the concurrent delivery by each of the parties hereto to the other of a PROTOCOL OF DELIVERY AND ACCEPTANCE acknowledging delivery of the VESSEL by the BUILDER and acceptance thereof by the BUYER, which PROTOCOL shall be prepared in duplicate and signed by each of the parties hereto.
 
3.                  DOCUMENTS TO BE DELIVERED TO THE BUYER
 
Upon delivery and acceptance of the VESSEL, the BUILDER shall deliver to the BUYER the following documents, which shall accompany the aforementioned PROTOCOL OF DELIVERY AND ACCEPTANCE :
 
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(a)             PROTOCOL OF TRIALS of the VESSEL made pursuant to this CONTRACT and the SPECIFICATIONS,
 
(b)            PROTOCOL OF INVENTORY of the equipment of the VESSEL, including spare parts, all as specified in the SPECIFICATIONS,
 
(c)             PROTOCOL OF STORES OF CONSUMABLE NATURE, such as all fuel oil and fresh water remaining in tanks if its cost is charged to the BUYER under Article VI.4. hereof,
 
(d)            DRAWINGS AND PLANS pertaining to the VESSEL as stipulated in the SPECIFICATIONS, which shall be furnished to the BUYER at no additional cost,
 
(e)             ALL CERTIFICATES required to be furnished upon delivery of the VESSEL pursuant to this CONTRACT, the SPECIFICATIONS and the customary shipbuilding practice, including
 
(i)                                  Classification Certificate
(ii)                               Safety Construction Certificate
(iii)                            Safety Equipment Certificate
(iv)                           Safety Radio Certificate
(v)                              International Loadline Certificate
(vi)                           International Tonnage Certificate
(vii)                        BUILDER’s Certificate
(viii)                     De-ratting Exemption Certificate
 
However, it is agreed by the parties that if the Classification Certificate and/or other certificates are not available at the time of delivery of the VESSEL, provisional certificates shall be accepted by the BUYER, provided that the BUILDER shall furnish the BUYER with formal certificates as promptly as possible after such formal certificates have been issued.
 
(f)               DECLARATION OF WARRANTY of the BUILDER that the VESSEL is delivered to the BUYER free and clear of any liens, claims, mortgages, or other encumbrances upon the BUYER’s title thereto, and in particular, that the VESSEL is absolutely free of all burdens in the nature of imposts, taxes, or charges imposed by the prefecture or country
 
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of the port of delivery, as well as of all liabilities of the BUILDER to its sub-contractors and employees and of all liabilities arising from the operation of the VESSEL in trial runs, or otherwise, prior to delivery except as otherwise provided under this CONTRACT.
 
(g)                      COMMERCIAL INVOICE.
 
4.                  TENDER OF THE VESSEL
 
If the BUYER fails to take delivery of the VESSEL after completion thereof according to this CONTRACT and the SPECIFICATIONS, the BUILDER shall have the right to tender delivery of the VESSEL after compliance with all procedural requirements as provided above.
 
5.                  TITLE AND RISK
 
Title and risk shall pass to the BUYER upon delivery and acceptance of the VESSEL being effected as stated above and the BUILDER shall be free of all responsibility or liability whatsoever related with this CONTRACT except for the warranty of quality contained in Article IX and the obligation to correct and/or remedy, as provided in Article VI.5.(d), if any, it being expressly understood that, until such delivery is effected, the VESSEL and equipment thereof are at the entire risk of the BUILDER including but not confined to, risks of war, insurrection and seizure by Governments or Authorities, whether Korean or foreign, and whether at war or at peace. The title to the BUYER’s supplies as provided in Article XII shall remain with the BUYER and the BUILDER’s responsibility for such BUYER’s supplies shall be as described in Article XII.2.
 
6.                  REMOVAL OF THE VESSEL
 
The BUYER shall take possession of the VESSEL immediately upon delivery thereof and shall remove the VESSEL from the SHIPYARD within three (3) days after delivery thereof is effected. Port dues and other charges levied by the Korean Government Authorities after delivery of the VESSEL and any other costs related to the removal of the VESSEL shall be borne by the BUYER.
 
(End of Article)
 
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ARTICLE VIII : DELAYS AND EXTENSIONS OF TIME (FORCE MAJEURE)
 
1.                  CAUSES OF DELAY
 
If, at any time after signing this CONTRACT, either the construction or delivery of the VESSEL or any performance required hereunder as a prerequisite to the delivery thereof is delayed by any of the following events; namely war, acts of state or government, blockade, revolution, insurrections, mobilization, civil commotion, riots, general workers strikes, sabotage,  Acts of God or the public enemy, plague or other epidemics, quarantines, prolonged failure of electric current, freight embargoes, or defects in major forgings or castings, or delays in the BUYER’s supplies as stipulated in Article XII, if any, or or defects in materials, machinery or equipment which could not have been detected by the BUILDER using reasonable care or earthquakes, tidal waves, typhoons, hurricanes, prolonged or unusually severe weather conditions or by destruction of the premises or works of the BUILDER or its sub-contractors, or of the VESSEL, or any part thereof, by fire, landslides, flood, lightning, explosion or the BUILDER’s performance under the CONTRACT, or delays caused by the CLASSIFICATION SOCIETY or the BUYER’s faulty action or omission, or other causes beyond the control of the BUILDER, or its sub-contractors, as the case may be, or for any other causes which, under the terms of this CONTRACT, authorise and permit extension of the time for delivery of the VESSEL, then, in the event of delays due to the happening of any of the aforementioned contingencies, the DELIVERY DATE of the VESSEL under this CONTRACT shall be extended for a period of time which shall not exceed the total accumulated time of all such delays.
 
The BUILDER shall have used reasonable efforts to mitigate the duration and effects of such events of the construction schedule.
 
2.                  NOTICE OF DELAYS
 
As soon as practicably possible after commencement of any delay but not later than fourteen (14) days on account of which the BUILDER claims that it is entitled under this CONTRACT to an extension of the DELIVERY DATE of the VESSEL, excluding delays due to arbitration, the BUILDER shall advise the BUYER in writing or by facsimile of the date such delay commenced, the reasons thereof and, if possible, its estimated duration of the probable delay in the delivery of the VESSEL, and shall supply the BUYER if reasonably available with evidence to justify the delay claimed. Within fourteen (14) days after such delay ends, the BUILDER shall likewise advise the BUYER in writing or by
 
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facsimile of the date that such delay ended, and also, shall specify the period of time by which the BUILDER claims the DELIVERY DATE should be extended by reason of such delay. Failure of the BUYER to object to the BUILDER’s notification of any claim for extension of the date for delivery of the VESSEL within fourteen (14) days after receipt by the BUYER of such notification shall be deemed to be a waiver by the BUYER of its right to object to such extension.
 
3.                  RIGHT TO RESCIND FOR EXCESSIVE DELAY
 
If the total accumulated time of all permissible and non-permissible delays, excluding delays due to (i) arbitration under Article XIV, (ii) the BUYER’s defaults under Article XI, (iii) modifications and changes under Article V or (iv) delays or defects in the BUYER’s supplies as stipulated in Article XII, aggregates two hundred and forty (240) days or more, then, the BUYER may, at any time thereafter, rescind this CONTRACT by giving a written notice of rescission to the BUILDER. Such rescission shall be effective as of the date the notice thereof is received by the BUILDER.
 
If the BUYER has not served the notice of rescission as provided in the above or Article III.1. hereof, the BUILDER may, at any time after expiration of the accumulated time of the delay in delivery, either two hundred and forty (240) days in case of the delay in this Paragraph or two hundred and ten (210) days in case of the delay in Article III.1, notify the BUYER of the future date upon which the BUILDER estimates the VESSEL will be ready for delivery and demand in writing or by facsimile that the BUYER make an election either to rescind this CONTRACT or to consent to the delivery of the VESSEL at such future date, in which case the BUYER shall, within fourteen(14) days after receipt of such demand, make and notify the BUILDER of such election. If the BUYER elects to consent to the delivery of the VESSEL at such future date (or other future date as the parties may agree):
 
(a)             Such future date shall become the contractual delivery date for the purposes of this CONTRACT and shall be subject to extension by reason of permissible delays as herein provided, and
 
(b)            If the VESSEL is not delivered by such revised contractual delivery date (as extended by reason of permissible delays), the BUYER shall have the same right of rescission upon the same terms as provided in the above and Article III. 1.
 
If the BUYER shall not make an election within fourteen(14) days as provided hereinabove, the BUYER shall be deemed to have accepted such extension of the DELIVERY DATE to
 
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the future delivery date indicated by the BUILDER.
 
4.               DEFINITION OF PERMISSIBLE DELAYS
 
Delays on account of the foregoing causes shall be understood to be permissible delays, and are to be distinguished from non-permissible unauthorised delays on account of which the CONTRACT PRICE of the VESSEL is subject to adjustment as provided in Article III hereof.
 
(End of Article)
 
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ARTICLE IX : WARRANTY OF QUALITY
 
1.                  GUARANTEE OF MATERIAL AND WORKMANSHIP
 
The BUILDER, for the period of twelve (12) months from the date of delivery of the VESSEL to the BUYER, guarantees the VESSEL and her engine and all parts and equipment thereof that are manufactured or furnished by the BUILDER under this CONTRACT against all defects which are directly due to faulty design, defective materials, construction miscalculation and/or poor workmanship, or negligent or other improper acts or omissions on the part of the BUILDER or its subcontractors provided such defects have not been caused by perils of the sea, rivers or navigations, or by normal wear and tear, overloading, improper loading or stowage, corrosion of the materials other than related to lack of maintenance, fire, accidents at sea or elsewhere, or by incompetence, mismanagement, negligence or wilful neglect or any alteration or addition to the VESSEL which has not previously been approved by the BUILDER.
 
The BUILDER will be responsible for all machinery or parts of machinery and all constructions which are supplied by sub-contractors and will guarantee the above mentioned for a period of twelve (12) months on the basis as laid down in this Paragraph. Upon rectification of an item claimed under this guarantee, this item shall be covered for further twelve (12) months under the same terms and conditions. However, this is limited to a maximum of Eighteen (18) months from Delivery Date.
 
2.                  NOTICE OF DEFECTS
 
The BUYER or its duly authorised representative will notify the BUILDER in writing or by facsimile promptly after discovery of any defect for which a claim is to be made under this guarantee.
 
The BUYER’s written notice shall include full particulars as to the nature of the defect and the extent of the damage caused thereby, but excluding consequential damage as hereinafter provided. The BUILDER will be under no obligation with respect to this guarantee in respect of any claim for defects discovered prior to the expiry date of the guarantee, unless notice of such defects is received by the BUILDER before the expiry date. However, facsimiled advice received by the BUILDER within seven (7) days after such expiry date that a claim is forthcoming will be sufficient compliance with the requirement as to time,
 
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provided that such facsimiled advice shall include at least a brief description of the defect including the identity of the equipment, extent of damage, name and number of any replacement part and description of any remedial work required, and that full particulars are given to the BUILDER not later than fourteen (14) days after the expiry date.
 
3.                  REMEDY OF DEFECTS
 
(a)              The BUILDER shall remedy, at its expense, any defects, against which the VESSEL is guaranteed under this Article, by making all necessary and reasonably practicable repairs or replacements at the SHIPYARD or elsewhere as provided for in (b) hereinbelow.
 
In such case, the VESSEL shall be taken at the BUYER’s cost and responsibility to the place selected, ready in all respects for such repairs or replacements and in any event, the BUILDER shall not be responsible for towage
 
(b)            However, BUYER should determine and prove if it is commercially and/or operationally impractical (which shall include, but not be limited to, an emergency) to bring the VESSEL to the SHIPYARD, the BUYER may cause the necessary repairs or replacements to be made elsewhere which is deemed by the BUYER with the consent of the BUILDER which shall not be unreasonably withheld, to be suitable for the purpose, provided that, in such event, the BUILDER may forward or supply replacement parts or materials under the terms described in (c) hereinbelow, unless forwarding or supplying thereof under the terms described in (c) hereinbelow would impair or delay the operation or working schedule of the VESSEL. In the event that the BUYER proposes to cause the necessary repairs or replacements to be made to the VESSEL at any shipyard or works other than the SHIPYARD, the BUYER shall first (but in all events as soon as reasonably possible) give the BUILDER notice in writing or by facsimile of the time and place such repairs will be made, and if the VESSEL is not thereby delayed, or her operation or working schedule is not thereby impaired, the BUILDER shall have the right to verify by its own representative(s) the nature and extent of the defects complained of. The BUILDER shall, in such case, promptly advise the BUYER by facsimile, after such examination has been completed, of its acceptance or rejection of the defects as ones that are covered by the guarantee herein provided. Upon the BUILDER’s acceptance of the defects as justifying remedy under this Article, or upon award of the arbitration so determining, the BUILDER shall compensate the BUYER an amount equal to the actual proven cost of making the same repairs or replacements.
 
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(c)             In the event that it is necessary for the BUILDER to forward a replacement for a defective part under this guarantee, replacement parts shall be shipped to the BUYER under the terms of CIF port of the country where vessel will be repaired.
 
(d)            The BUILDER reserves the option to retrieve, at the BUILDER’s cost, any of the replaced equipment/parts in case defects are remedied in accordance with the provisions in this Article.
 
(e)             Any dispute under this Article shall be referred to arbitration in accordance with the provisions of Article XIV hereof.
 
4.                  EXTENT OF THE BUILDER’S LIABILITY
 
(a)             After delivery of the VESSEL the responsibility of the BUILDER in respect of and/or in connection with the VESSEL and/or this CONTRACT shall be limited to the extent expressly provided in the Paragraphs of this Article. Except as expressly provided in the Paragraphs of this Article, in no circumstances and on no ground whatsoever shall the BUILDER have any responsibility or liability whatsoever or howsoever arising in respect of or in connection with the VESSEL or this CONTRACT after the delivery of the VESSEL. Further, but without in any way limiting the generality of the foregoing, the BUILDER shall have no liability or responsibility whatsoever or howsoever arising for or in connection with any consequential or special losses, damages or expenses (including but not limited to loss of time, loss of profit or earnings or demurrage directly or indirectly caused), any pecuniary loss or expense, any liability to any third party or any fine, compensation, penalty or other payment or sanction incurred by or imposed upon the BUYER or any other party whatsoever in relation to or in connection with this CONTRACT or the VESSEL.
 
(b)            The BUILDER shall be under no obligation with respect to defects in respect of which the BUILDER has not received notice in accordance with Paragraph 2 of this Article by the expiry date of the guarantee specified in Paragraph 1, nor in any event shall the BUILDER be liable for any worsening of the defects after the expiry date of the guarantee.
 
(c)             The BUILDER shall under no circumstances be liable for defects in the VESSEL or any part of equipment thereof caused by perils of the sea, rivers or navigations, or by normal wear and tear, overloading, improper loading or stowage, corrosion of the
 
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materials other than related to lack of maintenance, fire, accidents at sea or elsewhere, or by incompetence, mismanagement, negligence or wilful neglect or any alteration or addition on the part of the BUYER, its employees or agents or any other person on or doing work on the VESSEL, including the VESSEL’s officers, crew and passengers. Likewise, the BUILDER shall not be liable for defects in the VESSEL or any part of equipment thereof that are due to repairs carried out by any other than the BUILDER or which have not been carried out in accordance with the procedure set out in Paragraph 3 (b) of this Article.
 
(d)            The BUILDER shall not be obliged to repair, not be liable for, damage to the VESSEL or any part of the equipment thereof, which after delivery of the VESSEL, is caused other than by the defects of the nature specified in this Article. The guarantees contained as hereinabove in this Article replace and exclude any other liability, guarantee, warranty and/or condition imposed or implied by statute, common law, custom, contract (including this CONTRACT) or otherwise on the part of the BUILDER by reason of the construction and sale of the VESSEL for and to the BUYER or for any other reason whatsoever.
 
5.                        GUARANTEE ENGINEER
 
The BUILDER shall have the right to appoint a Guarantee Engineer to serve on the VESSEL as its representative for a period of Three (3) months from the date the VESSEL is delivered. However, if the BUYER and the BUILDER shall deem it necessary to keep the Guarantee Engineer on the VESSEL for a longer period, then he shall remain on board the VESSEL after the said Three (3) months, but not longer than Six (6) months from the delivery of the VESSEL.
 
The BUYER, and its employees, shall give such Guarantee Engineer full cooperation in carrying out his duties as the representative of the BUILDER on board the VESSEL.
 
The Guarantee Engineer shall sign BUYER’s Indemnity Forms and shall at all times deemed to be an employee of the BUILDER.
 
The BUYER shall accord the Guarantee Engineer treatment comparable to the VESSEL’s Chief Engineer, and shall provide board and lodging at no cost to the BUILDER and/or the Guarantee Engineer.
 
While the Guarantee Engineer is on board the VESSEL, the BUYER shall pay to the BUILDER the sum of United States Dollars Six Thousand and Five Hundred (US$ 6,500.-) per month as a compensation for a part of cost and charges to be borne by the BUILDER in connection with Guarantee Engineer and also shall pay the expenses of his repatriation to
 
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Korea by air upon termination of his service, the expenses of his communication with the BUILDER incurred in performing his duties and expenses, if any, of his medical and hospital care in the VESSEL’s hospital.
 
Pertaining to the detailed particulars of this Paragraph, an agreement will be made according to this effect between the parties hereto upon delivery of the VESSEL.
 
(End of Article)
 
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ARTICLE X : PAYMENT
 
1.                  CURRENCY
 
All payments under this CONTRACT shall be made in United States Dollars.
 
2.                  TERMS OF PAYMENT
 
The payments of the CONTRACT PRICE shall be made as follows :
 
(a)             First Instalment
 
Twenty per cent (20 %) of the CONTRACT PRICE amounting to U.S.Dollars Eighteen Million Three Hundred Thousand only (US$ 18,300,000.-) shall be paid within three (3) business days after receipt by the BUYER of the original of the Refund Guarantee specified in Paragraph 8 of this Article.
 
Under this CONTRACT, in counting the business days, only Saturdays and Sundays are excepted. When a due date falls on a day when banks are not open for business in New York, N.Y., U.S.A., such due date shall fall due upon the first business day next following.
 
(b)            Second Instalment
 
Twenty per cent (20%) of the CONTRACT PRICE amounting to U.S.Dollars Eighteen Million Three Hundred Thousand only (US$ 18,300,000.-) shall be paid within three (3) business days of receipt by the Buyer of a facsimiled advice from the BUILDER that steel cutting has been commenced.
 
(c)             Third Instalment
 
Ten per cent (10%) of the CONTRACT PRICE amounting to U.S.Dollars Nine Million One Hundered Fifty Thousand only (US$ 9,150,000.-) shall be paid within three (3) business days of receipt by the BUYER of a facsimiled advice from the BUILDER that the first block of the keel has been laid.
 
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(d)            Fourth Instalment
 
Ten per cent (10%) of the CONTRACT PRICE amounting to U.S.Dollars Nine Million One Hundred Fifty Thousand only (US$ 9,150,000-) shall be paid within three (3) business days of receipt by the BUYER of a facsimiled advice from the BUILDER that the launching of the VESSEL has been completed.
 
(f)               Fifth Instalment
 
Forty per cent (40%) of the CONTRACT PRICE amounting to U.S.Dollars Thirty Six Million Six Hundred Thousand only (US$ 36,600,000.-) plus or minus any increase or decrease due to modifications and/or adjustment, if any, arising prior to delivery of the VESSEL of the CONTRACT PRICE under Articles III and V of this CONTRACT shall be paid to the BUILDER concurrently with the delivery of the VESSEL. (The date stipulated for payment of each of the five instalments mentioned above is hereinafter in this Article and in Article XI referred to as the “DUE DATE” of that instalment).
 
It is understood and agreed upon by the BUILDER and the BUYER that all payments under the provisions of this Article shall not be delayed or withheld by the BUYER due to any dispute or disagreement of whatsoever nature arising between the BUILDER and the BUYER. Should there be any dispute in this connection, the matter shall be dealt with in accordance with the provisions of arbitration in Article XIV hereof. Expenses for remitting payments and any other expenses connected with such payments shall be for the account of the BUYER.
 
3.                  DEMAND FOR PAYMENT
 
At least fourteen (14) days prior to the date of each event provided in Paragraph 2 of this Article on which any payment shall fall due hereunder, with the exception of the payment of the first and second instalments, the BUILDER shall notify the BUYER by facsimile of the date such payment shall become due.
 
The BUYER shall immediately acknowledge receipt of such notification by facsimile to the BUILDER, and make payment as set forth in this Article. If the BUILDER fails to receive the BUYER’s said acknowledgement within three (3) days after sending the aforementioned notification, the BUILDER shall promptly facsimile to the BUYER a second notification of similar import. The BUYER shall immediately acknowledge by facsimile receipt of the
 
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foregoing second notification regardless of whether or not the first notification was acknowledged as aforesaid.
 
4.                  METHOD OF PAYMENT
 
(a)            All the pre-delivery payments and the payment due on delivery in settlement of the CONTRACT PRICE as provided for in Paragraph 2 of this Article shall be made in U.S. Dollars on or before the DUE DATE thereof by telegraphic transfer as follows ;
 
(i)                                     The payment of the first, second, third and fourth instalments shall be made to the account of the BUILDER with a bank to be duly designated by the BUILDER, in Korea (the “BUILDER’S BANK”) or any other bank by telegraphic transfer remittance at least two(2) business days prior to the DUE DATE notified by the BUILDER.
 
(ii)                                  The fifth instalment as provided for in Paragraph 2.(f) of this Article shall be deposited at the BUILDER’S BANK in the name of the Buyer or, if the BUILDER requires, with any other bank in the name of the Byuer by telegraphic transfer remittance at least two (2) business days prior to the scheduled delivery date of the VESSEL notified by the BUILDER, with instructions that the said instalment is payable to the BUILDER against presentation by the BUILDER to the BUILDER’S BANK or any other bank, as the case may be, of a duplicate original copy of the PROTOCOL OF DELIVERY AND ACCEPTANCE of the VESSEL signed by the BUILDER and the BUYER.
 
(b)            Simultaneously with each of such payments, the BUYER shall advise the BUILDER of the details of the payments by facsimile and at the same time, the BUYER shall cause the BUYER’s remitting Bank to advise the BUILDER’S BANK or any other bank of the details of such payments by authenticated bank cable or telex.
 
5.                  REFUND BY THE BUILDER
 
The payments made by the BUYER to the BUILDER prior to delivery of the VESSEL shall constitute advances to the BUILDER. If the VESSEL is rejected by the BUYER in accordance with the terms of this CONTRACT, or except in the case of rescission or rescission of this CONTRACT by the BUILDER under the provisions of Article XI hereof,
 
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if the BUYER terminates or rescinds this CONTRACT pursuant to any of the provisions of this CONTRACT specifically permitting the BUYER to do so, the BUILDER shall forthwith refund to the BUYER, in U.S. Dollars, the full amount of total sums paid by the BUYER to the BUILDER in advance of delivery together with interest thereon as herein provided.
 
The transfer and other bank charges of such refund shall be for the BUILDER’s account. The interest rate of the refund, as above provided, shall be seven per cent (7%) per annum from the date following the date of receipt by the BUILDER of the pre-delivery instalment(s) to the date of remittance by telegraphic transfer of such refund, provided, however, that if the cancellation of this CONTRACT by the BUYER is based upon delays due to force majeure or other causes beyond the control of the BUILDER as provided for in Article VIII hereof, then in such event, the interest rate of refund shall be reduced to six point five per cent (6.5%) per annum.
 
It is hereby understood by both parties that payment of any interest provided herein is by way of liquidated damages due to rescission of this CONTRACT and not by way of compensation for use of money.
 
If, the BUILDER is required to refund to the BUYER the instalments paid by the BUYER to the BUILDER as provided in this Paragraph, the BUILDER shall return to the BUYER all of the BUYER’s supplies as stipulated in Article XII which were not incorporated into the VESSEL and pay to the BUYER an amount equal to the cost to the BUYER of those supplies incorporated into the VESSEL.
 
6.                  TOTAL LOSS
 
If there is a total loss or a constructive total loss of the VESSEL prior to delivery thereof, the BUILDER shall proceed according to the option of the Buyer hereto either:
 
(a)             to build another vessel in place of the VESSEL so lost and deliver it under this CONTRACT to the BUYER, provided that the parties hereto shall have agreed in writing to a reasonable cost and time for the construction of such vessel in place of the lost VESSEL; or
 
(b)            to refund to the BUYER the full amount of the total sums paid by the BUYER to the BUILDER under the provisions of Paragraph 2 of this Article together with interest thereon at the rate of six point five per cent (6.5%) per annum from the date following
 
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the date of receipt by the BUILDER of such pre-delivery instalment(s) to the date of payment by the BUILDER to the BUYER of the refund.
 
If the parties hereto fail to reach such agreement within two (2) months after the VESSEL is determined to be a total loss or constructive total loss, the provisions of (b) hereinabove shall be applied.
 
7.                  DISCHARGE OF OBLIGATIONS
 
Such refund as provided in the foregoing Paragraphs 5 and 6 by the BUILDER to the BUYER shall forthwith discharge all the obligations, duties and liabilities of each of the parties hereto to the other except the claims of the BUILDER against the BUYER, if any, under this CONTRACT. Any and all refunds or payments due to the BUYER under this CONTRACT shall be effected by telegraphic transfer to the account specified by the BUYER.
 
8.                  REFUND GUARANTEE
 
The BUILDER shall deliver to the BUYER by hard copy or by SWIFT through the BUYER’s bank, acceptable to the BUILDER, an assignable letter of guarantee issued by a Bank acceptable to the Buyer as soon as possible but in any case no later than Ninety (90) days from the date of this CONTRACT for the refund of the pre-delivery instalments plus interest as aforesaid to the BUYER under or pursuant to Paragraph 5 above in the form annexed hereto as Exhibit “A”. All expenses in issuing and maintaining the letter of guarantee described in this Paragraph shall be borne by the BUILDER. In case of SWIFT, the BUYER shall advise the BUILDER of the details of the BUYER’s bank including the SWIFT address upon execution of this CONTRACT.
 
9.                  PERFORMANCE GUARANTEE
 
Upon signing this CONTRACT, the BUYER shall provide the BUILDER with an irrevocable and Corporate Guarantee pursuant to the Terms and Provisions of this Contract issued by a Corporate Guarantor acceptable to the BUILDER for the due and faithful performance by the BUYER of all its liabilities and responsibilities under the CONTRACT including, but not limited to, the payment of the CONTRACT PRICE and taking delivery of the VESSEL, in the form annexed hereto as Exhibit “B”.
 
(End of Article)
 
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ARTICLE XI : BUYER’S DEFAULT
 
1.                  DEFINITION OF DEFAULT
 
The BUYER shall be deemed to be in default under this CONTRACT in the following cases :
 
(a)             If the first, second, third and fourth instalment is not paid to the BUILDER within respective Three (3) banking days of such instalments; or
 
(b)            If the fifth instalment is not deposited at the BUILDER’S BANK or at the account of the BUILDER with any other bank in accordance with Article X.4.(a)(ii) hereof or if the said fifth instalment deposit is not released to the BUILDER against presentation by the BUILDER of a duplicate original copy of the PROTOCOL OF DELIVERY AND ACCEPTANCE; or
 
(c)             If the BUYER fails to take delivery of the VESSEL when the VESSEL is duly tendered for delivery by the BUILDER within Three (3) banking days under the provisions of Article VII hereof; or
 
(d)            If and order or an effective resolution shall be passed for winding up of the BUYER (except for the purpose of reorganization, merger or amalgamation); or
 
(e)             If the BUYER fails to be in punctual, due and full compliance with any of its obligations under this CONTRACT.
 
In case the BUYER is in default of any of its obligations under this CONTRACT, the BUILDER is entitled to and shall have the following rights, powers and remedies in addition to such other rights, powers and remedies as the BUILDER may have elsewhere in this CONTRACT and/or at law, at equity or otherwise.
 
2.                  EFFECT OF THE BUYER’S DEFAULT ON OR BEFORE THE DELIVERY OF THE VESSEL
 
If the BUYER shall be in default as provided in Paragraph 1 above of its obligations under this CONTRACT, then;
 
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(a)             The DELIVERY DATE of the VESSEL shall be extended automatically for the actual period of such default and the BUILDER shall not be obliged to pay any liquidated damages for the delay in delivery of the VESSEL caused thereby.
 
(b)            The BUYER shall pay to the BUILDER interest at the rate of seven per cent (7%) per annum in respect of the instalment(s) in default from the respective DUE DATE to the date of actual receipt by the BUILDER of the full amount of such instalment(s).
 
(c)             If the BUYER is in default in payment of any of the instalment(s) due and payable prior to or simultaneously with the delivery of the VESSEL, the BUILDER shall, in writing or by facsimile, notify the BUYER to that effect, and the BUYER shall, upon receipt of such notification, forthwith acknowledge in writing or by facsimile to the BUILDER that such notification has been received.
 
(d)            If any of the BUYER’s default continues for a period of ten(10) days after the BUILDER’s notification to the BUYER of such default, the BUILDER may, at its option, rescind this CONTRACT by serving upon the BUYER a written notice or a facsimile notice of rescission confirmed in writing.
 
(e)            In the event of such rescission by the BUILDER of this CONTRACT due to the BUYER’s default as provided for in paragraph 1 above, the BUILDER shall be entitled to retain and apply the instalments already paid by the BUYER to the recovery of the BUILDER’s loss and damage including, but not being limited to, reasonable estimated profit due to the BUYER’s default and the rescission of this CONTRACT and at the same time the BUILDER shall have the full right and power either to complete or not to complete the VESSEL which is the sole property of the BUILDER as it deems fit, and to sell the VESSEL at a public or private sale on such terms and conditions as the BUILDER thinks fit without being answerable for any loss or damage.
 
The proceeds received by the BUILDER from the sale shall be applied in addition to the instalment(s) retained by the BUILDER as mentioned hereinabove as follows : -
 
First,                            in payment of all reasonable costs and expenses of the sale of the VESSEL, including interest thereon at seven per cent (7%) per annum from the respective date of payment of such costs and expenses aforesaid to the date of sale on account of the BUYER’s default.
 
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Second,            if the VESSEL has been completed, in or towards satisfaction of the unpaid balance of the CONTRACT PRICE, to which shall be added the cost of all additional work and extras agreed by the BUYER including interest thereon at seven per cent (7%) per annum from the respective DUE DATE of the instalment in default to the date of sale, or if the VESSEL has not been completed, in or towards satisfaction of the unpaid amount of the cost incurred by the BUILDER prior to the date of sale on account of construction of the VESSEL, including work, labour, materials and reasonably estimated profit which the BUILDER would have been entitled to receive if the VESSEL had been completed and delivered plus interest thereon at seven per cent (7%) per annum from the respective DUE DATE of the instalment in default to the date of sale.
 
Third,                       the balance of the proceeds, if any, shall belong to the BUYER, and shall forthwith be paid over to the BUYER by the BUILDER.
 
In the event of the proceeds from the sale together with instalment(s) retained by the BUILDER being insufficient to pay the BUILDER, the BUYER shall be liable for the deficiency and shall pay the same to the BUILDER upon its demand.
 
(End of Article)
 
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ARTICLE XII : BUYER’S SUPPLIES
 
1.                  RESPONSIBILITY OF THE BUYER
 
The BUYER shall, at its own risk, cost and expense, supply all the BUYER’s supplies as specified in Paragraph 0.16.1 of the SPECIFICATIONS (hereinafter called the “BUYER’S SUPPLIES”), to the BUILDER at the SHIPYARD in proper condition ready for installation and in accordance with the time schedule to be furnished by the BUILDER sixty (60) days from signing this Contract.
 
In order to facilitate the installation of the BUYER’S SUPPLIES by the BUILDER, the BUYER shall furnish the BUILDER with the necessary plans, instruction books, test report and all test certificates required by the BUILDER and shall cause the representative(s) of the makers of the BUYER’S SUPPLIES to give the BUILDER any advice, instructions or assistance which the BUILDER may reasonably require in the installation or adjustment thereof at the SHIPYARD, all without cost or expense to the BUILDER.
 
The BUYER shall be liable for any expense incurred by the BUILDER for repair of the BUYER’S SUPPLIES due to defective design or materials, poor workmanship or performance or due to damage in transit and the DELIVERY DATE of the VESSEL shall be extended for the period of such repair if such repair shall affect the delivery of the VESSEL.
 
Commissioning into good order of the BUYER’S SUPPLIES during and after installation on board shall be made at the BUYER’s expense by the representative of respective maker or the person designated by the BUYER in accordance with the BUILDER’s building schedule.
 
Should the BUYER fail to deliver to the BUILDER the BUYER’S SUPPLIES and the necessary document or advice for such supplies within the time specified by the BUILDER, the DELIVERY DATE of the VESSEL shall automatically be extended for the period of such delay if such delay in delivery shall affect the delivery of the VESSEL. In such event, the BUYER shall pay to the BUILDER all losses and damages sustained by the BUILDER due to such delay in the delivery of the BUYER’S SUPPLIES and such payment shall be made upon delivery of the VESSEL, provided, however, that the BUILDER shall have :
 
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(a)             furnished the BUYER with the time schedule referred to above, two (2) months prior to installation of the BUYER’S SUPPLIES and
 
(b)            given the BUYER written notice of any delay in delivery of the BUYER’S SUPPLIES and the necessary document or advice for such supplies as soon as the delay occurs which might give rise to a claim by the BUILDER under this Paragraph.
 
Furthermore, if the delay in delivery of the BUYER’S SUPPLIES and the necessary document or advice for such supplies should exceed twenty (20) days from the date specified by the BUILDER, the BUILDER shall be entitled to proceed with construction of the VESSEL without installation of such items (regardless of their nature or importance to the BUYER or the VESSEL) in or on the VESSEL without prejudice to the BUILDER’s right hereinabove provided, and the BUYER shall accept the VESSEL so completed.
 
2.                  RESPONSIBILITY OF THE BUILDER
 
The BUILDER shall be responsible for storing, safekeeping and handling with reasonable care of the BUYER’S SUPPLIES which the BUILDER is required to install on board the VESSEL under Paragraph 0.16.1 of the SPECIFICATIONS after delivery of such supplies to the SHIPYARD, and shall install such supplies on board the VESSEL at the BUILDER’s expense unless otherwise specified in the SPECIFICATIONS.
 
However, the BUILDER shall not be responsible for the quality, performance or efficiency of any equipment included in the BUYER’S SUPPLIES and is under no obligation with respect to the guarantee of such equipment against any defects caused by poor quality, performance or efficiency of the BUYER’S SUPPLIES. If any of the BUYER’S SUPPLIES is lost or damaged while in the custody of the BUILDER, the BUILDER shall, if the loss or damage is due to wilful default or negligence on its part, be responsible for such loss or damage.
 
(End of Article)
 
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ARTICLE XIII - INSURANCE
 
1.                           EXTENT OF INSURANCE COVERAGE
 
From the time of launching until delivery of the VESSEL, the BUILDER shall, at its own cost and expense, insure the VESSEL and all machinery and equipment, appurtenances and outfits, including the BUYER’s Supplies, built into or installed in or upon the VESSEL, against all risks under the “Institute Causes for BUILDER’s Risk”, with first class insurance company or underwriters in.
 
The amount of such insurance coverage shall, up to the date of delivery of the VESSEL, not be less than the aggregate amount of all instalments paid by the BUYER to the BUILDER, plus the value of the BUYER’s Supplies in the custody of the Shipyard.
 
The BUILDER shall provide the copy of corresponding insurance coverage of the VESSEL to the BUYER.
 
2.                           TERMINATION OF BUILDER’S OBLIGATION TO INSURE
 
The BUILDER shall be under no obligation to insure the VESSEL hereunder after delivery and acceptance of the VESSEL.

(End of Article)
 
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ARTICLE XIV: ARBITRATION
 
1.                  APPOINTMENT OF THE ARBITRATOR
 
If any dispute or difference shall arise between the parties hereto concerning any matter or thing herein contained, or the operation or the design and / or construction of the VESSEL, its machinery and equipment thereof, or any matter or thing in any way connected with this CONTRACT or the rights, duties or liabilities of either party under or in connection with this CONTRACT, then, in every such case, the dispute or difference shall be referred to arbitration in London by a sole arbitrator. The arbitrator shall be appointed by agreement within fourteen (14) days of first written notification of either party to the other of intention to arbitrate such dispute or difference, or in default of such agreement, upon the application of either of the parties, by the President for the time being of the London Maritime Arbitrators Association who shall in making any such appointment have due regard to the requirement for an expeditious resolution of the dispute and in particular the availability of any arbitrator so appointed for an early hearing date.
 
2.                  LAWS APPLICABLE
 
Any arbitration arising hereunder shall be governed by and construed in accordance with the Arbitration Act 1996 of England or any statutory modification or re-enactments thereof for the time being in force. The award of the arbitrator shall be final and binding upon parties hereto.
 
3.                  PROCEEDINGS
 
In the event of any dispute or difference arising or occurring prior to delivery to, or acceptance by, the BUYER of the VESSEL being referred to arbitration, the parties hereby acknowledge that time is of the essence in obtaining an award from the arbitrator on such dispute or difference and the parties hereby agree that the arbitration shall be conducted according to the following timetable:
 
(a)            The claimant in the arbitration to serve points of claim within fourteen (14) days of the appointment of the arbitrator.
 
(b)           The respondent in the arbitration to serve points of defence and points of counterclaim,
 
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if any, within fourteen (14) days thereafter.
 
(c)         The claimant to serve points of reply and defence to counterclaim, if any, within seven (7) days thereafter and the hearing of the arbitration to commence within twelve (12) weeks of the appointment of the arbitrator.
 
4.                  ALTERATION OF DELIVERY OF THE VESSEL
 
In the event of the arbitration of any dispute or difference arising or occurring prior to delivery to, or acceptance by the BUYER of the VESSEL, the award by the arbitrator shall include a finding as to whether or not the contractual delivery date of the VESSEL should, as a result of such dispute, be in any way altered thereby.
 
5.                  NOTICE OF AWARD
 
The award shall immediately be given to the BUYER and the BUILDER by telefax.
 
6.                  EXPENSES
 
The Arbitration Board shall determine which party shall bear the expenses of the arbitration or the portion of such expenses which each party shall bear.
 
7.                  ENTRY IN COURT
 
In case of failure by either party to respect the award of the arbitration, the judgement may be entered in any proper court having jurisdiction thereof.
 
(End of Article)
 
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ARTICLE XV: SUCCESSORS AND ASSIGNS
 
The BUILDER agrees that, prior to delivery of the VESSEL, this CONTRACT may, with the prior written approval of the BUILDER, which the BUILDER shall not unreasonably withhold, be transferred to and the title thereof may be taken by another company. In the event of any assignment pursuant to the terms of this CONTRACT, the assignee, its successors and assigns shall succeed to all the rights and obligations of the BUYER under this CONTRACT. However, the BUYER shall remain responsible for performance by the assignee, its successors and assigns of all the BUYER’s obligations, liabilities and responsibilities under this CONTRACT. It is understood that any expenses or charges incurred due to the transfer of this CONTRACT shall be for the account of the BUYER.
 
The BUYER is hereby allowed to assign the Contract for the purposes of financing without BUILDER’S approval. However, the BUYER shall remain responsible for performance by the assignee, its successors and assigns of all the BUYER’s obligations, liabilities and responsibilities under this CONTRACT. It is understood that any expenses or charges incurred due to the transfer of this CONTRACT shall be for the account of the BUYER. The BUYER is further allowed to nominate a company controlled by the BUYER to take over the Contract.
 
The BUILDER shall fully cooperate in case the BUYER requests UK Tax lease financing arrangements. However, the BUYER shall remain responsible for performance by the assignee, its successors and assigns of all the BUYER’s obligations, liabilities and responsibilities under this CONTRACT. It is understood that any expenses or charges incurred due to the transfer of this CONTRACT shall be for the account of the BUYER.
 
The BUILDER shall have the right to assign this CONTRACT at any time after the effective date hereof, provided that prior written agreement is obtained from the BUYER.
 
(End of Article)
 
46

 
ARTICLE XVI: TAXES AND DUTIES
 
1.                  TAXES
 
Unless otherwise expressly provided for in this CONTRACT, all costs and taxes including stamp duties, if any, incurred in or levied by any country except Korea in connection with this CONTRACT shall be borne by the BUYER and corresponding costs and taxes in Korea, before delivery of the VESSEL, if any, shall be borne by the BUILDER.
 
2.                  DUTIES
 
The BUILDER shall hold the BUYER harmless from any payment of duty imposed in Korea upon materials or supplies which, under the terms of this CONTRACT, or amendments thereto, may be supplied by the BUYER from abroad for the construction of the VESSEL.
 
The BUILDER shall likewise hold the BUYER harmless from any payment of duty imposed in Korea in connection with materials or supplies for operation of the VESSEL, including running stores, provisions and supplies necessary to stock the VESSEL for its operation. This indemnity does not, however, extend to any items purchased by the BUYER for use in connection with the VESSEL which are not absolutely required for the construction or operation of the VESSEL.
 
(End of Article)
 
47

 
ARTICLE XVII: PATENTS, TRADEMARKS AND COPYRIGHTS
 
1.                  PATENTS, TRADEMARKS AND COPYRIGHTS
 
Machinery and equipment of the VESSEL, whether made or furnished by the BUILDER under this CONTRACT, may bear the patent numbers, trademarks, or trade names of the manufacturers. The BUILDER shall defend and save harmless the BUYER from all liabilities or claims for or on account of the use of any patents, copyrights or design of any nature or kind, or for the infringement thereof including any unpatented invention made or used in the performance of this CONTRACT and also for any costs and expenses of litigation, if any in connection therewith. No such liability or responsibility shall be with the BUILDER with regard to components and/or equipment and/or design supplied by the BUYER.
 
Nothing contained herein shall be construed as transferring any patent or trademark rights or copyrights in equipment covered by this CONTRACT, and all such rights are hereby expressly reserved to the true and lawful owners thereof.
 
2.                  RIGHTS TO THE SPECIFICATIONS, PLANS, ETC.
 
The BUILDER retains all rights with respect to the SPECIFICATIONS, plans and working drawings, technical descriptions, calculations, test results and other data, information and documents concerning the design and construction of the VESSEL and the BUYER shall not disclose the same or divulge any information contained therein to any third parties, including but not limited to any other shipbuilders, without the prior written consent of the BUILDER, excepting where it is necessary for usual operation, repair and maintenance of the VESSEL.
 
(End of Article)
 
48

 
ARTICLE XVIII: INTERPRETATION AND GOVERNING LAW
 
This CONTRACT has been prepared in English and shall be executed in duplicate and in such number of additional copies as may be required by either party respectively. The parties hereto agree that the validity and interpretation of this CONTRACT and of each Article and part thereof shall be governed by the laws of England.
 
(End of Article)
 
49

 
ARTICLE XIX : NOTICE
 
Any and all notices, requests, demands, instructions, advices and communications in connection with this CONTRACT shall be written in English, sent by registered air mail or facsimile and shall be deemed to be given when first received whether by registered mail or facsimile. They shall be addressed as follows, unless and until otherwise advised : -

To the BUILDER :	Sungdong Shipbuilding & Marine Engineering Co., Ltd.	
 	1609-2, Hwang-li, Gwangdo-myeon, Tongyoung-si,	
 	Gyeongnam, Korea	
 	 	
 	Contract Administration Department	
 	Attn : Mr. S. K. Ahn	
 	Facsimile: (82) 55 650 9294	
 	Telephone: (82) 55 650 9311	
 	 	
To the BUYER :	Danaos Shipping Co., Ltd.	
 	Akti Kondyli 14, 185 45 Piraeus, Greece	
 	Attn : Mr. Dimitrios Vastarouchas	
 	Facsimile : (30) 210 422 0855	
 	Telephone: (30) 210 419 6529	
 
The said notices shall become effective upon receipt of the letter or facsimile communication by the receiver thereof. Where a notice by facsimile is concerned which is required to be confirmed by letter, then, unless the CONTRACT or the relevant Article thereof otherwise requires, the notice shall become effective upon receipt of the facsimile.
 
(End of Article)
 
50

 
ARTICLE XX : EFFECTIVENESS OF THIS CONTRACT
 
This CONTRACT shall become effective upon signing by the parties hereto.
 
(End of Article)
 
51

 
ARTICLE XXI - INTERPRETATION
 
1.                           LAWS APPLICABLE
 
The parties hereto agree that the validity and interpretation of this Contract and of each Article and part thereof shall be governed by the laws of England.
 
2.                           DISCREPANCIES
 
All general language or requirements embodied in the SPECIFICATIONS are intended to amplify, explain and implement the requirements of this CONTRACT. However, in the event that any language or requirements so embodied permit of an interpretation inconsistent with any provisions of this Contract, then, in each and every such event, the applicable provisions of this Contract shall prevail and govern. In the event of conflict between the SPECIFICATIONS and Plans, the SPECIFICATIONS shall prevail and govern.
 
3.                           ENTIRE AGREEMENT
 
This Contract contains the entire agreement and understanding between the parties hereto and supersedes all prior negotiations, representations, undertaking and agreements on any subject matter of this Contract.
 
4.                           AMENDMENTS AND SUPPLEMENTS
 
Any supplement, memorandum of understanding or amendment, whatsoever form it may be relating to this CONTRACT, to be made and signed among parties hereof after signing this CONTRACT, shall be the integral part of this CONTRACT and shall be predominant over the respective corresponding Article and/or Paragraph of this CONTRACT.
 
The Contract can only be amended in writing.
 
(End of Article)
 
52

 
ARTICLE XXII : EXCLUSIVENESS
 
This CONTRACT shall constitute the only and entire agreement between the parties hereto, and unless otherwise expressly provided for in this CONTRACT, all other agreements, oral or written, made and entered into between the parties prior to the execution of this CONTRACT shall be null and void.
 
(End of Article)
 
53

 
IN WITNESS WHEREOF , the parties hereto have caused this CONTRACT to be duly executed on the date and year first above written.

BUYER	BUILDER	

For and on behalf of	For and on behalf of	
BOXCARRIER (NO.5) CORP.	SUNGDONG SHIPBUILDING &	
 	MARINE ENGINEERING CO.,LTD.	

By	/s/ John Coustas	 	By	/s/ Kwan Hong Yu	 	
Name: John Coustas	Name: Kwan Hong Yu	
Title:	Title:	
President & Chief Executive Officer	Chairman & Chief Executive Officer	

WITNESS : /s/ Huong Chul Jung, Attorney-in-fact	WITNESS: [Illegible]	

54

 
EXHIBIT “A”
 
LETTER OF REFUNDMENT GUARANTEE
 
Gentlemen :
 
We hereby issue our letter of guarantee no.             in favour of                    (hereinafter called the “BUYER”) for account of                    (hereinafter called the “BUILDER”) as follows in consideration of the shipbuilding contract dated (hereinafter called the “Contract”) made by and among the BUYER and the BUILDER for the construction of one(1) single screw diesel engine driven Container VESSEL having BUILDER’s Hull No. (hereinafter called the “VESSEL”).
 
If in connection with the terms of the Contract the BUYER shall become entitled to a refund of the advance payment(s) made to the BUILDER prior to the delivery of the VESSEL, we hereby irrevocably guarantee the repayment of the same to the BUYER immediately on demand being initially US$ (Say U.S. Dollars) together with interest thereon at the rate of Seven (7) percent per annum from the respective dates on which such sums were paid by the BUILDER to the date of remittance by telegraphic transfer of such refund.
 
The amount of this guarantee will be automatically increased, not more than three times, upon BUILDER’s receipt of the respective instalment: each time by the amount of instalment of US$ (Say U.S. Dollars), US$.- (Say U.S. Dollars) and US$.- (Say U.S. Dollars) respectively plus interest thereon as provided in the Contract, but in any eventuality the amount of this guarantee shall not exceed the total sum of US$.- (Say U.S. Dollars plus interest thereon at the rate of Seven (7) percent per annum from the respective dates on which such sums were paid by the BUYER to the BUILDER to the date of remittance by telegraphic transfer of the refund. However, in the event of cancellation of the CONTRACT being based on delays due to force majeure or other causes beyond the control of the BUILDER, the interest rate of refund shall be reduced to six point five per cent (6.5%) per annum as provided in Article X of the CONTRACT.
 
Our liability under this letter of guarantee shall not be affected by any alteration to or variation of the terms of the Contract you may hereafter agree with the BUILDER and by any other matter of circumstances, including bankruptcy or insolvency of the BUILDER, which might otherwise discharge our liability hereunder as guarantor of the BUILDER’s obligations as aforesaid.
 
In case any refund is made to you by the BUILDER or by us under this guarantee, our liability hereunder shall be automatically reduced by the amount of such refund.
 
This letter of guarantee is available against BUYER’s simple receipt and signed statement certifying that BUYER’s demand for refund has been made in conformity with Article X of the Contract and the BUILDER has failed to make the refund within Thirty One (31) days after BUYER’s demand to the BUILDER.
 
1

 
Refund shall be made to BUYER by telegraphic transfer in United States Dollars to an account designated by you without deduction, withholding or set-off.
 
This letter of guarantee shall expire and become null and void upon receipt by the BUYER of the sum guaranteed hereby or upon acceptance by the BUYER of the delivery of the VESSEL in accordance with the terms of the Contract and, in either case, this letter of guarantee shall be returned to us. This guarantee is valid from the date of this letter of guarantee until or in the event of delayed delivery until such time as the VESSEL is delivered by the BUILDER to the BUYER in accordance with the terms of the Contract.
 
Notwithstanding the provisions hereinabove, in case we receive notification from you or the BUILDER confirmed by an Arbitrator stating that your claim to cancel the Contract or your claim for refundment thereunder has been disputed and referred to Arbitration in accordance with the provisions of the Contract, the period of validity of this guarantee shall be extended until Thirty (30) days after the final and non-appealable award shall be rendered in the Arbitration and a copy thereof acknowledged by the Arbitrators. In such case, this guarantee shall not be available unless and until such acknowledged copy of the final award in the Arbitration justifying your claim is presented to us.
 
Your rights in respect of this letter of guarantee are assignable from the date of this letter of guarantee until such time as the VESSEL is delivered by the BUILDER to the BUYER in accordance with the provisions of the Contract, on the understanding that you will notify us of the identity of any assignee of your rights under this letter of guarantee.
 
Any notice or demand under this letter of guarantee shall be given by facsimile and sent to:

 

 
or to such other address as we might notify to you in writing. A notice shall be deemed to be served and shall take effect 2 hours after its transmission is completed, provided that if a notice would be deemed to be served on a day which is not a business day, or which is a business day but after 5:00 p.m. local time, in the place of receipt, the notice shall be deemed to be served and shall take effect at 9:00 a.m. on the next day which is a business day.
 
This guarantee shall be governed by and construed in accordance with the Laws of England. Any disputes arising under this guarantee (but not any disputes arising under the Contract which shall be determined by arbitration in accordance with the terms of the Contract and as referenced in this letter of guarantee) shall be determined by the High Court of Justice in London to whose exclusive jurisdiction we hereby submit. We appoint
 
2

 
                                                             as our agents for service of process in connection with any proceedings in such courts.
 
We each jointly and severally hereby represent and guarantee that we have the corporate power and authority to execute, deliver and perform the obligations under this letter of guarantee, and that such execution and performance will not violate or conflict with any provision of law, statute, rule, permit or regulation of any government, regulatory body, agency or other authority in the jurisdictions where we are subject to such laws and regulations.
 
IN WITNESS WHEREOF, we have hereunder set our hands and seal by our duly authorized representatives this           day of                , 2006.

 	Very truly yours,	

 	For and on behalf of	

 	 	
 	By	 	 	
 	Name :	
 	Title : Attorney-in-Fact	

 	For and on behalf of	

 	 	 	
 	By	 	 	
 	Name :	
 	Title : Attorney-in-Fact	
 
3

 
EXHIBIT “B”

Date :             , 2006
 
PERFORMANCE GUARANTEE
 
In consideration of the performance of a certain shipbuilding contract dated                                        (hereinafter called the “Contract”) by having your Hull No. (hereinafter called the “VESSEL”) providing among other things for payment of the Contract Price amounting to United States Dollars                                    (US$                                  );
 
We, the undersigned, hereby irrevocably and unconditionally guarantee to you, your successors, and assigns the due and faithful performance by the BUYER of its all liabilities and responsibilities under the Contract and any supplement, amendment, change or modification hereafter made thereto, including but not limited to, due and prompt payment of the Contract Price by the BUYER to you, your successors, and assigns under the Contract and any supplement, amendment, change or modification as aforesaid (hereby expressly waiving notice of any such supplement, amendment, change or modification as may be agreed to by the BUYER and confirming that this guarantee shall be fully applicable to the Contract as so supplemented, amended, changed or modified).
 
This Performance Guarantee shall be governed by the laws of England.

GUARANTOR :	
BY :	 	 	
TITLE :	
WITNESS :	
 
4

 
Exhibit 10.32

 	Norwegian Shipbrokers’ Association’s Memorandum of Agreement for sale and purchase of ships. Adopted by The Baltic and International Maritime Council (BIMCO) in 1956.	
 	Code-name	
 	SALEFORM 1993	
 	Revised 1966, 1983 and 1986/87.	

Dated: 7th February 2005
 
MS “E.R. Auckland” Schiffahrtsgesellschaft GmbH & Co. KG
c/o E.R. Schiffahrt GmbH & Cie. KG, Bel den Miihren 1, 20457 Hamburg/Germany
 
hereinafter called the Sellers, have agreed to sell, and
AUCKLAND MARINE INC.
80 Broad Street Monrovia, Liberia C/o DANAOS SHIPPING CO LTD 14, Akti Kondyli
185 45 Piraeus Greece
 
hereinafter called the Buyers, have agreed to buy
 
Name: E.R. AUKLAND
 
Classification Society/Class: GL

Built: 2004	 	     By: Hyundai Samho, Korea	
 	 	 	
Flag: Liberia	 	Place of Registration: Monrovia	
 	 	 	
Call Sign: A8DZ2	 	      Grt/Nrt GT/NT: 41,855 / 25,310	
 	 	 	
Register Number: 204	 	 	
 
hereinafter called the Vessel, on the following terms and conditions:
 
Definitions
 
“Banking days” are days on which banks are open both in the country of the currency stipulated for the Purchase Price in Clause 1 and in the place of closing stipulated in Clause 8.
 
“In writing” or “written” means a letter handed over from the Sellers to the Buyers or vice versa, a registered letter, telex, telefax or other modern form of written communication.
 
“Classification Society” or “Class” means the Society referred to in line 4.
 
1.         Purchase Price US$ 61,750,000 (Ie United States Dollars Sixty One Million, Seven Hundred and Fifty Thousand)
 
2.         Deposit
 
As security for the correct fulfillment of this Agreement the Buyers shall pay a deposit of 10% (ten per cent) of the Purchase Price within 3 ( three )                       banking days after from the date of this Agreement has been signed by both parties by fax and the tripartite agreement is signed by Sellers Buyers and CSAV as Charterers (see clause 17) . This deposit shall be placed with
 
Bank: HSH Nordbank
Accnt-Nr. 1100 172 687
Swift: HSH NDE HH
 
and held by them in a joint account for the Sellers and the Buyers, to be released in accordance with joint written instructions of the Sellers and the Buyers. Interest, if any , to be credited to the and split between the Buyers and Sellers equally . Any fee charged for holding the said deposit shall be borne equally by the Sellers and the Buyers. Also a further 10% to be in the form of corporate guarantee, as per attached wording, to be issued by Danaos Holdings Limited. Fax copy to be provided simultaineously with Buyers signing the MoA by fax and original to be provided with signed original MoA.

 
The said Purchase Price shall be paid in full free of bank charges to
Bank: HSH Nordbank
 BLZ: 200 500 00
 Accnt-Nr. USD: 1100152506
 IBAN USD: DE06210500001100152506
 SWIFT: HSH NDE HH_
on delivery of the Vessel, but not later than 3 banking days after the Vessel is in every respect physically ready for delivery in accordance with the terms and conditions of this Agreement and Notice of Readiness has been given in accordance with Clause 5.
 
4.                          Inspections
 
a)*                   The Buyers have inspected and accepted the Vessel’s classification records. The Buyers have also inspected the Vessel at/in                        on                        and have accepted the Vessel following this inspection and the sale is outright and definite, subject only to the terms and conditions of this Agreement. Sellers to permit Buyers to have access to vessels class records at any time prior to vessels delivery within Germanischer Lloyds normal office hours at Buyers cost and expenses. The relative authorisation to be sent to GL shortly after sale is definite and deposit and corporate guarantee lodged/provided
 
b)*                  The Buyers shall have the right to inspect the Vessel’s classification records and declare whether same are accepted or not within
 
The Sellers shall provide for inspection of the Vessel at/in
 
The Buyers shall undertake the inspection without-undue delay to the Vessel. Should the Buyers cause undue delay they shall compensate the Sellers for the losses thereby incurred. The Buyers shall inspect the Vessel without opening up and without cost to the- Sellers. During the inspection, the Vessel’s deck and engine log books shall be made available for examination by the Buyers. If the Vessel is accepted after such inspection, the-sale shall become outright and definite, subject only to the terms and conditions of this Agreement, provided the Sellers receive written notice of acceptance from the Buyers within 72 hours after completion of such inspection. Should notice of acceptance of the Vessel’s classification records and of the Vessel not be received by the Sellers as aforesaid, the deposit together with interest earned shall be released immediately to the Buyers, whereafter this Agreement shall be null and void.

*                             4 a) and 4b) are alternatives; delete whichever is not applicable. In the absence of deletions, alternative 4a) to apply.
 
5.                          Notices, time and place of delivery. See also clause 17
 
a)                          The Sellers shall keep the Buyers well informed of the Vessel’s itinerary after 90 days notice has been tendered and shall provide the Buyers with 90, 60, 45, 30, 20, 10, 7, 5, 3 and 1 days notice of the estimated time of arrival at the intended place of drydocking/underwater inspection/delivery . When the Vessel is at the place of delivery and in every respect physically ready for delivery in accordance with this Agreement, the Sellers shall give the Buyers a written Notice of Readiness for delivery.
 
b)                         The Vessel-shall be delivered and taken over safely afloat at a safe and accessible berth or anchorage at/in
 
In the Sellers’ option.
 
Expected time of delivery:
 
Data of cancelling (see Clauses 5 c), 6 b) (iii) and 14):

 
If the Sellers anticipate that, notwithstanding the exercise of due diligence by them, the Vessel will not be ready for delivery by the cancelling date they may notify the Buyers in writing stating the date when they anticipate that the Vessel will be ready for delivery and propose a new cancelling date. Upon receipt of such notification the Buyers shall have the option of either cancelling this Agreement in accordance with Clause 14 within 7 running days of receipt of the notice or of accepting the new date as the new cancelling date. If the Buyers have not declared their option within 7 running days of receipt of the Sellers’ notification or if the Buyers accept the new date, the date proposed in the Sellers’ notification shall be deemed to be the new cancelling date and shall be substituted for the cancelling date stipulated in line 61.
 
If this Agreement is maintained with the new cancelling date all other terms and conditions hereof including those contained in Clauses 5 a) and 5 c) shall remain unaltered and in full force and effect. Cancellation or failure to cancel shall be entirely without prejudice to any claim for damages the Buyers may have under Clause 14 for the Vessel not being ready by the original cancelling date.
 
d)                         Should the Vessel become an actual, constructive or compromised total loss before delivery the deposit together with interest earned shall be released immediately to the Buyers whereafter this Agreement shall be null and void.
 
6.                          Drydocking/Divers Inspection
 
a)**            The Sellers shall place the Vessel in drydock at the port of delivery for inspection by the Classification Society of the Vessel’s underwater parts below the deepest load line, the extent of the inspection being in accordance with the Classification Society’s rules. If the rudder, propeller, bottom or other underwater parts below the deepest load line are found broken, damaged or defective so as to affect the Vessel’s class, such defects shall be made good at the Sellers’ expense to the satisfaction of the Classification Society without condition/recommendation*.
 
b)**           (i) The Vessel is to be delivered without drydocking. However, the Buyers shall have the right at their expense to arrange for an underwater inspection by a diver approved by the Classification Society prior to the delivery of the Vessel. The Sellers shall at their cost make the Vessel available for such inspection. The extent of the inspection and the conditions under which it is performed shall be to the satisfaction of the Classification Society. If the conditions at the port of delivery are unsuitable for such inspection, the Sellers shall make the Vessel available at a suitable alternative place near to the delivery port.
 
However, not withstanding what has been mentioned above, if any damage is found to the rudder, propeller, bottom or other underwater parts below the deepest load line which in the opinion of class would impose a class condition, but does not affect vessel’s ability to trade until next scheduled drydocking, Buyers and Sellers shall agree to an amount of compensation to be deducted from the purchase price and Buyers shall accept delivery of the vessel including the condition(s) raised by the divers inspection.
 
If Sellers and Buyers cannot agree a compensation figure within 1 working day, then the figure to apply is to be the average quotes of estimated costs of repairs obtained from 2 first class yards. If the vessel delivers in the Far East then estimated cost of repairs to be obtained from 2 First Class Far Eastern yards, if the vessel delivers in Europe then estimated cost of repairs to be obtained from 2 First Class European yards, one appointed by the Sellers and one appointed by the Buyers. Compensation is to be the direct actual costs of repairs excluding drydock time, services and off-hire.
 
If any damage is found to the underwater parts which in the opinion of class would impose a class condition and can not be postponed until the next drydocking, then drydocking arrangements as per clause 6 (b) (ii) and (b) (iii) below shall apply with Buyers right to attend same as observers only without interference to Sellers work.
 
Fees for class attendance during divers inspection to be for Buyers account.

 
(ii) If the rudder, propeller, bottom or other underwater parts below the deepest load line are found broken, damaged or defective so as to effect the Vessel’s class, then unless repairs can be carried out afloat to the satisfaction of the Classification Society, the Sellers shall arrange for the Vessel to be drydocked at their expense for inspection by the Classification Society of the Vessel’s underwater parts below the deepest load line, the extent of the inspection being in accordance with the Classification Society’s rules. If the rudder, propeller, bottom or other underwater parts below the deepest load line are found broken, damaged or defective, so as to affect the Vessel’s class, such defects shall be made good by the Sellers at their expense to the satisfaction of the Classification Society without condition/recommendation*. In such event the Sellers are to pay also for the cost of the underwater inspection and the Classification Society’s attendance.
 
(iii) If the Vessel is to be drydocked pursuant to Clause 6 b) (ii) and no suitable dry-docking facilities are available at the port of delivery, the Sellers shall take the Vessel to a port where suitable drydocking facilities are available, whether within or outside the delivery range as per Clause 5 b). Once drydocking has taken place the Sellers shall deliver the Vessel at a port within the delivery range as per Clause 5 b) which shall, for the purpose of this Clause, become the new port of delivery. In such event the cancelling date provided for in Clause 5 b) shall be extended by the additional time required for the drydocking and extra steaming, but limited to a maximum of 14 running days.
 
c)         If the Vessel is drydocked pursuant to Clause 6 a) or 6 b) above
 
(i) the Classification Society may require survey of the tailshaft system, the extent of the survey being to the satisfaction of the Classification surveyor. If such survey is not required by the Classification Society, the Buyers shall have the right to require the tailshaft to be drawn and surveyed by the Classification Society, the extent of the survey being in accordance with the Classification Society’s rules for tailshaft survey and consistent with the current stage of the Vessel’s survey cycle. The Buyers shall declare whether they require the tailshaft to be drawn and surveyed not later than by the completion of the inspection by the Classification Society. The drawing and refitting of the tailshaft shall be arranged by the Sellers. Should any parts of the tailshaft system be condemned or found defective so as to affect the Vessel’s class, those parts shall be renewed or made good at the Sellers’ expense to the satisfaction of the Classification Society without condition/recommendation*.
 
(ii) the expenses relating to the survey of the tailshaft system shall be borne by the Buyers unless the Classification Society requires such survey to be carried out, in which case the Sellers shall pay these expenses. The Sellers shall also pay the expenses if the Buyers require the survey and parts of the system are condemned or found defective or broken so as to affect the Vessel’s class*.
 
(iii) the expenses in connection with putting the Vessel in and taking her out of drydock, including the drydock dues and the Classification Society’s fees shall be paid by the Sellers if the Classification Society issues any condition/recommendation* as a result of the survey or if it requires survey of the tailshaft system. In all other cases the Buyers shall pay the aforesaid expenses, dues and fees.
 
(iv) the Buyers’ representative shall have the right to be present in the drydock, but without interfering with the work or decisions of the Classification surveyor.
 
(v) the Buyers shall have the right to have the underwater parts of the Vessel cleaned and painted at their risk and expense without interfering with the Sellers’ or the Classification surveyor’s work, if any, and without affecting the Vessel’s timely delivery. If, however, the Buyers’ work in drydock is still in progress when the Sellers have completed the work which the Sellers are required to do, the additional docking time needed to complete the Buyers’ work shall be for the Buyers’ risk and expense. In the event that the Buyers’ work requires such additional time, the Sellers may upon completion of the Sellers’ work tender Notice of Readiness for delivery whilst the Vessel is still in drydock and the Buyers shall be obliged to take delivery in accordance with Clause 3, whether the Vessel is in drydock or not and irrespective of Clause 5 b).
 
Notes, if any, in the surveyor’s report which are accepted by the Classification Society without condition/recommendation are not to be taken into account.

 
7.         Spares/bunkers, etc.
 
The Sellers shall deliver the Vessel to the Buyers with everything belonging to her on board and on shore and on order. All spare parts and spare equipment including spare tail end shaft(s) and/or spare propeller(s)/propeller blade(s), if any, belonging to the Vessel at the time of inspection used or unused, whether on board or not shall become the Buyers’ property, but spares on order are to be excluded. Forwarding charges, if any, shall be for the Buyers’ account. The Sellers are not required to replace spare parts including spare tail-end shaft(s) and spare propeller(s)/propeller blade(s) which are taken out of spare and used as replacement prior to delivery, but the replaced items shall be the property of the Buyers. The radio installation and navigational equipment shall be included in the sale without extra payment if they are the property of the Sellers . Unused stores and provisions shall be included in the sale and be taken over by the Buyers without extra payment.
 
The Sellers have the right to take ashore crockery, plates, cutlery, linen and other articles bearing the Sellers’ flag or name, provided they replace same with similar unmarked items. Library, forms, etc., exclusively for use in the Sellers’ vessel(s), shall be excluded without compensation. Captain’s, Officers’ and Crew’s personal belongings including the slop chest are to be excluded from the sale, as well as the following additional items’ (including items on hire): i tems currently on hire: (though it is understood that hired items may be added at a later stage)
 
• Globe Wireless Equipment incl. SSAS System
• Seagull/ Videotel training software and videos not owners property and have to be returned.
• Weather Observation Instruments from DWD is property of the Federal Republic of Germany. (It consists of a laptop PC, a barograph, a barometer, a thermometer and a bucket.)
 
The Buyers shall take over the remaining bunkers and unused lubricating oils in storage tanks and unbroached sealed drums and designated storage tanks at Sellers last net paid prices as evidenced by vouchers/suppliers invoices, including discounts pay the current net market price (excluding barging expenses) at-the port and date of on delivery of the Vessel. Bunkers to be paid at Sellers last net paid prices as evidenced by vouchers/suppliers invoices, including discounts in the event of charter free delivery. Payment under this Clause shall be made at the same time and place and in the same currency as the Purchase Price.
 
8.         Documentation
 
The place of closing: Hamburg, Germany
 
In exchange for payment of the Purchase Price the Sellers shall furnish the Buyers with delivery documents which may be reasonably required for the legal transfer of the vessel and for her registration under new flag and ownership.   namely such list to be incorporated in an addendum to this MoA:
 
a)                          Legal Bill of Sale in a form recordable in                                    — (the country in which the Buyers are to register the Vessel), warranting that the Vessel is free from all encumbrances, mortgages and-maritime liens or any other debts-or claims whatsoever, duly notarially attested-and legalized by the consul of such country or other competent authority .
 
b)                         Current Certificate of Ownership issued by the competent authorities of the flag state of the Vessel.
 
c)                          Confirmation of Class issued within 72 hours prior to delivery.
 
d)                         Current Certificate issued by the competent authorities stating that the Vessel-is-free from registered encumbrances .

 
e) Certificate of deletion of the Vessel from the Vessel’s registry or other official evidence of deletion appropriate to the Vessel’s registry at the time of delivery, or, in the event that the registry does not as a matter of practice issue such documentation immediately, a written undertaking by the Sellers to-effect deletion from the Vessel’s registry forthwith and furnish a Certificate or other official evidence of deletion to the Buyers promptly and latest within~4 (four) weeks-after the Purchase Price has been paid and the Vessel-has been delivered.
 
f)                            Any such additional documents as may reasonably be required by the competent authorities for the purpose of-registering the Vessel, provided the Buyers notify the Sellers of any such documents as seen as possible after-the date of this Agreement.
 
At the time of delivery the Buyers and Sellers shall sign and deliver to each other a Protocol of Delivery and Acceptance confirming the date and time of delivery of the Vessel from the Sellers to the Buyers.
 
At the time of delivery the Sellers shall hand to the Buyers the classification certificate(s) as well as all plans etc., which are on board the Vessel. Other certificates which are on board the Vessel shall also be handed over to the Buyers unless the Sellers are required to retain same, in which case the Buyers to have the right to take copies. Other technical documentation which may be in the Sellers’ possession shall be promptly forwarded to the Buyers at their expense, if they so request. The Sellers may keep the Vessel’s log books but the Buyers to have the right to take copies of same.
 
9.         Encumbrances
 
The Sellers warrant that the Vessel, at the time of delivery, is free from all charters unless vessel is delivered as per Clause 17 of Appendix No.1 to the M.o.A. , encumbrances, mortgages and maritime liens or any other debts whatsoever. The Sellers hereby undertake to indemnify the Buyers against all consequences of claims made against the Vessel which have been incurred prior to the time of delivery.
 
10.       Taxes, etc.
 
Any taxes, fees and expenses in connection with the purchase and registration under the Buyers’ flag shall be for the Buyers’ account, whereas similar charges in connection with the closing of the Sellers’ register shall be for the Sellers’ account.
 
11.       Condition on delivery
 
The Vessel with everything belonging to her shall be at the Sellers’ risk and expense until she is delivered to the Buyers, but subject to the terms and conditions of this Agreement she shall be delivered and taken over as she was at the time of inspection, fair wear and tear excepted. However, the Vessel shall be delivered with her GL class fully maintained without condition/recommendation*, free of average damage affecting the Vessel’s class, and with her classification certificates and national certificates, as well as all other certificates the Vessel had at the time of inspection, valid and unextended without condition/recommendation” by Class or the relevant authorities at the time of delivery. All continuous survey cycles to be fully up to date at time of delivery. The Sellers shall notify the Classification Society of any matters coming to their knowledge prior to delivery which upon being reported to the Classification Society would lead to the withdrawl of the vessels class or to the imposition of a recommendation relating to her class. “Inspection” in this Clause 11, shall mean the Buyers’ inspection according to Clause 4 a) or 4 b), if applicable, or the Buyers’ inspection prior to the signing of this Agreement. If the Vessel is taken over without inspection, the date of this Agreement shall be the relevant date.
 
*                             Notes, if any, in the surveyor’s report which are accepted by the Classification Society without condition/recommendation are not to be taken into account.
 
12.       Name/markings
 
Upon delivery the Buyers undertake to change the name of the Vessel and alter funnel markings unless the vessel is delivered to and taken over by Buyers with the balance of time charter to CSAV

 
Should the deposit not be paid and/or the Corporate Guarantee have not been provided in accordance with Clause 2, the Sellers have the right to cancel this Agreement, and they shall be entitled to claim compensation for their losses and for all expenses incurred together with interest.
 
Should the Purchase Price not be paid in accordance with Clause 3, the Sellers have the right to cancel the Agreement, in which case the deposit together with interest earned shall be released to the Sellers. If the deposit does not cover their loss, the Sellers shall be entitled to claim further compensation for their losses and for all expenses incurred together with interest.
 
14.                   Sellers’ default
 
Should the Sellers fail to give Notice of Readiness in accordance with Clause 5 a) or fail to be ready to validly complete a legal transfer by the date stipulated in line 61 the Buyers shall have the option of cancelling this Agreement provided always that the Sellers shall be granted a maximum of 3 banking days after Notice of Readiness has been given to make arrangements for the documentation set out in Clause 8. If after Notice of Readiness has been given but before the Buyers have taken delivery, the Vessel ceases to be physically ready for delivery and is not made physically ready again in every respect by the date stipulated in line 61 and new Notice of Readiness given, the Buyers shall retain their option to cancel. In the event that the Buyers elect to cancel this Agreement the deposit together with interest earned shall be released to them immediately.
 
Should the Sellers fail to give Notice of Readiness by the date stipulated in line 61 or fail to be ready to validly complete a legal transfer as aforesaid they shall make due compensation to the Buyers for their loss and for all expenses together with interest if their failure is due to proven negligence and whether or not the Buyers cancel this Agreement.
 
15.                   Buyers’ representatives
 
After this Agreement has been signed by both parties and the deposit and Corporate Guarantee has been lodged, the Buyers have the right to place two representatives on board the Vessel at their sole risk and expense for the last 90 days prior to the intended delivery date upon arrival at on or about
 
These representatives are on board for the purpose of familiarisation and in the capacity of observers only, and they shall not interfere in any respect with the operation of the Vessel. The Buyers’ representatives shall sign the Sellers’ letter of indemnity prior to their embarkation.
 
Buyers can send maximum 1 representative to inspect each vessel twice per annum only during port stay and without interferance or delay to the vessel/schedule
 
16.                   Arbitration
 
a)*                   This Agreement shall be governed by and construed in accordance with English law and any dispute arising out of this Agreement shall be referred to arbitration in London in accordance with the Arbitration Acts 1950 and 1979 or any statutory modification or re-enactment thereof for the time being in force, one arbitrator being appointed by each party. On the receipt by one party of the nomination in writing of the other-party’s arbitrator, that party shall appoint their arbitrator within fourteen days, failing which the decision of the single arbitrator appointed shall apply. If two arbitrators properly appointed shall not agree they-shall appoint an umpire whose decision shall be final. In the case of dispute one single arbitrator to be nominated by the President of LMAA upon request of either party whose decision shall be final.
 
b)*                  This Agreement-shall be governed by and construed in accordance with Title [Illegible]-of the United States Code and the Law of the State of New York and should any dispute arise out of this Agreement,-the matter in dispute shall be referred to three persons at New York, one to be-appointed by each of the parties -hereto, and the third by the two so chosen; their decision or-that of any two of them shall be final, and for-purpose of enforcing any award, this Agreement may be made a rule of the Court.
 
The proceedings shall be conducted in accordance with the rules-of the Society of Maritime

 
[illegible], subject to the procedures applicable there. The laws of LMAA shall govern this Agreement.

*                             16 a), 16 b) and 16 c) are alternatives; delete whichever is not applicable. In the absence of deletions, alternative 16 a) to apply.
 
clauses 17 to 23 attached to form an integral part of this MoA.

For the Sellers	 	 	 	

 /s/ A. Schumacher	 	 	 	
A. SCHUMACHER	 	 	 	

For the Buyers	 	 	 	
 	 	 	 	
/s/ illegible	 	 	 	
 
This document is a computer generated copy of “SALEFORM 1993”, printed by authority of the Norwegian Shipbrokers’ Association, using software which is the copyright of Strategic Software Ltd. Any insertion or deletion to the form must be clearly visible. In the event of any modification made to the preprinted text of this document, the original document shall apply. The Norwegian Shipbrokers’ Association and Strategic Software Ltd. assume no responsibility for any loss or damage caused as a result of discrepancies between the original approved document and this document.

 
Appendix No 1
to the Memorandum of Agreement dated 7 th February 2005
(the “M.O.A.”)
relating to m/v “ER Aukland” (the “Vessel”)
MS “E.R. Auckland” Schiffahrtsgesellschaft GmbH & Co. KG
(the “Sellers”)
and
Auckland Marine Inc, Liberia (“Buyers”)
 
Clause 17
 
The Mv ‘E.R. Auckland’ shall be delivered in March 2007 either Time Charter Free in which case the ship to be delivered cargo free in either 1 safe port Singapore/S Japan range or in sellers option 1 safe port in Hamburg/Rotterdam range or with the balance of her Time charter to CSAV as per charter party dated 02nd October 2003 at USD 29250 Pd less 1,25 pct total commission until min 10-Mar/max 10-June 2007 in which case the Vessel to be delivered in a mutually agreed convenient safe port within the charterers trading range between 1st / 30th March 2007 with cancelling dates as 31st March 2007 with cargo as on board and without affecting vessels schedule and charterers port/cargo operations. If buyers do not agree to owners proposed port of delivery and as a consequence the delivery is thereby delayed the cancelling dates to be extended accordingly.
 
The vessel to be delivered in a safe port safely afloat, free of encumbrances, free of stowaways and free of maritime liens, mortgages or any other taxes, debts or claims whatsoever. Buyers have received a copy of the above Charter Party dated 2 nd October 2003 and have approved same.
 
Clause 18
 
Sellers to guarantee that upon signing this Memorandum of Agreement to the best of their knowledge the vessel is not blacklisted.
 
Clause 19
 
All instruction books, drawings, plans and manuals, onboard or ashore in owners/managers office that are in sellers possession are to be delivered to the Buyers. Owners to forward office set as soon as possible after delivery to Buyers nominated office. After sale is definite and Buyers have duly fulfilled all their obligations under the MoA Sellers shall provide one set of copies for both vessels of the following plans / documents in order buyers to construct their standard ANKO loading software. All forwarding costs to be for Buyers account.
 
• Capacity plan
• General Arrangement
• Loading Manual
• Trim and Stability booklet
• Container Stowage Plan
• Lashing Manual
• Cargo mass diagrams for every hold (if applicable)
• Hydrostatics
• Cross Curves
• Ullage tables/ Sounding tables for every compartment
• Longitudinal distribution of lightweight or relevant strength

 
• Tank top strength
• Position of draught marks
• Copy of the Loadline Certificate
 
• Lines Plan or Offset Tables
• In case the above are not available, the following are needed:
• Docking plan
• Shell expansion
• Construction drawings (frames): Aft & fore parts and at the engine room area
• Bonjean Curves
 
Clause 20
 
Vessel to be delivered with a full set of container lashing as per her cargo securing manual and in accordance with Osha rules and regulations which to be verified by a joint survey between Buyers and Sellers representatives. In case insufficient amount of lashing gears, Sellers to make cash compensation to Buyers at delivery.
 
Clause 21
 
Negotiations and sale, if any, to be kept strictly private and confidential.
 
Clause 22
 
See addition in Clause 12.
 
Sellers to produce a class maintenance certificate in accordance with clause 11 of the MoA dated no more than 3 days prior to the date of delivery
 
Clause 23
 
This MoA to be signed and executed simultaneously with the MoA for “E.R Wellington”

For and on behalf of Sellers	 	For and on behalf of Buyers	

 /s/ illegible	 	 	/s/ illegible	
MS ‘E.R Aukland’ Schiffahrtsgesellschaft	 	Auckland Marine Inc. Liberia	
GmbH & Co. KG	 	 	

 
Exhibit 10.33

 	Norwegian Shipbrokers’ Association’s Memorandum of Agreement for sale and purchase of ships. Adopted by The Baltic and International Maritime Council (BIMCO) in 1956.	
 	Code-name	
 	SALEFORM 1993	
 	Revised 1966, 1983 and 1986/87.	
 
Dated: 7th February 2005
 
MS “E.R. Wellington” Schiffahrtsgesellschaft GmbH & Co. KG c/o E.R. Schiffahrt GmbH & Cie. KG
 
Bei den Mühren 1, 20457 Hamburg/Germany
hereinafter called the Sellers, have agreed to sell, and
 
WELLINGTON MARINE INC.
80 Broad Street Monrovia, Liberia C/o DANAOS SHIPPING CO LTD 14, Akti Kondyli
185 45 Piraeus Greece
 
hereinafter called the Buyers, have agreed to buy
 
Name : E.R. WELLINGTON
 
Classification Society/Class: GL

Built: 2004	 	     By: Hyundai Samko, Korea	
 	 	 	
Flag: Liberia	 	Place of Registration: Monrovia	
 	 	 	
Call Sign: A8EGS	 	      Grt/Nrt GT/NT : 41,855 / 25,310	
 	 	 	
Register Number: 205	 	 	
 
hereinafter called the Vessel, on the following terms and conditions:
 
Definitions
 
“Banking days” are days on which banks are open both in the country of the currency stipulated for the Purchase Price in Clause 1 and in the place of closing stipulated in Clause 8.
 
“In writing” or “written” means a letter handed over from the Sellers to the Buyers or vice versa, a registered letter, telex, telefax or other modern form of written communication.
 
“Classification Society” or “Class” means the Society referred to in line 4.
 
1.         Purchase Price US$ 61,750,000 (Ie Untied States Dollars Sixty One Million, Seven Hundred and Fifty Thousand)
 
2.         Deposit
 
As security for the correct fulfilment of this Agreement the Buyers shall pay a deposit of 10 % (ten per cent) of the Purchase Price within 3 (three)                      banking days after from the date of this Agreement has been signed by both parties by fax and the tripartise agreement is signed by Sellers Buyers and CSAV as Charterers (see clause 17). This deposit shall be placed with
 
Bank: HSH Nordbank
Accn-Nr. 1100 172 693
Swift: HSH NDE HH
 
and held by them in a joint account for the Sellers and the Buyers, to be released in accordance with joint written instructions of the Sellers and the Buyers. Interest, if any , to be credited to the and split between the Buyers and Sellers equally. Any fee charged for holding the said deposit shall be borne equally by the Sellers and the Buyers. Also a further 10% to be in the form of corportate guarantee, as per attached wording, to be
 
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3.         Payment
 
The said Purchase Price shall be paid in full free of bank charges to
 
Bank: HSH Nordbank
BLZ: 200 500 00
Accnt-Nr. USD: 1100152521
IBAN USD: DE86210500001100152521
Swift: HSH NDE HH
 
on delivery of the Vessel, but not later than 3 banking days after the Vessel is in every respect physically ready for delivery in accordance with the terms and conditions of this Agreement and Notice of Readiness has been given in accordance with Clause 5.
 
4.         Inspections
 
a)*                   The Buyers have inspected and accepted the Vessel’s classification records. The Buyers have also inspected the Vessel at/in on and have accepted the Vessel following this inspection and the sale is outright and definite, subject only to the terms and conditions of this Agreement. Sellers to permit Buyers to have access to vessels class records at any time prior to vessels delivery within Germanischer Lloyds normal office hours at Buyers cost and expenses. The relative authorisation to be sent to GL shortly after sale is definite and deposit and corporate guarantee lodged/provided
 
b)*                  The Buyers shall have the right to inspect the Vessel’s classification records and declare whether same are accepted or not within
 
The Sellers shall provide for inspection of the Vessel at/in
 
The Buyers shall undertake the inspection without undue delay to the Vessel. Should the Buyers cause undue delay they shall compensate the Sellers for the losses thereby incurred. The Buyers shall inspect the Vessel without opening up and without cost to the Sellers. During the inspection, the Vessel’s deck and engine log books shall be made available for examination by the Buyers. If the Vessel is accepted after such inspection, the-sale shall become outright and definite, subject only to the terms and conditions of this Agreement, provided the Sellers receive written notice of acceptance from the Buyers within 72 hours after completion of such inspection.
 
Should notice of acceptance of the Vessel’s classification records and of the Vessel not be received by the Sellers as aforesaid, the deposit together with interest earned shall be released immediately to the Buyers, whereafter this Agreement shall be null and void.

*                             4 a) and 4b) are alternatives; delete whichever is not applicable. In the absence of deletions, alternative 4a) to apply.
 
5.                          Notices, time and place of delivery. See also clause 17
 
a)                          The Sellers shall keep the Buyers well informed of the Vessel’s itinerary after 90 days notice has been tendered and shall provide the Buyers with 90, 60, 45, 30, 20, 10, 7 5, 3, and 1 days notice of the estimated time of arrival at the intended place of drydocking/underwater inspection/ delivery. When the Vessel is at the place of delivery and in every respect physically ready for delivery in accordance with this Agreement, the Sellers shall give the Buyers a written Notice of Readiness for delivery.
 
b)                         The Vessel-shall be delivered and taken over safely afloat at a safe and accessible berth or anchorage at/in
 
in the Sellers’ option.
 
Expected time of delivery:
 
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c)                          If the Sellers anticipate that, notwithstanding the exercise of due diligence by them, the Vessel will not be ready for delivery by the cancelling date they may notify the Buyers in writing stating the date when they anticipate that the Vessel will be ready for delivery and propose a new cancelling date. Upon receipt of such notification the Buyers shall have the option of either cancelling this Agreement in accordance with Clause 14 within 7 running days of receipt of the notice or of accepting the new date as the new cancelling date. If the Buyers have not declared their option within 7 running days of receipt of the Sellers’ notification or if the Buyers accept the new date, the date proposed in the Sellers’ notification shall be deemed to be the new cancelling date and shall be substituted for the cancelling date stipulated in line 61.
 
If this Agreement is maintained with the new cancelling date all other terms and conditions hereof including those contained in Clauses 5 a) and 5 c) shall remain unaltered and in full force and effect. Cancellation or failure to cancel shall be entirely without prejudice to any claim for damages the Buyers may have under Clause 14 for the Vessel not being ready by the original cancelling date.
 
d)                         Should the Vessel become an actual, constructive or compromised total loss before delivery the deposit together with interest earned shall be released immediately to the Buyers whereafter this Agreement shall be null and void.
 
6. Drydocking/Divers Inspection
 
a )**            The Sellers shall place the Vessel in drydock at the port of delivery for inspection by the Classification Society of the Vessel’s underwater parts below the deepest load line the extent of the inspection being in accordance with the Classification Society’s rules, IF the rudder, propeller, bottom or other underwater parts below the deepest load line are found broken, damaged or defective so as to affect the Vessel’s class, such defects shall be made good at the Sellers’ expense to the satisfaction of the Classification Society without condition/recommendation*.
 
b)**           (i) The Vessel is to be delivered without drydocking. However, the Buyers shall have the right at their expense to arrange for an underwater inspection by a diver approved by the Classification Society prior to the delivery of the Vessel. The Sellers shall at their cost make the Vessel available for such inspection. The extent of the inspection and the conditions under which it is performed shall be to the satisfaction of the Classification Society. If the conditions at the port of delivery are unsuitable for such inspection, the Sellers shall make the Vessel available at a suitable alternative place near to the delivery port.
 
However, not withstanding what has been mentioned above, if any damage is found to the rudder, propeller, bottom or other underwater parts below the deepest load line which in the opinion of class would impose a class condition, but does not affect vessel’s ability to trade until next scheduled drydocking, Buyers and Sellers shall agree to an amount of compensation to be deducted from the purchase price and Buyers shall accept delivery of the vessel including the condition(s) raised by the divers inspection.
 
If Sellers and Buyers cannot agree a compensation figure within 1 working day, then the figure to apply is to be the average quotes of estimated costs of repairs obtained from 2 first class yards. If the vessel delivers in the Far East then estimated cost of repairs to be obtained from 2 First Class Far Eastern yards, if the vessel delivers in Europe then estimated cost of repairs to be obtained from 2 First Class European yards, one appointed by the Sellers and one appointed by the Buyers. Compensation is to be the direct actual costs of repairs excluding drydock time, services and off-hire.
 
If any damage is found to the underwater parts which in the opinion of class would impose a class condition and can not be postponed until the next drydocking, then drydocking arrangements as per clause 6 (b) (ii) and (b) (iii) below shall apply with Buyers right to attend same as observers only without interference to Sellers work.
 
Fees for class attendance during divers inspection to be for Buyers account.
 
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exemption permission is being granted by Germanischer Lloyd to trade until the next scheduled drydocking then unless repairs can be carried out afloat to the satisfaction of the Classification Society, the Sellers shall arrange for the Vessel to be drydocked at their expense for inspection by the Classification Society of the Vessel’s underwater parts below the deepest load line, the extent of the inspection being in accordance with the Classification Society’s rules. If the rudder, propeller, bottom or other underwater parts below the deepest load line are found broken, damaged or defective so as to affect the Vessel’s class, such defects shall be made good by the Sellers at their expense to the satisfaction of the Classification Society without condition/recommendation*. In such event the Sellers are to pay also for the cost of the underwater inspection and the Classification Society’s attendance.
 
(iii) If the Vessel is to be drydocked pursuant to Clause 6 b) (ii) and no suitable drydocking facilities are available at the port of delivery, the Sellers shall take the Vessel to a port where suitable drydocking facilities are available, whether within or outside the delivery range as per Clause 5 b). Once drydocking has taken place the Sellers shall deliver the Vessel at a port within the delivery range as per Clause 5 b) which shall, for the purpose of this Clause, become the new port of delivery. In such event the cancelling date provided for in Clause 5 b) shall be extended by the additional time required for the drydocking and extra steaming, but limited to a maximum of 14 running days.
 
c)         If the Vessel is drydocked pursuant to Clause 6 a) or 6 b) above
 
(i) the Classification Society may require survey of the tailshaft system, the extent of the survey being to the satisfaction of the Classification surveyor. If such survey is not required by the Classification Society, the Buyers shall have the right to require the tailshaft to be drawn and surveyed by the Classification Society, the extent of the survey being in accordance with the Classification Society’s rules for tailshaft survey and consistent with the current stage of the Vessel’s survey cycle. The Buyers shall declare whether they require the tailshaft to be drawn and surveyed not later than by the completion of the inspection by the Classification Society. The drawing and refitting of the tailshaft shall be arranged by the Sellers. Should any parts of the tailshaft system be condemned or found defective so as to affect the Vessel’s class, those parts shall be renewed or made good at the Sellers’ expense to the satisfaction of the Classification Society without condition/recommendation*.
 
(ii) the expenses relating to the survey of the tailshaft system shall be borne by the Buyers unless the Classification Society requires such survey to be carried out, in which case the Sellers shall pay these expenses. The Sellers shall also pay the expenses if the Buyers require the survey and parts of the system are condemned or found defective or broken so as to affect the Vessel’s class*.
 
(iii) the expenses in connection with putting the Vessel in and taking her out of drydock, including the drydock dues and the Classification Society’s fees shall be paid by the Sellers if the Classification Society issues any condition/recommendation* as a result of the survey or if it requires survey of the tailshaft system. In all other cases the Buyers shall pay the aforesaid expenses, dues and fees.
 
(iv) the Buyers’ representative shall have the right to be present in the drydock, but without interfering with the work or decisions of the Classification surveyor.
 
(v) the Buyers shall have the right to have the underwater parts of the Vessel cleaned and painted at their risk and expense without interfering with the Sellers’ or the Classification surveyor’s work, if any, and without affecting the Vessel’s timely delivery. If, however, the Buyers’ work in drydock is still in progress when the Sellers have completed the work which the Sellers are required to do, the additional docking time needed to complete the Buyers’ work shall be for the Buyers’ risk and expense. In the event that the Buyers’ work requires such additional time, the Sellers may upon completion of the Sellers’ work tender Notice of Readiness for delivery whilst the Vessel is still in drydock and the Buyers shall be obliged to take delivery in accordance with Clause 3, whether the Vessel is in drydock or not and irrespective of Clause 5 b).

*                             Notes, if any, in the surveyor’s report which are accepted by the Classification Society without condition/recommendation are not to be taken into account.
 
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7.         Spares/bunkers, etc.
 
The Sellers shall deliver the Vessel to the Buyers with everything belonging to her on board and on shore and on order . All spare parts and spare equipment including spare tail and shaft(s) and/or spare propeller(s)/propeller, blade(s), if any, belonging to the Vessel at the time of inspection used or unused, whether on board or not shall become the Buyers’ property, but spares on order are to be excluded. Forwarding charges, if any, shall be for the Buyers’ account. The Sellers are not required to replace spare parts including spare tail-end shaft(s) and spare propeller(s)/propeller blade(s) which are taken out of spare and used as replacement prior to delivery, but the replaced items shall be the property of the Buyers. The radio installation and navigational equipment shall be included in the sale without extra payment if they are the property of the Sellers . Unused stores and provisions shall be included in the sale and be taken over by the Buyers without extra payment.
 
The Sellers have the right to take ashore crockery, plates, cutlery, linen and other articles bearing the Sellers’ flag or name, provided they replace same with similar unmarked items. Library, forms, etc., exclusively for use in the Sellers’ vessel(s), shall be excluded without compensation. Captain’s, Officers’ and Crew’s personal belongings including the slop chest are to be excluded from the sale, as well as the following additional items (including items on hire): items currently on hire: (though it is understood that hired items may be added at a later stage)
 
• Globe Wireless Equipment incl. SSAS System
• Seagull/ Videotel training software and videos not owners property and have to be returned.
• Weather Observation Instruments from DWD is property of the Federal Republic of Germany. (It consists of a laptop PC, a barograph, a barometer, a thermometer and a bucket.)
 
The Buyers shall take over the remaining bunkers and unused lubricating oils in storage tanks and unbroached sealed drums and designated storage tanks at Sellers last net paid prices as evidenced by vouchers/suppliers invoices, including discounts pay the current net market price (excluding barging expenses) at-the port and date of on delivery of the Vessel. Bunkers to be paid at Sellers last net paid prices as evidenced by vouchers/suppliers invoices, including discounts in the event of charter free delivery .
 
Payment under this Clause shall be made at the same time and place and in the same currency as the Purchase Price.
 
8.         Documentation
 
The place of closing: Hamburg, Germany
 
In exchange for payment of the Purchase Price the Sellers shall furnish the Buyers with delivery documents which may be reasonably required for the legal transfer of the vessel and for her registration under new flag and ownership.  namely such list to be incorporated in an addendum to this MoA:
 
a)                          Legal Bill of Sale in a form recordable in                                    (the country in which the Buyers are to register the Vessel), warranting that the Vessel is free from all encumbrances, mortgages and-maritime liens or any other debts or claims whatsoever, duly notarially attested and legalized by the consul of such country or other competent authority.
 
b)                         Current Certificate of Ownership issued by the competent authorities of the flag state of the Vessel.
 
c)                          Confirmation of Class issued within 72 hours prior to delivery.
 
d)                         Current Certificate issued by the competent authorities stating that the Vessel is free from
 
[ILLEGIBLE INITIALS]

 
deletion appropriate to the vessels registry at the time of delivery, or, in the event that the registry does not as a matter of practice issue such documentation immediately, a written undertaking by the Sellers to effect deletion from the Vessel’s registry forthwith and furnish a Certificate or other official evidence of deletion to the Buyers promptly and latest within 4 (four) weeks after the Purchase Price has been paid and the Vessel has been delivered.
 
f)                            Any such additional documents as may reasonably be required by the competent authorities for the purpose of registering the Vessel, provided the Buyers notify the Sellers of any such documents as soon as possible after the date of this Agreement.
 
At the time of delivery the Buyers and Sellers shall sign and deliver to each other a Protocol of Delivery and Acceptance confirming the date and time of delivery of the Vessel from the Sellers to the Buyers.
 
At the time of delivery the Sellers shall hand to the Buyers the classification certificate(s) as well as all plans etc., which are on board the Vessel. Other certificates which are on board the Vessel shall also be handed over to the Buyers unless the Sellers are required to retain same, in which case the Buyers to have the right to take copies. Other technical documentation which may be in the Sellers’ possession shall be promptly forwarded to the Buyers at their expense, if they so request. The Sellers may keep the Vessel’s log books but the Buyers to have the right to take copies of same.
 
9.         Encumbrances
 
The Sellers warrant that the Vessel, at the time of delivery, is free from all charters unless vessel is delivered as per Clause 17 of Appendix No. 1 to the M.o.A . , encumbrances, mortgages and maritime liens or any other debts whatsoever. The Sellers hereby undertake to indemnify the Buyers against all consequences of claims made against the Vessel which have been incurred prior to the time of delivery.
 
10.       Taxes, etc.
 
Any taxes, fees and expenses in connection with the purchase and registration under the Buyers’ flag shall be for the Buyers’ account, whereas similar charges in connection with the closing of the Sellers’ register shall be for the Sellers’ account.
 
11.       Condition on delivery
 
The Vessel with everything belonging to her shall be at the Sellers’ risk and expense until she is delivered to the Buyers, but subject to the terms and conditions of this Agreement she shall be delivered and taken over as she was at the time of inspection, fair wear and tear excepted. However, the Vessel shall be delivered with her GL class fully maintained without condition/recommendation*, free of average damage affecting the Vessel’s class, and with her classification certificates and national certificates, as well as all other certificates the Vessel had at the time of inspection, valid and unextended without condition/recommendation* by Class or the relevant authorities at the time of delivery. All continuous survey cycles to be fully up to date at time of delivery. The Sellers shall notify the Classification Society of any matters coming to their knowledge prior to delivery which upon being reported to the Classification Society would lead to the withdrawl of the vessels class or to the imposition of a recommendation relating to her class. “Inspection” in this Clause 11, shall mean the Buyers’ inspection according to Clause 4 a) or 4 b), if applicable, or the Buyers’ inspection prior to the signing of this Agreement. If the Vessel is taken over without inspection, the date of this Agreement shall be the relevant date.

*                             Notes, if any, in the surveyor’s report which are accepted by the Classification Society without condition/recommendation are not to be taken into account.
 
12.       Name/markings
 
Upon delivery the Buyers undertake to change the name of the Vessel and alter funnel markings unless

 
c)                          Any dispute arising out of this Agreement shall be referred to arbitration at London, subject to the procedures applicable there. The laws of LMAA shall govern this Agreement.

*                             16 a), 16 b) and 16 c) are alternatives; delete whichever is not applicable. In the absence of deletions, alternative 16 a) to apply.
 
clauses 17 to 24 attached to form an integral part of this MoA.

For The Sellers	
 	
 /s/ A. Schumacher	 	
A. SCHUMACHER	

For the Buyers	
 	
 /s/ illegible	 	
illegible	
 
This document is a computer generated copy of “SALEFORM 1993”, printed by authority of the Norwegian Shipbrokers’ Association, using software which is the copyright of Strategic Software Ltd. Any insertion or deletion to the form must be clearly visible. In the event of any modification made to the preprinted text of this document, the original document shall apply. The Norwegian Shipbrokers’ Association and Strategic Software Ltd. assume no responsibility for any loss or damage caused as a result of discrepancies between the original approved document and this document.

 
13.                   Buyers’ default
 
Should the deposit not be paid and/or the Corporate Guarantee have not been provided in accordance with Clause 2, the Sellers have the right to cancel this Agreement, and they shall be entitled to claim compensation for their losses and for all expenses incurred together with interest.
 
Should the Purchase Price not be paid in accordance with Clause 3, the Sellers have the right to cancel the Agreement, in which case the deposit together with interest earned shall be released to the Sellers. If the deposit does not cover their loss, the Sellers shall be entitled to claim further compensation for their losses and for all expenses incurred together with interest.
 
14.                   Sellers’ default
 
Should the Sellers fail to give Notice of Readiness in accordance with Clause 5 a) or fail to be ready to validly complete a legal transfer by the date stipulated in line 61 the Buyers shall have the option of cancelling this Agreement provided always that the Sellers shall be granted a maximum of 3 banking days after Notice of Readiness has been given to make arrangements for the documentation set out in Clause 8. If after Notice of Readiness has been given but before the Buyers have taken delivery, the Vessel ceases to be physically ready for delivery and is not made physically ready again in every respect by the date stipulated in line 61 and new Notice of Readiness given, the Buyers shall retain their option to cancel. In the event that the Buyers elect to cancel this Agreement the deposit together with interest earned shall be released to them immediately.
 
Should the Sellers fail to give Notice of Readiness by the date stipulated in line 61 or fail to be ready to validly complete a legal transfer as aforesaid they shall make due compensation to the Buyers for their loss and for all expenses together with interest if their failure is due to proven negligence and whether or not the Buyers cancel this Agreement.
 
15.                   Buyers’ representatives
 
After this Agreement has been signed by both parties and the deposit and Corporate Guarantee has been lodged, the Buyers have the right to place two representatives on board the Vessel at their sole risk and expense for the last 90 days prior to the intended delivery date upon arrival at on or about
 
These representatives are on board for the purpose of familiarisation and in the capacity of observers only, and they shall not interfere in any respect with the operation of the Vessel. The Buyers’ representatives shall sign the Sellers’ letter of indemnity prior to their embarkation.
 
Buyers can send maximum 1 representative to inspect each vessel twice per annum only during port stay and without interferance or delay to the vessel/schedule
 
16.                   Arbitration
 
a)*                   This Agreement shall be governed by and construed in accordance with English law and any dispute arising out of this Agreement shall be referred to arbitration in London in accordance with the Arbitration Acts 1950 and 1979 or any statutory modification or re-enactment thereof for the time being in force, one arbitrator being appointed by each party. On the receipt by one party of the nomination in writing of the other party’s arbitrator; that party shall appoint their arbitrator within fourteen days, failing which the decision of the single arbitrator appointed shall apply. If two arbitrators properly appointed shall not agree they shall appoint an umpire whose decision shall be final . In the case of dispute one single arbitrator to be nominated by the President of LMAA upon request of either party whose decision shall be final.
 
b)*                  This Agreement shall be governed by and construed in accordance with Title 9 of the United States Code and the Law of the State of New York and should any dispute arise out of this Agreement, the matter in dispute shall be referred to three persons at New York, one to be appointed by each of the parties hereto, and the third by the two so chosen; their decision or that of any two of them shall be final, and for purpose of enforcing any award, this Agreement may be made a rule of the Court.

 
Appendix No 1
to the Memorandum of Agreement dated 7 th February 2005
(the “M.O.A.”)
relating to m/v “ER Wellington” (the “Vessel”)
MS “E.R. Wellington” Schiffahrtsgesellschaft GmbH & Co. KG (the “Sellers”)
and
Wellington Marine INC. Liberia (“Buyers”)
 
Clause 17
 
MV ‘E.R. Wellington’ to be delivered in September 2007 either Time Charter Free in which case the ship to be delivered cargo free in either 1 safe port Singapore/S. Japan range or in sellers option 1 safe port in Hamburg/Rotterdam range or with the balance of her Time Charter to CSAV as per charter party dated 02nd October 2003 at USD 29250 pd less 1.25 pct total commission until min 21-Sept/max-21-December 2007 in which case the Vessel to be delivered in a mutually agreed convenient safe port within the charterers trading range between 15th September/15th October 2007 with cancelling date 15th October 2007 with cargo as on board and without affecting vessels schedule and charterers port/cargo operations. If buyers do not agree to owners proposed port of delivery and as a consequence the delivery is thereby delayed the cancelling date to be extended accordingly.
 
The vessel to be delivered in a safe port safely afloat, free of encumbrances, free of stowaways and free of maritime liens, mortgages or any other taxes, debts or claims whatsoever. Buyers have received a copy of the above Charter Party dated 2 nd October 2003 and have approved same.
 
Clause 18
 
Sellers to guarantee that upon signing this Memorandum of Agreement to the best of their knowledge the vessel is not blacklisted.
 
Clause 19
 
All instruction books, drawings, plans and manuals, onboard or ashore in owners/managers office that are in sellers possession are to be delivered to the Buyers. Owners to forward office set as soon as possible after delivery to Buyers nominated office. After sale is definite and Buyers have duly fulfilled all their obligations under the MoA Sellers shall provide one set of copies for both vessels of the following plans / documents in order buyers to construct their standard ANKO loading software. All forwarding costs to be for Buyers account.
 
• Capacity plan
• General Arrangement
• Loading Manual
• Trim and Stability booklet

 
• Cross Curves
• Ullage tables/ Sounding tables for every compartment
• Longitudinal distribution of lightweight or relevant strength information
• Permissible Shear Force and Bending moments limits
• Midship section
• Tank top strength
• Position of draught marks
• Copy of the Loadline Certificate
 
• Lines Plan or Offset Tables
In case the above are not available, the following are needed:
• Docking plan
• Shell expansion
• Construction drawings (frames): Aft & fore parts and at the engine room area
• Bonjean Curves
 
Clause 20
 
Vessel to be delivered with a full set of container lashing as per her cargo securing manual and in accordance with Osha rules and regulations which to be verified by a joint survey between Buyers and Sellers representatives. In case insufficient amount of lashing gears, Sellers to make cash compensation to Buyers at delivery.
 
Clause 21
 
Sellers to supply to buyers one 1/200 model of 4300 Teu sister vessels when received from the Building yard in 2007 after delivery of the vessels to Buyers. All forwarding costs to be for Buyers account.
 
Clause 22
 
Negotiations and sale, if any, to be kept strictly private and confidential.
 
Clause 23
 
See addition in Clause 12.
 
Sellers to produce a class maintenance certificate in accordance with clause 11 of the MoA dated no more than 3 days prior to the date of delivery

 
Clause 24
 
This MoA to be signed and executed simultaneously with the MoA for “E.R Auckland”

For and on behalf of Sellers	 	For and on behalf of Buyers	

 /s/ illegible	 	 	/s/ illegible	 	
MS “E.R. Wellington” Schiffahrtsgesellschaft
GmbH & Co. KG	 	Wellington Marine INC. Liberia	

 
Exhibit 10.34

 	Norwegian Shipbroker Association’s Memorandum of Agreement for sale and purchase of ships. Adopted by The Baltic and International Maritime Council (BIMCO) in 1956.	
 	Code-name	
 	SALEFORM 1993	
 	Revised 1966, 1983 and 1986/87.	
 
MEMORANDUM OF AGREEMENT
 
Dated: 14 th August, 2006
 
“ORTELIUS MARITIME INC.”
 
MESSRS DANAOS CORPORATION WILL GUARANTEE PERFORMANCE OF SELLING COMPANY AND SHALL REMAIN JOINTLY AND SEVERALLY FULLY RESPONSIBLE FOR PROMPT AND TIMELY FULFILLMENT OF ALL SELLERS’ RESPONSIBILITIES, UNDERTAKINGS, OBLIGATIONS AND LIABILITIES HEREUNDER
 
hereinafter called the Sellers, have agreed to sell, and
 
MESSRS SHANGHAI TIME SHIPPING CO LTD OR A COMPANY TO BE NOMINATED BY THEM NO LATER THAN 30 DAYS OF APPROXIMATE NOTICE OF VESSEL’S INTENDED DELIVERY IS TENDERED FROM SELLERS
 
THE PERFORMANCE OF THIS AGREEMENT BY THE NOMINEE IS GUARANTEED BY SHANGHAI TIME SHIPPING CO LTD WHO ARE TO REMAIN JOINTLY AND SEVERALLY FULLY RESPONSIBLE FOR THE PROMPT AND TIMELY FULFILLMENT OF ALL BUYERS’ RESPONSIBILITIES, UNDERTAKINGS, OBLIGATIONS AND LIABILITIES HEREUNDER.
 
hereinafter called the Buyers, have agreed to buy
 
Name: “ FIVOS ”
 
Classification Society/Class: NKK

Built: 1994	 	By: TSUNEISHI	
 	 	 	
Flag: Cyprus	 	Place of registration: Limassol	
 	 	 	
Call Sign: C4HE2	 	Grt/Nrt: 36561 / 23007	
 
Register Numb e r : IMO/Reg No: 9104548
 
hereinafter called the Vessel, on the following terms and conditions:
 
Definition
 
“Banking days” are days on which banks are open both in the country of the currency stipulated for the Purchase Price in Clause 1 and in Shanghai / Piraeus / London the place of closing stipulated in Clause 8 .
 
“In writing” or “written” means a letter handed over from the Sellers to the Buyers or vice versa, a registered letter, telex, telefax or other modern form of written communication including e-mail.
 
“Classification Society” or “Class” means the Society referred to in line 4.
 
1.        Purchase price: USD 25.500.000 (United States Dollars Twenty Five Million Five Hundred Thousand, Only)
 
2.        Deposit
 
As security for the correct fulfillment of this Agreement the Buyers shall pay remit a deposit of 10% (ten per cent) of the Purchase Price within 3 (three) Shanghai/New York/Piraeus/London banking days from the date both parties hereto have signed this Agreement or a faxed/scanned copy hereof from the date of this Agreement . This deposit shall be placed with

 
The Royal Bank of Scotland PLC
Piraeus branch
45 Akti Miaouli
185 10 Piraeus, Greece
Swift Code RBOSGRAAA
Attn: Mr. Fotis Bratimos/ Ms Elena Konstantilieri
Account No: 506143
Beneficiary: Joint account in the names of “SHANGHAI TIME SHIPPING CO. LTD.”
(Buyers) and “ORTELIUS MARITIME INC.” (Sellers)
 
USD correspondent: JP Morgan Chase Bank, N.Y. CHASUS33
 
and held b y them in a joint account for the Sellers and the Buyers, to be released in accordance with joint written instructions of the Sellers and the Buyers. Interest, if any, to be credited to the Buyers. Any fee charged for opening, holding, lifting and closing holding the said deposit shall be borne equally by the Sellers and the Buyers. Buyers are not responsible for the delay of deposit remittance solely due to Sellers failure to process the joint account in time
 
3.        Payment
 
The said deposit and the balance of 90% (ninety per cent) of the Purchase Price ( the ‘Balance Money’) together with all other monies payable under this Agreement shall be paid in full free of bank charges to
 
DANAOS CORPORATION
 Account Number 178200-100
 With the Royal Bank of Scotland
 Piraeus branch
 45 Akti Miaouli
 185 10 Piraeus, Greece
 Swift Code RBOSGRAAA
 IBAN GR28 0640 0010 0000 0017 8200 100
 
on delivery of vessel, but not later than 3 Shanghai/NewYork/Piraeus/London banking days after the Vessel is in every respect physically ready for delivery in accordance with the terms and conditions of this Agreement and Notice of Readiness has been given in accordance with clause 5
 
Closing and exchange of delivery documents shall take place in London, U.K
 Structured Ship Finance
 Shipping Business Centre
 The Royal Bank of Scotland Group
 Tel: +44 207 615 4018
 
4.                          Inspections
 
The vessel and her classification records’ have been inspected and accepted by the Buyers and by the C.C.S. Thus the sale is outright and definite.
 
a)*                   The Buyers have inspected and accepted the Vessel’s classification records. The Buyers have also inspected the Vessel at/in  on
 
and have accepted the Vessel following this inspection and the sale is outright and definite, subject only to the terms and conditions of this Agreement.
 
b)*                  The Buyers shall have the right to inspect the Vessel’s classification records and declare whether same are accepted or not within
 
The Seller shall provide for inspection of the Vessel at/in
 
The Buyers shall undertake the inspection without undue delay to the Vessel. Should the Buyers cause undue delay they shall compensate the Sellers for the losses thereby incurred. The Buyers shall inspect the Vessel without opening up and without cost to the Sellers. During the inspection, the Vessel’s deck and engine log books shall be made available for

 
examination by the Buyers. If the Vessel is accepted after such inspection, the sale shall become outright and definite, subject only to the terms and conditions of this Agreement, provided the Sellers receive written notice of acceptance from the Buyers within 72 hours after completion of such inspection.
 
Should notice of acceptance of the Vessel’s classification records and of the Vessel not be received by the Sellers as aforesaid, the deposit together with interest earned shall be released immediately to the Buyers, whereafter this Agreement shall be null and void.
 
4a) and 4b) are alternatives; delete whichever is not applicable. In the absence of deletions, alternative 4a) to apply.
 
5.                          Notice, time and place of delivery
 
a)                          The Sellers shall keep the Buyers well informed of the Vessel’s itinerary and shall provide the Buyers with 30/20/10/7 and 3 days notice of the estimated time of arrival at the intended place of drydocking /underwater inspection/delivery. When the Vessel is at the place of delivery and in every respect physically ready for delivery in accordance with this Agreement, the Sellers shall give the Buyers a written Notice of Readiness for delivery.
 
Sellers shall keep the Buyers well informed of the Vessel’s itinerary and nominate the delivery range and intended place of delivery 30 days prior to the approximate delivery. Sellers shall provide Buyers with 20/15/10/7 and 3 days notice of the estimated time of arrival at the intended place of delivery. When the Vessel is at the place of delivery and in every respect physically ready for delivery in accordance with this Agreement, the Sellers shall give the Buyers a written Notice of Readiness for delivery.
 
The vessel will be delivered with swept clean holds
 
b)                         The Vessel shall be delivered and taken over safely afloat at a safe and accessible berth or anchorage at/in
in the Sellers’ option
 
Expected time of delivery: Between 16 th October 2006 and 15 th January 2007. Sellers shall also use their best endeavor to deliver the vessel as early as possible.
 
Sellers shall use their best endeavor to deliver the vessel in Singapore/Japan range. However, final delivery range will be back to back with the redelivery of the existing charters, i.e. vessel to be delivered by Sellers and taken over by Buyers over safely afloat at a safe and accessible berth/anchorage/buoy within Skaw/Passero range including UK/Continent. Eire/Morocco or passing either westbound, Singapore/Japan range including S. Korea/PRC/Taiwan/Philippines/Indonesia/Malaysia. Thailand, in the Sellers option, but in case at Sellers nominated port of delivery there is no Chinese Embassy where the Buyers joining crew cannot process visa from, then Buyers have the option to nominate at least 7 running days prior to the Sellers intended date of delivery an alternative port of delivery, which not to be more than 12 days steaming time from the Sellers’ nominated delivery port. Buyers nominated port to be the nearest to Sellers nominated port that Buyers may obtain visa for their crew. Sellers to undertake to sail the vessel to Buyers such nominated port at Sellers risk and Buyers cost. These costs will be the vessel’s daily running cost plus bunkers plus financing interest plus cost of exit from Sellers delivery port and entry to Buyers delivery port as quoted by the Sellers and Buyers agents respectively
 
Opex 3528 + Bunkers 11100 + Interest 4286 = $ 18914 per day at sea plus port(s) cost
 
Sea Time to be calculated upon full away from pilot station from Sellers nominated delivery port to sea pilot station to Buyers nominated port
 
c)                          Date of cancelling (see clauses 5c), 6 b) (iii)and 14): 15 th January 2007 in Buyers option
 
However, only in case Sellers need extra time purely for the preparatory purpose of delivery, i.e. not for the time charterers charter extension purpose, Buyers to grant an extention of cancelling date upto 30 th January 2007.
 
If the Sellers anticipate that, notwithstanding the exercise of due diligence by them, the

 
Vessel will not be ready for delivery by the cancelling date they may notify the Buyers in writing stating the date when they anticipate that the Vessel will be ready for delivery and propose a new cancelling date. Upon receipt of such notification the Buyers shall have the option of either cancelling this Agreement in accordance with Clause 14 within 3 7 running days of receipt of the notice or of accepting the new date as the new cancelling date. If the Buyers have not declared their option within 3 7 running days of receipt of the Sellers’ notification or if the Buyers accept the new date, the date proposed in the Sellers’ notification shall be deemed to be the new cancelling date and shall be substituted for the cancelling date stipulated in line 61.
 
If this Agreement is maintained with the new cancelling date all other terms and conditions hereof including those contained in Clauses 5 a) and 5 c) shall remain unaltered and in full force and effect. Cancellation or failure to cancel shall be entirely without prejudice to any claim for damages the Buyers may have under Clause 14 for the Vessel not being ready by the original cancelling date.
 
d)                         Should the Vessel become an actual, constructive or compromised total loss before delivery the deposit together with interest earned shall be released immediately to the Buyers whereafter this Agreement shall be null and void.
 
6.                          Drydocking/Divers Inspection (see additional clause 17)
 
a)**            The Sellers shall place the Vessel in drydock at the port of delivery for inspection by the Classification Society of the Vessel’s underwater parts below the deepest load line, the extent of the inspection being in accordance with Classification Society’s rules. If the rudder, propeller, bottom or other underwater parts below the deepest load line are found broken, damaged or defective so as to affect the Vessel’s class such defects shall be made good at the Sellers’ expense to the satisfaction of the Classification Society without condition/recommendation*.
 
b)**           (i)        The Vessel is to be delivered without drydocking , However, the Buyers shall have the right at their expense to arrange for an underwater inspection by a diver approved by the Classification society prior to the delivery of the Vessel. The Sellers shall at their cost make the Vessel, available for such inspection. The extent of the inspection and the conditions under which it is performed shall be to the satisfaction of the Classification Society. If the conditions at the port of delivery are unsuitable for such inspection, the Sellers shall make the Vessel available at a suitable alternative place near to be delivery port.
 
(ii)       If the rudder, propeller, bottom or other underwater parts below the deepest load line are found broken, damaged or defective so as to effect the Vessel’s class, then unless repairs can be carried out afloat to the satisfaction of the Classification society, the Sellers shall arrange for the Vessel to be drydocked at their expense for inspection by the Classification society of the Vessel’s underwater parts below the deepest load line, the extent of the inspection being in accordance with the Classification Society’s rules. If the rudder, propeller, bottom or other underwater parts below the deepest load line are found broken damaged or defective so as to effect the Vessel’s class, such defects shall be made good by the Sellers at their expense to the satisfaction of the classification society without condition/recommendation*. In such event the Sellers are to pay also for the cost of the underwater inspection and the Classification Society’s attendance.
 
(iii)      If the Vessel is to be drydocked pursuant to Clause 6 b) (ii) and no suitable drydocking facilities are available at the port of delivery, the Sellers shall take the Vessel to a port where suitable drydocking facilities are available , whether within or outside the delivery range as per Clause 5 b). Once drydocking has taken place the Sellers shall deliver the Vessel at a port within the delivery range as per clause 5 b) which shall for the purpose of this clause, become the new port of delivery. In such event the cancelling date provided for in clause 5 b) shall be extended by the additional time required for the dry docking and extra steaming, but limited to a maximum of 14 running days.
 
c)                          If the vessel is drydocked pursuant to Clause 6 a) or 6 b) above
 
(i)                        the Classification Society may require survey of the tailshaft system, the extent of

 
the survey being to the satisfaction of the Classification surveyer, if such survey is not required by the Classification Society, the Buyers shall have the right to require the tailshaft to be drawn and surveyed by Classification Society, the extent of the survey being in accordance with the Classification Society’s rules for tailshaft survey and consistent with the current stage of the Vessel survey cycle. The Buyers shall declare whether they require the tailshaft to be drawn and surveyed not later than by the completion of the inspection of the Classification Society. The drawing and refitting of the tailshaft shall be arranged by the Sellers. Should any parts of the tailshaft system be condemned or found defective so as to effect the Vessel’s class, those parts shall be renewed or made good at the Sellers’ expense to the satisfaction of the Classification Society without condition/recommendation.
 
(ii)       the expenses relating to the survey of the tailshaft system shall be borne by the Buyers unless the Classification Society requires such survey to be carried out, in which case the Sellers shall pay these expenses. The Sellers shall also pay the expenses if the Buyers require the survey and parts of the system are condemned or found defective or broken so as to effect the vessel’s class.
 
(iii)      the expenses in connection with putting the Vessel in and taking her out of drydock, including the drydock dues and the Classification Society’s fees shall be paid by the Sellers if the Classification Society issues any condition/recommendation* as a result of the survey or if it requires survey of the tailshaft system. In all other cases the Buyers shall pay the aforesaid expenses, dues and fees.
 
(iv)      the Buyers’ representative shall have the right to be present in the drydock, but without interfering with the work or decisions of the Classification surveyer.
 
(v)       the Buyers shall have the right to have the underwater parts of the Vessel cleaned and painted at their risk and expense without interfering with the Sellers’ or the Classifications surveyer’s work, if any, and without affecting the Vessel’s timely delivery. If, however, the Buyers’ work in drydock is still in progress when the Sellers have completed the work which the Sellers are required to do, the additional docking time needed to complete the Buyers’ work shall be for the Buyers’ risk and expense. In the event that the Buyers’ work requires such additional time, the Sellers may upon completion of the Sellers’ work tender Notice of Readiness for delivery whilst the Vessel is still in drydock and the Buyers shall be obliged to take delivery in accordance with Clause 3, whether the vessel is in drydock or not and irrespective of Clause 5 b).
 
*         Notes, if any, in the surveyers report which are accepted by the classification Society without condition/recommendation are not to be taken into account.
 
**        6 a) and 6 b) are alternatives; delete whichever is not applicable. In the absence of deletions, alternative 6a) to apply.
 
7.        Spares/bunkers, etc.
 
The Sellers shall deliver the Vessel to the Buyers with everything belonging to her on board and on shore. All spare parts and spare equipment including spare tail-end shaft(s) and/or spare propeller(s) /propeller blade(s) , if any, belonging to the Vessel at the time of inspection used or unused, whether on board or not shall become the Buyers’ property, but spares on order are to be excluded . Forwarding charges, if any, shall be for the Buyers’ account. The Sellers are not required to replace spare parts including spare tail-end shaft(s) and spare propeller(s)/ propeller blade(s) which are taken out of spare and used as replacement prior to delivery, but the replaced items shall be the property of the Buyers. The radio installation and navigational equipment shall be included in the sale without extra payment if they are the property of the Sellers. Unused stores and provisions shall be included in the sale and be taken over by the Buyers without extra payment.
 
The Sellers have the right to take ashore crockery, plates, cutlery, linen and other articles bearing the Seller’s flag or name, provided they replace same with similar unmarked items. Library, forms, etc., exclusively for use in the Sellers’ vessel(s), shall be excluded without compensation. Captain’s Officers’ and Crew’s personal belongings including the slop chest are to be excluded from the sale, as well as the following additional items (including items on hire):
 
•  Dosing pump for boiler water treatment (1 piece)
• Unifor HFO compatibility test kit (1 piece)

 
•   Extra deck air compressor with panel (1 piece)
•   H.P. washing machine complete with extension cables (1 piece)
•   Painting spray machine
 
The Buyers shall take over the remaining bunkers and unused lubricating oils in sealed drums or in storage tanks without having passed through the vessel’s system and sealed drums  and pay the current net marked last net purchase prices evidenced by the copy of invoices which to be provided by the sellers price (excluding barging expenses) at the port and date of delivery of the Vessel. Payment under this Clause shall be made at the same time and place and in the same currency as the Purchase Price.
 
The Seller’s and the Buyers’s familiarization representative shall jointly measure the bunker/lubricant oil quantity and prepare a Statement of Fact prior to delivery of the vessel showing the remaining quantities of bunkers and unused lubricant oil including calculated consumption by the Vessel upto the date of delivery, which shall be the amount of bunkers and lubricating oils the Buyers shall pay under the terms of this agreement
 
8.        Documentation. (see also additional clause 18)
 
The place of closing:
 
In exchange for payment of the Purchase Price the Sellers shall furnish the Buyers with delivery documents, namely:
 
a)                         Legal Bill of Sale in a form recordable in (the country in which the Buyers are to register the Vessel), warranting that the Vessel is free from all encumbrances, mortgages and maritime liens or any other debts or claims whatsoever, duly notarially attested and legalized by the consul of such country or other competent authority.
 
b)                        Current Certificate of Ownership issued by the competent authorities of the flag state of the Vessel.
 
c)                         Confirmation of Class issued within 72 hours prior to delivery.
 
d)                        Current Certificate issued by the competent authorities stating that the Vessel is free from register encumbrances.
 
e)                         Certificate of deletion of the Vessel from the Vessel’s registry or other official evidence of deletion appropriate to the Vessel’s registry at the time of delivery, or, in the event that the registry does not as a matter of practice issue such documentation immediately, a written undertaking by the Sellers to effect deletion from the Vessel’s registry forthwith and furnish a Certificate or other official evidence of deletion to the Buyers promptly and latest within 4 (four) weeks after the purchase Price has been paid and the Vessel has been delivered.
 
f)         Any such additional documents as may reasonably be required by the competent authorities for the purpose of registering the Vessel provided the Buyers notify the Sellers of any such documents as soon as possible after the date of this Agreement.
 
At the time of delivery the Buyers and Sellers shall sign and deliver to each other a Protocol of Delivery and Acceptance confirming the date and time of delivery of the Vessel from the Sellers to the Buyers.
 
At the time of delivery the Sellers shall hand to the Buyers the classification certificate(s) as well as all plans drawings and manuals etc., which are on board the Vessel and in Sellers’ office and/or their possession . Other certificates which are on board the Vessel shall also be handed over to the Buyers unless the Sellers are required to retain same, in which case the Buyers to have the right to take copies. Other technical documentation which may be in the Sellers’ possession shall be promptly forwarded to the Buyers at Buyers expense, if they so request. The Sellers may keep the Vessel’s log books but the Buyers to have the right to take copies of same.

 
9.        Encumbrances
 
The Sellers warrant that the Vessel, at the time of delivery, is free from all charters, encumbrances, mortgages, taxes and maritime liens or any other debts whatsoever as well as any dispute claim with its Union . The Sellers hereby undertake to indemnify the Buyers against all consequences of claims made against the Vessel which have been incurred prior to the time of delivery.
 
Sellers will provide Buyers with Free of Encumbrances Certificate dated the day of the closing same to be issued by the vessel’s Registry Authority or Cypriot Consulate in Piraeus or London.
 
10.      Taxes, etc.
 
Any taxes, fees and expenses in connection with the purchase and registration under the Buyers’ flag shall be for the Buyers account, where as similar charges in connection with the closing of the Sellers’ register shall be for the Sellers’ account.
 
11.      Condition on delivery
 
The Vessel with everything belonging to her shall be at the Sellers’ risk and expense until she is delivered to the Buyers, but subject to the terms and conditions of this Agreements she shall be delivered by the Sellers and taken over by the Buyers as she was at the time of inspection, fair wear and tear excepted.
 
However, the Vessel shall be delivered with her class maintained without condition/recommendation*, free of average damage affecting the Vessel’s class, and with her classification certificates and national certificates, as well as all other certificates the Vessel had at the time of inspection, valid and unextended for minimum 3 (three) months after the day of delivery without condition/recommendation* by Class or relevant authorities at the time of delivery.
 
“Inspection” in this Clause 11, shall mean the Buyers’ inspection according to Clause 4 a) or 4 b), if applicable, or the buyers inspection prior to the signing of this Agreement. If the Vessel is taken over without inspection, the date of this Agreement shall be the relevant date.

*                            Notes, if any, in the surveyor’s reports which are accepted by the Classification Society without condition/recommendation are not to be taken into account.
 
12.      Name/markings
 
Upon delivery the Buyers undertake to change the name of the Vessel and alter funnel markings
 
13.      Buyers’ default
 
Should the deposit not be paid in accordance with Clause 2, the Sellers have the right to cancel this Agreement, and they shall be entitled to claim compensation for their losses and for all their expenses incurred together with interest. Should the Purchase Price not be paid in accordance with Clause 3, the Sellers have the right to cancel the Agreement, in which case the deposit together with interest earned shall be released to the Sellers. If the deposit does not cover their loss, the Sellers shall be entitled to claim further compensation for their losses and for all their expenses incurred together with interest.
 
14.      Sellers’ default
 
Should the Sellers fail to give Notice of Readiness in accordance with Clause 5 a) or fail to be ready to validly complete a legal transfer by the date stipulated in line 61 or at such date as may have been extended pursuant to this Agreement the Buyers shall have the option of cancelling this Agreement provided always that the Sellers shall be granted a maximum of 3 banking days after Notice of Readiness has been given to make arrangements for the documentation set out in Clause 8. If after Notice of Readiness has been given but before the Buyers have taken delivery, the Vessel ceases to be physically ready for delivery and is not

 
made physically ready again in every respect by the date stipulated in line 61 and new Notice of Readiness given , has not been given by the date stipulated in line 61 or at such date as may have been extended pursuant to this Agreement the Buyers shall retain their option to cancel. In the event that the Buyers elect to cancel this Agreement the deposit together with interest earned thereon shall be released to them immediately.
 
Should the Sellers fail to give Notice of Readiness by the date stipulated in line 61 or fail to be ready to validly complete a legal transfer as aforesaid they shall make due compensation to the Buyers for their loss and for all expenses together with interest if their failure is due to proven negligence and whether or not the Buyers cancel this Agreement.
 
15.      Buyers’ representatives
 
After this Agreement has been signed by both parties and the deposit has been lodged, the Buyers have the right 60 days prior to the expected date of delivery to place up to 2 (two) representatives on board the Vessel at their sole risk and expense upon arrival at……..on or about. These representatives are on board for the purpose of familiarisation and in the capacity of observers only, and they shall not interfere in any respect with the operation of the Vessel. The Buyers’ representatives shall sign the Sellers’ letter of indemnity prior to their embarkation. The Buyers’ representatives are to be allowed to remain on board up to and during the time of delivery, always at Buyers’ sole risk and expense.
 
Once Sellers have tended NOR, Buyers are entitled to have another 8 representatives onboard for familiarization purpose only.
 
16.      Arbitration
 
a)*                   This Agreement shall be governed by and construed in accordance with English law and any dispute arising out of this Agreement shall be referred to arbitration in London in accordance with the Arbitration Acts 1996 1950 and 1979 or any statutory modification or re-enactment thereof for the time being in force, one arbitrator being appointed by each party. On the receipt by one party of the nomination in writing of the other party’s arbitrator, that party shall appoint their arbitrator within fourteen days, failing which the decision of the single arbitrator appointed shall apply. If two arbitrators properly appointed shall not agree they shall appoint an umpire whose decision shall be final.
 
b)*                  This Agreement shall be governed by and construed in accordance with Title 9 of the United Stage Code and the Law of the State of New York and should any dispute arise out of this Agreement, the matter in dispute shall be referred to three persons at New York, one to be appointed by each of the parties hereto, and the third by the two so chosen; their decision or that of any two of them shall be final, and for purpose of enforcing any award, this Agreement may be made a rule of the Court.
 
The proceedings shall be conducted in accordance with the rules of the Society of Maritime Arbitrators Inc. New York.
 
c)*                   Any dispute arising out of this Agreement shall be referred to arbitration at                               , subject to the procedures applicable there.
 
The laws of              shall govern this Agreement.

*                             16 a), 16 b) and 16 c) are alternatives, delete whichever is not applicable in the absence of deletions, alternative 16 a) to apply.
 
Additional Clauses:
 
17. Divers Inspection
 
No drydocking, prior to the delivery of the Vessel, however the Buyers to have the option to arrange at their risk and expense at any convenient port before delivery or at the port of delivery an inspection of the Vessel’s underwater parts by divers appointed by Buyers and approved by Vessel’s Class, in the presence of the Class surveyor and Sellers’ and Buyers’ representatives, Buyers not to interfere at the video monitor or with the Class surveyor’s work.

 
The Sellers shall notify Buyers as to the vessel’s itinerary for Buyers to decide the most convenient place for the underwater inspection to take place at Sellers time. Sellers to arrange Class Surveyor at Buyers expenses who shall be in attendance at the time of underwater inspection.
 
Buyers shall in any event pay for the divers and the cost of Class attendance. The extent of the inspection and the conditions under which it is performed shall be to the satisfaction/requirement of the Class surveyor attending. The Class to be the sole arbitrator as to whether underwater damage, if any, will impose any condition of Class. If the conditions at the place of such inspection are not suitable for such inspection, the Sellers shall make the Vessel available at a suitable alternative nearby place.
 
Should any damage be found to the underwater parts that will impose a condition of Vessel’s present class, then:
 
a. In case vessel’s Class imposes a condition but does not require drydocking before next scheduled drydocking, Sellers have the option to repair same to Class satisfaction prior to delivery or to compensate the Buyers with the estimated cost to repair such damage in a way which is acceptable to the Vessel’s Class, which cost to be only the direct cost to repair such damage (i.e. excluding docking/undocking costs, tugs, loss of hire, deviation, etc), as per the average of 2 (two) quotations received from 1 (one) major reputable repair yard chosen by Buyers and 1 (one) major reputable repair yard chosen by Sellers, such repair yards to be located in China and capable of repair a vessel of such type; The average amount agreed shall be deducted from the Purchase Price at the time of delivery.
 
b. In case that the rudder, propeller, bottom or other underwater parts below the summer load line be found broken, damaged or defective, so as to affect Vessel’s present class and must be immediately repaired, then clause 6B(ii) NSF 93 to be reinstated.
 
In the event the Vessel is to be drydocked, the canceling date will be extended appropriately for the extra time taken to deliver the Vessel due to ballasting/drydocking/repairs to be carried out to Class’ satisfaction in accordance with this Agreement, [but such extension will not exceed in total 7 running days].
 
In case of drydocking, the Buyers may carry out cleaning/painting works at their sole risk and expense, subject to the Sellers’ approval, without interfering with the Sellers’ drydock works nor the classification surveyor’s work, if any, and without affecting Vessel’s timely delivery schedule. If however Buyers’ works are still in progress when Sellers have completed their works and they are ready in all respects to deliver the Vessel to the Buyers as per the Agreement, then Sellers shall tender final Notice of Readiness to the Buyers whilst the Vessel is in drydock and Buyers must take timely delivery of the Vessel whether on drydock or not, with undocking expenses only to be for Sellers’ account.
 
The Class shall issue a Class Survey Record which indicates whether the Underwater Inspection has found any damage affecting class, and in the event that such damage is found, indicates whether it requires immediate rectification or whether it should be rectified during the next drydocking. This Class Survey Record will be issued immediately after the completion of the divers Underwater Inspection.
 
18. Documentation.
 
AA. Sellers to provide Buyers with following documents in exchange of purchase money at the time of closing:
 
(1)       Three original bills of sale notarially attested and legalized by the Chinese Embassy or Consulate in Athens or London and warranting that the vessel is free for all encumbrances, mortgages and maritime liens or other debts or claims whatsoever to be signed by a duly authorized signatory on behalf of the Sellers.
 
(2)       Minutes of meetings of the Board of directors and shareholders of the Sellers, authorizing the sale of the vessel to the Buyers and the issue of a Power of Attorney. The minutes to be notarially attested and legalized by the Chinese Embassy or Consulate in

 
Athens or London.
 
(3)       Copies of Memorandum and Articles of Association and other constitutional documents of the Seller, which are to be certified by the secretary of the Sellers.
 
(4)       Power of Attorney of the Seller authorizing individuals to execute all necessary documents on the Sellers’ behalf, same to be notarially attested and legalized by the Chinese Embassy or Consulate in Athens or London.
 
(5)       Deletion Certificate in original issued by the vessel’s Registry Authority on the date of delivery. In case that such original certificate is not available, the Sellers instead shall furnish the Buyers with a Letter of Undertaking on Sellers company letterhead at the time of delivery to provide the Deletion Certificate in original to the Buyers within 5 (five) working days from the date of delivery of the Vessel
 
(6)       Free of Encumbrances Certificate in original issued by the Vessel’s Registry Authority or the Cypriot Consulate in Piraeus or London on the date of delivery certifying that the vessel is free of all registered encumbrances and mortgages.
 
(7)       Letter of Undertaking which clearly states vessel is free from registered encumbrance and from all maritime liens and debts and that they further undertake to indemnify the Buyer for all and any claims arising prior to the delivery of the vessel.
 
(8)       Original class maintained certificate from NK classification that the vessel’s class is maintained free of recommendations/conditions of class dated not earlier than three (3) working days before date of delivery.
 
(9)       Letter of Undertaking which states that to the best of the Sellers’ knowledge the vessel is not blacklisted by the Arab Boycott League in Damascus or the ITF or any other nations or organizations.
 
(10)    3 original copies of commercial invoice in relation to the total purchase price of the vessel.
 
(11)    3 original copies of commercial invoices in relation to bunkers and lubrication oils remaining on board the vessel at delivery along with copies of invoices for the purchase of bunkers and lubrication oils.
 
(12)    Letter of Undertaking from seller to delete the vessel from INMARSAT on the day of delivery of the vessel.
 
(13)    Current Certificate of Ownership issued by the competent authorities of the flag state of the Vessel dated not earlier than three (3) working days before date of delivery.
 
BB. List of Original Documents to be delivered by vessel’s Buyers to Sellers in exchange of purchase money at the time of closing
 
(1).      Copy of the Buyers Company Registration Certificate duly notarised and officially translated into the English language by a competent public authority.
 
(2).      Original Board Resolutions (notarised and officially translated in the English language by a competent public authority) ratifying the Memorandum of Agreement and all other terms of the purchase of the Vessels and authorising the issuance of a Power of Attorney as per paragraph 3 herebelow.
 
(3).      Original Power of Attorney (notarised and officially translated in the English language by a competent public authority, executed by a duly authorised Director, appointing attorney(s)-in-fact empowered to sign, execute and deliver any and all documents necessary in connection with the purchase of the Vessels, as well as for the release of the deposit money and payment of the purchase price as well as any other payment due under the Memorandum of Agreement.

 
Both Sellers and Buyers shall exchange to each other the above drafts of documents at least 7 (seven) working days prior to delivery
 
19. Blacklisting.
 
The Sellers to confirm that to the best of their knowledge the Vessel is not blacklisted by any nation.
 
20. Plans/Manuals
 
At the time of Vessel’s delivery the Sellers to hand over to Buyers’ representative all drawings/plans and manuals available on board which are not to be returned to Class or Registry (in which case copies shall be provided). Sellers’ ISM manuals and forms as well as Vessel’s log books will not be handed over, however Buyers shall have the right to take the copy of log books. In addition all drawings/plans and manuals available in Managers’/Owners’ office to be forwarded to the Buyers’ office as soon as possible after delivery delay. Forwarding expenses to be for Buyers’ account.
 
21. Confidentiality
 
Both parties shall keep all the negotiations and the Agreement and all its terms strictly private and confidential.

For the Sellers	 	For the Buyers	
 	 	 	
 /s/ I. Prokopakis	 	 	/s/ [illegible]	 	
Name: I. PROKOPAKIS	 	Name: [illegible]	
 	 	 	
Title: Director	 	Title: [illegible]	
 	 	 	
Date: 16/08/2006	 	Date: 2006.8.15	
 	 	 	
On behalf of:
ORTELIUS MARITIME INC.	 	On behalf of:
Shanghai Time Shipping Co. Ltd. or its nominee	

For the Sellers	 	For the Buyers	
 	 	 	
FOR DANAOS CORPORATION	 	FOR SHANGHAI TIME SHIPPING CO LTD.	
 	 	 	
/s/ I. Prokopakis	 	 	/s/ [illegible]	 	
Name: I. PROKOPAKIS	 	Name: [illegible]	
 	 	 	
Title: Director	 	Title: [illegible]	
 	 	 	
Date: 16/08/2006	 	Date: 2006.8.15	
 	 	 	
On behalf of:	 	On behalf of:	

 
Exhibit 10.35

 	Norwegian Shipbroker Association’s Memorandum of Agreement for sale and purchase of ships. Adopted by The Baltic and International Maritime Council (BIMCO) in 1956.	
 	Code-name	
 	SALEFORM 1993	
 	Revised 1966, 1983 and 1986/87.	
 
MEMORANDUM OF AGREEMENT
 
Dated: 14 th August, 2006
 
“ALEXANDRA NAVIGATION INC.”
 
MESSRS DANAOS CORPORATION WILL GUARANTEE PERFORMANCE OF SELLING COMPANY AND SHALL REMAIN JOINTLY AND SEVERALLY FULLY RESPONSIBLE FOR PROMPT AND TIMELY FULFILLMENT OF ALL SELLERS’ RESPONSIBILITIES, UNDERTAKINGS, OBLIGATIONS AND LIABILITIES HEREUNDER
 
hereinafter called the Sellers, have agreed to sell, and
 
MESSRS SHANGHAI TIME SHIPPING CO LTD OR A COMPANY TO BE NOMINATED BY THEM NO LATER THAN 30 DAYS OF APPROXIMATE NOTICE OF VESSEL’S INTENDED DELIVERY IS TENDERED FROM SELLERS.
 
THE PERFORMANCE OF THIS AGREEMENT BY THE NOMINEE IS GUARANTEED BY SHANGHAI TIME SHIPPING CO LTD WHO ARE TO REMAIN JOINTLY AND SEVERALLY FULLY RESPONSIBLE FOR THE PROMPT AND TIMELY FULFILLMENT OF ALL BUYERS’ RESPONSIBILITIES, UNDERTAKINGS, OBLIGATIONS AND LIABILITIES HEREUNDER .
 
hereinafter called the Buyers, have agreed to buy
 
Name: “ ALEXANDRA I ”
 
Classification Society/Class: NKK

Built: 1994	 	By: IMABARl MARUGAME	
 	 	 	
Flag: Cyprus	 	Place of registration: Limassol	
 	 	 	
Call Sign: C4HC2	 	Grt/Nrt: 35886 / 23321	
 
Register Number IMO/Reg No: 9086942
 
hereinafter called the Vessel, on the following terms and conditions:
 
Definition
 
“Banking days” are days on which banks are open both in the country of the currency stipulated for the Purchase Price in Clause 1 and in Shanghai / Piraeus / London the place of closing stipulated in Clause 8.
 
“In writing” or “written” means a letter handed over from the Sellers to the Buyers or vice versa, a registered letter, telex, telefax or other modern form of written communication including e-mail.
 
“Classification Society” or “Class” means the Society referred to in line 4.
 
1.         Purchase price: USD 25.000.000 (United States Dollars Twenty Five Million, Only)
 
2.         Deposit
 
As security for the correct fulfillment of this Agreement the Buyers shall pay remit a deposit of 10% (ten per cent) of the Purchase Price within 3 (three) Shanghai/NewYork/Piraeus/London banking days from the date both parties hereto have signed this Agreement or a faxed/scanned copy hereof from the date of this Agreement . This deposit shall be placed with

 
The Royal Bank of Scotland PLC
Piraeus branch
45 Akti Miaouli
185 10 Piraeus, Greece
Swift Code RBOSGRAAA
Attn: Mr. Fotis Bratimos/ Ms Elena Konstantilieri
Account No: 506143
Beneficiary: Joint account in the names of “SHANGHAI TIME SHIPPING CO. LTD.”
(Buyers) and “ALEXANDRA NAVIGATION INC.” (Sellers)
 
USD correspondent: JP Morgan Chase Bank, N.Y. CHASUS33
 
and held by them in a joint account for the Sellers and the Buyers, to be released in accordance with joint written instructions of the Sellers and the Buyers. Interest, if any, to be credited to the Buyers. Any fee charged for opening, holding, lifting and closing holding the said deposit shall be borne equally by the Sellers and the Buyers. Buyers are not responsible for the delay of deposit remittance solely due to Sellers failure to process the joint account in time
 
3.         Payment
 
The said deposit and the balance of 90% (ninety per cent) of the Purchase Price ( the ‘Balance Money’) together with all other monies payable under this Agreement shall be paid in full free of bank charges to
 
DANAOS CORPORATION
Account Number 178200-100
With the Royal Bank of Scotland
Piraeus branch
45 Akti Miaouli
185 10 Piraeus, Greece
Swift Code RBOSGRAAA
IBAN GR28 0640 0010 0000 0017 8200 100
 
on delivery of vessel, but not later than 3 Shanghai/NewYork/Piraeus/London banking days after the Vessel is in every respect physically ready for delivery in accordance with the terms and conditions of this Agreement and Notice of Readiness has been given in accordance with clause 5
 
Closing and exchange of delivery documents shall take place in London, U.K
Structured Ship Finance
Shipping Business Centre
The Royal Bank of Scotland Group
Tel: +44 207 615 4018
 
4.         Inspections
 
The vessel and her classification records’ have been inspected and accepted by the Buyers and by the C.C.S. Thus the sale is outright and definite,
 
a)*                   The Buyers have inspected and accepted the Vessel’s classification records. The Buyers have also inspected the Vessel at/in                              on
 
and have accepted the Vessel following this inspection and the sale is outright and definite, subject only to the forms and conditions of this Agreement.
 
b)*                  The Buyers shall have the right to inspect the Vessel’s classification records and declare whether same are accepted or not within
 
The Seller shall provide for inspection of the Vessel at/in
 
The Buyers shall undertake the inspection without undue delay to the Vessel. Should the Buyers cause undue delay they shall compensate the Sellers for the losses thereby incurred. The Buyers shall inspect the Vessel without opening up and without cost to the Sellers. During the inspection, the Vessel’s deck and engine leg books shall be made available for examination by the Buyers, if the Vessel is accepted after such inspection, the sale shall become outright and definite, subject only to the terms and conditions of this Agreement ,

 
provided the Seller receive written notice of acceptance from the Buyers within 72 hours after completion of such inspection, Should notice of acceptance of the Vessel’s classification records and of the Vessel not be received by the Sellers as aftoresaid, the deposit together with interest earned shall be released immediately to the Buyers, whereafter this Agreement shall be null and void.
 
4a) and 4b) are alternatives; delete whichever is not applicable, in the absence of deletions, alternative 4a) to apply,
 
5.                          Notice, time and place of delivery.
 
a)                          The Sellers shall keep the Buyers well informed of the Vessel’s itinerary and shall provide the Buyers with 30/20/10/7 and 3 days notice of the estimated time of arrival at the intended place of drydocking /underwater inspection/delivery. When the Vessel is at the place of delivery and in every respect physically ready for delivery in accordance with this Agreement, the Sellers shall give the Buyers a written Notice of Readiness for delivery.
 
Sellers shall keep the Buyers well informed of the Vessel’s itinerary and nominate the delivery range and intended place of delivery 30 days prior to the approximate delivery. Sellers shall provide Buyers with 20/15/10/7 and 3 days notice of the estimated time of arrival at the intended place of delivery. When the Vessel is at the place of delivery and in every respect physically ready for delivery in accordance with this Agreement, the Sellers shall give the Buyers a written Notice of Readiness for delivery.
 
The vessel will be delivered with swept clean holds
 
b)                         The Vessel shall be delivered and taken over safely afloat at a safe and accessible berth or ancharge at/in
 
in the Sellers’ option
 
Expected time of delivery: Between 15 th December 2006 and 15 th January 2007. Sellers shall also use their best endeavor to deliver the vessel as early as possible.
 
Sellers shall use their best endeavor to deliver the vessel in Singapore/Japan range. However, final delivery range will be back to back with the redelivery of the existing charters, i.e. vessel to be delivered by Sellers and taken over by Buyers over safely afloat at a safe and accessible berth/anchorage/buoy within Skaw/Passero range, Singapore/Japan range including islands or US Gulf, in the Sellers option, but in case at Sellers nominated port of delivery there is no Chinese Embassy where the Buyers joining crew cannot process visa from, then Buyers have the option to nominate at least 7 running days prior to the Sellers intended date of delivery an alternative port of delivery, which not to be more than 12 days steaming time from the Sellers’ nominated delivery port. Buyers nominated port to be the nearest to Sellers nominated port that Buyers may obtain visa for their crew. ­Sellers to undertake to sail the vessel to Buyers such nominated port at Sellers risk and Buyers cost. These costs will be the vessel’s daily running cost plus bunkers plus financing interest plus cost of exit from Sellers delivery port and entry to Buyers delivery port as quoted by the Sellers and Buyers agents respectively
 
Opex 3528 + Bunkers 11100 + Interest 4286 = $ 18914 per day at sea plus port(s) cost
 
Sea Time to be calculated upon full away from pilot station from Sellers nominated delivery port to sea pilot station to Buyers nominated port
 
c)                          Date of cancelling (see clauses 5 c), 6b) (iii)and 14); 15 th January 2007 in Buyers option
 
However, only in case Sellers need extra time purely for the preparatory purpose of delivery, i.e. not for the time charterers charter extension purpose, Buyers to grant an extention of cancelling date upto 30 th January 2007.
 
If the Sellers anticipate that, notwithstanding the exercise of due diligence by them, the Vessel will not be ready for delivery by the cancelling date they may notify the Buyers in writing stating the date when they anticipate that the Vessel will be ready for delivery and

 
propose a new cancelling date. Upon receipt of such notification the Buyers shall have the option of either cancelling this Agreement in accordance with Clause 14 within 3 7 running days of receipt of the notice or of accepting the new date as the new cancelling date. If the Buyers have not declared their option within 3 7 running days of receipt of the Sellers’ notification or if the Buyers accept the new date, the date proposed in the Sellers’ notification shall be deemed to be the new cancelling date and shall be substituted for the cancelling date stipulated in line 61.
 
If this Agreement is maintained with the new cancelling date all other terms and conditions hereof including those contained in Clauses 5 a) and 5 c) shall remain unaltered and in full force and effect. Cancellation or failure to cancel shall be entirely without prejudice to any claim for damages the Buyers may have under Clause 14 for the Vessel not being ready by the original canceling date.
 
d)                         Should the Vessel become an actual, constructive or compromised total loss before delivery the deposit together with interest earned shall be released immediately to the Buyers whereafter this Agreement shall be null and void.
 
6.         Drydocking/Divers Inspection (see additional clause 17)
 
a)**            The Sellers shall place the Vessel in drydock at the port of delivery for inspection by the Classification Society of the Vessel’s underwater parts below the deepest load line, the extent of the inspection being in accordance with Classification Society’s rules. If the rudder, propeller, bottom or other underwater parts below the deepest lead line are found broken, damaged or defective so as to affect the Vessel’s class, such defects shall be made good at the Seller’s expense to the satisfaction of the Classification Society without condition/recommendation*.
 
b)**           (i)         The Vessel is to be delivered without drydocking. However, the Buyers shall have the right at their expense to arrange for an underwater inspection by a diver approved by the Classification society prior to the delivery of the Vessel. The Sellers shall at their cost make the Vessel available for such inspection. The extent of the inspection and the conditions under which it is performed shall be to the satisfaction of the Classification Society. If the conditions at the port of delivery are unsuitable for such inspection, the Sellers shall make the Vessel available at a suitable alternative place near to the delivery port.
 
(ii)        If the rudder, propeller, bottom or other underwater ports below the deepest load line are found broken, damaged or defective so as to effect the Vessel’s class, then unless repairs can be carried out afloat to the satisfaction of the Classification society, the Sellers shall arrange for the Vessel to be drydocked at their expense for inspection by the Classification society of the Vessel’s underwater parts below the deepest load line, the extent of the inspection being in accordance with the Classification Society’s rules. If the rudder, propeller, bottom or other underwater parts below the deepest load line are found broken, damaged or defective so as to effect the Vessel’s class, such defects shall be made good by the Sellers at their expense to the satisfaction of the classification society without condition/recommendation*. In such event the Sellers are to pay also for the cost of the underwater inspection and the Classification Society’s attendance.
 
(iii)       If the Vessel is to be drydocked pursuant to Clause 6 b) (ii) and no suitable dry docking facilities are available at the port of delivery, the Sellers shall take the Vessel to a port where suitable drydocking facilities are available, whether within or outside the delivery range as per Clause 5 b). Once drydocking has taken place the Sellers shall deliver the Vessel at a port within the delivery range as per clause 6 b) which shall, for the purpose of this clause, become the new port of delivery. In such event the cancelling date provide for in clause 6 b) shall be extended by the additional time required for the dry docking and extra cleaning, but limited to a maximum of 14 running days.
 
c)                          If the vessel is drydocked pursuant to Clause 6 a) or 6 b) above
 
(i)         the Classification Society may require survey of the tailshaft system, the extent of the survey being to the satisfaction of the Classification surveyor. If such survey is not required by the Classification Society, the Buyer shall have the right to require the tailshaft to be drawn and surveyed by Classification Society, the extent of the survey being in

 
accordance with the Classification Society’s rules for tailshaft survey and consistent with the current stage of the Vessel survey cycle. The Buyer shall declare whether they require the tailshaft to be drawn and surveyed not later than by the completion of the inspection of the Classification Society. The drawing and refitting of the tailshaft shall be arranged by the Sellers. Should any parts of the tailshaft system be condemned or found defective so as to effect the Vessel’s class, these parts shall be renewed or made good at the Sellers’ expense to the satisfaction of the Classification Society without condition/recommendation*.
 
(ii)        the expense relating to the survey of the tailshaft system shall be borne by the Buyers unless the Classification Society requires such survey to be carried out, in which case the Sellers shall pay these expenses. The Sellers shall also pay the expenses if the Buyers require the survey and parts of the system are condemned or found defective or broken so as to effect the vessel’s class*.
 
(iii)       the expense in connection with putting the Vessel in and taking her out of drydock, including the drydock dues and the Classification Society’s fees shall be paid by the Sellers if the Classification Society issues any condition/recommendation* as a result of the survey or if it requires survey of the tailshaft system. In all other cases the Buyers shall pay the aforesaid expenses, dues and fees.
 
(iv)       the Buyers’ representative shall have the right to be present in the drydock, but without interfering with the work or decisions of the Classification surveyor.
 
(v)        the Buyers shall have the right to have the underwater parts of the Vessel cleaned and painted at their risk and expense without interfering with the Sellers’ or the Classifications surveyor’s work, if any, and without affecting the Vessel’s timely delivery. If however, the Buyers’ work in drydock is still in progress when the Sellers have completed the work which the Sellers are required to do, the additional docking time needed to complete the Buyers’ work shall be for the Buyers’ risk and expense. In the event that the Buyers’ work requires such additional time, the Sellers may upon completion of the Sellers’ work tender Notice of Readiness for delivery whilst the Vessel is still in drydock and the Buyers shall be obliged to take delivery in accordance with Clause 3, whether the vessel is in drydock or not and irrespective of Clause 5b).

*          Notes, if any, in the surveyor’s report which are accepted by the classification Society without condition/recommendation are not to be taken into account.
 
**        6a) and 6 b) are alternatives; delete whichever is not applicable. In the absence of deletions, alternative 6a) to apply.
 
7.         Spares/bunkers, etc.
 
The Sellers shall deliver the Vessel to the Buyers with everything belonging to her on board and on shore. All spare parts and spare equipment including spare tail end shaft(s) and/or spare propeller(s)/ propeller blade(s) , if any, belonging to the Vessel at the time of inspection used or unused, whether on board or not shall become the Buyers’ property, but spares on order are to be excluded . Forwarding charges, if any, shall be for the Buyers’ account. The Sellers are not required to replace spare parts including spare tail end shaft(s) and spare propeller(s)/ propeller blade(s) , which are taken out of spare and used as replacement prior to delivery, but the replaced items shall be the property of the Buyers. The radio installation and navigational equipment shall be included in the sale without extra payment if they are the property of the Sellers. Unused stores and provisions shall be included in the sale and be taken over by the Buyers without extra payment.
 
The Sellers have the right to take ashore crockery, plates, cutlery, linen and other articles bearing the Seller’s flag or name, provided they replace same with similar unmarked items. Library, forms, etc., exclusively for use in the Sellers’ vessel(s), shall be excluded without compensation. Captain’s Officers’ and Crew’s personal belongings including the slop chest are to be excluded from the sale, as well as the following additional items (including items on hire);
 
• Dosing pump for boiler water treatment (1 piece)
• Unitor RFO compatibility test kit (1 piece)
• Extra deck air compressor with panel (1 piece)
• H.P. washing machine complete with extension cables (1 piece)
• Painting spray machine

 
The Buyers shall take over the remaining bunkers and unused lubricating oils in sealed drums or in storage tanks without having passed through the vessel’s system and sealed drums and pay the current net marked last net purchase prices evidenced by the copy of invoices which to be provided by the sellers price (excluding barging expenses) at the port and date of delivery of the Vessel. Payment under this Clause shall be made at the same time and place and in the same currency as the Purchase Price.
 
The Seller’s and the Buyers’s familiarization representative shall jointly measure the bunker/lubricant oil quantity and prepare a Statement of Fact prior to delivery of the vessel showing the remaining quantities of bunkers and unused lubricant oil including calculated consumption by the Vessel upto the date of delivery, which shall be the amount of bunkers and lubricating oils the Buyers shall pay under the terms of this agreement
 
8.         Documentation, (see also additional clause 18)
 
The place of closing:
 
In exchange for payment of the Purchase Price the Sellers shall furnish the Buyers with delivery documents, namely;
 
a)                         Legal Bill of Sale in a form recordable in (the country in which the Buyers are to register the Vessel), warranting that the Vessel is free from all encumbrances, mortgages and maritime liens or any other debts or claims whatsoever, duly notarially attested and legalized by the consul of such country or other competent authority.
 
b)                        Current Certificate of Ownership issued by the competent authorities of the flag state of the Vessel.
 
c)                         Confirmation of Class issued within 72 hours prior to delivery.
 
d)                        Current Certificate issued by the Competent authorities stating that the Vessel is free from register encumbrances.
 
e)                         Certificate of deletion of the Vessel from the Vessel’s registry or other official evidence of deletion appropriate to the Vessel’s registry at the time of delivery, or, in the event that the registry does not as a matter of practice issue such documentation immediately, a written undertaking by the Sellers to effect deletion from the Vessel’s registry forthwith and furnish a Certificate or other official evidence of deletion to the Buyers promptly and latest within 4 (four) weeks after the purchase Price has been paid and the Vessel has been delivered.
 
f)                           Any such additional documents as may reasonably be required by the competent authorities for the purpose of registering the Vessel provided the Buyers notify the Sellers of any such documents as soon as possible after the date of this Agreement.
 
At the time of delivery the Buyers and Sellers shall sign and deliver to each other a Protocol of Delivery and Acceptance confirming the date and time of delivery of the Vessel from the Sellers to the Buyers.
 
At the time of delivery the Sellers shall hand to the Buyers the classification certificate(s) as well as all plans drawings and manuals etc., which are on board the Vessel and in Sellers’ office and/or their possession. Other certificates which are on board the Vessel shall also be handed over to the Buyers unless the Sellers are required to retain same, in which case the Buyers to have the right to take copies. Other technical documentation which may be in the Sellers’ possession shall be promptly forwarded to the Buyers at Buyers expense, if they so request. The Sellers may keep the Vessel’s log books but the Buyers to have the right to take copies of same.
 
9.         Encumbrances
 
The Sellers warrant that the Vessel, at the time of delivery, is free from all charters, encumbrances, mortgages, taxes and maritime liens or any other debts whatsoever as well as any dispute claim with its Union. The Sellers hereby undertake to indemnify the Buyers

 
against all consequences of claims made against the Vessel which have been incurred prior to the time of delivery.
 
Sellers will provide Buyers with Free of Encumbrances Certificate dated the day of the closing same to be issued by the vessel’s Registry Authority or Cypriot Consulate in Piraeus or London.
 
10.       Taxes, etc.
 
Any taxes, fees and expenses in connection with the purchase and registration under the Buyers’ flag shall be for the Buyers account, where as similar charges in connection with the closing of the Sellers’ register shall be for the Sellers’ account.
 
11.       Condition on delivery
 
The Vessel with everything belonging to her shall be at the Sellers’ risk and expense until she is delivered to the Buyers, but subject to the terms and conditions of this Agreements she shall be delivered by the Sellers and taken over by the Buyers as she was at the time of inspection, fair wear and tear excepted.
 
However, the Vessel shall be delivered with her class maintained without condition/recommendation*, free of average damage affecting the Vessel’s class, and with her classification certificates and national certificates, as well as all other certificates the Vessel had at the time of inspection, valid and unextended for minimum 3 (three) months after the day of delivery without condition/recommendation* by Class or relevant authorities at the time of delivery.
 
“Inspection” in this Clause 11, shall mean the Buyers’ inspection according to Clause 4 a) or 4 b), if applicable, or the buyers inspection prior to the signing of this Agreement. If the Vessel is taken over without inspection, the date of this Agreement shall be the relevant date.

*                            Notes, if any, in the surveyor’s reports which are accepted by the Classification Society without condition/recommendation are not to be taken into account.
 
12.       Name/markings
 
Upon delivery the Buyers undertake to change the name of the Vessel and alter funnel markings
 
13.       Buyers’ default
 
Should the deposit not be paid in accordance with Clause 2, the Sellers have the right to cancel this Agreement, and they shall be entitled to claim compensation for their losses and for all their expenses incurred together with interest. Should the Purchase Price not be paid in accordance with Clause 3, the Sellers have the right to cancel the Agreement, in which case the deposit together with interest earned shall be released to the Sellers. If the deposit does not cover their loss, the Sellers shall be entitled to claim further compensation for their losses and for all their expenses incurred together with interest.
 
14.       Sellers’ default
 
Should the Sellers fail to give Notice of Readiness in accordance with Clause 5 a) or fail to be ready to validly complete a legal transfer by the date stipulated in line 61 or at such date as may have been extended pursuant to this Agreement the Buyers shall have the option of cancelling this Agreement provided always that the Sellers shall be granted a maximum of 3 banking days after Notice of Readiness has been given to make arrangements for the documentation set out in Clause 8. If after Notice of Readiness has been given but before the Buyers have taken delivery, the Vessel ceases to be physically ready for delivery and is not made physically ready again in every respect by the date stipulated in line 61 and new Notice of Readiness given , has not been given by the date stipulated in line 61 or at such date as may have been extended pursuant to this Agreement the Buyers shall retain their option to cancel. In the event that the Buyers elect to cancel this Agreement the deposit together with interest earned thereon shall be released to them immediately.
 
Should the Sellers fail to give Notice of Readiness by the date stipulated in line 61 or fail to be

 
ready to validly complete a legal transfer as aforesaid they shall make due compensation to the Buyers for their loss and for all expenses together with interest if their failure is due to proven negligence and whether or not the Buyers cancel this Agreement.
 
15.       Buyers’ representatives
 
After this Agreement has been signed by both parties and the deposit has been lodged, the Buyers have the right 60 days prior to the expected date of delivery to place up to 2 (two) representatives on board the Vessel at their sole risk and expense upon arrival at ……… on or about . These representatives are on board for the purpose of familiarisation and in the capacity of observers only, and they shall not interfere in any respect with the operation of the Vessel. The Buyers’ representatives shall sign the Sellers’ letter of indemnity prior to their embarkation. The Buyers’ representatives are to be allowed to remain on board up to and during the time of delivery, always at Buyers’ sole risk and expense.
 
Once Sellers have tended NOR, Buyers are entitled to have another 8 representatives onboard for familiarization purpose only.
 
16.       Arbitration
 
a)*                   This Agreement shall be governed by and construed in accordance with English law and any dispute arising out of this Agreement shall be referred to arbitration in London in accordance with the Arbitration Acts 1996 1950 and 1979 or any statutory modification or re-enactment thereof for the time being in force, one arbitrator being appointed by each party. On the receipt by one party of the nomination in writing of the other party’s arbitrator, that party shall appoint their arbitrator within fourteen days, failing which the decision of the single arbitrator appointed shall apply. If two arbitrators properly appointed shall not agree they shall appoint an umpire whose decision shall be final.
 
b)*                  This Agreement shall be governed by and construed in accordance with Title 9 of the United Stage Code and the Law of the State of New York and should any dispute arise out of this Agreement, the matter in dispute shall be referred to three persons at New York, one to be appointed by each of the parties hereto, and the third by the two so chosen; their decision or that of any two of them shall be final, and for purpose of enforcing any award, this Agreement may be made a rule of the Court.
 
The proceedings shall be conducted in accordance with the rules of the Society of Maritime Arbitraters Inc., New York.
 
c)*                   Any dispute arising out of this Agreement shall be referred to arbitration at                                                      , subject to the procedures applicable there. The laws of---- shall govern this Agreement.

*                             16a), 16b) and 16c) are alternatives; delete whichever is not applicable. In the absence of deletions, alternative 16a) to apply.
 
Additional Clauses:
 
17. Divers Inspection
 
No drydocking, prior to the delivery of the Vessel, however the Buyers to have the option to arrange at their risk and expense at any convenient port before delivery or at the port of delivery an inspection of the Vessel’s underwater parts by divers appointed by Buyers and approved by Vessel’s Class, in the presence of the Class surveyor and Sellers’ and Buyers’ representatives, Buyers not to interfere at the video monitor or with the Class surveyor’s work.
 
The Sellers shall notify Buyers as to the vessel’s itinerary for Buyers to decide the most convenient place for the underwater inspection to take place at Sellers time. Sellers to arrange Class Surveyor at Buyers expenses who shall be in attendance at the time of underwater inspection.

 
Buyers shall in any event pay for the divers and the cost of Class attendance. The extent of the inspection and the conditions under which it is performed shall be to the satisfaction/requirement of the Class surveyor attending. The Class to be the sole arbitrator as to whether underwater damage, if any, will impose any condition of Class. If the conditions at the place of such inspection are not suitable for such inspection, the Sellers shall make the Vessel available at a suitable alternative nearby place.
 
Should any damage be found to the underwater parts that will impose a condition of Vessel’s present class, then:
 
a. In case vessel’s Class imposes a condition but does not require drydocking before next scheduled drydocking, Sellers have the option to repair same to Class satisfaction prior to delivery or to compensate the Buyers with the estimated cost to repair such damage in a way which is acceptable to the Vessel’s Class, which cost to be only the direct cost to repair such damage (i.e. excluding docking/undocking costs, tugs, loss of hire, deviation, etc), as per the average of 2 (two) quotations received from 1 (one) major reputable repair yard chosen by Buyers and 1 (one) major reputable repair yard chosen by Sellers, such repair yards to be located in China and capable of repair a vessel of such type; The average amount agreed shall be deducted from the Purchase Price at the time of delivery.
 
b. In case that the rudder, propeller, bottom or other underwater parts below the summer load line be found broken, damaged or defective, so as to affect Vessel’s present class and must be immediately repaired, then clause 6B(ii) NSF 93 to be reinstated.
 
In the event the Vessel is to be drydocked, the canceling date will be extended appropriately for the extra time taken to deliver the Vessel due to ballasting/drydocking/repairs to be carried out to Class’ satisfaction in accordance with this Agreement, [but such extension will not exceed in total 7 running days].
 
In case of drydocking, the Buyers may carry out cleaning/painting works at their sole risk and expense, subject to the Sellers’ approval, without interfering with the Sellers’ drydock works nor the classification surveyor’s work, if any, and without affecting Vessel’s timely delivery schedule. If however Buyers’ works are still in progress when Sellers have completed their works and they are ready in all respects to deliver the Vessel to the Buyers as per the Agreement, then Sellers shall tender final Notice of Readiness to the Buyers whilst the Vessel is in drydock and Buyers must take timely delivery of the Vessel whether on drydock or not, with undocking expenses only to be for Sellers’ account.
 
The Class shall issue a Class Survey Record which indicates whether the Underwater inspection has found any damage affecting class, and in the event that such damage is found, indicates whether it requires immediate rectification or whether it should be rectified during the next drydocking. This Class Survey Record will be issued immediately after the completion of the divers Underwater Inspection.
 
18. Documentation.
 
AA. Sellers to provide Buyers with following documents in exchange of purchase money at the time of closing:
 
(1)        Three original bills of sale notarially attested and legalized by the Chinese Embassy or Consulate in Athens or London and warranting that the vessel is free for all encumbrances, mortgages and maritime liens or other debts or claims whatsoever to be signed by a duly authorized signatory on behalf of the Sellers.
 
(2)        Minutes of meetings of the Board of directors and shareholders of the Sellers, authorizing the sale of the vessel to the Buyers and the issue of a Power of Attorney. The minutes to be notarially attested and legalized by the Chinese Embassy or Consulate in Athens or London.
 
(3)        Copies of Memorandum and Articles of Association and other constitutional documents of the Seller, which are to be certified by the secretary of the Sellers.

 
(4)        Power of Attorney of the Seller authorizing individuals to execute all necessary documents on the Sellers’ behalf, same to be notarially attested and legalized by the Chinese Embassy or Consulate in Athens or London.
 
(5)        Deletion Certificate in original issued by the vessel’s Registry Authority on the date of delivery. In case that such original certificate is not available, the Sellers instead shall furnish the Buyers with a Letter of Undertaking on Sellers company letterhead at the time of delivery to provide the Deletion Certificate in original to the Buyers within 5 (five) working days from the date of delivery of the Vessel
 
(6)        Free of Encumbrances Certificate in original issued by the Vessel’s Registry Authority or the Cypriot Consulate in Piraeus or London on the date of delivery certifying that the vessel is free of all registered encumbrances and mortgages.
 
(7)        Letter of Undertaking which clearly states vessel is free from registered encumbrance and from all maritime liens and debts and that they further undertake to indemnify the Buyer for all and any claims arising prior to the delivery of the vessel.
 
(8)        Original class maintained certificate from NK classification that the vessel’s class is maintained free of recommendations/conditions of class dated not earlier than three (3) working days before date of delivery
 
(9)        Letter of Undertaking which states that to the best of the Sellers’ knowledge the vessel is not blacklisted by the Arab Boycott League in Damascus or the ITF or any other nations or organizations.
 
(10)      3 original copies of commercial invoice in relation to the total purchase price of the vessel.
 
(11)      3 original copies of commercial invoices in relation to bunkers and lubrication oils remaining on board the vessel at delivery along with copies of invoices for the purchase of bunkers and lubrication oils.
 
(12)      Letter of Undertaking from seller to delete the vessel from INMARSAT on the day of delivery of the vessel.
 
(13)      Current Certificate of Ownership issued by the competent authorities of the flag state of the Vessel dated not earlier than three (3) working days before date of delivery.
 
BB List of Original Documents to be delivered by vessel’s Buyers to Sellers in exchange of purchase money at the time of closing
 
(1).       Copy of the Buyers Company Registration Certificate duly notarised and officially translated into the English language by a competent public authority.
 
(2).       Original Board Resolutions (notarised and officially translated in the English language by a competent public authority) ratifying the Memorandum of Agreement and all other terms of the purchase of the Vessels and authorising the issuance of a Power of Attorney as per paragraph 3 herebelow.
 
(3).       Original Power of Attorney (notarised and officially translated in the English language by a competent public authority, executed by a duly authorised Director, appointing attorney(s)-in-fact empowered to sign, execute and deliver any and all documents necessary in connection with the purchase of the Vessels, as well as for the release of the deposit money and payment of the purchase price as well as any other payment due under the Memorandum of Agreement.
 
Both Sellers and Buyers shall exchange to each other the above drafts of documents at least 7 (seven) working days prior to delivery
 
19. Blacklisting.
 
The Sellers to confirm that to the best of their knowledge the Vessel is not blacklisted by any nation.

 
20. Plans/Manuals
 
At the time of Vessel’s delivery the Sellers to hand over to Buyers’ representative all drawings/plans and manuals available on board which are not to be returned to Class or Registry (in which case copies shall be provided). Sellers’ ISM manuals and forms as well as Vessel’s log books will not be handed over, however Buyers shall have the right to take the copy of log books. In addition all drawings/plans and manuals available in Managers’/Owners’ office to be forwarded to the Buyers’ office as soon as possible after delivery delay. Forwarding expenses to be for Buyers’ account.
 
21. Confidentiality
 
Both parties shall keep all the negotiations and the Agreement and all its terms strictly private and confidential.

For the Sellers	 	For the Buyers	
 	 	 	
 /s/ I. Prokopakis	 	 	/s/ illegible	 	
Name: I. PROKOPAKIS	 	Name: illegible	
 	 	 	
Title: Director	 	Title:	
 	 	 	
Date: 16/8/2006	 	Date: 2006.8.15	
 	 	 	
On behalf of:	 	On behalf of:	
ALEXANDRA NAVIGATION INC	 	Shanghai Time Shipping Co. Ltd. or its nominee	

For the Sellers	 	For the Buyers	
 	 	 	
FOR DANAOS CORPORATION	 	FOR SHANGHAI TIME SHIPPING CO LTD.	
 	 	 	
 /s/ I. Prokopakis	 	 	/s/ illegible	 	
Name: I. PROKOPAKIS	 	Name: illegible	
 	 	 	
Title: Director	 	Title:	
 	 	 	
Date: 16/8/2006	 	Date: 2006.8.15	
 	 	 	
On behalf of:	 	On behalf of:	

 
Exhibit 10.36

 	Norwegian Shipbroker Association’s Memorandum of Agreement for sale and purchase of ships. Adopted by The Baltic and International Maritime Council (BIMCO) in 1956.	
 	Code-name	
 	SALEFORM 1993	
 	Revised 1966, 1983 and 1986/87.	
 
MEMORANDUM OF AGREEMENT
 
Dated: 14 th August, 2006
 
“ORCHID NAVIGATION CORPORATION.”
 
MESSRS DANAOS CORPORATION WILL GUARANTEE PERFORMANCE OF SELLING COMPANY AND SHALL REMAIN JOINTLY AND SEVERALLY FULLY RESPONSIBLE FOR PROMPT AND TIMELY FULFILLMENT OF ALL SELLERS’ RESPONSIBILITIES, UNDERTAKINGS, OBLIGATIONS AND LIABILITIES HEREUNDER
 
hereinafter called the Sellers, have agreed to sell, and
 
MESSRS SHANGHAI TIME SHIPPING CO LTD OR A COMPANY TO BE NOMINATED BY THEM NO LATER THAN 30 DAYS OF APPROXIMATE NOTICE OF VESSEL’S INTENDED DELIVERY IS TENDERED FROM SELLERS
 
THE PERFORMANCE OF THIS AGREEMENT BY THE NOMINEE IS GUARANTEED BY SHANGHAI TIME SHIPPING CO LTD WHO ARE TO REMAIN JOINTLY AND SEVERALLY FULLY RESPONSIBLE FOR THE PROMPT AND TIMELY FULFILLMENT OF ALL BUYERS’ RESPONSIBILITIES, UNDERTAKINGS, OBLIGATIONS AND LIABILITIES HEREUNDER.
 
hereinafter called the Buyers, have agreed to buy
 
Name: “DIMITRIS C”
 
Classification Society/Class: DNV

Built: 1994	 	By: DAEWOO SB/HM	
 	 	 	
Flag: Cyprus	 	Place of registration: Limassol	
 	 	 	
Call Sign: C4HA2	 	Grt/Nrt: 26824 / 13885	
 
Register Number : IMO/Reg No: 9077381
 
hereinafter called the Vessel, on the following terms and conditions:
 
Definition
 
“Banking days” are days on which banks are open both in the country of the currency stipulated for the Purchase Price in Clause 1 and in Shanghai / Piraeus / London the place of closing stipulated in Clause 8.
 
“In writing” or “written” means a letter handed over from the Sellers to the Buyers or vice versa, a registered letter, telex, telefax or other modern form of written communication including e-mail.
 
“Classification Society ” or “Class” means the Society referred to in line 4.
 
1.         Purchase price: USD 22.250.000 (United States Dollars Twenty Two Million Two Hundred Fifty Thousand, Only)
 
2.         Deposit
 
As security for the correct fulfilment of this Agreement the Buyers shall pay remit a deposit of 10% (ten per cent) of the Purchase Price within 3 (three) Shanghai/New York/Piraeus banking days from the date both parties hereto have signed this Agreement or a faxed/scanned copy hereof from the date of this Agreement . This deposit shall be placed with

 
The Royal Bank of Scotland PLC
Piraeus branch
45 Akti Miaouli
185 10 Piraeus, Greece
Swift Code RBOSGRAAA
Attn: Mr. Fotis Bratimos/ Ms Elena Konstantilieri
Account No: 506143
Beneficiary: Joint account in the names of “SHANGHAI TIME SHIPPING CO. LTD.”
(Buyers) and “ORCHID NAVIGATION CORPORATION.” (Sellers)
 
USD correspondent: JP Morgan Chase Bank, N.Y. CHASUS33
 
and held by them in a joint account for the Sellers and the Buyers, to be released in accordance with joint written instructions of the Sellers and the Buyers. Interest, if any, to be credited to the Buyers. Any fee charged for opening, holding, lifting and closing holding the said deposit shall be borne equally the Sellers and the Buyers. Buyers are not responsible for the delay of deposit remittance solely due to Sellers failure to process the joint account in time
 
3.         Payment
 
The said deposit and the balance of 90% (ninety per cent) of the Purchase Price (the ‘Balance Money’) together with all other monies payable under this Agreement shall be paid in full free of bank charges to
 
DANAOS CORPORATION
Account Number 178200-100
With the Royal Bank of Scotland
Piraeus branch
45 Akti Miaouli
185 10 Piraeus, Greece
Swift Code RBOSGRAAA
IBAN GR28 0640 0010 0000 0017 8200 100
 
on delivery of vessel, but not later than 3 Shanghai/New York/Piraeus/London banking days after the Vessel is in every respect physically ready for delivery in accordance with the terms and conditions of this Agreement and Notice of Readiness has been given in accordance with clause 5
 
Closing and exchange of delivery documents shall take place in London, U.K
Structured Ship Finance
Shipping Business Centre
The Royal Bank of Scotland Group
Tel: +44 207 615 4018
 
4.         Inspections
 
The vessel and her classification records’ have been inspected and accepted by the Buyers and by the C.C.S. Thus the sale is outright and definite.
 
a)*                   The Buyers have inspected and accepted the Vessel’s classification records. The Buyers have also inspected the Vessel at/in                                              on
 
and have accepted the Vessel following this inspection and the sale is outright and definite, subject only to the terms and conditions of this Agreement.
 
b)*                  The Buyers shall have the right to inspect the Vessel’s classification records and declare whether same are accepted or not within
 
The Seller shall provide for inspection of the Vessel at/in
 
The Buyer shall undertake the inspection without undue delay to the Vessel. Should the Buyers cause undue delay they shall compensate the Seller for the losses thereby incurred. The Buyers shall inspect the Vessel without opening up and without cost to the Sellers. During the inspection, the Vessel’s deck and engine log books shall be made available for examination by the Buyers. If the Vessel is accepted after such inspection, the sale shall

 
become outright and definite, subject only to the terms and conditions of this Agreement, provided the Sellers receive written notice of acceptance from the Buyers within 72 hours after completion of such inspection.
 
Should notice of acceptance of the Vessel’s classification records and of the Vessel not be received by the Sellers as aforesaid, the deposit together with interest earned shall be released immediately to the Buyers, whereafter this Agreement shall be null and void.
 
4a) and 4b) are alternatives; delete whichever is not applicable. In the absence of deletions, alternative 4a) to apply.
 
5.                          Notice, time and place of delivery
 
a)                          The Sellers shall keep the Buyers well informed of the Vessel’s itinerary and shall provide the Buyers with 30/20/10/7 and 3 days notice of the estimated time of arrival at the intended place of drydocking/underwater inspection/delivery. When the Vessel is at the place of delivery and in every respect physically ready for delivery in accordance with this Agreement, the Sellers shall give the Buyers a written Notice of Readiness for delivery.
 
Sellers shall keep the Buyers well informed of the Vessel’s itinerary and nominate the delivery range and intended place of delivery 30 days prior to the approximate delivery. Sellers shall provide Buyers with 20/15/10/7 and 3 days notice of the estimated time of arrival at the intended place of delivery. When the Vessel is at the place of delivery and in every respect physically ready for delivery in accordance with this Agreement, the Sellers shall give the Buyers a written Notice of Readiness for delivery.
 
The vessel will be delivered with swept clean holds.
 
b)                         The Vessel shall be delivered and taken over safely afloat at a safe and accessible berth or anchorage at/in
 
in the Seller’s option
 
Expected time of delivery: Between 1 st November 2006 and 30 th January 2007. Sellers shall also use their best endeavor to deliver the vessel as early as possible.
 
Sellers shall use their best endeavor to deliver the vessel in Singapore/Japan range. However, final delivery range will be back to back with the redelivery of the existing charters, i.e. vessel to be delivered by Sellers and taken over by Buyers over safely afloat at a safe and accessible berth/anchorage/buoy within Aden/Japan range if PG then PMO, Skaw/Passero range, Boston/ BB range including USG/EC Mex/ECCA in the Sellers option, but in case at Sellers nominated port of delivery there is no Chinese Embassy where the Buyers joining crew cannot process visa from, then Buyers have the option to nominate at least 7 running days prior to the Sellers intended date of delivery an alternative port of delivery, which not to be more than 12 days steaming time from the Sellers’ nominated delivery port. Buyers nominated port to be the nearest to Sellers nominated port that Buyers may obtain visa for their crew. Sellers to undertake to sail the vessel to Buyers such nominated port at Sellers risk and Buyers cost. These costs will be the vessel’s daily running cost plus bunkers plus financing interest plus cost of exit from Sellers delivery port and entry to Buyers delivery port as quoted by the Sellers and Buyers agents respectively
 
Opex 3480 + Bunkers 10050 + Interest 4286 = USD 17816 per day at sea plus port(s) cost.
 
Sea Time to be calculated upon full away from pilot station from Sellers nominated delivery port to sea pilot station to Buyers nominated port
 
c)                          Date of cancelling (see clauses 5 c), 6 b) (iii) and 14): 30 th January 2007 in Buyers option
 
However, only in case Sellers need extra time purely for the preparatory purpose of delivery, i.e. not for the time charterers charter extension purpose, Buyers to grant an extention of cancelling date upto 15 th February 2007.
 
If the Sellers anticipate that, notwithstanding the exercise of due diligence by them, the Vessel will not be ready for delivery by the cancelling date they may notify the Buyers in writing stating the date when they anticipate that the Vessel will be ready for delivery and

 
propose a new cancelling date. Upon receipt of such notification the Buyers shall have the option of either cancelling this Agreement in accordance with Clause 14 within 3 7 running days of receipt of the notice or of accepting the new date as the new cancelling date. If the Buyers have not declared their option within 3 7 running days of receipt of the Sellers’ notification or if the Buyers accept the new date, the date proposed in the Sellers’ notification shall be deemed to be the new cancelling date and shall be substituted for the cancelling date stipulated in line 61.
 
If this Agreement is maintained with the new cancelling date all other terms and conditions hereof including those contained in Clauses 5 a) and 5 c) shall remain unaltered and in full force and effect. Cancellation or failure to cancel shall be entirely without prejudice to any claim for damages the Buyers may have under Clause 14 for the Vessel not being ready by the original cancelling date.
 
d)                         Should the Vessel become an actual, constructive or compromised total loss before delivery the deposit together with interest earned shall be released immediately to the Buyers whereafter this Agreement shall be null and void.
 
6.                          Drydocking/Divers Inspection (see additional clause 17)
 
a)**            The Sellers shall place the Vessel in drydock at the port of delivery for inspection by the Classification Society of the Vessel’s underwater parts below the deepest load line, the extent of the inspection being in accordance with Classification Society’s rules. If the rudder, propeller, bottom or other underwater parts below the deepest load line are found broken, damaged or defective so as to affect the Vessel’s class, such defects shall be made good at the Sellers’ expense to the satisfaction of the Classification Society without condition/recommendation*.
 
b)**           (i)         The Vessel is to be delivered without drydocking. However, the Buyers shall have the right at their expense to arrange for an underwater inspection by a diver approved by the Classification society prior to the delivery of the Vessel. The Sellers shall at their Cost make the Vessel available for such inspection. The extent of the inspection and the conditions under which it is performed shall be to the satisfaction of the Classification Society. If the conditions at the port of delivery are unsuitable for such inspection, the Sellers shall make the Vessel available at a suitable alternative place near to the delivery port.
 
(ii)        If the rudder, propeller, bottom or other underwater parts below the deepest load line are found broken, damaged or defective so as to effect the Vessel’s class, then unless repairs can be carried out afloat to the satisfaction of the Classification society, the Sellers shall arrange for the Vessel to be drydocked at their expense for inspection by the Classification society of the Vessel’s underwater parts below the deepest load line, the extent of the inspection being in accordance with the Classification Society’s rules. If the rudder, propeller, bottom or other underwater parts below the deepest load line are found broken damaged or defective so as to effect the Vessel’s class, such shall be made good by the Sellers at their expense to the satisfaction of the classification society without condition/recommendation*. In such event the Sellers are to pay also for the cost of the underwater inspection and the Classification Society’s attendance.
 
(iii)       If the Vessel is to be drydocked pursuant to Clause 6 b) (ii) and no suitable drydocking facilities are available at the port of delivery, the Sellers shall take the Vessel to a port where suitable drydocking facilities are available, whether within or outside the delivery range as per Clause 5 b). Once drydocking has taken place the Sellers shall deliver the Vessel at a port within the delivery range as per clause 5 b) which shall, for the purpose of this clause, become the new port of delivery, in such event the cancelling date provided for in clause 5 b) shall be extended by the additional time required for the dry-docking and extra steaming, but limited to a maximum of 14 running days.
 
c)                          If the vessel is drydocked pursuant to Clause 6 a) or 6 b) above
 
i)          the Classification Society may require survey of the tailshaft system, the extent of the survey being to the satisfaction of the Classification surveyor. If such survey is not required by the Classification Society, the Buyers shall have the right to require the tailshaft to be drawn and surveyed by Classification Society, the extent of the survey being in

 
accordance with the Classification Society’s rules for tailshaft survey and consistent with the current stage of the Vessel survey cycle. The Buyers shall declare whether they require the tailshaft to be drawn and surveyed not later than by the completion of the inspection of the Classification Society. The drawing and refitting of the tailshaft shall be arranged by the Sellers. Should any parts of the tailshaft system be condemned or found defective so as to effect the Vessel’s class, those parts shall be renewed or made good at the Sellers’ expense to the satisfaction of the Classification Society without condition/recommendation*.
 
(ii)        the expenses relating to the survey of the tailshaft system shall be borne by the Buyers unless the Classification Society requires such survey to be carried out, in which case the Sellers shall pay these expenses. The Sellers shall also pay the expenses if the Buyers require the survey and parts of the system are condemned or found defective or broken so as to effect the vessel’s class*.
 
(iii)       the expenses in connection with putting the Vessel in and taking her out of drydock, including the drydock dues and the Classification Society’s fees shall be paid by the Sellers if the Classification Society issues any condition/recommendation* as a result of the survey or if it requires survey of the tailshaft system. In all other cases the Buyers shall pay the aforesaid expenses, dues and fees.
 
(iv)       the Buyers’ representative shall have the right to be present in the drydock, but without interfering with the work or decisions of the Classification surveyor.
 
(v)        the Buyers shall have the right to have the underwater parts of the Vessel cleaned and painted at their risk and expense without interfering with the Sellers’ or the Classifications surveyor’s works, if any, and without affecting the Vessel’s timely delivery. If, however, the Buyers’ work in drydock is still in progress when the Sellers have completed the work which the Sellers are required to do, the additional docking time needed to complete the Buyers’ work shall be for the Buyers’ risk and expense. In the event that the Buyers’ work requires such additional time, the Sellers may upon completion of the Sellers’ work tender Notice of Readiness for delivery whilst the Vessel is still in drydock and the Buyers shall be obliged to take delivery in accordance with Clause 3, whether the vessel is in drydock or not and irrespective of Clause 5 b).
 
*          Notes, if any, in the surveyor’s report which are accepted by the classification Society without condition/recommendation are not to be taken into account.
 
**        6 a) and 6 b) are alternatives; delete whichever is not applicable. In the absence of deletions, alternative 6 a) to apply.
 
7.         Spares/bunkers, etc.
 
The Sellers shall deliver the Vessel to the Buyers with everything belonging to her on board and on shore. All spare parts and spare equipment including spare tail-end shaft(s) and/or spare propeller(s)/ propeller blade(s) , if any, belonging to the Vessel at the time of inspection used or unused, whether on board or not shall become the Buyers’ property, but spares on order are to be excluded . Forwarding charges, if any, shall be for the Buyers’ account. The Sellers are not required to replace spare parts including spare tail-end shaft(s) and spare propeller(s)/ propeller blade(s) which are taken out of spare and used as replacement prior to delivery, but the replaced items shall be the property of the Buyers. The radio installation and navigational equipment shall be included in the sale without extra payment if they are the property of the Sellers. Unused stores and provisions shall be included in the sale and be taken over by the Buyers without extra payment.
 
The Sellers have the right to take ashore crockery, plates, cutlery, linen and other articles bearing the Seller’s flag or name, provided they replace same with similar unmarked items. Library, forms, etc., exclusively for use in the Sellers’ vessel(s), shall be excluded without compensation. Captain’s Officers’ and Crew’s personal belongings including the slop chest are to be excluded from the sale, as well as the following additional items (including items on hire):
 
• Dosing pump for boiler water treatment (2 pieces)
• Unitor HFO compatibility test kit (1 piece)
• Extra deck air compressor with panel (1 piece)
• H.P. washing machine complete with extension cables (1 piece)
• Painting spray machine

 
The Buyers shall take over the remaining bunkers and unused lubricating oils in sealed drums or in storage tanks without having passed through the vessel’s system and sealed drums and pay the current not marked last net purchase prices evidenced by the copy of invoices which to be provided by the sellers price (excluding barging expenses) at the port and date of delivery of the Vessel. Payment under this Clause shall be made at the same time and place and in the same currency as the Purchase Price.
 
The Seller’s and the Buyers’s familiarization representative shall jointly measure the bunker/lubricant oil quantity and prepare a Statement of Fact prior to delivery of the vessel showing the remaining quantities of bunkers and unused lubricant oil including calculated consumption by the Vessel upto the date of delivery, which shall be the amount of bunkers and lubricating oils the Buyers shall pay under the terms of this agreement
 
8.         Documentation. (see also additional clause 18)
 
The place of closing :
 
In exchange for payment of the Purchase Price the Sellers shall furnish the Buyers with delivery documents, namely:
 
a)                         Legal Bill of Sale in a form recordable in (the country in which the Buyers are to register the Vessel), warranting that the Vessel is free from all encumbrances, mortgages and maritime liens or any other debts or claims whatsoever, duly notarially attested and legalized by the consul of such country or other competent authority.
 
b)                        Current Certificate of Ownership issued by the competent authorities of the flag state of the Vessel.
 
c)                         Confirmation of Class issued within 72 hours prior to delivery.
 
d)                        Current Certificate issued by the competent authorities stating that the Vessel is free from register encumbrances.
 
e)                         Certificate of deletion of the Vessel from the Vessel’s registry or other official evidence of deletion appropriate to the Vessel’s registry at the time of delivery, or, in the event that the registry does not as a matter of practice issue such documentation immediately, a written undertaking by the Sellers to effect deletion from the Vessel’s registry forthwith and furnish a Certificate or other official evidence of deletion to the Buyers promptly and latest within 4 (four) weeks after the purchase Price has been paid and the Vessel has been delivered.
 
f)                           Any such additional documents as may reasonably be required by the competent authorities for the purpose of registering the Vessel provided the Buyers notify the Sellers of any such documents as soon as possible after the date of this Agreement.
 
At the time of delivery the Buyers and Sellers shall sign and deliver to each other a Protocol of Delivery and Acceptance confirming the date and time of delivery of the Vessel from the Sellers to the Buyers.
 
At the time of delivery the Sellers shall hand to the Buyers the classification certificate(s) as well as all plans drawings and manuals etc., which are on board the Vessel and in Sellers’ office and/or their possession. Other certificates which are on board the Vessel shall also be handed over to the Buyers unless the Sellers are required to retain same, in which case the Buyers to have the right to take copies. Other technical documentation which may be in the Sellers’ possession shall be promptly forwarded to the Buyers at Buyers expense, if they so request. The Sellers may keep the Vessel’s log books but the Buyers to have the right to take copies of same.
 
9.         Encumbrances
 
The Sellers warrant that the Vessel, at the time of delivery, is free from all charters, encumbrances, mortgages, taxes and maritime liens or any other debts whatsoever as well as any dispute claim with its Union. The Sellers hereby undertake to indemnify the Buyers against all consequences of claims made against the Vessel which have been incurred prior to the time of delivery.

 
Sellers will provide Buyers with Free of Encumbrances Certificate dated the day of the closing same to be issued by the vessel’s Registry Authority or Cypriot Consulate in Piraeus or London.
 
10.       Taxes, etc.
 
Any taxes, fees and expenses in connection with the purchase and registration under the Buyers’ flag shall be for the Buyers account, where as similar charges in connection with the closing of the Sellers’ register shall be for the Sellers’ account.
 
11.       Condition on delivery
 
The Vessel with everything belonging to her shall be at the Sellers’ risk and expense until she is delivered to the Buyers, but subject to the terms and conditions of this Agreements she shall be delivered by the Sellers and taken over by the Buyers as she was at the time of inspection, fair wear and tear excepted.
 
However, the Vessel shall be delivered with her class maintained without condition/recommendation*, free of average damage affecting the Vessel’s class, and with her classification certificates and national certificates, as well as all other certificates the Vessel had at the time of inspection, valid and unextended for minimum 3 (three) months after the day of delivery without condition/recommendation* by Class or relevant authorities at the time of delivery.
 
“Inspection” in this Clause 11, shall mean the Buyers’ inspection according to Clause 4 a) or 4 b), if applicable, or the buyers inspection prior to the signing of this Agreement. If the vessel is taken over without inspection, the date of this Agreement shall be the relevant date.

*                            Notes, if any, in the surveyor’s reports which are accepted by the Classification Society without condition/recommendation are not to be taken into account.
 
12.       Name/markings
 
Upon delivery the Buyers undertake to change the name of the Vessel and alter funnel markings
 
13.       Buyers’ default
 
Should the deposit not be paid in accordance with Clause 2, the Sellers have the right to cancel this Agreement, and they shall be entitled to claim compensation for their losses and for all their expenses incurred together with interest. Should the Purchase Price not be paid in accordance with Clause 3, the Sellers have the right to cancel the Agreement, in which case the deposit together with interest earned shall be released to the Sellers. If the deposit does not cover their loss, the Sellers shall be entitled to claim further compensation for their losses and for all their expenses incurred together with interest.
 
14.       Sellers’ default
 
Should the Sellers fail to give Notice of Readiness in accordance with Clause 5 a) or fail to be ready to validly complete a legal transfer by the date stipulated in line 61 or at such date as may have been extended pursuant to this Agreement the Buyers shall have the option of cancelling this Agreement provided always that the Sellers shall be granted a maximum of 3 banking days after Notice of Readiness has been given to make arrangements for the documentation set out in Clause 8. If after Notice of Readiness has been given but before the Buyers have taken delivery, the Vessel ceases to be physically ready for delivery and is not made physically ready again in every respect by the date stipulated in line 61 and new Notice of Readiness given, has not been given by the date stipulated in line 61 or at such date as may have been extended pursuant to this Agreement the Buyers shall retain their option to cancel. In the event that the Buyers elect to cancel this Agreement the deposit together with interest earned thereon shall be released to them immediately.
 
Should the Sellers fail to give Notice of Readiness by the date stipulated in line 61 or fail to be ready to validly complete a legal transfer as aforesaid they shall make due compensation to the Buyers for their loss and for all expenses together with interest if their failure is due to proven negligence and whether or not the Buyers cancel this Agreement.

 
15.       Buyers’ representatives
 
After this Agreement has been signed by both parties and the deposit has been lodged, the Buyers have the right 60 days prior to the expected date of delivery to place up to 2 (two) representatives on board the Vessel at their sole risk and expense upon arrival at ……….. on or about . These representatives are on board for the purpose of familiarisation and in the capacity of observers only, and they shall not interfere in any respect with the operation of the Vessel. The Buyers’ representatives shall sign the Sellers’ letter of indemnity prior to their embarkation. The Buyers’ representatives are to be allowed to remain on board up to and during the time of delivery, always at Buyers’ sole risk and expense.
 
Once Sellers have tended NOR, Buyers are entitled to have another 8 representatives onboard for familiarization purpose only.
 
16.                   Arbitration
 
a)*                   This Agreement shall be governed by and construed in accordance with English law and any dispute arising out of this Agreement shall be referred to arbitration in London in accordance with the Arbitration Acts 1996 1950 and 1979 or any statutory modification or re-enactment thereof for the time being in force, one arbitrator being appointed by each party. On the receipt by one party of the nomination in writing of the other party’s arbitrator, that party shall appoint their arbitrator within fourteen days, failing which the decision of the single arbitrator appointed shall apply. If two arbitrators properly appointed shall not agree they shall appoint an umpire whose decision shall be final.
 
b)*                  This Agreement shall be governed by and constructed in accordance with Title 9 of the United Stage Code and the Law of the State of New York and should any dispute arise out of this Agreement, the matter in dispute shall be referred to three persons at New York, one to be appointed by each of the parties hereto, and the third by the two so chosen; their decision or that of any two of them shall be final, and for purpose of enforcing any award, this Agreement may be made a rule of the Court.
 
The proceedings shall be conducted in accordance with the rules of Society of Maritime Arbitrators Inc, New York.
 
c)*                   Any dispute arising out of this Agreement shall be referred to arbitration at ___________________________, subject to the procedures applicable there. The laws of              shall govern this Agreement.
 
16a), 16b) and 16a) are alternatives; delete whichever is not applicable. In the absence of deletions, alternative 16a) to apply.
 
Additional Clauses:
 
17. Divers Inspection
 
No drydocking, prior to the delivery of the Vessel, however the Buyers to have the option to arrange at their risk and expense at any convenient port before delivery or at the port of delivery an inspection of the Vessel’s underwater parts by divers appointed by Buyers and approved by Vessel’s Class, in the presence of the Class surveyor and Sellers’ and Buyers’ representatives, Buyers not to interfere at the video monitor or with the Class surveyor’s work.
 
The Sellers shall notify Buyers as to the vessel’s itinerary for Buyers to decide the most convenient place for the underwater inspection to take place at Sellers time. Sellers to arrange Class Surveyor at Buyers expenses who shall be in attendance at the time of underwater inspection.

 
Buyers shall in any event pay for the divers and the cost of Class attendance. The extent of the inspection and the conditions under which it is performed shall be to the satisfaction/requirement of the Class surveyor attending. The Class to be the sole arbitrator as to whether underwater damage, if any, will impose any condition of Class. If the conditions at the place of such inspection are not suitable for such inspection, the Sellers shall make the Vessel available at a suitable alternative nearby place.
 
Should any damage be found to the underwater parts that will impose a condition of Vessel’s present class, then:
 
a. In case vessel’s Class imposes a condition but does not require drydocking before next scheduled drydocking, Sellers have the option to repair same to Class satisfaction prior to delivery or to compensate the Buyers with the estimated cost to repair such damage in a way which is acceptable to the Vessel’s Class, which cost to be only the direct cost to repair such damage (i.e. excluding docking/undocking costs, tugs, loss of hire, deviation, etc), as per the average of 2 (two) quotations received from 1 (one) major reputable repair yard chosen by Buyers and 1 (one) major reputable repair yard chosen by Sellers, such repair yards to be located in China and capable of repair a vessel of such type; The average amount agreed shall be deducted from the Purchase Price at the time of delivery.
 
b. In case that the rudder, propeller, bottom or other underwater parts below the summer load line be found broken, damaged or defective, so as to affect Vessel’s present class and must be immediately repaired, then clause 6B(ii) NSF 93 to be reinstated.
 
In the event the Vessel is to be drydocked, the canceling date will be extended appropriately for the extra time taken to deliver the Vessel due to ballasting/drydocking/repairs to be carried out to Class’ satisfaction in accordance with this Agreement, [but such extension will not exceed in total 7 running days].
 
In case of drydocking, the Buyers may carry out cleaning/painting works at their sole risk and expense, subject to the Sellers’ approval, without interfering with the Sellers’ drydock works nor the classification surveyor’s work, if any, and without affecting Vessel’s timely delivery schedule. If however Buyers’ works are still in progress when Sellers have completed their works and they are ready in all respects to deliver the Vessel to the Buyers as per the Agreement, then Sellers shall tender final Notice of Readiness to the Buyers whilst the Vessel is in drydock and Buyers must take timely delivery of the Vessel whether on drydock or not, with undocking expenses only to be for Sellers’ account.
 
The Class shall issue a Class Survey Record which indicates whether the Underwater Inspection has found any damage affecting class, and in the event that such damage is found, indicates whether it requires immediate rectification or whether it should be rectified during the next drydocking. This Class Survey Record will be issued immediately after the completion of the divers Underwater Inspection.
 
18. Documentation.
 
AA. Sellers to provide Buyers with following documents in exchange of purchase money at the time of closing:
 
(1)        Three original bills of sale notarially attested and legalized by the Chinese Embassy or Consulate in Athens or London and warranting that the vessel is free for all encumbrances, mortgages and maritime liens or other debts or claims whatsoever to be signed by a duly authorized signatory on behalf of the Sellers.
 
(2)        Minutes of meetings of the Board of directors and shareholders of the Sellers, authorizing the sale of the vessel to the Buyers and the issue of a Power of Attorney. The minutes to be notarially attested and legalized by the Chinese Embassy or Consulate in Athens or London.
 
(3)        Copies of Memorandum and Articles of Association and other constitutional documents of the Seller, which are to be certified by the secretary of the Sellers.

 
(4)        Power of Attorney of the Seller authorizing individuals to execute all necessary documents on the Sellers’ behalf, same to be notarially attested and legalized by the Chinese Embassy or Consulate in Athens or London.
 
(5)        Deletion Certificate in original issued by the vessel’s Registry Authority on the date of delivery. In case that such original certificate is not available, the Sellers instead shall furnish the Buyers with a Letter of Undertaking on Sellers company letterhead at the time of delivery to provide the Deletion Certificate in original to the Buyers within 5 (five) working days from the date of delivery of the Vessel
 
(6)        Free of Encumbrances Certificate in original issued by the Vessel’s Registry Authority or the Cypriot Consulate in Piraeus or London on the date of delivery certifying that the vessel is free of all registered encumbrances and mortgages.
 
(7)        Letter of Undertaking which clearly states vessel is free from registered encumbrance and from all maritime liens and debts and that they further undertake to indemnify the Buyer for all and any claims arising prior to the delivery of the vessel.
 
(8)        Original class maintained certificate from DNV classification that the vessel’s class is maintained free of recommendations/conditions of class dated not earlier than three (3) working days before date of delivery
 
(9)        Letter of Undertaking which states that to the best of the Sellers’ knowledge the vessel is not blacklisted by the Arab Boycott League in Damascus or the ITF or any other nations or organizations.
 
(10)      3 original copies of commercial invoice in relation to the total purchase price of the vessel.
 
(11)      3 original copies of commercial invoices in relation to bunkers and lubrication oils remaining on board the vessel at delivery along with copies of invoices for the purchase of bunkers and lubrication oils.
 
(12)      Letter of Undertaking from seller to delete the vessel from INMARSAT on the day of delivery of the vessel.
 
(13)      Current Certificate of Ownership issued by the competent authorities of the flag state of the Vessel dated not earlier than three (3) working days before date of delivery.
 
BB. List of Original Documents to be delivered by vessel’s Buyers to Sellers in exchange of purchase money at the time of closing
 
(1).       Copy of the Buyers Company Registration Certificate duly notarised and officially translated into the English language by a competent public authority.
 
(2).       Original Board Resolutions (notarised and officially translated in the English language by a competent public authority) ratifying the Memorandum of Agreement and all other terms of the purchase of the Vessels and authorising the issuance of a Power of Attorney as per paragraph 3 herebelow.
 
(3).       Original Power of Attorney (notarised and officially translated in the English language by a competent public authority, executed by a duly authorised Director, appointing attorney(s)-in-fact empowered to sign, execute and deliver any and all documents necessary in connection with the purchase of the Vessels, as well as for the release of the deposit money and payment of the purchase price as well as any other payment due under the Memorandum of Agreement.
 
Both Sellers and Buyers shall exchange to each other the above drafts of documents at least 7 (seven) working days prior to delivery

 
19. Blacklisting.
 
The Sellers to confirm that to the best of their knowledge the Vessel is not blacklisted by any nation.
 
20. Plans/Manuals
 
At the time of Vessel’s delivery the Sellers to hand over to Buyers’ representative all drawings/plans and manuals available on board which are not to be returned to Class or Registry (in which case copies shall be provided). Sellers’ ISM manuals and forms as well as Vessel’s log books will not be handed over, however Buyers shall have the right to take the copy of log books. In addition all drawings/plans and manuals available in Managers’/Owners’ office to be forwarded to the Buyers’ office as soon as possible after delivery delay. Forwarding expenses to be for Buyers’ account.
 
21. Confidentiality
 
Both parties shall keep all the negotiations and the Agreement and all its terms strictly private and confidential.

For the Sellers	 	For the Buyers	

/s/ I. Prokopakis	 	 	/s/ illegible	 	
Name: I. PROKOPAKIS	 	Name: illegible	
 	 	 	
Title: Director	 	Title:	
 	 	 	
Date: 16/08/2006	 	Date: 2006.8.15	
 	 	 	
On behalf of:	 	On behalf of:	
ORCHID NAVIGATION CORPORATION.	 	Shanghai Time Shipping Co. Ltd. or its nominee	
 	 	 	
For the Sellers	 	For the Buyers	
 	 	 	
FOR DANAOS CORPORATION	 	FOR SHANGHAI TIME SHIPPING CO LTD.	

/s/ I. Prokopakis	 	 	/s/ illegible	 	
Name: I. PROKOPAKIS	 	Name: illegible	
 	 	 	
Title: Director	 	Title:	
 	 	 	
Date: 16/08/2006	 	Date: 2006.8.15	
 	 	 	
On behalf of:	 	On behalf of:	

 
Exhibit 10.37

 	Norwegian Shipbroker Association’s Memorandum of Agreement for sale and purchase of ships. Adopted by the Baltic and International Maritime Council (BIMCO) in 1956.	
 	Code-name	
 	SALEFORM 1993	
 	Revised 1966, 1983 and 1986/87.	
 
MEMORANDUM OF AGREEMENT
 
Dated: 14 th August, 2006
 
“ROBERTO C. MARITIME INC.”
 
MESSRS DANAOS CORPORATION WILL GUARANTEE PERFORMANCE OF SELLING COMPANY AND SHALL REMAIN JOINTLY AND SEVERALLY FULLY RESPONSIBLE FOR PROMPT AND TIMELY FULFILLMENT OF ALL SELLERS’ RESPONSIBILITIES, UNDERTAKINGS, OBLIGATIONS AND LIABILITIES HEREUNDER
 
hereinafter called the Sellers, have agreed to sell, and
 
MESSRS SHANGHAI TIME SHIPPING CO LTD OR A COMPANY TO BE NOMINATED BY THEM NO LATER THAN 30 DAYS OF APPROXIMATE NOTICE OF VESSEL’S INTENDED DELIVERY IS TENDERED FROM SELLERS
 
THE PERFORMANCE OF THIS AGREEMENT BY THE NOMINEE IS GUARANTEED BY SHANGHAI TIME SHIPPING CO LTD WHO ARE TO REMAIN JOINTLY AND SEVERALLY FULLY RESPONSIBLE FOR THE PROMPT AND TIMELY FULFILLMENT OF ALL BUYERS’ RESPONSIBILITIES, UNDERTAKINGS, OBLIGATIONS AND LIABILITIES HEREUNDER.
 
hereinafter called the Buyers, have agreed to buy
 
Name: “ ROBERTO C ”
 
Classification Society/Class: NKK

Built: 1994	 	By: KANASASHI TOYOHASHI	
 	 	 	
Flag: Cyprus	 	Place of registration: Limassol	
 	 	 	
Call Sign: C4HF2	 	Grt/Nrt: 26057 / 14870	
 
Register Number: IMO/Reg No: 9106716
 
hereinafter called the Vessel, on the following terms and conditions:
 
Definition
 
“Banking days” are days on which banks are open both in the country of the currency stipulated for the Purchase Price in Clause 1 and in Shanghai / Piraeus / London the place of closing stipulated in Clause 8.
 
“In writing” or “written” means a letter handed over from the Sellers to the Buyers or vice versa, a registered letter, telex, telefax or other modern form of written communication including e-mail.
 
“Classification Society” or “Class” means the Society referred to in line 4.
 
1.         Purchase price: USD 22.750.000 (United States Dollars Twenty Two Million Seven Hundred Fifty Thousand, Only)
 
2.         Deposit
 
As security for the correct fulfilment of this Agreement the Buyers shall pay remit a deposit of 10% (ten per cent) of the Purchase Price within 3 (three) Shanghai/New York/Piraeus/London banking days from the date both parties hereto have signed this Agreement or a faxed/scanned copy hereof from the date of this Agreement . This deposit shall be placed with

 
The Royal Bank of Scotland PLC
Piraeus branch
45 Akti Miaoull
185 10 Piraeus, Greece
Swift Code RBOSGRAAA
Attn: Mr. Fotis Bratimos/ Ms Elena Konstantilieri
Account No: 506143
Beneficiary: Joint account in the names of “SHANGHAI TIME SHIPPING CO. LTD.”
(Buyers) and “ROBERTO C. MARITIME INC.” (Sellers)
 
USD correspondent: JP Morgan Chase Bank, N.Y. CHASUS33
 
and held by them in a joint account for the Sellers and the Buyers, to be released in accordance with joint written instructions of the Sellers and the Buyers. Interest, if any, to be credited to the Buyers. Any fee charged for opening, holding, lifting and closing holding the said deposit shall be borne equally by the Sellers and the Buyers. Buyers are not responsible for the delay of deposit remittance solely due to Sellers failure to process the joint account in time
 
3.         Payment
 
The said deposit and the balance of 90% (ninety per cent) of the Purchase Price (the ‘Balance Money’) together with all other monies payable under this Agreement shall be paid in full free of bank charges to
 
DANAOS CORPORATION
Account Number 178200-100
With the Royal Bank of Scotland
Piraeus branch
45 Akti Miaouli
185 10 Piraeus, Greece
Swift Code RBOSGRAAA
IBAN GR28 0640 0010 0000 0017 8200 100
 
on delivery of vessel, but not later than 3 Shanghai/NewYork/Piraeus/London banking days after the Vessel is in every respect physically ready for delivery in accordance with the terms and conditions of this Agreement and Notice of Readiness has been given in accordance with clause 5
 
Closing and exchange of delivery documents shall take place in London, U.K
Structured Ship Finance
Shipping Business Centre
The Royal Bank of Scotland Group
Tel: +44 207 615 4018
 
Inspections
 
The vessel and her classification records’ have been inspected and accepted by the Buyers and by the C.C.S. Thus the sale is outright and definite.
 
a)*                   The Buyers have inspected and accepted the Vessel’s classification records. The Buyers have also inspected the Vessel at/in                          on and have accepted the Vessel following this inspection and the sale is outright and definite, subject only to the terms and conditions of this Agreement.
 
b)*                  The Buyers shall have the right to inspect the Vessel’s classification records and declare whether same are accepted or not within
 
The Seller shall provide for inspection of the Vessel at/in
 
The Buyers shall undertake the inspection without undue delay to the Vessel. Should the Buyers cause undue delay they shall compensate the Sellers for the losses thereby incurred. The Buyers shall inspect the Vessel without opening up and without cost to the Sellers. During the inspection, the Vessel’s deck and engine log books shall be made available for examination by the Buyers. If the Vessel is accepted after such inspection, the sale shall

 
become outright and definite, subject only to the terms and conditions of this Agreement, provided the Sellers receive written notice of acceptance from the Buyers within 72 hours after completion of such inspection.
 
Should notice of acceptance of the Vessel’s classification records and of the Vessel not be received by the Sellers as aforesaid, the deposit together with interest earned shall be released immediately to the Buyers, whereafter this Agreement shall be null and void.

*                             4a) and 4b) are alternatives; delete whichever is not applicable. In the absence of deletions, alternative 4a) to apply.
 
5.                          Notice, time and place of delivery
 
a)                          The Sellers shall keep the Buyers will informed of the Vessel’s itinerary and shall provide the Buyers with 30/20/10/7 and 3 days notice of the estimated time of arrival at the intended place of drydocking/underwater inspection/delivery. When the Vessel is at the place of delivery and in every respect physically ready for delivery in accordance with this Agreement, the Sellers shall give the Buyers a written Notice of Readiness for delivery.
 
Sellers shall keep the Buyers well informed of the Vessel’s itinerary and nominate the delivery range and intended place of delivery 30 days prior to the approximate delivery. Sellers shall provide Buyers with 20/15/10/7 and 3 days notice of the estimated time of arrival at the intended place of delivery. When the Vessel is at the place of delivery and in every respect physically ready for delivery in accordance with this Agreement, the Sellers shall give the Buyers a written Notice of Readiness for delivery.
 
The vessel will be delivered with swept clean holds
 
b)                         The Vessel shall be delivered and taken over safely afloat at a safe and accessible berth or anchorage at/in
 
in the Sellers’ option
 
Expected time of delivery: Between 4 th December 2006 and 5 th March 2007. Sellers shall also use their best endeavor to deliver the vessel as early as possible.
 
Sellers shall use their best endeavor to deliver the vessel in Singapore/Japan range. However, final delivery range will be back to back with the redelivery of the existing charters, i.e. vessel to be delivered by Sellers and taken over by Buyers over safely afloat at a safe and accessible berth/anchorage/buoy within Skaw/Passero range including UK/Med/B.Sea including Morocco or Boston/Bahia Blanca range including USG/Caribs/NCSA excluding Cuba or Aden/PMO/Japan range including PRC/Philippine Islands/full Indonesia and Malaysia in the Sellers option, but in case at Sellers nominated port of delivery there is no Chinese Embassy where the Buyers joining crew cannot process visa from, then Buyers have the option to nominate at least 7 running days prior to the Sellers intended date of delivery an alternative port of delivery, which not to be more than 12 days steaming time from the Sellers’ nominated delivery port. Buyers nominated port to be the nearest to Sellers nominated port that Buyers may obtain visa for their crew. Sellers to undertake to sail the vessel to Buyers such nominated port at Sellers risk and Buyers cost. These costs will be the vessel’s daily running cost plus bunkers plus financing interest plus cost of exit from Sellers delivery port and entry to Buyers delivery port as quoted by the Sellers and Buyers agents respectively
 
Opex 3480 + Bunkers 10050 + Interest 4286 = USD 17816 per day at sea plus port(s) cost.
 
Sea Time to be calculated upon full away from pilot station from Sellers nominated delivery port to sea pilot station to Buyers nominated port
 
c)                          Date of cancelling (see clauses 5 c), 6 b) (iii) and 14): 5 th March 2007 in Buyers option
 
However, only in case Sellers need extra time purely for the preparatory purpose of delivery, i.e. not for the time charterers charter extension purpose, Buyers to grant an extension of cancelling date upto 20 th March 2007

 
If the Sellers anticipate that, notwithstanding the exercise of due diligence by them, the Vessel will not be ready for delivery by the cancelling date they may notify the Buyers in writing stating the date when they anticipate that the Vessel will be ready for delivery and propose a new cancelling date. Upon receipt of such notification the Buyers shall have the option of either cancelling this Agreement in accordance with Clause 14 within 3 7 running days of receipt of the notice or of accepting the new date as the new cancelling date. If the Buyers have not declared their option within 3 7 running days of receipt of the Sellers’ notification or if the Buyers accept the new date, the date proposed in the Sellers’ notification shall be deemed to be the new cancelling date and shall be substituted for the cancelling date stipulated in line 61.
 
If this Agreement is maintained with the new cancelling date all other terms and conditions hereof including those contained in Clauses 5 a) and 5 c) shall remain unaltered and in full force and effect. Cancellation or failure to cancel shall be entirely without prejudice to any claim for damages the Buyers may have under Clause 14 for the Vessel not being ready by the original cancelling date.
 
d)                         Should the Vessel become an actual, constructive or compromised total loss before delivery the deposit together with interest earned shall be released immediately to the Buyers whereafter this Agreement shall be null and void.
 
6.                          Drydocking/Divers Inspection (see additional clause 17)
 
a)**            The Sellers shall place the Vessel in drydock of the port of delivery for inspection by the Classification Society of the Vessel’s underwater parts below the deepest load line, the extent of the inspection being in accordance with Classification Society’s rules. If the rudder, propeller, bottom or other underwater parts below the deepest load line are found broken, damaged or defective so as to affect the Vessel’s class, such defects shall be made good at the Sellers’ expense to the satisfaction of the Classification Society without condition/recommendation*.
 
b)**           (i)         The Vessel is to be delivered without drydocking. However, the Buyers shall have the right at their expense to arrange for an underwater inspection by a diver approved by the Classification society prior to the delivery of the Vessel. The Sellers shall at their cost make the Vessel available for such inspection. The extent of the inspection and the conditions under which it is performed shall be to the satisfaction of the Classification Society. If the conditions at the port of delivery are unsuitable for such inspection, the Sellers shall make the Vessel available at a suitable alternative place near to the delivery port.
 
(ii)        If the rudder, propeller, bottom or other underwater parts below the deepest load line are found broken, damaged or defective so as to effect the Vessel’s class, then unless repairs can be carried out afloat to the satisfaction of the Classification society, the Sellers shall arrange for the Vessel to be drydocked at their expense for inspection by the Classification society of the Vessel’s underwater parts below the deepest load line, the extent of the inspection being in accordance with the Classification Society’s rules. If the rudder, propeller, bottom or other underwater parts below the deepest load line are found broken, damaged or defective so as to effect the Vessel’s class such defects shall be made good by the Sellers at their expense to the satisfaction of the classification society without condition/recommendation*. In such event the Sellers are to pay also for the cost of the underwater inspection and the Classification Society’s attendance.
 
(iii)       If the Vessel is to be drydocked pursuant to Clause 6 b) (ii) and no suitable drydocking facilities are available at the port of delivery, the Sellers shall take the Vessel to a port where suitable drydocking facilities are available whether within or outside the delivery range as per Clause 5 b). Once drydocking has taken place the Sellers shall deliver the Vessel at a port within the delivery range as per clause 5 b) which shall, for the purpose of this clause, become the new port of delivery. In such event the cancelling date provided for in clause 5 b) shall be extended by the additional time required for the dry docking and extra steaming, but limited to be a maximum of 14 running days.
 
If the vessel is drydocked pursuant to Clause 6 a) or 6 b) above

 
c)                          (i)         the Classification Society may require survey of the tailshaft system, the extent of the survey being to the satisfaction of the Classification surveyor. If such survey is not required by the Classification Society, the Buyers shall have the right to require the tailshaft to be drawn and surveyed by Classification Society, the extent of the survey being in accordance with the Classification Society’s rules for tailshaft survey and consistent with the current stage of the Vessel survey cycle. The Buyers shall declare whether they require the tailshaft to be drawn and surveyed not later than by the completion of the inspection of the Classification Society. The drawing and refitting of the tailshaft shall be arranged by the Sellers. Should any parts of the tailshaft system be condemned or found defective so as to effect the Vessel’s class, these parts shall be renewed or made good at the Sellers’ expense to the satisfaction of the Classification Society without condition/recommendation.
 
(ii)        the expenses relating to the survey of the tailshaft system shall be borne by the Buyers unless the Classification Society requires such survey to be carried out, in which case the Sellers shall pay these expenses. The Sellers shall also pay the expenses if the Buyers require the survey and parts of the system are condemned or found defective or broken so as to effect the vessel’s class*.
 
(iii)       the expenses in connection with putting the Vessel in and taking her out of drydock, including the drydock dues and the Classification Society’s fees shall be paid by the Sellers if the Classification Society issues any condition/recommendation* as a result of the survey or if it requires survey of the tailshaft system. In all other cases the Buyers shall pay the aforesaid expenses, dues and fees.
 
(iv)       the Buyers’ representative shall have the right to be present in the drydock, but without interfering with the work or decisions of the Classification surveyor.
 
(v)        the Buyers shall have the right to have the underwater parts of the Vessel cleaned and painted at their risk and expense without interfering with the Sellers’ or the Classifications surveyor’s work, if any, and without affecting the Vessel’s timely delivery if, however, the Buyers’ work in drydock is still in progress when the Sellers have completed the work which the Sellers are required to do, the additional docking time needed to complete the Buyers’ work shall be for the Buyers’ risk and expense, in the event that the Buyers’ work requires such additional time, the Sellers may upon completion of the Sellers’ work tender Notice of Readiness for delivery whilst the Vessel is still in drydock and the Buyers shall be obliged to take delivery in accordance with Clause 3, whether the vessel is in drydock or not and irrespective of Clause 5 b).

*          Notes, if any, in the surveyor’s report which are accepted by the classification Society without condition/recommendation are not to be taken into account.
 
**        6 a) and 6 b) are alternatives; delete whichever is not applicable. In the absence of deletions, alternative 6 a) to apply.
 
7. Spares/bunkers, etc.
 
The Sellers shall deliver the Vessel to the Buyers with everything belonging to her on board and on shore. All spare parts and spare equipment including spare tail-end shaft(s) and/or spare propeller(s)/ propeller blade(s) , if any, belonging to the Vessel at the time of inspection used or unused, whether on board or not shall become the Buyers’ property, but spares on order are to be excluded . Forwarding charges, if any, shall be for the Buyers’ account. The Sellers are not required to replace spare parts including spare tail-end shaft(s) and spare propeller(s)/ propeller blade(s) which are taken out of spare and used as replacement prior to delivery, but the replaced items shall be the property of the Buyers. The radio installation and navigational equipment shall be included in the sale without extra payment if they are the property of the Sellers. Unused stores and provisions shall be included in the sale and be taken over by the Buyers without extra payment.
 
The Sellers have the right to take ashore crockery, plates, cutlery, linen and other articles bearing the Seller’s flag or name, provided they replace same with similar unmarked items. Library, forms, etc., exclusively for use in the Sellers’ vessel(s), shall be excluded without compensation. Captain’s Officers’ and Crew’s personal belongings including the slop chest are to be excluded from the sale, as well as the following additional items (including items on hire):
 
•  Dosing pump for boiler water treatment (1 piece)
•  Unitor HFO compatibility test kit (1 piece)

 
•  Extra deck air compressor with panel (1 piece)
•  H.P. washing machine complete with extension cables (1 piece)
•  Painting spray machine
 
The Buyers shall take over the remaining bunkers and unused lubricating oils in sealed drums or in storage tanks without having passed through the vessel’s system and coaled drums and pay the current net marked last net purchase prices evidenced by the copy of Invoices which to be provided by the sellers price (excluding barging expenses) at the port and date of delivery of the Vessel. Payment under this Clause shall be made at the same time and place and in the same currency as the Purchase Price.
 
The Seller’s and the Buyers’s familiarization representative shall jointly measure the bunker/lubricant oil quantity and prepare a Statement of Fact prior to delivery of the vessel showing the remaining quantities of bunkers and unused lubricant oil including calculated consumption by the Vessel upto the date of delivery, which shall be the amount of bunkers and lubricating oils the Buyers shall pay under the terms of this agreement.
 
8.         Documentation, (see also additional clause 18)
 
The place of closing:
 
In exchange for payment of the Purchase Price the Sellers shall furnish the Buyers with delivery documents, namely;
 
a)                         Legal Bill of Sale in a form recordable in (the country in which the Buyers are to register the Vessel), warranting that the Vessel is free from all encumbrances mortgages and maritime liens or any other debts or claims whatsoever, duly notarially attested and legalized by the consul of such country or other competent authority.
 
b)                        Current Certificate of Ownership issued by the competent authorities of the flag state of the Vessel.
 
c)                         Confirmation of Class issued within 72 hours prior to delivery.
 
d)                        Current Certificate issued by the competent authorities stating that the Vessel is free from register encumbrances.
 
e)                         Certificate of deletion of the Vessel from the Vessel’s registry or other official evidence of deletion appropriate to the Vessel’s registry at the time of delivery or, in the event that the registry does not as a matter of practice issue such documentation immediately, a written undertaking by the Sellers to effect deletion from the Vessel’s registry forthwith and furnish a Certificate or other official evidence of deletion to the Buyers promptly and latest within 4 (four) weeks after the purchase Price has been paid and the Vessel has been delivered.
 
f)                           Any such additional documents as may reasonably be required by the competent authorities for the purpose of registering the Vessel provided the Buyers notify the Sellers of any such documents as soon as possible after the date of this Agreement.
 
At the time of delivery the Buyers and Sellers shall sign and deliver to each other a Protocol of Delivery and Acceptance confirming the date and time of delivery of the Vessel from the Sellers to the Buyers.
 
At the time of delivery the Sellers shall hand to the Buyers the classification certificate(s) as well as all plans drawings and manuals etc., which are on board the Vessel and in Sellers’ office and/or their possession. Other certificates which are on board the Vessel shall also be handed over to the Buyers unless the Sellers are required to retain same, in which case the Buyers to have the right to take copies. Other technical documentation which may be in the Sellers’ possession shall be promptly forwarded to the Buyers at Buyers expense, if they so request. The Sellers may keep the Vessel’s log books but the Buyers to have the right to take copies of same.

 
9.         Encumbrances
 
The Sellers warrant that the Vessel, at the time of delivery, is free from all charters, encumbrances, mortgages, taxes and maritime liens or any other debts whatsoever as well as any dispute claim with its Union . The Sellers hereby undertake to indemnify the Buyers against all consequences of claims made against the Vessel which have been incurred prior to the time of delivery.
 
Sellers will provide Buyers with Free of Encumbrances Certificate dated the day of the closing same to be issued by the vessel’s Registry Authority or Cypriot Consulate in Piraeus or London.
 
10.       Taxes, etc.
 
Any taxes, fees and expenses in connection with the purchase and registration under the Buyers’ flag shall be for the Buyers account, where as similar charges in connection with the closing of the Sellers’ register shall be for the Sellers’ account.
 
11.       Condition on delivery
 
The Vessel with everything belonging to her shall be at the Sellers’ risk and expense until she is delivered to the Buyers, but subject to the terms and conditions of this Agreements she shall be delivered by the Sellers and taken over by the Buyers as she was at the time of inspection, fair wear and tear excepted.
 
However, the Vessel shall be delivered with her class maintained without condition/recommendation*, free of average damage affecting the Vessel’s class, and with her classification certificates and national certificates, as well as all other certificates the Vessel had at the time of inspection, valid and unextended for minimum 3 (three) months after the day of delivery without condition/recommendation* by Class or relevant authorities at the time of delivery.
 
“Inspection” in this Clause 11, shall mean the Buyers’ Inspection according to Clause 4 a) or 4 b), if applicable, or the buyers inspection prior to the signing of this Agreement, if the Vessel is taken over without Inspection, the date of this Agreement shall be the relevant data.

*                            Notes, if any, in the surveyor’s reports which are accepted by the Classification Society without condition/recommendation are not to be taken into account.
 
12.       Name/markings
 
Upon delivery the Buyers undertake to change the name of the Vessel and alter funnel markings
 
13.       Buyers’ default
 
Should the deposit not be paid in accordance with Clause 2, the Sellers have the right to cancel this Agreement, and they shall be entitled to claim compensation for their losses and for all their expenses incurred together with interest. Should the Purchase Price not be paid in accordance with Clause 3, the Sellers have the right to cancel the Agreement, in which case the deposit together with interest earned shall be released to the Sellers. If the deposit does not cover their loss, the Sellers shall be entitled to claim further compensation for their losses and for all their expenses incurred together with interest.
 
14.       Sellers’ default
 
Should the Sellers fail to give Notice of Readiness in accordance with Clause 5 a) or fail to be ready to validly complete a legal transfer by the date stipulated in line 61 or at such date as may have been extended pursuant to this Agreement the Buyers shall have the option of cancelling this Agreement provided always that the Sellers shall be granted a maximum of 3 banking days after Notice of Readiness has been given to make arrangements for the documentation set out in Clause 8. If after Notice of Readiness has been given but before the Buyers have taken delivery, the Vessel ceases to be physically ready for delivery and is not made physically ready again in every respect by the date stipulated in line 61 and new Notice of Readiness given , has not been given by the date stipulated in line 61 or at such date as

 
may have been extended pursuant to this Agreement the Buyers shall retain their option to cancel. In the event that the Buyers elect to cancel this Agreement the deposit together with interest earned thereon shall be released to them immediately.
 
Should the Sellers fail to give Notice of Readiness by the date stipulated in line 61 or fail to be ready to validly complete a legal transfer as aforesaid they shall make due compensation to the Buyers for their loss and for all expenses together with interest if their failure is due to proven negligence and whether or not the Buyers cancel this Agreement.
 
15. Buyers’ representatives
 
After this Agreement has been signed by both parties and the deposit has been lodged, the Buyers have the right 60 days prior to the expected date of delivery to place up to 2 (two) representatives on board the Vessel at their sole risk and expense upon arrival at…… on or about . These representatives are on board for the purpose of familiarisation and in the capacity of observers only, and they shall not interfere in any respect with the operation of the Vessel. The Buyers’ representatives shall sign the Sellers’ letter of indemnity prior to their embarkation. The Buyers’ representatives are to be allowed to remain on board up to and during the time of delivery, always at Buyers’ sole risk and expense .
 
Once Sellers have tended NOR, Buyers are entitled to have another 8 representatives onboard for familiarization purpose only.
 
16.                   Arbitration
 
a)*                   This Agreement shall be governed by and construed in accordance with English law and any dispute arising out of this Agreement shall be referred to arbitration in London in accordance with the Arbitration Acts 1996 1960 and 1979 or any statutory modification or re-enactment thereof for the time being in force, one arbitrator being appointed by each party. On the receipt by one party of the nomination in writing of the other party’s arbitrator, that party shall appoint their arbitrator within fourteen days, falling which the decision of the single arbitrator appointed shall apply. If two arbitrators properly appointed shall not agree they shall appoint an umpire whose decision shall be final.
 
b)*                  This Agreement shall be governed by and construed in accordance with Title 9 of the United Stage Code and the Law of the State of New York and should any dispute arise out of this Agreement, the matter in dispute shall be referred to three persons at New York, one to be appointed by each of the parties hereto, and the third by the two so chosen; their decision or that of any two of them shall be final, and for purpose of enforcing any award, this Agreement may be made a rule of the Court.
 
The proceedings shall be conducted in accordance with the rules of the Society of Maritime Arbitrators Inc. New York.
 
c)*                   Any dispute arising out of this Agreement shall be referred to arbitration at                     , subject to the procedures applicable there. The laws of                   shall govern this Agreement.

*                             16 a), 16 b) and 16 c) are alternatives; delete whichever is not applicable. In the absence of deletions, alternative 16 a) to apply.
 
Additional Clauses:
 
17. Divers Inspection
 
No drydocking, prior to the delivery of the Vessel, however the Buyers to have the option to arrange at their risk and expense at any convenient port before delivery or at the port of delivery an inspection of the Vessel’s underwater parts by divers appointed by Buyers and approved by Vessel’s Class, in the presence of the Class surveyor and Sellers’ and Buyers’ representatives, Buyers not to interfere at the video monitor or with the Class surveyor’s work.
 
The Sellers shall notify Buyers as to the vessel’s itinerary for Buyers to decide the most convenient place for the underwater inspection to take place at Sellers time. Sellers to

 
arrange Class Surveyor at Buyers expenses who shall be in attendance at the time of underwater inspection.
 
Buyers shall in any event pay for the divers and the cost of Class attendance. The extent of the inspection and the conditions under which it is performed shall be to the satisfaction/requirement of the Class surveyor attending. The Class to be the sole arbitrator as to whether underwater damage, if any, will impose any condition of Class. If the conditions at the place of such inspection are not suitable for such inspection, the Sellers shall make the Vessel available at a suitable alternative nearby place.
 
Should any damage be found to the underwater parts that will impose a condition of Vessel’s present class, then:
 
a. In case vessel’s Class imposes a condition but does not require drydocking before next scheduled drydocking, Sellers have the option to repair same to Class satisfaction prior to delivery or to compensate the Buyers with the estimated cost to repair such damage in a way which is acceptable to the Vessel’s Class, which cost to be only the direct cost to repair such damage (i.e. excluding docking/undocking costs, tugs, loss of hire, deviation, etc), as per the average of 2 (two) quotations received from 1 (one) major reputable repair yard chosen by Buyers and 1 (one) major reputable repair yard chosen by Sellers, such repair yards to be located in China and capable of repair a vessel of such type; The average amount agreed shall be deducted from the Purchase Price at the time of delivery.
 
b. In case that the rudder, propeller, bottom or other underwater parts below the summer load line be found broken, damaged or defective, so as to affect Vessel’s present class and must be immediately repaired, then clause 6B(ii) NSF 93 to be reinstated.
 
In the event the Vessel is to be drydocked, the canceling date will be extended appropriately for the extra time taken to deliver the Vessel due to ballasting/drydocking repairs/ to be carried out to Class’ satisfaction in accordance with this Agreement, [but such extension will not exceed in total 7 running days].
 
In case of drydocking, the Buyers may carry out cleaning/painting works at their sole risk and expense, subject to the Sellers’ approval, without interfering with the Sellers’ drydock works nor the classification surveyor’s work, if any, and without affecting Vessel’s timely delivery schedule. If however Buyers’ works are still in progress when Sellers have completed their works and they are ready in all respects to deliver the Vessel to the Buyers as per the Agreement, then Sellers shall tender final Notice of Readiness to the Buyers whilst the Vessel is in drydock and Buyers must take timely delivery of the Vessel whether on drydock or not, with undocking expenses only to be for Sellers’ account.
 
The Class shall issue a Class Survey Record which indicates whether the Underwater Inspection has found any damage affecting class, and in the event that such damage is found, indicates whether it requires immediate rectification or whether it should be rectified during the next drydocking. This Class Survey Record will be issued immediately after the completion of the divers Underwater Inspection.
 
18. Documentation,
 
AA. Sellers to provide Buyers with following documents in exchange of purchase money at the time of closing:
 
(1)        Three original bills of sale notarially attested and legalized by the Chinese Embassy or Consulate in Athens or London and warranting that the vessel is free for all encumbrances, mortgages and maritime liens or other debts or claims whatsoever to be signed by a duly authorized signatory on behalf of the Sellers.
 
(2)        Minutes of meetings of the Board of directors and shareholders of the Sellers, authorizing the sale of the vessel to the Buyers and the issue of a Power of Attorney. The minutes to be notarially attested and legalized by the Chinese Embassy or Consulate in

 
Athens or London.
 
(3)        Copies of Memorandum and Articles of Association and other constitutional documents of the Seller, which are to be certified by the secretary of the Sellers.
 
(4)        Power of Attorney of the Seller authorizing individuals to execute all necessary documents on the Sellers’ behalf, same to be notarially attested and legalized by the Chinese Embassy or Consulate in Athens or London.
 
(5)        Deletion Certificate in original issued by the vessel’s Registry Authority on the date of delivery. In case that such original certificate is not available, the Sellers instead shall furnish the Buyers with a Letter of Undertaking on Sellers company letterhead at the time of delivery to provide the Deletion Certificate in original to the Buyers within 5 (five) working days from the date of delivery of the Vessel
 
(6)        Free of Encumbrances Certificate in original issued by the Vessel’s Registry Authority or the Cypriot Consulate in Piraeus or London on the date of delivery certifying that the vessel is free of all registered encumbrances and mortgages.
 
(7)        Letter of Undertaking which clearly states vessel is free from registered encumbrance and from all maritime liens and debts and that they further undertake to indemnify the Buyer for all and any claims arising prior to the delivery of the vessel.
 
(8)        Original class maintained certificate from NK classification that the vessel’s class is maintained free of recommendations/conditions of class dated not earlier than three (3) working days before date of delivery
 
(9)        Letter of Undertaking which states that to the best of the Sellers’ knowledge the vessel is not blacklisted by the Arab Boycott League in Damascus or the ITF or any other nations or organizations.
 
(10)     3 original copies of commercial invoice in relation to the total purchase price of the vessel.
 
(11)     3 original copies of commercial invoices in relation to bunkers and lubrication oils remaining on board the vessel at delivery along with copies of invoices for the purchase of bunkers and lubrication oils.
 
(12)     Letter of Undertaking from seller to delete the vessel from INMARSAT on the day of delivery of the vessel.
 
(13)     Current Certificate of Ownership issued by the competent authorities of the flag state of the Vessel dated not earlier than three (3) working days before date of delivery.
 
BB. List of Original Documents to be delivered by vessel’s Buyers to Sellers in exchange of purchase money at the time of closing
 
(1).       Copy of the Buyers Company Registration Certificate duly notarised and officially translated into the English language by a competent public authority.
 
(2).       Original Board Resolutions (notarised and officially translated in the English language by a competent public authority) ratifying the Memorandum of Agreement and all other terms of the purchase of the Vessels and authorising the issuance of a Power of Attorney as per paragraph 3 herebelow.
 
(3).       Original Power of Attorney (notarised and officially translated in the English language by a competent public authority, executed by a duly authorised Director, appointing attorney(s)-in-fact empowered to sign, execute and deliver any and all documents necessary in connection with the purchase of the Vessels, as well as for the release of the deposit money and payment of the purchase price as well as any other payment due under the Memorandum of Agreement.

 
Both Sellers and Buyers shall exchange to each other the above drafts of documents at least 7 (seven) working days prior to delivery
 
19. Blacklisting.
 
The Sellers to confirm that to the best of their knowledge the Vessel is not blacklisted by any nation.
 
20. Plans/Manuals
 
At the time of Vessel’s delivery the Sellers to hand over to Buyers’ representative all drawings/plans and manuals available on board which are not to be returned to Class or Registry (in which case copies shall be provided). Sellers’ ISM manuals and forms as well as Vessel’s log books will not be handed over, however Buyers shall have the right to take the copy of log books. In addition all drawings/plans and manuals available in Managers’/Owners’ office to be forwarded to the Buyers’ office as soon as possible after delivery delay. Forwarding expenses to be for Buyers’ account.
 
21. Confidentiality
 
Both parties shall keep all the negotiations and the Agreement and all its terms strictly private and confidential.

For the Sellers	 	For the Buyers	

/s/ I. Prokorakis	 	 	/s/ illegible	 	
Name: I. PROKOPAKIS	 	Name: illegible	
 	 	 	
Title: Director	 	Title: illegible	
 	 	 	
Date: 16/08/2006	 	Date: 2006.8.15	
 	 	 	
On behalf of:
ROBERTO C. MARITIME INC.	 	On behalf of:
Shanghai Time Shipping Co. Ltd. or its nominee	

For the Sellers	 	For the Buyers	
 	 	 	
FOR DANAOS CORPORATION	 	FOR SHANGHAI TIME SHIPPING CO LTD.	

/s/ I. Prokopakis	 	 	/s/ illegible	 	
Name: I. PROKOPAKIS	 	Name: illegible	
 	 	 	
Title: Director	 	Title: illegible	
 	 	 	
Date: 16/08/2006	 	Date: 2006.8.15	
 	 	 	
On behalf of:	 	On behalf of:	

 
Exhibit 10.38

 	Norwegian Shipbroker Association’s Memorandum of Agreement for sale and purchase of ships. Adopted by The Baltic and International Maritime Council (BIMCO) in 1956.	
 	Code-name	
 	SALEFORM 1993	
 	Revised 1966, 1983 and 1986/87.	
 
MEMORANDUM OF AGREEMENT
 
Dated: 14 th August, 2006
 
“MARIA C. MARITIME INC.”
 
MESSRS DANAOS CORPORATION WILL GUARANTEE PERFORMANCE OF SELLING COMPANY AND SHALL REMAIN JOINTLY AND SEVERALLY FULLY RESPONSIBLE FOR PROMPT AND TIMELY FULFILLMENT OF ALL SELLERS’ RESPONSIBILITIES, UNDERTAKINGS, OBLIGATIONS AND LIABILITIES HEREUNDER
 
hereinafter called the Sellers, have agreed to sell, and
 
MESSRS SHANGHAI TIME SHIPPING CO LTD OR A COMPANY TO BE NOMINATED BY THEM NO LATER THAN 30 DAYS OF APPROXIMATE NOTICE OF VESSEL’S INTENDED DELIVERY IS TENDERED FROM SELLERS
 
THE PERFORMANCE OF THIS AGREEMENT BY THE NOMINEE IS GUARANTEED BY SHANGHAI TIME SHIPPING CO LTD WHO ARE TO REMAIN JOINTLY AND SEVERALLY FULLY RESPONSIBLE FOR THE PROMPT AND TIMELY FULFILLMENT OF ALL BUYERS’ RESPONSIBILITIES, UNDERTAKINGS, OBLIGATIONS AND LIABILITIES HEREUNDER.
 
hereinafter called the Buyers, have agreed to buy
 
Name: “MARIA C”
 
Classification Society/Class: NKK

Built: 1994	 	By: SHIN KURUSHIMA ONISHI	
 	 	 	
Flag: Cyprus	 	Place of registration: Limassol	
 	 	 	
Call Sign: C4HD2	 	Grt/Nrt: 26093 / 14868	
 
Register Number: IMO/Reg No: 9103166
 
hereinafter called the Vessel, on the following terms and conditions:
 
Definition
 
“Banking days” are days on which banks are open both in the country of the currency stipulated for the Purchase Price in Clause 1 and in Shanghai / Piraeus / London the place of closing stipulated in Clause 8.
 
“In writing” or “written” means a letter handed over from the Sellers to the Buyers or vice versa, a registered letter, telex, telefax or other modern form of written communication including e-mail.
 
“Classification Society” or “Class” means the Society referred to in line 4.
 
1.         Purchase price: USD 22.500.000 (United States Dollars Twenty Two Million Five Hundred Thousand, Only)
 
2.         Deposit
 
As security for the correct fulfilment of this Agreement the Buyers shall pay remit a deposit of 10% (ten per cent) of the Purchase Price within 3 (three) Shanghai/New York/Piraeus banking days from the date both parties hereto have signed this Agreement or a faxed/scanned copy hereof from the date of this Agreement. This deposit shall be placed with

 
The Royal Bank of Scotland PLC
Piraeus branch
45 Akti Miaouli
185 10 Piraeus, Greece
Swift Code RBOSGRAAA
Attn: Mr. Fotis Bratimos/ Ms Elena Konstantilieri
Account No: 506143
Beneficiary: Joint account in the names of “SHANGHAI TIME SHIPPING CO. LTD.”
(Buyers) and “MARIA C. MARITIME INC” (Sellers)
 
USD correspondent: JP Morgan Chase Bank, N.Y. CHASUS33
 
and held by them in a joint account for the Sellers and the Buyers, to be released in accordance with joint written instructions of the Sellers and the Buyers. Interest, if any, to be credited to the Buyers. Any fee charged for opening, holding, lifting and closing ho l d i ng the said deposit shall be borne equally by the Sellers and the Buyers. Buyers are not responsible for the delay of deposit remittance solely due to Sellers failure to process the joint account in time
 
3.         Payment
 
The said deposit and the balance of 90% (ninety per cent) of the Purchase Price ( the ‘Balance Money’ ) together with all other monies payable under this Agreement shall be paid in full free of bank charges to
 
DANAOS CORPORATION
Account Number 178200-100
With the Royal Bank of Scotland
Piraeus branch
45 Akti Miaouli
185 10 Piraeus, Greece
Swift Code RBOSGRAAA
IBAN GR28 0640 0010 0000 0017 8200 100
 
on delivery of vessel, but not later than 3 Shanghai/NewYork/Plraeus/London banking days after the Vessel is in every respect physically ready for delivery in accordance with the terms and conditions of this Agreement and Notice of Readiness has been given in accordance with clause 5
 
Closing and exchange of delivery documents shall take place in London, U.K
Structured Ship Finance
Shipping Business Centre
The Royal Bank of Scotland Group
Tel: +44 207 615 4018
 
4.         Inspections
 
The vessel and her classification records’ have been inspected and accepted by the Buyers and by the C.C.S. Thus the sale is outright and definite.
 
a)*                   The Buyers have inspected and accepted the Vessel’s classification records. The Buyers have also inspected the Vessel at/in on
 
and have accepted the Vessel following this inspection and the sale is outright and definite, subject only to the terms and conditions of this Agreement.
 
b)*                  The Buyers shall have the right to inspect the Vessel’s classification records and declare whether same are accepted or not within.
 
The Seller shall provide for inspection of the Vessel at/in
 
The Buyers shall undertake the inspection without undue delay to the Vessel. Should the Buyers cause undue delay they shall compensate the Sellers for the lessee thereby incurred. The Buyers shall inspect the Vessel without opening up and without cost to the Sellers. During the inspection, the Vessel’s dock and engine log books shall be made available for examination by the Buyers. If the Vessel is accepted after such inspection, the sale shall

 
become outright and definite, subject only to the terms and conditions of this Agreement, provided the Sellers receive written notice of acceptance from the Buyers within 72 hours after completion of such inspection.
 
Should notice of acceptance of the Vessel’s classification records and of the Vessel not be received by the Sellers as aforesaid, the deposit together with interest earned shall be released immediately to the Buyers, whereafter this Agreement shall be null and void.
 
4a) and 4b) are alternatives; delete whichever is not applicable. In the absence of deletions, alternative 4a) to apply.
 
5.                          Notice, time and place of delivery.
 
a)                          The Sellers shall keep the Buyers well informed of the Vessel’s itinerary and shall provide the Buyers with 30/20/10/7, and 3 days notice of the estimated time of arrival at the intended place of drydocking/underwater inspection/delivery. When the Vessel is at the place of delivery and in every respect physically ready for delivery in accordance with this Agreement, the Sellers shall give the Buyers a written Notice of Readiness for delivery.
 
Sellers shall keep the Buyers well informed of the Vessel’s itinerary and nominate the delivery range and intended place of delivery 30 days prior to the approximate delivery. Sellers shall provide Buyers with 20/15/10/7 and 3 days notice of the estimated time of arrival at the intended place of delivery. When the Vessel is at the place of delivery and in every respect physically ready for delivery in accordance with this Agreement, the Sellers shall give the Buyers a written Notice of Readiness for delivery.
 
The vessel will be delivered with swept clean holds
 
b)         The Vessel shall be delivered and taken over safely afloat at a safe and accessible berth or anchorage at/in
 
in the Sellers’ option.
 
Expected time of delivery: Between 17 th November 2006 and 18 th February 2007. Sellers shall also use their best endeavor to deliver the vessel as early as possible.
 
Sellers shall use their best endeavor to deliver the vessel in Singapore/Japan range. However, final delivery range will be back to back with the redelivery of the existing charters, i.e. vessel to be delivered by Sellers and taken over by Buyers over safely afloat at a safe and accessible berth/anchorage/buoy within Aden/Japan range, Skaw/Passero range including UK/Med, Buenos Aires/East Coast USA range, in the Sellers option, but in case at Sellers nominated port of delivery there is no Chinese Embassy where the Buyers joining crew cannot process visa from, then Buyers have the option to nominate at least 7 running days prior to the Sellers intended date of delivery an alternative port of delivery, which not to be more than 12 days steaming time from the Sellers’ nominated delivery port. Buyers nominated port to be the nearest to Sellers nominated port that Buyers may obtain visa for their crew. Sellers to undertake to sail the vessel to Buyers such nominated port at Sellers risk and Buyers cost. These costs will be the vessel’s daily running cost plus bunkers plus financing interest plus cost of exit from Sellers delivery port and entry to Buyers delivery port as quoted by the Sellers and Buyers agents respectively
 
Opex 3480 + Bunkers 10050 + Interest 4286 = USD 17816 per day at sea plus port(s) cost.
 
Sea Time to be calculated upon full away from pilot station from Sellers nominated delivery port to sea pilot station to Buyers nominated port
 
c)                          Date of cancelling (see clauses 5c), 6b) (iii) and 14): 18 th February 2007 in Buyers option
 
However, only in case Sellers need extra time purely for the preparatory purpose of delivery, i.e. not for the time charterers charter extension purpose, Buyers to grant an extention of cancelling date upto 28 th February 2007.
 
If the Sellers anticipate that, notwithstanding the exercise of due diligence by them, the Vessel will not be ready for delivery by the cancelling date they may notify the Buyers in

 
writing stating the date when they anticipate that the Vessel will be ready for delivery and propose a new cancelling date. Upon receipt of such notification the Buyers shall have the option of either cancelling this Agreement in accordance with Clause 14 within 3 7 running days of receipt of the notice or of accepting the new date as the new cancelling date. If the Buyers have not declared their option within 3 7 running days of receipt of the Sellers’ notification or if the Buyers accept the new date, the date proposed in the Sellers’ notification shall be deemed to be the new cancelling date and shall be substituted for the cancelling date stipulated in line 61.
 
If this Agreement is maintained with the new cancelling date all other terms and conditions hereof including those contained in Clauses 5 a) and 5 c) shall remain unaltered and in full force and effect. Cancellation or failure to cancel shall be entirely without prejudice to any claim for damages the Buyers may have under Clause 14 for the Vessel not being ready by the original cancelling date.
 
d)                         Should the Vessel become an actual, constructive or compromised total loss before delivery the deposit together with interest earned shall be released immediately to the Buyers whereafter this Agreement shall be null and void.
 
6.                          Drydocking/Divers Inspection (see additional clause 17)
 
a)**            The Sellers shall place the Vessel in drydock at the port of delivery for inspection by the Classification Society of the Vessel’s underwater parts below the deepest load line the extent of the inspection being in accordance with Classification Society’s rules. If the [illegible] propeller, bottom or other underwater parts below the deepest load line are found broken, damaged or defective so as to affect the Vessel’s class, such defects shall be made good at the Sellers’ expense to the satisfaction of the Classification Society without condition/recommendation*.
 
b)**           (i)         The Vessel is to be delivered without drydocking. However, the Buyers shall have the right at their expense to arrange for an underwater inspection by a diver approved by the Classification Society prior to the delivery of the Vessel. The Sellers shall at their cost make the Vessel available for such inspection. The extent of the inspection and the conditions under which it is performed shall be to the satisfaction of the Classification Society. If the conditions at the port of delivery are unsuitable for such inspection, the Sellers shall make the Vessel available at a suitable alternative place near to the delivery port.
 
(ii)        If the rudder, propeller, bottom or other underwater parts below the deepest load line are found broken, damaged or defective so as to effect the Vessel’s class, then unless repairs can be carried out affect to the satisfaction of the Classification society, the Sellers shall arrange for the vessel to be drydocked at their expenses for inspection by the Classification society of the Vessel’s underwater ports below the deepest load line, the extent of the inspection being in accordance with the Classification Society’s rules. If the rudder, propeller, bottom or other underwater parts below the deepest load line are found broken, damaged or defective so as to effect the Vessel’s class, such defects shall be made good by the Sellers at their expense to the satisfaction of the classification society without condition/recommendation*. In such event the Sellers are to pay also for the cost of the underwater inspection and the Classification Society’s attendance.
 
(iii)       If the vessel is to be drydocked pursuant to Clause 6 b) (ii) and no suitable dry docking facilities are available at the port of delivery, the Sellers shall take the Vessel to a port where suitable drydocking facilities are available whether within or outside the delivery range as per Clause 5 b). Once drydocking has taken place the Sellers shall deliver the Vessel at a port within the delivery range as per Clause 5 b) which shall, for the purpose of this Clause, become the new port of delivery. In such event the cancelling date provided for in Clause 5 b) shall be extended by the additional time required for the drydocking and extra steaming, but limited to a maximum of 14 running days.
 
c)                          If the Vessel is drydocked pursuant to Clause 6 a) or 6 b) above
 
(i)         the Classification Society may require survey of the talishaft system, the extent of the survey being to the satisfaction of the Classification surveyor. If such survey is not required by the Classification Society, the Buyers shall have the right to require the tailshaft

 
to be drawn and surveyed by Classification Society, the extent of the survey being in accordance with the Classification Society’s rules for tailshaft survey and consistent with the current stage of the Vessel survey cycle. The Buyers shall declare where they require the tailshaft to be drawn and surveyed not later than by the completion of the inspection of the Classification Society. The drawing and refitting of the tailshaft shall be arranged by the Sellers. Should any parts of the tailshaft system be condemned or found defective so as to effect the Vessel’s class, these parts shall be renewed or made good at the Seller’s expense to the satisfaction of the Classification Society without condition/recommendation*.
 
(ii)        the expenses relating to the survey of the tailshaft system shall be borne by the Buyers unless the Classification Society requires such survey to be carried out, in which case the Sellers shall pay those expenses. The Sellers shall also pay the expenses if the Buyers require the survey and parts of the system are condemned or found defective or broken so as to effect the vessel’s class.
 
(iii)       The expenses in connection with putting the Vessel in and taking her out of drydock, including the drydock dues and the Classification Society’s fees shall be paid by the Sellers if the Classification Society issues any condition/recommendation* as a result of the survey or if it requires survey of the tailshaft system. In all other cases the Buyers shall pay the aforesaid expenses, dues and fees.
 
(iv)       The Buyer’s representative shall have the right to be present in the drydock, but without interfering with the work or decisions of the Classification surveyor.
 
(v)        The Buyers shall have the right to have the underwater parts of the Vessel cleaned and painted at their risk and expense without interfering with the Sellers’ or the Classifications surveyor’s work, if any, and without affecting the Vessel’s timely delivery. If however, the Buyers’ work in drydock is still in progress when the Sellers have completed the work which the Sellers are required to do, the additional docking time needed to complete the Buyers’ work shall be for the Buyers’ risk and expense. In the event that the Buyers’ work requires such additional time, the Sellers may upon completion of the Sellers’ tender Notice of Readiness for delivery whilst the Vessel is still in drydock and the Buyers shall be obliged to take delivery in accordance with Clause 3, whether the Vessel is in drydock or not and Irrespective of Clause 5(b).
 
*          Notes, if any, in the surveyor’s report which are accepted by the classification Society without condition/recommendation are not to be taken into account.
 
**        6a) and 6 b) are alternative; delete whichever is not applicable. In the absence of deletions, alternative 6 a) to apply.
 
7. Spares/bunkers, etc.
 
The Sellers shall deliver the Vessel to the Buyers with everything belonging to her on board and on shore. All spare parts and spare equipment including spare tail-end shaft(s) and/or spare propeller (s)/ propeller blade(s) , if any, belonging to the Vessel at the time of inspection used or unused, whether on board or not shall become the Buyers’ property , but spares an ord e r are to be excluded . Forwarding charges, if any, shall be for the Buyers’ account. The Sellers are not required to replace spare parts including spare tail-end shaft(s) and spare propeller(s)/ propellers blade(s) which are taken out of spare and used as replacement prior to delivery, but the replaced items shall be the property of the Buyers. The radio installation and navigational equipment shall be included in the sale without extra payment if they are the property of the Sellers. Unused stores and provisions shall be included in the sale and be taken over by the Buyers without extra payment.
 
The Sellers have the right to take ashore crockery, plates, cutlery, linen and other articles bearing the Seller’s flag or name, provided they replace same with similar unmarked items. Library, forms, etc., exclusively for use in the Sellers’ vessel(s) shall be excluded without compensation, Captain’s Officers’ and Crew’s personal belongings including the slop chest are to be excluded from the sale, as well as the following additional items (including items on hire):
 
• Dosing pump for boiler water treatment (1 piece)
 • Unitor HFO compatibility test kit (1 piece)
 • Extra deck air compressor with panel (1 piece)
 • H.P. washing machine complete with extension cables (1 piece)
 • Painting spray machine

 
The Buyers shall take over the remaining bunkers and unused lubricating oils in sealed drums or in storage tanks without having passed through the vessel’s system and sealed drums and pay the current not marked last net purchase prices evidenced by the copy of invoices which to be provided by the sellers price (excluding barging expenses) at the port and date of delivery of the Vessel. Payment under this Clause shall be made at the same time and place and in the same currency as the Purchase Price.
 
The Seller’s and the Buyers’s familiarization representative shall jointly measure the bunker/lubricant oil quantity and prepare a Statement of Fact prior to delivery of the vessel showing the remaining quantities of bunkers and unused lubricant oil including calculated consumption by the Vessel upto the date of delivery, which shall be the amount of bunkers and lubricating oils the Buyers shall pay under the terms of this agreement.
 
8.                         Documentation. (see also additional clause 18)
 
The place of closing:
 
In exchange for payment-of-the-Purchase Price the Sellers shall furnish the Buyers with delivery documents, namely:
 
a)                         Legal Bill of Sale in a form recordable in (the country in which the Buyers are to register the Vessel), warranting that the Vessel is free from all encumbrance, mortgages and maritime liens or any other debts or [illegible] whatsoever, duly notarially attested and legalized by the consul of such country or other competent authority.
 
b)                        Current Certificate of Ownership issued by the competent authorities of the flag state of the Vessel.
 
c)                         Confirmation of Glass issued within 72 hours prior to delivery.
 
d)                        Current Certificate issued by the competent authorities stating that the Vessel is free from register encumbrance.
 
e)                         Certificate of deletion of the Vessel from the Vessel’s registry or other official evidence of deletion appropriate to the Vessel’s registry at the time of delivery, or, in the event that the registry does not as a matter of practice issue such documentation immediately, a written undertaking by the Sellers to effect deletion from the Vessel’s registry forthwith and furnish a Certificate or other official evidence of deletion to the Buyers promptly and latest within 4 (four) weeks after the purchase Price has been paid and the Vessel has been delivered.
 
f)                           Any such additional documents as may reasonably be required by the competent authorities for the purchase of registering the Vessel provided the Buyers notify the Sellers of any such documents as soon as possible after the date of this Agreement.
 
At the time of delivery the Buyers and Sellers shall sign and deliver to each other a Protocol of Delivery and Acceptance confirming the date and time of delivery of the Vessel from the Sellers to the Buyers.
 
At the time of delivery the Sellers shall hand to the Buyers the classification certificate(s) as well as all plans drawings and manuals etc., which are on board the Vessel and in Sellers’ office and/or their possession. Other certificates which are on board the Vessel shall also be handed over to the Buyers unless the Sellers are required to retain same, in which case the Buyers to have the right to take copies. Other technical documentation which may be in the Sellers’ possession shall be promptly forwarded to the Buyers at Buyers expense, if they so request. The Sellers may keep the Vessel’ s log books but the Buyers to have the right to take copies of same.
 
9.         Encumbrances
 
The Sellers warrant that the Vessel, at the time of delivery, is free from all charters, encumbrances, mortgages, taxes and maritime liens or any other debts whatsoever as well as

 
any dispute claim with its Union. The Sellers hereby undertake to indemnify the Buyers against all consequences of claims made against the Vessel which have been incurred prior to the time of delivery.
 
Sellers will provide Buyers with Free of Encumbrances Certificate dated the day of the closing same to be issued by the vessel’s Registry Authority or Cypriot Consulate in Piraeus or London.
 
10.       Taxes, etc.
 
Any taxes, fees and expenses in connection with the purchase and registration under the Buyers’ flag shall be for the Buyers account, where as similar charges in connection with the closing of the Sellers’ register shall be for the Sellers’ account.
 
11.       Condition on delivery
 
The Vessel with everything belonging to her shall be at the Sellers’ risk and expense until she is delivered to the Buyers, but subject to the terms and conditions of this Agreements she shall be delivered by the Sellers and taken over by the Buyers as she was at the time of inspection, fair wear and tear excepted.
 
However, the Vessel shall be delivered with her class maintained without condition/recommendation*, free of average damage affecting the Vessel’s class, and with her classification certificates and national certificates, as well as all other certificates the Vessel had at the time of inspection, valid and unextended for minimum 3 (three) months after the day of delivery without condition/recommendation* by Class or relevant authorities at the time of delivery.
 
“Inspection” in the Clause 11, shall mean the Buyers’ inspection according to Clause 4 a) or 4 b). If applicable, or the buyers inspection prior to the signing of this Agreement. If the Vessel is taken over without inspection, the date of this Agreement shall be the relevant date.
 
*                            Notes, if any, in the surveyor’ s reports which are accepted by the Classification Society without condition/recommendation are not to be taken into account.
 
12.       Name/markings
 
Upon delivery the Buyers undertake to change the name of the Vessel and alter funnel markings
 
13.       Buyers’ default
 
Should the deposit not be paid in accordance with Clause 2, the Sellers have the right to cancel this Agreement, and they shall be entitled to claim compensation for their losses and for all their expenses incurred together with interest. Should the Purchase Price not be paid in accordance with Clause 3, the Sellers have the right to cancel the Agreement, In which case the deposit together with interest earned shall be released to the Sellers. If the deposit does not cover their loss, the Sellers shall be entitled to claim further compensation for their losses and for all their expenses incurred together with interest.
 
14.       Sellers’ default
 
Should the Sellers fail to give Notice of Readiness in accordance with Clause 5 a) or fail to be ready to validity complete a legal transfer by the date stipulated in line 61 or at such date as may have been extended pursuant to this Agreement the Buyers shall have the option of cancelling this Agreement provided always that the Sellers shall be granted a maximum of 3 banking days after Notice of Readiness has been given to make arrangements for the documentation set out in Clause 8. If after Notice of Readiness has been given but before the Buyers have taken delivery, the Vessel ceases to be physically ready for delivery and is not made physically ready again in every respect by the date stipulated in line 61 and new Notice of Readiness given , has not been given by the date stipulated in line 61 or at such date as may have been extended pursuant to this Agreement the Buyers shall retain their option to cancel. In the event that the Buyers elect to cancel this Agreement the deposit together with interest earned thereon shall be released to them immediately. Should the Sellers fail to give Notice of Readiness by the date stipulated in line 61 or fail to be

 
ready to validity complete a legal transfer as aforesaid they shall make due compensation to the Buyers for their loss and for all expenses together with interest if their failure is due to proven negligence and whether or not the Buyers cancel this Agreement.
 
15.       Buyers’ representatives
 
After this Agreement has been signed by both parties and the deposit has been lodged, the Buyers have the right 60 days prior to the expected date of delivery to place up to 2 (two) representatives on board the Vessel at their sole risk and expense upon arrival at ……... on or about .These representatives are on board for the purpose of familiarisation and in the capacity of observers only, and they shall not interfere in any respect with the operation of the Vessel. The Buyers’ representatives shall sign the Sellers’ letter of indemnity prior to their embarkation. The Buyers’ representatives are to be allowed to remain on board up to and during the time of delivery, always at Buyers’ sole risk and expense.
 
Once Sellers have tended NOR, Buyers are entitled to have another 8 representatives onboard for familiarization purpose only.
 
16.       Arbitration
 
a)*                   This Agreement shall be governed by and construed in accordance with English law and any dispute arising out of this Agreement shall be referred to arbitration in London in accordance with the Arbitration Acts 1996 1950 and 1979 or any statutory modification or re-enactment thereof for the time being in force, one arbitrator being appointed by each party. On the receipt by one party of the nomination in writing of the other party’s arbitrator, that party shall appoint their arbitrator within fourteen days, failing which the decision of the single arbitrator appointed shall apply. If two arbitrators properly appointed shall not agree they shall appoint an umpire whose decision shall be final.
 
b)*                  This Agreement shall be governed by and construed in accordance with Title 9 of the United Stage Code and the Law of the State of New York and should any dispute arise out of this Agreement, the matter in dispute shall be referred to three persons at New York, one to be appointed by each of the parties hereto, and the third by the two so chosen; their decision or that of any two of them shall be final, and for purpose of enforcing any award, this Agreement may be made a rule of the Court.
 
The proceedings shall be conducted in accordance with the rules of the Society of Maritime Arbitrators Inc, New York.
 
c)*                   Any dispute arising out of this Agreement shall be referred to arbitration at                                                       , subject to the procedures applicable there. The laws of         shall govern this Agreement.
 
*                             16a), 16b) and 16c) are alternatives; delete whichever is net applicable in the absence of deletions, alternative 16 a) to apply.
 
Additional Clauses:
 
17. Divers Inspection
 
No drydocking, prior to the delivery of the Vessel, however the Buyers to have the option to arrange at their risk and expense at any convenient port before delivery or at the port of delivery an inspection of the Vessel’s underwater parts by divers appointed by Buyers and approved by Vessel’s Class, in the presence of the Class surveyor and Sellers’ and Buyers’ representatives, Buyers not to interfere at the video monitor or with the Class surveyor’s work.
 
The Sellers shall notify Buyers as to the vessel’s itinerary for Buyers to decide the most convenient place for the underwater inspection to take place at Sellers time. Sellers to arrange Class Surveyor at Buyers expenses who shall be in attendance at the time of underwater inspection.

 
Buyers shall in any event pay for the divers and the cost of Class attendance. The extent of the inspection and the conditions under which it is performed shall be to the satisfaction/requirement of the Class surveyor attending. The Class to be the sole arbitrator as to whether underwater damage, if any, will impose any condition of Class. If the conditions at the place of such inspection are not suitable for such inspection, the Sellers shall make the Vessel available at a suitable alternative nearby place.
 
Should any damage be found to the underwater parts that will impose a condition of Vessel’s present class, then:
 
a. In case vessel’s Class imposes a condition but does not require drydocking before next scheduled drydocking, Sellers have the option to repair same to Class satisfaction prior to delivery or to compensate the Buyers with the estimated cost to repair such damage in a way which is acceptable to the Vessel’s Class, which cost to be only the direct cost to repair such damage (i.e. excluding docking/undocking costs, tugs, loss of hire, deviation, etc), as per the average of 2 (two) quotations received from 1 (one) major reputable repair yard chosen by Buyers and 1 (one) major reputable repair yard chosen by Sellers, such repair yards to be located in China and capable of repair a vessel of such type; The average amount agreed shall be deducted from the Purchase Price at the time of delivery.
 
b. In case that the rudder, propeller, bottom or other underwater parts below the summer load line be found broken, damaged or defective, so as to affect Vessel’s present class and must be immediately repaired, then clause 6B(ii) NSF 93 to be reinstated.
 
In the event the Vessel is to be drydocked, the canceling date will be extended appropriately for the extra time taken to deliver the Vessel due to ballasting/drydocking/repairs to be carried out to Class’ satisfaction in accordance with this Agreement, [but such extension will not exceed in total 7 running days].
 
In case of drydocking, the Buyers may carry out cleaning/painting works at their sole risk and expense, subject to the Sellers’ approval, without interfering with the Sellers’ drydock works nor the classification surveyor’s work, if any, and without affecting Vessel’s timely delivery schedule. If however Buyers’ works are still in progress when Sellers have completed their works and they are ready in all respects to deliver the Vessel to the Buyers as per the Agreement, then Sellers shall tender final Notice of Readiness to the Buyers whilst the Vessel is in drydock and Buyers must take timely delivery of the Vessel whether on drydock or not, with undocking expenses only to be for Sellers’ account.
 
The Class shall issue a Class Survey Record which indicates whether the Underwater Inspection has found any damage affecting class, and in the event that such damage is found, indicates whether it requires immediate rectification or whether it should be rectified during the next drydocking. This Class Survey Record will be issued immediately after the completion of the divers Underwater Inspection.
 
18. Documentation.
 
AA. Sellers to provide Buyers with following documents in exchange of purchase money at the time of closing:
 
(1)        Three original bills of sale notarially attested and legalized by the Chinese Embassy or Consulate in Athens or London and warranting that the vessel is free for all encumbrances, mortgages and maritime liens or other debts or claims whatsoever to be signed by a duly authorized signatory on behalf of the Sellers.
 
(2)        Minutes of meetings of the Board of directors and shareholders of the Sellers, authorizing the sale of the vessel to the Buyers and the issue of a Power of Attorney. The minutes to be notarially attested and legalized by the Chinese Embassy or Consulate in Athens or London.
 
(3)        Copies of Memorandum and Articles of Association and other constitutional documents of the Seller, which are to be certified by the secretary of the Sellers.

 
(4)        Power of Attorney of the Seller authorizing individuals to execute all necessary documents on the Sellers’ behalf, same to be notarially attested and legalized by the Chinese Embassy or Consulate in Athens or London.
 
(5)        Deletion Certificate in original issued by the vessel’s Registry Authority on the date of delivery. In case that such original certificate is not available, the Sellers instead shall furnish the Buyers with a Letter of Undertaking on Sellers company letterhead at the time of delivery to provide the Deletion Certificate in original to the Buyers within 5 (five) working days from the date of delivery of the Vessel
 
(6)        Free of Encumbrances Certificate in original issued by the Vessel’s Registry Authority or the Cypriot Consulate in Piraeus or London on the date of delivery certifying that the vessel is free of all registered encumbrances and mortgages.
 
(7)        Letter of Undertaking which clearly states vessel is free from registered encumbrance and from all maritime liens and debts and that they further undertake to indemnify the Buyer for all and any claims arising prior to the delivery of the vessel.
 
(8)        Original class maintained certificate from NK classification that the vessel’s class is maintained free of recommendations/conditions of class dated not earlier than three (3) working days before date of delivery
 
(9)        Letter of Undertaking which states that to the best of the Sellers’ knowledge the vessel is not blacklisted by the Arab Boycott League in Damascus or the ITF or any other nations or organizations.
 
(10)      3 original copies of commercial invoice in relation to the total purchase price of the vessel.
 
(11)      3 original copies of commercial invoices in relation to bunkers and lubrication oils remaining on board the vessel at delivery along with copies of invoices for the purchase of bunkers and lubrication oils.
 
(12)      Letter of Undertaking from seller to delete the vessel from INMARSAT on the day of delivery of the vessel.
 
(13)      Current Certificate of Ownership issued by the competent authorities of the flag state of the Vessel dated not earlier than three (3) working days before date of delivery.
 
BB. List of Original Documents to be delivered by vessel’s Buyers to Sellers in exchange of purchase money at the time of closing
 
(1).       Copy of the Buyers Company Registration Certificate duly notarised and officially translated into the English language by a competent public authority.
 
(2).       Original Board Resolutions (notarised and officially translated in the English language by a competent public authority) ratifying the Memorandum of Agreement and all other terms of the purchase of the Vessels and authorising the issuance of a Power of Attorney as per paragraph 3 herebelow.
 
(3).       Original Power of Attorney (notarised and officially translated in the English language by a competent public, executed by a duly authorised Director, appointing attorney(s)-in-fact empowered to sign, execute and deliver any and all documents necessary in connection with the purchase of the Vessels, as well as for the release of the deposit money and payment of the purchase price as well as any other payment due under the Memorandum of Agreement.
 
Both Sellers and Buyers shall exchange to each other the above drafts of documents at least 7 (seven) working days prior to delivery

 
19. Blacklisting.
 
The Sellers to confirm that to the best of their knowledge the Vessel is not blacklisted by any nation.
 
20. Plans/Manuals
 
At the time of Vessel’s delivery the Sellers to hand over to Buyers’ representative all drawings/plans and manuals available on board which are not to be returned to Class or Registry (in which case copies shall be provided). Sellers’ ISM manuals and forms as well as Vessel’s log books will not be handed over, however Buyers shall have the right to take the copy of log books. In addition all drawings/plans and manuals available in Managers’/Owners’ office to be forwarded to the Buyers’ office as soon as possible after delivery delay. Forwarding expenses to be for Buyers’ account.
 
21. Confidentiality
 
Both parties shall keep all the negotiations and the Agreement and all its terms strictly private and confidential.

For the Sellers	 	For the Buyers	

 /s/ I Prokopakis	 	 	/s/ illegible	 	
Name: I. PROKOPAKIS	 	Name: [illegible]	
 	 	 	
Title: Director	 	Title:	
 	 	 	
Date: 16/08/2006	 	Date: 2006.8.15	
 	 	 	
On behalf of:	 	On behalf of:	
MARIA C. MARITIME INC.	 	Shanghai Time Shipping Co. Ltd. or its nominee	

For the Sellers	 	For the Buyers	
 	 	 	
FOR DANAOS CORPORATION	 	FOR SHANGHAI TIME SHIPPING CO LTD.	
 	 	 	
 /s/ I. Prokopakis	 	 	/s/ illegible	 	
Name: I. PROKOPAKIS	 	Name : [illegible]	
 	 	 	
Title: Director	 	Title:	
 	 	 	
Date: 16/08/2006	 	Date: 2006.8.15	
 	 	 	
On behalf of:	 	On behalf of:	

 
Exhibit 10.39

 	Norwegian Shipbroker Association’s Memorandum of Agreement for sale and purchase of ships. Adopted by The Baltic and International Maritime Council (BIMCO) in 1956.	
 	Code-name	
 	SALEFORM 1993	
 	Revised 1966, 1983 and 1986/87.	
 
MEMORANDUM OF AGREEMENT

 Dated: 14 th August, 2006
 
“MERCATOR SHIPPING INC.”
 
MESSRS DANAOS CORPORATION WILL GUARANTEE PERFORMANCE OF SELLING COMPANY AND SHALL REMAIN JOINTLY AND SEVERALLY FULLY RESPONSIBLE FOR PROMPT AND TIMELY FULFILLMENT OF ALL SELLERS’ RESPONSIBILITIES, UNDERTAKINGS, OBLIGATIONS AND LIABILITIES HEREUNDER
 
hereinafter called the Sellers, have agreed to sell, and
 
MESSRS SHANGHAI TIME SHIPPING CO LTD OR A COMPANY TO BE NOMINATED BY THEM NO LATER THAN 30 DAYS OF APPROXIMATE NOTICE OF VESSEL’S INTENDED DELIVERY IS TENDERED FROM SELLERS
 
THE PERFORMANCE OF THIS AGREEMENT BY THE NOMINEE IS GUARANTEED BY SHANGHAI TIME SHIPPING CO LTD WHO ARE TO REMAIN JOINTLY AND SEVERALLY FULLY RESPONSIBLE FOR THE PROMPT AND TIMELY FULFILLMENT OF ALL BUYERS’ RESPONSIBILITIES, UNDERTAKINGS, OBLIGATIONS AND LIABILITIES HEREUNDER.
 
hereinafter called the Buyers, have agreed to buy
 
Name: “ MV ACHILLEAS ”
 
Classification Society/Class: NKK

Built: 1994	 	By: KOYO MIHARA	
 	 	 	
Flag: Cyprus	 	Place of registration: Limassol	
 	 	 	
Call Sign: C4HB2	 	Grt/Nrt: 35879 / 23407	
 
Register Number: IMO/Reg No: 9115224
 
hereinafter called the Vessel, on the following terms and conditions:
 
Definition
 
“Banking days” are days on which banks are open both in the country of the currency stipulated for the Purchase Price in Clause 1 and in Shanghai / Piraeus / London the place of closing stipulated in Clause 8.
 
“In writing” or “written” means a letter handed over from the Sellers to the Buyers or vice versa, a registered letter, telex, telefax or other modern form of written communication including e-mail.
 
“Classification Society” or “Class” means the Society referred to in line 4.
 
1.         Purchase price: USD 25,500,000 (United States Dollars Twenty Five Million Five Hundred Thousand, Only)
 
2.         Deposit
 
As security for the correct fulfilment of this Agreement the Buyers shall pay remit a deposit of 10% (ten per cent) of the Purchase Price within 3 (three) Shanghai/New York/Piraeus/London banking days from the date both parties hereto have signed this Agreement or a faxed/scanned copy hereof from the date of the-Agreement . This deposit shall be placed with

 
The Royal Bank of Scotland PLC
Piraeus branch
45 Akti Miaouli
185 10 Piraeus, Greece
Swift Code RBOSGRAAA
Attn: Mr. Fotis Bratimos/ Ms Elena Konstantilleri
Account No: 506143
Beneficiary: Joint account in the names of “SHANGHAI TIME SHIPPING CO. LTD.” (Buyers) and “MERCATOR SHIPPING INC” (Sellers)
 
USD correspondent: JP Morgan Chase Bank, N.Y. CHASUS33
 
and held by them in a joint account for the Sellers and the Buyers, to be released in accordance with joint written instructions of the Sellers and the Buyers. Interest, if any, to be credited to the Buyers. Any fee charged for opening, holding, lifting and closing holding the said deposit shall be borne equally by the Sellers and the Buyers. Buyers are not responsible for the delay of deposit remittance solely due to Sellers failure to process the joint account in time
 
3.                         Payment
 
The said deposit and the balance of 90% (ninety per cent) of the Purchase Price (the ‘Balance Money’) together with all other monies payable under this Agreement shall be paid in full free of bank charges to
 
DANAOS CORPORATION
Account Number 178200-100
With the Royal Bank of Scotland
Piraeus branch
45 Akti Miaouli
185 10 Piraeus, Greece
Swift Code RBOSGRAAA
IBAN GR2B 0640 0010 0000 0017 8200 100
 
on delivery of vessel, but not later than 3 Shanghai/NewYork/ Piraeus/London banking days after the Vessel is in every respect physically ready for delivery in accordance with the terms and conditions of this Agreement and Notice of Readiness has been given in accordance with clause 5
 
Closing and exchange of delivery documents shall take place in London, U.K
Structured Ship Finance
Shipping Business Centre
The Royal Bank of Scotland Group
Tel: +44 207 615 4018
 
4.                          Inspections
 
The vessel and her classification records’ have been inspected and accepted by the Buyers and by the C.C.S. Thus the sale is outright and definite.
 
a)*                   The Buyers have inspected and accepted the Vessel’s classification records. The Buyers have also inspected the Vessel at/in                          on
 
and have accepted the Vessel following this inspection and the sale is outright and definite, subject only to the terms and conditions of this Agreement.
 
b)*                  The Buyers shall have the right to inspect the Vessel’s classification records and declare whether same are accepted or not within
 
The Seller shall provide for inspection of the Vessel at/in
 
The Buyers shall undertake the inspection without undue delay to the Vessel. Should the Buyers cause undue delay they shall compensate the Sellers for the losses thereby incurred. The Buyers shall inspect the Vessel without opening up and without cost to the Sellers.

 
During the inspection, the Vessel’s deck and engine log books shall be made available for examination by the Buyers. If the Vessel is accepted after such inspection, the sale shall become outright and definite, subject only to the terms and conditions of this Agreement, provided the Sellers receive written notice of acceptance from the Buyers within 72 hours after completion of such inspection.
 
Should notice of acceptance of the Vessel’s classification records and of the Vessel not be received by the Sellers as aforesaid, the deposit together with interest earned shall be released immediately to the Buyers, whereafter this Agreement shall be null and void.
 
4a) and 4b) are alternatives: delete whichever is not applicable. In the absence of deletions, alternative 4a) to apply.
 
5.                          Notice, time and place of delivery
 
a)                          The Sellers shall keep the Buyers well informed of the Vessel’s itinerary and shall provided the Buyers with 30/20/10/7 and 3 days notice of the estimated time of arrival at the intended place of drydocking/underwater inspection/ delivery. When the Vessel is at the place of delivery and in every respect physically ready for delivery in accordance with this Agreemnt, the Sellers shall give the Buyers a written Notice of Readiness for delivery.
 
Sellers shall keep the Buyers well informed of the Vessel’s itinerary and nominate the delivery range and intended place of delivery 30 days prior to the approximate delivery. Sellers shall provide Buyers with 20/15/10/7 and 3 days notice of the estimated time of arrival at the intended place of delivery. When the Vessel is at the place of delivery and in every respect physically ready for delivery in accordance with this Agreement, the Sellers shall give the Buyers a written Notice of Readiness for delivery.
 
The vessels will be delivered with swept clean holds
 
b)                         The Vessel’s shall be delivered and taken over safely afloat at a safe and accessible berth or anchorage at/in
 
in the Seller’s option
 
Expected time of delivery: Between 16 th February 2007 and 18 th April 2007. Sellers shall also use their best endeavor to deliver the vessel as early as possible.
 
Sellers shall use their best endeavor to deliver the vessel in Singapore/Japan range. However, final delivery range will be back to back with the redelivery of the existing charters, i.e. vessel to be delivered by Sellers and taken over by Buyers over safely afloat at a safe and accessible berth/anchorage/buoy within Skaw/Passero range, Singapore/Japan range including islands or US Gulf, in the Sellers option, but in case at Sellers nominated port of delivery there is no Chinese Embassy where the Buyers joining crew cannot process visa from, then Buyers have the option to nominate at least 7 running days prior to the Sellers intended date of delivery an alternative port of delivery, which not to be more than 12 days steaming time from the Sellers’ nominated delivery port. Buyers nominated port to be the nearest to Sellers nominated port that Buyers may obtain visa for their crew.-Sellers to undertake to sail the vessel to Buyers such nominated port at Sellers risk and Buyers cost. These costs will be the vessel’s daily running cost plus bunkers plus financing interest plus cost of exit from Sellers delivery port and entry to Buyers delivery port as quoted by the Sellers and Buyers agents respectively
 
Opex 3528 + Bunkers 11100 + Interest 4286 = $18914 per day at sea plus port(s) cost
 
Sea Time to be calculated upon full away from pilot station from Sellers nominated delivery port to sea pilot station to Buyers nominated port
 
c)         Date of cancelling (see clauses 5 c), 6 b) (iii) and 14): 18 th April 2007 in Buyers option
 
However, only in case Sellers need extra time purely for the preparatory purpose of delivery, i.e. not for the time charterers charter extension purpose, Buyers to grant an extention of cancelling date upto 30 th April 2007

 
If the Sellers anticipate that, notwithstanding the exercise of due diligence by them, the Vessel will not be ready for delivery by the cancelling date they may notify the Buyers in writing stating the date when they anticipate that the Vessel will be ready for delivery and propose a new cancelling date. Upon receipt of such notification the Buyers shall have the option of either cancelling this Agreement in accordance with Clause 14 within 3 7 running days of receipt of the notice or of accepting the new date as the new cancelling date. If the Buyers have not declared their option within 3 7 running days of receipt of the Sellers’ notification or if the Buyers accept the new date, the date proposed in the Sellers’ notification shall be deemed to be the new cancelling date and shall be substituted for the cancelling date stipulated in line 61.
 
If this Agreement is maintained with the new cancelling date all other terms and conditions hereof including those contained in Clauses 5 a) and 5 c) shall remain unaltered and in full force and effect. Cancellation or failure to cancel shall be entirely without prejudice to any claim for damages the Buyers may have under Clause 14 for the Vessel not being ready by the original cancelling date.
 
d)                         Should the Vessel become an actual, constructive or compromised total loss before delivery the deposit together with interest earned shall be released immediately to the Buyers whereafter this Agreement shall be null and void.
 
6.                          Drydocking/Divers Inspection (see additional clause 17)
 
a)**            The Sellers shall place the Vessel in drydock at the port of delivery for inspection by the Classification Society of the Vessel’s underwater parts below the deepest load line, the extent of the inspection being in accordance with Classification Society’s rules. If the rudder, propeller, bottom or other underwater parts below the deepest load line are found broken, damaged or defective so as to affect the Vessel’s class, such defects shall be made good at the Sellers’ expense to the satisfaction of the Classification Society without condition/recommendation*.
 
b)**           (i)         The Vessel is to be delivered without drydocking. However, the Buyers shall have the right at their expense to arrange for an underwater inspection by a diver approved by the Classification society prior to the delivery of the Vessel. The Sellers shall at their cost make the Vessel available for such inspection. The extent of the inspection and the conditions under which it is performed shall be to the satisfaction of the Classification Society. If the conditions at the port of delivery are unsuitable for such inspection, the Sellers shall make the Vessel available at a suitable alternative place near to the delivery port.
 
(ii)        if the rudder, propeller, bottom or other underwater parts below the deepest load line are found broken, damaged or defective so as to effect the Vessel’s class, then unless repairs can be carried out afloat to the satisfaction of the Classification society, the Sellers shall arrange for the Vessel to be drydocked at their expense for inspection by the Classification society of the Vessel’s underwater parts below the deepest load line the extent of the inspection being in accordance with the Classification Society’s rules. If the rudder, propeller, bottom or other underwater parts below the deepest load line are found broken, damaged or defective so as to effect the Vessel’s class, such defects shall be made good by the Sellers at their expense to the satisfaction of the classification society without condition/recommendation*. In such event the Sellers are to pay also for the cost of the underwater inspection and the Classification Society’s attendance.
 
(iii)       If the vessel is to be drydocked pursuant to Clause 6 b) (ii) and no suitable drydocking facilities are available at the port of delivery, the Sellers shall take the Vessel to a port where suitable drydocking facilities are available, whether within or outside the delivery range as per Clause 5 b). Once drydocking has taken place the Sellers shall deliver the Vessel at a port within the delivery range as per clause 5 b) which shall, for the purpose of this clause, become the new port of delivery, in such event the cancelling date provided for in clause 5 b) shall be extended by the additional time required for the dry docking and extra steaming, but limited to a maximum of 14 running days.
 
c)                          If the vessel is drydocked pursuant to Clause 6 a) or 6 b) above
 
(i)         the Classification Society may require survey of the tailshaft system, the extent of

 
the survey being to the satisfaction of the Classification surveyor. If such survey is not required by the Classification Society, the Buyers shall have the right to require the tailshaft to be drawn and surveyed by Classification Society, the extent of the survey being in accordance with the Classification Society’s rules for tailshaft survey and consistent with the current stage of the Vessel survey cycle. The Buyers shall declare whether they require the tailshaft to be drawn and surveyed not later than by the completion of the inspection of the Classification Society. The drawing and refitting of the shaft tailshaft shall be arranged by the Sellers. Should any parts of the tailshaft system be condemned or found defective so as to effect the Vessel’s class, those parts shall be renewed or made good at the Seller’s expense to the satisfaction of the Classification Society without condition/recommendation*.
 
(ii)        the expenses relating to the survey of the tailshaft system shall be borne by the Buyers unless the Classification Society requires such survey to be carried out, in which case the Sellers shall pay these expenses. The Sellers shall also pay the expenses if the Buyers require the survey and parts of the system are condemned or found defective or broken so as to effect the vessel’s class*.
 
(iii)       the expenses in connection with putting the Vessel in and taking her out of drydock, including the drydock dues and the Classification Society’s fees shall be paid by the Sellers. If the Classification Society issues any condition/recommendation* as a result of the survey or if it requires survey of the tailshaft system. In all other cases the Buyers shall pay the aforesaid expenses, dues and fees.
 
(iv)       the Buyer’s representative shall have the right to be present in the drydock, but without interfering with the work or decisions of the Classification surveyor.
 
(v)        the Buyers shall have the right to have the underwater parts of the Vessel cleaned and painted at their risk and expense without interfering with the Sellers’ or the Classifications surveyor’s work, if any, and without affecting the Vessel’s timely delivery. If, however, the Buyers’ work in drydock is still in progress when the Sellers have completed the work which the Sellers are required to do, the additional docking time needed to complete the Buyers’ work shall be for the Buyers’ risk and expense. In the event that the Buyers’ work requires such additional time, the Sellers may upon completion of the Sellers’ work tender Notice of Readiness for delivery whilst the Vessel is still in drydock and the Buyers shall be obliged to take delivery in accordance with Clause 3, whether the vessel is in drydock or not and irrespective of Clause 6 b).

*          Notes, if any, in the surveyor’s report which are accepted by the classification Society without condition/recommendation are not to be taken into account.
 
**        6 a) and 6 b) are alternatives; delete whichever is not applicable. In the absence of deletions, alternative 6 a) to apply.
 
7.                         Spares/bunkers, etc.
 
The Sellers shall deliver the Vessel to the Buyers with everything belonging to her on board and on shore. All spare parts and spare equipment including spare tail-end shaft(s) and/or spare propeller(s) /propeller blade(s) , if any, belonging to the Vessel at the time of inspection used or unused, whether on board or not shall become the Buyers’ property , but spares on order are to be excluded . Forwarding charges, if any, shall be for the Buyers’ account. The Sellers are not required to replace spare parts including spare tail-end shaft(s) and spare propeller(s)/ propeller blade(s) which are taken out of spare and used as replacement prior to delivery, but the replaced items shall be the property of the Buyers. The radio installation and navigational equipment shall be included in the sale without extra payment if they are the property of the Sellers. Unused stores and provisions shall be included in the sale and be taken over by the Buyers without extra payment.
 
The sellers have the right to take ashore crockery, plates, cutlery, linen and other articles bearing the Seller’s flag or name, provided they replace same with similar unmarked items. Library, forms, etc., exclusively for use in the Sellers’ vessel(s), shall be excluded without compensation. Captain’s Officers’ and Crew’s personal belongings including the slop chest are to be excluded from the sale, as well as the following additional items (including items on hire):
 
• Dosing pump for boiler water treatment (1 piece)
• Unitor HFO compatibility test kit (1 piece)
• Extra deck air compressor with panel (1 piece)

 
•  H.P. washing machine complete with extension cables (1 piece)
•  Painting spray machine
 
The Buyers shall take over the remaining bunkers and unused lubricating oils in sealed drums or in storage tanks without having passed through the vessel’s system and sealed drums and pay the current net marked last net purchase prices evidenced by the copy of invoices which to be provided by the sellers price (excluding barging expenses) at the port and date of delivery of the Vessel. Payment under this Clause shall be made at the same time and place and in the same currency as the Purchase Price.
 
The Seller’s and the Buyers’s familiarization representative shall jointly measure the bunker/lubricant oil quantity and prepare a Statement of Fact prior to delivery of the vessel showing the remaining quantities of bunkers and unused lubricant oil including calculated consumption by the Vessel upto the date of delivery, which shall be the amount of bunkers and lubricating oils the Buyers shall pay under the terms of this agreement
 
8.         Documentation, (see also additional clause 18)
 
The place of closing:
 
In exchange for payment of the Purchase Price the Sellers shall furnish the Buyers with delivery documents, namely:
 
a)                         Legal Bill of Sale in a form recordable in (the country in which the Buyers are to register the Vessel), warranting that the Vessel is free from all encumbrances, mortgages and maritime liens or any other debts or claims whatsoever, duly notarially attested and legalized by the consul of such country or other competent authority.
 
b)                        Current Certificate of Ownership issued by the competent authorities of the flag state of the Vessel.
 
c)                         Confirmation of Class issued within 72 hours prior to delivery.
 
d)                        Current Certificate issued by the competent authorities stating that the Vessel is free from register encumbrances.
 
e)                         Certificate of deletion of the Vessel from the Vessel’s a registry or other official evidence of deletion appropriate to the Vessel’s registry at the time of delivery, or, in the event that the registry does not as a matter of practice issue such documentation immediately, a written undertaking by the Sellers to effect deletion from the Vessel’s registry forthwith and furnish a Certificate or other official evidence of deletion to the Buyers promptly and latest within 4 (four) weeks after the purchase Price has been paid and the Vessel has been delivered.
 
f)          Any such additional documents as may reasonably be required by the competent authorities for the purpose of registering the Vessel provided the Buyers notify the Sellers of any such documents as soon as possible after the date of this Agreement.
 
At the time of delivery the Buyers and Sellers shall sign and deliver to each other a Protocol of Delivery and Acceptance confirming the date and time of delivery of the Vessel from the Sellers to the Buyers.
 
At the time of delivery the Sellers shall hand to the Buyers the classification certificate(s) as well as all plans drawings and manuals etc., which are on board the Vessel and in Sellers’ office and/or their possession. Other certificates which are on board the Vessel shall also be handed over to the Buyers unless the Sellers are required to retain same, in which case the Buyers to have the right to take copies. Other technical documentation which may be in the Sellers’ possession shall be promptly forwarded to the Buyers at Buyers expense, if they so request. The Sellers may keep the Vessel’s log books but the Buyers to have the right to take copies of same.

 
9.         Encumbrances
 
The Sellers warrant that the Vessel, at the time of delivery, is free from all charters, encumbrances, mortgages, taxes and maritime liens or any other debts whatsoever as well as any dispute claim with its Union. The Sellers hereby undertake to indemnify the Buyers against all consequences of claims made against the Vessel which have been incurred prior to the time of delivery.
 
Sellers will provide Buyers with Free of Encumbrances Certificate dated the day of the closing same to be issued by the vessel’s Registry Authority of Cypriot Consulate in Piraeus or London.
 
10.      Taxes, etc.
 
Any taxes, fees and expenses in connection with the purchase and registration under the Buyers’ flag shall be for the Buyers account, where as similar charges in connection with the closing of the Sellers’ register shall be for the Sellers’ account.
 
11.       Condition on delivery
 
The Vessel with everything belonging to her shall be at the Sellers’ risk and expense until she is delivered to the Buyers, but subject to the terms and conditions of this Agreements she shall be delivered by the Sellers and taken over by the Buyers as she was at the time of inspection, fair wear and tear excepted.
 
However, the Vessel shall be delivered with her class maintained without condition/recommendation*, free of average damage affecting the Vessel’s class, and with her classification certificates and national certificates, as well as all other certificates the Vessel had at the time of inspection, valid and unextended for minimum 3 (three) months after the day of delivery without condition/recommendation* by Class or relevant authorities at the time of delivery
 
“Inspection” in this Clause 11, shall mean the Buyers’ inspection according to Clause 4 a) or 4 b), if applicable, or the buyers inspection prior to the signing of this Agreement. If the Vessel is taken over without inspection, the date of this Agreement shall be the relevant date .

*                            Notes, if any, in the surveyor’s reports which are accepted by the Classification Society without condition/recommendation are not to be taken into account.
 
12.       Name/markings
 
Upon delivery the Buyers undertake to change the name of the Vessel and alter funnel markings
 
13.       Buyers’ default
 
Should the deposit not be paid in accordance with Clause 2, the Sellers have the right to cancel this Agreement, and they shall be entitled to claim compensation for their losses and for all their expenses incurred together with interest. Should the Purchase Price not be paid in accordance with Clause 3, the Sellers have the right to cancel the Agreement, in which case the deposit together with interest earned shall be released to the Sellers. If the deposit does not cover their loss, the Sellers shall be entitled to claim further compensation for their losses and for all their expenses incurred together with interest.
 
14.       Sellers’ default
 
Should the Sellers fail to give Notice of Readiness in accordance with Clause 5 a) or fail to be ready to validly complete a legal transfer by the date stipulated in line 61 or at such date as may have been extended pursuant to this Agreement the Buyers shall have the option of cancelling this Agreement provided always that the Sellers shall be granted a maximum of 3 banking days after Notice of Readiness has been given to make arrangements for the documentation set out in Clause 8. If after Notice of Readiness has been given but before the Buyers have taken delivery, the Vessel ceases to be physically ready for delivery and is not made physically ready again in every respect by the date stipulated in line 61 and new Notice

 
of Readiness given, has not been given by the date stipulated in line 61 or at such date as may have been extended pursuant to this Agreement the Buyers shall retain their option to cancel. In the event that the Buyers elect to cancel this Agreement the deposit together with interest earned thereon shall be released to them immediately.
 
Should the Sellers fall to give Notice of Readiness by the date stipulated in line 61 or fail to be ready to validly complete a legal transfer as aforesaid they shall make due compensation to the Buyers for their loss and for all expenses together with interest if their failure is due to proven negligence and whether or not the Buyers cancel this Agreement.
 
15.       Buyers’ representatives
 
After this Agreement has been signed by both parties and the deposit has been lodged, the Buyers have the right 60 days prior to the expected date of delivery to place up to 2 (two) representatives on board the Vessel at their sole risk and expense upon arrival at……..on or about . These representatives are on board for the purpose of familiarisation and in the capacity of observers only, and they shall not interfere in any respect with the operation of the Vessel. The Buyers’ representatives shall sign the Sellers’ letter of indemnity prior to their embarkation. The Buyers’ representatives are to be allowed to remain on board up to and during the time of delivery, always at Buyers’ sole risk and expense.
 
Once Sellers have tended NOR, Buyers are entitled to have another 8 representatives onboard for familiarization purpose only.
 
16.                   Arbitration
 
a)*                   This Agreement shall be governed by the construed in accordance with English law and any dispute arising out of this Agreement shall be referred to arbitration in London in accordance with the Arbitration Act s 1996 1950 and 1979 or any statutory modification or re-enactment thereof for the time being in force, one arbitrator being appointed by each party. On the receipt by one party of the nomination in writing of the other party’s arbitrator, that party shall appoint their arbitrator within fourteen days, failing which the decision of the single arbitrator appointed shall apply. If two arbitrators properly appointed shall not agree they shall appoint an umpire whose decision shall be final.
 
b)*               This Agreement shall be governed by and construed in accordance with Title [illegible] of the United Stage Code and the Law of the State of New York and should any dispute arise out of this Agreement, the matter in dispute shall be referred to three persons at New York, one to be appointed by each of the parties hereto, and the third by the two so chosen; their decision or that of any two of them shall be final, and for purpose of enforcing any award, this Agreement may be made a rule of the Court.
 
The proceedings shall be conducted in accordance with the rules of the Society of Maritime Arbitrators Inc. New York.
 
c)*                   Any dispute arising out of this Agreement shall be referred to arbitration at                                                      , subject to the procedures applicable there. The laws of shall govern this Agreement.

*                             16a), 16b) and 16c) are alternatives; delete whichever is not applicable. In the absence of deletions, alternative 16.a) to apply.
 
Additional Clauses;
 
17. Drivers inspection
 
No drydocking, prior to the delivery of the Vessel, however the Buyers to have the option to arrange at their risk and expense at the convenient port before delivery or at the port of delivery an inspection of the Vessel’s underwater parts by drivers appointed by Buyers and approved by Vessel’s Class, in the presence of the Class surveyor and Seller’s and Buyers’ representatives, Buyers not to interfere at the video monitor or with the Class surveyor’s work.

 
The Sellers shall notify Buyers as to the vessel’s itinerary for Buyers to decide the most convenient place for the underwater inspection to take place at Sellers time. Sellers to arrange Class Surveyor at Buyers expenses who shall be in attendance at the time of underwater inspection.
 
Buyers shall in any event pay for the divers and the cost of Class attendance. The extent of the inspection and the conditions under which it is performed shall be to the satisfaction/requirement of the Class surveyor attending. The Class to be the sole arbitrator as to whether underwater damage, if any, will impose any condition of Class. If the conditions at the place of such inspection are not suitable for such inspection, the Sellers shall make the Vessel available at a suitable alternative nearby place.
 
Should any damage be found to the underwater parts that will impose a condition of Vessel’s present class, then:
 
a. In case vessel’s Class imposes a condition but does not require drydocking before next scheduled drydocking, Sellers have the option to repair same to Class satisfaction prior to delivery or to compensate the Buyers with the estimated cost to repair such damage in a way which is acceptable to the Vessel’s Class, which cost to be only the direct cost to repair such damage (i.e. excluding docking/undocking costs, tugs, loss of hire, deviation, etc), as per the average of 2 (two) quotations received from 1 (one) major reputable repair yard chosen by Buyers and 1 (one) major reputable repair yard chosen by Sellers, such repair yards to be located in China and capable of repair a vessel of such type; The average amount agreed shall be deducted from the Purchase Price at the time of delivery.
 
b. In case that the rudder, propeller, bottom or other underwater parts below the summer load line be found broken, damaged or defective, so as to affect Vessel’s present class and must be immediately repaired, then clause 6B(II) NSF 93 to be reinstated.
 
In the event the Vessel is to be drydocked, the canceling date will be extended appropriately for the extra time taken to deliver the Vessel due to ballasting/drydocking/repairs to be carried out to Class’ satisfaction in accordance with this Agreement, [but such extension will not exceed in total 7 running days].
 
In case of drydocking, the Buyers may carry out cleaning/painting works at their sole risk and expense, subject to the Sellers’ approval, without interfering with the Sellers’ drydock works nor the classification surveyor’s work, if any, and without affecting Vessel’s timely delivery schedule. If however Buyers’ works are still in progress when Sellers have completed their works and they are ready in all respects to deliver the Vessel to the Buyers as per the Agreement, then Sellers shall tender final Notice of Readiness to the Buyers whilst the Vessel is in drydock and Buyers must take timely delivery of the Vessel whether on drydock or not, with undocking expenses only to be for Sellers’ account.
 
The Class shall issue a Class Survey Record which indicates whether the Underwater Inspection has found any damage affecting class, and in the event that such damage is found, indicates whether it requires immediate rectification or whether it should be rectified during the next drydocking. This Class Survey Record will be issued immediately after the completion of the divers Underwater Inspection.
 
18. Documentation.
 
AA. Sellers to provide Buyers with following documents in exchange of purchase money at the time of closing:
 
(1)        Three original bills of sale notarially attested and legalized by the Chinese Embassy or Consulate in Athens or London and warranting that the vessel is free for all encumbrances, mortgages and maritime liens or other debts or claims whatsoever to be signed by a duly authorized signatory on behalf of the Sellers.
 
(2)        Minutes of meetings of the Board of directors and shareholders of the Sellers,

 
authorizing the sales of the vessel to the Buyers and the issue of a Power of Attorney. The minutes to be notarially attested and legalized by the Chinese Embassy or Consulate in Athens or London.
 
(3)        Copies of Memorandum and Articles of Association and other constitutional documents of the Seller, which are to be certified by the secretary of the Sellers.
 
(4)        Power of Attorney of the Seller authorizing individuals to execute all necessary documents on the Sellers’ behalf, same to be notarially attested and legalized by the Chinese Embassy or Consulate in Athens or London.
 
(5)        Deletion Certificate in original issued by the vessel’s Registry Authority on the date of delivery. In case that such original certificate is not available, the Sellers instead shall furnish the Buyers with a Letter of Undertaking on Sellers company letterhead at the time of delivery to provide the Deletion Certificate in original to the Buyers within 5 (five) working days from the date of delivery of the Vessel
 
(6)        Free of Encumbrances Certificate in original issued by the Vessel’s Registry Authority or the Cypriot Consulate in Piraeus or London on the date of delivery certifying that the vessel is free of all registered encumbrances and mortgages.
 
(7)        Letter of Undertaking which clearly states vessel is free from registered encumbrance and from all maritime liens and debts and that they further undertake to indemnify the Buyer for all and any claims arising prior to the delivery of the vessel.
 
(8)        Original class maintained certificate from NK classification that the vessel’s class is maintained free of recommendations/conditions of class dated not earlier than three (3) working days before date of delivery
 
(9)        Letter of Undertaking which states that to the best of the Sellers’ knowledge the vessel is not blacklisted by the Arab Boycott League in Damascus or the ITF or any other nations or organizations.
 
(10)     3 original copies of commercial invoice in relation to the total purchase price of the vessel.
 
(11)     3 original copies of commercial invoices in relation to bunkers and lubrication oils, remaining on board the vessel at delivery along with copies of invoices for the purchase of bunkers and lubrication oils.
 
(12)     Letter of Undertaking from seller to delete the vessel from INMARSAT on the day of delivery of the vessel.
 
(13)     Current Certificate of Ownership issued by the competent authorities of the flag state of the Vessel dated not earlier than three (3) working days before date of delivery.
 
BB. List of Original Documents to be delivered by vessel’s Buyers to Sellers in exchange of purchase money at the time of closing
 
(1).       Copy of the Buyers Company Registration Certificate duly notarised and officially translated into the English language by a competent public authority.
 
(2).       Original Board Resolutions (notarised and officially translated in the English language by a competent public authority) ratifying the Memorandum of Agreement and all other terms of the purchase of the Vessels and authorising the issuance of a Power of Attorney as per paragraph 3 here below.
 
(3).       Original Power of Attorney (notarised and officially translated in the English language by a competent public authority, executed by a duly authorized Director, appointing attorney(s)-in-fact empowered to sign, execute and deliver any and all documents necessary in connection with the purchase of the Vessels, as well as for the release of the deposit money and payment of the purchase price as well as any other payment due under the Memorandum of Agreement.

 
Both Sellers and Buyers shall exchange to each other the above drafts of documents at least 7 (seven) working days prior to delivery.
 
19. Blacklisting.
 
The Sellers to confirm that to the best of their knowledge the Vessel is not blacklisted by any nation.
 
20. Plans/Manuals
 
At the time of Vessel’s delivery the Sellers to hand over to Buyers’ representative all drawings/plans and manuals available on board which are not to be returned to Class or Registry (in which case copies shall be provided). Sellers’ ISM manuals and forms as well as Vessel’s log books will not be handed over, however Buyers shall have the right to take the copy of log books. In addition all drawings/plans and manuals available in Managers’/Owners’ office to be forwarded to the Buyers’ office as soon as possible after delivery delay. Forwarding expenses to be for Buyers’ account.
 
21. Confidentiality
 
Both parties shall keep all the negotiations and the Agreement and all its terms strictly private and confidential.

For the Sellers	 	For the Buyers	
 	 	 	
/s/ I. PROKOPAKIS	 	 	/s/ illegible	 	
Name: I. PROKOPAKIS	 	Name: Illegible	
 	 	 	
Title: Director	 	Title: Illegible	
 	 	 	
Date: 16/08/2006	 	Date: 2006.8.15	
 	 	 	
On behalf of:	 	On behalf of:	
MERCATOR SHIPPING INC.	 	Shanghai Time Shipping Co. Ltd. or its nominee	
 	 	 	
For the Sellers	 	For the Buyers	
 	 	 	
FOR DANAOS CORPORATION	 	FOR SHANGHAI TIME SHIPPING CO. LTD.	
 	 	 	
/s/ I. PROKOPAKIS	 	 	/s/ illegible	 	
Name: I. PROKOPAKIS	 	Name: Illegible	
 	 	 	
Title: Director	 	Title: Illegible	
 	 	 	
Date: 16/08/2006	 	Date: 2006.8.15	
 	 	 	
On behalf of:	 	On behalf of:	

 
Exhibit 21.1
 
Subsidiaries
 
Alexandra Navigation Inc.
Appleton Navigation S.A.
Auckland Marine Inc.
Baker International S.A.
Balticsea Marine Inc.
Bayard Maritime Ltd.
Bayview Shipping Inc.
Blacksea Marine Inc.
Bounty Investment Inc.
Boxcarrier (No. 1) Corp.
Boxcarrier (No. 2) Corp.
Boxcarrier (No. 3) Corp.
Boxcarrier (No. 4) Corp.
Boxcarrier (No. 5) Corp.
Channelview Marine Inc.
Cobaltium Shipping (Private) Ltd.
Cobaltium Shipping Inc.
Commodore Marine Inc.
Constantia Maritime Inc.
Containers Lines Inc.
Containers Services Inc.
Continent Marine Inc.
Deleas Shipping Limited
Duke Marine Inc.

 
Erato Navigation Inc.
Federal Marine Inc.
Ferrous Shipping (Private) Ltd.
Ferrous Shipping Inc.
Geoffrey Shipholding Limited
Helderberg Maritime Inc.
Independence Navigation Inc.
Karlita Shipping Company Limited
Lacey Navigation Inc.
Lato Shipping (Private) Ltd.
Lissos Shipping (Private) Ltd.
Lito Navigation Inc.
Lydia Inc
Maria C Maritime Inc.
Medsea Marine Inc.
Mercator Shipping Inc.
Oceanew Shipping Limited
Oceanprize Navigation Limited
Orchid Navigation Corporation
Ortelius Maritime Inc.
Peninsula Maritime Inc.
Ramona Marine Company Limited
Roberto C Maritime Inc.
Sapfo Navigation Inc.
Saratoga Trading S.A.

 
Seacaravel Shipping Limited
Seacarriers Lines Inc.
Seacarriers Services Inc.
Seasenator Shipping Limited
Sederberg Maritime Inc.
Strondium Shipping Inc.
Titanium Holdings Inc.
Tully Enterprises S.A.
Tyron Enterprises S.A.
Victory Shipholding Inc.
Wellington Marine Inc.
Westwood Marine S.A.
Winterberg Maritime Inc.

 

Exhibit 23.1

 
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the use in this Registration Statement on Form F-1 of our report dated April 28, 2006 except for Note 19b which is as of September 18, 2006 relating to the consolidated financial statements of Danaos Corporation, which appear in such Registration Statement. We also consent to the reference to us under the heading "Experts" in such Registration Statement.
 
/s/ PricewaterhouseCoopers
PricewaterhouseCoopers S.A.
Athens, Greece
Date: September 19, 2006

 

 
Exhibit 23.6
 
Danaos Corporation
14 Akti Kondyli
185 45 Piraeus
Athens, Greece

Ladies and Gentlemen:
 
Reference is made to the prospectus (the “Prospectus”) included in the registration statement on Form F-1 relating to the initial public offering of common stock of Danaos Corporation (the “Company”).
 
We have reviewed the section in the Prospectus entitled “The International Shipping Industry” and confirm that it accurately describes the international containership and drybulk shipping markets. We further advise the Company that our role has been limited to the provision of the data, graphs, and tables set forth in the section of the Prospectus entitled “The International Shipping Industry.”  With respect to such statistical data, graphs and tables supplied by us, we advise you that:
 
•                                                       some industry data included in this discussion is derived from estimates or subjective judgments;
 
•                                                       the published information of other maritime data collection agencies may differ from this data; and
 
•                                                       while we have taken reasonable care in the compilation of the industry statistical data, graphs and tables and believe them to be accurate and correct, data compilation is subject to limited audit and validation procedures.
 
We hereby consent to all references to our name in the Prospectus and to the use of the graphical and statistical information supplied by us set forth in the section of the Prospectus entitled “The International Shipping Industry.”
 
We hereby consent to the filing of this letter as an exhibit to the Registration Statement of the Company on Form F-1 to be filed with the U.S. Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended, and to the reference to our firm in the section of the Prospectus entitled “Experts.”

CLARKSON RESEARCH SERVICES LIMITED	
 	 	
Name:	/s/ S. Gordon	 	
 	 	 	
Title:	Director	 	

 

Exhibit 23.7
 
CONSENT TO BE NAMED AS A NOMINEE FOR DIRECTOR
OF
DANAOS CORPORATION
 
The undersigned hereby consents to be named in the Registration Statement on Form F-1 (the “Registration Statement”), and all amendments thereto, to be filed by Danaos Corporation (the “Company”) in connection with the initial public offering of common stock of the Company, as a person who will become a director of the Company upon consummation of such initial public offering and to the filing of this consent as an exhibit to the Registration Statement.
 
Dated: September 19, 2006

/s/ Andrew B. Fogarty	 	
Name: Andrew B. Fogarty	

 

Exhibit 23.8
 
CONSENT TO BE NAMED AS A NOMINEE FOR DIRECTOR
OF
DANAOS CORPORATION
 
The undersigned hereby consents to be named in the Registration Statement on Form F-1 (the “Registration Statement”), and all amendments thereto, to be filed by Danaos Corporation (the “Company”) in connection with the initial public offering of common stock of the Company, as a person who will become a director of the Company upon consummation of such initial public offering and to the filing of this consent as an exhibit to the Registration Statement.
 
Dated: September 19, 2006

/s/ Myles R. Itkin	 	
Name: Myles R. Itkin	

 

Exhibit 23.9
 
CONSENT TO BE NAMED AS A NOMINEE FOR DIRECTOR
OF
DANAOS CORPORATION
 
The undersigned hereby consents to be named in the Registration Statement on Form F-1 (the “Registration Statement”), and all amendments thereto, to be filed by Danaos Corporation (the “Company”) in connection with the initial public offering of common stock of the Company, as a person who will become a director of the Company upon consummation of such initial public offering and to the filing of this consent as an exhibit to the Registration Statement.
 
Dated: September 19, 2006

/s/ Miklós Konkoly-Thege	 	
Name: Miklós Konkoly-Thege	

 
Exhibit 23.10
 
CONSENT TO BE NAMED AS A NOMINEE FOR DIRECTOR
OF
DANAOS CORPORATION
 
The undersigned hereby consents to be named in the Registration Statement on Form F-1 (the “Registration Statement”), and all amendments thereto, to be filed by Danaos Corporation (the “Company”) in connection with the initial public offering of common stock of the Company, as a person who will become a director of the Company upon consummation of such initial public offering and to the filing of this consent as an exhibit to the Registration Statement.
 
Dated: September 19, 2006

/s/ Robert A. Mundell	 	
Name: Robert A. Mundell